[House Hearing, 111 Congress]
[From the U.S. Government Printing Office]
ANTI-MONEY LAUNDERING: BLOCKING
TERRORIST FINANCING AND ITS
IMPACT ON LAWFUL CHARITIES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MAY 26, 2010
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-141
U.S. GOVERNMENT PRINTING OFFICE
58-051 WASHINGTON : 2010
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Oversight and Investigations
DENNIS MOORE, Kansas, Chairman
STEPHEN F. LYNCH, Massachusetts JUDY BIGGERT, Illinois
RON KLEIN, Florida PATRICK T. McHENRY, North Carolina
JACKIE SPEIER, California RON PAUL, Texas
GWEN MOORE, Wisconsin MICHELE BACHMANN, Minnesota
JOHN ADLER, New Jersey CHRISTOPHER LEE, New York
MARY JO KILROY, Ohio ERIK PAULSEN, Minnesota
STEVE DRIEHAUS, Ohio
ALAN GRAYSON, Florida
C O N T E N T S
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Page
Hearing held on:
May 26, 2010................................................. 1
Appendix:
May 26, 2010................................................. 37
WITNESSES
Wednesday, May 26, 2010
German, Michael, Policy Counsel, American Civil Liberties Union.. 23
Glaser, Daniel L., Deputy Assistant Secretary for Terrorist
Financing and Financial Crimes, U.S. Department of the Treasury 5
Guinane, Kay, Program Manager, Charity and Security Network...... 21
Levitt, Matthew, Director, Stein Program on Counterterrorism and
Intelligence, The Washington Institute for Near East Policy.... 24
APPENDIX
Prepared statements:
Moore, Hon. Dennis........................................... 38
German, Michael.............................................. 39
Glaser, Daniel............................................... 51
Guinane, Kay................................................. 65
Levitt, Matthew.............................................. 93
Additional Material Submitted for the Record
Moore, Hon. Dennis:
ACLU's June 2009 report entitled, ``Blocking Faith, Freezing
Charity''.................................................. 103
Report of The Constitution Project entitled, ``Reforming the
Material Support Laws: Constitutional Concerns Presented by
Prohibitions on Material Support to `Terrorist
Organizations'''........................................... 186
Ellison, Hon. Keith:
Written responses to questions submitted to Michael German... 200
Written responses to questions submitted to Kay Guinane...... 207
Written responses to questions submitted to Matthew Levitt... 237
ANTI-MONEY LAUNDERING: BLOCKING
TERRORIST FINANCING AND ITS
IMPACT ON LAWFUL CHARITIES
----------
Wednesday, May 26, 2010
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:03 a.m., in
room 2128, Rayburn House Office Building, Hon. Dennis Moore
[chairman of the subcommittee] presiding.
Members present: Representatives Moore of Kansas, Lynch,
Klein, Adler, Kilroy, Driehaus; Biggert and Paulsen.
Also present: Representatives Ellison, Al Green of Texas;
Castle and Royce.
Chairman Moore of Kansas. This hearing of the Subcommittee
on Oversight and Investigations of the House Financial Services
Committee will come to order.
Our hearing this morning is entitled, ``Anti-Money
Laundering: Blocking Terrorist Financing and Its Impact on
Lawful Charities.'' This is our 13th O&I hearing of the 111th
Congress.
We will begin this hearing with members' opening
statements, up to 10 minutes per side, and then we will hear
testimony from our witnesses for each witness panel. Members
will have up to 5 minutes to question our witnesses.
The chairman advises our witnesses to please keep your
opening statements to 5 minutes to keep things moving, so we
can get to members' questions. Also, any unanswered questions
can be followed up in writing for the record. And I understand
Mrs. Biggert has a request.
Mrs. Biggert. Yes, Mr. Chairman. I would like to ask
unanimous consent that the gentleman from Delaware, Mr. Castle,
and the gentleman from California, Mr. Royce, be--participate
in the subcommittee there on the Financial Services, but not--
Chairman Moore of Kansas. No objections on this side. If
there are no objections on your side, it is so ordered.
Without objection, all Members' opening statements will be
made a part of the record. And I will recognize myself for up
to 3 minutes on an opening statement.
Today's hearing is the second in a series of hearings we
are having focusing on oversight efforts to combat money
laundering and terrorist financing. Last month, our
subcommittee held a hearing reviewing several FinCEN oversight
reports examining how FinCEN could better interact with law
enforcement agencies, as well as improving the data quality
collected from suspicious activity reports.
While the May 1st Times Square bomb attempt is not the
subject of today's hearing, and is currently being investigated
by Federal authorities, the incident is a valid reminder that,
despite nearly 9 years passing since the tragic September 11,
2001, terrorist attacks, there continue to be those who wish to
do us harm.
Our government must use every tool available to shut those
terrorist groups down, including cutting off the financing that
supports them. Today, we are examining the Treasury
Department's efforts to block all financing that goes to
terrorist organizations that seek to do us harm, and how these
efforts impact lawful, law-abiding charities who only want to
use contributions for legitimate and good purposes.
Even if 1 percent of charity funds are going to a terrorist
organization, our government is required by law to shut that
source of funding down, as we should. But there are many good
organizations who want to fully abide by the law, and ensure
that 100 percent of their money is used only for good efforts.
So, I look forward to learning what steps Treasury has
taken with respect to those lawful charities, and encouraging
charity organizations to fully abide by the law. I am pleased
the Treasury Department was able to provide Deputy Assistant
Secretary Glaser to testify on these important issues, and I
look forward to hearing the views of our second panel of
witnesses, as well.
I now recognize for 5 minutes the ranking member of the
subcommittee, my colleague and friend from Illinois, Ranking
Member Judy Biggert. Mrs. Biggert?
Mrs. Biggert. Thank you, Chairman Moore, and thank you for
holding this important hearing. As we have learned, terrorists
will stop at nothing to carry out their plots to kill innocent
citizens, and terrorists have financed their attacks through
the formal banking system. They have also used informal
systems, for example. Terrorists sometimes use the hawala
system, an ancient method of underground banking, in which
couriers transfer money through networks.
Terrorists also have used charities to finance their
schemes, which is the focus of today's hearing. Charitable
contributions in the United States are vital to both domestic
and international humanitarian aid. They range from
organizations that help homeless children in our local
communities to families abroad who seek basic access to water,
shelter, and education, or are victims of tsunamis,
earthquakes, and other natural disasters.
It is important that while our intelligence, military, and
law enforcement communities work to free terrorist funds and
prevent terrorism, we also allow for the legitimate and
important philanthropical functions of charities to continue.
There must be a balance.
I commend our government officials, some of whom we will
hear from today, for their work to stop the flow of funds to
terrorist organizations. Please know that, while criticized
heavily by some, your work has saved, and could, in the future,
save many American lives. Thank you for your service.
At the same time, I ask that you continue to work with the
more than 1.5 million legitimate U.S. charities that are
clearly not involved in funding terrorists, but provide
important services to people in need, both here at home and
abroad.
Treasury officials should continuously work to improve
communications with charities, as well as guidelines or best
practices, so that charitable organizations have a clear
understanding of the rules of the road. Front groups
masquerading as charities can never be allowed to compromise
national security. National security must be everyone's top
priority.
With that, I look forward to hearing from today's
witnesses, and I yield back.
Chairman Moore of Kansas. Thank you. The chairman next
recognizes for 3 minutes Mr. Lynch of Massachusetts.
Mr. Lynch. Thank you, Mr. Chairman. Good morning. Mr.
Chairman, I want to thank you and Ranking Member Biggert for
holding this hearing today. I would like to welcome our first
panel witness, Mr. Glaser, and thank him and the other
panelists for helping the committee with its work.
This hearing is particularly timely, in light of the recent
Times Square bombing plot. As law enforcement investigates the
financing behind this act of terrorism, which involves my own
district and the State of Massachusetts, the issue of terrorist
financing has again raised to the surface.
In the recent past, the law enforcement community has
applied increasing pressure on investment networks and various
types of funding vehicles. The result of this escalated
enforcement has forced financing to enter informal channels, be
it a hawala or a hundi, as may have been the case in the Times
Square bombing, or others like informal charitable networks.
Charities have raised concerns, legitimate concerns, that
actions have been taken against associations for engaging
groups that were not explicitly designated by the Treasury as
terrorist organizations. Treasury has worked to engage
charitable organizations with good intentions. We must not
allow punitive measures to force charitable activity
underground.
There is a delicate balance and a reasonable zone of
operations in allowing charitable donations to continue, and to
prevent the financing of groups or individuals who plan to
attack the United States, or our colleagues and allies
overseas. I appreciate the difficulty in finding this delicate
balance.
I want to comment the Treasury, especially FinCEN and OFAC.
I have worked with them in a number of countries in the Middle
East, and they do tremendous work, often unappreciated, but
certainly highly valued in my eyes.
I look forward to hearing the testimony of our potential
policy solutions, and to help address this important issue. I
thank you, Mr. Chairman, and I yield back.
Chairman Moore of Kansas. Thank you to the gentleman from
Massachusetts. The chairman next recognizes the gentleman from
California, Mr. Royce, for 3 minutes.
Mr. Royce. Let me, Mr. Chairman, start with the observation
that the starting premise of this is all wrong. The title of
this hearing is, ``Blocking Terrorist Financing and Its Impact
on Lawful Charities.'' I wish we were more concerned about
blocking terrorist financing and its impact on terrorist
organizations.
We have sanctioned less than a dozen charities in the many
years since 9/11. Mr. Chairman, the fact of the matter is that
there are many, many individuals who have a cold, calculating,
and brutal resolve to kill as many Americans as possible by
whatever means possible. And charities have been a proven
resource for these individuals.
Technocrats at the Multilateral Financial Action Task Force
agree. As one witness will point out, this is not some
reflexive equation of Islamic charities with terrorism. Dr.
Levitt goes on to note that this critique flies in the face of
extensive available evidence, and simply falls flat.
We have to balance freedom to give with the freedom to live
and breathe. In this country, the Holy Land Foundation was
found guilty of 108 counts, including support of terrorism,
money laundering, and tax fraud. Millions went to Hamas. That
some lawful charities face extra burdens is an unfortunate but
needed response. No apology is needed.
In March, Youssef Nada, the self-described foreign minister
of the Muslim Brotherhood, was quietly removed from the UN
Security Council's terrorist financier list. Of course, this
individual has been involved with al-Qaeda. He's been involved
with Hamas. And the Brotherhood seeks the worldwide creation of
an Islamic caliphate. All of these listings and delisting
decisions have to be unanimous, meaning the Obama
Administration okayed this. This is of concern to me, and it
should be of concern to many Americans.
I yield back the balance of my time, Mr. Chairman.
Chairman Moore of Kansas. Thank you. Mr. Castle from
Delaware is recognized next for 2 minutes.
Mr. Castle. Thank you, Mr. Chairman. And thank you, Mrs.
Biggert, and thank you for allowing me to sit in on this. I am
pleased to be here for this hearing, whether it's under its
original name, or the new name that Mr. Royce has given it. I
think it's an important subject matter.
I believe strongly we must continue to examine current
efforts to combat terrorist financing. And I recently joined
Representative Lynch, who is here, in requesting a hearing to
determine whether our efforts here in the United States are
keeping pace with evolving trends terrorists are using to fund
their activities.
