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THE 9/11 COMMISSION REPORT:
IDENTIFYING AND PREVENTING
Monday, August 23, 2004
U.S. House of Representatives,
Committee on Financial Services,
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.
Page 2 PREV PAGE TOP OF DOC 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.
Page 3 PREV PAGE TOP OF DOC 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.
Page 4 PREV PAGE TOP OF DOC 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.
Page 5 PREV PAGE TOP OF DOC 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 modeland we have talked about how to do thisthe 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 peoplethat is in the nature of itbut 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 powerwe have given the government the poweras the chairman mentioned, we have worked on this committeethe 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.
Page 6 PREV PAGE TOP OF DOC 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.
Page 7 PREV PAGE TOP OF DOC 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 reportindeed, I first saw it only a few hours agowe believe the work of the staff on terrorist finance issues will be helpful to your own consideration of these issues.
Page 8 PREV PAGE TOP OF DOC 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 recognizesappropriately, in our viewthat 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.
Page 9 PREV PAGE TOP OF DOC 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.
Page 10 PREV PAGE TOP OF DOC 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.
Page 11 PREV PAGE TOP OF DOC 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.
Page 12 PREV PAGE TOP OF DOC 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.
Page 13 PREV PAGE TOP OF DOC 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.
Page 14 PREV PAGE TOP OF DOC 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.
Page 15 PREV PAGE TOP OF DOC 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. Personsindividuals or entitiessuspected 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.
Page 16 PREV PAGE TOP OF DOC 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.
Page 17 PREV PAGE TOP OF DOC 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 IRSand 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?
Page 18 PREV PAGE TOP OF DOC 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 substantialprovides 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.
Page 19 PREV PAGE TOP OF DOC 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.
Page 20 PREV PAGE TOP OF DOC 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 nois 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.
Page 21 PREV PAGE TOP OF DOC 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.
Page 22 PREV PAGE TOP OF DOC 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.
Page 23 PREV PAGE TOP OF DOC Mr. HAMILTON. Well, if you look atyou know, we made, I thinkI 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 facilitatorswe 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 someactually, 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.
Page 24 PREV PAGE TOP OF DOC 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.''
Page 25 PREV PAGE TOP OF DOC Finally, this committee has confidedI must say that this committeeand I would like to hear your assessment of thishas 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 notthat 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.
Page 26 PREV PAGE TOP OF DOC 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.
Page 27 PREV PAGE TOP OF DOC 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 unanimousobviously 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.
Page 28 PREV PAGE TOP OF DOC 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?
Page 29 PREV PAGE TOP OF DOC 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 understandI think this committee already understands itthe 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?
Page 30 PREV PAGE TOP OF DOC 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 Committeeit used to be the Banking Committeethe 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.
Page 31 PREV PAGE TOP OF DOC 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.
Page 32 PREV PAGE TOP OF DOC 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 levelI do not include Mr. Clarke being at the political levelin 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 foundand made extensive interviews, and so the independent check of our database found no links between terrorism and the Saudis who departed the country.
Page 33 PREV PAGE TOP OF DOC 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.
Page 34 PREV PAGE TOP OF DOC 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.
Page 35 PREV PAGE TOP OF DOC 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.
Page 36 PREV PAGE TOP OF DOC 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 onethis is a subcommittee of the International Relations Committeeand 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.
Page 37 PREV PAGE TOP OF DOC 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.
Page 38 PREV PAGE TOP OF DOC 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.
Page 39 PREV PAGE TOP OF DOC We thinkI will be talking about this a little more in the International Relations Committeewe 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.
Page 40 PREV PAGE TOP OF DOC 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.
Page 41 PREV PAGE TOP OF DOC 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 Qaedanot 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.
Page 42 PREV PAGE TOP OF DOC 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.
Page 43 PREV PAGE TOP OF DOC 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.''
Page 44 PREV PAGE TOP OF DOC 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 auditit 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.
Page 45 PREV PAGE TOP OF DOC 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 allmaybe 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 upI am thinking here of students that come into this countrythey 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.
Page 46 PREV PAGE TOP OF DOC 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?
Page 47 PREV PAGE TOP OF DOC 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 needand 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.
Page 48 PREV PAGE TOP OF DOC 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 Committeeand 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?
Page 49 PREV PAGE TOP OF DOC 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.
Page 50 PREV PAGE TOP OF DOC 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 youwe 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?
Page 51 PREV PAGE TOP OF DOC 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 notit is not a situation where you have to sendyou have to deal with 150 countries. You can prioritize these countries and know which ones are the key ones.
Page 52 PREV PAGE TOP OF DOC 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 countryacross 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 thinkfirst 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.
Page 53 PREV PAGE TOP OF DOC 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 moremore 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 strategythen, 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 haveif 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.
Page 54 PREV PAGE TOP OF DOC Mr. EMANUEL. Uh-huh.
Mr. HAMILTON. The necessity of following the money may be less in that case than it would in al Qaeda, which is very diffuse and dispersed. So your point is well taken. I wouldn't want to generalize and put it into stone or into granite, but I think the equities may very well shift in a case like Hezbollah.
Mr. EMANUEL. Second question, and that will be the end, Mr. Chairman.
Over at Treasury, for those who follow financing for terrorism, we have 25 individuals. Given that you said it is an organization that is always probing weaknesses in our financial systemI mean, I don't know if the number is 50, I don't know if the number is 40; you would think more than 25 would be necessary compared to some of the other functions over at Treasury that are staffed at a higher level.
Second, if you like, at the IRS for following and its toolsonly two-tenths of 1 percent is used for following terrorism. Yet we have an operation, I think it is $25 million out of $10 billionyet we have an operation over there investigating individuals in America who make $15- to $30,000, in the earned income tax credit unit, and they are literally going over everybody's returns. Yet we have two-tenths of 1 percent of the U.S. Budget dedicated to fightingto looking into terrorism.
I would imagineand they are as Machiavellian as we say they are, that 25 people over at the Treasury Department and somea little more assets of the IRS redirectedrather than investigating Americans, can be used to investigating how terrorists are using and not paying their taxes and doing some interesting things as it relates to using the Tax Code from a financing perspective.
Mr. HAMILTON. I didn't know those figures.
I simply would say
Page 55 PREV PAGE TOP OF DOC Mr. EMANUEL. Neither did I until this morning.
Mr. HAMILTON. This is an enormously important, urgent business. I have already commented on the lack of experts that we have and the necessity to train more. Treasury and IRS will have to comment on the specifics about that.
I justthis is an urgent matter, and I would think there would be very few higher priorities for our government now, or for Treasury or for the IRS.
Mr. EMANUEL. Thank you.
The CHAIRMAN. The gentleman yields back.
The gentleman from Connecticut, Mr. Shays.
Mr. SHAYS. Thank you, Mr. Chairman for holding this hearing.
Congressman Hamilton, your Commission has done a superb job; I have said it at other hearings, I will say it again. I will say it every time I have an opportunity. You had almost a sacred mission, and I think you treated it that way.
It is clear to me, when I read your report, when you say your Commission reports vigorous efforts to track terrorist financing must remain front and center in U.S. counterterrorism efforts. I am left with the view that if there was any successes at all in this effort, it was more in tracking the financial aspects.
As much as we need to do more, it wasyou are pretty convinced that we have been somewhat vigorous in this effort. And I want to know if that is, in fact, your view.
Mr. HAMILTON. Yes, it certainly is. I think we have greatly improved our ability to do this. We are getting better at it all the time. I think everybody would say we have still got a ways to go.
Mr. SHAYS. When Mrs. Kelly was asking her questionsI know she had more questions to askone of the points, the Commission argues for more congressional oversight of terrorist efforts, to fight terror financing. And then her question would have been, had she had more time, if the Policy Coordinating Council is under the NSC, whose staff cannot testify to Congress, don't we have less oversight ability, not more?
Page 56 PREV PAGE TOP OF DOC And I am interested to having you sort out that seeming contradiction.
Mr. HAMILTON. There has been an ongoing argument with regard to the NSC and whether or not it should testify, for many years. I think the question is well taken. It does limit the ability of the Congress to effectively have robust oversight. If it is carried out by the NSC, you can't get at them except under their terms.
Mr. SHAYS. Now, I have applauded and want to continue to applaud the efforts to point out that blame is fairly universal. The previous administration, the President with his 8 years, the present administration with its 8 months before September 11th, Congress and its oversight and the intelligence community. Your Commission was pretty strong at being critical of all, particularly the intelligence community, but you never really named names, neither those who had done well or those who had done badly.
But as it relates to Mr. Clarke, it came up. I just want to be clearMr. Clarke was absolutely outspoken before he released his book and while he was on his book tour, that it was the Bush administration's fault, not the Clinton administration's fault.
I just want you to sort that out. Was he accurate in his criticism that it was just the Bush administration or more the Bush administration?
Mr. HAMILTON. Mr. Shays, I am not going to get into the situation of evaluating Mr. Clarke and his criticism. Much of his criticism relates to things we were not investigating. We were not investigating the Iraqi war.
Mr. SHAYS. Well, let me ask this. We will just put Mr. Clarke out.
Your report was fairly clear, was it not, that both administrations had opportunities and they should have seized on those opportunities. Your report, it seemed to me, was fairly consistent that it was notyou were not criticizing or singling out either administration; is that correct?
Page 57 PREV PAGE TOP OF DOC Mr. HAMILTON. Absolutely. We leaned over backwards not to play the blame game. Our fundamental conclusion here was that the difficulties were systemic, not individual. And we just think it is a dead-end game to try to pinpoint one or two people there.
In the end, all of us lacked imagination. All of the government lacked capabilities. All of the government lacked management skills to deal with counterterrorism, and that is not a fault of any one person, or it is not even the fault of any one agency. It is justit runs across the board.
Mr. SHAYS. Thank you. Thank you again for your good work.
The CHAIRMAN. The gentleman yields back.
Mr. HAMILTON. I understand you are having a hearing this afternoon with Governor Kean?
Mr. SHAYS. Yes, we are.
Mr. HAMILTON. I am very pleased you are doing that. Thank you.
Mr. SHAYS. Thank you.
The CHAIRMAN. The gentleman from Georgia, Mr. Scott.
Mr. SCOTT. Thank you very much, Mr. Chairman.
I certainly want to join the chorus of those who are congratulating you on a job well done, you and the entire Commission, Mr. Hamilton.
I have a series of questions on the money trail, but just before getting to that, could you share with us your level of certainty as to the likelihood of our country receiving another terrorist attack to the level of 9/11?
Mr. HAMILTON. We interviewed thousands of people, every expert you can think of, and not a single one of them said there would be no more attacks.
You look at two things. You look at intent, and you look at capability by the enemy; they have them both. They hate us, this group, this radical Islamic group. The intent is clear. You read the fatwahs of Bin Laden, they are very, very clear, kill as many Americans as possible. They have the capabilities.
Page 58 PREV PAGE TOP OF DOC So we would be very foolish indeed to conclude that another attack is unlikely.
Mr. SCOTT. Now, so far, we have been able to freeze roughly $200 million in terrorist assets. It would be interesting to notegoing forward we can learn something, where we have got to go if we could get some information on the status of those funds. Where did they come from? Were they all from Islamic sources, or were they from other sources? Maybe European sources?
Could you just quickly give us a status on what we have learned from the funds that we have already intercepted?
Mr. HAMILTON. Mr. Scott, I think that really has to be directed to Treasury. I cannot give you the details of that.
Mr. SCOTT. All right.
Now, you mention in your report that the source of the funding pretty muchyou were pretty strong in saying it is not domestic, it is coming from elsewhere. Basically you mention charities. I am interested in another mainthat is called hawalas. This is an ancient, trust-based group, very informal, but moves very quietly within the Middle East and Asia. What have we learned about the hawalas?
Mr. HAMILTON. Well, we have learned they are just almost impossible to trace. Because of its informalities, it doesn't go into the regular system at all. It is one of the things that makes tracing terrorist money so exceedingly difficult. That is a technique you are talking about.
Charities were a source, the informal transfer of money based on very traditional patterns ismakes it exceedingly tough, because it is outside the system, and there is no paper trail for us.
Mr. SCOTT. Now
Page 59 PREV PAGE TOP OF DOC Mr. HAMILTON. That is one of the things that makes this target so difficult to get at.
Mr. SCOTT. That means, then, that so much of what we have got to do to plug this hole is going to come from getting help from other countries?
Mr. HAMILTON. No question about it.
Mr. SCOTT. I am very much concerned about four particular countries: Germany, France, portions of Russia, the former Soviet Union, and Saudi Arabia, of course.
It just seems to me that they arewe skirt around it, but it seems to me that there is something more there than just they don't have the kind of banking system that we have or there is something technical there.
Is there a political, philosophical, diplomatic situation there that is allowing a more laissez faire attitude toward these terrorists financing? If that is the case, what do you recommend we do to plug the gaps of those four countries particularly? Because I think they are at the top of the apex.
Mr. HAMILTON. Well, each of the countries presents a very different case. Germany and France, of course, have very sophisticated financial systems.
I thinkI think I would comment principally about Saudi Arabia. Our relationship with Saudi Arabia over a period of many years has been a very shallow relationship. We have said, okay, you give us oil at an affordable price; we will help you protect the royal family. And that is really the relationship. We have not had until recently what you would call candor and depth. It has been very shallow.
I have sat in on many, many meetings, probably hundreds of meetings, with U.S. officials and Saudi officials. And one of the things that has impressed me over the decades is that the relationship, for all of its importance, a very, very important relationship, didn't really have much depth to it. We were happy if we got the oil, which we desperately need; and they were happy, and the family was protected, which they desperately need.
Page 60 PREV PAGE TOP OF DOC So now you are in a situation where you need a lot more depth to it and that is developing now because of these financial flows and a lot of other matters. But it is very late in developing.
Mr. SCOTT. Thank you.
The CHAIRMAN. The gentleman from Texas, Mr. Hensarling.
Mr. HENSARLING. Thank you, Mr. Chairman.
Mr. Hamilton, let me add, too, my voice of congratulations for your service to the country in this work product that I know will be very important to Congress.
I want to start out, I think, plowing a little bit of old ground here, but maybe coming at this in a slightly different fashion. You said of the major policy recommendations that the 9/11 Commission has made, not one of them really deals with the financing of terrorism. So if there is not a specific recommendation for where policy recommendations or where Congress could go from here, can you tell us where we don't have to go?
In other words, since 9/11, where has Congress gotten it right? Where has the administration gotten it right? Where do we not need to focus? Where do we achieve substantial success?
Mr. HAMILTON. Well, I think you have gotten it right in some aspects of the PATRIOT Act. By far the biggest is the breaking down of the wall of separation between intelligence on the one hand and law enforcement on the other hand.
I think you have gotten it right in section 314(a). I think you have gotten it right in section 326 to give additional tools, if you would, to the investigators in looking at terrorist financing. So I think you are correct, a lot of good things have been done.
Beyond specific statutory provisions, there isn't any doubt the whole government is energized to try to share more information than it was prior to 9/11.
If you asked me the biggest area that needs to be developed, probably the hardest as well, is the international area, and just what we were talking about with Mr. Scott. Because thisthis is not something totally under our control. This is something we have to persuade other countries of, that it is in their national interest to do it. Not in our national interest, in their national interest. Otherwise they won't do it.
Page 61 PREV PAGE TOP OF DOC So I think this is an area that is terribly important because the flow of money to terrorists is largely money that comes from outside our boundaries. And that does mean we need their cooperation, and it means they have to have not only the political will, which is in question sometimes, but also the mechanisms to do it.
Mr. HENSARLING. In your testimony you talk about the extraordinary cooperation that has been received from the domestic financial services industry in helping trace terrorist funding. Under the PATRIOT Act, a whole new group of financial services players are now having to file these suspicious activity reports.
I think Congressman Paul alluded to a measurement, I didn't have it in my fingertips, that 12 million reports were generated the year prior to 9/11. Now, that is a lot of reports. In my congressional district, the Fifth Congressional District of Texas, I have met a number of independent and community bankers who tell me, Congressman, we want to do our part to fight the war on terror, but can you look us in the eyes and tell us that somebody is actually reading and using all of these reports that we generate? Because it is a big, big burden on our banks.
So, from your perspective, are we reading and using these reports?
Mr. HAMILTON. Well, I don't think I can answer that. I just don't know. It is kind of endemic, isn't it? The solution to so many of our problems from a governmental standpoint is to require more information; in almost every bill that is passed by the Congress, you require somebody to report somewhere. So you do overload the circuits here.
The other day when I was testifying, Jack Marsh, who is a former Secretary of the Army, told mewell, he testified that every day the United States Government produces 650 million bytes of data. And the question is how you sort through all of that. And does anybody read these reports? I don't know.
