Testimony of John S. Pistole, Deputy Assistant Director, Counterterrorism
Division, FBI
Before
the Senate Committee on Governmental Affairs
July 31, 2003
"Terrorism Financing: Origination, Organization, and
Prevention"
Good
morning Madam Chair Collins, Senator Lieberman, and other
distinguished members of the committee. It is an honor to
testify before this committee regarding the FBI's efforts
in identifying, tracking and dismantling the financial structure
supporting terrorist groups.
Prior to the events of September 11, 2001 (9/11), the FBI
had no mechanism to provide a comprehensive, centralized,
focused and pro-active approach to terrorist financial matters.
While the FBI examined financial records at the time of previous
terrorist attacks, as part of the investigation into each
of the attacks, the events of 9/11 identified a critical need
for a more comprehensive, centralized approach to financial
matters. The Terrorist Financing Operations Section (TFOS)
of the FBI's Counterterrorism Division was formed, after 9/11,
in response to this critical need. The mission of the TFOS
has since evolved into a broader strategy to identify, investigate,
prosecute, disrupt and dismantle incrementally, all terrorist
related financial and fund-raising activities.
Identifying,
tracking and dismantling the financial structure supporting
terrorist groups is critical to successfully dismantling the
organizations and preventing future terrorist attacks. As
is the case in most investigations, locating and "following
the money" plays a critical role in identifying those
involved in the criminal activity, establishing links among
them, and developing evidence of their involvement in the
activity.
Terrorists,
their networks and support structures, require funding in
some form to exist and operate. Whether the funding and financial
support is minimal or substantial, it usually leaves a financial
trail that can be traced, tracked, and exploited for pro-active
and reactive purposes. Being able to identify and track financial
transactions and links after a terrorist act has occurred
or terrorist activity has been identified, represents only
a small portion of the mission; the key lies in exploiting
financial information in efforts to identify previously unknown
terrorist cells, recognize potential terrorist activity/planning,
and predict and prevent potential terrorist acts.
In forming the TFOS, the FBI built upon its traditional expertise
in conducting complex criminal financial investigations and
long established relationships with the financial services
communities in the United States and abroad. Integrating these
skills and resources with the Counterterrorism Division, allows
the FBI to bring its full assets to bear in the financial
war on terrorism.
The TFOS
is both an operational and coordinating entity with pro-active
and reactive responsibilities. As a coordinating entity, the
TFOS is responsible for ensuring that a unified approach is
pursued in investigating terrorist financing networks. The
TFOS achieves this directive by: 1) coordinating the financial
aspects of FBI Field Office and Legat terrorism investigations;
2) establishing overall initiatives, policy and guidance on
terrorist financing matters; 3) participating in the National
Security Council's Policy Coordinating Committee (PCC) on
Terrorist Financing; 4) coordinating national liaison with
the financial services sector; 5) cooperating in and coordinating
criminal terrorist financing investigations with the Department
of Justice; and 5) providing support and training to Field
Offices to include the designated Terrorism Financing Coordinator
(TFC) .
It is
critical that the financial aspects of terrorism investigations
be adequately addressed and that a concerted, coordinated
effort is made to investigate terrorist finance issues by
experienced financial investigators. Rarely will a terrorist
financing investigation be confined to the territory of one
field office, rather they normally span not only multiple
field office jurisdictions, but the globe; i.e., these types
of investigations will frequently be linked to investigations
and/or issues in other jurisdictions and other countries.
It is imperative that these investigative efforts be effectively
coordinated, placed into perspective with other counterterrorism
efforts, prioritized in accordance with national and global
strategies, and addressed in concert rather than in a disjointed,
inefficient manner. Prior to the establishment of the TFOS,
there did not exist within the FBI a mechanism to ensure appropriate
focus on terrorist finance issues and provide the necessary
expertise and overall coordination to comprehensively address
these matters.
So how
far have we come in the war on terrorist financing since 9/11?
There currently exists a much better understanding of terrorist
financing methods. More sophisticated and effective processes
and mechanisms to address and target terrorist financing continue
to develop and evolve. Pro-active approaches are increasingly
being utilized. The awareness around the world on the part
of law enforcement, government agencies, regulators and policy
makers, and the private sector of terrorist financing methods,
suspicious financial activity and vulnerabilities is much
higher since 9/11. International cooperation has reached unparalleled
levels. Outreach with, and cooperation from, the private sector
has been outstanding and continues to develop, particularly
the level of two-way interaction between law enforcement and
the private sector. The ability to access and obtain this
type of information immediately has significantly enhanced
the FBI's ability to identify, investigate, and resolve immediate
threat situations involving potential terrorist activity.
