[Senate Hearing 109-1082]
[From the U.S. Government Publishing Office]
S. Hrg. 109-1082
COMBATING CHILD PORNOGRAPHY BY
ELIMINATING PORNOGRAPHERS' ACCESS TO THE
FINANCIAL PAYMENT SYSTEM
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON DRAWING ATTENTION TO THE PROBLEM OF CHILD PORNOGRAPHY AND TO
HIGHLIGHT WHAT FINANCIAL SERVICE COMPANIES CAN DO TO ELIMINATE IT FROM
THE FINANCIAL PAYMENT SYSTEM
__________
TUESDAY, SEPTEMBER 19, 2006
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
Available at: http: //www.access.gpo.gov /congress /senate /
senate05sh.html
----------
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
ROBERT F. BENNETT, Utah PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky EVAN BAYH, Indiana
MIKE CRAPO, Idaho THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina ROBERT MENENDEZ, New Jersey
MEL MARTINEZ, Florida
William D. Duhnke, Staff Director and Counsel
Steven B. Harris, Democratic Staff Director and Chief Counsel
Jonathon Gould, Counsel
John V. O'Hara, Senior Investigative Counsel
Genevieve de Sanctis, Professional Staff Member
Stephen R. Kroll, Democratic Special Counsel
Lee Price, Democratic Chief Economist
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
C O N T E N T S
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TUESDAY, SEPTEMBER 19, 2006
Page
Opening statement of Chairman Shelby............................. 1
Opening statements, comments, or prepared statements of:
Senator Bennett.............................................. 3
Senator Stabenow............................................. 4
Senator Allard............................................... 5
Senator Sarbanes............................................. 5
Senator Enzi................................................. 6
Senator Bunning.............................................. 8
WITNESSES
Alberto Gonzales, Attorney General of the United States.......... 9
Prepared Statement........................................... 39
Ernie Allen, President and Chief Executive Officer, National
Center for Missing and Exploited Children...................... 25
Prepared Statement........................................... 50
Response to written questions of:
Senator Shelby........................................... 103
Kim Mowder, Senior Vice President, Bank of America Merchant
Services....................................................... 27
Prepared Statement........................................... 60
Mike DeNoma, Group Executive Director and CEO of Consumer
Banking, Standard Chartered Bank............................... 29
Prepared Statement........................................... 69
Jodi Golinsky, Vice President, Regulatory and Public Policy
Counsel, MasterCard Worldwide.................................. 31
Prepared Statement........................................... 89
Response to written questions of:
Senator Shelby........................................... 106
Mark MacCarthy, Senior Vice President, Public Policy, Visa USA,
Inc............................................................ 33
Prepared Statement........................................... 95
COMBATING CHILD PORNOGRAPHY BY ELIMINATING PORNOGRAPHERS' ACCESS TO THE
FINANCIAL PAYMENT SYSTEM
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TUESDAY, SEPTEMBER 19, 2006
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:07 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Richard Shelby, presiding.
OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY
Chairman Shelby. The Committee will come to order.
This morning, the Banking Committee will examine the
exploding problem of child pornography on the Internet, and the
roles the Congress, the executive branch and the financial
services community can play in combating this global problem.
We will hear from the Attorney General of the United States on
the efforts of the Department of Justice to attack and stop
this criminal activity. The Committee will also review the
progress of the Financial Coalition Against Child Pornography
since its recent launch in March of this year.
Child pornography has become a multibillion dollar industry
worldwide because it is low-risk and highly profitable. The sad
truth is that there is a large and growing demand for these
disturbing images. Combine that demand with ease of access
provided by the Internet and the ability to use credit cards
and other payment methods and you get one of the fastest
growing on-line businesses.
Unfortunately, our banks and credit card companies, which
have been instrumental in the Internet commerce revolution,
have become an unintentional part of the problem. Credit cards
provide an easy and quick method of payment and are accepted
worldwide. Purveyors of child pornography know this and they
use the Internet and the credit card system to exploit and
abuse innocent children for profit.
While this all began as a mostly concealed cottage
industry, investigations today have unraveled complex
international financial trails. Billions of dollars a year in
illicit profits attract organized criminals who are highly
adept at using sophisticated finance and money-laundering
mechanisms such as shell and front companies which hide true
identities and process payments internationally. As the
Attorney General will soon discuss, an important key to
combating this growing transnational cancer is to follow the
money, the same tactic we use in disrupting organized crime
syndicates, narcotics traffickers, and terror networks.
If it were in the realm of possibility to eliminate the
incomprehensible demand for this type of disturbing material,
we would surely do it. But, unfortunately, that noble goal is
well beyond any of our capabilities. It is, nonetheless, all of
our responsibilities to do everything we can to protect our
children by combining our efforts to combat this undeniable
evil. The members of this Committee are committed to doing just
that by going after the money.
One such measure involves organizing banks, credit card
companies, Internet service providers, and alternate payment
providers to work together to address this issue. The Financial
Coalition Against Child Pornography is an initiative involving
the National Center for Missing and Exploited Children and its
international sister organization. These two groups are
collaborating with several financial institutions and Internet
industry leaders to eradicate the commercial viability of child
pornography by the year 2008. So far, 25 companies have joined
the Coalition. It is our hope that number will grow
significantly in the very near future.
In my role as Chairman of the Senate Banking Committee, I
have worked with the Center to bring together industry leaders
to develop and implement a comprehensive strategy to attack the
problem. We have the technology, resources and expertise--but
the key is cooperation, coordination and perhaps most
important, commitment in the financial services community.
I look forward to hearing from our witnesses as we discuss
these issues in more detail.
This morning, we will hear first from The Honorable Alberto
R. Gonzales, Attorney General of the United States. General
Gonzales, who, since taking the helm at Justice, has made
combating the scourge of child pornography one of the
Department's highest priorities. The Attorney General has
developed a new initiative, Project Safe Childhood, which will
coordinate Federal, State, and local law enforcement efforts to
prosecute child predators and rescue their victims. Under his
leadership, the Justice Department has partnered with the
National Center for Missing and Exploited Children and other
organizations, to deploy their considerable resources against
this threat.
Also, the Attorney General has worked with Congress to
craft new laws to combat those who would harm children--
particularly the recently enacted Adam Walsh Child Protection
and Safety Act of 2006. Mr. Attorney General, I commend you for
your efforts and we are very pleased that you are with us
today.
Our second panel will include Mr. Ernie Allen, President
and Chief Executive Officer of the National Center for Missing
and Exploited Children.
Ms. Kim Mowder, Senior Vice President of Bank of America
Merchant Services.
Mr. Mike DeNoma, Group Executive Director and CEO of
Consumer Banking for Standard Chartered Bank.
Ms. Jodi Golinsky, Vice President and Regulatory and Public
Policy Counsel for MasterCard Worldwide.
Mr. Mark MacCarthy, Senior Vice President for Public
Policy, Visa U.S.A., Inc.
So, we are looking forward to a great panel.
Senator Bennett, do you have any comments?
STATEMENT OF SENATOR ROBERT F. BENNETT
Senator Bennett. Thank you very much, Mr. Chairman. I
appreciate your calling the hearing. It is very timely here for
the Senator from Utah. I am going to read excerpts from a
release that came out of the United States Attorney's Office in
Salt Lake City that perhaps illustrates what it is we are
dealing with.
A complaint unsealed Friday in Federal court charges a
registered sex offender in Salt Lake City with enticing and
coercing a minor child in Illinois to engage in sexually
explicit conduct for the purpose of producing visual depictions
of the conduct.
The defendant allegedly told the child he needed the
pictures for modeling. And, on another occasion, offered the
child a modeling contract. U.S. Attorney Brett Tolman, District
of Utah, FBI special agent in charge Timothy Fuhrman of the
Salt Lake Field Office and Utah attorney general Mark Shurtleff
announced the arrest of Gerald Wheeler, 40, of Salt Lake City.
According to the complaint, a parent contacted law
enforcement authorities in Naperville, Illinois, saying that
his 13-year-old daughter had been receiving obscene, lewd, and
sexual messages on her computer site. The messages include
requests for the child to engage in various sexual acts, and
the child was asked to fly to New York to engage in sexual
conduct in exchange for a modeling contract.
Detectives were able to trace the IP address to an Internet
cafe in Salt Lake City, Utah. According to the complaint, the
owner of the cafe compared the log-in times to possible users
at the cafe at 3:16 a.m. on August 15, 2006. Because the cafe
is not a 24-hour facility, the owner confirmed that the only
individual with access to the IP address at 3:15 a.m. would be
the facility manager, Jerry. The owner also confirmed that he
knew that the cell number Brian--that is the pseudonym used--
had used to call the child belonged to a former employee of the
facility who was close to Jerry. Jerry was identified as Gerald
Wheeler. The owner of the cafe confirmed that a computer
recovered from the basement of the cafe was used primarily by
Wheeler prior to August 2006.
So here is an actual case, interstate, from Salt Lake City
to Naperville, Illinois, that required intelligent cooperation
with Federal authorities and local authorities that illustrates
that this is not a matter that can be left to local police
departments. It does require the attention of Federal
authorities, and, Mr. Attorney General, along with the
Chairman, I salute you for your attention to this.
When we get into the question period, Mr. Attorney General,
I am going to take you back to the Reagan administration when
your predecessor, Ed Meese, formed an Attorney General's
Commission to deal with this, a Commission that made a number
of recommendations. And, unfortunately, in the intervening
time, very little has been done about these recommendations,
and I am going to ask you if the Justice Department is
considering appointing another Commission.
I am told and cannot verify that at least one of your
predecessors told the U.S. Attorneys not to prosecute any
pornography cases. I will not use names because I cannot verify
that this actual order was given, but I think it is a very
significant issue, and I applaud you for your attention to it,
and you, Mr. Chairman, for holding this hearing.
Thank you.
Chairman Shelby. Senator Stabenow.
STATEMENT OF SENATOR DEBBIE STABENOW
Senator Stabenow. Thank you, Mr. Chairman, for scheduling
what is a very important hearing, and I also welcome Attorney
General Gonzales. I think this is one of the most important
topics that, frankly, we will deal with as it relates to
people's lives, because what happens to children fundamentally
can change their life forever. And it is incredibly important
that we have a sense of urgency about this issue. So I am
pleased that you are here, and I am very concerned about the
information we are uncovering, as the Chairman and Senator
Bennett have talked about.
First, the growth of the industry. Since 1988, the number
of Internet pornography images has increased 1,500 percent--
1,500 percent. That is astounding.
Second, the economics of the industry. Today, the market
for child pornography is estimated to be about a $30 billion
business that accounts for about 20 percent of the Internet
pornography market.
And, last, and most disturbing, is where the Internet sites
are being hosted, because, as we know, according to the
National Criminal Intelligence Service, more than half of all
the illegal sites are coming from here, coming from the United
States. Half--more than half.
While I recognize that the internet has provided a
distribution mechanism for illegal activity, we all agree it
should be a tool to combat the illegal activity. we have the
technology to trace money flows directly to child pornography
predators, identify websites around the world, and we need to
be having a sense of urgency as we move forward. We should also
be able to stay ahead of the predators using the Internet as a
vehicle for justice.
I know the coalition has targeted 2008, but as I review the
numbers, it may not seem far away for us working on a daily
basis, but for too many children that is a long ways away--
2008. Whether we invest in high-tech computer-based tracking
techniques, stiffer regulations, or increase education of
front-line law enforcement personnel, I believe we need to move
faster.
I have supported and will continue to support every effort
I can to address issues concerning the Internet and
exploitation of children. I am very proud to be one of the
sponsors of the Internet Safety and Child Protection Act, which
would tighten our laws regarding pornography purchases over the
Internet. And I hope that we will see action on that bill.
Again, Mr. Chairman, thank you very much for holding this
hearing. When it comes to child pornography and our children,
we are talking about a very profound area of changing a child's
life, and I hope that we will do everything together that we
can to have a sense of urgency about this issue, and I thank
you again for your leadership.
Chairman Shelby. Senator Allard.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Mr. Chairman, I would like to join my
colleagues in thanking you for holding this hearing and your
leadership on this particular matter. I would also like to join
them in welcoming Attorney General Gonzales here before the
Committee; your leadership in combating child pornography is
very much appreciated by many of us on this Committee.
I would also like to second Senator Bennett's comments that
it is important that we put together a program that really
yields results. Child pornography is one of the most appalling
and horrific crimes imaginable. Unfortunately, technology has
created some vulnerabilities. Child predators prey on
unsuspecting children and teenagers over the Internet via
social networking websites, web cams, and Internet access to
cell phones.
A recent study discovered one in five young people ages 10
to 17 who use the Internet regularly received a sexual
solicitation over the Internet within the previous year.
However, less than 10 percent of sexual solicitations were
reported to authorities.
According to a Mackenzie Worldwide report, child
pornography is a $20 billion industry worldwide, much of which
is funded by the Internet. The Internet has enabled child
pornography to become a fast-growing industry. It has allowed
thousands upon thousands of individuals worldwide access to
child pornography by simply using their credit cards and other
electronic payment methods.