This issue needs greater scrutiny, particularly in light of
reports that the attempted Times Square bomber used an informal
banking system--used hawala networks to fund his operations.
Today's hearing will focus on the impact on charitable
organizations of blocking funds to terrorist organizations
overseas.
Regardless of whether money is being funneled to other
countries or coming into the United States, we must have the
proper systems in place to detect and prevent money from
reaching the hands of terrorists. Without the compliance of
organizations in the business of collecting and transferring
money, our efforts to keep extremists from doing harm to
innocent civilians would surely be futile.
I look forward to hearing from today's witnesses, and
whatever fruit we can garner from that to prevent these
problems in the future. I yield back, Mr. Chairman.
Chairman Moore of Kansas. Thank you. I am pleased to
introduce our first witness this morning, Mr. Daniel Glaser,
who currently serves as the Deputy Assistant Secretary for
Terrorist Financing and Financial Crimes at the Treasury
Department.
Without objection, sir, your written statement will be made
a part of the record. Mr. Glaser, you are now recognized for 5
minutes.
STATEMENT OF DANIEL L. GLASER, DEPUTY ASSISTANT SECRETARY FOR
TERRORIST FINANCING AND FINANCIAL CRIMES, U.S. DEPARTMENT OF
THE TREASURY
Mr. Glaser. Thank you, Chairman Moore, Ranking Member
Biggert, and distinguished members of the committee. I thank
you for the opportunity to appear before you today to discuss
the Treasury Department's efforts to protect charities from
abuse by terrorists, and our outreach efforts to the charitable
in Muslim-American communities.
Treasury recognizes and values the importance of charitable
giving. Charitable giving and volunteerism have a long
tradition in the United States, and our country is a leader in
the world year after year in charitable donations. Our
generosity unites Americans of all backgrounds and religious
traditions.
However, the sad truth is that terrorist organizations such
as al-Qaeda, Hamas, and Hezbollah have established and used
charities, and have exploited well-intentioned donors.
Terrorist groups such as these use charities not just to raise
funds, but as an integral component of their organizations and
networks.
The Treasury Department has been given the responsibility
by Congress and the President to protect American lives and
security by using all lawful means to disrupt and dismantle
terrorist support networks wherever we find them. Our primary
tool in meeting this responsibility is through the application
of targeted financial sanctions under the International
Emergency Economic Powers Act, or IEEPA.
More than 30 years old, IEEPA forms the legal framework of
most of our targeted financial sanctions programs. As I
explained in great detail in my written testimony, we have
developed a well-established process for implementing IEEPA
designations that contains procedural safeguards, including
licensing provisions and delisting procedures.
All final agency actions taken under IEEPA are subject to
judicial review. And over the years, the courts have a strong
record of upholding the statute's constitutionality and our
application of it. The collective efforts of the law
enforcement community over the past decade have been successful
in making it more difficult for terrorist organizations to
raise funds in the United States.
Treasury has contributed to this effort, including by
applying targeted financial sanctions to a total of eight U.S.
charities. These charities were not unwitting victims. We
believe that our actions contributed to disrupting the
terrorist networks that those charities supported, and
protected well-intentioned donors who had no desire to support
terrorist groups.
That said, we understand that the ongoing terrorist threat
and U.S. enforcement actions, including Treasury designations,
have had an unfortunate and unintended chilling effect on the
charitable giving of Muslim-American communities, particularly
as it relates to the legitimate desire to provide support to
needy communities in risky areas.
We take this problem seriously, and we regard it as our
responsibility to work with the charitable and Muslim-American
communities to mitigate the chilling effect, and help create
what we call a safe giving space for well-intentioned donors.
These efforts have included attempts to provide the charitable
sector with relevant information and guidance, and also to
create alternative mechanisms for charitable giving to
populations in need in high-risk areas.
It is important to remember, however, that Treasury does
not have, nor do we seek, anti-money laundering or
counterterrorist financing supervisory authority over the
charitable sector. For that reason, it is vital that we form a
strong partnership with the charitable sector to address this
issue of mutual concern. We are confident that such a
partnership, based on mutual respect and an understanding of
the various perspectives and complexities relating to this
issue, can succeed in demonstrating that the choice between
charity and counterterrorism efforts is a false one.
Thank you for the opportunity to speak with you today. I
would be happy to answer any questions that you have.
[The prepared statement of Mr. Glaser can be found on page
51 of the appendix.]
Chairman Moore of Kansas. Thank you, Mr. Glaser, for your
testimony. I recognize myself for 5 minutes for questions.
Mr. Glaser, so everyone is clear, in a situation where a
charity organization uses 99 percent of its money for
legitimate, lawful, charitable purposes, and even just 1
percent is going to al-Qaeda or some other terrorist
organization, the Treasury Department still makes every effort
to shut that financing down. Is that correct, sir?
Mr. Glaser. Absolutely, Mr. Chairman. The question is not
what percentage of funds are going to a terrorist organization.
The question is whether the charity or whatever the designated
entity might be is owned or controlled by or acting for or on
behalf of a terrorist organization. And that's the test we
would put to it, not what percentage of the funds are traveling
to the organization.
Chairman Moore of Kansas. Would you elaborate on--I guess
you already have. I was going to--the second question, I think
you have already answered that.
Mr. Glaser, how has Treasury's voluntary best practices for
U.S.-based charities--a document that is on your Web site--been
received by the charity organizations you communicate with--are
they useful to these lawful charities?
Are there other proactive steps Treasury can take to ensure
law-abiding charities have every opportunity to fully
understand how best to follow the law?
Talk about that, if you would, please, sir.
Mr. Glaser. Thank you, Mr. Chairman, for that question. I
think that our voluntary best practices, or voluntary
guidelines, have been a work in progress. We released them many
years ago. And since that time, we have had an ongoing dialogue
with the charitable community on making sure they are as useful
as possible to that community. We have updated them twice since
they were initially released. And, in fact, we are working now
to update them again and to continually improve them.
As I said in my oral remarks, we don't have supervisory
authority over the charitable community. So it's important that
we find other ways to communicate with them and to work with
them, and we try very hard in that regard. And we think that
the guidelines are a good way of doing that.
We do understand that there are some people in the
charitable community who have problems with some aspects of
them, and that's something that we want to talk to them about,
and that's something that we want to continue to engage with
them on, and continue to improve, because they are going to be
most useful if and when they are perceived as a joint effort
from Treasury and from the charitable community.
That's not the only tool that we have. It's not the only
mechanism that we have to try to achieve the sorts of goals
that you're talking about, Mr. Chairman. We also try to provide
information in other ways, in terms of typologies, in terms of
information, in terms of dialogue.
There is another important whole set of initiatives that we
are trying to establish regarding alternative relief so that as
certain channels close down for all the right reasons, we can
work with the charitable community to make sure that there are
legitimate channels that remain open. And I think that's an
idea that frankly, not enough time has been spent on, and
something that we really want to kick up to the next level.
Chairman Moore of Kansas. Thank you, sir. And last
question, when it comes to shutting down terrorist financing, I
imagine there is a lot of--I would hope there is a lot of
coordination between other government agencies that the
Treasury Department deals with.
Mr. Glaser, would you describe briefly, sir, how Treasury
interacts with other agencies when it comes to blocking
terrorist financing? Are there barriers that should be removed,
or any improvements that could be made, with respect to
interagency communications, from Treasury's perspective?
Mr. Glaser. Thank you, Mr. Chairman. I think it's a good
question, because we sometimes speak--and even in my testimony
I probably used the term ``Treasury designations.'' But these
really are U.S. Government actions in the larger sense of the
term.
There is a--particularly as it relates to foreign
designations, but even with respect to U.S. designations, as
well, there is a vibrant interagency process, where, as a
target is examined, we ask ourselves collectively, ``What is
the right tool to use? What is the right action to take?'' And
there is a joint decision taken from all interested relevant
U.S. agencies.
Once a decision is made to proceed along the lines of
targeted financial sanctions, there is a well-established
process that includes, in particular, the Treasury Department,
the Justice Department, and the State Department. The
collection--the assembly of the administrative record is
reviewed by lawyers from all three of those Departments. And
then, obviously, there is a lot of talk about timing, and
making sure that everything is coordinated as well as possible.
So, I do think we have very good coordination and
interagency--well, very good interagency coordination as
regards this process.
Chairman Moore of Kansas. Thank you, sir. Next, the
chairman will recognize for up to 5 minutes for questions the
ranking member, Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman. Mr. Glaser, does the
Treasury believe that terrorist financing is a big problem
within the charitable sector?
Mr. Glaser. That's a good question. I think that we have--
within the United States, I think we have done a really good
job, frankly, of substantially reducing the ability of
charities within the United States to support terrorist
organizations. I don't think we want to rest on our laurels,
but I think when you look at the situation today compared to
the situation before 9/11, I think it has become much harder
for terrorist organizations to raise funds in the United
States.
With respect to the world as a whole, I do think charities
are an integral part of terrorist organizations, particularly
when you look at charities--a lot of charities in the Gulf,
even some charities in Europe. I think it is a problem that we
continue to face and continue to work with our partners on. But
if you're--
Mrs. Biggert. Yes. Then what level of coordination takes
place between the United States and other nations on the issue?
Do the bulk of other nations have adequate infrastructure in
place to help combat the illegal moneyflows through charitable
channels?
Mr. Glaser. There is quite a bit of international
coordination that happens on a variety of levels. Mr. Royce
made reference to the Financial Action Task Force, and that is
the premier standard-setting body in the world for anti-money
laundering and counter-terrorist financing standards, and we
have done a lot of work in the FATF, both on typologies and on
establishing international standards. I am the head of the U.S.
delegation--
Mrs. Biggert. Okay.
Mr. Glaser. --to the FATF, so I have been personally
involved in that.
In addition--and I think this is really important and often
overlooked--there is a considerable amount of work that has
been done in the Middle East/North Africa region. There is an
organization called MENAFATF, the Middle East North Africa
Financial Action Task Force. I was just at a meeting of the
MENAFATF in Tunisia 3 or 4 weeks ago, and MENAFATF has issued
its own best practices and guidelines with respect to
charities.
So, there is quite a bit of work that's done on that level.
There is also, obviously, a lot of work that's done
bilaterally. I am a part of a lot of it. I have traveled
throughout the Middle East, throughout Europe. We work with the
EU on this. We work directly with partners such as the Brits
and the Saudis.
There is--it's not a particularly controversial proposition
to say that these charities are involved in this type of
activity, so it's really just about working with our partners
to find solutions, and it's something we spend a lot of time
on.
Mrs. Biggert. Great. Then some in the nonprofit community
say that there has been a negative effect on charitable giving.
Do you agree? And what has Treasury done, if there has been any
chilling effect?
Mr. Glaser. I have no doubt that there has--I don't have
numbers, but I have no doubt that there has been a chilling
effect. And, as I said in my testimony, it's something that
troubles us, and it's something that we feel we have a
responsibility to work with the charitable community to
mitigate.
And we are trying to do everything we can in that regard.
We try to do it through guidance, we try to do it through best
practices. We try to do it through providing as much
information as we can. Frankly, we try to do it through
shutting down charities that we think are involved with
terrorist organizations, to take those off of the table.
