[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
                      SAFE AND FAIR SUPERVISION OF
                       MONEY SERVICES BUSINESSES

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 21, 2012

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-139


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

           James H. Clinger, Staff Director and Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

             SHELLEY MOORE CAPITO, West Virginia, Chairman

JAMES B. RENACCI, Ohio, Vice         CAROLYN B. MALONEY, New York, 
    Chairman                             Ranking Member
EDWARD R. ROYCE, California          LUIS V. GUTIERREZ, Illinois
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JEB HENSARLING, Texas                RUBEN HINOJOSA, Texas
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
THADDEUS G. McCOTTER, Michigan       JOE BACA, California
KEVIN McCARTHY, California           BRAD MILLER, North Carolina
STEVAN PEARCE, New Mexico            DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             JOHN C. CARNEY, Jr., Delaware
FRANCISCO ``QUICO'' CANSECO, Texas
MICHAEL G. GRIMM, New York
STEPHEN LEE FINCHER, Tennessee


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 21, 2012................................................     1
Appendix:
    June 21, 2012................................................    27

                               WITNESSES
                        Thursday, June 21, 2012

Bortner, Deborah, Director of Consumer Services, Washington State 
  Department of Financial Institutions, on behalf of the 
  Conference of State Bank Supervisors...........................     7
Daly, Timothy P., Senior Vice President, Global Public Policy, 
  The Western Union Company......................................     5
Levine, Ezra C., Counsel, The Money Services Round Table.........     8
Suleiman, Hersi, General Manager, Amal USA, Inc., on behalf of 
  the Somali-American Money Transmitters Association (SAMSA).....    10

                                APPENDIX

Prepared statements:
    Ellison, Hon. Keith..........................................    28
    Bortner, Deborah.............................................    30
    Daly, Timothy P..............................................    45
    Levine, Ezra C...............................................    51
    Suleiman, Hersi..............................................    57

              Additional Material Submitted for the Record

Ellison, Hon. Keith:
    Written statement of Adeso...................................    62
    Written statement of Oxfam America...........................    64
Renacci, Hon. James:
    Written statement of The Clearing House Association L.L.C., 
      et al......................................................    67


                      SAFE AND FAIR SUPERVISION OF
                       MONEY SERVICES BUSINESSES

                              ----------                              


                        Thursday, June 21, 2012

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:32 a.m., in 
room 2128, Rayburn House Office Building, Hon. James Renacci 
presiding.
    Members present: Representatives Renacci, Pearce, 
Luetkemeyer, Huizenga, Canseco, Grimm, Fincher; Maloney, Watt, 
Baca, and Scott.
    Also present: Representatives Ellison, Perlmutter, and 
Green.
    Mr. Renacci [presiding]. This hearing will come to order. 
Chairwoman Capito is running a little late, so we are going to 
go ahead and get started.
    I would first like to start with opening statements. And 
the first opening statement will be from Ranking Member 
Maloney.
    Mrs. Maloney. First of all, I want to thank Chairwoman 
Capito and the Republican Majority for scheduling this hearing 
on a very important issue that affects the community that I 
represent and, literally, communities across the country. And I 
would like to welcome all of the panelists, particularly Mr. 
Daly, who has appeared before this panel several times on this 
issue and played a constructive role in trying to find a 
solution.
    And I would like unanimous consent for the gentleman from 
Minnesota, Mr. Ellison, to participate in this hearing, as it 
is an area of grave concern to him and his constituents.
    Mr. Renacci. Without objection, it is so ordered.
    Mrs. Maloney. Okay. Great. Thank you.
    I have been working to find a solution to a very real 
problem for several Congresses now, which concerns money 
services businesses (MSBs) being denied access to banking 
services. We want to be expanding banking services, not 
contracting them.
    Without a banking relationship, MSBs are unable to provide 
financial services to communities, making it difficult for 
millions of Americans to pay their bills, send money or 
remittances or cash checks. The fact is that banks believe that 
it is simply too burdensome to keep track of the customers of 
the money services businesses they serve. And the concern about 
liability in the case of a money services business failing to 
comply with Anti-Money Laundering and Bank Secrecy Act 
statutory requirements has led to a termination of these 
accounts.
    We know that many accounting and tracking bills were put in 
place--and laws in place after the 9/11 terrorist attack to 
track terrorist money after the financial crisis. And many 
banks or financial institutions are saying they do not want to 
comply. It has gotten so challenging in the great City of New 
York that literally only one bank is now supplying this service 
that is needed for the money services businesses. So this is 
really, I would think, almost a crisis for this industry.
    I would like to point out that my colleague, Keith Ellison, 
has highlighted a very real problem that he hears about from 
his Somali constituents who rely on remittances to send money 
back to Somalia. So I am pleased we have a witness here today 
who can speak to this and possible, potential solutions.
    I do understand that Federal regulatory agencies 
recognizing the problem facing MSBs have sought to address the 
issue through agency guidance and regulatory changes and they 
say they support them. But it has had very little effect. My 
concern has been that if this issue is left unaddressed, the 
viability of money services businesses will be compromised, 
potentially pushing many of the transactions underground and 
untraceable to law enforcement.
    There have been a few legislative proposals over the years 
that have sought to address the concerns that both the banks 
and the MSBs have. I sponsored a bill in the last Congress and 
it literally passed in that Congress, in the Congress before, 
that would have enabled money services businesses to self-
certify that they are in compliance with the Bank Secrecy Act 
and the Anti-Money Laundering Act and that they had the Ant-
Money Laundering regime in place. This was a bipartisan bill 
that I would like to work on again with my colleagues.
    But there are also proposals that would delegate the 
registration process to the States using a model that has 
worked for mortgage lenders, as well as proposals that create a 
self-regulatory organization for MSBs. So I will be interested 
to hear from the witnesses today as to whether they believe the 
denial of access to bank services is something that can be 
fixed through legislation or whether it really is something 
that can be fixed through additional regulatory guidance.
    I think we would like to see a solution to this problem. 
And I hope we can work together to find it. I look forward to 
the witnesses' testimony today, and I really feel that this is 
an important challenge, so I thank everyone who is working on 
it.
    I yield back.
    Mr. Renacci. Thank you, Mrs. Maloney.
    I now want to recognize Mr. Scott for 3 minutes for his 
opening statement.
    Mr. Scott. Thank you very much, Mr. Chairman. And thank you 
for this very, very important hearing.
    Money services businesses play an important role for many 
Americans. Check-cashing services, money orders, and traveler's 
checks all play vital roles within the jurisdiction of what we 
know as MSBs. And their services are utilized by different 
areas of the population in different ways.
    Many individuals who are underbanked or completely unbanked 
utilize MSBs. MSBs are their lifeline for critical and crucial 
financial transactions, many of which are time-sensitive and 
are emergency situations. And they permit convenient access to 
cash.
    This is very, very important for millions and millions of 
Americans. So we have to ensure that these consumers are 
provided the proper and adequate protection and give 
appropriate financial education to them before transactions are 
completed. And this is especially true as the money services 
business industry continues to grow and its services become 
more accessible to potential customers.
    MSBs are regulated at both the Federal and the State levels 
by means of a complex structure of varying spans of reach, and 
therein lies a part of perhaps the challenge.
    Some of these agencies, namely the IRS, ensures that the 
money services businesses comply with the Bank Secrecy Act. And 
MSBs are required to register with the Financial Crimes 
Enforcement Network (FinCEN) within the Treasury Department.
    And so with this comes a key question that we might want to 
examine today and that is, how successful is the coordination 
between all of these regulatory systems. And what is the 
prospect for improvement and moving ahead?
    And then a specific question: Are money services 
businesses, such as money transmitters, categorically 
determined to be too high a risk?
    So as our economy continues to move towards recovery, 
Americans need reassurances that the financial services they 
choose to utilize are stable and are operating in a sound 
manner. And this holds especially true for many of my 
constituents and the constituents of members of this committee 
who rely on the services of money services businesses to pay 
monthly bills and even to help family members in need of 
immediate financial support, especially in these tough economic 
times.
    So it is an important hearing. Thank you, Mr. Chairman. I 
look forward to the panel.
    Mr. Renacci. Thank you, Mr. Scott. And I recognize Mr. 
Ellison for 3 minutes for an opening statement.
    Mr. Ellison. Thank you, Mr. Chairman, and thank you Ranking 
Member Maloney.
    In Minneapolis, MSBs are not a foreign policy issue. They 
are a local issue. In Minneapolis, what happens in Somalia is 
not a foreign policy issue for me as a Representative, it is a 
domestic policy--it is a domestic issue--it affects my 
constituents directly. My district is home to over 30,000 
Somali-Americans, but also many people from the Horn and all 
over the world who have immigrated to our great country and our 
great State.
    And we are very proud of this community. There are four 
Somali-American police officers, one popularly elected school 
board member, several people who have run for office, not 
necessarily successfully, but have run well, and there are a 
number of businesses that have opened up, and a number of 
nonprofits. We are very proud of our Somali community.
    In fact, the Somali community is probably largely 
responsible for the over $400 million that was sent to Somalia 
and the Horn to sustain their families. And global remittances 
are one-third of the Gross Domestic Product of Somalia today. 
But remittances to Somalia are, unfortunately, very complex. 
The bottom third of Somalia is a failed nation--the bottom 
third. And there is no functional government, no functional 
financial system.
    And Al-Shabaab, a terrorist organization, controls large 
pieces of the country. It is important that the United States 
have anti-terrorism financing controls in place to protect the 
United States and the rest of the world from the dangers of 
these people. But having had many years of experience now with 
the Bank Secrecy Act and anti-terrorism financing laws, I think 
it may be time to review which of these laws really protects us 
and which of them we passed with good intentions but not 
understanding the impact that these may cause.
    It is important to understand, Mr. Chairman, as I wrap up, 
that no government, to my knowledge, has ordered any bank to 
cease and desist. There has been no government action stopping 
the financial services sector from doing these MSB 
transactions. What has happened is, because of the regulatory 
burden and the fear of exposure to risk of regulatory or even 
prosecutorial action, the financial services institutions, 
including Wells Fargo Bank, Sunrise Bank, and others, have just 
come to a hard-nosed business decision that they would 
terminate the facilitation of these transactions, although they 
readily admit that 99 percent of the people who do the 
transactions are good, decent Americans who are simply trying 
to help their family members. But the risk--the regulatory 
burden is maybe too high.
    Now, I know my friends on the Republican side say--Ellison, 
you are talking about too high of a regulatory burden? Let me 
assure you, I am still a very proud bleeding heart liberal. But 
I do think it is important for us to recognize that perhaps we 
don't need more regulation. But maybe we need to review the 
regulations that we have in place and take a hard-nosed look at 
whether they are really protecting us from the harm we are 
trying to stop, and whether we really need those regulations 
into the future. I think what we really need is to look at 
taking away some things, as opposed to adding more.
    Thank you.
    Mr. Renacci. Thank you, Mr. Ellison. And you notice I let 
you go on a little bit because you were talking about 
overregulation, so--
    [laughter]
    I now recognize Mr. Baca for 1 minute for an opening 
statement.
    Mr. Baca. Thank you very much, Mr. Chairman, and Ranking 
Member Maloney, for calling this hearing.
    I also want to thank the witnesses for being here this 
morning and offering their insight.
    Over the years, this committee has examined the issue of 
regulation of money services businesses and remittances. Recent 
studies have shown that remittances have grown constantly, even 
in spite of the recession of 2008.
    So that tells us that our President is doing a good thing, 
because he is still allowing us to do a lot of remittance. And 
people make money because they are sending money somewhere, so 
the transaction is happening. So I thank the President for his 
initiatives and what he has done.
    In fact, last year, $351 billion globally was sent through 
remittance and $62 billion to Latin America and the Caribbean, 
and that was last year. As the minority population continues to 
grow in our country, more and more Americans may need to send 
money internationally to support their families. And that is 
critical, because they rely on these funds, not only to take 
care of their families, but their businesses, to create hope, 
to create dignity, and to create an opportunity for them. That 
plays an important part in allowing this to happen.
    The MSB industry is very complicated and there are many 
moving parts that cross over into many different levels of the 
State and Federal jurisdiction. However, as we examine this 
industry and the products, this committee has been constantly 
struggling with the need to provide--and I say, to provide--a 
safe and sound regulation with a need to ensure these services 
are allowed. It is clear that there is still work to be done.
    The unfortunate recent trend of the banks discontinuing 
services by MSBs rather than dealing with the tight security 
regulation is troubling because it only seems to make the 
problem worse. In the past, this committee has worked on 
legislation that has received bipartisan support--and I say, in 
the past--bipartisan support. And I hope we are able to do that 
again. And we come together because that is what the American 
people want to see us doing, working on a bipartisan solution.
    Again, I want to thank the Chair and the Ranking Member for 
calling this hearing and the witnesses for being here. I yield 
back the balance of my time.
    Mr. Renacci. Thank you. Before we welcome the witnesses, I 
would like to ask unanimous consent to insert the following 
statements in the record: a letter from the Clearing House 
Association; and the opening statement of Mrs. Capito.
    I will now move on to welcoming our witnesses. And I 
believe Mr. Perlmutter would like to introduce our first 
witness.
    Mr. Perlmutter. Yes. And I thank Chairwoman Capito and 
Ranking Member Maloney for allowing me to sit in on the hearing 
today.
    I want to welcome Western Union. It is a Colorado company 
with a worldwide reach. And my friend, Tim Daly, with whom I 
have practiced law--against, mostly, but somebody whom I have 
known for at least a couple of decades--is a good friend of 
mine. And we are glad to have you here in Washington and look 
forward to your testimony. So, good to have you, Tim.
    Mr. Daly. Thanks.
    Mr. Renacci. Thank you. And I will recognize Mr. Daly for 5 
minutes.

