Good morning Chairman Wolf, Representative Serrano and members of the Subcommittee. I welcome the opportunity to appear before you to discuss the FBI's Fiscal Year (FY) 2004 budget request. The FBI is undergoing extraordinary, positive change, to better meet the threats posed by terrorists, foreign intelligence services, and criminal enterprises. We have changed our organizational structure to address the greatest threats facing our country, to be more dynamic and flexible, and to ensure accountability. And we are dramatically upgrading our information technology. These changes, and many others that are ongoing, will ensure that the FBI stays on top of current and future threats well into the 21st century.

The FBI's FY 2004 budget request will give us the resources we need to keep this positive momentum. Our total request is $4.6 billion. We are requesting program changes totaling $513 million, including 2,346 new positions, 503 of which are Special Agents. This morning, I would like to briefly walk you through our progress to date, our assessment of the threat and the changes we are making to align our organization and resources to address the threat.

Before beginning, let me make one caveat to my testimony. We are still analyzing the impact of the 2003 Omnibus Appropriations Act on our 2004 request. It is possible that some changes to the request may be required to reflect the 2003 enacted level. We will be working with the Appropriations Committee on this analysis.

COUNTERTERRORISM PROGRESS

The prevention of another terrorist attack remains the FBI's top priority. We are thoroughly committed to identifying and dismantling terrorist networks, and I am pleased to report that our efforts have yielded major successes over the past 17 months. Over 212 suspected terrorists have been charged with crimes, 108 of whom have been convicted to date. Some are well-known -- including Zacarias Moussaoui, John Walker Lindh and Richard Reid. But, let me give you just a few recent examples:

• In March, Khalid Shaikh Mohammed was located by Pakistani officials and is in custody of the US at an undisclosed location. Mr. Mohammed was a key planner and the mastermind of the September 11th attack. Since the arrest, the FBI worked with other agencies to disrupt his financial network in the UAE and Pakistan and we are continuing to get extremely valuable information from him.
• On March 16, Abdullah al-Kidd, a US native and former University of Idaho football player, was arrested by the FBI at Dulles International Airport en route to Saudi Arabia. The FBI arrested three other men in the Idaho probe in recent weeks. And the FBI is examining links between the Idaho men and purported charities and individuals in six other jurisdictions across the country.
• In February, members of the Palestinian Islamic Jihad, including Professor Sami Al-Arian, were arrested by the FBI and charged under Racketeering Influence and Corrupt Organizations with operating a racketeering enterprise from 1984 until the present that engaged in violent activities.
• Six individuals in Portland, Oregon, were arrested by the FBI and charged with conspiracy to join al Qaeda and Taliban forces fighting against US and allied soldiers in Afghanistan. All six have entered plea negotiations.
• And, in Buffalo, the FBI arrested seven al-Qaeda associates and sympathizers. These individuals, members of a suspected sleeper cell, were indicted in September 2002 for providing material support to terrorism.

In addition, we are successfully disrupting the sources of terrorist financing, including freezing $113 million from 62 organizations and conducting 70 financial investigations, 23 of which have resulted in convictions.

COUNTERTERRORISM THREAT

Despite these successes, tangible terrorist threats remain. During this period, we are clearly focused on immediate threats to the nation because of the war in Iraq. In order to respond to potential threats, our Strategic Information and Operations Center at FBI Headquarters and our field special command posts are operating on a 24 hour basis. We established an Iraqi Task Force. And, our agents have interviewed over 5,000 individuals and are obtaining important information to help protect the American public.

But, even as we guard against this potential Iraqi threat, we believe that for the foreseeable future, the al-Qaeda network will remain one of the most serious threats facing this country. While the US has made progress in disrupting al-Qaeda at home and overseas, the organization maintains the ability and the intent to inflict significant casualties in the US with little warning.

CHANGING TO MEET TERRORIST THREATS

As al-Qaeda and other terrorist organizations change their tactics, the FBI, too, must evolve. And we are evolving.

Our new Analysis Branch in the Counterterrorism Division has produced 30 in-depth analytical assessments, including a comprehensive assessment of the terrorist threat to the homeland. We have also improved analyst training and dramatically beefed up our language translation capabilities.

I am now focusing on long-term strategies to enhance our ability to collect, analyze, and disseminate intelligence. I have put in place a new, formal structure that will enable the FBI to assess gaps and to establish formal policies and strategic plans for intelligence collection. As the President announced in his State of the Union address, a new Executive Assistant Director for Intelligence (EAD/I) will have direct authority for the FBI's national intelligence program, and will ensure that we have optimum intelligence strategies, structure, and policies in place.

We are establishing, in every field office, Intelligence units staffed with Reports Officers. These specially-trained individuals collect and extract intelligence from FBI investigations and share that information with our law enforcement and intelligence partners.

