[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                    ANTI-MONEY LAUNDERING: BLOCKING
                      TERRORIST FINANCING AND ITS
                       IMPACT ON LAWFUL CHARITIES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 26, 2010

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-141



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES WILSON, Ohio                 KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
              Subcommittee on Oversight and Investigations

                     DENNIS MOORE, Kansas, Chairman

STEPHEN F. LYNCH, Massachusetts      JUDY BIGGERT, Illinois
RON KLEIN, Florida                   PATRICK T. McHENRY, North Carolina
JACKIE SPEIER, California            RON PAUL, Texas
GWEN MOORE, Wisconsin                MICHELE BACHMANN, Minnesota
JOHN ADLER, New Jersey               CHRISTOPHER LEE, New York
MARY JO KILROY, Ohio                 ERIK PAULSEN, Minnesota
STEVE DRIEHAUS, Ohio
ALAN GRAYSON, Florida


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 26, 2010.................................................     1
Appendix:
    May 26, 2010.................................................    37

                               WITNESSES
                        Wednesday, May 26, 2010

German, Michael, Policy Counsel, American Civil Liberties Union..    23
Glaser, Daniel L., Deputy Assistant Secretary for Terrorist 
  Financing and Financial Crimes, U.S. Department of the Treasury     5
Guinane, Kay, Program Manager, Charity and Security Network......    21
Levitt, Matthew, Director, Stein Program on Counterterrorism and 
  Intelligence, The Washington Institute for Near East Policy....    24

                                APPENDIX

Prepared statements:
    Moore, Hon. Dennis...........................................    38
    German, Michael..............................................    39
    Glaser, Daniel...............................................    51
    Guinane, Kay.................................................    65
    Levitt, Matthew..............................................    93

              Additional Material Submitted for the Record

Moore, Hon. Dennis:
    ACLU's June 2009 report entitled, ``Blocking Faith, Freezing 
      Charity''..................................................   103
    Report of The Constitution Project entitled, ``Reforming the 
      Material Support Laws: Constitutional Concerns Presented by 
      Prohibitions on Material Support to `Terrorist 
      Organizations'''...........................................   186
Ellison, Hon. Keith:
    Written responses to questions submitted to Michael German...   200
    Written responses to questions submitted to Kay Guinane......   207
    Written responses to questions submitted to Matthew Levitt...   237


                    ANTI-MONEY LAUNDERING: BLOCKING
                      TERRORIST FINANCING AND ITS
                       IMPACT ON LAWFUL CHARITIES

                              ----------                              


                        Wednesday, May 26, 2010

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Dennis Moore 
[chairman of the subcommittee] presiding.
    Members present: Representatives Moore of Kansas, Lynch, 
Klein, Adler, Kilroy, Driehaus; Biggert and Paulsen.
    Also present: Representatives Ellison, Al Green of Texas; 
Castle and Royce.
    Chairman Moore of Kansas. This hearing of the Subcommittee 
on Oversight and Investigations of the House Financial Services 
Committee will come to order.
    Our hearing this morning is entitled, ``Anti-Money 
Laundering: Blocking Terrorist Financing and Its Impact on 
Lawful Charities.'' This is our 13th O&I hearing of the 111th 
Congress.
    We will begin this hearing with members' opening 
statements, up to 10 minutes per side, and then we will hear 
testimony from our witnesses for each witness panel. Members 
will have up to 5 minutes to question our witnesses.
    The chairman advises our witnesses to please keep your 
opening statements to 5 minutes to keep things moving, so we 
can get to members' questions. Also, any unanswered questions 
can be followed up in writing for the record. And I understand 
Mrs. Biggert has a request.
    Mrs. Biggert. Yes, Mr. Chairman. I would like to ask 
unanimous consent that the gentleman from Delaware, Mr. Castle, 
and the gentleman from California, Mr. Royce, be--participate 
in the subcommittee there on the Financial Services, but not--
    Chairman Moore of Kansas. No objections on this side. If 
there are no objections on your side, it is so ordered.
    Without objection, all Members' opening statements will be 
made a part of the record. And I will recognize myself for up 
to 3 minutes on an opening statement.
    Today's hearing is the second in a series of hearings we 
are having focusing on oversight efforts to combat money 
laundering and terrorist financing. Last month, our 
subcommittee held a hearing reviewing several FinCEN oversight 
reports examining how FinCEN could better interact with law 
enforcement agencies, as well as improving the data quality 
collected from suspicious activity reports.
    While the May 1st Times Square bomb attempt is not the 
subject of today's hearing, and is currently being investigated 
by Federal authorities, the incident is a valid reminder that, 
despite nearly 9 years passing since the tragic September 11, 
2001, terrorist attacks, there continue to be those who wish to 
do us harm.
    Our government must use every tool available to shut those 
terrorist groups down, including cutting off the financing that 
supports them. Today, we are examining the Treasury 
Department's efforts to block all financing that goes to 
terrorist organizations that seek to do us harm, and how these 
efforts impact lawful, law-abiding charities who only want to 
use contributions for legitimate and good purposes.
    Even if 1 percent of charity funds are going to a terrorist 
organization, our government is required by law to shut that 
source of funding down, as we should. But there are many good 
organizations who want to fully abide by the law, and ensure 
that 100 percent of their money is used only for good efforts.
    So, I look forward to learning what steps Treasury has 
taken with respect to those lawful charities, and encouraging 
charity organizations to fully abide by the law. I am pleased 
the Treasury Department was able to provide Deputy Assistant 
Secretary Glaser to testify on these important issues, and I 
look forward to hearing the views of our second panel of 
witnesses, as well.
    I now recognize for 5 minutes the ranking member of the 
subcommittee, my colleague and friend from Illinois, Ranking 
Member Judy Biggert. Mrs. Biggert?
    Mrs. Biggert. Thank you, Chairman Moore, and thank you for 
holding this important hearing. As we have learned, terrorists 
will stop at nothing to carry out their plots to kill innocent 
citizens, and terrorists have financed their attacks through 
the formal banking system. They have also used informal 
systems, for example. Terrorists sometimes use the hawala 
system, an ancient method of underground banking, in which 
couriers transfer money through networks.
    Terrorists also have used charities to finance their 
schemes, which is the focus of today's hearing. Charitable 
contributions in the United States are vital to both domestic 
and international humanitarian aid. They range from 
organizations that help homeless children in our local 
communities to families abroad who seek basic access to water, 
shelter, and education, or are victims of tsunamis, 
earthquakes, and other natural disasters.
    It is important that while our intelligence, military, and 
law enforcement communities work to free terrorist funds and 
prevent terrorism, we also allow for the legitimate and 
important philanthropical functions of charities to continue. 
There must be a balance.
    I commend our government officials, some of whom we will 
hear from today, for their work to stop the flow of funds to 
terrorist organizations. Please know that, while criticized 
heavily by some, your work has saved, and could, in the future, 
save many American lives. Thank you for your service.
    At the same time, I ask that you continue to work with the 
more than 1.5 million legitimate U.S. charities that are 
clearly not involved in funding terrorists, but provide 
important services to people in need, both here at home and 
abroad.
    Treasury officials should continuously work to improve 
communications with charities, as well as guidelines or best 
practices, so that charitable organizations have a clear 
understanding of the rules of the road. Front groups 
masquerading as charities can never be allowed to compromise 
national security. National security must be everyone's top 
priority.
    With that, I look forward to hearing from today's 
witnesses, and I yield back.
    Chairman Moore of Kansas. Thank you. The chairman next 
recognizes for 3 minutes Mr. Lynch of Massachusetts.
    Mr. Lynch. Thank you, Mr. Chairman. Good morning. Mr. 
Chairman, I want to thank you and Ranking Member Biggert for 
holding this hearing today. I would like to welcome our first 
panel witness, Mr. Glaser, and thank him and the other 
panelists for helping the committee with its work.
    This hearing is particularly timely, in light of the recent 
Times Square bombing plot. As law enforcement investigates the 
financing behind this act of terrorism, which involves my own 
district and the State of Massachusetts, the issue of terrorist 
financing has again raised to the surface.
    In the recent past, the law enforcement community has 
applied increasing pressure on investment networks and various 
types of funding vehicles. The result of this escalated 
enforcement has forced financing to enter informal channels, be 
it a hawala or a hundi, as may have been the case in the Times 
Square bombing, or others like informal charitable networks.
    Charities have raised concerns, legitimate concerns, that 
actions have been taken against associations for engaging 
groups that were not explicitly designated by the Treasury as 
terrorist organizations. Treasury has worked to engage 
charitable organizations with good intentions. We must not 
allow punitive measures to force charitable activity 
underground.
    There is a delicate balance and a reasonable zone of 
operations in allowing charitable donations to continue, and to 
prevent the financing of groups or individuals who plan to 
attack the United States, or our colleagues and allies 
overseas. I appreciate the difficulty in finding this delicate 
balance.
    I want to comment the Treasury, especially FinCEN and OFAC. 
I have worked with them in a number of countries in the Middle 
East, and they do tremendous work, often unappreciated, but 
certainly highly valued in my eyes.
    I look forward to hearing the testimony of our potential 
policy solutions, and to help address this important issue. I 
thank you, Mr. Chairman, and I yield back.
    Chairman Moore of Kansas. Thank you to the gentleman from 
Massachusetts. The chairman next recognizes the gentleman from 
California, Mr. Royce, for 3 minutes.
    Mr. Royce. Let me, Mr. Chairman, start with the observation 
that the starting premise of this is all wrong. The title of 
this hearing is, ``Blocking Terrorist Financing and Its Impact 
on Lawful Charities.'' I wish we were more concerned about 
blocking terrorist financing and its impact on terrorist 
organizations.
    We have sanctioned less than a dozen charities in the many 
years since 9/11. Mr. Chairman, the fact of the matter is that 
there are many, many individuals who have a cold, calculating, 
and brutal resolve to kill as many Americans as possible by 
whatever means possible. And charities have been a proven 
resource for these individuals.
    Technocrats at the Multilateral Financial Action Task Force 
agree. As one witness will point out, this is not some 
reflexive equation of Islamic charities with terrorism. Dr. 
Levitt goes on to note that this critique flies in the face of 
extensive available evidence, and simply falls flat.
    We have to balance freedom to give with the freedom to live 
and breathe. In this country, the Holy Land Foundation was 
found guilty of 108 counts, including support of terrorism, 
money laundering, and tax fraud. Millions went to Hamas. That 
some lawful charities face extra burdens is an unfortunate but 
needed response. No apology is needed.
    In March, Youssef Nada, the self-described foreign minister 
of the Muslim Brotherhood, was quietly removed from the UN 
Security Council's terrorist financier list. Of course, this 
individual has been involved with al-Qaeda. He's been involved 
with Hamas. And the Brotherhood seeks the worldwide creation of 
an Islamic caliphate. All of these listings and delisting 
decisions have to be unanimous, meaning the Obama 
Administration okayed this. This is of concern to me, and it 
should be of concern to many Americans.
    I yield back the balance of my time, Mr. Chairman.
    Chairman Moore of Kansas. Thank you. Mr. Castle from 
Delaware is recognized next for 2 minutes.
    Mr. Castle. Thank you, Mr. Chairman. And thank you, Mrs. 
Biggert, and thank you for allowing me to sit in on this. I am 
pleased to be here for this hearing, whether it's under its 
original name, or the new name that Mr. Royce has given it. I 
think it's an important subject matter.
    I believe strongly we must continue to examine current 
efforts to combat terrorist financing. And I recently joined 
Representative Lynch, who is here, in requesting a hearing to 
determine whether our efforts here in the United States are 
keeping pace with evolving trends terrorists are using to fund 
their activities.
    This issue needs greater scrutiny, particularly in light of 
reports that the attempted Times Square bomber used an informal 
banking system--used hawala networks to fund his operations. 
Today's hearing will focus on the impact on charitable 
organizations of blocking funds to terrorist organizations 
overseas.
    Regardless of whether money is being funneled to other 
countries or coming into the United States, we must have the 
proper systems in place to detect and prevent money from 
reaching the hands of terrorists. Without the compliance of 
organizations in the business of collecting and transferring 
money, our efforts to keep extremists from doing harm to 
innocent civilians would surely be futile.
    I look forward to hearing from today's witnesses, and 
whatever fruit we can garner from that to prevent these 
problems in the future. I yield back, Mr. Chairman.
    Chairman Moore of Kansas. Thank you. I am pleased to 
introduce our first witness this morning, Mr. Daniel Glaser, 
who currently serves as the Deputy Assistant Secretary for 
Terrorist Financing and Financial Crimes at the Treasury 
Department.
    Without objection, sir, your written statement will be made 
a part of the record. Mr. Glaser, you are now recognized for 5 
minutes.

