Senator SPECTER. That is a fine generalization of another era, but not when civilians are targeted.

Mr. WOLOSKY. It is not my view, Senator. It is my sense of what the Saudi position on Hamas is. I firmly believe that Hamas is a terrorist organization.

I also think that there is a misconception. David Aufhauser has used the word sophistry in understanding what Hamas is. The sophistry lies in the fact that it is true that Hamas provides social services in Palestinian territories. However, it is also a terrorist organization that kills innocent people. A vast majority of its funds have come from Saudi Arabia in recent years. Only relatively recently has that begun to change at the official level, although private Saudi contributions to Hamas must continue to be strictly monitored.

Our report recommends, in fact it goes very far on this issue, and it recommends that as a mandatory matter of international law, the United Nations Security Council pass a resolution that specifically designates Hamas as a terrorist organization and obligates all member states to close down Hamas organizations and fronts.

Senator SPECTER. Mr. Aufhauser, let me ask you a different question, and that is what more could the Administration do in a very active way to motivate the Saudis or compel the Saudis or sanction the Saudis into doing a better job on fighting terrorism? Mr. AUFHAUSER. Well, they have come a long way, as you know from testimony I have given before committees that you have sat on, as outlined by Lee and Mallory and the Council. Some extraordinary systemic changes. But what is missing is a sense of personal accountability and follow-through.

Also, on the broader scale, and I think far more important to us, far more important to us than personal accountability of one or two bad actors, is to stop the funding of the teaching of hate. And I think there should be a concerted Administration policy and campaign.

Senator SPECTER. Mr. Factor, thank you for the statement in your opening statement about the Saudi Arabia Accountability Act, which was cosponsored by the Chairman, and I am the principal sponsor, to provide a good starting point for focusing on terrorist financing certification regime.

Mr. Aufhauser, the Administration at first opposed the Syrian Accountability Act and then moved from opposed to neutral. And I think finally ended up perhaps inferentially supportive, although the formal neutral position was never changed.

What do you think the prospects are for the Administration to move to neutral or to support the Saudi Arabia Accountability Act? Or somewhere in between.

Mr. AUFHAUSER. I would just be guessing. Senator, but there is an institutional prejudice, understandable and I think to be lauded, at the Treasury Department to only have economic sanctions programs that are really quite enforceable and with real-world impact. And so they are studied about whether or not what has been proposed can be pursued and whether it can be effective.

Can I just say one thing about Hamas?

Senator SPECTER. Sure.

Mr. AUFHAUSER. It is reprehensible that they are not treated as a terrorist organization by the Saudis, I agree, but some historical perspective helps. For 6 years we have urged our European counterparts to join us in naming Hamas as a terrorist organization. And it was only September of last year that they finally joined us as another school bus was blown up in Jerusalem.

Even now, immediately after the designation of Hamas as a terrorist group by the Europeans, we then went to our European allies and said here are four organizations that are transmitting money directly to Hamas. And we were turned down in the freezing of those assets by all of them because they are still not use to the idea. They still cling to what I said before, the sophistry that the social welfare program of Hamas somehow excuses money that goes to killing.

The recent raids by the Israelis on banks, four banks in the West Bank, and the actual seizure physically of money intended for rejectionist groups, was intended to send a signal to a new funding source of Hamas, and that is Iran and Syria, getting back to your Syrian issue.

And informed intelligence sources tell me that for whatever reason, the money going to Hamas from Saudi Arabia has substantially dried up. Nobody can divine the reason. But it has been supplemented by money from Iran and Syria flowing through even more dangerous rejectionist groups in the West Bank.

Senator SPECTER. Thank you very much. My time has expired. I thank you, Madam Chairwoman.

Chairman COLLINS. Thank you Senator. Senator Pryor.

OPENING STATEMENT OF SENATOR PRYOR

Senator PRYOR. Thank you, Madam Chairman.

I would like to join all my colleagues on the Committee in thanking you for your leadership on this issue.

