    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

                            ENDING EXPLOITATION: HOW
                         THE FINANCIAL SYSTEM CAN WORK
                           TO DISMANTLE THE BUSINESS
                              OF HUMAN TRAFFICKING

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

                                VIRTUAL 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 SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 25, 2021

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 117-14

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    44-441 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             FRANK D. LUCAS, Oklahoma
    GREGORY W. MEEKS, New York           BILL POSEY, Florida
    DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
    AL GREEN, Texas                      BILL HUIZENGA, Michigan
    EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
    ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
    JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
    BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
    JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
    JUAN VARGAS, California              TOM EMMER, Minnesota
    JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
    VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
    AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
    MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
    CINDY AXNE, Iowa                     TED BUDD, North Carolina
    SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
    AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
    RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
    STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
    ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
    RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
    MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
    ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
    JESUS ``CHUY'' GARCIA, Illinois
    SYLVIA GARCIA, Texas
    NIKEMA WILLIAMS, Georgia
    JAKE AUCHINCLOSS, Massachusetts

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

                      JIM A. HIMES, Connecticut, Chairman

    JOSH GOTTHEIMER, New Jersey          FRENCH HILL, Arkansas, Ranking
    MICHAEL SAN NICOLAS, Guam                Member
    RITCHIE TORRES, New York             LEE M. ZELDIN, New York
    STEPHEN F. LYNCH, Massachusetts      ROGER WILLIAMS, Texas
    MADELEINE DEAN, Pennsylvania         TOM EMMER, Minnesota
    ALEXANDRIA OCASIO-CORTEZ, New York   WARREN DAVIDSON, Ohio
    JESUS ``CHUY'' GARCIA, Illinois      ANTHONY GONZALEZ, Ohio
    JAKE AUCHINCLOSS, Massachusetts      VAN TAYLOR, Texas, Vice Ranking
                                             Member

                               C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        March 25, 2021...............................................     1
    Appendix:
        March 25, 2021...............................................    33

                                   WITNESSES
                            Thursday, March 25, 2021

    C.deBaca, Ambassador Luis, Senior Fellow in Modern Slavery, and
      Visiting Lecturer in Law, Yale University Law School, and
      former U.S. Ambassador-at-Large to Monitor and Combat
      Trafficking in Persons.........................................     5
    Hatcher, Rev. Dr. Marian, USA Representative, Survivors of
      Prostitution-Abuse Calling for Enlightenment (SPACE)
      International..................................................    10
    Koch, Barry M., Founder and Owner, Barry M. Koch, PLLC, and
      Commissioner, Liechtenstein Initiative.........................     8
    Mickelwait, Laila, Founder, Traffickinghub Movement, and
      President, Justice Defense Fund................................    12
    Shelley, Louise, Omer L. and Nancy M. Hirst Endowed Chair, George
      Mason University, and Director, Terrorism, Transnational Crime
      and Corruption Center (TraCCC).................................     6

                                    APPENDIX

    Prepared statements:
        C.deBaca, Ambassador Luis....................................    34
        Hatcher, Rev. Dr. Marian.....................................    43
        Koch, Barry M................................................    48
        Mickelwait, Laila............................................    53
        Shelley, Louise..............................................   119

                  Additional Material Submitted for the Record

    Wagner, Hon. Ann:
        Responses to questions for the record submitted to Rev. Dr.
          Hatcher....................................................   130
        Responses to questions for the record submitted to Mr. Koch..   132
        Responses to questions for the record submitted to Ms.
          Mickelwait.................................................   134

                          ENDING EXPLOITATION: HOW THE
                          FINANCIAL SYSTEM CAN WORK TO
                             DISMANTLE THE BUSINESS
                              OF HUMAN TRAFFICKING

                                  ----------

                            Thursday, March 25, 2021

                 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 12:01 p.m.,
    via Webex, Hon. Jim A. Himes [chairman of the subcommittee]
    presiding.
        Members present: Representatives Himes, Gottheimer, San
    Nicolas, Torres, Lynch, Dean, Ocasio-Cortez, Garcia of
    Illinois, Auchincloss; Hill, Zeldin, Williams of Texas, Emmer,
    Davidson, Gonzalez of Ohio, and Taylor.
        Ex officio present: Representative Waters.
        Also present: Representative Wagner.
        Chairman Himes. Good afternoon, everybody. Welcome. 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.
        As a reminder, I ask all Members to keep themselves muted
    when they are not being recognized by the Chair. This will
    minimize disturbances while Members are asking questions of our
    witnesses. The staff has been instructed not to mute Members
    except when a Member is not being recognized by the Chair and
    there is inadvertent background noise.
        Members are also reminded that they may only participate in
    one remote proceeding at a time. If you are participating
    today, please keep your camera on. And if you choose to attend
    a different remote proceeding, please turn your camera off.
        If Members wish to be recognized during the hearing, please
    identify yourself by name to facilitate recognition by the
    Chair.
        Just as a reminder--this is our third subcommittee
    hearing--I will be pretty quick on the gavel when the timer has
    expired. I will, of course, allow witnesses to finish, within
    reason, answering questions. But I would ask Members that, if
    they go through their 4 minutes, to conclude their remarks, and
    any questions that are at that 4-minute mark will have to be
    answered in writing for the record.
        Today's hearing is entitled, ``Ending Exploitation: How the
    Financial System Can Work to Dismantle the Business of Human
    Trafficking.''
        I now recognize myself for 4 minutes to give an opening
    statement.
        Trafficking, and especially human trafficking, is a
    societal ill that too many people think is somebody else's
    problem. Even in southwestern Connecticut, we see the brutal
    effects of trafficking, and we are hardly unique in that
    respect.
        In 2019, in the United States, Polaris, which operates the
    National Human Trafficking Hotline, worked on more than 11,500
    situations of human trafficking involving more than 22,000
    survivors, more than 4,000 traffickers, and almost 2,000
    suspicious businesses. And the most shocking fact is that these
    numbers are likely only a very small percentage of what is
    actually going on.
        The worldwide reach of human trafficking is stunning. There
    are estimated to be more than 25 million human trafficking
    victims worldwide, and the business of human trafficking
    generates more than $150 billion in illegal profits per year.
        Today's hearing focuses on how we can harness the power of
    our financial services system to disrupt the business of human
    trafficking, whether by improving the anti-money-laundering
    statutes or by requiring public businesses to look down their
    supply chain to ensure that they are not benefiting from forced
    labor.
        There are a number of areas of improvement that I think
    this subcommittee should consider. We must ensure that the
    financial services firms know what to look for to help identify
    and shut down traffickers and that law enforcement has the best
    tools and resources available.
        We must increase our understanding of the nontraditional
    means of finance that traffickers are using to avoid our
    traditional anti-money-laundering detection systems. That
    includes traditional payment alternatives like prepaid credit
    cards, as well as newer technology like cryptocurrency.
        We must also pay special attention to the survivors of
    human trafficking. In the course of their exploitation, some
    survivors have their identities stolen by their traffickers,
    who then open accounts in their names to further their criminal
    enterprise. As these survivors seek to rebuild, they can find
    themselves in the untenable position of not being able to find
    shelter or open bank accounts, leaving them at risk of being
    victimized again.
        Finally, I take special pleasure in recognizing the
    extremely important role that nonprofits play in this space.
    Grace Farms, which is located in my district, has done
    tremendously important work to combat human trafficking by
    partnering with law enforcement and other nonprofits. That
    includes working with renowned experts, like Ambassador
    C.deBaca, who is with us today, on issues like the use of
    forced labor in the production of construction materials.
        With that, I would like to thank our panel of witnesses,
    whose expertise and experience in their respective fields is
    unparalleled. I sincerely appreciate your assistance in
    tackling these difficult issues.
        The Chair now recognizes the distinguished ranking member
    of the subcommittee, my friend, French Hill, for 5 minutes for
    an opening statement.
        Mr. Hill. Thank you, Mr. Chairman. Thank you for convening
    this hearing, and I thank the witnesses for joining us today,
    and for your expertise.
        A year ago, we began this anti-trafficking initiative when
    we held our first hearing. The plan then was to have hearings
    every quarter or so to dive deeper into specific types of
    trafficking. Then, COVID hit, and derailed our well-crafted
    plan, but I am pleased that we are resuming our previously
    scheduled programming today.
        To that end, I have said I would like to get these hearings
    to resume in person, Mr. Chairman. I know you share my view.
    Given the country is reopening, I think it is imperative for
    Congress to return to normal operations and serve as an example
    for our nation.
        Mr. Chairman, a year later, trafficking remains a huge
    concern for our country. Since I have been in Congress, I have
    traveled to the southwest border 6 times to study those
    critical policy needs. President Biden's recent executive
    actions that counter the Trump Administration's immigration
    reforms and border measures have increased human trafficking
    concerns.
        The unaccompanied minors arriving at our southwest border,
    if they are not already, are potential victims of human
    trafficking. So far, our U.S. Customs and Border Protection
    (CBP) has already apprehended 11,000 of these minors in
    February. According to the CBP, the cartels are making $14
    million a day. Let me repeat that: $14 million a day, or $400
    million in February alone, in trafficking the most vulnerable
    to our open border.
        Statistics tell us that 75 percent of these kids are
    between the ages of 15 and 17 and are highly vulnerable to
    smugglers and sexual assault. Many end up in debt bondage,
    working off their illegal crossing fee by forced labor, sex, or
    both.
        The Biden Administration inherited a secure border, and
    since eliminating many of the Trump Administration decisions,
    the U.S. has seen a 168 percent increase in border crossings
    and apprehensions for unaccompanied minors, and 63 percent for
    families.
        Likewise, in Africa's largest country, Nigeria, my concern
    is growing about the deteriorating human rights situation. I
    recently had a call with Dr. Khataza Gondwe with the Christian
    Solidarity Worldwide organization to discuss the intersection
    of trafficking and terrorism in Africa.
        And sadly, as we know, human trafficking happens anywhere,
    all over our nation, in our backyards. In my home State this
    past January, 13 people were arrested for a sex trafficking
    operation in northeast Arkansas. In this local case,
    fortunately, due to coordinated and cooperative law
    enforcement, and, I must say, well-funded law enforcement at
    the local, State, and Federal level, three victims were
    rescued.
        We need to ensure that we have policies in place to
    facilitate that kind of synergy and coordinated effort to cross
    jurisdictions and agencies. This is exactly what my good
    friend, Ann Wagner, has advocated for during her time in
    Congress, including in her bill, the Homeland Security
    Investigations Victim Assistance Act, which would help victims
    of trafficking access the resources they need, while also
    assisting law enforcement in apprehending their traffickers. I
    am pleased that she is waived into this hearing today and will
    lend her knowledge, interest, and expertise.
        Homeland Security Investigator Special Agent Jere Miles
    said it best in that recent Arkansas raid: ``When we
    collaborate with local law enforcement and community partners,
    we increase our reach and our impact.'' I could not agree more
    with this sentiment.
        I look forward to the expertise shared today, and I yield
    back the balance of my time.
        Chairman Himes. Thank you, Mr. Hill. I do share your hope
    that we can do this in person. I actually did a little due
    diligence in talking to the attending physician, and I was told
    that our Member vaccination rate is hovering around 75 percent.
    It probably doesn't quite get us there, so I would urge all
    members of the subcommittee who share mine and the ranking
    member's hopes that we can get together in person to urge our
    colleagues to get vaccinated so that we can leave this
    technology behind.
        Moving on, today, we welcome the testimony of our
    distinguished witnesses. By way of very quick introduction,
    first, Ambassador Luis C.deBaca, Senior Fellow in Modern
    Slavery, and Visiting Lecturer in Law at Yale University Law
    School here in the State of Connecticut. He is the former
    Ambassador-at-Large to Monitor and Combat Trafficking in
    Persons.
        Second, Dr. Louise Shelley, the Omer L. and Nancy M. Hirst
    Endowed Chair at George Mason University, and the Director of
    the Terrorism, Transnational Crime and Corruption Center, known
    as TraCCC.
        Third, Mr. Barry M. Koch, is the Founder and Owner of Barry
    M. Koch, PLLC, and Commissioner of the Liechtenstein
    Initiative.
        Fourth, we have Rev. Dr. Marian Hatcher, the USA
    Representative for SPACE International.
        And finally, we have Ms. Laila Mickelwait, Founder of
    Traffickinghub, and President and Founder of the Justice
    Defense Fund.
        Witnesses, thank you all for being here. You are reminded
    that your oral testimony will be limited to 5 minutes. You
    should be able to see a timer on your screen that will indicate
    how much time you have left, and a chime will go off at the end
    of your time. I would ask that you be mindful of the timer, and
    quickly wrap up your testimony if you hear the chime, so that
    we can be respectful of both the witnesses' and the committee
    members' time. And without objection, your written statements
    will be made a part of the record.
        Ambassador C.deBaca, you are now recognized for 5 minutes
    to give an oral presentation of your testimony.

