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Criminal Justice, Drug Policy and Human Resources Subcommittee - Terrorist Financing and Money Laundering Investigations

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Date:
Location: Washington, DC


Federal News Service May 11, 2004 Tuesday

May 11, 2004 Tuesday

HEADLINE: HEARING OF THE CRIMINAL JUSTICE, DRUG POLICY AND HUMAN RESOURCES SUBCOMMITTEE OF THE HOUSE COMMITTEE ON GOVERNMENT REFORM SUBJECT: TERRORIST FINANCING AND MONEY LAUNDERING INVESTIGATIONS: WHO INVESTIGATES AND HOW EFFECTIVE ARE THEY?

CHAIRED BY: REPRESENTATIVE MARK E. SOUDER (R-IN)

WITNESSES PANEL I: MARCY FORMAN, DEPUTY ASSISTANT DIRECTOR, FINANCIAL INVESTIGATIONS, U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT, DEPARTMENT OF HOMELAND SECURITY;

DONALD C. SEMESKY, CHIEF, OFFICE OF FINANCIAL OPERATIONS, DRUG ENFORCEMENT ADMINISTRATION, DEPARTMENT OF JUSTICE;

MICHAEL MOREHART, SECTION CHIEF, TERRORIST FINANCING OPERATIONS SECTION, FEDERAL BUREAU OF INVESTIGATION, DEPARTMENT OF JUSTICE; DWIGHT SPARLIN, DIRECTOR, OPERATIONS, POLICY, AND SUPPORT FOR THE CRIMINAL INVESTIGATIONS BRANCH, INTERNAL REVENUE SERVICE, DEPARTMENT OF TREASURY;

BOB WERNER, CHIEF OF STAFF, FINCEN, DEPARTMENT OF THE TREASURY; DANIEL GLASER, DIRECTOR MONEY LAUNDERING AND FINANCIAL CRIMES SECTION, DEPARTMENT OF TREASURY; JOHN ROTH, CHIEF OF CRIMINAL DIVISION'S ASSET FORFEITURE AND MONEY LAUNDERING SECTION, DEPARTMENT OF JUSTICE;

PANEL II: BONNI TISCHLER, VICE PRESIDENT, PINKERTON GLOBAL TRANSPORTATION AND SUPPLY CHAIN SECURITY DEPARTMENT; RICHARD STANA, DIRECTOR OF HOMELAND SECURITY AND JUSTICE, GENERAL ACCOUNTING OFFICE

LOCATION: 2154 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

BREAK IN TRANSCRIPT

REP. SOUDER: Ms. Blackburn?

REP. MARSHA BLACKBURN (R-TN): Thank you, Mr. Chairman, and I want to say thank you to each of you for taking your time to come over here this morning and talk with us and give us an update on where you are with this. I think when you have a district like mine, where Fort Campbell is located in Montgomery County, Tennessee, where you have many families, where you have military men and women who are deployed, we have Guardsmen and Reservists who are deployed and are aggressively working in Afghanistan and Iraq and fighting in this war on terror. And I appreciate the information that you all bring to us this morning.

Mr. Chairman has talked with you about Colombia and Mexico. We know that-and we've been watching what DOD has done over in Afghanistan with the stockpiles-destroying and removing the stockpiles of opium and heroin. And what I'd like to know-we know that the sale of this finances a lot of terrorist activity. Do we currently have any significant reports of success tracking the financing mechanisms or apprehending individuals that are engaged in terrorist financing in this region? Any member on the panel would like to answer that?

MR. MOREHART: I speak for the Internal Revenue Service as we have responsibility for many of the Bank Secrecy Act violations. We review the significant amount of data that's supplied by FinCEN through the banking community. We're working in partnership with the banking community to identify suspicious activity. They file those reports with us. In addition to that, we are looking at a number of charitable organizations who have been identified as having relationships with terrorist organizations and I mentioned in my opening statement a couple of those who have shown to be raising money in this country through their charitable organizations, through donors to that program and shifting money overseas.

And we've had a couple of significant successes and that is the Benevolent Foundation that I spoke about earlier. The individuals there raised millions of dollars, sent it overseas and are now facing 11 years or 11 years in prison. So we are looking at both the charitable organizations that may be involved in that sort of thing. The banking community, the financial community is working with us in partnership to identify those who are potentially conducting suspicious activities.

REP. BLACKBURN: And that is specific to Afghanistan and to that region? Am I correct?

MR. SPARLIN: Well, it's to the Middle East. It's kind of know- your-customer type of a situation.

REP. BLACKBURN: Exactly, okay. Thank you. I also want to ask just a little bit about looking at some of the other avenues of financing, the alternative means, if you will, diamonds, gold, contraband, counterfeit goods and intellectual property theft. It's particularly important to us in Tennessee because of what happens with entertainment product and with music. And my songwriters in Tennessee talk about this regularly. And the FBI leads some investigations and maintains case data, according to the GAO, and does not systematically collect and analyze data on terrorist use of alternative funding mechanisms. And if I'm wrong in that, I want you to correct me. Does the FBI anticipate collecting this type of data in the future and could it provide useful information about the utilization of these types of alternative funding schemes?

MR. MOREHART: Yes, ma'am. To answer that question, let me just give you a little detail on that. It is, as you might expect, difficult to accumulate that kind of information because there are so many different types of alternative financing methods. It's limited only by your imagination, if I might describe it that way. What the FBI is undertaking now is a number of different initiatives, if you will, or projects to try to accumulate that information and if I can describe it as a database so that we can accumulate it and send it out not only to FBI agents out in the field and the managers there but also the other agencies we interact with through the JTTF so they are aware of those types of financing mechanisms.

