    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

     FOLLOWING THE MONEY: EXAMINING CURRENT TERRORIST FINANCING TRENDS AND
                           THE THREAT TO THE HOMELAND

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                                COUNTERTERRORISM
                                AND INTELLIGENCE

                                     OF THE

                         COMMITTEE ON HOMELAND SECURITY
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 12, 2016

                                   __________

                               Serial No. 114-68

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                         COMMITTEE ON HOMELAND SECURITY

                       Michael T. McCaul, Texas, Chairman
    Lamar Smith, Texas                   Bennie G. Thompson, Mississippi
    Peter T. King, New York              Loretta Sanchez, California
    Mike Rogers, Alabama                 Sheila Jackson Lee, Texas
    Candice S. Miller, Michigan, Vice    James R. Langevin, Rhode Island
        Chair                            Brian Higgins, New York
    Jeff Duncan, South Carolina          Cedric L. Richmond, Louisiana
    Tom Marino, Pennsylvania             William R. Keating, Massachusetts
    Lou Barletta, Pennsylvania           Donald M. Payne, Jr., New Jersey
    Scott Perry, Pennsylvania            Filemon Vela, Texas
    Curt Clawson, Florida                Bonnie Watson Coleman, New Jersey
    John Katko, New York                 Kathleen M. Rice, New York
    Will Hurd, Texas                     Norma J. Torres, California
    Earl L. ``Buddy'' Carter, Georgia
    Mark Walker, North Carolina
    Barry Loudermilk, Georgia
    Martha McSally, Arizona
    John Ratcliffe, Texas
    Daniel M. Donovan, Jr., New York
                       Brendan P. Shields, Staff Director
                        Joan V. O'Hara,  General Counsel
                        Michael S. Twinchek, Chief Clerk
                    I. Lanier Avant, Minority Staff Director
                                     ------

               SUBCOMMITTEE ON COUNTERTERRORISM AND INTELLIGENCE

                       Peter T. King, New York, Chairman
    Candice S. Miller, Michigan          Brian Higgins, New York
    Lou Barletta, Pennsylvania           William R. Keating, Massachusetts
    John Katko, New York                 Filemon Vela, Texas
    Will Hurd, Texas                     Bennie G. Thompson, Mississippi
    Michael T. McCaul, Texas (ex             (ex officio)
        officio)
                   Mandy Bowers, Subcommittee Staff Director
                      John L. Dickhaus, Subcommittee Clerk
                Hope Goins, Minority Subcommittee Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   Statements

    The Honorable Peter T. King, a Representative in Congress From
      the State of New York, and Chairman, Subcommittee on
      Counterterrorism and Intelligence:
      Oral Statement.................................................     1
      Prepared Statement.............................................     2
    The Honorable Brian Higgins, a Representative in Congress From
      the State of New York, and Ranking Member, Subcommittee on
      Counterterrorism and Intelligence:
      Oral Statement.................................................     3
      Prepared Statement.............................................     4
    The Honorable Bennie G. Thompson, a Representative in Congress
      From the State of Mississippi, and Ranking Member, Committee on
      Homeland Security:
      Prepared Statement.............................................     5

                                   Witnesses

    Ms. Louise Shelley, Director, Terrorism, Transnational Crime and
      Corruptions Center, George Mason University:
      Oral Statement.................................................     6
      Prepared Statement.............................................     9
    Mr. Jonathan Schanzer, Vice President for Research, Foundation
      for the Defense of Democracies:
      Oral Statement.................................................    13
      Prepared Statement.............................................    14
    Ms. Deborah Lehr, Chairman and Founder, The Antiquities
      Coalition:
      Oral Statement.................................................    20
      Prepared Statement.............................................    22

                                    Appendix

    Questions From Ranking Member William R. Keating for Louise
      Shelley........................................................    41
    Questions From Ranking Member William R. Keating for Jonathan
      Schanzer.......................................................    41

     FOLLOWING THE MONEY: EXAMINING CURRENT TERRORIST FINANCING TRENDS AND
                           THE THREAT TO THE HOMELAND

                                  ----------

                             Thursday, May 12, 2016

                 U.S. House of Representatives,
                        Committee on Homeland Security,
             Subcommittee on Counterterrorism and Intelligence,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:06 a.m., in
    Room 311, Cannon House Office Building, Hon. Peter T. King
    [Chairman of the subcommittee] presiding.
        Present: Representatives Katko, Hurd, King, Higgins, and
    Keating.
        Mr. King. Good morning. The Committee on Homeland Security,
    Subcommittee on Counterterrorism and Intelligence will come to
    order.
        The subcommittee is meeting today to get testimony from
    three very distinguished experts regarding terror financing.
        I would like to welcome the Ranking Member, Mr. Higgins,
    and express my appreciation for the witnesses who are here
    today. I now recognize myself for an opening statement.
        In 2005, the 9/11 Commission gave the U.S. Government an A-
    in combating terrorist financing. As the United States built
    additional safeguards into the financial system to identify and
    disrupt the flow of funds to terrorists, we have scored some
    significant victories. Despite our successes, however, we
    cannot become complacent. Terrorist organizations have evolved,
    adopting new strategies and tactics, leveraging social media
    and encryption technology to recruit the next generation of
    jihadis and to plot attacks.
        Recent terror attacks and plotting have demonstrated
    terrorist organizations can have global impact at very little
    costs. While the cost of financing the 9/11 attack was
    estimated between $400,000 and a half-a-million dollars, AQAP's
    2010 cargo bomb plot reportedly cost only $4,200. The January
    Paris attacks cost only $10,000, and the 2015 Charlie Hebdo
    attackers allegedly sold counterfeit sneakers and clothing to
    fund their activity.
        As we have hardened our defenses, our enemies have adapted
    as well, seeking to wear down our resolve with smaller-scale,
    more frequent plots conducted by U.S. and European citizens who
    have fought on the battlefields of the Middle East and Asia or
    have become radicalized to take action at home.
        While ISIS' ability to hold territory in Iraq and Syria has
    provided it with access to resources that have allowed to
    finance the terror campaign internally, the success of
    coalition airstrikes targeting ISIS' oil production has forced
    the group to seek revenue through other activities, including
    human trafficking, taxing the local population, and robbing
    antiquities from world-renowned cultural and historical sites.
        ISIS facilitators have also encouraged recruits to resort
    to petty crime to fund travel to Syria and home-grown violent
    extremism. The alleged head of the Brussels ring that conducted
    the Paris attacks, doled out cash and presents to wayward
    youths he recruited as thieves and prospective fighters. They
    were then trained to target train stations and tourists,
    stealing luggage, even shoplifting for their cause.
        I am eager to hear from today's witnesses how terrorist
    groups and State sponsors of terrorism have been turning to
    criminal activities to develop new source of funds, evade
    detection, and acquire logistical expertise moving and
    laundering funds, as well as how supporters may be changing
    tactics to evade current laws and detect illicit funds moving
    to designated terror groups.
        Hezbollah facilitators have been shown to be particularly
    savvy in circumventing U.S. laws on terrorist financing. The
    Lebanese Canadian Bank case where bank officers engaged in
    laundering money from Colombian drug cartels and mixing it with
    proceeds from used cars bought in the United States,
    illustrates the sophistication and motivation of Hezbollah to
    finance its terrorist operations, and the close ties between
    terrorists and criminal networks. These organizations are
    highly innovative and motivated, and our Government must remain
    nimble in the laws and authorities it provides to our
    intelligence and law enforcement agencies to meet this
    challenge.
        When examined over time, several fundamental lessons
    emerge. First, a wide range of terrorist organizations have
    sought to draw upon the wealth and resources of the United
    States to finance their organizations and activities. Second,
    just as there is no one type of terrorist, there is no one type
    of terrorist financier or facilitator. Third, terrorist
    financiers and facilitators are creative and will seek to
    exploit vulnerabilities in our society and financial system to
    further their unlawful aims.
        I would like to welcome our expert panel. Your input is
    critical to the subcommittee's understanding of the current
    trends in terror financing and how the U.S. Government can
    build stronger partnerships with the public and private sector
    to identify funds being diverted to terrorist organizations and
    disrupt and dismantle the criminal and money-laundering rings.
        [The statement of Mr. King follows:]
                      Statement of Chairman Peter T. King
                                  May 12, 2016
        In 2005, the 9/11 Commission gave the U.S. Government an ``A-'' in
    combating terrorist financing. As the United States built additional
    safeguards into the financial system to identify and disrupt the flow
    of funds to terrorists, we have scored some significant victories.
        Despite our successes, however, we must not become complacent.
    Terrorist organizations have evolved, adopting new strategies and
    tactics, leveraging social media and encryption technology to recruit
    the next generation of jihadis, and plot attacks.
        Recent terror attacks and plotting have demonstrated that terrorist
    organizations can have global impact at very little cost. While the
    cost of financing the 9/11 attack was estimated at $400,000 to
    $500,000, AQAP's 2010 cargo bomb plot reportedly cost only $4,200. The
    January Paris attacks cost only $10,000 and the 2015 Charlie Hebdo
    attackers allegedly sold counterfeit sneakers and clothing to fund
    their activity.
        As we have hardened our defenses, our enemies have adapted as well,
    seeking to wear down our resolve with smaller-scale, more frequent
    plots conducted by U.S. and European citizens who have fought on the
    battlefields of the Middle East and Asia, or who have been radicalized
    to take action at home.
        While ISIS' ability to hold territory in Iraq and Syria has
    provided it with access to resources that have allowed to finance its
    terror campaign internally, the success of coalition airstrikes
    targeting ISIS' oil production, has forced the group to seek revenue
    through other activities, including human trafficking, taxing the local
    population, and robbing antiquities from world-renowned cultural and
    historical sites.
        ISIS facilitators have also encouraged recruits to resort to petty
    crime to fund travel to Syria and home-grown violent extremism. The
    alleged head of the Brussels ring that conducted the Paris attacks
    doled out cash and presents to the wayward youths he recruited as
    thieves and prospective fighters. They were then trained to target
    train stations and tourists, stealing luggage, even shoplifting for
    their cause.
        I am eager to hear from today's witnesses how terrorist groups and
    state sponsors of terrorism have been turning to criminal activities to
    develop new sources of funds, evade detection, and acquire logistical
    expertise moving and laundering funds, as well as how supporters may be
    changing tactics to evade current laws to detect illicit funds moving
    to designated terror groups.
        Hezbollah facilitators have been shown to be particularly savvy in
    circumventing U.S. laws on terrorist financing. The Lebanese Canadian
    Bank case, where bank officers engaged in laundering money from
    Colombian drug cartels, and mixed it with proceeds from used cars
    bought in the United States, illustrates the sophistication and
    motivation of Hezbollah to finance its terrorist operations, and the
    close ties between terrorist and criminal networks. These organizations
    are highly innovative and motivated and our Government must remain
    nimble in the laws and authorities is provides to our intelligence and
    law enforcement agencies to meet this challenge.
        When examined over time, several fundamental lessons emerge: First,
    a wide range of terrorist organizations have sought to draw upon the
    wealth and resources of the United States to finance their
    organizations and activities; second, just as there is no one type of
    terrorist, there is no one type of terrorist financier or facilitator;
    and third, terrorist financiers and facilitators are creative and will
    seek to exploit vulnerabilities in our society and financial system to
    further their unlawful aims.
        I would like to welcome our expert panel. Your input is critical to
    the subcommittee's understanding of the current trends in terror
    financing and how the U.S. Government can build stronger partnerships
    with the public and private sectors to identify funds being diverted to
    terrorist organizations and disrupt and dismantle the criminal and
    money-laundering rings.

        Mr. King. Now I am privileged to recognize the
    distinguished Ranking Member from upstate New York, almost
    Canada, Mr. Higgins.
        Mr. Higgins. Thank you, Mr. Chairman.
        I also look forward to hearing from the witnesses who have
    joined us today regarding your studies and background about
    this very, very important issue. Hearings like this allows us
    to stay engaged in the fight against terrorism, engage the
    dangers terrorist organizations pose in regions throughout the
    world.
        Terrorist organizations such as ISIS, Hezbollah, al-Qaeda,
    Hamas, to name a few, have all become very sophisticated in
    financing their terror activities. These financing tools span
    from criminal enterprises, such as ransoms, drug operations,
    and human trafficking, to creating charities under false
    pretenses too, and what may be the most surprising of all,
    looting and selling of antiquities to gain funds.
        Terror financing is of special interest to the committee
    because, according to reports, in 2014 alone, ISIS obtained
    revenue of $2 billion and a war chest of nearly $250 million.
    This surpasses any other terrorist organization's annual
    earnings. It makes ISIS a financially self-sufficient
    organization. ISIS' second-largest form of revenue is through
    the illicit and black market trade of stolen antiques.
        In control of a region that has over 5,000 archeological
    sites, ISIS has destroyed or looted and stolen artifacts that
    are worth millions of dollars. In the Middle East and North
    African region, ISIS has caused mass hysteria, wrecking temples
    in Syria, destroyed the Judeo-Christian tomb of Jonah, and
    pillaged the Mosul Museum in Iraq. Earlier this year, the
    United Nations Educational, Scientific, and Cultural
    Organization's director general declared that the deliberate
    destruction of cultural heritage in Syria and Iraq is, in fact,
    a war crime.
        Finally, through the less-prominent revenue source for
    ISIS, kidnapping for ransom has been effectively used by other
    terror organizations to finance their operations. Al-Qaeda and
    its affiliates have reportedly received in excess of $125
    million through KFRs since 2008, much of it paid by foreign
    governments. Combating these terror financing operations must
    be among our top priorities as doing so is a key component to
    our efforts to counter these groups globally.
        I look forward to having a productive conversation with the
    panelists and, hopefully, learning more about how to halt these
    terror financing operations.
        With that, I yield back.
        [The statement of Mr. Higgins follows:]
                   Statement of Ranking Member Brian Higgins
                                 April 27, 2016
        Hearings like these allow us to stay engaged in the fight against
    terrorism and gauge the dangers terrorist organizations pose in regions
    throughout the world. Terrorist organizations such as ISIL, ISIS,
    Hezbollah, al-Qaeda, and Hamas (to name a few) have all become very
    crafty in financing their terrorist, extremist operations.
        These financing tools span from criminal enterprises such as
    ransoms, drug operations, and human trafficking to creating charities
    under false pretenses, to, and what may be most surprising of all, the
    looting and selling of antiquities to gain funds.
        Terror financing is of special interest to the committee because
    according to reports, in 2014 alone, ISIS attained revenue of $2
    billion and a war chest of nearly $250 million.
        This surpasses any other terrorist organization's annual earnings
    and makes ISIS a ``financially self-sufficient'' organization. ISIS'
    second-largest form of revenue is through the illicit, black market
    trade of stolen antiques.
        In control of a region that has over 5,000 archaeological sites,
    ISIS has destroyed looted and stolen artifacts that are worth millions
    of dollars and a part of history.
        In the Middle Eastern and Northern African region, ISIS has caused
    mass hysteria--wrecked temples at the ruins of Palmyra in Syria,
    destroyed the Judeo-Christian Tomb of Jonah, and pillaged the Mosul
    Museum in Iraq.
        Earlier this year, the United Nations Educational, Scientific, and
    Cultural Organization's director-general declared the ``deliberate
    destruction of cultural heritage'' in Syria and Iraq a ``war crime.''
        Finally, though a less-prominent revenue source for ISIL,
    kidnapping for ransom has been effectively used by other terrorist
    groups to finance their operations. Al-Qaeda and its affiliates have
    reportedly received in excess of $125 million through KFR since 2008,
    much of it paid by foreign governments.
        Combating these terror financing operations must be among our top
    priorities, as doing so is a key component in our efforts to counter
    these groups globally. I look forward to having a productive
    conversation with the panelists and hopefully learning more about how
    to halt these terrorist financing operations.