    STATEMENT OF AMBASSADOR LUIS C.deBACA, SENIOR FELLOW IN MODERN
      SLAVERY, AND VISITING LECTURER IN LAW, YALE UNIVERSITY LAW
      SCHOOL, AND FORMER U.S. AMBASSADOR-AT-LARGE TO MONITOR AND
                     COMBAT TRAFFICKING IN PERSONS

        Ambassador C.deBaca. Thank you, Mr. Chairman, Ranking
    Member Hill, and members of the committee.
        Our Constitution, laws, and treaty obligations protect
    people from forced labor, forced prostitution, and the
    commercial sexual exploitation of children, but millions remain
    in servitude with a financial impact of at least $150 billion.
    That is a grave national security threat and a human rights
    imperative. It is a victim services challenge, and it poses
    both risks and opportunities for the financial system. Risks,
    because traffickers and profiteers use the financial system to
    move money, collect payments, and commit other crimes,
    sometimes even terrorism. So, too, lack of access to the
    financial system leads to self-collateralization. The resulting
    recruitment fees, transportation costs, and deductions for food
    and clothing create a peonage situation even before work
    starts.
        The abusive company-store employer-based financial system
    of the past is alive and well, and financial fraud and identity
    theft by traffickers further victimizes those upon whom they
    prey, because the financial system in which this crime is
    poorly understood exacerbates the victimization through credit
    scoring and other means, just as the lack of understanding has
    kept survivors out of transitional job opportunities because of
    criminal records or the inability to meet licensing standards.
        Initial discussions and preliminary responses have largely
    been around the retail level and primarily focused on sex
    trafficking, but the risk is much broader and touches on
    aspects such as commercial banking and construction financing,
    as I think my fellow witnesses will address. One note on
    construction financing, that multi-trillion-dollar industry is
    riddled with forced labor, and timber and mining operations
    often drive demand for sex trafficking.
        In October, Grace Farms' Design for Freedom report
    identified a number of at-risk building materials in addition
    to the abuse that we have seen on job sites. A good next step
    in advancing that effort would be to address construction
    financing so the trafficking risks are not borne solely by
    builders, workers, and vulnerable communities.
        Indeed, financial intelligence around construction
    materials supply chains can bring opportunities for disruption,
    innovation, and profit. Major financing often comes through the
    international financial institutions of multilateral
    development banks, but they have not taken an active role. The
    U.S. International Development Finance Corporation's project
    language prohibiting forced labor might be a good model for
    their activities.
        There are opportunities for partnership: the financial
    sector can help restore survivors and support service
    organizations; banks and consumer credit ratings should
    aggressively develop credit repair tools; and firms can provide
    hiring pathways for restoration and partner with service
    providers and survivors to obtain financial intelligence.
        But none of these things will be possible without
    leadership from the United States Government, which is why
    there is a need for agency-wide coordination at Treasury to
    move beyond the admirable, but informal, engagement and
    innovation of motivated staff. Imagine secretarial
    prioritization and trafficking-specific authorities, work
    responsibilities, and budgets, not to mention relationships
    with organized labor, human rights groups, service providers,
    and survivors themselves. So, too, clarifying and intensifying
    human rights sanction authorities and activities would provide
    a strong tool and ensure harmonization with our allies.
        Last fall, interagency recommendations were crafted with
    input from nongovernmental organizations (NGOs) and survivors.
    They represented the kind of bipartisan consensus that
    characterizes this fight, and they include: stepped-up
    financial intelligence gathering and dissemination; expansion
    and intensification of efforts at the Department of the
    Treasury; harnessing the power of the international financial
    institutions (IFIs) and the multilateral development banks
    (MDBs); creating innovative partnerships in support of
    survivors, as well to protect the integrity of the system;
    facilitating credit repair and restoration; and recognizing the
    need for mechanisms to protect NGOs and service providers who
    share important financial information and intelligence.
        A number of bills that track these recommendations have
    been introduced or are in the discussion stage and would have a
    real impact.
        Another worthy prospect in discussion is to build upon the
    success of the Foreign Corrupt Practices Act (FCPA) for
    trafficking and human rights abuses.
        Any of these recommended activities and potential laws
    would add to our ability to investigate and prosecute, to
    protect and restore, and to prevent this grave human rights
    crime. Such efforts would facilitate partnerships within the
    financial system, with allied nations, and most importantly,
    the most vulnerable and affected communities. And they would
    harness the power of the financial system and regulatory bodies
    alike in service to that most American of ideals: the promise
    of freedom.
        Thank you.
        [The prepared statement of Ambassador C.deBaca can be found
    on page 34 of the appendix.]
        Chairman Himes. Thank you, Ambassador.
        Dr. Shelley, you are now recognized for 5 minutes to give
    an oral presentation of your testimony.

    STATEMENT OF LOUISE SHELLEY, OMER L. AND NANCY M. HIRST ENDOWED
       CHAIR, GEORGE MASON UNIVERSITY, AND DIRECTOR, TERRORISM,
           TRANSNATIONAL CRIME AND CORRUPTION CENTER (TRACCC)

        Ms. Shelley. Thank you, and it is a great honor to be with
    you today.
        Human trafficking networks are entrepreneurial and
    flexible, and, as my written testimony reveals, human
    trafficking networks often converge with other illicit
    activities. In the United States, we have a variety of
    networks, both domestic and international, and their money is
    laundered both in the U.S. and abroad.
        We have networks that are very small, with a single
    trafficker and case facilitators; or, as in a recent Federal
    case that produced an indictment in 2018, involved 30,000
    clients, 58 cities, and 350,000 online advertisements. This
    reflects the growth of human trafficking in the online
    environment, as Laila Mickelwait will discuss.
        I also agree with Ambassador deBaca that much more needs to
    be done with labor trafficking, and that often involves
    corporate actors as we see in the fishing, agriculture, and
    production sector.
        Human traffickers in documented cases that I mention have
    used every type of money laundering available: underground
    banking; bulk cash smuggling; money laundering into real
    estate; establishment of live businesses as vehicles for money
    laundering, trade-based money laundering; misuse of credit
    cards, including prepaid credit cards; money transfer
    businesses; wire transfers; banks; and cryptocurrencies. And,
    in many cases, this illicit activity of human trafficking
    converges with the legitimate economy.
        What policies do we need to address human trafficking?
    First of all, we need to implement and realize the beneficial
    ownership law that has just been passed, and it needs to be
    carefully and comprehensively implemented. Traffickers can now
    hide behind shell companies and anonymous ownership. The
    largest detected network of human traffickers that I just
    mentioned involved massage parlors in cities across the U.S.,
    Canada, and Australia, and the vast majority of massage parlors
    hide their owners' identity. Therefore, we need to implement
    the Corporate Transparency Act and establish a national
    beneficial ownership directory.
        Second, we need to focus on cryptocurrency, which is being
    used to finance human trafficking and many other forms of
    illicit activity. Greater financial oversight is needed of this
    fast-growing financial instrument, and similarly, cooperation
    in the sharing of information between government agencies and
    the private sector is needed to track and analyze criminal
    transactions, as I indicate in my statement.
        Third, we need to follow the money. There needs to be a
    much more central attention to the role of money in
    investigations of human trafficking. This is difficult because
    there are relatively small numbers of suspicious activity
    reports in the FinCEN database, and they are often not used to
    full advantage, as was seen in the Epstein case. Training and
    awareness must be raised in the banking community to not only
    increase SARs reporting, but also to make use of these reported
    suspicious transactions that are presently underutilized.
        Fourth, we must focus on supply chains for human
    trafficking by looking at transport systems, travel agencies,
    hotels, rental apartments, rideshare services, and short-term
    rental apartments. According to the Human Trafficking
    Institute's analysis of Federal trafficking cases in recent
    years, over 80 percent of Federal cases of sex trafficking
    involved exploitation at hotels and motels.
        Fifth, we need to enhance regulation and reporting
    requirements of online businesses to vet customers and report
    suspicious transactions. More needs to be done by companies,
    such as Uber and Airbnb, in monitoring data for suspicious
    patterns of financial transactions and how their businesses
    inadvertently support human trafficking networks. The role of
    online businesses in human trafficking is broader than these
    companies addressed by the FOSTA-SESTA legislation.
        And sixth, we need to address trade-based money laundering
    (TBML). This underacknowledged form of money laundering is key
    to the movement of the proceeds of human trafficking into the
    global financial system as many of the loopholes in the rest of
    the system are shut. Our understanding of TBML requires greater
    analysis as to how it is occurring in human trafficking, and
    the red flags associated with it need to be much more carefully
    conceived. This will have an enormous impact not only in
    countering human trafficking, but other forms of the illicit
    economy, such as the Fentanyl trade and the environmental crime
    with which it sometimes intersects. This is also especially
    relevant to the fishing industry, in which larger numbers of
    individuals are subject to labor exploitation.
        Thank you very much.
        [The prepared statement of Dr. Shelley can be found on page
    119 of the appendix.]
        Chairman Himes. Thank you, Dr. Shelley.
        Mr. Koch, you are now recognized for 5 minutes.

