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


                    FROM TIMBER TO TUNGSTEN: HOW THE
                   EXPLOITATION OF NATURAL RESOURCES
                 FUNDS ROGUE ORGANIZATIONS AND REGIMES

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

                             HYBRID HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,

                       INTERNATIONAL DEVELOPMENT

                          AND MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 4, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-60
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
46-299 PDF                 WASHINGTON : 2022                     
          
----------------------------------------------------------------------------------- 

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

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

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

                  JIM A. HIMES, Connecticut, Chairman

JOSH GOTTHEIMER, New Jersey          ANDY BARR, Kentucky, Ranking 
MICHAEL SAN NICOLAS, Guam                Member
RITCHIE TORRES, New York             PETE SESSIONS, Texas
STEPHEN F. LYNCH, Massachusetts      ROGER WILLIAMS, Texas
MADELEINE DEAN, Pennsylvania         FRENCH HILL, Arkansas
ALEXANDRIA OCASIO-CORTEZ, New York   LEE M. ZELDIN, New York
JESUS ``CHUY'' GARCIA, Illinois      WARREN DAVIDSON, Ohio
JAKE AUCHINCLOSS, Massachusetts      ANTHONY GONZALEZ, Ohio
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 4, 2021.............................................     1
Appendix:
    November 4, 2021.............................................    35

                               WITNESSES
                       Thursday, November 4, 2021

Araya, Kidan, Member, Illicit Trafficking Working Group, Women of 
  Color Advancing Peace and Security; and Board Member, Africa 
  Policy Accelerator, CSIS.......................................     6
Fruth, Joshua T., Co-Founder and Chief Strategy Officer, Section 
  2 Financial Intelligence Solutions, LLC........................    12
Garcia Zendejas, Carla, Director, People, Land, and Resources, 
  Center for International Environmental Law (CIEL)..............     8
Mavrellis, Channing, Illicit Trade Director, Global Financial 
  Integrity......................................................    10
Miles, Kathleen, Director of Analysis, Center on Illicit Networks 
  and Transnational Organized Crime (CINTOC).....................     4

                                APPENDIX

Prepared statements:
    Araya, Kidan.................................................    36
    Fruth, Joshua T..............................................    48
    Garcia Zendejas, Carla.......................................    92
    Mavrellis, Channing..........................................    98
    Miles, Kathleen..............................................   116

              Additional Material Submitted for the Record

Himes. Hon. Jim A.:
    Written statement of the Coalition for a Prosperous America..   121
    Written responses to questions for the record from Kidan 
      Araya......................................................   131
    Written responses to questions for the record from Joshua T. 
      Fruth......................................................   134
    Written responses to questions for the record from Carla 
      Garcia Zendejas............................................   144
    Written responses to questions for the record from Channing 
      Mavrellis..................................................   151
Auchincloss, Hon. Jake:
    Written responses to questions for the record from Joshua T. 
      Fruth......................................................   159

 
                      FROM TIMBER TO TUNGSTEN: HOW
                      THE EXPLOITATION OF NATURAL
                         RESOURCES FUNDS ROGUE
                       ORGANIZATIONS AND REGIMES

                              ----------                              


                       Thursday, November 4, 2021

             U.S. House of Representatives,
                 Subcommittee on National Security,
                          International Development
                               and Monetary Policy,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:07 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jim A. Himes 
[chairman of the subcommittee] presiding.
    Members present: Representatives Himes, Torres, Dean, 
Auchincloss; Barr, Sessions, Williams of Texas, Hill, Zeldin, 
Davidson, and Gonzalez of Ohio.
    Ex officio present: Representative Waters.
    Chairman Himes. The Subcommittee on National Security, 
International Development and Monetary Policy will come to 
order. Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of this subcommittee are authorized to 
participate in today's hearing.
    Today's hearing is entitled, ``From Timber to Tungsten: How 
the Exploitation of Natural Resources Funds Rogue Organizations 
and Regimes.''
    I welcome the witnesses. Thank you for being here. As you 
have probably noticed, there is going to be some weird 
combination of in-person and remote, and it is a pretty busy 
day, so people will be coming in and out. But thanks very much 
for being here.
    And I now recognize myself for an opening statement of 4 
minutes or less.
    The illicit exploitation of natural resources has 
catastrophic effects in many dimensions. Proceeds go to fund 
violent extremists, terrorists, or to feed corruption. The 
environment is devastated. Local populations who might 
otherwise benefit from their natural endowment are left out, or 
worse, impressed into the destruction of the environment that 
they inhabit.
    When developed safely and equitably, materials like timber, 
charcoal, gold, and rare earth minerals can create good-paying 
jobs, encourage foreign investment, and lift communities out of 
poverty. Environmental crime slams the door on all of that.
    This is not a small problem. Experts estimate that illicit 
natural resources generate more than $100 billion a year in 
revenue, making it the fastest-growing international crime. The 
worst offenders in this space rely on many of the same tactics 
that this subcommittee has scrutinized before: shell and front 
companies to hide ownership; trade-based schemes to transport 
goods; and vast networks of financial players that avoid anti-
money laundering laws and anti-corruption measures.
    Sadly, examples abound and bring this crime into our day-
to-day lives. Gold that was illegally mined by the FARC and the 
National Liberation Army in southern Venezuela could be in our 
smartphones, tablets, and computers. Teak, timber, and rosewood 
that was smuggled by Boko Haram or Al Shabaab in Africa could 
be used to make boats and furniture. And sanctioned persons in 
Afghanistan may have supplied the talc used in paint and 
plastics.
    Companies that deal in these materials have a 
responsibility to implement strong supply chain monitoring, but 
Congress must also review the conditions that enable these 
criminals to thrive.
    As threats in this space evolve, so, too, must our 
strategies for combating money laundering, terrorism, finance, 
and environmental crime. The tools and resources that are 
already at our disposal can help disrupt these threats.
    Banks, non-governmental organizations (NGOs,) and 
international law enforcement agencies play a role in 
identifying illicit flows and tracking criminals. But despite 
many improvements in detection and reporting systems, natural 
resource exploitation remains a lucrative and booming industry 
for terrorists and criminals.
    We need to discuss how we can improve legal remedies, 
refine information sharing, and encourage the private sector to 
implement standards that recognize risks and suspicious 
behaviors.
    Our methods of financial negotiation need to adapt, our 
analysis must get sharper, and we must collaborate with our 
partners by offering assistance and expertise where it is 
needed most. By working together, we can ensure that our best 
and strongest ideas to dismantle environmental crime networks 
are brought to the forefront.
    With that, I would like to welcome our panel of witnesses 
and thank them for helping us shine a light on this issue 
today.
    And I now recognize the ranking member of the subcommittee, 
the gentleman from Kentucky, Mr. Barr, for 5 minutes for an 
opening statement.
    Mr. Barr. Thank you, Mr. Chairman. I appreciate you holding 
this hearing, and I thank the witnesses for appearing before 
us.
    Today's hearing is entitled, ``From Timber to Tungsten: How 
the Exploitation of Natural Resources Funds Rogue Organizations 
and Regimes.''
    As our witnesses will undoubtedly explain today, timber and 
tungsten are just two examples of the many valuable natural 
resources that have the potential to be exploited. Other 
examples include oil, coal, rare earth elements, and countless 
other natural resources that have commercial applications.
    These resources can be a source of pride and prosperity for 
the nations and communities that hold them. However, the 
resources are increasingly making it into the hands of bad 
actors, rogue regimes, terrorist organizations, or organized 
crime syndicates, and used to finance terrorism and other 
illegal activities.
    In a 2021 report, the Financial Action Task Force (FATF) 
estimated that illicit extraction or harvesting of resources 
like oil, timber, metals, and minerals generated between $110 
billion and $281 billion per year.
    Environmental crime typically occurs in regions with robust 
stores of valuable natural resources, but without stable 
governments that can provide security or enforce existing laws, 
this, in turn, perpetuates the struggles for the people in 
these parts of the world.
    The enrichment of bad actors through resource exploitation 
requires vast and sophisticated networks of shell companies, 
intermediaries, and money-laundering operations, and, in some 
cases, direct collaboration and coordination with corrupt 
government leaders.
    The U.S. and other nations have dedicated resources to 
combating money laundering and countering terrorist financing, 
but today's hearing will inform us where the gaps remain, what 
more we can do, and the possible long-term strategic 
consequences of illicit resource extraction by our adversaries.
    The Chinese Communist Party (CCP) has made no secret of its 
intent to grow its sphere of influence, monitor its citizens 
and others around the globe, and control the means of 
production and telecommunications to gain leverage globally.
    This is evident in the context of our hearing today. One 
example is China's relationship with the Democratic Republic of 
the Congo (DRC), where China had trapped the DRC with massive 
debt through its Belt and Road Initiative, and was able to 
leverage that vulnerability to gain control over the DRC's 
cobalt reserves.
    Nowhere is the threat of malign Chinese influence more 
evident than in Afghanistan. In the near term, we must focus on 
bringing to safety Americans and Afghan allies still trapped in 
Afghanistan, fighting to survive the brutal Taliban regime. 
Once we have accomplished that goal, we must turn our attention 
to the long-term strategic implications of our withdrawal from 
Afghanistan, and specifically through the lens of competition 
with China as they seek to usurp the U.S. as the preeminent 
global economic superpower.
    This hearing will allow us to examine this problem through 
one specific lens: how the Taliban and other terror groups, the 
Chinese, and non-state actors, can take advantage of the vast 
resources available in Afghanistan.
    Afghanistan has some of the most valuable stores of rare 
earth elements in the world, including many that play an 
important role in emerging technologies and are becoming 
increasingly scarce.
    In 2010, the U.S. conducted a geological survey of 
Afghanistan to identify natural resources present in the 
country. Afghanistan is believed to hold more than $1 trillion 
worth of mineral resources. The survey identified stores of 
gold, copper, tin, and rare earth elements needed in the 
production of advanced batteries. Those resources were largely 
untapped because of the precarious security situation in the 
country.
    Given the shift in power in Afghanistan, the Taliban, 
potentially through collaboration with the Chinese, who met 
with Taliban leaders in Doha just last week, may be able to 
harvest these elements and control the supply of scarce 
resources needed to fuel growth in the United States and other 
advanced economies, including key elements needed for electric 
vehicles such as lithium and neodymium.
    The Administration's haste to fully abandon gasoline-
powered vehicles and choke off energy production to fuel those 
vehicles make us less reliant on domestic energy and subjects 
us to the will of adversaries, whom we will increasingly rely 
on to provide us with the materials we need to live in our 
daily lives. And this could be one example of where the climate 
goals of this Administration directly conflict with our 
national security needs.
    I look forward to hearing from our witnesses today on this 
important topic. The problem of illicit natural resource 
extraction and environmental crime financing bad actors is 
widespread, complex, and has potential long-term implications 
on U.S. national security. The insights on the problem and 
advice for specific solutions we hear today will help guide our 
policymaking.
    Thank you, and I yield back.
    Chairman Himes. I thank the ranking member, and I welcome 
today's distinguished witnesses: Ms. Kathleen Miles, the 
director of analysis with the Center on Illicit Networks and 
Transnational Organized Crime; Ms. Kidan Araya, a member of the 
Illicit Trafficking Working Group, Women of Color Advancing 
Peace and Security, and a board member of the Africa Policy 
Accelerator at CSIS; Ms. Carla Garcia Zendejas, the director of 
people, land, and resources at the Center for International 
Environmental Law; Ms. Channing Mavrellis, the illicit trade 
director at Global Financial Integrity; and Mr. Joshua Fruth, 
the chief strategy officer of Section 2 Financial Intelligence 
Solutions.
    Witnesses are reminded that their oral testimony will be 
limited to 5 minutes. You should be able to see a timer on the 
desk in front of you that will indicate how much time you have 
left. I would ask that you be mindful of the timer, and quickly 
wrap up your testimony once your 5 minutes have expired, so 
that we can be respectful of both the other witnesses' and the 
subcommittee members' time.
    And without objection, your written statements will be made 
a part of the record.
    Ms. Miles, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

