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Saudi Arabia: Terrorist Financing Issues



                           Updated June 11, 2008


                          Christopher M. Blanchard

                   Analyst in Middle Eastern Affairs

       Foreign Affairs, Defense, and Trade Division

            Saudi Arabia: Terrorist Financing Issues


Summary

      According to the U.S. State Department 2007 International Narcotics Control

Strategy Report, "Saudi donors and unregulated charities have been a major source

of financing to extremist and terrorist groups over the past 25 years." The September

11, 2001 attacks fueled criticisms within the United States of alleged Saudi

involvement in terrorism or of Saudi laxity in acting against terrorist groups. The

final report released by the bipartisan National Commission on Terrorist Attacks

Upon the United States (the 9/11 Commission) indicates that the Commission "found

no evidence that the Saudi government as an institution or senior Saudi officials

individually funded [Al Qaeda]." The report also states, however, that Saudi Arabia

"was a place where Al Qaeda raised money directly from individuals and through

charities" and indicates that "charities with significant Saudi government

sponsorship" may have diverted funding to Al Qaeda.


     U.S. officials remain concerned that Saudis continue to fund Al Qaeda and other

terrorist groups. In April 2008, Undersecretary of the Treasury for Terrorism and

Financial Intelligence Stuart Levey told the Senate Finance Committee that the Saudi

government is "serious about fighting Al Qaeda in the kingdom, and they do," and

argued that Saudi officials' "seriousness of purpose with respect to the money going

out of the kingdom is not as high." He added, "Saudi Arabia today remains the

location from which more money is going to terror groups and the Taliban -- Sunni

terror groups and the Taliban -- than from any other place in the world."


     Saudi officials insist that their counter-terrorist financing efforts are robust and

are not limited to targeting domestic threats. In numerous official statements, Saudi

leaders have said they are committed to cooperating with the United States in fighting

terrorist financing, pointing out that Saudi Arabia has been a victim of terrorism and

shares the U.S. interest in combating it. Saudi leaders acknowledge providing

financial support for Islamic and Palestinian causes, but maintain that no official

Saudi support goes to any terrorist organizations, such as Hamas.


     Al Qaeda affiliated terrorist attacks in Saudi Arabia from 2003 to 2006 appear

to have given added impetus to the Saudi leadership in expanding counter-terrorist

financing efforts. Since mid-2003, the Saudi government has: set up a joint task

force with the United States to investigate terrorist financing in Saudi Arabia;

shuttered some charitable organizations suspected of terrorist ties; passed anti-money

laundering legislation; banned cash collections at mosques; centralized control over

some charities; closed unlicenced money exchanges; and scrutinized clerics involved

in charitable collections. A planned National Commission for Relief and Charity

Work Abroad has not been established. As required by the Intelligence Reform and

Terrorism Prevention Act (P.L. 108-458) and the Implementing Recommendations

of the 9/11 Commission Act (P.L. 110-53), President Bush has submitted strategies

for U.S.-Saudi collaboration, with special reference to combating terrorist financing.


     For more information about Saudi Arabia, see CRS Report RL33533, Saudi

Arabia: Cube updated to reflect major developments.



                                  Overview

      Since the 1970s, private Saudi citizens, Saudi government ministries, Saudi

government charitable committees, and international Islamic charity organizations

based in Saudi Arabia have provided financial and relief assistance to Muslims

around the world. This has included the provision of assistance to individuals and

groups engaged in or victimized by various nationalist and religious conflicts.

Similar public and private Saudi efforts have financed religious education and

proselytization programs in dozens of Muslim-majority and Muslim-minority

countries. In places such as Afghanistan, Pakistan, the Philippines, Chechnya,

Bosnia, Indonesia, Nigeria, Kashmir, Kosovo, and the West Bank and Gaza, some

of these activities appear to have provided financial or material support to individuals

or groups actively involved in terrorism, armed violence, or the propagation of

divisive religious ideologies. In 2007, the U.S. Department of State reported that,

"Saudi donors and unregulated charities have been a major source of financing to

extremist and terrorist groups over the past 25 years."1


      Official U.S. government concerns about this trend were apparent prior to the

September 11, 2001 terrorist attacks, which amplified public criticism within the

United States of alleged Saudi involvement in terrorism or of Saudi laxity in acting

against terrorist groups. Various critics have accused the Saudi government of

directly supporting terrorism and of creating a permissive environment that has

allowed funding to flow to terrorists and extremists. The final report released by the

bipartisan National Commission on Terrorist Attacks Upon the United States (the

9/11 Commission) indicates that the Commission "found no evidence that the Saudi

government as an institution or senior Saudi officials individually funded [Al

Qaeda]." The report also states, however, that Saudi Arabia "was a place where Al

Qaeda raised money directly from individuals and through charities" and indicates

that "charities with significant Saudi government sponsorship" may have diverted

funding to Al Qaeda.


     The Bush Administration's statements on Saudi Arabia's counterterrorism

policies have praised new Saudi efforts to combat terrorist financing, while generally

confirming accounts that suggest that the activities of some Saudi entities and

individuals have contributed to the spread of terrorism and extremism over time. In

April 2008, Undersecretary of the Treasury for Terrorism and Financial Intelligence

Stuart Levey told the Senate Finance Committee that the Saudi government is

"serious about fighting Al Qaeda in the kingdom, and they do," and argued that Saudi

1

  U.S. Department of State Bureau of International Narcotics and Law Enforcement,

International Narcotics Control Strategy Report, 2007.

                                       CRS-2


officials' "seriousness of purpose with respect to the money going out of the kingdom

is not as high." He added, "Saudi Arabia today remains the location from which

more money is going to... Sunni terror groups and the Taliban than from any other

place in the world."


     This report: reviews allegations of involvement by Saudis in terrorist financing

together with Saudi rebuttals; discusses the question of Saudi support for Palestinian

organizations and religious charities and schools (madrasas) abroad; analyzes recent

steps taken by Saudi Arabia to counter terrorist financing (many in conjunction with

the United States); and suggests some implications of recent Saudi actions for U.S.

counterterrorism policy.



    Saudi Arabia: Allegations of Terrorist Financing

     In the aftermath of the September 11 attacks, numerous allegations have been

leveled against the Saudi Arabian government and prominent Saudi citizens

regarding financial support for international terrorist groups. Although many of the

allegations fault the Saudi government for failing to act decisively to close down

channels of financial support, some critics go so far as to accuse Saudi government

officials of responsibility for the September 11 attacks through design or negligence

and for the continuing threat posed by the perpetrators or by like-minded terrorist

groups. Since September 11, U.S. government officials have welcomed "undeniable

progress" in the Saudi Arabian government's efforts to combat terrorist financing,2

while maintaining concern that "wealthy donors in Saudi Arabia are still funding

violent extremists around the world, from Europe to North Africa, from Iraq to

Southeast Asia."3 The following are summaries of the more publicized post-

September 11 reports of alleged Saudi involvement in terrorist financing.


General Allegations

    The 9/11 Commission.4 The final report released by the bipartisan National

Commission on Terrorist Attacks Upon the United States indicates that the

Commission "found no evidence that the Saudi government as an institution or senior

Saudi officials individually funded [Al Qaeda]." The report also states, however, that

Saudi Arabia "was a place where Al Qaeda raised money directly from individuals,


2

 U.S. Treasury Secretary John W. Snow, "Statement following Visit to Saudi Arabia,"

September 17, 2003.

3

  Testimony of Stuart Levey, Under Secretary, Office of Terrorism and Financial

Intelligence, U.S. Department of the Treasury, Before the Oversight and Investigations

Subcommittee of the House Financial Services Committee and the International Terrorism

and Nonproliferation Subcommittee of the House International Relations Committee, May

4, 2005; and Testimony of Daniel Glaser, Deputy Assistant Secretary, Office of Terrorist

Financing and Financial Crime, U.S. Department of the Treasury, Before the Senate

Committee on the Judiciary, November 8, 2005.

4

 National Commission on Terrorist Attacks Upon the United States, "The 9/11 Commission

Report," July 22, 2004.

                                         CRS-3


and through charities," and indicates that "charities with significant Saudi

government sponsorship," such as the Al Haramain Islamic Foundation, may have

diverted funding to Al Qaeda. (For more on this subject see `Action Against

Questionable Charity' below.)


      Specifically, the report describes bin Laden's use of "the Golden Chain," an

informal financial network of prominent Saudi and Gulf individuals originally

established to support the anti-Soviet Afghan resistance movement in the 1980s.

U.S. officials state that this network collected funds and funneled them to Arab

fighters in Afghanistan, and later to Al Qaeda, using charities and other non-

governmental organizations.5 According to the Commission's report, Saudi

individuals and other financiers associated with the Golden Chain enabled bin Laden

and Al Qaeda to replace lost financial assets and establish a base in Afghanistan

following their abrupt departure from Sudan in 1996. These activities were

facilitated in part, the report argues, by the "extreme religious views" that exist

within Saudi Arabia and the fact that "until recently" Saudi charities were "subject

to very limited oversight."


     Although the report highlights a series of unsuccessful U.S. government efforts

to gain access to a senior Al Qaeda financial operative who had been detained by

Saudi Arabia in 1997, the report credits the Saudi government with assisting U.S.

officials in interviewing members of the bin Laden family in 1999 and 2000. The

report argues that these meetings were integral to U.S. efforts to understand the role

of bin Laden's personal wealth in the financing of Al Qaeda. As a result of this

assistance, U.S. officials learned that Saudi government actions in the early 1990s

had in effect divested bin Laden of his share of the bin Laden family fortune, leading

Al Qaeda to rely thereafter on a "a core group of financial facilitators" based in the

Persian Gulf "and particularly in Saudi Arabia" for funding. The report also credits

Saudi government actions following the May 2003 bombings in Riyadh which

"apparently reduced the funds available to Al Qaeda -- perhaps drastically."


