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62–686 PDF 2010

A REVIEW OF CURRENT AND EVOLVING 

TRENDS IN TERRORISM FINANCING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 28, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–161 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

DENNIS MOORE, Kansas, Chairman 

STEPHEN F. LYNCH, Massachusetts 

RON KLEIN, Florida 

JACKIE SPEIER, California 

GWEN MOORE, Wisconsin 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

ALAN GRAYSON, Florida 

JUDY BIGGERT, Illinois 

PATRICK T. MCHENRY, North Carolina 

RON PAUL, Texas 

MICHELE BACHMANN, Minnesota 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

September 28, 2010 .......................................................................................... 1 

Appendix: 

September 28, 2010 .......................................................................................... 23 

WITNESSES 

TUESDAY, SEPTEMBER 28, 2010 

Caruso, David B., Chief Executive Officer, Dominion Advisory Group ............... 11 

Comras, Victor D., Special Counsel, The Eren Law Firm .................................... 5 

Landman, Stephen I., Director, National Security Law and Policy, The Investigative Project on Terrorism .............................................................................. 7 

Lewis, Eric L., Partner, Baach Robinson Lewis .................................................... 9 

APPENDIX 

Prepared statements: 

Minnick, Hon. Walt .......................................................................................... 24 

Caruso, David ................................................................................................... 28 

Comras, Victor D. ............................................................................................. 32 

Landman, Stephen I. ........................................................................................ 52 

Lewis, Eric L. .................................................................................................... 69 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Moore, Hon. Dennis: 

Written statement of Simon A. Charlton ....................................................... 78 

(1) 

A REVIEW OF CURRENT AND EVOLVING 

TRENDS IN TERRORISM FINANCING 

Tuesday, September 28, 2010 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 4 p.m., in room 

2128, Rayburn House Office Building, Hon. Dennis Moore [chairman of the subcommittee] presiding. 

Members present: Representatives Moore of Kansas, Lynch; 

Biggert, and Paulsen. 

Also present: Representative Minnick. 

Chairman MOORE OF KANSAS. This hearing of the Subcommittee 

on Oversight and Investigations of the House Financial Services 

Committee will come to order. 

Our hearing today is entitled, ‘‘A Review of Current and Evolving 

Trends in Terrorism Financing.’’ This is our 18th O&I hearing in 

the 111th Congress. 

We will begin this hearing with members’ opening statements, 

up to 10 minutes per side, and then we will hear testimony from 

our witnesses. 

For our witness panel, members will each have up to 5 minutes 

to question our witnesses. 

The Chair advises our witnesses to please keep your opening 

statements to 5 minutes so we can get to members’ questions. Also, 

any unanswered question can always be followed up in writing for 

the record. 

Without objection, all members’ opening statements will be made 

a part of the record. And I now recognize myself for up to 3 minutes for an opening statement. 

Today’s hearing is the third in a series of hearings focused on the 

very important issue of combating terrorism financing and money 

laundering. Earlier this year, the subcommittee held a hearing reviewing several oversight reports by GAO and the Treasury Department’s Inspector General that examined FinCEN’s efforts with 

respect to suspicious activity reports, Bank Secrecy Act compliance, 

and anti-money laundering, among other issues. 

This subcommittee held another hearing reviewing the Treasury 

Department’s efforts to combat the financing of terrorism while 

also reviewing various controls, disclosure, and decision-making 

processes to ensure law-abiding individuals and charities receive 

adequate due process. 

2 

With today’s hearing, we are taking a step back and looking at 

the broader issue of global terrorism financing in general. For example, how is terrorism being financed today, and how are terrorist 

organizations altering their financing techniques to avoid current 

efforts by the U.S. Government to stem the flow of money to terrorists? What are the latest trends our government needs to pay attention to so that we are making every effort to eliminate the financing of terrorism? 

I look forward to hearing from our panel of nongovernment witnesses who come to the table with a variety of perspectives to help 

provide a fresh look at these difficult questions. 

The May 1st Time Square bomb attempt earlier this year is a 

vivid remainder that despite a long period of time passing, over 9 

years now since the tragic September 11, 2001, terrorist attacks, 

there remain those who wish to do us harm. And our government 

should remain vigilant in shutting those terrorist groups down, including stopping the financing that supports them. 

This week, the Obama Administration announced plans to require U.S. banks to report all electronic money transfers into and 

out of the country to the authorities with the aim of helping the 

government better track the kind of money transfers that helped 

finance the al Qaeda hijackers on 9/11. We must keep in mind that 

the government has limited resources, and we will want to review 

that plan to ensure it is properly analyzed in the days and weeks 

ahead. 

Should the government take other steps to better combat the financing of terrorism? I look forward to hearing from our witnesses 

to explore this issue further. 

I now recognize for 4 minutes the ranking member of this subcommittee, my colleague and friend from Illinois, Ranking Member 

Judy Biggert. 

Mrs. BIGGERT. Thank you, Mr. Chairman, and thank you for 

scheduling today’s important hearing. It is clear that terrorists will 

stop at nothing to raise funds and funnel money to harm our citizens and our way of life. They will use any means possible—credit 

card fraud, travelers checks, and Internet payment systems—to 

carry out their attacks. I am very concerned that terrorists continue to exploit formal and informal financial systems to move 

amounts of money ranging from thousands to upwards of billions 

of dollars. Terrorists are nimble at adapting to an ever-changing 

marketplace, trying to keep one step ahead of financial institutions, 

regulators, and law enforcement. 

Are the efforts of financial institutions, the regulators and law 

enforcement sufficiently vigilant and agile to track and dismantle 

terrorist financing and ultimately shut down terrorist operations? 

Should certain efforts be reformed, better targeted, and streamlined? 

According to today’s witnesses, I think we will learn that there 

certainly is room for improvement. Improvement is not solely the 

responsibility of one regulator, one financial institution or one law 

enforcement entity. It is everyone’s responsibility to stop the financing of terrorism. National security should be at the top of everyone’s agenda, and failure to do so is unacceptable. 

3 

Finally, the United States cannot do this alone. We must 

strengthen partnerships and commitments from the international 

community to bolster antiterrorist financing operations. So I look 

forward to hearing from today’s witnesses, and I yield back. 

Chairman MOORE OF KANSAS. Thank you. 

Next, the Chair recognizes Mr. Lynch from Massachusetts for 

21⁄2 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman, and Ranking Member 

Biggert, for holding this hearing. 

I would like to welcome the witnesses and thank them for their 

willingness to help the committee with its work. As the cochairperson of the Task Force on Terrorist Financing and Anti-Proliferation, I sent along with my colleague Mr. Castle of Delaware a letter 

to the chairman back in May expressing an interest in holding a 

hearing that would focus on the development and growth of the informal banking system. We have seen one recent example of this 

system in the case of the Times Square bombing. 

