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 a tactical 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
their effectiveness, in disrupting the ability of known terrorist groups to receive money.
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
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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 team#2)
(much of this may have been explored in the joint intelligence 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 designated? What efforts were made
in finding and freezing assets after the designation? 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?
9/11 Closed by Statute
 (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?

Hi) 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
been used until after 9/11. What was the level of investigative effort
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 and Private

(1) What regulatory controls 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?
(3) Presidential Decision Directive 42 (1995) ordered other agencies to
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?
(5) The National Commission on Terrorism released a report in 1999, making
specific recommendations in the 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 terrorist 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?

d) Regulatory and Private

i) USA 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 BSA 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.]
Essential 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)
^>4 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 — minutes and agendas -L^ , ,M ,.,__
for post 9/11 activities.

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.

5) Lists and summaries of FBI terrorist financing investigations, both pre and post 9/11.

6) Lists and summaries of Operation Green Quest or other Customs/IRS/Secret Service

investigations into terrorist financing pre and post 9/11.

7) FinCEN BSA data and other information, including pre and post 9/11 Suspicious
Activity Reports and analytical products resulting from this analysis. Includes 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 or law enforcement. L s/,er.*Ac/

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's report

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Persons to interview (this list is evolving)
Informal (background)

Kenneth Katzman, Congressional Research Service

Lee Wolosky
Jon Winer

NSC:
Jody Myers
William F. Wechsler
Richard E. Clarke

Customs:
Marcy Forman, Director, Operation Green Quest, US Customs
Director, US Customs Service Office of Strategic Trade and Intelligence

FBI:
Dennis Lormel, Terrorist Finance Operations Section

Treasury:
Kenneth Dam, former Deputy Secretary
David Aufhauser, General Counsel
Jimmy Gurule' former Undersecretary for Enforcement
Undersecretary/Assistant Secretaries for Enforcement, Treasury 1995-2000
Juan Zarate, DAAS for terrorism
Bob McBrien, OFAC
Richard Newcomb, OFAC
Jim Sloan, FinCEN
David Voght, FinCEN

IRS:
Steven Miller, Director, Exempt Organizations, Tax Exempt/Government Entities
Division, IRS
Martha Sullivan, 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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Bruce Swartz, DAAG
Jim Reynolds, former Chief TVCS
Bary 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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