 STATEMENT OF KATHLEEN MILES, DIRECTOR OF ANALYSIS, CENTER ON 
  ILLICIT NETWORKS AND TRANSNATIONAL ORGANIZED CRIME (CINTOC)

    Ms. Miles. Good morning, Chairman Himes, Ranking Member 
Barr, and members of the subcommittee. It is an honor to be 
here today before you to discuss resource crime and its 
intersection with organized crime.
    My name is Kathleen Miles. I am the director of analysis at 
the Center on Illicit Networks and Transnational Organized 
Crime (CINTOC), and the CEO of Ex Arca, an information company 
that tracks money and influence in politics. At both CINTOC and 
Ex Arca, I work on uncovering how various illicit networks 
generate revenue.
    At CINTOC, I have led projects in Africa on wildlife 
trafficking and its intersection with other serious organized 
crime such as drugs and human trafficking.
    Prior to my work at CINTOC, I worked for Booz Allen 
Hamilton, supporting the U.S. intelligence community in 
counter-threat finance and financial operations. And during 
that time, I worked on the Afghan Threat Finance Cell.
    Over many years working at the nexus of illicit finance and 
organized crime, I have come to the following conclusion: Any 
time we talk about illicit and illegal commodities and 
organized criminal groups, we are really discussing the ability 
of these networks to create, launder, and utilize wealth.
    Today, I am going to discuss two topics: natural resource 
trafficking and why illicit actors increasingly exploit this 
lucrative crime sector; and solutions going forward.
    At CINTOC, we have discovered that criminal supply chains 
are typically commodity-agnostic. In other words, they operate 
the same way whether they are moving timber, drugs, or people. 
Additionally, illicit organizations function the same as 
commercial firms, constantly working to maximize competitive 
advantage and profits.
    Natural resource crime allows illicit networks to diversify 
revenue sources while reducing risk and keeping profits high. 
Additionally, criminal actors are less likely to get caught, 
and if they do, they face lower penalties than compared to 
other serious crime, like drug and human trafficking.
    In a 2016 investigation in Tanzania, I was tracking the 
network of a high-profile Iranian operative and businessman. 
This individual and his network operated front companies that 
provided cover for drugs and ivory shipments. His network also 
used his corrupt political influence to secure uranium mining 
rights for a Russian company. By helping to procure the mining 
rights, this Iranian individual made more money and posed a 
greater threat to U.S. national security than the drugs he was 
also trafficking.
    Natural resources create a particularly difficult problem 
for law enforcement. At the most basic level, a major problem 
is simply the lack of knowledge and the ability to identify 
which shipments are legal and which are not.
    While illicit drugs are a high priority for law 
enforcement, who receive requisite training, access to experts, 
and specialized education, their understanding of natural 
resource trafficking is oftentimes spotty and inconsistent, 
even in cases when these resources are worth more than the 
drugs on the illicit market.
    This inconsistent training means natural resources can 
literally hide in plain sight and be used to comingle assets. 
If we want to thwart illicit finance, we need to take a more 
holistic approach looking at the business enterprise of the 
network and not leave money on the table.
    If you remember one thing I have said today, please let it 
be this: Transnational crime organizations operate like any 
other import and export business. Their focus is on moving 
products from one place to another as efficiently as possible, 
and they do not move just one commodity. However, our law 
enforcement system is organized by commodity. From the DEA to 
the ATF, to the Fish and Wildlife Service, enforcement 
officials are siloed by their authorities, expertise, and 
commodity.
    In order to be more efficient, our law enforcement teams 
ought to work to understand the entire range of goods smuggled 
by each network they target and then work to disrupt the 
systems that enable that network, systems like social media 
platforms that facilitate organized crime.
    CINTOC's research has uncovered organized crime groups 
using Facebook to market and sell illegally-sourced timber, 
elephant ivory, and even plots of land in the rainforest. This 
is just the tip of the iceberg. There are dozens of other 
groups engaged in resource crimes operating on Facebook, 
Instagram, and other platforms. Social media platforms provide 
a space for organized criminals to meet, market, and sell goods 
that is global, ungoverned, and largely anonymous.
    As Congress debates how to reform the laws governing 
cyberspace, I implore you to consider reforms to Section 230 of 
the Communications Decency Act that would remove the liability 
shield for tech platforms that host and enable criminal 
commerce.
    This cannot wait. We are already seeing how wildlife 
markets on social media platforms are accelerating the 
extinction risks of iconic and endangered species.
    CINTOC and our partners with the Alliance to Counter Crime 
Online recommend the following changes: stripping immunities 
for hosting terror and serious crime content; putting the onus 
on tech firms to monitor their platforms; regulating that firms 
must report crime and terror activity, along with the full data 
of the users who uploaded it to law enforcement; and 
appropriating resources to law enforcement to contend with this 
data.
    Distinguished subcommittee members, if it is illegal in 
real life, it should be illegal to host it online.
    Thank you for inviting me to speak today.
    [The prepared statement of Ms. Miles can be found on page 
116 of the appendix.]
    Chairman Himes. Thank you, Ms. Miles.
    Ms. Araya, you are now recognized for 5 minutes.

 STATEMENT OF KIDAN ARAYA, MEMBER, ILLICIT TRAFFICKING WORKING 
 GROUP, WOMEN OF COLOR ADVANCING PEACE AND SECURITY; AND BOARD 
            MEMBER, AFRICA POLICY ACCELERATOR, CSIS

    Ms. Araya. Chairman Himes, Ranking Member Barr, and 
distinguished members of the subcommittee, thank you for 
inviting me today to speak at this critically important 
hearing.
    My name is Kidan Araya, and I come here before you as 
someone who has researched and spent time listening to 
communities who have been negatively impacted by illicit 
natural resource governance in Africa. My expertise lies in 
illicit timber trafficking in Africa, but my testimony today 
will offer insight comparable to a variety of resources that 
are illicitly traded on the continent.
    Africa is often considered the continent with the highest 
concentration of natural resources but also the continent with 
some of the highest rates of illicit capital trade.
    The United Nations estimates that every year, nearly 89 
billion U.S. dollars of illicit capital leaves the continent. 
The African Development Bank estimates that the overall 
economic impact is 120 billion U.S. dollars per year for the 
illicit trade of natural resources specifically.
    Corruption and bribery are key drivers of what sustains 
illicit trafficking of natural resources and bolsters its 
existence. Illegal trade exploits governance weaknesses in 
countries across the supply chain and a lack of enforcement of 
laws and at ports in those countries.
    Natural resources often reside in impoverished local 
communities, oftentimes rural, where individuals are recruited 
to illegally extract resources with the usual promises of 
steady income or development. Illicit trade of natural 
resources also takes advantage of a lack of corporate 
transparency and resource traceability in Africa.
    The financial crimes committed resulting in lost tax 
revenue throughout the illicit trade of natural resources in 
Africa deserve attention. For example, tax evasion from gold in 
Africa alone was valued at an estimated $40 billion U.S., 
according to a United Nations report.
    The bribery and corruption that continues to fuel the 
illicit trade can often be cash-based or free gifts, making it 
difficult to trace. Africa stands out from other continents in 
that an overwhelming percentage, some estimate up to 95 
percent, of all transactions are made in cash.
    There are various financiers and beneficiaries of illicit 
natural resource trade, including corrupt regimes and terrorist 
and/or armed conflict groups. Such an example can be seen in 
The Gambia, West Africa. Yahya Jammeh, the former president of 
The Gambia was reportedly involved in running an illicit timber 
trafficking cartel in the country.
    During 2014 to 2017, an estimated $163 million worth of 
timber was illegally exported from The Gambia into China, with 
most of that considered to be conflict timber imported from 
neighboring Senegal, bound in territories controlled by a local 
terrorist group.
    Terrorist groups in Somalia and Mozambique have also 
reportedly used the illicit trade of natural resources such as 
charcoal, timber, and precious gems to finance their trade to 
varying degrees.
    It is important to note that illicit crime also robs 
individuals and communities of their ability to earn a fair 
living. Illicit trade is a term that we throw out there, but we 
need to remind ourselves that this is a transnational crime, it 
is dangerous activity, and the presence of this crime keeps 
communities in cycles of poverty, insecurity, and instability.
    I have spoken with young people who told me they got 
involved in the fight against illegal deforestation after 
witnessing the lack of opportunity in their communities drive 
their friends to seek out dangerous, often deadly, migration 
journeys for a better life.
    If these young people can risk their safety to speak out 
against illicit trade, sometimes in the presence of violent, 
corrupt, and very powerful entities, countries such as the U.S. 
can surely step up to do even more to end illicit trade in 
natural resources in Africa.
    There are policy opportunities to address this issue. The 
progress and actions that African countries are pursuing to 
reduce illicit trade in natural resources should be a part of 
the African Growth and Opportunity Act. Renewal conversations, 
especially for high-risk illicit trade countries, as tackling 
environmental crime and recovering much needed tax revenue, 
will significantly help accomplish bilateral goals of helping 
African states become economically independent.
    Aiding in anticorruption efforts abroad, and clearly 
communicating that policies such as the Global Magnitsky Act 
expand and apply to high-level individuals who are involved in 
facilitating environmental crime, could also be helpful.
    The U.S. can also bolster climate adoption financing and 
local community development projects, while encouraging 
international bodies to do so, and helping out communities who 
have been harmed environmentally and economically by illicit 
natural resource extraction.
    Illicit trafficking of natural resources in Africa benefits 
from being in the shadows and is oftentimes not discussed. I 
hope today can play an important role in changing that. Further 
analysis can be found in my written testimony.
    Thank you for your time today.
    [The prepared statement of Ms. Araya can be found on page 
36 of the appendix.]
    Chairman Himes. Thank you, Ms. Araya.
    Ms. Garcia Zendejas, you are now recognized for 5 minutes.

