Statement Of Chairman Patrick Leahy
Senate Judiciary Committee Hearing On
"An Assessment Of The Tools Needed To Fight The Financing Of Terrorism"
November 20, 2002

Today’s hearing focuses on fighting the financing of terrorism.  Since September 11, 2001, we have learned a great deal about the ways in which Al Qaeda and other groups finance their terrorist activities.  Federal investigators have seized more than $113 million.  But it has also become clear that there is much we do not know about how terrorist organizations manage their finances.  Al Qaeda and other groups are adapting as their assets are frozen and formal markets are closed off to them.   

Due to the dogged work of foreign news correspondents, we have known for months or years that Al Qaeda transferred millions of dollars into untraceable commodities like diamonds and gold to avoid seizure in the international finance markets.  Commodities like these can be smuggled across borders without detection.  Such transactions were apparently conducted for a significant period of time.  A Washington Post article from December 30 of last year quoted a U.S. official as saying, “We are beginning to understand how easy it is to move money through commodities like diamonds.”  (Emphasis added).  This statement was made almost four months after the September 11 attacks.  The official continued, “One thing we are learning is not to ignore the obvious.”  Our intelligence community must operate at a higher level than these statements indicate.  The security of our nation depends on it. 

Cigarette smuggling is another method the terrorists have used to raise funds.  In June two men were convicted of running millions of dollars of cigarettes from North Carolina to Michigan and sending some of the proceeds to Hezbollah.  These men were prosecuted and convicted of conspiring to provide material support to a terrorist group, money laundering and credit card fraud.  I commend successes like these, which focus on less traditional mechanisms of terrorism financing, but I fear they are few and far between.  We need to keep ahead of the terrorists. 

This Committee is charged with oversight of all federal law enforcement efforts to stop money laundering.  This is an area where it is obvious that greater attention needs to be paid.  Last weekend, the Administration released a “report card” on its success in the war on terrorism, but missing from that report was any description of domestic and international law enforcement efforts.  According to the recent Council on Foreign Relations report on terrorist financing, the various government agencies responsible for this issue have been impeded in their investigations by inter-agency turf battles and an all-too-common unwillingness to share information.

Furthermore, while this hearing is titled, “An Assessment of the Tools Needed to Fight the Financing of Terrorism,” it is significant to note that the Congress has already provided agencies with effective and flexible statutes.  Last year, working closely together, Senator Sarbanes and I insisted that money laundering provisions be included in the USA PATRIOT Act, despite efforts by the Administration and House Republicans to have those provisions removed.  Having enacted those provisions, this Committee must fulfill its oversight obligations. 

Which provisions are being used, and to what effect?  I was troubled to see that, according to the Council on Foreign Relations report, the measures enacted in the USA PATRIOT Act that give power to the Secretary of Treasury to restrict or prohibit access to the U.S. financial system have never been used.  Earlier this year I was proud to introduce S.1770, important legislation containing tough new criminal penalties for those who finance terrorism.  That legislation, which also contained a new crime for terrorist bombers, was necessary to implement two important treaties that President Clinton signed after the bombings of the American embassies in Kenya and Tanzania.  Although the current Administration had not immediately moved to implement these important treaties, even after September 11, I am glad that after I introduced S.1770, I was able to work with the President to secure passage of the measure.  

Significantly, S.1770 provided a new crime, 18 U.S.C. 2339C, with a 20 year prison term for anyone who provides or collects funds with the intent that such funds be used in full or in part to carry out a terrorist act.   The new law does not require that the funds were actually used for such an act.  Thus, law enforcement does not have to wait for the terrorist act to be completed.  They can move in to cut off funding before the damage is done.  That law also includes another felony, punishable by 10 years in prison, for those who conceal the sources of terrorist financing.  Both provisions also give the government extraterritorial jurisdiction of such offenses, in order to allow them to stop terrorist financing that is aimed at harming the United States or its citizens wherever it may occur.

The message should be clear.  It is a crime to intentionally fund terrorists or to intentionally help those who seek to do so.  S.1770 provided powerful new tools.  It is now up to the executive branch, however, to use effectively these important tools that Congress has provided.  Thus far, like many of the provisions in the USA PATRIOT Act, I understand that these new provisions have not been used.

Finally, press accounts indicate that the United States has not found a way consistently to work in an effective manner with other governments and private entities in the common fight against terrorism.  As I just noted, the Administration’s own “report card” on the war on terror omitted any mention of international law enforcement efforts.  We depend upon other nations to freeze accounts and seize assets where terrorist-related activities are discovered.  But nations whose cooperation is critical to freezing accounts, like Switzerland, have complained of our government’s unwillingness to share information.

I was pleased to honor Senator Specter’s request to convene this hearing and look forward to the testimony of the witnesses he has selected to appear today.

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