I am pleased to see that Qwest Communications in Colorado
has been proactive and is showing initiative to raise awareness
and help combat the exploitation of young people over the
Internet. Qwest has partnered with the National Center for
Missing and Exploited Children to form a coalition to increase
parental and guardian education through the Qwest Connected
Family Online Classroom.
Again, I would like to thank Chairman Shelby for being the
motivation that brought together some of the world's most
prominent financial institutions, the Internet industry, and
the International Centre for Missing and Exploited Children to
form the Financial Coalition Against Child Pornography. The
goal of the coalition is to eradicate commercial child
pornography by 2008. In order to accomplish this, we need to
eliminate the flow of money being used to exploit innocent
victims.
I would like to thank the witnesses for being here today,
and I look forward to all of your testimony. Thank you, Mr.
Chairman.
Chairman Shelby. Senator Sarbanes.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Well, Mr. Chairman, I first want to very
strongly commend you for your work in this area and, in
particular, for bringing together the National Center for
Missing and Exploited Children, which has been under the very
capable leadership of Mr. Allen here, and the leading
participants in the payment system to fight the spread of child
pornography over the Internet.
I think as all my colleagues know, Chairman Shelby convened
a meeting of financial leaders to address this issue, and as he
said in a letter which he sent to all of his colleagues in the
Senate, and I quote him, ``If people were purchasing heroin or
cocaine and using their credit cards, we would be outraged and
we would do something about it. This is worse.''
So I want to join with others in recognizing your leading
efforts in this area.
The exploitation and greed that characterizes the
production and sale of child pornography are obvious and
apparent. The sale of child pornography is a multi-billion-
dollar-a-year industry worldwide. The human pain inflicted to
produce these moneys is dreadful to contemplate.
The Internet child pornography industry exists largely
because the use of credit cards and other online payment
mechanisms makes it possible easily to buy and sell
pornography, with potential secrecy, from anywhere in the
world. Without access to the payment system, it is reasonable
to believe that the Internet child pornography industry would
certainly shrink, and perhaps die. That is why an essential way
to identify and stop the criminals involved is to ``follow the
money.'' We can expect to find many of the common tools of
money laundering along the way, including front companies,
anonymous aggregators interposed between credit card merchant
banks and their customers, misuse of correspondent banking
relationships, all of which allow the child pornography
industry to disguise its operations and to facilitate the
international movement of funds derived from this criminal
activity.
I am encouraged that leading members of the payment system,
legitimate enterprises, amongst our most legitimate
enterprises, have pledged under the initiative and leadership
of Chairman Shelby to work to deal with these issues in
connection with the fight against child pornography.
I am pleased to join with my colleagues in welcoming the
Attorney General to the Committee this morning, and also,
because I am not sure I will be able to stay the entire
morning, Mr. Chairman, I want to welcome Mr. Allen, whose
tireless work on behalf of at-risk children is well known, and
the other members of the second panel. I look forward to
hearing the testimony of today's witnesses.
Thank you.
Chairman Shelby. Thank you.
Senator Enzi.
STATEMENT OF SENATOR MIKE ENZI
Senator Enzi. Thank you, Mr. Chairman, and I, too, want to
thank you for holding this hearing and for your tireless
efforts. I want to thank the Attorney General for being here
and the other members of the panel. We need to do everything we
can to stomp out this terrible blight on our children.
Each year, thousands of children are exploited by
photographing them and making those images and videos available
to child predators. We need to stop those terrible crimes, and
I look forward to hearing from the witnesses, with the ideas
about what can be done.
The sexual victimization of children is a tremendous
problem in our Nation, and, unfortunately, the problem is
probably more widespread than most recognize. According to the
National Center for Missing and Exploited Children, statistics
show that one in five girls and one in ten boys are sexually
exploited before they reach adulthood. Although these abuses
are so prevalent, less than 35 percent of those child sexual
assaults are even reported to authorities. The abused children
who are the victims of child pornography are harmed both
mentally and physically. Physically, they can be molested or
face exposure to sexually transmitted diseases. Although the
physical traumas are problematic, many child victims struggle
with the mental abuse for far longer.
Victims of child pornography can often face depression,
anger, and feelings of worthlessness and low self-esteem. These
feelings follow them into adulthood and forever alter their
lives. In addition, because emotional scars are not as visible
as physical wounds, they often go untreated.
Child pornography is illegal in all 50 States and most
countries. Although the growth of the Internet has been
beneficial in many ways, bad actors are using this information-
sharing tool to spread their filth. Unfortunately, the vastness
of cyberspace often makes prosecution of these criminals
difficult.
Congress has taken steps to combat child pornography, but
our actions up to this point have not gone far enough. Earlier
this year, the Senate passed and President Bush signed the Adam
Walsh Child Protection and Safety Act of 2006. This legislation
included provisions requiring producers of sexually explicit
material and simulated sexually explicit material to keep
records of every performer's name and date of birth.
While ensuring that performers are of legal age, Congress
and President Bush took one more step to protect the innocent.
In addition to this act, there are a number of other ideas
being discussed in Congress and within the administration. The
Department of Justice has sent proposals to the Hill to
increase fines if an electronic communication service provider
knowingly and willfully fails to report the presence of child
pornography on their systems. In addition, Justice hopes to
eliminate the practice of hiding terms in the website's code so
that the pornography site will come up on a search of the
Internet.
For example, some pornography website owners will place
terms such as ``Sesame Street'' in the code. When someone
searches on Google for children's shows, the pornography
website will also come up on the list of possible websites.
Many of the proposals attack the problem of child
pornography with increased regulation of the Internet. Those
deserve serious consideration, but in addition to taking action
on the Internet, there are many other ways we can prevent the
exploitation of children.
Today we are here to examine the role of the financial
industry on stopping child pornography and child pornographers.
I am pleased Chairman Shelby scheduled this hearing to tackle
this important issue before the Banking Committee. I also
applaud the efforts of the Financial Coalition Against Child
Pornography to wipe out commercial child pornography by 2008.
They seek to do so by destroying the financial network of these
criminals. The ambitious goal will take coordination of law
enforcement, private industry, States, and the Federal
Government.
I am committed to providing these individuals with the
resources they need to eliminate and eradicate child
pornography. I look forward to learning about efforts that are
currently underway and learning about what more can be done so
we can provide the resources to help law enforcement deal with
this problem. This hearing will help lay the groundwork for
legislative action as we engage in the fight against child
pornography.
Thank you again for holding this hearing and for our
distinguished guests taking the time to testify.
Chairman Shelby. Mr. Attorney General, we welcome you
again--oh. Senator Bunning, that is right.
STATEMENT OF SENATOR JIM BUNNING
Senator Bunning. Thank you, Mr. Chairman. I know I was a
little late, but I appreciate being recognized.
Chairman Shelby. He is recognized.
Senator Bunning. First of all, I would like to congratulate
Senator Shelby on all the work that he has done to bring the
hideous incidents, many incidents to our attention. And I would
like to welcome all of our witnesses today. I am especially
glad to see that Attorney General Gonzales was able to join us.
I would also like to extend a warm welcome to one of my fellow
Kentuckians who is on the second panel, Ms. Kim Mowder with the
Bank of America.
Mr. Chairman, I am pleased that the Committee will be
hearing testimony today regarding how to combat child
pornography through our financial institutions. I believe it is
an issue that deserves our attention and consideration.
Like my colleagues here today, I believe that sexual
predators are among the worst criminals in our society. My
thoughts and prayers go out to the victims and the victims'
families. It breaks my heart to hear stories in the news about
children who have been exploited by predators on the Internet.
I believe there is no punishment too severe for these
criminals.
This past year, Congress has addressed several ways to
combat such predators. Most of those ways, however, have
focused on increasing Federal penalties and establishing a
national registry. I believe it is time that we focused on the
finances of the industry. It is basic business sense to do so.
If we take away the money, then we can take away the incentives
for those who want to profit from exploiting children.
I am glad the industry has taken a leading role in this,
and I look forward to hearing about their plans. I would like
to thank all of the witnesses for their testimony today. I look
forward to hearing their thoughts on how we can best put an
end--an end--to this industry.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you, Senator Bunning.
Mr. Attorney General, your written testimony will be made
part of the hearing record in its entirety. We welcome you
again. You proceed as you wish.
Attorney General Gonzales. I would like to make an opening
statement, Mr. Chairman.
Chairman Shelby. Absolutely.
STATEMENT OF ALBERTO R. GONZALES, ATTORNEY GENERAL OF THE
UNITED STATES
Attorney General Gonzales. Mr. Chairman, Senator Sarbanes,
and distinguished Members of the Committee, thank you----
Chairman Shelby. Please bring the mike just a little
closer. We have got a lot of people in this room.
Attorney General Gonzales. Thank you for having me here
today to discuss a very important and vital issue: protecting
our children from exploitation on the Internet.
As all of you know, none of us can underestimate the
importance or the urgency of this threat against our kids.
Every day pedophiles troll the Internet to see and sell images
of child abuse. They also look for ways to contact our children
over the Internet. They are hoping to make contact with the
very young, the very innocent, to commit unthinkable acts and
to potentially sell images of those crimes to other pedophiles.
It is unfortunate that one of the greatest inventions of
our generation, the Internet, is providing the building ground
for the heinous crimes. That is why parents and volunteers and
law enforcement must make the Internet a battleground. We must
fight every day because predators seek to hurt our kids every
day.
As a father of two young boys, this issue is one that I
take extremely seriously on both personal and professional
levels. I know the same is true for Members of this Committee.
We are all aware that society's ability to protect its children
is a critical marker of that society. That is why protecting
our children from sexual exploitation on the Internet is a high
priority for the Department.
I know that the issue of child molestation, rape, and
pornography can be difficult for people to focus on because it
is simply so terrible. But we cannot turn away to preserve our
comfort level. We must confront the brutal facts.
For example, virtually all images of child pornography
depict the actual sexual abuse of real children. In other
words, each image literally documents a crime scene. These are
not just pornographic pictures or videos. They are images of
graphic sexual and physical abuse--rape, sodomy, and forced
oral sex--of innocent children, sometimes even babies.
The Internet has created a shocking field of competition to
see who can produce the most unthinkable photos or videos of
rape and molestation. In the perverse eyes of the pedophiles
and predators, this means the younger, the better.
Now, working with Federal investigators and advocacy
groups, I have seen just how horrific these images can be. I
have seen a young toddler tied up with towels, desperately
crying in pain, while she is brutally raped and sodomized by an
adult man. I have seen videos of very young daughters forced to
have intercourse and oral sex with their fathers and pictures
of older men forcing naked young girls to have anal sex. Now,
these are shocking images that cry out for the strongest law
enforcement response possible.
Moreover, these disturbing images are only the beginning of
a cycle of abuse. Once created, they become permanent records
of the abuse they depict and can haunt the victims literally
forever once they are posted on the Internet. Unfortunately,
advances in technology have also made it easier for offenders
both to profit from these images and to distribute them to each
other. Once images are posted on the Internet, it becomes very
difficult to remove them from circulation. Even more disturbing
is the fact that offenders rely on these images to develop a
plan of action for targeting their next victims and then use
the images to bring victims into submission.
The challenge we face in cyberspace was illustrated by a
new national survey released in August of 2006, conducted by
University of New Hampshire researchers for the National Center
for Missing and Exploited Children. The study revealed that a
full third of all kids ages 10 through 17 who use the Internet
were exposed to unwanted sexual material. Much of it was
extremely graphic.
As I mentioned, this battle against child exploitation is a
top priority. Earlier this year, as the Chairman indicated, we
launched a program called Project Safe Childhood that is
helping to coordinate the good efforts of U.S. Attorney's
Offices, law enforcement, and advocacy groups. Through Project
Safe Childhood, we are constantly expanding our efforts to
address the sexual exploitation of children on the Internet and
the financial underpinnings of this exploitation. This program
is helping law enforcement and community leaders develop a
coordinated strategy to prevent, investigate, and prosecute
sexual predators, abusers, and pornographers who target our
children.
As we have looked at ways to improve the law enforcement
response to the problem of online exploitation and abuse of
children, one thing we have continually heard from State and
local investigators and prosecutors is that many Internet
service providers do not retain records for a sufficient period
of time. Several months ago, I asked a working group within the
Department to look at this issue, and we are working hard on
ways to remedy this problem.
I see the initiative to protect our children as a strong,
three-legged stool. One leg is the Federal contribution led by
United States Attorneys around the country. Another is State
and local law enforcement, including the outstanding work of
the Internet Crimes Against Children Task Forces, which are
funded by the Department's Office of Justice Programs. And the
third is nongovernmental organizations like the Financial
Coalition Against Child Pornography and the National Center for
Missing and Exploited Children, without which we would not have
a CyberTipline.
I want to note that the Financial Coalition would not exist
without the leadership and vision of you, Mr. Chairman. You
were the catalyst in bringing industry leaders together to
address this serious problem.
