by president clinton and confirmed by the senate as the assistant secretary of commerce for export administration. previously, she served on the professional staff of the house of representatives committee on foreign affairs. in addition, she's worked with business groups and served on numerous working groups and committees addressing security and technology issues. i'm very grateful for this panel. you bring in expertise on an issue which i think is dramatically underappreciated by most americans, and few realize the importance of this as we conduct investigations and do our best to protect not just this nation but western interests from around the world from terrorist activity and threats. a critical element is the ability to understand how they're funded, how they're supported, how they operate. we've seen a remarkably changing capacity for them to do it. you've been there at the front end of this. we really need your insights to understand how things have evolved and what we ought to be

looking for to continue to do the best job we can to be on top of the ability to control their ability to carry out acts of terrorism against us. so at this point, i appreciate your being here. we are going to be called again to votes at 11:50, but we want to get the benefit of your testimony and we're going to do as much as we can to probe on questions as soon as we complete that. so i'll ask you to do your best to focus on the essence of your testimony and see if we can stay within the five-minute period. so the chair now recognizes dr. chanzer to testify. >> chairman meehan, ranking member higgins and members of subcommittee, on behalf of the foundation of defense for democracies thanks for the opportunity to testify. i base my testimony as an experience at the office of stelgs and analysis where i worked from 2004 to 2007 and was directly involved in designating several terrorist financiers. after the september 11th attacks the u.s. treasury immediately

went to work on uncovering terrorist funds. september 23rd, president george w. bush issued an executive order designating terrorist entities that threaten america. that list quickly grew and became a powerful tool for capturing terrorist money. the 9/11 commission report, at least in 2004, gave treasury high marks for its efforts but in denying terrorists the use of the formal banking sector, we have driven terror finance underground and we are now victims of our own success. they've adapted by hatching cheaper plots. it costs al qaeda, the arabian peninsula, just $442 to place two bombs on cargo planes in october 2010. the group bragged openly of this, jound scoring it is nearly impossible now to stop such low-cost operations. other terrorist groups rely heavily on bulk cash smug tolg evade detection with couriers delivering suitcases full of cash to terrorist master minds. others engage in trade-based money laundering where they invest in legitimate businesses.

broadly speaking, terrorist financiers are increasingly shifting to criminal activity. earlier this year, u.s. authorities found a vast network of money laundering, cocaine deals and more, exposing 30 u.s.-based car dealerships that helped move cash. senator dianne feinstein noted how the taliban relies on profits from the heroin trade to finance its operations. if this trend continue, it's reasonable to assume that criminal investigations will play an increasingly prominent role in u.s. efforts to counterterror finance. for its part, treasury must continue to issue designations even if fewer of them lead to actually capturing cash. the naming and shaming of terrorist financiers lets them know they're being watched and that helps us stem the flow of cash that can finance a tax on the home land or against allies abroad. designations can expose key nodes of terrorist groups that has been critical in exposing al qaeda's relationship with iran. in july of 2011, treasury dez nated al qaeda leader al sourry

and five other who is moved money and recruits to pakistan, the gulf, and iraq. treasury declared the network operates as part of a secret deal between al qaeda and the iranian government. in january 2009, treasury designated four other al qaeda operatives in iran. all of them including osama bin laden's son served on al kooid's executive counsel. of course none of this comes as surprise. the 9/11 commission in 2004 expressed concern over the iran/al qaeda operational relationship noting that it requires, quote, further investigation by the u.s. government, end quote. treasury is doing just that, and it shares its findings through the designation process. remarkably, treasury's robust counterterrorism program is the only one of its kind in the world. none of america's allies come close to our investment in human and financial resources to combat terror finance. this can be blamed on a combination of tight budgets and a lack of political will. though the international financial action task force recently beefed up its standards, it's insufficient.

