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50–304 2009

S. HRG. 109–1082 

COMBATING CHILD PORNOGRAPHY BY 

ELIMINATING PORNOGRAPHERS’ ACCESS TO THE 

FINANCIAL PAYMENT SYSTEM 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

ON DRAWING ATTENTION TO THE PROBLEM OF CHILD PORNOGRAPHY 

AND TO HIGHLIGHT WHAT FINANCIAL SERVICE COMPANIES CAN DO 

TO ELIMINATE IT FROM THE FINANCIAL PAYMENT SYSTEM 

TUESDAY, SEPTEMBER 19, 2006 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html 


dcolon on DSK2BSOYB1PROD with HEARING
(II) 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

RICHARD C. SHELBY, Alabama, Chairman 

ROBERT F. BENNETT, Utah 

WAYNE ALLARD, Colorado 

MICHAEL B. ENZI, Wyoming 

CHUCK HAGEL, Nebraska 

RICK SANTORUM, Pennsylvania 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

JOHN E. SUNUNU, New Hampshire 

ELIZABETH DOLE, North Carolina 

MEL MARTINEZ, Florida 

PAUL S. SARBANES, Maryland 

CHRISTOPHER J. DODD, Connecticut 

TIM JOHNSON, South Dakota 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

ROBERT MENENDEZ, New Jersey 

WILLIAM D. DUHNKE, Staff Director and Counsel 

STEVEN B. HARRIS, Democratic Staff Director and Chief Counsel 

JONATHON GOULD, Counsel 

JOHN V. O’HARA, Senior Investigative Counsel 

GENEVIEVE DE SANCTIS, Professional Staff Member 

STEPHEN R. KROLL, Democratic Special Counsel 

LEE PRICE, Democratic Chief Economist 

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator 

GEORGE E. WHITTLE, Editor 


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(III) 

C O N T E N T S 

TUESDAY, SEPTEMBER 19, 2006 

Page 

Opening statement of Chairman Shelby ................................................................ 1 

Opening statements, comments, or prepared statements of: 

Senator Bennett ................................................................................................ 3 

Senator Stabenow ............................................................................................. 4 

Senator Allard ................................................................................................... 5 

Senator Sarbanes .............................................................................................. 5 

Senator Enzi ..................................................................................................... 6 

Senator Bunning ............................................................................................... 8 

WITNESSES 

Alberto Gonzales, Attorney General of the United States ................................... 9 

Prepared Statement ......................................................................................... 39 

Ernie Allen, President and Chief Executive Officer, National Center for Missing and Exploited Children ................................................................................. 25 

Prepared Statement ......................................................................................... 50 

Response to written questions of: 

Senator Shelby ........................................................................................... 103 

Kim Mowder, Senior Vice President, Bank of America Merchant Services ....... 27 

Prepared Statement ......................................................................................... 60 

Mike DeNoma, Group Executive Director and CEO of Consumer Banking, 

Standard Chartered Bank ................................................................................... 29 

Prepared Statement ......................................................................................... 69 

Jodi Golinsky, Vice President, Regulatory and Public Policy Counsel, 

MasterCard Worldwide ........................................................................................ 31 

Prepared Statement ......................................................................................... 89 

Response to written questions of: 

Senator Shelby ........................................................................................... 106 

Mark MacCarthy, Senior Vice President, Public Policy, Visa USA, Inc. ............ 33 

Prepared Statement ......................................................................................... 95 


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(1) 

COMBATING CHILD PORNOGRAPHY BY ELIMINATING PORNOGRAPHERS’ ACCESS TO THE 

FINANCIAL PAYMENT SYSTEM 

TUESDAY, SEPTEMBER 19, 2006 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:07 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Richard Shelby, presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The Committee will come to order. 

This morning, the Banking Committee will examine the exploding problem of child pornography on the Internet, and the roles the 

Congress, the executive branch and the financial services community can play in combating this global problem. We will hear from 

the Attorney General of the United States on the efforts of the Department of Justice to attack and stop this criminal activity. The 

Committee will also review the progress of the Financial Coalition 

Against Child Pornography since its recent launch in March of this 

year. 

Child pornography has become a multibillion dollar industry 

worldwide because it is low-risk and highly profitable. The sad 

truth is that there is a large and growing demand for these disturbing images. Combine that demand with ease of access provided 

by the Internet and the ability to use credit cards and other payment methods and you get one of the fastest growing on-line businesses. 

Unfortunately, our banks and credit card companies, which have 

been instrumental in the Internet commerce revolution, have become an unintentional part of the problem. Credit cards provide an 

easy and quick method of payment and are accepted worldwide. 

Purveyors of child pornography know this and they use the Internet and the credit card system to exploit and abuse innocent children for profit. 

While this all began as a mostly concealed cottage industry, investigations today have unraveled complex international financial 

trails. Billions of dollars a year in illicit profits attract organized 

criminals who are highly adept at using sophisticated finance and 

money-laundering mechanisms such as shell and front companies 

which hide true identities and process payments internationally. As 

the Attorney General will soon discuss, an important key to combating this growing transnational cancer is to follow the money, the 


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same tactic we use in disrupting organized crime syndicates, narcotics traffickers, and terror networks. 

If it were in the realm of possibility to eliminate the incomprehensible demand for this type of disturbing material, we would 

surely do it. But, unfortunately, that noble goal is well beyond any 

of our capabilities. It is, nonetheless, all of our responsibilities to 

do everything we can to protect our children by combining our efforts to combat this undeniable evil. The members of this Committee are committed to doing just that by going after the money. 

One such measure involves organizing banks, credit card companies, Internet service providers, and alternate payment providers to 

work together to address this issue. The Financial Coalition 

Against Child Pornography is an initiative involving the National 

Center for Missing and Exploited Children and its international 

sister organization. These two groups are collaborating with several 

financial institutions and Internet industry leaders to eradicate the 

commercial viability of child pornography by the year 2008. So far, 

25 companies have joined the Coalition. It is our hope that number 

will grow significantly in the very near future. 

In my role as Chairman of the Senate Banking Committee, I 

have worked with the Center to bring together industry leaders to 

develop and implement a comprehensive strategy to attack the 

problem. We have the technology, resources and expertise—but the 

key is cooperation, coordination and perhaps most important, commitment in the financial services community. 

I look forward to hearing from our witnesses as we discuss these 

issues in more detail. 

This morning, we will hear first from The Honorable Alberto R. 

Gonzales, Attorney General of the United States. General 

Gonzales, who, since taking the helm at Justice, has made combating the scourge of child pornography one of the Department’s 

highest priorities. The Attorney General has developed a new initiative, Project Safe Childhood, which will coordinate Federal, 

State, and local law enforcement efforts to prosecute child predators and rescue their victims. Under his leadership, the Justice Department has partnered with the National Center for Missing and 

Exploited Children and other organizations, to deploy their considerable resources against this threat. 

Also, the Attorney General has worked with Congress to craft 

new laws to combat those who would harm children—particularly 

the recently enacted Adam Walsh Child Protection and Safety Act 

of 2006. Mr. Attorney General, I commend you for your efforts and 

we are very pleased that you are with us today. 

Our second panel will include Mr. Ernie Allen, President and 

Chief Executive Officer of the National Center for Missing and Exploited Children. 

Ms. Kim Mowder, Senior Vice President of Bank of America Merchant Services. 

Mr. Mike DeNoma, Group Executive Director and CEO of Consumer Banking for Standard Chartered Bank. 

Ms. Jodi Golinsky, Vice President and Regulatory and Public Policy Counsel for MasterCard Worldwide. 

Mr. Mark MacCarthy, Senior Vice President for Public Policy, 

Visa U.S.A., Inc. 


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So, we are looking forward to a great panel. 

Senator Bennett, do you have any comments? 

STATEMENT OF SENATOR ROBERT F. BENNETT 

Senator BENNETT. Thank you very much, Mr. Chairman. I appreciate your calling the hearing. It is very timely here for the Senator 

from Utah. I am going to read excerpts from a release that came 

out of the United States Attorney’s Office in Salt Lake City that 

perhaps illustrates what it is we are dealing with. 

A complaint unsealed Friday in Federal court charges a registered sex offender in Salt Lake City with enticing and coercing 

a minor child in Illinois to engage in sexually explicit conduct for 

the purpose of producing visual depictions of the conduct. 

The defendant allegedly told the child he needed the pictures for 

modeling. And, on another occasion, offered the child a modeling 

contract. U.S. Attorney Brett Tolman, District of Utah, FBI special 

agent in charge Timothy Fuhrman of the Salt Lake Field Office 

and Utah attorney general Mark Shurtleff announced the arrest of 

Gerald Wheeler, 40, of Salt Lake City. 

According to the complaint, a parent contacted law enforcement 

authorities in Naperville, Illinois, saying that his 13-year-old 

daughter had been receiving obscene, lewd, and sexual messages on 

her computer site. The messages include requests for the child to 

engage in various sexual acts, and the child was asked to fly to 

New York to engage in sexual conduct in exchange for a modeling 

contract. 

Detectives were able to trace the IP address to an Internet caf ́e 

in Salt Lake City, Utah. According to the complaint, the owner of 

the caf ́e compared the log-in times to possible users at the caf ́e at 

3:16 a.m. on August 15, 2006. Because the caf ́e is not a 24-hour facility, the owner confirmed that the only individual with access to 

the IP address at 3:15 a.m. would be the facility manager, Jerry. 

The owner also confirmed that he knew that the cell number 

Brian—that is the pseudonym used—had used to call the child belonged to a former employee of the facility who was close to Jerry. 

Jerry was identified as Gerald Wheeler. The owner of the caf ́e confirmed that a computer recovered from the basement of the caf ́e 

was used primarily by Wheeler prior to August 2006. 

So here is an actual case, interstate, from Salt Lake City to 

Naperville, Illinois, that required intelligent cooperation with Federal authorities and local authorities that illustrates that this is 

not a matter that can be left to local police departments. It does 

require the attention of Federal authorities, and, Mr. Attorney 

General, along with the Chairman, I salute you for your attention 

to this. 

When we get into the question period, Mr. Attorney General, I 

am going to take you back to the Reagan administration when your 

predecessor, Ed Meese, formed an Attorney General’s Commission 

to deal with this, a Commission that made a number of recommendations. And, unfortunately, in the intervening time, very 

little has been done about these recommendations, and I am going 

to ask you if the Justice Department is considering appointing another Commission. 


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I am told and cannot verify that at least one of your predecessors 

told the U.S. Attorneys not to prosecute any pornography cases. I 

will not use names because I cannot verify that this actual order 

was given, but I think it is a very significant issue, and I applaud 

you for your attention to it, and you, Mr. Chairman, for holding 

this hearing. 

Thank you. 

Chairman SHELBY. Senator Stabenow. 

STATEMENT OF SENATOR DEBBIE STABENOW 

Senator STABENOW. Thank you, Mr. Chairman, for scheduling 

what is a very important hearing, and I also welcome Attorney 

General Gonzales. I think this is one of the most important topics 

that, frankly, we will deal with as it relates to people’s lives, because what happens to children fundamentally can change their 

life forever. And it is incredibly important that we have a sense of 

urgency about this issue. So I am pleased that you are here, and 

I am very concerned about the information we are uncovering, as 

the Chairman and Senator Bennett have talked about. 

First, the growth of the industry. Since 1988, the number of 

Internet pornography images has increased 1,500 percent—1,500 

percent. That is astounding. 

Second, the economics of the industry. Today, the market for child pornography is estimated to be about a $30 billion business 

that accounts for about 20 percent of the Internet pornography 

market. 

And, last, and most disturbing, is where the Internet sites are 

being hosted, because, as we know, according to the National 

Criminal Intelligence Service, more than half of all the illegal sites 

are coming from here, coming from the United States. Half—more 

than half. 

While I recognize that the internet has provided a distribution 

mechanism for illegal activity, we all agree it should be a tool to 

combat the illegal activity. we have the technology to trace money 

flows directly to child pornography predators, identify websites 

around the world, and we need to be having a sense of urgency as 

we move forward. We should also be able to stay ahead of the predators using the Internet as a vehicle for justice. 

I know the coalition has targeted 2008, but as I review the numbers, it may not seem far away for us working on a daily basis, but 

for too many children that is a long ways away—2008. Whether we 

invest in high-tech computer-based tracking techniques, stiffer regulations, or increase education of front-line law enforcement personnel, I believe we need to move faster. 

I have supported and will continue to support every effort I can 

to address issues concerning the Internet and exploitation of children. I am very proud to be one of the sponsors of the Internet 

Safety and Child Protection Act, which would tighten our laws regarding pornography purchases over the Internet. And I hope that 

we will see action on that bill. 

Again, Mr. Chairman, thank you very much for holding this 

hearing. When it comes to child pornography and our children, we 

are talking about a very profound area of changing a child’s life, 

and I hope that we will do everything together that we can to have 


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a sense of urgency about this issue, and I thank you again for your 

leadership. 

Chairman SHELBY. Senator Allard. 

STATEMENT OF SENATOR WAYNE ALLARD 

Senator ALLARD. Mr. Chairman, I would like to join my colleagues in thanking you for holding this hearing and your leadership on this particular matter. I would also like to join them in 

welcoming Attorney General Gonzales here before the Committee; 

your leadership in combating child pornography is very much appreciated by many of us on this Committee. 

I would also like to second Senator Bennett’s comments that it 

is important that we put together a program that really yields results. Child pornography is one of the most appalling and horrific 

crimes imaginable. Unfortunately, technology has created some 

vulnerabilities. Child predators prey on unsuspecting children and 

teenagers over the Internet via social networking websites, web 

cams, and Internet access to cell phones. 