Congress, of course, has also provided valuable support for
our efforts by passing the Adam Walsh Child Protection and
Safety Act earlier this year. The Adam Walsh Act, signed by the
President, will help us keep our children safe by preventing
these crimes and by enhancing penalties for these crimes across
the board. But none of our efforts can stand alone. All must
involve high levels of sharing and coordination. That is what
Project Safe Childhood is all about.
One final note that I would like to share with the
Committee today is that our fight against the proliferation of
child sexual exploitation on the Internet does not stop at our
borders. It demands a global strategy. This makes it imperative
that we pay attention to the laws governing child sexual
exploitation in other Nations. Many countries have
astonishingly lenient punishments for child pornography
offenses.
For instance, in several nations, the production of child
pornography is punished with only a fine or imprisonment of
less than 6 months or a year. Simple possession is punishable
merely by a fine. And just as we need some States to strengthen
their laws to punish child sex offenders, we must encourage
foreign lawmakers to strengthen their laws as well, including
those concerning the financial components of these crimes.
I am, of course, grateful, Mr. Chairman, that the Committee
shares the Department's commitment to protecting our children.
Again, I want to thank you for establishing the Financial
Coalition Against Child Pornography. I also want to acknowledge
Senator Santorum's work for authoring the provision in the Adam
Walsh Act that authorized the Department's Project Safe
Childhood initiative. Senators, all of you, your exemplary
actions have truly shown the depth of your commitment to
protecting our children from abuse that no human being should
have to endure.
Mr. Chairman, thank you and the Committee for the
opportunity to speak to you. I would be pleased to answer any
questions the Committee may have.
Chairman Shelby. Thank you, Attorney General Gonzales.
Picking up on something you just said a minute ago, it has
been reported that in most of the world there are no statutes
or laws on child pornography, and only a handful of countries
actually have laws and harsh punishment for offenders. Mr.
Attorney General, what kind of collaborative efforts are
currently underway or contemplated between the Department of
Justice and international governments and law enforcement
officials? In other words, how can we, you as the Attorney
General and we as legislators, create a uniform system that
would help combat this commercial child pornography?
Attorney General Gonzales. An important part of my
responsibility as Attorney General is to develop and solidify
relationships with my foreign counterparts, because there are
many crimes that know no borders, such as terrorism, such as
the protection of intellectual property, and, of course, such
as the protection of our children. And for that reason,
whenever I travel it is always one of the items that is on my
list to raise with my counterparts in terms of what are the
efforts ongoing in that country and what can we do together to
help deal with this issue, because I think it is becoming more
and more of a problem in foreign countries as well, and my
foreign counterparts, they understand. They can't successfully
address this issue without the cooperation of the United
States.
We are also working with the European Union. There is an
organized effort within the European Union to focus on this
issue to see what we can do together collectively as a group
working with the United States and the member countries to
address this issue.
Senator, in terms of what Members of Congress can do, I
know that you have a lot of international travels, and I would
certainly put this at the top of the list of items to raise
with foreign legislators and foreign officials in terms of the
importance of protecting our children, because we will not be
able to protect our children here in America without the
cooperation of other countries. This is a very important
effort.
Chairman Shelby. Thank you. Shell corporations. Law
enforcement officials over the world over are concerned about
the use of U.S. shell companies to hide or facilitate criminal
activity, particularly money laundering. In a number of States,
they can be registered by foreign citizens by way of the
Internet in just minutes without any ownership information
being supplied. Officials have often noted that some cases had
to be because of insufficient information on what we call
beneficial owners. Does the Justice Department have an opinion
on whether having more information at the incorporation stage
and periodic updates of that information thereafter would be
beneficial in pursuing the fruits of crime like child
pornography? Would this take an intervention of Congress to
achieve the desired result? In other words, could we reach
other States, amend laws, or what?
Attorney General Gonzales. Mr. Chairman, I don't know
whether or not it would require the intervention of Congress.
That is something that I would be happy to look at and get back
to you. Obviously, the more information we have about those
engaged in criminal activity, the easier it is for the law
enforcement community to deal with it effectively. So I would
be happy to look at that and get back to you.
Chairman Shelby. That would be good.
Attorney General Gonzales. If I may, I was recently
reminded that I should have--I neglected to mention this.
Congress recently ratified the Cyber Crime Treaty, and that
will help us with respect to our efforts with our overseas
partners in fighting this problem.
Chairman Shelby. Stored value cards, there are many ways to
get money, I guess, and use it. This Committee has been
interested in stored value cards for some time. There is no
doubt that most people want to use these cards in a legitimate
way, yet there are always some others who will make illicit use
of them. Some of the cards' vulnerabilities stem from the ways
they are obtained. Programs often accept applications online,
by way of fax, or even through local check-cashing outlets, or
even convenience stores, often without having any customer
identification or suspicious activity reporting program in
place. In fact, some issuers flaunt being anonymous.
What effect do you think such cards are having or could
have on the ability of law enforcement to follow the money of
child pornography purveyors as they quickly process payments?
And will they be able to later identify online child porn?
Attorney General Gonzales. Mr. Chairman, they make it more
difficult, quite frankly, in our efforts to prosecute child
pornographers. I think one of the challenges that we will have
to wrestle with, and I think we need to approach this with an
open eye, and that is, we are dealing with a criminal element
that is smart and they watch what we do. And so while I hope to
see----
Chairman Shelby. And international in scope, right?
Attorney General Gonzales. And international in scope. And
so while I hope to see us make great success and great strides
in eliminating commercial websites that promote child
pornography by 2008 by following the money and going after
these credit card transactions, I fully expect that these
enterprisers will try to find other ways in which they can
facilitate these transactions other than through credit card
payments. And so they are smart. They are going to adjust to
what we do. We are going to have to be smart and flexible and
adjust in the way that we deal with this problem.
Chairman Shelby. But, notwithstanding, this is a daunting
challenge. We know that. But it is something that we cannot
afford to lose. We have got to prevail, have we not, for our
children?
Attorney General Gonzales. Mr. Chairman, this is a very
important fight for the future of our country. It is a serious
fight. The problem is enormous and it is immense, but we should
not shy away from the challenge. We have an obligation to
protect our children, and so I appreciate the effort of this
Committee.
Chairman Shelby. Thank you.
Senator Sarbanes.
Senator Sarbanes. Well, thank you very much, Mr. Chairman.
Mr. Attorney General, I first want to follow up on the
first question that Chairman Shelby put with respect to
cooperative efforts in the international arena. As I understand
it, the G8 law enforcement officials meet at least annually, I
gather, as a group. Is that correct?
Attorney General Gonzales. That is correct, sir.
Senator Sarbanes. Has this issue of the Internet
pornography issue been raised at those meetings of the G8
leading law enforcement officials?
Attorney General Gonzales. It has been raised. Yes, sir. I
have been in discussions with my G8 counterparts, and this is
an issue that we have discussed. Yes, sir. And I believe it is
an issue that has been discussed prior to my tenure as Attorney
General, but I am not certain of that.
Senator Sarbanes. But it is a matter that is high on the
agenda of those meetings? Would that be fair to say?
Attorney General Gonzales. Sir, I believe everything that
is on that agenda is a matter of priority for the member
countries, and it is an issue that we have talked about. Yes,
sir.
Senator Sarbanes. Now, under Section 314(a)(1) of the
PATRIOT Act, we have authorized law enforcement officials to,
and I now quote the Act, ``share with financial institutions
information regarding persons engaged in or reasonably
suspected, based on credible evidence, of engaging in terrorist
acts or money laundering.''
Now, presently, the regulations issued under that section,
which are issued by the Treasury Department, largely involve
financial institutions giving information to law enforcement.
Should the rules be revised for situations such as the fight
against child pornography so that enforcement agencies can
assist the coalition that we have made reference to earlier
more effectively by sharing information with cleared officials
about possible dishonest aggregators or shell companies? Is any
thought being given to that? And what can be done?
Attorney General Gonzales. Senator, I have not given any
thought to that in terms of looking at that regulation and the
sharing of information. I think if it can be done, it is
something that I think we should look at. If you are talking
about taking information about individuals and now sharing it
with a nongovernmental entity, there may be privacy issues that
we would have to look at. But that is something that we would
be happy to look at.
Senator Sarbanes. Would you undertake to do so? I think it
might be helpful in this effort.
Attorney General Gonzales. We will look at that, sir, and
give you our views about it.
Senator Sarbanes. All right. Several recent administrative
actions against international banks involving failure properly
to monitor correspondent accounts have been identified in the
press as potentially involving the flow of funds derived from
the sales of child pornography.
In your view, to what extent should international banks
take stronger steps to guard their correspondent banking
practices from abuse in this way? I mean, the bank itself in
its own practices may have some effective safeguards, but there
is a concern that the correspondent banking practices are not
subjected to the same scrutiny and standards.
Attorney General Gonzales. Sir, I believe that Mr. Allen is
going to talk about the importance of trying to have as many
members of the Financial Coalition involved as possible. I
think, as the Chairman indicated, we have over 20 members
currently, and that represents, I believe, something like 87
percent of the U.S. payments. But obviously, we need to get 100
percent in. As you have identified, it is not just a question
of U.S. banks. We also need to get banks outside of the United
States involved.
Senator Sarbanes. Well, in that regard, would additional
international agreements relating specifically to Internet
child pornography be helpful in furthering the effort to
develop international cooperation?
Attorney General Gonzales. It may be helpful, Senator.
Obviously, it depends on what those agreements say. But they
could be helpful, yes, sir.
Senator Sarbanes. Is there a special unit within the
Department of Justice that focuses on this issue only?
Attorney General Gonzales. Sir, we have a special--within
the Criminal Division we have a Child Exploitation and
Obscenity Section which focuses on child pornography generally.
Also, we have within the Criminal Division an International Law
Section, and so when we are dealing with our foreign
counterparts, we primarily deal with them through that
International Law Section. But it is all under the penumbra of
the Assistant Attorney General for the Criminal Division.
Senator Sarbanes. And how much cooperation do you get from
other agencies and departments of our Government, for example,
the Department of the Treasury? After all, much of what I have
referenced to, they are the first agency to work with these
money-laundering questions.
Attorney General Gonzales. Sir, I would say that the
cooperation that we have got from our sister agencies has been
very, very good, not only Treasury but, of course, the Internal
Revenue Service within Treasury, the Department of Homeland
Security, in particular ICE. The Postal Service has been
outstanding, as has the Secret Service. And so I would
characterize the cooperation and commitment to this issue as
being very strong.
Senator Sarbanes. Is there a structure established within
the executive branch of our Government to achieve this? Or is
this done on some ad hoc basis? Or is there a regular
monitoring, coordinating unit, interagency unit, that follows
this matter?
Attorney General Gonzales. Sir, I do not believe that there
is--I think you are kind of asking--I do not want to put words
in your mouth, but is there sort of a task force that is kind
of focused on this issue. None exists within the executive
branch that focuses solely on child pornography.
We do have a formal mechanism to look at trafficking that
is chaired out of the Secretary of State's office. But with
respect to child pornography, I would say, sir, that what we
have instead is an understanding of the scope of the problem
throughout the administration and a commitment throughout the
administration to work together to deal with this issue.
Senator Sarbanes. Well, it might be worth considering
whether establishing such a structure would be helpful, and I
commend that to you for the Department to give some thought to
it.
Attorney General Gonzales. Yes, Senator.
Senator Sarbanes. Mr. Chairman, I see my time is up. Thank
you.
Chairman Shelby. Senator Bennett. Thank you, Senator
Sarbanes.
Senator Bennett. I want to follow up a little on what
Senator Sarbanes was talking about. I do not want to imply that
Salt Lake City is a hotbed of these kinds of problems by going
again to a Utah case, but it demonstrates that the problems can
occur anywhere.
During the last week of July of this year, a 5-year-old
girl was kidnapped and murdered, and then after she was dead,
her body was raped.
Now, the man who had admitted having committed this crime
acknowledged that he was addicted to pornography and that the
murder of this child--her name was Destiny Norton--and the
subsequent act was his acting out of the pornographic fantasies
to which he was addicted.
This says to me that law enforcement of other kinds of
crimes--murder, in this case--should pay attention to
pornography. And I go back to the creation of the Meese
Commission, and it has been 20 years since we had the Meese
Commission on Pornography, and I remember a great deal of
ridicule that was heaped on the Meese Commission, in the media
and elsewhere, of people saying, ``Why is the Attorney General
wasting his time on a victimless crime? And why should the
Attorney General's Commission focus on this?''
Well, the addiction to pornography by the man's own
admission was a major motive in this horrible crime that took
the life of Destiny Norton. And it seems to me that is the
answer to the question of why law enforcement officials should
pay attention to ``a victimless crime,'' looking at these
pictures on the Internet is not the kind of thing we should be
spending the Justice Department's money on. As I say, the Meese
Commission was ridiculed for the focus that it had on
pornography.
My question to you, Mr. Attorney General, is: Isn't it time
we revisited the creation of an Attorney General's Commission,
an update, if you will of the kinds of things that the Meese
Commission prophesied would happen, a careful review of what
has happened over the last 20 years, and an analysis of whether
or not Destiny Norton's fate was an isolated incident or
represents part of a pattern that law enforcement officials
have been ignoring?
