[Senate Hearing 108-245]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-245

     TERRORISM FINANCING: ORIGINATION, ORGANIZATION, AND PREVENTION

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


                                HEARING

                               before the


                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION


                               __________

                             JULY 31, 2003

                               __________

      Printed for the use of the Committee on Governmental Affairs


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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas
              Michael D. Bopp, Staff Director and Counsel
               David A. Kass, Chief Investigative Counsel
             Mark R. Heilbrun, General Counsel and National
               Security Advisor to Senator Arlen Specter
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
            David Barton, Minority Professional Staff Member
                      Amy B. Newhouse, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Specter..............................................     3
    Senator Akaka................................................    13
    Senator Lautenberg...........................................    16
    Senator Coleman..............................................    17
    Senator Levin................................................    18
    Senator Pryor................................................    22
    Senator Carper...............................................    24

                               WITNESSES
                        Thursday, July 31, 2003

John S. Pistole, Acting Assistant Director for Counterterrorism, 
  Federal Bureau of Investigation................................     4
R. Richard Newcomb, Director, Office of Foreign Assets Control, 
  U.S. Department of the Treasury................................     7
Dore Gold, Former Israeli Ambassador to the United Nations, and 
  President, Jerusalem Center for Public Affairs.................    25
Jonathan M. Winer, Alston and Bird...............................    28
Steven Emerson, Executive Director, The Investigative Project....    31

                     Alphabetical List of Witnesses

Emerson, Steven:
    Testimony....................................................    31
    Prepared statement...........................................   131
Gold, Dore:
    Testimony....................................................    25
    Prepared statement with attachments..........................    77
Newcomb, R. Richard:
    Testimony....................................................     7
    Prepared statement with attachments..........................    54
Pistole, John S.:
    Testimony....................................................     4
    Prepared statement...........................................    45
Winer, Jonathan M.:
    Testimony....................................................    28
    Prepared statement...........................................   110

                                Appendix

Council on American-Islamic Relations (CAIR), Nihad Awad, 
  Executive Director, prepared statement with an attachment......   176
Questions and Responses for the Record from:
    Mr. Pistole..................................................   180
    Mr. Newcomb..................................................   185
    Mr. Gold.....................................................   190
    Mr. Winer....................................................   192
    Mr. Emerson..................................................   194

 
     TERRORISM FINANCING: ORIGINATION, ORGANIZATION, AND PREVENTION

                              ----------                              


                        THURSDAY, JULY 31, 2003

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:16 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Coleman, Specter, Levin, Akaka, 
Carper, Lautenberg, and Pryor.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order.
    Today, the Committee on Governmental Affairs is holding a 
hearing on the financing of terrorism. Terrorism costs money. 
From funds needed to buy explosives and airline tickets, to 
living expenses, to payoffs to the families of suicide bombers, 
terrorists must have constant and untraceable sources of money. 
Stopping the flow of these funds is a formidable task. Osama 
bin Laden is an experienced financier who once reportedly 
boasted that he and other al-Qaeda leaders know the cracks in 
the Western financial system like the lines on their own hands.
    Immediately after the September 11 attacks, the President 
took strong action to close the gaps in our financial system by 
issuing Executive Order 13224 to block terrorist funds. 
Nevertheless, serious questions persist about whether we are 
doing enough. There are even more serious questions about 
whether some of our allies are doing enough.
    Last year, the Council on Foreign Relations issued a report 
contending that U.S. efforts to curtail terrorism financing are 
impeded, ``not only by a lack of institutional capacity abroad 
but by a lack of political will among American allies.''
    The report concludes that our government appears to have 
responded to this lack of will with a policy decision not to 
use the full power of our influence and legal authority to 
compel greater cooperation.
    A key nation in the fight against terrorist financing is 
Saudi Arabia. It appears that from the joint inquiry by the 
House and Senate Intelligence Committees, which examined the 
kingdom's role in terrorist financing, that it is difficult to 
tell for sure exactly what the extent of the Saudi involvement 
is because almost an entire chapter regarding foreign support 
for the September 11 hijackers is classified. Even the parts 
that were published, however, raise serious concerns about 
Saudi Arabia's role in the September 11 attacks.
    For example, the unclassified portion of the joint inquiry 
report describes the activities of Omar al-Bayoumi, a man who 
apparently provided extensive assistance to two of the 
September 11 hijackers. According to the report, a source told 
the FBI that he thought al-Bayoumi must have been a foreign 
intelligence officer for Saudi Arabia or another power. The 
report also finds that al-Bayoumi had access to ``seemingly 
unlimited funding from Saudi Arabia.'' Al-Bayoumi is now 
reported to be living in Saudi Arabia.
    Last month, the General Counsel of the Treasury Department 
testified before the Terrorism Subcommittee of the Judiciary 
Committee that in many cases Saudi Arabia is the ``epicenter'' 
of terrorist financing. The Council on Foreign Relations report 
found that for years individuals and charities based in Saudi 
Arabia have been the most important source of funds for al-
Qaeda and that for years Saudi officials have turned a blind 
eye to this problem.
    As our witnesses Ambassador Dore Gold and Steven Emerson 
will describe in some detail, there is evidence that enormous 
sums of money flow from Saudi individuals and charitable 
organizations to al-Qaeda, to Hamas, and other terrorist 
organizations. The key question now is whether the Saudi 
Government is doing enough to stop the flow of this money, and 
if not, what actions the U.S. Government should take to prompt 
the Saudis to take more effective action. The Saudi Government 
recently announced some changes in its banking system and 
charity laws, but it is not clear that these changes go far 
enough or will be truly effective.
    We are fortunate to have with us today key counterterrorism 
officials from the FBI and the Department of Treasury. They 
will describe the administration's actions against terrorism 
financing, and they will help us better understand the level of 
cooperation our country is receiving from the Saudi and other 
governments. We also have three experts to discuss their views 
regarding the fight against terrorist financing generally and 
Saudi Arabia's role specifically.
    As the discussion of the joint inquiry report has made 
clear, there are still many questions about Saudi Arabia's 
role, even if that role is inadvertent, in the September 11 
attacks and about the extent of the Saudi Government's 
cooperation in the fight against terrorism. I hope today's 
hearing will help us get answers to some of these questions and 
will highlight areas in which our government needs to refocus 
its efforts in order to stop the flow of funds to terrorists.
    I am very pleased today to pass the gavel to Senator 
Specter, who spearheaded this investigation and is one of the 
Senate's leaders in the war against terrorism. He has served as 
the Chairman of the Senate Intelligence Committee. He chaired a 
hearing about this very subject last November in the Judiciary 
Committee, and he has continued to investigate this matter as a 
Member not only of this Committee but the Judiciary Committee 
as well.
    This hearing today is particularly timely given the release 
last week of the joint inquiry report on the September 11 
attacks. I applaud Senator Specter for his leadership in this 
area, and I am pleased to join him in working on an issue and a 
challenge to our country that has profound impact on the safety 
of our Nation and all law-abiding nations.
    Senator Specter.

              OPENING STATEMENT OF SENATOR SPECTER

    Senator Specter [presiding.] Thank you very much, Madam 
Chairman, Senator Collins. At the outset I compliment you on 
the outstanding job you are doing in chairing this very 
important Committee, a brief meteoric career so far in the U.S. 
Senate, and I thank you for your leadership on this important 
subject and for cooperating in this investigation and in this 
hearing and for handing me this mighty gavel. I appreciate it 
very much.
    The issue of the financing of terrorists is one of enormous 
importance, and the Saudi role is especially important in the 
wake of the very extensive report published on September 11 
with 26 missing pages identified as being Saudi involvement. 
There has been a decision by the Executive Branch not to 
release those pages, and I believe that puts a greater 
responsibility on Congress in oversight on hearings just like 
this.
    The question of Saudi cooperation with the United States 
has been on my agenda for the better part of the last decade. 
When I chaired the Senate Intelligence Committee in the 104th 
Congress, I went to Khobar Towers, investigated the matter, and 
talked to the Crown Prince as part of a U.S. effort to get 
cooperation from the Saudis. And while they profess to be very 
cooperative, the fact was that they were very uncooperative. 
There had been a car bombing in Riyadh in 1995 where Americans 
were killed. Federal officials were not permitted to talk to 
the suspects. They were beheaded by the Saudi Government so 
that we never did find out what they had to say. And then on 
June 25, 1996, Khobar Towers was blown up, 19 airmen killed, 
400 airmen wounded, and the issue has never yet been fully 
resolved.
    A criminal indictment was returned naming Iran as a co-
conspirator, and questions linger to this day as to whether 
some of those who were involved in Khobar Towers might have 
been involved in September 11. And our hearing today is going 
to probe this issue further to see if we can shed some light as 
to what the Saudi involvement is.
    The business of the financing of terrorism has broader 
scope, which we have investigated on the Judiciary Committee, 
last year a hearing on the financing of Hizbollah. They go into 
a small town in North Carolina and reap millions of dollars on 
cigarette smuggling, which goes to show you the scope of the 
tentacles. Hamas is raising money in the United States, and we 
are pursuing an investigation to identify those who contribute 
to Hamas with a thought to hold them liable as accessories 
before the fact to murder.
    When you contribute to a known terrorist organization and 
that terrorist organization then murders American citizens, 
those people who contribute knowingly could be indicted and 
prosecuted for being accessories before the fact to murder. And 
Saudi Arabia contributes reportedly about $4 billion a year to 
so-called charities which have dual purposes. And we really 
need to pull back the covers on this item, and this is a real 
challenge for the U.S. Government, and congressional oversight 
is a very important part.
    We have some expert witnesses today from the Federal Bureau 
of Investigation and from the Treasury Department who will 
detail efforts to identify Saudi contributions, and we have 
experts who have been in government, former Ambassador to the 
UN, Dore Gold, and others on a second panel.
    We are going to establish the time of 5 minutes for opening 
statements. Everything prepared in writing will be, as usual, 
made a part of the record, but that will leave us the maximum 
time for questions and answers.
    Our first witness is John Pistole, Deputy Executive 
Assistant Director for Counterterrorism of the Federal Bureau 
of Investigation. Welcome, Mr. Pistole, and the floor is yours.

TESTIMONY OF JOHN S. PISTOLE,\1\ ACTING ASSISTANT DIRECTOR FOR 
       COUNTERTERRORISM, FEDERAL BUREAU OF INVESTIGATION

    Mr. Pistole. Thank you, Senator Specter and Madam Chairman 
Collins. Thank you for the opportunity to be here today, and I 
will just take a couple of minutes, if I may, to make two 
points and then, as you mentioned, Senator Specter, to allow 
maximum time for questions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Pistole appears in the Appendix 
on page 45.
---------------------------------------------------------------------------
    The first point is the FBI's focus on terrorism financing 
and the radically changed organization that the FBI is today 
compared to prior to September 11, where today we have as our 
overriding emphasis the prevention of terrorist activity in the 
United States or against U.S. interests overseas. A key 
component of that is the identification of individuals involved 
in the financing of potential terrorist activity and trying to 
identify the full scope of the enterprise, the individuals 
associated with this group that is raising money that may be 
going to terrorist financing. And we see that as one of the key 
means of being able to disrupt and dismantle terrorist cells 
that may be operating here in the United States or overseas 
that may be targeting U.S. interests.
    The second point that I would like to make is talking about 
the unprecedented cooperation that we have had with not only 
our law enforcement and intelligence community partners here in 
the United States since September 11 but also with foreign 
partners in both the law enforcement and intelligence 
communities in addressing terrorism matters overall. Terrorism 
financing remains one of those challenging issues that certain 
countries such as Saudi Arabia we believe can do more in, and 
we will address that shortly.
    In terms of the FBI's response to September 11, I think the 
Committee is quite aware of the FBI's response in creating the 
Terrorist Financing Operations Section, or TFOS for short, 
which originally looked at the 19 hijackers and detailed every 
financial transaction that they conducted, overseas money 
coming in to them or while they were here in the United States. 
TFOS has evolved from that time into the central entity 
responsible for coordinating all terrorist financing 
investigations for the FBI and then working in concert with, 
again, our domestic law enforcement and intelligence community 
partners. And with me today is Dennis Lormel, the chief of the 
Terrorist Financing Operations Section, who has been almost 
singularly responsible to develop and implement the TFOS 
strategy.
    What TFOS has been doing is trying to follow the money, to 
identify those individuals who may be involved in terrorist 
financing and then to trace that money with law enforcement and 
intelligence aspects to ascertain where that money is going. 
And one of the key aspects of what the FBI is doing post-
September 11 is addressing every terrorist investigation as an 
intelligence-driven investigation as opposed to strictly a law 
enforcement investigation.
    The key here is to use all the tools available to us, 
whether it is the FISA court and the intercepts we are able to 
obtain through the FISA court, national security letters, any 
of the other tools available to us as a member of the 
intelligence community, and then to focus that investigation on 
the intelligence aspect, coupled with the law enforcement 
sanctions and tools that we have if we need to bring charges 
against individuals to take them off the street if they pose a 
threat or to elicit their cooperation.
    Given that background and that new paradigm that the FBI 
has employed since September 11, TFOS has followed the 
terrorist trail in a number of situations, and rather than go 
into the detail that is enumerated in my statement, I will just 
touch briefly on a couple of the successes in general terms.
    One of the key areas has been our outreach with and 
cooperation from the private sector. In that area, for example, 
we have developed the ability to conduct real-time monitoring 
of specifically identified financial activity, which has been 
invaluable not only to investigations here in the United States 
but to some of our foreign partners who have relied on that 
information, tracking money going from the U.S. overseas that 
may be used in terrorist activity and vice versa.
    In support of a specific high-profile joint terrorist 
investigation on financing, a number of countries and agencies, 
such as United Kingdom, Switzerland, Canada, and Europol, have 
detailed their investigators to TFOS on a temporary-duty basis. 
We have engaged in extensive coordination with authorities of 
numerous foreign governments in terrorist financing matters, 
which has led to joint investigative efforts around the world, 
including identifying and exploiting the financing of several 
overseas al-Qaeda cells, including those in Indonesia, 
Malaysia, Singapore, Spain, and Italy.
    There are a number of other relationships that have been 
established with central banks of foreign countries that have 
also enabled us to track terrorist funding in a way that we 
simply did not do prior to September 11.
    The other aspect that is critical here is the information 
sharing where our greatest successes have come in the 
interagency forum, where we are part of the National Security 
Council's Policy Coordinating Committee on terrorist financing, 
which was created in March 2002. The information sharing we 
have found has simply been critical to any success we have had, 
and especially our relationship with the Central Intelligence 
Agency in some sensitive ongoing matters has allowed us to 
develop an expertise that simply the U.S. Government did not 
have prior to September 11.
    Senator Specter, you mentioned the case in Charlotte, North 
Carolina, as one example. There are numbers of other examples 
which, again, I won't go into at this time. They are in my 
statement.
    The other point that I want to touch on is the cooperation 
of the foreign governments, and specifically Saudi Arabia. As 
we all know, late on the evening of May 12 of this year, three 
large bombs were detonated in Western housing complexes of 
Riyadh, Saudi Arabia. The next day, I was on a flight to Riyadh 
to lead an assessment team of the FBI, working with the CIA, to 
assess what the Saudi Government, specifically the Mabahith, 
the Saudi counterpart of the FBI, would allow us to do in terms 
of bringing a team of investigators and experts in to go 
through the crime scenes, to talk to witnesses, and to assess 
who may be responsible for those acts.
    As a result of the discussions, the Saudis allowed us to 
bring 75 FBI employees and an undisclosed number of agency 
people in to not only go through the crime scene, comb through 
it with shovels and screens, but also to analyze DNA from some 
of the human remains that were there, to do forensic tests on 
any and all evidence. They also gave us access to Saudi 
citizens who were witnesses to those three heinous acts.
    To summarize, what they did after May 12, which I believe 
was a defining moment for the Saudis because al-Qaeda attacked 
Saudi interests in their homeland, what they allowed us to do 
was unprecedented. You mentioned the Khobar Towers and the OPM-
SANG bombing prior to that where, frankly, we were frustrated 
beyond any recognition to accomplish what we were hoping to do, 
as you are well aware, Senator Specter.
    What I would say is that post-May 12, the Saudis have had a 
wake-up call, and we have had unprecedented cooperation with 
them in virtually every area. To that end, the one key area and 
the focus of today's hearing is on terrorist financing. The 
Saudis last year made a number of representations and enacted a 
number of laws designed to identify and dismantle terrorist 
financing that may be emanating from Saudi. From our position, 
the jury is still out on the effectiveness of what they have 
done. We simply have not seen the results of those initiatives 
from a terrorism financing perspective. Since May 12, they have 
arrested hundreds of people, either detained or killed in an 
attempt to apprehend----
    Senator Specter. Where do you say the jury is out? On what 
issue?
    Mr. Pistole. On the terrorism financing issue as far as the 
effectiveness of the Saudi initiatives to stem the tide of 
financing through NGOs or charitable organizations.
    Senator Specter. When the question and answer period comes, 
we are going to ask you when you think the jury will be in on 
that.
    Mr. Pistole. OK.
    Senator Specter. We would like to know. Could you sum up at 
this point?
    Mr. Pistole. Yes. I would be glad to, Senator.
    As a follow-up to a number of ongoing measures, there is a 
National Security Council team that is leaving Sunday to go to 
Riyadh, which I am participating in with State Department and 
Treasury Department senior officials, who are meeting with 
senior Saudi officials to address a number of the issues that 
may arise in this hearing today.
    That would conclude my opening statement.
    Senator Specter. OK. Thank you very much, Mr. Pistole.
    Our next witness is Rick Newcomb, who is the Treasury 
Office of Foreign Assets Control Director. Thank you for 
joining us, and we look forward to your testimony.

