U.S. Department of Justice Federal Bureau of Investigation Washington, D.C. 20535 STATEMENT OF JAMES K. KALLSTROM SPECIAL AGENT IN CHARGE SPECIAL OPERATIONS DIVISION NEW YORK FIELD DIVISION FEDERAL BUREAU OF INVESTIGATION ON MAY 3, 1994 BEFORE THE SUBCOMMITTEE ON TECHNOLOGY, ENVIRONMENT AND AVIATION OF THE COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY UNITED STATES HOUSE OF REPRESENTATIVES THANK YOU MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE FOR PROVIDING ME WITH THIS OPPORTUNITY TO DISCUSS WITH YOU AN ISSUE OF EXTREME IMPORTANCE AND OF GREAT CONCERN TO ALL IN LAW ENFORCEMENT AND THE INTELLIGENCE COMMUNITY -- OUR CONTINUED ABILITY TO CONDUCT COURT-AUTHORIZED ELECTRONIC SURVEILLANCE. IN THIS REGARD, I WANT TO STRONGLY URGE YOUR SUPPORT FOR ENACTMENT OF THE ADMINISTRATION'S PROPOSED "DIGITAL TELEPHONY AND COMMUNICATIONS PRIVACY IMPROVEMENT ACT OF 1994," AND TO EXPRESS ON BEHALF OF ALL IN LAW ENFORCEMENT OUR UNEOUIVOCAL SUPPORT FOR THE ADMINISTRATION'S KEY ESCROW (CLIPPER CHIP) ENCRYPTION INITIATIVE. AS YOU ARE AWARE, THE NATION'S TELECOMMUNICATIONS NETWORKS ARE ROUTINELY USED IN THE COMMISSION OF SERIOUS CRIMINAL ACTIVITIES. TERRORISTS, VIOLENT CRIMINALS, ORGANIZED CRIME GROUPS AND DRUG TRAFFICKING ORGANIZATIONS, WHICH ARE HIGHLY STRUCTURED, RELY HEAVILY UPON TELECOMMUNICATIONS TO PLAN AND EXECUTE THEIR CRIMINAL ACTIVITIES AND HIDE THEIR ILLEGAL PROFITS. SIMILARLY, FOREIGN INTELLIGENCE SERVICE OFFICERS AND THEIR AGENTS CARRY OUT THEIR ESPIONAGE MISSIONS THROUGH THESE NETWORKS. A LITTLE OVER TWENTY-FIVE YEARS AGO, CONGRESS RECOGNIZED THAT AMERICA'S CRIMINAL ELEMENTS USE THE TELEPHONE AND OTHER COMMUNICATIONS DEVICES TO CONDUCT THEIR ILLEGAL AND OFTEN VIOLENT ACTIVITIES. IN RESPONSE, CONGRESS PASSED "THE OMNIBUS CRIME CONTROL AND SAFE STREETS ACT OF 1968." TITLE III OF THAT ACT AUTHORIZES THE USE OF COURT-ORDERED ELECTRONIC SURVEILLANCE AND ESTABLISHES STRICT PROCEDURES FOR CONDUCTING THAT - 2 - SURVEILLANCE. AS YOU KNOW, THAT LAW PERNITS ELECTRONIC SURVEILLANCE ONLY FOR SERIOHS FELONY OFFENSES AND ONLY WHEN OTHER INVESTIGATIVE TECHNIQUES WILL NOT WORK OR ARE TOO DANGEROUS. SINCE 1968, LAW ENFORCEMENT HAS USED THIS CRIME-SOLVING AND CRIME-PREVENTING TECHNIQUE VERY EFFECTIVELY AND JUDICIOUSLY TO PROTECT OUR PEOPLE. IN A TEN-YEAR PERIOD ENDING IN 1992, MORE THAN 22,000 CONVICTIONS HAVE RESULTED FROM COURT-AUTHORIZED SURVEILLANCES. ALTHOUGH THESE RESULTS ARE