FOUR YEARS LATER: ARE WE SAFER

SEPTEMBER 8, 2005

COUNTERTERRORISM BLOG – PANEL DISCUSSION

Dennis M. Lormel

At the time of the 9/11 attacks, I was an executive with the FBI. Immediately after the attacks, I assumed responsibility for implementing and directing the financial investigation and for establishing and directing the FBI's investigative entity to deal with terrorist financing on a permanent basis. In this capacity, I've had first hand experience in disrupting the flow of funds to terrorists and in preventing terrorist activities. My remarks and observations for purposes of this forum are focused toward terrorist financing but address the overall terrorist threat confronting us.

Concerning the question, “are we safer today then we were prior to 9/11?”, my response is…we are safer in certain respects but are a country at risk, at significant risk. We are safer in terms of the investigative and intelligence gathering capabilities of our investigative, intelligence and regulatory agencies. Since 9/11, there have been many disruptive and preventive successes. Alarmingly, a number of those successes have been here in the United States (U.S.). The latest success involved the arrests and indictments of four individuals in southern California. The four men, three of whom were U.S. citizens and one lawful resident from Pakistan, were planning terrorist strikes in southern California later this year. There have been numerous other similar successes attributable to the outstanding work of law enforcement and intelligence agencies. In each situation, the ability to share actionable information in a timely manner was an important key to success. Such information sharing was for the most part lacking prior to 9/11.

On another front, in the aftermath of Hurricane Katrina, the initial response of federal, state and local government has come under harsh criticism. This demonstrates a serious vulnerability. There must be a full and impartial assessment to ensure the adequacy of incident/consequence response and management. In any major crisis incident, there will be a period where chaos and confusion are maximized and organization and communication are minimized. This can lead to delayed or ineffective responsiveness. It is incumbent that those responsible for crisis response have plans in place, to include contingency planning, that overcome the chaos/confusion factor and minimize the organization/communication issues as expeditiously as possible. It is critically important that the lessons learned from this catastrophe be applied to future planning and response plans to better safeguard our society.

Lessons learned, especially concerning terrorist financing since 9/11, played a significant role in formulating investigative direction and methodologies. In this regard, vulnerabilities in terms of societal and systemic weaknesses were assessed. Terrorist and criminal elements are expert at identifying and exploiting systemic vulnerabilities. Investigative strategies were implemented to minimize such vulnerability exploitation. Also, the two most significant areas where terrorists and terrorist organizations are vulnerable or weak are communications and finance. These two areas consistently lead to the disruption and dismantling of terrorist groups and their activities.

Other lessons learned were the importance of developing and implementing time sensitive investigative techniques, particularly time sensitive financial investigative techniques; conducting proactive initiatives; and the sharing of criminal and intelligence information and analysis. The development of proactive, time sensitive investigative techniques enabled investigators to exploit the financial weakness of terrorists by conducting tactical investigations that enabled the near real time tracking of financial transactions. This is truly a powerful investigative technique which requires close coordination between law enforcement and the financial community.

Terrorist financing is a component of terrorism. In this context, investigative strategies concerning terrorist financing had to be formulated to support the overall counterterrorism mission. It is important to understand that terrorists and terrorist organizations will always have access to funding. It is virtually impossible to cut off funding sources to terrorist elements. However, disrupting, diminishing or preventing funding flows is possible. In fact, U.S. investigative, intelligence and regulatory agencies have achieved noteworthy successes in the disruption of funding flows. Unfortunately, most of these successes cannot be made public because of investigative or intelligence considerations.

Prior to 9/11, the FBI did not have a consistent mechanism for addressing terrorist financing. I cannot speak for other agencies but my sense is that terrorist financing did not receive considerable attention. Post 9/11, the U.S. government interagency community has vigorously pursued terrorist financing. Certain quarters have criticized at least segments of the U.S. government if not the entire U.S. government for freezing actions or other actions they considered to be ineffective or minimally effective. To put that in perspective, freezing was one tool or option available. Asset freezing should not be viewed as a stand alone action. Freezing, in conjunction with other actions to include arrests, indictments, prosecutions, renditions or other disruptive activities, present effective means to deter and disrupt terrorist funding flows.

Since 9/11, the effectiveness of terrorist financing strategies and methodologies should be measured as an incremental process. It takes time to establish credibility and experience, as well as impact oriented strategies and methodologies. In my opinion, U.S. government terrorist financing initiatives have consistently evolved, matured and become more effective incrementally.

