Testimony of Dennis Lormel, Chief, Terrorist Financing Operations
Section, Counterterrorism Division, FBI
Before the Senate Judiciary Committee, Subcommittee on Technology,
Terrorism, and Government Information
October 9, 2002
"USA
PATRIOT ACT/Terrorism Financing Operations Section"
Introduction
Good
morning, Madam Chairman, and members of the Subcommittee on
Technology, Terrorism, and Government Information. On behalf
of the Federal Bureau of Investigation (FBI), I would like
to express my gratitude to the Subcommittee for affording
us the opportunity to participate in this forum and to update
the Subcommittee on our use of the tools established within
the framework of the USA PATRIOT Act and the work being conducted
by our Terrorism Financing Operations Section.
As this
Subcommittee is well aware, the FBI, in conjunction with law
enforcement and intelligence agencies throughout the United
States and the world, is engaged in the largest, most complex
and perhaps the most critical criminal and terrorism investigation
in our history. The FBI continues to dedicate considerable
resources to this investigation and remains committed to determining
the full scope of these terrorist acts, identifying all those
involved in planning, executing and/or assisting in any manner
the commission of these acts and others, and bringing those
responsible to justice. The FBI will continue to exercise
its leadership role in the global war on terrorism by taking
all possible steps to prevent any further acts of terrorism.
The
war on terrorism will be a long-term battle. It will not be
won overnight nor will it be won without the highest levels
of cooperation and coordination among law enforcement and
intelligence agencies around the globe. Terrorism knows no
borders or boundaries. The threat is not limited to any one
region of the world. Law enforcement and intelligence agencies
throughout the world possess tremendous resources and expertise.
Allying these resources against the common enemy of terrorism
is the key to dismantling these organizations and eliminating
the threat they pose. Make no mistake about it, even with
the combined resources and expertise possessed by law enforcement,
the threat posed by terrorism is grave. Terrorists do not
play by the rules of a civilized society, nor do they respect
human decency. They will stop at nothing to commit acts of
terror.
From a law enforcement perspective, success in the war on
terrorism must be measured in our ability to prevent future
acts of terrorism. Whether it be through prosecution, disruption,
blocking/freezing of funds, or allowing a funding mechanism
to remain in place in order to further an investigation, prevention
remains the overarching focus. In this regard, fighting the
war on terrorism requires powerful tools. The FBI appreciates
the tools provided by the Congress in enacting the USA Patriot
Act, including those contained within Title III of this Act,
which is also know as the International Money Laundering Anti-Terrorist
Financing Act of 2001.
The
Terrorist Financing Operations Section (TFOS)
I would
like to start my discussion regarding the FBI's use of the
USA Patriot by focusing on the tools provided within Title
III. To illustrate how these anti-money laundering provisions
aid our investigative efforts, it is necessary to understand
how the FBI has been restructured to address terrorist financing
matters. Identifying and tracking the financial structure
supporting terrorist groups is critical to dismantling the
organization and preventing future attacks. As in ordinary
criminal investigations, "following the money" identifies,
links, and develops evidence against those involved in criminal
activity. In the early stages of the investigation into the
events of September 11, 2001, it was financial evidence that
quickly established links between the hijackers and identified
co-conspirators.
It was
also in the early stages of this investigation that the FBI
and Department of Justice (DOJ) identified a critical need
for a more comprehensive, centralized approach to terrorist
financial matters. In response, the FBI established an interagency
Terrorism Financial Review Group (TFRG), operating out of
FBI Headquarters. By bringing together vast databases and
the expertise of numerous federal agencies, the TFRG, which
was subsequently expanded, renamed the Terrorist Financing
Operations Section (TFOS), and assigned to the FBI's Counterterrorism
Division, focuses a powerful array of resources on the financial
tentacles of terrorist organizations.
The
TFRG was created with a two-fold mission. First, it was designed
to conduct a comprehensive financial analysis of the 19 hijackers
to link them together and to identify their financial support
structure within the United States and abroad. Through the
execution of this mission, the TFRG was able to establish
how the hijackers responsible for the attacks received their
money, details of their flight training, where they lived,
and details concerning individuals associated with the hijackers.
The 19 hijackers opened 24 domestic bank accounts at four
different banks. The TFOS analyzed the data associated with
these accounts to develop a financial profile that has been
used in connection with the FBI's investigation regarding
the events of September 11, 2001.
The
second aspect of the TFRG's mission was to serve as a template
for preventive and predictive terrorist financial investigations.