STATEMENT OF CARLA GARCIA ZENDEJAS, DIRECTOR, PEOPLE, LAND, AND 
  RESOURCES, CENTER FOR INTERNATIONAL ENVIRONMENTAL LAW (CIEL)

    Ms. Garcia Zendejas. Thank you, Chairman Himes and Ranking 
Member Barr, for the opportunity to appear before this 
subcommittee today. I am Carla Garcia Zendejas, director of 
people, land, and resources at the Center for International 
Environmental Law (CIEL), a nonprofit organization that uses 
the power of law to protect the environment, promote human 
rights, and ensure a just and sustainable society.
    Forests play a vital role in mitigating climate change, 
protecting biodiversity, and supporting the lives and 
livelihoods of indigenous peoples and local communities. 
Deforestation and forest degradation, driven by unsustainable 
and illegal logging, threaten the ability of forest ecosystems 
to fulfill these functions.
    For decades, CIEL has worked to reduce the demand of 
illegal and unsustainable timber using legal tools such as the 
Lacey Act, the European Union Timber Regulation, and the 
Convention on International Trade in Endangered Species 
(CITES).
    While communities worldwide facing deforestation experience 
many of these issues I will address today, I will focus my 
remarks on Peru, to offer an in-depth examination of the 
diversity of impacts that one country faces.
    Even with a concerted effort to improve forest management 
institutions, much with the financial and technical support of 
the United States, Peruvian forests and the communities that 
depend on them are still at great risk. Illegal logging in Peru 
has a direct consequence on many issues including climate 
change.
    In 2020, Peru experienced the highest rate of deforestation 
in 20 years. More than 500,000 acres were lost. Illegal logging 
and the illegality of the forest trade in Peru also serves as a 
primary driver of criminal activities that occur on the land 
where forests have been destroyed, often enabling criminal 
organizations to exploit the land once it has been clear cut.
    Illegal logging serves as a vector for violence, crime, 
corruption, and exploitation, targeting landowners, 
environmental defenders, and indigenous peoples. Illicit uses 
of the land include gold mining, and plantations for coconut 
and palm oil. Illegal gold mining is now the most profitable 
illicit activity in Peru, not drug trafficking.
    Criminal networks exist throughout the gold supply chain, 
and exporters have legitimate companies that serve to 
effectively launder the ore along the way. Illegal logging and 
its related international trade is considered the third-largest 
crime in the world.
    As CIEL uncovered in our 2019 report, ``Authorized to 
Steal,'' public officials enable criminal networks to harvest 
timber in the Peruvian Amazon illegally. Some of the violations 
are committed by organized crime networks comprised of forestry 
agents, public officials, and private corporations colluding to 
extract and sell illegally sourced wood.
    Our reporting on the Amazon regions of Loreto and Ucayali 
demonstrates that while improvements have been made in the 
Peruvian legal framework to allow for enhanced forest 
management systems, it is precisely these digital systems that 
are used by corrupt Peruvian forest officials, in conjunction 
with fraudulent timber harvest approvals, to foster criminal 
activity.
    And although Peru does impose criminal and administrative 
penalties on those involved in trafficking and selling 
illegally-logged wood, there is a lack of enforcement and 
prosecution of these crimes.
    Our investigation showed that laundering illegal timber 
with official documents can only occur with the involvement of 
public officials. In September, criminal charges were filed in 
the Yacu Kallpa case, the largest illegal logging case in 
Peru's history.
    Prosecutors are now seeking to hold more than 90 people 
responsible for falsifying documents and evading laws. These 
individuals are allegedly responsible for illegal logging and 
trafficking in $1.6 million of Amazonian wood, intended for 
export in the Dominican Republic, Mexico, and the United 
States.
    The criminal charges came only weeks after a U.S. district 
court for the District Court of Columbia decision announced 
that Global Plywood, responsible for purchasing an illegal 
shipment of wood bound for the U.S., pleaded guilty for 
violating the Lacey Act.
    Recent indictments are the result of the Operacion Amazonas 
investigation led in Peru by OSINFOR and the Peruvian Customs 
and Tax Authority. There has not been a similar operation since 
2015.
    The ensuing investigation led to the largest amount of 
illegal timber ever destroyed under the Lacey Act, with an 
agreement to destroy the larger shipment, worth approximately 
$1 million.
    I would also note that Peruvian officials, including a 
former head of OSINFOR, received death threats for their 
actions. OSINFOR was designed to increase transparency and 
combat corruption, yet the Peruvian government and the timber 
industry have strived to erode its independence and 
effectiveness.
    Another effective tool is the Annex on Forest Sector 
Governance of the U.S.-Peru Trade Agreement, which contains 
verification and enforcement measures. Using the Forest Annex, 
the Office of the United States Trade Representative (USTR) 
requested verification of timber shipments, then blocked the 
importation of timber from La Oroza in 2017, after illegalities 
were verified in Peru.
    The success of legal frameworks in halting illegal logging 
is dependent on whether companies believe the risk of 
prosecution outweigh the profits from illegal timber.
    To solve the ongoing crisis, the U.S. should continue to 
use the Lacey Act, the Forest Annex, and existing laws 
prohibiting the importation of illegally-harvested wood, while 
incorporating similar provisions into other legislation.
    Thank you.
    [The prepared statement of Ms. Garcia Zendejas can be found 
on page 92 of the appendix.]
    Chairman Himes. Thank you, Ms. Garcia Zendejas.
    Ms. Mavrellis, you are recognized for 5 minutes.

STATEMENT OF CHANNING MAVRELLIS, ILLICIT TRADE DIRECTOR, GLOBAL 
                      FINANCIAL INTEGRITY

    Ms. Mavrellis. Chairman Himes, Ranking Member Barr, and 
distinguished members of the subcommittee, it is an honor and a 
privilege to testify before you today.
    My testimony will focus on the intersection of natural 
resource exploitation and illicit state and nonstate actors, 
and provide an overview of the dynamics and threats and 
shortcomings in our response, as well as recommendations.
    Natural resources have long been used to finance conflict 
and crime. In fact, crimes involving natural resources can 
often be more problematic than traditional transnational crimes 
like drug trafficking, because the threshold for government 
corruption is very low, the risk of prosecution and punishment 
even lower, yet the rewards are comparable or even higher.
    Despite the magnitude of the value and the seriousness of 
the impacts, the conversation around conflict and the 
exploitation of natural resources in the U.S., as well as 
globally, has traditionally remained very narrow, typically 
directed at how tungsten, tin, tantalum, and gold, as well as 
diamonds, are used by armed rebel groups in Africa as a source 
of financing in their attempt to overthrow the state.
    This restricted focus ignores three important points. 
First, conflict can occur over access to any natural resource, 
and any natural resource can be used to fund conflict.
    Second, conflict is greater than civil wars between armed 
groups and the state. It can also involve conflicts between 
criminal organizations, terrorist groups, civil society, 
civilians, and the private sector, including violence as well 
as human rights abuses.
    Finally, conflict occurs on every continent, impacting both 
developed and developing countries. For example, as highlighted 
in Global Financial Integrity's recent report, ``Financial 
Crime in Latin America and the Caribbean,'' emeralds have been 
at the center of the major conflicts in Colombia since the 
1960s.
    The industry is mired with high-profile assassinations, the 
use of armed groups by emerald magnates to protect their 
interests from state and nonstate actors, as well as mines and 
mining companies owned by major drug trafficking organizations.
    For Equatorial Guinea, natural resources play an 
overwhelmingly large role in the economy, as well as financing 
the Obiang regime's looting. While the Minister of Agriculture 
and Forestry, now first Vice President Teodoro Nguema Obiang, 
had a government salary of $4,000 per month. However, during an 
8-year period, he spent more than $300 million on luxury real 
estate, vehicles, and goods. These funds came from enriching 
himself off of the country's natural resources, specifically 
forcing timber, oil, and gas companies which sought to operate 
in Equatorial Guinea to pay millions of dollars in bribes.
    Meanwhile, as noted by the State Department, the government 
continues to commit a wide range of significant human rights 
abuses.
    Research by secure fisheries and the U.N. Security Council 
has shown that illegal, unreported, and and unregulated (IUU) 
fishing by foreign vessels in Somali waters, primarily vessels 
from Iran, Yemen, and southeast Asia, is fueling public anger 
and perpetuating conflict, including piracy.
    Additionally, the Global Initiative Against Transnational 
Organized Crime has identified a potential overlap between the 
vessels, operators, owners, and agents involved in IUU fishing 
in Somalia and in arms trafficking from Iran to Somalia and 
Yemen.
    It is extremely important to stress that transnational 
crime, including the exploitation of natural resources, is not 
just conducted by transnational criminal organizations. As 
illustrated in the examples above, state actors such as rogue 
and kleptocratic regimes, as well as nonstate actors including 
armed groups, terrorist groups, and private sector businesses, 
also play a pivotal role in engaging in, facilitating, and 
perpetuating these activities.
    The Financial Action Task Force's recent report on 
environmental crime highlighted what many of us in this 
community have known for a long time: Corruption, trade-based 
fraud, shell and front companies, as well as gatekeepers, play 
a significant role in both facilitating these crimes as well as 
laundering the related proceeds.
    The use of natural resource exploitation as a funding 
source, either directly or indirectly, clearly allows rogue 
actors and their regimes to continue their activities and to 
further entrench their power, while generating conflicts.
    There is also a serious threat to U.S. businesses, as 
natural resource supply chains often provide poor visibility, 
presenting serious risks to the businesses and financial 
institutions directly and indirectly involved. Transparency in 
the sourcing of natural resources, particularly critical 
minerals, is also important to ensure the resiliency of 
American supply chains.
    Additionally, exploiting natural resources controlled by 
rogue regimes and actors presents huge financial and 
reputational and legal risks to businesses and investors. 
Similarly, it can create an unfair business advantage, as those 
companies that illegally produce and/or trade in natural 
resources have lower input costs.
    The following are my top three recommendations, with 
additional recommendations included in my written testimony.
    First, expand Section 1502 and reissue with Section 1504 of 
the Dodd-Frank Act to encompass a wider geographic and species 
commodity focus.
    Second, the Financial Crimes Enforcement Network (FinCEN) 
should interpret other similar entities in the Corporate 
Transparency Act to the broadest extent possible.
    Finally, Congress should extend Bank Secrecy Act/Anti-Money 
Laundering (BSA/AM)L obligations to gatekeepers that are 
currently uncovered or exempted, in particular, legal 
professionals, company formation agents, accountants, and real 
estate.
    Thank you, and I look forward to your questions.
    [The prepared statement of Ms. Mavrellis can be found on 
page 98 of the appendix.]
    Chairman Himes. Thank you, Ms. Mavrellis.
    And Mr. Fruth, you are recognized for 5 minutes.

