[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
THE 9/11 COMMISSION REPORT:
IDENTIFYING AND PREVENTING
TERRORIST FINANCING
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
AUGUST 23, 2004
__________
Printed for the use of the Committee on Financial Services
Serial No. 108-107
U.S. GOVERNMENT PRINTING OFFICE
96-943 WASHINGTON : 2004
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio GREGORY W. MEEKS, New York
JIM RYUN, Kansas BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois KEN LUCAS, Kentucky
MARK GREEN, Wisconsin JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona MIKE ROSS, Arkansas
VITO FOSSELLA, New York CAROLYN McCARTHY, New York
GARY G. MILLER, California JOE BACA, California
MELISSA A. HART, Pennsylvania JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota RAHM EMANUEL, Illinois
TOM FEENEY, Florida DAVID SCOTT, Georgia
JEB HENSARLING, Texas ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey CHRIS BELL, Texas
TIM MURPHY, Pennsylvania
GINNY BROWN-WAITE, Florida BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona
Robert U. Foster, III, Staff Director
C O N T E N T S
----------
Page
Hearing held on:
August 23, 2004.............................................. 1
Appendix:
August 23, 2004.............................................. 89
WITNESSES
Monday, August 23, 2004
Hamilton, Hon. Lee H., Vice Chairman, National Commission on
Terrorist Attacks Upon the United States....................... 5
Levey, Hon. Stuart A., Under Secretary, Office of Terrorism and
Financial Intelligence, Department of the Treasury............. 56
Libutti, Hon. Frank, Under Secretary, Information Analysis and
Infrastructure Protection, Department of Homeland Security..... 58
Sabin, Barry, Chief of the Counterterrorism Section, Department
of Justice..................................................... 61
APPENDIX
Prepared statements:
Oxley, Hon. Michael G........................................ 90
Bachus, Hon. Spencer......................................... 92
Barrett, Hon. J. Gresham..................................... 93
Capito, Hon. Shelley Moore................................... 94
Castle, Hon. Michael N....................................... 95
Hensarling, Hon. Jeb......................................... 97
Hinojosa, Hon. Ruben......................................... 99
Kanjorski, Hon. Paul E....................................... 101
Kelly, Hon. Sue W............................................ 102
King, Hon. Peter T........................................... 104
Royce, Hon. Edward R......................................... 106
Hamilton, Hon. Lee H......................................... 108
Levey, Hon. Stuart A......................................... 115
Libutti, Hon. Frank.......................................... 126
Sabin, Barry................................................. 131
Additional Material Submitted for the Record
Bachus, Hon. Spencer:
Excerpts from 9/11 Commission Testimony and Staff Report
Regarding U.S. Government Successes in Counter Terrorist
Financing.................................................. 140
Hinojosa, Hon. Ruben:
Letters in opposition to the Culberson Amendment to the House
Transportation, Treasury Appropriations bill............... 143
Most Frequently Asked Questions Regarding the Matricula
Consular................................................... 166
Sample of Matricula Consular Id Card......................... 182
Hamilton, Hon. Lee H.:
Monograph on Terrorist Financing............................. 184
THE 9/11 COMMISSION REPORT:
IDENTIFYING AND PREVENTING
TERRORIST FINANCING
----------
Monday, August 23, 2004
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to call, at 10:05 a.m., in Room
2128, Rayburn House Office Building, Hon. Michael G. Oxley
[chairman of the committee] Presiding.
Present: Representatives Bachus, Castle, King, Royce,
Kelly, Paul, LaTourette, Biggert, Green, Shays, Fossella, Hart,
Capito, Tiberi, Feeney, Hensarling, Garrett, Barrett, Frank,
Kanjorski, Waters, Maloney, Watt, Hooley, Sherman, Meeks,
Moore, Hinojosa, Israel, McCarthy, Matheson, Emanuel, Scott,
and Bell.
The Chairman. The committee will come to order.
This hearing of the Committee on Financial Services will
begin. Without objection, all members' opening statements will
be made a part of the record, and the Chair recognizes himself
for a brief opening statement.
Good morning to our witnesses and members. The Financial
Services Committee meets today for an unusual August recess
hearing to consider the findings and recommendations of the
National Commission on Terrorist Attacks upon the United
States. Evaluating and acting upon these recommendations is, in
my view, a top priority for Congress to address this fall.
I want to welcome our old friend and colleague, Lee
Hamilton, and thank you, Lee, for your service on the 9/11
Commission and taking this time to give your views today.
The 9/11 Commission, chaired by former New Jersey Governor
Tom Kean and the aforementioned Mr. Hamilton, has performed a
valuable service to our Nation by providing an exhaustive and
compelling account of the terrorist threat that confronts us
and by developing serious policy recommendations to help meet
that threat.
As the House committee that took the lead after September
11 in crafting the antiterrorist finance provisions of the USA
PATRIOT Act and overseeing the government's efforts to shut off
al Qaeda's funding sources, we have a particular interest in
the Commission's work related to those subjects. More broadly,
as the third anniversary of the 9/11 attacks approaches and as
intelligence reports suggest the possibility of another major
attack, it is appropriate for this committee to take stock of
how far we have come in dismantling and disrupting the
terrorists' financial networks.
While our troops and some American citizens abroad have
been subjected to terrorism, we have been terror-free on U.S.
land since 9/11. That is both an accomplishment and a
challenge.
It is important to note that the most recent report issued
on the 9/11 Commission's website on Saturday actually gives
predominantly positive reviews to both the PATRIOT Act and
recent intelligence efforts. According to the report, ``While
definitive intelligence is lacking, these efforts have had a
significant impact on al Qaeda's ability to raise and move
funds, on the willingness of donors to give money
indiscriminately, and on the international community's
understanding and sensitivity to the issue. Moreover, the U.S.
Government has used the intelligence revealed through financial
information to understand terrorist networks, search them out,
and disrupt their operations.''
We at the Financial Services Committee are, of course,
concerned about the recent heightened terror alert for the
financial services sector. It serves as a stark reminder that
this Nation's financial institutions and the international
financial institutions are part of the front line in the war
against terrorists. We have made significant progress by
discovering and exposing al Qaeda's interest in these targets,
thus making their operations more difficult.
In its final report, the Commission was complimentary of
the PATRIOT Act and its effect on terrorist financing,
recognizing the extraordinary cooperation that financial
institutions have given to law enforcement. The government
needs to reward and encourage those efforts by more effectively
implementing these provisions of the PATRIOT Act, including
section 314, to seek to create a two-way street for information
sharing between the public and private sectors.
In this regard, I want to stress the importance of fully
funding the Treasury's Financial Crimes Enforcement Network,
FinCEN, so that it can carry out the critical responsibilities
Congress gave it in the PATRIOT Act to identify terrorist money
trails in real time and to provide law enforcement and the
financial services industry with immediate feedback on
suspicious financial activity.
The two major al Qaeda funding techniques emphasized in the
9/11 Commission Report are Islamic charities and informal value
transfer systems such as hawala. Although no one is under any
illusion that these avenues have been completely shut off to
the terrorists, the government can boast of many recent
successes in combating these forms of terrorist finance. Last
month, for example, the Justice Department obtained money
laundering indictments of five former leaders of the Holy Land
Foundation, a Texas-based charity alleged to have funneled over
$12 million to Hamas.
The government has also made extensive use of section 373
of the PATRIOT Act to shut down unlicensed money-transmitting
businesses suspected of funding terrorism. In addition, the
government has created a great deal of international consensus
on how best to create and tighten standards for fighting
terrorist financing at both the multilateral and bilateral
levels.
While more needs to be done by key allies, the Organization
for Economic Cooperation and Development, through the Financial
Action Task Force, has created strong international standards
which are being implemented across the world. As a result,
since 9/11 the number of financial intelligence units has
nearly doubled and the amount of information crossing borders
in the fight against terror has expanded significantly.
The International Monetary Fund and the World Bank are
including these international standards in the infrastructure
assessment process within the financial sector. The regional
development banks are establishing special facilities to
channel development assistance in this area as well.
Bilaterally, the number of countries where enhanced
information-sharing arrangements exists is growing. So we have
come a very long way since 9/11. We are committed to winning
the war against global terrorism, a task which will require
time, patience, courage, and perseverance.
The Chair's time has expired. I am pleased to yield to the
gentleman from Massachusetts, Mr. Frank.
[The prepared statement of Hon. Michael G. Oxley can be
found on page 90 in the appendix.]
Mr. Frank. Thank you, Mr. Chairman.
I appreciate the diligence with which Mr. Hamilton has made
himself available. This is my second time hearing him in
August, and he has been very helpful, because he is in an
unusually good position as a former senior Member of the
Congress to understand what it is that needs to be done to get
these recommendations enacted.
I was particularly pleased to have that monograph done by
the staff. I think we have, many of us, talked about our
admiration for the work of the Commission, and we should be
explicit that we were well-served in this country by the first-
rate staff that you and your colleagues assembled and by the
work they have done.
I cannot think of many cases where we have had a common,
agreed-upon framework in which to debate issues. Obviously,
there ought to be debate. We ought to be clear. People who
think that there is no room for debate and that we simply enact
things without debate are looking at the wrong country. This is
a democracy, and that is of the essence.
But the Commission has really done two things. It has given
us some very good, specific recommendations, but, in addition,
it has provided, through a first-rate body of work, a framework
in which to debate those. It is very helpful to have a debate
going on on policy where we are not arguing about what
happened, we are not arguing about the facts, and that is not
something to be taken for granted. I very much appreciate that.
I also found a couple of things of particular interest in
the report and one I do want to comment on and to thank Mr.
Hamilton for stressing, and that is the civil liberties aspect.
I was struck favorably by the Commission recommending that we
create a new body in the government to protect against civil
liberties abuses.
We have this dilemma, obviously. On September 11, our law
enforcement model, the law enforcement model of a free society,
was undermined. That is, the law enforcement model of a free
society basically is the bad guys get a free shot. We do not
stop you from doing things. The assumption is people are going
to behave themselves. And we say, on the other hand, if you do
something that is abusive to other people's rights, we are
going to catch you and punish you. It is called deterrence, and
that is essentially the model of a free society.
Then, 19 murderous thugs killed themselves to kill other
people and, obviously, deterrence does not work. So we then
have to arm law enforcement with more intrusive powers, because
we cannot wait. We have to intervene. But we want to do that in
the best possible way. And I think the model--and we have
talked about how to do this--the model that seems to me to get
this done is to give them the ability to be intrusive, to go
and catch people, to listen in on people, to spy on people--
that is in the nature of it--but to recognize that in a human
system, mistakes will be made. People will make mistakes.
And what we need to do then is to have really almost two
parallel systems: a system of vigorous intrusive enforcement
and a parallel system to try and minimize the errors, and
because errors will inevitably happen, have an appeals
mechanism, and this is I think particularly what is relevant in
the financial area. We are giving the government the power--we
have given the government the power--as the chairman mentioned,
we have worked on this committee--the power to freeze assets.
That is an important power for them to have. But equally
important is for there to be mechanisms whereby people whose
assets have been inappropriately or erroneously frozen to have
a quick and effective method of appeal, and that sometimes gets
left behind. That is our job. That is our job.
When some parts of the PATRIOT Act expire and we deal with
them next year, it is obvious that we should enact these
recommendations; and I am glad the Commission pointed this out.
We want to give vigorous powers to law enforcement, but we want
to accompany those powers with a set of procedures that give
people who are wronged by the enforcement, we want them to have
a prompt and ready way to fight back.
One of the things I noticed, for example, was in a couple
of cases people's assets were frozen and they were forbidden to
engage in any commercial transactions with anybody and then had
to get waivers so they could hire lawyers to fight this. Well,
that ought to be automatic. The notion that you can be frozen
and then by the very act of freezing your assets which you plan
to contest you cannot hire somebody to contest it, that just
does not conform with our basic principles of freedom.
So I thank you for being both very rigorous in the kinds of
enforcement we ought to have but in pointing out from your own
experience that we are going to make some mistakes and we need
to make sure that we do this.
Let me just say, finally, to people who worry about this,
having good mechanisms for the alleviation of error is an
important part of law enforcement. Because there will be people
who will oppose giving law enforcement the powers because they
are afraid of the mistakes that will get made, and having a
system for correcting the mistakes then becomes not a dilution
of the law enforcement powers but an essential element in the
decision to grant them.
Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
After consultation with the ranking member, it was
determined that we would allow all of the opening statements to
be made a part of the record which, with unanimous consent, it
is so ordered, so that we will have an adequate opportunity to
hear from the distinguished gentleman from Indiana, as well as
have an opportunity for questions.
The Chairman. With that, Mr. Hamilton, welcome to the
committee. We appreciate your service to our country, your long
service here in the Congress, as well as your vice chairmanship
of the 9/11 Commission. You have done the Nation a favor and a
service, and we are all grateful, and we are pleased to hear
from you today.
STATEMENT OF THE HONORABLE LEE H. HAMILTON, VICE CHAIRMAN,
NATIONAL COMMISSION ON TERRORIST ATTACKS UPON THE UNITED STATES
Mr. Hamilton. Thank you very much, Chairman Oxley and
Ranking Member Frank, distinguished members of the Financial
Services Committee. It is an honor to be with you this morning.
Governor Kean, who led the 9/11 Commission with
extraordinary distinction, is testifying this afternoon. I
think he is on his way down now from New Jersey. He could not
be here this morning.
I want to say a word of special thanks to all of you for
being here in August. I know that is unprecedented, and we are
very grateful to you. This committee has been involved in
financial aspects of our country's war on terrorism for a long
time. We are grateful to you for your leadership and for your
prompt consideration of our recommendations.
Mr. Frank mentioned the staff report. I am submitting to
you today a Commission staff report on terrorist financing. I
would like to ask that that be made part of the record.
The Chairman. Without objection.
[The following information can be found on page 184 in the
appendix.]
Mr. Hamilton. While Commissioners have not been asked to
review or approve this staff report--indeed, I first saw it
only a few hours ago--we believe the work of the staff on
terrorist finance issues will be helpful to your own
consideration of these issues.
After the September 11 attacks, the highest-level U.S.
Government officials publicly declared that the fight against
al Qaeda financing was as critical as the fight against al
Qaeda itself. It was presented as one of the keys to success in
the fight against terrorism. If we choke off the terrorists'
money, we limit their ability to conduct mass casualty attacks.
In reality, stopping the flow of funds to al Qaeda and
affiliated terrorist groups has proved to be essentially
impossible. At the same time, tracking al Qaeda financing is an
effective way to locate terrorist operatives and supporters and
to disrupt terrorist plots. Our government's strategy on
terrorist financing, thus, has changed significantly from the
early post-9/11 days. Choking off the money remains the most
visible and important aspect, and it is an important aspect of
our approach, but it is not our only or even most important
goal. Making it harder for terrorists to get money is a
necessary, but not sufficient, component of the overall
strategy.
Following the money to identify terrorist operatives and
sympathizers provides a particularly powerful tool in the fight
against terrorist groups. Use of this tool almost always
remains invisible to the general public, but it is a critical
part of the overall campaign against al Qaeda. Today, the
United States Government recognizes--appropriately, in our
view--that terrorist financing measures are simply one of many
tools in the fight against al Qaeda.
The September 11 hijackers used U.S. and foreign financial
institutions to hold, move, and retrieve their money. The
hijackers deposited money into U.S. accounts primarily by wire
transfers and deposits of cash or travelers checks brought from
overseas. Additionally, several of them kept funds in foreign
accounts which they accessed in the United States through ATM
and credit card transactions. The hijackers received funds from
facilitators in Germany and the United Arab Emirates or
directly from Khalid Sheikh Mohammed, KSM, as they transited
Pakistan before coming to the United States. The entire plot
cost al Qaeda somewhere in the range of $400,000 to $500,000,
of which approximately $300,000 passed through the hijackers'
bank accounts in the United States.
While in the United States, the hijackers spent money
primarily for flight training, travel, and living expenses.
Extensive investigation has revealed no substantial source of
domestic financial support. Neither the hijackers nor their
financial facilitators were experts in the use of the
international financial system. They created a paper trail
linking them to each other and their facilitators. Still, they
were adept enough to blend into the vast international
financial system easily, without doing anything to reveal
themselves as criminals, let alone terrorists bent on mass
murder.
The money-laundering controls in place at the time were
largely focused on drug trafficking and large-scale financial
fraud. They could not have detected the hijackers'
transactions. The controls were never intended to and could not
detect or disrupt the routine transactions in which the
hijackers engaged.
There is no evidence that any person with advanced
knowledge of the impending terrorist attacks used that
information to profit by trading securities. Although there has
been consistent speculation that massive al Qaeda-related
insider trading preceded the attacks, exhaustive investigation
by Federal law enforcement and the securities industry has
determined that unusual spikes in the trading of certain
securities were based on factors unrelated to terrorism.
Al Qaeda and Osama bin Ladin obtained money from a variety
of sources. Contrary to common belief, bin Laden did not have
access to any significant amounts of personal wealth,
particularly after his move from Sudan to Afghanistan. He did
not personally fund al Qaeda, either through an inheritance or
businesses he was said to have owned in Sudan. Al Qaeda's
funds, approximately $30 million per year, came from the
diversion of money from Islamic charities. Al Qaeda relied on
well-placed financial facilitators who gathered money from both
witting and unwitting donors, primarily in the Gulf region.
No persuasive evidence exists that al Qaeda relied on the
drug trade as an important source of revenue, had any
substantial involvement with conflict diamonds, or was
financially sponsored by any foreign government. The United
States is not, and has not been, a substantial source of al
Qaeda funding, although some funds raised in the United States
may have found their way to al Qaeda and its affiliated groups.
Before 9/11, terrorist financing was not a priority for
either domestic or foreign intelligence collection.
Intelligence reporting on this issue was episodic,
insufficient, and often inaccurate.
Although the National Security Council considered terrorist
financing important in its campaign to disrupt al Qaeda, other
agencies failed to participate to the NSC's satisfaction. There
was little interagency strategic planning or coordination.
Without an effective interagency mechanism, responsibility for
the program was disbursed among a myriad of agencies, each
working independently.
The FBI gathered intelligence on a significant number of
organizations in the United States suspected of raising funds
for al Qaeda or other terrorist groups. The FBI, however, did
not develop an end game for its work. Agents continued to
gather intelligence with little hope that they would be able to
make a criminal case or otherwise disrupt the operations of
these organizations.
The FBI could not turn these investigations into criminal
cases because of insufficient international cooperation; a
perceived inability to mingle criminal and intelligence
investigations due to the wall between intelligence and law
enforcement matters; sensitivities to overt investigations of
Islamic charities and organizations; and the sheer difficulty
of prosecuting most terrorist financing cases. Nonetheless, FBI
street agents had gathered significant intelligence on specific
groups.
On a national level, the FBI did not systematically gather
and analyze the information its agents developed. It lacked a
headquarters unit focusing on terrorist financing. Its
overworked counterterrorism personnel lacked time and resources
to focus specifically on financing. The FBI is an organization
that therefore failed to understand the nature and extent of
the jihadist fund-raising problem within the United States or
to develop a coherent strategy for confronting the problem. The
FBI did not, and could not, fulfill its role to provide
intelligence on domestic terrorist financing to government
policymakers. The FBI did not contribute to national policy
coordination.
The Department of Justice could not develop an effective
program for prosecuting terrorist-financed cases. Its
prosecutors had no systematic way to learn what evidence of
prosecutable crimes could be found in the FBI's intelligence
files, to which it did not have access.
The U.S. Intelligence Community largely failed to
comprehend al Qaeda's methods of raising, moving, and storing
money. It devoted relatively few resources to collecting the
financial intelligence that policymakers were requesting or
that would have informed the larger counterterrorism strategy.
The CIA took far too long to grasp basic financial
information that was readily available, such as the knowledge
that al Qaeda relied on fund-raising, not bin Laden's personal
fortune. The CIA's inability to grasp the true source of bin
Laden's funds frustrated policymakers, unable to integrate
potential covert action or overt economic disruption into the
counterterrorism effort.
The lack of specific intelligence about al Qaeda financing
and intelligence deficiencies persisted through 9/11. The
Office of Foreign Assets Control, the Treasury organization
charged by law with searching out, designating, and freezing
bin Laden access did not have access to much actionable
intelligence.
Before 9/11, a number of significant legislative and
regulatory initiatives designed to close vulnerabilities in the
U.S. financial system failed to gain traction. They did not
gain the attention of policymakers. Some of these, such as a
move to control foreign banks with accounts in the United
States, died as a result of banking industry pressure. Others,
such as a move to regulate money remitters, were mired in
bureaucratic inertia and a general antiregulatory environment.
It is common to say, the world has changed since 9/11. This
conclusion is especially apt in describing U.S.
counterterrorist efforts regarding financing. The U.S.
Government focused for the first time on terrorist financing
and devoted considerable energy and resources to the problem.
As a result, we now have a far better understanding of the
methods by which terrorist raise, move, and use money. We have
employed this knowledge to our advantage.
With a new sense of urgency post 9/11, the intelligence
community, including the FBI, created new entities to focus on
and bring expertise to the question of terrorist fund-raising
and the clandestine movement of money. The Intelligence
Community uses money flows to identify and locate otherwise
unknown associates of known terrorists and has integrated
terrorist financing issues into the larger counterterrorism
effort.
Equally important, many of the obstacles hampering
investigations have been stripped away. The current
Intelligence Community approach appropriately focuses on using
financial transactions in close coordination with other types
of intelligence to identify and track terrorist groups rather
than to starve them of funding.
Still, understanding al Qaeda's money flows and providing
actionable intelligence to policymakers presents ongoing
challenges because of the speed, diversity, and complexity of
the means and methods for raising and moving money; the
commingling of terrorist money with legitimate funds; the many
layers and transfers between donors and the ultimate recipients
of the money; the existence of unwitting participants,
including donors who give to generalized jihadist struggles
rather than specifically to al Qaeda; and the U.S. Government's
reliance on foreign government reporting for intelligence.
Bringing jihadist fund-raising prosecutions remains
difficult in many cases. The inability to get records from
other countries, the complexity of directly linking cash flows
to terrorist operations or groups, and the difficulty of
showing what domestic persons knew about illicit foreign acts
or actors all combine to thwart investigations and
prosecutions.
The domestic financial community and some international
financial institutions have generally provided law enforcement
and intelligence agencies with extraordinary cooperation. This
cooperation includes providing information to support quickly
developing investigations such as the search for terrorist
suspects at times of emergency. Much of this cooperation is
voluntary and based on personal relationships.
It remains to be seen whether such cooperation will
continue as the memory of 9/11 fades. Efforts to create
financial profiles of terrorist cells and terrorist fund-
raisers have proved unsuccessful, and the ability of financial
institutions to detect terrorist financing remains limited.
Since the September 11 attacks and the defeat of the
Taliban, al Qaeda's budget has decreased significantly.
Although the trend line is clear, the U.S. Government still has
not determined with any precision how much al Qaeda raises or
from whom or how it spends its money. It appears that the al
Qaeda attacks within Saudi Arabia in May and November, 2003,
have reduced, some say drastically, al Qaeda's ability to raise
funds from Saudi sources. There has been both an increase in
Saudi enforcement and a more negative perception of al Qaeda by
potential donors in the Gulf.
However, as al Qaeda's cash flows have decreased, so, too,
have its expenses, generally owing to the defeat of the Taliban
and the disbursement of al Qaeda. Despite our efforts, it
appears that al Qaeda can still find money to fund terrorist
operations. Al Qaeda now relies to an even greater extent on
the physical movement of money and other informal methods of
value transfer, which can pose significant challenges for those
attempting to detect and disrupt money flows.
While specific, technical recommendations are beyond the
scope of my remarks today, I stress four themes in relation to
this committee's work:
First, continued enforcement of the Bank Secrecy Act rules
for financial institutions, particularly in the area of
suspicious activity reporting is necessary.
The suspicious activity reporting provisions currently in
place provide our first defense in deterring and investigating
the financing of terrorist entities and operations. Financial
institutions are in the best position to understand and
identify problematic transactions or accounts.
Although the transactions of the 9/11 hijackers were small
and innocuous, apparently, or seemed to be, and could probably
not be detected today, vigilance in this area is important.
Vigilance assists in preventing open and notorious fund-
raising. It forces terrorists and their sympathizers to raise
and move money clandestinely, thereby raising the costs and the
risks involved. The deterrent value in such activity is
significant; and, while it cannot be measured in any meaningful
way, it ought not to be discounted.
The USA PATRIOT Act expanded the list of financial
institutions subject to bank secrecy regulation. We believe
that this was a necessary step to ensure that other forms of
moving and storing money, particularly less regulated areas
such as wire emitters, are not abused by terrorist financiers
and money launderers.
Second, investigators need the right tools to identify
customers and trace financial transactions in fast-moving
investigations.
The USA PATRIOT Act gave investigators a number of
significant tools to assist in fast-moving terrorism
investigations. Section 314(a) allows investigators to find
accounts or transactions across the country. It has proved
successful in tracking financial transactions and could prove
invaluable in tracking down the financial component of
terrorist cells. Section 326 requires specific customer
identification requirements for those opening accounts at
financial institutions. We believe both of these provisions are
extremely useful and properly balance customer privacy and the
administrative burden on the one hand against investigative
utility on the other.
Third, continuous examination of the financial system for
vulnerabilities is necessary.
While we have spent significant resources examining the
ways al Qaeda raised and moved money, we are under no illusion
that the next attack will use similar methods. As the
government has moved to close financial vulnerabilities and
loopholes, al Qaeda adapts. We must continually examine our
system for loopholes that al Qaeda can exploit and close them
as they are uncovered. This will require constant efforts on
the part of this committee, working with the financial
industry, their regulators, and the law enforcement and
intelligence community.
Finally, we need to be mindful of civil liberties in our
efforts to shut down terrorist networks.
In light of the difficulties in prosecuting some terrorist
fund-raising cases, the government has issued administrative
blocking and freezing orders under the International Emergency
Economic Powers Act, IEEPA, against U.S. Persons--individuals
or entities--suspected of supporting foreign terrorist
organizations. It may well be effective, and perhaps necessary,
to disrupt fund-raising operations through an administrative
blocking order when no other good options exist.
The use of IEEPA authorities against domestic organizations
run by U.S. citizens, however, raises significant civil
liberties concerns. IEEPA authorities allow the government to
shut down an organization on the basis of classified evidence
subject only to a deferential after-the-fact judicial review.
The provision of the IEEPA that allows the blocking of assets
during the pendency of an investigation also raises particular
concern in that it can shut down a U.S. entity indefinitely
without the more fully developed administrative record
necessary for a permanent IEEPA designation.
Vigorous efforts to track terrorist financing must remain
front and center in U.S. counterterrorism efforts. The
government has recognized that information about terrorist
money helps us to understand the networks, search them out, and
disrupt their operation. These intelligence and law enforcement
efforts have worked. The death or capture of several important
facilitators has decreased the amount of money available to al
Qaeda and increased its costs and difficulties in moving money.
Captures have produced a windfall of intelligence.
Raising the costs and risks of gathering and moving money
are necessary to limit al Qaeda's ability to plan and mount
significant mass casualty attacks. We should understand,
however, that success in these efforts will not of itself
immunize us from future terrorist attacks.
