[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
IDENTIFY, DISRUPT AND DISMANTLE: COORDINATING THE GOVERNMENT'S ATTACK
ON TERRORIST FINANCING
=======================================================================
JOINT HEARING
before the
SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
POLICY, INTERGOVERNMENTAL RELATIONS AND
THE CENSUS
and the
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
AND FINANCIAL MANAGEMENT
of the
COMMITTEE ON GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
DECEMEBER 15, 2003
__________
Serial No. 108-140
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
93-428 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
CHRIS CANNON, Utah DIANE E. WATSON, California
ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER,
NATHAN DEAL, Georgia Maryland
CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of
TIM MURPHY, Pennsylvania Columbia
MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee
JOHN R. CARTER, Texas CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota ------
MARSHA BLACKBURN, Tennessee BERNARD SANDERS, Vermont
(Independent)
Peter Sirh, Staff Director
Melissa Wojciak, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Philip M. Schiliro, Minority Staff Director
Subcommittee on Technology, Information Policy, Intergovernmental
Relations and the Census
ADAM H. PUTNAM, Florida, Chairman
CANDICE S. MILLER, Michigan WM. LACY CLAY, Missouri
DOUG OSE, California DIANE E. WATSON, California
TIM MURPHY, Pennsylvania STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Bob Dix, Staff Director
Lori Martin, Professional Staff Member
Ursula Wojciechowski, Clerk
Subcommittee on Government Efficiency and Financial Management
TODD RUSSELL PLATTS, Pennsylvania, Chairman
MARSHA BLACKBURN, Tennessee EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio PAUL E. KANJORSKI, Pennsylvania
JOHN SULLIVAN, Oklahoma MAJOR R. OWENS, New York
CANDICE S. MILLER, Michigan CAROLYN B. MALONEY, New York
MICHAEL R. TURNER, Ohio
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Mike Hettinger, Staff Director
Tabetha Mueller, Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on December 15, 2003................................ 1
Statement of:
Forman, Marcy M., Deputy Assistant Director, Financial
Investigations Division, U.S. Immigration and Customs
Enforcement, U.S. Department of Homeland Security.......... 51
Glass, George A., Director, Office of Terrorism Finance and
Sanctions Policy, Bureau of Economic and Business Affairs,
U.S. Department of State................................... 26
Ross, Jeff, Senior Advisor, Executive Office for the
Terrorist Financing/Financial Crimes, U.S. Department of
the Treasury............................................... 7
Townsend, Bruce, Deputy Assistant Director, Office of
Investigations, U.S. Secret Service, U.S. Department of
Homeland Security.......................................... 62
Whitehead, Carl, Special Agent in Charge, Tampa Office,
Federal Bureau of Investigation, U.S. Department of
Justice, accompanied by Frank J. Fabian, Unit Chief,
Terrorist Financing Operations Section, Washington, DC..... 37
Letters, statements, etc., submitted for the record by:
Forman, Marcy M., Deputy Assistant Director, Financial
Investigations Division, U.S. Immigration and Customs
Enforcement, U.S. Department of Homeland Security, prepared
statement of............................................... 55
Glass, George A., Director, Office of Terrorism Finance and
Sanctions Policy, Bureau of Economic and Business Affairs,
U.S. Department of State, prepared statement of............ 29
Putnam, Hon. Adam H., a Representative in Congress from the
State of Florida, prepared statement of.................... 4
Ross, Jeff, Senior Advisor, Executive Office for the
Terrorist Financing/Financial Crimes, U.S. Department of
the Treasury, prepared statement of........................ 11
Townsend, Bruce, Deputy Assistant Director, Office of
Investigations, U.S. Secret Service, U.S. Department of
Homeland Security, prepared statement of................... 64
Whitehead, Carl, Special Agent in Charge, Tampa Office,
Federal Bureau of Investigation, U.S. Department of
Justice, prepared statement of............................. 40
IDENTIFY, DISRUPT AND DISMANTLE: COORDINATING THE GOVERNMENT'S ATTACK
ON TERRORIST FINANCING
----------
MONDAY, DECEMBER 15, 2003
House of Representatives, Subcommittee on
Technology, Information Policy,
Intergovernmental Relations and the Census
joint with the Subcommittee on Government
Efficiency and Financial Management, Committee
on Government Reform,
Tampa, FL.
The subcommittees met, pursuant to notice, at 11:05 a.m.,
at the Tampa Port Authority Headquarters, 1st Floor Board Room,
1101 Channelside Drive, Tampa, FL, Hon. Adam Putnam (chairman
of the Subcommittee on Technology, Information Policy,
Intergovernmental Relations and the Census) presiding.
Present from the Subcommittee on Technology, Information
Policy, Intergovernmental Relations and the Census:
Representative Putnam.
Present from the Subcommittee on Government Efficiency and
Financial Management: Representative Platts.
Staff present from the Subcommittee on Technology,
Information Policy, Intergovernmental Relations and the Census:
Robert Dix, staff director; John Hambel, senior counsel; Lori
Martin, professional staff member; and Ursula Wojciechowski,
clerk.
Staff present from the Subcommittee on Government
Efficiency and Financial Management: Michael Hettinger, staff
director; and Tabetha Mueller, professional staff member.
Mr. Putnam. A quorum being present, one from each
subcommittee, a quorum in Congress, I guess, the joint hearing
of the Subcommittee on Technology, Information Policy and
Intergovernmental Relations and the Census, and the
Subcommittee on Government Efficiency and Financial Management
will come to order.
Good morning and welcome, everyone, to today's oversight
hearing examining the Federal Government's efforts to combat
money laundering and terrorist financing. Specifically we will
be looking at how Federal agencies are coordinating their
efforts to identify terrorist financing and the role of
information technology in that endeavor.
On behalf of the Subcommittee on Technology, let me extend
my appreciation to Mr. Platts and his able staff. It has been a
model of congressional cooperation in setting aside turf and
moving forward to get to the bottom of a very important issue.
And in a few moments I will be yielding to Mr. Platts for
his opening remarks. He has been a leader in the money
laundering issues, and his work on financial management has
been outstanding.
I want to take a few minutes, though, to share a few
thoughts from the perspective of the Technology Subcommittee
that I have chaired this past year. One of the most effective
ways to prevent future terrorist attacks on Americans and our
allies is to disrupt the flow of the funds that finance the
organizations. This is a complex challenge for several reasons.
Federal agencies and State and local law enforcement must
coordinate efforts with the private sector to identify
transactions that raise suspicion. Considering the amount of
information collected every day by banks and other financial
institutions, this is a daunting task. In addition, the way
terrorists move money through our financial institutions makes
it even more difficult to identify and dismantle their funding
schemes. We can't let the expense and difficulty of the task,
though, keep us from pursuing and accomplishing this critical
national security goal.
Federal and local law enforcement have worked together for
years to uncover money laundering activity. Through the Bank
Secrecy Act, the Money Laundering Control Act, and the National
Money Laundering Strategy, Congress has given agencies the
legislative tools to implement policies that help local law
enforcement identify illicit financial activity. The focus of
these efforts shifted after the attacks of September 11th.
While there are some similarities in the way money is moved
in money laundering schemes, terrorist financing often finds
its source in seemingly legitimate organizations. Illicit funds
provided through money laundering can and do provide a ready
source of money for terrorists. The full scope of terrorist
financing, though, is much larger. One of the greatest
challenges we face is how to improve the coordination and
information sharing between Federal agencies such as Treasury,
DHS, FBI and State Department with local authorities and
private institutions.
While the use of emerging information technology can
greatly assist in coordinating efforts, as well as identifying
and tracking suspicious financial data, the right policy and
trained personnel are essential in accomplishing this goal. And
as always, we have to be mindful of the need to protect civil
liberties as well as the privacy and physical security of the
financial data that is being gathered and analyzed.
Congress and the administration have done extensive work
already in setting sound policy to assist in the task of
shutting down terrorist financing. Enactment of the U.S.
Patriot Act and creation of the Department of Homeland Security
in response to September 11th has required Federal agencies to
alter the way financial crimes are defined and targeted with an
emphasis on much-needed coordination.
Congress will also be reassessing the National Money
Laundering Strategy in the coming year to determine whether and
how it should be renewed, since it is currently authorized only
through 2003.
And, finally, it is critical that Congress continue to
exercise its oversight responsibilities as agencies learn to
leverage resources and utilize information technology
effectively and efficiently. This is an issue that is near and
dear to the Tampa Bay area, with the Sami al-Arian case at the
University of South Florida as well as other incidents in our
area.
And it is important and appropriate that we hold this field
hearing here in Tampa where we have a number of local and
Federal law enforcement agencies who have firsthand experience
in dealing with this terribly complex task. And we appreciate
certainly Chairman Platts' willingness to fly to Florida from
Pennsylvania in the dead of winter to be with us and join us.
And we would certainly be remiss if we did not acknowledge
the tremendous holiday gift to all mankind that occurred
yesterday courtesy of the American soldiers and sailors and
marines and airmen who delivered Saddam Hussein to the world to
stand trial and find justice for the crimes that he has
committed against the Iraqi people.
With that, Mr. Platts, thank you so much for your
assistance, and welcome to Florida.
[The prepared statement of Hon. Adam H. Putnam follows:]
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Mr. Platts. Thank you, Mr. Chairman. It is great to be here
with you. And I echo your sentiments about the appropriateness
of our subcommittees working together as we are going to be
talking about cooperation within our law enforcement
communities on terrorist financing. It is certainly appropriate
as a body that Congress try to show cooperation and
coordination as well.
And I also echo your sentiments on the great news that we
got yesterday. And yesterday was about capturing Saddam
Hussein, the person. Today it is about how we cutoff the money
that flows to the people like Saddam and help funnel the
terrorist attacks, whether it be against Iraqis, Americans or
other peace-loving citizens around the world.
So I appreciate your hosting today's hearing. It is always
important, I think, for us when we have field hearings, a
chance to get out into our communities and meet with follow
public servants as well as for citizens to maybe see government
in action a little closer to home. And this hearing certainly
is an important one, and maybe, with the timing of yesterday's
capture of Saddam, all the more important that we are here
today.
We certainly know that financial crime is the functional
equivalent of a war industry for terrorists. Money provides the
life blood for acts of terror. Criminal activity we typically
associate with money laundering, smuggling, drug sales,
counterfeiting offer terrorists a ready source of funds. The
scope of terrorist financing, however, is unfortunately much
larger than that.
Legitimate charities, as was experienced here in south
Florida, nonprofit corporations, think tanks have all funneled
millions of dollars through the U.S. banking system to fund
terrorist activities. Many of the organizations have earned
tax-exempt status from the IRS. This new reality driven home by
the tragic attacks on September 11th require a new focus in the
war on financial crime. While the source and destination of
funding may differ, the mechanism used to disguise funds for
terrorist organizations are similar to those used by drug
traffickers and criminal organizations.
With tools provided by the USA Patriot Act and the
strategic efforts that have been in play to fight drug cartels,
the Federal Government has sharpened its focus and promoted
unprecedented coordination among law enforcement entities and
foreign governments. And I know we are going to hear much about
that coordination here today.
It is difficult to quantify the success of the Federal
Government's attack on terrorist financing. While we know that
millions of dollars in assets have been frozen around the
world, the ultimate goal of terrorist financing investigations
is the disruption of the flow of money, a result much more
difficult to quantify.
The United States has sought and received unprecedented
support from other countries in overhauling the laws governing
the international financial system and in designating entities
as supporters of terror. And we have increased transparency and
vigilance in the private sector. Our best weapon to attack
money laundering and terrorist financing threats is a
comprehensive and coordinated response. In this case,
efficiency and effectiveness are not just good government
rhetoric, they have the potential to save lives by preventing
terrorist attacks.
Recognizing the need for coordination efforts, as you
referenced, in 1998 Congress mandated the development of an
annual National Money Laundering Strategy. Much has changed
since that time. Five years later, the National Money
Laundering Strategy is up for reauthorization. We in Congress
have a responsibility to take a hard look at whether this type
of approach is the most effective.
We need to be sure that our dedicated law enforcement and
other government officials continue to have the tools they need
to be responsive to changes in technology and methodology, and
the flexibility to keep up with emerging challenges. We must
continue to enhance our ability to identify and eliminate
various avenues used to launder money, whether it be for drug
traffickers, criminal organizations or terrorists.
And we certainly today have a great panel of witnesses who
are on the front lines of the war on terrorism and on terrorist
financing. I want to thank each of you for your participation
here today, but especially for your service to our Nation and
our fellow citizens. We are blessed because of your service of
you and your colleagues, and I certainly look forward to your
testimony and appreciated the weekend reading you provided in
providing that testimony to us ahead of time and allowing us to
have an even more informed dialog here today. So thank you, Mr.
Chairman.
Mr. Putnam. Thank you, Mr. Chairman.
At this time, as is the custom with the Government Reform
Committee, we will swear in our witnesses. I would ask the
panel and anyone accompanying the panel who will be providing
supplementary information to please rise and raise your right
hands.
[Witnesses sworn.]
Mr. Putnam. Note for the record that all of the witnesses
responded in the affirmative.
We have notified the public that we will be here about 2
hours. We typically allow 5 minutes for opening statements. I
think, considering the size of the subcommittee and the
importance of the topic, if you go a little bit over, we are
certainly not going to hit the eject button on you. But we
would ask you to summarize your statements in 5 minutes or as
close to that as possible so we can get into the question and
answers and dialog.
Our first witness for this hearing is Jeff Ross. Mr. Ross
is the senior advisor for the Executive Office for Terrorist
Financing and Financial Crimes with the Department of the
Treasury. Mr. Ross serves as senior advisor in the area of
money laundering and terrorist financing in this newly created
office. That office, reporting to the Deputy Secretary of the
Treasury, has been charged with coordinating and leading
Treasury's multifaceted efforts to identify and attack
systematically terrorist financing, money laundering and
financial crimes, as well as spearhead the effort to identify
and freeze Iraqi assets looted by the former regime.