     STATEMENT OF BARRY M. KOCH, FOUNDER AND OWNER, BARRY M. KOCH,
            PLLC, AND COMMISSIONER, LIECHTENSTEIN INITIATIVE

        Mr. Koch. Thank you, Mr. Chairman, Ranking Member Hill, and
    members of the subcommittee. Thank you for the invitation to
    participate in today's hearing.
        My name is Barry Koch. I am a law professor and a private
    attorney with a consulting practice in which I provide expert
    witness and advisory services in money laundering cases and
    financial crimes risk management. I am also a co-founder of the
    United States and European Banks Alliance Against Human
    Trafficking, a former commissioner on the Financial Sector
    Commission, and I was one of a team of compliance professionals
    that developed the first quantitative model in the banking
    industry to monitor transactional activity for red flags
    indicative of labor trafficking and sex trafficking. More
    recently, I was an assistant district attorney here in New York
    County.
        I would like to offer one additional perspective before I
    offer five concrete recommendations for the subcommittee to
    consider. We are all in emphatic agreement about the moral
    imperatives to end human trafficking, but I would like to offer
    an additional practical reason for increasing our anti-
    trafficking efforts, which is that trafficking on a macro level
    is economically inefficient. It depresses innovation. It fuels
    corruption and the flow of illicit funds in the financial
    system. It deprives governments of tax revenues, and it
    disrupts the efficient deployment of human capital. It
    privatizes criminal profits while socializing the costs.
        So, here are my five recommendations for the subcommittee
    to consider. First, increase the use of financial records and
    financial data to initiate and strengthen prosecutions. Using
    financial records and financial data has been effective in
    identifying victims and perpetrators, improving coercion, which
    is a required element in a criminal charge, in corroborating
    witness testimony, and in serving as the basis for asset
    forfeitures.
        Further, if witnesses are reluctant to testify because of
    the threat of violence against them or family members, or the
    risk of being deported, or even because of the fear of being
    prosecuted themselves, financial records can be used to pursue
    other serious criminal charges that may not require testimony.
    For example, prosecutors may bring a case against a trafficker
    for tax evasion, structuring, and money laundering where the
    trafficker's tax returns report minimal income and assets, yet
    the financial records refute those tax returns by illustrating
    a lavish lifestyle. Serious crimes that may be related to the
    trafficking, such as bank fraud, kidnapping, extortion,
    identity theft, and immigration fraud can also form the basis
    for asset forfeiture, which is a very powerful tool to disrupt
    a trafficking business.
        Second, strengthen the use of sanction regimes. There is
    already a precedent for the U.S. to use economic sanctions to
    designate and punish human rights violators and to deny them
    access to the U.S. financial system. Executive Orders have in
    the past identified serious and flagrant human rights abuses as
    threats to the national security, foreign policy, and the
    economy of the United States. And, in this context, the
    government has previously sanctioned transnational criminal
    organizations, companies, and individuals for migrant
    smuggling, human trafficking, and child prostitution. These
    sanctions can be designed to be limited and surgical, and can
    be used to target industries that are notorious for using child
    labor and trafficked labor in their supply chains. In
    evaluating this recommendation, it is important to note that
    the U.S. financial sector already has a well-developed
    operational infrastructure to ensure immediate and sustainable
    compliance.
        Third, strengthen the risk assessment process employed by
    financial institutions as a critical element of their anti-
    money-laundering programs. There are material weaknesses in the
    current regulatory and operational framework, and here are a
    few practical ways to address them.
        One, require that the risk of human trafficking be
    specifically included in annual anti-money-laundering (AML)
    risk assessments. Very few large banks do this, and virtually
    none of the mid-sized and small banks or credit unions or money
    transmitters and check cashers include the risk of human
    trafficking as part of their annual AML risk assessment.
        Two, require financial institutions to evaluate human
    trafficking as a funding source for terrorist organizations.
    Although the current regulatory scheme treats human trafficking
    as a reportable predicate crime for money laundering, few, if
    any, financial institutions do that. Many national governments,
    including our own, have overlooked this issue, focusing only on
    the money laundering risks.
        There are published cases that report instances where the
    Islamic State has conducted online slave auctions in
    territories that it controlled. And, more recently, in fact we
    saw it just in yesterday's Wall Street Journal, cases involving
    Boko Haram, their multiple kidnappings of school children, some
    of whom are ransomed, while others are forced into marrying
    their captors, while still others are conscripted into serving
    as child soldiers.
        I am aware of the time, so I will simply refer the members
    to my written statement, which goes into additional
    recommendations, including how to address the cryptocurrency
    risks and how to take a more victim-centric approach to helping
    traffickers who are caught up in the criminal justice system.
    Thank you.
        [The prepared statement of Mr. Koch can be found on page 48
    of the appendix.]
        Chairman Himes. Thank you, Mr. Koch.
        Rev. Dr. Hatcher, you are now recognized for 5 minutes.

    STATEMENT OF REV. DR. MARIAN HATCHER, POLICY ANALYST AND VICTIM
         ADVOCATE, SURVIVORS OF PROSTITUTION-ABUSE CALLING FOR
                  ENLIGHTENMENT (SPACE) INTERNATIONAL

        Rev. Hatcher. Thank you. Greetings, Chairman Himes, Ranking
    Member Hill, Representatives from Illinois, and the members of
    the subcommittee. It is an honor and a privilege to share my
    personal and professional experience and knowledge in an area
    which adversely impacts citizens of this great country every
    day.
        Human trafficking relies on a business model which feeds on
    the vulnerable, benefitting only the predatory. It results in
    violence, substandard living conditions, loss of hope, and loss
    of life.
        Growing up, I had a loving and caring family. However,
    molestation by a relative at age 7 forever changed the
    trajectory of my life. While I went on to achieve formal
    education, corporate success, marriages, and motherhood, the
    trauma of that molestation would awaken under negative
    circumstances. Those circumstances included a volatile
    combination of domestic violence, drugs, and associated trauma.
        I was guilt-ridden and ashamed of allowing my first abuser,
    but not the last, to hurt me, assault my mother, put a gun to
    the head of my oldest son, and terrorize my other children.
    When I ran from the danger at home, I embraced a numbness
    provided by crack cocaine and alcohol. To feed that habit,
    prostitution became a way of life. Eventually, I was
    trafficked. Soon, it became impossible to imagine returning to
    my loved ones, whom I abandoned. My tribe, parents, ex-husband,
    aunts, and other in-laws took care of my children and each
    other until God brought me home.
        My exploitation eventually led to my arrest, not an
    uncommon outcome for so many trafficking survivors. However, I
    benefitted from jail-based treatment. And even though arrest
    should never be a tool for connecting survivors with services,
    having access to those services paved the way to reuniting me
    with my family after nearly 2 years, and I found a second
    chance.
        My second chance resulted in a career, a purpose-filled
    next chapter at the Cook County, Illinois, Sheriff's Office,
    where I progressed through several roles and most recently
    served as policy analyst and victim advocate. Currently, I am
    on medical leave due to progressive multiple sclerosis.
        From 2005 to 2019, my purpose and responsibilities became
    addressing the unaddressed issues of victims who lived,
    suffered, and often died because of experiences like mine.
    Seeing how many people, especially women of color, were ruined
    by systems of prostitution and systemic oppression planted in
    me a fiery passion and a focus on gender-based violence. This
    dedication was surpassed only by my commitment to hold
    predators accountable.
        I am here to present my lived experience, both as a victim
    of human trafficking and as a professional champion of law
    enforcement tactics that center on restorative justice and
    accountability. I am not speaking in any official capacity.
    Instead, I am here as a result of my lived and professional
    expertise, which informs this issue in several roles, including
    as a U.S. representative for SPACE International, which means
    Survivors of Prostitution-Abuse Calling for Enlightenment--we
    represent 10 countries--as a member of Shared Hope
    International's Just Response Council, and as a policy
    consultant at the National Center on Sexual Exploitation, and
    demand evolution.
        Based on my experience interviewing hundreds of victims and
    watching scores of Federal, State, and local trafficking cases
    unfold, I am going to share three high-level observations
    regarding the business model of human trafficking. My written
    testimony provides a more detailed assessment of these issues.
        First, the commercial sex trade is a billion-dollar
    industry, as we stated, that causes massive, long-term physical
    and psychological damage, disproportionately impacting women
    and youth of color. Yet, almost no money reaches victims, even
    those identified as victims of human trafficking. The need for
    expanded services for trafficking victims is great, and the
    lack of investment in services can be addressed in part by
    redirecting funds from convicted exploiters in order to help
    fund specialized programs that can address persistent scarcity
    of appropriate services.
        Second, technology can be a tool for investigation and
    prosecution by following the money, which also reduces reliance
    on the testimony of victims, who face a host of potentially re-
    traumatizing experiences in the criminal justice process. Using
    technology to follow the money is what King County, Seattle,
    did in its investigation and prosecution of the Review Board, a
    website set up by sex buyers to promote access to prostituted
    individuals. By focusing enforcement efforts on the market
    driver, the sex buyers, rather than the individuals being
    bought and sold on a website, they are able to dramatically
    impact the market for exploitation in their jurisdiction.
        Third, despite the current popularity of the mantra, ``sex
    work is work,'' my 15 years of experience also tells me that
    most women and youth do not want to be selling access to their
    bodies. Even those who are not trafficked are selling out of
    duress, such as addiction, homelessness, mental duress, or a
    combination of these factors. Most want out of the life. Most
    encounter major obstacles to achieving financial stability,
    including barriers to accessing basic banking services, such as
    bank accounts and credit cards. The resulting lack of resources
    often leads to re-exploitation as survivors feel they have no
    option other than returning to the commercial sex industry.
        I want to thank the subcommittee for the opportunity to
    testify today, and I look forward to answering your questions
    about these critically important issues.
        [The prepared statement of Rev. Dr. Hatcher can be found on
    page 43 of the appendix.]
        Chairman Himes. Thank you very much, Rev. Dr. Hatcher, for
    that testimony.
        Ms. Mickelwait, you are now recognized for 5 minutes to
    give an oral presentation of your testimony.