I would be pleased to respond to your questions.
The Chairman. Thank you, Mr. Hamilton. Again, we appreciate
your participation at the committee hearing today.
[The prepared statement of Hon. Lee H. Hamilton can be
found on page 108 in the appendix.]
The Chairman. Among the major themes of the Commission
report was the need to better allocate intelligence resources
and establishing clear lines of responsibility. While there was
a little commentary in the report itself about the Treasury's
anti-terrorist finance efforts, the committee, under the able
leadership of Mrs. Kelly, has undertaken several hearings on
that particular subject.
Two major threads have emerged during those hearings: one,
that the Financial Crimes Enforcement Network, or FinCEN, has
trouble improving the quality of its product because they
cannot operate their own computers, and two, that the IRS has a
lot of other good financial crimes investigators who do not
work on tax enforcement issues.
Would it not make a lot of sense as we look at the larger
picture to centralize these functions somewhere in government,
perhaps with the Office of Terrorist Financing and Intelligence
within Treasury? As we try to reach those goals, did the
Commission at least consider that possibility and does that
provide some kind of opportunity for reaching those two goals
that were raised?
Mr. Hamilton. Mr. Chairman, we are very careful about
putting into a single agency the lead role and trying to broker
the competing equities of various operating agencies. You have
in place today the NSC's Policy Coordinating Committee on
Terrorist Financing, and I think generally it has been
successful in doing the policy coordination that is necessary.
Now, obviously, Treasury has an enormously important role
to play in antiterrorism financing. But we are skeptical, I
guess, or doubtful that concentrating authority is a good move.
One reason for that is the way we view antiterrorist or
counterterrorism policy. We believe conducting counterterrorism
policy requires that you integrate a lot of aspects or use a
lot of tools of American policy and of American policymakers.
You have to have the military, you have to have covert action,
you have to have intelligence, you have to have Treasury, you
have to have economic assistance and economic policy and public
diplomacy and a lot of other things. So we are doubtful that
this should be focused in the Treasury.
With regard to the IRS--and may I say that is especially
true as al Qaeda has moved to these more informal means of
moving money. With regard to the IRS, we believe the IRS is
working effectively now in the FBI Joint Terrorism Task Forces,
which is designed to bring together the experts to fight
terrorism in a single, coordinated effort. We have not seen any
evidence that the IRS is not fully participating in that.
Now, you also mentioned the Financial Crimes Enforcement
Network. You folks know a lot more about that than I do. We did
learn about some of their problems because it does not use its
own systems to process secrecy data well, but getting into a
remedy for that really was outside our mandate, and we did not
address it.
The Chairman. Thank you.
One of the aspects of the Commission's findings which
received particular attention is its observation, and it was an
interesting quote, that the report says that ``trying to starve
the terrorists of money is like trying to catch one kind of
fish by draining the ocean.'' And, indeed, and you have
mentioned in your opening statement that, because of that
apparent change, I guess the issue is, is it an either/or kind
of thing. In other words, I can understand from the aspect of
intelligence that we follow the money, follow the money trail,
as opposed to efforts at locating and freezing those assets.
Should that be the general policy of the Federal Government, or
should it be dealt with on a case-by-case basis, depending on
the particular situation on the ground?
Mr. Hamilton. I believe the latter is the way to approach
it, Mr. Chairman. Freezing, of course, is a very, very
important weapon in dealing with terrorist financing. And the
existence of that power is a substantial--provides a
substantial deterrent, we believe. Wealthy people, wealthy
entities do not like the idea of having their assets frozen,
and it makes them, we would hope, we believe, more reluctant to
get involved in any kind of questionable financing that might
help the terrorists.
Having said that, I think on a given case whether or not to
use freezing has to be made on a case-by-case basis. You have
to look at all of the equities involved. Many times I think
freezing might be the right strategy, many times it would not
be the right strategy, and the better thing to do is not to
freeze the assets, keep the account open, and follow it, to
learn more about the terrorist financing. I do not think you
can generalize about that. What you do have to have is an
effective interagency process that considers the competing
equities and then make a decision.
The Chairman. Thank you. My time has expired.
The Chair now recognizes the gentlewoman from California,
Ms. Waters.
Mr. Frank. Mr. Chairman, if I could just explain, I was
here a week ago when I had a chance to question Mr. Hamilton,
and I thought with all of the members coming in, I would defer
for a while.
Ms. Waters. Thank you very much, Mr. Chairman and Ranking
Member Frank. I would like to thank you, Mr. Chairman, and our
Ranking Member for scheduling this important meeting.
Mr. Chairman, the 9/11 Commission's report and the staff
monograph on terrorist financing are tremendously valuable
resources to this committee as we consider the wide range of
issues that necessarily are implicated when we evaluate how we
can make it more costly and difficult for terrorists to engage
in terrorism without either sacrificing civil liberties or
unduly disrupting commerce. I would like to commend Chairman
Kean, Vice Chairman Hamilton and the other members of the 9/11
Commission and the Commission staff for the care and attention
that obviously went into these documents, and I thank all of
them for their work. They have certainly performed an
exceptional public service.
Mr. Chairman and members, I am going to take a line of
questioning that may be a little bit uncomfortable, but I think
it is absolutely necessary. First of all, I would like to note
that, as it has been reported, the 9/11 Commission confirmed
last month that it had found no evidence that the Government of
Saudi Arabia funded the al Qaeda terrorist network and the 9/11
hijackers received funding from Saudi citizen Omar al-Bayoumi
or Princess Haifa al-Faisal, wife of ambassador to the United
States Prince Bandar bin Sultan. I would like to ask, what went
into that investigation that would lead you to that conclusion?
The reason I would like to ask that is there are so many
reports. Time Magazine, for example, reported that the Saudis
still appear to be protecting charities associated with the
royal family which funnel money to the terrorists. Also, as you
know, there has been a lot written lately about the
relationship between President Bush and his father to the
Saudis, not only their personal friendships, but their money
relationships, relationships that include the Harkin Energy,
Halliburton and the Carlyle Group; and, of course, a lot has
been written about the $1 million that was funded to the Bush
library by the Saudis.
Also, it is noted that in this cozy relationship that this
administration has with the Saudis it goes so far as to
identify that Robert Jordan, the ambassador that was appointed
to Saudi Arabia, had no diplomatic experience, does not speak
Arabic and cannot be considered a serious diplomat as it
relates to representing our interests in a country where many
of us have very, very serious concerns.
So I would like to know, how did the Commission reach the
conclusion of finding no evidence that the Government of Saudi
Arabia furnished al Qaeda or the network with any funds or that
they are not still funding these charities? Did you have CIA
information that helped you to document that? As a matter of
fact, it appears that before 9/11, according to U.S. News, a
1996 CIA report found that a third of the 50 Saudi-backed
charities it studied were tied to terrorist groups. Similarly,
a 1998 report by the National Security Council had identified
the Saudi Government as the epicenter of terrorist funding,
becoming the single greatest force in spreading Islamic
fundamentalism and funneling hundreds of millions of dollars to
jihad groups and al Qaeda cells around the world.
Now I must admit that this information that I am reading to
you now came from the Center for American Progress. I will not
go on any further. I think you get the picture.
What I am trying to say to you is, if you have come to this
conclusion that the Saudi Government had no--is not responsible
for continuing to fund these charities where dollars ended up
with some of the 9/11 hijackers, how did you come to this
conclusion and what have you explored about this relationship
of this administration to the Saudi Government? Obviously, it
is very cozy. They have to escort members of bin Laden's family
out of the country, the princess who was found to have been
giving money to charities associated with 9/11 hijackers, all
leads us to a conclusion that this cozy relationship has to be
broken up, and I would just ask you to relate to this.
The Chairman. The gentlewoman's time has expired.
Mr. Hamilton. Thank you very much, Congresswoman Waters.
The Saudi connection with al Qaeda is a very, very
important matter to look at, and you really do have to make a
distinction between the activities of the Saudi Government
prior to the spring of 2003, when they were attacked
themselves, and then again later, I think in November, in 2003,
that time frame, pre-attacks in Saudi Arabia and post-attacks
in Saudi Arabia. Saudi Arabia is a key part of any
international effort to fight terrorist financing.
You asked us how we reached the conclusion. The conclusion
was that we found no evidence, as you have stated correctly,
that the Saudi Government as an institution or as individual
senior officials of the Saudi Government supported al Qaeda.
Now we sent investigators to Saudi Arabia. We reviewed all
kinds of information and documents with regard to that that are
available in the intelligence community. We listened to many,
many people who talked to us about these things. We followed
every lead that we could. This is an ongoing investigation. I
think it will continue. We are not going to have the final word
on it.
We did find in this, the pre-attack period, pre-Saudi
Arabia attack period, that there was a real failure to conduct
oversight in the Saudi Government, there was a lack of
awareness of the problem, and a lot of financing activity we
think flourished. We think that Saudi cooperation was
ambivalent and selective, and we were not entirely pleased with
it.
Then along came those attacks and, in the spring of 2003
and after that period, we believe the performance of the Saudi
Government improved quite a bit, and a number of the
deficiencies were corrected.
The Saudi Government needs to continue its activities to
strengthen their capabilities to stem the flow from Saudi
sources to al Qaeda; and we have to work very, very closely
with the Saudis in order to get that done. But we do not have
any evidence that the government itself or senior officials of
the government were involved in al Qaeda financing. And I think
our diplomatic efforts there over a period of time have been
helpful, but no one I think would say that we have resolved all
of the problems with the Saudis. So we have to continue to send
a message to the Saudi Government that the Saudis must do
everything within their power, everything within their power to
eliminate al Qaeda financing from Saudi sources.
The Chairman. The gentleman from Alabama.
Mr. Bachus. I thank the Chairman. I would like to commend
the Chairman and this committee for work which actually started
in 1996 to target these terrorist organizations and their
funding. I would like to note and welcome Vice Chairman
Hamilton to the committee.
Vice Chairman, as I understand your testimony today, one of
the things that has gotten a lot of attention is this
distinction about whether you freeze assets or you track the
transfer of those assets, and I think that what you are saying
is that it ought to be a case-by-case basis. Am I correct in
saying that?
Mr. Hamilton. Yes, you are.
Mr. Bachus. And in some cases we arrest the financier or
the facilitator and in other cases we observe him and document
his movements and try to find out who he is in contact with,
both upstream and downstream.
Mr. Hamilton. That is right. And what you have to keep in
mind here always is that, in counterterrorism policy, there are
a lot of things going on, and you cannot look at
counterterrorism policy solely as a matter of financing. That
is a very important part of it, but it is only a small part. So
you have to find out what all the intelligence is. You have to
find out what the military is doing, you have to find out what
the CIA is doing and a lot of other institutions, and that has
to be balanced and integrated.
Mr. Bachus. Are you aware that really the interagencies,
the agencies are cooperating today, the FBI and the Treasury,
what they are doing in these cases is they are sitting down and
reviewing the evidence and trying to make on a case-by-case-
basis decisions as to what hurts the terrorists the most?
Mr. Hamilton. Yes. We are aware that the cooperation has
picked up very substantially, that there are regular meetings
going on, that there are a lot of very smart people in these
agencies that are trying to do their best to correct some of
these problems.
Our concern, of course, is that it be sustained, that it be
continued and that it be institutionalized. You so often get
the response, well, we have a good working relationship between
official A and official B. That is very important, and without
that relationship things are not going to work very well. But
we have to look beyond the fact and understand that officials A
and B are not always going to be there, so you want to
institutionalize it.
Mr. Bachus. You are aware that, by direction of the
Congress, there was created an Office of Terrorism and
Financial Intelligence in the Treasury Department?
Mr. Hamilton. Yes.
Mr. Bachus. And that they have been coordinating with the
FBI and the CIA?
Mr. Hamilton. Yes.
Mr. Bachus. And they have been meeting and basically doing
what you all proposed here?
Mr. Hamilton. Yes, I agree with that. I think there are
mechanisms, there are entities that have been created since 9/
11 that have been useful and are operating much, much better
than prior to 9/11.
Mr. Bachus. I think if you take what you have recommended
and you look at what the Office of Terrorism and Financial
Intelligence is doing, I think you would be very satisfied that
they are, in fact, doing what you have asked them to do, with
one possible concern, and that is if it is an international
situation that we are not always getting cooperation overseas.
Mr. Hamilton. Well, if you look at--you know, we made, I
think--I think the figure was 41 recommendations, and we really
did not make a major recommendation with regard to terrorist
financing.
Mr. Bachus. Right, and I would like to commend you on that.
Because I will tell you that, from all we know, the system is
working incredibly well. We basically put most of these
facilitators--we have identified 383 of them. We have put most
of them either out of commission or they are on the run.
Mr. Hamilton. There is no cause for complacency, however.
Mr. Bachus. Oh, and I can tell you that there is not a day
that does not go by when these agencies are not meeting and
reviewing the situation and deciding on a case-by-case basis
how can we best hurt al Qaeda or these other organizations,
either we freeze the assets or we track the assets, and that
they are doing that, and I think you would be very satisfied.
I will ask you about this: The Financial Action Task Force,
are you aware of their work? That is the cooperation between
some--actually, it used to be 58 countries and now it is 94
countries, that we are actually going to each of those
countries and saying, either combat terrorism or we will move
against you to see that you do not do business with the United
States, and I guess the Commercial Bank of Syria would be one
example of some of our actions.
Mr. Hamilton. You are right. That is a very important
activity and one that will be a challenge to American diplomacy
for many years to come.
One of our principal allies in the war on terrorism is
Pakistan. Pakistan's laws with regard to tracking money and
terrorist financing and money laundering are practically
nonexistent. So a lot of things need to be done, and among
other things that need to be done is we need to provide
technical assistance to a lot of these countries.
Mr. Bachus. In fact, we are actually doing that with 94
countries today. We have increased it from 58 to 94. We have
problems with certain countries.
The Chairman. The gentleman's time has expired.
Mr. Bachus. I would simply say I would like to submit for
the record some of the things that the administration is doing
in promoting stronger antiterrorism financial regimes with
certain countries.
The Chairman. Without objection.
[The following information can be found on page 140 in the
appendix.]
The Chairman. The Chair is going the try to recognize
members in order of their appearance, and Mr. Frank is not
here. I have Ms. Maloney as the next. The gentlewoman from New
York.
Ms. Maloney. Thank you. Thank you very much for your
leadership, and I thank the Ranking Member and Chair for
holding this important oversight hearing.
Mr. Vice Chair, in your 9/11 Commission report you noted
that Congress has not demanded and the executive branch has not
produced a focused U.S. strategy for combating terrorist
funding, and that was on page 105. Unfortunately, this
committee has seen at least some evidence that this is true.
Even now, 3 years after 9/11, lines of jurisdiction remain
unclear, and agencies do not, as you testified today, always
coordinate their efforts.
To give one example, in a June hearing that we had of the
oversight committee on major violations of money laundering by
the Riggs Bank and UBS, the banking regulators pointed their
fingers at each other when asked why significant portions of
the new money-laundering provisions of the PATRIOT Act remained
on the drawing board and had not been put into practice.
Also, earlier this year, the oversight subcommittee
discussed with Deputy Secretary Bodman the fact that Treasury
was omitted from an interagency memorandum of understanding
between Homeland Security and the Justice Department concerning
terrorist financing investigations, and Mr. Bodman argued that
really Treasury did not need to be included and that Treasury
``defers to the FBI on enforcement matters, including tracking
terrorist finances.''
Finally, this committee has confided--I must say that this
committee--and I would like to hear your assessment of this--
has put our trust in the Treasury as the proper lead agency on
these tracking matters. But if Treasury is going to defer to
the FBI, maybe we are making our investment in the wrong place.
Some have suggested that we should move FinCEN to the FBI since
the FBI is the lead agency in investigations.
So I would like your comments on how we can better
coordinate between the various agencies and really have
responsibility placed firmly and accountability in certain
areas so that the fingerpointing stops and a timetable of
implementing the suggestions that have not been put in place.
I would also like to ask you about the comment on page 172
of the report that we still do not--that the United States
Government still does not know the origins of the financing of
the 9/11 terrorists. You further state that you believe it came
from wire transfers or cash, and what are we doing to track
wire transfers? You stated we are in some cases having
difficulty with certain foreign countries that will not
cooperate with us, particularly those that are on our high
terrorist threat list, but we can certainly track wire
transfers from those countries and from foreign banks, and what
are we doing specifically to track and internalize and assess
wire transfers?
But the larger issue that you pointed out of lack of
coordination, responsibility to accurately follow through, what
is your feelings on that? I must say I was delighted to see
that the Senate has implemented one of your recommendations by
coming forward with legislation for a Central Intelligence
Agency and directorate with budgetary powers. How do you see us
getting a hold on this financing so that we start having
accountability, as opposed to pointing fingers?
Mr. Hamilton. The coordination and integration of
counterterrorism policy under our recommendations would be
under the direction of a National Intelligence Director. Our
basic analysis was that 9/11 occurred in part because we did
not share information and that the intelligence agencies today,
the intelligence community today, is organized very much on the
basis of how you collect the intelligence, satellite, human
intelligence and so forth, and that it really ought to be
organized in this day and age more on a mission basis than on a
collection basis.
But the key is to get sharing of information across both
domestic and foreign means of collecting intelligence and that
there must be somewhere in the government where you pool and
analyze all of this intelligence and manage it and figure out
how to deal with it.
The Chairman. The gentleman's time has expired.
The gentleman from Delaware, Governor Castle.
Mr. Castle. Thank you, Mr. Chairman.
Let me just start, Mr. Hamilton, by saying that I just
think the report was really exceptional. I was on the
Intelligence Committee. We issued a report which I thought was
a pretty good report and I thought you did an extraordinary
job. I think you and Tom Kean deserve a lot of credit.
I watched a couple of those early hearings. I was a little
worried it was going to blow completely out of control. You did
a wonderful job of pulling it together with a diverse crowd,
shall we say.
Let me ask you one question that is not related to what we
are discussing here. I don't know anything about the staff
report that came out, I guess, on Saturday. You indicated you
didn't know a lot about it either.
What is the story on the staff report? This is a pretty
comprehensive report with footnotes and everything else. Why is
there a staff report? Does it differ? By whose authority was it
done?
Mr. Hamilton. Our staff did an enormous amount of
investigative work, and we drew from that obviously in putting
together the final report here; but there was a lot more work
done than appears in that volume, and so we decided that for
the expert, we would put out a number of monoliths. I think we
are going to put, maybe have put out, 12 or 13 of them and they
really are very detailed. They do not carry the approval of the
Commission.
In other words, this came out Friday night, I think was put
on our Web site Friday night. I didn't see it frankly till
early this morning.
I think it is totally consistent with my testimony. I think
it is totally consistent with what we say in the report, but it
is much more detailed.
Mr. Castle. And there will be more so these are sort of
supplemental?
Mr. Hamilton. It is a supplement, and it is really designed
for the expert.
Mr. Castle. Thank you. I appreciate that.
Let me turn to the subject at hand. I noted in the report,
from about page 385 on, a discussion about visitors and
immigration. This has always concerned me. It seems to me that
the one thing that could have stopped 9/11 is if we had had a
visa visitors system in place that would have prevented people
from being in this country. And there is some question about
whether some of them would have been able to be here or not,
but basically if you look at that for the next 10 pages, it
talks about a biometric screening system and goes on in some
detail in terms of visitors, et cetera.
Some of that is starting to happen now although it only
applies to a very small percentage of people who come to the
United States on immigration or in the area of visa. But it
seems to me that that makes a lot of sense.
Was that a unanimous--obviously you did everything
unanimously, but is there strong consensus about this?
It seems to me that this would pertain also to the subject
matter of today's hearing which is the finances. Obviously, if
you are here on some sort of visa or a passport or whatever it
may be and it does have biometric identification, this could be
shown or used in terms of opening up any kind of financial
accounts or whatever. I think there is crossover in that area,
and it should be done as rapidly as possible.
I would just like to get your comments on that.
Mr. Hamilton. Terrorists travel. When you travel, you leave
a trail. It is important for us to be able to follow that
trail. And so we believe there has to be a modern border
immigration system.
We think we have got a ways to go before we are there. We
favor a biometric entry-exit system. We are no experts on
biometrics; that is a complicated field in and of itself. But
there isn't any doubt that we have to be able to determine that
people are who they say they are when they come into the
country. We believe this is the best way to do it.
The technology is evolving. We think that the official,
whether that official is a Customs official or a border
official, a State Department official issuing a visa or whoever
it might be that has some responsibility for people who try to
get into this country, we think they have to have access to
files on visitors and immigrants so they can immediately access
that file and see who this person is that wants to come into
the country. That means they have to have a lot of
intelligence, it has to be pooled, it has to be dispersed.
This is a complicated business when we have got all of
these people coming into this country every day and millions,
of course, over a period of time. And we have to be able to
exchange information with other countries; intelligence from
other countries, issuance of a passport by another country
becomes enormously important to this country.
So all of this is terribly important, and I guess the key
observation we make is that immigration and border security is
a national security matter and it must be seen in that context.
I don't think it has been until recently. It is very important.
The Chairman. The gentleman's time has expired.
Mr. Castle. I yield back.
The Chairman. The gentleman from Pennsylvania.
Mr. Kanjorski. Thank you, Mr. Chairman.
Mr. Hamilton, I join my colleagues in congratulating you
and the Governor in doing great work in your final report. I am
not sure I understand why we are here today, though. Is there a
specific recommendation of a lack of existing laws that needs
to be changed to improve the situation?
The reason I ask that question is: I have been sitting on
this committee for almost 20 years and watching the great war
on drugs that has transpired for about 30 or 35 years. To the
best of my recollection, drugs are moving in and out of the
United States and money for drugs is moving in and out of the
United States in gigantic proportions. Some people, I think,
have estimated it from $100 billion to $140 billion a year. We
have neither been able to close that movement by devices, or
have not been extraordinarily successful.
When I look further at our borders, we have illegal
immigration at gigantic proportions in the country.
I am just wondering: Is this an exercise to make the public
feel better? When I say ``this exercise,'' the fact that the
Congress is now, each committee of the Congress scurrying back
here to Washington to consider this report.
What can we do? What are you asking this committee to do?
What are you asking the Congress to do in terms of financial
closure of holes and leaks within our system?
Mr. Hamilton. As I suggested, I don't think our
recommendations are primarily aimed at the terrorist financing
arena.
Having said that, it is important for the public to
understand--I think this committee already understands it--the
shift that is taking place in terrorist financing, how at one
time we were going to starve all the terrorists or drain the
swamp. While we don't reject that, there has been this
remarkable shift that it is important for the American public
and for this committee and for all of us to understand.
I guess what we are trying to say is that in fighting the
war on terrorism, getting the right kind of financial
information to the investigators at the right time is
tremendously important.
Mr. Kanjorski. What can we do to accomplish that? Do we
need more laws or do we have efficient laws in place?
Mr. Hamilton. I do not come before you with a request for a
specific new law. We are saying that what you have on the books
has been helpful, some of the provisions in the PATRIOT act. So
I am not calling for new legislation.
Mr. Kanjorski. I have watched your career my entire life
and admired it. You are usually an optimistic man. Are you
optimistic in terms of whether or not we can be more attentive
to solving these problems that particularly became highlighted
with 9/11? Is there something the American people can do? Is
there something specifically this Congress could do? Or are we
just relying on the various administration or executive
branches of the government and intelligence forces?
Mr. Hamilton. I have been quite pleased by the response to
the 9/11 Commission report. It has resonated. We are right up
there with Harry Potter in terms of public approval and buying
of the book.
Mr. Oxley. When does the movie come out?
Mr. Hamilton. That is not our work alone. It is just the
fact that the American people and, I think, the Congress are
ready to look very, very hard because of a variety of factors
on how we strengthen our counterterrorism efforts.
We recognize now that terrorism is the number one national
security threat to the United States. So what is pleasing to me
is that the Intelligence Committee, the Judiciary Committee,
the Banking Committee--it used to be the Banking Committee--the
Financial Services Committee are all asking themselves, what
should we be doing about this? That is an enormously pleasing
response.
We don't pretend that we have got everything exactly right
in this report. It is a complicated business. But I have been
enormously pleased that the President has responded quite
positively and you now see a lot of refinements, if you would,
or criticisms of this report coming out, all of which I think
are directed towards strengthening counterterrorism efforts in
the country.
Mr. Kanjorski. Thank you.
The Chairman. The gentleman's time has expired.
The gentleman from New York, Mr. King.
Mr. King. Thank you, Mr. Chairman.
Congressman Hamilton, it is always great to have you back.
Of course you have to be commended for the great job you did as
vice chairman, but also for the tremendous amount of time you
are putting in this month going from committee to committee. I
would think after all the years you spent in Congress you
wouldn't be that anxious to come back, but we certainly benefit
from your wisdom.
Mr. Hamilton, in your statement today and I believe also in
the report, you mentioned the fact that there was no
substantial source of domestic financial support for the 9/11
attacks. From your investigation, were you able to determine
whether or not there is a threat today though, a real concern
that there is domestic funding now for future attacks or
whether or not the al Qaeda supporters in this country are able
to raise money domestically?
Mr. Hamilton. We have not found any evidence of that, that
they are raising money from domestic sources.
Mr. King. Also you mentioned in your statement, and we have
seen evidence of it, that the financial services community has
been cooperative as far as dealing with the Federal Government
and providing information. There is a concern that some of us
have that perhaps the Federal Government is not giving enough
information back to the financial institutions which they could
use to learn more or perhaps spot things they wouldn't be able
to spot otherwise.
Do you think the government is implementing the PATRIOT Act
sufficiently as far as giving data back to the financial
community?
Mr. Hamilton. We hear a lot about that feedback problem. We
think it is a genuine one. You are right, of course. We agree
that the financial institutions, domestic financial
institutions, have been very cooperative. A lot of that, I
believe, really works because of personal relationships that
have developed between the government and the private sector,
and it is a very important fact. But the lack of feedback from
the government to the financial institutions, we heard a lot
about that in our interviews with banking personnel. What does
not seem to be present is a systematized, formalized way of
getting that information flow working. It depends too much, I
guess, on informal arrangements, not enough in a systematic
way. There may be reasons for that.
I know they have tried very hard, for example, to develop a
model of terrorist financing. That has not yet been developed
because it is very, very hard to do; but that being said, I
think steps are being taken to address the so-called feedback
problem. We encourage that. We would like to see that
institutionalized as well.
Mr. King. Mr. Hamilton, if you could perhaps just clarify
the record, you were asked before a multipart question, and in
there there was a statement which I think has not been
corrected where it was suggested that somehow the Bush
administration was responsible for getting the Saudi royal
family and members of their family out of the United States.
Wasn't it the finding of your commission that that was done
by Richard Clarke and never went any higher than him, and that
nobody at any high level of the administration was ever
contacted on that issue?
Mr. Hamilton. That is correct, Mr. King. A contact was made
by the FBI to Richard Clarke about Saudi citizens leaving this
country. We looked into that very, very carefully. This
occurred within hours after the 9/11 attack. Mr. Clarke was
very, very busy at that time in making decisions every hour. He
asked the FBI if they had investigated the backgrounds of these
people. The FBI said they had. Mr. Clarke gave his approval to
let these flights go ahead. So far as we are aware, the
decision went no higher than Mr. Clarke.
