[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE FINANCIAL
CRIMES ENFORCEMENT NETWORK
=======================================================================
HYBRID HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
APRIL 28, 2022
__________
Printed for the use of the Committee on Financial Services
Serial No. 117-81
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
47-648PDF 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
C O N T E N T S
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Page
Hearing held on:
April 28, 2022............................................... 1
Appendix:
April 28, 2022............................................... 49
WITNESSES
Thursday, April 28, 2022
Das, Himamauli, Acting Director, Financial Crimes Enforcement
Network (FinCEN), U.S. Department of the Treasury.............. 4
APPENDIX
Prepared statements:
Das, Himamauli............................................... 50
Additional Material Submitted for the Record
Himes, Hon. Jim A.:
Written statement of the Financial Accountability and
Corporate Transparency (FACT) Coalition.................... 62
Written statement of the Project on Government Oversight
(POGO)..................................................... 68
Written statement of The Sentry.............................. 83
Maloney, Hon. Carolyn:
Written statement of Democrats Abroad........................ 87
McHenry, Hon. Patrick:
Written statement of the CATO Institute Center for Monetary
and Financial Alternatives................................. 93
Letter to Secretary Yellen and Acting Director Das........... 96
Written statement of the National Association of Federally-
Insured Credit Unions (NAFCU).............................. 100
Written statement of SentiLink............................... 102
Das, Himamauli:
Written responses to questions from Representative Budd...... 110
Written responses to questions from Representative Sylvia
Garcia..................................................... 106
Written responses to questions from Representative Gooden.... 111
Written responses to questions from Representative
Luetkemeyer................................................ 108
Written responses to questions from Representative McHenry... 105
Written responses to questions from Representative Sessions.. 113
OVERSIGHT OF THE FINANCIAL
CRIMES ENFORCEMENT NETWORK
----------
Thursday, April 28, 2022
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:05 a.m., in
room 2128, Rayburn House Office Building, Hon. James A. Himes
presiding.
Members present: Representatives Velazquez, Sherman, Meeks,
Green, Cleaver, Perlmutter, Himes, Foster, Beatty, Vargas,
Gottheimer, Gonzalez of Texas, Axne, Casten, Lynch, Adams,
Tlaib, Dean, Garcia of Illinois, Williams of Georgia,
Auchincloss; McHenry, Posey, Luetkemeyer, Huizenga, Wagner,
Barr, Williams of Texas, Hill, Emmer, Zeldin, Loudermilk,
Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gonzalez of
Ohio, Rose, Steil, and Timmons.
Mr. Himes. [presiding]. The Financial Services Committee
will come to order.
Without objection, the Chair is authorized to declare a
recess of the committee at any time.
Today's hearing is entitled, ``Oversight of the Financial
Crimes Enforcement Network.''
I now recognize myself for 5 minutes to give an opening
statement.
Today, we welcome Mr. Himamauli Das, the Acting Director of
the Financial Crimes Enforcement Network, also known as FinCEN,
for the first time before our committee. At a time when the
international community is united in imposing severe sanctions
on Russia for its unprovoked attack on Ukrainian sovereignty
and democracy, a strong, well-resourced FinCEN is more
important than ever.
FinCEN is on the front lines of our financial intelligence
efforts, tracking and tracing the ways that bad actors, like
Putin and his allies, try to hide their assets. FinCEN also
provides law enforcement agencies with information to follow
the money, and alerts financial institutions to the ways that
bad actors might try to evade sanctions. Without FinCEN,
terrorists, drug traffickers, and other criminals would pose an
even greater threat to our national security and the integrity
of our financial sector.
Lately, this committee has focused hard on cracking down on
oligarchs and other bad actors looking to hide their ill-gotten
gains through financial channels. Last month, the committee
passed several bills to further cut Russia off from the global
markets, to isolate Russian officials on the international
stage, and to target Russian oligarchs, including the Nowhere
to Hide Oligarchs' Assets Act, which was led by Chairwoman
Waters. Today, I am pleased that we will continue discussing
these bills and other proposals to target financial crime
schemes, including a bill that I have sponsored, the Special
Measures to Fight Modern Threats Act, which would help FinCEN
target money laundering concerns operating outside of the
traditional banking sector.