        Mr. King. I thank the Ranking Member.
        I would advise other Members of the committee that opening
    statements may be submitted for the record.
        [The statement of Ranking Member Thompson follows:]
                 Statement of Ranking Member Bennie G. Thompson
        During a similar Committee on Homeland Security hearing during the
    112th Congress, I acknowledged that as the administration and our
    National efforts continue to ``disrupt and dismantle the activities and
    traditional funding sources of terrorist groups such as al-Qaeda, it
    should come as no surprise that their affiliates may turn to
    traditional criminal activities to fund ideologically-based violence.''
        As we meet today, the same holds true. Currently, the United
    Nations Security Council Sanctions List includes over 600 individuals
    and almost 400 organizations.
        As our international partners continue to share and coordinate
    threat and financial information and nations continue to impose
    economic sanctions, this game of whack-a-mole will continue as state-
    sponsored terrorist groups will seek other sources of financing.
        Terrorists organizations like al-Qaeda, the Islamic State, and Boko
    Haram are being forced to be more innovative with their financing
    schemes. Terrorist organizations are increasingly being linked to
    transnational organized crimes like drug trafficking, illicit trading
    of firearms, extortion, kidnapping, human trafficking, smuggling of
    migrants, trafficking in natural resources, fraudulent medicine sales,
    and cyber crime.
        It is no shock that the financial structures of terrorist
    organizations are analogous to criminal organizations. Both groups
    utilize various financing patterns to raise and store funds.
        Similarly and due to the criminal nature of terrorist
    organizations, their use of alternative financing apparatuses can make
    tracking their financial operations especially difficult.
        A 2009 analysis and accumulation of data from various studies
    suggests that transnational criminal proceeds are likely to amount to
    some 3.6% of global GDP, equivalent to about US$2.1 trillion.
        According to the United Nations Office on Drugs and Crime, the
    largest income for transnational organized crime comes from illicit
    drugs. The most recent figure from the United Nations states that
    illicit drugs account for 20% of all crime-related proceeds.
        Since the September 11 attacks, there has been a renewed Federal
    focus on terrorist organizations.
        In the 15 years that have followed, the U.S. Government has made it
    a top National security priority to disrupt the financial support
    networks for terrorists and terrorist organizations.
        Most significantly, in 2004, the Department of Treasury created the
    Office of Intelligence and Analysis to regularly review intelligence
    information. As a member of the intelligence community, the Treasury
    Office of Intelligence and Analysis creates financial data and trends,
    based on intelligence information pertaining to terrorist financing
    abuse of charitable organizations and corporations.
        Intelligence information within this office is gathered and
    disseminated by and to various agents, including the Department of
    Homeland Security's Office of Intelligence and Analysis and the Federal
    Bureau of Investigations.
        Information sharing is the key to maintaining the flow of
    information and ultimately tracking the dollars that are gained through
    transnational crimes, cultural crimes, and charitable contributions.
        These dollars keep terrorist organizations operational. These are
    the dollars they use to recruit, train, and equip their members so that
    they will in turn carry out violent terrorist acts.
        The duty of disruption and prevention still rests with the entire
    international community, not in the United States alone. In a world
    that grows more connected daily, it is important for other countries to
    make countering terrorism within their financial sectors a top
    international security priority.
        Terrorist organizations are becoming more fluid and diverse in the
    acquisition and laundering of money; consequently, our policy responses
    and counter efforts must be thoughtful and nimble.
        I look forward to hearing recommendations from our witnesses today
    regarding the best practices and considerations we can undertake to end
    the cycle of funding that these organizations use to survive.

        Mr. King. We are pleased to have a distinguished panel of
    witnesses before us today on this vital topic. Our first
    witness will be Dr. Louise Shelley. She's the founder and
    director of the Terrorism, Transnational Crime and Corruption
    Center at George Mason University. She is an internationally-
    recognized expert on the relationship among terrorism,
    organized crime, and corruption. She is a published author on
    these vital topics and has received numerous awards and
    fellowships. She received her undergraduate cum laude from
    Cornell University, and an MA in criminology from the
    University of Pennsylvania and holds a Ph.D. in sociology from
    the University of Pennsylvania.
        Dr. Shelley, you are recognized. Thank you for being here
    today. We really appreciate it.

    STATEMENT OF LOUISE SHELLEY, DIRECTOR, TERRORISM, TRANSNATIONAL
         CRIME AND CORRUPTIONS CENTER, GEORGE MASON UNIVERSITY