IMPRESSIVE, WIRETAPPING IS NOT SOMETHING THAT LAW ENFORCEMENT DOES FREQUENTLY OR CASUALLY. FOR EXAMPLE, IN 1992, ONLY 919 CRIMINAL WIRETAP ORDERS WERE OBTAINED BY ALL FEDERAL, STATE, AND LOCAL LAW ENFORCEMENT AGENCIES. ABOUT TWO- THIRDS OF THOSE WIRETAP ORDERS WERE OBTAINED FOR SERIOUS STATE AND LOCAL FELONIES. WITHOUT LAW ENFORCEMENT'S ABILITY TO EFFECTIVELY EXECUTE COURT ORDERS FOR ELECTRONIC SURVEILLANCE, THE COUNTRY WOULD BE UNABLE TO PROTECT ITSELF AGAINST FOREIGN THREATS, TERRORISM, ESPIONAGE, VIOLENT CRIME, DRUG TRAFFICKING, KIDNAPPING, AND OTHER CRIMES. WE MAY BE UNABLE TO INTERCEPT A TERRORIST BEFORE HE SETS OFF A DEVASTATING BOMB; UNABLE TO THWART A FOREIGN SPY BEFORE HE CAN STEAL SECRETS THAT ENDANGER THE ENTIRE COUNTRY; AND UNABLE TO ARREST DRUG TRAFFICKERS SMUGGLING IN HUGE AMOUNTS OF DRUGS THAT WILL CAUSE WIDESPREAD VIOLENCE AND DEATH. COURT-APPROVED ELECTRONIC SURVEILLANCE IS OF IMMENSE VALUE, AND OFTEN IS THE ONLY WAY TO PREVENT OR SOLVE THE MOST SERIOUS - 3 - CRIMES FACING TODAY'S SOCIETY. SEVERAL RECENT EXAMPLES HIGHLIGHT ITS IMPORTANCE: IN ONE CASE, A DEADLY TERRORIST INCIDENT WAS SOLVED; IN ANOTHER, A TERRORIST INCIDENT WAS PREVENTED; AND, IN A THIRD, THE ARREST OF AN ALLEGED SPY WAS FACILITATED IN WHAT IS SURELY ONE OF THE MAJOR ESPIONAGE CASES OF THIS OR ANY DECADE. BEYOND THESE MOST RECENT EXAMPLES, LET ME ALSO MENTION THE FOLLOWING INVESTIGATIONS WHERE THIS IMPORTANT TECHNIQUE WAS ESSENTIAL IN PREVENTING CRIMES AND, MORE IMPORTANTLY, IN SAVING HUMAN LIFE: * THE VIOLENT EL RUKN GANG IN CHICAGO, ACTING AS A SURROGATE FOR THE LIBYAN GOVERNMENT, PLANNED TO SHOOT DOWN A COMMERCIAL AIRLINER WITHIN THE UNITED STATES USING A STOLEN MILITARY WEAPON. THIS ACT OF TERRORISM WAS PREVENT DIRECTLY THROUGH THE USE OF ELECTRONIC SURVEILLANCE. * THE "ILL WIND" PUBLIC CORRUPTION AND DEFENSE DEPARTMENT FRAUD INVESTIGATION RELIED HEAVILY ON COURT-ORDERED ELECTRONIC SURVEILLANCE. TO DATE, THIS INVESTIGATION HAS RESULTED IN THE CONVICTION OF 65 INDIVIDUALS AND HORE THAN A QUARTER OF A BILLION DOILARS IN FINES, RESTITUTIONS AND RECOVERIES. * NUMEROUS DRUG TRAFFICKING AND MONEY LAUNDERING INVESTIGATIONS, SUCH AS THE "PIZZA CONNECTION" CASE, UTILIZED EXTENSIVE ELECTRONIC SURVEILLANCE IN THE „ 4 - SUCCESSFUL PROSECUTION OF LARGE-SCALE NATIONAL AND INTERNATIONAL DRUG TRAFFICKING ORGANIZATIONS. * IN A NOTABLE SEXUAL EXPLOITATION OF CHILDREN INVESTIGATION, THE FBI RELIED HEAVILY ON ELECTRONIC