 STATEMENT OF DANIEL L. GLASER, DEPUTY ASSISTANT SECRETARY FOR 
 TERRORIST FINANCING AND FINANCIAL CRIMES, U.S. DEPARTMENT OF 
                          THE TREASURY

    Mr. Glaser. Thank you, Chairman Moore, Ranking Member 
Biggert, and distinguished members of the committee. I thank 
you for the opportunity to appear before you today to discuss 
the Treasury Department's efforts to protect charities from 
abuse by terrorists, and our outreach efforts to the charitable 
in Muslim-American communities.
    Treasury recognizes and values the importance of charitable 
giving. Charitable giving and volunteerism have a long 
tradition in the United States, and our country is a leader in 
the world year after year in charitable donations. Our 
generosity unites Americans of all backgrounds and religious 
traditions.
    However, the sad truth is that terrorist organizations such 
as al-Qaeda, Hamas, and Hezbollah have established and used 
charities, and have exploited well-intentioned donors. 
Terrorist groups such as these use charities not just to raise 
funds, but as an integral component of their organizations and 
networks.
    The Treasury Department has been given the responsibility 
by Congress and the President to protect American lives and 
security by using all lawful means to disrupt and dismantle 
terrorist support networks wherever we find them. Our primary 
tool in meeting this responsibility is through the application 
of targeted financial sanctions under the International 
Emergency Economic Powers Act, or IEEPA.
    More than 30 years old, IEEPA forms the legal framework of 
most of our targeted financial sanctions programs. As I 
explained in great detail in my written testimony, we have 
developed a well-established process for implementing IEEPA 
designations that contains procedural safeguards, including 
licensing provisions and delisting procedures.
    All final agency actions taken under IEEPA are subject to 
judicial review. And over the years, the courts have a strong 
record of upholding the statute's constitutionality and our 
application of it. The collective efforts of the law 
enforcement community over the past decade have been successful 
in making it more difficult for terrorist organizations to 
raise funds in the United States.
    Treasury has contributed to this effort, including by 
applying targeted financial sanctions to a total of eight U.S. 
charities. These charities were not unwitting victims. We 
believe that our actions contributed to disrupting the 
terrorist networks that those charities supported, and 
protected well-intentioned donors who had no desire to support 
terrorist groups.
    That said, we understand that the ongoing terrorist threat 
and U.S. enforcement actions, including Treasury designations, 
have had an unfortunate and unintended chilling effect on the 
charitable giving of Muslim-American communities, particularly 
as it relates to the legitimate desire to provide support to 
needy communities in risky areas.
    We take this problem seriously, and we regard it as our 
responsibility to work with the charitable and Muslim-American 
communities to mitigate the chilling effect, and help create 
what we call a safe giving space for well-intentioned donors. 
These efforts have included attempts to provide the charitable 
sector with relevant information and guidance, and also to 
create alternative mechanisms for charitable giving to 
populations in need in high-risk areas.
    It is important to remember, however, that Treasury does 
not have, nor do we seek, anti-money laundering or 
counterterrorist financing supervisory authority over the 
charitable sector. For that reason, it is vital that we form a 
strong partnership with the charitable sector to address this 
issue of mutual concern. We are confident that such a 
partnership, based on mutual respect and an understanding of 
the various perspectives and complexities relating to this 
issue, can succeed in demonstrating that the choice between 
charity and counterterrorism efforts is a false one.
    Thank you for the opportunity to speak with you today. I 
would be happy to answer any questions that you have.
    [The prepared statement of Mr. Glaser can be found on page 
51 of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. Glaser, for your 
testimony. I recognize myself for 5 minutes for questions.
    Mr. Glaser, so everyone is clear, in a situation where a 
charity organization uses 99 percent of its money for 
legitimate, lawful, charitable purposes, and even just 1 
percent is going to al-Qaeda or some other terrorist 
organization, the Treasury Department still makes every effort 
to shut that financing down. Is that correct, sir?
    Mr. Glaser. Absolutely, Mr. Chairman. The question is not 
what percentage of funds are going to a terrorist organization. 
The question is whether the charity or whatever the designated 
entity might be is owned or controlled by or acting for or on 
behalf of a terrorist organization. And that's the test we 
would put to it, not what percentage of the funds are traveling 
to the organization.
    Chairman Moore of Kansas. Would you elaborate on--I guess 
you already have. I was going to--the second question, I think 
you have already answered that.
    Mr. Glaser, how has Treasury's voluntary best practices for 
U.S.-based charities--a document that is on your Web site--been 
received by the charity organizations you communicate with--are 
they useful to these lawful charities?
    Are there other proactive steps Treasury can take to ensure 
law-abiding charities have every opportunity to fully 
understand how best to follow the law?
    Talk about that, if you would, please, sir.
    Mr. Glaser. Thank you, Mr. Chairman, for that question. I 
think that our voluntary best practices, or voluntary 
guidelines, have been a work in progress. We released them many 
years ago. And since that time, we have had an ongoing dialogue 
with the charitable community on making sure they are as useful 
as possible to that community. We have updated them twice since 
they were initially released. And, in fact, we are working now 
to update them again and to continually improve them.
    As I said in my oral remarks, we don't have supervisory 
authority over the charitable community. So it's important that 
we find other ways to communicate with them and to work with 
them, and we try very hard in that regard. And we think that 
the guidelines are a good way of doing that.
    We do understand that there are some people in the 
charitable community who have problems with some aspects of 
them, and that's something that we want to talk to them about, 
and that's something that we want to continue to engage with 
them on, and continue to improve, because they are going to be 
most useful if and when they are perceived as a joint effort 
from Treasury and from the charitable community.
    That's not the only tool that we have. It's not the only 
mechanism that we have to try to achieve the sorts of goals 
that you're talking about, Mr. Chairman. We also try to provide 
information in other ways, in terms of typologies, in terms of 
information, in terms of dialogue.
    There is another important whole set of initiatives that we 
are trying to establish regarding alternative relief so that as 
certain channels close down for all the right reasons, we can 
work with the charitable community to make sure that there are 
legitimate channels that remain open. And I think that's an 
idea that frankly, not enough time has been spent on, and 
something that we really want to kick up to the next level.
    Chairman Moore of Kansas. Thank you, sir. And last 
question, when it comes to shutting down terrorist financing, I 
imagine there is a lot of--I would hope there is a lot of 
coordination between other government agencies that the 
Treasury Department deals with.
    Mr. Glaser, would you describe briefly, sir, how Treasury 
interacts with other agencies when it comes to blocking 
terrorist financing? Are there barriers that should be removed, 
or any improvements that could be made, with respect to 
interagency communications, from Treasury's perspective?
    Mr. Glaser. Thank you, Mr. Chairman. I think it's a good 
question, because we sometimes speak--and even in my testimony 
I probably used the term ``Treasury designations.'' But these 
really are U.S. Government actions in the larger sense of the 
term.
    There is a--particularly as it relates to foreign 
designations, but even with respect to U.S. designations, as 
well, there is a vibrant interagency process, where, as a 
target is examined, we ask ourselves collectively, ``What is 
the right tool to use? What is the right action to take?'' And 
there is a joint decision taken from all interested relevant 
U.S. agencies.
    Once a decision is made to proceed along the lines of 
targeted financial sanctions, there is a well-established 
process that includes, in particular, the Treasury Department, 
the Justice Department, and the State Department. The 
collection--the assembly of the administrative record is 
reviewed by lawyers from all three of those Departments. And 
then, obviously, there is a lot of talk about timing, and 
making sure that everything is coordinated as well as possible.
    So, I do think we have very good coordination and 
interagency--well, very good interagency coordination as 
regards this process.
    Chairman Moore of Kansas. Thank you, sir. Next, the 
chairman will recognize for up to 5 minutes for questions the 
ranking member, Mrs. Biggert.
    Mrs. Biggert. Thank you, Mr. Chairman. Mr. Glaser, does the 
Treasury believe that terrorist financing is a big problem 
within the charitable sector?
    Mr. Glaser. That's a good question. I think that we have--
within the United States, I think we have done a really good 
job, frankly, of substantially reducing the ability of 
charities within the United States to support terrorist 
organizations. I don't think we want to rest on our laurels, 
but I think when you look at the situation today compared to 
the situation before 9/11, I think it has become much harder 
for terrorist organizations to raise funds in the United 
States.
    With respect to the world as a whole, I do think charities 
are an integral part of terrorist organizations, particularly 
when you look at charities--a lot of charities in the Gulf, 
even some charities in Europe. I think it is a problem that we 
continue to face and continue to work with our partners on. But 
if you're--
    Mrs. Biggert. Yes. Then what level of coordination takes 
place between the United States and other nations on the issue? 
Do the bulk of other nations have adequate infrastructure in 
place to help combat the illegal moneyflows through charitable 
channels?
    Mr. Glaser. There is quite a bit of international 
coordination that happens on a variety of levels. Mr. Royce 
made reference to the Financial Action Task Force, and that is 
the premier standard-setting body in the world for anti-money 
laundering and counter-terrorist financing standards, and we 
have done a lot of work in the FATF, both on typologies and on 
establishing international standards. I am the head of the U.S. 
delegation--
    Mrs. Biggert. Okay.
    Mr. Glaser. --to the FATF, so I have been personally 
involved in that.
    In addition--and I think this is really important and often 
overlooked--there is a considerable amount of work that has 
been done in the Middle East/North Africa region. There is an 
organization called MENAFATF, the Middle East North Africa 
Financial Action Task Force. I was just at a meeting of the 
MENAFATF in Tunisia 3 or 4 weeks ago, and MENAFATF has issued 
its own best practices and guidelines with respect to 
charities.
    So, there is quite a bit of work that's done on that level. 
There is also, obviously, a lot of work that's done 
bilaterally. I am a part of a lot of it. I have traveled 
throughout the Middle East, throughout Europe. We work with the 
EU on this. We work directly with partners such as the Brits 
and the Saudis.
    There is--it's not a particularly controversial proposition 
to say that these charities are involved in this type of 
activity, so it's really just about working with our partners 
to find solutions, and it's something we spend a lot of time 
on.
    Mrs. Biggert. Great. Then some in the nonprofit community 
say that there has been a negative effect on charitable giving. 
Do you agree? And what has Treasury done, if there has been any 
chilling effect?
    Mr. Glaser. I have no doubt that there has--I don't have 
numbers, but I have no doubt that there has been a chilling 
effect. And, as I said in my testimony, it's something that 
troubles us, and it's something that we feel we have a 
responsibility to work with the charitable community to 
mitigate.
    And we are trying to do everything we can in that regard. 
We try to do it through guidance, we try to do it through best 
practices. We try to do it through providing as much 
information as we can. Frankly, we try to do it through 
shutting down charities that we think are involved with 
terrorist organizations, to take those off of the table.
    We also--again, we have in the past worked with the 
charitable community on establishing alternative relief 
systems, alternative relief mechanisms. There was something 
back in the summer of 2008 that we started called, ``The 
American Charities for Palestine.'' That was sort of a pilot 
project.
    We would like to build on that concept so that we could 
work with the charitable community to make sure that Americans, 
Muslim-Americans and any American who wants to give to places 
like the Palestinian territories or earthquake relief in 
Pakistan or anywhere, has the opportunity to do so. We regard 
that as a responsibility of ours, and we work very hard to try 
to achieve that.
    Mrs. Biggert. Do you see that the charities are still being 
abused by terrorists and other illicit actors? Has it slowed 
down, or--
    Mr. Glaser. Again, globally, I don't think it has slowed 
down. I think that there are charities throughout the world 
that continue to operate as integral parts of terrorist 
organizations.
    Domestically, as has been pointed out, we have designated 8 
charities since 9/11. We have not designated a Muslim charity 
in almost 3 years. So I think that we have had success, and I 
think it has become a lot harder to raise funds within the 
United States for terrorist organizations.
    Mrs. Biggert. Thank you. I yield back.
    Chairman Moore of Kansas. Thanks to the gentlelady. And 
next, the chairman recognizes for 5 minutes Mr. Lynch for 
questions.
    Mr. Lynch. Thank you, Mr. Chairman. Mr. Glaser, one of the 
other hats that I wear, along with Mr. Royce of California, I 
co-chair the Task Force on Terrorist Financing and Non-
Proliferation.
    The initial goal of our group, working with Treasury, was 
really to look at the formal, established finance system, and 
to try to encourage countries--and we spent a lot of time in 
Jordan, Morocco, Tunisia, Afghanistan, and India--to adopt 
anti-money laundering statutes that would hopefully drive 
terrorist financing out of the legitimate financing system. And 
I think that you have had some good success. FATF has had some 
great success, I think, considering where we started before 9/
11.
    Now, I think what has happened is we have seen, since the 
official banking system has been closed off in larger respects, 
now we have seen this migration to these informal value 
transfer systems. I'm talking about the hawalas and the hundis 
that--in some countries they're registered, in some countries 
they're not. It's sort of a mish-mash.
    What complicates things is there is a religious dimension 
to the use of hawalas in fulfilling Zakat by good Muslims. So, 
I guess my question is, how do we take that next step?
    Now that we have the formal banking system going in the 
right direction with know-your-customer protocols, and you have 
a pretty solid matrix, a risk matrix for these charities, how 
do we--I guess how do we drive whatever is left of that 
terrorist financing in those informal transfer systems and 
these other charities, how do we drive the money out of that 
system?
    It seems to be more insidious, more pernicious, tougher to 
get at. But, that's really what we would have to do.
    Mr. Glaser. Thank you, Mr. Lynch, and thank you for your 
and Mr. Royce's leadership on this issue. We are very well 
aware of all the work that you have done in this area, and we 
do appreciate it.
    When you think about how terrorists--terrorist 
organizations could move money, could transfer money around the 
world, when you think about how anyone could move or transfer 
money around the world, there are really only four ways that it 
could be done, when you think about it: it could be done 
through a formal financial institution; it could be done 
through an informal financial institution; it could be done 
through trade; or it could be done through the physical 
movement of cash. Those are the only four ways to transfer 
value that I could even imagine.
    Now, there are enormous amounts of variety within each of 
those. But we need to focus on each of those four to make sure 
