[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
TERRORISM AND DIGITAL FINANCING: HOW
TECHNOLOGY IS CHANGING THE THREAT
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HEARING
BEFORE THE
SUBCOMMITTEE ON
INTELLIGENCE AND
COUNTERTERRORISM
OF THE
COMMITTEE ON HOMELAND SECURITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
JULY 22, 2021
__________
Serial No. 117-25
__________
Printed for the use of the Committee on Homeland Security
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-867 PDF WASHINGTON : 2021
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COMMITTEE ON HOMELAND SECURITY
Bennie G. Thompson, Mississippi, Chairman
Sheila Jackson Lee, Texas John Katko, New York
James R. Langevin, Rhode Island Michael T. McCaul, Texas
Donald M. Payne, Jr., New Jersey Clay Higgins, Louisiana
J. Luis Correa, California Michael Guest, Mississippi
Elissa Slotkin, Michigan Dan Bishop, North Carolina
Emanuel Cleaver, Missouri Jefferson Van Drew, New Jersey
Al Green, Texas Ralph Norman, South Carolina
Yvette D. Clarke, New York Mariannette Miller-Meeks, Iowa
Eric Swalwell, California Diana Harshbarger, Tennessee
Dina Titus, Nevada Andrew S. Clyde, Georgia
Bonnie Watson Coleman, New Jersey Carlos A. Gimenez, Florida
Kathleen M. Rice, New York Jake LaTurner, Kansas
Val Butler Demings, Florida Peter Meijer, Michigan
Nanette Diaz Barragan, California Kat Cammack, Florida
Josh Gottheimer, New Jersey August Pfluger, Texas
Elaine G. Luria, Virginia Andrew R. Garbarino, New York
Tom Malinowski, New Jersey
Ritchie Torres, New York
Hope Goins, Staff Director
Daniel Kroese, Minority Staff Director
Natalie Nixon, Committee Clerk
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SUBCOMMITTEE ON INTELLIGENCE AND COUNTERTERRORISM
Elissa Slotkin, Michigan, Chairwoman
Sheila Jackson Lee, Texas August Pfluger, Texas, Ranking
James R. Langevin, Rhode Island Member
Eric Swalwell, California Michael Guest, Mississippi
Josh Gottheimer, New Jersey Jefferson Van Drew, New Jersey
Tom Malinowski, New Jersey Jake LaTurner, Kansas
Bennie G. Thompson, Mississippi (ex Peter Meijer, Michigan
officio) John Katko, New York (ex officio)
Brittany Carr, Subcommittee Staff Director
Adrienne Spero, Minority Subcommittee Staff Director
Joy Zieh, Subcommittee Clerk
C O N T E N T S
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Page
Statements
The Honorable Elissa Slotkin, a Representative in Congress From
the State of Michigan, and Chairwoman, Subcommittee on
Intelligence and Counterterrorism:
Oral Statement................................................. 1
Prepared Statement............................................. 3
The Honorable August Pfluger, a Representative in Congress From
the State of Texas, and Ranking Member, Subcommittee on
Intelligence and Counterterrorism:
Oral Statement................................................. 4
Prepared Statement............................................. 6
The Honorable Bennie G. Thompson, a Representative in Congress
From the State of Mississippi, and Chairman, Committee on
Homeland Security:
Prepared Statement............................................. 7
Witnesses
Ms. Stephanie Dobitsch, Deputy Under Secretary, Office of
Intelligence and Analysis, Department of Homeland Security:
Oral Statement................................................. 8
Prepared Statement............................................. 9
Mr. John Eisert, Assistant Director, Investigative Programs,
Homeland Security Investigations, Immigration and Customs
Enforcement, Department of Homeland Security:
Oral Statement................................................. 11
Prepared Statement............................................. 12
Mr. Jeremy Sheridan, Assistant Director, Office of
Investigations, U.S. Secret Service, Department of Homeland
Security:
Oral Statement................................................. 17
Prepared Statement............................................. 18
TERRORISM AND DIGITAL FINANCING: HOW TECHNOLOGY IS CHANGING THE THREAT
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Thursday, July 22, 2021
U.S. House of Representatives,
Committee on Homeland Security,
Subcommittee on Intelligence
and Counterterrorism,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:03 a.m., in
room 310, Cannon House Office Building, Hon. Elissa Slotkin
[Chairwoman of the subcommittee] presiding.
Present: Representatives Slotkin, Jackson Lee, Swalwell,
Gottheimer, Malinowski, Thompson (ex officio), Pfluger, Guest,
Van Drew, LaTurner, and Meijer.
Ms. Slotkin. The Subcommittee on Intelligence and
Counterterrorism will come to order.
The subcommittee is meeting today on ``Terrorism and
Digital Financing: How Technology Is Changing the Threat.''
Without objection, the Chair is authorized to declare the
subcommittee in recess at any point.
Good morning, everyone. I want to thank our witnesses from
the Department of Homeland Security for being here today to
discuss a topic that I think is really timely and really
interesting, which is how digital financial tools can be
exploited by terrorist actors to funnel support for their
activities.
Over the past several months, the abuse of digital finance
platforms and technologies has jumped into the public view as
the result of the burst of ransomware attacks that has struck
the heart of day-to-day life in America, from gas pipelines and
meat-processing plants to schools and hospitals.
Last month, just as an anecdote, I held an event in my
district with the Secretary of Agriculture focused on small
family farms. This was just days after the ransomware attack on
the world's largest meat processor. I am in a room full of
farmers. We are in the barn. There is the John Deere tractors
behind us. When we opened it up to Q&A, the first question from
the farmers was about cyber attacks, cryptocurrency, and asking
what their Government was doing to protect them.
Now, let's be clear, there is nothing inherently illicit or
illegal about cryptocurrencies or other digital finance
technologies. They are used by millions of law-abiding people
every single day. Nor is there anything inherently suspect
about using technologies that aim to protect the privacy of
users.
But it is our responsibility on this committee to also
understand how these tools could enable malicious activity that
threatens our homeland security, whether it is a ransomware
like the one I discussed with those farmers or our topic today,
funding for terrorism.
Detecting and preventing terrorist funding at home or
abroad has long been a cat-and-mouse game for the Federal
investigators in the intelligence community. Just like cyber
criminals, terrorists consistently seek legal loopholes,
illegal pathways, and new tech to stay one step ahead of
governments, especially when it comes to funding their
operations.
As a former CIA analyst, I know this is far from a new
challenge. We have been tracking terrorist financing for
decades, and I know first-hand how difficult it can be.
While the technology has changed, today's terrorists and
extremist groups benefit from using many of the same tools that
so many of us rely on for our daily, honest activities, just as
they exploited commonly-used financial systems in the past.
Some of the on-line platforms and on-line tech allow easy
access for thousands, if not millions, of users to donate money
through on-line campaigns. For example, crowdfunding through
PayPal, GoFundMe, and Amazon have become popular ways in recent
years for extremist groups to raise money. Bitcoin has been the
currency of choice for ransomware and terrorist actors.
To put this in context, according to the Global Project
Against Hate and Extremism, from about 2005 to 2015, just about
every extremist group they tracked featured a PayPal button on
their website.
Now, even though PayPal and other payment-processing
platforms became aware of the issue and began to ban extremists
from their platforms, which is a great first step, these groups
have persevered and maintained a strong on-line presence.
So, beyond social media platforms, new tech like
cryptocurrencies, which are decentralized, largely anonymous
forms of digital money, have enabled terrorists to further
expand and disguise their funding efforts.
Think about, for many of us who were, sort-of, in the 9/11
era, the hawalas that we all became familiar with after 9/11,
except now the currency is virtual instead of being filtered
through couriers.
As these technologies become more and more widely used, we
have seen a number of incidents in the past year that highlight
the need for the Federal Government to understand these
technologies, the degree to which they pose a threat, and their
impact on terrorist financing.
There is a number of examples from recent weeks; I am sure
you all will be talking about them. But just as nefarious
groups have changed their fundraising tactics after crackdowns
by payment processors like PayPal, when law enforcement begins
following and cracking down on illicit Bitcoin use, terrorist
fundraisers advise supporters to use other cryptocurrencies to
avoid detection. This was the case of a pro-ISIS website that
requested its supporters send money via Monero, another
cryptocurrency, instead of Bitcoin, because of its privacy and
safety features.
So we just need to properly understand and combat this
threat. We know that it requires a lot of partnership between
the private sector, our allies and partners--and, of course, a
task the Department of Homeland Security is well-positioned to
lead.
I will just end by saying, today, I am hoping our witnesses
will help us understand the actual scope and scale of this
challenge. How much money are we talking about? How does it
compare to terrorist financing as a whole or the total amount
of cryptocurrency transactions? Who is taking advantage of this
new tool? Is it domestic or foreign groups? Just help us
contextualize a little bit.
We know we have an uphill battle. Our subcommittee stands
ready to help the Department with what you need. If you need
changes to legislation, if you need resources, we want to hear
more from you, not less.
So we are pleased to welcome our witnesses today.
I will just note that, as I mentioned to the witnesses, we
expect votes to be called probably in the next 10 minutes. We
will try and keep the hearing going as long as possible. There
will probably be a short gap when myself and Mr. Malinowski are
voting, but we will try to tag-team to make it as minimal as
possible.
[The statement of Chairwoman Slotkin follows:]
Statement of Chairwoman Elissa Slotkin
July 22, 2021
Over the past several months, the abuse of digital finance
platforms and technologies has jumped into public view, as a result of
the burst of ransomware attacks that have struck at the heart of day-
to-day life in America--from pipelines and meat processing plants, to
schools and hospitals. Last month, I held an event in my district with
the Secretary of Agriculture that was focused on family farms--just
days after a ransomware attack on the world's largest meat processor.
And in a room full of Michigan farmers, the first question was about
cryptocurrency--asking what our Government can do to track and recover
digital payments of ransoms to these criminal groups.
Now, let's be clear: There's nothing inherently illicit or illegal
about cryptocurrencies or other digital finance technologies, which are
used by millions of law-abiding people every day. Nor is there anything
inherently suspect about using technologies that aim to protect the
privacy of users. But it's our responsibility on this committee to also
understand how these tools could enable malicious activity, that
threatens our homeland security--whether that's a ransomware attack,
like the one I discussed with those farmers, or our topic today:
Funding for terrorism. Detecting and preventing terrorist funding--at
home, and abroad--has long been a cat-and-mouse game for Federal
investigators and the intelligence community.
Just like cyber criminals, terrorists consistently seek legal
loopholes, illegal pathways, and new technologies to stay one step
ahead of governments--especially when it comes to funding their
operations. As a former CIA analyst, I know this is far from a new
challenge--we've been tracking terrorist financing for decades--and I
know first-hand how difficult it can be. While technology has changed,
today's terrorist and extremist groups benefit from using many of the
same tools that so many of us rely on for our daily, honest
activities--just as they exploited commonly-used financial systems, in
the past. Some of these on-line platforms and on-line technologies
allow easy access for thousands--if not millions--of users to donate
money through on-line campaigns. For example, crowdfunding through
PayPal, GoFundMe, and Amazon became a popular way in recent years for
extremist groups to raise money. To put this into context, according to
the Global Project Against Hate and Extremism, from about 2005-2015,
just about every extremist group they tracked featured a PayPal button
on their website.
Now, even though PayPal and other payment processing platforms
became aware of the issue and began to ban extremists from such
platforms--at first glance, a promising first step--extremist and
terrorist groups have persevered and maintained an on-line presence.
For example, ISIS supporters have recently used Instagram to solicit
donations for ISIS-affiliated women being detained in Syria, via PayPal
fundraising links. Beyond social media platforms, new financial
technologies like cryptocurrencies--which are decentralized, largely
anonymous forms of digital money--have enabled terrorists to further
expand and disguise their funding efforts.
As these technologies become more and more widely used, we've seen
a number of incidents just in the past year that highlight the need for
the Federal Government to understand these technologies, the degree to
which they pose a threat, and their impact on terrorist financing. In
August 2020, the Justice Department ``dismantle[ed] three terrorist
financing cyber-enabled campaigns'' involving Foreign Terrorist
Organizations (FTOs)--ISIS, Hamas' military wing, and al-Qaeda--
resulting in the Government's largest-ever seizure of cryptocurrency
from terrorist organizations. The seizure involved ``millions of
dollars'' spanning 300 cryptocurrency accounts, four websites, and four
Facebook pages--underscoring how various digital technologies could be
used to help foster fundraising efforts.
Just as nefarious groups changed fundraising tactics after
crackdowns by payment processors like PayPal, when law enforcement
began following and cracking down on illicit Bitcoin use, terrorist
fundraisers advised supporters to use other cryptocurrencies, to avoid
detection. This was the case with a pro-ISIS website that requested
that its supporters send money via Monero, another cryptocurrency,
instead of Bitcoin, because of its privacy and safety features.
Properly understanding and effectively combating this threat will
require close partnerships between all levels of government, the
private sector, and our allies--a task the Department of Homeland
Security is well-positioned to lead.
Today, I'm hoping our witnesses can help us understand the actual
scope and scale of this challenge:
How much money are we talking about?
How does it compare to terrorist financing as a whole, or
the total amount of cryptocurrency transactions?
Who's taking advantage of it: Domestic or foreign groups?
I'm also interested in understanding how the intelligence and law
enforcement approach to illicit digital financing compares to your
historical work on terrorist funding, and the steps you're taking to
combat it. It's clear that our law enforcement and intelligence
community face an uphill battle in understanding and tackling this
threat--as the examples I've outlined show, the technology is changing
rapidly, as their adoption only continues to increase.
Our subcommittee stands ready to help the Department take on this
challenge, and we're pleased to welcome our witnesses today. I look
forward to hearing from you about the trends the Department is
currently monitoring on this issue and the novel ways it is working to
counter terrorists' use of digital financing.
Ms. Slotkin. So I now recognize the Ranking Member of the
subcommittee, the gentleman from Texas, Mr. Pfluger, for an
opening statement.
Mr. Pfluger. Thank you, Madam Chair. I appreciate you
holding this hearing today.
I would like to thank the witnesses as well: Assistant
Director Jeremy Sheridan from the Office of Investigations at
the Secret Service, Assistant Director John Eisert from
Investigative Programs at HSI, and Acting Deputy Under
Secretary Stephanie Dobitsch from the Office of Intelligence
and Analysis.
I appreciate your expertise and your willingness to speak
with us today on this very important subject. I am looking
forward to an informative and productive discussion on this
very important topic.
I think this hearing is especially timely right now, with
American troops, in effect, fully withdrawn from Afghanistan
and the Taliban rapidly taking control of Afghanistan's
provincial districts, reportedly occupying about a third of the
country and including the key border-crossing areas.
Afghan Security Forces are surrendering. The Taliban is
beginning to fight for some of the provincial cities. There is
reporting, public reporting, that the Afghan government could
collapse at some point, as soon as maybe even 6 months.
But I think the point is, all that to say that foreign
terrorist organizations are alive and well. Not only are they
present overseas, but they are growing. As we know, Afghanistan
is only a portion of the wide-spread and diverse terror threat
landscape that we face around the world. If they are given the
opportunity to submit their presence overseas, I have no doubt
that their next goal is and will continue to be to launch an
attack on U.S. soil or on those of our partners and allies.
Those who have served in Afghanistan saw first-hand the
death and destruction that terrorist organizations can cause
and have caused. It is absolutely imperative that the war on
terror be fought abroad, on foreign soil, not here at home. We
must guarantee that foreign terrorist organizations do not have
the resources to expand their operations and bring the fight to
the United States, to our homeland.
Cutting off their access to financing is absolutely
critical. It is paramount in this fight. Terrorist financing is
not a new issue. Whether a transnational criminal organization,
a foreign terrorist organization, or money launderer, we have
been confronting this problem for decades. But cryptocurrency
is, in fact, becoming a new tool that terrorists and other
criminal enterprises have at their disposal.