I used to think maybe the 9/11 report wouldn't be read, but it is being read. That is a good point. I mean, it is a valid point. Is it reallyI mean, how do you assess this data? What kind of mechanisms there are?
Page 62 PREV PAGE TOP OF DOC And we did not do that. That is, I would guess, part of the oversight of your committee. How is it used? That is a question really for the fellows coming after me here.
The CHAIRMAN. The gentleman's time is about to expire.
Mr. HENSARLING. In that case, the gentleman will yield back.
The CHAIRMAN. The gentleman from North Carolina, Mr. Watt.
Mr. WATT. Thank you, Mr. Chairman.
Thank you, Mr. Hamilton, for being here today. I had the pleasure of being with you in the Judiciary Committee on Friday. I would have to say, when I left home Friday morning to fly to Washington, I felt that I had a much, much clearer understanding of why I was coming to a hearing in the Judiciary Committee on privacy and civil liberties, because there were specific proposals that the 9/11 Commission had made that we were going to delve into, and we did delve into those pretty rigorously in our subcommittee, joint subcommittee hearings.
I am not quite as confident that I understand the rationale for today's hearing, because in looking through the suggestions report, I didn't see anything that specifically we were being suggested to act upon that had financial services implications. Notwithstanding that fact, I am here, and I have been listening, either in the room or in the back room, since I got here; and I still haven't heard any specific things that this committee needs to do.
You mentioned four things, generally, at the end of your testimony, and I thought maybe we might get to some suggestions there. About as close as we got was your suggestion that we need to make sure that we have tools to trace funds in fast-moving investigations.
Are there any specific things that you think we should be considering in that context that are not already on the books? That would be one question I would have.
And then second in the committee's report, or maybe it was just the Democratic committee's staff report, there is a reference on the last page to the NSC staff report that thought that one possible solution to some weaknesses in the intelligence community was to create an all-source terrorist financing intelligence analysis center. I assume that is what Mr. Royce was talking about when he asked you questions earlier today from the other side.
Page 63 PREV PAGE TOP OF DOC The report goes on to report that Richard Clarke, the National Counterterrorism Coordinator, had pushed for the funding of such a center at Treasury, but neither the Treasury nor the CIA was willing to commit the resources to such an all-source terrorist financing intelligence center.
So I guess the second question would be, does the 9/11 Commission recommend something in that area consistent with what coincidentally was originally suggested and pushed by Richard Clarke and now seems to be being suggested and pushed by Mr. Royce or a couple of other people who have asked questions here earlier today?
Those are the two questions I had:
Are there specific things that we need to do that we haven't already done to provide tools to trace funds and fast-moving investigations, one of your four suggestions.
And, number 2, does the 9/11 Commission suggest we do something to create an all-source terrorist financing intelligence analysis center similar to the one that Richard Clarke has been pushing for?
Mr. HAMILTON. We certainly support an all-source terrorist analysis center. We don't confine that to terrorist financing. We think that in order to put together effective counterterrorism efforts you have to integrate all aspects of counterterrorism. So we wouldn't recommend, I think, a specific center just dealing with financing.
That is exactly the problem we are contending against. That is stovepiping; we think that is an inadequate, insufficient perspective on the problem of terrorism.
We do think it is terribly important to have a center where you take all of the domestic and all of the foreign sources together and not only look at, analyze the data that you have with regard to terrorism, but also do some planning operationally so that you can put together an effective program.
If I may, this problem of planning operationally is important and may be a little hard to grasp. I don't know. But the illustration we use all the time is of the two muscular hijackers out in San Diego. We had bits and pieces of information about them; the FBI knew a little bit about them. The CIA knew a little bit about them, but nobody put it together and managed it, and plannedtook charge of it.
Page 64 PREV PAGE TOP OF DOC George Tenet was asked on more than one occasionnot with regard to them, but with regard to Moussaoui in Minneapolisif he knew about it. He said he did, and he asked his people to work with the FBI about it. And then, in response to one of our questions, This was the FBI's case. And that illustrated for us the problem, in a sense, that nobody really put it all together, said, I am responsible for this, and said, I am going to manage it.
So the center has to have the ability to look at all aspects of counterterrorism, not just financing, and put together the case and an operational plan to deal against it.
Now, let me also say, I have heard the comment several times here that I am not asking you to do anything because I haven't proposed any specific legislation. I have not proposed any specific legislation, but I hope it is not your view of responsibility that legislation is the only business of the United States Congress. It is not.
The business of legislation is part of your business, but the business of oversight is also part of it. And we are specifically asking you to tighten up oversight in a lot of different areas. And I understand that oversight is not as attractive for a Member of Congress as the business of drafting legislation, but if you want my personal view, it is just as important.
I am deeply concerned that the Congress today is not as robust and aggressive as it ought to be on oversight. And that is not a comment on this Congress. It goes back to when I served in the Congress as well.
We are asking you to look at the tools. Do you have the tools and the financialin the financial community today to deal effectively with these possible terrorist financings? You are the experts on this, not me. You are the experts on the financial system. You have to answer that question. That comes about through oversight.
We are asking you to find the vulnerabilities in the financial system today. We are not experts on that in the 9/11 Commission. You are the experts on that. That is what we are asking you to do.
Page 65 PREV PAGE TOP OF DOC You have got to look at these things very hard. We are asking you to take a look at the question of civil liberties in financial institutions here. We don't have specific recommendations with regard to how you resolve civil liberties with respect to the flow of financial movementsthe flow of financial movements in the economy.
So I think my message here is that dealing with terrorist financing is not just a question of legislationalthough that is very important. It is a question of robust oversight as well.
The CHAIRMAN. The gentleman's time has expired.
The gentlelady from West Virginia, Mrs. Capito.
Mrs. CAPITO. Thank you, Mr. Chairman.
And thank you, Vice Chairman.
I have a question sort of a little more general nature. I happened to be in a bank, a community bank in West Virginia. I represent West Virginia. The bank officer was asking me the very same questions about the forms. Who is reading these and how important are these? I sort of took a different tack with her. I said, I guess that is in the 326 requirements of the PATRIOT Act that you emphasize are so important.
But I said, I think it is important for us to recognize across the country, even in the rural areas, that this war on terror has to be fought not only in the big financial centers where we are tracking down transactions, but everyone has to be enlisted and be part of the solution of tracking down the terrorists.
Then, when I was reading your report, you have a sentence on page 383 where it says, ''If al Qaeda is replaced by smaller, decentralized terrorist groups, the premise behind the government's efforts that terrorists need a financial support network may become outdated.''
And after reading that statement, it sort of backs up what I am saying, that everybody, no matter where you live in the United States, no matter what kind of financial institution you are attached withyou need to be part of the solution rather than saying it is going to be done in New York, Chicago, Miami, and the more natural places.
Page 66 PREV PAGE TOP OF DOC I was wondering if you had a more generalized perspective, how we can help our constituents in these kinds of areas who feel a little bit removed from some of the solutionshow important their role really is to seeking the solutions and to find the terrorist route.
Then I think, well, the terrorists when they entered the air transportation system, they didn't enter in Boston. I believe they entered in Maine and other areas wherethey were considered to be maybe easier or maybe less likely to be heavily screened. For whatever reason, it was obviously very successful.
So did you have any comments on that?
Mr. HAMILTON. I think your observation is very good. In other words, one of the functions you have to play if you pass a piece of legislation is to explain to people why it is necessary. Apparently, you were trying to do that. I commend that. It seems to me that is exactly right. There isn't any doubt in fighting terrorism we have to ask a lot of people to do a lot of things.
The first line of defense against terrorism in many respects is the general public. The most obvious example is of course is, if you sit down on an airplane and somebody lights a shoe to their matchor a match to their shoe, excuse meyou are going to react to that. You are the first line of defense. Likewise, the banker or the financial institution has to recognize that they do have a burden in fighting terrorism.
Nowmaybe that burden is excessive. I really can't make that judgment. I don't know because I don't know exactly what they have to do. But there is no doubt that we are putting an extra burden on them. And all the Americans have to accept the fact that there are burdens placed on them by reason of terrorism.
My own observation, by and large, is they want to be very much helpful and cooperative. If it is explained to themthey are prepared to do it.
Page 67 PREV PAGE TOP OF DOC Mrs. CAPITO. Thank you. I have no further questions.
I yield back.
Mr. FOSSELLA. [Presiding.] Thank you very much. The gentlelady yields back.
The gentlelady from OregonMs. Hooley.
Ms. HOOLEY. Thank you, Mr. Chair.
Mr. Hamilton, thank you so much for all the work you have put inand sitting and listening for so long today and answering questions. I have just a couple of quick questions.
Did the Commission find any financial link between the terrorists that hit us on September 11th and Saddam's regime in Iraq?
More broadlydid you discover any financial link between the group of al Qaeda and Iraq?
Mr. HAMILTON. What we found is, there is no cooperative operational relationship. Were there contacts? Yes. Were there ties? Depends on how you define the word ''ties.'' yes. But there was no cooperative relationship, and we do not believe that Hussein was involved in planning or implementing 9/11.
Ms. HOOLEY. One of the things we have heard talked about today with lots of different people isI mean, I knowI think this committee has done some good things about money laundering and freezing assets.
As they use more and more a system outside the regular banking community, as they useas they go outside the total system, are we going to be behind the 8-ball if we put our emphasis on freezing funds or following the money? Is it still important to do that as we look at how did they usehow did they use their own system outside of financial institutions?
Mr. HAMILTON. We certainly have to understand their own system better. Freezing is going to be an important tool in dealing with terrorism. As we have suggested, it has to be applied with consideration of some of the other equities involved.
Page 68 PREV PAGE TOP OF DOC But we will have to try to understand betterand our foreign friends and allies can help us herethe systems that these people use in financing their operations.
Ms. HOOLEY. One quick last question, a little outside the financial community, but since you are here right now: The FBI and immigration don't have systems of fingerprinting that mesh. I mean, they have separate systems. How important is that going to be to make sure that the FBI and immigration have the same kind of fingerprinting systems in the future?
Mr. HAMILTON. You are going to have to have integrated systems so these various agencies can talk to one another, share data with one another. If you can't do that, you are not going to be able to put together an effective counterterrorism unit.
Ms. HOOLEY. Thank you. I yield back.
Mr. FOSSELLA. Thank you. The gentlelady yields back.
The gentleman from New Jersey, Mr. Garrett.
Mr. GARRETT OF NEW JERSEY. Thank you, Mr. Hamilton. And I also thank our Chair for holding this hearing this morning and now this afternoon. I come away, so far, from this hearing with a couple of thoughts on it, taking notes down as I went along.
One, initially when you talk about these terrorists are entrepreneurial in nature, and smart, keen, and able to look into different areas, you opened up your comments with regard to the book and how well it is selling.
I am not sure how many average Americans are actually buying and reading through that entire book, but I am sure that you will agree that the terrorists, whoever they may be and wherever they are, are buying that and will be getting the supplemental reports and following up on that just to, as you say, find the gaps.
If we are learning anything from all of this as far as where the gaps are, I suppose that the terrorists are also learning to that extent as well.
Page 69 PREV PAGE TOP OF DOC I take your clarification, I guess, if you will, about not calling for any new legislation. I appreciate that. I think this committee has taken that charge, as far as oversight with regard to other agencies. I know Mrs. Kelly has held hearings, that I have sat in on, on some other agencies a little outside this area, where they may have been overextending their authority. So I commend the members of the subcommittee for having taken that step.
I have also taken from your comments, repeatedly stated, no substantial domestic source of funding. And from that, a comment from my colleague from the other side of the aisle, who is no longer here now, but through his long tenure here with regard to the war on drugs. And perhaps what his comment was, what we have done over those 30 years may have playedsome element as far as deterrent effect, as far as the ingress, and effect as far as the materials and also the dollars.
One of my questions to you, though, is where the burden should be placed, and maybe from your past experience, here to address the issue of the political will that is necessary to address one of these. And also the pragmatic approach as well, as far as following the chain of money; we have had a number of hearings already on this topic.
The burden seems to be placed right now on the so-called law-abiding system as far as our chain is concerned. We have already heard about the Bank Secrecy Act and the Suspicious Activity Reports. So there is already a burden placed on our financial institutions.
There is already a burden being placed on an individual as far as being up in the $10,000 range. We have questioned others on that. I don't know if you have a specific recommendation as far as that threshold. You can comment on that if you would like.
But also I will tell you this little story in 30 seconds. Recently, I went to my local bank where I have been known for some 40-odd years, where I grew up, to open a new account and my banker told me she had to get proof of my identification, who I was, even though she knew who I was for all those years. And I gave her my driver's license, which some people say is easy to counterfeit in New Jersey.
Page 70 PREV PAGE TOP OF DOC Whereas if you had somebody come into the country tomorrow, legal or otherwise, they are able to go into the same institution with a matricular consular card, not produced by the State of New Jersey or any other a State office or any other Federal office, but produced by a foreign country without any proof as to where that person is coming from or the legality of that person being in the United States. This administration says that is a proper and adequate source of identification. I would appreciate your comment on that.
Finally, I would be curious as to your thoughts on the impact of this on other aspects of law enforcement as we go forward. You made the comment that there is a degree of inertia in past aspects of law enforcement, that once they were set up years ago, they continue to go down that same road.
Obviously, we have 30 years of drug enforcement as far as a focus of law enforcement. Local law enforcement has their own charges.
Will we see the same systemic placement be created here as we are directing all of our attentions and energies in this one areanot that I am saying we should be doing soand will it have any impact, negative or otherwise, on other areas of law enforcement, be they Federal or local?
Mr. HAMILTON. Well, I worry about this question of degrading capabilities with respect to the FBI. This is outside our mandate. But the Director of the FBI said continually, I am shifting the focus of the FBI from law enforcement to prevention of terrorism. We all applaud that. But what does the bank robber think about that?
I mean, what happens on drugs? If you go to talk to Federal judges today, they will tell you that their dockets are overloaded with drug cases. What does it mean if the FBI moves away from drug enforcement laws?
I think these are things that have to be worked out. Director Mueller's response to that, I think, is, turning a lot of these responsibilities over to the DEA, that they will develop the capabilities. I hope he is right there.
Page 71 PREV PAGE TOP OF DOC But you do have to be aware when you focus on terrorism, and you tell all these agencies and departments that this is your number one prioritythe question you raise, I think, is a very, very good onewhat happens then in terms of the other responsibilities that department has?
We can't answer that right now, but we know what the political signal is now, and that is to put your resources into fighting terrorism. We have to look at the consequences of that down the road.
You asked about where does the burden lie here. It lies, as I am afraid you correctly point out, with the American citizen. How do you get the information you need, however, without asking the American, the law-abiding American citizen? I don't know how you get it. If you want to get information with regard to financial flows and everybody agrees that you need that information in order to fight terrorism, you have got to ask somebody. And the only people that really know it are the people in the financial institutions. And so you do put a burden on them.
Now, I don't know how you avoid that burden. My guess is they are prepared to accept that burden to some degree. And your job is to make sure that burden is not an excessive burden, however you may define excessive. Do they, in fact, collect information that is valuable to the government, or is it just paperwork?
The other point I want to make in response to your question is the importance of secure identification. This gets into some pretty tight, ticklish areas. We have been talking about civil liberties here. This is a civil liberty area. But, again, from the standpoint of fighting terrorism, you have to have secure identification of people. And that is why we recommend that there be Federal standards with regard to driver's licenses and passports and the like.
All of the hijackers except one had American identification papers, 18 out of 19 of them. And what that meant is that some of these identification papers were issued pretty sloppily.
Page 72 PREV PAGE TOP OF DOC Now, we have got to correct that, and secure identification. I don't know how you work through this question of civil liberties, the national identification card and all the rest of it. We have to work through that. But I don't have any doubt at all that if you are going to effectively fight terrorism, you have got to have secure identification.
The CHAIRMAN. [Presiding.] The gentleman's time has expired.
The gentleman from Texas, Mr. Hinojosa.
Mr. HINOJOSA. Thank you, Mr. Chairman.
I also wish to thank you, Vice Chairman Lee Hamilton, for your outstanding leadership and great efforts to protect our great Nation by strengthening antiterrorism efforts that are being made here in our country, and especially by this committee.
Your testimony is both very informative and very disturbing. It is very disturbing because it seems to me that the terrorists who entered the United States came from Canada with doctored passports Canada accepted as valid and valid visas issued by the United States. The terrorists funded the 9/11 attack using the mainstream financial system.
What is even more disturbing is that Treasury's attempts to stop terrorist financing by freezing assets in mainstream financial systems have failed to stem the tide.