A recent study discovered one in five young people ages 10 to 17 

who use the Internet regularly received a sexual solicitation over 

the Internet within the previous year. However, less than 10 percent of sexual solicitations were reported to authorities. 

According to a Mackenzie Worldwide report, child pornography is 

a $20 billion industry worldwide, much of which is funded by the 

Internet. The Internet has enabled child pornography to become a 

fast-growing industry. It has allowed thousands upon thousands of 

individuals worldwide access to child pornography by simply using 

their credit cards and other electronic payment methods. 

I am pleased to see that Qwest Communications in Colorado has 

been proactive and is showing initiative to raise awareness and 

help combat the exploitation of young people over the Internet. 

Qwest has partnered with the National Center for Missing and Exploited Children to form a coalition to increase parental and guardian education through the Qwest Connected Family Online Classroom. 

Again, I would like to thank Chairman Shelby for being the motivation that brought together some of the world’s most prominent 

financial institutions, the Internet industry, and the International 

Centre for Missing and Exploited Children to form the Financial 

Coalition Against Child Pornography. The goal of the coalition is to 

eradicate commercial child pornography by 2008. In order to accomplish this, we need to eliminate the flow of money being used 

to exploit innocent victims. 

I would like to thank the witnesses for being here today, and I 

look forward to all of your testimony. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Sarbanes. 

STATEMENT OF SENATOR PAUL S. SARBANES 

Senator SARBANES. Well, Mr. Chairman, I first want to very 

strongly commend you for your work in this area and, in particular, 

for bringing together the National Center for Missing and Exploited Children, which has been under the very capable leadership 

of Mr. Allen here, and the leading participants in the payment system to fight the spread of child pornography over the Internet. 


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I think as all my colleagues know, Chairman Shelby convened a 

meeting of financial leaders to address this issue, and as he said 

in a letter which he sent to all of his colleagues in the Senate, and 

I quote him, ‘‘If people were purchasing heroin or cocaine and using 

their credit cards, we would be outraged and we would do something about it. This is worse.’’ 

So I want to join with others in recognizing your leading efforts 

in this area. 

The exploitation and greed that characterizes the production and 

sale of child pornography are obvious and apparent. The sale of 

child pornography is a multi-billion-dollar-a-year industry worldwide. The human pain inflicted to produce these moneys is dreadful to contemplate. 

The Internet child pornography industry exists largely because 

the use of credit cards and other online payment mechanisms 

makes it possible easily to buy and sell pornography, with potential 

secrecy, from anywhere in the world. Without access to the payment system, it is reasonable to believe that the Internet child pornography industry would certainly shrink, and perhaps die. That 

is why an essential way to identify and stop the criminals involved 

is to ‘‘follow the money.’’ We can expect to find many of the common tools of money laundering along the way, including front companies, anonymous aggregators interposed between credit card 

merchant banks and their customers, misuse of correspondent 

banking relationships, all of which allow the child pornography industry to disguise its operations and to facilitate the international 

movement of funds derived from this criminal activity. 

I am encouraged that leading members of the payment system, 

legitimate enterprises, amongst our most legitimate enterprises, 

have pledged under the initiative and leadership of Chairman Shelby to work to deal with these issues in connection with the fight 

against child pornography. 

I am pleased to join with my colleagues in welcoming the Attorney General to the Committee this morning, and also, because I am 

not sure I will be able to stay the entire morning, Mr. Chairman, 

I want to welcome Mr. Allen, whose tireless work on behalf of atrisk children is well known, and the other members of the second 

panel. I look forward to hearing the testimony of today’s witnesses. 

Thank you. 

Chairman SHELBY. Thank you. 

Senator Enzi. 

STATEMENT OF SENATOR MIKE ENZI 

Senator ENZI. Thank you, Mr. Chairman, and I, too, want to 

thank you for holding this hearing and for your tireless efforts. I 

want to thank the Attorney General for being here and the other 

members of the panel. We need to do everything we can to stomp 

out this terrible blight on our children. 

Each year, thousands of children are exploited by photographing 

them and making those images and videos available to child predators. We need to stop those terrible crimes, and I look forward to 

hearing from the witnesses, with the ideas about what can be done. 

The sexual victimization of children is a tremendous problem in 

our Nation, and, unfortunately, the problem is probably more wideVerDate Nov 24 2008 00:52 Nov 24, 2009 Jkt 050304 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 E:\HR\OC\A304.XXX A304

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spread than most recognize. According to the National Center for 

Missing and Exploited Children, statistics show that one in five 

girls and one in ten boys are sexually exploited before they reach 

adulthood. Although these abuses are so prevalent, less than 35 

percent of those child sexual assaults are even reported to authorities. The abused children who are the victims of child pornography 

are harmed both mentally and physically. Physically, they can be 

molested or face exposure to sexually transmitted diseases. Although the physical traumas are problematic, many child victims 

struggle with the mental abuse for far longer. 

Victims of child pornography can often face depression, anger, 

and feelings of worthlessness and low self-esteem. These feelings 

follow them into adulthood and forever alter their lives. In addition, because emotional scars are not as visible as physical wounds, 

they often go untreated. 

Child pornography is illegal in all 50 States and most countries. 

Although the growth of the Internet has been beneficial in many 

ways, bad actors are using this information-sharing tool to spread 

their filth. Unfortunately, the vastness of cyberspace often makes 

prosecution of these criminals difficult. 

Congress has taken steps to combat child pornography, but our 

actions up to this point have not gone far enough. Earlier this year, 

the Senate passed and President Bush signed the Adam Walsh 

Child Protection and Safety Act of 2006. This legislation included 

provisions requiring producers of sexually explicit material and 

simulated sexually explicit material to keep records of every performer’s name and date of birth. 

While ensuring that performers are of legal age, Congress and 

President Bush took one more step to protect the innocent. In addition to this act, there are a number of other ideas being discussed 

in Congress and within the administration. The Department of Justice has sent proposals to the Hill to increase fines if an electronic 

communication service provider knowingly and willfully fails to report the presence of child pornography on their systems. In addition, Justice hopes to eliminate the practice of hiding terms in the 

website’s code so that the pornography site will come up on a 

search of the Internet. 

For example, some pornography website owners will place terms 

such as ‘‘Sesame Street’’ in the code. When someone searches on 

Google for children’s shows, the pornography website will also come 

up on the list of possible websites. 

Many of the proposals attack the problem of child pornography 

with increased regulation of the Internet. Those deserve serious 

consideration, but in addition to taking action on the Internet, 

there are many other ways we can prevent the exploitation of children. 

Today we are here to examine the role of the financial industry 

on stopping child pornography and child pornographers. I am 

pleased Chairman Shelby scheduled this hearing to tackle this important issue before the Banking Committee. I also applaud the efforts of the Financial Coalition Against Child Pornography to wipe 

out commercial child pornography by 2008. They seek to do so by 

destroying the financial network of these criminals. The ambitious 


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goal will take coordination of law enforcement, private industry, 

States, and the Federal Government. 

I am committed to providing these individuals with the resources 

they need to eliminate and eradicate child pornography. I look forward to learning about efforts that are currently underway and 

learning about what more can be done so we can provide the resources to help law enforcement deal with this problem. This hearing will help lay the groundwork for legislative action as we engage 

in the fight against child pornography. 

Thank you again for holding this hearing and for our distinguished guests taking the time to testify. 

Chairman SHELBY. Mr. Attorney General, we welcome you 

again—oh. Senator Bunning, that is right. 

STATEMENT OF SENATOR JIM BUNNING 

Senator BUNNING. Thank you, Mr. Chairman. I know I was a little late, but I appreciate being recognized. 

Chairman SHELBY. He is recognized. 

Senator BUNNING. First of all, I would like to congratulate Senator Shelby on all the work that he has done to bring the hideous 

incidents, many incidents to our attention. And I would like to welcome all of our witnesses today. I am especially glad to see that Attorney General Gonzales was able to join us. I would also like to 

extend a warm welcome to one of my fellow Kentuckians who is on 

the second panel, Ms. Kim Mowder with the Bank of America. 

Mr. Chairman, I am pleased that the Committee will be hearing 

testimony today regarding how to combat child pornography 

through our financial institutions. I believe it is an issue that deserves our attention and consideration. 

Like my colleagues here today, I believe that sexual predators 

are among the worst criminals in our society. My thoughts and 

prayers go out to the victims and the victims’ families. It breaks 

my heart to hear stories in the news about children who have been 

exploited by predators on the Internet. I believe there is no punishment too severe for these criminals. 

This past year, Congress has addressed several ways to combat 

such predators. Most of those ways, however, have focused on increasing Federal penalties and establishing a national registry. I 

believe it is time that we focused on the finances of the industry. 

It is basic business sense to do so. If we take away the money, then 

we can take away the incentives for those who want to profit from 

exploiting children. 

I am glad the industry has taken a leading role in this, and I 

look forward to hearing about their plans. I would like to thank all 

of the witnesses for their testimony today. I look forward to hearing their thoughts on how we can best put an end—an end—to this 

industry. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator Bunning. 

Mr. Attorney General, your written testimony will be made part 

of the hearing record in its entirety. We welcome you again. You 

proceed as you wish. 

Attorney General GONZALES. I would like to make an opening 

statement, Mr. Chairman. 


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Chairman SHELBY. Absolutely. 

STATEMENT OF ALBERTO R. GONZALES, ATTORNEY GENERAL 

OF THE UNITED STATES 

Attorney General GONZALES. Mr. Chairman, Senator Sarbanes, 

and distinguished Members of the Committee, thank you—— 

Chairman SHELBY. Please bring the mike just a little closer. We 

have got a lot of people in this room. 

Attorney General GONZALES. Thank you for having me here 

today to discuss a very important and vital issue: protecting our 

children from exploitation on the Internet. 

As all of you know, none of us can underestimate the importance 

or the urgency of this threat against our kids. Every day pedophiles 

troll the Internet to see and sell images of child abuse. They also 

look for ways to contact our children over the Internet. They are 

hoping to make contact with the very young, the very innocent, to 

commit unthinkable acts and to potentially sell images of those 

crimes to other pedophiles. 

It is unfortunate that one of the greatest inventions of our generation, the Internet, is providing the building ground for the heinous crimes. That is why parents and volunteers and law enforcement must make the Internet a battleground. We must fight every 

day because predators seek to hurt our kids every day. 

As a father of two young boys, this issue is one that I take extremely seriously on both personal and professional levels. I know 

the same is true for Members of this Committee. We are all aware 

that society’s ability to protect its children is a critical marker of 

that society. That is why protecting our children from sexual exploitation on the Internet is a high priority for the Department. 

I know that the issue of child molestation, rape, and pornography 

can be difficult for people to focus on because it is simply so terrible. But we cannot turn away to preserve our comfort level. We 

must confront the brutal facts. 

For example, virtually all images of child pornography depict the 

actual sexual abuse of real children. In other words, each image literally documents a crime scene. These are not just pornographic 

pictures or videos. They are images of graphic sexual and physical 

abuse—rape, sodomy, and forced oral sex—of innocent children, 

sometimes even babies. 

The Internet has created a shocking field of competition to see 

who can produce the most unthinkable photos or videos of rape and 

molestation. In the perverse eyes of the pedophiles and predators, 

this means the younger, the better. 

Now, working with Federal investigators and advocacy groups, I 

have seen just how horrific these images can be. I have seen a 

young toddler tied up with towels, desperately crying in pain, while 

she is brutally raped and sodomized by an adult man. I have seen 

videos of very young daughters forced to have intercourse and oral 

sex with their fathers and pictures of older men forcing naked 

young girls to have anal sex. Now, these are shocking images that 

cry out for the strongest law enforcement response possible. 

Moreover, these disturbing images are only the beginning of a 

cycle of abuse. Once created, they become permanent records of the 

abuse they depict and can haunt the victims literally forever once 


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they are posted on the Internet. Unfortunately, advances in technology have also made it easier for offenders both to profit from 

these images and to distribute them to each other. Once images are 

posted on the Internet, it becomes very difficult to remove them 

from circulation. Even more disturbing is the fact that offenders 

rely on these images to develop a plan of action for targeting their 

next victims and then use the images to bring victims into submission. 

The challenge we face in cyberspace was illustrated by a new national survey released in August of 2006, conducted by University 

of New Hampshire researchers for the National Center for Missing 

and Exploited Children. The study revealed that a full third of all 

kids ages 10 through 17 who use the Internet were exposed to unwanted sexual material. Much of it was extremely graphic. 

As I mentioned, this battle against child exploitation is a top priority. Earlier this year, as the Chairman indicated, we launched a 

program called Project Safe Childhood that is helping to coordinate 

the good efforts of U.S. Attorney’s Offices, law enforcement, and advocacy groups. Through Project Safe Childhood, we are constantly 

expanding our efforts to address the sexual exploitation of children 

on the Internet and the financial underpinnings of this exploitation. This program is helping law enforcement and community 

leaders develop a coordinated strategy to prevent, investigate, and 

prosecute sexual predators, abusers, and pornographers who target 

our children. 

As we have looked at ways to improve the law enforcement response to the problem of online exploitation and abuse of children, 

one thing we have continually heard from State and local investigators and prosecutors is that many Internet service providers do not 

retain records for a sufficient period of time. Several months ago, 

I asked a working group within the Department to look at this 

issue, and we are working hard on ways to remedy this problem. 