  STATEMENT OF TIMOTHY P. DALY, SENIOR VICE PRESIDENT, GLOBAL 
            PUBLIC POLICY, THE WESTERN UNION COMPANY

    Mr. Daly. Thank you, Congressman Perlmutter, for the kind 
words. I appreciate it. And you are right, it was against, and 
I won't disclose that I was usually the loser. So, thank you. 
Congressman Perlmutter is a very accomplished attorney.
    Good morning, Mr. Chairman, Ranking Member Maloney, and 
members of the subcommittee. I am Tim Daly, senior vice 
president for global public policy for Western Union. I am 
pleased to be here today to discuss the regulatory environment 
for money services businesses.
    Western Union is a leader in global payment services. 
Western Union provides consumers and businesses with fast, 
reliable, and convenient ways to send and receive money around 
the world.
    Today, Western Union operates from approximately 500,000 
locations in 200 countries and territories across the globe. As 
a large, geographically diverse business, Western Union 
operates in a complex and sometimes cumbersome regulatory 
environment that involves multiple State and Federal agencies. 
Western Union and other money transmitters are licensed by the 
individual States in which we do business. States are 
responsible for the day-to-day regulatory supervision and 
oversight of money transmitters.
    States conduct regular on-site examinations of money 
transmitters. These examinations review financial condition, 
check for regulatory compliance, and monitor the maintenance of 
financial reserves.
    Western Union is subject to examination by each State in 
which it is licensed. In 2011, Western Union was examined by 11 
State banking departments. Money transmitters like Western 
Union must also register every 2 years with the Financial 
Crimes Enforcement Network (FinCEN). Both FinCEN and the IRS 
have enforcement authority over Western Union's compliance with 
BSA requirements.
    A welcome development over the past several years has been 
the enactment of memoranda of understanding (MOUs) among the 
IRS, FinCEN and the State banking departments to share 
information and resources in the examinations of money 
transmitters whose operations cross State lines. State 
examiners can monitor and enforce compliance with the Bank 
Secrecy Act and other Federal anti-money laundering laws, as 
well as examining for safety and soundness.
    FinCEN retains its authority over the legal and practical 
interpretation of the Bank Secrecy Act. The IRS, FinCEN, and 
State regulators have agreed on a joint examination manual for 
money transmitters that focuses on BSA compliance issues.
    The States have also entered into agreements with each 
other to coordinate and consolidate examinations of money 
transmitters on an interstate basis. Under these agreements, 
teams of examiners from several States participate in a 
coordinated examination, with one State agency serving as the 
lead. Western Union's experience with these multi-State 
examination teams has been positive, and we support the 
continuation of this effort to coordinate and consolidate 
supervision across State lines. We appreciate the efforts of 
the Money Transmitter Regulators Association to develop and 
deploy joint examination protocols for consolidated multi-State 
examinations, in which a lead State would have the authority to 
act on behalf of up to 10 other States.
    We are also encouraged by the development of a pilot 
program that would adopt the National Mortgage Licensing System 
(NMLS) to cover State licensing of money transmitters. States 
would still make their own decisions about whether to award a 
license, but this system would eliminate duplication of effort 
and opportunities for error.
    As the committee considers further modernization of the 
regulatory structure for money transmitters, we encourage the 
advancement of coordinated, consolidated supervision between 
and among the relevant State and Federal agencies, together 
with certainty and consistency within the examination process.
    Thank you again for inviting Western Union to testify 
today. I look forward to answering any questions you may have.
    [The prepared statement of Mr. Daly can be found on page 45 
of the appendix.]
    Mr. Renacci. Thank you, Mr. Daly.
    I now want to recognize Ms. Deborah Bortner, director of 
consumer services, Washington State Department of Financial 
Institutions, on behalf of the Conference of State Bank 
Supervisors, for 5 minutes.