TESTIMONY OF R. RICHARD NEWCOMB,\1\ DIRECTOR, OFFICE OF FOREIGN 
        ASSETS CONTROL, U.S. DEPARTMENT OF THE TREASURY

    Mr. Newcomb. Thank you, Senator Specter, Madam Chairman, 
Members of the Committee. I am pleased to have the opportunity 
to testify this morning about our efforts to combat terrorist 
support networks that threaten U.S. citizens and property 
worldwide.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Newcomb with attachments appears 
in the Appendix on page 54.
---------------------------------------------------------------------------
    The threat of terrorist support networks and financing is 
real. It has been our mission to help identify and disrupt 
these networks. There is much we know about how radical Islamic 
terrorist networks are established and still thrive. Wealthy 
individuals and influential individuals and families based in 
the Middle East have provided seed money and support to build a 
transnational support infrastructure that terrorists have used 
for their purposes. This network, fueled by deep-pocket donors 
and often controlled by terrorist organizations, their 
supporters, and those willing to look the other way, includes 
or implicates banks, businesses, NGOs, charities, social 
service organizations, schools, mosques, madrassas, and 
affiliated terrorist training camps and safe houses throughout 
the world.
    The terrorist networks are well entrenched, self-
sustaining, though vulnerable to the United States, allied, and 
international efforts applying all tools at our disposal. 
Today, I will explain our efforts being implemented in 
coordination with other Federal agencies, including the 
Departments of Defense, State, Justice, Homeland Security, the 
FBI, the intelligence community, and other agencies to choke 
off the key nodes in the transnational terrorist support 
infrastructure.
    The primary mission of the Office of Foreign Assets Control 
of the Treasury Department is to administer and enforce 
economic sanctions against targeted foreign countries and 
foreign groups and individuals, such as terrorists, terrorist 
organizations, and narcotics traffickers, which pose a threat 
to the national security, foreign policy, or economy of the 
United States. We act under the general Presidential wartime 
and national emergency powers, as well as specific legislation, 
to prohibit transactions and block or freeze assets subject to 
U.S. jurisdiction. The origin of our involvement in the fight 
against terrorism stems from the initial conception of 
terrorism as being solely state-sponsored. Our mandate in the 
realm of terrorism was to compile available evidence 
establishing that certain foreign entities or individuals that 
were owned or controlled by, or acting for or on behalf of, a 
foreign government subject to an economic sanctions program. 
Such entities and individuals became known as SDNs and are 
subject to the same sanctions as the foreign government to 
which they are related.
    The President harnessed these powers and authorities in 
launching the economic war against terrorism in response to the 
terrorist attack of September 11 and pursuant to the powers 
available to the President under the International Emergency 
Economic Powers Act. President Bush issued Executive Order 
13224, entitled ``Blocking Property and Prohibiting 
Transactions with Persons Who Commit, Threaten to Commit, or 
Support Terrorism,'' declaring that acts of grave terrorism and 
threats of terrorism committed by foreign terrorists pose an 
unusual and extraordinary threat to the national security, 
foreign policy, or economy of the United States. This order 
prohibits U.S. persons from transacting or dealing with 
individuals or entities owned or controlled, acting for or on 
behalf of, assisting or supporting, or otherwise associated 
with persons listed in the Executive Order and those designated 
under the Executive Order as specially designated global 
terrorists.
    After the September 11 attacks, President Bush rallied the 
international community to unite in the economic war on 
terrorism. The U.S. Government has worked with the United 
Nations to pass resolutions that parallel U.S. authorities to 
designate entities supporting al-Qaeda. The international 
community, including our allies in the Persian Gulf, joined us 
and have committed to fully cooperating on all fronts against 
al-Qaeda and its supporters. On a regular basis, for example, 
the United States works cooperatively with Saudi authorities on 
issues relating to the war on terrorism. In some areas, 
cooperation is routine and systematic. In others, especially 
those touching aspects of terrorist financing and 
infrastructure, which touches all aspects of government, 
coordination is more complex.
    We have acted with Saudi Arabia and other allies in 
targeting al-Qaeda and other terrorist infrastructure. These 
actions have included a number of multilateral efforts that 
many times resulted in notifying and listing at the United 
Nations under United Nations Security Council Resolutions 1267 
and 1455.
    Some of the terrorist supporters we targeted include 
financial networks, including the al-Barakaat network, a 
Somalia-based hawala operator that was active worldwide. And 
the Muslim Brotherhood-backed Nasreddin financial services 
network. Other efforts have targeted charitable fronts based in 
the United States, including the Benevolence International 
Foundation, Global Relief Foundation, and the Holy Land 
Foundation, and foreign-based charitable fronts including 
branch offices of the Revival of Islamic Heritage Society and 
the Afghan Support Committee. We also acted with our allies 
against major al-Qaeda-affiliated organizations such as Jemaa 
Islamiyah.
    In the coming months, we are seeking to significantly 
expand these efforts and impact the implementation of the 
President's authorities under the Executive Order by adopting a 
more systematic approach to evaluating the activities of major 
terrorist organizations in various regions. This approach will 
focus on identifying key nodes that sustain the abilities of 
terrorist organizations to remain operational despite 
successful actions by the United States and its allies to 
capture and arrest terrorists, cell members, leaders, and 
operational planners.
    In furtherance of this end, we have initiated a 
collaborative effort with the Department of Defense and other 
agencies to develop information and strategies against 
terrorist financing and infrastructure. Last fall, we began a 
pilot project with the U.S. Pacific Command and other DOD 
elements that identified terrorist support networks in 
Southeast Asia and selected key nodes or priority targets in 
these networks. The project focused special attention on al-
Qaeda network affiliates in PACOM's AOR, including Jemaa 
Islamiyah, which subsequently carried out the Bali bombings, 
and the Abu Sayaff Group and others. This approach identified 
the key leaders, fundraisers, businessmen, recruiters, 
companies, charities, mosques, and schools that were part of 
its support network. Thus far, we have imposed sanctions 
against two of these key nodes and are coordinating actions 
against several others.
    This process is the model that we are seeking to continue 
and expand in the collaborative efforts with DOD agencies and 
the combatant commands. We are working with USEUCOM 
headquarters. Meetings in the near future are planned to lay 
the groundwork for a continuing joint project. We also plan to 
begin projects with the Central Command Southern Command 
shortly thereafter. Working with these commands and other 
agencies provides us and DOD partners with, in effect, a force 
multiplier that brings together a variety of counterterrorism 
tools and resources to enhance opportunities for future 
efforts.
    Taking a regional approach, following the various command's 
areas of responsibility, this effort will seek to identify and 
isolate the key nodes of the transnational terrorist support 
infrastructure in the respective AORs. This approach seeks to 
provide the opportunity to cripple an entire organization at 
one time through our implementation of the President's 
authority in coordination with possible actions in other 
departments and agencies and in cooperation with our allies at 
the UN.
    We have already taken steps to implement this approach in 
some regions. For example, we are working with other DOD 
agencies, including the Office of Naval Intelligence, to fully 
identify the terrorism support infrastructure in the Horn of 
Africa. In this region, shipping and related drug-smuggling 
activities appear to be strengthening the terrorist networks in 
this area. Working with ONI provides us the opportunity to work 
with analysts who have unique experience in other areas less 
accessible to us.
    I have today a few graphical representations of the key 
nodes approach that could be applicable to a terrorist support 
network in any region. It is related in Appendix 2 of my 
written testimony. Charts 1 and 2 are examples of the various 
steps of the funding process. Donors provide money to a variety 
of intermediaries often acting on behalf of charitable 
organizations to collect funds. The charitable organizations in 
turn use the funds both for legitimate humanitarian efforts but 
also, either wittingly or unwittingly, allow some funds to be 
siphoned off by facilitators who serve as the conduit to the 
extremist groups. Facilitators frequently are employees of the 
charitable organizations with close ties to the extremist 
groups or members of the extremist group with responsibility 
for liaising with charitable organizations.
    Chart 2 is a theoretical model of how the key nodes of the 
terrorist support structure can be more systematically 
identified in their respective levels of participation in the 
funding network.
    Chart 3 is a model of a terrorist support network with the 
key nodes highlighted that we believe economic sanctions could 
effectively impact. These include financial, leadership, and 
influence nodes, which are color-coded in red, blue, and green. 
Influence nodes can include individuals and institutions that 
provide spiritual or other guidance or serve as recruitment 
centers.
    Chart 4 shows theoretically how designation and----
    Senator Specter. Before you leave Chart 3, what does Chart 
3 show?
    Mr. Newcomb. Chart 3 shows in green the financial targets, 
in red the leadership targets, in purple the influence targets. 
And by using an effects-based targeting approach, we are able 
on an interagency basis to identify who the key leaders of 
these various participating entities are so that when taking 
them out, we can result in Chart 4, which shows theoretically 
how designation will isolate the key nodes of Chart 3 and sever 
the critical ties within the overall network and thereby 
disrupt its overall functioning. By removing these key nodes of 
the support structure, the leadership, the influence, the 
financial, the terrorist group is unable to mobilize people and 
resources in support of terrorists, thus rendering it 
ineffective.
    The funds necessary for a terrorist organization to carry--
--
    Senator Specter. Mr. Newcomb, you are double time now plus. 
Would you sum up? And we will go to Q and A.
    Mr. Newcomb. I have perhaps another minute.
    Senator Specter. OK.
    Mr. Newcomb. The funds necessary for a terrorist 
organization to carry out an attack often are minimal, but the 
support infrastructure critical for indoctrination, 
recruitment, training, logistical support, the dissemination of 
propaganda, and other material requires substantial funding. 
The President's power under Executive Order 13224, as well as 
other legislation, provide the United States with authorities 
that are critical to attacking this threat posed by these 
terrorist organizations. Our effectiveness in implementing 
these authorities requires strong coordination with other U.S. 
departments and agencies and support from U.S. allies under 
United Nations Security Council Resolutions 1267 and 1455.
    Terrorist organizations including al-Qaeda, the Egyptian 
Islamic Jihad, Jemaa Islamiyah, Al-Ittihad Al-Islamiyya, Hamas, 
Hizbollah, and others rely on their infrastructure for support 
and to shield their activities from scrutiny. The secretive 
nature of their activities and their frequent reliance on 
charitable, humanitarian, educational, and religious cover are 
vulnerabilities we can exploit by making designations under the 
Executive Order. Decisive action against high-impact targets 
deters others, forcing key nodes of financial support to choose 
between public exposure of support for terrorist activities or 
tarnishing their reputation, to the detriment of their business 
and commercial interest.
    Thank you, Senator.
    Senator Specter. We will now proceed with questioning, 5-
minute rounds, and the Chairman has deferred to me for the 
first round.
    Mr. Newcomb, in interviews by staff preparatory to your 
coming here, you advised that a good many of your 
recommendations for sanctions were rejected. Would you amplify 
what has happened on that?
    Mr. Newcomb. Yes, Senator. In identifying key nodes, our 
responsibility is to identify how these terrorist organizations 
fit their activities together.
    Senator Specter. Well, after you have identified them and 
made the recommendation--I only have 5 minutes. I want to focus 
very sharply on the rejections on the recommendations which 
involve Saudi sources. Precisely what has happened on that?
    Mr. Newcomb. Well, the designation, as we indicated in our 
discussions, is not the only possible action. There is also law 
enforcement, intelligence, diplomatic, and military----
    Senator Specter. Well, let's focus on economic sanctions, 
which is my question, before we go into other possible actions. 
I want to know about the recommendations on economic sanctions 
as to Saudis which have been turned down.
    Mr. Newcomb. Senator Specter, we have made numerous 
recommendations, including relating to Saudi Arabia and other 
terrorist support organizations and groups. This goes through a 
Policy Coordinating, PCC process, where all the equities of the 
government come to the table, including----
    Senator Specter. Well, my question focuses on 
recommendations which you have made for sanctions as to Saudi 
organizations which have been rejected.
    Mr. Newcomb. Well, first let me say it is not--it is the 
policy not to comment on internal policy deliberations within 
the government. I can tell you these issues have been discussed 
with all the key players at the table, and when there is 
another possible action that can be taken, we have achieved our 
goal by teeing issues up.
    Senator Specter. I am not asking about internal 
deliberations. I am asking you--and let me be specific with 
some organizations which have been discussed with you by staff 
prior to your coming here.
    Were there recommendations as to the National Commercial 
Bank of Saudi Arabia for economic sanctions which were 
rejected?
    Mr. Newcomb. No, Senator Specter, there was not.
    Senator Specter. Were there recommendations for sanctions 
against the World Assembly of Muslim Youth?
    Mr. Newcomb. There, as in others, these are issues that we 
looked at and examined very carefully. There was no 
recommendation out of our office on either of those.
    Senator Specter. Well, what conclusions did you come to on 
the World Assembly of Muslim Youth?
    Mr. Newcomb. That along with the whole variety of 
charitable organizations operating head offices in Saudi are 
organizations that we are looking at, as well as the whole 
range of several hundred or so possible organizations that may 
be funding terrorist activities. Rising to the level of a 
recommendation is a complicated policy----
    Senator Specter. Well, I am not concerned about several 
hundred others. I would like to know, what about the World 
