Testimony of John S. Pistole, Assistant Director, Counterterrorism
Division, FBI
Before
the Senate Committee on Banking, Housing and Urban Affairs
September 25, 2003
"Identifying, Tracking and Dismantling the Financial
Structure of Terrorist Organizations"
Good
Morning Chairman Shelby, Senator Sarbanes, and other distinguished
members of the committee. On behalf of the FBI, I would like
to thank you for this opportunity to address the FBI's role
in ensuring greater integrity of our country's financial institutions
with respect to terrorist financing. I will discuss the FBI's
efforts in identifying, tracking and dismantling the financial
structure supporting terrorist groups to include forward thinking
proactive and predictive capabilities. I will speak about
our evolving liaison, sharing and outreach relationships with
the financial community as well as with foreign governments
and their respective financial and regulatory institutions
(to include Saudi Arabia). I will conclude with some recent
terrorist financing successes and the challenges we as well
as private industry still face in following the money and
obtaining and analyzing financial records, especially in emerging
threat situations.
FBI
CHANGE IN FOCUS
As Director
Mueller stated during his June 18, 2003 testimony before the
House of Representatives Committee on Appropriations it is
critical that the FBI transform it's "intelligence effort
from tactical to strategic..if the FBI is to be successful
in preventing terrorism and more proactive in countering foreign
intelligence adversaries and disrupting and dismantling significant
criminal activity."
Following
the events of September 11, 2001 (9/11), the FBI changed it's
focus making counterterrorism it's highest priority and redirecting
resources accordingly. The emphasis was placed on intelligence
with prevention as our primary goal. Counter terrorism investigations
have become intelligence driven. Criminal investigation into
these matters is considered a tool to achieve disruption,
dismantlement and prevention.
FORMATION
OF TFOS
Prior
to the events of 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, immediately 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 6) 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 in a timely fashion has significantly
enhanced the FBI's ability to identify, investigate, and resolve
immediate threat situations involving potential terrorist
activity. However, we still face significant challenges in
obtaining and analyzing financially related records in a timely
fashion, especially in emerging threat situations, which I
will discuss later in my testimony. The ability to conduct
near 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. This illustrates another
example of not only more pro-active measures but also of increased
cooperation and coordination with the international community.
LIAISON
AND OUTREACH
Extensive
training and support of international investigations by the
TFOS has led to Agent visits/exchanges and training programs
involving a variety of countries from Europe, Asia, the Middle
East, South America, and Africa. In support of specific high
profile joint terrorist financial investigative matters, a
number of countries and agencies, including the United Kingdom,
Switzerland, Canada, Germany and Europol, have detailed investigators
to the TFOS on a TDY basis. The 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
Qaeda cells, including cells located in Indonesia, Malaysia,
Singapore, Spain, and Italy. We have also disrupted Al Qaeda
financing in the UAE, Pakistan, Afghanistan, and Indonesia
with the assistance of relationships established with authorities
in those and other countries.
The 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 U.S. Department of State,
the 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.
Through
these training and outreach initiatives the TFOS has been
able to build relationships with foreign counterparts that
improves the FBI's ability to obtain access to financial records
held by foreign financial institutions.
The TFOS
has cultivated and maintains a contact database of private
industry and government sources/persons who can provide financial
data, including near real-time monitoring of financial transactions.
Many of these contacts can be reached or accessed on 24 hour/7
days a week emergency basis allowing the TFOS to respond rapidly
to critical incidents. In all cases, TFOS follows applicable
legal procedures in obtaining access to financial data.
Through
these contacts and with legal process 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 near 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.
PROACTIVE
TFOS PROJECTS
The TFOS
has a responsibility to be not only REACTIVE but PROACTIVE
as well, to think strategically about potential threats and
future case development. As a result, the TFOS, together with
the Counterterrorism Section (CTS), Criminal Division of the
Department of Justice (DOJ), have begun a number of pro-active
initiatives to identify potential terrorists and terrorist
related financing activities.