        Ms. Shelley. Thank you very much, Chairman King, Ranking
    Member Higgins, and Members of the subcommittee for inviting
    me.
        I have submitted a statement, and so I will supplement it
    with some of the insights that I have had since I submitted it.
    I also will highlight a few important points.
        The last few weeks, I have spent traveling in Europe
    speaking with top specialists and advisers on terrorist finance
    and their homeland security. In fact, I joke that this is a
    life unlike what most academics have, especially American
    women, academics. From these conversations, I have a real
    concern that, especially in Francophone Europe where the
    attacks have occurred, that is in France and Belgium, there is
    not real appreciation of the relationship of crime and
    terrorism.
        Despite the fact that, as was mentioned in the opening
    statements, these terrorist attacks have been funded by petty
    crime, there is a failure to appreciate the importance of this.
    What we are finding is that it is the same network that has
    been involved in all of these terrorist attacks, but is
    disbursed among France, Belgium, the United Kingdom, and
    Germany, and maybe elsewhere. They are heavily funded by crime,
    and these acts are committed primarily by radicalized
    criminals. Yet there is not a strategy in Europe to deal with
    this problem.
        This is not just a problem for the Europeans, it is a
    problem for us, because we have Americans traveling in Europe;
    we have businesses operating internationally in Europe; we have
    military operations overseas, and yet we are having our allies
    failing to see this problem with the severity that it is and
    the consequences that it has and the types of policing and
    intelligence responses that one needs to this new hybrid
    threat.
        Second, my research that I continue to do under my Carnegie
    Corporation Fellowship points out the centrality of the problem
    of illicit trade to terrorist financing. This is a massive
    problem. It is 8 to 15 percent of the global economy, and,
    therefore, it is very possible to hide the illicit in the
    large-scale illicit flows.
        Yesterday, the research center that I direct had an event
    on the Panama Papers with the manager of the Panama Papers and
    the former head of the tax authority in Colombia, who provided
    detailed analyses of how much of this illicit money from
    Colombia, from the drug trade that is run by both criminals and
    terrorists, wound up in Panama using the mechanisms of trade-
    based money laundering and hiding illicit trade in larger-scale
    trade.
        So this is a very clear example that we had yesterday of
    how this problem of trade-based money laundering is supporting
    terrorism, not just in the Middle East, but on our back door,
    and paid for by the drug payments that come from the United
    States and move back to Colombia.
        So, therefore, I think we need to pay much more attention
    to the role of illicit trade. I am glad that we are having a
    presentation on antiquities on this panel, because that is one
    form of illicit trade that is used to fund terrorism and
    intersects with many other forms of illicit trade, as Ms. Lehr
    and I discussed before the opening of the hearing.
        But this illicit trade does not exist in a vacuum. It is
    supported by banks; it is supported by law firms; it is
    supported by professional services that write contracts, that
    develop contracts, and help mask the illicit trade. This is one
    thing that the Panama Papers has also revealed, is that there
    are a lot of high-level facilitators. Even though there are not
    many people mentioned in the Panama Papers that are American,
    many of the facilitators are based in the United States.
    Therefore, we need to be paying much more attention to the
    members of the legitimate community that are either
    inadvertently or sometimes knowingly facilitating illicit
    trade. We have seen this in recent revelations of Deutsche
    Bank, we have seen it with HSBC, and this continues to remain a
    problem.
        I also want to mention three foci areas of illicit trade
    that I think of as relatively new that are not being paid
    enough attention to. For example, there is now a large illicit
    trade in gold, some of this coming out of Colombia. One of the
    things that we see with terrorist groups is they have enormous
    flexibility and ability to switch between one area of illicit
    activity and another. So the revenues for the FARC in Colombia
    are now estimated to be greater from the illicit gold trade
    than from the narcotics trade.
        The second type of new trade I wanted to discuss is that of
    the kidney trade. For quite a number of years, there has been a
    trade in Egypt in which wealthy foreigners come and are
    operated on in hospitals obtaining kidneys that they cannot
    legitimately obtain in the United States or Western Europe. Now
    there is a new source of providers of these kidneys, according
    to research with kidney donors and purchasers, is that migrants
    from the crisis in Iraq and Syria want to pay smugglers, but
    they don't have the money to pay the smugglers. So there are
    facilitators in Turkey working among the refugee communities
    that find individuals ready to sell their kidneys, who will
    then travel to Egypt, sell their kidneys, and pay the
    smugglers.
        What makes this a problem of terrorist finance is that it
    appears that this trade has become so lucrative that groups
    like al-Nusrah are intimidating the doctors who have
    traditionally performed this trade and are taking many of the
    profits out of this trade. But what has changed is that the
    purchasers of the kidneys are no longer bringing suitcases of
    dollars to Egypt but are putting the money through wire
    transfers, transfers to travel agencies into bank accounts in
    Western Europe, France, the United Kingdom, and Germany, which
    gives them a new funding source to draw on in western banking
    centers but does not require transfers from the Middle East.
        The last area that I want to bring up as a new area of
    concern is what I call a problem of possibly dual-use crime,
    which is the growing trade of illicit pesticides, something
    that has really emerged on the international markets in the
    last 7, 8 years.
        I was recently on this European trip at a meeting of the
    OECD on illicit trade, and one of the Polish specialists was
    talking about the confiscation of huge amounts of these
    dangerous pesticides in northeast Europe. Europol is now
    estimating that 25 percent of the pesticides used in northeast
    in Europe are illegal. The general figure is 10 percent in
    Europe, and it is about a third of the market in a major food
    exporter like India. It is also a problem in China.
        So we are looking at something that is both a health
    hazard, as we are an importer of food. We also have some of
    these illegal pesticides entering into our markets but not in
    as large a scale as elsewhere, but there is also the
    possibility that as this phenomenon increases, it can be used
    by terrorists to introduce dangerous chemicals and harm health.
    So this is something that I believe deserves more attention.
        So what do I recommend that we do? We are still not
    focusing sufficiently on illicit trade as a source of terrorist
    financing, despite the fact that trade is an essential element
    of the Middle East economy and is, as I have just mentioned,
    has been revealed as being a central part of financing in the
    trade that we have in Colombia and Latin America. We need to
    focus on new emerging areas and not just the kinds of trade
    that we have been thinking about before.
        As I talked about before, we need to be expanding our
    efforts in the United States to be focusing on the relationship
    of crime and terrorism and how these phenomena are linked. In
    our attaches that work for homeland security, we need to be
    developing this greater appreciation of this phenomena through
    our insights and lessons learned. This needs to especially be
    done with our European colleagues who have faced such major
    terrorist challenges lately and have not yet reoriented their
    policing or their intelligence to focus on this threat in a new
    way.
        Because so much of this illicit trade is connected to the
    business world, we need to establish much more of public-
    private partnerships with companies that are aware of this
    illicit trade, with shipping companies, transport companies,
    and others. Much of this trade is going on in the dark Web.
        There is research that is going on today on the internet,
    the deep Web, and the dark Web, but not enough that I think is
    accessible on the interaction of the crime and the terrorist
    funding that goes on between the dark Web and the deep Web.
        We had a seminar on this at our research center about 6
    weeks ago. We had 120 people in the room, many of them from law
    enforcement, many of them that work in homeland security, and
    there is a desperate need for information and insights on how
    to understand and focus on this problem. We must continue to
    address the money laundering that is contributing to the
    illicit trade and also deriving from the illicit trade. We must
    work much more on the beneficial ownership between valuable
    properties, shell corporations, and understand the challenges
    we face in not having more transparency in our financial
    system.
        Thank you.
        [The prepared statement of Ms. Shelley follows:]
                      Prepared Statement of Louise Shelley
                                  May 12, 2016
        The growing linkages between crime and terrorism observed in the
    past 4 decades are not merely a result of globalization or the need to
    assure a more diversified revenue flow for terrorist groups. Rather,
    this change represents a profound evolution in organized crime and
    terrorism, as well as their relationship to the state. The terrorist
    attacks in France and Belgium provide strong proof that the
    associations of crime and terrorism are very present as most of the
    identified terrorists have criminal backgrounds. The heavy recruitment
    of criminals by ISIS as terrorists is hardly surprising as the
    antecedents of ISIS lie in its founder, the criminal, Al-Zarqawi who
    became a terrorist.\1\
    ---------------------------------------------------------------------------
        \1\ See Joby Warrick, Black Flags: The Rise of ISIS, (New York:
    Knopf/Doubleday, 2015).
    ---------------------------------------------------------------------------
        What is of particular concern to U.S. homeland security is that
    many of our European allies fail to see this threat as one of crime and
    terrorism. Having just recently returned from a European trip during
    which I had many meetings over several weeks with highly-placed members
    of the Francophone security community as well as officials from other
    European states, it is clear that many in policy positions in the
    European security community fail to appreciate this important
    evolution. The exception may be the Italians who have observed these
    links between crime and terrorism for over 3 decades as publicly
    expressed by Italy's current anti-mafia prosecutor and a predecessor
    who is now President of the Italian Senate.\2\ But for many other
    countries in Continental Europe, there is not a recognition of the
    problem that terrorists increasingly use crime to support their
    activities \3\ and that ISIS, in particular, focuses on recruiting low-
    level criminals into its ranks.
    ---------------------------------------------------------------------------
        \2\ Franco Roberti remarks at Dialoghi sulle mafie, Seconda
    edizione Assessorato alla cultura del Comune di Napoli-Universita Suor
    Orsola Benincasa Napoli, S. Domenico Maggiore 16-17-18-19 marzo 2016;
    Pietro Grasso, Il rapporto tra traffici illeciti e terrorismo, November
    16, 2015, Italian Senate, http://www.radioradicale.it/scheda/458928/il-
    rapporto-tra-traffici-illeciti-e-terrorismo.
        \3\ This is a particular problem in France despite the recent
    attacks and the biographies of the terrorist attackers.
    ---------------------------------------------------------------------------
        The crimes used by the criminal-terrorists are not large-scale
    crimes but low-level narcotics trafficking, small-scale fraudulent bank
    loans and illicit trade that are being used to support their
    activity.\4\ The funding patterns identified in the first French attack
    of the Kouachi Brothers and Koulibaly continue because it is the same
    network that continues to attack--one that is dispersed among France,
    Belgium, the United Kingdom, and Germany. There have been very few wire
    transfers identified emanating from the Middle East to these overseas
    members of the ISIS network. The European terrorist cells are heavily
    home-funded through crime.
    ---------------------------------------------------------------------------
        \4\ Marie-Christine Dupuis-Danon, ``Pour lutter contre l'argent de
    la terreur, traitons vraiment la question de l'economie souterraine et
    des traffics,'' April 27, 2016, http://www.lemonde.fr/idees/article/
    2016/04/27/pour-briser-les-ressources-du-terrorisme-luttons-contre-l-
    economie-souterraine_4909282_3232.html#wj1kZiCU4mGeEFED.99.
    ---------------------------------------------------------------------------
        Prisons and relationships established in prison are key to
    recruitment and network enhancement. This was fist evident in the
    investigations that followed the Madrid subway bombing in 2004 \5\ and
    has remained true with the most recent terrorist attacks in France and
    Belgium where bonds among criminals were made in prison and individuals
    once incarcerated together have gone on to commit terrorist attacks
    with their former fellow inmates.\6\
    ---------------------------------------------------------------------------
        \5\ Shelley, 38-39.
        \6\ Steven Mufson, ``How Belgian Prisons became a Breeding Ground
    for Islamic Extremism,'' March 27, 2016, https://
    www.washingtonpost.com/world/europe/how-belgian-prisons-became-a-
    breeding-ground-for-islamic-extremism/2016/03/27/ac437fd8-f39b-11e5-
    a2a3-d4e9697917d1_- story.html.
    ---------------------------------------------------------------------------
        We need to expect that patterns established in one place may be
    replicated in another. Therefore, we may see patterns identified in
    Europe manifesting themselves in the United States. Therefore, we need
    to focus more on prisons and their role in terrorist recruitment and
    financing.
        The attacks in France and Belgium in 2015 and 2016, committed
    primarily by radicalized criminals, are evidence that these countries
    failed to respond to the new hybrid of criminals and terrorists--
    terrorists who have criminal pasts and continue to support themselves
    and their terrorist acts through criminal activity.\7\ Law enforcement
    and security bodies are not organized to reflect this new reality nor
    are there plans to reorient their focus to address this threat. This
    nearly assures that there will be future terrorist attacks in Western
    Europe. This will be very politically destabilizing for our allies but
    may have even more direct consequences for us. Americans, American
    businesses and installations may be victims of these attacks. The
    failure to respond to the new hybrid threat by European governments
    also has other consequences for our security. Many of these hybrid
    criminal-terrorists have European passports. Therefore, the new hybrid
    terrorists can enter our country more easily as they have more mobility
    than other potential terrorists who need visas to enter the United
    States.
    ---------------------------------------------------------------------------
        \7\ Dupuis-Danon.
    ---------------------------------------------------------------------------
            hiding the illicit in the illicit: size of illicit trade
        My present research on my Carnegie Council Fellowship continues to
    see the problem of illicit trade as a key funding source for terrorism.
    The size of illicit trade is growing in almost all identified
    categories. Therefore, while there is a contraction in much global
    trade and a decline of export of natural commodities with the Chinese
    economic slowdown, a similar shrinking in illicit trade has not been
    identified. Unfortunately no multinational body, no NGO, nor any group
    of trade specialists have reported the contraction of any form of
    illicit trade that they are analyzing.
        Reliable estimates of recent years indicate that illicit trade
    represents at least 10% of global trade with other estimates ranging
    between 8 and 15%.\8\ These ranges were calculated before the Syrian
    conflict escalated, the ascendency of ISIS and the generation of
    hundreds of millions from the sale of smuggled oil. Nor do they reflect
    the massive growth of illegal migration facilitated by human smugglers
    who have netted approximately $3-6 billion from this trade to Europe in
    2015 alone.\9\
    ---------------------------------------------------------------------------
        \8\ David Luna, ``The Destructive Impact of Illicit Trade and the
    Illegal Economy on Economic Growth, Sustainable Development, and Global
    Security,'' http://www.state.gov/j/inl/rls/rm/199808.htm.
        \9\ Europol, Migrant Smuggling in Europe, 2016, p.13,
    migrant_smuggling_- europol_report_2016.pdf.
    ---------------------------------------------------------------------------
        The OECD has estimated that illicit trade in counterfeits
    represents 5 percent of the economies of the developed world.\10\ This
    figure underestimates the problem in the developed world because
    illicit goods produced within Europe such as synthetic drugs and
    illicit whites (legally produced cigarettes intended to be sold without
    payment of taxes) are widely distributed and traded among European
    countries but are not counted in this figure.\11\ The OECD figure for
    illicit trade in the developing world is half that of the developed
    world.\12\ But this is counterintuitive and the data used to derive
    this result is problematic and leads to a dramatic understatement of
    the problem. The calculation is based on customs data from a relatively
    limited number of countries and OECD did not take into account the very
    high levels of corruption in customs' agencies in the developing world
    that choose not to seize goods or deliberately fail to report on
    illegal trade to government officials as the customs personnel are
    benefiting directly from this trade.\13\
    ---------------------------------------------------------------------------
        \10\ OECD and EUIPO, Trade in Counterfeit and Pirated Goods Mapping
    the Economic Impact (Paris: OECD, 2016).
        \11\ Illustrative of this are the illegal cigarettes factories in
    Eastern Europe that produce cigarettes that are distributed within
    Europe. Their share of illicit trade is not reflected in the OECD
    report because it occurs within the trade bloc but causes the loss of
    hundreds of millions if not billions in lost tax revenues.
        \12\ OeCD and EUIPO.
        \13\ Ibid.
    ---------------------------------------------------------------------------
        The counterfeit figure is only 1 important component of the
    totality of illicit trade. It does not count the equally or more common
    trade in narcotics that as much as 3 decades ago was estimated to
    represent 5 to 7 percent of world trade, a percentage that has not
    declined in recent decades as new drugs have entered the global market
    and new regions have become significant consumers of illegal drugs.
    There are many more aspects of the illegal economy including such
    clearly illegal activity as trafficking in humans, arms, and many forms
    of cyber crime consist of illegal trade in credit cards, identities,
    and child pornography. Many of these crimes converge, enhancing their
    impact and enriching the key facilitators. Then there is also the
    illegal trade in some products that might be legally traded as timber,
    fish, and gold but are exploited and traded illegally.
        Illicit trade and commerce is facilitated by enormous illicit and
    dubious financial flows to offshore locales such as has been recently
    confirmed by the Panama Papers.\14\ The anonymity of shell companies
    and the possibility to disguise the origin of funds makes it possible
    for criminals, terrorists, the corrupt, and the rich seeking to hide
    their wealth to all converge in the same locale.
    ---------------------------------------------------------------------------
        \14\ GFI data on size of flows--http://www.gfintegrity.org/issue/
    illicit-financial-flows/, Panama Papers,  https://
    panamapapers.icij.org/ as a subset of this.
    ---------------------------------------------------------------------------
        Therefore, with such a large quantity of illicit trade and money in
    the world it is easy for terrorists to hide their activity within this
    massive movement of goods and funds. Therefore, we need to pay more
    attention to the trade and the trade-documents which may help reveal
    anomalies in this movement.
        We also need to focus on legitimate banks that can help facilitate
    the storing and transport of money for terrorists. Recent
    investigations reveal that legitimate large banks such as Deutsche
    Bank, in violation of international regulations, receive funds that are
    associated with terrorists and criminals as this helps increase
    profits. Officials at Deutsche Bank, in a significant number of
    suspicious files examined by auditors, revealed that officials were
    told to avoid warning signs or not to commit due diligence on what
    should be suspicious clients.\15\
    ---------------------------------------------------------------------------
        \15\ James Shotter and Caroline Binham, ``Deutsche Bank warned on
    crime curbs: UK Watchdog finds `systemic' weakness in laundering
    controls,'' Financial Times, May 2, 2016, p. 13. James Shotter and
    Caroline Binham ``Deutsche Bank still plagued by legal uncertainty in
    wake of FCA warning,'' Financial Times, May 2, 2016, p. 15.
    ---------------------------------------------------------------------------
        This illicit movement of funds and sales is increasingly being
    conducted within the dark web. The dark web figures in the illicit
    kidney trade, mentioned below, because those seeking a kidney
    transplant establish contact with facilitators through closed networks
    on the web. The dark web also helps facilitate drug and arms sales, in
    particular, as buyers and sellers often interact in private groups that
    thrive in the dark web.
                                three foci areas
        Within this illicit trade there are 3 areas that deserve more
    attention because they have been associated with terrorist financing or
    might in the future. These are: Illicit gold trade, illicit kidney
    trade, and illicit pesticide trade. These categories are also
    associated with significant environmental and/or health harms. These
    new areas reveal that illicit actors also shift between diverse forms
    of illicit trade to optimize profits and reduce risk.
    Gold Trade
        The FARC, a major Colombian terrorist organization that survived
    for decades in the illicit drug trade has now acquired a new illegal
    revenue source with less risk and higher profits. Over 85% of the gold
    mined in Colombia is mined illegally,\16\ meaning this large economic
    sector is a lightly-regulated market, providing the criminals and
    terrorists opportunities to exploit production. FARC's revenues from
    the illegal gold trade now \17\ exceed those from the drug market. The
    terrorist group has taken the practices it has learned in one area and
    applied them to another. Therefore, illicit gold mining and trade is
    accompanied by intimidation, violence, and extortion as well as
    exploitation of indigenous populations.
    ---------------------------------------------------------------------------
        \16\ http://www.worldpoliticsreview.com/articles/17770/colombia-s-
    informal-gold-miners-feel-the-heat-from-all-sides.
        \17\ Global Initiative, ``Organized Crime and Illegally Mined Gold
    in Latin America,'' 2016, http://www.globalinitiative.net/organized-
    crime-and-illegally-mined-gold-in-latin-america/.
    ---------------------------------------------------------------------------
    Kidney Trade
        Egypt has had doctors performing kidney transplants for individuals
    from foreign countries who cannot acquire kidneys in their home
    countries. The nature of the business has changed as the cost of kidney
    transplants has increased in Egypt and profit-margins have increased.
    Long-term research undertaken by Professor Campbell Fraser in the
    Middle East and Asia suggests that there are new opportunistic
    participants in this trade. Turkish middlemen procure refugees who are
    seek to pay smugglers to move family members to Europe. As the business
    has grown, groups such as al-Nusra have moved in, forcing the doctors,
    who once were the prime recipients of the profits, to work under their
    control. Payments made by Europeans seeking these operations now remain
    in European banking accounts, possibly giving the terrorists involved
    in this trade access to significant sums in Europe as the profits of
    this trade can reach $40,000 an operation.\18\
    ---------------------------------------------------------------------------
        \18\ Professor Campbell Fraser, ``Human Organ Trafficking:
    Understanding the Changing Role of Social Media and Dark Web
    Technologies 2010-2015,'' January 21, 2016, http://traccc.gmu.edu/
    events/previously-hosted-events/.
    ---------------------------------------------------------------------------
    Illicit Pesticide Trade
        The problem of the growing use of illicit pesticides is a generally
    growing problem and a threat to our security. But the threat may be
    compounded because it is an ever-escalating part of illicit trade. The
    threat comes from both the importation of food that has been grown in
    places where these illegal and dangerous pesticides are used but also
    the importation of deadly pesticides into the United States. This could
    be what I have referred to as a dual-use crime in my book Dirty
    Entanglements: Corruption, Crime and Terrorism. It makes money for
    illicit actors and also causes serious harm to purchasers.\19\ The
    threat is accelerating as illegal pesticides now represent one-third of
    the market among key food exporters such as India.\20\ These dangerous
    chemicals are used in 10 percent of Europe with usage in Northeastern
    Europe at 25%.\21\ Large-scale seizures have occurred in Poland
    recently.\22\ Some of these pesticides are so deadly that they destroy
    all crops and damage the soil.
    ---------------------------------------------------------------------------
        \19\ Louise Shelley, Dirty Entanglements: Corruption, Crime and
    Terrorism (Cambridge and New York: Cambridge University Press), pp. 36,
    201.
        \20\ ``Federation of Indian Chamber of Commerce and Industry
    (FICCI) and Tata Strategic Management Group. Study on sub-standard,
    spurious/counterfeit pesticides in India: 2015 Report, New Dehli:
    FICCI.2015.
        \21\ UNICRI ``Illegal Pesticides, Organized Crime and Supply Chain
    Integrity,'' 2016, p. 42. http://www.unicri.it/in_focus/files/
    The_problem_of_illicit_pesticides_low_res1.pdf.
        \22\ Presentation at OECD Task Force on Illicit Trade, Paris, April
    18-19, 2016.
    ---------------------------------------------------------------------------
                                recommendations
        1. Attach more attention to the analysis and policing of illicit
            trade as this remains an underpoliced area of criminal
            activity. This is important for the different agencies of
            Homeland Security that have such great jurisdictional authority
            over trade entering and exiting the United States.
        2. Focus on new emergent forms of illicit trade such as organ
            trade, illicit pesticide trade, and natural resources. Continue
            to focus on underpoliced areas of criminal activity that
            continue to contribute significantly to terrorism such as
            counterfeiting, antiquities and illicit cigarette trade,\23\
            and trade-based money laundering.
    ---------------------------------------------------------------------------
        \23\ The Global Illicit Trade in Tobacco: A Threat to National
    Security 2016, http://www.state.gov/documents/organization/250513.pdf.
    ---------------------------------------------------------------------------
        3. Expand the combined policing and counter-terrorism efforts
            developed in New York and Los Angeles to other locales both
            domestically and internationally. There should be best
            practices developed on combating hybrid threats and the
            relationship of crime and terrorism. This should be done both
            in the United States and also with counterparts in Europe, Asia
            and Africa, and Latin America.
        4. Work with our allies in Europe to help them understand the
            relationships between crime and terrorism that we are
            detecting. Bilateral and multi-lateral engagement should be
            expanded.
        5. Establish public-private partnerships to get more insights from
            the business community on the anomalies they see and the
            emerging patterns that they are identifying in illicit trade.
        6. Support research that can help us understand trends in terrorist
            financing in the real and the virtual world. We need to
            understand more of how the different levels of the cyber
            world--the internet, the deep web, and the dark web interact in
            the world of threat finance. We need to continue to understand
            cyber currencies and their enabling role.
        7. We must continue to address the money-laundering contributing to
            illicit trade. The targeting of illicit flows into real estate
            in New York and Miami needs to be expanded to other
            jurisdictions, and made permanent. We must implement the
            policies being developed to identify the beneficial ownership
            behind valuable properties and shell corporations.

        Mr. King. Thank you very much, Dr. Shelley.
        Our next witness is Dr. Jonathan Schanzer. He is the vice
    president for research at the Foundation for the Defense of
    Democracies. He has been a leading scholar on terror finance
    and other counterterrorism issues for decades, serving multiple
    think tanks as an analyst at the Department of Treasury. He
    earned his Ph.D. from King's College in London and has
    published a number of books on terrorism and Middle East-based
    terror groups.
        Dr. Schanzer, you are recognized. Thank you. Thank you for
    being here today.