Assembly of Muslim Youth? Were they funding terrorist 
organizations, subject to economic sanctions, without any 
action being taken?
    Mr. Newcomb. I can not conclude that in this hearing today. 
It is an organization that we----
    Senator Specter. You can or you can not conclude----
    Mr. Newcomb. Cannot.
    Senator Specter. At this hearing today?
    Mr. Newcomb. Well, we did not conclude that in our 
deliberations, so I can not say that was a recommendation of 
our office.
    Senator Specter. How about the International Islamic Relief 
Organization? Were there recommendations for sanctions there 
which were rejected by higher officials in the Treasury 
Department?
    Mr. Newcomb. This is an issue that we looked at, and, 
again, your question relates to policy deliberations within the 
administration which I can not comment on. I can tell you we 
did look at that organization.
    Senator Specter. I am not interested in your policy 
deliberations. What I am interested in is your conclusions. 
Were there economic sanctions taken against the International 
Islamic Relief Organization?
    Mr. Newcomb. To date, there have not been as of this date.
    Senator Specter. Do you think there should be?
    Mr. Newcomb. It is something that we would look at very 
carefully along with the others participating in the policy 
process.
    Senator Specter. Well, when you look at it very carefully, 
how long have you been looking at it up until now?
    Mr. Newcomb. Certainly since immediately in the aftermath 
of September 11.
    Senator Specter. Well, that is almost 2 years. How long 
will it take you to come to a conclusion?
    Mr. Newcomb. We can recommend and we can designate, but 
there is a policy process which takes into account all the 
variety of----
    Senator Specter. I have got 16 seconds left. Have you 
recommended as to any of the organizations I have mentioned to 
you some tough economic sanctions which were turned down by 
higher officials, implicitly because they were Saudi 
organizations?
    Mr. Newcomb. I can not say it is because they were Saudi 
organizations.
    Senator Specter. Well, could you say whether they were 
turned down?
    Mr. Newcomb. I can say that there have been some charities 
and other organizations that we have considered, we have had at 
the table, and that have been deferred for other actions which 
I would deem as appropriate.
    Senator Specter. Well, my red light went on in the middle 
of your last answer, but I will be back.
    Mr. Newcomb. OK.
    Senator Specter. Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman, for 
holding this hearing on terrorism financing.
    I agree with my colleagues Senator Shelby and Senator 
Graham, who say that we need to make public much of the 
information from a congressional report on intelligence and the 
activities surrounding the terrorist attacks of September 11, 
2001. There needs to be a full and open debate on these issues. 
And this is an effort partly today at this hearing.
    I am also concerned about terrorism in Africa, and I think 
that we should put an end to the illicit trade in so-called 
blood diamond funds, which funds activities of Liberian 
President Charles Taylor, and also supports conflicts in Angola 
and the Congo.
    I am equally concerned about terrorism in Asia. We must 
stop the activities of terrorists in Bali and the laundered 
money there that financed the bombing in Bali. These confront 
us as we look into Saudi Arabia and our tracking and 
coordinating intelligence with them and the lack of some of 
this information from them.
    What we are learning is that there is a lesson that we 
cannot afford to ignore, and this Committee is certainly moving 
out on this.
    Mr. Pistole, the House-Senate September 11 Commission 
report states that intelligence resources to fight terrorism 
are stretched thin. Do you believe that the FBI has adequate 
resources, people, and funding for training in place to combat 
terrorism?
    Mr. Pistole. Senator, you have identified some critical 
issues for the FBI in terms of ensuring adequate training. To 
answer your question, I believe we have sufficient personnel, 
nearly 29,000 employees right now, over 11,000 of whom are 
special agents, to address the counterterrorism issue facing 
the United States domestically. But it is through the 
enhancement or augmentation through the Joint Terrorism Task 
Forces where we have over 2,000 FBI and other agency, law 
enforcement, and intelligence community personnel dedicated to 
84 JTTFs around the country that we're able to leverage our 
limited resources in an effective means of being the arms and 
the operational node of the U.S. Government in fighting 
terrorism in the United States
    Senator Akaka. Mr. Pistole and Mr. Newcomb, we know there 
are frustrations, as you mentioned, Mr. Pistole, about what we 
are doing about tracking and coordination. My question to each 
of you is: What more needs to be done to improve tracking and 
coordination of terrorist funding intelligence?
    Mr. Pistole. I think one of the keys is to achieve the 
cooperation of foreign governments such as Saudi Arabia where 
the assessment is much of the funding stems from, and as I 
mentioned earlier, I am leaving Sunday to go to Jiddah. I hope 
to achieve some success in that arena with my colleagues from 
Treasury and from State and from the National Security Council.
    There are a number of issues on the table that will be 
discussed, and I would be willing to give the Committee a 
follow-up briefing after that trip, if they so desired.
    Senator Akaka. Mr. Newcomb.
    Mr. Newcomb. Thank you, Senator. I share my colleague's 
point of view that we need to continue doing the work that we 
are doing, working within the administration and other 
government agencies but also with foreign counterparts, to have 
a unified front utilizing authorities under the United Nations 
to take joint action, coordinating fully with local law 
enforcement authorities, but continuing our current efforts.
    Senator Akaka. My time is up, Mr. Newcomb, but I noted that 
your written statement discusses a terrorist supporter 
identification program that has been developed with the Pacific 
Command. Given that Hawaii is the gateway to and from the 
Pacific, this is of interest, of course, to me, and I certainly 
want to hear more about that.
    My time is up, but I wish to learn more about that project.
    Mr. Newcomb. Fine, Senator. I would be happy----
    Senator Specter. Thank you, Senator Akaka. Chairman 
Collins.
    Chairman Collins. Thank you very much, Senator Specter.
    Mr. Newcomb, I want to make sure that the Committee 
understands how you compile the list of suspected terrorist 
financers. First of all, it is my understanding that the Office 
of Foreign Assets Control has the power to recommend that 
individuals and entities that are involved in financing acts of 
terrorism can be placed on a government list, and the listing 
of that individual or entity is critical to depriving them of 
the ability to provide funds for terrorists. Is that accurate?
    Mr. Newcomb. That is accurate. I would also point out and 
add that we also are the implementing and enforcement agency as 
well. So it is those two nodes, a recommending function and an 
implementation function.
    Chairman Collins. And after your office recommends an 
entity for listing, that recommendation is then reviewed by an 
Interagency Policy Coordinating Committee that you referred to 
in your discussions with Senator Specter. Is that correct?
    Mr. Newcomb. That is correct, Madam Chair.
    Chairman Collins. Have you ever recommended that an entity 
be listed and had that recommendation rejected by this 
Interagency Policy Committee?
    Mr. Newcomb. We have made numerous recommendations on a 
variety of different targets, as is our responsibility. And it 
goes to the Policy Coordinating Council which has a multitude 
of different points of view--State Department, the Justice 
Department, the FBI, the CIA, and others. So long as there is a 
responsible action to be taken, designation per se is not the 
only possible tool within the President's ambit of foreign 
policy----
    Chairman Collins. And I understand that, that there may be 
other ways to approach the problem. But I assume that when you 
recommend the listing of an entity, that is based on an 
investigation that you have conducted and that there is a sound 
factual record for the listing of the entity, that is why you 
brought that recommendation forward. Is that correct?
    Mr. Newcomb. That is correct. When we have a target we wish 
to designate, we develop evidence so that, should a designation 
happen, we are able to sustain a challenge to that in Federal 
court. So we do develop evidentiary packages as the basis for 
recommendations.
    Chairman Collins. And it is correct--and I understand there 
may be other action taken, but it is correct that your 
recommendations are sometimes turned down by this interagency 
committee, correct?
    Mr. Newcomb. The issue I think we are having somewhat of a 
debate about is the characterization of ``turned down.'' Turned 
down----
    Chairman Collins. For listing on the terrorist financers 
list.
    Mr. Newcomb. Oftentimes they are not adopted for purposes 
of listing at this time.
    Chairman Collins. That is the same as being turned down, 
not adopted, not--entities that you recommend be listed are not 
always listed as a result of the committee, the interagency 
committee, not accepting your recommendation that they be 
listed. Is that correct?
    Mr. Newcomb. That is correct, but I have to add the caveat 
that because there are other agencies--for example, the FBI may 
say we have law enforcement equities in that particular target 
at this time. If you move forward now, you will disrupt those 
equities. That is, in my opinion, and in the opinion of the 
PCC, a very responsible way to proceed. Let us not interfere 
with your case. We will stand down until an appropriate time. 
And there have been examples when that objection has been 
removed.
    Chairman Collins. What percentage of your recommendations 
to list Saudi entities or individuals have been rejected?
    Mr. Newcomb. Madam Chairman, I don't have the answer to 
that information. You sent that to----
    Chairman Collins. We have asked for that, as you know.
    Mr. Newcomb. You have asked for it, and we will get it to 
you for the record.
    Chairman Collins. Would you say that more than 50 percent 
of the recommendations that you have made to list Saudi 
entities or individuals have not been accepted by the 
committee?
    Mr. Newcomb. I am going to have to get that information for 
you for the record. I don't have it at this time.
    Chairman Collins. In conversations with staff, you were 
asked whether it might be as high as 95 percent. Do you recall 
telling the staff that you did not believe it was quite that 
high?
    Mr. Newcomb. Yes, I certainly did say it wasn't that high. 
I don't have the exact figure. Let me also explain to you, 
there are a range of specific areas where we have been looking 
where there are considerable other equities at stake. I think 
the point that has to be made is that there are a whole range 
of targets that we are prepared to move forward on, can move 
forward on, have developed evidentiary packages on, and other 
equities come into play that are responsible equities.
    I don't know if the number in every one of these categories 
is that high, but we do a thorough examination of potential 
targeting.
    Chairman Collins. One final question on this area, since my 
time has expired. On this interagency committee, as you point 
out, there are representatives from various departments and 
agencies like the FBI, departments like the State Department 
and Justice. Which agency is responsible for most of the 
rejections of your recommendations to list Saudi entities and 
individuals?
    Mr. Newcomb. I would say it is a combination of deferring 
action based on recommendations from the State Department, the 
FBI, the Justice Department, and the intelligence community 
based on a variety of equities that they have involved--
diplomatic, law enforcement, intelligence, and others.
    Chairman Collins. So no one agency or department on the 
committee is responsible for rejecting your recommendations 
more than any other agency or department?
    Mr. Newcomb. I think in all conversations relating to 
foreign policy and foreign relations, we look very strongly to 
the State Department, and the State Department is always a very 
active player in these. So they do have a view, as well as the 
other agencies. But I think it is a combination of all of 
those.
    Chairman Collins. Thank you.
    Senator Specter. Thank you very much, Senator Collins. 
Senator Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Thank you, Mr. Chairman.
    There are things that concern me--and I want to examine the 
specifics. Unfortunately, we are pushed for time, and I look at 
the clock and realize that you have another panel, Madam 
Chairman, and we have to get on with it. But I do want to say I 
have an active interest in the relationship with Saudi Arabia. 
In 1991, immediately after the first Gulf War, I went to Saudi 
Arabia, and I was outraged at diplomats, Senators, and 
Congressmen with an Israeli stamp on their passports were 
prohibited entry. And I got the Saudis to change that in a 
hurry, and it is no longer a restriction, that is, for 
officials of the U.S. Government. But I think if you are an 
ordinary citizen of this great country, you are prohibited 
entry if you have had an Israeli stamp in your passport.
    It is outrageous. When they dial 911, we answered the phone 
immediately, sent over 500,000 people to the area to try and 
provide a rescue operation and the resuscitation effort, 
because that is what I specifically want to call it. All was 
lost there, Kuwait, Saudi Arabia, and then the ingratitude of 
the Government of Saudi Arabia not to present a witness here, 
not to present someone to offer testimony. Very frankly, it is 
compounded even to a more aggravating degree when the President 
has refused to permit the full record established in the 900-
page report to be out there when the Saudis themselves say they 
would like to clear the record. Or are we looking at a sleight 
of hand, forgive the suspicion, that a routine was set up that 
said, well, OK, we in the Saudi Government will say make it 
public, and, Mr. President, we would thank someone in the 
administration if they would simply say that it is being 
withheld for methods, etc. It is pitiful.
    I am using this time knowledgeably, Mr. Chairman, and I 
would like to ask Mr. Pistole for a short view on the Saudi 
Government's willingness to cooperate in investigations 
subsequent to terrorist attacks on the embassies in Africa and 
the USS Cole?
    Mr. Pistole. Subsequent to those two incidents, Senator, as 
I think you are aware, there was very limited cooperation from 
the Saudi Government. As I mentioned in my opening statement, I 
believe May 12 was the defining moment for the Saudis in that 
the fact that they were attacked, that Saudi citizens were 
killed in the attacks, and that al-Qaeda seemed to be thumbing 
their noses at the royal family to say we will conduct attacks 
in the homeland here and you can not stop us. The cooperation 
since May 12 on the Riyadh bombings, as I mentioned, has been 
unprecedented in all areas but for the financing issue, which 
is still ongoing, and there are a number of issues on the table 
for that.
    Senator Lautenberg. So there is still a reluctance to open 
up the relationship and to say, ``America, you are without a 
doubt our best and most needed friend.'' I find that more than 
just a curious response to this kind of symbiotic relationship 
that we have had for a long time.
    I yield back the time here.
    Senator Specter. Thank you very much, Senator Lautenberg. 
Senator Coleman.