I see the initiative to protect our children as a strong, threelegged stool. One leg is the Federal contribution led by United 

States Attorneys around the country. Another is State and local 

law enforcement, including the outstanding work of the Internet 

Crimes Against Children Task Forces, which are funded by the Department’s Office of Justice Programs. And the third is nongovernmental organizations like the Financial Coalition Against Child 

Pornography and the National Center for Missing and Exploited 

Children, without which we would not have a CyberTipline. 

I want to note that the Financial Coalition would not exist without the leadership and vision of you, Mr. Chairman. You were the 

catalyst in bringing industry leaders together to address this serious problem. 

Congress, of course, has also provided valuable support for our 

efforts by passing the Adam Walsh Child Protection and Safety Act 

earlier this year. The Adam Walsh Act, signed by the President, 

will help us keep our children safe by preventing these crimes and 

by enhancing penalties for these crimes across the board. But none 

of our efforts can stand alone. All must involve high levels of sharing and coordination. That is what Project Safe Childhood is all 

about. 


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One final note that I would like to share with the Committee 

today is that our fight against the proliferation of child sexual exploitation on the Internet does not stop at our borders. It demands 

a global strategy. This makes it imperative that we pay attention 

to the laws governing child sexual exploitation in other Nations. 

Many countries have astonishingly lenient punishments for child 

pornography offenses. 

For instance, in several nations, the production of child pornography is punished with only a fine or imprisonment of less than 6 

months or a year. Simple possession is punishable merely by a fine. 

And just as we need some States to strengthen their laws to punish 

child sex offenders, we must encourage foreign lawmakers to 

strengthen their laws as well, including those concerning the financial components of these crimes. 

I am, of course, grateful, Mr. Chairman, that the Committee 

shares the Department’s commitment to protecting our children. 

Again, I want to thank you for establishing the Financial Coalition 

Against Child Pornography. I also want to acknowledge Senator 

Santorum’s work for authoring the provision in the Adam Walsh 

Act that authorized the Department’s Project Safe Childhood initiative. Senators, all of you, your exemplary actions have truly shown 

the depth of your commitment to protecting our children from 

abuse that no human being should have to endure. 

Mr. Chairman, thank you and the Committee for the opportunity 

to speak to you. I would be pleased to answer any questions the 

Committee may have. 

Chairman SHELBY. Thank you, Attorney General Gonzales. 

Picking up on something you just said a minute ago, it has been 

reported that in most of the world there are no statutes or laws on 

child pornography, and only a handful of countries actually have 

laws and harsh punishment for offenders. Mr. Attorney General, 

what kind of collaborative efforts are currently underway or contemplated between the Department of Justice and international 

governments and law enforcement officials? In other words, how 

can we, you as the Attorney General and we as legislators, create 

a uniform system that would help combat this commercial child 

pornography? 

Attorney General GONZALES. An important part of my responsibility as Attorney General is to develop and solidify relationships 

with my foreign counterparts, because there are many crimes that 

know no borders, such as terrorism, such as the protection of intellectual property, and, of course, such as the protection of our children. And for that reason, whenever I travel it is always one of the 

items that is on my list to raise with my counterparts in terms of 

what are the efforts ongoing in that country and what can we do 

together to help deal with this issue, because I think it is becoming 

more and more of a problem in foreign countries as well, and my 

foreign counterparts, they understand. They can’t successfully address this issue without the cooperation of the United States. 

We are also working with the European Union. There is an organized effort within the European Union to focus on this issue to see 

what we can do together collectively as a group working with the 

United States and the member countries to address this issue. 


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Senator, in terms of what Members of Congress can do, I know 

that you have a lot of international travels, and I would certainly 

put this at the top of the list of items to raise with foreign legislators and foreign officials in terms of the importance of protecting 

our children, because we will not be able to protect our children 

here in America without the cooperation of other countries. This is 

a very important effort. 

Chairman SHELBY. Thank you. Shell corporations. Law enforcement officials over the world over are concerned about the use of 

U.S. shell companies to hide or facilitate criminal activity, particularly money laundering. In a number of States, they can be registered by foreign citizens by way of the Internet in just minutes 

without any ownership information being supplied. Officials have 

often noted that some cases had to be because of insufficient information on what we call beneficial owners. Does the Justice Department have an opinion on whether having more information at the 

incorporation stage and periodic updates of that information thereafter would be beneficial in pursuing the fruits of crime like child 

pornography? Would this take an intervention of Congress to 

achieve the desired result? In other words, could we reach other 

States, amend laws, or what? 

Attorney General GONZALES. Mr. Chairman, I don’t know whether or not it would require the intervention of Congress. That is 

something that I would be happy to look at and get back to you. 

Obviously, the more information we have about those engaged in 

criminal activity, the easier it is for the law enforcement community to deal with it effectively. So I would be happy to look at that 

and get back to you. 

Chairman SHELBY. That would be good. 

Attorney General GONZALES. If I may, I was recently reminded 

that I should have—I neglected to mention this. Congress recently 

ratified the Cyber Crime Treaty, and that will help us with respect 

to our efforts with our overseas partners in fighting this problem. 

Chairman SHELBY. Stored value cards, there are many ways to 

get money, I guess, and use it. This Committee has been interested 

in stored value cards for some time. There is no doubt that most 

people want to use these cards in a legitimate way, yet there are 

always some others who will make illicit use of them. Some of the 

cards’ vulnerabilities stem from the ways they are obtained. Programs often accept applications online, by way of fax, or even 

through local check-cashing outlets, or even convenience stores, 

often without having any customer identification or suspicious activity reporting program in place. In fact, some issuers flaunt being 

anonymous. 

What effect do you think such cards are having or could have on 

the ability of law enforcement to follow the money of child pornography purveyors as they quickly process payments? And will they 

be able to later identify online child porn? 

Attorney General GONZALES. Mr. Chairman, they make it more 

difficult, quite frankly, in our efforts to prosecute child pornographers. I think one of the challenges that we will have to wrestle 

with, and I think we need to approach this with an open eye, and 

that is, we are dealing with a criminal element that is smart and 

they watch what we do. And so while I hope to see—— 


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Chairman SHELBY. And international in scope, right? 

Attorney General GONZALES. And international in scope. And so 

while I hope to see us make great success and great strides in 

eliminating commercial websites that promote child pornography 

by 2008 by following the money and going after these credit card 

transactions, I fully expect that these enterprisers will try to find 

other ways in which they can facilitate these transactions other 

than through credit card payments. And so they are smart. They 

are going to adjust to what we do. We are going to have to be 

smart and flexible and adjust in the way that we deal with this 

problem. 

Chairman SHELBY. But, notwithstanding, this is a daunting challenge. We know that. But it is something that we cannot afford to 

lose. We have got to prevail, have we not, for our children? 

Attorney General GONZALES. Mr. Chairman, this is a very important fight for the future of our country. It is a serious fight. The 

problem is enormous and it is immense, but we should not shy 

away from the challenge. We have an obligation to protect our children, and so I appreciate the effort of this Committee. 

Chairman SHELBY. Thank you. 

Senator Sarbanes. 

Senator SARBANES. Well, thank you very much, Mr. Chairman. 

Mr. Attorney General, I first want to follow up on the first question that Chairman Shelby put with respect to cooperative efforts 

in the international arena. As I understand it, the G8 law enforcement officials meet at least annually, I gather, as a group. Is that 

correct? 

Attorney General GONZALES. That is correct, sir. 

Senator SARBANES. Has this issue of the Internet pornography 

issue been raised at those meetings of the G8 leading law enforcement officials? 

Attorney General GONZALES. It has been raised. Yes, sir. I have 

been in discussions with my G8 counterparts, and this is an issue 

that we have discussed. Yes, sir. And I believe it is an issue that 

has been discussed prior to my tenure as Attorney General, but I 

am not certain of that. 

Senator SARBANES. But it is a matter that is high on the agenda 

of those meetings? Would that be fair to say? 

Attorney General GONZALES. Sir, I believe everything that is on 

that agenda is a matter of priority for the member countries, and 

it is an issue that we have talked about. Yes, sir. 

Senator SARBANES. Now, under Section 314(a)(1) of the PATRIOT 

Act, we have authorized law enforcement officials to, and I now 

quote the Act, ‘‘share with financial institutions information regarding persons engaged in or reasonably suspected, based on credible evidence, of engaging in terrorist acts or money laundering.’’ 

Now, presently, the regulations issued under that section, which 

are issued by the Treasury Department, largely involve financial 

institutions giving information to law enforcement. Should the 

rules be revised for situations such as the fight against child pornography so that enforcement agencies can assist the coalition that 

we have made reference to earlier more effectively by sharing information with cleared officials about possible dishonest aggregators 


dcolon on DSK2BSOYB1PROD with HEARING
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or shell companies? Is any thought being given to that? And what 

can be done? 

Attorney General GONZALES. Senator, I have not given any 

thought to that in terms of looking at that regulation and the sharing of information. I think if it can be done, it is something that 

I think we should look at. If you are talking about taking information about individuals and now sharing it with a nongovernmental 

entity, there may be privacy issues that we would have to look at. 

But that is something that we would be happy to look at. 

Senator SARBANES. Would you undertake to do so? I think it 

might be helpful in this effort. 

Attorney General GONZALES. We will look at that, sir, and give 

you our views about it. 

Senator SARBANES. All right. Several recent administrative actions against international banks involving failure properly to monitor correspondent accounts have been identified in the press as potentially involving the flow of funds derived from the sales of child 

pornography. 

In your view, to what extent should international banks take 

stronger steps to guard their correspondent banking practices from 

abuse in this way? I mean, the bank itself in its own practices may 

have some effective safeguards, but there is a concern that the correspondent banking practices are not subjected to the same scrutiny and standards. 

Attorney General GONZALES. Sir, I believe that Mr. Allen is going 

to talk about the importance of trying to have as many members 

of the Financial Coalition involved as possible. I think, as the 

Chairman indicated, we have over 20 members currently, and that 

represents, I believe, something like 87 percent of the U.S. payments. But obviously, we need to get 100 percent in. As you have 

identified, it is not just a question of U.S. banks. We also need to 

get banks outside of the United States involved. 

Senator SARBANES. Well, in that regard, would additional international agreements relating specifically to Internet child pornography be helpful in furthering the effort to develop international 

cooperation? 

Attorney General GONZALES. It may be helpful, Senator. Obviously, it depends on what those agreements say. But they could be 

helpful, yes, sir. 

Senator SARBANES. Is there a special unit within the Department 

of Justice that focuses on this issue only? 

Attorney General GONZALES. Sir, we have a special—within the 

Criminal Division we have a Child Exploitation and Obscenity Section which focuses on child pornography generally. Also, we have 

within the Criminal Division an International Law Section, and so 

when we are dealing with our foreign counterparts, we primarily 

deal with them through that International Law Section. But it is 

all under the penumbra of the Assistant Attorney General for the 

Criminal Division. 

Senator SARBANES. And how much cooperation do you get from 

other agencies and departments of our Government, for example, 

the Department of the Treasury? After all, much of what I have 

referenced to, they are the first agency to work with these moneylaundering questions. 


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Attorney General GONZALES. Sir, I would say that the cooperation that we have got from our sister agencies has been very, very 

good, not only Treasury but, of course, the Internal Revenue Service within Treasury, the Department of Homeland Security, in particular ICE. The Postal Service has been outstanding, as has the 

Secret Service. And so I would characterize the cooperation and 

commitment to this issue as being very strong. 

Senator SARBANES. Is there a structure established within the 

executive branch of our Government to achieve this? Or is this 

done on some ad hoc basis? Or is there a regular monitoring, coordinating unit, interagency unit, that follows this matter? 

Attorney General GONZALES. Sir, I do not believe that there is— 

I think you are kind of asking—I do not want to put words in your 

mouth, but is there sort of a task force that is kind of focused on 

this issue. None exists within the executive branch that focuses 

solely on child pornography. 

We do have a formal mechanism to look at trafficking that is 

chaired out of the Secretary of State’s office. But with respect to 

child pornography, I would say, sir, that what we have instead is 

an understanding of the scope of the problem throughout the administration and a commitment throughout the administration to 

work together to deal with this issue. 

Senator SARBANES. Well, it might be worth considering whether 

establishing such a structure would be helpful, and I commend that 

to you for the Department to give some thought to it. 

Attorney General GONZALES. Yes, Senator. 

Senator SARBANES. Mr. Chairman, I see my time is up. Thank 

you. 

Chairman SHELBY. Senator Bennett. Thank you, Senator Sarbanes. 

Senator BENNETT. I want to follow up a little on what Senator 

Sarbanes was talking about. I do not want to imply that Salt Lake 

City is a hotbed of these kinds of problems by going again to a 

Utah case, but it demonstrates that the problems can occur anywhere. 

During the last week of July of this year, a 5-year-old girl was 

kidnapped and murdered, and then after she was dead, her body 

was raped. 

Now, the man who had admitted having committed this crime acknowledged that he was addicted to pornography and that the murder of this child—her name was Destiny Norton—and the subsequent act was his acting out of the pornographic fantasies to which 

he was addicted. 

This says to me that law enforcement of other kinds of crimes— 

murder, in this case—should pay attention to pornography. And I 

go back to the creation of the Meese Commission, and it has been 

20 years since we had the Meese Commission on Pornography, and 

I remember a great deal of ridicule that was heaped on the Meese 

Commission, in the media and elsewhere, of people saying, ‘‘Why 

is the Attorney General wasting his time on a victimless crime? 

And why should the Attorney General’s Commission focus on this?’’ 