     STATEMENT OF JONATHAN SCHANZER, VICE PRESIDENT FOR RESEARCH,
               FOUNDATION FOR THE DEFENSE OF DEMOCRACIES

        Mr. Schanzer. Chairman King, Ranking Member Higgins, and
    distinguished Members of the subcommittee, on behalf of
    Foundation for Defense of Democracies, thank you for inviting
    me to testify.
        As a former terrorism finance analyst at the U.S.
    Department of Treasury, I commend you for keeping an eye on
    this crucial aspect of our National security. I will focus my
    comments today on recent FDD research which tracked a U.S.-
    based network of former employees and donors from 3 domestic
    organizations that provided material and financial support to
    the terrorist organization Hamas, but who now work or fundraise
    for an Illinois-based organization called American Muslims for
    Palestine, or AMP. The 3 now-defunct organizations are Holy
    Land Foundation for Relief and Development, KindHearts for
    Charitable Development, and the Islamic Association for
    Palestine.
        Let's address Holy Land first. This is an organization that
    gave $12 million to Hamas over 10 years, and 5 of their leaders
    are now in jail in the United States. When I testified last
    month before the House Foreign Affairs Committee, I discussed 3
    AMP figures who had previously worked for or on behalf of the
    Holy Land Foundation. Today, I will discuss a fourth figure
    named Kifah Mustapha.
        Kifah Mustapha was the head of the Holy Land Foundation's
    office in Illinois. Today, he gives speeches at AMP fundraisers
    and makes promotional videos for the organization. Mr. Mustapha
    also works for the Mosque Foundation, a nonprofit that gave
    money to the Holy Land Foundation before it was shut down.
    Today, it gives money to AMP.
        Now let's look at the overlap with KindHearts. Abdelbasset
    Hamayel, who is officially the registered agent for AMP, was
    the Wisconsin and Illinois representative for KindHearts, a
    group that the Treasury called the progeny of the Holy Land
    Foundation. Treasury blocked the assets of KindHearts, and it
    was ultimately dissolved.
        Mr. Chairman, we have also learned that AMP's founder and
    president, Hatem Bazian, was 1 of 2 featured speakers at a 2004
    KindHearts fundraising dinner in California. Incidentally, the
    other speaker at this dinner was Mohammed el-Mezain, who is
    currently in jail for his role in the Holy Land Foundation and
    for providing financial support to Hamas. Bazian, I should
    note, also spoke in England at an event in 2014 sponsored by
    the Hamas charity known as Interpal, which was designated for
    terrorism by the U.S. Treasury in 2003. Interpal belonged to an
    umbrella organization known as Union of Good, which was also
    designated by the Treasury for terrorism in 2008.
        Finally, there are multiple connections between AMP and the
    Islamic Association for Palestine, or IAP. This was a group
    found civilly liable in Federal court for supporting Hamas. One
    interesting figure here is Osama Abuirshaid, who ran IAP's
    newspaper. He is currently the National coordinator and policy
    director for AMP.
        In late April, Abuirshaid took what he called a surprise
    trip to Doha, Qatar, where he posted pictures of himself on
    social media with Ayman Jarwan. Jarwan was in prison in the
    United States and ultimately deported for his role in a
    fraudulent charity that violated Iraq sanctions, laundered
    money, and sent funds to 2 charities designated for funding al-
    Qaeda. The exact nature of this meeting between Jarwan and
    Abuirshaid is unclear.
        My written testimony today, along with the one I submitted
    to Congress last month, describes AMP's other troubling
    connections to now-defunct organizations implicated in
    terrorism finance. I encourage you to read them both. When you
    do, please note how AMP operates on university campuses across
    the country by coordinating and funding the efforts of an
    activist network known as Students for Justice in Palestine.
        To conclude, our open-source research did not indicate that
    AMP or any of these individuals are currently involved in any
    illegal activity. However, because they are a tax-advantaged
    organization, the past activities of those who work for or on
    behalf of AMP should at least merit greater transparency and
    scrutiny. The IRS might consider studying the British model for
    charity oversight.
        In the United Kingdom, the Charity Commission monitors the
    charitable sector for organizations that are run by extremists.
    This does not stop individuals from exercising their right to
    free speech, according to the laws of their country, but the
    commission has ensured in the most egregious abuses of the
    system that they don't receive tax breaks. The goal, according
    to the commission's website, is to, ``Ensure that the public
    can support charities with confidence.''
        Finally, there is a broader question, one raised today by
    Eli Lake of Bloomberg News, and that is, is the Treasury
    Department still tracking individuals previously involved in
    terror financing activities here in the United States? If so,
    this subcommittee has the power to ask why, who should be
    leading this effort, and whether more resources should be
    devoted to the problem.
        Once again, on behalf of Foundation for Defense of
    Democracies, thank you for inviting me to testify. I look
    forward to your questions about this network and other
    terrorism finance trends that FDD has been tracking.
        [The prepared statement of Mr. Schanzer follows:]
                    Prepared Statement of Jonathan Schanzer
                                  May 12, 2016
        Chairman King, Ranking Member Higgins, and distinguished Members of
    this subcommittee, on behalf of the Foundation for Defense of
    Democracies, thank you for inviting me to testify today. As a former
    terrorism finance analyst at the U.S. Department of the Treasury, I
    commend you for keeping a focus on this crucial aspect of our National
    security.
        This testimony is based on FDD's most recent findings about a
    network of former employees and donors from organizations that provided
    material and financial support to the terrorist organization Hamas, but
    who now work for or on behalf of an Illinois-based organization called
    American Muslims for Palestine (AMP). My testimony today should be of
    particular interest to this subcommittee. It builds on findings I
    submitted to Congress last month, while highlighting new areas of
    concern.\1\
    ---------------------------------------------------------------------------
        \1\ Jonathan Schanzer, ``Israel Imperiled: Threats to the Jewish
    State,'' Joint Hearing before the House Foreign Affairs Committee,
    Subcommittee on Terrorism, Nonproliferation and Trade & Subcommittee on
    the Middle East and North Africa, April 19, 2016 (http://
    docs.house.gov/meetings/FA/FA18/20160419/104817/HHRG-114-FA18-Wstate-
    SchanzerJ-20160419.pdf).
    ---------------------------------------------------------------------------
                         american muslims for palestine
        American Muslims for Palestine's mission, according to its website,
    is ``all about educating people about Palestine.''\2\ FDD has
    determined that the group is a leading orchestrator of the so-called
    Boycott, Divestment, and Sanctions (BDS) campaign, which can be best
    described as a concerted campaign to delegitimize and wage economic
    warfare against the state of Israel.
    ---------------------------------------------------------------------------
        \2\ ``What is AMP?'' American Muslims for Palestine, accessed May
    9, 2016 (http://www.ampalestine.org/index.php/about-amp/amp-faq/212-
    what-is-amp).
    ---------------------------------------------------------------------------
        AMP states that it has existed for more than a decade, first as a
    ``strictly volunteer organization'' beginning in 2005, before opening
    its National headquarters in Palos Hills, Illinois in 2008.\3\
    Registered as a corporation in California in 2006, the organization now
    has an office in the Washington, DC area that engages in lobbying on
    Capitol Hill.\4\ Based on available records, AMP is not a Federal,\5\
    501c3, tax-exempt organization.\6\ Rather, it is a corporate nonprofit,
    which means that it does not file IRS 990 forms that would make its
    finances more transparent. AMP instead receives tax-exempt funds
    through its fiscal sponsor, Americans for Justice in Palestine
    Educational Foundation (AJP), which is a 501c3.\7\ AMP and AJP share
    offices and officers,\8\ yet they remain legally distinct entities.
    ---------------------------------------------------------------------------
        \3\ ``When was AMP formed?'' American Muslims for Palestine,
    accessed May 9, 2016 (http://www.ampalestine.org/index.php/about-amp/
    amp-faq/214-when-was-amp-formed).
        \4\ Email to Subscribers, ``New DC-area office open! AMP welcomes
    new legislative coordinator!'' American Muslims for Palestine, March 3,
    2016. The organization is not located at the address registered in
    Washington, DC.
        \5\ Illinois Secretary of State Business Services, Corporate
    Filing, ``American Muslims for Palestine Inc.,'' File Number 66688003,
    accessed May 9, 2016 (http://www.ilsos.gov/corporatellc/
    CorporateLlcController).
        \6\ Internal Revenue Service, ``Exemption Requirements--501(c)(3)
    Organizations,'' accessed May 9, 2016 (https://www.irs.gov/Charities-&-
    Non-Profits/Charitable-Organizations/Exemption-Requirements-Section-
    501(c)(3)-Organizations).
        \7\ ``Are donations to AMP tax exempt?'' American Muslims for
    Palestine, accessed May 9, 2016 (http://www.ampalestine.org/index.php/
    about-amp/amp-faq/219-are-donations-to-amp-tax-exempt).
        \8\ Internal Revenue Service, Form 990: Return of Organization
    Exempt from Income Tax, ``AJP Educational Foundation Inc.,'' 2014,
    accessed via GuideStar (http://www.guidestar.org/FinDocuments//2014/
    271/365/2014-271365284-0ba3397f-9.pdf).
    ---------------------------------------------------------------------------
        At its 2014 annual conference, AMP invited participants to ``come
    and navigate the fine line between legal activism and material support
    for terrorism.''\9\ This is quite apt. Several individuals now working
    for or on behalf of AMP once worked for or on behalf of the Holy Land
    Foundation for Relief and Development (HLF), the Islamic Association
    for Palestine (IAP), and/or KindHearts for Charitable Development. All
    3 organizations were implicated by the Federal Government for financing
    Hamas between 2001 and 2011. Moreover, several of AMP's donors were
    involved in organizations implicated in funding the designated
    terrorist groups Hamas, Palestinian Islamic Jihad, and even al-Qaeda.
    ---------------------------------------------------------------------------
        \9\ Shane Harris, ``Pro-Palestinian Group Lectured On Skirting
    Terror Laws,'' The Daily Beast, December 5, 2014 (http://
    www.thedailybeast.com/articles/2014/12/05/pro-palestinian-group-
    lectured-on-skirting-terror-laws.html).
    ---------------------------------------------------------------------------
               kindhearts, interpal, and the holy land foundation
        I would first like to direct your attention to the past activities
    of AMP's founder and president, Hatem Bazian. In December 2014, Bazian
    spoke at an event\10\ sponsored by a UK-based charity called Interpal
    (also known as the Palestinian Relief and Development Fund).\11\ The
    U.S. Treasury designated Interpal as a terrorist entity in 2003 for
    providing money to Hamas and Hamas's global financing network.\12\
    Interpal was a branch of Hamas's international fundraising organ, the
    Union of Good, itself designated by the U.S. Department of the Treasury
    in 2008.\13\
    ---------------------------------------------------------------------------
        \10\ @sidali_1, ``http://istanddrhatem.eventbrite.co.uk come with
    pockets full at a free event and show your support for Palestine,''
    Twitter, December 2, 2014 (https://twitter.com/sidali_1/status/
    539916046917197824).
        \11\ @sidali_1, ``Last call for free tickets as Dr Hatem Bazian has
    arrived in Glasgow.,'' Twitter, December 15, 2014 (https://twitter.com/
    sidali_1/status/544484525892317184).
        \12\ U.S. Department of the Treasury, Press Release, ``U.S.
    Designates Five Charities Funding Hamas and Six Senior Hamas Leaders as
    Terrorist Entities,'' August 22, 2003 (http://www.treasury.gov/press-
    center/press-releases/Pages/js672.aspx).
        \13\ U.S. Department of the Treasury, Press Release, ``Treasury
    Designates the Union of Good,'' November 12, 2008 (https://
    www.treasury.gov/press-center/press-releases/Pages/hp1267.aspx).
    ---------------------------------------------------------------------------
        It is also worth noting that Bazian was 1 of 2 featured speakers at
    a 2004 KindHearts fundraising dinner in California.\14\ The other
    speaker at this dinner was Mohammed el-Mezain. Mezain is currently
    serving time in prison for his role in the Holy Land Foundation and for
    providing financial support to Hamas.\15\ HLF was designated as a
    terrorist entity by the U.S. Treasury in December 2001.\16\ From 1995
    to 2001, according to Federal court documents, ``HLF sent approximately
    $12.4 million outside of the United States with the intent to willfully
    contribute funds, goods, and services to Hamas.''\17\ Mezain also
    served as a consultant for KindHearts.\18\ The Treasury Department in
    2006 used a mechanism known as a Block Pending Investigation (BPI),
    which required that the Government freeze the assets of KindHearts,
    stating that the organization was the ``progeny'' of HLF, and that it
    provided ``support for terrorism behind the facfade of charitable
    giving.''\19\
    ---------------------------------------------------------------------------
        \14\ Flier, ``KindHearts San Diego Fundraising Dinner for
    Palestine,'' Sakkal Design Graphic Design and Illustrations, June 18,
    2004 (http://www.sakkal.com/Graphics/logos/kindheart/benefit/
    kindheart_san_diego_flyer.html).
        \15\ U.S. Department of Justice, Press Release, ``Federal Judge
    Hands Downs Sentences in Holy Land Foundation Case,'' May 27, 2016
    (https://www.justice.gov/opa/pr/federal-judge-hands-downs-sentences-
    holy-land-foundation-case).
        \16\ U.S. Department of the Treasury, ``Protecting Charitable
    Organizations--E,'' accessed May 9, 2016 (http://www.treasury.gov/
    resource-center/terrorist-illicit-finance/Pages/protecting-
    charities_execorder_13224-e.aspx).
        \17\ United States of America v. Mohammad El-Mezain, et al.,
    Appeal, 09-10560 (Court of Appeals Fifth Circuit, December 7, 2011),
    page 9 (http://www.ca5.uscourts.gov/opinions%5Cpub%5C09/09-10560-
    CR0.wpd.pdf).
        \18\ U.S. Department of the Treasury, Press Release, ``Treasury
    Freezes Assets of Organization Tied to Hamas,'' February 19, 2006
    (https://www.treasury.gov/press-center/press-releases/Pages/
    js4058.aspx).
        \19\ U.S. Department of the Treasury, Press Release, ``Treasury
    Freezes Assets of Organization Tied to Hamas,'' February 19, 2006
    (http://www.treasury.gov/press-center/press-releases/Pages/
    js4058.aspx).
    ---------------------------------------------------------------------------
        Bazian is not the only AMP figure with KindHearts connections.
    There is also AMP's registered agent, Abdelbasset Hamayel.\20\ Hamayel
    appears to have served as KindHearts' Illinois representative.\21\
    Indeed, one graphic design firm posted Hamayel's business card on its
    website, identifying him as KindHeart's ``Illinois and Wisconsin
    Representative.''\22\ Additionally, a KindHeart's poster for a 2004
    fundraiser lists Abaset@Kind-Hearts.org as the point of contact.\23\
    ---------------------------------------------------------------------------
        \20\ Illinois Secretary of State Business Services, Corporate
    Filing, ``American Muslims for Palestine, Inc.,'' File Number 66688003,
    accessed April 15, 2016 (http://www.ilsos.gov/corporatellc/
    CorporateLlcController).
        \21\ Steven Emerson, ``Money Laundering and Terror Financing Issues
    in the Middle East,'' Senate Committee on Banking, Housing, and Urban
    Affairs, July 13, 2005 (http://www.banking.senate.gov/public/_cache/
    files/d2b01fcf-a768-45d3-9d9d-436f93ee5f9e/33A699F-
    F535D59925B69836A6E068FD0.emerson.pdf).
        \22\ ``KindHearts Business Cards with Names,'' Sakkal Design
    Graphic Design and Illustrations, accessed April 15, 2016 (http://
    www.sakkal.com/Graphics/logos/kindheart/kind- hearts_bc03.html).
        \23\ Flier, ``Annual Fund Raising Dinner for Palestine &
    KindHearts' Annual Contest,'' KindHearts Charitable Humanitarian
    Development, April 23, 2005, accessed via WayBack Machine (http://
    web.archive.org/web/20050515004402/http://www.kind-hearts.org/upcoming-
    %20event/set%204%20prinout.pdf).
    ---------------------------------------------------------------------------
            the islamic association for palestine and help the needy
        I would also like to discuss Osama Abuirshaid, who AMP identifies
    as its ``National Coordinator''\24\ and ``National Policy
    Director.''\25\ In August 2015, the United States Citizenship and
    Immigration Services deemed that Abuirshaid was currently ``ineligible
    for naturalization'' because he failed to properly disclose his
    connections with the Islamic Association for Palestine (IAP).\26\ IAP
    was found civilly liable in a Federal district court for supporting
    Hamas.\27\ The defendants appealed, but a Federal appeals court upheld
    the judgment in 2008.\28\
    ---------------------------------------------------------------------------
        \24\ Press Release, ``Latest bus ad causes stir in DC,'' American
    Muslims for Palestine, February 24, 2015 (http://www.ampalestine.org/
    index.php/newsroom/press-releases/627-new-bus-ad-takes-on-israel-us-
    relationship-on-eve-of-netanyahu-s-address-to-congress).
        \25\ Press Release, ``AMP condemns attack on Al Aqsa; youth,''
    American Muslims for Palestine, September 16, 2015 (http://
    www.ampalestine.org/index.php/newsroom/statements/666-amp-condemns-
    attack-on-al-aqsa-youth).
        \26\ Abuirshaid v. Johnson et al, No. 1:2015cv01113 (Virginia
    Eastern District Court, August 31, 2015) (https://dockets.justia.com/
