Testimony of Michael F.A. Morehart,
Section Chief,
Terrorist Financing Operations Section
Counterterrorism Division
Before the Congressional Committee of Government Reform
Subcommittee on Criminal Justice, Drug Policy, and Human Resources
"Terrorist Financing and Money Laundering Investigations:
Who Investigates and How Effective are They"
May 11, 2004
Good
morning, Chairman Souder, Ranking Member Cummings and
distinguished members of the committee. On behalf of
the Federal Bureau of Investigation (FBI), I would like
to thank you for this opportunity to testify before you
today. I will discuss the combined efforts of the FBI
and its partners in law enforcement, which have resulted
in a significant improvement in cooperation and the efficiency
with which we interact to address the investigation of
money laundering and terrorist financing matters. I will
provide as much information as I am able, given the open
nature of this forum. I should also caution that long-standing
FBI policy prohibits us from commenting on the specifics
of ongoing investigations and will therefore not be able
to provide the Subcommittee with the operational details
of any specific investigation referenced in this testimony.
The
FBI's Counterterrorism program has made comprehensive
changes in order to meet its primary mission of detecting,
disrupting and defeating, or more simply put, preventing
terrorist operations before they occur. We have spent
the past two and a half years transforming operations
and realigning resources to meet the threats of the
post-September 11th environment.
Terrorists, their networks and their support structures require
funding in some form to exist and operate. Whether
the financial support is minimal or substantial,
or whether the funds are derived from illegal narcotics
or some other criminal activity, it usually leaves
a trail that can be exploited by law enforcement
for investigative purposes. Being able to identify
and track these financial trails after a terrorist
act has occurred is important, but the key to achieving
the mission of prevention lies in exploiting financial
information to identify previously unknown or undetected
terrorists and/or terrorist cells. To this end, the
FBI has bolstered its ability to effectively combat
terrorism through the formation of the Terrorist
Financing Operations Section, or TFOS.
The
mission of TFOS includes conducting full financial
analysis of terrorist suspects and their financial
support structures in the United States and abroad;
coordinating joint participation, liaison and outreach
efforts to appropriately utilize financial information
resources of private, government and foreign entities;
utilizing FBI and Legal Attache& expertise to
fully exploit financial information from foreign
law enforcement, including the overseas deployment
of TFOS personnel; working jointly with the intelligence
community to fully exploit intelligence to further
terrorist investigations; working jointly with prosecutors,
law enforcement and regulatory communities; and developing
predictive models and conducting data analysis to
facilitate the identification of previously unknown
terrorist suspects.
In
addition, the FBI has undertaken a number of initiatives
to improve information sharing and coordination with
our national and international partners. For instance,
we have significantly increased the number of Joint
Terrorism Task Forces, or JTTFs, across the country.
Prior to September 11th there were 34 JTTFs in existence,
now there are 84.
The
JTTFs effectively partner FBI personnel with literally
hundreds of investigators from various federal, state
and local agencies. The success of the JTTFs lies
in the vast and varied expertise of its members'
ability to investigate terrorism. These members include
representatives from a variety of federal agencies
such as the Bureau of Immigration and Customs Enforcement,
or ICE, the Internal Revenue Service, the Departments
of State, Defense and Treasury, the Postal Inspection
Service and the Environmental Protection Agency.
It is important to note that every agency has an
open-ended invitation to participate in the JTTF.
The FBI sends all terrorism leads and terrorism related
information directly to the JTTFs. All participating
agencies are involved in the investigation of terrorism
cases and can use the full resources of the entire
task force when required. Moreover, all agencies
have full access to each others' information systems
and files.
Subsequent to the events of September 11, 2001, the United
States Customs Service was mandated to investigate
terrorism
financing. This was achieved via the initiation of "Operation
Green Quest." Green Quest attained a number of successes,
but represented, in some measure, a duplicative effort
and reinforced the need for a centralized coordinating
entity. Consequently, a Memorandum of Agreement (MOA)
pertaining to the investigation of terrorism financing
was entered into between the Department of Justice
(DOJ) and the Department of Homeland Security (DHS).