We found no evidence that any flight of Saudi nationals
departed airspace before it was reopened. That was one of the
charges. We found no involvement of U.S. officials at the
political level--I do not include Mr. Clarke being at the
political level--in the decision-making. We believe that the
FBI screening was satisfactory.
We subsequently, after the fact and with a much larger
list, ran the names against our lists and found--and made
extensive interviews, and so the independent check of our
database found no links between terrorism and the Saudis who
departed the country.
This too is an ongoing investigation. We give you what we
were able to find or not able to find and those were the
conclusions.
Mr. King. There was no evidence of any impropriety
whatsoever.
The Chairman. The gentleman's time has expired.
The gentleman from California, Mr. Sherman.
Mr. Sherman. Thank you, Mr. Chairman.
Mr. Hamilton, I think your commission needs to be commended
for so many different things, one of which is to point out the
powerful tool that, following the money it provides in knowing
what the terrorists are up to.
My concern is that your comments might be misinterpreted to
argue for a fatalistic reduction in our effort to turn off the
money to the terrorists. We were not able to stop them from
getting the roughly $30 million they needed for what they did,
but the other way to look at that glass and say it is half full
is to say, we did stop them from getting $60 million or $100
million or $200 million a year which they would have put to
even more diabolical use.
My first question relates to the fact that it is my
understanding that your commission's term of office expired
this weekend. I can't think of a better investment of U.S.
taxpayer dollars than what your commission has done. Yet you
have left a lot of unanswered questions, as naturally you
would. You have identified them. You have said additional work
should be done.
It strikes me that much as you might like to relax, your
commission are the best people to do it. Perhaps you could
explain to this committee how important it is that we keep the
Commission in business, and perhaps you would inspire all of my
colleagues to cosponsor legislation to do just that.
Mr. Hamilton. The Commission, of course, is a statutory
body created by you in the Congress and by the President. You
are right, it went out of business this weekend. All of the
Commissioners believe that the recommendations we have made are
worthwhile and should be considered, and each of them is
committed to trying to help advance the case for the
recommendations. All of the Commissioners have said that they
will not involve themselves in partisan politics with regard to
the terrorism issue, and we will do our level best to try to
meet that commitment. We have, because of pending business, if
you would, and unanswered questions, decided to stay in
business on a private basis. We have raised money for that
purpose, not from the government but from private sources.
I am not quite up to date on all of that, but we are going
to be opening an office here very shortly. Chairman Kean and
one or two of the other commissioners have been more involved
in it than I. We will continue to function.
There are a lot of inquiries that still come into the
Commission. There are questions that we have not answered. We
are deeply committed to trying to see implementation of some of
our reforms. We need help in doing that. We have got to have
staff, we have got to have people to write testimony and do
research.
Of course, the e-mails continue to come. My office just
receives e-mails every day, requests for testimony and speaking
and all the rest of it. We can't possibly meet all those
demands and we do need some help.
Mr. Sherman. One approach is that you continue, but morph
into a foundation. Another approach is that we continue you as
a government-funded commission with all of the official
imprimatur, liberating you from the time that it would take to
raise funds one donor at a time, one schmooze at a time.
Which is the better approach to serve this Nation and to
begin to answer the many questions that still remain
unanswered?
Mr. Hamilton. We leave that judgment to you and to your
colleagues, Mr. Sherman. We are not going to try to do that. We
have moved ahead on a private basis.
Mr. Sherman. I think it may be obvious to my colleagues
that your time is best spent doing the work of the Commission
rather than doing the work of forming and funding some new
foundation, but let me move on to one more question.
Your commission explodes the false impression that Osama
bin Laden had access to a personal fortune of tens of millions
or hundreds of millions of dollars. Yet he is one of the many
sons of one of the richest families in the world. He did at one
point inherit tens of millions of dollars or interests in
family businesses worth tens of millions of dollars.
Do we have any idea who controls this money or who took it
away from his control, and who then should disgorge that money
so that we can provide compensation not only to the victims of
9/11, but also to the victims in East Africa for whom there is
no other source of compensation?
The Chairman. The gentleman's time has expired. The
gentleman may respond.
Mr. Hamilton. We think with regard to Osama bin Laden's
assets, most of them were spent during the period he was in
Sudan before he moved to Afghanistan. He was supporting at that
point quite a large organization. We think a number of his
assets were frozen by the Saudis. We found no evidence that the
9/11 attack itself was financed with his personal funding.
Mr. Sherman. I would hope the Saudi Government would
disgorge whatever assets it has frozen.
The Chairman. The gentleman from California, Mr. Royce.
Mr. Royce. Thank you, Mr. Chairman. I thank Vice Chairman
Hamilton.
Lee, I wanted you to know that I very much appreciated your
leadership as Chair of the House International Relations
Committee, but I also appreciated your judgment and I wanted to
ask you today a couple of questions.
One, as you continue your efforts, I think we need to
create a new structure whereby each safety and soundness
regulator would have a designated group that works hand in hand
with a newly created Office of Terrorism and Financial
Intelligence in the Treasury Department.
My view is that Congress needs to strongly consider
Treasury as the agency to house and run our government's
centralized financial intelligence unit. I say that because I
think we should put the PCC basically in charge of integration
and cooperation between these agencies. But I think if we look
at the fact that today money moves across borders faster than
people, faster than weapons, with a click of a mouse. You have
got tens of millions of dollars that can be sent anywhere in
the world, and it is Treasury that has an institutional and
historical relationship with the foreign central banks and the
ministries of finance responsible for instituting antiterror
finance laws in countries around the world; and I think it is
Treasury that can apply pressure on nations through the seats
that it has on multilateral institutions. If we look at the
World Bank or the IMF, if you elevate Treasury's role in this,
you have got an enormous amount of leverage there.
I throw that out for the future and for your thoughts here
today in terms of how we could elevate Treasury's muscle in
this.
The other thing I wanted to ask you about, we had a hearing
out at LAX prior to the 9/11 Commission hearing there where we
looked at these 19 hijackers, we looked at the visas. The
committee went through, one by one--this is a subcommittee of
the International Relations Committee--and we saw how most of
these could have been caught, should have been caught, because
there were obvious mistakes made where they weren't even filled
out in most cases.
I would like to go to your thoughts requiring a biometric
identification of all visas and passports. Lee, if there had
been due diligence at the time of those 19, most would have not
gotten into the country, if there had really been close work,
if Visa Express hadn't basically waved them into the country.
But it seems to me that this concept that you have of this
biometric identification system that would be on all passports
and visas worldwide potentially for people who would come into
the United States would allow us to get at this question of the
national security component, now, of people visiting and
leaving the country and would allow our intelligence
authorities to actually know who is here.
I wanted to hear your thoughts about how we would implement
such a system.
Mr. Hamilton. The 9/11 Commission report, of course, is
general. It deals with broad concepts and does not get into
great detail on the implementation. There is a lot of arguments
today on what kind of biometrics you would have. We really
don't try to make judgments about that. We are not experts in
that field. But we think the concept is a very important one
for the very reason that you said.
It is just agonizing to look at these visas and passports
that these hijackers had and to see how they slipped in. 19 out
of 19. Actually 19 out of 20. We stopped one of them coming
into the country. But they worked the system very, very well.
You said, well, if there had been due diligence. It is easy
to say that in hindsight, of course. At the time none of us
anticipated anything quite like this. The importance of it, we
believe, is paramount in order to have an effective system of
guarding our own borders.
Your earlier point about elevating the work of the
Treasury, I am open, would be, and I think the Commission would
be open to suggestions about that. You now have this policy
coordinating committee in the NSC, which we think has done a
pretty good job of coordination; and how it would fit in with
all of that, I don't quite know what your thoughts would be
there.
Treasury plays a tremendously important part in
counterterrorism policy in tracing the flow of these funds.
They are a major actor without any doubt.
The Chairman. The gentleman's time has expired.
The gentleman from Kansas, Mr. Moore.
Mr. Moore. Thank you, Mr. Chairman.
Thank you, Congressman Hamilton, for appearing before our
committee this morning. As a member of the bipartisan 9/11
Commission Caucus, you and Governor Kean and members of the
Commission, I think, have set a powerful example of what can be
accomplished when we set aside partisan politics and work
together for the good of our country. I thank you for that, Mr.
Hamilton.
As you know, the Commission staff report examines in great
detail the difficulties that United States authorities have had
in tracking and freezing al Qaeda's finances. While financial
support for al Qaeda has dropped significantly since September
11, according to the staff report, al Qaeda continues to fund
terrorist operations with relative ease primarily because al
Qaeda's attacks are relatively inexpensive to conduct.
Additionally, the staff report notes that many in the
intelligence community believe that new jihadist groups are
forming and are in the process of creating a loose network of
terrorist organizations that will exist independent of al
Qaeda. The 9/11 Commission report reached a conclusion very
similar and said that if al Qaeda is replaced by smaller,
decentralized terrorist groups, the premise behind the
government's efforts that terrorists need a financial support
network may become outdated.
Many of us on this committee and in the House supported the
Financial Antiterrorism Act of 2001 which is now part of the
PATRIOT act. As you note in your testimony, the PATRIOT act has
given law enforcement a number of new tools to assist in
terrorism investigations. I want to ask you a couple of
questions as a former Member of Congress and someone who is
very familiar obviously with the conclusions of your 9/11
Commission report.
Number one, what should Congress be doing right now and in
the future to focus our attention as much on emerging non-al
Qaeda terrorist threats as we are trying to freeze assets of al
Qaeda? And, number two, I saw in the news this morning and on
television reports that Senator Roberts of Kansas, the chairman
of the Intelligence Committee in the Senate, was discussing his
proposed legislation that would address some of the
recommendations of the 9/11 Commission.
I wondered, Mr. Hamilton, can you share with us the details
of Senator Roberts' proposal? Thank you, sir.
Mr. Hamilton. Mr. Moore, I am not able to share with you
the details of Senator Roberts' proposal. I have seen only the
press accounts this morning. I had a very brief conversation
with Senator Roberts on Friday. I know he is sending me his
bill that the Republicans on the Intelligence Committee in the
Senate have agreed upon.
His, of course, is a very important voice here, so we will
want to look at that very, very carefully. But it would be
quite premature for me to make any judgment with regard to that
plan. Obviously it will be given very serious consideration.
Your first question is about what can Congress can do with
regard to non-al Qaeda assets. It is a good observation because
we believe that what has happened to al Qaeda is that, as you
say, it has become very decentralized and a lot of other
groups, a lot of new leaders are emerging, all of whom have a
certain admiration for Osama bin Laden. They look to him as an
inspiration, but do not take operational guidance from him.
We think--I will be talking about this a little more in the
International Relations Committee--we think that the nature of
the threat is changing as we move along here. So Congress has
to be alert to this and also alert to how other groups might be
financing their efforts. We don't have any information with
respect to that. We were not asked to look into it and did not.
Mr. Moore. Thank you very much.
The Chairman. The gentleman's time has expired.
The gentlelady from New York, Mrs. Kelly.
Mrs. Kelly. Thank you, Mr. Chairman. I wanted to discuss
one sentence from the Commission report which I see received a
little more attention in the monograph that you released. The
sentence is, ``We have seen no persuasive evidence that al
Qaeda funded itself by trading in African conflict diamonds.''
As you well know, this is an issue over which many people
have struggled, so I am hoping for a little bit more light to
be shed on the process, how the Commission came to the decision
to include that sentence. I think it may be useful to the
members here as they consider that issue.
The Commission was, of course, I think right to look at the
information from the FBI and the CIA. In the Commission's
review, it also had available to it information from a number
of sources which came to different conclusions, including the
U.N. and U.S.-sanctioned special court of Sierra Leone, a four-
star Air Force general who is currently the deputy commander of
the U.S. European Command, and the work of a respected
journalist who has spent a great deal of time in the western
Africa area and has written extensively on the topic.
Additionally, there have been rather new developments on
this, owing to the capture of al Qaeda operative Ahmed Ghailani
in Pakistan. Ghailani spent several years in western Africa and
is known to have interacted with Liberian President Charles
Taylor. In a recent Boston Globe article about capture, U.S.
intelligence officials said, and I quote, ``Charles Taylor was
in the back pocket of al Qaeda. He was helping them launder
money through the diamond mines.'' this is from an article this
month in the Boston Globe.
Approaching the issue as someone who is just really trying
to get to the bottom of an apparent schism of information here,
I hope you can enlighten the committee as to what sources of
information were considered and how you analyzed them. For
example, to what extent did you consult with the Defense
Intelligence Department? It seems that only the FBI and CIA
sources are quoted in the report as footnotes.
I also understand that the chief investigator for the
special court of Sierra Leone met with the Commission staff in
June and offered two additional informants who had firsthand
information about the activities in 1999 and 2000 in West
Africa of Ghailani, of Fazul Abdullah Mohammed, another al
Qaeda operative who is currently on the FBI's most-wanted
terrorist list for his involvement in the 1998 embassy
bombings, and of Mohammed Atef, a top-ranking al Qaeda
commander. But the Commission chose not to contact these
sources, from what I gather.
I wonder if you would talk for a minute about the
Commission's process regarding blood diamonds and why they
chose to interview only certain people and not others. Perhaps
there is more information available now.
Mr. Hamilton. Mrs. Kelly, this too is an ongoing
investigation and I don't know that we have the final word on
it. The distinction I would want to draw is between al Qaeda
and maybe some specific al Qaeda operatives.
There is some evidence that specific al Qaeda operators may
have dabbled in or maybe just expressed an interest in precious
stones at some point. But what we are not able to do is to take
that evidence and extrapolate from it and conclude that al
Qaeda funded itself in that manner. We are aware of the reports
that you referred to. I think we are aware of all of them. I
would need to double-check that, but I think we are aware of
all of them.
None of them came as a surprise to me. We have looked at
NGO reports. We have looked at a number of journalist reports.
We have looked at investigators who work for the United
Nations. A number of them have alleged that conflict diamonds
were used. We do not believe on the basis of the evidence that
we have now that those claims can be substantiated. But
obviously you have to maintain an open mind here, as I think
the Commission tried to do.
We evaluated the sources of information for these various
public reports. We checked the FBI records. We checked the CIA
records. They came to the conclusion, as you suggest in your
question, that there was no credible evidence----
Mrs. Kelly. I am sorry, Mr. Hamilton, to interrupt here but
I have a very short period of time, and I simply wanted to know
why there were certain people chosen for you to interview and
others seemed to have been left out, such as these two
gentlemen that were offered to you by the special courts of
Sierra Leone.
Mr. Hamilton. I will simply have to check that. I think we
have checked either all of them directly or indirectly. But one
of the things we were careful about is not to accept the word
of anybody. We always looked for corroboration and we didn't
find it in these cases.
The Chairman. The gentlewoman's time has expired.
Mr. Hamilton. If you have evidence that al Qaeda--not al
Qaeda-associated people, but if you have evidence that al Qaeda
itself was funded by conflict diamonds, we are certainly open
to that.
The Chairman. The gentleman from New York, Mr. Israel.
Mr. Israel. Thank you, Mr. Chairman.
Chairman Hamilton, thank you so much for joining us. If I
may, let me extend personal warm wishes to Secretary Libutti
who will be appearing in our next panel whose family hails from
Huntington, New York, which I represent. It is my hometown. The
wedding ring that I wear was purchased at Libutti Jewelers. I
want him to know that not only do I support my local economy,
but I support the Libutti family economy and will continue to
do that.
Mr. Chairman, I would like to ask you about Saudi Arabia.
The Saudis recently began running rather significant television
and radio ads in 19 U.S. media markets specifically citing the
Commission's report as somehow bestowing on the Saudis a kind
of Good Housekeeping Seal of Approval, noting that the report
has said of the Saudis that they have been a loyal ally to the
United States.
What the report actually says, as you know, is that the
Saudis have been a problematic ally in combating Islamic
extremism, and somehow the word ``problematic'' was dropped
from that Saudi media campaign.
I was wondering if you could comment on what the Commission
has learned about the extent of Saudi financial involvement in
al Qaeda and what you think we need to be doing in order to
ensure the complete, consistent assistance of the Saudis in
cracking down on the financing of terrorist organizations or
charitable organizations that finance terrorist organizations.
Mr. Hamilton. Mr. Israel, we did not find evidence of the
involvement of the Saudi Government as an institution in the
plot. We did not find any evidence that the Saudi Government
was involved in financing terrorism as a whole. The word
``problematic'' was used in the report because in the period
following 9/11, we think that the Saudi cooperation was
episodic and not very helpful in our efforts. We think that
changed rather dramatically in the year 2003 after the attacks
in their country.
So since 9/11 and especially since, I guess I should say,
May of 2003, there has been strong Saudi cooperation on the
terrorist financing issue.
Mr. Israel. Thank you, Mr. Chairman. I yield back.
The Chairman. The gentleman yields back.
The gentleman from Texas, Mr. Paul.
Mr. Paul. Thank you, Mr. Chairman.
Welcome, Mr. Hamilton. I have two questions. One deals with
the fourth amendment and the other one deals with the
practicality of monitoring all the financial transactions of
every American.
Earlier it was said that you are an optimist, and I think
that I would confirm that, that you are. Your acknowledgment
that the government needs more tools to monitor what is going
on in this country, you also acknowledge the fact that if we
are not careful, there could be abuses, civil liberties could
be violated and these powers could be misused. I think that, as
one that is a bit more skeptical, I recognize the fact that
governments tend in that direction. They tend too often to
abuse their powers this was a big issue at the time of the
Constitutional Convention, and the Constitution was written to
curtail the powers of government, not to authorize the
government to do so much.
The fourth amendment is rather clear, the right of the
people to be secure in their places, in their homes, in their
persons and their papers and their effects, and that none of
these should be violated unless there is probable cause and a
search warrant. This country more or less gave up on that in
the early 1970s with the Bank Secrecy Act and we expanded on
that power, of course, with the PATRIOT Act.
Evidently the whole country, especially just about
everybody in Washington, concedes that a notion which was
strongly rejected at the time of the founding of this country
and that is the sacrifice of liberty is necessary in order to
provide security. There still are a few Americans that cling to
that notion that we don't have to sacrifice liberty for
security.
So my question regarding the fourth amendment is, since it
is not followed technically anymore, should this be revised? Is
the fourth amendment outdated?
I will go ahead and ask my second question. That has to do
with the practicality of what we do. In many ways, it seems
very impractical. The year before 9/11, we had 12 million
suspicious activity reports issued. There was a lot of
information in there. It was hard to digest. It looks like we
are moving in the direction of not only do we look at the
banking records, we are going to look at everything from car
dealers down to coin dealers all other financial transactions.
I wanted to quote very briefly a statement from John Yoder,
who was the director of asset forfeiture for Ronald Reagan, in
reference to this issue. He says, ``It costs more to enforce
and regulate them than the benefits that are received. You're
getting so much data on people who are absolutely legitimate
and who are doing nothing wrong. There's just too much
paperwork out there. It really is not a targeted effort. You
have investigators running around chasing innocent people
trying to find something that they're doing wrong rather than
targeting real criminals.''
This makes me think about a report that just came out this
week, because there is going to be an audit released in the
near future of the moneys that were controlled by the Coalition
Provisional Authority. During that period when they were in
charge of the moneys of Iraq, they collected $8.8 billion, and
they don't know where it went. The audit--it doesn't reveal
where our responsibilities were to monitor this.
The report is going to say that they don't know much about
where it went. The odds of some of that money ending up in the
hands of the enemy are pretty good.
So I think we are way off target. We are targeting innocent
Americans. At the same time, we don't even manage our affairs
over in Iraq where so much money has been misplaced. 9/11
actually was an excuse to expand the PATRIOT Act. That
legislation had been floating around here for years.
So I am discouraged that so many people are so complacent
and so willing to give up their privacy because they say, well,
it is going to help us, it is going to make us more secure. It
wasn't 9/11 that prompted so much of this financial privacy
invasion that allowed us to pass it, it was just the atmosphere
that did this.
I don't see where it is very practical to do this. It cost
somewhere close to $11 to $12 billion a year to fill out these
financial transaction reports, and we are talking about a lot
more and the businessmen and the banks are going to be fearful
and intimidated. And what is it going to do to the criminals?
Do you think they are a bunch of dumb clucks out there? All
they have to do is get into an honest business, which they do.
They probably won't even have their financial transaction
reports issued.
It is going to be the good guys that are going to be
penalized.
I just, unfortunately, have to disagree with the mood. I
know you have some sympathies for civil liberties and concerns,
so I would like you to comment.
The Chairman. The gentleman's time has expired. The
gentleman may respond briefly.
Mr. Hamilton. There isn't any doubt, in fighting the war on
terrorism, you enormously expand the power of government in all
sorts of ways and you make government much more intrusive into
the lives of people. I don't see how anyone can deny that.
We have had all kinds of laws put on the books since 9/11.
We will have more. They all--maybe not all, but many of them
have a liberty or civil liberties aspect to them. We think,
most of us think, that that is necessary because of the reason
you suggested, to increase the security of our people.
Just look at what has happened on the Hill up here. The
number of measures you have put into place to protect the
Congress have just been extraordinary. It is happening
everywhere across America today. I don't think that is going to
change with the concern that we have about terrorism, but we do
have to sensitize ourselves to the case that you make for civil
liberties.
What we recommend is a board and a board that is created
across the executive branch to look at civil liberties. There
is no such board today. You have inspectors general in various
departments, but you really do need to be sensitive to the
civil liberties and you must put into practice the principle of
review. That is the key.
The Chairman. The gentlelady from New York, Ms. McCarthy.
Mrs. McCarthy. Thank you, Mr. Chairman. Again, thank you,
Mr. Hamilton. I have been watching on TV and this is, I think,
the third time that I have actually sat with you on these
issues. Two things that we haven't really touched upon too much
and that, basically, is going back to your report where you are
saying the world institutions, banking institutions, haven't
been working closely enough for the transparency that we need
to know on following these terrorists.
I guess the second part, on just listening to all the
questions we have been going through here, when we talk about
immigration and talking about how are we going to be able to
track the backgrounds of those that want to come into this
country, I know right now to get a passport, you have to go to
one of our embassies. As far as I know from our office, working
with other embassies across the world, they do an extensive
background check. But again when they come here into this
country and set up--I am thinking here of students that come
into this country--they do set up banking accounts, they do set
up sometimes a charge account if they are going to be here for
a couple of years of study.
I don't know whether that part of the question would go to
the next panel, which would be the Treasury. Is the Treasury
and those entities working with the banks on trying to teach
them what to look for on the transparency of withdrawing money?
I just think about my own charge account, and because I
travel so much, let's face it, we are all over the country, a
charge goes here and a charge goes there. Obviously, my charge
account credit card follows me, and if all of a sudden I am
making a purchase that doesn't fit into my character, a red
flag goes up. Are we doing that, the same, with these visitors
that come into this country and are the banks working with the
Treasury Department as far as trying to track that down?
All I can think of is our staffs certainly in other
countries, embassies, they don't have the staff to do all these
background checks. So is our CIA then working with the
embassies to do the background checks of everybody that wants
to come into this country legally? We are not even touching
upon those that come in illegally.
Mr. Hamilton. You have raised a number of questions. Let me
try to address the question of the multilateral institutions,
if I may.
We think they have done a pretty good job of setting
standards, in engaging on this question of terrorist financing,
but that is only the first step; and what we don't see evidence
of is the implementation and the enforcement. We think it has
been fairly spotty. So a lot of work still needs to be done
with the various international institutions to improve their
activity with regard to terrorist financing.
The United States has exercised, I think, leadership in
trying to develop strong standards in a short period of time,
but it is not just a matter of developing the standards. You
have got to implement them and enforce them, and that is where
the work needs to be done.
Mrs. McCarthy. As a follow-up question to that, with the
international community, what are their reasonings on not
working or fulfilling some of the things that we have
implemented? Would it be, as Mr. Paul has said, they didn't
want to intrude on their citizens? Or is it a matter of just
changing the attitude as the world has changed since September
11?
Mr. Hamilton. I think sometimes we don't appreciate how far
advanced our banking financial system is and how sophisticated
it is today as compared to many nations around the world. We
are asking them to do an awful lot of things very quickly. They
just don't have the internal mechanisms to do it. So it takes
an extensive amount of activity on our part.
They also are operating against very substantial domestic
political forces which don't want us to do these things because
they look upon it as an intrusion into their practices, I
suppose. So this is a very, very long-term effort for the
United States Government.
Mrs. McCarthy. Thank you.
The Chairman. The gentlelady's time has expired.
The gentleman from Ohio, Mr. LaTourette.
Mr. LaTourette. Thank you very much, Mr. Chairman. Mr.
Hamilton, it is good for see you again. I want to begin with
observations that were made by Mr. Frank and then also Mr. Paul
and with, I think, Mr. Kanjorski's question if I can.
When Mr. Frank made his opening remarks, he talked a little
bit about the necessity of how the paradigm of law enforcement
has changed. We used to wait for you to commit a crime, we go
out and catch the bad guy. Now, sadly, we have had to consider
legislation that has in it snooping, spying, intrusion. And Mr.
Paul talked about the fourth amendment and the need--and not
only is Mr. Frank sensitive to the civil liberties issue, Mr.
Paul certainly is, and I know you are as well, not only based
upon your work with the Commission, but also based upon your
long and distinguished career here.
I also made some notes when you were talking and that is
that the financial transactions that the terrorists used prior
to September 11, you found no evidence of fraud. There were no
fraudulent transactions that would somehow ring alarm bills in
the system already in place. You then indicated they did, in
fact, leave a paper trail.
The next note that I made is that we did not understand
prior to September 11 the routes that the terrorists would use
to move and get money to different places and then use it.
And then the last note that I made is that you are under no
illusion to believe that they will use the same techniques that
you have discovered during the course of your investigation,
which leads me then to Mr. Kanjorski.
What has always troubled me is that if you go back to the
first World Trade Center bombing, after we learned that lesson,
we made it extremely difficult to drive a car bomb into the
parking garage of buildings, and we are doing that all around
Washington D.C. So on September 11 they determined that they
were going to use airplanes.
With all of the changes at the FAA and other places and air
marshals, we are making it very difficult to use airplanes as
weapons. So I think it is reasonable to expect that the next
event will not use car bombs and/or airplanes. That leads me to
Mr. Kanjorski.
Mr. Kanjorski said, then what are we doing here, I guess,
if we are under no illusion that what you have discovered or
how they used money prior to September 11 will be the way that
they will do it again.
The question that I have, and I know that I have sort of
gone roundabout to get there, I think that this committee did
do some good work with Title III and the PATRIOT Act. I think
you have acknowledged that and others have also acknowledged
that. Your monograph talks about the fact that that is indeed
the case. But as legislators, as members of the Financial
Services Committee--and I know again to Mr. Kanjorski you have
said you are not here to advocate a specific piece of
legislation, but I guess the question would be based upon what
you have seen, the effectiveness of Title III and how agencies
are now talking to each other, Mr. Bachus' observation that we
now have 94 countries involved in talking to each other about
financial institutions. Do you think that we have the
legislative framework in place for the agencies, if ever-
diligent, to find sort of the next financial scheme that these
folks might use?
