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February 20, 2004:

The Honorable Thad Cochran:

Chairman:

The Honorable Robert C. Byrd:

Ranking Minority Member:

Subcommittee on Homeland Security:

Committee on Appropriations:

United States Senate:

Subject: Investigations of Terrorist Financing, Money Laundering, and 
Other Financial Crimes:

After the tragic events of September 11, 2001, federal efforts to wage 
a seamless, coordinated campaign against sources of terrorist financing 
became critically important. In May 2003, the Attorney General and the 
Secretary of Homeland Security signed a Memorandum of Agreement 
(Agreement) concerning terrorist financing investigations, which 
contained a number of provisions designed to resolve jurisdictional 
issues and enhance interagency coordination. The Agreement and its 
related procedures specified that the Federal Bureau of Investigation 
(FBI) was to have the lead role in investigating terrorist financing 
and that the U.S. Immigration and Customs Enforcement (ICE), a 
component of the Department of Homeland Security, was to pursue 
terrorist financing solely through participation in FBI-led task 
forces, except as expressly approved by the FBI. Specific provisions of 
the Agreement directed the FBI and ICE to, among other things, develop 
collaborative procedures for handling applicable ICE investigations or 
financial crimes leads that have a nexus to terrorism. Another 
provision required that the FBI and ICE jointly report to the Attorney 
General, the Secretary of Homeland Security, and the Assistant to the 
President for Homeland Security on the status of the implementation of 
the Agreement 4 months from its effective date.

Shortly after the Memorandum of Agreement was signed, Department of 
Homeland Security component agencies, the U.S. Secret Service and ICE, 
expressed concern that the Agreement could adversely affect their 
ability to conduct investigations involving financial crimes. Thus, 
Senate Report 108-86 (July 2003)[Footnote 1] directed that we evaluate 
the Agreement's impact on the existing authorities of the Secret 
Service and ICE to effectively carry out traditional financial crimes 
investigations. Our initial work showed that the Agreement pertains 
only to investigations and operations of the FBI and ICE and does not 
impact the investigative authority or operations of the Secret Service. 
Therefore, we are not discussing the Secret Service in this report. In 
accordance with the congressional mandate and as agreed with your 
offices, this report addresses the following questions:

1. What is the status of the implementation of the Memorandum of 
Agreement?

2. How has the Agreement affected the mission or role of ICE regarding 
investigations of financial crimes?

3. What are the potential challenges to the successful implementation 
of the Agreement?

To address these questions, our work focused on the principal 
components of the Department of Homeland Security and the Department of 
Justice that are responsible for implementing the Agreement and 
investigating and prosecuting terrorist financing--ICE, the FBI and its 
Joint Terrorism Task Forces, the Terrorist Financing Unit of the 
Counterterrorism Section in Justice's Criminal Division, and U.S. 
Attorneys Offices. To determine the implementation status of the 
Agreement and the potential challenges to its successful 
implementation, we contacted headquarters officials from these 
components, and we reviewed available documentation of intra-agency and 
interagency communications on these topics. We obtained additional 
perspectives on the Agreement and its implementation from field 
officials in three major U.S. cities and reviewed related documents.

Further, to determine how the Agreement has affected the mission or 
role of ICE, we interviewed ICE headquarters and field officials and 
reviewed applicable laws and other documents. We also contacted the 
Department of the Treasury's Financial Crimes Enforcement Network, 
officials from three financial regulatory agencies (Federal Reserve 
Board, Office of the Comptroller of the Currency, and the Securities 
and Exchange Commission), two large U.S. banks, and one banking 
industry association.[Footnote 2] The results of our interviews with 
federal law enforcement officials in the field offices and with the 
financial community officials may not be representative of the views 
and opinions of others nationwide. We performed our work from October 
2003 to February 2004 in accordance with generally accepted government 
auditing standards. Enclosure I presents more details about our 
objectives, scope, and methodology.

Results in Brief:

As of February 2004, the FBI and ICE had implemented or taken 
concrete steps to implement most of the key Memorandum of Agreement 
provisions. For example, the agencies had developed collaborative 
procedures to determine whether applicable ICE investigations or 
financial crimes leads may be related to terrorism or terrorist 
financing--and, if so, determine whether these investigations or leads 
should thereafter be pursued under the auspices of the FBI. The FBI and 
ICE have not yet issued a joint report on the status of the 
implementation, which was required 4 months from the effective date of 
the Agreement. By granting the FBI the lead role in investigating 
terrorist financing, the Agreement has altered ICE's role in 
investigating terrorism-related financial crimes. However, the 
Agreement generally has not affected the agency's mission or role in 
investigating other financial crimes. The FBI and ICE have and will 
continue to confront a number of operational and organizational 
challenges, such as establishing and maintaining effective interagency 
relationships and ensuring that the financial crimes expertise and 
other investigative competencies of both agencies are appropriately and 
effectively utilized. Continued progress in implementing the Agreement 
depends largely on the FBI's and ICE's ability to find workable 
strategies to overcome these challenges.

Background:

The former U.S. Customs Service, which is now part of ICE, and the 
FBI both have a long history of investigating money laundering and 
other financial crimes.[Footnote 3] In response to the terrorist 
attacks of September 11, 2001, the Departments of the Treasury and 
Justice both established multi-agency task forces dedicated to 
combating terrorist financing. Treasury established Operation Green 
Quest, led by Customs, to augment existing counterterrorist efforts by 
targeting current terrorist funding sources and identifying possible 
future sources. In addition to targeting individuals and organizations, 
Operation Green Quest was designed to attack the financial systems that 
may be used by terrorists to raise and move funds, such as fraudulent 
charities and the shipment of bulk currency. In January 2003, Customs 
expanded Operation Green Quest by doubling the personnel commitment to 
a total of approximately 300 agents and analysts nationwide to work 
solely on terrorist financing matters. In March 2003, Customs and 
Operation Green Quest were transferred to ICE, within the Department of 
Homeland Security.