Unfortunately, Congress has not always been known for our
ability to stay one step ahead, when it comes to the latest
technological advances. But, when we are confronting the issue
of terrorism and financing, playing catch-up is not an option
for us.
During a conversation I had earlier this week with
Assistant Director Sheridan and Assistant Director Eisert, they
mentioned that, relative to the terrorist-financing world, that
cryptocurrency and the transactions account for maybe 1 percent
of all cases.
I think that this tells me right now that we are having
this hearing at exactly the right time, that we might have a
chance to stay one step ahead of what the issues and the
problems could be, before this becomes a systemic issue world-
wide. We are now in a position to provide our agency partners
with the resources and the authorities that they need to
confront this proactively instead of reacting to it.
That is why I am most looking forward to the hearing--about
the hearing today. How do we ensure that cryptocurrency
transactions continue to be 1 percent, or maybe even less, of
the problem? What does DHS need from us in Congress to best
situate themselves to combat this threat?
Coming out of this hearing, I also hope to understand what
we should expect going forward. Although this is a small
portion of the problem now, do we foresee that changing? If it
is suspected to grow, how much will it grow, and how can we
minimize that growth?
It has been almost 20 years since 19 al-Qaeda terrorists
coordinated the hijacking of 4 commercial airlines, flying them
into buildings which were recognized world-wide as symbols of
American strength, of freedom, of accomplishment, and taking
2,977 innocent lives.
Thus far, we have successfully prevented an attack of that
magnitude that we experienced on September 11. As long as I
serve my country--and I think the Chairwoman will also agree--
whether it is in uniform overseas or in the capacity that we
now serve here in Congress, I will do everything and I think I
can confidently say we will do everything in our power to
ensure that what happened on 9/11 does not happen again. I am
confident that my fellow Members on the Homeland Security
Committee also feel the same way in a very bipartisan manner.
I am looking forward to working with Chairwoman Slotkin and
the other Members of this committee to ensure that we are
providing the Department with all the tools necessary to
minimize the threat caused by terrorist financing and to
successfully protect our homeland.
Once again, I would like to thank our witnesses for joining
us today, for your expertise, for your service to this country,
and for looking at a threat in a proactive way that we can
combat now so that it doesn't continue to become a problem of
larger magnitude.
With that, Madam Chair, I yield back.
[The statement of Ranking Member Pfluger follows:]
Statement of Ranking Member August Pfluger
Thank you, Madam Chair. I appreciate you holding this hearing today
and thank our witnesses: Assistant Director Jeremy Sheridan from the
Office of Investigations at the Secret Service, Assistant Director John
Eisert from Investigative Programs at HSI, and Acting Deputy Under
Secretary Stephanie Dobitsch from the Office of Intelligence and
Analysis. I am looking forward to an informative and productive
discussion on this very important topic.
This hearing is especially timely, with American troops in effect
fully withdrawn from Afghanistan, and the Taliban rapidly taking
control of Afghanistan's provincial districts--reportedly occupying
about a third of the country including key border-crossing areas.
Afghan security forces are surrendering, and the Taliban is beginning
to fight for some of the provincial cities. There has been public
reporting that the Afghan government could collapse within 6 months of
our withdraw. All this to say that foreign terrorist organizations are
alive and well. Not only are they present overseas, but they are
growing, and as we all know Afghanistan is only a portion of the wide-
spread and diverse terror threat landscape. If they are given the
opportunity to cement their presence overseas, I have no doubt that
their next goal will be to launch an attack on U.S. soil.
Those who served in Afghanistan saw first-hand the death and
destruction that terrorist organizations cause. It is absolutely
imperative that the war on terror be fought on foreign soil. We must
guarantee that foreign terrorist organizations do not have the
resources to expand their operations and bring the fight to the
homeland. Cutting off their access to financing is absolutely critical.
Terrorist financing is not a new issue. Whether a transnational
criminal organization, foreign terrorist organization, or money
launderer, we have been confronting this problem for decades. But
crypto currency is a new tool that terrorists and other criminal
enterprises have at their disposal. Unfortunately, Congress has not
always been known for our ability to stay one step ahead when it comes
to the latest technological advances, but when we're confronting the
issue of terrorism financing, playing catch-up is not an option. During
a conversation I had earlier this week with Assistant Director Sheridan
and Assistant Director Eisert, they mentioned that relative to the
entire terrorist financing world, crypto currency transactions account
for about 1 percent of cases. That tells me we are having this hearing
at exactly the right time--before this is a systemic problem. We are
now in the position to provide our agency partners with the resources
and authorities they need to confront this proactively, as opposed to
reactively.
That is what I am most looking forward to hearing about today--how
do we ensure that crypto currency transactions continue to be 1 percent
of the problem. And what does DHS need from us in Congress to best
situate themselves to combat this threat?
Coming out of this hearing I also hope to understand what we should
expect going forward. Although this is a small portion of the problem
now, do we foresee that changing? If it is suspected to grow--how much
and how can we minimize any growth?
It has been almost 20 years since 19 al-Qaeda terrorists
coordinated the hijacking of four commercial airlines, flying them into
buildings which were recognized world-wide as symbols of American
strength and accomplishment, taking 2,977 innocent lives. Thus far we
have successfully prevented an attack of the magnitude we experienced
on September 11. As long as I serve my country, whether in uniform
overseas or here in Congress, I will do everything in my power to
ensure that what happened on 9/11 does not happen again and I am
confident that my fellow Members on the Homeland Security Committee
feel the same way.
I am looking forward to working with Chairwoman Slotkin and the
other Members of the subcommittee to ensure that we are providing the
Department with all of the tools necessary to minimize the threat
caused by terrorist financing and successfully protect the homeland.
I thank our witnesses for their willingness to appear before the
subcommittee, today, and I yield back the balance of my time.
Ms. Slotkin. Additional Member statements will be submitted
for the record.
[The statement of Chairman Thompson follows:]
Statement of Chairman Bennie G. Thompson
July 22, 2021
We are here today to talk about the use of modern financial
technologies for terrorist fundraising and financing. The mantra
``follow the money'' has been one of the most effective ways of
investigating and stopping criminal and terrorist activity. But since
this committee was formed after 9/11, we have seen the rise of new
platforms like Paypal and GoFundMe and entirely new types of money
developed in the form of cryptocurrencies. These financial technologies
and the digital marketplaces that make use of them have revolutionized
the American economy and global markets.
Unfortunately, they have complicated law enforcement and
intelligence community efforts to detect and prohibit terrorist
financing. As Treasury Secretary Janet Yellen told the Senate Finance
Committee, cryptocurrencies ``can be used to finance terrorism,
facilitate money laundering, and support malign activities that
threaten U.S. national security interests. . . .''
Following the money is undoubtedly a different task than it was at
the outset of the War on Terror. Yet, it remains a crucial guidepost in
our efforts to root out terrorists and strengthen National security. We
must ensure that our intelligence and law enforcement agencies have the
tools and capabilities to keep pace with technological changes and new
terrorist financing practices.
I was pleased to support Rep. Kathleen Rice's bill, the Homeland
Security Assessment of Terrorists' Use of Virtual Currencies Act, which
required the Department of Homeland Security to produce a threat
assessment of terrorists' use of virtual currency. And I look forward
to hearing how this assessment has informed the Department's efforts to
combat such activity.
I am pleased that Chairwoman Slotkin is leading on this critical
issue by holding today's hearing. I look forward to a productive
conversation on this topic and to working with DHS, its components, and
interagency partners to ensure they have the resources they need.
Ms. Slotkin. I now welcome our panel of witnesses.
Our first witness is Ms. Stephanie Dobitsch, the deputy
under secretary for intelligence enterprise operations at DHS.
Our second witness is Mr. John Eisert, the assistant director
of investigative programs at U.S. Immigration and Customs
Enforcement, Homeland Security Investigations, HSI. Our third
and final witness is Mr. Jeremy Sheridan, the assistant
director of the Office of Investigations at the U.S. Secret
Service.
Without objection, the witnesses' full statements will be
inserted into the record.
I now ask each witness to summarize his or her statement
for 5 minutes, beginning with Deputy Under Secretary Dobitsch.
STATEMENT OF STEPHANIE DOBITSCH, DEPUTY UNDER SECRETARY, OFFICE
OF INTELLIGENCE AND ANALYSIS, DEPARTMENT OF HOMELAND SECURITY
Ms. Dobitsch. Good morning, Chairwoman Slotkin, Ranking
Member Pfluger, Members of the subcommittee. Thank you for the
opportunity to appear before you today to represent the Office
of Intelligence and Analysis and to discuss the malicious use
of crypto and other digital currencies.
Over the last several years, I&A has observed a growing and
concerning trend of a wide range of malicious actors seeking to
use access to digital and cryptocurrencies to facilitate their
activities. This includes domestic and international
terrorists, nation-state adversaries, transnational and other
criminal organizations, and cyber criminals.
While the intent and capabilities of these actors vary
widely, I&A assesses that all of them see using crypto and
other digital currencies as an effective means to obfuscate and
fund their operations, including against the United States.
Cryptocurrencies are a digital or virtual currency that is
secured by cryptography, or, in other words, sophisticated
coding. They are not issued by any central authority, and they
offer users a high degree of anonymity, complicating law
enforcement and intelligence community efforts to identify and
disrupt potentially threatening activity.
Bitcoin is the market leader, but there are thousands of
other cryptocurrencies, including currency known as privacy
coins, which provide an even greater level of obscurity for
malicious actors. This means that users can easily hide who is
sending or receiving a transaction, transaction amounts, and
individual units of currency.
Since at least 2015, we have observed terrorists seeking to
use cryptocurrencies to procure materials and solicit funding
for their operations. Most of this activity has occurred by
terrorist groups and associates overseas, spanning the
ideological spectrum. For example, supporters of ISIS and al-
Qaeda have solicited cryptocurrency donations. Earlier this
year, a pro-al-Qaeda media group offered a reward of 1 Bitcoin,
worth about $60,000 at the time, to the first person to kill a
police officer in a Western country.
We have also seen foreign racially- or ethnically-motivated
violent extremists claim that their activities were supported
by the use of cryptocurrencies. In 2019, Brenton Tarrant, the
perpetrator of the mosque attacks in Christchurch, New Zealand,
claimed in his manifesto to have made money dealing in
cryptocurrency. Later that same year, a racially- or
ethnically-motivated violent extremist who attempted an attack
in a synagogue in Germany claimed he received financial support
for his operation via cryptocurrency.
Beyond terrorism, the use of cryptocurrency has become even
more common among cyber actors and criminal organizations.
North Korean cyber actors affiliated with the regime have
executed lucrative cryptocurrency thefts valued at hundreds of
millions of dollars. Cryptocurrency is increasingly being used
to buy and sell drugs on the dark web and by drug cartels
seeking to launder their drug profits. Cryptocurrency is
becoming the payment of choice for cyber criminals who are
conducting ransomware attacks or selling malicious cyber
services on-line.
It is important to remember that the illicit use of
cryptocurrency is a small fraction of the global transactions
that occur daily, and many malicious actors, particularly
foreign terrorist groups, are still relying on traditional
means of funding.
However, as this technology becomes more accessible and
more scrutiny is applied to traditional banking systems, we
expect to see more activity, and our ability to detect and
disrupt these threat actors will be even more difficult.
I&A's mandate and core mission is to provide Federal,
State, local, Tribal, territorial, and private-sector partners
with the intelligence and information necessary to secure the
homeland. I want to underscore that I&A is committed to
strengthening our efforts to identify and communicate the plans
and intentions of malicious actors seeking to exploit emerging
technologies like cryptocurrency.
Just this week, I&A hosted our partners from the State and
local intelligence councils for a conference, where this topic
was discussed as a significant intelligence gap in our
intelligence.
Like with any threat to the homeland, I&A will ensure that
policy and operational decision makers have the most robust
understanding of this threat that the intelligence community
can provide.
Thank you again for the opportunity to appear before you
today to discuss this issue and for your continued support to
the Office of Intelligence and Analysis.
[The prepared statement of Ms. Dobitsch follows:]
Prepared Statement of Stephanie Dobitsch
July 22, 2021
Chairwoman Slotkin, Ranking Member Pfluger, and distinguished
Members of the Subcommittee on Intelligence & Counterterrorism. Thank
you for the opportunity to appear before you today to discuss threats
from terrorist use of cryptocurrencies. It is an honor to be here
representing the Department of Homeland Security's (DHS) Office of
Intelligence and Analysis (I&A), and the dedicated intelligence
professionals that keep the homeland safe, secure, and resilient.
terrorist use of cryptocurrency
As we have learned in our fight against terrorism, terrorists are
highly adaptive and have proven successful in exploiting new and
emerging technologies to plan attacks against U.S. interests and the
homeland. While some of those technologies, such as drones and 3D
printing, pose direct harm, it is often access to sources of funding
that are difficult to trace or attribute that allow terrorist groups
even greater means to conduct a broad range of operations against the
United States. Additionally, as governments and the global financial
industry devote more resources to restricting terrorist use of
traditional banking systems, the relative ease and anonymity of
cryptocurrencies are helping to offset these restrictions, including
for other malicious actors seeking to do harm to the United States.
Since at least 2015, we have observed terrorists experimenting with
cryptocurrencies to obfuscate their financial activities, procure
materials, and solicit donations for their operations. These activities
have spanned the spectrum of terrorist ideologies--from Racially or
Ethnically Motivated Violent Extremists (RMVEs), to groups like the
Islamic State of Iraq and ash-Sham (ISIS), al-Qaeda, and HAMAS. Using
cryptocurrencies may be attractive to terrorists and supporters of
violent extremism because they appear to offer a level of anonymity and
less government oversight.
We have seen ISIS supporters around the world requesting donations
in cryptocurrency and they may have used the donated cryptocurrency to
purchase website domains in 2015 and 2018. Since at least 2018, other
individuals who support violent extremism abroad, as well as
individuals who support RMVE ideologies, have solicited multiple types
of cryptocurrency from on-line donors via social media. Also, receiving
payments through cryptocurrency has risen in popularity, especially
among Racially or Ethnically Motivated Violent Extremists (RMVE). For
example, in March, the FBI arrested a RMVE on a weapons charge who sold
merchandise via social media platforms and accepted payment in a
variety of ways, including cryptocurrency. Additionally, in June a pro-
al-Qaeda media group overseas offered a reward of one Bitcoin--which
was worth around $60,000 at the time--to the first person to kill a
police officer in a Western country in response to the announcement.
To date, we are not aware of any specific cases where Domestic
Violent Extremists (DVEs) or Home-grown Violent Extremists (HVEs) in
the homeland have leveraged cryptocurrency to directly fund an attack.
A review of DVE and HVE violence in the United States reveals that most
attacks involved simple, easy to acquire weapons that were personally
financed.
There are a handful of examples of DVEs abroad utilizing
cryptocurrency to facilitate violence, including a RMVE in Germany who
attacked a synagogue in 2019 and received financial support for attack
preparation from an unknown individual via cryptocurrency.
Additionally, a RMVE attacked a mosque in Christchurch, New Zealand,
and claimed in his manifesto to have made money dealing in
cryptocurrency, however investigators assess he did not make
significant profits. Regardless of what we have witnessed in the United
States to date, we know that terrorists historically are adaptive and
often seek to embrace new technologies, and activities overseas can
often foreshadow developments domestically.
