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96–943 PDF 2004

THE 9/11 COMMISSION REPORT:

IDENTIFYING AND PREVENTING

TERRORIST FINANCING

HEARING

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

AUGUST 23, 2004

Printed for the use of the Committee on Financial Services

Serial No. 108–107

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

DOUG BEREUTER, Nebraska 

RICHARD H. BAKER, Louisiana 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

DOUG OSE, California 

JUDY BIGGERT, Illinois 

MARK GREEN, Wisconsin 

PATRICK J. TOOMEY, Pennsylvania 

CHRISTOPHER SHAYS, Connecticut 

JOHN B. SHADEGG, Arizona 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

MELISSA A. HART, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

TIM MURPHY, Pennsylvania 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

BARNEY FRANK, Massachusetts 

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 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JAY INSLEE, Washington 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

KEN LUCAS, Kentucky 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

MIKE ROSS, Arkansas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

RAHM EMANUEL, Illinois 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

CHRIS BELL, Texas 

BERNARD SANDERS, Vermont

ROBERT U. FOSTER, III, Staff Director 

(III)

C O N T E N T S 

Page 

Hearing held on: 

August 23, 2004 ................................................................................................ 1

Appendix: 

August 23, 2004 ................................................................................................ 89

WITNESSES 

MONDAY, AUGUST 23, 2004

Hamilton, Hon. Lee H., Vice Chairman, National Commission on Terrorist 

Attacks Upon the United States ......................................................................... 5

Levey, Hon. Stuart A., Under Secretary, Office of Terrorism and Financial 

Intelligence, Department of the Treasury .......................................................... 56

Libutti, Hon. Frank, Under Secretary, Information Analysis and Infrastructure Protection, Department of Homeland Security .......................................... 58

Sabin, Barry, Chief of the Counterterrorism Section, Department of Justice .... 61

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 90

Bachus, Hon. Spencer ...................................................................................... 92

Barrett, Hon. J. Gresham ................................................................................ 93

Capito, Hon. Shelley Moore ............................................................................. 94

Castle, Hon. Michael N. ................................................................................... 95

Hensarling, Hon. Jeb ........................................................................................ 97

Hinojosa, Hon. Rube ́n ....................................................................................... 99

Kanjorski, Hon. Paul E. ................................................................................... 101

Kelly, Hon. Sue W. ........................................................................................... 102

King, Hon. Peter T. .......................................................................................... 104

Royce, Hon. Edward R. .................................................................................... 106

Hamilton, Hon. Lee H. ..................................................................................... 108

Levey, Hon. Stuart A. ...................................................................................... 115

Libutti, Hon. Frank .......................................................................................... 126

Sabin, Barry ...................................................................................................... 131

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Bachus, Hon. Spencer: 

Excerpts from 9/11 Commission Testimony and Staff Report Regarding 

U.S. Government Successes in Counter Terrorist Financing .................... 140

Hinojosa, Hon. Rube ́n: 

Letters in opposition to the Culberson Amendment to the House Transportation, Treasury Appropriations bill ...................................................... 143

Most Frequently Asked Questions Regarding the Matricula Consular ....... 166

Sample of Matricula Consular Id Card ........................................................... 182

Hamilton, Hon. Lee H.: 

Monograph on Terrorist Financing ................................................................. 184

(1)

THE 9/11 COMMISSION REPORT: 

IDENTIFYING AND PREVENTING 

TERRORIST FINANCING 

Monday, August 23, 2004

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to call, at 10:05 a.m., in Room 

2128, Rayburn House Office Building, Hon. Michael G. Oxley 

[chairman of the committee] Presiding. 

Present: Representatives Bachus, Castle, King, Royce, Kelly, 

Paul, LaTourette, Biggert, Green, Shays, Fossella, Hart, Capito, 

Tiberi, Feeney, Hensarling, Garrett, Barrett, Frank, Kanjorski, Waters, Maloney, Watt, Hooley, Sherman, Meeks, Moore, Hinojosa, 

Israel, McCarthy, Matheson, Emanuel, Scott, and Bell. 

The CHAIRMAN. The committee will come to order. 

This hearing of the Committee on Financial Services will begin. 

Without objection, all members’ opening statements will be made 

a part of the record, and the Chair recognizes himself for a brief 

opening statement. 

Good morning to our witnesses and members. The Financial 

Services Committee meets today for an unusual August recess 

hearing to consider the findings and recommendations of the National Commission on Terrorist Attacks upon the United States. 

Evaluating and acting upon these recommendations is, in my view, 

a top priority for Congress to address this fall. 

I want to welcome our old friend and colleague, Lee Hamilton, 

and thank you, Lee, for your service on the 9/11 Commission and 

taking this time to give your views today. 

The 9/11 Commission, chaired by former New Jersey Governor 

Tom Kean and the aforementioned Mr. Hamilton, has performed a 

valuable service to our Nation by providing an exhaustive and compelling account of the terrorist threat that confronts us and by developing serious policy recommendations to help meet that threat. 

As the House committee that took the lead after September 11 

in crafting the antiterrorist finance provisions of the USA PATRIOT Act and overseeing the government’s efforts to shut off al 

Qaeda’s funding sources, we have a particular interest in the Commission’s work related to those subjects. More broadly, as the third 

anniversary of the 9/11 attacks approaches and as intelligence reports suggest the possibility of another major attack, it is appropriate for this committee to take stock of how far we have come in 

dismantling and disrupting the terrorists’ financial networks. 

2

While our troops and some American citizens abroad have been 

subjected to terrorism, we have been terror-free on U.S. land since 

9/11. That is both an accomplishment and a challenge. 

It is important to note that the most recent report issued on the 

9/11 Commission’s website on Saturday actually gives predominantly positive reviews to both the PATRIOT Act and recent intelligence efforts. According to the report, ‘‘While definitive intelligence is lacking, these efforts have had a significant impact on al 

Qaeda’s ability to raise and move funds, on the willingness of donors to give money indiscriminately, and on the international community’s understanding and sensitivity to the issue. Moreover, the 

U.S. Government has used the intelligence revealed through financial information to understand terrorist networks, search them out, 

and disrupt their operations.’’

We at the Financial Services Committee are, of course, concerned 

about the recent heightened terror alert for the financial services 

sector. It serves as a stark reminder that this Nation’s financial institutions and the international financial institutions are part of 

the front line in the war against terrorists. We have made significant progress by discovering and exposing al Qaeda’s interest in 

these targets, thus making their operations more difficult. 

In its final report, the Commission was complimentary of the PATRIOT Act and its effect on terrorist financing, recognizing the extraordinary cooperation that financial institutions have given to 

law enforcement. The government needs to reward and encourage 

those efforts by more effectively implementing these provisions of 

the PATRIOT Act, including section 314, to seek to create a twoway 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 

3

number of financial intelligence units has nearly doubled and the 

amount of information crossing borders in the fight against terror 

has expanded significantly. 

The International Monetary Fund and the World Bank are including these international standards in the infrastructure assessment process within the financial sector. The regional development 

banks are establishing special facilities to channel development assistance in this area as well. Bilaterally, the number of countries 

where enhanced information-sharing arrangements exists is growing. So we have come a very long way since 9/11. We are committed to winning the war against global terrorism, a task which 

will require time, patience, courage, and perseverance. 

The Chair’s time has expired. I am pleased to yield to the gentleman from Massachusetts, Mr. Frank. 

[The prepared statement of Hon. Michael G. Oxley can be found 

on page 90 in the appendix.] 

Mr. FRANK. Thank you, Mr. Chairman. 

I appreciate the diligence with which Mr. Hamilton has made 

himself available. This is my second time hearing him in August, 

and he has been very helpful, because he is in an unusually good 

position as a former senior Member of the Congress to understand 

what it is that needs to be done to get these recommendations enacted. 

I was particularly pleased to have that monograph done by the 

staff. I think we have, many of us, talked about our admiration for 

the work of the Commission, and we should be explicit that we 

were well-served in this country by the first-rate staff that you and 

your colleagues assembled and by the work they have done. 

I cannot think of many cases where we have had a common, 

agreed-upon framework in which to debate issues. Obviously, there 

ought to be debate. We ought to be clear. People who think that 

there is no room for debate and that we simply enact things without debate are looking at the wrong country. This is a democracy, 

and that is of the essence. 

But the Commission has really done two things. It has given us 

some very good, specific recommendations, but, in addition, it has 

provided, through a first-rate body of work, a framework in which 

to debate those. It is very helpful to have a debate going on on policy where we are not arguing about what happened, we are not arguing about the facts, and that is not something to be taken for 

granted. I very much appreciate that. 

I also found a couple of things of particular interest in the report 

and one I do want to comment on and to thank Mr. Hamilton for 

stressing, and that is the civil liberties aspect. I was struck favorably by the Commission recommending that we create a new body 

in the government to protect against civil liberties abuses. 

We have this dilemma, obviously. On September 11, our law enforcement model, the law enforcement model of a free society, was 

undermined. That is, the law enforcement model of a free society 

basically is the bad guys get a free shot. We do not stop you from 

doing things. The assumption is people are going to behave themselves. And we say, on the other hand, if you do something that 

is abusive to other people’s rights, we are going to catch you and 

4

punish you. It is called deterrence, and that is essentially the 

model of a free society. 

Then, 19 murderous thugs killed themselves to kill other people 

and, obviously, deterrence does not work. So we then have to arm 

law enforcement with more intrusive powers, because we cannot 

wait. We have to intervene. But we want to do that in the best possible way. And I think the model—and we have talked about how 

to do this—the model that seems to me to get this done is to give 

them the ability to be intrusive, to go and catch people, to listen 

in on people, to spy on people—that is in the nature of it—but to 

recognize that in a human system, mistakes will be made. People 

will make mistakes. 

And what we need to do then is to have really almost two parallel systems: a system of vigorous intrusive enforcement and a 

parallel system to try and minimize the errors, and because errors 

will inevitably happen, have an appeals mechanism, and this is I 

think particularly what is relevant in the financial area. We are 

giving the government the power—we have given the government 

the power—as the chairman mentioned, we have worked on this 

committee—the power to freeze assets. That is an important power 

for them to have. But equally important is for there to be mechanisms whereby people whose assets have been inappropriately or 

erroneously frozen to have a quick and effective method of appeal, 

and that sometimes gets left behind. That is our job. That is our 

job. 

When some parts of the PATRIOT Act expire and we deal with 

them next year, it is obvious that we should enact these recommendations; and I am glad the Commission pointed this out. We 

want to give vigorous powers to law enforcement, but we want to 

accompany those powers with a set of procedures that give people 

who are wronged by the enforcement, we want them to have a 

prompt and ready way to fight back. 

One of the things I noticed, for example, was in a couple of cases 

people’s assets were frozen and they were forbidden to engage in 

any commercial transactions with anybody and then had to get 

waivers so they could hire lawyers to fight this. Well, that ought 

to be automatic. The notion that you can be frozen and then by the 

very act of freezing your assets which you plan to contest you cannot hire somebody to contest it, that just does not conform with our 

basic principles of freedom. 

So I thank you for being both very rigorous in the kinds of enforcement we ought to have but in pointing out from your own experience that we are going to make some mistakes and we need to 

make sure that we do this. 

Let me just say, finally, to people who worry about this, having 

good mechanisms for the alleviation of error is an important part 

of law enforcement. Because there will be people who will oppose 

giving law enforcement the powers because they are afraid of the 

mistakes that will get made, and having a system for correcting the 

mistakes then becomes not a dilution of the law enforcement powers but an essential element in the decision to grant them. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

5

After consultation with the ranking member, it was determined 

that we would allow all of the opening statements to be made a 

part of the record which, with unanimous consent, it is so ordered, 

so that we will have an adequate opportunity to hear from the distinguished gentleman from Indiana, as well as have an opportunity 

for questions. 

The CHAIRMAN. With that, Mr. Hamilton, welcome to the committee. We appreciate your service to our country, your long service 

here in the Congress, as well as your vice chairmanship of the 9/

11 Commission. You have done the Nation a favor and a service, 

and we are all grateful, and we are pleased to hear from you today. 

STATEMENT OF THE HONORABLE LEE H. HAMILTON, VICE 

CHAIRMAN, NATIONAL COMMISSION ON TERRORIST ATTACKS UPON THE UNITED STATES 

Mr. HAMILTON. Thank you very much, Chairman Oxley and 

Ranking Member Frank, distinguished members of the Financial 

Services Committee. It is an honor to be with you this morning. 

Governor Kean, who led the 9/11 Commission with extraordinary 

distinction, is testifying this afternoon. I think he is on his way 

down now from New Jersey. He could not be here this morning. 

I want to say a word of special thanks to all of you for being here 

in August. I know that is unprecedented, and we are very grateful 

to you. This committee has been involved in financial aspects of our 

country’s war on terrorism for a long time. We are grateful to you 

for your leadership and for your prompt consideration of our recommendations. 

Mr. Frank mentioned the staff report. I am submitting to you 

today a Commission staff report on terrorist financing. I would like 

to ask that that be made part of the record. 

The CHAIRMAN. Without objection. 

[The following information can be found on page 184 in the appendix.] 

Mr. HAMILTON. While Commissioners have not been asked to review or approve this staff report—indeed, I first saw it only a few 

hours ago—we believe the work of the staff on terrorist finance 

issues will be helpful to your own consideration of these issues. 

After the September 11 attacks, the highest-level U.S. Government officials publicly declared that the fight against al Qaeda financing was as critical as the fight against al Qaeda itself. It was 

presented as one of the keys to success in the fight against terrorism. If we choke off the terrorists’ money, we limit their ability 

to conduct mass casualty attacks. 

In reality, stopping the flow of funds to al Qaeda and affiliated 

terrorist groups has proved to be essentially impossible. At the 

same time, tracking al Qaeda financing is an effective way to locate 

terrorist operatives and supporters and to disrupt terrorist plots. 

Our government’s strategy on terrorist financing, thus, has 

changed significantly from the early post-9/11 days. Choking off the 

money remains the most visible and important aspect, and it is an 

important aspect of our approach, but it is not our only or even 

most important goal. Making it harder for terrorists to get money 

is a necessary, but not sufficient, component of the overall strategy. 

6

Following the money to identify terrorist operatives and sympathizers provides a particularly powerful tool in the fight against 

terrorist groups. Use of this tool almost always remains invisible 

to the general public, but it is a critical part of the overall campaign against al Qaeda. Today, the United States Government recognizes—appropriately, in our view—that terrorist financing measures are simply one of many tools in the fight against al Qaeda. 

The September 11 hijackers used U.S. and foreign financial institutions to hold, move, and retrieve their money. The hijackers deposited money into U.S. accounts primarily by wire transfers and 

deposits of cash or travelers checks brought from overseas. Additionally, several of them kept funds in foreign accounts which they 

accessed in the United States through ATM and credit card transactions. The hijackers received funds from facilitators in Germany 

and the United Arab Emirates or directly from Khalid Sheikh Mohammed, KSM, as they transited Pakistan before coming to the 

United States. The entire plot cost al Qaeda somewhere in the 

range of $400,000 to $500,000, of which approximately $300,000 

passed through the hijackers’ bank accounts in the United States. 

While in the United States, the hijackers spent money primarily 

for flight training, travel, and living expenses. Extensive investigation has revealed no substantial source of domestic financial support. Neither the hijackers nor their financial facilitators were experts in the use of the international financial system. They created 

a paper trail linking them to each other and their facilitators. Still, 

they were adept enough to blend into the vast international financial system easily, without doing anything to reveal themselves as 

criminals, let alone terrorists bent on mass murder. 

The money-laundering controls in place at the time were largely 

focused on drug trafficking and large-scale financial fraud. They 

could not have detected the hijackers’ transactions. The controls 

were never intended to and could not detect or disrupt the routine 

transactions in which the hijackers engaged. 

There is no evidence that any person with advanced knowledge 

of the impending terrorist attacks used that information to profit 

by trading securities. Although there has been consistent speculation that massive al Qaeda-related insider trading preceded the attacks, exhaustive investigation by Federal law enforcement and the 

securities industry has determined that unusual spikes in the trading of certain securities were based on factors unrelated to terrorism. 

Al Qaeda and Osama bin Ladin obtained money from a variety 

of sources. Contrary to common belief, bin Laden did not have access to any significant amounts of personal wealth, particularly 

after his move from Sudan to Afghanistan. He did not personally 

fund al Qaeda, either through an inheritance or businesses he was 

said to have owned in Sudan. Al Qaeda’s funds, approximately $30 

million per year, came from the diversion of money from Islamic 

charities. Al Qaeda relied on well-placed financial facilitators who 

gathered money from both witting and unwitting donors, primarily 

in the Gulf region. 

No persuasive evidence exists that al Qaeda relied on the drug 

trade as an important source of revenue, had any substantial involvement with conflict diamonds, or was financially sponsored by 

7

any foreign government. The United States is not, and has not 

been, a substantial source of al Qaeda funding, although some 

funds raised in the United States may have found their way to al 

Qaeda and its affiliated groups. 

Before 9/11, terrorist financing was not a priority for either domestic or foreign intelligence collection. Intelligence reporting on 

this issue was episodic, insufficient, and often inaccurate. 

Although the National Security Council considered terrorist financing important in its campaign to disrupt al Qaeda, other agencies failed to participate to the NSC’s satisfaction. There was little 

interagency strategic planning or coordination. Without an effective 

interagency mechanism, responsibility for the program was disbursed among a myriad of agencies, each working independently. 

The FBI gathered intelligence on a significant number of organizations in the United States suspected of raising funds for al Qaeda 

or other terrorist groups. The FBI, however, did not develop an end 

game for its work. Agents continued to gather intelligence with little hope that they would be able to make a criminal case or otherwise disrupt the operations of these organizations. 

The FBI could not turn these investigations into criminal cases 

because of insufficient international cooperation; a perceived inability to mingle criminal and intelligence investigations due to the 

wall between intelligence and law enforcement matters; sensitivities to overt investigations of Islamic charities and organizations; 

and the sheer difficulty of prosecuting most terrorist financing 

cases. Nonetheless, FBI street agents had gathered significant intelligence on specific groups. 

On a national level, the FBI did not systematically gather and 

analyze the information its agents developed. It lacked a headquarters unit focusing on terrorist financing. Its overworked 

counterterrorism personnel lacked time and resources to focus specifically on financing. The FBI is an organization that therefore 

failed to understand the nature and extent of the jihadist fundraising problem within the United States or to develop a coherent 

strategy for confronting the problem. The FBI did not, and could 

not, fulfill its role to provide intelligence on domestic terrorist financing to government policymakers. The FBI did not contribute to 

national policy coordination. 

The Department of Justice could not develop an effective program for prosecuting terrorist-financed cases. Its prosecutors had 

no systematic way to learn what evidence of prosecutable crimes 

could be found in the FBI’s intelligence files, to which it did not 

have access. 

The U.S. Intelligence Community largely failed to comprehend al 

Qaeda’s methods of raising, moving, and storing money. It devoted 

relatively few resources to collecting the financial intelligence that 

policymakers were requesting or that would have informed the 

larger counterterrorism strategy. 

The CIA took far too long to grasp basic financial information 

that was readily available, such as the knowledge that al Qaeda relied on fund-raising, not bin Laden’s personal fortune. The CIA’s 

inability to grasp the true source of bin Laden’s funds frustrated 

policymakers, unable to integrate potential covert action or overt 

economic disruption into the counterterrorism effort. 

8

The lack of specific intelligence about al Qaeda financing and intelligence deficiencies persisted through 9/11. The Office of Foreign 

Assets Control, the Treasury organization charged by law with 

searching out, designating, and freezing bin Laden access did not 

have access to much actionable intelligence. 

Before 9/11, a number of significant legislative and regulatory 

initiatives designed to close vulnerabilities in the U.S. financial 

system failed to gain traction. They did not gain the attention of 

policymakers. Some of these, such as a move to control foreign 

banks with accounts in the United States, died as a result of banking industry pressure. Others, such as a move to regulate money 

remitters, were mired in bureaucratic inertia and a general 

antiregulatory environment. 

It is common to say, the world has changed since 9/11. This conclusion is especially apt in describing U.S. counterterrorist efforts 

regarding financing. The U.S. Government focused for the first 

time on terrorist financing and devoted considerable energy and resources to the problem. As a result, we now have a far better understanding of the methods by which terrorist raise, move, and use 

money. We have employed this knowledge to our advantage. 

With a new sense of urgency post 9/11, the intelligence community, including the FBI, created new entities to focus on and bring 

expertise to the question of terrorist fund-raising and the clandestine movement of money. The Intelligence Community uses money 

flows to identify and locate otherwise unknown associates of known 

terrorists and has integrated terrorist financing issues into the 

larger counterterrorism effort. 

Equally important, many of the obstacles hampering investigations have been stripped away. The current Intelligence Community approach appropriately focuses on using financial transactions 

in close coordination with other types of intelligence to identify and 

track terrorist groups rather than to starve them of funding. 

Still, understanding al Qaeda’s money flows and providing actionable intelligence to policymakers presents ongoing challenges 

because of the speed, diversity, and complexity of the means and 

methods for raising and moving money; the commingling of terrorist money with legitimate funds; the many layers and transfers 

between donors and the ultimate recipients of the money; the existence of unwitting participants, including donors who give to generalized jihadist struggles rather than specifically to al Qaeda; and 

the U.S. Government’s reliance on foreign government reporting for 

intelligence. 

Bringing jihadist fund-raising prosecutions remains difficult in 

many cases. The inability to get records from other countries, the 

complexity of directly linking cash flows to terrorist operations or 

groups, and the difficulty of showing what domestic persons knew 

about illicit foreign acts or actors all combine to thwart investigations and prosecutions. 

The domestic financial community and some international financial institutions have generally provided law enforcement and intelligence agencies with extraordinary cooperation. This cooperation 

includes providing information to support quickly developing investigations such as the search for terrorist suspects at times of emerVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
9

gency. Much of this cooperation is voluntary and based on personal 

relationships. 

It remains to be seen whether such cooperation will continue as 

the memory of 9/11 fades. Efforts to create financial profiles of terrorist cells and terrorist fund-raisers have proved unsuccessful, and 

the ability of financial institutions to detect terrorist financing remains limited. 

Since the September 11 attacks and the defeat of the Taliban, al 

Qaeda’s budget has decreased significantly. Although the trend line 

is clear, the U.S. Government still has not determined with any 

precision how much al Qaeda raises or from whom or how it spends 

its money. It appears that the al Qaeda attacks within Saudi Arabia in May and November, 2003, have reduced, some say drastically, al Qaeda’s ability to raise funds from Saudi sources. There 

has been both an increase in Saudi enforcement and a more negative perception of al Qaeda by potential donors in the Gulf. 

However, as al Qaeda’s cash flows have decreased, so, too, have 

its expenses, generally owing to the defeat of the Taliban and the 

disbursement of al Qaeda. Despite our efforts, it appears that al 

Qaeda can still find money to fund terrorist operations. Al Qaeda 

now relies to an even greater extent on the physical movement of 

money and other informal methods of value transfer, which can 

pose significant challenges for those attempting to detect and disrupt money flows. 

While specific, technical recommendations are beyond the scope 

of my remarks today, I stress four themes in relation to this committee’s work: 

First, continued enforcement of the Bank Secrecy Act rules for financial institutions, particularly in the area of suspicious activity 

reporting is necessary. 

The suspicious activity reporting provisions currently in place 

provide our first defense in deterring and investigating the financing of terrorist entities and operations. Financial institutions are in 

the best position to understand and identify problematic transactions or accounts. 

Although the transactions of the 9/11 hijackers were small and 

innocuous, apparently, or seemed to be, and could probably not be 

detected today, vigilance in this area is important. Vigilance assists 

in preventing open and notorious fund-raising. It forces terrorists 

and their sympathizers to raise and move money clandestinely, 

thereby raising the costs and the risks involved. The deterrent 

value in such activity is significant; and, while it cannot be measured in any meaningful way, it ought not to be discounted. 

The USA PATRIOT Act expanded the list of financial institutions 

subject to bank secrecy regulation. We believe that this was a necessary step to ensure that other forms of moving and storing 

money, particularly less regulated areas such as wire emitters, are 

not abused by terrorist financiers and money launderers. 

Second, investigators need the right tools to identify customers 

and trace financial transactions in fast-moving investigations. 

The USA PATRIOT Act gave investigators a number of significant tools to assist in fast-moving terrorism investigations. Section 

314(a) allows investigators to find accounts or transactions across 

the country. It has proved successful in tracking financial transVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
10

actions and could prove invaluable in tracking down the financial 

component of terrorist cells. Section 326 requires specific customer 

identification requirements for those opening accounts at financial 

institutions. We believe both of these provisions are extremely useful and properly balance customer privacy and the administrative 

burden on the one hand against investigative utility on the other. 

Third, continuous examination of the financial system for 

vulnerabilities is necessary. 

While we have spent significant resources examining the ways al 

Qaeda raised and moved money, we are under no illusion that the 

next attack will use similar methods. As the government has 

moved to close financial vulnerabilities and loopholes, al Qaeda 

adapts. We must continually examine our system for loopholes that 

al Qaeda can exploit and close them as they are uncovered. This 

will require constant efforts on the part of this committee, working 

with the financial industry, their regulators, and the law enforcement and intelligence community. 

Finally, we need to be mindful of civil liberties in our efforts to 

shut down terrorist networks. 

In light of the difficulties in prosecuting some terrorist fund-raising cases, the government has issued administrative blocking and 

freezing orders under the International Emergency Economic Powers Act, IEEPA, against U.S. Persons—individuals or entities—suspected of supporting foreign terrorist organizations. It may well be 

effective, and perhaps necessary, to disrupt fund-raising operations 

through an administrative blocking order when no other good options exist. 

The use of IEEPA authorities against domestic organizations run 

by U.S. citizens, however, raises significant civil liberties concerns. 

IEEPA authorities allow the government to shut down an organization on the basis of classified evidence subject only to a deferential 

after-the-fact judicial review. The provision of the IEEPA that allows the blocking of assets during the pendency of an investigation 

also raises particular concern in that it can shut down a U.S. entity 

indefinitely without the more fully developed administrative record 

necessary for a permanent IEEPA designation. 

Vigorous efforts to track terrorist financing must remain front 

and center in U.S. counterterrorism efforts. The government has 

recognized that information about terrorist money helps us to understand the networks, search them out, and disrupt their operation. These intelligence and law enforcement efforts have worked. 

The death or capture of several important facilitators has decreased the amount of money available to al Qaeda and increased 

its costs and difficulties in moving money. Captures have produced 

a windfall of intelligence. 

Raising the costs and risks of gathering and moving money are 

necessary to limit al Qaeda’s ability to plan and mount significant 

mass casualty attacks. We should understand, however, that success in these efforts will not of itself immunize us from future terrorist attacks. 

I would be pleased to respond to your questions. 

The CHAIRMAN. Thank you, Mr. Hamilton. Again, we appreciate 

your participation at the committee hearing today. 

11

[The prepared statement of Hon. Lee H. Hamilton can be found 

on page 108 in the appendix.] 

The CHAIRMAN. Among the major themes of the Commission report was the need to better allocate intelligence resources and establishing clear lines of responsibility. While there was a little commentary in the report itself about the Treasury’s anti-terrorist finance efforts, the committee, under the able leadership of Mrs. 

Kelly, has undertaken several hearings on that particular subject. 

Two major threads have emerged during those hearings: one, 

that the Financial Crimes Enforcement Network, or FinCEN, has 

trouble improving the quality of its product because they cannot 

operate their own computers, and two, that the IRS has a lot of 

other good financial crimes investigators who do not work on tax 

enforcement issues. 