I know that the Financial Action Task Force, currently composed of 33 member countries, has been meeting frequently since 9/11 to address terrorist financing. The task force recently issued its 2003 and 2004 report essentially determining that the countries it reviewed are taking appropriate measures to address terrorist financing and making necessary changes to their regulatory systems in order to better prevent, detect and eliminate terrorist financing with certain modifications needed.
My question, Vice Chairman Hamilton, is that prior to 9/11, which of our U.S. Consulates required biometric information like a fingerprint of visa applicants?
Mr. HAMILTON. I am not the one to answer that.
Page 73 PREV PAGE TOP OF DOC Mr. HINOJOSA. You mentioned that.
Mr. HAMILTON. I am not aware that they sought fingerprints from anyone, but I don't want to make that as a blanket rule.
Mr. HINOJOSA. You mentioned in your testimony that they had sent you a copy of the 9/11 Commission staff monograph, and that you hadn't had an opportunity to read it yet. But I wish to read something from that report, from that staff report, that says, ''with the exception of our consulates in Mexico, biometric information, like a fingerprint, was not routinely collected from visa applicants before 9/11.''
Mr. HAMILTON. Yes.
Mr. HINOJOSA. The reason I bring this up is because the gentleman just before me spoke about his concern about visas and identification cards that will be used by individuals who are unbanked, and that is something that is very important, not only to me, but to many who have congressional districts like mine.
I know that he asked you specific questions, and you answered them very well, in that we want to be careful that the information is legitimate and they are not falsified documents and so forth; but I think that we are concerned about all the countries that sent people into our United States, particularly those who came in through Canada and those who can come in through Mexico. So those are concerns that I have been discussing with bankers in my district over that last two weeks.
The rural areas that I represent, 80 percent of my congressional district, have many community, rural community bankers who are asking themselves and asking us as Members of Congress: ''Are we expected to expend as much money and meet the same regulatory requirements as the national banks like Chase and Wells Fargo and all those real big banks are doing in response to all of this, being that they have so much more human resources?''
The truth of the matter is, I didn't know how to answer that. What recommendations would you make to small, rural, community bankers as they try to carry their weight on this matter that you are discussing with us?
Page 74 PREV PAGE TOP OF DOC Mr. HAMILTON. I think it is very important that the banker know their customers and be able to identify their customers. There is no substitute for that. In that sense, they are the first line of defense. So it calls for an exercise of diligence and care on the part of the banker to make sure that he or she knows with whom they deal.
The CHAIRMAN. The gentleman's time has expired.
The gentleman from Florida, Mr. Feeney.
Mr. FEENEY. Thank you, Mr. Chairman.
Again, Mr. Hamilton, we got to visit Friday as part of the Subcommittee on the Judiciary. I was able to commend the Commission for a great job on the report. I wasn't able to serve with you becauselike other members have said what an honor and privilege it has been to serve with you. But I have been impressed with your stamina just over the last several days; it is pretty extraordinary.
I noteyou were talking about this in response to the gentleman from Texas, Mr. Hensarling. I note in Plato's dialogues he suggests that the best person to hire to protect your property is an accomplished thief. Unfortunately, we don't have the benefit of the wisdom of terrorists that have switched sides and decided to have an epiphany and support freedom and civilization. But what we can do is, hopefully, think outside the box.
One of the things you have been able to do in your report about the financial institutions is that we have been successful in some respects, but the terrorists are very much adaptive, they are very flexible. The most fungible asset they have, I would suggest, is probably the resources. It only took them $4- or $500,000 according to your report to accomplish the 9/11 attack. It is a lot harder to find 19 people to commit suicide, as they did, especially finding people able to fly planes, able to mix in our language and culture. And finding the plane itself, getting a hold of it, a bomb or a chemical weapon is very difficult. But replacing $4- or $500,000 is a fairly easy task.
Page 75 PREV PAGE TOP OF DOC But having said that, it seems to me we can learn from some of the ways that other underground entities have operated to launder and move money, for example, the Mafia. These are things that the FBI has had a great deal of expertise in over the years. You know, underground organizations have moved into more legitimate enterprises, they have moved into less risky enterprises. Things like intellectual property theft are a relatively risk free, although illegal, way to raise money.
Can you comment on what we have learned as we try to track resources both nationally and internationally in the hands of the terrorists? And along with that, can you tell us how we ought to draw the balance, if you have thought about it to any great degree?
There are plenty of legitimate Christian and Jewish charities out there. We have some illegitimate Muslim charities who have been helping fund terrorism. How do we encourage giving in charitable opportunities, but also crack down on this new threat?
Mr. HAMILTON. I think the latter problem that you discussed is a major challenge for American foreign policy. It is easy for us to sit in this country and say, well, Saudis, you have to crack down on these charities, but you have to remember that those charities also may do a lot of humanitarian work. And they are going to resent, and the people are going to resent, the United States telling them how to run their charities.
So you get into a real tension here between our desire to crack down on charities and the fact that they may be giving money to the terrorists, on the one hand, and the anti-American feelings that exist in many places around the world today. We can exacerbate that greatly by demanding change in these charities.
How do you deal with that? Well, I don't think there is any silver bullet here. You deal with it through a very extensive dialogue with a particular government. Now, we have done that with the Saudis, for example, on a couple of their charities. We have made quite a bit of progress, it seems to me. One of them has been closed and changes have been made in the manner in which the Saudis oversee their charities at the upper levels of the Saudi Government.
Page 76 PREV PAGE TOP OF DOC So the only answer to the question, I think, is one of dialogue and education, I guess, diplomacy with the countries involved.
Mr. FEENEY. Real quickly on this question, we have had a lot of discussion today, do you freeze assets or do you allow the assets to flow, follow the money and capture a greater organization. Under the organizational chart that the 9/11 Commission proposed, who makes the call?
Mr. HAMILTON. Well, who would make the call would be eventually the policymakers, the President, and the National Security Council. But they would be making the call on the basis of recommendations from the national intelligence director and the national intelligence center. You would set up a national intelligence center that deals with counterterrorism, and that is the center that would bring together all of the information from all of the sources into one place; in other words, you would get a genuine sharing of information. But beyond an intelligence function, it has an operational planning function, like the military has and the J-2, J-3 concept, so that the national counterterrorism center not only would have the intelligence, but it would plan the operation. It would not make policy, it would not execute policy, but it would plan.
And that, incidentally, is a part of our recommendations. It seems to be harder to grasp, I think it was harder to grasp by the Commission itself, but we tend to look at these things in terms of just intelligence. It is much more than intelligence. It is bringing together the information and planning operationally how to deal with the problem that the intelligence presents to you. And then that, of course, goes up to the national intelligence director, and he reports it to the President.
The CHAIRMAN. The gentleman's time has expired.
The gentleman from New York, Mr. Meeks.
Mr. MEEKS. Thank you, Mr. Chairman, and thank you, Mr. Hamilton. I want to join the chorus of voices who have lauded you and Chairman Kean for what you have done. You have really kind of restored some hope to the American public that we can sometimes put politics aside and party aside in coming together to really help the American people. It is kind of the same feeling that we had initially after 9/11 where we felt we were coming together, we were together as a Congress. What you have done on the Commission is to continue on along that basis, showing that you can come together, and I think that you and the Commission have set an example that we need to follow also here in Congress.
Page 77 PREV PAGE TOP OF DOC That being said, I want to also thank the families of the victims of 9/11, because if it was not for them and them sticking to it and insisting that this Commission be formed, you may not be before us today. So I want to say a special thank you. I think the American people owe a great debt of gratitude to the families. They have lost so much, yet they still have stood up for so long so that you are sitting here and we are now addressing some of the issues that we probably should have been addressing all along, and it would not have happened without them, and the American people owe them a great debt of gratitude.
Let me ask this question. You know oftentimes when we talk, I talk about diversity. The reason why we talk about diversity and various issues is because we get different ideas and different opinions from different people, whether an individual happens to be of different ethnic backgrounds, et cetera.
Did the Commission at all look at our intelligence agencies and even some of our diplomatic corps, et cetera, along the avenue of diversity, whether or not because of ideas we had enough Arab Americans and Muslims and others that were involved in it, in helping us come up to determine or predict even an outcome of what terrorists there may be; and further and specifically, in looking at the whole, keeping in context the financial services, the whole compliant system that Muslims generally work with when they are talking about bankingwe talked about hidingmaking sure we understand their whole financial system so that we can be helpful in that regard in trying to figure out the best way to stop this kind of money laundering, et cetera, to fight against terrorism?
Mr. HAMILTON. Thank you for your comments about the families. That is exactly on the mark. They have been enormously important to us and helpful to us in the course of our investigation. They gave us at one point about 150 questions, I think. We tried to answer all of them. We could not answer all of them; we did the best we could. But they have been exceedingly supportive and many of them are very, very knowledgeable about these public policy issues. So we have been pleased to have their support and they are marvelous people individually, and we have come to know many of them quite well.
Page 78 PREV PAGE TOP OF DOC The second point on diversity, I am pleased you raised it. We put very great emphasis on the necessity of the intelligence community becoming more diverse. It is an absolute necessity. There is tremendous emphasis today on human intelligence. You cannot possibly penetrate an al Qaeda cell with a guy like me. It cannot be done. I do not care how fluent an Arab speaker I would beand I am notyou cannot penetrate it. These are very small cells. They are often tied by family relationships. They are a very closely knit group, and penetrating those groups is the toughest intelligence target that we have. It cannot be done by a gentleman from Indiana who went to Indiana schools and all the rest. It has to be done with someone of that culture.
So creating that diversity now becomes a national security priority. We hear all the time about the languages that need to be spoken and, incidentally, you are talking about 20 or more of them, many languages that we have to master. And beyond mastery of the language is mastery of the culture itself. You mentioned this. You have to understand the culture better than we do; not just the financial culture, but many other aspects of their culture. People have to begin to see this as an important part of our Intelligence Community, and if the CIA or other Intelligence Communities want to do a more effective job in human intelligence, or if they want to do a more effective job just in providing accurate information to the policymakers, they are going to have to become more diverse. And they are going to have to hire people with great linguistic skills; and I mean when we are talking about linguistic skills, we are not just speaking about somebody who speaks the language. They have to speak it like a native speaker if you are going to penetrate these groups. It is very important.
The CHAIRMAN. The gentleman's time has expired.
The gentleman from Wisconsin, Mr. Green.
Mr. GREEN. Thank you, Mr. Chairman. Of course I add my voice to the others in congratulating you, Mr. Hamilton, for your work. I apologize for coming in late. Like Mr. Feeney, I have been jumping back and forth between simultaneous hearings on the recommendations.
Page 79 PREV PAGE TOP OF DOC I know the Commission has not recommended specific legislation. Would members such as yourself be willing to comment in writing on specific legislation that we put together going forward on this subject? Is that something that you would be willing to do?
Mr. HAMILTON. I have to be a little careful about this. The Commission may or may not meet in the future. I think we probably will have some meetings on it, but it really depends on how we evolve from this point on, and I am afraid I am not able to give you a specific answer as to the Commission commenting on a specific piece of legislation.
Mr. GREEN. Perhaps individual members?
Mr. HAMILTON. I think individual members might, but here we have to be careful and say, okay, it is an individual opinion and it is not a Commission opinion.
Mr. GREEN. Your points were well taken on the need for Members to vigorously utilize our oversight function. On the other hand, this is obviously an area in which it is difficult for us as Members to know all of the details and all of the facts in this rapidly evolving challenge that we face. Obviously, oftentimes the crucial data is classified, it is difficult for us to translate, and I think the whole subject matter is a difficult one for us, because I am not sure how we define progress in this area. Is progress the lack of a terrorist attack? Is progress so much time having passed between the disruption publicly of a threat? Obviously it is difficult for us, as it was difficult for you, and I think it is going to pose some real challenges for Members exercising the oversight function as we go forward in the years ahead. In fact, I think you point out quite eloquently, in both your testimony and in the report, the danger of allowing us to be lulled into that thinking, that progress is the absence of a very public, specific terrorist incident. Perhaps that is the problem that we suffered from in the past.
So your points are well taken on oversight. Unfortunately, I think there are some limitations, and with those limitations and with that void, I think that is why so many Members are asking you and others about specific legislative recommendations. It is almost human nature. We want to be involved and active and doing something, and obviously legislation presents a vehicle that we can devote our energy to.
Page 80 PREV PAGE TOP OF DOC Mr. HAMILTON. Well, on the question of oversight, I think you do not want to sell yourself short. You are the American policymakers, you are the politicians, you are the people who are closest to the American people. You know what the big policy issues are, and you must not let any agency intimidate you or snow you. I really firmly believe that every legislator has to respect the constitutional obligation and that means you are a part of a separate, but equal, branch of government, and that means you must assert that right continually.
I like your point about metrics. Don Rumsfeld, Secretary Rumsfeld had the best comments on that. You probably remember his famous memorandum. How can we tell whether we are winning or losing? We do not have a good set of metrics. He is absolutely right about that. It is very, very hard to develop in this effort.
Mr. GREEN. Finally, and quickly, there was a sentence in your report that really struck me, and I do not think it gets enough attention. The sentence says very clearly and specifically, we are safer than we were 4 years ago, but we are not safe. I think with this Commission, or this hearing process, and the Commission itself, we rightly focus on our shortcomings and what we need to do. I do not think we talk enough about progress that has been made. I like that aspect of the report, because I think it is something that the American people need to hear, that we are safer than we were 4 years ago for a number of reasons. So I think that is something important for the American people to hear.
The CHAIRMAN. The gentleman's time has expired.
Mr. HAMILTON. We very much agree with that.
The CHAIRMAN. The gentleman from Texas, Mr. Bell.
Mr. BELL. Thank you very much, Mr. Chairman. Mr. Hamilton, thank you for your service and your testimony here today. The good news is that I am asking questions, so that means you are very close to being finished. The bad news is that I have a couple of questions too.
Page 81 PREV PAGE TOP OF DOC The first is really touching upon something that Mr. Feeney raised and you really did not have an adequate opportunity to respond to, and it really goes back to a statement you made earlier about the need not to fight the last war, and I think that really goes to the core of what our strategy has to be in this war on terrorism. But my question is, how do you keep from fighting the last war?
You know, based on your service here in the House, that we operate in an incredibly reactive environment, and I am just curious that if you are talking about the financing of terrorist activity or any other aspect of this war on terrorism, if the terrorists are as clever and resourceful as you indicate that they arethat the Commission indicates that they are, and one really only has to read the first few pages of the report to see just how resourceful they can beit almost seems like it is a scene from that old cartoon where there is a water leak and the character is trying to plug the water leak and then the water starts shooting out from a different source and pretty soon you are running around.
So we can respond to what we already know, but my question is, based on what you have seen and heard, how do you stay above or ahead of the curve in this war on terrorism, and how do you keep from just fighting the last war?
Mr. HAMILTON. I think you have to consult the nonconventional thinker. You have to go outside the box. You know, congressional committees get in the habit of having the same witnesses all the time, and that is understandable, because you deal largely with policy questions and you want the policymakers there. But it is important for Members of Congress, as it is important for executive branch people, to put their feet up on the desk, look out the window, and think unusual thoughts, and use their imaginations.
One of the pieces of advice we had given to us regularly was, talk to some of the novelists. Talk to a Tom Clancy and a lot of other writers that you all could identify that I cannot, who thinkwho use their imagination. And you have to do that. That is my only advice on it, because you have to expand your own sources of information to figure out what some of these people are thinking about.
Page 82 PREV PAGE TOP OF DOC Mr. BELL. Can you institutionalize that to any degree, in your opinion?
Mr. HAMILTON. I doubt it. It really takes individual initiative. You cannot very well establish, I do not believe, an office of imagination over here. That would not sell too well, I do not think.
Mr. BELL. There would be a lot of people willing to serve, though.
Mr. HAMILTON. You do need people and you need to consult with people who do not express always the conventional wisdom, and that is an important thing to keep in mind.
Mr. BELL. Also, going back to something you talked about earlier about the cooperation that has existed between financial institutions and law enforcement and your concern that perhaps as the memory of 9/11 fades, that cooperation could subside, and you talked about the need for some institutionalization there.
How would you go about institutionalizing that cooperation?
Mr. HAMILTON. Well, those who are familiar with the financial institutions, the private sector people could probably give you a better answer than I can. But there really does have to beand maybe they already exist, I do not knowmechanisms whereby a dialogue can take place between the bankers, if you will, the financial institution people, and the policymakers. That is, it is very important that that dialogue take place and there has to be a mechanism for it to occur. It may be the mechanisms are already in place and they need to have an expanded agenda.
Dialogue is the answer to your question. There has to be dialogue, and you have to have a place where that dialogue can take place.