One of the things that we are doing is we have what we call an Annual Field Office Report.

For the first time last year, that Annual Field Office Report included questions regarding terrorism financing methods, mechanisms, if you will, that we are accumulating and analyzing as we speak. In addition, we intend to go back out to the field with a detailed survey that will be answered by those supervisors, if you will, that oversee the Joint Terrorism Task Forces or handle their terrorism financing matters. And we're going to ask for specific detailed information on the various types of financing mechanisms that they have observed so that we can also accumulate that information and disseminate it for educational purposes, if you will.

Also we are in the process-this is a growing process-of suggesting manual changes. One of the things the FBI agents have to do and their counterparts on the JTTFs is to report back to our headquarters as to the preliminary investigations and full investigations of terrorist matters. One of the aspects that we are requesting is that they specifically must include any information they have on terrorist financing that relates to any specific investigation. We are in the process now of collecting that information and, within, I would say, the very near future, we will have a product that describes the types of financing mechanisms that we're seeing.

REP. BLACKBURN: Thank you, sir. Let me ask --

Mr. Chairman, may I continue for just a moment. Thank you, sir.

Do you all-is there a way for you to construct for us-and there may not be-just a chart that would show what you estimate to be the amount of money that leaves this country with drug sales, what there is with the alternative means that terrorists or organizations are pulling out of this country? I think sometimes people have a tough time visualizing-good people with good money sometimes end up spending it on counterfeit goods or contraband or different things. I don't know if you have an estimate of the amount that gets tied back to terrorist activity.

MR. MOREHART: You know, it would be extremely difficult to even guess on that amount. The bottom line, when you're talking about terrorist financing in terms of or equating it to money laundering, the bottom line with those funds is concealing the funds and their ultimate use as opposed to pure laundering of the funds to make illicit funds look as if they're, you know, good money, if you will, or clean money. So that, in and of itself, poses a problem. The concealment issue. It is extremely difficult, as you describe, Congresswoman. A lot of people, for example, may contribute funds to an NGO, thinking that it is a legitimate donation, when, in fact, that money is taken down through several transactions and then used to fund insurgency, for example, in Iraq. It's very difficult to determine when it becomes from legitimate money, if you will, to illicit funds. So it's almost impossible to give you a dollar amount.

REP. BLACKBURN: Well, and I know that's one of the things that makes your job very difficult and we appreciate the efforts you all continue to place on it. I do have one other question. Methamphetamines and the situation that we have in Canada with smuggling the precursor chemicals that are coming in and we know that grew through the 90s. And without revealing any sensitive or classified information, can you tell us what your agencies are doing to target the financial side of the precursor chemical smuggling?

MR. SEMESKY: Congresswoman Blackburn, the Drug Enforcement Administration has targeted, and quite successfully, the precursor chemicals coming from Canada into the United States and has seen a dramatic drop in the amount brought into the U.S. as well as a very steep increase in the price for pseudoephedrine. I don't have specific figures to give you on that. As far as the financing side of that, they have in those investigations addressed the financing or the money that's earned from the sale of pseudoephedrine and ephedrine and, as Mr. Morehart pointed out, as we track those funds and they've gotten into the banking system once they get to the Middle East, they literally disappear because they go over many times in the form of money orders or checks and they hit the first bank and are turned into cash again and the trail is gone.

REP. BLACKBURN: Thank you. We appreciate your efforts and thank you for your time and for being here today.

REP. SOUDER: I want to follow up briefly and first on that subject of the precursor chemical. At our Detroit hearing, we heard the good news that they feel-the different agencies feel we've had-both Homeland Security, DEA and others-progress particularly there where we had at least signs from a few big busts that a large percentage of the precursor chemicals were coming in across at Detroit and we had a couple of big busts plus the Ecstasy bust. But I want to confirm these and then ask a question. We also understood when I asked a follow-up question that there has not been a reduction.

First off, there has not been a dramatic reduction on the ground in the United States on meth, either in precursor chemicals or in use of methamphetamine that we've not seen a decline or-we assume there is a decline in Rotterdam and Antwerp as a shipping point. So therefore, if it's not coming from Canada, where is it?

MR. SEMESKY: Mr. Chairman, that is not something my division addresses. But my understanding is that there are new routes and one of them is Mexico. And that is something that is being addressed.

REP. SOUDER: Because one of the questions is it's presumably, since the precursor chemicals are predominantly made for these kinds of drugs in the area of the Netherlands and in Belgium and we know where the bulk of it is coming from, it seems that one of the best ways to trace this would be the money. Somebody is shipping it.

MR. SEMESKY: Again, that is something that our diversion and foreign operations division are addressing. There are several operations that are gathering financial intelligence on, the wire transfers that are going through. They have to-and my division is working with them on that in tracing back the precursors as they are seized to the manufacturer and then looking at the manufacturers who they're receiving payments from. And it's obviously a long process and it involves getting information from foreign banks but that is something that's being addressed.

REP. SOUDER: So you've kind of hinted-and I want any other comments from anybody who are tracking the finances of this. If this stuff moves from Europe and instead of which-we are still at the preliminary-in other words, we don't have lots of big cases here with which to sort this through. But if there's been a reduction in Canada, that's moving in Mexico, are there things that we need to do? Are we not able to track that once it hits Mexico? Is it-presumably they're shipping to the more northern parts of Mexico rather than the southern parts of Mexico and let me ask Mr. Werner, in one of the-Werner or Warner? --

MR. WERNER: Werner, Mr. Chairman.

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