In addition to concerns about terrorists using existing
cryptocurrency, we are also concerned about the speed and complexity in
which cryptocurrencies develop and advance to improve the user
experience, including increased privacy measures, which challenges our
collective abilities in the U.S. Government to identify and mitigate
malicious use of this technology. Bitcoin is the market leader of
cryptocurrencies and, unsurprisingly, it is also the most popular
cryptocurrency for criminal and terrorist use. However, newer and less
popular cryptocurrencies, known as ``privacy coins,'' are increasingly
attractive to malicious actors because they include even more stringent
privacy and security features. We already know that terrorists
affiliated with ISIS, RMVEs, and other violent extremists are using
these privacy coins to conduct financial activities while obfuscating
their identies.
Finally, it is important to keep in mind that the vast majority of
terrorist financing occurs through methods other than cryptocurrency,
and most cryptocurrency is used legitimately. But cryptocurrency has
some appealing attributes that have already been exploited by
terrorists, and we anticipate violent extremists will continue to use
this tool to facilitate their terrorist activities, especially as the
technology becomes easier to access and more wide-spread in use in
general commerce and the commercial sector. As these technologies
become increasingly ubiquitous, the opportunity for malicious actors to
exploit them will grow.
i&a efforts
I&A's mandate and core mission is to provide our State, local,
Tribal, territorial, and private-sector partners with the intelligence
and information necessary to secure the homeland. This includes
establishing and running analytic seminars on the illicit use of
cryptocurrency and the dark web to inform our partners on the illicit
use of the dark web, blockchain technology, major cryptocurrencies
used, how criminals are using cryptocurrencies to launder money and
make illegal transactions, and key tools and best practices that
analysts can leverage in Dark Web and cryptocurrency investigations.
And I want to underscore that I&A is committed to strengthening our
efforts to identify and communicate threats from foreign and domestic
terrorists, including their plans and intentions to exploit emerging
technologies such as cryptocurrency through a number of recently-
published pieces of Classified and un-Classified analytic production.
I&A is also working to support our colleagues across DHS and the
intelligence community through sharing and analyzing cryptocurrency
data to enhance our understanding of the threat across the National
security and law enforcement landscape. As with any threat to the
homeland, we are committed to ensuring policy makers and operational
decision makers have the most robust understanding of the threat that
the intelligence community can provide.
conclusion
Thank you again for the opportunity to appear before you today to
discuss this critical threat and for your continued support for I&A. We
remain committed to keeping the homeland safe, secure, and resilient by
safeguarding the Nation from terrorist, criminal, and other threat
actors; protecting the physical and digital borders of the United
States from Transnational Criminal Organizations and terrorist networks
seeking to exploit and undermine our financial and cyber systems; and
we will continue our efforts at home and abroad to uphold the National
security and public safety of the United States.
Ms. Slotkin. Thank you, Ms. Dobitsch.
I now recognize Assistant Director Eisert to summarize his
statement for 5 minutes.
My sense is we may break just after Mr. Eisert for a few
moments while we go and vote.
STATEMENT OF JOHN EISERT, ASSISTANT DIRECTOR, INVESTIGATIVE
PROGRAMS, HOMELAND SECURITY INVESTIGATIONS, IMMIGRATION AND
CUSTOMS ENFORCEMENT, DEPARTMENT OF HOMELAND SECURITY
Mr. Eisert. Thank you, Chairwoman Slotkin, Ranking Member
Pfluger, and distinguished Members of the subcommittee. Thank
you for the opportunity to appear before you today to discuss
the critical investigative role Homeland Security
Investigations plays in the fight to protect the homeland from
transnational crime and threats.
My testimony today will focus on HSI's efforts to identify,
investigate, and bring to justice criminal organizations and
terrorist networks whose illicit use of cryptocurrency
jeopardizes National security and public safety.
As the principal investigative component of the Department
of Homeland Security, HSI is a global law enforcement
organization responsible for conducting criminal investigations
into the illegal cross-border movement of goods, money,
contraband, people, and technology into, out of, and throughout
the United States.
HSI strives to protect the homeland's digital borders and
pursue malicious cyber actors with the same dedication that we
safeguard our physical land and sea borders. HSI applies its
unique authorities and capabilities to conduct investigations,
which include combating financial crime, investigating cyber
crime, and protecting National security. The illicit use of
cryptocurrency by nefarious actors leads to each of these
priorities.
Cryptocurrency is a digital asset that works as a medium of
exchange or a store of value and is often used to purchase
illicit items such as drugs or guns on the dark net
marketplaces, to launder criminally-derived proceeds, or as a
means to provide material support to terrorist organizations.
Traditional money-laundering methods remain, yet cryptocurrency
can now be used with relative ease to facilitate any type of
illicit activity.
Given that cryptocurrency is utilized across the spectrum
of crimes that HSI has the authority to investigate, HSI plays
a critical role in the U.S. Government's efforts to detect,
investigate, and prevent its illicit use.
As such, HSI investigations related to cryptocurrency have
risen from a single criminal investigation in 2011 to over 604
active criminal investigations and $80 million in
cryptocurrency seizures in this year alone. This marked
increase signifies growing confidence in cryptocurrency by bad
actors but also HSI's technical proficiency in performing these
complex investigations.
To be successful, HSI recognizes the importance of enhanced
public and private partnerships. With that, we continue to be
forward-leaning in our approach to Operation Cornerstone, our
outreach efforts.
Since 2019, HSI has provided 660 presentations to over
61,000 attendees, with the primary focus of detecting and
closing vulnerabilities in the financial, trade, and
transportation sectors. With the rapid growth of virtual
currency, HSI expanded our outreach to include private
industries involved in the cryptocurrency space, conducting 116
presentations to over 5,000 participants.
The relationship we build with private sector directly
correlates to our investigative success. They are not mutually
exclusive.
Last year, HSI led a global cyber operation with IRS and
the FBI related to 24 cryptocurrency accounts, all of which
were identified as sources of influence for al-Qaeda. The HSI
undercover operation was initiated to investigate the unlawful
use of cryptocurrency to support terrorism. The result of the
investigation--ending result of the investigation, HSI seized
60 virtual currency wallets, worth $80 million, and illuminated
the illicit financial network.
In another case, HSI initiated another cyber undercover
operation that resulted in the seizure of 150 cryptocurrency
accounts, worth $2 million, and the taking over of a Hamas-
administered website that solicited funds for jihad. HSI
covertly operated this site, embedding an HSI undercover wallet
and email to track funds and communications.
The results of these cases and others illustrate how law
enforcement can effectively disrupt terrorist groups through
the use of HSI's financial and global investigative
authorities, technical aptitude, undercover authorities, and
the ability to use private sector as a force multiplier to
disrupt and dismantle the command-and-control structure of
these criminal organizations.
In closing, I appreciate your interest in this rapidly-
growing field. Thank you again for the opportunity to be before
you today and for your continued support of Homeland Security
Investigations. Thank you.
[The prepared statement of Mr. Eisert follows:]
Prepared Statement of John Eisert
Thursday, July 22, 2021
introduction
Chairwoman Slotkin, Ranking Member Pfluger, and distinguished
Members: Thank you for the opportunity to appear before you to discuss
the critical investigative role U.S. Immigration and Customs
Enforcement (ICE) Homeland Security Investigations (HSI) plays in the
fight to protect the homeland from transnational crime and other
threats. My testimony today will focus on HSI's efforts to identify,
investigate, and ultimately bring to justice criminal and terrorist
organizations whose illicit use of cryptocurrency jeopardizes the
National security and public safety of the United States.
the hsi mission
As the largest investigative component of the Department of
Homeland Security, HSI is the premier law enforcement organization
responsible for conducting Federal criminal investigations into the
illegal cross-border movement of goods, money, technology, people, and
other contraband into, out of, and throughout the United States. HSI
strives to protect the homeland's digital borders and pursue malicious
cyber actors with the same dedication it safeguards our land and sea
borders from traditional organized transnational crime.
HSI's operational priorities serve as the foundation of HSI's
investigative and enforcement focus. HSI applies its unique authorities
and capabilities to conduct complex and significant transnational
investigations aligned with these priorities, which include combating
financial crime, investigating cyber crime, and protecting National
security. The illicit use of cryptocurrency by nefarious actors relates
to each of these priorities and represents a key area of focus for
HSI's investigations and operations.
HSI participates in and has representation on dozens of
collaborative cyber-related efforts, including the HSI Cyber Crimes
Center, the Federal Bureau of Investigation's National Cyber
Investigative Joint Task Force, the U.S. Secret Service Electronic
Crimes Task Force, and the DHS Science and Technology Internet
Anonymity Project Working Group.
cryptocurrency and the threat it poses to the homeland
A cryptocurrency is a digital asset that works as a medium of
exchange, a unit of account, or a store of value. Cryptocurrency uses
strong cryptography to secure financial transactions, control the
creation of additional units, and verify the transfer of assets. In
2009, Bitcoin was introduced as the first decentralized convertible
virtual currency and offered a high level of pseudo-anonymity for
people to send and receive money over the internet. While Bitcoin is by
far the most popular and well-known cryptocurrency, thousands of
cryptocurrencies have been created and new ones are created every day.
There is open source or proprietary software that anyone can use to
create a cryptocurrency.
Since 2009 cryptocurrencies have increasingly been used as the
currency of choice to facilitate crime. From individual actors to
large-scale transnational criminal organizations (TCOs), cryptocurrency
can be exploited by any criminal organization engaged in almost any
type of illicit activity. Cryptocurrencies are attractive to criminal
and terrorist organizations because they offer a relatively fast,
inexpensive, and pseudonymous system of transactions as compared to
more traditional financial transactions.
HSI has seen that nefarious actors are inclined to use
cryptocurrency based on the perception that there is anonymity
associated with their transactions or that because cryptocurrency used
during an illicit scheme can be moved immediately offshore to a foreign
exchange or over the counter trader (OTC), that U.S. law enforcement
entities will be unable to trace or to seize and recover the assets. In
addition, cryptocurrency offers the ability to engage in money
laundering with minimal effort. By using OTCs or offshore exchanges,
cryptocurrency can be laundered and reintroduced into the U.S.
financial system relatively easily by utilizing typical laundering
techniques of placement and layering. When used to fund terrorist
operations and activities, terrorist organizations often have the
opposite requirement. They seek to conceal the origin of funds from
donors, businesses, and other legitimate sources to avoid law
enforcement scrutiny.
HSI has seen nefarious actors expend cryptocurrency in furtherance
of a wide array of crimes HSI investigates. Both at home and abroad,
cryptocurrency can be used to purchase illicit items such as drugs or
guns on darknet marketplaces; to launder criminally-derived proceeds;
or to provide material support to or funding for terrorist actors or
organizations to carry out operations. Cryptocurrency can also be used
to pay fraudsters, ransomware actors, or individuals involved in other
illicit schemes such as intellectual property theft and illegal
technology procurement. In addition, current trends indicate
cryptocurrency is becoming prevalent within criminal organizations
involved in child exploitation and human trafficking. Whether expended
by TCOs, or terrorist organizations, or facilitators of such
organizations, the use of cryptocurrency by bad actors continues to
expand and evolve and presents a potential threat to the National
security and public safety of the United States.
hsi's lines of effort
Given that cryptocurrency is used across the spectrum of crimes
that HSI has the authority to investigate, HSI plays a critical role in
the U.S. Government's efforts to detect, investigate, and prevent its
illicit use by criminal and terrorist actors. Using its authorities and
subject-matter expertise in financial, cyber, and National security
cases; its strong strategic partnerships; and its robust international
footprint, HSI employs a multi-faceted approach to combat crimes
enabled by the use of cryptocurrency. This approach is rooted in HSI's
investigative expertise, and supplemented by robust collaboration,
training, and outreach programs. These efforts are described below.
Investigations
Bitcoin and other cryptocurrencies are attractive to bad actors
because of their pseudo-anonymity and ease of transfer, but at some
point, criminals need to convert their cash into cryptocurrency or
their cryptocurrency into cash. Whenever monetary exchanges are made, a
chokepoint is created. This is the time when criminals are most
vulnerable and can be identified through law enforcement means and
methods. Using traditional investigative methods such as surveillance,
undercover operations, and confidential informants, coupled with
sophisticated financial and blockchain analysis, HSI can take advantage
of these chokepoints and use them to identify, disrupt, and dismantle
the terrorist organizations and TCOs.
In 2013, the U.S. Department of the Treasury's Financial Crimes
Enforcement Network issued guidance clarifying that certain persons or
companies that exchange convertible virtual currency, such as
cryptocurrency, are considered money services businesses (MSBs), and
therefore must follow the same regulatory and reporting protocols as
traditional MSBs. The protocols include developing and implementing an
anti-money laundering compliance program, filing suspicious activity
reports, and registration requirements, among others. These procedures
include ``Know Your Customer'' measures to record personal identifying
information from customers to mitigate fraud. Lawful users of
cryptocurrencies tend to use registered, compliant cryptocurrency
exchanges that adhere to regulatory and operational measures in
exchange for security, low fees, and the ease of processing
transactions.
Those who use cryptocurrency for illegal purposes generally avoid
registered exchanges and seek illicit or unregistered exchanges that do
not require or ask for personal identifying information. These illicit
exchanges often take the form of a direct Peer-to-Peer (P2P) exchanger.
P2P exchangers post advertisements stating the price for which they are
willing to either buy or sell cryptocurrency on-line. Although some P2P
exchangers do register with FinCEN and State authorities and follow
compliance laws, most do not. Rather, these illicit P2P exchangers
position themselves as the money launderers in the cryptocurrency
world. P2P exchangers illegally generate revenue by charging a premium
for allowing their customers to remain anonymous. They will sell
cryptocurrency above market value and buy below market value to or from
those customers who want to remain anonymous.
Targeting these illicit P2P exchangers enables HSI to open the door
and pull back the veil of pseudo-anonymity provided by
cryptocurrencies. HSI can identify other criminals using cryptocurrency
to fund and further their illicit activities through interviews and
suspect cooperation; forensic analysis of computers, mobile phones, and
other seized electronics; and the use of advanced blockchain tracing
tools.
Since 2018, HSI's Cryptocurrency Intelligence Program (CIP), housed
at the National Bulk Cash Smuggling Center, has targeted unlicensed
cryptocurrency MSBs and other gatekeepers in the cryptocurrency space.
CIP provides blockchain forensics and analytics support to HSI
investigators, as well as State, local, and international partners
investigating cryptocurrency-enabled crimes. CIP uses technical and
subject-matter expertise to exploit blockchain evidence, guide agency
policy, monitor market intelligence, and regularly engages with
private-sector partners such as exchanges, other virtual asset service
providers and the blockchain industry groups.
Collaboration
With the rapid development of new technologies, TCOs and terrorist
organizations often adapt new methodologies to facilitate their illicit
activities. It is now more essential than ever that law enforcement
agencies work together to enhance our abilities to address this threat.
Currently, HSI uses established investigative techniques that have
gradually evolved to keep pace with this change but, HSI often engages
its Federal, State, local, and international partners to learn and
exchange new and innovative approaches in the cryptocurrency space. HSI
leads and participates in numerous task forces and working groups such
as, the HSI Cyber Crimes Center, the FBI's National Cyber Investigative
Joint Task Force, the U.S. Secret Service's Cyber Fraud Task Force, and
the DHS Science and Technology Internet Anonymity Project Working
Group.
HSI's extensive international footprint, comprised of more than 80
offices in over 50 countries, equips HSI with a global ability to
connect and engage with international partners in this space. HSI
special agents assigned to EUROPOL coordinate multi-lateral foreign
investigations of darknet markets, cryptocurrencies, and illicit travel
connected to terrorism. HSI also sits on multiple committees and
engages with international partners to exchange ideas, guide regulatory
developments, and exchange investigative information. Given the
transnational nature of the crimes HSI investigates, these
international partnerships are essential to investigations into
cryptocurrency use in illicit and terrorist activities.
