Dm B8 Team 4 Fdr- Workplan Team 4- Funding Of Terrorist Activities- W Notes 470

National Commission on the Terrorist Attacks upon the United States Team #4 Funding of Terrorist Activities

Team members: John Roth Douglas Greenburg Serena Wille Workplan: Premise statement, key questions, suggested readings, categories of documents, and interviews

Premise statement The effort to deny funding to terrorists cuts across a broad spectrum of public and private actors: the intelligence community, law enforcement, the diplomatic and foreign policy sector, financial regulators, banks, and a broad range of non-bank financial industries not previously regulated in this area. The current strategy attempts to stop funding on two levels: a "systems" approach, using mechanisms such as lists of terrorist organizations to freeze assets and controls on financial institutions to more tightly control the movement of money, and atactical approach, by disrupting individuals and institutions known to fund terrorists or move their money. We must initially examine the validity of the premise that "money is the lifeblood of terrorists," given the small amounts of money necessary (the oft-quoted figure of $500,000 for the 9/11 attacks, for example, or the fact that convicted Millennium bomber Ahmed Ressam financed himself through petty crime) to inflict significant harm. As part of the premise, our team will examine the known methods of financial support for terrorist operations (state or quasi-state sponsorship, general fundraising, diversion of funds from legitimate charities, petty crime, conflict diamonds, drug trafficking) and the methods for moving and disguising such funds (banks and other financial institutions, bulk cash or precious metal smuggling, and informal value transfer mechanisms) to determine if these methods are or were being used, and to what extent, by terrorist organizations. We can also explore the collateral benefits of the focus on terrorist financing. We will then identify the pre-9/11 efforts to impede terrorist financing and assess ,. -TTtheir effectivenessjin disrupting the ability of known terrorist groups to receive m o n e y ^ _ _ — ^ We will examine some of the failures alleged by the Joint Intelligence Committee^and others: a lack of appreciation of the threat, unclear roles among the institutions involved, a failure to share information, and a lack of an overall strategy with regard to terrorist financing. Through aggressive investigation of the pre-9/11 efforts, we expect to draw our own conclusions about the effectiveness and the impact, or lack thereof, of government and private programs. We plan to review the data concerning the actual financing of the 9/11 attacks, to determine how the attacks were funded, including the source of the funds, the method by which the funds were transmitted to the hijackers, and the extent to which the 9/11 hijackers used the U.S. financial system to support their operation. As part of this analysis, we will focus on how the financing of the 9/11 operation went undetected. In particular, we will learn whether mistakes were made in carrying out the then-existing policies and procedures or whether the then-existing approach was simply not designed to detect the relatively small transactions that apparently funded the 9/11 attacks. Since the 9/11 attacks, the U.S. government has devoted substantial resources on many different fronts to disrupting and curtailing terrorist financing. We will identify current U.S. strategy and assess its utility and effectiveness. As part of this effort, we will determine whether any identified institutional defects have been remedied. Given the

large number of governmental agencies and organizations involved in combating terrorist financing, our team will focus on the extent of the coordination and information sharing between and among the various actors. We will pursue this at both the policy level, where the policies and strategy are set, as well as on the operational level, where the policies and strategies are executed. We will also examine, to the extent possible, the response of terrorist organizations to government efforts, and whether we have the capacity to timely anticipate those responses and change our strategy accordingly. Finally, we will make specific, actionable recommendations as needed.

