[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE NEXT TERRORIST FINANCIERS:
STOPPING THEM BEFORE THEY START
=======================================================================
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
__________
JUNE 23, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-94
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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
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Page
Hearing held on:
June 23, 2016................................................ 1
Appendix:
June 23, 2016................................................ 41
WITNESSES
Thursday, June 23, 2016
Cassara, John A., former U.S. Intelligence Officer and Treasury
Special Agent.................................................. 9
Farah, Douglas, President, IBI Consultants LLC; and Senior Non-
Resident Associate, Americas Program, Center for Strategic and
International Studies.......................................... 13
Gurule, Hon. Jimmy, Law Professor, University of Notre Dame Law
School......................................................... 7
Realuyo, Celina B., Professor of Practice, William J. Perry
Center for Hemispheric Defense Studies, National Defense
University..................................................... 11
Zarate, Juan C., Chairman and Co-Founder, Financial Integrity
Network; and Chairman and Senior Counselor, Center on Sanctions
and Illicit Finance, Foundation for Defense of Democracies..... 5
APPENDIX
Prepared statements:
Cassara, John A.............................................. 42
Farah, Douglas............................................... 52
Gurule, Hon. Jimmy........................................... 62
Realuyo, Celina B............................................ 71
Zarate, Juan C............................................... 87
THE NEXT TERRORIST FINANCIERS:
STOPPING THEM BEFORE THEY START
----------
Thursday, June 23, 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 10:13 a.m., in
room 2128, Rayburn House Office Building, Hon. Michael
Fitzpatrick [chairman of the task force] presiding.
Members present: Representatives Fitzpatrick, Pittenger,
Ross, Barr, Rothfus, Poliquin, Hill; Lynch, Foster, and Sinema.
Also present: Representatives Garrett and Carney.
Chairman Fitzpatrick. The Task Force to Investigate
Terrorism Financing will come to order.
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 purpose of questioning the witnesses.
The Chair now recognizes himself for 4 minutes for an
opening statement.
Thank you, everyone, for joining us today for the eleventh
and final hearing of the House Financial Services Committee's
Task Force to Investigate Terrorism Financing. Today's hearing
is entitled, ``The Next Terrorist Financiers: Stopping Them
Before They Start.''
I would like to again thank Chairman Hensarling and Ranking
Member Waters, as well as my colleagues here, for their
unwavering support as we have investigated the threat of terror
finance. I would also like to take a moment to thank Liana
Rosen and Martin Weiss of the Congressional Research Service
for the invaluable assistance that they have provided to this
body.
On June 12, 2016, we watched in horror as a lone terrorist
pledging allegiance to ISIS carried out the Nation's worst
terror attack since 9/11. As we continue to grieve and pray for
those devastated by this attack, we must redouble our efforts
to be clear in our resolve to protect our Nation and her
citizens from radical Islamic terrorism that continues to
target us. Our efforts to combat this radicalism must be
carried out on multiple fronts through diplomatic action,
military force, and countering the finances used to carry out
these attacks.
As chairman of this Task Force to Investigate Terrorism
Financing, I have joined with Ranking Member Lynch, Vice Chair
Pittenger, and this dedicated bipartisan body to investigate
and evaluate the efforts made by the United States to counter
and dismantle the financial networks funding these terrorist
organizations.
Our investigation has covered a range of topics, including
the vulnerabilities of the global financial system, trade-based
money laundering, the importance of assisting the developing
world, and the sale and trafficking of illicit goods. During
this time, it has become evident the United States must be able
to work freely with its international partners and seamlessly
adapt to evolving money laundering and terror financing
tactics.
For this reason, the task force will be proposing a series
of bills which aim to improve communication and coordination
amongst various government agencies, allow for increased
information sharing, and ensure the Treasury is properly
supported and recognized for its role in our Nation's national
security strategy. These bills, coupled with the report
containing the task force's findings, will provide a clear
blueprint for the United States so it may continue to evolve
and improve in its fight to ensure terror groups are unable to
financially support their operations.
Today, for the eleventh and final hearing of this task
force, we will recap what we have learned with these five
expert witnesses who have previously lent their voices to this
discussion in past hearings. Together, we will discuss the
necessary changes Congress must consider to better enable U.S.
agencies in our fight.
At this time, I would like to recognize a member of the
bipartisan task force, Ms. Sinema of Arizona, our colleague,
who has been a valuable asset and trusted friend during the
course of these hearings, for an opening statement.
Ms. Sinema. Thank you, Chairman Fitzpatrick.
Over the course of the past 10 hearings, this task force
has found that U.S. Government efforts to counter the financing
of terrorism lack sufficient coordination, and that the United
States has no unified national strategy to guide our
counterfinancing efforts. We need a whole of government CTF
strategy that enhances detection, deterrence, and prosecution,
and ultimately furthers our broader national security goals.
I appreciate the witnesses' testimony in past hearings, and
agree that the Federal Government must change its approach and
mindset to counter the financing of terrorism. I look forward
to hearing more from our witnesses today about ways to improve
the effectiveness of our counterterrorism financing efforts and
to better align these efforts with our broader national
interests.
Thank you to Chairman Fitzpatrick and Ranking Member Lynch
for their leadership on this task force. I look forward to
continuing our work with colleagues on both sides of the aisle
to keep money out of terrorists' hands and build on our
progress to strengthen America's security.
I yield back.
Chairman Fitzpatrick. At this time, I would like to
recognize the vice chairman of the task force, Mr. Robert
Pittenger of North Carolina, who was one of the first Members
of the House to bring ideas on CTF and on money laundering
proposals to the full House Financial Services Committee. I
recognize Mr. Pittenger for an opening statement.
Mr. Pittenger. Thank you, Mr. Chairman. I deeply appreciate
your great leadership on this important task force. And Mr.
Pinder, thank you for your supportive role in all that we do.
And thank you, distinguished panelists, for the critical
role that you play with us--for some of you, this will be your
second or third time to be with us--and the counsel that you
provide to us. We recognize better the importance of terrorism
financing. This is an important tool for us to be able to
defeat the Islamic terrorists.
This week, I just returned from a forum with over 100
members of Parliament and other government officials from 30
countries. As we seek to collaborate with them on issues of
terrorism financing and intelligence and cybersecurity matters,
the one thing that I have observed is that our partners around
the world generally seek to work with us, but they don't have
the tools. They don't have the understanding. And they need the
resources that must be provided. So the input that you provide
this task force has really been critical.
So I welcome your input today and your advice, and frankly,
the experience that you have had, observations, even since the
last time we met. So thank you for being with us. We look
forward to our further dialogue.
I yield back.
Chairman Fitzpatrick. We now welcome our witnesses.
Mr. Juan Zarate is chairman and senior counselor at the
Center on Sanctions and Illicit Finance at the Foundation for
Defense of Democracies. Mr. Zarate served as the Deputy
Assistant to the President and the Deputy National Security
Adviser for Combating Terrorism from 2005 until 2009, and was
responsible for developing and implementing all aspects of the
U.S. Government's counterterrorism strategy. Mr. Zarate was the
first ever Assistant Secretary of the Treasury for Terrorist
Financing and Financial Crimes. He is also a former Federal
prosecutor who served on terrorism prosecution teams prior to
9/11, including the investigation of the USS Cole attack in
Yemen.
Mr. Zarate is a graduate of Harvard College and Harvard Law
School, and is a former Rotary International Fellow at the
University of Salamanca in Spain. Mr. Zarate testified before
the task force's April 22, 2015, hearing entitled, ``A Survey
of Global Terrorism and Terrorist Financing.''
The Honorable Jimmy Gurule is a law professor at Notre Dame
Law School. Mr. Gurule joined the Notre Dame Law School faculty
in 1989, and became a full professor in 1996. The professor has
also worked in a variety of high-profile public law enforcement
positions, including Under Secretary for Enforcement at the
U.S. Department of the Treasury from 2001 until 2003; Assistant
Attorney General for the Office of Justice Programs at DOJ from
1990 until 1992; and Assistant U.S. Attorney, where he served
as Deputy Chief of the major narcotics section of the Los
Angeles U.S. Attorney's Office from 1985 to 1989.
He earned his bachelor's degree from the University of Utah
in 1974, and his juris doctorate from the University of Utah
College of Law in 1980.
Mr. John Cassara is a former United States Intelligence
Officer and Treasury Special Agent. He has over 26 years of
experience in the Federal Government intelligence and law
enforcement communities. An expert in anti-money laundering and
terror financing, Mr. Cassara invented the concept of
international trade transparency units, and recently released a
book on the topic this past fall entitled, ``Trade-Based Money
Laundering: The Next Frontier in International Money Laundering
Enforcement.'' He has lectured around the world on a variety of
transnational crime issues, and is currently an industry
adviser.
Mr. Cassara holds a master's degree in international
management from the American Graduate School of International
Management in Phoenix, Arizona. He graduated magna cum laude
from the University of California San Diego, with a bachelor's
degree in political science.
Professor Celina Realuyo is a professor of practice at the
William J. Perry Center for Hemispheric Studies at the National
Defense University. Prior to joining the National Defense
University in 2007, Ms. Realuyo served as the State Department
Director of Counterterrorism Finance Programs in the U.S.
Secretary of State's Office of the Coordinator for
Counterterrorism. She has also cochaired the terror financing
work group. Professor Realuyo has previously been a private
banker in London with Goldman Sachs International, and also
previously had a distinguished career as a United States
foreign service officer.
She holds an MBA from the Harvard Business School, an M.A.
from Johns Hopkins University School of Advanced International
Studies, and a bachelor's degree from the Georgetown University
School of Foreign Service.
Mr. Douglas Farah is president of IBI Consultants LLC, and
is also a senior non-resident associate for the Americas
Program at the Center for Strategic and International Studies.
From 1985 to 2005, Mr. Farah worked as a journalist, primarily
as a foreign correspondent and investigative reporter for The
Washington Post. Since leaving the Post in 2004, Mr. Farah has
worked as a consultant to the United States Government on
national intelligence reform, nonstate armed actors, critical
infrastructure protection, criminal terrorist pipelines, bulk
cash smuggling to Mexico, as well as other topics. He is also
the author of two books, and he appears regularly in a national
and international medium, and has been published in more than a
dozen journals and magazines.
Mr. Farah graduated from the American Cooperative School in
La Paz, Bolivia. He also received a bachelor's degree with
highest honors from the William Allen White School of
Journalism at the University of Kansas, with a bachelor's in
honors in Latin American studies from the University of Kansas.
The witnesses will now be recognized for 5 minutes each to
give an oral presentation of their written 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 are three lights, which
you are familiar with. Yellow means you have 1 minute
remaining. Red means your time is up.
At this point, Mr. Zarate, you are now recognized for 5
minutes.
STATEMENT OF JUAN C. ZARATE, CHAIRMAN AND CO-FOUNDER, FINANCIAL
INTEGRITY NETWORK; AND CHAIRMAN AND SENIOR COUNSELOR, CENTER ON
SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE OF
DEMOCRACIES
Mr. Zarate. Mr. Chairman, thank you for that kind
introduction. Ranking Member Lynch, Vice Chairman Pittenger,
distinguished members of this task force, I am honored to be
before you yet again to testify on the evolving threats and
issues tied to terrorist financing and illicit financing. I am
especially honored to be with this panel, all of whom I
consider friends and from whom I have learned quite a bit
throughout their careers.
Let me begin by commending this task force for not only
your diligence but your bipartisan efforts to focus on these
issues. Over a year ago, when many thought that this issue did
not have relevance, I think much has happened over the last
year to not only prove the relevance of this task force but the
importance of your work. And I want to thank your committee
staff, including Joe Pinder, for his continued efforts over the
course of many years in this regard.
But there have been many things that have happened since we
last met. Terrorist organizations and criminal networks have
continued to leverage local and regional economies and the
global commercial system to profit and evade scrutiny. Growing
regional and proxy battles in the Middle East, South Asia, and
Africa have increased the risk that terrorist and militant
groups are taking advantage of crises to create for-profit
militancy and networks. Terrorist infiltration and control of
urban environments in places like Mosul, Sirte, and Raqqa have
complicated how the U.S. Government and our allies attempt to
disrupt terrorist financing, putting a premium on dislodging
terrorist organizations physically from key sites and
resources.