Mr. Ross, you have $750,000 in additional assets thanks to
the capture of Saddam Hussein. Welcome to the subcommittee.
STATEMENT OF JEFF ROSS, SENIOR ADVISOR, EXECUTIVE OFFICE FOR
THE TERRORIST FINANCING/FINANCIAL CRIMES, U.S. DEPARTMENT OF
THE TREASURY
Mr. Ross. Thank you, Mr. Chairman. Thank you both.
Preliminarily, this hearing is not about his capture, but I
will note for the record that Mr. Hussein felt that there were
four essentials for his survival: a ventilator fan, an air
pipe, a pistol, and, as you correctly noted, $750,000 in crisp
U.S. $100 bills. So ``follow the money where the money goes''
even as of yesterday was pointed out again.
Good morning, and thank you again for the invitation. I
have prepared a formal written testimony, which I would
appreciate if the subcommittee would accept into the record.
Mr. Putnam. Mr. Ross, before you begin, could you pull the
mic a little bit closer, or clip it to your tie or something?
We want to make sure that the reporter picks it up.
Mr. Ross. OK. Preliminarily I would like to thank these
committees and the Congress for the new and enhanced tools
which the Congress has given the executive branch to identify
and attack terrorist financing, money laundering, and other
financial crimes. I assure you we will use those powers
aggressively, but judiciously.
Money serves both as the fuel for terror, narcotrafficking
and organized crime, as well as a significant vulnerability.
Money flows leave a signature and audit trail; provide a road
map, which, once discovered, might well prove the best single
means for identification and capture of terrorists and their
facilitators and other criminals. If we and our international
partners can identify, follow and stop the money, we will have
gone a long way to destroy this infrastructure.
The Treasury strongly believes that resources devoted to
fighting money laundering and financial crimes reap benefits
far beyond merely addressing the underlying financial crimes
that they are targeting. The terrorist financiers, money
launderers and other financial criminals leave footprints in
the global system, and these footprints lead in two directions,
both forward to identify future perpetrators and facilitators
and backward to identify supporting entities and individuals.
Additionally, it leads to information which would allow for
asset recovery.
To pursue this following-the-money approach, last March
Treasury established the Executive Office, which the chairman
was kind enough to describe. It is a small office with a lot of
responsibilities, the last of which is the search for and
attempt to repatriate as much of the Iraqi assets as Hussein
looted as is possible.
A quick mention about Tampa. I agree, this is a fitting
venue for this hearing. Tampa law enforcement has been and is
on the cutting edge of investigating and prosecuting both, Mr.
Whitehead. More than a decade ago the BCCI case filed here in
Tampa revealed the global implications of money laundering, and
that case has become a byword for the complexity and global
reach of international money launderers.
On the terrorist financing front, as we have already heard,
the Sami al-Arian case, which is a principal case here, and
terrorist financing was a principal component of the charges in
that case.
Just as money laundering involves the placement, movement
and integration of criminal proceeds in the legitimate
financial system, the horrific end results of terrorist
activities require the raising, movement and use of large
volumes of funds. The terrorist act itself cannot be
accomplished without a sophisticated financial and operational
infrastructure that costs millions, if not tens of millions, of
dollars. This infrastructure--including purchasing safe houses,
martyrs' family support, recruitment costs, indoctrination
costs, logistical and personnel training and support, and
finally the purchase of weapons--must be exploited.
The committees have asked for some examples of successes in
this war. Perhaps the most visible weapon on the financial
front of the war against terrorism has been the public
designation of terrorists and their support network coupled
with freezing their assets under Executive Order 13-224, put
out by the President September 24, 2001. To date, 344
individuals and entities, including 23 charities, have been
designated, or over $136 million frozen worldwide.
However, numbers designated and funds frozen must never be
construed as the ultimate barometer of the effectiveness of our
financial war on terrorism. Only a small measure of success is
counted in the dollars frozen. The larger balance is found in
the changes that the global attacks have cost in the
methodologies of raising, moving and using the financing of
terror. All engaged in terror financing systems are at
increased risk and scrutiny, domestically by the Patriot Act,
in Saudi Arabia by increased scrutiny on charities, in the
Middle East and Pakistan on remittances, and the alternate
remittance system. Compelled changes in financing methodologies
disrupt systems, increase the risk of detection and may
ultimately dry up the pipelines themselves.
Other noteworthy achievements: Almost 700 terror-related
accounts blocked worldwide, 100 in the United States; 172
countries' blocking orders in force against assets of
terrorists; 80 countries have introduced new terror-related
legislation; 84 countries now have FinCEN-equivalent financial
intelligence units.
Treasury, with Department of State, established a $5
million Treasury counterterrorism fund. As we sit here, there
has been created and there is in place an FBI-IRS CI training
capability in Saudi Arabia working on the financial side. IRS
CI has 41 interagency SAR review teams, including one operating
right here in Tampa as we speak, download and review 140,000
SARs annually for possible leads to terrorist financing. The
Financial Action Task Force has issued special recommendations.
There have been--40 countries accepted an Abu Dhabi Declaration
on Hawalas, which is an important alternative remittance
system, international attack.
Since passage of the Patriot Act, 14,000 money service
businesses have registered with FinCEN, very important, now
subject to SAR reporting. There have been a number of
Department of Justice-initiated cases, which are described in
the formal testimony, and I will leave the FBI and Justice to
wax on those.
Second component, the 2003 National Money Laundering
Strategy. The strategy was released last month, has three
overarching goals: Safeguarding the national financial system
for money laundering and terrorist financing; enhance the U.S.
Government's ability to identify, investigate and prosecute
money laundering organizations; and ensure effective
regulation.
The core principle of this strategy is enhancing our
ongoing efforts to combat money laundering by using interagency
approaches such as HIFCAs, OCDETFs, SAR review team and HIDTAs.
We also are using our asset forfeiture laws. The Treasury
Executive Office for Asset Forfeiture reports that fiscal year
2003 receipts into the Treasury fund exceeded $250 million,
which is a 45 percent increase over the fiscal year 2002
receipts.
Through OFAC we are implementing the specially designated
Narcotics Trafficker Program. We are working on the Foreign
Narcotics Drug Kingpin Act program to attack drug money
launderers. We have identified, through cases, clear links
between Colombia and terrorism and narcotrafficking.
Regulatory effectiveness. Patriot Act mandates the greatest
numbers of substantial changes to the U.S. anti-money-
laundering regulatory regime in recent memory. Among things we
have done is we have closed off our financial borders to
foreign shell banks, required additional due diligence for
correspondent accounts, required foreign banks with
correspondent accounts to identify a person for service of
process. We have required U.S. financial institutions to
establish customer identification and verification.
Two points in the Patriot Act I would like to mention very
briefly. Patriot Act section 311 enables the Secretary to
protect the U.S. financial system against specific terrorist
financing and money laundering threats posed by foreign
financial institutions, accounts or even jurisdictions. The
mere possibility of these designations has caused the nations
to make changes to their legal and regulatory regimes and
enhance the global anti-money-laundering and terrorist
financing infrastructure.
Another provision is 314(a), which permits FinCEN to make
contact with over 29,000 U.S. financial institutions in one
fell swoop. It permits law enforcement agencies quickly to
locate the accounts and transactions of those suspected of
significant money laundering or the financing of terror. Since
it was inaugurated last February, it has supported 64
terrorism/terrorist financing cases and 124 money laundering
cases. Three indictments have resulted, in part, from searches
made under this system, 407 grand jury subpoenas, 11 search
warrants.
Very quickly on technology, criminals benefit from
enhancements in technology, as both these subcommittees are
well aware. So does U.S. law enforcement. Technology holds one
of the keys to our success in the financial war on terrorism.
Appendix H of the National Money Laundering Strategy has a long
report on terrorist financing on-line. It identifies how we are
trying to identify and attack it.
IRS CI has a pilot counterterrorism project that is
utilizing all Treasury data bases as well as tax-related--
protected tax information, to support FBI Joint Terrorism Task
Forces.
Finally, FinCEN since September 11 has supported 2,692
terrorist investigations. The terror hotline has resulted in
789 tips. FinCEN has received over 2,842 SARs possibly related
to terrorist financing.
Technology works in two directions. We at the Treasury are
trying to work from our side. Thank you very much.
Mr. Putnam. Thank you, Mr. Ross.
[The prepared statement of Mr. Ross follows:]
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Mr. Putnam. Our next witness is George Glass. Mr. Glass has
been Director of the Office of Terrorist Finance and Economic
Sanctions Policy in the State Department since just after the
September 11, 2001, World Trade Center and Pentagon attacks. He
presently also serves as Acting Deputy for Energy, Commodities
and Sanctions. Prior to September 2001, he was Deputy Chief of
Mission at the U.S. Embassy in Bern, Switzerland. He served as
U.S. Consul General in Bavaria, Germany, from 1997 to 2002.
Welcome to the subcommittee.
STATEMENT OF GEORGE A. GLASS, DIRECTOR, OFFICE OF TERRORISM
FINANCE AND SANCTIONS POLICY, BUREAU OF ECONOMIC AND BUSINESS
AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. Glass. Thank you, Chairman Putnam, Chairman Platts,
distinguished members of the committee. I want to thank you for
the opportunity to testify today on U.S. efforts to combat
terrorist financing.
The United States is engaged in a long-term war against
terrorism. I thank you for your support and for providing the
necessary tools for waging this war. This fight requires
actions on multiple fronts.
We have made substantial progress, but an awful lot remains
to be done. Since September 11, 2001, the United States, as
noted, has ordered the freezing in the United States of the
assets of 344 individuals and entities linked to terrorism.
We have supported the submission by dozens of countries
around the world of some 244 al-Qaeda-linked names for
inclusion in the U.N. asset freeze list requiring all countries
around the world to take action against these names. We have
frozen approximately $136.8 million in almost 50 countries,
including the United States. We have instructed our embassies
formally to approach every country, every government around the
world some 75 times to freeze each name that we designate.
We have developed a broad international coalition against
terrorist finance. We have stopped a major hawala network based
out of Somalia, which had been operating in some 40 countries.
We acted against supporters of the Asian terrorist group linked
to the Bali disco bombing. We designated charities funding
Hamas, and we disrupted Saudi terrorist financiers.
We assisted the strengthening of national laws, regulations
and regulatory institutions around the world to better combat
terrorist finance and money laundering, and through all of this
we made it harder for terrorists and for their supporters to
use financial systems.
Particularly important in making this happen is the fact
that we have come a very long way over the past 2 years in
terms of U.S. Government interagency coordination. We improved
the degree to which all agencies with equities related to the
pursuit of terrorist financing cooperate and coordinate their
efforts. This strong interagency teamwork involves the
intelligence and law enforcement communities as well as State,
Treasury, Homeland Security, Justice, and the financial
regulatory agencies all collectively pursuing understanding of
the system of financial backers, facilitators and
intermediaries that play a role in this shadowy financial
world.
A key weapon against terrorist finance has been the
President's Executive Order 13224, signed on September 23,
2001, just 12 days after the terrorist attacks of September
11th. The order provided the basic structure and authorities
for an effort unprecedented in history to identify and freeze
the assets of individuals and entities associated with
terrorism across the board. Under the Executive Order the
administration has frozen the assets of 344 individuals and
entities on 47 separate occasions. The agencies cooperating in
this effort are in daily contact, looking at and evaluating new
names and targets for possible asset freeze.
However, our scope is not just limited to freezing assets.
We have very successfully used other actions as well, including
developing diplomatic initiatives with other governments to
conduct audits and investigations, exchanging information on
records, cooperating in law enforcement and intelligence
efforts, and in shaping new regulatory initiatives.
We also have a very substantial interagency commitment that
provides counterterrorist finance training to help our
coalition partners develop and enhance their capabilities to
detect, disrupt and dismantle terrorist financing networks by
strengthening the legal frameworks, providing financial
investigative training, training banking regulatory communities
on suspicious transactions, developing financial intelligence
units that cooperate internationally, and strengthening the
ability of prosecutors to bring terrorist financiers to
justice. We have already assessed and are providing assistance
to a number of high priority countries in this area.
Internationally, the U.N.'s role in response to the
challenge of terrorist financing has been significant. This is
extremely important because most of the assets making their way
to terrorists are not under U.S. control; and, when it comes to
al-Qaeda in particular, it means that when an individual or
entity is included in the U.N. sanctions list, all 191 U.N.
member states are obligated to implement the sanctions,
including asset freezes against these individuals and entities.
The U.N. has added a total of some 244 al-Qaeda-linked names to
its consolidated list since September 11th.
U.S. efforts against terrorist finance are active in all
regions of the world. Saudi Arabia has been one important
focus. On October 12, 2001, we froze the assets of Saudi
millionaire Yasin al Kadi because of his links to al-Qaeda. He
was designated and listed by the U.N. for worldwide sanctions.
Subsequently we and the Saudi Government submitted, on March
11, 2002, the names of the Somali and Bosnian branches of the
charity al Haramain to the United Nations, also for worldwide
asset freezing. We and the Saudis also submitted the name of
Wael Julaidan, a prominent Saudi al-Qaeda financier, to the
U.N. for sanctions, including asset freeze, on September 6,
2002.
Saudi Arabia has made changes to its banking and charity
systems to help strangle the funds that keep al-Qaeda in
business.
Another key focus of terrorist finance has been Hamas,
which was first formally designated by the U.S. Government as a
foreign terrorist organization in October 1997. On August 22nd
of this year, just a few months ago, the President announced
the designation for asset freezing of five key Hamas
fundraisers. On that day he also announced the designation of
six top Hamas leaders. Hamas's suicide bombings demonstrate the
organization's commitment to undermining any real efforts to
move toward permanent peace between Israel and the
Palestinians. Shutting off the flow of funds to Hamas is
crucial to reducing Hamas's ability to carry out its activities
and to thwart progress toward peace.
