[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
STOPPING TERROR FINANCE: A
COORDINATED GOVERNMENT EFFORT
=======================================================================
HEARING
BEFORE THE
TASK FORCE TO INVESTIGATE
TERRORISM FINANCING
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 24, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-91
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
SCOTT GARRETT, New Jersey GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico RUBEN HINOJOSA, Texas
BILL POSEY, Florida WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK, STEPHEN F. LYNCH, Massachusetts
Pennsylvania DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin KEITH ELLISON, Minnesota
ROBERT HURT, Virginia ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina BILL FOSTER, Illinois
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DENNY HECK, Washington
LUKE MESSER, Indiana JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Task Force to Investigate Terrorism Financing
MICHAEL G. FITZPATRICK, Pennsylvania, Chairman
ROBERT PITTENGER, North Carolina, STEPHEN F. LYNCH, Massachusetts,
Vice Chairman Ranking Member
PETER T. KING, New York BRAD SHERMAN, California
STEVE STIVERS, Ohio GREGORY W. MEEKS, New York
DENNIS A. ROSS, Florida AL GREEN, Texas
ANN WAGNER, Missouri KEITH ELLISON, Minnesota
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
DAVID SCHWEIKERT, Arizona DANIEL T. KILDEE, Michigan
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine
FRENCH HILL, Arkansas
C O N T E N T S
----------
Page
Hearing held on:
May 24, 2016................................................. 1
Appendix:
May 24, 2016................................................. 41
WITNESSES
Tuesday, May 24, 2016
Calvery, Jennifer Shasky, Director, Financial Crimes Enforcement
Network (FinCEN), U.S. Department of the Treasury.............. 5
McDonald, Larry, Deputy Assistant Secretary, Office of Technical
Assistance, U.S. Department of the Treasury.................... 7
APPENDIX
Prepared statements:
King, Hon. Peter T........................................... 42
Calvery, Jennifer Shasky..................................... 48
McDonald, Larry.............................................. 43
STOPPING TERROR FINANCE: A
COORDINATED GOVERNMENT EFFORT
----------
Tuesday, May 24, 2016
U.S. House of Representatives,
Task Force to Investigate
Terrorism Financing,
Committee on Financial Services,
Washington, D.C.
The task force met, pursuant to notice, at 10:03 a.m., in
room HVC-210, the Capitol Visitor Center, Hon. Michael
Fitzpatrick [chairman of the task force] presiding.
Members present: Representatives Fitzpatrick, Pittenger,
Ross, Barr, Rothfus, Schweikert, Williams, Poliquin, Hill;
Lynch, Ellison, Himes, Foster, Kildee, Sinema, and Carney.
Ex officio present: Representative Hensarling.
Chairman Fitzpatrick. The Task Force to Investigate
Terrorism Financing will come to order.
The title of today's task force hearing is, ``Stopping
Terror Finance: A Coordinated Government Effort.''
Without objection, the Chair is authorized to declare a
recess of the task force at any time.
Also, without objection, members of the full Financial
Services Committee who are not members of the task force may
participate in today's hearing for the purposes of making an
opening statement and questioning the witnesses.
The Chair now recognizes himself for 5 minutes for an
opening statement.
I want to thank everyone for joining us at this hearing of
the House Financial Services Committee's Task Force to
Investigate Terrorism Financing. I would like to again thank
Chairman Hensarling and Ranking Member Waters, as well as my
colleagues here, for their consistent and unwavering support as
we continue to investigate the threat of terror finance.
During our term, this body has attended investigative
hearings with policy experts and briefings by administrative
personnel to better understand how terrorist organizations
finance their activities around the world. In addition to
investigating the evolution of illicit finance flows, we
continue to review the rules and the regulations of the United
States Government that we have in place in order to determine
whether they are effective or whether those rules require
modifications or whether modifications are necessary.
We know the United States is central to understanding and
combating the funding of terror. The Treasury's June 2015
National Terrorist Financing Risk Assessment, which was the
first of its kind, clearly stated that the central role of the
U.S. financial system within the international finance system,
and the sheer volume and diversity of international financial
transactions, that in some way pass through U.S. financial
institutions, expose the U.S. financial system to terrorist
financing risks that other financial systems may not face.
This task force continues to note that illicit actors are
adaptive, constantly evolving their money laundering and
financing techniques to better avoid detection. These
techniques and practices, such as trade-based money laundering,
or the narcotics trade, often cross the jurisdictions of
several different U.S. Government agencies, making
communication, coordination, and information sharing amongst
agency personnel paramount. These findings have pushed us
toward a common conclusion. In order to properly combat the
financing of terrorism, government coordination is a necessity.
Yet unbelievably, the Federal Government does not maintain a
single strategic document or interagency implementation plan
for combating the financing of terrorism.
Today's hearing will focus on Federal efforts to combat
terrorism financing and explore how the U.S. Department of the
Treasury coordinates with relevant agency and law enforcement
personnel to fill this current gap.
At this time, I would like to recognize this task force's
ranking member, my colleague, Mr. Lynch, from Massachusetts.
Mr. Lynch. Thank you very much, Mr. Chairman, and Vice
Chairman Pittenger. I really appreciate you holding this
hearing. I also want to thank our witnesses today, Director
Calvery and Deputy Assistant Secretary McDonald, for helping
this task force with its work. And thank you for your good work
every day.
I am pleased that we are holding this hearing so we can
examine how to best coordinate a strategy within the Treasury
Department and across government agencies to stop the flow of
financing to terrorist organizations. Detecting and disrupting
the flow of funding to terrorist groups is crucial in our fight
against terrorism. While it has proven to be challenging work,
I also think it is extremely worthwhile.
In March of last year, House Financial Services Committee
Chairman Jeb Hensarling and Ranking Member Maxine Waters
created a 21-member bipartisan task force and charged it with
ensuring that our government is using every tool at its
disposal to deprive groups like the Islamic State and Boko
Haram and other terrorist organizations of the funds they rely
on to advance their destructive ideology. Through this task
force, we have learned that we must mentor and support
Financial Intelligence Units in vulnerable countries that lack
the rule of law. Some of my colleagues on this task force, both
sides of the aisle, have recently returned from a congressional
delegation to Latin America to examine these issues.
My own work in this field, along with many other members on
this committee, has been focused on the Middle East, where I
have had the opportunity to work on some ongoing
counterterrorism financing efforts. In particular, we have been
actively involved in establishing Financial Intelligence Units
in Jordan, Afghanistan, and in Morocco. These FIUs have served
as national centers that promote information sharing by
receiving, investigating, and sharing financial intelligence
with law enforcement agencies and international financial
intelligence counterparts across the globe.
Given this focus on strengthening FIUs, I am pleased to
learn more about the Treasury Department Office of Technical
Assistance collaboration to strengthen FIUs in Guatemala and in
Cambodia. As we are all aware, countries with weak financial
institutions and ineffective financial sector oversight serve
as a breeding ground for terrorist activity. They seek to raise
and move funds without detection. And witnesses at our previous
hearings have emphasized how the United States could play a
more productive role in addressing these risks by providing
technical assistance to countries that fail to implement
adequate anti-money laundering and counterterrorism financing
measures. This can be accomplished by thorough, robust,
dedicated teams of Treasury attaches and contract advisers who
are posted in relevant countries that are high-risk countries.
During a recent codel, Congressional Delegation Donnelly,
Joe Donnelly over in the U.S. Senate, we visited Bahrain, Iraq,
and the UAE. And I had the opportunity to meet with Bill Rich,
one of our young Treasury attaches. He is one of only 17. I was
very impressed with Mr. Rich and the good work he is doing in
his field. Although he is a very bright and capable person, he
is responsible for a very wide portfolio with many countries
that cover many challenges, and a portfolio that I believe is
too robust for one single person to properly manage. They need
help, all of our attaches need help. And we need more of them.
In order to effectively combat terrorist financing threats
both in the United States and abroad, it is imperative that the
United States implements a cohesive strategy to determine the
roles and responsibilities of Department of the Treasury
attaches and contract advisers. We have to deploy these people
more effectively, and they need more resources. And as I said,
we need more of them.
My colleagues and I in Congress have an important role here
too. Through the appropriations process we have to support the
vital work the Treasury Department and the Financial Crimes
Enforcement Network and other relevant agencies engage in to
safeguard our financial system from illicit activity.
I look forward to this hearing, and the testimony of our
witnesses today, so we can better understand the U.S.
Government effort to combat illicit finance. I yield back the
balance of my time. Thank you, Mr. Chairman.
Chairman Fitzpatrick. Thank you, Mr. Lynch. I now recognize
for an opening statement the vice chairman of the task force,
the gentleman from North Carolina, Mr. Pittenger, for 1 minute.
Mr. Pittenger. Thank you, Chairman Fitzpatrick, Ranking
Member Lynch, and our distinguished panelists, Ms. Shasky
Calvery and Mr. McDonald, for your presence with us here today.
In my opinion, both panelists represent the most
significant government agencies dedicated towards combating
money laundering and illicit finance initiatives. And we thank
you for your continued hard work. Through this task force, I
have had the opportunity to travel and learn about both U.S.
and foreign responses to terror financing. Recently, we
traveled to Colombia, Panama, Paraguay, and Argentina to meet
firsthand with many South American officials, FIUs, and others
tasked with combating money laundering and drug smuggling.
With the utmost confidence, I can say that every official
we met with had a genuine interest in promoting and ending
money laundering and smuggling initiatives. However, each
official also echoed the financial and technological hurdles in
place that prevent a foreign government from living up to their
own capabilities and to FTF enforcement standards.
The Financial Crimes Enforcement Network and the Office of
Technical Assistance provide critical capacities to track
terrorism financing while improving financial institution
infrastructures around the world. However, I truly believe we
can do much more in certain areas around the world to educate
and assist with anti-money laundering capabilities.
Thank you, Mr. Chairman, and to our distinguished
panelists. I look forward to hearing from you, and I yield
back.
Chairman Fitzpatrick. I now recognize the gentlewoman from
Arizona, Ms. Sinema, for 1 minute.
Ms. Sinema. Thank you, Chairman Fitzpatrick and Ranking
Member Lynch.
The Islamic State is a serious threat to the United States
and our allies. While coalition forces have succeeded in
recapturing some IS-controlled territory, IS maintains a global
network capable of funding and carrying out deadly attacks on
civilians here and around the world. This task force has
received testimony that the internal sale of oil is a
significant source of income for IS, but it is the taxation,
extortion, and theft throughout the entire supply chain that
funds the organization.
As IS continues to diversify its revenue streams, we must
have up to date information and a coordinated strategy to
disrupt its funding sources and keep money and resources out of
its control. This is why Chairman Fitzpatrick and I offered an
amendment to the NDAA to direct the Secretary of Defense to
establish a whole of government strategy to destroy their
funding networks. This strategy must include a comprehensive
assessment of IS's revenue sources, a valuation of best
practices to combat IS financing, and clear ways to measure the
effectiveness of efforts to weaken IS. DOD must also
specifically address how it will deny IS revenue from the sale
of Libyan oil.
I look forward to working with my colleagues on both sides
of the aisle to keep money out of terrorists' hands and build
on our progress to strengthen America's security.
Thank you, Mr. Chairman. I yield back.
Chairman Fitzpatrick. We now welcome our witnesses. Ms.
Jennifer Shasky Calvery is the Director of the Financial Crimes
Enforcement Network, or FinCEN, at the U.S. Department of the
Treasury.
This will be Ms. Shasky Calvery's last congressional
testimony for FinCEN. She is stepping down after having served
as Director since September 23, 2012. Prior to joining
Treasury, Ms. Shasky Calvery had a 15-year career at the
Justice Department, where she focused on combating money
laundering and organized crime. Notably, she was a prosecutor
with the organized crime and racketeering section, and more
recently Chief of the Asset Forfeiture and Money Laundering
section.
Ms. Calvery holds a law degree from the University of
Arizona College of Law. She graduated summa cum laude with an
undergraduate degree in international affairs from George
Washington University, where she was also an all-star
basketball player.
And I just want to say as you conclude your work at FinCEN,
we all appreciate your incredible work for our Nation, and that
you would take some time at this point to brief our task force
here on our issues of mutual concern. So we appreciate that.