     Council on Foreign Relations Studies.6 An independent task force

sponsored by the Council on Foreign Relations has issued two reports that address

terrorist financing and Saudi Arabia's alleged financial support for terrorism. The


5

  FBI agents discovered a handwritten list of 20 alleged Al Qaeda financiers during a March

2002 raid on a Saudi-based charity in Sarajevo, Bosnia. Bin Laden apparently referred to

the group as "the Golden Chain." Further details were submitted to the U.S. District Court

for the Northern District of Illinois by federal prosecutors in January 2003. The 9/11

Commission Report cites the following document: "Government's Evidentiary Proffer

Supporting the Admissibility of Co-Conspirator Statements, United States v. Enaam

Arnaout, No. 02-CR-892 (N.D. Ill. filed January 6, 2003)."

6

  Terrorist Financing. Report of an Independent Task Force Sponsored by the Council on

Foreign Relations, October 2002. Available at [http://www.cfr.org/pdf/Terrorist_Financing

_TF.pdf] and Update on the Global Campaign Against Terrorist Financing. Second Report

of an Independent Task Force on Terrorist Financing Sponsored by the Council on Foreign

Relations, June 15, 2004. See [http://www.cfr.org/pdf/Revised_Terrorist_Financing.pdf].

The Council on Foreign Relations does not institutionally endorse the studies produced by

its independent task forces, and notes that task force members are solely responsible for the

content of their respective reports.

                                        CRS-4


task force's October 2002 report strongly criticized what it asserted was Saudi

financial support for international terrorist groups. For example, the report stated

both in its summary and in the main body: "For years, individuals and charities

based in Saudi Arabia have been the most important source of funds for Al Qaeda.

And for years, Saudi officials have turned a blind eye to this problem." The authors

argued that a connection between Saudi donors and Al Qaeda is logical for several

reasons:


     Saudi Arabia possesses the greatest concentration of wealth in the region; Saudi

     nationals and charities were previously the most important sources of funds for

     the mujahideen [fighters against the Soviet occupation in Afghanistan]; Saudi

     nationals have always constituted a disproportionate percentage of Al Qaeda's

     own membership; and Al Qaeda's political message has long focused on issues

     of particular interest to Saudi nationals, especially those who are disenchanted

     with their own government [emphasis added].


      The report grouped Saudi Arabia with Pakistan, Egypt, and other Gulf states and

regional financial centers as "source and transit countries," implying that donations

to terrorist causes not only originate in these countries but also that donations from

other countries pass through them en route to terrorist organizations. The Saudi

government responded by charging that the report's allegations were based on "false

and inconclusive information."7 A Treasury Department spokesperson reportedly

described the report as "seriously flawed" because in the Department's opinion it did

not describe new initiatives to combat terrorist financing adequately.8


     The task force's second report, released in June 2004, updates the first report

and chronicles the steps the Saudi Arabian government had taken to strengthen its

financial, legal, and regulatory systems and to combat terrorist financing since late

2002. The report acknowledged the Saudi government's announcement of "the

enactment or promulgation of a profusion of new laws and regulations and the

creation of new institutional arrangements... intended to tighten controls over the

principal modalities of terrorist financing." The report welcomed the steps and

concluded that "on a comparative basis" Saudi Arabia had taken "more decisive legal

and regulatory action to combat terrorist financing than many other Muslim states."


     The second report also identified several areas in which its authors argued that

Saudi authorities could have done more to combat terrorist financing. It argued that

additional action was essential "because of the fundamental centrality that persons

and organizations based in Saudi Arabia have had in financing militant Islamist

groups on a global basis." The report cited a lack of publicly available enforcement

information as the basis for its questions about the Saudi government's commitment

to implement its new terrorist financing laws and regulations. For example, the

report specifically criticized the Saudi government's "failure to punish, in a

demonstrable manner, specific and identified leaders of charities found to be


7

 Royal Embassy of the Kingdom of Saudi Arabia, "Response to CFR Report," October 17,

2002. Available at [http://www.saudiembassy.net/2002News/Press/PressDetail.asp?cYear=

2002&cIndex=54].

8

 Douglas Farah, "Report: Terror Funds Flow Through Saudi Arabia," Washington Post,

October 16, 2002.

                                         CRS-5


funneling money to militant Islamist organizations." Saudi authorities claimed at the

time to have prosecuted five individuals "for terror financing" and frozen the assets

"of number of other individuals."9


      In response to the second report's release, Adel Al Jubeir, then-foreign policy

advisor to Saudi Crown Prince Abdullah and chief Saudi spokesman, charged that

the task force's conclusions were "politically motivated, ill-informed, and factually

incorrect."10 A Treasury Department spokesperson reportedly agreed with the report's

assertion that Saudi Arabia should take further steps to combat terrorist financing.11


     The September 11 Lawsuit. In mid-August 2002, the families of more than

600 victims of the September 11 attacks filed a suit for approximately $1 trillion

against three members of the Saudi royal family, a number of financial institutions

and individuals, and the government of Sudan. The suit, which the Saudi media have

described as an attempt to extort Saudi deposits in the United States, alleges that the

defendants enabled the September 11 attacks to occur by making financial resources

available to the perpetrators. On November 14, 2003, however, Judge James

Robertson of the U.S. District Court of the District of Columbia ruled that two of the

leading defendants, Defense Minister and now Crown Prince Sultan and former

Director of Intelligence and Saudi ambassador to the United States Prince Turki Al

Faisal, were entitled to foreign sovereign immunity for their official acts. [Burnett v.

Al Baraka Inv. and Development Corp., 292 F.Supp.2d 9 (D.D.C. 2003)].12


      Arab Bank Lawsuits. Families of victims killed or injured in terrorist attacks

in Israel have filed two civil lawsuits against Arab Bank PLC of Jordan in the U.S.

District Court of New York seeking approximately $2 billion in damages [Linde et

al. v. Arab Bank, 04 CV 02799 (E.D.N.Y. filed July 2, 2004) and Almog et al. v.

Arab Bank, 04 CV 05564 (E.D.N.Y. filed December 21, 2004)]. Although the Saudi

government is not a party to the lawsuit, the complaints allege that the Saudi

Committee for the Support of the Al Quds Intifada used accounts established at Arab

Bank as conduits for funds to charities and individuals in the West Bank and Gaza

Strip associated with the Islamic Resistance Movement (Hamas), Islamic Jihad, and

other terrorist entities (for a full description of the Committee, see Funding for

Palestinian Organizations below). The complaints also allege that the Saudi

Committee used accounts in Arab Bank and Arab Bank branches in the Palestinian

territories to provide "insurance benefits" to the families of suicide bombers and

others killed or detained in confrontations with Israeli security forces.


     In court documents filed with the U.S. District Court in response to the lawsuits,

Shukri Bishara, the chief banking officer for Arab Bank PLC, states that "beginning

in December 2000, the Saudi Committee made approximately 200,000 payments into


9

    Adel Al Jubeir, Interview Transcript: CNN Late Edition, June 15, 2004.

10

  Adel Al Jubeir, "Saudi Arabia Blasts CFR Task Force Report," June 15, 2004. Available

at [http://www.saudiembassy.net/2004News/Press/PressDetail.asp?cIndex=223].

11

     Reuters, "Saudis Doing Better Battling Terror Funding-Report," June 15, 2004.

12

  See also Carol D. Leonnig, "Judge Rejects Saudi Terrorist Link," Washington Post,

November 15, 2003.


CRS-6


Palestine through Arab Bank branches totaling over US$90,000,000."13 According

to the documents, these funds were primarily used to support "unemployed

Palestinians, persons in hospitals, Palestinians that were wounded or injured in the

violence, persons whose houses were destroyed as well as payments to Palestinian

schools hospitals and infrastructure in general." Bishara contends that the lawsuits'

allegations of Arab Bank's involvement in a conspiracy with Saudi officials to

promote Palestinian suicide terrorism are "completely false and untrue." Press

reports quote Bishara as stating that Arab Bank "did not have prior knowledge of

payments to the families of suicide bombers."14 In 2003, the Central Bank of Jordan

(CBJ) ordered all Jordanian banks "to freeze any dealing" with six Hamas figures and

associated charities. In response to the lawsuits' allegations, a Saudi Committee

official stated that the Committee "didn't know that some of the people we were

sending money to were relatives of suicide bombers."15 In the past, however,

Committee officials have indicated that the Committee supported "the families of

Palestinian martyrs, without differentiating between whether the Palestinian was a

bomber or was killed by Israeli troops."16


      In a February 25, 2005 announcement, the U.S. Office of the Comptroller of the

Currency (OCC) ordered the New York branch of Arab Bank PLC to halt its

traditional banking activities, including the transfer of funds and the opening of

accounts. The OCC order characterized "the inadequacy of the branch's controls

over its funds transfer business"as "especially serious." On August 17, 2005, the

OCC announced a $24 million civil fine against the New York branch of Arab Bank

PLC because of "deficiencies in the Branch's internal controls, particularly in the

area of Bank Secrecy Act and Anti-Money Laundering compliance."17 On September

2, 2005, U.S. District Judge Nina Gershon dismissed two of the eight counts in

lawsuits filed against Arab Bank PLC but allowed the rest to proceed to trial. In

January 2007, Judge Gershon ruled that Israelis and other foreign nationals could

pursue similar claims in U.S. court under the terms of the Alien Tort Claims Act of

1789. Statements from Arab Bank in response to both rulings declared, "Arab Bank

remains confident that it will prevail at trial. The bank abhors terrorism."18 In July

2007, Representative Anthony Weiner introduced the Arab Bank Accountability Act


13

  Declaration of Shukry Bishara in Support of Defendant's Motion to Dismiss, November

11, 2004. Linde et al. v. Arab Bank, 04 CV 02799, E.D.N.Y.

