[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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Available via the World Wide Web: http://www.gpo.gov/fdsys/
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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
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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).
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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.
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\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.
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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).
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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).
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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\
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\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).
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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\
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\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).
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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/).
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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\
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\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).
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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\
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\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).
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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\
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\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).
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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\
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\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).
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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).
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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\
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\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).
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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).
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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).
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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).
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On behalf of the Foundation for Defense of Democracies, thank you
again for inviting me to testify.
Mr. King. Thank you, Doctor, very much for your testimony.
Our next witness is Deborah Lehr. She is the chairman of
the Antiquities Coalition, an organization which she launched
to work with governments across the Middle East to fight
against antiquities trafficking and its use in financing
terrorism. She is also CEO and founding partner of Basilinna--
did I pronounce that correctly? Okay.--a strategic consulting
firm focused on China and the Middle East. She serves as a
senior fellow at the Paulson Institute, a not-for-profit
chaired by former Treasury Secretary, Hank Paulson.
Ms. Lehr also serves on a number of prestigious board and
advisory councils, including National Geographic and the board
of the Archeological Institute of America.
Ms. Lehr, thank you for being here today, and we look
forward to your testimony. You are recognized.
STATEMENT OF DEBORAH LEHR, CHAIRMAN AND FOUNDER, THE
ANTIQUITIES COALITION
Ms. Lehr. Thank you, Chairman King, Ranking Member Higgins.
We really appreciate the opportunity to testify before the
subcommittee this morning. The Antiquities Coalition commends
the subcommittee for its focus on the cutting off of financing
for terrorist organizations, particularly for antiquities
trafficking.
Culture has very clearly become a weapon of war and a
fundraising tool for violent extremist organizations across the
Middle East and northern Africa. Certainly, antiquities looting
has been happening ever since there was buried treasure, but
not since World War II has it happened on this scale. Millions
of archeological sites, historic and religious sites are being
threatened by organized plunder by ISIL. These attacks are more
than a destruction of heritage. They are the eradication of its
shared history, the elimination of economic opportunity. They
are a crime of war. They are precursors to genocide and they
fund terrorism.
The Abu Sayyaf raid by U.S. special forces confirmed how
the extremist group has institutionalized the trafficking and
destruction of antiquities. It has created its own ministry of
antiquities and it uses the sales of permits to promote
antiquities looting and illicit excavations.
ISIL is making significant profits from this. Our records
that were seized show that in just a 3-month period, they had
raised $1.25 million or annualized $5 million. While not on the
scale of oil revenues, as was indicated by the Ranking Member
earlier, if you think about what the costs are to fund some of
these terrorist activities, that money goes a really long way,
particularly when you think there is a virtual limitless supply
of these antiquities across the MENA region.
ISIL use these priceless antiquities as just a commodity to
be plucked from the ground for profit. The organized looting
and trafficking of antiquities, or as we call it cultural
racketeering, is a criminal industry that spans the globe. All
countries with a past worth protecting are now at risk, but
countries in crisis are most vulnerable, particularly during
times of war.
Nowhere has heritage suffered more than in Syria and Iraq.
The list of destruction and plundering is long: Palmyra, the
Muslim Museum, Nineveh, and hundreds of others, including
historical sites that are meaningful to the foundations of
Islam, Christianity, and Judaism.
What is the size of this illegal trade? It is very
difficult to determine the size of a legitimate antiquities
market, let alone the illicit. So my organization has sponsored
research by the University of Chicago to calculate, for the
first time ever, the size of the losses in Iraq and Syria
through algorithms that could be applied for other countries.
We had commissioned Dr. Sarah Parcak, who was this year's TED
Prize winner to do the same in Egypt, where she calculated that
over a 3-year period the losses were potentially as high as $3
billion.
Yet what we do know are what are the declared trade figures
of the imports into the United States of HTF tariff line 97,
which is for antiques over 100 years old.
The United States accounts for 43 percent of the global art
market. We are the largest in the world. Last year, our No. 1
import from Syria, accounting for 40 percent of our total
imports, were antiquities. Even though overall imports from
Syria have dropped precipitously from $430 million in 2010 to
$12.4 million last year, the rate of antiquities has continued
to increase--rate of antiquities imports has continued to
increase. All of these antiquities came through one port, the
customs port of New York. For Iraq, after oil, antiquities are
the largest import from that country.
