[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]






 
                   THE TRAFFICKERS' ROADMAP: HOW BAD.
                    ACTORS EXPLOIT FINANCIAL SYSTEMS.
                   TO FACILITATE THE ILLICIT TRADE IN.
                  PEOPLE, ANIMALS, DRUGS, AND WEAPONS

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

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                     INTERNATIONAL DEVELOPMENT AND
                            MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 4, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-88
                           
                           
                           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
 
 
 
 
                            ______                       
 
 
              U.S. GOVERNMENT PUBLISHING OFFICE 
42-863 PDF             WASHINGTON : 2021 
 
                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            SCOTT TIPTON, Colorado
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
DENNY HECK, Washington               TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
RASHIDA TLAIB, Michigan              DAVID KUSTOFF, Tennessee
KATIE PORTER, California             TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois                JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts       BRYAN STEIL, Wisconsin
BEN McADAMS, Utah                    LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia            WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts      VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
           Subcommittee on National Security, International 
                    Development and Monetary Policy

                  EMANUEL CLEAVER, Missouri, Chairman

ED PERLMUTTER, Colorado              FRENCH HILL, Arkansas, Ranking 
JIM A. HIMES, Connecticut                Member
DENNY HECK, Washington               FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California             ROGER WILLIAMS, Texas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          ANTHONY GONZALEZ, Ohio
MICHAEL SAN NICOLAS, Guam            JOHN ROSE, Tennessee
BEN McADAMS, Utah                    DENVER RIGGLEMAN, Virginia, Vice 
JENNIFER WEXTON, Virginia                Ranking Member
STEPHEN F. LYNCH, Massachusetts      WILLIAM TIMMONS, South Carolina
TULSI GABBARD, Hawaii                VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 4, 2020................................................     1
Appendix:
    March 4, 2020................................................    41

                               WITNESSES
                        Wednesday, March 4, 2020

Adkins, Travis L., Lecturer, African & Security Studies, Walsh 
  School of Foreign Service, Georgetown University...............     6
Kassenova, Togzhan, Senior Fellow, Project on International 
  Security, Commerce, and Economic Statecraft (PISCES), Center 
  for Policy Research, Suny-Albany...............................     8
Peters, Gretchen, Executive Director, Center on Illicit Networks 
  and Transnational Organized Crime (CINTOC), and Chair, Alliance 
  to Counter Crime Online (ACCO).................................    10
Realuyo, Celina B., Adjunct Professor, The George Washington 
  University Elliott School of International Affairs.............     5
Swift, Angel Nguyen, Founder and Director, STAT (Stand Together 
  Against Trafficking), and Advisor, Enigma Technologies.........    12

                                APPENDIX

Prepared statements:
    Adkins, Travis L.............................................    42
    Kassenova, Togzhan...........................................    51
    Peters, Gretchen.............................................    63
    Realuyo, Celina B............................................    80
    Swift, Angel Nguyen..........................................    97


                   THE TRAFFICKERS' ROADMAP: HOW BAD

                    ACTORS EXPLOIT FINANCIAL SYSTEMS

                   TO FACILITATE THE ILLICIT TRADE IN

                  PEOPLE, ANIMALS, DRUGS, AND WEAPONS

                              ----------                              


                        Wednesday, March 4, 2020

             U.S. House of Representatives,
                 Subcommittee on National Security,
                          International Development
                                and Monetary Policy
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 2128, Rayburn House Office Building, Hon. Emanuel Cleaver 
[chairman of the subcommittee] presiding.
    Members present: Representatives Cleaver, Perlmutter, 
Sherman, Vargas, Gottheimer, McAdams, Garcia of Illinois; Hill, 
Lucas, Williams, Emmer, Gonzalez of Ohio, Rose, Riggleman, 
Timmons, and Taylor.
    Ex officio present: Representative McHenry.
    Also present: Representatives Gonzalez of Texas and 
Pressley.
    Chairman Cleaver. The Subcommittee on National Security, 
International Development and Monetary Policy will come to 
order. Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of this subcommittee are authorized to 
participate in today's hearing.
    Today's hearing is entitled, ``The Trafficker's Roadmap: 
How Bad Actors Exploit Financial Systems to Facilitate the 
Illicit Trade in People, Animals, Drugs, and Weapons.
    I now recognize myself for 5 minutes to give an opening 
statement.
    My district is the hometown of former President Harry 
Truman. He lived in Independence, Missouri, which is sort of a 
suburb of Kansas City, Missouri. It is also the site of the 
Harry S. Truman Presidential Library, and the home of many, 
many hardworking middle-class Americans.
    In November of last year, a Federal raid involving 
Independence, Missouri, police officers resulted in the arrest 
of 21 individuals in a human trafficking sting operation. The 
arrest reminds me that the scourge of trafficking is all around 
us. My home State of Missouri ranks 16th in the country for 
human trafficking cases, with 114 cases reported just last 
year.
    Our country is among the top three origin points for this 
wicked scheme and system. Today, 24.9 million people worldwide 
are victims of human trafficking. This reality grips our heart 
and grabs our attention. However, it is a slice of a much 
broader and invidious structure. Trafficking in all forms--
drugs, animals, weapons, humans, whatever--is a mechanism to 
move and clean dirty money. It allows for criminal systems to 
flourish, from ISIS fighters who have looted World Heritage 
sites and sold ancient artifacts to bankroll their war machine, 
to those who sell counterfeit medication to desperate and 
ailing people.
    Trafficking is an enormous financial enterprise, amounting 
to somewhere between $1.6 trillion and $2.2 trillion. The 
Department of the Treasury's 2020 National Strategy for 
Combating Terrorists and Other Illicit Financing highlights 
that, ``the same strength that makes the United States an 
attractive destination for legitimate investment--a large 
economy; and an open business climate for investment and 
financial services--also can attract criminals and other 
illicit actors seeking to hide or disguise their ill-gotten 
gains or fund their dangerous plots.''
    This illicit system knows no race, creed, nor party 
affiliation. It unifies us as a potential victim, and today 
unites us in opposition to this common threat.
    It is for this reason that I am excited, under the 
leadership of Full Committee Chairwoman Waters, to join with 
Subcommittee Ranking Member Hill in launching this initiative 
to directly confront trafficking in all forms. This hearing 
will be the first in a series aimed at examining curtailing 
trafficking at its roots. As many of my colleagues will agree, 
we have done a lot of legislative nipping at the fringes of 
this problem. It is now time for us to strike at its core.
    This hearing will lay the framework for this conversation, 
and hopefully will provide our committee with insight and 
future direction. As we start this dialogue, it is important to 
engage from a frame of common understanding. We know that there 
is cross-cutting and collaboration across trafficking networks 
within our system. There is a convergence in human trafficking 
and drug trafficking roots as well as the weapons of mass 
destruction (WMD) trafficking and narcotics trafficking 
networks.
    There are common mechanisms and vulnerabilities that 
trafficking facilitators are exploiting within our financial 
system to enable their illicit activities. We also know that 
the crime of trafficking, itself, is evolving. This past 
January, a joint investigation involving the United States, 
Germany, the Netherlands, Northern Ireland, and the United 
Kingdom helped take down a website which the Justice Department 
says sold billions of stolen usernames, passwords, and other 
data. One credit union in my district notes that 20 percent of 
their cards were affected by data breaches in 2019. And CNBC 
reported that hackers may have accessed over $8 billion in 
consumer records in 2019.
    So, I am eager to start this conversation and hear from you 
all about these issues as well as the legislative issues before 
us today, championed by my colleague, Mr. Foster, and 
Congressman McAdams. I look forward to hearing from all of you.
    I now recognize the ranking member of the subcommittee, Mr. 
Hill, for 4 minutes for an opening statement.
    Mr. Hill. Thank you, Mr. Chairman, for convening this 
hearing. And I thank our witnesses for participating today. 
This is indeed a topic that we care about deeply on both sides 
of this dais. I appreciate Chairwoman Waters caring about it 
and helping lead this human trafficking initiative within our 
committee.
    Similar to our last subcommittee hearing, in the 5 years 
that I have been working on illicit finance issues, I don't 
remember analyzing it from the point of view of trafficking, so 
I look forward to an interesting dialogue and learning ways to 
mitigate these threats.
    In my home State of Arkansas, drug trafficking continues to 
be a heightened concern. I have heard stories from many 
heartbroken Arkansans detailing the opioid crisis that has 
claimed the lives of their young ones. We cannot allow more 
families to be destroyed by the opioid crisis, which is killing 
more than 130 Americans a day.
    Overdoses are rising across Arkansas and fentanyl continues 
to be a growing threat in our communities. That is why I am 
proud to lead H.R. 2483, the Fentanyl Sanctions Act, with my 
friend, Congressman Rose of New York, which is the first-ever 
fentanyl sanctions effort in the House. The legislation would 
apply pressure on the Chinese government to honor their 
commitment to make fentanyl illegal, and provide the United 
States with more tools and resources to go after illicit 
traffickers in China, Mexico, and other countries.
    A couple of years ago, I had the pleasure of meeting 
Vanessa Neumann, a Venezuelan-American diplomat who now 
consults on ways to dismantle illicit finance. Her 2017 book, 
``Blood Profits: How American Consumers Unwittingly Fund 
Terrorists,'' details a variety of ways that the $400 billion 
counterfeiting industry is funding terrorism around the world.
    She outlines that 11 percent of the approximately 5.7 
trillion cigarettes smoked every year are illicitly traded. The 
illicit tobacco trade is larger than the illicit trade of oil, 
wildlife, timber, arts and cultural property, and blood 
diamonds, combined. Furthermore, the funding of tobacco 
trafficking often comes from developed economies, including the 
United States. To that end, I am disappointed that we were not 
able to have a tobacco trafficking witness here today for the 
panel. I understand that this industry can often be politically 
charged in nature and can take away from the larger discussion. 
However, it would have been valuable to learn just how 
persistent tobacco trafficking is financed and how it is 
benefitting terror organizations.
    Today, I am also interested in learning more about the 
financing of trafficking and how and when the lines between 
terror financing and trafficking financing become blurred. As I 
understand it, following the aftermath of the 9/11 attacks, 
President Bush invoked an Executive Order which has made it 
more difficult for terrorist groups to access their funding. As 
a result, global terrorism has merged with organized crime to 
create financing workarounds. These intertwined transnational 
relationships are complex and very adaptive.
    And with that, let me yield the balance of my time to my 
friend from North Carolina, the ranking member of the Full 
Committee, Mr. McHenry.
    Mr. McHenry. I thank the ranking member for yielding, and I 
thank the panel for being here. This is quite a challenging 
issue for us to tackle. This committee has the capacity, and 
has the jurisdiction to limit, inhibit, impair, and delay the 
ability of traffickers to fund themselves. So we are looking 
for ideas to meet this challenge, and there is consensus on 
both sides of the aisle that we have to do something. We have 
to take action.
    So I am grateful that we have a bipartisan panel and a 
bipartisan hearing, and I thank Chairman Cleaver for convening 
this hearing, and I look forward to the testimony.
    Chairman Cleaver. Thank you. Today, we welcome the 
testimony of five witnesses. Our first witness today is Dr. 
Togzhan Kassenova. Thank you for being here. Dr. Kassenova is a 
Senior Fellow with the Project on International Security, 
Commerce, and Economic Statecraft at the Center for Policy 
Research, SUNY-Albany; a Senior Nonresident Scholar at the 
Institute of International Science and Technology Policy at the 
Elliott School; and a Nonresident Fellow at the Nuclear Policy 
Conference at the Carnegie Endowment for International Peace 
from 2011 to 2015. She has served on the United Nations 
Secretary-General Advisory Board on Disarmament Matters.
    Our second witness, Mr. Adkins, has nearly 20 years of 
experience working with vulnerable populations in over 50 
nations across Africa, the Middle East, and Latin America. He 
has held leadership positions at the National Democratic 
Institute; InterAction; and the Subcommittee on Africa, Global 
Health, Human Rights and International Organizations, among 
others. He is currently a Lecturer on U.S. Policy, and African 
and Security Studies at Georgetown University.
    Our third witness is Celina B. Realuyo. Thank you for being 
here. She is Professor of Practice at the William J. Perry 
Center for Hemispheric Defense Studies at the National Defense 
University, where she focuses on U.S. national security, 
illicit networks, transnational organized crime, 
counterterrorism, and threat finance issues in the Americas. As 
a former U.S. diplomat, an international banker with Goldman 
Sachs, a U.S. counter-terrorism official, and a Professor of 
International Security Affairs at the National Defense 
Georgetown, George Washington, and Joint Special Operations 
Universities, Professor Realuyo has over 2 decades of 
international experience in the public, private, and academic 
sectors.
    Our fourth witness is Gretchen Peters, an authority on the 
intersection of crime and terrorism, money laundering, and 
transnational crime. She is Executive Director of the Center on 
Illicit Networks and Transnational Organized Crime. She chairs 
the Alliance to Counter Crime Online. She serves on the 
Advisory Board of the Center on Economic and Financial Power, 
and previously co-chaired an OECD Task Force on Wildlife and 
Environmental Crime.
    Our final witness is Angel Nguyen Swift, who is an Advisor 
and Independent Consultant with Enigma Technologies, a data 
intelligence company, where she most recently worked as the 
Vice President of Compliance and Financial Crime Solutions. She 
is also the creator of the Stand Together Against Trafficking 
(STAT) project, which connects the anti-human-trafficking 
community to identify and share financial indicators of human 
trafficking activity. To further this mission, she has 
partnered with Polaris, the Association of Certified Anti-Money 
Laundering Specialists, and Enigma to leverage technology to 
empower the sharing of these financial indicators across the 
anti-financial-crime community.
    Thank you all for being here. Witnesses are reminded that 
your oral testimony will be limited to 5 minutes. And without 
objection, your written statements will be made a part of the 
record.
    We will begin with you, Ms. Realuyo. You have 5 minutes.