Now, do you have enough discretionary money in the Office
of Juvenile Justice and Delinquency Prevention to fund a new
AG's Commission on this issue?
Attorney General Gonzales. I do not know whether or not,
Senator, whether the funds are there, but that is something
that we can easily look into and get back to you. Let me just
say that we are doing a lot of--you talked about is it not now
time to go back and look at the sources of this issue and look
at what we ought to do to address it. That is ongoing and has
been ongoing, and it is not just a function or commitment by
the Federal Government, but obviously, organizations like the
National Center for Missing and Exploited Children are very
focused on this issue.
The recommendations of the Meese Commission, you have to
remember also, you know, a long time ago, and the changes in
technology have been unbelievable. I have not read the Meese
Commission report lately. I am not sure they could have
imagined the scope, the depth of the threat to our children
that exists today.
Senator Bennett. That is why I am asking you to consider
creating a new one, because those data are significantly out of
date, 20 years after the fact. I think you may get some of the
same ridicule from some of the same sources that pooh-poohed
the Meese Commission, but I would hope you would consider
creating a new one and ignoring those kinds of attacks.
Attorney General Gonzales. Well, the only thing I would
add, Senator, is that, you know, one of the recommendations of
the Meese Commission was that we ought to have recordkeeping in
terms of sexually explicit materials. And we now have, of
course, 2257 and we just had for the first time a conviction,
``Girls Gone Wild,'' there was a conviction for not keeping the
appropriate records of minors used in the production of
sexually explicit materials.
And so that was a recommendation of the Meese Commission,
and, of course, since the recommendations of the Meese
Commission, we have had Congress take action through the
PROTECT Act, through the Adam Walsh Child Protection Act. And
so I suspect if you look carefully at the Meese Commission,
some of the recommendations are reflected in some of the
protections given by Congress in these two very important
pieces of legislation.
What I care about is protecting our kids. If it requires a
task force, I am happy to look at that. I think we are doing a
lot, quite frankly, working closely with our Federal
counterparts, international counterparts, our State and local
partners, nonprofit groups around the country, parents who care
very much about this issue. But if we need to do more, I am
happy to look at it.
Senator Bennett. I cannot speak for the Chairman, but he is
in a position on the Appropriations Committee to help you out
if money is a problem.
Thank you.
Chairman Shelby. We hope money will never be a problem, Mr.
Attorney General, when it comes to justice. You know that.
Attorney General Gonzales. Yes, sir.
Chairman Shelby. Senator Stabenow.
Senator Stabenow. Thank you, Mr. Chairman.
Just to follow up with Senator Bennett in terms of funding,
one of the questions that I had related to just keeping up with
the demand, when we look at the National Center for Missing and
Exploited Children that says that the CyberTipline in 2001
received 24,000 reports of child pornography, as you know, and
that August of this year, the number had climbed to 375,000.
So, Mr. Attorney General, my first question would be just
simply: How are you going to keep up with this, and, in fact,
is this an issue just from an enforcement standpoint alone in
which we need to be looking increased resources?
Attorney General Gonzales. I think that, as I indicated,
the problem is enormous. It is immense. It presents some
tremendous challenges for the Department--not only for the
Department, but our State and local counterparts.
Do we need more resources? We need more resources, quite
frankly, but we realize that we do not live or operate in an
environment of limitless resources. There are other priorities
that are important that have to be met as well, which means
that we have to be smart in utilizing the resources that
Congress gives to us. And I think that we have been smart by
greater collaboration and coordination with State and local
counterparts, by leveraging what we know through additional
trainings with State and local counterparts.
I must tell you that, of course, the Adam Walsh Child
Protection Act authorized additional prosecutors. I think that
is something that should be seriously looked at, not only
prosecutors within the U.S. Attorneys' Offices around the
country, but additional prosecutors in the Child Exploitation
and Obscenity Section. The Adam Walsh Child Protection Act also
authorized funding for additional computer forensic experts.
There is a serious backlog because we do not have enough
computer forensic experts, and so there was an authorization
for additional such experts for both the FBI and for ICE. I
view it as a serious backlog, and I think that is something
that Congress should be looking at.
I think also we have a serious need with respect to
children who are victimized. Oftentimes there is no place to
put them. The State and local facilities simply are not
available, and so we have to put them in juvenile facilities,
which is not the best place to put kids who have been
victimized. And so one of the things that I think ought to be
looked at is whether or not there should be additional grants
so that we--grants for State and local entities that can
provide additional shelters for kids.
So there are needs there. There is no question about it.
But we have to be smart, and I look forward to working with the
Congress to come up with the appropriate level of
appropriations to meet these needs, these very important needs.
Senator Stabenow. I appreciate that. This is an area, in
one way or another, that I have worked in my whole adult career
and have tracked in Michigan what happens when we do not pay
attention to children, to shutting these kinds of things down.
In the past, it was different kinds of exploitation, but the
truth is we are going to pay there the mental health system,
the juvenile justice system, the lack of children being
successful in school or successful adults because of the
outrageous victimization of children. And so I would just
encourage you to have a loud voice, because I believe you have
people here who would like very much to respond to that.
If I might just go on, before my time runs out, to a couple
of other different kinds of questions, one back to looking at
the international front because, as I understand it, Russia's
illegal sites may be growing even faster than the United
States' and so what happens with our G8 partners becomes very,
very important.
When we worked on the PATRIOT Act legislation together, I
was proud to author amendments to put in the concentration
accounts language, and at that time we had language relating to
correspondent bank accounts. We did not end up passing that and
putting it in the PATRIOT Act.
But I am wondering, as you have these discussions now, are
there very specific things that you are hearing or tools that
we should be addressing that would help you as you are working
with our G8 counterparts to be able to do what you need to do?
Attorney General Gonzales. Senator, most of our
discussions, quite candidly, relate to sharing of information,
evidence that could be useful in prosecutions. And we have had
some successes, some international takedowns involving sites
around the world because of this kind of cooperation and
collaboration.
In addition to information or evidence that would be useful
in connection with a prosecution, my discussions have also
centered upon legislation, what laws exist in those countries
that would discourage the growth of Internet sites.
So those are the kinds of things we have focused on. I do
not have any recollection about specific discussions about
financial transactions, but we may very well have had them. I
just do not recall them at this time.
But as I think Senator Sarbanes said, following the money
is extremely critical, and having additional tools to do so
would be most helpful.
Senator Stabenow. And, Mr. Chairman, I know my time is up.
I would just comment again on The Internet Safety and Child
Protection Act, and I just mention this only because this deals
with the other side of victimization, which is the number of
young people under the age of 18 that are getting on these
sites. So we not only, as you so rightly indicated, have crimes
being committed in full view while we are watching this, but we
need to be addressing and passing legislation that requires
verification of age so that 10-year-olds, 11-year-olds, 12-
year-olds, who are now being able to get on and see this and
may become the next generation of pornographers and predators
are not able to get on these sites.
Attorney General Gonzales. Senator, as the father of 14-
year-old and 11-year-old boys, I very much appreciate your
comments. Let me just take a moment, Senator, to say that
parents have a responsibility here. This is not something that
the Congress, as wonderful and as powerful as this Committee
is, can deal with effectively. We have to get parents involved.
We have to make them understand this really is a war.
Chairman Shelby. You are absolutely right, Mr. Attorney
General.
Senator Stabenow. The only thing I would say is that we can
verify age, and so I agree with that as a parent totally, but
we can work together to verify age.
Attorney General Gonzales. Yes, Senator.
Chairman Shelby. Mr. Attorney General, I am going to say it
again, you are absolutely right, because without the parents
being involved, we are wasting our time and money.
Attorney General Gonzales. I am afraid to say that is true,
Senator.
Chairman Shelby. Senator Allard.
Senator Allard. Thank you, Mr. Chairman.
Attorney General Gonzales. I want to explore a little bit
with you those things that may lead to the success of your
effort and those things that may create obstacles.
My first question is: What do you think would be the
greatest obstacle to success in your war against child
pornography?
Attorney General Gonzales. We need information, Senator,
and information helps us make cases. There is, understandably,
reluctance about the Government having too much information
about individuals and individual transactions. And obviously,
we operate under a very strong Constitution. We respect and
understand the civil liberties and the privacy rights of
individuals. But we have got to find a way to harmonize this so
that we can get access to information that would be helpful.
I talked in my remarks about the issue of data retention.
When I travel around the country, every cop, every agent, every
prosecutor, they understand and they support this notion that
we need to figure out a way to have Internet service providers
retain data for a sufficient period of time that would allow us
to go back and retrieve it through a legal process in
connection with an investigation of someone who is harming a
child.
I believe Congress has recently received a letter signed by
49 State Attorneys General supporting this, asking the Congress
to look at this. And if it is not part of the record, I would
like to have it submitted. I am not sure if it is appropriate
for me to do that, Mr. Chairman, but I think that it is an
important letter that the Committee should have before them as
they consider this issue. And it is the kind of issue where
even the State Attorneys General, you know, they reluctantly
concede this is a problem that is national scope, and they
would normally like to deal with issues on a local level, the
State level. But they understand that this is a national
problem that requires Federal legislation.
Again, this is all related to the question of information.
The more information we can have in a way that respects the
privacy rights and the civil liberties of Americans, the more
effective we can be in prosecuting these cases.
Senator Allard. Attorney General Gonzales, what part of
your program do you think is most likely to be successful?
Attorney General Gonzales. I think that--two. I think
education is important. Things like this hearing today are
extremely important. When I go out and talk about this, it is
important. When you go out and talk, it is important.
We think that people understand the scope of this problem,
but so many people really do not. And so we need to educate
people about the dangers that exist. I think we can be
successful in that. The Ad Council has been very, very helpful
working with NCMEC, with ads in the past. We are going to
partner with the Ad Council and NCMEC for new ads next year
again--all with the goal of trying to educate people about the
scope of this problem.
Obviously, at the Department of Justice, what we do is
prosecute. That is what we do. And I think that we have had
some good successes to date. We are going to continue to push
forward and to be aggressive in this area.
Just last week I was in South Carolina. I asked every
United States Attorney to send a representative to the training
center in South Carolina so they can be trained, spend 4 days
there or 3 days there to learn about prosecuting obscenity
cases.
In every district around the country, we have a Project
Safe Childhood Coordinator in every U.S. Attorney district to
develop a comprehensive, district-wide strategy. So we know
what works, what is effective, what makes us most effective in
prosecuting these kinds of cases. So we are going to do our
part in prosecuting these cases. I think programs like the
Financial Coalition are extremely important because it is
another avenue of getting information to the law enforcement
community. We are now able to have our own data base of the
commercial websites that are promoting child pornography. That
was not possible before the Financial Coalition, and so that
has been very, very helpful.
Senator Allard. Mr. Chairman, the Congress has passed the
Government Procedures and Results Act. It is now adopted on the
administrative side as PART. And one of the toughest things, I
think, to measure in the PART program is your educational
effort. I agree with you, education is a vital part to
accomplish it. But how are you going to measure success when we
come in to using education that is measurable?
Attorney General Gonzales. Well, hopefully, if you look at
recent studies about the number of children who have been
solicited online and you look at the number of children who are
responding to those solicitations, which I believe are going
down, I think part of the reason is because we are doing a
better job of educating parents and educating kids about the
dangers of online solicitation.
So you are right, this may be an area that is going to be
tough to measure. But I think you and I can both agree how
important this is and, nonetheless, while it may be tough to
measure, we have an obligation, in order to be successful in
this, to educate parents and educate kids about the dangers of
child pornography on the Internet.
Senator Allard. I hope you spend some time in figuring out
how to best measure this, because I think that is vital for the
continuation of this program that you are starting. And if we
cannot show results in some way, then I think it is difficult
to come to the appropriators for more money for the program.
Attorney General Gonzales. We will look at that, Senator.
Senator Allard. Thank you, Mr. Chairman.
Chairman Shelby. Thank you, Senator Allard.
Senator Enzi.
Senator Enzi. Thank you, Mr. Chairman. Senator Sarbanes
mentioned an American law that could provide some follow-up. In
England, a law was passed earlier this year that allows law
enforcement officials to pass along to credit card companies
the information of those who are suspected of or convicted of
accessing child pornography. The credit card industry then has
the ability to revoke the offender's credit card.
Is the Department of Justice interested in participating in
such a program? And what liability issues exist if you were to
participate?
Attorney General Gonzales. I would need to look at that
program, quite frankly, Senator. Obviously, we operate under
different legal systems, and I would have to--I would want the
opportunity to look at that. There may be, again, if you are
talking about sharing information, Government information, with
commercial enterprises or nongovernmental entities, there may
be privacy interests that we would have to take into
consideration.
But this is a kind of crime where the more information we
have, the more helpful it is, as I have indicated already. And
it is something that I would be interested in looking at, so I
would be happy to do that.
Senator Enzi. OK. Thank you.