Well, the addiction to pornography by the man’s own admission 

was a major motive in this horrible crime that took the life of Destiny Norton. And it seems to me that is the answer to the question 


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of why law enforcement officials should pay attention to ‘‘a 

victimless crime,’’ looking at these pictures on the Internet is not 

the kind of thing we should be spending the Justice Department’s 

money on. As I say, the Meese Commission was ridiculed for the 

focus that it had on pornography. 

My question to you, Mr. Attorney General, is: Isn’t it time we revisited the creation of an Attorney General’s Commission, an update, if you will of the kinds of things that the Meese Commission 

prophesied would happen, a careful review of what has happened 

over the last 20 years, and an analysis of whether or not Destiny 

Norton’s fate was an isolated incident or represents part of a pattern that law enforcement officials have been ignoring? 

Now, do you have enough discretionary money in the Office of 

Juvenile Justice and Delinquency Prevention to fund a new AG’s 

Commission on this issue? 

Attorney General GONZALES. I do not know whether or not, Senator, whether the funds are there, but that is something that we 

can easily look into and get back to you. Let me just say that we 

are doing a lot of—you talked about is it not now time to go back 

and look at the sources of this issue and look at what we ought to 

do to address it. That is ongoing and has been ongoing, and it is 

not just a function or commitment by the Federal Government, but 

obviously, organizations like the National Center for Missing and 

Exploited Children are very focused on this issue. 

The recommendations of the Meese Commission, you have to remember also, you know, a long time ago, and the changes in technology have been unbelievable. I have not read the Meese Commission report lately. I am not sure they could have imagined the 

scope, the depth of the threat to our children that exists today. 

Senator BENNETT. That is why I am asking you to consider creating a new one, because those data are significantly out of date, 

20 years after the fact. I think you may get some of the same ridicule from some of the same sources that pooh-poohed the Meese 

Commission, but I would hope you would consider creating a new 

one and ignoring those kinds of attacks. 

Attorney General GONZALES. Well, the only thing I would add, 

Senator, is that, you know, one of the recommendations of the 

Meese Commission was that we ought to have recordkeeping in 

terms of sexually explicit materials. And we now have, of course, 

2257 and we just had for the first time a conviction, ‘‘Girls Gone 

Wild,’’ there was a conviction for not keeping the appropriate 

records of minors used in the production of sexually explicit materials. 

And so that was a recommendation of the Meese Commission, 

and, of course, since the recommendations of the Meese Commission, we have had Congress take action through the PROTECT Act, 

through the Adam Walsh Child Protection Act. And so I suspect if 

you look carefully at the Meese Commission, some of the recommendations are reflected in some of the protections given by 

Congress in these two very important pieces of legislation. 

What I care about is protecting our kids. If it requires a task 

force, I am happy to look at that. I think we are doing a lot, quite 

frankly, working closely with our Federal counterparts, international counterparts, our State and local partners, nonprofit 


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groups around the country, parents who care very much about this 

issue. But if we need to do more, I am happy to look at it. 

Senator BENNETT. I cannot speak for the Chairman, but he is in 

a position on the Appropriations Committee to help you out if 

money is a problem. 

Thank you. 

Chairman SHELBY. We hope money will never be a problem, Mr. 

Attorney General, when it comes to justice. You know that. 

Attorney General GONZALES. Yes, sir. 

Chairman SHELBY. Senator Stabenow. 

Senator STABENOW. Thank you, Mr. Chairman. 

Just to follow up with Senator Bennett in terms of funding, one 

of the questions that I had related to just keeping up with the demand, when we look at the National Center for Missing and Exploited Children that says that the CyberTipline in 2001 received 

24,000 reports of child pornography, as you know, and that August 

of this year, the number had climbed to 375,000. 

So, Mr. Attorney General, my first question would be just simply: 

How are you going to keep up with this, and, in fact, is this an 

issue just from an enforcement standpoint alone in which we need 

to be looking increased resources? 

Attorney General GONZALES. I think that, as I indicated, the 

problem is enormous. It is immense. It presents some tremendous 

challenges for the Department—not only for the Department, but 

our State and local counterparts. 

Do we need more resources? We need more resources, quite 

frankly, but we realize that we do not live or operate in an environment of limitless resources. There are other priorities that are important that have to be met as well, which means that we have to 

be smart in utilizing the resources that Congress gives to us. And 

I think that we have been smart by greater collaboration and coordination with State and local counterparts, by leveraging what 

we know through additional trainings with State and local counterparts. 

I must tell you that, of course, the Adam Walsh Child Protection 

Act authorized additional prosecutors. I think that is something 

that should be seriously looked at, not only prosecutors within the 

U.S. Attorneys’ Offices around the country, but additional prosecutors in the Child Exploitation and Obscenity Section. The Adam 

Walsh Child Protection Act also authorized funding for additional 

computer forensic experts. There is a serious backlog because we 

do not have enough computer forensic experts, and so there was an 

authorization for additional such experts for both the FBI and for 

ICE. I view it as a serious backlog, and I think that is something 

that Congress should be looking at. 

I think also we have a serious need with respect to children who 

are victimized. Oftentimes there is no place to put them. The State 

and local facilities simply are not available, and so we have to put 

them in juvenile facilities, which is not the best place to put kids 

who have been victimized. And so one of the things that I think 

ought to be looked at is whether or not there should be additional 

grants so that we—grants for State and local entities that can provide additional shelters for kids. 


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So there are needs there. There is no question about it. But we 

have to be smart, and I look forward to working with the Congress 

to come up with the appropriate level of appropriations to meet 

these needs, these very important needs. 

Senator STABENOW. I appreciate that. This is an area, in one way 

or another, that I have worked in my whole adult career and have 

tracked in Michigan what happens when we do not pay attention 

to children, to shutting these kinds of things down. In the past, it 

was different kinds of exploitation, but the truth is we are going 

to pay there the mental health system, the juvenile justice system, 

the lack of children being successful in school or successful adults 

because of the outrageous victimization of children. And so I would 

just encourage you to have a loud voice, because I believe you have 

people here who would like very much to respond to that. 

If I might just go on, before my time runs out, to a couple of 

other different kinds of questions, one back to looking at the international front because, as I understand it, Russia’s illegal sites 

may be growing even faster than the United States’ and so what 

happens with our G8 partners becomes very, very important. 

When we worked on the PATRIOT Act legislation together, I was 

proud to author amendments to put in the concentration accounts 

language, and at that time we had language relating to correspondent bank accounts. We did not end up passing that and 

putting it in the PATRIOT Act. 

But I am wondering, as you have these discussions now, are 

there very specific things that you are hearing or tools that we 

should be addressing that would help you as you are working with 

our G8 counterparts to be able to do what you need to do? 

Attorney General GONZALES. Senator, most of our discussions, 

quite candidly, relate to sharing of information, evidence that could 

be useful in prosecutions. And we have had some successes, some 

international takedowns involving sites around the world because 

of this kind of cooperation and collaboration. 

In addition to information or evidence that would be useful in 

connection with a prosecution, my discussions have also centered 

upon legislation, what laws exist in those countries that would discourage the growth of Internet sites. 

So those are the kinds of things we have focused on. I do not 

have any recollection about specific discussions about financial 

transactions, but we may very well have had them. I just do not 

recall them at this time. 

But as I think Senator Sarbanes said, following the money is extremely critical, and having additional tools to do so would be most 

helpful. 

Senator STABENOW. And, Mr. Chairman, I know my time is up. 

I would just comment again on The Internet Safety and Child Protection Act, and I just mention this only because this deals with 

the other side of victimization, which is the number of young people under the age of 18 that are getting on these sites. So we not 

only, as you so rightly indicated, have crimes being committed in 

full view while we are watching this, but we need to be addressing 

and passing legislation that requires verification of age so that 10- 

year-olds, 11-year-olds, 12-year-olds, who are now being able to get 


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on and see this and may become the next generation of pornographers and predators are not able to get on these sites. 

Attorney General GONZALES. Senator, as the father of 14-year-old 

and 11-year-old boys, I very much appreciate your comments. Let 

me just take a moment, Senator, to say that parents have a responsibility here. This is not something that the Congress, as wonderful 

and as powerful as this Committee is, can deal with effectively. We 

have to get parents involved. We have to make them understand 

this really is a war. 

Chairman SHELBY. You are absolutely right, Mr. Attorney General. 

Senator STABENOW. The only thing I would say is that we can 

verify age, and so I agree with that as a parent totally, but we can 

work together to verify age. 

Attorney General GONZALES. Yes, Senator. 

Chairman SHELBY. Mr. Attorney General, I am going to say it 

again, you are absolutely right, because without the parents being 

involved, we are wasting our time and money. 

Attorney General GONZALES. I am afraid to say that is true, Senator. 

Chairman SHELBY. Senator Allard. 

Senator ALLARD. Thank you, Mr. Chairman. 

Attorney General GONZALES. I want to explore a little bit with 

you those things that may lead to the success of your effort and 

those things that may create obstacles. 

My first question is: What do you think would be the greatest obstacle to success in your war against child pornography? 

Attorney General GONZALES. We need information, Senator, and 

information helps us make cases. There is, understandably, reluctance about the Government having too much information about individuals and individual transactions. And obviously, we operate 

under a very strong Constitution. We respect and understand the 

civil liberties and the privacy rights of individuals. But we have got 

to find a way to harmonize this so that we can get access to information that would be helpful. 

I talked in my remarks about the issue of data retention. When 

I travel around the country, every cop, every agent, every prosecutor, they understand and they support this notion that we need 

to figure out a way to have Internet service providers retain data 

for a sufficient period of time that would allow us to go back and 

retrieve it through a legal process in connection with an investigation of someone who is harming a child. 

I believe Congress has recently received a letter signed by 49 

State Attorneys General supporting this, asking the Congress to 

look at this. And if it is not part of the record, I would like to have 

it submitted. I am not sure if it is appropriate for me to do that, 

Mr. Chairman, but I think that it is an important letter that the 

Committee should have before them as they consider this issue. 

And it is the kind of issue where even the State Attorneys General, 

you know, they reluctantly concede this is a problem that is national scope, and they would normally like to deal with issues on 

a local level, the State level. But they understand that this is a national problem that requires Federal legislation. 


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Again, this is all related to the question of information. The more 

information we can have in a way that respects the privacy rights 

and the civil liberties of Americans, the more effective we can be 

in prosecuting these cases. 

Senator ALLARD. Attorney General Gonzales, what part of your 

program do you think is most likely to be successful? 

Attorney General GONZALES. I think that—two. I think education 

is important. Things like this hearing today are extremely important. When I go out and talk about this, it is important. When you 

go out and talk, it is important. 

We think that people understand the scope of this problem, but 

so many people really do not. And so we need to educate people 

about the dangers that exist. I think we can be successful in that. 

The Ad Council has been very, very helpful working with NCMEC, 

with ads in the past. We are going to partner with the Ad Council 

and NCMEC for new ads next year again—all with the goal of trying to educate people about the scope of this problem. 

Obviously, at the Department of Justice, what we do is prosecute. That is what we do. And I think that we have had some good 

successes to date. We are going to continue to push forward and 

to be aggressive in this area. 

Just last week I was in South Carolina. I asked every United 

States Attorney to send a representative to the training center in 

South Carolina so they can be trained, spend 4 days there or 3 

days there to learn about prosecuting obscenity cases. 

In every district around the country, we have a Project Safe 

Childhood Coordinator in every U.S. Attorney district to develop a 

comprehensive, district-wide strategy. So we know what works, 

what is effective, what makes us most effective in prosecuting 

these kinds of cases. So we are going to do our part in prosecuting 

these cases. I think programs like the Financial Coalition are extremely important because it is another avenue of getting information to the law enforcement community. We are now able to have 

our own data base of the commercial websites that are promoting 

child pornography. That was not possible before the Financial Coalition, and so that has been very, very helpful. 

Senator ALLARD. Mr. Chairman, the Congress has passed the 

Government Procedures and Results Act. It is now adopted on the 

administrative side as PART. And one of the toughest things, I 

think, to measure in the PART program is your educational effort. 

I agree with you, education is a vital part to accomplish it. But how 

are you going to measure success when we come in to using education that is measurable? 

Attorney General GONZALES. Well, hopefully, if you look at recent 

studies about the number of children who have been solicited online and you look at the number of children who are responding to 

those solicitations, which I believe are going down, I think part of 

the reason is because we are doing a better job of educating parents and educating kids about the dangers of online solicitation. 

So you are right, this may be an area that is going to be tough 

to measure. But I think you and I can both agree how important 

this is and, nonetheless, while it may be tough to measure, we have 

an obligation, in order to be successful in this, to educate parents 


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and educate kids about the dangers of child pornography on the 

Internet. 

Senator ALLARD. I hope you spend some time in figuring out how 

to best measure this, because I think that is vital for the continuation of this program that you are starting. And if we cannot show 

results in some way, then I think it is difficult to come to the appropriators for more money for the program. 

Attorney General GONZALES. We will look at that, Senator. 

Senator ALLARD. Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator Allard. 

Senator Enzi. 

Senator ENZI. Thank you, Mr. Chairman. Senator Sarbanes mentioned an American law that could provide some follow-up. In England, a law was passed earlier this year that allows law enforcement officials to pass along to credit card companies the information of those who are suspected of or convicted of accessing child 

pornography. The credit card industry then has the ability to revoke the offender’s credit card. 

Is the Department of Justice interested in participating in such 

a program? And what liability issues exist if you were to participate? 

Attorney General GONZALES. I would need to look at that program, quite frankly, Senator. Obviously, we operate under different 

legal systems, and I would have to—I would want the opportunity 

to look at that. There may be, again, if you are talking about sharing information, Government information, with commercial enterprises or nongovernmental entities, there may be privacy interests 

that we would have to take into consideration. 