 STATEMENT OF DEBORAH BORTNER, DIRECTOR OF CONSUMER SERVICES, 
   WASHINGTON STATE DEPARTMENT OF FINANCIAL INSTITUTIONS, ON 
       BEHALF OF THE CONFERENCE OF STATE BANK SUPERVISORS

    Ms. Bortner. Good morning, Mr. Chairman, Ranking Member 
Maloney, and distinguished members of the subcommittee. My name 
is Deborah Bortner, and I am the director of non-depositories 
at the Washington State Department of Financial Institutions. I 
am pleased to testify today on behalf of the Conference of 
State Bank Supervisors.
    I want to thank you and the members of the subcommittee for 
holding this hearing on money services businesses. I appreciate 
the opportunity to discuss the regulation of MSBs by State 
regulators.
    State and Federal regulators and policymakers have worked 
together to make non-depository supervision more comprehensive, 
more consistent, and more efficient. Specific initiatives under 
way include the expansion of the Nationwide Mortgage Licensing 
System and registry, the NMLS, for the licensing of other 
financial services, enhanced multi-State exams and enforcement 
actions, and ongoing efforts to improve State-Federal 
coordination.
    Before I discuss the State supervision of MSBs, I would 
like to provide a little background on what we have done in the 
mortgage area, because it may provide a roadmap for what we 
hope to achieve in MSB supervision.
    Well over a decade ago, State mortgage regulators 
recognized the need to work together to enhance supervision of 
the mortgage industry. One of the cornerstones of State 
mortgage supervision is the NMLS. State mortgage regulators 
began the development of the NMLS in 2004.
    In 2008, Congress, through the leadership of Representative 
Bachus, embraced and codified NMLS into Federal law through the 
SAFE Act. The SAFE Act created a comprehensive, State-Federal 
approach to licensing and registration of mortgage loan 
originators. There are certain elements of the mortgage 
supervisory framework that could improve supervision of non-
depositories, including MSBs.
    Recently, State regulators have begun to use the NMLS for 
other non-depository providers besides mortgage lenders. In 
several States, including my own, these expanded license types 
will include MSBs. By the end of 2013, we anticipate that at 
least 16 States will be using the NMLS to manage their MSB 
licenses.
    State regulators have been overseeing MSBs through 
licensing and by conducting on-site exams for a number of 
years. Generally, the State licensing process requires 
background checks on directors and officers, financial 
statements, surety bonds, BSA policies, and proof of 
registration with FinCEN, if appropriate.
    Examiners in the fields review compliance with BSA, 
reporting and recordkeeping, capital and permissible 
investments. Through CSBS and the Money Transmitter Regulators 
Association (MTRA), State regulators have also been working 
together to increase regulatory efficiency in supervising MSBs 
that operate in multiple States.
    In 2002, the MTRA formed a foundation for multi-State exams 
by establishing the groundwork for States to coordinate MSB 
examinations and information-sharing. We currently are building 
upon those agreements to further promote coordination, 
consistency, and efficiency, while ensuring safety and 
soundness in consumer protection.
    States are also working closely with our Federal 
counterparts to coordinate supervision of MSBs. Coordinated 
State-Federal efforts include jointly developed exam procedures 
and quarterly calls between the IRS and State regulators to 
discuss current initiatives and supervisory issues.
    MSBs are local in touch and national in scale, so State and 
Federal regulators must work together to ensure effective and 
consistent supervision, which benefits regulators, licensees, 
and consumers. The evolution of State mortgage regulation 
demonstrates that uniform infrastructure and Federal policy 
should support, not supplant, State regulation. As the SAFE Act 
has shown, combined State-Federal regulatory regimes can 
promote consistent and comprehensive regulation without losing 
the benefit of having States serve as the cops on the beat.
    Thank you for the opportunity to testify before you today. 
I look forward to answering any questions you may have.
    [The prepared statement of Ms. Bortner can be found on page 
30 of the appendix.]
    Mr. Renacci. Thank you, Ms. Bortner.
    I now want to recognize Mr. Ezra Levine, counsel, the Money 
Services Round Table, for 5 minutes.

STATEMENT OF EZRA C. LEVINE, COUNSEL, THE MONEY SERVICES ROUND 
                             TABLE

    Mr. Levine. Thank you. And good morning, Mr. Chairman, 
Ranking Member Maloney, and members of the subcommittee.
    I am Ezra Levine, with the law firm of Morrison and 
Foerster, here in D.C., and I am also counsel to the Money 
Services Round Table.
    The Money Services Round Table was founded in 1988 as an 
information-sharing and advocacy group for the Nation's leading 
non-bank money transmitters. Our members provide electronic 
money transmission, payment instruments like money orders and 
traveler's checks, and stored value services. Our members are 
State-licensed and are treated as financial institutions under 
the BSA.
    Money transmitters operate in a complex regulatory 
environment, as you have already heard. While States are the 
prudential regulator, both the IRS and the States examine money 
transmitters for BSA compliance. We have been working towards a 
more coordinated, consistent regulatory structure for money 
transmitters, and we are pleased with the progress State 
regulators have made under the leadership of the Money 
Transmitter Regulators Association, known as the MTRA. We 
support continued efforts to streamline this process and 
improve the consistency of application and enforcement of laws 
governing money transmitters.
    The regulatory process has been evolving. In the early 
1990s, State supervision of money transmitters took its first 
steps toward coordination and uniformity with the development 
by the MTRA of its ``model legislation outline,'' which served 
as the basis for new, more uniform, and updated safety and 
soundness licensing laws in about 30 States. However, also 
during this period, States began to include BSA compliance as 
part of the on-site exam protocols and, increasingly, our 
members were subject to multiple duplicative and uncoordinated 
on-site exams. You heard Mr. Daly talk about 11 exams.
    In part as a response to this proliferation of State exams 
having a BSA component, about 10 years ago, the IRS, FinCEN, 
and the State banking departments entered into MOUs to promote 
more effective BSA exams by the States. In short, States now 
monitor and enforce BSA compliance, as an adjunct to examining 
for safety and soundness exams. But FinCEN retains the 
authority, the overall authority, to interpret the BSA. In 
addition, in recent years, to provide substantive BSA guidance, 
the IRS, FinCEN, and the State regulators, working together 
through the MTRA, adopted an MSB exam manual.
    Finally, the States, through the MTRA, have begun to 
coordinate multi-State exams of money transmitters. In this 
useful program, teams of examiners from several States 
participate in the exam, with one State agency as lead. Now, 
the ultimate goal of this initiative is a system in which a 
lead State regulator performs one exam for each licensee, each 
year, and then that exam is shared with all the other States.
    In sum, State exams probably will continue to be the most 
effective means of monitoring BSA compliance by money 
transmitters. However, without coordination, inconsistency and 
duplication are sure to occur. Therefore, we urge continued 
work toward uniform application of the BSA and more 
coordination of State exams and enforcement activities.
    The Money Services Round Table looks forward to further 
discussions as we all work together towards a more effective 
and efficient regulatory structure that protects our entire 
financial system. Thank you again for inviting us to testify 
today. I look forward to answering any questions you have. 
Thank you, again.
    [The prepared statement of Mr. Levine can be found on page 
51 of the appendix.]
    Mr. Renacci. Thank you, Mr. Levine. I want to now recognize 
our last witness, Mr. Hersi Suleiman, general manager, Amal 
USA, Inc., for 5 minutes.

