Investigations of Terrorist Financing, Money Laundering, and Other Financial Crimes
Gao ID: GAO-04-464R February 20, 2004After the tragic events of September 11, 2001, federal efforts to wage a seamless, coordinated campaign against sources of terrorist financing became critically important. In May 2003, the Attorney General and the Secretary of Homeland Security signed a Memorandum of Agreement (Agreement) concerning terrorist financing investigations, which contained a number of provisions designed to resolve jurisdictional issues and enhance interagency coordination. The Agreement and its related procedures specified that the Federal Bureau of Investigation (FBI) was to have the lead role in investigating terrorist financing and that the U.S. Immigration and Customs Enforcement (ICE), a component of the Department of Homeland Security, was to pursue terrorist financing solely through participation in FBI-led task forces, except as expressly approved by the FBI. Specific provisions of the Agreement directed the FBI and ICE to, among other things, develop collaborative procedures for handling applicable ICE investigations or financial crimes leads that have a nexus to terrorism. Another provision required that the FBI and ICE jointly report to the Attorney General, the Secretary of Homeland Security, and the Assistant to the President for Homeland Security on the status of the implementation of the Agreement 4 months from its effective date. Shortly after the Memorandum of Agreement was signed, Department of Homeland Security component agencies, the U.S. Secret Service and ICE, expressed concern that the Agreement could adversely affect their ability to conduct investigations involving financial crimes. Thus, Senate Report 108-86 (July 2003) directed that we evaluate the Agreement's impact on the existing authorities of the Secret Service and ICE to effectively carry out traditional financial crimes investigations. Our initial work showed that the Agreement pertains only to investigations and operations of the FBI and ICE and does not impact the investigative authority or operations of the Secret Service. Therefore, we are not discussing the Secret Service in this report. In accordance with the congressional mandate and as agreed with the offices of the Chairman and Ranking Minority Member of the Senate Committee on Appropriations, Homeland Security Subcommittee, this report addresses (1) what is the status of the implementation of the Memorandum of Agreement? (2) how has the Agreement affected the mission or role of ICE regarding investigations of financial crimes? and (3) What are the potential challenges to the successful implementation of the Agreement?
As of February 2004, the FBI and ICE had implemented or taken concrete steps to implement most of the key Memorandum of Agreement provisions. For example, the agencies had developed collaborative procedures to determine whether applicable ICE investigations or financial crimes leads may be related to terrorism or terrorist financing--and, if so, determine whether these investigations or leads should thereafter be pursued under the auspices of the FBI. The FBI and ICE have not yet issued a joint report on the status of the implementation, which was required 4 months from the effective date of the Agreement. By granting the FBI the lead role in investigating terrorist financing, the Agreement has altered ICE's role in investigating terrorism-related financial crimes. However, the Agreement generally has not affected the agency's mission or role in investigating other financial crimes. The FBI and ICE have and will continue to confront a number of operational and organizational challenges, such as establishing and maintaining effective interagency relationships and ensuring that the financial crimes expertise and other investigative competencies of both agencies are appropriately and effectively utilized. Continued progress in implementing the Agreement depends largely on the FBI's and ICE's ability to find workable strategies to overcome these challenges.
GAO-04-464R, Investigations of Terrorist Financing, Money Laundering, and Other Financial Crimes
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February 20, 2004:
The Honorable Thad Cochran:
Chairman:
The Honorable Robert C. Byrd:
Ranking Minority Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
United States Senate:
Subject: Investigations of Terrorist Financing, Money Laundering, and
Other Financial Crimes:
After the tragic events of September 11, 2001, federal efforts to wage
a seamless, coordinated campaign against sources of terrorist financing
became critically important. In May 2003, the Attorney General and the
Secretary of Homeland Security signed a Memorandum of Agreement
(Agreement) concerning terrorist financing investigations, which
contained a number of provisions designed to resolve jurisdictional
issues and enhance interagency coordination. The Agreement and its
related procedures specified that the Federal Bureau of Investigation
(FBI) was to have the lead role in investigating terrorist financing
and that the U.S. Immigration and Customs Enforcement (ICE), a
component of the Department of Homeland Security, was to pursue
terrorist financing solely through participation in FBI-led task
forces, except as expressly approved by the FBI. Specific provisions of
the Agreement directed the FBI and ICE to, among other things, develop
collaborative procedures for handling applicable ICE investigations or
financial crimes leads that have a nexus to terrorism. Another
provision required that the FBI and ICE jointly report to the Attorney
General, the Secretary of Homeland Security, and the Assistant to the
President for Homeland Security on the status of the implementation of
the Agreement 4 months from its effective date.
Shortly after the Memorandum of Agreement was signed, Department of
Homeland Security component agencies, the U.S. Secret Service and ICE,
expressed concern that the Agreement could adversely affect their
ability to conduct investigations involving financial crimes. Thus,
Senate Report 108-86 (July 2003)[Footnote 1] directed that we evaluate
the Agreement's impact on the existing authorities of the Secret
Service and ICE to effectively carry out traditional financial crimes
investigations. Our initial work showed that the Agreement pertains
only to investigations and operations of the FBI and ICE and does not
impact the investigative authority or operations of the Secret Service.
Therefore, we are not discussing the Secret Service in this report. In
accordance with the congressional mandate and as agreed with your
offices, this report addresses the following questions:
1. What is the status of the implementation of the Memorandum of
Agreement?
2. How has the Agreement affected the mission or role of ICE regarding
investigations of financial crimes?
3. What are the potential challenges to the successful implementation
of the Agreement?
To address these questions, our work focused on the principal
components of the Department of Homeland Security and the Department of
Justice that are responsible for implementing the Agreement and
investigating and prosecuting terrorist financing--ICE, the FBI and its
Joint Terrorism Task Forces, the Terrorist Financing Unit of the
Counterterrorism Section in Justice's Criminal Division, and U.S.
Attorneys Offices. To determine the implementation status of the
Agreement and the potential challenges to its successful
implementation, we contacted headquarters officials from these
components, and we reviewed available documentation of intra-agency and
interagency communications on these topics. We obtained additional
perspectives on the Agreement and its implementation from field
officials in three major U.S. cities and reviewed related documents.