But this is a kind of crime where the more information we have, 

the more helpful it is, as I have indicated already. And it is something that I would be interested in looking at, so I would be happy 

to do that. 

Senator ENZI. OK. Thank you. 

Now, last year the administration announced its intention to 

ramp up the prosecution of Federal obscenity cases. What is the 

status of that increased prosecution? And has it increased the prosecution of obscenity cases that have led to increased prosecution of 

child pornographers? And do you find that people that do obscenity 

also do child pornography? 

Attorney General GONZALES. There is a connection. I think there 

is a connection. I think we can cite the studies that show a connection. If you are talking about—people ask, well, why are you going 

after obscenity cases? It is because oftentimes there is child pornography involved, and that is why we think it is important, and that 

is why in this discussion we should not lose sight of obscenity prosecution. That is important. And it is a reason why, as I indicated 

in response to an earlier question, I have asked our U.S. Attorneys 

to do more. You asked me what is our status. We need to do more, 

quite frankly. 

I have spoken with the troops out in the field about why I think 

this is important. I think we need to do a better job, and so we will 

continue to work at it. 

Senator ENZI. What has been the result of the increased prosecution of obscenity cases? 


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Attorney General GONZALES. I cannot cite to you the numbers, 

but we can certainly get that for you, Senator. I would have to say 

that probably—I will say that I am disappointed in the efforts to 

date. But in defense, in fairness, I mean, these are tougher cases 

to make, again, depending on the prevailing standards of a community, whether or not you can have a successful prosecution. I suspect it is probably easier in some portions of the country than it 

is in other portions of the country. And so we are asking in some 

cases much more of a U.S. Attorney, depending on, you know, what 

city or town they are located in as opposed to someone else. 

But, nonetheless, because of the correlation between obscenity 

and child pornography, I think it is important that we not lose 

sight of these kinds of cases as well. 

Senator ENZI. And I would appreciate it if you would give me 

those numbers. I have reviewed a number of proposals to curb pornography and child pornography, and most of the proposals from 

the Department of Justice deal with the regulation of the Internet. 

Will you be presenting us with any formal legislative proposals 

for the Banking Committee to consider? And if so, could you give 

us a preview of those proposals? 

Attorney General GONZALES. Senator, I do not know whether--we 

are still in discussions about what, if anything, we would present 

to this Committee. Again, I apologize, but I do not have an answer 

to that question. 

Senator ENZI. OK. Thank you. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator. 

Senator Bunning. 

Senator BUNNING. Thank you, Mr. Chairman. 

Attorney General Gonzales, in observation of what we have done 

and where the status of Internet pornography and exploitation of 

children presently is, we seem to be going backwards. And the reason I say that we seem to be going backwards is that every time 

I watch or see a case, I see local, State, and Federal laws conflicting on what we can actually arrive at. 

Now, I am asking you as the Attorney General, the chief law enforcement of the United States of America, what law would best 

serve our purpose so that we can wipe away the conflicting laws 

of local and State jurisdiction? Because if you watch some of the 

cases that are coming up, it always seems that local, State, and 

Federal jurisdictions are bumping into each other trying to prosecute the very people we know are exploiting our children, my 

grandchildren, and your two children. 

So what can you do and what can your Department do to suggest 

getting rid of or making sure that the privacy laws are not violated 

and we can get at the perpetrators? 

Attorney General GONZALES. Senator, I do not know whether it 

would make sense, quite frankly, to have a Federal law that would 

preempt State law. We have some very dedicated, very committed 

State and local prosecutors. Quite frankly, we do not have the resources—there are only 12,000 Federal law enforcement officials. 

There are 800,000 State and local law enforcement officials. And so 

we need them as partners, quite frankly. And so we need them to 

be able to prosecute State and local violations. 


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I would not characterize it as us bumping into each other. You 

know, obviously, we run—everyone is committed to this issue. In 

many cases, State and local officials are quite happy to have the 

Feds take over a prosecution. Why? Because we in most cases have 

better resources. We have more experience in dealing with these 

cases. And, quite frankly, the sentences, the Federal sentences are 

much tougher. 

And so, for that reason, it has been my experience that the cooperation in terms of how to resolve these cases has been actually 

pretty good. And, obviously, from time to time, there are disagreements, but my general experience is that the end goal here is, 

again, to get a successful prosecution, and we try to work together 

whenever we can. 

Senator BUNNING. I can understand us working together, but I 

have seen many cases that are stymied because of local, State, and 

Federal laws conflicting on certain privacy, evidence, and how a 

case is handled. We know the person is guilty. We cannot get to 

them because of some local jurisdiction—or State jurisdiction, for 

that matter. And I just think that the situation is such that we 

have to be able to get to the perpetrators. 

Attorney General GONZALES. Senator, I would like the opportunity to think about this question, and perhaps I could get back 

to you with a response. 

Senator BUNNING. OK. In preparing for this hearing, I was looking over the list of organizations in the Financial Coalition Against 

Child Pornography, but I did not see the Child Exploitation and 

Obscenity Section of the Department of Justice anywhere. 

What role does this section play in this group? 

Attorney General GONZALES. Senator, the Financial Coalition is 

a nongovernmental entity, and the members include NCMEC, its 

international partner, Internet industry leaders, and banks and financial institutions. 

The coalition sort of serves as a clearinghouse. We have folks 

from the Department of Justice, the FBI, CEOS, the Postal Service, 

ICE, there on the premises at NCMEC. And so as they receive information, we receive it real-time, and that is why I talked earlier 

about this data base that has been created of commercial websites. 

And so when this information comes in, NCMEC makes an evaluation as to whether or not is this, in fact, child pornography. If it 

is, if they believe it is, they refer it to the law enforcement community. We then make an assessment as to whether or not this is 

something that should be prosecuted. If we cannot make that assessment within 10 days, then NCMEC goes back to the bank, say 

it is Visa or MasterCard, and then Visa or MasterCard takes the 

action that they believe is appropriate in dealing with that particular merchant. 

So CEOS is involved in terms of assisting in the investigations, 

assisting in the prosecutions, and also involved very much so in 

training programs around the country with State and local officials. 

Senator BUNNING. I know my time is almost—last question. 

Internationally, what countries are you seeing the most child pornography come from? And what cooperation have you gotten from 

those governments? 


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Attorney General GONZALES. Senator, I would say—I would characterize it as sort of Eastern Europe and Asia. I do not want to 

name a country in terms of—I do not want to emphasize a particular—— 

Senator BUNNING. You do not have to name a country. Just give 

me sections. 

Attorney General GONZALES. Eastern Europe. 

Senator BUNNING. Eastern Europe. And what cooperation have 

you gotten from those governments? 

Attorney General GONZALES. Senator, we have seen cooperation 

in connection with specific cases where there has been a willingness to share information and to participate in prosecutions. But, 

quite frankly, I think that countries ought to be doing more. 

We worry about the explosion of child pornography in our country. I believe it is even worse in other countries. It is because, I 

think, the efforts there are not as great as they are here in this 

country. 

Senator BUNNING. They do not realize the damage that is being 

done. 

Thank you. 

Chairman SHELBY. Thank you, Senator Bunning. 

Senator Sarbanes. 

Senator SARBANES. I really want to go to the next panel, Mr. 

Chairman. 

Mr. Attorney General, child pornography, as I understand it, is 

per se obscene, correct? 

Attorney General GONZALES. Child pornography is not protected. 

That is correct, sir. 

Senator SARBANES. That is right. So it does not have any First 

Amendment protections. 

Attorney General GONZALES. That is correct, sir. 

Senator SARBANES. So getting at child pornography, it seems to 

me, is a matter of implementation and enforcement. We do not 

have any sort of problem with the legal standard because the 

courts, in effect, have said on its face it is obscene, correct? 

Attorney General GONZALES. That is correct, sir. 

Senator SARBANES. Well, it seems to me that that really lays the 

basis for a pretty intense enforcement effort on the part of Federal, 

State, and local governments at all levels. I mean, I was listening 

carefully to Senator Bunning’s question, and I thought it was a 

very, very important question. But we do not have a situation here 

where there is some question about the legality and so forth. The 

courts have been very clear about that, as I understand it. 

And so it seems to me the challenge is the enforcement and the 

implementation. We appreciate what the Department of Justice is 

doing, and I think the other Federal agencies could also do more. 

And, of course, we need to back it with resources from here if we 

are going to—and I do, again, in closing, commend Chairman Shelby for launching this initiative, which I think was a very innovative approach. If we can dry up the money, we are going to dry up 

at least a very large part of this activity. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator. 


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Mr. Attorney General, we thank you for your presence today. We 

know you are a busy man. Let’s continue to work on this. And 

there are a number of things for the record that you said you would 

get back to various Members here today. 

Attorney General GONZALES. Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you. 

We now will welcome the members of our second panel: Mr. 

Ernie Allen, President and Chief Executive Officer of the National 

Center for Missing and Exploited Children; Ms. Kim Mowder, Senior Vice President, Bank of America Merchant Services; Mr. Mike 

DeNoma, Group Executive Director of Consumer Banking for 

Standard Chartered Bank; Ms. Jodi Golinsky, Vice President, Regulatory and Public Policy Counsel for MasterCard Worldwide; Mr. 

Mark MacCarthy, Senior Vice President for Public Policy, Visa 

USA, Inc. 

I will tell all of you now, all of your statements will be made part 

of the record in their entirety. The bad news—or maybe the good 

news—we have a vote pending at noon, so we ask that you summarize your remarks as quickly as possible. 

Mr. Allen, I just want to say something about you and thank you 

for your tireless efforts. You have been very instrumental—very— 

in the success of the coalition thus far—we have got a long way to 

go—for your work on behalf of children all over the world. Thank 

you so much, and welcome again to the panel. 

STATEMENT OF ERNIE ALLEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL CENTER FOR MISSING AND EXPLOITED CHILDREN 

Mr. ALLEN. Thank you, Mr. Chairman, Senator Sarbanes, and 

Members of the Committee. I will be brief and summarize my testimony. 

Mr. Chairman, as the Committee has pointed out, 1 year ago you 

convened leaders of the financial industry in this room and challenged us to do more to attack this problem. Six months ago, you 

joined us as we launched this new Financial Coalition. And as you 

know, and as has been mentioned, we set a goal, and that goal was 

to eradicate commercial child pornography by 2008. Well, today 

what I wanted to report to you and the Committee is what we believe is significant progress. 

As you mentioned, financial industry leaders who represent 87 

percent of the U.S. payments industry, measured in dollars running through the system, have signed on. They involve the largest 

credit card companies, major banks, third-party payment companies, Internet leaders, and we are seeking to expand the membership internationally. 

I am pleased that an international bank, a coalition member, is 

with us today, Standard Chartered Bank of Singapore. Our mission, as the Committee has mentioned, is to follow the money, stop 

the payments, shut down the accounts, and put an end to this 

multi-billion-dollar worldwide enterprise. 

The Attorney General spoke in vivid terms about what this problem really is, and let me emphasize that we still believe that most 

of America does not get it. They think this a problem about 20- 

year-olds in pigtails made to look like they are 15. Eighty percent 


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of the offenders who have been identified have had images of prepubescent children, 39 percent less than 6 years old, 19 percent 

younger than 3 years old. That is what this problem is about. 

Since our March announcement, we have built a mechanism for 

sharing information between the participating companies and law 

enforcement. Our goal is to quickly identify the merchant bank at 

which the account is located and then utilize existing banking law 

to stop the payments and shut down the sites. 

Our first priority remains investigation and prosecution, and as 

the Attorney General indicated, law enforcement always has first 

crack at the data. But our premise is you cannot possibly prosecute 

everybody. I have talked on many occasions about that Texas 

website that we identified through a report to our CyberTipline 5 

or 6 years ago which, when it was shut down by the Dallas Police 

Department, had 70,000 customers paying $29.95 a month and 

using their credit cards to access graphic images of small children 

being raped and sexually assaulted. That is not acceptable. 

What I am prepared to report to you today is that, even though 

we have just completed the pilot phase of this effort, testing the 

mechanisms and systems that we have put into place for information sharing and action, there are three basic conclusions that we 

have drawn that we are seeing already. One is because of the 

strong, unprecedented efforts of law enforcement at all levels, the 

efforts of the financial companies and others. We believe that we 

are already disrupting these enterprises. 

Our first and primary goal was to eliminate the use of the credit 

card for child pornography purposes. We want these processes to 

be as difficult and cumbersome as possible and make the business 

plan unworkable for these enterprises. And what we are seeing is 

that, while we are still finding credit card logos on many of these 

sites, in most instances when we look deeper, we are finding that 

they do not link to real accounts. 

There are a couple of possible explanations. One is we are finding that in many cases these logos are being used for purposes of 

identity theft. If you attempt to purchase access to a child pornography site and you do not get access to that product, who are you 

going to tell? So there is no question that criminals are using this 

technique for identity theft. 

The other thing we are seeing is that in many cases the operators are going back to the purchaser and offering other payment 

mechanisms. These tend to be non-mainstream payment devices, 

but, clearly, as the Attorney General indicated, these businesses 

are evolving and they are changing, and we think the leadership 

of this industry and the pressure that is being put on these illegal 

sites is already having impact. 

There are some things that we believe that you and Senator Sarbanes and the Committee can help us do. One, we are proud of the 

fact that companies representing 87 percent of the U.S. payments 

industry are part of the coalition. But it ought to be 100 percent. 

We welcome your help in bringing the rest of the U.S. financial industry into this process. 