Now, last year the administration announced its intention
to ramp up the prosecution of Federal obscenity cases. What is
the status of that increased prosecution? And has it increased
the prosecution of obscenity cases that have led to increased
prosecution of child pornographers? And do you find that people
that do obscenity also do child pornography?
Attorney General Gonzales. There is a connection. I think
there is a connection. I think we can cite the studies that
show a connection. If you are talking about--people ask, well,
why are you going after obscenity cases? It is because
oftentimes there is child pornography involved, and that is why
we think it is important, and that is why in this discussion we
should not lose sight of obscenity prosecution. That is
important. And it is a reason why, as I indicated in response
to an earlier question, I have asked our U.S. Attorneys to do
more. You asked me what is our status. We need to do more,
quite frankly.
I have spoken with the troops out in the field about why I
think this is important. I think we need to do a better job,
and so we will continue to work at it.
Senator Enzi. What has been the result of the increased
prosecution of obscenity cases?
Attorney General Gonzales. I cannot cite to you the
numbers, but we can certainly get that for you, Senator. I
would have to say that probably--I will say that I am
disappointed in the efforts to date. But in defense, in
fairness, I mean, these are tougher cases to make, again,
depending on the prevailing standards of a community, whether
or not you can have a successful prosecution. I suspect it is
probably easier in some portions of the country than it is in
other portions of the country. And so we are asking in some
cases much more of a U.S. Attorney, depending on, you know,
what city or town they are located in as opposed to someone
else.
But, nonetheless, because of the correlation between
obscenity and child pornography, I think it is important that
we not lose sight of these kinds of cases as well.
Senator Enzi. And I would appreciate it if you would give
me those numbers. I have reviewed a number of proposals to curb
pornography and child pornography, and most of the proposals
from the Department of Justice deal with the regulation of the
Internet.
Will you be presenting us with any formal legislative
proposals for the Banking Committee to consider? And if so,
could you give us a preview of those proposals?
Attorney General Gonzales. Senator, I do not know whether--
we are still in discussions about what, if anything, we would
present to this Committee. Again, I apologize, but I do not
have an answer to that question.
Senator Enzi. OK. Thank you.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you, Senator.
Senator Bunning.
Senator Bunning. Thank you, Mr. Chairman.
Attorney General Gonzales, in observation of what we have
done and where the status of Internet pornography and
exploitation of children presently is, we seem to be going
backwards. And the reason I say that we seem to be going
backwards is that every time I watch or see a case, I see
local, State, and Federal laws conflicting on what we can
actually arrive at.
Now, I am asking you as the Attorney General, the chief law
enforcement of the United States of America, what law would
best serve our purpose so that we can wipe away the conflicting
laws of local and State jurisdiction? Because if you watch some
of the cases that are coming up, it always seems that local,
State, and Federal jurisdictions are bumping into each other
trying to prosecute the very people we know are exploiting our
children, my grandchildren, and your two children.
So what can you do and what can your Department do to
suggest getting rid of or making sure that the privacy laws are
not violated and we can get at the perpetrators?
Attorney General Gonzales. Senator, I do not know whether
it would make sense, quite frankly, to have a Federal law that
would preempt State law. We have some very dedicated, very
committed State and local prosecutors. Quite frankly, we do not
have the resources--there are only 12,000 Federal law
enforcement officials. There are 800,000 State and local law
enforcement officials. And so we need them as partners, quite
frankly. And so we need them to be able to prosecute State and
local violations.
I would not characterize it as us bumping into each other.
You know, obviously, we run--everyone is committed to this
issue. In many cases, State and local officials are quite happy
to have the Feds take over a prosecution. Why? Because we in
most cases have better resources. We have more experience in
dealing with these cases. And, quite frankly, the sentences,
the Federal sentences are much tougher.
And so, for that reason, it has been my experience that the
cooperation in terms of how to resolve these cases has been
actually pretty good. And, obviously, from time to time, there
are disagreements, but my general experience is that the end
goal here is, again, to get a successful prosecution, and we
try to work together whenever we can.
Senator Bunning. I can understand us working together, but
I have seen many cases that are stymied because of local,
State, and Federal laws conflicting on certain privacy,
evidence, and how a case is handled. We know the person is
guilty. We cannot get to them because of some local
jurisdiction--or State jurisdiction, for that matter. And I
just think that the situation is such that we have to be able
to get to the perpetrators.
Attorney General Gonzales. Senator, I would like the
opportunity to think about this question, and perhaps I could
get back to you with a response.
Senator Bunning. OK. In preparing for this hearing, I was
looking over the list of organizations in the Financial
Coalition Against Child Pornography, but I did not see the
Child Exploitation and Obscenity Section of the Department of
Justice anywhere.
What role does this section play in this group?
Attorney General Gonzales. Senator, the Financial Coalition
is a nongovernmental entity, and the members include NCMEC, its
international partner, Internet industry leaders, and banks and
financial institutions.
The coalition sort of serves as a clearinghouse. We have
folks from the Department of Justice, the FBI, CEOS, the Postal
Service, ICE, there on the premises at NCMEC. And so as they
receive information, we receive it real-time, and that is why I
talked earlier about this data base that has been created of
commercial websites. And so when this information comes in,
NCMEC makes an evaluation as to whether or not is this, in
fact, child pornography. If it is, if they believe it is, they
refer it to the law enforcement community. We then make an
assessment as to whether or not this is something that should
be prosecuted. If we cannot make that assessment within 10
days, then NCMEC goes back to the bank, say it is Visa or
MasterCard, and then Visa or MasterCard takes the action that
they believe is appropriate in dealing with that particular
merchant.
So CEOS is involved in terms of assisting in the
investigations, assisting in the prosecutions, and also
involved very much so in training programs around the country
with State and local officials.
Senator Bunning. I know my time is almost--last question.
Internationally, what countries are you seeing the most child
pornography come from? And what cooperation have you gotten
from those governments?
Attorney General Gonzales. Senator, I would say--I would
characterize it as sort of Eastern Europe and Asia. I do not
want to name a country in terms of--I do not want to emphasize
a particular----
Senator Bunning. You do not have to name a country. Just
give me sections.
Attorney General Gonzales. Eastern Europe.
Senator Bunning. Eastern Europe. And what cooperation have
you gotten from those governments?
Attorney General Gonzales. Senator, we have seen
cooperation in connection with specific cases where there has
been a willingness to share information and to participate in
prosecutions. But, quite frankly, I think that countries ought
to be doing more.
We worry about the explosion of child pornography in our
country. I believe it is even worse in other countries. It is
because, I think, the efforts there are not as great as they
are here in this country.
Senator Bunning. They do not realize the damage that is
being done.
Thank you.
Chairman Shelby. Thank you, Senator Bunning.
Senator Sarbanes.
Senator Sarbanes. I really want to go to the next panel,
Mr. Chairman.
Mr. Attorney General, child pornography, as I understand
it, is per se obscene, correct?
Attorney General Gonzales. Child pornography is not
protected. That is correct, sir.
Senator Sarbanes. That is right. So it does not have any
First Amendment protections.
Attorney General Gonzales. That is correct, sir.
Senator Sarbanes. So getting at child pornography, it seems
to me, is a matter of implementation and enforcement. We do not
have any sort of problem with the legal standard because the
courts, in effect, have said on its face it is obscene,
correct?
Attorney General Gonzales. That is correct, sir.
Senator Sarbanes. Well, it seems to me that that really
lays the basis for a pretty intense enforcement effort on the
part of Federal, State, and local governments at all levels. I
mean, I was listening carefully to Senator Bunning's question,
and I thought it was a very, very important question. But we do
not have a situation here where there is some question about
the legality and so forth. The courts have been very clear
about that, as I understand it.
And so it seems to me the challenge is the enforcement and
the implementation. We appreciate what the Department of
Justice is doing, and I think the other Federal agencies could
also do more. And, of course, we need to back it with resources
from here if we are going to--and I do, again, in closing,
commend Chairman Shelby for launching this initiative, which I
think was a very innovative approach. If we can dry up the
money, we are going to dry up at least a very large part of
this activity.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you, Senator.
Mr. Attorney General, we thank you for your presence today.
We know you are a busy man. Let's continue to work on this. And
there are a number of things for the record that you said you
would get back to various Members here today.
Attorney General Gonzales. Thank you, Mr. Chairman.
Chairman Shelby. Thank you.
We now will welcome the members of our second panel: Mr.
Ernie Allen, President and Chief Executive Officer of the
National Center for Missing and Exploited Children; Ms. Kim
Mowder, Senior Vice President, Bank of America Merchant
Services; Mr. Mike DeNoma, Group Executive Director of Consumer
Banking for Standard Chartered Bank; Ms. Jodi Golinsky, Vice
President, Regulatory and Public Policy Counsel for MasterCard
Worldwide; Mr. Mark MacCarthy, Senior Vice President for Public
Policy, Visa USA, Inc.
I will tell all of you now, all of your statements will be
made part of the record in their entirety. The bad news--or
maybe the good news--we have a vote pending at noon, so we ask
that you summarize your remarks as quickly as possible.
Mr. Allen, I just want to say something about you and thank
you for your tireless efforts. You have been very
instrumental--very--in the success of the coalition thus far--
we have got a long way to go--for your work on behalf of
children all over the world. Thank you so much, and welcome
again to the panel.
STATEMENT OF ERNIE ALLEN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL CENTER FOR MISSING AND EXPLOITED CHILDREN
Mr. Allen. Thank you, Mr. Chairman, Senator Sarbanes, and
Members of the Committee. I will be brief and summarize my
testimony.
Mr. Chairman, as the Committee has pointed out, 1 year ago
you convened leaders of the financial industry in this room and
challenged us to do more to attack this problem. Six months
ago, you joined us as we launched this new Financial Coalition.
And as you know, and as has been mentioned, we set a goal, and
that goal was to eradicate commercial child pornography by
2008. Well, today what I wanted to report to you and the
Committee is what we believe is significant progress.
As you mentioned, financial industry leaders who represent
87 percent of the U.S. payments industry, measured in dollars
running through the system, have signed on. They involve the
largest credit card companies, major banks, third-party payment
companies, Internet leaders, and we are seeking to expand the
membership internationally.
I am pleased that an international bank, a coalition
member, is with us today, Standard Chartered Bank of Singapore.
Our mission, as the Committee has mentioned, is to follow the
money, stop the payments, shut down the accounts, and put an
end to this multi-billion-dollar worldwide enterprise.
The Attorney General spoke in vivid terms about what this
problem really is, and let me emphasize that we still believe
that most of America does not get it. They think this a problem
about 20-year-olds in pigtails made to look like they are 15.
Eighty percent of the offenders who have been identified have
had images of prepubescent children, 39 percent less than 6
years old, 19 percent younger than 3 years old. That is what
this problem is about.
Since our March announcement, we have built a mechanism for
sharing information between the participating companies and law
enforcement. Our goal is to quickly identify the merchant bank
at which the account is located and then utilize existing
banking law to stop the payments and shut down the sites.
Our first priority remains investigation and prosecution,
and as the Attorney General indicated, law enforcement always
has first crack at the data. But our premise is you cannot
possibly prosecute everybody. I have talked on many occasions
about that Texas website that we identified through a report to
our CyberTipline 5 or 6 years ago which, when it was shut down
by the Dallas Police Department, had 70,000 customers paying
$29.95 a month and using their credit cards to access graphic
images of small children being raped and sexually assaulted.
That is not acceptable.
What I am prepared to report to you today is that, even
though we have just completed the pilot phase of this effort,
testing the mechanisms and systems that we have put into place
for information sharing and action, there are three basic
conclusions that we have drawn that we are seeing already. One
is because of the strong, unprecedented efforts of law
enforcement at all levels, the efforts of the financial
companies and others. We believe that we are already disrupting
these enterprises.
Our first and primary goal was to eliminate the use of the
credit card for child pornography purposes. We want these
processes to be as difficult and cumbersome as possible and
make the business plan unworkable for these enterprises. And
what we are seeing is that, while we are still finding credit
card logos on many of these sites, in most instances when we
look deeper, we are finding that they do not link to real
accounts.
There are a couple of possible explanations. One is we are
finding that in many cases these logos are being used for
purposes of identity theft. If you attempt to purchase access
to a child pornography site and you do not get access to that
product, who are you going to tell? So there is no question
that criminals are using this technique for identity theft.
The other thing we are seeing is that in many cases the
operators are going back to the purchaser and offering other
payment mechanisms. These tend to be non-mainstream payment
devices, but, clearly, as the Attorney General indicated, these
businesses are evolving and they are changing, and we think the
leadership of this industry and the pressure that is being put
on these illegal sites is already having impact.
There are some things that we believe that you and Senator
Sarbanes and the Committee can help us do. One, we are proud of
the fact that companies representing 87 percent of the U.S.
payments industry are part of the coalition. But it ought to be
100 percent. We welcome your help in bringing the rest of the
U.S. financial industry into this process.
Second, we recognize that this is a global phenomenon. We
need your help in bringing more international institutions and
international decisionmakers into this process.