14

  Bloomberg, "Arab Bank Says it Didn't Know of Payments to Bombers' Families,"

February 10, 2005.

15

     Ibid.

16

   In May 2002, Mubarak Al Biker, the "executive manager" of the Saudi Committee to

Support the Al Quds Intifada, stated "we support the families of Palestinian martyrs, without

differentiating between whether the Palestinian was a bomber or was killed by Israeli

troops." Ra'id Qusti, "Saudi Telethon Funds Go Direct to Palestinian Victims," Arab News

(Jedda), May 27, 2002. Available at [http://www.arabnews.com/?page=1&section=0

&article=15591&d=27&m=5&y=2002].

17

  Office of the Comptroller of the Currency, Civil Money Penalty 2005-101, August 17,

2005.

18

 Associated Press, "Federal Judge Allows Terror Lawsuits Against Arab Bank to Proceed,"

September 2, 2005.

                                        CRS-7


(H.R. 2985), which would require the Secretary of the Treasury to release certain

information related to Arab Bank, would block property belonging to Arab Bank

under U.S. jurisdiction; and would revoke Arab Bank's banking charter.


      Joint Congressional Report. The declassification and release in mid-2003

of the report of the Joint Inquiry into Intelligence Community Activities before and

after the Terrorist Attacks of September 11, 2001 also brought attention to the alleged

role of Saudi Arabia in supporting terrorism. In the 900-page report, a crucial chapter

on foreign support for the hijackers is virtually all blanked out -- 28 pages in all --

because the Administration refused on national security grounds to release the

chapter in a public forum. There has been speculation about the degree to which the

deleted pages might reveal Saudi complicity in the September 11 attacks. According

to the press, persons who claim to have read the still-classified section of the report

say it covers Saudi links with individuals involved in the attacks.19 The Saudi foreign

minister appealed to President Bush to publish the censored pages so as to enable

Saudi Arabia to rebut these suspicions, but the President refused on the grounds that

an ongoing investigation of the September 11 attacks might be compromised.20


      The Brisard "U.N." Report. A controversial private report issued by French

investigator Jean-Charles Brisard in December 2002 made several detailed

allegations about the involvement of prominent Saudi nationals in the financing of

international terrorist organizations. The United Nations Security Council did not

solicit or endorse Brisard's report, although it has been mischaracterized as a U.N.

report in the public record.21 Although most public allegations of Saudi support for

terrorist activities have not quantified the amounts of money involved, Brisard's

report asserted that Al Qaeda received between $300 million and $500 million during

the decade prior to 2002, by "abusing this pillar of Islam [charitable donations] and

taking advantage of the Saudi regulatory vacuum."22 Brisard described Saudi donors

as "wealthy businessmen and bankers." The report has been the subject of a lawsuit

in the United Kingdom regarding defamation of character, and a British High Court

ruled in July 2004 that allegations contained within the report were "untrue."23


19

  James Risen and David Johnston, "Report on September 11 Suggests a Role by Saudi

Spies," New York Times, August 2, 2003.

20

  Mike Allen, "Bush Won't Release Classified September 11 Report," Washington Post,

July 30, 2003, p. A1; David Johnson and Douglas Jehl, "Bush Refuses to Declassify Saudi

Section of Report," New York Times, July 30, 2003.

21

  An April 29, 2004 correction appended to Joel Mowbray, "Saudis Behaving Badly,"

National Review Online, December 20, 2002, reads, "The Brisard Report was an unsolicited

document submitted to the U.N. by its author." See also a private letter written by former

U.N. Security Council President Alfonso Valdivieso that disassociates the U.N. from

Brisard's report. Available at [http://www.binmahfouz.info/pdf/faqs_5_jsb_12march.pdf].

22

    Jean-Charles Brisard, Terrorism Financing: Roots and Trends of Saudi Terrorism

F i nancing. J CB Cons ul t i ng, D e c e mb e r 1 9 , 2 0 0 3 . A va i l a b l e a t

[http://www.nationalreview.com/document/ document-un122002.pdf].

23

  The full text of the Court's judgment is available at [http://www.binmahfouz.info/pdf/

faq_4_judgment.pdf].

                                          CRS-8


[Mahfouz v. Brisard & Others, High Court of Justice, Queen's Bench Division,

United Kingdom - [2004] EWHC 1735 (QB)]


      Allegations of Support for Iraqi Insurgents. Since 2004, a number of

statements from U.S. officials and other unnamed sources have alleged that private

individuals and organizations in Saudi Arabia have financially supported insurgent

operations in Iraq.24 News accounts have suggested that insurgent recruiters and

facilitators prefer to deal with Saudi young men because Saudis provide for their own

expenses and often personally finance insurgent operations.25 A senior U.S. Treasury

Department official testified in July 2005 that Saudi individuals may be "a significant

source" of financing for the Iraq insurgency.26 The Iraq Study Group report (p. 25)

stated that "funding for the Sunni insurgency [in Iraq] comes from private individuals

within Saudi Arabia and the Gulf States." Iraqi officials have called on Saudi Arabia

and other neighboring countries to do more to restrict financial networks operating

in their countries from supporting insurgents in Iraq.27


     Saudi authorities initially denied the claims, but have since acknowledged that

Saudi citizens have traveled to Iraq or otherwise offered material support to the

insurgency. Saudi officials claim to have taken action against suspected insurgent

financiers. The Saudi government administers official aid programs in Iraq under the

supervision of the Saudi Committee for the Relief of the Iraqi People and the Saudi

Red Crescent Society. Prince Nayef bin Abd Al Aziz, the Saudi Minister of Interior,

directs the Committee's operations.28 In May 2003, the Saudi government

established an official government bank account, Unified Account Number 111, to

consolidate public and private donations in support of the Iraqi people.29 Saudi press

reports describing the operations of the Committee and the Red Crescent Society

indicate that numerous shipments of food aid and medical supplies have been



24

  In October 2004, an unidentified Defense Department official told the press that private

Saudi individuals and charities were channeling funds to insurgent groups in Iraq. Saudi

officials vigorously denied the claims and appealed for U.S. officials to provide concrete

information in support of the charges so that Saudi authorities could investigate and

prosecute any individuals or entities that may have been involved. John Lumpkin,

"Insurgents Infiltrating Iraq Have Cash," Associated Press, October 22, 2004; and, Royal

Embassy of Saudi Arabia, "Saudi Official Refutes Allegation that the Kingdom is

Neglecting Issue of Funding to the Iraqi Insurgency," October 23, 2004.

25

  "Our brothers in Iraq are asking for Saudis. The Saudis go with enough money to support

themselves and their Iraqi brothers. A week ago we sent a Saudi to the jihad; he went with

100,000 Saudi riyals ($27,000). There was a celebration among his brothers there!" See

Ghaith Abdul-Ahad, "Outside Iraq but Deep in the Fight," Washington Post, June 8, 2005.

26

  Testimony of Stuart Levey, Before the Senate Committee on Banking, Housing, and

Urban Affairs, July 13, 2005.

27

  Tarek El Tablawy, "Iraq Minister Urges Neighbors on Militants," Associated Press, May

11, 2005.

28

     Agence France Presse, "Saudi Telethon Raises $11.5 Million for Iraqis," April 28, 2003.

29

  See Royal Embassy of the Kingdom of Saudi Arabia, "Bank Account Ready to Receive

Donations for Iraqi Aid," April 24, 2003. Available at [http://www.saudiembassy.net/

2003News/News/RelDetail.asp?cIndex=737].

                                        CRS-9


delivered across Iraq since April 2003, including shipments to the former-insurgent

stronghold of Fallujah during the summer of 2004.30 Other Saudi based charities,

including the International Islamic Relief Organization (IIRO) have also delivered

aid to Iraq, including to Fallujah and other areas of fluctuating insurgent activity.

According to press reports, the IIRO maintained collection accounts in two Saudi

banks where donations could be made as recently as December 2004.31 U.S. officials

have expressed general concerns about the IIRO's operations and questioned its

exclusion from Saudi charitable account regulations (see below).


            Funding for Palestinian Organizations

     Support for Palestinian causes and the provision of humanitarian aid to

Palestinians has long been an important component of Saudi foreign policy, and

many Saudis identify strongly with the Palestinian people and view support for

Palestinian causes as a religious, cultural, or, in some cases, political obligation.

Repeated allegations made by Israeli and Western sources have contended that Saudi

support for Palestinian institutions and individuals has directly or indirectly

supported Palestinian terrorist groups, although public reporting has not conclusively

linked official Saudi government support to Palestinian terrorist organizations. Some

reports suggest that Hamas maintains a significant fund-raising infrastructure inside

Saudi Arabia.32


     Saudi Arabia, like other Arab states, recognizes the Palestine Liberation

Organization (PLO) as the legitimate representative of the Palestinian people. A

2002 Saudi government report stated that overall government and private aid to

Palestinian causes had reached $2.61 billion.33 Currently, Saudi officials say that

government support to Palestinian causes, approximately $80 million to $100 million

per year, goes solely to the Palestinian Authority, which was established pursuant to


30

   Agence France Presse, "Saudi Arabia Sends Aid to Residents of Iraqi Rebel Bastion,"

June 10, 2004; and BBC Monitoring International Reports, "Saudi Arabia Sends Relief to

Iraq's Al-Fallujah," Saudi TV1 (Riyadh), August 8, 2004.

31

  The accounts reportedly were held in Al Rajhi Bank (Account Number 31900010777023)

and National Commercial Bank (Account Number 10477702000102). International Islamic

News Agency (Jeddah), "IIRO Distributes Aid to Falluja War Victims," December 21, 2004.

