NATIONAL COMMISSION ON TERRORIST ATTACKS UPON THE UNITED STATES

Public Hearing

Alexander Hamilton U.S. Custom House Auditorium
One Bowling Green
New York, York

CONTENTS

Glenn Fine, U.S. Department of Justice

Lee Wolosky, Boies, Schiller & Flexner LLP

Gerald Dillingham, Civil Aviation Issues, General Accounting Offices

Questions and Answers

LAW ENFORCEMENT, DOMESTIC INTELLIGENCE, AND HOMELAND SECURITY

Steven Brill, Author

Michael Wermuth, RAND

Zoe Baird, Markle Foundation

Randy Larsen, ANSER Institute for Homeland Security

Questions and Answers

IMMEDIATE RESPONSE TO THE ATTACKS

Shawn Kelley, Arlington County Fire Department

William Baker, American Society of Civil Engineers

Ken Holden, New York Department of Design and Constructio

Questions and Answers

PROCEEDINGS

MR. KEAN: As we start I want to do two things. One is to make part of the permanent record we have a statement here from Senator Lieberman, who sent in a statement to make part of our record, and a statement from Chris Chez from Connecticut. We will make both those statements part of the permanent record.

I also want to recognize people who should have been recognized yesterday, I think, because they are absolutely vital to our work. Phil Zelikow, our Executive Director who is behind me with Chris Kojm, Deputy Director and Dan Marcus, who is General Counsel. They are absolutely essential, and will be, to our work.

I want to recognize, as well, Stephanie Kaplan and Tracey Shycoff, who did all the work really to put these hearings together these two days.

Our first panel this morning is on borders, money and transportation security.

Let me see, we are missing one person I thought was going to be here. Alright, so going in order no, I'm alright, I am looking at the wrong one.

We start out with Glenn Fine, unless you have some sort of order you all would like to go in?

(Pause.)

MR. KEAN: Okay, from the U.S. Department of Justice.

MR. FINE: Mr. Chairman, Mr. Vice Chairman, and Members of the National Commission, I appreciate the opportunity to testify before the Commission about the work of the Department of Justice Office of the Inspector General on border security issues. Both before and after the September 11 terrorist attacks, we have focused much of our resources on these and other national security issues in the Department of Justice.

Today, I will describe findings from several of these reviews that examined programs in the Immigration and Naturalization Service. That agency had responsibility for immigration and border security issues until March 1, 2003, when it was transferred into the new Department of Homeland Security.

At the outset of my remarks, I want to stress that while we have noted serious deficiencies over the years in various INS operations, this should in no way diminish the important work of thousands of INS employees, now DHS employees. Most of them perform diligently, under very difficult circumstances, and their mission is critical to the security of our country. Yet, our reviews have revealed significant problems that left gaps in the INS's attempts to secure the nation's borders.

In one important review, we examined the INS's contacts with two September 11 terrorists Mohamed Atta and Marwan Alshehhi. We investigated how these two were admitted in the United States. We also examined how, six months after the terrorist attacks, a Florida flight school received notification that Atta and Alshehhi's applications to change their immigration status from "visitors" to "students" had been approved. The mailing of these forms raised serious concerns about the INS's tracking of foreign students in the United States.

With regard to Atta and Alshehhi's entries into the U.S., the evidence did not show that the inspectors who admitted them violated INS policies and practices.

However, our review found that the adjudication of their change of status applications was untimely and significantly flawed. The INS took more that 10 months to adjudicate the applications, well after Atta and Alshehhi had finished their training course at the Florida flight school. In addition, the INS adjudicator who approved their applications did so without adequate information, including the fact that they had left the country twice after filing their applications, which meant they had abandoned their request for a change of status.

We also found that historically the INS has devoted little attention to monitoring foreign students, and its paper based tracking system was inefficient, inaccurate, and unreliable. The new internet based foreign student tracking system, called SEVIS, has the potential to dramatically improve the foreign student program.

Last month, the OIG completed a follow up review to assess the INS's progress in implementing the SEVIS system. We found that while the INS has made progress, the system is not fully implemented. Significant deficiencies remain, such as a lack of adequate oversight and training of contractors hired to conduct site visits of schools, and a lack of procedures to identify and refer potential fraud for enforcement action.

In my written statement, I describe in greater detail a series of other reviews that the OIG has conducted on border security issues. One review examined the INS's efforts to prevent illegal immigration along the northern border. Until recently, the INS devoted significant resources to deterring illegal immigration along the southwest border, but did not focus such attention on the northern border. For example, as late as 1999, only 311 of the national total of approximately 8,000 Border Patrol agents were assigned to the northern border. We concluded that the level of illegal activity on the northern border clearly exceeded the Border Patrol's capacity to respond.

After September 11, we issued a follow up review that found the INS had made some improvements to enhance the security of the northern border. However, we concluded that increased staffing and resources for the northern border continued to be a critical need.

We also have conducted other reviews related to border security. For example: We reviewed the INS's record in deporting aliens who have been issued final orders of removal. We found that the INS removed 92 percent of detained aliens with final removal orders, but only 13 percent of non detained aliens.

In addition, we reviewed the Visa Waiver Program which allows visitors from 28 countries to enter the U.S. without first obtaining a visa. We found that INS inspectors did not check passports of all of these visitors against the INS's computerized lookout system, and that the use of stolen passports from some of these visa waiver countries presented a serious problem.

A theme we found repeated in many of our reviews was that the INS's information technology systems needed significant improvement. Many OIG reviews have questioned the reliability of the INS's information systems and the accuracy of the data produced by them.

In addition, INS information systems are not always integrated with other agencies' systems. For example, the INS and the FBI developed their agency's automated fingerprint identification systems separately, and full integration of the systems remains years away.

I also want to mention, briefly, one other review that, while not addressing border security issues, does relate squarely to the Commission's work.

At the request of FBI Director Mueller in June 2002, we initiated a review to examine aspects of the FBI's handling of intelligence information prior to the September 11 attacks. Our review focuses on how the FBI handled an electronic communication written by an agent in its Phoenix office regarding extremists attending flight schools in Arizona. Our review also is examining aspects of the FBI's handling of the Moussaoui investigation and its handling of other intelligence before September 11. I believe the final results of this review will be useful to the Commission, and we intend to cooperate fully with your review of these subjects.

Based on the significant body of work by the OIG during the last several years, I believe there are several broad themes that the Commission may want to examine relating to border security.

First, information and intelligence sharing among all levels of government remains a critical component of the effort to prevent terrorist attacks in the United States. Without adequate intelligence, the ability of front line employees to screen effectively those who seek to enter the country is limited.

Second, our reviews have found that the current systems for identifying when aliens enter and leave the country are clearly inadequate. Implementing an effective entry exit tracking system is a daunting challenge that will require substantial efforts and a large investment of resources.

Third, we encourage the Commission to focus on the often overlooked issue of human capital. To fulfill its mission, the Department of Homeland Security must have sufficiently trained immigration staff and supervisors. Historically, this has been a challenge for the INS.

Fourth, I think it is also important to note that timely and consistent processing of the millions of benefit applications has been a longstanding problem for the INS, and now for the DHS. An enhanced focus on border security should not override this important service related responsibility.

And finally, the transfer of the INS to the Department of Homeland Security presents enormous management challenges. The transfer will not, in itself, resolve the issues I have identified today. Solutions to border security issues will require innovation and aggressive management oversight.

In sum, I believe that these border security issues present many potential areas for the Commission to examine in the months head. We will be pleased to provide any information or assistance to the Commission as it performs this critically important task.

That concludes my statement. I would be pleased to answer any questions.

MR. KEAN: I think we will do the panel and come back, probably with questions.

Lee Wolosky from Boies, Schiller & Flexner, come in.

MR. WOLOSKY: Thank you for inviting me to testify before you on the subject of terrorist financing. It is an honor and a privilege to be able to appear before you today.

Unlike other terrorist leaders, Osama bin Laden is neither a military hero, a religious authority, or an obvious representative of the downtrodden and disillusioned. Rather he is a rich financier. He built al Qaeda's financial network from the foundation of a system originally designed to channel resources to the mujahadeen fighting the Soviets in Afghanistan the 1980s.

Thanks to the leadership of the Bush administration that network has been disrupted, but it has certainly not been destroyed. And as long as al Qaeda retains access to a viable financial network, it will remain a lethal threat to the United States.

Like al Qaeda itself, its financial network is deliberately compartmentalized, and is characterized by layers and redundancies. Al Qaeda raises money from a variety of sources and moves money in a variety of manners. It runs businesses operating under the cloak of legitimacy and criminal conspiracies ranging from the petty to the grand. The most important source of al Qaeda's money, however, is its continuous fund raising efforts.

Al Qaeda's global fund raising network is built upon a foundation of charities, nongovernment organizations, mosques, Muslim community centers, web sites, intermediaries, facilitators and banks and other financial institutions. Some whose money goes to al Qaeda know full well the illicit and violent purposes that it will further. Other donors believe their money will fund legitimate humanitarian efforts, but the money is nonetheless diverted to al Qaeda. For years, individuals and charities based in Saudi Arabia have been the most important source of funds for al Qaeda.