We also--again, we have in the past worked with the
charitable community on establishing alternative relief
systems, alternative relief mechanisms. There was something
back in the summer of 2008 that we started called, ``The
American Charities for Palestine.'' That was sort of a pilot
project.
We would like to build on that concept so that we could
work with the charitable community to make sure that Americans,
Muslim-Americans and any American who wants to give to places
like the Palestinian territories or earthquake relief in
Pakistan or anywhere, has the opportunity to do so. We regard
that as a responsibility of ours, and we work very hard to try
to achieve that.
Mrs. Biggert. Do you see that the charities are still being
abused by terrorists and other illicit actors? Has it slowed
down, or--
Mr. Glaser. Again, globally, I don't think it has slowed
down. I think that there are charities throughout the world
that continue to operate as integral parts of terrorist
organizations.
Domestically, as has been pointed out, we have designated 8
charities since 9/11. We have not designated a Muslim charity
in almost 3 years. So I think that we have had success, and I
think it has become a lot harder to raise funds within the
United States for terrorist organizations.
Mrs. Biggert. Thank you. I yield back.
Chairman Moore of Kansas. Thanks to the gentlelady. And
next, the chairman recognizes for 5 minutes Mr. Lynch for
questions.
Mr. Lynch. Thank you, Mr. Chairman. Mr. Glaser, one of the
other hats that I wear, along with Mr. Royce of California, I
co-chair the Task Force on Terrorist Financing and Non-
Proliferation.
The initial goal of our group, working with Treasury, was
really to look at the formal, established finance system, and
to try to encourage countries--and we spent a lot of time in
Jordan, Morocco, Tunisia, Afghanistan, and India--to adopt
anti-money laundering statutes that would hopefully drive
terrorist financing out of the legitimate financing system. And
I think that you have had some good success. FATF has had some
great success, I think, considering where we started before 9/
11.
Now, I think what has happened is we have seen, since the
official banking system has been closed off in larger respects,
now we have seen this migration to these informal value
transfer systems. I'm talking about the hawalas and the hundis
that--in some countries they're registered, in some countries
they're not. It's sort of a mish-mash.
What complicates things is there is a religious dimension
to the use of hawalas in fulfilling Zakat by good Muslims. So,
I guess my question is, how do we take that next step?
Now that we have the formal banking system going in the
right direction with know-your-customer protocols, and you have
a pretty solid matrix, a risk matrix for these charities, how
do we--I guess how do we drive whatever is left of that
terrorist financing in those informal transfer systems and
these other charities, how do we drive the money out of that
system?
It seems to be more insidious, more pernicious, tougher to
get at. But, that's really what we would have to do.
Mr. Glaser. Thank you, Mr. Lynch, and thank you for your
and Mr. Royce's leadership on this issue. We are very well
aware of all the work that you have done in this area, and we
do appreciate it.
When you think about how terrorists--terrorist
organizations could move money, could transfer money around the
world, when you think about how anyone could move or transfer
money around the world, there are really only four ways that it
could be done, when you think about it: it could be done
through a formal financial institution; it could be done
through an informal financial institution; it could be done
through trade; or it could be done through the physical
movement of cash. Those are the only four ways to transfer
value that I could even imagine.
Now, there are enormous amounts of variety within each of
those. But we need to focus on each of those four to make sure
that we have the systems in place to detect and deter money
laundering and terrorist financing through the formal sector,
the informal sector, through cash couriers, and through trade.
And we try to focus on all of them.
With respect to your specific question on the informal
sector, we have tried to take a sort of a three-category
approach to it. The first is to regulate with what we call a
light touch. There are approximately 40,000 registered money
service businesses in the United States. Not all of them would
meet the definition of hawala. Hawala is is an Arab word for a
particular style of money transfer. And you said ``hundi.''
There are other words for it in other parts of the world. But
what we try to do is register them, educate them, and bring
them up to the surface.
A lot of these service providers--most of these service
providers--are performing perfectly legitimate, legal
transactions. But what we want to do is reach them so that we
can communicate with them, explain to them what the laws are,
and try to get them to be more a part of the system.
Frankly, the broader solution to the issue is more of a
systemic, almost generational solution of making sure that
there is affordable financial services provided to all
communities throughout the world. Because the reason why these
types of services actually exist is because they are more
convenient for, say, a Pakistani immigrant who wants to send
money to his family in a village in Pakistan. It's oftentimes
going to be easier to do that through some sort of form of
alternate remittance.
Mr. Lynch. Right.
Mr. Glaser. So we try to do all that. We have tried to set
international standards. But I completely recognize that this
is an issue that we have not, by any stretch of the
imagination, solved. And it is something that we really do look
forward to working with you and other Members of Congress on
devising solutions for.
Mr. Lynch. Thank you. I yield back.
Chairman Moore of Kansas. Thank you, sir. The chairman will
next recognize the gentleman from Minnesota, Mr. Paulsen, for 5
minutes.
Mr. Paulsen. Thank you, Mr. Chairman. And, Mr. Glaser,
knowing that we have to have an effective regime to monitor
terrorist financing, and knowing that funding for the attacks
for September 11th came through so-called nonprofit or so-
called charitable organizations, that that's the case, and you
talked about the four different access points to move resources
for funding terrorism, how much more do we really know about
terrorist financing today than we did 10 years ago, before
these laws took effect?
And I just want to set the table for you, just to sort of
explain. Have the current laws in place now really helped us
gain the knowledge necessary to combat some of the challenges
that we have been facing?
Mr. Glaser. Thank you for the question, Mr. Paulsen. I
think we do know quite a bit more about the way terrorist
organizations finance themselves. I think we know a lot more
about the subject of terrorism and counterterrorism broadly
than we did before 9/11. There has certainly been a lot more
attention and resources devoted to it, and I think we have
learned a lot of lessons.
Charities are by no means the only way that terrorist
organizations raise funds. They raise them through individual
donors, they raise them through state sponsors. They raise them
through legitimate business, they raise them through crime.
They raise them through taxing populations. There are all sorts
of ways that terrorist organizations raise funds. And we need
to focus on all of them.
But I do think we understand these issues better, and I
think we have had success. I think that terrorist organizations
such as Hamas and al-Qaeda are in far worse financial shape
today than they have ever been in the past. And I think that's
due to the efforts not just of the United States Government,
but of the entire international community that has been working
very hard on this.
Mr. Paulsen. And would you go so far as to say that the
information that has been provided by these laws now has given
us enough information to help prevent another attack, to
certainly prevent the resources from going forward to prevent
another attack from occurring, or at least made it much more
difficult?
Mr. Glaser. I think they have made it more difficult. I
wish I could say that I promise you that these laws could
prevent another attack. Unfortunately, that's not a promise
anybody could make.
But I--in particular, we do our part at the Treasury
Department, but in particular, people like the FBI and other
parts of the law enforcement and national security community
work every day to do everything they can to prevent a next
attack.
Mr. Paulsen. I appreciate that. And, Mr. Glaser, there is
testimony this committee will hear from in the next panel
that's coming up that suggests that the Treasury Department is
not set up to effectively monitor the charitable sector. And I
just wanted to see if you agreed with that.
Between FinCEN and the OFAC, the OIA, and the other
numerous intelligence agencies that you just mentioned, too, I
just want to--do you think you lack the resources to
effectively combat terrorist financing right now? And how do
you feel about that?
Mr. Glaser. Thank you, Mr. Paulsen. We are not set up to
monitor the charitable community. That's not our
responsibility. That's not what we do. That's not what we seek
to do.
We are set up--and in 2004, Congress, working with the
Administration, created the component of the Treasury
Department that I am a part of, the Office of Terrorism and
Financial Intelligence, and I think it was a revolutionary
decision--we are the only finance ministry in the world that
has an office like TFI, and that has allowed us to be a real
leader throughout the world in addressing issues like this.
So, I do think we are well set up to address issues related
to terrorist financing as best as we can, and we work very hard
on that. I appreciate the support that we have gotten, and I
think we are appropriately set up. But I do agree that we are
not set up to monitor charities, nor do we seek to monitor
charities.
Mr. Paulsen. Thank you, Mr. Chairman. I yield back.
Chairman Moore of Kansas. Thank you, sir. The chairman will
next recognize the gentleman from New Jersey, Mr. Adler, for 5
minutes.
Mr. Adler. Thank you, Mr. Chairman. I want to follow up on
Mr. Paulsen's question about resources, maybe shift it a little
bit to whether there are legislative needs that you would seek
from us to empower you to do a better job with your limited
role. I understand your point that it's a limited role. Are
there things you need from us to give you more power or more
direction to achieve our national security interests, as it has
been laid out in the discussion this morning?
Mr. Glaser. Thank you for the question, Mr. Adler. No, I
think what we need from Congress is what we're getting from
Congress, which is a close attention to this problem. Hearings
like this, I think, are important and helpful in bringing out
these issues and stimulating public discussion and stimulating
debate. I think it is all very important and healthy.
And I think Congress is playing an absolutely vital role in
its oversight function. But I don't--there are no particular
pieces of legislation that I would have to offer to enable us
to do our role better. I think we have what we need right now.
Mr. Adler. Is that a consensus opinion of the Department,
or is it--I want to make sure it's beyond just your opinion, as
much as I respect your opinion, that we--I want to have the
comfort that we are doing what we should do to empower you to
do what you need to do to keep our country safe.
Mr. Glaser. Yes, I am speaking for the Department.
Mr. Adler. Thank you. I yield back.
Chairman Moore of Kansas. The chairman thanks the
gentleman. And next, the chairman will recognize Mr. Royce of
California for 5 minutes.
Mr. Royce. Mr. Glaser, Doug Farah is the former Washington
Post bureau chief who has dug pretty deep on these issues. And,
as a matter of fact, not just on terror finance, on the issue
of conflict diamonds he helped bring President Charles Taylor
of Liberia to the bar of justice for war crimes.
But he wrote recently, ``So far, the Muslim Brotherhood is
winning every battle, and rapidly recapturing the ground lost
in the dark days after 9/11 when their role in radicalization
and financing of radical Islam was recognized and confronted,
at least briefly.''
I want to go back to my opening remarks, where I brought up
the case of Youssef Nada, foreign minister of the Muslim
Brotherhood, as he calls himself, who says that--as we know, he
was removed rather quietly from the UN Security Council's
terrorist financier list. He was involved with al-Qaeda. He was
involved with Hamas. And to be removed from that list, it has
to be unanimous. So, that would mean that the Obama
Administration okayed this. And I wanted to ask you why, or if
you knew why.
Mr. Glaser. Thank you, Mr. Royce. To the first part of your
question, and then to the second part of your question. I do
agree with you, radicalization is a really important issue. I
think it's, frankly, one of the next big issues that we, as a
government--we are focusing on it, but I think it's something
that we really, as we make progress in other areas, I think
it's an issue for us to pay even closer attention to.
When we talk about the role that charities and other groups
play in terrorism, one of the reasons why I made some of the
points that I make--and I try to make them all the time--is
we're not just talking about fundraising when we talk about
these terrorist networks. We are talking about radicalization.
We are talking about providing logistical support. We are
talking about being an integral component of a radical
extremist violent network. And those are the networks that we
are seeking to disrupt.
With respect to Mr. Nada, you are correct. He was delisted
at the UN, and then we subsequently delisted him in the United
States. Mr. Royce, I don't have any further information for you
on that, but we would be happy to get back to you with
information on Mr. Nada.