List of key questions 1) Is the premise that "money is the life blood of terrorism" valid? a) Given the demonstrated ability of terrorists to use tiny amounts of money to create significant attacks, can efforts to starve terrorists of funding be effective? b) How are funds used by terrorists generated, and how do they move? How is the worldwide terrorist infrastructure funded? How are terrorist cells within the US funded? Do different groups use different methods? Do other criminal groups obtain and move funds in the same manner? c) Will reducing funding to international terrorist organizations disrupt the efforts of U.S.-based terrorists? d) Are there collateral benefits to this effort, such as identifying and tracking members of terrorist and other organized crime groups? 2) Prior to 9/11, what did the U.S. do to identify and stop money going to terrorist groups? a) Within the US government? i) Intelligence (1) What was the role of the intelligence community in gathering intelligence^ about the flow of funds to terrorist organizations? (crosscut with (much of this may have been explored in thejpintyirftefirgeaee-report) (2) Did the intelligence community collect useful intelligence in this area? How was that information used? Could have it been put to better use? (3) What was the intelligence community proposal for covert action against bin Laden financial accounts? Why was the proposal not approved? ii) Executive/Administrative (1) What was the role of Treasury, particularly OFAC, in blocking and seizing assets associated with terrorist groups generally? Was it effective? (2) What role did the State Department play in designating Foreign Terrorist Organizations (FTOs)? Was it effective^ (3) When were al-Qaida and^the Taliban designatedjLJWhat efforts were made in finding and freezing assefrafterthe^esignation? Were they effective? How could this be measured? Could anything else have been done? (4) Congress appropriated money for the development of the foreign terrorist asset tracking center (FTAT) for FY 2000, to be placed in Treasury, but the Center was not operational until after 9/11. What were the circumstances surrounding that delay? What was the impact of that delay? Why did Treasury oppose the White House efforts to fund this center? " What does the move of the FT AT to the CIA after 9/11 tell us about issues related to the FT AT before 9/11?

(5) What was the level of support from the intelligence and law enforcement communities in gathering evidence to support both the OFAC and FTO designations?

Law Enforcement (1) What was law enforcement's role in investigating and prosecuting the financing of terrorist operations domestically? How effective was it? (Partial crosscut with team 6) (2) The terrorist fundraising statutes, 18 USC 2339A and 2339B, had never ~\n used until after 9/11 generally into terrorist funding? If there had not been an effort, why not? (a) The FBI knew of the Holy Land Foundation's links to Hamas as early as 1993. Why no law enforcement or blocking action taken against it / until 2001? (3) The Financial Crimes Enforcement Network ("FinCEN") is the government's center for analysis and distribution of financial crimes information. What was the level of effort prior to 9/11? In 1999, there were specific law enforcement requests to FinCEN, asking for assistance from its hawala expert. Those requests were not acted upon. Why? (4) Besides the FBI, did other law enforcement agencies (either federal of state) investigate terrorist financing? Was there any confusion as to the roles of the various law enforcement agencies? What was the general level of coordination among agencies? iv) Regulatory (md Private^ (1) What regulatoiycontrols were in place to prevent the U.S. financial system from being used by terrorists to move money? Were they effective? (a) There were specific legislative proposals to assist in curbing the unregulated movement of money, and also to assist in getting foreign banks to open their books to legitimate law enforcement requests. Why were these proposals not acted on until after 9/11? (2) Had there been any efforts to improve the controls? Specifically, Congress had directed FinCEN in 1994 to regulate the money transmitter business, yet the regulations doing so were not put into place until after 9/11. Why? (3) Could the controls have detected the money movements of the 9/11 hijackers? (4) Regulation aside, was the private sector doing anything? v) Overall Government Strategy And Coordination (1) Was there an overall U.S. interagency strategy for combating the financial support given to terrorist organizations? (2) How effective was that coordination? What was the level of cooperation among government agencies in this area? Between government and the

private sector? If there were shortcomings in this area, what were the causes? ^-———V~^) (3) Presidential Decision Directive 42 (1995) ordered ^ither agenGiesio increase and integrate efforts against terrorist financing and money laundering. What efforts did the directed agencies make in complying with this FDD? (4) After the East Africa bombings in 1998, a new interagency team was created under the auspices of the NSC to look at terrorist financing. What did this group do? The National Commission on Terrprism-reieased a report in 1999, making specific recormiielidmrorisTrrtEe area of terrorist financing. Who was responsible for assessing and implementing these recommendations? Were they implemented? If not, why not? (6) To what extent did any identified failures of coordination contribute to the failure to detect the 9/11 hijackers or other Al-Qaeda activity?

b) Worldwide? i) What were the U.S. government's diplomatic efforts to ensure that-other countries would assist us in the tracking, seizing and freezing,rferrorist assets? ii) Were there any particular countries whose lack of effort, or ability, impeded the U.S. government's efforts to disrupt terrorist financing? What efforts did the U.S. government make, if any, to improve the effort or ability of any such countries? iii) Specifically, what efforts did the US government make in persuading Saudi Arabia to cut off funding to the Taliban and Al Qaeda? What were the results? iv) What was the level of law enforcement cooperation between countries? v) How effective were these efforts? 3) How were the 9/11 attacks funded? (in conjunction with team 1A) a) What was the source of funds of the 9/11 hijackers, and how did those funds get to the hijackers? How much did the operation actually cost? b) To what extent was the U.S. financial system used by the hijackers? c) Why did the financing of the 9/11 operation go undetected? Was it a specific failure of an individual or group, or was the failure more systemic? d) What do the methods of the 9/11 terrorists tell us about current government efforts? 4) What are our current efforts, and are we on the right track? a) Intelligence (with team #2) i) What is the current role of the intelligence community in gathering intelligence about the flow of funds to terrorist organizations?