Al Qaeda moves its funds through the global financial system, the Islamic banking system, and the underground hawala system, among other money transfer mechanisms. It uses its global network of businesses and charities as a cover for moving funds. And it uses such time honored methods as bulk cash smuggling and the global trade in gold and other commodities to both move and store value.

Following September 11, 2001, the Bush administration, building on the policies of the previous administration, undertook tactical actions to disrupt particular individual nodes in the terrorist financial network and strategic initiatives to change the environment within which terrorists raise and move funds.

Tactical initiatives include law enforcement and intelligence activities, along with public designations under the International Emergency Economic Powers Act (IEEPA) of persons, businesses, and financial institutions associated with the financial network of al Qaeda and other terrorist organizations.

Since much of the subject matter is highly classified, the effectiveness of tactical measures is difficult to determine. Clearly, there have been successes, such as the recent action targeting the al-Farooq mosque just across the East River from here. Successes have been made possible due to markedly improved law enforcement and tactical intelligence cooperation from foreign states since September 11.

By contract, progress in the strategic arena, in my judgement, has simply not been made a high enough priority. Far too many key countries, including virtually all in the Middle East and South Asia, still have in place ineffective or rudimentary bank supervisory and anti money laundering regimes. In no country, including the United States, are either Islamic charities or the underground hawala system effectively regulated.

Fundamentally, U.S. efforts to curtail the financing of terrorism are impeded not only by a lack of institutional capacity abroad, but by a lack of political will among key foreign partners. Some have a history of ignoring the problem. Some perceive, correctly or incorrectly, that the U.S.'s attention on the subject has waned. Some simply disagree with the U.S. view of the nature and severity of the problem.

Confronted with this lack of political will, the current administration, in my view, has not made full use of all relevant and legal policy tools at its disposal. For example, punitive provisions of Title III of the USA PATRIOT ACT enable the Executive Branch to restrict or prohibit access to the U.S. financial system for foreign states or foreign financial institutions that lack adequate anti money laundering regimes. This powerful tool remains unused in a terrorist financing context.

Finally, I would like to say a few words about the war in Iraq, which I support, but which I fear may retard progress on these critical issues.

Even supporters of the war must concede that the United States has not effectively justified the war to many members of the international community.

This state of affairs may set back ongoing U.S. efforts to fight terrorism. Terrorist financing is a transnational problem requiring transnational solutions. In almost all cases, the money trail leads or originates overseas. Curtailing terrorist financing therefore requires comprehensive law enforcement and intelligence cooperation with foreign states.

Political commitment defines the nature and scope of that cooperation. An internationally unpopular war may make the necessary commitment more difficult.

At the same time, the diplomatic imperatives of fighting a war in Iraq may have bumped terrorist financing down the bilateral agenda with critical front line states. By all external indications, the Saudis and other front line states have not taken sufficient steps to change the strategic environment that funds extremism. Appropriate regulation of charities, hawala and the formal banking system, along with the reining in of the madrassa educational system, among other things, requires a fundamental commitment to long term structural reform. While laws, regulations and decrees are difficult to come by, there is no credible evidence that comprehensive structural reform is taking place.

And yet we do not appear to be holding the Saudis' feet to the fire. Rather than speaking out loudly and forcefully about their and other states' failure to take steps necessary to assure U.S. security, the United States remains publicly silent on these issues, no doubt captive to the near term diplomatic imperatives of waging war, and assuring the basing and overflight rights, along with the petroleum production commitments, that are necessary or desirable in connection with that undertaking.

Thank you very much.

MR. KEAN: Mr. Dillingham is from Civil Aviation and General Accounting Office.

MR. DILLINGHAM: Thank you, Mr. Chairman.

Mr. Chairman, Vice Chairman Hamilton, Members of the Commission, thank you for inviting GAO to participate in this very important national forum.

As many of you know, GAO is the investigative arm of the United States Congress. Over the years our reports have been a key source of information about the security of the nations transportation system.

In June of 2000 we reported that the terrorist threat of attacks using aircraft was a persistent and growing concern for the United States. The report also said that the trend in terrorism against targets was towards large scale incidents designed for maximum destruction, terror and media impact. Fifteen months later 9/11 happened.

Mr. Chairman, I have submitted a formal statement, for the record. This morning I would like to summarize that statement around two questions. First, how has transportation security changed since 9/11? And second, where do we go from here?

Regarding the first question about changes since September 11. Overall I think the nation has come a long way. Before 9/11 security was never treated as a national priority and it had never gotten the kind of attention or resources that it receives today. We now have a federal agency whose primary mission is ensuring security for all modes of transportation. That agency is the Transportation Security Administration. TSA is the largest agency within the new Department of Homeland Security.

During the first 18 months of its existence the primary focus of TSA has been in aviation security. Before 9/11 the airlines, the airports and the federal aviation administration were all in charge of some aspect of aviation security. Unfortunately, as is often the case, when everybody is in charge, no one is really in charge and things can and did fall through the cracks.

Prior to 9/11 the very critical task of passenger and baggage screening, what was referred to as the last line of defense, was being handled by persons who were not properly trained, who were not properly supervised, whose salaries were not even competitive with the salaries of nearby fast food restaurants, and who had probably got the job less than six months.

Now most of the security screeners have been federalized. The question is whether screening is better because the staff are now federal employees. I submit to you that screening probably is better, but not because workers are federal employees. Screening is better because the workers are more skilled, because they are receiving a decent wage and because they are getting better training and supervision.

However, I want to point out that the TSA reports that since it took over screening they have confiscated literally millions of prohibited items. I know that you have seen in the media, earlier on, about knitting needles and scissors and things of that nature. We are not talking about those kind of things. We are talking about over a million knives and box cutters. We are talking about more than a thousand firearms.

Since 9/11 there is a long list of security initiatives that have been undertaken. Some of which are classified and some of which are widely publicized, such as all baggage being screened before it goes on the aircraft, the installation of reinforced cockpit doors, and the presence of thousands of Federal Air Marshals.

In spite of all that has been accomplished, there are still vulnerabilities and occasional lapses in the aviation security system. The system is far from perfect and a hundred percent secure. I submit to you that occasional lapse will probably continue to occur. The goal should be perfection, but there should also be a recognition that perfection is not attainable. The question is, are we doing as much as practicable to move towards that goal?

I think for the most part the answer is yes. With most of the goals that Congress set for TSA regarding aviation security now behind them, TSA is in the very early stages of working with the other transportation modes to enhance security in those modes.

Unlike the direct and pervasive role it played with regard to aviation, TSA envisions serving more as a transportation system security manager for the other modes. TSA will establish security standards and facilitate coordination and collaboration across the six transportation modes. TSA has also provided some relatively small amounts of money to the other modes for security projects.

For the most part, state and local authorities and the private sector, in collaboration with a variety of federal agencies, such as the Coast Guard, Customs and federal law enforcement agencies, have been responsible for as much of what has been done to improve security in the other modes. These improvements have largely been a few new security initiatives or increased frequency of existing activities.

The new initiatives are activities such as conducting vulnerability assessments, in establishing first response teams. The increased frequency type activities includes things like additional training for emergency preparedness and revising emergency plans and conducting emergency drills.

The bottom line is that actions are being taken and some progress is being made towards securing the nation's transportation system. But what could be considered as constituting an effective overall multi modal transportation security environment, may very well be years away.

Turning to our last question. Where do we go from here and how do we get there?

The nation faces a very difficult and resource intensive task to secure the transportation system. I would like to offer some thoughts and observations of where we need to go to move closer to the goal.

First, we must recognize that it is not possible to anticipate and counter every risk. Priorities must be assigned with time and money devoted to those threats and hazards that are best established and most likely to cause the most harm. In short, we need to plan and act strategically.

Second, effective coordination must be established among the many public and private entities responsible for transportation security.

Third, terrorists are creative. We need to address a significant proportion of our energies to identifying possible new terrorist risks and threats rather than simply preparing for the last type of attack that occurred. And in the final analysis, transportation security, which is crucial to our nation, it must be considered in the larger context of other national priorities and weighed and supported accordingly.

Mr. Chairman and Members of the Commission, this is very much a work in progress and much needs to be done. The GAO stands ready to help.

Thank you very much.

MR. KEAN: Thank you, Mr. Dillingham. Commissioner Gorelick.

MS. GORELICK: Thank you, Mr. Chairman. I would like address my first couple of questions to Inspector General Fine.

First of all, I would like to say we have a very able and talented public servant in Glenn Fine. We are very happy to have you here today, and very pleased that you are doing your job in the Justice Department.

First question, I understand that the CIA launched an internal review immediately after 9/11 of its conduct before 9/11. Did the Justice Department do the same thing?