Second, we recognize that this is a global phenomenon. We need 

your help in bringing more international institutions and international decisionmakers into this process. 


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And then, as the Committee pointed out, third, as it relates to 

the Attorney General’s report, we need much more law enforcement 

presence and much more law enforcement attention to this problem. What we have discovered is that the sheer scale of this is far 

greater than any of us ever imagined. The Internet has spawned 

a problem that is of a magnitude unimaginable. 

Mr. Chairman, I am pleased to report to you that we are making 

progress, but we have only just begun. 

Chairman SHELBY. Thank you. 

Ms. Mowder. 

STATEMENT OF KIM MOWDER, SENIOR VICE PRESIDENT, 

BANK OF AMERICA MERCHANT SERVICES 

Ms. MOWDER. Chairman Shelby, Senator Sarbanes, and MM embers of the Committee, my name is Kim Mowder. I am the head 

of Risk and Fulfillment for BA Merchant Services, a subsidiary of 

Bank of America. Bank of America BA Merchant Services provides 

card processing services for merchants across the United States. 

We applaud the Chairman’s focus on this issue and the resulting 

coalition that Ernie Allen so ably chairs. We are proud to be a part 

of this collective effort and believe that your involvement, Mr. 

Chairman, is what led to this first ever joint industry effort to combat child pornography—a process that I understand began right 

here in this room. We certainly commend Kathy Casey as well for 

all of her efforts before she left the Committee. 

We are equally proud to be associated with the National Center 

for Missing and Exploited Children. We subscribe to and wholeheartedly agree with all of the benefits and progress Mr. Allen has 

described to you. Like everything Ernie brings his passion and 

commitment to, it is working, and it goes without saying that we 

appreciate the excellent work being done by the Attorney General, 

the Department of Justice, and all law enforcement to combat the 

issue. 

I would like to begin my testimony by emphasizing that Bank of 

America’s policy and practice is to vigorously screen for and avoid 

signing merchants that are engaged in any kind of questionable activity, let alone child pornography, and to terminate any relationships that subsequently change in that direction should that happen. We simply have zero tolerance when it comes to issues like 

child pornography, and like our colleagues, we are closely aligned 

with and cooperate with law enforcement at every level. 

Bank of America is the second largest acquirer of merchant services in America. We have been processing credit cards for merchants since 1958 and have approximately 700,000 active merchants in our system. We take great pride in our very conservative 

risk-averse approach to the merchant services business and do not 

hesitate to decline nearly 2,000 applicants a year because the activity of the merchant is inconsistent with our policies. 

In that regard, our underwriting policy clearly defines those merchant types whom we deem to be unacceptable for a card servicing 

relationship. We are much more conservative than is legally permissible, and the following business types are routinely declined by 

us: adult entertainment products and services, dating and escort 

services, debt collection firms, pornography products and services, 


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tobacco products being sold via mail order, telephone order, or 

Internet sales, wire transfer of money, or any money-related services. No exceptions are made on these business entities and, again, 

we have zero tolerance for issues like child pornography. 

Our process of thoroughly vetting merchant applications begins 

with the salesperson talking directly to a merchant, often face to 

face. Together they complete a merchant application that is sent to 

the underwriting experts in our processing center. Our process is 

based on the principle of know your customer, not only to screen 

out undesirable activities but also to look for other potential business opportunities. 

Merchant application packages contain profile information on the 

merchant’s business that includes but is not limited to a description of the products and services being sold, a description of how 

sales will occur, and demand deposit banking information. In addition, the merchant application may include personal name, address, and Social Security information on the owner or officer of the 

business. This information is used in the due diligence process to 

validate the business type and ownership. 

Underwriters review new merchant applications, and they are 

charged with validating the merchant’s physical business address, 

confirmation of the products or services being sold, and the methods of sale, i.e., retail storefront, mail order, Internet. And of 

course, all pages and links in a merchant’s website are examined 

and maintained for future comparisons. I have listed in my written 

testimony nine of the tools we use to properly vet merchant applications, including verifying physical inventory, contacting neighboring businesses, and based upon information from these sources, 

the underwriter may decide it is necessary to perform additional 

due diligence. 

We will do whatever is necessary to ensure we are signing merchants consistent with our very conservative policies. Again, should 

the merchant be selling products or services via the Internet, the 

merchant’s Internet links are a substantial focus, and we look at 

embedded links to any other sites to identify products and services 

that might be offered through this merchant’s site that could be 

identified as unacceptable. 

Screening for unacceptable activities does not end with the initial 

due diligence process. All accounts are reviewed every year by BA 

Merchant Services, and our Risk Department performs daily monitoring of merchant transaction activity to ensure close monitoring 

of their daily processing. Daily activity reports are generated on 

those merchants that appear to be processing sales contrary to the 

expected norm based on the original terms of their processing 

agreement and the business type and size. 

Risk investigators utilize the same due diligence tools to investigate the merchants appearing on our exception reporting as those 

used by the underwriters on new merchant applications, all in an 

effort to gain an understanding of the merchant’s current processing behavior. And due diligence may include, but is not limited 

to, talking directly to card holders to confirm transaction validity 

and makeup, communicating with the merchant’s banking representative, or speaking directly with the merchant. 


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From this investigation, the investigator will determine what, if 

any, post-due diligence must occur. Should the investigation determine that the merchant subsequently has begun engaging in unacceptable activities, the following actions are immediately taken: the 

merchant processing capability is terminated, merchant profile information is forwarded to the bank’s Investigation Service Division 

for immediate investigation, and the bank coordinates with law enforcement. 

And, of course, we work in very close partnership with the card 

associations. They employ on our behalf a vast array of protocols, 

all designed to be a formidable line of defense to capture potential 

illegal activities. Our efforts and theirs are not discrete, but a 

seamless and cooperative venture to ensure we all prevent the use 

of our payment networks for such practices. It is a partnership 

made stronger by the coalition Ernie chairs. 

In summary, Bank of America has a zero tolerance for anything 

related to child pornography. We believe strongly that our investigations and due diligence procedures provide assurance that no 

undesirable merchant activities are being processed through our 

service, and we work closely with the card associations to close any 

merchants that they identify as posing a risk. Finally, we support 

the collective efforts of the coalition and this Committee to ensure 

the legitimate electronic payments industry is neither wittingly or 

unwittingly facilitating the sale of online child pornography. 

Thank you. 

Chairman SHELBY. Thank you. 

Mr. DeNoma. 

STATEMENT OF MIKE DeNOMA, GROUP EXECUTIVE DIRECTOR, CONSUMER BANKING, STANDARD CHARTERED BANK 

Mr. DENOMA. Thank you, Mr. Chairman and distinguished Members of the Committee, for the opportunity to contribute to this discussion. My name is Mike DeNoma. I am the Group Executive Director of Standard Chartered Bank and the CEO of Global Consumer Bank. My home base is Singapore. 

As we all know, the scourge of child pornography knows no 

boundaries. For that reason, I was eager to travel to Washington 

yesterday to be part of these important hearings. 

I commend the Senate Committee on Banking, Housing, and 

Urban Affairs for its commitment to this vital issue. In particular, 

I want to acknowledge Senator Shelby for his leadership in helping 

us to build and launch the Financial Coalition Against Child Pornography. 

In addition to my role at Standard Chartered, I am a member 

of the Board of International Centre for Missing and Exploited 

Children, and it is an honor to be affiliated with that group. 

Standard Chartered is a founding member of the Financial Coalition Against Child Pornography. As an individual institution, 

Standard Chartered, like Bank of America, has its own processes 

for ridding its systems of child pornography merchants, and we are 

beginning to share best practice with other industry players. However, we firmly believe the best way to battle this horrendous problem is to join forces and brain power with other members of the 

industry on both a global and a country-by-country basis. Given my 


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company’s 153-year history and role in Asia, Africa, and the Middle 

East, we have committed to take the lead in attempting to recruit 

key actors—governments, payment providers, regulators, financial 

institutions, and Internet service providers—within each of our 56 

countries and have them join forces to combat this serious problem 

on a national level. 

Our objective is to present these key actors in 75 percent of our 

countries by the end of March 2007. We have been working in 

Singapore as a pilot market for this approach over the last 5 

months. The Association of Banks in Singapore, which has 110 

members, and the coalition it formed, we believe, is now just weeks 

away from making an important announcement on how it will combat this problem on a Singapore level. India, Hong Kong, Thailand, 

and Indonesia are next on our list and will be presented in the next 

60 days. 

Further, we are trying to raise awareness of the size, scope, and 

intensity of this problem amongst critical local decisionmakers as 

well as with the general public and opinion formers across our 

markets and the globe. 

The Attorney General mentioned the need for education. To that 

end, we recently launched a campaign that we call ‘‘Light A Million 

Candles.’’ Our goal is to gather a million signatures in a virtual petition to challenge financial institutions, governments, payment organizations, Internet service providers, technology companies, and 

law enforcement agencies to work together to eradicate this problem. The internet is much of the cause of this problem, and we believe the internet must be used to fight it. It is a platform to tell 

the facts and get people to take action. 

The campaign was developed by a team lead by Standard Chartered employees who donated not only their time but also their creativity, and, in fact, their personal funds in raising the $60,000 to 

produce the television spot, which we will get you all a copy of, and 

they raised those funds in 48 hours. Global advertising agency 

TBWA worked with award-winning director Royston Than and 

well-known photographer Geoff Ang to develop a hard-hitting campaign involving a TV commercial, print ads, a viral e-mail that is 

in 22 languages on its way to 50 languages, and a website to increase awareness of the global problem of child pornography and 

to motivate people to visit lightamillion candles.com to pledge their 

support for this cause. One week old, 76,000 candles were lit by 

Sunday evening on the website by individuals from 130 countries. 

In fact, the last record before this meeting started, it is now up to 

105,000 signatures from 130 countries. 

In addition, the global media agency OMD is approaching international media owners to support the cause by running the TVC 

and print ad as a public service. So far, CNN, MTV, the BBC, Discovery Channel, Time Magazine, and Reader’s Digest in four languages have already agreed to donate media space to support the 

campaign. We expect much more coverage in the weeks and 

months ahead. 

The TV commercial itself involves 11 children of 11 different nationalities, giving the facts of child pornography in their own language, with subtitles in English below. We tested it with conVerDate Nov 24 2008 00:52 Nov 24, 2009 Jkt 050304 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 E:\HR\OC\A304.XXX A304

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sumers. It is both a sad and disturbing commercial, but it does 

drive action. 

In terms of financial services industry push, the 23,000 delegates 

and observers to the IMF/World Bank meetings in Singapore this 

week will see the TV spot in elevators of the 110 buildings and hotels and on the big video screens in the main conference area of the 

IMF. And perhaps most important, our chairman and senior executives will be working at the IMF on a personal level to raise awareness of this issue and to enlist international and local financial institutions to join the Financial Coalition Against Child Pornography. 

As you can see, Standard Chartered is engaged in the fight on 

a number of fronts. To be sure, the challenge is considerable in 

many areas, and includes safe harbor legislation on legal liability, 

clearinghouse administration and accountability, whether it is on a 

national or a global level, and the rapidly evolving alternative payment methods. But the good news is that awareness of the problem 

is growing rapidly, and the payments industry is putting a great 

deal of muscle into following and stopping the flow of funds to this 

insidious enterprise. But I agree with the Attorney General. Much 

more needs to be done. 

Again, I commend the Committee for its proactive work on this 

critical matter and look forward to continuing our dialog with you 

in the future. 

Chairman SHELBY. Thank you very much. 

Ms. Golinsky. 

STATEMENT OF JODI GOLINSKY, VICE PRESIDENT, REGULATORY AND PUBLIC POLICY COUNSEL, MASTERCARD 

WORLDWIDE 

Ms. GOLINSKY. Good morning, Chairman Shelby, Ranking Member Sarbanes, and Members of the Committee. My name is Jodi 

Golinsky, and I am Vice President, Regulatory and Public Policy 

Counsel at MasterCard Worldwide. It is my pleasure to appear before you today to discuss our efforts to combat child pornography. 

MasterCard deplores attempts to use our system for illegal purposes, and we are deeply committed to combating the sale of child 

pornography. Our efforts in this area include: one, working to prevent offending websites from accepting MasterCard-branded payment cards; two, detecting websites attempting to circumvent our 

prohibition; and, three, assisting law enforcement to detect, apprehend, and prosecute child pornographers. 

We have had great success in impeding these criminals from accessing our system. We recognize, however, that we see only part 

of the problem and that criminals who are denied access to our system are quick to look for other payment alternatives. We also recognize that private sector efforts alone are simply not enough. Collaboration with law enforcement is critical. Law enforcement must 

be given the tools and resources to apprehend and prosecute these 

criminals, and there must be an effective mechanism for the private sector to assist law enforcement in achieving those objectives. 

To address these issues, MasterCard has partnered with the National Center for Missing and Exploited Children, or NCMEC, to 

form the Financial Coalition Against Child Pornography. We 


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strongly commend the Chairman for his leadership in the formation of the coalition. In conjunction with government leaders and 

law enforcement agencies worldwide, the coalition has embarked on 

a first of its kind globally focused effort to identify and eliminate 

commercial sources of child pornography. 

I want to discuss more directly MasterCard’s efforts to combat 

this problem as well. MasterCard has a series of rules that require 

financial institutions that contract with merchants, also known as 

acquiring banks, to ensure that the merchants are legitimate and 

engaged in solely legal activities. These rules mandate, among 

other things, that acquirers perform due diligence before authorizing merchants to accept MasterCard payment cards and that 

acquirers monitor merchants on an ongoing basis for compliance 

with the rules. We have also proactively educated our customer financial institutions around the world about our rules and their obligations with respect to illegal transactions, such as child pornography. 

