FROM THE OFFICE OF PUBLIC AFFAIRS

Good morning, Mr. Chairman.

I was in Cambridge, England on September 11^th of last year, attending an international conference on money laundering.  The college was populated with attorneys general, chief justices and ministers of police and even some general counsels. 

The meeting had the trappings of a serious and sober affair, but in truth there was a lot of self-congratulation.  The law enforcement community had been on the trail of money laundering for more than a decade, and had something to crow about: elaborate computer screens, predictive models, profiles of conduct, capture and indictment, all evidenced that we were gaining a lead on a tough issue.

The disintegration of the World Trade Center silenced all in Cambridge.  It wasn’t just that it was awful.  It was also the realization that the gathering had been looking, for too long, at the world through the wrong end of a telescope.  Money had been spirited around the globe by means and measures and in denominations that mocked detection.  The most serious threat to our well-being was now clean money intended to kill, not dirty money seeking a place of hiding.

I caught a jump seat on a military jet the next day, thinking that Treasury would do the orthodoxy – collect revenue, sell war bonds and send the money across the river to the Pentagon. 

But this is a profoundly uncommon war.  There is no known sovereign; no uniformed army; no hill to take; no target that is seemingly out-of-bounds.  Indeed, a premium is obscenely placed upon death of innocents. 

It is shadow warfare.  The primary source of the stealth and mobility necessary to wage it is money.  It is the fuel for the enterprise of terror. 

It is also its Achille’s heel.  It leaves a signature, an audit trail which, once discovered, might well prove the best single means of identification, prevention and capture.

Indeed, much of the intelligence that we gather in this war is suspect.  It’s the product of treachery, deceit, interrogation, bribery and trying to read encrypted talk.  But books and records do not lie.  They are literally diaries of terror.

That’s a dramatic statement, but I do not think it possible to overstate the importance of the war campaign against terrorist financing.  Nor do I think it wise to understate the difficulty.

Ours is a deliberately open and porous economy.  The ways to game it are near infinite.  Moreover, our problem is international in scope.  The overwhelming bulk of the assets that we seek to freeze, the cash flow that we hope to strangle and the records that we aspire to audit are beyond the oceans that surround us.  To act alone would justly invite critique.

So, once in Washington, Treasury set about to craft an ambitious program to include (i) an executive order that raises the standards of conduct and due diligence of financial intermediaries, and explicitly targets even unwitting underwriters of terror for the seizure of their assets; (ii) U.N. Security Council resolutions that mirror the same and criminalize terrorist financing; (iii) more scrutiny at the gateway to U.S. financial markets under the PATRIOT Act; (iv) extensive public diplomacy to champion the need and wisdom for international vigilance; (v) engagement of central bankers and finance ministries in the pursuit of terrorist funds; and (vi) outreach to the private sector for assistance in the identification, location and apprehension of terrorists and their bankers.

Much of the effort is overseen by a policy coordinating committee established by the National Security Council, which I chair.  As best as humanly possible, and surely we have feet of clay, we have one government working in concert fighting the campaign against terrorist financing.  But the task remains daunting.  Material issues that face us include a near-insatiable appetite for actionable intelligence, increasing demands by coalition partners to share that intelligence, and a chorus of competing voices that risk confusion of our message. 

Public perception is also important.

This is not a box score game.  Only a small measure of success in the campaign is counted in the dollars of frozen accounts.  The larger balance is found in the wariness, caution, and apprehension of donors; in the renunciation of any immunity for fiduciaries and financial intermediaries who seek refuge in notions of benign neglect and discretion, rather than vigilance; in pipelines that have gone dry; in the flight to old ways of value transfer like gold on precious gems, and the ability to focus our resources on those avenues of last resort; and in the gnawing awareness on the part of those who bank terror that the symmetry of borderless war means that there is no place to hide the capital that underwrites terror. 

[One last point.  It’s Pollyannaish to say that we will stop the flow of all the money, but it’s also self-defeating not to try.  How we have chosen to go about it is perhaps captured by a brief story.

The Federal Reserve Bank in New York abuts the perimeter of the World Trade Center.  It is an imposing and seemingly impregnable building and the nerve center for the execution of US monetary policy.  It also literally houses the wealth of nations.  Buried deep in the bedrock of Manhattan, well below the subways, $63 billion of gold reserves of a hundred countries are stored in Federal Reserve vaults. 

It all had to be abandoned when the World Trade Center collapsed.  The structural integrity of a third building -- World Trade Center 7 -- was threatened by inferno.  The prospect of its toppling recommended evacuation of the New York Fed.

Now this was a first for the fortress like Fed.  My counterpart, the General Counsel, Tom Baxter, raced through the building assuring himself that each and every one of his colleagues was safely out the door.  Once satisfied, he himself prepared to descend the steps that front the building.  There was a palpable sense of urgency.  Smoke was billowing out of the site of the World Trade Center, police sirens were blaring, and the Fed’s own police were urging Tom to hurry down the steps. 

But first he turned to lock the door, only to find that the door does not lock from the outside.  Sixty-Three billion dollars of gold and an open building.  Tom hesitated, thought of all the alternatives of returning and winding his way through a maze of corridors and parking lot ally ways to secure the building, but the entreaties of the police prevailed.  Tom joined them and was sped by police vehicle to a place of refuge.

When he arrived, he telephoned Chairman Greenspan to report the good news that all employees were safe, out and accounted for.  The evacuation had gone without incident.  The Chairman had only one question – Tom, did you lock the door?

The answer, of course, was no. 

We cannot and should not lock the door, because it means the bad guys won.  What we have to do is be vigilant. 

With perfect intelligence, there would be no need for the Patriot Act.  In that respect it is a default mechanism.  But because we do not yet have complete intelligence source, it is an important gatekeeper.  The predicate for everything we do, however, is actionable intelligence.  And I welcome the opportunity to discuss the issue with each of you in a venue that will not compromise on-going operations or investigations.  Thank you sir.