32

   Matthew Levitt, "PeaceWatch #521 A Hamas Headquarters in Saudi Arabia?,"

Washington Institute for Near East Policy, September 28, 2005; and, CRS interview with

former U.S. Treasury Department official, September 2007.

33

  Royal Embassy of the Kingdom of Saudi Arabia, "Kingdom's Aid to Palestenians (sic.)

Nears Ten Billion Saudi Riyals," May 2, 2002. Available at [http://www.saudiembassy.net/

2002 News/News/ForDetail.asp?cIndex=1122]. It is unclear if this figure included

contributions to the Saudi-sponsored, multilateral Al Aqsa and Al Quds Intifada (Jerusalem

uprising) funds established by 22 Arab leaders in October 2000. See embassy website at

[http://www.saudiembassy.net/2000News/Statements/StateDetail.asp?cIndex=357].

                                        CRS-10


the Israeli-Palestinian agreement of September 13, 1993, known as the first Oslo

Accord.34


      Following the January 25, 2006, elections for the Palestinian Legislative

Council in which Hamas won a majority of the votes, Saudi officials indicated that

funding support for the Palestinian Authority would continue. According to press

reports, Saudi officials promised $20 million to cover immediate needs on the part

of the Palestinian Authority. On March 19, 2006, Prince Saud al Faisal stated the

Saudi position, saying that "humanitarian assistance is not given to a government. It

is given to a people ..." to help them deal with a difficult humanitarian situation.

Saudi Arabia made significant efforts to support a Palestinian unity government prior

to the intra-Palestinian violence of early 2007, and, in December 2007, Saudi Arabia

pledged between $500 and $750 million to the Palestinian Authority over three

years.35


Officially Sanctioned Relief Efforts

     Saudi Committees. Within Saudi Arabia, two official charitable committees

solicited and delivered aid to Palestinian institutions, individuals, and causes after the

onset of the second Palestinian intifada in October 2000: the Saudi Popular

Committee for Assisting the Palestinian Mujahideen and the Saudi Committee for

the Support of the Al Quds Intifada (now known as the Saudi Committee for the

Relief of the Palestinian People). According to Saudi press reports, Prince Salman

bin Abd Al Aziz, the governor of Riyadh Province, established the Popular

Committee and directed its operations.36 The Popular Committee's periodic public

reports indicate that it provided approximately $8.8 million to the PLO from October

2000 to April 2003.37


     The Saudi Committee for the Support of the Al Quds Intifada served as the main

conduit for Saudi financial and material aid to the Palestinian territories after its

establishment under Royal Decree 8636 on October 16, 2000. A December 31, 2003

report issued by the Saudi Embassy in Washington stated that the costs of the Al

Quds Intifada Committee's 31 relief programs amounted to 524,265,283 Saudi riyals

(SR) [$139,804,075], in addition to the costs of then-current projects, which


34

  Don Van Natta, Jr, with Timothy L. O'Brien, "Flow of Saudi's Cash to Hamas Is

Scrutinized," New York Times, September 17, 2003, pp. A1, A10.

35

 Howard LaFranchi, "Global donors exceed Palestinian expectations at Paris conference,"

Christian Science Monitor, December 19, 2007.

36

   In one press report, Prince Salman asserted that the Popular Committee had been

established after the 1967 Arab-Israeli War "with the aim of assisting the Palestinians." It

is unclear if the Popular Committee operated over a thirty year period or was reactivated in

October 2000. See Arab News (Jedda) "Salman Rejects Terrorism Charges Against

Charities," November 3, 2002.

37

  Data compiled from official and non-official Saudi press reports spanning the period from

October 2000 to April 2003. See Saudi Press Agency, "PLO gets more than SR 1.8 million

from the Popular Committee for Assisting the Palestinian Mujahideen," April 22, 2003, and

Foreign Broadcast Information Service (FBIS) reports: "Press Summary -- Saudi

Leadership Report,"October 1-15, 2000 through June 16-30, 2004.

                                       CRS-11


amounted to a further 203,699,433 SR [$54,302,249]. The report also stated that

"the value of the services provided by the Committee to the Palestinian people"

through December 2003 was equal to an additional 727,964,716 SR

[$194,123,924].38


      The Al Quds Intifada Committee's periodic public reports describe millions of

riyals in monetary aid that its programs provided to the Palestinian people in the form

of financial transfers to the Palestinian Authority (PA), donations to charitable

organizations in the West Bank and Gaza Strip, and by means of direct assistance to

over 35,000 needy Palestinian individuals. In addition to financial assistance, the Al

Quds Intifada Committee also provided food, blankets, medicine, ambulances, and

other aid in kind through programs aimed at supporting health care, education, and

the provision of basic social services in the Palestinian territories that were disrupted

during the uprising. The Committee also constructed hundreds of homes for

Palestinians who were left homeless due to violence and house demolitions.

Palestinian officials reportedly praised the Committee's support for the Palestinian

people.


      In June 2004, the Saudi government announced that the future activities of all

Saudi charitable committees and organizations that send aid abroad (including "the

Palestinian committees") will be monitored and directed by the Saudi

Nongovernmental National Commission for Relief and Charity Work Abroad.39 As

of June 2008, the National Commission was not operational. In October 2006, the

Saudi Ministry of Interior submitted plans for its creation to Saudi Arabia's Shura

Council for review and consultation. Saudi officials reportedly continue to work to

resolve legal and financial hurdles to the integration of the international operations

of Saudi Arabian charities.40 The Al Quds Intifada Committee continues to operate

independently under the name -- "the Saudi Committee for the Relief of the

Palestinian People." The Committee now provides humanitarian relief and assistance

via a number of partnerships with U.N. agencies. For example, in September 2006,

the Committee announced plans to provide $6.3 million to finance the construction

of 100 housing units in Hebron in cooperation with UN-HABITAT.41


     Relief Coordination. Since 2000, both Committees have issued public

solicitations encouraging Saudi citizens to make donations to support the welfare of

the Palestinian people. In one often cited instance, the Al Quds Intifada Committee

organized a telethon sponsored by King Fahd in April 2002 that raised over $110



38

  Royal Embassy of the Kingdom of Saudi Arabia, "Humanitarian Relief Handed Over to

Pal e s t i ni a n Of f i c i a l s i n K i ngdom," De c e mber 31 , 2 0 0 3 . See

[http://www.saudiembassy.net/2003News/News/ ForDetail.asp?cIndex=1189].

39

   Adel Al Jubeir, "U.S. and Saudi Officials Hold a News Conference on a Major

Development in the War on Terrorism," Federal Document Clearing House Transcript, June

2, 2004. The Commission's creation was originally announced in late February 2004.

40

  Josh Meyer, "The World; U.S. Faults Saudi Efforts on Terrorism," Los Angeles Times,

January 15, 2006.

41

 Al-Bawaba News, "Saudi Arabia to fund construction of 100 housing units in West Bank,"

September 11, 2006.

                                       CRS-12


million for families of Palestinians killed or injured in the uprising.42 Saudi officials

told their U.S. counterparts that the proceeds of this telethon were funneled through

non-governmental organizations to provide humanitarian support to needy

Palestinian families.


      Unified Accounts. Saudi press reports indicate that the Al Quds Intifada

Committee consolidated the proceeds of its fund-raising efforts along with public and

private donations in support of Palestinian causes in national, government-sponsored

unified accounts established in a number of Saudi banks.43 "Unified Account

Number 98" and "Unified Account Number 90" were referred to in Saudi press

reports describing the Al Quds Intifada Committee's activities, although it is unclear

if both accounts existed simultaneously, if they are synonymous, or if one superseded

the other.44 Saudi officials have repeatedly assured their U.S. counterparts that

Account 98 no longer exists, most recently in a meeting with a U.S. Treasury

delegation that visited Saudi Arabia in January 2006. However, Saudi press reports

describe Saudi officials urging Saudi citizens to make donations to the account at

their local banks, including a television advertisement that solicited donations to

Account 98 in August 2005.45


     Delivery Mechanisms. Once collected, the proceeds of the Al Quds Intifada

Committee's fundraising efforts were delivered to Palestinian beneficiaries in a

variety of ways. Material aid collected by the Committee, such as food, clothing,

blankets, and vehicles, was delivered in cooperation with third parties such as the

Jordanian Red Crescent Society and the United Nations Relief and Works Agency

(UNRWA). The Committee also developed a special process to transfer financial aid

to Palestinian individuals in cooperation with Jordan's Arab Bank PLC.46



42

  Royal Embassy of the Kingdom of Saudi Arabia, "Telethon for Palestinian Victims

Highly Successful," April 14, 2002. See [http://www.saudiembassy.net/2002News/News/

ForDetail.asp?cIndex=1132].

43

  Saudi Press Agency, "Prince Urges Donations for Jerusalem," October 10, 2000. The

press report lists "the National Commercial Bank, the Saudi-American Bank, Al Rajhi

Banking and Investment Corporation, the Saudi-British bank, the Saudi-Dutch Bank, the

Arab National Bank, the Saudi-French Bank, and Al Riyadh Bank" as sponsors of Unified

Account 98. FBIS Translations GMP20001006001246 and GMP20001021000192. See

also Robert Lenzner and Nathan Vardi, "Terror Inc.," Forbes, October 18, 2004.

44

  Later, in an April 2002 interview, high-ranking Committee official Dr. Sa'id Al Urabi Al

Harithi stated that "All relief agencies that collect funds in support of the Palestinians

deposit the funds in the Committee's Account Number 90." FBIS Translations

GMP20001006001246 and GMP20020419000070.

45

  See Testimony of Daniel Glaser, Deputy Assistant Secretary for Terrorist Financing and

Financial Crimes, U.S. Department of the Treasury, Before the Senate Judiciary Committee,

November 8, 2005; and Middle East Media Research Institute (MEMRI), "Saudi

Government Official on Iqra TV: All Muslims Must Support Jihad -- Send Money to the

Saudi Committee for Support of the Al-Quds Intifada, Account No. 98," Special Dispatch

Series - No. 990, September 21, 2005.