We had a question a moment ago about the bankers in West Virginia. They are outside the dialogue. That is why they are asking those questions. And that means no matter what exists today, it is not working completely, because they do not understand what thewhy it is they are gathering this information. And so I think you have to look at it with that perspective.
Page 83 PREV PAGE TOP OF DOC Mr. BELL. Thank you very much.
Thank you, Mr. Chairman.
The CHAIRMAN. The clean-up hitter, the gentleman from Staten Island, Mr. Fossella.
Mr. FOSSELLA. Thank you, Mr. Chairman.
Mr. Hamilton, thank you very much. I would echo the words of my colleagues to say that I appreciate your service as well, and underscore the reality that you mentioned earlier, and others, about the families who suffered; regrettably and tragically, many of those were from the area I represent in Staten Island and Brooklyn; 200 of my neighbors on Staten Island alone were killed. Their memory has become the foundation for what we are doing here and, fortunately, it seems like people are working together to achieve that goal of protecting us once and for all.
Let me just say I am pleased in terms of some successes that you mentioned of the PATRIOT Act, and as one of the successes, because it appears that it has become sort of a whipping boy, there is a monster behind every tree out in the political arena. As you mentioned earlier, it seems to have its successes in forcing agencies to cooperate with each other, at a minimum, and obtain and apprehend those would-be terrorists. So thanks for adding that.
In terms of outside the box, the reality is these are not Boy Scouts or Girl Scouts. A lot of them are just animals that want to see the destruction of the U.S. I would point to what I think is one of the greatest police departments in the world, the New York City Police Department. One of the reasons why they are so successful, I believe, especially the detectives, is that they are not afraid to get on the ground and work and find out the nuts and the bolts and the nitty-gritty. They do not have their feet up on the desk.
So that is one way in which I hope the Federal agencies can better utilize those local law enforcement officers like the New York City Police Department and detectives. They do, to a degree, do not get me wrong, but I think it could always be better.
Page 84 PREV PAGE TOP OF DOC You have answered a lot of questions, and some I wanted to ask have been asked, so I will not repeat them. But let me just ask one quick one regarding the Department of Treasury, specifically the TFI office, your testimony about all agencies and sharing a goal to work together. Do you think that that office should maintain a group of financial experts to oversee compliance? And to what degree does it make sense for the Department, if at all, to have criminal enforcement capability? Thanks again.
Mr. HAMILTON. Thank you for mentioning the tragedy that these families encountered. That was continually impressed upon the commissioners, and we cannot be cognizant of that too often. And those in your area, New York, New Jersey, certainly suffered the most, because that is where the heaviest casualties were.
Secondly, I think that the emphasis you put on local and State is likewise very important, because these people are the frontline officials. There are 18,000 first responders, or approximately that number, and you cannot imagine an effective war on terrorism without their participation. And one of the huge problems here is how you get information from up here to down thereif you say up is here in Washingtonthe flow of information downward, without compromising sources. That is a big-time problem in all of this. But it is one we must solve, and it is one that local and State officials complain an awful lot about. They do not feel like they are in the loop with regard to information. And we direct some of our comments to that in the report.
With regard to the Treasury having criminal enforcement powers, I really do not feel qualified to answer that. I just do not know that much about it. My general sense is the prosecutors have to do that in the Department of Justice, but I would be no expert there.
Mr. FOSSELLA. Fair enough. Thank you very much, Mr. Hamilton.
The CHAIRMAN. The committee is pleased to have you here. We put you through a long, difficultwell, I do not know how difficult it was, but it was a long process. You have been on the other side of this for a long time, so now you can appreciate it from both sides of the dais. But I know I speak for all of the Members on the committee to say how deeply we appreciate your appearance here today and your expertise. Your expertise precedes you before the 9/11 Commission with your great work in the Congress and, clearly, you have done yeoman's work, as well as the other commissioners.
Page 85 PREV PAGE TOP OF DOC With that, you are dismissed. I know you have some other work this afternoon. Thank you very much.
Mr. HAMILTON. Thank you very much.
The CHAIRMAN. The Chair notes that some members may have additional questions for the witness which they may want to submit in writing. Without objection, the hearing record will remain open for 30 days to submit written questions to the witnesses and to place the response in the record.
We now invite our second panel to appear.
Gentlemen, welcome to the Committee on Financial Services. Let me introduce the panel. The honorable Stuart A. Levey, Under Secretary for the Office of Terrorism and Financial Intelligence, Department of the Treasury, and an Ohio native; the Honorable Frank Libutti, Under Secretary for Information Analysis and Infrastructure Protection, the Department of Homeland Security. We already know where you are from, from our friend from Long Island. And the next witness is Mr. Barry Sabin, Chief of the Counterterrorism Section, Department of Justice.
Gentlemen, thank you all for your patience as we worked our way through the vice chairman of the 9/11 Commission. I notice you were all here, and hopefully it was a worthwhile experience for you as well as for the members of the committee.
The CHAIRMAN. We will begin with you, Mr. Levey.
STATEMENT OF HON. STUART A. LEVEY, UNDER SECRETARY FOR THE OFFICE OF TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY
Mr. LEVY. Thank you, Mr. Chairman, members of the committee, thank you for inviting me here today to testify about our efforts to combat terrorist financing and the 9/11 Commission report. This is my first opportunity to testify in my new position as Under Secretary for the new Office of Terrorism and Financial Intelligence.
Page 86 PREV PAGE TOP OF DOC There is little need to underscore the importance of our campaign against terrorist financing, especially before this audience. Both in the PATRIOT Act and in other ways, this committee has demonstrated its commitment to fighting the financial war on terror. The committee would certainly agree, as I do, with the 9/11 Commission's primary recommendation that ''vigorous efforts to track terrorist financing must remain front and center in U.S. counterterrorism efforts.''
It is an honor for me to testify alongside Under Secretary Libutti and Barry Sabin today. I just left the Justice Department a few weeks ago, where I had the privilege of working directly with Mr. Sabin and Mr. Breinholt and his team, both in the criminal division and at the FBI. They are real pros, and I am pleased to be able to continue working with them on this issue.
Those of us who work on this issue are also indebted to the 9/11 Commission and its staff, including specifically John Roth whom some of you know. Both in its main report and in the staff monograph, the Commission's fine work will certainly help us improve our overall efforts to combat terrorist financing.
I would like to highlight three issues in my oral statement. First, I think it is important to underscore that our terrorist financing campaign is just one part of the overall mission to fight terrorism. Put another way, the goal is not so much to stop the money as it is to stop the killing. That seems obvious, but it actually has real implications for the tactics we choose to use in particular situations. Our goal must always be to choose the action that will do the most to cripple terrorist organizations.
For example, in a certain case, the best action may be to publicly designate a financier to freeze terrorist-related assets and also shut down a conduit for further financing. In another case, the best strategy may be to observe the financier or money flow covertly to identify the next link in the chain rather than to cut the money off.
Page 87 PREV PAGE TOP OF DOC In pursuing that goal, we need to draw on a full range of weapons in our arsenal from agencies all around the government, from intelligence activities to diplomatic pressure, from administrative action to criminal prosecutions. As the Commission recognized, the interagency team that focuses on terrorist financing is all committed to that principle, and the team work is excellent. But even with the best teamwork, we have a difficult challenge. Terrorist groups like al Qaeda are savvy and are evolving in response to our actions, so we must continue to improve and adjust as well.
Second, I would like to say a few words about recent changes at Treasury that should enhance our contribution to that team. Since the September 11 attacks, Treasury has worked diligently to combat terrorist financing and otherwise safeguard the integrity of our financial system and international financial systems generally. However, Treasury's structure did not match its mission to combat terrorist financing as a distinct priority. President Bush and Secretary Snow therefore created the new Office of Terrorism and Financial Intelligence to bring all of the Department's assets to bear more effectively to fight terrorist financing and financial crime.
TFI has two major components. The first, the Office of Intelligence and Analysis, reflects our recognition that the war on terror remains a war of information. Treasury's Office of Intelligence Analysis will integrate, for the first time, all of the Department's financial information and intelligence streams and ensure that the information is properly utilized to support the campaign against terrorist financing, as well as other aspects of Treasury's mission.
TFI also includes the Office of Terrorist Financing and Financial Crimes, which is the policy and enforcement apparatus for the Department on these issues. Led by Assistant Secretary Juan Zarate, this office will, among many other things, integrate the important functions of OFAC and FinCEN with other components of the Department, work with IRS-CI and other law enforcement on emerging domestic and international criminal issues, and represent the United States at international bodies dedicated to fighting terrorist financing and financial crime such as the FATF that we have heard discussed today.
Page 88 PREV PAGE TOP OF DOC Third, I would like to focus on the differences between money laundering and terrorist financing.
The main reason why tracking terrorist finances must remain a central part of the overall counterterrorism mission is that money trails generally do not lie. As a result, they can help us identify, locate, and arrest terrorists. One key question is whether the systems we have implemented to ensure financial transparency, most of which were aimed at money laundering, are sufficient to ensure that we are able to ''vigorously track terrorist financing'' as the Commission recommended.
Terrorist financing and money laundering are not the same, and by applying the same methods and tools to both problems we may inhibit our ability to succeed. With money laundering, investigators essentially look through a telescope to try to detect the movement of large amounts of tainted money trying to move through our financial system. With terrorist financing, investigators essentially need a microscope to detect and track the clandestine movement of relatively small amounts of money, money that is often ''clean'' money, but that is intended for an evil purpose.
This difference has policy implications for all of us. At Treasury, we have begun to study how we can devise tools or systems aimed more particularly at terrorist financing. Among other things, we need to work with the private sector on this, and this is something we have heard discussed already today. The financial industry has shown tremendous resolve since 9/11 and is eager to cooperate with us on this issue, but we need to help them help us. For example, we can build on the information sharing relationships that FinCEN has already developed under section 314 of the PATRIOT Act, and I was pleased to hear Chairman Hamilton endorse that function. I look forward to working together with this committee on these issues and to answering your questions. Thank you.
[The prepared statement of Hon. Stuart A. Levey can be found on page 115 in the appendix.]
Page 89 PREV PAGE TOP OF DOC The CHAIRMAN. Mr. Libutti.
STATEMENT OF HON. FRANK LIBUTTI, UNDER SECRETARY FOR INFORMATION ANALYSIS AND INFRASTRUCTURE PROTECTION, DEPARTMENT OF HOMELAND SECURITY
Mr. LIBUTTI. Good afternoon, Chairman Oxley, Congressman Frank, distinguished members of the committee. I was about to say, although I do not see the gentleman here, my special greetings to Congressman Israel; my family appreciates your support, sir.
Today I will provide an overview of the Information Analysis and Infrastructure Protection Directoratewe call it IAIPdescribe initiatives that the Department has taken to protect the financial services critical infrastructure in general, and to discuss some of the specific actions taken after the recent elevation of the threat level for the financial services sector in New York City, northern New Jersey, and Washington, D.C.
IAIP leads the Nation's efforts to protect our critical infrastructure from attack or disruption. The IAIP directorate was created to analyze and integrate terrorist threat information and to map that threat against vulnerabilities, both physical and cyber, to protect our critical infrastructure and key assets.
Recognizing the potentially devastating effects of disruption of services or catastrophic failures in the banking and financial sectors, IAIP works on a daily basis to assess threats and vulnerabilities, mitigate risk, develop protective measures, and communicate with the sector.
The banking and finance sector not only represents both physical and cyber vulnerabilities, but is also critically interconnected with every other critical sector within our Nation. IAIP has focused on monitoring and assessing threats and vulnerabilities to all sectors, including the banking and financial sector. Sharing this information with the private sector is a vital component of IAIP's mission.
Page 90 PREV PAGE TOP OF DOC DHS, the Department of Homeland Security, also acts as a coordinator with other government entities. In the financial field, IAIP partners with the U.S. Treasury to share information with government entities and the private sector through the Financial Services Sector Coordinating Council, the Finance and Banking Information Infrastructure Committee, and the Financial Services Information Sharing and Analysis Center, what we call FS-ISAC. The FS-ISAC provides a mechanism for gathering and analyzing and appropriately sanitizing and disseminating information to and from infrastructure sectors and the Federal Government. Every 2 weeks, the FS-ISAC conducts threat intelligence conference calls at the unclassed level for members with IAIP providing input. These calls cover physical and cyber threats, vulnerabilities, incidents that have occurred during the previous 2 weeks, and suggestions and guidance on future courses of action. The Financial Services ISAC, as with all ISACs, is capable of organizing crisis conference calls within an hour of notification of a crisis.
In addition, the Department of Homeland Security has established close working relationships with the appropriately cleared senior members of the ISAC to exchange classified information as appropriate.
IAIP receives and evaluates current threat and incident information, including suspicious activity reports submitted directly by the industry or through the ISAC, and provides timely feedback on those issues. As recent events have exemplified, during times of elevated threat, IAIP intensifies its efforts to coordinate and reach out to the private sector the entities described above and other government agencies.
I would be remiss, given this committee's leadership in the fight against terrorist finances and financial crime, if I did not take a moment to highlight for you the other important role of homeland security relative to the financial service industry; that is, our role in the investigation of a wide variety of financial crimes. I know this committee is uniquely positioned to appreciate the depth of financial investigative expertise and jurisdiction now housed within the Department of Homeland Security. The investigative functions and personnel of the former U.S. Customs Service, now housed within immigration and Customs enforcement, includes some of the most experienced financial investigators in the U.S. Government. In addition, the Department of Homeland Security is also home to the U.S. Secret Service, which has, as one of its primary missions, the investigation of counterfeiting, credit card fraud, and cybercrime. Together, they represent a vast and impressive array of expertise critical to protecting our Nation's financial systems.
Page 91 PREV PAGE TOP OF DOC The latest series of events against a U.S. financial institution was spurred by ongoing concerns over al Qaeda's interests in targeting U.S. critical infrastructure as well as recent intelligence, information of detailed reconnaissance against several U.S. financial institutions. Based on the multiple reporting streams and the information contained in these reports, the intelligence community concluded that the information warranted a change in the alert status. The level and specificity of information found was alarming, prompting DHS to raise the threat level to orange for the financial service sector in New York, northern New Jersey and Washington, D.C. on Sunday, August 1. This was the first time the level had been changed for an individual sector in a geographic-specific area.
In response to the heightened threat level, IAIP acted on several fronts to address the threat. Conference calls were arranged between DHS, financial sector leaders, State homeland security personnel, including homeland security advisors, and local law enforcement. In addition, senior DHS leadership personally met with CEOs and security directors from the financial sector to better inform them of the evolving conditions and provide guidance. Subsequent to providing immediate alerts to the financial sector regarding the threat, IAIP continued to work with the industry to ensure that all targeted financial institutions were individually briefed. IAIP coordinated with Federal, State, and local law enforcement entities to ensure that the appropriate information was exchanged between the government and the private sector. We also pooled affected financial sectors to determine what additional protective measures were implemented by the private sector itself during this heightened period.
IAIP personnel were also immediately deployed to facilities in Washington, D.C., New York City, and northern New Jersey. Teams of IAIP personnel conducted site-assist visits, what we call SAVs, in collaboration with local law enforcement officials and asset owners and operators to facilitate the identification of vulnerabilities and to discuss protective measures.
Page 92 PREV PAGE TOP OF DOC In addition to these SAVs, IAIP personnel have been working with individual facilities and local law enforcement entities to implement buffer zones around selected banking and finance sites. Buffer zones are community-based efforts focused on rapidly reducing vulnerabilities outside the fence of selected critical infrastructure and key resources. To support these efforts, IAIP provides assistance to local law enforcement officials to develop and implement buffer zones, to share best practices, and lessons learned.
IAIP has taken many actions to secure the financial services sector with our friends in State, local, and the folks sitting with me here today. Our job, however, is not done. We will continue to monitor the evolving threat condition and communicate those threats with the private sector and our partners within State and Federal agencies. Together with the Department of Treasury, we have laid the foundation for a true partnership with the public and private sectors. Based on this foundation, we will continue to dedicate ourselves to making a difference in protecting our Nation.
Thank you for the opportunity to testify before you today, Mr. Chairman. I would be pleased to answer any questions at this time.
The CHAIRMAN. Thank you, Mr. Libutti.
[The prepared statement of Hon. Frank Libutti can be found on page 126 in the appendix.]
The CHAIRMAN. Mr. Sabin.
STATEMENT OF BARRY SABIN, CHIEF OF THE COUNTERTERRORISM SECTION, DEPARTMENT OF JUSTICE
Mr. SABIN. Chairman Oxley, Congressman Frank, members of the committee, I am honored to appear before this committee today. I am also pleased to share the microphone today with Mr. Libutti and Mr. Levey, a dedicated and principled former colleague of mine.