MR. FINE: No. The Justice Department did not do a broad after action report similar to what you describe with the CIA. Initially the Justice Department deferred to the Joint Intelligence Committee which was doing a broad review that looked at the actions of various Federal Government agencies, including the Justice Department and others. After that, it has deferred to this Commission to do that broad review.

However, also the Inspector General, Department of Justice, my office, has done a series of reviews on national security issues, some of which I describe in my report in my written testimony, others on the FBI.

In addition when we have been confronted with particular issues such as the Atta and Alshehhi visa issue or change of application issue, we have done reviews on that. In June, as I mentioned, of last year at the request of Director Mueller we launched a review on how the FBI handled the intelligence information related to the September 11 attacks. So we are doing that kind of review. But the broad after action review similar to the CIA has not been undertaken by the Justice Department itself.

MS. GORELICK: Thank you. My second question is this. As I read your report, I see very different reviews occurring for a foreigner who wants to come into this country as a student, depending on what route he takes.

So could you contrast, for example, a foreigner who wants to come into this country as a student, but who applies for a visa in a visa waiver country, comes in as a visitor and then tries to change his status to a student status, which would allow him to stay longer, versus, someone who applies to be a student from a non waiver country and goes through the consular process for a student waiver. Could you describe the two?

MR. FINE: Sure. It is a different review process.

For the student who applies abroad in his or her own country, they have to show ties to the country, their own country, and show an indication that they will return to the country afterwards. They have to show financial means, they have to show that they have been accepted at an accredited school in the United States, and normally, although not always, they normally go through an interview process with consular officer. As a result they get a student visa. They come to the United States. They present the visa to the immigration inspector at the port of entry, and they enter into the United States and take up studies.

That is a different process than a foreign student who did not get visa abroad but who comes to the United States on a visitor visa or who may come to the United States without a visa because they are from one of the 28 visa waiver countries. So they enter the United States either with a visitor visa or without a visa from a visa waiver country, and in the United States they then apply to change their status to student.

In the United States it is largely a paper process. They fill out the I 589 form. They show they have been accepted by a school. They show financial means, and then the INS adjudicates their status on paper without an interview. Also, prior to September 11, as we found in the Atta and Alshehhi case, without even checks of the database that would show what their status was when they applied to the United States. So it is a different process depending on which route they take.

MS. GORELICK: So if you are clever, you can figure out a way to come into this country and stay for a substantial period of time without anyone ever interviewing you as to the appropriateness of that occurring?

MR. FINE: It is possible to do that.

MS. GORELICK: Has that changed since September 11?

MR. FINE: It has not markedly changed since September 11, particularly from the visa waiver countries.

MS. GORELICK: Mr. Dillingham, did you want to add something?

MR. DILLINGHAM: Yes, I did. To the best of our knowledge, the State Department is denying student visas to people who want to come in to study flying in the United States. That, in fact, has changed.

MS. GORELICK: I'm glad to hear that.

One other general question for you, Mr. Fine. What is the state of connectivity between the intelligence community and INS today, INS either at the Justice Department or at the Department of Homeland Security? How much information flows between the Intelligence Community and those who are guarding our borders and vice versa?

MR. FINE: Connectivity is better than it was in the past. Now immigration inspectors and INS officials do connect through their own databases, through the interagency or board information system to State Department databases, the class database, tip off systems, and in those databases is intelligence information provided by intelligence agencies.

In addition, the INS has more direct contacts with the intelligence agencies through their Office of Intelligence. However, the information is often unclassified, often sometimes vague and not in a particular usable form, we have been told by some immigration inspectors. I think that is a critical issue, that this Commission and the government needs to look at. The connectivity of information. The integration of the systems and the ability to get usable information, usable intelligence information to the front line employees who need to use that information to screen people who come to the United States. Without that it is an enormously difficult job that they do. MS. GORELICK: Thank you very much. MR. KEAN: Mr. Gorton.

MR. GORTON: Mr. Fine, assuming that in 2001 the INS have been substantially better funded, maybe twice as much money, and equally more efficient in carrying on its duties. How many of the 19 hijackers could have been in the United States or would have perfectly valid first entry into the United States, in any event?

MR. FINE: That actually, I think, is speculative and I can't really answer that question.

What we do know is that many of them, most of them, entered into the United States with valid visas and the immigration inspectors did not have any information or intelligence that would change the outcome of their inspection of them.

So for that it is hard to say what the difference would have been had the INS been better funded or had more information, but I do think it is an important issue that needs to be addressed going forward.

MR. GORTON: I take it then that most, if not all of them, could at least have had a first entry into the United States as visitors even if the INS had been much more efficient?

MR. FINE: That's correct, and really the issue there is the State Department. The State Department's interviews of them, giving visas to them, and my understanding is

MR. GORTON: But they wouldn't have required interviews at all if they were just coming here first as tourists, would they?

MR. FINE: Pardon me?

MR. GORTON: Would they not have required interviews at all if they were just coming here first as tourists?

MR. FINE: From some countries they would have, yes. From the visa waiver countries they wouldn't have required interviews. But many of them came from non visa waiver countries such as Saudi Arabia and elsewhere, where they did require interviews.

The Inspector General of the Department of State has looked at that and from my understanding of it, has indicated that there were some gaps in the processing of those 19 terrorists for their visas, but that's an issue for the State Department's Inspector General.

MR. GORTON: The question is basically leading to this. I think you have pointed out very eloquently, particularly in your written statement, the INS or any similar agency doesn't exist simply to keep people out. It exists in order to let the right people in, whether they are tourists, full time immigrants, doing business here, or anything else. One of your statistics is 500 million particular contacts at one time or another.

So I guess my question is, how much can we realistically expect to increase safety and the exclusion of dangerous aliens simply by a more efficient bureaucracy or homeland security agency, and how uch for providing for the safety of the people of the United States, is on the laps of Congress perhaps to make different policies and to make the system less complex and easier to administer than it is.

Does the Department of Justice have views on that subject?

MR. FINE: Well, I am not sure I can speak for the Department of Justice per se, but I do believe the issues need to be addressed at all levels. It can't simply be looking at the INS and the end product of the process, saying all the onus or burden goes upon them. There does have to be a look at how to allow the flow of travellers and commerce across our borders, but in a way that attempts to screen out ones who shouldn't be here.

Perhaps through trusted traveller lanes, or ways to increase the ability of cargo to be inspected in advance. So that is an important issue. There are policy issues that the United States Congress has to look at as well.

What we have looked at is the INS's aspect of it and we have found deficiencies. I am not saying that is the sole problem in protecting our country.

MR. GORTON: One more question of that nature, you spoke of the 28 visa waiver countries in your written testimony, at least. You speak to the fact that there is a great deal of theft of passports from those countries. Of course they are, in a sense, valid passports. Is there any practical solution to that problem? Obviously from very friendly countries a visa waiver is probably a good policy decision, but how do we prevent the misuse of visa waiver passports?

MR. FINE: I think there are several ways to do that. One is to ensure that those countries have better accountability of their passports, and if their passports are being stolen we might want to look to see whether those countries should remain in the visa waiver program.

Secondly, once those passports were stolen they have to be reported so that the numbers of those passports can be entered into lookout systems, and when someone travelling with that passport shows up at a port of entry, an INS inspector can check the database, see that it's a stolen passport, see that it is illegitimate and stop that person.

What we found in our reviews is that foreign countries sometimes

MR. GORTON: How are we going to determine whether the passport was stolen?

MR. FINE: By the foreign country having clear internal controls about passports. They know they are missing, they know they are stolen. They report it to the United States. It is entered into a look out system, and then we can stop people trying to use those passports. That's what happens, but we found that is not happening on a consistent basis and in come cases the INS inspectors didn't even check the look out systems to determine whether the passport had been reported as stolen. That is one thing that we can do.

MS. GORELICK: Let me follow up on that and then move to more questions of Mr. Wolosky and Mr. Dillingham.

The INS, as I understand from your report and my own experience, has utilized biometric measures for the identification of individuals trying to come into this country which, obviously, are harder to forge than a passport, and certainly harder to steal.

Do you see a future in the utilization more broadly of biometric measures as a form of identity checks at our borders?

MR. FINE: Yes, I do. I think it is critical. Names can be changed. Names can be misspelled. Names are not a full enough identifier. There does need to be some use of biometrics to ensure that the person showing up at the border is the person that received the visa, and also that the person is who he or she says he is.

So, yes, biometrics are clearly needed to be incorporated into our identification systems.

MS. GORELICK: Finally, you have raised serious questions about the visa waiver program. In your professional opinion, should that program be continued?

MR. FINE: I think the visa waiver program does have significant benefits. It is a policy question whether those benefits outweigh the costs, and I am not in a position to say that the program should be discontinued. But I do think the countries that are in it should be carefully screened and held accountable to ensure that the appropriate measures, that its passports are not being fraudulently used.

MR. GORTON: Have we ever picked up a suspected terrorist who came here on a stolen passport from a visa waiver country?

MR. FINE: Yes, we have.