In the past, this committee, and Chairwoman Waters in
particular, played an important role in passing the Anti-Money
Laundering Act of 2020 (AMLA), which was the most sweeping
anti-money laundering reform in decades. AMLA tasks FinCEN with
zeroing in on corruption, cybercrime, foreign and domestic
terrorist financing fraud, transnational criminal organization
activity, and trafficking. It also contains the Corporate
Transparency Act, which requires corporations to disclose their
true beneficial owners and tasks FinCEN with implementing this
transformative anti-corruption measure. In the 15 months since
AMLA became law, FinCEN has made considerable progress on these
tasks, despite delays in authorized funding. But there is more
work ahead to do, and more regulations to be finalized to
ensure that law enforcement can use these important tools to
follow the money and bring bad actors to justice.
Even before Russia's illegal invasion of Ukraine, FinCEN
helped protect our financial sector from money launderers,
authoritarians, and kleptocrats. Today, as some of the richest
and most corrupt people in the world look to the United States
to stash their dirty money, it is important that Congress and
this committee give FinCEN the resources it needs to assure
that Putin, his cronies, and his despots and thugs don't get
access to our financial system to hide their money.
It is also important that FinCEN be transparent with
Congress about its accomplishments, its challenges, its
strengths and its weaknesses, and to share findings that can
help lawmakers who are tasked with oversight to better
understand FinCEN's strengths and weaknesses. FinCEN and
Congress must work together to make sure that our financial
crime toolkit is being put to good use, and that we are staying
vigilant against emerging threats and sanction evasion schemes.
Finally, I would like to enter into the record statements
from the Project on Government Oversight, The Sentry, and the
FACT Coalition. These statements emphasize FinCEN's critical
role in combating corruption, and stress the importance of a
fully-funded and staffed FinCEN to implement the beneficial
ownership reporting requirements as envisioned by Congress.
Without objection, it is so ordered.
Mr. Das, I look forward to your testimony on the
implementation of the Anti-Money Laundering Act of 2020, and
FinCEN's progress on the beneficial ownership database, and to
learning more about how Congress can be a strong and reliable
partner in helping FinCEN successfully combat financial crime.
I now recognize the ranking member of the committee, the
gentleman from North Carolina, Mr. McHenry, for 5 minutes.
Mr. McHenry. Thank you, Mr. Himes, and thank you for
sitting in the chair. We wish Chairwoman Waters a speedy
recovery from COVID, and we are glad that she is getting the
care she needs and taking the responsibility of separating and
quarantining. We wish her a speedy recovery.
But I want to thank the Chair for holding the hearing. As
we know, the proper oversight of agency heads is necessary for
Congress' intent to be fulfilled and for agencies to fulfill
their responsibilities. For an office like FinCEN, which has
operated under the radar screen for the last 3\1/2\ years,
appearing before us is especially significant. Acting Director
Das, thank you for being here. Thank you for your outreach.
Mr. Das, you were not head of FinCEN during the Fiscal Year
2021 National Defense Authorization Act (NDAA) negotiations,
which resulted in a rewrite of the statute that you are now
implementing. But I would like to take a moment to share with
you congressional intent during those negotiations, and the
resulting statute and the intent of that statute. And the
reason why I want to do this is because in reading FinCEN's
beneficial ownership notice of proposed rulemaking (NPRM),
there seems to be quite a disconnect.
Early negotiations were anything but bipartisan. For
Republicans, non-negotiables were clear. We wanted to limit
burdens on small businesses, protect personally identifiable
information (PII) as if it were tax information, and hold
FinCEN accountable to the American people once a bill became
law. We understood on both sides of the aisle that the stakes
were too high for millions of small businesses to not get this
right. So, the four corners in our negotiations came to an
agreement that a revised beneficial ownership regime would:
first, be easy to understand for small businesses; second,
limit the burdens on those filing; and third, protect civil
liberties and ensure confidentiality.
What resulted was a targeted statute that would focus on
stopping bad actors, such as Chinese and Russian nationals,
from using the financial system. At the same time, it limited
the burdens of law-abiding small businesses in the process. We
directed FinCEN to prevent duplicative and burdensome
requirements on small businesses, including rescinding the
customer due diligence rule. We directed FinCEN to report on
steps it is taking to minimize reporting requirements, which
will provide this committee with necessary data on suspicious
activity reports (SARs), currency transaction reports (CTRs),
and the reporting thresholds. And we asked that the new
beneficial ownership data be equipped with the strongest
privacy and disclosure protections for small business owners'
information.
FinCEN is one of the biggest data collectors in the U.S.