Page 93 PREV PAGE TOP OF DOC Working together, the various components involved in the United States' efforts to combat terrorism and its funding have made significant progress and scored key strategic victories, while continuing to respect constitutionally guaranteed civil liberties. We are sobered and ennobled by the unique opportunity that history has presented to us to seek justice, both in our words and in our actions.
To be clear, we will be aggressive, as Congress and the American people rightly expect that of us. Our concerted efforts and reliance on the rule of law have led to the disruption or demise of terrorist cells in locations across the Nation. We continue to dismantle the terrorist financial networks, including those that prey on charities through, in part, an application of standard white-collar investigative techniques.
Much of our success is due to the wide array of legislative tools made available to us by this committee and the Congress, for which we are grateful.
Today, I would like to survey, first, some of what we have done since 9/11 in the area of terrorist financing and criminal enforcement; second, some of the trends that we foresee; and lastly, how this work relates to the Treasury Department and the Department of Homeland Security, and the oversight responsibilities of this committee. My goal is to cite some examples and highlight some trends, and I do not intend this description to be a comprehensive review of all that has been done in this area by the Justice Department.
The watershed legislative development of terrorist financing enforcement occurred in 1996 when Congress passed the Antiterrorism and Effective Death Penalty Act. This statute created the section 2339B offense, and the concept of ''designated foreign terrorist organizations'' or FTOs.
With the assistance of a Hamas leader, an organization known as Holy Land Foundation for Relief and Development, became Hamas's U.S. beachhead and source of support. A few weeks ago, the Holy Land Foundation and its officers were indicted by a grand jury in Dallas for, among other crimes, conspiring to provide material support to Hamas for over the last decade.
Page 94 PREV PAGE TOP OF DOC Another accused U.S.-based terrorist financier, Sami Al-Arian, along with his co-conspirators, allegedly used his University of South Florida office and several nonprofit entities he established to support the Palestinian Islamic Jihad.
Since 9/11, we have relied on section 2339B to charge persons who sought to donate themselves to violent jihad causes around the world.
We prosecuted and obtained guilty pleas from several men living in Lackawanna, New York, who had attended a terrorist training camp in Afghanistan. In New York City we recently obtained the guilty plea and military cooperation of al Qaeda associate and military procurer Mohammed Junaid Babar.
Recently in Northern Virginia, our prosecutors convicted several persons of training in the United States to engage in violent jihad activities abroad. Earlier, we obtained in that district the guilty plea of al Qaeda operative Iyman Fares.
Clearly, our ability to address this conduct through criminal prosecutions would not have been possible had Congress not provided us with a powerful tool like the material support statutes, including Section 810 of the USA PATRIOT Act. These maximum penalties, combined with terrorist enforcement of the U.S. sentencing guidelines, allow us to exert significant leverage over terrorist supporters to gain their cooperation.
The very process of ''material support'' investigations often results in the identification of other targets and future prosecutions. For example, following a Charlotte, North Carolina Hezbollah prosecution, prosecutors in Detroit have built on these successes to charge other Hezbollah-connected individuals linked to cigarette smuggling and tax evasion racketeering conspiracy.
The Holy Land Foundation case in Dallas was assisted by an FBI raid on September 7, 2001 of a related company known as INFOCOM. Last month, the brothers that ran INFOCOM were convicted by a jury in Dallas of illegally shipping computer parts to State sponsors of terrorism.
Page 95 PREV PAGE TOP OF DOC The Northern Virginia jihad case was assisted by Chicago prosecutors assigned to the Benevolence International Foundation investigation.
Simply stated, aggressive law enforcement begets more enforcement and further disruption of terrorist support mechanisms. Prosecutions generate more leads and intelligence. Let me underscore the point because I think it is a critical one. Increased penalties yield cooperation by criminal defendants, which yields information, which enables the government to more successfully prevent terrorist incidents and attack terrorist funding.
No matter how effective our criminal statutes are in theory, using them depends on the development of facts. Since 9/11 and with the vital assistance provided by Congress with the USA PATRIOT Act, criminal investigators and prosecutors now have access to the full body of information developed by the U.S. Intelligence Community, including intelligence gathered through investigative activities authorized by the Foreign Intelligence Surveillance Act. In addition to the Holy Land Foundation and Sami Al-Arian cases, an example would include the Chicago indictment of three Hamas operatives announced by the Attorney General this past Friday. We believe that sections 218 and 504 of the USA PATRIOT Act, which has been vital to bringing these prosecutions, represent a key congressional contribution to our counterterrorism efforts and we are gratified that this view is shared by the National Terrorism Commission in its report.
Intergovernmental coordination, however, is not enough. Many of our prosecutions have been aided by cooperation that stretches across international boundaries. For example, the conviction of Abdulrahman Alamoudi in Alexandria, Virginia, originated with information provided to us by British law enforcement, which questioned Alamoudi at Heathrow Airport about a briefcase containing $340,000.
Abu Hamza al-Masri and Baber Ahmed, who have been charged with terrorist support offenses, are currently in British custody awaiting extradition to the United States.
Our enforcement record has benefited from Director Mueller's decision immediately after September 11 to create a specialized unit of financial investigators to focus on the problem of international terrorism, now known as the Terrorist Financing Operation Section.
Page 96 PREV PAGE TOP OF DOC Relying on changes to the crime of operating an unlawful money transmitting business, codified at Title XVIII United States Code, section 1960, made useful by the USA PATRIOT Act, we have brought charges in jurisdictions such as New Jersey and Brooklyn and obtained convictions in Massachusetts and Virginia. This crime will remain a valuable part of our counterterrorism strategy, and we support pending legislation in H.R. 3016 that would make section 1960 a RICO predicate.
The private sector, particularly the financial services industry, has been responsive to the USA PATRIOT Act section 314(a) requesting information on certain potential customers. We hope to continue working with the Treasury to improve the utility of Bank Secrecy Act reports, including suspicious activity reports to law enforcement, and to provide the financial services sector with additional feedback on the utility of such data.
The Department recognizes that the terrorist threats we are facing today and in the foreseeable future, cannot be addressed by any single department, bureau, or agency. That is why we need to acknowledge and further develop our strong partnerships, both informally and formally, with the Departments of the Treasury and Homeland Security.
I thank this committee for its continued leadership and support. I am happy to answer any questions you may have.
The CHAIRMAN. Thank you, Mr. Sabin.
[The prepared statement of Barry Sabin can be found on page 131 in the appendix.]
The CHAIRMAN. Mr. Sabin, let me begin with you because you raised some very interesting points, and I think that too many times the successes that we have had as a result of the PATRIOT Act go either unreported or, even worse, ignored by virtually everybody. Yet, when we see articles that appeared today, all negative, it is almost as if the writers, the journalists are looking for negative information to put out there about the work that all of you are doing, positive work that too many times is underreported or not reported at all. It seems like when you have legitimate criticismnobody is perfectbut that that seems to get the headlines. Once again, we found that today in virtually every major newspaper. It is just unfortunate.
Page 97 PREV PAGE TOP OF DOC So I want to salute all of you for the work that you do to make us safer. Mr. Sabin, your chronicling of some of those successes, I think, needs to be told more and more so the public does get a balanced view of the efforts that are being made in this country.
You mentioned section 21 and section 504 of the PATRIOT Act which has facilitated information sharing. That obviously is going to sunset next year. I happen to think that was an unwise decision on the part of the Congress to put a sunset provision in.
But what would be the implications of the failure to reenact the PATRIOT Act in your estimation?
Mr. SABIN. Echoing Vice Chairman Hamilton's comments this morning, sections 218 and 504 of the PATRIOT Act are, on a day-to-day basis, the essential tools that allow criminal law enforcement and intelligence folks that are looking at these problems to discuss and share information. The proverbial wall that people have referred to was brought down by those particular sections of the USA PATRIOT Act. To allow it to sunset I believe would be setting us back to a stage whereand the monograph that was issued over the weekend agreesyou would have those kinds of dysfunctions and lack of communication and coordination.
So in terms of section 218 and 504, on a day-to-day basis, it is invaluable for criminal investigators to be talking to intelligence investigators, for prosecutors to be talking to those folks in order to share information and use all of the tools that Congress has provided us in order to address the particular threat or the particular disruption activity.
There are other provisions in the PATRIOT Act, echoing Mr. Hamilton's remarks this morning. I believe section 314 is vital for working with obtaining information from the financial community, the financial sector. Section 326, involving ''know your customer,'' has proved to be very beneficial. USA PATRIOT Act, section 373, which relates to the change that this Congress made in the intent relating to the unlawful money transmitting license transactions under section 1960, has been invaluable to us.
Page 98 PREV PAGE TOP OF DOC So all of those provisions of the PATRIOT Act, but most especially 218 and 504, that allows us to communicate and share information are invaluable.
The CHAIRMAN. We thank you particularly for mentioning Title III, which is the contribution that the Financial Services Committee made. Clearly, if you look at it from a broad perspective, they really enmesh and work quite well together, and you folks are the ones that carry it out.
Mr. Libutti, do you have any comments in regard to the PATRIOT Act?
Mr. LIBUTTI. I fully support the comments of my friend to the left, sir. I think it is the only way to go in terms of keeping the wall down and making progress.
The CHAIRMAN. Mr. Levey.
Mr. LEVEY. I totally agree, sir.
The CHAIRMAN. The Commission report deals with extensive bottlenecks and discusses methods to remedy that situation. I am concerned about a particular issue regarding FinCEN, and I mentioned it to our first witness, Mr. Hamilton, regarding the inability of FinCEN to use their own computers and to effectively do their jobs.
Wouldn't FinCEN be better able to ensure data quality and be responsible for failures if it had its own computers and was responsible for its own data? Also, now that Treasury has an Under Secretary for Enforcement, does it make sense to you to have nontax financial crime investigators at IRS, or do you think they should be shifted to the terrorism and financial intelligence office?
Mr. LEVEY. Well, let methere are obviously two separate questions. Let me take the second one first in terms of the shifting of IRS criminal investigators to the Office of Counterterrorism and Financial Intelligence. I have heard that suggestion. I know that Chairwoman Kelly has also made that suggestion. Obviously, this is something that we need to think about, but my first reaction is that I have talked with Commissioner Everson already. He has pledged to me and to the Department that he is going to be as supportive as possible of the mission of the new office and work with us on all of the initiatives that we have, and we will have to just work together with him to see how that develops and see if more drastic changes are necessary. I am not sure that they are, and I do not know that our needs are limited to criminal investigators either. It may be that we need some of the other expertise from the IRS on the noncriminal auditing side that they obviously have as well.
Page 99 PREV PAGE TOP OF DOC With respect to the question you asked about FinCEN, I think I agree with the premise of the question, which is that FinCEN needs to move ahead in terms of developing its technology to be more responsive to law enforcement and to the private sector, and under the leadership of Director Fox, I think they are headed in that direction. The key point here is their BSAdirect initiative, which is moving forward and we anticipate will be done by October of 2005. That will free up FinCEN to do more sophisticated analysis of financial data that comes in, and improve access on behalf of law enforcement to that data.
The problem I think underlying the question is the fact that right now the information is being provided to us generally through paper reporting and then the data is being entered by the IRS at the Detroit computing center. I think that that is something we need to take a look at because I cannot imagine that when we look down the road 5 years from now, that we will still be in that situation. That seems to be a situation we need to correct and move towards an e-filing system in some way that is not overly burdensome on the private sector but which provides FinCEN with better ability to manipulate the data.
The CHAIRMAN. Thank you.
The gentleman from Massachusetts, Mr. Frank.
Mr. FRANK. Mr. Levey, I have had to go in and out, but I gather there was some conversationI just heard someabout taking some IRS personnel cell investigators and maybe some others and have them also be doing terrorism work; is that correct?
Mr. LEVEY. Well, the IRS already supports
Mr. FRANK. Right. But there was some suggestion about having them do more?
Mr. LEVEY. Well, there were suggestions in the first panel about whether the IRSquestioning whether the IRS's commitment in terms of resources to terrorism
Page 100 PREV PAGE TOP OF DOC Mr. FRANK.is enough. Well, I would like to say very clearly, if we are going to increase IRS resources to you, it should only come if we have increased IRS resources. If there is an area in this government which I do not think is being done to excess, it is enforcement of the Tax Code at this point. I think we went too far in weakening enforcement, and the notion that we would further weaken it would trouble me.
So I would be glad to vote for some more money. I know we are all supposed to be opposed to government in general, but then we are all for it in the specific. So I would like to say, I hope people would resist cheering if we further cut the IRS. Yes, I would like to see some more resources, obviously whatever you need, but not at the expense of existing enforcement of the Tax Code, and I hope that that would be the Department's position, and I would hope that they would not feel pressured to do that.
Let me ask Mr. Sabin, in your testimony, Mr. Hamilton said on behalf of the Commission, they were not recommending any legislative changes in the area that came under your jurisdiction. And as I read the testimony, there was one area where youI do not think this is our jurisdiction, but it is in this area, you talked about the ''lone wolf'' international terrorists.
Would you like to see the law changed so that individuals who are acting in international terrorismand it says non-United States persons, so this is a noncitizen; is that correct?
Mr. SABIN. Yes.
Mr. FRANK. And right now you have to prove that they are connected to some organization, so even if they are otherwise doing something they should not be doing in this area. That did not seem to me to be terribly controversial, and I note that, although I know it is not our jurisdiction.
Let me say, by the way, on the subject of legislation and sunsetting, sunsetting is something that does not mean you think it is a bad idea. In fact, in other contexts people think sunsetting is a good thing in general. I do favor extension of the provisions we talked about, but I also favor sunsetting them, for two reasons. First of all, you do not know for sure how they are going to work out. Secondly, you do have this problem, which is these are important powers but they can be abused, and I think the sunset is one of the best ways we have to make sure that the powers are used appropriately and not inappropriately. I think having people know that if there are controversies generated about whether or not they are used appropriately, that that is important.
Page 101 PREV PAGE TOP OF DOC Let me just ask in that regard on the question of the freezing of assets in particularand I would ask both Mr. Levey and Mr. Sabinthe Commission, and in the monograph, and in Mr. Hamilton's testimony, they gave examples of people whose assets were frozen, and that included a freeze on any commercial transactions so that until they get a waiver, until they get waivers, they could not even engage counsel to defend themselves.
Shouldn't that sort of a waiver be automatic? After all, we are not talking about anybody who has been found in any neutral court to have been guilty of something. Shouldn't there be some kind of a presumption that you would be allowed to defend yourself against the accusation, especially since, as I understand it, the freeze stays in effect. We are not talking about lifting the freeze, we are talking about being able to combat the freeze.
Is there any reason why they should not be automatic so that people will have the resources to defend themselves?
Mr. SABIN. You are getting into the area of the general civil liberties question and the balancing that needs to be addressed. In terms of the sixth amendment right to counsel, we are committed to preserving that and protecting that.
Mr. FRANK. That is in the criminal context. I guess I am not as clear as I should be on the freezing of assets. When I went to law school, we were not freezing assets that much. Who knew? What is your right to counsel in the case of the freezing of your assets?
Mr. SABIN. You do. If you make an appropriate license request to the Office of Foreign Asset Control through the Treasury Department, Mr. Levey's shop, they can grant that for
Mr. FRANK. Grant what? They grant you the right to do it. You do not get free counsel. So it is not the right to counsel, but it is right to pay a lawyer. There is that criminal/civil distinction. You do not have the automatic right.
Page 102 PREV PAGE TOP OF DOC Mr. FRANK. Shouldn't that be automatic? Let me ask you, Mr. Levey, would you turn someone down just to be able to hire a lawyer to defendto object to the freeze?
Mr. LEVEY. It is my understanding that we have not turned anyone down; that that is routinely granted.
Mr. FRANK. Why even require it? What, have you got nothing else to do but sit around and stamp ''yes''? Why not just say that narrowly defined for the purpose of challenging the legitimacy of the order, there is that automatic waiver? I just don't think it serves a purpose to say that we would everit is hard to think of a circumstance in which you would turn it down. It is a right to counsel.
Mr. LEVEY. It is not a question of whether we would ever turn it down. It is a question of once we have frozen the assets, we want to monitor what happens and make sure that the money is only used for that purpose.
Mr. FRANK. That is not inconsistent with saying that to the extent that it is for the purposes of defense, you could do it. It would still be subject to the monitoring. That is one of the changes that would make me feel a little better, and I think it is generally a good idea not to have even a theoretical blockage of that sort.
Mr. LEVEY. Although it is a theoretical power, we have not exercised it.
Mr. FRANK. You haven't exercised it and you shouldn't exercise it, so why have it?
Thank you, Madam Chair.
Mrs. KELLY. [Presiding] Thank you. Mr. Bachus.