 STATEMENT OF HERSI SULEIMAN, GENERAL MANAGER, AMAL USA, INC., 
ON BEHALF OF THE SOMALI-AMERICAN MONEY TRANSMITTERS ASSOCIATION 
                            (SAMSA)

    Mr. Suleiman. Thank you, Mr. Chairman, and Ranking Member 
Maloney. I greatly appreciate the opportunity to testify here 
today.
    I am here on behalf of the Somali-American Money 
Transmitters Association. I also would like to thank 
Congressman Ellison for his leadership with this issue and also 
in the Minnesota delegation.
    I am here today because it is our firm conviction that the 
solutions to our problems lie in amicable discussions and 
sharing of information. We Somali-Americans own business 
transmissions across the country. We are regulated by both 
Federal and State. We register a license in multiple States. We 
also register with FINCA.
    We also have independent CPAs who audit us on a yearly 
basis, on top of both Federal and State regulations. We have 
independent compliance auditor reviewers who also audit our 
books on a yearly basis.
    I am very, very excited that Ms. Deborah Bortner from 
Washington State is here today. We have been dealing with 
Washington for a long, long, long time, and they have been 
helpful to us.
    The issue in front of us today has been going on for a 
long, long, long time. National banks, State banks assisted us 
in doing business a long, long, long time ago. We have been 
using the small community banks, credit unions, helping us to 
continue banking with our banking relationships. However, that 
became dead-ended recently, and we can no longer continue with 
our banking relationships.
    We are here to ask you--to bring your attention that this 
issue is a humanitarian issue. We are all aware of the 
situation in Somalia. We are all well aware this is beyond 
financial support. It is a humanitarian issue that is affecting 
us here in the United States.
    We follow all the rules, all the compliance imposed on us, 
both at the Federal and the State level. And we do conduct 
thorough customer service in terms of knowing our customer. We 
follow, again, all the rules and regulations. We know our 
customers.
    A personal story that I would like to share with you. I, 
myself, being here in the United States for nearly 30 years, 
have a family back home. My sister and her children and my 
nephews, whom she takes care on a daily basis, I send money 
every month. They use that money for shelter, for food, and for 
medicine. It is extremely important that they receive that 
money. The only way they can receive that money is through a 
money transmitter.
    As you all aware, there is no banking system in Somalia--no 
financial institutions in Somalia. This is the only way. I 
greatly appreciate you taking a hard look at this issue and 
helping us to somehow, somewhere solve this banking crisis we 
are facing.
    I now I look forward your questions and thank you for your 
time.
    [The prepared statement of Mr. Suleiman can be found on 
page 57 of the appendix.]
    Mr. Renacci. Thank you, Mr. Suleiman.
    We now move on to questions from Members. I will first 
recognize myself for 5 minutes. I do want to thank all of the 
witnesses for being here today.
    Ms. Bortner, I believe having a single point of contact for 
money transmitter license applicants is a reasonable idea and 
will allow for an efficient sharing of information. You mention 
in your written testimony that the NMLS is a natural 
possibility for collecting and sharing this information. Could 
you go over again what current efforts are in place to expand 
NMLS to also manage money services businesses, and also 
describe why the NMLS would be a good fit for this industry?
    Ms. Bortner. Mr. Chairman, for many years, we have been 
licensing in each State--49 States currently license MSBs. And 
it is kind of like looking through a peephole--we know what 
that industry is in our State, and we share information amongst 
States.
    But I think having the NMLS, which is currently adding 
those types of licenses to the NMLS--having them have a single 
portal for all States to be able to license their MSBs--it is 
just a portal. We make all the licensing decisions at the State 
level, but there is this portal, just like mortgage lenders and 
securities brokers have the very same national portal to 
license.
    And before we can really effectively regulate this 
industry, I think we need to know who they are in one place, 
where it can be shared by Federal and State regulators. And I 
think that would really increase the efficiency. For one thing, 
if you need fingerprints in one State, you can share those 
fingerprints. If you need some sort of credit reporting or 
anything like that, it is shared in one place and everybody 
sees the same document.
    So that is really what is really going on right now--States 
are beginning to transition onto the NMLS. But the SAFE Act 
required us all to get on it. It made us all get on within a 
very short period of time. And I think that is a very efficient 
way to deal with this issue.
    Mr. Renacci. Thank you. What specific changes in Federal 
law are necessary to ensure that NMLS remains effective and 
will allow it to expand into other industries? Do you have any 
suggestions?
    Ms. Bortner. We have--the NMLS is available for licensing 
and the SAFE Act required all States to provide that mechanism. 
And it was a very easy way of providing a Federal law that 
created minimum standards for licensing of mortgage loan 
originators. And we all had to get on it, either that or HUD 
was going to take over the regulatory process for loan 
originators.
    So amazingly, in 1 year, 49 of the States adopted laws 
consistent with the SAFE Act, and that created the efficiency 
by getting all the loan originators onto the NMLS over a short 
period of time.
    Mr. Renacci. I am sorry. I was referring to the privilege 
and the CFPB. I am sorry.
    Ms. Bortner. Oh, okay. I am sorry. One of the benefits of 
having the SAFE Act was to create the confidentiality amongst 
the States and with the Federal regulators. That means that if 
Ohio shares information with me, then I have to protect that 
information as if I am Ohio. And that is the confidentiality 
provision that was in the SAFE Act.
    It also provided an opportunity for us to share our exams 
and make us more efficient because we could work together as a 
result of that.
    Mr. Renacci. And I have been working with your organization 
on the legislation to go along in that fashion. I would hope to 
introduce a bill in the next couple of days.
    I yield back the remainder of my time. And I recognize Mrs. 
Maloney for 5 minutes.
    Mrs. Maloney. Thank you very much. And I welcome all the 
panelists. Many of you talked about the regulatory burden, and 
what I am hearing from my constituents is not so much the 
regulatory burden, but the absolute lack of access to banking 
services to be able to process and run their business. That is 
the absolute crucial problem.
    I did want to share, in response to Mr. Daly's and Ms. 
Bortner's and Mr. Levine's testimony about the regulatory 
burden, that some areas or the category of businesses are 
working with their regulators to come up with one form that 
solves all of their problems and answers. Some are working to 
computerize it. It is not so much providing the information. It 
is the paperwork and time of employees to put it together. They 
are putting computer systems together that will then shoot that 
information out every month, so that the burden is not so much, 
and compiling it so that it all comes together. The technology 
is there. It is a matter of working to make it happen.
    But I would like my question to go to the central point of 
getting to banking services. If you can't process your money, 
you are out of business. Don't worry about the regulation. You 
are out of business.
    MSBs are an important part of the financial services in the 
community I represent and in many communities, because many 
people do not want to pay the bank fees or they feel 
uncomfortable or they don't speak English or for whatever 
reason, they want to go to an MSB. And it is a huge source of 
banking in New York City. But all of the banks, save one, have 
said they will not process their business. Now, that is a huge 
problem. We live in America. Businesses can make decisions. And 
they are basically saying that the compliance laws and the 
oversight laws are too onerous. They don't want to take the 
risk in any way, shape, or form.
    So in the bill I offered in the last Congress, it tried to 
take the risk away from financial institutions, so that--and 
by--and incidentally, the banking industry supported the bill, 
because they are concerned about being sued or violating any 
Federal law. So it is just easier for them to just say, no, I 
don't even want any of your business. And so, if you could get 
a self-regulatory system going, where the liability is not on 
the bank, maybe some of the banks would provide this service.
    I would just like to ask all the panelists how you really 
handle the central issue, which is lack of access to the banks. 
Now, the bank supervisors say, oh, we are not doing anything to 
encourage any financial institution not to provide financial 
services or to service MSBs. We are not in any way, shape or 
form; yet, the financial institutions are making this decision 
on their own. So, it is really at a crisis point.
    I think, Ms. Bortner, you told me that no bank now in 
Washington State will process MSBs. Is that correct?
    Ms. Bortner. Congresswoman Maloney, we lost the largest 