 STATEMENT OF CELINA B. REALUYO, ADJUNCT PROFESSOR, THE GEORGE 
 WASHINGTON UNIVERSITY ELLIOTT SCHOOL OF INTERNATIONAL AFFAIRS

    Ms. Realuyo. Thank you, Chairman Cleaver, Ranking Member 
Hill, and members of the House Financial Services Subcommittee 
on National Security, International Development and Monetary 
Policy for this opportunity to appear before you today to 
testify on the threat posed by global illicit networks to U.S. 
national security.
    Illicit networks include terrorists, criminals, rogue 
states, and their facilitators. They engage in a diverse set of 
activities including human, drug, and arms trafficking; 
kidnapping; extortion; and money laundering. These nefarious 
networks share land, air, maritime, and cyber domains, tactics, 
and financial facilitators around the world.
    While the crimes they commit are not new, globalization has 
supercharged criminality in terms of scale, geography, income, 
and sadly, the violence that accompanies it. From unprecedented 
drug overdose deaths here in the United States to record 
cocaine production in Colombia, and the dramatic humanitarian 
crisis in Venezuela, global illicit networks are threatening 
the prosperity and security of the Western hemisphere.
    In Venezuela, external actors like Cuba, Russia, China, 
Iran, Hezbollah, Turkey, and Colombian armed groups, along with 
the illegal gold, oil, and narcotics trade, are sustaining 
Nicolas Maduro's authoritarian regime, whose tyranny and 
economic malpractice has led to over 5 million Venezuelans 
fleeing their country.
    Meanwhile, Mexican cartels capitalize on Mexico's proximity 
to the U.S. as a destination country for migrants and for 
illegal drugs. The cartels operate like corporations, assessing 
market supply and demand, securing supply chains, and financing 
their operations. They engage in all types of trafficking, 
including drugs, migrants, guns, gasoline, and even avocados. 
Just as they diversify their criminal activities, they launder 
their proceeds through banks, money services businesses, bulk 
cash smuggling, trade-based money laundering, front companies, 
and in cyberspace.
    Sadly, a culture of corruption, impunity and weak 
government institutions enables these Mexican cartels. They are 
extremely well-armed and use violence to empower themselves, 
resulting in a record 35,588 homicides in Mexico in 2019. They 
continue to control lucrative smuggling corridors across our 
southwest border and partner with Colombian traffickers, 
Central American gangs, and international facilitators.
    Despite the extradition of the notorious leader of the 
Sinaloa cartel, El Chapo Guzman, Sinaloa remains powerful and 
has gone global, distributing drugs to over 50 countries as far 
away as Australia, and engaging with Russian arms dealers and 
Chinese money launderers to support its operations.
    The Mexican cartels are actually fueling our opioid 
epidemic in our country. Illicit fentanyl, 50 times more potent 
than heroin, is smuggled into the U.S. directly through the 
Postal Service from China, but increasingly across our southern 
border. Orders and purchases from China are brokered online, 
and financed through a variety of mechanisms, including online 
payment processors and virtual currencies.
    The marketplace for narcotics like heroin, fentanyl, and, 
increasingly, methamphetamines, has expanded with the use of 
technology and the darknet that provides efficiency, ease of 
payment, anonymity, and convenient delivery by mail. This 
online evolution is truly disrupting the traditional marketing 
and distribution aspects of narcotics trafficking.
    So you might ask, what are we doing to counter the Mexican 
cartels and address the opioid epidemic? The U.S. and Mexico 
continue to strengthen their close cooperation to reduce 
demand, interdict drug flows, cut off the funding, and 
dismantle these cartels. Since the start of the Merida 
Initiative in 2008, the U.S. has helped Mexico more effectively 
eradicate poppy, detect labs, follow the money, prosecute drug 
traffickers, and enhance border security.
    Cartel violence in Mexico made world headlines last 
October, when Mexican Security Forces, overpowered by the 
Sinaloa cartel in a violent gun battle, were forced to release 
one of El Chapo's sons who was wanted for drug trafficking in 
the United States. Then in early November, criminal gangs 
ambushed and killed nine U.S.-Mexican women and children from 
the LeBaron family in Sonora, Mexico, sparking outrage on both 
sides of the border.
    To counter the cartels and the opioid epidemic and the 
evolving drug trade, our two countries must continue to reduce 
demand and supply, counter money laundering, and enhance our 
cyber measures to monitor and, more importantly, fight the 
scourge of how these illicit networks are financing themselves. 
Both countries need to keep up with the rapid changes in the 
production, marketing, financing, and delivery of narcotics, 
particularly synthetics that are threatening the security and 
prosperity of our region.
    Thank you for your attention, and I look forward to your 
questions.
    [The prepared statement of Ms. Realuyo can be found on page 
80 of the appendix.]
    Chairman Cleaver. Thank you very much. Mr. Adkins, you are 
now recognized for 5 minutes.

  STATEMENT OF TRAVIS L. ADKINS, LECTURER, AFRICAN & SECURITY 
STUDIES, WALSH SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY

    Mr. Adkins. Chairman Cleaver, Ranking Member Hill, and 
members of the subcommittee, thank you so much for the honor of 
inviting me to testify today. I would like to begin with a note 
of sincere thanks for your leadership and elevation of the 
critical issues related to illicit trafficking and the ways in 
which it devastates individual lives, families, and 
communities, as well as the environment and national and global 
security.
    I want to congratulate you all and thank you for launching 
the bipartisan Counter-Trafficking Initiative. This is exactly 
the kind of high-level and comprehensive effort needed to 
advance our legislative and law-enforcement capacities, as well 
as our efforts at transnational cooperation, providing us with 
the data, oversight, and information-sharing capacity to close 
the gaps in operational agility that we have in comparison to 
bad actors and illicit traffickers.
    Over the course of today's hearing, we will hear much in 
the way of data and statistics, outlining the scope and scale 
of illicit flows. My hope is that the quantitative data will 
always be wed to the qualitative nightmare of the human beings 
caught in the web of trafficking in persons. This global 
phenomenon has destructive and far-reaching social, economic, 
and political implications for individuals and governments at 
the local, national, regional, and international levels. Though 
there is some variance by subregion in the form of 
exploitation, women and girls are the primary targets of human 
trafficking worldwide. While the exploitation of trafficked 
human beings takes place in a variety of forms, the two most 
prevalent are sexual exploitation and forced labor.
    In terms of recent trends in the flows and movement of 
trafficked people, while human trafficking is a global and 
transnational challenge, the overwhelming majority of those 
detected are still within their countries of origin, not in 
foreign destination countries. Trend lines also make it clear 
that the international movements of trafficked persons is 
overwhelmingly from more impoverished regions into wealthier 
and more affluent countries in the world.
    Since the almost universal ratification of the United 
Nations' Trafficking in Persons Protocol in 2003, there has 
been a surge in nations creating legislative schemes to 
criminalize human trafficking worldwide. This surge coincides 
with the increased reports of the detection of trafficking 
victims over the past several years. While this could indicate 
an increase in the number of trafficked persons, it is likely 
to also indicate the national capacity improvement of nations 
for data collection, trafficking, and detection of human 
trafficked individuals, and that they have improved.
    While the subregions of sub-Saharan Africa and North Africa 
and the Middle East have seen improvements as well, they lag 
behind in detection and convictions, making them regions of 
relative impunity for human traffickers.
    While human trafficking and its convergence with other 
forms of illicit trade are justifiably viewed as security 
threats in their utility to finance transnational criminal 
organizations and terrorist groups, these threats are also 
rooted in the deep development challenges posed by weak and 
ineffectual states, including poor governance, official 
corruption, extreme poverty, regional instability, unresolved 
conflict, and excessive disease burdens, issues which place 
African populations at greater risk for the abuse, 
exploitation, and trauma of human trafficking.
    The illicit market for trafficking in persons has been 
linked to multiple crimes which enrich transnational criminal 
organizations and terrorist groups, including kidnapping, 
fraud, rape, commercial sex work, and the breaking of 
immigration and border laws, as well as money laundering and 
tax evasion. Trafficking in persons both converges with and 
helps to sustain transnational criminal organizations as well 
as terrorist organizations.
    I will close by saying that to get to the heart of this 
challenge, we certainly must address the methods, tactics, and 
the financing mechanisms of criminal organizations, but also 
the enabling environments that support their existence and 
growth.
    Thank you.
    [The prepared statement of Mr. Adkins can be found on page 
42 of the appendix.]
    Chairman Cleaver. Thank you, Mr. Adkins. Dr. Kassenova, you 
have 5 minutes.

   STATEMENT OF TOGZHAN KASSENOVA, SENIOR FELLOW, PROJECT ON 
   INTERNATIONAL SECURITY, COMMERCE, AND ECONOMIC STATECRAFT 
       (PISCES), CENTER FOR POLICY RESEARCH, SUNY-ALBANY

    Ms. Kassenova. Chairman Cleaver, Ranking Member Hill, and 
distinguished members of the subcommittee, thank you for the 
opportunity to contribute to this hearing.
    If a 10-kiloton nuclear bomb, like the one that North Korea 
tested, is dropped on Washington, D.C., a fireball of almost 
500 feet in radius will cover the City. Within a half-mile 
radius, up to 90 percent of people could die without medical 
help, some of them within hours.
    Stealing or buying a ready-made weapon is a next-to-
impossible feat. The main path to a bomb is to procure 
components on the international market and then build a weapon. 
Proliferators buy good-quality goods from American, European, 
and Asian suppliers. This means they pay for these goods 
through the formal financial system, making financial 
institutions part of their proliferation schemes.
    Financial institutions struggle with identifying 
transactions related to procurement, fundraising, and movement 
of money for illicit WMD programs. They do not have technical 
expertise on which goods are sensitive. They lack information 
on who will use these goods and for what purpose. The sanctions 
related software returns a high number of false positives, 
while such lists contain names of known proliferators and are 
not used for catching new bad actors or identifying those who 
hide under false identities.
    Proliferators extensively use shell and front companies. 
They also abuse correspondent accounts, and that is the main 
vulnerability to the U.S. financial system. At the same time, 
financial institutions can be important players in the fight 
against proliferation, but to do that they need to improve 
their capacity for detection, and there are some simple steps 
that they can take.
    For example, they can request more detailed information on 
the type of business from customers as part of service 
suitability for high-risk products like trade finance or wires. 
They can better scrutinize phone numbers and addresses. It is 
common for front and shell companies associated with WMD 
procurement to share managers' addresses and phone numbers. 
They can adopt new tech solutions to monitor and trade finance 
instead of a manual review of trade documentation. This can 
involve, for example, blockchain-based trade finance platforms. 
They can also incorporate tailored geographical factors into 
transaction monitoring. We know, for example, that many front 
companies working on behalf of North Korea reside in specific 
municipalities in China.
    Similar to money launderers, proliferators favor formal 
financial systems and rely on shell and front companies to 
avoid detection. But there are also important differences. 
Transactions related to WMD procurement look like legitimate 
commercial activity, and in addition to individuals' entities 
and transactions, the recent emphasis on goods on which 
financial institutions do not have expertise.
    Despite the differences, it is worth approaching various 
kinds of illicit financing holistically. We know that 
proliferation agents engage in other types of financial crime. 
The most notorious case is North Korea. It fundraises, moves 
the funds, launders money, and pays for its WMD program via a 
global financial system. In some cases, proliferation financing 
was uncovered because of suspicious indicators related to money 
laundering.
    As far as public-private partnerships are concerned, 
creating opportunities for all relevant actors to share 
information can help uncover such networks. For example, export 
control authorities have expertise on dual use and military 
goods and information on export license approvals and denials, 
as well as blacklists of violators. Customs and border security 
agencies have information on the movement of sensitive goods. 
This information can be extremely helpful to financial 
institutions. While financial institutions are constrained in 
terms of disclosing proprietary information, they can share 
their insights on the patterns that they see of suspicious 
financial flows, and these can detect proliferators as well as 
add to our understanding of how these networks operate and how 
they finance their activities.
    Existing public-private partnerships, such as the FinCEN 
Exchange, or the Joint Money Laundering Intelligence Task Force 
(JMLIT) in the UK, and others are a great start. Going forward, 
it is worth considering how to involve small and medium-sized 
banks into such partnerships.
    Finally, academic institutions, NGOs, and think tanks are 
becoming increasing indispensable in confronting proliferation 
financing by contributing to research and capacity-building 
efforts, and they should be recognized as important actors and 
utilized fully as an available resource.
    Thank you.
    [The prepared statement of Dr. Kassenova can be found on 
page 51 of the appendix.]
    Chairman Cleaver. Thank you very much. Ms. Peters, you are 
now recognized for 5 minutes.