I was talking to Ms. Hart. The thing that really shocks me
is that this thing only cost $300,000 to $500,000 to pull off.
I think that is shocking. Do you think we are there or do you
think we have work yet to do?
Mr. Hamilton. I don't know if I am really qualified to
answer that. This gets into very technical areas. We have been
pleased with section 314(a) and section 326 of the PATRIOT Act.
We think those are useful tools. Whether or not additional
tools may be necessary, I am probably not the one to ask.
What has impressed me is that these terrorists that
attacked us on 9/11 are very entrepreneurial and they are very
good at finding the gaps in our system both in immigration and
border security, but also in other areas.
You indicated the next event may be entirely different from
the last one. I think there is a lot of merit to that. One of
the pieces of advice we continually received was not to fight
the last war, always to use our imaginations with regard to
possibilities.
All I can say in response to your good observations is, we
do have to be alert to different kinds of attacks, tactics and
targets that the terrorists might have. Whether or not you need
specific new powers in financial regulation is really beyond my
competence.
Mr. LaTourette. Thank you very much. I yield back, Mr.
Chairman.
The Chairman. The gentleman yields back.
The gentleman from Utah, Mr. Matheson.
Mr. Matheson. Thank you, Mr. Chairman.
Thank you, Mr. Hamilton, for your service. I am not asking
you for a specific legislative proposal as you had in your
previous discussions with some of the other questions, but you
used to be a Member of Congress and I know you know the pace of
this institution and you know how long it takes to get some
things done. And the committee functions are not just
legislating, it is also oversight and considering issues.
The 9/11 report, of course, covers a whole range of issues
and a lot of different committees with a lot of jurisdictions.
Relative to the Financial Services Committee, do you have a
suggestion for what priorities the Financial Services Committee
ought to be looking at relative to the 9/11 Commission report
for the balance of the 108th Congress, and with not many
legislative days left, what we should be also looking at as we
commence with the 109th Congress next year?
Mr. Hamilton. I don't think I can be very helpful to you on
the specifics. We make a report at a point in time, and time
keeps moving. So what this committee, I think, has to do is
simply monitor these things very carefully. You know the
financial system, you are the experts on it. I am not.
You have to decide where the loopholes may be, and you have
to work closely with the intelligence people, the law
enforcement people with respect to that. And so the only advice
I can give you is very general.
The country looks to you to be the experts on the financial
system, and they look to you--we look to you as one of the
bodies that must come up with answers to a continually shifting
scene.
So it takes careful oversight. It takes careful review view
of the laws, it takes careful review of the visit track
particulars that we have heard, that we understand. But beyond
that it takes consideration of what they might do in the
future, and that takes real expertise and it takes constant
monitoring, and that is one of the reasons we say in the report
that there is no support for robust congressional oversight.
Mr. Matheson. It seems to me that in other parts of the
Commission report, which are applicable to other committees in
the jurisdiction, there are significant changes, whether it is
the new national director of intelligence or whatnot. In terms
of the Financial Services Committee jurisdiction, I am not
reading the significant recommended changes in our current laws
in the report. Is that a fair statement?
Mr. Hamilton. That is correct.
Mr. Matheson. Thank you.
I yield back, Mr. Chairman.
The Chairman. The gentleman yields back.
The gentlelady from Illinois, Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
Again, Vice Chairman Hamilton, I would like to thank you
for your service and the fine work that both you and the entire
Commission and the staff did on the report and the monograph.
I would like to turn now to international efforts and how
we work with other countries to follow the money to terrorists
and stem the flow of money to those terrorists. And obviously
any international regime for combating terrorist finance is
only as strong as its weakest link; and not unlike drug cartels
or organized crime, terrorists will naturally find those links
where anti-money-laundering standards are lax and then
enforcement is minimal.
As part of its work, did the Commission seek to identify
where those vulnerabilities in the global terrorist system
exist and, if so, what did you find?
Mr. Hamilton. We did not undertake a country-by-country
analysis of the vulnerabilities of various financial systems.
The State Department already has a report that comes out under
the title, the International Narcotics Crime Report, and it
makes an assessment that we think has been very good.
Now, there are some governments that are kind of in a top
tier, and the focus diplomatically has to be on those
governments. That means we have to travel to those countries a
lot. We have to work with their people very carefully.
We have mentioned several times here the importance of
technical assistance, see what needs to be done in these
countries. It is not--it is not a situation where you have to
send--you have to deal with 150 countries. You can prioritize
these countries and know which ones are the key ones.
The Saudis have come up here any number of times this
morning. Everyone knows they are a key country, and we have got
to deal with them; and there are probably several others that
are in the top tier. And one of the things, incidentally, we
found is, we don't have enough people who are technically
qualified here, real experts, to do the work that needs to be
done here at home in our own shop, but also provide technical
assistance across the country--across the world.
So I would hope that one of the things that will happen is
that we will begin to train more of these experts.
Mrs. Biggert. Okay.
Mr. Hamilton. And clearly the State Department has to put
in its diplomatic message as it deals in bilateral relations
with country after country, the importance of terrorist
financing. That has to be a part of our regular message to
countries.
Mrs. Biggert. If we could go back then to your exchange
with Chairman Oxley and Chairman Bachus about making a decision
to freeze or follow the money on a case-by-case basis, I
think--first of all, I think you have said that Congress
doesn't need to make changes to current law for those
decisions. But I am concerned that while case-by-case decisions
may work well in the U.S., and the U.S. Government, they could
present some very large challenges in our work with other
countries, particularly those who might be viewed as the
weakest links in the international regime for combating
terrorist financing.
Could you comment on that or give us some guidance on that?
Mr. Hamilton. Well, I am not sure I can be very helpful
there except to say that in dealing with each of these
countries, you have to begin where they are and their own
financial systems. And in some cases, the recommendation we
make for our own country, that you just referred to about
balancing these interests, may not apply to other countries. So
I think it has to be done country by country, not only case by
case.
Mrs. Biggert. All right. Thank you, thank you very much.
I yield back.
The Chairman. The gentlelady yields back.
The gentleman from Illinois, Mr. Emanuel.
Mr. Emanuel. Thank you, Mr. Chairman.
Thank you, Mr. Hamilton, for your work over the last 2
years.
Two questions, one on the issue of freezing the assets and/
or following the money. If you can shed some light on whether
organizations like Hamas and Hezbollalh were freezing assets
that may be a more--more accurate, more correct, a better tool
in a financial sense than an al Qaeda, which is more of an
elusive organization where you want to follow the money, and
not get into this either/or strategy--then, as you use the
term, be more ``opportunistic.'' different terrorist
organizations are going to require different skills sets and
different tactics.
In Illinois, just the other day, on a Hamas organization,
we used the freezing of financial assets as a very successful
legal tool, as well as a fighting-terrorism tool.
I think that you have--if you think of it from outer
circles going in, Hamas and Hezbollah, with state sponsors like
Syria and Iran, freezing assets is the right tactic, the right
tool. Al Qaeda and some of its spin-offs and imitators are more
elusive. Actually following the money will give you a way to
literally unmask the organization and track it worldwide.
If you could shed some light on that.
Mr. Hamilton. I think it makes sense to me. The equities
shift depending on the type of organization you are targeting.
Hezbollah, as we all know, is supposed to be the most
sophisticated terrorist organization in the world.
Mr. Emanuel. Uh-huh.
Mr. Hamilton. The necessity of following the money may be
less in that case than it would in al Qaeda, which is very
diffuse and dispersed. So your point is well taken. I wouldn't
want to generalize and put it into stone or into granite, but I
think the equities may very well shift in a case like
Hezbollah.
Mr. Emanuel. Second question, and that will be the end, Mr.
Chairman.
Over at Treasury, for those who follow financing for
terrorism, we have 25 individuals. Given that you said it is an
organization that is always probing weaknesses in our financial
system--I mean, I don't know if the number is 50, I don't know
if the number is 40; you would think more than 25 would be
necessary compared to some of the other functions over at
Treasury that are staffed at a higher level.
Second, if you like, at the IRS for following and its
tools--only two-tenths of 1 percent is used for following
terrorism. Yet we have an operation, I think it is $25 million
out of $10 billion--yet we have an operation over there
investigating individuals in America who make $15- to $30,000,
in the earned income tax credit unit, and they are literally
going over everybody's returns. Yet we have two-tenths of 1
percent of the U.S. Budget dedicated to fighting--to looking
into terrorism.
I would imagine--and they are as Machiavellian as we say
they are, that 25 people over at the Treasury Department and
some--a little more assets of the IRS redirected--rather than
investigating Americans, can be used to investigating how
terrorists are using and not paying their taxes and doing some
interesting things as it relates to using the Tax Code from a
financing perspective.
Mr. Hamilton. I didn't know those figures.
I simply would say----
Mr. Emanuel. Neither did I until this morning.
Mr. Hamilton. This is an enormously important, urgent
business. I have already commented on the lack of experts that
we have and the necessity to train more. Treasury and IRS will
have to comment on the specifics about that.
I just--this is an urgent matter, and I would think there
would be very few higher priorities for our government now, or
for Treasury or for the IRS.
Mr. Emanuel. Thank you.
The Chairman. The gentleman yields back.
The gentleman from Connecticut, Mr. Shays.
Mr. Shays. Thank you, Mr. Chairman for holding this
hearing.
Congressman Hamilton, your Commission has done a superb
job; I have said it at other hearings, I will say it again. I
will say it every time I have an opportunity. You had almost a
sacred mission, and I think you treated it that way.
It is clear to me, when I read your report, when you say
your Commission reports vigorous efforts to track terrorist
financing must remain front and center in U.S. counterterrorism
efforts. I am left with the view that if there was any
successes at all in this effort, it was more in tracking the
financial aspects.
As much as we need to do more, it was--you are pretty
convinced that we have been somewhat vigorous in this effort.
And I want to know if that is, in fact, your view.
Mr. Hamilton. Yes, it certainly is. I think we have greatly
improved our ability to do this. We are getting better at it
all the time. I think everybody would say we have still got a
ways to go.
Mr. Shays. When Mrs. Kelly was asking her questions--I know
she had more questions to ask--one of the points, the
Commission argues for more congressional oversight of terrorist
efforts, to fight terror financing. And then her question would
have been, had she had more time, if the Policy Coordinating
Council is under the NSC, whose staff cannot testify to
Congress, don't we have less oversight ability, not more?
And I am interested to having you sort out that seeming
contradiction.
Mr. Hamilton. There has been an ongoing argument with
regard to the NSC and whether or not it should testify, for
many years. I think the question is well taken. It does limit
the ability of the Congress to effectively have robust
oversight. If it is carried out by the NSC, you can't get at
them except under their terms.
Mr. Shays. Now, I have applauded and want to continue to
applaud the efforts to point out that blame is fairly
universal. The previous administration, the President with his
8 years, the present administration with its 8 months before
September 11th, Congress and its oversight and the intelligence
community. Your Commission was pretty strong at being critical
of all, particularly the intelligence community, but you never
really named names, neither those who had done well or those
who had done badly.
But as it relates to Mr. Clarke, it came up. I just want to
be clear--Mr. Clarke was absolutely outspoken before he
released his book and while he was on his book tour, that it
was the Bush administration's fault, not the Clinton
administration's fault.
I just want you to sort that out. Was he accurate in his
criticism that it was just the Bush administration or more the
Bush administration?
Mr. Hamilton. Mr. Shays, I am not going to get into the
situation of evaluating Mr. Clarke and his criticism. Much of
his criticism relates to things we were not investigating. We
were not investigating the Iraqi war.
Mr. Shays. Well, let me ask this. We will just put Mr.
Clarke out.
Your report was fairly clear, was it not, that both
administrations had opportunities and they should have seized
on those opportunities. Your report, it seemed to me, was
fairly consistent that it was not--you were not criticizing or
singling out either administration; is that correct?
Mr. Hamilton. Absolutely. We leaned over backwards not to
play the blame game. Our fundamental conclusion here was that
the difficulties were systemic, not individual. And we just
think it is a dead-end game to try to pinpoint one or two
people there.
In the end, all of us lacked imagination. All of the
government lacked capabilities. All of the government lacked
management skills to deal with counterterrorism, and that is
not a fault of any one person, or it is not even the fault of
any one agency. It is just--it runs across the board.
Mr. Shays. Thank you. Thank you again for your good work.
The Chairman. The gentleman yields back.
Mr. Hamilton. I understand you are having a hearing this
afternoon with Governor Kean?
Mr. Shays. Yes, we are.
Mr. Hamilton. I am very pleased you are doing that. Thank
you.
Mr. Shays. Thank you.
The Chairman. The gentleman from Georgia, Mr. Scott.
Mr. Scott. Thank you very much, Mr. Chairman.
I certainly want to join the chorus of those who are
congratulating you on a job well done, you and the entire
Commission, Mr. Hamilton.
I have a series of questions on the money trail, but just
before getting to that, could you share with us your level of
certainty as to the likelihood of our country receiving another
terrorist attack to the level of 9/11?
Mr. Hamilton. We interviewed thousands of people, every
expert you can think of, and not a single one of them said
there would be no more attacks.
You look at two things. You look at intent, and you look at
capability by the enemy; they have them both. They hate us,
this group, this radical Islamic group. The intent is clear.
You read the fatwahs of Bin Laden, they are very, very clear,
kill as many Americans as possible. They have the capabilities.
So we would be very foolish indeed to conclude that another
attack is unlikely.
Mr. Scott. Now, so far, we have been able to freeze roughly
$200 million in terrorist assets. It would be interesting to
note--going forward we can learn something, where we have got
to go if we could get some information on the status of those
funds. Where did they come from? Were they all from Islamic
sources, or were they from other sources? Maybe European
sources?
Could you just quickly give us a status on what we have
learned from the funds that we have already intercepted?
Mr. Hamilton. Mr. Scott, I think that really has to be
directed to Treasury. I cannot give you the details of that.
Mr. Scott. All right.
Now, you mention in your report that the source of the
funding pretty much--you were pretty strong in saying it is not
domestic, it is coming from elsewhere. Basically you mention
charities. I am interested in another main--that is called
hawalas. This is an ancient, trust-based group, very informal,
but moves very quietly within the Middle East and Asia. What
have we learned about the hawalas?
Mr. Hamilton. Well, we have learned they are just almost
impossible to trace. Because of its informalities, it doesn't
go into the regular system at all. It is one of the things that
makes tracing terrorist money so exceedingly difficult. That is
a technique you are talking about.
Charities were a source, the informal transfer of money
based on very traditional patterns is--makes it exceedingly
tough, because it is outside the system, and there is no paper
trail for us.
Mr. Scott. Now----
Mr. Hamilton. That is one of the things that makes this
target so difficult to get at.
Mr. Scott. That means, then, that so much of what we have
got to do to plug this hole is going to come from getting help
from other countries?
Mr. Hamilton. No question about it.
Mr. Scott. I am very much concerned about four particular
countries: Germany, France, portions of Russia, the former
Soviet Union, and Saudi Arabia, of course.
It just seems to me that they are--we skirt around it, but
it seems to me that there is something more there than just
they don't have the kind of banking system that we have or
there is something technical there.
Is there a political, philosophical, diplomatic situation
there that is allowing a more laissez faire attitude toward
these terrorists financing? If that is the case, what do you
recommend we do to plug the gaps of those four countries
particularly? Because I think they are at the top of the apex.
Mr. Hamilton. Well, each of the countries presents a very
different case. Germany and France, of course, have very
sophisticated financial systems.
I think--I think I would comment principally about Saudi
Arabia. Our relationship with Saudi Arabia over a period of
many years has been a very shallow relationship. We have said,
okay, you give us oil at an affordable price; we will help you
protect the royal family. And that is really the relationship.
We have not had until recently what you would call candor and
depth. It has been very shallow.
I have sat in on many, many meetings, probably hundreds of
meetings, with U.S. officials and Saudi officials. And one of
the things that has impressed me over the decades is that the
relationship, for all of its importance, a very, very important
relationship, didn't really have much depth to it. We were
happy if we got the oil, which we desperately need; and they
were happy, and the family was protected, which they
desperately need.
So now you are in a situation where you need a lot more
depth to it and that is developing now because of these
financial flows and a lot of other matters. But it is very late
in developing.
Mr. Scott. Thank you.
The Chairman. The gentleman from Texas, Mr. Hensarling.
Mr. Hensarling. Thank you, Mr. Chairman.
Mr. Hamilton, let me add, too, my voice of congratulations
for your service to the country in this work product that I
know will be very important to Congress.
I want to start out, I think, plowing a little bit of old
ground here, but maybe coming at this in a slightly different
fashion. You said of the major policy recommendations that the
9/11 Commission has made, not one of them really deals with the
financing of terrorism. So if there is not a specific
recommendation for where policy recommendations or where
Congress could go from here, can you tell us where we don't
have to go?
In other words, since 9/11, where has Congress gotten it
right? Where has the administration gotten it right? Where do
we not need to focus? Where do we achieve substantial success?
Mr. Hamilton. Well, I think you have gotten it right in
some aspects of the PATRIOT Act. By far the biggest is the
breaking down of the wall of separation between intelligence on
the one hand and law enforcement on the other hand.
I think you have gotten it right in section 314(a). I think
you have gotten it right in section 326 to give additional
tools, if you would, to the investigators in looking at
terrorist financing. So I think you are correct, a lot of good
things have been done.
Beyond specific statutory provisions, there isn't any doubt
the whole government is energized to try to share more
information than it was prior to 9/11.
If you asked me the biggest area that needs to be
developed, probably the hardest as well, is the international
area, and just what we were talking about with Mr. Scott.
Because this--this is not something totally under our control.
This is something we have to persuade other countries of, that
it is in their national interest to do it. Not in our national
interest, in their national interest. Otherwise they won't do
it.
So I think this is an area that is terribly important
because the flow of money to terrorists is largely money that
comes from outside our boundaries. And that does mean we need
their cooperation, and it means they have to have not only the
political will, which is in question sometimes, but also the
mechanisms to do it.
Mr. Hensarling. In your testimony you talk about the
extraordinary cooperation that has been received from the
domestic financial services industry in helping trace terrorist
funding. Under the PATRIOT Act, a whole new group of financial
services players are now having to file these suspicious
activity reports.
I think Congressman Paul alluded to a measurement, I didn't
have it in my fingertips, that 12 million reports were
generated the year prior to 9/11. Now, that is a lot of
reports. In my congressional district, the Fifth Congressional
District of Texas, I have met a number of independent and
community bankers who tell me, Congressman, we want to do our
part to fight the war on terror, but can you look us in the
eyes and tell us that somebody is actually reading and using
all of these reports that we generate? Because it is a big, big
burden on our banks.
So, from your perspective, are we reading and using these
reports?
Mr. Hamilton. Well, I don't think I can answer that. I just
don't know. It is kind of endemic, isn't it? The solution to so
many of our problems from a governmental standpoint is to
require more information; in almost every bill that is passed
by the Congress, you require somebody to report somewhere. So
you do overload the circuits here.
The other day when I was testifying, Jack Marsh, who is a
former Secretary of the Army, told me--well, he testified that
every day the United States Government produces 650 million
bytes of data. And the question is how you sort through all of
that. And does anybody read these reports? I don't know.
I used to think maybe the 9/11 report wouldn't be read, but
it is being read. That is a good point. I mean, it is a valid
point. Is it really--I mean, how do you assess this data? What
kind of mechanisms there are?
And we did not do that. That is, I would guess, part of the
oversight of your committee. How is it used? That is a question
really for the fellows coming after me here.
The Chairman. The gentleman's time is about to expire.
Mr. Hensarling. In that case, the gentleman will yield
back.
The Chairman. The gentleman from North Carolina, Mr. Watt.
Mr. Watt. Thank you, Mr. Chairman.
Thank you, Mr. Hamilton, for being here today. I had the
pleasure of being with you in the Judiciary Committee on
Friday. I would have to say, when I left home Friday morning to
fly to Washington, I felt that I had a much, much clearer
understanding of why I was coming to a hearing in the Judiciary
Committee on privacy and civil liberties, because there were
specific proposals that the 9/11 Commission had made that we
were going to delve into, and we did delve into those pretty
rigorously in our subcommittee, joint subcommittee hearings.
I am not quite as confident that I understand the rationale
for today's hearing, because in looking through the suggestions
report, I didn't see anything that specifically we were being
suggested to act upon that had financial services implications.
Notwithstanding that fact, I am here, and I have been
listening, either in the room or in the back room, since I got
here; and I still haven't heard any specific things that this
committee needs to do.
You mentioned four things, generally, at the end of your
testimony, and I thought maybe we might get to some suggestions
there. About as close as we got was your suggestion that we
need to make sure that we have tools to trace funds in fast-
moving investigations.
Are there any specific things that you think we should be
considering in that context that are not already on the books?
That would be one question I would have.
And then second in the committee's report, or maybe it was
just the Democratic committee's staff report, there is a
reference on the last page to the NSC staff report that thought
that one possible solution to some weaknesses in the
intelligence community was to create an all-source terrorist
financing intelligence analysis center. I assume that is what
Mr. Royce was talking about when he asked you questions earlier
today from the other side.
The report goes on to report that Richard Clarke, the
National Counterterrorism Coordinator, had pushed for the
funding of such a center at Treasury, but neither the Treasury
nor the CIA was willing to commit the resources to such an all-
source terrorist financing intelligence center.
So I guess the second question would be, does the 9/11
Commission recommend something in that area consistent with
what coincidentally was originally suggested and pushed by
Richard Clarke and now seems to be being suggested and pushed
by Mr. Royce or a couple of other people who have asked
questions here earlier today?
Those are the two questions I had:
Are there specific things that we need to do that we
haven't already done to provide tools to trace funds and fast-
moving investigations, one of your four suggestions.
And, number 2, does the 9/11 Commission suggest we do
something to create an all-source terrorist financing
intelligence analysis center similar to the one that Richard
Clarke has been pushing for?
Mr. Hamilton. We certainly support an all-source terrorist
analysis center. We don't confine that to terrorist financing.
We think that in order to put together effective
counterterrorism efforts you have to integrate all aspects of
counterterrorism. So we wouldn't recommend, I think, a specific
center just dealing with financing.
That is exactly the problem we are contending against. That
is stovepiping; we think that is an inadequate, insufficient
perspective on the problem of terrorism.
We do think it is terribly important to have a center where
you take all of the domestic and all of the foreign sources
together and not only look at, analyze the data that you have
with regard to terrorism, but also do some planning
operationally so that you can put together an effective
program.
If I may, this problem of planning operationally is
important and may be a little hard to grasp. I don't know. But
the illustration we use all the time is of the two muscular
hijackers out in San Diego. We had bits and pieces of
information about them; the FBI knew a little bit about them.
The CIA knew a little bit about them, but nobody put it
together and managed it, and planned--took charge of it.
George Tenet was asked on more than one occasion--not with
regard to them, but with regard to Moussaoui in Minneapolis--if
he knew about it. He said he did, and he asked his people to
work with the FBI about it. And then, in response to one of our
questions, This was the FBI's case. And that illustrated for us
the problem, in a sense, that nobody really put it all
together, said, I am responsible for this, and said, I am going
to manage it.
So the center has to have the ability to look at all
aspects of counterterrorism, not just financing, and put
together the case and an operational plan to deal against it.
Now, let me also say, I have heard the comment several
times here that I am not asking you to do anything because I
haven't proposed any specific legislation. I have not proposed
any specific legislation, but I hope it is not your view of
responsibility that legislation is the only business of the
United States Congress. It is not.
The business of legislation is part of your business, but
the business of oversight is also part of it. And we are
specifically asking you to tighten up oversight in a lot of
different areas. And I understand that oversight is not as
attractive for a Member of Congress as the business of drafting
legislation, but if you want my personal view, it is just as
important.
I am deeply concerned that the Congress today is not as
robust and aggressive as it ought to be on oversight. And that
is not a comment on this Congress. It goes back to when I
served in the Congress as well.
We are asking you to look at the tools. Do you have the
tools and the financial--in the financial community today to
deal effectively with these possible terrorist financings? You
are the experts on this, not me. You are the experts on the
financial system. You have to answer that question. That comes
about through oversight.
We are asking you to find the vulnerabilities in the
financial system today. We are not experts on that in the 9/11
Commission. You are the experts on that. That is what we are
asking you to do.
You have got to look at these things very hard. We are
asking you to take a look at the question of civil liberties in
financial institutions here. We don't have specific
recommendations with regard to how you resolve civil liberties
with respect to the flow of financial movements--the flow of
financial movements in the economy.
So I think my message here is that dealing with terrorist
financing is not just a question of legislation--although that
is very important. It is a question of robust oversight as
well.
The Chairman. The gentleman's time has expired.
The gentlelady from West Virginia, Mrs. Capito.
Mrs. Capito. Thank you, Mr. Chairman.
And thank you, Vice Chairman.
I have a question sort of a little more general nature. I
happened to be in a bank, a community bank in West Virginia. I
represent West Virginia. The bank officer was asking me the
very same questions about the forms. Who is reading these and
how important are these? I sort of took a different tack with
her. I said, I guess that is in the 326 requirements of the
PATRIOT Act that you emphasize are so important.
But I said, I think it is important for us to recognize
across the country, even in the rural areas, that this war on
terror has to be fought not only in the big financial centers
where we are tracking down transactions, but everyone has to be
enlisted and be part of the solution of tracking down the
terrorists.
Then, when I was reading your report, you have a sentence
on page 383 where it says, ``If al Qaeda is replaced by
smaller, decentralized terrorist groups, the premise behind the
government's efforts that terrorists need a financial support
network may become outdated.''
And after reading that statement, it sort of backs up what
I am saying, that everybody, no matter where you live in the
United States, no matter what kind of financial institution you
are attached with--you need to be part of the solution rather
than saying it is going to be done in New York, Chicago, Miami,
and the more natural places.
I was wondering if you had a more generalized perspective,
how we can help our constituents in these kinds of areas who
feel a little bit removed from some of the solutions--how
important their role really is to seeking the solutions and to
find the terrorist route.
Then I think, well, the terrorists when they entered the
air transportation system, they didn't enter in Boston. I
believe they entered in Maine and other areas where--they were
considered to be maybe easier or maybe less likely to be
heavily screened. For whatever reason, it was obviously very
successful.
So did you have any comments on that?
Mr. Hamilton. I think your observation is very good. In
other words, one of the functions you have to play if you pass
a piece of legislation is to explain to people why it is
necessary. Apparently, you were trying to do that. I commend
that. It seems to me that is exactly right. There isn't any
doubt in fighting terrorism we have to ask a lot of people to
do a lot of things.
The first line of defense against terrorism in many
respects is the general public. The most obvious example is of
course is, if you sit down on an airplane and somebody lights a
shoe to their match--or a match to their shoe, excuse me--you
are going to react to that. You are the first line of defense.
Likewise, the banker or the financial institution has to
recognize that they do have a burden in fighting terrorism.
Now--maybe that burden is excessive. I really can't make
that judgment. I don't know because I don't know exactly what
they have to do. But there is no doubt that we are putting an
extra burden on them. And all the Americans have to accept the
fact that there are burdens placed on them by reason of
terrorism.
My own observation, by and large, is they want to be very
much helpful and cooperative. If it is explained to them--they
are prepared to do it.
Mrs. Capito. Thank you. I have no further questions.