              OPENING STATEMENT OF SENATOR COLEMAN

    Senator Coleman. Thank you, Mr. Chairman.
    Following up on the questions from my distinguished 
colleague from New Jersey on the level of cooperation, first 
let me backtrack a little bit. I believe in the written 
testimony of Mr. Winer, one of the subsequent panelists, he 
noted that, ``Saudi Arabia has been the most significant source 
of terrorist funds for al-Qaeda.''
    Mr. Pistole, would you agree or disagree with that 
assertion?
    Mr. Pistole. I would at this point say the FBI does not 
have enough intelligence or law enforcement information to 
agree or disagree with that. There is obviously a tremendous 
amount of money that has flown through NGOs and charitable 
organizations. As Mr. Newcomb mentioned, the question is how 
much of that has gone specifically for terrorist activity. And 
in limited situations, we can document that, and I can tell you 
affirmatively, yes, that this money has gone for this act. But 
to trace it from the government to a particular terrorist, I 
can not sit here and tell you that has been done.
    Senator Coleman. Mr. Newcomb, could you respond to that?
    Mr. Newcomb. I agree with my colleague from the Bureau. We 
are aware of large amounts of money going to charitable 
organizations. They are dual purpose in the fact that some of 
the otherwise legitimate activities are subverted. The extent 
to which that takes place is not completely clear, but I would 
characterize it as considerable.
    Senator Coleman. Mr. Pistole, on the issue of financing, 
you indicated at least in the willingness to cooperate there 
has been substantial improvements in some areas but still work 
to be done on the financing side. Can you identify two or three 
things that need to be done that aren't being done today?
    Mr. Pistole. Yes, Senator, several areas. One is the Saudi 
Government payment of defense counsel, for example, here in the 
United States of Saudi citizens who have been charged with 
crimes. That is an issue that we have raised with the Saudi 
Government and pursuing next week in follow-up meetings. To us, 
that is tantamount to buying off a witness, if you will, and so 
that gives us concern if the government is supplying money for 
defense counsel.
    Other areas that we are addressing is the specific funding 
through whether it is NGOs or charitable organization, that 
they know or should know is going to specific terrorist 
organizations or individuals associated with terrorism.
    Senator Coleman. Again, short questioning periods. I am 
going to switch gears for a second, and I apologize I wasn't 
here for your oral testimony, but I read your written 
testimony. You give a very spirited defense of the PATRIOT Act, 
which has certainly been the source of a lot of discussion.
    Can you help me connect the dots? Is there something in the 
PATRIOT Act that you didn't have before that specifically 
allows you to break an organization that was doing something it 
shouldn't be doing?
    Mr. Pistole. Absolutely, Senator. The most compelling part 
of the PATRIOT Act has been the elimination of what we refer to 
as ``the wall'' between law enforcement and intelligence 
collection activities. For example, if Mr. Newcomb was an FBI 
agent sitting in New York working a criminal investigation on 
Osama bin Laden, and I was an intelligence agent, because of 
prohibitions under ``the wall,'' we would not be allowed to 
share that information. With the passage of the PATRIOT Act, we 
are now able to share that information and ``connect the 
dots.'' That is the most compelling part of the PATRIOT Act.
    Senator Coleman. Does that break in the wall also go down 
to the level of local sheriffs, local law enforcement? And let 
me explain why I ask. There has been concern raised about crop 
dusters and the ability to spread, for instance, something like 
anthrax. And I know the FBI often has been notified about that, 
but I wonder if our local sheriffs--they know where the grass 
fields are. They know where the crop dusters are.
    Mr. Pistole. Absolutely, and this week, in fact, with 
tomorrow's deadline, our Joint Terrorism Task Forces are going 
back and recontacting all those individuals we contacted after 
September 11 to see if there has been any suspicious activity.
    To answer specifically your question about sharing with 
local and State law enforcement agencies, that is done 
primarily through the Joint Terrorism Task Forces, and 
obviously it is a matter of, if there is classified 
information, whether they have the appropriate clearances. We 
still pass the information of the threat related but just may 
not identify the source or method of acquiring that 
information, for example, overseas.
    Senator Coleman. Thank you. Thank you, Mr. Chairman.
    Senator Specter. Thank you, Senator Coleman. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you, Mr. Chairman. Just very briefly a 
few comments, and then my questions.
    Saudi behavior towards terrorism, particularly towards 
terrorism aimed at the United States, has been very lax and 
very disturbing for many years. The reference has already been 
made to the attack on Khobar Towers in Saudi Arabia in 1996 
where we lost 19 American servicemen, after which the FBI 
complained that Saudi officials failed to cooperate with the 
United States probe and denied requests to question key Saudi 
officials.
    During the 1990's, the Saudi Government became one of the 
few governments in the world that supported the Taliban, 
despite the Taliban's link to terrorists.
    At the same time the Saudi Government was taking steps to 
strengthen its relations with the United States, it is said, it 
was funding extreme Muslim clerics in educational schools, the 
madrassas, that routinely called for attacks on the United 
States and hatred of all things American. And those madrassas 
in Pakistan, funded mainly by Saudi money, have provided 
recruits for the Taliban.
    Anti-American statements became standard fare in Saudi-
supported newspapers and publications. In 2001, after the 
September 11 attack killed 3,000 people in the United States, 
we found out that 15 of the 19 hijackers were Saudi nationals.
    The recently released report by the joint inquiry on the 
September 11 attack states in the unclassified section that a 
Saudi citizen employed by the Saudi Civil Aviation Agency paid 
many of the expenses of two of the hijackers and ``had access 
to seemingly unlimited funding from Saudi Arabia.''
    Until recently, Saudi Government officials and prominent 
Saudi citizens routinely contributed huge sums to Muslim 
charities which supported terrorism, including support for 
families of terrorists. The United States finally shut down 
several of those charities which were operating in the United 
States.
    The question that the President asked not too long ago--
``Are you with us or against us in the war on terrorism?''--in 
the case of the Saudis has got to be answered, ``Yes.'' Both. 
The rhetoric is that they are with us, but the actions too 
often have been that, in fact, they have been against us. And, 
of course, there is now a new issue with U.S.-Saudi relations, 
and that is that 28-page piece of the September 11 joint 
inquiry report which has been redacted, blanked out. These 
deletions have been described by the former chairman of the 
Intelligence Committee, Senator Shelby, as being related to 
embarrassing information and not to information which should be 
properly classified. And it seems to me that there just has to 
be declassification of all or almost all of that material if we 
are going to make public what is in there which is so 
critically important.
    [The prepared opening statement of Senator Levin follows:]

              PREPARED OPENING STATEMENT OF SENATOR LEVIN

    Terrorists need money to carry out acts of terrorism. They need 
money for explosives, for communications, for travel, and for all the 
other details involved in carrying out plans for mass murder and 
mayhem. Global terrorist organizations need global financing. They need 
to be able to transfer funds across international lines, move money 
quickly, and minimize inquiries into their finances, their activities, 
and their supporters.
    Since the 9-11 attack, stopping terrorist financing has become a 
U.S. priority. This Committee has contributed in a significant way to 
that priority through a 3-year anti-money laundering investigation 
conducted by our Permanent Subcommittee on Investigations. This 
investigation, which produced extensive hearings and reports, not only 
documented little known methods for transferring illegal funds into the 
United States, but also provided important recommendations for 
strengthening U.S. laws to detect, prevent, and halt terrorist 
financing. These recommendations were included in S. 1371, a bipartisan 
bill I introduced in early 2001; they were picked up by the Senate 
Banking Committee which improved and expanded them; and they were then 
included in Title III of the USA Patriot Act, which was enacted into 
law in October 2001, six weeks after the 9-11 attack.
    The new anti-money laundering provisions in Title III of the 
Patriot Act boosted U.S. efforts to stop terrorist financing. For 
example, Title III tightened the rules for money transfers by 
completely barring foreign shell banks from opening U.S. financial 
accounts, making it harder for offshore banks to arrange transfers of 
money into the United States, and requiring U.S. banks and securities 
firms to exercise more care before opening accounts for foreign persons 
and financial institutions. Title III also targeted informal money 
transfer systems, called ``hawalas,'' which are often used in the 
Middle East to transfer funds outside normal banking channels without 
paperwork or regulatory oversight. The new law essentially requires 
these operations to register with the U.S. Government or risk shutdown 
and criminal prosecution.
    Title III also made it easier to prosecute money laundering 
offenses involving foreign offenders by making it easier to freeze and 
seize foreign funds, obtain information from foreign jurisdictions, and 
prosecute foreign individuals and companies. The new law also required 
more U.S. financial institutions to establish ant-money laundering 
programs, verify customer information, and report suspicious financial 
transactions. Title III also modernized U.S. anti-terrorism criminal 
statutes by making it a crime to bring into the United States or take 
out of the United States large amounts of cash without disclosing the 
action and, if asked, providing an explanation for the funds, and by 
making it clear that anti-money laundering prohibitions apply to funds 
obtained legally if intended for use in planning, committing or 
concealing a terrorist act. The new law has enabled U.S. prosecutors to 
apply anti-terrorism prohibitions to funds legally collected by a 
charity if that charity intends to use the funds to support terrorism.
    The U.S. Government has started to make good use of these new anti-
money laundering provisions to intensify the fight against terrorist 
financing, but it would be incorrect to say that the United States has 
yet won this fight. We will hear testimony today about the difficulties 
of shutting down terrorist financing when some foreign governments are 
reluctant to take the necessary steps and may even, directly or 
indirectly, support persons or entities facilitating the movement of 
terrorist funds.
    The example the Committee has chosen to highlight today is Saudi 
Arabia. For years, there has been disturbing Saudi behavior regarding 
terrorism. In 1996, for example, after bombs killed 19 U.S. servicemen 
at Khobar Towers in Saudi Arabia, the FBI complained that Saudi 
officials failed to cooperate with the U.S. probe and denied requests 
to question key Saudi suspects. Also during the 1990's, the Saudi 
government became one of the few governments in the world to support 
the Taliban in Afghanistan, despite its links to terrorists. The Saudi 
government also funded some extreme Muslim clerics and schools known as 
madrassas that routinely called for attacks on the United States and 
hatred of all things American. Madrasses in Pakistan, funded mainly by 
Saudi money, provided recruits for the Taliban.
    Anti-American statements became standard fare in some Saudi-
supported newspapers and publications. In 2001, after the 9-11 attack 
killed more than 3,000 people in the United States, it was determined 
that 15 of the 19 hijackers were Saudi nationals. The recently released 
report by the Joint Inquiry into the 9-11 attack states in an 
unclassified section that a Saudi citizen employed by the Saudi civil 
aviation agency paid many of the expenses of two of the hijackers, and 
``had access to seemingly unlimited funding from Saudi Arabia.''
    Saudi government officials and prominent Saudi citizens have 
routinely contributed millions of dollars to Muslim charities which 
support terrorism, including supporting families of terrorists killed 
in bombings or other terrorist attacks. The United States finally shut 
down several such charities that were operating in the United States. 
The United States also decided earlier this year to vacate its military 
posts in Saudi Arabia at least in part due to discontent within the 
country at having a U.S. presence and continuing attacks on the United 
States by some Saudi clerics and in some Saudi publications.
    There are some recent actions taken by the Saudi government to stop 
terrorism. Saudi officials have openly identified their country as a 
strong U.S. ally and a foe of anti-American terrorism. In May of this 
year, after terrorist suicide bombings in Saudi Arabia killed 35 
people, the Saudi government began a series of raids to arrest 
terrorists within its borders. One such raid in July reportedly 
resulted in the arrest of 16 persons linked to al Quaeda and the 
dismantling of a weapons arsenal with 20 tons of bomb-making chemicals, 
detonators, rocket-propelled grenades, and rifles. Saudi officials also 
allegedly used information uncovered in this raid to halt several 
terrorist plots. We will also hear testimony today that the Saudi 
government has taken steps to strengthen cooperation in terrorist 
financing cases and other anti-terrorism efforts.
    Today, there is a new irritant in U.S.-Saudi relations. It arises 
from the 28-page gap and other blanked out information in the 9-11 
Joint Inquiry report. These deletions have been described as based less 
on protecting U.S. national security than on protecting Saudi Arabia 
from embarrassment. The former head of the Senate Intelligence 
Committee, Senator Richard Shelby, recently said, for example, that he 
had closely reviewed the deleted information and ``90 to 95 percent'' 
involved simply ``embarrassing'' information that should be 
declassified and disclosed. Recently, the Saudi government itself 
called for declassifying the information. Disclosure is the right 
course to set the record straight.
    The evidence of the past few years indicates that Saudi Arabia has 
a mixed record when it comes to stopping terrorism aimed at the United 
States. Some of the madrassas and some of the government-controlled 
press continue to teach hatred of Americans and the United States. Some 
Saudi nationals, including Osama bin Laden, have led terrorist 
organizations focused on U.S. destruction. Some Saudi-supported 
charities collect money that supports anti-U.S. terrorism. Some Saudi-
supported clerics continue to praise suicide bombings that kill 
Americans.
    The overly simplistic question of President Bush--``Are you with us 
or against us in the war on terrorism?''--is seemingly answered ``yes'' 
in the case of Saudi Arabia. The disturbing question remains: Is Saudi 
Arabia, in too many cases, failing to take the actions needed to cut 
off terrorist funding and failing to encourage tolerance and moderation 
rather than the hatred and extremism that breeds new terrorists.