  STATEMENT OF GRETCHEN PETERS, EXECUTIVE DIRECTOR, CENTER ON 
 ILLICIT NETWORKS AND TRANSNATIONAL ORGANIZED CRIME (CINTOC), 
       AND CHAIR, ALLIANCE TO COUNTER CRIME ONLINE (ACCO)

    Ms. Peters. Chairman Cleaver, Ranking Member Hill, and 
distinguished members of the subcommittee, thank you for giving 
me an opportunity to testify today. I also want to thank my 
daughter, Isabella, who came with me.
    I am the Executive Director of the Center on Illicit 
Networks and Transnational Organized Crime, and I also co-
founded the Alliance to Counter Crime Online. I have a long 
history of tracking organized crime and terrorism. I was a war 
reporter in Afghanistan and Pakistan, and I authored a book 
about the Taliban and the drug trade, which got me recruited by 
the U.S. military to support our intelligence community. I 
mapped transnational illicit networks for Special Operations 
Command, the DEA, and CENTCOM, and I still provide training to 
the intelligence community.
    In 2014 and 2015, I received grants from the State 
Department and U.S. Fish and Wildlife to map wildlife supply 
chains from Africa to Asia, running investigations in South 
Africa, Kenya, Tanzania, Gabon, and Cameroon. These projects 
illuminated two important trends: one, at the transnational 
level, wildlife supply chains converged directly with other 
serious organized crime, from drugs to human trafficking; and 
two, an enormous amount of organized crime activity has moved 
online. I am going to discuss that later.
    Criminal supply chains look the same no matter what 
commodity they move. I have submitted this graphic of what I 
like to call the ``martini glass model.'' It breaks down the 
criminal supply chain into three sectors: the production 
sector, where raw materials are cultivated or produced; the 
distribution sector, where goods are shipped transnationally; 
and the retail sector, where goods are sold to consumers.
    Both ends of the criminal supply chain, the production and 
retail sectors, are characterized by having many actors who 
earn lower profit margins. These might be the farmers growing 
drug crops in Colombia or Afghanistan, or the guys selling dime 
bags on street corners. They are the highly visible aspects of 
the criminal activity and, therefore, they are the most 
frequent targets of law enforcement. But they are 
inconsequential to the operation of the supply chain and they 
are easily replaced if arrested.
    Controlling the supply chains are those in the middle of 
it, in the stem of the martini glass, the distributors or 
traffickers. They tend to finance the entire supply chain. They 
have much higher profit margins and they are much harder to 
replace when interdicted.
    In 2017, I published an article called, ``The Curse of the 
Shiny Object,'' which was submitted as part of my testimony 
today. The shiny object curse happens when the visible or 
attention-grabbing aspect of a problem or a crime distracts 
from identifying and countering its core drivers. The shiny 
object curse impacts crime policy. Think of the billions of 
dollars the U.S. Government spent spraying drug crops in 
Colombia and Mexico, or stop-and-frisk policies here at home.
    Congress has also poured millions of dollars into anti-
poaching projects across Africa, aiming to stem a conservation 
crisis that threatens rhinos and elephants and other iconic 
species with extinction. But poachers, like drug farmers, are 
inconsequential to the overall supply chain.
    It is more efficient, and you are going to have more impact 
to target the traffickers--if you break the stem of the martini 
glass, you disrupt the supply chain for longer and you 
disconnect the actors at either end. The martini stem is where 
convergence occurs, since traffickers move multiple types of 
illicit goods. Their skill set is to move shipments through the 
global transport system, and money launderers clean those 
illicit profits and they don't care if the money comes from 
human trafficking, drugs, nuclear material; it is just money.
    In 2016, when I was supporting DEA's Special Operations 
Division, I had the opportunity to screen undercover recordings 
of a major African trafficking network. The kingpin was 
bragging to the undercovers about moving drugs, ivory, and 
people, and he would say, ``We have a route through Mombasa. We 
also have a route in and out of Dar es Salaam. We have a route 
into Maputo.'' He wasn't talking about roads or runways. He was 
talking about corrupt pathways.
    Distinguished members of the subcommittee, U.S. law 
enforcement is organized around what is in the box being 
smuggled, but what we should be focusing on is disrupting the 
corrupt systems and pathways that allow smuggling to occur.
    Lastly, I would like to address the issue of online crime. 
Just like commercial commerce and communications, a large 
portion of illicit activity has shifted online, but the laws 
governing the tech industry are out of date. Section 230 of the 
Communications Decency Act (CDA) still grants expansive 
immunity to tech firms for user-generated content, even when it 
is criminal activity and even when the tech firms know it is.
    Take the fentanyl crisis, which is now killing more than 
60,000 Americans every year. It is well-known that Chinese 
traffickers are marketing fentanyl-laced opioids through fake 
pharmacies that are advertised on platforms, search engines, 
and social media. Google and Facebook both host thousands of 
these illegal pharmacies, and somehow that is still not against 
the law.
    Distinguished subcommittee members, I want to request your 
support as a committee to support reform to CDA 230, to make 
tech firms liable for hosting serious crime content, just like 
the financial services industry is liable for hosting criminal 
content. I have submitted amendments to both proposed bills, 
the CONFRONT Act, and the Stopping Trafficking Act, to specify 
the need for government research into how criminal networks are 
exploiting cyberspace.
    Thank you for focusing on this important issue.
    [The prepared statement of Ms. Peters can be found on page 
63 of the appendix.]
    Chairman Cleaver. Thank you. Ms. Swift, you are recognized 
now for 5 minutes.

  STATEMENT OF ANGEL NGUYEN SWIFT, FOUNDER AND DIRECTOR, STAT 
   (STAND TOGETHER AGAINST TRAFFICKING) AND ADVISOR, ENIGMA 
                          TECHNOLOGIES