The MOA addressed the importance of DOJ, FBI and
DHS waging a seamless, coordinated law enforcement
campaign relative to terrorist financing
The
MOA, signed by Attorney General Ashcroft and DHS
Secretary Ridge on May 13, 2003, designated the FBI
as the lead agency in terrorist financing investigations
and operations; thereby enabling DHS to focus its
law enforcement activities on other criminal schemes
that threaten the integrity of United States financial
systems. DHS has implemented AOperation Cornerstone@,
led by ICE, to investigate criminals who launder
illicit proceeds, to bring them to justice and to
help try to eliminate financial infrastructure vulnerabilities.
Former US Customs Service "Operation Green Quest" criminal
cases having no nexus to terrorism were converted
to AOperation Cornerstone,@ while those cases having
a nexus to terrorism were transitioned to the appropriate
JTTF where participating ICE Task Force members continue
to play significant roles. In accordance with the
MOA, ongoing and future AOperation Cornerstone@ investigations
that develop links to terrorism will be referred
to the FBI through TFOS.
By
addressing the need for coordination and recognizing
the expertise and strengths of ICE and the FBI, the
MOA provides direction and needed coordination in
the war on terrorism. The result is the enhanced
ability to detect systemic vulnerabilities within
the financial framework. Consequently, the financial
systems are continually analyzed from a big picture
perspective and those exploiting the systemic weaknesses
are scrutinized.
Pursuant to the MOA, ICE and the FBI developed collaborative
procedures to determine whether appropriate ICE financial
crime leads or money laundering investigations may
be related to terrorism or terrorist financing. These
procedures are included as an attachment to supplement
this testimony.
These
procedures provide a framework for the review of all appropriate
ICE financial leads and investigations within the confines
of a Joint Vetting Unit, or JVU. The JVU is comprised of
both ICE and FBI personnel. The JVU's primary responsibility
is to evaluate ICE investigations to determine whether a
nexus to terrorism or terrorism financing exists. Moreover,
relevant data associated with the investigation is compared
to data contained in FBI databases in order to ensure investigative
deconfliction. If the vetted investigation or information
is identified as having a significant nexus to terrorism
or terrorist financing, the investigation is referred to
the ICE Deputy Chief at TFOS. The ICE Deputy Chief, in turn,
examines the information provided and discusses the elements
of the terrorism nexus with the FBI TFOS Section Chief.
A collaborative determination is then made regarding whether
the investigation will be conducted under the auspices of
the JTTF, taking into account the strength of the terrorism
or terrorist financing nexus, the impact on the investigation
of non-terrorism matters and the stage and development of
the respective investigation.
If
a matter is determined to have a sufficient terrorism
nexus and is transitioned to the relevant JTTF, both
the FBI and ICE are mindful that ICE agents devoted
substantial efforts in initiating and developing
their case prior to the transition. Recognizing this,
ICE and the FBI have agreed that ICE agents assigned
to those JTTF investigations will serve as lead case
agents in the investigations and prosecutions developed
by ICE. Both agencies understand that the coordinated
tasking and utilization of ICE and FBI resources,
coupled with joint collaborative decision-making
on strategy and operational issues, as well as the
sharing of intelligence, will ensure that all investigative
avenues are explored, and all intelligence gathering
and investigative tools are properly employed.
The
application of the MOA allowed the FBI and ICE to
exchange senior personnel. In this vein, a senior
manager from the Financial Investigations Division
of ICE currently serves as the Deputy Chief of the
FBI's TFOS. The ICE Deputy Chief has a fully integrated
role in the evaluation and determination of whether
an ICE investigation has a nexus to terrorism or
terrorist financing. The ICE Deputy Chief has full
access to FBI databases and other resources as he
deems necessary. Likewise, the FBI assigned a senior
manager from TFOS to the ICE Financial Division to
participate in the vetting process and the generation
of leads to TFOS.
To
date, the vetting has been utilized in the review
of 30 cases. Ten of these were identified as having
confirmed connections to terrorism or terrorist financing,
and ICE agreed to transition those ten cases to the
appropriate JTTF. (1)
In
addition to the aforementioned efforts, on a national
level, the National Security Council (NSC) formalized
the Policy Coordinating Committee (PCC) on Terrorist
Financing at the end of 2001. The NSC chairs the
PCC, which generally meets at least once a month
to coordinate the United States Government's campaign
against terrorist financing.