46

  The Committee's website and Committee officials (see below) state that the Al Quds

Intifada Committee opened accounts in Arab Bank PLC, which operates 22 local branches

                                                                        (continued...)

                                        CRS-13


     In an April 2002 interview Dr. Sa'id Al Urabi Al Harithi, the "chairman of the

Executive Committee in Support of the Al Aqsa Intifada" and an advisor to Prince

Nayef, provided details about the process used to identify beneficiaries and deliver

financial aid to them:47


     !   Using information provided by "welfare societies" and "official

         sources" in the Palestinian territories, the Al Quds Intifada

         Committee prepared lists of potential beneficiaries drawn from the

         ranks of "the wounded, the families of martyrs, the families of

         prisoners and disabled persons," and families that had been affected

         by the uprising. The word "martyr" is used to refer to those killed

         as a result of violence (usually Israeli actions).48


     !   Then, a "central committee" conducted a "general study" of the lists

         and verified "the names of the beneficiaries, their telephone

         numbers, social conditions, addresses, and the date and type of

         injury." According to Al Harithi, the Committee would "coordinate

         with the Palestinian Authority and the [Palestinian] ambassador on

         the information in [the lists]" to confirm that it was "precise, correct,

         and clear."


     !   Once the information had been confirmed and approved, the

         Committee, in coordination with "the National Arab Bank,"49

         opened a bank account in the beneficiary's name, into which a

         standard amount of riyals or dollars were transferred based on the

         individual's circumstances and the criteria set by the Committee for

         each of its different programs. For example, "the committee

         allocated 20,000 riyals [$5,333] for the family of each martyr,"and

         "the sum of 10,000 Saudi riyals [$2,666] for every prisoner."


     !   After the deposit had been made, a team in the Palestinian territories

         followed up "on the process of delivering aid directly to the



46

  (...continued)

throughout the West Bank and Gaza Strip. The Committee's website, available at

[http://www.alquds-saudi.org], discusses the use of Arab Bank PLC branches as conduits

to transfer funds to beneficiaries.

47

  "Saudi Al Aqsa Intifadah Committee Chief on Delivering Donations to Palestinians,"

Jedda Ukaz, April 2002. FBIS Translation - GMP20020419000070.

48

   According to an official Saudi government statement: "The Saudi government offers

assistance to the families of those killed, and these, the victims of the violence, are often

referred to as martyrs. Nevertheless, the Saudi government does not condone the act of

killing oneself and killing others by means of suicide bombings, and Saudi religious leaders

have condemned the taking of innocent lives." See [http://www.saudiembassy.net/2002

News/Statements/StateDetail.asp?cIndex=146].

49

  Jordan's Arab Bank PLC owns a 40% stake of Saudi Arabia's Arab National Bank.

Although the Committee clearly states that funds were delivered via Arab Bank PLC

branches it is unclear what role, if any, Saudi Arabia's Arab National Bank played in the

Process.


CRS-14


        beneficiaries" and filed "regular reports to the Saudi Committee in

        Support of the Al Quds Intifada."


Allegations of Support for Palestinian Terrorists

      Allegations of Support for the Families of Suicide Attackers. In May

2002, Israeli officials released a report that alleged that the Saudi Committee for the

Support of the Al Quds Intifada had "transferred large sums of money to families of

Palestinians who died in violent events, including notorious terrorists."50 The report

argued that this alleged financial support encouraged Palestinian terrorism by easing

the potential burden on the families of attackers. Saudi officials called the allegations

"baseless and false," and stated "unequivocally that Saudi Arabia does not provide

financial support to suicide bombers or their families."51 Saudi officials also

questioned the claim that Palestinian suicide attacks were financially rather than

politically motivated. Statements made by Committee figures in response to specific

claims that the Al Quds Intifada Committee provided support to the families of

suicide bombers or otherwise supported terrorism have been less consistent.52 Then-

Saudi government spokesman Adel Al Jubeir discussed the possibility that money

from the Committee may have gone to the families of suicide bombers but

categorically ruled out the existence of any quid pro quo arrangement or reward

system similar to that sponsored by former Iraqi President Saddam Hussein.53


    Saudi Committee Website. The Al Quds Intifada Committee website,

maintained in the name of "the Saudi Committee for Relief of the Palestinian

People,"54 once contained over 40,000 transaction records that featured the names



50

  Ben Barber, "Saudi Millions Finance Terror Against Israel," Washington Times, May 7,

2002. Israel also released allegedly seized documents that featured "the letterhead of the

`Saudi Arabian Committee for Support of the Al Quds Intifada.'"

51

  See Royal Embassy of the Kingdom of Saudi Arabia, "The Kingdom of Saudi Arabia

Responds to False Israeli Charges," May 6, 2002. Available at [http://www.saudiembassy.

net/2002News /Press/PressDetail.asp?cYear=2002&cIndex=36] and Royal Embassy of the

Kingdom of Saudi Arabia, "Saudi Arabia Doesn't Reward Terrorism," May 11, 2002.

Available at [http://saudiembassy.net/2002News/News/ TerDetail.asp?cIndex=45].

52

  Dr. Sa'id Al Urabi Al Harithi stated in April 2002 that the Al Quds Intifada Committee

had "nothing to do with terrorism" and "nothing to do with politics," and added that Saudi

Arabia "rejects and fights terrorism." [FBIS Translation GMP20020419000070] In May

2002, Mubarak Al Biker, the "executive manager" of the Al Quds Intifada Committee, stated

"we support the families of Palestinian martyrs, without differentiating between whether the

Palestinian was a bomber or was killed by Israeli troops." Ra'id Qusti, "Saudi Telethon

Funds Go Direct to Palestinian Victims," Arab News (Jedda), May 27, 2002. Available at

[http://www.arabnews.com/ ?page=1&section=0&article=15591&d=27&m=5&y=2002].

53

  See Royal Embassy of the Kingdom of Saudi Arabia, "Saudi Arabia Does Not Support

Terrorism," Interview Published in National Journal, May 11, 2002. Available at

[http://www.saudiembassy.net/2002News/Statements/TransDetail.asp?cIndex=149].

"Palestinians Said to Get Iraq Millions," Boston Globe, May 30, 2002.

54

  See [http://www.alquds-saudi.org/]. Archived versions of the Committee website are

available at [http://web.archive.org/web/*/[http://www.alquds-saudi.org]]. The website

                                                                           (continued...)

                                        CRS-15


individuals who received humanitarian aid and financial support from the

Committee. The records portion of the Committee website was deactivated in March

2005. The website states that "many accounts were opened for the harmed persons

at the Arab [B]ank branches in the Palestinian territory, and fixed aids [i.e. donations]

were transferred to the harmed people in their respective accounts."55 One of the

Committee's programs supported Palestinian families whose primary breadwinners

were killed by Israeli forces or under other violent circumstances during the uprising.

Online records for this program contained the names of deceased individuals,

transaction numbers, the date of their deaths, their home towns, and the

circumstances in which they were killed. The Committee's description of the

program indicated that payments of 20,000 SR [$5,300] were transmitted to the

family members of these individuals in their names following their death.


     Of the 1,300 names contained in the records for this specific Committee

program, over 60 matched or closely resembled the names of known Palestinian

militants who carried out attacks on Israeli military personnel and civilians from

October 2000 to March 2002.56 These individuals included suicide bombers and

gunmen who were killed during actual and attempted attacks inside Israel and the

Palestinian territories. Most of the Committee records assigned to individuals whose

names matched or closely resembled those of suicide attackers listed "assassination"

as the cause of death -- however other records credited "martyrdom." A handful of

these records indicated that the individuals they referred to were killed during a

"martyrdom operation."57 The Committee removed all records from its website in

early 2005.


     Alleged Support to Hamas. Since the early 1990s, there have been

unsubstantiated reports of Saudi public and private assistance to the fundamentalist

Islamic Resistance Movement (Hamas), which the U.S. government has designated





54

  (...continued)

cited Royal Decree 8636 as the basis for the establishment of the "Relief Committee."

55

     In archive, see [http://www.alquds-saudi.org/programs/programsDetails.asp?id=1].

56

   The Palestinian Human Rights Monitoring Group (PHRMG) maintains comprehensive

English and Arabic language lists of suicide attackers. These lists contain names that also

appeared on the Saudi Committee website. Further information provided in these and other

Committee records such as individuals' home towns and dates of death matched information

provided in public press accounts of attacks. In some instances, date and name data reflect

slight variations and inconsistencies. Transcriptions of Arabic names often differ in

Western media reporting and there is considerable uniformity in Arabic names. Mohammed

and Ahmed, for example, are very common Arabic names often found among Palestinians.

The PHRMG lists are available online at [http://www.phrmg.org/PHRMG%20Documents/

Suicide%20bombers/Tables/].

57

   The Arabic text in the "Details" field of these Committee records read "amaliyah

istishadiyah," a commonly used euphemism for a suicide attack that translates literally to

"martyrdom operation." In archive see, for example, [http://www.alquds-saudi.org/

programs/beneficiaryDetails.asp?id=96940] and [http://www.alquds-saudi.org/programs/

beneficiaryDetails.asp?id=97139], accessed January 2006.

                                         CRS-16


as a foreign terrorist organization.58 The Saudi government has not officially

described Hamas as a terrorist organization. In its annual report on terrorism for the

year 2001 (Patterns of Global Terrorism, 2001), the State Department noted that

Hamas received funding from "private benefactors in Saudi Arabia and other

moderate Arab states." The 2002 and most 2003 editions of the report did not

mention Saudi Arabia as a specific source of funding for Hamas. The State

Department's 2005 Country Reports for Terrorism (released in March 2006)

indicated that "private benefactors in Saudi Arabia and other Arab states" remained

a primary source of funding for Hamas.59 The 2006 report did not cite Saudi Arabia

specifically and the 2007 report stated that Hamas "fundraising takes place in the

Gulf countries."


