Thank you, Chairman Sarbanes, for the invitation to testify this morning, and for holding this important hearing. The anti-money laundering provisions of the USA PATRIOT Act that were enacted last October were a model of bipartisan and bicameral cooperation. I salute you, Mr. Chairman, Senator Gramm, your colleagues on the Committee, and my fellow panelists for a job well done.
In the three months since we were together in the East Room of the White House to watch President Bush sign the USA PATRIOT Act into law, we have seen a number of successes in the financial war on terrorism. The Bush administration has pursued an aggressive strategy of blocking and freezing suspected terrorist funds, including closing down “hawalas” in cities across the country. The administration has also been active on the international front, working with Interpol and other governments to hammer out agreements and protocols that will facilitate greater cooperation on terrorist financing issues.
The Treasury Department and other financial regulators are off to an impressive start in writing the rules to implement the new law. As you know, Mr. Chairman, one of our primary goals in the PATRIOT Act was to extend the anti-money laundering regime to segments of the financial services industry that had not previously been fully enlisted in the effort. I was pleased that among the first regulations rolled out by the regulators were rules to apply Suspicious Activity Reporting requirements to securities broker-dealers and so-called money service businesses. By standardizing regulation and leveling the playing field among different industry groups, we also close possible loopholes that terrorists and other criminals are only too happy to exploit.
I also want to commend the administration for its announcement last week that the President’s 2003 budget will contain increased funding for the Financial Crimes Enforcement Network (FinCEN), which the PATRIOT Act elevated from agency to bureau status, and which has a critical role to play in supporting law enforcement efforts to track and seize terrorist assets.
The financial services industry has been asked to do a lot in the wake of 9/11, including responding to a blizzard of requests for information from law enforcement authorities and making significant (and costly) adjustments to internal operating procedures. The industry will be asked to do a lot more as regulatory implementation of the new anti-money laundering provisions gathers speed. This could be one of the financial services industry’s finest hours, as it rises to the challenge of shutting down the channels used by terrorists.
As proud as we are of our legislative achievement, none of us has any illusions that Title III of the USA PATRIOT Act is the last word, or that we can afford to rest on our laurels in the fight against terrorism. The one thing we can least afford is complacency.
This hearing is the first of what I’m sure will be many efforts in both the House and Senate to exercise rigorous oversight of regulatory implementation of the PATRIOT Act, to ensure that deadlines are met and congressional intent is followed. We need to know from Treasury what parts of the new law are working well, and what parts aren’t. As ongoing investigations proceed and additional intelligence is gathered in al Qaeda’s former haunts in Afghanistan and elsewhere, we will undoubtedly learn things about the methods that terrorists use to move money through the international financial system that could serve as the basis for future legislative efforts.
Previous investigations suggest that one of the techniques favored by terrorists in financing their operations is credit card fraud. This underscores the importance of the work that Senator Levin and others are doing to determine the potential money laundering vulnerabilities associated with credit cards, which we know are used extensively in Internet gambling and to transact business through unregulated offshore secrecy havens. At a minimum, credit card associations should be required to implement anti-money laundering programs, as mandated for all financial institutions in the PATRIOT Act.
Finally, I will be paying particular attention – as I know industry is – to regulatory implementation of the provision in the PATRIOT Act requiring financial institutions to verify the identity of those who attempt to open accounts with them. The provision imposes legal obligations not only on financial institutions to verify the identity of account-holders, but also on customers to supply institutions with accurate, truthful information.
Let me close by thanking you once again, Chairman Sarbanes, for allowing me to appear this
morning. I look forward to working with you and the other members of this committee as we
rededicate ourselves to the absolutely essential task of starving the terrorists of the funds needed to
commit their acts of evil.
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