The application of U.S. law and pressure from targeted
sanctions to exclude Hezbollah from the Lebanese financial
system has created enormous pressure in Lebanon, with Hezbollah
leadership speaking out against the closing of Hezbollah-
related bank accounts and a bomb exploding just recently in
front of Blom Bank in Beirut.
The Panama Papers and tax-related leaks have raised
important questions about the limits of financial transparency
and accountability, and whether the current anti-money
laundering system globally is effective. Complications and
burdens on the legitimate financial community in the
application of sanctions and financial crime risk management
have continued to abut against the public policy needs for
financial inclusion.
New technologies enabling the digital economy are providing
not only enormous opportunities for innovation and access, but
illicit actors are also finding ways to leverage tools like
digital currency to create illicit bazaars via the Internet and
access capital without scrutiny, as we saw in the Silk Road and
Liberty Reserve cases. And continued and significant cyber
attacks by state and nonstate actors on the financial sector
have demonstrated yet again that the financial system remains
at the heart of the cyber storm.
These are just a few of the examples and recent
developments that continue to illuminate and complicate the
terrorist and illicit financial landscape. Billions of dollars
in illicit trade and money laundering continue to reach the
hands of criminals and illicit actors, despite best efforts.
More needs to be done. And I know this task force has done
quite a bit of work, but let me suggest seven categories of
work to focus on.
First, we need to continue to sharpen the tools that we use
in our toolkit. The playbook that we have used since 9/11 must
remain strategic, its implementation focused on effectiveness.
And it must be reinforced with a strengthened and committed
international system devoted to the protection of the
international financial system and our collective security.
Two, the United States must find strategic ways of using
targeted unwinding of sanctions to our strategic benefit. We
are seeing the challenges of this now with Iran, Cuba, and even
Burma. The United States should ensure that it is using its
power of unwinding the way that we use the power of targeted
sanctions to full effect.
Three, we must have a more aggressive information-sharing
system between public and private authorities, within sectors,
and across borders. We are working on a 20th Century model that
is crashing up against the 21st Century economy and
expectations. We need to think differently about how
information is shared, analyzed, and used to protect the
financial system.
Fourth, we have to balance financial exclusion and
inclusion by finding ways of sharing the risk. The twin goals
of financial integrity and inclusion can be met with some
creative collaboration.
Fifth, we must focus on the effectiveness of the AML/CFT
and sanction system. And we should not be shy about leading the
world in its enforcement and in judging the world in terms of
effectiveness.
Sixth, we must realize and address the convergence of cyber
and financial warfare. As I said, the financial community is
now at the center of the cyber storm, and the recent bank heist
involving the SWIFT network was a wake-up call for the attack
on the trust and integrity of that system. There needs to be a
more aggressive approach to private sector defense of its
systems and public-private collaboration to defend critical
financial systems.
And finally, we need the resources to be able to regulate
and enforce. This means resources not just for Treasury, OFAC,
and FinCEN, the usual bodies, but also the IRS, CID, and others
that are forced and need to enforce these laws and regulations.
Finally, Mr. Chairman, these are tools and strategies that
need to be embedded in a broader strategy of national and
economic security. And this is not just confined to the quiver
of economic sanctions or targeted financial measures. This has
to include the development of strategies of financial inclusion
that use elements of U.S. economic influence, private
investment to benefit good behavior and to promote what our
allies are trying to do around the world. It also involves
developing defensive economic strategies with our allies to
counter the potential economic influence and pressure that
countries like Russia and China are already wielding.
In the 21st Century, Mr. Chairman, economic security
underpins the Nation's ability to project its power and
influence. And the power to affect the budgets of America's
enemies is an enormous power that needs to be tended carefully
and wielded wisely. And America's enemies, especially nimble
terrorist organizations that often blend with criminality, will
continue to find ways to work around the international pressure
and strictures put upon them.
This is why the campaign against terrorist financing is not
a static venture, but instead, an ongoing and critical part of
the challenging terrorist and international security landscape.
The U.S. Government must continue to innovate and find new ways
and partners to make it harder, costlier, and riskier for
terrorist groups around the world to raise and move money.
Mr. Chairman, thank you again for the privilege of
testifying today. I would be happy to answer any questions you
or your colleagues may have.
[The prepared statement of Mr. Zarate can be found on page
87 of the appendix.]
Chairman Fitzpatrick. Thank you.
Professor Gurule, you are recognized for 5 minutes.
STATEMENT OF THE HONORABLE JIMMY GURULE, LAW PROFESSOR,
UNIVERSITY OF NOTRE DAME LAW SCHOOL
Mr. Gurule. Chairman Fitzpatrick, Ranking Member Lynch,
Vice Chairman Pittenger, and other distinguished members of the
Task Force to Investigate Terrorism Financing, permit me to
begin by thanking you for inviting me to testify on the
important and timely topic of, ``The Next Terrorist Financier:
Stopping Them Before They Start.''
As we approach the 15-year anniversary of the 9/11
terrorist attacks that tragically took the lives of
approximately 3,000 innocent civilians, it is imperative that
the U.S. Government continue to evaluate and enhance the
effectiveness of such counterterrorism measures as curtailing
terror financing in order to protect national security and save
innocent lives. To that end, I would like to propose four
recommendations to the task force and the broader committee to
strengthen the U.S. Government's counterterrorist financing
efforts.
The first recommendation deals with economic sanctions.
Shortly after the 9/11 terror attacks, President George W. Bush
signed Executive Order 13224. It authorizes the President as
delegated to the Secretary of the Treasury to designate
individuals and entities as specially designated global
terrorists (SDGT's). That designation has important legal
implications.
First, any assets located in the United States of such
individuals and entities have to be frozen. Second, U.S.
persons are prohibited from doing business with the SDGTs, the
specially designated global terrorists.
Initially, the executive order designated 12 individuals
and 15 entities as SDGTs. At present, there are now over 1,000
such individuals, such SDGTs. And while the executive order has
been an effective tool in curtailing the funding to Al Qaeda,
which relies largely on support from external donors and
corrupt charities sympathetic to their cause, it has been less
effective with respect to the Islamic State.
The Islamic State poses a different terrorist financing
challenge. It obtains its money primarily from external
sources, including the sale of oil and gas, extortion and
taxation, kidnapping for ransom, looting banks, selling stolen
equities, and human trafficking--selling young girls and women
as sex slaves. The Islamic State's annual budget has been
estimated to be as high as $2 billion.
The reason why the executive order again has been less
effective with respect to the Islamic State is that the
individuals who have been targeted under the executive order,
members of the Islamic State, senior leaders of the Islamic
State, do not have resources in the United States. They don't
have assets in the United States to be blocked. Furthermore,
there is no evidence that U.S. persons are doing business with
such individuals.
I don't want to diminish the importance of being designated
under the executive order, but in large part it becomes more
symbolic in kind of highlighting and identifying these
individuals as bad actors than actually curtailing the funding
of the Islamic State. And so what I propose, in addition--not
in place of but in addition to--would be that Congress pursue a
model similar to that which has been used against Iran, and
which is focused not only on primary sanctions but secondary
sanctions.
Primary sanctions prohibit U.S. persons from doing business
with the target. Secondary sanctions prohibit foreign persons
and foreign entities from doing business with the entity. And I
think we need a sanction regime that is similar to the
Comprehensive Iran Sanctions and Accountability and Divestment
Act of 2010, which does exactly that: prohibits foreign
businesses from contributing to the energy sector of Iran. And
we need something similar for the Islamic State.
My second recommendation deals with the criminal
enforcement and, specifically, the material support statute. I
think the Department of Justice has a very checkered record of
prosecuting major, underscoring major, terrorist financiers. I
think to that end the efforts could be enhanced if Congress
amended the terrorist financing statute 18 U.S.C. 2339C to
lower the scienter threshold from requiring the government to
prove that the defendant knowing and with the intent--or
intended the funds to be used to finance violent crimes.
Instead, it seems to me that it should be a crime if an
individual donates to, let's say, a lone wolf terrorist knowing
that individual is engaged in terrorist acts or intends to
engage in terrorist acts. That type of conduct should be
prohibited under the statute, and currently it is not.
My third recommendation deals with the Justice Against
Sponsors of Terrorism Act (JASTA). On May 17, 2016, the U.S.
Senate unanimously passed JASTA. I think that it plays an
important role. Civil actions play an important role with
respect to deterring terrorist behavior and going after the
funding of terrorism. I think it is important that any state
that sponsors acts of terrorism on U.S. soil should be held
accountable. And the Act seeks to accomplish that objective.
And then lastly, my fourth recommendation deals with the
development of a national counterterrorist financing strategy
to effectively go after the money of Al Qaeda, the Islamic
State, and the next major terrorist organizations. It is
imperative that the United States develop a comprehensive,
coordinated counterterrorist financing strategy. Unfortunately,
no such strategy exists today.
The counterterrorist financing strategy needs to be
adaptive. It needs to anticipate different methods of raising
money and moving money globally. It needs to be, again,
proactive on the front end, not simply reacting to the crisis
of the day.
So with that, thank you very much, and I look forward to
answering questions during the question-and-answer session.
Thank you.
[The prepared statement of Mr. Gurule can be found on page
62 of the appendix.]
Chairman Fitzpatrick. Thank you, Professor.
Mr. Cassara, you are recognized for 5 minutes.
STATEMENT OF JOHN A. CASSARA, FORMER U.S. INTELLIGENCE OFFICER
AND TREASURY SPECIAL AGENT
Mr. Cassara. Chairman Fitzpatrick, Ranking Member Lynch,
Vice Chairman Pittenger, and members of the task force, thank
you for the opportunity to testify today. It is an honor for me
to be here and, in particular, to be included on this panel
with friends and such distinguished colleagues.
In 2008, I wrote an essay published by the Department of
State entitled, ``Mobile Payments--A Growing Threat.'' Eight
years later, that threat has materialized. The growth of access
to cellular devices is breathtaking. In 1990, there were
approximately 11 million mobile phones worldwide. In 2016, the
number of mobile lines and service has surpassed global
population. There are now approximately 410 million mobile
money accounts in the world, with approximately 270 mobile
money services operating in 93 countries. More than 1 billion
mobile money transactions were processed in December 2015. We
should cheer these developments.
The G20 included financial inclusion on its priority agenda
to help over 2 billion adults around the world who have limited
access to financial institutions. I know many task force
members have traveled extensively in the developing world.
Undoubtedly, you have observed how easy access to M-payments
via the ubiquitous cell phone is transforming lives by
providing a much-needed link to financial services at a very
reasonable price.
Users are not required to have a bank account or a credit
card. Countries without modern financial infrastructures are
able to leapfrog directly into cutting edge networks. M-
payments allow the purchase of products and services. Salaries
and government benefits can be credited to cellular devices. M-
payments have empowered small business creation, and
remittances from migrant workers are sent home via the use of
cell phones.
However, this wonderful development is going to have some
very dangerous side effects. I would like to explain how M-
payments are used in the three stages of money laundering.
The first stage is placement of illicit cash into financial
institutions. One of the most prevalent techniques is
structuring or smurfing. For example, a professional money
launderer takes a large amount of drug dollars and divides it
into small amounts. He gives the small sums to runners or
smurfs to deposit. The transactions are done in ways that
attempt to avoid mandated financial transparency reporting
requirements.
M-payments offer criminals a new way to place the proceeds
of crime. For example, runners are recruited and given proceeds
of criminal activity or even charitable or terror finance
contributions. They are given instructions to go to M-payment
establishments and use the illicit funds to load up their cell
phones with e-value under the maximum threshold level. The
runners are then directed to forward the mobile money credit to
master accounts controlled by the money launderer. This
technique has been called digital smurfing.
The next objective is to layer the dirty money by multiple
transfers, thereby confusing the paper trail and adding
multiple levels of venue and jurisdiction. With M-payments,
layering will be taken to new levels. In most jurisdictions,
mobile value can be transferred from person to person and
account to account, and then directed to a financial
institution or money service business either in the host
country or perhaps sent to another country or even an offshore
haven. Mobile value could even be credited to an online account
or perhaps used to purchase virtual currencies in cyberspace.