                  Charitable Giving and Madrasas

      Charitable giving (zakat) is a religious obligation for Muslims, constituting one

of the five "pillars of Islam." Many wealthy Saudis contribute approximately 2.5

percent of their annual income or more to charitable causes and relief organizations

that fund religious education programs, orphanages, hospitals, and other development

projects both within Saudi Arabia and around the world. One expert estimates Saudi

charitable donations, in general, to be about $3 billion to $4 billion annually, of

which 10-20% is disseminated abroad.60 Saudi officials estimate that $100 million

in charitable donations are directed abroad each year.61 As part of the government's

effort to combat potential terrorist financing activities, Saudi charities reportedly are

now prohibited from sending funds abroad, although international charities

headquartered in the kingdom continue to raise funds for international activities via

Saudi banks and private Saudi citizens may direct domestic and externally-held assets

to overseas charitable endeavors.


Charity Oversight

      In response to criticism and allegations of involvement in terrorist financing

directed at Saudi Arabian charitable organizations, the Saudi government has taken

a series of steps to provide greater oversight to charitable giving in the Kingdom. In

December 2002, the government announced the creation of the High Commission for

Oversight of Charities to provide assistance to Saudi Arabian charities in reforming



58

  Some individuals and groups in Europe, North America, and the Middle East have argued

that financial support for Hamas is legitimate because of the social services the organization

provides to Palestinians, which they argue are separate from the group's military wing, the

Izzedine Al Qassam Brigades, and its role in conducting terrorist operations.

59

  Department of State, Country Reports on Terrorism, April 27, 2005. Hamas entry

available at [http://www.state.gov/s/ct/rls/45394.htm].

60

   Jonathan M. Winer, Congressional testimony before the Committee on Senate

Governmental Affairs, July 31, 2003. Mr. Winer, a former State Department official, is an

independent consultant.

61

  Adel al-Jubeir, "U.S. and Saudi Officials Hold a News Conference on a Major

Development in the War on Terrorism," Federal Document Clearing House Transcript,

June 2, 2004.

                                         CRS-17


their operations and improving their transparency.62 At that time, Saudi officials also

indicated that all Saudi charities had been audited; however, the results of those

audits have not been made publicly available.


      In February 2004, King Fahd issued a royal decree establishing the Saudi

Nongovernmental Commission on Relief and Charity Work Abroad.63 The

Commission was publicly reintroduced in June 2004, and described as "the sole

vehicle" through which all private Saudi donations marked for international

distribution will flow in the future.64 In June 2005, the Saudi press reported that the

Council of Ministers had decided that all future overseas charitable contributions

must be channeled through the Commission.65 As of June 2008, the Commission

was not operational, and Ministry of Interior officials reported that the Saudi royal

court would need to make a decision regarding the establishment of the

Commission.66


      In May 2003, the Saudi government introduced new banking regulations that

prohibited private charities67 and relief groups from transmitting funds overseas until

further regulations could be instituted to ensure that the money would not be

channeled to terrorist organizations.68 The new banking regulations do not place

similar restrictions on the operations of "multilateral" charitable organizations based

in Saudi Arabia, such as the Muslim World League (MWL), the International Islamic

Relief Organization (IIRO), or the World Assembly of Muslim Youth (WAMY),

which actively raise funds among the Saudi population.69 Saudi officials have stated

that in spite of the regulatory exclusion, in practice these charities are being subjected



62

  Adel al-Jubeir, "Saudi Plans to Fight Terrorism," Federal News Service, December 3,

2002.

63

  Agence France Presse, "Saudi Arabia to Create Body for All Charity Abroad after Terror

Charges," February 28, 2004.

64

  Adel al-Jubeir, "U.S. and Saudi Officials Hold a News Conference on a Major

Development in the War on Terrorism," Federal Document Clearing House Transcript,

June 2, 2004.

65

 P.K. Abdul Ghafour, "Kingdom Streamlines Flow of Funds to Charities Abroad," Arab

News (Jeddah), June 14, 2005.

66

     CRS analyst meeting with Saudi officials, Riyadh, Saudi Arabia, February 2008.

67

  It is estimated that there are 267 charities operating in Saudi Arabia. See Jamil al-Dhiyabi,

"Supervisor of Saudi Charities to al-Hayat: There Are No Deception or Illegal Remittances

in Our Work; Ministry To Apply New Measures Starting Next Year," Al-Hayat (London,

in Arabic), October 6, 2003, translation by Foreign Broadcast Information Service (FBIS).

68

   Royal Embassy of the Kingdom of Saudi Arabia, "Saudi Arabian Monetary Agency

Implements New Regulations Regarding Charities," June 12, 2003. Available at

[http://www.saudiembassy. net/2003News/Press/PressDetail.asp?cYear=2003&cIndex=99].

69

  See Saudi Arabian Monetary Authority, "Rules Governing the Opening of Bank Accounts

in Saudi Arabia and General Operational Guidelines," April 2003, Section 300-1-6-5. In

June 2004, the Northern Virginia offices of the WAMY were raided by FBI and Customs

officials in relation to a terrorism investigation. WAMY spokesmen have repeatedly denied

the group is linked to terrorist organizations.

                                        CRS-18


to identical levels of scrutiny as all Saudi charities.70 Officials from the Defense

Department and Treasury Department have stated that the IIRO, WAMY, and the

MWL "continue to cause us concern" and that the charities "need to be included" in

the oversight of new Saudi charity regulations and regulatory bodies.71


Action Against Questionable Charities

      In late-2004, the Saudi government dissolved the Al Haramain Islamic

Foundation, a large charity with links to the royal family, after years of sustained

criticism and a series of joint U.S.-Saudi actions relating to its alleged involvement

in terrorist financing. U.S. investigators have linked a former Al Haramain employee

to the 1998 U.S. embassy bombing in Tanzania,72 and a June 2, 2004 Treasury

Department statement called Al Haramain "one of the principal Islamic NGOs

providing support for the Al Qaida [variant transcription of Arabic word] network

and promoting militant Islamic doctrine worldwide."73 Since March 2002, the United

States and Saudi Arabia have jointly designated 12 branches of Al Haramain as front

organizations for terrorist activities, including its U.S. chapter. The two countries

have asked the U.N. Al Qaeda and Taliban Sanctions Committee (which monitors

sanctions pursuant to U.N. Security Council Resolution 1267) to add the branches to

the Committee's consolidated list of terrorists tied to Al Qaeda and the Taliban.74


     In the United States, prosecutors recently dropped charges against Al

Haramain's U.S. branch, based in Oregon. Prosecutors are continuing to pursue

charges against the branch's founders and corporate officers, including Suliman Al

Buthe, a U.S. designated terrorist financier and Saudi national currently in Saudi


70

  According to Deputy Assistant Treasury Secretary Daniel Glaser, "It is not clear to us that

this de facto prohibition is having true effect and we remain deeply concerned about this

issue. Furthermore, these restrictions do not apply to foreign branches of Saudi-based NGOs

and charities, which can transfer money among themselves throughout the world with little

accountability to the Kingdom. It is possible, for example, for an IIRO official in Saudi

Arabia to advise IIRO branches in country X and country Y to transfer money to each other,

outside of Saudi regulatory reach." Glaser, Testimony Before the Senate Committee on the

Judiciary, November 8, 2005.

71

   Testimony of Stuart Levey, Before the Senate Committee on Banking, Housing, and

Urban Affairs, July 13, 2005; and Testimony of Caleb Temple, Director of Operations, Joint

Intelligence Task Force for Combating Terrorism Before the Terrorism, Unconventional

Threats and Capabilities of the House Armed Services Committee and the Oversight and

Investigations Subcommittee of the House Financial Services Committee, July 28, 2005.

72

  U.S. Department of the Treasury, "JS-1108: Treasury Announces Joint Action with Saudi

Arabia Against Four Branches of al-Haramain In The Fight Against Terrorist Financing,"

January 22, 2004. Available at [http://www.treasury.gov/press/releases/js1108.htm].

73

  U.S. Department of the Treasury, "JS-1703: Additional al-Haramain Branches, Former

Leader Designated by Treasury as Al Qaida Supporters," June 2, 2004. Available at

[http://www.ustreas.gov/press/releases/js1703.htm].

74

  The designated branches are Indonesia, Pakistan, the Netherlands, Afghanistan, Albania,

Kenya, Tanzania, Bangladesh, Ethiopia, Bosnia, Comoros Islands, Somalia, and the United

States.

                                         CRS-19


Arabia.75 Al Buthe maintains his innocence.76 U.S. authorities also designated Al

Haramain's founder and director, Aqeel Abdulaziz Al Aqil, as a supporter of

terrorism in June 2004.77 In early January 2004, Al Aqil had stepped down from his

position and remains in Saudi Arabia. Al Aqil's successor, Dabbas Al Dabbasi,

resigned as director of the organization on July 14, 2004 because of "the freezing of

the establishment's internal accounts and the inability to give charitable support."78

Saudi officials have indicated that Al Haramain's international operations were to be

absorbed by the new Nongovernmental Commission for Relief and Charity Work

Abroad, which is not yet operational.


     In August 2006, the Treasury Department designated the Philippine and

Indonesian branches of IIRO, along with the Saudi executive director of the IIRO's

branch in the kingdom's Eastern Province, Abd al Hamid Sulaiman al Mujil.

According to the Treasury Department, Al Mujil "has been called the `million dollar

man' for supporting Islamic militant groups," and "provided donor funds directly to

Al Qaeda" while raising funds for other groups.79 The United Nations designated Al

Mujil on August 4, 2006. Saudi authorities have not prosecuted Al Mujil to date.