This mission, consistent with the TFRG's restructuring into
the TFOS, has since evolved into a broader effort to identify,
investigate, prosecute, disrupt, and dismantle all terrorist-related
financial and fundraising activities.
To accomplish
this mission, the TFOS has implemented initiatives to address
all aspects of terrorist financing. For example, the TFOS
is engaged in an aggressive international outreach program
to share information regarding terrorist financing methods
with the financial community and law enforcement, and has
built upon long-established relationships with the financial
services community in the United States and abroad. The international
outreach initiative is coordinated through the network of
FBI Legal Attache Offices located in 44 key cities worldwide,
providing coverage for more than 200 countries and territories.
As touched
upon earlier, a significant focus of the TFOS' efforts is
prediction and prevention. In this regard, it has developed
numerous data mining projects to provide further predictive
abilities and maximize the use of both public and private
database information. These efforts are complemented by the
centralized terrorist financial database which the TFOS developed
in connection with its coordination of financial investigation
of individuals and groups who are suspects of FBI terrorism
investigations. The TFOS has cataloged and reviewed financial
documents obtained as a result of numerous financial subpoenas
pertaining to individuals and accounts. These documents have
been verified as being of investigatory interest and have
been entered into the terrorist financial database for linkage
analysis. The TFOS has obtained financial information from
FBI Field Divisions and Legal Attache Offices, and has reviewed
and documented financial transactions. These records include
foreign bank accounts and foreign wire transfers. The information
contained within the aforementioned database is being used
to identify terrorist cells operating in the United States
and abroad to prevent further terrorist acts. The TFOS meets
regularly with representatives from the banking community
and the financial services industry to share information and
to refine methods to detect and identify potential terrorists
around the world.
The TFOS
created and continues to update a financial control list which
contains names and identifying data for individuals under
investigation for potential links to terrorist organizations.
These lists are regularly shared with domestic and international
law enforcement and intelligence agencies, and with the Federal
Reserve Board, which disseminates the lists to financial institutions
so they can flag suspicious financial activity.
The
TFOS regularly shares information with Customs' Operation
Green Quest and provides daily downloads from its database
to Green Quest and the Financial Crimes Enforcement Network
(FinCEN). Further, the TFOS is working with FinCEN to explore
new ways to data mine the Suspicious Activity Report (SAR),
Currency Transaction Report (CTR), and Currency and Monetary
Instrument Report databases.
Based
on its international investigative abilities, and its close
association with the Intelligence Community, the TFOS is in
a unique position to coordinate anti-terrorism financial investigations
and to ensure those investigations are coordinated with the
goals and objectives of the FBI's Counterterrorism Program.
Use
of the USA PATRIOT Act
I would
now like to discuss how the TFOS has been making use of the
tools established by the USA PATRIOT Act. Terrorist financing
methods range from the highly sophisticated to the most basic.
Traditionally, their efforts have been aided considerably
by the use of correspondent bank accounts, private banking
accounts, offshore shell banks, bulk cash smuggling, identity
theft, credit card fraud, and other criminal operations. Informal
Value Transfer Systems, such as "Hawalas," also
present problems for law enforcement. They permit terrorists
a means of transferring funds that is difficult to detect
and trace. These informal systems are commonplace and appear
to serve as an efficient means of transacting in mostly "cash"
societies such as Pakistan, Afghanistan, and the Phillippines.
In applying provisions of the USA PATRIOT Act we seek to erode
the effectiveness of such methods without unduly undermining
the legitimate economic activity that may rely on them. The
Act establishes stricter rules for correspondent bank accounts,
requires securities brokers and dealers to file SARs, and
certain cash businesses to register with FinCEN and file SARs
for a wider range of financial transactions.
The
Act contains many other provisions that the FBI believes will
considerably aid our efforts to address terrorist financing.
These include the authority to seize terrorist assets, and
the addition of terrorism and other offenses to the list of
racketeering offenses. The utilization of this aspect of the
USA PATRIOT Act is perhaps best exemplified through actions
that have been taken against Non-Governmental Organizations
(NGOs) believed to provide financial support to know Foreign
Terrorist Organizations and other affiliated Terrorist Cells.
As in the case of Halawas, the funding of terrorist organizations
such as Al Qaeda and Hamas through NGOs and charitable organizations
represents a significant challenge to law enforcement. Funding
of terrorism through NGOs is a prime focus of terrorist financial
investigations. NGOs may be large international organizations
which can be exploited by individual employees sympathetic
to terrorist causes through local branch offices; they may
be private NGOs which exist solely to support a militant cause;
or they may be closely affiliated with a state sponsor of
terrorism. One of the challenges in investigations involving
terrorist fundraising through NGOs is distinguishing terrorist
fundraising activities from legitimate or what may appear
to be legitimate charitable fundraising. Fundraising on the
part of terrorist groups which on the surface appear to be
efforts to "help the poor" or fundraising for charitable,
humanitarian or other legitimate purposes actually falls squarely
in the realm of logistical support for terrorist activity.
