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March 4, 2004

Money Laundering: Current Status of Our Efforts To Coordinate and Combat Money Laundering and Terrorist Financing


The Honorable Norm Coleman
Caucus on Interntational Narcotics Control


Good afternoon and welcome to today's hearing.

We are holding this hearing to address the nation's continuing efforts to combat money laundering and terrorist financing. Much has been said about the relationship between drug traffickers and terrorists. In Colombia, three groups of narco-guerrillas use funds earned through drug trafficking to intimidate civilian populations. In Afghanistan, opium production is on the rise, and there are indications that proceeds of the drug trade are financing Al Qaeda (AL-KAY-DUH) as we speak.

Of course, drug trafficking is not the only source of revenue for terrorist organizations many Islamic charities have raised money in ostensibly legal ways and diverted it to fund terror. More creative fundraising approaches include cigarette smuggling and trade in counterfeit goods.

Both terrorists and drug lords have in common the need to launder their money, to disguise its source and destination. That's why the U.S. needs an aggressive strategy to fight money laundering, and why this hearing, to examine the status of our efforts, is so important.

In the past six months, the General Accounting Office released three reports that identify shortcomings in our efforts to combat money laundering and terrorist financing. The first report addressed problems with the National Money Laundering Strategy including, overlapping and duplicative investigative efforts by the Departments of Justice, Treasury and federal regulatory officials; the strategy's lack of clearly defined leadership; a failure to use risk or threat assessments to set priorities; and the lack of evaluative mechanisms needed to judge performance.

The second report addresses the lack of available information on the potential use of informal value transfer systems, such as hawalas (HA-WALL-AS) to transfer terrorist or criminal funds out of the country; the misuse of charitable organizations to raise and transfer funds; and the potential use of commodities, such as diamonds, to transfer and store terrorist or criminal funds.

The third report addresses a Memorandum of Agreement between the Departments of Justice and Homeland Security signed in May 2003 that gives lead responsibility to the Federal Bureau of Investigation for terrorist financing investigations. While the report recognizes progress in implementing the provisions of the Agreement, it also cautions that challenges remain in maintaining interagency relationships, and in operational and organizational changes.

The Money Laundering and Financial Crimes Strategy Act of 1998 required the Departments of Justice and Treasury to develop a National Money Laundering Strategy. The provision of the National Strategy Act that required the development of a national money laundering strategy expired in December 2002. The Chairman, Senator Grassley, has introduced legislation that would extend the requirement for a National Money Laundering Strategy for another 3 years. In part, today's hearing will address the need for continuing the implementation of a national strategy.

By going after money laundering, we are able to put away criminals, both domestic and global. In my own state of Minnesota, methamphetamine is a worrisome and growing problem. I applaud the work being done on the meth crisis by Minnesota State Senator Julie Rosen, and others. Our headlines in Minnesota in the past year have included stories of major meth dealers convicted not just of drug offenses, but also of money laundering. The two crimes are intimately connected, and affect communities across the country.

I am also concerned about the growing reach of international drug trafficking organizations not only in our national parks and forests, but also in our neighborhoods. As Chairman of the Senate Foreign Relations Subcommittee on Western Hemisphere, Narcotics and Peace Corps Affairs, I hope to hold a joint hearing with the Senate Caucus on International Narcotics Control on this troubling trend.

The Bank Secrecy Act, the USA PATRIOT Act and the Money Laundering and Financial Crimes Strategy Act are all designed to identify, trace and provide for the confiscation or blocking of terrorists' money and assets. Strategies were developed in 1999, 2000, 2001, and 2002. The 2003 strategy was just released. According to GAO, the strategies developed between 1999 and 2002 had mixed results in achieving their desired goal. The strategy was useful in the first two years, but dissention between Justice and Treasury during the last two years compromised the strategy's purpose of promoting coordination and marshaling resources.

The Money Laundering and Financial Crimes Strategy Act also created High Intensity Money Laundering and Related Financial Crime Area task forces (HICFAs) to concentrate federal, state and local law enforcement efforts in high intensity money laundering zones. However, by May 2003, two of seven HICFA task forces had not begun operations.

Even without a National Money Laundering Strategy, the government has made progress in our war on terrorism. Al Qaeda (AL-KAY-DUH) no longer enjoys the protection of a sovereign nation. Saddam Hussein no longer dispenses terror in Iraq. We have frozen or blocked about $200 million in terrorist funds world-wide. We have publicly designated 351 individuals or organizations as terrorist-related. We have shut down charities and smuggling operations that were funneling money to terrorists. We are implementing regulations to require more thorough financial reporting by organizations and individuals who are conducting financial transactions that might be used as conduits for terrorists' or drug lords' money.

In spite of our successes, we must continue to address any problems that could compromise our efforts. The GAO reports highlight problems with federal agencies' efforts to address terrorist financing and money laundering, including investigative overlap and duplication.

The Memorandum of Agreement signed by the Attorney General and the Secretary of the Department of Homeland Security in May 2003 appears to be having the intended effect of reducing investigative overlap and duplication and of increasing coordination among and between federal agencies. However, the Memorandum of Agreement is but one aspect of a national money laundering strategy. For example, efforts to strengthen international cooperation require the involvement of the Departments of State, Treasury and a host of international organizations such as the Financial Advisory Task Force and the Egmont Group. The Federal Bureau of Investigation should not be expected to take the lead on fostering international cooperation on matters that are not directly related to the FBI's investigative mission. A plan such as the National Money Laundering Strategy may be necessary to effectively identify priorities and direct limited resources.

I do not need to convince our distinguished witnesses on the merits of a sound and viable strategy. Intuitively, a plan is a necessity if we are to effectively identify priorities and coordinate and direct our limited resources. If not an annual National Money Laundering Strategy as envisioned in the 1998 Act, then what do you propose? I look forward to your answers because this is not a war that we can afford to lose. Whether they be terrorists or drug dealers, they undermine our nation and our values and we must stop them.