[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




                               BEFORE THE

                       TASK FORCE TO INVESTIGATE

                          TERRORISM FINANCING

                                 OF THE


                     U.S. HOUSE OF REPRESENTATIVES


                             SECOND SESSION


                             JUNE 23, 2016


       Printed for the use of the Committee on Financial Services

                           Serial No. 114-94


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                    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
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
FRANK GUINTA, New Hampshire
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
                            C O N T E N T S

Hearing held on:
    June 23, 2016................................................     1
    June 23, 2016................................................    41

                        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


Prepared statements:
    Cassara, John A..............................................    42
    Farah, Douglas...............................................    52
    Gurule, Hon. Jimmy...........................................    62
    Realuyo, Celina B............................................    71
    Zarate, Juan C...............................................    87



                        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 
    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 
    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 
    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 
    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 
    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 
    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 


    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 
    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 
    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.


    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 
    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 
    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 
    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.


    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 
    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.

                       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 
    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 
    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.


    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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