    Ms. Nguyen Swift. Thank you. Chairman Cleaver, Ranking 
Member Hill, and members of the subcommittee, I am honored to 
appear before you today to discuss an issue that is so 
incredibly important to the fabric of who we are as a society, 
and that is ripe for meaningful solutions and progress.
    I have been very fortunate to be a part of a passionate and 
dedicated community of professionals who work tirelessly 
protecting the financial system from illicit and nefarious 
activity. The community I am referring to is the anti-money 
laundering and counter financing of terrorism community, more 
modernly known as the anti-financial-crime community. This 
includes financial institutions, law enforcement, government 
agencies, nonprofit organizations, and even now technology 
companies.
    For the past 18 years, I have seen criminal networks, time 
and time again, exploit and abuse our financial systems. First, 
as I joined the Manhattan District Attorney's Office as a 
prosecutor on September 4, 2001; then, as I sat in the World 
Financial Center, right across from ground zero, leading 
efforts to build a financial intelligence unit at American 
Express; and most recently, in my position at Enigma 
Technologies, where I intimately learn how data and technology 
can play a crucial role in our Anti-Money Laundering/Combating 
the Financing of Terrorism (AML/CFT) ecosystem.
    Due to these experiences, I am more convinced than ever 
that the only way to successfully dismantle trafficking 
organizations which so brazenly exploit multiple aspects of 
humanity and environment and safety is through coordinated, 
collaborative communities that build and share financial 
intelligence. It is with this conviction that the Stand 
Together Against Trafficking (STAT) initiative was created 3 
years ago.
    There are three main points I hope to convey in both my 
oral and written testimony. One, financial intelligence and 
evidence is crucial to secure successful prosecution of all 
trafficking networks, and we need to help law enforcement 
better understand the financial services system.
    Two, financial institutions are well-positioned to assist 
law enforcement in identifying strong investigative leads, 
given that, as you have heard from the entire panel, even 
though trafficking networks are different, they exhibit 
overlapping financial indicators, and, in fact, there are many 
proactive, ongoing efforts led by financial institutions to 
identify these indicators.
    Three, in order to truly step up progress, a more unified, 
multi-dimensional collaborative ecosystem to share knowledge 
must be established, ideally with support and coordination 
through government agencies.
    Financial intelligence allows law enforcement to secure 
irrefutable evidence that defines business models of criminal 
enterprises; affirms traffickers' motivations; alleviates 
burdens for victims and eyewitnesses; assists in identifying 
third-party facilitators like gatekeepers, attorneys, 
accountants, and real estate professionals, all of whom we 
should be holding more accountable; and allows law enforcement 
to go after primary motivating factors for the business of 
trafficking. It allows us to go after the profits. There needs 
to be more focus on the financial investigations aspect of all 
trafficking investigations.
    Financial institutions are here to help. First, with the 
AML regulations from the Know Your Customer program to CDD to 
the requirement to monitor for and report suspicious activity, 
financial institutions have a prime vantage point. However, 
they are often operating with little actionable information. 
They can see the data but they need to know what the data is 
telling them. If given more context and/or reliable 
information, financial institutions can integrate trafficking-
specific factors or lists into already existing risk 
assessments and/or screening processes. They can develop 
specific topology-driven criteria into their transaction 
monitoring systems and programs. They can provide more targeted 
information to law enforcement through the reporting of 
suspicious activity reports (SARs), and potentially even 
restrict or cut off access to the financial services to these 
trafficking organizations.
    So, how can we get financial institutions more information? 
Simple: collaboration. There are many proactive efforts 
underway today. However, these proactive efforts are often met 
by people where time and resources are limited, often leading 
to a lot of missed opportunities to explore and analyze how 
they build upon all of these collaborations together.
    It is with all these concepts in mind that STAT, Stand 
Together Against Trafficking, was created. At the core of this 
work is a platform that, with trusted partners from law 
enforcement, nonprofits like Polaris, and financial 
institutions like Truist, Ally, Western Union, and U.S. Bank, 
we have come together to identify a methodology and a structure 
to share all of this great knowledge that is available to the 
industry today. While focusing first on human trafficking, we 
know that the financial indicators across the networks share 
the commonalities and therefore can be leveraged across all 
areas of trafficking.
    I have also submitted comments along the lines of the two 
bills that are before the subcommittee today, and I urge the 
subcommittee to consider involving every community that is 
involved in the anti-trafficking space. I also urge the 
committee to consider the framework around Presidential 
Decision Directive 63, later updated by Homeland Security under 
Presidential Decision Directive 7, which led to the creation of 
the Financial Services Information Sharing and Analysis Center, 
FS-ISAC, to focus on sharing targeted data intelligence to 
reduce cyber risk in the global systems. I think that this can 
be leveraged for addressing trafficking today. To disrupt and 
dismantle a network, we must get ours together. Thank you.
    [The prepared statement of Ms. Nguyen Swift can be found on 
page 97 of the appendix.]
    Chairman Cleaver. Thank you very much. I thank all of you 
for your testimony. I now recognize myself for 5 minutes for 
questions.
    One of the concerns I have, that hopefully the panel can 
help clear up, is the issue of whether or not trafficking 
creates a national security threat. Is it a national security 
issue, Dr. Kassenova?
    Ms. Kassenova. It is both a national and international 
security issue, without a doubt, because in my written 
statement, I had more time to go into this, but basically, we 
have the commercial market in which we obviously still use 
components and technology and material, and this material is 
available, and the raw export controls systems in place and 
sanctions regimes, but those who illicitly procure WMD-related 
items are still able to do it. And so, the financial sector is 
among the most important actors in terms of trying to limit 
this access. And if they continue to have access to these 
components and continue to improve their WMD programs and 
missile programs, unfortunately, we might have an event that 
will absolutely show and prove to us that it is a major 
national and international security threat.
    Chairman Cleaver. Well, that is unsettling. That doesn't 
make me feel very good. But one of the issues that we discover, 
at least in my experience with this committee, is that when 
there is a crisis, we discover that there has not been much 
communication. In 2008, we found out that the Federal Reserve 
was not communicating with Treasury and the FDIC. We hopefully 
resolved that.
    So is there the kind of communication and coordination that 
you think contributes, or the lack thereof, to the growing 
problem?
    Ms. Kassenova. I think compared to some other 
jurisdictions, the U.S. is actually above average in terms of 
interagency communication, but it is still not where it could 
be or should be. There is definitely space for improvement. And 
right now what I see as external and not within the government 
is that issues are siloed and information and data is siloed. 
Those, for example, who work on export controls see one part of 
the picture. Financial institutions see another part of the 
picture.
    We started having initiatives that are trying to bring 
these different types of data together, but there is so much 
more that can be done in terms of just stepping back and 
looking at all of these issues in a more comprehensive, 
holistic way. So, there's definitely space for improvement. And 
it is an easy thing to do. To overcome bureaucracy maybe is not 
that easy, but in practical terms, it is something that can be 
done immediately.
    Chairman Cleaver. Okay. Mr. Adkins and Ms. Peters, if you 
were sitting up here with us and you became completely 
convinced that we needed to do something, and we needed to do 
something now, what would it be? What would you want to do if 
you were sitting in one of these seats?
    Mr. Adkins. The first thing I would say, Mr. Chairman, is 
to fund an initiative that is very similar to what you have 
done with the bipartisan counter-trafficking initiative, and I 
think to speak a little bit to the last question, one of the 
things that is, I think, misunderstood about many of the 
transnational and terrorist organizations is the level of 
connectedness, the level of sophistication, the level of 
agility, and the level of communications that they have.
    As Ms. Peters gave a beautiful anecdote about listening to 
traffickers' communication and they are talking about all of 
the different routes that they have, and the fact is that they 
outstrip us in their ability to connect to one another, to 
share data and information, to be able to track movements more 
thoroughly. And so, in that instance where we fail, they thrive 
in the gaps of the disconnections and the lack of information 
that we have.
    The other thing that I will say, which I think is somewhat 
shared between the testimony of Ms. Peters and myself, is the 
idea that we can go after trafficking networks all that we 
want, but if we do not address and recognize and acknowledge 
the things that sustain them, the things that give them oxygen, 
the conditions that give them the space to operate, then we are 
essentially trying to chuck water out of a boat with a hole in 
it, and that is these ideas of poverty, instability, official 
corruption, and conflict, which contribute greatly to the 
conditions that make people fall victim to trafficking, 
specifically in persons.
    Chairman Cleaver. Thank you. I wish we had much more time 
than we have, but my time is up.
    I now recognize the gentleman from Arkansas, the ranking 
member of the subcommittee, Mr. Hill.
    Mr. Hill. Thank you, Mr. Chairman. And I want to thank the 
panel for their excellent testimony. Thanks for being with us 
today. I just got back from a trip to the desert in Arizona 2 
weeks ago, and that was a keen description, Mr. Adkins, of 
those gaps, even in our own country, where human trafficking 
across the desert is significant. It is primarily a drug and 
trafficking location across the Sonoran Desert between Nogales 
and Lukeville, Arizona, and there you have gaps, because we are 
just now putting up the kind of integrated towers that will 
give us both the camera and radio transmission technology to 
back up our Border Patrol there and other local law 
enforcement. And they are really at a disadvantage to the 
cartels who run a much more sophisticated communication 
operation there on the border.
    I wanted to ask Ms. Peters about this issue of hitting in 
between the two martini glasses. There are a lot of people in 
that mix, obviously the cartels, the transnational drug groups, 
the people who have merged terrorism with traditional 
smuggling, but the gatekeepers, let's talk a little bit about 
that. We have SARs and the financial system and we really 
monitor the banks. We make the banks our co-partners in this 
effort.
    But what are other ways in that gatekeeper arena to 
interdict some of those trading routes--lawyers, notaries, 
accountants, people who offer services in those countries? How 
do we attack all of that, Ms. Peters?
    Ms. Peters. If I can put it most simply, I think that the 
strategy should be network-focused as opposed to commodity-
focused. I have seen operation after operation just focused on, 
say, narcotics, or just focused on wildlife, or just focused on 
human trafficking, in part because our agencies, our law 
enforcement agencies are restricted by the authorities that 
they have. And there has been some effort to get around that by 
grouping agencies together, mainly out at the Special 
Operations Division of DEA. But even there I have seen case 
after case where a lot of data has been left on the table about 
an organization's criminal activities, just because they don't 
have the team working. It doesn't have the authorities.
    You never see criminals get wrapping around the axle about 
what it is that they will traffic in. If they are going to make 
money off of it, they will do it. I think Hezbollah, for 
example, which the U.S. Government has repeatedly targeted for 
drug trafficking, makes more money off of the illegal timber 
trade, and we don't touch them for that. They make a lot of 
money off of trading diamonds. That is terrorist financing, and 
we ought to be going after them for those things.
    And so, I think if we can think about all of the different 
illicit activities a network is involved in, and especially to 
go after the financing of those activities, to be looking for 
the money, taking the money away from them, those are the ways 
that I would strengthen some of the operations--
    Mr. Hill. I appreciate that. That is why I emphasized--and 
we have talked about it for years--a fusion center operation 
between our financial sector and our law enforcement sector, 
reading those financial services people into it on a need-to-
know basis, to look for those patterns of these practices. This 
is also why I raised the issue of cigarettes, which, because of 
trade-based money laundering, just pass through our ports of 
entry all day long, every day, undetected, because they are not 
an illegal narcotic, and yet the money is used to finance 
transnational crime.
    You also raised about the dark web, and of course, I want 
to thank the Trump Administration and leadership in Congress 
both for shutting down Backpage and taking a number of 
coordinated efforts to stop human trafficking in the worst 
ways. But Ms. Realuyo, could you talk about what else we should 
do to shut down the internet aspect of illicit trading?
    Ms. Realuyo. What we are seeing is that these groups are 
very innovative and they are actually much more adaptive than 
our governments. And what is frightening is that we see also, 
because of the clientele who tend to be younger and more 
comfortable in the internet, we are seeing this explosion and 
transformation and evolution of the drug trade from plant-
based, which used to be heroin, marijuana, and cocaine, over to 
these synthetics, which are much more potent.
    In your opening statement you talked about the opioid 
epidemic, and what is even more frightening is we are seeing an 
increase in the U.S., because methamphetamine is being now 
marketed as the safer alternative to fentanyl, and they are 
combined. And kind of supporting and by echoing the other 
witnesses' testimony about how we should be looking at the 
gatekeepers are the same. They are out to make money, and it 
doesn't matter what they are trafficking in.
    The other thing we see in the case of groups like the 
Mexican cartels is they are physically controlling the supply 
chain and the routes, whether that be migrants or actual drugs 
that are passing through, or avocados to take advantage of the 
Super Bowl.
    Mr. Hill. Thank you very much.
    Ms. Realuyo. These are the types of things we are seeing.
    Mr. Hill. Thank you.
    Chairman Cleaver. Thank you. I now recognize the gentleman 
from Colorado, Mr. Perlmutter, for 5 minutes.
    Mr. Perlmutter. Good morning, everybody. Thank you for your 
testimony today. Some of you have testified here before, and I 
just want to thank you for your continued vigilance in this 
area.
    I am going to switch gears. I want to start kind of in the 
crypto areas with a general question to begin with, and this is 
to anybody who wants to take it. Cash has long been king for 
economics generally, but certainly within the trafficking 
world. And as we move more to cryptocurrencies and the like, 
have you seen that change?
    Ms. Peters, let's start with you, and then Dr. Kassenova.
    Ms. Peters. Thank you for that important question, and I 
also wanted to address something that Ranking Member Hill said 
in his commentary about the dark web. Criminals aren't in the 
dark. They are operating in the dark web but they are using 
surface web platforms as much as any dark web. That is where 
the customers are. I don't know how to get on the dark web; I 
don't know about any of you. If you want to sell drugs to 
people or you want to sell sex or ivory, it is on Facebook. It 
is on Instagram. These platforms provide the same anonymities 
as the dark web and a far greater reach of customers.
    With regards to your question about crypto, we haven't seen 
evidence that major criminal organizations have moved 
institutionally into blockchain currency. In fact, they seem to 
be as concerned about the risk and the instability of 
cryptocurrencies as regular consumers are.
    That being said, there is an increase, and particularly in 