MasterCard also works closely with law enforcement officials to 

assist them in detecting and prosecuting child pornographers. In 

addition, we undertake significant efforts to detect child pornographers seeking to circumvent our controls. These efforts include 

searching the Internet to identify sites that appear to be selling 

child pornography and purporting to accept our cards as payment. 

In the overwhelming majority of cases where our brand appears on 

the site, we have found that the site does not actually accept our 

cards but impermissibly displays our logo. Our success in impeding 

these criminals from using our system does not end the problem, 

however. We have seen a clear trend in which child pornographers 

denied access to our system are moving rapidly to alternative payment methods to avoid detection and prosecution. We are not, 

therefore, content simply to drive these criminals from our system, 

and we are devoting considerable resources to a more comprehensive approach to dealing with the problem. 

We believe that our partnership with NCMEC and the coalition 

provides such an approach. MasterCard provides to NCMEC the 

fruits of our investigative efforts and other information that may 

be helpful to them. NCMEC in turn investigates and then refers 

this information to the appropriate law enforcement officials who 

are given the opportunity to conduct their own investigation. If law 

enforcement decides to proceed with an investigation, we work with 

law enforcement to support their efforts. If law enforcement decides 

not to proceed, a notice is sent to any payment service provided on 

that site, and those services work to terminate payment acceptance 

at the site. 

In addition to our active participation in the coalition, 

MasterCard is also a corporate sponsor of NCMEC. MasterCard 

views our sponsorship of NCMEC as an extension of our fight 

against the exploitation of children and dissemination of child pornography on the Internet, and we are very proud to contribute to 

their efforts. 

Chairman Shelby, Ranking Member Sarbanes, and Members of 

the Committee, thank you again for the opportunity to discuss 

these important issues with you today. MasterCard is deeply committed to doing its part to eliminate the commercial viability of 


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child pornography on the Internet. It has also been our pleasure to 

work with your staff, with NCMEC, with law enforcement, and others to try to develop solutions to this problem, and we look forward 

to continuing those efforts. 

I would be glad to answer any questions you may have. 

Chairman SHELBY. Mr. MacCarthy. 

STATEMENT OF MARK MacCARTHY, SENIOR VICE PRESIDENT, 

PUBLIC POLICY, VISA USA, INC. 

Mr. MACCARTHY. Thank you, Chairman Shelby, Ranking Member Sarbanes, and Members of the Committee. My name is Mark 

MacCarthy. I am Senior Vice President for Public Policy with Visa, 

and thank you for the opportunity to appear at today’s hearing. 

Mr. Chairman, Visa does not allow its payment system to be 

used for illegal activity, and that includes child pornography. And 

because the crime of child pornography is such a heinous exploitation of the vulnerable and the innocent, we have a special program designed to search the Internet to detect child pornography 

merchants and expel them from the Visa system. I want to describe 

that program for you in more detail today, but I want to start with 

the Financial Coalition Against Child Pornography. 

Visa cannot conduct a successful campaign against child pornography by itself. We need to cooperate with others. And that is why, 

under your leadership, Mr. Chairman, Visa and other payment systems joined to form the Financial Coalition Against Child Pornography. 

Together with our coalition partners, we will enhance our efforts 

to identify these websites, we will pinpoint the merchants who are 

involved in this illicit activity, and we will cut them off from our 

networks, and we will provide assistance to law enforcement to 

track them down and get rid of them for good. 

Our own zero tolerance anti-child pornography program has two 

parts: We have got a set of due diligence requirements, as my colleague at MasterCard has mentioned, and we have our monitoring 

program designed to detect child pornography sites and get them 

out of our payment system. 

A brief word on our system. Visa itself conducts communication 

and settlement functions for the members of the Visa Payment System. It is the members of the Visa Payment System themselves 

who have these direct relationships with the merchants. 

We have explicit rules to govern their conduct. One of the rules 

is not to introduce illegal transactions into the system. And our 

pornography rules are quite clear. On child porn, acquires must ensure that Internet merchants do not submit child pornography 

transactions into the Visa system, and they must terminate acceptance at any child pornography site that is found to be accepting 

Visa cards. 

You have heard from another one of my colleagues at Bank of 

America the kind of due diligence requirements that they go 

through. We think that these are important and necessary lines of 

defense against child pornography entering our system, but they 

are not a panacea. Child pornography merchants do not present 

themselves as such to our financial institutions. They often appear 

to be legitimate merchants. They use a variety of techniques to fool 


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acquires and gain access to our system. Senator Sarbanes mentioned a few of those techniques earlier. 

As a result, Visa has a monitoring system to identify and eliminate child porn transactions. Since 2002, we have retained the 

services of an outside firm to search the Internet for child pornography websites that appear to be accepting Visa payment cards. 

This firm uses advanced webcrawling and filtering technology to 

detect the websites. It looks for websites that display the Visa logo 

and that satisfy one or more indicators that they are engaged in 

the sale of child pornography or that they advertise themselves as 

engaged in the sale of child pornography. 

These sweeps are ongoing. They are conducted 24 hours a day, 

7 days a week, 365 days a year. Hundreds of millions of websites 

are searched every month. 

When our search firm detects one of these problematic sites, they 

conduct test transactions to see whether, in fact, the site is accepting Visa cards or whether they are simply purporting to accept 

Visa cards. As my colleague from MasterCard pointed out, in most 

of the cases they are merely purporting to accept the Visa cards. 

When we find a site that is actually accepting Visa, we immediately get in touch with law enforcement and find out whether 

they have an active and ongoing investigation. If there is no request from law enforcement to keep the site open, Visa instructs 

the acquiring bank to shut down that website immediately. 

If the sites are not, in fact, accepting Visa cards but they just appear to be, we then attempt to contact the web hosting service and 

get them to take down the Visa logo. 

In addition, Visa provides information on all these sites to law 

enforcement, and if they request it, we do allow these sites to remain operational. 

Visa’s anti-child pornography program has made progress since 

we started it in 2002. Our most recent numbers tell the story. In 

August of this year, our search firm examined over 11 million 

Internet sites a day and found two child pornography sites that accepted Visa cards. Of course, that is two too many. Since the beginning of this year, nine such sites have been identified in the Visa 

system, and all of these sites were quickly expelled from our system. 

Mr. Chairman, in conclusion, let me repeat the point I started 

with. The way forward lies with collective action. Visa intends to 

continue and to increase our efforts with the Financial Coalition 

Against Child Pornography and to work cooperatively with law enforcement to put an end to this scourge. 

I would be happy to answer any questions you might have. 

Chairman SHELBY. First, I would recognize Senator Allard, and 

I will conclude after everybody else because we have got a vote on 

the floor. Senator Allard. 

Senator ALLARD. Thank you, Mr. Chairman. I have a couple of 

questions I would like to ask. 

We have just been provided with some material here by Mr. 

Allen on some of the websites. For the audience’s benefit, all the 

offensive material has been blacked out. But I noticed that there 

were some claims on these websites I would like to investigate with 

you. 


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There are some copyright claims. Now, are these false claims, or 

are they actually protected by the copyright system? And the question is: If they are protected by our copyright system, is that good 

in the fact that it prevents the dissemination of the offending material? Or is it bad in the fact that it protects the profits for those 

who are—protects the profits of the child porn exploiters? 

Mr. ALLEN. Senator Allard, I think it is a bad thing. I think it 

is a misuse of the copyright system. However, in most—the examples we have given you are pretty explicit, and I am not sure how 

they got through the copyright system. But most of them are not 

quite as clear-cut. 

Frankly, this has not been an aspect that we have focused on, 

but I think your point is a very good one, and we need to look more 

closely at that. 

Senator ALLARD. Maybe in the Library of Congress I believe is 

where we have those copyrights provided for. 

Mr. ALLEN. Absolutely. 

Senator ALLARD. And so maybe some kind of program at the Library of Congress might be helpful in that regard. 

The other question that I have, there is actually a guarantee on 

those sites also about absolute privacy. Now, is that a false claim? 

Mr. ALLEN. Well, I think pretty clearly it is a false claim, but certainly that is the premise. If you think about the pressure that is 

on these sites, the kind of consumer audience that is being attracted, and certainly part of the premise is you can come to the 

site and you can patronize with no risk. Clearly, the effort of this 

coalition, the effort of Federal, State, local, and international law 

enforcement is to pierce that veil of privacy and make sure that 

they are not private so we can look behind the curtain. But, nonetheless, it is going to be a continuing representation that these 

sites make. 

Senator ALLARD. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Sarbanes. 

Senator SARBANES. Well, thank you, Mr. Chairman. I will be 

very quick because I know there is a vote going. 

Mr. MacCarthy, I wanted to ask you a quick question. You said 

if they are using the Visa logo, you ask them to stop using it. Is 

that correct? 

Mr. MACCARTHY. If the site is actually accepting Visa cards, we 

are able—— 

Senator SARBANES. You expel them from your system. 

Mr. MACCARTHY. Right. 

Senator SARBANES. But if you are not actually doing that, they 

are just advertising the Visa logo, what do you do? 

Mr. MACCARTHY. We have no ability to get directly to them 

through our banks, but we try to track them down using our search 

firm to find the hosting service that provides them the ability to 

maintain a website on the Internet. 

When we find that hosting service, we say to them, No. 1, look 

what you are involved in; and, No. 2, at the very least, take down 

our logo from the site, they are not authorized to do it. 

Senator SARBANES. Well, you can order them to take it—can they 

use your logo as an advertising way without your permission? 


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Mr. MACCARTHY. No, they cannot, but the question is: How do 

you enforce that? How do you make them stop doing it? You have 

to find them. And the way you find them is to go to the web 

hosting service and try to have their relationship with the merchant used to take down the logo. That is how we have to do it. 

Going forward, we will probably be able to use the NCMEC facilities to have a better way of proceeding in this area, but right now 

the best way we have got to do it is to go to the web hosting services. 

Senator SARBANES. Now, Mr. Allen, you said earlier there was a 

site in, I think you said, Dallas with 70,000 people a month, they 

pay $30 a month? 

Mr. ALLEN. Right. 

Senator SARBANES. So that is over $2 million a month just on 

that site. Is that correct? 

Mr. ALLEN. That is right, Senator. 

Senator SARBANES. That is $25 million a year. 

Mr. ALLEN. And this was a mom-and-pop operation. This was not 

a highly sophisticated operation. 

Now, in the interest of full disclosure, that is now 6 or 7 years 

ago. We think that that level of misuse of the payment system has 

disappeared because of the efforts of these companies. But I think 

that demonstrated what the potential consumer audience is for this 

content. That is one site. 

Senator SARBANES. Now, where are they shifting off to when they 

get blocked out from using the credit cards? Where are these 

snakes going off to, sneaking off to? 

Mr. ALLEN. They are going to a variety of places. Two of our key 

partners in this effort are PayPal and E-Gold, the third-party payment mechanisms who have increased their vigilance to make sure 

they do not go there, the use of Western Union, the use of a host 

of other payment mechanisms, and increasingly we are hearing 

that there are small aggregators who are being developed and customized specifically for the purpose of serving this kind of enterprise. So it is a moving target. 

Senator SARBANES. Thank you, Mr. Chairman 

Chairman SHELBY. Senator Bunning. 

Senator SARBANES. I want to thank the panel. It was very helpful testimony. We appreciate it. 

Senator BUNNING. I am just going to ask anyone of the panel. 

You have set a very ambitious deadline to meet your goal of eliminating all commercial child pornography. Why do you believe you 

can accomplish this goal by 2008, especially given the challenge 

posed by the Internet? 

Mr. ALLEN. Senator, I believe, we believe it is realistic. The reality is I do not think there is a precedent for this kind of industrywide approach to the problem. Our view simplistically is that if we 

can disrupt these enterprises, if you can eliminate the use of the 

credit card, it is going to be very difficult to maintain these businesses if you have to pay cash to gain access to a—— 

Senator BUNNING. But you just gave us some examples of where 

they are going. 

Mr. ALLEN. That is where they are going, but clearly, the effort 

here is to stay ahead of the curve and to follow them where they 


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go. One of the things that we are learning now from law enforcement is a huge percentage of the operators of these businesses 

today are organized criminals, many of them in Eastern Europe. 

And in our judgment, at some point this is just not going to be 

worth the price that it costs. The reason they are into this now is 

because the profits are enormous and the risks are minimal. What 

we are trying to do is increase the risks and eliminate the profit. 

Senator BUNNING. Yes, but you say that Eastern Europe or the 

European—isn’t it more difficult to prosecute at that level? 

Mr. ALLEN. Oh, absolutely, and one of the things we are doing 

through our International Centre in partnership with Interpol is 

training law enforcement around the world, building capacity. 

There is now a virtual global task force based in the U.K. to create 

a more unified law enforcement approach. The FBI has an international task force through its Innocent Images National Initiative. 

So we are bringing a lot more troops to the battlefield. 

Mr. DENOMA. I think part of it is by setting the deadline, you 

force action. 

Senator BUNNING. Setting the deadline would actually force the 

perpetrators or the—— 

Mr. DENOMA. No. I think it will force action from—— 

Senator BUNNING. From the financial—— 

Mr. DENOMA. The financial, governments, law enforcement, 

ISPs, and the reason is I think there should be increasingly an argument why a bank is not on the coalition. 

Senator BUNNING. On the list, yes. 

Mr. DENOMA. Frankly, I think alternative payment methods 

should have to provide a reason why they are not in the coalition. 

