Chairman Sarbanes, Ranking Minority Senator Gramm, Members of the Committee, I am pleased to appear before the Committee on Banking, Housing and Urban Affairs to discuss with issues related to money laundering, including the 2002 National Money Laundering Strategy and our progress on the financial front of the ongoing war on terrorism. I appreciate your attention to this important issue and your interest in the Administration's ongoing efforts to refine our battle plan against domestic and international money laundering.
Initially, I would like to thank the Members of this Committee, as well as all of the Members of Congress, for your efforts in developing and passing two landmark pieces of legislation in prompt response to the threats that our nation has encountered over the past year. The USA PATRIOT Act, passed in response to the reprehensible attacks of September 11, provided those of us whose mission it is to protect the people of the United States with a wide array of new measures that will serve to enhance our ability to carry out this work. The Sarbanes-Oxley Act of 2002, passed in response to the threat to our economic well-being posed by corporate criminals, was a signal to those who seek to cheat hard-working Americans that these kinds of actions will not be tolerated. You should be proud of your accomplishments in passing these extraordinary bills, just as we at the Department of Justice are proud of our efforts to protect the physical and economic well being of the people in this country.
As the Members of this Committee are well aware, money laundering enforcement is a critical component in the fight against all kinds of criminal activity, whether it be international terrorism, drug trafficking, health care fraud or white collar crime. It makes no difference whether money is the motive of the crime, as it is in the case of drug trafficking and fraud, or whether money is the fuel that powers the engine, as it is in the case of terrorism. Money is the key, and money laundering and other financial investigations allow us to unlock the doors to these criminal organizations and provide us a roadmap that ties together the links in the criminal organization. In cases where profit is the motive, following the money forward leads to those who seek to profit from their crimes. In terrorism cases, following the money backward leads to those who developed or planned the terrorist attacks. A graphic example of this principle was provided by our efforts following the attacks of September 11, where the financial trail provided the first links in our efforts to unravel the plot that led up to those attacks
Our country faces a multitude of threats during these challenging times, threats that law-abiding, hardworking Americans should not have to face, yet they do. International terrorists seek to undermine our security. Drug traffickers seek to poison the minds and bodies of our children. Organized crime groups seek to corrupt our businesses and institutions. Corporate criminals seek to undermine our economic well-being. But we do not shrink from these challenges. In fact, they inspire us to work even harder, because the American people deserve to live their lives in a safe and secure world, and it is our duty to provide that safety and security for them. Those challenges inspire us to strive for new and better ways to utilize our resources, and to use our limited resources in the most effective manner that we can.
The first step in marshaling our forces to confront a challenge is to develop a strategy. In the case of money laundering, the development of a strategy was mandated by Congress in 1998 with the passage of the "Money Laundering and Financial Crimes Strategy Act of 1998." This Act (codified at Title 31, United States Code, § 5340 et seq.) requires the President, acting through the Secretary of the Treasury and in consultation with the Attorney General, to develop a national strategy for combating money laundering and related financial crimes. The first National Strategy was issued in September 1999. The 2001 Strategy was due to be presented to Congress on September 12, 2001. The horrific events of September 11 and the legislative and law enforcement responses to it have obviously changed our approach to the Strategy. The 2002 Strategy reflects some of those changes. In addition to the five goals that comprised the 2001 Strategy, a sixth goal - addressing terrorist financing - was added. The 2002 National Money Laundering Strategy was issued on July 25, 2002 and, as with all the previous strategies, was signed by the Secretary of the Treasury and the Attorney General.
The prevention, investigation and prosecution of money laundering crimes present unique challenges. Money itself is not contraband. The background circumstances surrounding the source, movement and destination of the money must be ascertained to make such a determination and must be proven in court to convict someone of a money laundering offense. Furthermore, because money laundering encompasses all different kinds of criminal activity, the methods of money laundering will vary depending on the nature of the criminal activity that generated the illegal proceeds or that the money laundering is furthering.
The 2002 Strategy, building upon the previous Strategies, makes significant strides in advancing our battle plan against money laundering and, in fact, addresses some formidable issues head-on. In Goal One, the Strategy confronts the issue of defining the scope of the money laundering problem and the development of measures of effectiveness. Goal Two addresses the critical issue of terrorist financing. I will discuss the Department's progress on this front in more detail later in my testimony.
Goal Three constitutes the core of the 2002 Strategy for purposes of law enforcement. This Goal sets forth what the Department believes are the major challenges in attacking money laundering. The first Objective of Goal Three is to enhance inter-agency coordination of money laundering investigations. Because money laundering encompasses all kinds of criminal activity, all of our major law enforcement agencies, as well as state and local law enforcement agencies, are involved in money laundering enforcement. The first priority in this regard is to establish an interagency targeting team to identify money-laundering related targets for priority enforcement actions. This interagency targeting team has already been created and has met on several occasions. The purpose of this group is to identify those organizations or systems that constitute significant money laundering threats and to target them for coordinated enforcement action. This will ensure that all of our law enforcement agencies are focusing their resources on the most significant targets in a coordinated manner.