Mr. Larry McDonald is Deputy Assistant Secretary for the
Office of Technical Assistance, or OTA, at the U.S. Department
of the Treasury. He oversees a program that provides financial
technical assistance to approximately 50 countries. In 2004,
Mr. McDonald received the Secretary's honor. Mr. McDonald has
served in several senior roles at Treasury since joining the
Department in 1987. Previously, Mr. McDonald worked at the
Organization for Economic Cooperation and Development. Mr.
McDonald has a master's degree from the Fletcher School of Law
and Diplomacy and an undergraduate degree from Middlebury
College.
The witnesses will now have 5 minutes to give an oral
presentation of their testimony. And without objection, the
witnesses' written statements will be made a part of the
record.
Once the witnesses have finished presenting their
testimony, each member of the task force will have 5 minutes
within which to ask questions.
For the witnesses, on your table there are three lights:
green; yellow; and red. Yellow means you have 1 minute
remaining, and red means your time is up.
And with that, Ms. Shasky Calvery, you are recognized now
for 5 minutes.
STATEMENT OF JENNIFER SHASKY CALVERY, DIRECTOR, FINANCIAL
CRIMES ENFORCEMENT NETWORK (FinCEN), U.S. DEPARTMENT OF THE
TREASURY
Ms. Calvery. Chairman Fitzpatrick, Ranking Member Lynch,
and distinguished members of the task force, I appreciate the
opportunity to appear today to discuss FinCEN's role in
countering the financing of terrorism. We value the committee's
attention to this issue.
Today, I will discuss FinCEN's view of the terrorist
financing landscape and ways that we understand current and
future threats, risks, and vulnerabilities. FinCEN's mission is
to safeguard the financial system from illicit use, combat
money laundering, and promote national security through the
collection, analysis, and dissemination of financial
intelligence and strategic use of financial authorities.
We serve two roles> First, as the Financial Intelligence
Unit, or FIU of the United States, we collect, analyze, and
disseminate financial intelligence to help fight money
laundering and the financing of terrorism. Second, we serve as
the lead anti-money laundering countering the financing of
terrorism regulator for the Federal Government.
The Treasury Department combats terrorist financing by
identifying and disrupting the flow of financial resources to
terrorists and terrorist organizations and hardening the
international financial system from abuse by illicit actors.
FinCEN supports these broader efforts by identifying sources of
revenue for terrorist organizations and identifying their
attempts to access the international financial system.
FinCEN then uses its authorities to eliminate these access
points. ISIL, of course, is one of the primary terrorist
threats we are focused on today. FinCEN receives approximately
55,000 financial institution filings each day. Most of this
financial intelligence comes from two reporting streams: large
cash transactions exceeding $10,000; and suspicious
transactions identified by financial institutions. To manage
this collection, we use business rules or algorithms to
identify reports meriting further review.
Currently, we run 22 rules aimed at: one, cutting off
ISIL's sources of revenue and attempts to access the
international financial system; and two, identifying potential
foreign terrorist fighters. These rules generate over 1,000
matches each month, and about 10 percent of those matches
result in reports sent to domestic authorities and foreign
FIUs.
FinCEN also employs its unique regulatory authorities to
obtain special collections of financial intelligence from
industry, which has been used to inform government efforts to
counter ISIL's financial activities. This work confirms our
belief in industry's desire to assist our efforts, not merely
out of a sense of obligation, but as active participants.
Financial intelligence plays an important role in
preventing terrorist attacks. Authorities worldwide have an
interest in identifying potential foreign terrorist fighters,
many of whom have engaged in terrorist acts in jurisdictions
outside the conflict zone.
FinCEN shares its financial intelligence through secure
channels to authorized stakeholders on the widest possible
basis. We disseminate information to our law enforcement
partners, intelligence authorities, and border police. For
example, financial intelligence has allowed us to assist U.S.
Customs and Border Protection with the watch listing of
potential terrorists, as well as identifying individuals of
concern that have subsequently had their visas revoked or
denied, or have been placed on the U.S. no-fly list.
We also share with relevant foreign FIUs. We do this
because terrorists and terrorist facilitators move from one
jurisdiction to the next, and we do not hold all the pieces of
the puzzle. The feedback suggests we are taking the right
approach. Over the past 8 months, we have received 354 positive
responses from 41 foreign FIUs that the financial intelligence
we provided either corroborated information related to an
ongoing investigation or provided new investigative leads.
Financial transparency is also key to our counterterrorist
financing efforts. On May 6th, the President announced several
developments to strengthen our work in this area, including a
customer due diligence, or CDD rule, and proposed beneficial
ownership legislation. The CDD rule requires that covered
financial institutions know and verify the identities of the
natural persons who own, control, and profit from the legal
entities the financial institutions service.
Treasury also sent beneficial ownership legislation to
Congress that would require companies to know and report
adequate, accurate, and current beneficial ownership
information at the time of a company's formation and transfer.
These two initiatives actually dovetailed together, and are
critical to aid law enforcement efforts to safeguard the
financial system. Being able to identify who the real people
are that are involved in a transaction is critical to our work
to combat money laundering and terrorism.
The terrorist financing landscape is complex and dynamic.
We must continue our dialogue to ensure we have the right
regulatory and statutory structure to prevent abuse of our
financial system, while striking the right balance between
personal privacy and financial transparency.
Thank you for the opportunity to testify, and I welcome
your questions.
[The prepared statement of Director Calvery can be found on
page 48 of the appendix.]
Chairman Fitzpatrick. Thank you. Mr. Larry McDonald, you
are now recognized for 5 minutes.
STATEMENT OF LARRY MCDONALD, DEPUTY ASSISTANT SECRETARY, OFFICE
OF TECHNICAL ASSISTANCE, U.S. DEPARTMENT OF THE TREASURY
Mr. McDonald. Chairman Fitzpatrick, Ranking Member Lynch,
and members of the task force, thank you very much for the
opportunity to testify today. It is a pleasure to participate
with my colleague, Jennifer Calvery.
Treasury's technical assistance program, specifically the
Economic Crimes Team within that program, has a close and
effective partnership with FinCEN based on our institutional
mandates and our special expertise. We are, respectively, the
capacity building and the operational arms of the Treasury's
work to combat terrorist financing and financial crimes.
Together, we are part of a coordinated, overall U.S. Government
effort.
Treasury's Office of Technical Assistance, or OTA as we
call it, is comprised of five teams: economic crimes; banking;
revenue; budget; and debt management. OTA's economic crimes
team promotes compliance with international standards and best
practices, in particular the Financial Action Task Force
recommendations. The crimes team partners with foreign
Financial Intelligence Units as well as regulatory, analytical,
law enforcement, and judicial authorities tasked with
developing effective AML/CFT regimes.
OTA is a relatively small program, and the Economic Crimes
Team is smaller still. Total OTA funding is approximately $50
million per year, which supports about 100 projects in 50
countries. Total funding for the Economic Crimes Team is about
$7.5 million per year, which currently supports 15 projects in
Asia, sub-Saharan Africa, Latin America and the Caribbean, and
the Middle East. While small, OTA is, we believe, a cost-
effective program that punches above its weight.
As Secretary Lew put it during this committee's March
hearing on the international financial system, Treasury gets,
``more bang for the buck'' out of OTA than anything else. I
refer you to my written testimony and to OTA's annual report to
Congress for examples of successful engagements by the Economic
Crimes Team and other parts of OTA.
Let me share with you a few lessons from our experience
regarding effective technical assistance. Effective technical
assistance depends on many things. Assistance providers for
their part must show some restraint, allowing potential country
partners to step forward of their own volition with clear
expressions of interest. Once interest has been manifested,
technical assistance providers must be good listeners and
patient analysts in order to understand the real underlying
problems and the capacity of the requester to absorb
assistance. This is the essence of demand-driven assistance.
Technical assistance providers must also demonstrate a
commitment to coordination. Coordination may entail doing a
project differently or not doing it at all depending upon what
other assistance providers are doing. There are cases when OTA
changes its project or even declines a request to provide
technical assistance when we determine that another provider is
already involved and our work would be duplicative. Effective
coordination is also facilitated when assistance providers
focus their work on areas where they have special expertise and
an institutional mandate.
OTA's Economic Crimes Team has special expertise in
building the human capacity of Financial Intelligence Units and
working through those Financial Intelligence Units to enhance
the effectiveness of other AML/CFT regime stakeholders. For
AML/CFT assistance to be effective, recipients for their part
must be genuinely committed to a systemic approach to AML/CFT
development. The weak link breaks the chain. Effective AML/CFT
regime development requires strengthening and integrating the
work of the entire spectrum of AML/CFT stakeholders. The goal
is a system in which both prevention and enforcement measures
are mutually reinforcing.
Governments that receive technical assistance must show a
commitment to creating and retaining a core of professionals,
career professionals. It is disheartening when a change of
government in our partner countries results in the departure of
our technical level colleagues.
Finally, and most importantly, technical assistance must be
backed up in our partner countries by a commitment at the
policy and the political levels to push forward transparency
and accountability in public finance when, inevitably,
entrenched interests resist.
In conclusion, let me reemphasize that combating terrorist
financing, money laundering, and other financial crimes is a
top priority for the Treasury Department and the U.S.
Government.
I want to thank you for the opportunity to testify today. I
appreciate your support and interest, and welcome your
questions.
[The prepared statement of Deputy Assistant Secretary
McDonald can be found on page 43 of the appendix.]
Chairman Fitzpatrick. We thank the witnesses for their
opening statements.
The Chair now recognizes himself for 5 minutes for
questions. Ms. Calvery, could you talk to us about the impact
that technology has had on the fight against terror finance and
how Treasury and FinCEN plan to adapt?
Ms. Calvery. Yes. I think there has been both positive and
negative ramifications of advances in technology. On the
positive end, we are using advanced analytics at FinCEN to comb
through the data we receive. As I mentioned earlier, we receive
55,000 filings on average from financial institutions each day.
So the idea that we would have human beings able to comb
through all of that information and understand it is I think
beyond our capacity for sure. And we need technology to help us
go through that data. We use advanced analytics and business
rules to help us understand what is important and get it to law
enforcement in a timely manner.
So now, from the time that a bank files a suspicious
activity report, to the time we get it in the hands of law
enforcement, may be 24 to 48 hours. If it is a terrorism-
related issue, they will call our hotline and we will get it to
them even faster. But for just things going through the normal
system, it takes 24 to 48 hours for us to get it in the hands
of people who can take action. So that is the positive benefits
of technology.
Of course with technological innovation we also have
advances in the finance industry and new products and services
coming onboard. Many of those products and services provide
potential opportunities for greater efficiencies, lowering
costs, and providing better services. But we also need to keep
abreast of what financial crimes risks they pose. And are they
covered by regulations? Are we still going to be able to
collect information? So that is one of the challenges we take
on at FinCEN to try to stay abreast of the ever-changing
technology in the fintech arena.
And we have also attempted to reflect some responsibility
back on industry itself, encouraging the developers of fintech
to also be thinking about compliance and thinking about
information sharing when they are developing their products and
services so that they can accomplish those ends as well.
Chairman Fitzpatrick. Thank you.
Mr. McDonald, can you comment on the role that the National
Security Council plays in prioritizing and directing
interagency efforts, the role of the Treasury with respect to
the Council? And Ms. Calvery, you might want to also comment.
Mr. McDonald. The National Security Council plays a role in
both the setting of what I would call the strategic outlines of
our technical assistance strategy and also, in cases where it
is required, helping to break through instances where there
might be a lack of mutual understanding among agencies about
what is a priority country, what is a priority region, what is
a priority engagement.
Our coordination work truly begins before it gets to the
National Security Council within the Treasury Department,
working with our colleagues on terrorist financing and
financial crimes in the first instance, working with the State
Department, both its regional bureaus, with INL, the
international narcotics and law enforcement part of the State
Department, working with the State Department's office on
counterterrorism.
So in most instances, I would say, we are able to agree on
a plan of action and a game plan without necessarily involving
the National Security Council. But there are instances,
certainly at the beginning, the very beginning of that process
when you are looking at the broad outlines of a strategy, and
then in those instances where there is something that needs to
be worked out and the NSC's participation is important or
essential.