that we have the systems in place to detect and deter money 
laundering and terrorist financing through the formal sector, 
the informal sector, through cash couriers, and through trade. 
And we try to focus on all of them.
    With respect to your specific question on the informal 
sector, we have tried to take a sort of a three-category 
approach to it. The first is to regulate with what we call a 
light touch. There are approximately 40,000 registered money 
service businesses in the United States. Not all of them would 
meet the definition of hawala. Hawala is is an Arab word for a 
particular style of money transfer. And you said ``hundi.'' 
There are other words for it in other parts of the world. But 
what we try to do is register them, educate them, and bring 
them up to the surface.
    A lot of these service providers--most of these service 
providers--are performing perfectly legitimate, legal 
transactions. But what we want to do is reach them so that we 
can communicate with them, explain to them what the laws are, 
and try to get them to be more a part of the system.
    Frankly, the broader solution to the issue is more of a 
systemic, almost generational solution of making sure that 
there is affordable financial services provided to all 
communities throughout the world. Because the reason why these 
types of services actually exist is because they are more 
convenient for, say, a Pakistani immigrant who wants to send 
money to his family in a village in Pakistan. It's oftentimes 
going to be easier to do that through some sort of form of 
alternate remittance.
    Mr. Lynch. Right.
    Mr. Glaser. So we try to do all that. We have tried to set 
international standards. But I completely recognize that this 
is an issue that we have not, by any stretch of the 
imagination, solved. And it is something that we really do look 
forward to working with you and other Members of Congress on 
devising solutions for.
    Mr. Lynch. Thank you. I yield back.
    Chairman Moore of Kansas. Thank you, sir. The chairman will 
next recognize the gentleman from Minnesota, Mr. Paulsen, for 5 
minutes.
    Mr. Paulsen. Thank you, Mr. Chairman. And, Mr. Glaser, 
knowing that we have to have an effective regime to monitor 
terrorist financing, and knowing that funding for the attacks 
for September 11th came through so-called nonprofit or so-
called charitable organizations, that that's the case, and you 
talked about the four different access points to move resources 
for funding terrorism, how much more do we really know about 
terrorist financing today than we did 10 years ago, before 
these laws took effect?
    And I just want to set the table for you, just to sort of 
explain. Have the current laws in place now really helped us 
gain the knowledge necessary to combat some of the challenges 
that we have been facing?
    Mr. Glaser. Thank you for the question, Mr. Paulsen. I 
think we do know quite a bit more about the way terrorist 
organizations finance themselves. I think we know a lot more 
about the subject of terrorism and counterterrorism broadly 
than we did before 9/11. There has certainly been a lot more 
attention and resources devoted to it, and I think we have 
learned a lot of lessons.
    Charities are by no means the only way that terrorist 
organizations raise funds. They raise them through individual 
donors, they raise them through state sponsors. They raise them 
through legitimate business, they raise them through crime. 
They raise them through taxing populations. There are all sorts 
of ways that terrorist organizations raise funds. And we need 
to focus on all of them.
    But I do think we understand these issues better, and I 
think we have had success. I think that terrorist organizations 
such as Hamas and al-Qaeda are in far worse financial shape 
today than they have ever been in the past. And I think that's 
due to the efforts not just of the United States Government, 
but of the entire international community that has been working 
very hard on this.
    Mr. Paulsen. And would you go so far as to say that the 
information that has been provided by these laws now has given 
us enough information to help prevent another attack, to 
certainly prevent the resources from going forward to prevent 
another attack from occurring, or at least made it much more 
difficult?
    Mr. Glaser. I think they have made it more difficult. I 
wish I could say that I promise you that these laws could 
prevent another attack. Unfortunately, that's not a promise 
anybody could make.
    But I--in particular, we do our part at the Treasury 
Department, but in particular, people like the FBI and other 
parts of the law enforcement and national security community 
work every day to do everything they can to prevent a next 
attack.
    Mr. Paulsen. I appreciate that. And, Mr. Glaser, there is 
testimony this committee will hear from in the next panel 
that's coming up that suggests that the Treasury Department is 
not set up to effectively monitor the charitable sector. And I 
just wanted to see if you agreed with that.
    Between FinCEN and the OFAC, the OIA, and the other 
numerous intelligence agencies that you just mentioned, too, I 
just want to--do you think you lack the resources to 
effectively combat terrorist financing right now? And how do 
you feel about that?
    Mr. Glaser. Thank you, Mr. Paulsen. We are not set up to 
monitor the charitable community. That's not our 
responsibility. That's not what we do. That's not what we seek 
to do.
    We are set up--and in 2004, Congress, working with the 
Administration, created the component of the Treasury 
Department that I am a part of, the Office of Terrorism and 
Financial Intelligence, and I think it was a revolutionary 
decision--we are the only finance ministry in the world that 
has an office like TFI, and that has allowed us to be a real 
leader throughout the world in addressing issues like this.
    So, I do think we are well set up to address issues related 
to terrorist financing as best as we can, and we work very hard 
on that. I appreciate the support that we have gotten, and I 
think we are appropriately set up. But I do agree that we are 
not set up to monitor charities, nor do we seek to monitor 
charities.
    Mr. Paulsen. Thank you, Mr. Chairman. I yield back.
    Chairman Moore of Kansas. Thank you, sir. The chairman will 
next recognize the gentleman from New Jersey, Mr. Adler, for 5 
minutes.
    Mr. Adler. Thank you, Mr. Chairman. I want to follow up on 
Mr. Paulsen's question about resources, maybe shift it a little 
bit to whether there are legislative needs that you would seek 
from us to empower you to do a better job with your limited 
role. I understand your point that it's a limited role. Are 
there things you need from us to give you more power or more 
direction to achieve our national security interests, as it has 
been laid out in the discussion this morning?
    Mr. Glaser. Thank you for the question, Mr. Adler. No, I 
think what we need from Congress is what we're getting from 
Congress, which is a close attention to this problem. Hearings 
like this, I think, are important and helpful in bringing out 
these issues and stimulating public discussion and stimulating 
debate. I think it is all very important and healthy.
    And I think Congress is playing an absolutely vital role in 
its oversight function. But I don't--there are no particular 
pieces of legislation that I would have to offer to enable us 
to do our role better. I think we have what we need right now.
    Mr. Adler. Is that a consensus opinion of the Department, 
or is it--I want to make sure it's beyond just your opinion, as 
much as I respect your opinion, that we--I want to have the 
comfort that we are doing what we should do to empower you to 
do what you need to do to keep our country safe.
    Mr. Glaser. Yes, I am speaking for the Department.
    Mr. Adler. Thank you. I yield back.
    Chairman Moore of Kansas. The chairman thanks the 
gentleman. And next, the chairman will recognize Mr. Royce of 
California for 5 minutes.
    Mr. Royce. Mr. Glaser, Doug Farah is the former Washington 
Post bureau chief who has dug pretty deep on these issues. And, 
as a matter of fact, not just on terror finance, on the issue 
of conflict diamonds he helped bring President Charles Taylor 
of Liberia to the bar of justice for war crimes.
    But he wrote recently, ``So far, the Muslim Brotherhood is 
winning every battle, and rapidly recapturing the ground lost 
in the dark days after 9/11 when their role in radicalization 
and financing of radical Islam was recognized and confronted, 
at least briefly.''
    I want to go back to my opening remarks, where I brought up 
the case of Youssef Nada, foreign minister of the Muslim 
Brotherhood, as he calls himself, who says that--as we know, he 
was removed rather quietly from the UN Security Council's 
terrorist financier list. He was involved with al-Qaeda. He was 
involved with Hamas. And to be removed from that list, it has 
to be unanimous. So, that would mean that the Obama 
Administration okayed this. And I wanted to ask you why, or if 
you knew why.
    Mr. Glaser. Thank you, Mr. Royce. To the first part of your 
question, and then to the second part of your question. I do 
agree with you, radicalization is a really important issue. I 
think it's, frankly, one of the next big issues that we, as a 
government--we are focusing on it, but I think it's something 
that we really, as we make progress in other areas, I think 
it's an issue for us to pay even closer attention to.
    When we talk about the role that charities and other groups 
play in terrorism, one of the reasons why I made some of the 
points that I make--and I try to make them all the time--is 
we're not just talking about fundraising when we talk about 
these terrorist networks. We are talking about radicalization. 
We are talking about providing logistical support. We are 
talking about being an integral component of a radical 
extremist violent network. And those are the networks that we 
are seeking to disrupt.
    With respect to Mr. Nada, you are correct. He was delisted 
at the UN, and then we subsequently delisted him in the United 
States. Mr. Royce, I don't have any further information for you 
on that, but we would be happy to get back to you with 
information on Mr. Nada.
    Mr. Royce. I will just repeat what I said in my opening 
statement on that same front. The Brotherhood, according to 
their charter, seeks the worldwide creation of an Islamic 
caliphate. And to delist somebody who was involved with al-
Qaeda and Hamas gives me some concern.
    I also want to point out that back in 2006, the Treasury 
Department designated the Philippine and Indonesian offices of 
the International Islamic Relief Organization, a Saudi-based 
charity, as terrorist-designated entities. And I think that was 
a welcome move, given its facilitating of funds for al-Qaeda. 
One individual involved in that operation was dubbed ``The 
Million Dollar Man'' by fellow jihadists, who depended upon him 
for the transfer of those sums of money.
    But there are now reports that the International Islamic 
Relief Organization has reopened a U.S. chapter, this time in 
Florida. And its articles of incorporation says that it's 
intended to be the U.S. chapter of the International Islamic 
Relief Organization. Are you concerned about this development?
    Mr. Glaser. There are a number of charities in the Gulf 
that we have worked very closely with governments in the Gulf 
on, some of which we have actually designated, like the Revival 
of Islamic--RIHS, Revival of Islamic Heritage Society.
    With respect to IRO, we have designated certain branches of 
the IRO, and we have also worked very, very closely with the 
Saudi Government on issues relating to terrorist financing, Mr. 
Royce. I have testified before Congress previously on our 
efforts--
    Mr. Royce. Whoa, whoa. You might be working closely with 
the Saudis. But last year the State Department, in its report 
on money laundering, concluded that Saudi Arabia continues to 
be a significant jurisdictional source for terrorist financing 
worldwide, and notes that the Saudi Government could do more to 
target Saudi-based support for extremism outside of Saudi's 
borders. And that's what we're talking about.
    Mr. Glaser. Yes, I agree with that. They are still a 
source, their country is still a source of terrorist financing. 
And, like all of us, they could do more. I think they have done 
a lot more.
    And I think that since we at the Treasury Department have 
been very open about identifying our concerns about Saudi 
Arabia, I think it's also incumbent upon us to say when we 
think they are doing a good job, and I think that they have 
greatly improved their efforts in this area.
    Sure, there is a lot more they could do. And when I was in 
Tunisia, Mr. Royce, just a few weeks ago, the MENAFATF was 
discussing Saudi Arabia's evaluation report, which is a 
several-hundred page in-depth analysis of Saudi Arabia's legal 
structure and efforts in this area. I think it points out the 
good things and I think it points out the areas in which they 
still need to improve.
    Mr. Royce. A lot of concerns. Thank you, sir.
    Chairman Moore of Kansas. The gentleman's time has expired. 
The chairman will next recognize the gentleman from Delaware, 
Mr. Castle, for 5 minutes.
    Mr. Castle. Thank you, Mr. Chairman. Mr. Glaser, are you 
familiar with the terrorist financing report which was 
authorized in section 6303 of the Intelligence Reform and 
Prevention Act back in 2004?
    Mr. Glaser. Yes.
    Mr. Castle. We have never received that report. I have 
written letters to the President, and we mentioned it again--I 
and others have mentioned it in various intelligence activities 
on the Floor, etc.
    Can you--what has happened to that report? That was due in 
2005. Is it going to be forthcoming? Is there some reason why 
we are not seeing this?
    Mr. Glaser. Thank you, Mr. Castle. We are aware of the 
requirement issue of this report, and our plan is to issue a 
terrorist financing report to meet the statutory requirement. 
There has been a lot of internal discussion about what form 
this report should take. There are different aspects of it that 
we have struggled with.
    But it is something that we know there is--we understand 
there is an expectation that we are going to do this, and we do 
plan to meet that expectation.
    Mr. Castle. Needless to say, the date has long since passed 
that it was due. I would hope that these discussions could come 
up with a resolution, we could get that report, which may 
answer some of the questions which we are posing here today.
    In my--another question I have is--and you mentioned it a 
little bit with Saudi Arabia--but in--and you also indicated 
that we may be the only country which has an office dedicated 
to this particular problem. I assume you're talking about 
terrorism financing when you say that. But what is our 
relationship with the bulk of other countries? Do they have any 
kind of an infrastructure or anything else in place that you 
can actually work with, with respect to financing issues that 
we are discussing here today?
    I realize that's a pretty broad question, but can you give 
us a quick synopsis of what you see in these other countries?
    Mr. Glaser. Thank you for the question. I am happy to.
    To clarify what I said earlier, we are the only country 
with an office within a finance ministry like the one we have 
at the U.S. Treasury Department, in terms of being able to 
focus not just on terrorist financing, but on all financial 
components of national security issues--in particular, 
terrorist financing. And it has, I think, allowed us to 
approach issues in a more sophisticated, more aggressive way 
than any other finance ministry in the world, and we are very 
proud of that.
    But there certainly are offices throughout the world--
governments throughout the world--dealing with this issue in 
different ways, and there are offices and governments that 
focus on terrorist financing.
    As far as our--the way we work with and cooperate with 
those governments, again, it happens on all--on a variety of 
levels. On the broadest level, on the multilateral level, there 
are a number of international bodies, I think most particularly 
the Financial Action Task Force, which I have mentioned a 
couple of times, which is the international standard-setting 
body for money laundering and terrorist financing. It is 
headquartered at the OACD in Paris, and it has 34 members, to 
include most of the largest countries in the world.
    That network, then, is extended through what are called 
FATF-style regional bodies, which are regional FATFs that exist 
in every region. There is one in the Middle East, there is one 
in Central Asia, there is one for Asia, for South America, the 
Caribbean, eastern and southern Africa, west Africa, and 
central Africa. So, there are these FATF-style regional bodies, 
and those are intended to provide regional solutions to 
regional issues relating to this. Obviously, there is then work 
done at the UN. There is work done at so many different bodies 
on this area.
    And equally as importantly is our bilateral outreach. I 