it allows members to mutually evaluate, overwhelms according to recommendations and enables states like saudi arabia and kata to give themselves high marks regardless of the realities. the system is full of holes and terrorists predictably gravitate to the areas of weakest authority. looking ahead, treasury's policy shop, tffc, needs to prompt allies and adversaries to do more to combat terror finance. for the short term, the most glaring challenge is the threat of a nuclear iran. treasury has had a real impact. tehran faces tougher sanctions than ever before and the regime is cash strapped. though tehran continues to push forward with its nuclear program, the regime reportedly finds it increasingly difficult to bankroll terrorist proxy, hamas and hezbollah, to the extent it had in the past. admittedly, we may not be past the point where we can prevent a nuclear iran, but treasury's efforts have been instructive and demonstrate if properly

applied, it can truly diminish the opportunity to sponsor terror. there are many other things i did not have time to address today. i'm happy to answer your questions. on behalf of the foundation for defense of democracies, thanks for invite megatoday. >> thank you, doctor. grateful for your testimony. the chair now recognizes mr. cassara to testify. >> chairman meehan, ranking member hig gings, and members of the subcommittee, thank you for the opportunity to testify today. it is an honor for me to be here. while there are no simple solutions to all the challenges identified by the subcommittee, i believe there are three realistic and cost-effective steps we should take. mr. chairman, i believe you used to the term recalibrate tactics. i think that's a very, very good way of putting it. i have broadly categorized my proposed recalibrations, if you

will, as transparency, technology, and draining a swamp. the three are intertwined and complementary. i elaborate upon them in my written statement. because of time constraint, i will just briefly summarize them. let's begin with transparency. shortly after the september 11th trax, i had a very interesting conversation with a pakistani businessman involved in the gray markets and the underworld of crime. he told me something i'll never forget. he said, mr. john, don't you understand that criminals and terrorists are moving money and transferring value right under your noses? but the west doesn't see it. your enemies are laughing at you. his words infuriated me because i knew he was right. i worked overseas for years with frequent travels to the arabian peninsula, africa, south asia. i became intrigued with the opaque indigenous but very effective ways of transferring money and value, so different from our own. for example, the pakistani

businessman was referring to various forms of what we loosely call trade-based money laundering. it involves the transfer of valley ya commodities and trade goods. in addition to simple but effective customs fraud, trade-based value transfer is often used to provide countervaluation or a way of balancing the books in many global underground financial systems, including some that are used to finance terror. without going into detail, some of these trade-based value schemes are found in networks. most other regional forms of alternative remittance systems, the afghan transit trade, suspect international, lebanese, hezbollah networks, trading syndicate, and nonbank lawless regimes in the horn of africa. now, in theory, spotting anomalies in trade data and overlapping these anomalies with financial data, transportation data, travel data would allow us

to kind of peer into these underground networks by going in through the back door. when a buyer and seller are working together, the price of a good or a service can be whatever they want it to be. there is no invoice police. now, this is a very simple example. this pen, it's a nice pen. let's say it costs roughly $50. buyer and seller via say false invoicing could overvalue this to say it's worth $100. similarly, they could undervalue to show us it's worth, say, $10 or even $1. now, why is this important? well, to move money out of a country, participants import goods at overvalued prices or export goods at undervalued prices. to move money into a country, participants import goods at undervalued prices or export goods at overvalued prices. and for the most part, all this

avoids countries' financial transparency reporting requirements. we are not picking this up. this vulnerable is what osama bin laden himself once called cracks in the western financial system. i once had a conversation with an iranian freight forwarder in dubai, and i was talking about this type of money laundering, trade manipulation, over and under invoicing. he says to me, mr. john, money laundering, but that's what we do. precisely. it's the way of life out there. it's the way they do business. now, in order to help combat this type of trade-based money laundering, i.c.e. established the world's first trade transparency union, or ttu. there are approximately eight additional ttus the in the western hemisphere and more planned. congress can help promote transparency by ensuring the u.s. ttu has sufficient