Further, to determine how the Agreement has affected the mission or
role of ICE, we interviewed ICE headquarters and field officials and
reviewed applicable laws and other documents. We also contacted the
Department of the Treasury's Financial Crimes Enforcement Network,
officials from three financial regulatory agencies (Federal Reserve
Board, Office of the Comptroller of the Currency, and the Securities
and Exchange Commission), two large U.S. banks, and one banking
industry association.[Footnote 2] The results of our interviews with
federal law enforcement officials in the field offices and with the
financial community officials may not be representative of the views
and opinions of others nationwide. We performed our work from October
2003 to February 2004 in accordance with generally accepted government
auditing standards. Enclosure I presents more details about our
objectives, scope, and methodology.
Results in Brief:
As of February 2004, the FBI and ICE had implemented or taken
concrete steps to implement most of the key Memorandum of Agreement
provisions. For example, the agencies had developed collaborative
procedures to determine whether applicable ICE investigations or
financial crimes leads may be related to terrorism or terrorist
financing--and, if so, determine whether these investigations or leads
should thereafter be pursued under the auspices of the FBI. The FBI and
ICE have not yet issued a joint report on the status of the
implementation, which was required 4 months from the effective date of
the Agreement. By granting the FBI the lead role in investigating
terrorist financing, the Agreement has altered ICE's role in
investigating terrorism-related financial crimes. However, the
Agreement generally has not affected the agency's mission or role in
investigating other financial crimes. The FBI and ICE have and will
continue to confront a number of operational and organizational
challenges, such as establishing and maintaining effective interagency
relationships and ensuring that the financial crimes expertise and
other investigative competencies of both agencies are appropriately and
effectively utilized. Continued progress in implementing the Agreement
depends largely on the FBI's and ICE's ability to find workable
strategies to overcome these challenges.
Background:
The former U.S. Customs Service, which is now part of ICE, and the
FBI both have a long history of investigating money laundering and
other financial crimes.[Footnote 3] In response to the terrorist
attacks of September 11, 2001, the Departments of the Treasury and
Justice both established multi-agency task forces dedicated to
combating terrorist financing. Treasury established Operation Green
Quest, led by Customs, to augment existing counterterrorist efforts by
targeting current terrorist funding sources and identifying possible
future sources. In addition to targeting individuals and organizations,
Operation Green Quest was designed to attack the financial systems that
may be used by terrorists to raise and move funds, such as fraudulent
charities and the shipment of bulk currency. In January 2003, Customs
expanded Operation Green Quest by doubling the personnel commitment to
a total of approximately 300 agents and analysts nationwide to work
solely on terrorist financing matters. In March 2003, Customs and
Operation Green Quest were transferred to ICE, within the Department of
Homeland Security.
On September 13, 2001, the FBI formed a multi-agency task force--
which is now known as the Terrorist Financing Operations Section
(TFOS)--to combat terrorist financing. The mission of TFOS has evolved
into a broad role to identify, investigate, prosecute, disrupt, and
dismantle all terrorist-related financial and fundraising activities.
The FBI also took action to expand the antiterrorist financing focus of
its Joint Terrorism Task Forces (JTTFs)--teams of local and state law
enforcement officials, FBI agents, and other federal agents and
personnel whose mission is to investigate and prevent acts of
terrorism.[Footnote 4] In 2002, the FBI created a national JTTF in
Washington, D.C., to collect terrorism information and intelligence and
funnel it to the field JTTFs, various terrorism units within the FBI,
and partner agencies.
Following September 11, representatives of the FBI and Operation
Green Quest met on several occasions to attempt to delineate
antiterrorist financing roles and responsibilities. However, such
efforts were largely unsuccessful. The resulting lack of clearly
defined roles and coordination procedures contributed to duplication of
efforts and disagreements over which agency should lead
investigations.[Footnote 5] To help resolve these long-standing
jurisdictional issues, in May 2003, the Attorney General and the
Secretary of Homeland Security signed a Memorandum of Agreement on
terrorist financing investigations. According to the Agreement, the
Department of Justice will lead federal law enforcement efforts against
terrorist financing.[Footnote 6] The Agreement specifies that the FBI
is to lead terrorist financing investigations and operations, utilizing
the intergovernmental and intra-agency national JTTF at FBI
headquarters and the JTTFs in the field. The Agreement also specifies
that, through TFOS, the FBI is to provide overall operational command
to the national JTTF and the field JTTFs.
The Agreement contains several provisions designed to increase
information sharing and coordination of terrorist financing
investigations. For example, the Agreement requires the FBI and ICE to
(1) detail appropriate personnel to each other's agency and (2) develop
specific collaborative procedures to determine whether applicable ICE
investigations or financial crimes leads may be related to terrorism or
terrorist financing. Also, the Agreement required the FBI and ICE to
produce a joint written report on the status of the implementation of
the Agreement 4 months from its effective date. Additional details on
the Agreement and all of its provisions are presented in enclosure II.
Most Key Memorandum of Agreement Provisions Have Been Implemented:
As of February 2004, most of the key Memorandum of Agreement
provisions had been implemented or were in the process of being
implemented (see table 1). For example, in accordance with the
Agreement, the FBI and ICE have cross-detailed key management personnel
at the headquarters level, with an ICE manager serving as Deputy
Section Chief of TFOS and an FBI manager detailed to ICE's financial
crimes division. Also, the FBI and ICE have developed collaborative
procedures to determine whether appropriate ICE money laundering
investigations or financial crime leads may be related to terrorism or
terrorist financing.
Table 1: Status of Implementation of Key Memorandum of Agreement
Provisions (as of Feb. 2004):
Agreement provisions: Increase information sharing and coordination
(para. 3):
* Take all reasonable and necessary steps to permit the maximum
allowable information sharing relating to terrorist financing
information and intelligence among the members of the national JTTF
and field JTTFs;
* Detail appropriate FBI personnel to the financial crimes division of
ICE. Such detailees are to be provided full and timely access to all
data developed in ICE's money laundering and financial crimes cases on
an ongoing basis;
Implementation status:
* According to FBI and ICE officials, the implementation of this
provision is ongoing. For example, the agencies are taking steps to
ensure that ICE agents assigned to field JTTFs have required security
clearances;
*In February 2004, the FBI detailed a manager to ICE's financial
crimes division. Earlier, other FBI staff had been detailed to ICE.