SURVEILLANCE TO PREVENT VIOLENT INDIVIDUALS FROM ABDUCTING, TORTURING, AND MURDERING A CHILD IN ORDER TO MAKE A "SNUFF MURDER" FILM. I CAN ASSURE YOU THAT A LOSS OR DIMINISHMENT OF ELECTRONIC SURVEILLANCE WILL PRODUCE THE FOLLOWING DISASTROUS RESULTS: * AN INCREASED LOSS OF LIFE, ATTRIBUTABLE TO LAW ENFORCEMENT'S INABILITY TO PREVENT TERRORIST ACTS AND MURDERS. * AN INCREASE IN CORRUPTION AND ECONOMIC HARM TO BUSINESS, INDUSTRY, LABOR UNIONS, AND SOCIETY GENERALLY, AMOUNTING TO BILLIONS OF DOLLARS, CAUSED BY THE GROWTH OF UNDETECTED AND UNPROSECUTED ORGANIZED CRIME, PUBLIC CORRUPTION, AND GOVERNMENTAL FRAUD. * AN INCREASED AVAILABILITY OF MUCH CHEAPER NARCOTICS AND ILLEGAL DRUGS -- ALONG WITH THE PERSONAL, SOCIETAL, AND ECONOMIC HARM BROUGHT ABOUT BY INCREASED DRUG USE: THAT IS, THE NUMEROUS DEATHS, RAVAGED LIVES, INCREASED HEALTH CARE COSTS, AND THE TREMENDOUS ECONOMIC HARM CALCULATED IN THE BILLIONS OF DOLLARS. * A SUBSTANTIAL INCREASE IN UNDETECTED AND UNPROSECUTED VIOLENT CRIMES (BOMBINGS, MURDERS, AND OTHER VIOLENT „ 5 - ACTS) ALONG WITH THE LOSS OF HUNDREDS OF LIVES AND MILLIONS OF DOLLARS IN ECONOMIC HARM. MR. CHAIRMAN, AND MEMBERS OF THE SUBCOMMITTEE, THE PROBLEM IS THAT RECENT AND CONTINUING ADVANCES IN TELECOMMUNICATIONS SYSTEMS AND NETWORKS AND THE INTRODUCTION OF NEW DIGITALLY-BASED TECHNOLOGIES, TRANSMISSION MODES, AND SERVICES AND FEATURES ARE MAKING IT INCREASINGLY MORE DIFFICULT, IF NOT IMPOSSIBLE, FOR LAW ENFORCEMENT TO CONDUCT COURT-ORDERED ELECTRONIC SURVEILLANCE. THESE TECHNOLOGIES PRESENT A TWO-FOLD THREAT TO THE PUBLIC SAFETY: FIRST, THE DIMINISHED ABILITY OF TELECOMMUNICATIONS SERVICE PROVIDERS TO ASSIST LAW ENFORCEMENT IN ACCESSING COMMUNICATIONS SUBJECT TO COURT-ORDERED INTERCEPTION (THE DIGITAL TELEPHONY ISSUE); AND SECONDLY, THE DIMINISHED ABILITY TO ANALYZE AND DECIPHER, ON A REAL-TIME BASIS, INTERCEPTED COMMUNICATIONS THAT ARE ENCRYPTED (THE ENCRYPTION ISSUE). LIKE OTHER ADVANCED DIGITAL TELECOMMUNICATIONS TECHNOLOGIES, THE AVAILABILITY OF HIGH-GRADE ENCRYPTION NOW THREATENS TO IMPAIR, AND, IN MANY INSTANCES, PRECLUDE OUTRIGHT, THE EFFECTIVE USE OF COURT-ORDERED ELECTRONIC SURVEILLANCE. DIGITAL TELEPHONY ISSUE SINCE THE DIVESTITURE OF AT&T IN 1984, THE NUMBER OF COMMON CARRIERS HAS GROWN TO OVER 2,000 AND TELEPHONE TECHNOLOGY HAS BECOME VERY DIVERSE AND SOPHISTICATED. IN THE PAST, WHEN A LAW ENFORCEMENT AGENCY CONDUCTED ELECTRONIC SURVEILLANCE OR A "WIRETAP" ON A SUBJECT'S TELEPHONE LINE IN THE "LOCAL LOOP," IT „ 6 - WAS VIRTUALLY ASSURED OF INTERCEPTING ALL OF THE CONTENT OF COMMUNICATIONS AS WELL AS THE ASSOCIATED DIALING INFORMATION. NOW COMMON CARRIERS ARE DEPLOYING ADVANCED TECHNOLOGIES, INCLUDING SOPHISTICATED SERVICES AND FEATURES, PERMITTING THE TRANSMISSION OF MULTIPLE, SIMULTANEOUS COMMUNICATIONS OF DIFFERENT SUBSCRIBERS OVER FIBER OPTIC AND WIRE FACILITIES. ALSO, CELLULAR TELEPHONES AND FEATURES SUCH AS CALL FORWARDING PERMIT MOBILITY AND THE REDIRECTING OF CALLS ANYWHERE. LIKEWISE, "FOLLOW-ME" FEATURES EXPAND THE CALL FORWARDING CONCEPT TO NATIONAL PROPORTIONS. THE DEPLOYMENT OF PERSONAL COMMUNICATIONS SERVICES (PCS) IN THE NEAR FUTURE WILL FURTHER INCREASE THE PROBLEM OF FINDING TECHNICAL ACCESS POINTS TO EFFECT A WIRETAP. IN FACT, INDUSTRY REPRESENTATIVES HAVE ACKNOWLEDGED THAT ~lSTING NETWORKS OFFERING TUESE SERVICES AND FEATURES, AS WELL AS NETWORKS PLANNED FOR THE FUTURE, IN T~EIR CDRRiNT AND PLANNED CONFIGURATIONS, OFTEN PREVENT, AND WILL CONTINUE TO PR~VENT, COMMON CARRIERS FROM COMPLYING WITH COURT ORDERS AND PROVIDING THE NEEDED ACCESS TO AT.T. COMMUNICATIONS AND DIALING INFORMATION. OVER THE LAST DECADE, WE ESTIMATE THAT SEVERAL HUNDRED COURT ORDERS HAVE BEEN FRUSTRATED, IN WHOLE OR IN PART, BY VARIOUS TECHNOLOGICAL IMPEDIMENTS. IN 1993, THE FBI CONDUCTED AN INFORMAL SURVEY OF FEDERAL AND LOCAL LAW ENFORCEMENT REGARDING RECENT TECHNOLOGICAL PROBLEMS WHICH REVEALED 91 INSTANCES WHERE LAW ENFORCEMENT WAS PRECLUDED, IN WHOLE OR IN PART, FROM FULLY IMPLEMENTING COURT ORDERS. TWO-THIRDS OF THEM RELATED TO EITHER CELLULAR TELEPHONE SYSTEMS OR WIRELINE COMMUNICATIONS THAT „ 7 - EMPLOYED CUSTOM CALLING FEATURES. IT IS IHPORTANT TO NOTE THAT MaNY COURT ORDERS HAVE NOT BEEN SOUGHT OR SERVED ON CARRIERS DUE TO THE AWAR~NFSS OF PRE-EXISTING IMPEDI~ENTS, AND THUS COULD NOT BE COUNTED IN THIS SURVEY. OTHER PROBLEMS ENCOUNTERED INCLUDE INTERCEPTING DIGITAL VOICE COMMUNICATIONS AND HIGH-SPEED DATA, AND FIBER OPTIC LINES. SINCE THAT SURV~Y, MANY ~ORE PROBLEMS ~AVE BEEN DETECTED. IN 1992, ONE STATE LAW ENFORCEMENT AGENCY ADVISED THAT 25% OF ITS ELECTRONIC SURVEILLANCE INTERCEPTIONS WERE IMPEDED BY ADVANCED SYSTEMS FEATURES. HOWEVER, IT WOULD BE A MISTAKE TO GAUGE THIS PROBLEM BY LOOKING BACKWARDS AND SIMPLY ATTEMPTING TO QUANTIFY THROUGH SOME BRIEF, INFORMAL SURVEY THE PROBLEM IN TERMS OF THE NUMBER OF COURT ORDERS