MS. GORELICK: I would like to ask Mr. Dillingham a couple of questions, not just about aviation security, but as I understand it, you previously were director of physical infrastructure issues, generally, at the GAO.

There have been published reports that the Transportation Security Administration has poured, in fact, more resources into aviation security than perhaps we are needing at the moment. Yet we hear that there is not the same degree of attention being paid to our ports, to container shipments, to bridges, to tunnels. And as you have said, if everyone is in charge, no one is in charge.

You have contrasted the way in which TSA is approaching its role in aviation security with what, I think you have described as, a more management role setting standards, creating a collaborative role with all of the many parties who have responsibilities for all of these other transportation modes.

Could you comment on whether the resources are adequate to maintain and increase our security in these other areas of transportation, and whether the management structure that you have described is adequate?

MR. DILLINGHAM: Yes. I think, without a doubt, there has been disproportionate resources applied to aviation. Aviation is different from the rest of the modes in that there was a Federal, a large Federal presence associated with aviation prior to 9/11. It was, of course, the FAA.

The other modes are also different in their characteristics. Mass transit, for example, is very hard to secure because of the nature of it. It's large, it has to be open. There are lots of ways to get into it.

Ports, a huge undertaking needs to be done, but there is also this sort of mix of stakeholders, local, state and federal players with regard to some of these other modes of transportation. Clearly, there is a gap between what has been done for aviation and what needs to be done for the rest of the modes. Money is a big issue.

Just by example, we came up from Washington on the Amtrack. We came through a very heavily populated northeast corridor, and to my knowledge there was no metal detector check. There was no screening to speak of, and we pulled in under Penn Station.

That could have been a very bad situation. A situation that occurred in Baltimore a year or so ago with a chemical fire on a freight train. All of this points to the notion that there are definite gaps, whether there are going to be enough resources to address that is a real question.

What the TSA is doing now is, trying to establish what are vulnerabilities associated with these various modes, and to move from there.

The management structure you ask about, I think there is no way that it can be the same as with aviation. Aviation was mandated by legislation, so I think the coordination and the collaboration and the structure that TSA is trying to put in place is, in fact, a good first step and it is probably a logical step to take in terms of managing.

It will still be a case where well it wouldn't be a case where no one is in charge. TSA will be in charge by statute. They are in charge of all transportation security. They will, therefore, have a statutory basis to coordinate and for cooperation and setting standards across the system.

MS. GORELICK: Well, Mr. Dillingham, if I might make an observation. Before September 11, 2001, the GAO and other agencies made numerous reports about the vulnerability of our aviation security system. And the response was often, you need to understand how disperse power is. There are various entities with various responsibilities. There are local transportation authorities. There is the aviation industry, et cetera, and of course, this is very costly, and trying to figure out who bears the burden is very complicated.

That sounds actually quite similar to what we are hearing now about transportation outside the aviation security arena. I am prepared to concede that there is a lot of complexity, but I wonder whether we have the same urgency being brought to bear around our ports, in particular, around container shipments in particular, around the security of our bridges and tunnels, and whether you, having broad experience and lengthy experience in this area, feel that we have the right level of effort and the right structure being brought to bear.

MR. DILLINGHAM: I think the process that is in place is the necessary process. That is, to determine what's important. This is all being done on a risk assessment basis, meaning that the TSA is looking across all modes trying to see what the vulnerabilities and the threats are, and then to prioritize that across all threats and across all modes. Because, as I said in my statement, there is no way that we, as a country, can secure against all risk. So we have to prioritize and we have to prioritize according to what the threat is and the likely harm that would come if that threat is in fact realized.

I think ports are high on the agenda. Right now, only two percent of the thousands of containers that come into the country are physically inspected, but neither the technology nor the manpower is available to inspect 100 percent of them. But we are moving in the direction of getting better technology and finding ways, both internationally and domestically to address the issue.

MR. GORTON: Mr. Dillingham, you were very optimistic about the degree of progress we have made since 9/11 with respect to air transportation. First, I just wanted to make sure, you talked about six modes, have I got the other five right, car, train, mass transit, bus and maritime? Would those be the other five?

MR. DILLINGHAM: Yes, sir.

MR. GORTON: Which of those five is the highest priority and the greatest threat, as far as you are concerned, from the point of view of moving in the direction of the degree of progress we have made with airlines.

MR. DILLINGHAM: I think ports. I think maritime because maritime cannot only be a place of substantial infrastructural damage, but it can have cascading effects on the economy. We can see when our ports were closed for a very short time a few months ago, how that effected the economy and international commerce. So I think ports are probably the next highest priority, and probably highest in terms of vulnerability as well.

MR. GORTON: One other question, if I may, both for you and for Mr. Fine.

How would you characterize the cooperation of the commercial airlines themselves in connection with air transportation safety? That question is for you. And the question for you, Mr. Fine, with respect to tracking emigrants and immigrants from the United States?

MR. DILLINGHAM: When you say their cooperation with regard to safety could you say more. What do you mean?

MR. GORTON: The whole TSA attempt, which you characterized as being pretty successful so far, would you characterize all or most of the airlines as being highly cooperative with the safety measures or reluctant from time to time?

MR. DILLINGHAM: I think the airlines are it is probably both. The airlines, of course, are in some economic distress. So the airlines will often sort of push back with regard to at least paying for some of the security measures that are being put in place and they see them as unfunded mandates.

However, the airlines on the other hand recognize that if the flying public do not believe that security is much improved, the flying public will not come back and the airline industry will suffer even greater economic woes, which in turn has a cascading effect on the rest of the economy.

MR. GORTON: How about with tracking people?

MR. FINE: I think it is mixed. I don't think that they have been uncooperative. I do think that there are issues regarding the collection of departure cards, I 94, and whether they are universally collected and provided to the INS. They are clearly not.

There are also issues with regard to airport facilities, inspection facilities, ensuring that they are safe and secure.

In the end, though, it is a Government function to ensure that it is handled appropriately. I think the onus is on the federal government to ensure that whatever needs to be done is done. And I think that's where the answer lies.

MS. GORELICK: Mr. Wolosky, we had a witness here yesterday who basically said that there is so much money, as he put it I think, "sloshing around" in the Islamic charitable community, and so relatively little of it is needed, if you will, to successfully fund terrorism, that the ability to squeeze out the part that has been siphoned off to support terrorism activities is extremely challenging, let's say. Could you give us your assessment of that? After all, you said we need to do that. We need to identify those sources of funds and eliminate them.

MR. WOLOSKY: Sure. First, I absolutely think it is true that there is a very large amount of money as you said, or as the witness said "sloshing around" through that system. In part because it is actually one of the five pillars of Islam, Zacat, to give at least 2.5 percent of your income to charitable endeavors. That is collected both through retail charities, at mosques and Muslim community centers, and through larger donations, typically by Gulf Arabs.

But particularly when it is given at mosques and Muslim community centers, again, like the mosque across the river, it is frequently collected by a community leader. It is co mingled. It is dispersed at the discretion of the community leader, most frequently without any record keeping or any accountability.

But I don't agree with the premise that just because a large amount of money moves through that system that the United States should not take steps to regulate that activity within its own borders. Nor do I agree with the premise the United States should forego instruments of foreign policy to compel other states in which this activity occurs to engage in similar regulatory efforts.

I think that there are really two reasons to take such action, notwithstanding the fact that a relatively small amount of money can contribute to devastating terrorist attacks.

The first is that where particular nodes are identified, you actually can take steps to prevent attacks from occurring by choking off the financing.

Secondly, to the extent that you force systemic changes, you make it harder for terrorists to raise and move money. To the extent that you achieve that objective, you are forcing them to spend more time worrying about how they are going to raise and move money, than spending time and effort on planning and executing deadly attacks.

MS. GORELICK: Thank you for that response. I think it will help us as we consider the kind of factual inquiry we need to be making here.

You raised, I think, two fairly dispiriting points. One is that the issue of attacking the sources of terrorism funding has moved lower on the bilateral foreign policy agenda. And also, that the necessity for some international rubric for attacking terrorist financing has been undermined by the lack of international consensus for this effort.

I was struck by the fact that in November of '02, when you did your report, you actually observed that while immediately in the aftermath of 9/11 there was a lot of international cooperation, you said, "that coalition may be fraying" and you noted a "widening gap between the U.S. and Europe" on the basic salience and perimeters of global terrorism.

My question to you is this, here we are six months later, how are our requests for international cooperation in the area of financing of terrorism being met? How are other key participants in the international community currently responding to our request for help?

MR. WOLOSKY: I think with respect to both questions, unfortunately they are better posed to someone who is currently working on these issues on behalf of the United States Government, but I do think that, as a general matter, there is substantial evidence to suggest that our foreign partners you have to remember, the way this process has worked insofar as IEEPA designations is concerned, is that the United States, through executive order, has named individuals and organizations that are part of the terrorist financial network, the assets of which are frozen, assets subject to U.S. jurisdiction are frozen. U.S. persons are prohibited by law from transacting business with those persons or organizations.