  STATEMENT OF JOSHUA T. FRUTH, CO-FOUNDER AND CHIEF STRATEGY 
    OFFICER, SECTION 2 FINANCIAL INTELLIGENCE SOLUTIONS, LLC

    Mr. Fruth. Chairman Himes, Ranking Member Barr, and 
distinguished members of the subcommittee, I am honored to 
appear before you today to discuss how environmental crime in 
Afghanistan will enable China to choke off supply chains, and 
fund terrorists with attack ambitions, and how to employ 
humanitarian assistance and interagency soft power policy 
options to mitigate these threats.
    I am co-founder of Risk Consultancy Section 2, but I have 
spent my career in the intelligence community, law enforcement, 
and banking compliance fields as an AML director. I am here 
today as a private citizen.
    From 2018 to 2019, I deployed as a Department of Defense 
(DOD) contractor assigned to the Drug Enforcement 
Administration (DEA), embedded with U.S. Special Operations as 
the lead counter-threat finance adviser to two successive 
commanding generals of NATO Special Operations in Afghanistan, 
Major Generals Buck Elton and Chris Donahue.
    On November 1st, General Elton and I coauthored a White 
Paper that serves as the basis for my testimony today. It was 
submitted into the record.
    We argue that there are two types of environmental crime in 
Afghanistan with national security implications, including the 
drug trade and Chinese mining of rare earths.
    The Taliban have been involved in the opiates business for 
decades, but the Afghan drug trade recently changed for the 
worst. Around late 2017, the Taliban discovered a plant in the 
mountains of central Afghanistan, comprised of highly pure 
ephedra, which is used in the production of amphetamines.
    Within a year, they developed an industrial-scale crystal 
methamphetamine production infrastructure and earned more 
operating revenue than they had in the past 20 years in the 
heroin business.
    In mid-2019, a major U.S.- and Afghan-partnered operation 
destroyed the Taliban's methamphetamine trade, but they have 
since reconstituted that capability.
    At the end of that assignment, I authored a White Paper for 
U.S. Central Command on post-drawdown threat finance solutions, 
available by request to Members at a higher classification.
    Without global recognition or access to frozen funds, the 
Taliban could consolidate, professionalize, and industrialize 
the drug trade and become the world's largest drug cartel and 
narco terror state. Worst case, they could align themselves 
with Mexican cartels, due to their mutual Chinese 
interlocutors, supplying precursor chemicals and money-
laundering services. The drug trade has killed more Americans 
than the war on terror, and it is likely those profits will be 
used to fund additional attacks.
    Under the protection of a narco terror state, supported by 
foreign intelligence agencies, armed with American weapons, and 
funded by drugs and Chinese mining operations, U.S. officials 
are correct in their assessment that ISIS-K and al-Qaida may 
have the capability to attack the homeland in just 6 to 12 
months. They may exploit our porous southern border undercover 
as refugees fleeing Afghanistan's humanitarian crisis. Without 
positive identification, pockets of ungoverned spaces emerge 
for terrorists to exploit poor population resource controls and 
develop U.S. operating bases for attack planning.
    The most serious environmental issue in Afghanistan is a 
hybrid threat financial facilitation network built around China 
extracting rare minerals. We assess they have incentivized 
Pakistan to manage and pay off Afghan terror groups to mitigate 
risks to mining.
    Afghanistan is known as the Saudi Arabia of lithium, with 
1.4 million metric tons of rare earths worth over a trillion 
dollars. Many of these are used to produce lithium ion 
batteries for electric cars.
    Neodymium is used in magnets that dramatically extend the 
driving range of EV batteries. On September 21st, the 
Department of Commerce initiated an investigation into the 
national security impacts of neodymium magnet imports.
    If China gains control of Afghanistan's neodymium, lithium, 
cobalt, and dysprosium deposits, it threatens the American auto 
industry as we rapidly transition to electrification.
    China is undercutting us in other rare earth markets, and 
our domestic deposits can't keep up with our demands. We import 
80 percent of our rare earths from China, but only 23 percent 
of our oil from the Middle East. The Organization of the 
Petroleum Exporting Countries (OPEC) accounts for 40 percent of 
the world's oil, while China represents 75 percent of global 
lithium-ion battery cell capacity, compared to America's 7 
percent.
    If China seizes Afghanistan's rare earths and Taiwan's 
semiconductor industry, it could choke off technology supply 
chains for military, diplomatic, and trade leverage.
    Beijing is expanding their space-, land-, and sea-based 
telecommunications infrastructure, flooding the market with 
Huawei and ZTE hardware. Once they control the rare earth 
source materials, emerging technologies, hardware, and 5G 
infrastructure, they can collect intelligence on end users 
around the world, while concurrently controlling the 
information environment to China's benefit.
    We provided policy recommendations in the White Paper for 
how to employ noncombat interagency authorities and 
capabilities to counter these risks. However, these solutions 
are contingent on evacuating the estimated 14,000 U.S. 
permanent legal residents, Afghan Special Immigrant Visa (SIV) 
allies, and underserved population groups.
    We face a ripe environment for high-value hostage-taking 
and humanitarian abuses, and anticipate that China and Pakistan 
may use these matters as negotiating leverage to weaken our 
disruption efforts.
    Failure to act could also diminish our credibility with 
partners and surrogate intelligence networks whom we need to 
execute these objectives. We recommend leveraging medical and 
food aid to facilitate evacuation operations, thereby avoiding 
direct terrorist financing, while also reminding the Afghan 
people how sharply our values contrast with those of the 
Taliban.
    While our combat mission is over, our national security 
challenges in Afghanistan have only just begun. We can debate 
the merits of our past decisions at any time, but there is only 
one time to resolve the issues of the present, and that time is 
now.
    [The prepared statement of Mr. Fruth can be found on page 
48 of the appendix.]
    Chairman Himes. Thank you, Mr. Fruth.
    I now recognize myself for 5 minutes for questions.
    Ms. Miles, let me start with you. I was intrigued by your 
proposal of removing Section 230 protections. There is 
obviously precedent for that with respect to prostitution.
    My first question about that is, given the vast array--we 
have heard a lot of examples here today--if we could snap our 
fingers, which we can't, but if we could snap our fingers and 
remove the civil liability protection in 230 for trade in 
illicit goods, would we be talking about a very substantial 
attack on this trade or would it be marginal?
    Ms. Miles. We believe it to be pretty substantial. We see a 
lot of connection between organized crime groups across 
different continents, whether they are in South America, 
messaging and working with people in Africa or Asia. We believe 
that by attacking the social media systems that are helping to 
propagate this crime, we would have a pretty substantial impact 
on the overall crime networks.
    Chairman Himes. And the social media platforms have been 
discussed lately here. I wonder if you could anticipate what 
their objections would be in this narrow realm, and whether or 
not you believe those objections would be meritorious? 
Obviously, we have done this before, so I am just wondering, 
what would that dynamic look like with the platforms?
    Ms. Miles. I think the platforms are concerned about 
opening up liability. They don't want to be sued every time 
someone sells a joint on Facebook. And so, we can keep the 
liability tailored to say, serious organized crime, people 
engaged in moving metric tons of drugs, people engaged in human 
trafficking--these are serious crimes that we can all agree 
on--to mitigate liability from smaller crimes that are harder 
to police on the platform.
    I would also say that I think Facebook in particular spent 
a lot of time recently talking about how much they are dealing 
with organized crime on their platform, and I would like to 
remind everyone that they have only spent 4 percent of their 
annual revenue over 5 years, and they have spent almost 20 
percent on public relations.
    Chairman Himes. Thank you. I appreciate that.
    This question is for Mr. Fruth to start with, but then I 
will open it up. I happen to sit on the Select Committee on 
Intelligence as well, and I wonder--I will start with Mr. 
Fruth, because he may have the most direct experience, but I'll 
open it up afterwards.
    In as much as their activities are visible, is the 
intelligence community (IC) sufficiently focused on this 
threat? And let me expand it beyond the intelligence community 
to include law enforcement. We haven't heard a lot more about 
what the IC and law enforcement could do in addition to what 
they are doing today.
    Mr. Fruth?
    Mr. Fruth. Thank you, Mr. Chairman, for the question. I 
think that we have certainly transitioned away from a counter 
insurgency environment to incorporate more of an emphasis on 
great power competition, and I take that to encompass China, 
Russia, Iran, and to a lesser extent, other jurisdictions as 
well.
    I do think that the geographic combatant command area of 
responsibility emphasis where it is geographic in nature, could 
potentially silo us in some places where we could potentially 
be focused more functionally on the problem set pertaining to 
China. But I do think we have made more of a shift in the last 
few years in that direction.
    Chairman Himes. Thank you. I appreciate that.
    Do any of the other witnesses have a view on the question 
of whether the IC and the law enforcement sector could be doing 
more, and if so, how?
    Ms. Miles?
    Ms. Miles. I really think, from my experience both working 
in the intelligence community and with Federal law enforcement 
and outside of it, we really need to have more people working 
cross-function and cross-region. When you are talking about 
someplace like China, for some reason, our China experts focus 
on China. We need to have China experts focusing on 
Afghanistan, Africa, South America, and North America. By 
bringing and marrying functional and regional experts, we can 
have a more holistic approach of dealing with the problems.
    Chairman Himes. Thank you, I appreciate that.
    For my last question, I think, let me target it at Ms. 
Araya and Ms. Garcia Zendejas. Another area we haven't talked a 
bunch about is consumer preference. We see consumers really 
driving change in areas like electric vehicles and that sort of 
thing.
    What can we do, narrowly speaking, Congress--and I point at 
you because you talked about things that go into consumer 
products like wood, that sort of thing--what can we to do as 
Congress or what can we do more broadly as a society to really 
raise the awareness amongst consumers about how they might 
participate in tamping down this trade?
    Ms. Araya. Thank you, Mr. Chairman. I think one way that we 
could do that is to promote the transparency and to let 
consumers know that this is going on. Many times when I have 
talked to people about my work with illicit timber trafficking, 
or the stories that communities have shared with me about how 
they are exploited, many of my friends in the United States 
have no idea that is what is going on.
    And I also think that another way to do that effectively is 
to celebrate companies who are doing the right thing and who 
are being transparent in their supply chains. And that is 
something that I think Congress could uplift and let the 
American people know that these are the companies that we 
should be looking to seek business with.
    Chairman Himes. Okay. Ms. Garcia Zendejas, I am out of 
time, so very quickly.
    Ms. Garcia Zendejas. I think it goes into the same point of 
highlighting those that do good, and actually pointing out 
those who don't, in a more public setting, because few people 
are aware of the Lacey Act and what the Lacey Act can do, but 
knowing that USTR is doing great things is something that 
should be promoted.
    Chairman Himes. Thank you. Thanks very much.
    I now recognize the distinguished ranking member of the 
subcommittee, Mr. Barr, for 5 minutes of questions.
    Mr. Barr. I thank my friend, the chairman, again, for his 
leadership in holding this hearing. And I really appreciate the 
excellent testimony and insights of our witnesses.
    I want to continue to hone in on China. We all know that 
China has a long-term strategy and a multi-pronged approach to 
usurp the United States as the preeminent global superpower. 
Within the purview of today's hearing, we have heard that China 
is seeking to secure and cut off key elements of the supply 
chain, including rare earth elements that make everyday 
technology possible.
    Mr. Fruth, in a post-drawdown Afghanistan, how are the 