Informal value transfer systems such as hawala can also be
added to the equation.
Finally, a criminal organization uses the place and layered
funds to integrate them into the economy by purchasing, say,
for example, property, equities, and commercial enterprises.
For example, the daughter of one of the worst kleptocrats in
Africa has invested in cell phone carriers and M-payment
providers in multiple countries.
While there are currently few documented cases of money
laundering and terror finance related to M-payments, in large
part this is because the countries where M-payments are present
and our terrorist adversaries operate, have few, if any, anti-
money laundering or terrorist-financed prosecutions and
convictions. I believe we should move quickly to engineer new
forms of data collection and analytic tools into M-payment
systems, and put in place effective regulatory and enforcement
countermeasures. Please see my written testimony for more
details, including recommendations.
Thank you again for the honor of being here. I look forward
to answering any questions you may have.
[The prepared statement of Mr. Cassara can be found on page
42 of the appendix.]
Chairman Fitzpatrick. Thank you.
Professor Realuyo, you are now recognized.
STATEMENT OF CELINA B. REALUYO, PROFESSOR OF PRACTICE, WILLIAM
J. PERRY CENTER FOR HEMISPHERIC DEFENSE STUDIES, NATIONAL
DEFENSE UNIVERSITY
Ms. Realuyo. Thank you, Chairman Fitzpatrick, Vice Chairman
Pittenger, Ranking Member Lynch, and task force members, for
the opportunity to appear before you again today to discuss
improving efforts to combat terrorist financing through more
public-private partnerships. I am honored to be here alongside
those of us who started the financial front of the war on
terror in the wake of 9/11.
Today, we face a broad spectrum of threats such as global
terrorism, transnational organized crime, and cyber attacks
that requires a multidisciplinary approach to comprehend and
counter. The convergence of terrorism and crimes threaten state
sovereignty and our economy. Governments can no longer
guarantee the security, prosperity, and rule of law that their
people expect. Average citizens who see something and say
something are often the first to identify threats. They know
their industries and their communities best. Therefore,
governments need to actively engage the public to detect,
dismantle, and deter illicit actors. By fostering robust
public-private partnerships, together we can better counter
terrorism and crime at home and abroad.
This is particularly true for threat financing, since
funding is the most critical of enablers for terrorism, crime,
and corruption. We have witnessed how financial intelligence,
economic targeting, and sanctions have helped us to counter
threats around the world since 9/11. This is the case of our
current campaign against ISIL, where we see momentum on both
the financial and military fronts in Iraq and Syria.
Since I last appeared before this committee in May 2015,
following the money trail has been instrumental in degrading
ISIL's ability to generate revenue and fund its criminalized
caliphates. Defense Secretary Ash Carter, as recently as Monday
here in Washington, said, ``We have seen results in targeting
ISIL's leaders and finances through Operation Inherent Resolve.
Our attacks on its economic infrastructure, from its oil wells
to its stashes of cash, are putting a stranglehold on the
group.''
As we speak here today, ISIL is on its heels in Iraq and
Syria, as Iraqi forces have just begun to liberate Fallujah and
prepare to move on Mosul. But ISIL, unfortunately, is proving
to be a very adaptive adversary. Terrorism expert Jean-Charles
Brisard said that despite constant coalition air strikes, ISIL
still has a $2 billion empire. As oil revenues have decreased
by 30 percent, it is more reliant on taxation in the
territories that it still occupies. Therefore, reestablishing
control of those territories is paramount to defeating ISIL
militarily, financially, as well as psychologically.
ISIL has expanded its reach beyond Iraq and Syria, as we
have seen with the tragic attacks in Paris and Brussels. It is
present in 19 countries, including a new caliphate in Libya.
And ISIL's influence has reached our own shores. FBI Director
Comey says that upwards of 200 Americans have traveled or tried
to fight for ISIL. And the FBI has some 1,000 ISIL-related
cases open nationwide. It has inspired homegrown terrorists
like those responsible for the deadly attacks in San Bernadino
and Orlando.
For the FBI and joint terrorism task forces that I train on
terrorist financing, financial forensics are a critical
component of all of their investigations. While these latest
attacks don't cost very much money, the public can assist law
enforcement in identifying suspicious activities before
terrorist attacks occur rather than afterwards.
Since the 1970s, the U.S. Government has worked with the
private sector to pursue financial crimes, like tax evasion and
money laundering. Since 9/11, we have seen constructive public-
private partnerships. The financial intelligence and
information-sharing working group imparts case studies and red
flags for financial crimes. Similarly, the Financial Services
Information Sharing and Analysis Center disseminates timely
physical and cyber threats to alert its members, reflecting the
changing nature of the domain that is cyber.
Over the past decade, we have definitely increased our
ability to detect terrorist financing, levied effective
economic sanctions against both state actors as well as
terrorist groups, and raised awareness on how our evolving
financial system can be exploited to fund terrorism and crime.
But we could do more to thwart future terrorist financiers with
the following five measures that I propose.
Number one, integrate the financial instrument of national
power more deliberately into U.S. strategies to counter
emerging threats. Number two, strengthen domestic and
international financial intelligence and information-sharing
mechanisms to counter threat financing. Number three, dedicate
more human financial and technological resources to those
responsible for pursuing terrorist financing across the U.S.
Government. Number four, research the drivers of the illicit
economy and anticipate how new financial innovations could be
used by future terrorist financiers. And lastly, empower the
public and private sector, and more importantly, individuals,
to actively detect and support our counterterrorism financing
operations.
In a chapter that will be coming out in a book that we are
publishing called, ``Beyond Convergence,'' next month, I write
about something called C3 through P3, and it is that we need to
communicate, cooperate, and collaborate through public-private
partnerships to counter the complexity of threats and safeguard
our national security, whether it is talking about terrorist
financing, countering violent extremism, or the new threats
that we face in the cyber domain.
Thank you, Mr. Chairman and task force members, for your
time and attention, but more importantly, for highlighting the
importance of the financial instrument of national power that
those of us on this panel have been advocating for the last 15
years. And I look forward to your questions.
[The prepared statement of Ms. Realuyo can be found on page
71 of the appendix.]
Chairman Fitzpatrick. Thank you very much, Professor.
And Mr. Farah, you are now recognized for 5 minutes.
STATEMENT OF DOUGLAS FARAH, PRESIDENT, IBI CONSULTANTS LLC; AND
SENIOR NON-RESIDENT ASSOCIATE, AMERICAS PROGRAM, CENTER FOR
STRATEGIC AND INTERNATIONAL STUDIES
Mr. Farah. Chairman Fitzpatrick, Ranking Member Lynch, and
members of the task force, thank you for the opportunity to
testify on this important issue of the changing nature of
terrorist financing. I speak only for IBI Consultants and
myself at this hearing.
I would like to address three main issues today: the
emergence of criminalized states; the use of commodities,
particularly gold, in the terrorist and criminal financial
structures; and the use of offshore havens.
In my 3 decades of focusing on transnational organized
crime and illicit money flows, I have found that there is
really very little new under the sun. What has changed in
recent years is the volume of the streams of illicit money
flows in which terrorists and allied transnational criminal
organizations can hide their money movements. I believe the
emergence of criminalized states in Latin America, Africa, and
the former Soviet Union, meaning states where the senior
leadership is involved on behalf of the state in transnational
organized criminal activity, is a primary factor. The fact that
these illicit flows are now embedded within state structures is
a key factor in making it difficult to halt such financial
flows.
In the Western Hemisphere, it is the involvement of
numerous states led by Venezuela in an ongoing criminal
enterprise that makes disrupting and dismantling financial
networks so difficult. The government of Nicolas Maduro, along
with the governments of Evo Morales in Bolivia, Rafael Correa
in Ecuador, Daniel Ortega in Nicaragua, and Salvador Sanchez
Ceren in El Salvador, grouped under the umbrella of the
Bolivarian Alliance for the Peoples of Our America, or ALBA,
has actively helped the FARC, Hezbollah, Spanish ETA
separatists and other designated terrorists and criminal
organizations develop a significant presence not only in Latin
America but across the world.
In each of the ALBA nations, as detailed in my written
testimony, the leaders control hundreds of millions of dollars
that do not pass through the national budget or any other
accounting mechanism, and serve essentially as slush funds for
the ALBA leadership and their allies in transnational organized
crime and, potentially, terrorists.
Within the context of these vast, economically irrational
money flows already moving through criminalized states, the
growing amount of unusual mining and exporting of minerals,
particularly gold in Latin America, must be viewed with
concern. The relatively high price of gold, coupled with the
ease of movement, placement, and sale, and the striking lack of
control over the movement of the commodity make it particularly
attractive to both criminal and terrorist groups.
Colombian President Juan Manuel Santos estimated that gold
provided $2 billion a year to terrorist and criminal groups in
his country, outstripping cocaine as the primary financial
asset. While it takes 6 months to grow coca and process a kilo
of cocaine, along with significant technical skills, low-cost
and low-skill gold mining in Colombia--in the Colombian jungle
can easily yield 2 kilos of gold a month. A kilo of cocaine
sells for about $2,570 in the Colombian jungle, while a
kilogram of gold can fetch up to 19 times that much. The
precious metal is also relatively easy to legalize, while
cocaine remains illegal and heavily penalized.
Because the FARC and its allies in Venezuela want to
disguise the origin of their gold after it is mined, they often
move it through Guyana, Suriname, Nicaragua, and Ecuador to
avoid detection of gold entering the market from places that
might arouse suspicion of either terrorist or transnational
criminal connections. Those using gold often disguise the
origin of the gold so that they can avoid detection and paying
taxes, thus you have the unusual situation where Peru and
others were exporting--they were moving their gold to Colombia
and declaring it as Colombian gold as they moved it out so that
Colombia on paper was exporting more gold than it actually
produced.
The massive leak of internal documents at the Panamanian
law firm Mossack Fonseca, now known as the Panama Papers, also
gives an unsettling view of just how easy it is to use law
firms in certain jurisdictions to incorporate entities where
the real owners are never disclosed, and then use those
entities to move massive sums of money to offshore havens where
the anonymity is not only preserved but enhanced and
reinforced.
While privacy issues are real and valid, the current
structure represents one of the most glaring weaknesses in the
financial structures that are used by a host of illicit actors,
including terrorists and transnational criminal organizations.
It is easy but dangerous to forget that Al Qaeda and Hamas used
extensive offshore structures in the Bahamas to move money
around the globe, both prior to and following the attacks of 9/
11, something Juan Zarate worked extensively on when he was at
the Treasury Department and helped shut down a significant flow
of funds at that time.
This opaque world overlaps with the vast unregulated world
of gold and other commodity movements, and both intersect in
the growing number of criminal state jurisdictions. This
amounts to a perfect storm for terrorist financiers and
transnational criminal organizations to hide and move cash and
cash value across the world in ways that are virtually
untraceable.
I offer recommendations on dealing with these issues in my
written testimony. And I welcome the chance to answer any
questions you may have.
Thank you again for the valuable work of this task force.
And thank you for the opportunity to testify again here.
[The prepared statement of Mr. Farah can be found on page
52 of the appendix.]
Chairman Fitzpatrick. Thank you, Mr. Farah.
And thank you to all the witnesses for your testimony here
today and your work with the task force, as well as the staff
in preparation for the hearings and for the bills that are
going to be introduced.
Mr. Cassara, in your written statement, you note that
FinCEN's MSB registration process, the money service
businesses, have been less than effective. I think you state
that they were weak. Can you identify some specific examples of
weakness and then how you would address it, if you were us?
Mr. Cassara. Just a little bit of background. I was at
FinCEN. Before 9/11, the head of FinCEN at the time, Stan
Morris, was very concerned about what he called money service
businesses (MSBs). He contracted with a accounting firm, one of
the Big 8 accounting firms, to do a study. And the numbers came
back that there were approximately--at that time; this was
about 2000--240,000 MSBs in the United States. Very little was
done with that information.