resources to systematically examine trade fraud in the united states for reasons of both national security and to enhance our revenue. our ttu should further be encouraged to expand the ttu network overseas, particularly in areas where our adversaries operate, and we should also promote trade transparency overseas by building it into the u.s. trade agenda. let me briefly switch now and talk about technology. over the last few years, there have been tremendous advances in the amount of data collected and available for analysis. just a few examples include financial, trade, and transport data. communications and social networking are growing exponentially. industry calls these record sets of information big data. concurrently, there have been major advances in data warehousing, data mining, and advanced analytics. i'm not a technical person. however, i'm excited about some of the new tools and resources that have been recently developed to exploit big data and help the modern criminal

investigator. yet those tools are not in our investigators' hands. not at the federal, state, or local level. and i'm convinced the only way we're going to reelistally stay abreast of some of these challenges that we face and financial crimes and terror finance is to use technology as a force multiplier. now, if we're talking about financial data, we have to talk about treasuries, financial crimes enforcement network, f finsen. finsen is the gatekeeper and should be the u.s. government's premier financial crimes resource. however, as i documented in my first book, "hide-and-seek: intelligence enforcement," finsen has never lived up to its early promise and potential. the expertise and managerial will simply do not exist to fully exploit the data -- >> sir, we're going to get

called, all worth developing in our follow-up questions. let me ask if i can -- is there a quick point you want to make in summary? >> no. i refer the committee to my statement and -- my statement elaborate ts on these points. >> anybody who is watching these hearings should appreciate the tremendous amount of work that went into the written testimony, which is far more expansive and i think lays out for those who are studying this issue. mr. lumell, let me turn to you for your five minutes before we -- and then ms. eckert. thank you. you may want to push your button. >> sorry. i appreciate the fact you're having this hearing, and i admire your desire to continue this. it's very heartening to see that the committee wants to address this topic. it's very important. i was in a unique position on

9/11. i was in position of leadership in the fbi where i got to follow the money. and i saw first hand in the three years that i was there how well we used proactive techniques. one of the things that you're interested in are investigative techniques and tactics. how we succeed is being proactive. how we succeed is to look at financial information and how we can take financial intelligence and use it from a strategic, tactical, and historic standpoint and use that in furtherance of investigative initiatives. we did it then. the government is doing it today. and they do it pretty well. but we can do things better than what we do, and i hope that the committee can come away with that sense in going back and looking and assessing the government on some of these issues. in any event, let me start with the government and the private sector in terms of perspectives. and perspective is very important, and the government

and private sector have some good partnerships, but we can partner better. and one of the things we have to look at is the bank secrecy act and the importance of bank secrecy information and how we can use that in furtherance of investigative developments and initiatives. and quite frankly, when you look at the bank secrecy act, you're looking at identifying suspicious activity in terms of who, what, when, where, how. when it comes to the private sector, they're interested in the how. the government is interested in the why. so we have to blend those two and bring them together bert than we do. terrorists -- and you said it in your statement, mr. higgins said it, and i've heard it here with the other panelists of how challenged we are in terms of moneys being used differently and smaller denominations of moneys being used. and so the government is more challenged in terms of identifying terrorist financing. and that goes to the fact, again, going back to the

financial sector, it's possible to identify terrorist financing, but it's not probable. and the lesser amounts that are used, the more challenging it gets and it plays then to the importance of the partnerships between the public and private sector, and, again, bringing the why and how together to be able to accomplish things. i testified on october 3rd, 2001, and i was asked specifically to testify about what the biggest vulnerabilities in the financial sector were. and i said the biggest v vulnerabilities were wire transfers, correspondent banking and money services. today i look at this differently and i say the problems we have are basically twofold. you have criminal problems, crime problems, and you've got problems in terms of facilitation tools. and the crime problems are fraud and money laundering. and money laundering in the greater context of all types of