Since the bombing attempt occurred over the summer, we have 

learned that Faisal Shahzad attained transfers of $5,000 and 

$7,000 which were provided by an informal money system known 

as a hawala. Hawalas or hundis, as they are sometimes known, operate apart from the regulatory grid. Terrorist organizations have 

exploited the informal nature of the hawala structure to move cash 

across borders and to fund their illicit activities. 

Despite the certain success of our enforcement agencies in preventing the use of the formal banking system by terrorist groups, 

we need to know more about informal transfer systems like these 

hawalas that allow operations to continue. 

I had an opportunity to read over the testimony of each of our 

witnesses last night. And I look forward to and welcome their 

thoughts and suggestions in terms of how we might have greater 

success against these informal money transfer systems. Again, I 

thank you for your willingness to help the committee with its work, 

and I yield back the balance of my time. 

Chairman MOORE OF KANSAS. Thank you, sir. 

The Chair next recognizes Mr. Paulsen from Minnesota for 4 

minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman, and Ranking Member 

Biggert, for holding this important hearing as well today. 

We know that financial institutions often serve as the first line 

of defense in detecting financial crimes and providing critical information to law enforcement. The ability to follow the money trail 

provides our intelligence and our law enforcement community with 

information that leads to a broader understanding of terrorist organizations and drug dealers. And certainly, the laws that passed in 

Congress since 9/11 have been crucial in helping to obtain that information. It is essential to catching criminals and defeating terrorists. 

But we must be vigilant and make sure that we can to continue 

to provide the necessary tools. 

In light of the President’s proposal earlier this week to monitor 

all electronic money transferrings that are coming in and out of 

this country, I am interested in hearing more about how we can 

4 

make improvements in tracking terrorist financing from the panel 

today . 

And I want to thank the witnesses. I look forward to the testimony and making proposals that we achieve some additional success. 

Mr. Chairman, I yield back. 

Chairman MOORE OF KANSAS. Thank you, sir. 

The Chair now asks unanimous consent for Representative Walt 

Minnick to participate in today’s hearing and give a brief opening 

statement. Without objection, Mr. Minnick, you are recognized for 

up to 31⁄2 minutes, sir. 

Mr. MINNICK. I thank you, Chairman Moore and Ranking Member Biggert. I commend you for holding this important hearing 

today and I thank you for the opportunity to participate. 

As 9/11 illustrated with jarring clarity, disrupting the financing 

of global terrorism is critically important to the survival of civilized 

society. On this, the 9th anniversary of this tragedy, we need to examine the progress that has been made and the shortfalls in the 

international financial surveillance system that are yet to be addressed. 

Just how vulnerable is our banking system today to being the 

conduit through which sophisticated global terrorist groups finance 

their infrastructure and procure their weapons of death and destruction? How are we doing in identifying and using financial information to disrupt related endeavors such as drug trafficking, 

weapon sales, sanction breaking, and the money laundering incident to other large-scale criminal activity? 

We hope and expect that our witnesses today will give us some 

of the answers. 

The committee has previously discussed the lack of oversight of 

massive fund flows originating in the Middle East. It has studied 

the interconnectiveness of global financial centers. It has explored 

the threats posed by banking secrecy rules in Switzerland, the Caribbean, and emerging financial centers of the Far East. It has argued the trade-offs between maintaining privacy and disclosing 

threats to international security. 

We are here today to learn whether the U.S. financial authorities 

have the tools, staffing, and the will to successfully perform our 

Nation’s portion of this task: to discover whether foreign governments and international financial institutions are similarly focused 

and effective; and to understand whether this information is being 

shared and effectively used to arrest and imprison drug kingpins, 

foil al Qaeda and other international terrorist groups, enforce trade 

sanctions, and identify global criminal activity. 

Do we understand our vulnerabilities, and are we working effectively to overcome them? These are all questions that must be answered to assure our citizens that our government is protecting 

both their assets and our Nation’s security in an increasingly dangerous and interconnected world. 

Thank you, Mr. Chairman. I yield back. 

Chairman MOORE OF KANSAS. Thank you, Mr. Minnick. 

I yield myself an additional minute. 

Before our witnesses testify, I want to put today’s testimony in 

the proper context. I am—and I hope all of us are—most interested 

5 

in learning about the latest trends in terrorist financing and/or 

money laundering, so that we can make sure our government is 

adapting and is fully prepared to keep up with them. 

There are some allegations in the written testimony where parties not present are named and accused. We are not a court of law, 

and we cannot engage in factfinding in this setting. We do not have 

all the facts or the response—if we don’t have the response of those 

named. Opinions expressed and allegations made must be viewed 

within that context, and we will leave the record of the hearing 

open to afford any party named an opportunity to present their 

own response and their side of the story. 

I am pleased now to introduce our panel of witnesses this afternoon. First, Mr. Victor Comras, special counsel of the Eren Law 

Firm. Mr. Comras is a retired career U.S. diplomat, having served 

35 years at the State Department before being appointed by thenUnited Nations Secretary General Kofi Annan to serve as one of 

five international monitors to oversee the implementation of Security Council measures against al Qaeda and tourism financing. 

Second, Mr. Stephen Landman, director of national security law 

and policy at the Investigative Project on Terrorism. Mr. Landman 

has researched and written extensively on issues related to terrorist support structures with a focus on financing and the use of 

developing technologies by terrorist groups. 

Third, Mr. Eric Lewis, partner at Baach Robinson Lewis, where 

he has represented clients in a variety of complex legal cases, many 

involving financial fraud. Mr. Lewis previously served for many 

years as an adjunct professor of law at Georgetown University. 

And finally, Mr. David Caruso, chief executive officer, Dominion 

Advisory Group. Mr. Caruso began his career as a Special Agent 

with the U.S. Secret Service before being hired to manage the AntiMoney Laundering and Enhanced Due Diligence Group at 

JPMorgan. He subsequently served as a director at two Big Four 

accounting firms, where he led anti-money laundering compliance 

and fraud investigations and has more than 15 years of experience 

creating and implementing comprehensive anti-money laundering 

or AML programs. 

Without objection, your written statements will be made a part 

of the record. 

Mr. Comras, sir, you are recognized for 5 minutes. 

STATEMENT OF VICTOR D. COMRAS, SPECIAL COUNSEL, THE 

EREN LAW FIRM 

Mr. COMRAS. I am here today to express my views and concerns 

with regard to U.S. and international efforts to stem the flow of financial support to terrorist organizations. 