As a
participant on the National Security Council's Policy Coordinating
Committee (PCC) on terrorist finance, the TFOS participates
in the effort to target NGOs believed to provide financial
support to known Foreign Terrorist Organizations and affiliated
terrorist cells. The PCC coordinates the development and implementation
of policies to combat terrorist financing and provides analysis
on these issues. Numerous FBI Field Offices have open investigations
into organizations that may be funneling money to Foreign
Terrorist Organizations and the TFOS has acted as a clearinghouse
for these cases and has summarized the collected data.
In order
to disrupt terrorist financing channels, the TFOS has coordinated
FBI terrorist investigations with the terrorist designation
and asset freezing efforts of the OFAC and Operation Green
Quest. These efforts have resulted in the freezing of millions
of dollars in foreign and US bank accounts. Specifically,
the joint efforts targeting Al-Barakaat, the Holy Land Foundation
for Relief and Development, the Global Relief Foundation,
and the Benevolence International Foundation have resulted
in the execution of numerous search warrants and the disruption
of the fundraising and money remittance operations of these
and other organizations. Financial investigations of these
entities have revealed that approximately $200 million in
contributions passed through these organizations each year.
The
USA PATRIOT Act also enables prosecutors to seize money subject
to forfeiture in a foreign bank account by authorizing the
seizure of a foreign bank's funds held in a U.S. correspondent
account. Other important provisions expand the ability to
prosecute unlicensed money transmitters, allow law enforcement
faster access to reports of currency transactions in excess
of $10,000, and provide authority for the service of administrative
subpoenas on foreign banks concerning records of foreign transactions.
This latter provision allows law enforcement to obtain critical
information in an investigation on a more timely basis than
was possible before. In counterterrorism investigations, of
course, speed is of the essence because prevention is the
goal.
Section
362 of the USA PATRIOT Act mandates that FinCEN establish
a highly secure network to 1) allow financial institutions
to file SARs and CTRs on-line, and 2) "provide financial
institutions with alerts and other information regarding suspicious
activities that warrant immediate and enhanced scrutiny."
FinCEN has developed the USA Patriot Act Communication System
to meet this mandate and is implementing the system. This
will be a valuable tool for law enforcement, but it will require
the full cooperation of private financial institutions. The
TFOS has worked with financial institutions, and has provided
to them information to help detect patterns of activity possibly
associated with terrorist activity and the PACS will help
considerably in these efforts.
Use
of Other Provisions of the USA PATRIOT Act
In addition
to the provisions effecting changes to money laundering statutes,
the USA PATRIOT Act effected changes in national security
authorities, the substantive criminal law, immigration law,
and victim assistance statutes, and other areas. In particular,
the Act seeks to improve the efficiency of the process associated
with the FBI's conduct of electronic surveillance and physical
searches authorized through the Foreign Intelligence Surveillance
Act (FISA) of 1978 and to remove barriers to the timely sharing
of information between counterintelligence and counterterrorism
intelligence operations and criminal investigations. These
enhancements in efficiency improve our ability to detect and
prosecute offenders, and with less disruption to legitimate
commerce. I would now like to highlight those provisions that
the FBI has been utilizing most often in connection with the
execution of its counterterrorism responsibilities.
Changes
in Predicate Standards for National Security Letters (NSLs)
NSLs
are administrative subpoenas that are issued in counterintelligence
and counterterrorism investigations to obtain telephone and
electronic communications records from telephone companies
and Internet Service Providers (pursuant to the Electronic
Communications Privacy Act, or ECPA); records from financial
institutions (pursuant to the Right to Financial Privacy Act);
and information from credit bureaus (pursuant to the Fair
Credit Reporting Act). Delay in obtaining NSLs has long been
identified as a significant problem relative to the conduct
of counterintelligence and counterterrorism investigations.
Two factors contributed most prominently to this delay. These
were the complexity of the standard predication for NSLs and
the requirement that signature authority be restricted to
officials no lower than a Deputy Assistant Director at FBI
Headquarters.