And then, as the Committee pointed out, third, as it
relates to the Attorney General's report, we need much more law
enforcement presence and much more law enforcement attention to
this problem. What we have discovered is that the sheer scale
of this is far greater than any of us ever imagined. The
Internet has spawned a problem that is of a magnitude
unimaginable.
Mr. Chairman, I am pleased to report to you that we are
making progress, but we have only just begun.
Chairman Shelby. Thank you.
Ms. Mowder.
STATEMENT OF KIM MOWDER, SENIOR VICE PRESIDENT, BANK OF AMERICA
MERCHANT SERVICES
Ms. Mowder. Chairman Shelby, Senator Sarbanes, and MM
embers of the Committee, my name is Kim Mowder. I am the head
of Risk and Fulfillment for BA Merchant Services, a subsidiary
of Bank of America. Bank of America BA Merchant Services
provides card processing services for merchants across the
United States. We applaud the Chairman's focus on this issue
and the resulting coalition that Ernie Allen so ably chairs. We
are proud to be a part of this collective effort and believe
that your involvement, Mr. Chairman, is what led to this first
ever joint industry effort to combat child pornography--a
process that I understand began right here in this room. We
certainly commend Kathy Casey as well for all of her efforts
before she left the Committee.
We are equally proud to be associated with the National
Center for Missing and Exploited Children. We subscribe to and
wholeheartedly agree with all of the benefits and progress Mr.
Allen has described to you. Like everything Ernie brings his
passion and commitment to, it is working, and it goes without
saying that we appreciate the excellent work being done by the
Attorney General, the Department of Justice, and all law
enforcement to combat the issue.
I would like to begin my testimony by emphasizing that Bank
of America's policy and practice is to vigorously screen for
and avoid signing merchants that are engaged in any kind of
questionable activity, let alone child pornography, and to
terminate any relationships that subsequently change in that
direction should that happen. We simply have zero tolerance
when it comes to issues like child pornography, and like our
colleagues, we are closely aligned with and cooperate with law
enforcement at every level.
Bank of America is the second largest acquirer of merchant
services in America. We have been processing credit cards for
merchants since 1958 and have approximately 700,000 active
merchants in our system. We take great pride in our very
conservative risk-averse approach to the merchant services
business and do not hesitate to decline nearly 2,000 applicants
a year because the activity of the merchant is inconsistent
with our policies.
In that regard, our underwriting policy clearly defines
those merchant types whom we deem to be unacceptable for a card
servicing relationship. We are much more conservative than is
legally permissible, and the following business types are
routinely declined by us: adult entertainment products and
services, dating and escort services, debt collection firms,
pornography products and services, tobacco products being sold
via mail order, telephone order, or Internet sales, wire
transfer of money, or any money-related services. No exceptions
are made on these business entities and, again, we have zero
tolerance for issues like child pornography.
Our process of thoroughly vetting merchant applications
begins with the salesperson talking directly to a merchant,
often face to face. Together they complete a merchant
application that is sent to the underwriting experts in our
processing center. Our process is based on the principle of
know your customer, not only to screen out undesirable
activities but also to look for other potential business
opportunities.
Merchant application packages contain profile information
on the merchant's business that includes but is not limited to
a description of the products and services being sold, a
description of how sales will occur, and demand deposit banking
information. In addition, the merchant application may include
personal name, address, and Social Security information on the
owner or officer of the business. This information is used in
the due diligence process to validate the business type and
ownership.
Underwriters review new merchant applications, and they are
charged with validating the merchant's physical business
address, confirmation of the products or services being sold,
and the methods of sale, i.e., retail storefront, mail order,
Internet. And of course, all pages and links in a merchant's
website are examined and maintained for future comparisons. I
have listed in my written testimony nine of the tools we use to
properly vet merchant applications, including verifying
physical inventory, contacting neighboring businesses, and
based upon information from these sources, the underwriter may
decide it is necessary to perform additional due diligence.
We will do whatever is necessary to ensure we are signing
merchants consistent with our very conservative policies.
Again, should the merchant be selling products or services via
the Internet, the merchant's Internet links are a substantial
focus, and we look at embedded links to any other sites to
identify products and services that might be offered through
this merchant's site that could be identified as unacceptable.
Screening for unacceptable activities does not end with the
initial due diligence process. All accounts are reviewed every
year by BA Merchant Services, and our Risk Department performs
daily monitoring of merchant transaction activity to ensure
close monitoring of their daily processing. Daily activity
reports are generated on those merchants that appear to be
processing sales contrary to the expected norm based on the
original terms of their processing agreement and the business
type and size.
Risk investigators utilize the same due diligence tools to
investigate the merchants appearing on our exception reporting
as those used by the underwriters on new merchant applications,
all in an effort to gain an understanding of the merchant's
current processing behavior. And due diligence may include, but
is not limited to, talking directly to card holders to confirm
transaction validity and makeup, communicating with the
merchant's banking representative, or speaking directly with
the merchant.
From this investigation, the investigator will determine
what, if any, post-due diligence must occur. Should the
investigation determine that the merchant subsequently has
begun engaging in unacceptable activities, the following
actions are immediately taken: the merchant processing
capability is terminated, merchant profile information is
forwarded to the bank's Investigation Service Division for
immediate investigation, and the bank coordinates with law
enforcement.
And, of course, we work in very close partnership with the
card associations. They employ on our behalf a vast array of
protocols, all designed to be a formidable line of defense to
capture potential illegal activities. Our efforts and theirs
are not discrete, but a seamless and cooperative venture to
ensure we all prevent the use of our payment networks for such
practices. It is a partnership made stronger by the coalition
Ernie chairs.
In summary, Bank of America has a zero tolerance for
anything related to child pornography. We believe strongly that
our investigations and due diligence procedures provide
assurance that no undesirable merchant activities are being
processed through our service, and we work closely with the
card associations to close any merchants that they identify as
posing a risk. Finally, we support the collective efforts of
the coalition and this Committee to ensure the legitimate
electronic payments industry is neither wittingly or
unwittingly facilitating the sale of online child pornography.
Thank you.
Chairman Shelby. Thank you.
Mr. DeNoma.
STATEMENT OF MIKE DeNOMA, GROUP EXECUTIVE DIRECTOR, CONSUMER
BANKING, STANDARD CHARTERED BANK
Mr. DeNoma. Thank you, Mr. Chairman and distinguished
Members of the Committee, for the opportunity to contribute to
this discussion. My name is Mike DeNoma. I am the Group
Executive Director of Standard Chartered Bank and the CEO of
Global Consumer Bank. My home base is Singapore.
As we all know, the scourge of child pornography knows no
boundaries. For that reason, I was eager to travel to
Washington yesterday to be part of these important hearings.
I commend the Senate Committee on Banking, Housing, and
Urban Affairs for its commitment to this vital issue. In
particular, I want to acknowledge Senator Shelby for his
leadership in helping us to build and launch the Financial
Coalition Against Child Pornography.
In addition to my role at Standard Chartered, I am a member
of the Board of International Centre for Missing and Exploited
Children, and it is an honor to be affiliated with that group.
Standard Chartered is a founding member of the Financial
Coalition Against Child Pornography. As an individual
institution, Standard Chartered, like Bank of America, has its
own processes for ridding its systems of child pornography
merchants, and we are beginning to share best practice with
other industry players. However, we firmly believe the best way
to battle this horrendous problem is to join forces and brain
power with other members of the industry on both a global and a
country-by-country basis. Given my company's 153-year history
and role in Asia, Africa, and the Middle East, we have
committed to take the lead in attempting to recruit key
actors--governments, payment providers, regulators, financial
institutions, and Internet service providers--within each of
our 56 countries and have them join forces to combat this
serious problem on a national level.
Our objective is to present these key actors in 75 percent
of our countries by the end of March 2007. We have been working
in Singapore as a pilot market for this approach over the last
5 months. The Association of Banks in Singapore, which has 110
members, and the coalition it formed, we believe, is now just
weeks away from making an important announcement on how it will
combat this problem on a Singapore level. India, Hong Kong,
Thailand, and Indonesia are next on our list and will be
presented in the next 60 days.
Further, we are trying to raise awareness of the size,
scope, and intensity of this problem amongst critical local
decisionmakers as well as with the general public and opinion
formers across our markets and the globe.
The Attorney General mentioned the need for education. To
that end, we recently launched a campaign that we call ``Light
A Million Candles.'' Our goal is to gather a million signatures
in a virtual petition to challenge financial institutions,
governments, payment organizations, Internet service providers,
technology companies, and law enforcement agencies to work
together to eradicate this problem. The internet is much of the
cause of this problem, and we believe the internet must be used
to fight it. It is a platform to tell the facts and get people
to take action.
The campaign was developed by a team lead by Standard
Chartered employees who donated not only their time but also
their creativity, and, in fact, their personal funds in raising
the $60,000 to produce the television spot, which we will get
you all a copy of, and they raised those funds in 48 hours.
Global advertising agency TBWA worked with award-winning
director Royston Than and well-known photographer Geoff Ang to
develop a hard-hitting campaign involving a TV commercial,
print ads, a viral e-mail that is in 22 languages on its way to
50 languages, and a website to increase awareness of the global
problem of child pornography and to motivate people to visit
lightamillion candles.com to pledge their support for this
cause. One week old, 76,000 candles were lit by Sunday evening
on the website by individuals from 130 countries. In fact, the
last record before this meeting started, it is now up to
105,000 signatures from 130 countries.
In addition, the global media agency OMD is approaching
international media owners to support the cause by running the
TVC and print ad as a public service. So far, CNN, MTV, the
BBC, Discovery Channel, Time Magazine, and Reader's Digest in
four languages have already agreed to donate media space to
support the campaign. We expect much more coverage in the weeks
and months ahead.
The TV commercial itself involves 11 children of 11
different nationalities, giving the facts of child pornography
in their own language, with subtitles in English below. We
tested it with consumers. It is both a sad and disturbing
commercial, but it does drive action.
In terms of financial services industry push, the 23,000
delegates and observers to the IMF/World Bank meetings in
Singapore this week will see the TV spot in elevators of the
110 buildings and hotels and on the big video screens in the
main conference area of the IMF. And perhaps most important,
our chairman and senior executives will be working at the IMF
on a personal level to raise awareness of this issue and to
enlist international and local financial institutions to join
the Financial Coalition Against Child Pornography.
As you can see, Standard Chartered is engaged in the fight
on a number of fronts. To be sure, the challenge is
considerable in many areas, and includes safe harbor
legislation on legal liability, clearinghouse administration
and accountability, whether it is on a national or a global
level, and the rapidly evolving alternative payment methods.
But the good news is that awareness of the problem is growing
rapidly, and the payments industry is putting a great deal of
muscle into following and stopping the flow of funds to this
insidious enterprise. But I agree with the Attorney General.
Much more needs to be done.
Again, I commend the Committee for its proactive work on
this critical matter and look forward to continuing our dialog
with you in the future.
Chairman Shelby. Thank you very much.
Ms. Golinsky.
STATEMENT OF JODI GOLINSKY, VICE PRESIDENT, REGULATORY AND
PUBLIC POLICY COUNSEL, MASTERCARD WORLDWIDE
Ms. Golinsky. Good morning, Chairman Shelby, Ranking Member
Sarbanes, and Members of the Committee. My name is Jodi
Golinsky, and I am Vice President, Regulatory and Public Policy
Counsel at MasterCard Worldwide. It is my pleasure to appear
before you today to discuss our efforts to combat child
pornography.
MasterCard deplores attempts to use our system for illegal
purposes, and we are deeply committed to combating the sale of
child pornography. Our efforts in this area include: one,
working to prevent offending websites from accepting
MasterCard-branded payment cards; two, detecting websites
attempting to circumvent our prohibition; and, three, assisting
law enforcement to detect, apprehend, and prosecute child
pornographers.
We have had great success in impeding these criminals from
accessing our system. We recognize, however, that we see only
part of the problem and that criminals who are denied access to
our system are quick to look for other payment alternatives. We
also recognize that private sector efforts alone are simply not
enough. Collaboration with law enforcement is critical. Law
enforcement must be given the tools and resources to apprehend
and prosecute these criminals, and there must be an effective
mechanism for the private sector to assist law enforcement in
achieving those objectives.
To address these issues, MasterCard has partnered with the
National Center for Missing and Exploited Children, or NCMEC,
to form the Financial Coalition Against Child Pornography. We
strongly commend the Chairman for his leadership in the
formation of the coalition. In conjunction with government
leaders and law enforcement agencies worldwide, the coalition
has embarked on a first of its kind globally focused effort to
identify and eliminate commercial sources of child pornography.
I want to discuss more directly MasterCard's efforts to
combat this problem as well. MasterCard has a series of rules
that require financial institutions that contract with
merchants, also known as acquiring banks, to ensure that the
merchants are legitimate and engaged in solely legal
activities. These rules mandate, among other things, that
acquirers perform due diligence before authorizing merchants to
accept MasterCard payment cards and that acquirers monitor
merchants on an ongoing basis for compliance with the rules. We
have also proactively educated our customer financial
institutions around the world about our rules and their
obligations with respect to illegal transactions, such as child
pornography.