I yield back.
Mr. Fossella. [Presiding.] Thank you very much. The
gentlelady yields back.
The gentlelady from Oregon--Ms. Hooley.
Ms. Hooley. Thank you, Mr. Chair.
Mr. Hamilton, thank you so much for all the work you have
put in--and sitting and listening for so long today and
answering questions. I have just a couple of quick questions.
Did the Commission find any financial link between the
terrorists that hit us on September 11th and Saddam's regime in
Iraq?
More broadly--did you discover any financial link between
the group of al Qaeda and Iraq?
Mr. Hamilton. What we found is, there is no cooperative
operational relationship. Were there contacts? Yes. Were there
ties? Depends on how you define the word ``ties.'' yes. But
there was no cooperative relationship, and we do not believe
that Hussein was involved in planning or implementing 9/11.
Ms. Hooley. One of the things we have heard talked about
today with lots of different people is--I mean, I know--I think
this committee has done some good things about money laundering
and freezing assets.
As they use more and more a system outside the regular
banking community, as they use--as they go outside the total
system, are we going to be behind the 8-ball if we put our
emphasis on freezing funds or following the money? Is it still
important to do that as we look at how did they use--how did
they use their own system outside of financial institutions?
Mr. Hamilton. We certainly have to understand their own
system better. Freezing is going to be an important tool in
dealing with terrorism. As we have suggested, it has to be
applied with consideration of some of the other equities
involved.
But we will have to try to understand better--and our
foreign friends and allies can help us here--the systems that
these people use in financing their operations.
Ms. Hooley. One quick last question, a little outside the
financial community, but since you are here right now: The FBI
and immigration don't have systems of fingerprinting that mesh.
I mean, they have separate systems. How important is that going
to be to make sure that the FBI and immigration have the same
kind of fingerprinting systems in the future?
Mr. Hamilton. You are going to have to have integrated
systems so these various agencies can talk to one another,
share data with one another. If you can't do that, you are not
going to be able to put together an effective counterterrorism
unit.
Ms. Hooley. Thank you. I yield back.
Mr. Fossella. Thank you. The gentlelady yields back.
The gentleman from New Jersey, Mr. Garrett.
Mr. Garrett of New Jersey. Thank you, Mr. Hamilton. And I
also thank our Chair for holding this hearing this morning and
now this afternoon. I come away, so far, from this hearing with
a couple of thoughts on it, taking notes down as I went along.
One, initially when you talk about these terrorists are
entrepreneurial in nature, and smart, keen, and able to look
into different areas, you opened up your comments with regard
to the book and how well it is selling.
I am not sure how many average Americans are actually
buying and reading through that entire book, but I am sure that
you will agree that the terrorists, whoever they may be and
wherever they are, are buying that and will be getting the
supplemental reports and following up on that just to, as you
say, find the gaps.
If we are learning anything from all of this as far as
where the gaps are, I suppose that the terrorists are also
learning to that extent as well.
I take your clarification, I guess, if you will, about not
calling for any new legislation. I appreciate that. I think
this committee has taken that charge, as far as oversight with
regard to other agencies. I know Mrs. Kelly has held hearings,
that I have sat in on, on some other agencies a little outside
this area, where they may have been overextending their
authority. So I commend the members of the subcommittee for
having taken that step.
I have also taken from your comments, repeatedly stated, no
substantial domestic source of funding. And from that, a
comment from my colleague from the other side of the aisle, who
is no longer here now, but through his long tenure here with
regard to the war on drugs. And perhaps what his comment was,
what we have done over those 30 years may have played--some
element as far as deterrent effect, as far as the ingress, and
effect as far as the materials and also the dollars.
One of my questions to you, though, is where the burden
should be placed, and maybe from your past experience, here to
address the issue of the political will that is necessary to
address one of these. And also the pragmatic approach as well,
as far as following the chain of money; we have had a number of
hearings already on this topic.
The burden seems to be placed right now on the so-called
law-abiding system as far as our chain is concerned. We have
already heard about the Bank Secrecy Act and the Suspicious
Activity Reports. So there is already a burden placed on our
financial institutions.
There is already a burden being placed on an individual as
far as being up in the $10,000 range. We have questioned others
on that. I don't know if you have a specific recommendation as
far as that threshold. You can comment on that if you would
like.
But also I will tell you this little story in 30 seconds.
Recently, I went to my local bank where I have been known for
some 40-odd years, where I grew up, to open a new account and
my banker told me she had to get proof of my identification,
who I was, even though she knew who I was for all those years.
And I gave her my driver's license, which some people say is
easy to counterfeit in New Jersey.
Whereas if you had somebody come into the country tomorrow,
legal or otherwise, they are able to go into the same
institution with a matricular consular card, not produced by
the State of New Jersey or any other a State office or any
other Federal office, but produced by a foreign country without
any proof as to where that person is coming from or the
legality of that person being in the United States. This
administration says that is a proper and adequate source of
identification. I would appreciate your comment on that.
Finally, I would be curious as to your thoughts on the
impact of this on other aspects of law enforcement as we go
forward. You made the comment that there is a degree of inertia
in past aspects of law enforcement, that once they were set up
years ago, they continue to go down that same road.
Obviously, we have 30 years of drug enforcement as far as a
focus of law enforcement. Local law enforcement has their own
charges.
Will we see the same systemic placement be created here as
we are directing all of our attentions and energies in this one
area--not that I am saying we should be doing so--and will it
have any impact, negative or otherwise, on other areas of law
enforcement, be they Federal or local?
Thank you.
Mr. Hamilton. Well, I worry about this question of
degrading capabilities with respect to the FBI. This is outside
our mandate. But the Director of the FBI said continually, I am
shifting the focus of the FBI from law enforcement to
prevention of terrorism. We all applaud that. But what does the
bank robber think about that?
I mean, what happens on drugs? If you go to talk to Federal
judges today, they will tell you that their dockets are
overloaded with drug cases. What does it mean if the FBI moves
away from drug enforcement laws?
I think these are things that have to be worked out.
Director Mueller's response to that, I think, is, turning a lot
of these responsibilities over to the DEA, that they will
develop the capabilities. I hope he is right there.
But you do have to be aware when you focus on terrorism,
and you tell all these agencies and departments that this is
your number one priority--the question you raise, I think, is a
very, very good one--what happens then in terms of the other
responsibilities that department has?
We can't answer that right now, but we know what the
political signal is now, and that is to put your resources into
fighting terrorism. We have to look at the consequences of that
down the road.
You asked about where does the burden lie here. It lies, as
I am afraid you correctly point out, with the American citizen.
How do you get the information you need, however, without
asking the American, the law-abiding American citizen? I don't
know how you get it. If you want to get information with regard
to financial flows and everybody agrees that you need that
information in order to fight terrorism, you have got to ask
somebody. And the only people that really know it are the
people in the financial institutions. And so you do put a
burden on them.
Now, I don't know how you avoid that burden. My guess is
they are prepared to accept that burden to some degree. And
your job is to make sure that burden is not an excessive
burden, however you may define excessive. Do they, in fact,
collect information that is valuable to the government, or is
it just paperwork?
The other point I want to make in response to your question
is the importance of secure identification. This gets into some
pretty tight, ticklish areas. We have been talking about civil
liberties here. This is a civil liberty area. But, again, from
the standpoint of fighting terrorism, you have to have secure
identification of people. And that is why we recommend that
there be Federal standards with regard to driver's licenses and
passports and the like.
All of the hijackers except one had American identification
papers, 18 out of 19 of them. And what that meant is that some
of these identification papers were issued pretty sloppily.
Now, we have got to correct that, and secure
identification. I don't know how you work through this question
of civil liberties, the national identification card and all
the rest of it. We have to work through that. But I don't have
any doubt at all that if you are going to effectively fight
terrorism, you have got to have secure identification.
The Chairman. [Presiding.] The gentleman's time has
expired.
The gentleman from Texas, Mr. Hinojosa.
Mr. Hinojosa. Thank you, Mr. Chairman.
I also wish to thank you, Vice Chairman Lee Hamilton, for
your outstanding leadership and great efforts to protect our
great Nation by strengthening antiterrorism efforts that are
being made here in our country, and especially by this
committee.
Your testimony is both very informative and very
disturbing. It is very disturbing because it seems to me that
the terrorists who entered the United States came from Canada
with doctored passports Canada accepted as valid and valid
visas issued by the United States. The terrorists funded the 9/
11 attack using the mainstream financial system.
What is even more disturbing is that Treasury's attempts to
stop terrorist financing by freezing assets in mainstream
financial systems have failed to stem the tide.
I know that the Financial Action Task Force, currently
composed of 33 member countries, has been meeting frequently
since 9/11 to address terrorist financing. The task force
recently issued its 2003 and 2004 report essentially
determining that the countries it reviewed are taking
appropriate measures to address terrorist financing and making
necessary changes to their regulatory systems in order to
better prevent, detect and eliminate terrorist financing with
certain modifications needed.
My question, Vice Chairman Hamilton, is that prior to 9/11,
which of our U.S. Consulates required biometric information
like a fingerprint of visa applicants?
Mr. Hamilton. I am not the one to answer that.
Mr. Hinojosa. You mentioned that.
Mr. Hamilton. I am not aware that they sought fingerprints
from anyone, but I don't want to make that as a blanket rule.
Mr. Hinojosa. You mentioned in your testimony that they had
sent you a copy of the 9/11 Commission staff monograph, and
that you hadn't had an opportunity to read it yet. But I wish
to read something from that report, from that staff report,
that says, ``with the exception of our consulates in Mexico,
biometric information, like a fingerprint, was not routinely
collected from visa applicants before 9/11.''
Mr. Hamilton. Yes.
Mr. Hinojosa. The reason I bring this up is because the
gentleman just before me spoke about his concern about visas
and identification cards that will be used by individuals who
are unbanked, and that is something that is very important, not
only to me, but to many who have congressional districts like
mine.
I know that he asked you specific questions, and you
answered them very well, in that we want to be careful that the
information is legitimate and they are not falsified documents
and so forth; but I think that we are concerned about all the
countries that sent people into our United States, particularly
those who came in through Canada and those who can come in
through Mexico. So those are concerns that I have been
discussing with bankers in my district over that last two
weeks.
The rural areas that I represent, 80 percent of my
congressional district, have many community, rural community
bankers who are asking themselves and asking us as Members of
Congress: ``Are we expected to expend as much money and meet
the same regulatory requirements as the national banks like
Chase and Wells Fargo and all those real big banks are doing in
response to all of this, being that they have so much more
human resources?"
The truth of the matter is, I didn't know how to answer
that. What recommendations would you make to small, rural,
community bankers as they try to carry their weight on this
matter that you are discussing with us?
Mr. Hamilton. I think it is very important that the banker
know their customers and be able to identify their customers.
There is no substitute for that. In that sense, they are the
first line of defense. So it calls for an exercise of diligence
and care on the part of the banker to make sure that he or she
knows with whom they deal.
The Chairman. The gentleman's time has expired.
The gentleman from Florida, Mr. Feeney.
Mr. Feeney. Thank you, Mr. Chairman.
Again, Mr. Hamilton, we got to visit Friday as part of the
Subcommittee on the Judiciary. I was able to commend the
Commission for a great job on the report. I wasn't able to
serve with you because--like other members have said what an
honor and privilege it has been to serve with you. But I have
been impressed with your stamina just over the last several
days; it is pretty extraordinary.
I note--you were talking about this in response to the
gentleman from Texas, Mr. Hensarling. I note in Plato's
dialogues he suggests that the best person to hire to protect
your property is an accomplished thief. Unfortunately, we don't
have the benefit of the wisdom of terrorists that have switched
sides and decided to have an epiphany and support freedom and
civilization. But what we can do is, hopefully, think outside
the box.
One of the things you have been able to do in your report
about the financial institutions is that we have been
successful in some respects, but the terrorists are very much
adaptive, they are very flexible. The most fungible asset they
have, I would suggest, is probably the resources. It only took
them $4- or $500,000 according to your report to accomplish the
9/11 attack. It is a lot harder to find 19 people to commit
suicide, as they did, especially finding people able to fly
planes, able to mix in our language and culture. And finding
the plane itself, getting a hold of it, a bomb or a chemical
weapon is very difficult. But replacing $4- or $500,000 is a
fairly easy task.
But having said that, it seems to me we can learn from some
of the ways that other underground entities have operated to
launder and move money, for example, the Mafia. These are
things that the FBI has had a great deal of expertise in over
the years. You know, underground organizations have moved into
more legitimate enterprises, they have moved into less risky
enterprises. Things like intellectual property theft are a
relatively risk free, although illegal, way to raise money.
Can you comment on what we have learned as we try to track
resources both nationally and internationally in the hands of
the terrorists? And along with that, can you tell us how we
ought to draw the balance, if you have thought about it to any
great degree?
There are plenty of legitimate Christian and Jewish
charities out there. We have some illegitimate Muslim charities
who have been helping fund terrorism. How do we encourage
giving in charitable opportunities, but also crack down on this
new threat?
Mr. Hamilton. I think the latter problem that you discussed
is a major challenge for American foreign policy. It is easy
for us to sit in this country and say, well, Saudis, you have
to crack down on these charities, but you have to remember that
those charities also may do a lot of humanitarian work. And
they are going to resent, and the people are going to resent,
the United States telling them how to run their charities.
So you get into a real tension here between our desire to
crack down on charities and the fact that they may be giving
money to the terrorists, on the one hand, and the anti-American
feelings that exist in many places around the world today. We
can exacerbate that greatly by demanding change in these
charities.
How do you deal with that? Well, I don't think there is any
silver bullet here. You deal with it through a very extensive
dialogue with a particular government. Now, we have done that
with the Saudis, for example, on a couple of their charities.
We have made quite a bit of progress, it seems to me. One of
them has been closed and changes have been made in the manner
in which the Saudis oversee their charities at the upper levels
of the Saudi Government.
So the only answer to the question, I think, is one of
dialogue and education, I guess, diplomacy with the countries
involved.
Mr. Feeney. Real quickly on this question, we have had a
lot of discussion today, do you freeze assets or do you allow
the assets to flow, follow the money and capture a greater
organization. Under the organizational chart that the 9/11
Commission proposed, who makes the call?
Mr. Hamilton. Well, who would make the call would be
eventually the policymakers, the President, and the National
Security Council. But they would be making the call on the
basis of recommendations from the national intelligence
director and the national intelligence center. You would set up
a national intelligence center that deals with
counterterrorism, and that is the center that would bring
together all of the information from all of the sources into
one place; in other words, you would get a genuine sharing of
information. But beyond an intelligence function, it has an
operational planning function, like the military has and the J-
2, J-3 concept, so that the national counterterrorism center
not only would have the intelligence, but it would plan the
operation. It would not make policy, it would not execute
policy, but it would plan.
And that, incidentally, is a part of our recommendations.
It seems to be harder to grasp, I think it was harder to grasp
by the Commission itself, but we tend to look at these things
in terms of just intelligence. It is much more than
intelligence. It is bringing together the information and
planning operationally how to deal with the problem that the
intelligence presents to you. And then that, of course, goes up
to the national intelligence director, and he reports it to the
President.
The Chairman. The gentleman's time has expired.
The gentleman from New York, Mr. Meeks.
Mr. Meeks. Thank you, Mr. Chairman, and thank you, Mr.
Hamilton. I want to join the chorus of voices who have lauded
you and Chairman Kean for what you have done. You have really
kind of restored some hope to the American public that we can
sometimes put politics aside and party aside in coming together
to really help the American people. It is kind of the same
feeling that we had initially after 9/11 where we felt we were
coming together, we were together as a Congress. What you have
done on the Commission is to continue on along that basis,
showing that you can come together, and I think that you and
the Commission have set an example that we need to follow also
here in Congress.
That being said, I want to also thank the families of the
victims of 9/11, because if it was not for them and them
sticking to it and insisting that this Commission be formed,
you may not be before us today. So I want to say a special
thank you. I think the American people owe a great debt of
gratitude to the families. They have lost so much, yet they
still have stood up for so long so that you are sitting here
and we are now addressing some of the issues that we probably
should have been addressing all along, and it would not have
happened without them, and the American people owe them a great
debt of gratitude.
Let me ask this question. You know oftentimes when we talk,
I talk about diversity. The reason why we talk about diversity
and various issues is because we get different ideas and
different opinions from different people, whether an individual
happens to be of different ethnic backgrounds, et cetera.
Did the Commission at all look at our intelligence agencies
and even some of our diplomatic corps, et cetera, along the
avenue of diversity, whether or not because of ideas we had
enough Arab Americans and Muslims and others that were involved
in it, in helping us come up to determine or predict even an
outcome of what terrorists there may be; and further and
specifically, in looking at the whole, keeping in context the
financial services, the whole compliant system that Muslims
generally work with when they are talking about banking--we
talked about hiding--making sure we understand their whole
financial system so that we can be helpful in that regard in
trying to figure out the best way to stop this kind of money
laundering, et cetera, to fight against terrorism?
Mr. Hamilton. Thank you for your comments about the
families. That is exactly on the mark. They have been
enormously important to us and helpful to us in the course of
our investigation. They gave us at one point about 150
questions, I think. We tried to answer all of them. We could
not answer all of them; we did the best we could. But they have
been exceedingly supportive and many of them are very, very
knowledgeable about these public policy issues. So we have been
pleased to have their support and they are marvelous people
individually, and we have come to know many of them quite well.
The second point on diversity, I am pleased you raised it.
We put very great emphasis on the necessity of the intelligence
community becoming more diverse. It is an absolute necessity.
There is tremendous emphasis today on human intelligence. You
cannot possibly penetrate an al Qaeda cell with a guy like me.
It cannot be done. I do not care how fluent an Arab speaker I
would be--and I am not--you cannot penetrate it. These are very
small cells. They are often tied by family relationships. They
are a very closely knit group, and penetrating those groups is
the toughest intelligence target that we have. It cannot be
done by a gentleman from Indiana who went to Indiana schools
and all the rest. It has to be done with someone of that
culture.
So creating that diversity now becomes a national security
priority. We hear all the time about the languages that need to
be spoken and, incidentally, you are talking about 20 or more
of them, many languages that we have to master. And beyond
mastery of the language is mastery of the culture itself. You
mentioned this. You have to understand the culture better than
we do; not just the financial culture, but many other aspects
of their culture. People have to begin to see this as an
important part of our Intelligence Community, and if the CIA or
other Intelligence Communities want to do a more effective job
in human intelligence, or if they want to do a more effective
job just in providing accurate information to the policymakers,
they are going to have to become more diverse. And they are
going to have to hire people with great linguistic skills; and
I mean when we are talking about linguistic skills, we are not
just speaking about somebody who speaks the language. They have
to speak it like a native speaker if you are going to penetrate
these groups. It is very important.
The Chairman. The gentleman's time has expired.
The gentleman from Wisconsin, Mr. Green.
Mr. Green. Thank you, Mr. Chairman. Of course I add my
voice to the others in congratulating you, Mr. Hamilton, for
your work. I apologize for coming in late. Like Mr. Feeney, I
have been jumping back and forth between simultaneous hearings
on the recommendations.
I know the Commission has not recommended specific
legislation. Would members such as yourself be willing to
comment in writing on specific legislation that we put together
going forward on this subject? Is that something that you would
be willing to do?
Mr. Hamilton. I have to be a little careful about this. The
Commission may or may not meet in the future. I think we
probably will have some meetings on it, but it really depends
on how we evolve from this point on, and I am afraid I am not
able to give you a specific answer as to the Commission
commenting on a specific piece of legislation.
Mr. Green. Perhaps individual members?
Mr. Hamilton. I think individual members might, but here we
have to be careful and say, okay, it is an individual opinion
and it is not a Commission opinion.
Mr. Green. Your points were well taken on the need for
Members to vigorously utilize our oversight function. On the
other hand, this is obviously an area in which it is difficult
for us as Members to know all of the details and all of the
facts in this rapidly evolving challenge that we face.
Obviously, oftentimes the crucial data is classified, it is
difficult for us to translate, and I think the whole subject
matter is a difficult one for us, because I am not sure how we
define progress in this area. Is progress the lack of a
terrorist attack? Is progress so much time having passed
between the disruption publicly of a threat? Obviously it is
difficult for us, as it was difficult for you, and I think it
is going to pose some real challenges for Members exercising
the oversight function as we go forward in the years ahead. In
fact, I think you point out quite eloquently, in both your
testimony and in the report, the danger of allowing us to be
lulled into that thinking, that progress is the absence of a
very public, specific terrorist incident. Perhaps that is the
problem that we suffered from in the past.
So your points are well taken on oversight. Unfortunately,
I think there are some limitations, and with those limitations
and with that void, I think that is why so many Members are
asking you and others about specific legislative
recommendations. It is almost human nature. We want to be
involved and active and doing something, and obviously
legislation presents a vehicle that we can devote our energy
to.
Mr. Hamilton. Well, on the question of oversight, I think
you do not want to sell yourself short. You are the American
policymakers, you are the politicians, you are the people who
are closest to the American people. You know what the big
policy issues are, and you must not let any agency intimidate
you or snow you. I really firmly believe that every legislator
has to respect the constitutional obligation and that means you
are a part of a separate, but equal, branch of government, and
that means you must assert that right continually.
I like your point about metrics. Don Rumsfeld, Secretary
Rumsfeld had the best comments on that. You probably remember
his famous memorandum. How can we tell whether we are winning
or losing? We do not have a good set of metrics. He is
absolutely right about that. It is very, very hard to develop
in this effort.
Mr. Green. Finally, and quickly, there was a sentence in
your report that really struck me, and I do not think it gets
enough attention. The sentence says very clearly and
specifically, we are safer than we were 4 years ago, but we are
not safe. I think with this Commission, or this hearing
process, and the Commission itself, we rightly focus on our
shortcomings and what we need to do. I do not think we talk
enough about progress that has been made. I like that aspect of
the report, because I think it is something that the American
people need to hear, that we are safer than we were 4 years ago
for a number of reasons. So I think that is something important
for the American people to hear.
The Chairman. The gentleman's time has expired.
Mr. Hamilton. We very much agree with that.
The Chairman. The gentleman from Texas, Mr. Bell.
Mr. Bell. Thank you very much, Mr. Chairman. Mr. Hamilton,
thank you for your service and your testimony here today. The
good news is that I am asking questions, so that means you are
very close to being finished. The bad news is that I have a
couple of questions too.
The first is really touching upon something that Mr. Feeney
raised and you really did not have an adequate opportunity to
respond to, and it really goes back to a statement you made
earlier about the need not to fight the last war, and I think
that really goes to the core of what our strategy has to be in
this war on terrorism. But my question is, how do you keep from
fighting the last war?
You know, based on your service here in the House, that we
operate in an incredibly reactive environment, and I am just
curious that if you are talking about the financing of
terrorist activity or any other aspect of this war on
terrorism, if the terrorists are as clever and resourceful as
you indicate that they are--that the Commission indicates that
they are, and one really only has to read the first few pages
of the report to see just how resourceful they can be--it
almost seems like it is a scene from that old cartoon where
there is a water leak and the character is trying to plug the
water leak and then the water starts shooting out from a
different source and pretty soon you are running around.
So we can respond to what we already know, but my question
is, based on what you have seen and heard, how do you stay
above or ahead of the curve in this war on terrorism, and how
do you keep from just fighting the last war?
Mr. Hamilton. I think you have to consult the
nonconventional thinker. You have to go outside the box. You
know, congressional committees get in the habit of having the
same witnesses all the time, and that is understandable,
because you deal largely with policy questions and you want the
policymakers there. But it is important for Members of
Congress, as it is important for executive branch people, to
put their feet up on the desk, look out the window, and think
unusual thoughts, and use their imaginations.
One of the pieces of advice we had given to us regularly
was, talk to some of the novelists. Talk to a Tom Clancy and a
lot of other writers that you all could identify that I cannot,
who think--who use their imagination. And you have to do that.
That is my only advice on it, because you have to expand your
own sources of information to figure out what some of these
people are thinking about.
Mr. Bell. Can you institutionalize that to any degree, in
your opinion?
Mr. Hamilton. I doubt it. It really takes individual
initiative. You cannot very well establish, I do not believe,
an office of imagination over here. That would not sell too
well, I do not think.
Mr. Bell. There would be a lot of people willing to serve,
though.
Mr. Hamilton. You do need people and you need to consult
with people who do not express always the conventional wisdom,
and that is an important thing to keep in mind.
Mr. Bell. Also, going back to something you talked about
earlier about the cooperation that has existed between
financial institutions and law enforcement and your concern
that perhaps as the memory of 9/11 fades, that cooperation
could subside, and you talked about the need for some
institutionalization there.
How would you go about institutionalizing that cooperation?
Mr. Hamilton. Well, those who are familiar with the
financial institutions, the private sector people could
probably give you a better answer than I can. But there really
does have to be--and maybe they already exist, I do not know--
mechanisms whereby a dialogue can take place between the
bankers, if you will, the financial institution people, and the
policymakers. That is, it is very important that that dialogue
take place and there has to be a mechanism for it to occur. It
may be the mechanisms are already in place and they need to
have an expanded agenda.
Dialogue is the answer to your question. There has to be
dialogue, and you have to have a place where that dialogue can
take place.
We had a question a moment ago about the bankers in West
Virginia. They are outside the dialogue. That is why they are
asking those questions. And that means no matter what exists
today, it is not working completely, because they do not
understand what the--why it is they are gathering this
information. And so I think you have to look at it with that
perspective.
Mr. Bell. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. The clean-up hitter, the gentleman from
Staten Island, Mr. Fossella.
Mr. Fossella. Thank you, Mr. Chairman.
Mr. Hamilton, thank you very much. I would echo the words
of my colleagues to say that I appreciate your service as well,
and underscore the reality that you mentioned earlier, and
others, about the families who suffered; regrettably and
tragically, many of those were from the area I represent in
Staten Island and Brooklyn; 200 of my neighbors on Staten
Island alone were killed. Their memory has become the
foundation for what we are doing here and, fortunately, it
seems like people are working together to achieve that goal of
protecting us once and for all.
Let me just say I am pleased in terms of some successes
that you mentioned of the PATRIOT Act, and as one of the
successes, because it appears that it has become sort of a
whipping boy, there is a monster behind every tree out in the
political arena. As you mentioned earlier, it seems to have its
successes in forcing agencies to cooperate with each other, at
a minimum, and obtain and apprehend those would-be terrorists.
So thanks for adding that.
In terms of outside the box, the reality is these are not
Boy Scouts or Girl Scouts. A lot of them are just animals that
want to see the destruction of the U.S. I would point to what I
think is one of the greatest police departments in the world,
the New York City Police Department. One of the reasons why
they are so successful, I believe, especially the detectives,
is that they are not afraid to get on the ground and work and
find out the nuts and the bolts and the nitty-gritty. They do
not have their feet up on the desk.
So that is one way in which I hope the Federal agencies can
better utilize those local law enforcement officers like the
New York City Police Department and detectives. They do, to a
degree, do not get me wrong, but I think it could always be
better.
You have answered a lot of questions, and some I wanted to
ask have been asked, so I will not repeat them. But let me just
ask one quick one regarding the Department of Treasury,
specifically the TFI office, your testimony about all agencies
and sharing a goal to work together. Do you think that that
office should maintain a group of financial experts to oversee
compliance? And to what degree does it make sense for the
Department, if at all, to have criminal enforcement capability?