Europe it is being tracked, but what I see looking at money 
laundering all the time, is that criminals still want to get 
their money into the U.S. dollar or the euro. They want to be 
in major currencies.
    Mr. Perlmutter. Okay. Dr. Kassenova, did you have a 
comment?
    Ms. Kassenova. Yes. The cyber domain and crypto domain is 
what we see as an emergent threat and a threat that we do not 
understand fully yet. I will just give you an example of North 
Korea. They have been extremely successful with cyber attacks 
on financial institutions. For transferring money from banks, 
for example, they also attack cryptocurrency exchanges. And so 
on crypto, for example, they not only mine cryptocurrency, they 
also steal it, both from exchanges but also from other users, 
and then they engage in those layers of multiple online 
transactions so that the tail of it is completely lost, and it 
is extremely difficult to track what they use this money for.
    And then eventually, we know that for North Korea, their 
WMD program is one of their most important national projects. 
So for sure, some of that money is being used for proliferation 
activity. And just to give you a data point, it is believed 
that North Korea illegally obtained up to $2 billion U.S. 
dollars through cyber activities.
    Mr. Perlmutter. Okay. So let me follow up with that, and 
again, to the entire panel, North Korea, Iran, Russia maybe, 
can you all discuss the role on corruption in foreign 
governments and how it may or may not affect our efforts to 
stem this international trafficking?
    Mr. Adkins, why don't you take a shot at that?
    Mr. Adkins. Sure. I think that it is at the heart of this 
trafficking piece. And so what I have submitted in my written 
testimony is the notion that trafficking is, in fact, a symptom 
and a driver of official corruption. And one of the things that 
folks who traffic in persons are doing is, yes, they are 
criminals, but they are also doing bribes and kickbacks to 
political officials, to border control and law enforcement 
agents, and essentially utilizing the networks that are 
supposed to defend against them as part of their efforts to 
make the kinds of illicit trade that we do see. And in many 
governments, of course, there is this idea of actual 
complicitness from the very senior levels of the government on 
down, in having certain countries be transit points. And I 
think that is one of the reasons that we see specific countries 
at the top of the list for efforts like this.
    Mr. Perlmutter. So in your vernacular up there, these 
countries would be, in effect, big facilitators.
    Mr. Adkins. Absolutely.
    Mr. Perlmutter. Okay. I yield back to the Chair. Thank you.
    Chairman Cleaver. Thank you. The ranking member of the Full 
Committee, the gentleman from North Carolina, Mr. McHenry, is 
now recognized.
    Mr. McHenry. Thank you, Mr. Chairman. Ms. Peters, I want to 
start with you. Give me the contours of this. In terms of 
trafficking, for us as American policymakers, how many people 
are we talking about, who are directly involved, who have the 
logistical capacity for the larger-scale movement of people and 
products for illicit trade?
    Ms. Peters. Well, I am not sure I could give you a number 
globally for that but it is a much smaller number than, say, 
the farmers growing drugs or the people selling drugs on the 
streets. I can give you examples of a number of networks that I 
have worked on. It has been a handful of people at the top. I 
am talking about a dozen or less, including their financial 
operation.
    Now what you will see is that a trafficking network will 
often outsource aspects of its work. They might outsource the 
money laundering to a fixer or organization; Mossack Fonseca is 
a good example that was catering to a lot of illicit 
organizations. But I have worked on a number of big projects 
where there was a dozen or less, or just a few dozen people at 
the top of the bureaucracy. But these are identifiable 
bureaucracies. In every operation--
    Mr. McHenry. Okay. So what are those vulnerabilities? You 
have identifiable bureaucracies. What are some of those key 
vulnerabilities that I need to understand?
    Ms. Peters. The key vulnerabilities are the brokers who 
have the capacity to move containers through the transnational 
system. There are not a lot of people who have that capacity.
    Mr. McHenry. So, policing the brokers. Okay.
    Ms. Peters. Identifying who are the folks that have the 
capacity to move illicit containers through transnationally. 
There are not a lot of networks that have the capacity to do 
that.
    Mr. McHenry. Okay.
    Ms. Peters. And then identifying the financial--the teams 
within those big networks that are running the financial 
aspects of it. If you can interdict them, it is often more 
impactful to the overall operation of the network than simply 
arresting or killing the kingpin.
    Mr. McHenry. Okay. So tell me the most uninteresting 
product that has been used to illicitly finance terrorism and 
other activities that you have talked about.
    Ms. Peters. The most uninteresting?
    Mr. McHenry. Yes, uninteresting, because we hear ivory all 
the time. But when you say timber, I think, well, this is not 
the normal discussion we have as policymakers. We understand, 
Ms. Realuyo, your explanation of the illicit drug trade. We 
hear that a lot. We don't hear timber, though. So, why timber?
    Ms. Peters. What you see is a phenomenon in places when 
there has been a crackdown, say, on narcotics or ivory, that 
criminals will diversify into another profit-making sector 
where they perceive there to be lower risk. Africa has these 
incredible forests of 1,500-year-old hardwoods that are in high 
demand in China, where there are timber shortages and a lot of 
demand for wooden furniture. So, the trunks of these trees will 
sell for $150,000 each. That is a huge amount of money, and 
nobody is really looking at it. So, we have seen a lot of 
groups move into that.
    Mr. McHenry. Okay. This is helpful. It is helpful to have 
this in the conversation.
    Ms. Realuyo, I mentioned that we hear a lot about the drug 
trade, but when we hear fentanyl, we commonly think of China. 
But we have an issue that you are an expert on in terms of what 
is happening right now in Mexico. Can you walk us through the 
contours of that? Because my district, like all of us here, has 
been severely impacted by the opioid epidemic. We have five 
deaths a day in North Carolina as a result of opioids. So if 
you could speak to that, it would be quite helpful.
    Ms. Realuyo. Sure. China continues to be the source country 
of not just fentanyl but also other precursor chemicals that 
fuel the other types of drugs that are coming to our shores. 
What we are seeing, though, is the U.S. Postal Service has 
really stepped up its detection and monitoring operations. As 
Gretchen explained, these groups are adjusting. So what is 
happening is they are diverting into the ports in Mexico where 
the clashes among the cartels that are very violent lately are 
starting to take place, and in Mexico there has been proof that 
laboratories there are themselves now manufacturing fentanyl, 
as well as methamphetamine.
    Why the Mexican cartels are so important is that they are 
actually now being used as the route, instead of through the 
Postal Service. Almost every day you hear about news in 
airports and Postal Service workers being much more aware of 
what we are doing.
    So we are seeing it in terms of awareness, detection, but 
more importantly the nimbleness of these groups, and more 
importantly, fentanyl and laced fentanyl products are actually 
much more lucrative and much easier to make.
    Mr. McHenry. So this means we have to have heightened 
awareness for Customs, right?
    Ms. Realuyo. Right.
    Mr. McHenry. At our borders, to understand that Customs 
agents, in their capacity, that their technological capacity is 
supremely important when it comes to human trafficking and 
trafficking of all kinds.
    Ms. Realuyo. That is right, and we are trying to protect 
both on the U.S. and Mexican side, those who are the first 
responders and the law enforcement agents, because it is even 
overwhelming our dogs that are doing detection.
    Mr. McHenry. Thank you.
    Chairman Cleaver. The gentleman from California, Mr. 
Vargas, is recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman, and Ranking 
Member Hill for this hearing, and, of course, I thank the 
witnesses. The number of people who are victims of human 
trafficking really is staggering, the suffering we are seeing 
in our own country, and I am from San Diego, so we certainly 
have it there in large quantities, unfortunately. And the 
suffering that happens around the world is, again, something 
that is monstrous.
    And I do think it is, as stated earlier, a national and 
international security issue. Trafficking has the victims who 
are directly abused but also the funding for terrorism and 
other illicit crimes like drugs, that was spoken about.
    And interestingly, and, Ms. Peters, you brought up the 
issue of the tech companies, how they are involved in a sense, 
not actively in that they want their technology to be used in 
this way but it is being used in this way. I am from 
California, and I was in the legislature there for some time, 
and to be truthful we always protected the tech companies to 
make sure that this new technology, this creed of industry that 
we had could flourish because it was in its infancy, and we saw 
the opportunities that it provided. And so, we haven't leaned 
on it very hard. We haven't burdened it very hard, as we have 
the banking systems and other systems, because they are more 
mature.
    So I do want to dig down a little bit on that, because it 
is intriguing when you say that we need to do more, in a sense, 
and you juxtaposed it to the banking system. Could you go a 
little deeper in that, on your comment?
    Ms. Peters. Yes. When the Communications Decency Act 
Section 230 was passed a quarter century ago, there were only 
about 25 million Americans using the internet, and most of them 
connected through a telephone dial-up. Social media was not a 
thing. The iPhone was not a thing. Smartphones were not a 
thing. And the tech algorithms that connect people did not 
exist either.
    Today, we live in a world, first of all, where the tech 
industry is no longer in its infancy. It no longer, I think, 
warrants the protections that it was--
    Mr. Vargas. They are, in fact, the wealthiest companies--
    Ms. Peters. The wealthiest companies in the world. There is 
also an enormous amount of venture capital in Silicon Valley 
supporting the emergence of new firms. They don't need the 
support that they used to get, in my opinion.
    Second of all, their tech algorithms are connecting buyers 
and sellers of illicit goods faster than these companies' own 
beleaguered moderators can remove the material. So I think they 
would get a lot better at moderating illicit activity and 
removing illicit activity if they were facing serious 
liabilities for hosting it.
    Our motto at the Alliance to Counter Crime Online is if it 
is illegal in real life, it should be illegal to host it 
online. I am not talking about getting rid of the liability 
shield for tortious commentary. I still think there should be 
Yelp reviews and people should be allowed to forward emails 
without risk of liability to the tech firms. But we need to 
have carve-outs for serious criminal activity.
    And I am very pleased to see that Senators Graham and 
Blumenthal have put forward new legislation about human 
trafficking, but I want to ask them, why only human 
trafficking? We have upwards of 60,000 Americans dying a year 
from drug overdoses, most of which is being bought and marketed 
online. Why is that still allowed? Why are terrorist 
organizations still allowed to have Facebook pages? It is 
crazy. This should not be happening.
    I have a fact sheet that I have turned in with my testimony 
that gives you an overview of the types of crime we are 
tracking online and it is breathtaking.
    Mr. Vargas. Thank you. You didn't mention cryptocurrency, 
though. You did earlier. I do have a bill that passed out of 
here last year, H.R. 502, the FIND Trafficking Act, that asks 
the--well, actually it didn't ask, but directed the Comptroller 
General to carry out a study to find out how cryptocurrency is 
being used. Could someone address that, because I agree with 
you, it is hard for us just to be frank. We don't like to put 
regulations, the Republicans don't, the Democrats, on industry. 
The Democrats don't like to do it on new creative industry. And 
I think that is why we have given tech a pass. And with all the 
things that are happening now, I don't think we should give 
them a pass. I think that we should drill down deeper.
    But could someone--and I only have 30 seconds left--talk 
about cryptocurrency? Yes, Ms. Realuyo, go ahead?
    Ms. Realuyo. We haven't seen a mass movement from 
traditional criminals to the crypto space because cash is still 
king to pay your assassins and your distributors. There is a 
move afoot among the terrorist groups, particularly returning 
foreign fighters of ISIS who have gone underground, to use 
other ways to communicate, but also to try to raise money and 
support themselves. It is no secret that Hamas actually has 
advertised that you can donate to their organization using a 
bitcoin, and they even give you the instructions on how to do 
it. What they don't really know is it is not fully anonymous, 
but we will keep that amongst ourselves in terms of being able 
to track.
    Mr. Vargas. Yes, let's keep that one among ourselves. My 
time has expired. Thank you, Mr. Chairman. I yield back.
    Chairman Cleaver. Thank you. The gentleman from Texas, Mr. 
Williams, is now recognized for 5 minutes.
    Mr. Williams. Thank you, Mr. Chairman, and it is 
heartbreaking to hear the horrific stories coming from human 
trafficking survivors. As a father of two daughters and a 
beautiful granddaughter, I cannot begin to imagine any of them 
being subjected to this type of abuse. So before I begin with 
my questions, I want to sincerely thank the chairman for 
calling this hearing. And I want to thank all of the witnesses 
for being here today to share your expertise with all of us.
    Monopoly Market, Empire Market, DarkMarket, and White House 
Market are just a few of the more than 40 online vendors where 
you can buy thousands of different types of drugs over the 
internet. These websites are operating in plain sight, as we 
have said today, and you can find information about each with a 
simple Google search, as you said, and customers can leave 
reviews. Vendors say exactly how their drugs will be shipped, 
how the websites will walk you through the payment process, 
step by step. White House Market publishes that they have over 
15,000 listings from 1,300 vendors on their platform alone.
    Almost 200 Americans die every single day from drug 
overdoses, yet all of these websites are still online as we 
speak, and we have touched on that. So, Ms. Peters, let me ask 
you, what can be done to allow our government to be more 
aggressive in taking down these illegal online marketplaces 
that are hubs for trafficking drugs?
    Ms. Peters. We would like to see Congress remove the 
liability shield that the tech industry currently enjoys for 
hosting serious organized crime content. Having spoken to them, 
I believe that the authors of CDA 230 intended that liability 
shield only to pertain to speech, which I agree should be 
protected, as opposed to illicit activity. So we believe that 
there should be carveouts for that issue specified, as was done 
with Fost Assesto when it passed, with regards to human 
trafficking. We believe that tech firms should be legislated 
similar to the financial industry to hand over data they have 
about illicit activity on their platforms to law enforcement, 
and we would also like to see Congress appropriate more 
resources to the law enforcement community to deal with what 
will inevitably be a deluge of data.
    And I will give you an example. Facebook only began 
tracking drug sales on its platform last year, which is kind of 
incredible, and in the first quarter of last year, they removed 
4.4 million postings that were selling drugs. To put that in 
perspective, that is 400 times larger than this notorious dark 
website, the Silk Road, ever was: 4.4 million postings.
    Mr. Williams. Thank you. Any sustainable long-term 
solutions to shut down these complicated trafficking networks 
will require a coalition of countries from across the globe, I 
think, since some other countries might not have the same 
resources or capabilities to go after human traffickers. So Mr. 
Adkins, what can the United States do to help those nations 
that we will need to bring in as partners to stop this horrible 
practice?
    Mr. Adkins. That is a great question. I think that when we 
talk about technical support, when we talk about the support 
that we have over the last decade or so that has been 
diminishing for democracy and governance, support from the 
United States to countries that have issues with weak 
governance, what is our engagement in international conventions 
and data sharing types of initiatives that can help support 
those types of countries to improve in those sectors? But I 
think the real issue is that they are not just falling behind 
because of lack of capacity, but mostly because of the lack of 
resources.