MasterCard also works closely with law enforcement
officials to assist them in detecting and prosecuting child
pornographers. In addition, we undertake significant efforts to
detect child pornographers seeking to circumvent our controls.
These efforts include searching the Internet to identify sites
that appear to be selling child pornography and purporting to
accept our cards as payment. In the overwhelming majority of
cases where our brand appears on the site, we have found that
the site does not actually accept our cards but impermissibly
displays our logo. Our success in impeding these criminals from
using our system does not end the problem, however. We have
seen a clear trend in which child pornographers denied access
to our system are moving rapidly to alternative payment methods
to avoid detection and prosecution. We are not, therefore,
content simply to drive these criminals from our system, and we
are devoting considerable resources to a more comprehensive
approach to dealing with the problem.
We believe that our partnership with NCMEC and the
coalition provides such an approach. MasterCard provides to
NCMEC the fruits of our investigative efforts and other
information that may be helpful to them. NCMEC in turn
investigates and then refers this information to the
appropriate law enforcement officials who are given the
opportunity to conduct their own investigation. If law
enforcement decides to proceed with an investigation, we work
with law enforcement to support their efforts. If law
enforcement decides not to proceed, a notice is sent to any
payment service provided on that site, and those services work
to terminate payment acceptance at the site.
In addition to our active participation in the coalition,
MasterCard is also a corporate sponsor of NCMEC. MasterCard
views our sponsorship of NCMEC as an extension of our fight
against the exploitation of children and dissemination of child
pornography on the Internet, and we are very proud to
contribute to their efforts.
Chairman Shelby, Ranking Member Sarbanes, and Members of
the Committee, thank you again for the opportunity to discuss
these important issues with you today. MasterCard is deeply
committed to doing its part to eliminate the commercial
viability of child pornography on the Internet. It has also
been our pleasure to work with your staff, with NCMEC, with law
enforcement, and others to try to develop solutions to this
problem, and we look forward to continuing those efforts.
I would be glad to answer any questions you may have.
Chairman Shelby. Mr. MacCarthy.
STATEMENT OF MARK MacCARTHY, SENIOR VICE PRESIDENT, PUBLIC
POLICY, VISA USA, INC.
Mr. MacCarthy. Thank you, Chairman Shelby, Ranking Member
Sarbanes, and Members of the Committee. My name is Mark
MacCarthy. I am Senior Vice President for Public Policy with
Visa, and thank you for the opportunity to appear at today's
hearing.
Mr. Chairman, Visa does not allow its payment system to be
used for illegal activity, and that includes child pornography.
And because the crime of child pornography is such a heinous
exploitation of the vulnerable and the innocent, we have a
special program designed to search the Internet to detect child
pornography merchants and expel them from the Visa system. I
want to describe that program for you in more detail today, but
I want to start with the Financial Coalition Against Child
Pornography.
Visa cannot conduct a successful campaign against child
pornography by itself. We need to cooperate with others. And
that is why, under your leadership, Mr. Chairman, Visa and
other payment systems joined to form the Financial Coalition
Against Child Pornography.
Together with our coalition partners, we will enhance our
efforts to identify these websites, we will pinpoint the
merchants who are involved in this illicit activity, and we
will cut them off from our networks, and we will provide
assistance to law enforcement to track them down and get rid of
them for good.
Our own zero tolerance anti-child pornography program has
two parts: We have got a set of due diligence requirements, as
my colleague at MasterCard has mentioned, and we have our
monitoring program designed to detect child pornography sites
and get them out of our payment system.
A brief word on our system. Visa itself conducts
communication and settlement functions for the members of the
Visa Payment System. It is the members of the Visa Payment
System themselves who have these direct relationships with the
merchants.
We have explicit rules to govern their conduct. One of the
rules is not to introduce illegal transactions into the system.
And our pornography rules are quite clear. On child porn,
acquires must ensure that Internet merchants do not submit
child pornography transactions into the Visa system, and they
must terminate acceptance at any child pornography site that is
found to be accepting Visa cards.
You have heard from another one of my colleagues at Bank of
America the kind of due diligence requirements that they go
through. We think that these are important and necessary lines
of defense against child pornography entering our system, but
they are not a panacea. Child pornography merchants do not
present themselves as such to our financial institutions. They
often appear to be legitimate merchants. They use a variety of
techniques to fool acquires and gain access to our system.
Senator Sarbanes mentioned a few of those techniques earlier.
As a result, Visa has a monitoring system to identify and
eliminate child porn transactions. Since 2002, we have retained
the services of an outside firm to search the Internet for
child pornography websites that appear to be accepting Visa
payment cards. This firm uses advanced webcrawling and
filtering technology to detect the websites. It looks for
websites that display the Visa logo and that satisfy one or
more indicators that they are engaged in the sale of child
pornography or that they advertise themselves as engaged in the
sale of child pornography.
These sweeps are ongoing. They are conducted 24 hours a
day, 7 days a week, 365 days a year. Hundreds of millions of
websites are searched every month.
When our search firm detects one of these problematic
sites, they conduct test transactions to see whether, in fact,
the site is accepting Visa cards or whether they are simply
purporting to accept Visa cards. As my colleague from
MasterCard pointed out, in most of the cases they are merely
purporting to accept the Visa cards.
When we find a site that is actually accepting Visa, we
immediately get in touch with law enforcement and find out
whether they have an active and ongoing investigation. If there
is no request from law enforcement to keep the site open, Visa
instructs the acquiring bank to shut down that website
immediately.
If the sites are not, in fact, accepting Visa cards but
they just appear to be, we then attempt to contact the web
hosting service and get them to take down the Visa logo.
In addition, Visa provides information on all these sites
to law enforcement, and if they request it, we do allow these
sites to remain operational.
Visa's anti-child pornography program has made progress
since we started it in 2002. Our most recent numbers tell the
story. In August of this year, our search firm examined over 11
million Internet sites a day and found two child pornography
sites that accepted Visa cards. Of course, that is two too
many. Since the beginning of this year, nine such sites have
been identified in the Visa system, and all of these sites were
quickly expelled from our system.
Mr. Chairman, in conclusion, let me repeat the point I
started with. The way forward lies with collective action. Visa
intends to continue and to increase our efforts with the
Financial Coalition Against Child Pornography and to work
cooperatively with law enforcement to put an end to this
scourge.
I would be happy to answer any questions you might have.
Chairman Shelby. First, I would recognize Senator Allard,
and I will conclude after everybody else because we have got a
vote on the floor. Senator Allard.
Senator Allard. Thank you, Mr. Chairman. I have a couple of
questions I would like to ask.
We have just been provided with some material here by Mr.
Allen on some of the websites. For the audience's benefit, all
the offensive material has been blacked out. But I noticed that
there were some claims on these websites I would like to
investigate with you.
There are some copyright claims. Now, are these false
claims, or are they actually protected by the copyright system?
And the question is: If they are protected by our copyright
system, is that good in the fact that it prevents the
dissemination of the offending material? Or is it bad in the
fact that it protects the profits for those who are--protects
the profits of the child porn exploiters?
Mr. Allen. Senator Allard, I think it is a bad thing. I
think it is a misuse of the copyright system. However, in
most--the examples we have given you are pretty explicit, and I
am not sure how they got through the copyright system. But most
of them are not quite as clear-cut.
Frankly, this has not been an aspect that we have focused
on, but I think your point is a very good one, and we need to
look more closely at that.
Senator Allard. Maybe in the Library of Congress I believe
is where we have those copyrights provided for.
Mr. Allen. Absolutely.
Senator Allard. And so maybe some kind of program at the
Library of Congress might be helpful in that regard.
The other question that I have, there is actually a
guarantee on those sites also about absolute privacy. Now, is
that a false claim?
Mr. Allen. Well, I think pretty clearly it is a false
claim, but certainly that is the premise. If you think about
the pressure that is on these sites, the kind of consumer
audience that is being attracted, and certainly part of the
premise is you can come to the site and you can patronize with
no risk. Clearly, the effort of this coalition, the effort of
Federal, State, local, and international law enforcement is to
pierce that veil of privacy and make sure that they are not
private so we can look behind the curtain. But, nonetheless, it
is going to be a continuing representation that these sites
make.
Senator Allard. Thank you, Mr. Chairman.
Chairman Shelby. Senator Sarbanes.
Senator Sarbanes. Well, thank you, Mr. Chairman. I will be
very quick because I know there is a vote going.
Mr. MacCarthy, I wanted to ask you a quick question. You
said if they are using the Visa logo, you ask them to stop
using it. Is that correct?
Mr. MacCarthy. If the site is actually accepting Visa
cards, we are able----
Senator Sarbanes. You expel them from your system.
Mr. MacCarthy. Right.
Senator Sarbanes. But if you are not actually doing that,
they are just advertising the Visa logo, what do you do?
Mr. MacCarthy. We have no ability to get directly to them
through our banks, but we try to track them down using our
search firm to find the hosting service that provides them the
ability to maintain a website on the Internet.
When we find that hosting service, we say to them, No. 1,
look what you are involved in; and, No. 2, at the very least,
take down our logo from the site, they are not authorized to do
it.
Senator Sarbanes. Well, you can order them to take it--can
they use your logo as an advertising way without your
permission?
Mr. MacCarthy. No, they cannot, but the question is: How do
you enforce that? How do you make them stop doing it? You have
to find them. And the way you find them is to go to the web
hosting service and try to have their relationship with the
merchant used to take down the logo. That is how we have to do
it.
Going forward, we will probably be able to use the NCMEC
facilities to have a better way of proceeding in this area, but
right now the best way we have got to do it is to go to the web
hosting services.
Senator Sarbanes. Now, Mr. Allen, you said earlier there
was a site in, I think you said, Dallas with 70,000 people a
month, they pay $30 a month?
Mr. Allen. Right.
Senator Sarbanes. So that is over $2 million a month just
on that site. Is that correct?
Mr. Allen. That is right, Senator.
Senator Sarbanes. That is $25 million a year.
Mr. Allen. And this was a mom-and-pop operation. This was
not a highly sophisticated operation.
Now, in the interest of full disclosure, that is now 6 or 7
years ago. We think that that level of misuse of the payment
system has disappeared because of the efforts of these
companies. But I think that demonstrated what the potential
consumer audience is for this content. That is one site.
Senator Sarbanes. Now, where are they shifting off to when
they get blocked out from using the credit cards? Where are
these snakes going off to, sneaking off to?
Mr. Allen. They are going to a variety of places. Two of
our key partners in this effort are PayPal and E-Gold, the
third-party payment mechanisms who have increased their
vigilance to make sure they do not go there, the use of Western
Union, the use of a host of other payment mechanisms, and
increasingly we are hearing that there are small aggregators
who are being developed and customized specifically for the
purpose of serving this kind of enterprise. So it is a moving
target.
Senator Sarbanes. Thank you, Mr. Chairman
Chairman Shelby. Senator Bunning.
Senator Sarbanes. I want to thank the panel. It was very
helpful testimony. We appreciate it.
Senator Bunning. I am just going to ask anyone of the
panel. You have set a very ambitious deadline to meet your goal
of eliminating all commercial child pornography. Why do you
believe you can accomplish this goal by 2008, especially given
the challenge posed by the Internet?
Mr. Allen. Senator, I believe, we believe it is realistic.
The reality is I do not think there is a precedent for this
kind of industry-wide approach to the problem. Our view
simplistically is that if we can disrupt these enterprises, if
you can eliminate the use of the credit card, it is going to be
very difficult to maintain these businesses if you have to pay
cash to gain access to a----
Senator Bunning. But you just gave us some examples of
where they are going.
Mr. Allen. That is where they are going, but clearly, the
effort here is to stay ahead of the curve and to follow them
where they go. One of the things that we are learning now from
law enforcement is a huge percentage of the operators of these
businesses today are organized criminals, many of them in
Eastern Europe. And in our judgment, at some point this is just
not going to be worth the price that it costs. The reason they
are into this now is because the profits are enormous and the
risks are minimal. What we are trying to do is increase the
risks and eliminate the profit.
Senator Bunning. Yes, but you say that Eastern Europe or
the European--isn't it more difficult to prosecute at that
level?
Mr. Allen. Oh, absolutely, and one of the things we are
doing through our International Centre in partnership with
Interpol is training law enforcement around the world, building
capacity. There is now a virtual global task force based in the
U.K. to create a more unified law enforcement approach. The FBI
has an international task force through its Innocent Images
National Initiative.
So we are bringing a lot more troops to the battlefield.
Mr. DeNoma. I think part of it is by setting the deadline,
you force action.
Senator Bunning. Setting the deadline would actually force
the perpetrators or the----
Mr. DeNoma. No. I think it will force action from----
Senator Bunning. From the financial----
Mr. DeNoma. The financial, governments, law enforcement,
ISPs, and the reason is I think there should be increasingly an
argument why a bank is not on the coalition.
Senator Bunning. On the list, yes.