Agreement provisions: Develop collaborative procedures to implement
the Agreement (para. 4);
* By June 30, 2003, develop collaborative procedures to determine
whether an ICE money laundering or financial crime lead or
investigation is related to terrorism or terrorist financing and to
ensure effective deconfliction;
Implementation status:
* The FBI and ICE finalized the collaborative procedures in July 2003.
(See enc. II.).
Agreement provisions: Detail a Homeland Security employee to be Deputy
Section Chief of TFOS (para. 5);
* When the position of Deputy Section Chief of TFOS next becomes
vacant or by December 1, 2003--whichever comes first--the position
shall be filled by a Homeland Security employee detailed to the FBI;
Implementation status:
* In July 2003, the position of Deputy Section Chief of TFOS was
filled by a Homeland Security employee. ICE has maintained staffing at
TFOS (or predecessor groups) since October 2001.
Agreement provisions: Detail ICE personnel to the national JTTF and
JTTFs (para. 6);
* To utilize the expertise and capabilities of ICE in the federal
campaign against terrorist financing, Homeland Security will detail a
significant number of appropriate personnel to the national JTTF and
field JTTFs, and the FBI will ensure that the detailees are fully
integrated into its efforts to combat terrorist financing;
Implementation status:
* In February 2004, ICE officials said that 3 ICE agents had been
assigned to the national JTTF and a total of 277 ICE agents had been
assigned to field JTTFs.[A] The officials did not know how many of
these assignments were made after the Agreement was signed.
Agreement provisions: Report on the implementation status of the
Agreement (para. 8);
* The FBI and ICE shall provide a joint written report to the Attorney
General, the Secretary of Homeland Security, and the Assistant to the
President for Homeland Security on the status of the implementation of
the Agreement 4 months from the effective date of the Agreement;
Implementation status:
* No report had been issued, as of February 20, 2004.
Source: GAO analysis of the Agreement and the collaborative procedures
(see enc. II) and discussions with FBI and ICE officials.
[A] According to ICE officials, the total for the field JTTFs does not
include ICE agents who will be assigned in consonance with vetted cases
being transitioned to the JTTFs, nor does it include ICE investigators
who participate part time on JTTFs. Also, the officials said that 32 of
the 277 ICE agents assigned to field JTTFs were former Customs Service
agents. The ICE officials did not know how many of the 32 Customs
agents had worked under the former Operation Green Quest.
[End of table]
Further, as an integral aspect of the collaborative procedures, ICE
created a joint vetting unit, in which ICE and FBI personnel--who have
full access to ICE and FBI databases--are to conduct reviews to
determine whether a potential nexus to terrorism or terrorist financing
exists in applicable ICE investigations or financial crimes leads. If
so, the matter is to be referred to TFOS, where the FBI Section Chief
is to provide the ICE Deputy Section Chief with information
demonstrating the terrorism nexus, as well as the stage and development
of the corresponding FBI investigation. Then, the Section Chief and the
ICE Deputy Section Chief are to discuss the elements of the terrorism
nexus, ICE's equity or commitment of resources to-date in the
investigation, violations being pursued by ICE before the Memorandum of
Agreement, and the direction of the investigation. After this
collaborative consultation, the FBI and ICE are to decide (1) whether
the ICE investigation will be conducted under the auspices of the JTTF
and (2) agency roles in pursuing related investigations. Specific
investigative strategies generally are to be developed at the field
level by FBI, ICE, and U.S. Attorneys Office personnel. The Terrorist
Financing Unit of the Counterterrorism Section in Justice's Criminal
Division is involved in coordinating and prosecuting matters and cases
involving terrorist financing, which are investigated by both the FBI
and ICE.
From July to October 2003, the FBI provided a list of individuals,
businesses, and organizations to the vetting unit that it believed were
related to pre-Agreement ICE Operation Green Quest investigations. A
review of the list by the vetting unit and TFOS identified
approximately 30 potential crossover subjects. The FBI believed that
these subjects had ties to terrorism or terrorist financing--and,
accordingly, per the Agreement's collaborative procedures--any related
ICE investigations should be transitioned to JTTFs. According to ICE
officials, in late-October, TFOS demonstrated that 10 of the
approximately 30 subjects had a confirmed nexus to terrorism or
terrorist financing, and ICE agreed to transition the related ICE
investigations to JTTFs. Regarding the other subjects, as of February
2004, FBI and ICE officials were engaged in discussions to determine
appropriate courses of action.
Moreover, ICE has provided the vetting unit two sets of financial
crimes leads to determine whether they may be related to terrorism or
terrorist financing. Specifically, in September 2003, ICE provided the
vetting unit a computer disk containing more than 7,000 subjects
records that were related to all open former Operation Green Quest
leads in ICE's financial investigations database. As of February 2004,
TFOS was in the process of running the approximately 7,000 ICE subject
records through FBI databases to determine whether the FBI had ongoing
investigations involving the same subjects. Since the Agreement was
signed, ICE has provided an additional 11 financial crimes leads to the
vetting unit. TFOS has determined that none of these 11 leads had a
significant connection to an FBI terrorism investigation and,
therefore, would not be governed by the Agreement and ICE could
continue to pursue them. More details about the results of the vetting
process are presented in enclosure III.
Another Agreement provision--requiring ICE to detail a significant
number of appropriate personnel to the national JTTF and the JTTFs in
the field--is being handled on a location-specific, case-by-case basis.
In response to our inquiries, FBI and ICE officials said that this
provision was not intended to refer to a specific number of personnel
and certainly was not intended to imply that all former Operation Green
Quest agents were to be detailed to JTTFs. According to ICE officials,
as of February 2004, a total of 277 ICE personnel (from various legacy
agencies) were assigned full time to JTTFs--a total that consisted of
161 former Immigration and Naturalization Service agents, 59 Federal
Air Marshals, 32 former Customs Service agents, and 25 Federal
Protective Service agents. ICE officials said that this total does not
include ICE agents who will be assigned to JTTFs in consonance with
vetted cases being transitioned to the JTTFs, nor does it include ICE
investigators who participate part time on JTTFs.