The overriding
goal of these projects is to identify potential terrorists
and terrorist related individuals/entities, mechanisms or
schemes through the digital exploitation of data. To accomplish
this, the TFOS seeks to 1) identify potential data sources;
2) create pathways and protocols to legally acquire and analyze
the data; and 3) provide both reactive and proactive operational,
predictive and educational support to investigators and prosecutors.
It is
important to understand that these projects and similar initiatives
by the TFOS seek only to more fully exploit information already
obtained by the FBI in the course of it's investigations
or through the acquisition of new data through the appropriate
channels and legal process. The FBI does not seek access to
personal or financial information outside these constraints.
INFORMATION
SHARING
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 the TFOS and the intelligence agencies. The TFOS has
personnel detailed to the CIA/CTC and personnel from there
work directly with the TFOS on financial intelligence matters.
A Policy
Coordinating Committee (PCC) on Terrorist Financing was formalized
at the end of 2001. The PCC generally meets at least once
a month to coordinate the United States government's campaign
against terrorist financing. The meeting generally focus on
ensuring that all relevant components of the federal government
are acting in a coordinated and effective manner to combat
terrorist financing.
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 potential
source of funding for terrorist groups, needed closer scrutiny.
This included any role that may have involved Saudi Arabia
or 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 important steps to deter global
terrorism, and has redoubled its efforts following the deadly
car bombings in the Kingdom on May 12, 2003. Prior to the
May 12 bombings, Saudi Arabia put new laws and regulations
in place for all charitable organizations, ensuring that they
are audited to prevent the flow of funds to entities other
than charity. Saudi Arabia has also 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. These measures are being
reviewed this week by an international team of experts from
the Financial Action Task Force.
In March
2002, Saudi Arabia and the U.S. Government jointly blocked
the accounts of Bosnia and Somalia branches of Al-Haramain
Islamic Foundation, and of Wa'el Hamza Julaidan, an associate
of Usama bin Laden who provided financial and logistical support
to Al Qaeda.
Since
the May 12, 2003 bombings of the three western compounds in
Riyadh, Saudi Arabia, cooperation with the Kingdom of Saudi
Arabia has significantly 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. Saudi Arabia has contributed to the break
up of a number of Al Qaeda cells, the arrests of key Al Qaeda
leaders and the capture of Al Qaeda members in Saudi Arabia.
The Saudi
and U.S. Governments have recently agreed to focus increased
investigative attention on identifying and eliminating sources
of terrorist funding within the Kingdom and around the world.
The FBI and our counterparts in the Saudi Ministry of Interior
have established a joint terrorism financing task force.
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 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 government's position in defending suits brought by those
who provide material support; 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.
The FBI
has utilized the legislative tools provided in the USA PATRIOT
Act to further its terrorist financing investigations. Some
examples of how the TFOS has used the provisions in the USA
PATRIOT Act to obtain foreign bank account information by
issuing subpoenas on those foreign bank's U.S. correspondent
bank and to corroborate financial data obtained through criminal
investigative techniques with intelligence sources. All of
these techniques have significantly assisted ongoing terrorism
investigations and would not have been possible, but for the
enactment of the USA PATRIOT Act.
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 civil liberties with our obligation
to protect Americans from terrorism.
TERRORIST
FINANCING SUCCESSES
The FBI
has achieved several recent and notable successes. These are
the direct result of our ongoing efforts to cultivate more
meaningful and productive international relationships, and
increase emphasis on sharing relevant financial information
domestically between law enforcement, government agencies,
and private financial institutions. In concert with other
U.S. Government agencies, the FBI has deployed advisers and
trainers on numerous missions around the world to assist countries
in the crafting of legislation to combat terrorist financing,
further strengthen financial oversight controls, and encourage
closer scrutiny of suspicious financial transactions.