Chinese exploiting the rise of the Taliban to secure rare earth 
elements in the country, what is the intel on that, and can you 
elaborate on the relationship between the Chinese and Taliban 
forces and other terrorist groups, perhaps, as it relates to 
natural resource extraction?
    Mr. Fruth. Thank you for the question. I think that, first 
and foremost, China wants to get rare earths from anywhere it 
can. It doesn't matter if it is DRC, Australia, Brazil--they 
will choke us out of any market they can.
    Afghanistan, however, is an absolute treasure trove as it 
pertains to rare earths. I think that the Chinese, amongst 
Pakistan, were the first to recognize the legitimacy of the 
Taliban Islamic Emirate regime, and I think that China and 
Pakistan have complementary needs.
    The Taliban want the recognition, they want the 
humanitarian aid, and they need money and assistance in 
governance. China is interested in the China-Pakistan economic 
corridor, their Belt and Road Initiative, the rare earths, and 
obviously they want security for their mining operations. So, I 
think they are going to employ Pakistan and the Taliban to 
essentially manage all of the other insurgent groups in 
Afghanistan, to ensure that there is a secure environment for 
them.
    In terms of the other terrorist groups, obviously we have 
seen a connection between the Taliban and al-Qaida and Haqqani 
over history. However, we saw the Taliban and ISIS-K fighting 
up and through 2019 when the Taliban nearly obliterated ISIS-K, 
pushed them through Nangarhar into the Peshawar in Pakistan. We 
assess that the situation has changed. There is an old saying 
in Afghanistan about, ``turning your turban,'' which is 
essentially a local reference to changing your loyalties to 
favor the victor.
    We in the West oftentimes simplify these groups, but there 
are a lot of gray areas in Afghanistan. A lot of ISIS-K members 
may actually be working as proxies for the Taliban right now.
    Mr. Barr. Let's talk about electric vehicles (EVs) and rare 
earth in that context. Afghanistan is home to key deposits of 
lithium and neodymium, two key elements in the creation of 
batteries for emerging technology, including EVs. With the fall 
of the Afghan government, and China's likely emerging 
partnership with the Taliban, they will be able to harvest and 
exclude from the market key stores of these materials.
    Again, Mr. Fruth, what impact might this have on the U.S. 
auto industry, specifically in the context of a growing shift 
to electric vehicles?
    Mr. Fruth. Well, a couple of things. I think, number one, 
transportation is one of our 16 components of critical 
infrastructure. So, I think the most immediate concern that I 
have is the supply chain issues. If they can choke off the 
market and hold the American auto industry hostage, that could 
apply negotiating leverage in other policy matters.
    I think beyond that, I am worried from a cybersecurity 
perspective about vulnerabilities that could emanate from China 
making components that go into these vehicles, particularly as 
they make gains in the autonomous and quantum and AI fields.
    Mr. Barr. This is what I meant when I said in my opening 
statement that the national security strategy of abandoning 
Afghanistan could be in direct conflict with the 
Administration's climate goals and move toward EVs.
    Let's talk about the geology of Afghanistan really quickly. 
The United States has conducted geological surveys of 
Afghanistan, identifying stores of valuable natural resources.
    Mr. Fruth, I recognize that you are not a geologist, but 
you have focused on great power competition, including as it 
relates to China. What might be the impact if those U.S. 
Government geological surveys become available to the Taliban, 
and/or the Chinese if they engage in partnerships with the 
Taliban, for resource extraction?
    Mr. Fruth. Thank you for the question, and thank you for 
the point that I am not a geologist or a scientist. But I would 
say that effectively, it improves the conditions for China to 
exploit Afghanistan's rare minerals.
    They are mapped better. I think the airfields have been 
improved dramatically in the 20 years that we have been there. 
They can pull copper from Mes Aynak. They can pull gold and 
rare earths from Ghazni, Kandahar, Nimruz, and Herat. And then 
they can drive down from Nimruz and Farah. They can drive down 
the Pakistan-Iran border to the port of Gwadar for 
international shipping or they can just go through Badakhshan 
as part of their Belt and Road Initiative into China.
    Mr. Barr. My time is running out, but in the White Paper, 
you allude to a collaboration with Pakistan. Can you elaborate 
on Pakistan's goals through the relationship with China and 
Afghanistan?
    Mr. Fruth. Sure. Pakistan is essentially acting as an 
intermediary between China and these Sunni terror groups. They 
are financially incentivized by China to do so. They are in a 
difficult current economic state. They are reliant on their 
loans from the IMF with quarterly periodic reviews and 
disbursement periods, and they are FATF grey-listed.
    So, I think that one of the ways to potentially combat this 
is to apply financial pressure on Pakistan as the gatekeeper of 
this hybrid threat network that includes China and four Sunni 
terror groups.
    Mr. Barr. Thank you. I yield back.
    Chairman Himes. The gentleman yields back.
    The gentleman from New York, Mr. Torres, is now recognized 
for 5 minutes.
    Mr. Torres. Thank you, Mr. Chairman.
    Mr. Fruth, I actually found your testimony to be 
terrifying. I have felt for a long time that one of the 
greatest national security threats to the United States is our 
dependency for advanced semiconductors on Taiwan, which is at 
ever-rising risk of an invasion from China. And China is facing 
a demographic crisis and could become more provocative and 
desperate over time.
    Do you see the risk of China controlling rare materials in 
Afghanistan comparable to the risk of China controlling 
semiconductors in Taiwan? Do you see them as comparable 
national security threats?
    Mr. Fruth. Representative Torres, that is an excellent 
question. I actually don't even see them in that respect. I see 
them as two parts of the same plan. I think they want to seize 
Afghanistan for the rare earths, and they want to seize Taiwan 
for, not only the semiconductors, but also the silicon.
    Mr. Torres. So, how do we address it? Because it is not 
clear to me what the solution is.
    Mr. Fruth. I agree with the other witness who had mentioned 
that this is a functional problem set versus a geographic 
problem set. So, I think we can't silo ourselves.
    I think if we are in a post-drawdown environment and we 
know that military options, at least from a combat perspective, 
aren't on the table, I do think there are options that I have 
laid out in the White Paper that I submitted into my testimony 
for interagency capabilities and authorities, and also with our 
other host nation mission partners that we had in the past and 
our allies to apply pressure through the Departments of 
Commerce, Treasury, and State, and through other elements of 
DOD, to combat both of these threats.
    But I think we just need to understand the geostrategic 
implications of China trying to secure the semiconductors and 
the rare earths, in terms of controlling the supply chains, as 
well as laying the infrastructure for telecommunications. 
Because their goal is to control the hearts and minds of 
Americans and others around the world by controlling the 
telecommunications business, as well as the information 
environment, through psychological operations and deception.
    Mr. Torres. Ms. Miles, I was struck by your testimony. If I 
understood your testimony correctly, the enforcement apparatus 
of the United States is too siloed, focusing on particular 
commodities and particular criminals. But you seem to think 
that we need to take a more systemic approach to enforcement, 
focusing on the supply chain, which is agnostic about 
particular commodities. So, what should we do to break down the 
silos that prevent effective enforcement?
    Ms. Miles. Thank you so much for your question. I really 
think that to effectively address the silos, you kind of have 
to start breaking it down and breaking down specifically the 
groups inside the U.S. Federal Government that focus commodity-
based and putting them into task forces, putting them into 
groups, and enabling those groups to leverage all 18 
intelligence communities' authorities, all 18 intelligence 
communities' knowledge, to systematically go after networks.
    And then, I think simultaneously, you really have to take a 
look at strengthening some of the banking laws around 
transparency and strengthening the laws around technology.
    We are seeing a globalization, especially on social media 
platforms, of organized crime, and if we don't get our hands 
around how these groups are interacting with each other in 
cyberspace, we are never going to be able to combat them.
    Mr. Torres. But it sounds like we need either a new entity 
or an interagency task force specifically focused on illicit 
natural resource extraction, because it spans across multiple 
jurisdictions--enforcement jurisdictions.
    Ms. Miles. Yes.
    Mr. Torres. Okay. Ms. Mavrellis, as you know, there can be 
a direct line that runs from illicit natural resource 
extraction to international supply chains to the shelves of 
U.S. retail stores.
    If you are an American business and you become aware that 
your supply chains are entangled with illicit natural resource 
extraction, what are your legal obligations? What happens when 
you fail to meet those legal obligations? And a third question 
would be, are most businesses even aware of their entanglement 
with illicit natural resource extraction?
    Ms. Mavrellis. Thank you for the question. I am going to 
address your last question first. I think you have to recognize 
that there are those businesses that knowingly choose to do 
this, and there are those that don't really understand what 
they are getting involved in.
    What I would recommend is, and it is based more for 
terrorism, but the Customs Trade Partnership Against Terrorism 
(CTPAT) could be really well-used and expanded to looking at 
natural resource supply chains. It requires businesses in the 
U.S. who want to have essentially kind of a preferred status 
with Customs and Border Protection (CBP) to introduce due 
diligence programs. They recently introduced regulations or 
requirements to have trade-based money laundering programs 
within these companies to better understand that, Hey, if I am 
selling a good overseas, and I am getting payments in cash for 
this, or I am getting payments from third parties, this is a 
red flag indicator.
    So, I think there is a lot more we can do from the private-
sector side as well as--sorry--from kind of the CBP side, from 
the USTR side, in terms of promoting these programs for 
businesses that use or engage in natural resources.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Ohio, Mr. Davidson, is recognized for 5 
minutes.
    Mr. Davidson. Thank you, Mr. Chairman. Thank you to our 
witnesses, and I really appreciate the focus on China in 
particular.
    Ms. Miles, your construction is so important and, frankly, 
would be so relevant here in Congress. Often we focus in silos 
or committees of jurisdiction instead of focusing on problems. 
And if you want to solve a problem, generally you align 
authority, responsibility, and accountability, and we have to 
do that within our government for a whole-of-government 
approach, whether it is China or solving illicit finance, for 
example.
    When we look at finance, a lot of times we focus on the 
banking system or the payment system. In America, we have our 
traditional banking system. We have some derivatives of money 
services businesses. But over the course of the war on terror, 
we had to confront alternative payment systems like hawala 
networks.
    Right now, in fintech, we are confronting cryptocurrencies, 
and people don't understand crypto right now, just like lots of 
people still don't understand hawala.
    Mr. Fruth, you have had to solve this problem of illicit 
finance and the bad actors regardless of how the system moves. 
Can you offer any insights on following the money?
    Mr. Fruth. I appreciate the question, Congressman. I don't 
think there is anything nefarious about cryptocurrency. I think 
when we deal with bad actors, they are going to exploit fiat 
currency, they are going to exploit cryptocurrency; it is just 
one mechanism or another.
    I will say that we are seeing cryptocurrency being 
exploited by both transnational criminal organizations as well 
as terrorist groups.
    Thinking back to August of last year, DOJ announced over 
300 cryptocurrency wallets associated with ISIS, al-Qaida, and 
Hamas. Of course, we know that ISIS-K and al-Qaida are present 
in Afghanistan. They have external operations attack ambitions 
against the West. And we have seen a nexus, for example, with 
the cartels and Chinese financial facilitators, utilizing 
cryptocurrency, operating in the casino business. So, we may 
see those two different typologies meet, if we have an EXOPs 
threat of those Sunni insurgent groups coming to the United 