ii) Is information useful? Is it being put to good use? iii) Is the Foreign Terrorist Asset Tracking Group operational? What does it do? Is it effective? b) Executive and administrative i) Domestically: (1) What have we blocked and why? Is blocking being used in appropriate circumstances? What has been the net effect of the blocking? (2) Who have we designated and why? What has been the net effect of the blocking? ii) Worldwide: What has been the level of cooperation with US generated lists? What are the perceived flaws, if any, in the current approach (crosscut with Team #3)? iii) Have there been any before and after assessment of money flows that occurred as a result of blocking? What do we think terrorists groups have done in reaction to blocking? c) Law Enforcement i) Prosecution of charities and other groups. Who have we prosecuted? What do the investigations reveal about the nature of terrorist financing? How effective has the use of the terrorist fundraising statutes been? Has FinCEN helped? ii) What is the level of cooperation with intelligence community? What has been the effect of greater information sharing powers contained within the USA Patriot Act? (crosscut with team 6) iii) What is the level of cooperation within and among law enforcement agencies? Are they coordinating efforts? Are there any institutional barriers? What can be improved? . v d) Regulatory and Private

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i) US A PATRIOT Act: What does it do? Is it effective? What are the burdens on the financial services industry? Are they too much? Should there be more? Are there privacy issues? Can it be made better? Will the new regulations of non-bank financial institutions catch methods used by terrorists? Who is to regulate non-bank financial institutions in this area? Do they have sufficient resources? ii) Is BS A data on terrorist finance being used by law enforcement? How? Does it result in assisting cases and investigations? Does it contribute to our understanding of terrorist financing investigations? If not, why not? iii) What have we learned about what the financial transactions of a U.S.-based terrorist cell looks like? Are we able to get any predictive data on terrorist financing? iv) How do we get information, either concerning general trends or specific individuals, to financial institutions? How effective is it?

v) Is there a way to regulate charities to prevent abuse? What do other countries do? e) Diplomatic i) How well are other countries cooperating with U.S. regulatory, intelligence and law enforcement authorities in the area of terrorist financing? (1) What has the U.S. requested other countries to do? How has the U.S. tried to influence enforcement in other countries? (2) Who are key allies that need to improve enforcement? Who are non-allies that need to improve enforcement? (3) Does the U.S. see the problem the same way as the international community? If not, what is the disconnect? ii) Do other countries have the technical capacity to regulate and monitor for transactions relating to terrorism? What can be done about that? iii) Are there international organizations that address this problem? How effective are they? f)

Overall government strategy and coordination. i) Do we have a government-wide strategy on terrorist financing? How is this enforced within the interagency community? ii) What is the current mechanism for coordinating and ensuring cooperation? Do gaps (still) exist? Is information being shared? Is there something else that needs to be done? iii) How effective are the current efforts to disrupt terrorist financing in preventing another 9/11 or making another 9/11 substantially more difficult to accomplish? (1) If we conclude is that it is impossible to prevent even low-tech, inexpensive attacks, (like 9/11 or the Ressam attempt), are there are other benefits that make our efforts worth doing?

Briefing plan for commissioners David Aufhauser, Treasury General Counsel Dennis Lormel, Chief of FBI Terrorist Financing Operations Lee Wolosky, Council on Foreign Relations Task Force