The second priority in Goal Three is to create a uniform set of undercover guidelines for federal money laundering enforcement operations. Our well-intended agents in the field are sometimes limited in conducting joint undercover operations because they must follow different agency guidelines. These guidelines are not arbitrary or archaic; they are carefully drafted guidelines to address policy concerns of the agencies, but sometimes they address these concerns in different ways. If we can find ways to overcome these differences or develop uniform guidelines that address the concerns and priorities of all of the agencies, our efforts in conducting these operations will be significantly enhanced.
The third priority of Goal Three is to work with U.S. Attorneys' Offices to participate in Suspicious Activity Report (SAR) Review Teams where they do not currently exist but could add value. These SAR Review Teams are another vehicle for promoting interagency coordination. SARs have been proven useful for identifying targets or trends in money laundering activity, and each law enforcement agency utilizes the SARs. However, we have found that when an interagency task force is created to review the SARs in a coordinated manner, the value of the SARs is enhanced even further and investigative priorities can be identified and coordinated. DOJ and Treasury are both promoting the value of these SAR Review Teams to the investigators and prosecutors in the field. I am proud to say that, according to an Internal Revenue Service survey of its SAR review teams, U.S. Attorneys' Offices participate in 37 of the 41 teams that have been established nationwide.
Objective Two of Goal Three focuses on the High-Risk Money Laundering and Related Financial Crime Area (HIFCA) Task Forces. The first four HIFCAs were designated in the 2000 Strategy based on recommendations made by an interagency working group. The first four HIFCAs were New York/New Jersey; San Juan, Puerto Rico; Los Angeles; and a "systems" HIFCA based in Texas and Arizona focusing on the issue of bulk movements of cash. In 2001, Chicago and San Francisco were designated as HIFCAs. The HIFCA concept was another attempt to coordinate the resources of all of the law enforcement and regulatory agencies in a jurisdiction on the most significant money laundering targets or threats in the region. While a number of issues have hampered the HIFCA's from reaching their true potential, the 2002 Strategy will have DOJ and Treasury reviewing the HIFCA program and refining the mission, composition and structure of the HIFCA Task Forces, so that they can fulfill the mission that was intended for them.
With regard to Goal Two of the Strategy, we have no greater priority than the prevention of further terrorist acts against our citizens. We believe that the use of every tool in our arsenal is necessary to do that, and terrorist financing enforcement, one of the focuses of this Committee, is key. By "terrorist financing enforcement," I mean the use of financial investigative tools to identify and prosecute persons involved in terrorist plots anywhere in the world. If we can identify would-be terrorists through financial techniques, or prosecute them for traditional financial crimes, or target their supporters and operatives with the crime of terrorist financing, we will be preventing violent attacks that may otherwise occur. We may never know exactly how many lives we saved, but we will certainly not be merely reacting to terrorism that we and the other parts of the Government failed to thwart.
The Department of Justice's terrorist financing enforcement efforts are centered around two components the Attorney General established in the aftermath of September 11.
Within the Criminal Division, we created the DOJ Terrorist Financing Task Force, a specialized unit consisting of experienced white-collar prosecutors drawn from several U.S. Attorneys' Offices, the Tax Division, and some litigating components of the Criminal Division, such as the Fraud Section, the Office of International Affairs and the Asset Forfeiture and Money Laundering Section. This Washington-based team of prosecutors works with their colleagues around the country, using financial investigative tools aggressively to disrupt groups and individuals who represent terrorist threats. These attorneys also work closely with the FBI's Financial Review Group, the Foreign Terrorist Tracking Task Force, and the Treasury Department's "Operation Green Quest," which are developing preventive and predictive models and using advanced algorithms to mine data and identify terrorist suspects.
In the field, the Attorney General created 93 Antiterrorism Task Forces (ATTFs) to integrate and coordinate antiterrorism activities in each of the judicial districts. Each ATTF is headed by a veteran Assistant United States Attorney from each district, and includes federal, state and local members of the district's Joint Terrorism Task Forces (JTTFs), the successful FBI program which serves as the ATTFs' operational arm. The ATTF program is managed by six National Regional Antiterrorism Coordinators from Main Justice, who work closely and share office space with the Terrorist Financing Task Force.
How does this structure add to prevention? To appreciate this, one has to understand the terrorist financing laws, investigative tools and information-sharing protocols, some of which were - thanks to Congress - enhanced by the USA PATRIOT Act.
First, the criminal laws relating to terrorist financing are a powerful tool in enhancing our ability to insert law enforcement into terrorist plots at the earliest possible stage of terrorist planning. For example, it is now a crime for anyone subject to U.S. jurisdiction to provide anything of value - including their own efforts or expertise - to organizations designated as "foreign terrorist organization." It does not matter whether the persons providing such support intend their donations to be used for violent purposes, or whether actual terrorism results. If someone subject to U.S. jurisdiction provides, or even attempts to provide, any material support or resources to Hamas, Hizballah, Al Qaeda, the Abu Sayyaf Group or any of the other 34 designated groups, that person can be prosecuted in the U.S. courts. Our prosecutors need not prove that the support actually went to specific terrorist acts.