States.
    But I would say that there is nothing inherently wrong with 
cryptocurrency. It is just one stage in a multi-pronged, 
layering process that we would see that incorporates both fiat 
and cryptocurrency.
    Mr. Davidson. Yes, thank you. And a lot of times, people 
come up with solutions that go macro. And I think about Dodd-
Frank's conflict minerals reporting requirement.
    Prior to coming to Congress, I was in manufacturing, and we 
would fill out conflict minerals reports on tin, for example, 
because it is a component that goes into steel. I had a little 
metal stamping company in Ohio, but I was required to fill this 
out, and I can assure you, we didn't have the resources or even 
access to the resources to figure out whether U.S. Steel--how 
they source their metal or make it or whatever. But we had all 
of these reporting requirements.
    I don't think it was really focused on solving the problem, 
but it had a macroeconomic impact on small businesses all over 
America.
    The conflict minerals were coming in at the border, so the 
companies that were the importers of record could be used. And 
we also have tools that help focus that, like sanctions, not so 
much passive things like forcing the Securities and Exchange 
Commission to be a regulatory body, but actually things with 
teeth and power that use resources to get at it like the Office 
of Foreign Assets Control (OFAC) and our sanctions regimes.
    So as you think about that, Mr. Fruth, you are not a 
financial regulator, but to talk about this in the United 
States with crypto markets, there are folks who want to 
outright ban all of this technology in order to stop the 
possibility that somebody would use it in illicit finance.
    Thankfully, we haven't done that to the U.S. dollar, but 
could you highlight the right way to focus on the root problem 
of illicit use?
    Mr. Fruth. I don't know that it is a regulatory issue per 
se as much as it is a resource allocation issue. I am a 
certified cryptocurrency investigator. I have worked some 
interesting cryptocurrency cases.
    In 2018, I wrote an article for Reuters entitled, ``Crypto-
cleansing,'' which was the basis of how a lot of folks in the 
AML business came to understand the art of the. ``how,'' in 
terms of how to launder money through cryptocurrency.
    Again, I would say that, right now, it is an education 
issue, having a common operating picture across public and 
private sector partners with equities in the problem set versus 
a regulatory issue. That is not to say that there isn't a 
regulatory framework needed to help support cryptocurrency, 
but, again, I don't think there is anything innately nefarious 
about cryptocurrency. There is a public ledger of transactions.
    There are ways to obfuscate that, such as going through 
mixers or homomorphic-encrypted, note-to-note encrypted privacy 
coins. But generally speaking, I think it is just one component 
or stage within a money-laundering process that is going to 
include fiat currency anyway.
    Mr. Davidson. Thank you. I look forward to scheduling a 
subsequent briefing about the classified nature of China's 
extraction of rare earth minerals in Afghanistan.
    And I yield back.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Massachusetts, Mr. Auchincloss, who is 
also the Vice Chair of the Full Committee, is now recognized 
for 5 minutes.
    Mr. Auchincloss. Thank you, Mr. Chairman.
    I want to focus on Afghanistan. Following the drawdown, 
there are really three imperatives, I think. One is to prevent 
the rise of a narco terror state in Afghanistan, and Mr. Fruth, 
you have outlined that, I think quite compellingly, in your 
testimony.
    The second is to provide the conditions for economic 
development and humanitarian protections in this country, and 
that is perhaps the most urgent, given the starvation and 
privations being faced by a majority of the population this 
coming winter.
    And, finally, to counter the Chinese Communist Party's 
hegemony over rare earth element mining that is going to propel 
its dominance in energy and information technology, and that 
would actually increase the strategic value of Taiwan to it, to 
create that synergistic value that, Mr. Fruth, you again have 
outlined.
    And it strikes me that a lot of the approaches being put 
forward right now to meet those three imperatives are very 
defensive, and they are very focused on governmental solutions. 
And I would offer that really we need to be a little bit more 
proactive and leaning into public-private partnerships here in 
that we could be pushing forward for our own responsible rare 
earth element mining in Afghanistan, first at Mes Aynak and 
then elsewhere.
    This would short-circuit the rise of a narco terror state 
by creating a licit economy that is distinct from the illicit 
one. This could disrupt the Chinese Communist Party's attempts 
to gain hegemony over rare earth elements (REE) mining in 
Central Asia, and it could create revenue streams that, if 
properly framed, could be reinvested into the population and 
into physical infrastructure in the country. There are a lot of 
challenges to do in that: commercial; diplomatic; security; and 
legal.
    And starting with you, Ms. Garcia Zendejas, I am wondering 
if I could hear from the panel about what lessons we might draw 
from responsible mining practices in Africa, from the 
establishment of special economic zones globally, or how we 
might think about being proactive in Afghanistan for NATO-
domiciled companies to start looking to invest there, so that 
we are the ones establishing working protections, we are the 
ones establishing control over the rare earth elements, that we 
are the ones establishing revenue streams that are fed back 
into the population as opposed to being siphoned off by a 
kleptocracy. How can we go about framing this so that it is a 
triple-line win?
    Ms. Garcia Zendejas. Thank you. Thank you for the question. 
I would like to speak a bit about Colombia to respond to your 
question.
    There are legitimate infrastructure development projects in 
Colombia, many of which have been funded by the Inter-American 
Development Bank, where the U.S. has approved and supported 
these investments, for example, of the Hidroituango, the 
largest dam in Colombia.
    The communities there have been fighting against this dam, 
unfortunately, because it is in the middle of a conflict zone 
where the FARC and drug traffickers are still very much 
entrenched. There are mining interests that are both legal and 
illegal that are part of this area also.
    Just a few days ago, the leader of the Cartel Del Golfo was 
arrested and may be extradited to the United States. That 
cartel has been controlling that area, so they have been 
supporting and trying to kill indigenous and environmental 
defenders who oppose this dam project and who oppose legal 
projects.
    Mr. Auchincloss. So, what is the lesson for Afghanistan 
from this?
    Ms. Garcia Zendejas. The lesson for Afghanistan is that, 
even with legitimate development projects, if you do not take 
care of assessing the contextual risk in the situation, you 
will only exacerbate the situation of human rights violations.
    There needs to be a solid ground where communities and all 
of the risks that are in place are assessed, and due diligence 
is required, so any public-private partnership can come into a 
somewhat stable situation.
    Mr. Auchincloss. In my final 20 seconds, Mr. Fruth?
    Mr. Fruth. I don't think there is any chance that China and 
Pakistan will allow us into Afghanistan to engage in any type 
of mining contracts.
    Mr. Auchincloss. I yield back.
    Chairman Himes. The gentleman yields back.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman.
    Every question I get from my constituents regarding 
national security has to do with the Biden Administration's 
disastrous Afghanistan withdrawal. In order to satisfy their 
arbitrary deadline, we rushed out of the country without any 
cohesive strategy. American soldiers lost their lives, American 
citizens are still stranded in the Taliban-controlled capital, 
and we left military equipment in the hands of a deadly 
terrorist group.
    We surrendered all of our leverage that would allow us to 
monitor the Taliban's activities as they look to rebuild and 
monetize their drug networks to carry out attacks across the 
globe. So, it was an inexcusable blunder that will be a stain 
on President Biden for the rest of history.
    Mr. Fruth, my question is, given your experience on the 
ground in Afghanistan, I want to get your thoughts on this 
debacle, and can you describe what you think the long-term 
national security consequences will be from these actions?
    Mr. Fruth. Thank you for the question. I think, from my 
perspective as an intelligence professional, I am just looking 
at the current state environment and the future state rather 
than looking backwards.
    I would say that I would concur that we need to get our 
folks out of the country, as well as our Afghan SIV allies. I 
think we also need to look out for disenfranchised and 
vulnerable populations in Afghanistan as well, so that in a 
future state, because we are not going to be there militarily, 
if we want to utilize all of our soft power interagency 
capabilities and authorities to deter the unholy alliance 
between China, Pakistan, and various terrorist groups in the 
country, I think in order to do that, we need to make sure that 
a robust kidnap-for-ransom environment isn't used by our near-
peer state adversaries as a means of negotiation that undercuts 
and undermines our negotiating leverage and disruption efforts.
    Mr. Williams of Texas. It seems like many of my Democrat 
colleagues want to turn a blind eye to the absolute disaster at 
the southern border that the Biden Administration has caused. 
And I live in Texas.
    Over 2 million people have illegally crossed into our 
country in 2021 alone, and we have no idea, absolutely no idea, 
how many others have evaded Border Patrol and are currently 
residing in our country illegally.
    Instead of trying to stop the surge of illegal entries into 
our country, Democrats are trying to incentivize even more 
people to come in. The Biden Administration wants to pay an 
unbelievable amount of money, almost half-a-million dollars 
each, to individuals who were separated at the border, when 
they made the choice to enter the country illegally.
    This is more money than some of the families of 9/11 
receive, and it is disgraceful. There is also over a hundred 
billion dollars earmarked in the Build Back Better scam just 
for illegal immigrants, which would be paid for by raising 
taxes on small business. So, instead of stopping the flood of 
people coming to our country, the Democrats are incentivizing 
more to show up.
    Mr. Fruth, again, can you talk about the national security 
implications of having the southern border as porous as it has 
ever, ever been?
    Mr. Fruth. Thank you for the question, Congressman. I think 
my main concern with a porous border isn't the 2 million people 
a year or what have you; it is the 400,000 to 500,000 people 
that CBP would call, ``got-aways.'' A got-away is somebody that 
maybe we picked up on the camera and took a picture of, but we 
have never identified or spoken to them and we don't know who 
they are.
    I think the popular misconception is that folks crossing 
the border, the migrants, are from three or four different 
countries. That is just not true. They are from 150 different 
countries. So, we don't know if they are narcos, sex 
traffickers, foreign intelligence officers, or terrorists.
    Also, we are in an environment where we have an ongoing 
pandemic, and I am concerned that we don't know if these folks 
are vaccinated, we don't know if they are exhibiting symptoms, 
and that concerns me as well.
    But back to the kind of main components of those risks. 
From a narcotics perspective, we know that we have a fentanyl 
murder epidemic in this country. It is absolutely a murder 
epidemic. It involves China and it involves the Mexican 
cartels. They are putting the fentanyl in other powders in 
Mexico, and they are actually starting to professionally press 
the counterfeit pills in this country. So, they are embedding 
their operatives in this country.
    Just this past week, we had an active ISIS threat here in 
Northern Virginia, just down the street from where I live. So, 
obviously, I am concerned about those folks crossing the 
border, particularly in light of the Under Secretary of Defense 
for Policy saying that they could be here in 6 to 12 months.
    I am also concerned about sex traffickers. We know that 
folks who are crossing the border with the coyotes, the 
smugglers, oftentimes are forced to pay for their smuggling 
through debt servitude and sexual exploitation. And, of course, 
we are concerned about foreign intelligence officers from a 
number of different jurisdictions penetrating our borders.
    Mr. Williams of Texas. How about that half-a-million 
dollars going to people who are breaking the law? What do you 
think about that, quickly? Do you think that is a good idea?
    Mr. Fruth. I don't have any feedback on that, Congressman.
    Mr. Williams of Texas. I have a lot of feedback. It is not 
good.
    I yield back.