Chairman Fitzpatrick. Director Calvery?
Ms. Calvery. I think Larry put it well. Essentially, the
National Security Council sets the strategic direction based on
the coordinated input of all of the agencies, and then holds us
accountable for actually implementing what we said we would do.
Chairman Fitzpatrick. Director, can you comment on the
methodologies that FinCEN uses in looking for or spotting
trade-based money laundering schemes, particular methodologies?
Ms. Calvery. Sure. I think most recently the methodologies
we have employed have been with the use of our Geographic
Targeting Order, which is an authority that enables the
Director to put in place a special collection of information
for a limited time period, 120 days. So we have been using that
most recently in California and in south Florida, where from
working closely with our law enforcement partners, we
understood that there was an issue of trade-based money
laundering in the garment district in LA and the electronics
district in south Florida. And essentially law enforcement
believed that drug cash was making its way into businesses and
then back down to Mexico and/or Colombia.
So we used the Geographic Targeting Order to collect
additional information. Law enforcement was able to see how the
criminal actors diverted their actions, what evasive steps they
took. And most recently it resulted in over 20 arrests in south
Florida, and has really helped both us and law enforcement to
understand the typologies much better.
Chairman Fitzpatrick. Thank you. I recognize Mr. Lynch for
5 minutes.
Mr. Lynch. Thank you. And Ms. Calvery, I want to join the
chairman in thanking for your service to your country and
wishing you well. Let's stay right on that topic. I know that
one of the things that we are working on with my staff and with
Treasury is to work on legislation to expand that Geographic
Targeting Order. Would you elaborate a little bit on why that
would be helpful?
Ms. Calvery. Sure. And thank you for the question. So right
now the Geographic Targeting Order enables us to collect
information when there is a transaction involving monetary
instruments like cash, currency, or checks. We would propose
expanding that for us to collect information when there is a
transaction involving funds, the more broad definition. So that
would include, for instance, wire transfers. And an example of
where that is important is with our real estate GTO. There we
are focused on criminals who are taking their illicit proceeds
and using them to purchase luxury residential real estate.
Right now we have GTOs focused in Manhattan and in Miami
County. And with those two geographic targeting orders, we are
able to collect information when someone uses cash or a check
to purchase real estate, some portion of real estate. We are
not able to do it, however, when someone wires funds to
purchase real estate. And that is becoming the more and more
common way that people engage in transactions.
Mr. Lynch. Right. Let me ask--and this is for both of the
witnesses--the Panama papers, that whole incident. It just shed
light on the role of offshore financial mechanisms to move and
store money anonymously. That issue, along with the beneficial
ownership issue, creates a real problem for all of us on this
committee and law enforcement as well.
To what extent, as far as it has been reported--I am not
sure how to put this. What role, if any, do you think FATF
might have in verifying the information contained in the Panama
papers? And how might we use this information to address the
terrorism-related issues?
Ms. Calvery. All right. I would be happy to field that one.
I would not look to FATF in the first instance as the body to
engage in the investigation and operational activity
surrounding the Panama papers.
Mr. Lynch. Maybe I am just looking for lessons learned from
what we understand what has been going on. And I understand it
is powerful individuals being able to move their money
offshore. Well, they could do that for terrorist financing as
well if they are coming out of the Gulf or something like that.
So are there some lessons learned that we might use in our
context, which is terrorist financing?
Ms. Calvery. Yes. Actually, now that I better understand
the question, FATF does have a role. And I think they have been
playing it. First, they have set an international standard
around the collection of beneficial ownership information. They
have made it clear that countries should be collecting
beneficial ownership information to better enable their ability
to fight money laundering and terrorist finance. So that is the
international standard.
Here in the United States, we have made some progress but
have some work to do on that front. The CDD rule I think was a
definite step forward in terms of the collection of beneficial
ownership information. What that enables us to do is to have
our banks collecting information on legal entities when their
customers, or when they are providing them services, no matter
where that legal entity was forms, whether it was formed in the
U.S., the B.V.I., et cetera, et cetera.
The beneficial ownership information that we recently
proposed dovetails with that, because that would require the
collection of beneficial ownership information at the time a
U.S. legal entity is formed in the United States or when it is
transferred. And that is important because we often will see
illicit actors take U.S. legal entities outside of the United
States to use them to establish bank accounts. And that money
ends up right back in the U.S. financial system indirectly
through correspondent accounts. And so to be able to deal with
both risks, we need both authorities in place.
Mr. Lynch. Thank you. And in closing, I just want to say--
and Mr. McDonald, you could obviously add to this if you wish.
From a lot of people that we talked to in this area, the
United States facilitates some of this because of our laws,
because of our unwillingness to deal with the beneficial
ownership issue. We basically turn a blind eye to this and let
this happen. Is that correct? Is that your--
Mr. McDonald. What I was going to do was add just quickly
to Jen's point about Panama to say that the technical
assistance program is engaged in Panama. I have visited myself
the Financial Intelligence Unit there and met with their team.
They are not the worst. They are not the best around the world.
They do have a Financial Intelligence Unit that has good
leadership. But they are still in the relatively early stages
of implementing improved laws related to reporting
requirements.
And we are still in sort of the middle ground of trying to
build their capacity to make them more effective in that role.
Mr. Lynch. Thank you, Mr. Chairman. I yield back.
Chairman Fitzpatrick. The Chair now recognizes the vice
chairman of the task force, Mr. Pittenger, for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman. Thank you to each
of you again. My question relates to our collaborative efforts
with our partners around the globe. In our meetings in South
America with Colombia, and Paraguay, and Panama, and Argentina,
we found, as I said earlier, willing partners. But Mr.
McDonald, as you said earlier in your statement, that we are
only as strong as our weakest link. And in the discussions I
have had previously with President al-Sisi and other foreign
leaders, they have also expressed a willingness, but did not
have the capacity to really be a strong asset in our efforts.
How do you all work together? Kind of walk through with me
assessing the needs and what needs to be done through OTA, and
the role that you play with FinCEN, Ms. Calvery. How do you all
address that? And then how do we establish that relationship
with them and then provide them the leadership and the support
that they need?
Mr. McDonald. I will kick it off. Central America is a good
place to look at as an example of this. Our technical
assistance efforts begin in most regions, including in Central
America, with an expression of interest, a request by the
potential counterparts. It might be from the Financial
Intelligence Unit, it might be at a more senior level when a
finance minister or central bank governor is in Washington
talking to the Secretary at the time of IMF-World Bank annual
meetings or something like that, and for one reason or another,
they have a recognition that they need to do better. It might
be because they are aware, more aware of the threat of illicit
finance.
It might be that they are seeing the departure of foreign
banks who are trying to deal with this problem of derisking.
And they will ask us if we can be helpful to them in
strengthening their system. We will typically get in touch with
the State Department both in Washington and with the embassy.
In Central America, I can tell you that there is a particularly
good collaboration between the State Department, INL
responsible for Central America. The Central American Regional
Security Initiative is one in which we co-fund projects in
Central America and talk to each other about a game plan for
TA.
Then ultimately, it does require a follow-through on the
part of leadership in our partner countries to implement the
strength and capacities that we try to help them build.
Guatemala is an interesting case in point. They, over a
number of years, built their capacity to identify and address
money laundering cases. In 2014, they took down a money
laundering operation and sentenced the ringleader and seven of
their participants to a number of years in jail.
I would just say one last point about our collaboration
with FinCEN. While FinCEN is really the operational arm of the
Treasury's efforts, as I said earlier, and OTA is the capacity-
building arm, we know that FinCEN has expertise that we can
benefit from. So at a staff level, we are frequently in
interaction with each other about things that FinCEN knows a
lot about. Thank you.
Mr. Pittenger. Thank you. Ms. Calvery?
Ms. Calvery. Yes. I think to just give a real practical
example in the area of terrorist financing of how we help some
of the FIUs that might have less capacity to do their job,
recently, in this last year, we brought 40 FIUs together. The
United States FinCEN and the Netherlands FIU led an effort
where 40 FIUs focused on the issue of foreign terrorist
fighters and trying to understand what they look like in
financial data.
What are their financial patterns? What do they look like
before they get to the conflict zone? What do they look like
when they are in transit? And what do they look like when they
get back? Because we all have an interest in identifying these
individuals. So 40 countries came together. We looked at
patterns all across the world. We came up with red flags for
industry of what type of activity they should be looking out
for. We then drafted an advisory to financial institutions.
Here in the United States, we issued it securely to our
financial institutions. And then we provided a sample to over
150 FIUs of that same advisory for them to issue to their
financial institutions.
So in that way you have 40 FIUs that are better situated to
perhaps understand the threats, articulate the threats, help
the other members of the Egmont Group of FIUs to take
information and get it out to their industry and thereby get
better reporting from industry back to FIUs.
Mr. Pittenger. My time has expired.
Chairman Fitzpatrick. I now recognize the gentleman from
Illinois, Mr. Foster, for 5 minutes. Thank you.
Mr. Foster. Thank you, Mr. Chairman.
And thanks to both of our witnesses for their very
important service to our country.
As you are certainly aware, one of the issues in the Iran
nuclear deal was the possibility of Iran diverting some
fraction of their funds that were released under the JCPOA for
terrorist purposes. So I actually have a pair of related
questions.
The first one is how specifically does FinCEN guard against
Iran illicitly accessing the U.S. financial system? And
secondly, recently the Secretary of State and the Secretary of
the Treasury both stated that Iran at that time had access to
only about $3 billion of the amount made available to it under
the JCPOA.
And so I was wondering, has that number increased since
those statements were made? Do we have the ability to track
actually how much they have received? And could you explain how
that funding is being made available to Iran so far and how we
are able to follow it under the state sponsorship of terrorist
sanctions?
Ms. Calvery. Sure. Let me focus on FinCEN's role in
understanding and tracking financial transactions from Iran.
Our data is collected from U.S. financial institutions, and
of course U.S. financial institutions are still embargoed from
dealing with Iran in almost all circumstances. So we don't tend
to have a lot of direct open data about Iranian financial
transactions. We do, however, receive information and keep on
alert for any type of front companies that might be used to
access the dollar, the U.S. financial system, and work very
closely with our colleagues at OFAC to understand those
financial transactions and to follow their funds.
In terms of some of your more specific questions about the
amount of money that Iran has at its disposal at this moment, I
really would have to defer to some of my colleagues at OFAC to
help me answer that question. So I would be happy to take that
back and get you--
Mr. Foster. I would appreciate it. That is a number that I
think Congress will have a great interest in tracking. And so
if there was some information channels so we could have some
authoritative statement about what that number was, that would
be very useful.
Second question, sort of unrelated, many of the financial
services players that are involved in the payment chain are
actually regulated and supervised at the State level. And so
could you describe the coordination between FinCEN and the
States since it is obviously critical to ensuring the financial
services sector is not used for illicit purposes?
Ms. Calvery. Sure. This is an issue that we focus on quite
a bit at FinCEN, and particularly in the last year we really
have been focused on money services businesses and their
supervision. So they are licensed by States, money services
businesses in this country are licensed by States, and
supervised both by States and the IRS. And then FinCEN is
responsible for any enforcement actions that might come out of
that.
So as a result of the Money Remittances Improvement Act of
2014, we have been coordinating more than ever between the
Federal and the State system. So the States have, for instance,
a data system in which they can collect licensing information
and put their supervisory exams and all of this type of
information to one data system. And we have signed a memorandum
of understanding so that we too now get access to that data.
And together, the Federal Government and the States--there are
about 30 States that participate at this point--are able to
look at trends and identify risks and better focus our exams.
We are doing coordination of our exams. We are doing joint
exams. And that is in the money services business arena, but we
also coordinate quite closely across depository institutions,
and other types of financial institutions.
Mr. Foster. Thank you. So you view the situation as
improving at a satisfactory rate in terms of the State-
regulated--
Ms. Calvery. I do think it is improving. Actually, a major
area of focus has been to communicate to our banks and to our
Federal banking agencies the supervision that is in place for
money services businesses. I think there had been a lack of
understanding and a lack of communication on how well they are
regulated and what that regulation looks like in detail so that
there could be some understanding of how that works.
Mr. Foster. All right. Thank you.
And I was also interested in your comments about shell
corporations and real estate transactions.