bank that was supporting the Somali community just recently, as 
a result of a Federal investigation on a compliance officer 
that was a part of a very small MSB.
    So I think what one of the issues is, is the reputational 
risk. And I think the banking institutions just aren't willing 
to take that reputational risk when they see--one issue 
happens, and they say, I have to get out of this business 
because we don't want people thinking that we support terrorism 
or money laundering.
    The interesting part of that investigation is that none of 
the transmissions occurred at that money transmitter. It 
occurred all outside that money transmitter. So it would be 
impossible to detect that as a regulator, but it is also--I 
don't think, as a regulator, I don't blame a banking 
institution for that either.
    Mrs. Maloney. I agree with you. And I would like the 
chairman, if he would, to yield time for the panelists to 
respond to my question, which I think is a central issue. How 
do you get access to banking services? What if--okay, just--if 
Mr. Daly and Mr. Levine and Mr. Suleiman, if you have any 
answer to that? That is the central issue. And in many States, 
it is totally drying up, so that there is no place to go.
    Mr. Daly. Thank you, Congresswoman Maloney. As you can 
imagine, Western Union, as a global company with a robust and 
complex compliance department, doesn't face the same issues as 
the smaller providers do, because banks have comfort in our 
services.
    But as Ms. Bortner said, banks can be risk-averse when 
dealing with smaller providers. And some of these smaller 
providers, by the way, are our agents. We operate through 
different agents around the country. In the United States, we 
have 60,000 agent locations. So, it is an issue that we are 
concerned about.
    We did support the bill last session, which as you said, 
would have addressed this issue. And it was a bipartisan bill 
that passed the House. It did not pass the Senate. And I think 
that bill would have been a good approach, because it would 
have given banks some comfort. Because I think, as Ms. Bortner 
said, their issue is they are worried about the risk. And it 
would have allowed banks to rely upon the certification of 
companies that they were compliant and that certification would 
be under oath. So, that is our perspective.
    Mr. Renacci. Before the rest of the witnesses go, can we 
please try and hold it to 20 seconds only, because we are 
trying to keep the meeting going because of votes.
    Mr. Levine. Thank you, Mr. Chairman. In response, the Money 
Services Round Table, as Mr. Daly indicated, actively supported 
your bill, Mrs. Maloney. We thought it was terrific. We thought 
it would fix the problem. And it didn't go anywhere in the 
Senate. It would have given a safe harbor to banks. The real 
problem is that banks are risk-averse.
    As Ms. Bortner said, the Federal Financial Institutions 
Examination Council (FFIEC) examination manual since the year 
2002 has indicated that MSBs are ``risky businesses.'' Now, 
while the OCC and others say it is an urban myth, that in fact, 
banking examiners are winking an eye, telling local banks, 
``Hey, listen. Stay away from MSBs.'' In fact, that is the 
evidence. And that is what is happening nationwide. And it is 
happened now for 10 years.
    Mr. Suleiman. I would like to add that I agree with Mr. 
Levine 100 percent. FFIEC--any time they go and visit a bank, 
the first question they ask you would be, do you have MSB 
account. And if the bank says, yes, they take that account and 
spend a great deal of time simply looking at all the 
transactions for that particular MSB account. It happened to us 
recently. And as a result, a small community bank, which we had 
a relationship with for a long period of time, called us and 
said, I can't take this--simply can't take this.
    So there is pressure coming from the top to the banks, even 
though we are providing all the necessary documentation showing 
that we are in compliance at both the Federal level and the 
State level.
    Mrs. Maloney. Okay. Thank you.
    Mr. Renacci. Thank you, Mrs. Maloney. I just want to make 
note that we have votes schedule for approximately 10:45. So as 
we ask questions, as you get to your last question, I would 
allow that--when you get to 5 minutes, that the question just 
be answered and we move to the next Member, so everybody has a 
chance to ask questions.
    I now recognize Mr. Luetkemeyer for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. I thank all of 
you for being here today. And certainly--a comment on Mr. 
Ellison's testimony today as well. I have outside my district 
and within the district as well, a large eastern European 
group, which has the same problem his folks have, so I am very 
interested in this issue.
    I want to approach it a little bit differently. I know that 
the Consumer Financial Protection Bureau recently published a 
rule back in February that seems to have a very negative effect 
on the institutions in my area, with regards to being able to 
continue to provide services. Would you like to comment on that 
or are you aware of the rule? I am sure you probably are.
    Mr. Daly?
    Mr. Daly. Thank you, Congressman. That is a question every 
money transmitter is dealing with today. The general premise of 
the rule, as you know, is that consumers should have adequate 
information to make a purchase decision. They should know what 
the fees are and what the exchange rates are. And we agree with 
that premise. We believe an informed consumer is a good 
consumer.
    As you can imagine, though, in the implementation of a rule 
like this, there are some complexities. And there are a couple 
of issues that companies like Western Union and banks and 
credit unions are struggling with in the rule. One issue is, in 
addition to fees disclosed by companies, which I think was 
Congress' intent that we disclose the fees we charge, the rule 
also requires us to disclose lifting fees--so fees that are 
charged by banks on international bank transactions. For 
Western Union, the vast majority of our transactions are cash-
to-cash transactions. But we do have some transactions that 
involve bank accounts. And in those transactions, we incur 
these lifting fees.
    The challenge we face and that banks face on that issue is 
these lifting fees are not known at the time the transaction is 
sent. And the path these transactions take often changes. So, 
there is literally no way for us to know those fees to disclose 
them. On that issue, compliance isn't difficult; it is 
impossible.
    We have raised this issue with the Bureau and we have met 
with them multiple times. We are working with them on the 
issue. But that--
    Mr. Luetkemeyer. During the course of the rulemaking 
process, were you a part of the rulemaking process? Do they 
contact you and you give your views, the unintended 
consequences of what would happen if they went forward with 
this proposal?
    Mr. Daly. Yes, Congressman, on this and other issues, we 
filed extensive comments with both the Federal Reserve, who the 
rulemaking started with, and then with the Bureau. And we have 
met with and continued to meet with the Bureau, as they address 
this particular issue.
    Mr. Luetkemeyer. Are you aware--did they do a cost-benefit 
analysis of this rule to see, one, if it is practical; is this 
going to be cost-effective for the people who are going to have 
to implement it, such as yourself? Are you aware of that?
    Mr. Daly. As far as a specific cost-benefit analysis, I am 
not, sir.
    Mr. Luetkemeyer. Okay.
    To follow up, Mr. Levine, I am just kind of curious. I know 
you represent a whole group of folks who provide these 
services. If we wind up, as we continue to go down this road of 
not allowing our--or not permitting or continuing to dwindle 
with the number of folks who can provide these services, what 
happens then? Is there a black market that occurs? And if so, 
how does that work? Can you just briefly give me some ideas of 
the seriousness of this and how we can be driving people in the 
wrong direction for our services that they really need?
    Mr. Levine. Congressman, thank you. That is a great point. 
One of the points we always argue is that when you foreclose 
services from honest vendors--so you foreclose the opportunity 
for decent citizens to transmit money--likely, what happens is 
the money is going to move anyway. It is just going to move 
underground.
    And from a law enforcement and public policy standpoint, 
the last thing you want is to encourage with economic 
incentives, in effect, the growth of underground money 
transmitters--hawalas and others. Hawalas has become a 
pejorative term--
    Mr. Luetkemeyer. Basically, what you are doing is probably 
chasing the good money underground--
    Mr. Levine. Exactly.
    Mr. Luetkemeyer. --with the bad money.
    Mr. Levine. Right.
    Mr. Luetkemeyer. Is that a fair statement?
    Mr. Levine. Yes. Yes. Absolutely. And then, there is no 
transparency.
    Mr. Luetkemeyer. Right. Okay. Fantastic. I appreciate your 
comments today.
    And I will yield back the balance of my time. Thank you, 
Mr. Chairman.
    Mr. Renacci. Thank you, Mr. Luetkemeyer.
    I recognize Mr. Watt for 5 minutes.
    Mr. Watt. Thank you, Mr. Chairman. If Mr. Scott wants to go 
first, that is fine with me. Do you want me to go? Okay. Thank 
you, Mr. Chairman. And thank you for convening the hearing.
    Like most members of this committee, I have a number of 
MSBs in my congressional district, and certainly a lot of them 