On four
separate occasions, the FBI has received financial information
from a foreign government directly related to the funding
of a pending terrorist attack. On these occasions the FBI
was able to provide near real-time tracking of the funds and
provide the foreign government with specific and identifiable
information regarding the parties involved in the financial
transactions - more explicitly the exact location and time
the transactions occurred. Based on this critical information,
the foreign government was able to locate members of terrorist
cells and prevent them from executing their intended terrorist
attacks.
In January
2003, German law enforcement authorities that had been working
closely with the FBI arrested Mohammed Al Hassan Al-Moayad,
a Yemeni national, on charges of conspiring to provide material
support to Al Qaeda and Hamas. Al-Moayad was a significant
financial contributor to Al Qaeda and Hamas and boasted that
he provided over $20 million dollars to Usama bin Laden. Al-Moayad
had participated in several fund-raising events at the Al-Farouq
Mosque in Brooklyn, New York. Al-Moayad has been arrested
and is awaiting extradition to New York from Germany.
In December
2002, a Federal grand jury in Dallas returned an indictment
against a senior Hamas leader, Mousa Abu Marzouk, for conspiring
to violate U.S. laws that prohibit dealing in terrorist funds.
Also arrested and charged by the FBI were Ghassan Elashi,
chairman of the Holy Land Foundation for Relief and Development
(HLF). Elashi and four of his brothers, all of whom are employees
of the Richardson, Texas, based InfoCom Corporation, were
charged with selling computers and computer parts to Libya
and Syria, both designated state sponsors of terrorism. The
indictment alleged that the Elashi brothers disguised capital
investment from Marzouk, a specially designated terrorist
for his admitted leadership role with Hamas. The indictment
and subsequent arrests have disrupted a U.S.-based business,
which was conducting activities with a known Hamas leader,
and international state sponsors of terrorism.
In support
of other FBI Field Office cases, the TFOS provided intelligence
and criminal financial investigative assistance through various
mechanisms such as: a) financial analytical support; b) financial
link analysis; c) field deployment of financial experts; and
d) major case management support. This support aided investigators
in a variety of cases such as:
- The
FBI Joint Terrorism Task Force (JTTF) in Charlotte, N.C.
utilized racketeering and terrorist financing statutes to
disrupt, and then dismantle a Hizballah procurement and
fund-raising network relying on interstate cigarette smuggling.
- The
FBI, supported the Treasury's Office of Foreign Asset Control
(OFAC), in blocking assets of U.S. offices for Holy Land
Foundation for Relief and Development (HLF). This resulted
in the closure of Hamas' largest fund-raising entity in
the U.S. (The HLF has been linked to the funding of Hamas
terrorist activities, and raised $13 million dollars of
support in 2000).
- Joint
FBI-OFAC cooperation shut down U.S. based offices of Benevolence
International Foundation (BIF). Assets and records were
blocked after it was determined that the charity was funneling
money to Al Qaeda. In February 2003, Enaam Arnaout, the
head of BIF, pled guilty to racketeering conspiracy and
fraud charges.
- The
FBI, with cooperation from the U.S. Intelligence Community
and a foreign government, apprehended a principle money
launderer of Usama bin Laden's, responsible for funneling
approximately tens of millions of dollars through international
accounts to Al Qaeda and the Taliban.
- In
February 2003, the FBI arrested Sami Al Arian, the alleged
leader of U.S.-based Palestinian Islamic Jihad (PIJ), and
three other members of his organization. They also closed
several front companies suspected of providing material
support to PIJ members in operations against Israel.