Mr. BACHUS. Thank you. Thank you, Madam Chairman. The first thing I would like to say, if you look at Mr. Hamilton's testimony, you come over to the seventh page, which are his conclusions. I want to commend all three of you gentlemen because his conclusion is that intelligence and law enforcement efforts have worked. That is what his conclusion of the report is, that what you have been doing has worked. I think we all when we say that, everybody says we have got to continue to be diligent. I think we all realize that. I don't think there are any disagreements there. If you read his testimony, if you read the monograph, if you read the 9/11 Commission, it tells you bottom line, we have been very effective at degrading al Qaeda.
Page 103 PREV PAGE TOP OF DOC For that reason, I want to introduce for the record and ask unanimous consent to introduce for the record about three pages of quotes from the 9/11 Commission testimony, their report and also their monograph detailing excellent U.S. Government successes in the counterterrorism financial field. I would like to introduce that without objection.
Mrs. KELLY. Without objection, so ordered.
[The following information can be found on page 140 in the appendix.]
Mr. BACHUS. I would also, and I don't know that anyone has said this to date, but this committee has performed 12 full committee and subcommittee hearings on 9/11. What we have found, number one, is that our U.S. financial services industry has provided law enforcement and intelligence agencies with extraordinary cooperation. That is exactly what the 9/11 Commission said. They said our domestic financial institutions have given extraordinary support to our efforts to get information. What they also say is that what we have donein fact, Mr. Hamilton said he could offer no need for additional legislation.
With that, I would like to address some questions to the Treasury Department, if I could. Mr. Levey, the 9/11 Commission, they asked you to do certain things and I think they are validating what you have done. That is my idea, because they say three things. One, that you should focus on the full range of tools to bring to bear on the threat of terrorist financing. Isn't that what the government and Treasury is doing today?
Mr. LEVEY. That is certainly what we are trying to do, sir. That is exactly right. We are working together with agencies around the government to determine what in each circumstance is the appropriate tool to be exercised. I think the 9/11 CommissionI appreciate very much their recognition that we have improved our strategies and are now on the right track in that respect.
Mr. BACHUS. They characterize your efforts as being very successful. I don't know that I have read that anywhere.
Page 104 PREV PAGE TOP OF DOC Second, Mr. Hamilton today in their report stresses that you should push the international community through the financial action task force and other mechanisms. Isn't that exactly what Treasury has been doing?
Mr. LEVEY. Indeed they have. It is easy for me to give Treasury credit since almost all of this work occurred before I got there, so I don't feel that it is immodest in any way. They have done an excellent job with respect to pushing for international cooperation through the FATF. There is more work to be done, particularly in the implementation side, as Chairman Hamilton said, but this has been, I think, one of the areas that we can take the most pride in.
Mr. BACHUS. As far as those successes, in fact, they recognize those successes, but also the CRS report to Congress on the 9/11 Commission recommendation actually goes into about two pages of successes where you have been able to enlist numerous countries and their compliance has increased dramatically. And you have also established standards through the financial action task force, through the IMF, through the World Bank.
Mr. LEVEY. That is all true. I would like to, if I could just say that that is in some respects an accomplishment of the Treasury Department but that is also something that the State Department and the Justice Department play an important role in, and they deserve a lot of the credit there.
Mr. BACHUS. The TFI office, is that the mechanism you plan to use to deal with the issues
Mrs. KELLY. The gentleman's time has expired. If you have a question, please finish and then we will have a short answer.
Mr. BACHUS. Thank you.
Mrs. KELLY. Do you have a question? If you want to finish your question, please do and then we can have a short answer.
Page 105 PREV PAGE TOP OF DOC Mr. BACHUS. The TFI office, is that the mechanism that you plan to use to deal with these issues over the long term?
Mr. LEVEY. Yes, indeed. This is an attempt to set the Treasury Department up for what is going to be a long-term fight and we will be now structured to take that on.
Mr. BACHUS. I think as you said in your testimony, we have all said, the fact we have been successful today does not mean we don't need to redouble our efforts in the future, because there is a lot in this report that says it is going to be a tough job. One of them is that they don't need that much money. So we may be dealing with small amounts of money and how do we stop that without sacrificing our own constitutional rights and our own freedom of movement.
Mrs. KELLY. The gentleman's time has expired. Mr. Israel.
Mr. ISRAEL. Thank you, Madam Chair. I have two questions, one for Mr. Levey, and one for my friend Mr. Libutti.
Mr. Libutti, many of us are very deeply concerned with cyber vulnerabilities of financial institutions and many of us on this committee have made several visits to the New York Stock Exchange, for example, as I did. On one of my trips, I had a rather substantive meeting about the issue of cyber vulnerability at the stock exchange and the broad array of technologies and systems that they use to protect against.
My question is what level of consultation and cooperation do you have with institutions like the New York Stock Exchange and other critical financial institutions?
And my second question to you, sir, is, my understanding, and it may be a misinformed understanding, is that many of these systems and technologies are proprietary, so you have different financial institutions protecting their data with systems and technologies that they are not particularly willing to share with their competitors. How do you kind of integrate that? What do you do to move the whole process forward so that these technologies and protected systems aren't becoming too cumbersome and conflicting but move the entire financial community forward?
Page 106 PREV PAGE TOP OF DOC Mr. LIBUTTI. Sir, I appreciate the question. I would respond first by telling you that basic leadership 101, a spirit of cooperation and trust, has to be developed out of my front office, as it has been long before I got there, by Secretary Ridge. That is, a reachout on a continuing basis with the leadership in the private sector including cyber.
In terms of our relationship and ongoing interface with the New York Stock Exchange and the leadership of other financial institutions in New York, my assessment of that has been terrific and it has been highlighted by the terrific interaction over the last 2 or 3 weeks.
You asked a question also about, or alluded to the notion that we need to be pretty sensitive to and look at ways that we deal with private industry and perhaps even those who compete within the private industry. There is a program called a PCII which is an opportunity in plain English that protects those industries from sharing critical vulnerabilities with us that we hold, in again plain English, close to the chest. It is in the law and we probably, I would say, surprisingly haven't received a great deal of input across the private sector. Perhaps they are testing the system. Perhaps they are wondering how indeed we will administer it. But the handful of requests, that is, information that has come to us that is sensitive and vulnerable, we are working on. I have been in the organization now a little over a year and I am surprised we haven't gotten more folks coming forward sharing that information. Does that answer your question?
Mr. ISRAEL. It does. Thank you, Mr. Libutti.
Mr. Levey, when this committee marked up the antimoney laundering legislation that was later rolled into the PATRIOT Act, I had offered an amendment that was accepted by the Chairman and by the committee that would have included the use of charitable organizations, not-for-profit organizations, and nongovernmental organizations in a study of issues specifically related to the financing of terrorist groups, and the means terrorist groups use to transfer funds around the world and in the United States.
In fact, Vice Chairman Hamilton in answer to my question before, said that we don't see any evidence that the Saudi Government has actively financed terror, but it is indisputable that charitable organizations throughout the Middle East have been financing terrorist organizations and activities. While that amendment was accepted by the committee, it was not included in the final legislation.
Page 107 PREV PAGE TOP OF DOC Do you believe that the Treasury Department ought to be formally studying the use of charitable organizations in the financing of terror? Would that be useful, do you believe?
Mr. LEVEY. I think that obviously the problem of terrorist financing through charities is one that is clear and I think maybe even more clear by the 9/11 Commission report because it makesit tells us that the majority of the money raised for al Qaeda came through organizations like this. I think it is fair to say that there is an awful lot of study going on, so I am hesitant to take on a formal burden even though I think there is a lot of study already going on about how different charities are being used and have been used in the past to fund terrorist activities.
Mr. ISRAEL. Is the Treasury Department to your knowledge actively studying the role of charitable organizations and money laundering through charitable organizations with respect to terror?
Mr. LEVEY. I believe there is a fair amount of work going on in that respect and that the IRS is doing work to update the types of information that they are getting from organizations before they get tax-exempt status and that sort of thing. I am not sure I am familiar with all the details but I know that there is a significant amount of work going on.
Mr. ISRAEL. My time is running out, but if you would be kind enough to look into that and respond with more detail, I would appreciate it.
Mr. LEVEY. I would be happy to.
Mr. ISRAEL. Thank you, sir. Thank you, Madam Chair.
Mrs. KELLY. Thank you, Mr. Israel.
It is now my turn to ask questions so I am going to ask a question about whether or not you expect Saudi Arabia to actually establish a FIU anytime soon. I have in my hand a press release from the Royal Embassy of Saudi Arabia. The reason I am asking a question here is that they are very fond about talking about their decision to establish a FIU but they still don't have one almost 2 years later. A press release but no action. I am concerned that this is another case of Saudi backsliding.
Page 108 PREV PAGE TOP OF DOC This also leads to a broader issue that we have to consider, and that is the whole issue of international cooperation. The 9/11 Commission staff monograph indicates that antiterrorist financing efforts had little success without help from our foreign counterparts. The Independent Task Force on Terrorist Financing recently put forth a proposal aimed at improving these efforts. Among its recommendations were that Congress establish a Treasury-led certification regime on terrorist financing that would report annually to Congress the efforts of countries to combat terror funding and would have the ability to impose sanctions on countries that failed to perform up to standard.
In light of the areas where we find either episodic assistance or no assistance whatsoever, do you think this is a proposal that Congress ought to be considering? I think the proposal rightly emphasizes the central role of Treasury in this effort. I would like your comments, Mr. Levey.
Mr. LEVEY. I guess you have a couple of questions there. Let me start on the certification regime that is suggested there with Treasury having the authority to designate countries. I think that that is something that has a lot of complications associated with it that we would have to proceed cautiously on. I think, just listening to Vice Chairman Hamilton this morning, we have a situation like Pakistan where perhaps on this issue they are not doing everything that we would like them to do in terms of their financial regime, but obviously with respect to terrorism generally, they are an absolutely essential partner. These sorts of certification regimes have difficulties and the PATRIOT Act already gives the Secretary of the Treasury at least some authority in this respect under section 311 to not only designate certain countries and jurisdictions as primary money laundering concerns, but what is particularly effective there is simply the threatened use of 311 sanctions being a very effective tool to get people to move.
With respect to the Saudi Arabia question, I would have to say I agree with what I think your sentiment is, which is that this is an instance in which there was an indication that they would be moving to do something we want them to do but it hasn't happened yet. Obviously as you know very well, there are lots of areas on which they have made significant progress, progress that is very valuable to us, and I think Chairman Hamilton alluded to that, but there are also situations where they need to move further and we need to continue to push them. The FIU situation is one of them. Another is that while they have announced a regime to monitor charities in the kingdom, it doesn't cover certain organizations that we have long thought to have terrorist financing concerns.
Page 109 PREV PAGE TOP OF DOC Mrs. KELLY. Thank you. The committee is familiar with the ability of FINTRAC, the Canadian Financial Intelligence Unit, and AUSTRAC, the Australian FIU, to receive international wire transfer data electronically. Wouldn't this be helpful for our FIU and Treasury, the FinCEN, to be able to have that authority, and what can you tell me about that?
Mr. LEVEY. I do thinkthis is something that I know Bill Fox is looking at very carefully. It does frankly appear to me to be something that would be useful. I am a little hesitant to jump in without knowing the details. It does seem to me there may be a scaleability problem in terms of what something Canada and Australia are able to do; whether we, given the volume that we would have to deal with, would be able to just implement the same thing. But it is certainly in concept an idea that I think we should be pursuing.
Mrs. KELLY. If you need more money to get the job done electronically, I think we must address that here in Congress and we need to do it rapidly.
I want to go to another question. The 9/11 Commission's monograph reveals in detail how the hijackers received money from wire transfers, cash, travelers checks that were carried in credit or debit cards for overseas bank accounts. We know that credit cards, debit cards, ATM cards, store value cards, can be used to access foreign banks and conduct transactions. How do we address this issue?
Mr. LEVEY. You point out a very difficult problem. This is, I think, part of the problem, that we are also dealing with very small amounts of money. The amounts of money that were going to these hijackers are in the hundreds or perhaps thousands and not the volume of money that our current antimoney laundering regime is designed to detect. What we need to do, frankly, is work with the private sector, who has been very cooperative with us, to figure out ways where we can share information with them to help them better detect terrorist financing.
I point out one possibility there is through the Bank Secrecy Act advisory group where Bill Fox already has this organization set up by the Congress which has FACA exemption that is specifically designed, I think, to encourage just that kind of frank discussion between the government and the private sector about how best to share the information that is needed in this context.
Page 110 PREV PAGE TOP OF DOC Mrs. KELLY. Do either of the other witnesses have a response to that comment, to that question?
Thank you. My time is up. Ms. McCarthy.
Mrs. MCCARTHY. Thank you. Again I thank you for sitting through this with us.
Let me say something about the PATRIOT Act. I voted for it. One of the things that I happened to agree with on the sunset part of it is according to the 9/11 Commission, 9/11 happened because there were failures on every single level, including Congress, because we didn't have the oversight. And so I also think that by having a sunset, it makes us, all of us in every one of our committees, have the oversight to see what is right, what is wrong, and how can we improve it. I think that the majority of Members feel that way.
Explaining that to your constituent back home, that is another thing. Which brings us up to the point of where the small rural banks are not getting information that our larger corporation banks are getting. If we follow patterns, those that are coming in here to do harm to us, if I was them, I certainly wouldn't go to a large bank. I would go to some local little bank that wouldn't be noticed that much. We have a lot of work.
I guess that follows up with my other question which a couple of members already alluded to. The lone person out there, the one guy that is trying to do harm to us, and again just following the small amounts of money that are taken out and tracking on that, hopefully you will reach out to those rural banks, the smaller banks. They might be able to think outside the box. Because all of usI am sitting here thinking we are giving away, because it is going to be on C-SPAN, everything that we are doing. Sometimes I wonder. I believe in open government, but sometimes do we give them too much information on what we are doing, which is the way we live and we don't want to give that up. But, gosh, sometimes I sit here and think all the information you are giving us, you are also giving to the world. Don't think they are not listening, thinking how are we going to outfox them. With that, I will open it up to any responses.
Page 111 PREV PAGE TOP OF DOC Mr. LEVEY. I thought only my mother was watching, but maybe not.
Mrs. MCCARTHY. You would be surprised. I thought the same thing, that people weren't watching. But even when we are giving speeches at 11 and 12 o'clock at night on the floor, we get e-mails. You are on prime time somewhere in this country.
Mr. LEVEY. Let me just say that you have highlighted a difficult problem. One thing that we are trying to grapple with, that this is not something where we needed to be 3 years ago but we are making great improvements. One thing that is being done, I think, to give the kind of feedback that banks are looking for in terms of suspicious activity reports they are filing is that FinCEN is putting together their SAR activity review. They basically do a detailed and sophisticated analysis of the SARs that are filed. This is one that just came out this month. It is excellent. Not only is it I think substantively very good, but it invites the private sector to come back and say, actually it wasn't helpful in this respect or you need to do more of this and more of that. And that is just the kind of cooperative relationship with the private sector we are trying to build. I know that that is really the centerpiece of what General Libutti is trying to build. I think we have a ways to go in this respect, but this is something that both the Department of Homeland Security and we are trying to do systematically.
Mr. LIBUTTI. My response to your fine question is really in two parts. One, education. Education needs to be applied against large institutions and small ones as well. There is no luxury in the little guywhile very important in that community, doesn't need to know how to deal with challenges and vulnerabilities to that system. I think education that starts with senior leadership in the organization or from the bottom up asking for help is absolutely paramount. I think that covers it. Education and accepting the fact that the scope of attack or vulnerability isn't simply going to be on the largest facilities.
Mrs. MCCARTHY. Could I follow up with one quick question? When I think about college students and getting false ID, that is the easiest thing to do in this country. Ask any college kid. Actually, ask any high school kid. If we can't stop high school kids from getting false IDs, how are we going to stopwe give false IDs where it is a positive-negative ID.
Page 112 PREV PAGE TOP OF DOC We have already done testing through the ATF on trying to obtain illegal guns out there. So how are we going to address this issue with so many people coming in here where it is easy? I can go to my flea market and get a whole new identity. How do you stop something like that?
Mr. LEVEY. First of all, I hope the statute of limitations has run on my high school, obtaining a false ID. But you are right, it is a very easy situation. But I think Congressman Hamilton pointed out one thing we should be doing, which is starting to look at national standards for identification. This is a bit outside my lane in my current job, but I know there is an ongoing effort within the executive branch both before and in response to the 9/11 Commission report.
Mr. SABIN. With respect to the questions, first on tradecraft of al Qaeda and other terrorist groups, they are monitoring us. They areas evidenced in the terrorist training manual that was recovered in searches, they are reviewing what we are doing and trying to change, and we are trying to stay two steps ahead of that.