    And this is kind of the main thrust of my appearance today, 
is that these are generally poor countries, many of whom are 
mired in unresolved conflict, many of whom cannot even provide 
the most basic services for their citizens. And so, when you 
get into the higher-order level of things around border 
protection, around legislation, and law enforcement, these 
nations would be weaker in those areas across-the-board, so 
human trafficking is only a small slice of the deficiencies 
that they would have in being able to protect their territories 
and their citizens.
    Mr. Williams. Okay. Quickly, Dr. Kassenova, can you discuss 
how North Korea most regularly accesses the global financial 
system, and the role that Chinese financial institutions play 
in their ability to obtain critical WMD technologies?
    Ms. Kassenova. China is among the jurisdictions that 
actually are of great concern to the nonproliferation 
community. Over the years, we have seen progress both on export 
controls and then nonproliferation policies and clamping down 
on this kind of activity, but it is still not enough.
    Specifically on North Korea, most of North Korea's sanction 
evasion and illegal access to international markets and 
financial systems does involve China, and I shouldn't say 
China, but middlemen, agents, brokers, and front companies that 
are based in China.
    Mr. Williams. Thank you.
    Ms. Kassenova. I want to recognize that over the years, 
there have been improvements, but it is not where we want to 
see the government.
    Mr. Williams. Okay. Thank you. I yield back.
    Chairman Cleaver. Thank you. The gentlewoman from 
Massachusetts, Ms. Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Chairman Cleaver, for waving me 
on, and Ranking Member Hill, for holding this hearing, and 
thank you to our witnesses for sharing your expertise with us 
today.
    The deprivation of women's bodily autonomy for political 
ends is not a phenomenon limited to one time or place--from 
Boko Haram and Al-Shabaab kidnappings to small-scale Boston 
traffickers, exploiters are making a profit by trading trauma 
and condemning families to a lifetime of fear for their 
children's safety.
    Mr. Adkins, how is trafficking used to further the goals of 
these insurgencies, and why is human trafficking, including 
sexual exploitation specifically, so effective in terrorizing 
local communities?
    Mr. Adkins. Thank you for your question, Representative 
Pressley. The first thing that I would say is that there is a 
general overarching sense in the world of essentially 
patriarchy and the diminishment of the value, worth, and 
protection of women in our society, and certainly in many 
nations abroad. That would be kind of the overarching piece of 
this.
    The second piece is that even though terrorist 
organizations don't have very strong links in terms of the 
actual transport and kind of cross-border movement of 
trafficked persons, they certainly are consumers of trafficked 
women and children as porters, as sex slaves, as concubines, as 
people to be forced into marriage.
    And so essentially, what trafficked people create for many 
of these terrorist organizations is a base of consumption, to 
feed themselves, to sustain their movements, to keep the morale 
of their soldiers high, to actually entice young men to join 
terrorist movements with this idea that you would have power at 
the point of a gun and that you would have access to women, all 
the way up to your liking.
    The other piece of this is that, again, even though the 
ties are not strong in terms of linking them directly to doing 
trafficking, they actually create the conditions that induce 
vulnerability for more people.
    Ms. Pressley. Okay.
    Mr. Adkins. And because of what Boko Haram has been doing 
in Nigeria, trafficking writ large in Nigeria has become a more 
serious problem, and it is a more serious problem for more 
vulnerable people. So, any type of organizations that create 
displacement, that create refugee flows, that create internally 
displaced persons, are, by dint of that action, creating more 
people who will be disconnected from state services and 
protection, disconnected from their families, and then by dint 
of that, more vulnerable to being brought into the dark 
underworld of transnational criminal organizations and 
terrorist groups.
    Ms. Pressley. Thank you. Thank you for that comprehensive 
response, Mr. Adkins. Just in the interest of time, I will try 
to conflate my two final questions and hear from whomever would 
like to contribute.
    I want to bring a survivor into this discussion. I 
represent the Massachusetts Seventh District and I work closely 
with a survivor-level organization called My Life My Choice, 
and the Eva Center as well, which works with survivors of 
trafficking to rebuild and recover. Now, survivors face 
obstacles in reclaiming their financial agency, and this is 
something we don't often talk about. My Life My Choice shared 
the story of one such survivor, Kendra. She grew up in state 
care due to parental substance use and sexual abuse in the 
home. By age 13, she had met her first exploiter. Kendra 
continued to face sexual exploitation through her teens and her 
early 20's. By the time she escaped for good, her Social 
Security number had been stolen by her exploiters, and credit 
cards and an auto loan fraudulently taken out in her name. 
Although case managers were able to help Kendra appeal this 
credit fraud in court, many survivors lack access to this 
support.
    So I just want to make sure that we are thinking both about 
prevention and recovery. Ms. Nguyen Swift, how can banks better 
help survivors appeal and correct fraud and reclaim ownership 
of their finances?
    Ms. Nguyen Swift. Thank you. This is an extremely important 
issue. I think there are two connected items here that you have 
hit upon: one, how do we restore credit for the survivors; and 
two, how do we get them access once they have extracted 
themselves from their experience?
    There are a lot of efforts that are being done today with 
banks through the Liechtenstein Initiative, which is trying to 
create internal policies and procedures in order to evaluate, 
with social work organizations, new accounts that are being 
created for survivors so that they can get their foot in the 
door. Once they get their foot in the door, then their accounts 
can go through the normal system and they can build their 
credit that way.
    But I think the root cause really is, how do we restore 
credit for the survivors, because if we are able to help them 
restore their credit, and we are able to help that conversation 
start, then they can apply for any type of financial services. 
So, I think we need to bring those agencies who are responsible 
for evaluating credit to the table, to have that conversation 
to identify solutions, the credit bureaus and agencies and 
things like that. Banks, unfortunately, cannot, because once 
bad activities happen--
    Mr. Perlmutter. [presiding]. The gentlelady's time has 
expired. Thank you.
    Ms. Nguyen Swift. Thank you.
    Mr. Perlmutter. The gentleman from Ohio, Mr. Gonzalez, is 
recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you to our witnesses for being 
here, and thank you, Chairman Cleaver and Ranking Member Hill, 
for holding this hearing on such an important topic. I am 
thrilled to know that this is the first in a series of 
hearings. It is good to know that we are going to beef up our 
understanding of what is a critical issue in Ohio, where I am 
from, but also across the country. We have been, in many 
respects, ground zero for the opioid crisis, fentanyl 
trafficking, but also human trafficking, which is something 
that our office has been working on for the past year or so.
    Ms. Peters, I want to start with you, because I think this 
is a really interesting point that you touched on with respect 
to Section 230. I have an open question, which I am just 
curious for your thoughts on. I think there are kind of two 
minds that I could take with that. One would be liability moves 
to the platforms themselves, like Facebook, YouTube, et cetera. 
The other could be maybe liability in some respects, at least 
for these dark websites, it could move to the hosting services, 
right?
    Do you have a sense of--I guess, why would you go in the 
direction you have gone as opposed to the hosting services? And 
I am curious, generally curious, because I think this is a 
tough topic.
    Ms. Peters. We believe that the platforms hosting the data, 
as opposed to the website host, should hold the liability 
because they are mainly talking about platforms that are free 
to use. So, these platforms make money by harvesting the data 
of their users. The notion that they don't know what is going 
on is absurd to me.
    Mr. Gonzalez of Ohio. Yes. I agree with you.
    Ms. Peters. And I think that, in particular, those 
platforms should have a lower liability shield.
    To me, putting that liability on the web hosting devices 
would be kind of akin to putting liability onto a telephone 
service that is just carrying messages. However, if you have 
illicit organizations like, say, the Sinaloa cartel or 
Hezbollah, that actually have a website, I don't think they 
should be allowed to--
    Mr. Gonzalez of Ohio. Yes, and there are certain hosting 
services that specifically focus on the Sinaloas of the world, 
right?
    Ms. Peters. And they should be targeted for that, I agree, 
but ordinarily, I would say if a web hosting service is hosting 
a platform, and that platform is hosting illicit activity, to 
me, the platform is at fault.
    Mr. Gonzalez of Ohio. Yes. I think I generally agree. I am 
still thinking through it, because I think there is--
    Ms. Peters. I think there is also a very interesting debate 
about the question of strict liability regimes or duty of care, 
which I would be happy to discuss ad nauseum, but it is a very 
important issue to discuss.
    Mr. Gonzalez of Ohio. Okay. And then, Ms. Realuyo, with 
extremism a lot of times we see that the conversation starts on 
a Facebook, or a YouTube, sort of a traditional platform, and 
then at a certain point it bumps off and goes into the fringe 
platform world. Is your sense that that is what is happening in 
the trafficking world as well, where it is starting on a 
Facebook, and then it is moving to a dark website, or is it 
actually transacting on Facebook directly?
    Ms. Realuyo. When you take a look at all of these groups, 
whether they be terrorist or criminal in nature, you still have 
to have a human interface. We are now studying a lot of the 
ISIS foreign fighters who have come back, and in partnership 
with several of our international counterparts, we are trying 
to better understand, for example, why did that Tunisian young 
man--how did he get involved, and in one point, more 
interestingly, in Western countries like Europe and the United 
States? They get drawn in because of the accessibility of that 
propaganda online, but then, more importantly, there usually is 
a physical facilitator who helps them to make that voyage to 
the Islamic state, and now we are much more concerned about the 
ones who are coming back.
    What we are seeing, too, in terms of trafficking, in terms 
of whether it is drugs or people, there is still a physical, 
because you have to actually--there are some goods that have to 
be transferred.
    Mr. Gonzalez of Ohio. Right.
    Ms. Realuyo. And we need to equally watch, monitor, and 
understand, but also go after both that that push online, but 
more importantly, those that are actually physically engaged in 
that trafficking.
    Mr. Gonzalez of Ohio. Okay. And then if you can do this in 
30 seconds, you highlighted how coordination is essential. I 
completely agree. I think most people said that on the panel. 
Legislatively, what is one thing we can do to make sure the 
coordination does happen more frequently than it currently 
does?
    Ms. Realuyo. Having been in and out of government over the 
last 20 years, once you all require a congressional report, it 
actually focuses the different agencies to have a sense of 
concentrated mission. And what we are seeing now, particularly 
in the military, is we look at threat finance across all of the 
different regions, and then, more importantly, across all of 
what we call the modalities, whether it is weapons of mass 
destruction, human trafficking, gold. We didn't really talk 
about Venezuela, which is the true trafficker of gold, oil, and 
drugs, in terms of facilitation. But we are getting better at 
it.
    Mr. Gonzalez of Ohio. Thank you. My time is up. I will 
follow up. I yield back. Thank you.
    Mr. Perlmutter. The gentleman yields back. The gentleman 
from Utah, Mr. McAdams, is recognized for 5 minutes.
    Mr. McAdams. Thank you, and thank you all for being here 
today to share your expertise on this very important topic, and 
one that I think we have to do a better job about combating.
    Trafficking takes shape in many forms and has many victims, 
whether it is the over 20 million people trafficked into forced 
labor or sexual exploitation, or the drugs that are trafficked 
into our country that devastates families and communities. And 
while they have differences, for sure, in what is trafficked, 
we know that they also share commonalities. So I am glad that 
this hearing is exploring the topic in more depth and hopefully 
will provide lawmakers some direction on how to better counter 
these various forms of illicit activity.
    Ms. Nguyen Swift, you noted that financial institutions are 
well-situated to assist law enforcement in identifying strong 
investigative leads, given that different trafficking networks 
often exhibit overlapping financial indicators. Can you 
elaborate on how some of these networks operate similarly, from 
a financial perspective, and what type of indicators can we 
see?
    Ms. Nguyen Swift. Sure. At the end of the day, all types of 
trafficking is a business, and financial services companies 
provide a limited amount of products. And so, checking 
accounts, business accounts, credit cards, prepaid cards, and 
cryptocurrency have been echoed multiple times today; there are 
only certain ways that you can actually get money into that 
system and out of that system. And so, if you are looking at 
criminal business enterprises, they have to rely on those 
various products.
    Some of the typologies that we have seen across multiple 
levels of trafficking are business accounts that are being 
opened under multiple shell company names. However, they share 
similar account managers, they share similar owners, and they 
share certainly similar patterns of activity in dealing with 
the same third parties. So if we are able to understand more 
context around what those relationships look like, and that 
comes from intelligence, then we are able to pinpoint and 
understand more what networks they are part of.
    Mr. McAdams. And maybe a related question, do we have a 
good understanding about how some of those networks may operate 
differently as they flow through the regulated financial 
system, different forms of trafficking? That is, do we 
understand how human trafficking networks would appear as it 
proceeds through the financial system, compared to how a drug 
trafficking network would appear?
    Ms. Nguyen Swift. There are some indicators that you can 
kind of tell the difference. For example, with credit cards, 
the types of purchases you might see are going to be different, 
and in human trafficking, a brothel situation, you are going to 
see a lot of feminine products being purchased, and in drug 
trafficking, probably not, unless there is a home that is also 
being leveraged where a lot of women are working.
    So from a financial institution perspective, it is hard to 
tell some of those nuances. The only way to do that is with 
getting contextual information from experts in the industries 
that are working in those specific areas. So, there are some 
telltale signs, but we need to know what they are.
    Mr. McAdams. Thank you. In your written testimony, several 
of you talked about both potential advantages and disadvantages 
to technology in the trafficking of goods. Professor Realuyo, 
you noted that opioid buyers can visit dark websites 
anonymously using special browsers and make purchases with 
virtual currencies like Bitcoin, making transactions difficult 
to trace. And Dr. Kassenova, you testified that adopting 
technical solutions to monitoring trade finance transactions, 
including by adopting blockchain-based trade finance platforms 
can play a role in uncovering suspicious transactions.
    How should we, as policymakers, be thinking about the role 
that emerging technologies can play in trafficking and illicit 
financing, whether that be AI or digital currencies, et cetera, 
and are there ways that we can harness these technologies to 
fight trafficking?
    Ms. Realuyo. It's great to see you again.
    Mr. McAdams. You, too.
    Ms. Realuyo. I really see, more importantly, because I kind 
of traverse the private and then the public sector, what we 
really need is just greater research, and then at one point, on 
the government side, we need much more investment in law 
enforcement and intelligence training to understand what these 
technologies present as an upside, but more importantly, the 
dark side and what that back door is.
    Because as they modify and, more importantly, adapt, 
incorporating this new technology to improve the efficiency of 
their businesses, they understand what our counter measures 