PARTICIPATION
OF FINANCIAL INSTITUTIONS
Since
the events of 9/11, private industry and particularly the
financial services industry have made great efforts to assist
law enforcement in the investigation of terrorism and terrorist
financing related matters. Their corporate patriotism and
desire to work more closely with government in protecting
America is recognized and appreciated. They are literally
on the "front lines" in the financial war on terrorism. Because
it takes money to travel, communicate and carry out terrorist
acts it is the bank teller, manager or broker that is more
likely to interact with the next terrorist or terrorist financier,
maybe even before law enforcement or the intelligence community
does. For this reason, it is critical that the financial services
industry receive the necessary training and awareness of the
"Things to Look For" as it relates to terrorism and that they
have a vehicle or mechanism to report their suspicions to
the government in a timely and efficient manner. This is accomplished
through the use and electronic filing of SARs. Conversely,
the government needs to have a way to communicate these "Things
to Look For" with the private sector as well as a mechanism
to publish names of individuals, entities and/or organizations
reasonably suspected of engaging in terrorist activity. Outreach
and training combined with the utilization of USA PATRIOT
ACT Section 314(a) facilitates the timely sharing of information
between law enforcement and financial institutions. As mentioned
earlier, the TFOS has sponsored and participated in a series
of conferences and training forums with representatives from
the financial services industry and regulators to educate
them of the "Things To Look For" but more coordination and
law enforcement outreach is needed.
PRODUCTION
OF FINANCIAL RECORDS IN ELECTRONIC FORMAT
One of
the biggest challenges facing law enforcement when it comes
to financial records analysis is the unavailability of financial
records in electronic format. In the past, it was common for
investigators to request and financial institutions to provide
copies of financial records such as statements, copies of
checks or deposit slips in hard-copy (i.e., paper) form. The
delays inherent to their production and forwarding to law
enforcement was complicated by the fact that the records were
not readily accessible by the financial institution and because
they are often in paper form they are not readily searchable
or retrievable. This is especially true when time is of the
essence during emerging threat situations where access to
and analysis of the records is critical. Some financial institutions
have made great strides in converting and storing their transactional
and customer records in electronic format. The credit card
industry is a good example of this. Many banks and institutions
even allow their customers to view and download their account
transactional data via the internet into financial management
programs. However, others because of the nature of their business
or the costs involved do not digitally store or are not capable
of producing records electronically.
Future
law enforcement investigations would be significantly enhanced
if financial institutions were to develop and adopt standards
of best practices for the storage and production of financial
records in electronic format. Countless hours and resources
on the part of private industry and the government could be
saved if these records were stored and produced in a format
that eliminated the need for investigators to re-input or
type the information back into financial analysis programs.
Currently
when records are not available in a digital format, we utilize
high-speed scanners to scan and copy the records. Text is
thereby converted to Optical Character Recognition (OCR) searchable
text. By "digitizing" the documents into scanned, searchable
images they become immediately available to all with a need
or interest in the records. Digitizing the records not only
facilitates rapid dissemination of the documents but also
provides for enhanced searching and analysis. Storage, retrieval
and discovery production costs are also thereby reduced. Once
the records are digital, then advanced searching tools may
be applied against them to identify key information, patterns
or trends.
However,
as long as relevant records remain in paper form whether held
by the financial institution or the government, investigators
are impeded in their timely dissemination and analysis. This
can have an impact on our preventative efforts.
In summary,
the increased promotion of anti-terrorist financing training
both domestically and internationally would go a long way
towards furthering cooperation and raising awareness of patterns
in terrorist financing. Efforts to interdict illegal money
remitters which undermine our financial institutions and provide
a potential avenue for illicit funds to be transferred should
be pursued. Finally, the production of financial records in
electronic format would facilitate not only sharing and analysis,
but increase our ability to tactically respond to emerging
threats.
CONCLUSION
Terrorism
is a global problem. The solution is grounded in what we have
experienced since 9/11 - unprecedented international cooperation
and coordination. The threat terrorism 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 U.S. Government, the FBI has made considerable progress
toward achieving and implementing these abilities.
Again,
I offer my gratitude and appreciation to you, Chairman Shelby,
Senator Sarbanes, and the distinguished members of the Committee,
for dedicating your time and effort to this issue and I would
be happy to respond to any questions you may have.
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