Further, in response to our inquiries, ICE officials said they could
not readily determine how many of the 277 ICE personnel (including the
32 former Customs Service agents) were assigned to JTTFs after the
Agreement became effective or how many of these personnel were now
working on financial aspects of terrorism investigations. The officials
also said they could not readily determine how many of the 32 former
Customs Service agents had financial investigations expertise or had
worked in the former Operation Green Quest.[Footnote 7] The officials
noted that all former Customs Service agents assigned to the JTTFs had
received financial investigations training.
Finally, as shown in table 1, the FBI and ICE have not yet produced the
required joint report on the status of the implementation of the
Memorandum of Agreement. ICE officials said they provided a draft
report to the FBI in January 2004. FBI officials said they anticipate
that a joint report will be finalized by the end of February 2004.
The Memorandum of Agreement Generally Has Not Affected ICE's Mission or
Role in Investigating Nonterrorism-Related Financial Crimes:
By granting the FBI the lead role in investigating terrorist financing,
the Agreement has altered ICE's role in investigating terrorism-related
financial crimes. However, the Agreement generally has not affected the
agency's mission or role in investigating other financial crimes.
Specifically, the Agreement did not affect ICE's statutory authorities
to conduct investigations of money laundering and other traditional
financial crimes. ICE investigations can still cover the wide range of
financial systems--including banking systems, money services
businesses, bulk cash smuggling, trade-based money laundering systems,
illicit insurance schemes, and illicit charity schemes--that could be
exploited by money launderers and other criminals. According to ICE
headquarters officials, ICE is investigating the same types of
financial systems as before the Memorandum of Agreement.
Also, while the Memorandum of Agreement specifies that the FBI has
primary investigative jurisdiction over confirmed terrorism-related
financial crimes, the Agreement does not preclude ICE from
investigating suspicious financial activities that have a potential
(unconfirmed) nexus to terrorism--which was the primary role of the
former Operation Green Quest. To support investigations with a
potential nexus to terrorism and other financial crimes investigations,
in July 2003, ICE launched Operation Cornerstone, a new financial
investigative program designed to identify and eliminate
vulnerabilities in financial systems that could be exploited by
individuals, criminal organizations, and terrorists. According to ICE
headquarters officials, ICE will continue to aggressively investigate
financial crimes within its jurisdiction, regardless of the origin of
the targets or the source or destination of the money.
Further, ICE officials at headquarters and the three field locations we
visited said the Agreement generally has not affected the agency's
relationships with the financial community. Through Operation
Cornerstone, ICE plans to continue efforts to develop working
partnerships with financial industry representatives to share
information and identify and close industrywide security gaps that
could be exploited by money launderers and other criminal
organizations. The three financial regulators we contacted (the Federal
Reserve Board, the Office of the Comptroller of the Currency, and the
Securities and Exchange Commission) also said the Agreement has not
affected their relationships with ICE. The two financial institutions
we contacted offered similar comments. The banking industry association
representative we contacted said that it may be too soon to tell how
the Agreement has affected ICE's relationships with the financial
community.
According to Financial Crimes Enforcement Network officials, the
Memorandum of Agreement did not affect their agency's procedures for
collecting and disseminating financial leads, except in specific cases
where the information was related to terrorist financing. The officials
explained that after the Agreement was signed, the agency sent only
those specific cases potentially related to terrorist financing to the
FBI and no longer to ICE. In August 2003, ICE sent a letter to the
Financial Crimes Enforcement Network announcing the creation of
Operation Cornerstone and requesting that all leads be referred to
Cornerstone, regardless of any alleged or apparent terrorist
connection. In its letter, ICE noted that under the former Operation
Green Quest, most referrals initially characterized as "terrorist-
related financing" did not ultimately reveal a link to terrorism but
were successfully investigated by ICE regarding other financial crimes.
In its September 2003 response to ICE, the Financial Crimes Enforcement
Network explained its process for referring terrorist-related leads to
the FBI--based on its understanding of the Agreement--and offered to
work with ICE to improve the vetting process if needed. In December
2003, the Financial Crimes Enforcement Network's new Director made the
decision to provide Operation Cornerstone with the same terrorist
financing information as provided to the FBI.
Finally, ICE officials at the three field locations we visited said the
Agreement generally has not affected their relationships with state and
local law enforcement agencies. Specifically, at one location, after
the Agreement was signed, local law enforcement agencies withdrew two
agents from Operation Green Quest but subsequently replaced them with
agents who did not specialize in terrorism matters. At a second
location, after the Agreement was signed, 8 to 10 state agents stopped
working joint investigations with Operation Green Quest but
subsequently continued to work with ICE on nonterrorism-related
financial investigations.[Footnote 8] At a third location, state and
local law enforcement did not support Operation Green Quest before the
Agreement was signed. ICE officials at all three locations said the
Agreement did not affect state and local support on other types of
financial crimes investigations that were unrelated to terrorism.
The FBI and ICE Face Many Challenges in Implementing the Memorandum of
Agreement:
The successful implementation of the Memorandum of Agreement will
require the FBI and ICE to address many operational and organizational
challenges. First, the agencies face the task of finding common space
for FBI, ICE, and other JTTF personnel to work together. Additionally,
ICE personnel assigned to JTTFs may encounter obstacles to effective
information sharing as agents requiring additional security clearances
complete the time-consuming process for obtaining such clearances. At
the organizational level, the FBI and ICE confront various challenges
integrating organizational cultures and effectively coordinating
resources. Shifting priorities and large-scale reorganizations in these
agencies produced a certain amount of turmoil and anxiety, which
initially was exacerbated by the Agreement, particularly for ICE
agents, who may have perceived the Agreement as minimizing their role
in terrorist financing investigations.