As mentioned, we have just passed the 9th anniversary of that 

terrible 9/11 attack that confirmed for us and for most of the international community that international terrorism poses one of the 

gravest threats to international peace and security. 

Since then, governments have spent well into the hundreds of 

billions of dollars to prevent, defend against, and fight terrorism, 

and to provide security for their interests at home and abroad. And 

the world’s financial community has invested billions more on regulatory compliance measures to police accounts and transactions in 

6 

order to steer clear of counterterrorism and money-laundering 

issues. 

Yet, terrorism continues to poses a worldwide threat. Empirical 

evidence demonstrates that al Qaeda, the Taliban, Hamas, 

Hezbollah, and other terrorist groups continue to have access to the 

funds they need to maintain their organizations and their terrorist 

operations. And if anything, Taliban funding is expanding, not diminishing. 

The Taliban’s cash flow from Afghanistan’s poppy fields comes as 

no surprise, but the $106 million they reportedly received last year 

from overseas donors is a real eye-opener. 

Hamas and Hezbollah have also developed their own worldwide 

financial network, drawing closely on their links with the Muslim 

Brotherhood. These terrorist groups have also tapped into criminal 

networks operating in the tri-border area of Latin America, and in 

West Africa and Southeast Asia. And this transfer of money from 

criminal activities to terrorism relies heavily on money-laundering 

techniques here and abroad. 

I know, Mr. Chairman, that our U.S. financial institutions take 

the threat of international terrorism very seriously. They have 

come a long way since 9/11 in putting in place effective procedures 

to identify reporting to block suspicious transactions, and the U.S. 

Government regulatory agencies are now both intensive and vigilant in their oversight. 

But while great strides have been made in cutting down the flow 

of terrorism funds from the United States, our banks remain awkwardly vulnerable to getting caught up in terrorist group-related 

transactions that originate and terminate overseas. Our banks 

have little choice but to rely on the veracity and accuracy of the 

transactional information provided to them by their overseas clients and associates. And in the fast and very competitive world of 

international financial transactions, these assurances are often 

shortchanged. 

The problem is further complicated by the emergence overseas of 

numerous underfunded and underregulated homegrown banks and 

informal transfer facilities that lack the wherewithal to mount and 

maintain an effective compliance system. And many of these financial institutions are located in areas quite susceptible to the recruitment of terrorists. 

It is essential, therefore, that there be greater cooperation between the U.S. Government in sharing cautionary information that 

they acquire through their own channels and alerting their banks, 

our banks, to such suspicious transactions; not just to rely on the 

one-way flow of information from the banks to the government that 

seems to exist today. 

When I say that the locus of terrorism financing problem is 

largely overseas, I do so with a caveat. As you know, there have 

been several actions recently to penalize financial institutions, foreign financial institutions with branches in the United States, for 

their involvement in dollarizing terrorist-related transactions. 

There have been other egregious cases where foreign bank 

branches in the United States have sought to circumvent our sanctions laws and regulations. 

7 

And when we take these stringent actions against them, we send 

a strong message that the United States will not countenance such 

activities in the United States. 

And Mr. Chairman, an even stronger message is now being sent 

by victims of terrorism as they move in U.S. courts to hold these 

and other financial institutions accountable for facilitating the flow 

of funds to terrorist organizations. 

We must face up to the fact, Mr. Chairman, that while we take 

seriously the illegality of all transactions that support terrorism in 

their activities, many other countries do not. Many of the transactions that these banks have engaged in are not considered illegal 

in many of the other countries in which they operate. 

I can tell you that shortly after 9/11, you may recall the Security 

Council adopted resolution 1373, which was meant in part to obligate all countries to prevent the transfer of funds to terrorist organizations for any terrorist purposes. But that resolution has a serious loophole; it fails to define terrorism. Rather, it leaves to each 

country to decide for itself which groups they consider terrorists 

and which they hail as freedom fighters. 

The fact is that there is only really a very small fragile and narrow international consensus as to who the terrorists are. For the 

most part, it is represented in a small list of designated al Qaeda 

and Taliban entities and individuals that has been published by 

the United Nations. I want to make it clear; beyond that point, beyond that list of designated individuals and entities, there is no 

international consensus and, therefore, no clear and enforceable 

international obligation which inhibits countries from allowing 

their financial institutions to engage in financial transactions with 

such undesignated individuals and entities. Given U.S. bank interaction with this larger international— 

Chairman MOORE OF KANSAS. The gentlemen’s time has expired. 

Will you please wind up? 

Mr. COMRAS. —banking community, the vulnerabilities become 

stark. And we must be extra vigilant when it comes to ensuring the 

information regarding the originator and ultimate recipient of each 

transaction is complete and accurate. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Comras can be found on page 32 

of the appendix.] 

Chairman MOORE OF KANSAS. Thank you, sir. 

Mr. Landman, you are recognized for up to 5 minutes, sir. 

STATEMENT OF STEPHEN I. LANDMAN, DIRECTOR, NATIONAL 

SECURITY LAW AND POLICY, THE INVESTIGATIVE PROJECT 

ON TERRORISM 

Mr. LANDMAN. Thank you, Chairman Moore, Ranking Member 

Biggert, and distinguished members of the subcommittee. Thank 

you very much for holding today’s hearing on the evolving threat 

of terrorist financing. 

In the past decade, the speed with which the United States has 

developed, implemented, and fine-tuned its counterterrorist financing strategy has been nothing if not impressive. 

Despite these successes, however, terrorist groups continue to 

raise and move money for recruitment, indoctrination, logistical 

8 

support, training, and to finance their murderous actions. As we 

are learning, however, like the terrorist groups, their financing 

crosses both geographical borders and technological boundaries. Indeed, like water on concrete, this money is finding all of the holes. 

Through a combination of criminal prosecution, regulatory enforcement, and civil litigation, the United States has effectively 

closed off the formal financial sector to terrorist groups. At the 

forefront of the regulatory reforms are amendments to the BSA 

that accompany the PATRIOT Act. These updated recordkeeping 

and reporting requirements have expanded both the depth and 

breadth of financial intelligence available to law enforcement officials. 

And while the result has been a more secure financial system, 

it could benefit still from greater cooperation between law enforcement and the private sector. And although the idea has been proposed before, I would again urge the committee to consider working 

to increase information sharing between banks and law enforcement officials by granting bankers access to limited classified information. 

But no amount of regulations will matter for those banks that 

are intent on supporting terrorism. And that is why Congress must 

act to clarify the scope of financial services under the material support law. American victims of terrorism have been working to hold 

institutions like Arab Bank liable for providing what amounts to 

death insurance plans by Hamas to Hamas militants. And in each 

of the cases, the institutions have responded that they were simply 

providing routine banking services, conduct that they argued was 

not prohibited. Congress can reaffirm that there is nothing routine 

about terrorism and by amending the term Financial Services to 

encompass ‘‘routine banking services.’’ 