On September 13, 2001, the FBI formed a multi-agency task force--
which is now known as the Terrorist Financing Operations Section 
(TFOS)--to combat terrorist financing. The mission of TFOS has evolved 
into a broad role to identify, investigate, prosecute, disrupt, and 
dismantle all terrorist-related financial and fundraising activities. 
The FBI also took action to expand the antiterrorist financing focus of 
its Joint Terrorism Task Forces (JTTFs)--teams of local and state law 
enforcement officials, FBI agents, and other federal agents and 
personnel whose mission is to investigate and prevent acts of 
terrorism.[Footnote 4] In 2002, the FBI created a national JTTF in 
Washington, D.C., to collect terrorism information and intelligence and 
funnel it to the field JTTFs, various terrorism units within the FBI, 
and partner agencies.

Following September 11, representatives of the FBI and Operation 
Green Quest met on several occasions to attempt to delineate 
antiterrorist financing roles and responsibilities. However, such 
efforts were largely unsuccessful. The resulting lack of clearly 
defined roles and coordination procedures contributed to duplication of 
efforts and disagreements over which agency should lead 
investigations.[Footnote 5] To help resolve these long-standing 
jurisdictional issues, in May 2003, the Attorney General and the 
Secretary of Homeland Security signed a Memorandum of Agreement on 
terrorist financing investigations. According to the Agreement, the 
Department of Justice will lead federal law enforcement efforts against 
terrorist financing.[Footnote 6] The Agreement specifies that the FBI 
is to lead terrorist financing investigations and operations, utilizing 
the intergovernmental and intra-agency national JTTF at FBI 
headquarters and the JTTFs in the field. The Agreement also specifies 
that, through TFOS, the FBI is to provide overall operational command 
to the national JTTF and the field JTTFs.

The Agreement contains several provisions designed to increase 
information sharing and coordination of terrorist financing 
investigations. For example, the Agreement requires the FBI and ICE to 
(1) detail appropriate personnel to each other's agency and (2) develop 
specific collaborative procedures to determine whether applicable ICE 
investigations or financial crimes leads may be related to terrorism or 
terrorist financing. Also, the Agreement required the FBI and ICE to 
produce a joint written report on the status of the implementation of 
the Agreement 4 months from its effective date. Additional details on 
the Agreement and all of its provisions are presented in enclosure II.

Most Key Memorandum of Agreement Provisions Have Been Implemented:

As of February 2004, most of the key Memorandum of Agreement 
provisions had been implemented or were in the process of being 
implemented (see table 1). For example, in accordance with the 
Agreement, the FBI and ICE have cross-detailed key management personnel 
at the headquarters level, with an ICE manager serving as Deputy 
Section Chief of TFOS and an FBI manager detailed to ICE's financial 
crimes division. Also, the FBI and ICE have developed collaborative 
procedures to determine whether appropriate ICE money laundering 
investigations or financial crime leads may be related to terrorism or 
terrorist financing.

Table 1: Status of Implementation of Key Memorandum of Agreement 
Provisions (as of Feb. 2004):

Agreement provisions: Increase information sharing and coordination 
(para. 3): 
* Take all reasonable and necessary steps to permit the maximum 
allowable information sharing relating to terrorist financing 
information and intelligence among the members of the national JTTF 
and field JTTFs; 
* Detail appropriate FBI personnel to the financial crimes division of 
ICE. Such detailees are to be provided full and timely access to all 
data developed in ICE's money laundering and financial crimes cases on 
an ongoing basis; 

Implementation status: 
* According to FBI and ICE officials, the implementation of this 
provision is ongoing. For example, the agencies are taking steps to 
ensure that ICE agents assigned to field JTTFs have required security 
clearances; 
*In February 2004, the FBI detailed a manager to ICE's financial 
crimes division. Earlier, other FBI staff had been detailed to ICE.

Agreement provisions: Develop collaborative procedures to implement 
the Agreement (para. 4); 
* By June 30, 2003, develop collaborative procedures to determine 
whether an ICE money laundering or financial crime lead or 
investigation is related to terrorism or terrorist financing and to 
ensure effective deconfliction; 

Implementation status: 
* The FBI and ICE finalized the collaborative procedures in July 2003. 
(See enc. II.).

Agreement provisions: Detail a Homeland Security employee to be Deputy 
Section Chief of TFOS (para. 5); 
* When the position of Deputy Section Chief of TFOS next becomes 
vacant or by December 1, 2003--whichever comes first--the position 
shall be filled by a Homeland Security employee detailed to the FBI; 

Implementation status: 
* In July 2003, the position of Deputy Section Chief of TFOS was 
filled by a Homeland Security employee. ICE has maintained staffing at 
TFOS (or predecessor groups) since October 2001.

Agreement provisions: Detail ICE personnel to the national JTTF and 
JTTFs (para. 6); 
* To utilize the expertise and capabilities of ICE in the federal 
campaign against terrorist financing, Homeland Security will detail a 
significant number of appropriate personnel to the national JTTF and 
field JTTFs, and the FBI will ensure that the detailees are fully 
integrated into its efforts to combat terrorist financing; 

Implementation status: 
* In February 2004, ICE officials said that 3 ICE agents had been 
assigned to the national JTTF and a total of 277 ICE agents had been 
assigned to field JTTFs.[A] The officials did not know how many of 
these assignments were made after the Agreement was signed.

Agreement provisions: Report on the implementation status of the 
Agreement (para. 8); 
* The FBI and ICE shall provide a joint written report to the Attorney 
General, the Secretary of Homeland Security, and the Assistant to the 
President for Homeland Security on the status of the implementation of 
the Agreement 4 months from the effective date of the Agreement; 

Implementation status: 
* No report had been issued, as of February 20, 2004. 

Source: GAO analysis of the Agreement and the collaborative procedures 
(see enc. II) and discussions with FBI and ICE officials.