First, I am wondering if you have any comments on proposals
that have been floating around in Congress for a while to
basically pierce the corporate veil in the United States, to
just not allow anonymous shell corporations to be made, which I
guess is what many countries have.
Would that have a big influence on your ability to do your
job?
Ms. Calvery. It would have a very large influence on our
ability to do our job. I think this is actually the fourth time
over 8 years that I have testified in front of Congress on this
issue. And the one thing that I think has been consistent
throughout--and some of that was at the Department of Justice
and some of that has been with Treasury--is that criminals,
terrorists, and other illicit actors use shell companies and
hide behind the corporate veil as a means of engaging in
illicit transactions anonymously. And so anything we can do to
take that away and provide greater financial transparency would
be of great aid to law enforcement and to combating money
laundering and terrorist finance.
So the beneficial ownership legislation that the President
sent up to Congress recently I think sets out a good plan on
how to do that. But we are certainly interested in working with
Congress on a proposal that will work.
Mr. Foster. Thank you. I guess at this point I am out of
time, so I will yield back.
Chairman Fitzpatrick. The gentleman from Maine, Mr.
Poliquin, is recognized for 5 minutes.
Mr. Poliquin. Thank you, Mr. Chairman. And thank you, Ms.
Calvery and Mr. McDonald, for being here. We appreciate your
leadership on this issue and your service to our country. I
think everybody knows with the activities we have seen around
the globe over the past couple of years that it is absolutely
critical for our own national security that we win this war on
terror. And part of that is making sure we stop the money flows
to terrorist organizations around the world.
In particular, I would like focus a little bit here on the
Patriot Act and Section 314(b) that deals with information
sharing, financial information sharing among financial
institutions. So my question to you, Ms. Calvery, first, is I
am sure you are familiar with that section of the law. Do you
see those rules as being too restrictive for financial
institutions to be able to share this information such that
they can see patterns of money flows around the world such that
they can pinpoint a way to interrupt this flow of funding?
Ms. Calvery. Thank you, Congressman, for the question. I am
very familiar with Sections 314(b) and 314(a). We use them
quite extensively at FinCEN. I think there are some
improvements that could be made to the statute, and in
particular clarifying right now so 314(b), of course, allows
financial institutions to share information with one another
concerning suspicious activity related to money laundering and
terrorist finance. It would be helpful to clarify that that
authority extends beyond a strict reading of money laundering
and terrorist finance, but applies to all crimes.
Money laundering, of course, has many, many predicates to
it. And we think it would be helpful to make it clear that
financial institutions can share information with one another
about suspicious activity involving violations of criminal law
and regulations.
Likewise, there have been some issues in the courts and
there is now an inconsistency in the court rulings on whether
or not the safe harbor that financial institutions get when
they file a suspicious activity report, whether they had to
have a good faith belief that the criminal activity occurred.
And we see that as chilling on financial institutions. And we
would certainly support a change to make it clear that a good
faith belief that criminal activity has occurred is not
required to file a SAR.
Mr. Poliquin. Let's drill down a little bit deeper, if I
can, Ms. Calvery. Talk to me a little bit about the sharing of
information, of course with relevant safeguards, among
financial institutions in the Federal Government.
Could you please comment on that? How is that working? Can
you see any changes that government can make to make that
better? You have listed a couple when it comes to dealing with
financial institutions themselves. Now, let's throw the
government in.
Ms. Calvery. Yes, so there is less needed in terms of
authorities to make that better, and more needed in terms of
innovation and activity on the ground. And I think that is
happening. It has really been an exciting development over the
last year. We have been partnering, FinCEN has been partnering
with law enforcement and financial institutions, using the
314(a) and (b) authorities, to share information on a more
real-time iterative basis, where FinCEN will have a meeting
with specific financial institutions that can help on a
specific problem and provide context of the request we are
about to make to them, to enable them to go back and look in
their data and do a better job of finding relevant information.
It also enables them to talk amongst themselves, the
financial institutions to talk and share information amongst
themselves. And that type of joint iterative activity, we found
to be much more productive.
Mr. Poliquin. Great. I represent a very highly rural part
of America. We have the largest congressional district in Maine
east of the Mississippi River. Is this problem of funding or
stopping the flow of funds to terrorist organizations unique to
large money center institutions? What advice can you give our
folks back in Maine who deal with small financial institutions
and mostly in rural areas that they can be on the lookout for
these sort of activities that ordinarily they might not catch?
Ms. Calvery. Unfortunately, I think we have seen that
individuals have been radicalized in all different types of
communities of different sizes in cities, in rural areas. And
so then the money flows also follow where the radicalization
occurs. To put it more concretely, of those business rules I
was talking about earlier and the alerts that we get on
activity related to potential terrorist activity, ISIL activity
specifically, most of that reporting comes from depository
institutions. About 60-some percent comes from depository
institutions, maybe 37 percent from money services businesses.
Most of it comes from large financial institutions, which by
the way are also in smaller areas at the retail level. But some
of it is also coming from small community banks and small MSBs.
I recall seeing at least one report where it was a mom-and-
pop money services convenience store/money services business
operation, and they provided some very important reporting for
law enforcement.
Mr. Poliquin. Mr. Chairman, I am just about out of my time,
but if I could ask one more question. Is that possible, sir?
Chairman Fitzpatrick. Your time has expired.
Mr. Poliquin. My time has expired. Thank you, Mr. Chairman.
Chairman Fitzpatrick. Thank you, Mr. Poliquin. The Chair
now recognizes Mr. Kildee of Michigan for 5 minutes.
Mr. Kildee. Thank you, Mr. Chairman. And I thank the
witnesses for their participation.
I would like to start with Ms. Calvery, if you could offer
some comments on the basic subject of Iran and sanctions. And I
refer to a speech that Secretary Lew gave back in March, where
he indicated it was his view that the credibility of sanctions
themselves is at stake if the promise of sanctions relief can't
be fully realized.
So I guess I am curious to what extent you think that
criticism is valid, how it might apply more broadly than just
to Iran's sanctions, and how effective you think Treasury's
sanctions regime has been effective? If you could comment on
that, I would appreciate it.
Ms. Calvery. I have not left government service yet. That
will be next week. So I am going to start by saying that
whatever the Secretary said, I agree with. Actually, I do
agree.
Mr. Kildee. I am sure he will be very much encouraged by
that.
Ms. Calvery. Even next week, he will get that same answer.
But joking aside, at FinCEN, we are not the sanctions experts.
We support our colleagues at OFAC in their investigations by
getting them the financial intelligence they need.
What I can tell you is I am very impressed by their
seriousness of effort and their ability to fashion sanctions in
a very targeted manner, their ability to work with a changing
scenario on the ground, a changing diplomatic situation on the
ground to impose sanctions and to be flexible in moving those
sanctions as needed. But in terms of the specifics, I really
need to refer you to my colleagues at OFAC.
Mr. Kildee. Then if I could zero in on something where
FinCEN would clearly have some role, and that is implementation
of the Hezbollah International Financing Prevention Act. Could
you comment on the extent to which that is being implemented
and how you feel it is succeeding in limiting the ability of
Hezbollah to raise, to move, to use funds in pursuit of their
terrorist aims?
Ms. Calvery. Yes. FinCEN's role when it comes to the
financing of Hezbollah is, again, in the collection of
information and sharing that, whether it is with OFAC to focus
on the sanctions side, or the implementation of the Act,
sharing it with law enforcement and the intelligence community.
We have used both our traditional authorities to collect that
information, so the suspicious activity reporting and that type
of thing, but we have also used some of our targeted
authorities.
We have used, for instance, Section 311 of the Patriot Act
to focus on foreign financial institutions that we believed
were moving funds on behalf of Hezbollah, and to cut them off
from the U.S. financial system, and to collect additional
information.
We did that in the case of the Lebanese Canadian Bank, and
in the case of a couple of money services businesses, Halawi
and Rmeiti. So that is where we kind of fit into this bigger
Hezbollah picture.
Mr. Kildee. And the last question I have returns to the
issue I think Mr. Foster had raised to a certain extent. And
coming from Michigan, one of my long-time mentors is former
Senator Carl Levin, who has spoken out pretty clearly on this
issue of beneficial ownership and various methods that have
shielded true ownership or true beneficiaries of ownership. I
dealt with it on a much smaller scale. For many years, I was a
county treasurer trying to deal with abandoned properties and
trying to locate owners through various clouds of ownership and
shell corporations.
And I am just curious if you would comment on what you
think, either of you or both of you, would be the essential
elements of beneficial ownership legislation that would
actually get at the question? I know Senator Levin had some
concern that, from a regulatory standpoint, allowing only
managers to be named rather than true owners might really be a
step backward rather than a step forward. I wonder if you would
comment.
Ms. Calvery. Sure. I, too, am from Michigan. I grew up in
Michigan, and Senator Levin spoke at my eighth grade
Constitutional Convention Day. So I look at Senator Levin a bit
as a mentor myself.
However, I do disagree with him on the characterization of
the definition of beneficial ownership in the CDD rule in a
fairly fundamental way. The definition requires--it has two
prongs to it. It would require individuals to provide
information about someone who controls a company. So that could
be the manager, director, et cetera, someone who has actual
control over the company, and those individuals who have an
equity stake in the company, at least 25 percent of an equity
stake in the company. So it requires both of those things. And
the reason that we went in that direction--and I first got
involved in this definition when I was at the Department of
Justice and I was being asked personally, what does law
enforcement need? We know that criminals are going to try to
hide. They will never actually give their names. So what does
law enforcement need to actually be able to take the next step
in their investigation? And our response, my response, was we
need something more than a nominee. When law enforcement looks
at a name on a piece of paper, they need to be able to go out,
knock on someone's door, and that person has to have some
connection to the bad guy, because now they have something to
work with. If it is a nominee who doesn't know the bad guy, it
is a dead end. And that is the situation we have been in, a
dead end.
Now there is someone for law enforcement to go talk to,
someone who controls the company and someone who has an equity
interest in the company on paper. No bad guy is going to stay
very far away from the person who is actually able to control
their money day to day. They are going to have some connection
back and forth, and that enables law enforcement to take the
next step in their investigation. And that is why I think that
definition will prove helpful and effective in the CDD context.
But through the beneficial ownership legislation that we have
proposed, it requires a rulemaking process. And I think it is
fair game to again examine, is that the right definition in
that context, or is there a better definition that we should
put in place? And that is what the rulemaking process is for.
Mr. Kildee. All right. I see my time has expired. I do
think it is a subject that requires a lot more exploration. My
experience has been that it is difficult sometimes to separate
a designated manager from an equity owner. And I have seen it
where it might appear as if you are dealing with someone who
has a real stake but often--and this again is in a limited
scale, but I can't imagine it is less complicated in terrorism
financing. I think it is a difficult area that we need to
explore further.
With that, Mr. Chairman, I thank you for your flexibility.
Chairman Fitzpatrick. Thank you.
Mr. Rothfus of Pennsylvania is recognized for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
Mr. McDonald, I wondered if I could ask you a couple of
questions. From your position at OTA, can you tell us how
receptive developing countries are, particularly in Africa and
the Middle East, to integrating efforts to block terrorist
financing as a priority concern and accepting assistance from
the United States, other G-20 countries, or the IMF, or
development banks to identify and address issues in their
nation?
Mr. McDonald. Africa and the Middle East cover a lot of
territory. There are a lot of different countries and very
different circumstances. So I will try--I am going to avoid
giving you just one paintbrush description of it. In Africa--in
sub-Saharan Africa, in particular, I think the overriding
challenge and problem is not so much one of a lack of
willingness to give attention to this issue and to try to do
better. It is fundamentally and primarily one of very low
capacity, very limited, sometimes nonexistent, technology. We
talked earlier about the role of technology.
I will give you an example. In Liberia, where we are
engaging, our Economic Crimes Team in their assessment mission
went to the financial intelligence unit. It was ankle deep in
water. There were plastic chairs. Maybe one computer. It is
really unbelievably limited in terms of the human and kind of
material capacity to do that job. That is an extreme example.
There are other parts of sub-Saharan Africa that are far
better. We work, for example, in Kenya and Tanzania, different
picture. But, by and large, in sub-Saharan Africa, it is
fundamentally a challenge of having the resources and the
capacity.