are, and we need to step up the pace of what our measures are 
in order to detect, particularly, but more importantly, trying 
to figure out how to better work also the private sector so 
that they become the eyes and ears of what is happening in 
their sector.
    Mr. McAdams. Thank you. Dr. Kassenova?
    Ms. Kassenova. Thank you for this chance to kind of give a 
bit of a positive side of new technology. For proliferation 
financing, when I talk to the representatives of the financial 
institutions, they feel a little bit overwhelmed that if we 
start checking everybody so deeply, then it will slow down 
their transactions. And so for them, the main challenge is how 
to operationalize the risk and automate it, and this is where 
technology can come in very handy.
    Just to give two specific examples, it is the pilot 
blockchain-based trade finance platform, Voltron, that I was 
referring to, and the people behind it are more interested in 
efficiency. But because it provides better transparency, you 
can have a collateral, positive effect in finding out some 
suspicious actors.
    Artificial intelligence, for example. There are startups 
that are working on that, and this is then tapped potential of 
technology, and I think, from where we sit, there are 
definitely--
    Mr. Perlmutter. I am going to have to cut you off. The 
gentleman's time has expired. He can submit more questions to 
you in writing and finish that.
    The gentleman from Texas, Mr. Taylor, is recognized for 5 
minutes.
    Mr. Taylor. Thank you, Mr. Chairman. I appreciate this 
hearing. First, I appreciate the bipartisan nature of it. I 
appreciate the lack of theatrics in this particular hearing. I 
am the newest member of the committee, so this is a first for 
me.
    Also, I think the scale of what we are talking about is 
really incredible. If you think about how MasterCard processes 
$1.7 trillion of transactions annually, and that is about what 
we are talking about here. So just to kind of give us a scale, 
I think this is very impressive.
    I just want to understand, and Ms. Peters, I have been 
hearing about your exploits for years from my wife, Ann, who 
was your roommate at college. So I just wanted to ask, crypto 
versus cash wires versus hard cash, kind of thinking about 
those three, electronic transactions versus cryptocurrency 
versus hard cash, what are you seeing kind of as the makeup in 
illicit trade broadly, in your experience?
    Ms. Peters. Well, before I answer that I just wanted to 
very quickly make the comment that I don't think blockchain is 
necessarily something we should fear. Blockchain technology 
holds the promise of actually tracking financial assets better. 
I think the risk is that non-governmental actors from Facebook 
to the founders of various cryptocurrencies are trying to get 
involved in managing world currencies. This should be the role 
of governments, not companies, and certainly not illicit 
actors. So I think there is a need for the U.S. Government to 
look into perhaps releasing its own blockchain currency, or 
something like that. But we don't necessarily need to think of 
blockchain as a bad thing.
    I also want to make the point that we used to talk about--
those of us who are interested in the financing of crime, our 
battle cry to our teams used to be to follow the money, and it 
always takes you to the leaders. These days, when I work with a 
team of investigators, I instruct them to follow the value. We 
often see criminals moving illicit value through commodity 
trades, whether it is a group like Hezbollah or the Taliban, 
who got very deeply involved in the used car trade. You buy a 
used car; how much is a used car worth? It's like asking how 
long is a piece of string. You can put any value on it you want 
and you move that value through the system.
    I have seen this across the world, in multiple sectors. I 
even worked on an investigation once in--
    Mr. Taylor. I need to just try to refocus you back on my 
original question, which was, what are you seeing in terms of 
illicit transactions, and so the $1.7 trillion transactions we 
are talking about today, in hard cash, right, like physical 
dollars versus electronic transactions versus crypto? What is 
that mix?
    Ms. Peters. I am actually saying I don't think there is a 
huge amount of crypto. It is growing, but I think that the bulk 
of criminal transactions that we see are put into trade. 
Criminal networks that I have studied across the world and 
across various sectors of crime will buy commodities.
    Mr. Taylor. So you are saying it is a barter--you are 
saying the transfer--
    Ms. Peters. A literal barter of goods.
    Mr. Taylor. --it is a barter across, but obviously, there 
is cash on the consumer side.
    Ms. Peters. And cash will move through banks, but it will 
be hidden as a trade-based money laundering operation.
    Mr. Taylor. Okay. So it is electronic transactions that 
are--
    Ms. Peters. And there is a significant amount of cash-based 
smuggling, particularly in certain sectors, and I certainly 
have worked on cases where we have seen literally planeloads of 
cash being moved from one country to another.
    Mr. Taylor. So, hard cash is big--
    Ms. Peters. Hard cash.
    Mr. Taylor. --and electronic--
    Ms. Peters. Cash smuggling certainly takes place, but cash 
is heavy. It is physically heavy and it is hard to place back 
into the financial system, so it becomes a burden.
    What I see as by far the biggest phenomenon of how illicit 
money moves around the world is in trade-based money laundering 
transactions.
    Mr. Taylor. But it is electronic transactions masked as 
trade?
    Ms. Peters. Ultimately, yes, it goes through the SWIFT 
system.
    Mr. Taylor. Okay. And then the other--we have about a 
minute here, so the other question I had for you was the dark 
web versus legitimate websites. So, Silk Road, and there was a 
pretty good Wired magazine article a couple of years back 
talking about giving taxonomy to Silk Road. They were 
estimating there was about $50 million in transactions per 
month that were taking place on Silk Road.
    What is incredible is the amount of resources that went 
into that, and literally it led to the sentencing of just one 
person. Right? So, you are moving $50 million in drugs a month, 
a tremendous amount of law enforcement by the United States, 
and only one person went to jail on that particular website.
    What are you seeing, dark web transactions versus 
legitimate website transactions? In other words, if we pursued 
your Section 230 liability idea, just for legitimate websites, 
Facebook, what is that going to do, versus--
    Ms. Peters. My organization focuses exclusively on illicit 
activity that is happening on surface web platforms, simply 
because we don't have the capacity to also look at the dark 
web. There is so much of it happening on ordinary platforms 
that are on all of our phones--Google, Facebook, Twitter, 
Instagram, WeChat. There is certainly illicit activity taking 
place on the dark web but most people don't know how to get 
onto the dark web.
    Mr. Taylor. Right. Thank you. I apologize. I am out of 
time. I yield back, Mr. Chairman.
    Mr. Perlmutter. The gentleman yields back. I should mention 
that Mr. Hill and Mr. Foster of Illinois are working on digital 
currency issues that you just brought up as to whether or not 
there should be a Federal digital currency.
    But I want to turn to another gentleman from Illinois, Mr. 
Garcia, and he is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman, and 
Ranking Member Hill, for this hearing, and thank you to all of 
the outstanding witnesses who have joined us today. Your 
testimony shows how critical financial services and the global 
financial system are to illegal trafficking networks, and how 
connected those networks are to the wide range of policies we 
consider at the Federal level, from drug policy to 
international relations.
    On cartels and U.S.-Mexico policy, Professor Realuyo, you 
shared a lot of information with us about the cartels in 
Mexico. Drugs are flooding north into the U.S., guns are 
heading south into Mexico, and each side seems to blame the 
other. In your written testimony, you note that 80 percent of 
weapons used by criminals in Mexico come from the United 
States. President Trump and Mexican president Lopez Obrador 
have pledged to work together to curb arms trafficking, but 
this has been a contentious issue for years.
    Professor Realuyo, have there been any substantive changes 
recently in how both countries deal with the smuggling of 
weapons?
    Ms. Realuyo. Sadly, because of what happened to the LeBaron 
family in November, we have always had these bilateral security 
cooperation meetings, but this time, both sides have actually 
dedicated much more visibility and time to looking at the 
firearms trading.
    I spend lots of time at the border, and when you cross the 
border, very rarely does the U.S. actually check outbound, and 
even more rarely do the Mexicans check what is coming inbound.
    We went to Nogales, crossed 4 times, just as a test, with 
an unmarked--not a government vehicle--just to take a look, and 
unfortunately, they didn't check for cash or guns. What we are 
trying to do, too, is try to raise awareness, and what is also 
quite interesting is once they did the study there, is a lot of 
diversion, because of the corruption of the security forces in 
Mexico of guns that are also being used by the cartels of 
diversion.
    So at least it is an agenda item that has been raised to 
the higher, in terms of every meeting that is had now with 
Ambassador Landau there, they are actually focusing a lot more, 
because of the violence rate that was recorded last year in 
Mexico.
    Mr. Garcia of Illinois. And as a follow-up, what policy 
changes could we make here in Congress to help curb the flood 
of guns to Mexico, and a brief one, please.
    Ms. Realuyo. Yes. Obviously, each State in our Federal 
system has its own recognition of how they control the sale of 
guns, but, more importantly, I think raising awareness of the 
average American that the violence that could come to our 
borders is actually caused by the firearms that are coming from 
the United States. It is nothing new, but sadly it takes these 
breaking news events on CNN and Fox News to actually get the 
average American to realize this, and sadly, no congressional 
district is immune to the opioid epidemic, as you know from 
your State.
    Mr. Garcia of Illinois. Thank you so much. Dr. Kassenova, 
on the topic of transparency and corporate ownership, you write 
that the U.S. lags behind many countries in requirements for 
transparency about who owns companies and trusts. This is a 
problem for the proliferation of weapons but it has effects 
throughout our economy.
    Dr. Kassenova, how would bringing U.S. transparency 
standards for corporate ownership in line with EU standards 
make it easier for law enforcement and regulators to catch bad 
actors?
    Ms. Kassenova. I think it will help on two levels. It will 
help domestically because then we will know, in terms of in the 
U.S. context, who is actually controlling the company standing 
behind the companies, because we know there is so much deceit 
that is happening behind the non-transparent corporate 
structures.
    But there is also another level, which is connected to the 
international context and the norm making. The more countries 
you have who require that transparency, the more you reduce the 
space in which these malicious actors can operate.
    Mr. Garcia of Illinois. Okay. Thank you. And at the 56-
second mark, Ms. Swift, how can industry and regulators work 
together to make sure that we have the best information 
possible for investigating and stopping financial crimes?
    Ms. Nguyen Swift. Thank you. I think that the industry 
needs to learn more from investigators. I think government is 
in a very special place to be able to make that happen. Right 
now, there are a lot of disparate opportunities that are 
happening, conversations that are happening, intelligence 
gathering that is happening. However, there is not one 
coordinated effort to bring all of this knowledge and data 
together so that we can learn from it collectively.
    So, I think government is in a place where they can pull 
together reports, pull together studies and committees with the 
appropriate actors and appropriate stakeholders in order to 
move that ball forward.
    Mr. Garcia of Illinois. Thank you very much. Mr. Chairman, 
I yield back.
    Mr. Perlmutter. The gentleman yields back. Mr. Timmons from 
South Carolina is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. Professor Realuyo, I 
went to McAllen, Texas, with a number of my colleagues a year 
ago, in March, and it was what I would consider maybe the 
height of the challenges we were facing at the southern border. 
It was really eye-opening and shocking the stories we heard 
from the Customs and Border Patrol and the ICE agents. Is it 
your understanding that things have improved in the last 12 
months? Could you speak to that?
    Ms. Realuyo. Sure. Just from the official data, when we 
take a look at--we usually look at the border crisis more in 
terms of the movement of migrants and people than in the 
movement of drugs. And there had been some hypotheses that this 
huge onslaught of taking care of people first before drugs 
actually allowed the drug traffickers to take advantage of this 
idea of the bubble, in terms of the balloon that you squeeze.
    The numbers are quite promising in terms of the lower 
number of interdictions, and more importantly, what we are 
seeing in terms of people moving. And that is obviously 
attributed to a lot of the cooperation with Mexico.
    Earlier in the hearing, we talked about, what do we need to 
do with our international partners to address these very 
challenging issues of trafficking. Once in Mexico, they 
realized that the problem of migrants not crossing the border 
was becoming their own problem in terms of social services, 
health, insecurity. They wised up, and at one point they 
secured their southern border. This is what you saw last year 
with the deployment of their newly minted National Guard, which 
has worked hand in hand with the U.S. in terms of enforcing 
border security on the southern border with Guatemala, with 
technology, but more importantly, on Mexico's northern border, 
which is our southern border.
    Mr. Timmons. So there has been increased manpower on the 
Mexico side of the border that has helped address this issue?
    Ms. Realuyo. And technology and skill set. The use of 
drones now to monitor, and more importantly, this way of 
actually doing much more interagency collaboration to figure 
out where the movement of people and possible shipments of 
drugs is actually being relocated.
    Mr. Timmons. In your testimony, you state that 90 percent 
of heroin in the U.S. originates from Mexico. Do you have any 
statistics on how much fentanyl originates from Mexico?
    Ms. Realuyo. That is actually much more difficult because 
of the amount that is coming through the mail service first. 
But what is disturbing is that we are seeing more activity and 
more interest of the Mexican cartels to dominate the synthetic, 
which is not just fentanyl but methamphetamine, where we have 
seen, last year, an increase of use. So while methamphetamine 
is not as lethal as fentanyl, many of you know, in your 
districts, it actually manifests in a much more violent and a 
more addictive fashion, which then has other consequences in 
terms of violent crimes and acts that are committed by meth 
addicts.
    Mr. Timmons. I was a State prosecutor for 4 years and we 
had issues with fentanyl, but that was just--they were 
tragedies. They weren't violent crimes, and meth really was a 
major problem, and still is a major problem in my district.
    Ms. Peters, I hate to say that I have never heard the term, 
``timber trafficking,'' before today. Could you talk about how 
that works? Just give me a better understanding.
    Ms. Peters. Well, timber trafficking takes place around the 
globe. I am not sure if it is on the list, but it is a very 
large global--
    Mr. Timmons. Are they timbering forests and then saying 
they got the product from other places, or--
    Ms. Peters. There are a range of things happening. One is 
illegal deforestation of a range of woods. In some cases, it is 
endangered wood species or timber species that are protected 
internationally, like certain rosewood and hardwood species 
that are then mislabeled and then smuggled into end consumer 
states.
    Mr. Timmons. So they are processed and then shipped and 
they are mislabeled, and it is not--
    Ms. Peters. Sometimes, it is processed in the place that it 
is smuggled out of. There will be lumber factories that will 
cut it down into planks or whatever, or make it into furniture. 
In other cases I have seen rough logs exported in containers.
    Mr. Timmons. And are the end users generally the United 
States and Western Europe or is it all over the world?
    Ms. Peters. It can be the United States. I am familiar with 
at least one case that involved lumber liquidators who were 
busted for, perhaps not knowingly, but importing wood that had 
been illegally exported from, I believe it was Brazil. So, 
there is a tremendous amount of this timber trafficking going 
on, both in Latin America and in Africa, with a lot of the wood 
going to China these days, and some of it coming into the 
United States, certainly.