operating in the State of North Carolina. And we have had a 
number of opportunities just to hear from them about the 
regulatory burdens and costs that they face. They, of course, 
are regulated by the IRS, FinCEN, the State of North Carolina, 
and now, the CFPB. And they clearly have a case for asserting 
that the regulations are burdensome. I don't reach, 
necessarily, the same conclusion that some of my colleagues on 
the committee might reach that is an argument for no 
regulation, but I do think we have an obligation to regulate in 
as efficient and as good a way as we can without being 
burdensome.
    Mr. Daly, Ms. Bortner, and Mr. Levine, in particular, in 
light of the memorandum of understanding between the IRS, 
FinCEN, and the States, do you see opportunities for the 
consolidation of the supervisory functions, first? And in light 
of the CFPB's involvement in the issue now, would it be 
necessary for the IRS to continue to have the role that they 
have traditionally had or might some of that role be logically 
transferred to the CFPB?
    Mr. Daly. Thank you, Congressman. That is a good question. 
I would say this--first of all, I think on the question of 
consolidation, we have made a lot of progress.
    Mr. Watt. Is that through the MOU?
    Mr. Daly. Through the MOU and increased coordination 
between and among the States and the Federal Government. Yes, 
sir. It is a result of that and we are making progress on that 
front.
    To your question of on the Federal side, I think it is 
important to remember that we are dealing with AML regulation, 
safety and soundness regulation, which has traditionally been 
in the province of the States. And then the CFPB, really their 
function is consumer protection. So I think we need to continue 
to recognize the separate focuses of each of those agencies.
    Mr. Levine. And Congressman, one reason for the MOUs--and 
this was about 10 years ago--was the fact that the IRS with 
scarce resources was really spread very thin, particularly 
after the USA Patriot Act, when insurance companies and others 
were brought into the ambit by the Congress of the Bank Secrecy 
Act. The IRS is the regulator.
    Therefore, since the States were already on scene, it made 
sense for FinCEN and the IRS to really say to the States--look, 
you are already doing on-site exams. Some of the States were 
already doing BSA as an adjunct to the safety and soundness 
exam, so why not do that officially. They are doing it 
officially and the trend--I think Ms. Bortner will testify to 
this--is for the States, on their own, to get together, because 
in fact, it is far more efficient. We want to encourage that. 
We like that. It is a good thing.
    Mr. Watt. Maybe I should ask the question--are there 
additional things that can be done to either streamline or 
consolidate the regulation here that you all would suggest?
    Ms. Bortner. Congressman, I think that this is a work in 
progress. And I think Mr. Daly--
    Mr. Watt. I am trying to figure out where we ought to be 
trying to progress to, I guess, is--
    Ms. Bortner. Yes. The progress is to eventually--and I 
don't speak for any of my other State colleagues--we would have 
one exam and yearly, and then some of us who couldn't be on 
that exam or didn't feel the necessity to be on that exam, 
would accept that exam.
    I think we are headed in that direction. And I think that 
would make it much more efficient and--
    Mr. Watt. Would that exam be headed by a State or would it 
be headed by a Federal agency?
    Ms. Bortner. Yes, it would be headed by the State, because 
the State exams are much broader than the Federal exams. When 
Congress passes an act, we enforce it. So, we have been 
enforcing BSA. And that is part of our exam process. We also 
have consumer protection and we also have financial stability. 
And so we enforce that across-the-board. So that is what makes 
our exams, I think, broader, and I would like to think it is 
very important to make sure the industry is stable and that 
consumers are protected.
    Mr. Watt. Thank you, Mr. Chairman. I yield back.
    Mr. Renacci. Thank you, Mr. Watt.
    I now recognize Mr. Canseco for 5 minutes.
    Mr. Canseco. Thank you, Mr. Chairman.
    Ms. Bortner, a number of banks are leaving the money 
services business and discontinuing their partnerships with 
MSBs. Can you give us some idea as to the characteristics of 
banks that are leaving the businesses, versus the ones that are 
staying in it, as far as size, location, category, that sort of 
thing?
    Ms. Bortner. Congressman, it has been my experience that 
starting a number of years ago, the larger institutions started 
dropping the MSBs. The regional banking institutions took them 
up, and now some of those regional banking institutions have 
dropped them. And now, some of the very smallest institutions 
are trying to bank MSBs, but it isn't quite as efficient as 
having some of the larger financial institutions, which have 
better systems to get money places. It isn't as efficient as 
having the bigger institutions.
    Mr. Canseco. Mr. Levine, do you have anything to add to 
that?
    Mr. Levine. No, I think that is exactly right. The larger 
institutions generally backed out first--again, about 10 years 
ago. But there were one or two of them--Wells Fargo in 
particular, which has a very, very active--and I don't do any 
work for Wells Fargo--but Wells Fargo has a very, very active 
MSB program, where they spend a lot of money vetting all MSB 
accounts. So it is possible, I suppose, but in fact, it is 
trickling down now even to the community banks. It is a bad 
trend.
    Mr. Canseco. Thank you.
    Ms. Bortner, with more banks leaving the business, how does 
this affect the monitoring of the MSBs?
    Ms. Bortner. Congressman, I agree with Mr. Levine. Our 
ability to monitor is consistent with our ability to have a 
license. If they don't have a legitimate way to get money, 
where it is being transferred, then that money is going to go 
underground. And we are not going to be aware of how they get 
it there, how much, to whom it is given. And I think having 
that capability is very, very important for us to make sure 
that there is no money laundering and money is not going to 
terrorists.
    Mr. Canseco. Let me ask you another question, Ms. Bortner. 
As costs increase for MSBs, there runs the risk that more of 
these transactions could be pushed underground and that more 
fraudulent transactions could take place. So how best can 
policymakers strike a balance between the continuation of these 
services and the protection of Americans from criminals or 
terrorists?
    Ms. Bortner. Congressman, as far as the cost goes, I think 
the States are very sensitive about the cost of examination and 
regulation. We actually changed our systems so that we don't 
charge for exams and we charge other ways. And some of the cost 
has been shifted to the bigger money transmitters to pay for 
the cost of that regulation, which I think is to their benefit, 
too. So I think we are sensitive to it and we are trying to 
deal with it.
    Mr. Canseco. Do you see in the MSB industry some of the 
same things that we see in the banking industry--that costly 
regulation or confusing regulation can drive businesses to less 
regulated operators?
    Ms. Bortner. Congressman, I think that, as we try to 
regulate them in the most efficient way, we are trying to deal 
with some of those issues. And I don't think that--obviously, 
the less legitimate folks who are in this industry who aren't 
licensed--if you have to get your money somewhere and there is 
no legitimate banking industry that is going to help you, help 
the Somali community, for instance, then that is problematic.
    Mr. Canseco. Mr. Levine, do you have anything to add to 
that?
    Mr. Levine. No, I don't. I agree with what Ms. Bortner 
said. I think it is really a problem. It does--in fact, the 
entire bank closure problem, the regulatory burden problem, 
cost, in fact, often--maybe not often, but at least sometimes--
drives money underground--just a bad thing. It strengthens 
underground transmitters and then you worry about who is 
using--what are the vehicles Al Qaeda and others are going to 
use?
    Mr. Canseco. So how do we reverse that?
    Mr. Levine. One thing is--we come back to almost how we 
started with Mrs. Maloney's bill. Mrs. Maloney's bill which 
passed the House would have given banks, frankly, the cover--
the safe harbor they need to be able to back off the Federal 
regulators--the banking regulators. I think that is a safe 
statement from looking at my regulator colleague here. And that 
would have worked, but short of something like that, I don't 
see how you push the banks into accepting MSBs. And in fact, 
without a bank, you can't do MSB business. I think we all agree 
on that.
    Mr. Canseco. Thank you, very much. My time has expired--
    Mr. Levine. Thank you.
    Mr. Canseco. --and I appreciate your candor.
    Mr. Renacci. Thank you, Mr. Canseco.
    I now recognize Mr. Scott for 5 minutes.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Let me ask--on the issue of anti-money laundering, 
terrorists are financing--in my capacity as vice chairman of 
the Foreign Affairs Subcommittee on Nuclear Non-Proliferation 
and Terrorism, I went over into--with the Special Ops--into 
Somalia and into Kenya and Yemen--very hot spots. And one of 
the issues that came up is the use of monies coming in to 
finance terrorism, particularly with Al-Shabaab, that you may 
be familiar with in Somalia.
    We have Somalia citizens here who have challenges and 