Mr. Royce. I will just repeat what I said in my opening
statement on that same front. The Brotherhood, according to
their charter, seeks the worldwide creation of an Islamic
caliphate. And to delist somebody who was involved with al-
Qaeda and Hamas gives me some concern.
I also want to point out that back in 2006, the Treasury
Department designated the Philippine and Indonesian offices of
the International Islamic Relief Organization, a Saudi-based
charity, as terrorist-designated entities. And I think that was
a welcome move, given its facilitating of funds for al-Qaeda.
One individual involved in that operation was dubbed ``The
Million Dollar Man'' by fellow jihadists, who depended upon him
for the transfer of those sums of money.
But there are now reports that the International Islamic
Relief Organization has reopened a U.S. chapter, this time in
Florida. And its articles of incorporation says that it's
intended to be the U.S. chapter of the International Islamic
Relief Organization. Are you concerned about this development?
Mr. Glaser. There are a number of charities in the Gulf
that we have worked very closely with governments in the Gulf
on, some of which we have actually designated, like the Revival
of Islamic--RIHS, Revival of Islamic Heritage Society.
With respect to IRO, we have designated certain branches of
the IRO, and we have also worked very, very closely with the
Saudi Government on issues relating to terrorist financing, Mr.
Royce. I have testified before Congress previously on our
efforts--
Mr. Royce. Whoa, whoa. You might be working closely with
the Saudis. But last year the State Department, in its report
on money laundering, concluded that Saudi Arabia continues to
be a significant jurisdictional source for terrorist financing
worldwide, and notes that the Saudi Government could do more to
target Saudi-based support for extremism outside of Saudi's
borders. And that's what we're talking about.
Mr. Glaser. Yes, I agree with that. They are still a
source, their country is still a source of terrorist financing.
And, like all of us, they could do more. I think they have done
a lot more.
And I think that since we at the Treasury Department have
been very open about identifying our concerns about Saudi
Arabia, I think it's also incumbent upon us to say when we
think they are doing a good job, and I think that they have
greatly improved their efforts in this area.
Sure, there is a lot more they could do. And when I was in
Tunisia, Mr. Royce, just a few weeks ago, the MENAFATF was
discussing Saudi Arabia's evaluation report, which is a
several-hundred page in-depth analysis of Saudi Arabia's legal
structure and efforts in this area. I think it points out the
good things and I think it points out the areas in which they
still need to improve.
Mr. Royce. A lot of concerns. Thank you, sir.
Chairman Moore of Kansas. The gentleman's time has expired.
The chairman will next recognize the gentleman from Delaware,
Mr. Castle, for 5 minutes.
Mr. Castle. Thank you, Mr. Chairman. Mr. Glaser, are you
familiar with the terrorist financing report which was
authorized in section 6303 of the Intelligence Reform and
Prevention Act back in 2004?
Mr. Glaser. Yes.
Mr. Castle. We have never received that report. I have
written letters to the President, and we mentioned it again--I
and others have mentioned it in various intelligence activities
on the Floor, etc.
Can you--what has happened to that report? That was due in
2005. Is it going to be forthcoming? Is there some reason why
we are not seeing this?
Mr. Glaser. Thank you, Mr. Castle. We are aware of the
requirement issue of this report, and our plan is to issue a
terrorist financing report to meet the statutory requirement.
There has been a lot of internal discussion about what form
this report should take. There are different aspects of it that
we have struggled with.
But it is something that we know there is--we understand
there is an expectation that we are going to do this, and we do
plan to meet that expectation.
Mr. Castle. Needless to say, the date has long since passed
that it was due. I would hope that these discussions could come
up with a resolution, we could get that report, which may
answer some of the questions which we are posing here today.
In my--another question I have is--and you mentioned it a
little bit with Saudi Arabia--but in--and you also indicated
that we may be the only country which has an office dedicated
to this particular problem. I assume you're talking about
terrorism financing when you say that. But what is our
relationship with the bulk of other countries? Do they have any
kind of an infrastructure or anything else in place that you
can actually work with, with respect to financing issues that
we are discussing here today?
I realize that's a pretty broad question, but can you give
us a quick synopsis of what you see in these other countries?
Mr. Glaser. Thank you for the question. I am happy to.
To clarify what I said earlier, we are the only country
with an office within a finance ministry like the one we have
at the U.S. Treasury Department, in terms of being able to
focus not just on terrorist financing, but on all financial
components of national security issues--in particular,
terrorist financing. And it has, I think, allowed us to
approach issues in a more sophisticated, more aggressive way
than any other finance ministry in the world, and we are very
proud of that.
But there certainly are offices throughout the world--
governments throughout the world--dealing with this issue in
different ways, and there are offices and governments that
focus on terrorist financing.
As far as our--the way we work with and cooperate with
those governments, again, it happens on all--on a variety of
levels. On the broadest level, on the multilateral level, there
are a number of international bodies, I think most particularly
the Financial Action Task Force, which I have mentioned a
couple of times, which is the international standard-setting
body for money laundering and terrorist financing. It is
headquartered at the OACD in Paris, and it has 34 members, to
include most of the largest countries in the world.
That network, then, is extended through what are called
FATF-style regional bodies, which are regional FATFs that exist
in every region. There is one in the Middle East, there is one
in Central Asia, there is one for Asia, for South America, the
Caribbean, eastern and southern Africa, west Africa, and
central Africa. So, there are these FATF-style regional bodies,
and those are intended to provide regional solutions to
regional issues relating to this. Obviously, there is then work
done at the UN. There is work done at so many different bodies
on this area.
And equally as importantly is our bilateral outreach. I
spend an awful lot of my time traveling throughout the world,
not just on this issue, but on issues--on all national security
issues the Treasury is related to, be it North Korea, be it
Iran, be it counterterrorism, be it other issues, trying to
coordinate actions, passing information to governments, trying
to persuade them to take action, working with them throughout
the world, doing this.
Last month, I was in the Palestinian territories working
with the government of the Palestinian Authority on precisely
these types of issues, and they are very, very good partners of
ours.
So, there is not one forum and there is not one way of
doing this. It is a full-time job to coordinate internationally
and to work on all these subjects. But I think we have made
good progress.
Mr. Castle. Thank you, Mr. Glaser. My time is up.
Chairman Moore of Kansas. Thank you. I ask unanimous
consent that Mr. Ellison from Minnesota, a member of the full
committee, be allowed to participate and ask questions. Without
objection, it is so ordered. Mr. Ellison, do you have any
questions, sir?
Mr. Ellison. Yes, Mr. Chairman, thank you.
Chairman Moore of Kansas. Yes, sir. You are recognized.
Mr. Ellison. Mr. Chairman, thank you for holding this
hearing, and thank you for inviting me to attend. I am hopeful
that we can improve the rules on charitable giving so that all
Americans, including Muslims, can give to charity without
inadvertently running afoul of the law.
Currently, the net of suspicion is simply cast too broadly.
While it is crucial that we disrupt and destroy terrorist
financing networks, President Obama himself acknowledged,
``Rules on charitable giving have made it harder for Muslims to
fulfill their religious obligation.'' That's why I am committed
to working with Members of Congress and members in the
community to ensure that everyone can fulfill their religious
obligations, including Muslims, who have a duty to fulfill
Zakat, which is charity.
Rules must also change so that charities can make
contributions to fight poverty around the world, including in
Muslim majority countries. Humanitarian aid in the Middle East,
Africa, South Asia and elsewhere is crucial, so that it can--
it's also an effective tool to combat terrorism.
My question is, will the Treasury Department consider
implementing new rules and procedures to assist Muslim-
Americans to contribute to charities?
Mr. Glaser. Thank you. Thank you, Mr. Ellison, and I
certainly do agree with you that our efforts to fight terrorism
over these past 10 years have made it more difficult for people
to give, particularly to high-risk areas. And they should have
the opportunity to do so. I completely agree with that. I think
our charities do a phenomenal job, and an extremely important
job in providing relief to these needy communities.
On a humanitarian level, it's important. And, frankly, on a
national security level, I think it's important, as well. So
there is absolutely no disagreement on that issue.
We take--as I have said before, we take our responsibility
very, very seriously in this area, and we have--we are
continually thinking about and trying to solve the problems
that go along with this. And they are a very complicated and
difficult set of problems.
The ideas that we have come up with have been to try to
provide guidance to the charitable community, in terms of best
practices, to try to provide information to the charitable
community, in terms of risk matrixes and typologies, and things
like that. We want to--we welcome, we invite a vibrant dialogue
with--
Mr. Ellison. Let me ask you another question in that same
vein.
Mr. Glaser. Okay.
Mr. Ellison. Could Treasury direct the creation of a
single, user-friendly publicly-accessible database
consolidating each of the government's prohibited lists, so
that donors, mosques, and 501(c)3 organizations can easily
determine if a charity to which they want to donate is on a
prohibited list?
Mr. Glaser. We do--Mr. Ellison, we do have on our Web site
the list of designated entities. Unfortunately, the problem
goes beyond that. It's not really just a question of not
donating to a prohibited entity. As far as a donor is
concerned, if a charity is operating in the United States, it's
not on a prohibited list.
The problem--and we have never, for that reason, we have
never targeted donors--the complexity and the difficulty come
with charities in the United States who are trying to provide
needed legitimate services in these high-risk areas, and the
complexities that go along with who they may be working with,
and whom they may be dealing with. And it's a very difficult
issue.
Because certainly all aspects of these organizations--like
Hamas, like Hezbollah--are not publicly identified as
designated charities. This is why I think it's important that
we do provide guidance on how to--how they should--how they can
protect themselves, and provide them information on how these
organizations operate.
Mr. Ellison. Okay. With any time I have remaining, let me
ask you this: Could Treasury provide a rebuttable presumption
of innocence to donors--individuals, mosques, 501(c)3
organizations--who can show that at the time of the
contribution, they checked the combined list and did their due
diligence and did not have reason to know that the organization
was connected to terrorists, or otherwise fraudulent?
Mr. Glaser. Thank you, Mr. Ellison. Again, we have never
targeted donors. So the issue is not really one of providing
rebuttal of presumptions with respect to donors. The issue--
Mr. Ellison. If I may intervene, good citizens don't want
to donate to organizations that are prohibited. So, to a
certain extent, a donor could be concerned about being
targeted, him or herself, or the entity's self.
But, on the other hand, they might just not want to donate
to an organization that the government believes is a prohibited
organization, whether or not they are targeted themselves. Do
you understand my point?
Mr. Glaser. I do understand your point. I do understand
that the actions that we have taken have created a chilling
effect within the--particularly within the Muslim-American
community. I do understand that. And it's a concern. It's
something that we are trying to work with.
I don't think establishing a rebuttal--the standard that we
are dealing with is whether an entity is owned or controlled
by, operating for or on behalf of a terrorist organization.
That's the standard that we are working with, and that is the
standard that we should continue to work with.
But we need to supplement that with a strong partnership
with the charitable community, so that we could get to starting
to improve a lot of the very legitimate concerns that you have
raised.
Mr. Ellison. Thank you, Mr. Chairman.
Chairman Moore of Kansas. The gentleman's time has expired.
The chairman will next recognize Mr. Klein from Florida for up
to 5 minutes.