    docket/virginia/vaedce/1:2015cv01113/327963).
        \27\ Laurie Cohen, ``3 Islamic fundraisers held liable in terror
    death,'' Chicago Tribune, November 11, 2004 (http://
    articles.chicagotribune.com/2004-11-11/news/0411110231_1_david-boim-
    magistrate-judge-arlander-keys-joyce-boim).
        \28\ ``Anti-Terrorism Judgment Upheld Against U.S. Charities,''
    Anti-Defamation League, December 18, 2008 (http://archive.adl.org/
    main_terrorism/boim_upheld.html#.VLg28y5RLGA).
    ---------------------------------------------------------------------------
        Shortly after my April 19 testimony, Abuirshaid announced on
    Facebook that he was taking a ``surprise trip'' to Doha, Qatar.\29\
    While there, Abuirshaid met and even posted pictures with a man named
    Ayman Jarwan on Facebook.\30\ Jarwan was the executive director of a
    fraudulent unregistered charity known as Help the Needy, which
    illegally sent funds to Iraq in violation of U.S. sanctions and also
    sent funds to charities designated by the U.S. Treasury for funding al-
    Qaeda.\31\ Jarwan was sentenced to 18 months in a Federal prison for
    conspiring to violate the International Emergency Economic Powers Act
    (IEEPA).\32\ He appears to have served 15 months before being deported
    to Jordan.\33\ The exact nature of this meeting between Jarwan and
    Abuirshaid is unclear.
    ---------------------------------------------------------------------------
        \29\ Osama Abuirshaid, Facebook, April 28, 2016 (https://
    www.facebook.com/osama.abuirshaid.7/posts/
    1089811474428955?pnref=story).
        \30\ Osama Abuirshaid, Facebook, April 28, 2016 (https://
    www.facebook.com/osama.abuirshaid.7/posts/
    1090156511061118?pnref=story).
        \31\ William Kates, ``Gov't: Suspect Hid Illegal Charity Role,''
    Associated Press, March 9, 2003 (http://www.freerepublic.com/focus/
    news/860489/posts).
        \32\ U.S. Department of Justice, Press Release, ``Indictments
    Allege Illegal Financial Transfers to Iraq; Visa Fraud Involving
    Assistance to Groups that Advocate Violence,'' February 26, 2003
    (https://www.justice.gov/archive/opa/pr/2003/February/03_crm_119.htm).
        \33\ Katherine Hughes, ``Muslim Charity and the Case of Dr. Rafil
    Dhafir,'' Guild Practitioner, accessed May 9, 2016 (http://
    www.dhafirtrial.net/2007/11/24/denial-of-due-process-to-muslims-
    disgraces-us-all/).
    ---------------------------------------------------------------------------
        Abuirshaid is 1 of 4 AMP figures to have worked for or on behalf of
    IAP. There is Sufian Nabhan, an AMP board member \34\ who was IAP's
    former Michigan representative.\35\ There is also the aforementioned
    Abdelbasset Hamayel, who served as IAP's secretary general.\36\ Today,
    he is AMP's registered agent in Chicago.\37\ And finally, there is
    Rafeeq Jaber, the former president of IAP.\38\ AMP's tax-exempt arm,
    the AJP Educational Foundation, listed him as its tax preparer in its
    most recent public filing.\39\ He has been identified in the
    Palestinian press as the ``spiritual father'' of AMP's coalitions with
    other Muslim-American organizations,\40\ and he signed a September 2015
    petition as a representative of AMP.\41\ His financial services
    business is currently listed at the same office building where IAP was
    located before it shut down.\42\
    ---------------------------------------------------------------------------
        \34\ ``AMP National Board,'' American Muslims for Palestine,
    accessed May 9, 2016 (http://www.ampalestine.org/index.php/about-amp/
    amp-national-board).
        \35\ ``IAP Contact Information,'' Islamic Association for
    Palestine, April 7, 2003, accessed via Wayback Machine (http://
    web.archive.org/web/20030407164156/http://www.iap.org/contactus.htm).
        \36\ ``IAP Contact Information,'' Islamic Association for
    Palestine, April 7, 2003, accessed via Wayback Machine (http://
    web.archive.org/web/20030407164156/http://www.iap.org/contactus.htm).
        \37\ Illinois Secretary of State Business Services, Corporate
    Filing, ``American Muslims for Palestine Inc.,'' File Number 66688003,
    accessed May 9, 2016 (http://www.ilsos.gov/corporatellc/
    CorporateLlcController).
        \38\ ``IAP Contact Information,'' Islamic Association for
    Palestine, April 7, 2003, accessed via Wayback Machine (http://
    web.archive.org/web/20030407164156/http://www.iap.org/contactus.htm).
        \39\ Internal Revenue Service, Form 990: Return of Organization
    Exempt from Income Tax, ``AJP Educational Foundation Inc.,'' 2014,
    accessed via GuideStar (http://www.guidestar.org/FinDocuments//2014/
    271/365/2014-271365284-0ba3397f-9.pdf).
        \40\ ``[Sic] (Hundreds of Thousands in the Streets of American
    Cities in Support of Gaza),'' Ma'an News Agency (Palestinian
    Territories), August 11, 2014 (http://maannews.net/
    Content.aspx?id=719809).
        \41\ ``Petition to ISNA Leadership to do more for Syria,''
    Change.org, September 3, 2015 (https://www.change.org/p/isna-
    leadership-president-secretary-gen-and-majlis-ash-shura-petition-to-
    isna-leadership-to-do-more-for-syria).
        \42\ ``Jaber Financial Services INC,'' Cortera, accessed May 9,
    2016 (http://start.cortera.com/company/research/k5m5qyr4s/jaber-
    financial-services-inc/); ``IAP Contact Information,'' Islamic
    Association for Palestine, April 7, 2003, accessed via Wayback Machine
    (http://web.archive.org/web/20030407164156/http://www.iap.org/
    contactus.htm).
    ---------------------------------------------------------------------------
                  additional links to the holy land foundation
        I would next like to bring to the attention of this subcommittee
    information about Kifah Mustapha who films promotional videos for
    AMP.\43\ He is also a regular speaker at AMP events, including AMP's
    2014 and 2015 annual national conferences.\44\ Troublingly, AMP is
    giving him this prominent platform even though he was the registered
    agent in Illinois for the Holy Land Foundation.\45\ As the registered
    agent, Mustapha described his role as ``soliciting money for the
    various programs HLF held'' in Illinois and in other States.\46\
    ---------------------------------------------------------------------------
        \43\ AMP-Chicago, Facebook, November 21, 2015 (https://
    www.facebook.com/ampalestinechicago/posts/909912559098044).
        \44\ Conference Program, American Muslims for Palestine, November
    2015; Conference Program, American Muslims for Palestine, November
    2014.
        \45\ Boim v. Quranic Literacy Institute, Memorandum Opinion and
    Order, 127 F. Supp. 2d 1002 (Northern District of Illinois, January 10,
    2001) (http://law.justia.com/cases/federal/district-courts/FSupp2/127/
    1002/2512250/).
        \46\ Boim vs. Quranic Literacy Institute, Deposition of Kifah
    Mustapha, 00-C-2905 (Northern District of Illinois, March 2, 2004).
    ---------------------------------------------------------------------------
        Mustapha is not the only AMP figure to have worked for or on behalf
    of the Holy Land Foundation. He joins Hossein Khatib, a board member
    for AMP,\47\ who was previously a Holy Land Foundation regional
    director.\48\ There is also Jamal Said, who is a regular keynote
    speaker at AMP fundraisers,\49\ and who raised money for HLF as the
    director of the Mosque Foundation, a 501c3 organization that donated
    money to the HLF.\50\ I should note that Mustapha was the associate
    director of the Mosque Foundation from 2002 to 2014.\51\ Like Said,
    Mustapha was an unindicted co-conspirator\52\ in the Holy Land
    Foundation trial.\53\
    ---------------------------------------------------------------------------
        \47\ ``AMP National Board,'' American Muslims for Palestine,
    accessed April 15, 2016 (http://www.ampalestine.org/index.php/about-
    amp/amp-national-board).
        \48\ ``Hussein Khatib,'' LinkedIn, accessed January 12, 2015
    (https://www.linkedin.com/profile/
    view?id=100176222&authType=NAME_SEARCH&authToken=6PVm&locale=en_US&-
    srchid=3641870051421096965128&srchindex=4&srchtotal=20&trk=vsrp_people_r
    es_name&- trkInfo=VSRPsearchId%3A3641870051421096965128%2CVSRP-
    targetId%3A100176222%2CVSRPcmpt%3Aprimary).
        \49\ AMP-Chicago, ``AMP Annual Fundraising Dinner,'' Facebook,
    March 19, 2014 (https://www.facebook.com/ampalestinechicago/photos/
    gm.1407041112890451/597477577008212/?type=3&theater); AMP-Chicago,
    Facebook, April 18, 2015, (https://www.facebook.com/events/
    1568230430114028/); AMP-Chicago, Facebook, March 5, 2016 (https://
    www.facebook.com/events/1693121294239623/).
        \50\ Joel Mowbray, ``Reign of the Radicals,'' The Wall Street
    Journal, January 27, 2006 (http://www.wsj.com/articles/
    SB113832728441457779).
        \51\ ``Kifah Mustapha,'' LinkedIn, accessed May, 6, 2016 (https://
    www.linkedin.com/in/kifahmustapha).
        \52\ Chuck Goudie, ``I-Team Report: Pillar of the State Police,''
    ABC, March 9, 2010 (http://abc7chicago.com/archive/7309866/).
        \53\ Andrea Elliott, ``White House Quietly Courts Muslims in US,''
    The New York Times, April 18, 2010 (http://www.nytimes.com/2010/04/19/
    us/politics/19muslim.html).
    ---------------------------------------------------------------------------
        Interestingly, in December 2009, Mustapha joined the Illinois State
    Police as part of its volunteer chaplain program. A few months later,
    he was fired after the Illinois police ``watched a video seized from
    Mustapha's office on which they say Mustapha chants terrorist lyrics
    and children are seen with guns,'' which was filmed when Mustapha was
    younger.\54\ Mustapha filed a lawsuit, claiming discrimination based on
    his political views and national origin, but it was dismissed in 2013
    after a Federal court found the police were well within their rights to
    conclude that Mustapha's past statements and associations made him an
    inappropriate candidate to be a police chaplain.\55\
    ---------------------------------------------------------------------------
        \54\ Chuck Goudie, ``Rebuke for Well-Known Muslim Cleric,'' ABC,
    March 12, 2013 (http://abc7chicago.com/archive/9024968/).
        \55\ Kifah Mustapha v. Jonathon E. Monken, Patrick Keen, and
    Illinois State Police, Memorandum Opinion and Order, 1:10-cv-05473
    (Northern District of Illinois, June 25, 2013).
    ---------------------------------------------------------------------------
        There is also Salah Sarsour, an AMP board member,\56\
    fundraiser,\57\ and 2015 conference chairman.\58\ A 2001 FBI memo
    describes how Sarsour's brother, after being arrested by Israel in
    1998, told Israeli officials about his brother's ``involvement with
    Hamas and fundraising activities of HLFRD [Holy Land Foundation for
    Relief and Development].''\59\
    ---------------------------------------------------------------------------
        \56\ ``AMP National Board,'' American Muslims for Palestine,
    accessed May 9, 2016 (http://www.ampalestine.org/index.php/about-amp/
    amp-national-board).
        \57\ ``Sponsor the Conference,'' American Muslims for Palestine,
    accessed May 9, 2016 (https://web.archive.org/web/20160323162120/http:/
    /conference.ampalestine.org/index.php/sponsorship).
        \58\ Email to Subscribers, ``A letter from AMP Conference Chairman
    Salah Sarsour,'' American Muslims for Palestine, December 1, 2014.
        \59\ FBI Memo to the U.S. Department of the Treasury, ``Holy Land
    Foundation For Relief And Development International Emergency Economic
    Powers Act,'' November 1, 2001 (http://www.copleydc.net/cns_links/
    terrorism/fbi%20report.pdf).
    ---------------------------------------------------------------------------
                         middle east financial services
        Finally, I would like to discuss Middle East Financial Services
    (MEFS), which is a Bridgeview, Illinois-based business \60\ that
    provides financial support to AMP.\61\ One of MEFS's employees, Sana'a
    Abed Daoud,\62\ is a board member of AMP.\63\ Her relationship to the
    owners is unclear, but they share a last name.\64\
    ---------------------------------------------------------------------------
        \60\ ``Contact Information,'' Middle East Financial Services,
    accessed May 9, 2016 (http://mefs.us/).
        \61\ Conference Program, American Muslims for Palestine, November
    2014, page 29; Conference Program, American Muslims for Palestine,
    November 2015, page 6.
        \62\ Sana'a Abed Daoud, Facebook, April 28, 2016 (https://
    www.facebook.com/sanaa.a.daoud?fref=ts).
        \63\ ``AMP National Board,'' American Muslims for Palestine,
    accessed May 9, 2016 (http://www.ampalestine.org/index.php/about-amp/
    amp-national-board).
        \64\ Illinois Secretary of State Business Services, Corporate
    Filing, ``Middle East Financial Services Incorporated,'' File Number
    60642273, accessed May 9, 2016 (http://www.ilsos.gov/corporatellc/
    CorporateLlcController).
    ---------------------------------------------------------------------------
        MEFS has never been charged with being complicit in terrorism
    financing, and we do not have evidence that it has been engaged in
    illicit activities, but its services have been used by some who have.
    Indeed, MEFS was used in 2002 to wire money to Palestinian Islamic
    Jihad (PIJ), which the State Department designated as a terrorist group
    in 1997.
        Salah Daoud, a former MEFS employee and former IAP board member,
    testified in court in 2005 about how one of IAP's volunteers, Hatem
    Fariz, used MEFS over several months to send approximately $60,000 to
    PIJ.\65\ Daoud testified in exchange for immunity.\66\ Fariz was
    sentenced to 37 months in a U.S. prison for ``conspiracy to make or
    receive contributions of funds, goods, or services to or for the
    benefit of a Specially Designated Terrorist.''\67\
    ---------------------------------------------------------------------------
        \65\ ``Witness says Al-Arian co-defendant sent $60,000 to the
    Middle East,'' Associated Press, June 30, 2005 (http://
    www.mywebtimes.com/news/illinois_ap/witness-says-al-arian-co-defendant-
    sent-to-the-middle/article_9533c078-b9c2-522e-9d6e-48fd41be15c3.html);
    United States v. Sami Amin Al-Arian et al., Transcript of Proceedings,
    8:03-CR-77-T-30TBM, (Middle District of Florida Tampa Division, June
    29, 2005).
        \66\ ``Witness says Al-Arian co-defendant sent $60,000 to the
    Middle East,'' Associated Press, June 30, 2005 (http://
    www.mywebtimes.com/news/illinois_ap/witness-says-al-arian-co-defendant-
    sent-to-the-middle/article_9533c078-b9c2-522e-9d6e-48fd41be15c3.html).
        \67\ Meg Laughlin, ``Al-Arian associate gets prison,'' Tampa Bay
    Times, July 26, 2006 (http://www.sptimes.com/2006/07/26/Tampabay/
    Al_Arian_associate_ge.shtml).
    ---------------------------------------------------------------------------
                        recommendations and conclusions
        Mr. Chairman, FDD has not seen any evidence that AMP is engaged in
    any illicit activity. But we remain deeply concerned that individuals
    connected to entities that were previously implicated in terrorism
    finance can so easily regroup with such scant oversight. That is why,
    in my April 19 testimony, I stated that the IRS needs to pay more
    attention to the prior histories of Section 501 entities and their
    officers or directors.
        It should be required that nonprofits disclose in their IRS 990 and
    1023 forms the roles of its leaders (board members and executives) in
    organizations that earned Treasury or State Department designations,
    Treasury actions like Block Pending Investigations (BPI), or litigation
    in which their organization was found liable for material support for
    terrorism. This is a transparency issue at its core.
        The IRS might consider studying the British model for charity
    oversight. In the United Kingdom, the Charity Commission monitors the
    charitable sector for organizations that are run by extremists.\68\
    This oversight has not stopped individuals from exercising their right
    to free speech according to the laws of their country. But the
    Commission has ensured that, in the most egregious cases, if there are
    any organizations that have abused the system, they do not receive tax
    breaks. The goal, according to the Commission's website, is ``to ensure
    that the public can support charities with confidence.''\69\ Again, we
    do not conclude that AMP's activities would warrant any regulatory
    sanctions, but we do believe that Americans have a right to know what
    we have uncovered.
    ---------------------------------------------------------------------------
        \68\ Andrew Gilligan, ``Extremists to be purged from charity boards
    under new law,'' The Telegraph (UK), September 19, 2015 (http://
    www.telegraph.co.uk/news/uknews/terrorism-in-the-uk/11877560/
    Extremists-to-be-purged-from-charity-boards-under-new-law.html).
        \69\ UK Charity Commission, ``What we do,'' accessed May 9, 2016
    (https://www.gov.uk/government/organisations/charity-commission).
    ---------------------------------------------------------------------------
        Finally, there is a broader question this subcommittee may wish to
    ask the Federal Government: Does the Treasury Department still issue
    designations of U.S.-based charities like Holy Land Foundation or
    KindHearts? After 8 high-profile terrorist designations of domestic
    charities between 2001 and 2009,\70\ the pace has slowed to a crawl.
    This subcommittee has the power to ask why, who should be leading this
    effort, and whether more resources should be devoted to the problem.
    ---------------------------------------------------------------------------
        \70\ Holy Land Foundation (2001), Benevolence International
    Foundation (2002), Global Relief Foundation (2002), Islamic American
    Relief Agency (2004), Al-Haramain Islamic Foundation (2004), Goodwill
    Charitable Organization (2007), Tamil Rehabilitation Organization
    (2007), and Tamil Foundation (2009). U.S. Department of the Treasury,
    ``Designated Charities and Potential Fundraising Front Organizations
    for FTOs (listed by affiliation and designation date),'' April 5, 2016
    (https://www.treasury.gov/resource-center/terrorist-illicit-finance/
    Pages/protecting-fto.aspx).
    ---------------------------------------------------------------------------
        On behalf of the Foundation for Defense of Democracies, thank you
    again for inviting me to testify.