And increasingly what we are trying to do internationally is ask 

why a government of a certain country is not pursuing action like 

many other countries in the world are. 

Senator BUNNING. Well, I would think Visa and MasterCard 

would also not only throw the people out but report everything 

they do to the law enforcement agencies in the country or in the 

area where these perpetrators are exploiting. 

Ms. GOLINSKY. Absolutely, Senator. 

Mr. MACCARTHY. Senator, we have reporting relationships all 

over the world with international law enforcement as well as U.S. 

law enforcement. 

Senator BUNNING. Thank you. 

Ms. GOLINSKY. And MasterCard does as well. 

Senator BUNNING. Thank you very much, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator. 

I want to thank all of you, starting again with Mr. Allen, for your 

commitment. I want to thank the whole panel. 

Mr. DeNoma, I want to especially thank you for the work that 

you are doing. You have taken the lead in recruiting international 

members, which the Attorney General pointed out is so important, 

to join the Financial Coalition Against Child Pornography. We hope 

you will continue in this effort and work. We have got a long way 

to go. 

This has been, I think, a good hearing this morning. We have 

also had a chance to conduct an up-to-date review on the effort to 

eradicate child pornography. We have learned of the positive 


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steps—and they are out there—that the Government and the financial service industry that a lot of you represent have taken. 

We have also had a chance to get a glimpse of the ongoing efforts 

of the criminals who seek to profit from this horrible crime. Clearly, they will not simply give up. You know, they are going to be 

around. You are talking about billions of dollars. Billions. Easy 

money, too. 

I noted in my opening statement that our commitment and your 

commitment is crucial, and our level of commitment, that of the 

Government, the industry, and families must be greater than that 

of the criminals. If it is not, we will not win. 

I think it will not be enough—it never is enough—to have press 

releases or normally participating organizations like the Financial 

Coalition. But if we are going to achieve our goal to eradicate child 

pornography, it is going to take constant vigilance and hard, hard 

work. And I commend you for your participation. I think we have 

a long way to go. 

I personally believe that the software, if it is not there—and I 

know Bill Gates is very interested in this, too. Like everybody, he 

has got children. Maybe they can come up with software that will 

help you folks at Visa and MasterCard and the banking industry 

track these people a lot easier than it is today, because we have 

to win this battle. 

We have a vote on the floor. The Committee is adjourned. Thank 

you. 

[Whereupon, at 12:07 p.m., the hearing was adjourned.] 

[Prepared statements and responses to written questions supplied for the record follow:] 


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RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY 

FROM ERNIE ALLEN 

Q.1. In your testimony, you highlighted the success of the Coalition pilot program. As we move forward, have you learned of any 

new challenges that the Financial Coalition Against Child Pornography will face, and do you have the tools and cooperation to address them? 

A.1. We are very encouraged by the unprecedented level of cooperation among the companies of the Financial Coalition Against 

Child Pornography (‘‘FCACP’’), the National Center for Missing & 

Exploited Children (‘‘NCMEC’’) and the International Centre for 

Missing & Exploited Children (‘‘ICMEC’’). At the same time, we are 

realistic that we are attacking a global problem that has flourished 

on the Internet, a channel that has no geographic or jurisdictional 

boundaries. The Coalition’s commitment is strong, but challenges 

abound. 

Most immediately, the worldwide scope of this problem necessitates the cooperation of financial institutions around the globe. 

We are in discussions with banking associations and individual 

companies outside the U.S., but progress is slow. There is hesitation about reporting into a US-based clearinghouse. The way forward may be to build regional networks that ultimately flow into 

our core system here, but we need the participation of companies 

and governments around the world in order to build a framework 

that will get us to our goal. 

A centerpiece of the Coalition’s work will be test transactions 

done by law enforcement once a commercial child pornography site 

is identified. The issuing members of the Coalition are being asked 

to contribute test cards on an ongoing basis. It is too early to determine if we will secure an adequate flow of test cards to keep the 

clearinghouse running to optimum effectiveness. The early response has been positive and enthusiastic. 

The importance of law enforcement in our efforts to eradicate 

commercial child pornography cannot be understated. We are encouraged that the FBI has joined ICE in helping us to conduct test 

transactions. It is our hope to engage more law enforcement agencies going forward. 

As for detection of the websites, thus far, we are reliant on one 

company (G2), Electronic Service Providers (ESPs) and the general 

public through NCMEC’s CyberTipline (www.cybertipline.com) to 

report commercial child pornography sites. Awareness of reporting 

to the CyberTipline needs to be dramatically increased. 

Despite the fact that we are nearing our 425,000th report since 

1998, our research indicates that most of the American public still 

doesn’t know about the CyberTipline. Reporting of child pornography and online enticement of children should be easier and more 

universal. We are eager to work with the private sector to explore 

mechanisms that will make reporting easier and more instantaneous, such as a link or icon on the screen that enables reporting 

at the very moment the illegal conduct is detected by the public. 

Such an icon could serve as a virtual panic button for children in 

chat rooms and on social networking sites, and an easy way for 

millions to report without having to know or remember 

www.cybertipline.com. In addition, methods of detecting these 


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websites as soon as they are uploaded onto the web must be developed. 

We are mindful that as we put pressure on commercial child pornographers’ reliance on traditional payment methods, they will 

move to alternative payment schemes. We are just starting to understand the implications of that migration but clearly we must 

identify and get cooperation from alternative billing companies that 

exist today and those that are sure to be created as this business 

adjusts to the disruption that is already taking place. 

From a legislative/regulatory perspective, the Financial Coalition 

strategy is impacted by the inability to share data among the companies to build a more robust investigative resource. Legislation allowing for the transfer of information between and among companies registered with NCMEC would enhance the ability to keep offenders from acquiring financial payment capabilities. 

We would be remiss if we did not share with the Committee concerns we have about existing laws that negatively impact the 

broader battle against commercial child pornography. 

In April 2006 NCMEC’s sister organization, the International 

Centre for Missing & Exploited Children (ICMEC), completed a 

study of child pornography laws around the world. The results 

were alarming: of the 186 Interpol member countries, more than 

half (95) have no laws addressing child pornography and in many 

other countries, the existing laws are inadequate. 

As Attorney General Gonzales said in his testimony, ‘‘Just as we 

need some states to strengthen their laws to punish child sex offenders, we must encourage some foreign lawmakers to strengthen 

their laws as well, including those concerning the financial components of these crimes.’’ 

Also, while not directly related to the financial industry, NCMEC 

believes another obstacle to overcome is the reporting of child pornography found on customers’ accounts by electronic service providers to NCMEC. Though apparently mandated by federal statute, 

42 U.S.C. § 13032, not all ESP’s are reporting and those that do report are not sending uniform types of information, rendering some 

reports useless. Some ESPs take the position that the statute is not 

a clear mandate and that it exposes them to possible criminal prosecution for distributing child pornography themselves. 

In addition, because there are no guidelines for the contents of 

these reports, some ESPs do not send customer information that allows NCMEC to identify a law enforcement jurisdiction. So potentially valuable investigative leads are left to sit in the CyberTipline 

database with no action taken. Together with the U.S. Internet 

Service Providers Association (‘‘USISPA’’), we developed ‘‘best practices’’ reporting guidelines to address this problem. The major ESPs 

are following these guidelines. However, these are voluntary rather 

than mandatory, so there is no enforcement mechanism for those 

who choose not to follow them. 

This reporting statute also constrains NCMEC in that it permits 

us to forward the CyberTipline leads only to U.S. law enforcement. 

This is a real problem, considering the global nature of the Internet. As an example, there is a portion of one major ESP system 

based in the U.S. that is used primarily in Brazil. This ESP wants 

us to send information about child pornography they find on their 


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customers’ accounts to Brazilian law enforcement. But we are prohibited from doing so. 

There is also another necessary yet missing link in the chain 

from detection of child pornography to conviction of the distributor. 

Once the CyberTipline analysts give law enforcement all the information they need about specific images traded on the Internet, 

there can be no prosecution until the date and time of that online 

activity is connected to an actual person. There is currently no requirement for ESPs to retain connectivity logs for their customers 

on an ongoing basis. Some have policies on retention but these 

vary, are not implemented consistently, and are for too short a 

time to have meaningful prosecutorial value. 

Q.2. It should disturb all of us that child pornographers assume 

that they can still use the financial payment system to purchase 

and sell their products. What can we do to change the perception 

that the payment system is an option of any kind for child pornography transactions? 

A.2. The Senate Banking Committee raises an intriguing concept 

that, by coincidence, was discussed at the most recent Coalition 

meeting. Specifically, what opportunities exist to educate the public 

and the business community of the risks they are now taking if 

they attempt to buy or sell child pornography, now that groups 

such as the FCACP exist? We will explore launching a media relations and/or public service campaign that puts people on notice. 

The participation of members of the Senate Banking Committee 

would give such a campaign significant momentum. In the future, 

as the work of the Coalition leads to actual arrests, this type of 

news will generate even greater awareness. 

Q.3. The Internet has no boundaries and, consequently, has 

fueled consumption of child pornography by facilitating distribution 

and accessibility of these images. Thus, we need to think about attacking this problem not only by detection and action, but also by 

discouraging initial engagement and participation. What else can 

be done within the financial services community to raise barriers 

to entry in order to deter criminals and to diminish the attractiveness of the commercial child pornography industry? 

A.3. In its first six months of operation, the Coalition’s focus was 

to build the clearinghouse and make it operational. Now that the 

clearinghouse is up and running, we can turn our attention to additional priorities. The Prevention Working Group’s mandate is to explore what the industry can do to make it harder for these merchants to get into the system in the first place. As a starting point, 

this group has collected best practices for underwriting and 

verifying merchants. The idea is to ensure that all Coalition members benefit from the best ideas currently being implemented by industry leaders. Once complete, the Best Practices document will be 

an appropriate platform from which to address how barriers to 

entry can be raised. 

We are committed to working with banking leaders in the United 

States and worldwide to erect barriers, train and empower employees, and ensure worldwide vigilance in order to stop this insidious 

criminal enterprise. 

——— 


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RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY 

FROM JODI GOLINSKI 

Q.1. Can you describe some of the techniques that child pornography merchants use to fool acquiring banks and thereby gain access to the Visa and MasterCard systems? 

A.1. MasterCard is deeply committed to eliminating the commercial viability of child pornography on the Internet and we have 

been working with our customer financial institutions, law enforcement and the National Center for Missing and Exploited Children 

(‘‘NCMEC’’) to prevent child pornographers from using our system. 

These efforts are succeeding, as it is rare for a child pornography 

merchant to successfully obtain access to our system. Nonetheless, 

the criminals that operate child pornography web sites have become increasingly sophisticated over time and work hard to evade 

our controls. For example, some child pornography merchants will 

attempt to engage in so-called ‘‘factoring’’ schemes in which the 

child pornographer seeks to dupe a legitimate business into submitting the child pornographer’s transactions into our system. We are 

also aware of schemes in which a child pornographer will establish 

a seemingly legitimate business to gain access to our system and 

later sells child pornography through that business. MasterCard 

uses a variety of approaches to detect this type of activity. These 

include searching the Internet for such merchants and having test 

transactions performed at the site. 

Q.2. Credit card association rules require acquiring banks to 

shoulder responsibility for weeding out illegal merchants such as 

child pornographers in their portfolios. In your testimony, you both 

mention a number of sanctions that your companies may impose on 

acquiring banks that do not meet these responsibilities. How do 

you know that these sanctions are working? 

A.2. MasterCard has a series of rules that require acquirers to 

ensure that merchants with whom they contract to accept 

MasterCard-branded cards are legitimate and engage in solely 

legal activities. These rules mandate, among other things, that 

acquirers perform due diligence on a merchant before authorizing 

the merchant to accept MasterCard payment cards and that 

acquirers monitor merchants for compliance with the rules. When 

we detect that a child pornographer has gained access to the system through an acquirer, we work closely with the acquirer to address the problem. In our experience, the acquirers we permit to 

participate in our system are extremely cooperative in addressing 

child pornography problems and work rapidly to resolve these 

issues. 

In addition, MasterCard undertakes significant efforts to detect 

child pornographers seeking to circumvent our controls. These efforts include searching the Internet to identify sites that appear to 

be selling child pornography and purporting to accept our cards as 

payment. Through these efforts we have found that our anti-child 

pornography programs have been quite effective. Indeed, it is increasingly rare that child pornography sites actually accept our 

cards as payment. We are not content, however, simply to drive 

these criminals from our system and are working with NCMEC 

and others in the payments industry to ensure that child pornogVerDate Nov 24 2008 00:52 Nov 24, 2009 Jkt 050304 PO 00000 Frm 00110 Fmt 6602 Sfmt 6602 E:\HR\OC\A304.XXX A304

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raphers driven from our system do not find safe haven in other 

payment systems. 

Q.3. Both Visa and MasterCard use advanced web crawling and 

filtering technology to monitor websites for child pornography. Has 

this technology detected any trends in the prevalence of child pornography? 

A.3. As part of our efforts to detect child pornography, 

MasterCard uses the services of a technology company that constantly searches the Internet to identify child pornography sites 

that purport to accept our cards. As a result of these efforts, we 

have detected a clear trend away from accepting traditional payment cards on these sites toward the acceptance of alternative payment methods. For example, many of these sites direct their customers to another site where the customer can establish a special 

electronic payment account that has been used to pay the child pornographer. Some of these electronic payment sites use unusual 

value propositions such as offering the ability to transact over the 

Internet using virtual precious metals or calling card minutes to 

pay for products sold by web sites. Through the coalition formed by 

NCMEC we are working to find ways to address these evolving 

schemes. 


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