activities that require money being laundered back through the financial industry. the facilitation tools would be things like wire tfrs, correspondent banking, money service businesses. and -- i'm sorry. not money service businesses, illegal money remitters. the iranian sanctions, for instance, you look at wire transfers, correspondent banking, shell companies, those are things that they take advantage of. money remitters to me is the biggest problem we have in the financial sector. the banks don't recognize who their clients are or customers are that have illegal money remittance operations. and then electronic mechanisms. that's the wave of the future. we have tremendous capabilities. we're getting away from cash. the more we get away from cash and the more like cash these mechanisms become, the more vulnerable we are to money laundering. i think if you look at africa as a flashpoint, that's a good case in point of how terrorists are using these mechanisms to be

able to launlder money. i think there are some very good partnerships again. and one in particular is jpmorgan chase and the department of homeland security investigations. they've partnered to strategically collect information and to -- through targeted transaction monitoring have really done a tremendous job in dealing with human smuggling. we can do the same thing in terrorist finance, but it takes a more concerted effort. so those are things that we need to look at. and in my written statement, i put some recommendations, chairman, about certain things that we need to do. >> let me say one thing. unfortunately, there's six minutes left in the vote that i must go vote on right now. and i am struggling with how best to do this. i think they're going to give me a minute to sprint. so what i'm going to do is ask

ms. eckert to do her testimony, and then i'm going to have to reconvene with the rest of the committee. let me go to ms. eckert's testimony, and then i'll you a closing comment and we'll try to work from there. i want to make sure you get your opportunity to hit the essence, ms. eckert. the chair now recognizes ms. eckert. >> mr. chairman, thank you very much for the opportunity to be here. i want to commend you and the committee for focusing on this vitally important issue. i don't think enough attention has been paid to it. ten years with experience in countering the financing of terrorism i think is a very opportune time to focus on it. i have a number of recommendations. i'm not going to review what's been done with regard to al qaeda. there are specific initiatives that i am part of that we're looking at the effectiveness of sanctions, for example, against iran and north korea, other sponsors of terrorism. my comments in the testimony and today are primarily focused on

al qaeda. i won't focus right now in terms of some of the unintended consequences of this -- of the regime countering the financing of terrorism. but i think it's important to o because they have the potential to weaken what is critically important initiative both globally and nationally. so what i would do is just very briefly offer a couple of points that i think that we need to take account of as we look at strengthening the cft measures. first is, i think, it's important to understand that we need enhanced information analysis. there's still a great deal we don't know. new electronic payment methods, digital methods that some of my colleagues have been talking about. very important to focus on. we need the understand differences in terms of not only the terrorist organizations but how they move, raise, and store funds. we need to develop metrics.

in the past the only metrics we've had is the number of designations and the amount frozen. those are clearly inadequate to -- and they can be misleading. we haven't seen a steady progress with regard to that. but that doesn't mean that our terrorist financing initiatives are not working. finally, i think for information we need to analyze the information that we have and evaluate it. the private sector provides ample amount of information, but it goes into a process as one of my colleagues has said, and it's not really utilized and not really analyzed except when it gets to the law enforcement side. so i think there's an awful lot that can be done within the current system to be able to discern patterns that could assist financial institutions in identifying terrorist financing. second major area is collaboration and information sharing with the private sector. the central role in this is the private sector. governments don't freeze assets

if private sector do. there are a number of ways. we've all talked about the need for greater collaboration but i think the partnerships so far has been pretty much one-way flow of information. i think there's more that can be done. security clearances for certain individuals in financial institutions, the british have done it to great effect. and that what we need to do is to understand that initiatives to enhance information will make our law enforcement intelligence efforts smarter and more effective. inadequate capacity in other countries, we cannot do this alone. the u.n. has played very important role, a number of the fatf, have played important roles in establishing this global regime. but more needs to be done to provide assistance to other countries to be able to put in place the necessary legal administrative and enforcement mechanisms to carry out the

prohibition in the financing of terrorism. further, i think that it's time ten years later really for a critical assessment of effectiveness. and in this regard, there has been a lot focused on some of the positive things but not necessarily the cost or limitations of the current approach and whether or not we're focusing on where the challenges are going and how the terrorists are raising monies now. it's still focused primarily on the formal financial sector. i think that we really need to take a good hard look at what we're doing now and, as you said, i had to strike in my testimony the number of times i said recalibrate. so i'm pleased that we're thinking in the same -- in the same vein. but in short, there has been an impressive global effort to regulate trans border movement of funds through the formal sector financial institutions. but al qaeda and other groups have adapted and they continue to have access to funds.

