joint congressional report that reportedly detailed the role of Saudi persons or organizations in the 9/11 attacks.

At the end of 2003, two reports concluded that U.S. efforts to combat terrorist financing had yet to accomplish the basic mission of stopping the flow of money to terror groups. The U.S. General Accounting Office, the investigative arm of Congress, concluded that federal authorities still did not have a clear understanding of how terrorists move their financial assets and continue to struggle to halt terrorist funding. The United Nations Monitoring Group, in its second required report to the UN's al-Qaeda and Taliban Sanctions Committee, also found that "al-Qaeda continues to receive funds it needs from charities, deep-pocket donors, and business and criminal activities, including the drug trade. Extensive use is still being made of alternative remittance systems, and al-Qaeda has shifted much of its financial activity to areas in Africa, the Middle East and South-East Asia where the authorities lack the resources or the resolve to closely regulate such activity."

The views expressed in the Task Force's first report are now widely held, at home and abroad. Combating terrorist financing must remain a central and integrated element of the broader war on terrorism, and Saudi Arabia should be—and is—taking important efforts in this regard. Effective international efforts will continue to require both strong U.S. leadership and sustained political will in the source and transit countries for the funds that continue to support international terrorist organizations such as al-Qaeda. As a senior Treasury Department official told Congress on March 24, 2004, "we have found that our success is also dependent on the political will and resources of other governments."

It is with these thoughts in mind that we offer the findings and recommendations that follow. We note at the outset that much of the discussion in the text of this report and in the appendixes concerns Saudi Arabia. That is certainly not because we believe that Saudi Arabia is alone in the need to take effective and sustained action to combat terrorist financing. Indeed, on a comparative basis Saudi Arabia has recently taken more decisive legal and regulatory action to combat terrorist financing than many other Muslim states. Nor is it to minimize the potential significance of new modalities of terrorist financing that have nothing to do with individuals and organizations based in Saudi Arabia. Al-Qaeda financing has almost certainly become more diffuse since the dispersal of its leadership from Afghanistan; whereas once al-Qaeda's funds were managed centrally, communication and logistical difficulties have forced local operatives in

5

"ny cases to improvise and fend for themselves. Rather, it is because of the fundamental itrality that persons and organizations based in Saudi Arabia have had in financing militant amist groups on a global basis—a fact that officials of the U.S. government have now joined Birs Task Force in publicly affirming.

5 The Madrid bombing investigation, for example, indicates that the cell responsible for the March 2004 train bombing in that city relied significantly on self-help and drug trafficking to fund its operations.

FINDINGS

As a general matter, we wish to reaffirm the principal "findings" of our initial report, reproduced here in Appendix A. Although progress has been made on several important fronts, al-Qaeda and other terrorist organizations, as demonstrated by recent attacks and related investigations, still have ready access to financial resources, and that fact constitutes an ongoing threat to the United States (among other states). The problem has not been solved and, as we noted in our initial report, there is no single "silver bullet" to end the financing of terror. With those thoughts in mind, we wish to make the following additional findings regarding the state of efforts to combat terrorist financing since the issuance of our last report.

1. Various international fora are engaged in a wide array of multilateral activities that collectively constitute a new international regime for combating terrorist financing. In our initial report, we recommended the creation of a new international organization dedicated solely to issues involving terrorist financing. We find that many of the activities we envisioned such an organization undertaking are now underway under the leadership of existing international institutions and regimes, mitigating the need for a new specialized international organization. Specifically, we note that:

· In September 2001, only four countries had ratified the International Convention for the Suppression of the Financing of Terrorism; by the end of April 2004, that number had increased to 117 states.