In the Middle East, I don't want to say that capacity is
not at issue; it certainly is. Depending on the country you are
talking about, whether it is Saudi Arabia, where we have an
engagement, or Iraq, where we are resuming engagement, it is a
very mixed picture. It is a combination of limited capacity.
Certainly, it is the case in Iraq. But, also, in Iraq in
particular, a very--a political and security environment that
is turbulent, to say the least. So our technical assistance
efforts in a country like Iraq, where I went on mission in
November to try to re-establish our engagement, is one where
there are some improvements. The legal regime has been
strengthened by passage of new legislation. There has been a
kind of a--there have been some changes within the central bank
and the financial intelligence unit that are promising. But it
is a region that is characterized by tremendous political and
security--
Mr. Rothfus. You mentioned a willingness on the part of
sub-Saharan African countries to look at these issues, but
there is a capacity issue. In the Middle East, there are some
capacity issues. But can you address the willingness issue with
those Middle East countries, Gulf states, other countries in
the Middle East?
Mr. McDonald. I would hesitate to characterize the
willingness of all the countries in the Middle East. The ones
that I am the most familiar with are Iraq. We almost had an
engagement in Yemen until things went in a different direction
there. We have worked in Jordan, where I think one of the other
members of the panel noted there have been improvements in
their FIU work and their AML/CFT regime. So it really depends
on the country. I would just say that it is highly country-
specific.
Mr. Rothfus. I would like to ask maybe about the impact on
the willingness of countries, whether in Africa or the Middle
East, with respect to recent activity. Do you think that these
countries are more or less receptive to working with us when
they see the Secretary of State holding public meetings with
some of the biggest banks in Europe to encourage investment and
business in Iran, the world's largest state sponsor of terror?
Is there an inconsistency there?
Mr. McDonald. I haven't talked to them about that. I
couldn't say that is a--let me put it this way: I have never
had any of my interlocutors in the Middle East tell me that
they felt differently about the issue because of the factor
that you mentioned.
Mr. Rothfus. Ms. Shasky Calvery, I just commend you on your
work and congratulate you and wish you well in your next
endeavor.
As you look back on your service, where do you think the
United States has failed with respect to the prevention of
terrorism financing? And where do you see the biggest
vulnerabilities going forward?
Ms. Calvery. I don't know if I would characterize it as
failure as much as needing to consistently improve. So I think
it was Winston Churchill who said something to the effect of
change is good, and constant change is to be perfect. We need
to constantly be changing in the government and evolving with
the threat. And the threat--you have state actors. You have
illicit actors who have billions of dollars at their disposal
to be able to pay the best attorneys, the best accountants, the
best bankers to come up with the most sophisticated schemes to
hide illicit assets. And that is the charge we have, to keep up
with that. So we need to remain vigilant with a determined
adversary and ensure that we keep changing with the times and
understanding the risks.
That is not easy to do. What I see as the primary risks
going forward are really what we had in the threat assessment,
the threat assessment that we handed in to FATF. This idea that
the chairman raised at the beginning that we have an incredibly
complex financial system, the largest financial system, brings
with it unique threats. We need to understand the full gamut of
how all our financial industry works, all the different aspects
of it, the various products and services, and then understand
that the volume of transactions that go through the U.S.
financial system is immense. So it is trying to remain focused
on a big field of vulnerabilities to find a very narrow stream
of illicit activity that is flowing through it. That is
probably our biggest challenge moving forward.
Mr. Rothfus. Thank you, and I yield back.
Chairman Fitzpatrick. The gentleman from Arizona, Mr.
Schweikert, is recognized for 5 minutes.
Mr. Schweikert. Thank you, Mr. Chairman.
And, Ms. Shasky Calvery, so only a week left?
Ms. Calvery. 3 days.
Mr. Schweikert. Okay. So let's, actually, because I think
we always make a mistake of--in some of these discussions, at
one point, we are talking about our sort of formal networks and
informal and terrorism financing and other bad actors and these
dollar scales. So let's just do a quick thought experiment. You
have been doing this for how long?
Ms. Calvery. Almost 20 years.
Mr. Schweikert. Okay. So you have seen lots of creativity
and things you never thought of all of a sudden appearing. So
if I took you and put on the other side of the world tomorrow
and said, ``Here is a half million dollars in cash,'' because
that is the type of threat that we often worry about because
that buys people who mean harm to us, and said, ``You are on
the other side of the world; here is your half million dollars;
give it to someone somewhere in North America, and you have 10
days to do it,'' you could do that.
Ms. Calvery. I am not offering those for sale, but yes.
Mr. Schweikert. No, no, I am not saying how. We are not
going to put on the ``how.'' But look, I sit here on this
committee, and I know I could do it.
Ms. Calvery. Yes.
Mr. Schweikert. Through breaking it up and all sorts of
different networks, and some in hard commodities, some in this,
some in that, some in a DHL package. It is quite doable, isn't
it?
Ms. Calvery. Potentially, yes.
Mr. Schweikert. Potentially, or just it is doable?
Ms. Calvery. It is doable.
Mr. Schweikert. And there becomes sort of my concern of
some--so much of our resources we fixate on: Okay. We are going
to watch the SWIFT system. We are going to track this, track
that.
At the same time, a handful of diamonds shoved into a
package is being sent to--there are lots of ways to move
resources to finance bad actors.
And so I want to sort of bounce on to the next concept.
Someone in a very similar position for another three-letter
agency who is an acquaintance talked me through saying that
some of the networks that wash money for someone selling
copyright violations or illicit drugs also, that these networks
are basically for sale. So they don't really care where you got
the money. If you are moving money for terrorism, if you are
moving money for a cartel, if you are moving money for this,
there are entire networks basically that sell their services.
Is that a fair characterization?
Ms. Calvery. That is a fair characterization.
Mr. Schweikert. So, functionally, money laundering, money
movement, asset movement is actually a formal business in a
corrupt sector.
Ms. Calvery. Yes. I would call them professional money
launderers.
Mr. Schweikert. Okay. So, in many ways, isn't that one of
our mistakes? Being someone from a border State, some of the
crazy things that we have come across--in a previous life when
we were rehabbing houses, we walked into a house that had a
bundle of cash in it that was getting ready to be loaded up and
taken back south. I mean, the things you come across. So my
concern is, do we spend too much in the way of our resources
saying, ``We are going to monitor and build algorithms and look
at the SWIFT system,'' and not us understanding that there are
hundreds and hundreds of different ways to be creative or break
it up or use parts--so much of our focus on the formal banking
sector, that there is massive leakage around us.
Ms. Calvery. I think you need financial intelligence to
identify those professional money launderers and facilitators
to be able to go after them. And I think they in turn
ultimately need the formal financial system to be able to move
money globally, particularly when you start talking about large
sums of money. So when you are talking about something like a
Sinaloa Cartel that by all estimates has billions of dollars
that it needs to launder, they need to do that through the
formal financial system.
Mr. Schweikert. You just moved to where I was trying to do
this. So it is the very large scale amounts of money that are
going to use--try to access our more formal networks because of
the efficiencies.
Ms. Calvery. Not necessarily. We also see it, for instance,
in the case of foreign terrorist fighters who have extremely
small amounts of money. They are essentially trying to pay for
their travel to the conflict zone or perhaps for the weaponry
that they are going to need when they are in the conflict.
Mr. Schweikert. But they also have access to the ability to
move small dollars in lots of informal sort of networks.
Ms. Calvery. But they are doing it through the formal
financial system.
Mr. Schweikert. So, in the formal sector, how many--let's
just use an example. How many Iranian institutions now have
access to SWIFT?
Ms. Calvery. I don't know the answer to that question.
Mr. Schweikert. Okay. Because that is one of the things we
have been tracking, because I believe there now are some SWIFT
relationships with some Iranian institutions to European banks.
And once that money hits a European institution, the ability to
move money back into North America, even if we still have--what
is it--311 sanctions on that institution, they still basically
have access to the world's backbone. Is that sort of--am I
heading in the right direction there?
Ms. Calvery. Not necessarily. I think we have--in terms of
Iran's access to the U.S. financial system, I don't think they
have--
Mr. Schweikert. But if they have access to Europe and the
ability, then--so if I can SWIFT money through a European
institution, strawman it out, wash it back out, and then send
it SWIFT back through under a different sender, I am just--my
concern is our resources seem to focus on formal networks. And
my understanding is the scale of what we will refer to as sort
of informal networks are also massive. And in our example, if I
give you the half million and put you on the other side of the
world, you might mix it up and use all sorts, and then when it
hits the other side, it comes back together.
And I have always--and I know I am way over time--but I
thought it was absurd that we have a system where if I do
$9,999, I don't get reported, but if I do $10,000, I do get
reported. So bad actors just do $9,999 and use the other
alternatives instead of just the fixation of, let's just use an
algorithm system to look for a dollar--because a dollar
threshold in some ways is absurd.
Ms. Calvery. So there are a lot of things--
Mr. Schweikert. Yes, I know. A lot of moving parts there.
And we are way over time. But--
Ms. Calvery. Let me perhaps try to address some of it. We
seek to collect financial intelligence and have transparency
over those parts of the financial system that we think are the
most vulnerable to illicit finance. And when you start talking
about things like cash and following a bare instrument like
cash, we have focused on thresholds. But even with a threshold,
we still have the suspicious activity reporting regime to
support it. So if someone is doing transactions at $9,999, we
expect to have a suspicious activity report. If someone is
structuring several different transactions to get above
$10,000, we expect to get a suspicious activity report.
Mr. Schweikert. Thank you, Ms. Calvery.
Mr. Chairman, thank you for your patience. I know we are
way over time.
Chairman Fitzpatrick. Thank you.
The gentleman from Texas, Mr. Williams, is recognized.
Mr. Williams. Thank you, Chairman Fitzpatrick. And thanks
to both of you for being here today.
Mr. McDonald, one of the key themes of these task force
hearings has been international cooperation. We in the United
States can only do so much on our own. While I believe our
countryis making great strides in combating the financing of
terrorism, we still can do more, and we need to do more. In
previous task force hearings, the committee has explored the
idea of trade transparency units which seek to identify trade-
based money laundering trends and conduct ongoing analysis of
trade data provided through partnerships with other countries.
One of our past witnesses, John Cassara, who is a former U.S.
intelligence officer and Treasury special agent, testified that
having TPP signatories agree to these TTUs would promote trade
transparency. It would also be a revenue enhancer and, in his
opinion, not derail implementation of current or future trade
deals. I wanted to get your thoughts on this idea of making
sure that our trading partners are following the same set of
rules as we do.
Mr. McDonald. Let me kick it off. And I think Ms. Calvery
has something that she could add to that. So certainly the
trading system, the international trading system, is one of the
vehicles for money laundering and transmitting terrorist
financing. And it is one of the areas where we work with our
partner countries to try to get them better positioned to be
the front line of shutting that off. So we work with customs
officials. We work with officials in countries that are
responsible for managing and overseeing the trading--trade
flows in those countries to try to strengthen their capacity--
and I think this is part of your question--for them to work
more closely with others in the United States and in other
countries who are involved in trying to combat trade-based
money laundering. So that is part of our work.
Jen, I don't know if you have something you would like to
add to that?
Ms. Calvery. Sure. FinCEN works very closely with Homeland
Security investigations on a number of different matters--and
CBP--on trade-based money laundering. So we are very familiar
with the TTUs and think that they have really done a good job
over the years. So a good example is the TTU that we have here
and the relationship we have with Mexico. They are able to
share trade information, extensive trade information, to find
where there has been over-invoicing or under-invoicing of
export and import trade between the two countries and thereby
find money that is being laundered. When you put that type of
data together with the data we collect at FinCEN, we are really
able to start to hone in on some professional money launderers
and facilitation networks and to take action.
Mr. Williams. Thank you.
Mr. McDonald, last week I was encouraged to see G7 members
agree to enhanced information sharing and cooperation when it
comes to terror financing. This follows a similar agreement by
the G-20 nations. But when it comes to TPP, not all of the
current signatories are part of the larger discussion. How
receptive are developing countries to integrating efforts to
block terrorist financing as a priority concern and in turn
accepting assistance from the United States? In other words,
when it does--or in other words, does it become beneficial for
them to actually engage in this topic instead of turning a
blind eye to it?