Other criticisms against U.S. government efforts concerning terrorist financing have focused on the inability to trace funds from the point of origin to the ultimate point of destination. In this context, they view terrorist financing initiatives to be marginally successful at best. Investigative strategies, methodologies and techniques must be considered from a broader three dimensional perspective. There are strategic, tactical and historic applications for addressing terrorist financing. The above criticism only applies to the historic application. In totality, including the broader dimensions of strategic and tactical applications, terrorist financing initiatives have achieved more then adequate results.

Strategic financial information is intelligence oriented and used for trend analysis. This is an area that is emerging and whose law enforcement and intelligence functionality has not reached it's potential. Stuart Levey, Under Secretary Terrorism and Financial Intelligence, U.S. Department of the Treasury, is in the process of developing a strategic intelligence capability, collateral to his primary responsibility of cutting off the flow of support to international terrorist groups.

After we established the Terrorist Financing Operations Section (TFOS) at the FBI, the importance of strategic intelligence was a primary consideration. We established a Financial Intelligence Unit, to produce actionable financial intelligence. A component of this unit was the Proactive Exploits Group. This group has evolved into a new Unit, that has developed and implemented advanced technological and data mining capabilities. It's ability to access and analyze Bank Secrecy Act (BSA) information, in conjunction with FinCEN, and other data sources, has come to fruition and is generating significant intelligence information that is actionable intelligence and can be utilized to initiate new investigations or supplement ongoing investigations. The value of this intelligence cannot be understated.

FinCEN developed BSA Direct. The system, which is in the design and implementation phases, will assist investigators at identifying anomalies, trends and patterns. BSA Direct will assist in the process of connecting the dots and ferreting out money laundering and terrorist financing. It relies on data mining and analytical applications with improved access for law enforcement and regulators. It is anticipated that the BSA Direct initiative will be the cornerstone of FinCENs technology architectures.

The area that has generated the most significant level of success has been the tactical investigative application of financial information. In this context, financial information is used in a tactical operational capacity. For instance, during my tenure at the TFOS, FBI, we had a mechanism to track financial transactional information which assisted a foreign intelligence service in preventing six potential terrorist attacks in their country. The tracking and tracing of financial information is an incredibly powerful financial investigative tool. The tactical dimension is best suited to proactive investigative techniques.

The historic approach is the most challenging because it is reactive and relies on historic tracing of funds. As money is moved from point of origination to point of receipt, the ability to trace funds into the hands of terrorists becomes increasingly remote. This is especially true when attempting to trace funds through conduits such as charities and banks in at risk countries, such as Middle East countries, to groups including Al Qaeda Hamas and Hezbollah, who are adept at disguising the end beneficiary of funds. This is the area where well known terrorist facilitators have frustrated investigators and regulators by successfully shielding their connectivity to terrorist elements.

In returning to the question at hand, “are we safer today then we were before 9/11?”, the adaptability factor is a measure of how safe we actually are. Terrorists are extremely adept in adapting to changing dynamics. As systemic vulnerabilities and weaknesses are identified and diminished, terrorists look for other weaknesses to exploit. Likewise, as terrorist characteristics and red flags are identified, terrorists change characteristics and methodologies. The ability of government and the private sector to adapt to and accept change is a true indicator of how safe we are. In the last few years, investigative and intelligence agencies have undergone significant institutional changes. On the operational level, agencies and business institutions must continue to assess emerging trends and implement systemic changes as warranted. The adaptability factor is an ongoing process and is critically important to our safety.

In turning toward industry, the financial sector is on the front line in the war against terrorist financing. To their credit, the U.S. financial sector has performed a credible job in implementing policies and procedures in accordance with BSA requirements to deal with money laundering and terrorist financing. However, more specific and detailed terrorist financing training should be incorporated into the anti-money laundering (AML) training regimes. AML training is generally pretty comprehensive in dealing with money laundering identification and compliance. Terrorist financing differs substantially from money laundering. Terrorist financing training does not rise to the level of awareness that AML training does.

For its part, government needs to do a better job of outreach with the financial sector. There are a number of BSA compliance issues festering in terms of the benefits and burdens of BSA requirements. This is especially true in the area of suspicious activity reporting (SARs). Feedback and guidance from the government concerning BSA issues has been inconsistent. This is an area that FinCEN and the American Bankers Association have assumed visible leadership roles in addressing. SARs are critically important to the FBI and FinCEN initiatives discussed earlier.

An area in which the U.S. government has excelled is providing technical assistance to other countries in developing infrastructure and capacity to address AML and terrorist financing. The State Department, in conjunction with the Department of Justice, FBI, Treasury and IRS, has led this initiative. A number of training programs have been completed. These programs have reaped incredible goodwill and intangible benefits for the U.S. Regretably, budgetary and resource constraints have hindered program continuity in this area.