Mr. Klein. Thank you, Mr. Chairman. And thank you for being
here today. This is obviously a very important issue around the
country. I would like to yield to my colleague, Mr. Lynch, who
has some follow-up questions.
Mr. Lynch. Thank you. I thank the gentleman. Mr. Glaser, I
want to push back a little bit on Mr. Adler's question, when he
asked you if you thought that your agency had sufficient
resources to do its job. I think you're trying to be a team
player, and I understand taking that position.
But looking at the responsibilities that you have, let's
just start with the greater need for, let's say, FinCEN to
interface now, and especially within the Financial Fraud Task
Force, to now interface with 3,000 local law enforcement
agencies inside the United States, doing all the things that
you have already talked about in all these different countries,
what the different, MENAFATF task force, all the
responsibilities you have there, the tremendous need we have in
the Middle East and in north Africa for you to help that
situation, the cross-border transfer of funds issue that you're
trying to address, I think you are way over--I think the
demands on your agency, especially on FinCEN and OFAC are far
exceeding--the demands are far exceeding what your capabilities
are.
And what troubles me greatly is, when I look at the--next
year's budget, you basically have been level-funded--a little
bit of an increase--and, I see the agencies that you serve, the
FBI, a huge increase on their part, and greater need for you to
spread yourself even thinner than what you are doing right now.
I just don't see how--and I appreciate your being a team
player and saying, ``We're fine,'' but that's not what I see. I
see greater demand on your agency, especially the financial
crimes enforcement network, globally, as well as domestically,
and I just don't see any way near you filling your obligations,
given what they are right now, and the expectations, I think,
of Congress for you to meet these further demands. So, I would
just like to hear what you have to say about that. I hate to
put you on the spot, but you're the only one here.
Mr. Glaser. No, I understand, Representative Lynch. It's a
fair question. I don't really know how to respond, though. I
appreciate your support. I suppose on some level, more money is
better than less money. But we--this is part of a broader
conversation, with respect to the Treasury budget, and I am not
the right person to respond to that.
We feel that we are meeting our mission with the resources
that we have. And we do the best that we can.
Mr. Lynch. Let me ask you: On the formal banking side, we
have the ability to do suspicious transaction reports and CTRs,
where--those are the sort of little red flags sometimes that
give us reason for concern and further investigation. Do we
have anything on the charity side that remotely compares to
that?
Because I think on the next panel, we are going to hear
about the great amount of data that we gather through the BSA,
the Bank Secrecy Act, and that some feel we aren't really
utilizing. So there is going to be pushback on that by my
friends from the ACLU, who think that on an individual secrecy
and privacy standpoint, it's not worth the intrusion.
Mr. Glaser. I am not familiar with the ACLU's position with
respect to the Bank Secrecy Act. But the Bank Secrecy Act
doesn't apply to charities. There is not a supervisory
framework. The money laundering laws--the Bank Secrecy Act,
which is the basic regulatory framework that we have for anti-
money laundering--
Mr. Lynch. I understand. I am asking if there is anything
comparable.
Mr. Glaser. No.
Mr. Lynch. To what we do on the bank side?
Mr. Glaser. No.
Mr. Lynch. To charities? No? Okay. Thank you. I appreciate
your indulgence, Mr. Chairman, and I yield back.
Chairman Moore of Kansas. I thank the gentleman. The
chairman will next recognize the gentlelady from Ohio, Ms.
Kilroy, for 5 minutes.
Ms. Kilroy. Thank you, Mr. Chairman. And I would yield to
my colleague from Minnesota, Mr. Ellison.
Mr. Ellison. And let me thank the gentlelady and the
chairman. Just a few more questions.
Has the Obama Administration applied the current rules to
close charities and freeze charitable assets that the Bush
Administration has been applying? I guess my question is, it
looks like the activity has been significantly less, but do you
feel that the same principles are still at work? Or how have
they changed?
As you know, the Bush Administration closed down about
seven charities and prosecuted one.
Mr. Glaser. Yes, there have been a total of 8 charities
designated under our basic Executive Order since 9/11. There
has not--six of the eight could be identified as Muslim
charities. There have been no Muslim charities designated in
the United States for almost 3 years. There have been recently
two charities designated that are related to the Tamil Tigers
that had their assets blocked.
Mr. Ellison. But I guess my question is, is this a policy
change from the Obama Administration, or is it the fact that
the activity just isn't going on?
Mr. Glaser. I think we certainly remain committed to
shutting down terrorist networks wherever we find them. And
there hasn't--there has not been a change in policy in that
regard. If there is a terrorist network that we identify in the
United States, we are going to take whatever lawful means that
we have--
Mr. Ellison. So the answer is you just haven't discovered
that kind of activity.
Mr. Glaser. The answer is that we haven't found that to be
appropriate authority in any case--
Mr. Ellison. Okay.
Mr. Glaser. --of any Muslim--
Mr. Ellison. Okay, okay, okay, yes. Since we have limited
time, you know how it is.
Under current law, the Treasury does have the ability to
freeze assets, but does not have the authority to bring a
formal charge. Is that right? Do you refer that over to the
attorney general for prosecution?
Mr. Glaser. They are two completely different processes.
Mr. Ellison. Okay.
Mr. Glaser. We don't--the Justice Department would take
care of criminal prosecution, but the decision to designate a
charity does not imply that there will be a criminal
prosecution.
Mr. Ellison. Do you feel that there are sufficient due
process safeguards in place for a charity to come and sort of
show that, ``Hey, in fact we didn't do this, or, if we did, it
was in good faith and we will clean it up?''
Mr. Glaser. Yes. Again, I do think we have sufficient due
process. As I tried to explain in my written testimony, there
are procedures that we go through on the front end. And then,
on the back end, we do have a licensing system so that any
designated--not just a charity, any designated entity could
come in and say, ``We need access to our funds to pay for legal
fees or pay for basic expenses,'' and we regularly permit that
to happen.
And then we do have a delisting procedure, and we have
delisted 34--34 listed entities have been delisted, none of
them charities. So we do have a delisting process that we have
demonstrated works. This is a process that has been reviewed by
the courts many times, and I think we have a strong--
Mr. Ellison. Can I ask you, is there a process, an interim
process--there is freezing, on the one hand, and there is not
taking any action on the other. Is there a process to say,
``Look, you have some questionable donations from some
questionable sources, or to some questionable sources, and
we're not sure that you know that, but we're going to work with
you to make sure you get things cleaned up?'' Do you have a
process like that?
Mr. Glaser. There is not a formal process like that, Mr.
Ellison. But I think it's important to remember that the
entities that we have designated have not--we have not regarded
them to be unwitting victims in all of this. We regard them as
being part of these terrorist networks. And we have found it to
be our obligation to take the action that we took.
Mr. Ellison. Yes. I yield back.
Chairman Moore of Kansas. I thank the gentleman.
Ms. Kilroy. Mr. Chairman? I think we had maybe half-a-
second there left.
So, I just want to understand, if a charity is having
difficulty, experienced difficulty with banking or with being
able to wire, they're not on your list, but they're still
experiencing that difficulty, they're following your best
practices, do you have some kind of process or open door that
would allow that charity--that would help that charity to
understand what the problem was, so that they could make sure
that they were in compliance, and be able to fulfill the
charitable function, the humanitarian relief, or whatever it
was that they were engaged in?
Mr. Glaser. Certainly, we do have a number of outreach
processes to try to have precisely this type of discussion with
charities, and we are happy to do even more of it.
I am not aware of charities having a problem obtaining--
non-designated charities having a problem of obtaining
financial services. But if that is a problem, it's something
that we would be interested in learning about, and it's
something that we would be happy to work with the charitable
sector on.
Ms. Kilroy. Thank you.
Chairman Moore of Kansas. Thank you, Mr. Glaser, for your
service and your testimony today. You are now excused.
And I will invite the second panel of witnesses to please
take your seats. Thank you, Mr. Glaser.
Mr. Glaser. Thank you, Mr. Chairman. Thank you.
Chairman Moore of Kansas. I am pleased to introduce our
second panel of witnesses. First, we will hear from Ms. Kay
Guinane, who is the program manager of the Charity and Security
Network.
Next, we will hear from Mr. Michael German, policy counsel
at the American Civil Liberties Union.
And finally, we will hear from Mr. Matthew Levitt,
director, Stein Program on Counterterrorism and Intelligence at
the Washington Institute for Near East Policy.
Without objection, your written statements will be made a
part of the record. Ms. Guinane, you are recognized, ma'am, for
5 minutes.
STATEMENT OF KAY GUINANE, PROGRAM MANAGER, CHARITY AND SECURITY
NETWORK
Ms. Guinane. Thank you. I would like to begin by expressing
my thanks to you, Chairman Moore, Ranking Member Biggert, and
the members of the subcommittee, for holding this very
important hearing, and inviting me to testify. This is the
first opportunity U.S. charities have had to tell their story
about the impact of national security laws since 9/11, and we
very much appreciate that.
It's a critical first step, then, in calling attention to a
serious and overlooked problem: the barriers that current
national security laws create for legitimate U.S. charitable
organizations. The Charity and Security Network, where I am
program manager, is a broad cross-section of U.S. organizations
that are working to provide solutions to the problems that are
being addressed today.
First, I want to strongly state and emphasize that the U.S.
charitable sector condemns violence and terrorism. We share the
Department of Treasury's goal of stopping the flow of financing
to terrorist organizations, whether directly or indirectly.
But, unlike many foreign organizations, the U.S. charitable
sector is highly regulated, primarily by the IRS. In addition,
we are subject to ethical standards that demand non-
discrimination in development and aid programs.
These standards were described in a May 12th letter to
President Obama from a group of 30 charities. These groups
said, ``Since the Reagan Administration's declaration in 1984
that `a hungry child knows no politics,' U.S. policy has been
to provide humanitarian assistance on the basis of need,
without regard to political affiliation, creed, race, or the
international status of the country or territory to which a
person belongs. It is the Golden Rule of the American nonprofit
sector, and it provides humanitarian assistance all over the
world.''
We urge you to assess the testimony today by this standard,
with the view that charity and security are mutually
reinforcing, not competing goals. We feel our work directly
confronts terrorism.
Despite some statements from the Department of the
Treasury, charities are not a major source of terrorist
financing. U.S.-based charities comprise only 1.68 percent of
designated entities on the specially designated global
terrorist list. And the 9/11 staff monograph made it clear that
they were not a source of domestic support for the attacks of
9/11. Instead, the work of charitable organizations confronts
the conditions that may be conducive to terrorism. This has
been recognized by Ambassador Benjamin, Coordinator of
Counterterrorism at the Department of State, who said, ``There
is probably no success in this area that can happen without
civil society.''
Since 9/11, the U.S. charitable sector has proactively
taken steps to enhance transparency and accountability to
protect the charitable sector from bad actors. These efforts
include guides and programs such as the Principles of
International Philanthropy, or a handbook, ``Counterterrorism
Measures: What U.S. Nonprofits and Grant Makers Need to Know.''
In addition, Muslim Advocates operates a charities
accreditation program.
But the impact of U.S. Treasury enforcement on legitimate
charitable organization has been largely negative. First,
Treasury's Antiterrorist Financing Guidelines demonstrated a
lack of understanding of how charities operate, and the
charitable sector has uniformly called for their withdrawal, to
no avail.