in order to be affective we have to reassess and recalibrate policies and create a genuine partnership with the private sector. thank you, sir. >> thank you, each, for your testimony. as i am very frustrated that we are competing with what was a very dynamic schedule over in the house, i am going to at this point in time recess the committee and i have to be candid in saying that it's not likely we're going to be able to collect the membership that i think this issue deserves. i'm hope that we will recess and look for an opportunity to reconvene at a point in time that will be convenient for you and us and i am hope that you will be able to pap participate. the issue that we are discussing is too important to rush through in this form. i think you've laid the groundwork in this testimony today that will allow us to have a jumping off point in any number of areas. the service that you each have

given to our country at the critical time as we began this process was vital to the protection of this nation. but it's continuing ability for us to adapt as our enemy has adapted that's going to allow us to protect this nation in the future. few people are talking about this. you understand it. we've got to communicate this and do it effectively. so i thank you. we will follow up at a later time, but at this point in time, without objection, the committee, subcommittee, is in recess subject to the call of the chair. the chair indicates that it will consult with the minority in order to provide members with adequate notice of when we will reconvene. thank you for your testimony. i look forward to following up with you at another forum in which we can develop these issues far more broadly. thank you.

wrapping up the house hearing on terrorist financing. they are going into recess subject to the call of the chair. so it appears they will not be back here today. the homeland security subcommittee on counter terrorism and intelligence this morning looking at efforts since 9/11 to cut off money to terrorist organizations. members going into this recess subject to call of the chair because the house has been conducting series of votes on amendments to the defense department appropriations bill.

you can watch those votes going on right now in the house. watch them on c-span. right now a discussion on the debate over the house transportation bill from this morning's "washington journal." >> congressman from west virginia is here this morning. we will close out the day with us. you're here to talk to us about the transportation highway bill, as it's called, this ch is set to expire soon. deadline approaching. part of it over the fact that the keystone excel pipeline has been included in the measure. where do things stand right now? >> just as a way of quick background, it's been 2 1/2 years since we passed a long-term robust transportation bill. we've been limping along passing extension after extension. it's no way to address modern 21st century transportation

network in the great super power that we are. so you're right that we're on another extense right now. current funding will expire the 30th. it's vital we address this issue sooner rather than later. >> what are the dollars attached to it? >> $109 billion bill over two years. the house passed bill is current levels at a 90-day extension. the necessity of acting now is a t. fact that this is a time contracts are let, construction season here in the spring. it's vital that we not let a construction season go by without renewing service transportation bill or longer than 90-daytime period. it's vit that we let industry know, let our workers know, that they're going to have jobs this summer. the bureau labor of statistics, for example, have recently released figures that show thousands of jobs are being lost in the construction business because of the uncertainty,

limping along, as we are. 90 days at a time, 90 days at a time. and we're in our ninth extension now over this 2 1/2 year per idea that the last law expired. so we need to step up to the plate. we need to address this. we are in conference now. that's a good thing. the fact that the senate has passed a bipartisan bill, the house, as i said, has passed 90-day extension because of the failure to pass the republican plan of earlier this year. so it's vital that the joint house-senate conference committee, we are meeting and addressing at the current time a time is short. we only have 18 legislative days prior to the june 30th cut off date and it's vital we address this now. there are too many worker ace cross the country waiting for congress to act. we know that we're losing construction r construction and manufacturing jobs in this country although we're on the upswing now coed