Thanks again.
Mr. Hamilton. Thank you for mentioning the tragedy that
these families encountered. That was continually impressed upon
the commissioners, and we cannot be cognizant of that too
often. And those in your area, New York, New Jersey, certainly
suffered the most, because that is where the heaviest
casualties were.
Secondly, I think that the emphasis you put on local and
State is likewise very important, because these people are the
frontline officials. There are 18,000 first responders, or
approximately that number, and you cannot imagine an effective
war on terrorism without their participation. And one of the
huge problems here is how you get information from up here to
down there--if you say up is here in Washington--the flow of
information downward, without compromising sources. That is a
big-time problem in all of this. But it is one we must solve,
and it is one that local and State officials complain an awful
lot about. They do not feel like they are in the loop with
regard to information. And we direct some of our comments to
that in the report.
With regard to the Treasury having criminal enforcement
powers, I really do not feel qualified to answer that. I just
do not know that much about it. My general sense is the
prosecutors have to do that in the Department of Justice, but I
would be no expert there.
Mr. Fossella. Fair enough. Thank you very much, Mr.
Hamilton.
The Chairman. The committee is pleased to have you here. We
put you through a long, difficult--well, I do not know how
difficult it was, but it was a long process. You have been on
the other side of this for a long time, so now you can
appreciate it from both sides of the dais. But I know I speak
for all of the Members on the committee to say how deeply we
appreciate your appearance here today and your expertise. Your
expertise precedes you before the 9/11 Commission with your
great work in the Congress and, clearly, you have done yeoman's
work, as well as the other commissioners.
With that, you are dismissed. I know you have some other
work this afternoon. Thank you very much.
Mr. Hamilton. Thank you very much.
The Chairman. The Chair notes that some members may have
additional questions for the witness which they may want to
submit in writing. Without objection, the hearing record will
remain open for 30 days to submit written questions to the
witnesses and to place the response in the record.
We now invite our second panel to appear.
Gentlemen, welcome to the Committee on Financial Services.
Let me introduce the panel. The honorable Stuart A. Levey,
Under Secretary for the Office of Terrorism and Financial
Intelligence, Department of the Treasury, and an Ohio native;
the Honorable Frank Libutti, Under Secretary for Information
Analysis and Infrastructure Protection, the Department of
Homeland Security. We already know where you are from, from our
friend from Long Island. And the next witness is Mr. Barry
Sabin, Chief of the Counterterrorism Section, Department of
Justice.
Gentlemen, thank you all for your patience as we worked our
way through the vice chairman of the 9/11 Commission. I notice
you were all here, and hopefully it was a worthwhile experience
for you as well as for the members of the committee.
The Chairman. We will begin with you, Mr. Levey.
STATEMENT OF HON. STUART A. LEVEY, UNDER SECRETARY FOR THE
OFFICE OF TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF
THE TREASURY
Mr. Levy. Thank you, Mr. Chairman, members of the
committee, thank you for inviting me here today to testify
about our efforts to combat terrorist financing and the 9/11
Commission report. This is my first opportunity to testify in
my new position as Under Secretary for the new Office of
Terrorism and Financial Intelligence.
There is little need to underscore the importance of our
campaign against terrorist financing, especially before this
audience. Both in the PATRIOT Act and in other ways, this
committee has demonstrated its commitment to fighting the
financial war on terror. The committee would certainly agree,
as I do, with the 9/11 Commission's primary recommendation that
``vigorous efforts to track terrorist financing must remain
front and center in U.S. counterterrorism efforts.''
It is an honor for me to testify alongside Under Secretary
Libutti and Barry Sabin today. I just left the Justice
Department a few weeks ago, where I had the privilege of
working directly with Mr. Sabin and Mr. Breinholt and his team,
both in the criminal division and at the FBI. They are real
pros, and I am pleased to be able to continue working with them
on this issue.
Those of us who work on this issue are also indebted to the
9/11 Commission and its staff, including specifically John Roth
whom some of you know. Both in its main report and in the staff
monograph, the Commission's fine work will certainly help us
improve our overall efforts to combat terrorist financing.
I would like to highlight three issues in my oral
statement. First, I think it is important to underscore that
our terrorist financing campaign is just one part of the
overall mission to fight terrorism. Put another way, the goal
is not so much to stop the money as it is to stop the killing.
That seems obvious, but it actually has real implications for
the tactics we choose to use in particular situations. Our goal
must always be to choose the action that will do the most to
cripple terrorist organizations.
For example, in a certain case, the best action may be to
publicly designate a financier to freeze terrorist-related
assets and also shut down a conduit for further financing. In
another case, the best strategy may be to observe the financier
or money flow covertly to identify the next link in the chain
rather than to cut the money off.
In pursuing that goal, we need to draw on a full range of
weapons in our arsenal from agencies all around the government,
from intelligence activities to diplomatic pressure, from
administrative action to criminal prosecutions. As the
Commission recognized, the interagency team that focuses on
terrorist financing is all committed to that principle, and the
team work is excellent. But even with the best teamwork, we
have a difficult challenge. Terrorist groups like al Qaeda are
savvy and are evolving in response to our actions, so we must
continue to improve and adjust as well.
Second, I would like to say a few words about recent
changes at Treasury that should enhance our contribution to
that team. Since the September 11 attacks, Treasury has worked
diligently to combat terrorist financing and otherwise
safeguard the integrity of our financial system and
international financial systems generally. However, Treasury's
structure did not match its mission to combat terrorist
financing as a distinct priority. President Bush and Secretary
Snow therefore created the new Office of Terrorism and
Financial Intelligence to bring all of the Department's assets
to bear more effectively to fight terrorist financing and
financial crime.
TFI has two major components. The first, the Office of
Intelligence and Analysis, reflects our recognition that the
war on terror remains a war of information. Treasury's Office
of Intelligence Analysis will integrate, for the first time,
all of the Department's financial information and intelligence
streams and ensure that the information is properly utilized to
support the campaign against terrorist financing, as well as
other aspects of Treasury's mission.
TFI also includes the Office of Terrorist Financing and
Financial Crimes, which is the policy and enforcement apparatus
for the Department on these issues. Led by Assistant Secretary
Juan Zarate, this office will, among many other things,
integrate the important functions of OFAC and FinCEN with other
components of the Department, work with IRS-CI and other law
enforcement on emerging domestic and international criminal
issues, and represent the United States at international bodies
dedicated to fighting terrorist financing and financial crime
such as the FATF that we have heard discussed today.
Third, I would like to focus on the differences between
money laundering and terrorist financing.
The main reason why tracking terrorist finances must remain
a central part of the overall counterterrorism mission is that
money trails generally do not lie. As a result, they can help
us identify, locate, and arrest terrorists. One key question is
whether the systems we have implemented to ensure financial
transparency, most of which were aimed at money laundering, are
sufficient to ensure that we are able to ``vigorously track
terrorist financing'' as the Commission recommended.
Terrorist financing and money laundering are not the same,
and by applying the same methods and tools to both problems we
may inhibit our ability to succeed. With money laundering,
investigators essentially look through a telescope to try to
detect the movement of large amounts of tainted money trying to
move through our financial system. With terrorist financing,
investigators essentially need a microscope to detect and track
the clandestine movement of relatively small amounts of money,
money that is often ``clean'' money, but that is intended for
an evil purpose.
This difference has policy implications for all of us. At
Treasury, we have begun to study how we can devise tools or
systems aimed more particularly at terrorist financing. Among
other things, we need to work with the private sector on this,
and this is something we have heard discussed already today.
The financial industry has shown tremendous resolve since 9/11
and is eager to cooperate with us on this issue, but we need to
help them help us. For example, we can build on the information
sharing relationships that FinCEN has already developed under
section 314 of the PATRIOT Act, and I was pleased to hear
Chairman Hamilton endorse that function. I look forward to
working together with this committee on these issues and to
answering your questions. Thank you.
[The prepared statement of Hon. Stuart A. Levey can be
found on page 115 in the appendix.]
The Chairman. Mr. Libutti.
STATEMENT OF HON. FRANK LIBUTTI, UNDER SECRETARY FOR
INFORMATION ANALYSIS AND INFRASTRUCTURE PROTECTION, DEPARTMENT
OF HOMELAND SECURITY
Mr. Libutti. Good afternoon, Chairman Oxley, Congressman
Frank, distinguished members of the committee. I was about to
say, although I do not see the gentleman here, my special
greetings to Congressman Israel; my family appreciates your
support, sir.
Today I will provide an overview of the Information
Analysis and Infrastructure Protection Directorate--we call it
IAIP--describe initiatives that the Department has taken to
protect the financial services critical infrastructure in
general, and to discuss some of the specific actions taken
after the recent elevation of the threat level for the
financial services sector in New York City, northern New
Jersey, and Washington, D.C.
IAIP leads the Nation's efforts to protect our critical
infrastructure from attack or disruption. The IAIP directorate
was created to analyze and integrate terrorist threat
information and to map that threat against vulnerabilities,
both physical and cyber, to protect our critical infrastructure
and key assets.
Recognizing the potentially devastating effects of
disruption of services or catastrophic failures in the banking
and financial sectors, IAIP works on a daily basis to assess
threats and vulnerabilities, mitigate risk, develop protective
measures, and communicate with the sector.
The banking and finance sector not only represents both
physical and cyber vulnerabilities, but is also critically
interconnected with every other critical sector within our
Nation. IAIP has focused on monitoring and assessing threats
and vulnerabilities to all sectors, including the banking and
financial sector. Sharing this information with the private
sector is a vital component of IAIP's mission.
DHS, the Department of Homeland Security, also acts as a
coordinator with other government entities. In the financial
field, IAIP partners with the U.S. Treasury to share
information with government entities and the private sector
through the Financial Services Sector Coordinating Council, the
Finance and Banking Information Infrastructure Committee, and
the Financial Services Information Sharing and Analysis Center,
what we call FS-ISAC. The FS-ISAC provides a mechanism for
gathering and analyzing and appropriately sanitizing and
disseminating information to and from infrastructure sectors
and the Federal Government. Every 2 weeks, the FS-ISAC conducts
threat intelligence conference calls at the unclassed level for
members with IAIP providing input. These calls cover physical
and cyber threats, vulnerabilities, incidents that have
occurred during the previous 2 weeks, and suggestions and
guidance on future courses of action. The Financial Services
ISAC, as with all ISACs, is capable of organizing crisis
conference calls within an hour of notification of a crisis.
In addition, the Department of Homeland Security has
established close working relationships with the appropriately
cleared senior members of the ISAC to exchange classified
information as appropriate.
IAIP receives and evaluates current threat and incident
information, including suspicious activity reports submitted
directly by the industry or through the ISAC, and provides
timely feedback on those issues. As recent events have
exemplified, during times of elevated threat, IAIP intensifies
its efforts to coordinate and reach out to the private sector
the entities described above and other government agencies.
I would be remiss, given this committee's leadership in the
fight against terrorist finances and financial crime, if I did
not take a moment to highlight for you the other important role
of homeland security relative to the financial service
industry; that is, our role in the investigation of a wide
variety of financial crimes. I know this committee is uniquely
positioned to appreciate the depth of financial investigative
expertise and jurisdiction now housed within the Department of
Homeland Security. The investigative functions and personnel of
the former U.S. Customs Service, now housed within immigration
and Customs enforcement, includes some of the most experienced
financial investigators in the U.S. Government. In addition,
the Department of Homeland Security is also home to the U.S.
Secret Service, which has, as one of its primary missions, the
investigation of counterfeiting, credit card fraud, and
cybercrime. Together, they represent a vast and impressive
array of expertise critical to protecting our Nation's
financial systems.
The latest series of events against a U.S. financial
institution was spurred by ongoing concerns over al Qaeda's
interests in targeting U.S. critical infrastructure as well as
recent intelligence, information of detailed reconnaissance
against several U.S. financial institutions. Based on the
multiple reporting streams and the information contained in
these reports, the intelligence community concluded that the
information warranted a change in the alert status. The level
and specificity of information found was alarming, prompting
DHS to raise the threat level to orange for the financial
service sector in New York, northern New Jersey and Washington,
D.C. on Sunday, August 1. This was the first time the level had
been changed for an individual sector in a geographic-specific
area.
In response to the heightened threat level, IAIP acted on
several fronts to address the threat. Conference calls were
arranged between DHS, financial sector leaders, State homeland
security personnel, including homeland security advisors, and
local law enforcement. In addition, senior DHS leadership
personally met with CEOs and security directors from the
financial sector to better inform them of the evolving
conditions and provide guidance. Subsequent to providing
immediate alerts to the financial sector regarding the threat,
IAIP continued to work with the industry to ensure that all
targeted financial institutions were individually briefed. IAIP
coordinated with Federal, State, and local law enforcement
entities to ensure that the appropriate information was
exchanged between the government and the private sector. We
also pooled affected financial sectors to determine what
additional protective measures were implemented by the private
sector itself during this heightened period.
IAIP personnel were also immediately deployed to facilities
in Washington, D.C., New York City, and northern New Jersey.
Teams of IAIP personnel conducted site-assist visits, what we
call SAVs, in collaboration with local law enforcement
officials and asset owners and operators to facilitate the
identification of vulnerabilities and to discuss protective
measures.
In addition to these SAVs, IAIP personnel have been working
with individual facilities and local law enforcement entities
to implement buffer zones around selected banking and finance
sites. Buffer zones are community-based efforts focused on
rapidly reducing vulnerabilities outside the fence of selected
critical infrastructure and key resources. To support these
efforts, IAIP provides assistance to local law enforcement
officials to develop and implement buffer zones, to share best
practices, and lessons learned.
IAIP has taken many actions to secure the financial
services sector with our friends in State, local, and the folks
sitting with me here today. Our job, however, is not done. We
will continue to monitor the evolving threat condition and
communicate those threats with the private sector and our
partners within State and Federal agencies. Together with the
Department of Treasury, we have laid the foundation for a true
partnership with the public and private sectors. Based on this
foundation, we will continue to dedicate ourselves to making a
difference in protecting our Nation.
Thank you for the opportunity to testify before you today,
Mr. Chairman. I would be pleased to answer any questions at
this time.
The Chairman. Thank you, Mr. Libutti.
[The prepared statement of Hon. Frank Libutti can be found
on page 126 in the appendix.]
The Chairman. Mr. Sabin.
STATEMENT OF BARRY SABIN, CHIEF OF THE COUNTERTERRORISM
SECTION, DEPARTMENT OF JUSTICE
Mr. Sabin. Chairman Oxley, Congressman Frank, members of
the committee, I am honored to appear before this committee
today. I am also pleased to share the microphone today with Mr.
Libutti and Mr. Levey, a dedicated and principled former
colleague of mine.
Working together, the various components involved in the
United States' efforts to combat terrorism and its funding have
made significant progress and scored key strategic victories,
while continuing to respect constitutionally guaranteed civil
liberties. We are sobered and ennobled by the unique
opportunity that history has presented to us to seek justice,
both in our words and in our actions.
To be clear, we will be aggressive, as Congress and the
American people rightly expect that of us. Our concerted
efforts and reliance on the rule of law have led to the
disruption or demise of terrorist cells in locations across the
Nation. We continue to dismantle the terrorist financial
networks, including those that prey on charities through, in
part, an application of standard white-collar investigative
techniques.
Much of our success is due to the wide array of legislative
tools made available to us by this committee and the Congress,
for which we are grateful.
Today, I would like to survey, first, some of what we have
done since 9/11 in the area of terrorist financing and criminal
enforcement; second, some of the trends that we foresee; and
lastly, how this work relates to the Treasury Department and
the Department of Homeland Security, and the oversight
responsibilities of this committee. My goal is to cite some
examples and highlight some trends, and I do not intend this
description to be a comprehensive review of all that has been
done in this area by the Justice Department.
The watershed legislative development of terrorist
financing enforcement occurred in 1996 when Congress passed the
Antiterrorism and Effective Death Penalty Act. This statute
created the section 2339B offense, and the concept of
``designated foreign terrorist organizations'' or FTOs.
With the assistance of a Hamas leader, an organization
known as Holy Land Foundation for Relief and Development,
became Hamas's U.S. beachhead and source of support. A few
weeks ago, the Holy Land Foundation and its officers were
indicted by a grand jury in Dallas for, among other crimes,
conspiring to provide material support to Hamas for over the
last decade.
Another accused U.S.-based terrorist financier, Sami Al-
Arian, along with his co-conspirators, allegedly used his
University of South Florida office and several nonprofit
entities he established to support the Palestinian Islamic
Jihad.
Since 9/11, we have relied on section 2339B to charge
persons who sought to donate themselves to violent jihad causes
around the world.
We prosecuted and obtained guilty pleas from several men
living in Lackawanna, New York, who had attended a terrorist
training camp in Afghanistan. In New York City we recently
obtained the guilty plea and military cooperation of al Qaeda
associate and military procurer Mohammed Junaid Babar.
Recently in Northern Virginia, our prosecutors convicted
several persons of training in the United States to engage in
violent jihad activities abroad. Earlier, we obtained in that
district the guilty plea of al Qaeda operative Iyman Fares.
Clearly, our ability to address this conduct through
criminal prosecutions would not have been possible had Congress
not provided us with a powerful tool like the material support
statutes, including Section 810 of the USA PATRIOT Act. These
maximum penalties, combined with terrorist enforcement of the
U.S. sentencing guidelines, allow us to exert significant
leverage over terrorist supporters to gain their cooperation.
The very process of ``material support'' investigations
often results in the identification of other targets and future
prosecutions. For example, following a Charlotte, North
Carolina Hezbollah prosecution, prosecutors in Detroit have
built on these successes to charge other Hezbollah-connected
individuals linked to cigarette smuggling and tax evasion
racketeering conspiracy.
The Holy Land Foundation case in Dallas was assisted by an
FBI raid on September 7, 2001 of a related company known as
INFOCOM. Last month, the brothers that ran INFOCOM were
convicted by a jury in Dallas of illegally shipping computer
parts to State sponsors of terrorism.
The Northern Virginia jihad case was assisted by Chicago
prosecutors assigned to the Benevolence International
Foundation investigation.
Simply stated, aggressive law enforcement begets more
enforcement and further disruption of terrorist support
mechanisms. Prosecutions generate more leads and intelligence.
Let me underscore the point because I think it is a critical
one. Increased penalties yield cooperation by criminal
defendants, which yields information, which enables the
government to more successfully prevent terrorist incidents and
attack terrorist funding.
No matter how effective our criminal statutes are in
theory, using them depends on the development of facts. Since
9/11 and with the vital assistance provided by Congress with
the USA PATRIOT Act, criminal investigators and prosecutors now
have access to the full body of information developed by the
U.S. Intelligence Community, including intelligence gathered
through investigative activities authorized by the Foreign
Intelligence Surveillance Act. In addition to the Holy Land
Foundation and Sami Al-Arian cases, an example would include
the Chicago indictment of three Hamas operatives announced by
the Attorney General this past Friday. We believe that sections
218 and 504 of the USA PATRIOT Act, which has been vital to
bringing these prosecutions, represent a key congressional
contribution to our counterterrorism efforts and we are
gratified that this view is shared by the National Terrorism
Commission in its report.
Intergovernmental coordination, however, is not enough.
Many of our prosecutions have been aided by cooperation that
stretches across international boundaries. For example, the
conviction of Abdulrahman Alamoudi in Alexandria, Virginia,
originated with information provided to us by British law
enforcement, which questioned Alamoudi at Heathrow Airport
about a briefcase containing $340,000.
Abu Hamza al-Masri and Baber Ahmed, who have been charged
with terrorist support offenses, are currently in British
custody awaiting extradition to the United States.
Our enforcement record has benefited from Director
Mueller's decision immediately after September 11 to create a
specialized unit of financial investigators to focus on the
problem of international terrorism, now known as the Terrorist
Financing Operation Section.
Relying on changes to the crime of operating an unlawful
money transmitting business, codified at Title XVIII United
States Code, section 1960, made useful by the USA PATRIOT Act,
we have brought charges in jurisdictions such as New Jersey and
Brooklyn and obtained convictions in Massachusetts and
Virginia. This crime will remain a valuable part of our
counterterrorism strategy, and we support pending legislation
in H.R. 3016 that would make section 1960 a RICO predicate.
The private sector, particularly the financial services
industry, has been responsive to the USA PATRIOT Act section
314(a) requesting information on certain potential customers.
We hope to continue working with the Treasury to improve the
utility of Bank Secrecy Act reports, including suspicious
activity reports to law enforcement, and to provide the
financial services sector with additional feedback on the
utility of such data.
The Department recognizes that the terrorist threats we are
facing today and in the foreseeable future, cannot be addressed
by any single department, bureau, or agency. That is why we
need to acknowledge and further develop our strong
partnerships, both informally and formally, with the
Departments of the Treasury and Homeland Security.
I thank this committee for its continued leadership and
support. I am happy to answer any questions you may have.
The Chairman. Thank you, Mr. Sabin.
[The prepared statement of Barry Sabin can be found on page
131 in the appendix.]
The Chairman. Mr. Sabin, let me begin with you because you
raised some very interesting points, and I think that too many
times the successes that we have had as a result of the PATRIOT
Act go either unreported or, even worse, ignored by virtually
everybody. Yet, when we see articles that appeared today, all
negative, it is almost as if the writers, the journalists are
looking for negative information to put out there about the
work that all of you are doing, positive work that too many
times is underreported or not reported at all. It seems like
when you have legitimate criticism--nobody is perfect--but that
that seems to get the headlines. Once again, we found that
today in virtually every major newspaper. It is just
unfortunate.
So I want to salute all of you for the work that you do to
make us safer. Mr. Sabin, your chronicling of some of those
successes, I think, needs to be told more and more so the
public does get a balanced view of the efforts that are being
made in this country.
You mentioned section 21 and section 504 of the PATRIOT Act
which has facilitated information sharing. That obviously is
going to sunset next year. I happen to think that was an unwise
decision on the part of the Congress to put a sunset provision
in.
But what would be the implications of the failure to
reenact the PATRIOT Act in your estimation?
Mr. Sabin. Echoing Vice Chairman Hamilton's comments this
morning, sections 218 and 504 of the PATRIOT Act are, on a day-
to-day basis, the essential tools that allow criminal law
enforcement and intelligence folks that are looking at these
problems to discuss and share information. The proverbial wall
that people have referred to was brought down by those
particular sections of the USA PATRIOT Act. To allow it to
sunset I believe would be setting us back to a stage where--and
the monograph that was issued over the weekend agrees--you
would have those kinds of dysfunctions and lack of
communication and coordination.
So in terms of section 218 and 504, on a day-to-day basis,
it is invaluable for criminal investigators to be talking to
intelligence investigators, for prosecutors to be talking to
those folks in order to share information and use all of the
tools that Congress has provided us in order to address the
particular threat or the particular disruption activity.
There are other provisions in the PATRIOT Act, echoing Mr.
Hamilton's remarks this morning. I believe section 314 is vital
for working with obtaining information from the financial
community, the financial sector. Section 326, involving ``know
your customer,'' has proved to be very beneficial. USA PATRIOT
Act, section 373, which relates to the change that this
Congress made in the intent relating to the unlawful money
transmitting license transactions under section 1960, has been
invaluable to us.
So all of those provisions of the PATRIOT Act, but most
especially 218 and 504, that allows us to communicate and share
information are invaluable.
The Chairman. We thank you particularly for mentioning
Title III, which is the contribution that the Financial
Services Committee made. Clearly, if you look at it from a
broad perspective, they really enmesh and work quite well
together, and you folks are the ones that carry it out.
Mr. Libutti, do you have any comments in regard to the
PATRIOT Act?
Mr. Libutti. I fully support the comments of my friend to
the left, sir. I think it is the only way to go in terms of
keeping the wall down and making progress.
The Chairman. Mr. Levey.
Mr. Levey. I totally agree, sir.
The Chairman. The Commission report deals with extensive
bottlenecks and discusses methods to remedy that situation. I
am concerned about a particular issue regarding FinCEN, and I
mentioned it to our first witness, Mr. Hamilton, regarding the
inability of FinCEN to use their own computers and to
effectively do their jobs.
Wouldn't FinCEN be better able to ensure data quality and
be responsible for failures if it had its own computers and was
responsible for its own data? Also, now that Treasury has an
Under Secretary for Enforcement, does it make sense to you to
have nontax financial crime investigators at IRS, or do you
think they should be shifted to the terrorism and financial
intelligence office?
Mr. Levey. Well, let me--there are obviously two separate
questions. Let me take the second one first in terms of the
shifting of IRS criminal investigators to the Office of
Counterterrorism and Financial Intelligence. I have heard that
suggestion. I know that Chairwoman Kelly has also made that
suggestion. Obviously, this is something that we need to think
about, but my first reaction is that I have talked with
Commissioner Everson already. He has pledged to me and to the
Department that he is going to be as supportive as possible of
the mission of the new office and work with us on all of the
initiatives that we have, and we will have to just work
together with him to see how that develops and see if more
drastic changes are necessary. I am not sure that they are, and
I do not know that our needs are limited to criminal
investigators either. It may be that we need some of the other
expertise from the IRS on the noncriminal auditing side that
they obviously have as well.
With respect to the question you asked about FinCEN, I
think I agree with the premise of the question, which is that
FinCEN needs to move ahead in terms of developing its
technology to be more responsive to law enforcement and to the
private sector, and under the leadership of Director Fox, I
think they are headed in that direction. The key point here is
their BSAdirect initiative, which is moving forward and we
anticipate will be done by October of 2005. That will free up
FinCEN to do more sophisticated analysis of financial data that
comes in, and improve access on behalf of law enforcement to
that data.
The problem I think underlying the question is the fact
that right now the information is being provided to us
generally through paper reporting and then the data is being
entered by the IRS at the Detroit computing center. I think
that that is something we need to take a look at because I
cannot imagine that when we look down the road 5 years from
now, that we will still be in that situation. That seems to be
a situation we need to correct and move towards an e-filing
system in some way that is not overly burdensome on the private
sector but which provides FinCEN with better ability to
manipulate the data.
The Chairman. Thank you.
The gentleman from Massachusetts, Mr. Frank.
Mr. Frank. Mr. Levey, I have had to go in and out, but I
gather there was some conversation--I just heard some--about
taking some IRS personnel cell investigators and maybe some
others and have them also be doing terrorism work; is that
correct?
Mr. Levey. Well, the IRS already supports----
Mr. Frank. Right. But there was some suggestion about
having them do more?
Mr. Levey. Well, there were suggestions in the first panel
about whether the IRS--questioning whether the IRS's commitment
in terms of resources to terrorism----
Mr. Frank.--is enough. Well, I would like to say very
clearly, if we are going to increase IRS resources to you, it
should only come if we have increased IRS resources. If there
is an area in this government which I do not think is being
done to excess, it is enforcement of the Tax Code at this
point. I think we went too far in weakening enforcement, and
the notion that we would further weaken it would trouble me.
So I would be glad to vote for some more money. I know we
are all supposed to be opposed to government in general, but
then we are all for it in the specific. So I would like to say,
I hope people would resist cheering if we further cut the IRS.