While these steps will ensure that terrorists remain persona non 

grata in the banking industry, FTOs continue to raise and move 

money through the abuse of charitable institutions and underground banking. The shuttering of the Holy Land Foundation, an 

Islamic charity proven to have provided over $12 million to Hamas, 

demonstrates that terrorist groups are able to raise money for acts 

of violence and that they are willing to do so under the guise of 

humanitarian relief efforts. 

Today, Viva Palestina, a British-based charity with an American 

branch, has picked up where HLF left off, flouting U.S. terror finance laws and raising over $200,000 in the United States and providing that money to Hamas in support of humanitarian efforts. 

In order to ensure the sanctity of the charitable sector, Congress 

should resist any efforts that would create a humanitarian aid exception to the material support law. And you can also urge expanded review and verification of charitable filings for inconsistencies. 

Another tried-and-true method for moving terrorist finances has 

been the underground banking system, specifically hawalas. And 

despite expanded applicability of the BSA to cover hawalas, the 

statute must be more aggressively enforced. 

The recent arrest of Mohammed Younis, who allegedly helped finance the failed Time Square bombing by serving as a hawaladar 

is a reminder of the importance of financial investigations as part 

9 

of a broader counterterrorism policy. Every terrorism investigation 

should have a parallel terror finance component. 

Finally, moving forward, we must recognize that rather than 

simply rest on their laurels, terrorist groups have shown an incredible ability to adapt changing technologies to their needs. The creation of stored value cards and the expansion of the Internet are 

just two of the problems that those tasked with countering terrorist 

financing will face over the next decade. 

If you are a terrorist, technology has made bulk cash smuggling 

easier than ever in the form of stored value cards. And although 

they bear all of the requisite qualities, they are not currently considered monetary instruments subject to regulation. The exclusion 

of them as reportable instruments is the result of technology outpacing regulations. And while reports suggest that Treasury is currently considering adding those to the list of monetary instruments, 

they must act quickly to plug this gap before terrorist financiers 

take advantage of it. 

More worrisome, however, is the Internet, which has already revolutionized FTO operations, from the spread of propaganda to the 

planning and preparation of attacks. And a particular concern 

should be virtual worlds, which have the capacity to serve as the 

hawalas of the 21st Century. They provide many of the same characteristics as the existing hawala networks; they are fast, inexpensive, reliable, convenient, and, most notably, discreet. The existing 

regulations should be updated to curb the potential for the abuse, 

bring virtual worlds under the umbrella of covered institutions 

under the BSA. 

Members of the committee, American efforts to disrupt terrorist 

financing schemes have put organizations such as al Qaeda in dire 

financial straits. These successes however have been tempered by 

continuing blind spots in the enforcement of existing regulations 

and an inability to update current laws on pace with technological 

advancements. 

Chairman Moore, thank you very much for allowing me to come 

and speak with you today. I look forward to your questions on this 

critical issue, and I yield back the balance of my time. 

[The prepared statement of Mr. Landman can be found on page 

52 of the appendix.] 

Chairman MOORE OF KANSAS. Thank you, sir. 

The Chair next recognizes Mr. Lewis for up to 5 minutes. 

STATEMENT OF ERIC L. LEWIS, PARTNER, BAACH ROBINSON 

LEWIS 

Mr. LEWIS. Thank you, Chairman Moore, Ranking Member 

Biggert, and the distinguished members of the subcommittee for 

the opportunity to testify today regarding one of the largest abuses 

ever of the United States banking system. The fraud and moneylaundering scheme that I would like to discuss involves the transfer of approximately $1 trillion through the United States financial 

system, all directed by a single Saudi national named Maan AlSanea, using a Saudi Arabian remittance company or hawala 

called the Money Exchange, as well as two banks he controlled in 

Bahrain and other companies in the Cayman Islands and Switzerland. 

10 

The fraud appears to have deprived its victims of more than $20 

billion, making it larger than the Madoff fraud in actual out-ofpocket loss, yet there were no questions asked, not by banks, regulators, or prosecutors, until the whole scheme collapsed. 

The Money Exchange’s main U.S. dollar account was with an 

American bank in New York. The Money Exchange was a small 

company with a transactional volume for its remittence customers 

of around $60 million per year in total. Nevertheless, it approached 

a major U.S. bank that visited it in the Middle East and said it 

would like to open a corresponding account in New York in order 

to transfer approximately $15 billion in payments annually. 

At least four huge red flags present themselves right at the outset, which is the key point at which banks can make determinations about the bona fides of their customers: first, you have a 

high-risk region and country, the Middle East, Saudi Arabia; second, a business that accepts money transfers for walk-in customers, 

with whom it has no account relationship and does none of the necessary due diligence; third, you have a massive transactional volume, $15 billion a year; and fourth, you have a volume of transactions which is entirely disproportionate to the customer’s ostensible business. 

One would expect a searching interrogation of this customer; that 

is what the ‘‘know your customer’’ rules require. There should be 

a careful evaluation of the intended use of the account, the source, 

destination, and business purpose of the funds flowing through. 

And because the prospective customer is itself a financial institution, there must be a thorough investigation of that institution’s 

anti-money laundering and ‘‘know your customer’’ policies, yet our 

investigation has revealed no evidence of any significant due diligence or anti-money laundering investigation of the Money Exchange in Saudi Arabia. 

The two Bahraini banks, Awal Bank and the International Banking Corporation, had no legitimate customers. They were created 

and used by Mr. Al-Sanea to borrow money and then funnel it 

through the U.S. financial system to dummy customers and then 

to his own companies. So if the core is to know your customer’s customers, here you had two large banks that had no customers. 

U.S. anti-money laundering and anti-terror finance policy is a 

two-part defense. There must be pre-event diligence by the banks, 

backed by regulatory oversight, and post-event law enforcement, 

where the initial diligence has failed to prevent or detect money 

laundering. 

Banks are the critical first lines of defense, supported by clear 

regulation. But banks often have incentives to look the other way, 

and fines for noncompliance are still viewed as relatively unlikely 

to occur as the cost of doing business if they do. This must change 

if the system is to work effectively. 

Our regulatory regime also needs to make it clear that if banks 

agree to open dollar accounts for customers, it doesn’t matter if the 

relationship is based elsewhere. That customer must be subject to 

all of the scrutiny and rigor applied to someone who walks off the 

street in midtown Manhattan to open a bank account. We are not 

aware of any investigations ongoing by the relevant regulator into 

this massive systemic failure. We understand that Congressman 

11 

Peter King has written to the attorney general to request an investigation, but we have received no information or requests for information to date from the Justice Department. 