That process has been multi lateralized through U.N. Security Council Resolution 1390 whereby the same names of individuals or organizations has gone to the United Nations and gone out to the member states of United Nations for similar action, as the member states may wish to engage in.

There have been, in my experience, two problems with the multi lateralization of that process. The first is that many states lack the technical capacity to actually freeze funds. That was illustrated for me personally when I visited, in recent months, a strategically significant African country and I asked them the question: What happened to this piece of paper with all these names that came from the United Nations? Where did it go? Answer: It went to the Foreign Ministry.

I go to the Foreign Ministry and say, what did you do with this piece of paper with all the names on it? Well, we sent it to the Central Bank.

Go to the Central Bank, as I did and say, what happened to this list? Well, we sent it to our banks.

Go to the banks, as I did: What happened to this piece of paper with all the names? Well, we put it over there because we don't have any ability to go through our accounts and identify the beneficial holders of the accounts.

So that is a point on technical capacity which needs to be addressed in this context.

The second point has to do with differing standards of who and what constitutes a terrorist, and also the evidentiary standards with respect to the type of information that foreign states have asked for in connection with supporting the U.S. designations.

With respect to the first subpoint, as the report of the Council on Foreign Relations notes, the European Union still to this day permits Hamas and Hizbollah to legally raise funds on its territory.

Secondly, with respect to evidentiary standards, what we have found post 9/11 was that while there was initial willingness of other states to freeze funds over designated individuals and organizations originated by the U.S. Government, that willingness faded as the months went on and foreign states asked for increasingly sensitive intelligence information that supported the original U.S. designations, which when it wasn't provided caused them to fail to take steps to freeze the accounts of designated individuals and organizations.

MR. GORTON: Mr Wolosky, would you give us a brief description of how the Hawala system works. What kind of financial system is it?

And secondly, what the United States has done with respect to its illegitimate use for the support of terrorism when the deposits originate here in the United States.

And third, whether there is really anything we can do with respect to such an informal system when the transactions take place entirely overseas.

MR. WOLOSKY: Sure. The way it works is essentially as follows.

Let's assume that I am a Pakistani immigrant living in Brooklyn and wish to transfer $500 to my parents living in Islamabad. The way I can use the Hawala system to accomplish that money transfer is by going to a local individual, a hawaladar in Brooklyn, giving him my $500. He uses his network, which is most frequently a clan or family based network and contacts his counterpart in Islamabad, and he says, when someone comes in with a particular identifying code, give him the $500.

That system enables money to be moved without the physical movement of money

MR. GORTON: Is not that individual in Brooklyn engaged in banking activities under the laws of New York?

MR. WOLOSKY: Well, until recently the problem has been that there has been no Federal regulation of that activity. Post 9/11, using preexisting legal authorities, the Department of the Treasury has begun to require that activity, individuals who engage in that activity to register.

MR. GORTON: I see.

MR. WOLOSKY: Because the activity fundamentally is intended to be anonymous, without record keeping, without paper trails. The likelihood that the individuals will register is quite remote.

But notwithstanding that fact, it provides a basis for prosecution in Federal court if they fail to register. Prior to 9/11 frequently there was no basis for prosecution in Federal court. Now if they fail to register, they can be prosecuted.

MR. GORTON: Is that effectively our method of stopping some portion of that $500 from going, not to the parent in Islamabad, but to terrorism?

MR. WOLOSKY: Yes. I think a basic point which you alluded to is that this system of moving money is used for mainly legitimate purposes. It is unique to several different cultures in south Asia and east Asia. It has been used for centuries. It is used by terrorists and other criminals, but it is also used by a lot of people who just want to move money and avoid formal banking. They have access to formal financial systems, but they want to avoid it, for whatever reasons.

But you asked whether that was the primary method of regulating this activity in the United States. I believe that it is, through a registration system.

And you also asked whether it what steps or whether the United States should take action to prevent other countries from being part of abuses of this system.

I think the answer is yes. Again, if you look under Title 3 of the U.S.A. Patriot Act, it authorizes the Executive Branch to restrict or prohibit access to the U.S. financial system on the part of states or foreign financial institutions that lack adequate anti money laundering regimes.

This is ultimately the most powerful tool in the arsenal of the U.S. Government. It has not and it provides leverage over states that, for instance, refuse to regulate in any manner the Hawala system.

It hasn't really been used to this point in this context and the findings of the distinguished Bipartisan Commission and the Council on Foreign Relations was that it should.

MR. GORTON: One follow up question. You may have left out the middle of this transaction. Your Pakistani has gone and given $500 to the Hawala person in Brooklyn who has then called Islamabad or communicated with Islamabad, which gives $500 to the parent there, but somehow or other the $500 has still got to get from Brooklyn to Islamabad, does it not?

MR. WOLOSKY: No. It doesn't. That's how the system works.

In other words, it is credited through family relationship, let's say, or a clan based relationship. The money itself physically does not move.

If you, for instance, if your uncle called you and asked you to loan some $500 to someone who he wanted you to loan the money to, you probably would do it, even if he didn't advance you the $500. You would rely on the fact of your family relationship for settlement to occur in the manner of your choosing, at some future day. That is exactly how the Hawala system works.

MS. GORELICK: There would be an off setting transaction at some point in the future?

MR. WOLOSKY: At some point in the future. Again, at a time of convenience, whatever the circumstances may require. It doesn't have to be in cash. It could be in gold or it could be through some co mingled account in an Islamic bank. It can occur in a variety of different ways.

MS. GORELICK: One of the challenges for this Commission is to look at organizational issues and to make sure, A, our Government is arrayed correctly and organized correctly and, B, that it is using all of its authorities.

The Council on Foreign Relations report and your testimony note, a lack of organizational accountability for the money laundering issue. You made a number of recommendations with regard to who should have the leadership and who should have the ultimate responsibility.

Since that report was issued, can you describe what, if anything, has been done to address the organizational problems that you identified, and could you describe briefly those organizational deficiencies?

MR. WOLOSKY: Sure. The report suggested that notwithstanding the significance of this issue, the fundamental significance of this issue, there was no single U.S. official with the correct mandate and authority to coordinate U.S. policy on terrorist financing issues. Policy is currently coordinated through a policy coordination committee that is headed by the General Council of the Treasury Department.

The Bipartisan Commission of the Council on Foreign Relations concluded that that, for a variety of reasons, was not the most effective way to coordinate various diplomatic, intelligence and law enforcement and regulatory ingredients that contribute to effective and sustained U.S. policy response.

For one thing, the report of the Council on Foreign Relations concluded that the Treasury Department was not the appropriate agency to coordinate diplomatic or intelligence activities.

There is also the question as to whether or not even the most capable General Counsel of the Treasury and I don't know the General Counsel of the Treasury, but I am told that he is extraordinarily competent given his other statutory and institution responsibilities, has other things to worry about than the suppression of terrorist financing.

MS. GORELICK: I take it from your report, though, that the Congress has vested this responsibility in the Treasury Department and other agencies of Government have resisted implementing that; is that correct?

MR. WOLOSKY: I think that the Executive Bank has vested this responsibility in the Treasury Department. There is no statutory authority whatsoever with respect to terrorist financing.

Our report concluded that because of the very different and difficult ingredients that contribute to an effective response, ranging from diplomatic activities to intelligence activities to regulatory activities, that that was best coordinated out of the White House.

MS. GORELICK: An organizational question for you, Mr. Fine.

You have noted that a very substantial portion of the immigration and naturalization service responsibilities that are the subject of your reports, have now been transferred to the Department of Homeland Security.

Your office has evidently built up a tremendous amount of expertise in the review and oversight of those functions. Has all of that capacity in your office been transferred to the Department of Homeland Security so that that oversight can continue uninterrupted in that new department?

MR. FINE: All of our capacity has not been transferred, but we have transferred a portion of our capacity.

There is a Department of Homeland Security, Office of the Inspector General that has been created. It has been created with resources from various entities. We have provided resources to it. The Department of Treasury Inspector General's Office has provided resources to it. The Department of Transportation Inspector General's Office has provided resources, FEMA and others. So there is a newly developed Department of Homeland Security, OIG. We have provided investigators and some managers to that entity.

A lot of our capacity is involved with the INS, but it is also involved with the FBI, the DEA, the Marshal Service. So there is not a distinct unit that we could transfer over there.

I do think it is a critical issue that you raised, though, because I do think that is it is critically important that there be adequate, aggressive and strong oversight over this new entity, ranging from the INS to the Customs Service, to the Secret Service to the TSA. It is going to be a daunting challenge for that new agency, the Department of Homeland Security OIG, to get up and running, and to ensure that there is continuity of oversight.

We believe strongly in it and we think that that new OIG ought to be adequately funded to perform its mission in an aggressive way.

MR. HAMILTON: Mr. Wolosky, well, first of all let me say, this has been a marvelous panel. Each of the three of you have been very helpful to the Commission and we appreciate it.