        Mr. King. Thank you, Doctor, very much for your testimony.
        Our next witness is Deborah Lehr. She is the chairman of
    the Antiquities Coalition, an organization which she launched
    to work with governments across the Middle East to fight
    against antiquities trafficking and its use in financing
    terrorism. She is also CEO and founding partner of Basilinna--
    did I pronounce that correctly? Okay.--a strategic consulting
    firm focused on China and the Middle East. She serves as a
    senior fellow at the Paulson Institute, a not-for-profit
    chaired by former Treasury Secretary, Hank Paulson.
        Ms. Lehr also serves on a number of prestigious board and
    advisory councils, including National Geographic and the board
    of the Archeological Institute of America.
        Ms. Lehr, thank you for being here today, and we look
    forward to your testimony. You are recognized.

         STATEMENT OF DEBORAH LEHR, CHAIRMAN AND FOUNDER, THE
                         ANTIQUITIES COALITION

        Ms. Lehr. Thank you, Chairman King, Ranking Member Higgins.
    We really appreciate the opportunity to testify before the
    subcommittee this morning. The Antiquities Coalition commends
    the subcommittee for its focus on the cutting off of financing
    for terrorist organizations, particularly for antiquities
    trafficking.
        Culture has very clearly become a weapon of war and a
    fundraising tool for violent extremist organizations across the
    Middle East and northern Africa. Certainly, antiquities looting
    has been happening ever since there was buried treasure, but
    not since World War II has it happened on this scale. Millions
    of archeological sites, historic and religious sites are being
    threatened by organized plunder by ISIL. These attacks are more
    than a destruction of heritage. They are the eradication of its
    shared history, the elimination of economic opportunity. They
    are a crime of war. They are precursors to genocide and they
    fund terrorism.
        The Abu Sayyaf raid by U.S. special forces confirmed how
    the extremist group has institutionalized the trafficking and
    destruction of antiquities. It has created its own ministry of
    antiquities and it uses the sales of permits to promote
    antiquities looting and illicit excavations.
        ISIL is making significant profits from this. Our records
    that were seized show that in just a 3-month period, they had
    raised $1.25 million or annualized $5 million. While not on the
    scale of oil revenues, as was indicated by the Ranking Member
    earlier, if you think about what the costs are to fund some of
    these terrorist activities, that money goes a really long way,
    particularly when you think there is a virtual limitless supply
    of these antiquities across the MENA region.
        ISIL use these priceless antiquities as just a commodity to
    be plucked from the ground for profit. The organized looting
    and trafficking of antiquities, or as we call it cultural
    racketeering, is a criminal industry that spans the globe. All
    countries with a past worth protecting are now at risk, but
    countries in crisis are most vulnerable, particularly during
    times of war.
        Nowhere has heritage suffered more than in Syria and Iraq.
    The list of destruction and plundering is long: Palmyra, the
    Muslim Museum, Nineveh, and hundreds of others, including
    historical sites that are meaningful to the foundations of
    Islam, Christianity, and Judaism.
        What is the size of this illegal trade? It is very
    difficult to determine the size of a legitimate antiquities
    market, let alone the illicit. So my organization has sponsored
    research by the University of Chicago to calculate, for the
    first time ever, the size of the losses in Iraq and Syria
    through algorithms that could be applied for other countries.
    We had commissioned Dr. Sarah Parcak, who was this year's TED
    Prize winner to do the same in Egypt, where she calculated that
    over a 3-year period the losses were potentially as high as $3
    billion.
        Yet what we do know are what are the declared trade figures
    of the imports into the United States of HTF tariff line 97,
    which is for antiques over 100 years old.
        The United States accounts for 43 percent of the global art
    market. We are the largest in the world. Last year, our No. 1
    import from Syria, accounting for 40 percent of our total
    imports, were antiquities. Even though overall imports from
    Syria have dropped precipitously from $430 million in 2010 to
    $12.4 million last year, the rate of antiquities has continued
    to increase--rate of antiquities imports has continued to
    increase. All of these antiquities came through one port, the
    customs port of New York. For Iraq, after oil, antiquities are
    the largest import from that country.
        Since the Arab Spring in 2011, we have seen, from 5
    countries in the MENA area, an average increase overall in
    antiquities of 90 percent. For Turkey, it's been up by 80
    percent; Egypt, 55; Syria, 134; Iraq, 492; and Lebanon, 58. Why
    Turkey and Lebanon? Because they are the major transshipment
    points for antiquities coming out of Iraq and Syria.
        So there is much that can be done. In April, the
    Antiquities Coalition released a task force report with
    recommendations to promote very practical solutions to this
    growing crisis and to serve as an on-going resource for
    policymakers. It was recommendations for the U.S. Government,
    international institutions, and the art market, and just one in
    a series of reports that we hope to release, particularly the
    next one focused on what source countries can do.
        In addition, we fully support the recommendations in H.R.
    2285 focused on ICE and CBP. These organizations are on the
    front line of our war against cultural racketeering and
    protecting our own market.
        But other considerations for this subcommittee to think
    about: One is there needs to be an overall coordinator within
    the United States Government. We believe that that person
    should be at the National Security Council, that they should be
    able to coordinate through all the institutions of the U.S.
    Government and work with subcommittees like this one. The focus
    of law enforcement should be on criminal prosecutions, not just
    on seizing the antiquities and repatriating them. The trade
    should be restricted to designated ports. This has been done in
    the case of wildlife. There is no reason it can't be done in
    the case of antiquities.
        One of the things that the earlier legislation promotes,
    and we strongly support, is as the majority of antiquities are
    coming in through New York, there is a big difference between
    the quality of the seizures that are happening in Newark, which
    has done a tremendous amount of work and the authorities there
    are highly trained, and JFK. We think an additional focus on
    just some practical aspects of training at JFK could go a long
    way toward stopping the United States becoming the principal
    designation, particularly since most of the art market is based
    in New York City.
        Raising awareness at ports of entry, just having Border
    Patrol work at various ports of entry to recognize that the
    import of these antiquities is illegal. The Department of
    Homeland Security could be supportive of what we hope will be a
    more active role in the State Department in negotiating
    cultural MOUs with countries in crisis. These cultural MOUs
    serve as the legal basis to give ICE the ability to close the
    market to antiquities coming into our country. There is not a
    single one of them with any country in the Middle East at the
    moment.
        The legislation that was passed recently that stops the
    import of antiquities into Syria builds on what was done with
    Iraq, but both of those have been legislated. We need to see
    them with Egypt, with some of the transshipment countries, and
    others to really help protect our own market from being a
    source of terrorist financing.
        It is important we stop American dollars from funding
    conflict in crime through cultural racketeering. This is a
    problem that didn't start with ISIL and it is not going to end
    with it. So it is necessary to create a framework for combating
    the illicit trade and antiquities globally.
        I thank the subcommittee for your work, and I thank you for
    the opportunity to testify before you today. I am happy to
    answer any questions. Thank you.
        [The statement of Ms. Lehr follows:]
                       Prepared Statement of Deborah Lehr
                                  May 12, 2016
        It is an honor to appear before the House Committee on Homeland
    Security's Subcommittee on Counterterrorism and Intelligence at the
    hearing on ``Following the Money: Examining the Current Terrorist
    Financing Trends and the Threat to the Homeland.'' We commend the
    committee for its focus on cutting off all aspects of financing for
    terrorist organizations, including from antiquities trafficking.
        Culture is increasingly a weapon of war and a fundraising tool for
    violent extremist organizations, especially in the Middle East and
    North Africa (MENA). Millions of archeological, historic, and religious
    sites in this region--including the Cradle of Civilization--are
    threatened by organized plunder or destruction from armed conflict by
    terrorist organizations such as ISIL, the al-Nusrah Front, and other
    al-Qaeda affiliates. The sheer number of sites provides a consistent
    source of revenue for the foreseeable future.
        Not since the Nazis have we seen more calculated and wide-spread
    attacks on heritage, which as witnessed in World War II, are an
    inseparable part of broader attacks against ethnic and religious
    minorities.
        These terrorist acts against culture--whether bombing ancient
    temples in Palmyra, plundering the Mosul Museum, or burning libraries
    with historic texts in Mali--land violent extremists on the front page
    of international newspapers and generate attention in social media. The
    propaganda value of this publicity cannot be overstated. These attacks
    strike at the economies of the countries targeted, intimidate local
    populations, and eradicate their past and ours--all while bringing in
    millions of dollars to fund additional violence.
        Certainly, antiquities looting has occurred since there was buried
    treasure. ISIL is not the first terrorist organization to benefit from
    it: We have much evidence of organized involvement by al-Qaeda and the
    Taliban going back to the turn of the millennium. But ISIL and its
    sympathizers have taken it to a new level.
        They are intentionally targeting the symbols of our cultures--the
    very foundations of our history--as a means to destroy our spirit.
    ISIL's use of culture as a weapon strikes at the values we cherish: The
    freedom of expression and religion. They are trafficking these
    plundered antiquities, which have become with oil and kidnapping a
    critical source of funding, to arm their deadly cause.
        The problem is wide-spread across the MENA region. Many of the
    attacks on heritage are targeted at its economy, which is reliant on
    cultural tourism. A slowing economy threatens political stability, a
    point not lost on ISIL.
        In Egypt, earlier this year, a bomb was disarmed at the Pyramids.
    Just last summer, a suicide bomber detonated his explosive device
    outside of the Temple of Karnak in Luxor. The bombing of the airliner
    from Sharm el-Sheikh was carrying Russian tourists, who were Egypt's
    single largest source of tourism revenues.
        In Tunisia, ISIL targeted the Bardo Museum--killing 21 foreign
    tourists and injuring many more. Cultural heritage tourism, a top
    source of revenue for the country, has declined precipitously since
    then which has placed a heavy burden on the economy.
        In Mali, Yemen, and Libya, historic libraries have been raided,
    artifacts pillaged, and ancient structures razed, along with Shiite and
    Sufi places of worship.
        Nowhere has heritage suffered more than Syria and Iraq. The list of
    destruction is long: Palmyra, Mosul, Nineveh, and hundreds of others
    from throughout millennia of history, culture, and religion, including
    historical sites meaningful to the foundations of Islam, Christianity,
    and Judaism. Priceless treasures from these sites have been stolen,
    unceremoniously ripped from the ground, losing all sense of history and
    context, perhaps never to be seen again.
        Sometimes, in our work, we are confronted with what we believe to
    be a false dichotomy: The supposed choice between saving lives or
    ``saving stones.'' The director of National Museum of Iraq answered
    this question eloquently when he explained: ``Yes, they're just
    statues, but for us, they're living things. We came from them, we are
    part of them. That is our culture and our belief.''
        These attacks are so much more than the destruction of heritage.
    They are the eradication of a shared history. They are the elimination
    of economic opportunity. They are precursors to genocide. They are a
    crime of war. It is the use of our shared heritage and culture to fund
    their terrorist activities.
        The Abu Sayyaf raid was the confirmation of these linkages between
    the promotion of illicit digging and trafficking of antiquities for
    profit and its financing of international terrorism.
        The raid in May 2015 by U.S. Special Operations Forces on the
    compound of the ISIL leader Abu Sayyaf, the group's director of
    financial operations and proclaimed ``Emir of Oil and Gas,'' uncovered
    a treasure trove of documents that exposed the illicit trade of
    antiquities in detail. These records confirmed that ISIL's antiquities
    operations are far more systematic than the opportunistic grave robbing
    that has taken part in the region for centuries. It also confirmed that
    ISIL is making significant profits from them.
        ISIL's use of cultural racketeering is industrial, methodical, and
    strictly controlled from the highest levels of the organization's
    leadership. The recovered papers revealed that Abu Sayyaf headed ISIL's
    Diwan Al-Rikaz or Ministry of Resources. This office includes an entire
    antiquities department, itself subdivided by geography and
    specialization. Bureaus have been carved out for administration,
    exploration and identification of new sites, investigation of known
    sites, excavation, and marketing and sale of antiquities.
        By placing the antiquities departments under the Diwan Al-Rikaz,
    ISIL clearly views cultural heritage as a resource to be exploited like
    oil and gas. It has created an institutionalized and legalized form of
    plunder.
        Under their established system, ISIL issues permits to loot and
    sell antiquities, subject to a traditional 20% khums tax, a religious
    levy on spoils of war. Receipts for these transactions, signed by
    Sayyaf or other top officials in the Diwan, were discovered in the
    raid.
        Just 3 months of these receipts indicated total sales worth $1.25
    million, or $5 million on an annualized basis. Counterterrorism experts
    tell us that attacks such as the one in Paris cost approximately
    $30,000 to finance. While not on the scale of oil revenues, sales of
    these illicit treasures can still fund a significant number of
    terrorist attacks globally. Especially when there is a virtual endless
    number of archaeological sites yet to be excavated in the region.
        Moreover, a cache of antiquities was found in the compound,
    awaiting sale beyond the group's borders. Most of these were small and
    easily transportable, but photos found on a computer showed larger
    items that had already been sold. Some of these recovered antiquities
    came from the Mosul Museum with their museum inventory numbers still
    intact. This is definite proof that while ISIL was destroying artifacts
    on camera at the Mosul Museum in February 2015, as part of their
    propaganda efforts, behind the scenes they were plundering and
    trafficking them for profit.
        The organized looting and trafficking of antiquities, or cultural
    racketeering, is a criminal industry that spans the globe. All
    countries with a past worth protecting are at risk, but countries in
    crisis are most vulnerable, especially during times of war.
        The United States has the opportunity and responsibility to play a
    leadership role in the fight against cultural racketeering and deal an
    effective blow against the overall illicit market. The United States is
    the largest art market, accounting for 43% of the global trade, and
    leads world demand for antiquities.
        So what can be done?
        There is much that can be accomplished--both by individuals and
    institutions.
        I launched the Antiquities Coalition--and we emphasize the
    Coalition aspect of our name in bringing together a broad range of
    interests in fighting this crime--to focus on practical, viable
    solutions to cultural racketeering.
        Last spring, we united 10 governments in the MENA region, Foreign
    and Antiquities Ministries, to issue the Cairo Declaration, which is an
    action plan to protect the region's heritage. This year, we will bring
    14 MENA countries and the Arab League together in Jordan, to explore
    how to implement the commitments in the Cairo Declaration. It will also
    include the first meeting of a MENA-wide task force, where governments
    designate a principal coordinator for their country to work within
    their own governments on this important initiative.
        During the U.N. General Assembly meetings in New York last fall,
    the Antiquities Coalition convened foreign ministers, ambassadors, and
    leaders in the archaeological, law enforcement, and museum communities
    for the first time to explore solutions. Our #CultureUnderThreat Task
    Force was created as a result of these discussions. The Antiquities
    Coalition will convene this high-level group again in New York this
    September to continue the momentum for the necessary political will to
    win this fight. Our goal is to support individual countries in their
    efforts to better protect their own heritage. Most importantly--we
    focus on action--and implementing what we have recommended.
        In April, the Antiquities Coalition released a task force report,
    along with the Middle East Institute and the Asia Society,
    #CultureUnderThreat: Recommendations for the U.S. Government, to
    promote solutions to this growing crisis and serve as an on-going
    resource for policy makers.
        The report puts forward a series of recommendations for the U.S.
    Government, the international community, and the global art market. It
    also details the importance of halting antiquities looting and
    trafficking as part of the fight against violent extremism and
    organized crime. Cultural crimes are linked to security threats such as
    money laundering, transnational organized crime, and international
    terrorist financing.
        We fully support the recommendations in H.R. 2285, The Prevent
    Trafficking in Cultural Property Act, for Customs and Border Protection
    (CBP) and Immigration and Customs Enforcement (ICE). These
    organizations are on the front lines of our war against cultural
    racketeering, and essential to preventing the United States from being
    a major source of terrorist financing, especially from looted
    antiquities.
        In addition, we congratulate each Member of the committee for
    passage of H.R. 1493, The Protect and Preserve International Cultural
    Property Act, which will ensure that the United States is in compliance
    with U.N. Security Resolution 2199. H.R. 1493 will restrict imports of
    Syrian antiquities so that the United States market will no longer be a
    destination of choice for conflict antiquities.
        Additional recommendations that the committee could consider
    include our calls to:
       Develop a coordinated whole-of-Government strategy in
            conjunction with the Executive branch. A point person at the
            National Security Council should be appointed who can
            coordinate with relevant agencies including ICE and CBP, as
            well as with Congress, including this critical committee, to
            ensure that policies to halt antiquities as well as other
            illicit sources of financing for terrorism and organized crime
            are cut off.
       Shift the focus of law enforcement to dismantling criminal
            networks through more criminal prosecutions instead of
            primarily seizing and repatriating antiquities.
       Restrict the import and export of cultural property to
            designated ports in order to more effectively monitor the
            antiquities trade. This step has already been taken to better
            oversee the wildlife trade.
       The Department of Homeland Security could also further raise
            awareness at ports of entry about not importing conflict
            antiquities.
       U.S. Customs and Border Patrol should work with the World
            Customs Organization (WCO) to join and further develop ARCHEO,
            a web-based application that allows real-time communication
            between government authorities and international experts to
            prevent antiquities trafficking.
       The Department of Homeland Security could support State
            Department efforts to negotiate cultural memoranda of
            understandings with countries in crisis. These agreements
            provide the legal basis for closing the U.S. market to illicit
            antiquities from signatory countries.
        These steps are important not only to combat financing to ISIL--but
    also to other violent extremist organizations such as the al-Nusrah
    Front, al-Qaeda, and the Taliban, as well as armed insurgents and
    organized criminals operating in countries in crisis. We must stop
    American dollars from funding conflict and crime through cultural
    racketeering. This is not a problem that started with ISIL, and it will
    not end with ISIL, even if they were to be defeated tomorrow. So we
    must work together to create a framework for combating the illicit
    trade in antiquities globally.
        I thank the committee for the work that you are already doing to
    combat this illicit and dangerous trade, and thank you for the
    opportunity to testify before you today. I am happy to answer any
    questions.
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        01/Culture-Under-Threat-Task-Force-Report-Complete-Dcoumney-.pdf
    Mr. King. Thank you, Ms. Lehr.
        I thank all of you for appearing today. Just so you know,
    all of your written statements will be submitted for the
    record.
        I recognize myself.
        Dr. Shelley, in your testimony, you make a reference to the
    NYPD and Los Angeles Police Department, success they have had
    in disrupting terror activities and how that can be applied to
    other law enforcement. Do you have anything in specific--
    anything specifically you want to say in that that other
    departments should be looking at that is being done by New York
    and Los Angeles?
        Ms. Shelley. I think one of the successes that explains--or
    one of the reasons that explains their successes is the ability
    to help organize the diverse Federal agencies that are working
    in these locales and to cooperate with local law enforcement.
    So that is one very important part, that there needs to be much
    more local-Federal cooperation.
        Second, New York has very top analysts on counterterrorism
    with wide experience that are helping their intelligence and
    their analytical community. So they are doing things that are
    site-specific. Just as Ms. Lehr was talking about the
    particularities of the New York market, there are things that
    you need to focus on and understand vulnerabilities in your
    community.
        Also, there is an importance of coordinating the
    counterterrorism policing and the counter-crime policing,
    because these 2 intersect in many ways that are not high-level
    transnational crime. So it becomes very much the activities of
    local police that help detect something that could be
    overlooked by Federal law enforcement, but the 2 of them
    informing each other makes for much more successful policing.
        Mr. King. Thank you, Doctor.
        Dr. Schanzer, you mentioned in your written testimony that
    the Treasury Department has not made a domestic designation of
    a charity for supporting terrorism for 2009. Now, does that
    mean that illegal fundraising has stopped, or has there been a
    shift in U.S. policy? Any comment you can make on that, I
    appreciate it.
        Mr. Schanzer. Sure. Mr. Chairman, in short, the reason for
    this halt is still unclear. I think on the one hand, we can
    certainly say that the environment has become a restrictive one
    for charities that would like to fundraise on American soil.
    The successes that we have had, certainly since the first few
    years after 9/11, may have served as a deterrent for those who
    would want to fundraise for terrorists on American soil.
        On the other hand, I find it very hard to believe that
    there is not one single charity operating here in the United
    States and actively fundraising for a terrorist organization,
    whether it would be Hamas, Hezbollah, al-Qaeda, or the Islamic
    State. So I do wonder whether this is a political decision that
    has been made by the White House, whether it has been a
    bureaucratic one made by the Treasury Department as the office
    of terrorism and financial intelligence has shifted its
    priorities. So it may be that the FBI is focused on this
    squarely.
        The issue that I would raise, though, is whether the FBI
    has enough manpower and has enough at its disposal in order to
    counter this challenge. In other words, we know that the FBI is
    squarely focused on trying to defend the homeland day in and
    day out, but they are looking at threats from ISIS or from
    lone-wolf terrorists or from al-Qaeda, and they may be less
    inclined to go after some of what they might deem as small
