AN ASSESSMENT OF CURRENT EFFORTS TO COMBAT TERRORISM FINANCING

TUESDAY, JUNE 15, 2004

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Committee met, pursuant to notice, at 10:30 a.m., in room SD-342, Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman of the Committee, presiding.

Present: Senators Collins, Coleman, Specter, Lieberman, Levin, Akaka, Lautenberg, and Pryor.

OPENING STATEMENT BY CHAIRMAN COLLINS

Chairman COLLINS. The committee will come to order. Good morning. Today the Governmental Affairs Committee will conduct a review of current efforts underway to combat terrorism financing.

This is the third hearing the Committee has held during the past year on this issue of great global importance. The focus of our hearing today is a new report by the Independent Task Force on Terrorism Financing sponsored by the Council on Foreign Relations. The Council's first report, released in October 2002, begins with these words: "The fog of war has long befuddled military and political leaders. Of all the battle fronts in today's war on terrorism, few are as foggy as efforts to combat terrorist financing."

As both of these reports make clear, however, this fog is no natural phenomenon. It is entirely manmade. Terrorism thrives in the shadows. It prospers by deceit and deliberate confusion. It is a perverted world in which murderers are called freedom fighters and in which building schools and health clinics can excuse the slaughter of innocents.

The answer is relentless scrutiny and then taking forceful and effective action.

This new report focuses primarily upon the actions taken by the Governments of the United States and of the Kingdom of Saudi Arabia. It provides an insightful analysis of the progress that has been made and of the challenges that remain.

As the report observes, Saudi Arabia has, on a comparative basis, taken more legal and regulatory actions to combat terrorism financing than many other Muslim States. However, the size, the reach and the wealth of persons and institutions there with connections to violent terrorist groups put the kingdom on the front lines of this battle.

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There are other engines of terrorism financing, but as David Aufhauser, one of our distinguished witnesses, testified just 1 year ago, Saudi Arabia is, in many ways, the epicenter of terrorism financing. As the Council's first report stated, individuals and charities based in Saudi Arabia have been the most important source of funds for al Qaeda.

A phrase that occurs again and again throughout this new report is political will. In some instances, it is evident and growing. In others it is still woefully lacking. This mixed result characterizes Saudi Arabia. The Saudi government deserves credit for undertaking considerable legislative and regulatory reforms. Questions remain, however, about whether these reforms are being consistently, effectively, and vigorously implemented.

For example, the kingdom recently dissolved the notorious Al Haramain charity and it has created a new organization to coordinate and oversee private Saudi charitable giving abroad. This is a very positive step that should significantly diminish the ability of al Qaeda and other terrorist groups to raise and move funds using charities as conduits. There remain, however, serious questions. Most important, what are the Saudi's doing to crack down on the International Islamic Relief Organization, the World Assembly of Muslim Youth, and the Muslim World League, three of the charities alleged to have the most troubling terrorism connections.

Terrorists attacking Saudi Arabia from within the country have been killed and many Saudi law enforcement personnel have given their lives. Yet this report also notes that since September 11, 2001 we know of not a single Saudi donor of funds to terrorist groups who has been publicly punished.

Perhaps most troubling is the continued gap between what Saudi leaders say to the world and what some of them have to say to their own people. Following the al Qaeda attacks in early May, Crown Prince Abdullah said on Saudi TV that "Zionism is behind the terrorist attacks in the kingdom. . . . I am 95 percent sure of that." That astonishing and inflammatory remark was reiterated a few days later by the Saudi Foreign Minister. The Saudi Interior Minister then left no doubt as to the meaning when he bluntly stated that al Qaeda is backed by Israel.

This is not just a lack of political will. This is political blindness. To say that the Kingdom of Saudi Arabia is a full partner in the war against terrorism while such inflammatory and anti-Semitic statements are being made would certainly be vastly premature.

On an encouraging note, the report details significant progress by the U.S. Government in combating terrorism financing. A key recommendation of the first task force report in 2002 was for the Administration to centralize the coordination of efforts to combat terrorism financing. This has been accomplished to a significant degree.

The Administration also deserves credit for prompting the Saudis to begin to undertake serious reforms and to extend meaningful cooperation to American terrorism investigations. The progress represented by the enactment of the Saudi legal reforms, the Saudi actions against al Qaeda cells in the kingdom, and the creation of the Joint Terrorism Financing Task Force should not be understated. These are indeed important achievements.

But the report also finds several troubling shortcomings and includes a number of thought-provoking recommendations for change. I am particularly intrigued by the task force's recommendation for Congress to enact a certification regime that would require the President to certify whether foreign nations are fully cooperating with the fight against terrorism financing. If the President did not make this certification or issue a waiver in the interest of national security, non-cooperating nations would face an array of sanctions. This type of regime has been employed in the war on illegal drugs. The report suggests that it be in place for the fight against terrorist funds as well.

We, the Governments of the United States, Saudi Arabia, and all responsible nations, have made considerable progress in combating terrorism. But this struggle is not easily won and money remains the lifeblood of many terrorist operations. We must not rest until we have done everything in our power to halt the flow of money that breathes life into these groups. We must exercise relentless scrutiny and take strong action. And as this report emphasizes so clearly, we must have the sustained will necessary to win the war against terrorism.

Senator Lieberman.

OPENING STATEMENT BY SENATOR LIEBERMAN

Senator LIEBERMAN. Thank you very much, Chairman Collins for convening this hearing, and also, I must say, for that excellent opening statement.

Our subject for today is about one of the most important battlefronts in our war against terror and that is the effort to stop the funding of terrorists. If we can succeed in choking off the money that sustains terrorist activities we can literally reduce the death and destruction the terrorists cause.