If I may follow-up with some of Senator Specter's questions, Mr. Aufhauser, something you said a few moments ago. You said that they need to stop funding the teaching of hate. That is a foreign concept, I think, to us here in America. Could you elaborate on that a little bit and explain to the Committee exactly what you mean by that?

Mr. AUFHAUSER. Sure. Wahabism, which is the strain of Islam that they endorse and champion, is very austere, very severe, very uncompromising and very intolerant of differences in views, and can easily be morphed into religious sanction for violence.

And it is taught by clerics who are sent out globally with funding from the Ministry for Islamic Affairs, which in my judgment is a much more important audience to talk to about our future then the Ministry of Internal Security or Defense in Saudi Arabia.

Indeed, on my last trip to Saudi Arabia, we met with the Minister for Islamic Affairs and he affirmed that they need to do some trimming of their clerical group to weed radical extremists out of it. Unfortunately, their first focus has been domestically and not those who have already been exported abroad.

Senator, one last thing. I had a dinner with the prime minister of one of the Southeast Asian countries who said he will not let an

Islamic cleric into his country anymore. The reason is they teach a hate which becomes a bullet.

Senator PRYOR. Let me follow-up on something you said, that they have focused internally first, within Saudi Arabia. But apparently, there is not much evidence to show that they are trying to curb the export of terrorism and extremism. Is that fair to say, for Saudi Arabia?

Mr. AUFHAUSER. I hope I am not sounding too legalistic-to me, this is a very important thing. I chaired a group in the situation room at the White House every Wednesday morning, and it was a group of terrific men and women from every agency of any relevancy, where we would review what we had learned in the preceding 7 days about terrorist financing.

We had a mountain of evidence about the financing of the teaching of hate, who was funding it, where it was going, what they were teaching in the schools, who the converts were, what social welfare they were pursuing, what the threat was in pursuing something more militant.

And we had a modest pile over here on my right hand which was evidence of the funding of an act of terror.

So there is a distinction between fundamental and extremism and an act of terror that gives us the power to try to act abroad in policing things.

The problem with the Saudi model today is it is a blizzard of this funding for folks who teach people that I am their enemy. There is even something more dramatic-it is not the Saudis, but the Iranians that fund a radio station out of Beirut called al-Manar, to the tune of about $110 million a year. That funding helps al-Manar publish and broadcast every day a screed that says Jews and Americans should be killed.

Now should we not stop that funding of that broadcast?

That is not an act of terror. But it is no different from lighting a match in a parched forest.

Senator PRYOR. I know that you would never speak for any of these countries and you would never presume that, but I would like to get your impressions, if we can focus on Saudi Arabia, on why they have not cracked down internally? I am just assuming there are domestic reasons, domestic political reasons that they may fear a backlash within their own country for doing this. I would like to get your impressions on that.

Mr. AUFHAUSER. The most immediate reason for no activity on terrorist financing is they are singularly focused on the guys who are trying to kill them within their confines. They are not looking for financiers. They are looking for terrorists. If he happens also to be a financier, he is a dead man.

So they are devoting virtually every police and intelligence and military resource they have to ferreting out terrorists within their own cells.

That has drawn away, as I said earlier, ironically the focus that we wanted them to have. I cannot blame them. I will tell you that. But for the moment it has drawn away literally every resource from looking at people who export-I think it was Senator Levin who said Saudi Arabia exports two things, a counterfeit religion and oil. He is only two-thirds right. They also export money.

And that money is the purchase for terror. And we would like them to refocus on that.

Senator PRYOR. Madam Chairman, since I have just a few seconds left, I would like to ask the other two witnesses to respond to that last question about Saudi Arabia. Why, in your impressions-not to speak for them, but your impressions about why they are reluctant to crack down internally or at least why they have not done so to date?

Mr. FACTOR. I believe that they have a civil war on their hands which is their first and foremost interest. They also have not had enormous pressure put on them to open up their society. And they fear for their own regime being toppled. So putting all of those three things together, what is being exported is a secondary issue.

I believe the conclusion they need to come to very rapidly is that that civil war will never be solved as long as they are exporting money that could be used for terrorism.