        STATEMENT OF LAILA MICKELWAIT, FOUNDER, TRAFFICKINGHUB
             MOVEMENT, AND PRESIDENT, JUSTICE DEFENSE FUND

        Ms. Mickelwait. Thank you very much.
        Prior to this year, Pornhub was the tenth most trafficked
    website in the world, with 42 billion visits per year. The site
    boasted 6.8 million videos uploaded per year; that would take
    169 years to watch. Pornhub is owned by MindGeek, an
    international pornography conglomerate that has obtained a
    monopoly on the porn industry.
        As the New York Times put it, MindGeek is a porn titan.
    MindGeek is also what I call a mega sex trafficker, in that its
    sites are infested with highly monetized commercial crime scene
    footage of user-generated child sexual abuse, rape, assault,
    and other forms of non-consensual pornographic content.
        Every video on Pornhub is commercial. In fact, the totality
    of videos on the MindGeek sites generate hundreds of millions
    of dollars per year. The company knowingly has enabled and
    profited from mass amounts of filmed sex acts induced by force,
    fraud, or coercion, and the commercial sexual abuse of
    children.
        Unfortunately, Pornhub is not alone. There is an entire big
    porn industry operating similar user-generated porn sites. For
    example, MindGeek's biggest rival, WGCZ, which has had a recent
    class action lawsuit filed against it on behalf of trafficked
    minors, boasts 200 million daily visitors and 6 billion daily
    ad impressions on its sites. Like Pornhub, these websites are
    set up for exploitation, allowing any user with a cell phone
    camera to anonymously upload sex acts with only an email
    address. This lack of oversight and accountability is
    intentional on the part of these sites because the unlimited
    ability to upload content by any user in the world is the
    business model that generates the most profit.
        For Pornhub and its largest competitors, content is king.
    The more content that is uploaded, the more traffic is driven
    to the site, and the more profit is generated from advertising,
    premium memberships, and the sale of user data. In fact, 50
    percent of Pornhub's profit is generated via advertising.
    Because profits are the crux of the issue, financial services
    actors that facilitate and benefit from the exchange of money
    play a crucial role when it comes to enabling or disabling the
    crime of sex trafficking on such sites.
        For example, after 2 million people from 192 countries had
    signed the petition to hold Pornhub accountable, over 300
    organizations called for the site to be shut down. Victims
    publically came forward. Lawmakers in the U.S. and abroad
    called for criminal investigations. Grassroots protests were
    being organized around the world, and hundreds of media
    articles were bringing attention to the sexual crime on the
    site. Pornhub still refused to acknowledge the problem. Even
    until October 2020, Pornhub told the media that suggestions
    that children were being exploited on the site were conspiracy
    theories.
        However, in December, a groundbreaking New York Times
    expose put pressure on the major card companies to stop
    enabling the abuse. MasterCard, Visa, and Discover quickly
    responded by confirming illegal content on the site, disabling
    the use of their cards, and, in under 24 hours, the 10th most
    trafficked website in the world deleted 80 percent of its
    content, totaling 10 million videos.
        Not only was this a dramatic admission of guilt on the part
    of Pornhub, but it was also a demonstration of the power and
    influence that financial institutions have in regulating even
    the largest websites in the world. This leverage should have
    been utilized a long time before it was, not only because it
    was the right thing to do, but because knowing that trafficking
    was being facilitated with their services and not taking action
    is illegal. According to the Trafficking Victims Protection
    Act, knowingly benefitting from a trafficking venture is
    prohibited.
        So, what are the solutions? First, we urgently need the
    antiquated law, 18 U.S. Code Sec. 2257, to be amended to hold
    websites distributing user-generated pornography responsible
    for age verification and record-keeping. This law has been in
    place for decades to help prevent child abuse from
    proliferating in the porn industry, but it must be updated to
    keep up with the times and hold the major online porn
    distributors accountable for the content from which they
    profit.
        Second, we need mandatory, reliable age and consent
    verification procedures mandated for every sex act uploaded
    online. Reintroducing and passing the bipartisan, Stop Internet
    Sexual Exploitation Act, should be a priority. Laws regarding
    the disclosure of beneficial owners of companies who own such
    sites is also an important accountability measure. In the case
    of MindGeek, its executives and owners have intentionally
    hidden their identities in order to escape scrutiny. Even now,
    we do not know who is ultimately behind the company.
        Lastly, enforcement of laws concerning the mandatory
    reporting of child sexual abuse material must be improved to
    ensure that companies like MindGeek, which has offices,
    servers, and substantial consumers in the United States, are
    held accountable for failing to report known child sexual abuse
    material (CSAM) as legally required. Recent testimony and
    publically available data show that despite widespread presence
    of child exploitation on Pornhub, the company made no reports
    to Canadian or American authorities for over a decade. This is
    unacceptable. We need accountability. These actions would go a
    long way in the realm of sex trafficking prevention in the
    digital age.
        Thank you for the opportunity to testify today.
        [The prepared statement of Ms. Mickelwait can be found on
    page 53 of the appendix.]
        Chairman Himes. Thank you, Ms. Mickelwait, and thank you to
    all of our witnesses, for your powerful and valuable testimony.
        I now recognize myself for 5 minutes for questions.
        Ambassador C.deBaca, I would like to start with you. Both
    you and Dr. Shelley mentioned supply chains, that Congress is
    spending a lot of time thinking about supply chains in the
    context of cybersecurity. I wonder if you could give us some
    guidance? And Dr. Shelley, since you mentioned it too, I will
    turn to you next.
        What actually should the Congress be doing with respect to
    mandating, requiring, encouraging, or asking for disclosure
    that would improve the visibility into supply chains?
        Ambassador C.deBaca. Thank you, Mr. Chairman. I think that
    one of the most important things is to remove the current
    situation in which most companies who are looking at their
    supply chains are either already good actors, or are doing it
    solely on a voluntary basis, so that they can then back off of
    as convenient.
        And we saw that just in the last 24 hours with Inditex, the
    parent company of Zara, who has evidently taken their zero
    tolerance for forced labor policy off of their website due to
    Chinese pressure over the Weibo situation. I think that tells
    us right there that, even in something that has been as well-
    documented, even in something that has been as well organized
    as the cotton campaign and the garment work over the last
    decade, if it is left to companies to do voluntarily, they will
    do it when convenient. Or, they will do it through greenwashing
    and ineffective multi-stakeholder initiatives.
        So, I think that we need to, just as what we have seen with
    the United Kingdom's mandatory disclosures and the Australian
    Modern Slavery Act that followed it, building on the example of
    the California Supply Chain Transparency Act, I think it is
    time for a United States Supply Chain Transparency Act at the
    national level, which does not make disclosure or doing work in
    your supply chain at all voluntary on the part of firms.
        There is a lot that one can do by looking at the Federal
    procurement regulations, which again are bipartisan responses
    from both the Obama and Trump Administrations. President Trump
    and his folks took the Obama Executive Order and helped to put
    teeth into it, and I think it just shows that this is a
    consensus issue, that we can come together.
        Chairman Himes. Thank you, Ambassador.
        Dr. Shelley, let me ask you to chime in if you would like
    to. I do have one remaining question for Mr. Koch, though, so
    let me ask you to be brief, if you would?
        Ms. Shelley. Certainly. I certainly endorse what Ambassador
    deBaca says about supply chain transparency and how we need
    that on the national level and not just in California. But I
    think there also needs to be much more of an enforcement
    mechanism and not just voluntary declarations because it has
    not been as effective as needed.
        I have been working for the last 2 years on an NSF grant
    looking at illicit supply chains in regards to human
    trafficking, and what is evident from this research is that
    many of the key notes intersect with the legitimate economy.
    So, as we are looking at, and as was just talked about, online
    activity and advertisements, so, that intersects with the
    internet. Then, we have transport of victims, which often
    occurs through commercial vehicles or often with ridesharing.
    And then, the victims, of course, who are exploited by the
    traffickers are taken often to hotels and motels, which takes
    them and places them in another commercial environment, which
    is a legitimate part of our economy.
        So, what we need to be doing is focusing much more on the
    intersection of this illicit phenomenon that is resulting with
    so much tragedy and how it is being facilitated and supported
    by legitimate and large-scale companies in the United States.
    Because many of the hotels are large chains, and they have,
    until there started to be suits from victims, not paid enough
    attention to what was going on in their hotels and establishing
    policies. So, this is not something that is existing totally in
    the illicit and dark economy.
        Chairman Himes. Thank you, Dr. Shelley.
        Mr. Koch, I only have 9 seconds left, so I am going to ask
    you to answer this question in written form. I am very
    interested to know whether there is alternative financial
    information that our current anti-money-laundering efforts do
    not capture that would be valuable in this effort. Again, I am
    out of time, so I cannot ask you to answer. But I would also
    invite the other witnesses, if they have thoughts about data
    that we might capture that would be helpful, to also respond
    subsequent to this hearing.
        With that, I recognize the distinguished ranking member,
    Mr. Hill, for 5 minutes for questions.
        Mr. Hill. Thank you, Mr. Chairman, and again, thanks for
    the hearing. And what an excellent panel. Everybody on our
    subcommittee is learning a great deal and we appreciate the
    heartfelt, detailed, and recommended ideas in your testimony.
        Speaker Pelosi, whenever she gives an interview, always
    makes a statement--and I am going to paraphrase here. It is
    always, for her, she says, about the children. And so, this is
    certainly a major challenge when one thinks about human
    trafficking both on the border, domestically, and in other
    countries as a part of the transnational crime movement. I know
    this is a desponding topic for so many, and Speaker Pelosi
    often mentions it is always about the children. I hope that we
    on this subcommittee think about that, that it is in fact often
    about our youngest, most vulnerable people.
        I mentioned in my opening statement about the encounters on
    the border, 100,000 alone in February, the highest in 7 years.
    One report I read said the highest in 15 years. So, this is a
    key challenge for us right now in the country. It is definitely
    a crisis. Jeh Johnson, who was our former Secretary of Homeland
    Security under President Obama, said that anytime there were
    more than 1,000 encounters a day, it was a bad number. So, I
    hope that puts in perspective the challenge that we have.
        Ambassador C.deBaca, when an unaccompanied minor crosses
    the border into the United States, tell us how Health and Human
    Services and other agencies are responsible for the child,
    screening potential sponsors to ensure a child is not put into
    a harmful situation or a trafficking situation here in our
    country.
        Ambassador C.deBaca. As a former Federal prosecutor, my
    direct responsibility was investigating and prosecuting cases.
    But my understanding as to what HHS does with unaccompanied
    alien children is that within a short timeframe--I think 48
    hours--they are tasked with identifying sponsors, preferably
    family members, whom the children can then go ahead and travel
    to join. There was a consensus in the 2008 Trafficking Victims
    Protection Act Reauthorization that the prior practice of
    releasing the unaccompanied alien minors back across the border
