In 1974, a disgraced President was driven from office for lies and deceits. In 1977, an international extra-legal cartel literally dimmed the lights of the White House, demonstrating profound new powers abroad not tied to guns, bullets or boots on the ground. And in 1979, the nadir of U.S. influence – the Shah transformed into a stateless person; hostages held captive for more than a year; a failed rescue mission; and the Soviet invasion of Afghanistan.

Tied to that was the takeover of the Grand Mosque in Mecca, challenging the sole claim to legitimacy of the Saudi royal family as the guardians of the faith. A U.S. impotent to protect its allies and citizens abroad held little promise to the threatened Saudi monarchy. So it understandably responded with a vengeance, retaking the Mosque and directing an unfathomable wealth of petrodollars - by some estimates, north of $75 billion - to demonstrate that it is the true and rightful champion of Islam. It did so by underwriting schools, mosques, call center and charities throughout the Islamic Diaspora. Wherever there was need, they came as teachers, as providers of social welfare, and as holy men. But what they taught was an unforgiving, intolerant, uncompromising and austere view of the faith that

became kindling for Usama Bin Laden's match.

It will take a generation - and a clear headed program of public diplomacy that, for example, condemns legal sophistries that justify torture - to recapture

hearts and minds poisoned by false teachings of hate. What can be done and

should be done to scale back the violence in the interim is to deplete the resources made available to kill innocents. No tool is more useful in doing so than in stopping the funding of terrorism. The Council on Foreign Relations, and this Committee, are to be commended for the profile given to the subject.

As for al-Qaeda, the organization is broken, its central bank severely challenged. Yet, today, it is more lethal than the day that it brought down the twin towers in Manhattan - more a movement than an organization with predictable or explicit design. Autonomous cells, catering to acts of nihilism, increasingly funded through pedestrian criminal activity, threaten sudden and senseless death without purpose. And they do so everywhere - Bali, Istanbul, the London subway system, Casablanca, Baghdad, New York and Washington. We cannot bunker and guard every school, marketplace, shopping center, airport, train station or place of worship.

New elements of national power are therefore required to prevent the killing. None are more central than intelligence and the disruption of the lines of logistical support. Money informs and defines both with a degree of integrity, reliability, insight and impact that is without peer.

9/11 brought a group of us together in the Administration that tackled the subject with demonstrable successes. Today, there is a new vocabulary about

terrorist financing and it includes new laws, new standards of professional and fiduciary conduct, extraordinary commitments of multilateralism at the UN, World Bank, IMF, and within the G8, 10 and 20 as well as APEC, greater capacity abroad, more sophisticated intelligence, and a greatly enhanced partnership with the private sector.

But the effort remains, at best, a proxy for the real thing. Terrorism permits murder to masquerade under religious sanction, altering the whole DNA of war by placing a premium on the death of women and children. Until it is an act of shame to provide money for any such counterfeit purpose, the blood will flow. Accordingly, we must return to first principles:

• Terror must be defined -- at the UN and elsewhere -- to condemn money intended to kill civilians for political reason;

• We must disrupt the funding not only of terror, but of the teaching of hate that is its crucible; and

· We must address the deficit of hope that haunts much of the Islamic world with debt reduction and meaningful economic aide and development

assistance. Paul O'Neill and I had a metaphor for that proposition, as

Quixotic as it may sound, a well in every village.

Of more immediate purpose within the jurisdiction of the Committee, the assets and cash flow that we seek to freeze and disrupt are located abroad. International cooperation is therefore critical, and it requires a new mind set in intelligence that will inform both the nature and manner of collection. Our new secrets must be collected with the intention of sharing, and strong enough to withstand a measure of judicial scrutiny. That is a sea change required by the developing jurisprudence of terrorism and its focus on prevention, rather than punishment.

In addition, if Madrid has any lessons – terrorism funded through criminal activity - local law enforcement must be integrated more directly with the national intelligence community to facilitate a two way dialogue of increasingly equal value. Finally, we must vest an agency of the U.S. government with the power to direct and execute the campaign against terrorist financing. The NSC is not the appropriate place to direct a theater of war.

The man who straps a bomb to his chest as he enters a marketplace is an implacable foe. He is beyond redemption and cannot be deterred. It would be the height of irony - and perhaps the promise of future tragedy – if we permit the

orthodoxy of how we have organized government, and collected and acted upon intelligence in the past to deter us from responding in the future.

Post-Hearing Questions for the Record

Submitted to Lee S. Wolosky

From Senator Daniel Akaka

"An Assessment of Current Efforts to Combat Terrorism Financing"

June 15, 2004

1. There have been reports in the media that the joint U.S.-Saudi task force has been working. However, it is my understanding that U.S. participants have only requested low level documents to avoid having further requests denied.

In your expert opinion, how effective has the joint task force investigated terrorism financing?

Answer: Because I am not privy to the work of the joint U.S.-Saudi task force, it is difficult to offer a confident assessment. However, it does not appear that the work of this task force - the formation of which was publicly announced almost a year ago has lead to any terrorist financing-related arrests or prosecutions. I would encourage the committee to seek to confirm that fact and to ascertain whether the joint task force is achieving success by other metrics.

2. Appendix C of the Council's report states that “Saudi compliance with counterterrorist financing measures is relatively strong."

But, Appendix B - the Technical Assessment of Saudi Arabian Law - indicates that the Saudi government has failed to implement their new terrorism financing laws. This Appendix presents a devastating pattern of failure by the Saudis to confront terrorism financing.

On a scale of A to F, what overall grade would you give the Saudis?

Answer: Appendix C to the Task Force Report analyzes the Saudi response on a comparative basis, principally by analyzing the Saudi response to terrorist financing to that of other nations in the Muslim world. On this comparative basis, it gives the Saudi response relatively high marks. Appendix B to the Report and the Report itself do not use that comparative basis as a benchmark; they seek rather to analyze the Saudi response in relation to international best practices and the broad imperatives of U.S. national security, respectively. Here, there are certain deficiencies, as identified in the text. So on balance, it is difficult to offer a single, overall "grade" to the Saudi response. It depends on the relevant benchmarks.