Mr. Wolosky, I was focused on your final paragraph. "We don't hold the Saudis feet to the fire."

I gather from your testimony that we, the United States, and the countries that are most responsible here, if we had the political will to crack down on financing, we could do it. But, because of policy considerations that are very important, we don't do it.

We have to have the oil. We have to have the overflight rights. We have to have the basing rights. And because we have to have those things, we do not hold their feet to the fire. Is that your view?

MR. WOLOSKY: That is my view. Unfortunately, I wasn't called before you to testify on policy with regard to Saudi Arabia in the current context of

MR. HAMILTON: I know, I appreciate that. I am not being critical of you in any way. It is just a very good illustration of how policy gets in the way of, in this case, enforcement.

MR. WOLOSKY: Yes. That's the point of my testimony. In other words, I am not here to make judgments of whether or not particular issues should be prioritized over other issues, but what I can tell you is that the United States, at the highest levels, has not spoken out loudly and forcefully on the terrorist financing issue as it relates to Saudi Arabia.

That is not to say that things aren't being done. I have every reason to believe that a lot is being done, but it is being done in the shadows. The conclusion of the Council of Foreign Relations' report was that it was time to bring it out of the shadows. For the President of the United States or for other senior officials to state clearly, unequivocally and unambiguously what was required of the Saudi Government on the terrorist financing issue.

That is not being done, and in the judgment of this task force it needed to be done in order to set benchmarks for the Saudis and to enable the Saudi Government to communicate to its own citizens what kind of conduct was and was not acceptable.

MR. THOMPSON: Mr. Dillingham, I don't want to sound like a cranky business traveller, but I would like to get into an area of focus on the part of TSA in terms of air travel security, because funding follows focus, as we know, and your testimony and that of Mr. Fine this morning, have pointed out some rather large funding gaps, particularly with regard to port security which you testified to, and the issue of water security that Mr. Fine testified to.

I acknowledge that TSA employees, the new ones especially, are finding and retrieving large amounts of weapons. But if news stories are to be credited, some weapons still get through. I understand it is a system which depends not just on technology, but on human instinct and humans paying attention as well. But it seems to me that a fault of government is it fights yesterday's battles.

As I go through airline security screening processes, I see this sort of almost obsessive focus on belts, and shoes. And at the same time you are telling me that containers are coming into the United States inspected only at the level of 2 percent, if that. And Mr. Fine is telling me that the northern border is, in many respects, an unprotected area, particularly with regard to 24/7 coverage. While everybody is down in the Southwest trying to prevent undocumented workers from crossing the border to work in the United States and take jobs that Americans won't do.

Is our focus on airline security wrong? Who makes these policies? Who reviews these policies? How are they kept up to date? Are we anticipating ways in which terrorists can use airline vulnerability, or are we saying that because Richard Reid got on an airplane and tried to light his shoes, that we are going to focus on shoes of millions and millions of American business travellers. And for the life of me, maybe you can explain it, but I don't see the relevance of showing your belt buckle open as opposed to your belt buckle closed, and yet we have these jam ups at the security system screening depots with people milling around. We have all seen this process.

Is this the right balance? Is there somebody sitting in Washington to say, well, let's look at what we are doing about airline security and try and anticipate future attacks?

MR. DILLINGHAM: Yes, Governor, if I could.

I think it is part of, if you have only got a hammer, all of the answers you use that hammer for. That's sort of how aviation security has evolved. That was the first thing that came out of the box and we have applied all of our resources to it.

It may seem if I can give you just sort of a story behind the belt buckle. What has been determined is that before 9/11 people would the belt buckle would send off an alarm and the screener would pass by and say, okay, belt buckle, no problem.

But the process of testing the system, if you have a belt buckle and you can hide a weapon inside or behind that belt buckle, and it is only passed as, it is only a buckle, it is not a weapon. That's the kind of situation that they were focusing on.

It is the same thing with people at airports. They see grandmothers and children being examined and it seems embarrassing, in fact it can be, but they also have intelligence to say that the terrorists have used these kind of ways to get things through.

We are now seeing a ratcheting back of the things that don't make sense. We are seeing a rationalization of security. You are no longer asked did you pack your bag, has it been with you the whole time. There is no longer the prohibition of driving up to the airport.

We are seeing ratcheting back. We are seeing a rationalization of it. So there is someone who is looking at this. After 9/11 it was, let's do everything that we can to change the situation for aviation security, and now there are changes.

You are right, that has been the reputation of security in this country, fighting the last battle and not looking for what's coming. I can tell you that our office is looking at that issue and trying to understand, you know, to what extent are we looking for the next generation of technology. To what extent are we moving beyond where we were being prepared for the threats that we haven't seen yet, but we know were out there.

MR. THOMPSON: Mr. Fine, going back to the students for the moment. Do we have a rough idea how many students are in the United States at any one particular time?

MR. FINE: About half a million.

MR. THOMPSON: Have a million?

MR. FINE: Yes.

MR. THOMPSON: I noticed all the way through you written testimony, and a little bit in your oral testimony as well, that almost every system that we have developed or identified to deal with some of the issues about student entry or student remainder or student registration, don't yet seem to be working or up to snuff. I mean, is the shear number of foreign students in the United States at any one time going to overwhelm any system?

MR. FINE: It clearly overwhelmed the paper based system which was antiquated and inefficient. A computer based system I am not sure will overwhelm the ability of the system to track who is in the country, who is not in the country, who has shown up at school, who had has gotten a student visa, came to the United States and then never showed up in the school, as actually one of the September 11 hijackers did. He got a visa to show up at a language school, never showed up. The school didn't do anything about it and none of the authorities knew this.

So we need a system that tracks that and can provide that information. What is going to be very difficult is what to do with that information and how to decide what is the important ones to follow through with and how to prioritize what happens with an enormous amount of information. For that, I think, there needs to be intelligence and adequate intelligence to determine where the threats are.

But in the first step there does have to be a system, a computerized system that does track the status of the students. I believe that the SEVIS system that is being implemented is a good system and has the potential to do it, it is just simply not fully implemented and needs more steps to go.

MR. THOMPSON: Assuming the systems work, can we ever hire enough people to follow up on the information in the system and go track the people down who disappear from the system? To me that is a really devilish problem.

MR. FINE: I don't think you can hire enough people to track all of them, but I think you can do some efforts with some issues where there is intelligence that indicates you need to.

It is also important to be able to provide information from that system to other law enforcement agencies, so that when other law enforcement agencies come in contact with somebody, they will know that this is a person out of status, this is a student who never showed up at school. So they have that information and can act upon it. Prior to this computerized system, there was no possibility of that.

MR. THOMPSON: Could you or Mr. Dillingham comment on the status of the technology or efforts, pilot programs, or anything else that is out there to prescreen business travellers on airlines, or prescreen workers who come into the United States during the course of day and go back to their host country in the evening.

It seems to me we haven't made much progress there and the result is, I presume, that we are still using a lot of human resources to screen the same people day in day out that present what you presume to be a low security risk. Are there enough people to guard our northern border?

MR. FINE: Those are important projects. There are some projects that provide trusted travellers access across the border. They are not universally available. I believe that is an issue that needs to be addressed and needs to be more widely used.

Part of the issue is the money. Sometimes the fees are higher than people want to pay. But it is a program that I think provides some relief from the crushing workload that inspectors have along the border, an ability to speed some people up and allow greater scrutiny of others.

MR. THOMPSON: The technology is there, I presume?

MR. FINE: Yes.

MR. DILLINGHAM: Yes. Following what Mr. Fine said, the TSA is in fact looking at programs such as trusted travellers, starting with identifying, using identification with biometrics for all transportation workers. So that is in process.

And at an international level, I think it is one of the unresolved issues. There is some cooperation between other countries and the United States in terms of supplying passenger lists for international travellers ahead of time. That is one of the issues that needs to be further explored. Bilateral, multilateral agreements with regard to security and security operations between the United States and other countries. It is clearly an open area.

MR. KEAN: I have one question and then Commissioner Ben Veniste and Commissioner Lehman.

I think I read about a year ago for the first time that the greatest danger out there was probably containers, and containers in container ports. You said practically the same thing again today and I read it a number of times in between. You said, well the technology has got to be developed.

Can you give us any kind of approximate timetable when that kind of danger is going to be lessened or are we just going to live with it?

MR. DILLINGHAM: We are certainly going to live with it for a while. There are some technologies out there that can be used. What's missing right now is better technology and also the balance between screening and moving cargo. There are ways in which you can x ray these containers, you can physically inspect these containers, but what you are talking about is slowing the commercial process. That is where the balance has to be struck.

Technologies are, in fact, being developed. In some cases the technology is so expensive at this point that it is also not being readily accepted by the maritime community.

MR. KEAN: Is there any kind of a timetable, six months a year, two years?

MR. DILLINGHAM: I would go with multiple years. Not six months, not a year, but a few years.

MR. THOMPSON: What do other countries do?