In Asia we have also been active. We have been working
closely with the governments in Asia to stop funding for Jemaah
Islamiyah, an organization linked to the September 2002 Bali
disco bombing.
Another key focus has been hawalas, or informal money
remittance systems, which have posed special challenges in the
Middle East and South Asia. We have made a special effort to
engage countries on hawalas and other informal networks,
encouraging innovative solutions, including via technical
assistance and regulatory oversight.
Mr. Chairman, asset freezes and arrests get the headlines,
but diplomatic action also makes a difference. When we talk
about diplomatic approaches for dealing with targets, we are
talking about getting other governments to cooperate in the war
against terrorist financing by taking concrete actions of their
own, including law enforcement and intelligence actions, as
well as getting them to speak out publicly against terrorist
groups.
It has involved encouraging foreign governments to
prosecute key terrorists and terrorist financiers, to extradite
a terrorist financier, to pass strong antiterrorist financing
legislation, to prohibit funds from being sent to a charity,
and to make sure companies funneling funds to terrorists are
shut down.
We have made it more difficult for terrorists to move and
collect funds, but we still have a long way to go given the
dimensions of this challenge.
Mr. Chairman, I would like to thank you both for the
opportunity to address this important issue.
Mr. Putnam. Thank you, Mr. Glass.
[The prepared statement of Mr. Glass follows:]
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Mr. Putnam. Our next witness is Mr. Carl Whitehead, Special
Agent in Charge here in Tampa, Mr. Whitehead with the FBI. Mr.
Whitehead entered duty with the FBI in 1982 and has served in
the Detroit, Los Angeles, New Orleans and San Antonio field
offices.
During his career Mr. Whitehead has directed several
significant drug, public corruption, and violent crimes
investigations, most recently as an inspector in the Inspection
Division with FBI headquarters in Washington. Mr. Whitehead has
significantly contributed to ensuring the operational and
administrative efficiencies of the FBI.
Welcome, Mr. Whitehead. You are recognized.
STATEMENT OF CARL WHITEHEAD, SPECIAL AGENT IN CHARGE, TAMPA
OFFICE, FEDERAL BUREAU OF INVESTIGATION, U.S. DEPARTMENT OF
JUSTICE, ACCOMPANIED BY FRANK J. FABIAN, UNIT CHIEF, TERRORIST
FINANCING OPERATIONS SECTION, WASHINGTON, DC
Mr. Whitehead. Thank you. Good morning, Mr. Chairmen and
members of both subcommittees. I would like to, on behalf of
the FBI, to thank you for giving us the opportunity to
participate in this forum and to provide comments on the FBI
achievements, together with our partners, in the ongoing effort
to identify, dismantle, and disrupt sources of terrorist
financing. I also appreciate the opportunity to highlight the
FBI's use of information technology to better identify and
isolate suspicious transactions related to terrorist financing.
As you are aware, since September 11, 2001, the FBI has
relocated or reallocated substantial resources to protect the
American people from another terrorist attack. At FBI
headquarters, the Counterterrorism Division has been
reorganized to provide a more centralized, comprehensive, and
proactive approach to investigating terrorist-related matters.
In the field we have increased the number of agents devoted to
terrorism cases and expanded the ranks of our Joint Terrorism
Task Forces [JTTFs], which involve agents and officers from a
host of State, local and Federal partners.
Given the focus of this hearing, you clearly appreciate
that the fight against terrorist financing is a major front in
our war on terror. Simply put, terrorists and their networks
require funding in some form to exist and operate. Whether the
funding and financial support is minimal or substantial, it
leaves a financial trail that can be traced, tracked and
exploited for proactive and reactive purposes.
Being able to identify and track financial transactions and
links after a terrorist act has occurred is only a small part
of the mission for us. The key is honing our ability to exploit
financial information to identify previously unknown terrorist
cells, recognize potential terrorist activity, and predict and
prevent potential terrorist acts.
To this end the FBI has bolstered its ability to
effectively combat terrorism through the formation of the
Terrorist Financing Operations Section [TFOS]. TFOS was created
to combine the FBI's traditional expertise in conducting
complex criminal financial investigations with advanced
technologies and the powerful legislative tools provided by the
U.S. Patriot Act. To achieve its goals TFOS has developed a
strong support network within the private financial sector and
encouraged the cooperation and coordination among law
enforcement and intelligence agencies both here and abroad.
In the past several months, TFOS has demonstrated its
capabilities by conducting near real-time financial tracking of
a terrorist cell and providing specific and identifiable
information to a foreign intelligence agency, which resulted in
the prevention of six potentially deadly terrorist attacks.
This recent success is not an isolated one. The FBI has
engaged in extensive coordination with the authorities of
numerous foreign governments in terrorist financing matters,
leading to joint investigative efforts throughout the world.
These joint investigations have successfully targeted the
financing of several overseas al-Qaeda cells. Additionally,
with the assistance of relations established with the central
banks of several strategic countries, successful disruptions of
al-Qaeda financing have been accomplished in countries such as
UAE, Pakistan, Afghanistan, and Indonesia.
Those of us in the field have also benefited from the
increased coordination and liaison being spearheaded at the
national-international level. TFOS has provided operational
support to FBI field divisions across the United States. This
assistance is providing a form of financial analytical support,
major case management, financial link analysis, and the
deployment of teams of experts to develop investigative plans
to analyze large volumes of documents and data. TFOS has
provided this type of operational support in the al-Qaeda
sleeper cell cases in Buffalo and Portland and many others.
Here in Tampa, we have seen the results of increased
coordination and cooperation in investigations like the
criminal case against Sami al-Arian, the alleged U.S. leader of
the Palestinian Islamic Jihad, and the World Islamic Study
Enterprise. As has been widely reported, that case resulted in
the closure of several front companies suspected of funneling
money to support PIJ operations against Israel.
In August 2002, an investigation led to the deportation of
Mazen Al-Najjar, the brother-in-law of Sami al-Arian and a
known PIJ member.
In February, following a 50-count indictment for RICO and
material support of terrorism violations, the FBI arrested al-
Arian and three other U.S.-based members of the PIJ. The FBI
also executed over 11 search warrants associated with this
case.
Despite the success and other achievements outlined in my
written testimony, we cannot rest in our efforts to combat
terrorist financing. The FBI has an ability to not only react,
but proactively and strategically think about potential threats
and future case developments. Technology is an important tool
in this effort.
The Proactive Exploits Group within TFOS has conducted an
extensive review of data-mining software and link analysis
tools currently utilized by other government entities and
private industries to assess their potential use by the FBI.
The Proactive Exploits Group has already created an interactive
computer playbook generator that can assist investigators in
determining data sources to be queried in their cases,
depending on the quantity and quality of their investigative
data.
Working with outside experts, the FBI has also developed a
process by where the Financial Intelligence Analysis Unit
within TFOS can batch query multiple data bases for potential,
after matches by names, telephone numbers, e-mails, etc. This
batch process has the potential to save the FBI hundreds if not
thousands of hours of data input and query time on each
occasion it is used. It also facilitates rapid acquisition and
the sharing of information with other agencies.
In my submitted remarks, several ongoing data analysis
projects are outlined in more detail. It is important to
understand, however, that these projects and similar
initiatives by TFOS seek only to more fully exploit information
already obtained by the FBI in the course of its
investigations, or through appropriate legal process, and where
there is an articulated law enforcement need. The FBI does not
seek to access personal or financial information outside of
these constraints.
I would like to use my final moments with the committee to
underscore the FBI's commitment to greater coordination and
cooperation with other agencies in this fight against
terrorism. At a national level, TFOS routinely participates in
joint endeavors with the agencies presented here today. We are
an active participant on the Policy Coordinating Committee on
Terrorist Financing, which is chaired by the Treasury
Department, and focuses on ensuring that all relevant
components of the Federal Government are acting in a
coordinated and effective manner to combat terrorism financing.
We have also benefited from agreements between the
Department of Homeland Security and DOJ that clarify our
complementary missions in the terrorist financing and money
laundering arenas. At a local level, we have long appreciated
the fact that the most difficult cases must be tackled in
concert with our sister agencies. That reality has become all
the more clear as we face the challenges of a terrorist threat.
Terrorism is a global problem that reaches into every
community. A solution is a willingness to engage in
unprecedented national and international cooperation and an
openness to new tools and new ways of thinking. The FBI is
committed to both.
Again I offer my gratitude and appreciation to you,
Chairman Putnam and Chairman Platts, as well as the
distinguished members of both committees for dedicating your
time and effort to this important issue.
Mr. Putnam. Thank you, Mr. Whitehead.
[The prepared statement of Mr. Whitehead follows:]
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Mr. Putnam. Our next witness is Ms. Marcy Forman, Deputy
Assistant Director for Financial Investigations Division, U.S.
Immigration and Customs Enforcement at the Department of
Homeland Security.
In this position, Ms. Forman has oversight on three
specific initiatives under the Financial Investigations
Division, the centerpiece of which is Cornerstone. Cornerstone
focuses on identifying means and methods used by criminal
organizations to exploit financial systems through the
transfer, laundering, and/or concealment of the true source of
criminal proceeds.
Welcome to the subcommittee. You are recognized.
STATEMENT OF MARCY M. FORMAN, DEPUTY ASSISTANT DIRECTOR,
FINANCIAL INVESTIGATIONS DIVISION, U.S. IMMIGRATION AND CUSTOMS
ENFORCEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY
Ms. Forman. Thank you. Good morning, Chairman Putnam and
Chairman Platts. It is a privilege to appear before you to
discuss the ongoing law enforcement efforts and accomplishments
of the Department of Homeland Security [DHS], Bureau of
Immigration and Customs Enforcement [BICE]. BICE Financial
Investigations is committed to protecting the integrity of
America's financial systems against the exploitation by money
launderers and those who finance terrorism.
I would like to begin by commending Congress for its
decisive and immediate enactment of the USA Patriot Act,
enabling law enforcement to more effectively investigate money
laundering and terrorist finance activities in order to protect
the financial systems of this Nation.
DHS fully supports the mission of BICE. Secretary Ridge
demonstrated this commitment by participating in the rollout of
BICE's Cornerstone initiative in July 2003, which I will
discuss further in my testimony.
BICE is pleased to have the Department's full support in
these investigations and in working cooperatively with the
private sector to help reduce the vulnerabilities of the
financial systems exploitation.
Financial investigations continue to be a BICE priority.
BICE brings a unique assembly of over 30 years of financial
investigative expertise, powerful statutory authorities and
cutting-edge investigative techniques in the conduct of money
laundering and terrorist financing investigations. The
enactment of the USA Patriot Act serves to further enhance
these investigative techniques.
The enactment of the Money Laundering and Financial Crimes
Strategy Act in 1998, which mandated the National Money
Laundering Strategy, serves as a blueprint for addressing
investigative financial priorities.
BICE and the former U.S. Customs Service has time and again
demonstrated its expertise in the kinds of complex, large-
scale, and high-impact investigations that BICE continues
today. For example, the BICE-led investigations in such cases
as the BCCI in Tampa, Operation Greenback in South Florida,
Operation Casablanca in Los Angeles, Operation Wirecutter in
New York, Operation Green Mile in Phoenix, and the BICE-led
initiatives in the New York El Dorado Task Force. In these
cases and initiatives alone, BICE, in conjunction with other
Federal, State and local law enforcement, has seized
approximately $900 million in criminal proceeds.
I would like to take a moment to highlight the ongoing
successes of the El Dorado Task Force. The El Dorado Task Force
was created in 1992 and is the largest and most prominent
interagency money laundering task force in the country. One
recent El Dorado investigation led to the guilty plea of
Broadway National Bank for violations of the Bank Secrecy Act,
and paid a $4 million fine, the most significant BSA-related
prosecution in many years.
This task force has since been the model for the
establishment of other money-laundering task forces throughout
the law enforcement community. It also served as a template for
the creation of the High Intensity Financial and Related Crimes
Areas, HIFCAs, that were created as part of the National Money
Laundering Strategy.
In response to the events of September 11, 2001, BICE,
through the former Customs Service established Operation Green
Quest. Operation Green Quest was an interagency task force
designed to augment existing counterterrorism efforts by
targeting financial networks through the application of a
systems-based approach to following the money.
Operation Green Quest was committed to the identification,
disruption, and dismantling of organizations which served as
sources of terrorist funding. In connection with the
consolidation within DHS, in May 2003 a memorandum of agreement
was reached between DHS and DOJ to clarify the roles and
responsibilities for terrorist financing investigations.
BICE adopted the successful methodology embodied in
Operation Green Quest to the new financial initiative called
Cornerstone, which was launched in July 2003. As part of this
initiative, BICE has expanded the longstanding working
partnership with the financial and trade sectors in an effort
to identify and eliminate the vulnerabilities that can be
exploited by criminal and terrorist organizations.
Through Cornerstone and its predecessors, BICE has achieved
great success in identifying systems that have been used by
narcotics traffickers, arms traffickers, and terrorist networks
to finance terrorist activities. These systems include trade-
based violations such as the black market peso exchange, the
largest trade-based laundering system in the Western
Hemisphere, the smuggling of bulk cash, misuse of money service
businesses and the exploitation of charities and
nongovernmental organizations. Since October 25, 2001, the
combined efforts of Operation Green Quest and Cornerstone have
resulted in the seizure of approximately $35 million, have led
to the execution of 172 search warrants, 233 arrests, 163
indictments and 94 convictions.
With the integration of the statutory authorities and
investigative tools from the former Customs Service and the
former Immigration and Naturalization Service, BICE is able to
more effectively target vulnerabilities that facilitate illegal
activities.