The United States alone possesses the resources and the tools to 

protect the global financial system from international financial 

crime, money laundering, and terror financing. And the United 

States has an overwhelming national security interest in taking 

the lead. We cannot delegate this critical responsibility to others. 

This fraud involved more than a dozen countries. Each of them had 

only a piece of it. Each can claim that it can only investigate and 

see a slice. Each can claim some other country has a greater responsibility. But in an age when international fraudsters and 

money launderers can cross borders with a click of a mouse, the response cannot be, ‘‘It is not our responsibility.’’ That is a recipe for 

disaster. 

Banks must diligently inquire into their customers and their customers’ customers. Wrongdoers must be investigated, charged, extradited, and prosecuted. The United States must lead, but cooperation must be sought. Saudi Arabia, for example, is a committed ally in the fight against terror financing, and I have no 

doubt if the United States underlined the importance of getting to 

the bottom of this or other massive money-laundering schemes that 

originate there, the Saudis would cooperate. 

Extensive legislation is not needed; the need is for strong oversight and firm priorities, together with clearly defined responsibilities and accountability. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Lewis can be found on page 69 

of the appendix.] 

Chairman MOORE OF KANSAS. Thank you, sir, for your testimony. 

Mr. Caruso, you are recognized for up to 5 minutes, sir. 

STATEMENT OF DAVID B. CARUSO, CHIEF EXECUTIVE 

OFFICER, DOMINION ADVISORY GROUP 

Mr. CARUSO. Good afternoon, Chairman Moore, Ranking Member 

Biggert, and members of the subcommittee. 

Thank you for the opportunity to appear before you today to discuss the vulnerabilities of our financial system to terrorists and 

money launderers. Financial institutions, particularly depository 

institutions, play a crucial role in identifying and reporting terrorist financing and money laundering. 

Over the last 10 years, banks have spent considerable amounts 

of money to hire staff and implement software systems to detect 

suspicious activity. As a result, most financial institutions comply 

with the Bank Secrecy Act, or BSA. However, compliance with regulations and identifying potential terrorist financing and money 

laundering are not necessarily synonymous. 

Suspicious Activity Reports, or SARs, reporting activity related 

to BSA violations account for nearly half of all SAR filings. The 

majority of these SARs are made up of those reporting attempts to 

evade the Currency Transaction Reporting threshold, a practice 

known as structuring. The burden of detecting, investigating, and 

reporting cash structuring using today’s version of the SAR hampers a financial institution’s ability to identify transactions associVerDate Nov 24 2008 18:19 Dec 10, 2010 Jkt 062686 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\62686.TXT TERRIE
12 

ated with more serious crimes and makes our financial system 

more vulnerable to terrorist financing and money laundering. 

Consideration should be given to creating a new SAR, designed 

to report only cash structuring. Such a SAR would still provide the 

government with required information and would reduce the time 

and effort needed by institutions to complete the form, thus enabling more energy to be directed at uncovering terrorist financing 

and significant money laundering. 

When institutions detect structuring, they must adhere to the requirements of the Federal Financial Institutions Examination 

Council and FinCEN which mandate that SARs include a thorough 

and complete narrative or written depiction of the events that led 

to the conclusion a SAR must be filed. In addition, institutions are 

expected to compile supporting case information into a comprehensive file. This information is used by auditors and examiners as a 

way to test a bank’s compliance with BSA. 

Over the past 5 years, the expectations of regulators and industry practice has expanded. Writing the SAR narrative is as timeconsuming as ever. A modified SAR to report structuring will convey the relevant facts of an investigation—who, what, where, when, 

and how much—but can be compiled into a more concise format, 

such as a table or spreadsheet, that will still inform law enforcement of what it needs to know, provide regulators with evidence of 

an institutions’s compliance with the BSA, and then free up resources of a bank to focus on detecting terror financing and sophisticated money-laundering schemes. 

Financial institutions struggle with how to effectively detect terrorist financing. Retrospective analysis of terrorist funding does not 

provide clear enough direction to bank investigators on what specific transactions may indicate funds are being sent to support terrorists. Depository institutions and other financial institutions, including money services businesses, have implemented automated 

software systems designed to more effectively and quickly identify 

suspicious activity. However, these software systems produce large 

numbers of alerts mostly related to structuring because structuring 

is the easiest type of activity for these systems to identify. Satisfying the regulatory requirements around investigating, documenting, and reporting structuring takes a typical bank investigator between 3 to 8 hours. 

Our experience working with small, mid-sized, and large banks 

shows us that structuring accounts for between 60 and 70 percent 

of all BSA-related SARs. We also see that over half of the customers who structure have neither structured before nor subsequently to the incident in question. These one-time structurers, 

however, eat away at the time a bank staff can then spend uncovering and investigating activity whose impact on the financial system and national security could be much more serious. 

Structuring SARs provide the government with important information, including information that may lead to the discovery of serious criminal activity. The importance of this information should 

not be minimized. What should be minimized, however, is the time 

and effort needed to report the activity. 

By creating a SAR tailored to report only structuring, the government would relieve financial institutions of their largest BSA, AML 

13 

compliance burden and then enable institutions to use that available time and those available resources to identify and report more 

serious crime. Thank you, again, for the opportunity to testify here 

today. 

[The prepared statement of Mr. Caruso can be found on page 28 

of the appendix.] 

Chairman MOORE OF KANSAS. Thank you, sir. 

I appreciate the testimony of the witnesses. 

I am going to start the questions. 

The first question, Mr. Caruso, is directed to you. I agree with 

and appreciate your testimony where you commend U.S. financial 

institutions for working with the government to combat terrorism 

financing as well as the government’s vigilant efforts to stem the 

flow of money to terrorist organizations. 

I don’t know if you saw the announcement yesterday, but do you 

have a general reaction to the Administration’s plan to expand 

tracking of electronic money transfers? Is this a wise approach, or 

does it raise concerns? 

Mr. CARUSO. It does raise concerns, from my perspective, knowing how difficult it is for institutions to comply with existing rules 

and regulations, as mightily as they do try. And our experience is 

that nearly all do try as best they can. 

But in order for a bank to capture that information, and report 

it to the government on a regular basis, although I understand the 

government’s view that there are only 300 or 400 banks that it will 

impact, will be a significant burden on those banks. And then it 

raises for me the question that my testimony raises, is that the 

best use of a bank’s time to report that information? 

Chairman MOORE OF KANSAS. All right, thank you. 

Mr. Landman, do you have any thoughts about this question? 

Mr. LANDMAN. I saw it yesterday, and I have been thinking 

about it since. 