Mr. McDonald. So, broadly, I would say that developing
countries are receptive to assistance and interested in
strengthening their AML/CFT regimes in different ways. Part of
it is a growing recognition on their part that terrorist
financing, dirty money of different kinds, can harm them.
Terrorist financing or funding that is being laundered in the
direction of the United States doesn't always end up only here.
The countries of Central America, South America, and other
parts of the developing world, I think, are increasingly aware
of their stake in trying to address this issue.
As I said earlier, it is not only their concern about
funding of criminal activity within their own countries but
also the loss of correspondent banking accounts upon which
their financial system depends. So I do believe that they do
recognize the importance of this issue. And while I can't speak
for the--it is on a country-by-country basis whether they want
to have a technical assistance program with us--they are
interested.
Mr. Williams. Really quickly, should TTU be a part of the
TPP agreement?
Mr. McDonald. I don't know the answer to that question.
Mr. Williams. That is why I ask it.
Mr. McDonald. I will find out. Can I find out and get back
to you?
Mr. Williams. Would you do that for me?
Mr. McDonald. We will do it today.
Mr. Williams. Thank you. I appreciate it.
Mr. Chairman, I yield back.
Chairman Fitzpatrick. The gentleman from Arkansas, Mr.
Hill, is recognized.
Mr. Hill. Thank you, Mr. Chairman. I appreciate you and
Ranking Member Lynch for your steady leadership of our task
force.
Director Calvery, best wishes to you in your next step in
your career.
And, Mr. McDonald, thank you for your service at Treasury.
As a former Deputy Assistant Secretary of the Treasury, I
always appreciate hearing from a fresh one. And I appreciate
your work.
I led the technical assistance design to all of Central and
Eastern Europe to the Finance Ministries from the Treasury back
a quarter century ago. So it is good to see you continuing to
do that good work.
I am grateful to both of you for your leadership around the
world to make our efforts to fight terror finance more robust,
more coordinated, and more successful.
This information sharing and collecting, one thing in your
testimony, Director Calvery, I was interested in your
discussion about sharing with other financial intelligence
units around the world--and that makes complete sense to me--
and sharing with other public entities in the United States
like your work with Homeland Security and border security.
Excellent work. But whenever I talk to people in the private
sector, they always seem more interested in targeting rather
than sharing. And so the question I have for you is, how can we
focus on targeting rather than just funneling terabytes of
information into Treasury's IT center and analytics center? It
seems like we are missing the power of hundreds of people out
there on the front lines every day in our biggest banks around
the globe.
So can you reflect on sharing essentially with the private
sector's financial intelligence units and our biggest banks in
the world and also how we can better target getting them
engaged on the front lines of terror finance?
Ms. Calvery. Sure. I think there has been some real
innovation in this space over the last year, which I referenced
briefly earlier. Both in the United States, and the United
Kingdom as well, there has been a fair amount in the press
about the JMLIT, the joint money laundering task forces that
they are operating. But both are doing essentially the same
thing, and that is doing targeted information sharing between
government and industry, financial institutions. So focusing on
a very specific problem set--maybe it is something related to
ISIL; maybe it is something very targeted and specific, not the
broad topic--and sharing targeted information and then seeing
what each side, what government can do, what industry can do,
what industry can do by speaking to one another and sharing
information, by putting all of our efforts together, what kind
of progress can be made in targeting some of the financial
facilitators that we are trying go after? We are seeing
promising results. Many of those efforts are still ongoing and
in investigative stages. So I can't speak to the specifics. But
I can tell you there is a lot of excitement on this topic right
now. There is a lot of excitement in industry. This is what
they would prefer to be doing, the people who staff their
financial intelligence units. And it is what government and the
law enforcement area would like to be doing. So I am expecting
that there is going to be great development in this area just
because of the concentration of effort of some very talented
people in the year ahead.
Mr. Hill. Thanks.
On the subject of beneficial ownership, I congratulate
Treasury for finding and plugging the gap in single member non-
citizen-owned LLCs. I think that was a good proposal you made
to Congress in your disclosure in the recent days. But I still
have trouble, and we have had this discussion at a number of
these hearings, understanding your push for bank collection of
beneficial ownership at the 25-percent ownership level through
the normal customer ID process, when instead under the Code,
Section 6103, why don't we grant FinCEN the ability to get IRS
data, which has much more up-to-date, much more accurate
beneficial ownership for C corps and LLCs, particularly if you
plug the foreign single member question. Why do we keep going
back to something that is dated and not very reliable, frankly?
Ms. Calvery. Sir, I think that is an important question.
And it is important to understand the distinction between--
government understanding beneficial ownership to help it with
its investigations. So, like the proposed legislation to
collect information at the time of company formation, that
would help law enforcement. It is important to distinguish that
from a bank's responsibilities as well to understand who their
customers are and to be able to assess whether there is a
suspicious activity occurring within those accounts. It is only
a financial institution that is going to have insight into
whether their customer is engaged in suspicious activity and
file those reports that will get to law enforcement and
potentially initiate an investigation.
So, for instance, if they know who the beneficial ownership
is of a legal entity customer, they are going to be better
positioned to implement their sanctions obligations. They are
going to be in a better position to understand whether the
activity is the type of activity they should expect from that
customer.
Mr. Hill. Yes. I am out of time, Mr. Chairman, and I
understand that. But the issue is they already have that
obligation under the Bank Secrecy act now on filing a SAR. They
don't need more directives about documenting beneficial
ownership when they gather that information a lot now, both on
the deposit side and the loan side, including who is
responsible for filing the tax return for the LLC, et cetera.
Banks know that information, and they have an obligation if
there is something suspicious to report it.
I am talking about the timeliness and accuracy of actual
beneficial ownership that you want to try to sort through. And
I am arguing that the IRS has a much better source of that
data, that it is much more current, much more accurate than
Secretaries of State or bank credit files. That is the argument
I am making. And that it is a much more robust source of that
data if you had access to it as a law enforcement agency under
something like 6103's normal power arrangements for IRS data.
Ms. Calvery. So I think when--that seems to be more of a
reference to the beneficial ownership legislation proposal. And
there we are focused on having FinCEN collect the information
or have the information because it is a part of our statutory
mandate to make that information available to law enforcement
more broadly, State, Federal, law enforcement, to enable them
to do their jobs, to provide it to regulatory authorities and
to provide it as appropriate to the intelligence community to
fight international terrorism and other national security
threats. Whereas, in the tax context, there is much more
limited abilities to be able to share that information with the
broader community. And so that is the--
Mr. Hill. But that is a problem I think you need to solve.
Thank you, Mr. Chairman, for the extra time.
Chairman Fitzpatrick. Sure.
The gentleman from Florida, Mr. Ross, is recognized for 5
minutes.
Mr. Ross. Thank you, Mr. Chairman.
And I want to thank our witnesses today for being here, Ms.
Shasky Calvery, especially, for your service, as well as Mr.
McDonald.
I want to focus on something, because you hit on something
in your opening statement, Mr. McDonald. You stated that the
goal is a system in which both prevention and enforcement
measures are robust and mutually reinforcing. It would seem to
me that, absent enforcement, you won't have prevention, because
one would lead to the deterrent of the other and hopefully be a
good system. It reminds me of a commercial that I saw on TV for
LifeLock where you have a bank guard standing in the middle of
a robbery and one of the victims says, ``Do something,'' and
the bank guard says, ``I am just a monitoring guard; I don't do
anything to prevent the actual robbery.'' My focus here is
going to be on enforcement.
Ms. Shasky Calvery, are we doing enough in enforcement?
Ms. Calvery. I think we are. The United States is doing
more than any other country around the world in terms of
enforcing the Bank Secrecy Act. If anything, the criticism
internationally is that we are doing too much. But--
Mr. Ross. But are other countries cooperating with the
enforcement? In other words, are we just--we are gathering
data. We are monitoring. We find specific targets. We find
dynamic targets that require some of the developing countries
to assist us. Do they enforce to the level that we need them to
enforce in order to lead to prevention?
Ms. Calvery. There is not one answer--because there are so
many countries out there, I can't answer one way for all of
them. Each is a different situation. But I think we are seeing
a trend moving in a positive direction where more and more of
our partners around the world are enforcing their anti-money
laundering provisions. And now, in FATF, there has been a move.
Before it was enough just to have laws on the books
criminalizing or otherwise prohibiting money laundering in
terrorist finance. Now there is a move when we do mutual
evaluations, when we do assessments of other countries as
peers, to say whether they are in compliance with the
international anti-money laundering standards. Now we are
looking at the effectiveness. It is not enough just to have
rules on the books. Are you actually implementing them, and are
they effective?
Mr. Ross. And what can we do if they are not implementing
them? If they are not--
Ms. Calvery. At least in the FATF context, there is a
system to have kind of increasing sanctions on countries for
failing to comply with those standards.
Mr. Ross. That is what I would ask you, especially as you
reflect on 20 years there, what would you suggest we need to do
more in terms of what resources or tools would be necessary to
strengthen enforcement, not so much with us as a country but
with our allies in trying to stop the money laundering in the
terrorist financing?
Ms. Calvery. Well--
Mr. Ross. Do the sanctions work?
Ms. Calvery. So, two separate questions. The first one in
terms of enforcement of our AML/CFT regime, what more do we
need to do there? I think we need to give the push on
effectiveness in FATF a chance to work. There are going to be
some very important conversations that are going to come out of
that. We are in the first round of those reviews right now, and
already, it is starting to highlight some issues for us to be
focused on in the years ahead.
In terms of the sanctions regime and whether that works, I
really would have to refer you to my colleagues at OFAC who do
that for a living every day.
Mr. Ross. Okay. Mr. McDonald, would you say that there are
obstacles to cooperation that Congress should know about with
some of our cooperating countries?
Mr. McDonald. Could you repeat the question?
Mr. Ross. Yes. Would you say that there are obstacles to
cooperation, and if so, what could we do to try to overcome
those obstacles?
Mr. McDonald. So, certainly, there are obstacles. I already
mentioned and won't repeat, the obstacle of there being
extremely, extremely low capacity and just terribly rudimentary
work spaces and technology in the countries where we work.
Another obstacle is, as I sort of alluded to in my oral
remarks, the inevitability that entrenched interests will
manifest themselves at some point when you get to the point
where--
Mr. Ross. Can we provide them any incentives? Can we
provide them any incentives to invest more on their end without
having to appropriate more on our end?
Mr. McDonald. I think I will piggyback on a couple of
things that Jen referred to. I do think that there is evidence
that the FATF procedures and the FATF monitoring process does,
if you will accept the expression, put the squeeze in a
positive way on countries that are subject to that. An example
is Cambodia. They were in the FATF ICRG review process not
doing well. They saw the writing on the wall. They asked us for
technical assistance to help them build the capacity to do
better. It took years, but they did emerge from that process.
Of course, it will be important for them to sustain it. Getting
out of the ditch is just the first step.
But I do think that there are examples--there is evidence
that the FATF process can be an effective way of focusing
attention. Case in Panama, another country that we have been
talking about.
Mr. Ross. Thank you.
And I see my time is up. I yield back.
Chairman Fitzpatrick. The gentleman from Kentucky, Mr.
Barr, is recognized.
Mr. Barr. Thank you, Mr. Chairman.
And, to Ms. Calvery and Mr. McDonald, thank you for your
testimony today. Thank you for your service. Thanks to the work
of the Office of Technical Assistance and FinCEN. It's very
critical work in terms of coordinating the government's efforts
to stop terror financing.
I wanted to start with Treasury's monitoring of the
implementation of the Iran nuclear deal and specifically the
data on any Iranian sanctions relief moving to terror proxies.
I know, Ms. Calvery, you indicated that FinCEN really is
not doing a whole lot of that, that you would defer to the
Office of Foreign Asset Control (OFAC). But to either of you,
has Treasury made a finding about whether any sanctions relief
has found its way into the hands of terrorists?
Ms. Calvery. I don't believe that there has been a finding
one way or the other. But I am not certain.
Mr. Barr. And from the Office of Technical Assistance, same
conclusion?