Would it not make a lot of sense as we look at the larger picture 

to centralize these functions somewhere in government, perhaps 

with the Office of Terrorist Financing and Intelligence within 

Treasury? As we try to reach those goals, did the Commission at 

least consider that possibility and does that provide some kind of 

opportunity for reaching those two goals that were raised? 

Mr. HAMILTON. Mr. Chairman, we are very careful about putting 

into a single agency the lead role and trying to broker the competing equities of various operating agencies. You have in place 

today the NSC’s Policy Coordinating Committee on Terrorist Financing, and I think generally it has been successful in doing the 

policy coordination that is necessary. 

Now, obviously, Treasury has an enormously important role to 

play in antiterrorism financing. But we are skeptical, I guess, or 

doubtful that concentrating authority is a good move. 

One reason for that is the way we view antiterrorist or 

counterterrorism policy. We believe conducting counterterrorism 

policy requires that you integrate a lot of aspects or use a lot of 

tools of American policy and of American policymakers. You have 

to have the military, you have to have covert action, you have to 

have intelligence, you have to have Treasury, you have to have economic assistance and economic policy and public diplomacy and a 

lot of other things. So we are doubtful that this should be focused 

in the Treasury. 

With regard to the IRS—and may I say that is especially true as 

al Qaeda has moved to these more informal means of moving 

money. With regard to the IRS, we believe the IRS is working effectively now in the FBI Joint Terrorism Task Forces, which is designed to bring together the experts to fight terrorism in a single, 

coordinated effort. We have not seen any evidence that the IRS is 

not fully participating in that. 

Now, you also mentioned the Financial Crimes Enforcement Network. You folks know a lot more about that than I do. We did learn 

about some of their problems because it does not use its own systems to process secrecy data well, but getting into a remedy for 

that really was outside our mandate, and we did not address it. 

The CHAIRMAN. Thank you. 

One of the aspects of the Commission’s findings which received 

particular attention is its observation, and it was an interesting 

quote, that the report says that ‘‘trying to starve the terrorists of 

12

money is like trying to catch one kind of fish by draining the 

ocean.’’ And, indeed, and you have mentioned in your opening 

statement that, because of that apparent change, I guess the issue 

is, is it an either/or kind of thing. In other words, I can understand 

from the aspect of intelligence that we follow the money, follow the 

money trail, as opposed to efforts at locating and freezing those assets. Should that be the general policy of the Federal Government, 

or should it be dealt with on a case-by-case basis, depending on the 

particular situation on the ground? 

Mr. HAMILTON. I believe the latter is the way to approach it, Mr. 

Chairman. Freezing, of course, is a very, very important weapon in 

dealing with terrorist financing. And the existence of that power is 

a substantial—provides a substantial deterrent, we believe. 

Wealthy people, wealthy entities do not like the idea of having 

their assets frozen, and it makes them, we would hope, we believe, 

more reluctant to get involved in any kind of questionable financing that might help the terrorists. 

Having said that, I think on a given case whether or not to use 

freezing has to be made on a case-by-case basis. You have to look 

at all of the equities involved. Many times I think freezing might 

be the right strategy, many times it would not be the right strategy, and the better thing to do is not to freeze the assets, keep the 

account open, and follow it, to learn more about the terrorist financing. I do not think you can generalize about that. What you 

do have to have is an effective interagency process that considers 

the competing equities and then make a decision. 

The CHAIRMAN. Thank you. My time has expired. 

The Chair now recognizes the gentlewoman from California, Ms. 

Waters. 

Mr. FRANK. Mr. Chairman, if I could just explain, I was here a 

week ago when I had a chance to question Mr. Hamilton, and I 

thought with all of the members coming in, I would defer for a 

while. 

Ms. WATERS. Thank you very much, Mr. Chairman and Ranking 

Member Frank. I would like to thank you, Mr. Chairman, and our 

Ranking Member for scheduling this important meeting. 

Mr. Chairman, the 9/11 Commission’s report and the staff monograph on terrorist financing are tremendously valuable resources to 

this committee as we consider the wide range of issues that necessarily are implicated when we evaluate how we can make it more 

costly and difficult for terrorists to engage in terrorism without either sacrificing civil liberties or unduly disrupting commerce. I 

would like to commend Chairman Kean, Vice Chairman Hamilton 

and the other members of the 9/11 Commission and the Commission staff for the care and attention that obviously went into these 

documents, and I thank all of them for their work. They have certainly performed an exceptional public service. 

Mr. Chairman and members, I am going to take a line of questioning that may be a little bit uncomfortable, but I think it is absolutely necessary. First of all, I would like to note that, as it has 

been reported, the 9/11 Commission confirmed last month that it 

had found no evidence that the Government of Saudi Arabia funded the al Qaeda terrorist network and the 9/11 hijackers received 

funding from Saudi citizen Omar al-Bayoumi or Princess Haifa alVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
13

Faisal, wife of ambassador to the United States Prince Bandar bin 

Sultan. I would like to ask, what went into that investigation that 

would lead you to that conclusion? 

The reason I would like to ask that is there are so many reports. 

Time Magazine, for example, reported that the Saudis still appear 

to be protecting charities associated with the royal family which 

funnel money to the terrorists. Also, as you know, there has been 

a lot written lately about the relationship between President Bush 

and his father to the Saudis, not only their personal friendships, 

but their money relationships, relationships that include the Harkin Energy, Halliburton and the Carlyle Group; and, of course, a 

lot has been written about the $1 million that was funded to the 

Bush library by the Saudis. 

Also, it is noted that in this cozy relationship that this administration has with the Saudis it goes so far as to identify that Robert 

Jordan, the ambassador that was appointed to Saudi Arabia, had 

no diplomatic experience, does not speak Arabic and cannot be considered a serious diplomat as it relates to representing our interests in a country where many of us have very, very serious concerns. 

So I would like to know, how did the Commission reach the conclusion of finding no evidence that the Government of Saudi Arabia 

furnished al Qaeda or the network with any funds or that they are 

not still funding these charities? Did you have CIA information 

that helped you to document that? As a matter of fact, it appears 

that before 9/11, according to U.S. News, a 1996 CIA report found 

that a third of the 50 Saudi-backed charities it studied were tied 

to terrorist groups. Similarly, a 1998 report by the National Security Council had identified the Saudi Government as the epicenter 

of terrorist funding, becoming the single greatest force in spreading 

Islamic fundamentalism and funneling hundreds of millions of dollars to jihad groups and al Qaeda cells around the world. 

Now I must admit that this information that I am reading to you 

now came from the Center for American Progress. I will not go on 

any further. I think you get the picture. 

What I am trying to say to you is, if you have come to this conclusion that the Saudi Government had no—is not responsible for 

continuing to fund these charities where dollars ended up with 

some of the 9/11 hijackers, how did you come to this conclusion and 

what have you explored about this relationship of this administration to the Saudi Government? Obviously, it is very cozy. They 

have to escort members of bin Laden’s family out of the country, 

the princess who was found to have been giving money to charities 

associated with 9/11 hijackers, all leads us to a conclusion that this 

cozy relationship has to be broken up, and I would just ask you to 

relate to this. 

The CHAIRMAN. The gentlewoman’s time has expired. 

Mr. HAMILTON. Thank you very much, Congresswoman Waters. 

The Saudi connection with al Qaeda is a very, very important 

matter to look at, and you really do have to make a distinction between the activities of the Saudi Government prior to the spring 

of 2003, when they were attacked themselves, and then again later, 

I think in November, in 2003, that time frame, pre-attacks in 

14

Saudi Arabia and post-attacks in Saudi Arabia. Saudi Arabia is a 

key part of any international effort to fight terrorist financing. 

You asked us how we reached the conclusion. The conclusion was 

that we found no evidence, as you have stated correctly, that the 

Saudi Government as an institution or as individual senior officials 

of the Saudi Government supported al Qaeda. Now we sent investigators to Saudi Arabia. We reviewed all kinds of information and 

documents with regard to that that are available in the intelligence 

community. We listened to many, many people who talked to us 

about these things. We followed every lead that we could. This is 

an ongoing investigation. I think it will continue. We are not going 

to have the final word on it. 

We did find in this, the pre-attack period, pre-Saudi Arabia attack period, that there was a real failure to conduct oversight in 

the Saudi Government, there was a lack of awareness of the problem, and a lot of financing activity we think flourished. We think 

that Saudi cooperation was ambivalent and selective, and we were 

not entirely pleased with it. 

Then along came those attacks and, in the spring of 2003 and 

after that period, we believe the performance of the Saudi Government improved quite a bit, and a number of the deficiencies were 

corrected. 

The Saudi Government needs to continue its activities to 

strengthen their capabilities to stem the flow from Saudi sources 

to al Qaeda; and we have to work very, very closely with the 

Saudis in order to get that done. But we do not have any evidence 

that the government itself or senior officials of the government 

were involved in al Qaeda financing. And I think our diplomatic efforts there over a period of time have been helpful, but no one I 

think would say that we have resolved all of the problems with the 

Saudis. So we have to continue to send a message to the Saudi 

Government that the Saudis must do everything within their 

power, everything within their power to eliminate al Qaeda financing from Saudi sources. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. I thank the Chairman. I would like to commend the 

Chairman and this committee for work which actually started in 

1996 to target these terrorist organizations and their funding. I 

would like to note and welcome Vice Chairman Hamilton to the 

committee. 

Vice Chairman, as I understand your testimony today, one of the 

things that has gotten a lot of attention is this distinction about 

whether you freeze assets or you track the transfer of those assets, 

and I think that what you are saying is that it ought to be a caseby-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, 

15

but it is only a small part. So you have to find out what all the 

intelligence is. You have to find out what the military is doing, you 

have to find out what the CIA is doing and a lot of other institutions, and that has to be balanced and integrated. 

Mr. BACHUS. Are you aware that really the interagencies, the 

agencies are cooperating today, the FBI and the Treasury, what 

they are doing in these cases is they are sitting down and reviewing the evidence and trying to make on a case-by-case- basis decisions as to what hurts the terrorists the most? 

Mr. HAMILTON. Yes. We are aware that the cooperation has 

picked up very substantially, that there are regular meetings going 

on, that there are a lot of very smart people in these agencies that 

are trying to do their best to correct some of these problems. 

Our concern, of course, is that it be sustained, that it be continued and that it be institutionalized. You so often get the response, 

well, we have a good working relationship between official A and 

official B. That is very important, and without that relationship 

things are not going to work very well. But we have to look beyond 

the fact and understand that officials A and B are not always going 

to be there, so you want to institutionalize it. 

Mr. BACHUS. You are aware that, by direction of the Congress, 

there was created an Office of Terrorism and Financial Intelligence 

in the Treasury Department? 

Mr. HAMILTON. Yes. 

Mr. BACHUS. And that they have been coordinating with the FBI 

and the CIA? 

Mr. HAMILTON. Yes. 

Mr. BACHUS. And they have been meeting and basically doing 

what you all proposed here? 

Mr. HAMILTON. Yes, I agree with that. I think there are mechanisms, there are entities that have been created since 9/11 that 

have been useful and are operating much, much better than prior 

to 9/11. 

Mr. BACHUS. I think if you take what you have recommended 

and you look at what the Office of Terrorism and Financial Intelligence is doing, I think you would be very satisfied that they are, 

in fact, doing what you have asked them to do, with one possible 

concern, and that is if it is an international situation that we are 

not always getting cooperation overseas. 

Mr. HAMILTON. Well, if you look at—you know, we made, I 

think—I think the figure was 41 recommendations, and we really 

did not make a major recommendation with regard to terrorist financing. 

Mr. BACHUS. Right, and I would like to commend you on that. 

Because I will tell you that, from all we know, the system is working incredibly well. We basically put most of these facilitators—we 

have identified 383 of them. We have put most of them either out 

of commission or they are on the run. 

Mr. HAMILTON. There is no cause for complacency, however. 

Mr. BACHUS. Oh, and I can tell you that there is not a day that 

does not go by when these agencies are not meeting and reviewing 

the situation and deciding on a case-by-case basis how can we best 

hurt al Qaeda or these other organizations, either we freeze the asVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
16

sets or we track the assets, and that they are doing that, and I 

think you would be very satisfied. 

I will ask you about this: The Financial Action Task Force, are 

you aware of their work? That is the cooperation between some—

actually, it used to be 58 countries and now it is 94 countries, that 

we are actually going to each of those countries and saying, either 

combat terrorism or we will move against you to see that you do 

not do business with the United States, and I guess the Commercial Bank of Syria would be one example of some of our actions. 

Mr. HAMILTON. You are right. That is a very important activity 

and one that will be a challenge to American diplomacy for many 

years to come. 

One of our principal allies in the war on terrorism is Pakistan. 

Pakistan’s laws with regard to tracking money and terrorist financing and money laundering are practically nonexistent. So a lot of 

things need to be done, and among other things that need to be 

done is we need to provide technical assistance to a lot of these 

countries. 

Mr. BACHUS. In fact, we are actually doing that with 94 countries 

today. We have increased it from 58 to 94. We have problems with 

certain countries. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. BACHUS. I would simply say I would like to submit for the 

record some of the things that the administration is doing in promoting stronger antiterrorism financial regimes with certain countries. 

The CHAIRMAN. Without objection. 

[The following information can be found on page 140 in the appendix.] 

The CHAIRMAN. The Chair is going the try to recognize members 

in order of their appearance, and Mr. Frank is not here. I have Ms. 

Maloney as the next. The gentlewoman from New York. 

Ms. MALONEY. Thank you. Thank you very much for your leadership, and I thank the Ranking Member and Chair for holding this 

important oversight hearing. 

Mr. Vice Chair, in your 9/11 Commission report you noted that 

Congress has not demanded and the executive branch has not produced a focused U.S. strategy for combating terrorist funding, and 

that was on page 105. Unfortunately, this committee has seen at 

least some evidence that this is true. Even now, 3 years after 9/

11, lines of jurisdiction remain unclear, and agencies do not, as you 

testified today, always coordinate their efforts. 

To give one example, in a June hearing that we had of the oversight committee on major violations of money laundering by the 

Riggs Bank and UBS, the banking regulators pointed their fingers 

at each other when asked why significant portions of the new 

money-laundering provisions of the PATRIOT Act remained on the 

drawing board and had not been put into practice. 

Also, earlier this year, the oversight subcommittee discussed 

with Deputy Secretary Bodman the fact that Treasury was omitted 

from an interagency memorandum of understanding between 

Homeland Security and the Justice Department concerning terrorist financing investigations, and Mr. Bodman argued that really 

Treasury did not need to be included and that Treasury ‘‘defers to 

17

the FBI on enforcement matters, including tracking terrorist finances.’’

Finally, this committee has confided—I must say that this committee—and I would like to hear your assessment of this—has put 

our trust in the Treasury as the proper lead agency on these tracking matters. But if Treasury is going to defer to the FBI, maybe 

we are making our investment in the wrong place. Some have suggested that we should move FinCEN to the FBI since the FBI is 

the lead agency in investigations. 

So I would like your comments on how we can better coordinate 

between the various agencies and really have responsibility placed 

firmly and accountability in certain areas so that the fingerpointing 

stops and a timetable of implementing the suggestions that have 

not been put in place. 

I would also like to ask you about the comment on page 172 of 

the report that we still do not—that the United States Government 

still does not know the origins of the financing of the 9/11 terrorists. You further state that you believe it came from wire transfers 

or cash, and what are we doing to track wire transfers? You stated 

we are in some cases having difficulty with certain foreign countries that will not cooperate with us, particularly those that are on 

our high terrorist threat list, but we can certainly track wire transfers from those countries and from foreign banks, and what are we 

doing specifically to track and internalize and assess wire transfers? 

But the larger issue that you pointed out of lack of coordination, 

responsibility to accurately follow through, what is your feelings on 

that? I must say I was delighted to see that the Senate has implemented one of your recommendations by coming forward with legislation for a Central Intelligence Agency and directorate with budgetary powers. How do you see us getting a hold on this financing 

so that we start having accountability, as opposed to pointing fingers? 

Mr. HAMILTON. The coordination and integration of 

counterterrorism policy under our recommendations would be 

under the direction of a National Intelligence Director. Our basic 

analysis was that 9/11 occurred in part because we did not share 

information and that the intelligence agencies today, the intelligence community today, is organized very much on the basis of 

how you collect the intelligence, satellite, human intelligence and 

so forth, and that it really ought to be organized in this day and 

age more on a mission basis than on a collection basis. 

But the key is to get sharing of information across both domestic 

and foreign means of collecting intelligence and that there must be 

somewhere in the government where you pool and analyze all of 

this intelligence and manage it and figure out how to deal with it. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from Delaware, Governor Castle. 

Mr. CASTLE. Thank you, Mr. Chairman. 

Let me just start, Mr. Hamilton, by saying that I just think the 

report was really exceptional. I was on the Intelligence Committee. 

We issued a report which I thought was a pretty good report and 

I thought you did an extraordinary job. I think you and Tom Kean 

deserve a lot of credit. 

18

I watched a couple of those early hearings. I was a little worried 

it was going to blow completely out of control. You did a wonderful 

job of pulling it together with a diverse crowd, shall we say. 

Let me ask you one question that is not related to what we are 

discussing here. I don’t know anything about the staff report that 

came out, I guess, on Saturday. You indicated you didn’t know a 

lot about it either. 

What is the story on the staff report? This is a pretty comprehensive report with footnotes and everything else. Why is there a staff 

report? Does it differ? By whose authority was it done? 

Mr. HAMILTON. Our staff did an enormous amount of investigative work, and we drew from that obviously in putting together the 

final report here; but there was a lot more work done than appears 

in that volume, and so we decided that for the expert, we would 

put out a number of monoliths. I think we are going to put, maybe 

have put out, 12 or 13 of them and they really are very detailed. 

They do not carry the approval of the Commission. 

In other words, this came out Friday night, I think was put on 

our Web site Friday night. I didn’t see it frankly till early this 

morning. 

I think it is totally consistent with my testimony. I think it is 

totally consistent with what we say in the report, but it is much 

more detailed. 

Mr. CASTLE. And there will be more so these are sort of supplemental? 

Mr. HAMILTON. It is a supplement, and it is really designed for 

the expert. 

Mr. CASTLE. Thank you. I appreciate that. 

Let me turn to the subject at hand. I noted in the report, from 

about page 385 on, a discussion about visitors and immigration. 

This has always concerned me. It seems to me that the one thing 

that could have stopped 9/11 is if we had had a visa visitors system 

in place that would have prevented people from being in this country. And there is some question about whether some of them would 

have been able to be here or not, but basically if you look at that 

for the next 10 pages, it talks about a biometric screening system 

and goes on in some detail in terms of visitors, et cetera. 

Some of that is starting to happen now although it only applies 

to a very small percentage of people who come to the United States 

on immigration or in the area of visa. But it seems to me that that 

makes a lot of sense. 

Was that a unanimous—obviously you did everything unanimously, but is there strong consensus about this? 

It seems to me that this would pertain also to the subject matter 

of today’s hearing which is the finances. Obviously, if you are here 

on some sort of visa or a passport or whatever it may be and it 

does have biometric identification, this could be shown or used in 

terms of opening up any kind of financial accounts or whatever. I 

think there is crossover in that area, and it should be done as rapidly as possible. 

I would just like to get your comments on that. 

Mr. HAMILTON. Terrorists travel. When you travel, you leave a 

trail. It is important for us to be able to follow that trail. And so 

we believe there has to be a modern border immigration system. 

19

We think we have got a ways to go before we are there. We favor 

a biometric entry-exit system. We are no experts on biometrics; 

that is a complicated field in and of itself. But there isn’t any doubt 

that we have to be able to determine that people are who they say 

they are when they come into the country. We believe this is the 

best way to do it. 

The technology is evolving. We think that the official, whether 

that official is a Customs official or a border official, a State Department official issuing a visa or whoever it might be that has 

some responsibility for people who try to get into this country, we 

think they have to have access to files on visitors and immigrants 

so they can immediately access that file and see who this person 

is that wants to come into the country. That means they have to 

have a lot of intelligence, it has to be pooled, it has to be dispersed. 

This is a complicated business when we have got all of these people coming into this country every day and millions, of course, over 

a period of time. And we have to be able to exchange information 

with other countries; intelligence from other countries, issuance of 

a passport by another country becomes enormously important to 

this country. 

So all of this is terribly important, and I guess the key observation we make is that immigration and border security is a national 

security matter and it must be seen in that context. I don’t think 

it has been until recently. It is very important. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. CASTLE. I yield back. 

The CHAIRMAN. The gentleman from Pennsylvania. 

Mr. KANJORSKI. Thank you, Mr. Chairman. 

Mr. Hamilton, I join my colleagues in congratulating you and the 

Governor in doing great work in your final report. I am not sure 

I understand why we are here today, though. Is there a specific 

recommendation of a lack of existing laws that needs to be changed 

to improve the situation? 

The reason I ask that question is: I have been sitting on this 

committee for almost 20 years and watching the great war on 

drugs that has transpired for about 30 or 35 years. To the best of 

my recollection, drugs are moving in and out of the United States 

and money for drugs is moving in and out of the United States in 

gigantic proportions. Some people, I think, have estimated it from 

$100 billion to $140 billion a year. We have neither been able to 

close that movement by devices, or have not been extraordinarily 

successful. 

When I look further at our borders, we have illegal immigration 

at gigantic proportions in the country. 

I am just wondering: Is this an exercise to make the public feel 

better? When I say ‘‘this exercise,’’ the fact that the Congress is 

now, each committee of the Congress scurrying back here to Washington to consider this report. 

What can we do? What are you asking this committee to do? 

What are you asking the Congress to do in terms of financial closure of holes and leaks within our system? 

Mr. HAMILTON. As I suggested, I don’t think our recommendations are primarily aimed at the terrorist financing arena. 

20

Having said that, it is important for the public to understand—

I think this committee already understands it—the shift that is 

taking place in terrorist financing, how at one time we were going 

to starve all the terrorists or drain the swamp. While we don’t reject that, there has been this remarkable shift that it is important 

for the American public and for this committee and for all of us to 

understand. 

I guess what we are trying to say is that in fighting the war on 

terrorism, getting the right kind of financial information to the investigators at the right time is tremendously important. 

Mr. KANJORSKI. What can we do to accomplish that? Do we need 

more laws or do we have efficient laws in place? 

Mr. HAMILTON. I do not come before you with a request for a specific new law. We are saying that what you have on the books has 

been helpful, some of the provisions in the PATRIOT act. So I am 

not calling for new legislation. 

Mr. KANJORSKI. I have watched your career my entire life and 

admired it. You are usually an optimistic man. Are you optimistic 

in terms of whether or not we can be more attentive to solving 

these problems that particularly became highlighted with 9/11? Is 

there something the American people can do? Is there something 

specifically this Congress could do? Or are we just relying on the 

various administration or executive branches of the government 

and intelligence forces? 

Mr. HAMILTON. I have been quite pleased by the response to the 

9/11 Commission report. It has resonated. We are right up there 

with Harry Potter in terms of public approval and buying of the 

book. 

Mr. OXLEY. When does the movie come out? 

Mr. HAMILTON. That is not our work alone. It is just the fact that 

the American people and, I think, the Congress are ready to look 

very, very hard because of a variety of factors on how we strengthen our counterterrorism efforts. 

We recognize now that terrorism is the number one national security threat to the United States. So what is pleasing to me is 

that the Intelligence Committee, the Judiciary Committee, the 

Banking Committee—it used to be the Banking Committee—the 

Financial Services Committee are all asking themselves, what 

should we be doing about this? That is an enormously pleasing response. 

We don’t pretend that we have got everything exactly right in 

this report. It is a complicated business. But I have been enormously pleased that the President has responded quite positively 

and you now see a lot of refinements, if you would, or criticisms 

of this report coming out, all of which I think are directed towards 

strengthening counterterrorism efforts in the country. 

Mr. KANJORSKI. Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from New York, Mr. King. 

Mr. KING. Thank you, Mr. Chairman. 

Congressman Hamilton, it is always great to have you back. Of 

course you have to be commended for the great job you did as vice 

chairman, but also for the tremendous amount of time you are putting in this month going from committee to committee. I would 

21

think after all the years you spent in Congress you wouldn’t be 

that anxious to come back, but we certainly benefit from your wisdom. 

Mr. Hamilton, in your statement today and I believe also in the 

report, you mentioned the fact that there was no substantial source 

of domestic financial support for the 9/11 attacks. From your investigation, were you able to determine whether or not there is a 

threat today though, a real concern that there is domestic funding 

now for future attacks or whether or not the al Qaeda supporters 

in this country are able to raise money domestically? 

Mr. HAMILTON. We have not found any evidence of that, that 

they are raising money from domestic sources. 

Mr. KING. Also you mentioned in your statement, and we have 

seen evidence of it, that the financial services community has been 

cooperative as far as dealing with the Federal Government and 

providing information. There is a concern that some of us have that 

perhaps the Federal Government is not giving enough information 

back to the financial institutions which they could use to learn 

more or perhaps spot things they wouldn’t be able to spot otherwise. 

Do you think the government is implementing the PATRIOT Act 

sufficiently as far as giving data back to the financial community? 

Mr. HAMILTON. We hear a lot about that feedback problem. We 

think it is a genuine one. You are right, of course. We agree that 

the financial institutions, domestic financial institutions, have been 

very cooperative. A lot of that, I believe, really works because of 

personal relationships that have developed between the government and the private sector, and it is a very important fact. But 

the lack of feedback from the government to the financial institutions, we heard a lot about that in our interviews with banking 

personnel. What does not seem to be present is a systematized, formalized way of getting that information flow working. It depends 

too much, I guess, on informal arrangements, not enough in a systematic way. There may be reasons for that. 

I know they have tried very hard, for example, to develop a 

model of terrorist financing. That has not yet been developed because it is very, very hard to do; but that being said, I think steps 

are being taken to address the so-called feedback problem. We encourage that. We would like to see that institutionalized as well. 

Mr. KING. Mr. Hamilton, if you could perhaps just clarify the 

record, you were asked before a multipart question, and in there 

there was a statement which I think has not been corrected where 

it was suggested that somehow the Bush administration was responsible for getting the Saudi royal family and members of their 

family out of the United States. 

Wasn’t it the finding of your commission that that was done by 

Richard Clarke and never went any higher than him, and that nobody at any high level of the administration was ever contacted on 

that issue? 

Mr. HAMILTON. That is correct, Mr. King. A contact was made by 

the FBI to Richard Clarke about Saudi citizens leaving this country. We looked into that very, very carefully. This occurred within 

hours after the 9/11 attack. Mr. Clarke was very, very busy at that 

time in making decisions every hour. He asked the FBI if they had 

22

investigated the backgrounds of these people. The FBI said they 

had. Mr. Clarke gave his approval to let these flights go ahead. So 

far as we are aware, the decision went no higher than Mr. Clarke. 

We found no evidence that any flight of Saudi nationals departed 

airspace before it was reopened. That was one of the charges. We 

found no involvement of U.S. officials at the political level—I do not 

include Mr. Clarke being at the political level—in the decisionmaking. We believe that the FBI screening was satisfactory. 

We subsequently, after the fact and with a much larger list, ran 

the names against our lists and found—and made extensive interviews, and so the independent check of our database found no links 

between terrorism and the Saudis who departed the country. 

This too is an ongoing investigation. We give you what we were 

able to find or not able to find and those were the conclusions. 

Mr. KING. There was no evidence of any impropriety whatsoever. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from California, Mr. Sherman. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

Mr. Hamilton, I think your commission needs to be commended 

for so many different things, one of which is to point out the powerful tool that, following the money it provides in knowing what the 

terrorists are up to. 

My concern is that your comments might be misinterpreted to 

argue for a fatalistic reduction in our effort to turn off the money 

to the terrorists. We were not able to stop them from getting the 

roughly $30 million they needed for what they did, but the other 

way to look at that glass and say it is half full is to say, we did 

stop them from getting $60 million or $100 million or $200 million 

a year which they would have put to even more diabolical use. 