Since the Arab Spring in 2011, we have seen, from 5
countries in the MENA area, an average increase overall in
antiquities of 90 percent. For Turkey, it's been up by 80
percent; Egypt, 55; Syria, 134; Iraq, 492; and Lebanon, 58. Why
Turkey and Lebanon? Because they are the major transshipment
points for antiquities coming out of Iraq and Syria.
So there is much that can be done. In April, the
Antiquities Coalition released a task force report with
recommendations to promote very practical solutions to this
growing crisis and to serve as an on-going resource for
policymakers. It was recommendations for the U.S. Government,
international institutions, and the art market, and just one in
a series of reports that we hope to release, particularly the
next one focused on what source countries can do.
In addition, we fully support the recommendations in H.R.
2285 focused on ICE and CBP. These organizations are on the
front line of our war against cultural racketeering and
protecting our own market.
But other considerations for this subcommittee to think
about: One is there needs to be an overall coordinator within
the United States Government. We believe that that person
should be at the National Security Council, that they should be
able to coordinate through all the institutions of the U.S.
Government and work with subcommittees like this one. The focus
of law enforcement should be on criminal prosecutions, not just
on seizing the antiquities and repatriating them. The trade
should be restricted to designated ports. This has been done in
the case of wildlife. There is no reason it can't be done in
the case of antiquities.
One of the things that the earlier legislation promotes,
and we strongly support, is as the majority of antiquities are
coming in through New York, there is a big difference between
the quality of the seizures that are happening in Newark, which
has done a tremendous amount of work and the authorities there
are highly trained, and JFK. We think an additional focus on
just some practical aspects of training at JFK could go a long
way toward stopping the United States becoming the principal
designation, particularly since most of the art market is based
in New York City.
Raising awareness at ports of entry, just having Border
Patrol work at various ports of entry to recognize that the
import of these antiquities is illegal. The Department of
Homeland Security could be supportive of what we hope will be a
more active role in the State Department in negotiating
cultural MOUs with countries in crisis. These cultural MOUs
serve as the legal basis to give ICE the ability to close the
market to antiquities coming into our country. There is not a
single one of them with any country in the Middle East at the
moment.
The legislation that was passed recently that stops the
import of antiquities into Syria builds on what was done with
Iraq, but both of those have been legislated. We need to see
them with Egypt, with some of the transshipment countries, and
others to really help protect our own market from being a
source of terrorist financing.
It is important we stop American dollars from funding
conflict in crime through cultural racketeering. This is a
problem that didn't start with ISIL and it is not going to end
with it. So it is necessary to create a framework for combating
the illicit trade and antiquities globally.
I thank the subcommittee for your work, and I thank you for
the opportunity to testify before you today. I am happy to
answer any questions. Thank you.
[The statement of Ms. Lehr follows:]
Prepared Statement of Deborah Lehr
May 12, 2016
It is an honor to appear before the House Committee on Homeland
Security's Subcommittee on Counterterrorism and Intelligence at the
hearing on ``Following the Money: Examining the Current Terrorist
Financing Trends and the Threat to the Homeland.'' We commend the
committee for its focus on cutting off all aspects of financing for
terrorist organizations, including from antiquities trafficking.
Culture is increasingly a weapon of war and a fundraising tool for
violent extremist organizations, especially in the Middle East and
North Africa (MENA). Millions of archeological, historic, and religious
sites in this region--including the Cradle of Civilization--are
threatened by organized plunder or destruction from armed conflict by
terrorist organizations such as ISIL, the al-Nusrah Front, and other
al-Qaeda affiliates. The sheer number of sites provides a consistent
source of revenue for the foreseeable future.
Not since the Nazis have we seen more calculated and wide-spread
attacks on heritage, which as witnessed in World War II, are an
inseparable part of broader attacks against ethnic and religious
minorities.
These terrorist acts against culture--whether bombing ancient
temples in Palmyra, plundering the Mosul Museum, or burning libraries
with historic texts in Mali--land violent extremists on the front page
of international newspapers and generate attention in social media. The
propaganda value of this publicity cannot be overstated. These attacks
strike at the economies of the countries targeted, intimidate local
populations, and eradicate their past and ours--all while bringing in
millions of dollars to fund additional violence.
Certainly, antiquities looting has occurred since there was buried
treasure. ISIL is not the first terrorist organization to benefit from
it: We have much evidence of organized involvement by al-Qaeda and the
Taliban going back to the turn of the millennium. But ISIL and its
sympathizers have taken it to a new level.