Mr. McDonald. Yes. I do not know the--
Mr. Barr. What about with your colleagues with OFAC? Any
communications within Treasury from OFAC about their monitoring
of the implementation of the agreement?
Ms. Calvery. I would have to defer to OFAC on that.
Mr. Barr. The reason why I would ask, and it is kind of a
fundamental question in terms of Congress' oversight of the
agreement, is that Secretary Kerry, about 5 months ago, in
Switzerland, at the World Economic Forum, acknowledged that
sanctions relief will likely go to terrorists. That is our own
Secretary of State defending the agreement acknowledged that
maybe one of the core weaknesses of the agreement that he
negotiated was that some of the sanctions relief would end up
in the hands of the Iran Revolutionary Guard Corps or other
terrorist proxies. And so it is troubling that Treasury, which
is charged with the mission of monitoring terror financing,
doesn't really have an answer to that basic and fundamental
question.
And by the way, the Secretary of State in making that
declaration indicated that there would be consequences if Iran
uses the money to fund terrorism. How can we know to impose
consequences if we don't know whether or not any of the
sanctions relief has in fact found its way into the hands of
terrorists?
Ms. Calvery. Congressman, I want to make sure that I didn't
misspeak. I did not mean to suggest that Treasury does not have
answers to these questions. Instead, as the Director of FinCEN,
I don't have answers to those questions, but I would be happy
to take them back.
Mr. Barr. Thank you.
Mr. McDonald. The same for me. It is just not in my area of
responsibility. But I feel confident that there is an answer to
that question in Treasury.
Mr. Barr. We would like to know. And so thank you for--and
I recognize that Technical Assistance and FinCEN are not at the
core of that question. But, presumably, the Office of Foreign
Assets Control would be. Someone at Treasury--this is a pretty
critical question that Treasury should be well aware of,
everyone within Treasury in the area of countering terror
finance.
Let me quickly move on to the Office of Technical
Assistance specifically. And, Mr. McDonald, in your testimony,
you indicated that OTA has a relatively smaller footprint in
the Middle East. Given that the locus of most terrorism
activity is in the Middle East, shouldn't we be more--and I
understand that you have to have a willing government as a
partner here--but shouldn't we be more proactively and
aggressively interjecting ourselves into those Middle Eastern
embassies?
Mr. McDonald. When I made my remarks about the importance
of demand-driven technical assistance, I did not mean to
suggest that we should be sitting back on our heels and waiting
for others to come to us and not doing anything on our own. So,
certainly, part of my job is to make sure that potential
partners for our technical assistance program are aware of our
program, of how it relates to U.S. national interests and their
interests. And I would also say that an important part of the
role of the Treasury's attaches overseas is to serve as
advocates for this kind of awareness. So, certainly, that is--
Mr. Barr. Just in terms of prioritization of the scarce
resources that Treasury has in this area, and maybe it is too
scarce, but do we have enough attaches in our Middle Eastern
embassies?
Mr. McDonald. I asked this question before I came up today.
What is the answer if the question is, are there enough
attaches out there? And, certainly, we would welcome and
benefit from additional resources, not only to support
additional attaches but even the ones that we have. So the
rising cost of doing business at embassies internationally,
which is affecting all agencies, not just Treasury, is one of
concern just for our existing footprint. And in order to do
more, certainly additional Treasury attaches would be helpful.
I am very aware of the benefit that I get out of our attaches
in Afghanistan and Iraq and in many, many countries. Well, not
that many. Actually, 17 countries where we have attaches. But,
certainly, that would be a helpful addition to the picture.
Mr. Barr. Thank you.
I yield back.
Chairman Fitzpatrick. The gentleman from Minnesota, Mr.
Ellison, is recognized.
Mr. Ellison. I thank the chairman and the ranking member.
And I also want to thank our witnesses today.
I represent Minneapolis, Minnesota, which is home to
probably the most Somali-Americans in our country, in North
America, perhaps. We have as many Somali-Americans in the
Minneapolis area as they do anywhere outside of Somalia. I
could tell you, and I think you are well-aware, that there is a
crisis going on, and it is not getting better. Many U.S.-based
Americans who find their roots in that part of the world are
unable to provide critical assistance to their loved ones. Some
of this is food. Some of this is school fees. A lot of it is
just the basic sustenance of life. Upwards of 40 percent of the
GDP of Somalia is foreign remittance. Now, licensed money
remitters, as you know, are known as money service businesses,
or MSBs. And I am sure you all are aware that they are losing
their ability to open bank accounts and send money overseas.
Increasingly, correspondent banks are declining to provide
wire transfers to many nations, including Somalia, and many who
have opened up these accounts are having them closed. And every
day, it feels like the window is a little smaller and smaller.
And I can tell you I have talked to these banks and these
credit unions, and they don't have a problem remitting money.
But they feel that the financial and liability risks are so
great to them that it just doesn't cost out for them. So they
are making a business decision to close accounts and to not
open them.
In November 2014, FinCEN published a statement on providing
banking services to money services businesses. I found the
statement very clear. But since then, the situation really
hasn't improved very much. And I guess my first question is,
why did FinCEN's 2014 statement not really turn the trick? Why
didn't it provide necessary assurance to bankers that they can
meet their requirements and still provide services to
regulatory compliant MSBs?
Ms. Calvery. Ultimately, the banking industry has to assess
the risks, what controls it can put in place, and what its
appetite is to deal with those risks. And I think, as Larry can
tell you from the work that he and his team do in Somalia, that
Somalia presents a lot of challenges around the illicit finance
risks present in the country and the state of its financial
system and its ability to control those risks. Here in the
United States, what FinCEN is able to do and what we have been
doing beyond issuing the statement in 2014 is to move on the
Money Remittances Improvement Act that you proposed and
President Obama signed into law in 2014 to ensure that there is
good supervision of the money services business industry and
that banks and banking regulators, examiners, know that
supervision system is strong so that we have the conditions on
this side to ensure that banks can have comfort that MSBs
operating in the United States and how they are examined and
supervised in the United States is something they can be
comfortable with.
That doesn't necessarily help them with the risks on the
side in Somalia.
Mr. Ellison. Okay. Would you like to respond, Mr. McDonald?
Mr. McDonald. Only to mention that our technical assistance
program is working with the Somalia authorities, in particular
in the area that Jen mentioned, to strengthen bank supervision
capacity in the central bank. We are fortunate to have the
collaboration of the U.S. Embassy in Kenya and the Kenyan
School of Monetary Studies, where we conduct those training
activities because the security environment doesn't allow us to
do so in Somalia. So it is a tough undertaking, but it is one
that we are committed to.
Mr. Ellison. I want to thank you for doing what you are
doing. And I just want to encourage you to do more because if
our effort is to thwart and stop the terrorists and Al Shabaab,
if we drive the money underground, it is just more opaque. It
is not a better situation.
Let me see if I can squeeze one more question in. I have
heard from banks that their regulators do not acknowledge that
MSBs are regulated by State banking supervisors and the IRS. So
banks feel that they must not only know their customer, but
their customer's customer. Do you see this phenomenon? Is there
a way we can get through this? How do you see this?
Ms. Calvery. That is the effort that we have been
particularly focused on I would say over the last 6 months. And
I do see improvements. And that is the communication between
money services businesses, their trade associations, their
regulators, the States themselves, the IRS, communicating to
banks and their supervisors about how that supervision regime
works. I think there was a fair amount of surprise among some
of the banks and banking supervisors to see how much they are
actually supervised. And we are also working with money
services businesses on putting together a best practices guide
for them so that they can give even further comfort.
Mr. Ellison. Let me tell you, I am about 40 seconds past my
time. But if there is another round, I have a few more
questions for you. Thank you.
I yield back.
Chairman Fitzpatrick. The gentleman from Delaware, Mr.
Carney, is recognized.
Mr. Carney. Thank you, Mr. Chairman and Mr. Ranking Member,
for this hearing today and for your very good work on this task
force. Thank you to both of you for coming in and for your work
for our country.
I am not a member of the task force, so I appreciate an
opportunity to be here and to listen to the testimony and to
ask a few questions. And I will try to end with just a general
question, which is if both of you could kind of underscore
after this full discussion the top three threats that keep you
up at night in this area.
Mr. McDonald. We were going to flip a coin to see who went
first. But so, certainly, Iraq is a country, an area of
concern. It is part of a broader region of concern. I am
hopeful that our technical assistance engagement there as part
of a broader, significantly broader, set of steps on the
security front will be beneficial and be fruitful. So Iraq is a
country of concern.
Mr. Carney. Is it getting better or worse?
Mr. McDonald. Pardon me?
Mr. Carney. Is it getting better or worse?
Mr. McDonald. I think on the--we are having to postpone our
scheduled mission, next mission, because of the very--the
recent unrest in the international zone. So that is not better.
Afghanistan, a country that I have visited many times,
where we have resumed a technical assistance engagement, is a
very important part of the world, that keeps me up at night in
some respects. I do have a feeling, a sense of hope that the
current leadership, President Ghani, whom I know well from when
he was the Finance Minister of Afghanistan, understands the
issues, understands the importance of building institutional
capacity. But he obviously has a tremendous number of security,
political, and other challenges he is confronting.
Mr. Carney. I am running out of time. Number three?
Mr. McDonald. So I will--why don't I just--
Mr. Carney. Anything else that you would like to add to
that? And I have one other point I would like to make.
Ms. Calvery. I will go quickly: number one would be the
idea that ensuring that we get, collect, and share any
information we possibly can to prevent a foreign terrorist
fighter or a homegrown violent extremist from engaging in
violent activity in this country; number two, that we are doing
everything within our power at FinCEN to protect the financial
system from cyber actors, illicit cyber actors; and number
three, that we at the same time stay focused on professional
money-laundering networks that are responsible for laundering
billions of dollars for organized crime and other illicit
actors.
Mr. Carney. So it doesn't sound like you guys sleep very
well at night with those concerns.
I am disappointed that Mr. Hill is not here because I would
like to follow up on the last point that he made. I represent
the State of Delaware. Most corporations, LLCs, are formed in
Delaware, and the concerns raised about beneficial ownership
concern elected officials and leaders in Delaware as well as
elsewhere. Mr. Hill talked about and Senator Carper on the
other side of the Capitol is working on legislation that would
give access to law enforcement agencies to the data that is
already being collected at the IRS and to expand on some of
that data so that law enforcement had better tools around
beneficial ownership to kind of get beyond the so-called
corporate veil.
Do you have a view of that? You had a back-and-forth, but I
wasn't clear on what your view was on using that IRS data and
making it available to law enforcement agencies.
Ms. Calvery. Yes. Treasury and the Administration set up a
proposal just a few weeks ago--a legislative proposal--on the
collection of beneficial ownership information that we think is
the right solution. We are definitely open to continuing the
conversation to come to a solution on this issue. But that
proposal would focus on FinCEN collecting information. One of
the benefits to that proposal over some of the others I have
seen over the years that would have put the onus on the States
to collect information and make it available is that it doesn't
require States to do anything extra. It also has a 50-State
solution, so to speak, in the sense that you can't have
arbitrage between different States if they do things
differently. But that is the proposal that we have been
pushing.
Mr. Carney. Thank you very much.
Again, to the Chair and the ranking member, thanks very
much for the opportunity to sit in.
Chairman Fitzpatrick. With that, we are going to proceed to
a second round of questions. There shouldn't be too many. I
just actually have--I want to recognize myself first for 5
minutes.
One particular issue has to do with asset forfeiture. So my
question would be to you, Mr. McDonald. Recently, there was a
series of meetings in South and Central America that
Representative Pittenger and Representative Ellison and I
attended with a number of others. And as we traveled and met
with different governmental and FIU professionals in those
countries, there was an area of common concern. I think we take
for granted sometimes that, in this country, most States have
asset forfeiture laws in place. And so you find a bad actor, a
law breaker, you can not only let the prosecution take their
liberty, but you can hurt them a second time by getting to
their assets. Most of the times those assets were had with ill-
begotten gains. You can convert them to cash. You can, using
our laws, take that cash and pay things like police overtime at
the local level or the State level or Federal to investigate
the next law breaker.