Training
HSI has been engaged in a multi-year effort to increase its
``cyber-enabled'' workforce by training special agents, criminal
analysts, and computer forensic analysts to conduct more effective and
comprehensive on-line investigations. The HSI headquarters-based
financial crimes unit and the HSI Cyber Crimes Center have partnered to
provide cryptocurrency and darknet training for HSI special agents, as
well as Federal, State, local, and international partners. Since 2017,
HSI's subject-matter experts in cryptocurrency have conducted beginner
and advanced cryptocurrency training to over 1,000 international law
enforcement partners and Government officials world-wide. The training
enables U.S. law enforcement agencies to initiate prolonged and
combined campaigns of coordinated investigations targeting the criminal
organizations that are using cryptocurrencies to launder illicit
proceeds derived from various criminal schemes.
Outreach
In 2003, HSI initiated the Cornerstone outreach initiative, a
Nation-wide program designed to promote cooperation and collaboration
with private-sector partners in order to detect and close
vulnerabilities within the financial industry. This mission is
accomplished through proactive outreach and collaboration with
businesses and industries that manage the very systems terrorists and
other criminal organizations seek to exploit. Within the financial
sector, HSI's efforts focus on conducting outreach with traditional
financial institutions as well as MSBs. With the rapid growth of
cryptocurrency, and with it the expansion of private companies involved
in cryptocurrency, HSI has expanded Cornerstone to include outreach and
training to private industry involved in the cryptocurrency space, who
often represent the first line of defense against money laundering and
the illicit use of cryptocurrency.
statistics and investigative successes
While HSI's investigative portfolio is extensive and diverse,
financial investigations are at the core of every investigative program
area that we investigate. TCOs, terrorist organizations and the myriad
of criminal networks have grown increasingly more technical in their
approach to obfuscating their criminal acts, while also morphing
operations to the perceived anonymity of the darknet. Traditional
money-laundering methods remain, yet cryptocurrency can now be used
with relative ease to facilitate any type of illicit activity. As such,
HSI investigations related to cryptocurrency have risen from one
criminal investigation in 2011, to over 604 active criminal
investigations in 2021. To date in 2021, HSI has already seized
$79,825,606.65 in cryptocurrency. This marked increase signifies
growing confidence in cryptocurrency use by bad actors and requires
that law enforcement remains technically proficient in performing these
complex investigations.
These metrics also reflect an ability of HSI and our partners to
engage in a concerted effort to identify and disrupt illicit economies,
but to also use that intelligence to disrupt and dismantle the command-
and-control structure of TCOs and those that proliferate or support
terrorist acts.
To illustrate the above point, HSI led a global cyber operation,
along with the Internal Revenue Service (IRS) and Federal Bureau of
Investigation (FBI), which resulted in the dismantlement of an on-line
infrastructure of Hamas's militant wing, Al Qassam Brigades. Beginning
in October 2019, HSI established several undercover personas who
executed undercover donation payments, using Bitcoin and undercover
electronic communications, with the subjects operating the Hamas
cryptocurrency fundraising campaign. The undercover payments were
executed in a method that enabled investigators to identify those
supporters based in the United States and allowed investigators to
further identify money flows. Through additional communications
exploitation, HSI was able to identify 64 unique communication
channels, which led to the execution of a seizure warrant on a Hamas
donor's Bitcoin wallet.
Through additional court-ordered search warrants, HSI identified 64
terrorist-affiliated email addresses, which illuminated the
organizational blueprint, as well as covert access of Hamas's on-line
recruitment, financing, domain, and network infrastructure, which was
spread across the United States, Canada, Russia, Germany, and Saudi
Arabia. In July 2020, HSI and IRS special agents executed a total of 24
Federal search and seizure warrants at numerous cryptocurrency
exchanges, domain registration providers, VPN service providers, on-
line payment providers, DDOS protection providers, and email providers,
resulting in numerous account take-overs, server seizures, email
account seizures, and domain redirections. Additionally, this cyber
operation was executed in cooperation with foreign partners and
ultimately resulted in the seizure of terabytes of terrorist-controlled
data, the seizure of several million dollars from hundreds of Bitcoin
wallets, and the account takeover of a terrorist-administered website
that solicits terrorist donations via Bitcoin. This account takeover of
website, www.alqassam.net, enabled HSI to seize terrorist donations for
a 30-day period.
To highlight another investigative example, in 2020, HSI, IRS, and
FBI initiated an investigation related to 24 cryptocurrency accounts,
all of which were identified as foreign assets or sources of influence
for al-Qaeda. This investigation was initiated to investigate the
unlawful use of cryptocurrency to support and finance terrorism. As a
result of this investigation, HSI subsequently seized 60 virtual
currency wallets used in this terrorism financing scheme. The results
of this case and others illustrate how law enforcement can effectively
disrupt terrorist groups, though the use of HSI's financial and global
investigative authorities, technical aptitude, undercover and asset
forfeiture authorities and ability to use law enforcement and the
private sector as force multipliers in this fight.
gaps and solutions
While HSI has had success in countering the use of cryptocurrency
to facilitate crime, investigative and regulatory challenges still
remain. On the investigative front, the pseudo-anonymity offered by
cryptocurrencies, combined with enhanced encryption being implemented
by some platforms, restricts law enforcement's ability to trace
financial transactions between illicit actors in support of a broad
range of criminal activities. Cryptocurrency protocols are continuously
being refined, and new cryptocurrencies are regularly developed and
deployed with ever-growing technological complexity. As a result, law
enforcement organizations such as HSI are confronted with the need to
continuously update and expand their training and expertise to enable
effective investigations. This presents a resource and training
challenge, particularly in light of competing priorities within an
agency such as HSI with a broad mission set.
Additionally, significant challenges in international regulation
remain, including the classification of cryptocurrency, which varies
from country to country, and the lack of a common understanding and
definition for cryptocurrency and what it is under the law. From HSI's
perspective, the implementation of consistent global regulatory
oversight would be an important step toward mitigating the illicit use
of cryptocurrencies by terrorist and criminal actors. HSI has and will
continue to engage with stakeholders across the branches of the U.S.
Government to address questions, provide insight, and respond to
requests related to cryptocurrency and the digital economy.
conclusion
Thank you again for the opportunity to appear before you today to
discuss this important topic and for your continued support of HSI and
our investigative mission. HSI remains committed to protecting the
physical and digital borders of the United States from TCOs and
terrorist networks seeking to exploit and undermine our financial and
cyber systems and will continue our efforts at home and abroad to
uphold the National security and public safety of the United States.
Ms. Slotkin. Thank you for your testimony.
Pursuant to today's order, the subcommittee stands in
recess, subject to the call of the Chair.
Mr. Malinowski will be back shortly. I will flag that we
have a couple of Members who are on-line. You can't see them,
but when they are called for questions, they will come up, and
you will be aware of them.
So give us just a few minutes. We will be right back to
you.
[Recess.]
Ms. Slotkin. The subcommittee will come back to order.
I now recognize Assistant Director Sheridan to summarize
his statement for 5 minutes.
Mr. Sheridan. Can you hear me, ma'am? I have a red--is that
good? Can you hear me? OK.
Ms. Slotkin. We can, unless----
Mr. Sheridan. OK.
Ms. Slotkin [continuing]. The staff can't hear. Let us
know. But we can hear you well.
STATEMENT OF JEREMY SHERIDAN, ASSISTANT DIRECTOR, OFFICE OF
INVESTIGATIONS, U.S. SECRET SERVICE, DEPARTMENT OF HOMELAND
SECURITY
Mr. Sheridan. Thank you, ma'am.
Chairwoman Slotkin, Ranking Member Pfluger, and Members of
this subcommittee, good morning. Thank you for inviting me here
today to testify on how cryptocurrencies, virtual currencies,
and other forms of digital money are being used to further
advance criminal activity, including acts of terrorism and
violent extremism.
My name is Jeremy Sheridan, and I am the assistant director
of the Secret Service's Office of Investigations. I lead our
more than 160 field offices and direct our global network of
Cyber Fraud Task Forces. I work to ensure that the Secret
Service is effectively detecting and arresting those engaged in
the violations we are authorized to investigate, while also
supporting our diverse protective requirements across the
world.
For more than 150 years, the Secret Service has conducted
investigations to protect the American public, private
companies, financial institutions, and critical infrastructure
from criminal exploitation. We maintain extensive authorities,
expertise, and capabilities to safeguard financial and payment
systems from criminal misuse, even as those activities are
increasingly transnational and enabled by digital money.
The Secret Service has a distinctive record of success in
countering risks related to new technologies. We have
successfully investigated and dismantled some of the most
notorious virtual money platforms and crypto exchanges and
brought to justice some of the most infamous money launderers
and cyber criminals in U.S. history.
Today, we remain committed to keeping pace with innovation
and the evolving strategies and tactics criminals are using to
exploit new financial instruments.
Our perspective on these matters is based on our unique
role. We are not a financial regulator or a member of the
intelligence community. We are a law enforcement agency focused
on accomplishing our integrated mission of protecting
designated persons, places, and events and investigating crimes
that undermine the integrity of financial and payment systems.
This unified mission necessitates that we understand how
digital money may present risk to the Nation's financial system
as well as to our many protectees.
Consequently, today, I will aim to address the broad
criminal risks of digital money as well as the work of the
Secret Service and our partners to mitigate those risks. I
believe the measures to investigate and address these risks
apply equally to violent extremism and financially motivated
crime as they do to other forms of criminality.
I wish to stress that, while digital money is not
inherently criminal, it can be abused and is currently being
abused for a wide variety of criminal purposes, from money
laundering and ransomware to illicit financing of terrorism and
violent extremism.
Over the past decade, law enforcement has made great
strides in the fight against the illicit use of digital money,
but we anticipate that the on-going growth and criminality will
continue over the coming years. Organized crime groups,
terrorists, and other bad actors will continue to view digital
money as an effective means to transfer value globally and as a
means of evading the anti-money-laundering controls that are
well-established within the traditional financial system.
As the cryptocurrency industry improves their compliance
with anti-money-laundering obligations, the Secret Service is
focused on staying one step ahead of our adversaries. By
building the investigative capabilities and purview to meet the
evolving threats, we can continue to detect and arrest those
who engage in criminality using digital money.
But we must not be complacent. Keeping pace with criminals
requires a continuous investment in technology, training, and,
most importantly, people. The investigation of cyber crime and
illicit finance is complex, demanding work. We need a steady
stream of bright, diligent professionals equipped with the
latest technology, training, and expertise if we hope to
continue to be successful in the future, as we have in the
past.
Allow me to reiterate what many of my predecessors have
emphasized. Those that seek to further their illicit activities
through the use of digital currencies or the internet, more
broadly, should have no illusions that they are beyond the
reach of law. Even those digital assets and services that claim
to be anonymous can be tracked and interdicted.
As the investigative work of the Secret Service and our
partners has demonstrated over the decades, we in law
enforcement, whether it be the Secret Service, the FBI, HSI,
IRS CI, or any of the other investigative agencies of the U.S.
Government, are relentless in enforcing the law. We will not
stop until those who seek to harm the United States and its
citizens are arrested, convicted, and punished.
Chairwoman Slotkin, Ranking Member Pfluger, and Members of
this subcommittee, thank you again for the opportunity to
appear before you today and for your continued support of the
U.S. Secret Service. I look forward to working closely with
this committee and with other Members of Congress on our shared
priorities and welcome your questions.
[The prepared statement of Mr. Sheridan follows:]
Prepared Statement of Jeremy Sheridan
July 22, 2021
introduction
Good morning Chairwoman Slotkin, Ranking Member Pfluger, and
Members of this subcommittee: Thank you for inviting me to testify on
how criminals use digital money,\1\ including cryptocurrencies, to
further illicit activity, such as terrorism and unlawful acts of
violent extremism. My name is Jeremy Sheridan and I am the assistant
director of the Office of Investigations. In this role, I lead more
than 160 Secret Service field offices and direct our network of Cyber
Fraud Task Forces (CFTFs) in their investigations of sophisticated
computer and financial crimes. I ensure our global network of field
offices and task forces effectively detect and arrest those that are
engaging in the criminal violations we are authorized to
investigate,\2\ while fully supporting our diverse protective
requirements across the world.
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\1\ The term ``digital money'' is used to refer to a representation
of value that is stored on and transferred through computer systems and
that is used similar to money, regardless of legal tender status. The
term ``digital money'' is inclusive of, but is not limited to,
cryptocurrency assets like Bitcoin, Ether, Tether, and others.
Consistent with FinCEN guidance (FIN-2013-G001), the Secret Service
uses the term ``virtual currency'' to refer to mediums of exchange that
operate like currency, but do not have legal tender status.
\2\ See 18 U.S.C. 1028-1030, and 3056(b).
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Today, I will provide you with an overview of the risks associated
with digital money, as viewed from the perspective of the United States
Secret Service (Secret Service), and to highlight the various actions
we are taking to address those risks. As part of my testimony, I will
also seek to highlight some key challenges that we see on the horizon.
For more than 150 years, the Secret Service has conducted
investigations to protect the American public, private companies,
financial institutions, and critical infrastructure from criminal
exploitation. We maintain extensive authorities, expertise, and
capabilities to effectively safeguard financial and payment systems
from criminal misuse, even as those illicit activities are increasingly
transnational in nature and enabled by the internet.\3\
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\3\ For more information on the Secret Service's investigative
mission see: https://www.secretservice.gov/investigation.
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The Secret Service has a distinctive record of success in
countering risks related to emerging financial and payment
technologies. This includes countering fraud in electronic transfers of
funds in the early 1980's, countering criminal schemes related to
payment cards in the 1990's, and investigations related to
cryptocurrencies and digital money platforms over the past decade and
half. Today, we remain committed to keeping pace with technological
innovation and the evolving strategies and tactics criminals are using
to exploit these new financial instruments.
Through our decades of criminal investigations, the Secret Service
has developed a deep understanding of the risks, challenges, and
potential investigative benefits of digital money, as well as the
effectiveness of various potential law enforcement and regulatory
responses. Our perspective on these matters is based on our unique
role. We are not a financial regulator or a member of the intelligence
community. We are a law enforcement agency focused on accomplishing our
dual responsibilities of protecting designated persons, places, and
events and investigating crimes that undermine the integrity of
financial and payment systems. These unified mission sets necessitate
that we understand how digital money may present risks our Nation's
financial system, such as through money laundering, fraud, theft, and
extortion by cyber criminals (including through ransomware), in
addition to the ways in which they present risks to our many
protectees.
Consequently, my testimony today will address the broad risks of
how criminals can use digital money. In the interest of protecting on-
going investigative activities and other law enforcement sensitive
information, I will avoid detailed discussion of specific recent events
or law enforcement techniques. I believe this committee's work can be
well-informed by a discussion of the broad range of illicit activity
that is enabled by digital money. The measures to investigate and
address these risks, I believe, apply equally to terrorism, violent
extremism, and financially-motivated crime, as they do to other forms
of criminality.
secret service investigations of digital money
The commercialization of the internet in the 1990's brought with it
a new push to develop payment systems that could function effectively
within a digital economy. While the U.S. market predominately adopted
payment cards as the solution, there have been numerous attempts to
develop new digital payment systems that could operate with greater
independence from, and with a similar degree of trust to, the
traditional financial system, and all at a potentially lower cost. In
2009, Bitcoin sought to achieve these goals through a novel approach of
using public-key cryptography and on-going decentralized computation to
form a blockchain, a technical architecture which forms the basis of
most forms of digital money today.\4\
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\4\ Nakamoto, Satoshi, ``Bitcoin: A Peer-to-Peer Electronic Cash
System'' (2008). Last accessed on July 6, 2021. Available at: https://
bitcoin.org/bitcoin.pdf.