Then, 9/11 happened. The PATRIOT Act was passed. After
that, MSBs in this country are supposed to be registered with
Treasury's FinCEN, and I think they are supposed to be licensed
in 47 or 48 of the 50 States. There are approximately--I
haven't been on the site recently--40,000 MSBs that have
registered with FinCEN, which means, if that earlier study was
correct, that 200,000 are missing.
If you go back to the 2007 national anti-money laundering
strategy report, that strategy report says, in effect, that
approximately 20 percent of MSBs are registered with FinCEN. In
other words, where are the missing MSBs? MSBs, as you all know,
are everything from PayPal to mom-and-pop check cashing
companies to hawaladars to casas de cambio along the Southwest
border. We have not done a very good job of getting them
registered. Of course, if they are not registered, they are not
filing suspicious activity reports. The program hasn't worked
as it was constructed.
Chairman Fitzpatrick. So what would your recommendation be?
Mr. Cassara. Well, I can defer to my distinguished
colleagues here, but the IRS, I believe, has the mandate to
work with regulators to go out and ensure that those MSBs are
in fact registered. That hasn't been done. In my opinion as
well, there should be more outreach to the money service
business communities, particularly in the various ethnic
communities in this country because, quite frankly, a lot of
them don't know that they are supposed to be registered. More
work needs to be done in this area.
Chairman Fitzpatrick. Would any of the other panelists like
to add anything to that?
Mr. Zarate?
Mr. Zarate. I think there are three things that could be
done, Mr. Chairman. I think one is the outreach that John has
talked about. I think there is always awareness-building that
has to be done, not just in the traditional money service
business sector, as John mentioned, but also with new digital
payment sectors, the bitcoin community, et cetera, which now
have to register if they are acting and transacting as money
service business. So there is a lot of outreach that still has
to be done. Education. So that would help.
Second, is the enforcement of the regulations themselves.
As I mentioned in my remarks and in my testimony, the need for
resources is very real. The IRS has been given the mandate to
go out and regulate on behalf of FinCEN. The Bank Secrecy Act
in this sector, frankly, they just don't have the resources to
do it at the scale to deal with the nationwide sort of
disbursement of the sector. Part of that is also enlisting
State authorities a bit more. These are State-regulated
entities in many regards.
Third, is that money service businesses now have the
challenge of having bank accounts. And I think there is
something here to be done in the context of financial
inclusion, as I had remarked, to work with the formal financial
system, in particular the major global banks, as well as
smaller regional banks, to try to work with money service
businesses, not only to register them, but to make sure that
they have access to the financial system, and understand what
their obligations are as a regulated entity under the anti-
money laundering rules of this country.
So I think those three categories of activities would take
us far afield from where we are and would certainly be an
improvement.
Chairman Fitzpatrick. Professor Gurule?
Mr. Gurule. Yes, I would add, I think first there has to be
a prioritizing with respect to if there are 240,000, at a
minimum, MSBs, I think that resources should be spent on
identifying the largest MSBs that are moving the largest amount
of money annually to ensure that those particular MSBs are
registered. One way to ensure that might be, for example, to
require that when the MSB files its tax returns with the IRS,
it must submit some statement, some affirmative statement, that
they are in fact registered with the Treasury Department. So
they have an affirmative obligation to state that. And if they
fail to state it, then that should raise a red flag. If they
falsely state it, then they could be prosecuted for making a
material false statement, which is a Federal violation.
Chairman Fitzpatrick. My time has expired.
I recognize Mr. Lynch for 5 minutes.
Mr. Lynch. Thank you, Mr. Chairman. At the outset, let me
just thank Chairman Fitzpatrick and also Vice Chair Pittenger
for the great work, and to all the members on the task force.
And I want to say thank you to this all-star panel. You
have all been up here multiple times testifying on various
issues, cutting-edge subjects in this area. And I just want to
say thank you for all the work you have done. As I said before,
you have all been up here multiple times. And in wrapping up
this iteration of the task force, we really benefited greatly
not only from your testimony today but also from your advice,
your counsel, helping us to formulate legislative responses to
the problems that we have talked about here. And we have some
of those that we will roll out after the conclusion of this
hearing. But I just want to say thank you for your service to
our country, and thank you for allowing us to be the
beneficiaries of your expertise.
The members of this task force are well-traveled. My
colleagues, there is nobody on this task force who hasn't put
in a lot of frequent flyer miles trying to drill down on this
problem. We just came back not too long ago from Nigeria and
Tanzania. And there are some wonderful, wonderful things being
done, Mr. Cassara, with mobile payments, as you mentioned. And
it is incredible what is happening in parts of the Third World
where, for example, in Nigeria where mobile payments are now
financing a solar energy culture there where electricity is
being brought into some of the most remote areas of that
country. And with the growth of their population, it has been
really incredible what they are doing with very small micro
payments, but giving these villages in some pretty remote
places the ability to import electricity into their homes. It
is revolutionizing that country.
But as you all have indicated, it also presents a real
problem for us in trying to track the flow of terrorist
financiers. And we have done some work up on the Syrian border.
We met with--members of this task force have met with a half a
dozen--they are a so-called moderate Syrian rebel groups, but I
am not so sure how moderate they really were or are. But the
bottom line is they are all using WhatsApp and they are all
financing their operations. And these are the rebel groups. And
I would bet that their counterparties there, ISIL and other
groups there, the al-Nusrah Front, are also using the same
mobile apps to finance their efforts as well.
So our ability to drill down on this is really--the pace--
well, the velocity of change is so quick, it has been
breathtaking. And it has been very difficult for us, because
just when you think you are catching up, something new will
come out. You know, the last thing we looked at was sort of a
model of this bitcoin platform that uses blockchain. And now we
are trying to catch up to that to see if this presents another
area of vulnerability.
Mr. Cassara, in the area of mobile payments especially, and
all the panelists, you have all been working on this, what are
the single most persistent vulnerabilities that you see there?
We had trouble, for example, getting some of the companies to
take down sites where we know there has been chatter. In other
cases, we also know that there has been work being done on a
video game platform. So they go into these chat rooms, and I am
sure that there is--finance is a component of what is going on
there as well. How do we--what is the most effective way to get
at that problem?
Mr. Cassara. Thank you for the question. I think the
largest threat dealing with M-payments is the simple volume of
M-payments. For example, according to experts, there are about
1 billion mobile money transactions in a given month. If only 1
percent of those are suspect, okay, 1 percent, so fraud, money
laundering, suspect charitable contributions, terror finance,
whatever it is, you are talking about 120 million suspect
transactions a year. And you think 1 percent is too high? Break
it down. Say it is half of 1 percent. So you are talking 60
million suspect transactions a year. It is overwhelming.
And we, the 93 countries where this is going on, don't have
any systematic way to analyze the very volume of these things
to put in place red flags so that law enforcement, even the
financial intelligence units can get involved with tracking
these things.
Another tremendous problem, and something I would like to
go into a little bit more detail on, is the fact of where these
very systems operate. You mentioned Syria, you mentioned
Nigeria, the Philippines, Pakistan, Bangladesh, and
Afghanistan. These are some of the areas in the world where we
have the very weakest law enforcement. And so there aren't any
cases. And this is something that we need to address.
Mr. Lynch. Okay. Thank you.
My time has expired. I yield back. Thank you, Mr. Chairman.
Chairman Fitzpatrick. The vice chairman of the task force,
Mr. Pittenger, is recognized.
Mr. Pittenger. Thank you, Mr. Chairman. Thank you for, I
think, a very sobering analysis. And the scope and impact of
what we now clearly see through of the transfers from mobile
payments, from bitcoin, from gold is enormously challenging.
We have our own structures inside Treasury with FinCEN and
OTA and OFAC. And yet, as I shared earlier, we have our allies,
our friends, who seek, for the most part, to cooperate with us,
but have very limited resources. What else do we need to be
doing to support our own agencies and to broaden their
capacities to the extent that they can address the issues that
were brought up today and broaden our ability to help our
friends around the globe?
I was with President el-Sisi last December. I am going to
see him again at the end of next week. And he, in spirit, I
believe, wants to be supportive. They lack enormous
technological support. We saw that, of course, in South America
as well. So speak to that and what we need to be doing
resource-wise inside our own financial institutions to support
them, to address these prevailing challenges, and how we can
better support our allies around the world?
Juan, would you like to start?
Mr. Zarate. Thank you, that is a great and expansive
question. I think the first thing we need to do is make sure we
have a system that actually ensures transparency and
accountability, that then allows the regulators and authorities
that are responsible for ensuring that our system isn't being
misused by criminals or terrorists, actually can see what is
there. And I think there has been a lot of progress this past
year with the issuance of the customer due diligence rule from
Treasury, something we had talked about a year ago as being
necessary. That is incredibly important to getting to the
ultimate beneficial ownership of corporate entities.
The beneficial ownership legislation that has been
presented to Congress, I think, needs to be taken up and looked
at carefully to determine how best to get at who owns the
entities in this country that are acquiring vast amounts of
real estate, or perhaps even trying to hide their hand in
placement or movement of funds. So I think that is critical,
first and foremost. There has to be that.
Second, what I mentioned in terms of information sharing,
we do have to move to a more aggressive model of information
sharing, in particular with the private sector. The private
sector is required to help, by law, they want to help, by now,
culture and by being hit over the head with enforcement
actions. And we need to find ways of enabling them to be the
gatekeepers of the financial system, which helps the government
regulate bad behavior. So I think that is critical.
And third, I think we need to be more demanding of our
foreign partners. The reality is that the United States, for
the last 20 years, has been the only country in the world that
has an Office of Foreign Assets Control (OFAC) that is
responsible for administering and enforcing sanctions. No other
country in the world has had a similar entity. And the reality
is, we need our partners around the world to have a discipline
around the enforcement of these measures, and it is part of the
reason why I argue that we need to continue to push the
enforcement of these issues and sanctions, in part because we
have been put in a position of driving that international
agenda and focus. You have seen it with the FIFA corruption
case; you have seen it with sanctions; you have seen it on
terrorist financing. That will remain our role, but we need to
be demanding of our foreign counterparts, in particular
governments and banking centers that do have capacity and
resources to do this well.
Mr. Gurule. Domestically, I think that there needs to be a
better job of information sharing between the Federal
regulators and DOJ. With respect to HSBC, for example, there
are multiple instances where the OCC, which was responsible for
auditing and ensuring compliance of HSBC with the Bank Secrecy
Act (BSA), found multiple violations where the bank was in
noncompliance with the BSA. And the question is, was that
information being shared with the FBI? Was that information
being shared with DOJ? I think there needs to be a stronger
partnership between those two agencies.
The Federal regulators are really on the front lines of
auditing these banks to ensure compliance with the BSA and
counterterrorist financing regulations, and we need to ensure
that once they find a problem, once they find, for example, a
failure to file SARs, or an ineffective--or they are in
noncompliance with respect to having written policies and
procedures to prevent terrorist financing, we need to engage
and make sure that the FBI is involved in looking more closely
to see whether or not that noncompliance has resulted in money
laundering, the use of the bank by drug cartels and terrorists.
And then second, something that I spoke to just briefly in
my oral statement, the importance of a counterterrorist
financing strategy. So to ensure greater coordination, to
ensure--between Federal agencies, interagency coordination, to
ensure prioritizing, to ensure that we are not only confronting
the current threat, but anticipating the future threats and the
future methods which the terrorists are going to use to move
money globally. We need to be thinking through that, and ensure
that we are not simply reacting to the problem and the crisis
of today.
Mr. Pittenger. My time has expired, but I sure would love
to hear more.
Chairman Fitzpatrick. The gentleman from Illinois, Mr.
Foster, is recognized for 5 minutes.
Mr. Foster. Thank you, Mr. Chairman. And thank you to our
witnesses.
When I step back and look at this problem, I think of it
sort of in two different levels. The first thing is, can we
define a world in which money laundering is impossible? And
then what are the essential features of such a world? And then
to step back again, do we actually want to live in such a
world, because of the implications for the costs and the
privacy that will be essential for this.