others. I would like for you to address how serious this is, 
because those concerns were raised. And what kinds of 
difficulties are placed upon legitimate citizens in the United 
States who have the desire to send money transmitters into 
these regions, and especially with the requirement as some 
banks are having. The banks are saying it is important for us 
not just to know our customers, but to know the customers of 
our customers. And so, we on this committee would be interested 
to know what we can do to address this issue. Is this a 
challenge? How serious is this, and particularly, in that hot 
spot region?
    Mr. Suleiman, perhaps you could--yes, sir?
    Mr. Suleiman. Congressman, thank you. That is a legitimate 
question and it is a concern we as Somali-Americans also have.
    Al-Shabaab, as we all know, is a terrorist organization. We 
are fighting as a Somali, in a way, and as Somali-Americans. 
They are an enemy to all of us. And somehow, somewhere, we need 
to defeat them. However, it is true that Somalia, Kenya, and 
Yemen are very hot spots, as the Congressman suggested.
    First of all, we are knowing our customer, identifying our 
customer. We also have agents where the recipient, anywhere 
that money is sent, we have an agent also follow the due 
diligence of customer acknowledgement and customer 
identification to make sure the person--the beneficiary of that 
particular money receives that amount of money.
    As I said earlier, I send money to my sister, and she is 
the one who gets that money. The Somali-American Money 
Transmitters Association (SAMSA) consists of 14 companies. 
Those 14 companies--we are taking steps to, number one, improve 
our system. We are in the process of making our system work. It 
cannot be somewhere interrupted or hacked--or make it efficient 
to track or conduct it--the sender and the receiver.
    In addition to that, most of our customers are repeat 
customers. I would say about 80 to 85 percent of customers are 
repeat customers--sending money to the same person every month. 
And we track that way and that person is the one who is 
receiving the money.
    Mr. Scott. So you believe then that there is enough 
certainty for the banks, in terms of serving MSBs, that we can 
provide them, while being careful not to undermine the 
effectiveness of the Bank Secrecy Act in stopping any money 
laundering or terrorism.
    What I am trying to get at here is that--is this something 
this committee needs to look into? Is there something more we 
can do to make sure that all of this is a tight network that is 
put in, so that our constituents who may be Somalians or may be 
Kenyans or people from this--who are citizens--are not held to 
a different standard simply because their homeland is in these 
hot spots? I just want to know, is there anything more you 
think that we on the committee can do to give this certainty to 
banks?
    And also to any of you, particularly Western Union, and any 
of you--do you feel that we are in good enough shape in 
securing the necessary pieces to make sure that our citizens 
are not held to a different standard that--in terms of--in 
their efforts of trying to get money to their relatives in 
these hot spots?
    Mr. Suleiman. Congressman, I think what the committee can 
do is, number one, to pass Ranking Member Maloney's 
legislation. And also, there is uncertainty out there that the 
banks are afraid of. So if we--if the Congress can ease that 
uncertainty.
    Mr. Renacci. Mr. Suleiman, we really have to move on--
    Mr. Scott. Thank you.
    Mr. Renacci. --only because of votes.
    Mr. Scott. Sorry, Mr. Chairman. Thank you so much.
    Mr. Suleiman. Okay.
    Mr. Renacci. I want to recognize Mr. Grimm for 5 minutes.
    Mr. Grimm. Thank you, Mr. Chairman. And I would like to 
thank the panel for testifying today.
    I am very interested in following up on what my colleague 
was just talking about. So if the gentleman would like to 
complete his answer, that would be fine with me.
    Mr. Suleiman. Thank you, Congressman. What I was going to 
say was there is uncertainty out there that the banks are 
afraid of. And that is what all the witnesses alluded to 
earlier, that there are some regulations out there that 
really--if the banks can get uncertainty--and look at the 
situation a little more--I think the banks will be a little 
more reluctant to work with us. But it is the uncertainty in 
regulations that they are afraid in terms of their risk 
assessment, and that risk assessment can be regulations imposed 
on the banks.
    Mr. Grimm. Just to follow up on that--very perfunctory, do 
you think, in your view, that most MSBs are aware of the U.S. 
anti-money laundering statutes? Do you think that they are up-
to-speed at the level they should be?
    Mr. Suleiman. Absolutely. Yes.
    Mr. Grimm. Okay. This is open to the panel. What questions 
have we not asked today that you think we need to know? Is 
there something that we haven't discussed that you feel is 
relevant that you would like this committee to know about? And 
I open that up to the panel.
    No? Wow, we must have hit on everything.
    [laughter]
    Ms. Bortner. Congressman, I think that we have covered most 
of the issues that we wanted to cover. But, I think that 
Congress could create some sort of uniformity by setting 
minimum standards and protecting the confidentiality of 
information.
    I think that Congressman Renacci--sorry--I really want to 
compliment you on focusing in on that issue, because I think 
that is a very, very important issue to allow us to really work 
together and be as effective and efficient as we can.
    Mr. Renacci. Point well taken.
    Mr. Levine. All I would say, Congressman--and we really 
have talked about it--but in the whole construct of the Bank 
Secrecy Act, there is a balance between--because it is risk-
based, and that is all post-USA Patriot Act. There was a 
shift--oh, I am sorry. Yes, I am sorry. There was a shift to 
risk-based. Everything is now subjective. And so what banks are 
looking at, if you look at it from the standpoint of the bank, 
and I am not here to support banks or represent banks; what 
they are told is, you not only look at your customer, but you 
also look at where the money is going--to geography.
    So as your colleague indicated before, if you look at hot 
spots, as he mentioned, banks are going to say, wait, there is 
more risk, not only because it is a hot spot, but there are 
customers who--many customers who may be semi-anonymous or 
sending money to a hot spot. Therefore, the regulators are 
going to say, what enhanced due diligence are you doing, bank? 
And the bank is going to say, well, what can we do? It is going 
to a hot spot, of which there are many.
    And I am not sure how you solve that dilemma, except if you 
go back to--how do you give the bank some sort of protection? 
And that is what this all comes back to, I think, which is why, 
again, Mrs. Maloney has not pushed me to say this, but it is 
really true. Her bill was the perfect response to this.
    Mr. Suleiman. I would like to add that we at the Somali-
American Money Transmitters Association--this affected us more 
than any other money transmitter companies out there. And we 
are right now in a dead-end where all the banks have ceased to 
do business with us--all over. We are using only very, very few 
of the smallest small banks and credit unions right now in all 
States. And I ask you to take a hard look at this issue, 
particularly with Somali-Americans.
    Mr. Grimm. My time has expired. I yield back.
    Mr. Renacci. Thank you, Mr. Grimm.
    I recognize Mr. Ellison for 5 minutes.
    Mr. Ellison. Thank you, Mr. Chairman.
    First, I would like to ask for unanimous consent to insert 
into the record letters from Oxfam and Adeso.
    Mr. Renacci. Without objection, it is so ordered.
    Mr. Ellison. My question is simply this: have there been 
any government enforcement actions against a financial 
institution, like a bank, that caused them to get out of the 
MSB business? My understanding is that there haven't been. Am I 
right?
    Mr. Suleiman. I think so, yes.
    Mr. Ellison. It is not a trick question. The reason I ask 
the question that way is because I think that this situation 
that we are in as a system is to try to find ways to coax banks 
to do the MSB work. No one has told them not to do it. Nobody 
has been prosecuted. We haven't seen the big punch from the 
government. What we have seen is banks making an assessment of 
risk and coming to the conclusion it is too much; we have to 
back out. Am I right about that?
    Ms. Bortner. Congressman, I think that banks have a variety 
of ways that they interpret what their regulators are saying 
and it doesn't really take, on the bank side, an enforcement 
action, but those conversations go on in a confidential manner 
in the exchange of information during the exams.
    Mr. Ellison. Right.
    Ms. Bortner. So I think that is--just because we have not 
seen--
    Mr. Ellison. Right. And I can see how you could think that 
I am trying to catch somebody. I am not trying to cross-examine 
you. I am just trying to ascertain that this is a bank 
assessment of its risk and a decision it has made. So 
therefore, if government can affect the situation, it is going 
to have to do something to create greater comfort. Can you 
agree with that?
    Ms. Bortner. That is fair.
    Mr. Ellison. So if that is true--let me just share a quick 
anecdote with my limited time. A banker whom I cannot name 
contacted me and told me confidentially--they didn't tell me 
this confidentially, they wanted their identity to be 