My immediate thought was that it seemed like a good idea. That 

being said, I think there are significant concerns with the volume 

of data that it is going to result in. Banks are going to be giving 

way more information to the government. And the same way that 

Mr. Caruso suggests it may overwhelm banks, I think it may have 

the effect of overwhelming the government. But if the government 

can figure out a way to work with banks and filter that properly, 

it would be very good. 

Chairman MOORE OF KANSAS. Any thoughts, Mr. Comras? 

Mr. COMRAS. I think the filtering is the critical element. 

Chairman MOORE OF KANSAS. Turn your microphone on, please, 

sir. 

Mr. COMRAS. Sorry. 

I think that filtering is the critical element. The mass of information is sometimes the easiest way of hiding the real gems in the 

information. And until we know exactly what we want to target 

and have a better profile and direct our efforts towards that profile, 

a lot of our efforts are going to be wasted. 

Chairman MOORE OF KANSAS. Thank you, sir. 

Mr. Caruso, I am intrigued by a concern Mr. Lewis raised on 

page 6 of his testimony, that compliance officials are viewed as 

‘‘anti-business.’’ Have you found this to be the case? And what 

14 

steps could the government take to encourage self-policing by financial firms, going beyond the minimal requirements and encouraging a culture within firms to remain vigilant against new terrorism financing techniques? 

Mr. Landman? 

Excuse me, Mr. Caruso, first. 

Mr. CARUSO. I think that it is a fair assessment that compliance 

departments are viewed by the lines of business as often impediments. However, I don’t necessarily view that as a bad thing. I 

think a natural tension between a business group and compliance 

group is actually important because it makes the compliance staff 

perform their job better, to argue their case about how a customer 

should be treated or a transaction should be reported. And that 

process, in all of my experience, actually helps educate the business 

people better than if the compliance people were to have some sort 

of carte blanche and just be able to dictate what can happen. 

Chairman MOORE OF KANSAS. Any thoughts, Mr. Landman? 

Mr. LANDMAN. There is an easy response which is just that I understand that this is burdensome, but there are legitimate civil 

penalties that would be enforced if we don’t do this work. And from 

the perspective of the compliance department, they are just saving 

the bank money long term in litigation. Look at the case of Arab 

Bank, this case, which may litigate for 10 more years could wind 

up costing our bank hundreds of millions of dollars; that is something worth protecting. 

Chairman MOORE OF KANSAS. Thank you, sir. 

Mr. Comras, you make some strong points in your testimony that 

beyond international consensus to combat the financing of al Qaeda 

and the Taliban, the international community has not reached consensus to stem the flow of money to other terrorist groups. What 

actions should the United States Government take in response to 

this concern? 

Mr. COMRAS. Mr. Chairman, I think our response has to take two 

directions. One, we have to use the leverage that we have through 

our banking community and the major role that we play to alert 

other banks to the risks that are involved. 

At the same time, we have a very major leverage with the 

Antiterrorism Act of 1996, which allows victims of terrorism to use 

our courts to hold banks, even those that are outside the United 

States, accountable when they are involved in the financing of terrorists that caused such victims to suffer from terrorism. 

The second route we must take is to work through the international organizations, through FATF and through other forums, to 

convince our friends and allies to take this risk seriously. I had an 

opportunity to look very closely at this issue over the last couple 

of years and I wrote a book on that trying to devote greater attention to using the international institutions to deal with a developing consensus, including a definition of terrorism that is more 

universal and has applicability to all of these banks. 

Chairman MOORE OF KANSAS. Thank you, sir. 

The Chair’s time has expired. The Chair next recognizes Ranking 

Member Biggert for up to 5 minutes. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

15 

It seems that nearly every time a bank is fined for having a bad 

anti-money laundering program, we find it has received passing 

evaluations of its money-laundering program during the period 

that was in question. How is it that banks are able, unintentionally 

or otherwise, to facilitate the flow of large sums of money to or for 

customers when they really don’t know anything about the customer without regulators picking that up? Are regulators and bank 

examiners properly trained or just not doing their jobs? 

Maybe, Mr. Comras, could you start with that? 

Mr. COMRAS. Banks, of course, are very reliant on the information that is provided to them by their clients overseas, and they, 

I think, have taken for granted that some of these clients are not 

providing all of the information that is required. We now require 

a whole set of information with respect to transactions that includes identification information of the originator and the recipient 

of transactions. Other banks have not had that practice, and only 

a few banking jurisdictions, and I include Europe, require such information to accompany transfers. 

We have to develop a better system to assure ourselves that the 

transactional information that is provided by the overseas banks is 

accurate. And in cases where it is not, take very firm action to deal 

with that situation. 

Mrs. BIGGERT. Do you think that the banking regulators share 

in the responsibilities for gaps in our financial institutions? 

Mr. COMRAS. I think that the banking regulators look very closely at the information that is provided, and they take that information, use it, run it through their filters, run it through the software, 

run it through their name checks. But they also are prisoners of 

a system that relies so heavily on the information that is provided. 

And until you have some alarm that is set off, some incident where 

you know that you have gotten false information, there is not much 

that you can do to check that information. 

That is why I think it is important that there be a better sense 

of cooperation between government entities or information-gathering entities and banks to assure that there is a greater flow to 

the banks of information that can give them the caution that they 

need to take a closer look when they are getting information from 

overseas banks. 

Mrs. BIGGERT. Thank you. 

Mr. Landman, would you agree with that, that the regulators 

are— 

Mr. LANDMAN. Absolutely, Ranking Member Biggert. I think 

through the FATF, we can ensure that foreign financial institutions 

are implementing the same type of ‘‘know your customer’’ requirements that are used here. And I think that through something I 

mentioned in my testimony, the increased cooperation with law enforcement perhaps by providing classified briefings to banks, they 

would be able to get that kind of detail that Mr. Comras suggested 

is going to be necessary. 

Mrs. BIGGERT. There was so much concern with the PATRIOT 

Act that the different groups couldn’t talk to each other. Do you 

find that really has changed now, so law enforcement has been able 

to talk the regulators and the banks? 

16 

Mr. LANDMAN. I think that right now, it seems like it may be information going one way from banks going towards the government. At least, that is the view that I have seen of it. I think that 

the banks could probably benefit from this additional information 

from the government. And I think the government would benefit as 

well. There would be more precise reporting in the future as a result of that. 

Mrs. BIGGERT. All right. Do you think that the system in place 

to identify and stop the terrorist financing is flexible enough to 

evolve as the threats change, or does the apparatus become static— 

Mr. LANDMAN. I hope so. I hope it is flexible enough. I think that 

everything that I have spoken about today are minor tweaks. We 

are not talking about major changes to the Bank Secrecy Act. We 

are not talking about major changes to any of the FinCEN regulations. And I think that through minor tweaks, you can continue to 

use the same regulations moving forward. 