    was simply creating a revolving door and was creating an awful
    lot of sexual assault and other mistreatment on the other side
    of the Mexican border.
        Mr. French. Thank you very much. I agree. I think it is a
    huge challenge. And right now, those held in unaccompanied
    conditions are--70 percent are not being met with any kind of
    resolution within 72 hours.
        Mr. Chairman, I would like to ask unaimous consent to
    insert in the record a study that was released by the Senate
    Permanent Subcommittee on Investigations on Protecting
    Unaccompanied Alien Children from Trafficking and Other Abuses.
        Chairman Himes. Without objection, it is so ordered.
        Mr. French. Thank you very much.
        I was talking to my friend Melissa Dawson today. She runs
    the Centers for Youth and Family here in Arkansas, and they do
    an outstanding job helping our kids who are victims of
    trafficking here in the State. I visited that process, and I
    admire her so much. She talks about the issue of technology
    increasing trafficking, and she also talked about her concern
    that she cannot see cases get prosecuted because they are
    complex around--to track the transactions, and she is concerned
    about Bitcoin and cash apps.
        So, Mr. Koch, is there a way that cash apps and other
    currencies, such as Bitcoin transactions, could be monitored
    more effectively for suspicious activity?
        Mr. Koch. Yes, absolutely. And I, again, would refer the
    subcommittee to my written statement where I address this, but
    let me explain the context in which I address it because it is
    a very important question.
        It is the context of public-private partnerships, which the
    Congress did cover in the Anti-Money Laundering Act of 2020.
    There are some not-for-profit startups and there are other
    companies that are doing some brilliant, cutting-edge work in
    looking at cryptocurrency analysis, in looking at the dark web
    for specifically this purpose, and they are sharing the
    information with law enforcement and with the financial sector.
    And this information provides actionable intelligence for
    investigations. More should be done, but the public-private
    partnership theme, which I know your subcommittee is concerned
    with, as well, is one very effective way to go in that
    direction.
        Mr. French. Thank you for that. I will have some additional
    questions for the record, and Mr. Chairman, I yield back.
        Chairman Himes. The gentleman's time has expired.
        The gentleman from New Jersey, Mr. Gottheimer, is
    recognized for 5 minutes.
        Mr. Gottheimer. Thank you, Chairman Himes and Ranking
    Member Hill, for calling this very important hearing today, and
    to all of our witnesses for being here.
        Many of the same online tools that we all use to keep in
    touch with loved ones or conduct business during this pandemic,
    as we all know, are increasingly being utilized by those who
    wish to do harm to our nation. This harm is not limited solely
    to political extremist hate and propaganda by groups like Hamas
    and Proud Boys, but also comes as illicit activities, such as
    groups that utilize social media to advertise or recruit
    potential human trafficking victims. This, to me, is
    unacceptable. Tech companies and social media platforms should
    be doing everything they can to stop the proliferation of
    harmful content.
        Ms. Mickelwait, we see this time and time again, as
    websites drag their feet to remove illicit content and fail to
    report it to the authorities. Should tech companies be held to
    a higher liability standard when it comes to allowing this
    material to stay online? And what role could the financial
    services industry play to help stop illicit actors from
    profiting from the content generated by human trafficking?
        Ms. Mickelwait. Thank you for that question. I think what
    is important here is to highlight the harm that these recorded
    crime scene videos do to these victims. It is one thing for a
    victim to be subject to rape, to be subject to trafficking. But
    what I have heard from countless victims, whom I have spoken
    with about their abuse online, is that it is the
    immortalization of their trauma--they call it that--because
    they go on with the knowledge that their abuse, that their
    trauma, the worst moments of their life, will live on in the
    digital space long after they are gone. And they live with that
    terrorizing knowledge.
        I think that there is this high, high level of
    responsibility for sites like Pornhub, and like MindGeek-owned
    sites like XVIDEOS, xHamster, and others that are distributing
    sex acts, often containing minors, containing trafficked women,
    containing those who have not given their consent to be
    uploaded and distributed online. And I think that we must hold
    them accountable. We need to see age and consent verification
    when a sex act is uploaded online. I think that would go a long
    way in the area of prevention, like I mentioned.
        Mr. Gottheimer. Do you think the tech companies should be
    held to a higher liability in general? Should they be held more
    responsible for this?
        Ms. Mickelwait. I think that they should be held
    responsible as any company that would knowingly benefit from a
    trafficking venture, would knowingly benefit from the
    distribution of child sexual abuse material. We have those laws
    in place, and I think that they need to be applied.
        Mr. Gottheimer. Thank you. If I can turn to the Ambassador
    now, do you believe that the current financial intelligence
    system we have in place is effective at providing the proper
    data to law enforcement to track and combat human trafficking
    through the financial system?
        Ambassador C.deBaca. I do not. And I think that one of the
    things that we have seen is that it has been a slow uptake of
    the SARs checkbox that has been added. It took a lot of staff
    work and it took a lot of dedicated folks in both the banking
    industry and over at Treasury to get that done. But it really
    needs, I think, to get disseminated out to the banks.
        And, then, back at the Department of Justice and in the
    U.S. Attorneys' offices, the folks over in the Asset Forfeiture
    and Money Laundering Sections are working more closely with the
    folks over in the criminal section of the Civil Rights Division
    so that we can incorporate in following the money.
        Mr. Gottheimer. And just to follow up on that, Ambassador,
    should there be a coordinator at Treasury working with the
    Secretary? How would you provide this agency-wide coordination
    to help stop, human trafficking? What steps should we take
    specifically?
        Ambassador C.deBaca. One of the things that we saw during
    my time as the coordinator for the U.S. Government was that
    when a Secretary's office brought the anti-trafficking fight
    into the highest level of the agency, things started getting
    done. We saw that at Transportation. We saw it at the
    Department of Education. We even saw it at USDA. So, I think
    that it would be a salutary thing for the Department of the
    Treasury to make that move, as well.
        Mr. Gottheimer. Thank you. And it is something I have been
    working with Treasury on to make sure that we are using all of
    our coordination and to stand up to the social media websites
    and cryptocurrencies and stay one step ahead here, which I
    think is key. And we will continue to work together to make
    sure that happens so that we are well-coordinated and our
    arsenals combat this threat.
        So, thank you again to our witnesses for your time today. I
    yield back.
        Chairman Himes. The gentleman yields back. The gentleman
    from Texas, Mr. Williams, is recognized for 5 minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
    you, Mr. Ranking Member.
        Regardless of whether my Democratic colleagues want to
    recognize what everyone else can see in plain sight, there is a
    crisis at our southern border. There were 100,000 illegal
    immigrants detained in the month of February alone, and a large
    number of these were children and family units coming across
    our border.
        I am extremely concerned that as our border patrol agents
    are being overwhelmed by all these people, it is making it
    easier for human traffickers to slip through the cracks and
    expand this horrible practice in this country.
        Governor Greg Abbott, from my great State of Texas, summed
    up the issue well in a letter he sent to the Biden
    Administration earlier this week about what we are seeing on
    the ground. He wrote, ``Recent decisions by your administration
    are emboldening dangerous cartels, smugglers, and human
    traffickers to ramp up their criminal operations. In many
    cases, these criminals entice unaccompanied minors into
    inhumane conditions and expose them to abuse and terror.'' And
    I, along with many of my fellow Texans, share the exact
    concerns of our Governor.
        So, Ambassador, what additional steps should HHS be taking
    to ensure that children apprehended at the border are not being
    trafficked?
        Ambassador C.deBaca. I think there areat a couple of
    things. First of all, I think it is not just HHS, but DHS
    itself, as you said. And I think putting all of the onus on our
    border patrol personnel takes one of the most important tools
    out of the tool chest, and that is the folks over at Homeland
    Security Investigations (HSI).
        What we know about human trafficking is that it doesn't
    manifest itself in transit. It is something that typically is
    only known once people have gotten to their destination and are
    put into forced labor or sex trafficking. We are talking about
    an interior enforcement priority that HSI, I think, is good at,
    but always lacks the efforts, the money, the budget, the
    agents, et cetera, for it.
        I think there are the kind of things that we heard from
    Ranking Member Hill about the situation up in Arkansas, with
    HSI agents being able to work hand in glove with their local
    counterparts. I think that is going to be really important.
        As far as the HHS is concerned, there is good leadership
    over there in the counter-trafficking office, and I think that
    the procedures, as I understand it, are being worked on. I am
    not part of that effort. But I would say that typically, one
    wants to have as much information as possible about the
    families and placements that those children are traveling to
    join.
        Mr. Williams of Texas. Okay. Thank you. I do have other
    questions. But before I move on, I just need to reiterate one
    more time that we have a serious problem at our southern
    border, and so far, we have not seen the leadership that is
    needed out of the White House to get the situation under
    control.
        Mr. Koch, we have been told that the current Currency
    Transaction Report (CTR) and Suspicious Activity Report (SAR)
    thresholds are so low that it makes finding bad actors
    extremely difficult. We have heard it described as trying to
    find a needle in a haystack. And since there is so much
    information to sift through, how can we make the use of these
    suspicious transaction reports more useful for law enforcement?
        Mr. Koch. It should be part of a larger approach within the
    financial industry to deny the traffickers access to the
    system. Much of what has been discussed over the past few
    minutes has been reactive. And that is not bad, but it is
    different from preventive. And what is missing from the
    regulatory environment is that the global banking system is not
    doing risk assessments for trafficked labor in supply chains of
    their corporate customers, and that is a gaping hole. It is
    probably much larger than the SARs that talk about credit card
    fraud and identity theft and CTRs that report $11,000 in
    currency transactions. So, I think you have to combine the two.
        But as far as the actual thresholds, my view is that the
    CTR threshold is the correct threshold, and I would take
    guidance from law enforcement there on changing the number. It
    has been discussed many times over the years and they have
    consistently said, don't change the number.
        I would take the same view with the SARs. It is not the
    number that matters. It is the narrative and the sophistication
    of the transactional analysis that I would focus on.
        Mr. Williams of Texas. Okay. Thank you. And, Mr. Chairman,
    I yield back.
        Chairman Himes. The gentleman yields back.
        The gentleman from New York, Mr. Torres, is recognized for
    5 minutes.
        Mr. Torres. Thank you, Mr. Chairman.
        The 115th Congress, for the first time ever, established an
    exception to Section 230. The exception allows tech companies
    to be held civilly liable for sexually exploitive content.
        I have a question for Ms. Mickelwait. To what extent has
    the law been effective at diminishing the online market for
    sexually exploitive content? Because I gather from your
    testimony that online platforms remain widespread facilitators