[A] According to ICE officials, the total for the field JTTFs does not 
include ICE agents who will be assigned in consonance with vetted cases 
being transitioned to the JTTFs, nor does it include ICE investigators 
who participate part time on JTTFs. Also, the officials said that 32 of 
the 277 ICE agents assigned to field JTTFs were former Customs Service 
agents. The ICE officials did not know how many of the 32 Customs 
agents had worked under the former Operation Green Quest.

[End of table]

Further, as an integral aspect of the collaborative procedures, ICE 
created a joint vetting unit, in which ICE and FBI personnel--who have 
full access to ICE and FBI databases--are to conduct reviews to 
determine whether a potential nexus to terrorism or terrorist financing 
exists in applicable ICE investigations or financial crimes leads. If 
so, the matter is to be referred to TFOS, where the FBI Section Chief 
is to provide the ICE Deputy Section Chief with information 
demonstrating the terrorism nexus, as well as the stage and development 
of the corresponding FBI investigation. Then, the Section Chief and the 
ICE Deputy Section Chief are to discuss the elements of the terrorism 
nexus, ICE's equity or commitment of resources to-date in the 
investigation, violations being pursued by ICE before the Memorandum of 
Agreement, and the direction of the investigation. After this 
collaborative consultation, the FBI and ICE are to decide (1) whether 
the ICE investigation will be conducted under the auspices of the JTTF 
and (2) agency roles in pursuing related investigations. Specific 
investigative strategies generally are to be developed at the field 
level by FBI, ICE, and U.S. Attorneys Office personnel. The Terrorist 
Financing Unit of the Counterterrorism Section in Justice's Criminal 
Division is involved in coordinating and prosecuting matters and cases 
involving terrorist financing, which are investigated by both the FBI 
and ICE.

From July to October 2003, the FBI provided a list of individuals, 
businesses, and organizations to the vetting unit that it believed were 
related to pre-Agreement ICE Operation Green Quest investigations. A 
review of the list by the vetting unit and TFOS identified 
approximately 30 potential crossover subjects. The FBI believed that 
these subjects had ties to terrorism or terrorist financing--and, 
accordingly, per the Agreement's collaborative procedures--any related 
ICE investigations should be transitioned to JTTFs. According to ICE 
officials, in late-October, TFOS demonstrated that 10 of the 
approximately 30 subjects had a confirmed nexus to terrorism or 
terrorist financing, and ICE agreed to transition the related ICE 
investigations to JTTFs. Regarding the other subjects, as of February 
2004, FBI and ICE officials were engaged in discussions to determine 
appropriate courses of action.

Moreover, ICE has provided the vetting unit two sets of financial 
crimes leads to determine whether they may be related to terrorism or 
terrorist financing. Specifically, in September 2003, ICE provided the 
vetting unit a computer disk containing more than 7,000 subjects 
records that were related to all open former Operation Green Quest 
leads in ICE's financial investigations database. As of February 2004, 
TFOS was in the process of running the approximately 7,000 ICE subject 
records through FBI databases to determine whether the FBI had ongoing 
investigations involving the same subjects. Since the Agreement was 
signed, ICE has provided an additional 11 financial crimes leads to the 
vetting unit. TFOS has determined that none of these 11 leads had a 
significant connection to an FBI terrorism investigation and, 
therefore, would not be governed by the Agreement and ICE could 
continue to pursue them. More details about the results of the vetting 
process are presented in enclosure III.

Another Agreement provision--requiring ICE to detail a significant 
number of appropriate personnel to the national JTTF and the JTTFs in 
the field--is being handled on a location-specific, case-by-case basis. 
In response to our inquiries, FBI and ICE officials said that this 
provision was not intended to refer to a specific number of personnel 
and certainly was not intended to imply that all former Operation Green 
Quest agents were to be detailed to JTTFs. According to ICE officials, 
as of February 2004, a total of 277 ICE personnel (from various legacy 
agencies) were assigned full time to JTTFs--a total that consisted of 
161 former Immigration and Naturalization Service agents, 59 Federal 
Air Marshals, 32 former Customs Service agents, and 25 Federal 
Protective Service agents. ICE officials said that this total does not 
include ICE agents who will be assigned to JTTFs in consonance with 
vetted cases being transitioned to the JTTFs, nor does it include ICE 
investigators who participate part time on JTTFs.

Further, in response to our inquiries, ICE officials said they could 
not readily determine how many of the 277 ICE personnel (including the 
32 former Customs Service agents) were assigned to JTTFs after the 
Agreement became effective or how many of these personnel were now 
working on financial aspects of terrorism investigations. The officials 
also said they could not readily determine how many of the 32 former 
Customs Service agents had financial investigations expertise or had 
worked in the former Operation Green Quest.[Footnote 7] The officials 
noted that all former Customs Service agents assigned to the JTTFs had 
received financial investigations training.

Finally, as shown in table 1, the FBI and ICE have not yet produced the 
required joint report on the status of the implementation of the 
Memorandum of Agreement. ICE officials said they provided a draft 
report to the FBI in January 2004. FBI officials said they anticipate 
that a joint report will be finalized by the end of February 2004.

The Memorandum of Agreement Generally Has Not Affected ICE's Mission or 
Role in Investigating Nonterrorism-Related Financial Crimes:

By granting the FBI the lead role in investigating terrorist financing, 
the Agreement has altered ICE's role in investigating terrorism-related 
financial crimes. However, the Agreement generally has not affected the 
agency's mission or role in investigating other financial crimes. 
Specifically, the Agreement did not affect ICE's statutory authorities 
to conduct investigations of money laundering and other traditional 
financial crimes. ICE investigations can still cover the wide range of 
financial systems--including banking systems, money services 
businesses, bulk cash smuggling, trade-based money laundering systems, 
illicit insurance schemes, and illicit charity schemes--that could be 
exploited by money launderers and other criminals. According to ICE 
headquarters officials, ICE is investigating the same types of 
financial systems as before the Memorandum of Agreement.