The most effective investigations of terrorist financing will bring to
bear all relevant resources on the problem. The FBI and ICE face
challenges in ensuring that the implementation of the Agreement does
not create a disincentive for ICE agents to initiate or support
terrorist financing investigations. Additional challenges involve
ensuring that the financial crimes expertise and other investigative
competencies of the FBI and ICE are effectively utilized and that the
full range of the agencies' collective authorities--intelligence
gathering and analysis as well as law enforcement actions, such as
executing search warrants and seizing cash and other assets--are
effectively coordinated.
Inherently, efforts to meet these challenges will be an ongoing
process. Our interviews with FBI and ICE officials at headquarters and
three field locations indicated that long-standing jurisdictional and
operational disputes regarding terrorist financing investigations may
have strained interagency relationships to some degree and could pose
an obstacle in fully integrating investigative efforts. In addition,
some of the ICE field officials we contacted had concerns about
permanently detailing financial agents to JTTFs, partly because the
officials were reluctant to have ICE agents supervised by FBI
personnel. Further, FBI and ICE headquarters generally were not issuing
joint communications to their field offices. For instance, the agencies
had not issued joint guidance to all their supervisory agents regarding
implementation of the Agreement. Rather, the agencies issued separate
memorandums. Similarly, the agencies distributed separate memorandums
to their field offices regarding the transition of certain ICE
investigations to JTTFs. While the separate memorandums generally
addressed the same issues, these communications varied in the
specificity of the agencies' respective roles in pursuing the
investigations. In summary, these examples indicate that establishing
and maintaining effective interagency relationships will be a key
determinant of continued progress in implementing the Agreement and
achieving its ultimate goal.
Concluding Observations:
The Memorandum of Agreement represents a partnering commitment by the
FBI and ICE to wage a seamless, coordinated campaign against sources of
terrorist financing. In the 9 months since the Agreement was signed,
progress has been made. Continued progress will depend largely on the
ability of the agencies to establish and maintain effective interagency
relationships and meet various other operational and organizational
challenges.
Agency Comments:
We provided a draft of this report for review and comment to
Justice, Homeland Security, and Treasury. The three departments did not
comment on the overall substance of the draft report. We received
responses from three Justice components (Criminal Division, FBI, and
Executive Office for U.S. Attorneys), Homeland Security's ICE, and
Treasury's Financial Crimes Enforcement Network. Four of the five
respondents provided technical comments and clarifications, which have
been incorporated in this report where appropriate. The fifth
respondent, the Executive Office for U.S. Attorneys, had no comments.
Also, we provided a draft of the applicable sections of this report for
review and comment to the three federal financial regulatory agencies
we contacted. The Federal Reserve Board said the draft sections
accurately reflected the agency's position vis-à-vis ICE. A
representative from the Office of the Comptroller of the Currency said
he had no objection to the draft language. And, the Securities and
Exchange Commission had no comments.
We are providing copies of this report to the Attorney General and
the Secretary of Homeland Security. We also will make copies available
to others on request.
If you have any questions about this report, please contact me at
(202) 512-8777 or Danny R. Burton, Assistant Director, or Eric Erdman,
Senior Analyst, at (214) 777-5600. Other key contributors to this
report were Alison Heafitz, Allison Abrams, Barbara Keller, and Kathryn
Young.
Signed by:
Richard M. Stana:
Director, Homeland Security and Justice Issues:
Enclosures - 3:
[End of section]
Objectives, Scope, and Methodology:
Objectives:
In May 2003, the Attorney General and the Secretary of Homeland
Security signed a Memorandum of Agreement (Agreement) concerning
terrorist financing investigations to help resolve jurisdictional
issues and enhance interagency coordination. Regarding the Agreement,
Senate Report 108-86 (July 2003)[Footnote 9] contained the following
directive:
The Committee [on Appropriations] is concerned that the recent
Memorandum of Agreement (MOA) between the Department of Homeland
Security and the Department of Justice regarding investigations of
terrorist financing will adversely affect the ability of the United
States Secret Service (USSS) and the Bureau of Immigration and Customs
Enforcement (BICE) to effectively carry out traditional financial
crimes investigations. The Committee expects the General Accounting
Office (GAO) to provide the Committee — an evaluation of the MOA's
impact on existing authorities of the USSS and BICE to effectively
carry out financial crimes investigations, including the MOA's impact
on the financial community and State and local cooperation.
Our work indicated that the Agreement does not apply to the Secret
Service. Therefore, we did not focus on the Secret Service in our
evaluation. Rather, in accordance with the congressional mandate--and
as agreed with the offices of the Chairman and the Ranking Minority
Member, Subcommittee on Homeland Security, Senate Committee on
Appropriations--we addressed the following questions in reference to
the progress of the U.S. Immigration and Customs Enforcement (ICE) and
the Federal Bureau of Investigation (FBI) in implementing the
Agreement:
* What is the status of the implementation of the Memorandum of
Agreement?
* How has the Agreement affected the mission or role of ICE regarding
investigations of financial crimes?
* What are the potential challenges to the successful implementation
of the Agreement?
[End of section]
Scope and Methodology:
To address these questions, our work focused on the federal entities
primarily responsible for investigating and prosecuting terrorist
financing and implementing the Memorandum of Agreement. Within the
Department of Homeland Security (DHS), we focused principally on ICE
(the component that is comprised of agents from the legacy U.S. Customs
Service). Within the Department of Justice, we focused on the FBI--
including its Joint Terrorism Task Forces (JTTFs) and Terrorist
Financing Operations Section (TFOS)--the Terrorist Financing Unit of
the Criminal Division's Counterterrorism Section, and U.S. Attorneys
Offices.
Status of the Implementation of the Memorandum of Agreement:
Preliminarily, we reviewed the Agreement to obtain an understanding of
its various provisions. Also, we contacted headquarters officials from
ICE, the FBI, and the Executive Office for U.S. Attorneys to discuss
the implementation status of the Agreement and to identify and review
applicable procedures or other guidance for implementing the Agreement.
To obtain additional perspectives on the status of Agreement's
implementation, we visited ICE, FBI, and U.S. Attorneys Offices in
three field locations. Each of the three locations was a major
metropolitan area. However, due to law enforcement sensitivity of
ongoing investigations, the three field locations are not disclosed in
this report. We queried the field office officials about the
implementation status of the MOA's various provisions, and we reviewed
available documentation of intra-agency and interagency communications
on this topic. The views and opinions expressed by officials in the
field locations may not be representative of officials nationwide.