    fries, smaller charities that are fundraising for organizations
    that may not pose a direct threat to the homeland.
        So I think there are some interesting bureaucratic
    questions to ask the Federal Government right now, to ask the
    White House, and it could be the function of this subcommittee
    to do so.
        Mr. King. Thank you. You also mentioned in connection
    between the U.S.-based BDS movement and the PLO. Anything you
    can add to that?
        Mr. Schanzer. Absolutely. The research that we submitted to
    the House Foreign Affairs Committee 3 weeks ago indicated that
    there is an unregistered charity operating in the Chicago area,
    which is also where this other charity, AMP, is operating right
    now. That this smaller charity, this unregistered charity, has
    been--that one of its members, one of its leaders, has been a
    fighter for the Popular Front for the Liberation of Palestine,
    has a function within the PLO as one of their notaries in the
    Chicago area. Also, members of this organization have gone to
    meet with Mahmoud Abbas, the chairman and president of the
    Palestinian Authority, as well as his prime minister, Rami
    Hamdallah.
        The extent to which the PLO may or may not be funding the
    BDS movement, we just don't know at this point. But certainly
    that node that we found in Chicago may offer some indication.
        Mr. King. Thank you.
        I recognize the Ranking Member.
        Mr. Higgins. Thank you, Mr. Chairman.
        Just on the issue of ransoms. The United States and Britain
    has an explicit policy not to pay ransoms. My question is: Do
    they do that? Do they pay ransoms through proxies?
        Dr. Shelley, any thoughts on that?
        Ms. Shelley. I think that there is a decline on the
    kidnapping of Americans because there is less likelihood of
    paying ransoms. I am afraid that in some cases, some people may
    use proxies, but I have no definitive proof of that.
        Mr. Higgins. But if the other European countries beyond
    Great Britain are--have a policy of paying ransoms, and the
    incidences of hostage-taking disproportionately from folks from
    those countries, are those European countries now reconsidering
    their policies of paying ransom?
        Ms. Shelley. I have not heard that there is a major
    reconsideration of this. This is part of the problem of what I
    was discussing earlier, of the Europeans failing to connect the
    dots between the crime problem and the terrorism problem and
    the money that funds terrorism.
        Mr. Higgins. Yes, please.
        Mr. Schanzer. Just a quick note, Mr. Ranking Member. That I
    think that there is maybe an interesting angle to look at when
    we talk about proxies or cutouts involved in ransom.
        I look at the case of Bowe Bergdahl as being extremely
    instructive that the Qataris served as an intermediary on
    behalf of the Taliban to secure the release of Bowe Bergdahl in
    exchange for other Guantanamo Bay prisoners. This is something
    that the Qataris have been doing. This is an interesting
    country that is, on the one hand, it is an ally of the United
    States, on the other hand, it is working on behalf of some of
    our enemies. So it would be instructive to take a look at the
    case of Qatar in the role of kidnapping and the release of
    people who have been held hostage.
        Mr. Higgins. So are you arguing that a prisoner exchange
    would constitute a paying of ransom in a way?
        Mr. Schanzer. Certainly.
        Mr. Higgins. Okay. Interesting. Okay.
        Just the other issue. Generally, with respect to ISIS, what
    is the current trend in terms of, you know, where their
    financing is coming from, from the largest component to the
    smallest component? Has that changed at all?
        For all the panelists.
        Ms. Shelley. There has been, certainly, a diminution in the
    amount of money obtained from oil, but there has been an
    increase in the amount of money obtained from forcing refugees
    so that their property is being confiscated. There has been a
    taxing of the migrant flows. There has been a movement into
    taxing the Captagon, on the drugs that move within the Middle
    East, especially to Saudi Arabia. So that there are other areas
    of growth that have compensated for this.
        What is very interesting is that there is a very different
    basis of funding for ISIS in the Middle East than ISIS in
    Europe. Almost all of ISIS in Europe is locally crime funded
    from small-scale petty crimes. There have been, as I mentioned
    in my testimony, very few examples of financial transfers from
    the Middle East to fund the terrorism attacks or the travel of
    terrorists to the Middle East. So we are looking at 2 very
    different funding sources for European-based terrorism versus
    Middle East terrorism.
        Mr. Schanzer. Mr. Ranking Member, we had Assistant
    Secretary Danny Glaser from the Treasury Department at FDD
    yesterday and gave a very interesting presentation. He did
    mention that we have seen a precipitous decline in ISIS
    finance, which we certainly welcome as good news.
        I think some of that has to do with the simple fact that
    the price of oil has dropped since ISIS' formation. Also, we
    have seen the bombing of cash depots, which has certainly dealt
    a blow to the organization.
        But I would note that the primary source of funding, from
    my perspective, for ISIS has been through taxing, plunder, and
    pillaging. So what this means is that the ability of ISIS to
    raise funds for itself is inextricably tied to the territory
    that it controls.
        So when one talks about defeating ISIS finance, a lot of
    the time we hear in the U.S. Government that we can sort-of
    separate out the battle against the flow of finance from the
    overall battle of trying to degrade or defeat ISIL, as the
    administration calls it. I actually see that it is one and the
    same. That if we are able to deprive them of this territory,
    then we will be able to deprive them of the ability to tax
    their own people or to plunder the territory that they have
    captured. So this is an incredibly important issue to note as
    we talk about a strategy for ISIL moving forward.
        Mr. Higgins. My time is up.
        Mr. Chairman, I ask for unanimous consent that this report
    from the Antiquities Coalition be submitted for the record.
        Mr. King. Absolutely. Without objection.*
    ---------------------------------------------------------------------------
        * The information follows has been retained in committee files and
    is available at http://taskforce.theantiquitiescoalition.org/.
    ---------------------------------------------------------------------------
        Mr. Higgins. Thank you.
        Mr. King. Okay. The gentleman from New York, the Chairman
    of the Transportation Security Subcommittee, Mr. Katko.
        Mr. Katko. Thank you, Mr. Chairman.
        Ms. Lehr, I want to focus some of my questions on you for a
    moment, if I may. I don't think you can underestimate the
    importance of the antiquities black market. Before I came to
    Congress, I was a Federal prosecutor. Remarkably, we had one
    such case in our district in Syracuse, New York. It happened
    because we found thousands upon thousands of tablets that had
    ended up at Cornell University. They ended up there through an
    antiquities dealer in New York City. Going through that case,
    it was remarkable to me to see how difficult it was to do any
    sort of a criminal prosecution and how difficult it was just to
    go through the process of repatriating these assets back to
    Iraq.
        The tablets were stolen. They were all small tablets, about
    4,000 years old, that really chronicled Iraq's history. I don't
    know how you put a value on that. But I know that this dealer
    in New York City paid a substantial amount of money to get
    those. He kept some there and some were donated to Cornell.
    They all ultimately have been back.
        But, you know, I saw--I want to talk to you more about
    that. Because I think, you know, what ISIS has done in Palmyra
    and these other places, we don't know what they have done with
    those antiquities. But I do know there is a voracious appetite
    for them on the international market.
        So with that in mind, and that as a backdrop, I want to ask
    you a couple of questions. What can we do to tweak the laws
    from a criminal standpoint to try and use these--to better
    prosecute--better investigate and prosecute these antiquities
    laws? Also, probe with you after that a little bit more about
    why you think it is necessary to have someone on the National
    Security Council involved on this as opposed to the Department
    of Justice.
        Ms. Lehr. Well, thank you for raising I think what are some
    of the critical issues, because it is very hard to try these
    cases. I think there are several different reasons for it.
        One, there is a lack of understanding sometimes about the
    antiquities issues, and they aren't seen as a priority, even
    though it is one of the top global crimes. There aren't
    dedicated resources at the Department of Justice or dedicated
    prosecutors like there are in wildlife, that if you even had
    one dedicated antiquities prosecutor at DOJ who local
    prosecutors could call----
        Mr. Katko. See, that was my thought. When somebody from the
    Department of Justice that became a specialist on this and
    really understood it----
        Ms. Lehr. Right.
        Mr. Katko [continuing]. Once you understand the law, it is
    really not that hard to make a case like any other case.
    Garnering the proof is the thing. But I think having someone at
    the Department of Justice specifically designated for that is
    probably a pretty good idea.
        Ms. Lehr. That is right. Just a month ago it was
    antiquities week in New York--Asia week. Sorry. Dealers from
    around the world came to sell antiquities there. Every single
    day for 10 days, there were raids on antiquities dealers and on
    auction houses, not a single person is going to jail. Some poor
    old Japanese man, dealer, was caught and he went to Rikers for
    one week, and then he cut and deal and went back. They seized
    his antiquities and that was the worst that happened.
        So it really is an issue. So all that work takes place.
    These are being sold for millions and millions of dollars. They
    raised over, I think, close to $400 million in that time, and
    there are no prosecutions. So----
        Mr. Katko. You think about the $400 million, like Mr. King
    noted earlier, the Paris attacks were, what, $10,000 total?
        Ms. Lehr. Yeah.
        Mr. Katko. So you can do a lot of damage with $400 million.
        Ms. Lehr. Exactly. The reason I said the National Security
    Council, and maybe I am biased because I used to work there,
    but there needs to be coordination overall in the Government.
        Currently, the top position in the U.S. Government is an
    assistant secretary in culture and diplomacy at the State
    Department. When we are dealing with terrorist issues and
    financing and many of these others, I just don't think it is
    capable as obviously, they are there, that that is the right
    seat in looking at cultural diplomacy. There needs to be
    somebody who is centralized, who can coordinate with DOJ, with
    ICE, with others, with Treasury to make sure that we are
    collecting the kind of information that we need and these
    things are being investigated.
        The other point, just if I can say----
        Mr. Katko. Sure.
        Ms. Lehr [continuing]. One last thing on the art market, it
    is largely unregulated. So in many ways for these auction
    houses, who I think Christie's makes about $7 billion annually,
    Sotheby's makes very similar, in many ways these seizures are
    just the price of doing business.
        Mr. Katko. Right.
        Ms. Lehr. So it is not necessarily in their interest to do
    the kind of due diligence that we would expect to see to track
    it back to terrorists.
        Mr. Katko. When you say Sotheby's makes $7 billion a year,
    around there, is that just the commissions they earn on the
    things they are selling?
        Ms. Lehr. Yes.
        Mr. Katko. Okay. So obviously----
        Ms. Lehr. Those are their annual revenue.
        Mr. Katko. The amount of revenue they are generating
    through those sales is exponentially more than that, obviously.
    Right.
        So, yeah, I mean, I think that--I am trying to think of the
    best legal means. Do you have any suggestions as to what the
    best legal means would be to create this position or positions
    at the Department of Justice? Because I think it is something
    that needs to be done.
        Ms. Lehr. I think there could be a precedent with what has
    been done with wildlife, and they have appointed somebody who
    is the top prosecutor, I understand, who comes with a
    background in wildlife crimes. There is an art unit--arts crime
    unit at the FBI, but they are not investigators. So I think
    really the position needs to be a DOJ with somebody with a
    criminal prosecution background.
        Mr. Katko. Okay. All right. Well, thank you very much. My
    time has pretty much expired, so thank you.
        Mr. King. Thank you, Mr. Katko.
        The gentleman from as Massachusetts, Mr. Keating.
        Mr. Keating. Thank you, Mr. Chairman. I might comment that
    I am just days back from traveling through northern Africa in
    particular, and I must tell you that our efforts at striking
    and targeting oil reserves and the revenues they are getting
    from there has really been effective and is being extended,
    actually, because of its effectiveness. So I have seen how we
    have been successful in that regard.
        I also am aware that, you know, in Syria and Iraq how the
    area is shrinking and that will affect taxation. But we are
    going to see more of an emphasis because of this effectiveness,
    I think, on ransoming and on antiquities because of the way we
    are shrinking the other alternatives, I believe.
        So I want to thank Ms. Lehr, for the work that you have
    done with the #CultureUnderThreat Task Force and the
    Antiquities Coalition. It is important work in many respects.
    But I would ask you to talk about what we can do to have more
    bilateral agreements with other countries. Because, again, as
    we begin--and we have a lot of work still to do. As we begin
    putting up barriers here, they will seek other venues. So how
    can we work, in your opinion, to extend those agreements?
        Ms. Lehr. Great. Thank you also for the excellent work that
    you are doing. We are very supportive of the legislation that
    you are proposing.
        These cultural MOUs are really very important because they
    do provide the legal basis to stop the import of antiquities
    into our country, and we have approached it in 2 ways. No. 1,
    to encourage the State Department--well, 3. Encourage the State
    Department to look at these as part of their diplomatic efforts
    in the Middle East. No. 2, to work with the countries in
    question to help them understand what they can be doing,
    because it is not just the United States, it is all the major
    markets that we can do this with. No. 3, we are talking to the
    Arab league to get them to consider requesting an MOU on behalf
    of all of its members so that we could do it at once.
        The United States is the leader on this issue. If we
    proceed with this, we will see very quickly that the Europeans
    will do something similar. So if we can close our market, we
    can use these agreements to close the European market and the
    Japanese market. We at least have made a major step forward in
    cutting off these sources, which is the largest markets.
        The only other one out there, which is the second-largest
    market is China, and we have to start to think about how to
    work with them because soon, if they decide they want to start
    buying these antiquities, that is going to be a big problem.
        Mr. Keating. I do think we are going to have to look at
    northern Africa as well, because they are sourcing that as they
    are getting more pressure in Syria and Iraq as well.
        Just another question that I had in terms of the way the
    organizations, the terrorist organizations are trying to deal
    monetarily with things. The Society of World-wide International
    Financial Telecommunications, SWIFT, I wanted to see--you know,
    there is a little tension, as you might have known, with our
    E.U. allies in terms of privacy issues and dealing with that.
        If we are changing that to adapt to their concerns too, how
    can that limit our effectiveness? So could you comment on what
    is going on, our privacy concerns of our allies in Europe and
    how that is affecting our ability to deal with it from a
    financial standpoint?
        Mr. Schanzer. Mr. Keating, I am happy to answer that from
    maybe 1 or 2 angles. As you are likely aware, at one point the
    U.S. Treasury was mining the SWIFT database through a subpoena
    system. This is now made public, but this is something that was
    first--it first made news when I was at the Treasury Department
    that the Treasury was subpoenaing--issuing subpoenas to the
    SWIFT system, and then they were able to look at the actual
    data that was being transferred by suspected terrorists. I am
    unclear as to whether that continues to this day, and it may
    have something to do with the specific concerns that our
    European allies have voiced over this.
        We have also seen SWIFT at the center of a controversy with
    regard to Iran. The SWIFT consortium had agreed to block the
    Iranians from the SWIFT system, making it virtually impossible
    for 17 different Iranian banks to move money electronically
    around the world, and this was an incredibly effective method
    to halt terror finance coming out of Iran. We--pursuant to the
    deal just signed over the last summer, the Joint Comprehensive
    Plan of Action, we have now allowed Iran back onto this system.
    So this is going to make the countering of Iranian terrorism
    finance that much more difficult.
        So my sense here is that we have, I think, growing
    disagreements over the financial data that can be used by the
    U.S. Government to counter terrorism finance coming from SWIFT.
    I don't know how they plan on moving forward with their
    cooperation with the United States, but my sense is that it is
    a steady backslide. Perhaps engaging with the SWIFT consortium
    on a one-to-one basis could be very useful.
        Mr. Keating. Mr. Chairman, if I could just have unanimous
    consent to indicate I will have a written question on the
    matter of virtual currency. Because, as we know, the terrorists
    in the Paris attack, the night before, paid for their hotel
    with prepaid, you know, type of currency, if you want to call
    it currency. So that is another issue we are going to have to
    look at carefully.
        So I will do that in writing, Mr. Chairman, so I don't
    extend my time here. I yield back.
        Mr. King. Without objection. The gentleman from
    Massachusetts always get what he wants anyway so----
        The gentleman from Texas, Mr. Hurd, the Chairman of the
    Information Technology Subcommittee, House Committee on
    Oversight and Government Reform.
        Mr. Hurd.
        Ms. Shelley. Can I say something on that?
        Mr. King. Surely.
        Ms. Shelley. I say that one of the topics I heard discussed
    extensively at the meetings I was at in Europe among Europeans
    was the issue of how much the prepaid credit cards, the SWIFT,
    are held by corporations, and yet it is governments that are
    trying to combat the terrorism. This is forcing a lot of
    consideration of this issue in Europe.
        I think--and this is why I was pointing out in my testimony
    that I think the Europeans, as they are facing this issue of
    the evidence of the linkage between crime and terrorism, with
    just the example that you gave, are doing a serious thinking.
    As they are worrying that they are not doing enough to prevent
    the next terrorist attack, I think there is an area of
    flexibility and engagement that is open now that was not open
    previously.
        Mr. King. Thank you.
        Mr. Hurd.
        Mr. Hurd. Chairman King, Ranking Member Higgins, I want to
    thank you all for this, putting on this hearing. It is one of
    the more illuminating hearings I have been to this year.
        My first question is to Ms. Lehr. Can you--you mentioned
    that organized plunder by ISIS, you said it is generating $1
    million a year or $5 million a year?
        Ms. Lehr. In the raid on the Abu Sayyaf compound by our
    special forces, and he was essentially the CFO, they set up a
    ministry of the antiquities, and they were selling permits to
    promote digging as well as they take taxes. We have an info
    graph we submitted----
        Mr. Hurd. Yeah, I saw.
        Ms. Lehr [contiuing]. Into the record to show the process.
    Receipts for 3 months were $1.5 million.
        Mr. Hurd. Wow. Okay. That is helpful.
        Can you mention or answer briefly what is UNESCO's role in
    all of this?
        Ms. Lehr. UNESCO's responsibility is obviously over
    culture. They have raised awareness significantly and
    highlighted the linkages between cultural genocide as a
    precursor to genocide and promoting this as a crime of war
    under the Hague Convention. Their actual ability to go in and
    help protect sites and other activities like that is very
    limited. I think that that is an opportunity, if the United
    States were to consider participation again in UNESCO, to
    really take a leadership role.
        Mr. Hurd. Thank you.
        Terrorists are becoming increasingly tech savvy. There is
    evidence that cyber attacks and cyber theft are becoming tools
    in their arsenal. Dr. Schanzer, this may be most appropriate
    for you. Are there any instances that you know where terrorist
    groups have engaged in ransomware? Are they trying to take
    people's data and hold it hostage for a reward?
        Dr. Shelley, if you have any input on that.
        Mr. Schanzer. Congressman Hurd, I have actually not seen
    anything specifically related to that. What we have seen is
    what we call cyber-enabled economic warfare, which is, I would
    say, is a growing trend where state sponsors of terrorism are
    trying to capture that information and perhaps use it for
    political means.
        I don't know if you can call it terrorism, per se, but
    certainly the capturing of the SF-86 information of U.S.
    Government officials by what we believe is the Chinese
    certainly qualifies as cyber-enabled economic warfare, to my
    mind. The hack of Sony by North Korean hackers, this also, I
    think, qualifies.
        It is a new realm. I think it is more difficult to
    characterize, but certainly something to watch.
        Mr. Hurd. Thank you. I think I would--that is an area that
    we need to explore a little bit more.
        One point to Ms. Lehr. One of the other values of having
    someone sitting at NSC on this is to drive collection within
    the intelligence community. I spent 9\1/2\ years as an
    undercover officer in the CIA and, you know, I was chasing
    hawala dealers and folks like that to try to, you know,
    understand, to follow the money and collect that. If we--if I
    would have had some of this information on some of these folks
    that are organized in, you know, illegal antiquities dealing,
    those guys are probably less covert than, you know, al-Qaeda. I
    think that is another value of having an entity within the NSC
    to ensure this is part of the NIPF, the National Intelligence
    Priority Framework, to drive collection in order to stop this
    funding stream to terrorists.
        My last question is probably best directed to Dr. Shelley.
    Many of our Gulf partners were seeing the money coming from the
    Gulf into organizations in Syria and Iraq. What can be done to
    help our Gulf partners solve this problem that is happening
    within their own borders?
        Ms. Shelley. That is a very difficult question. In part,
    some of our Gulf partners have to be aware that this money is
    being moved and are not--consciously not doing something about
    it. So this is--this is a problem. So I can't say that there is
    government complicity, but there is also not an attempt to
    suppress it.
        I think part of what I said in my testimony is that much
    more needs to be explained about the linkages between the
    crime, the money movement, and the terrorism, and how it comes
    back to bite you. That is something that many people don't
    understand. I think the Saudis are beginning to understand this
    much better, but there are other parts of the Gulf that need to
    be helped along in this area as well.
        Mr. Hurd. On that, the deputy crown prince of Saudi Arabia
    is leading a coalition of 39 Islamic countries that are
    focusing on the narrative, encountering the narrative of
    extremism, and I think this is a topic that can be integrated
    into their efforts. You know, the fact that it is being led by
    our Sunni partners is important, but this is an area where we
    can support them.
        Ms. Shelley. It is also very interesting that within the
    context of the United Nations, the Saudis are being very
    involved in looking at the crime terror linkage as well and
    trying to bring other countries to be aware of this.
        Mr. Hurd. I really appreciate you all being here today.
        Mr. Chairman, I yield back.
        Mr. King. Thank you, Mr. Hurd. The gentleman yields back.
        Ranking Member, do you have any further questions?
        Mr. Higgins. No.
        Mr. King. All right. Thank you.
        So I want to thank the witnesses for your testimony today.
    It has been extremely valuable. I want to thank the Members for
    their questions. The Members of this subcommittee may have some
    additional questions to the witnesses, and I would ask you to
    respond to those in writing, if you would. We appreciate it.
        So pursuant to Committee Rule VII(e), the hearing record
    will be held open for 10 days.
        Without objection, the subcommittee stands adjourned.
        [Whereupon, at 11:13 a.m., the subcommittee was adjourned.]