Cornerstone systematically and strategically examines
financial systems that may be susceptible to abuse and seeks to
prevent their exploitation. In addition, Cornerstone relies on
the worldwide network of 37 BICE foreign attache officers,
which have established and continued to maintain criminal
relationships for corresponding law enforcement government
enemies in their host country.
I noted earlier a number of BICE investigative successes
and would like to provide a brief outline of a few of our
significant ongoing investigations. In northern Virginia, as a
result of the BICE, IRS, and FBI ongoing investigations of
charities and nongovernment organizations, Biheiri was
convicted for various immigration violations. In addition,
Alamoudi was arrested and indicted for violations of
immigration law, money laundering, structuring transactions
with the government of a state that supports terrorism, and the
International Emergency Economic Powers Act [IEEPA].
It is alleged that these individuals and their
organizations were financing terrorist groups around the world.
In Miami, BICE detained and seized approximately $5.6 million
in assets belonging to a high-ranking Nicaraguan Government
official who was alleged to have embezzled and laundered in
excess of $100 million. This investigation was conducted by the
BICE-led Foreign Political Corruption Unit, in coordination
with the BICE Attache Office/Panama, and the Nicaraguan
Government.
In Seattle, 13 individuals were indicted for transferring
$12 million to Iraq in violation of money laundering laws and
IEEPA. To date, the primary subject of this suggestion has been
convicted of money laundering and additional prosecutions are
pending.
In the New York-Newark metropolitan area, BICE, together
with IRS and other law enforcement agencies, conducted joint
investigations which targeted money service businesses
operating without a license. These investigations identified
the illegal transfer of about $100 million to countries of
interest.
To date, these investigations have resulted in 14 arrests,
12 indictments, 6 convictions for failure to register as a
money service business, and for other violations.
With these investigations, BICE has demonstrated the
benefits derived from the USA Patriot Act, specifically to the
statutory changes related to unlicensed money service
businesses, cash smuggling, and the expanded authority to
identify accounts belonging to suspects. The BICE Financial
Division has continuously evolved to match its investigative
priorities with the critical concerns of this Nation.
Since March 2003, BICE Financial and Strategic
Investigative Division has deployed four teams of BICE special
agents to the Iraqi theater of operations. BICE special agents
are conducting investigations relative to violations of U.S.
law, to include weapons of mass destruction, illegal
procurement of U.S.-origin technology, and money laundering.
BICE has established an Iraq task force in Washington, DC,
to review and analyze documents and financial records that have
been obtained through the world to identify violations of U.S.
laws. To date, BICE special agents have been responsible for
the recovery of over $32 million in cash hidden in Iraq by the
former regime, and are attempting to determine the source of
these funds.
As part of the DHS initiative to promote a partnership with
the private financial sector, BICE, in coordination with the
U.S. Secret Service, will hold semiannual Systematic Homeland
Approach to Reducing Exploitation [SHARE] meetings. SHARE
meetings will promote an exchange of information between
government and executive members of the financial and trade
communities that are impacted by money laundering, identify
theft, and various other financial crimes.
In support of SHARE, Cornerstone publishes Tripwire, a
quarterly newsletter that BICE provides to the financial sector
to address law enforcement concerns, emerging trends, patterns
and pathologies in the money laundering and terrorist finance
arena.
In conclusion, I would like to thank the chairmen for the
opportunity to testify before you today. I would also like to
thank the joint subcommittees for their continued interest and
support. It would be my pleasure to answer any questions.
Mr. Putnam. Thank you, Ms. Forman.
[The prepared statement of Ms. Forman follows:]
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Mr. Putnam. The financial witness is Mr. Bruce Townsend.
Mr. Townsend is currently Deputy Assistant Director of the U.S.
Secret Service Office of Investigations. A career member of the
Senior Executive Service, he oversees Secret Service offices in
the United States and in 20 countries abroad, he develops
Secret Service investigative policy, and leads the
investigative initiatives.
We welcome your input to the subcommittee and thank you for
being here. You are recognized.
STATEMENT OF BRUCE TOWNSEND, DEPUTY ASSISTANT DIRECTOR, OFFICE
OF INVESTIGATIONS, U.S. SECRET SERVICE, U.S. DEPARTMENT OF
HOMELAND SECURITY
Mr. Townsend. Good morning. Chairmen Platts and Putnam,
thank you for the invitation to testify on the subject of
terrorist financing and the role the Secret Service plays in
combatting this problem.
With me today is Special Agent in Charge John Joyce of the
Secret Service Tampa Field Office. I am pleased to report that
our Tampa Field Office is fully engaged and committed to the
interagency coordination that is necessary to assist in the
effort to keep America secure.
In addition to providing the highest level of physical
protection to our Nation's leaders, the Secret Service
exercises broad investigative jurisdiction over a wide priority
of financial crimes. As the original guardian of our Nation's
financial payment systems, the Secret Service has a long
history of pursuing those who would victimize our financial
systems and the law-abiding citizens of the United States.
In recent years, the combination of the information
revolution, the effects of globalization, and the rise of
international terrorism have caused the investigative mission
of the Secret Service to evolve dramatically. Today, our dual
missions of investigations and protection have become fully
interdependent and inseparable.
When the Secret Service moved from its home of 138 years in
the Treasury Department to the Department of Homeland Security,
we brought with us intact all of our personnel, resources, and
investigative jurisdictions and responsibilities. Today those
jurisdictions and responsibilities require us to be involved in
the investigation of not only traditional financial crimes but
also identity crimes, as well as a wide range of electronic and
high-tech crimes.
The events of September 11, 2001 have altered the
priorities and actions of law enforcement throughout the world,
and the Secret Service is no exception. Immediately following
the attacks, the Secret Service was able to bring its
experience in credit card and identity fraud as well as its
electronic crimes expertise to bear on the investigation,
working with the Department of Justice, and the FBI in the
following ways: Assisting in developing complete financial
profiles of all suspects, living and deceased, in the
investigation. Identifying other suspects through current and
historical financial investigations. Contributing to an
intelligence assessment regarding possible future acts through
analysis of money movement, expenditures, and other financial
data. Developing an analysis of current credit card usage by
the suspects in the investigation. Investigating more than
17,000 leads in support of the Department of Justice-led
investigation.
As part of the Department of Homeland Security, the Secret
Service continues to be involved in a collaborative effort
targeted at analyzing the potential for financial, identity,
and electronic crimes to be used in conjunction with terrorist
activities.
The Secret Service prides itself on an investigative and
preventative philosophy, which fully involves our partners in
the private sector and academia and our colleagues at all
levels of law enforcement in combatting the different types of
financial and electronic crime committed against the people of
the United States.
Central to our efforts in this arena are our liaison and
information exchange relationships with the Treasury
Department, the State Department, the FBI, and the Bureau of
Immigrations and Customs Enforcement. As a key element in our
strategy of sharing information and cooperating with other
agencies involved in the effort to keep America safe, the
Secret Service has assigned 58 special agents to the FBI's
Joint Terrorism Task Forces, as well as headquarters personnel
to the Bureau of Immigrations and Customs Enforcement [BICE],
Operation Cornerstone, and the Treasury Department's Financial
Crimes Enforcement Network [FinCEN].
It is through our work in the areas of financial and
electronic crime that we have developed particular expertise in
the investigation of credit card fraud, identify theft, cyber
crime, and bank fraud. Secret Service investigative focus is
often on organized criminal enterprises, both domestic and
transnational.
As Secret Service investigations undercover activities of
individuals or groups focusing on doing harm to the United
States, appropriate contact is immediately made and information
is passed to those agencies whose primary mission is
counterterrorism. For more than a century, the Secret Service
has maintained its dual missions of investigation and
protection. Whether it is through the investigation of
traditional financial and identity crime, the protection of our
Nation's critical and financial infrastructure, or the
safeguarding of our Nation's leaders, the Secret Service will
continue to devote all its resources to assist in keeping the
United States safe and secure from those wishing to do us harm.
Chairmen Platts and Putnam, this concludes my prepared
statement. I will be pleased to answer any questions.
Mr. Putnam. Thank you very much, Mr. Townsend.
[The prepared statement of Mr. Townsend follows:]
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Mr. Putnam. And thank you to all of our witnesses. And this
lays the foundation for I think an important dialog. And we
will let Mr. Platts begin with the questions. You are
recognized.
Mr. Platts. Thank you, Mr. Chairman. And, again, my thanks
to each of you for your testimonies and participation.
Maybe start with kind of a broader question regarding the
National Money Laundering Strategy. And all are free to answer.
But I think, Mr. Ross, and Ms. Forman, Mr. Whitehead, it kind
of directly relates to your three entities.
Currently, just the Department of Justice and Treasury sign
off on that strategy. With the realignment of duties and with
BICE being at DHS and Secret Service being at DHS, it seems
logical if we are going to reauthorize the strategy, now that
this initial 5-year period is up, that we would look at having
DHS be one of the signatories to that strategy, given the
important role that DHS plays in this issue.
I would be interested in the perspective of each of your
offices in adding DHS as one of the three signatories, instead
of just two.
Mr. Ross. Thank you, Mr. Chairman. I agree with you. I
think, if it is reauthorized--and I understand Senator Grassley
has a bill that would reauthorize the Money Laundering
Strategy, I think through 2006. I agree with you.
I think, given the competences and the capabilities that
have been transferred from Treasury over to DHS, particularly
the antimoney-laundering areas described by Ms. Forman on
Cornerstone, I think DHS is an integral player to the money
laundering strategies.
In fact, they were consulted with respect to this one. I
think the timing was just such that the signature wasn't there.
But I concur. The Treasury Department concurs.
Mr. Platts. Mr. Whitehead, for Justice. Any objections to
DHS having to sign off as well?
Mr. Whitehead. Well, clearly DHS is an important part of
the equation. And I think, as Mr. Ross said, it was probably a
timing issue there as for when the first agreement was signed.
So there would be no objections, from my perspective. Of course
I am looking at it from the local perspective, but, nationally,
I wouldn't see where there would be an opposition to that.
Mr. Platts. I assume, Ms. Forman, DHS would like to have a
greater say in that strategy if it is to be reauthorized. And
maybe if you want to speak also to the issue--and, if others
want to add as well--should we be reauthorizing it in a similar
form to what it is, or should we look at some significant
changes, given the events of the last 5 years?
Ms. Forman. To answer the first question, I agree DHS
should be an integral part of the Money Laundering Strategy,
and I believe we will be, based on the historical perspective
as well as our current perspective in money laundering
investigations.
With regards to the reissuance of a National Money
Laundering Strategy, I certainly would support it with some
modifications in terms of probably greater accountability in
terms of the participants, agents, as well as a proposal for
some funding resources to go along with it.
Mr. Platts. And accountability for developing better
performance standards, kind of how to judge what everyone is
bringing to the table? In what sense would you envision more
accountability?
Ms. Forman. Performance standards as well as compliance
with the dictates and the agreements in the strategy, and based
on the goals and objectives that are set forth, to make sure
that we are in concert in reaching those goals and objectives.
Mr. Platts. That kind of begs the question: Are there
specific examples that you believe now we are not doing that,
that we are not--all entities that are part of the strategy are
not complying with all of the aspects of the strategy?
Ms. Forman. No. I think all of the agencies are in--going
in the direction to achieve those. But I think we need to
prioritize in terms of which ones we can achieve realistically
during the timeframes that are set out.
Mr. Platts. Any other comments on maybe the
reauthorization? Any changes from what we currently have, if we
are going to reauthorize?
Mr. Ross. One point I would like to make since the fact
that since September 11, it has been a greater emphasis,
obviously, on terrorist financing. As everyone has testified,
the systems that are utilized by terrorist financiers and the
systems that are utilized by money launders are virtually the
same. There are different players involved. For instance, you
don't usually find narcotraffickers using charities to move
narcoproceeds.
But the systems themselves, the bulk couriers, the money
remitters, the money order sales, the international movements
of funds, the systems are the same. So I think that to the
extent that it is reauthorized, it would not be untoward to
maintain a terrorist financing component within the strategy
itself, as we have done.
With respect to changes, I think a yearly report in a lot
of cases causes some of the tensions that Ms. Forman was
talking about, and that possibly something along the line of a
different yearly report, a yearly report in a little different
timeframe than February, might be something to consider with
respect to the strategy. And also additional resources and
funding, I think are important, particularly, if we are--if
Congress is looking to reauthorize a continuation of the HIFCA-
type program.
As you know, setting up a program with no funding and no
resources and kind of on a voluntary basis is very difficult at
best, and in some circumstances could suggest, you know, taking
from Peter to pay Paul, and that sort of thing. So I think
funding and resources would be an area in which we would like
to work closely with Congress if it is determined to
reauthorize.
Mr. Platts. And, Mr. Ross, you kind of touched on a
followup I had, was with the funding issue, with the HIFCAs.
And if we are reauthorizing and continue that mandate, should,
one, there be a dedicated funding stream for that requirement,
and should HIFCAs be part of that reauthorization, given how
they have been used thus far?
Mr. Ross. I think in the HIFCA context, a lot of it has
been determined by what existed before, as opposed to what you
are trying to recreate. As Ms. Forman testified, the El Dorado
Task Force was kind of the paradigm example of an interagency
financial task force that preexisted. It became kind of the
centerpiece with respect to the HIFCA.
The program, it was a fairly easy transition. In other
areas where you did not have a specific interagency approach to
financial crime, it is more difficult to try to pull the pieces
together. And I think there, if you have a greater system
accountability, as Ms. Forman said, and also funding, I think
it will greater enable the districts and geographic areas of a
sense of how they want to function, how do they want to pull
together, what do they want to concentrate on? Do they want to
specialize in narcotics money laundering? Do they want to
specialize across the board?
I think that we do need to add some form and structure.
Treasury will work--delighted to work very closely with all
committees of the Congress as this goes forward.