    Senator Levin. My question of you, Mr. Newcomb, is the 
following: You have indicated that the recommendations that 
your Department has made relative to listing of entities that 
have contributed or have links to terrorist organizations in a 
number of cases were not accepted. And you have declined to 
identify the organizations, those charities and other entities 
that you recommended. On what basis do you decline to share 
with us those recommendations? Are you asserting Executive 
privilege here this morning?
    Mr. Newcomb. No, Senator, I am not.
    Senator Levin. Then what is the basis for your refusal to 
share with this Committee the names of those entities that you 
have recommended?
    Mr. Newcomb. Let me be real clear about what it is we have 
done. We have looked at evidence or information we believe was 
credible, and we have surfaced the target to a Policy 
Coordinating Committee chaired by the Treasury Department to 
determine what action is appropriate, whether it be 
designation, law enforcement, intelligence, or diplomatic. A 
number of agencies have come forward in a variety of different 
contexts and recommended that action be deferred.
    As to the specific names, it is matters that are sensitive 
because of law enforcement or other equities that are at stake. 
If you wish to have a briefing in a classified session, that 
would be more appropriate. But today, in a public hearing, it 
is not appropriate to mention actions that we may be taking to 
subvert the element of surprise or to in any way interfere with 
ongoing diplomatic, law enforcement, or other actions.
    Senator Levin. Is that information classified?
    Mr. Newcomb. Oftentimes----
    Senator Levin. No, not oftentimes. Specifically, are the 
names of the entities that you have recommended for listing 
classified?
    Mr. Newcomb. The evidentiary packages we prepare in most 
instances are.
    Senator Levin. Now let me ask my question again. My time is 
up? I will still ask it one more time, if I may, Mr. Chairman. 
I know the Chairman tried very hard and others have tried very 
hard to get this information, so let me try again.
    Are the names of those entities classified? The names 
classified that you have recommended for listing. It is a yes 
or no question.
    Mr. Newcomb. The names themselves are not classified.
    Senator Levin. Then I think you ought to present them to us 
today.
    Mr. Newcomb. I don't have them with me, Senator.
    Senator Levin. I think you ought to present them to the 
Committee within the next 24 hours if they are not classified, 
unless you are asserting Executive privilege that the President 
only can assert.
    Thank you.
    Senator Specter. Thank you, Senator Levin. When I passed 
you the note that the time was up, I was enjoying your 
questioning, not so much the answers but the questioning. But 
we have got a lot of Senators here and another panel.
    Senator Levin. I appreciate that.
    Senator Specter. Thank you. Senator Pryor.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Mr. Chairman.
    I have a question first for Mr. Pistole, and that is, have 
you found Saudi Arabia in general to be cooperative with your 
agency?
    Mr. Pistole. There is a clear delineation between prior to 
May 12 and the bombings in Riyadh and after May 12. Prior to 
May 12, there was a lot of frustration. Several Senators have 
mentioned Khobar Towers, tremendous frustration with that. 
Since the May 12 bombings where Saudi citizens were killed, and 
U.S. citizens were killed, there has been, as I described it, 
unprecedented cooperation.
    Senator Pryor. When you say unprecedented, do you feel like 
it is totally transparent cooperation, or do you feel like they 
are still holding some things back?
    Mr. Pistole. Oh, clearly, I believe they are holding some 
things back, just as I think we would in any investigation if 
we have the Mabahith come here to conduct an investigation 
because Saudi citizens were killed. We would not share 
everything with them because of national security concerns. So 
I don't for a minute doubt that they are withholding some 
information, what they perceive as in their national security 
interest. But the level of cooperation that we have had is such 
that, for example, having direct access to interview Saudi 
citizens who were eyewitnesses, direct access to the evidence, 
to bring back to the FBI laboratory if we so desired to do any 
type of analysis we wanted, that is what I describe as 
unprecedented.
    Senator Pryor. Mr. Newcomb, I would ask you the same 
question, and that is, the level of cooperation from Saudi 
Arabia to your agency.
    Mr. Newcomb. Yes, we have achieved a number of successes. 
One was the joint designation of two branches of the Al-
Haramain charitable organization in Bosnia and Somalia, as well 
as an individual that was affiliated with one of the charities, 
Mr. Julaidan. At meetings that we participated bilaterally with 
the Saudis, they announced to us and then subsequently 
announced in a press release the creation of a ministry 
specifically for the oversight of charities. In discussions we 
had with the Jeddah Chamber of Commerce, they implemented a 
code of conduct relating to standards for charitable giving. 
And we have had dialogues with a variety of deep-pocket Saudi 
individuals going through the responsibilities that we believed 
they were presented in the sanctions initiative and the United 
Nations resolutions.
    We have had meetings in Saudi and here, people soliciting 
us and us soliciting them. So those are things I would point to 
of things we have been able to do together, Senator.
    Senator Pryor. Thank you. I would also join with Senator 
Levin, Mr. Newcomb, that if the names are not classified, I 
think you should provide those to the Committee, hopefully 
within the next 24 hours.
    The last thing I wanted to ask--this is a general question 
probably for both of you, and that is, as I understand Saudi 
Arabia, there are a lot of internal pressures relating to 
terrorist activity, and perhaps the government does not either 
have the will or in the final analysis maybe the total control 
over some terrorist activities that may be going on within its 
borders. And as I understand it, the royal family there has 
been subject to acts of terrorism and near acts of terrorism on 
a number of occasions.
    Has that changed since--you were talking about May 11? I 
have forgotten the date.
    Mr. Pistole. May 12.
    Senator Pryor. Has that changed since May 12?
    Mr. Pistole. I believe so because I think that the royal 
family in particular sees themselves as being vulnerable to al-
Qaeda efforts in the kingdom and that no longer is this simply 
an entity that is focusing on Western interests but has now 
turned on the kingdom and the royal family that represents the 
kingdom. So, yes, I think they see themselves in a struggle for 
survival at this point.
    Senator Pryor. Mr. Newcomb, do you have any comments on 
that?
    Mr. Newcomb. I don't. I have not had discussions since that 
date so I could base any summary or conclusions, so I cannot 
add to that.
    Senator Pryor. Thank you. That is all, Senator Specter. 
Thank you.
    Senator Specter. Thank you very much, Senator Pryor.
    Mr. Pistole and Mr. Newcomb, there are obviously many more 
questions to be asked, but we have another panel. What we would 
request that you do is stay in the hearing room because 
something may arise in the course of the testimony from the 
next panel which would lead us to want to ask you some follow-
up questions, if that should arise.
    We will now turn to Dore Gold, former Israeli Ambassador--
--
    Senator Carper. Mr. Chairman, could I ask one quick 
question of these panelists before they leave?
    Senator Specter. One quick question?
    Senator Carper. Yes.
    Senator Specter. With an answer?
    Senator Carper. Hopefully.
    Senator Specter. OK.
    Mr. Pistole, we have had a late arrival here. Senator 
Carper has arrived and has one quick question.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Gentlemen, and Mr. Chairman, thank you for 
your consideration.
    Gentlemen, the report issued last year on terrorist 
financing by the independent task force sponsored by the 
Council on Foreign Relations States, ``It is true that Saudi 
Arabia has taken two or three important steps to improve its 
capability to cooperate on these matters with the United 
States, for which it should be commended. A hundred more steps, 
and Saudi Arabia may be where it needs to be.''
    That is the quote, and that sounds like Saudi Arabia is 
about 1 percent of the way where it needs to be. Is that a fair 
characterization?
    Mr. Newcomb. Senator, I would respond by saying at least 
from where we sit, Saudi has taken some important first steps, 
steps I have mentioned in answer to Senator Pryor's questions. 
I think then the question becomes follow-up, how are they 
implementing, what are the oversight of charities that this new 
ministry is doing, what future joint designations are we going 
to make, and how are they going to be implementing the 
regulation of charities and other such activities. So I think 
it is an ongoing process and one that we need to continue.
    Senator Specter. Senator Carper, you have a second quick 
question?
    Senator Carper. Thank you, Mr. Chairman.
    In terms of getting the other 99 percent of the way, what 
do we need to be doing at our end, the legislative end, to 
encourage that along?
    Mr. Newcomb. I think we need to be doing more of what we 
are doing, what we are doing except more of it, and I think we 
need to continue dialogues where we are able to focus on the 
issues that are relevant to the relationship.
    Senator Carper. Mr. Pistole, do you want to add any 
comments on this?
    Mr. Pistole. My only insight on that, Senator, is that it 
is such a broad issue for the U.S. Government as a whole with 
so many equities represented that, from an FBI perspective, we 
are having some significant successes that we are trying to 
build upon and that anything that we would do would need to be 
done in concert with the National Security Council, with all 
the other equities represented. So we are building on the 
successes. We are trying to get into things that we have never 
been allowed to before, and we have had some incremental 
successes.
    Senator Carper. All right. Thanks very much.
    Senator Specter. Thank you very much, Senator Carper.
    We will now proceed to the second panel. The first witness 
is former Ambassador Dore Gold, Israeli Ambassador to the 
United Nations, a recognized expert on Middle Eastern strategic 
affairs, author of ``Hatred's Kingdom: How Saudi Arabia 
Supports the New Global Terrorism.'' Ambassador Gold, we are 
very tight on time, and we will set the clock at 5 minutes, and 
we look forward to your testimony.

  TESTIMONY OF DORE GOLD,\1\ FORMER ISRAELI AMBASSADOR TO THE 
  UNITED NATIONS, AND PRESIDENT, JERUSALEM CENTER FOR PUBLIC 
                            AFFAIRS

    Mr. Gold. Thank you very much, Madam Chairman and Senator 
Specter and the Senators who are Members of this Committee, for 
inviting me to this panel. I should start by saying my 
testimony here, I am speaking on my own behalf. I don't 
represent the Government of Israel or any other institution. I 
think, however, that there are three dimensions of what Israel 
has experienced over the last number of years that will be of 
interest to the Committee and to the American people at large 
because of the concern about Saudi Arabia's role in support, 
both ideological and financial, of the new terrorism that we 
are facing.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gold with attachments appears in 
the Appendix on page 77.
---------------------------------------------------------------------------
    I believe some of the lessons and some of the experiences 
that we are having have direct connections and implications for 
the issues that are of concern to you.
    Let me begin with a little bit about how we have gotten 
into this subject, and I am going to basically restrict my 
presentation to just a number of issues that are in a 
PowerPoint presentation. You have my written testimony, if you 
want to go into further detail on historical elements as well.
    If today, for example, a young Palestinian wishes to see 
what are the ideological sources on what basis he should commit 
a suicide bombing attack against Israelis, and he goes to the 
website of the Hamas organization, what you will find here--and 
you see it here on the PowerPoint. This is directly from a 
Hamas website. Of, let's say, the number of clerics that are 
mentioned here who justify suicide attacks, the use of suicide 
bombing, and the fact that the person is regarded as a martyr 
in Islam, the largest national grouping of clerics that support 
these positions are Saudis.
    This immediately opened up the question of the Saudi 
relationship to the wave of suicide bombing that Israel is 
facing. But the problem of ideological support that we are 
seeing for these kinds of suicide attacks is not just confined 
to the area of Israel.
    If we go on to the next presentation, right after the 
September 11 attack a book was published on a Saudi website 
which was rather alarming since it basically--it is called 
``The Foundations of the Legality of the Destruction That 
Befell America.'' This basically justifies the attacks on the 
United States.
    Now, when you find a book like this on a Saudi website--and 
what was interesting, of course, is one of the men who is one 
of the authors of this book is mentioned on the Hamas website--
you have to ask: Are we dealing with a Saudi extremist, someone 
who is on the periphery of society, somebody who is maybe the 
equivalent of a Timothy McVeigh in the Saudi system?
    Well, we did biographical research on these individuals, 
particularly the two that wrote the introduction to the book. 
One of them is Sheikh al-Shuaibi, who recently died last year, 
in 2002, and he, of course, is one of the ideological sources 
on the Hamas site as well. He happens to be an individual who 
grew up in the Saudi system, who studied under the Grand Mufti 
of Saudi Arabia when King Faisal was in power. His students 
look like a ``Who's Who'' of Saudi Arabia, including the former 
Minister of Islamic Affairs of Saudi Arabia and the current 
Grand Mufti. And, therefore, when someone like this puts his 
name on a book justifying the attacks on September 11 and we 
find that that individual has a leading role in the education 
of elements of the Saudi establishment, that is a source of 
very serious concern about what is going on in Saudi Arabia in 
terms of religious support for the new wave of attacks that we 
are facing.
    It also has a relationship to the financial side as well, 
because if leading clerics are taking position of this radical 
nature, what does that suggest to members of society who are 
thinking about what to do about charitable contributions, and 
even if an organization is considered tainted because of 
terrorist connections? Therefore, looking into the ideological 
support structure of the new terrorism becomes very important.
    Just to give you a sense of where things can possibly lead, 
once you can justify attacks on the United States of September 
11, it doesn't become surprising that we have now a new fatwa 
that was released in May 2003 which justifies the use of 
weapons of mass destruction against the United States, 
including the killing of 10 million Americans or other 
infidels.
    Now, the author of this particular fatwa--his name is 
Nasser al-Fahad--happens to have been imprisoned by Saudi 
Arabia recently, which is a positive development because I know 
many of the Senators are following the post-May 12 
developments. But, nonetheless, that these ideas are out there, 
that these ideas influence young people, are of tremendous 
concern. And, of course, we have also seen in the past in the 
1990's where extremist clerics were put in prison by Saudi 
Arabia were subsequently let out. So this is an issue that you 
should be looking at.
    Let me move now into the issue of the terrorist financing 
with direct implications for your Committee and for your 
concerns. This may be difficult for you to read, but this 
particular element of the powerpoint presentation outlines the 
three largest Saudi charities that have been suspected of being 
involved in terrorist financing: IIRO, WAMY--that is the World 
Assembly of Muslim Youth--and al-Haramain. I think the 
important element in this particular slide that you should pay 
attention to is many times you hear in a lot of these hearings 
Saudi NGOs, non-governmental organizations. And you would think 
from that, therefore, that the government responsibility in 
Riyadh is somewhat minimal when you see connections between 
Saudi charities and particular terrorist organizations.
    But someone doing the most minimal declassified work 
possible, going to the websites of each of these organizations, 
in Arabic, you would find--when you try to see who is at the 
head of these organizations, what you will find is that these 
are not NGOs. These are GOs. These are government 
organizations, and let me be very specific.
    When you look to see who is the head of the IIRO, which is 
a branch or a subset of the Muslim World League, you find that 
the chairman of the Constituent Council of the World Muslim 
League, the Muslim World League, is no less than the Grand 
Mufti of Saudi Arabia, who is, by the way, a member of the 
Saudi cabinet. If you look both at WAMY and al-Haramain--I 
understand you should have before you also these papers so that 
you can see them more clearly--you will see that at the head of 
both WAMY and al-Haramain, the chairman of these organizations, 
the chairman of the WAMY Secretariat and the chairman of the 
al-Haramain Administrative Council, is the Minister of Islamic 
Affairs of Saudi Arabia, who is also a Saudi cabinet member. So 
that the ultimate corporate responsibility in each of these 
organizations is in the hands of a member of the Saudi 
Government.
    Now, in following how these organizations have been active, 
probably one of the earliest sources of evidence of some 
problem in the way that these organizations function comes from 
documents that were found in Bosnia in the late 1980's. One of 
these documents is on the stationery of the International 
Islamic Relief Organization, and it summarizes a meeting 
between bin Laden representatives and the Secretary General of 
the Muslim World League. This document is, of course, not an 
Israeli document. It wasn't found by Israeli sources, but it is 
certainly well known among those who are following this issue 
in the intelligence community.
    But I think what directly relates to Israel is the 
following document. In Operation Defensive Shield in the West 
Bank, when Israel went into Palestinian headquarters, a number 
of Saudi documents were found, not just Palestinian documents, 
on the pattern of terrorist funding. This document is on 
stationery of the International Islamic Relief Organization, 
and it summarizes the disbursement of $280,000 to 14 Hamas 
front organizations. So here we have IIRO----
    Senator Specter. Do you have a date on that document?
    Mr. Gold. I can get the date for you, but this document was 
undated. We can probably approximate it in the year 2000.
    Now, what is very important, I think, for your study of 
this situation of Saudi financing of terrorism is to look at 
the statements that Saudi officials are making about issues 
which we can document. For example, Adel Jubeir, who frequently 
appears on American television--he is the foreign policy 
adviser of Crown Prince Abdullah--stated on August 16, 2002, on 
``Crossfire,'' ``We do not allow funding to go from Saudi 
Arabia to Hamas.'' And he has made repeated references of this 
sort. On the other side, in the Foreign Ministry of Saudi 
Arabia, the Foreign Minister, Prince Saud al-Faisal told Arab 
News, an English newspaper of Saudi Arabia, the following on 
June 23, 2003. He was asked if the kingdom had ever financed 
Islamic movements in Palestine, meaning Hamas and Islamic 
Jihad, whether directly or indirectly. And Prince Saud said 
that since the establishment of the Palestine Liberation 
Organization as the sole legitimate representative of the 
Palestinian people, the Saudi Kingdom has been sending the 
remittances through the PLO. So, again, we have another firm 
denial of any Saudi Arabian support for Hamas.
    Senator Specter. Ambassador Gold, you are now double time, 
so could you sum up?
    Mr. Gold. Yes. I will wrap up with one more document.
    One of the strongest sources of evidence showing Saudi 
Arabian support for Hamas, a recognized international terrorist 
organization, is actually a letter written by Mahmud Abbas, 
also known as Abu Mazen, the Prime Minister of the Palestinian 
Authority today. This letter was written in December 2000. It 
was a fax that was sent to Prince Salman, governor of Riyadh 
and a full brother of King Fahd. In this letter, Abu Mazen 
specifically requests that the Saudis stop funding al-Jamiya 
al-Islamiya, which is a Hamas front in the Gaza Strip.
    I would just end by showing you the kind of activities that 
this organization does, because many people say, oh, well, they 
are involved in civilian activity. This is a graduation of 
1,650 kindergarten students in the Gaza Strip in 2001 in which 
the children are in uniforms. They are re-enacting terrorist 
attacks. For example, here is a young girl re-enacting the 
lynching of Israeli soldiers. Many of them are also wearing 
suicide belts as well. So this is the kind of education which 
Saudi Arabia has been funding and the kind of education which 
Abu Mazen has sought that the Saudis stop.
    One last element, because terrorist financing is--and this 
will be my final slide. This is a check, a corporate check from 
the Chase Manhattan Bank in New York. The corporate check 
belongs to Al-Rajhi Banking and Investment Company, which has 
long been suspected of being a conduit for terrorist financing 
by many authorities. In this case, we actually found a check 
from 1999 showing how an American account could be used for 
funding Hamas. The organization the check is written to is 
Lajna Sakat Tulkarm, which means the Tulkarm Charity Board, 
which is an unquestionable Hamas front.
    I will stop here, and we can go into further elements of my 
presentation.
    Senator Specter. Thank you, Ambassador Gold.
    The Committee had invited Adel al-Jubeir, foreign policy 
spokesman for the Kingdom of Saudi Arabia, to appear and he 
declined. I want that to be known publicly.
    Our next witness is Jonathan Winer, formerly Deputy 
Assistant Secretary of State for International Law Enforcement, 
and now an attorney with the firm of Alston and Bird. Thank you 
very much for joining us, Mr. Winer, and we look forward to 
your testimony.