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Since that time, the popularity of Bitcoin has inspired an
exponential growth in digital assets globally, from cryptocurrencies to
stable coins to non-fungible tokens (NFTs). As of July 2021, there are
more than 5,000 blockchains in operation on the internet, with over 300
million users world-wide and total market capitalization of
approximately $1.43 trillion.\5\ Even central banks are exploring these
technologies as a means of encouraging more transparent and seamless
financial exchanges. Several are already in circulation.\6\ While much
of this effort is in support of legitimate economic activity, the rapid
expansion of cryptocurrencies, as well as other digital stores of
value, presents a significant challenge to law enforcement, and a
growing area of risk to the United States and our foreign partners.
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\5\ ``Cryptocurrency Prices by Market Cap,'' Last accessed on July
6, 2021. Available at: https://www.coingecko.com/en.
\6\ Among others, the Central Bank of Sweden proposed an ``e-
krona'' in November 2016, and started testing an e-krona proof of
concept in 2020; in November 2017, the Central Bank of Uruguay
announced to begin a test to issue digital Uruguayan pesos; and on
October 20, 2020, the Central Bank of the Bahamas introduced the ``Sand
Dollar'' as a digital legal currency equivalent to the traditional
Bahamian dollar. See Deloitte, ``Are Central Bank Digital Currencies
(CBDCs) the money of tomorrow?'' Last accessed on July 11, 2021.
Available at https://www2.deloitte.com/content/dam/Deloitte/lu/
Documents/financial-services/Banking/lu-are-central-bank-digital-
currencies.pdf.
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The Secret Service has been at the forefront of combatting these
crimes from their earliest iterations, and we continue this work today.
We have successfully investigated and dismantled two centralized
virtual currency providers that supported extensive criminal activity:
e-Gold Ltd. (in 2007) \7\ and Liberty Reserve (in 2013).\8\ Working
with our partners, we investigated and ultimately shut down a number of
other virtual currency exchangers,\9\ including Western Express,\10\
which was prosecuted by the Manhattan District Attorney's Office, and,
in 2017, the cryptocurrency exchange BTC-e.\11\ Through a partnership
with the Internal Revenue Service's Criminal Investigation Division
(IRS-CI) and other foreign and domestic law enforcement agencies, we
successfully shuttered BTC-e, after it was accused to have failed to
implement a program to prevent illicit financing.\12\
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\7\ See U.S. Department of Justice: ``Over $56.6 Million Forfeited
In E-Gold Accounts Involved In Criminal Offenses,'' https://
www.justice.gov/usao-md/pr/over-566-million-forfeited-e-gold-accounts-
involved-criminal-offenses; Digital Currency Business E-Gold Indicted
for Money Laundering and Illegal Money Transmitting, https://
www.justice.gov/archive/opa/pr/2007/April/07_crm_301.html.
\8\ See U.S. Department of Justice press releases: ``Founder of
Liberty Reserve Pleads Guilty to Laundering More Than $250 Million
through His Digital Currency Business,'' https://www.justice.gov/opa/
pr/founder-liberty-reserve-pleads-guilty-laundering-more-250-million-
through-his-digital; ``Manhattan U.S. Attorney Announces Charges
Against Liberty Reserve, One Of World's Largest Digital Currency
Companies, And Seven Of Its Principals And Employees For Allegedly
Running A $6 Billion Money Laundering Scheme,'' https://
www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-charges-
against-liberty-reserve-one-world-s-largest.
\9\ Exchangers are businesses that allow for the trade of digital
currencies for other assets, such as conventional fiat money, such as
U.S. dollars, or other digital currencies.
\10\ See Manhattan District Attorney, ``DA Vance Testimony on
Digital Currency before the Department of Financial Services,'' https:/
/www.manhattanda.org/da-vance-testimony-on-digital-currency-before-the-
department-of-financial-services/.
\11\ See, ``Russian National and Bitcoin Exchange Charged In 21-
Count Indictment For Operating Alleged International Money Laundering
Scheme And Allegedly Laundering Funds From Hack Of Mt. Gox,'' https://
www.justice.gov/usao-ndca/pr/russian-national-and-bitcoin-exchange-
charged-21-count-indictment-operating-alleged.
\12\ See, ``FinCEN Fines BTC-e Virtual Currency Exchange $110
Million for Facilitating Ransomware, Dark Net Drug Sales'' https://
www.fincen.gov/news/news-releases/fincen-fines-btc-e-virtual-currency-
exchange-110-million-facilitating-ransomware.
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More recently, in collaboration with our Federal and international
partners, we successfully investigated a highly sophisticated, Russia-
based criminal scheme to defraud multiple cryptocurrency exchangers and
their customers.\13\ This effort led to the seizure of millions of
dollars' worth of virtual assets. The criminals indicted in this scheme
are alleged to have employed a variety of advanced methods in support
of their fraud, including using fictitious or stolen identities to
create accounts; circumventing exchanges' internal controls; swapping
and mixing different types of virtual currency; moving virtual currency
through multiple intermediary addresses; and a market manipulation
scheme in which inexpensive virtual currency was purchased at a fast
rate to increase demand and price, then quickly sold for a higher price
to make a quick profit.
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\13\ See, ``Russian Nationals Indicted for Conspiracy to Defraud
Multiple Cryptocurrency Exchanges and Their Customers,'' https://
www.justice.gov/usao-ndca/pr/russian-nationals-indicted-conspiracy-
defraud-multiple-cryptocurrency-exchanges-; and ``Treasury Sanctions
Russian Cyber Actors for Virtual Currency Theft,'' https://
home.treasury.gov/news/press-releases/sm1123.
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And just this year, our work investigating illicit uses of
cryptocurrency supported indictments and arrests associated with a vast
money-laundering operation that provided criminal services to not only
some of the world's most dangerous cyber criminals but also North
Korean military-affiliated actors.\14\ This North Korean group is
accused of creating and deploying multiple malicious cryptocurrency
applications, of developing and fraudulently marketing a fictitious
blockchain platform, and ultimately stealing more than $1.3 billion
from victims in the United States and overseas.
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\14\ See, ``Three North Korean Military Hackers Indicted in Wide-
Ranging Scheme to Commit Cyberattacks and Financial Crimes Across the
Globe,'' https://www.justice.gov/opa/pr/three-north-korean-military-
hackers-indicted-wide-ranging-scheme-commit-cyberattacks-and.
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During the course of our criminal investigations, the Secret
Service maintains close and continuous partnerships with a wide range
of domestic and international law enforcement agencies. We regularly
coordinate our work with the Department of Justice, Federal Bureau of
Investigation (FBI), Homeland Security Investigations (HSI), IRS-CI and
others, and, where appropriate, conduct joint investigations and
information sharing with foreign counterparts. Through our Cyber Fraud
Task Forces and through domestic and international task forces, like
the National Cyber Investigative Joint Task Force (NCIJTF) and the
Joint Cybercrime Action Taskforce (J-CAT) in Europe, we work to ensure
effective deconfliction and intelligence sharing between and among our
law enforcement partners.
countering risks involving digital money
Criminals can abuse digital money for a wide variety of purposes,
including in support of terrorist or violent extremist activities. The
types of criminality are diverse, and include such schemes as crypto-
jacking,\15\ thefts of private keys,\16\ the purchase of illicit goods
or services on the dark web, attacks on block chain networks,\17\
money-laundering, sanctions evasion, illicit financing, and as the
extortion payment method of choice in modern ransomware, among other
potential crimes.\18\
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\15\ Crypto-jacking is the use of malware or compromised websites
to use, without authorization, computing power of others for
cryptocurrency mining. Mining is the computational process that
verifies and maintains a blockchain, and is typically incentivized by a
blockchain protocol rewarding cryptocurrency to miners.
\16\ Control of assets on a blockchain is maintained through
exclusive control and access to the associated private cryptographic
key; however, there have been numerous instances of cryptocurrency
heists, involving major exchanges, wallets, and individual users
resulting from the theft and illicit use of private cryptographic keys.
\17\ We have observed a few instances of attacks on blockchain
systems themselves, either to impair their operation, as part of a
broader scheme, or as part of a ``51 percent attack'' to defraud other
users of the cryptocurrency. Such activities typically involve
violations of 18 U.S.C. 1030 and can also include other criminal
offenses.
\18\ Ransomware, which impairs the operation of a computer as part
of an extortion demand, has substantially grown in threat,
corresponding with adopting cryptocurrencies as the means of paying
extortion demands.
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The blockchain analysis tracking firm Chainalysis, has identified
approximately $21.4 billion worth of likely illicit cryptocurrency
transfers in 2020.\19\ However, we believe that this is likely a
significant underestimate of the total value of illicit cryptocurrency
transfers. Certain blockchain implementations on specific currencies
can provide information for insightful analysis on its own, but a full
accounting of the motives and identities of criminal actors using these
tools can only be achieved through the work of trained criminal
investigators, armed with subpoena powers and court-sanctioned legal
process to undercover the true scale of the problem.
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\19\ ``Crypto Crime Report 2021,'' Chainalysis, available at:
https://go.chainalysis.com/rs/503-FAP-074/images/Chainalysis-Crypto-
Crime-2021.pdf.
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A 2019 study \20\ on terrorist use of digital currencies by the
RAND Corporation, supported Secret Service's Office of Investigations
finding that a specific digital currency can be viewed as more or less
appealing to bad actors based upon six criteria: A currency's level of
anonymity, its usability, its security, its acceptance in the
marketplace, its reliability, and its overall volume. RAND's research
shows that, ``should a single cryptocurrency emerge that provides wide-
spread adoption, better anonymity, improved security, and that is
subject to lax or inconsistent regulation, then the potential utility
of this cryptocurrency, as well as the potential for its use by
terrorist [or criminal] organizations, would increase.'' It is thus
essential that the U.S. Government keep pace with changes in the market
and align investigative resources and regulatory oversight to shifts in
the tactics of terrorists, criminals, and other bad actors.
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\20\ See, ``Terrorist Use of Cryptocurrencies Technical and
Organizational Barriers and Future Threats,'' The RAND Corporation,
2019, available at https://www.rand.org/pubs/research_reports/
RR3026.html.
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Law enforcement has made tremendous strides in the fight against
illicit use of digital money, but we anticipate that the on-going
growth in criminality will continue in the coming years. Organized
crime groups, terrorists, violent extremists, and other bad actors will
continue to view cryptocurrencies as an effective means to transfer
substantial values globally, without encountering the anti-money
laundering controls common in the traditional financial system. As the
cryptocurrency industry improves their compliance with anti-money
laundering (AML) obligations, I am focused on keeping the Secret
Service one step ahead of our adversaries. By developing the
investigative capabilities and purview to meet the evolving threat
landscape, we can continue to detect and arrest those engaged in crime,
including those engaged in terrorism and violent extremism.
challenges for further consideration
Cryptocurrencies remain attractive to bad actors for the various
reasons provided above, but it also has its limitations and criminal
drawbacks. For cryptocurrencies or other digital assets to be utilized
within the mainstream economy--namely, to exchange them for most goods
or services--they usually must be converted into government-backed fiat
currency, such as the U.S. dollar, European euro, or Chinese yuan. This
conversion typically occurs through ``exchanges,'' money services
businesses which allow for the purchase and sale of digital assets with
fiat currency. Exchanges, both as on-ramps and off-ramps to the
cryptocurrency economy, have been a particularly effective data source
and control point for governments to focus their efforts; however, as
the variety of digital assets increases, further attention is needed to
address the risks of technologies and services that obscure digital
transactions from law enforcement and regulatory oversight.
The United States and the broader international community have
spent decades developing, implementing, and strengthening a global
anti-money laundering (AML), Know-Your-Customer (KYC), and countering
the financing of terrorism (CFT) regime. Financial institutions doing
business in the United States must follow a host of statutory and
regulatory obligations, including those related to the Bank Secrecy Act
of 1970, the Annunzio-Wylie Anti-Money Laundering Act of 1992, and the
Money Laundering Suppression Act of 1994, in addition to other
associated laws and Federal regulations. These laws require covered
entities to be registered, establish compliance programs, due diligence
systems and monitoring programs, transmit suspicious activity reports,
and develop risk-based anti-money-laundering programs. Failing to
comply with these requirements or conducting or facilitating
transactions designed to avoid reporting requirements or conceal or
promote specified unlawful activities may constitute criminal
violations of Title 31 of the U.S. Code or sections 1956, 1957, or 1960
of Title 18, in addition to other provisions of U.S. law.
Criminals and terrorist groups persistently seek to avoid U.S. and
foreign AML and KYC requirements by utilizing exchanges that do not
adhere to these laws or reporting requirements. Criminals are also
increasingly exploiting over-the-counter (OTC) brokers, which
facilitate transactions conducted directly between two parties through
bilateral contracts. Unlicensed OTC brokers with weak AML/CFT programs
are increasingly being used by criminals and other bad actors for money
laundering and other financial crimes. Compared to institutional
exchanges, OTC brokers provide a more decentralized approach, which
makes them attractive for those intent on engaging in money-laundering
activity. In both cases, with exchanges or OTCs, criminals look to
utilize those providers hosted in foreign jurisdictions with lax AML
requirements or weak enforcement.
Accordingly, it is vital to U.S. National security that AML/KYC
laws achieve their intended effects, regardless of the bad actors'
motivations for exploiting them. The enactment of the Anti-Money
Laundering Act of 2020 (AML 2020) was an important step in this
direction. Timely and effective implementation of the rules directed by
this law, and effective enforcement of violations, will likely have a
substantial impact on the illicit market.
We are closely monitoring and participating in the implementation
of the AML Act of 2020, both to track potential emerging risks and to
identify where further action may be helpful. For example, enhanced
data reporting, collection, retention requirements, and accessibility
requirements may strengthen criminal investigations and effective
oversight. We also foresee significant money laundering risks, which
may require further action, related to anonymity-enhanced
cryptocurrencies, services intended to obscure transactions on
blockchains (i.e., cryptocurrency tumblers or mixers), and
cryptocurrency mining pools.
That said, the United States should be cautious about acting
unilaterally, as this can simply lead to the ``offshoring'' of
cryptocurrencies and associated services to foreign jurisdictions. We
believe that the most effective interventions are those that are
conducted in coordination with other major economic powers. Our foreign
partners perform critical roles in in assisting U.S. law enforcement
with conducting investigations, making arrests, seizing criminal
assets, and establishing effective AML regulations to counter
transnational criminal activity that harms Americans. As we take steps
domestically, we continue to work to ensure that foreign partners are
willing and capable to assist us in investigations. To that end, the
Secret Service continues to partner closely with Departments of State,
Justice, and the Treasury to develop these essential foreign
partnerships and work collaboratively on multinational criminal
investigations and training programs.
Further, we acknowledge that some exchangers or brokers may
actively obfuscate their ownership and location in an effort to evade
detection and oversight. To address this challenge, additional
consideration is warranted to improve cooperation between U.S.
Government authorities and foreign and domestic providers of electronic
communications services and remote computing services. This will
facilitate expeditiously identifying users engaged in certain illicit
activities, such as those involving digital money laundering,
transnational cyber crime, or terrorist financing. Last year, the
Cyberspace Solarium Commission made important recommendations toward
achieving such improved cooperation.\21\
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\21\ See, The Cyberspace Solarium Commission Report, available at,
https://www.solarium.gov/report.
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Strong overseas partnerships are also key to effective regulation
and oversight. Fostering these partnerships requires continual
investment in government-to-government law enforcement and regulatory
relationships to develop shared understanding of risks, and to ensure
an effective international anti-money laundering regulatory and
enforcement programs. Toward this end, we welcome efforts to improve
global controls related to digital assets, through our international
partners, and other global financial and banking associations.
Finally, investigating crimes involving digital money, and the
transnational organized criminal and terrorist groups that exploit it,
requires highly-skilled criminal investigators. Hiring, developing,
retaining, and equipping our investigative workforce, as well as
partnering with and training our domestic and foreign law enforcement
and other partners to develop their investigative capabilities, are all
critical priorities for ensuring that the United States is well-
prepared to address emerging risks both today and into the future.