MR. DILLINGHAM: They are petty much in the same way. Those are the containers that are coming here. What we have now is we are trying to work with other countries to do some screening, some random screening of containers at their point of origin so there is less to be concerned about as they arrive on U.S. shores, but it is an international issue. It is an international issue, so they aren't doing any more than we are doing.

You will find, for example, in an aviation context, El Al does a lot more with containers that are going on board and cargo that is going on board than the U.S. does. But the thing about that is, it is such a small operation compared to what we do in the States that it is not even comparable almost.

MR. KEAN: Commissioner Ben Veniste.

MR. BEN VENISTE: Thank you. Mr. Fine, I want to express our appreciation for your offer of complete cooperation with this Commission. We will definitely take you up on it.

In the limited time we have available, it is imperative that we take advantage of the pre existing work that has been done in order to identify what needs to be done further and to make recommendations to the Congress and the President.

I want to mention, yesterday Mr. Wolosky, we had a panel that included Professor Ranstorp and Brian Jenkins who spoke about the galvanizing effect of 9/11 on the cooperation of international intelligence agencies with our own in connection with the anti terrorism efforts.

You have made a very provocative statement with respect to the potential for degrading that cooperative effort as the result of political differences relating to the war in Iraq. Do you have any concrete evidence or information to suggest that the multilateral intelligence services have in any way slacked off from their cooperation with our intelligence community in that respect?

MR. WOLOSKY: No, I don't. But I can tell you that having worked these issues day in day out, they are very difficult under the best of circumstances. What I fear is that we may be entering into the worst of circumstances with respect to our efforts to cooperate with states that disagree with U.S. policies in Iraq, which I happen to support.

But my point is that it may be increasingly difficult for moderate Arab regimes, and even our traditional allies, to continue to engage in the type of cooperation that, I agree, was unprecedented following September 11.

MR. BEN VENISTE: So your observation is one based on informed speculation rather than actual evidence?

MR. WOLOSKY: Correct.

MR. BEN VENISTE: Let me ask just one other question of Mr. Fine and Mr. Dillingham. We have heard about the potential for the trusted traveller card, perhaps utilizing biometric information.

Is this the precursor, is this the camel's nose under the tent for a national identity card utilizing such information?

MR. FINE: I don't believe it is the camel under the tent. It is an option for people to undertake if they want to go quickly across the border. It is a voluntary thing that people can participate in or not participate in if they want to.

I think there are clear benefits to it, to them and to the system to allow certain people who have been prescreened to go across the border quickly.

MR. DILLINGHAM: I would agree. I wouldn't say that it is the nose under the tent, but I would want to point out that as far an as transportation is concerned, this does not mean that passengers or persons would not be subject to screening. They would still go through a screening process. It means that they would not necessarily have that second screening at the gate. Again, I agree that it is a voluntary process.

Right now transportation is developing what's called a Computer Assisted Passenger Profiling System, CAPS, which is based on information about the passenger that allows them to be sort of placed in the various categories of screening. Almost like our national terrorist alert sort of thing, red, green, yellow in terms of degree of screening. At the end of that flight, that information is purged and not kept. There is clearly civil liberties and privacy issues and organizations looking at that.

We think that it is a way to make our system more efficient and focus our resources on those places where they need to be focused, finite resources for security.

MR. KEAN: Okay we have to move on with Commissioner Lehman, Commissioner Fielding and Commissioner Roemer who have suggested that they would like to ask brief questions, I hope.

MR. LEHMAN: I have two brief questions for Mr. Dillingham.

First, while little old ladies are being frisked at La Guardia, it is possible for an Arab businessman to pick up the phone and make a call an go up to Whiteplains and charter a Gulfstream or 737 Boeing executive jet which have no reinforced doors, no armed pilots and no screening for him and his party to go through.

Are there any plans to do anything about this rather huge lacuna in our civil aviation security?

MR. DILLINGHAM: Yes, Mr. Secretary. We have pointed out that charter flights, general aviation, cargo, these are still significant gaps in security and they, in fact, have to be addressed. It is a matter of priorities and funding.

Almost any aircraft can be a weapon. I mean, we saw in the Florida case where just a general aviation aircraft was stolen and flown into a building. That could have very well been an aircraft that had some chemical biological agents on it as well.

The point is, the threats and the vulnerabilities are everywhere.

MR. LEHMAN: Yes, but this one is so obvious, what is taking so long? Here we are a long time after 9/11 and nothing has been done, I can assure you, because I use these planes fairly frequently and I have never seen a touch of security.

MR. DILLINGHAM: It is recognized. We keep pointing it out, but we can't make them do it. Hopefully the Commission will point this out, as well, as one of the gaps and that is a gap that needs to be addressed.

MR. LEHMAN: I would say it is a fairly urgent and glaring one considering the urgency that has been applied to some other sectors. Anyway, enough said.

The other question I have, as a veteran of the Reagan Administration, I participated in a major crisis effort to increase airline security after several hijackings in the early days of the Reagan Administration. I recall that a U.S. marshal program was put into effect at that time with great urgency. I also recall that there was an edict put out, to put reinforced doors and to see that the pilots that the door were kept closed throughout the flight and that only the pilot had the key.

What ever happened to those programs?

MR. DILLINGHAM: Unfortunately, the history has been when the particular event leaves the headlines, the follow through has not always been what we would want it to be, and that's the case with many of the recommendations that took place after Pan Am 103, after the TWA 800. We have 9/11 and we have a situation where the Federal Air Marshal Service went from less than thirty or less than a hundred, to several thousand within a short period of time. We have a situation where the recommendation that you made early on about cockpit doors being locked and so forth, that now some 10, 15 years later we now have, as a result of 9/11, we have 80 percent of the fleet with doors installed and the deadline being at the end of the week for all of the fleet.

It's the nature of where we have been, as long as there is oversight and constant reinforcement that these things must be done, the more likely that they will, in fact, be done.

MR. KEAN: Commissioner Fielding.

MR. FIELDING: Thank you. I have two quick questions to you, Mr. Dillingham.

First of all, I guess as a cranky flyer I ought to tell you that I think the TSA people are a vast improvement and are obviously trained in attitude as well, and I applaud you for that.

You gave us the list of priorities, of vulnerability priorities, and I understand air and then maritime, but for our planning purposes could you go a little further down the list?

MR. DILLINGHAM: I think the next one on the list would be mass transit, freight rail would follow that. The reason I say mass transit is because so many persons use mass transit and an incident on mass transit would have not only disastrous human effect, but the psychology of that would also be tremendous.

Rail, it's hard to prioritize too much because a chemical biological accident associated with rail has both the human dimension as well as the psychological dimension. So it is in that order I would go, aviation, maritime mass transit, rail.

Now, having said that, more people ride the bus than many of these modes combined, but it is the incident. I mean, the likelihood of you going to do damage to enough buses at one point in time as opposed to what would happen in mass transit, as we saw in the Japan incident, it is different. So it's the greatest harm to the greatest number of people is part of the decision about where things rank.

MR. FIELDING: Thank you, the other thing is just to follow up on what Secretary Lehman asked you.

Your answer to light aircraft issue, which has boggled everybody's mind who has ever been around those, is "you can't make them do it." Who is "them"?

MR. DILLINGHAM: Well, you can make recommendations and usually our recommendations will go to the U.S. Congress. We make recommendations to the agencies who in turn are responsive to the U.S. Congress. So it has to be a congressional priority that is followed through, and often times I think someone mentioned today, that action goes where the money goes.

It is not for us to sort of make policies. It is for us to present the information to the policy makers, and from there, they can make them do it.

MR. FIELDING: How about the Executive Branch?

MR. DILLINGHAM: Those are the people that we generally are saying need to do something. We are a congressional agency and our mission is oversight, generally, of the executive agencies.

I don't want to sound like they don't do anything, but generally the implementation is not the way we want it to be. Some of the recommendations that have been made about aviation have been around for years. They were either not implemented or partially implemented.

After 9/11 there was a new urgency to it. We have been talking about screeners not doing what they are supposed to do for 15 years.

MR. FIELDING: Thank you. Thank you, Mr. Chairman.

MR. KEAN: Last question for Commissioner Roemer.

MR. ROEMER: Thank you, Mr. Chairman. I too want to join in applauding the help that this particular panel has been to the Commission.

I want to ask Mr. Fine, having been on the Education Committee for 12 years in Congress and having sat through many oversight hearings of SEVIS and heard time and time and time again that we couldn't implement the program, it would be another year, it would be another year. We are experiencing this program problem and that problem.

When is this finally going to be ready to be fully implemented and working in our country?

MR. FINE: Well, it has been implemented. There is the SEVIS system available. It applies to new students now. There are clearly bugs in it, there are clearly problems with it, but I believe the INS has made significant progress in implementing the system.

We have pointed out where deficiencies are. They need to address those deficiencies. Come August, they say that it will apply to every student, not solely the new students but also the continuing students. So according to their schedule, by August of this year the SEVIS system will be up, running, available and we hope will be adequately followed through with all the things that need to be done to ensure that is fully implemented as well.