With respect to the rural bank or the large bank that needs that feedback from the government, one thing the Justice Department did was post-9/11 set up the antiterrorism advisory councils, so you have the Joint Terrorism Task Forces that are operational components with FBI and an assortment of investigatory agents looking at action-oriented operational concerns. The antiterrorism advisory councils headed up by the U.S. attorney in each district with a litany of different agencies to share information, to undertake training and education and to assist in evaluating critical infrastructure has, a component of that, the financial services sector. So small and large banks in that community are part of those, what we call ATACs, that can share information, obtain feedback, use the guidance that Treasury posts on its Web site to disseminate and therefore be more informed and therefore understand what its government is doing and how it is using the data that is being provided through suspicious activity reports.
Page 113 PREV PAGE TOP OF DOC Mrs. MCCARTHY. Thank you.
Mrs. KELLY. Thanks, Ms. McCarthy. Mrs. Biggert.
Mrs. BIGGERT. Thank you, Madam Chairman. My first question is for Mr. Sabin. In the report, the 9/11 Commission states that the government should expect less from trying to dry up terrorist money and more from following the money for intelligence as a tool to hunt terrorists, understand their networks and disrupt their operations. And we have been talking about that a lot today, but my basic question, though, is who in the U.S. Government decides either to freeze or to follow the money?
Mr. SABIN. Through the PCC that was referred to, the policy coordinating committee, earlier today. You have on a case-by-case basis the weighing of the equities, on what stage should you designate, on what stage should you go operational and at what time should you charge or do search warrants or pursue specific investigatory avenues. So that balancing act and those weighing of equities occurs on each of the different investigations or cases. If it ripens into an actual criminal prosecution, so be it, but the idea is prevention rather than actual prosecution. So in certain instances, there will be a designation without a criminal prosecution. In others, vice versa. So those are where that communication that was so lauded and applauded in the Commission report and in the monograph is being actually undertaken by government officials.
Mrs. BIGGERT. Is there any danger or is that a change in policy that we have been dealing with our international partners? Are we sending a different signal when we are kind of going in between the two or changing that? Are they going to be concerned about us changing the track? It seems that we were doing the freezing of assets and suddenly we are moving to something else. Is that a problem with anyone internationally?
Mr. SABIN. Others may speak to that more directly, but it is going to be important to have a clear message and for those connections and relationships to be both formal and informal so that people understand what we are doing and why we are doing it, to articulate that through the appropriate intelligence channels or cop-to-cop channels or prosecutorial channels or the military channels or the diplomatic channels, so that people understand what we are doing and what is our end game. That was one of the key things that was addressed in the report, was have an end game, have a strategic view of where you want to go from where you are presently, and how you can seek to accomplish that with all the government agencies contributing to that process.
Page 114 PREV PAGE TOP OF DOC Mr. LEVEY. Can I just make one comment?
Mrs. BIGGERT. Yes.
Mr. LEVEY. Which is that I totally agree with everything Mr. Sabin said. I don't think that there is any danger of confusion out there. The message is we are going to use all of our tools and use them all as they are most effective. But I want to make one comment, which is that it is not an either/or. I think Congressman Hamilton pointed this out, at least at one point. It can often be a both/and, where that is the best approach, where we can both designate and prosecute as we have done in Holy Land, that is even more effective. And we will continue to do that when we have the chance to.
Mrs. BIGGERT. Then continuing on that line, Mr. Levey, we have got a high level of cooperation from other nations in really tracing the terror finance, once the funds leave the U.S. financial system or before they enter it. Then the process gets much more difficult. Can you talk a little bit about the sort of tools that would make that easier for us?
Mr. LEVEY. One of the thingsI think what you are referring to is that we need to make sure that in order to track the money, that we are also able to track it abroad. We certainly have
Mrs. BIGGERT. Either before it gets here or before it leaves the country.
Mr. LEVEY. Right. We do have lots of mechanisms for doing that. We have lots of people in the government working on that issue in particular. One of the things I can comment on is that we are building relationships through our financial intelligence units around the country, around the world I should say, where FinCEN is our representative here in the United States, but then there are financial intelligence units in other countries around the world to try to exchange that sort of information as quickly as possible, because we have to bewe have to be quick if we are going to be effective.
Page 115 PREV PAGE TOP OF DOC The CHAIRMAN. [Presiding] The gentlewoman's time has expired. The gentlelady from California.
Ms. WATERS. Thank you very much, Mr. Chairman. I would like to thank our witnesses. My head is just swimming from all of this interagency cooperation that we have and I am very pleased that people are cooperating so well. But I think that we all agree that thus far we are only able to identify relatively small amounts of money that is supporting terrorism, and even with the new laws under the PATRIOT Act where we can indict those who are substantial supporters, it is still very limited.
Some questions were raised here today that have not really been dealt with. I and others continue to raise questions about the charitable organizations and the Saudi government's relationship to them, and I for one believe that we are not able to penetrate just how big that is because the Saudis are our friends for a lot of reasons, close to this administration, and we have oil interests and other kinds of things. And I think that this cozy relationship is not allowing us to deal with the Saudis in the way that we should be. We will eventually get to it but it is going to be late in the game.
Secondly, Congresswoman Kelly asked about the blood diamonds. She asked about Liberia and Charles Taylor which I am led to believe is a source of funding. We have not talked about tanzanite, tanzanite that is mined mostly in Africa that supposedly has been supporting Osama bin Laden for a long time. We say nothing about the drugs and the poppy fields in Afghanistan. You guys can tell us how great friends we are with Pakistan all you want. That border between Pakistan and Afghanistan, everything goes on. That is where all the dope dealing and the black market smuggling and crossing of the borders with the Taliban and al Qaeda and everybody else is. God bless Mr. Musharraf. I think he throws us a bone from time to time, but I am not convinced that there is any great effort to deal with terrorists. Are the madrassas still going on? The schools are still there. Are they still being funded by the Saudis? Yes, they are. That is where all the fundamentalism and the hatred is taught.
Page 116 PREV PAGE TOP OF DOC Here I guess I am appreciative for the efforts that you make, but nobody is talking about the substantial terrorist funding that come from those sources that we have alluded to. And, in addition to that, where does the money come from to purchase the surface-to-air missiles, the grenade launchers, the AK-47s, the A-16s? Let's talk real money and let's talk real support for terrorism, and let's talk about why it is difficult to get at those sources. Until we face up to it, the interagency task force will be chasing each other for a long time. Anybody can respond.
Mr. SABIN. I will start. With respect to alternative remittance systems and the ability to fund through areas that would include drugs or weapons or infant formula, we are reviewingthere are GAO studies that confirm that, about the government efforts to review and address, including FBI investigations in that regard. We have brought cases that relate toin both undercover and other types of criminal prosecutions relating to, for example, in Colombia, the FARC and the AUC, both foreign terrorist designated organizations.
Ms. WATERS. If I could interrupt you for just one moment. Just tell me about the poppy fields that are flourishing in Afghanistan and the fact that we have Karzai in Kabul and we kind of watch him to make sure they don't kill him, but the Taliban and the warlords and everybody else are in control and we just turn a blind eye because we can't go in there and disrupt the cultivation, the growing of these poppy fields, because we are relying on that money to support that economy and we don't want to make enemies over there. Let's just talk about that money.
Mr. SABIN. I am going to stay in my lane in terms of the Justice Department. But in terms of the 9/11 Commission report, what it found was that there was not drug trafficking funding for Osama bin Laden or al Qaeda, that it was linked to the Taliban but not to bin Laden.
With respect to Saudi charities, we are following the leadsI am a career prosecutor. We look at the facts, we look at the law and we try and achieve justice and we follow the leads where it takes us. In terms of after the May 2003 Riyadh bombings, the cooperation that has been provided to the FBI and to others that are seeking to look at those different charitable organizations have been most meaningful, as stated by Mr. Hamilton this morning.
Page 117 PREV PAGE TOP OF DOC In terms of the conflict diamonds issue that you brought up, that is a matter that was referred to the Justice Department, it is under investigation and I would refer and echo Mr. Hamilton's comments about the fact that to date nothing has been demonstrably linked between that and actual criminal charges being able to be brought, but we are currently investigating and pursuing those leads.
The CHAIRMAN. The gentlelady's time has expired. The gentlelady from Oregon, Ms. Hooley.
Ms. HOOLEY. Thank you, Mr. Chair. I want to thank all of you for being here today and all of the hard work we know you do every single day. I would like to quickly rehash the recent case of the Riggs Bank and their business dealings and possible money laundering and terrorist financing. Based on Senate banking testimony, FinCEN was not made aware of any bank secrecy problems by Riggs until 6 years after the OCC first noticed such problems. If FinCEN was not made aware of these problems until 2003, 6 years after they were first noticed, I would like to know when exactly were other terrorist financing investigators and the Justice Department and Homeland Security notified so they could quickly investigate Riggs' situation and its impact on our national and homeland security and, frankly, were they ever notified?
The second question is as the Riggs case points out, the lack of sharing of information even within the Treasury, not to mention with other Cabinet agencies, what can we do to fix this?
Third, how much progress has the Department of Treasury and its regulatory agencies made incorporating current generation information technology to identify suspicious individuals, companies, and financial transactions and connect the dots in its antimoney laundering enforcement activities? And the last question is, we have talked a lot about the PATRIOT Act, that parts of it were sunsetting. We are going to be looking at reauthorization for that. What changes do you think we need to make?
Page 118 PREV PAGE TOP OF DOC Mr. LEVEY. Let me try
Ms. HOOLEY. You can start anywhere you want on any of those questions.
Mr. LEVEY. How about I will take the easy ones and leave the hard ones for my colleagues. Actually none of those are easy, because the Riggs situation is a very serious problem. I don't want to make light of that at all. What we saw at Riggs, I think everyone agreed, was aI think they used the word themselvesa failure of oversight. What we don't know is whether what we saw at Riggs is just a chip of ice or whether it is the tip of an iceberg, because we don't have the information within FinCEN and main Treasury to know what our banking regulators are finding out there.
So in response to that, what we are doing to try to correct that, this was something that the Secretary and the Deputy Secretary already announced, is that we are negotiating arrangements with the banking regulators to make sure we get the information into FinCEN on Bank Secrecy Act compliance that they are finding out in the field, and we are learning about all significant violations of the Bank Secrecy Act reporting requirements. FinCEN has set up its own unit to deal with this issue exclusively. We need to get that information to determine whether we have a widespread problem out there. I think there is a certain amount of confidence that Riggs was an outlier, but we certainly can't guarantee that until we get that information in, and we are going to do that.
With respect to the part of your question about using sophisticated technology to deal withto identify suspicious transactions. Actually I think the monograph does a good job of explaining what we do at the Treasury Department on this issue. The private sector has a very sophisticated ability to recognize anomalies in transactions of its customers and they generally do a good job of detecting suspicious transactions in that context. But to be clear, that context is designed to detect money laundering transactions. This is what I tried to allude to at the beginning of my testimony, and which the monograph also points out. That system, while it is effective for the purposes it has been designed for, is not the answer to the question about detecting terrorist financing.
Page 119 PREV PAGE TOP OF DOC I will let Barry respond to the other questions.
Mr. SABIN. With respect to Riggs, that is a short answer. It is pending investigation. I can't comment further. With respect to proposed legislation, I do have some suggestions building upon some of the questions that were asked of Mr. Hamilton this morning. I would ask this committee and the Congress to pursue legislation presently identified as H.R. 4942 which would add a section 2339 D to the material support statutes that I talked about in my opening remarks, that would enable military-style training-camp activity, training abroad in terrorist training camps, to be clearly a Federal criminal offense. Right now we use it within the meaning of material support under 2339 B, to get technical.
Ms. HOOLEY. That is way technical.
Mr. SABIN. But it is extremely important. To take it into a larger perspective, what the cases that have been brought, we have discussed about here today, you see in the charity cases, in the fund-raising cases relating to Palestinian Islamic jihad, Hamas, Hezbollah, all emanating from the 2339 B relating to the foreign terrorist organizations.
With respect to the al Qaeda aspects, it is more the providing of personnel or the links to the actual training camps that would be much easier for us to prove and charge in terms of a clear congressional intent under 2339 D.
I would also recommend H.R. 3016, which has some technical and jurisdictional corrections as presently proposed, as well as increased penalties under the International Emergency Economic Powers Act. And also the additional provisions that I mentioned in my opening remarks.
The CHAIRMAN. The gentlelady's time has expired.
Ms. HOOLEY. I can't follow up real quick?
The CHAIRMAN. Real quick.
Ms. HOOLEY. It has been 7 years since we discovered the Riggs' noncompliance and it is post-9/11. I am a little troubled about hearing that you have to negotiate with regulators to get your information.
Page 120 PREV PAGE TOP OF DOC Thank you, Mr. Chairman.
The CHAIRMAN. The gentleman from Texas.
Mr. PAUL. Thank you, Mr. Chairman. Earlier I spoke about the fourth amendment and privacy issues, but I am afraid that is a moot point these days and I won't bring that up and I won't ask you about that because it seems like we have sort of conceded it, that privacy for the average American citizen is no longer of much concern. But I am concerned about the practicalities. It sounds like the more laws we have on the books, the more criminals you are going to catch, and it has been just working great. I am not convinced of that.
I have taken some advice from a John Yoder who was the director of the Asset Forfeiture Office under Reagan. He was describing the atmosphere before 9/11. Of course this is what brings this all about, the 9/11 report. In reference to that, he says, ''We already had so much information that we weren't really focusing on the right stuff. What good does it do to gather more paperwork when you are already so awash in paperwork that you are not paying attention to your own currently existing intelligence-gathering system.''
I think that is unfortunately what we are facing. The terrorists used $500,000 and I don't believe anybody proved that they even broke our financial laws. So all this activity is directed at law-abiding American citizens and hopefully we pick up a criminal here and there. On a daily basis, the American U.S. financial system transfers $1.7 trillion. So we are looking for a needle in the haystack. Yet all we do is we add more and more bureaucracy, more cost. It is costing $12 billion a year for our banks and our companies to fill out these reports. It just seems that we give up our liberties too casually and that even with the Bank Secrecy Act of 1970, we were filling out 12 million currency transaction reports every year and it didn't help us. So what we are going to do is we are going to ask for a lot more of these reports to be sent in.
Also, you have mentioned that, oh, yes, but we are having success, we are finding criminals, we are doing this. But one thing we never addressed and that we always assume is that those individuals may well have been caught by following the rules, following the laws, following the fourth amendment and getting an honest-to-goodness legitimate search warrant. You are assuming that none of these people could possibly have been caught unless we throw the fourth amendment out. That, I think, doesn't necessarily follow.
Page 121 PREV PAGE TOP OF DOC My question for the three of you has to do with the national ID card. Because in the post-9/11 atmosphere, the ease with which the PATRIOT Act was passed, legislation which had been proposed for years just got stuck in and sailed right through, this post-9/11 atmosphere now has set the stage for the national ID card. So there are a lot of people concerned about it. But once again since security or the pretense at gaining security is far superior to the burning desire for liberty, I think the national ID card is on the agenda and I think the report certainly has indicated that. So I would like to know what you think about the national ID card and how necessary is the national ID card for you to pursue your responsibilities?
Mr. SABIN. I will start. With respect to the fourth amendment, both in word and in deed, we are respectful and sensitive to using it appropriately, making sure that we execute rule 41 criminal search warrants, going to a United States district court judge and making sure that we have probable cause in order to obtain limited amounts of material that are appropriate in order to pursue that particular investigation. Whether that is through a search warrant or through electronic interceptions, we make sure that we satisfy the appropriate legal standard and don't abuse that authority or circumvent in any way, shape or form the strictures in the fourth amendment to the Constitution.
In terms of information overload, your point about the volume of information that is provided to the Federal Government, it is a lot. We need to make sure that we establish both in terms of short-term and long-term mechanisms, as was discussed this morning, the ability to exploit and use that information appropriately, by getting the experts both within the government and outside the government to educate us about how to use that information and how to make it most meaningful to us in an action format, whether that is providing guidance to the intelligence or law enforcement folks, to make sure that it is not just paperwork stacking up but it is materials that can be used and used effectively and timely.
In terms of the thorny privacy issues and the national identification card, I don't believe the Justice Department has a specific position. I will stay in lane as opposed to reaching out and advocating one position or another. I can tell you that we are seeking to understand who the individuals are and using our tools that Congress has provided us to understand the movement of moneys, the movement of individuals, the travel that occurs, and understand where they have traversed either in terms of the persons or their materials.
Page 122 PREV PAGE TOP OF DOC The CHAIRMAN. The gentleman's time has expired. The gentleman from California, Mr. Sherman.