Government. Yet, how they collect, manage, and allow access to
that data remains largely a mystery to Congress and, most
assuredly, the public. Unfortunately, after reading FinCEN's
NPRM, it is clear that the Agency needs a reminder of what
Congress directed. The proposed rule was far too complex,
overly broad, and deviated significantly from Congress' intent.
My colleagues across the aisle like to advocate for greater
authorities for FinCEN. I understand that. We have a new
statute. The rules have not been implemented on that new
statute. Let's get that done before we talk about new
authorities, and I think that is where we are at this stage.
And without objection, I would like to submit for the
record my letter with Ranking Member Luetkemeyer, outlining our
disappointment and concerns with the beneficial ownership NPRM.
Thank you.
Mr. Himes. Without objection, it is so ordered.
Mr. McHenry. Director Das, it is fair to say that FinCEN
has too many responsibilities and doesn't do any of them as
well as they could. I am hopeful that in your leadership of
FinCEN, we can right some of these huge challenges for the
Agency and get it right for the American people. And I look
forward to working with you to ensure that our anti-money
laundering programs are targeted and effective, and at the same
time, protect Americans' civil liberties.
With that, Mr. Chairman, thank you, and I yield back.
Mr. Himes. Thank you to the ranking member. I now recognize
the gentleman from Kentucky, Mr. Barr, for 1 minute for an
opening statement.
Mr. Barr. I thank the Chair for yielding and for holding
this hearing today.
Congressional oversight of FinCEN is long overdue. Acting
Director Das, thank you for coming before us today to talk
about the operations of FinCEN. FinCEN indeed has a critical
mission, and safeguarding the financial system against illicit
use has never been more important. Whether FinCEN is targeting
Russian oligarchs, international terrorists, or narcotics
traffickers, we need to hold your office accountable for
results. At times, this will mean FinCEN investigators need to
find a needle in a haystack. Congress supports this work, but
FinCEN must also guard against the temptation to add to the
haystack endlessly, simply so it can collect more and more data
on Americans. FinCEN's intelligence should be used as a weapon
against money launderers, not as a financial Wikipedia on law-
abiding citizens. I look forward to hearing how FinCEN can stay
focused on its targeted mission, including its efforts to
counter bad actors from Russia.
Thank you for your testimony, and I yield back.
Mr. Himes. The gentleman yields back. I want to welcome
today's distinguished witness to the committee, Mr. Himamauli
Das, the Acting Director of the Financial Crimes Enforcement
Network.
You will have 5 minutes to summarize your testimony, Mr.
Das. You should be able to see a timer that will indicate how
much time you have left. I would ask you to be mindful of the
timer and quickly wrap up your testimony if you hear the chime.
And without objection, your written statement will be made
a part of the record.
Acting Director Das, you are now recognized for 5 minutes.
STATEMENT OF HIMAMAULI DAS, ACTING DIRECTOR, FINANCIAL CRIMES
ENFORCEMENT NETWORK (FINCEN)
Mr. Das. Good morning. My name is Him Das, and I am the
Acting Director of the Financial Crimes Enforcement Network.
Chairman Himes, Ranking Member McHenry, and distinguished
members of the committee, thank you for the invitation to
appear before you today to provide an update on FinCEN's
implementation of the Anti-Money Laundering Act of 2020,
including the Corporate Transparency Act.
FinCEN fulfills a critical statutory mandate as the
administrator of the Bank Secrecy Act (BSA). In that role, we
draft regulations to implement the BSA, we receive statutorily-
required reports from financial institutions about things like
suspicious activities and high-value cash transactions, and we
regulate financial institutions and enforce the rules. We can
and have imposed significant monetary penalties against
financial institutions that failed to implement effective and
reasonably-designed Anti-Money Laundering/Combating the
Financing of Terrorism (AML/CFT) programs. Our statutory
authorities give us a powerful toolkit that we use to protect
the U.S. national security and safeguard the integrity of our
financial system. Along with suspicious activity and cash
transaction reports, we can request information from financial
institutions, and in some cases, non-financial trades and
businesses within defined parameters through special collection
tools.
We use the information that financial institutions report
to us to support law enforcement to target and disrupt illicit
finance threats. And it is a diverse set of threats, from cyber
criminals to kleptocrats, organized crime groups and beyond.
Our information and analysis is critical to combat all of them.
In fact, in a survey released in 2020, the Government
Accountability Office found that law enforcement personnel at
six law enforcement agencies use BSA reports extensively to
inform their investigations, and that BSA reporting helped to
identify potential subjects, networks, and defendants.