       TESTIMONY OF JONATHAN M. WINER,\1\ ALSTON AND BIRD

    Mr. Winer. Thank you, Mr. Chairman. Before the team goes 
off to Saudi Arabia to try and work these issues out, it may be 
useful to recollect what has happened in past missions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Winer appears in the Appendix on 
page 110.
---------------------------------------------------------------------------
    Back in 1998, 5 years ago, right after the bombs went off 
in Dar es Salaam and Nairobi, the Executive Branch convened an 
interagency meeting on the International Emergency Economic 
Powers Act to determine whether there should be designations in 
connection with those bombings in relationship to terrorist 
finance. We tried to assess as a government then what the basis 
was for al-Qaeda to carry out its activities around the world, 
and we had two false conclusions we were basing our assessment 
on at the time. The first is it doesn't take a lot of money to 
be a terrorist, and the second is bin Laden is wealthy and 
doesn't need money from anybody else. It was an incomplete 
theory of the case, an inadequate theory of the case, and 
ultimately a wrong theory of the case.
    The actual case was it cost a lot of money to create al-
Qaeda. It was a constant fundraising operation. And it took us 
some months until late 1998 to figure that out. We now had a 
theory. The question was what to do about it.
    What we sought to do then was to map the network with 
fragmented information, identify the key nodes, and then try to 
disrupt those nodes. We also had as a government the enormous 
power of the International Emergency Economic Powers Act to 
freeze assets of foreign entities--banks, businesses, 
charities, whatever. And we recognized that this important 
power was not recognized or understood by many countries, 
including countries where we saw terrorist finance to be a 
problem.
    We came to the conclusion that we should do an 
International Emergency Economic Powers Act designation against 
the Taliban as one way of taking action against al-Qaeda, as a 
means of putting pressure not only on the Taliban but their 
supporters, as well as other governments in the region. We 
wanted to increase the leverage that we had.
    We had had sporadic contacts at that point with embassies 
in the region, including with the Saudis. These were not 
particularly focused, and they weren't particularly high level. 
We recognized in late 1998, early 1999 as a government that the 
only way you can really deal with the Saudi Government is from 
the top down. There were communications between the Vice 
President's office and Crown Prince Abdullah which took place 
in which the United States said we want to send a team over 
that is very high level to discuss something that is very 
important in connection with our embassies having been 
attacked.
    In May or June 1999, these meetings took place in Saudi 
Arabia. They were interagency meetings, very similar to the 
interagency meetings that are about to take place once again in 
Saudi Arabia that have been discussed earlier today in these 
hearings.
    We had said we didn't want one-on-one's, this agency 
meeting with that agency on either side, because when you have 
one-on-one's agency after agency, you can get the runaround: We 
would love to help you, but you have to go talk to someone 
else. We wanted a unified, integrated approach government to 
government. That is my understanding of what took place. I was 
not directly part of that mission. I received reports when it 
came back.
    The delegation talked about IEEPA to the Saudi Government. 
They talked about how the use of IEEPA could hurt U.S.-Saudi 
financial and economic relationships and even result in 
substantial freezes of Saudi funds and freezes of funds of 
high-level individuals in Saudi Arabia with international 
prominence. These meetings took place 4 years ago, prior to the 
September 11 attacks.
    We advised them that we would be shutting down Ariana 
Airlines, the Taliban's airline, and that any airports that 
continued to permit Ariana flights to take place, they could 
potentially get shut down. At that point, the Moscow airport 
and the Saudi airport were two of the airports that Ariana was 
using, given cover in part by the Russians. The Saudi ability--
Ariana Airlines' ability to use Saudi Arabia was stopped at 
that time, and that provided the first use of IEEPA in that 
area relevant to the terrorist area.
    We hoped that this would start a new relationship on the 
subject of terrorist finance. I left the government in late 
1999. I was told that there was a second meeting in early 2000. 
Another U.S. interagency delegation went to Saudi Arabia. The 
readout that I hear on an unclassified basis very generally is 
that there was only marginal benefit from the second meeting, 
that the desert sands of Saudi Arabia had ground down this 
initiative like so many before it. Again, 3\1/2\ to 4 years 
ago, prior to September 11.
    One problem we ran into was that the Saudis had very little 
centralized integration and their government agencies didn't 
talk to one another, didn't trust one another, didn't work 
together, didn't communicate with one another. And that had an 
impact on the political will of the Saudi Government.
    Now, I was asked also to talk briefly about the designation 
process. I participated in IEEPA designation processes on 
various issues when I was in the Clinton Administration, and I 
can tell you that, yes, sometimes it was the State Department 
who said no, we don't want to get our foreign partners upset--
not my part of the State Department but other parts of the 
State Department. And, of course, geographics trump functionals 
most of the time at the State Department. State relationships 
are more important. Sometimes it was the FBI. Quite often it 
was the FBI because they didn't want to have criminal cases 
interfered with. Sometimes it was the Justice Department 
backing up the FBI.
    In my experience, it was never the CIA or the intelligence 
agency. It may have happened in other cases, but not in any 
case that I participated in. And very rarely--rarely--it was 
the White House or the Treasury, but very rarely. Usually State 
or FBI in my experience.
    Now, did we shoot down designations that Treasury had the 
ability to put together and, in fact, recommended? We 
absolutely did. It did not happen to be in the terrorist area 
during my time. It was in other areas. But it certainly 
happened, in which foreign policy or other considerations 
trumped decisions or recommendations made by OFAC. I can say 
that as a general matter.
    A couple of final points before I run out of time. It has 
been my experience that collective leadership is not usually a 
mechanism to forceful action. In the Clinton Administration, 
through much of the time a fellow named Dick Clark pushed 
counterterrorism in a central way, including terrorist finance. 
I am sure there is someone doing this in the administration 
today. I just don't happen to know who it is. I am concerned 
that there isn't somebody in the White House with that job. I 
think there should be.
    Finally, with regard to the Saudis and this latest mission, 
coming 4 years after the first mission on exactly this topic, 
denial is not just a river in Egypt, and those who forget the 
past are condemned to repeat it.
    Thank you, Mr. Chairman.
    Senator Specter. Thank you very much, Mr. Winer.
    Our next witness is Steve Emerson, an expert on terrorism 
and terrorist financing, the author of ``American Jihad: The 
Terrorists Living Among Us.'' Mr. Emerson is currently NBC's 
terrorism analyst and a special investigative correspondent for 
CNN.
    Thank you for joining us, Mr. Emerson, and we look forward 
to your testimony.