And so to start with the first part of the question, what
are the essential elements of a world where it would be
impossible to launder money? Okay. I think at a minimum, you
have to get rid of anonymous shell corporations in the United
States. And is there anyone who thinks that even needs an
asterisk? It is essentially mandatory that you not be able to
hide behind that. And that is a big part of this, starting by
cleaning up our own house first, that we have to make the
United States a model for at least inside the United States, we
would not be able to launder money internally. My predecessor
in Congress just started a jail term for failing to attempt to
launder money and as part of some other criminal activity.
But another essential part of this has to be mandatory
traceability of financial transactions. You simply cannot allow
electronic financial transactions where the beneficial owner is
not recorded, and it would be some kind of crime not to do
that. And is there any way around that as an absolute
requirement to a regime that would make it impossible? Well,
thank you. I think I agree.
And then you have to--because of the volume problem, you
are going to have to have the ability to do big data analytics
on this in some way that does not cause privacy concerns, which
is a heck of a problem and gets to the second part of my
question.
Another essential part, I think, has to be authentication,
that you have to know when someone claims he is this person,
that he is the beneficial owner, that you have to have
something akin to a national digital ID card, where you can't
cheat on it to know that you actually know the beneficial
owner, and have an electronic record of who that person is and
it is not some third party.
So it seems to me that all of these are essential just to
clean up the financial part and to make it impossible to
launder through the financial system. And then, as has been
brought up by our witnesses, there are two more steps. You have
to internationalize this, which to me means you are going to
have to simply deny access to the United States and the world-
regulated financial system to any country that doesn't adopt
essentially equivalent rules. I think that is unavoidable.
And then, finally, you have to deal with the commodities
problem, that everything from Bitcoin, to gold, to hard-to-
value assets will have to come under the same regime that I
have just described for financial services. This is a very
Draconian set of requirements. I think, however, we can waste a
heck of a lot of time and money if we define a system that has
gaping loopholes in it that people can immediately drive a
truck through. And so, it seems to me that we are really facing
a binary choice. Do we want to make it impossible to launder
money, or do we want to have all of the things I have just
described?
Is there something that is sort of wrong with that big
picture analysis? Are there things that I am missing in this? I
have to say that I am not convinced which road we want to go
down, because you are talking about a world where cash is
simply not--the benefits of cash where you can have anonymous
transactions would not be allowed, at least electronically. And
a lot of people, including me, have a lot of worries about
going down that road.
Are there big points that I have missed in that sort of
binary choice that we have to make? Mr. Farah, you look like
you are reaching for the--
Mr. Farah. I think that is really a good description of
what--sort of the macro questions that we are facing. And I
think that, to me, there is something of a middle ground in
taking away the really easy advantages that illicit groups have
in ways that don't impinge on your privacy or your ability to
actually conduct business. I think, as John Cassara was talking
about, the sheer volume, most of it for good stuff, there is a
threshold at which if you overregulate, you kill business and
our commerce comes to a grinding halt.
So I think that things like not allowing anonymous shell
corporations, I think that basic regulation of commodities and
an accounting of how--for example, why, for a certain amount of
time, Colombia was exporting more gold than it produced. Those
should raise red flags. That is not rocket science. That is
sort of basic due diligence on your commodities and how they
move. The fact that in several countries where gold move
extensively, you have free trade zones built into the airports,
so you can fly gold in, walk it to the free trade zone without
ever declaring it, and reship it to another country without it
ever transiting in any formal way. That is the most basic
loopholes that you can begin to close. I think if you--
Mr. Foster. So how rapidly will people--let's say you close
those loopholes. Then you have Bitcoin or things like that, and
there will be billions of dollars flowing immediately. Are we--
Mr. Farah. I think the key is to raise the cost of illicit
transactions to the point where they are no longer quite so
lucrative and quite so easy, and over time, you build up, as we
have done with some success in some ways with drug trafficking
money, where you began enough regulations that it is no longer
that easy, that cheap, and that--and with absolute impunity.
You raise the cost over time. And I think, as I think many of
my colleagues addressed, that these are rapidly adaptive
groups, that you have to be able to think rapidly and ahead of
the curve, which is something that bureaucracy is not very good
at, but if you raise the cost over time, you diminish the
impact of illicit behavior.
Mr. Foster. Okay. And I guess my time has expired, but I
thank everyone for their thoughtful participation in this,
because it is a real decision our society is going to have to
make. Thank you.
Chairman Fitzpatrick. The gentleman from Pennsylvania, Mr.
Rothfus, is recognized for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman. I thank the panel for
being with us today to continue this serious conversation that
we have been having about terror financing. I would like to
direct my first question to Professor Gurule.
In your testimony, you discussed the importance of
secondary sanctions, and you recommend that the United States
both strengthen existing sanctions, and potentially impose new
ones, like those in the Comprehensive Iran Sanctions
Accountability and Divestment Act of 2010 aimed at the Islamic
State. As you know, however, the Joint Comprehensive Plan of
Action (JCPOA), commonly known as the Iran Nuclear Deal,
actually lifted many secondary sanctions against Iran and
created loopholes, for example, regarding the sale of
commercial passenger aircraft, which Boeing is already seeking
to exploit.
Do you think it was wise for the President to waive these
sanctions as part of the JCPOA?
Mr. Gurule. Well, I think that perhaps it would have been
better to have waited to decide to lift the sanctions, to
determine whether or not Iran is in compliance with its
obligations under the Joint Comprehensive Plan of Action. To
lift those immediately after the agreement was signed perhaps
is questionable.
Mr. Rothfus. There are two aspects in dealing with Iran:
one is the nuclear; but the other is that it is the world's
leading sponsor of terrorism. Wouldn't lifting these secondary
sanctions weaken our efforts to combat the world's leading
state sponsor of terrorism?
Mr. Gurule. Well, certainly. And let's keep in mind that I
think it was the secondary sanctions that really put the
squeeze on Iran, and I think forced them to the bargaining
table and forced them to agree to make certain concessions with
respect to developing their nuclear sector. And then to take
kind of that principal leverage that was used against Iran to
bring them to the bargaining table and then to lift that,
again, raises some serious questions whether or not that was
premature, whether or not we should have waited, permitted some
time to determine whether or not Iran is going to live up to
its obligations under the agreement.
Mr. Rothfus. In your testimony, you also recommend that the
United States should develop a comprehensive counterterrorist
financing strategy. My concern is that the President can't even
articulate an actual strategy to combat the Islamic State
militarily. It is really not surprising that the Administration
has also failed to develop a strategy to counter the financing
of such groups.
In your opinion, why hasn't the Administration done this
work to develop a plan to cut down on terrorist financing?
Mr. Gurule. It is a good question that you raise. And one
possible answer is that it isn't a priority of the
Administration, despite public statements to the contrary, and
it certainly goes to the question of the effectiveness of the
current U.S. Government's counterterrorist financing efforts.
I worked at the Treasury Department. I know how committed
those employees are, how hard they work to counter this effort,
but I think that their efforts would be enhanced if it was done
in a more thoughtful, forward-leaning, forward-thinking,
comprehensive manner, in terms of targeting priorities,
anticipating future methods of moving money for terrorists
around the world, and then there are specific strategies that
have been developed in coordination with other important
government agencies to combat those threats. So I think the
failure to have such a strategy has undermined our overall
efforts.
Mr. Rothfus. Mr. Zarate, your testimony also talks about
the need to develop this comprehensive strategy. Here we are
more than 2 years--it is June 2016--since the Islamic State was
dismissed by the President as the ``JV team.'' Do you have any
insights as to why we don't have this comprehensive strategy
outlined yet from the Administration? Any insights?
Mr. Zarate. Congressman, I think we were caught flat-
footed, to be quite honest. I think our withdrawal in 2011 left
us blind to what was happening in Iraq. We had established the
Iraq Threat Finance Cell in 2006, precisely to look at the
financial intelligence and information around how Al Qaeda and
other terrorist groups in the insurgency were raising and
moving money. That was dismantled, and I think we were caught
flat-footed; we just didn't have eyes on the ground, we were no
longer looking at it. So I think that is one of the reasons.
And think we have been playing catch-up.
And to Professor Gurule's point, in order for sanctions, or
secondary sanctions, or any type of tool to work, we have to
have the intelligence, we have to understand how these
financial infrastructures work. We have to understand who their
moneymen are; we have to understand what brokers they are
relying upon; we have to understand what the intersection is
with the regional and global economy; how money service
businesses are potentially implicated. All of that has to be
done, and I think we are playing catch-up.
And to Professor Gurule's point, I think we have colleagues
at the Treasury Department who are working assiduously and with
enormous energy to try to get at this problem, but I think we
are doing a lot of catch-up work.
Mr. Rothfus. I yield back.
Chairman Fitzpatrick. The gentleman from California, Mr.
Sherman, is recognized.
Mr. Sherman. There is, obviously, division in any political
organization, such as the Administration. It may explain why we
are not going after certain targets. There are those in the
Administration trying to do everything possible to reduce the
economic power of Iran, and now the Administration is
considering a $100 billion Boeing jet deal so that Iran will be
able to efficiently airlift thugs to Damascus, where thousands
of people will be killed as a direct result of that airlift
capacity and where hundreds of thousands will be driven into
exile as a result of that capacity. Perhaps the biggest
terrorist financial transaction will be licensed by Treasury,
that is to say, a $100 billion transaction for an airline
available to the IRGC for its airlift capacity.
I should also point out that--and this is outside the scope
of this task force--when we look at financial problems, it is
not just our enemies; it is our so-called friends. If people
want to say, why do we have ISIS? We have ISIS because we have
Malaki. Why did one of the best equipped and most lavishly
provisioned armies in the history of the Middle East not only
fade into nothing, but give its weapons to ISIS on the way out,
and then leave the money in the Mosul Bank? You have to look at
Mr. Malaki and we have to wonder why we ever put him into
power.
I want to focus with Mr. Zarate and Mr. Gurule on just how
much evidence you need to put an entity on the terrorism list.
I think the book, ``Treasury's War,'' says there was once an
80/20 rule. If you are 80 percent sure, put them on. Now, I see
an awful lot of IRGC entities that aren't on. And I wonder--you
look at what the legal standard is, which is you can put them
on unless the courts determine it is arbitrary and capricious.
That basically means the law says you get to do almost anything
you want to do. I don't know--I think it is incredibly rare
that any entity has gone into a U.S. court and said, take us
off the list, it is arbitrary and capricious to put us on. Some
have appealed to the Administration, but never has the
Administration, to my knowledge, been overruled by the court
system. So basically, the Administration can do what they want.
Has the thinking in Treasury swung too far in the direction
of we need more proof, more documents, more files, and more
review before we put an entity on the list? Gentlemen?
Mr. Zarate. Congressman, the standard is a reasonable basis
to believe that the individual meets the criteria of the
executive order, and so there has to be a body of evidence. And
with the USA PATRIOT Act allowing for the use of intelligence
and protecting that information, intelligence can also be used
as part of the body of evidence. But you are right, that is the
lowest standard in the legal context that you would allow, and
the appellate review is obviously the most permissive under
U.S. law.
I think three things are at play: one, there has been more
reticence to avoid litigation, because there have been
challenges, and I think there is a bit of resistance there;
two, I think there has been a recalibration as to when to use
targeted sanctions most effectively. Is it effective to put
people on these lists if they don't have any financial
connectivity, don't have any business interest; so a more
strategic thinking around how you use the list and for what
purposes--
Mr. Sherman. Are you saying that there are circumstances
where it is pretty obvious they are a terrorist organization,
but you just don't bother to put them on the list because they
don't seem to have much of a bank account?
Mr. Zarate. It is not necessarily terrorist organizations,
but particular individuals, for example, who may be foot
soldiers, for example, in Mosul who may not be transacting, may
not be have any financial benefit. And, frankly, one of the
concerns that the Treasury has to deal with is banks and
financial institutions dealing with a laundry list, as
Professor Gurule mentioned, over a thousand STGTs, and the STN
list is even longer; so a desire not to clog the system with
irrelevant names, or less strategic names. So I think that is a
serious issue.