                   Saudi Counter-Terrorism Efforts

Post-September 11 Actions

     Saudi officials maintain that they are working closely with the United States to

combat terrorism, which they say is aimed as much at the Saudi regime as it is at the

United States. A month after the September 11 attacks, the Saudi Government

announced that it would implement U.N. Security Council Resolution1373, which

called for freezing terrorist-related funds. The Saudi Arabian Monetary Agency has

issued a number of "white papers" detailing actions taken by Saudi Arabia to combat

terrorist financing. An update, issued in April 2004, addresses various steps


75

  Les Zaitz, "Tax Case Ends Against Charity," The Oregonian (Portland), August 5, 2005;

and U.S. Department of the Treasury, JS-1895:U.S.-Based Branch of Al Haramain

Foundation Linked to Terror, September 9, 2004.

76

     Paul Elias, "Wiretap Case Centers on Saudi" Associated Press, August 15, 2007.

77

   The designation of individuals and organizations under the regulations blocking or

freezing terrorist assets requires an administrative determination by the Secretary of State

or the Secretary of the Treasury, in consultation with one another and with the Attorney

General. The initial determination is conducted without input from the subject of the

determination and, thus, at this stage, the rigorous standards applicable to adversarial legal

procedures such as criminal or civil trials are inapplicable.

78

     Majid Al-Kanani, "Al-Haramain Director Resigns," Arab News (Jeddah), July 15, 2004.

79

  U.S. Department of the Treasury, "HP-45: Treasury Designates Director, Branches of

Charity Bankrolling Al Qaida Network,"August 3, 2006.

                                         CRS-20


including adopted legislation, implemented regulations and resolutions, and

cooperation with the United States.80


      In the past, U.S. officials, while acknowledging Saudi efforts, have expressed

frustration with Saudi reluctance to share information gleaned from Saudi

investigations of terrorist incidents and to move against organizations and individuals

suspected of involvement in terrorism. Since mid-2003, however, the Saudi

government seems to have become increasingly convinced of the seriousness of the

terrorist threat and its attendant financing. Many commentators attribute this

increased Saudi concern to the Al Qaeda terrorist campaign that swept the kingdom

from 2003 through 2006.81 The State Department's 2003 Patterns of Global

Terrorism report stated that the May and November 2003 attacks "galvanized Riyadh

into launching a sustained crackdown against Al Qa'ida's presence in the Kingdom

and spurred an unprecedented level of cooperation with the United States."


      Joint Task Force. Shortly after the May 2003 attacks in Riyadh, a joint U.S.-

Saudi intelligence task force was set up to help identify the perpetrators. This set the

stage for a more permanent bilateral group with a broader mission. During the first

week in August 2003, a delegation of senior U.S. counter-terrorism officials from the

National Security Council, the State Department, the Treasury Department, and the

Federal Bureau of Investigation met with Saudi leaders reportedly to urge them to do

more to cut off the funneling of money to terrorists through Saudi businesses and

organizations.82 U.S. officials traveled to Riyadh later that month to set up a joint

task force to investigate terrorist financing in Saudi Arabia. Subsequently, agents

from U.S. organizations including the Federal Bureau of Investigation and the

Internal Revenue Service joined Saudi officials to set up a center to focus on bank

accounts, computer records, and other financial data. In addition, the FBI and the

Internal Revenue Service Criminal Investigative Division have carried out a program

of terrorism financing training for the Saudi government and have held sessions in

Riyadh and Washington, D.C.83 According to press articles, the task force program

marked the first time that U.S. law enforcement officials had been stationed in Saudi

Arabia to pursue intelligence and financing issues.84 In March 2005, Saudi Ministry

of Interior officials reported that U.S.-Saudi Joint Task Force on Terrorist Financing


80

 Available at [http://www.saudiembassy.net/ReportLink/SAMA%20INITIATIVES%20

BY%20 KSA%20UP%20DATED%20APRIL%202004.pdf].

81

     Patrick E. Tyler, "Stability Itself Is the Enemy," New York Times, November 10, 2003.

82

  Susan Schmidt, "U.S. Officials Press Saudis on Aiding Terror," Washington Post, August

6, 2003, p. A12.

83

  U.S. Congress, House of Representatives, Hearing of the Subcommittee on the Middle

East and Central Asia of the House Committee on International Relations on Saudi Arabia

and the Fight Against Terrorism Financing, Rayburn House Office Building, Washington,

DC, March 24, 2004; testimony of Mr. Thomas Harrington, Deputy Assistant director of the

FBI Counterrorism Operational Support Branch, Federal News Service transcript, p. 7.

84

  Douglas Farah, "U.S.-Saudi Anti-Terror Operation Planned; Task Force Will Target

Funding," Washington Post, August 26, 2003.

                                         CRS-21


operations had led to the investigation of 1,098 Saudi bank accounts for suspicion of

involvement in terrorism financing since September 11, 2001.85


      Legal and Oversight Measures. Prior to 2003, Saudi Arabia lacked

legislation specifically criminalizing money laundering and terrorist financing.

Following Al Qaeda attacks within Saudi Arabia in May 2003, Saudi authorities

moved forward with a number of draft laws and regulations, including a law adopted

in August 2003 making money laundering and terrorist financing criminal offenses.86

That month, the Saudi Arabian government also introduced new banking regulations

that prohibited private charities and relief groups from transmitting funds overseas

until further regulations could be instituted to ensure that the money would not be

channeled to terrorist organizations. New financial regulations also created a

requirement for charitable organizations to have single disbursement bank accounts

and an approved official with signatory authority to facilitate tighter controls over

charity accounts and transactions.87 The Saudi Arabian Monetary Agency (SAMA)

continues to serve as the chief regulatory body for Saudi Arabia's banks and financial

institutions.


      A number of other oversight and regulatory mechanisms were also created,

including a ban on cash collections at mosques and new rules governing the

insurance sector and capital markets. All unlicensed money exchange houses were

ordered closed, and authorities put in place close supervision mechanisms on

traditional money transfer mechanisms used to send funds abroad, such as the hawala

system.88 The kingdom's religious authorities also have engaged in closer vetting of

religious clerics and supervision of money given to them by their congregations. The

government suspended more than 1,000 clerics during 2003 and another 900 in

February 2004 reportedly "on the grounds of negligence," which may include

negligent financial accounting procedures.89 In September 2007, Interior Minister

Prince Nayef bin Abd al Aziz urged citizens to comply with directives restricting the

solicitation and collection of donations.90 In March 2008, Minister of Social Affairs

Abd al Muhsin Bin Abd al Aziz al Akkas described his ministry's methods for


85

     Author meeting with Ministry of Interior officials, Riyadh, Saudi Arabia, March 2005.

86

  The implementing regulations for the Saudi anti-money laundering and terrorist financing

law that was introduced in August 2003 had not been issued as of September 2005.

87

 Again, "multilateral organizations" based in Saudi Arabia like the IIRO, WAMY, and

MWL are not subject to these restrictions.

88

  For background information on hawala transactions see, Patrick M. Jost and Harjit Singh

Sandhu, "The Hawala Alternative Remittance System and its Role in Money Laundering,"

Interpol General Secretariat, January 2000. Available at [http://www.interpol.int/Public/

FinancialCrime/MoneyLaundering/hawala/default.asp].

89

     "Show of Force," Middle East Economic Digest, 26 March-1 April 2004, p. 30.

90

 "Saudi Interior Minister Bans Using Donation Boxes in Public Areas," OSC Document -

GMP20070904614006, September 3, 2007.

                                        CRS-22


supervising the finances of the over 300 domestic charities chartered by his ministry,

including official financial audits and unscheduled inspection visits.91


     Financial Intelligence Unit. According to the Financial Action Task Force

(FATF),92 Saudi Arabia has established a Permanent Committee on Combating the

Financing of Terrorism to coordinate its counter-terrorist financing policy efforts.

A Financial Investigation Unit (SA-FIU) has been designated to serve as Saudi

Arabia's financial intelligence unit (FIU). The SA-FIU began operations in

September 2005.93 Treasury Department officials have welcomed the SA-FIU's

establishment, and the U.S. Financial Crimes Enforcement Network (FinCEN) is a

sponsor of the SA-FIU for membership in the Egmont Group.94


     The FATF-GCC Assessment. In September 2003, members of the

Financial Action Task Force (FATF) and representatives of the Gulf Cooperation

Council (GCC) visited Saudi Arabia to examine Saudi financial practices. The FATF

2004 annual report, released on July 2, 2004, states that Saudi Arabia's legal and

regulatory system is "compliant or largely compliant with most of the FATF 40+8

Recommendations" on terrorist financing.95 The FATF review dealt only with the

adequacy of legal and regulatory provisions and did not assess the degree to which

the laws and regulations were being effectively implemented. The FATF report

concludes that the Saudi government's legal definition of terrorist financing "does

not conform to the international standards as expressed in the UN International

Convention on the Suppression of Terrorist Financing."96

91

 "Saudi Minister on Regular Audits, Controls on Charitable Activity in Kindgom," OSC

Document - GMP20080305614009, March 5, 2008.

92

  The Financial Action Task Force is "an inter-governmental body whose purpose is the

development and promotion of policies, both at national and international levels, to combat

money laundering and terrorist financing." For more information, see the FATF website at

[http://www1.oecd.org/fatf/].

93

  Prior to September 2005, investigations and prosecutions of financial crimes were being

administered by elements of the Ministry of Interior in conjunction with specially seconded

SAMA personnel. For a full description of Saudi Arabia's current financial regulatory

structure see the State Department's 2005 International Narcotics Control Strategy Report.

Saudi Arabia entry available online at [http://www.state.gov/p/inl/rls/nrcrpt/2005/vol2/

html/42395.htm].