Also, while the Memorandum of Agreement specifies that the FBI has 
primary investigative jurisdiction over confirmed terrorism-related 
financial crimes, the Agreement does not preclude ICE from 
investigating suspicious financial activities that have a potential 
(unconfirmed) nexus to terrorism--which was the primary role of the 
former Operation Green Quest. To support investigations with a 
potential nexus to terrorism and other financial crimes investigations, 
in July 2003, ICE launched Operation Cornerstone, a new financial 
investigative program designed to identify and eliminate 
vulnerabilities in financial systems that could be exploited by 
individuals, criminal organizations, and terrorists. According to ICE 
headquarters officials, ICE will continue to aggressively investigate 
financial crimes within its jurisdiction, regardless of the origin of 
the targets or the source or destination of the money.

Further, ICE officials at headquarters and the three field locations we 
visited said the Agreement generally has not affected the agency's 
relationships with the financial community. Through Operation 
Cornerstone, ICE plans to continue efforts to develop working 
partnerships with financial industry representatives to share 
information and identify and close industrywide security gaps that 
could be exploited by money launderers and other criminal 
organizations. The three financial regulators we contacted (the Federal 
Reserve Board, the Office of the Comptroller of the Currency, and the 
Securities and Exchange Commission) also said the Agreement has not 
affected their relationships with ICE. The two financial institutions 
we contacted offered similar comments. The banking industry association 
representative we contacted said that it may be too soon to tell how 
the Agreement has affected ICE's relationships with the financial 
community.

According to Financial Crimes Enforcement Network officials, the 
Memorandum of Agreement did not affect their agency's procedures for 
collecting and disseminating financial leads, except in specific cases 
where the information was related to terrorist financing. The officials 
explained that after the Agreement was signed, the agency sent only 
those specific cases potentially related to terrorist financing to the 
FBI and no longer to ICE. In August 2003, ICE sent a letter to the 
Financial Crimes Enforcement Network announcing the creation of 
Operation Cornerstone and requesting that all leads be referred to 
Cornerstone, regardless of any alleged or apparent terrorist 
connection. In its letter, ICE noted that under the former Operation 
Green Quest, most referrals initially characterized as "terrorist-
related financing" did not ultimately reveal a link to terrorism but 
were successfully investigated by ICE regarding other financial crimes. 
In its September 2003 response to ICE, the Financial Crimes Enforcement 
Network explained its process for referring terrorist-related leads to 
the FBI--based on its understanding of the Agreement--and offered to 
work with ICE to improve the vetting process if needed. In December 
2003, the Financial Crimes Enforcement Network's new Director made the 
decision to provide Operation Cornerstone with the same terrorist 
financing information as provided to the FBI.

Finally, ICE officials at the three field locations we visited said the 
Agreement generally has not affected their relationships with state and 
local law enforcement agencies. Specifically, at one location, after 
the Agreement was signed, local law enforcement agencies withdrew two 
agents from Operation Green Quest but subsequently replaced them with 
agents who did not specialize in terrorism matters. At a second 
location, after the Agreement was signed, 8 to 10 state agents stopped 
working joint investigations with Operation Green Quest but 
subsequently continued to work with ICE on nonterrorism-related 
financial investigations.[Footnote 8] At a third location, state and 
local law enforcement did not support Operation Green Quest before the 
Agreement was signed. ICE officials at all three locations said the 
Agreement did not affect state and local support on other types of 
financial crimes investigations that were unrelated to terrorism.

The FBI and ICE Face Many Challenges in Implementing the Memorandum of 
Agreement:

The successful implementation of the Memorandum of Agreement will 
require the FBI and ICE to address many operational and organizational 
challenges. First, the agencies face the task of finding common space 
for FBI, ICE, and other JTTF personnel to work together. Additionally, 
ICE personnel assigned to JTTFs may encounter obstacles to effective 
information sharing as agents requiring additional security clearances 
complete the time-consuming process for obtaining such clearances. At 
the organizational level, the FBI and ICE confront various challenges 
integrating organizational cultures and effectively coordinating 
resources. Shifting priorities and large-scale reorganizations in these 
agencies produced a certain amount of turmoil and anxiety, which 
initially was exacerbated by the Agreement, particularly for ICE 
agents, who may have perceived the Agreement as minimizing their role 
in terrorist financing investigations.

The most effective investigations of terrorist financing will bring to 
bear all relevant resources on the problem. The FBI and ICE face 
challenges in ensuring that the implementation of the Agreement does 
not create a disincentive for ICE agents to initiate or support 
terrorist financing investigations. Additional challenges involve 
ensuring that the financial crimes expertise and other investigative 
competencies of the FBI and ICE are effectively utilized and that the 
full range of the agencies' collective authorities--intelligence 
gathering and analysis as well as law enforcement actions, such as 
executing search warrants and seizing cash and other assets--are 
effectively coordinated.

Inherently, efforts to meet these challenges will be an ongoing 
process. Our interviews with FBI and ICE officials at headquarters and 
three field locations indicated that long-standing jurisdictional and 
operational disputes regarding terrorist financing investigations may 
have strained interagency relationships to some degree and could pose 
an obstacle in fully integrating investigative efforts. In addition, 
some of the ICE field officials we contacted had concerns about 
permanently detailing financial agents to JTTFs, partly because the 
officials were reluctant to have ICE agents supervised by FBI 
personnel. Further, FBI and ICE headquarters generally were not issuing 
joint communications to their field offices. For instance, the agencies 
had not issued joint guidance to all their supervisory agents regarding 
implementation of the Agreement. Rather, the agencies issued separate 
memorandums. Similarly, the agencies distributed separate memorandums 
to their field offices regarding the transition of certain ICE 
investigations to JTTFs. While the separate memorandums generally 
addressed the same issues, these communications varied in the 
specificity of the agencies' respective roles in pursuing the 
investigations. In summary, these examples indicate that establishing 
and maintaining effective interagency relationships will be a key 
determinant of continued progress in implementing the Agreement and 
achieving its ultimate goal.