My first question relates to the fact that it is my understanding 

that your commission’s term of office expired this weekend. I can’t 

think of a better investment of U.S. taxpayer dollars than what 

your commission has done. Yet you have left a lot of unanswered 

questions, as naturally you would. You have identified them. You 

have said additional work should be done. 

It strikes me that much as you might like to relax, your commission are the best people to do it. Perhaps you could explain to this 

committee how important it is that we keep the Commission in 

business, and perhaps you would inspire all of my colleagues to cosponsor legislation to do just that. 

Mr. HAMILTON. The Commission, of course, is a statutory body 

created by you in the Congress and by the President. You are right, 

it went out of business this weekend. All of the Commissioners believe that the recommendations we have made are worthwhile and 

should be considered, and each of them is committed to trying to 

help advance the case for the recommendations. All of the Commissioners have said that they will not involve themselves in partisan 

politics with regard to the terrorism issue, and we will do our level 

best to try to meet that commitment. We have, because of pending 

business, if you would, and unanswered questions, decided to stay 

in business on a private basis. We have raised money for that purpose, not from the government but from private sources. 

I am not quite up to date on all of that, but we are going to be 

opening an office here very shortly. Chairman Kean and one or two 

23

of the other commissioners have been more involved in it than I. 

We will continue to function. 

There are a lot of inquiries that still come into the Commission. 

There are questions that we have not answered. We are deeply 

committed to trying to see implementation of some of our reforms. 

We need help in doing that. We have got to have staff, we have 

got to have people to write testimony and do research. 

Of course, the e-mails continue to come. My office just receives 

e-mails every day, requests for testimony and speaking and all the 

rest of it. We can’t possibly meet all those demands and we do need 

some help. 

Mr. SHERMAN. One approach is that you continue, but morph 

into a foundation. Another approach is that we continue you as a 

government-funded commission with all of the official imprimatur, 

liberating you from the time that it would take to raise funds one 

donor at a time, one schmooze at a time. 

Which is the better approach to serve this Nation and to begin 

to answer the many questions that still remain unanswered? 

Mr. HAMILTON. We leave that judgment to you and to your colleagues, Mr. Sherman. We are not going to try to do that. We have 

moved ahead on a private basis. 

Mr. SHERMAN. I think it may be obvious to my colleagues that 

your time is best spent doing the work of the Commission rather 

than doing the work of forming and funding some new foundation, 

but let me move on to one more question. 

Your commission explodes the false impression that Osama bin 

Laden had access to a personal fortune of tens of millions or hundreds of millions of dollars. Yet he is one of the many sons of one 

of the richest families in the world. He did at one point inherit tens 

of millions of dollars or interests in family businesses worth tens 

of millions of dollars. 

Do we have any idea who controls this money or who took it 

away from his control, and who then should disgorge that money 

so that we can provide compensation not only to the victims of 9/

11, but also to the victims in East Africa for whom there is no 

other source of compensation? 

The CHAIRMAN. The gentleman’s time has expired. The gentleman may respond. 

Mr. HAMILTON. We think with regard to Osama bin Laden’s assets, most of them were spent during the period he was in Sudan 

before he moved to Afghanistan. He was supporting at that point 

quite a large organization. We think a number of his assets were 

frozen by the Saudis. We found no evidence that the 9/11 attack 

itself was financed with his personal funding. 

Mr. SHERMAN. I would hope the Saudi Government would disgorge whatever assets it has frozen. 

The CHAIRMAN. The gentleman from California, Mr. Royce. 

Mr. ROYCE. Thank you, Mr. Chairman. I thank Vice Chairman 

Hamilton. 

Lee, I wanted you to know that I very much appreciated your 

leadership as Chair of the House International Relations Committee, but I also appreciated your judgment and I wanted to ask 

you today a couple of questions. 

24

One, as you continue your efforts, I think we need to create a 

new structure whereby each safety and soundness regulator would 

have a designated group that works hand in hand with a newly 

created Office of Terrorism and Financial Intelligence in the Treasury Department. 

My view is that Congress needs to strongly consider Treasury as 

the agency to house and run our government’s centralized financial 

intelligence unit. I say that because I think we should put the PCC 

basically in charge of integration and cooperation between these 

agencies. But I think if we look at the fact that today money moves 

across borders faster than people, faster than weapons, with a click 

of a mouse. You have got tens of millions of dollars that can be sent 

anywhere in the world, and it is Treasury that has an institutional 

and historical relationship with the foreign central banks and the 

ministries of finance responsible for instituting antiterror finance 

laws in countries around the world; and I think it is Treasury that 

can apply pressure on nations through the seats that it has on multilateral institutions. If we look at the World Bank or the IMF, if 

you elevate Treasury’s role in this, you have got an enormous 

amount of leverage there. 

I throw that out for the future and for your thoughts here today 

in terms of how we could elevate Treasury’s muscle in this. 

The other thing I wanted to ask you about, we had a hearing out 

at LAX prior to the 9/11 Commission hearing there where we 

looked at these 19 hijackers, we looked at the visas. The committee 

went through, one by one—this is a subcommittee of the International Relations Committee—and we saw how most of these 

could have been caught, should have been caught, because there 

were obvious mistakes made where they weren’t even filled out in 

most cases. 

I would like to go to your thoughts requiring a biometric identification of all visas and passports. Lee, if there had been due diligence at the time of those 19, most would have not gotten into the 

country, if there had really been close work, if Visa Express hadn’t 

basically waved them into the country. But it seems to me that this 

concept that you have of this biometric identification system that 

would be on all passports and visas worldwide potentially for people who would come into the United States would allow us to get 

at this question of the national security component, now, of people 

visiting and leaving the country and would allow our intelligence 

authorities to actually know who is here. 

I wanted to hear your thoughts about how we would implement 

such a system. 

Mr. HAMILTON. The 9/11 Commission report, of course, is general. It deals with broad concepts and does not get into great detail 

on the implementation. There is a lot of arguments today on what 

kind of biometrics you would have. We really don’t try to make 

judgments about that. We are not experts in that field. But we 

think the concept is a very important one for the very reason that 

you said. 

It is just agonizing to look at these visas and passports that 

these hijackers had and to see how they slipped in. 19 out of 19. 

Actually 19 out of 20. We stopped one of them coming into the 

country. But they worked the system very, very well. 

25

You said, well, if there had been due diligence. It is easy to say 

that in hindsight, of course. At the time none of us anticipated anything quite like this. The importance of it, we believe, is paramount 

in order to have an effective system of guarding our own borders. 

Your earlier point about elevating the work of the Treasury, I am 

open, would be, and I think the Commission would be open to suggestions about that. You now have this policy coordinating committee in the NSC, which we think has done a pretty good job of 

coordination; and how it would fit in with all of that, I don’t quite 

know what your thoughts would be there. 

Treasury plays a tremendously important part in 

counterterrorism policy in tracing the flow of these funds. They are 

a major actor without any doubt. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from Kansas, Mr. Moore. 

Mr. MOORE. Thank you, Mr. Chairman. 

Thank you, Congressman Hamilton, for appearing before our 

committee this morning. As a member of the bipartisan 9/11 Commission Caucus, you and Governor Kean and members of the Commission, I think, have set a powerful example of what can be accomplished when we set aside partisan politics and work together 

for the good of our country. I thank you for that, Mr. Hamilton. 

As you know, the Commission staff report examines in great detail the difficulties that United States authorities have had in 

tracking and freezing al Qaeda’s finances. While financial support 

for al Qaeda has dropped significantly since September 11, according to the staff report, al Qaeda continues to fund terrorist operations with relative ease primarily because al Qaeda’s attacks are 

relatively inexpensive to conduct. 

Additionally, the staff report notes that many in the intelligence 

community believe that new jihadist groups are forming and are in 

the process of creating a loose network of terrorist organizations 

that will exist independent of al Qaeda. The 9/11 Commission report reached a conclusion very similar and said that if al Qaeda is 

replaced by smaller, decentralized terrorist groups, the premise behind the government’s efforts that terrorists need a financial support network may become outdated. 

Many of us on this committee and in the House supported the 

Financial Antiterrorism Act of 2001 which is now part of the PATRIOT act. As you note in your testimony, the PATRIOT act has 

given law enforcement a number of new tools to assist in terrorism 

investigations. I want to ask you a couple of questions as a former 

Member of Congress and someone who is very familiar obviously 

with the conclusions of your 9/11 Commission report. 

Number one, what should Congress be doing right now and in 

the future to focus our attention as much on emerging non-al 

Qaeda terrorist threats as we are trying to freeze assets of al 

Qaeda? And, number two, I saw in the news this morning and on 

television reports that Senator Roberts of Kansas, the chairman of 

the Intelligence Committee in the Senate, was discussing his proposed legislation that would address some of the recommendations 

of the 9/11 Commission. 

I wondered, Mr. Hamilton, can you share with us the details of 

Senator Roberts’ proposal? Thank you, sir. 

26

Mr. HAMILTON. Mr. Moore, I am not able to share with you the 

details of Senator Roberts’ proposal. I have seen only the press accounts this morning. I had a very brief conversation with Senator 

Roberts on Friday. I know he is sending me his bill that the Republicans on the Intelligence Committee in the Senate have agreed 

upon. 

His, of course, is a very important voice here, so we will want 

to look at that very, very carefully. But it would be quite premature for me to make any judgment with regard to that plan. Obviously it will be given very serious consideration. 

Your first question is about what can Congress can do with regard to non-al Qaeda assets. It is a good observation because we 

believe that what has happened to al Qaeda is that, as you say, it 

has become very decentralized and a lot of other groups, a lot of 

new leaders are emerging, all of whom have a certain admiration 

for Osama bin Laden. They look to him as an inspiration, but do 

not take operational guidance from him. 

We think—I will be talking about this a little more in the International Relations Committee—we think that the nature of the 

threat is changing as we move along here. So Congress has to be 

alert to this and also alert to how other groups might be financing 

their efforts. We don’t have any information with respect to that. 

We were not asked to look into it and did not. 

Mr. MOORE. Thank you very much. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentlelady from New York, Mrs. Kelly. 

Mrs. KELLY. Thank you, Mr. Chairman. I wanted to discuss one 

sentence from the Commission report which I see received a little 

more attention in the monograph that you released. The sentence 

is, ‘‘We have seen no persuasive evidence that al Qaeda funded 

itself by trading in African conflict diamonds.’’

As you well know, this is an issue over which many people have 

struggled, so I am hoping for a little bit more light to be shed on 

the process, how the Commission came to the decision to include 

that sentence. I think it may be useful to the members here as they 

consider that issue. 

The Commission was, of course, I think right to look at the information from the FBI and the CIA. In the Commission’s review, it 

also had available to it information from a number of sources 

which came to different conclusions, including the U.N. and U.S.-

sanctioned special court of Sierra Leone, a four-star Air Force general who is currently the deputy commander of the U.S. European 

Command, and the work of a respected journalist who has spent 

a great deal of time in the western Africa area and has written extensively on the topic. 

Additionally, there have been rather new developments on this, 

owing to the capture of al Qaeda operative Ahmed Ghailani in 

Pakistan. Ghailani spent several years in western Africa and is 

known to have interacted with Liberian President Charles Taylor. 

In a recent Boston Globe article about capture, U.S. intelligence officials said, and I quote, ‘‘Charles Taylor was in the back pocket of 

al Qaeda. He was helping them launder money through the diamond mines.’’ this is from an article this month in the Boston 

Globe. 

27

Approaching the issue as someone who is just really trying to get 

to the bottom of an apparent schism of information here, I hope 

you can enlighten the committee as to what sources of information 

were considered and how you analyzed them. For example, to what 

extent did you consult with the Defense Intelligence Department? 

It seems that only the FBI and CIA sources are quoted in the report as footnotes. 

I also understand that the chief investigator for the special court 

of Sierra Leone met with the Commission staff in June and offered 

two additional informants who had firsthand information about the 

activities in 1999 and 2000 in West Africa of Ghailani, of Fazul 

Abdullah Mohammed, another al Qaeda operative who is currently 

on the FBI’s most-wanted terrorist list for his involvement in the 

1998 embassy bombings, and of Mohammed Atef, a top-ranking al 

Qaeda commander. But the Commission chose not to contact these 

sources, from what I gather. 

I wonder if you would talk for a minute about the Commission’s 

process regarding blood diamonds and why they chose to interview 

only certain people and not others. Perhaps there is more information available now. 

Mr. HAMILTON. Mrs. Kelly, this too is an ongoing investigation 

and I don’t know that we have the final word on it. The distinction 

I would want to draw is between al Qaeda and maybe some specific 

al Qaeda operatives. 

There is some evidence that specific al Qaeda operators may 

have dabbled in or maybe just expressed an interest in precious 

stones at some point. But what we are not able to do is to take that 

evidence and extrapolate from it and conclude that al Qaeda funded itself in that manner. We are aware of the reports that you referred to. I think we are aware of all of them. I would need to double-check that, but I think we are aware of all of them. 

None of them came as a surprise to me. We have looked at NGO 

reports. We have looked at a number of journalist reports. We have 

looked at investigators who work for the United Nations. A number 

of them have alleged that conflict diamonds were used. We do not 

believe on the basis of the evidence that we have now that those 

claims can be substantiated. But obviously you have to maintain 

an open mind here, as I think the Commission tried to do. 

We evaluated the sources of information for these various public 

reports. We checked the FBI records. We checked the CIA records. 

They came to the conclusion, as you suggest in your question, that 

there was no credible evidence——

Mrs. KELLY. I am sorry, Mr. Hamilton, to interrupt here but I 

have a very short period of time, and I simply wanted to know why 

there were certain people chosen for you to interview and others 

seemed to have been left out, such as these two gentlemen that 

were offered to you by the special courts of Sierra Leone. 

Mr. HAMILTON. I will simply have to check that. I think we have 

checked either all of them directly or indirectly. But one of the 

things we were careful about is not to accept the word of anybody. 

We always looked for corroboration and we didn’t find it in these 

cases. 

The CHAIRMAN. The gentlewoman’s time has expired. 

28

Mr. HAMILTON. If you have evidence that al Qaeda—not al 

Qaeda-associated people, but if you have evidence that al Qaeda 

itself was funded by conflict diamonds, we are certainly open to 

that. 

The CHAIRMAN. The gentleman from New York, Mr. Israel. 

Mr. ISRAEL. Thank you, Mr. Chairman. 

Chairman Hamilton, thank you so much for joining us. If I may, 

let me extend personal warm wishes to Secretary Libutti who will 

be appearing in our next panel whose family hails from Huntington, New York, which I represent. It is my hometown. The wedding ring that I wear was purchased at Libutti Jewelers. I want 

him to know that not only do I support my local economy, but I 

support the Libutti family economy and will continue to do that. 

Mr. Chairman, I would like to ask you about Saudi Arabia. The 

Saudis recently began running rather significant television and 

radio ads in 19 U.S. media markets specifically citing the Commission’s report as somehow bestowing on the Saudis a kind of Good 

Housekeeping Seal of Approval, noting that the report has said of 

the Saudis that they have been a loyal ally to the United States. 

What the report actually says, as you know, is that the Saudis 

have been a problematic ally in combating Islamic extremism, and 

somehow the word ‘‘problematic’’ was dropped from that Saudi 

media campaign. 

I was wondering if you could comment on what the Commission 

has learned about the extent of Saudi financial involvement in al 

Qaeda and what you think we need to be doing in order to ensure 

the complete, consistent assistance of the Saudis in cracking down 

on the financing of terrorist organizations or charitable organizations that finance terrorist organizations. 

Mr. HAMILTON. Mr. Israel, we did not find evidence of the involvement of the Saudi Government as an institution in the plot. 

We did not find any evidence that the Saudi Government was involved in financing terrorism as a whole. The word ‘‘problematic’’ 

was used in the report because in the period following 9/11, we 

think that the Saudi cooperation was episodic and not very helpful 

in our efforts. We think that changed rather dramatically in the 

year 2003 after the attacks in their country. 

So since 9/11 and especially since, I guess I should say, May of 

2003, there has been strong Saudi cooperation on the terrorist financing issue. 

Mr. ISRAEL. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman yields back. 

The gentleman from Texas, Mr. Paul. 

Mr. PAUL. Thank you, Mr. Chairman. 

Welcome, Mr. Hamilton. I have two questions. One deals with 

the fourth amendment and the other one deals with the practicality 

of monitoring all the financial transactions of every American. 

Earlier it was said that you are an optimist, and I think that I 

would confirm that, that you are. Your acknowledgment that the 

government needs more tools to monitor what is going on in this 

country, you also acknowledge the fact that if we are not careful, 

there could be abuses, civil liberties could be violated and these 

powers could be misused. I think that, as one that is a bit more 

skeptical, I recognize the fact that governments tend in that direcVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
29

tion. They tend too often to abuse their powers this was a big issue 

at the time of the Constitutional Convention, and the Constitution 

was written to curtail the powers of government, not to authorize 

the government to do so much. 

The fourth amendment is rather clear, the right of the people to 

be secure in their places, in their homes, in their persons and their 

papers and their effects, and that none of these should be violated 

unless there is probable cause and a search warrant. This country 

more or less gave up on that in the early 1970s with the Bank Secrecy Act and we expanded on that power, of course, with the PATRIOT Act. 

Evidently the whole country, especially just about everybody in 

Washington, concedes that a notion which was strongly rejected at 

the time of the founding of this country and that is the sacrifice 

of liberty is necessary in order to provide security. There still are 

a few Americans that cling to that notion that we don’t have to sacrifice liberty for security. 

So my question regarding the fourth amendment is, since it is 

not followed technically anymore, should this be revised? Is the 

fourth amendment outdated? 

I will go ahead and ask my second question. That has to do with 

the practicality of what we do. In many ways, it seems very impractical. The year before 9/11, we had 12 million suspicious activity reports issued. There was a lot of information in there. It was 

hard to digest. It looks like we are moving in the direction of not 

only do we look at the banking records, we are going to look at everything from car dealers down to coin dealers all other financial 

transactions. 

I wanted to quote very briefly a statement from John Yoder, who 

was the director of asset forfeiture for Ronald Reagan, in reference 

to this issue. He says, ‘‘It costs more to enforce and regulate them 

than the benefits that are received. You’re getting so much data on 

people who are absolutely legitimate and who are doing nothing 

wrong. There’s just too much paperwork out there. It really is not 

a targeted effort. You have investigators running around chasing 

innocent people trying to find something that they’re doing wrong 

rather than targeting real criminals.’’

This makes me think about a report that just came out this 

week, because there is going to be an audit released in the near 

future of the moneys that were controlled by the Coalition Provisional Authority. During that period when they were in charge of 

the moneys of Iraq, they collected $8.8 billion, and they don’t know 

where it went. The audit—it doesn’t reveal where our responsibilities were to monitor this. 

The report is going to say that they don’t know much about 

where it went. The odds of some of that money ending up in the 

hands of the enemy are pretty good. 

So I think we are way off target. We are targeting innocent 

Americans. At the same time, we don’t even manage our affairs 

over in Iraq where so much money has been misplaced. 9/11 actually was an excuse to expand the PATRIOT Act. That legislation 

had been floating around here for years. 

So I am discouraged that so many people are so complacent and 

so willing to give up their privacy because they say, well, it is going 

30

to help us, it is going to make us more secure. It wasn’t 9/11 that 

prompted so much of this financial privacy invasion that allowed 

us to pass it, it was just the atmosphere that did this. 

I don’t see where it is very practical to do this. It cost somewhere close to $11 to $12 billion a year to fill out these financial transaction reports, and we are talking about a lot more and the businessmen and the banks are going to be fearful and intimidated. 

And what is it going to do to the criminals? Do you think they are 

a bunch of dumb clucks out there? All they have to do is get into 

an honest business, which they do. They probably won’t even have 

their financial transaction reports issued. 

It is going to be the good guys that are going to be penalized. 

I just, unfortunately, have to disagree with the mood. I know you 

have some sympathies for civil liberties and concerns, so I would 

like you to comment. 

The CHAIRMAN. The gentleman’s time has expired. The gentleman may respond briefly. 

Mr. HAMILTON. There isn’t any doubt, in fighting the war on terrorism, you enormously expand the power of government in all 

sorts of ways and you make government much more intrusive into 

the lives of people. I don’t see how anyone can deny that. 

We have had all kinds of laws put on the books since 9/11. We 

will have more. They all—maybe not all, but many of them have 

a liberty or civil liberties aspect to them. We think, most of us 

think, that that is necessary because of the reason you suggested, 

to increase the security of our people. 

Just look at what has happened on the Hill up here. The number 

of measures you have put into place to protect the Congress have 

just been extraordinary. It is happening everywhere across America 

today. I don’t think that is going to change with the concern that 

we have about terrorism, but we do have to sensitize ourselves to 

the case that you make for civil liberties. 

What we recommend is a board and a board that is created 

across the executive branch to look at civil liberties. There is no 

such board today. You have inspectors general in various departments, but you really do need to be sensitive to the civil liberties 

and you must put into practice the principle of review. That is the 

key. 

The CHAIRMAN. The gentlelady from New York, Ms. McCarthy. 

Mrs. MCCARTHY. Thank you, Mr. Chairman. Again, thank you, 

Mr. Hamilton. I have been watching on TV and this is, I think, the 

third time that I have actually sat with you on these issues. Two 

things that we haven’t really touched upon too much and that, basically, is going back to your report where you are saying the world 

institutions, banking institutions, haven’t been working closely 

enough for the transparency that we need to know on following 

these terrorists. 

I guess the second part, on just listening to all the questions we 

have been going through here, when we talk about immigration 

and talking about how are we going to be able to track the backgrounds of those that want to come into this country, I know right 

now to get a passport, you have to go to one of our embassies. As 

far as I know from our office, working with other embassies across 

the world, they do an extensive background check. But again when 

31

they come here into this country and set up—I am thinking here 

of students that come into this country—they do set up banking accounts, they do set up sometimes a charge account if they are going 

to be here for a couple of years of study. 

I don’t know whether that part of the question would go to the 

next panel, which would be the Treasury. Is the Treasury and 

those entities working with the banks on trying to teach them what 

to look for on the transparency of withdrawing money? 

I just think about my own charge account, and because I travel 

so much, let’s face it, we are all over the country, a charge goes 

here and a charge goes there. Obviously, my charge account credit 

card follows me, and if all of a sudden I am making a purchase 

that doesn’t fit into my character, a red flag goes up. Are we doing 

that, the same, with these visitors that come into this country and 

are the banks working with the Treasury Department as far as trying to track that down? 

All I can think of is our staffs certainly in other countries, embassies, they don’t have the staff to do all these background checks. 

So is our CIA then working with the embassies to do the background checks of everybody that wants to come into this country 

legally? We are not even touching upon those that come in illegally. 

Mr. HAMILTON. You have raised a number of questions. Let me 

try to address the question of the multilateral institutions, if I may. 

We think they have done a pretty good job of setting standards, 

in engaging on this question of terrorist financing, but that is only 

the first step; and what we don’t see evidence of is the implementation and the enforcement. We think it has been fairly spotty. So a 

lot of work still needs to be done with the various international institutions to improve their activity with regard to terrorist financing. 

The United States has exercised, I think, leadership in trying to 

develop strong standards in a short period of time, but it is not just 

a matter of developing the standards. You have got to implement 

them and enforce them, and that is where the work needs to be 

done. 

Mrs. MCCARTHY. As a follow-up question to that, with the international community, what are their reasonings on not working or 

fulfilling some of the things that we have implemented? Would it 

be, as Mr. Paul has said, they didn’t want to intrude on their citizens? Or is it a matter of just changing the attitude as the world 

has changed since September 11? 

Mr. HAMILTON. I think sometimes we don’t appreciate how far 

advanced our banking financial system is and how sophisticated it 

is today as compared to many nations around the world. We are 

asking them to do an awful lot of things very quickly. They just 

don’t have the internal mechanisms to do it. So it takes an extensive amount of activity on our part. 

They also are operating against very substantial domestic political forces which don’t want us to do these things because they look 

upon it as an intrusion into their practices, I suppose. So this is 

a very, very long-term effort for the United States Government. 

Mrs. MCCARTHY. Thank you. 

The CHAIRMAN. The gentlelady’s time has expired. 

The gentleman from Ohio, Mr. LaTourette. 

32

Mr. LATOURETTE. Thank you very much, Mr. Chairman. Mr. 

Hamilton, it is good for see you again. I want to begin with observations that were made by Mr. Frank and then also Mr. Paul and 

with, I think, Mr. Kanjorski’s question if I can. 

When Mr. Frank made his opening remarks, he talked a little bit 

about the necessity of how the paradigm of law enforcement has 

changed. We used to wait for you to commit a crime, we go out and 

catch the bad guy. Now, sadly, we have had to consider legislation 

that has in it snooping, spying, intrusion. And Mr. Paul talked 

about the fourth amendment and the need—and not only is Mr. 

Frank sensitive to the civil liberties issue, Mr. Paul certainly is, 

and I know you are as well, not only based upon your work with 

the Commission, but also based upon your long and distinguished 

career here. 

I also made some notes when you were talking and that is that 

the financial transactions that the terrorists used prior to September 11, you found no evidence of fraud. There were no fraudulent transactions that would somehow ring alarm bills in the system already in place. You then indicated they did, in fact, leave a 

paper trail. 

The next note that I made is that we did not understand prior 

to September 11 the routes that the terrorists would use to move 

and get money to different places and then use it. 

And then the last note that I made is that you are under no illusion to believe that they will use the same techniques that you 

have discovered during the course of your investigation, which 

leads me then to Mr. Kanjorski. 

What has always troubled me is that if you go back to the first 

World Trade Center bombing, after we learned that lesson, we 

made it extremely difficult to drive a car bomb into the parking garage of buildings, and we are doing that all around Washington 

D.C. So on September 11 they determined that they were going to 

use airplanes. 

With all of the changes at the FAA and other places and air marshals, we are making it very difficult to use airplanes as weapons. 

So I think it is reasonable to expect that the next event will not 

use car bombs and/or airplanes. That leads me to Mr. Kanjorski. 

Mr. Kanjorski said, then what are we doing here, I guess, if we 

are under no illusion that what you have discovered or how they 

used money prior to September 11 will be the way that they will 

do it again. 

The question that I have, and I know that I have sort of gone 

roundabout to get there, I think that this committee did do some 

good work with Title III and the PATRIOT Act. I think you have 

acknowledged that and others have also acknowledged that. Your 

monograph talks about the fact that that is indeed the case. But 

as legislators, as members of the Financial Services Committee—

and I know again to Mr. Kanjorski you have said you are not here 

to advocate a specific piece of legislation, but I guess the question 

would be based upon what you have seen, the effectiveness of Title 

III and how agencies are now talking to each other, Mr. Bachus’ 

observation that we now have 94 countries involved in talking to 

each other about financial institutions. Do you think that we have 

33

the legislative framework in place for the agencies, if ever-diligent, 

to find sort of the next financial scheme that these folks might use? 

I was talking to Ms. Hart. The thing that really shocks me is 

that this thing only cost $300,000 to $500,000 to pull off. I think 

that is shocking. Do you think we are there or do you think we 

have work yet to do? 

Mr. HAMILTON. I don’t know if I am really qualified to answer 

that. This gets into very technical areas. We have been pleased 

with section 314(a) and section 326 of the PATRIOT Act. We think 

those are useful tools. Whether or not additional tools may be necessary, I am probably not the one to ask. 

What has impressed me is that these terrorists that attacked us 

on 9/11 are very entrepreneurial and they are very good at finding 

the gaps in our system both in immigration and border security, 

but also in other areas. 

You indicated the next event may be entirely different from the 

last one. I think there is a lot of merit to that. One of the pieces 

of advice we continually received was not to fight the last war, always to use our imaginations with regard to possibilities. 