    Mr. Timmons. Would you say that oftentimes, the end user is 
not aware that the timber is illegal?
    Ms. Peters. I think so, yes. Most of the time, the end user 
is not aware that it is illegal. In terms of the end consumer, 
I think that is often the case. I am not sure about the 
companies that are purchasing the timber, in the middle part of 
the supply chain.
    Mr. Timmons. Sure. Mr. Chairman, I yield back.
    Mr. Perlmutter. The gentleman yields back. The gentleman 
from New Jersey, Mr. Gottheimer, is recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Chairman, and Ranking Member 
Hill, for calling this hearing, and thank you to all of the 
witnesses for being here today. We are very grateful.
    I recently met with brave law enforcement officers from the 
Port Authority of New York and New Jersey's Police Department. 
As the United States' largest transportation police force, the 
Port Authority Police Department (PAPD) has unique experience 
and a very strong record of combating human trafficking at 
ports of entry in my region.
    Since it was founded in the 1970s, the PAPD's renowned 
Youth Services Unit, located in the Port Authority's midtown 
bus terminal, the busiest terminal in the world, has intervened 
in thousands of human sexual trafficking cases, saving 
countless youth from victimization by predators.
    Ms. Peters, if I can ask you a question please, based on 
your experience regarding trafficking methods here in the 
United States, should we deploy more front-line officers 
trained in detecting victims at transportation hubs like 
airports, train terminals, bridges, and tunnels, and other 
facilities?
    Ms. Peters. I believe there are important ways that, yes, 
front-line law enforcement and security forces in places like 
bus terminals and airport can be better trained to identify and 
potentially disrupt trafficking events. There have also been 
some initiatives by different industries, both the trucking 
industry and members of the transport industry, including firms 
like UPS and some airlines, to train their drivers to look for 
what appears to be trafficking and to report it. So, I think 
those are important initiatives that should be incentivized.
    Mr. Gottheimer. Thank you. Just following up on that, would 
you support the establishment of a regional center of 
excellence for human trafficking training for transportation 
and other specialized police to share techniques and expertise 
and undergo rigorous training and learn to deal with vulnerable 
youth and predatory traffickers?
    Ms. Peters. Yes. I think that would be a great idea, and, 
in particular, if it were placed in some of the hotspots in 
this country where there is a large amount of trafficking going 
on.
    Mr. Gottheimer. And, of course, in New Jersey and New York 
and that area, in the regional area, there is a large amount, 
correct?
    Ms. Peters. New Jersey, I believe, as well as Georgia has a 
big problem. Texas has a big problem. California. Honestly, it 
is a nationwide issue, but certain States that are on big 
trucking routes really are hit hard.
    Mr. Gottheimer. Thank you. It is why I believe the center 
is so important.
    Ms. Nguyen Swift, if I can ask you a question please, given 
your experience as an attorney with the New York County 
District Attorney's Office, and your time in the private 
sector, can you speak to the importance of financial 
information-sharing and the ability to collect data to share to 
identify patterns and enable criminal investigations?
    Ms. Nguyen Swift. I think that is the only way we do it. 
The only way we can successfully prosecute cases is to tell the 
story through financial evidence, which supports and 
corroborates victim eyewitness testimony. As a prosecutor, we 
know how difficult it is to bring a case and to be able to rise 
up to the evidentiary standards that we must prove in terms of 
the elements of the crime.
    So the only way that we can absolutely succeed in this is 
to bring together, again, the data from all aspects and 
perspectives, and then we learn from that. So as we continue to 
look at these cases, to be able to successfully prosecute and 
understand what data is important, we will be able to continue 
to learn and then give back to the financial community, and the 
cycle goes on.
    Mr. Gottheimer. Thank you. Do you believe that the current 
financial intelligence system we have in place is effective in 
providing the proper data and law enforcement to combat 
trafficking?
    Ms. Nguyen Swift. I think it is getting there, but I think 
we can do a lot better. I think there are a lot of mechanisms 
that are currently in place that attempt to get us to that 
point, but I think it is still very difficult for financial 
institutions to share information with each other and not so 
much with law enforcement, but also the ability for non-
financial institutions such as nonprofit organizations, and 
other government agencies, to also share back data to financial 
institutions is extremely important.
    Mr. Gottheimer. Just one more for you, when a 
transportation police officer makes an arrest of an individual 
in connection with a trafficking investigation, what 
information can be used by investigators to track down a wider 
network?
    Ms. Nguyen Swift. Anything that person has on them--
identification, any sort of understanding in terms of, if there 
are funds that are on them, phones, any electronic devices. 
Everything is being done electronically these days, so 
identification for the machine ID, user IDs, any of those 
things can be traced to financial records, and then ultimately, 
financial transactions that are contained in the wire.
    Mr. Gottheimer. Thanks. Shifting a little bit, I proposed 
bipartisan legislation called the FASTER Act to help law 
enforcement freeze the assets of terrorists or other extremists 
to prevent these funds from being hidden in the system, and 
used to carry out another attack by friends or family or 
unknown accomplices. It also calls for a national home-grown 
terrorism incident clearinghouse for law enforcement to collect 
and share information on incidents to help investigate and 
thwart future attacks. I believe this data-sharing and other 
data-sharing is essential, and anything we can do in Congress 
to the facilitate information-sharing, that you were talking 
about, I think will help, especially in this effort.
    Ms. Nguyen Swift. Absolutely.
    Mr. Gottheimer. Thank you so much for your time today, 
everyone. Thank you. I yield back.
    Mr. Perlmutter. The gentleman from New Jersey yields back. 
The gentleman from Virginia, Mr. Riggleman, is recognized for 5 
minutes.
    Mr. Riggleman. Thank you, Mr. Chairman, and thank you all 
for being here. I am sorry if I am a little bit excited. The 
day before I was elected, I was a senior consultant at the 
Pentagon actually dealing with, and hearing about attack 
modalities, title authorities, application machine learning, 
and then talking about selectors. I got pretty excited. So, we 
should have some fun today, with all of the things I have done 
in the last 26 years.
    And this is pretty timely for me. I have a huge district, 
10,000 square miles. In Axton, Virginia, we just had four 
members of the Jalisco cartel caught, and they are actually in 
court now, just last week. When we talk about methamphetamines, 
and I appreciate that that seems to be the drug of choice right 
now, we have opioid activity, heroin, K2, you know, synthetic 
marijuana, but we also have a massive methamphetamine problem. 
So, I thank you all for being here today.
    I want to start with you, Ms. Realuyo. You said, 
``modality,'' so I got really excited about that. We are 
talking about attack modalities and technologies that we see at 
the border right now. What do you think the most challenging 
segment or attribute portions of those modalities are when you 
are trying to figure out the technology issues that you have? 
For example, when you are looking at an attack modality, is it 
knowing our own environment? Is it information-sharing? Is it 
technology within the network? Where do you see those gaps 
specifically on those modalities when we are talking about on 
the border and those specific technologies?
    Ms. Realuyo. I teach cybersecurity as well, but we are 
never going to get to the point that technology will replace an 
actual human being. We work with a lot of military and law 
enforcement. We always talk about that sixth sense that 
something is not right, or a red flag.
    What we are trying to do is better incorporate the use, 
whether it is unmanned drones or detection devices, to figure 
out what is in a container. You still have to have a trained 
human being and an analyst and law enforcement agent who can 
actually understand what they are seeing.
    I had the privilege, a couple of weeks ago, to go to Santo 
Domingo, which is a huge container port that is the transit 
point for a lot of Colombian cocaine, going through the 
Dominican Republic, coming to the United States, but even more 
so, going towards Europe. And those x-ray machines are 
fantastic, but unless we are able to train our counterparts, 
who are the eyes and ears pushing that border out, it is all 
for naught, because the technology will never actually replace 
human beings.
    And what I fear is that the technology, and more 
importantly, the illicit networks, are gaining so much ground 
because they are so nimble and have tremendous resources, to 
have the better equipment of night vision goggles, and our own 
soldiers do, we need to get much more nimble and also hire a 
different profile, in terms of cyber analysts who can actually 
help to understand how cyber is the new domain, and then more 
importantly, what the cyber instruments that we can use to 
complement our military intelligence and financial instruments 
in national power.
    Mr. Riggleman. It is amazing that you say that, because we 
were actually trying to template human behavior with machine-
learning rules and finding out that we were missing some key 
segments. Even when we thought we had it right, we just 
couldn't get it down.
    And Ms. Peters, when you talked about transnational 
networks analysis, and you talked about information-sharing, 
again, I got pretty excited. I don't hear much when people are 
talking about title authorities, which is one of the biggest 
problems that we had in DoD and also in NSA was actually the 
information-sharing component.
    Right now, do you see that the biggest issue is technology, 
is it funding, or do you actually think it is the policies that 
are in place for information-sharing that are preventing us 
from doing a little bit more as far as doing analysis or 
aggregation of data?
    Ms. Peters. That is a very good question. I would actually 
probably say all three of those issues, to some extent, combine 
to create the challenges we have. Information-sharing, having 
been on the operational side of some of these investigations, 
is a really challenging aspect, particularly if you are 
operating in a multinational environment and you don't quite 
trust the folks that you are working with. But even within the 
U.S. interagency, I have seen one group of law enforcement or 
intelligence operatives try to get credit for something another 
group does. There are incentives for people not to share data.
    Mr. Riggleman. That is correct.
    Ms. Peters. And we have to accept that those incentives 
exist, and that there is also a constant challenge between 
information-sharing and operational security. The more 
information gets passed around, the less secure it is.
    And I guess I have seen some operations that have worked 
really well, but it is very much personality-driven between the 
different agents from different agencies, such that if they can 
get along, they work together great. But I think programs to 
help those interagency groups in a particular region or on a 
particular supply chain, get to know each other, hang out 
together, drink some beers together, those are the kind of 
things that might sound silly but they actually --
    Mr. Riggleman. No, they work. I own a distillery. It works. 
Trust me, it does work. And I think it is really about kicking 
over rice bowls, isn't it?
    Ms. Peters. I am the author of, ``The Martini Glass.''
    Mr. Riggleman. So, we could get along very well. I wish I 
had more than 10 seconds, because I was going to go to Ms. 
Nguyen Swift and talk about AI/ML and actually some of the 
issues that you have. But I only have 5 seconds, and I want to 
yield my time back, so thank you all very much for being here 
today.
    Mr. Perlmutter. The gentleman from Virginia yields his time 
back. If he has other questions, he can submit them in writing 
to the panel.
    The gentleman from California, Mr. Sherman, who is also the 
Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, is recognized for 5 
minutes.
    Mr. Sherman. I know it will come as a shock to my 
colleagues, but I want to talk a little bit about 
cryptocurrency. Right now, the biggest currency is Bitcoin. The 
disadvantage of Bitcoin is you can't really go buy a turkey 
sandwich with a Bitcoin anywhere around here. There are onramps 
and offramps, and eventually you need to convert.
    We had, sitting where you are now, Dr. Kassenova, our 
friend, Mr. Zuckerberg, who is putting forward the Libra, the 
``Zuck buck,'' which, if he is successful, will be Bitcoin on 
steroids, and he has envisioned there to be a way where you 
wouldn't need an onramp and an offramp because you could 
actually spend Libra.
    There are two organizations that are allies, Hezbollah and 
Hamas, and if you are engaged in a criminal enterprise it helps 
to have the ideological cohesions of some political cause. 
Hezbollah has used that very successfully to be an effective 
drug dealer.
    Behind you is a screenshot from a video from the Qassam 
Brigade of Hamas, and it is nice enough that this video has it 
in both Arabic and English, and we have translated the Arabic 
and we find out that Hamas does a good job of translating into 
English. They have it right there on the screen, ``Bitcoin is a 
cryptocurrency that cannot be traced.''
    Ms. Realuyo, the video that I have referred to provides 
Hamas supporters with detailed instructions on how to donate to 
the terrorist group without tipping off law enforcement. 
According to The New York Times, in the most recent version of 
the Hamas website, every visitor is given a unique Bitcoin 
address where he or she can send digital currency, a method 
that makes donations nearly impossible to track. A recent 
report by the think tank, the International Institute for 
Counter-Terrorism (ICT), indicates that one Hamas-controlled 
Bitcoin wallet traded 3,370 Bitcoins, or over $29 million in 
just one day.
    How can criminals, terrorists, and sanctions evaders use 
cryptocurrency to evade our efforts? And then, I will ask if 
anyone else on the panel has a comment on this.
    Ms. Realuyo. Sure. As we have seen over the past 20 years 
since the tragic attacks of 9/11, we have been focusing on 
following the money, but more importantly, our counterparts and 
our adversaries have been evolving in the way that they are 
trying to finance themselves and then physically move money.
    I have seen, and more importantly, have been following this 
issue of Hamas, and it is very innovative--you have to give 
them credit--fundraising schemes. But as we also know, Bitcoin 
tracing is actually not totally anonymous. What we are worried 
about is the evolution of thousands of other cryptocurrencies 
that are much more difficult to trace, that are becoming 
anonymizers.
    We have also seen that other groups closer to home--in 
Venezuela, as many of you know, they are actually using 
cryptocurrencies to engage not just in criminal activities but 
actually how to send remittances. So we have to take a look at 
how those types of criminal activities in the cyber space are 
being co-opted by criminal insurgencies and groups, not just 
what we would see as the traditional Islamist terrorist groups.
    We have to be better about monitoring and understanding how 
they are doing it, but I am more fascinated by who is actually 
going on there, and then more importantly, giving the money, 
because that is the next generation of fighters that we are 
going to be--
    Mr. Sherman. Hamas and Hezbollah have ideological appeal. 
ISIS has been destroyed territorially but not ideologically or 
theologically. And the more capable, the more used these 
cryptocurrencies are, the more powerful tool they will be for 
those trying to escape international, especially U.S., law 
enforcement.
    Does anyone else have a comment? Yes, Dr. Kassenova?
    Ms. Kassenova. In the 9 seconds that I have, I will just 
give you another example. With North Korea, for example, when 
they do cyber attacks and then do ransomware, they force their 
victims to pay in cryptocurrency and then they recycle through 
several stages. They don't cash out immediately, but they cash 
out eventually.
    Mr. Sherman. Thank you. I yield back.
    Mr. Perlmutter. The gentleman from California yields back.
    I would like to thank our witnesses for their testimony 
today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 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.
    This hearing is now adjourned.
    [Whereupon, at 12:02 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             March 4, 2020
                             
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