spend an awful lot of my time traveling throughout the world, 
not just on this issue, but on issues--on all national security 
issues the Treasury is related to, be it North Korea, be it 
Iran, be it counterterrorism, be it other issues, trying to 
coordinate actions, passing information to governments, trying 
to persuade them to take action, working with them throughout 
the world, doing this.
    Last month, I was in the Palestinian territories working 
with the government of the Palestinian Authority on precisely 
these types of issues, and they are very, very good partners of 
ours.
    So, there is not one forum and there is not one way of 
doing this. It is a full-time job to coordinate internationally 
and to work on all these subjects. But I think we have made 
good progress.
    Mr. Castle. Thank you, Mr. Glaser. My time is up.
    Chairman Moore of Kansas. Thank you. I ask unanimous 
consent that Mr. Ellison from Minnesota, a member of the full 
committee, be allowed to participate and ask questions. Without 
objection, it is so ordered. Mr. Ellison, do you have any 
questions, sir?
    Mr. Ellison. Yes, Mr. Chairman, thank you.
    Chairman Moore of Kansas. Yes, sir. You are recognized.
    Mr. Ellison. Mr. Chairman, thank you for holding this 
hearing, and thank you for inviting me to attend. I am hopeful 
that we can improve the rules on charitable giving so that all 
Americans, including Muslims, can give to charity without 
inadvertently running afoul of the law.
    Currently, the net of suspicion is simply cast too broadly. 
While it is crucial that we disrupt and destroy terrorist 
financing networks, President Obama himself acknowledged, 
``Rules on charitable giving have made it harder for Muslims to 
fulfill their religious obligation.'' That's why I am committed 
to working with Members of Congress and members in the 
community to ensure that everyone can fulfill their religious 
obligations, including Muslims, who have a duty to fulfill 
Zakat, which is charity.
    Rules must also change so that charities can make 
contributions to fight poverty around the world, including in 
Muslim majority countries. Humanitarian aid in the Middle East, 
Africa, South Asia and elsewhere is crucial, so that it can--
it's also an effective tool to combat terrorism.
    My question is, will the Treasury Department consider 
implementing new rules and procedures to assist Muslim-
Americans to contribute to charities?
    Mr. Glaser. Thank you. Thank you, Mr. Ellison, and I 
certainly do agree with you that our efforts to fight terrorism 
over these past 10 years have made it more difficult for people 
to give, particularly to high-risk areas. And they should have 
the opportunity to do so. I completely agree with that. I think 
our charities do a phenomenal job, and an extremely important 
job in providing relief to these needy communities.
    On a humanitarian level, it's important. And, frankly, on a 
national security level, I think it's important, as well. So 
there is absolutely no disagreement on that issue.
    We take--as I have said before, we take our responsibility 
very, very seriously in this area, and we have--we are 
continually thinking about and trying to solve the problems 
that go along with this. And they are a very complicated and 
difficult set of problems.
    The ideas that we have come up with have been to try to 
provide guidance to the charitable community, in terms of best 
practices, to try to provide information to the charitable 
community, in terms of risk matrixes and typologies, and things 
like that. We want to--we welcome, we invite a vibrant dialogue 
with--
    Mr. Ellison. Let me ask you another question in that same 
vein.
    Mr. Glaser. Okay.
    Mr. Ellison. Could Treasury direct the creation of a 
single, user-friendly publicly-accessible database 
consolidating each of the government's prohibited lists, so 
that donors, mosques, and 501(c)3 organizations can easily 
determine if a charity to which they want to donate is on a 
prohibited list?
    Mr. Glaser. We do--Mr. Ellison, we do have on our Web site 
the list of designated entities. Unfortunately, the problem 
goes beyond that. It's not really just a question of not 
donating to a prohibited entity. As far as a donor is 
concerned, if a charity is operating in the United States, it's 
not on a prohibited list.
    The problem--and we have never, for that reason, we have 
never targeted donors--the complexity and the difficulty come 
with charities in the United States who are trying to provide 
needed legitimate services in these high-risk areas, and the 
complexities that go along with who they may be working with, 
and whom they may be dealing with. And it's a very difficult 
issue.
    Because certainly all aspects of these organizations--like 
Hamas, like Hezbollah--are not publicly identified as 
designated charities. This is why I think it's important that 
we do provide guidance on how to--how they should--how they can 
protect themselves, and provide them information on how these 
organizations operate.
    Mr. Ellison. Okay. With any time I have remaining, let me 
ask you this: Could Treasury provide a rebuttable presumption 
of innocence to donors--individuals, mosques, 501(c)3 
organizations--who can show that at the time of the 
contribution, they checked the combined list and did their due 
diligence and did not have reason to know that the organization 
was connected to terrorists, or otherwise fraudulent?
    Mr. Glaser. Thank you, Mr. Ellison. Again, we have never 
targeted donors. So the issue is not really one of providing 
rebuttal of presumptions with respect to donors. The issue--
    Mr. Ellison. If I may intervene, good citizens don't want 
to donate to organizations that are prohibited. So, to a 
certain extent, a donor could be concerned about being 
targeted, him or herself, or the entity's self.
    But, on the other hand, they might just not want to donate 
to an organization that the government believes is a prohibited 
organization, whether or not they are targeted themselves. Do 
you understand my point?
    Mr. Glaser. I do understand your point. I do understand 
that the actions that we have taken have created a chilling 
effect within the--particularly within the Muslim-American 
community. I do understand that. And it's a concern. It's 
something that we are trying to work with.
    I don't think establishing a rebuttal--the standard that we 
are dealing with is whether an entity is owned or controlled 
by, operating for or on behalf of a terrorist organization. 
That's the standard that we are working with, and that is the 
standard that we should continue to work with.
    But we need to supplement that with a strong partnership 
with the charitable community, so that we could get to starting 
to improve a lot of the very legitimate concerns that you have 
raised.
    Mr. Ellison. Thank you, Mr. Chairman.
    Chairman Moore of Kansas. The gentleman's time has expired. 
The chairman will next recognize Mr. Klein from Florida for up 
to 5 minutes.
    Mr. Klein. Thank you, Mr. Chairman. And thank you for being 
here today. This is obviously a very important issue around the 
country. I would like to yield to my colleague, Mr. Lynch, who 
has some follow-up questions.
    Mr. Lynch. Thank you. I thank the gentleman. Mr. Glaser, I 
want to push back a little bit on Mr. Adler's question, when he 
asked you if you thought that your agency had sufficient 
resources to do its job. I think you're trying to be a team 
player, and I understand taking that position.
    But looking at the responsibilities that you have, let's 
just start with the greater need for, let's say, FinCEN to 
interface now, and especially within the Financial Fraud Task 
Force, to now interface with 3,000 local law enforcement 
agencies inside the United States, doing all the things that 
you have already talked about in all these different countries, 
what the different, MENAFATF task force, all the 
responsibilities you have there, the tremendous need we have in 
the Middle East and in north Africa for you to help that 
situation, the cross-border transfer of funds issue that you're 
trying to address, I think you are way over--I think the 
demands on your agency, especially on FinCEN and OFAC are far 
exceeding--the demands are far exceeding what your capabilities 
are.
    And what troubles me greatly is, when I look at the--next 
year's budget, you basically have been level-funded--a little 
bit of an increase--and, I see the agencies that you serve, the 
FBI, a huge increase on their part, and greater need for you to 
spread yourself even thinner than what you are doing right now.
    I just don't see how--and I appreciate your being a team 
player and saying, ``We're fine,'' but that's not what I see. I 
see greater demand on your agency, especially the financial 
crimes enforcement network, globally, as well as domestically, 
and I just don't see any way near you filling your obligations, 
given what they are right now, and the expectations, I think, 
of Congress for you to meet these further demands. So, I would 
just like to hear what you have to say about that. I hate to 
put you on the spot, but you're the only one here.
    Mr. Glaser. No, I understand, Representative Lynch. It's a 
fair question. I don't really know how to respond, though. I 
appreciate your support. I suppose on some level, more money is 
better than less money. But we--this is part of a broader 
conversation, with respect to the Treasury budget, and I am not 
the right person to respond to that.
    We feel that we are meeting our mission with the resources 
that we have. And we do the best that we can.
    Mr. Lynch. Let me ask you: On the formal banking side, we 
have the ability to do suspicious transaction reports and CTRs, 
where--those are the sort of little red flags sometimes that 
give us reason for concern and further investigation. Do we 
have anything on the charity side that remotely compares to 
that?
    Because I think on the next panel, we are going to hear 
about the great amount of data that we gather through the BSA, 
the Bank Secrecy Act, and that some feel we aren't really 
utilizing. So there is going to be pushback on that by my 
friends from the ACLU, who think that on an individual secrecy 
and privacy standpoint, it's not worth the intrusion.
    Mr. Glaser. I am not familiar with the ACLU's position with 
respect to the Bank Secrecy Act. But the Bank Secrecy Act 
doesn't apply to charities. There is not a supervisory 
framework. The money laundering laws--the Bank Secrecy Act, 
which is the basic regulatory framework that we have for anti-
money laundering--
    Mr. Lynch. I understand. I am asking if there is anything 
comparable.
    Mr. Glaser. No.
    Mr. Lynch. To what we do on the bank side?
    Mr. Glaser. No.
    Mr. Lynch. To charities? No? Okay. Thank you. I appreciate 
your indulgence, Mr. Chairman, and I yield back.
    Chairman Moore of Kansas. I thank the gentleman. The 
chairman will next recognize the gentlelady from Ohio, Ms. 
Kilroy, for 5 minutes.
    Ms. Kilroy. Thank you, Mr. Chairman. And I would yield to 
my colleague from Minnesota, Mr. Ellison.
    Mr. Ellison. And let me thank the gentlelady and the 
chairman. Just a few more questions.
    Has the Obama Administration applied the current rules to 
close charities and freeze charitable assets that the Bush 
Administration has been applying? I guess my question is, it 
looks like the activity has been significantly less, but do you 
feel that the same principles are still at work? Or how have 
they changed?
    As you know, the Bush Administration closed down about 
seven charities and prosecuted one.
    Mr. Glaser. Yes, there have been a total of 8 charities 
designated under our basic Executive Order since 9/11. There 
has not--six of the eight could be identified as Muslim 
charities. There have been no Muslim charities designated in 
the United States for almost 3 years. There have been recently 
two charities designated that are related to the Tamil Tigers 
that had their assets blocked.
    Mr. Ellison. But I guess my question is, is this a policy 
change from the Obama Administration, or is it the fact that 
the activity just isn't going on?
    Mr. Glaser. I think we certainly remain committed to 
shutting down terrorist networks wherever we find them. And 
there hasn't--there has not been a change in policy in that 
regard. If there is a terrorist network that we identify in the 
United States, we are going to take whatever lawful means that 
we have--
    Mr. Ellison. So the answer is you just haven't discovered 
that kind of activity.
    Mr. Glaser. The answer is that we haven't found that to be 
appropriate authority in any case--
    Mr. Ellison. Okay.
    Mr. Glaser. --of any Muslim--
    Mr. Ellison. Okay, okay, okay, yes. Since we have limited 
time, you know how it is.
    Under current law, the Treasury does have the ability to 
freeze assets, but does not have the authority to bring a 
formal charge. Is that right? Do you refer that over to the 
attorney general for prosecution?
    Mr. Glaser. They are two completely different processes.
    Mr. Ellison. Okay.
    Mr. Glaser. We don't--the Justice Department would take 
care of criminal prosecution, but the decision to designate a 
charity does not imply that there will be a criminal 
prosecution.
    Mr. Ellison. Do you feel that there are sufficient due 
process safeguards in place for a charity to come and sort of 
show that, ``Hey, in fact we didn't do this, or, if we did, it 
was in good faith and we will clean it up?''
    Mr. Glaser. Yes. Again, I do think we have sufficient due 
process. As I tried to explain in my written testimony, there 
are procedures that we go through on the front end. And then, 
on the back end, we do have a licensing system so that any 
designated--not just a charity, any designated entity could 
come in and say, ``We need access to our funds to pay for legal 
fees or pay for basic expenses,'' and we regularly permit that 
to happen.
    And then we do have a delisting procedure, and we have 
delisted 34--34 listed entities have been delisted, none of 
them charities. So we do have a delisting process that we have 
demonstrated works. This is a process that has been reviewed by 
the courts many times, and I think we have a strong--
    Mr. Ellison. Can I ask you, is there a process, an interim 
process--there is freezing, on the one hand, and there is not 
taking any action on the other. Is there a process to say, 
``Look, you have some questionable donations from some 
questionable sources, or to some questionable sources, and 
we're not sure that you know that, but we're going to work with 
you to make sure you get things cleaned up?'' Do you have a 
process like that?
    Mr. Glaser. There is not a formal process like that, Mr. 
Ellison. But I think it's important to remember that the 
entities that we have designated have not--we have not regarded 
them to be unwitting victims in all of this. We regard them as 
being part of these terrorist networks. And we have found it to 
be our obligation to take the action that we took.
    Mr. Ellison. Yes. I yield back.
    Chairman Moore of Kansas. I thank the gentleman.
    Ms. Kilroy. Mr. Chairman? I think we had maybe half-a-
second there left.
    So, I just want to understand, if a charity is having 
difficulty, experienced difficulty with banking or with being 
able to wire, they're not on your list, but they're still 
experiencing that difficulty, they're following your best 
practices, do you have some kind of process or open door that 
would allow that charity--that would help that charity to 
understand what the problem was, so that they could make sure 
that they were in compliance, and be able to fulfill the 
charitable function, the humanitarian relief, or whatever it 
was that they were engaged in?
    Mr. Glaser. Certainly, we do have a number of outreach 
processes to try to have precisely this type of discussion with 
charities, and we are happy to do even more of it.
    I am not aware of charities having a problem obtaining--
non-designated charities having a problem of obtaining 
financial services. But if that is a problem, it's something 
that we would be interested in learning about, and it's 
something that we would be happy to work with the charitable 
sector on.
    Ms. Kilroy. Thank you.
    Chairman Moore of Kansas. Thank you, Mr. Glaser, for your 
service and your testimony today. You are now excused.
    And I will invite the second panel of witnesses to please 
take your seats. Thank you, Mr. Glaser.
    Mr. Glaser. Thank you, Mr. Chairman. Thank you.
    Chairman Moore of Kansas. I am pleased to introduce our 
second panel of witnesses. First, we will hear from Ms. Kay 
Guinane, who is the program manager of the Charity and Security 
Network.
    Next, we will hear from Mr. Michael German, policy counsel 
at the American Civil Liberties Union.
    And finally, we will hear from Mr. Matthew Levitt, 
director, Stein Program on Counterterrorism and Intelligence at 
the Washington Institute for Near East Policy.
    Without objection, your written statements will be made a 
part of the record. Ms. Guinane, you are recognized, ma'am, for 
5 minutes.