FRUSTRATED . THE INDISPUTABLE FACT IS THAT EMERGING AND FUTURE TECHNOLOGIES WILL HAVE A HUCH GREATER AND HORE DEVASTATING IMPACT ON LAW ENFORCEMENT AND THE PUBLIC SAFETY, U~LESS CONGRESS ACTS NOW TO ENSU.RE THAT CURR~NT IKPEDIKENTS ARE REHOVED AND NEW ONES ARE NOT INTRODUCED. FOR ALMOST FOUR YEARS, WE HAVE ATTEMPTED TO RESOLVE THIS PROBLEM WITH OFFICIALS OF THE TELECOMMUNICATIONS INDUSTRY AT ALL CORPORATE LEVELS. WE HAVE BRIEFED SENIOR EXECUTIVES OF MAJOR COMMON CARRIERS ABOUT THE DIFFICULTIES AND THE FACT THAT FUTURE TECHNOLOGIES WOULD SEVERELY DIMINISH, IF NOT PRECLUDE, ELECTRONIC SURVEILLANCE. ALTHOUGH APPEARING SUPPORTIVE, SEVERAL INDICATED THAT WITHOUT SOME MANDATE, SUCH AS LEGISLATION, THEIR COMPANIES COULD NOT UNILATERALLY INVEST MONEY OR TECHNICAL RESOURCES TO „ 8 - DEVELOP AND IMPLEMENT SOLUTIONS, ESPECIALLY IF THERE WERE NO ASSURANCE OF COMPETITORS DOING SO. FOR THE LAST TWO YEARS, WE HAVE MET WITH AN INDUSTRYBASED TECHNICAL WORKING GROUP. THIS GROUP WAS LATER ORGANIZED AS THE ELECTRONIC COMMUNICATIONS SERVICE PROVIDERS COMMITTEE UNDER AN INDUSTRY ASSOCIATION KNOWN AS THE ALLIANCE FOR TELECOMMUNICATIONS INDUSTRY SOLUTIONS (ATIS). AS A RESULT OF THIS PROCESS, THERE HAS BEEN A BETTER UNDERSTANDING BY BOTH LAW ENFORCEMENT AND INDUSTRY REPRESENTATIVES OF THE ISSUES THAT EACH FACE WITH RESPECT TO ELECTRONIC SURVEILLANCE. HOW~V~K, CONTRARY TO ASSERTIONS OF INDUSTRY LOBBYISTS, NEW TELECOMMUNICATIONS TECHNOLOGIES DO AND WILL CONTINaE TO JEOPARDIZE LAW ENFORCEMENT'S SURVEILLaNCE ABILITIES. THE ATIS CHAIRMAN HAS STATED IN A RECENT LETTER THAT THE ENTIRE COMMITTEE, NOT JUST ONE PARTICIPANT OR ONE GROUP OF PARTICIPANTS, NOW RECOGNIZES THE PROBLE~S AND IMPEDIMENTS THAT THESE TELECOMNUNICATIONS TECHNOLOGIES ARE CREATING FOR LAW ENFORCEHENT. IMPORTANTLY, HE ACRNOW~EDGES, HOWEVER, THAT SOLUTIONS THAT MAY BE DEVELOPED CAN ONLY BE RECOMMENDED IN THE COMMITTEE AND THAT ANY IMPLEMENTATION WOULD BE ENTIRELY VOLUNTARY. LAW ENFORCEMENT CONTINUES TO SUPPORT DIALOGUE WITH INDUSTRY; HOWEVER, THE WORKING GROUP PROCESS AND THE STANDARDS BODY FORUM NOW BEING USED IS VOLUNTARY AND IS NOT EQUIPPED OR CHARTERED TO SOLVE THE PROBLEM OR ENSURE IMPLEMENTATION OF SOLUTIONS. THERE IS NO MECHANISM, NO RESOLUTION, SHORT OF LEGISLATION, THAT CAN COMPEL THE TELECOMMUNICATIONS INDUSTRY TO - 9 - DEPLOY TIMELY AND COMPREHENSIVE SOLUTIONS. THUS, THE ADMINISTRATION HAS CONCLUDED AFTER A LENGTHY IN-DEPTH STUDY CONDUCTED