Mr. Platts. I have one more kind of broad issue, and then
yield back to the chairman. We are going to have several
rounds. I appreciate your allowing us that, and your patience,
as we do have a lot of questions.
When we look at--and we have had I believe tremendous
success, knowing that we have a deadly enemy out there that, if
given the opportunity to have another September 11th, would
have it tomorrow if they could pull it off. And we need to be
grateful for the work of our Intelligence Community, our law
enforcement community, our military, that have taken the fight
to Osama bin Laden and al-Qaeda instead of waiting for them to
bring the fight to us again.
But, as we are always looking to improve in how to
strengthen our abilities, and while we are grateful for the
successes over the last plus 2 years, one of the things that
when I look at the reorganization, when we created the
Department of Homeland Security, was to really try to bring
together under that one roof the various entities involved in
this battle and this war on terror. And with, you know, the
historic move of Secret Service from Treasury to DHS,
Immigration and Customs, the various aspects that were
consolidated--and then we have the memorandum of agreement this
summer that kind of undoes what I thought that we were doing
with the creation of the Department and the shift of the
criminal investigation responsibility out of the Department to
the FBI and the Department of Justice, which seems to negate
the advantages of DHS, especially with Treasury and BICE being
in DHS.
I welcome all of your comments on have we consolidated and
then, in the end, decentralized through that memorandum of
agreement. And maybe it ties into State as well, by the fact
that we now have the FBI with the lead on criminal
investigations, we have DHS and BICE kind of on the--guarding
the framework, protecting the framework of the financial
community, and then we have State chairing the Terrorist
Financing Working Group that kind of brought everyone together,
then through that kind of agreement have gone the opposite way.
Am I missing something in that belief?
Mr. Townsend. Mr. Chairman, I will kick that one off. With
regard to the Secret Service specifically, when the agreement
that you are referring to was first contemplated, there was
some initial confusion, and part of that is it was on the part
of our own organization.
But that MOA--and again speaking from the Secret Service
perspective--has not affected us. We are carrying on with the
historic and traditional missions that I mentioned in my
opening statement.
I had an opportunity to speak to Mr. Ross prior to
beginning today, from the Treasury Department. We have a
special agent that continues to work in the Treasury Department
on issues, and he brings information back and forth as is
needed. And we intend to enhance that relationship both in
staffing and the quality of the relationship.
So we are while, we hope, contributing to the new mission
of the Department, we believe that we can make a contribution
there, we are certainly endeavoring to do whatever we can to
bring whatever expertise and resources we have to the
Department and thereby keeping America safe, we still are
continuing with our historic mission.
One, probably the most illustrative, is that of the
integrity of our U.S. Federal Reserve notes, our bank notes.
The Secret Service continues to work very closely with Treasury
in tracking counterfeiting, both domestically and around the
world. We are happy to report that while it is always a
concern, the U.S. bank note and the U.S. currency is safe,
sound, and secure. People want the dollar around the world. And
they use it, and they should continue to do so.
So from the Secret Service perspective, clearly September
11 has changed everything, but at the same time, we continue to
do the things we do best, but with a new focus on keeping the
country safe.
Mr. Platts. OK.
Ms. Forman. If I may address that question, the May 2003
memorandum of understanding created an environment of efficient
and timely exchange of information. The document itself has a
subset of protocols which establish the mechanisms of which
information is exchanged and who will work what investigation
based on various factors, to include what is in the best
interests of the U.S. Government, the equities of the
investigative agency, the resources expended, and the corporate
knowledge.
And there are protocols in place where we have a deputy at
TFOS is a BICE senior manager from the Financial Investigations
Division. So we have unfettered access to information, and so
does the FBI in the exchange of information regarding terrorist
financing investigations.
We are still in the game of investigating terrorist
financing as well as other vulnerabilities in a coordinated
effort with the FBI. In addition, our methodology is the same.
For the last 30 years, the former Customs Service, now BICE,
has applied a methodology of attacking systems and identifying
vulnerabilities in systems to include a corrupt system such as
the black market peso exchange, to legitimate financial
systems, such as the money service businesses, where in
Phoenix, AZ we have a major initiative called BICE Storm, where
we have identified money orders that are being utilized for
alien smuggling as well as narcotics traffickers, based on an
assessment of the system as well as a census that was
conducted. So the methodology has always been the same.
We will go after the corrupt system if the entire system is
corrupt, or we will surgically go in and remove the bad apple,
that individual and entities that are corrupt.
Mr. Whitehead. First off, the memorandum of agreement has
clearly improved the coordination and development of the TFOS.
And, as Ms. Forman stated, the exchange of personnel from BICE
has really served to help to move that forward. I have a member
of our TFOS, the unit chief, Frank Fabian, here. I would like
to yield to him to make a couple of comments about that.
Mr. Putnam. We need to swear you in.
[Witness sworn.]
Mr. Putnam. Note for the record that he responded in the
affirmative. If you will speak into the mic, please.
Mr. Fabian. Certainly. In listening to the comments of Ms.
Forman, I certainly echo those comments. And I would add that
since the adoption of the MOA, we have put in place senior
people over with BICE, as they have with us. We have
established a joint vetting unit to ensure that cases that come
in from the field are reviewed at the senior level in
Washington.
Those cases that on the surface do not appear to have a
terrorism financing nexus to them, are certainly then
investigated through Homeland Security and BICE. Those that do,
they continue to participate on through the JTTFs and
respective field offices where they occur.
What this has done, in our opinion, is what it was set out
to accomplish. And that is, to make sure that efforts were not
duplicated by different agencies working the same cases perhaps
from a different perspective, and maybe even not knowing that
they were investigating them. So I think it has done a great
deal to aid in the efficiency of the investigative efforts
between the very talented agents that have for years been
working these sorts of investigations through operation Green
Quest, and now Cornerstone, with agents from the Bureau and the
other participating agencies on the JTTF.
Mr. Platts. Well, I appreciate your addressing that. I
think that is an important message to get out, that we have
done our best to kind of break down those stovepipes and have
all entities working hand in hand, and have the--in the end,
all of us on the same page as we look out for the best
interests of our fellow citizens.
Now I will reserve the rest of my questions for the next
round. Thank you, Mr. Chairman.
Mr. Putnam. Thank you. The purpose of this hearing is to
discuss the various schemes that terrorists and others have
used to circumvent the existing regulatory framework to fund
their illegal activities. And Mr. Ross, I think, has pointed
out the similarities and the differences between traditional
money laundering of moneys, profits generated by illegal
activities, and terrorist financing, which also has that
component but also may utilize profits that were very
legitimately earned and funneled through charitable
organizations or front groups.
The GAO report that was just released this weekend
discussed another key component of the circumvention, and that
involves methods other than using U.S. currency. The conversion
of that currency into cigarettes, diamonds, gold, other
species, if you will, that is easy to conceal, easy to transfer
across borders. And it identified that as a weakness, that we
may not have the current regulatory framework in place, which I
would view as being an indication of success that our currency
laws, whether it is bank secrecy or Graham-Leach-Bliley, or the
Patriot, or the whole laundry list of things that have
developed since the early 1970's, have pushed the bad guys into
an alternative form of financing.
But I would ask--I suppose we will begin with Treasury and
Customs or whomever is appropriate to address this issue of how
effectively does the law allow us to track the transfer of
commodities, which has become the alternative to using currency
in some cases?
Mr. Ross. Thank you, Mr. Chairman. I echo your views that
to the extent that we have driven terrorist financiers and
narcotraffickers and other organized criminals out of the
direct banking and formal financial system, and even to a
lesser extent out of the informal system and into a trade-based
system, it is an accomplishment.
At the same time, it is not an end in and of itself. As Ms.
Forman testified earlier, we at Treasury and now DHS and
Justice are well aware of the use of trading commodities. We
are well aware that, for instance, narcotraffickers move
billions of dollars' worth of U.S. dollars back into Colombia
in the form of trade goods. We are aware of that. We are
working on it in an interagency basis.
I will defer to Ms. Forman to describe a particular
mechanism that they have in place at DHS, I think it is the
paradigm data base, to try to identify trade-based anomalies.
But I will go specifically to the diamonds and commodities
mentioned in the GAO report.
I think it is unfortunate that at the time the GAO report
was finalized, the Money Laundering Strategy had not been
released or not been released sufficient so that GAO could take
a look at the report. In the strategy in appendix D we do have
the report on trade-based money laundering and terrorist
financing.
What we identify in that is that, of course, the use of
commodities is to be expected. A, they are mediums of exchange
in areas which are particularly susceptible to terrorist
financing; that is, the Middle East, Africa, and the Far East.
So the mechanisms are in place. The dealers are in place,
people who have historically dealt in trade goods, diamonds,
emeralds, gold, in particular are in place. And we do discuss
this in the Money Laundering Strategy.
I think from a law and regulatory perspective that we do
have the tools. I believe what we need to do more of is work
more closely with our international counterparts because, as a
member of the panel earlier mentioned, I guess Mr. Glass, as
much money as is generated in the United States goes into
terrorist financing, much, much more is generated abroad. What
we need is for our international partners to identify and
target the possible use of trade-based money laundering and
terrorist financing through their countries as well.
But appendix D does address this topic.
Mr. Putnam. Ms. Forman.
Ms. Forman. If I could add. I concur with Mr. Ross's
assessment in terms of having the tools necessary to identify
trade-based money laundering. Customs, former Customs Service,
now BICE, has a system called the numerically integrated
intelligence system. It is a software package that was
developed by former Customs Service, which is able to identify
anomalies in trade. The software, it is a software package that
contains Bank Secrecy Act data, import-export data, I-94
Immigration data, and various other type of data that can be
utilized to identify anomalies in trade.
The benefit of having this software is when you are working
with your international counterparts--and specifically I can
site examples of us working with Colombia--in which we also
have their trade data. So we are able to identify exports out
of the United States, and the foreign country is able to
identify what they actually received. Colombia, in particular,
is indicative that when a certain amount of exports leave the
United States, some commodities such as appliances, computers,
and so forth may be smuggled in to avoid taxes and duties in
Colombia, when, in fact, may be part of the black market peso
exchange, or drug dollars, unwittingly used most of the time,
are utilized to purchase these commodities.
Mr. Putnam. Anyone else? Mr. Glass.
Mr. Glass. We at the State Department, we have been in
touch with a number of organizations and governments around the
world on the issue of alternative remittance systems and their
reported use. There have been a variety of press reports about
this over the past year or so. And it is an issue that we have,
with other agencies, tried to gather and collect more
information on.
It is an issue that is very, very difficult to get what I
would call actionable intelligence on. It is an issue that--
where there are a lot of stories, there is a lot of
unsubstantiated information out there. And we are working and
trying to get that more precise.
When we take action overseas in the realm of terrorist
finance of any kind, whether it be against an entity or an
individual or whatever, one of the things that is most
important in that effort is providing information, a
justification as to what you are doing and why you are doing
it.
We often provide to overseas governments a statement of
case as to why you suspect this activity is taking place by
this organization or by this individual. And the point of this
is we need hard information, not only of an intelligence
nature, but information that is sharable with other
governments, with organizations, to get them to act. It is one
of the things that we are constantly pressing for in our
interagency collaboration. We work with all of the agencies at
this table on a routine basis in order to develop just that
kind of information. But particularly when we get into the
realm of alternative remittance systems, it becomes more and
more of a challenge.
We do have in place, which I am sure that you are aware of,
the Kimberly process to deal with conflict diamonds, where
there is a certification regime on rough diamonds, in order to
try to make it more difficult to use diamonds and gems to avoid
the formal financial systems.
There is perhaps, however, more that can be done in the
alternative remittance systems field. It is something where we
do have ongoing discussions not only with our posts overseas,
but also with a number of other governments around the world in
order to come to terms with this important issue.
Mr. Putnam. Well, GAO devotes a considerable amount of
space to this issue. It is clear that it is a main avenue of
diversion. And its center of activity is in parts of the world
where we, frankly, don't have a very large or active role: West
Africa, essentially no government, no borders, no control, and
a fair amount of the world's diamonds. And all indications are
that they are funding al-Qaeda, Hamas, Hezbollah, among others.
So it appears to be a gaping hole in our preparedness.
Speaking of international cooperation, how has
international cooperation changed since September 11th, and the
Patriot legislation? Who is cooperating the best? And who is
cooperating the least?
Mr. Glass. I presume that would be to the State Department?
Mr. Putnam. Give us your best diplomatic answer on who is.
Mr. Glass. Well, I will tell you quite frankly, to my
knowledge, before the Executive order of September 23, 2001, I
am not aware that the State Department went out worldwide to
every government in the world and asked them to freeze assets
of a given entity or individual. This was something that really
was a new undertaking in the aftermath of September 11th.
When the President signed the Executive order and included
the 27 names in the annex to that Executive order, we
immediately approached every country in the world and asked
them to search these names, and said, if you find any assets
from these individuals, they should be frozen.
And since that time, as I mentioned in my testimony, we
have gone out over 75 times to every country with whom we have
diplomatic relations around the world and asked them to freeze
assets. We have provided them supporting information, we have
provided them identifying information on each of those names
and asked them to take action.
So we really do have, in many ways, much more of an
international effort, if you will, a very precise and targeted
effort against specific targets to freeze assets than was there
at any time previously. This has worked I think in a promising
way. Some two-thirds of assets frozen around the world have
been frozen outside of the United States, one-third inside the
United States, roughly speaking.
Assets are frozen at the current time in approximately 50
countries around the world, and about 170 countries report that
they are taking action to freeze assets every time the names
are released. Now, when names are added to the United Nations
in New York, they are automatically--all member states are
obliged under Chapter 7 to freeze those assets immediately, and
the key phrase is here, ``without delay.'' Very, very quickly.
Mr. Putnam. They are obliged to. Has there been full
cooperation with that obligation?
Mr. Glass. It is very hard to say precisely whether there
has been complete and full cooperation. We know that, as Mr.