They are intentionally targeting the symbols of our cultures--the
very foundations of our history--as a means to destroy our spirit.
ISIL's use of culture as a weapon strikes at the values we cherish: The
freedom of expression and religion. They are trafficking these
plundered antiquities, which have become with oil and kidnapping a
critical source of funding, to arm their deadly cause.
The problem is wide-spread across the MENA region. Many of the
attacks on heritage are targeted at its economy, which is reliant on
cultural tourism. A slowing economy threatens political stability, a
point not lost on ISIL.
In Egypt, earlier this year, a bomb was disarmed at the Pyramids.
Just last summer, a suicide bomber detonated his explosive device
outside of the Temple of Karnak in Luxor. The bombing of the airliner
from Sharm el-Sheikh was carrying Russian tourists, who were Egypt's
single largest source of tourism revenues.
In Tunisia, ISIL targeted the Bardo Museum--killing 21 foreign
tourists and injuring many more. Cultural heritage tourism, a top
source of revenue for the country, has declined precipitously since
then which has placed a heavy burden on the economy.
In Mali, Yemen, and Libya, historic libraries have been raided,
artifacts pillaged, and ancient structures razed, along with Shiite and
Sufi places of worship.
Nowhere has heritage suffered more than Syria and Iraq. The list of
destruction is long: Palmyra, Mosul, Nineveh, and hundreds of others
from throughout millennia of history, culture, and religion, including
historical sites meaningful to the foundations of Islam, Christianity,
and Judaism. Priceless treasures from these sites have been stolen,
unceremoniously ripped from the ground, losing all sense of history and
context, perhaps never to be seen again.
Sometimes, in our work, we are confronted with what we believe to
be a false dichotomy: The supposed choice between saving lives or
``saving stones.'' The director of National Museum of Iraq answered
this question eloquently when he explained: ``Yes, they're just
statues, but for us, they're living things. We came from them, we are
part of them. That is our culture and our belief.''
These attacks are so much more than the destruction of heritage.
They are the eradication of a shared history. They are the elimination
of economic opportunity. They are precursors to genocide. They are a
crime of war. It is the use of our shared heritage and culture to fund
their terrorist activities.
The Abu Sayyaf raid was the confirmation of these linkages between
the promotion of illicit digging and trafficking of antiquities for
profit and its financing of international terrorism.
The raid in May 2015 by U.S. Special Operations Forces on the
compound of the ISIL leader Abu Sayyaf, the group's director of
financial operations and proclaimed ``Emir of Oil and Gas,'' uncovered
a treasure trove of documents that exposed the illicit trade of
antiquities in detail. These records confirmed that ISIL's antiquities
operations are far more systematic than the opportunistic grave robbing
that has taken part in the region for centuries. It also confirmed that
ISIL is making significant profits from them.
ISIL's use of cultural racketeering is industrial, methodical, and
strictly controlled from the highest levels of the organization's
leadership. The recovered papers revealed that Abu Sayyaf headed ISIL's
Diwan Al-Rikaz or Ministry of Resources. This office includes an entire
antiquities department, itself subdivided by geography and
specialization. Bureaus have been carved out for administration,
exploration and identification of new sites, investigation of known
sites, excavation, and marketing and sale of antiquities.
By placing the antiquities departments under the Diwan Al-Rikaz,
ISIL clearly views cultural heritage as a resource to be exploited like
oil and gas. It has created an institutionalized and legalized form of
plunder.
Under their established system, ISIL issues permits to loot and
sell antiquities, subject to a traditional 20% khums tax, a religious
levy on spoils of war. Receipts for these transactions, signed by
Sayyaf or other top officials in the Diwan, were discovered in the
raid.
Just 3 months of these receipts indicated total sales worth $1.25
million, or $5 million on an annualized basis. Counterterrorism experts
tell us that attacks such as the one in Paris cost approximately
$30,000 to finance. While not on the scale of oil revenues, sales of
these illicit treasures can still fund a significant number of
terrorist attacks globally. Especially when there is a virtual endless
number of archaeological sites yet to be excavated in the region.
Moreover, a cache of antiquities was found in the compound,
awaiting sale beyond the group's borders. Most of these were small and
easily transportable, but photos found on a computer showed larger
items that had already been sold. Some of these recovered antiquities
came from the Mosul Museum with their museum inventory numbers still
intact. This is definite proof that while ISIL was destroying artifacts
on camera at the Mosul Museum in February 2015, as part of their
propaganda efforts, behind the scenes they were plundering and
trafficking them for profit.
