[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 [all]