And last, the political will of the country has to establish that no cause, however legitimate, justifies the use of terror. Indeed, the use of terror delegitimizes even the most worthy cause. They have to build political will on that, which they are not doing doing.

Mr. WOLOSKY. I largely agree with these two comments.

First, I do think they are trying to crack down internally. They are fighting a civil war because it threatens the leadership of their country. It threatens their lives. And they are dedicating resources to fight that civil war.

They are also cracking down internally, at least there are suggestions that they are cracking down internally, on the extremism that is propagated within Saudi Arabia. Our report makes a distinction between the propagation of extremism within Saudi Arabia and its export outside of Saudi Arabia.

Within Saudi Arabia we have seen the remarkable spectacle in the past year, for instance, of clerics, extremist clerics, going on television to renounce their old views. That is a rather remarkable occurrence within the cultural and social context in which it has occurred.

Externally, we find very little evidence of action being taken in respect to this pile, the pile that evidences the flow of billions of dollars in support of the propagation of extremism internationally. And our report says that constitutes, that export of extremism constitutes a strategic threat to the United States.

I think we are the first group to go that far in characterizing that financial flow in that manner.

Senator PRYOR. Thank you, Madam Chairman.

Chairman COLLINS. Thank you.

We have had vote just called. So I am going to do one final quick round of a question each, and then we will adjourn the hearing. I do thank you for your very valuable testimony.

Mr. Factor, as you know from our discussions, I am particularly interested in the recommendation of the report that we pass legislation creating a certification whereby the President would certify the compliance of nations with an effort to halt terrorism financing. Some people have expressed concerns that would be too narrow a test for nations to have to pass. They say that the war against

lins, intelligence is called intelligence because it is not fact. It is inference based on being a truffle hound and digging something up which is suggestive.

We have gone abroad and sought the domestic assistance of countries and regulators to reform suspect banks. It is a better way then merely using the blunderbuss of a nuclear Section 311 action against a bank that does not otherwise maintain correspondent accounts.

Senator LIEBERMAN. So, in other words, it is not worth using because it will not really hurt them because they do not have correspondent relationships with U.S. institutions?

Mr. AUFHAUSER. In many instances, you are talking about rather minor banks that do not have correspondent relationships.

Now the Syrian banks in question do have correspondent relationships with several New York banks. They are modest in scope but the gravimen of the Syrian banks was believed by the Administration to be so grave, particularly-they were the principal conduits for the UN Oil for Food Program frauds, for the smuggling of unsanctioned oil out of Iraq and for using some of those funds or placing them in the hands of Hezbollah.

So it was a very strong case and not withstanding the modest ties with New York banks, it was decided that it should be pursued.

Senator LIEBERMAN. How about the Saudi banks? Do they tend to have correspondent relations with U.S. banks that might bring them within Section 311?

Mr. AUFHAUSER. Yes, and they also have, interestingly, substantial correspondent relationships, even more substantial correspondent relationships, with European banks.

There is an open legal question-I think, frankly, it falls against us, I actually asked my staff to look at it at one juncture-whether the Patriot Act Section 311 permits what I call a secondary boycott. That is if we say a bank in Saudi Arabia, following your hypothetical, is to be barred from correspondent banking in the United States, can we say that any bank that does banking with it abroad is similarly barred? I think the way the act is written now, the answer to that is no.

Senator LIEBERMAN. So, bottom line, you would say that in some cases it does not make sense to use Section 311 of the Patriot Act because the banks do not have correspondent relations here. But, generally, would you counsel that it be used more aggressively?

Mr. AUFHAUSER. I will do more than counsel. I will tell you, in the next calendar year, because of the bad banks initiative that I mentioned, there will be substantial actions taken against miscreant banks under Section 311.

Senator LIEBERMAN. Good. Thank you, my time is up.
Chairman COLLINS. Senator Coleman.

Senator COLEMAN. Thank you. Mr. Aufhauser, in your testimony you noted that if Madrid has any lessons, local law enforcement must be integrated more directly with the national intelligence community to facilitate a two-way dialogue of increasingly equal value. Do you have any specific recommendations as to how we accomplish that?