Concluding Observations:

The Memorandum of Agreement represents a partnering commitment by the 
FBI and ICE to wage a seamless, coordinated campaign against sources of 
terrorist financing. In the 9 months since the Agreement was signed, 
progress has been made. Continued progress will depend largely on the 
ability of the agencies to establish and maintain effective interagency 
relationships and meet various other operational and organizational 
challenges.

Agency Comments:

We provided a draft of this report for review and comment to 
Justice, Homeland Security, and Treasury. The three departments did not 
comment on the overall substance of the draft report. We received 
responses from three Justice components (Criminal Division, FBI, and 
Executive Office for U.S. Attorneys), Homeland Security's ICE, and 
Treasury's Financial Crimes Enforcement Network. Four of the five 
respondents provided technical comments and clarifications, which have 
been incorporated in this report where appropriate. The fifth 
respondent, the Executive Office for U.S. Attorneys, had no comments. 
Also, we provided a draft of the applicable sections of this report for 
review and comment to the three federal financial regulatory agencies 
we contacted. The Federal Reserve Board said the draft sections 
accurately reflected the agency's position vis--vis ICE. A 
representative from the Office of the Comptroller of the Currency said 
he had no objection to the draft language. And, the Securities and 
Exchange Commission had no comments.

We are providing copies of this report to the Attorney General and 
the Secretary of Homeland Security. We also will make copies available 
to others on request.

If you have any questions about this report, please contact me at 
(202) 512-8777 or Danny R. Burton, Assistant Director, or Eric Erdman, 
Senior Analyst, at (214) 777-5600. Other key contributors to this 
report were Alison Heafitz, Allison Abrams, Barbara Keller, and Kathryn 
Young.

Signed by: 

Richard M. Stana:

Director, Homeland Security and Justice Issues:

Enclosures - 3:

[End of section]

Objectives, Scope, and Methodology:

Objectives:

In May 2003, the Attorney General and the Secretary of Homeland 
Security signed a Memorandum of Agreement (Agreement) concerning 
terrorist financing investigations to help resolve jurisdictional 
issues and enhance interagency coordination. Regarding the Agreement, 
Senate Report 108-86 (July 2003)[Footnote 9] contained the following 
directive:

The Committee [on Appropriations] is concerned that the recent 
Memorandum of Agreement (MOA) between the Department of Homeland 
Security and the Department of Justice regarding investigations of 
terrorist financing will adversely affect the ability of the United 
States Secret Service (USSS) and the Bureau of Immigration and Customs 
Enforcement (BICE) to effectively carry out traditional financial 
crimes investigations. The Committee expects the General Accounting 
Office (GAO) to provide the Committee  an evaluation of the MOA's 
impact on existing authorities of the USSS and BICE to effectively 
carry out financial crimes investigations, including the MOA's impact 
on the financial community and State and local cooperation.

Our work indicated that the Agreement does not apply to the Secret 
Service. Therefore, we did not focus on the Secret Service in our 
evaluation. Rather, in accordance with the congressional mandate--and 
as agreed with the offices of the Chairman and the Ranking Minority 
Member, Subcommittee on Homeland Security, Senate Committee on 
Appropriations--we addressed the following questions in reference to 
the progress of the U.S. Immigration and Customs Enforcement (ICE) and 
the Federal Bureau of Investigation (FBI) in implementing the 
Agreement:

* What is the status of the implementation of the Memorandum of 
Agreement?

* How has the Agreement affected the mission or role of ICE regarding 
investigations of financial crimes?

* What are the potential challenges to the successful implementation 
of the Agreement?

[End of section]

Scope and Methodology:

To address these questions, our work focused on the federal entities 
primarily responsible for investigating and prosecuting terrorist 
financing and implementing the Memorandum of Agreement. Within the 
Department of Homeland Security (DHS), we focused principally on ICE 
(the component that is comprised of agents from the legacy U.S. Customs 
Service). Within the Department of Justice, we focused on the FBI--
including its Joint Terrorism Task Forces (JTTFs) and Terrorist 
Financing Operations Section (TFOS)--the Terrorist Financing Unit of 
the Criminal Division's Counterterrorism Section, and U.S. Attorneys 
Offices.

Status of the Implementation of the Memorandum of Agreement:

Preliminarily, we reviewed the Agreement to obtain an understanding of 
its various provisions. Also, we contacted headquarters officials from 
ICE, the FBI, and the Executive Office for U.S. Attorneys to discuss 
the implementation status of the Agreement and to identify and review 
applicable procedures or other guidance for implementing the Agreement. 
To obtain additional perspectives on the status of Agreement's 
implementation, we visited ICE, FBI, and U.S. Attorneys Offices in 
three field locations. Each of the three locations was a major 
metropolitan area. However, due to law enforcement sensitivity of 
ongoing investigations, the three field locations are not disclosed in 
this report. We queried the field office officials about the 
implementation status of the MOA's various provisions, and we reviewed 
available documentation of intra-agency and interagency communications 
on this topic. The views and opinions expressed by officials in the 
field locations may not be representative of officials nationwide.

Effects of the Memorandum of Agreement on the Mission or Role of ICE:

To determine how (if at all) the Agreement has affected the mission or 
role of ICE--including impact on state and local law enforcement 
cooperation--we interviewed ICE headquarters officials and field 
officials in the three locations. Further, regarding financial 
community relationships, we contacted the Department of the Treasury's 
Financial Crimes Enforcement Network;[Footnote 10]

* regulatory officials at the Federal Reserve Board, the Office of the 
Comptroller of the Currency, and the Securities and Exchange 
Commission;

* representatives from two large U.S. banks; and:

* a representative from a banking industry association.

The results of these contacts are not necessarily representative of the 
entire financial community. Generally, based on relationships 
established in previous work, the interviewees were individuals who 
agreed to talk with us and were accessible within the limited time 
frames of our review.

Potential Barriers to the Implementation of the Memorandum of 
Agreement:

To identify potential barriers to the successful implementation of 
the Agreement, we interviewed ICE, FBI, and U.S. Attorneys Office 
officials at headquarters and the three field locations. Also, we 
reviewed agency memorandums and other communications regarding 
Agreement implementation.