STATEMENT OF KAY GUINANE, PROGRAM MANAGER, CHARITY AND SECURITY 
                            NETWORK

    Ms. Guinane. Thank you. I would like to begin by expressing 
my thanks to you, Chairman Moore, Ranking Member Biggert, and 
the members of the subcommittee, for holding this very 
important hearing, and inviting me to testify. This is the 
first opportunity U.S. charities have had to tell their story 
about the impact of national security laws since 9/11, and we 
very much appreciate that.
    It's a critical first step, then, in calling attention to a 
serious and overlooked problem: the barriers that current 
national security laws create for legitimate U.S. charitable 
organizations. The Charity and Security Network, where I am 
program manager, is a broad cross-section of U.S. organizations 
that are working to provide solutions to the problems that are 
being addressed today.
    First, I want to strongly state and emphasize that the U.S. 
charitable sector condemns violence and terrorism. We share the 
Department of Treasury's goal of stopping the flow of financing 
to terrorist organizations, whether directly or indirectly. 
But, unlike many foreign organizations, the U.S. charitable 
sector is highly regulated, primarily by the IRS. In addition, 
we are subject to ethical standards that demand non-
discrimination in development and aid programs.
    These standards were described in a May 12th letter to 
President Obama from a group of 30 charities. These groups 
said, ``Since the Reagan Administration's declaration in 1984 
that `a hungry child knows no politics,' U.S. policy has been 
to provide humanitarian assistance on the basis of need, 
without regard to political affiliation, creed, race, or the 
international status of the country or territory to which a 
person belongs. It is the Golden Rule of the American nonprofit 
sector, and it provides humanitarian assistance all over the 
world.''
    We urge you to assess the testimony today by this standard, 
with the view that charity and security are mutually 
reinforcing, not competing goals. We feel our work directly 
confronts terrorism.
    Despite some statements from the Department of the 
Treasury, charities are not a major source of terrorist 
financing. U.S.-based charities comprise only 1.68 percent of 
designated entities on the specially designated global 
terrorist list. And the 9/11 staff monograph made it clear that 
they were not a source of domestic support for the attacks of 
9/11. Instead, the work of charitable organizations confronts 
the conditions that may be conducive to terrorism. This has 
been recognized by Ambassador Benjamin, Coordinator of 
Counterterrorism at the Department of State, who said, ``There 
is probably no success in this area that can happen without 
civil society.''
    Since 9/11, the U.S. charitable sector has proactively 
taken steps to enhance transparency and accountability to 
protect the charitable sector from bad actors. These efforts 
include guides and programs such as the Principles of 
International Philanthropy, or a handbook, ``Counterterrorism 
Measures: What U.S. Nonprofits and Grant Makers Need to Know.'' 
In addition, Muslim Advocates operates a charities 
accreditation program.
    But the impact of U.S. Treasury enforcement on legitimate 
charitable organization has been largely negative. First, 
Treasury's Antiterrorist Financing Guidelines demonstrated a 
lack of understanding of how charities operate, and the 
charitable sector has uniformly called for their withdrawal, to 
no avail.
    Perhaps the biggest problem with the Guidelines is that 
complete compliance with every suggested practice provides no 
legal protection to a charity, not even a presumption of good 
faith. A charity could still be shut down and have all its 
assets frozen and seized, all without notice, opportunity to 
see the evidence against it, or present evidence on its own 
behalf. There is no independent review, and upon appeal to 
Federal court, no opportunity to present evidence.
    The situation with frozen funds is also problematic. There 
is no timeline or process for the long-term disposition of 
these funds. Treasury can grant licenses that would allow funds 
to go to legitimate charities for charitable purposes, but they 
have refused every request to do so.
    Using UNICEF data, I calculated that, if we know at least 
$7 million in U.S. charitable funds have been frozen, that 
could provide 11,480,000 children with basic health supplies, 
or 12,180,000 children could be vaccinated against polio. But 
the lack of transparency and these Draconian sanctions have 
discouraged many U.S. charities from pursuing international 
humanitarian work. And charities that do so complain of long 
delays with licensing applications, and have lost funding as a 
result.
    In the end, what we need from Treasury is transparency, 
accountability, proportionality, and humanity in their approach 
to enforcement in the charitable sector.
    Thank you for the opportunity to bring our story to you 
today.
    [The prepared statement of Ms. Guinane can be found on page 
65 of the appendix.]
    Chairman Moore of Kansas. I thank the lady for her 
testimony.
    Mr. German, you are recognized, sir, for 5 minutes.