FY 2004 COUNTERTERRORISM REQUEST

Our FY 2004 request includes approximately $1 billion in direct support for counterterrorism. Nearly 50% of all requested program changes, or $250 million, supports counterterrorism. In particular, the 430 positions proposed in the FY 2004 budget will strengthen operational support around the country and improve CT management and coordination at FBI Headquarters. New personnel would provide an increased level of guidance, legal advice, and operational support to investigators on the front line of the war on terrorism. We must also continue to grow our cadre of strategic analysts. The number of FBI counterterrorism cases more than doubled last year, and with the recent capture of high-ranking al-Qaeda operatives, the number of cases will continue to climb.

The requested amounts would support 66 JTTFs - critical multi-agency task forces that facilitate cooperation and information sharing, and act as a "first line" for preventing terrorist attacks. It would expand vital international partnerships by adding new FBI Legal Attaches in Sarajevo, Bosnia; Kuwait City, Kuwait; Tashkent, Uzbekistan; Kabul, Afghanistan; and Belgrade, Serbia, and by enhancing our presence in several existing locations to handle a growing workload.

Approval of this budget request would also improve FBI crisis response capabilities, so we are prepared to respond to the scene of a terrorist attack at home or abroad quickly and effectively, with the equipment we need.

COUNTERINTELLIGENCE PROGRESS

Mr. Chairman, so far this morning I have focused on the terrorist threats facing this country. Our counterintelligence efforts are also vital to national security. I want to emphasize that the FBI is thoroughly engaged in fighting the serious threat from foreign intelligence services and their assets. The FBI had several successful investigations in this area. Last month, Brian Regan agreed to accept a life sentence for attempted espionage and unlawful gathering of defense information. In October 2002, Ana Montes was sentenced to 25 years in prison following her plea of guilty to one count conspiracy to commit espionage on behalf of Cuba.

COUNTERINTELLIGENCE THREATS

Intelligence threats fall into four general categories. The most significant - and our top counterintelligence priority -- is the potential for an agent of a hostile group or nation to enhance its capability to produce or use weapons of mass destruction. A second threat is the potential for a foreign power to penetrate the U.S. Intelligence Community. A third threat is the targeting of government supported research and development. The individuals awarded research and development contracts in support of ongoing operations and war-making capabilities constitute the highest risk. The fourth threat is the potential compromise of Critical National Assets (CNAs). The nation's CNAs are those persons, information, assets, activity, R&D technology, infrastructure, economic security or interests whose compromise would do damage to the survival of the United States.

CHANGING TO MEET INTELLIGENCE THREATS

Just as we have worked to transform ourselves within the counterterrorism program, we have made significant changes to the FBI's counterintelligence program. Last May, when I announced the second phase of the FBI reorganization, I indicated that we would be refocusing our counterintelligence program to focus on the four threats I outlined. That effort is progressing with a centralized, nationally directed program. We established a Counterespionage Section responsible for overseeing all of the FBI's counterespionage efforts, including economic espionage, and we clarified our priorities and objectives in a "National Strategy for Counterintelligence."

With your support, we reprogrammed 216 positions from criminal investigations to counterintelligence, and we now have full-time counterintelligence squads in 48 of the 56 field offices.

FY 2004 COUNTERINTELLIGENCE BUDGET REQUEST

For FY 2004, we ask your support for program changes totaling $63 million and 599 positions, including 94 agents, to further our counterintelligence strategy. These resources would provide the necessary investigators, analysts, and surveillance capabilities needed to address emerging global threats, bolster both our fixed and mobile surveillance capabilities, and improve our ability to detect espionage activities targeting national assets and universities.

CYBER CRIME PROGRESS

Next, I would like to discuss our third priority - cyber. We have created a consolidated new Cyber Division at Headquarters to manage investigations into Internet-facilitated crimes, to support investigations throughout the Bureau that call for technical expertise, and to help us coordinate with public and private sector partners.

Forty-seven of our field offices have, or will soon have, a specialized cyber squad; eight will have multiple cyber squads. Cyber Action Teams assist with specialized expertise. And the FBI now participates in over 30 investigative task forces dedicated to cyber crime.

This strategy is proving successful. Our computer intrusion program, for example, has identified 2,554 compromised computers, and resulted in 95 convictions and $186 million in restitutions. During 2002, Innocent Images National Initiative investigations resulted in 692 arrests, 648 indictments/informations, and 646 convictions. And despite using only 5% of all FBI resources, the Cyber Program is facilitating investigative activities across all Bureau programs.

CYBER CRIME THREAT

Unfortunately, we are seeing explosive growth in cyber crime - both traditional crimes such as fraud and copyright infringement that have migrated on-line, and new crimes like computer intrusions and denial of service attacks.

To date, terrorists have posed only low-level cyber threats, but some organizations are increasingly using information technology for communication. Terrorist groups are increasingly computer savvy, and with publicly available hacker tools, many have the capability to launch nuisance attacks against Internet-connected systems. As terrorists become more computer savvy, their attack options will increase.