All I can say in response to your good observations is, we do have 

to be alert to different kinds of attacks, tactics and targets that the 

terrorists might have. Whether or not you need specific new powers 

in financial regulation is really beyond my competence. 

Mr. LATOURETTE. Thank you very much. I yield back, Mr. Chairman. 

The CHAIRMAN. The gentleman yields back. 

The gentleman from Utah, Mr. Matheson. 

Mr. MATHESON. Thank you, Mr. Chairman. 

Thank you, Mr. Hamilton, for your service. I am not asking you 

for a specific legislative proposal as you had in your previous discussions with some of the other questions, but you used to be a 

Member of Congress and I know you know the pace of this institution and you know how long it takes to get some things done. And 

the committee functions are not just legislating, it is also oversight 

and considering issues. 

The 9/11 report, of course, covers a whole range of issues and a 

lot of different committees with a lot of jurisdictions. Relative to 

the Financial Services Committee, do you have a suggestion for 

what priorities the Financial Services Committee ought to be looking at relative to the 9/11 Commission report for the balance of the 

108th Congress, and with not many legislative days left, what we 

should be also looking at as we commence with the 109th Congress 

next year? 

Mr. HAMILTON. I don’t think I can be very helpful to you on the 

specifics. We make a report at a point in time, and time keeps moving. So what this committee, I think, has to do is simply monitor 

these things very carefully. You know the financial system, you are 

the experts on it. I am not. 

You have to decide where the loopholes may be, and you have to 

work closely with the intelligence people, the law enforcement people with respect to that. And so the only advice I can give you is 

very general. 

34

The country looks to you to be the experts on the financial system, and they look to you—we look to you as one of the bodies that 

must come up with answers to a continually shifting scene. 

So it takes careful oversight. It takes careful review view of the 

laws, it takes careful review of the visit track particulars that we 

have heard, that we understand. But beyond that it takes consideration of what they might do in the future, and that takes real expertise and it takes constant monitoring, and that is one of the reasons we say in the report that there is no support for robust congressional oversight. 

Mr. MATHESON. It seems to me that in other parts of the Commission report, which are applicable to other committees in the jurisdiction, there are significant changes, whether it is the new national director of intelligence or whatnot. In terms of the Financial 

Services Committee jurisdiction, I am not reading the significant 

recommended changes in our current laws in the report. Is that a 

fair statement? 

Mr. HAMILTON. That is correct. 

Mr. MATHESON. Thank you. 

I yield back, Mr. Chairman. 

The CHAIRMAN. The gentleman yields back. 

The gentlelady from Illinois, Mrs. Biggert. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Again, Vice Chairman Hamilton, I would like to thank you for 

your service and the fine work that both you and the entire Commission and the staff did on the report and the monograph. 

I would like to turn now to international efforts and how we 

work with other countries to follow the money to terrorists and 

stem the flow of money to those terrorists. And obviously any international regime for combating terrorist finance is only as strong as 

its weakest link; and not unlike drug cartels or organized crime, 

terrorists will naturally find those links where anti-money-laundering standards are lax and then enforcement is minimal. 

As part of its work, did the Commission seek to identify where 

those vulnerabilities in the global terrorist system exist and, if so, 

what did you find? 

Mr. HAMILTON. We did not undertake a country-by-country analysis of the vulnerabilities of various financial systems. The State 

Department already has a report that comes out under the title, 

the International Narcotics Crime Report, and it makes an assessment that we think has been very good. 

Now, there are some governments that are kind of in a top tier, 

and the focus diplomatically has to be on those governments. That 

means we have to travel to those countries a lot. We have to work 

with their people very carefully. 

We have mentioned several times here the importance of technical assistance, see what needs to be done in these countries. It 

is not—it is not a situation where you have to send—you have to 

deal with 150 countries. You can prioritize these countries and 

know which ones are the key ones. 

The Saudis have come up here any number of times this morning. Everyone knows they are a key country, and we have got to 

deal with them; and there are probably several others that are in 

the top tier. And one of the things, incidentally, we found is, we 

35

don’t have enough people who are technically qualified here, real 

experts, to do the work that needs to be done here at home in our 

own shop, but also provide technical assistance across the country—across the world. 

So I would hope that one of the things that will happen is that 

we will begin to train more of these experts. 

Mrs. BIGGERT. Okay. 

Mr. HAMILTON. And clearly the State Department has to put in 

its diplomatic message as it deals in bilateral relations with country after country, the importance of terrorist financing. That has to 

be a part of our regular message to countries. 

Mrs. BIGGERT. If we could go back then to your exchange with 

Chairman Oxley and Chairman Bachus about making a decision to 

freeze or follow the money on a case-by-case basis, I think—first of 

all, I think you have said that Congress doesn’t need to make 

changes to current law for those decisions. But I am concerned that 

while case-by-case decisions may work well in the U.S., and the 

U.S. Government, they could present some very large challenges in 

our work with other countries, particularly those who might be 

viewed as the weakest links in the international regime for combating terrorist financing. 

Could you comment on that or give us some guidance on that? 

Mr. HAMILTON. Well, I am not sure I can be very helpful there 

except to say that in dealing with each of these countries, you have 

to begin where they are and their own financial systems. And in 

some cases, the recommendation we make for our own country, 

that you just referred to about balancing these interests, may not 

apply to other countries. So I think it has to be done country by 

country, not only case by case. 

Mrs. BIGGERT. All right. Thank you, thank you very much. 

I yield back. 

The CHAIRMAN. The gentlelady yields back. 

The gentleman from Illinois, Mr. Emanuel. 

Mr. EMANUEL. Thank you, Mr. Chairman. 

Thank you, Mr. Hamilton, for your work over the last 2 years. 

Two questions, one on the issue of freezing the assets and/or following the money. If you can shed some light on whether organizations like Hamas and Hezbollalh were freezing assets that may be 

a more—more accurate, more correct, a better tool in a financial 

sense than an al Qaeda, which is more of an elusive organization 

where you want to follow the money, and not get into this either/

or strategy—then, as you use the term, be more ‘‘opportunistic.’’ 

different terrorist organizations are going to require different skills 

sets and different tactics. 

In Illinois, just the other day, on a Hamas organization, we used 

the freezing of financial assets as a very successful legal tool, as 

well as a fighting-terrorism tool. 

I think that you have—if you think of it from outer circles going 

in, Hamas and Hezbollah, with state sponsors like Syria and Iran, 

freezing assets is the right tactic, the right tool. Al Qaeda and some 

of its spin-offs and imitators are more elusive. Actually following 

the money will give you a way to literally unmask the organization 

and track it worldwide. 

If you could shed some light on that. 

36

Mr. HAMILTON. I think it makes sense to me. The equities shift 

depending on the type of organization you are targeting. Hezbollah, 

as we all know, is supposed to be the most sophisticated terrorist 

organization in the world. 

Mr. EMANUEL. Uh-huh. 

Mr. HAMILTON. The necessity of following the money may be less 

in that case than it would in al Qaeda, which is very diffuse and 

dispersed. So your point is well taken. I wouldn’t want to generalize and put it into stone or into granite, but I think the equities 

may very well shift in a case like Hezbollah. 

Mr. EMANUEL. Second question, and that will be the end, Mr. 

Chairman. 

Over at Treasury, for those who follow financing for terrorism, 

we have 25 individuals. Given that you said it is an organization 

that is always probing weaknesses in our financial system—I 

mean, I don’t know if the number is 50, I don’t know if the number 

is 40; you would think more than 25 would be necessary compared 

to some of the other functions over at Treasury that are staffed at 

a higher level. 

Second, if you like, at the IRS for following and its tools—only 

two-tenths of 1 percent is used for following terrorism. Yet we have 

an operation, I think it is $25 million out of $10 billion—yet we 

have an operation over there investigating individuals in America 

who make $15- to $30,000, in the earned income tax credit unit, 

and they are literally going over everybody’s returns. Yet we have 

two-tenths of 1 percent of the U.S. Budget dedicated to fighting—

to looking into terrorism. 

I would imagine—and they are as Machiavellian as we say they 

are, that 25 people over at the Treasury Department and some—

a little more assets of the IRS redirected—rather than investigating Americans, can be used to investigating how terrorists are 

using and not paying their taxes and doing some interesting things 

as it relates to using the Tax Code from a financing perspective. 

Mr. HAMILTON. I didn’t know those figures. 

I simply would say——

Mr. EMANUEL. Neither did I until this morning. 

Mr. HAMILTON. This is an enormously important, urgent business. I have already commented on the lack of experts that we 

have and the necessity to train more. Treasury and IRS will have 

to comment on the specifics about that. 

I just—this is an urgent matter, and I would think there would 

be very few higher priorities for our government now, or for Treasury or for the IRS. 

Mr. EMANUEL. Thank you. 

The CHAIRMAN. The gentleman yields back. 

The gentleman from Connecticut, Mr. Shays. 

Mr. SHAYS. Thank you, Mr. Chairman for holding this hearing. 

Congressman Hamilton, your Commission has done a superb job; 

I have said it at other hearings, I will say it again. I will say it 

every time I have an opportunity. You had almost a sacred mission, 

and I think you treated it that way. 

It is clear to me, when I read your report, when you say your 

Commission reports vigorous efforts to track terrorist financing 

must remain front and center in U.S. counterterrorism efforts. I am 

37

left with the view that if there was any successes at all in this effort, it was more in tracking the financial aspects. 

As much as we need to do more, it was—you are pretty convinced 

that we have been somewhat vigorous in this effort. And I want to 

know if that is, in fact, your view. 

Mr. HAMILTON. Yes, it certainly is. I think we have greatly improved our ability to do this. We are getting better at it all the 

time. I think everybody would say we have still got a ways to go. 

Mr. SHAYS. When Mrs. Kelly was asking her questions—I know 

she had more questions to ask—one of the points, the Commission 

argues for more congressional oversight of terrorist efforts, to fight 

terror financing. And then her question would have been, had she 

had more time, if the Policy Coordinating Council is under the 

NSC, whose staff cannot testify to Congress, don’t we have less 

oversight ability, not more? 

And I am interested to having you sort out that seeming contradiction. 

Mr. HAMILTON. There has been an ongoing argument with regard 

to the NSC and whether or not it should testify, for many years. 

I think the question is well taken. It does limit the ability of the 

Congress to effectively have robust oversight. If it is carried out by 

the NSC, you can’t get at them except under their terms. 

Mr. SHAYS. Now, I have applauded and want to continue to applaud the efforts to point out that blame is fairly universal. The 

previous administration, the President with his 8 years, the 

present administration with its 8 months before September 11th, 

Congress and its oversight and the intelligence community. Your 

Commission was pretty strong at being critical of all, particularly 

the intelligence community, but you never really named names, 

neither those who had done well or those who had done badly. 

But as it relates to Mr. Clarke, it came up. I just want to be 

clear—Mr. Clarke was absolutely outspoken before he released his 

book and while he was on his book tour, that it was the Bush administration’s fault, not the Clinton administration’s fault. 

I just want you to sort that out. Was he accurate in his criticism 

that it was just the Bush administration or more the Bush administration? 

Mr. HAMILTON. Mr. Shays, I am not going to get into the situation of evaluating Mr. Clarke and his criticism. Much of his criticism relates to things we were not investigating. We were not investigating the Iraqi war. 

Mr. SHAYS. Well, let me ask this. We will just put Mr. Clarke 

out. 

Your report was fairly clear, was it not, that both administrations had opportunities and they should have seized on those opportunities. Your report, it seemed to me, was fairly consistent that 

it was not—you were not criticizing or singling out either administration; is that correct? 

Mr. HAMILTON. Absolutely. We leaned over backwards not to play 

the blame game. Our fundamental conclusion here was that the 

difficulties were systemic, not individual. And we just think it is a 

dead-end game to try to pinpoint one or two people there. 

In the end, all of us lacked imagination. All of the government 

lacked capabilities. All of the government lacked management 

38

skills to deal with counterterrorism, and that is not a fault of any 

one person, or it is not even the fault of any one agency. It is just—

it runs across the board. 

Mr. SHAYS. Thank you. Thank you again for your good work. 

The CHAIRMAN. The gentleman yields back. 

Mr. HAMILTON. I understand you are having a hearing this afternoon with Governor Kean? 

Mr. SHAYS. Yes, we are. 

Mr. HAMILTON. I am very pleased you are doing that. Thank you. 

Mr. SHAYS. Thank you. 

The CHAIRMAN. The gentleman from Georgia, Mr. Scott. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

I certainly want to join the chorus of those who are congratulating you on a job well done, you and the entire Commission, Mr. 

Hamilton. 

I have a series of questions on the money trail, but just before 

getting to that, could you share with us your level of certainty as 

to the likelihood of our country receiving another terrorist attack 

to the level of 9/11? 

Mr. HAMILTON. We interviewed thousands of people, every expert 

you can think of, and not a single one of them said there would 

be no more attacks. 

You look at two things. You look at intent, and you look at capability by the enemy; they have them both. They hate us, this group, 

this radical Islamic group. The intent is clear. You read the 

fatwahs of Bin Laden, they are very, very clear, kill as many Americans as possible. They have the capabilities. 

So we would be very foolish indeed to conclude that another attack is unlikely. 

Mr. SCOTT. Now, so far, we have been able to freeze roughly $200 

million in terrorist assets. It would be interesting to note—going 

forward we can learn something, where we have got to go if we 

could get some information on the status of those funds. Where did 

they come from? Were they all from Islamic sources, or were they 

from other sources? Maybe European sources? 

Could you just quickly give us a status on what we have learned 

from the funds that we have already intercepted? 

Mr. HAMILTON. Mr. Scott, I think that really has to be directed 

to Treasury. I cannot give you the details of that. 

Mr. SCOTT. All right. 

Now, you mention in your report that the source of the funding 

pretty much—you were pretty strong in saying it is not domestic, 

it is coming from elsewhere. Basically you mention charities. I am 

interested in another main—that is called hawalas. This is an ancient, trust-based group, very informal, but moves very quietly 

within the Middle East and Asia. What have we learned about the 

hawalas? 

Mr. HAMILTON. Well, we have learned they are just almost impossible to trace. Because of its informalities, it doesn’t go into the 

regular system at all. It is one of the things that makes tracing terrorist money so exceedingly difficult. That is a technique you are 

talking about. 

39

Charities were a source, the informal transfer of money based on 

very traditional patterns is—makes it exceedingly tough, because it 

is outside the system, and there is no paper trail for us. 

Mr. SCOTT. Now——

Mr. HAMILTON. That is one of the things that makes this target 

so difficult to get at. 

Mr. SCOTT. That means, then, that so much of what we have got 

to do to plug this hole is going to come from getting help from other 

countries? 

Mr. HAMILTON. No question about it. 

Mr. SCOTT. I am very much concerned about four particular 

countries: Germany, France, portions of Russia, the former Soviet 

Union, and Saudi Arabia, of course. 

It just seems to me that they are—we skirt around it, but it 

seems to me that there is something more there than just they 

don’t have the kind of banking system that we have or there is 

something technical there. 

Is there a political, philosophical, diplomatic situation there that 

is allowing a more laissez faire attitude toward these terrorists financing? If that is the case, what do you recommend we do to plug 

the gaps of those four countries particularly? Because I think they 

are at the top of the apex. 

Mr. HAMILTON. Well, each of the countries presents a very different case. Germany and France, of course, have very sophisticated financial systems. 

I think—I think I would comment principally about Saudi Arabia. Our relationship with Saudi Arabia over a period of many 

years has been a very shallow relationship. We have said, okay, 

you give us oil at an affordable price; we will help you protect the 

royal family. And that is really the relationship. We have not had 

until recently what you would call candor and depth. It has been 

very shallow. 

I have sat in on many, many meetings, probably hundreds of 

meetings, with U.S. officials and Saudi officials. And one of the 

things that has impressed me over the decades is that the relationship, for all of its importance, a very, very important relationship, 

didn’t really have much depth to it. We were happy if we got the 

oil, which we desperately need; and they were happy, and the family was protected, which they desperately need. 

So now you are in a situation where you need a lot more depth 

to it and that is developing now because of these financial flows 

and a lot of other matters. But it is very late in developing. 

Mr. SCOTT. Thank you. 

The CHAIRMAN. The gentleman from Texas, Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

Mr. Hamilton, let me add, too, my voice of congratulations for 

your service to the country in this work product that I know will 

be very important to Congress. 

I want to start out, I think, plowing a little bit of old ground 

here, but maybe coming at this in a slightly different fashion. You 

said of the major policy recommendations that the 9/11 Commission has made, not one of them really deals with the financing of 

terrorism. So if there is not a specific recommendation for where 

40

policy recommendations or where Congress could go from here, can 

you tell us where we don’t have to go? 

In other words, since 9/11, where has Congress gotten it right? 

Where has the administration gotten it right? Where do we not 

need to focus? Where do we achieve substantial success? 

Mr. HAMILTON. Well, I think you have gotten it right in some aspects of the PATRIOT Act. By far the biggest is the breaking down 

of the wall of separation between intelligence on the one hand and 

law enforcement on the other hand. 

I think you have gotten it right in section 314(a). I think you 

have gotten it right in section 326 to give additional tools, if you 

would, to the investigators in looking at terrorist financing. So I 

think you are correct, a lot of good things have been done. 

Beyond specific statutory provisions, there isn’t any doubt the 

whole government is energized to try to share more information 

than it was prior to 9/11. 

If you asked me the biggest area that needs to be developed, 

probably the hardest as well, is the international area, and just 

what we were talking about with Mr. Scott. Because this—this is 

not something totally under our control. This is something we have 

to persuade other countries of, that it is in their national interest 

to do it. Not in our national interest, in their national interest. 

Otherwise they won’t do it. 

So I think this is an area that is terribly important because the 

flow of money to terrorists is largely money that comes from outside our boundaries. And that does mean we need their cooperation, and it means they have to have not only the political will, 

which is in question sometimes, but also the mechanisms to do it. 

Mr. HENSARLING. In your testimony you talk about the extraordinary cooperation that has been received from the domestic financial services industry in helping trace terrorist funding. Under the 

PATRIOT Act, a whole new group of financial services players are 

now having to file these suspicious activity reports. 

I think Congressman Paul alluded to a measurement, I didn’t 

have it in my fingertips, that 12 million reports were generated the 

year prior to 9/11. Now, that is a lot of reports. In my congressional 

district, the Fifth Congressional District of Texas, I have met a 

number of independent and community bankers who tell me, Congressman, we want to do our part to fight the war on terror, but 

can you look us in the eyes and tell us that somebody is actually 

reading and using all of these reports that we generate? Because 

it is a big, big burden on our banks. 

So, from your perspective, are we reading and using these reports? 

Mr. HAMILTON. Well, I don’t think I can answer that. I just don’t 

know. It is kind of endemic, isn’t it? The solution to so many of our 

problems from a governmental standpoint is to require more information; in almost every bill that is passed by the Congress, you require somebody to report somewhere. So you do overload the circuits here. 

The other day when I was testifying, Jack Marsh, who is a 

former Secretary of the Army, told me—well, he testified that every 

day the United States Government produces 650 million bytes of 

41

data. And the question is how you sort through all of that. And 

does anybody read these reports? I don’t know. 

I used to think maybe the 9/11 report wouldn’t be read, but it 

is being read. That is a good point. I mean, it is a valid point. Is 

it really—I mean, how do you assess this data? What kind of mechanisms there are? 

And we did not do that. That is, I would guess, part of the oversight of your committee. How is it used? That is a question really 

for the fellows coming after me here. 

The CHAIRMAN. The gentleman’s time is about to expire. 

Mr. HENSARLING. In that case, the gentleman will yield back. 

The CHAIRMAN. The gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. 

Thank you, Mr. Hamilton, for being here today. I had the pleasure of being with you in the Judiciary Committee on Friday. I 

would have to say, when I left home Friday morning to fly to 

Washington, I felt that I had a much, much clearer understanding 

of why I was coming to a hearing in the Judiciary Committee on 

privacy and civil liberties, because there were specific proposals 

that the 9/11 Commission had made that we were going to delve 

into, and we did delve into those pretty rigorously in our subcommittee, joint subcommittee hearings. 

I am not quite as confident that I understand the rationale for 

today’s hearing, because in looking through the suggestions report, 

I didn’t see anything that specifically we were being suggested to 

act upon that had financial services implications. Notwithstanding 

that fact, I am here, and I have been listening, either in the room 

or in the back room, since I got here; and I still haven’t heard any 

specific things that this committee needs to do. 

You mentioned four things, generally, at the end of your testimony, and I thought maybe we might get to some suggestions 

there. About as close as we got was your suggestion that we need 

to make sure that we have tools to trace funds in fast-moving investigations. 

Are there any specific things that you think we should be considering in that context that are not already on the books? That would 

be one question I would have. 

And then second in the committee’s report, or maybe it was just 

the Democratic committee’s staff report, there is a reference on the 

last page to the NSC staff report that thought that one possible solution to some weaknesses in the intelligence community was to 

create an all-source terrorist financing intelligence analysis center. 

I assume that is what Mr. Royce was talking about when he asked 

you questions earlier today from the other side. 

The report goes on to report that Richard Clarke, the National 

Counterterrorism Coordinator, had pushed for the funding of such 

a center at Treasury, but neither the Treasury nor the CIA was 

willing to commit the resources to such an all-source terrorist financing intelligence center. 

So I guess the second question would be, does the 9/11 Commission recommend something in that area consistent with what coincidentally was originally suggested and pushed by Richard Clarke 

and now seems to be being suggested and pushed by Mr. Royce or 

42

a couple of other people who have asked questions here earlier 

today? 

Those are the two questions I had: 

Are there specific things that we need to do that we haven’t already done to provide tools to trace funds and fast-moving investigations, one of your four suggestions. 

And, number 2, does the 9/11 Commission suggest we do something to create an all-source terrorist financing intelligence analysis center similar to the one that Richard Clarke has been pushing for? 

Mr. HAMILTON. We certainly support an all-source terrorist analysis center. We don’t confine that to terrorist financing. We think 

that in order to put together effective counterterrorism efforts you 

have to integrate all aspects of counterterrorism. So we wouldn’t 

recommend, I think, a specific center just dealing with financing. 

That is exactly the problem we are contending against. That is 

stovepiping; we think that is an inadequate, insufficient perspective on the problem of terrorism. 

We do think it is terribly important to have a center where you 

take all of the domestic and all of the foreign sources together and 

not only look at, analyze the data that you have with regard to terrorism, but also do some planning operationally so that you can put 

together an effective program. 

If I may, this problem of planning operationally is important and 

may be a little hard to grasp. I don’t know. But the illustration we 

use all the time is of the two muscular hijackers out in San Diego. 

We had bits and pieces of information about them; the FBI knew 

a little bit about them. The CIA knew a little bit about them, but 

nobody put it together and managed it, and planned—took charge 

of it. 

George Tenet was asked on more than one occasion—not with regard to them, but with regard to Moussaoui in Minneapolis—if he 

knew about it. He said he did, and he asked his people to work 

with the FBI about it. And then, in response to one of our questions, This was the FBI’s case. And that illustrated for us the problem, in a sense, that nobody really put it all together, said, I am 

responsible for this, and said, I am going to manage it. 

So the center has to have the ability to look at all aspects of 

counterterrorism, not just financing, and put together the case and 

an operational plan to deal against it. 

Now, let me also say, I have heard the comment several times 

here that I am not asking you to do anything because I haven’t proposed any specific legislation. I have not proposed any specific legislation, but I hope it is not your view of responsibility that legislation is the only business of the United States Congress. It is not. 

The business of legislation is part of your business, but the business of oversight is also part of it. And we are specifically asking 

you to tighten up oversight in a lot of different areas. And I understand that oversight is not as attractive for a Member of Congress 

as the business of drafting legislation, but if you want my personal 

view, it is just as important. 

I am deeply concerned that the Congress today is not as robust 

and aggressive as it ought to be on oversight. And that is not a 

43

comment on this Congress. It goes back to when I served in the 

Congress as well. 

We are asking you to look at the tools. Do you have the tools and 

the financial—in the financial community today to deal effectively 

with these possible terrorist financings? You are the experts on 

this, not me. You are the experts on the financial system. You have 

to answer that question. That comes about through oversight. 

We are asking you to find the vulnerabilities in the financial system today. We are not experts on that in the 9/11 Commission. You 

are the experts on that. That is what we are asking you to do. 

You have got to look at these things very hard. We are asking 

you to take a look at the question of civil liberties in financial institutions here. We don’t have specific recommendations with regard 

to how you resolve civil liberties with respect to the flow of financial movements—the flow of financial movements in the economy. 

So I think my message here is that dealing with terrorist financing is not just a question of legislation—although that is very important. It is a question of robust oversight as well. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentlelady from West Virginia, Mrs. Capito. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

And thank you, Vice Chairman. 

I have a question sort of a little more general nature. I happened 

to be in a bank, a community bank in West Virginia. I represent 

West Virginia. The bank officer was asking me the very same questions about the forms. Who is reading these and how important are 

these? I sort of took a different tack with her. I said, I guess that 

is in the 326 requirements of the PATRIOT Act that you emphasize 

are so important. 

But I said, I think it is important for us to recognize across the 

country, even in the rural areas, that this war on terror has to be 

fought not only in the big financial centers where we are tracking 

down transactions, but everyone has to be enlisted and be part of 

the solution of tracking down the terrorists. 

Then, when I was reading your report, you have a sentence on 

page 383 where it says, ‘‘If al Qaeda is replaced by smaller, decentralized terrorist groups, the premise behind the government’s efforts that terrorists need a financial support network may become 

outdated.’’

And after reading that statement, it sort of backs up what I am 

saying, that everybody, no matter where you live in the United 

States, no matter what kind of financial institution you are attached with—you need to be part of the solution rather than saying 

it is going to be done in New York, Chicago, Miami, and the more 

natural places. 

I was wondering if you had a more generalized perspective, how 

we can help our constituents in these kinds of areas who feel a little bit removed from some of the solutions—how important their 

role really is to seeking the solutions and to find the terrorist 

route. 

Then I think, well, the terrorists when they entered the air 

transportation system, they didn’t enter in Boston. I believe they 

entered in Maine and other areas where—they were considered to 

44

be maybe easier or maybe less likely to be heavily screened. For 

whatever reason, it was obviously very successful. 

So did you have any comments on that? 

Mr. HAMILTON. I think your observation is very good. In other 

words, one of the functions you have to play if you pass a piece of 

legislation is to explain to people why it is necessary. Apparently, 

you were trying to do that. I commend that. It seems to me that 

is exactly right. There isn’t any doubt in fighting terrorism we have 

to ask a lot of people to do a lot of things. 

The first line of defense against terrorism in many respects is the 

general public. The most obvious example is of course is, if you sit 

down on an airplane and somebody lights a shoe to their match—

or a match to their shoe, excuse me—you are going to react to that. 

You are the first line of defense. Likewise, the banker or the financial institution has to recognize that they do have a burden in 

fighting terrorism. 

Now—maybe that burden is excessive. I really can’t make that 

judgment. I don’t know because I don’t know exactly what they 

have to do. But there is no doubt that we are putting an extra burden on them. And all the Americans have to accept the fact that 

there are burdens placed on them by reason of terrorism. 

My own observation, by and large, is they want to be very much 

helpful and cooperative. If it is explained to them—they are prepared to do it. 

Mrs. CAPITO. Thank you. I have no further questions. 

I yield back. 

Mr. FOSSELLA. [Presiding.] Thank you very much. The gentlelady 

yields back. 

The gentlelady from Oregon—Ms. Hooley. 

Ms. HOOLEY. Thank you, Mr. Chair. 

Mr. Hamilton, thank you so much for all the work you have put 

in—and sitting and listening for so long today and answering questions. I have just a couple of quick questions. 