The
Departments of State, Treasury, Homeland Security
and Justice also participate in an interagency Terrorist
Financing Working Group, chaired by the State Department,
to coordinate government efforts to identify, prioritize,
assess and assist those countries whose financial
systems are vulnerable to terrorist exploitation.
Groups of experts, including DOJ money laundering
prosecutors, law enforcement officials from many
U.S. Government agencies and regulatory members,
have provided extensive on-the-ground assessments
of such countries' vulnerabilities in an effort to
develop and provide targeted training and technical
assistance to those countries identified as most
vulnerable. The Working Group has identified 42 countries
whose cooperation is critical in the war against
terrorism. All of the participating agencies have
the opportunity to provide training or technical
assistance to each of these countries. The agencies
work together closely to make sure that this assistance
is not duplicative and provides needed tools in the
investigation of terrorism financing.
With
respect to the 2003 National Money Laundering Strategy,
the FBI concurs with the strategy's goals and objectives
as set forth by the Treasury Department. The blocking
of terrorist assets worldwide, establishing and promoting
international legal standards for adoption by other
countries to safeguard their financial infrastructures
from abuse and facilitating the exchange of international
information are several key objectives which must
be achieved if law enforcement and regulatory agencies
are to have any success in stemming the flow of illegal
funds throughout the world.
Money laundering and terrorist financing raise significant issues
with respect to prevention, detection and prosecution of terrorism.
Sophisticated techniques employed to launder money and finance terrorism
add to the challenges and complexity of the issue. These techniques
may involve myriad types of transactions as well as a plethora of
financial institutions and related entities, such as financial advisers,
shell corporations and service providers who act as intermediaries
for transfers to, through, and from different countries; and the
use of different financial instruments and other kinds of value-storing
assets. Money laundering is a fundamentally simple concept; it is
the process by which proceeds from a criminal activity are disguised
to conceal their illicit origins. Likewise, the financing of terrorism
is also a simple concept; it is the financial support of terrorist
acts or those who encourage, plan, or engage in terrorism. Money
laundering and terrorist financing often display similar transactional
features, most having to do with concealment. Money launderers send
illicit proceeds through legal channels so as to conceal their criminal
origins, while those who finance terrorism transfer funds that may
be legal or illicit in origin in such a way as to conceal their source
and ultimate use, which is the support of terrorism.
By
their very nature, money laundering and terrorist
financing are geared towards secrecy and do not lend
themselves to statistical analysis. Money launderers
do not document the extent of their operations or
publicize the amount of their profits, nor do those
who finance terrorism. Moreover, because these activities
take place on a global basis, estimates are even
more difficult to produce.
The
FBI's efforts to combat terrorism have been greatly
aided by the provisions of the USA PATRIOT Act and,
pursuant to the 2003 National Money Laundering Strategy,
the FBI is ensuring its vigorous and appropriate
application. It has already proven extraordinarily
beneficial in the war on terrorism. Most importantly,
the PATRIOT Act has facilitated the 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 tools in
our efforts to identify and track the financial structures
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 PATRIOT Act, which establishes stricter rules
for correspondent bank accounts; requires securities
brokers and dealers to file Suspicious Activity Reports,
or SARS; and money transmitting businesses, which
include any person who engages as a business in the
transmission of money, to register with the Financial
Crimes Enforcement Network (FinCEN) and file SARS.
There are other provisions of the Act that have considerably
aided the efforts of law enforcement 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 funds held in a US correspondent account. The
FBI understands that combating terrorist financing
is a mission that cannot be accomplished independently.
The need for information sharing and close cooperation
cannot be overstated.
Thank
you for the opportunity to testify before you today
and to highlight the FBI's investigative efforts
and the role of the FBI in combating terrorist financing.
It would be my pleasure to answer any questions.
(1) As to the remaining 20
investigations, it was determed they were either
(1) of no further investigative interest to ICE,
however, ICE agreed to provide personnel and other
assistance to the JTTF, as needed; (2) already under
the direction of the JTTF, or a working agreement
was in place between the FBI, ICE and the respective
U.S. Attorney regarding the investigation; or (3)
investigations where no defined terrorist nexus had
been established, resulting in continued coordination
of investigative efforts between FBI and ICE offices.