CHANGING TO MEET CYBER THREATS

Looking forward, our Cyber Program will focus on identifying and neutralizing: (1) individuals or groups conducting computer intrusions and spreading malicious code; (2) intellectual property thieves; (3) Internet fraudsters; and (4) on-line predators that sexually exploit or endanger children. Our success will depend on maintaining state-of the art technical capabilities to handle complex investigations and forming and maintaining public/private alliances.

FY 2004 BUDGET REQUEST

For FY 2004, the FBI is requesting $234.4 million to protect the US against cyber-based attacks and high-technology crimes. This request represents program changes of $62 million and 194 positions, including 77 agents. These resources will enable the FBI to staff computer intrusion squads in field offices, enhance technical capacities to identify persons illegally accessing networks, and provide funding for the training and equipment we need to more aggressively investigate cyber incidents. The requested resources will enable the FBI to increase its efforts to detect the sexual exploitation of children on the Internet. Over the past six years we have seen these cases grow in number from 113 to over 2,300. We must increase our commitment here. Finally, the resources would allow us to expand our ability to conduct computer forensics examinations. Right now, 6 out of 10 investigations require some level of computer forensics support. History tells us that the number of cases requiring this support will continue to grow and that the number of forensic examinations required per investigation will also continue to grow.

TECHNOLOGY PROGRESS

I would like to touch on our efforts to upgrade FBI technology. Over the past two years the FBI has made significant progress in modernizing our information technology infrastructure to better support our investigative needs. As part of our Trilogy project to date, 21,025 new desktop computers and High-speed Local Area Networks have been deployed to 622 FBI locations; 3,408 printers and 1,463 scanners were provided; our wide area network is scheduled to come on-line at the end of this month and 524 sites of 594 are now operating on Trilogy representing 92% of our US employees; and the Enterprise Operations Center becomes operational early this spring to manage data, network, hardware, software applications and security access. The wide area network will connect computers throughout the entire FBI. We are now focused on implementing a corporate data warehousing capability that is key to FBI intelligence, investigative, and information sharing initiatives as well as to our records management system.

Trilogy will change the FBI culture from paper to electronic. It will replace redundant searches of stove-piped systems. Agents will search multiple databases - linking thousands of data points of evidence, leads and suspects - through a single portal. Trilogy is the base for a modern computer architecture. Trilogy computers, servers, and networks will support state-of-the-art applications. Using Trilogy to transport, the Integrated Data Warehouse will link 31 FBI databases for single-portal searches and data mining. The Collaborative Capabilities program will allow electronic data sharing with other agencies.

FY 2004 BUDGET REQUEST

We are now at the point in our information technology upgrade where it is essential that we preserve these investments by ensuring there is sufficient funding for life-cycle operations and maintenance of systems and for technology refreshment. The FY 2004 request includes program changes of $82 million to fund technology refreshment and operations and maintenance. These resources will ensure that the equipment we have deployed stays in good working order, and that it is replaced in an orderly manner. The FBI can never again allow its equipment to become obsolete.

OTHER PROGRAMS

We are completely restructuring our internal security programs and processes. We have created a dedicated Security Division and are consolidating security functions under a single management structure. As we implement these changes to improve security, we are addressing recommendations in the Webster and Rand reports. The FY 2004 request includes program changes of $37 million and 126 positions, including 32 agents. These resources will fund polygraph examinations, guard services, and other security expenses.

The FBI Laboratory's R&D efforts generated more than 120 projects, providing more than 100 deliverable products to the operational units, 58 technical publications, and 126 scientific presentations, in the last three years. The FBI's Combined DNA Index System software is used by 185 domestic and 23 foreign laboratories. The FY 2004 request includes $3.28 million and 32 positions funding nuclear DNA and the Federal Convicted Offender Program.

I will conclude with the FBI's Criminal Program. We have opened more than 85 major corporate fraud investigations. At the end of FY 2002, the FBI had five corporate fraud investigations with losses in excess of $1 billion. Currently, this number has increased to eight. Forty-five FBI field offices are participating in multi-agency corporate fraud working groups. The FY 2004 request includes $16 million and 164 positions, including 54 agents. The request will fund additional financial analysts and investigators to support this initiative.

CLOSING

The FBI has turned a corner in its history. With the support of Congress, we have been able to make dramatic and substantive changes. Our transformation continues because the threats facing the U.S. homeland continue to evolve. I want to reassure you that we are committed to protecting this country from those who seek to harm us through acts of terror, espionage, cyber attacks, or criminal acts. Every citizen must be able to enjoy the basic freedoms this great nation provides. The men and women of the FBI understand their roles in these challenging and uncertain times. With your support, we can give them the resources and tools they need to carry out our mission.

Thank you.