Mr. DeNoma. Frankly, I think alternative payment methods
should have to provide a reason why they are not in the
coalition. And increasingly what we are trying to do
internationally is ask why a government of a certain country is
not pursuing action like many other countries in the world are.
Senator Bunning. Well, I would think Visa and MasterCard
would also not only throw the people out but report everything
they do to the law enforcement agencies in the country or in
the area where these perpetrators are exploiting.
Ms. Golinsky. Absolutely, Senator.
Mr. MacCarthy. Senator, we have reporting relationships all
over the world with international law enforcement as well as
U.S. law enforcement.
Senator Bunning. Thank you.
Ms. Golinsky. And MasterCard does as well.
Senator Bunning. Thank you very much, Mr. Chairman.
Chairman Shelby. Thank you, Senator.
I want to thank all of you, starting again with Mr. Allen,
for your commitment. I want to thank the whole panel.
Mr. DeNoma, I want to especially thank you for the work
that you are doing. You have taken the lead in recruiting
international members, which the Attorney General pointed out
is so important, to join the Financial Coalition Against Child
Pornography. We hope you will continue in this effort and work.
We have got a long way to go.
This has been, I think, a good hearing this morning. We
have also had a chance to conduct an up-to-date review on the
effort to eradicate child pornography. We have learned of the
positive steps--and they are out there--that the Government and
the financial service industry that a lot of you represent have
taken.
We have also had a chance to get a glimpse of the ongoing
efforts of the criminals who seek to profit from this horrible
crime. Clearly, they will not simply give up. You know, they
are going to be around. You are talking about billions of
dollars. Billions. Easy money, too.
I noted in my opening statement that our commitment and
your commitment is crucial, and our level of commitment, that
of the Government, the industry, and families must be greater
than that of the criminals. If it is not, we will not win.
I think it will not be enough--it never is enough--to have
press releases or normally participating organizations like the
Financial Coalition. But if we are going to achieve our goal to
eradicate child pornography, it is going to take constant
vigilance and hard, hard work. And I commend you for your
participation. I think we have a long way to go.
I personally believe that the software, if it is not
there--and I know Bill Gates is very interested in this, too.
Like everybody, he has got children. Maybe they can come up
with software that will help you folks at Visa and MasterCard
and the banking industry track these people a lot easier than
it is today, because we have to win this battle.
We have a vote on the floor. The Committee is adjourned.
Thank you.
[Whereupon, at 12:07 p.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
supplied for the record follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM ERNIE
ALLEN
Q.1. In your testimony, you highlighted the success of the
Coalition pilot program. As we move forward, have you learned
of any new challenges that the Financial Coalition Against
Child Pornography will face, and do you have the tools and
cooperation to address them?
A.1. We are very encouraged by the unprecedented level of
cooperation among the companies of the Financial Coalition
Against Child Pornography (``FCACP''), the National Center for
Missing & Exploited Children (``NCMEC'') and the International
Centre for Missing & Exploited Children (``ICMEC''). At the
same time, we are realistic that we are attacking a global
problem that has flourished on the Internet, a channel that has
no geographic or jurisdictional boundaries. The Coalition's
commitment is strong, but challenges abound.
Most immediately, the worldwide scope of this problem
necessitates the cooperation of financial institutions around
the globe. We are in discussions with banking associations and
individual companies outside the U.S., but progress is slow.
There is hesitation about reporting into a US-based
clearinghouse. The way forward may be to build regional
networks that ultimately flow into our core system here, but we
need the participation of companies and governments around the
world in order to build a framework that will get us to our
goal.
A centerpiece of the Coalition's work will be test
transactions done by law enforcement once a commercial child
pornography site is identified. The issuing members of the
Coalition are being asked to contribute test cards on an
ongoing basis. It is too early to determine if we will secure
an adequate flow of test cards to keep the clearinghouse
running to optimum effectiveness. The early response has been
positive and enthusiastic.
The importance of law enforcement in our efforts to
eradicate commercial child pornography cannot be understated.
We are encouraged that the FBI has joined ICE in helping us to
conduct test transactions. It is our hope to engage more law
enforcement agencies going forward.
As for detection of the websites, thus far, we are reliant
on one company (G2), Electronic Service Providers (ESPs) and
the general public through NCMEC's CyberTipline
(www.cybertipline.com) to report commercial child pornography
sites. Awareness of reporting to the CyberTipline needs to be
dramatically increased.
Despite the fact that we are nearing our 425,000th report
since 1998, our research indicates that most of the American
public still doesn't know about the CyberTipline. Reporting of
child pornography and online enticement of children should be
easier and more universal. We are eager to work with the
private sector to explore mechanisms that will make reporting
easier and more instantaneous, such as a link or icon on the
screen that enables reporting at the very moment the illegal
conduct is detected by the public. Such an icon could serve as
a virtual panic button for children in chat rooms and on social
networking sites, and an easy way for millions to report
without having to know or remember www.cybertipline.com. In
addition, methods of detecting these websites as soon as they
are uploaded onto the web must be developed.
We are mindful that as we put pressure on commercial child
pornographers' reliance on traditional payment methods, they
will move to alternative payment schemes. We are just starting
to understand the implications of that migration but clearly we
must identify and get cooperation from alternative billing
companies that exist today and those that are sure to be
created as this business adjusts to the disruption that is
already taking place.
From a legislative/regulatory perspective, the Financial
Coalition strategy is impacted by the inability to share data
among the companies to build a more robust investigative
resource. Legislation allowing for the transfer of information
between and among companies registered with NCMEC would enhance
the ability to keep offenders from acquiring financial payment
capabilities.
We would be remiss if we did not share with the Committee
concerns we have about existing laws that negatively impact the
broader battle against commercial child pornography.
In April 2006 NCMEC's sister organization, the
International Centre for Missing & Exploited Children (ICMEC),
completed a study of child pornography laws around the world.
The results were alarming: of the 186 Interpol member
countries, more than half (95) have no laws addressing child
pornography and in many other countries, the existing laws are
inadequate.
As Attorney General Gonzales said in his testimony, ``Just
as we need some states to strengthen their laws to punish child
sex offenders, we must encourage some foreign lawmakers to
strengthen their laws as well, including those concerning the
financial components of these crimes.''
Also, while not directly related to the financial industry,
NCMEC believes another obstacle to overcome is the reporting of
child pornography found on customers' accounts by electronic
service providers to NCMEC. Though apparently mandated by
federal statute, 42 U.S.C. Sec. 13032, not all ESP's are
reporting and those that do report are not sending uniform
types of information, rendering some reports useless. Some ESPs
take the position that the statute is not a clear mandate and
that it exposes them to possible criminal prosecution for
distributing child pornography themselves.
In addition, because there are no guidelines for the
contents of these reports, some ESPs do not send customer
information that allows NCMEC to identify a law enforcement
jurisdiction. So potentially valuable investigative leads are
left to sit in the CyberTipline database with no action taken.
Together with the U.S. Internet Service Providers Association
(``USISPA''), we developed ``best practices'' reporting
guidelines to address this problem. The major ESPs are
following these guidelines. However, these are voluntary rather
than mandatory, so there is no enforcement mechanism for those
who choose not to follow them.
This reporting statute also constrains NCMEC in that it
permits us to forward the CyberTipline leads only to U.S. law
enforcement. This is a real problem, considering the global
nature of the Internet. As an example, there is a portion of
one major ESP system based in the U.S. that is used primarily
in Brazil. This ESP wants us to send information about child
pornography they find on their customers' accounts to Brazilian
law enforcement. But we are prohibited from doing so.
There is also another necessary yet missing link in the
chain from detection of child pornography to conviction of the
distributor. Once the CyberTipline analysts give law
enforcement all the information they need about specific images
traded on the Internet, there can be no prosecution until the
date and time of that online activity is connected to an actual
person. There is currently no requirement for ESPs to retain
connectivity logs for their customers on an ongoing basis. Some
have policies on retention but these vary, are not implemented
consistently, and are for too short a time to have meaningful
prosecutorial value.
Q.2. It should disturb all of us that child pornographers
assume that they can still use the financial payment system to
purchase and sell their products. What can we do to change the
perception that the payment system is an option of any kind for
child pornography transactions?
A.2. The Senate Banking Committee raises an intriguing
concept that, by coincidence, was discussed at the most recent
Coalition meeting. Specifically, what opportunities exist to
educate the public and the business community of the risks they
are now taking if they attempt to buy or sell child
pornography, now that groups such as the FCACP exist? We will
explore launching a media relations and/or public service
campaign that puts people on notice. The participation of
members of the Senate Banking Committee would give such a
campaign significant momentum. In the future, as the work of
the Coalition leads to actual arrests, this type of news will
generate even greater awareness.
Q.3. The Internet has no boundaries and, consequently, has
fueled consumption of child pornography by facilitating
distribution and accessibility of these images. Thus, we need
to think about attacking this problem not only by detection and
action, but also by discouraging initial engagement and
participation. What else can be done within the financial
services community to raise barriers to entry in order to deter
criminals and to diminish the attractiveness of the commercial
child pornography industry?
A.3. In its first six months of operation, the Coalition's
focus was to build the clearinghouse and make it operational.
Now that the clearinghouse is up and running, we can turn our
attention to additional priorities. The Prevention Working
Group's mandate is to explore what the industry can do to make
it harder for these merchants to get into the system in the
first place. As a starting point, this group has collected best
practices for underwriting and verifying merchants. The idea is
to ensure that all Coalition members benefit from the best
ideas currently being implemented by industry leaders. Once
complete, the Best Practices document will be an appropriate
platform from which to address how barriers to entry can be
raised.
We are committed to working with banking leaders in the
United States and worldwide to erect barriers, train and
empower employees, and ensure worldwide vigilance in order to
stop this insidious criminal enterprise.
RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM JODI
GOLINSKI
Q.1. Can you describe some of the techniques that child
pornography merchants use to fool acquiring banks and thereby
gain access to the Visa and MasterCard systems?
A.1. MasterCard is deeply committed to eliminating the
commercial viability of child pornography on the Internet and
we have been working with our customer financial institutions,
law enforcement and the National Center for Missing and
Exploited Children (``NCMEC'') to prevent child pornographers
from using our system. These efforts are succeeding, as it is
rare for a child pornography merchant to successfully obtain
access to our system. Nonetheless, the criminals that operate
child pornography web sites have become increasingly
sophisticated over time and work hard to evade our controls.
For example, some child pornography merchants will attempt to
engage in so-called ``factoring'' schemes in which the child
pornographer seeks to dupe a legitimate business into
submitting the child pornographer's transactions into our
system. We are also aware of schemes in which a child
pornographer will establish a seemingly legitimate business to
gain access to our system and later sells child pornography
through that business. MasterCard uses a variety of approaches
to detect this type of activity. These include searching the
Internet for such merchants and having test transactions
performed at the site.
Q.2. Credit card association rules require acquiring banks
to shoulder responsibility for weeding out illegal merchants
such as child pornographers in their portfolios. In your
testimony, you both mention a number of sanctions that your
companies may impose on acquiring banks that do not meet these
responsibilities. How do you know that these sanctions are
working?
A.2. MasterCard has a series of rules that require
acquirers to ensure that merchants with whom they contract to
accept MasterCard-branded cards are legitimate and engage in
solely legal activities. These rules mandate, among other
things, that acquirers perform due diligence on a merchant
before authorizing the merchant to accept MasterCard payment
cards and that acquirers monitor merchants for compliance with
the rules. When we detect that a child pornographer has gained
access to the system through an acquirer, we work closely with
the acquirer to address the problem. In our experience, the
acquirers we permit to participate in our system are extremely
cooperative in addressing child pornography problems and work
rapidly to resolve these issues.
In addition, MasterCard undertakes significant efforts to
detect child pornographers seeking to circumvent our controls.
These efforts include searching the Internet to identify sites
that appear to be selling child pornography and purporting to
accept our cards as payment. Through these efforts we have
found that our anti-child pornography programs have been quite
effective. Indeed, it is increasingly rare that child
pornography sites actually accept our cards as payment. We are
not content, however, simply to drive these criminals from our
system and are working with NCMEC and others in the payments
industry to ensure that child pornographers driven from our
system do not find safe haven in other payment systems.
Q.3. Both Visa and MasterCard use advanced web crawling and
filtering technology to monitor websites for child pornography.
Has this technology detected any trends in the prevalence of
child pornography?
A.3. As part of our efforts to detect child pornography,
MasterCard uses the services of a technology company that
constantly searches the Internet to identify child pornography
sites that purport to accept our cards. As a result of these
efforts, we have detected a clear trend away from accepting
traditional payment cards on these sites toward the acceptance
of alternative payment methods. For example, many of these
sites direct their customers to another site where the customer
can establish a special electronic payment account that has
been used to pay the child pornographer. Some of these
electronic payment sites use unusual value propositions such as
offering the ability to transact over the Internet using
virtual precious metals or calling card minutes to pay for
products sold by web sites. Through the coalition formed by
NCMEC we are working to find ways to address these evolving
schemes.