Reading list Council on Foreign Relations, Terrorist Financing, 2002 [Relvance: Most complete discussion of the issue to date. Staffed and written by leading experts in the field. Makes specific policy recommendations worth considering.] Financial Crimes Enforcement Network, SAR Report no. 4 [Relevance: U.S. Government's first efforts at identifying a typology for domestic financial transactions relating to terrorism. Open to question how useful such a typology is, given the innocuous nature of terrorist-related financial transactions.] Financial Action Task Force, Special Recommendations on Terrorist Financing, October 31, 2001. [Relevance: Best efforts to date on international cooperation and standards setting.] National Commission on Terrorism, Final Report, pages 26 to 29. [Relevance: Discussion of the issue and recommendations to stop non-state financial support of terrorism worthy of consideration. Failure to implement recommendations also worth discussion.] Civil Complaint in Burnett v. Al Bakara Investment and Development Corporation, pages 221 to 378 . Lawsuit by victims families against individuals and financial institutions in the Middle East. While the ultimate merits of the lawsuit are subject to debate, the excerpted pages give a good description of the charities, banks and individuals alleged to assist bin Laden and Al-Qaida. Indictment, United States v. Zacarias Moussaoui [Relevance: good illustration of the use of a financial investigation to determine the scope and nature of the conspiracy.]

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categories of documents 1) Select OFAC decision-packages - Treasury a) Al-Qaida and bin Laden (8/22/1998) b) Taliban (7/4/1999) c) Al-Barakaat (11/7/2001) d) Holy Land Foundation (Hamas) (12/4/2001) e) Al-Hamati Sweets Bakeries, Al-Shifa' Honey Press For Industry and Commerce,' et al., (the honey companies) (10/12/2001) f) Afghan Support Committee and Revival of Islamic Heritage Society (1/9/2002) g) Al-Harimain Islamic Fountation (3/11/2002) 2) Policy Coordination Committee (PCC) for terrorist finance ~ fc 3) NSC documents relating to terrorist financing, particularly Presidential Decision Directives 39 (counter terrorism coordination), 42 (international organized crime) and 63 (critical infrastructure protection), and documents relating to the implementation of those directives. 4) Agenda, minutes and notes of meetings of Counterterrorism Strategy Group, pre 9/11. —fty 5) Lists and summaries of FBI terrorist financing investigations, both tf*-pre and post 9/11. \~z-

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6) Lists and summaries of Operation Green Quest or other Customs/IRS/Secret Service investigations into terrorist financingfpre and post 9 / 1 L H V

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r^pre and post 9/11\s FinCEN BSA data and other information, including Activity Reports and analytical products resulting froln this analysisrIncludes 1998 report on hawala prepared by Patrick lost.

8) CTC, UBL Task Force materials as it related to terrorist finance (overlap with Team #2) 9) Cables to/from State Department to US embassies concerning cooperation on terrorist financing intelligence gather ob law enforcement. 10) U.S. Customs Service Office of Strategic Trade and Intelligence report, October 2001 (re: honey shipments) 11) Financial analysis of 9/11 attacks, created by FBI's Terrorist Financial Review Group (later renamed Terrorist Financing Operations Section) 12) Other documents as suggested by the/joint committee^ report

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Persons to interview (this list is evolving) Informal (background) <^>
NSC: Jodv Mvers

Richard E. Clarke Customs:

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{Director, Operation Green Quest, US Customs Director, US (JUsto jstoms Service Office of Strategic Trade and Intelligence

FBI: i I Dennis Lormel, Terrorist Finance Operations Section

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Treasury: i I Kenneth Dam, former; Deputy Secretary David Aufhausej-, Geheral Counsel Jimmy Gurule' former Undersecretary for Enforcement Undersecretary^Assistant Secretaries for Enforcement, Treasury 1995-2000 Juan Zarate.d^AAS^for terrorism

IOFAC

Richard Newcorrib. OFAC JRnCEN I

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IRS: \ I ! I Steven Millar, Director, Exempt Organizations, Tax Exempt/Government Entities Division, IRS U i i Martha Sullivafli Director, Compliance, Small and Medium Sized Businesses, IRS (MSBs) \' '

State: Unit head, Office of the Coordinator for Counterterrorism, Counterterrorism Finance and Designation Unit Justice:

Michael Chertoff, AAG Alice Fischer, DAAG

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9/11

Law Enforcement Privacy

Bruce Swartz, DAAG Jim Reynolds, former Chief TVCS Baj^Sabin, Chief TVCS Jeff Breinholt, CT section, Justice Gordon Kromberg, AUSA, EDVA Private Industry: Rick Small, Director for Global Anti-Money Laundering, Citigroup Director of compliance, SunTrust Experts in money laundering/terrorist finance/OFAC compliance issue as it relates to US financial institutions

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