Mrs. BIGGERT. Mr. Caruso, how effective has FinCEN or OFAC 

or the Treasury Department been in providing the financial institutions with the information necessary to combat terrorism? 

Mr. CARUSO. I think that it has been modest, the success has 

been modest, that the information that the government is able to 

provide institutions. Institutions struggle amongst themselves on 

how to identify the types of activities that the witnesses have spoken about here today and that the members are so interested in. 

I think regulators are very process-oriented. They look at a bank 

to make sure they have all the mechanics and logistics of an antimoney laundering program in place, but without specificity on 

what exactly to look for—Mr. Landman, I thought, made an excellent suggestion—that if law enforcement were able to inform regulators very specifically about the types of criminal investigations 

and intelligence investigations that they have ongoing, the regulators would have a much, much better understanding of what it 

is that the banks—what they should be looking for at banks, and 

then, subsequently, banks will begin to look for those things. 

Mrs. BIGGERT. Thank you, I yield back. 

Chairman MOORE OF KANSAS. Thank you to the gentlelady. 

The Chair recognizes Mr. Lynch for up to 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Mr. Caruso, you raised the issue about the cumbersome and 

time-consuming nature of the SARs reporting. Right now, I think 

banks file about 1.4 million SARs per year, so we have to go 

through those to try to get information. They also file, I think, 14 

million CTRs, which are for transactions over $10,000. And now, 

this morning, I read in the New York Times and the Washington 

Post that the Obama Administration intends to expand its counterterrorist financing efforts by requiring U.S. banks to report all 

international money transfers. From your end, workability, what 

do you think that expansion is going to do to your ability to report 

in a timely fashion and to handle the volume of reports that will 

be necessary? 

Mr. CARUSO. Banks are going to have to hire more people. They 

are going to have to develop additional systems to capture the information that their other technology systems capture. They will 

17 

have to develop a lot of processes and procedures to report that information. 

And I would imagine that the government would hold the view 

that if the bank is capturing this information and reporting it to 

the government in a way that they have not yet done before, there 

would be an expectation that the bank will look at the information. 

Mr. LYNCH. Just thinking about the huge volume of information 

that is going to be coming into the government, and then we are 

going to have to review that to find out—to actually use the information rather than just collecting it. I am just concerned about 

whether or not this is the best use of our time and the most efficient use of the information that we are getting. 

Is there a way—you talk about the fact that 60 to 70 percent of 

the SARs right now are these structuring noncompliance situations, is there a way to speed that up where it is—there is a lot 

of similar information, so that you can spend more time on the 

more serious offenses? Is there some way we might streamline 

that? 

I know Mr. Shaul from Mr. Frank’s committee has indicated 

there might even be a way to bar code some of these reports or 

some portion of the information, just so that bank employees aren’t 

spending all their time doing this. 

Mr. CARUSO. Yes. The way the industry understands the problem 

is that the government’s computers are unable to accept what most 

would consider a very simplistic and modern form of communication, the spreadsheet, and we have all seen them, in which valuable information can be captured almost instantaneously, compiled 

and reported within minutes. Unfortunately, the requirements now 

dictate that a bank’s employees create a narrative and, in essence, 

tell a story around this very simplistic event. 

Mr. LYNCH. All right. I only have a minute and a half. 

Mr. Comras, we are sort of—there is a double-edged sword here. 

Initially, I worked a lot with FinCEN in Afghanistan, in Jordan, 

in Tunisia, and in Morocco, setting up Financial Intelligence Units. 

Some countries it appears—this is my opinion—set up these FIUs 

in order to get off the bad list. In other words, they wanted to be 

compliant with—after September 11th, they wanted to show that 

they were doing something to stop this. But the number of SARs 

and reports that we are getting are very limited from a lot of these 

countries. They are not really living up to the spirit of law, and 

now, to make it even worse, we have to share—we have an obligation if they comply with the basic rubric of anti-money laundering 

and terrorist financing, combatting that, that we have an obligation to share information with them. 

And I am wondering, is there a better way to use the name-andshame, the Wolfsberg principles, against some of these countries 

that are just—I think they have been less than diligent in their effort to combat terror financing? 

Mr. COMRAS. I agree with you completely. I think that much, 

much more has to be done to hold accountable international financial institutions, and one of the best tools to do that is naming and 

shaming. Between 2003 and 2008, FATF put a moratorium on 

naming and shaming, but thankfully, in 2008, they began that 

process again of indicating which countries lacked the political will 

18 

or the wherewithal to apply their financial rules in any meaningful 

way. I think that FATF has to continue to do that kind of an action. 

I think that we have to look at groups. We have a committee of 

the United Nations, a group that works under this resolution 1373, 

called CTED, and another group that provides assistance to the Security Council with respect to al Qaeda and the Taliban. They are 

well placed to begin to monitor and report on what is actually occurring in this area. And I think they need to be encouraged to 

take that kind of action. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I yield back. 

Chairman MOORE OF KANSAS. I thank the gentleman. 

The Chair next recognizes Mr. Paulsen for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

I just want to follow up with Mr. Caruso on the questioning that 

was just taking place regarding the SAR narratives. In your testimony, you had mentioned that writing the SAR narrative is as 

time-consuming as ever, and putting aside whether structuring infractions should be subject to such a requirement, how useful is the 

narrative portion itself for law enforcement? How useful is the narrative? 

Mr. CARUSO. It is very useful when it is describing matters that 

are of interest to law enforcement. For a case involving significant 

fraud or money laundering, narcotics trafficking, perhaps terror financing, a well-written narrative will grab the attention of a law 

enforcement agent, and that makes the difference between a law 

enforcement agent starting an investigation or not. 

So a SAR narrative is very important when applied to matters 

that require the telling of a story. Structuring rarely requires the 

telling of a story. 

Mr. PAULSEN. Regarding the structuring SAR that you describe, 

is it your view that these would be composed only of objective information, and this could almost entirely be compiled by advanced 

software systems and filed instantaneously? 

Mr. CARUSO. Largely. Obviously, there would be the opportunity 

for the bank to add some narrative description if they would choose 

to do so. But most structuring is objective. It is detailing the 

amounts of the transactions, the day on which they occurred and 

who conducted the transactions. 

Mr. PAULSEN. Would there be value for law enforcement of having the capability of filing such reports in realtime? 

Mr. CARUSO. Absolutely, and that is an important point. Most of 

the structuring SARs are filed anywhere from 30 to 60 days after 

the event has taken place. One of the reasons is the software systems, and also the other reason is the regulatory requirements to 

compile a lengthy narrative. 