94

   The Egmont Group is the international membership organization that formally links

financial intelligence units and facilitates information sharing for money laundering and

terrorist financing investigations.

95

  See "Kingdom of Saudi Arabia: Executive Summary - FATF Recommendations for Anti-

Money Laundering and Combating the Financing of Terrorism" in Annex C of the report

Available at [http://www1.oecd.org/fatf/pdf/AR2004-Annexes_en.PDF]. The FATF's

"40+8" Recommendations on terrorist financing and money laundering are internationally

recognized regulatory and legal benchmarks.

96

  Saudi officials maintain that the wider body of Islamic sharia law that underlies the Saudi

legal system adequately criminalizes material support for terrorism. U.S. and FATF

officials argue that the language of Saudi Arabia's criminal statutes on terrorist financing

should explicitly reflect international standards.

                                          CRS-23


      In November 2004, the Saudi Arabian government announced its participation

in the newly established Middle East and North Africa Financial Action Task Force

(MENAFATF). Membership in the regional body commits Saudi Arabia to

implementing the internationally recognized anti-money laundering and counter-

terrorist financing standards designed by FATF.


      Enforcement. According to the State Department's 2007 International

Narcotics Control Strategy Report, "there is little money laundering in Saudi Arabia

related to traditional predicate offenses" such as narcotics trafficking or smuggling.

Since 2003, the Saudi government has undertaken a number of enforcement actions

in response to international concerns about terrorist financing, including freezing

some suspect accounts and jointly designating a number of individuals and

organizations as Specially Designated Global Terrorists along with U.S. authorities.

Saudi Interior Ministry officials reported in March 2005 that security forces had

seized $4.5 million through raids on terrorist safe houses and operatives, along with

$6.5 million in 11 separate bank accounts since early 2003.97 The U.S. Department

of the Treasury also reports that Saudi security forces have killed a number of Al

Qaeda financiers, including Yousif Salih Fahad Al Ayeeri (a.k.a. "Swift Sword") and

Khaled Ali Al Hajj, who reportedly were key financial facilitators for terrorist

operatives in the Persian Gulf region.98 The 2007 Country Report on Terrorism in

Saudi Arabia notes that cooperation with the United States has helped Saudi

authorities arrest "16 Saudi-based terrorism financiers." However, Administration

officials have criticized the Saudi government for failing to prosecute prominent

individuals accused of financing international terrorism (see below).


Continuing Uncertainties and Questions

     Saudi Arabia has undertaken significant administrative reforms in its efforts to

curtail terrorist financing. A FATF official involved in the 2003-2004 assessment

of Saudi practices was quoted as saying that the new regulations to control Saudi-

based charities "probably go further than any country in the world."99 As noted

above, however, the effectiveness of many of these steps will depend on their

implementation. Several uncertainties and unresolved questions remain.


      Dilatory Action. U.S. officials have complained in the past that Saudi

officials have been slow to take action against organizations and entities implicated

in terrorist financing. According to the 9/11 Commission Monograph on Terrorist

Financing, "the Saudi government turned a blind eye to the financing of al Qaeda"

before September 11, 2001, and "the Saudis did not begin to crack down hard on Al

Qaeda financing in the Kingdom until after the May 2003 Al Qaeda attacks in

Riyadh." The report recognized the "significantly higher levels of cooperation" that

U.S. officials have received from their Saudi counterparts since May 2003. Securing

97

     Author meeting with Ministry of Interior officials, Riyadh, Saudi Arabia, March 2005.

98

     Ibid., testimony by (then) Deputy Assistant Secretary of the Treasury Juan Zarate, p. 8.

99

 Robin Allen, "Saudis meet anti-terror finance benchmarks," Financial Times (London),

March 8, 2004.

                                        CRS-24


timely cooperation remains an important component of U.S. efforts to curb the flow

of funds to terrorist groups.


      Private Donors and Accountability. U.S. officials have said that the Saudi

government should give more emphasis to demanding personal responsibility for

terrorist financiers and act against those who tolerate or promote financing of terrorist

activity. The U.S. Treasury Department has observed that "while current regulations

take account of the financial activities of charitable concerns, they do not apply to

direct donations made by private donors."100 The 9/11 Commission terrorist

financing monograph stated that as of 2004, Saudi authorities had "failed to impose

criminal punishment on any high-profile donor." Some individuals have had their

assets frozen by Saudi authorities and have been forbidden from traveling outside

Saudi Arabia. However, several prominent Saudi individuals suspected by U.S.

authorities of involvement in terrorist financing have not been charged or prosecuted

in the United States, Saudi Arabia, or other jurisdictions. These individuals are

believed to be in Saudi Arabia. The U.S. State Department has stated that "Saudi

Arabia should demonstrate its willingness to hold elites accountable" for money

laundering and terrorist financing related offenses. On September 11, 2007, Treasury

Undersecretary Stuart Levey stated that, "when the evidence is clear that these

individuals have funded terrorist organizations, and knowingly done so, then they

should be prosecuted and treated as real terrorism because it is."101 Saudi authorities

assert that the availability of sufficient evidence to support courtroom prosecutions

of alleged terrorist financiers is limited by the classification of information in some

cases.


     Currency Controls and Cash Couriers. Although Saudi Arabia's

financial customer information requirements are more stringent for international

transfers under newly adopted regulations, some loopholes may remain. The FATF

report called on Saudi officials to increase the amount of information required for

foreign currency conversion transactions at money remittance centers in the

Kingdom. Since 2006, Saudi customs authorities have introduced a new currency

and precious items declaration system at all border crossings for amounts under

$16,000. The use of cash couriers has been identified as "primary mechanism for the

transfer of insurgency funds into Iraq" and U.S. Treasury Department officials have

stated that Iraq's neighbors have a responsibility to act to prevent the transfer of large

amounts of cash to insurgent organizations in Iraq. The extent to which couriers may

be ferrying cash from Saudi Arabia into Iraq is unclear. However, press reports have

described insurgent groups' preferences for Saudi recruits because of the large

amounts of personal funding, usually in cash, that some Saudi nationals have brought

with them to Iraq.102


100

      Glaser, Testimony Before Senate Committee on the Judiciary, November 8, 2005.

101

  Brian Ross, "U.S.: Saudis Still Filling Al Qaeda's Coffers," ABC News, September 11,

2007.

102

  Ghaith Abdul-Ahad, "Outside Iraq but Deep in the Fight," Washington Post, June 8,

2005.

                                       CRS-25


                                      Outlook

      It seems clear that challenges to internal security and terrorist incidents in Saudi

Arabia have impelled the Saudi leadership to devote heightened attention to

countering the financing of terrorism. This has been particularly true since mid-2003,

when terrorists began mounting a series of attacks on residential and office

compounds, apparently in an effort to target the Saudi government as well as the

western presence in Saudi Arabia. Both U.S. officials and independent observers

have welcomed the mechanisms that Saudi authorities have put in place with the aim

of stemming the flow of funds destined for terrorist groups. They point out, however,

that the effectiveness of these measures will be tested by the degree to which Saudi

authorities succeed in implementing the various regulations that have been

established in recent years. To date, U.S. officials have continued to express approval

of changes in Saudi policy along with disappointment with Saudi enforcement

measures, particularly with a lack of public prosecutions for individuals accused of

financing terrorism outside of the kingdom.


Issues for Congress

     Several Committees and Members in the 108th and 109th Congresses expressed

interest in these issues and held hearings and introduced legislation relating to U.S.-

Saudi cooperation in the fight against terrorism and terrorist financing. Section 575

of the FY2005 Omnibus Appropriations Bill (P.L. 108-447) prohibited Saudi Arabia

from receiving aid or any direct assistance from the United States unless the

President exercised waiver authority and certified that Saudi Arabia was "cooperating

with efforts to combat international terrorism and that the proposed assistance will

help facilitate that effort." The President exercised this waiver by Presidential

Determination 2005-38 on September 26, 2005, and provided $200,000 in terrorism

financing assistance (NADR-CTF) to Saudi authorities. The Intelligence Reform and

Terrorism Prevention Act (P.L. 108-458) required the President to submit to

Congress within 180 days a strategy for collaboration with the people and

government of Saudi Arabia, including a framework for cooperation on efforts to

combat terrorist financing.


      In the 110th Congress, Section 2043 of the Implementing Recommendations of

the 9/11 Commission Act (P.L. 110-53, signed August 3, 2007) finds that "the

Kingdom of Saudi Arabia has an uneven record in the fight against terrorism,

especially with respect to terrorist financing," and requires the Administration to

submit a report 180 days after enactment describing the long term strategy of the

United States, "to work with the Government of Saudi Arabia to combat terrorism,

including through effective measures to prevent and prohibit the financing of

terrorists by Saudi institutions and citizens." The document submitted in January

2008 does not describe a strategy for future counter-terrorist financing cooperation

with Saudi Arabia, but does review in general terms Saudi actions to date to improve

their counter-terrorist financing measures.103


103

  U.S. Department of State, U.S. Strategy Toward Saudi Arabia, Report Pursuant to Section

2043c of the Implementing the Recommendations of the 9/11 Commission Act, P.L. 110-53,

                                                                           (continued...)

                                     CRS-26


      Future Steps. Members of Congress may seek to support executive branch

efforts to encourage implementation of new Saudi laws and regulations. Hearings

and inquiries seeking specific information about terrorist financing threats and

monitoring U.S. and foreign government efforts to strengthen regulatory regimes,

implementation capacity, and enforcement may improve public consideration of these

issues. Intelligence considerations may limit the degree to which officials can

publicly discuss terrorist financing threats and U.S. and foreign responses. Domestic

political considerations and information security requirements may continue to limit

the Saudi government's willingness to enforce existing regulations, particularly to

prosecute prominent alleged financiers.


103

   (...continued)

January 30, 2008.

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