confidential, they said--look, I am a big banker in town. I 
have 60 people working on the Bank Secrecy Act and the Patriot 
Act compliance. They are not making minimum wage, okay? We are 
talking about accountants, compliance personnel, lawyers.
    I guess my question is--complying--the regulations might be 
perfectly legitimate. I am not questioning the value of the 
regulations, but they are expensive. Is this a fair statement? 
Yes or no.
    Mr. Daly. Congressman, yes. We--Western Union--spend about 
$40 million a year and have about 400 people dedicated to our 
AML compliance function, which we consider one of the most 
critical functions that we provide.
    Mr. Ellison. Is one of the reasons you expend that kind of 
money because of the risk of civil and even maybe criminal 
penalties if the regulations are not fully complied with? Do 
you expend that kind of money because you are trying to prevent 
an even greater harm, which could be civil penalties or maybe 
even criminal penalties if you don't have full compliance?
    Mr. Daly. Actually, Congressman, it is a good question. But 
from Western Union's perspective, we spend the money to try and 
make sure bad people--whether or not they are terrorists--don't 
use our services. It is a challenging--
    Mr. Ellison. Mr. Daly, thank you for responding. And 
forgive my jumping in here, because they only give us 5 
minutes, and I want to make sure that my colleagues get a 
chance.
    So you are doing it to protect the American public. But I 
guess here is my root question: We have had the Bank Secrecy 
Act and the Patriot Act in place for a while. Are there ways to 
consolidate or maybe even repeal without risking any of the 
protections that are in place right now? I guess I am asking, 
can we do what we need to do, which is to protect the American 
public, less expensively by consolidating regulation; maybe 
even by eliminating some that we thought would be helpful, but 
maybe experience has shown aren't necessary, but still cost 
money?
    Mr. Daly. Congressman, that is a very good question. And we 
have thought about it. On the AML front, I don't know that 
there is anything I would change.
    I think the greatest potential for savings from our 
perspective is the kind of thing we have talked about, which is 
the increased consolidation of the exam process and other 
regulatory structures. In fact, in the past, we have testified 
in support of a Federal license for money transmitters. So 
uniformity at some level is what I think would lead to the 
greater cost savings.
    Mr. Ellison. I am out of time. Let me thank all the 
panelists, particularly Mr. Suleiman. I appreciate all your 
work.
    Mr. Renacci. Thank you, Mr. Ellison. I want to recognize 
Mr. Fincher for 5 minutes.
    Mr. Fincher. Thank you, Mr. Chairman.
    Ms. Bortner, I have a question for you. I thank the panel, 
also, for being with us today.
    The manufactured housing industry is big in our State. And 
in your testimony, you talked about the SAFE Act a lot. There 
seems to be some confusion about some of the language in the 
SAFE Act. And in the manufactured housing industry at home, 
some of the customers are having some issues getting capital. 
Can you comment on maybe some of the confusion or clarification 
in the SAFE Act in moving forward on the State level or back to 
what I am alluding to?
    Ms. Bortner. Congressman, I think we have tried to work 
with our manufactured housing folks in our State, in the State 
of Washington, to clarify when we expect licensing and when we 
don't expect licensing. And we work with them on seller 
financing and whether or not they would be required to license.
    I think you would find that if you talk to the manufactured 
housing folks in Washington, they would be pleased as to how we 
have enforced the SAFE Act when necessary, and backed off away 
from the SAFE Act when we haven't thought it was necessary--and 
still enforcing the SAFE Act, but interpreting it in a way that 
is consistent with protection of consumers in that arena.
    Mr. Fincher. I guess what I am getting at is that maybe the 
interpretation or maybe misinterpretation from different States 
to others. Do you think there is something that needs to be 
done at the Federal level to make sure that we are all 
following the same statute?
    Ms. Bortner. Congressman, since I haven't heard any of the 
complaints from any of our manufactured home providers, I don't 
really know how to answer that question.
    Mr. Fincher. Okay. Thank you. I yield back.
    Mr. Renacci. Thank you, Mr. Fincher.
    I recognize Mr. Green for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the ranking 
member as well. Thank you for allowing me to be a part of the 
hearing. I serve on the full committee, but I am not a part of 
this subcommittee, so thank you.
    Let me start with my friend from Somalia. Thank you for 
appearing. I appreciate some of the great difficulties your 
country is contending with. These are difficult times. And my 
hope is that we will be able to do as much as we can to assist 
you, not only with this issue but many other issues.
    And I am a believer in the notion that when you cannot do 
enough, and we may not be able to do enough, you should do all 
that you can. And I think this government has demonstrated a 
willingness to do all that it can and I hope that we will 
continue to do this.
    Now, with reference to this specific issue, it appears to 
me that some of the concern emanates from the notion that, 
candidly, banks don't want to do a lot of policing. They don't 
get in the business of banking to do policing. So they just 
really--they understand the necessity. They understand that we 
don't want to in any way promote, promulgate money laundering, 
but banks don't want to be in the business of policing if they 
can avoid it, just as doctors, by the way, don't want to get in 
the business of policing certain things that we assign them to 
police.
    Given that this is something that they don't find a great 
comfort zone with, they do it because it is patriotic to do so. 
The law requires it, so they want to be patriotic and they want 
to follow the law. My suspicion is that your business--you 
didn't get into the business of transference of money 
remittances to try to police some other things, but you 
understand it is something you have to do.
    So now, with this degree of reluctance, the question for me 
becomes, first of all, how do we establish a greater comfort 
zone for the industry, so that they understand that this is 
really not about overregulation? Because I know that there is 
this belief that we push too hard; we impose too many 
regulations. We are trying as best we can to protect the 
country so that we can continue to engage in the business that 
makes the country as vibrant as it is.
    Is just saying to you, that we want to help you, enough? 
What do we have to do to help businesses understand that we are 
not really antithetical to business? And I say this as it 
relates to both sides of the aisle, because my suspicion is 
that when we produce things that business doesn't see as 
exactly beneficial, they don't just look at one side of the 
aisle. They say that the Congress is doing this.
    Is the bill that Mrs. Maloney has going to give you the 
comfort that you are looking for? I have heard one person 
comment, I believe--Mr. Levine, did you comment on it? Does 
that bill give you the comfort zone that you are looking for? 
Maybe it is not perfect. But does it help you to the extent 
that you will feel comfortable moving forward?
    Mr. Levine?
    Mr. Suleiman. Thank you, Congressman. We as Somali-
Americans are well aware of the generosity of the American 
government and the American people towards Somalia, which is 
unwavering. We do appreciate that. I am here as a Somali-
American to appreciate it--the American government and the 
American people to help--the support in Somalia.
    To go back to your question--yes, I do believe that Ranking 
Member Maloney's bill is a good start.
    Mr. Green. Let me just intercede, because I have 31 seconds 
left.
    Mr. Levine would you kindly give a yea or a nay, as to the 
Maloney bill?
    Mr. Levine. Yea.
    Mr. Green. Let me just go right on down the line.
    Madam, I am sorry, I can't read your name from here. Ms. 
Bortner--is that correct?
    Ms. Bortner. Yes. I don't think the organization has taken 
a position on the bill, but from what I read of it, personally, 
it looks like it is a good step.
    Mr. Green. Thank you. I appreciate your answer.
    Yes, sir. If you would--Mr. Daly?
    Mr. Daly. Yes, Congressman. As I indicated earlier, Western 
Union is not directly impacted by the bank account closure 
issue, but many of our agents are, so we have supported the 
Maloney bill in the past.
    Mr. Green. Thank you very much. I yield back any time that 
I have left. And I thank you, Mrs. Maloney, as well.
    Mr. Renacci. Thank you, Mr. Green.
    And I want to thank the panel and all the witnesses for 
their testimony today. The Chair notes that some Members may 
have additional questions for this panel, which they may wish 
to submit in writing. Without objection, the hearing record 
will remain open for 30 days for Members to submit written 
questions to these witnesses and to place their responses in 
the record.
    This hearing is adjourned.
    [Whereupon, at 11:02 a.m., the hearing was adjourned.]


                            A P P E N D I X



                             June 21, 2012


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