Mr. PAULSEN. Any other suggestions you might have about 

changing the SAR form? 

Mr. CARUSO. No. I think my view is that the structuring work 

is what takes up the most amount of time, so let’s look at the 

things that we can get the most return on in proving, and that to 

me would be the most important. And then I am sure there would 

be others after that, but that one would be first. 

19 

Mr. PAULSEN. Thank you, Mr. Chairman. 

I yield back. 

Chairman MOORE OF KANSAS. I thank the gentleman. 

The Chair next recognizes Mr. Minnick for 5 minutes. 

Mr. MINNICK. Mr. Lewis, as I think you are aware from our prior 

conversations, I was involved a long number of years ago in helping 

set up the Federal Government’s response to the international drug 

trafficking issue. And there we found that the key to really getting 

at the kingpins and people who were behind drug trafficking was 

not opening suitcases at the Mexican border; it was following the 

money. 

It is clear to me that things haven’t changed with respect to terrorism or drug trafficking for that matter. We found that you needed a central repository that had both access and clout and interface 

with law enforcement, Federal, local, and international, to really 

make good use of information. The problem was not a shortage of 

information; it was analytic capability and analytic focus. 

In the terrorism area, in 2005, we set up FinCEN, as Mr. Lynch 

was commenting earlier, to do precisely this with respect to following the money involving terrorism. Listening to the testimony 

of all of our witnesses, it is pretty clear to me that FinCEN has 

not accomplished the task. And I would like to ask you, having 

studied the issue, where is the deficiency at FinCEN? Is it access 

to information? Is it analytic capability and focus? Is it the interface with law enforcement or foreign cooperation? Where is the 

shortfall, and what needs to be done to fix FinCEN, so it can perform this critically important international role? 

Mr. LEWIS. Thank you, Congressman Minnick. 

FinCEN has probably been underresourced, and I think there is 

a real confusion as to whose job is what. I think there is slippage 

at every stage of the matter. For example, when banks do their due 

diligence, there is an element of ‘‘out of sight, out of mind.’’ And 

when a Middle Eastern business wants to open an account in a 

New York bank, they are not going to have the level of communication and information that they would get if it were a New York 

business. That has to stop. 

So there needs to be an interface between the compliance people 

and the business people at the bank to begin with, so that good information is coming into the United States whenever a Middle 

Easterner, or someone from any politically risky area of the world, 

wants to open an account. And they need to get that qualitative information. 

They also need to have better filters so that when a business 

comes in, as in our case, and says, ‘‘We are going to do $15 billion 

of transactions,’’ somebody there finds out why, and that is documented. And if the story doesn’t add up, then that information goes 

to the regulators. And when that $15 billion in transactions grows 

to $30 billion and $35 billion, there also needs to be a red flag that 

goes up within the bank within the regulator. 

So there is a problem of being inundated with money, but—with 

information—there needs to be a kind of qualitative regulation so 

that there is a dialogue between the regulators, the banks, and 

FinCEN, so everyone knows what they are looking for. I think Mr. 

Caruso’s idea of avoiding that sea of information that is likely to 

20 

yield very little should be reconstituted so there is better qualitative dialogue between the bank regulators, who are looking to the 

financial safety and soundness, and FinCEN, which is really looking to the national security interests. I think everyone is 

stovepiped at the moment, and you don’t have FinCEN having the 

ability to take the lead and access— 

Mr. MINNICK. Does FinCEN have the access to the artificial intelligence capability to go through and sift this information and 

find the relevant information? There is a lot of that kind of software currently available. 

Mr. LEWIS. I don’t really know how their technological systems 

work. They certainly should. 

Mr. MINNICK. They report to an Under Secretary. Is he taking 

his job seriously enough to provide this interface and outreach that 

is necessary to use the information intelligently? 

Mr. LEWIS. I think the Administration does take it seriously, but 

there has been a failure to specify what the qualitative areas are 

where they really should be looking, as opposed to simply generating reams of information according to abstract categories that 

have no real meaning in the real fight against terrorism. 

Mr. MINNICK. Thank you. 

And finally, where did that trillion dollars go? 

Mr. LEWIS. We don’t know, and that is the big problem, because 

even if we could account for 99 percent of it, there is so much 

money unaccounted for, and it poses a real danger to our system 

and to the national security interests of this country. 

Mr. MINNICK. Thank you. 

I yield back. 

Chairman MOORE OF KANSAS. Mr. Lynch, you have 1 minute to 

respond if you would like to respond to that. 

Mr. LYNCH. I can’t sit and let that go. The remarks regarding 

FinCEN, the Financial Crimes Enforcement Network, I have 

worked with them very, very closely on half a dozen countries 

where they have done unbelievable work. The Financial Crimes 

Enforcement Network, FinCEN, Jim Freis over there is doing incredible work with very limited resources. 

We have expanded their responsibility. Not only do they respond 

to every single government agency in terms of information, every 

foreign government, now they have been expanded. Their responsibility has been expanded to respond to State police agencies, local 

police departments, and they are still doing so with the same resources they had before. 

I have sponsored amendments to try to increase their funding, so 

they can do a better job. But those people are courageous men and 

women over there doing a fantastic job. And I just think members 

need to get over there, like I have, sit down with FinCEN and get 

to know what they are doing and the scope of their work, and you 

would be very pleased with the work they are doing. They are 

doing unbelievable work over at FinCEN. 

God bless them over there. They need more money. 

The gentleman is right. They are underresourced. Mr. Lewis is 

absolutely correct. And we are asking them to do much, much, 

much more. And while we are pushing money out to these departVerDate Nov 24 2008 18:19 Dec 10, 2010 Jkt 062686 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\62686.TXT TERRIE
21 

ments that FinCEN responds to, we have not given any resources, 

any increased resources, to FinCEN to do their job. 

So, thank you, Mr. Chairman. 

Chairman MOORE OF KANSAS. Thank you, sir. 

And again, thanks to our witnesses for your testimony here 

today. Today’s hearing gave us an opportunity to review the latest 

trends in terrorism financing and equip our committee with new 

insights that we will take back to the relevant Federal agencies 

who are staffed with top notch men and women who rarely are recognized for their efforts but play a key role in keeping our country 

safe. We will discuss these issues with them. 

This is not and should not be a partisan issue. We all want to 

make sure our government has the tools and resources it needs to 

best combat terrorism financing. 

The Chair notes that some members may have additional questions for our witnesses which they may 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 hearing record will also remain open so that anyone named 

in a witness statement will have an opportunity to respond to those 

witnesses’ comments or allegations. 

Again thanks to all. And our hearing is adjourned. 

[Whereupon, at 5:05 p.m., the hearing was adjourned.] 

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