For example, the ability to conduct real-time monitoring of
specifically identified financial activity has been invaluable
to not only investigations ongoing in the US, but to foreign
law enforcement and intelligence agencies in related investigations.
Another example of not only more pro-active measures but also
of increased cooperation and coordination with the international
community.
Extensive training and support of international investigations
by TFOS has led to Agent visits/exchanges and training programs
involving a variety of countries from Europe, Southeast Asia,
the Middle East, South America, etc. In support of specific
high profile joint terrorist financial investigative matters,
a number of countries and agencies, including the United Kingdom,
Switzerland, Canada and Europol, have detailed investigators
to TFOS on a TDY basis. TFOS has engaged in extensive coordination
with authorities of numerous foreign governments in terrorist
financing matters, leading to joint investigative efforts
throughout the world. These joint investigations have successfully
targeted the financing of several overseas al-Qa'ida cells,
including those located in Indonesia, Malaysia, Singapore,
Spain, and Italy. Furthermore, with the assistance of relationships
established with the central banks of several strategic countries,
successful disruptions of al-Qa'ida financing have been accomplished
in counties such as the UAE, Pakistan, Afghanistan, and Indonesia.
TFOS
has developed a specific terrorist financing/money laundering
crimes curriculum for international training which includes
topics such as: acquiring and handling evidence in document
intensive financial investigations, major case management
techniques, forensic examination tools, and methods of terrorist
financing. At the request of the US Department of State, TFOS
has led an interagency team to provide this curriculum to
a number of countries (and is scheduled to provide to approximately
38 countries) identified as needing law enforcement training
on conducting terrorist financing investigations.
TFOS
has cultivated and maintains a contact database of private
industry and government sources/persons who can provide financial
data, including real-time monitoring of financial transactions.
Many of these contacts can be reached or accessed on 24 hour/7
days a week emergency allowing TFOS to respond rapidly to
critical incidents.
Through
these contacts the TFOS has access to data and information
from a variety of entities including: Banking, Credit/Debit
Card Sector, Money Services Businesses, Securities/Brokerages
Sector, Insurance, Travel, Internet Service Providers, Telecommunications
Industry, Law Enforcement, State/Federal Regulatory Agencies,
Public and Open Source Data Providers, the Intelligence Community,
and International Law Enforcement and Intelligence Contacts.
The timeliness and accessibility of the data is contingent
on a variety of factors including whether the acquisition
of the information requires legal process, the search capabilities
of the data provider, and the size and depth of the data request.
The ability to access and obtain this type of information
in a time sensitive and urgent manner has significantly enhanced
the FBI's ability to identify, investigate and resolve immediate
threat situations involving potential terrorist activity.
For example, the ability to conduct real-time monitoring of
specifically identified financial activity has been invaluable
to not only investigations ongoing in the US, but to foreign
law enforcement and intelligence agencies in related investigations.
Being able to identify and track financial transactions and
links after a terrorist act has occurred or terrorist activity
has been identified represents only a small portion of the
mission; the key lies in exploiting financial information
in efforts to identify previously unknown terrorist cells,
recognize potential terrorist activity/planning, and predict
and prevent potential terrorist acts. Prior to 9/11, there
was not enough emphasis placed on addressing the mechanisms
and systems associated with terrorist financing and disrupting
them before they could be utilized to further terrorist activities.
Since September 11, TFOS, together with the Counter-Terrorism
Section (CTS), Criminal Division of the Department of Justice
(DOJ), have begun a number of pro-active link analysis initiatives
to identify potential terrorists and terrorist related financing
activities.
The overriding goal of these projects is to pro-actively identify
potential terrorists and terrorist related individuals/entities,
mechanisms or schemes through the digital exploitation of
data. To accomplish this, TFOS seeks to 1) identify potential
electronic data sources within domestic and foreign government
and private industry providers; 2) create pathways and protocols
to acquire and analyze the data; and 3) provide both reactive
and proactive operational, predictive and educational support
to investigators and prosecutors.
Information sharing is critical to all of our efforts. The
intelligence community, including the FBI, produces and obtains
tremendous amounts of classified intelligence information.