This can be achieved by strengthening and growing law enforcement
training and capacity-building programs that equip Federal law
enforcement, and our partners, with the technical skills and tools
necessary pursue the most sophisticated transnational criminals.
Programs such as the Secret Service's National Computer Forensics
Institute (NCFI), which yearly trains over 3,000 U.S. State and local
law enforcement officials in computer investigations techniques, and
the Department of State's International Law Enforcement Academies
(ILEA), which provide instruction to foreign law enforcement partners
on approaches to combatting cyber crime and illicit finance, are prime
examples of initiatives that enhance these requisite capabilities.
conclusion
Digital money is clearly of great interest to governments,
businesses, and U.S. citizens, as demonstrated by the substantial
research conducted and investments places into these assets. The Secret
Service is focused on doing our part to address the challenges posed by
the increasing use of digital money in furtherance of illicit activity,
from ransomware, to money laundering, to the financing of violent
extremists and terrorists. But we and our law enforcement partners,
both domestic and foreign, must and can do more. We must dramatically
expand our efforts, and continue to adapt our investigative tools and
techniques, if we hope to stem the tide.
Chairwoman Slotkin, Ranking Member Pfluger, and Members of this
subcommittee, I will conclude by reiterating what many of my
predecessors have emphasized here before in this body: Those that seek
to further their illicit activities through use of digital currencies,
or the internet more broadly, should have no illusions that they are
beyond the reach of the law. Even those assets and services that
purport to be ``anonymous'' can be tracked and interdicted. As the
investigative work of the Secret Service and our law enforcement
partners has over the years demonstrated: We are relentless in
enforcing the law and will not stop until those who seek to harm the
United States and its citizens are arrested, convicted, and punished to
the fullest extent of the law.
Thank you again for the opportunity to appear before you today, and
your continued support for the mission of the U.S. Secret Service. I
look forward to working closely with this committee, and with other
Members of Congress, on our shared priorities. I look forward to
answering your questions.
Ms. Slotkin. I thank all the witnesses for their testimony.
I will remind the subcommittee that we each have 5 minutes
to question the panel. Since we haven't been in the room for a
while, the clock is under the screens. That is 5 minutes total,
so I will give you a gentle tap of the gavel when you have hit
your 5-minute mark, if you are going strong.
I will now recognize myself for questions.
So, Ms. Dobitsch, can you help us just contextualize the
threat? You know, sort-of, we know that there is, you know, a
number--there is a bunch of terrorist organizations, there is a
bunch of domestic extremist organizations that threaten
Americans in different ways. How significant is the use of
cryptocurrency versus other types of currencies, versus
traditional types of currencies? I know it is hard to put an
exact percentage on it, but give us a sense of the scale, if
you would.
Ms. Dobitsch. Thank you, Chairwoman.
In terms of the scale, I think from a terrorist perspective
we are really in the nascent stages, particularly as we look at
foreign terrorist groups overseas. They remain reliant on those
traditional sources of funding. But we are seeing increasing
use of cryptocurrency, particularly regarding soliciting
donations and fundraising. So early on in the stages.
I think from a criminal perspective it is becoming more
mainstream. Obviously, we are seeing more activity from
transnational criminal organizations, obviously from cyber
criminals, and, in certain instances, nation-states that are
using it more frequently than they are those traditional
sources.
I think, as the technology becomes more accessible and
easier for the user, it is going to be more common among
terrorist groups. Again, it is largely limited. We have seen
several cases. But, again, I think the concern for us is that
as the technology advances and becomes more user-friendly that
we are going to see more activity.
Ms. Slotkin. Mr. Eisert, can you help us understand the use
of sites that Americans are really used to, like GoFundMe, you
know, Amazon, to raise money for charity? You know, most
Americans have seen someone at least advertise those kinds of
campaigns. Can you talk to us about what, if any, abuse you see
of those sites?
Mr. Eisert. Sure. Luckily for us, a lot of those mainstream
payment systems, like PayPal and GoFundMe, they have due-
diligence systems in place and checks and balances. So a lot of
the social media sites and those mainline payment systems have
identified criminal activity and have pushed them off the
networks.
But that is why--that is one of the reasons why we are
starting to see an increase into these alternate forms of
payment systems, like virtual currency.
Ms. Slotkin. Then I think for both Mr. Eisert and Mr.
Sheridan, just tell us about--you know, I have assumed that
from a law enforcement perspective it is just harder to go
after, you know, groups that are using cryptocurrency as
opposed to traditional currencies.
What are the tools or legal authorities that either you
don't have, that you want to have, that would make your life
easier? What are the roadblocks that are holding you back?
Mr. Sheridan. That is a really important question, ma'am.
Thank you.
So, in regards to your first question about tools, we in
the Secret Service rely on our Cyber Fraud Task Forces that are
stationed globally and partner with all of Government in order
to combat this threat. What we need in order to expand is to
increase our presence in the international setting. As was
mentioned earlier, this is an international/transnational crime
situation that we are facing, and we need to increase our
presence there.
We need to get better at our processes in order to ensure
that we are aggregating data appropriately and conducting the
necessary data-link analysis for attribution.
We need to continue to modernize. We greatly appreciate
Congress's help in the Cyber Fraud Task Force modernization
that they have assisted us with, but we need to continue to
grow in those areas.
As it relates to authorities, similarly, ma'am, there are
areas for growth as it relates to our investigative authorities
related to money laundering, structured payments, and
unlicensed money transmitters that would make us stronger in
this fight.
Ms. Slotkin. OK. Well, I am sure we would love to hear more
about some of the details.
Then to Ms. Dobitsch again: You know, we know that
intelligence is an important part of understanding these
organizations and how they finance themselves. Talk to us
about, like, what does the interagency structure look like in
the Government? Who is working on this? Who do you talk to
every day? Is there actually coordination between different
actors?
Ms. Dobitsch. Yes, ma'am, it is certainly an interagency
problem.
I think the difficulty really is thinking about that end-
user. So we are seeing the activity occurring, but oftentimes
we have significant information and intelligence gaps about
where that money is going and how it is ultimately used.
I&A certainly serves as that bridge between law enforcement
and the intelligence community. In addition to that, it really
takes not just an individual or an intelligence officer that
kind-of understands the intent and capabilities of the actor
but also has that deep understanding and knowledge of the
technology itself.
If you look at a group like ISIS, in terms of their use of
drones, really, since 2014, they rapidly expanded their
capability to leverage drones, first for reconnaissance and
then for actual attacks on the battlefield overseas.
So it really takes a whole-of-Government effort and
connecting that law enforcement information with the
intelligence to get the fullest picture of the threat.
Ms. Slotkin. Great.
I now recognize Ranking Member Mr. Pfluger for questions.
Mr. Pfluger. Thank you, Chairwoman.
I am so glad you brought up the use of drones. I think the
key here is that they are using an innovative approach, and the
nature of warfare is constantly changing, and we have to stay
one step ahead.
So I appreciate your testimonies so far and wanted to get
right into some questions with Mr. Eisert.
I understand that cryptocurrency has attracted bad actors
because of the pseudo-anonymity or anonymity, in some cases. I
want to focus now on the cartels. Have you seen cartels using
cryptocurrencies in order to hide illicit proceeds from
transnational criminal activity?
Mr. Eisert. Yes. Thank you for that question.
Yes, we do have recent investigations where we do see
cartels conducting business with money brokers, professional
money launderers. Throughout our investigations, we target
these professional money launderers and insert our undercover
activities with them.
Specific to the cartels, we have found ourselves in the
middle of investigations picking up cartel-level street
proceeds and converting them to cryptocurrency through peer-to-
peer platforms.
Mr. Pfluger. How easy is that, for them to translate that
into--to either leverage for what they want to get out of it
for the use of, you know--into and out of the United States?
Mr. Eisert. Oh, once it is in the virtual currency format,
it could be moved around the world in a matter of minutes, 100
times over around the world.
The biggest chokepoints and where we have our most success
is when the on-ramping or the off-ramping of the virtual
currency, so, for instance, getting it into the virtual
currency realm. That is where we have our success in our
undercover platforms and through our traditional money-
laundering investigations.
A few years back, many of the mainline exchanges were
regulated as money service businesses and needed know-your-
customer regulations, and that has pushed a lot of the illicit
activity to unregulated peer-to-peer atmosphere. That is where
we primarily target the cartel and their work.
Mr. Pfluger. Thank you very much for that.
For Mr. Sheridan, how does the Secret Service's approach
differ from other agencies, other law enforcement colleagues?
Kind-of, what makes you and the Secret Service unique in this
regard?
Mr. Sheridan. Thank you for that question, sir.
So all law enforcement entities bring their own unique set
of capabilities to this fight. We in the Secret Service are a
smaller organization. That makes us more agile for information
sharing and case coordination within our own agency.
That small size also requires us to rely on partnerships.
Partnerships are the lifeblood of the Secret Service, not only
in our protective mission but investigatively as well. So we
develop very strong partnerships across all of Government and
with our international law enforcement partners.
We also have a unique methodology, in that we have been
doing this for 150 years. We have, over the past several
decades, created a database of information related to these
cyber actors, many of whom have graduated up to these most
complex cyber-enabled fraud schemes that we are seeing today.
We are able to follow that digital link to when they were just
starting out and had a more public--and weren't as concerned
with their on-line presence as being so noticeable.
Then I think our perspective. Our perspective is based on
our focused statutory authority, which is to protect the
Nation's financial payment systems and financial
infrastructure. That allows us to be specialists, as opposed to
generalists, and create, really, subject-matter experts within
our organization to conduct these investigations.
Mr. Pfluger. Thank you for that.
Let me just talk about the whole-of-Government approach. I
appreciate your comments on that, Ms. Dobitsch. For me,
representing a university that is a cyber center of excellence,
talk to me about that whole-of-Government approach, the
private-public partnerships that you all, I think, have
mentioned, and how we can leverage a university like Angelo
State University, who focuses on this--and, by the way, a
minority-serving institution, a Hispanic-serving institution,
doing wonderful things. Talk to me about how we can incorporate
students and their learning and what they should be focusing on
so that they can enter your organizations and combat this.
Ms. Dobitsch. Yes, sir. Absolutely. As I stated earlier,
having a sophisticated understanding of the technology itself
is the first step, and that often comes from private business
and academia. Understanding the trends that exist in
cryptocurrency and other digital currencies is really that
first step.
Then, also, learning more about the vulnerabilities of each
of those types of currencies. From the Classified intelligence
perspective, we have the intent and capabilities of those
actors, but we can only understand really what the threat is if
we know well what the technology is able to do and what
security mechanisms are in place to prevent the malicious use
of that currency or other technology.
So it really is a partnership. It is not just intelligence.
That is why we say ``information and intelligence.'' It is that
law enforcement data, it is the private academia, and, really,
all sources of information, because this is a global trend, it
is a global technology, and all types of actors are really
seeking to exploit the technology for their own benefit.
Mr. Pfluger. Well, thank you for that.
We need to know the resources that you need. We need to
know the things that you identify, what we are talking about
here. If there is a more comprehensive list, we need to know
that.
We have seen it in the ransomware attacks recently. You
have mentioned it in many of the examples you have given us.
But that is the purpose of this hearing and the purpose of our
committee, is to give you those resources, if we can, to make
sure that we can combat that.
With that, Madam Chair, I yield back.
Ms. Slotkin. The Chair will now recognize other Members for
questions they may wish to ask the witnesses. In accordance
with the guidelines laid out by the Chairman and Ranking Member
in the February 3 colloquy, I will recognize Members in order
of seniority, alternating between Majority and Minority.
Members participating virtually are also reminded to unmute
themselves when recognized for questioning.
The Chair recognizes for 5 minutes the gentleman from New
Jersey, Mr. Malinowski.
Mr. Malinowski. Thank you. Thank you, Madam Chair.
So, as all of you have testified, cryptocurrencies are
being used right now for all kinds of very nefarious purposes--
to purchase illicit goods, drugs, guns; to provide material
support to terrorist organizations; to enable the ransom
payments that are fueling arguably the biggest threat, one of
the biggest threats, that Americans are facing in their daily
lives today.
Mr. Eisert, I think you said in your testimony that they
give bad actors the ability to engage in money laundering with
minimal effort. That is pretty bad.
Just so everybody is clear, maybe say a little bit more
about that. What is it about cryptocurrency that enables
somebody to engage in money laundering with minimal effort?
Mr. Eisert. Absolutely. Thank you for that question.
The cryptocurrency problem set transcends borders,
transcends industries. What I mean by that is, as I discussed
earlier, once you can get your money into the crypto world
through a regulated exchanger or an unregulated exchanger, it
is a push of the button.
I could tell you about the old days of law enforcement of
following money launderers from bank to bank, and good luck if
they could hit 20 in a day. Now you can sit on your couch and
move it 100 times over. There is one documented case where
money was moved over 21,000 times before it came out.
Mr. Malinowski. Yes.
Mr. Eisert. It is that simple. So, once it is in the
system, it is moving.
Tracing it within the system, it is challenging but not
unbelievable. Identifying who is attached to that transaction
is the challenge.
Mr. Malinowski. Well, here is what troubles me. Chairwoman
Slotkin, in her opening statement, said that there is nothing
inherently wrong with digital currency. I could be convinced of
that, but I am not convinced of that, because I am trying to
see the other side.
With, for example, drone technology, we know drones can be
used for deadly, nefarious purposes, including some we have not
yet seen that we all fear. Yet all of us can list dozens of
positive uses of drone technology for consumers, for companies.
Maybe you are not the right people to ask this question to,
but can you think of any socially beneficial uses of
cryptocurrency beyond providing some people with something to
speculate in and make money off of?
Mr. Eisert. Well, coming from the law enforcement side, we
are always looking at the illicit side. So I can only tell you
what my beliefs are and what is out there on the open web. I
believe a lot of that focus goes into the underbanked. It gives
an opportunity for the underbanked areas and countries to
engage in world-wide transactions.
Mr. Malinowski. Well, I don't know. I mean, I hear things
like, well, it provides privacy. That didn't stop us from--and
I am deeply committed to privacy. It did not stop us from
banning the use of anonymous shell companies for very similar
reasons, right? Because they are used to cover up illicit
activity.
I hear the phrase that it enables the democratization of
currency. Every time someone says we are democratizing
something, it kind-of ends the conversation. That is sort-of
good. I don't really understand what that means in this
context. I think it is an abstraction, whereas ransomware
attacks are not an abstraction. They are hurting people every
single day.
So I am not sure if I see it. I think we do need to expand
this conversation to ask that fundamental question, whether the
challenges that you are facing, that we are asking you to deal
with, in protecting us against all of these social ills, are
challenges that are necessary, inescapable, and inevitable. I
think we have to ask, what is the good, what is the positive
social value of this phenomenon that is also creating all of
this harm?
You know, I think when you look at the history of how we
built modern economies in the United States and around the
world, we started 300 or 400 years ago with multiple currencies
that were unregulated and not controlled by governments, and in
every modern economy we built what we have today when
Government decided, no, we are going to have one currency that
is issued and regulated by Government.
I think I could ask you--we don't have time--how we can
better regulate cryptocurrency, but I think if we regulated it,
it wouldn't be crypto anymore, and so what would be the point?
So I come back to the question, should this be allowed?
Thank you. I yield back.
Ms. Slotkin. The Chair recognizes for 5 minutes the
gentleman from Mississippi, Mr. Guest.
Mr. Guest. Thank you, Madam Chairman.
Director Sheridan, you say in your written testimony that
for cryptocurrency and other digital assets to be utilized
within the mainstream economy, they usually must be converted
into Government-backed currencies, such as the U.S. dollar and
the euro.