Effects of the Memorandum of Agreement on the Mission or Role of ICE:
To determine how (if at all) the Agreement has affected the mission or
role of ICE--including impact on state and local law enforcement
cooperation--we interviewed ICE headquarters officials and field
officials in the three locations. Further, regarding financial
community relationships, we contacted the Department of the Treasury's
Financial Crimes Enforcement Network;[Footnote 10]
* regulatory officials at the Federal Reserve Board, the Office of the
Comptroller of the Currency, and the Securities and Exchange
Commission;
* representatives from two large U.S. banks; and:
* a representative from a banking industry association.
The results of these contacts are not necessarily representative of the
entire financial community. Generally, based on relationships
established in previous work, the interviewees were individuals who
agreed to talk with us and were accessible within the limited time
frames of our review.
Potential Barriers to the Implementation of the Memorandum of
Agreement:
To identify potential barriers to the successful implementation of
the Agreement, we interviewed ICE, FBI, and U.S. Attorneys Office
officials at headquarters and the three field locations. Also, we
reviewed agency memorandums and other communications regarding
Agreement implementation.
Memorandum of Agreement and Collaborative Procedures:
Concerning Terrorist Financing Investigations:
In May 2003, the Attorney General and the Secretary of Homeland
Security signed a Memorandum of Agreement (MOA) concerning terrorist
financing investigations. Consistent with the MOA, in July 2003, the
FBI and DHS/ICE agreed on collaborative procedures for determining
whether appropriate ICE financial crime leads or money laundering
investigations may be related to terrorism or terrorism financing.
The following sections of this enclosure provide the details of the
MOA and the collaborative procedures, respectively.
Memorandum of Agreement Between the Department of Justice and the
Department of Homeland Security:
On May 13, 2003, the Attorney General and the Secretary of Homeland
Security signed a Memorandum of Agreement that consisted of the
following 11 paragraphs:
1. Definitions. For purposes of this agreement:
a. "Secretary" means the Secretary of Homeland Security, and his
successors, on behalf of all covered entities they head, supervise or
represent.
b. "Attorney General" means the Attorney General of the United States,
and his successors, on behalf of all covered entities they head,
supervise or represent.
c. "Director" means the Director of the Federal Bureau of
Investigation, and his successors.
d. "Parties" means the signatories to this Agreement and their
successors, on behalf of all covered entities they head, supervise or
represent.
2. Understanding the importance of waging a seamless, coordinated
campaign against terrorist sources of financing, the undersigned agree
that the Department of Justice will, as part of its responsibilities as
the lead law enforcement agency in combating terrorism, and in
accordance with the President's National Strategy for Homeland
Security, lead the federal law enforcement effort against terrorist
financing. The Federal Bureau of Investigation (FBI) will lead
terrorist financing investigations and operations, utilizing the
intergovernmental and intra-agency National Joint Terrorism Task Forces
(NJTTF) at FBI Headquarters and the Joint Terrorism Task Forces (JTTFs)
in the field to conduct terrorist financing investigations and
operations. Through the Terrorist Financing Operations Section (TFOS),
the FBI will provide overall operational command to the NJTTF and the
JTTFs.
3. The Secretary and the Attorney General will ensure that all
appropriate information and intelligence relating to terrorist
financing is shared with members of the NJTTF and JTTFs, including
Department of Homeland Security (DHS) detailees, to the greatest extent
permissible by law and applicable guidelines, and consistent with the
March 3, 2003, Memorandum of Understanding Between the Intelligence
Community, Federal Law Enforcement Agencies, and the Department of
Homeland Security Concerning Information Sharing. The parties agree to
promptly take all reasonable and necessary steps to permit the maximum
allowable information sharing relating to terrorist financing
information and intelligence among the members of the NJTTF and the
JTTFs. To further increase information sharing and coordination, the
Attorney General and the Director agree to detail appropriate personnel
to the financial crimes division of the Bureau of Immigration and
Customs Enforcement (ICE). The Secretary shall ensure that such
detailees are provided full and timely access to all data developed by
ICE's money laundering and financial crimes cases on an ongoing basis.
4. After June 30, 2003, DHS will pursue terrorist financing
investigations and operations solely through its participation in the
NJTTF, the JTTFs, and TFOS, except as expressly approved by TFOS as
provided in this paragraph. Both DHS and the Department of Justice
(DOJ) will, however, continue independently to investigate money
laundering and other financial crime matters that are unrelated to
terrorism. DHS will focus its activities on protecting the integrity of
U.S. financial infrastructures. To determine whether a money laundering
or financial crime matter is related to terrorism or terrorist
financing and to ensure effective deconfliction, all appropriate DHS
leads relating to money laundering and financial crimes will be checked
with the FBI. The parties agree to develop, as soon as possible but no
later than June 30, 2003, specific collaborative procedures to enable
the Section Chief of TFOS and Deputy Section Chief of TFOS detailed
from DHS (or, if prior to the appointment of the Deputy Section Chief
from DHS, the Associate Chief referenced in paragraph 3) to determine
which leads should be provided to TFOS to enable TFOS to determine
whether such leads may be related to terrorism or terrorist financing.
Such procedures will provide for joint and continuous analysis of
leads. Beginning on July 1, 2003, in any given matter, if TFOS
determines that the matter is unrelated to terrorism or terrorist
financing, the leadership of the investigation regarding the matter
shall not be governed by this MOA. Determinations by TFOS shall take
into account the following factors: strength of the terrorism or
terrorist financing nexus; impact on the investigation of non-terrorism
matters; and stage and development of the respective investigations. If
TFOS, after consultation with DHS, determines that the matter is
related to terrorism or terrorist financing, the investigation and
operation of the matter shall be led by the FBI in accordance with
paragraph 2. In pursuing investigations, TFOS will consider, among
other things, the following factors: preservation of the government's
flexibility and options to pursue investigations of both terrorism and
non-terrorism matters; maintenance of the continuity of investigative
personnel and management where appropriate (including the option, at
the discretion of TFOS, to allow ICE to conduct terrorist financing
investigations); and utilization of relevant expertise and authorities.