Ross mentioned in his testimony, that 170 countries report that
they have issued blocking orders, that they have instructed
their financial institutions to freeze assets on given names
and specific individuals. We do know, as I mentioned, that
assets have been frozen overseas. We make an effort through our
embassies to monitor and to find out whether countries are
being effective in their efforts.
But there are challenges out there that continue to exist,
particularly when you get into less developed areas of the
world. It is one thing in the United States for officials here
to issue notices to financial institutions to freeze assets, to
do that electronically on a real-time basis. It is another to
try and imagine this being done in certain parts of Africa or
in countries such as Afghanistan.
Mr. Putnam. Or Syria or Libya or some of the other helpful
countries who are members of the United Nations.
Mr. Glass. Those present their own unique challenges in
their own way. But we do make demarches on a routine basis to
the Syrian Government on these issues when a name comes up and
is added to the U.N. list.
We do send our diplomats in to request that they also
freeze those names, as we do in all other countries with whom
we have diplomatic relations. This is new. Our embassies are
more engaged in these activities than ever. The instructions
that we send out to our posts on this are cleared by all of the
agencies in Washington, by the Treasury Department, by the
Justice Department, and are coordinated very closely at post.
So it is a work in progress. But it is one that we spend an
awful lot of effort on. And we have raised, I am completely
convinced, the level of international attention to terrorist
finance to a level that was never there before.
Mr. Putnam. Let me ask just one financial and brief
question before I yield back to Mr. Platts. The events of
September 11th, I think everybody universally refers to them as
this turning point in the way that we have viewed the world or
the way that we have approached certain crimes. It has been
referred that money laundering is one of them, that it was this
watershed event that shifted the way that we viewed the
process, the investigation, the procedure.
The Congress reacted, passing the Patriot Act. There were
Executive orders, creation of the Department of Homeland
Security. So we took this jarring event in the Federal
Government's bureaucratic culture that the folks, all of you
who have to go out there and have your specific missions--that
was a jarring event, followed by several jarring legislative
activities, not the least of which was severing your 170-some-
odd year relationship with Treasury and putting you into the
newly created Department, and moving Customs and things like
that. So we have done all of that.
How much better are you able to communicate with all of the
other agencies sitting at this table than you were prior to
that? Do you have access? For example, Secret Service is here,
Customs is here. Do you have complete, unfettered access to
each other's data bases when you are involved in an
investigation, or are there still barriers to that? And how
does that work across the other departments? I would be
interested in hearing your thoughts on that.
Mr. Townsend. I will kick off that, Mr. Chairman. With
regard to the data bases, on a technical level I believe the
answer to that is no. And to some degree that shouldn't come as
a surprise to us, because we have spent the last 20 or 30 or 40
years designing things that way. If you look at a very
grassroots level, look at the voice radio systems just in
emergency first responders.
Some 20 or 30 years ago when I was a uniformed policeman,
it was thought to be a bad thing that you could hear everyone's
radio traffic in a county area. So we worked for the last 30
years designing stovepiped radio systems where you couldn't
hear everything that was going on in a region or a county. That
was thought to be a good thing.
Well, we think differently now. So while we recognize that
our thinking has to change, unfortunately it is not going to
happen overnight.
When you asked the question on the access to everyone's
data bases, speaking with the Secret Service and--the U.S.
Secret Service relationship is when I need something, we are
going to give it to them. There was a boom in technology in
terms of the realization that communication has to exist, and
that information we have is available to other law enforcement
partners. The answer is yes.
I think the answer was yes post-September 11, but it is an
emphasis now. Excuse me, pre-September 11. The answer was, yes,
pre-September 11. It is an emphatic yes now.
Mr. Putnam. Mr. Ross, do you have better coordination with
the different agencies today than you did prior?
Mr. Ross. Well, I would like to give a quick anecdote if I
could. Immediately after September 11, at that point I was a
DOJ employee. I went over to work with the FBI when they
established the precursor to the TFOS, which is called the
TFRG, Terrorist Financial Review Group. It was the FBI
initiative to create a financing--interagency financing
strategy for terrorism. Never been done before.
What happened was, we sat around the table and said, ``Who
are the best people at agencies to have sitting here with their
data bases so that we can immediately plug into them?'' The
first order of business was, well, who do we need? We need IRS
CI. We need FinCEN. We absolutely need Customs. We need DEA.
Federal Reserve would be helpful.
And what happened, people came, worked together, shared
literally a huge room, everyone with their own data bases. And
I have never seen an entity function better. But, at the same
time, everyone still maintained separate data bases. Everyone
still was patched into their own individual data bases.
Most importantly, everyone brought to the table their own
unique abilities with what you do with the data that was being
fed to them.
So in answer to your question, I am not sure if it is
better. I know better agency coordination on terrorist
financing is better--it virtually didn't exist prior to
September 11, if it did at all. So it is tremendously better.
Are people more aware? Are they more aware of what data
bases can be applied and can be applied on the interagency
basis and proactively to identify terror? Yes, an emphatic yes
to that. So I think that there are times when an
interoperability capability is useful--and at times, even if it
is useful, will be made more useful--to have the right people
with the right data bases work in an interagency composition,
which is what I think is the most effective use of these data
bases that exist.
Mr. Putnam. Thank you. We will return to this. But I want
to yield back to Mr. Platts.
Mr. Platts. Thank you, Mr. Chairman. I am going to kind of
pick up where Chairman Putnam was with the international
community, and probably, Mr. Ross and Mr. Glass, really focus
on your testimonies.
As I was preparing for today's hearing, and again having
the chance to review your testimonies ahead of time--appreciate
you sharing that--there was an article in my Sunday paper
yesterday that I read, and you may have seen a variation of it
in the Washington paper or elsewhere. I am going to just read a
short part of it.
I am quoting from the article, ``Governments around the
world aren't enforcing global sanctions designed to stem the
flow of money to al-Qaeda and impede the business activity of
the organization's financiers, allowing the terrorist network
to retain formidable financial resources, according to the
United States, European and U.N. investigators.
``Several businessmen designated by the United Nations as
terrorist financiers, whose assets were supposed to have been
frozen more than 2 years ago, continue to run vast business
empires and travel freely, because most nations are unaware of
the sanctions and others don't enforce them,'' the
investigators said.
``Several charities based in Saudi Arabia and Pakistan that
were reportedly shut down by the governments, because of the
groups' alleged financial ties to Osama bin Laden, also
continue to operate freely,'' they said.
Then I jump to basically the end of the article that says,
``So far the world body has publicly named 272 people as
sponsors of terrorism. But U.N./U.S. officials say they don't
know where more than half of those people are, and only 83 of
191 countries have submitted the required U.N. reports on
attacking terrorist financing and implementing the travel ban.
Only a third of those have given a list to their border
guards.''
That doesn't present the best picture for the world
community stepping up to the plate and delivering, as we
understand they are obligated to do. And that is kind of
following up Chairman Putnam's question of who isn't, in
assessing the job they are doing?
And I think, Mr. Glass starting with you, according to
this--and I did not have the chance between yesterday morning
reading this and this morning to try to verify some of those
numbers--but according to this, only 83 of 191 countries have
submitted the required U.N. reports. That is something that we
should be able to verify. And I would appreciate for the record
if the Department of State could provide both of our
subcommittees this report that goes to compliance with the
obligations that these 191 countries have.
Is that 83 number correct? And who are the other 90 or so
that are not submitting the required U.N. reports regarding
terrorist financing? From a specific request, I would
appreciate that information. That should be readily
determinable by the Department.
But I welcome, maybe in a more broad response, of--we never
heard any specific nations mentioned. Who has done a great job
and who hasn't? And I would like to revisit that, especially in
light of, you know, my citizens back home are reading this
article. And I appreciate you can't make other countries do
what they are obligated to do under their U.N. Charter
agreement. But we need to know who those countries are and what
can we do as a government to try to get them to do what they
are obligated to do as members of the U.N.
Mr. Glass. Well, thank you. I counted about 10 or 12
questions in there.
Mr. Platts. I imagine, at least.
Mr. Glass. And I am somewhat familiar with this U.N. report
that came out about 3 weeks ago. First of all, on the question
that governments are not enforcing sanctions around the world
it is, at the end of the day, up to each individual country to
implement sanctions in accordance with the U.N. resolutions--in
accordance with their U.N. obligations.
We, however, in Washington do routinely, through our
embassies overseas, remind governments of those obligations.
And we do engage them. If we have bilateral discussions with
specific governments in Washington, we will make that part of
the agenda for discussions, and ask them to tell us how things
are going on the terrorist finance front on asset freezing, on
travel bans. I would tell you, as part of our talking points
when we do discuss terrorist finance, those issues are always
prominent, including the travel ban issue, which we have been
highlighting more and more as time goes along.
The specific--some of the specific cases mentioned in the
U.N. report were referring to the NADA-NASREDDIN network in
Europe, which has been one that we and the Treasury and Justice
Department have been looking at for quite some time, and we
have frozen those names domestically and at the U.N. some time
ago now.
We were also intrigued to learn recently, slightly before
the press reporting here, of the issue of how some European
countries are dealing with the freezing of assets.
And the issue for the Europeans, for some European
countries, not all of them, but for some of them is, how you
define assets. When you freeze assets are you just talking
about bank accounts, or are you taking about material assets,
things, an automobile, a building of some kind or another?
And apparently in different European countries they deal
with this definition in a legal sense in different ways. And
this has become a bigger issue that apparently was featured at
a workshop that the European Union held on November 7th, last
month. And the Europeans are paying more and more attention to
this to try to come to terms with just this issue in response
to this question.
You asked about certain charities being frozen around the
world. These came up also in that report. And we have been in
discussions with both Pakistan and Saudi Arabia both of which
you mentioned regarding these charities, regarding the freezing
of assets of these charities. But in some cases it is not just
a question of freezing the assets of charities inside any one
of these countries, since these organizations frequently
operate in other countries as well.
And in some cases, freezing assets is not the only action
that is to be taken. There are other activities that are taken,
such as investigative activities which we are working, as was
mentioned, with other countries, investigating charities. There
are other methods that are taken such as regulatory oversight.
And on other occasions it is not always clear how much
wittingness or affiliation has been involved with a charity
toward the support of terrorism. But we are very much engaged
in that activity and trying to make sure that a charity that is
designated is actually frozen, in fact.
You mentioned that--you read that approximately half of the
countries around the world were not aware of their obligation
to freeze assets, if I understood your question.
Mr. Platts. That is what the story states.
Mr. Glass. I can only confirm to you that we discuss, we
raise the U.N. obligation with every country with whom we have
diplomatic relations on a regular basis around the world. So if
these countries claim they are not aware of their U.N.
obligations, the United States has reminded them of those U.N.
obligations on a regular and repeated basis.
Some of the countries around the world give the lists to
their border guards. This is also something that we remind them
too, that there is a travel ban. We remind countries of this,
that there is a travel sanction that comes with the U.N.
obligations here. We have confirmed, for example, that in
rather out-of-the-way places, in Asia, countries have told us,
for example, that, they don't have the capability always to
freeze assets in all of their banks, because their banks often
conduct business on the basis of hand receipts, for example.
But they do pass out the lists to their border guards and
do use them in terms of travel bans, which some countries do,
some don't.
We would like to know more about those countries that
don't, because we think it is important that they do, that they
be reminded of that. And we will make efforts to do so in the
future.
In terms of completing reports to the United Nations, the
actual U.N. report which is in, I believe it is on the U.N. Web
site--I am told it is at this point in time--does list by name
those countries that have not submitted reports to the U.N. in
compliance with the 1267 Committee at this point in time. So
you can get that list off of the U.N. If you don't have it, I
am sure we can also get it and provide it to you.
My brief scanning of that list of names earlier, I don't
have this report with me here, indicated to me that many of
those countries are in lesser developed areas that are not
perhaps part of the mainstream financial system that we
always--that we think of when we think of banks and bank
regulations. But, nonetheless, we think it is important that
all countries report to the U.N. on this very important issue.
Which countries so far have done a good job and which have
not? I think there is a lot to be done for all of us. I do know
that, for example, that the European Union has put together its
own mechanisms for listing names, for adding names very, very
quickly, that are designated by the United Nations, so that all
European Union member states are required to freeze assets when
names are added to the U.N. list.
Other countries around the world have what we call self-
executing mechanisms, where as soon as a name is added to the
U.N. list, in those countries, it automatically becomes
regulation or law to freeze those assets in financial
institutions, and those countries are required to freeze
immediately as well.
Other countries are less responsive and may not have such
quick responsiveness on those names. We would encourage them,
however, to improve that. And as part of that, we have a team,
we have several teams actually that travel around the world
trying to provide countries with the technical capabilities to
freeze assets in order to carry out these obligations, to get
them capabilities to buildup not only a suspicious activity
reporting mechanism, but also a mechanism to notify their banks
of names that should be frozen, to provide identifying
information, to search for bank accounts.
But I will tell you that in my own work on this issue over
the past 2\1/2\ years, it has struck me how challenging this
can be in some countries. If I take, for example, just the
country of Afghanistan and try to think about how to implement
sanctions in that country, it became very clear, for example,
that Afghan citizens almost routinely do not know their own
dates of birth. They may know the year in which they were born,
but there is no central registry for the day and month when
Afghan citizens were born.
So you have to ask yourself, if you are going to identify
accounts, if you are going to ask banking or financial
institutions to freeze assets and you don't have a date of
birth of an individual, it becomes very, very difficult to do
so, because there are a lot of people with names that are very,
very similar.
Frequently also we only have one part, a fragment of a name
that we are dealing with when we are trying to freeze assets.