So one of the things we noticed and, specifically, when we
were in Paraguay, and I will just give you an example: The
plane landed on a tarmac in Ciudad del Este near the tri-border
area. And there was a somewhat legendary jet that was sitting
there, that had been, I guess, forfeited. And it looked like it
had been there for about 10 years or so. It was covered with
moss. And so we questioned, and the answer was: We don't really
have the process or the ability, technical assistance, I guess,
to actually complete the forfeiture process. So what was a
valuable asset at one point in time is just wasting away. It is
probably going to cost the government funds and resources to
get rid of it, as opposed to actually using it against the
terrorists or the money launderers or the narcotraffickers or
wherever it came from.
So does OTA--what can you tell us about some of these
countries that we work with and their ability to use asset
forfeiture and our assistance to help them get their job done?
Mr. McDonald. First, we do provide technical assistance to
help countries establish and implement asset forfeiture
regimes.
You are right that it is an unattended area or a
nonexistent area. And in a number of countries, it is one of
the important areas of the work of our Economic Crimes Team. It
is something that I think if we had been there when the plane
first got to that tarmac and became possibly available for
being part of an asset forfeiture action, it would have been a
good thing.
But we are working with--I am going to confirm this--but
part of our work in Paraguay is, I believe, on asset
forfeiture. It is certainly part of our work in other countries
and Central America, Latin America, and the Caribbean. In
Haiti, frankly, one of our--and it is, unfortunately, not a
long list--one of the examples of progress that we made in our
engagement in Haiti was on asset forfeiture.
So, bottom line, you are absolutely right. That is an
important part of the AML/CFT regime-strengthening effort. It
is something that we do.
So, in a demonstration of OTA efficiency, the head of OTA's
enforcement--Economic Crimes Team, Erin Schenck, just reminded
me that we began asset forfeiture management work in Paraguay.
There was a mission, a TDY, earlier this month, and it is an
area of high demand. I don't think that--I have actually seen
that plane. And I don't think that we are going to get much
money out of that plane. But we are going to fix the asset
forfeiture regime so that sort of thing is not repeated.
Chairman Fitzpatrick. There won't be much money out of that
plane at this point in time. It has been sitting there--appears
as though--a long time, a decade or more. But it is just an
example where sometimes you have to invest money to get money
back. And if you want to suggest some additional resources OTA
could use, I would like to see funds properly invested in
providing technical assistance to some of these countries so
they can get more of their own resources, and we can do a
better job together.
But I appreciate the fact that you guys are on top of that
particular case, which, as I said, was somewhat legendary
there. We spoke to the prosecutor about it, and we couldn't
really get a clear answer.
Mr. McDonald. If I may, just quickly, note that in addition
to technical assistance in the asset forfeiture area, a big
part of our work across other teams is domestic resource
mobilization more generally, so trying to help these countries
mobilize more resources in their own country to the benefit of
efforts to combat money laundering and terrorist financing but
also so that they can provide basic public services more
effectively than they are able to do now.
Chairman Fitzpatrick. I recognize Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
Let me just follow up. We had a situation here several
months ago where we had cyber hackers get into the central bank
in Bangladesh and send instructions to the New York Federal
Reserve Bank to wire--actually, they requested $951 million to
be sent to various locations around the globe. They ended up
successfully getting the New York Fed to wire $81 million to
certain casinos in the Philippines. And they successfully stole
the $81 million. It was a payout. I know we have Abu Sayyaf
operating there out in the smaller islands in the Philippines.
Is there any indication--this is a pretty sophisticated
operation. I know that the Philippine government has issued--or
taken away people's passports because they think it was an
inside job. I am not so sure it was. But are you folks involved
in that? And what can you tell us about it?
Ms. Calvery. I can't say a whole lot in this forum because
there are ongoing investigations and so forth happening. What I
can tell you is, at the highest level, the threat of malicious
cyber actors is a top priority of the U.S. Government. The idea
that they are going to attack our financial institutions or
financial infrastructure is a top priority of the Treasury. And
there are many people at Treasury who are working on this issue
every day.
At FinCEN specifically, our role is to collect information
through suspicious activity reports, and we do get a lot of
information in those SARs on different cyber threats.
Mr. Lynch. A little wrinkle here because the Philippine
senate had a bill to require reporting of suspicious
transactions, the suspicious activity reports, and the casinos
lobbied against them in the Philippine legislature and defeated
the amendment. So they don't have that. So we have this gap in
the Philippine anti-money laundering protocols. And here we are
in the meantime basically signing a trade agreement with these
folks. So it is problematic.
Are there other measures that we might--we have this
vulnerability in the Philippines because of the lack of this
anti-money laundering legislation. Are there other ways that we
can fill that gap to help you do your job?
Ms. Calvery. One of the things that we are currently doing
to fill that gap is, at FinCEN, we have a program known as the
Global Rapid Response Program. We work it together with the
FBI, the Secret Service, and I believe Homeland Security just
signed on. And what we have been doing is when there are cyber
incidents like this and the money moves--it moves very quickly,
and of course, it is moving internationally--is law enforcement
gets information from the victim, usually a big business, and
they get that information to us. We work with our partner FIUs
around the world to get that money either refused, turned
around, or arrested before the bad guy actually gets his hands
on it. In the last 18 months, I believe we have recovered
around $186 million on behalf of U.S. businesses. And it is a
program that, unfortunately, I think is going to keep
increasing.
Mr. Lynch. Mr. McDonald, do you have anything to add?
Mr. McDonald. No, not on this topic.
Mr. Lynch. Okay. This was all done via SWIFT, which is a
huge problem for us. You mentioned the recovery that we have
had on behalf of U.S. businesses. Was that with international
partners where SWIFT would be involved, or are those internal
within the United States where SWIFT would not be involved?
Ms. Calvery. It was with international partners where wire
transfers would have gone, yes, internationally.
Mr. Lynch. Okay. All right. Thank you.
I yield back.
Chairman Fitzpatrick. I recognize the vice chairman, Mr.
Pittenger, for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
Sometime back, we had a briefing with the four major banks,
who came to discuss their role in our combined efforts. And in
that discussion, of course, these 4 banks receive 90 percent of
the foreign funds that come into our country, and they shared
with us the problems that they have under 314(b) in sharing
information with each other but also in 314 in receiving
information from the government.
And one thought that came out at that time was establishing
some type of nonprofit which could be in receipt of data. I am
aware that in Pittsburgh, Carnegie Mellon, the government, and
the financial institutions have joined together, and there is a
501(c)(3) that has been established. Do you envision something
like that for cyber? That is for cybercrimes. Do you envision
that something like that could be established?
Ms. Calvery. I am familiar with the outfit in Pittsburgh,
and I have certainly been involved in many of these discussions
with our big four financial institutions as we and others have
been exploring ideas of how best to share information and what
we might want to try to set up. I think the thinking--we will
see--but my sense is that the thinking has evolved a bit away
from this idea of establishing a nonprofit. As some of these
institutions are trying out different mechanisms for sharing
information with one another under 314(b) and 314(a), they are
kind of learning by doing in terms of, what are going to be the
most effective ways to share information?
And we at FinCEN are supporting them. We have had a number
of meetings and discussions about it, and we have been very
open to issuing guidance or administrative rulings on any
questions that industry might have.
Mr. Pittenger. Clearly, we need to modify 314 in terms of
the safe harbor rules, because they feel the impediments there
in terms of receiving data from the government that they feel
like is important for them.
Regarding FATF, do you envision that the TTUs could be or
should be incorporated as the recommendations with FATF?
Ms. Calvery. Wow. I haven't been privy to much of this
discussion of whether TTUs are going to be incorporated into
FATF, so I just don't know the answer to that question.
Mr. Pittenger. From your experience of 20 years, do you
feel like that is a valid option that we should be looking at?
Ms. Calvery. I think it is worth continuing to explore
information sharing in all its forms. I do know the FATF is
very focused on that. They are interested not just in how our
FIU is sharing with one another, but how also is law
enforcement doing that? And I would put it under that kind of
rubric. So I wouldn't be surprised, with some of the efforts
that they have ongoing to look at that issue, whether TTU isn't
a part of it or whether it couldn't be a part of it.
Mr. Pittenger. Ms. Shasky Calvery, how many members are
there in Egmont?
Ms. Calvery. I believe it is 151.
Mr. Pittenger. 151.
And, Mr. McDonald, the OTAs, how many countries do we serve
or work with?
Mr. McDonald. In the economic crimes area, we work in 15
countries.
Mr. Pittenger. Fifteen countries?
Mr. McDonald. Fifteen, one-five.
Mr. Pittenger. One-five. What do you say would be the ideal
number to get a complete--the best communication, establish
relationships, the best collaboration, the best impact? What
number would you like to see our working relationship with in
terms of countries?
Mr. McDonald. We did an exercise along those lines
internally once, and we kind of thought, setting aside all
financial considerations, what would be our dream--
Mr. Pittenger. Yes, sir, that is what I want to hear.
Mr. McDonald. --footprint for the whole program. And we are
at, overall, about 50 countries for the whole program, 15 in
the economic crimes area. Ultimately, we did not come down to a
specific number. And the reason is it really doesn't matter if
you are not in a country that is determined to use your
assistance well. And it is very difficult to know that ahead of
time. We do our best to do good assessments.
I would say, look, if I had to pull a number out of my back
pocket here, we certainly see an increasing number of demands,
requests for our technical assistance on AML/CFT matters,
whether it is because Central American or other countries know
that criminality in their own countries is a great threat to
them, and so they want to do more to reduce the financing of
that, or because they see banks picking up and decamping. So we
have their attention.
Mr. Pittenger. Excuse me. How many cooperating countries
would you say that there are out there? You stated that,
clearly, there are those who would be difficult and a challenge
to work with. But what is the universe of those whom you
believe would be willing to cooperate with us?
Mr. McDonald. I could easily see us working with 20 to 25
countries in the AML/CFT area. But that is based on what we
know now about emerging needs.
Mr. Pittenger. What is the distinction, please clarify for
me, Ms. Shasky Calvery and Mr. McDonald, the 150 members, FIUs,
members of Egmont, and the more limited numbers of countries
that are engaged with us with OTA?
Mr. McDonald. Well, OTA--Egmont includes member countries
from the entire globe.
Mr. Pittenger. I understand.
Mr. McDonald. We are authorized by statute to work in
developing countries and transitional countries. The
``transitional country'' term goes back to when we were
created, the former Soviet Union, and so on transitioning. So
we are only a subset of the total membership potential of
Egmont.
Mr. Pittenger. I got that. Would you say that your major
impediment then is financing? Is it resources on your part? Is
it talented people that we could send in, attaches?
Mr. McDonald. We would definitely benefit from additional
resources in terms of financing to support our technical
advisory work in terms of attache presence. But I would also--
so the answer to that is yes; that is an impediment that we
would benefit from more resources. But we have to be judicious
in how we use those resources and to focus it on those
countries where we think we are going to be able to get
something done.
Mr. Pittenger. You mentioned one cooperating country, that
they had a computer and a chair in a room. That was--
Mr. McDonald. Liberia.
Mr. Pittenger. How do we support them financially? What are
the entities that would participate? Is it us or our State
Department, the World Bank, IMF?
Mr. McDonald. In a place like Liberia, where there is
pretty much everything to be done, we would focus our efforts
on just getting the financial intelligence unit functioning in
a basic way. We would reach out to the World Bank, possibly
USAID, to see if they could finance the acquisition of basic
information technology, basic stuff that would allow banks to
report suspicious transactions electronically rather than on
written pieces of paper. We might reach out to other bilateral
providers--the U.K. is active in this area--to see if they
could complement our work. So, in a country like Liberia, where
there is everything to be done, we would be reaching out to a
number of different parties.
Mr. Pittenger. Thank you.
I appreciate both of you.
Ms. Shasky Calvery, I look forward to continued dialogue
with you in the private sector.
Ms. Calvery. Thank you.
Mr. Pittenger. And, Mr. McDonald, in your position now, I
look forward to more dialogue. Thank you.
Mr. McDonald. Thank you very much.
Chairman Fitzpatrick. I would like to thank our witnesses
again for their time and their testimony to the task force here
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 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
With that, the task force is adjourned.
[Whereupon, at 12:14 p.m., the hearing was adjourned.]
A P P E N D I X
May 24, 2016
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