    TESTIMONY OF STEVEN EMERSON,\1\ EXECUTIVE DIRECTOR, THE 
                     INVESTIGATIVE PROJECT

    Mr. Emerson. Let me clarify that I was formerly a 
correspondent for CNN. Thank you to the Committee for holding 
this hearing this morning. I think that shining a light on the 
whole issue of the very intricate web of connections between 
the Saudi Government and the funding of terrorism is absolutely 
pivotal to preventing another September 11.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Emerson appears in the Appendix 
on page 131.
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    Just recently, in the last month, Adel al-Jubeir, foreign 
affairs adviser to the Crown Prince Abdullah, denied that Saudi 
Arabia was funding terrorism, and when asked about whether 
Saudi charities had complied with the new regulations, he said 
he hoped so. He also stated, ``If the UN is headquartered in 
New York, is America responsible for everything the UN does?''
    Now, I think it is very important to bear out in the very 
beginning here that the analogy that Mr. Jubeir has referred to 
is not correct. The fact of the matter is that major Saudi 
NGOs, non-governmental organizations, as they have been 
designated legally, either in Saudi Arabia or in conjunction 
with the United Nations, have been tied for years directly and 
indirectly to the support for al-Qaeda, Hamas, Islamic Jihad, 
and other terrorist groups. Often, it must be stated, the 
connections are not neatly compartmentalized, largely because 
of the very complex ways in which terrorist funding has been 
laundered to terrorist groups. Still at other times, the 
evidence shows that NGOs carry out activities that are 
``totally legitimate and legal.'' Indeed, it is the very 
external legitimacy of these groups that provides the perfect 
cover to siphon off, divert, or launder financial support or to 
provide cover for terrorist cells. There is also a problem 
sometimes in determining whether an affiliate group makes the 
entire organization corrupt or whether, in fact, there is just 
one bad rogue chapter in that organization.
    Let me just briefly go over some of these things that I 
have presented in the written testimony to give an indication 
of why the problem is not just limited to either select 
chapters and why it is connected to the Saudi regime itself.
    For example, we have collected several textbooks used and 
distributed in the United States, distributed by the Saudi 
Embassy in Washington, D.C. They have the full imprimatur of 
the Kingdom of Saudi Arabia on the textbooks. In the testimony, 
I refer to the curricular used in grades 4 through 11, but let 
me just cite a quote from the 7th grade class Book 5. The book 
says, `` `What is learned from the Hadith?' and teaches, `The 
curse of Allah be upon the Jews and the Christians.' '' Grades 
8 through 11 continue to emphasize the notion and piousness of 
the jihad, and in grade 11 it warns against taking the Jews and 
Christians as friends or protectors of Muslims.
    I think this, unfortunately, helps develop a whole 
generational mind-set that leads to terrorism, noting that 
terrorism is really the culmination of indoctrination and 
recruitment. Much of that indoctrination is entirely legal, 
with terrorism being the violent, illegal expression ultimately 
and representing the culmination of the indoctrination and 
recruitment.
    The Muslim World League, as has been referred to 
previously, is a group that was established in 1962 by the 
Saudi Arabian regime. It has continued to fund major Islamic 
movements around the world, often defending itself by claiming 
it is only involved in promoting education or repelling hatred 
against Islam.
    However, it is absolutely clear that U.S. investigators, 
law enforcement for the FBI and intelligence investigators at 
the CIA, have collected abundant material showing MWL 
connections to al-Qaeda and to Hamas during the past 20 years--
15 years in Hamas, to be specific, and in the case of al-Qaeda 
going back to the late 1980's. Similarly, other groups in Saudi 
Arabia, NGOs such as the International Islamic Relief 
Organization, established in 1978 as an arm of the MWL. Let me 
just briefly point out that in 1994, Muhammad Jamal Khalifa, 
Osama bin Laden's 37-year-old brother-in-law, was arrested in 
California coming from the Philippines. In his possession were 
documents connecting Islamic terrorist manuals to the 
International Islamic Relief Organization, the group that he 
had headed in the Philippines. In addition, the Canadian 
Government has stated in testimony in Canadian courts in the 
last 2 years that the IIRO secretly funded terrorism.
    I think it is also important to note that Fayez Ahmed 
Alshehri, one of the September 11 airline hijackers, told his 
father before he set out for the hijacking conspiracy that he 
was going to work for the IIRO.
    There is another group that is also involved and controlled 
by the Saudi Government and also has been cited in terms of its 
ties to Bosnian terrorists and to al-Jemaa Islamiyah. This 
group is al-Haramain.
    Last, I would like to point out that the group called WAMY, 
the World Assembly of Muslim Youth, is an organization that, 
even though Saudi officials claim have no official connection, 
is largely funded by Saudi officials and by senior Saudi 
philanthropists. This organization has been tied to the 1993 
World Trade Center bombing and has been repeatedly tied to al-
Qaeda in numerous activities around the world. Most of that 
material I submit for the record in the testimony.
    Thank you very much.
    Senator Specter. Thank you, Mr. Emerson.
    I had asked FBI Official Pistole to stay, and I have one 
question for you at this point as a follow-up to Mr. Winer. Is 
Mr. Pistole present?
    Mr. Lormel. I am Dennis Lormel, sir. Mr. Pistole had to go 
back to the office. I stayed behind. I am chief of the 
Terrorist Financing Operations Section.
    Senator Specter. Well, when we ask witnesses to come, we 
request that they stay for the full hearing because in the 
course of the hearing other issues arise where we would like to 
have them here.
    Mr. Lormel. Sir, that is why I stayed. If I could answer 
the question, I would be happy to.
    Senator Specter. Well, when the Committee asked Mr. Pistole 
to stay, he ought to stay. In his absence, I will ask you the 
question.
    It has been reported that the FBI will not pursue a 
criminal investigation where probable cause exists for the 
investigation if there is an objection from the State 
Department. Is there any validity to that report?
    Mr. Lormel. No, sir, I don't believe so. Maybe if you could 
explain a little more, I could better understand the context.
    Senator Specter. Well, the report is that where there is 
probable cause to pursue an investigation under the criminal 
laws of the United States, the State Department can interpose 
an objection and prevent that investigation from going forward. 
And that is a very relevant point of inquiry at this particular 
hearing. It is a point that I have inquired about before.
    Would you do two things? Would you identify yourself for 
the record? Do that now.
    Mr. Lormel. Dennis Lormel, and I am the chief of the 
Terrorist Financing Operations Section in the Counterterrorism 
Division of the FBI.
    Senator Specter. OK. And would you relay that question to 
higher authorities in the Federal Bureau of Investigation and 
respond to this Committee?
    Mr. Lormel. Yes, sir, I will.
    Senator Specter. Thank you.
    Mr. Lormel. And to my knowledge, I am not aware of any such 
cases. I can specifically speak to terrorist financing, and in 
our investigations there has been no such interaction with the 
State Department requesting that we stand down on criminal 
cases.
    Senator Specter. Well, take the question up with higher 
authorities in the FBI, and while you are doing that, tell them 
that when the Committee asks a witness to appear, we like to 
have them here for the entire hearing, like the Senators are 
here for the entire hearing.
    Mr. Lormel. Yes, Senator.
    Senator Specter. Mr. Winer, you very delicately stated that 
the State Department doesn't want to get our foreign partners 
upset. That is a magnificent understatement. Have you ever 
heard of a report that the FBI would not pursue an 
investigation, a criminal investigation, where probable cause 
existed if the State Department raised an objection at the 
highest levels?
    Mr. Winer. I have not heard such reports, sir. In the time 
that I was at the State Department as the senior person for 
international law enforcement, I was aware of no such request 
from the State Department to the Bureau. Certainly I made none 
or would have encouraged or permitted the making of none.
    However--and it is an important caveat--when requests of 
that nature are made, they are not written down and they are 
not done within the system, and they are done at a high level. 
I don't mean this specific request because I don't know of such 
a request. But if a foreign government wished to be protected 
from a particular action by the U.S. Government and a Secretary 
of State so chose to do it, they do have the capacity and, in 
my experience, take advantage of that capacity to go around the 
system on any number of highly sensitive matters to arrange to 
have things done.
    I think it is very undesirable because I believe every 
decision made should be on the record. I believe it is critical 
for the integrity of the system not to have decisions taken off 
the record. But it did take place during my time in government, 
not in connection with the FBI, not in connection with a 
criminal justice matter.
    Senator Specter. Well, what was it in connection with and 
what was it?
    Mr. Winer. Inquiries that other people were making other 
than the FBI. Matters were essentially calmed, quieted, stopped 
as a result of very high-level interventions, but not criminal 
justice pertaining to terrorism, not law enforcement per se. 
Regulatory.
    Senator Specter. Can you be a little more specific in 12 
seconds?
    Mr. Winer. I can not, not because I am trying to protect 
any information from the Committee but because while I 
recollect it happening more than once, the exact circumstances 
are not at my fingertips, unfortunately. The memory of it is 
absolutely precise, but the substance, unfortunately, is not, 
sir.
    I will say last, if I may, that in the regulatory review 
process, the fact that there is no process for integrating the 
equities into a solution is a huge problem when it comes to 
IEEPA. And, generally speaking, the way in which the Bureau 
deals with the State Department is that simply the Bureau does 
its thing, the State Department does its thing, and never the 
twain shall meet. So the problem is, when you get into everyone 
asserting their equities within the interagency process for an 
IEEPA designation, if one component objects, often that 
terminates, shuts down the whole thing, and that is not a good 
outcome.
    Thank you, sir.
    Senator Specter. Well, there is considerable concern by 
many in the Congress about Saudi Arabia being shielded for 
foreign policy reasons.
    Mr. Winer. I have that concern, sir.
    Senator Specter. That has been broadly expressed here today 
and in virtually every quarter. And one of the inquiries which 
has to be pursued is to what extent that is done and what are 
the policy ramifications, and it may be appropriate on public 
policy lines. But when you have a criminal investigation, an 
investigation into the U.S. Criminal Code, and there is 
probable cause to proceed, and it does not proceed because of 
foreign policy considerations, that is a matter which should 
attract the attention of the Congress at the highest levels. 
And that is an issue which is being pursued. It is not an easy 
issue to get answered.
    Chairman Collins.
    Chairman Collins. Thank you very much, Senator Specter.
    Ambassador Gold, your exhibits are extremely persuasive and 
convincing in casting much doubt on the repeated claims by the 
Saudi Government that it is not funneling money to terrorist 
groups such as Hamas. Our previous FBI witness believes that 
there has finally been a sea change in the commitment of the 
Saudis since the bombing in May in Riyadh.
    I want to ask you two questions. First, what is your 
general assessment of the commitment by the Saudis in the wake 
of the May bombing? Do you believe there really is an attitude 
change and a commitment now? And, second, have you seen any 
evidence that the May 12 bombings have caused the Saudis to cut 
back on their financial and other support for Hamas?
    Mr. Gold. Let me answer your question, Madam Chairman. I 
think one has to draw a fundamental distinction between what is 
going on domestically in Saudi Arabia and what might be going 
on globally. Certainly that is the evidence that I have at this 
point.
    I think it is clear, anybody just perusing newspapers since 
May 12, that Saudi Arabia is taking a large number of 
counterterrorist actions at home in terms of unveiling 
different units of al-Qaeda or--and, by the way, in 
geographically different parts of the kingdom--or trying to 
find weapons caches. That seems to be what is going on there. 
Counterterrorism activity at home seems to be considerable in 
comparison to what existed before.
    However, I can report to you with, let's say, full 
authority and perhaps even encapsulating the national 
intelligence assessment of Israel that at present, as we speak, 
approximately 50 to 70 percent of the Hamas budget comes from 
Saudi Arabia. And I would say that portion, the Saudi portion 
of Hamas funding, is growing rather than declining.
    Now, that is all I can say about the particular case of 
Saudi Arabia and Hamas. I think it would be interesting to 
compare what is going on globally in the Philippines, in 
Russia, in East Africa, and with respect to al-Qaeda as well 
outside of Saudi Arabia to see whether their action is only 
aimed at protecting themselves domestically, but it is 
basically the same old business overseas.
    Chairman Collins. Thank you.
    Mr. Emerson, you raised a very good point in your statement 
that it is not only a matter of Saudi support, financial 
support for terrorist organizations but, rather, the 
curriculum, the schools, what Saudi children and Saudi-
supported schools elsewhere are teaching young people and 
whether or not they are instilling a hatred of Christians and 
Jews. And to me that is equally disturbing because it helps 
raise a whole new generation of people who are going to be 
susceptible to terrorists, to involvement with terrorist 
groups.
    Have you seen any change in Saudi schools since the events 
of September 11 or more recently since the bombing in Riyadh?
    Mr. Emerson. Since September 11, I can tell you Saudi 
officials have declared that they have reined in some of the 
clergy and they fired or, ``re-educated more than a thousand 
clerics.''
    On the other hand, the fact of the matter is if one looks 
at the FBIS reports, the Foreign Broadcast Information Service 
reports, plus the Saudi media and Saudi television, which is 
openly available on satellite television, one can see routine 
demagoguery leveled against the United States, against 
Christians and Jews routinely. Saudi websites features are the 
demonization of Jews and Christians as well as moderate 
Muslims. And I think you should be aware of something else, 
very disturbing. This incitement is not necessarily illegal. It 
is considered free speech, and particularly in the United 
States. The problem is: How does one combat incitement within 
the context of an open society?
    It is my feeling that incitement needs to have the sunshine 
to expose the whole virus of extremism, and those groups, 
entities, individuals that are propagating the incitement need 
to be delegitimized, or invited to the United States, or 
embraced. And I think that goes to the heart of getting Saudi 
Arabia to understand and recognize that it must rein in the 
extremists that in turn breed the terrorists that carried out 
September 11.
    Chairman Collins. Thank you. May I do just one quick 
question for Mr. Winer?
    Senator Specter. Absolutely.
    Chairman Collins. Thank you.
    Mr. Winer, you have experience in a previous 
administration, and I am trying to better understand why the 
U.S. Government has not been tougher with the Saudis. Do you 
believe that one factor, aside, perhaps, from our bases or oil, 
but I have heard that the U.S. Government has been hesitant to 
go after some suspected financers of terrorist groups because 
they are prominent Saudi business people. Do you think that is 
accurate?
    Mr. Winer. Yes.
    Chairman Collins. Could you expand further on why you think 
the Federal Government under both the previous administration 
and perhaps this administration as well has been somewhat 
reluctant to fully confront the Saudi Government in the wake of 
all of this compelling evidence?
    Mr. Winer. I think a number of the factors are 
institutional and bureaucratic before you get to the additional 
factors pertaining to Saudi Arabia itself.
    First, institutionally and bureaucratically, the only 
businessmen really that the U.S. Government went after prior to 
September 11 were Colombian businessmen who were also major 
cocaine traffickers. Prior to that, we used the International 
Emergency Economic Powers Act against countries or against 
military leaders, that kind of thing. These were businessmen. 
We were able to go after them because we found a computer in 
Colombia from the Cali cartel that listed all the businesses 
owned by these people who we had chapter and verse as drug 
traffickers. Easy case to make. Justice led making that case. 
Treasury, Mr. Newcomb strongly supported doing that because he 
felt all the facts were there, and it wasn't going to put IEEPA 
powers at risk, because what the U.S. Government is worried 
about, if we reach too far and somebody who is well funded goes 
after us and says you don't have the authority to do that, you 
don't have the public evidence to do that, we might lose some 
of that power. So there is an institutional concern. Don't 
overreach and then lose some of the power you have. Those are 
institutional and bureaucratic but very important constraints.
    In the area of Saudi businessmen, you have got the problem 
of the fragmentary nature of the information, the fact that 
money is fungible, and just because a businessman funded a huge 
charity and that charity engaged in terrorist logistical 
support and recruitment in the Philippines and in the Middle 
East and in Chechnya and Bosnia and wherever, while also doing 
lots of wonderful other things, how do you know that that 
businessman when he gave that money intended the bad things as 
well as the good things? A difficult case to make.
    So prior to September 11, you are having tremendous 
tensions over what is the right thing to do in light of those 
institutional issues, legal issues, practical issues, even 
before you get to the sensitivity of the Saudi relationship 
itself. The facts about terrorist finance, while voluminous, 
are also often rather murky and difficult to fully decipher. 
Our intelligence was poorly arrayed prior to September 11 to 
gather all the information we needed. The interagency process 
didn't work as well as it should have, although Dick Clark 
tried valiantly to put it together and did, I think, a 
remarkable job. We didn't have as many facts as we should have. 
But we went to the Saudis as a government, shared with them 
what we had, asked them for more information, warned them of 
what might take place, and ultimately nothing happened. I think 
those are all facts that are undisputable. The why's and the 
wherefore's and the what should's are really up to you all to 
determine next.
    Thank you very much, Madam Chairman.
    Chairman Collins. Thank you, Senator Specter.
    Senator Specter. Thank you, Chairman Collins. Senator 
Pryor.
    Senator Pryor. Thank you.
    Mr. Winer, if you can educate this Committee just very 
briefly, as I understand Saudi Arabia--tell me if this is true 
or not. But as I understand Saudi Arabia, the economic power 
and the political power really are merged into one in the sense 
of there are families and it is pretty much one and the same.
    Mr. Winer. I know of no facts to dispute that assessment. I 
think that is right.
    Senator Pryor. OK. So sometimes when we talk about 
individuals doing something versus the government doing 
something, a lot of times it is a matter of an individual maybe 
in their personal capacity versus in some other official 
capacity, right? It is all a hodgepodge. It is all mixed up. Is 
that fair to say?
    Mr. Winer. Yes, sir.
    Senator Pryor. One thing that we are sensitive to obviously 
here in this country is al-Qaeda as a terrorist organization. I 
know that Ambassador Gold has mentioned a few times, Hamas. In 
this country, we are not quite as tuned into that. But, 
Ambassador Gold, what other terrorist organizations in your 
personal view have ties to Saudi Arabia besides al-Qaeda and 
Hamas?
    Mr. Gold. Well, many of these organizations are part of all 
the same network. In fact, al-Qaeda should probably be seen as 
a consortium of terrorist organizations where they use the 
assets, sometimes manpower assets, sometimes financial, conduit 
assets, sometimes expertise in explosives, and share them 
around the world. Some of those assets are in the Philippines. 
Some of those assets are in Indonesia. Some of those assets are 
in Chechnya and Dagestan in Russia. Some of those assets are in 
Egypt. And Hamas, by the way, is part of that network to a 
large extent.
    I think you can find the fingers of Saudi financial 
involvement through these charities with most of the countries 
that I mentioned.
    Let me just add one other point to my presentation at this 
time. Many times you are going to see Saudi denials, very firm 
denials, that they have cleaned up their act, that these 
charitable contacts around the world no longer are with 