    Chairman Himes. The gentleman yields back.
    The gentlewoman from Pennsylvania, Ms. Dean, is recognized 
for 5 minutes.
    Ms. Dean. Thank you, Mr. Chairman. And I thank our 
witnesses for coming today and testifying before us.
    An issue that is close to my heart is protecting endangered 
and at-risk wildlife. I care a lot about elephant slaughter for 
the illegal trade of ivory, and other wildlife trafficking. 
And, therefore, I want to do anything we can to combat that.
    Ms. Miles, I would like to start with you. How do criminal 
enterprises or rogue actors take advantage of, and profit from, 
wildlife trafficking? And do they avoid law enforcement 
scrutiny of their operations through the trafficking of 
wildlife?
    Ms. Miles. Thank you so much for your question. Typically, 
in my experience, people who are trafficking wildlife, 
especially the people who are able to take elephant ivory off 
the Continent of Africa and transport it across continents into 
Asia and into markets for selling, are organized criminals. And 
they don't care what is in the box. Whether it is heroin or 
ivory, they have created corrupted pathways that allow them to 
bring illicit goods from the supply to market.
    I think when we really want to talk about how to solve the 
ivory trade issue, we have to be looking at, where do these 
routes already exist, how are we moving drugs, how are we 
moving timber, how are we moving every other resource, and 
attack the network across every single commodity that they are 
trafficking.
    Ms. Dean. So, we have to check and understand the routes, 
and interfere and disrupt the routes, and the network that is 
going on?
    Ms. Miles. Yes.
    Ms. Dean. In addition to that, just last week, I led a 
letter with a bipartisan group of my colleagues urging the 
Japanese government to close the country's domestic legal ivory 
market. So, I am hoping that part of the solution would be to 
stop the marketing at other countries, in other locations.
    One of my gravest concerns is that the legal ivory market 
complicates enforcement efforts for illegal ivory poaching by 
creating something of a gray market where illegally trafficked 
items are mixed in with legal items. Do you have a comment on 
that?
    Ms. Miles. Yes. We see that all the time, the commingling 
of licit and illicit goods. It works well to do it with ivory 
but also with other items as well.
    Ms. Dean. Thank you.
    Ms. Araya and Ms. Zendejas, are there other instances where 
illegal wildlife trafficking is mixed into legal commerce 
because of the existence of an open market in a specific 
country?
    Ms. Araya?
    Ms. Araya. Thank you, Congresswoman, for the question. Yes, 
there is. And I would like to use my time to also state that a 
key way to combat both wildlife trafficking and the mixture of 
licit goods with illicit goods is supporting African 
governments in fighting this crime.
    As other witnesses have stated, there is the transnational 
crime, and there needs to be work done in the countries that 
are demanding these resources, and there also needs to be work 
done in the countries that are exporting this. And we have 
talked about corruption and bribery and how that has made it 
difficult for this trade to stop, but there are African 
countries that do want to do the right thing. One example of 
that is Gabon, which actually has an ivory trade, and has 
spoken out against forest crimes where traffickers not only 
illegally deforest the forest, but they take away the ivory of 
elephants.
    I think allowing those champions to know that they are 
supported by the U.S., and to have a strengthened bilateral 
enforcement can also prove as an example to other African 
countries that this is possible, that they can receive the 
support, that they can stop this. And I think that will have a 
big impact, because if it is not allowed to leave the 
continent, then these transnational criminals don't have a 
business.
    Ms. Dean. I really appreciate your pointing that out, that 
there are countries of origin that want to interfere and 
disrupt this corrupt, illicit, illegal, and inhumane trade. 
Thank you for pointing that out and, of course, the country of 
Gabon.
    Ms. Zendejas, did you want to add to the conversation?
    Ms. Garcia Zendejas. No, I don't have anything to add on 
that.
    Ms. Dean. Yes, Ms. Mavrellis?
    Ms. Mavrellis. We did a report at Global Financial 
Integrity in 2018, looking at the illegal trade in great apes, 
and we saw a lot of issues in terms of particularly CITES 
permits being used. With the live animals, it is very easy to 
launder them into the trade, particularly when you have 
governments like Guinea that were providing them.
    But when looking at the whole supply chain, there are 
certain critical points that we need to target, definitely 
supporting what the other witness said in terms of keeping it 
on the continent. A lot of the times, looking at the trade in 
great apes, there were just three or four international 
suppliers that were perfect chokepoints to go after. Instead, 
we focus on either just the poacher or the people buying them.
    Ms. Dean. And if you don't mind offline--
    Chairman Himes. The gentlelady's time has expired. We will 
take additional information for the record.
    The gentleman from Arkansas, Mr. Hill, is now recognized 
for 5 minutes.
    Mr. Hill. I appreciate that, Mr. Chairman.
    It's nice to have this panel here. It is a good discussion. 
We have had several discussions on trade-based money laundering 
over the past few years, oil-fueled ISIS murder throughout 
Syria and Iraq and it took us 2 years--
    Chairman Himes. The gentleman will briefly suspend. I think 
your microphone may be off, Mr. Hill.
    Mr. Hill. Maybe I was using--
    Chairman Himes. We will start the clock again.
    Mr. Hill. Gosh, you are so generous. Thank you. I thank the 
chairman. I was speaking into Mr. Williams' microphone. Sorry 
about that.
    Well, thanks for the panel being here. We have had an 
effort to have trade-based money laundering at the forefront of 
this subcommittee for a number of years, including when it was 
just a task force. So, it is good to have you back.
    Smuggling oil out of Syria and Iraq fueled ISIS and funded 
ISIS for years, and it was pressure from this committee and 
from others in the Congress that caused the Obama 
Administration to change policy and interdict that oil before 
it crossed the border into Turkey. So, we know how these 
commodities fuel bad actors around the country.
    I was in the Congo not long ago, in Brazzaville, and we 
have an embassy there that only has 14 people in it. So, for us 
to really do anything very significant to aid in stopping 
deforestation in the Congo is challenging. And that trip to 
Africa reinforced, Ms. Araya, your comments about corruption.
    It is hard for us to take actions here about interdicting 
terror finance or trade-based money-laundering finance and 
transnational crime when it is the countries' leadership itself 
that is facilitating it. And that is endemic in all of the 
continents of the world, but particularly, I would say, in 
Africa and Latin America.
    Mr. Fruth, quick question, should we impose Magnitsky 
sanctions for trade-based money laundering in some of these 
countries of concern?
    Mr. Fruth. That is not for me to say, Congressman, but I 
think that there are a lot of different authorities and 
capabilities that we can utilize against these countries, their 
leadership, whether it be OFAC designations, whether it be 
State Department designations, whether it be Commerce entity 
listing--I think there is a wide range of different 
capabilities that we can use, but certainly corruption is an 
issue, and it is an issue in Afghanistan as well.
    Mr. Hill. Yes. We talked about how there is no Mutual Legal 
Assistance (MLAT) treaty with China. I think that was 
referenced in somebody's testimony. Can somebody talk about the 
value of having a legal treaty, extradition-type treaty, MLAT 
treaty with a country? Does that speed up the ability of 
catching people engaged in trade-based money laundering?
    Ms. Mavrellis?
    Ms. Mavrellis. It depends. We just completed a report 
looking at financial crime in Latin America and the Caribbean. 
And our chapter looking at money laundering, it is really 
excellent to have that because it facilitates intelligence 
sharing, but there are a lot of issues in terms of two 
different types of legal systems--civil and common law--having 
to deal with each other.
    They are talking with different languages. It is not just 
Spanish and English, but also different types of legal 
structures. And so, there are issues communicating in terms of 
what level of evidence is needed, and it is hard sometimes for 
our partner countries to know what is sufficient evidence to 
get assistance from the United States.
    Mr. Hill. I heard you reference conflict minerals, and, of 
course, in the Dodd-Frank Act, we imposed an enormous, costly 
regulation on public companies on conflict minerals.
    And I want to quote from The Washington Post: ``The 
legislation signed into law by President Obama set off a chain 
of events that has propelled millions of miners and their 
families deeper into poverty. According to interviews with 
miners, community leaders, activists, and Congolese and Western 
officials, if Obama's law wasn't signed, the ban would not have 
existed.''
    And it goes on to talk about the negative consequences of 
trying to use the public securities laws to tackle this 
problem.
    It has really been costly. I think it is overdone. I don't 
think that is the right tool to use.
    Should we consider a special suspicious activity report 
(SAR) for trade-based money laundering where we enhance, maybe 
go beyond the financial system on a suspicious activity report?
    Mr. Fruth, you are nodding. Do you have a comment on that?
    Mr. Fruth. Yes. I am a big fan of more boxes on the SAR 
forms. As a person, I don't know how many other folks here 
have, but I have actually written SARs and I have also received 
SARs, on both the public and private sector side. And I am a 
big fan of allowing more boxes on the SAR form, so by the time 
FinCEN actually receives that, we have a more detailed 
understanding of what the different threat landscape is and 
predicate sources of funds in different schemes. So, I would 
absolutely concur with that.
    Mr. Hill. Is that the kind of thing you think that would 
enhance the public-private partnership that has been outlined 
today?
    Mr. Fruth. I do. I think FinCEN is one of the most 
underutilized agencies within the U.S. Government and certainly 
an asset for law enforcement, the intelligence community, et 
cetera. So, I think expanding out detail on those SAR forms, 
such as your suggestion about trade-based money laundering, is 
an excellent idea.
    Mr. Hill. Thank you for that. I would invite the panelists 
to comment on that in writing to the subcommittee. That would 
be helpful to understand your thoughts on the details of the 
partnership. I thank you for the testimony.
    And I yield back.
    Chairman Himes. The gentleman's time has expired.
    The gentleman from Ohio, Mr. Gonzalez, is recognized for 5 
minutes. He is coming to us remotely.
    Mr. Gonzalez of Ohio. Thank you, Chairman Himes and Ranking 
Member Barr, for holding this hearing. And thank you to our 
witnesses. It has certainly been an enlightening hearing so 
far, and I appreciate everybody's contributions and questions.
    Mr. Fruth, I want to start with you. In your testimony, you 
highlight that there is over a trillion dollars worth of rare 
earth minerals in Afghanistan. We talked a bit about that.
    About a decade or so ago, the Obama Administration made a 
similar indication, but the reports at the time seemed to 
indicate that getting the proper mining infrastructure to 
properly access these minerals could take several years to 
establish.
    If China were to immediately insert themselves into the 
country now to begin exploiting the resources there, how 
quickly do you think it would take them to establish the mining 
capabilities in the country?
    Mr. Fruth. Thank you for the question, Congressman. And as 
a fellow Ohioan, it is good to see you. I was born and raised 
in Ohio.
    First off, I am not a geologist. I worked in the 
intelligence community over the course of my career, so I can't 
speak to that. What I can say is, whatever our assessment was 
10 years ago, I don't even know if that is the relevant 
qualitative factor that I would look at. It is more about what 
China's assessment is.
    China has prioritized drawing rare earths from Afghanistan. 
So however we look at the situation, the reality is that China 
has prioritized this. And whether it takes them 2 years to 
extract these minerals or 10 years, China is playing the long 
game. They are looking at the next decades. If they can control 
these rare earths, that is going to supply them with the 
critical components that they need for their emerging 
technology over the course of the next decade.
    So I don't know that it is so much a matter of whether it 
is a 2-year ordeal or a 10-year ordeal. The fact of the matter 
is, if they secure these rare earths, they are going to extract 
them, however much time it takes.