While much of the information can be of significant value
in terrorist finance investigations, the value will not be
realized nor maximized absent the ability to filter the information,
analyze it, and disseminate it in an appropriate manner to
those who can make the best use of the information. Toward
this end, the TFOS participates in joint endeavors involving
the CIA, FBI, Treasury Department, Department of Justice,
and the Department of Homeland Security involving potential
terrorist related financial transactions, in addition to other
joint participation between TFOS and the intelligence agencies.
TFOS has personnel detailed to the CIA/CTC/FINO and personnel
from there work directly with TFOS on financial intelligence
matters.
The National Security Council formalized the Policy Coordinating
Committee (PCC) on Terrorist Financing at the end of 2001.
Treasury chairs the PCC and representatives from the Central
Intelligence Agency, the Department of Defense, the Department
of Justice, the Federal Bureau of Investigation, the Department
of Homeland Security, the National Security Council and the
State Department attend meetings.
The PCC generally meets at least once a month to coordinate
the United States government's campaign against terrorist
financing. The meeting generally focuses on ensuring that
all relevant components of the federal government are acting
in a coordinated and effective manner to combat terrorist
financing.
Terrorist
Financing Successes
In addition,
the FBI, working in coordination with other entities of the
US government, has participated in the following successes:
- An
FBI Joint Terrorism Task Force in Charlotte used racketeering
statutes to obtain convictions which disrupted and dismantled
a Hizballah procurement and fund-raising cell. Twenty-six
individuals were arrested for crimes including immigration
fraud, visa fraud, cigarette smuggling, interstate transportation
of stolen property, fraud, bank fraud, bribery, money laundering,
racketeering, and providing material support to a terrorist
organization.
- The
FBI coordinated with the Office of Foreign Asset Control
(OFAC) to justify the blocking of Holy Land Foundation for
Relief and Development (HLF) assets and the closing of its
US offices, shutting down HAMAS' largest fund-raising entity
in the US. The HLF had been linked to the funding of HAMAS
terrorist activities, and in 2000, HLF raised $13 million.
- Offices
of the Benevolence International Foundation (BIF), a US
based charity, were shut down and its assets and records
blocked following an OFAC and FBI investigation which determined
that the charity was being used to funnel money to Al Qa'ida.
In February 2003, Enaam Arnaout, the head of BIF, pled guilty
to racketeering conspiracy, admitting he fraudulently obtained
charitable donations in order to provide financial assistance
to persons engaged in violent activities overseas.
- As
a result of information developed by the FBI, a foreign
security service, in conjunction with US Intelligence Community
agencies, apprehended one of the most significant money
launderers associated with Usama Bin Laden, for funneling
$67 million through international accounts to al-Qa'ida
and the Taliban.
- A
criminal case against Sami Al Arian, the alleged US leader
of the Palestinian Islamic Jihad (PIJ), and the World Islamic
Studies Enterprise has forced the closure of several front
companies suspected of funneling money to support PIJ operations
against Israel. In August 2002, the investigation led to
the deportation of Mazen Al-Najjar, the brother-in-law of
Sami Al Arian and a known PIJ member. In February, following
a 50-count indictment for RICO and Material Support of terrorism
violations, the FBI arrested Al-Arian and three other U.S.-based
members of the Palestinian Islamic Jihad, including Sameeh
Hammoudeh, Hatim Naji Fariz, and Ghassan Ballout. The FBI
also executed seven search warrants associated with this
action.
- TFOS
has provided operational support to FBI Field Divisions
across the United States to enhance the intelligence/criminal
investigations of individuals and groups, associated with
or providing material support to, terrorist organizations
and activities. This assistance is provided in the form
of conducting intelligence/criminal financial investigations,
financial analytical support, major case management, financial
link analysis, and the deployment of teams of experts to
develop investigative plans to analyze large volumes of
documents and data. TFOS has provided this operational support
in the Al Qa'ida sleeper cell cases in Buffalo and Portland,
as well as in the Richard Reid, John Walker Lindh, Jose
Padilla, Al Haramain, PIJ, and Mohamed Almoayad cases, among
many others. This type of operational support has also been
provided to Divisions investigating NGOs, such as the Holy
Land Foundation for Relief and Development, Benevolence
International Foundation and the Global Relief Foundation.
- TFOS
has engaged in extensive coordination with authorities of
numerous foreign governments in terrorist financing matters,
leading to joint investigative efforts throughout the world.