The organized looting and trafficking of antiquities, or cultural
racketeering, is a criminal industry that spans the globe. All
countries with a past worth protecting are at risk, but countries in
crisis are most vulnerable, especially during times of war.
The United States has the opportunity and responsibility to play a
leadership role in the fight against cultural racketeering and deal an
effective blow against the overall illicit market. The United States is
the largest art market, accounting for 43% of the global trade, and
leads world demand for antiquities.
So what can be done?
There is much that can be accomplished--both by individuals and
institutions.
I launched the Antiquities Coalition--and we emphasize the
Coalition aspect of our name in bringing together a broad range of
interests in fighting this crime--to focus on practical, viable
solutions to cultural racketeering.
Last spring, we united 10 governments in the MENA region, Foreign
and Antiquities Ministries, to issue the Cairo Declaration, which is an
action plan to protect the region's heritage. This year, we will bring
14 MENA countries and the Arab League together in Jordan, to explore
how to implement the commitments in the Cairo Declaration. It will also
include the first meeting of a MENA-wide task force, where governments
designate a principal coordinator for their country to work within
their own governments on this important initiative.
During the U.N. General Assembly meetings in New York last fall,
the Antiquities Coalition convened foreign ministers, ambassadors, and
leaders in the archaeological, law enforcement, and museum communities
for the first time to explore solutions. Our #CultureUnderThreat Task
Force was created as a result of these discussions. The Antiquities
Coalition will convene this high-level group again in New York this
September to continue the momentum for the necessary political will to
win this fight. Our goal is to support individual countries in their
efforts to better protect their own heritage. Most importantly--we
focus on action--and implementing what we have recommended.
In April, the Antiquities Coalition released a task force report,
along with the Middle East Institute and the Asia Society,
#CultureUnderThreat: Recommendations for the U.S. Government, to
promote solutions to this growing crisis and serve as an on-going
resource for policy makers.
The report puts forward a series of recommendations for the U.S.
Government, the international community, and the global art market. It
also details the importance of halting antiquities looting and
trafficking as part of the fight against violent extremism and
organized crime. Cultural crimes are linked to security threats such as
money laundering, transnational organized crime, and international
terrorist financing.
We fully support the recommendations in H.R. 2285, The Prevent
Trafficking in Cultural Property Act, for Customs and Border Protection
(CBP) and Immigration and Customs Enforcement (ICE). These
organizations are on the front lines of our war against cultural
racketeering, and essential to preventing the United States from being
a major source of terrorist financing, especially from looted
antiquities.
In addition, we congratulate each Member of the committee for
passage of H.R. 1493, The Protect and Preserve International Cultural
Property Act, which will ensure that the United States is in compliance
with U.N. Security Resolution 2199. H.R. 1493 will restrict imports of
Syrian antiquities so that the United States market will no longer be a
destination of choice for conflict antiquities.
Additional recommendations that the committee could consider
include our calls to:
Develop a coordinated whole-of-Government strategy in
conjunction with the Executive branch. A point person at the
National Security Council should be appointed who can
coordinate with relevant agencies including ICE and CBP, as
well as with Congress, including this critical committee, to
ensure that policies to halt antiquities as well as other
illicit sources of financing for terrorism and organized crime
are cut off.
Shift the focus of law enforcement to dismantling criminal
networks through more criminal prosecutions instead of
primarily seizing and repatriating antiquities.
Restrict the import and export of cultural property to
designated ports in order to more effectively monitor the
antiquities trade. This step has already been taken to better
oversee the wildlife trade.
The Department of Homeland Security could also further raise
awareness at ports of entry about not importing conflict
antiquities.
U.S. Customs and Border Patrol should work with the World
Customs Organization (WCO) to join and further develop ARCHEO,
a web-based application that allows real-time communication
between government authorities and international experts to
prevent antiquities trafficking.
The Department of Homeland Security could support State
Department efforts to negotiate cultural memoranda of
understandings with countries in crisis. These agreements
provide the legal basis for closing the U.S. market to illicit
antiquities from signatory countries.