The United Nations Counter-Terrorism Committee (CTC), established by Security Council Resolution 1373, requires all member states to criminalize the provision of financial support to terrorists and to freeze terrorist assets. Significant progress has been achieved in focusing states' attention on implementation measures—all 191 countries have submitted first-round reports to the CTC, and many are engaged in the CTC's initiative to enhance compliance. The greatest impact of the UN's efforts has been in the adoption of national terrorist financing legislation, formation of domestic institutions such as Financial Intelligence Units (FIUS), and the identification of technical assistance needs of states. While the CTC's momentum slowed in late 2003, the Security Council, with strong U.S. support, adopted new measures in March to

"revitalize" the CTC as the primary mechanism to assist states in combating terrorist financing.

The G8 established a Counter-Terrorism Action Group (CTAG) at the Evian Summit in June 2003 to assist the CTC in coordinating capacity-building assistance. The CTAG represents a potentially significant effort by donor nations to supplement the UN's capacity-building initiatives.

The Financial Action Task Force (FATF) has played an important role in responding to 9/11 by promulgating its Eight Special Recommendations Against Terrorist Financing, establishing a methodology for assessing compliance with the eight recommendations, and issuing guidance for financial institutions in detecting terrorist financing, as well as developing best practices concerning the freezing of terrorist assets, alternative remittances, and nonprofit organizations. The FATF is also refocusing its efforts to ensure more effective implementation. The recent renewal of the FATF mandate shows the commitment of states to these issues.

The UN's al-Qaeda and Taliban Sanctions Committee has expanded the list of terrorist entities against which all states are required to restrict financing. The Sanctions Committee has steadily improved the amount of detailed identifying information on listed individuals and increased its oversight and monitoring of states' implementation and enforcement efforts.

· Since the publication of our initial report, FATF has also reviewed Saudi Arabia's laws and regulations, an action it had previously not taken.

In collaboration with the FATF, the International Monetary Fund (IMF) and World Bank have assessed forty-one countries' compliance with anti-money laundering and countering terrorist financing (AML/CTF) standards in a pilot program. Results indicate that while many jurisdictions are doing a good job countering money laundering, some were lagging behind in measures to deter terrorist financing. In April 2004, the IMF and World Bank agreed to continue the assessments as part of the ongoing Financial Sector Assessment Program (FSAP) and Reports on the Observance of Standards and Codes (ROSCs) but to adopt a more comprehensive and integrated approach to conducting assessments.

Cooperation on terrorist financing has become a permanent part of the agendas of regional organizations such as the EU, Asia-Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN), the Gulf Cooperation Council (GCC), the Organization of American States (OAS), the Organization for Security and Cooperation in Europe (OSCE), and the African Union, as recommended by our first report. In the aftermath of the March 11 terrorist attacks in Madrid, the EU adopted a Terrorism Action Plan, including new proposals to strengthen the fight against terrorist financing through enhanced customs controls on cash movements, establishment of an electronic database of all targeted persons and entities, and possible modification of the procedures requiring unanimity for revisions of the list of terrorist organizations and assets. APEC established a Counter-Terrorism Action Plan, with a specific checklist of measures and a timeframe for members to halt the financing of terrorism.

· As countries reach a clearer understanding of what is required to stem terrorist financing, the number of requests for training and capacity-building technical assistance have increased. By the end of 2003, more than 160 states had requested or received capacity-building assistance from the CTC. The World Bank reported receiving more than 100 requests from countries to help build capacity to fight money laundering and terrorist financing. The CTC has facilitated assistance in drafting antiterrorist financing legislation, support to banking supervisory bodies, and establishment of FIUS in almost sixty cases, with eighty-nine countries participating in workshops; countering terrorist financing training has been provided to seventyone countries thus far.

2. Saudi Arabia has taken important actions to disrupt domestic al-Qaeda cells and has

improved and increased tactical law enforcement and intelligence cooperation with the United States, though important questions of political will remain. Saudi actions to disrupt, degrade, and destroy domestic al-Qaeda cells are an extremely welcome development since the issuance of our last report. Interior Ministry and other Saudi law enforcement and intelligence officials are now regularly killing al-Qaeda members and sympathizers in violent confrontations--and are just as regularly being killed by them on the streets of Saudi Arabia.