[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

                               __________

       Printed for the use of the Committee on Homeland Security
                                     

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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 [email protected] 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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 

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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

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  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.