And that leads to the comment that you also find in the U.N.
report, which is an accurate comment, that identifying
information is not adequate. And it is not. It is a constant
quest that we, that OFAC, that the Treasury Department, that
the intelligence and law enforcement community are constantly
challenged with, to come up with specific identifying
information in order that we can be effective and freeze assets
and not, for example, inform financial institutions to freeze
the assets of someone named Smith, which is a worthless
exercise, because you get so many positive hits that you really
can't be effective.
These are the challenges that we are facing. We are getting
better. And we are getting better with countries around the
world. But we have a long way to go. And part of that, an
important part of that, which I think is supported nicely by
the Congress, is providing technical assistance, helping other
countries to come to terms in their financial networks with
building systems to actually freeze assets and identify people.
Mr. Platts. Well, I appreciate the substantive answer, and
trying to touch on the various points. And I would agree, one,
that we are seeing headway and we are making headway and seeing
progress. And I would agree there are differences and
challenges from a Third World country trying to fulfill these
requirements versus the United States or the European Union or
other more developed, wealthier countries.
But I guess what I would hope, and we certainly can pull up
the list from the U.N. site that is specifically referenced in
the report, but I would still appreciate the Department of
State providing these subcommittees a list of those nations
that the Department identifies--and the best way I can say, is
where there is an identified charity, where there isn't a
question of misidentification, but this is the charity in
question, and there is a sizable amount that is to be frozen,
and for whatever reason that host nation is not freezing, that
we have a best picture possible of who is fulfilling the U.N.
requirements and who is not.
And it really goes to one of the frustrations that I think
a lot of people feel about the U.N. And one of the reasons I am
grateful for the leader that we have in the White House is we
have a President that said the U.N. needs to--what it says
needs to mean something. If there is no action, the words are
meaningless. And with Iraq for, what, 16 or 17 times we said,
do this or else, and we never acted. And thanks to our
President, the Prime Minister of Great Britain, and others who
joined us, there was action to followup those words and enforce
those words.
And my worry is that we are seeing something similar here.
We have all of these countries agreeing in word to do this. But
the question: Are they really doing it? Are there actions that
are coming about because of those words? And I would be
interested in seeing which nations aren't. If it is a Saudi
Arabia or a Germany, that is different than if it is an
Afghanistan, given Afghanistan is, as we speak, trying to craft
a new constitution. But I think that would help our perspective
at the Congress.
A couple of specific questions. And, Mr. Ross, I do want to
allow you to comment as well. But on the U.N. definition of
assets and the debate out there, I take it that there is no
definition in the U.N. regarding the freezing of assets? And
that is the reason for the disparity--or is it--there is a
definition in the U.N. requirements, and countries are choosing
then to actually enforce it differently?
Mr. Glass. The Security Council resolution that uses the
word ``assets'' does not provide a more specific definition.
Mr. Platts. OK.
Mr. Glass. To the best of my knowledge.
Mr. Platts. OK. Thank you. I guess the information that
would be helpful is the Department has identified who you go
back to. If you could share that with us, I would appreciate
that. That you know are not doing it; that you are having your
representatives at the embassies go out and remind them of
their obligation.
Mr. Glass. Could I just add that the Department does not
maintain a list of countries, for example, that are more
cooperative or less cooperative or anything like that. We do
try to encourage, with every country with whom we work around
the world, that they take their various obligations in the
realm of terrorist finance seriously and implement the Security
Council resolutions. But also--and this is something that is
much broader than just the State Department, but it affects all
of us here at the table--is how they are cooperating with us,
for example, at an investigative level on a certain name or a
target or issue, or how they cooperate with us in auditing
books or quietly providing records, for example, bank records
in one case or another.
So it is a very broad effort. And I just wanted to----
Mr. Platts. Right. And probably a give-and-take as you look
at all of those aspects. I appreciate that. I guess to best
possibly refine my request is, to go back to that, where there
is an absolutely known charity with these assets in this
country that is party to that U.N. Charter, and the Department
is aware that they are not freezing those assets, that be
shared with the subcommittees.
And, Mr. Ross, I don't know if you want to add. Mr. Glass
covered it probably pretty extensively.
Mr. Ross. Mr. Glass has covered it very well. I do note for
the record, I believe, in that article my superior did also
point out the issues with respect to the legal and regulatory
and structural problem about what is an asset in some of the
countries.
Mr. Platts. Maybe if you could followup--or jointly--
another specific, that apparently is going to be an identified
listing of countries. We talked about the 191 having the
obligation. And, Mr. Ross, you referenced 172 that have
blocking orders in force.
So there is 19 that, you know, are identifiable as not
having blocking orders, of those 191. If we could have that
shared with us, that would be great.
If I can touch on one other issue quickly, and then send it
back to you, Mr. Chairman.
One is just the testimony. I appreciate a number of you
talking about the Patriot Act. And I think, Mr. Whitehead, your
statement sums it up, I think very importantly, for the public
to understand the importance of that legislation and this
battle against terrorism, and your quote, past terrorist
financing methods--I am sorry, I am reading the wrong sentence.
``The success in preventing another catastrophic attack on the
United States homeland would have been much more difficult if
not impossible without the act.'' And I appreciate your
highlighting in some detail, as a number of you did in your
written testimony, that the Patriot Act has gone a long way to
giving you the tools of the 21st century to protect Americans
here at home.
And, you know, through this hearing, help the public to
understand that there is a lot of misinformation, you know, or
misunderstanding out there about the Patriot Act and how it
impacts Americans versus allowing you to go after the bad guys.
And I appreciate your specifically talking about it, as well as
others, in your testimony; that has benefited this law
enforcement effort.
Thank you, Mr. Chairman.
Mr. Putnam. Thank you, Mr. Platts.
I want to return to Mr. Glass, if I may. You have
represented your Department exceptionally well and been a very
good diplomat. But you are the Director of the Office of
Economic Sanctions Policy, and you have survived two different
waves of questioning with only a passing reference to one
continent.
Surely you can give us some sense of those nations. You
have already quantified it by saying that a third of the frozen
assets are in the United States and two-thirds are abroad. Of
those two-thirds of the assets that are abroad, where are they
concentrated? What are the top two, three, five places where
these other frozen foreign assets are located, as some way of
giving us a better understanding of which nations are the
source of the greatest volume of funds for terrorists?
Mr. Glass. Mr. Chairman, I would have to defer to my--or
perhaps invite my Treasury colleague to comment on this,
because the data on which those conclusions are based is data
that is compiled by the Department of the Treasury.
They do have, as best they can put together, an indication
as to which countries compile a certain amount of information
on what assets are frozen. Some of that information is subject
to various bank secrecy issues in those countries. And it is
not State Department data. But nonetheless it does, I think,
reflect some of the efforts.
The one comment I would make is that my own viewing of that
information seems to indicate that a lot of those assets are in
places where money would normally pass through; that is, large
banking centers, large financial centers around the world. But
I don't know if, Jeff, you are in a position to----
Mr. Ross. Bob, appreciate the hand-off. Of course, what I
will do, Mr. Chairman, is I did not come prepared to identify
countries. I will go back, and the Treasury Department will
address this as a followup question, with respect to countries
and freezing.
One thing I cannot recall is if there are any restrictions
on disclosure of the specific amounts by country. But if there
are, obviously we will work very closely with the subcommittee
to get you the information.
Mr. Putnam. How about Customs? Who has been the most
cooperative, and who has been the least cooperative in dealing
with the post-September 11 changes that have occurred as we
attempt to crack down on the terrorism financing and other
money laundering and smuggling and things of that nature?
Ms. Forman. Well, I can just address the countries we are
dealing with in terms of the money laundering arena and some of
the terrorist financing arena. In terms of the money
laundering, drug money laundering in particular, we have an
excellent relationship with the Colombian Government.
Under Plan Colombia, we have several initiatives that have
been put in place to address the black market peso exchange and
narcotics money laundering. In regards to money laundering and
terrorist financing, we work very closely with our Canadian
counterparts, British counterparts, and various other European
countries around the world. And we have had great success in
that area.
Mr. Putnam. For any of you, how cooperative have countries
outside of Western Europe been, particularly those nations in
Southern Asia and the Middle East and Africa? Understandably we
are dealing with countries that do have less developed
financial institutions, less developed regulatory frameworks.
But I think what the two of us are struggling to grasp is,
is the conventional wisdom correct that a substantial portion
of the funding is coming from Saudi Arabia or is it not? Are
our allies in Western Europe cooperating with us as strongly in
the boardrooms and the banking houses of Antwerp and London and
Paris as they are in other parts of the world militarily and
diplomatically, or is there a gap there?
Are the European financial centers--you are the former
Consul General to Bern, Switzerland--are the Swiss banking
houses cooperative, relatively speaking, or are they not? And I
can't think of any other ways to ask the same question. But
perhaps you all might help illuminate this a bit for the
benefit of the public forum, rather than a memo to us in 2
weeks that we read and glean the information that we need from,
but essentially the purpose of a congressional field hearing,
getting out of Washington and into the Tampa, FLs or the York,
PAs of the world would be lost.
So if you would, please help us understand better just how
cooperative these other nations have been. For example, you
mentioned the U.N. Web site that lists those countries
participating. But in response to a number of Mr. Platts's
questions, you correctly included the caveat that we remind, we
work with, we encourage. We coerce. We incent those nations
with whom we have diplomatic relations.
Now, how many countries do we have diplomatic relations
with that are members of the United Nations, and how many are
members of the U.N. but do not enjoy official diplomatic
relations with the United States. That may be a back channel
for all of those funds, because we don't have relations, we
don't have embassies, we don't have official ties that would
allow us to encourage, incent, and coerce?
Mr. Glass. Generally speaking, Mr. Chairman, those
countries with whom we don't have diplomatic relations are for
the most part those countries that are state sponsors of
terrorism with whom we have no financial or banking
relationships either, and we should not have any kind of
financial interaction. And these are closely regulated and
enforced by the U.S. Government.
To address your question, if I might just try to take a
stab at it, as to how cooperation is going around the world on
terrorist finance, I think you rightfully noted that we have
good cooperation with European Union member states. We talk to
the Europeans on a regular basis. They have--not only do they
have a mechanism for designating names from the United Nations,
an automatic self-executing mechanism, but they also maintain a
clearinghouse list for non-al-Qaeda-linked names that do not go
to the U.N.
These are also terrorist names, but they are not linked to
al-Qaeda or the Taliban. That list has, and I don't have it
with me today, but it has about 110, 120 names on it that have
come from various corners of the world. There is an
International Sikh group that is listed there. There are ETA
names that are listed on that list. And the Europeans, when
they add names to that list, they come to us and ask us to
freeze those names as well on our list in the United States,
which we do. These are names, as I mentioned, which do not
qualify for asset freeze at the United Nations because of the
way that the Security Council resolutions are written to focus
primarily on al-Qaeda.
Cooperation with the Europeans is good. I am happy to
discuss that more if you want more detail there. But let me
move on to some of the other regions.
In the Middle East, cooperation varies from country to
country. Around the Persian Gulf, we have had a number of very
promising joint efforts with a number of countries there that
have, for example, provided a large number of banking records
in some cases. In other cases, they have conducted raids and
shut down Hawala organizations. They have held conferences on
Hawalas in order encourage countries throughout the region to
implement regulatory measures to control Hawalas that have been
very successful, that have resonated widely.
They have frozen assets of individuals and entities in
their countries. The situation with Saudi Arabia, which I
provided more detail of in my testimony, is one that is a very
important focus for the United States. We are in regular high-
level contact with the Saudi Government. Just several months
ago, there was created an--under the leadership of the FBI, a
joint task force with Saudi officials. I don't know if my
colleague wishes to discuss more about that, but that has been
mentioned in previous testimony. That is a very promising and
very effective operation where we, U.S. investigators and Saudi
Arabia investigators on the ground, are working full time to
followup terrorist leads, including in the fields of terrorist
finance.
The Saudis have joined us in designating key Saudi
financiers. They have joined us in designating some branches of
al Haramain. There have been discussions with the Saudis about
broader efforts against al Haramain, as well as other charities
that are promising. But I don't--in this forum I am not in a
position to get into the specifics of what we plan to do in the
future with specific targets.
Cooperation is improving. There is more to do. But it is
improving and we are, we believe, seeing results. The Saudis
have frozen assets of terrorists and terrorist supporters
inside Saudi Arabia. Again, I don't know if I am in a position
to share that information in this forum or not.
In the case of Pakistan, a very important country as well,
we have had ongoing discussions with the Pakistanis. The
Secretary of the Treasury visited Pakistan in August or
September of this year where there was discussion of terrorism
finance. There are very important charities and organizations
in Pakistan whose assets have been frozen, but there is a lot
more in that country that needs to be done. We do have,
however, a good working relationship with that country.
In Asia, there has been a lot of terrorist activity in
Asia, particularly by Jemaah Islamiyah. When we and 49 other
countries submitted Jemaah Islamiyah to the U.N. for asset
freezing I believe back in October 2002, it was the largest
such effort against any organization by an international
coalition, 50 countries asking the U.N. to designate and freeze
this organization. That has taken place.
And since that time, some additional 22 individuals have
been added to the U.N. list. These are key financial people,
financial and other leaders of Jemaah Islamiyah in Asia, and
Asian countries are obliged to freeze assets of these
individuals. Whether they have, and to what extent, depends in
this case particularly to the degree as to whether they have
the technical expertise to actually implement financial
freezes. This is something where we are providing technical
assistance and advice to several of these countries in Asia at
this time in order to help build that capacity, to help them in
this regard.
And so there is an effort, there are cooperative efforts
with countries going on.
We have ongoing dialogs as well with Russia, with China,
where they freeze assets. At least they tell us they do. We are
not exactly sure how they go about this or how they implement
freeze orders domestically in their individual systems. But we
are told by their officials, by various parts of their
governments, that they implement freeze orders.
In other countries around the world, they will either tell
us that they are implementing freeze orders, or they will
request additional expertise and technical assistance to do so.