This statute was used in the Charlotte, North Carolina Hizballah case, the John Walker Lindh matter, the recent New York indictment of supporters of Sheik Rahman, and the actions we took over the last few months in Seattle, Detroit, and Buffalo. It is a powerful preventive tool. The Terrorist Financing Task Force is aggressively promoting this enforcement strategy, and it is available to help U.S. Attorneys' Offices and ATTFs where circumstances arise in the districts that may justify these charges.
Second, the financial investigative tools at our disposal, which have been refined over the years for use in combating money laundering, can be employed in terrorist financing enforcement. Money laundering - the process by which dirty money is transformed into seemingly legitimate proceeds - depends on financial transactions, which can now be identified through various Bank Secrecy Act reports that are required of the private financial community. The financing of terrorism, though it involves the opposite process - otherwise legitimate money being applied to dirty purposes -- may be revealed by those same reports. To the extent we succeed in raising the global standards for money laundering prevention or enacting tools that help our own efforts in this area, we will be enhancing the world's and our own ability to stop terrorist financing. In this sense, terrorism prosecutors are money laundering prosecutors. They share the same expertise.
Another criminal statute that was enhanced by the USA PATRIOT Act was section 1960 of Title 18, prohibiting unlicenced or unregistered money remitters. This revised statute was used successfully in the District of Massachusetts. On November 14, 2001, a federal grand jury in Boston returned an indictment charging Liban Hussein, the local president of an al Barakaat money remitting house, and his brother, Mohamed Hussein, with a violation of § 1960. This prosecution was part of a national, and indeed international, enforcement action against the al Barakaat network. On April 20, 2002, Mohamed Hussein was convicted of this offense and he was recently sentenced to 18 months' incarceration for operating an unlicenced money remitting business.
Finally, we are now enjoying an unprecedented level of cooperation and information-sharing between and among U.S. government agencies involved in counterterrorism, due in part to important changes made by the USA PATRIOT Act. As the Committee knows, prior to last October, there was no mechanism for sharing certain types of criminal investigative material with the intelligence community, and the intelligence community could not open their files to law enforcement. Such sharing was possible, but only in clearly-delineated situations and following very exacting procedures. For terrorist financing enforcement, the loosening of these rules - particularly when it involves information about terrorist financial supporters living in the United States - will be invaluable. Although this is only a small subset of information relevant to terrorist financing, it will assure that we are using the full spectrum of information from all sources to prevent future attacks before they occur, from open-source to highly sensitive classified information.
The structure we have in place both in Washington and the field to focus on terrorist financing enforcement will maximize the effectiveness of these tools. Where law enforcement and intelligence intersect, information-sharing with field office components necessarily involves their interaction with Washington. The Terrorist Financing Task Force can access and provide information to the ATTFs that they might not otherwise have, while providing a wider perspective on developing trends and joining disparate districts that may have pieces of the same puzzle without knowing it. This role is in addition to the legal expertise and litigation support we have gathered here at Main Justice for the specific purposes of insuring that the terrorist financing enforcement option is a robust one that can be used by those senior government officials in charge of our war on terrorism.
No discussion about money laundering would be complete without a discussion about drug money and our efforts to stop it. In the words of then-Associate Attorney General Stephen Trott in 1987, and who now sits on the U.S. Court of Appeals for the Ninth Circuit, "[i]t is not enough to follow drug trails; it is also necessary to follow the money in order to reach high levels in drug organizations." No one can tell us definitely how much drug money is laundered in the U.S. -- but we do know that users in the U.S. spent at least $63 billion dollars on drugs last year. Since assuming the office of Deputy Attorney General, I have made the Organized Crime Drug Enforcement Task Forces (OCDETF) the centerpiece of the Department's efforts to attack the supply side of the drug problem. The Attorney General and I announced this last March a new strategy to use OCDETF to go after the entrenched and significant drug trafficking and drug money laundering groups. Integral in this strategy is the use of money laundering charges, financial investigations and forfeiture. In fact, new guidelines issued to the U.S. Attorneys' Offices now require that each OCDETF investigation must contain a financial component, and that the results of those investigations must be documented. I can assure you that we will be closely reviewing the results of these investigations in order to use our scarce resources in the most efficient way possible. Likewise, the Special Operations Division, a multiagency operation consisting of DEA, FBI, Customs, the IRS and prosecutors from the Criminal Division, has a special money laundering unit dedicated to a strategy of targeting the command and control elements of major drug money laundering groups. It is the best strategy we have to deal with organized money laundering groups, and its success has been demonstrated time and again.
Conclusion
I would like to conclude by expressing the appreciation of the Department of Justice for the continuing support that this Committee has demonstrated for the Administration's anti-money laundering enforcement efforts.
Mr. Chairman and Members of the Committee, thank you for this opportunity to appear before you today. I look forward to working with you as we continue the war against terrorist financing and all forms of money laundering, and to refine our Strategy to address these serious threats. I would welcome any questions you may have at this time.
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