Memorandum of Agreement and Collaborative Procedures:

Concerning Terrorist Financing Investigations:

In May 2003, the Attorney General and the Secretary of Homeland 
Security signed a Memorandum of Agreement (MOA) concerning terrorist 
financing investigations. Consistent with the MOA, in July 2003, the 
FBI and DHS/ICE agreed on collaborative procedures for determining 
whether appropriate ICE financial crime leads or money laundering 
investigations may be related to terrorism or terrorism financing.

The following sections of this enclosure provide the details of the 
MOA and the collaborative procedures, respectively.

Memorandum of Agreement Between the Department of Justice and the 
Department of Homeland Security:

On May 13, 2003, the Attorney General and the Secretary of Homeland 
Security signed a Memorandum of Agreement that consisted of the 
following 11 paragraphs:

1. Definitions. For purposes of this agreement:

a. "Secretary" means the Secretary of Homeland Security, and his 
successors, on behalf of all covered entities they head, supervise or 
represent.

b. "Attorney General" means the Attorney General of the United States, 
and his successors, on behalf of all covered entities they head, 
supervise or represent.

c. "Director" means the Director of the Federal Bureau of 
Investigation, and his successors.

d. "Parties" means the signatories to this Agreement and their 
successors, on behalf of all covered entities they head, supervise or 
represent.

2. Understanding the importance of waging a seamless, coordinated 
campaign against terrorist sources of financing, the undersigned agree 
that the Department of Justice will, as part of its responsibilities as 
the lead law enforcement agency in combating terrorism, and in 
accordance with the President's National Strategy for Homeland 
Security, lead the federal law enforcement effort against terrorist 
financing. The Federal Bureau of Investigation (FBI) will lead 
terrorist financing investigations and operations, utilizing the 
intergovernmental and intra-agency National Joint Terrorism Task Forces 
(NJTTF) at FBI Headquarters and the Joint Terrorism Task Forces (JTTFs) 
in the field to conduct terrorist financing investigations and 
operations. Through the Terrorist Financing Operations Section (TFOS), 
the FBI will provide overall operational command to the NJTTF and the 
JTTFs.

3. The Secretary and the Attorney General will ensure that all 
appropriate information and intelligence relating to terrorist 
financing is shared with members of the NJTTF and JTTFs, including 
Department of Homeland Security (DHS) detailees, to the greatest extent 
permissible by law and applicable guidelines, and consistent with the 
March 3, 2003, Memorandum of Understanding Between the Intelligence 
Community, Federal Law Enforcement Agencies, and the Department of 
Homeland Security Concerning Information Sharing. The parties agree to 
promptly take all reasonable and necessary steps to permit the maximum 
allowable information sharing relating to terrorist financing 
information and intelligence among the members of the NJTTF and the 
JTTFs. To further increase information sharing and coordination, the 
Attorney General and the Director agree to detail appropriate personnel 
to the financial crimes division of the Bureau of Immigration and 
Customs Enforcement (ICE). The Secretary shall ensure that such 
detailees are provided full and timely access to all data developed by 
ICE's money laundering and financial crimes cases on an ongoing basis.

4. After June 30, 2003, DHS will pursue terrorist financing 
investigations and operations solely through its participation in the 
NJTTF, the JTTFs, and TFOS, except as expressly approved by TFOS as 
provided in this paragraph. Both DHS and the Department of Justice 
(DOJ) will, however, continue independently to investigate money 
laundering and other financial crime matters that are unrelated to 
terrorism. DHS will focus its activities on protecting the integrity of 
U.S. financial infrastructures. To determine whether a money laundering 
or financial crime matter is related to terrorism or terrorist 
financing and to ensure effective deconfliction, all appropriate DHS 
leads relating to money laundering and financial crimes will be checked 
with the FBI. The parties agree to develop, as soon as possible but no 
later than June 30, 2003, specific collaborative procedures to enable 
the Section Chief of TFOS and Deputy Section Chief of TFOS detailed 
from DHS (or, if prior to the appointment of the Deputy Section Chief 
from DHS, the Associate Chief referenced in paragraph 3) to determine 
which leads should be provided to TFOS to enable TFOS to determine 
whether such leads may be related to terrorism or terrorist financing. 
Such procedures will provide for joint and continuous analysis of 
leads. Beginning on July 1, 2003, in any given matter, if TFOS 
determines that the matter is unrelated to terrorism or terrorist 
financing, the leadership of the investigation regarding the matter 
shall not be governed by this MOA. Determinations by TFOS shall take 
into account the following factors: strength of the terrorism or 
terrorist financing nexus; impact on the investigation of non-terrorism 
matters; and stage and development of the respective investigations. If 
TFOS, after consultation with DHS, determines that the matter is 
related to terrorism or terrorist financing, the investigation and 
operation of the matter shall be led by the FBI in accordance with 
paragraph 2. In pursuing investigations, TFOS will consider, among 
other things, the following factors: preservation of the government's 
flexibility and options to pursue investigations of both terrorism and 
non-terrorism matters; maintenance of the continuity of investigative 
personnel and management where appropriate (including the option, at 
the discretion of TFOS, to allow ICE to conduct terrorist financing 
investigations); and utilization of relevant expertise and authorities.

5. The parties agree that when the position of Deputy Section Chief of 
the TFOS next becomes vacant or by December 1, 2003, whichever comes 
first, the position shall be filled by a DHS employee detailed to the 
FBI, and shall continue to be filled by a DHS employee in the future. 
The employee will be chosen by mutual agreement of the Secretary and 
the Attorney General. Until such time as the position of Deputy Chief 
is filled by a DHS employee, the parties agree that a DHS employee 
shall be detailed to the FBI in a newly created position of "Associate 
Chief" of TFOS. The employee will be chosen by mutual agreement of the 
Secretary and the Attorney General.