  STATEMENT OF MICHAEL GERMAN, POLICY COUNSEL, AMERICAN CIVIL 
                        LIBERTIES UNION

    Mr. German. Chairman Moore, Ranking Member Biggert, and 
members of the subcommittee, thank you for inviting me to 
testify on behalf of the American Civil Liberties Union about 
the need for greater transparency and due process in the 
Treasury Department's enforcement of antiterrorism financing 
laws, particularly as it affects charitable organizations 
working to foster peace, promote human rights, and alleviate 
human suffering around the world. Congress serves an essential 
constitutional role in overseeing Executive Branch activities, 
and we commend you for scheduling this important hearing.
    The ACLU has long been concerned about the over-broad 
authorities conveyed through the International Emergency 
Economic Procedures Act and Executive Order 13224, which give 
the Treasury Department practically unfettered authority to 
declare individuals or organizations specially designated 
global terrorists using secret evidence, without independent 
oversight, probable cause, or effective due process, procedures 
to protect against error and abuse.
    The serious consequences of such designations include the 
seizure and freezing of all financial and tangible assets 
without any notice, hearing, or judicial review. Where entities 
have tried to challenge their designations, courts have 
generally applied a highly deferential standard of review, 
which requires finding the Agency acted in an arbitrary and 
capricious manner in order to overturn a designation.
    If a court does review Treasury's evidence, it may do so in 
camera and ex parte, which denies the designated entity the 
opportunity to challenge the evidence against it. Treasury can 
even freeze assets pending an investigation.
    Moreover, as mentioned in my written testimony and 
documented in even greater detail in the ACLU report, 
``Blocking Faith, Freezing Charity,'' the Treasury Department's 
unequaled enforcement of these over-broad laws has a 
disproportionate impact on Muslim charities, implicating First 
Amendment rights in addition to the Fourth and Fifth Amendment 
due process concerns.
    In Cairo, Egypt, last year, President Barack Obama 
acknowledged that, ``in the United States, rules on charitable 
giving have made it harder for Muslims to fulfill their 
religious obligation.'' Such discriminatory practices alienate 
American Muslims, undermine U.S. standing in the Muslim world, 
and provide fuel for extremists' inflammatory allegations that 
the United States is anti-Muslim.
    But it isn't just Muslim charities that are 
unconstitutionally chilled from engaging in legitimate 
religious, humanitarian, and advocacy activities. The Carter 
Center, Christian Peacemaker Teams, Grass Roots International, 
Human Rights Watch, the International Crisis Group, the 
Institute for Conflict Analysis and Resolution at George Mason 
University, the Kroc Institute for International Peace Studies 
at Notre Dame University, Operation USA, and the Peace Appeal 
Foundation joined in an amicus brief filed by the ACLU in 
support of a challenge to the criminal statute prohibiting 
material support for terrorism.
    They argued that a result of the breadth and vagueness of 
the statute's terms--it was unclear whether legitimate 
activities such as peacemaking, conflict resolution, human 
rights advocacy, and the provision of aid to needy civilians 
could expose them to the risk of criminal penalties if they 
involved a group that the U.S. Government has designated or may 
in the future designate as foreign terrorist organizations.
    Such a chilling effect on legitimate aid is 
counterproductive to U.S. counterterrorism goals. The 
generosity of the American people toward those in need around 
the world is an asset to U.S. counterterrorism efforts. Our 
government should not squander it by unfairly castigating the 
charitable sector as a primary source of terrorist financing, 
particularly when the available evidence belies this notion, as 
the government has actually designated and successfully 
prosecuted relatively few U.S. charities for terrorism-related 
activities.
    Indeed, a 2004 report on terrorist financing by the 9/11 
Commission staff found that the evidentiary basis for many of 
Treasury's designation decisions were ``quite weak'' in the 
post 9/11 period, which led to questionable designations that 
made other nations ``unwilling to freeze assets, or otherwise 
act merely on the basis of U.S. action.''
    Similarly, a 2005 Government Accountability Office study 
suggested that the shroud of secrecy under which the Treasury 
Department exercises its authorities raises questions about the 
effectiveness of these important programs. GAO called for 
greater oversight of these authorities, but found that in 2009 
follow-up, the Treasury's Terrorism and Financial Intelligence 
Office continues to face deficiencies in interagency 
cooperation and strategic workforce planning, and has yet to 
develop appropriate performance measures to effectively assess 
its core programs.
    Congress must address these deficiencies that risk both our 
liberties and our security, by bringing needed transparency to 
the Treasury Department's procedures through vigorous public 
oversight and the establishment of effective due process 
mechanisms that give entities impacted by these broad 
authorities a meaningful opportunity to defend themselves 
before a neutral arbiter.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. German can be found on page 
39 of the appendix.]
    Chairman Moore of Kansas. Thank you, Mr. German.
    Mr. Levitt, sir, you are recognized for 5 minutes.

    STATEMENT OF MATTHEW LEVITT, DIRECTOR, STEIN PROGRAM ON 
COUNTERTERRORISM AND INTELLIGENCE, THE WASHINGTON INSTITUTE FOR 
                        NEAR EAST POLICY