These steps are important not only to combat financing to ISIL--but
also to other violent extremist organizations such as the al-Nusrah
Front, al-Qaeda, and the Taliban, as well as armed insurgents and
organized criminals operating in countries in crisis. We must stop
American dollars from funding conflict and crime through cultural
racketeering. This is not a problem that started with ISIL, and it will
not end with ISIL, even if they were to be defeated tomorrow. So we
must work together to create a framework for combating the illicit
trade in antiquities globally.
I thank the committee for the work that you are already doing to
combat this illicit and dangerous trade, and thank you for the
opportunity to testify before you today. I am happy to answer any
questions.
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01/Culture-Under-Threat-Task-Force-Report-Complete-Dcoumney-.pdf
Mr. King. Thank you, Ms. Lehr.
I thank all of you for appearing today. Just so you know,
all of your written statements will be submitted for the
record.
I recognize myself.
Dr. Shelley, in your testimony, you make a reference to the
NYPD and Los Angeles Police Department, success they have had
in disrupting terror activities and how that can be applied to
other law enforcement. Do you have anything in specific--
anything specifically you want to say in that that other
departments should be looking at that is being done by New York
and Los Angeles?
Ms. Shelley. I think one of the successes that explains--or
one of the reasons that explains their successes is the ability
to help organize the diverse Federal agencies that are working
in these locales and to cooperate with local law enforcement.
So that is one very important part, that there needs to be much
more local-Federal cooperation.
Second, New York has very top analysts on counterterrorism
with wide experience that are helping their intelligence and
their analytical community. So they are doing things that are
site-specific. Just as Ms. Lehr was talking about the
particularities of the New York market, there are things that
you need to focus on and understand vulnerabilities in your
community.
Also, there is an importance of coordinating the
counterterrorism policing and the counter-crime policing,
because these 2 intersect in many ways that are not high-level
transnational crime. So it becomes very much the activities of
local police that help detect something that could be
overlooked by Federal law enforcement, but the 2 of them
informing each other makes for much more successful policing.
Mr. King. Thank you, Doctor.
Dr. Schanzer, you mentioned in your written testimony that
the Treasury Department has not made a domestic designation of
a charity for supporting terrorism for 2009. Now, does that
mean that illegal fundraising has stopped, or has there been a
shift in U.S. policy? Any comment you can make on that, I
appreciate it.
Mr. Schanzer. Sure. Mr. Chairman, in short, the reason for
this halt is still unclear. I think on the one hand, we can
certainly say that the environment has become a restrictive one
for charities that would like to fundraise on American soil.
The successes that we have had, certainly since the first few
years after 9/11, may have served as a deterrent for those who
would want to fundraise for terrorists on American soil.
On the other hand, I find it very hard to believe that
there is not one single charity operating here in the United
States and actively fundraising for a terrorist organization,
whether it would be Hamas, Hezbollah, al-Qaeda, or the Islamic
State. So I do wonder whether this is a political decision that
has been made by the White House, whether it has been a
bureaucratic one made by the Treasury Department as the office
of terrorism and financial intelligence has shifted its
priorities. So it may be that the FBI is focused on this
squarely.
The issue that I would raise, though, is whether the FBI
has enough manpower and has enough at its disposal in order to
counter this challenge. In other words, we know that the FBI is
squarely focused on trying to defend the homeland day in and
day out, but they are looking at threats from ISIS or from
lone-wolf terrorists or from al-Qaeda, and they may be less
inclined to go after some of what they might deem as small
fries, smaller charities that are fundraising for organizations
that may not pose a direct threat to the homeland.
So I think there are some interesting bureaucratic
questions to ask the Federal Government right now, to ask the
White House, and it could be the function of this subcommittee
to do so.
Mr. King. Thank you. You also mentioned in connection
between the U.S.-based BDS movement and the PLO. Anything you
can add to that?
Mr. Schanzer. Absolutely. The research that we submitted to
the House Foreign Affairs Committee 3 weeks ago indicated that
there is an unregistered charity operating in the Chicago area,
which is also where this other charity, AMP, is operating right
now. That this smaller charity, this unregistered charity, has
been--that one of its members, one of its leaders, has been a
fighter for the Popular Front for the Liberation of Palestine,
has a function within the PLO as one of their notaries in the
Chicago area. Also, members of this organization have gone to
meet with Mahmoud Abbas, the chairman and president of the
Palestinian Authority, as well as his prime minister, Rami
Hamdallah.