6. The parties agree that the federal campaign against terrorist 
financing must utilize the significant expertise and capabilities of 
ICE. To this end, the parities will ensure that the appropriate ICE 
personnel have a significant and active presence on the NJTTF at 
headquarters and the JTTFs in the field. The Secretary will detail a 
significant number of appropriate personnel to the task forces, and the 
Director will ensure that the detailees are fully integrated into the 
FBI's efforts to combat terrorist financing, both at Headquarters and 
in the field, and are able to assist in the process described in 
paragraph 4, supra. The Secretary will ensure that the performance of 
DHS agents detailed to the FBI under this Agreement is recognized as a 
critical component of the DHS mission and that Customs Service's pre-
existing financial investigative expertise is preserved and developed 
through recruitment, training and retention initiatives.

7. The Secretary agrees that no later than June 30, 2003, Operation 
Green Quest (OGQ) will no longer exist as a program name. The Secretary 
agrees to ensure that any future DHS initiative or program to 
investigate crimes affecting the integrity and lawful operation of U.S. 
financial infrastructure will be performed through the financial crimes 
division of ICE. DHS will investigate matters related to terrorism and 
terrorist financing only with the consent of the FBI in accordance with 
this Memorandum of Agreement.

8. The Attorney General and the Secretary shall direct the Director 
and the Assistant Secretary for ICE to provide a joint written report 
to the Attorney General, the Secretary, and the Assistant to the 
President for Homeland Security on the status of the implementation of 
this Agreement four months from the effective date of this 
Agreement.[Footnote 11]

9. The parties shall immediately pursue implementation of the terms of 
this Agreement. Within ten days of the effective date of this Agreement 
the parties shall jointly issue guidance to all FBI and ICE supervisory 
agents regarding this Agreement.

10. Except where otherwise indicated, the terms of this Agreement shall 
be effective upon the signature of all parties.

11. These provisions are not intended to and do not create any rights, 
privileges, or benefits, substantive or procedural, enforceable by any 
individual or organization against the United States, its departments, 
agencies, or other entities, its officers or employees, or any other 
person.

Collaborative Procedures Pertaining to the Memorandum of Agreement:

Consistent with the MOA dated May 13, 2003, the FBI and DHS/ICE 
jointly agree on the following collaborative procedures to determine 
whether appropriate ICE financial crime leads or money-laundering 
investigations may be related to terrorism or terrorism 
financing.[Footnote 12] Nothing in this document shall supersede the 
written provisions in the aforementioned MOA. The following procedures 
pertain only to information and the operations of DHS/ICE:

1. DHS/ICE will establish a Joint Vetting Unit (JVU) within the 
Financial Information Analysis Section, which will continue to utilize 
the existing ICE vetting methodology to identify financial leads or 
investigations with a nexus to terrorism or terrorism financing 
consistent with the MOA.

2. The JVU will be staffed by DHS/ICE and FBI personnel who will have 
full access to relevant DHS/ICE and FBI databases to conduct reviews to 
determine whether a nexus to terrorism or terrorism financing exists in 
the appropriate DHS/ICE lead information or investigations. The JVU 
will establish a joint tracking system on investigative leads referred 
to the JVU and provide the assigned FBI personnel access to the system.

3. Throughout the collaborative vetting process, the determination of 
whether a DHS/ICE investigative referral or investigation is related to 
terrorism or terrorist financing shall be governed by the factors 
delineated in the MOA.

4. DHS will designate an ICE official to serve as the Deputy Chief of 
the FBI's TFOS. The Deputy Chief will have a fully integrated role in 
the evaluation and determination of whether a DHS/ICE referral or 
investigation has a nexus to terrorism or terrorism financing. The 
Deputy Chief and other DHS/ICE personnel assigned to TFOS will be 
provided complete and continuous access to FBI databases.

5. If, after collaborative consultation is made between the TFOS 
Section Chief and the DHS/ICE Deputy Chief, TFOS determines that a lead 
or investigation has a nexus to terrorism or terrorism financing, the 
matter will be investigated solely through the NJTTF, JTTF and TFOS, 
except as expressly approved by TFOS as delineated in the MOA.

6. Beginning on or about July 1, 2003, DHS/ICE and the FBI will begin 
the joint collaborative review within the JVU of pending DHS/ICE 
terrorist financing investigations. The review process to determine 
nexus to terrorism and terrorism financing will be governed by the 
procedures as outlined in this document and as delineated in the MOA.

ICE Investigations and Leads Identified as Having a Potential Nexus to 
Terrorism or Terrorist Financing:

This enclosure summarizes the status of the vetting of U.S. 
Immigration and Customs Enforcement (ICE) investigations and leads 
regarding the following three sources:

* From July to October 2003, the Federal Bureau of Investigation (FBI) 
provided a list to the joint vetting unit of approximately 30 terrorist 
financing or terrorist subjects it believed had crossover with ICE 
investigations.

* In September 2003, the ICE vetting unit provided the FBI's Terrorist 
Financing Operations Section (TFOS) a computer disk containing more 
than 7,000 subject records.

* In addition, as of January 2004, the ICE vetting unit had provided 11 
leads to TFOS to determine whether they may be related to terrorism or 
terrorist financing.

FBI Referral of Approximately 30 Investigative Subjects:

From July to October 2003, the FBI provided a list to the joint 
vetting unit of approximately 30 terrorist financing or terrorist 
subjects (including individuals, businesses, and other entities) it 
believed had crossover with ICE investigations. According to ICE 
officials, the FBI was claiming sovereignty over any ICE investigation 
that related to these subjects, claiming these subjects had sufficient 
ties to terrorism or terrorist financing, per Memorandum of Agreement 
guidelines.[Footnote 13] The officials said that, in late-October, TFOS 
demonstrated that 10 of the approximately 30 subjects had a confirmed 
nexus to terrorism or terrorist financing and ICE agreed to transition 
the related ICE investigations to the FBI's Joint Terrorism Task Forces 
(JTTFs). Regarding the other subjects, as of February 2004, FBI and ICE 
officials were engaged in discussions to determine appropriate courses 
of action.