    Mr. Levitt. Thank you. Chairman Moore, Ranking Member 
Biggert, and distinguished members of the subcommittee, I thank 
you for the opportunity to appear before you today at this 
important hearing on this critical topic.
    Nonprofit organizations are especially susceptible to abuse 
by terrorists and their supporters for whom charitable or 
humanitarian organizations are particularly attractive fronts. 
The Financial Action Task Force, the multilateral body that 
aims to set global standards for anti-money laundering and 
counterterror financing has found that, ``Terror networks often 
use compromised or complicit charities and businesses to 
support their objectives.''
    In fact, FATF warned that, ``The misuse of nonprofit 
organizations for the financing of terrorism is coming to be 
recognized as a crucial weak point in the global struggle to 
stop such funding at its source.''
    According to the Justice Department, intelligence indicates 
that terrorists continue to use charities as sources of both 
financial and logistical support. British officials concur. 
According to a joint UK Treasury/Home Office report, a 
significant proportion of terror finance investigations in the 
UK in the year 2006 included analysis of links to charities. 
The report found that, ``The risk of exploitation of charities 
is a significant aspect of the terrorist finance threat.''
    Indeed, terrorist groups have long exploited charities for 
a variety of purposes, as we document in the Washington 
Institute study of ``the Money Trail'' in some detail. Illicit 
charities offer available legitimacy for terrorist fundraising, 
attracting unwitting donors who are unaware that the monies 
they donate for humanitarian purposes fund terror.
    Charities are vulnerable to abuse as money laundering 
mechanisms, and can be abused to provide terrorist operatives 
with day jobs, salaries, meeting places, and more. Through 
charities, trans-national terrorist groups have been able to 
move personnel, funds, and material to and from high-risk areas 
under cover of humanitarian charity work.
    Charities tend to operate in zones of conflict, and 
traditionally involve the flow of money in only one direction, 
both of which are characteristics that would arouse money 
laundering suspicions in other organizations.
    Most charities are completely law abiding, praiseworthy 
organizations. But among the minority of charities engaged in 
supporting terrorism, some are founded with the express purpose 
of financing terror, while others are infiltrated by terrorist 
operatives and supporters, and co-opted from within.
    Treasury designations of an entire charity, as have been 
the case in only a few instances here in the United States, 
focus only on the former. Never has the government targeted 
unwitting donors. Recognizing that analysis of this particular 
preferred means of terror financing demands a discerning and 
discriminating level of analysis, Ambassador Francis Taylor, 
then the State Department's coordinator for counterterrorism, 
noted in 2002 that, ``Any money can be diverted if you don't 
pay attention to it, and I believe that terrorist 
organizations, just like criminal enterprises, can bore into 
any legitimate enterprise to try and divert money for illicit 
purposes.''
    Consider the example referenced earlier of Abd Al Hamid Al-
Mujil, executive director of the eastern province of the 
International Islamic Relief Organization, designated by 
Treasury in 2006. According to the public statement announcing 
his designation, and to declassified intelligence included 
therein, Mujil was described by fellow jihadists as the 
``Million Dollar Man'' for his support of terrorist groups, 
including al-Qaeda, through his charity.
    One reason the charitable sector remains vulnerable to 
terrorist financing, according to the Financial Action Task 
Force, is that charities are subjected to lesser regulatory 
requirements than other entities, such as financial 
institutions or private companies. The United States has been 
largely alone in cracking down on the abuse of charities and 
NGOs by militant groups. Many other countries have been 
reluctant to take any steps to tackle this problem, often out 
of concern that they will appear to be targeting humanitarian 
efforts.
    Despite some criticism, the U.S. Government has been 
consistent in its effort to protect the donor public and stem 
the flow of funds to terrorists by cracking down on the abuse 
of the charitable sector by terrorist organizations. The 
Treasury Department has designated around 60 charities with 
ties to terrorist groups, a few with branches in the United 
States. The United States has also prosecuted charities and 
their leaders, such as in the case of the Holy Land Foundation 
for Relief and Development, which was found guilty on all 
counts in November 2008.
    In none of these cases was U.S. Government action 
capricious or based on sparse, dated, or unreliable 
information. In none of these cases was the charity suspected 
of engaging in one or two bad transactions. The designation 
process, in particular--I know, from firsthand experience--is 
appropriately robust, vigorous, and errs on the side of 
caution. Designated entities can and do appeal their 
designations, and the Treasury Department has a record of 
lifting designations when warranted.
    But it should be clear that charities and international aid 
organizations come to this problem set from a noble and well-
intentioned perspective, focused on the need to highlight 
opportunities to facilitate quick, efficient, and timely aid. 
Thankfully, promoting opportunities for charitable giving, and 
reducing the risk that those opportunities are abused for 
illicit purposes are in no way mutually exclusive goals.
    The problem is not enforcement of U.S. laws banning 
material support to terrorist organizations, but rather the 
unintended impact this has had on charitable giving. Greater 
due diligence on the part of the nonprofit sector, combined 
with government outreach, would go a long way toward resolving 
this problem. Thank you.
    [The prepared statement of Mr. Levitt can be found on page 
93 of the appendix.]
    Chairman Moore of Kansas. I thank the gentleman for his 
testimony, and all of the witnesses for their testimony. I 
recognize myself for up to 5 minutes for questions.
    Mr. German, since the ACLU issued its report last summer, 
are there any new observations or ongoing concerns you may have 
with respect to blocking terrorist financing and its impact on 
law-abiding charities?
    Mr. German. As I--
    Chairman Moore of Kansas. Let me just ask this, too. How 
would you evaluate Treasury's performance on these issues?
    Mr. German. As I detail in my written statement, we have 
had a decision in the Kind Hearts case. So, that was very 
welcome.
    And, obviously, the court turned it to Congress to try to 
develop a process by which the Fourth Amendment rights of 
charities whose property is seized, either pending 
investigation or through designation, have an opportunity to 
defend themselves--understand the charges, have necessary 
notice, and defend themselves. So we are looking forward to 
working with this committee to help address responding to the 
court's decision.
    In regard to the Treasury Department's response to 
President Obama's acknowledgment of the problem and the impact 
on Muslim charities, we have not seen a significant effort to 
address that issue. And certainly, the community still has 
concerns that are impacting its ability to pay Zakat.
    Chairman Moore of Kansas. Thank you, sir. Ms. Guinane, are 
the Treasury's voluntary best practices for U.S.-based 
charities document useful for charities who are trying to fully 
abide by U.S. law? Do you have any suggestions in terms of how 
they may be improved, or how Treasury can do a better job in 
this area?
    Ms. Guinane. I'm sorry, I was unable to hear the second 
part of your question.
    Chairman Moore of Kansas. I said with regard to the 
Treasury's voluntary best practices, a document useful for 
charities, is it useful for those charities who are trying to 
abide by law?
    And do you have any suggestions, in terms of how they may 
be improved or how Treasury can do a better job in this area?
    Ms. Guinane. Yes, we do. In 2005, the Treasury Guidelines 
Working Group, which was a broadly representative collection of 
charitable organizations and experts, developed the Principles 
of International Charity, and submitted that to Treasury as a 
suggested replacement for the Guidelines. Treasury adopted some 
of those suggestions, but not all. And in 2006, when it 
released the current version of its guidelines, it retained a 
lot of the problematic provisions.
    Since then, the Charity and Security Network has 
coordinated an effort to develop specific procedures that we 
think make sense for charitable due diligence and for due 
process, and we would be happy to share those with the 
committee and with Treasury, as well.
    Chairman Moore of Kansas. Thank you. Mr. Levitt or Mr. 
German, do you have any comments?
    Mr. German. I would just like to add a little pushback on 
the issue that--or the argument that donors aren't impacted, 
and donors aren't targeted. We document in the report that 
there is a substantial effort by the FBI to contact donors and 
ask them about their charitable donations, which creates this 
chilling effect that puts fear into them, where even donating 
to an organization that may not be designated today would not 
protect them from prosecution later.
    Chairman Moore of Kansas. Thank you. Mr. Levitt?
    Mr. Levitt. In which case the ACLU should have an issue 
with the way the FBI is conducting its investigations into 
terror financing. If that happens, that is in no way a function 
of the designation process.
    If I may add one last thing, if I have the number right 
that you cited--it was only 1.68 percent of designated entities 
that are U.S.-based charities means there is an inherent flaw 
in measuring a lot of this by how many designations are done. 
Or, for that matter, how much money is seized.
    I think it's really important to understand designation is 
a very powerful tool, in part because it should not be done 
capriciously, and because you err on the side of caution. There 
are many, many cases, domestically and abroad, where charities 
hit the threshold for designation, but in this robust 
interagency review are rejected for designation. And other 
tools--law enforcement, or regulation, or outreach to the 
charity--lots of other tools are used.
    That doesn't mean that only 1.68 percent of charities in 
the United States have ever been of concern. It might be that 
the whole charity wasn't bad, there was just one person. You 
don't want to shut down that charity. We're all in agreement 
that--on this panel--you want to facilitate charity to the 
greatest extent possible, period.
    It's a very flawed metric to measure this just by how many 
charities have been designated, in part because Treasury is so 
careful about only designating the worst cases where they are 
absolutely knowingly engaged in this activity. Only those are 
designated.
    Chairman Moore of Kansas. Thank you. My time has expired. 
The chairman next recognizes Mrs. Biggert for 5 minutes for 
questions.
    Mrs. Biggert. Thank you, Mr. Chairman, Mr. Levitt. How can 
Treasury address the problem of a designated entity shutting 
down, only to open up some time later, perhaps under a new 
name?
    Mr. Levitt. As you heard earlier, there is a really good 
interagency process on this, not only leading up to the 
designation or to whatever other action is decided upon for a 
charity or an entity of any kind that is deemed to be knowingly 
engaged in supporting terror financing, but also in terms of 
the follow-up, to see what the entity is doing.
    So, sometimes you will have charities that open up under a 
new name, and they are engaging in the same terror finance 
activity. And you then need to decide if you're going to 
designate or take some other law enforcement action against 
those.
    In other cases, you might have people who are involved with 
the original designated charity who are not knowingly involved 
in illegal activity. They were in the minority and they open up 
some legitimate charity, and that's to be applauded. It really 
has to be a careful investigation.
    Mrs. Biggert. Should there be some database of individuals 
working for organizations, similar to the relatively recent 
database on mortgage brokers?
    In other words, if there was a list of people or 
individuals who were involved in this, and their name pops up 
again in another organization, is that part of the designation, 
or is that--would that be something new, or would that be 
helpful?
    Mr. Levitt. That would be new, and I don't know that it 
would be helpful. You really do need to conduct a very thorough 
investigation. I wouldn't want to create a list like that, 
which would basically tar-and-feather, name-and-shame them, 
unless you really knew that those individuals, particular 
individuals, were involved.
    There were people involved in the Holy Land Foundation that 
were not indicted and were not designated because they were 
some accountant or some secretary and they weren't aware of the 
stuff that was going on behind closed doors, or all the 
activities. So you want to be very careful about that.
    Mrs. Biggert. Okay. And then you know the difference of 
charities established for the express purpose of financing 
terror and those charities that were infiltrated by terrorist 
operatives. Should Treasury's approach differ when policing 
these types--different types of abuses? And should the 
enforcement outcome differ?
    Mr. Levitt. It has to be done on a case-by-case basis. 
Often, people describe the U.S. designation system as a 
sledgehammer approach, just shutting down charities. Compare 
it, for example, to the UK charity commission, which can be 
described as a scalpel approach, where they tend to try and 
carve out the bad entity from the good, or if there is a little 
good entity, from the larger bad.
    My feeling is this is not an either/or. This has to be a 
case-by-case study. Because in the United States, the Treasury 
was so careful only to designate the most egregious offenders, 
they have not designated a domestic case where there was a good 
part to be cut out of the otherwise bad charity--short of, for 
example, in the case I just cited of some low-level employee.
    When you have such an example, I think it would be useful 
to consider. If the charity itself is good, and it's being 
abused by one or two bad actors, and it is possible to remove 
the tumor and keep the rest of the patient alive, that would be 
a very useful thing to do.
    To date, the Treasury has only tried this approach--
designating parts of an organization, as opposed to all of it--
with charities abroad. And in each of these, al-Haramain, 
Revival of Islamic Heritage Society, it has failed, and 
ultimately had to designate all of it. But that's because, I 
think, in those charities abroad, the United States doesn't 
have regulatory and law enforcement oversight capability.
    If we were to find such a target in this country, I think 
that would be a useful approach. But it would have to be case-
by-case, based on the nature of the precise evidence and 
intelligence available.
    Mrs. Biggert. Could you elaborate on the global partner 
vetting system, PVS, and how that would work in practice?
    Mr. Levitt. The partner vetting system, which was applied 
to entities largely working with USAID in the Palestinian 
territories, is based on the finding that, unknowingly, USAID 
and others were partnering with entities--in the West Bank and 
Gaza, in particular--that were tied to Hamas or other terrorist 
groups. And it comes down to how extensive the due diligence is 
that's being done by these charities, not only in terms of who 
they're partnering with here, but really who they are 
partnering with abroad.
    You could be a legitimate charity here, trying to do the 
right thing, let alone have legitimate donors trying to do the 
right thing. If you're not careful about who you partner with 
abroad, you're handing money on a silver platter to some very 
bad actors. The partner vetting system, in a nutshell, was set 
in place to require charities to do some vetting of the local 
partners they were working with.
    Let's be clear. This is not easy to do. It is a burden, and 
it's costly. I think that the charitable, nonprofit sector has 
a responsibility for due diligence, and that due diligence goes 
way beyond looking at the various U.S. Government lists, way 
beyond that. The government also has a responsibility, I think, 
to try and do more, through transparency and working with the 
public sector, to enable that, because vetting your partners is 
hard.
    But the premise, for example, of coming up with a best 
practices list which, if you do that and nothing else, will 
protect you from any prosecution, is never going to happen, 
because we all have responsibilities in our daily lives, our 
personal lives, our business lives, our charitable lives, to 
make sure that we are doing as much as we can to partner with 
the right people and not the wrong people. If you make a 
mistake, government is not going to target you.
    Mrs. Biggert. Thank you. I yield back.
    Chairman Moore of Kansas. Thank you. The chairman will next 
recognize for up to 5 minutes, Mr. Lynch from Massachusetts.