    Mr. Gonzalez of Ohio. Yes. And I could tell by your 
brilliance that you must be from Ohio, so I am just glad that 
you reminded me of that.
    But that being said, so obvious follow-up to that question 
is, what should we be doing now to best prepare ourselves? How 
do we prevent China from taking over rare earths and securing 
that supply chain? And how do we prevent Afghanistan from 
basically being in a similar relationship status with China as 
North Korea is?
    Mr. Fruth. Excellent question. So, two parts. China is 
financially undercutting us from a cost perspective in all of 
these emerging rare earth theaters, which tells me that they 
actually prioritize being able to choke the market off more 
than they prioritize the profit margins coming from these rare 
earths. So, that is point number one.
    Point number two, if we look at this hybrid threat 
collective that I have outlined in my testimony, in Afghanistan 
right now, it includes China, it includes various terrorist 
organizations, and it includes Pakistan.
    China knows that they can't manage all of the different 
divisions--political, religious, ideological, Tribal, et 
cetera--throughout Afghanistan, so they are employing Pakistan 
to do that on their behalf.
    So my answer to you on that would be, we need to apply lots 
and lots and lots of pressure on Pakistan, who has proclaimed 
to be our friend for the last 20 years and taken aid from us, 
and even possibly bombed our friends in the Northern Resistance 
Front in the Panjshir with laser-guided munitions that we 
provided to them to bomb ISIS and al-Qaida.
    So, they are not our friends, they are not behaving as an 
ally, and we should start applying financial and economic 
pressure on them accordingly, and that could help break down 
the security situation that they are trying to provide for 
China to extract these rare earths.
    Mr. Gonzalez of Ohio. Thank you for that. And one last 
question on Pakistan. Where do you see the biggest leverage 
points there from a U.S. perspective? I think you highlighted 
some, but just maybe drill down a little bit deeper?
    When you said, put pressure on Pakistan, where are we best 
equipped to do that?
    Mr. Fruth. Pakistan has been in a difficult economic 
position for some time. If you think back, I think 2016, 2017, 
the New York Department of Financial Services levied $225 
million in fines at Habib Bank Limited and removed their New 
York correspondent branch license. If you remember, that was 
absolutely detrimental to the Pakistani economy, and the entire 
global financial system started contemplating whether they 
should de-risk Pakistan.
    Now, they are FATF grey-listed. Their energy minister just 
came out, I think a couple of days ago, and said that they 
think that they are actually going to get off the FATF grey 
list here soon.
    I think it is absurd. I don't think they should be off the 
FATF grey list. If anything, I think we should be applying more 
pressure and looking at our partnerships with the IMF, 
considering the conditions that were set out in their IMF 
loans, and reviewing, with an interagency effort, whether or 
not they have violated those conditions with recent revelations 
from the interior minister that they were the custodians of the 
Taliban for the past 20 years, that they sheltered them, and 
that they have been providing thousands of kids from Pakistani 
madrasas every year to reconstitute the Taliban against U.S. 
interests in Afghanistan.
    Mr. Gonzalez of Ohio. Thank you. Your testimony has been 
very, very enlightening. I appreciate all that, and I look 
forward to following up in person.
    And I yield back.
    Chairman Himes. The gentleman's time has expired.
    I now recognize the gentleman from Texas, Mr. Sessions, for 
5 minutes, who is coming to us remotely.
    Mr. Sessions. Yes. Mr. Chairman, thank you very much, and 
thank you also to Ranking Member Barr.
    My question really, I think, is for Ms. Araya, or to anyone 
who is on this panel. But what I am interested in, and I really 
want to follow up on the conversation about animals and 
poaching and the ability that we have to cede the destruction 
of at least Africa and where these animals are indigenous to, 
and you have made a powerful recommendation in your testimony 
to expand funding programs for the International Affairs 
Department of the U.S. Fish and Wildlife Service, providing 
technical assistance and to use technology that helps.
    And I just wanted to talk about this, because the problem 
that I see is yet in the funding packages that some of our 
colleagues have put out, they seem to not be able to 
distinguish between legitimate trade and the ability that we 
have to protect these animals from poaching. And I think the 
U.S. Fish and Wildlife Service is important, and I would like 
to hear that conversation that anyone on the panel may have 
about the funding levels.
    Ms. Araya. Thank you, Congressman, for your comment. I 
can't provide comments on a specific funding package, but I 
think it is very important for more funding to go towards U.S. 
agencies such as U.S. Fish and Wildlife, APHIS, even certain 
parts of the U.S. Department of State, that are governing 
illicit trafficking, because, as I mentioned before, there are 
governments, there is law enforcement in these countries who do 
want the help, they do want capacity-building in order to 
detect different wildlife trafficking, different species of 
timber, different illicit goods, but they don't have the 
current capacity or knowledge or funding to do so.
    When I was on the continent, I met different guards--forest 
guards, wildlife guards--who said that they actually wanted to 
do more to curb this trade locally, but they didn't have the 
funds to do that, especially compared to many of these 
traffickers who are on the ground, who have weapons, who are 
considered to be violent. It was very difficult for them to 
even go against that.
    I think letting our African partners know that the U.S. 
takes this very seriously, and for the United States to provide 
funding to our experts in our country who can provide that 
technical assistance to aid our African country partners in 
doing this important work to end wildlife crime, illicit 
environmental crime, will be very critical moving forward.
    Mr. Sessions. Thank you. I did listen to your conversation, 
as well as some of the members of this committee who have 
talked about capacity-building relationships, continuing those, 
but perhaps the most important part was actually engaging the 
partners where they would choose to do that.
    Does anyone else on the panel have any conversation 
specifically related to that?
    Ms. Garcia Zendejas. Thank you. Thank you for the question. 
I would like to mention that wildlife trafficking levels in 
Peru are even higher than illicit trade in timber.
    But I wanted to highlight an effective operation, which was 
Operacion Amazonas, and it was successful precisely because of 
this interagency, very broad effort. It included the Peruvian 
Customs and Tax Authority. It included the supervising offices 
for forest. It included the Peruvian environmental prosecutor, 
the attorney general for ministry and the environment, 
including the World Customs Organization and INTERPOL.
    That has been the most successful operation that has led to 
these indictments both in the U.S. and in Peru, and it is this 
cross-sector effort that made it possible.
    Mr. Sessions. Anyone else?
    Ms. Mavrellis. I would just like to add, I think having and 
placing U.S. Fish and Wildlife Service staff, as recommended in 
the Preventing Future Pandemics Act, within other governments, 
within other countries, is extremely critical to sharing that 
knowledge and capacity-building to those countries, to help 
them know how to engage in investigations, particularly the 
financial side of the investigations.
    I think it is also important to involve the private sector, 
looking at things like United for Wildlife and the efforts 
pushed through there, involving the transportation sector, 
involving the financial sector, and educating them and 
involving them in detecting this and stopping this.
    Mr. Sessions. I want to thank you, Mr. Chairman. I think 
the discussion of INTERPOL also is important and finding 
willing partners.
    Mr. Chairman, I want to thank you very much, and I yield 
back my time.
    Chairman Himes. The gentleman's time has expired.
    I now recognize for 5 minutes the Chair of the Full 
Committee, the distinguished gentlewoman from California, 
Chairwoman Waters.
    Chairwoman Waters. Thank you so very much, Chairman Himes.
    I am very pleased to be able to participate in this hearing 
today. And I would like to direct this question to Ms. 
Mavrellis.
    Earlier this year, Congress passed the Corporate 
Transparency Act of 2020 (CTA) and the Anti-Money Laundering 
Act of 2020 into law. The tools and authorities provided in 
these laws include reporting on the beneficial owners of U.S.-
registered shell companies and improving information sharing 
between financial institutions and government regarding red 
flags and other threat indicators.
    As Treasury and other agencies work to implement these laws 
through rulemaking, what do agencies like the Financial Crimes 
Enforcement Network (FinCEN) need to do to ensure that the 
actions taken are effective?
    For example, what should be included in the rule to ensure 
that the beneficial owners of currently anonymous shell 
companies do not escape the mandated reporting requirements?
    Ms. Mavrellis. Thank you very much for the question, Madam 
Chairwoman. Coming from Global Financial Integrity, the work 
that we do with the Financial Accountability and Corporate 
Transparency Coalition (FACT), for us, it is extremely 
important for FinCEN to interpret, ``other similar entities,'' 
to include partnerships, sole proprietorships, trusts, 
foundations, and business associations, unless a particular 
entity qualifies for an exemption.
    It is a difficult issue because you have companies being 
incorporated at a State level, while all of this regulation 
going on is at a Federal level. So having the widest definition 
possible really helps to make sure that no types of entities 
fall through the cracks.
    It also really tries to keep the transparency objectives of 
the CTA, making sure that it is highly useful to law 
enforcement, to national security and intelligence agencies, as 
well as the financial institutions. It helps to bring us into 
better compliance or into better harmony with our other allies, 
like the U.K. and the EU.
    I also want to stress the importance of the financial 
institution information sharing. I think the FinCEN Exchange 
needs to be promoted and really expanded to be like what we see 
with other colleagues, like the U.K.'s Joint Money Laundering 
Intelligence Taskforce (JMLIT). They have working groups that 
work together to put out papers, and to identify red flags. And 
I think we really need to work with financial institutions to 
encourage them to feel more comfortable sharing information 
between themselves.
    They are allowed to under the PATRIOT Act, but I think 
there is a lot of hesitation legally to do so, as well as to do 
it within FinCEN Exchange. So, FinCEN Exchange can be a more 
informal relationship for them to have the connection, share 
the information, and it can be very productive, I think.
    Chairwoman Waters. Thank you very much. And I think I heard 
part of that just as I was coming in about the kinds of 
interactions that could or should be taking place to help them 
to do their job.
    Are you aware of the need for additional resources for 
FinCEN?
    Ms. Mavrellis. Absolutely. They have a huge mandate, and 
their staffing is about 300, so significant amounts of 
resources need to go in, and not just in terms of having good 
pay for the staffers but having more human capacity to handle 
this. I think it is extremely important that they are able to 
accomplish this task.
    They are having to handle just a wide remit of different 
activities. In terms of just thinking about the number of 
Suspicious Activity Reports (SARs) and Currency Transaction 
Records (CTRs) that they have to handle each year, having the 
capacity to really evaluate them and getting actionable 
intelligence from them is just--you could put a price on it, 
but it is priceless to be able to do so.
    Chairwoman Waters. Thank you very much. In working with my 
staff and with the Chair of this subcommittee, we have 
identified the fact that there is a need for additional 
resources. And we have made some moves, but this should be a 
bipartisan effort in order to get the resources that are needed 
to do what we expect them to do. So, I thank you.
    And I yield back the balance of my time.
    Chairman Himes. The gentlewoman yields back.
    And I believe this concludes our questioning. I would like 
to thank our witnesses for their testimony today and for a very 
engaging discussion.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    With that, this hearing is adjourned.
    [Whereupon, at 11:44 a.m., the hearing was adjourned.]

                            A P P E N D I X


                            November 4, 2021
                            
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