Perhaps the biggest problem with the Guidelines is that
complete compliance with every suggested practice provides no
legal protection to a charity, not even a presumption of good
faith. A charity could still be shut down and have all its
assets frozen and seized, all without notice, opportunity to
see the evidence against it, or present evidence on its own
behalf. There is no independent review, and upon appeal to
Federal court, no opportunity to present evidence.
The situation with frozen funds is also problematic. There
is no timeline or process for the long-term disposition of
these funds. Treasury can grant licenses that would allow funds
to go to legitimate charities for charitable purposes, but they
have refused every request to do so.
Using UNICEF data, I calculated that, if we know at least
$7 million in U.S. charitable funds have been frozen, that
could provide 11,480,000 children with basic health supplies,
or 12,180,000 children could be vaccinated against polio. But
the lack of transparency and these Draconian sanctions have
discouraged many U.S. charities from pursuing international
humanitarian work. And charities that do so complain of long
delays with licensing applications, and have lost funding as a
result.
In the end, what we need from Treasury is transparency,
accountability, proportionality, and humanity in their approach
to enforcement in the charitable sector.
Thank you for the opportunity to bring our story to you
today.
[The prepared statement of Ms. Guinane can be found on page
65 of the appendix.]
Chairman Moore of Kansas. I thank the lady for her
testimony.
Mr. German, you are recognized, sir, for 5 minutes.
STATEMENT OF MICHAEL GERMAN, POLICY COUNSEL, AMERICAN CIVIL
LIBERTIES UNION
Mr. German. Chairman Moore, Ranking Member Biggert, and
members of the subcommittee, thank you for inviting me to
testify on behalf of the American Civil Liberties Union about
the need for greater transparency and due process in the
Treasury Department's enforcement of antiterrorism financing
laws, particularly as it affects charitable organizations
working to foster peace, promote human rights, and alleviate
human suffering around the world. Congress serves an essential
constitutional role in overseeing Executive Branch activities,
and we commend you for scheduling this important hearing.
The ACLU has long been concerned about the over-broad
authorities conveyed through the International Emergency
Economic Procedures Act and Executive Order 13224, which give
the Treasury Department practically unfettered authority to
declare individuals or organizations specially designated
global terrorists using secret evidence, without independent
oversight, probable cause, or effective due process, procedures
to protect against error and abuse.
The serious consequences of such designations include the
seizure and freezing of all financial and tangible assets
without any notice, hearing, or judicial review. Where entities
have tried to challenge their designations, courts have
generally applied a highly deferential standard of review,
which requires finding the Agency acted in an arbitrary and
capricious manner in order to overturn a designation.
If a court does review Treasury's evidence, it may do so in
camera and ex parte, which denies the designated entity the
opportunity to challenge the evidence against it. Treasury can
even freeze assets pending an investigation.
Moreover, as mentioned in my written testimony and
documented in even greater detail in the ACLU report,
``Blocking Faith, Freezing Charity,'' the Treasury Department's
unequaled enforcement of these over-broad laws has a
disproportionate impact on Muslim charities, implicating First
Amendment rights in addition to the Fourth and Fifth Amendment
due process concerns.
In Cairo, Egypt, last year, President Barack Obama
acknowledged that, ``in the United States, rules on charitable
giving have made it harder for Muslims to fulfill their
religious obligation.'' Such discriminatory practices alienate
American Muslims, undermine U.S. standing in the Muslim world,
and provide fuel for extremists' inflammatory allegations that
the United States is anti-Muslim.
But it isn't just Muslim charities that are
unconstitutionally chilled from engaging in legitimate
religious, humanitarian, and advocacy activities. The Carter
Center, Christian Peacemaker Teams, Grass Roots International,
Human Rights Watch, the International Crisis Group, the
Institute for Conflict Analysis and Resolution at George Mason
University, the Kroc Institute for International Peace Studies
at Notre Dame University, Operation USA, and the Peace Appeal
Foundation joined in an amicus brief filed by the ACLU in
support of a challenge to the criminal statute prohibiting
material support for terrorism.
They argued that a result of the breadth and vagueness of
the statute's terms--it was unclear whether legitimate
activities such as peacemaking, conflict resolution, human
rights advocacy, and the provision of aid to needy civilians
could expose them to the risk of criminal penalties if they
involved a group that the U.S. Government has designated or may
in the future designate as foreign terrorist organizations.
Such a chilling effect on legitimate aid is
counterproductive to U.S. counterterrorism goals. The
generosity of the American people toward those in need around
the world is an asset to U.S. counterterrorism efforts. Our
government should not squander it by unfairly castigating the
charitable sector as a primary source of terrorist financing,
particularly when the available evidence belies this notion, as
the government has actually designated and successfully
prosecuted relatively few U.S. charities for terrorism-related
activities.
Indeed, a 2004 report on terrorist financing by the 9/11
Commission staff found that the evidentiary basis for many of
Treasury's designation decisions were ``quite weak'' in the
post 9/11 period, which led to questionable designations that
made other nations ``unwilling to freeze assets, or otherwise
act merely on the basis of U.S. action.''
Similarly, a 2005 Government Accountability Office study
suggested that the shroud of secrecy under which the Treasury
Department exercises its authorities raises questions about the
effectiveness of these important programs. GAO called for
greater oversight of these authorities, but found that in 2009
follow-up, the Treasury's Terrorism and Financial Intelligence
Office continues to face deficiencies in interagency
cooperation and strategic workforce planning, and has yet to
develop appropriate performance measures to effectively assess
its core programs.
Congress must address these deficiencies that risk both our
liberties and our security, by bringing needed transparency to
the Treasury Department's procedures through vigorous public
oversight and the establishment of effective due process
mechanisms that give entities impacted by these broad
authorities a meaningful opportunity to defend themselves
before a neutral arbiter.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. German can be found on page
39 of the appendix.]
Chairman Moore of Kansas. Thank you, Mr. German.
Mr. Levitt, sir, you are recognized for 5 minutes.
STATEMENT OF MATTHEW LEVITT, DIRECTOR, STEIN PROGRAM ON
COUNTERTERRORISM AND INTELLIGENCE, THE WASHINGTON INSTITUTE FOR
NEAR EAST POLICY
Mr. Levitt. Thank you. Chairman Moore, Ranking Member
Biggert, and distinguished members of the subcommittee, I thank
you for the opportunity to appear before you today at this
important hearing on this critical topic.
Nonprofit organizations are especially susceptible to abuse
by terrorists and their supporters for whom charitable or
humanitarian organizations are particularly attractive fronts.
The Financial Action Task Force, the multilateral body that
aims to set global standards for anti-money laundering and
counterterror financing has found that, ``Terror networks often
use compromised or complicit charities and businesses to
support their objectives.''
In fact, FATF warned that, ``The misuse of nonprofit
organizations for the financing of terrorism is coming to be
recognized as a crucial weak point in the global struggle to
stop such funding at its source.''
According to the Justice Department, intelligence indicates
that terrorists continue to use charities as sources of both
financial and logistical support. British officials concur.
According to a joint UK Treasury/Home Office report, a
significant proportion of terror finance investigations in the
UK in the year 2006 included analysis of links to charities.
The report found that, ``The risk of exploitation of charities
is a significant aspect of the terrorist finance threat.''
Indeed, terrorist groups have long exploited charities for
a variety of purposes, as we document in the Washington
Institute study of ``the Money Trail'' in some detail. Illicit
charities offer available legitimacy for terrorist fundraising,
attracting unwitting donors who are unaware that the monies
they donate for humanitarian purposes fund terror.
Charities are vulnerable to abuse as money laundering
mechanisms, and can be abused to provide terrorist operatives
with day jobs, salaries, meeting places, and more. Through
charities, trans-national terrorist groups have been able to
move personnel, funds, and material to and from high-risk areas
under cover of humanitarian charity work.
Charities tend to operate in zones of conflict, and
traditionally involve the flow of money in only one direction,
both of which are characteristics that would arouse money
laundering suspicions in other organizations.
Most charities are completely law abiding, praiseworthy
organizations. But among the minority of charities engaged in
supporting terrorism, some are founded with the express purpose
of financing terror, while others are infiltrated by terrorist
operatives and supporters, and co-opted from within.
Treasury designations of an entire charity, as have been
the case in only a few instances here in the United States,
focus only on the former. Never has the government targeted
unwitting donors. Recognizing that analysis of this particular
preferred means of terror financing demands a discerning and
discriminating level of analysis, Ambassador Francis Taylor,
then the State Department's coordinator for counterterrorism,
noted in 2002 that, ``Any money can be diverted if you don't
pay attention to it, and I believe that terrorist
organizations, just like criminal enterprises, can bore into
any legitimate enterprise to try and divert money for illicit
purposes.''
Consider the example referenced earlier of Abd Al Hamid Al-
Mujil, executive director of the eastern province of the
International Islamic Relief Organization, designated by
Treasury in 2006. According to the public statement announcing
his designation, and to declassified intelligence included
therein, Mujil was described by fellow jihadists as the
``Million Dollar Man'' for his support of terrorist groups,
including al-Qaeda, through his charity.
One reason the charitable sector remains vulnerable to
terrorist financing, according to the Financial Action Task
Force, is that charities are subjected to lesser regulatory
requirements than other entities, such as financial
institutions or private companies. The United States has been
largely alone in cracking down on the abuse of charities and
NGOs by militant groups. Many other countries have been
reluctant to take any steps to tackle this problem, often out
of concern that they will appear to be targeting humanitarian
efforts.
Despite some criticism, the U.S. Government has been
consistent in its effort to protect the donor public and stem
the flow of funds to terrorists by cracking down on the abuse
of the charitable sector by terrorist organizations. The
Treasury Department has designated around 60 charities with
ties to terrorist groups, a few with branches in the United
States. The United States has also prosecuted charities and
their leaders, such as in the case of the Holy Land Foundation
for Relief and Development, which was found guilty on all
counts in November 2008.
In none of these cases was U.S. Government action
capricious or based on sparse, dated, or unreliable
information. In none of these cases was the charity suspected
of engaging in one or two bad transactions. The designation
process, in particular--I know, from firsthand experience--is
appropriately robust, vigorous, and errs on the side of
caution. Designated entities can and do appeal their
designations, and the Treasury Department has a record of
lifting designations when warranted.
But it should be clear that charities and international aid
organizations come to this problem set from a noble and well-
intentioned perspective, focused on the need to highlight
opportunities to facilitate quick, efficient, and timely aid.
Thankfully, promoting opportunities for charitable giving, and
reducing the risk that those opportunities are abused for
illicit purposes are in no way mutually exclusive goals.
The problem is not enforcement of U.S. laws banning
material support to terrorist organizations, but rather the
unintended impact this has had on charitable giving. Greater
due diligence on the part of the nonprofit sector, combined
with government outreach, would go a long way toward resolving
this problem. Thank you.
[The prepared statement of Mr. Levitt can be found on page
93 of the appendix.]
Chairman Moore of Kansas. I thank the gentleman for his
testimony, and all of the witnesses for their testimony. I
recognize myself for up to 5 minutes for questions.
Mr. German, since the ACLU issued its report last summer,
are there any new observations or ongoing concerns you may have
with respect to blocking terrorist financing and its impact on
law-abiding charities?