These joint investigations have successfully targeted the
financing of several overseas Al Qa'ida cells, including
those located in Indonesia, Malaysia, Singapore, Spain,
and Italy. Furthermore, with the assistance of relationships
established with the central banks of several strategic
countries, successful disruptions of Al Qa'ida financing
have been accomplished in counties such as the UAE, Pakistan,
Afghanistan, and Indonesia.
- The
FBI conducted a detailed financial investigation/analysis
of the 19 hijackers and their support network, following
the September 11th attacks. This investigation initially
identified the Al Qa'ida funding sources of the 19 hijackers
in the UAE and Germany. The financial investigation also
provided the first links between Ramzi Binalshibh and the
9/11 operation. A continuing investigation, in coordination
with the PENTTBOMB Team, has traced the origin of the funding
of 9/11 back to financial accounts in Pakistan, where high-ranking
and well-known Al Qa'ida operatives played a major role
in moving the money forward, eventually into the hands of
the hijackers located in the U.S. As part of the 9/11 financial
investigation, thousands of individuals and organizations
were investigated in the U.S. and abroad to determine whether
they played any part in supporting the hijackers or the
operation. Although the vast majority of these individuals
and organizations were cleared, this process of elimination
resulted in numerous other quality terrorism investigations
being initiated, as well as criminal charges against hundreds
of individuals for fraud and other criminal activity.
- At
the request of a foreign liaison service, TFOS traced financial
transactions in a near real-time manner which led to the
location of a terrorist cell and prevention of a terrorist
act.
- Since
9/11, the United States has frozen $36.3 million in terrorist
assets while other countries have frozen an estimated $97
million, for a total of over $133 million.
- U.S.
authorities issued blocking orders on the assets of 281
terrorists, terrorist organizations, and terrorist supporters,
effectively denying them access to the U.S. financial system.
- Federal
law enforcement officials have arrested over 61 individuals,
indicted 43 and convicted 12 in connection with terrorist
financing investigations.
- U.S.
Government agencies, to include the FBI's TFOS, deployed
trainers and advisers on missions to countries around the
world to assist with the drafting of legislation to combat
terrorist financing, strengthen bank supervision in identifying
suspicious transactions, and address other financial crimes
and corruption.
Since
9/11, over 120 countries have introduced new terrorist-related
legislation and approximately 80 countries established Financial
Investigation Units.
Saudi
Arabia and the War on Terrorism
Following
the 9/11 attacks, it became apparent that the role of Non-Governmental
Organizations (NGOs) and charitable organizations, as a source
of funding for terrorist groups, needed closer scrutiny. This
included the role of Saudi Arabia and its citizens in the
support of terrorism, both directly and indirectly, through
the financial support of these charitable organizations.
The
Kingdom of Saudi Arabia has taken proactive measures to deter
global terrorism. In 1995, the bombing of Khobar Towers occurred
in Saudi Arabia. In 1996, the Kingdom established a joint
Counter-Terrorism Committee with the United States to share
information on al-Qa'ida. In the wake of September 11, Saudi
Arabia has increased its counterterrorism efforts with the
following initiatives:
- Saudi
Arabia has put new laws and regulations in place for all
charitable groups, ensuring that they are audited to prevent
the flow of funds to entities other than charity.
- Saudi
Arabia has further strengthened its laws and regulations
regarding money laundering. These efforts include new rules
concerning the verification of customers' identities as
well as restrictions on non-residents' ability to open accounts
in the country.
- Saudi
Arabia and the United States maintain a Counter-Terrorism
Committee comprised of intelligence and law enforcement
personnel who meet regularly to share information and resources
and develop action plans to root out terrorist networks.
- In
March 2002, Saudi Arabia and the US jointly blocked the
accounts of Bosnia and Somalia branches of Al-Haramain Islamic
Foundation, and in the summer of 2002, jointly froze the
assets of the Rabita Trust, and those of its director Wa'el
Hamza Julaidan, an associate of Bin Laden who provided financial
and logistical support to al-Qa'ida.
- Saudi
Arabia has contributed to the break up of a number of al-Qa'ida
cells, the arrests of key al-Qa'ida leaders and capture
of al-Qa'ida members in Saudi Arabia.
Since the May 12, 2003 bombings of the three western compounds
in Riyadh, Saudi Arabia, cooperation with the Kingdom of
Saudi Arabia has improved. The FBI sent an investigative
team to the Kingdom and worked with the law enforcement
and intelligence services to conduct the appropriate post
incident investigation and evidence collection. Cooperation
with the Saudi Arabian government continues on this and
other terrorism investigations.