In late-2003, the FBI and ICE sent memorandums to their respective 
field offices to notify them about agreements reached regarding the 10 
subjects. In general, the memorandums noted that future investigative 
activities related to these subjects would be conducted under the 
auspices of the JTTFs and that the FBI and ICE would make joint 
collaborative decisions on strategic and operational issues. The 
memorandums also addressed, in different levels of detail, the 
respective roles of the FBI and ICE in pursuing the investigations.

We visited three field locations where ICE investigations had been 
identified to be transitioned to the local JTTF. We found that the 
status of the transitions and the continuing role of ICE varied by 
location and circumstance.

* At one location, the investigative and prosecutorial strategy for 
pursuing the joint investigation had recently been developed at the 
field level by FBI, ICE, and U.S. Attorneys Office personnel. ICE had 
agreed to detail personnel to the local JTTF, and ICE and JTTF 
personnel were jointly working the investigation.[Footnote 14] The JTTF 
also had been supporting the ICE investigation before the Memorandum of 
Agreement.

* At a second location, the investigative and prosecutorial strategy 
for pursuing the joint investigation had recently been developed at the 
field level by FBI, ICE, and U.S. Attorneys Office personnel. ICE had 
agreed to support part of the JTTF investigation that involved 
violations within ICE's jurisdiction. However, ICE would not commit 
personnel to the JTTF, in part because of the distance between the ICE 
and JTTF offices.

* At a third location, ICE had provided its investigative files to the 
JTTF and was not supporting the investigation. In January 2004, ICE 
headquarters officials said the files were turned over during a period 
of initial confusion about the role of ICE under the Agreement. The 
officials said that they have asked the ICE field office to contact the 
JTTF to determine if ICE support is needed on the investigation.

ICE Provided TFOS More Than 7,000 Subject Records:

In September 2003, the ICE vetting unit provided TFOS a computer disk 
containing more than 7,000 subject records--including individuals, 
businesses, and other entities--that were related to all open former 
Operation Green Quest leads in ICE's financial investigations database. 
According to ICE officials, ICE requested that the FBI identify any 
positive subject record hits in FBI databases, so that ICE field 
offices could be advised of FBI investigative interests or crossover 
investigations. As of February 2004, the FBI had not provided the final 
disposition to ICE on the results of the FBI's subject record checks. 
According to an FBI official, TFOS was in the process of running the 
ICE subject records through FBI databases to determine whether the FBI 
had ongoing investigations involving the same subjects.

ICE Provided TFOS an Additional 11 Leads:

In addition, as of January 2004, the ICE vetting unit had provided 11 
leads to TFOS to determine whether they may be related to terrorism or 
terrorist financing. According to TFOS, some of the ICE leads were 
found to have either a nexus to terrorism or crossovers with 
nonterrorism-related FBI investigations. However, TFOS determined that 
none of the 11 ICE leads had a significant connection to an FBI 
terrorism investigation. Therefore, the leads would not be governed by 
the Memorandum of Agreement and ICE could continue to pursue them.

(440259):

FOOTNOTES

[1] Title I of the Senate Appropriations Committee report on the 
Department of Homeland Security Appropriations Bill for 2004. 

[2] A primary role of the Financial Crimes Enforcement Network is to 
support terrorist financing investigations through the facilitation of 
information sharing and networking among the law enforcement, 
regulatory, and financial communities. This role includes collecting 
and disseminating financial leads to law enforcement agencies. 

[3] Money laundering is the process used to transform monetary proceeds 
derived from criminal activities into funds and assets that appear to 
have come from legitimate sources. 

[4] According to the FBI, the first JTTF came into being in 1980, and 
the total number of task forces has nearly doubled since September 11, 
2001. Today, there is a JTTF in each of the FBI's 56 main field 
offices, and additional task forces are located in smaller FBI offices. 

[5] See U.S. General Accounting Office, Combating Money Laundering: 
Opportunities Exist to Improve the National Strategy, GAO-03-813 
(Washington, D.C.: Sept. 26, 2003).

[6] According to Justice, the main terrorist financing criminal statute 
is 18 U.S.C.  2339B, which gives the Attorney General the 
responsibility for investigating the crime of terrorist financing.

[7] As mentioned previously, Customs expanded Operation Green Quest in 
January 2003 by doubling the personnel commitment to a total of 
approximately 300 agents and analysts nationwide to work solely on 
terrorist financing matters.

[8] According to ICE officials, the 8 to 10 state agents were not 
detailed to Operation Green Quest but worked joint investigations with 
ICE on an ad hoc, as-needed basis. 

[9] Title I of the Senate Appropriations Committee report on the 
Department of Homeland Security Appropriations Bill for 2004. 

[10] A primary role of the Financial Crimes Enforcement Network is to 
support terrorist financing investigations through the facilitation of 
information sharing and networking among the law enforcement, 
regulatory, and financial communities. This role includes collecting 
and disseminating financial leads to law enforcement agencies.

[11] As indicated in paragraph 10 below, "the terms of this Agreement 
shall be effective upon the signature of all parties." The Agreement 
was signed by applicable parties on May 13, 2003. Four months later 
would be mid-September 2003. However, according to ICE officials, the 
Agreement was not fully effective until the collaborative procedures 
were signed in July 2003. Therefore, the officials said the joint 
report was due in November 2003.

[12] Michael Garcia, Assistant Secretary for ICE, signed the 
collaborative procedures on July 2, 2003. Robert Mueller, Director of 
the FBI, signed the collaborative procedures on July 7, 2003.

[13] According to ICE officials, the approximately 30 subjects were 
related or linked to about 30 former Operation Green Quest leads and 
about 80 ICE investigations. The officials noted that (1) an ICE 
investigation can consist of multiple, related leads and (2) in some 
cases, leads may become multiple investigations due to location and 
subject associations.

[14] At the time of our review, the local JTTF did not have enough 
space to accommodate the ICE personnel. As a result, the joint 
investigation was being conducted out of the ICE field office, with FBI 
personnel visiting the ICE office two or three times each week.