The Council on Foreign Relations, in its report today, has done a real service. The report should help us refocus, reexamine and redouble our efforts to cut off the flow of money to international terrorist groups. Of course, that includes leading us to take again a hard and demanding look at financial support for terrorism from Saudi Arabian sources.

Immediately after September 11, President Bush signed an executive order aimed at blocking terrorist funds. In one sense our overarching question in this hearing and our Committee's continuing investigations is what progress has been made in implementing that order.

It is clear that in the first few months following the President's announcement there was very significant success. Over $100 million in terrorist money was blocked or frozen around the world. But, in the 2 years since then only $30 million has been stopped. So that both the United Nations Monitoring Group on Terrorist Financing and Congress's own General Accounting Office concluded at the end of 2003 that American efforts have sadly not stemmed the flow of money to terror groups.

We will want to ask our witnesses today why this has happened and what we can do together to make sure that we do cut off the flow of money. The Council on Foreign Relations report does sug

gest the beginning of a series of answers about where some of the problems may be.

I thought one surprising possible cause that the report cites is the fact that the Administration has only used new authorities under the Patriot Act, the much-maligned Patriot Act, to crack down on the assistance of foreign financial institutions for terrorism only one time and that was quite recently against a Syrian bank. I would like to get a little background about why we think that has happened and whether the witnesses believe that there are other areas in which we can use that Patriot Act authority.

Second, the Council report tells us that the coordination of America's efforts to block terrorist funding has bounced around a bit among the National Security Council, the Counsel of the Treasury Department, and the FBI. In fact, there have been five different people in charge since September 11. And, that uncertainty and changes in leadership may have undermined the coordination and the effectiveness of our anti-terror financing efforts.

Leadership has now shifted, with some clarity it appears to me, to the National Security Council, although not through any formal process that would give it continuity and institutional permanence. I think that is greatly to be desired.

I note for the record the nodding of at least two of the witnesses to that suggestion.

I do also note that one of our witnesses today, former Treasury Department General Counsel David Aufhauser, believes that this leadership role, in fact, should reside at the Treasury Department. I would be interested in hearing his views on that matter during his testimony.

But either way, whether at the Treasury Department or at the NSC, leadership has got to be made certain, and in that sense, institutionalized. It should no longer be left to ad hoc and uncertain arrangements.

The Intelligence Committees of Congress reported a while back in their joint inquiry into September 11 that the tendrils of Bin Laden's al Qaeda terrorist network extend into as many as 60 countries. That means our war against this network and those who finance it must be just as extensive.

The Council reports, hopefully, that 117 nations have signed now the International Convention to Suppress Terror Financing, which is up from four at the time of the September 11 attacks. So we have gone from four countries who are signatories to 117. That is the good news.

The bad news is that most of those countries, the Council reports, do not have either the actual tracking capabilities or the resources to track laundered money. I want to hear from the witnesses about what we can do to make that bad news better.

In working to cut off funding for terrorism, Saudi Arabia, long a very important and close ally of the United States of America, becomes a necessary focus of attention. Bin Laden was a Saudi but more to the point 15 of the 19 September 11 hijackers were Saudis and questions continue to remain about financial connections between Saudi money and terror funding within the United States. Before the May 2003 terrorist bombings in Riyadh many independent analysts, including the Council on Foreign Relations, have

told us that Saudi officials may have talked the talk on cooperating with the United States in the blocking of terrorism financing and investigating and prosecuting of those who were involved in it. But then, in many cases, did not walk the walk. In fact, they turned a blind eye to Saudi money going to organizations directly or indirectly supporting terrorism.

Again, I stress that is not my conclusion, that is the conclusion of many independent analysts. Today's CFR report points encouragingly to positive signs of intelligence sharing and law enforcement cooperation between the Saudis and the United States, again particularly since the May 2003 bombings in Riyadh. It says there is evidence that the actions taken by the Saudi government since then have actually hindered Bin Laden's financial operations and forced foreign-based terror groups to begin to try to raise their funds locally. That cooperation and progress between the United States and the Saudis is important and must grow.

In fact a joint U.S.-Saudi task force on these subjects was established last August to help the Saudis clamp down on terrorism financing, but the Council report tells us jarringly that the work of the joint task force has not led yet to one public arrest or prosecution of anyone in Saudi Arabia for financing terrorism. And that is hard to understand, particularly as the Council on Foreign Relations report indicates that there are two Saudis named Yasin Qadi and Wa'el Hamza Julaidan, who have been declared financiers of terrorism by the U.S. Government.

So we have made some progress in tracking and stopping terrorist financing but we, in Congress, still need to consider whether our urgent need to starve the terrorists of funding is being hampered by an uncertain organizational structure, by turf battles and perhaps by continuing defensiveness about our special relationship with the Saudi government and the Saudi ruling family.

In a day and age of terrorism which brings death and destruction not just to us and others but to Saudis themselves, we ought to be able best to preserve our relationship with the Saudis with total honesty and the most aggressive joint efforts against terrorism.

The CFR report and today's hearing, I hope, will begin to give us some answers to these questions which have become, in fact, life and death questions.

Thank you, Chairman Collins.

Chairman COLLINS. Thank you Senator. Senator Coleman.

OPENING STATEMENT OF SENATOR COLEMAN

Senator COLEMAN. Thank you, Chairman Collins. And thank you for your commitment to relentless scrutiny of this issue by holding a series of hearings on the report by the Council on Foreign Relations regarding terrorist financing.

Just two observations. One, it is clear that a new framework for the U.S.-Saudi relationship needs to be put into play focusing on accountability, accountability for terrorist financing. We have to see concrete results.

Second, in light of last week where we had a celebration of the life of Ronald Reagan and his optimism and belief that we would win the Cold War, and we did, I have the same optimism that we are going to win this struggle against terrorism, the same opti