But as I said, this is--this is something we are continuing to
work at, where we do approach these governments on a routine
basis. We do encourage them. And when they ask for technical
assistance, we try to assist in that regard, and provide that
expertise.
Mr. Putnam. Thank you, Mr. Glass.
Mr. Whitehead, my financial question is for you. You have
dodged most of the bullets today. As someone who has been in
the Washington office and in field offices all around the
country, we would certainly presume, or at least hope that the
benefits of the successive waves of legislation benefit the
field offices the most.
We hear a great deal from local law enforcement that there
is insufficient information sharing. And at the Federal
Government alone, we have a small slice of the different
agencies and departments that also must share information
critical to your successful outcome in an investigation.
So my question to you would be, have you seen an
improvement in information sharing, or are there still barriers
because of security clearances, data base incapabilities, lack
of interoperability? Are there still barriers, or has your
ability to get your hands on all of the evidence, all of the
information that the entire Federal Government has collected
that may be of interest to you in your specific circumstance,
is it where it ought to be?
Mr. Whitehead. Well, thank you for giving me the
opportunity to answer your last question here. There has been
tremendous improvement since September 11 in that arena. Our
JTTFs, with having representatives of all of the Federal
agencies as well as local and State representatives working
hand in hand every day, has tremendously improved the flow of
intelligence.
We have had tremendous successes in the integration. As Mr.
Ross stated yesterday, or earlier, it is very effective to have
those data bases available. Although they don't talk to each
other, we have them colocated under one roof so that we can
have access to all of those data bases, and that has been
tremendously helpful to us.
So the legislation that has been passed, that the Patriot
Act has given us, is a tremendous tool in order to combat this
problem. Probably one of the biggest examples of that here in
Tampa, of course, is the al-Arian case, where we now, because
of the wall going down between the classified and criminal
side, we were able to use 9 years of gathered intelligence to
support that criminal prosecution. So that is just a tremendous
advantage for us.
Mr. Putnam. That was as a result of the Patriot Act?
Correct?
Mr. Whitehead. Exactly. Because of the removal of the wall
between the intelligence and criminal side which previously
prohibited using that type of intelligence to support a
criminal investigation, we were unable to do that. But now we
are able to successfully support these cases. And this is an
excellent example of how we have been able to use that as a
result of the act. So this allowed the use of national security
letters, which enabled us to obtain records, to gather
intelligence in these cases has been tremendously helpful;
prior to the act, we would have to obviously go to a court to
get some type of court order in order to obtain their financial
records or telephone records in these classified cases.
And now we are able to do that on a national security
letter, on my signature. So it has just been a tremendously
helpful process to help us gather the intelligence we need to
prevent acts of terrorism from occurring.
Mr. Putnam. Thank you, Mr. Whitehead.
Mr. Platts, do you have any final thoughts or last
questions?
Mr. Platts. If I could try to run through some real quick.
And if it is OK, I would like to reserve the ability to submit
some for the record.
Mr. Putnam. Certainly. We will be making that motion at the
end.
Mr. Platts. OK. A final comment on Chairman Putnam and I
both kind of pursuing the country issue and, I think, trying to
summarize for why we see it as so important, for two primary
reasons. One is the importance of this effort being
comprehensive. You know, if 150 countries are doing a great job
and 41 are not, we know where the terrorists are going to put
all of their money. They are going to put it in the 41 that are
not.
And so, you know, the importance of us encouraging every
nation to do what they have agreed to do, and again for the
U.N. to mean something, if they are part of that agreement they
need to comply with what they agreed to. And if they don't, it
just--we know where the terrorists are going to go with those
resources.
The second is, you know, our Nation is a very generous
Nation, and we have always been a beacon of hope for people
coming here. But we have also been the beacon of hope for our
willingness to go to other countries and provide assistance.
And I think it is appropriate for taxpayers to know if a
country is in need of assistance, humanitarian, health care,
education, whatever it may be, and American taxpayers step up
to the plate and say we are going to help, that we don't want
to be doing that for a nation that is not helping us.
And if there is a nation that is on their list saying, no
we won't freeze those assets, well, that is fine. But don't
look for America to, you know, come helping you and your
citizens. And that is something that as policymakers in
Congress we need to know. And that is something that would
reflect--be reflected in the actions Congress takes when we
pass appropriations bills. And those countries need to
understand that our generosity maybe won't continue if they are
not helping us to track down criminals, which is what we are
after.
So I think it is important to kind of phrase those two
priorities as to why we kind of have to continue to seek some
specifics. I will try to run through two or three items real
quickly here and not get into as in depth as we have these
other issues.
One. Mr. Ross, just for the volume of information, and as
we have changed the statute and regs regarding suspicious
activity reports the volume that you are now handling has grown
dramatically. Can you quickly summarize, one, from the
technology standpoint, which relates to out of the
subcommittee, your ability to use technology. From a funding
standpoint, do you have the resources from Congress to
assimilate this information you get; are you just doing the
best you can, but there is no way you can handle all you are
getting?
Mr. Ross. Thank you, Mr. Chairman. I think, particularly
from a financing perspective, that they are doing a much better
job of using technology, particularly in the area of link
analysis, which is data mining, which is a crucial area where
what you do is you take disparate pieces of information; for
instance in the SAR data base, in the narrative text, it could
mention this phone number here, in another field on another SAR
filed in a whole another place, that could mention the same
phone number there. There are no linkages whatsoever between
those two.
However, if you purchase the right software and you apply
the right package, through a link analysis you will find a
commonalty between those phone numbers, telephone records,
common addresses, common bank accounts. That type of approach
is what is being utilized by FinCEN now. That approach is being
used in the proactive reports that they are sending out to law
enforcement. And I think I gave the statistics on the numbers,
and the hundreds of those that have been sent out to law
enforcement, quite a few implicating possible terrorist
financing activities.
So what we are doing is using existing and new technologies
better to link financial data to get to the investigators who
can then use that data to try to make their investigations. So
I think we are comfortable.
Mr. Platts. Are you strained from a human resource
standpoint or financial resources in applying that technology?
Mr. Ross. No, I don't believe we are. I would defer to a
FinCEN specialist. I would have to get back with FinCEN. But
from what I have seen, the numbers and quality of the reports
going out are holding steady. What is more remarkable to me is
the FinCEN ability to communicate with 29,000 financial
institutions on these 314a requests that are coming in from law
enforcement. Now, they are very refined. Those requests only
can be made with respect to terrorist financing, and in the
most significant money laundering cases.
But as a result of those, as I believe I testified, there
have been indictments, at least in part based on the responses
from the financial institutions. There have been hundreds, I
think, of grand jury subpoenas for the bank accounts. There
have been thousands of tips and leads.
So the technology now that is being applied--5 years ago I
would have told you this is impossible, it can't be done--and
today it is being done on a biweekly basis.
Mr. Platts. Great. I am going to touch real quickly on two
others. One that concerns me is the decision by Treasury on the
Mexican Matricular Consular card being used for opening bank
accounts as an acceptable means of identification.
My understanding is Department of Justice, FBI, and perhaps
the Secret Service don't support that decision to allow that as
a form of identification because of the ease of which they can
be acquired. If you would want to comment in defense of the
Treasury, and if FBI and Secret Service, or if any of our
panelists want to comment on your position.
Mr. Ross. Thank you, Mr. Chairman. Yes, I will comment on
this. We at Treasury decided that the financial institutions--
and I think an important thing to remember is that we are not
talking exclusively about banks here, we are speaking of
security brokers, mutual funds, brokerage houses, future
commission markets. We are talking about a wide range of
financial institutions that do business in a wide variety of
capacities. This is not just a simple banking community.
For risk-based analysis, what we have mandated, and we put
out final regs in May 2003, are that these financial
institutions must have written policies and procedures, a
basis--which provides a reasonable basis for them to conclude
that they are aware of the identity of the person with whom
they are doing the business.
We are aware of the concern with respect to Matriculars. We
are aware of concerns probably with respect to driver's
licenses, for instance.
Mr. Platts. That is my last question. I was going to touch
on that.
Mr. Ross. I think any and all identification instruments
can be abused. There is no question about that. The question--
our view at Treasury is that the financial institution itself,
the one that has created the environment in which it operates
and the one that is providing the service, has to be the one
that is in--from a reasonable perspective, the best position to
identify what is reasonable for them to have to identify the
person with whom they are transacting business.
Mr. Platts. But if our Federal Government is saying that
this other Federal Government's official identification is
acceptable--I mean, that we recognize it--who is the bank then
to say, no, we are not going to recognize the Mexican
Consulate's identification they have provided? I mean, it
really to me falls to us to say is that acceptable or not, that
specific form; as opposed to having, how many institutions did
you--the tens of thousands, you know, to have all of them
individually saying, this is acceptable. It worries me, because
when we are trying to have that comprehensive effort, we have a
gaping, you know, hole here that a terrorist can get through,
because of how easily these identifications can be acquired.
Mr. Ross. Well, as I said, we are aware of the concerns. We
do not believe that we have sufficient discrete information to
suggest that a particular item of identity is more likely not
to be accurately either attained or to have accurate
information on it than other items of information.
The problem with trying to identify--trying to use a
regulation such as 326 where you are going after a wide variety
of financial institutions offering a wide variety of services
is if you try go down the path and say this is good, this is
bad, you are going to end up with a regulation that is
constantly going to tend to morph and to be changed.
We are trying to work a regulation that allows--reasonably
allows us to be able to identify who the account holders were.
And we understand that there are differences of opinion on this
point.
Mr. Platts. If I can wrap up with the FBI and Secret
Service on that specifically. Do you believe that we should
continue to allow this form of identification to be accepted?
And related to it, regarding driver's licenses, should we at
the Federal level prohibit individuals who are not legally
present in the United States to have driver's licenses, given
how they are accepted as an official form of identification? So
that--two different issues, but very much related to who is
this person and are they who they say they are, and are they
here lawfully?
Mr. Whitehead. Well, clearly the use of fraudulent
identifications is a major problem for us in these
investigations and has unfortunately been one that is difficult
to get our arms around as far as constantly trying to identify
individuals and developing intelligence on it.
As far as the position on whether we agree with the use of
these cards or not, we are going to have to defer to my
national office TFOS, to give you any current positions from
headquarters.
Mr. Fabian. Actually, I don't know if I can speak to that
issue. I don't know if I can address that issue specifically. I
would say that all of us here at the table, I am sure all of us
on the panel recognize that the purpose of having
identification when opening accounts, conducting financial
transactions, that there is a reasonable expectation that
information is correct and legitimate.
In fact, the Patriot Act strengthened the ability of the
banks to determine those that were opening accounts and
requires specific information. So I think any----
Mr. Platts. I guess if we could whether--which of you would
maybe followup is what is the FBI's official position
specifically on Matriculars; you know, should they be allowed
as an acceptable form of identification for opening up a bank
account in that--by the Federal Government?
Mr. Fabian. I am sorry.
Mr. Platts. If we can have that followup to the
subcommittee, that would get to the exact point. With the
Secret Service?
Mr. Townsend. With your permission, we would submit for the
record on that issue. With regard to the driver's license
issue, if I can parcel your question with regard to the
possession, we will also submit for the record on that.
But I would like to let the subcommittee, the chairmen
know, that the Secret Service has an ongoing initiative with
the American Association for Motor Vehicle Administrators, the
Document Security Alliance, to continue to address this issue
of our 50 different driver's licenses and the attendant
problems.
It is something that we think we can bring some expertise
to with regard to our document analysis capabilities. And it is
something that is ongoing. We meet with those associates
regularly. It is something that we recognize as a real concern.
We are endeavoring to bring the technology that is available
into driver's licenses.
And, of course, as you are aware, you are dealing with 50
separate State legislatures. It is not something that is going
to be an overnight fix. But these two organizations, AMVA and
the Document Security Alliance, I think it is a good
partnership. And the issue that you bring up is one that is at
the forefront.
Mr. Platts. I appreciate it. That gets to that second part,
coming out of the State house myself, and Adam as well, in
having that uniformity. And if there is guidance from your work
with the national association, of the State administrators, the
highway administrators, that we need legislation, legislation
that would through Federal funding help provide that, you know,
coordination and that uniform driver's license so we have the
ability for one State to better talk to another, that this guy
has already got a license here and not let him get five other
ones in different States.
We would welcome that feedback if you believe that, as you
are working with the association, there is a need for a
legislative approach. Because I support that effort. And having
that uniformity would be very helpful. I appreciate your both
following up with specifics on the driver's license and the
Matriculars.
And, Mr. Chairman, I just want to thank you for your
patience with me, as I do have more questions, but I will
submit those for the record to followup.
And again I appreciate our witnesses and your allowing me
to join you at this hearing today.
Mr. Putnam. Thank you, Mr. Platts. I also have a number of
questions. And that being the case, since there are questions
that we did not have time for today, the record will remain
open for 2 weeks for submitted questions and answers. And we
appreciate the panelists' full cooperation in responding.
I want to thank you, Mr. Platts and your staff, as well as
the staff of the Subcommittee on Technology for putting
together this hearing. It is always a challenge to organize a
field hearing outside of Washington with the logistics.
And I appreciate the witnesses cooperating as well as with
their travel schedules. We want to thank you for all of your
participation. Agencies and law enforcement have a tremendous
task before them. I think that we clearly have made progress,
but there is also still room for improvement.
As we have discovered in other areas of the Federal
Government, grappling with the coordinating efforts and
communicating vital information between agencies is an
important component to our eventual success.
Without that cooperation on all levels, our goal of choking
off terrorist financial networks will be difficult to realize.
With that, we appreciate the participation of the audience.
And we certainly want to thank the Port Authority for their
cooperation in allowing us to use their particular venue,
particularly George Williamson and John Thorington with the
Port Authority.
With that, the subcommittees stand adjourned.
[Whereupon, at 2:35 p.m., the joint subcommittee hearing
was adjourned.]