[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 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 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:] [GRAPHIC] [TIFF OMITTED] T3428.001 [GRAPHIC] [TIFF OMITTED] T3428.002 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:] [GRAPHIC] [TIFF OMITTED] T3428.003 [GRAPHIC] [TIFF OMITTED] T3428.004 [GRAPHIC] [TIFF OMITTED] T3428.005 [GRAPHIC] [TIFF OMITTED] T3428.006 [GRAPHIC] [TIFF OMITTED] T3428.007 [GRAPHIC] [TIFF OMITTED] T3428.008 [GRAPHIC] [TIFF OMITTED] T3428.009 [GRAPHIC] [TIFF OMITTED] T3428.010 [GRAPHIC] [TIFF OMITTED] T3428.011 [GRAPHIC] [TIFF OMITTED] T3428.012 [GRAPHIC] [TIFF OMITTED] T3428.013 [GRAPHIC] [TIFF OMITTED] T3428.014 [GRAPHIC] [TIFF OMITTED] T3428.015 [GRAPHIC] [TIFF OMITTED] T3428.016 [GRAPHIC] [TIFF OMITTED] T3428.017 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:] [GRAPHIC] [TIFF OMITTED] T3428.018 [GRAPHIC] [TIFF OMITTED] T3428.019 [GRAPHIC] [TIFF OMITTED] T3428.020 [GRAPHIC] [TIFF OMITTED] T3428.021 [GRAPHIC] [TIFF OMITTED] T3428.022 [GRAPHIC] [TIFF OMITTED] T3428.023 [GRAPHIC] [TIFF OMITTED] T3428.024 [GRAPHIC] [TIFF OMITTED] T3428.025 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:] [GRAPHIC] [TIFF OMITTED] T3428.026 [GRAPHIC] [TIFF OMITTED] T3428.027 [GRAPHIC] [TIFF OMITTED] T3428.028 [GRAPHIC] [TIFF OMITTED] T3428.029 [GRAPHIC] [TIFF OMITTED] T3428.030 [GRAPHIC] [TIFF OMITTED] T3428.031 [GRAPHIC] [TIFF OMITTED] T3428.032 [GRAPHIC] [TIFF OMITTED] T3428.033 [GRAPHIC] [TIFF OMITTED] T3428.034 [GRAPHIC] [TIFF OMITTED] T3428.035 [GRAPHIC] [TIFF OMITTED] T3428.036 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:] [GRAPHIC] [TIFF OMITTED] T3428.037 [GRAPHIC] [TIFF OMITTED] T3428.038 [GRAPHIC] [TIFF OMITTED] T3428.039 [GRAPHIC] [TIFF OMITTED] T3428.040 [GRAPHIC] [TIFF OMITTED] T3428.041 [GRAPHIC] [TIFF OMITTED] T3428.042 [GRAPHIC] [TIFF OMITTED] T3428.043 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:] [GRAPHIC] [TIFF OMITTED] T3428.044 [GRAPHIC] [TIFF OMITTED] T3428.045 [GRAPHIC] [TIFF OMITTED] T3428.046 [GRAPHIC] [TIFF OMITTED] T3428.047 [GRAPHIC] [TIFF OMITTED] T3428.048 [GRAPHIC] [TIFF OMITTED] T3428.049 [GRAPHIC] [TIFF OMITTED] T3428.050 [GRAPHIC] [TIFF OMITTED] T3428.051 [GRAPHIC] [TIFF OMITTED] T3428.052 [GRAPHIC] [TIFF OMITTED] T3428.053 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.]