    of sex trafficking, even with the threat of civil liability.
        Ms. Mickelwait. One thing that we are seeing now is the
    utilization of that law with regard to MindGeek, the specific
    case. Since December, there have been multiple lawsuits filed
    against the company, utilizing that carve-out. We are seeing
    two class action lawsuits on behalf of trafficked minors: one
    filed in California; and another filed in Alabama. And we also
    have a filing of 40 women who were trafficked on Pornhub, who
    are also utilizing that law. So, yes, we are seeing that this
    was an important accountability measure and that it is being
    utilized and, so, I think it is a positive thing.
        Mr. Torres. And you rightly pointed out that the Nicholas
    Kristof expose, ``The Children of Pornhub,'' demonstrates that
    public scrutiny can create a powerful incentive for companies
    to do the right thing. Is there a role for the Federal
    Government to play in monitoring websites for sexually
    exploitive content and calling out companies that continue to
    facilitate sex trafficking?
        Ms. Mickelwait. I believe that there is a role for the
    government to play in accountability for these sites. My
    recommendations are not just for monitoring, but really, the
    enforcement of laws, the updating of laws that we have already
    on the books. For example, I mentioned 18 U.S Code Sec. 2257.
    This was a law that was adopted decades ago, and the problem
    with the law is that it is antiquated. It is old. It was
    implemented to prevent child sexual abuse, rape, and
    trafficking in the pornography industry back when DVDs and VHS
    tapes and magazines were the primary distribution method for
    this content. It needs to be updated, and I think that would go
    a long way in helping to prevent child exploitation, and
    trafficking on these big porn sites.
        But also, like I mentioned, the Stop Internet Sexual
    Exploitation Act, which focuses on age verification and consent
    verification for sex acts that are being uploaded online. I
    think, again, that is a very, very critical and important
    priority that we must focus on to help prevent the distribution
    of this kind of content in the digital age.
        Mr. Torres. You made a powerful point about the
    immortalization of trauma, and I am wondering, how do we best
    prevent that? Should porn sites be more like YouTube, which
    does not allow for downloading? How do we best prevent the
    immortalization of trauma as you described earlier?
        Ms. Mickelwait. First, I want to point out that up until
    the New York Times piece pointed out that there was this
    download button on every single video--and think about that, 7
    million videos uploaded per year. And like I said, it would
    take 169 years to watch this content. And the company designed
    the site in such a way that they enabled a download button on
    every single video, even though they were not verifying age and
    consent for upload. And we have records that show that they
    only had less than 10 moderators per shift monitoring this
    content on the site.
        This is kind of a business model. The way that these sites
    are set up is to have this unlimited ability to upload. Again,
    because content is king, because traffic is what drives
    profits. I think that, obviously, we need to disable the
    ability for those downloads.
        But even if you disable the ability for downloads, people
    in this day and age can screen-record anything online and then
    they can redistribute it again and again and again and again
    for the rest of time, once it is uploaded initially onto any of
    these sites. So, I think the preventative measure is, before
    upload, these sex acts need to be vetted. There needs to be
    accountability before upload, before these acts get onto these
    sites. We need those kinds of preventative measures in place.
        Mr. Torres. And then I have a quick question for the
    Ambassador. We all know China's role in the labor trafficking
    of Uyghur Muslims. Are there any other nation states, any
    particularly egregious actors that are known to aid and abet
    human trafficking, and have we imposed sanctions on those
    countries? And that will be my final question for the
    Ambassador.
        Ambassador C.deBaca. Yes. There are both in state-sponsored
    forced labor, such as the North Korean labor export scheme,
    which sends enslaved North Koreans into other countries,
    especially in industrial and manufacturing. But we have also
    seen sanctions on countries for mistreatment of trafficking
    victims, such as Iran and others.
        I think one of the things that, as we are looking at--
        Chairman Himes. Ambassador, I'm sorry. The gentleman's time
    has expired. I need you to wrap it up quickly.
        Ambassador C.deBaca. Yes. Cotton is not simply a Uyghur
    problem. It also is a problem in the former central Asian
    republics.
        Chairman Himes. If you would like to elaborate on that
    answer, you can do so in writing for the record. The
    gentleman's time has expired.
        The gentleman from Ohio, Mr. Davidson, is recognized for 5
    minutes.
        Mr. Davidson. Thank you, Mr. Chairman, and thanks to our
    ranking memberand to our witnesses. I just appreciate that we
    are having this hearing on an important topic.
        I want to also thank my colleague, Ann Wagner, who has
    really done a lot of work on this in my time on the committee
    now and my time in Congress. It has been rewarding to be part
    of cosponsoring some of the bills she has worked on over time.
        So, thanks for the work that you all are devoting to really
    ending this practice, or at least making the people who
    participate in it accountable. It is a black market practice in
    the United States, sex trafficking, human trafficking, and we
    have a very large black market.
        Ambassador C.deBaca, what is the makeup of the demand
    component of this? You talked about interior enforcement when
    Congressman Williams was talking about it. How do we get after
    the demand? What is the profile of the demand and how do we
    focus on them?
        Ambassador C.deBaca. I think that one of the things that we
    see is there are two types of demand. There is demand for
    commercial sex and demand for cheaply-made goods that are kind
    of derivative demand that traffickers then use enslavement and
    abuse to meet. And then, there is the other demand, the even
    more pernicious demand, which is specific to child commercial
    sexual exploitation, almost a pedophilic demand for images or
    sexual contact with minors.
        And I think we have to address both of those demands. If we
    only focus on the most heinous, I think that we are allowing
    these industries to flourish in those cracks.
        Mr. Davidson. I want to focus on where this happens. And
    then, I guess I am wondering, are immigrants and minorities
    more exploited as victims of human trafficking? Does that seem
    to fit the profile in the supply chain?
        Ambassador C.deBaca. This week in my class at Yale, we are
    just getting to the 1970s, and that is kind of the pivot point
    when the African-American community stops being the dominant
    group in which enslavement, modern slavery, is happening in the
    domestic service or agricultural farm work. In both of those
    sectors, we have seen a replacement of that previously excluded
    and vulnerable community by a predominantly immigrant
    community.
        In sex trafficking, I think we still see folks from the
    minority communities, and, I think most troubling, the
    indigenous community. The tribes are seeing an awful lot of
    problems that are tied into a number of the other social ills
    that plague the tribes.
        Mr. Davidson. Thank you for that. And I think it just
    highlights how important it is, the interconnectedness here,
    with fixing our broken immigration system. It creates a massive
    black market. People are exploited on it tremendously. And we
    are a welcoming country for people who do it legally, but the
    broken nature of the legal system in the United States, coupled
    with the massive appeal of our country as a true land of
    opportunity, creates a big desire to be here even if it means
    being here illegally.
        And I think the interior enforcement should not be looked
    at as hostile; it should be looked at as compassionate. We have
    to end these practices. We have to secure our borders. It is a
    component of national security, and it is a component to end
    human suffering and exploitation, or at least diminish it here
    in the United States.
        I think one of the areas that we should look at--and it is
    noticed in this bill. It is not so much a focus here on the
    Securities and Exchange Commission. Congressman Torres talked
    about Uyghurs and Uyghur exploitation in China. And, as a
    component of our foreign policy, I think it has been a great
    legacy for the United States to deal with human rights, and
    China is clearly abusing their Uyghur population in virtually
    every way that you could imagine.
        I think that the bill that we noticed, talking about how to
    turn the SEC into sort of a law enforcement mechanism for other
    good causes, is wrong-headed. We should look at sanctions, and
    I would love to work with Congressman Torres on that, and
    others in the committee, because stronger things with the tools
    that we already have using the Office of Foreign Assets Control
    (OFAC) would be more useful than trying to go passively and
    just go after publically-traded companies and their supply
    chains.
        So, thanks for the work. I look forward to collaboration
    with members of the committee and with some of our witnesses if
    you have any ideas. So, with that, I yield back.
        Chairman Himes. The gentleman yields back.
        The gentlewoman from Pennsylvania, Ms. Dean, is recognized
    for 5 minutes.
        Ms. Dean. Thank you, Mr. Chairman, and thank you for
    bringing together such an amazing panel of experts.
        I want to ask a couple of quick questions.
        Rev. Hatcher, how can we more effectively support survivors
    of human trafficking, both their physical and mental health,
    but also their financial well-being?
        Rev. Hatcher. That is a great question. First of all, we
    need to turn the pain into purpose and the exploitation into
    economic empowerment. Those two things together give survivors
    a chance. There is that lack of hope. If you have no hope,
    there is no chance of trying to become a productive member of
    society. And we are talking about lives who are utilized for
    constant pounding and sexual activity that numbs them to what
    is really going on in the world, what really is good about
    being alive and being a human being and being a person who is
    able to contribute to the world. And to have an enriched way of
    looking at things, to have dignity and respect. So, the most
    important thing is to get victims and survivors to a point
    where they want to live, where they want to be a part of
    society, where they feel they can contribute to society.
        I was blessed to be in an environment at the Cook County
    Sheriff's Office that believed in rehabilitation. The domestic
    violence sent me to that really awful place. I was missing for
    2 years. But I ended up in this safe place, if you happen to be
    jailed, but this safe place that gave me services. Okay. Then,
    my 17 years in the corporate sector brought that together.
        But I am not the normal profile when it comes down to
    prostituted and exploited individuals. Most of them have not
    had an opportunity to be contributing members of society
    before, to be able to know that there are norms that do not
    include their body being sold to meet their basic needs.
        So, we need to make sure that there is no long-term impact,
    like criminalization. For me, I was in a forward-thinking
    environment and was hired with a felony conviction that was not
    until 13 years later granted executive clemency by Governor
    Rauner. Think about that. The Sheriff's office said, ``We
    believe in rehabilitation, it is okay, we know that you have
    things to contribute.''
        We have to not criminalize survivors. We have to, when they
    are criminalized, provide vacatur opportunities. And from the
    very beginning, there has to be a plan. There has to be a plan
    to provide, meet that person where they are at, walk side by
    side with them to know exactly what they need. And it takes a
    team. It takes a multidisciplinary team.
        Ms. Dean. Thank you, and I apologize. I could listen to you
    give us more information, but I only have so many minutes, and
    I want to try to get one other question in that sort of
    follows. But thank you for what you just said and what you
    highlighted. It somewhat follows what Mr. Himes was asking when
    his time stopped.
        Mr. Koch, in your testimony, one of your recommendations
    was for financial institutions to require the risk of human
    trafficking to be included on the annual money laundering