You said that exchanges serve both as on-ramps and off-
ramps to the cryptocurrency economy. You talk about the growth
of unlicensed over-the-counter brokers and the importance of
anti-money-laundering and know-your-customers laws.
Could you expand on that very briefly?
Mr. Sheridan. Yes, sir. Thank you for that question.
What my written testimony was meant to encapsulate is the
ecosystem of what we refer to as digital money. We see in a lot
of these conversations that the terms related to the different
platforms are used interchangeably: Virtual currency, digital
currency, cryptocurrency. We in the Secret Service use the term
``digital money,'' because that encapsulates all forms, to
include cryptocurrency and the most commonly referred to coins,
such as Bitcoin, Ethereum, Tether, and so forth.
The true definition really comes down to the technology
used to create it, the regulations that apply, whether or not
it is legal tender. But, for us, it comes down to how it is
used.
So the written testimony is meant to describe in more
detail how it is used, as my colleague has identified, to on-
ramp from legal tender to digital money, how it is used
laterally for legal and illicit means, and how it is off-
ramped, converted away from a digital platform to legal tender.
The exchangers that were referenced are certainly integral
to that. These are the ways in which we in law enforcement find
are primary means to engage for identification and further
information related to the digital money that is used.
Mr. Guest. Switching gears very quickly, back in April,
there was an announcement that the Secret Service was going to
partner with the Mississippi attorney general's office, various
other local law enforcement agencies, in establishing a
Mississippi Cyber Fraud Task Force.
My question is two-fold. One, can you talk a little bit
about the importance of these task forces, how that serves as a
force multiplier to what you are trying to do in the Secret
Service?
Then the other thing I want to follow up on is, it is my
understanding that all of these agents will be trained at the
National Computer Forensics Institute, which is located at
Hoover, Alabama. I am very familiar with that institute. But
can you talk a little bit about the mission of that institute
and the important role that that organization serves?
Mr. Sheridan. Yes, sir. The Cyber Fraud Tasks Forces are
our global network of investigative task forces staffed by not
only our special agent personnel but our professional work
force of subject-matter experts from our Investigative Services
Division, our network intrusion forensics analysts. These are
our touchpoints to the local communities, to your constituents,
that bring the information back to our Global Investigative
Operations Center to make the whole Secret Service approach to
our investigations.
As you said, sir, a lot of what we do on that local level
is through the National Computer Forensics Institute. As you
are aware, that is the only Federal facility to train and equip
State, local, territorial, Tribal officers, judges, and
prosecutors. Those officers and law enforcement entities are
really the first responders. They are the front line, they are
the surge capacity in this fight against the complex cyber-
enabled fraud.
We are very grateful for the support of Congress for the
growth of that facility. We have trained over 16,000 of those
law enforcement officials. But, as you are aware, that
facility's authorization is due to sunset in 2022, and we would
greatly appreciate the support to continue its authorization,
not only domestically but to expand that same training to our
foreign partners to take this fight globally, to have that
surge capacity on the global scale.
Mr. Guest. As it relates to the National Computer Forensics
Institute, do you feel that it serves as a key component in our
fight against cyber crime?
Mr. Sheridan. Sir, I could not agree with you more
wholeheartedly on that question. It trains, equips State, local
officers to be the first line of defense, the first people that
your constituents are primarily going to call.
With their support--as I mentioned, partnerships in the
Secret Service--and shoulder-to-shoulder with us, this is how
we are going to beat this adversary and how we are going to get
more competent at combating these types of fraud schemes.
Mr. Guest. As I understand your testimony, Director
Sheridan, you believe it is crucial that Congress not only
reauthorize this program but that we robustly fund what is
going on there at the National Computer Forensics Institute. Is
that correct?
Mr. Sheridan. Yes, sir. I think that is imperative in this
fight.
Mr. Guest. Thank you, Madam Chairman. I yield back.
Ms. Slotkin. Perfect timing.
The Chair recognizes for 5 minutes the gentleman from
California, Mr. Swalwell.
Mr. Swalwell. Thank you. I thank the Chairwoman for holding
this critical hearing as the dashboard is blinking for
America's businesses as it relates to ransomware attacks.
In many ways, this feels like a pre-September 11
environment for businesses, in that you have all the signs
there that, you know, we are going to continue to face attacks,
perhaps ones that could shut down for a protracted period of
time critical infrastructure. You have these attacks being
launched from foreign countries that are not our allies. It is
unclear whether they are state-sponsored, but they are
certainly state-enabled, because countries are looking the
other way and aren't cooperating with us or INTERPOL in
apprehending and stopping the hackers.
So I wanted to first invoke a Bay Area business leader,
John Chambers, who used to be the CEO at Cisco. He recently
said that more than 65,000 ransomware attacks are expected to
happen this year, at an average cost to small and medium-size
businesses of $170,000 each.
Kevin Mandia, the CEO of FireEye, recently said, ``There is
a direct correlation between ransomware and the anonymity of
digital currency.'' While I certainly am a supporter of
cryptocurrency and blockchain technologies, I want to make sure
that they are not contributing to or enabling these attacks.
So the question I have first: Is anonymous cryptocurrency
hindering your office's abilities at DHS to respond to cyber
attacks? Mr. Eisert.
Mr. Eisert. Thank you for that question. To get to your
point about the use of virtual currencies in ransomware, the
biggest hurdle is already taken care of with those illicit
actors. The payer is on-ramping that money into the system for
him. That is usually where we have our greatest success, as I
discussed before.
As for the fight against network intrusion, H&I has the
Cyber Crimes Center, which supports cyber-enabled crimes as
well as cyber crime directly. Within the Cyber Crimes Center,
we have a network intrusion program; we call it Operation Cyber
Centurion. What Cyber Centurion does is, we have trained
special agents around the country with specific software and
tools, and we scan and detect vulnerabilities in the
infrastructure.
So we will scan the open net for vulnerabilities that have
been published by our sister agency, CISA, where, when we
identify those vulnerabilities, we will reach out to those
organizations and say, ``Hey, you have a gap here,'' or, ``Hey,
you have a gap inside your system right now,'' and then we will
proactively do an investigation with that.
Mr. Swalwell. Thank you, Mr. Eisert.
To follow up on that, how much does it help when a business
reports to you that they have been attacked? How does that
factor into whether you think we should have mandatory
reporting, whether it is in critical infrastructure space or
just business-wide in America? What information do you yield
when you learn about a ransomware attack?
Mr. Eisert. The more dots we have out there, the more
connections we can make. So, with the increased reporting,
either it be from the financial arena or just in the trend of
money laundering and everything else, or private industry on
how they have been hacked, when we have more bits of evidence
and information, we can connect to bigger networks. So it would
be extreme help to have that information.
Mr. Swalwell. I know there is a lot that we can do, you
know, left of boom, as far as, like, the hygiene requirements
that we have, particularly of, you know, U.S. Government
vendors and contractors. But on the right-of-boom side, what
are you doing to make sure that businesses are comfortable
working with DHS or the Bureau?
You know, the concern I have heard from some vendors is,
you know, we don't want to open our books up to the FBI or DHS;
you know, who knows what we have done inadvertently that could
put us, you know, on their radar. We don't want them thinking
that way. We want them to trust the Government, that the
Government can be a part of understanding the attack and,
ideally, have the capability to shut it down.
So what are you doing to try and earn the trust of
businesses who are victims?
Mr. Eisert. Again, thank you for that question.
Well, we partner tremendously with our brothers and sisters
in FBI and CISA in this world. We do a lot of outreach. I spoke
earlier about Operation Cornerstone, which does a lot of
outreach to private industries to let them know who we are,
what we can do, how we can help. With that comes a level of
comfortability.
I can't speak for the other agencies on what they do
independently, but I think it is important that we continue to
work together and show that we are in this with one fight.
Mr. Swalwell. Great. Thank you.
Thank the Chair for the hearing. I yield back.
Ms. Slotkin. Thank you.
The Chair recognizes for 5 minutes the gentleman from the
greatest State in the Union, Michigan, Mr. Meijer.
Mr. Meijer. Amen. Thank you, Madam Chair.
Then thank you to our witnesses for testifying here today
and sharing a little bit more of your knowledge and experience
and understanding on this critical issue that has obviously
been in the news because of ransomware but has been an issue
more broadly.
As Ranking Member of this committee's Oversight
Subcommittee, I always want to make sure that our Government is
functioning as efficiently and as adequately as possible so
that we can be most effective in combating terrorism.
You know, we have before us three different subcomponents
of the Department of Homeland Security represented. So I will
allow whoever feels most well-equipped to answer this question
to do so.
But I want to understand, with all of the different Federal
entities engaged in countering terrorism financing and the
illicit financial activities that help contribute toward it,
can you provide a little bit more clarity on which specific
agencies are responsible for tracking which activities? So what
are the left and right limits not only of your own entities but
also how you engage with the broader intelligence and law
enforcement community in these efforts?
Mr. Sheridan. Sir, if I could, I will start conceptually
first.
We do recognize the fact that there are certainly
overlapping authorities, to some extent, and responsibilities.
But we in law enforcement view it as a team sport. There is
more than enough work to go around. It is essential that we
have that level of partnership and collaboration due to the
complexity and the scope and scale of our adversary.
We have institutional deconfliction and information-sharing
mechanisms in place to ensure we aren't being wasteful in any
way and being good stewards of the American taxpayer dollar, to
your concern.
More on a tactical approach, I will speak for the Secret
Service, in that our role is focused on protecting the Nation's
financial infrastructure and financial payment systems, so we
will investigate crimes that violate U.S. law related to those.
Because of those information-sharing mechanisms we have in
place through our task forces, with my colleagues here at the
table, as well as all of Federal and State and local law
enforcement, we are able to share information and case
coordination as an investigation comes up that may not focus on
those payment systems.
Mr. Eisert. If I may add to that, primacy within the Joint
Terrorism Task Force lays with the FBI. So they will always
have primacy when it comes to terrorism and terrorism
financing. But, like my colleague said, a lot of us bring
unique authorities to the table.
H&I is the largest Federal contributor to the FBI's Joint
Terrorism Task Force. It speaks specifically about those
authorities. Fifty percent, almost 50 percent, of all
disruptions within the Joint Terrorism Task Force fall within
the authorities that HSI bring to the table--so, for instance,
the UC activity, the undercover activity, that we have; full
use of Bank Secrecy Act data that we have; full access to trade
data.
So each agency is bringing their particular skill set.
Ms. Dobitsch. I will just add as well, I think, from the
intelligence perspective, I&A is really serving as the bridge
between the intelligence community and our State and local law
enforcement partners.
The first step really is access to that data, making sure
that everyone involved in this fight has access to that data
and that it is integrated in a way that we could use technology
to quickly identify those threats.
We think it is critical--particularly as we talked about
how big cryptocurrency is and the use of digital currencies, it
requires a sophisticated understanding and expertise but
technology to be able to quickly comb through the data and
figure out what we should be looking at. So it is really the
access and the integration that is critical.
Oftentimes we have local law enforcement information that
is filling intelligence gaps and intelligence information that
is helping local law enforcement understand what those
vulnerabilities are.
Mr. Meijer. Thank you all for your responses to that to
better help, kind-of, flesh out that universe from a top-down
level. I am heartened to hear on both the access side and the
information-sharing side and on the deconfliction-mechanism
side that those have been adequately addressed.
I guess, when it comes to resources and capabilities--and
then my time is running short here, but are there any concerns
that there may be either gaps in enforcement, gaps in
collection, or gaps in capabilities that we should be working
to address?
Mr. Eisert. Specific to the virtual currency problem set,
the current regulations doesn't encapsulate the whole virtual
currency. Virtual currency AML and know-your-customer stuff
does not mirror traditional banking industry AML.
Mr. Meijer. Then, with that, Madam Chair, my time has
expired, and I yield back.
Ms. Slotkin. Thank you.
I will just note for the Members that we will do a quick
second round here.
But the Chair recognizes for 5 minutes the gentleman from
New Jersey, Mr. Gottheimer.
Mr. Gottheimer. Thank you, Chairwoman Slotkin, for
organizing this very important hearing.
Thank you to each of the witnesses for being here today and
for the work you and your colleagues do to help counter the
illicit use of cryptocurrencies.
I am concerned about the increasing attractiveness of
cryptocurrencies to two types of illicit actors: One, foreign
terrorist organizations such as Hamas, Hezbollah, and ISIS,
and, second, to the use of domestic White supremacists like the
Proud Boys and other violent extremist groups which were
involved in the January 6 attack on the Capitol.
If it is OK, I will start with you, Ms. Dobitsch. How does
our ability to pursue the illicit use of cryptocurrencies
differ between these two types of actors? Is it easier to shut
down, seize the assets of, and bring charges against foreign
terrorist organizations compared to domestic violent
extremists?
Ms. Dobitsch. Thank you, sir.
I would say that it is complex from both perspectives, in
part because of the anonymity that cryptocurrency and other
digital currencies provide. Even if we can see the transaction,
we often don't know who the transaction--or who is receiving
that and then what the ultimate purpose of that resource is.
So it is difficult even from a foreign terrorist
perspective to be able to track that money as it relates to it
ultimately resulting in the purchase of a weapon or some kind
of facilitation of an operation.
From the domestic violent extremist angle, certainly we are
seeing an increase in calls for fundraising and donations using
cryptocurrency, but we have a difficult time really trying to
translate that to violence and understanding how that resource
is being translated into a plot or an operation here in the
homeland.
Mr. Gottheimer. Thank you. But, compared to cash, is it
easier to track, or it is still more difficult because you
can't really understand the purpose of it?
Ms. Dobitsch. I would defer to my law enforcement
colleagues on which one is more or less----
Mr. Gottheimer. I guess I will turn to Mr. Eisert on that
one, or Mr. Sheridan I guess. I don't know. Who do you think is
better on that one?
Mr. Sheridan. Is your question about----
Mr. Gottheimer. I guess it is a Secret Service question, so
cash----
Mr. Sheridan. Is your question about tracking, sir?
Mr. Gottheimer. Yes.
Mr. Sheridan. By its nature, digital money is easier to
track, because there is a digital trail and actual evidence
related to its use and each step it takes along the blockchain
as it moves.
Mr. Gottheimer. If I can stick with you, if that is OK, how
can we eliminate barriers and friction for law enforcement to
make it easier for us to keep up with ever-evolving digital
assets and technologies? Is there anything you think we should
be doing straightaway?
Mr. Sheridan. For us, it would be resourcing in the basic
concepts of people, process, and technology.
We need to increase our work force, not only in volume but
in capabilities, on the law enforcement side as well as the
subject-matter experts, our professional work staff that we
hire. We have a great team of computer scientists, folks with
the capabilities to conduct blockchain analysis and crypto
tracing, but we need more of them.
We need to keep pace with the adversary. We need to grow
into the international locations where we don't have as strong
a presence, because this is a transnational crime.
We need to get better at our processes, to modernize and
have more advanced capabilities to handle the volume of data
that we are seeing, because there is such a significant trading
and movement related to these currencies.
We also need to modernize our technologies related to our
task forces throughout the globe.
Mr. Gottheimer. Thank you, sir.
Mr. Eisert, would you describe the role undercover HSI
agents placed in last year's seizure of millions of dollars in
cryptocurrencies from terrorists, including ISIS, al-Qaeda, and
Hamas, if you don't mind? Thanks.
Mr. Eisert. Absolutely. Excuse me, though, if I stay vague.
There is a lot of undercover activity and Classified
information that we are happy to host a separate meeting on.
Mr. Gottheimer. Of course.
Mr. Eisert. But those initial leads, if I can just bulk
them together--they ran parallel and were very similar--those
initial leads came through the Intelligence Committee as well
as some reporting from watchdog organizations.