Section
505 of the USA Patriot changed the standard predication for
all three types of NSLs to one requiring that the information
being sought through the NSL is "relevant to an authorized
investigation to protect against international terrorism or
clandestine intelligence activities, provided that such an
investigation of a United States person is not conducted solely
on the basis of activities protected by the first amendment
of the Constitution of the United States." Prior to the
Act, the statutes required both relevance and "specific
and articulable facts" giving reason to believe that
the subject is an agent of a foreign power, or, in the case
of subscriber requests, had been in contact with such an agent.
This "agent of a foreign power" prong of the standard
made it necessary to collect and document specific facts demonstrating
that the standard had been met. This requirement and the complexity
of the standard itself often led to extensive delays in generating
NSLs.
Section
505 also allowed the Director to delegate signature authority
for NSLs to Special Agents in Charge serving in designated
field divisions. The provisions delineated within Section
505 have resulted in investigators receiving the data needed
in the furtherance of ongoing investigations in a more timely
fashion, which in turn has had a positive impact on numerous
investigations.
"Roving"
FISA Electronic Surveillance Authority
Section
206 of the USA PATRIOT Act amends FISA to allow the FISC to
issue a "generic" secondary order where the Court
finds that the "actions of the target of the application
may have the effect of thwarting the identification of a specified
person." This means that, when a FISA target engages
in conduct that has the effect of defeating electronic surveillance,
such as by rapidly switching cell phones, Internet accounts,
or meeting venues, the Court can issue an order directing
"other persons," to effect the authorized electronic
surveillance.
Changes
in the Duration of FISA Authority
Section
207 of the Act extends the standard duration for several categories
of FISC Orders. First, the section allow for electronic surveillances
and search orders on non-US person agents of a foreign power
pled under Section 101(b)(1)(A) of the FISA, to run for an
initial period of 120 days, instead of 90, and to be renewed
for periods of one year. The section also extends the standard
duration of physical search orders in all other cases, which
applies to US persons and non-officer/employee targets, from
45 to 90 days. These extension provisions have resulted in
a more effective utilization of available personnel resources
and the collection mechanisms authorized under the FISA.
Expansion
of the FISC
Section 207 also expanded the FISC from seven judges to eleven
judges, three of whom must reside in the Washington, D.C.
area. This has increased the availability of FISC judges and
has resulted in the convening of the FISC on a weekly basis,
which has enabled the FBI to implement FISA-authorized collection
operations in a more timely fashion.
Changes
in FISA Pen Register/Trap and Trace Authority
Section
214 of the Act makes a substantial revision to the standard
for a FISA-authorized pen register/trap and trace. Prior to
the USA PATRIOT Act, FISA-authorized pen registers required
two showings: (1) relevance to an investigation, and (2) specific
and articulable facts giving reason to believe that the targeted
line was being used by an agent of a foreign power, or was
in communications with such an agent, under specified circumstances.
Section 214 simply eliminates the second of the required showings.
FISA-authorized pen/trap and trace orders are now available
whenever the FBI certifies that "the information likely
to be obtained is foreign intelligence information not concerning
a United States person, or is relevant to an ongoing investigation
to protect against international terrorism or clandestine
intelligence activities, provided that such investigation
of a United States person is not conducted solely upon the
basis of activities protected by the first amendment to the
Constitution."
This
new standard requires that the information sought be relevant
to an "ongoing investigation to protect against international
terrorism or clandestine intelligence activities." Use
of this technique is authorized in full investigations properly
opened under the AG Guidelines for FBI Foreign Intelligence
Collection and Foreign Counterintelligence Investigations.
Finally, the new standard does not mean that FISA pen register/trap
and trace authority is only available on the subjects of investigations.
The authority is available when the information sought is
"relevant" to the investigation, as described above.
For example, information concerning apparent associates or,
or individuals in contact with, the subject of an investigation,
may be relevant.
Conclusion
The
USA PATRIOT Act has provided the FBI with improved tools for
conducting counterterrorism and counterintelligence investigations.
These new tools require DOJ and the FBI to gain a complete
understanding of the provisions, develop guidelines and protocols
for their appropriate use, and educate investigators and prosecutors.
In addition, many of the provisions require the Department
of Treasury to issue new regulations and rules. While all
of this is being done as expeditiously as possible, the full
impact of the tools provided by the USA PATRIOT Act are yet
to be seen. The FBI is continuing to digest its provisions,
develop guidelines and protocols for its appropriate use,
and educate investigators and prosecutors. Nevertheless, the
Act enhances the ability of law enforcement and intelligence
agencies to achieve our common goal of preventing acts of
terrorism, without compromising the civil liberties and Constitutional
protections enjoyed by our citizens. Thank you for this opportunity
to appear today. I welcome any questions you have.
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