5. The parties agree that when the position of Deputy Section Chief of
the TFOS next becomes vacant or by December 1, 2003, whichever comes
first, the position shall be filled by a DHS employee detailed to the
FBI, and shall continue to be filled by a DHS employee in the future.
The employee will be chosen by mutual agreement of the Secretary and
the Attorney General. Until such time as the position of Deputy Chief
is filled by a DHS employee, the parties agree that a DHS employee
shall be detailed to the FBI in a newly created position of "Associate
Chief" of TFOS. The employee will be chosen by mutual agreement of the
Secretary and the Attorney General.
6. The parties agree that the federal campaign against terrorist
financing must utilize the significant expertise and capabilities of
ICE. To this end, the parities will ensure that the appropriate ICE
personnel have a significant and active presence on the NJTTF at
headquarters and the JTTFs in the field. The Secretary will detail a
significant number of appropriate personnel to the task forces, and the
Director will ensure that the detailees are fully integrated into the
FBI's efforts to combat terrorist financing, both at Headquarters and
in the field, and are able to assist in the process described in
paragraph 4, supra. The Secretary will ensure that the performance of
DHS agents detailed to the FBI under this Agreement is recognized as a
critical component of the DHS mission and that Customs Service's pre-
existing financial investigative expertise is preserved and developed
through recruitment, training and retention initiatives.
7. The Secretary agrees that no later than June 30, 2003, Operation
Green Quest (OGQ) will no longer exist as a program name. The Secretary
agrees to ensure that any future DHS initiative or program to
investigate crimes affecting the integrity and lawful operation of U.S.
financial infrastructure will be performed through the financial crimes
division of ICE. DHS will investigate matters related to terrorism and
terrorist financing only with the consent of the FBI in accordance with
this Memorandum of Agreement.
8. The Attorney General and the Secretary shall direct the Director
and the Assistant Secretary for ICE to provide a joint written report
to the Attorney General, the Secretary, and the Assistant to the
President for Homeland Security on the status of the implementation of
this Agreement four months from the effective date of this
Agreement.[Footnote 11]
9. The parties shall immediately pursue implementation of the terms of
this Agreement. Within ten days of the effective date of this Agreement
the parties shall jointly issue guidance to all FBI and ICE supervisory
agents regarding this Agreement.
10. Except where otherwise indicated, the terms of this Agreement shall
be effective upon the signature of all parties.
11. These provisions are not intended to and do not create any rights,
privileges, or benefits, substantive or procedural, enforceable by any
individual or organization against the United States, its departments,
agencies, or other entities, its officers or employees, or any other
person.
Collaborative Procedures Pertaining to the Memorandum of Agreement:
Consistent with the MOA dated May 13, 2003, the FBI and DHS/ICE
jointly agree on the following collaborative procedures to determine
whether appropriate ICE financial crime leads or money-laundering
investigations may be related to terrorism or terrorism
financing.[Footnote 12] Nothing in this document shall supersede the
written provisions in the aforementioned MOA. The following procedures
pertain only to information and the operations of DHS/ICE:
1. DHS/ICE will establish a Joint Vetting Unit (JVU) within the
Financial Information Analysis Section, which will continue to utilize
the existing ICE vetting methodology to identify financial leads or
investigations with a nexus to terrorism or terrorism financing
consistent with the MOA.
2. The JVU will be staffed by DHS/ICE and FBI personnel who will have
full access to relevant DHS/ICE and FBI databases to conduct reviews to
determine whether a nexus to terrorism or terrorism financing exists in
the appropriate DHS/ICE lead information or investigations. The JVU
will establish a joint tracking system on investigative leads referred
to the JVU and provide the assigned FBI personnel access to the system.
3. Throughout the collaborative vetting process, the determination of
whether a DHS/ICE investigative referral or investigation is related to
terrorism or terrorist financing shall be governed by the factors
delineated in the MOA.
4. DHS will designate an ICE official to serve as the Deputy Chief of
the FBI's TFOS. The Deputy Chief will have a fully integrated role in
the evaluation and determination of whether a DHS/ICE referral or
investigation has a nexus to terrorism or terrorism financing. The
Deputy Chief and other DHS/ICE personnel assigned to TFOS will be
provided complete and continuous access to FBI databases.
5. If, after collaborative consultation is made between the TFOS
Section Chief and the DHS/ICE Deputy Chief, TFOS determines that a lead
or investigation has a nexus to terrorism or terrorism financing, the
matter will be investigated solely through the NJTTF, JTTF and TFOS,
except as expressly approved by TFOS as delineated in the MOA.
6. Beginning on or about July 1, 2003, DHS/ICE and the FBI will begin
the joint collaborative review within the JVU of pending DHS/ICE
terrorist financing investigations. The review process to determine
nexus to terrorism and terrorism financing will be governed by the
procedures as outlined in this document and as delineated in the MOA.
ICE Investigations and Leads Identified as Having a Potential Nexus to
Terrorism or Terrorist Financing:
This enclosure summarizes the status of the vetting of U.S.
Immigration and Customs Enforcement (ICE) investigations and leads
regarding the following three sources:
* From July to October 2003, the Federal Bureau of Investigation (FBI)
provided a list to the joint vetting unit of approximately 30 terrorist
financing or terrorist subjects it believed had crossover with ICE
investigations.
* In September 2003, the ICE vetting unit provided the FBI's Terrorist
Financing Operations Section (TFOS) a computer disk containing more
than 7,000 subject records.
* In addition, as of January 2004, the ICE vetting unit had provided 11
leads to TFOS to determine whether they may be related to terrorism or
terrorist financing.
FBI Referral of Approximately 30 Investigative Subjects:
From July to October 2003, the FBI provided a list to the joint
vetting unit of approximately 30 terrorist financing or terrorist
subjects (including individuals, businesses, and other entities) it
believed had crossover with ICE investigations. According to ICE
officials, the FBI was claiming sovereignty over any ICE investigation
that related to these subjects, claiming these subjects had sufficient
ties to terrorism or terrorist financing, per Memorandum of Agreement
guidelines.[Footnote 13] The officials said that, in late-October, TFOS
demonstrated that 10 of the approximately 30 subjects had a confirmed
nexus to terrorism or terrorist financing and ICE agreed to transition
the related ICE investigations to the FBI's Joint Terrorism Task Forces
(JTTFs). Regarding the other subjects, as of February 2004, FBI and ICE
officials were engaged in discussions to determine appropriate courses
of action.