MR. ROEMER: You have confidence that that deadline is going to be reached?

MR. FINE: I wouldn't say with confidence that it is going to be reached, because I have seen similar things that you have seen. What I will say is, they have made progress and they need to make more progress.

MR. ROEMER: Mr. Wolosky, one quick question for you.

With respect to Saudi Arabia and the efforts they are making internally and bilaterally with the United States to do more about cracking down on the financing of contributions to terrorist operations, how would you measure the lack of progress since 9/11 internally? What have they done internally to crack down? And secondly, externally and bilaterally with the United States? In addition to elevating this to the highest levels of concern for us, what other steps need to be taken to make this communication more of a priority in terms of benchmarks and implementing programs?

MR. WOLOSKY: Sure. Well, in assessing what has been done I think it is helpful to distinguish, again, between tactical measures and strategic measures.

The tactical measures are, again, ones that target particular nodes of the terrorist financing infrastructure, particular individuals, particular charities, et cetera.

Much of that activity is conducted by law enforcement intelligence agencies. Much of it is not transparent and should remain not transparent.

There has been a substantial amount of activity, as I understand it, between the United States Government and the Saudi Government at the tactical law enforcement and intelligence level.

At the same time, there have been indications that there are problems, chiefly, with respect to the two public designations that were made of organizations or individuals that support terror. Jointly, I mean joint designations under the IEEPA statute with the Saudi Government, there were two last year. One targeted the Al Aman charity and the other was targeting an individual who was identified by the Treasury Department as a significant contributor-one of the cofounders of al Qaeda is what I believe the Treasury press release said.

Now, with respect to Al Aman the problems are published reports that it is still in business with respect to the individual who is identified in September and designated by U.S. Government. The problem is that in the days after his designation by the U.S. Government, the designation was questioned by senior Saudi officials.

So that indicates to me, at least, that notwithstanding substantial efforts, there are still problems at the tactical level in identifying particular nodes within terrorist financial system with Saudi Arabia.

Now, at the strategic level, there you get into questions of regulation of charities, steps that are taken or avoided with respect to putting in place, know your customer rules and suspicious activity reporting requirements within Saudi financial institutions. Regulations of charities, like hawala, things of that sort.

Again, that information should be publicly available. It should be available to this Commission. It should be available to the United States Government. It should be available to me as a concerned private citizen when I log onto the web. At least with respect to my efforts, I haven't been able to find it.

MR. ROEMER: Thank you.

MR. KEAN: Thank you very much. This has been a very, very helpful panel. I hope we can come back to some of you again. Thank you very much for your help.

(Recess.)

MR. KEAN: The next panel consists of Michael Wermuth of RAND Corporation, Steven Brill, author of a book many of us have read, "After: How America Confronted the September 12 Era." Zoe Baird of the Markle Foundation, and Randy Larsen of ANSER Institute for Homeland Security.

And I know, Mr. Brill, you have a hard and fast deadline, so maybe if with start off with you, sir.

MR. BRILL: Thank you very much, Governor. I appreciate your accommodating me.

I am delighted to be here this morning and honored to be asked to share some of my views with you. I think the primary benefit that I might be able to offer the Committee, which is something less than the expertise of the witnesses you have just heard, is that for the last year and a half I travelled this country, trying to get a grip on all of the questions you have been dealing with and, in particular, the questions you were dealing with this morning.

I spoke at great length not only to the people at the top of the issues, Attorney General Ashcroft, Secretary Ridge, Bob Bonnard, Jim Loy and people like that, and their staffs, but also to the people who are actually out in the field trying to implement and make sense of what was going on in Washington during some very difficult times.

My goal was to make a connection between policy, between discussions like the ones we are having today and what was actually happening in the airports, at the docks, at the borders.

What I found, I think I can keep my remarks fairly brief and I hope quite simple, really falls much more under the category of what we can go do going forward as opposed to mistakes we might have made in the past. But I did come across some of those mistakes that we made in the past.

First, one general observation that I suspect everyone in this room shares and I really got to see firsthand in, I think, a very special way, we are the people out there doing this job, are, I think, the worthy successors to the greatest generation that Tom Broker wrote about. They are people in Customs, in INS, in the Coast Guards, of course, men and women overseas who have really risen to the challenges of, what I call, the September 12 Era.

The issue is what kind of support those people are going to get. Their dedication is constant. Their attention spans are long. I sat in on meetings of people who have been dealing with the container, the cargo container security issue, who have been dealing with this issue for 10, 11, 12 years or 20 years. I have sat in on meetings where the Office of Homeland Security brought people together for the first time from the Department of Transportation, from Customs, the Coast Guard, from Treasury, the Department of State, to deal with the problem like container security, or deal with the problem like borders, and they were delighted to meet each other. They had all been working off in their corners in different places dedicated to those issues.

Their attention span is long. I can't say the same, with all respect, to many of you on this panel from members of Congress, from members of Executive Branch and certainly from members of the press. Their attention spans are quite something else.

First, let me just recount a couple of the obvious pre 9/11 mistakes that I encountered. One was that on the evening of September 11, airline executives started to get a fax from the FAA. The FAA's fax was, guess what, a watch list, a no fly list. Don't let these 300 people fly. This is the evening of September 11.

Airline executives had the same reaction that I suspect you had: 'it is too bad we didn't get this the morning of September 11.' There are 300 names on that list. That list had been sitting around. It had been provided both by the CIA and the FBI to the head of Civil Security at the FAA, and they hadn't yet developed over a period of months a protocol for how to add names or subtract names from the list, and under whose letterhead it was going to be issued, so they hadn't issued it. The evening of September 11, they decided to issue it.

The second story that I think illustrates the lack of urgency. On the northern border, this is something that Inspector General Fine has reported on more times than you are ever going to have hearings. On the northern border they were two border patrol agents who in 1999 testified before Congress about something called the "catch and release program." Here is what the "catch and release program" is.

They would catch people sneaking over the border in Detroit, walking through the train tunnel or coming in on little boats on the shore. They would catch them and then what they would do is, they would give them a self addressed postcard. And they would hand them the card after they caught them and arrested them. They would hand them this card and say, 'listen, when you get an address in the United States, the country you are sneaking into, that you are not supposed to be in, when you establish an address, send us back this postcard. Then we will know your address, and then we can mail you a notice of your deportation hearing. Then you can come for a hearing, and then we can deport you.' A lot of these people didn't really show up for deportation hearing or send the postcards back.

They testified about it in 1999. What happens in October of 2001 I am sorry, not October, the week after September 11, 2001? They tell a reporter for the Detroit Free Press something less than what I have just told you. Much less in detail, that the northern border isn't secure. That we don't have the resources. We can't hold people in detention when we catch them. Guess what happens to them. They get a notice that they are going to be fired.

Luckily, the Inspector General stepped in. The office of, I think it is the Special Counsel Office that protects whistle blowers, stepped in. They did not get fired, but that was the INS border patrol reaction.

That policy after there was yet another hearing in November of 2001, that policy has now been changed somewhat. But this took September 11. It took an Inspector General. It took some reports in the Detroit Free Press before that policy talk about obvious gaps such as the general aviation gap, this is a fairly obvious gap.

One more example, just before the millennium there was a very well publicized arrest of someone who was attempting to sneak in over the northern border in Washington State, who had plans to blow up Los Angles Airport.

Ray Kelly, who was then the Customs Director, thought that as a result of that, this was a good time to reinforce the northern border with as many customs agents as he could possibly send there. His attitude, as I recount in the book was, I will send them there and surely Congress will pay for it now that we have made the arrest. Surely the issue of the budget to protect the northern border going to be solved by this obvious manifestation of the crisis, and those extra agents lasted for a few months. Congress lost interest, it went back to being just the way it was.

The air marshals just one more point. On the September 11, the air marshals, there was 31 U.S. air marshals in the United States of America, none of them were on a single airplane on the morning of September 11. There are now, their target is something upwards of 3,000, I think, now, and we are doing it urgently, and, I guess that's good.

But today as we speak the attention span is still mixed. It still takes the INS, they say, five to seven months to render an environmental impact statement before they can put a pole up that will hold a camera at a strategic point on the northern border, or to put motion detectors. They have to do environmental impact statements, five to seven months in an administration that is not otherwise really quite that well known for its sensitivity to the environment.

The dilemma of all this is I could sit here for two or three hours as could the other members of this panel and talk about the gaps. The really serious issue is that we can never really be doing enough. We can all trade anecdotes and we can all decide that we are not doing enough, and we really cannot do enough in a country that has 7500 miles of border, that has thousands of miles of natural gas pipelines, tens of thousands of facilities storing or shipping dangerous chemical, infinite entrances to subways, to trains and to office buildings, and just as many vulnerabilities relating to food or water supply, and even to office building ventilation systems.

So the critics that say we are not doing enough are always going to be right. The issue is, how can we make the debate and the way we go forward a little more