Mr. SHERMAN. Thank you. I would briefly comment to the gentleman from Texas that there are concerns between security and privacy but they don't rise quite to the high level as security versus liberty. That is to say, it is possible that in this war against terrorism, things like my donations to various causes the President disagrees with might become public, but my right to make thosemy preference is to keep those private, but my right to make them is not at stake. The privacy interest is there.
Addressing our witnesses, we have seen a great report come out of the 9/11 Commission. They, however, in answering questions, raise as many additional questions as they answer. They provide some recommendations with some specificity. There are other recommendations that need to be fleshed out. Gentlemen, can you think of a reason why we wouldn't give them another year or two to give us another volume and to continue their good work? Anyone want to answer that one?
Mr. LEVEY. Just speaking forI really don't have a position on that. I think that is a decision for you.
Mr. SHERMAN. You are here to represent the administration. Anything we do would have to be signed by the administration. We get statements all the time of what the President's senior advisers would advise him to do. You are the President's senior advisers. Tell me now, do we shut them down or do we get a volume two?
Mr. LIBUTTI. I think it is premature to
Mr. SHERMAN. They are dead. Is it premature to treat the patient? We are reviving the recently deceased here.
Mr. LIBUTTI. Sir, with all due respect, I am going to treat the patient and I am going to be respectful.
Page 123 PREV PAGE TOP OF DOC Mr. SHERMAN. Let me go on to another question.
Mr. LIBUTTI. Sir, if I may, please. I think that very soon there will be a package forwarded to the Hill leadership to be reviewed. I think the results of that review will indicate whether it is smart or not to ask members of the 9/11 Commission to come forward and continue to support the review of that which is most important relative to national security. As I said, I say this with all due respect, sir, it is premature for me to make that comment now. I think it is smart to consider it as an option.
Mr. SHERMAN. I would hope that this would be bipartisan. I know that the administration didn't support the creation of the Commission. It would certainly do a lot for this country if the administration would support its continued existence or revitalization.
We had a huge controversy in this Congress about a particular provision of the PATRIOT Act dealing with access to library records. Of course, had we removed that element of the PATRIOT Act, you could still use grand juries. You could still use search warrants. There are plenty of other ways to get library information. Can you tell me, how many times was the PATRIOT Act provision dealing with library and bookstore records actually used in the last year and how many of those times would it have been impossible to go through the additional work of using our more general information-gathering law enforcement provisions?
Mr. SABIN. I believe sometimea year ago, the number was declassified and promulgated as zero. Section 215 had not been used with respect to libraries. Libraries is not mentioned by name in the PATRIOT Act and grand jury subpoenas had previously been used in a number of instances. But that is a number that had been publicly disseminated.
Mr. SHERMAN. As you can see from my interchange with the gentleman from Texas, I am willing to give you folks tools even when it causes me some concerns on the privacy issues. But if we give you a tool and it is not terribly necessary and it causes incredible consternation and a feeling of a lack of privacy, perhaps that is a tool that we should consider suspending and give you some other tools that maybe you would use more often.
Page 124 PREV PAGE TOP OF DOC Moving on, we have gotin trying to deal with sexual predators on the Internet, we have local law enforcement people go on line and pretend to be confused, vulnerable adolescents. Now that we have destroyed the Taliban sanctuaries, a lot of what al Qaeda and others are doing is on the Internet. Do we have the capacity to have people go on line, set up Web sites that look like they are jihadist, or answer and communicate on Web sites that are jihadist? Do we have the people who have the perfect knowledge of Arabic, the understanding of the Koran and how it is being interpreted, the ability to speak the rhetoric of extremism? Do we have the people to go on line, just as we have local police officials that do an excellent job of imitating the vulnerable adolescent and are able to trick the predators? Because it occurs to me that just as we are worried about sexual predators, these terrorists are the major nonsexual predators that we have.
The CHAIRMAN. The gentleman's time has expired. The panel may respond.
Mr. SABIN. My understanding is that yes, the FBI has identified that issue, is acting upon the issue. Indeed a recent case in Connecticut, Babar Ahmed, related to the understanding of the use of the Internet for violent jihad activities to recruit and fund activities over in Bosnia and Chechnya.
The CHAIRMAN. The gentleman from North Carolina.
Mr. WATT. Thank you, Mr. Chairman.
Mr. Levey, I was struck by your analysis that differentiated between terrorism financing and money laundering.
Over the years, we have come up with fairly good systems for setting some protocols for what would identify money laundering activities. You indicated that terrorism financing, instead of looking for large transfers, is like using a microscope to look for small transfers.
Page 125 PREV PAGE TOP OF DOC I think the concern that raises is, there are some privacy and individual rights issues that come into playmuch more front and center in that kind of microscopic look than if you are looking more globally at larger transactions where thegetting to the identification of a particular individual is triggered only by big transactions.
Yet, neither you nor Mr. Libutti made any reference in your testimony to the part of the 9/11 Commission's recommendations dealing with individual liberties and privacy. Mr. Sabin gave me about one sentence of itand his was a passing glancelet me be politically correct.
So I am wondering whether you could discuss just for a little bit some of the unique problems of privacy and individual liberties that are current in this setup.
Mr. Libutti, if you could follow up, you indicated in response to somebody's question, one of the last two or three questioners, that there is some legislative package about to come forward from the administration that will deal with the most important national security issues, again failing to acknowledge that that will have any of the recommendations that the 9/11 Commission has made about the establishment of a commission that would oversee individual liberties and privacy. So I am wondering whether any of those parts of the recommendation are likely to be in that, based on the discussions that you all have had up to this point.
Let me go to Mr. Levey and then Mr. Libutti, and since you mentionedI will let you off the hook. I won't even
Mr. SABIN. I will engage. That is okay.
Mr. WATT.ask you to address it. At least you gave it lip service.
And I want to ask another question. I just want them to deal with those two issues.
Page 126 PREV PAGE TOP OF DOC Mr. LEVEY. Well, you have raised a serious issue, and I feel like I should have gotten off the hook too, because in my testimony, I also pointed out that with respect to the problems posed by looking for the small transactions that involve terrorist financing, that we need to be sensitive to the privacy.
Mr. WATT. That must have been in your written testimony.
Mr. LEVEY. It was.
Mr. WATT. I don't think you mentioned it in your oral testimony.
Mr. LEVEY. I will learn for next time.
But this is a serious issue, and it actually gets a little bit to the comments that Mr. Paul was talking about earlier, when we are talking about looking for essentially, you know, small transactions, clean money. And we have to figure out how we are going tohow we are going to put in a system that we can have a chance of detecting it. There are privacy concerns that are raised, and I think the monograph goes through some of those; it discusses them.
I think that this is an issue that we need to study, and we need to work with the private sector that also, of course, has the interests of their customers in mind. We have to work together with them to come up with a solution. It is not going to be easy. We have to, perhaps, get together with them and give them a little bit of a description of what the needle they are looking for looks like. And we have to do that in a way that doesn't sully the reputations of people whose interests shouldn't be sullied, et cetera.
The CHAIRMAN. The gentleman's time has expired.
Mr. WATT. May I have Mr. Libutti's response?
The CHAIRMAN. I am sorry. Mr. Libutti may respond.
Mr. LIBUTTI. Thank you, Mr. Chairman, sir.
Page 127 PREV PAGE TOP OF DOC First, on the privacy piece, the Department of Homeland Security has designated a privacy officer and has a privacy officer in place. And I fully support all comments and actions relative to the Fourth Amendment. We need to do that. We need to be smart enough to balance security and privacy, and I am with you 100 percent, sir. I did that for 35 years in the United States Marine Corps and am very proud of it.
The other business that I alluded to earlier, and if I used the word or expression ''legislative package,'' or that I misspoke, what I was sayingwe all heard the President talk about the 9/11 Commission, what his intent was, and what I was suggesting, and don't have specific information about, is that I am sure that the folks and staff over at the White House, in concert with other members and the other agency led by our boss, will have specific actions that they would like people to consider.
And that is the point I was trying to make, Mr. Chairman.
The CHAIRMAN. The gentleman from Texas, Mr. Hinojosa.
Mr. HINOJOSA. Thank you, Mr. Chairman.
Before asking my questions, I would ask, Mr. Chairman, for unanimous consent to submit for the record this document showing the security features of the current matricular consular card. This document is part of the integral program for the improvement of the consular services on March 6, 2002. The Mexican Ministry of Foreign Affairs informed us that they have started issuing a new, higher security consular identification card called Matricula Consular, Alta Seguridad, or MCAS is the acronym. They began issuing the card in 2002.
The CHAIRMAN. Without objection.
[The following information can be found on page 182 in the appendix.]
Mr. HINOJOSA. Thank you.
Mr. Libutti, it is my understanding that the majority, if not all, of the financial institutions for which Homeland Security raised the threat level to Orange on Sunday, August 1st, already considered themselves as prepared as possible for potential terrorist threats and likely were unable to take additional precautions. It is also my understanding that New York City and Washington D.C., have been at threat level Orange since 9/11.
Page 128 PREV PAGE TOP OF DOC I assumed this meant that all the businesses and other persons and entities located in these two cities should also consider themselves at the Orange threat level. So why did Homeland Security and the administration make what appears to be a nonannouncement? The financial institutions could not take any additional precautions.
Can you answer that?
Mr. LIBUTTI. Sir, you made a comment relative to additional precautions not being taken, if I understood you correctly.
Mr. HINOJOSA. Well, they said that they were as prepared as they could be.
Mr. LIBUTTI. Sir, I understand now. I spent a year and a half with NYPD and set up the Counterterrorist Bureau in the city. And again, as I said earlier, I have been in this job for a year.
I have also reviewed the casing reports in detail, and I have talked to Assistant Secretary Liscouski and Assistant Secretary Hughes. One is in charge of intelligence for the Department of Homeland Security and the other is in charge of critical infrastructure.
I have also had conversations with the leadership in the private sector in New York, as have my two assistant secretaries. And the bottom line is, there were lots of other things that could be done both in terms of those sites and improving security, or said another way, reducing vulnerabilities, as well as across the financial sector.
So, my folks, my leadership, not only looked at the sites identified in New Jersey, New York and Washington, but across the entire financial sector, and provided bulletins and information in terms of best practices and lessons learned. So there was, in my humble view, lots of work that needed to be done. Lots of it has been done, and we feel good about that, but as you might suspect, there is plenty of work to continue.
And once you get it in place, once you get a grade during an inspection or review of A-plus, that doesn't mean that you stop protecting that asset. And we have learned that sometimes the hard way.
Page 129 PREV PAGE TOP OF DOC Mr. HINOJOSA. I just want to note that I supported Ranking Member Sanders' amendment that would have prohibited the U.S. Government from having even more access to private information than it already does. We need to ensure that we protect our citizens' civil rights to as great a degree as possible as we implement the 9/11 Commission report's recommendations.
After listening to all of the questions and the dialogue that occurred this morning through 2:00, I feel like there is a great deal more that we can do, and the recommendations that are in that report are certainly the things that we, as a Committee on Financial Services, are going to try to implement as bestas soon as possible. So, I thank you.
And with that, I yield back the balance of my time.
The CHAIRMAN. The gentleman yields back.
Well, I will let Mr. Bell describe the fact that he is the last questioner as he did the last witness.
Mr. BELL. Thank you, Mr. Chairman.
I think some very interesting questions have been laid on the table today. And I think we are all concerned about civil liberties, but also recognize that we live in an era where we are constantly under the threat of terrorism. And after the bomb goes off or after the plane crashes, it is a little late. And the best way to stop terroristic activity is to stop it before it starts and to foil the plot, if you will. And probably one of the best trails to accomplishing that goal is the money trail.
But I have to say, Mr. Levey, in looking at your written statement, where you raise the question, the key question before us is whether the systems we have implemented to ensure financial transparency, most of which were aimed at money laundering, are sufficient to provide the Federal Government with the information it needs to vigorously track terrorist financing.
Page 130 PREV PAGE TOP OF DOC You seem to infer that they are notand I want to be perfectly clear on thisand when you are talking about money laundering, I assume that a lot of the systems and tools that are in place are designed to capture large transactions, and that is when the alarm initially goes off. Is that fair?
Mr. LEVEY. Yes.
Mr. BELL. And what you are saying is that when it comes to financing some type of terroristic-type of activity, the size of the transaction may not be there. The alarm may never go off, as we have seen. Is that also fair?
Mr. LEVEY. There are two different things.
Mr. BELL. Will you turn on your mike?
Mr. LEVEY. No, I think it is on.
Mr. BELL. All right. I couldn't hear you.
Is that the problem, that when you are talking about financing terroristic activity, the size of the transaction may not set off any alarm?
Mr. LEVEY. That is one of the issues. That is one of the issues involved with it.
What I am saying is, we have a very robust system to detect money laundering, and that system is probably the best in the world. It provides great financial transparency in our system. And we need to build on that further and use that groundwork, too, to also look for terrorist financing.
But what I am saying isit is sort of getting back to what Chairman Hamilton was saying about not relaxing and continue to involvewe can't continue to say we have a system in place and then hope it is going to help us detect terrorist financing. We have to continue to work to build it to do a better job.
Mr. BELL. But when you are talking about building upon that system, and if you are going to move outside the size of the transaction, then what other types of red flags are you going to be looking for, and when does it really start encroaching on people's civil liberties?
Page 131 PREV PAGE TOP OF DOC Are you going to be looking at transactions or numerous transactions made by people with Arab-sounding names? Is that the kind of tool and system that we are looking at implementing?
Mr. LEVEY. No. What II don't purport to have all the ideas that we are going to need on this. But the principal thing we need to do is figure out a better way to share information that the government already has with the private sector and vice versa. To build on what we have got in Section 314 of the PATRIOT Act, which allows that information sharing in a more robust way than has ever occurred before, so that we can provide them with better guidance as to what they should be looking for and vice versa.
Mr. BELL. I don't think anybody has a problem with the information sharing per se, but what triggers the information sharing, and that is what I am trying to get at, what kind of factor outside the typical red flags you look for in a money laundering case, what kind of new factors would you be implementing to perhaps trigger the sharing of information?
Mr. LEVEY. I think that is exactly the dialogue we need to start.
Mr. BELL. We are not there yet?
Mr. LEVEY. No, we are not there.
Mr. BELL. Also, before my time runs out, you are familiar with the Culberson amendment to the Treasury appropriations, transportation bill, are you not?
Mr. LEVEY. Is this the matricula?
Mr. BELL. Yes. Could you comment on that? My understanding is that Treasury strongly opposes the amendment. And if you could explain, perhaps, what thatthe impact might be if that amendment were to be passed?
Mr. LEVEY. Well, as a matter of fact, the Secretary of the Treasury wrote a letter to Chairman Young and also to Mr. Obey on this very issue. We do oppose the amendment. The amendment, as it is currently written, would prevent us from enforcing any of our regulations under Section 326 of the PATRIOT Act, and we havethe Secretary has written a letter requesting that the provision be removed from the bill during the consideration by the full Appropriations Committee.
Page 132 PREV PAGE TOP OF DOC Mr. BELL. All right. Thank you very much for your testimony today.
Thank you, Mr. Chairman. I will yield back.
The CHAIRMAN. The gentleman yields back.
The Chair would indicate that he is going to use the prerogative of the Chair to ask one last question, Mr. Levey. Since you are from Summit County, at least we ought to let you have the last one.
Among other things, as you know, section 314 of the USA PATRIOT Act mandates the government share information relevant to money laundering and terrorist financing with the financial industry, and we are in the process that FinCEN has begun under this section to gather information on an urgent basis about suspected terrorists. But inherent in the spirit of 314 and the line of 314 was the proverbial two-way street of information sharing.
Can you tell the committee what plans you have to fulfill this mandate?
Mr. LEVEY. Well, we have the Bank Secrecy Act Advisory Group that is set up, and we are going to continue to work within that context to maximize our information sharing with the private sector. As you know, that is statutorily mandated to be exempt from the requirements of the FACA and therefore gives us a great opportunity for a real robust exchange of views with the private sector.
One thing we are looking at, and we are trying to figure out how best to do it, is to bring law enforcement into that process and share information through that mechanism with the private sector. And we look forward to working with the private sector and figuring out exactly how that is going to work.
There are a lot of complications there with respect to law enforcement, sensitive information, et cetera. But we think that that is a mechanism that we should be pursuing.
Page 133 PREV PAGE TOP OF DOC The CHAIRMAN. Thank you. Please feel free to work with our committee, as well, since we wrote the language and are obviously sensitive to that issue. We appreciate all of you gentlemen testifying today.
The Chair notes that some members may have additional questions for this panel which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record.
The CHAIRMAN. There being no further business before the committee, the committee stands adjourned.
[Whereupon, at 3:20 p.m., the committee was adjourned.]