Did the Commission find any financial link between the terrorists that hit us on September 11th and Saddam’s regime in Iraq? 

More broadly—did you discover any financial link between the 

group of al Qaeda and Iraq? 

Mr. HAMILTON. What we found is, there is no cooperative operational relationship. Were there contacts? Yes. Were there ties? Depends on how you define the word ‘‘ties.’’ yes. But there was no cooperative relationship, and we do not believe that Hussein was involved in planning or implementing 9/11. 

Ms. HOOLEY. One of the things we have heard talked about today 

with lots of different people is—I mean, I know—I think this committee has done some good things about money laundering and 

freezing assets. 

As they use more and more a system outside the regular banking 

community, as they use—as they go outside the total system, are 

we going to be behind the 8-ball if we put our emphasis on freezing 

funds or following the money? Is it still important to do that as we 

look at how did they use—how did they use their own system outside of financial institutions? 

Mr. HAMILTON. We certainly have to understand their own system better. Freezing is going to be an important tool in dealing 

45

with terrorism. As we have suggested, it has to be applied with 

consideration of some of the other equities involved. 

But we will have to try to understand better—and our foreign 

friends and allies can help us here—the systems that these people 

use in financing their operations. 

Ms. HOOLEY. One quick last question, a little outside the financial community, but since you are here right now: The FBI and immigration don’t have systems of fingerprinting that mesh. I mean, 

they have separate systems. How important is that going to be to 

make sure that the FBI and immigration have the same kind of 

fingerprinting systems in the future? 

Mr. HAMILTON. You are going to have to have integrated systems 

so these various agencies can talk to one another, share data with 

one another. If you can’t do that, you are not going to be able to 

put together an effective counterterrorism unit. 

Ms. HOOLEY. Thank you. I yield back. 

Mr. FOSSELLA. Thank you. The gentlelady yields back. 

The gentleman from New Jersey, Mr. Garrett. 

Mr. GARRETT OF NEW JERSEY. Thank you, Mr. Hamilton. And I 

also thank our Chair for holding this hearing this morning and 

now this afternoon. I come away, so far, from this hearing with a 

couple of thoughts on it, taking notes down as I went along. 

One, initially when you talk about these terrorists are entrepreneurial in nature, and smart, keen, and able to look into different 

areas, you opened up your comments with regard to the book and 

how well it is selling. 

I am not sure how many average Americans are actually buying 

and reading through that entire book, but I am sure that you will 

agree that the terrorists, whoever they may be and wherever they 

are, are buying that and will be getting the supplemental reports 

and following up on that just to, as you say, find the gaps. 

If we are learning anything from all of this as far as where the 

gaps are, I suppose that the terrorists are also learning to that extent as well. 

I take your clarification, I guess, if you will, about not calling for 

any new legislation. I appreciate that. I think this committee has 

taken that charge, as far as oversight with regard to other agencies. I know Mrs. Kelly has held hearings, that I have sat in on, 

on some other agencies a little outside this area, where they may 

have been overextending their authority. So I commend the members of the subcommittee for having taken that step. 

I have also taken from your comments, repeatedly stated, no substantial domestic source of funding. And from that, a comment 

from my colleague from the other side of the aisle, who is no longer 

here now, but through his long tenure here with regard to the war 

on drugs. And perhaps what his comment was, what we have done 

over those 30 years may have played—some element as far as deterrent effect, as far as the ingress, and effect as far as the materials and also the dollars. 

One of my questions to you, though, is where the burden should 

be placed, and maybe from your past experience, here to address 

the issue of the political will that is necessary to address one of 

these. And also the pragmatic approach as well, as far as following 

46

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 lawabiding system as far as our chain is concerned. We have already 

heard about the Bank Secrecy Act and the Suspicious Activity Reports. So there is already a burden placed on our financial institutions. 

There is already a burden being placed on an individual as far as being up in the $10,000 range. We have questioned others on 

that. I don’t know if you have a specific recommendation as far as 

that threshold. You can comment on that if you would like. 

But also I will tell you this little story in 30 seconds. Recently, 

I went to my local bank where I have been known for some 40-odd 

years, where I grew up, to open a new account and my banker told 

me she had to get proof of my identification, who I was, even 

though she knew who I was for all those years. And I gave her my 

driver’s license, which some people say is easy to counterfeit in 

New Jersey. 

Whereas if you had somebody come into the country tomorrow, 

legal or otherwise, they are able to go into the same institution 

with a matricular consular card, not produced by the State of New 

Jersey or any other a State office or any other Federal office, but 

produced by a foreign country without any proof as to where that 

person is coming from or the legality of that person being in the 

United States. This administration says that is a proper and adequate source of identification. I would appreciate your comment on 

that. 

Finally, I would be curious as to your thoughts on the impact of 

this on other aspects of law enforcement as we go forward. You 

made the comment that there is a degree of inertia in past aspects 

of law enforcement, that once they were set up years ago, they continue to go down that same road. 

Obviously, we have 30 years of drug enforcement as far as a 

focus of law enforcement. Local law enforcement has their own 

charges. 

Will we see the same systemic placement be created here as we 

are directing all of our attentions and energies in this one area—

not that I am saying we should be doing so—and will it have any 

impact, negative or otherwise, on other areas of law enforcement, 

be they Federal or local? 

Thank you. 

Mr. HAMILTON. Well, I worry about this question of degrading capabilities with respect to the FBI. This is outside our mandate. But 

the Director of the FBI said continually, I am shifting the focus of 

the FBI from law enforcement to prevention of terrorism. We all 

applaud that. But what does the bank robber think about that? 

I mean, what happens on drugs? If you go to talk to Federal 

judges today, they will tell you that their dockets are overloaded 

with drug cases. What does it mean if the FBI moves away from 

drug enforcement laws? 

I think these are things that have to be worked out. Director 

Mueller’s response to that, I think, is, turning a lot of these responsibilities over to the DEA, that they will develop the capabilities. 

I hope he is right there. 

47

But you do have to be aware when you focus on terrorism, and 

you tell all these agencies and departments that this is your number one priority—the question you raise, I think, is a very, very 

good one—what happens then in terms of the other responsibilities 

that department has? 

We can’t answer that right now, but we know what the political 

signal is now, and that is to put your resources into fighting terrorism. We have to look at the consequences of that down the road. 

You asked about where does the burden lie here. It lies, as I am 

afraid you correctly point out, with the American citizen. How do 

you get the information you need, however, without asking the 

American, the law-abiding American citizen? I don’t know how you 

get it. If you want to get information with regard to financial flows 

and everybody agrees that you need that information in order to 

fight terrorism, you have got to ask somebody. And the only people 

that really know it are the people in the financial institutions. And 

so you do put a burden on them. 

Now, I don’t know how you avoid that burden. My guess is they 

are prepared to accept that burden to some degree. And your job 

is to make sure that burden is not an excessive burden, however 

you may define excessive. Do they, in fact, collect information that 

is valuable to the government, or is it just paperwork? 

The other point I want to make in response to your question is 

the importance of secure identification. This gets into some pretty 

tight, ticklish areas. We have been talking about civil liberties 

here. This is a civil liberty area. But, again, from the standpoint 

of fighting terrorism, you have to have secure identification of people. And that is why we recommend that there be Federal standards with regard to driver’s licenses and passports and the like. 

All of the hijackers except one had American identification papers, 18 out of 19 of them. And what that meant is that some of 

these identification papers were issued pretty sloppily. 

Now, we have got to correct that, and secure identification. I 

don’t know how you work through this question of civil liberties, 

the national identification card and all the rest of it. We have to 

work through that. But I don’t have any doubt at all that if you 

are going to effectively fight terrorism, you have got to have secure 

identification. 

The CHAIRMAN. [Presiding.] The gentleman’s time has expired. 

The gentleman from Texas, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Mr. Chairman. 

I also wish to thank you, Vice Chairman Lee Hamilton, for your 

outstanding leadership and great efforts to protect our great Nation 

by strengthening antiterrorism efforts that are being made here in 

our country, and especially by this committee. 

Your testimony is both very informative and very disturbing. It 

is very disturbing because it seems to me that the terrorists who 

entered the United States came from Canada with doctored passports Canada accepted as valid and valid visas issued by the 

United States. The terrorists funded the 9/11 attack using the 

mainstream financial system. 

What is even more disturbing is that Treasury’s attempts to stop 

terrorist financing by freezing assets in mainstream financial systems have failed to stem the tide. 

48

I know that the Financial Action Task Force, currently composed 

of 33 member countries, has been meeting frequently since 9/11 to 

address terrorist financing. The task force recently issued its 2003 

and 2004 report essentially determining that the countries it reviewed are taking appropriate measures to address terrorist financing and making necessary changes to their regulatory systems in 

order to better prevent, detect and eliminate terrorist financing 

with certain modifications needed. 

My question, Vice Chairman Hamilton, is that prior to 9/11, 

which of our U.S. Consulates required biometric information like a 

fingerprint of visa applicants? 

Mr. HAMILTON. I am not the one to answer that. 

Mr. HINOJOSA. You mentioned that. 

Mr. HAMILTON. I am not aware that they sought fingerprints 

from anyone, but I don’t want to make that as a blanket rule. 

Mr. HINOJOSA. You mentioned in your testimony that they had 

sent you a copy of the 9/11 Commission staff monograph, and that 

you hadn’t had an opportunity to read it yet. But I wish to read 

something from that report, from that staff report, that says, ‘‘with 

the exception of our consulates in Mexico, biometric information, 

like a fingerprint, was not routinely collected from visa applicants 

before 9/11.’’

Mr. HAMILTON. Yes. 

Mr. HINOJOSA. The reason I bring this up is because the gentleman just before me spoke about his concern about visas and 

identification cards that will be used by individuals who are 

unbanked, and that is something that is very important, not only 

to me, but to many who have congressional districts like mine. 

I know that he asked you specific questions, and you answered 

them very well, in that we want to be careful that the information 

is legitimate and they are not falsified documents and so forth; but 

I think that we are concerned about all the countries that sent people into our United States, particularly those who came in through 

Canada and those who can come in through Mexico. So those are 

concerns that I have been discussing with bankers in my district 

over that last two weeks. 

The rural areas that I represent, 80 percent of my congressional 

district, have many community, rural community bankers who are 

asking themselves and asking us as Members of Congress: ‘‘Are we 

expected to expend as much money and meet the same regulatory 

requirements as the national banks like Chase and Wells Fargo 

and all those real big banks are doing in response to all of this, 

being that they have so much more human resources?′′

The truth of the matter is, I didn’t know how to answer that. 

What recommendations would you make to small, rural, community bankers as they try to carry their weight on this matter that 

you are discussing with us? 

Mr. HAMILTON. I think it is very important that the banker know 

their customers and be able to identify their customers. There is 

no substitute for that. In that sense, they are the first line of defense. So it calls for an exercise of diligence and care on the part 

of the banker to make sure that he or she knows with whom they 

deal. 

The CHAIRMAN. The gentleman’s time has expired. 

49

The gentleman from Florida, Mr. Feeney. 

Mr. FEENEY. Thank you, Mr. Chairman. 

Again, Mr. Hamilton, we got to visit Friday as part of the Subcommittee on the Judiciary. I was able to commend the Commission for a great job on the report. I wasn’t able to serve with you 

because—like other members have said what an honor and privilege it has been to serve with you. But I have been impressed with 

your stamina just over the last several days; it is pretty extraordinary. 

I note—you were talking about this in response to the gentleman 

from Texas, Mr. Hensarling. I note in Plato’s dialogues he suggests 

that the best person to hire to protect your property is an accomplished thief. Unfortunately, we don’t have the benefit of the wisdom of terrorists that have switched sides and decided to have an 

epiphany and support freedom and civilization. But what we can 

do is, hopefully, think outside the box. 

One of the things you have been able to do in your report about 

the financial institutions is that we have been successful in some 

respects, but the terrorists are very much adaptive, they are very 

flexible. The most fungible asset they have, I would suggest, is 

probably the resources. It only took them $4- or $500,000 according 

to your report to accomplish the 9/11 attack. It is a lot harder to 

find 19 people to commit suicide, as they did, especially finding 

people able to fly planes, able to mix in our language and culture. 

And finding the plane itself, getting a hold of it, a bomb or a chemical weapon is very difficult. But replacing $4- or $500,000 is a fairly easy task. 

But having said that, it seems to me we can learn from some of 

the ways that other underground entities have operated to launder 

and move money, for example, the Mafia. These are things that the 

FBI has had a great deal of expertise in over the years. You know, 

underground organizations have moved into more legitimate enterprises, they have moved into less risky enterprises. Things like intellectual property theft are a relatively risk free, although illegal, 

way to raise money. 

Can you comment on what we have learned as we try to track 

resources both nationally and internationally in the hands of the 

terrorists? And along with that, can you tell us how we ought to 

draw the balance, if you have thought about it to any great degree? 

There are plenty of legitimate Christian and Jewish charities out 

there. We have some illegitimate Muslim charities who have been 

helping fund terrorism. How do we encourage giving in charitable 

opportunities, but also crack down on this new threat? 

Mr. HAMILTON. I think the latter problem that you discussed is 

a major challenge for American foreign policy. It is easy for us to 

sit in this country and say, well, Saudis, you have to crack down 

on these charities, but you have to remember that those charities 

also may do a lot of humanitarian work. And they are going to resent, and the people are going to resent, the United States telling 

them how to run their charities. 

So you get into a real tension here between our desire to crack 

down on charities and the fact that they may be giving money to 

the terrorists, on the one hand, and the anti-American feelings that 

50

exist in many places around the world today. We can exacerbate 

that greatly by demanding change in these charities. 

How do you deal with that? Well, I don’t think there is any silver 

bullet here. You deal with it through a very extensive dialogue 

with a particular government. Now, we have done that with the 

Saudis, for example, on a couple of their charities. We have made 

quite a bit of progress, it seems to me. One of them has been closed 

and changes have been made in the manner in which the Saudis 

oversee their charities at the upper levels of the Saudi Government. 

So the only answer to the question, I think, is one of dialogue 

and education, I guess, diplomacy with the countries involved. 

Mr. FEENEY. Real quickly on this question, we have had a lot of 

discussion today, do you freeze assets or do you allow the assets 

to flow, follow the money and capture a greater organization. 

Under the organizational chart that the 9/11 Commission proposed, 

who makes the call? 

Mr. HAMILTON. Well, who would make the call would be eventually the policymakers, the President, and the National Security 

Council. But they would be making the call on the basis of recommendations from the national intelligence director and the national intelligence center. You would set up a national intelligence 

center that deals with counterterrorism, and that is the center that 

would bring together all of the information from all of the sources 

into one place; in other words, you would get a genuine sharing of 

information. But beyond an intelligence function, it has an operational planning function, like the military has and the J-2, J-3 

concept, so that the national counterterrorism center not only 

would have the intelligence, but it would plan the operation. It 

would not make policy, it would not execute policy, but it would 

plan. 

And that, incidentally, is a part of our recommendations. It 

seems to be harder to grasp, I think it was harder to grasp by the 

Commission itself, but we tend to look at these things in terms of 

just intelligence. It is much more than intelligence. It is bringing 

together the information and planning operationally how to deal 

with the problem that the intelligence presents to you. And then 

that, of course, goes up to the national intelligence director, and he 

reports it to the President. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from New York, Mr. Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman, and thank you, Mr. Hamilton. I want to join the chorus of voices who have lauded you and 

Chairman Kean for what you have done. You have really kind of 

restored some hope to the American public that we can sometimes 

put politics aside and party aside in coming together to really help 

the American people. It is kind of the same feeling that we had initially after 9/11 where we felt we were coming together, we were 

together as a Congress. What you have done on the Commission is 

to continue on along that basis, showing that you can come together, and I think that you and the Commission have set an example that we need to follow also here in Congress. 

That being said, I want to also thank the families of the victims 

of 9/11, because if it was not for them and them sticking to it and 

51

insisting that this Commission be formed, you may not be before 

us today. So I want to say a special thank you. I think the American people owe a great debt of gratitude to the families. They have 

lost so much, yet they still have stood up for so long so that you 

are sitting here and we are now addressing some of the issues that 

we probably should have been addressing all along, and it would 

not have happened without them, and the American people owe 

them a great debt of gratitude. 

Let me ask this question. You know oftentimes when we talk, I 

talk about diversity. The reason why we talk about diversity and 

various issues is because we get different ideas and different opinions from different people, whether an individual happens to be of 

different ethnic backgrounds, et cetera. 

Did the Commission at all look at our intelligence agencies and 

even some of our diplomatic corps, et cetera, along the avenue of 

diversity, whether or not because of ideas we had enough Arab 

Americans and Muslims and others that were involved in it, in 

helping us come up to determine or predict even an outcome of 

what terrorists there may be; and further and specifically, in looking at the whole, keeping in context the financial services, the 

whole compliant system that Muslims generally work with when 

they are talking about banking—we talked about hiding—making 

sure we understand their whole financial system so that we can be 

helpful in that regard in trying to figure out the best way to stop 

this kind of money laundering, et cetera, to fight against terrorism? 

Mr. HAMILTON. Thank you for your comments about the families. 

That is exactly on the mark. They have been enormously important 

to us and helpful to us in the course of our investigation. They gave 

us at one point about 150 questions, I think. We tried to answer 

all of them. We could not answer all of them; we did the best we 

could. But they have been exceedingly supportive and many of 

them are very, very knowledgeable about these public policy issues. 

So we have been pleased to have their support and they are marvelous people individually, and we have come to know many of 

them quite well. 

The second point on diversity, I am pleased you raised it. We put 

very great emphasis on the necessity of the intelligence community 

becoming more diverse. It is an absolute necessity. There is tremendous emphasis today on human intelligence. You cannot possibly penetrate an al Qaeda cell with a guy like me. It cannot be 

done. I do not care how fluent an Arab speaker I would be—and 

I am not—you cannot penetrate it. These are very small cells. They 

are often tied by family relationships. They are a very closely knit 

group, and penetrating those groups is the toughest intelligence 

target that we have. It cannot be done by a gentleman from Indiana who went to Indiana schools and all the rest. It has to be done 

with someone of that culture. 

So creating that diversity now becomes a national security priority. We hear all the time about the languages that need to be 

spoken and, incidentally, you are talking about 20 or more of them, 

many languages that we have to master. And beyond mastery of 

the language is mastery of the culture itself. You mentioned this. 

You have to understand the culture better than we do; not just the 

financial culture, but many other aspects of their culture. People 

52

have to begin to see this as an important part of our Intelligence 

Community, and if the CIA or other Intelligence Communities 

want to do a more effective job in human intelligence, or if they 

want to do a more effective job just in providing accurate information to the policymakers, they are going to have to become more diverse. And they are going to have to hire people with great linguistic skills; and I mean when we are talking about linguistic 

skills, we are not just speaking about somebody who speaks the 

language. They have to speak it like a native speaker if you are 

going to penetrate these groups. It is very important. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from Wisconsin, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. Of course I add my voice 

to the others in congratulating you, Mr. Hamilton, for your work. 

I apologize for coming in late. Like Mr. Feeney, I have been jumping back and forth between simultaneous hearings on the recommendations. 

I know the Commission has not recommended specific legislation. 

Would members such as yourself be willing to comment in writing 

on specific legislation that we put together going forward on this 

subject? Is that something that you would be willing to do? 

Mr. HAMILTON. I have to be a little careful about this. The Commission may or may not meet in the future. I think we probably 

will have some meetings on it, but it really depends on how we 

evolve from this point on, and I am afraid I am not able to give 

you a specific answer as to the Commission commenting on a specific piece of legislation. 

Mr. GREEN. Perhaps individual members? 

Mr. HAMILTON. I think individual members might, but here we 

have to be careful and say, okay, it is an individual opinion and 

it is not a Commission opinion. 

Mr. GREEN. Your points were well taken on the need for Members to vigorously utilize our oversight function. On the other hand, 

this is obviously an area in which it is difficult for us as Members 

to know all of the details and all of the facts in this rapidly evolving challenge that we face. Obviously, oftentimes the crucial data 

is classified, it is difficult for us to translate, and I think the whole 

subject matter is a difficult one for us, because I am not sure how 

we define progress in this area. Is progress the lack of a terrorist 

attack? Is progress so much time having passed between the disruption publicly of a threat? Obviously it is difficult for us, as it 

was difficult for you, and I think it is going to pose some real challenges for Members exercising the oversight function as we go forward in the years ahead. In fact, I think you point out quite eloquently, in both your testimony and in the report, the danger of allowing us to be lulled into that thinking, that progress is the absence of a very public, specific terrorist incident. Perhaps that is 

the problem that we suffered from in the past. 

So your points are well taken on oversight. Unfortunately, I 

think there are some limitations, and with those limitations and 

with that void, I think that is why so many Members are asking 

you and others about specific legislative recommendations. It is almost human nature. We want to be involved and active and doing 

53

something, and obviously legislation presents a vehicle that we can 

devote our energy to. 

Mr. HAMILTON. Well, on the question of oversight, I think you do 

not want to sell yourself short. You are the American policymakers, 

you are the politicians, you are the people who are closest to the 

American people. You know what the big policy issues are, and you 

must not let any agency intimidate you or snow you. I really firmly 

believe that every legislator has to respect the constitutional obligation and that means you are a part of a separate, but equal, 

branch of government, and that means you must assert that right 

continually. 

I like your point about metrics. Don Rumsfeld, Secretary Rumsfeld had the best comments on that. You probably remember his famous memorandum. How can we tell whether we are winning or 

losing? We do not have a good set of metrics. He is absolutely right 

about that. It is very, very hard to develop in this effort. 

Mr. GREEN. Finally, and quickly, there was a sentence in your 

report that really struck me, and I do not think it gets enough attention. The sentence says very clearly and specifically, we are 

safer than we were 4 years ago, but we are not safe. I think with 

this Commission, or this hearing process, and the Commission 

itself, we rightly focus on our shortcomings and what we need to 

do. I do not think we talk enough about progress that has been 

made. I like that aspect of the report, because I think it is something that the American people need to hear, that we are safer 

than we were 4 years ago for a number of reasons. So I think that 

is something important for the American people to hear. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. HAMILTON. We very much agree with that. 

The CHAIRMAN. The gentleman from Texas, Mr. Bell. 

Mr. BELL. Thank you very much, Mr. Chairman. Mr. Hamilton, 

thank you for your service and your testimony here today. The 

good news is that I am asking questions, so that means you are 

very close to being finished. The bad news is that I have a couple 

of questions too. 

The first is really touching upon something that Mr. Feeney 

raised and you really did not have an adequate opportunity to respond to, and it really goes back to a statement you made earlier 

about the need not to fight the last war, and I think that really 

goes to the core of what our strategy has to be in this war on terrorism. But my question is, how do you keep from fighting the last 

war? 

You know, based on your service here in the House, that we operate in an incredibly reactive environment, and I am just curious 

that if you are talking about the financing of terrorist activity or 

any other aspect of this war on terrorism, if the terrorists are as 

clever and resourceful as you indicate that they are—that the Commission indicates that they are, and one really only has to read the 

first few pages of the report to see just how resourceful they can 

be—it almost seems like it is a scene from that old cartoon where 

there is a water leak and the character is trying to plug the water 

leak and then the water starts shooting out from a different source 

and pretty soon you are running around. 

54

So we can respond to what we already know, but my question is, 

based on what you have seen and heard, how do you stay above 

or ahead of the curve in this war on terrorism, and how do you 

keep from just fighting the last war? 

Mr. HAMILTON. I think you have to consult the nonconventional 

thinker. You have to go outside the box. You know, congressional 

committees get in the habit of having the same witnesses all the 

time, and that is understandable, because you deal largely with 

policy questions and you want the policymakers there. But it is important for Members of Congress, as it is important for executive 

branch people, to put their feet up on the desk, look out the window, and think unusual thoughts, and use their imaginations. 

One of the pieces of advice we had given to us regularly was, talk 

to some of the novelists. Talk to a Tom Clancy and a lot of other 

writers that you all could identify that I cannot, who think—who 

use their imagination. And you have to do that. That is my only 

advice on it, because you have to expand your own sources of information to figure out what some of these people are thinking about. 

Mr. BELL. Can you institutionalize that to any degree, in your 

opinion? 

Mr. HAMILTON. I doubt it. It really takes individual initiative. 

You cannot very well establish, I do not believe, an office of imagination over here. That would not sell too well, I do not think. 

Mr. BELL. There would be a lot of people willing to serve, though. 

Mr. HAMILTON. You do need people and you need to consult with 

people who do not express always the conventional wisdom, and 

that is an important thing to keep in mind. 

Mr. BELL. Also, going back to something you talked about earlier 

about the cooperation that has existed between financial institutions and law enforcement and your concern that perhaps as the 

memory of 9/11 fades, that cooperation could subside, and you 

talked about the need for some institutionalization there. 

How would you go about institutionalizing that cooperation? 

Mr. HAMILTON. Well, those who are familiar with the financial 

institutions, the private sector people could probably give you a 

better answer than I can. But there really does have to be—and 

maybe they already exist, I do not know—mechanisms whereby a 

dialogue can take place between the bankers, if you will, the financial institution people, and the policymakers. That is, it is very important that that dialogue take place and there has to be a mechanism for it to occur. It may be the mechanisms are already in place 

and they need to have an expanded agenda. 

Dialogue is the answer to your question. There has to be dialogue, and you have to have a place where that dialogue can take 

place. 

We had a question a moment ago about the bankers in West Virginia. They are outside the dialogue. That is why they are asking 

those questions. And that means no matter what exists today, it is 

not working completely, because they do not understand what 

the—why it is they are gathering this information. And so I think 

you have to look at it with that perspective. 

Mr. BELL. Thank you very much. 

Thank you, Mr. Chairman. 

55

The CHAIRMAN. The clean-up hitter, the gentleman from Staten 

Island, Mr. Fossella. 

Mr. FOSSELLA. Thank you, Mr. Chairman. 

Mr. Hamilton, thank you very much. I would echo the words of 

my colleagues to say that I appreciate your service as well, and underscore the reality that you mentioned earlier, and others, about 

the families who suffered; regrettably and tragically, many of those 

were from the area I represent in Staten Island and Brooklyn; 200 

of my neighbors on Staten Island alone were killed. Their memory 

has become the foundation for what we are doing here and, fortunately, it seems like people are working together to achieve that 

goal of protecting us once and for all. 

Let me just say I am pleased in terms of some successes that you 

mentioned of the PATRIOT Act, and as one of the successes, because it appears that it has become sort of a whipping boy, there 

is a monster behind every tree out in the political arena. As you 

mentioned earlier, it seems to have its successes in forcing agencies 

to cooperate with each other, at a minimum, and obtain and apprehend those would-be terrorists. So thanks for adding that. 

In terms of outside the box, the reality is these are not Boy 

Scouts or Girl Scouts. A lot of them are just animals that want to 

see the destruction of the U.S. I would point to what I think is one 

of the greatest police departments in the world, the New York City 

Police Department. One of the reasons why they are so successful, 

I believe, especially the detectives, is that they are not afraid to get 

on the ground and work and find out the nuts and the bolts and 

the nitty-gritty. They do not have their feet up on the desk. 

So that is one way in which I hope the Federal agencies can better utilize those local law enforcement officers like the New York 

City Police Department and detectives. They do, to a degree, do not 

get me wrong, but I think it could always be better. 

You have answered a lot of questions, and some I wanted to ask 

have been asked, so I will not repeat them. But let me just ask one 

quick one regarding the Department of Treasury, specifically the 

TFI office, your testimony about all agencies and sharing a goal to 

work together. Do you think that that office should maintain a 

group of financial experts to oversee compliance? And to what degree does it make sense for the Department, if at all, to have criminal enforcement capability? Thanks again. 