PURSUANT TO A PRESIDENTIAL REVIEW DIRECTIVE THAT TEIS INFORNaL, VOLUNTARY PROCESS IS NOT, AND CANNOT BE, A SUBSTITUTE FOR COMPRRRRNSIVE LEGISLATION. ON MARCH 25, 1994, THE ADMINISTRATION FORWARDED TO CONGRESS "THE DIGITAL TELEPHONY AND COMMUNICATIONS PRIVACY IMPROVEMENT ACT OF 1994." THIS LEGISLATIVE PROPOSAL REPRESENTS, IN MY ESTIMATION, THE ONLY RATIONAL, VIABLE APPROACH TO SOLVING THIS PROBLEM IN A TIMELY AND COMPREHENSIVE FASHION. LEGISLATION ALONE CAN ASSURE THAT ALL OF THE IMPEDIMENTS TO AUTHORIZED ELECTRONIC SURVEILLANCE WILL BE REMOVED WITHIN A REASONABLE PERIOD OF TIME. THE PURPOSE OF THE ADMINISTRATION'S PROPOSAL, QUITE SIMPLY, IS TO MAINTAIN TECHNOLOGICAL CAPABILITIES COMMENSURATE WITH EXISTING STATUTORY AUTHORITY -- THAT IS, TO PREVENT ADVANCED TELECOMMUNICATIONS TECHNOLOGY FROM REPEALING DE FACTO STATUTORY AUTHORITY ALREADY CONFERRED BY CONGRESS. THE PROPOSED LEGISLATION EXPLICITLY STATES THAT IT DOES NOT ALTER OR EXPAND THE GOVERNMENT'S AUTHORITY TO CONDUCT COURT-ORDERED ELECTRONIC SURVEILLANCE AND USE PEN REGISTER OR TRAP AND TRACE DEVICES. THE ESSENCE OF THE LEGISLATION IS TO CLARIFY AND MORE FULLY DEFINE THE NATURE AND EXTENT OF THE SERVICE PROVIDER'S "ASSISTANCE" REQUIREMENT THAT WAS ENACTED BY CONGRESS IN 1970, WHICH CONGRESS IMPOSED SO THAT COURT ORDERS WOULD NOT BE FRUSTRATED DUE TO A PROVIDER'S FAILURE TO FURNISH NEEDED TECHNOLOGICAL ASSISTANCE AND „ 10 „ FACILITIES. THE PROPOSED LEGISLATION RELATES SOLELY TO ADVANCED TECHNOLOGY, NOT LEGAL AUTHORITY OR PRrVACY. THE PROPOSAL REPRESENTS A PROPER, BALANCED APPROACH TO THIS ISSUE. IT DEALS WITH THE "DIGITAL TELEPHONY" PROBLEM IN AN APPROPRIATELY COMPREHENSIVE FASHION -- IT DOES NOT SIMPLY "BANDAID OVER" PAST PROBLEMS; IT ALSO RESPONSIBLY DEALS WITH NEW SERVICES AND TECHNOLOGIES (SUCH AS PERSONAL COMMUNICATIONS SERVICES) THAT SOON WILL EMERGE. ON THE OTHER HAND, THE LEGISLATION IS NARROWLY FOCUSED ON WHERE THE VAST MAJORITY OF THE PROBLEMS EXIST -- THE NETWORKS OF COMMON CARRIERS, A SEGMENT OF THE INDUSTRY WHICH HISTORICALLY HAS BEEN SUBJECT TO REGULATION. THE ADMINISTRATION'S PROPOSAL INCLUDES CLEARLY-STATED ELECTRONIC SURVEILLANCE REQUIREMENTS, SYSTEMS SECURITY PROVISIONS, A REASONABLE DEADLINE FOR COMPLIANCE, REQUIREMENTS FOR EQUIPMENT MANUFACTURER AND SUPPORT SERVICE PROVIDER COOPERATION, PROPER ENFORCEMENT AND PENALTY PROVISIONS, ONGOING GOVERNMENT CONSULTATION TO FACILITATE COMPLIANCE, AND, IMPORTANTLY, A