Mr. German. As I--
Chairman Moore of Kansas. Let me just ask this, too. How
would you evaluate Treasury's performance on these issues?
Mr. German. As I detail in my written statement, we have
had a decision in the Kind Hearts case. So, that was very
welcome.
And, obviously, the court turned it to Congress to try to
develop a process by which the Fourth Amendment rights of
charities whose property is seized, either pending
investigation or through designation, have an opportunity to
defend themselves--understand the charges, have necessary
notice, and defend themselves. So we are looking forward to
working with this committee to help address responding to the
court's decision.
In regard to the Treasury Department's response to
President Obama's acknowledgment of the problem and the impact
on Muslim charities, we have not seen a significant effort to
address that issue. And certainly, the community still has
concerns that are impacting its ability to pay Zakat.
Chairman Moore of Kansas. Thank you, sir. Ms. Guinane, are
the Treasury's voluntary best practices for U.S.-based
charities document useful for charities who are trying to fully
abide by U.S. law? Do you have any suggestions in terms of how
they may be improved, or how Treasury can do a better job in
this area?
Ms. Guinane. I'm sorry, I was unable to hear the second
part of your question.
Chairman Moore of Kansas. I said with regard to the
Treasury's voluntary best practices, a document useful for
charities, is it useful for those charities who are trying to
abide by law?
And do you have any suggestions, in terms of how they may
be improved or how Treasury can do a better job in this area?
Ms. Guinane. Yes, we do. In 2005, the Treasury Guidelines
Working Group, which was a broadly representative collection of
charitable organizations and experts, developed the Principles
of International Charity, and submitted that to Treasury as a
suggested replacement for the Guidelines. Treasury adopted some
of those suggestions, but not all. And in 2006, when it
released the current version of its guidelines, it retained a
lot of the problematic provisions.
Since then, the Charity and Security Network has
coordinated an effort to develop specific procedures that we
think make sense for charitable due diligence and for due
process, and we would be happy to share those with the
committee and with Treasury, as well.
Chairman Moore of Kansas. Thank you. Mr. Levitt or Mr.
German, do you have any comments?
Mr. German. I would just like to add a little pushback on
the issue that--or the argument that donors aren't impacted,
and donors aren't targeted. We document in the report that
there is a substantial effort by the FBI to contact donors and
ask them about their charitable donations, which creates this
chilling effect that puts fear into them, where even donating
to an organization that may not be designated today would not
protect them from prosecution later.
Chairman Moore of Kansas. Thank you. Mr. Levitt?
Mr. Levitt. In which case the ACLU should have an issue
with the way the FBI is conducting its investigations into
terror financing. If that happens, that is in no way a function
of the designation process.
If I may add one last thing, if I have the number right
that you cited--it was only 1.68 percent of designated entities
that are U.S.-based charities means there is an inherent flaw
in measuring a lot of this by how many designations are done.
Or, for that matter, how much money is seized.
I think it's really important to understand designation is
a very powerful tool, in part because it should not be done
capriciously, and because you err on the side of caution. There
are many, many cases, domestically and abroad, where charities
hit the threshold for designation, but in this robust
interagency review are rejected for designation. And other
tools--law enforcement, or regulation, or outreach to the
charity--lots of other tools are used.
That doesn't mean that only 1.68 percent of charities in
the United States have ever been of concern. It might be that
the whole charity wasn't bad, there was just one person. You
don't want to shut down that charity. We're all in agreement
that--on this panel--you want to facilitate charity to the
greatest extent possible, period.
It's a very flawed metric to measure this just by how many
charities have been designated, in part because Treasury is so
careful about only designating the worst cases where they are
absolutely knowingly engaged in this activity. Only those are
designated.
Chairman Moore of Kansas. Thank you. My time has expired.
The chairman next recognizes Mrs. Biggert for 5 minutes for
questions.
Mrs. Biggert. Thank you, Mr. Chairman, Mr. Levitt. How can
Treasury address the problem of a designated entity shutting
down, only to open up some time later, perhaps under a new
name?
Mr. Levitt. As you heard earlier, there is a really good
interagency process on this, not only leading up to the
designation or to whatever other action is decided upon for a
charity or an entity of any kind that is deemed to be knowingly
engaged in supporting terror financing, but also in terms of
the follow-up, to see what the entity is doing.
So, sometimes you will have charities that open up under a
new name, and they are engaging in the same terror finance
activity. And you then need to decide if you're going to
designate or take some other law enforcement action against
those.
In other cases, you might have people who are involved with
the original designated charity who are not knowingly involved
in illegal activity. They were in the minority and they open up
some legitimate charity, and that's to be applauded. It really
has to be a careful investigation.
Mrs. Biggert. Should there be some database of individuals
working for organizations, similar to the relatively recent
database on mortgage brokers?
In other words, if there was a list of people or
individuals who were involved in this, and their name pops up
again in another organization, is that part of the designation,
or is that--would that be something new, or would that be
helpful?
Mr. Levitt. That would be new, and I don't know that it
would be helpful. You really do need to conduct a very thorough
investigation. I wouldn't want to create a list like that,
which would basically tar-and-feather, name-and-shame them,
unless you really knew that those individuals, particular
individuals, were involved.
There were people involved in the Holy Land Foundation that
were not indicted and were not designated because they were
some accountant or some secretary and they weren't aware of the
stuff that was going on behind closed doors, or all the
activities. So you want to be very careful about that.
Mrs. Biggert. Okay. And then you know the difference of
charities established for the express purpose of financing
terror and those charities that were infiltrated by terrorist
operatives. Should Treasury's approach differ when policing
these types--different types of abuses? And should the
enforcement outcome differ?
Mr. Levitt. It has to be done on a case-by-case basis.
Often, people describe the U.S. designation system as a
sledgehammer approach, just shutting down charities. Compare
it, for example, to the UK charity commission, which can be
described as a scalpel approach, where they tend to try and
carve out the bad entity from the good, or if there is a little
good entity, from the larger bad.
My feeling is this is not an either/or. This has to be a
case-by-case study. Because in the United States, the Treasury
was so careful only to designate the most egregious offenders,
they have not designated a domestic case where there was a good
part to be cut out of the otherwise bad charity--short of, for
example, in the case I just cited of some low-level employee.
When you have such an example, I think it would be useful
to consider. If the charity itself is good, and it's being
abused by one or two bad actors, and it is possible to remove
the tumor and keep the rest of the patient alive, that would be
a very useful thing to do.
To date, the Treasury has only tried this approach--
designating parts of an organization, as opposed to all of it--
with charities abroad. And in each of these, al-Haramain,
Revival of Islamic Heritage Society, it has failed, and
ultimately had to designate all of it. But that's because, I
think, in those charities abroad, the United States doesn't
have regulatory and law enforcement oversight capability.
If we were to find such a target in this country, I think
that would be a useful approach. But it would have to be case-
by-case, based on the nature of the precise evidence and
intelligence available.
Mrs. Biggert. Could you elaborate on the global partner
vetting system, PVS, and how that would work in practice?
Mr. Levitt. The partner vetting system, which was applied
to entities largely working with USAID in the Palestinian
territories, is based on the finding that, unknowingly, USAID
and others were partnering with entities--in the West Bank and
Gaza, in particular--that were tied to Hamas or other terrorist
groups. And it comes down to how extensive the due diligence is
that's being done by these charities, not only in terms of who
they're partnering with here, but really who they are
partnering with abroad.
You could be a legitimate charity here, trying to do the
right thing, let alone have legitimate donors trying to do the
right thing. If you're not careful about who you partner with
abroad, you're handing money on a silver platter to some very
bad actors. The partner vetting system, in a nutshell, was set
in place to require charities to do some vetting of the local
partners they were working with.
Let's be clear. This is not easy to do. It is a burden, and
it's costly. I think that the charitable, nonprofit sector has
a responsibility for due diligence, and that due diligence goes
way beyond looking at the various U.S. Government lists, way
beyond that. The government also has a responsibility, I think,
to try and do more, through transparency and working with the
public sector, to enable that, because vetting your partners is
hard.
But the premise, for example, of coming up with a best
practices list which, if you do that and nothing else, will
protect you from any prosecution, is never going to happen,
because we all have responsibilities in our daily lives, our
personal lives, our business lives, our charitable lives, to
make sure that we are doing as much as we can to partner with
the right people and not the wrong people. If you make a
mistake, government is not going to target you.
Mrs. Biggert. Thank you. I yield back.
Chairman Moore of Kansas. Thank you. The chairman will next
recognize for up to 5 minutes, Mr. Lynch from Massachusetts.
Mr. Lynch. Thank you, Mr. Chairman. Mr. Levitt, you had an
opportunity to look at Treasury's response and how they are
trying to interface with different law enforcement
organizations, and trying to really deal with the banking side
of this, as well as the charity side of this.
Do you think we are asking too much of Treasury right now,
given the resources that we're allocating to them for their
job?
Mr. Levitt. As a former colleague of Danny Glaser's, I am
wary of placing him on the hot seat. But enjoying the prospect
of not being the former Treasury DAS, and being able to speak
my mind, I actually do agree with him. For the moment, Treasury
seems to have enough resources, and there may be a question
of--
Mr. Lynch. Even the financial crimes network?
Mr. Levitt. FinCEN is its own entity and agency within TFI.
And I would strongly recommend--and I assume the subcommittee
has--reaching out directly to the director, Jim Freis, and
others on this issue. I don't claim to be an expert on the
internal workings of FinCEN.
My sense when I was there--I left in early 2007--and my
sense observing as an academic from the outside is that
Treasury is doing a remarkable job, and that Treasury's mission
hasn't changed since the Bush Administration or during the
Obama Administration, because this is a simple, nonpartisan,
bipartisan law enforcement issue, where there is complete
consensus. This is not a political decision.
Mr. Lynch. The problem, though, is that we are now asking
them to operate on a more granular level in dealing with 3,000
local law enforcement agencies.
We have the situation, such as in Boston, where you have
either a hundi or a hawala provides resources, modest
resources, to a group that is connected to the Times Square
bombing attempt. And it just seems to me that we're asking a
tremendous amount from some very brave individuals who are
stretched very thin in meeting those obligations.
And I am trying to, on my own part, as one Member, trying
to get more resources to that organization, because I feel that
everyone will agree after we have an intelligence failure that
we should have increased the resources of that agency. But it's
tough to convince people in the meantime.
Let me ask, I know that there is a pretty solid matrix that
Treasury has laid out for charities to operate in a responsible
manner, which is to try to identify their customers, to make
sure that the funding is somehow funneled through a legitimate
banking institution so we have that screen, and also to monitor
the activity of that charity to basically see what they are
doing.
Those seem like rather reasonable expectations that we
should have of our charities. And I am just wondering if I am
missing something?
Mr. Levitt. I don't think you are, sir. I think they are
reasonable, but they are also baseline. They are meant to be
the baseline for discussion and for interaction with the
charitable sector.
There is a lot the charitable sector has done in this
regard to improve that is laudable. Some of it you have heard
about it at this panel. Danny mentioned charity in the American
Palestinian context that has been done, I think, trend-setting
work, trying to bridge the divide between the need--and it is a
national security need, I would argue--for humanitarian
support, and it's important well beyond its national security
implications on its own right.
They are not supposed to be an answer to everything. They
are supposed to be giving direction. And so they're a baseline.