    Mr. Lynch. Thank you, Mr. Chairman. Mr. Levitt, you had an 
opportunity to look at Treasury's response and how they are 
trying to interface with different law enforcement 
organizations, and trying to really deal with the banking side 
of this, as well as the charity side of this.
    Do you think we are asking too much of Treasury right now, 
given the resources that we're allocating to them for their 
job?
    Mr. Levitt. As a former colleague of Danny Glaser's, I am 
wary of placing him on the hot seat. But enjoying the prospect 
of not being the former Treasury DAS, and being able to speak 
my mind, I actually do agree with him. For the moment, Treasury 
seems to have enough resources, and there may be a question 
of--
    Mr. Lynch. Even the financial crimes network?
    Mr. Levitt. FinCEN is its own entity and agency within TFI. 
And I would strongly recommend--and I assume the subcommittee 
has--reaching out directly to the director, Jim Freis, and 
others on this issue. I don't claim to be an expert on the 
internal workings of FinCEN.
    My sense when I was there--I left in early 2007--and my 
sense observing as an academic from the outside is that 
Treasury is doing a remarkable job, and that Treasury's mission 
hasn't changed since the Bush Administration or during the 
Obama Administration, because this is a simple, nonpartisan, 
bipartisan law enforcement issue, where there is complete 
consensus. This is not a political decision.
    Mr. Lynch. The problem, though, is that we are now asking 
them to operate on a more granular level in dealing with 3,000 
local law enforcement agencies.
    We have the situation, such as in Boston, where you have 
either a hundi or a hawala provides resources, modest 
resources, to a group that is connected to the Times Square 
bombing attempt. And it just seems to me that we're asking a 
tremendous amount from some very brave individuals who are 
stretched very thin in meeting those obligations.
    And I am trying to, on my own part, as one Member, trying 
to get more resources to that organization, because I feel that 
everyone will agree after we have an intelligence failure that 
we should have increased the resources of that agency. But it's 
tough to convince people in the meantime.
    Let me ask, I know that there is a pretty solid matrix that 
Treasury has laid out for charities to operate in a responsible 
manner, which is to try to identify their customers, to make 
sure that the funding is somehow funneled through a legitimate 
banking institution so we have that screen, and also to monitor 
the activity of that charity to basically see what they are 
doing.
    Those seem like rather reasonable expectations that we 
should have of our charities. And I am just wondering if I am 
missing something?
    Mr. Levitt. I don't think you are, sir. I think they are 
reasonable, but they are also baseline. They are meant to be 
the baseline for discussion and for interaction with the 
charitable sector.
    There is a lot the charitable sector has done in this 
regard to improve that is laudable. Some of it you have heard 
about it at this panel. Danny mentioned charity in the American 
Palestinian context that has been done, I think, trend-setting 
work, trying to bridge the divide between the need--and it is a 
national security need, I would argue--for humanitarian 
support, and it's important well beyond its national security 
implications on its own right.
    They are not supposed to be an answer to everything. They 
are supposed to be giving direction. And so they're a baseline.
    Mr. Lynch. Mr. German and Ms. Guinane, there seems to be 
a--on the one hand, I have been into Gaza a few times, and I 
have to admit I am impressed with the Palestinian Monetary 
Authority and how they are really trying to work within BSA and 
trying to conform with those anti-money laundering statutes.
    However, you have to acknowledge, not too long ago, we 
caught Mr. Hania coming in through the Rafah Gate with $30 
million in cash in some suitcases. So we have success in the 
formal sense. But in the informal sense we are concerned about 
money getting to Hamas and to Hezbollah.
    And I am just curious what the overlay that I just talked 
about with Mr. Levitt on the risk matrices, how do you find 
that? Reasonable? Unreasonable? Or--how does it create 
difficulties for you to operate, or charities to operate?
    Mr. German. The problem is multi-faceted. Part of the 
problem is that following all the rules that Treasury puts out 
doesn't protect a charity. So it's impossible to know whether 
they are actually complying with the law. It's very burdensome, 
and there is not much evidence that it is actually effective in 
preventing terrorism. And that's really the problem with the 
lack of transparency.
    Our constitutional system is built so that we don't have to 
take the Treasury Department's word for whether their actions 
are effective. Part of our system is what you're doing today, 
which is wonderful, is digging into these questions to find out 
both whether it's effective and whether it's complying with the 
law and protecting people's individual rights.
    So, that transparency is something that actually will force 
more efficiency and more effectiveness, and make them actually 
prove that they have the right people caught in this--and also 
encourage the public to understand the problem, so that they 
can better curb their activities where they see other people 
getting in trouble.
    But where this is all happening behind closed doors, it's 
impossible for the public to know why an agency was designated, 
or why it was not taken off the list. When there is that 
secrecy, it's impossible to know how to react.
    Chairman Moore of Kansas. The gentleman's time has expired. 
Mr. Royce, you are recognized, sir, for 5 minutes.
    Mr. Royce. Thank you, Mr. Chairman. I was going to ask Mr. 
Levitt a question.
    You mentioned that only the most egregious cases have come 
forward--no cases in the last 3 years. But I guess there is a 
handful of cases here that have been brought up today and I 
wanted to speak to those three, the three that were mentioned.
    There are perhaps 1.5 million charities, I guess, and this 
handful of charities, since we're speaking about their attempts 
to get delisted, we should probably reference them.
    The ACLU, in its report, defends the Holy Land Foundation, 
even though a jury trial convicted the defendants of every one 
of the 108 charges.
    And then we go to the testimony of Ms. Guinane. She 
mentions the Benevolence International Foundation and the 
Islamic African Relief Agency. Now, in terms of the Benevolent 
International Foundation, the CEO was indicted by the Justice 
Department for operating that organization as a racketeering 
enterprise and providing material support to terrorist 
organizations, including al-Qaeda.
    The Islamic African Relief Agency, that was designated for 
providing direct financial support for Osama bin Laden and al-
Qaeda's precursor, and also for commingling funds, engaging in 
a joint program with an institute controlled by Osama bin 
Laden, and was responsible for moving funds to the Palestinian 
territories for use in terrorist activities, notably serving as 
a conduit to Hamas. By the way, the assistance to Osama bin 
Laden was providing assistance to Taliban fighters.
    And then, lastly, it's headquartered in Khartoum, Sudan. So 
the point was made that they have made repeated requests over a 
2-year period for a release of funds to assist in Pakistan. I 
am just back from Pakistan. And up in northwest Pakistan, there 
are a lot of activities up there by dibhindi schools. And right 
now, they are supporting the Taliban, and--the dibhindi 
schools--are graduating young students who are ending up in the 
Taliban who are carrying out activities against the Pakistani 
government. And also over the border in Afghanistan, I was also 
up in Kabul. Same problem. Graduates out of these schools are 
going out and, with the support of the dibhindi movement, are 
carrying out attacks in Afghanistan.
    Perhaps, given the past history of this organization, the 
reason the government doesn't want to release the funds when 
they say they're going to send those funds to spend them in 
Pakistan, is because these funds might end up being spent the 
way other funds are being spent right now in Pakistan, in order 
to fuel the war to try to overturn the state and turn it into 
an Islamic Republic.
    I would just like Mr. Levitt's opinion on that.
    Mr. Levitt. When the United States designates an entity, it 
produces a fact sheet for use in the press release based on at 
least some declassified intelligence. This is important so we 
can have this conversation with the public sector, with the 
charitable sector, so that people can't sit before Congress and 
say, ``Nobody knows why these charities are designated.'' They 
may not have the whole picture, but they get at least a certain 
amount of the evidence put before them, even if it's only a 
little bit.
    And it can only be a little bit, because much of it has to 
come from intelligence, because you're dealing with entities--
in those very few examples where charities are engaged as 
terrorist fronts--and let's stress that most are not--where 
they're engaged in covert activity, and they are doing one 
thing publicly, and a very, very different thing, as you laid 
out, privately.
    When a charity has been so designated, its trust is gone. 
And if there is to be some type of program whereby the funds 
that it collected from donors who wanted to do the right thing, 
is to be dispersed to facilitate aid, it seems to me that 
decision, should there be a mechanism to facilitate it, should 
be made by someone other than an individual tied to that 
original charity.
    But it doesn't seem to me like that's something that could 
not happen. I, not in or out of government, have been party to 
this discussion as to under what circumstances those funds, 
frozen from an illicit charity involved in terror financing, 
can ultimately be dispersed for truly humanitarian purposes. 
But it doesn't strike me, if it can be done in a trustworthy 
way, as a bad idea. In fact, it might be sticking a finger in 
the eye of the terrorists. But it would have to be done 
appropriately.
    Mr. Royce. It also strikes me that this doesn't exactly 
limit people's freedom of action, given the number of charities 
that exist in the world, and given this very small list, it 
doesn't seem to me that would preclude people from doing 
charitable work.
    Mr. Levitt. I don't think so. As someone who gives to 
charity, it has never stopped me. I think that there is a need, 
there is a gap that can be filled by people who are expert in 
nonprofit operations to do things like this charity that I 
discussed in my written testimony has done in the context of 
facilitating charitable giving from Americans, including 
Muslim-Americans, to needy Palestinians, which is a laudable, 
praiseworthy, wonderful thing, so long as it's done in such a 
way that the donors and the charity and the government here and 
the government in the Palestinian Authority, for that matter, 
have a level of comfort that it's not going to illicit actors.
    Mr. Royce. Thank you.
    Chairman Moore of Kansas. The gentleman's time has expired. 
The chairman next recognizes Mr. Ellison for 5 minutes. Sir?
    Mr. Ellison. Thank you, Mr. Chairman. I think it's fair to 
point out that the Holy Land Foundation defendants were 
convicted. I think it's also fair to point out that their 
appeal is not completed, and that the first time they were 
tried, I think that on nearly all counts, there was a hung 
jury. And I think it's also fair to say that there were some 
novel uses of evidence in the case that resulted in a 
conviction. So, I don't know what's going to happen, and I'm 
not here to retry the case, but I just think those facts are 
important, as well.
    Let me ask the panel, what happens after assets are frozen? 
Once they are frozen, essentially, what happens next?
    Ms. Guinane. When the charitable assets are frozen, their 
banks receive a notice that the assets are blocked. The charity 
receives such a notice. Government agents come and seize all 
their files and equipment, and any goods they have, such as--I 
understand there is a warehouse in Missouri full of blankets 
that belong to one of the U.S. charities that was shut down.
    After that, there is very little public information about 
what happens to that money. Right now, as far as we know, it's 
just sitting there with no plan for its disposition.
    What could happen, and what we feel should happen is that 
these funds belong to the charitable mission of the 
organization. And even if there are bad actors in the 
organization, the funds should be spent by an able and 
legitimate charity to further that charitable mission. If it's 
to assist children, if it's to promote health, whatever that 
is, that's what should happen to those funds. But right now, 
there is no provision for that to happen. And Treasury has 
declined every request, as noted from charities, to transfer 
those funds.
    Treasury has plenty of authority under their licensing 
regulations to oversee and regulate any release of frozen 
funds. They don't automatically go back to the designated 
organization or to the same people to spend--
    Mr. Ellison. But at least at this time, there is no clear 
procedure as to what happens after--with the frozen assets, how 
they're--are they sent to other organizations that are 
legitimately serving the mission, or--
    Ms. Guinane. There is no provision. And I think that's 
because this is occurring under IEEPA, which is an economic 
embargo law that was originally meant as a Trading-With-the-
Enemy Act is where--
    Mr. Ellison. So you think at least Congress or at least the 
Agency needs to promulgate either statutes or rules to deal 
with the disposition of these assets?
    Ms. Guinane. There are none, and that's something we need.
    Mr. Ellison. Also, is there any appeal process, once assets 
are frozen? And, if there is, could you describe it?
    Mr. German. In my written testimony, I go through the case 
of Kind Hearts, where they were actually frozen pending 
investigation. They weren't actually designated. In February of 
2006, their assets were seized and frozen, pending 
investigation. And more than a year later, in May of 2007, they 
were given a notice that they were provisionally designated. 
When they tried to find out why this had happened, the Treasury 
Department was unresponsive. And their attempts to defend 
themselves against unknown charges were--Treasury was also 
unresponsive, so--
    Mr. Ellison. So they weren't given a hearing date, they 
weren't given a--
    Mr. German. No, there is no hearing, no notice, no hearing, 
no due process at all.
    Mr. Ellison. Do you have any reason to believe that 
Treasury has changed its approach on this issue under the Obama 
Administration?
    Mr. Levitt. No, and that's because this is a nonpartisan, 
bipartisan, law enforcement issue. It's not a policy issue.
    Mr. Ellison. Thank you very much, sir. Do you, either one 
of the two of you, have any reason to believe that there has 
been any change?
    Ms. Guinane. I see more openness to dialogue under the 
Obama Administration, and an acknowledgment that there is a 
problem, which is a big step forward.
    However, there hasn't been a change in the actual 
procedures. There is still no proportionality, so that a small 
organization that makes a mistake can correct its problem. We 
still just have the freeze-and-seize kind of instant death 
sanction, and that's pretty much it.
    Mr. Ellison. And do you have any accurate data on what 
portion of the terrorist financing comes from American 
charities worldwide?
    Ms. Guinane. There is not enough transparency in the 
process for me to be able to answer that question. I just know 
from news reports and reports from attorneys for some of the 
designated organizations that there is at least $7 million in 
U.S. charitable funds that are frozen.
    Mr. Ellison. Thank you.
    Mr. Levitt. But, of course, the amount of frozen funds is 
an immaterial number, given the fact that designation is only 
one tool.
    And so, there may be many other entities out there, because 
the designation--
    Mr. Ellison. I don't have a question before this witness, 
sir, Mr. Chairman.
    Chairman Moore of Kansas. The gentleman's time has expired, 
and we have completed the hearing. Again, thanks to our 
witnesses for your testimony today.
    Today's hearing gave us another opportunity to review 
efforts to stop money laundering and terrorist financing in an 
aggressive manner that makes the most sense. We will continue 
reviewing these issues in the weeks and months ahead.
    I ask unanimous consent that the following item be entered 
into the record: ACLU's June 2009 report entitled, ``Blocking 
Faith, Freezing Charity.''
    The Chair notes that some members may have additional 
questions for our witnesses, which they may submit in writing. 
Without objection, the hearing record will remain open for 30 
days for members to submit written questions to these 
witnesses, and to place their responses in the record.
    The hearing is adjourned, and again, thanks to our 
witnesses and our members.
    [Whereupon, at 11:54 a.m., the hearing was adjourned.]


                            A P P E N D I X



                              May 26, 2010


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