COMMITMENT BY THE FEDERAL GOVERNMENT TO PAY COMMON CARRIERS FOR REASONABLE CHARGES ASSOCIATED WITH ACHIEVING COMPLIANCE. ENCRYPTION ISSUE TECHNOLOGICAL ADVANCES IN THE TELECOMMUNICATIONS INDUSTRY, INCLUDING DIGITALLY-FORMATTED TRANSMISSIONS, ARE ALSO FACILITATING THE DEVELOPMENT AND PRODUCTION OF AFFORDABLE, HIGHGRADE COMMUNICATIONS ENCRYPTION PRODUCTS FOR PRIVATE-SECTOR USE. SECURING COMMUNICATIONS AND INFORMATION THROUGH THE USE OF EXCELLENT CRYPTOGRAPHY CAN BE A MIXED BLESSING FOR BOTH THE „ 11 „ GOVERNMENT AND SOCIETY. ON THE ONE HAND, IT IS EXTREMELY BENEFICIAL AND OFTEN ESSENTIAL WHEN USED TO PROTECT CLASSIFIED GOVERNMENT COMMUNICATIONS AND INFORMATION. SIMILARLY, IT IS VERY IMPORTANT, AND SOMETIMES CRUCIAL, WHEN USED TO PROTECT SENSITIVE, UNCLASSIFIED GOVERNMENTAL AND COMMERCIALLY SENSITIVE AND PROPRIETARY BUSINESS COMMUNICATIONS AND INFORMATION. ON THE OTHER HAND; THE USE OF EXCELLENT CRYPTOGRAPHIC PRODUCTS BY THE MYRIAD ARRAY OF CRIMINALS AND TERRORISTS POSES AN EXTREMELY SERIOUS THREAT TO THE PUBLIC SAFETY AND NATIONAL SECURITY. THE ESSENCE OF THE CRYPTOGRAPHIC THREAT IS THAT HIGHGRADE AND USER-FRIENDLY ENCRYPTION PRODUCTS CAN SERIOUSLY HINDER LAW ENFORCEMENT AND COUNTERINTELLIGENCE AGENCIES IN THEIR ABILITY TO CONDUCT ELECTRONIC SURVEILLANCE THAT IS OFTEN NECESSARY TO CARRYING OUT THEIR STATUTORILY-BASED MISSIONS AND RESPONSIBILITIES. IN PARTICULAR, SOME ENCRYPTION PRODUCTS PUT AT RISK EFFORTS BY FEDERAL, STATE AND LOCAL LAW ENFORCEMENT AGENCIES TO OBTAIN TO CONTENTS OF INTERCEPTED COMMUNICATIONS BY PRECLUDING REAL-TIME DECRYPTION. REAL-TIME DECRYPTION IS OFTEN ESSENTIAL SO THAT LAW ENFORCEMENT CAN RAPIDLY RESPOND TO CRIMINAL ACTIVITY AND, IN MANY INSTANCES, PREVENT SERIOUS AND LIFE-THREATENING CRIMINAL ACTS. THE PRESIDENTIAL DECISION DIRECTIVE ANNOUNCED ON APRIL 16, 1993, CONCERNING THE USE OF THE GOVERNMENT-DEVELOPED KEY ESCROW MICROCIRCUIT, FORMERLY REFERRED TO AS THE "CLIPPER CHIP," IS A REASONABLE, RATIONAL, AND BALANCED INITIATIVE CONCERNING THE USE OF ENCRYPTION. IT ADDRESSES BOTH THE NEEDS OF - 12 - LAW-ABIDING AMERICAN CITIZENS AND BUSINESSES TO PROTECT THEIR PRIVATE AND SENSITIVE COMMUNICATIONS WITH HIGH- GRADE ENCRYPTION AND THE LEGITIMATE NEEDS OF THE GOVERNMENT AND LAW ENFORCEMENT TO CONDUCT COURT- AUTHORIZED ELECTRONIC SURVEILLANCE TO ADDRESS SERIOUS CRIMINAL ACTIVITY, ENSURE THE PUBLIC SAFETY, AND PROTECT THE NATIONAL SECURITY. ON FEBRUARY 9, 1994, THE NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY (NIST) PROMULGATED A FEDERAL INFORMATION PROCESSING STANDARD (FIPS) FOR AN "ESCROWED ENCRYPTION STANDARD." THE "ESCROWED ENCRYPTION STANDARD" PROVIDES SUPERB PRIVACY PROTECTION THROUGH THE USE OF AN EXTREMELY STRONG CRYPTOGRAPHIC ALGORITHM, WHILE AT THE SAME TIME PERMITTING REAL-TIME DECRYPTION BY LAW ENFORCEMENT OF THE COMMUNICATIONS PROTECTED BY THAT ALGORITHM, WHEN LEGALLY AUTHORIZED. REAL-TIME DECRYPTION IS PROVIDED THROUGH A DIGITAL KEY THAT IS UNIQUE TO EACH CHIP EMPLOYING THE ESCROWED ENCRYPTION STANDARD. AT THE TIME OF THE CHIP'S PROGRAMMING, THAT KEY IS MATHEMATICALLY SPLIT INTO TWO PIECES AND THOSE PIECES ARE SEPARATELY RETAINED BY TWO ENTITIES, KNOWN AS "KEY ESCROW AGENTS," WHO HOLD THE KEY COMPONENTS UNTIL NEEDED FOR RELEASE IN CONJUNCTION WITH A LAWFULLY AUTHORIZED ELECTRONIC SURVEILLANCE. THE ATTORNEY GENERAL HAS APPROVED RIGOROUS AND DETAILED PROCEDURES UNDER WHICH THE TWO KEY ESCROW AGENTS MAY RELEASE THE KEY COMPONENTS. THE VOLUNTARY FIPS WILL FACILITATE FEDERAL GOVERNMENT DEPARTMENTS' AND AGENCIES' ACQUISITION OF ENCRYPTION PROTECTION FOR SENSITIVE BUT UNCLASSIFIED TELECOMMUNICATIONS. THERE IS GOOD „ 13 „ REASON TO BELIEVE THAT ENCRYPTION VENDORS WILL APPRECIATE KEY ESCROW ENCRYPTION AS AN EVOLVING STANDARD AND WILL LIKELY MARKET SUCH EQUIPMENT IN THE PRIVATE SECTOR, PARTICULARLY TO BUSINESSES AND CORPORATIONS WHO HAVE A NEED TO COMMUNICATE WITH FEDERAL GOVERNMENT COMPONENTS REGARDING SENSITIVE INFORMATION THROUGH SECURE AND INTEROPERABLE DEVICES. IN THE NEW DIGITAL AGE OF TELECOMMUNICATIONS, SOMETIMES KNOWN AS THE GLOBAL GRID, IT IS IMPERATIVE THAT ELECTRONIC SURVEILLANCE BE MAINTAINED AS A VIABLE AND EFFECTIVE LAW ENFORCEMENT INVESTIGATIVE TOOL, BOTH TO COUNTER THE THREATS FROM HOSTILE INTELLIGENCE SERVICES AND TO COMBAT THE CONSPIRACIES AND ACTIONS OF OUR MOST SERIOUS, AND OFTEN VIOLENT, CRIMINALS. WE FULLY SUPPORT THE VICE PRESIDENT'S INITIATIVE TO CREATE A NATIONAL INFORMATION SUPERHIGHWAY TO SHARE INFORMATION, EDUCATE AMERICANS, AND INCREASE PRODUCTIVITY. HOWEVER, IT WOULD BE WRONG FOR US AS PUBLIC SERVANTS TO KNOWINGLY ALLOW THIS INFORMATION SUPERHIGHWAY TO JEOPARDIZE THE SAFETY AND ECONOMIC WELL-BEING OF LAW-ABIDING AMERICANS BY BECOMING AN EXPRESSWAY AND SAFE HAVEN FOR TERRORISTS, SPIES, DRUG DEALERS, AND MURDERERS. AT THIS TIME I WILL BE HAPPY TO ANSWER ANY QUESTIONS THE SUBCOMMITTEE MAY HAVE. „ 14 „