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

mism. But it is going to take resolve, it is going to take commitment. This report and these series of hearings go a long way to bolstering that optimism and making it a reality.

So again, I look forward to hearing the witnesses' testimony. Thank you for your leadership.

Chairman COLLINS. Senator Lautenberg.

OPENING STATEMENT OF SENATOR LAUTENBERG

Senator LAUTENBERG. Thank you, Madam Chairman, for holding this important hearing.

President Bush has said it, that money is the lifeblood of terrorism. And if we want to win the global war on terrorism, it is critical that we find out who is financing terrorism, how they are doing it, what we can do to stop it. And I am disappointed that we do not have any Administration official available to us today but these are good witnesses, Madam Chairman, and I am sure we will learn a lot.

Cooperation between Congress and the Administration is imperative. And we face a daunting challenge when it comes to attacking the financial infrastructure that makes terrorism function. That is why I am puzzled that we did not take an obvious step a few weeks ago when I offered an amendment to the Department of Defense Authorization Bill to close the loophole that allows American companies to do business through foreign subsidiaries with nations that sponsor terrorism.

I salute Chairman Collins for her vote. The amendment was defeated 49 to 50 and I am grateful that the Chairman was one of three Republicans to support the amendment. And I hope that she has the capacity to convince the rest of the caucus of the amendment's merits because I will keep offering it until the Senate adopts it.

For the life of me, I do not know how we can condone U.S. companies doing business with rogue states like Iran. 60 Minutes had a segment just a few months ago detailing an interest that, for instance, Halliburton had with a sham foreign subsidiary in the Grand Caymans so that it could sell oil field equipment to Iran. Nothing more, by the way, than an address, a drop station. There was nothing else there. But it enabled Halliburton to do business with Iran and other rogue states.

I have had members of my staff look into this and sure enough they found evidence of the business activity that existed between this subsidiary and a London-based subsidiary of the National Iranian Oil Company called Kala Limited. The State Department has verified that Iran supports Hamas and Hezbollah and Islamic Jihad.

I was in Israel some years ago when a terrorist attack by Islamic Jihad killed eight people. And I was there just a few weeks ago when a terrorist killed 10 people in the port city of Ashtarak. And we cannot forget when Hezbollah attacked the Marine barracks in Beirut, killing 241 of our soldiers.

Does it make sense for an American company to help Iranians produce oil more efficiently when they use those extra profits to finance terrorist groups that have killed Americans? I went to four viewings and funerals last week in the State of New Jersey, people

who died in the service of their country. And to think that an American company could be helping to finance indirectly those terrorist organizations is a national disgrace. We had a chance to close that loophole and we failed.

I am also concerned, as was suggested by Chairman Collins and by the Ranking Member, Senator Lieberman, about the complicity that seems to be in existence in Saudi Arabia and without criticism coming sufficiently from the Administration. Saudi Arabia still has not designated groups like Hamas as terrorist organizations. And as much as 60 percent of Hamas' annual budget is donated from Saudi sources. And although the Saudis have passed some antimoney-laundering laws, they do not seem to be enforcing them.

So I appreciate that we have a delicate relationship with countries like Saudi Arabia. But if we are going to protect Americans, which is the primary concern, here and abroad from the scourge of terrorism, we have got to find out who is financing it even if we disturb some of our buddies in the process.

I thank you, Madam Chairman, for holding this hearing.
Chairman COLLINS. Senator Pryor.

Senator PRYOR. I do not have any opening statement. Thank you.
Chairman COLLINS. Thank you, Senator. Senator Akaka.

OPENING STATEMENT OF SENATOR AKAKA

Senator AKAKA. Thank you very much, Madam Chairman.

I want to commend you for having this hearing and we hope that it will strengthen our capability to address the threats and challenges of terrorism financing.

I have a statement that I would like to place in the record. I just want to thank you again for holding this hearing and I look forward to hearing our witnesses and working with my colleagues on this important problem. Thank you.

[The prepared statement of Senator Akaka follows:]

PREPARED OPENING STATEMENT OF SENATOR AKAKA Madam Chairman, thank you for holding this hearing. I hope it will help to strengthen our capability to address the threats and challenges of terrorism financing.

Last July, Mr. Pistole, from the Federal Bureau of Investigation reminded this Committee that identifying and dismantling the financial structures of terrorist groups is critical to preventing future attacks. We must heed Mr. Pistole's words especially as terrorist attacks continue to rise.

It is disheartening that almost three years after September 11, terrorist groups, including al Qaeda, continue to maintain sophisticated financial networks. What is more alarming is that sources attribute at least 60 percent of Hamas and al Qaeda funds to Saudi-based entities. Most of these funds are diverted from charities and businessmen to terrorist groups and are used to execute attacks or to entice new recruits.

Earlier this month, Saudi Arabia pledged it would dissolve the Al-Haramain Islamic Foundation, which U.S. officials allege to be al Qaeda's largest financial supporter, contributing $50 million on an annual basis. The National Commission for Relief and Charity Work Abroad will merge the assets of Al-Haramain and other Saudi-based charities into one account and ensure their legitimate use. But, Saudi officials have not yet specified whether the Commission will oversee charities with known terrorist connections.

I am concerned that this may be another promise that the Saudis cannot fulfill. Last May, the Saudi government announced it would establish the High Commission for Charities to address Saudi-based groups financing terrorism. As of February of this year, no proposed budget or staff existed for this Commission. Furthermore,