Upon identifying the illicit intent of those organizations,
we approached each of those organizations with multiple
undercover personas, engaged them in conversation to get the
intent of what the purpose of the money was, at which point we
started to identify the Bitcoin wallets that they asked for.
Throughout the investigation, their methods changed, but
with each method change we just identified a new branch of
tracing that we had to run and go do, bringing it right to the
end, bringing it right to the culmination of the seizure of
about $10 million in both cases.
Mr. Gottheimer. Excellent. I appreciate that. I would enjoy
a briefing in a Classified setting on that.
Mr. Eisert. Excellent.
Mr. Gottheimer. Thank you so much.
I yield back. Thank you, Chairwoman.
Ms. Slotkin. Thank you.
We will now turn to a second round. I will recognize myself
for some questions.
So two very different questions. One is on this idea that
our companies, our organizations, even local governments are
not mandated reporters when it comes to the attacks that they
withstand.
So, for instance, a big box store could be hacked and have
a ton of all of our personal data taken and then pay a ransom
for that money, potentially through cryptocurrency, and not
have to report that to the very individuals who had their
information stolen, not have to report that to law enforcement,
not have to actually say anything. We have seen examples of
companies who have waited 6 months, a year, et cetera, to
actually come forward and say something about this.
Tell me, for the folks in law enforcement, what that does
to your ability to actually help go after these guys. Do you
believe that companies and organizations should be mandated
reporters when they are the victim of a hacking or ransomware
attack?
Mr. Sheridan.
Mr. Sheridan. Thank you, ma'am. That is an extremely
important question. We, yes, support reporting in all instances
to law enforcement, regardless of agency or which law
enforcement entity it is reported to.
I do believe there are some misconceptions about law
enforcement's role in this, as was referenced earlier, that
perhaps law enforcement creates an intrusion or creates some
type of vulnerability to systems.
We view our investigative mission as part of the prevention
process. We will work with organizations and whatever third
party they have as part of their security team in a
collaborative sense.
Reporting to us will help make systems stronger, will help
identify areas of weakness, the attack vectors, the indicators
of compromise. It will prevent future attacks not only to that
individual organization but perhaps other organizations that
may have similar vulnerabilities.
Ms. Slotkin. Yes.
You know, I talk to people in my district, and they feel
like their data, their information, they are on the front lines
of, kind-of, a cyber war. They are asking me constantly, you
know, are we doing something about this? Is my Government
helping to stop these attacks?
A lot of people took notice when the Colonial Pipeline was
attacked and ransomed, when, you know, we got money back
through the FBI acting to grab some of that money back. It felt
like the first time we were punching back--in a public way,
right? Of course, there are lots of that things I know you
can't talk about that, and we are glad to not talk about them.
But help explain to, again, that farmer in the middle of my
district who is asking about cybersecurity. Convince him that
their Government is doing something about the fact that they
are being constantly attacked.
Mr. Sheridan. Yes, ma'am.
Well, it starts, as was referenced earlier, with the
National Computer Forensics Institute. We have trained over
16,000 State and local officers to be the first responders to
these events. It starts with contacting them, contacting law
enforcement.
There are multiple tools within our organizations and our
partners in order to interdict and stop in real time some of
these victimizations that are occurring, not only within the
network itself but in terms of the transfer of the funds that
have been taken by these illicit actors.
Within the Secret Service, we have our Global Rapid
Response and Incident Tracking Team that is able to
domestically stop wire transfers if notified within a certain
amount of time. Since its inception in----
Ms. Slotkin. If notified. Uh-huh.
Mr. Sheridan. If notified.
Ms. Slotkin. Right.
Mr. Sheridan. If it is notified, since 2019, we have
intercepted more than $80 million in transit to prevent it from
going to illicit actors.
Within the Department of Treasury, FinCEN has their Rapid
Response Program. Similarly, that is more internationally
focused, but, over the past 4 years, we have an 82 percent
success rate working with FinCEN if notified within a 72-hour
window, primarily within a 48-hour window. The success rate
drops dramatically depending on the amount of time that has
lapsed. But we have been able to interdict more than $385
million from going to criminal actors.
Within the Secret Service, we have our own Asset Forfeiture
Branch that returns victim funds to victims if we are notified,
if we are able to participate in the investigation and find the
illicit funds in transit.
Ms. Slotkin. So that is super-helpful and connects the two
questions, right, that you all can actually do some real things
if you are notified, but our current system does not require
organizations or companies to notify anybody if their data has
been taken, if there has been ransom.
So I appreciate that and would offer that we could do with
a little bit more public talk and discussion from you all about
what you are doing, because it sounds like it is more than the
average citizen knows, and they want to know that their
Government is protecting them.
So, with that, I yield to the gentleman from Texas, Mr.
Pfluger.
Mr. Pfluger. Thank you, Madam Chair.
Kind-of discussing a similar topic, you know, attribution
seems to be one of the toughest things to get after. So,
whether it is mandatory or whether this public-private
partnership encourages people because they know that, if the
assets that they have potentially lost are going to be returned
to them, then hopefully that will also drive a motivation to
report--and especially if the education is out there and we
have forums where they understand that, you know, your agencies
offer them something to prevent this type of activity from
happening.
But let me kind-of focus in on the National Computer
Forensics Institute and why it is valuable to the Secret
Service in your investigations and what more it can be doing
and how can we in Congress support you.
Mr. Sheridan.
Mr. Sheridan. Yes, sir. Thank you for the question.
We are very, very grateful for Congress's support to this
date regarding NCFI. It has been phenomenal to see the growth
in that program and the number of people and State and local
officers, judges, and prosecutors that have been trained there,
over 16,000 to date.
We are currently training about 3,000 a year. Projected
estimates are almost twice that, but we are limited by not only
the authorization that is pending in 2022 to sunset but the
current resourcing that we have to that facility.
We think we can double our capacity in terms of training,
as well as expand into international areas, which I think is
imperative for us to be stronger globally with our law
enforcement partners around the world in order to combat this.
Mr. Pfluger. Well, thank you.
Just a question for any of you that wants to comment on
this. How closely linked are terrorist organizations and these
ransomware attacks that we are seeing, which are not new, but
some of them are being publicized, especially the ones that are
happening toward critical infrastructure, whether it is our
food supply, our energy supply? How closely linked, and what is
the projected or estimated threat, as you see it with your
crystal ball, in the future?
Ms. Dobitsch. So, to date, we haven't seen really any
connections between ransomware attacks and terrorist groups or
associates.
But what we would underscore is, as we discussed earlier,
that rapid ability to adapt that we have seen demonstrated by
the broad range of terrorist groups. In addition to that, we
call it the copycat trend. Terrorist groups often adopt
tactics, techniques, and procedures from other malicious actors
that they see as beneficial to them.
So, again, as terrorists' use of cryptocurrency and digital
currencies becomes more commonplace, certainly we could expect
to see them using ransomware as a means to fund their
operations.
In addition to that, we are increasingly seeing cyber
criminals offer ransomware as a service. So individuals can buy
a service on the dark web, and we often don't know who the
actor is that is paying for that service.
So there are many opportunities for terrorists to exploit
ransomware to support their operations.
Mr. Pfluger. Again, probably underscoring the NCFI, your
role that you play there.
I would just say, based on that response, that I don't
think--our position on this has to be incredibly strong. The
responses that we as a country levy upon bad actors, criminal
organizations, terrorist organizations, malign actors anywhere,
state or non-state--it is not limited to 16 industries in this
country; it is going to be across the board. Our response has
got to be strong. I hope that this committee will continue to
take that up and investigate this.
With that, Madam Chair, I will yield back.
Ms. Slotkin. The Chair recognizes the gentleman from New
Jersey, Mr. Malinowski.
Mr. Malinowski. Thank you, Madam Chair.
So I am still not convinced this market in cryptocurrency
should even exist, but let's talk about regulation for a
moment.
The Treasury Department recently announced that it would be
requiring cryptocurrency transactions I believe over $10,000 to
be reported to the IRS. Is that correct?
Mr. Eisert. I believe there is proposed legislation.
Mr. Malinowski. It is proposed, right. So that does require
action from us? Or is this something that----
Mr. Eisert. I would have to defer to Treasury on that.
Mr. Malinowski. OK.
In principle, would that at least help to address the
challenge that Chairwoman Slotkin referred to, in the sense
that presumably a company making a ransom payment of over
$10,000 would then at least have to report that to the IRS?
Mr. Eisert. I would say depending on how the regulation is
written.
Mr. Malinowski. Right.
Mr. Eisert. If we want to take mainstream financial
institutions and how regulations are written now, if cash was
to go into the system, there would be a requirement. Right now,
the mainstream regulation revolves around cash.
Mr. Malinowski. OK.
Mr. Eisert. If it mirrored it with virtual currency, then
yes.
Mr. Malinowski. That would presumably be helpful to you
all.
Mr. Eisert. Extremely.
Mr. Malinowski. Yes. OK. Most ransomware payments would be
over $10,000, just in the current scheme of things, so it would
probably capture a significant share of, if not all, ransomware
payments.
Other ideas? Should the SEC be given the authority to
regulate cryptocurrency exchanges? Is that something that the
administration is considering proposing?
Mr. Sheridan. So, sir, the challenge with regulation that
we see is, because digital money is used in so many different
capacities, depending on the technology that is used to create
it and, essentially, how it is employed, there is no one
regulatory agency that currently has oversight. Sometimes it is
a commodity, sometimes it is a security, a derivative, legal
tender.
So regulation is certainly important, as my colleague has
identified. The anti-money-laundering laws, know-your-customer,
countering of financing of terrorism, the anti-money-laundering
law of 2020 have all been instrumental in helping tamp down
criminal activity related to this. But, from a law enforcement
perspective, we are not regulatory in nature, and our
perspective would be to grow authorities related to our
investigative and statutory capabilities as opposed to
regulatory capabilities.
There is some concern, as also was referenced, about the
dual-edged nature of overregulation that may push illicit use
and criminal actors deeper into anonymizing methods and corners
of the internet that would make it more difficult for law
enforcement.
Mr. Malinowski. OK. Well, you know, we would very much
value, I think, your guidance in finding that sweet spot, if
the answer is going to be greater regulation.
I presume that you would agree that, whatever rules we come
up with, they should be broadly harmonized across the 50 States
but also internationally. I wonder if you know of any examples
outside the United States of regulatory steps that other
governments, partner governments, have taken that you think
might be helpful to emulate or, on the contrary, helpful not to
emulate.
Mr. Eisert. Sure. Thank you.
Homeland Security Investigations sits on working groups
with the Financial Action Task Force, FATFs, which is a
conglomerate of countries and regulatory bodies. In this
working group, we discuss those exact things--where should we
be going? Many of the regulations you are seeing proposed and
that have already come through are a result of those FATFs.
You know, with that, the regulations and know-your-
customer, they are meant to root out bad actors, support OFAC
fundings. At no point do they restrict legal transfer of these
virtual currencies. So it is important to note that, no matter
what has been proposed, nothing is restricting the use of
virtual currency. It is just creating obtainable records to
root out the bad actors.
Mr. Malinowski. OK. Thank you.
I yield back.
Ms. Slotkin. The Chair recognizes the gentleman from
Michigan, Mr. Meijer.
Mr. Meijer. Thank you, Madam Chair.
I just want to follow up on the earlier line of questioning
that I had. Mr. Eisert, I think you mentioned that one of the--
you know, the gaps that you identify when it comes to specific
and virtual currency problem sets. We have been talking about
that a little bit.
I want to drill down, because I think many who are watching
or listening here today are familiar with Bitcoin. They have at
least heard of Bitcoin, if they are not more broadly aware of
blockchain and crypto. But Bitcoin, though it is the most well-
known and one of the largest by market--or the largest by
market capitalization, it is one of, I think, over 5,000
different cryptocurrencies. So you have not only, you know,
some others that people may have heard of, like Litecoin,
Ethereum, Doge, but also many, many, many old coins and then
proposed stable coins as well.
Ms. Dobitsch, in your report, you also said--or your
testimony, you also said that newer and less popular
cryptocurrencies are increasingly attractive to malicious
actors because of their more stringent privacy and security
features.
I guess, how well-resourced do you feel to deal with the
lesser-known cryptos, not just those who may be in the top, you
know, 5 or 10 of market cap, but even the potential for the
exploitation of some of these mini or micro cap
cryptocurrencies?
Mr. Eisert. The privacy coins create a challenge because of
their hidden blockchain, their obscured blockchain. A lot of
our data analytics aren't as thorough as it is with the open
blockchains, and sometimes it is not thorough enough for us to
bring it to a courtroom to do something.
Luckily for us, because, as you mentioned, the market cap
and the total volume of coin, the usability is not there. If
you are looking at Monero, with maybe a market cap right now of
40 to 50 million, if you are looking to move 3 million in
Monero, you are using 10 percent of the market.
So the usability is not there yet, and that is the scary
part. The good thing is a lot of U.S. exchanges will not accept
Monero because of its hidden blockchain. It won't meet their
know-your-customer and AML policies.
Mr. Meijer. Well, I actually want to follow up on that
point, because, you know, when terrorists were aware that email
traffic might be monitored, I mean, the way you get around that
is you don't have that go through traffic, right? You have a
draft, and then two parties both have access.
I mean, what about a scenario where it is a super-micro-
mini cap where it is not usable as a currency but if a company
were to invest, you know, $10 million into it and, prior to
that investment, a terrorist or ransomware entity, you know,
buys up the entirety of it, I mean, it is essentially
functioning as a mechanism to pass that through. Because, once
the money is in there, they could just sell whatever the gains
are, and then, you know, all of the losses are borne by the
entity that had purchased--that company paying that ransom.
I mean, that would obviously be a scenario where, to Mr.
Malinowski's reference to the proposed Treasury Department
regulations, it would not qualify, because it isn't a transfer.
It is merely a purchase that is held. But that asset,
essentially like a balloon deflating, loses all value, and all
the air is captured on the outside.
I mean, is that a scenario you could foresee happening?
Mr. Eisert. Yes, I am trying to track most of it.
Some of the regulations being proposed--and, again, I
really would prefer to yield to Treasury on something like
that--is, if an unhosted wallet has an exchange with a
regulated wallet, there would be a reporting mechanism. So that
would capture some of that.
As for an alt-coin or a privacy coin that an organization
decides to use and pump a lot of money in, that is great; they
are still going to have the problem of--I am going to keep
using the term--``off-ramping'' it. That is where the AML, the
anti-money-laundering, policies will take effect and capture.
Mr. Meijer. Ms. Dobitsch, anything to add?
Ms. Dobitsch. No, just that we have seen terrorist groups
use privacy coins, including Monero. So it is certainly
something that we are seeing.
I would also note that, you know, thousands of
cryptocurrencies; the advancements are daily. So the increased
privacy, the increased anonymity of these occurs with the
creation of every new Bitcoin. So it is certainly a challenge,
I think, first, to understand what they are using and then to
have greater insight into how they are actually using the
currency.
Mr. Meijer. OK.
Well, I appreciate the additional ability to probe a little
bit deeper there. It is clearly that, you know, Bitcoin
presents its own challenges, but, in the broad, you know,
ecosphere of various cryptocurrencies, especially when we get
down to that very small end, the opportunities for exploitation
are nearly limitless.
With that, Madam Chair, my time has expired, and I yield
back.
Ms. Slotkin. With that, I thank the witnesses for their
testimony and the Members for their questions.
The Members of the subcommittee may have additional
questions for the witnesses, and we ask that you respond
expeditiously in writing to those questions.
The Chair reminds Members that the subcommittee record will
remain open for 10 business days.
Without objection, the subcommittee stands adjourned.
[Whereupon, at 11:39 a.m., the subcommittee was adjourned.]
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