Mr. HAMILTON. Thank you for mentioning the tragedy that these 

families encountered. That was continually impressed upon the 

commissioners, and we cannot be cognizant of that too often. And 

those in your area, New York, New Jersey, certainly suffered the 

most, because that is where the heaviest casualties were. 

Secondly, I think that the emphasis you put on local and State 

is likewise very important, because these people are the frontline 

officials. There are 18,000 first responders, or approximately that 

number, and you cannot imagine an effective war on terrorism 

without their participation. And one of the huge problems here is 

how you get information from up here to down there—if you say 

up is here in Washington—the flow of information downward, without compromising sources. That is a big-time problem in all of this. 

But it is one we must solve, and it is one that local and State officials complain an awful lot about. They do not feel like they are 

56

in the loop with regard to information. And we direct some of our 

comments to that in the report. 

With regard to the Treasury having criminal enforcement powers, I really do not feel qualified to answer that. I just do not know 

that much about it. My general sense is the prosecutors have to do 

that in the Department of Justice, but I would be no expert there. 

Mr. FOSSELLA. Fair enough. Thank you very much, Mr. Hamilton. 

The CHAIRMAN. The committee is pleased to have you here. We 

put you through a long, difficult—well, I do not know how difficult 

it was, but it was a long process. You have been on the other side 

of this for a long time, so now you can appreciate it from both sides 

of the dais. But I know I speak for all of the Members on the committee to say how deeply we appreciate your appearance here today 

and your expertise. Your expertise precedes you before the 9/11 

Commission with your great work in the Congress and, clearly, you 

have done yeoman’s work, as well as the other commissioners. 

With that, you are dismissed. I know you have some other work 

this afternoon. Thank you very much. 

Mr. HAMILTON. Thank you very much. 

The CHAIRMAN. The Chair notes that some members may have 

additional questions for the witness which they may want to submit in writing. Without objection, the hearing record will remain 

open for 30 days to submit written questions to the witnesses and 

to place the response in the record. 

We now invite our second panel to appear. 

Gentlemen, welcome to the Committee on Financial Services. Let 

me introduce the panel. The honorable Stuart A. Levey, Under Secretary for the Office of Terrorism and Financial Intelligence, Department of the Treasury, and an Ohio native; the Honorable 

Frank Libutti, Under Secretary for Information Analysis and Infrastructure Protection, the Department of Homeland Security. We already know where you are from, from our friend from Long Island. 

And the next witness is Mr. Barry Sabin, Chief of the 

Counterterrorism Section, Department of Justice. 

Gentlemen, thank you all for your patience as we worked our 

way through the vice chairman of the 9/11 Commission. I notice 

you were all here, and hopefully it was a worthwhile experience for 

you as well as for the members of the committee. 

The CHAIRMAN. We will begin with you, Mr. Levey. 

STATEMENT OF HON. STUART A. LEVEY, UNDER SECRETARY 

FOR THE OFFICE OF TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY 

Mr. LEVY. Thank you, Mr. Chairman, members of the committee, 

thank you for inviting me here today to testify about our efforts to 

combat terrorist financing and the 9/11 Commission report. This is 

my first opportunity to testify in my new position as Under Secretary for the new Office of Terrorism and Financial Intelligence. 

There is little need to underscore the importance of our campaign 

against terrorist financing, especially before this audience. Both in 

the PATRIOT Act and in other ways, this committee has demonstrated its commitment to fighting the financial war on terror. 

The committee would certainly agree, as I do, with the 9/11 ComVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
57

mission’s primary recommendation that ‘‘vigorous efforts to track 

terrorist financing must remain front and center in U.S. 

counterterrorism efforts.’’

It is an honor for me to testify alongside Under Secretary Libutti 

and Barry Sabin today. I just left the Justice Department a few 

weeks ago, where I had the privilege of working directly with Mr. 

Sabin and Mr. Breinholt and his team, both in the criminal division and at the FBI. They are real pros, and I am pleased to be 

able to continue working with them on this issue. 

Those of us who work on this issue are also indebted to the 9/

11 Commission and its staff, including specifically John Roth whom 

some of you know. Both in its main report and in the staff monograph, the Commission’s fine work will certainly help us improve 

our overall efforts to combat terrorist financing. 

I would like to highlight three issues in my oral statement. First, 

I think it is important to underscore that our terrorist financing 

campaign is just one part of the overall mission to fight terrorism. 

Put another way, the goal is not so much to stop the money as it 

is to stop the killing. That seems obvious, but it actually has real 

implications for the tactics we choose to use in particular situations. Our goal must always be to choose the action that will do the 

most to cripple terrorist organizations. 

For example, in a certain case, the best action may be to publicly 

designate a financier to freeze terrorist-related assets and also shut 

down a conduit for further financing. In another case, the best 

strategy may be to observe the financier or money flow covertly to 

identify the next link in the chain rather than to cut the money 

off. 

In pursuing that goal, we need to draw on a full range of weapons in our arsenal from agencies all around the government, from 

intelligence activities to diplomatic pressure, from administrative 

action to criminal prosecutions. As the Commission recognized, the 

interagency team that focuses on terrorist financing is all committed to that principle, and the team work is excellent. But even 

with the best teamwork, we have a difficult challenge. Terrorist 

groups like al Qaeda are savvy and are evolving in response to our 

actions, so we must continue to improve and adjust as well. 

Second, I would like to say a few words about recent changes at 

Treasury that should enhance our contribution to that team. Since 

the September 11 attacks, Treasury has worked diligently to combat terrorist financing and otherwise safeguard the integrity of our 

financial system and international financial systems generally. 

However, Treasury’s structure did not match its mission to combat 

terrorist financing as a distinct priority. President Bush and Secretary Snow therefore created the new Office of Terrorism and Financial Intelligence to bring all of the Department’s assets to bear 

more effectively to fight terrorist financing and financial crime. 

TFI has two major components. The first, the Office of Intelligence and Analysis, reflects our recognition that the war on terror 

remains a war of information. Treasury’s Office of Intelligence 

Analysis will integrate, for the first time, all of the Department’s 

financial information and intelligence streams and ensure that the 

information is properly utilized to support the campaign against 

terrorist financing, as well as other aspects of Treasury’s mission. 

58

TFI also includes the Office of Terrorist Financing and Financial 

Crimes, which is the policy and enforcement apparatus for the Department on these issues. Led by Assistant Secretary Juan Zarate, 

this office will, among many other things, integrate the important 

functions of OFAC and FinCEN with other components of the Department, work with IRS-CI and other law enforcement on emerging domestic and international criminal issues, and represent the 

United States at international bodies dedicated to fighting terrorist 

financing and financial crime such as the FATF that we have 

heard discussed today. 

Third, I would like to focus on the differences between money 

laundering and terrorist financing. 

The main reason why tracking terrorist finances must remain a 

central part of the overall counterterrorism mission is that money 

trails generally do not lie. As a result, they can help us identify, 

locate, and arrest terrorists. One key question is whether the systems we have implemented to ensure financial transparency, most 

of which were aimed at money laundering, are sufficient to ensure 

that we are able to ‘‘vigorously track terrorist financing’’ as the 

Commission recommended. 

Terrorist financing and money laundering are not the same, and 

by applying the same methods and tools to both problems we may 

inhibit our ability to succeed. With money laundering, investigators 

essentially look through a telescope to try to detect the movement 

of large amounts of tainted money trying to move through our financial system. With terrorist financing, investigators essentially 

need a microscope to detect and track the clandestine movement of 

relatively small amounts of money, money that is often ‘‘clean’’ 

money, but that is intended for an evil purpose. 

This difference has policy implications for all of us. At Treasury, 

we have begun to study how we can devise tools or systems aimed 

more particularly at terrorist financing. Among other things, we 

need to work with the private sector on this, and this is something 

we have heard discussed already today. The financial industry has 

shown tremendous resolve since 9/11 and is eager to cooperate with 

us on this issue, but we need to help them help us. For example, 

we can build on the information sharing relationships that FinCEN 

has already developed under section 314 of the PATRIOT Act, and 

I was pleased to hear Chairman Hamilton endorse that function. 

I look forward to working together with this committee on these 

issues and to answering your questions. Thank you. 

[The prepared statement of Hon. Stuart A. Levey can be found 

on page 115 in the appendix.] 

The CHAIRMAN. Mr. Libutti. 

STATEMENT OF HON. FRANK LIBUTTI, UNDER SECRETARY 

FOR INFORMATION ANALYSIS AND INFRASTRUCTURE PROTECTION, DEPARTMENT OF HOMELAND SECURITY 

Mr. LIBUTTI. Good afternoon, Chairman Oxley, Congressman 

Frank, distinguished members of the committee. I was about to 

say, although I do not see the gentleman here, my special greetings 

to Congressman Israel; my family appreciates your support, sir. 

Today I will provide an overview of the Information Analysis and 

Infrastructure Protection Directorate—we call it IAIP—describe 

59

initiatives that the Department has taken to protect the financial 

services critical infrastructure in general, and to discuss some of 

the specific actions taken after the recent elevation of the threat 

level for the financial services sector in New York City, northern 

New Jersey, and Washington, D.C. 

IAIP leads the Nation’s efforts to protect our critical infrastructure from attack or disruption. The IAIP directorate was created to 

analyze and integrate terrorist threat information and to map that 

threat against vulnerabilities, both physical and cyber, to protect 

our critical infrastructure and key assets. 

Recognizing the potentially devastating effects of disruption of 

services or catastrophic failures in the banking and financial sectors, IAIP works on a daily basis to assess threats and 

vulnerabilities, mitigate risk, develop protective measures, and 

communicate with the sector. 

The banking and finance sector not only represents both physical 

and cyber vulnerabilities, but is also critically interconnected with 

every other critical sector within our Nation. IAIP has focused on 

monitoring and assessing threats and vulnerabilities to all sectors, 

including the banking and financial sector. Sharing this information with the private sector is a vital component of IAIP’s mission. 

DHS, the Department of Homeland Security, also acts as a coordinator with other government entities. In the financial field, IAIP 

partners with the U.S. Treasury to share information with government entities and the private sector through the Financial Services 

Sector Coordinating Council, the Finance and Banking Information 

Infrastructure Committee, and the Financial Services Information 

Sharing and Analysis Center, what we call FS-ISAC. The FS-ISAC 

provides a mechanism for gathering and analyzing and appropriately sanitizing and disseminating information to and from infrastructure sectors and the Federal Government. Every 2 weeks, 

the FS-ISAC conducts threat intelligence conference calls at the 

unclassed level for members with IAIP providing input. These calls 

cover physical and cyber threats, vulnerabilities, incidents that 

have occurred during the previous 2 weeks, and suggestions and 

guidance on future courses of action. The Financial Services ISAC, 

as with all ISACs, is capable of organizing crisis conference calls 

within an hour of notification of a crisis. 

In addition, the Department of Homeland Security has established close working relationships with the appropriately cleared 

senior members of the ISAC to exchange classified information as 

appropriate. 

IAIP receives and evaluates current threat and incident information, including suspicious activity reports submitted directly by the 

industry or through the ISAC, and provides timely feedback on 

those issues. As recent events have exemplified, during times of 

elevated threat, IAIP intensifies its efforts to coordinate and reach 

out to the private sector the entities described above and other government agencies. 

I would be remiss, given this committee’s leadership in the fight 

against terrorist finances and financial crime, if I did not take a 

moment to highlight for you the other important role of homeland 

security relative to the financial service industry; that is, our role 

in the investigation of a wide variety of financial crimes. I know 

60

this committee is uniquely positioned to appreciate the depth of financial investigative expertise and jurisdiction now housed within 

the Department of Homeland Security. The investigative functions 

and personnel of the former U.S. Customs Service, now housed 

within immigration and Customs enforcement, includes some of the 

most experienced financial investigators in the U.S. Government. 

In addition, the Department of Homeland Security is also home to 

the U.S. Secret Service, which has, as one of its primary missions, 

the investigation of counterfeiting, credit card fraud, and 

cybercrime. Together, they represent a vast and impressive array 

of expertise critical to protecting our Nation’s financial systems. 

The latest series of events against a U.S. financial institution 

was spurred by ongoing concerns over al Qaeda’s interests in targeting U.S. critical infrastructure as well as recent intelligence, information of detailed reconnaissance against several U.S. financial 

institutions. Based on the multiple reporting streams and the information contained in these reports, the intelligence community concluded that the information warranted a change in the alert status. 

The level and specificity of information found was alarming, 

prompting DHS to raise the threat level to orange for the financial 

service sector in New York, northern New Jersey and Washington, 

D.C. on Sunday, August 1. This was the first time the level had 

been changed for an individual sector in a geographic-specific area. 

In response to the heightened threat level, IAIP acted on several 

fronts to address the threat. Conference calls were arranged between DHS, financial sector leaders, State homeland security personnel, including homeland security advisors, and local law enforcement. In addition, senior DHS leadership personally met with 

CEOs and security directors from the financial sector to better inform them of the evolving conditions and provide guidance. Subsequent to providing immediate alerts to the financial sector regarding the threat, IAIP continued to work with the industry to ensure 

that all targeted financial institutions were individually briefed. 

IAIP coordinated with Federal, State, and local law enforcement 

entities to ensure that the appropriate information was exchanged 

between the government and the private sector. We also pooled affected financial sectors to determine what additional protective 

measures were implemented by the private sector itself during this 

heightened period. 

IAIP personnel were also immediately deployed to facilities in 

Washington, D.C., New York City, and northern New Jersey. 

Teams of IAIP personnel conducted site-assist visits, what we call 

SAVs, in collaboration with local law enforcement officials and 

asset owners and operators to facilitate the identification of 

vulnerabilities and to discuss protective measures. 

In addition to these SAVs, IAIP personnel have been working 

with individual facilities and local law enforcement entities to implement buffer zones around selected banking and finance sites. 

Buffer zones are community-based efforts focused on rapidly reducing vulnerabilities outside the fence of selected critical infrastructure and key resources. To support these efforts, IAIP provides assistance to local law enforcement officials to develop and implement 

buffer zones, to share best practices, and lessons learned. 

61

IAIP has taken many actions to secure the financial services sector with our friends in State, local, and the folks sitting with me 

here today. Our job, however, is not done. We will continue to monitor the evolving threat condition and communicate those threats 

with the private sector and our partners within State and Federal 

agencies. Together with the Department of Treasury, we have laid 

the foundation for a true partnership with the public and private 

sectors. Based on this foundation, we will continue to dedicate ourselves to making a difference in protecting our Nation. 

Thank you for the opportunity to testify before you today, Mr. 

Chairman. I would be pleased to answer any questions at this time. 

The CHAIRMAN. Thank you, Mr. Libutti. 

[The prepared statement of Hon. Frank Libutti can be found on 

page 126 in the appendix.] 

The CHAIRMAN. Mr. Sabin. 

STATEMENT OF BARRY SABIN, CHIEF OF THE 

COUNTERTERRORISM SECTION, DEPARTMENT OF JUSTICE 

Mr. SABIN. Chairman Oxley, Congressman Frank, members of 

the committee, I am honored to appear before this committee 

today. I am also pleased to share the microphone today with Mr. 

Libutti and Mr. Levey, a dedicated and principled former colleague 

of mine. 

Working together, the various components involved in the United 

States’ efforts to combat terrorism and its funding have made significant progress and scored key strategic victories, while continuing to respect constitutionally guaranteed civil liberties. We are 

sobered and ennobled by the unique opportunity that history has 

presented to us to seek justice, both in our words and in our actions. 

To be clear, we will be aggressive, as Congress and the American 

people rightly expect that of us. Our concerted efforts and reliance 

on the rule of law have led to the disruption or demise of terrorist 

cells in locations across the Nation. We continue to dismantle the 

terrorist financial networks, including those that prey on charities 

through, in part, an application of standard white-collar investigative techniques. 

Much of our success is due to the wide array of legislative tools 

made available to us by this committee and the Congress, for which 

we are grateful. 

Today, I would like to survey, first, some of what we have done 

since 9/11 in the area of terrorist financing and criminal enforcement; second, some of the trends that we foresee; and lastly, how 

this work relates to the Treasury Department and the Department 

of Homeland Security, and the oversight responsibilities of this 

committee. My goal is to cite some examples and highlight some 

trends, and I do not intend this description to be a comprehensive 

review of all that has been done in this area by the Justice Department. 

The watershed legislative development of terrorist financing enforcement occurred in 1996 when Congress passed the 

Antiterrorism and Effective Death Penalty Act. This statute created the section 2339B offense, and the concept of ‘‘designated foreign terrorist organizations’’ or FTOs. 

62

With the assistance of a Hamas leader, an organization known 

as Holy Land Foundation for Relief and Development, became 

Hamas’s U.S. beachhead and source of support. A few weeks ago, 

the Holy Land Foundation and its officers were indicted by a grand 

jury in Dallas for, among other crimes, conspiring to provide material support to Hamas for over the last decade. 

Another accused U.S.-based terrorist financier, Sami Al-Arian, 

along with his co-conspirators, allegedly used his University of 

South Florida office and several nonprofit entities he established to 

support the Palestinian Islamic Jihad. 

Since 9/11, we have relied on section 2339B to charge persons 

who sought to donate themselves to violent jihad causes around the 

world. 

We prosecuted and obtained guilty pleas from several men living 

in Lackawanna, New York, who had attended a terrorist training 

camp in Afghanistan. In New York City we recently obtained the 

guilty plea and military cooperation of al Qaeda associate and military procurer Mohammed Junaid Babar. 

Recently in Northern Virginia, our prosecutors convicted several 

persons of training in the United States to engage in violent jihad 

activities abroad. Earlier, we obtained in that district the guilty 

plea of al Qaeda operative Iyman Fares. 

Clearly, our ability to address this conduct through criminal 

prosecutions would not have been possible had Congress not provided us with a powerful tool like the material support statutes, including Section 810 of the USA PATRIOT Act. These maximum 

penalties, combined with terrorist enforcement of the U.S. sentencing guidelines, allow us to exert significant leverage over terrorist supporters to gain their cooperation. 

The very process of ‘‘material support’’ investigations often results in the identification of other targets and future prosecutions. 

For example, following a Charlotte, North Carolina Hezbollah prosecution, prosecutors in Detroit have built on these successes to 

charge other Hezbollah-connected individuals linked to cigarette 

smuggling and tax evasion racketeering conspiracy. 

The Holy Land Foundation case in Dallas was assisted by an FBI 

raid on September 7, 2001 of a related company known as 

INFOCOM. Last month, the brothers that ran INFOCOM were 

convicted by a jury in Dallas of illegally shipping computer parts 

to State sponsors of terrorism. 

The Northern Virginia jihad case was assisted by Chicago prosecutors assigned to the Benevolence International Foundation investigation. 

Simply stated, aggressive law enforcement begets more enforcement and further disruption of terrorist support mechanisms. Prosecutions generate more leads and intelligence. Let me underscore 

the point because I think it is a critical one. Increased penalties 

yield cooperation by criminal defendants, which yields information, 

which enables the government to more successfully prevent terrorist incidents and attack terrorist funding. 

No matter how effective our criminal statutes are in theory, 

using them depends on the development of facts. Since 9/11 and 

with the vital assistance provided by Congress with the USA PATRIOT Act, criminal investigators and prosecutors now have access 

63

to the full body of information developed by the U.S. Intelligence 

Community, including intelligence gathered through investigative 

activities authorized by the Foreign Intelligence Surveillance Act. 

In addition to the Holy Land Foundation and Sami Al-Arian cases, 

an example would include the Chicago indictment of three Hamas 

operatives announced by the Attorney General this past Friday. We 

believe that sections 218 and 504 of the USA PATRIOT Act, which 

has been vital to bringing these prosecutions, represent a key congressional contribution to our counterterrorism efforts and we are 

gratified that this view is shared by the National Terrorism Commission in its report. 

Intergovernmental coordination, however, is not enough. Many of 

our prosecutions have been aided by cooperation that stretches 

across international boundaries. For example, the conviction of 

Abdulrahman Alamoudi in Alexandria, Virginia, originated with information provided to us by British law enforcement, which questioned Alamoudi at Heathrow Airport about a briefcase containing 

$340,000. 

Abu Hamza al-Masri and Baber Ahmed, who have been charged 

with terrorist support offenses, are currently in British custody 

awaiting extradition to the United States. 

Our enforcement record has benefited from Director Mueller’s decision immediately after September 11 to create a specialized unit 

of financial investigators to focus on the problem of international 

terrorism, now known as the Terrorist Financing Operation Section. 

Relying on changes to the crime of operating an unlawful money 

transmitting business, codified at Title XVIII United States Code, 

section 1960, made useful by the USA PATRIOT Act, we have 

brought charges in jurisdictions such as New Jersey and Brooklyn 

and obtained convictions in Massachusetts and Virginia. This crime 

will remain a valuable part of our counterterrorism strategy, and 

we support pending legislation in H.R. 3016 that would make section 1960 a RICO predicate. 

The private sector, particularly the financial services industry, 

has been responsive to the USA PATRIOT Act section 314(a) requesting information on certain potential customers. We hope to 

continue working with the Treasury to improve the utility of Bank 

Secrecy Act reports, including suspicious activity reports to law enforcement, and to provide the financial services sector with additional feedback on the utility of such data. 

The Department recognizes that the terrorist threats we are facing today and in the foreseeable future, cannot be addressed by any 

single department, bureau, or agency. That is why we need to acknowledge and further develop our strong partnerships, both informally and formally, with the Departments of the Treasury and 

Homeland Security. 

I thank this committee for its continued leadership and support. 

I am happy to answer any questions you may have. 

The CHAIRMAN. Thank you, Mr. Sabin. 

[The prepared statement of Barry Sabin can be found on page 

131 in the appendix.] 

The CHAIRMAN. Mr. Sabin, let me begin with you because you 

raised some very interesting points, and I think that too many 

64

times the successes that we have had as a result of the PATRIOT 

Act go either unreported or, even worse, ignored by virtually everybody. Yet, when we see articles that appeared today, all negative, 

it is almost as if the writers, the journalists are looking for negative information to put out there about the work that all of you are 

doing, positive work that too many times is underreported or not 

reported at all. It seems like when you have legitimate criticism—

nobody is perfect—but that that seems to get the headlines. Once 

again, we found that today in virtually every major newspaper. It 

is just unfortunate. 

So I want to salute all of you for the work that you do to make 

us safer. Mr. Sabin, your chronicling of some of those successes, I 

think, needs to be told more and more so the public does get a balanced view of the efforts that are being made in this country. 

You mentioned section 21 and section 504 of the PATRIOT Act 

which has facilitated information sharing. That obviously is going 

to sunset next year. I happen to think that was an unwise decision 

on the part of the Congress to put a sunset provision in. 

But what would be the implications of the failure to reenact the 

PATRIOT Act in your estimation? 

Mr. SABIN. Echoing Vice Chairman Hamilton’s comments this 

morning, sections 218 and 504 of the PATRIOT Act are, on a dayto-day basis, the essential tools that allow criminal law enforcement and intelligence folks that are looking at these problems to 

discuss and share information. The proverbial wall that people 

have referred to was brought down by those particular sections of 

the USA PATRIOT Act. To allow it to sunset I believe would be 

setting us back to a stage where—and the monograph that was 

issued over the weekend agrees—you would have those kinds of 

dysfunctions and lack of communication and coordination. 

So in terms of section 218 and 504, on a day-to-day basis, it is 

invaluable for criminal investigators to be talking to intelligence investigators, for prosecutors to be talking to those folks in order to 

share information and use all of the tools that Congress has provided us in order to address the particular threat or the particular 

disruption activity. 

There are other provisions in the PATRIOT Act, echoing Mr. 

Hamilton’s remarks this morning. I believe section 314 is vital for 

working with obtaining information from the financial community, 

the financial sector. Section 326, involving ‘‘know your customer,’’ 

has proved to be very beneficial. USA PATRIOT Act, section 373, 

which relates to the change that this Congress made in the intent 

relating to the unlawful money transmitting license transactions 

under section 1960, has been invaluable to us. 

So all of those provisions of the PATRIOT Act, but most especially 218 and 504, that allows us to communicate and share information are invaluable. 

The CHAIRMAN. We thank you particularly for mentioning Title 

III, which is the contribution that the Financial Services Committee made. Clearly, if you look at it from a broad perspective, 

they really enmesh and work quite well together, and you folks are 

the ones that carry it out. 

Mr. Libutti, do you have any comments in regard to the PATRIOT Act? 

65

Mr. LIBUTTI. I fully support the comments of my friend to the 

left, sir. I think it is the only way to go in terms of keeping the 

wall down and making progress. 

The CHAIRMAN. Mr. Levey. 

Mr. LEVEY. I totally agree, sir. 

The CHAIRMAN. The Commission report deals with extensive bottlenecks and discusses methods to remedy that situation. I am concerned about a particular issue regarding FinCEN, and I mentioned it to our first witness, Mr. Hamilton, regarding the inability 

of FinCEN to use their own computers and to effectively do their 

jobs. 

Wouldn’t FinCEN be better able to ensure data quality and be 

responsible for failures if it had its own computers and was responsible for its own data? Also, now that Treasury has an Under Secretary for Enforcement, does it make sense to you to have nontax 

financial crime investigators at IRS, or do you think they should 

be shifted to the terrorism and financial intelligence office? 

Mr. LEVEY. Well, let me—there are obviously two separate questions. Let me take the second one first in terms of the shifting of 

IRS criminal investigators to the Office of Counterterrorism and Financial Intelligence. I have heard that suggestion. I know that 

Chairwoman Kelly has also made that suggestion. Obviously, this 

is something that we need to think about, but my first reaction is 

that I have talked with Commissioner Everson already. He has 

pledged to me and to the Department that he is going to be as supportive as possible of the mission of the new office and work with 

us on all of the initiatives that we have, and we will have to just 

work together with him to see how that develops and see if more 

drastic changes are necessary. I am not sure that they are, and I 

do not know that our needs are limited to criminal investigators either. It may be that we need some of the other expertise from the 

IRS on the noncriminal auditing side that they obviously have as 

well. 

With respect to the question you asked about FinCEN, I think 

I agree with the premise of the question, which is that FinCEN 

needs to move ahead in terms of developing its technology to be 

more responsive to law enforcement and to the private sector, and 

under the leadership of Director Fox, I think they are headed in 

that direction. The key point here is their BSAdirect initiative, 

which is moving forward and we anticipate will be done by October 

of 2005. That will free up FinCEN to do more sophisticated analysis of financial data that comes in, and improve access on behalf 

of law enforcement to that data. 

The problem I think underlying the question is the fact that 

right now the information is being provided to us generally through 

paper reporting and then the data is being entered by the IRS at 

the Detroit computing center. I think that that is something we 

need to take a look at because I cannot imagine that when we look 

down the road 5 years from now, that we will still be in that situation. That seems to be a situation we need to correct and move towards an e-filing system in some way that is not overly burdensome on the private sector but which provides FinCEN with better 

ability to manipulate the data. 

The CHAIRMAN. Thank you. 

66

The gentleman from Massachusetts, Mr. Frank. 

Mr. FRANK. Mr. Levey, I have had to go in and out, but I gather 

there was some conversation—I just heard some—about taking 

some IRS personnel cell investigators and maybe some others and 

have them also be doing terrorism work; is that correct? 

Mr. LEVEY. Well, the IRS already supports——

Mr. FRANK. Right. But there was some suggestion about having 

them do more? 

Mr. LEVEY. Well, there were suggestions in the first panel about 

whether the IRS—questioning whether the IRS’s commitment in 

terms of resources to terrorism——

Mr. FRANK.—is enough. Well, I would like to say very clearly, if 

we are going to increase IRS resources to you, it should only come 

if we have increased IRS resources. If there is an area in this government which I do not think is being done to excess, it is enforcement of the Tax Code at this point. I think we went too far in 

weakening enforcement, and the notion that we would further 

weaken it would trouble me. 