The
USA PATRIOT Act and Other Legislation
Our efforts
to combat terrorism have been greatly aided by the provisions
of the PATRIOT Act. The success in preventing another catastrophic
attack on the U.S. homeland would have been much more difficult,
if not impossible, without the Act. It has already proved
extraordinarily beneficial in the war on terrorism, and our
opportunities to use it will only increase. Most importantly,
the PATRIOT Act has produced greater collection and sharing
of information within the law enforcement and intelligence
communities.
Title III of the Act, also known as the International Money
Laundering Anti-Terrorist Financing Act of 2001, has armed
us with a number of new weapons in our efforts to identify
and track the financial structure supporting terrorist groups.
Past terrorist financing methods have included the use of
informal systems for transferring value in a manner that is
difficult to detect and trace. The effectiveness of such methods
should be significantly eroded by the Act, which establishes
stricter rules for correspondent bank accounts, requires securities
brokers and dealers to file Suspicious Activity Reports or
SARS, and certain money services to register with FinCEN and
file SARS for a wider range of financial transactions.
There are other provisions of the Act that have considerably
aided our efforts to address the terrorist threat including:
strengthening the existing ban on providing material support
to terrorists and terrorist organizations; the authority to
seize terrorist assets; and the power 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.
It is important for the Committee and the American people
to know that the FBI is using the PATRIOT Act authorities
in a responsible manner. We are making every effort to effectively
balance our obligation to protect Americans from terrorism,
with our obligation to protect their civil liberties.
Executive
Branch Organizational Changes
Organizational
changes that have taken place within the Executive Branch
with respect to the investigation of terrorism financing include
the execution of a Memorandum of Agreement (MOA) between the
Department of Justice (DOJ) and the Department of Homeland
Security (DHS) concerning terrorist financing investigations.
The MOA addresses the importance of waging a seamless, coordinated
campaign against terrorist sources of financing. It was signed
by Attorney General Ashcroft and Homeland Security Secretary
Ridge on May 13, 2003. Prior to this agreement, both the DOJ
and DHS had separate terrorist financing task forces. Under
DOJ, the FBI had the TFOS, which was discussed earlier. The
DHS had the Bureau of Immigration and Customs (ICE) led Operation
Green Quest (OGQ).
Pursuant to the MOA, OGQ ceased to exist as a program name
as of June 30, 2003. Accordingly, the FBI was designated to
lead terrorist financing investigations and operations. It
was agreed that DHS would focus its activities on protecting
the integrity of U.S. financial infrastructures. To that extent,
the DHS implemented the ICE led Operation Cornerstone. Operation
Cornerstone will identify vulnerabilities in financial systems
through which criminals launder their illicit proceeds, bring
the criminals to justice and work to eliminate the vulnerabilities.
The majority of the former OGQ case inventory was criminal
cases, with no nexus to terrorism. These cases were converted
from OGQ to Operation Cornerstone. Those cases that had a
nexus to terrorism that were investigated by the former OGQ
are currently being assessed for transition to the appropriate
FBI Joint Terrorism Task Force (JTTF). Ongoing and future
Operation Cornerstone investigations that develop links to
terrorism will be referred to the FBI through the TFOS. The
ICE and TFOS are coordinating investigative initiatives that
will enable the ICE to identify financial systemic vulnerabilities
and which will enable the TFOS to identify ties to terrorism
and terrorist financing. In addition, there is a liaison from
ICE assigned to TFOS, and investigators from ICE will be represented
on the JTTFs.
Terrorism represents a global problem. The solution is grounded
in what would have been considered prior to 9/11, unprecedented
international cooperation and coordination. The threat it
poses must always be considered imminent. In addition to considerable
financial investigative expertise, addressing terrorism and
the finances that support and propagate it requires the ability
to both implement proactive and preventive approaches to disrupt
and dismantle as well as the ability to conduct highly reactive
immediate response financial investigations to address potential
imminent threats. As stated herein and in conjunction with
more and more of the international community and other aspects
of the US Government, the FBI has made considerable progress
toward achieving and implementing these abilities.
Again, I offer my gratitude and appreciation to you, Madam
Chair Collins, Senator Specter, and the Governmental Affairs
Committee, for dedicating your time and effort to this issue
and I would be happy to respond to any questions.
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