In late-2003, the FBI and ICE sent memorandums to their respective
field offices to notify them about agreements reached regarding the 10
subjects. In general, the memorandums noted that future investigative
activities related to these subjects would be conducted under the
auspices of the JTTFs and that the FBI and ICE would make joint
collaborative decisions on strategic and operational issues. The
memorandums also addressed, in different levels of detail, the
respective roles of the FBI and ICE in pursuing the investigations.
We visited three field locations where ICE investigations had been
identified to be transitioned to the local JTTF. We found that the
status of the transitions and the continuing role of ICE varied by
location and circumstance.
* At one location, the investigative and prosecutorial strategy for
pursuing the joint investigation had recently been developed at the
field level by FBI, ICE, and U.S. Attorneys Office personnel. ICE had
agreed to detail personnel to the local JTTF, and ICE and JTTF
personnel were jointly working the investigation.[Footnote 14] The JTTF
also had been supporting the ICE investigation before the Memorandum of
Agreement.
* At a second location, the investigative and prosecutorial strategy
for pursuing the joint investigation had recently been developed at the
field level by FBI, ICE, and U.S. Attorneys Office personnel. ICE had
agreed to support part of the JTTF investigation that involved
violations within ICE's jurisdiction. However, ICE would not commit
personnel to the JTTF, in part because of the distance between the ICE
and JTTF offices.
* At a third location, ICE had provided its investigative files to the
JTTF and was not supporting the investigation. In January 2004, ICE
headquarters officials said the files were turned over during a period
of initial confusion about the role of ICE under the Agreement. The
officials said that they have asked the ICE field office to contact the
JTTF to determine if ICE support is needed on the investigation.
ICE Provided TFOS More Than 7,000 Subject Records:
In September 2003, the ICE vetting unit provided TFOS a computer disk
containing more than 7,000 subject records--including individuals,
businesses, and other entities--that were related to all open former
Operation Green Quest leads in ICE's financial investigations database.
According to ICE officials, ICE requested that the FBI identify any
positive subject record hits in FBI databases, so that ICE field
offices could be advised of FBI investigative interests or crossover
investigations. As of February 2004, the FBI had not provided the final
disposition to ICE on the results of the FBI's subject record checks.
According to an FBI official, TFOS was in the process of running the
ICE subject records through FBI databases to determine whether the FBI
had ongoing investigations involving the same subjects.
ICE Provided TFOS an Additional 11 Leads:
In addition, as of January 2004, the ICE vetting unit had provided 11
leads to TFOS to determine whether they may be related to terrorism or
terrorist financing. According to TFOS, some of the ICE leads were
found to have either a nexus to terrorism or crossovers with
nonterrorism-related FBI investigations. However, TFOS determined that
none of the 11 ICE leads had a significant connection to an FBI
terrorism investigation. Therefore, the leads would not be governed by
the Memorandum of Agreement and ICE could continue to pursue them.
(440259):
FOOTNOTES
[1] Title I of the Senate Appropriations Committee report on the
Department of Homeland Security Appropriations Bill for 2004.
[2] A primary role of the Financial Crimes Enforcement Network is to
support terrorist financing investigations through the facilitation of
information sharing and networking among the law enforcement,
regulatory, and financial communities. This role includes collecting
and disseminating financial leads to law enforcement agencies.
[3] Money laundering is the process used to transform monetary proceeds
derived from criminal activities into funds and assets that appear to
have come from legitimate sources.
[4] According to the FBI, the first JTTF came into being in 1980, and
the total number of task forces has nearly doubled since September 11,
2001. Today, there is a JTTF in each of the FBI's 56 main field
offices, and additional task forces are located in smaller FBI offices.
[5] See U.S. General Accounting Office, Combating Money Laundering:
Opportunities Exist to Improve the National Strategy, GAO-03-813
(Washington, D.C.: Sept. 26, 2003).
[6] According to Justice, the main terrorist financing criminal statute
is 18 U.S.C. § 2339B, which gives the Attorney General the
responsibility for investigating the crime of terrorist financing.
[7] As mentioned previously, Customs expanded Operation Green Quest in
January 2003 by doubling the personnel commitment to a total of
approximately 300 agents and analysts nationwide to work solely on
terrorist financing matters.
[8] According to ICE officials, the 8 to 10 state agents were not
detailed to Operation Green Quest but worked joint investigations with
ICE on an ad hoc, as-needed basis.
[9] Title I of the Senate Appropriations Committee report on the
Department of Homeland Security Appropriations Bill for 2004.
[10] A primary role of the Financial Crimes Enforcement Network is to
support terrorist financing investigations through the facilitation of
information sharing and networking among the law enforcement,
regulatory, and financial communities. This role includes collecting
and disseminating financial leads to law enforcement agencies.
[11] As indicated in paragraph 10 below, "the terms of this Agreement
shall be effective upon the signature of all parties." The Agreement
was signed by applicable parties on May 13, 2003. Four months later
would be mid-September 2003. However, according to ICE officials, the
Agreement was not fully effective until the collaborative procedures
were signed in July 2003. Therefore, the officials said the joint
report was due in November 2003.
[12] Michael Garcia, Assistant Secretary for ICE, signed the
collaborative procedures on July 2, 2003. Robert Mueller, Director of
the FBI, signed the collaborative procedures on July 7, 2003.
[13] According to ICE officials, the approximately 30 subjects were
related or linked to about 30 former Operation Green Quest leads and
about 80 ICE investigations. The officials noted that (1) an ICE
investigation can consist of multiple, related leads and (2) in some
cases, leads may become multiple investigations due to location and
subject associations.
[14] At the time of our review, the local JTTF did not have enough
space to accommodate the ICE personnel. As a result, the joint
investigation was being conducted out of the ICE field office, with FBI
personnel visiting the ICE office two or three times each week.