                                A P P E N D I X

                                  ----------

      Questions From Ranking Member William R. Keating for Louise Shelley
        Question 1a. The Islamic State has proven adept at using the
    internet for its propaganda and recruitment, as well for conducting
    operations. For example, the terrorists involved in the Paris attack
    used prepaid cards to rent hotel rooms before the night of the attack.
        How prevalent are anonymous payments, prepaid instruments, and
    virtual currencies like Bitcoin, at financing terrorism?
        Question 1b. Is this an area that the United States' current
    financial intelligence units and terror financing units are equipped to
    handle?
        Answer. The European-based terrorists have relied more on more
    simple forms of financing such as pre-paid cards and transfers through
    underground banking that enhance their anonymity. But they have made
    use of the internet to order weapons. Therefore, it is highly possible
    that they have or will use virtual currencies in the future to buy
    commodities that they need.
        The European terrorists have not shown the sophistication that has
    been shown by individuals affiliated with ISIS central in Iraq and
    Syria. Therefore, it is likely that the technical capacity shown by
    terrorists based in the Middle East will permit them to rely more on
    virtual currency in the future.
        The rapidly changing and evolving forms of virtual currencies
    should remain a priority for financial intelligence and terrorist
    financing units because so much of terrorist financing is linked to
    trade. Therefore, any payment system that can help facilitate the
    anonymity of trade is deserving of significant attention.
     Questions From Ranking Member William R. Keating for Jonathan Schanzer
        Question 1a. The Islamic State has proven adept at using the
    internet for its propaganda and recruitment, as well for conducting
    operations. For example, the terrorists involved in the Paris attack
    used prepaid cards to rent hotel rooms before the night of the attack.
        How prevalent are anonymous payments, prepaid instruments, and
    virtual currencies like Bitcoin, at financing terrorism?
        Answer. Alternative payment platforms enabled by advances in
    financial technology (Fintech) have become increasingly prevalent. But
    as my colleague Yaya Fanusie notes, the extent to which such tools are
    currently facilitating terrorism is unclear as only a handful of cases
    of terrorist fundraising on these platforms has been made public.
        Prepaid cards' anonymity, ease-of-use, and global availability make
    it difficult for financial authorities to identify significant illicit
    use. The Brussels attackers used prepaid cards to purchase walkie-
    talkies for their operation last March, according to Belgium's finance
    minister. In France, where the Paris attackers last November used
    roughly 30,000 euros on prepaid cards to pay for cars and housing in
    the run-up to the attack, identification is not required for loading up
    to 2,500 euros.
        The key risk lies in cards that allow users to reload without
    identity checks. Indeed, new forms of on-line and mobile payment
    services, some of which allow for anonymous transactions, have become
    more common in terrorist financing in recent years. For example, U.S.
    law enforcement reported that some individuals have used the on-line
    and mobile payment system CashU for illicit transactions. A FATF report
    points out that millennials--who use on-line and mobile payments more
    than older adults--make up the half of customers in terrorism financing
    suspicious transaction reports.
        Using social media, supporters of jihadist groups have exploited
    mobile platforms like Kik, WhatsApp, and Telegram as a way to
    facilitate fundraising. Some apps use end-to-end encryption, making
    them even more attractive to terrorists looking to operate
    clandestinely.
        The growth in mobile payments also reflects the expansion of
    mobile-based solutions in other parts of the world, particularly in
    Africa and Asia, which lack access to conventional banking services.
    Financial intelligence experts point out that illicit actors can
    exploit mobile payment systems for money laundering by directing the
    transfer of funds through multiple, seemingly unaffiliated accounts.
        As for terrorists exploiting bitcoin, the possibility is certainly
    there but law enforcement and financial authorities have not confirmed
    these reports. Worryingly, in 2014, a U.S.-based Islamic State
    supporter posted on-line a manual he authored explaining how to use
    bitcoin to fund the group. One reason bitcoin has not become the
    currency of choice could stem from the fact that cryptocurrencies are
    not fully anonymous. Indeed, cryptocurrency platforms leave an open
    trail of transactions encoded in software which can be tracked through
    financial forensics. In addition, virtual currencies have minimal
    circulation within the international financial system.
        One final platform to watch is peer-to-pear on-line lending. One of
    the San Bernardino attackers accessed a loan for $28,500 from the on-
    line lending site Prosper weeks before the December 2015 attack. These
    platforms provide users with funds quicker than conventional bank loans
    or credit card companies.
        Question 1b. Is this an area that the United States' current
    financial intelligence units and terror financing units are equipped to
    handle?
        Answer. The U.S. Government's current financial intelligence
    apparatus appears sufficiently aware of the terror finance risks posed
    by these emerging technologies, but it might not be fully equipped to
    investigate the coming rise in Fintech-related terror finance cases.
    For example, FinCen in 2013 provided overall guidance on how virtual
    currencies would be treated under U.S. regulatory and compliance
    infrastructure. However, the rate of change in new financing platforms,
    led in part by small start-ups and highly technical software
    innovation, is difficult even for the broader financial sector to keep
    pace. And the public sector traditionally falls behind the market.
        Moreover, there is likely to be a gap between the monitoring FinCen
    requires on customer transactions and the level of transaction analysis
    small Fintech firms can do, especially for products with no verified
    customer identification. Finally, this problem is bigger than FinCen's
    jurisdiction. Outside the United States, suspicious transaction
    analysis may be particularly difficult for firms in the growing mobile
    payment industry.