And the third is diplomatically, what makes sense. A lot of
times, the U.S. Treasury and the State Department use the list
in a diplomatic way to push action, for example, the Saudi
government. And sometimes, listing an individual or entity
makes sense, and sometimes having a quiet conversation to get
the same effect and impact makes sense. And so I think there is
some degree of that balance that takes place.
So those would be the three reasons I would give as to why
you have seen the phenomenon you have described.
Mr. Sherman. Mr. Gurule, should we be listing entities more
quickly, do you think?
Mr. Gurule. I think that, as you stated, the legal standard
is incredibly low. And then on appeal, if a designation is
challenged by the person who has been listed, again, it is a
very deferential standard to the administrative agency,
arbitrary or capricious. And I would say 99 times out of 100,
the designee loses. There are very, very few cases in which the
designation is overturned. So it shouldn't be for fear that,
oh, we are going to lose this and it is going to be overturned
by a Federal judge.
I guess my concern is listing individuals primarily kind of
for symbolic value. Okay, now we have listed, we have
publicized that this guy is a senior member of ISIS, now he has
been out and now the world knows, and so that has some value,
but if there are no assets in the United States to be blocked,
if there is no evidence that U.S. persons are doing business
with Abu Bakr al-Baghdadi, it seems to me that the designation
does not have much value in terms of the objective of
curtailing funding. If that is ultimately what the objective
is, then--
Mr. Sherman. Part of the objective is just to punish and
name shame the individual, but I will agree, maybe you don't
want to do privates, but a colonel or a general is worth
putting on.
I just want to, for the record, indicate that this contract
to sell wea---planes, I was about to say weapons, because that
is what they are also, is not $100 billion, but it is tens of
billions of dollars. I yield back.
Chairman Fitzpatrick. Mr. Poliquin of Maine is recognized
for 5 minutes.
Mr. Poliquin. Thank you, Mr. Chairman, very much. And I
appreciate you bringing these distinguished witnesses before
us, and all the great work that we have done in the past year
on this issue.
In a very frightening way, I think we all saw in Orlando
that for all kinds of reasons, terrorism has now reached our
shores. And this is something a lot of folks have been very
concerned about for a very long period of time, so many issues
that we have already discussed today. Lacking a priority by
this Administration to stay on offense has put us in a very
difficult situation, in my opinion.
Ms. Realuyo, let me ask you this question: What impact, if
any, would the defeat of ISIS have on a broader impact on
interrupting money flows to terrorist organizations around the
world who look to harm us?
Ms. Realuyo. We have to take a look at the fight against
ISIL in a specific way. And you have seen various
Administration officials actually tout the progress that is
being made, if we categorize it as a campaign against ISIL in
Iraq and Syria. So we have seen that militarily and
financially. But what has happened is that the group has
actually metastasized, and this is what the fear is, is that
they are actually sending people who are--the foreign fighters,
we are now up to 40,000 foreign fighters, according to the CIA,
who have traveled to Syria to fight alongside ISIS, including
over 200 Americans.
Now, the problem that we have is that return of the foreign
fighters, and I know several of you serve on the Homeland
Security Committee, where that is the concern that we have.
Then the third batch that we are worried about is the fight in
the Levant, then those who are returning to places like
Brussels and Paris. And the third iteration, which sadly we
have seen here in the United States, are those who are
inspired.
I think the victims and the families of victims of any
terror attack are not making this distinction between ISIL-
directed and ISIL-inspired. I think a lot of us are kind of
caught up with what was the categorization of, sadly, the
attack in Orlando or San Bernardino. The effect is the same,
right, if we think of terrorism defined as the act of violence
against innocents for a political or ideological or religious
cause.
What we are seeing, though, is that even if we were to
defeat ISIL, which is very important, there are three phases of
the campaign against ISIL. There is the physical, which is the
military. There is the financial, which actually has done very
well in the last year since I last appeared before you. They
are down year on year, about 30 percent. And as we know, they
need money to actually pay the foreign fighters and then, more
importantly, sustain its caliphate.
And then the psychological one is what I think is now
really coming to the forefront of the average Americans. What
does it take and how are these people inspired so far away in
basements across the United States, or in the U.K., or in
France, or in Brussels? This is the question that we have to
ask.
What is important is that defeat of ISIL, because of its
ability to propagandize, and then, more importantly, inspire
and train, which is what we saw in the case of the European
attacks, foreign fighters who will then return to their home
countries to wage jihad against their local populations. So it
is a very complex issue that really has metastasized in a way
that not just the United States, but other countries across the
world now are trying to grapple with, this idea of homegrown
versus ISIS-directed, and then, more importantly, the fight
that we see now on the ground, particularly in Iraq. In the
last couple of days, we have seen the Iraqi forces take up
arms, and are actually trying to clear and hold parts of
Fallujah.
But the financial piece--and to address the other question:
So in the White House strategy of November 2014, there were
nine lines of effort, and line number five is disrupting ISIL's
financing. When we take a look at grading--since I am a
professor, we grade, right--the nine lines of effort, the
military and the financial have actually--we have seen progress
on both fronts, but as we have seen, these attacks don't take a
lot of money.
So you have to really keep fighting the fight physically,
financially, and more importantly, psychologically. And I know
that there are other hearings on the Hill this week that are
looking at this concept of countering violent extremism, both
here in the United States and abroad.
Mr. Poliquin. Mr. Cassara--if I may, Mr. Chairman. If you
could pick one thing, one thing only, what would be your
primary issue to interrupt? What would have the greatest
impact, based on all the hearings that we have had and all
those that you have participated in, all the work that you have
done in your career, the one thing that would have the greatest
impact at interrupting money flows to terrorist organizations,
what would that be?
Mr. Cassara. The thing that I would like to see the most,
and it impacts more than terror finance, I would like to see
trade transparency. We talked about this in the previous
hearing. I think it is doable. I think the time is right. I
think it impacts terror finance; it impacts underground
finance; and it impacts revenue streams for governments. I
think the time has come to aim towards international trade
transparency.
Mr. Poliquin. Mr. Zarate, same question to you, sir.
Mr. Zarate. Without a doubt, disruption and dislodgement of
terrorists' control of resources and territory that they use to
develop diversified portfolios and war economies. Groups that
occupy real territory in urban environments not only are able
to tax, develop trade schemes, exploit the resources, but they
also use those environments to serve as an economic shield.
We have been reluctant to be more aggressive in Mosul
precisely because we have to worry about the day after, and we
have to worry about the financial and other infrastructure of
that city. The reality is ISIS has used that city to fund
itself, and to use that as a hub, along with Raqqa and its
control of other cities, to develop a war economy. That is why
some estimates have them raising $2 billion, and even with our
best efforts, they continue to raise hundreds of millions of
dollars. And so, I would say, whether it is ISIS or Al Qaeda or
the FARC or Hezbollah, their ability to actually leverage
resources and territory is probably the most fundamental thing
you can do to disrupt terrorist financing today.
Mr. Poliquin. Thank you very much.
Mr. Chairman, I appreciate it very much. I yield back my
time.
Chairman Fitzpatrick. The gentleman from Arkansas, Mr.
Hill, is recognized for 5 minutes.
Mr. Hill. Thank you, Mr. Chairman. And thank you and
Congressman Lynch for your significant leadership, and I
appreciate the ranking member and the chairman of the full
Financial Services Committee in sponsoring this task force,
because I think it has been so important, and I think it has
been a demonstration really across the Congress of returning to
something that was a tenet of mine some 30-plus years ago,
which was a strong, consistent, bipartisan view on foreign
policy matters. And I want to thank Mr. Lynch and Mr.
Fitzpatrick for demonstrating that in this matter, and thank
the staff for their hard work, since they also have other
things to do here at the Financial Services Committee. And
thanks to our panel for coming back and for your full
participation over the last year.
I just can't help but react to some of the commentary. You
know, I think the issue that terror finance has really not been
on the radar screen of this Administration until more recently
is due to what I think is an a la carte NSC process that has
thwarted the best judgment of our professionals at the State
Department and our professionals at the Department of Defense.
And it is not my opinion, it is Leon Panetta's opinion, it is
Bob Gates' opinion, it is the Joint Chiefs' opinion, and
therefore, we have been behind the curve on so many of these
issues, as my friend, Mr. Sherman, noted.
And one of those we have been behind the curve on is terror
finance. If we had had a better process in working with the
Iraqis, I don't think we would have seen the explosion of ISIS
out of Syria into Iraq, and by not reacting, they got the
terror network they have today. If we were doing today what--2
years ago or 3 years ago, they would not have the terror
network that we are so concerned about. So since San Bernardino
and Paris, I do commend the Administration for changing the
rules of engagement, including terror finance targets as
military targets. It is something I think we talked about in
our very first hearing of this group.
Well, as everyone on the panel knows, I have a pet project
in this terror finance arena, and so I would like to get some
views on it. First, I commend the Treasury's draft on
eliminating this foreign-owned, single-member LLC issue. I
think that is a good catch, one I personally didn't know about,
that they didn't even register to get a taxpayer ID number, so
I think that is an important catch and will have lasting
benefits.
Mr. Zarate, as we have talked before and as we have had
testimony on this panel, we have talked about this issue,
though, of beneficial ownership, and the Treasury proposal, in
my view, sort of misses the mark, because it is too broad, it
is 24.9 percent or 25 percent, it is relying on the usual
suspects, i.e., the banks to sort of police it and basically
report it through a SAR process, which is good, or okay, but it
is extremely cumbersome, paper-based, burdensome on small
institutions, I think way after the fact, not very timely, and
I don't think will be effective, and it will end up being a
major new paper-shuffling exercise.
But as I have argued in here, I think the IRS data and
sharing the IRS data, particularly now that we add single-
member non-citizen-owned LLCs is the most robust way to have a
single data source that is all digitized, and it is already in
the possession of the Federal Government.
So how do we add properly in 26 U.S.C. 6103 the ability for
FinCEN to have access to the ownership information you find on
a K-1 for an LLC and maintain privacy rights and follow our
normal procedures? I will start with you, Juan, if I might.
Mr. Zarate. Congressman, thank you. And I know that you
have been focused on this issue for some time. I think you have
to create a particular carve-out for the IRS to be able to
share this information. And to your point, the information
doesn't do much good if it is locked up in an archive and isn't
made available to those who actually have to regulate and look
for problematic trends, individuals, and networks.
I would also say there has to be a way for the markets to
actually understand with whom they are doing business, and so,
there should be some sharing of the burden. I agree with you,
the burden shouldn't always be on the banks to have to
determine ultimate beneficial ownership, but that does then put
the onus on corporate registration regimes and entities,
including at the State level, to actually understand and to
have available information about corporations and LLCs that are
based in those jurisdictions.
So I don't disagree with you, but I think there has to be a
very specific carve-out to protect privacy and civil liberties,
but it has to be real time, and there has to be some market
mechanism by which market actors can share information about
who their customers are, because ultimately, we want banks,
financial institutions, regulated bodies to understand who they
are doing business with.
Mr. Hill. I will yield back, Mr. Chairman, and go another
round if you have one. Thank you.
Chairman Fitzpatrick. The gentleman from Kentucky, Mr.
Barr, is now recognized.
Mr. Barr. Thank you, Mr. Chairman, and Ranking Member
Lynch. Thank you for your leadership on this task force over
the last year. This has been an important exercise in
determining how we can better disrupt and degrade terrorist
organizations through the financial streams that seem to end up
in terrorists' hands. And thank you to the panel for your
insightful testimony.
I wanted to focus a little bit on this Orlando attack,
because the FBI has said to us in the aftermath of this tragedy
that these are the kinds of attacks that are the most difficult
to disrupt, the most difficult to detect, a lone-wolf scenario,
a self-radicalized individual for whom normal intelligence
gathering efforts are incapable of disrupting these kinds of
lone wolf attacks.
So outside of the Bank Secrecy Act, or referencing the Bank
Secrecy Act, is there anything that Federal law enforcement can
do to identify financial transactions of individuals who are on
watch lists that could maybe detect, before a tragedy like
this, individuals who might engage in this kind of activity?
Does anyone want to weigh in on that?