So I would be glad to vote for some more money. I know we are 

all supposed to be opposed to government in general, but then we 

are all for it in the specific. So I would like to say, I hope people 

would resist cheering if we further cut the IRS. Yes, I would like 

to see some more resources, obviously whatever you need, but not 

at the expense of existing enforcement of the Tax Code, and I hope 

that that would be the Department’s position, and I would hope 

that they would not feel pressured to do that. 

Let me ask Mr. Sabin, in your testimony, Mr. Hamilton said on 

behalf of the Commission, they were not recommending any legislative changes in the area that came under your jurisdiction. And as 

I read the testimony, there was one area where you—I do not think 

this is our jurisdiction, but it is in this area, you talked about the 

‘‘lone wolf’’ international terrorists. 

Would you like to see the law changed so that individuals who 

are acting in international terrorism—and it says non-United 

States persons, so this is a noncitizen; is that correct? 

Mr. SABIN. Yes. 

Mr. FRANK. And right now you have to prove that they are connected to some organization, so even if they are otherwise doing 

something they should not be doing in this area. That did not seem 

to me to be terribly controversial, and I note that, although I know 

it is not our jurisdiction. 

Let me say, by the way, on the subject of legislation and 

sunsetting, sunsetting is something that does not mean you think 

it is a bad idea. In fact, in other contexts people think sunsetting 

is a good thing in general. I do favor extension of the provisions 

we talked about, but I also favor sunsetting them, for two reasons. 

First of all, you do not know for sure how they are going to work 

out. Secondly, you do have this problem, which is these are important powers but they can be abused, and I think the sunset is one 

of the best ways we have to make sure that the powers are used 

appropriately and not inappropriately. I think having people know 

that if there are controversies generated about whether or not they 

are used appropriately, that that is important. 

67

Let me just ask in that regard on the question of the freezing of 

assets in particular—and I would ask both Mr. Levey and Mr. 

Sabin—the Commission, and in the monograph, and in Mr. Hamilton’s testimony, they gave examples of people whose assets were 

frozen, and that included a freeze on any commercial transactions 

so that until they get a waiver, until they get waivers, they could 

not even engage counsel to defend themselves. 

Shouldn’t that sort of a waiver be automatic? After all, we are 

not talking about anybody who has been found in any neutral court 

to have been guilty of something. Shouldn’t there be some kind of 

a presumption that you would be allowed to defend yourself against 

the accusation, especially since, as I understand it, the freeze stays 

in effect. We are not talking about lifting the freeze, we are talking 

about being able to combat the freeze. 

Is there any reason why they should not be automatic so that 

people will have the resources to defend themselves? 

Mr. SABIN. You are getting into the area of the general civil liberties question and the balancing that needs to be addressed. In 

terms of the sixth amendment right to counsel, we are committed 

to preserving that and protecting that. 

Mr. FRANK. That is in the criminal context. I guess I am not as 

clear as I should be on the freezing of assets. When I went to law 

school, we were not freezing assets that much. Who knew? What 

is your right to counsel in the case of the freezing of your assets? 

Mr. SABIN. You do. If you make an appropriate license request 

to the Office of Foreign Asset Control through the Treasury Department, Mr. Levey’s shop, they can grant that for——

Mr. FRANK. Grant what? They grant you the right to do it. You 

do not get free counsel. So it is not the right to counsel, but it is 

right to pay a lawyer. There is that criminal/civil distinction. You 

do not have the automatic right. 

Mr. FRANK. Shouldn’t that be automatic? Let me ask you, Mr. 

Levey, would you turn someone down just to be able to hire a lawyer to defend—to object to the freeze? 

Mr. LEVEY. It is my understanding that we have not turned anyone down; that that is routinely granted. 

Mr. FRANK. Why even require it? What, have you got nothing 

else to do but sit around and stamp ‘‘yes’’? Why not just say that 

narrowly defined for the purpose of challenging the legitimacy of 

the order, there is that automatic waiver? I just don’t think it 

serves a purpose to say that we would ever—it is hard to think of 

a circumstance in which you would turn it down. It is a right to 

counsel. 

Mr. LEVEY. It is not a question of whether we would ever turn 

it down. It is a question of once we have frozen the assets, we want 

to monitor what happens and make sure that the money is only 

used for that purpose. 

Mr. FRANK. That is not inconsistent with saying that to the extent that it is for the purposes of defense, you could do it. It would 

still be subject to the monitoring. That is one of the changes that 

would make me feel a little better, and I think it is generally a 

good idea not to have even a theoretical blockage of that sort. 

Mr. LEVEY. Although it is a theoretical power, we have not exercised it. 

68

Mr. FRANK. You haven’t exercised it and you shouldn’t exercise 

it, so why have it? 

Thank you, Madam Chair. 

Mrs. KELLY. [Presiding] Thank you. Mr. Bachus. 

Mr. BACHUS. Thank you. Thank you, Madam Chairman. The first 

thing I would like to say, if you look at Mr. Hamilton’s testimony, 

you come over to the seventh page, which are his conclusions. I 

want to commend all three of you gentlemen because his conclusion 

is that intelligence and law enforcement efforts have worked. That 

is what his conclusion of the report is, that what you have been 

doing has worked. I think we all when we say that, everybody says 

we have got to continue to be diligent. I think we all realize that. 

I don’t think there are any disagreements there. If you read his 

testimony, if you read the monograph, if you read the 9/11 Commission, it tells you bottom line, we have been very effective at degrading al Qaeda. 

For that reason, I want to introduce for the record and ask unanimous consent to introduce for the record about three pages of 

quotes from the 9/11 Commission testimony, their report and also 

their monograph detailing excellent U.S. Government successes in 

the counterterrorism financial field. I would like to introduce that 

without objection. 

Mrs. KELLY. Without objection, so ordered. 

[The following information can be found on page 140 in the appendix.] 

Mr. BACHUS. I would also, and I don’t know that anyone has said 

this to date, but this committee has performed 12 full committee 

and subcommittee hearings on 9/11. What we have found, number 

one, is that our U.S. financial services industry has provided law 

enforcement and intelligence agencies with extraordinary cooperation. That is exactly what the 9/11 Commission said. They said our 

domestic financial institutions have given extraordinary support to 

our efforts to get information. What they also say is that what we 

have done—in fact, Mr. Hamilton said he could offer no need for 

additional legislation. 

With that, I would like to address some questions to the Treasury Department, if I could. Mr. Levey, the 9/11 Commission, they 

asked you to do certain things and I think they are validating what 

you have done. That is my idea, because they say three things. 

One, that you should focus on the full range of tools to bring to 

bear on the threat of terrorist financing. Isn’t that what the government and Treasury is doing today? 

Mr. LEVEY. That is certainly what we are trying to do, sir. That 

is exactly right. We are working together with agencies around the 

government to determine what in each circumstance is the appropriate tool to be exercised. I think the 9/11 Commission—I appreciate very much their recognition that we have improved our strategies and are now on the right track in that respect. 

Mr. BACHUS. They characterize your efforts as being very successful. I don’t know that I have read that anywhere. 

Second, Mr. Hamilton today in their report stresses that you 

should push the international community through the financial action task force and other mechanisms. Isn’t that exactly what 

Treasury has been doing? 

69

Mr. LEVEY. Indeed they have. It is easy for me to give Treasury 

credit since almost all of this work occurred before I got there, so 

I don’t feel that it is immodest in any way. They have done an excellent job with respect to pushing for international cooperation 

through the FATF. There is more work to be done, particularly in 

the implementation side, as Chairman Hamilton said, but this has 

been, I think, one of the areas that we can take the most pride in. 

Mr. BACHUS. As far as those successes, in fact, they recognize 

those successes, but also the CRS report to Congress on the 9/11 

Commission recommendation actually goes into about two pages of 

successes where you have been able to enlist numerous countries 

and their compliance has increased dramatically. And you have 

also established standards through the financial action task force, 

through the IMF, through the World Bank. 

Mr. LEVEY. That is all true. I would like to, if I could just say 

that that is in some respects an accomplishment of the Treasury 

Department but that is also something that the State Department 

and the Justice Department play an important role in, and they deserve a lot of the credit there. 

Mr. BACHUS. The TFI office, is that the mechanism you plan to 

use to deal with the issues——

Mrs. KELLY. The gentleman’s time has expired. If you have a 

question, please finish and then we will have a short answer. 

Mr. BACHUS. Thank you. 

Mrs. KELLY. Do you have a question? If you want to finish your 

question, please do and then we can have a short answer. 

Mr. BACHUS. The TFI office, is that the mechanism that you plan 

to use to deal with these issues over the long term? 

Mr. LEVEY. Yes, indeed. This is an attempt to set the Treasury 

Department up for what is going to be a long-term fight and we 

will be now structured to take that on. 

Mr. BACHUS. I think as you said in your testimony, we have all 

said, the fact we have been successful today does not mean we 

don’t need to redouble our efforts in the future, because there is a 

lot in this report that says it is going to be a tough job. One of 

them is that they don’t need that much money. So we may be dealing with small amounts of money and how do we stop that without 

sacrificing our own constitutional rights and our own freedom of 

movement. 

Mrs. KELLY. The gentleman’s time has expired. Mr. Israel. 

Mr. ISRAEL. Thank you, Madam Chair. I have two questions, one 

for Mr. Levey, and one for my friend Mr. Libutti. 

Mr. Libutti, many of us are very deeply concerned with cyber 

vulnerabilities of financial institutions and many of us on this committee have made several visits to the New York Stock Exchange, 

for example, as I did. On one of my trips, I had a rather substantive meeting about the issue of cyber vulnerability at the stock 

exchange and the broad array of technologies and systems that 

they use to protect against. 

My question is what level of consultation and cooperation do you 

have with institutions like the New York Stock Exchange and other 

critical financial institutions? 

And my second question to you, sir, is, my understanding, and 

it may be a misinformed understanding, is that many of these sysVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
70

tems and technologies are proprietary, so you have different financial institutions protecting their data with systems and technologies that they are not particularly willing to share with their 

competitors. How do you kind of integrate that? What do you do 

to move the whole process forward so that these technologies and 

protected systems aren’t becoming too cumbersome and conflicting 

but move the entire financial community forward? 

Mr. LIBUTTI. Sir, I appreciate the question. I would respond first 

by telling you that basic leadership 101, a spirit of cooperation and 

trust, has to be developed out of my front office, as it has been long 

before I got there, by Secretary Ridge. That is, a reachout on a continuing basis with the leadership in the private sector including 

cyber. 

In terms of our relationship and ongoing interface with the New 

York Stock Exchange and the leadership of other financial institutions in New York, my assessment of that has been terrific and it 

has been highlighted by the terrific interaction over the last 2 or 

3 weeks. 

You asked a question also about, or alluded to the notion that 

we need to be pretty sensitive to and look at ways that we deal 

with private industry and perhaps even those who compete within 

the private industry. There is a program called a PCII which is an 

opportunity in plain English that protects those industries from 

sharing critical vulnerabilities with us that we hold, in again plain 

English, close to the chest. It is in the law and we probably, I 

would say, surprisingly haven’t received a great deal of input 

across the private sector. Perhaps they are testing the system. Perhaps they are wondering how indeed we will administer it. But the 

handful of requests, that is, information that has come to us that 

is sensitive and vulnerable, we are working on. I have been in the 

organization now a little over a year and I am surprised we haven’t 

gotten more folks coming forward sharing that information. Does 

that answer your question? 

Mr. ISRAEL. It does. Thank you, Mr. Libutti. 

Mr. Levey, when this committee marked up the antimoney laundering legislation that was later rolled into the PATRIOT Act, I 

had offered an amendment that was accepted by the Chairman and 

by the committee that would have included the use of charitable 

organizations, not-for-profit organizations, and nongovernmental 

organizations in a study of issues specifically related to the financing of terrorist groups, and the means terrorist groups use to transfer funds around the world and in the United States. 

In fact, Vice Chairman Hamilton in answer to my question before, said that we don’t see any evidence that the Saudi Government has actively financed terror, but it is indisputable that charitable organizations throughout the Middle East have been financing terrorist organizations and activities. While that amendment 

was accepted by the committee, it was not included in the final legislation. 

Do you believe that the Treasury Department ought to be formally studying the use of charitable organizations in the financing 

of terror? Would that be useful, do you believe? 

Mr. LEVEY. I think that obviously the problem of terrorist financing through charities is one that is clear and I think maybe even 

71

more clear by the 9/11 Commission report because it makes—it 

tells us that the majority of the money raised for al Qaeda came 

through organizations like this. I think it is fair to say that there 

is an awful lot of study going on, so I am hesitant to take on a formal burden even though I think there is a lot of study already 

going on about how different charities are being used and have 

been used in the past to fund terrorist activities. 

Mr. ISRAEL. Is the Treasury Department to your knowledge actively studying the role of charitable organizations and money 

laundering through charitable organizations with respect to terror? 

Mr. LEVEY. I believe there is a fair amount of work going on in 

that respect and that the IRS is doing work to update the types 

of information that they are getting from organizations before they 

get tax-exempt status and that sort of thing. I am not sure I am 

familiar with all the details but I know that there is a significant 

amount of work going on. 

Mr. ISRAEL. My time is running out, but if you would be kind 

enough to look into that and respond with more detail, I would appreciate it. 

Mr. LEVEY. I would be happy to. 

Mr. ISRAEL. Thank you, sir. Thank you, Madam Chair. 

Mrs. KELLY. Thank you, Mr. Israel. 

It is now my turn to ask questions so I am going to ask a question about whether or not you expect Saudi Arabia to actually establish a FIU anytime soon. I have in my hand a press release 

from the Royal Embassy of Saudi Arabia. The reason I am asking 

a question here is that they are very fond about talking about their 

decision to establish a FIU but they still don’t have one almost 2 

years later. A press release but no action. I am concerned that this 

is another case of Saudi backsliding. 

This also leads to a broader issue that we have to consider, and 

that is the whole issue of international cooperation. The 9/11 Commission staff monograph indicates that antiterrorist financing efforts had little success without help from our foreign counterparts. 

The Independent Task Force on Terrorist Financing recently put 

forth a proposal aimed at improving these efforts. Among its recommendations were that Congress establish a Treasury-led certification regime on terrorist financing that would report annually to 

Congress the efforts of countries to combat terror funding and 

would have the ability to impose sanctions on countries that failed 

to perform up to standard. 

In light of the areas where we find either episodic assistance or 

no assistance whatsoever, do you think this is a proposal that Congress ought to be considering? I think the proposal rightly emphasizes the central role of Treasury in this effort. I would like your 

comments, Mr. Levey. 

Mr. LEVEY. I guess you have a couple of questions there. Let me 

start on the certification regime that is suggested there with Treasury having the authority to designate countries. I think that that 

is something that has a lot of complications associated with it that 

we would have to proceed cautiously on. I think, just listening to 

Vice Chairman Hamilton this morning, we have a situation like 

Pakistan where perhaps on this issue they are not doing everything 

that we would like them to do in terms of their financial regime, 

72

but obviously with respect to terrorism generally, they are an absolutely essential partner. These sorts of certification regimes have 

difficulties and the PATRIOT Act already gives the Secretary of the 

Treasury at least some authority in this respect under section 311 

to not only designate certain countries and jurisdictions as primary 

money laundering concerns, but what is particularly effective there 

is simply the threatened use of 311 sanctions being a very effective 

tool to get people to move. 

With respect to the Saudi Arabia question, I would have to say 

I agree with what I think your sentiment is, which is that this is 

an instance in which there was an indication that they would be 

moving to do something we want them to do but it hasn’t happened 

yet. Obviously as you know very well, there are lots of areas on 

which they have made significant progress, progress that is very 

valuable to us, and I think Chairman Hamilton alluded to that, but 

there are also situations where they need to move further and we 

need to continue to push them. The FIU situation is one of them. 

Another is that while they have announced a regime to monitor 

charities in the kingdom, it doesn’t cover certain organizations that 

we have long thought to have terrorist financing concerns. 

Mrs. KELLY. Thank you. The committee is familiar with the ability of FINTRAC, the Canadian Financial Intelligence Unit, and 

AUSTRAC, the Australian FIU, to receive international wire transfer data electronically. Wouldn’t this be helpful for our FIU and 

Treasury, the FinCEN, to be able to have that authority, and what 

can you tell me about that? 

Mr. LEVEY. I do think—this is something that I know Bill Fox 

is looking at very carefully. It does frankly appear to me to be 

something that would be useful. I am a little hesitant to jump in 

without knowing the details. It does seem to me there may be a 

scaleability problem in terms of what something Canada and Australia are able to do; whether we, given the volume that we would 

have to deal with, would be able to just implement the same thing. 

But it is certainly in concept an idea that I think we should be pursuing. 

Mrs. KELLY. If you need more money to get the job done electronically, I think we must address that here in Congress and we 

need to do it rapidly. 

I want to go to another question. The 9/11 Commission’s monograph reveals in detail how the hijackers received money from wire 

transfers, cash, travelers checks that were carried in credit or debit 

cards for overseas bank accounts. We know that credit cards, debit 

cards, ATM cards, store value cards, can be used to access foreign 

banks and conduct transactions. How do we address this issue? 

Mr. LEVEY. You point out a very difficult problem. This is, I 

think, part of the problem, that we are also dealing with very small 

amounts of money. The amounts of money that were going to these 

hijackers are in the hundreds or perhaps thousands and not the 

volume of money that our current antimoney laundering regime is 

designed to detect. What we need to do, frankly, is work with the 

private sector, who has been very cooperative with us, to figure out 

ways where we can share information with them to help them better detect terrorist financing. 

73

I point out one possibility there is through the Bank Secrecy Act 

advisory group where Bill Fox already has this organization set up 

by the Congress which has FACA exemption that is specifically designed, I think, to encourage just that kind of frank discussion between the government and the private sector about how best to 

share the information that is needed in this context. 

Mrs. KELLY. Do either of the other witnesses have a response to 

that comment, to that question? 

Thank you. My time is up. Ms. McCarthy. 

Mrs. MCCARTHY. Thank you. Again I thank you for sitting 

through this with us. 

Let me say something about the PATRIOT Act. I voted for it. 

One of the things that I happened to agree with on the sunset part 

of it is according to the 9/11 Commission, 9/11 happened because 

there were failures on every single level, including Congress, because we didn’t have the oversight. And so I also think that by having a sunset, it makes us, all of us in every one of our committees, 

have the oversight to see what is right, what is wrong, and how 

can we improve it. I think that the majority of Members feel that 

way. 

Explaining that to your constituent back home, that is another 

thing. Which brings us up to the point of where the small rural 

banks are not getting information that our larger corporation 

banks are getting. If we follow patterns, those that are coming in 

here to do harm to us, if I was them, I certainly wouldn’t go to a 

large bank. I would go to some local little bank that wouldn’t be 

noticed that much. We have a lot of work. 

I guess that follows up with my other question which a couple 

of members already alluded to. The lone person out there, the one 

guy that is trying to do harm to us, and again just following the 

small amounts of money that are taken out and tracking on that, 

hopefully you will reach out to those rural banks, the smaller 

banks. They might be able to think outside the box. Because all of 

us—I am sitting here thinking we are giving away, because it is 

going to be on C-SPAN, everything that we are doing. Sometimes 

I wonder. I believe in open government, but sometimes do we give 

them too much information on what we are doing, which is the way 

we live and we don’t want to give that up. But, gosh, sometimes 

I sit here and think all the information you are giving us, you are 

also giving to the world. Don’t think they are not listening, thinking how are we going to outfox them. With that, I will open it up 

to any responses. 

Mr. LEVEY. I thought only my mother was watching, but maybe 

not. 

Mrs. MCCARTHY. You would be surprised. I thought the same 

thing, that people weren’t watching. But even when we are giving 

speeches at 11 and 12 o’clock at night on the floor, we get e-mails. 

You are on prime time somewhere in this country. 

Mr. LEVEY. Let me just say that you have highlighted a difficult 

problem. One thing that we are trying to grapple with, that this 

is not something where we needed to be 3 years ago but we are 

making great improvements. One thing that is being done, I think, 

to give the kind of feedback that banks are looking for in terms of 

suspicious activity reports they are filing is that FinCEN is putting 

74

together their SAR activity review. They basically do a detailed and 

sophisticated analysis of the SARs that are filed. This is one that 

just came out this month. It is excellent. Not only is it I think substantively very good, but it invites the private sector to come back 

and say, actually it wasn’t helpful in this respect or you need to 

do more of this and more of that. And that is just the kind of cooperative relationship with the private sector we are trying to build. 

I know that that is really the centerpiece of what General Libutti 

is trying to build. I think we have a ways to go in this respect, but 

this is something that both the Department of Homeland Security 

and we are trying to do systematically. 

Mr. LIBUTTI. My response to your fine question is really in two 

parts. One, education. Education needs to be applied against large 

institutions and small ones as well. There is no luxury in the little 

guy—while very important in that community, doesn’t need to 

know how to deal with challenges and vulnerabilities to that system. I think education that starts with senior leadership in the organization or from the bottom up asking for help is absolutely 

paramount. I think that covers it. Education and accepting the fact 

that the scope of attack or vulnerability isn’t simply going to be on 

the largest facilities. 

Mrs. MCCARTHY. Could I follow up with one quick question? 

When I think about college students and getting false ID, that is 

the easiest thing to do in this country. Ask any college kid. Actually, ask any high school kid. If we can’t stop high school kids from 

getting false IDs, how are we going to stop—we give false IDs 

where it is a positive-negative ID. 

We have already done testing through the ATF on trying to obtain illegal guns out there. So how are we going to address this 

issue with so many people coming in here where it is easy? I can 

go to my flea market and get a whole new identity. How do you 

stop something like that? 

Mr. LEVEY. First of all, I hope the statute of limitations has run 

on my high school, obtaining a false ID. But you are right, it is a 

very easy situation. But I think Congressman Hamilton pointed out 

one thing we should be doing, which is starting to look at national 

standards for identification. This is a bit outside my lane in my 

current job, but I know there is an ongoing effort within the executive branch both before and in response to the 9/11 Commission report. 

Mr. SABIN. With respect to the questions, first on tradecraft of 

al Qaeda and other terrorist groups, they are monitoring us. They 

are—as evidenced in the terrorist training manual that was recovered in searches, they are reviewing what we are doing and trying 

to change, and we are trying to stay two steps ahead of that. 

With respect to the rural bank or the large bank that needs that 

feedback from the government, one thing the Justice Department 

did was post-9/11 set up the antiterrorism advisory councils, so you 

have the Joint Terrorism Task Forces that are operational components with FBI and an assortment of investigatory agents looking 

at action-oriented operational concerns. The antiterrorism advisory 

councils headed up by the U.S. attorney in each district with a litany of different agencies to share information, to undertake training and education and to assist in evaluating critical infrastructure 

75

has, a component of that, the financial services sector. So small 

and large banks in that community are part of those, what we call 

ATACs, that can share information, obtain feedback, use the guidance that Treasury posts on its Web site to disseminate and therefore be more informed and therefore understand what its government is doing and how it is using the data that is being provided 

through suspicious activity reports. 

Mrs. MCCARTHY. Thank you. 

Mrs. KELLY. Thanks, Ms. McCarthy. Mrs. Biggert. 

Mrs. BIGGERT. Thank you, Madam Chairman. My first question 

is for Mr. Sabin. In the report, the 9/11 Commission states that the 

government should expect less from trying to dry up terrorist 

money and more from following the money for intelligence as a tool 

to hunt terrorists, understand their networks and disrupt their operations. And we have been talking about that a lot today, but my 

basic question, though, is who in the U.S. Government decides either to freeze or to follow the money? 

Mr. SABIN. Through the PCC that was referred to, the policy coordinating committee, earlier today. You have on a case-by-case 

basis the weighing of the equities, on what stage should you designate, on what stage should you go operational and at what time 

should you charge or do search warrants or pursue specific investigatory avenues. So that balancing act and those weighing of equities occurs on each of the different investigations or cases. If it ripens into an actual criminal prosecution, so be it, but the idea is 

prevention rather than actual prosecution. So in certain instances, 

there will be a designation without a criminal prosecution. In others, vice versa. So those are where that communication that was 

so lauded and applauded in the Commission report and in the 

monograph is being actually undertaken by government officials. 

Mrs. BIGGERT. Is there any danger or is that a change in policy 

that we have been dealing with our international partners? Are we 

sending a different signal when we are kind of going in between 

the two or changing that? Are they going to be concerned about us 

changing the track? It seems that we were doing the freezing of assets and suddenly we are moving to something else. Is that a problem with anyone internationally? 

Mr. SABIN. Others may speak to that more directly, but it is 

going to be important to have a clear message and for those connections and relationships to be both formal and informal so that 

people understand what we are doing and why we are doing it, to 

articulate that through the appropriate intelligence channels or 

cop-to-cop channels or prosecutorial channels or the military channels or the diplomatic channels, so that people understand what we 

are doing and what is our end game. That was one of the key 

things that was addressed in the report, was have an end game, 

have a strategic view of where you want to go from where you are 

presently, and how you can seek to accomplish that with all the 

government agencies contributing to that process. 

Mr. LEVEY. Can I just make one comment? 

Mrs. BIGGERT. Yes. 

Mr. LEVEY. Which is that I totally agree with everything Mr. 

Sabin said. I don’t think that there is any danger of confusion out 

there. The message is we are going to use all of our tools and use 

76

them all as they are most effective. But I want to make one comment, which is that it is not an either/or. I think Congressman 

Hamilton pointed this out, at least at one point. It can often be a 

both/and, where that is the best approach, where we can both designate and prosecute as we have done in Holy Land, that is even 

more effective. And we will continue to do that when we have the 

chance to. 

Mrs. BIGGERT. Then continuing on that line, Mr. Levey, we have 

got a high level of cooperation from other nations in really tracing 

the terror finance, once the funds leave the U.S. financial system 

or before they enter it. Then the process gets much more difficult. 

Can you talk a little bit about the sort of tools that would make 

that easier for us? 

Mr. LEVEY. One of the things—I think what you are referring to 

is that we need to make sure that in order to track the money, that 

we are also able to track it abroad. We certainly have——

Mrs. BIGGERT. Either before it gets here or before it leaves the 

country. 

Mr. LEVEY. Right. We do have lots of mechanisms for doing that. 

We have lots of people in the government working on that issue in 

particular. One of the things I can comment on is that we are 

building relationships through our financial intelligence units 

around the country, around the world I should say, where FinCEN 

is our representative here in the United States, but then there are 

financial intelligence units in other countries around the world to 

try to exchange that sort of information as quickly as possible, because we have to be—we have to be quick if we are going to be effective. 

The CHAIRMAN. [Presiding] The gentlewoman’s time has expired. 

The gentlelady from California. 

Ms. WATERS. Thank you very much, Mr. Chairman. I would like 

to thank our witnesses. My head is just swimming from all of this 

interagency cooperation that we have and I am very pleased that 

people are cooperating so well. But I think that we all agree that 

thus far we are only able to identify relatively small amounts of 

money that is supporting terrorism, and even with the new laws 

under the PATRIOT Act where we can indict those who are substantial supporters, it is still very limited. 

Some questions were raised here today that have not really been 

dealt with. I and others continue to raise questions about the charitable organizations and the Saudi government’s relationship to 

them, and I for one believe that we are not able to penetrate just 

how big that is because the Saudis are our friends for a lot of reasons, close to this administration, and we have oil interests and 

other kinds of things. And I think that this cozy relationship is not 

allowing us to deal with the Saudis in the way that we should be. 

We will eventually get to it but it is going to be late in the game. 

Secondly, Congresswoman Kelly asked about the blood diamonds. 

