SPEAKERS CONTENTS INSERTS
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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.
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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.
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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.''
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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.
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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.
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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.
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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?
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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?
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.''
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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.
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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.
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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?
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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.
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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?
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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.
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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?
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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.
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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.
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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.
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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 orga