Yes, I would like to see some more resources, obviously
whatever you need, but not at the expense of existing
enforcement of the Tax Code, and I hope that that would be the
Department's position, and I would hope that they would not
feel pressured to do that.
Let me ask Mr. Sabin, in your testimony, Mr. Hamilton said
on behalf of the Commission, they were not recommending any
legislative changes in the area that came under your
jurisdiction. And as I read the testimony, there was one area
where you--I do not think this is our jurisdiction, but it is
in this area, you talked about the ``lone wolf'' international
terrorists.
Would you like to see the law changed so that individuals
who are acting in international terrorism--and it says non-
United States persons, so this is a noncitizen; is that
correct?
Mr. Sabin. Yes.
Mr. Frank. And right now you have to prove that they are
connected to some organization, so even if they are otherwise
doing something they should not be doing in this area. That did
not seem to me to be terribly controversial, and I note that,
although I know it is not our jurisdiction.
Let me say, by the way, on the subject of legislation and
sunsetting, sunsetting is something that does not mean you
think it is a bad idea. In fact, in other contexts people think
sunsetting is a good thing in general. I do favor extension of
the provisions we talked about, but I also favor sunsetting
them, for two reasons. First of all, you do not know for sure
how they are going to work out. Secondly, you do have this
problem, which is these are important powers but they can be
abused, and I think the sunset is one of the best ways we have
to make sure that the powers are used appropriately and not
inappropriately. I think having people know that if there are
controversies generated about whether or not they are used
appropriately, that that is important.
Let me just ask in that regard on the question of the
freezing of assets in particular--and I would ask both Mr.
Levey and Mr. Sabin--the Commission, and in the monograph, and
in Mr. Hamilton's testimony, they gave examples of people whose
assets were frozen, and that included a freeze on any
commercial transactions so that until they get a waiver, until
they get waivers, they could not even engage counsel to defend
themselves.
Shouldn't that sort of a waiver be automatic? After all, we
are not talking about anybody who has been found in any neutral
court to have been guilty of something. Shouldn't there be some
kind of a presumption that you would be allowed to defend
yourself against the accusation, especially since, as I
understand it, the freeze stays in effect. We are not talking
about lifting the freeze, we are talking about being able to
combat the freeze.
Is there any reason why they should not be automatic so
that people will have the resources to defend themselves?
Mr. Sabin. You are getting into the area of the general
civil liberties question and the balancing that needs to be
addressed. In terms of the sixth amendment right to counsel, we
are committed to preserving that and protecting that.
Mr. Frank. That is in the criminal context. I guess I am
not as clear as I should be on the freezing of assets. When I
went to law school, we were not freezing assets that much. Who
knew? What is your right to counsel in the case of the freezing
of your assets?
Mr. Sabin. You do. If you make an appropriate license
request to the Office of Foreign Asset Control through the
Treasury Department, Mr. Levey's shop, they can grant that
for----
Mr. Frank. Grant what? They grant you the right to do it.
You do not get free counsel. So it is not the right to counsel,
but it is right to pay a lawyer. There is that criminal/civil
distinction. You do not have the automatic right.
Mr. Frank. Shouldn't that be automatic? Let me ask you, Mr.
Levey, would you turn someone down just to be able to hire a
lawyer to defend--to object to the freeze?
Mr. Levey. It is my understanding that we have not turned
anyone down; that that is routinely granted.
Mr. Frank. Why even require it? What, have you got nothing
else to do but sit around and stamp ``yes''? Why not just say
that narrowly defined for the purpose of challenging the
legitimacy of the order, there is that automatic waiver? I just
don't think it serves a purpose to say that we would ever--it
is hard to think of a circumstance in which you would turn it
down. It is a right to counsel.
Mr. Levey. It is not a question of whether we would ever
turn it down. It is a question of once we have frozen the
assets, we want to monitor what happens and make sure that the
money is only used for that purpose.
Mr. Frank. That is not inconsistent with saying that to the
extent that it is for the purposes of defense, you could do it.
It would still be subject to the monitoring. That is one of the
changes that would make me feel a little better, and I think it
is generally a good idea not to have even a theoretical
blockage of that sort.
Mr. Levey. Although it is a theoretical power, we have not
exercised it.
Mr. Frank. You haven't exercised it and you shouldn't
exercise it, so why have it?
Thank you, Madam Chair.
Mrs. Kelly. [Presiding] Thank you. Mr. Bachus.
Mr. Bachus. Thank you. Thank you, Madam Chairman. The first
thing I would like to say, if you look at Mr. Hamilton's
testimony, you come over to the seventh page, which are his
conclusions. I want to commend all three of you gentlemen
because his conclusion is that intelligence and law enforcement
efforts have worked. That is what his conclusion of the report
is, that what you have been doing has worked. I think we all
when we say that, everybody says we have got to continue to be
diligent. I think we all realize that. I don't think there are
any disagreements there. If you read his testimony, if you read
the monograph, if you read the 9/11 Commission, it tells you
bottom line, we have been very effective at degrading al Qaeda.
For that reason, I want to introduce for the record and ask
unanimous consent to introduce for the record about three pages
of quotes from the 9/11 Commission testimony, their report and
also their monograph detailing excellent U.S. Government
successes in the counterterrorism financial field. I would like
to introduce that without objection.
Mrs. Kelly. Without objection, so ordered.
[The following information can be found on page 140 in the
appendix.]
Mr. Bachus. I would also, and I don't know that anyone has
said this to date, but this committee has performed 12 full
committee and subcommittee hearings on 9/11. What we have
found, number one, is that our U.S. financial services industry
has provided law enforcement and intelligence agencies with
extraordinary cooperation. That is exactly what the 9/11
Commission said. They said our domestic financial institutions
have given extraordinary support to our efforts to get
information. What they also say is that what we have done--in
fact, Mr. Hamilton said he could offer no need for additional
legislation.
With that, I would like to address some questions to the
Treasury Department, if I could. Mr. Levey, the 9/11
Commission, they asked you to do certain things and I think
they are validating what you have done. That is my idea,
because they say three things. One, that you should focus on
the full range of tools to bring to bear on the threat of
terrorist financing. Isn't that what the government and
Treasury is doing today?
Mr. Levey. That is certainly what we are trying to do, sir.
That is exactly right. We are working together with agencies
around the government to determine what in each circumstance is
the appropriate tool to be exercised. I think the 9/11
Commission--I appreciate very much their recognition that we
have improved our strategies and are now on the right track in
that respect.
Mr. Bachus. They characterize your efforts as being very
successful. I don't know that I have read that anywhere.
Second, Mr. Hamilton today in their report stresses that
you should push the international community through the
financial action task force and other mechanisms. Isn't that
exactly what Treasury has been doing?
Mr. Levey. Indeed they have. It is easy for me to give
Treasury credit since almost all of this work occurred before I
got there, so I don't feel that it is immodest in any way. They
have done an excellent job with respect to pushing for
international cooperation through the FATF. There is more work
to be done, particularly in the implementation side, as
Chairman Hamilton said, but this has been, I think, one of the
areas that we can take the most pride in.
Mr. Bachus. As far as those successes, in fact, they
recognize those successes, but also the CRS report to Congress
on the 9/11 Commission recommendation actually goes into about
two pages of successes where you have been able to enlist
numerous countries and their compliance has increased
dramatically. And you have also established standards through
the financial action task force, through the IMF, through the
World Bank.
Mr. Levey. That is all true. I would like to, if I could
just say that that is in some respects an accomplishment of the
Treasury Department but that is also something that the State
Department and the Justice Department play an important role
in, and they deserve a lot of the credit there.
Mr. Bachus. The TFI office, is that the mechanism you plan
to use to deal with the issues----
Mrs. Kelly. The gentleman's time has expired. If you have a
question, please finish and then we will have a short answer.
Mr. Bachus. Thank you.
Mrs. Kelly. Do you have a question? If you want to finish
your question, please do and then we can have a short answer.
Mr. Bachus. The TFI office, is that the mechanism that you
plan to use to deal with these issues over the long term?
Mr. Levey. Yes, indeed. This is an attempt to set the
Treasury Department up for what is going to be a long-term
fight and we will be now structured to take that on.
Mr. Bachus. I think as you said in your testimony, we have
all said, the fact we have been successful today does not mean
we don't need to redouble our efforts in the future, because
there is a lot in this report that says it is going to be a
tough job. One of them is that they don't need that much money.
So we may be dealing with small amounts of money and how do we
stop that without sacrificing our own constitutional rights and
our own freedom of movement.
Mrs. Kelly. The gentleman's time has expired. Mr. Israel.
Mr. Israel. Thank you, Madam Chair. I have two questions,
one for Mr. Levey, and one for my friend Mr. Libutti.
Mr. Libutti, many of us are very deeply concerned with
cyber vulnerabilities of financial institutions and many of us
on this committee have made several visits to the New York
Stock Exchange, for example, as I did. On one of my trips, I
had a rather substantive meeting about the issue of cyber
vulnerability at the stock exchange and the broad array of
technologies and systems that they use to protect against.
My question is what level of consultation and cooperation
do you have with institutions like the New York Stock Exchange
and other critical financial institutions?
And my second question to you, sir, is, my understanding,
and it may be a misinformed understanding, is that many of
these systems and technologies are proprietary, so you have
different financial institutions protecting their data with
systems and technologies that they are not particularly willing
to share with their competitors. How do you kind of integrate
that? What do you do to move the whole process forward so that
these technologies and protected systems aren't becoming too
cumbersome and conflicting but move the entire financial
community forward?
Mr. Libutti. Sir, I appreciate the question. I would
respond first by telling you that basic leadership 101, a
spirit of cooperation and trust, has to be developed out of my
front office, as it has been long before I got there, by
Secretary Ridge. That is, a reachout on a continuing basis with
the leadership in the private sector including cyber.
In terms of our relationship and ongoing interface with the
New York Stock Exchange and the leadership of other financial
institutions in New York, my assessment of that has been
terrific and it has been highlighted by the terrific
interaction over the last 2 or 3 weeks.
You asked a question also about, or alluded to the notion
that we need to be pretty sensitive to and look at ways that we
deal with private industry and perhaps even those who compete
within the private industry. There is a program called a PCII
which is an opportunity in plain English that protects those
industries from sharing critical vulnerabilities with us that
we hold, in again plain English, close to the chest. It is in
the law and we probably, I would say, surprisingly haven't
received a great deal of input across the private sector.
Perhaps they are testing the system. Perhaps they are wondering
how indeed we will administer it. But the handful of requests,
that is, information that has come to us that is sensitive and
vulnerable, we are working on. I have been in the organization
now a little over a year and I am surprised we haven't gotten
more folks coming forward sharing that information. Does that
answer your question?
Mr. Israel. It does. Thank you, Mr. Libutti.
Mr. Levey, when this committee marked up the antimoney
laundering legislation that was later rolled into the PATRIOT
Act, I had offered an amendment that was accepted by the
Chairman and by the committee that would have included the use
of charitable organizations, not-for-profit organizations, and
nongovernmental organizations in a study of issues specifically
related to the financing of terrorist groups, and the means
terrorist groups use to transfer funds around the world and in
the United States.
In fact, Vice Chairman Hamilton in answer to my question
before, said that we don't see any evidence that the Saudi
Government has actively financed terror, but it is indisputable
that charitable organizations throughout the Middle East have
been financing terrorist organizations and activities. While
that amendment was accepted by the committee, it was not
included in the final legislation.
Do you believe that the Treasury Department ought to be
formally studying the use of charitable organizations in the
financing of terror? Would that be useful, do you believe?
Mr. Levey. I think that obviously the problem of terrorist
financing through charities is one that is clear and I think
maybe even more clear by the 9/11 Commission report because it
makes--it tells us that the majority of the money raised for al
Qaeda came through organizations like this. I think it is fair
to say that there is an awful lot of study going on, so I am
hesitant to take on a formal burden even though I think there
is a lot of study already going on about how different
charities are being used and have been used in the past to fund
terrorist activities.
Mr. Israel. Is the Treasury Department to your knowledge
actively studying the role of charitable organizations and
money laundering through charitable organizations with respect
to terror?
Mr. Levey. I believe there is a fair amount of work going
on in that respect and that the IRS is doing work to update the
types of information that they are getting from organizations
before they get tax-exempt status and that sort of thing. I am
not sure I am familiar with all the details but I know that
there is a significant amount of work going on.
Mr. Israel. My time is running out, but if you would be
kind enough to look into that and respond with more detail, I
would appreciate it.
Mr. Levey. I would be happy to.
Mr. Israel. Thank you, sir. Thank you, Madam Chair.
Mrs. Kelly. Thank you, Mr. Israel.
It is now my turn to ask questions so I am going to ask a
question about whether or not you expect Saudi Arabia to
actually establish a FIU anytime soon. I have in my hand a
press release from the Royal Embassy of Saudi Arabia. The
reason I am asking a question here is that they are very fond
about talking about their decision to establish a FIU but they
still don't have one almost 2 years later. A press release but
no action. I am concerned that this is another case of Saudi
backsliding.
This also leads to a broader issue that we have to
consider, and that is the whole issue of international
cooperation. The 9/11 Commission staff monograph indicates that
antiterrorist financing efforts had little success without help
from our foreign counterparts. The Independent Task Force on
Terrorist Financing recently put forth a proposal aimed at
improving these efforts. Among its recommendations were that
Congress establish a Treasury-led certification regime on
terrorist financing that would report annually to Congress the
efforts of countries to combat terror funding and would have
the ability to impose sanctions on countries that failed to
perform up to standard.
In light of the areas where we find either episodic
assistance or no assistance whatsoever, do you think this is a
proposal that Congress ought to be considering? I think the
proposal rightly emphasizes the central role of Treasury in
this effort. I would like your comments, Mr. Levey.
Mr. Levey. I guess you have a couple of questions there.
Let me start on the certification regime that is suggested
there with Treasury having the authority to designate
countries. I think that that is something that has a lot of
complications associated with it that we would have to proceed
cautiously on. I think, just listening to Vice Chairman
Hamilton this morning, we have a situation like Pakistan where
perhaps on this issue they are not doing everything that we
would like them to do in terms of their financial regime, but
obviously with respect to terrorism generally, they are an
absolutely essential partner. These sorts of certification
regimes have difficulties and the PATRIOT Act already gives the
Secretary of the Treasury at least some authority in this
respect under section 311 to not only designate certain
countries and jurisdictions as primary money laundering
concerns, but what is particularly effective there is simply
the threatened use of 311 sanctions being a very effective tool
to get people to move.
With respect to the Saudi Arabia question, I would have to
say I agree with what I think your sentiment is, which is that
this is an instance in which there was an indication that they
would be moving to do something we want them to do but it
hasn't happened yet. Obviously as you know very well, there are
lots of areas on which they have made significant progress,
progress that is very valuable to us, and I think Chairman
Hamilton alluded to that, but there are also situations where
they need to move further and we need to continue to push them.
The FIU situation is one of them. Another is that while they
have announced a regime to monitor charities in the kingdom, it
doesn't cover certain organizations that we have long thought
to have terrorist financing concerns.
Mrs. Kelly. Thank you. The committee is familiar with the
ability of FINTRAC, the Canadian Financial Intelligence Unit,
and AUSTRAC, the Australian FIU, to receive international wire
transfer data electronically. Wouldn't this be helpful for our
FIU and Treasury, the FinCEN, to be able to have that
authority, and what can you tell me about that?
Mr. Levey. I do think--this is something that I know Bill
Fox is looking at very carefully. It does frankly appear to me
to be something that would be useful. I am a little hesitant to
jump in without knowing the details. It does seem to me there
may be a scaleability problem in terms of what something Canada
and Australia are able to do; whether we, given the volume that
we would have to deal with, would be able to just implement the
same thing. But it is certainly in concept an idea that I think
we should be pursuing.
Mrs. Kelly. If you need more money to get the job done
electronically, I think we must address that here in Congress
and we need to do it rapidly.
I want to go to another question. The 9/11 Commission's
monograph reveals in detail how the hijackers received money
from wire transfers, cash, travelers checks that were carried
in credit or debit cards for overseas bank accounts. We know
that credit cards, debit cards, ATM cards, store value cards,
can be used to access foreign banks and conduct transactions.
How do we address this issue?
Mr. Levey. You point out a very difficult problem. This is,
I think, part of the problem, that we are also dealing with
very small amounts of money. The amounts of money that were
going to these hijackers are in the hundreds or perhaps
thousands and not the volume of money that our current
antimoney laundering regime is designed to detect. What we need
to do, frankly, is work with the private sector, who has been
very cooperative with us, to figure out ways where we can share
information with them to help them better detect terrorist
financing.
I point out one possibility there is through the Bank
Secrecy Act advisory group where Bill Fox already has this
organization set up by the Congress which has FACA exemption
that is specifically designed, I think, to encourage just that
kind of frank discussion between the government and the private
sector about how best to share the information that is needed
in this context.
Mrs. Kelly. Do either of the other witnesses have a
response to that comment, to that question?
Thank you. My time is up. Ms. McCarthy.
Mrs. McCarthy. Thank you. Again I thank you for sitting
through this with us.
Let me say something about the PATRIOT Act. I voted for it.
One of the things that I happened to agree with on the sunset
part of it is according to the 9/11 Commission, 9/11 happened
because there were failures on every single level, including
Congress, because we didn't have the oversight. And so I also
think that by having a sunset, it makes us, all of us in every
one of our committees, have the oversight to see what is right,
what is wrong, and how can we improve it. I think that the
majority of Members feel that way.
Explaining that to your constituent back home, that is
another thing. Which brings us up to the point of where the
small rural banks are not getting information that our larger
corporation banks are getting. If we follow patterns, those
that are coming in here to do harm to us, if I was them, I
certainly wouldn't go to a large bank. I would go to some local
little bank that wouldn't be noticed that much. We have a lot
of work.
I guess that follows up with my other question which a
couple of members already alluded to. The lone person out
there, the one guy that is trying to do harm to us, and again
just following the small amounts of money that are taken out
and tracking on that, hopefully you will reach out to those
rural banks, the smaller banks. They might be able to think
outside the box. Because all of us--I am sitting here thinking
we are giving away, because it is going to be on C-SPAN,
everything that we are doing. Sometimes I wonder. I believe in
open government, but sometimes do we give them too much
information on what we are doing, which is the way we live and
we don't want to give that up. But, gosh, sometimes I sit here
and think all the information you are giving us, you are also
giving to the world. Don't think they are not listening,
thinking how are we going to outfox them. With that, I will
open it up to any responses.
Mr. Levey. I thought only my mother was watching, but maybe
not.
Mrs. McCarthy. You would be surprised. I thought the same
thing, that people weren't watching. But even when we are
giving speeches at 11 and 12 o'clock at night on the floor, we
get e-mails. You are on prime time somewhere in this country.
Mr. Levey. Let me just say that you have highlighted a
difficult problem. One thing that we are trying to grapple
with, that this is not something where we needed to be 3 years
ago but we are making great improvements. One thing that is
being done, I think, to give the kind of feedback that banks
are looking for in terms of suspicious activity reports they
are filing is that FinCEN is putting together their SAR
activity review. They basically do a detailed and sophisticated
analysis of the SARs that are filed. This is one that just came
out this month. It is excellent. Not only is it I think
substantively very good, but it invites the private sector to
come back and say, actually it wasn't helpful in this respect
or you need to do more of this and more of that. And that is
just the kind of cooperative relationship with the private
sector we are trying to build. I know that that is really the
centerpiece of what General Libutti is trying to build. I think
we have a ways to go in this respect, but this is something
that both the Department of Homeland Security and we are trying
to do systematically.
Mr. Libutti. My response to your fine question is really in
two parts. One, education. Education needs to be applied
against large institutions and small ones as well. There is no
luxury in the little guy--while very important in that
community, doesn't need to know how to deal with challenges and
vulnerabilities to that system. I think education that starts
with senior leadership in the organization or from the bottom
up asking for help is absolutely paramount. I think that covers
it. Education and accepting the fact that the scope of attack
or vulnerability isn't simply going to be on the largest
facilities.
Mrs. McCarthy. Could I follow up with one quick question?
When I think about college students and getting false ID, that
is the easiest thing to do in this country. Ask any college
kid. Actually, ask any high school kid. If we can't stop high
school kids from getting false IDs, how are we going to stop--
we give false IDs where it is a positive-negative ID.
We have already done testing through the ATF on trying to
obtain illegal guns out there. So how are we going to address
this issue with so many people coming in here where it is easy?
I can go to my flea market and get a whole new identity. How do
you stop something like that?
Mr. Levey. First of all, I hope the statute of limitations
has run on my high school, obtaining a false ID. But you are
right, it is a very easy situation. But I think Congressman
Hamilton pointed out one thing we should be doing, which is
starting to look at national standards for identification. This
is a bit outside my lane in my current job, but I know there is
an ongoing effort within the executive branch both before and
in response to the 9/11 Commission report.
Mr. Sabin. With respect to the questions, first on
tradecraft of al Qaeda and other terrorist groups, they are
monitoring us. They are--as evidenced in the terrorist training
manual that was recovered in searches, they are reviewing what
we are doing and trying to change, and we are trying to stay
two steps ahead of that.
With respect to the rural bank or the large bank that needs
that feedback from the government, one thing the Justice
Department did was post-9/11 set up the antiterrorism advisory
councils, so you have the Joint Terrorism Task Forces that are
operational components with FBI and an assortment of
investigatory agents looking at action-oriented operational
concerns. The antiterrorism advisory councils headed up by the
U.S. attorney in each district with a litany of different
agencies to share information, to undertake training and
education and to assist in evaluating critical infrastructure
has, a component of that, the financial services sector. So
small and large banks in that community are part of those, what
we call ATACs, that can share information, obtain feedback, use
the guidance that Treasury posts on its Web site to disseminate
and therefore be more informed and therefore understand what
its government is doing and how it is using the data that is
being provided through suspicious activity reports.
Mrs. McCarthy. Thank you.
Mrs. Kelly. Thanks, Ms. McCarthy. Mrs. Biggert.
Mrs. Biggert. Thank you, Madam Chairman. My first question
is for Mr. Sabin. In the report, the 9/11 Commission states
that the government should expect less from trying to dry up
terrorist money and more from following the money for
intelligence as a tool to hunt terrorists, understand their
networks and disrupt their operations. And we have been talking
about that a lot today, but my basic question, though, is who
in the U.S. Government decides either to freeze or to follow
the money?
Mr. Sabin. Through the PCC that was referred to, the policy
coordinating committee, earlier today. You have on a case-by-
case basis the weighing of the equities, on what stage should
you designate, on what stage should you go operational and at
what time should you charge or do search warrants or pursue
specific investigatory avenues. So that balancing act and those
weighing of equities occurs on each of the different
investigations or cases. If it ripens into an actual criminal
prosecution, so be it, but the idea is prevention rather than
actual prosecution. So in certain instances, there will be a
designation without a criminal prosecution. In others, vice
versa. So those are where that communication that was so lauded
and applauded in the Commission report and in the monograph is
being actually undertaken by government officials.
Mrs. Biggert. Is there any danger or is that a change in
policy that we have been dealing with our international
partners? Are we sending a different signal when we are kind of
going in between the two or changing that? Are they going to be
concerned about us changing the track? It seems that we were
doing the freezing of assets and suddenly we are moving to
something else. Is that a problem with anyone internationally?
Mr. Sabin. Others may speak to that more directly, but it
is going to be important to have a clear message and for those
connections and relationships to be both formal and informal so
that people understand what we are doing and why we are doing
it, to articulate that through the appropriate intelligence
channels or cop-to-cop channels or prosecutorial channels or
the military channels or the diplomatic channels, so that
people understand what we are doing and what is our end game.
That was one of the key things that was addressed in the
report, was have an end game, have a strategic view of where
you want to go from where you are presently, and how you can
seek to accomplish that with all the government agencies
contributing to that process.
Mr. Levey. Can I just make one comment?
Mrs. Biggert. Yes.
Mr. Levey. Which is that I totally agree with everything
Mr. Sabin said. I don't think that there is any danger of
confusion out there. The message is we are going to use all of
our tools and use them all as they are most effective. But I
want to make one comment, which is that it is not an either/or.
I think Congressman Hamilton pointed this out, at least at one
point. It can often be a both/and, where that is the best
approach, where we can both designate and prosecute as we have
done in Holy Land, that is even more effective. And we will
continue to do that when we have the chance to.
Mrs. Biggert. Then continuing on that line, Mr. Levey, we
have got a high level of cooperation from other nations in
really tracing the terror finance, once the funds leave the
U.S. financial system or before they enter it. Then the process
gets much more difficult. Can you talk a little bit about the
sort of tools that would make that easier for us?
Mr. Levey. One of the things--I think what you are
referring to is that we need to make sure that in order to
track the money, that we are also able to track it abroad. We
certainly have----
Mrs. Biggert. Either before it gets here or before it
leaves the country.
Mr. Levey. Right. We do have lots of mechanisms for doing
that. We have lots of people in the government working on that
issue in particular. One of the things I can comment on is that
we are building relationships through our financial
intelligence units around the country, around the world I
should say, where FinCEN is our representative here in the
United States, but then there are financial intelligence units
in other countries around the world to try to exchange that
sort of information as quickly as possible, because we have to
be--we have to be quick if we are going to be effective.
The Chairman. [Presiding] The gentlewoman's time has
expired. The gentlelady from California.
Ms. Waters. Thank you very much, Mr. Chairman. I would like
to thank our witnesses. My head is just swimming from all of
this interagency cooperation that we have and I am very pleased
that people are cooperating so well. But I think that we all
agree that thus far we are only able to identify relatively
small amounts of money that is supporting terrorism, and even
with the new laws under the PATRIOT Act where we can indict
those who are substantial supporters, it is still very limited.
Some questions were raised here today that have not really
been dealt with. I and others continue to raise questions about
the charitable organizations and the Saudi government's
relationship to them, and I for one believe that we are not
able to penetrate just how big that is because the Saudis are
our friends for a lot of reasons, close to this administration,
and we have oil interests and other kinds of things. And I
think that this cozy relationship is not allowing us to deal
with the Saudis in the way that we should be. We will
eventually get to it but it is going to be late in the game.
Secondly, Congresswoman Kelly asked about the blood
diamonds. She asked about Liberia and Charles Taylor which I am
led to believe is a source of funding. We have not talked about
tanzanite, tanzanite that is mined mostly in Africa that
supposedly has been supporting Osama bin Laden for a long time.
We say nothing about the drugs and the poppy fields in
Afghanistan. You guys can tell us how great friends we are with
Pakistan all you want. That border between Pakistan and
Afghanistan, everything goes on. That is where all the dope
dealing and the black market smuggling and crossing of the
borders with the Taliban and al Qaeda and everybody else is.
God bless Mr. Musharraf. I think he throws us a bone from time
to time, but I am not convinced that there is any great effort
to deal with terrorists. Are the madrassas still going on? The
schools are still there. Are they still being funded by the
Saudis? Yes, they are. That is where all the fundamentalism and
the hatred is taught.
Here I guess I am appreciative for the efforts that you
make, but nobody is talking about the substantial terrorist
funding that come from those sources that we have alluded to.