The extent to which the PLO may or may not be funding the
BDS movement, we just don't know at this point. But certainly
that node that we found in Chicago may offer some indication.
Mr. King. Thank you.
I recognize the Ranking Member.
Mr. Higgins. Thank you, Mr. Chairman.
Just on the issue of ransoms. The United States and Britain
has an explicit policy not to pay ransoms. My question is: Do
they do that? Do they pay ransoms through proxies?
Dr. Shelley, any thoughts on that?
Ms. Shelley. I think that there is a decline on the
kidnapping of Americans because there is less likelihood of
paying ransoms. I am afraid that in some cases, some people may
use proxies, but I have no definitive proof of that.
Mr. Higgins. But if the other European countries beyond
Great Britain are--have a policy of paying ransoms, and the
incidences of hostage-taking disproportionately from folks from
those countries, are those European countries now reconsidering
their policies of paying ransom?
Ms. Shelley. I have not heard that there is a major
reconsideration of this. This is part of the problem of what I
was discussing earlier, of the Europeans failing to connect the
dots between the crime problem and the terrorism problem and
the money that funds terrorism.
Mr. Higgins. Yes, please.
Mr. Schanzer. Just a quick note, Mr. Ranking Member. That I
think that there is maybe an interesting angle to look at when
we talk about proxies or cutouts involved in ransom.
I look at the case of Bowe Bergdahl as being extremely
instructive that the Qataris served as an intermediary on
behalf of the Taliban to secure the release of Bowe Bergdahl in
exchange for other Guantanamo Bay prisoners. This is something
that the Qataris have been doing. This is an interesting
country that is, on the one hand, it is an ally of the United
States, on the other hand, it is working on behalf of some of
our enemies. So it would be instructive to take a look at the
case of Qatar in the role of kidnapping and the release of
people who have been held hostage.
Mr. Higgins. So are you arguing that a prisoner exchange
would constitute a paying of ransom in a way?
Mr. Schanzer. Certainly.
Mr. Higgins. Okay. Interesting. Okay.
Just the other issue. Generally, with respect to ISIS, what
is the current trend in terms of, you know, where their
financing is coming from, from the largest component to the
smallest component? Has that changed at all?
For all the panelists.
Ms. Shelley. There has been, certainly, a diminution in the
amount of money obtained from oil, but there has been an
increase in the amount of money obtained from forcing refugees
so that their property is being confiscated. There has been a
taxing of the migrant flows. There has been a movement into
taxing the Captagon, on the drugs that move within the Middle
East, especially to Saudi Arabia. So that there are other areas
of growth that have compensated for this.
What is very interesting is that there is a very different
basis of funding for ISIS in the Middle East than ISIS in
Europe. Almost all of ISIS in Europe is locally crime funded
from small-scale petty crimes. There have been, as I mentioned
in my testimony, very few examples of financial transfers from
the Middle East to fund the terrorism attacks or the travel of
terrorists to the Middle East. So we are looking at 2 very
different funding sources for European-based terrorism versus
Middle East terrorism.
Mr. Schanzer. Mr. Ranking Member, we had Assistant
Secretary Danny Glaser from the Treasury Department at FDD
yesterday and gave a very interesting presentation. He did
mention that we have seen a precipitous decline in ISIS
finance, which we certainly welcome as good news.
I think some of that has to do with the simple fact that
the price of oil has dropped since ISIS' formation. Also, we
have seen the bombing of cash depots, which has certainly dealt
a blow to the organization.
But I would note that the primary source of funding, from
my perspective, for ISIS has been through taxing, plunder, and
pillaging. So what this means is that the ability of ISIS to
raise funds for itself is inextricably tied to the territory
that it controls.
So when one talks about defeating ISIS finance, a lot of
the time we hear in the U.S. Government that we can sort-of
separate out the battle against the flow of finance from the
overall battle of trying to degrade or defeat ISIL, as the
administration calls it. I actually see that it is one and the
same. That if we are able to deprive them of this territory,
then we will be able to deprive them of the ability to tax
their own people or to plunder the territory that they have
captured. So this is an incredibly important issue to note as
we talk about a strategy for ISIL moving forward.
Mr. Higgins. My time is up.
Mr. Chairman, I ask for unanimous consent that this report
from the Antiquities Coalition be submitted for the record.
Mr. King. Absolutely. Without objection.*
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* The information follows has been retained in committee files and
is available at http://taskforce.theantiquitiescoalition.org/.
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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.