Ms. Realuyo. I think, sadly, the Orlando attack shows that
people did see something and say something, well beyond the
financial piece. So from what we know that has been disclosed
through the reporting and open sources, he obviously
transferred the deed for a very small value. Someone had to
actually do that transaction. It is not a banking transaction,
but there were probably lawyers involved.
The other thing as well, our system, because of this
$10,000 threshold, we are always looking at the nature of the
transaction as opposed to these kind of what I call
institutionalized levels.
So the other thing I study is transactional organized
crime, and, sadly, we have seen human trafficking as a scourge
that is really dealing with the migration patterns through the
Americas, around the world. A lot of those transactions are
below that $10,000 threshold. But we also need to see and
figure out, and that is what I wrote my testimony on, is how
can you actually have the public who do see something, say
something, know how to approach law enforcement or the
government, whether they work at a bank or another financial
institution, or some sort of interaction where they can
actually take their complaints and, more importantly, their
suspicions in a safe way to those who could prevent the next
Orlando or San Bernardino.
We saw this too. I had the privilege of going and working
with the L.A. Joint Terrorism Task Force the day after the San
Bernardino attacks, and it was pretty interesting to see that
after the attack, a lot of the neighbors were saying, well, we
saw suspicious things taking place, but we didn't want to say
something.
So I think it goes beyond just financial services, but if
we can actually educate our public and, sadly, we also have a
new generation. So my students at George Washington University
who just graduated, they were children on 9/11. For them, it
was a movie. We all know exactly where we were and, more
importantly, we were inculcated in that culture of see
something, say something, and we have to get the next
generation to be just as aware that these people have this
intent, irrespective of what the motivation is, and want to use
violence against innocent people.
Mr. Barr. To follow up with any of the other witnesses, in
the financial system, is there a blind spot? Is there something
that we are not doing in our financial system that we should be
doing to help identify suspicious financial activity that might
tip Federal law enforcement to weapon purchases, things like
that?
Mr. Gurule. I think it is difficult, because, again, the
lone-wolf terror attack does not involve a lot of money. These
are financed with a few thousand dollars at most. I can't
imagine that the Orlando shooting cost Mateen more than that.
And so I think it is very difficult to identify any financial
transaction that would alert or raise some red flag, and then
cause law enforcement to react. But I am concerned about people
who have knowledge of someone who is going to commit a
terrorist attack, such as the wife and other associates of Omar
Mateen, and there is no legal obligation to disclose that
information to the police.
It is interesting, however, that if you are a
schoolteacher, you have to disclose information regarding a
child who has been physically abused, or you believe has been
sexually abused. If you are a nurse or a doctor, you have to
disclose that to the police, but if you are a citizen and you
have reason to believe that your boyfriend or close associate
is going to launch a terror attack, you have no legal
obligation to disclose that to anyone. You have not committed a
crime by keeping that information to yourself.
And by the way, if you provide that person some money,
let's say for benign purposes, or some other material support,
that isn't even a crime. Under the Material Support statute
dealing with lone-wolf terrorists, it is only a crime if you
provide the material support knowing or intending that that
support will be used to commit a violent crime. So if you
provide it for a benign purpose, you haven't committed a crime,
and you are not prosecutable.
And so one of the recommendations that I made is that I
think that those particular statutes, 2339(a) and 2339(b), need
to have a lower scienter like 2339(b) that says, if you
knowingly provide material support to a foreign terrorist
organization (FTO), regardless of your intent, that is a crime.
And I think that we need to bring those two statutes in line
with 2339(b), and I am not saying eliminate the knowing or
intending, but make it a lesser crime if you have knowledge
that the person is a terrorist, or about to commit a terrorist
attack, and you provide that person material support.
Mr. Barr. Thank you.
Chairman Fitzpatrick. The gentleman's time has expired.
We are going to go to a second round of questions. And the
gentleman from North Carolina, Mr. Pittenger, is recognized.
Mr. Pittenger. Thank you so much, Mr. Chairman. I really
appreciate your leadership on this important task force.
One reference to Mr. Poliquin's statement and inquiry dealt
with the data, and your response, I believe, Juan, was that we
have legislation that hopefully will get passed before we
break, to collect data from Customs and Treasury and Commerce,
bill of lading and other export-import data, and then
assimilate that and then provide it to FinCEN and other
departments, so Customs and others. So at least we are moving
that direction on that.
Ms. Realuyo, I would like to ask you, and Mr. Farah, your
thoughts in terms of the nexus between the criminal element and
the terrorist. I know that you are getting ready to have a
conference in that regard. And just speak to that issue, if you
would.
Ms. Realuyo. Several years ago, Doug and I began taking a
look at this convergence of terrorism and crime. Traditionally,
terrorist groups have state sponsors, and there are still state
sponsors that do exist, in the case of Iran supporting
Hezbollah, but what we have seen with contracting Al Qaeda
core, which was basically funded by donors, as opposed to what
we see now in terms of ISIL and its other affiliates, Boko
Haram, Al Qaeda in the Islamic Maghreb, they are actually
reliant on criminal activities to support and sustain
themselves, and some groups have actually moved away from the
terrorist aspirations and just become criminal groups.
What we are seeing, then, is an actual need now to combine
those who are doing the law enforcement, military intelligence,
information gathering, and then, more importantly, operations
to counter crime and counter terrorism in a much more
interdisciplinary and interagency way.
So the way we are looking at this is actually we refer to
them now academically at the National Defense University as
illicit networks, which will also include nuclear
proliferators, as well as all of their facilitators. And this
is what we are trying to do, is when you take a look at--and
Doug can speak much more in depth about this, drug trafficking
transactions are actually supporting terrorist groups, as we
have seen through the Lebanese Canadian Bank, is that case was
briefed to you all here before, but this question that we were
limiting ourselves by having silos of excellence here in
Washington, right? Those who did counterterrorism only looked
at terrorist groups, and those who worked on crime or drug
trafficking were very siloed.
What we are seeing now is that our adversaries who threaten
sovereignty and, more importantly, our economic viability, are
actually joining forces, if not becoming these hybrid groups,
and that is the case when we take a look at things like the
FARC, Hezbollah, Shining Path, and then, more importantly, the
metastasis of ISIL, which is really an auto-financed group, it
is something we hadn't really seen before, that has actually
created its own territory across two countries.
I defer to Doug, who can go much more granularly into this
convergence that we have actually seen on the ground.
Mr. Farah. Thank you, Celina.
I think it was in the early days a few years back, there
was a lot of resistance to the idea, because the idea was that
terrorists didn't care about money and criminals didn't care
about ideology or whatever was diving terrorists. And over
time, it became abundantly clear, and I think in the early
days, Juan and John and others were working on in the policy
world and on the ground seeing exactly how, for example, Al
Qaeda was able to use blood diamond flows controlled by
Hezbollah in West Africa to move and hide their value. And as
you see that I talked about today, gold and other things are
available to them. And it doesn't matter anymore on the ground
really what you belong to if you are--because so many groups
are in the money-making business together. And I think that
goes back to one of the points I was making in my testimony
about states that allow this or protect transnational organized
crime as instruments of policy.
So when you have Venezuela using the FARC, which is both a
designated terrorist organization and a major drug trafficking
organization, as an instrument of their foreign policy and
allowing them safe harbor and constructing in their country a
safe space where Hezbollah can come, where multiple other
terrorist organizations can come, learn how to benefit from the
drug trafficking and exchange methodologies and thoughts, then
you have an entirely different level of complicity and
convergence in ways that are very, very hard to disentangle.
Mr. Pittenger. Can I ask you a quick question? Do you have
a concern with FARC, the agreement between FARC and Venezuela?
Mr. Farah. Yes, sir, I do. I would say there is a
potential, there is a template that other groups have followed
that I think that the FARC is very well advised on and is
likely to follow. I think the primary leader, or the designer
of the template are both the FMLN in El Salvador and the FSLN
in Nicaragua, where they learned that they could take control
of the state. Hugo Chavez and Fidel Castro are not exempt from
this as well. They also are the brains behind how to move into
the process as a political force, get rid of all the moderates
in that political force that you create, and go almost directly
into illicit financing mechanisms to perpetuate yourself in
power with the complete absence of accountability.
I think in my written testimony, I noted that, for example,
Daniel Ortega has acknowledged that he gets about $500 million
a year from Venezuela, supposedly from the sale of oil, which
is not nearly that much, which is essentially his personal
slush fund. It doesn't--it is 20 percent of the national budget
that is not allocated in the national budget in any way and
which there is no oversight.
In El Salvador, you have Alba Petroleos, which is
generating, by their own accounts, $1 billion a year, which is
23 percent of the national budget, which does not go through
any appropriations process, any oversight whatsoever, and is
simply the slush fund of senior party leaders, who have deep
ties to the FARC, which allows the FARC to move money out and
launder it through their state structure.
So I think that is an enormous problem, which the FARC is
going to take full advantage as they move forward, because I
think at the end of the day, one, it comes down to one's
assumptions. The FARC are genuinely interested in becoming--
incorporating into the peace process and joining the democratic
process, because that is what they believe, or is it an
extension, is the peace process an extension of their political
agenda to take power and hold it over a long period of time? I
believe the latter.
Mr. Pittenger. I thank each of you for your invaluable
insight and assistance.
I yield back.
Chairman Fitzpatrick. The ranking member, Mr. Lynch, is now
recognized.
Mr. Lynch. Thank you again, Mr. Chairman.
Professor Realuyo, in your remarks, you identified those
five or six points that you really got to focus. I want to talk
about point four, which is enhancing our financial intelligence
in some of these areas, and especially Iraq and Syria where
that is going on.
We have a bill that I think has four Republican Members and
four Democratic Members here, to establish basically a reward
system that allows and enables the Secretary of the Treasury to
prepare a reward system for intelligence coming out of that
area. One of our great difficulties is that we don't have boots
on the ground in a lot of these spots. You are right, it is a
very unique auto financing system, they have control of
territory, and we don't have a whole lot of information coming
out. So one of the thoughts was to, and not only in this case
with ISIL, but with other--I think Mr. Cassara has described
them as criminalized nation states, being able to get
information through whistleblowers or people who will come
forward.
Do you think that is a practical approach to try to
incentivize some greater intelligence capacity within our
partner states, and also with insurgencies that are going up
against Bashar al-Assad and some of these other, more
criminalized nation states?
Ms. Realuyo. What I think you are referring to is something
we call Rewards for Justice, a type of model. And it actually
worked in terms of the very beginning of our engagement in Iraq
to find Saddam Hussein and his sons. And actually, those who
helped identify and locate Saddam Hussein are now living in the
United States as their reward for justice. So it is an
interesting way to complement the types of things that we are
doing on the financial front, but also internally, we still
need to invest a lot more in terms of those who are within our
U.S. Government on how to use and then, more importantly,
validate that type of information that might be coming, because
if it is just a question of, like, we call confidential
informants that we use throughout law enforcement agencies,
such as the DEA, we have to figure out a better way to do that.
So the question is, how do we enhance our own intelligence
capabilities, whether they be in our military or across the
greater and broader U.S. Government, on how to keep up with--
and this is the thing, I think, most of us are quite concerned
with. I know Juan and I have talked about it.
Financial innovation and financial technology is moving at
an unprecedented pace, and unfortunately, a lot of the talent
and those who can detect the backdoors to these very
constructive technologies that help us, whether they be virtual
currencies or mobile payments, we need to get that kind of
brain trust into the U.S. Government to help us take a look at
these new anomalies. And that is what we are looking at, more
ways to proactively promote public-private partnerships, which
has been embarked, by the way, in the area of cybersecurity,
because the firms that we are working with really understand
the cost of these cyber breaches, we should impart that into
financial services and the broader sector with the same aplomb
as we are doing in the cyber sector.
Mr. Lynch. Great.
And, Mr. Zarate, you have had a good perspective inside
Treasury. One of the frustrating parts for us on this committee
is when we--we were in the Gulf recently, and we got--one of
our Treasury attaches is trying to interface with the FIUs in
those areas. We have one young agent there who is handling five
different countries. So we are understaffed. And with the
complications with money coming out of the Gulf going up to
Iraq and Syria, it is a real problem.