suspected groups. For example, there was a press release put 
out on October 18, 2002, by the Saudi Embassy in Washington, 
and in it the Saudis asserted that, since September 11, all 
charitable groups have been audited to ensure that there are no 
links to suspected groups.
    Now, I don't know what a suspected group is and they don't 
clarify it, but you would think that a suspected group would be 
groups that are on the State Department list of terrorist 
organizations. Well, the very same month that in Washington the 
Saudis were putting this out as a press release to the 
Washington Press Corps, you had another little event going on 
in Riyadh, Saudi Arabia. You had a WAMY conference. And that 
photograph of Khaled Mashal, one of the highest leaders in the 
Hamas organization, was taken by Reuters at a WAMY conference 
in October 2002, the very same month. So, in Washington, they 
are saying that they are cutting off their contacts, the 
contacts of the charities, with suspected groups, yet in Riyadh 
you have the Saudis inviting one of the leaders of Hamas to a 
WAMY conference in Saudi Arabia.
    By the way, the Hamas actually prepared a record of Khaled 
Mashal's meetings in Riyadh, and it was found by Israeli forces 
the following month in the Gaza Strip. And according to that 
record, Khaled Mashal was not just a peripheral guest of a 
peripheral organization, WAMY. He actually had a for-eyes 
meeting with Crown Prince Abdullah, who actually chaired that 
WAMY conference.
    Senator Pryor. Mr. Winer, if I may ask you, with the 
increased financial security on terrorist organizations around 
the world, do you see some new tactics out there that they are 
trying to do to get around some of our efforts? And what are 
those tactics, and what do we need to be looking for?
    Mr. Winer. Yes, sir. One quick observation. I am not aware 
of any individual or entity that has been arrested for 
terrorist finance in Saudi Arabia to date. If there have been 
any such arrests, none of them have been publicly announced.
    As to new techniques, gold markets and precious metals 
generally, commodities, diamonds, as Senator Akaka raised 
before, remain essentially unregulated globally. Regulation of 
charities globally still is extremely poor, and charities 
remain a tremendous opportunity well outside Saudi Arabia for 
moving terrorist funds.
    The underground alternative remittance systems are still, 
by and large, extremely poorly regulated. In every country, we 
are beginning a crackdown. Here we have required them to 
register in theory. I am not sure whether that is as effective 
as it should be. Certainly registration of hawalas in the 
Middle East remains relatively minimalist in practice, and 
those networks are very substantial. Money continues to move 
back and forth in terms of currency from Yemen to Saudi Arabia 
and into and out of UAE. So our ability to track all of that, 
particularly in connection with remittances, some of which 
involve legitimate remittances and some of which don't, is 
poor. And the religious schools around the world generally have 
no oversight in terms of movements of money.
    In the United States, if you go to the IRS filings for 
religious groups, mosques, synagogues, or churches--it doesn't 
matter what religion--all you have to do is say, ``I am a 
mosque,'' ``I am a church.'' That is all you have to report to 
the IRS. There is no further detail in the public filings 
beyond that. That is in the United States, which is presumably 
one of the better regulated countries. So I think that is still 
a potentially significant problem.
    That said, formal financial institutions cannot risk being 
associated with terrorist finance. If the U.S. Government were 
to go after any major financial institution anywhere in the 
world with a terrorist finance designation, it would create 
such a chilling impact that one would imagine further due 
diligence, regulatory efforts be put into place by financial 
institutions all over the world to ensure that didn't happen to 
them and to protect shareholder interests and equities.
    Thank you.
    Senator Pryor. Thank you for that answer, and I want to 
thank the panel for being here.
    Senator Specter. Thank you, Senator Pryor.
    The Committee intends to pursue the question as to whether 
economic sanctions are being imposed, and there are very 
substantial indicators that they are not. When Saudi Arabia is 
involved, we are soft on economic sanctions. But there is a 
broader picture which is emerging, and that is the potential 
for criminal sanctions.
    We have held in the Judiciary Committee hearings several 
years ago on the focus on U.S. citizens being murdered in 
Israel by terrorist organizations. And we are pursuing the 
question of bringing those terrorists to the United States for 
trial.
    In 1986, we passed the Terrorist Prosecution Act, which 
gives extraterritorial jurisdiction to the United States to 
bring terrorists into our courts and to impose the death 
penalty. And there are two cases which we are currently 
focusing on with Israeli Attorney General Rubenstein and U.S. 
Attorney General John Ashcroft. One involves an individual who 
is in the United States where requests have been made to get 
witnesses to testify about his conduct involved in terrorism 
and murder of American citizens, and that evidence has to be 
provided by Israel. And contacts have been made at the very 
highest level with the Israeli Government, and some assurances 
have been received that there will be cooperation.
    There is another individual who confessed on television, 
with no question about the voluntariness of the confession. And 
the issue is getting that individual extradited to the United 
States, which is complicated because, as is well known, Israel 
does not have the death penalty. But there are exceptions under 
Israeli law where national security is involved. And when we go 
through the very impressive chart, Ambassador Gold, that you 
put up about Saudi national charities and the financing of 
international terrorism, and they are not non-governmental 
organization, they are governmental organizations, those 
individuals who finance Hamas are potentially liable for 
prosecution in the United States criminal courts because Hamas 
takes credit for the killings. The murders at Hebrew University 
were American. U.S. citizens were murdered.
    So this is a matter that we need to pursue further on the 
hard evidentiary line. But I think that economic sanctions are 
fine. I would like to see them imposed, but there is a lot more 
that can be done.
    Let me yield at this point to Senator Collins, and I will 
come back to questioning.
    Chairman Collins. I just want to thank you, Senator, for 
spearheading this investigation. It is important, and the 
evidence we have heard in the statements this morning from the 
experts are compelling in painting a picture of the Saudi 
Government's many links to these charitable organizations and 
those organizations linked to terrorist groups. So I applaud 
your initiating this investigation, and I look forward to 
continuing to work with you.
    Senator Specter. Well, thank you. Thank you, Senator 
Collins.
    Senator Pryor, do you have any further questions?
    Senator Pryor. No.
    Senator Specter. Then let me proceed just a bit further.
    Ambassador Gold, you have testified about the document 
which was signed by the current Palestinian Prime Minister 
requesting that Saudi official stop financing Hamas. Would you 
go through that again and elaborate on precisely what it says?
    Mr. Gold. Well, we actually have an English translation.
    Senator Specter. That is from Abu Mazen?
    Mr. Gold. Abu Mazen, yes. Also known as Mahmud Abbas.
    Senator Specter. Who is the Palestinian Prime Minister.
    Mr. Gold. He is the Palestinian Prime Minister, and he 
wrote in his own handwriting a fax that was sent to Prince 
Salman, the governor of Riyadh and full brother of King Fahd, 
probably the fourth most powerful man in Saudi Arabia. And I 
can just read this paragraph to you that I have on the screen, 
which is an exact translation of the relevant material.
    Senator Specter. Please do.
    Mr. Gold. ``I hereby wish to inform you that he''--meaning 
Yasser Arafat--``has spoken with me on the telephone and asked 
me to transmit to you his request that you mediate and 
interfere and express his view concerning the ongoing situation 
in our homeland. The Saudi committee responsible for 
transferring the donations to beneficiaries has been sending 
large amounts to radical committees and associations, among 
which the Islamic Society''--that is a translation of al-Jamiya 
al-Islamiyah--``which belongs to Hamas, the al-Islah 
Association''--an association known to be a Hamas institution 
in Gaza--``and to the brethren who engage in jihad in all 
regions. This fact badly influences the internal situation. It 
also results in strengthening these brethren and has, 
therefore, a negative impact on all sides. Moreover, the 
Committee does not send any money or assistance to members of 
Fatah.''
    So this is, again, written not by an Israeli but by perhaps 
the No. 2 man in the Palestinian Authority today----
    Senator Specter. Perhaps the No. 1 man.
    Mr. Gold. Well, a lot of people are hoping to make him the 
No. 1, Prime Minister Mahmud Abbas. It is in his own 
handwriting, and it was written in December 2002.
    Senator Specter. I will come to you in a minute, Mr. Winer.
    And it is directed to whom, again?
    Mr. Gold. Prince Salman is the governor of Riyadh, and it 
is directed to him. He is a full Sudairi brother of King Fahd, 
and I would say about the fourth most powerful man in Saudi 
Arabia.
    Senator Specter. Do you have a judgment as to why the 
letter was written to him?
    Mr. Gold. Well, apparently they had sent messages to others 
as well, such as Prince Naif. But Salman has always been a kind 
of critical figure in many of the charitable enterprises, and 
perhaps that was why he was chosen.
    Senator Specter. And when the last line says that no 
contributions were given to Fatah, what do you make of that?
    Mr. Gold. Well, I think here there is a desire, clearly, to 
make sure that all resources coming from Saudi Arabia go 
through the Fatah organization, which is the largest national 
component inside the Palestinian Authority. They want the money 
in their hands and not going to Hamas.
    I think the importance of this document is that it clearly 
indicates that Saudi Arabia was funding Hamas in the year 2000, 
and we would say, as I said earlier, that funding is continuing 
to this day, in fact, becoming more significant as we speak.
    Senator Specter. Mr. Winer, you had your hand up indicating 
a wish to say something?
    Mr. Winer. It relates to this topic. Last year, FBIS 
reported that President Musharraf in Pakistan sent a similar 
communication to senior Saudi officials asking the Saudi 
Government to stop funding or Saudi Arabia to stop funding 
radical militants in madrassas in Pakistan who were creating 
problems of Islamic militancy within Pakistan for President 
Musharraf.
    Senator Specter. What do you think we ought to do about 
that, Mr. Winer? You are a former State Department official.
    Mr. Winer. I think that the Congress and the White House 
still speak with the bully pulpit, that they are communicating, 
as you are doing today, is important. Beyond that, I think 
sanctions have to be taken against particular entities, when we 
have sufficient evidence to determine that an entity, 
regardless of who----
    Senator Specter. How about sanctions against the Saudi 
Arabian Government?
    Mr. Winer. I think the first thing to do is sanctions 
against economic entities that are substantial where we have 
definitive information that those entities have been used to 
fund terrorism. That is what our law permits. That is what we 
have warned Saudi Arabia, among others, we could do. To the 
extent that we have the ability to do that and the evidentiary 
packages are sufficient, I think we should do it. That is my 
opinion.
    Senator Specter. Ambassador Gold, to what extent, as you 
produce documents and show charts, is there an evidentiary 
chain which would go to these officials of the Saudi Government 
who are chairmen of these organizations, IIRO, WAMY, al-
Haramain, to show the connection between those individuals and 
their direction of funds through these specific organizations 
to Hamas, which then results in the murders of U.S. citizens?
    Mr. Gold. I cannot supply the evidence to show that the 
heads, the chairmen of these organizations know where every 
dollar is going in these particular allocations to Hamas. But, 
again, the material showing that the organizations are 
allocating to Hamas is clear-cut.
    I would say there is one other aspect here, I think, that 
should be taken into account. I cannot speak about how the U.S. 
Government should respond. I am an Israeli citizen. But we are 
now----
    Senator Specter. We are going to reserve those questions 
for State Department officials. We are not going to ask an 
Israeli former Ambassador to tell us what to do.
    Mr. Gold. But I will comment on one aspect affecting policy 
today because the United States is now leading the way to 
implement what is called the road map, a performance-based road 
map to a permanent two-state solution. And in phase one of the 
road map--this is from the Department of State website--you can 
see that Arab States are expected to cut off public and private 
funding and all other forms of support for groups supporting 
and engaging in violence and terror. Therefore, I would say the 
crown jewels of U.S. Middle East policy, that is, the road map, 
specifically refers to cases like Saudi Arabia. In short, Saudi 
Arabia ought to go under the road map.
    I would also add that at the Sharm El-Sheikh Summit on June 
3, 2003, President Bush made a declaration in which he said he 
had the assurances of all those present that there would be no 
more terrorist funding, and here is the actual phrase that he 
used at the summit: ``The leaders here today have declared 
their firm rejection of terror regardless of its 
justifications. They have also committed to practical actions 
to use all means to cut off assistance, including arms and 
financing, to any terror group.''
    So what you have is clear-cut U.S. policy to make sure that 
Saudi Arabia doesn't continue funding Hamas. I would say from 
the testimony you have heard today, the same networks that are 
working with Hamas are also working with al-Qaeda. If you make 
sure that the funding to Hamas stops, you will also, to a large 
extent, improve the national security of the United States by 
cutting off the funding routes to al-Qaeda as well.
    Senator Specter. Ambassador Gold, when you say you can not 
say that these officials in these organizations, these 
governmental officials knew where every dollar went, I can 
understand that. But if they know that there are some dollars 
going to Hamas and they know Hamas is engaged in terrorism, and 
that terrorism results in murders of U.S. citizens, that is--
you don't have to find where every dollar goes. You just have 
to be able to prove that they know that some dollars are going 
to terrorists.
    Mr. Gold. I would suggest they have a kind of corporate 
responsibility standing at the head, at the apex of these 
organizations to know about it.
    Senator Specter. You can not establish criminal liability 
as the head of a corporation. You have got to prove that they 
knew what was going on, knowledge, participation, and 
acquiescence.
    Mr. Gold. The documents that I can supply can show the 
organizations' links to Hamas. I can also show you how the 
organization is structured. But you would have to go probably 
to U.S. agencies to find out whether any other information is 
available linking these individuals to Hamas funding.
    Senator Specter. And when you have the connection to al-
Qaeda, it is a much broader criminal responsibility. There you 
have the murders of 3,000 American citizens.
    Mr. Gold. That is absolutely true. But, again, I will only 
make statements here about things that I can document. What I 
have stated in this Committee hearing I can document.
    Senator Specter. Well, the statement by the President that 
you have got on the board is about as good as you can get for 
him to extract those promises from the leaders of Saudi Arabia 
and other countries. And now the issue is pursuit to see to it 
that they live up to what they have said.
    One other subject before adjourning. Mr. Emerson, your 
comment, I think, about the 7th graders who were having hate 
materials in their educational portfolios, that has been a 
problem ongoing for quite a long time. We have seen in the 
Palestinian Authority materials in grade schools, and part of 
the funding of the Palestinian Authority after Oslo, before we 
stopped the funding, was conditioned on changing, taking those 
materials out of the textbooks.
    You have had considerable experience in this field. What 
recommendations would you have as to how to deal with the 
problem of this hate literature going to the next generation?
    Mr. Emerson. I think it is probably the most frustrating 
problem to deal with insofar as asking Saudi Arabia to stop the 
incitement within its own borders is basically asking it to 
essentially renounce its own Wahhabist ideology. There is a 
fundamental contradiction here.
    On the other hand, as a result of the Riyadh attacks, I 
think more members of the family realize that the tiger is now 
coming to bite it and it cannot afford to keep paying off 
cooptation money overseas or even trying to essentially incite 
its citizens against Christians or Jews or Israelis or 
Americans in an effort to dissuade them from being frustrated 
with the regime itself.
    But there is a fundamental contradiction here. My belief is 
that Saudi Arabia, as you have noted here, should be subject to 
the sanctions that were empowered by the PATRIOT Act because of 
the fact that foreign national central monetary institutions 
are allowed to be subject to sanctions if their funding 
mechanisms do not stop or are aware of terrorist financing. And 
I think the body of evidence of terrorist ties going back for 
the last 15 years on WAMY, IIRO, al-Haramain, and several other 
Saudi, ``NGOs are so demonstrably present that it would be 
reckless disregard for anyone to say that they were unaware of 
those ties, let alone not taking responsibility.''
    At this point, I can tell you based on the information we 
have collected that there are direct ties between Saudi 
Government officials, the members of the family--not all, but 
some--and all of those NGOs in terms of the financial support 
and the largesse they receive.
    One other point I would just like to add, because you have 
been very good in terms of pressing the government to make sure 
that it does not succumb to any political pressure. I can tell 
you based on discussions that I have had with law enforcement 
officials and prosecutors that while no one has said to me that 
they received a red light from the State Department, they have 
repeatedly expressed their frustration at the resistance within 
the government decisionmaking process to fully give them the 
green light to go after and conduct criminal investigations 
against Saudi entities and individuals. Part of the frustration 
is because Saudi Arabia has provided diplomatic immunity or 
actually pulled back some of the key witnesses, material 
witnesses that were being held here or subject to investigation 
and not made them available to the U.S. Government.
    In other cases, it is the fear of antagonizing the Saudi 
regime that has basically put a red light to some of the key 
law enforcement prosecutions that are being considered at this 
point as we speak.
    Senator Specter. Well, first you say there is no red light, 
and then you say there is not a green light. And we are not 
looking for amber in between. And then you just concluded by 
saying that there was a red light on criminal investigations. 
Could you amplify that a bit?
    Mr. Emerson. The red light insofar as a document that says 
we will not support a criminal investigation because of fear of 
engendering antagonism of the Saudi regime, I know of no such 
document that would ever be produced.
    Senator Specter. Well, you wouldn't necessarily expect to 
have a document under seal, notarized. You might have a 
conversation. Who would want to put that in writing? Some 
congressional committee might get a hold of it.
    Mr. Emerson. Right, but you might not even have the 
conversation. It might just die, on the wane. In other words, 
it might not be acted upon.
    Senator Specter. Well, there would be a reason for why it 
wasn't acted upon.
    Mr. Emerson. Well, there would be some type of bureaucratic 
reasons. Look, I can tell you documents we received under FOIA 
going back to 1996, 1997, and 1998, show that certain radical 
Islamic charities were being categorized as terrorist conduits 
back in those years--and yet they weren't frozen or had any 
sanctions against them until 2001. So something intervened to 
stop that designation and stop the asset forfeiture.
    Now, I can not tell you what stopped it because I haven't 
received the documents--and I deal only with empirical 
evidence. But I know something stopped it, and I can only 
imagine that it was diplomatic pressure.
    Senator Specter. Well, those are subjects we are going to 
pursue. One final comment. When you talk about Saudi textbooks 
responding to Wahhabi philosophy, there is a limit to how far 
you can go, even under those circumstances, as far as inciting 
murder. That crosses international lines, and it is an 
international crime. And we have got to look at the toughest 
lines, economic sanctions, criminal sanctions, whatever it 
takes.
    Well, thank you very much, gentlemen. I think this has been 
informative, and stay tuned.
    [Whereupon, at 12:41 p.m., the Committee was adjourned.]


                            A P P E N D I X

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