Mr. Lynch. Mr. German and Ms. Guinane, there seems to be
a--on the one hand, I have been into Gaza a few times, and I
have to admit I am impressed with the Palestinian Monetary
Authority and how they are really trying to work within BSA and
trying to conform with those anti-money laundering statutes.
However, you have to acknowledge, not too long ago, we
caught Mr. Hania coming in through the Rafah Gate with $30
million in cash in some suitcases. So we have success in the
formal sense. But in the informal sense we are concerned about
money getting to Hamas and to Hezbollah.
And I am just curious what the overlay that I just talked
about with Mr. Levitt on the risk matrices, how do you find
that? Reasonable? Unreasonable? Or--how does it create
difficulties for you to operate, or charities to operate?
Mr. German. The problem is multi-faceted. Part of the
problem is that following all the rules that Treasury puts out
doesn't protect a charity. So it's impossible to know whether
they are actually complying with the law. It's very burdensome,
and there is not much evidence that it is actually effective in
preventing terrorism. And that's really the problem with the
lack of transparency.
Our constitutional system is built so that we don't have to
take the Treasury Department's word for whether their actions
are effective. Part of our system is what you're doing today,
which is wonderful, is digging into these questions to find out
both whether it's effective and whether it's complying with the
law and protecting people's individual rights.
So, that transparency is something that actually will force
more efficiency and more effectiveness, and make them actually
prove that they have the right people caught in this--and also
encourage the public to understand the problem, so that they
can better curb their activities where they see other people
getting in trouble.
But where this is all happening behind closed doors, it's
impossible for the public to know why an agency was designated,
or why it was not taken off the list. When there is that
secrecy, it's impossible to know how to react.
Chairman Moore of Kansas. The gentleman's time has expired.
Mr. Royce, you are recognized, sir, for 5 minutes.
Mr. Royce. Thank you, Mr. Chairman. I was going to ask Mr.
Levitt a question.
You mentioned that only the most egregious cases have come
forward--no cases in the last 3 years. But I guess there is a
handful of cases here that have been brought up today and I
wanted to speak to those three, the three that were mentioned.
There are perhaps 1.5 million charities, I guess, and this
handful of charities, since we're speaking about their attempts
to get delisted, we should probably reference them.
The ACLU, in its report, defends the Holy Land Foundation,
even though a jury trial convicted the defendants of every one
of the 108 charges.
And then we go to the testimony of Ms. Guinane. She
mentions the Benevolence International Foundation and the
Islamic African Relief Agency. Now, in terms of the Benevolent
International Foundation, the CEO was indicted by the Justice
Department for operating that organization as a racketeering
enterprise and providing material support to terrorist
organizations, including al-Qaeda.
The Islamic African Relief Agency, that was designated for
providing direct financial support for Osama bin Laden and al-
Qaeda's precursor, and also for commingling funds, engaging in
a joint program with an institute controlled by Osama bin
Laden, and was responsible for moving funds to the Palestinian
territories for use in terrorist activities, notably serving as
a conduit to Hamas. By the way, the assistance to Osama bin
Laden was providing assistance to Taliban fighters.
And then, lastly, it's headquartered in Khartoum, Sudan. So
the point was made that they have made repeated requests over a
2-year period for a release of funds to assist in Pakistan. I
am just back from Pakistan. And up in northwest Pakistan, there
are a lot of activities up there by dibhindi schools. And right
now, they are supporting the Taliban, and--the dibhindi
schools--are graduating young students who are ending up in the
Taliban who are carrying out activities against the Pakistani
government. And also over the border in Afghanistan, I was also
up in Kabul. Same problem. Graduates out of these schools are
going out and, with the support of the dibhindi movement, are
carrying out attacks in Afghanistan.
Perhaps, given the past history of this organization, the
reason the government doesn't want to release the funds when
they say they're going to send those funds to spend them in
Pakistan, is because these funds might end up being spent the
way other funds are being spent right now in Pakistan, in order
to fuel the war to try to overturn the state and turn it into
an Islamic Republic.
I would just like Mr. Levitt's opinion on that.
Mr. Levitt. When the United States designates an entity, it
produces a fact sheet for use in the press release based on at
least some declassified intelligence. This is important so we
can have this conversation with the public sector, with the
charitable sector, so that people can't sit before Congress and
say, ``Nobody knows why these charities are designated.'' They
may not have the whole picture, but they get at least a certain
amount of the evidence put before them, even if it's only a
little bit.
And it can only be a little bit, because much of it has to
come from intelligence, because you're dealing with entities--
in those very few examples where charities are engaged as
terrorist fronts--and let's stress that most are not--where
they're engaged in covert activity, and they are doing one
thing publicly, and a very, very different thing, as you laid
out, privately.
When a charity has been so designated, its trust is gone.
And if there is to be some type of program whereby the funds
that it collected from donors who wanted to do the right thing,
is to be dispersed to facilitate aid, it seems to me that
decision, should there be a mechanism to facilitate it, should
be made by someone other than an individual tied to that
original charity.
But it doesn't seem to me like that's something that could
not happen. I, not in or out of government, have been party to
this discussion as to under what circumstances those funds,
frozen from an illicit charity involved in terror financing,
can ultimately be dispersed for truly humanitarian purposes.
But it doesn't strike me, if it can be done in a trustworthy
way, as a bad idea. In fact, it might be sticking a finger in
the eye of the terrorists. But it would have to be done
appropriately.
Mr. Royce. It also strikes me that this doesn't exactly
limit people's freedom of action, given the number of charities
that exist in the world, and given this very small list, it
doesn't seem to me that would preclude people from doing
charitable work.
Mr. Levitt. I don't think so. As someone who gives to
charity, it has never stopped me. I think that there is a need,
there is a gap that can be filled by people who are expert in
nonprofit operations to do things like this charity that I
discussed in my written testimony has done in the context of
facilitating charitable giving from Americans, including
Muslim-Americans, to needy Palestinians, which is a laudable,
praiseworthy, wonderful thing, so long as it's done in such a
way that the donors and the charity and the government here and
the government in the Palestinian Authority, for that matter,
have a level of comfort that it's not going to illicit actors.
Mr. Royce. Thank you.
Chairman Moore of Kansas. The gentleman's time has expired.
The chairman next recognizes Mr. Ellison for 5 minutes. Sir?
Mr. Ellison. Thank you, Mr. Chairman. I think it's fair to
point out that the Holy Land Foundation defendants were
convicted. I think it's also fair to point out that their
appeal is not completed, and that the first time they were
tried, I think that on nearly all counts, there was a hung
jury. And I think it's also fair to say that there were some
novel uses of evidence in the case that resulted in a
conviction. So, I don't know what's going to happen, and I'm
not here to retry the case, but I just think those facts are
important, as well.
Let me ask the panel, what happens after assets are frozen?
Once they are frozen, essentially, what happens next?
Ms. Guinane. When the charitable assets are frozen, their
banks receive a notice that the assets are blocked. The charity
receives such a notice. Government agents come and seize all
their files and equipment, and any goods they have, such as--I
understand there is a warehouse in Missouri full of blankets
that belong to one of the U.S. charities that was shut down.
After that, there is very little public information about
what happens to that money. Right now, as far as we know, it's
just sitting there with no plan for its disposition.
What could happen, and what we feel should happen is that
these funds belong to the charitable mission of the
organization. And even if there are bad actors in the
organization, the funds should be spent by an able and
legitimate charity to further that charitable mission. If it's
to assist children, if it's to promote health, whatever that
is, that's what should happen to those funds. But right now,
there is no provision for that to happen. And Treasury has
declined every request, as noted from charities, to transfer
those funds.
Treasury has plenty of authority under their licensing
regulations to oversee and regulate any release of frozen
funds. They don't automatically go back to the designated
organization or to the same people to spend--
Mr. Ellison. But at least at this time, there is no clear
procedure as to what happens after--with the frozen assets, how
they're--are they sent to other organizations that are
legitimately serving the mission, or--
Ms. Guinane. There is no provision. And I think that's
because this is occurring under IEEPA, which is an economic
embargo law that was originally meant as a Trading-With-the-
Enemy Act is where--
Mr. Ellison. So you think at least Congress or at least the
Agency needs to promulgate either statutes or rules to deal
with the disposition of these assets?
Ms. Guinane. There are none, and that's something we need.
Mr. Ellison. Also, is there any appeal process, once assets
are frozen? And, if there is, could you describe it?
Mr. German. In my written testimony, I go through the case
of Kind Hearts, where they were actually frozen pending
investigation. They weren't actually designated. In February of
2006, their assets were seized and frozen, pending
investigation. And more than a year later, in May of 2007, they
were given a notice that they were provisionally designated.
When they tried to find out why this had happened, the Treasury
Department was unresponsive. And their attempts to defend
themselves against unknown charges were--Treasury was also
unresponsive, so--
Mr. Ellison. So they weren't given a hearing date, they
weren't given a--
Mr. German. No, there is no hearing, no notice, no hearing,
no due process at all.
Mr. Ellison. Do you have any reason to believe that
Treasury has changed its approach on this issue under the Obama
Administration?
Mr. Levitt. No, and that's because this is a nonpartisan,
bipartisan, law enforcement issue. It's not a policy issue.
Mr. Ellison. Thank you very much, sir. Do you, either one
of the two of you, have any reason to believe that there has
been any change?
Ms. Guinane. I see more openness to dialogue under the
Obama Administration, and an acknowledgment that there is a
problem, which is a big step forward.
However, there hasn't been a change in the actual
procedures. There is still no proportionality, so that a small
organization that makes a mistake can correct its problem. We
still just have the freeze-and-seize kind of instant death
sanction, and that's pretty much it.
Mr. Ellison. And do you have any accurate data on what
portion of the terrorist financing comes from American
charities worldwide?
Ms. Guinane. There is not enough transparency in the
process for me to be able to answer that question. I just know
from news reports and reports from attorneys for some of the
designated organizations that there is at least $7 million in
U.S. charitable funds that are frozen.
Mr. Ellison. Thank you.
Mr. Levitt. But, of course, the amount of frozen funds is
an immaterial number, given the fact that designation is only
one tool.
And so, there may be many other entities out there, because
the designation--
Mr. Ellison. I don't have a question before this witness,
sir, Mr. Chairman.
Chairman Moore of Kansas. The gentleman's time has expired,
and we have completed the hearing. Again, thanks to our
witnesses for your testimony today.
Today's hearing gave us another opportunity to review
efforts to stop money laundering and terrorist financing in an
aggressive manner that makes the most sense. We will continue
reviewing these issues in the weeks and months ahead.
I ask unanimous consent that the following item be entered
into the record: ACLU's June 2009 report entitled, ``Blocking
Faith, Freezing Charity.''
The Chair notes that some members may have additional
questions for our witnesses, which they may submit in writing.
Without objection, the hearing record will remain open for 30
days for members to submit written questions to these
witnesses, and to place their responses in the record.
The hearing is adjourned, and again, thanks to our
witnesses and our members.
[Whereupon, at 11:54 a.m., the hearing was adjourned.]
A P P E N D I X
May 26, 2010
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Friday, September 20, 2013
ANTI-MONEY LAUNDERING: BLOCKING TERRORIST FINANCING AND ITS IMPACT ON LAWFUL CHARITIES
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