    assessments, which is something few currently do. What would
    that assessment look like? Can you explain how it would benefit
    and ultimately reduce trafficking?
        Mr. Koch. The benefit would be that it would keep
    trafficking out of that institution. It would make it more
    difficult for large projects and large corporations that have
    trafficked labor and child labor in their supply chains to
    access financial products.
        What it would look like--there is actually a model. It is
    an interactive model that is in my written statement that we
    will not have time to go through today. But what it would look
    like is that the banks would evaluate. If you take a very large
    construction project, for example, look at the construction of
    the football stadium in Qatar in connection with the upcoming
    World Cup soccer tournament.
        If you believe that there is trafficked labor in the
    construction supply chains, why hasn't the very sophisticated
    credit analysis that all the big western banks have gone
    through when they decided to open up lines of credit in the
    hundreds of billions of dollars, why hasn't that analysis
    included an analysis about whether the construction crews have
    trafficked labor? If the analysis expands to that, you can get
    representations and warranties and covenants in your credit
    facilities so that you can address this problem. And if the
    borrowers don't address it, they will be denied credit.
        Ms. Dean. Super. Thank you, Mr. Chairman. I yield back.
        Mr. Chairman. The gentlelady's time is expired.
        The gentleman from Ohio, Mr. Gonzalez, is recognized for 5
    minutes.
        Mr. Gonzalez of Ohio. Thank you, Chairman Himes and Ranking
    Member Hill, for holding this important and timely hearing. And
    thank you to our panel of witnesses. It has been incredibly
    important to hear your testimonies and your insights into this
    critical issue.
        Online child exploitation is one of the worst issues facing
    our society. Last year, the National Center for Missing and
    Exploited Children received more than 21.7 million reports of
    child exploitation, representing a 28 percent increase over
    2019, as folks have been stuck inside during this pandemic.
    Congress must pay increased attention and provide the requisite
    funding, but also make the appropriate changes to the law.
        On that note, Ms. Mickelwait, I want to start with you and
    pick up where Mr. Torres left off on the immortalization
    component. I think, frankly, the suggestions that you made in
    your testimony are common sense. I look forward to working with
    anybody who wants to work on this to make sure that we get
    these implemented. I cannot see why we would not want reliable
    agent consent verification procedures for any image of a sex
    act uploaded online.
        But on the immortalization piece, what recourse do victims
    have, if any, to get the content taken down? Are they able to
    use the tools of the law to get it taken down? Or how would
    they go about doing that?
        Ms. Mickelwait. This is a huge, huge problem, because even
    when they are able to get this content taken down, what we find
    again and again is that it gets re-uploaded again and again and
    again. And so, these victims live in a state of kind of
    obsession with trying to find their abuse material online.
        They live with the fear that they cannot even go out
    sometimes to the grocery store or apply for a job. They believe
    that somebody has seen the videos of their exploitation and
    abuse. Often, it causes them to be suicidal, to have suicidal
    tendencies and thoughts, severe depression, all of these
    things. Once these videos get online, these images, it is
    almost impossible to guarantee that they won't be uploaded
    again.
        There are some measures that are implemented on these sites
    for victims to be able to remove content, but often, they are
    ignored. We have many cases, and a case, for example, of
    Pornhub--
        Mr. Gonzalez of Ohio. Can I reclaim my time? I'm sorry, Ms.
    Mickelwait, just for a second. I saw Dr. Hatcher nodding her
    head. I just want to let her into the conversation. Does that
    resonate with you, the story that Ms. Mickelwait was just
    telling?
        Rev. Hatcher. Absolutely. I agree with everything that she
    is saying. It causes extreme re-traumatization, and it is like
    it becomes their job to try to find where their images are,
    where these videos are. And that constant angst and anxiety of,
    has someone seen this? And in a lot of cases, they have. So, it
    is a constant sense of re-traumatization.
        Mr. Gonzalez of Ohio. Thank you for that.
        Mr. Koch, I want to switch to you. One of the biggest
    barriers to effective tracking of money involved in human
    trafficking is the widespread use of aging technology by banks
    as they monitor transactions for signs of money laundering. As
    you may know, banks are required by law to monitor the
    activity. Most monitoring systems are rules-based, so programs
    with an if-then scenario. So, if certain things occur, then
    transactions will be flagged.
        Today, it strikes me we could and probably should be using
    AI-based technology, like machine learning, to recognize
    suspicious patterns. One, do you agree with my assessment? But
    then, two, what would need to happen to convert the industry to
    more high-tech tools?
        Mr. Koch. First of all, yes, I agree with your assessment,
    although the industry has progressed quite a lot in the last
    few years from the traditional rules-based. Many of the large
    banks are using machine learning and AI. The smaller banks and
    the credit unions are not, and those are serious
    vulnerabilities. And there are ways to address those, as well,
    with some of the public-private partnerships. But absolutely,
    your fundamental point about using technology is critical.
        And I would add something to that. In addition to machine
    learning and AI, in addition to the rules-based, there is the
    typologies-based, and that comes from information sharing
    between law enforcement and the private sector. When you do a
    post-mortem after you bring down a trafficking ring and you
    understand how they access the system, how they move their
    money, how they stole identities and the like, you can develop
    automated rules that are based on those typologies to prevent
    and detect those instances from happening again. So, I would do
    all three.
        Mr. Gonzalez of Ohio. Thank you, and I yield back.
        Chairman Himes. The gentleman's time has expired. The
    gentleman from Illinois, Mr. Garcia, is recognized for 5
    minutes.
        Mr. Garcia of Illinois. Thank you, Chairman Himes and
    Ranking Member Hill, for holding this important hearing. And
    thanks to our witnesses for joining us today, especially Rev.
    Hatcher, who hails from Cook County here in the Chicagoland
    area.
        I arrived in this country from Mexico when I was a child.
    My father came to work under the Bracero program, a government
    program that brought Mexican workers to the United States.
    Since then, I have seen our global economy change, and I have
    seen the evolution of legal and illegal ways to supply labor to
    employers. And I have seen that human rights and labor rights
    always go together. It is almost impossible for someone with no
    labor rights to speak up about trafficking, and it is hard for
    a person without status to speak up about labor exploitation.
        So, I want to direct my first question to Ambassador
    deBaca. When some people hear about the horrors of human
    trafficking, their first instinct is to close the borders and
    shut off immigration. Does that make sense to you? Or does
    criminalizing immigration just make trafficked workers more
    vulnerable to corrupt employers and traffickers?
        Ambassador C.deBaca. I think what we have seen, Mr. Garcia,
    is exactly I think what you are noticing, which is that the
    more securitized the border is, the more there becomes a need
    to go to the gray economy and find facilitators and smugglers
    to get into that country. And without having sane and sensible
    guest worker programs with protections, without having family
    unification, without having alternative means of immigration,
    it is not simply that the people will come. We should not put
    this on the workers. It is that the farmers want the work. The
    people who own the companies want the workers.
        Frankly, it was the North Carolina agriculture community
    that pushed for an African guest worker program before the
    Civil War because they thought that it would bring down the
    price of slaves. It was the folks who were building the
    railroads who pushed to bring in Chinese folks, whom they later
    excluded. So, I think that we need to look at it not simply as
    an issue of the foreign worker who wants to come to the United
    States and get a job, but thinking about how the American
    employers can actually get the folks that they need to do the
    work. There are plenty of people who are more than willing to
    come here and contribute and do that work.
        Mr. Garcia of Illinois. Thank you for sharing that insight.
    Ambassador, in your testimony, you mentioned the construction
    industry and how we need to hold traffickers accountable, not
    only at the work sites, but for the financing and insurance of
    construction projects, as well. Do you think there is a way
    that workers and labor organizations, like trade unions or
    worker centers, could be helpful in identifying exploitation
    and holding these groups higher up the chain accountable?
        Ambassador C.deBaca. Yes, sir. We certainly saw that in
    agriculture with the Coalition of Immokalee Workers, who
    started out in tomatoes and pickles and I think oranges, many
    of whom were survivors of a notorious coup leader in the 1990s
    in his slavery ring.
        But what we have seen is a worker center and a construction
    union in the Twin Cities, in Minneapolis, who have taken that
    approach, the Immokalee approach, and started to work to clean
    up the construction sites and the construction industry there
    in Minnesota. And I think that when we actually bring together
    the worker power, we can set a lot of standards that then good
    employers can look to as far as how they govern their supply
    chains and their worksites.
        Mr. Garcia of Illinois. Thank you very much.
        And again, I appreciate all of the fantastic witnesses for
    shedding light on exploitation and trafficking of humans. Thank
    you so much.
        Chairman Himes. The gentleman yields back.
        The gentleman from Texas, Mr. Taylor, is recognized for 5
    minutes.
        Mr. Taylor. Thank you, Chairman Himes. I appreciate it. And
    Ranking Member Hill, I just wanted to echo your encouragement
    for, if not in-person hearings, hybrid hearings. I know we
    safely did those last year and hoped they would come back. I
    think it really facilitates our ability to interact with each
    other in person.
        And I will just further echo Ranking Member Hill's comments
    about the crisis on our southern border. A few days ago, I was
    at an emergency intake site in Dallas, Texas, where a facility
    that had zero--did not even have a signed lease last week, hit
    capacity at 2,300 children as a result of what officials there
    called the greatest crisis they have ever seen. And it is very
    worrisome, and I know that it is going to result,
    unfortunately, in more human trafficking as a result of just
    not having the personnel to secure our border.
        Shifting over to this topic, I wanted to build on my
    colleague, Representative Dean's, questions about helping
    survivors to take the next step. Something I worked on when I
    was in the Texas legislature was legislation to help victims of
    human trafficking to be able to seal their records. Many of
    them, while they were trafficked, had been convicted of crimes
    while they were being trafficked, and those criminal
    convictions would preclude them from really living full and
    productive lives.
        Rev. Hatcher, I was going to ask you--if I may be so bold
    as to ask you--did you incur a conviction while you were being
    trafficked or did you know others who had gone through that?
        Rev. Hatcher. Yes. So, that is my story. Thank you for
    asking that question. I was arrested and I was actually sent
    to--my traffickers sent me out to get drugs to bring back to
    where the sex acts took place for enormous amounts of time. All
    it was, was the selling of sex, and the use of drugs was 24-7.
    So, I was sent out to do so. And I was arrested.
        I mentioned that I received executive clemency from then-
    Governor Rauner for a conviction for drugs. But the application
    for clemency was built on the fact that I was a trafficking
    victim and that I was under duress and sent out to do their
    bidding, which is the typical story, sir. We are the ones who
    end up with the convictions and the difficulties in getting
    back in the mainstream society.