She asked about Liberia and Charles Taylor which I am led to believe is a source of funding. We have not talked about tanzanite, 

tanzanite that is mined mostly in Africa that supposedly has been 

supporting Osama bin Laden for a long time. We say nothing about 

the drugs and the poppy fields in Afghanistan. You guys can tell 

us how great friends we are with Pakistan all you want. That borVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
77

der between Pakistan and Afghanistan, everything goes on. That is 

where all the dope dealing and the black market smuggling and 

crossing of the borders with the Taliban and al Qaeda and everybody else is. God bless Mr. Musharraf. I think he throws us a bone 

from time to time, but I am not convinced that there is any great 

effort to deal with terrorists. Are the madrassas still going on? The 

schools are still there. Are they still being funded by the Saudis? 

Yes, they are. That is where all the fundamentalism and the hatred is taught. 

Here I guess I am appreciative for the efforts that you make, but 

nobody is talking about the substantial terrorist funding that come 

from those sources that we have alluded to. And, in addition to 

that, where does the money come from to purchase the surface-toair missiles, the grenade launchers, the AK-47s, the A-16s? Let’s 

talk real money and let’s talk real support for terrorism, and let’s 

talk about why it is difficult to get at those sources. Until we face 

up to it, the interagency task force will be chasing each other for 

a long time. Anybody can respond. 

Mr. SABIN. I will start. With respect to alternative remittance 

systems and the ability to fund through areas that would include 

drugs or weapons or infant formula, we are reviewing—there are 

GAO studies that confirm that, about the government efforts to review and address, including FBI investigations in that regard. We 

have brought cases that relate to—in both undercover and other 

types of criminal prosecutions relating to, for example, in Colombia, 

the FARC and the AUC, both foreign terrorist designated organizations. 

Ms. WATERS. If I could interrupt you for just one moment. Just 

tell me about the poppy fields that are flourishing in Afghanistan 

and the fact that we have Karzai in Kabul and we kind of watch 

him to make sure they don’t kill him, but the Taliban and the warlords and everybody else are in control and we just turn a blind 

eye because we can’t go in there and disrupt the cultivation, the 

growing of these poppy fields, because we are relying on that 

money to support that economy and we don’t want to make enemies over there. Let’s just talk about that money. 

Mr. SABIN. I am going to stay in my lane in terms of the Justice 

Department. But in terms of the 9/11 Commission report, what it 

found was that there was not drug trafficking funding for Osama 

bin Laden or al Qaeda, that it was linked to the Taliban but not 

to bin Laden. 

With respect to Saudi charities, we are following the leads—I am 

a career prosecutor. We look at the facts, we look at the law and 

we try and achieve justice and we follow the leads where it takes 

us. In terms of after the May 2003 Riyadh bombings, the cooperation that has been provided to the FBI and to others that are seeking to look at those different charitable organizations have been 

most meaningful, as stated by Mr. Hamilton this morning. 

In terms of the conflict diamonds issue that you brought up, that 

is a matter that was referred to the Justice Department, it is under 

investigation and I would refer and echo Mr. Hamilton’s comments 

about the fact that to date nothing has been demonstrably linked 

between that and actual criminal charges being able to be brought, 

but we are currently investigating and pursuing those leads. 

78

The CHAIRMAN. The gentlelady’s time has expired. The 

gentlelady from Oregon, Ms. Hooley. 

Ms. HOOLEY. Thank you, Mr. Chair. I want to thank all of you 

for being here today and all of the hard work we know you do every 

single day. I would like to quickly rehash the recent case of the 

Riggs Bank and their business dealings and possible money laundering and terrorist financing. Based on Senate banking testimony, 

FinCEN was not made aware of any bank secrecy problems by 

Riggs until 6 years after the OCC first noticed such problems. If 

FinCEN was not made aware of these problems until 2003, 6 years 

after they were first noticed, I would like to know when exactly 

were other terrorist financing investigators and the Justice Department and Homeland Security notified so they could quickly investigate Riggs’ situation and its impact on our national and homeland 

security and, frankly, were they ever notified? 

The second question is as the Riggs case points out, the lack of 

sharing of information even within the Treasury, not to mention 

with other Cabinet agencies, what can we do to fix this? 

Third, how much progress has the Department of Treasury and 

its regulatory agencies made incorporating current generation information technology to identify suspicious individuals, companies, 

and financial transactions and connect the dots in its antimoney 

laundering enforcement activities? And the last question is, we 

have talked a lot about the PATRIOT Act, that parts of it were 

sunsetting. We are going to be looking at reauthorization for that. 

What changes do you think we need to make? 

Mr. LEVEY. Let me try——

Ms. HOOLEY. You can start anywhere you want on any of those 

questions. 

Mr. LEVEY. How about I will take the easy ones and leave the 

hard ones for my colleagues. Actually none of those are easy, because the Riggs situation is a very serious problem. I don’t want 

to make light of that at all. What we saw at Riggs, I think everyone agreed, was a—I think they used the word themselves—a failure of oversight. What we don’t know is whether what we saw at 

Riggs is just a chip of ice or whether it is the tip of an iceberg, because we don’t have the information within FinCEN and main 

Treasury to know what our banking regulators are finding out 

there. 

So in response to that, what we are doing to try to correct that, 

this was something that the Secretary and the Deputy Secretary 

already announced, is that we are negotiating arrangements with 

the banking regulators to make sure we get the information into 

FinCEN on Bank Secrecy Act compliance that they are finding out 

in the field, and we are learning about all significant violations of 

the Bank Secrecy Act reporting requirements. FinCEN has set up 

its own unit to deal with this issue exclusively. We need to get that 

information to determine whether we have a widespread problem 

out there. I think there is a certain amount of confidence that 

Riggs was an outlier, but we certainly can’t guarantee that until 

we get that information in, and we are going to do that. 

With respect to the part of your question about using sophisticated technology to deal with—to identify suspicious transactions. 

Actually I think the monograph does a good job of explaining what 

79

we do at the Treasury Department on this issue. The private sector 

has a very sophisticated ability to recognize anomalies in transactions of its customers and they generally do a good job of detecting suspicious transactions in that context. But to be clear, that 

context is designed to detect money laundering transactions. This 

is what I tried to allude to at the beginning of my testimony, and 

which the monograph also points out. That system, while it is effective for the purposes it has been designed for, is not the answer 

to the question about detecting terrorist financing. 

I will let Barry respond to the other questions. 

Mr. SABIN. With respect to Riggs, that is a short answer. It is 

pending investigation. I can’t comment further. With respect to proposed legislation, I do have some suggestions building upon some 

of the questions that were asked of Mr. Hamilton this morning. I 

would ask this committee and the Congress to pursue legislation 

presently identified as H.R. 4942 which would add a section 2339 

D to the material support statutes that I talked about in my opening remarks, that would enable military-style training-camp activity, training abroad in terrorist training camps, to be clearly a Federal criminal offense. Right now we use it within the meaning of 

material support under 2339 B, to get technical. 

Ms. HOOLEY. That is way technical. 

Mr. SABIN. But it is extremely important. To take it into a larger 

perspective, what the cases that have been brought, we have discussed about here today, you see in the charity cases, in the fundraising cases relating to Palestinian Islamic jihad, Hamas, 

Hezbollah, all emanating from the 2339 B relating to the foreign 

terrorist organizations. 

With respect to the al Qaeda aspects, it is more the providing of 

personnel or the links to the actual training camps that would be 

much easier for us to prove and charge in terms of a clear congressional intent under 2339 D. 

I would also recommend H.R. 3016, which has some technical 

and jurisdictional corrections as presently proposed, as well as increased penalties under the International Emergency Economic 

Powers Act. And also the additional provisions that I mentioned in 

my opening remarks. 

The CHAIRMAN. The gentlelady’s time has expired. 

Ms. HOOLEY. I can’t follow up real quick? 

The CHAIRMAN. Real quick. 

Ms. HOOLEY. It has been 7 years since we discovered the Riggs’ 

noncompliance and it is post-9/11. I am a little troubled about hearing that you have to negotiate with regulators to get your information. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from Texas. 

Mr. PAUL. Thank you, Mr. Chairman. Earlier I spoke about the 

fourth amendment and privacy issues, but I am afraid that is a 

moot point these days and I won’t bring that up and I won’t ask 

you about that because it seems like we have sort of conceded it, 

that privacy for the average American citizen is no longer of much 

concern. But I am concerned about the practicalities. It sounds like 

the more laws we have on the books, the more criminals you are 

80

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 honestto-goodness legitimate search warrant. You are assuming that none 

of these people could possibly have been caught unless we throw 

the fourth amendment out. That, I think, doesn’t necessarily follow. 

My question for the three of you has to do with the national ID 

card. Because in the post-9/11 atmosphere, the ease with which the 

PATRIOT Act was passed, legislation which had been proposed for 

years just got stuck in and sailed right through, this post-9/11 atmosphere now has set the stage for the national ID card. So there 

are a lot of people concerned about it. But once again since security 

or the pretense at gaining security is far superior to the burning 

desire for liberty, I think the national ID card is on the agenda and 

I think the report certainly has indicated that. So I would like to 

know what you think about the national ID card and how necessary is the national ID card for you to pursue your responsibilities? 

Mr. SABIN. I will start. With respect to the fourth amendment, 

both in word and in deed, we are respectful and sensitive to using 

it appropriately, making sure that we execute rule 41 criminal 

search warrants, going to a United States district court judge and 

making sure that we have probable cause in order to obtain limited 

amounts of material that are appropriate in order to pursue that 

particular investigation. Whether that is through a search warrant 

or through electronic interceptions, we make sure that we satisfy 

the appropriate legal standard and don’t abuse that authority or 

81

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 shortterm and long-term mechanisms, as was discussed this morning, 

the ability to exploit and use that information appropriately, by 

getting the experts both within the government and outside the 

government to educate us about how to use that information and 

how to make it most meaningful to us in an action format, whether 

that is providing guidance to the intelligence or law enforcement 

folks, to make sure that it is not just paperwork stacking up but 

it is materials that can be used and used effectively and timely. 

In terms of the thorny privacy issues and the national identification card, I don’t believe the Justice Department has a specific position. I will stay in lane as opposed to reaching out and advocating 

one position or another. I can tell you that we are seeking to understand who the individuals are and using our tools that Congress 

has provided us to understand the movement of moneys, the movement of individuals, the travel that occurs, and understand where 

they have traversed either in terms of the persons or their materials. 

The CHAIRMAN. The gentleman’s time has expired. The gentleman from California, Mr. Sherman. 

Mr. SHERMAN. Thank you. I would briefly comment to the gentleman from Texas that there are concerns between security and 

privacy but they don’t rise quite to the high level as security versus 

liberty. That is to say, it is possible that in this war against terrorism, things like my donations to various causes the President 

disagrees with might become public, but my right to make those—

my preference is to keep those private, but my right to make them 

is not at stake. The privacy interest is there. 

Addressing our witnesses, we have seen a great report come out 

of the 9/11 Commission. They, however, in answering questions, 

raise as many additional questions as they answer. They provide 

some recommendations with some specificity. There are other recommendations that need to be fleshed out. Gentlemen, can you 

think of a reason why we wouldn’t give them another year or two 

to give us another volume and to continue their good work? Anyone 

want to answer that one? 

Mr. LEVEY. Just speaking for—I really don’t have a position on 

that. I think that is a decision for you. 

Mr. SHERMAN. You are here to represent the administration. 

Anything we do would have to be signed by the administration. We 

get statements all the time of what the President’s senior advisers 

would advise him to do. You are the President’s senior advisers. 

Tell me now, do we shut them down or do we get a volume two? 

Mr. LIBUTTI. I think it is premature to——

Mr. SHERMAN. They are dead. Is it premature to treat the patient? We are reviving the recently deceased here. 

Mr. LIBUTTI. Sir, with all due respect, I am going to treat the patient and I am going to be respectful. 

Mr. SHERMAN. Let me go on to another question. 

82

Mr. LIBUTTI. Sir, if I may, please. I think that very soon there 

will be a package forwarded to the Hill leadership to be reviewed. 

I think the results of that review will indicate whether it is smart 

or not to ask members of the 9/11 Commission to come forward and 

continue to support the review of that which is most important relative to national security. As I said, I say this with all due respect, 

sir, it is premature for me to make that comment now. I think it 

is smart to consider it as an option. 

Mr. SHERMAN. I would hope that this would be bipartisan. I 

know that the administration didn’t support the creation of the 

Commission. It would certainly do a lot for this country if the administration would support its continued existence or revitalization. 

We had a huge controversy in this Congress about a particular 

provision of the PATRIOT Act dealing with access to library 

records. Of course, had we removed that element of the PATRIOT 

Act, you could still use grand juries. You could still use search warrants. There are plenty of other ways to get library information. 

Can you tell me, how many times was the PATRIOT Act provision 

dealing with library and bookstore records actually used in the last 

year and how many of those times would it have been impossible 

to go through the additional work of using our more general information-gathering law enforcement provisions? 

Mr. SABIN. I believe sometime—a year ago, the number was declassified and promulgated as zero. Section 215 had not been used 

with respect to libraries. Libraries is not mentioned by name in the 

PATRIOT Act and grand jury subpoenas had previously been used 

in a number of instances. But that is a number that had been publicly disseminated. 

Mr. SHERMAN. As you can see from my interchange with the gentleman from Texas, I am willing to give you folks tools even when 

it causes me some concerns on the privacy issues. But if we give 

you a tool and it is not terribly necessary and it causes incredible 

consternation and a feeling of a lack of privacy, perhaps that is a 

tool that we should consider suspending and give you some other 

tools that maybe you would use more often. 

Moving on, we have got—in trying to deal with sexual predators 

on the Internet, we have local law enforcement people go on line 

and pretend to be confused, vulnerable adolescents. Now that we 

have destroyed the Taliban sanctuaries, a lot of what al Qaeda and 

others are doing is on the Internet. Do we have the capacity to 

have people go on line, set up Web sites that look like they are 

jihadist, or answer and communicate on Web sites that are 

jihadist? Do we have the people who have the perfect knowledge 

of Arabic, the understanding of the Koran and how it is being interpreted, the ability to speak the rhetoric of extremism? Do we 

have the people to go on line, just as we have local police officials 

that do an excellent job of imitating the vulnerable adolescent and 

are able to trick the predators? Because it occurs to me that just 

as we are worried about sexual predators, these terrorists are the 

major nonsexual predators that we have. 

The CHAIRMAN. The gentleman’s time has expired. The panel 

may respond. 

83

Mr. SABIN. My understanding is that yes, the FBI has identified 

that issue, is acting upon the issue. Indeed a recent case in Connecticut, Babar Ahmed, related to the understanding of the use of 

the Internet for violent jihad activities to recruit and fund activities 

over in Bosnia and Chechnya. 

The CHAIRMAN. The gentleman from North Carolina. 

Mr. WATT. Thank you, Mr. Chairman. 

Mr. Levey, I was struck by your analysis that differentiated between terrorism financing and money laundering. 

Over the years, we have come up with fairly good systems for 

setting some protocols for what would identify money laundering 

activities. You indicated that terrorism financing, instead of looking 

for large transfers, is like using a microscope to look for small 

transfers. 

I think the concern that raises is, there are some privacy and individual rights issues that come into play—much more front and 

center in that kind of microscopic look than if you are looking more 

globally at larger transactions where the—getting to the identification of a particular individual is triggered only by big transactions. 

Yet, neither you nor Mr. Libutti made any reference in your testimony to the part of the 9/11 Commission’s recommendations dealing with individual liberties and privacy. Mr. Sabin gave me about 

one sentence of it—and his was a passing glance—let me be politically correct. 

So I am wondering whether you could discuss just for a little bit 

some of the unique problems of privacy and individual liberties 

that are current in this setup. 

Mr. Libutti, if you could follow up, you indicated in response to 

somebody’s question, one of the last two or three questioners, that 

there is some legislative package about to come forward from the 

administration that will deal with the most important national security issues, again failing to acknowledge that that will have any 

of the recommendations that the 9/11 Commission has made about 

the establishment of a commission that would oversee individual 

liberties and privacy. So I am wondering whether any of those 

parts of the recommendation are likely to be in that, based on the 

discussions that you all have had up to this point. 

Let me go to Mr. Levey and then Mr. Libutti, and since you mentioned—I will let you off the hook. I won’t even——

Mr. SABIN. I will engage. That is okay. 

Mr. WATT.—ask you to address it. At least you gave it lip service. 

And I want to ask another question. I just want them to deal 

with those two issues. 

Mr. LEVEY. Well, you have raised a serious issue, and I feel like 

I should have gotten off the hook too, because in my testimony, I 

also pointed out that with respect to the problems posed by looking 

for the small transactions that involve terrorist financing, that we 

need to be sensitive to the privacy. 

Mr. WATT. That must have been in your written testimony. 

Mr. LEVEY. It was. 

Mr. WATT. I don’t think you mentioned it in your oral testimony. 

Mr. LEVEY. I will learn for next time. 

But this is a serious issue, and it actually gets a little bit to the 

comments that Mr. Paul was talking about earlier, when we are 

84

talking about looking for essentially, you know, small transactions, 

clean money. And we have to figure out how we are going to—how 

we are going to put in a system that we can have a chance of detecting it. There are privacy concerns that are raised, and I think 

the monograph goes through some of those; it discusses them. 

I think that this is an issue that we need to study, and we need 

to work with the private sector that also, of course, has the interests of their customers in mind. We have to work together with 

them to come up with a solution. It is not going to be easy. We 

have to, perhaps, get together with them and give them a little bit 

of a description of what the needle they are looking for looks like. 

And we have to do that in a way that doesn’t sully the reputations 

of people whose interests shouldn’t be sullied, et cetera. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. WATT. May I have Mr. Libutti’s response? 

The CHAIRMAN. I am sorry. Mr. Libutti may respond. 

Mr. LIBUTTI. Thank you, Mr. Chairman, sir. 

First, on the privacy piece, the Department of Homeland Security 

has designated a privacy officer and has a privacy officer in place. 

And I fully support all comments and actions relative to the Fourth 

Amendment. We need to do that. We need to be smart enough to 

balance security and privacy, and I am with you 100 percent, sir. 

I did that for 35 years in the United States Marine Corps and am 

very proud of it. 

The other business that I alluded to earlier, and if I used the 

word or expression ‘‘legislative package,’’ or that I misspoke, what 

I was saying—we all heard the President talk about the 9/11 Commission, what his intent was, and what I was suggesting, and don’t 

have specific information about, is that I am sure that the folks 

and staff over at the White House, in concert with other members 

and the other agency led by our boss, will have specific actions that 

they would like people to consider. 

And that is the point I was trying to make, Mr. Chairman. 

The CHAIRMAN. The gentleman from Texas, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Mr. Chairman. 

Before asking my questions, I would ask, Mr. Chairman, for 

unanimous consent to submit for the record this document showing 

the security features of the current matricular consular card. This 

document is part of the integral program for the improvement of 

the consular services on March 6, 2002. The Mexican Ministry of 

Foreign Affairs informed us that they have started issuing a new, 

higher security consular identification card called Matricula Consular, Alta Seguridad, or MCAS is the acronym. They began 

issuing the card in 2002. 

The CHAIRMAN. Without objection. 

[The following information can be found on page 182 in the appendix.] 

Mr. HINOJOSA. Thank you. 

Mr. Libutti, it is my understanding that the majority, if not all, 

of the financial institutions for which Homeland Security raised the 

threat level to Orange on Sunday, August 1st, already considered 

themselves as prepared as possible for potential terrorist threats 

and likely were unable to take additional precautions. It is also my 

85

understanding that New York City and Washington D.C., have 

been at threat level Orange since 9/11. 

I assumed this meant that all the businesses and other persons 

and entities located in these two cities should also consider themselves at the Orange threat level. So why did Homeland Security 

and the administration make what appears to be a nonannouncement? The financial institutions could not take any additional precautions. 

Can you answer that? 

Mr. LIBUTTI. Sir, you made a comment relative to additional precautions not being taken, if I understood you correctly. 

Mr. HINOJOSA. Well, they said that they were as prepared as 

they could be. 

Mr. LIBUTTI. Sir, I understand now. I spent a year and a half 

with NYPD and set up the Counterterrorist Bureau in the city. 

And again, as I said earlier, I have been in this job for a year. 

I have also reviewed the casing reports in detail, and I have 

talked to Assistant Secretary Liscouski and Assistant Secretary 

Hughes. One is in charge of intelligence for the Department of 

Homeland Security and the other is in charge of critical infrastructure. 

I have also had conversations with the leadership in the private 

sector in New York, as have my two assistant secretaries. And the 

bottom line is, there were lots of other things that could be done 

both in terms of those sites and improving security, or said another 

way, reducing vulnerabilities, as well as across the financial sector. 

So, my folks, my leadership, not only looked at the sites identified in New Jersey, New York and Washington, but across the entire financial sector, and provided bulletins and information in 

terms of best practices and lessons learned. So there was, in my 

humble view, lots of work that needed to be done. Lots of it has 

been done, and we feel good about that, but as you might suspect, 

there is plenty of work to continue. 

And once you get it in place, once you get a grade during an inspection or review of A-plus, that doesn’t mean that you stop protecting that asset. And we have learned that sometimes the hard 

way. 

Mr. HINOJOSA. I just want to note that I supported Ranking 

Member Sanders’ amendment that would have prohibited the U.S. 

Government from having even more access to private information 

than it already does. We need to ensure that we protect our citizens’ civil rights to as great a degree as possible as we implement 

the 9/11 Commission report’s recommendations. 

After listening to all of the questions and the dialogue that occurred this morning through 2:00, I feel like there is a great deal 

more that we can do, and the recommendations that are in that report are certainly the things that we, as a Committee on Financial 

Services, are going to try to implement as best—as soon as possible. So, I thank you. 

And with that, I yield back the balance of my time. 

The CHAIRMAN. The gentleman yields back. 

Well, I will let Mr. Bell describe the fact that he is the last questioner as he did the last witness. 

Mr. BELL. Thank you, Mr. Chairman. 

86

I think some very interesting questions have been laid on the 

table today. And I think we are all concerned about civil liberties, 

but also recognize that we live in an era where we are constantly 

under the threat of terrorism. And after the bomb goes off or after 

the plane crashes, it is a little late. And the best way to stop terroristic activity is to stop it before it starts and to foil the plot, if you 

will. And probably one of the best trails to accomplishing that goal 

is the money trail. 

But I have to say, Mr. Levey, in looking at your written statement, where you raise the question, the key question before us is 

whether the systems we have implemented to ensure financial 

transparency, most of which were aimed at money laundering, are 

sufficient to provide the Federal Government with the information 

it needs to vigorously track terrorist financing. 

You seem to infer that they are not—and I want to be perfectly 

clear on this—and when you are talking about money laundering, 

I assume that a lot of the systems and tools that are in place are 

designed to capture large transactions, and that is when the alarm 

initially goes off. Is that fair? 

Mr. LEVEY. Yes. 

Mr. BELL. And what you are saying is that when it comes to financing some type of terroristic-type of activity, the size of the 

transaction may not be there. The alarm may never go off, as we 

have seen. Is that also fair? 

Mr. LEVEY. There are two different things. 

Mr. BELL. Will you turn on your mike? 

Mr. LEVEY. No, I think it is on. 

Mr. BELL. All right. I couldn’t hear you. 

Is that the problem, that when you are talking about financing 

terroristic activity, the size of the transaction may not set off any 

alarm? 

Mr. LEVEY. That is one of the issues. That is one of the issues 

involved with it. 

What I am saying is, we have a very robust system to detect 

money laundering, and that system is probably the best in the 

world. It provides great financial transparency in our system. And 

we need to build on that further and use that groundwork, too, to 

also look for terrorist financing. 

But what I am saying is—it is sort of getting back to what Chairman Hamilton was saying about not relaxing and continue to involve—we can’t continue to say we have a system in place and then 

hope it is going to help us detect terrorist financing. We have to 

continue to work to build it to do a better job. 

Mr. BELL. But when you are talking about building upon that 

system, and if you are going to move outside the size of the transaction, then what other types of red flags are you going to be looking for, and when does it really start encroaching on people’s civil 

liberties? 

Are you going to be looking at transactions or numerous transactions made by people with Arab-sounding names? Is that the 

kind of tool and system that we are looking at implementing? 

Mr. LEVEY. No. What I—I don’t purport to have all the ideas that 

we are going to need on this. But the principal thing we need to 

do is figure out a better way to share information that the governVerDate 0ct 09 2002 11:17 Dec 01, 2004 Jkt 000000 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 G:\DOCS\96943.TXT FIN1 PsN: MICAH
87

ment already has with the private sector and vice versa. To build 

on what we have got in Section 314 of the PATRIOT Act, which 

allows that information sharing in a more robust way than has 

ever occurred before, so that we can provide them with better guidance as to what they should be looking for and vice versa. 

Mr. BELL. I don’t think anybody has a problem with the information sharing per se, but what triggers the information sharing, and 

that is what I am trying to get at, what kind of factor outside the 

typical red flags you look for in a money laundering case, what 

kind of new factors would you be implementing to perhaps trigger 

the sharing of information? 

Mr. LEVEY. I think that is exactly the dialogue we need to start. 

Mr. BELL. We are not there yet? 

Mr. LEVEY. No, we are not there. 

Mr. BELL. Also, before my time runs out, you are familiar with 

the Culberson amendment to the Treasury appropriations, transportation bill, are you not? 

Mr. LEVEY. Is this the matricula? 

Mr. BELL. Yes. Could you comment on that? My understanding 

is that Treasury strongly opposes the amendment. And if you could 

explain, perhaps, what that—the impact might be if that amendment were to be passed? 

Mr. LEVEY. Well, as a matter of fact, the Secretary of the Treasury wrote a letter to Chairman Young and also to Mr. Obey on this 

very issue. We do oppose the amendment. The amendment, as it 

is currently written, would prevent us from enforcing any of our 

regulations under Section 326 of the PATRIOT Act, and we have—

the Secretary has written a letter requesting that the provision be 

removed from the bill during the consideration by the full Appropriations Committee. 

Mr. BELL. All right. Thank you very much for your testimony 

today. 

Thank you, Mr. Chairman. I will yield back. 

The CHAIRMAN. The gentleman yields back. 

The Chair would indicate that he is going to use the prerogative 

of the Chair to ask one last question, Mr. Levey. Since you are 

from Summit County, at least we ought to let you have the last 

one. 

Among other things, as you know, section 314 of the USA PATRIOT Act mandates the government share information relevant to 

money laundering and terrorist financing with the financial industry, and we are in the process that FinCEN has begun under this 

section to gather information on an urgent basis about suspected 

terrorists. But inherent in the spirit of 314 and the line of 314 was 

the proverbial two-way street of information sharing. 

Can you tell the committee what plans you have to fulfill this 

mandate? 

Mr. LEVEY. Well, we have the Bank Secrecy Act Advisory Group 

that is set up, and we are going to continue to work within that 

context to maximize our information sharing with the private sector. As you know, that is statutorily mandated to be exempt from 

the requirements of the FACA and therefore gives us a great opportunity for a real robust exchange of views with the private sector. 

88

One thing we are looking at, and we are trying to figure out how 

best to do it, is to bring law enforcement into that process and 

share information through that mechanism with the private sector. 

And we look forward to working with the private sector and figuring out exactly how that is going to work. 

There are a lot of complications there with respect to law enforcement, sensitive information, et cetera. But we think that that 

is a mechanism that we should be pursuing. 

The CHAIRMAN. Thank you. Please feel free to work with our 

committee, as well, since we wrote the language and are obviously 

sensitive to that issue. We appreciate all of you gentlemen testifying today. 

The Chair notes that some members may have additional questions for this panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

The CHAIRMAN. There being no further business before the committee, the committee stands adjourned. 

[Whereupon, at 3:20 p.m., the committee was adjourned.] 

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August 23, 2004

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