And, in addition to that, where does the money come from to
purchase the surface-to-air missiles, the grenade launchers,
the AK-47s, the A-16s? Let's talk real money and let's talk
real support for terrorism, and let's talk about why it is
difficult to get at those sources. Until we face up to it, the
interagency task force will be chasing each other for a long
time. Anybody can respond.
Mr. Sabin. I will start. With respect to alternative
remittance systems and the ability to fund through areas that
would include drugs or weapons or infant formula, we are
reviewing--there are GAO studies that confirm that, about the
government efforts to review and address, including FBI
investigations in that regard. We have brought cases that
relate to--in both undercover and other types of criminal
prosecutions relating to, for example, in Colombia, the FARC
and the AUC, both foreign terrorist designated organizations.
Ms. Waters. If I could interrupt you for just one moment.
Just tell me about the poppy fields that are flourishing in
Afghanistan and the fact that we have Karzai in Kabul and we
kind of watch him to make sure they don't kill him, but the
Taliban and the warlords and everybody else are in control and
we just turn a blind eye because we can't go in there and
disrupt the cultivation, the growing of these poppy fields,
because we are relying on that money to support that economy
and we don't want to make enemies over there. Let's just talk
about that money.
Mr. Sabin. I am going to stay in my lane in terms of the
Justice Department. But in terms of the 9/11 Commission report,
what it found was that there was not drug trafficking funding
for Osama bin Laden or al Qaeda, that it was linked to the
Taliban but not to bin Laden.
With respect to Saudi charities, we are following the
leads--I am a career prosecutor. We look at the facts, we look
at the law and we try and achieve justice and we follow the
leads where it takes us. In terms of after the May 2003 Riyadh
bombings, the cooperation that has been provided to the FBI and
to others that are seeking to look at those different
charitable organizations have been most meaningful, as stated
by Mr. Hamilton this morning.
In terms of the conflict diamonds issue that you brought
up, that is a matter that was referred to the Justice
Department, it is under investigation and I would refer and
echo Mr. Hamilton's comments about the fact that to date
nothing has been demonstrably linked between that and actual
criminal charges being able to be brought, but we are currently
investigating and pursuing those leads.
The Chairman. The gentlelady's time has expired. The
gentlelady from Oregon, Ms. Hooley.
Ms. Hooley. Thank you, Mr. Chair. I want to thank all of
you for being here today and all of the hard work we know you
do every single day. I would like to quickly rehash the recent
case of the Riggs Bank and their business dealings and possible
money laundering and terrorist financing. Based on Senate
banking testimony, FinCEN was not made aware of any bank
secrecy problems by Riggs until 6 years after the OCC first
noticed such problems. If FinCEN was not made aware of these
problems until 2003, 6 years after they were first noticed, I
would like to know when exactly were other terrorist financing
investigators and the Justice Department and Homeland Security
notified so they could quickly investigate Riggs' situation and
its impact on our national and homeland security and, frankly,
were they ever notified?
The second question is as the Riggs case points out, the
lack of sharing of information even within the Treasury, not to
mention with other Cabinet agencies, what can we do to fix
this?
Third, how much progress has the Department of Treasury and
its regulatory agencies made incorporating current generation
information technology to identify suspicious individuals,
companies, and financial transactions and connect the dots in
its antimoney laundering enforcement activities? And the last
question is, we have talked a lot about the PATRIOT Act, that
parts of it were sunsetting. We are going to be looking at
reauthorization for that. What changes do you think we need to
make?
Mr. Levey. Let me try----
Ms. Hooley. You can start anywhere you want on any of those
questions.
Mr. Levey. How about I will take the easy ones and leave
the hard ones for my colleagues. Actually none of those are
easy, because the Riggs situation is a very serious problem. I
don't want to make light of that at all. What we saw at Riggs,
I think everyone agreed, was a--I think they used the word
themselves--a failure of oversight. What we don't know is
whether what we saw at Riggs is just a chip of ice or whether
it is the tip of an iceberg, because we don't have the
information within FinCEN and main Treasury to know what our
banking regulators are finding out there.
So in response to that, what we are doing to try to correct
that, this was something that the Secretary and the Deputy
Secretary already announced, is that we are negotiating
arrangements with the banking regulators to make sure we get
the information into FinCEN on Bank Secrecy Act compliance that
they are finding out in the field, and we are learning about
all significant violations of the Bank Secrecy Act reporting
requirements. FinCEN has set up its own unit to deal with this
issue exclusively. We need to get that information to determine
whether we have a widespread problem out there. I think there
is a certain amount of confidence that Riggs was an outlier,
but we certainly can't guarantee that until we get that
information in, and we are going to do that.
With respect to the part of your question about using
sophisticated technology to deal with--to identify suspicious
transactions. Actually I think the monograph does a good job of
explaining what we do at the Treasury Department on this issue.
The private sector has a very sophisticated ability to
recognize anomalies in transactions of its customers and they
generally do a good job of detecting suspicious transactions in
that context. But to be clear, that context is designed to
detect money laundering transactions. This is what I tried to
allude to at the beginning of my testimony, and which the
monograph also points out. That system, while it is effective
for the purposes it has been designed for, is not the answer to
the question about detecting terrorist financing.
I will let Barry respond to the other questions.
Mr. Sabin. With respect to Riggs, that is a short answer.
It is pending investigation. I can't comment further. With
respect to proposed legislation, I do have some suggestions
building upon some of the questions that were asked of Mr.
Hamilton this morning. I would ask this committee and the
Congress to pursue legislation presently identified as H.R.
4942 which would add a section 2339 D to the material support
statutes that I talked about in my opening remarks, that would
enable military-style training-camp activity, training abroad
in terrorist training camps, to be clearly a Federal criminal
offense. Right now we use it within the meaning of material
support under 2339 B, to get technical.
Ms. Hooley. That is way technical.
Mr. Sabin. But it is extremely important. To take it into a
larger perspective, what the cases that have been brought, we
have discussed about here today, you see in the charity cases,
in the fund-raising cases relating to Palestinian Islamic
jihad, Hamas, Hezbollah, all emanating from the 2339 B relating
to the foreign terrorist organizations.
With respect to the al Qaeda aspects, it is more the
providing of personnel or the links to the actual training
camps that would be much easier for us to prove and charge in
terms of a clear congressional intent under 2339 D.
I would also recommend H.R. 3016, which has some technical
and jurisdictional corrections as presently proposed, as well
as increased penalties under the International Emergency
Economic Powers Act. And also the additional provisions that I
mentioned in my opening remarks.
The Chairman. The gentlelady's time has expired.
Ms. Hooley. I can't follow up real quick?
The Chairman. Real quick.
Ms. Hooley. It has been 7 years since we discovered the
Riggs' noncompliance and it is post-9/11. I am a little
troubled about hearing that you have to negotiate with
regulators to get your information.
Thank you, Mr. Chairman.
The Chairman. The gentleman from Texas.
Mr. Paul. Thank you, Mr. Chairman. Earlier I spoke about
the fourth amendment and privacy issues, but I am afraid that
is a moot point these days and I won't bring that up and I
won't ask you about that because it seems like we have sort of
conceded it, that privacy for the average American citizen is
no longer of much concern. But I am concerned about the
practicalities. It sounds like the more laws we have on the
books, the more criminals you are going to catch, and it has
been just working great. I am not convinced of that.
I have taken some advice from a John Yoder who was the
director of the Asset Forfeiture Office under Reagan. He was
describing the atmosphere before 9/11. Of course this is what
brings this all about, the 9/11 report. In reference to that,
he says, ``We already had so much information that we weren't
really focusing on the right stuff. What good does it do to
gather more paperwork when you are already so awash in
paperwork that you are not paying attention to your own
currently existing intelligence-gathering system.''
I think that is unfortunately what we are facing. The
terrorists used $500,000 and I don't believe anybody proved
that they even broke our financial laws. So all this activity
is directed at law-abiding American citizens and hopefully we
pick up a criminal here and there. On a daily basis, the
American U.S. financial system transfers $1.7 trillion. So we
are looking for a needle in the haystack. Yet all we do is we
add more and more bureaucracy, more cost. It is costing $12
billion a year for our banks and our companies to fill out
these reports. It just seems that we give up our liberties too
casually and that even with the Bank Secrecy Act of 1970, we
were filling out 12 million currency transaction reports every
year and it didn't help us. So what we are going to do is we
are going to ask for a lot more of these reports to be sent in.
Also, you have mentioned that, oh, yes, but we are having
success, we are finding criminals, we are doing this. But one
thing we never addressed and that we always assume is that
those individuals may well have been caught by following the
rules, following the laws, following the fourth amendment and
getting an honest-to-goodness legitimate search warrant. You
are assuming that none of these people could possibly have been
caught unless we throw the fourth amendment out. That, I think,
doesn't necessarily follow.
My question for the three of you has to do with the
national ID card. Because in the post-9/11 atmosphere, the ease
with which the PATRIOT Act was passed, legislation which had
been proposed for years just got stuck in and sailed right
through, this post-9/11 atmosphere now has set the stage for
the national ID card. So there are a lot of people concerned
about it. But once again since security or the pretense at
gaining security is far superior to the burning desire for
liberty, I think the national ID card is on the agenda and I
think the report certainly has indicated that. So I would like
to know what you think about the national ID card and how
necessary is the national ID card for you to pursue your
responsibilities?
Mr. Sabin. I will start. With respect to the fourth
amendment, both in word and in deed, we are respectful and
sensitive to using it appropriately, making sure that we
execute rule 41 criminal search warrants, going to a United
States district court judge and making sure that we have
probable cause in order to obtain limited amounts of material
that are appropriate in order to pursue that particular
investigation. Whether that is through a search warrant or
through electronic interceptions, we make sure that we satisfy
the appropriate legal standard and don't abuse that authority
or circumvent in any way, shape or form the strictures in the
fourth amendment to the Constitution.
In terms of information overload, your point about the
volume of information that is provided to the Federal
Government, it is a lot. We need to make sure that we establish
both in terms of short-term and long-term mechanisms, as was
discussed this morning, the ability to exploit and use that
information appropriately, by getting the experts both within
the government and outside the government to educate us about
how to use that information and how to make it most meaningful
to us in an action format, whether that is providing guidance
to the intelligence or law enforcement folks, to make sure that
it is not just paperwork stacking up but it is materials that
can be used and used effectively and timely.
In terms of the thorny privacy issues and the national
identification card, I don't believe the Justice Department has
a specific position. I will stay in lane as opposed to reaching
out and advocating one position or another. I can tell you that
we are seeking to understand who the individuals are and using
our tools that Congress has provided us to understand the
movement of moneys, the movement of individuals, the travel
that occurs, and understand where they have traversed either in
terms of the persons or their materials.
The Chairman. The gentleman's time has expired. The
gentleman from California, Mr. Sherman.
Mr. Sherman. Thank you. I would briefly comment to the
gentleman from Texas that there are concerns between security
and privacy but they don't rise quite to the high level as
security versus liberty. That is to say, it is possible that in
this war against terrorism, things like my donations to various
causes the President disagrees with might become public, but my
right to make those--my preference is to keep those private,
but my right to make them is not at stake. The privacy interest
is there.
Addressing our witnesses, we have seen a great report come
out of the 9/11 Commission. They, however, in answering
questions, raise as many additional questions as they answer.
They provide some recommendations with some specificity. There
are other recommendations that need to be fleshed out.
Gentlemen, can you think of a reason why we wouldn't give them
another year or two to give us another volume and to continue
their good work? Anyone want to answer that one?
Mr. Levey. Just speaking for--I really don't have a
position on that. I think that is a decision for you.
Mr. Sherman. You are here to represent the administration.
Anything we do would have to be signed by the administration.
We get statements all the time of what the President's senior
advisers would advise him to do. You are the President's senior
advisers. Tell me now, do we shut them down or do we get a
volume two?
Mr. Libutti. I think it is premature to----
Mr. Sherman. They are dead. Is it premature to treat the
patient? We are reviving the recently deceased here.
Mr. Libutti. Sir, with all due respect, I am going to treat
the patient and I am going to be respectful.
Mr. Sherman. Let me go on to another question.
Mr. Libutti. Sir, if I may, please. I think that very soon
there will be a package forwarded to the Hill leadership to be
reviewed. I think the results of that review will indicate
whether it is smart or not to ask members of the 9/11
Commission to come forward and continue to support the review
of that which is most important relative to national security.
As I said, I say this with all due respect, sir, it is
premature for me to make that comment now. I think it is smart
to consider it as an option.
Mr. Sherman. I would hope that this would be bipartisan. I
know that the administration didn't support the creation of the
Commission. It would certainly do a lot for this country if the
administration would support its continued existence or
revitalization.
We had a huge controversy in this Congress about a
particular provision of the PATRIOT Act dealing with access to
library records. Of course, had we removed that element of the
PATRIOT Act, you could still use grand juries. You could still
use search warrants. There are plenty of other ways to get
library information. Can you tell me, how many times was the
PATRIOT Act provision dealing with library and bookstore
records actually used in the last year and how many of those
times would it have been impossible to go through the
additional work of using our more general information-gathering
law enforcement provisions?
Mr. Sabin. I believe sometime--a year ago, the number was
declassified and promulgated as zero. Section 215 had not been
used with respect to libraries. Libraries is not mentioned by
name in the PATRIOT Act and grand jury subpoenas had previously
been used in a number of instances. But that is a number that
had been publicly disseminated.
Mr. Sherman. As you can see from my interchange with the
gentleman from Texas, I am willing to give you folks tools even
when it causes me some concerns on the privacy issues. But if
we give you a tool and it is not terribly necessary and it
causes incredible consternation and a feeling of a lack of
privacy, perhaps that is a tool that we should consider
suspending and give you some other tools that maybe you would
use more often.
Moving on, we have got--in trying to deal with sexual
predators on the Internet, we have local law enforcement people
go on line and pretend to be confused, vulnerable adolescents.
Now that we have destroyed the Taliban sanctuaries, a lot of
what al Qaeda and others are doing is on the Internet. Do we
have the capacity to have people go on line, set up Web sites
that look like they are jihadist, or answer and communicate on
Web sites that are jihadist? Do we have the people who have the
perfect knowledge of Arabic, the understanding of the Koran and
how it is being interpreted, the ability to speak the rhetoric
of extremism? Do we have the people to go on line, just as we
have local police officials that do an excellent job of
imitating the vulnerable adolescent and are able to trick the
predators? Because it occurs to me that just as we are worried
about sexual predators, these terrorists are the major
nonsexual predators that we have.
The Chairman. The gentleman's time has expired. The panel
may respond.
Mr. Sabin. My understanding is that yes, the FBI has
identified that issue, is acting upon the issue. Indeed a
recent case in Connecticut, Babar Ahmed, related to the
understanding of the use of the Internet for violent jihad
activities to recruit and fund activities over in Bosnia and
Chechnya.
The Chairman. The gentleman from North Carolina.
Mr. Watt. Thank you, Mr. Chairman.
Mr. Levey, I was struck by your analysis that
differentiated between terrorism financing and money
laundering.
Over the years, we have come up with fairly good systems
for setting some protocols for what would identify money
laundering activities. You indicated that terrorism financing,
instead of looking for large transfers, is like using a
microscope to look for small transfers.
I think the concern that raises is, there are some privacy
and individual rights issues that come into play--much more
front and center in that kind of microscopic look than if you
are looking more globally at larger transactions where the--
getting to the identification of a particular individual is
triggered only by big transactions.
Yet, neither you nor Mr. Libutti made any reference in your
testimony to the part of the 9/11 Commission's recommendations
dealing with individual liberties and privacy. Mr. Sabin gave
me about one sentence of it--and his was a passing glance--let
me be politically correct.
So I am wondering whether you could discuss just for a
little bit some of the unique problems of privacy and
individual liberties that are current in this setup.
Mr. Libutti, if you could follow up, you indicated in
response to somebody's question, one of the last two or three
questioners, that there is some legislative package about to
come forward from the administration that will deal with the
most important national security issues, again failing to
acknowledge that that will have any of the recommendations that
the 9/11 Commission has made about the establishment of a
commission that would oversee individual liberties and privacy.
So I am wondering whether any of those parts of the
recommendation are likely to be in that, based on the
discussions that you all have had up to this point.
Let me go to Mr. Levey and then Mr. Libutti, and since you
mentioned--I will let you off the hook. I won't even----
Mr. Sabin. I will engage. That is okay.
Mr. Watt.--ask you to address it. At least you gave it lip
service.
And I want to ask another question. I just want them to
deal with those two issues.
Mr. Levey. Well, you have raised a serious issue, and I
feel like I should have gotten off the hook too, because in my
testimony, I also pointed out that with respect to the problems
posed by looking for the small transactions that involve
terrorist financing, that we need to be sensitive to the
privacy.
Mr. Watt. That must have been in your written testimony.
Mr. Levey. It was.
Mr. Watt. I don't think you mentioned it in your oral
testimony.
Mr. Levey. I will learn for next time.
But this is a serious issue, and it actually gets a little
bit to the comments that Mr. Paul was talking about earlier,
when we are talking about looking for essentially, you know,
small transactions, clean money. And we have to figure out how
we are going to--how we are going to put in a system that we
can have a chance of detecting it. There are privacy concerns
that are raised, and I think the monograph goes through some of
those; it discusses them.
I think that this is an issue that we need to study, and we
need to work with the private sector that also, of course, has
the interests of their customers in mind. We have to work
together with them to come up with a solution. It is not going
to be easy. We have to, perhaps, get together with them and
give them a little bit of a description of what the needle they
are looking for looks like. And we have to do that in a way
that doesn't sully the reputations of people whose interests
shouldn't be sullied, et cetera.
The Chairman. The gentleman's time has expired.
Mr. Watt. May I have Mr. Libutti's response?
The Chairman. I am sorry. Mr. Libutti may respond.
Mr. Libutti. Thank you, Mr. Chairman, sir.
First, on the privacy piece, the Department of Homeland
Security has designated a privacy officer and has a privacy
officer in place. And I fully support all comments and actions
relative to the Fourth Amendment. We need to do that. We need
to be smart enough to balance security and privacy, and I am
with you 100 percent, sir. I did that for 35 years in the
United States Marine Corps and am very proud of it.
The other business that I alluded to earlier, and if I used
the word or expression ``legislative package,'' or that I
misspoke, what I was saying--we all heard the President talk
about the 9/11 Commission, what his intent was, and what I was
suggesting, and don't have specific information about, is that
I am sure that the folks and staff over at the White House, in
concert with other members and the other agency led by our
boss, will have specific actions that they would like people to
consider.
And that is the point I was trying to make, Mr. Chairman.
The Chairman. The gentleman from Texas, Mr. Hinojosa.
Mr. Hinojosa. Thank you, Mr. Chairman.
Before asking my questions, I would ask, Mr. Chairman, for
unanimous consent to submit for the record this document
showing the security features of the current matricular
consular card. This document is part of the integral program
for the improvement of the consular services on March 6, 2002.
The Mexican Ministry of Foreign Affairs informed us that they
have started issuing a new, higher security consular
identification card called Matricula Consular, Alta Seguridad,
or MCAS is the acronym. They began issuing the card in 2002.
The Chairman. Without objection.
[The following information can be found on page 182 in the
appendix.]
Mr. Hinojosa. Thank you.
Mr. Libutti, it is my understanding that the majority, if
not all, of the financial institutions for which Homeland
Security raised the threat level to Orange on Sunday, August
1st, already considered themselves as prepared as possible for
potential terrorist threats and likely were unable to take
additional precautions. It is also my understanding that New
York City and Washington D.C., have been at threat level Orange
since 9/11.
I assumed this meant that all the businesses and other
persons and entities located in these two cities should also
consider themselves at the Orange threat level. So why did
Homeland Security and the administration make what appears to
be a nonannouncement? The financial institutions could not take
any additional precautions.
Can you answer that?
Mr. Libutti. Sir, you made a comment relative to additional
precautions not being taken, if I understood you correctly.
Mr. Hinojosa. Well, they said that they were as prepared as
they could be.
Mr. Libutti. Sir, I understand now. I spent a year and a
half with NYPD and set up the Counterterrorist Bureau in the
city. And again, as I said earlier, I have been in this job for
a year.
I have also reviewed the casing reports in detail, and I
have talked to Assistant Secretary Liscouski and Assistant
Secretary Hughes. One is in charge of intelligence for the
Department of Homeland Security and the other is in charge of
critical infrastructure.
I have also had conversations with the leadership in the
private sector in New York, as have my two assistant
secretaries. And the bottom line is, there were lots of other
things that could be done both in terms of those sites and
improving security, or said another way, reducing
vulnerabilities, as well as across the financial sector.
So, my folks, my leadership, not only looked at the sites
identified in New Jersey, New York and Washington, but across
the entire financial sector, and provided bulletins and
information in terms of best practices and lessons learned. So
there was, in my humble view, lots of work that needed to be
done. Lots of it has been done, and we feel good about that,
but as you might suspect, there is plenty of work to continue.
And once you get it in place, once you get a grade during
an inspection or review of A-plus, that doesn't mean that you
stop protecting that asset. And we have learned that sometimes
the hard way.
Mr. Hinojosa. I just want to note that I supported Ranking
Member Sanders' amendment that would have prohibited the U.S.
Government from having even more access to private information
than it already does. We need to ensure that we protect our
citizens' civil rights to as great a degree as possible as we
implement the 9/11 Commission report's recommendations.
After listening to all of the questions and the dialogue
that occurred this morning through 2:00, I feel like there is a
great deal more that we can do, and the recommendations that
are in that report are certainly the things that we, as a
Committee on Financial Services, are going to try to implement
as best--as soon as possible. So, I thank you.
And with that, I yield back the balance of my time.
The Chairman. The gentleman yields back.
Well, I will let Mr. Bell describe the fact that he is the
last questioner as he did the last witness.
Mr. Bell. Thank you, Mr. Chairman.
I think some very interesting questions have been laid on
the table today. And I think we are all concerned about civil
liberties, but also recognize that we live in an era where we
are constantly under the threat of terrorism. And after the
bomb goes off or after the plane crashes, it is a little late.
And the best way to stop terroristic activity is to stop it
before it starts and to foil the plot, if you will. And
probably one of the best trails to accomplishing that goal is
the money trail.
But I have to say, Mr. Levey, in looking at your written
statement, where you raise the question, the key question
before us is whether the systems we have implemented to ensure
financial transparency, most of which were aimed at money
laundering, are sufficient to provide the Federal Government
with the information it needs to vigorously track terrorist
financing.
You seem to infer that they are not--and I want to be
perfectly clear on this--and when you are talking about money
laundering, I assume that a lot of the systems and tools that
are in place are designed to capture large transactions, and
that is when the alarm initially goes off. Is that fair?
Mr. Levey. Yes.
Mr. Bell. And what you are saying is that when it comes to
financing some type of terroristic-type of activity, the size
of the transaction may not be there. The alarm may never go
off, as we have seen. Is that also fair?
Mr. Levey. There are two different things.
Mr. Bell. Will you turn on your mike?
Mr. Levey. No, I think it is on.
Mr. Bell. All right. I couldn't hear you.
Is that the problem, that when you are talking about
financing terroristic activity, the size of the transaction may
not set off any alarm?
Mr. Levey. That is one of the issues. That is one of the
issues involved with it.
What I am saying is, we have a very robust system to detect
money laundering, and that system is probably the best in the
world. It provides great financial transparency in our system.
And we need to build on that further and use that groundwork,
too, to also look for terrorist financing.
But what I am saying is--it is sort of getting back to what
Chairman Hamilton was saying about not relaxing and continue to
involve--we can't continue to say we have a system in place and
then hope it is going to help us detect terrorist financing. We
have to continue to work to build it to do a better job.
Mr. Bell. But when you are talking about building upon that
system, and if you are going to move outside the size of the
transaction, then what other types of red flags are you going
to be looking for, and when does it really start encroaching on
people's civil liberties?
Are you going to be looking at transactions or numerous
transactions made by people with Arab-sounding names? Is that
the kind of tool and system that we are looking at
implementing?
Mr. Levey. No. What I--I don't purport to have all the
ideas that we are going to need on this. But the principal
thing we need to do is figure out a better way to share
information that the government already has with the private
sector and vice versa. To build on what we have got in Section
314 of the PATRIOT Act, which allows that information sharing
in a more robust way than has ever occurred before, so that we
can provide them with better guidance as to what they should be
looking for and vice versa.
Mr. Bell. I don't think anybody has a problem with the
information sharing per se, but what triggers the information
sharing, and that is what I am trying to get at, what kind of
factor outside the typical red flags you look for in a money
laundering case, what kind of new factors would you be
implementing to perhaps trigger the sharing of information?
Mr. Levey. I think that is exactly the dialogue we need to
start.
Mr. Bell. We are not there yet?
Mr. Levey. No, we are not there.
Mr. Bell. Also, before my time runs out, you are familiar
with the Culberson amendment to the Treasury appropriations,
transportation bill, are you not?
Mr. Levey. Is this the matricula?
Mr. Bell. Yes. Could you comment on that? My understanding
is that Treasury strongly opposes the amendment. And if you
could explain, perhaps, what that--the impact might be if that
amendment were to be passed?
Mr. Levey. Well, as a matter of fact, the Secretary of the
Treasury wrote a letter to Chairman Young and also to Mr. Obey
on this very issue. We do oppose the amendment. The amendment,
as it is currently written, would prevent us from enforcing any
of our regulations under Section 326 of the PATRIOT Act, and we
have--the Secretary has written a letter requesting that the
provision be removed from the bill during the consideration by
the full Appropriations Committee.
Mr. Bell. All right. Thank you very much for your testimony
today.
Thank you, Mr. Chairman. I will yield back.
The Chairman. The gentleman yields back.
The Chair would indicate that he is going to use the
prerogative of the Chair to ask one last question, Mr. Levey.
Since you are from Summit County, at least we ought to let you
have the last one.
Among other things, as you know, section 314 of the USA
PATRIOT Act mandates the government share information relevant
to money laundering and terrorist financing with the financial
industry, and we are in the process that FinCEN has begun under
this section to gather information on an urgent basis about
suspected terrorists. But inherent in the spirit of 314 and the
line of 314 was the proverbial two-way street of information
sharing.
Can you tell the committee what plans you have to fulfill
this mandate?
Mr. Levey. Well, we have the Bank Secrecy Act Advisory
Group that is set up, and we are going to continue to work
within that context to maximize our information sharing with
the private sector. As you know, that is statutorily mandated
to be exempt from the requirements of the FACA and therefore
gives us a great opportunity for a real robust exchange of
views with the private sector.
One thing we are looking at, and we are trying to figure
out how best to do it, is to bring law enforcement into that
process and share information through that mechanism with the
private sector. And we look forward to working with the private
sector and figuring out exactly how that is going to work.
There are a lot of complications there with respect to law
enforcement, sensitive information, et cetera. But we think
that that is a mechanism that we should be pursuing.
The Chairman. Thank you. Please feel free to work with our
committee, as well, since we wrote the language and are
obviously sensitive to that issue. We appreciate all of you
gentlemen testifying today.
The Chair notes that some members may have additional
questions for this panel which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these
witnesses and to place their responses in the record.
The Chairman. There being no further business before the
committee, the committee stands adjourned.
[Whereupon, at 3:20 p.m., the committee was adjourned.]
A P P E N D I X
August 23, 2004
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