We have a bipartisan amendment to try to push through some
more money to FinCEN and parts of Treasury that would deal with
that, OTA and other departments. How critical is that to--as
the professor pointed out, we are in a competition for this
talent, and the folks who are really, really keen on some of
the cutting-edge technology in the financial services area are
being pulled away by big money, understandably, by the private
firms, and that is why these partnerships are so important.
How critical is it to make sure that we get the resources
to hire the people, and especially with--as Mr. Gurule has
indicated, I forget how many money service businesses are out
there, but just to get coverage on that, how important is it to
pump more money into FinCEN and Treasury so that we plus-up our
capacity within the government?
Mr. Zarate. I think it is incredibly important. And I think
you are right that we have been under-resourced in a whole
range of areas in this domain for a good period of time. And I
will tell you that what you saw out in the Gulf was actually
leaps and bounds beyond what we had when I was there, when we
were fighting for budget dollars just to put one attache out
there. Now you have, I think, three in the Gulf region. But I
think you are absolutely right. The international presence has
to be deeper. The technical expertise has to be present, and
you are right that the market itself is sucking the expertise
out of the U.S. Government. I work a lot with the private
sector now on the outside, and a lot of these major global
banks look like Treasury alumni associations--
Mr. Lynch. Yes.
Mr. Zarate. --and all of the key global compliance officers
are all Treasury alumni, and for good reason--
Mr. Lynch. Yes.
Mr. Zarate. --for good reason, but it does demonstrate that
there is a real demand in the private sector and in the public
domain.
A final point: I think we now realize, and this comes from
the years of experience that is represented on this panel, that
these issues are not just critical to financial regulation, but
they are central to our national security. And we have
underinvested in this domain, both in the context of our tools
and resources, but also our long-term strategic thinking in
this domain. If you look at this compared to our DOD dollars,
and those are important, I am a huge fan of our kinetics and
our military force and projection, but if you look at it in
comparison, it is miniscule, when in many regards, this is a
key asymmetric power for our country, and we need to be
thinking strategically, we need to be adapting quickly, and we
need to contend with the fact that our enemies are thinking
pretty creatively around our controls and our power, and that
starts, first and foremost, with the office we created, the
Office of Terrorism and Financial Intelligence, they need to be
resourced.
Mr. Lynch. Thank you. I know I am over my time, and I
appreciate the chairman's indulgence, but just to put a finer
point on the talent cycle here, even here on our subcommittees
and task forces, Treasury is hiring away our staff, because
someone else is hiring away their staff. And so, I guess it
is--
Mr. Zarate. Robbing Peter to pay Paul.
Mr. Lynch. There is just--we have to train a lot more
people on the things we are working on, but I am preaching to
the choir here. As a group, you have been tremendous on this
stuff.
I yield back.
Chairman Fitzpatrick. The gentleman from Arkansas, Mr.
Hill, is recognized.
Mr. Hill. Thank you, Mr. Chairman. Just before I switch
subjects, if I could return back to this issue of beneficial
ownership and just continue my visit here on that.
So I understand the States and State incorporation laws,
and there is a lot to be done there, and I am for any
innovative suggestions on that. But still, regardless of that,
whether I incorporate in Delaware or I incorporate in Arkansas,
if I have an LLC, and it is domestic, I have a taxpayer ID
number. And every year I file a balance sheet and K-1s for all
those investors, at every percentage, not 25 percent, but at
.9999 percent.
Therefore, I think it is a superior support with also a
legal basis that it has to be accurate or you violated Federal
law. Whereas, the statutes on, do I fill out my LLC information
form with the Secretary of State, I am not sure how imposing
that is.
So I would like other members of the panel to kind of react
to Mr. Zarate's and my little colloquy we have had. Any other
thoughts on this subject?
Mr. Gurule. I would add simply that, again, it seems to me
that it is a critical component of know-your-customer. Know-
your-customer has been a fundamental principle guiding
transparency with financial institutions through the Bank
Secrecy Act for decades.
Mr. Hill. Right.
Mr. Gurule. And I think that it is really part and parcel
of that. I don't think that the principle of know-your-customer
is being fully implemented if we don't know who the beneficial
owner is of the particular company that is the customer of the
bank. We have a CIP program that again requires--regulations
require a customer to identify itself, and his name and address
basically. And I don't think that goes far enough.
And so I think to fully implement the requirement of KYC to
fully understand who you are doing business with, we need that
information. And I don't think that it is an unreasonable
request to impose on banks.
Mr. Hill. Fair enough. And I don't--I can understand that
point of view. And people already have that Gramm-Leach-Bliley
obligation. It is a legal obligation they have. They have an
obligation to file an SAR when they see something that merits
that. So those are already in place. In other words, they
should know their beneficial owners, particularly in a credit
situation. I would argue they know them all intimately because
of the guaranty process to get that credit facility put in
place.
But I am up here at a macro level saying, if I was trying
to collect big data and I wanted it in a consistent format, and
use some discovery techniques that are consistent with the
Fourth Amendment, all this talk about whether the banks have it
digitized or it is in paper in their files and all is, you
know, a more--it is less robust than an IRS solution if I were
looking for the needle in the haystack. So that is my comment
on that.
Anybody else want to go there? Probably not. Good. I have
worn you out.
So let me, if I could, switch to--well, let me do one thing
before I switch to Section 314. How about the idea of a utility
format for this data repository at the state level? We have
automated secretaries of state, we have paper-based, we have
robust Internet accessibility. I would still argue it is not
timely and it is not impressive. But we can automate it.
So what about a utility-type structure? Mr. Zarate, do you
want to start with that, and then others, to tackle this
beneficial ownership issue?
Mr. Zarate. Congressman, I think the utility model is
incredibly important to pursue, not just in the context of
ultimate beneficial ownership information (UBO), but more
broadly to provide a new model for how the anti-money
laundering system itself works.
I think we will talk about 314 in a second, but the reality
is the current system is very much stovepiped institution by
institution, transaction by transaction. We are now moving into
an age when not only can we deal with big data, but we have
potential use of AI technologies, the ability to collect data
and analyze it in ways that are helpful not only to look at the
past but also even predictive ways. And there are ways of
collectivizing the risk and looking at vulnerabilities across
sectors, as opposed to just one institution at a time.
And so to your point, I think a utility for purposes of
State registry of corporations and ultimate beneficial
ownership, is a great idea because people need access to that
information, be they a bank or a car dealer or another
regulated entity. But more broadly, and I think a big idea that
stems from this, is we need to think aggressively about how we
use new technologies to actually make this system more
effective, to use the data we have. We have a lot of data. And
it is part of what this task force has been looking at. And to
use that technology to actually protect privacy and civil
liberties, while also making the information more valuable on a
real-time basis.
So we have talked a lot about this over the years, but
there is now an opportunity, given the technology, to create a
sense of a utility not just around particular data points, but
around the entire system itself.
Mr. Hill. Thank you.
Mr. Chairman, may I have--would you yield me a minute?
I just want to touch on 314 about this issue of
collaboration, Professor Realuyo, you mentioned--do you
anticipate that the best approach to that is another center
like our center in Pittsburgh on cyber or do you view it as
just statutory protections that allow collaboration when it is
needed? What do you think the best way to achieve collaboration
is from our point of view as legislators, where there needs to
be a framework, some sort of a legislative framework change
made?
Ms. Realuyo. I have my lawyers here. But the real problem,
and more importantly, we have been working on at our agency on
counterterrorism and countercrime issues. You have to--on top
of having actual requirements for information sharing and
mechanisms for really timely information sharing, because we
see now that our adversaries are moving in milliseconds. And if
you are aware of an app called WhatsApp that the rest of the
world is using, you can really send instructions quite quickly.
And we are only catching up in terms of this piece.
You have to create this culture of sharing. And I think it
has taken--for example, the military, for jointness, it has
taken decades for them to actually become what they call
purple. So we need to incite, and more importantly, when we are
looking inside the tragedies like Orlando and San Bernadino,
highlight the fact that we are not sharing at light speed, even
though our adversaries are operating at light speed, and then
use legislation that compels and create mechanisms.
So you have to have the actual legal framework, and then
within the legal framework, have the institutions who have--led
by people with political will to actually enforce that
legislation, and then have these actual mechanisms that can
incorporate real-time data and information, and then pass it
along to those in law enforcement or in the intelligence or
military to actually act upon it.
We have greatly improved in the last 15 years since the
tragic attacks of September 11th, but we have to see how these
different facets help us to achieve the mission of countering
terrorist financing.
Mr. Hill. Would any other panel members like to comment on
that?
Mr. Zarate. I can weigh in and defend Celina, if you like,
sir. A couple of things--I think the Pittsburgh Center is an
important model because it creates a discipline around the
information sharing that is more than just sharing one piece of
data at a time. It is about looking at trends, looking at
particular cases.
In the U.K., they are experimenting with a model called
JMLIT, which is a joint money laundering task force that is
actually combining the private sector and the public sector in
a more aggressive way. So I think more aggressive information-
sharing models work.
One thing to keep in mind--and I know this task force has
traveled a lot and has great influence when you meet with
counterparts. One of the restraints internationally, though, is
in laws around the world that prevent the sharing of customer
data and information, even within a global institution. So a
major global bank, let's say based in the United States, can't
necessarily see on a real-time basis information about a
customer or a transaction that happens in Malaysia or that
happens in Turkey, in part because there are restrictions as to
how that data can flow outside the borders of that country.
In a global enterprise, when we are asking institutions to
manage their risk and where we want real-time information
sharing, that is a 19th Century model for how we manage risk.
And I think we have to take that up not only internally, but
also with our counterparts around the world.
Mr. Hill. Thank you, Mr. Chairman. I yield my time back.
Chairman Fitzpatrick. The gentleman from Arkansas, Mr.
Hill, has yielded back. And with that, the time for all
questions has expired.
I also want to again thank our witnesses for their
testimony, not just today, but for your willingness to appear
before this task force on multiple occasions and for providing
your expertise even between hearings.
One of the things we tried to do with this task force was
recognize the body of sort of your life's work, what you do
each and every day, which is think about and work to protect
our country, the citizens, the economy, and bring that focus
back here to the House Committee on Financial Services.
And one of the other goals I had for the task force was to
make sure that, as we look back at the work between the members
of the task force and between parties, that there would be no
light between us, since we are all singularly focused on the
goal of chasing down terror finance, cutting it off, and
keeping our country safe. And that occurred largely as a result
of the work of Ranking Member Stephen Lynch, who has been
really an incredible partner throughout this process. And I
want to thank Mr. Lynch for his work.
And the work that we have going forward, we have a series
of bills that are going to be coming out here.
And finally, I think the witnesses would all recognize that
the work we do is supported by a lot of staff back in the
office. They are the ones who keep the wheels turning. And Joe
Pinder--when this idea was first brought to the Committee on
Financial Services and presented to Mr. Pinder, not only did
Joe immediately embrace the idea of going forward with this
task force, he had already in his mind been thinking about this
for some time; this is something he has a special interest in,
and he has brought an incredible expertise to this.
And so, Joe, I want to thank you for what you do, what you
have have done for the task force, what you do for our
committee, and have done for our country.
But the members of the task force have committed a lot of
time and effort over the course of the last year. I see French
Hill is still here at the very end. And French has never missed
a meeting, and has been an incredible resource with his
background both in the Administration and now as a Member of
Congress, as well as in the financial services sector. He is
laser-focused on the issues, not just the ones he talked about
here today, but the ones he has been talking to us about for
the last more than 12, probably 18, months as we went through
this work.
So with that, I just want to again thank the witnesses for
what you have done for us. We are going to keep in touch. When
the report comes out, that will be a result of staff work.
There is a series of bills that will be introduced very
shortly. And as those bills are introduced, it is our
commitment to the witnesses to keep you engaged with us as we
ask for your support. We believe these bills are as bipartisan
as the work of this task force has been, and we hope to see
them on the Floor soon and hopefully over to the Senate after
they pass the House of Representatives.
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, and without objection, this hearing is
adjourned. Thank you very much.
[Whereupon, at 12:20 p.m., the hearing was adjourned.]
A P P E N D I X
June 23, 2016
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