        Mr. Taylor. Sure. I know that in Texas, we were able to
    pass laws to help victims like yourself who were convicted of
    crimes while they were being trafficked to be able to seal
    their criminal records. Did they have a similar law for the
    crimes you were convicted of in the State of Illinois?
        Rev. Hatcher. The reason why my only recourse was to
    receive executive clemency and expungement by the Governor of
    Illinois was because in Illinois, the law is more narrow. And
    in Illinois, there is a law--if the convictions had been
    related to prostitution or human trafficking, everything would
    have been able to be vacated. But because it was a drug charge,
    a drug charge was not in that, so there were certain prior
    crimes that did not qualify.
        Mr. Taylor. Yes. And I will say, I was very surprised when
    I came to Congress and reviewed--there is no sealing law in
    Federal statute today. A sentence to a Federal penitentiary
    should not be a life sentence. And I think if we want to help
    people get their lives back, we need to work on that.
        I actually signed on as an original lead with my colleague
    from New York, Hakeem Jeffries, on a piece of legislation to
    expand the very narrow--we have a very narrow piece of
    expunction. But I am also working with him on this sealing law
    to try to help people who have been convicted of a crime, who
    served their time, to be able to seal their record so that they
    could take that next positive step in their life the way that
    you have. I think you really exemplify--
        Rev. Hatcher. Well, they could seal them. Yes. I should
    say, sir--excuse me for interrupting. They could seal them. But
    in terms of making it go away, then yes.
        Mr. Taylor. But understand, under Federal law, there is no
    sealing provision today. None.
        Rev. Hatcher. No. And it is terrible--
        Mr. Taylor. It would make sense to me to take the lessons
    that we have learned on crime at the State level and apply them
    to the Federal level and really give so many millions of
    Americans their chance to get their lives back.
        Mr. Chairman, I yield back.
        Chairman Himes. The gentleman's time has expired.
        I now recognize the Chair of the Full Committee, Chairwoman
    Maxine Waters, for 5 minutes.
        Chairwoman Waters. Thank you so very much, Mr. Chairman. I
    am so pleased you are holding this hearing. And this is a
    subject that has been talked about and talked about and talked
    about, and I think now what you are doing is providing the
    leadership for us to really do something about it.
        I would like to address my question to Rev. Dr. Hatcher and
    Mr. Koch. You have worked directly with survivors and with
    efforts to support survivors. Without proactive engagement, it
    can be difficult for survivors, whose credit and identities
    have been misappropriated and damaged, to secure employment or
    shelter. Lacking identification such as birth certificates or
    driver's licenses, they face hurdles in accessing the banking
    system and navigating services to access benefits and restore
    identities. Can you illustrate how the financial services
    industry can help and how non-profit services, law enforcement,
    and government can take action to support survivors so they may
    escape this nightmarish cycle of abuse?
        Rev. Hatcher. First of all, it is an honor, Chairwoman
    Waters. I am a great fan of yours.
        So, I will give you an example. What happened when I was in
    my exploitation was, one of the traffickers involved in my
    orbit got me to sign for a car, because, before my trafficking
    experience, I had A-1 credit, so he had me sign for a car. I
    still have that, even though it was years ago and I have worked
    around it, it is still something that they call me for. And, of
    course, there is interest. But that in itself, there was fear.
        First of all, survivors have a hard time making it back
    because of--I had financial literacy in my previous life, but
    after exploitation, I did not even--I was scared. And I did not
    have the ability at that time to get my credit report run, out
    of fear. I knew how to do it, but most survivors--many do not
    ever have a credit report run, know what they need to do to
    rebuild their credit, or obtain for the first time a credit
    card. It took me time to get my bank account situation back
    because I was scared to even try to do that again.
        There needs to be financial literacy. There needs to be
    financial coaching for survivors so that whatever point they
    need to start doing this, to get that financial foundation,
    they need support. They need help, and they need someone who is
    going to help them navigate the system, the financial systems,
    to get their lives back.
        The other thing, though, I would say, not only that, is to
    deal with the fact, in therapy, that this was not your fault.
    There is so much guilt associated with--you look really bad
    when you have bad credit. It is just most people think of--but
    when you look at it as somebody who is not going to give me
    that chance, they are not going to give me any of the chances
    along any lines, and now I cannot even get a bank account or a
    credit card.
        Chairwoman Waters. Wow. What a nightmare.
        Mr. Koch?
        Mr. Koch. Yes. Thank you, Madam Chairwoman. It is nice to
    meet you.
        Chairwoman Waters. Thank you.
        Mr. Koch. The Liechtenstein Initiative that I participated
    in, and it is still very active, is a public-private
    partnership cosponsored by the governments of Australia, the
    Netherlands, and Liechtenstein, and co-convened by Muhammad
    Yunus, the Nobel Peace Prize winner for micro-credit.
        We created what we call the Survivor Inclusion Initiative.
    We recognized very early on that survivors, if they are lucky
    enough to escape their traffickers, often learn that their
    identities have been hijacked, and that can make it impossible
    to open a bank account. Their credit histories have been
    ruined, and it can be difficult to get a job, difficult to get
    an apartment. And, of course, all of that makes them more
    vulnerable to re-victimization.
        So, we created the Survivor Inclusion Initiative. I brought
    together 12 global banks. And in partnership with Polaris, who
    brought together some of the larger victim service providers in
    the country, we created a mechanism to open simple checking and
    savings accounts for [inaudible] survivors. And it is really
    very gratifying to be able to report to you that in about a
    year's time, we had opened approximately 2,000 bank accounts--
        Chairwoman Waters. Wow.
        Mr. Koch. --in the U.K., Canada, and the U.S, and that
    program continues.
        Since I am out of time, I will mention very quickly that
    the suggestion that you mentioned about credit repair and
    financial literacy is a concrete area where a lot of
    stakeholders can make a contribution. There is an opportunity
    for credit repair legislation and financial literacy programs.
    We are working on those, as well, and would be happy to speak
    to the staff to continue that discussion.
        Chairwoman Waters. Thank you so very much. I appreciate all
    that you have done and the leadership you have provided. And
    there is hope, given the kind of reformation that you share
    with us, for us to be able to do something about it. And with
    Mr. Himes in charge, we are going to get something done.
        Thank you very much.
        Chairman Himes. The chairwoman yields back.
        The gentlewoman from Missouri, Mrs. Wagner, is recognized
    for 5 minutes.
        Mrs. Wagner. I want to thank Chairman Himes and Ranking
    Member French Hill for allowing me to speak at this hearing. I
    am subcommittee-crashing at the moment, but I am grateful for
    them allowing me to discuss an issue that I am so passionate
    about, and talk about the bad actors that can profit and evade
    detection through the financial services industry.
        I was so proud when Congress passed my Fight Online Sex
    Trafficking Act (FOSTA), with the help of many of our witnesses
    and so many on this committee, also, on a bipartisan basis. I
    can say that FOSTA was also--we led the only successful effort
    to amend the increasingly controversial Section 230 of the
    Communications Decency Act in the history of Section 230, since
    1996. And FOSTA really helps expose and hold accountable
    websites that profit from modern day sex slavery.
        The financial services industry plays a pivotal role in
    combatting trafficking, and these stakeholders must ensure that
    their products are not being used to purchase child sexual
    abuse and sex trafficking material. I have worked at length
    with credit card companies to help them better scrutinize their
    payment processing.
        And following the tireless campaign of Traffickinghub and
    Laila Mickelwait, which precipitated a scathing report from the
    New York Times in December on the massive amount of rape and
    child sexual abuse materials on Pornhub, as was previously
    stated in her testimony, Visa, MasterCard, and Discover
    announced that they would no longer process payments to the
    website. And just days later, Pornhub removed up to three-
    fourths of its library, totaling roughly 10 million videos.
    This is a good first step, but more must and can be done.
        The coronavirus pandemic has exacerbated the problem of
    online enticement to an unprecedented degree, and Laila, who
    hails from my home State of Missouri, has done tremendous work
    to expose other websites, like OnlyFans, that promote child
    sexual abuse. But credit card companies still service OnlyFans
    and the site uses mainstream, low-risk, merchant category
    codes, despite charging customers for explicit content that
    preys on our children. I hope that by shedding light on these
    bad, bad actors today that financial services companies will
    choose to better scrutinize these sites.
        I am also thrilled to welcome Marian Hatcher as a witness
    today. Marian was indispensable to my team as we worked to get
    FOSTA over the finish line, and she is truly one of the
    nation's preeminent public servants.
        Ms. Mickelwait, given your experience with Pornhub and
    MindGeek, how can financial services companies take proactive
    steps to ensure that their services are not being used to
    purchase child sexual abuse material online?
        Ms. Mickelwait. Yes. Thank you for that question, and thank
    you for your work, Mrs. Wagner. I have really appreciated, as
    an activist, your passion and dedication to fighting sex
    trafficking specifically. So, thank you. Thank you for that.
        And I hate to sound like a broken record--often I feel like
    I am--but these companies--when you are talking about sex
    trafficking, when we are talking about sex acts that are being
    uploaded online, we need accountability and oversight on the
    nature of those sex acts. Credit card companies should not be
    allowing their services to enable transactions if these
    companies are not verifying that these are not children who are
    being trafficked and raped for profit on their site; and that
    these are, in consent and agreement, that these are not women
    who are being assaulted, who are being drugged and raped, who
    are being trafficked for profit, as well.
        Mrs. Wagner. And if I could, Ms. Mickelwait, because I am
    running out of time here, how does the mislabeling of merchant
    category codes, such as this case with OnlyFans, make it more
    difficult for financial services companies to monitor potential
    human trafficking and child sexual abuse?
        Ms. Mickelwait. Unfortunately, my expertise really has
    focused on the big porn sites, like MindGeek sites, and I am
    not familiar with those merchant category codes. So,
    unfortunately, that is not a question I would be able to
    appropriately answer.
        Mrs. Wagner. My time has expired. Mr. Chairman, I want to
    thank you. This is so, so very important. And I would like to
    submit the rest of my questions for the record. And, also, I
    would like us to really look into these merchant category codes
    and bring it to light through our Financial Services Committee
    and through your subcommittee. So, again, thank you for
    indulging me and for convening this really important hearing. I
    am grateful.
        Chairman Himes. The gentlelady's time has expired.
        And I would like to thank our witnesses for their very
    powerful, very useful, very pragmatic, and constructive
    testimony today. I think I speak for all of my colleagues when
    I say we are grateful for the opportunity to discuss in a
    bipartisan way how we can address one of the uglier aspects of
    our society.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        With that, I thank the Members, and I particularly thank
    the witnesses, and this hearing is adjourned.
        [Whereupon, the hearing was adjourned at 1:46 p.m.]

                                A P P E N D I X

                                 March 25, 2021

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