Recent events, from COVID-19 to Russia's invasion of
Ukraine and the rise in ransomware attacks on U.S. businesses,
have underscored the importance of protecting our financial
system. They have made clear the importance of an AML/CFT
framework that is well-designed and effective in preventing bad
actors from exploiting the financial system, and that protects
Americans and American ideals. Clearly, FinCEN has a robust
agenda and a diverse mission. And while we work to carry out
our statutory mandate, we are also cognizant of our
responsibility to do so in a way that safeguards citizens'
privacy, that does not put undue burden on small businesses,
and that does not spark de-risking that harms financial
inclusion. All of these considerations are important to me and
to our institution.
The AML Act has only expanded our responsibilities, and it
is nothing short of transformative. We recognize the enormous
opportunity that it presents to streamline, modernize, and
update the U.S. AML/CFT regime. The Act has helped position us
to address today's challenges and provides us with the tools to
approach innovations in a way that balances opportunities and
risks, and it has placed national security front and center in
FinCEN's mandate.
While the AML Act has made a significant improvement to the
AML/CFT framework, these improvements come at a cost. FinCEN
employs a team of about 300 dedicated employees: intelligence
analysts; investigators and enforcement officers; policy
strategists; data analysts; and others. We welcomed the Fiscal
Year 2022 appropriations to support our mission. Those
resources are critical to support our IT systems and to build
our beneficial ownership database. But nonetheless, FinCEN has
significant staffing requests that remain unfunded. These
include requests specifically related to positions required in
the AML Act, such as foreign Financial Intelligence Unit (FIU)
liaisons, domestic liaisons, and others.
Timely and effective implementation of the AML Act is our
top priority. Even with our limited resources, the FinCEN team
is working diligently with law enforcement and regulatory
stakeholders to promulgate rules and take other steps under the
Act to promote a transparent financial system. It is important
that we get it done right, and we get it done quickly. We have
accomplished a lot, but we also recognize that we need to do
more. As you are aware, we are missing deadlines. And to be
blunt, we will likely continue to do so because our budget
situation has required us to make significant tradeoffs among
competing priorities.
Just as I am grateful for the opportunity to appear before
you today, I am also glad that I have had the opportunity to
speak with some of you in the lead-up to today's session to
hear more about your priorities and what is most important to
your constituents. The entire FinCEN team is committed to
working with you and to carrying out our ambitious agenda with
your support, and I am happy to answer any questions.
[The prepared statement of Acting Director Das can be found
on page 50 of the appendix.]
Mr. Himes. Thank you, Acting Director Das. I now recognize
myself for 5 minutes of questions.
Mr. Das, I read your testimony and just listened, and I
appreciate all of that testimony. What I would love to have you
do first in my 5 minutes is maybe fill in some of the blanks,
which are really critical oversight blanks from what we have
heard so far, that is, how FinCEN defines success. I would
assume it would be prosecutions assisted in, nefarious plots
disrupted. How do you quantify and, therefore, know when you
are succeeding and where you may succeed better? I am used to
thinking in the intelligence context, where the intelligence
community looks at the number of citations for collection and
in various reports and that sort of thing.
And then second, if we have time, the other thing we
obviously need to do is protect the privacy of the American
people, and I am very grateful for the data that you have
provided my office with respect to the collection that you do.
How do you evaluate and how do you raise incidents of privacy
breaches that, from an oversight standpoint, we should be
interested in? But, again, I am primarily interested in how you
define success and what metrics allow you, and therefore us, to
track that success.
Mr. Das. Thank you for that question, Chairman Himes, and
thank you for your support and the committee support as well.
Again, we are very focused on measuring and ensuring success in
achieving FinCEN's mission. We think it is incredibly important
to engage with stakeholders in Congress on ensuring the
effectiveness of BSA reporting, and it is absolutely critical
to ensuring confidence in the AML/CFT framework.
Again, I just want to step back for a second. FinCEN has a
number of functions, right? We collect information and reports
from financial institutions, we issue regulations that regulate
financial institutions to ensure that they have successful and
effective and reasonably designed AML/CFT programs as well, and
we work closely with law enforcement, and the intelligence
community, and the Office of Foreign Assets Control (OFAC) in
ensuring that they receive and use our information in an
effective way. We want to be effective on all of these fronts
because all three components of our mission work together.
In terms of your specific question on the success of
reporting, the AML Act provides a framework for that. Section
6201 of the AML Act does precisely that. It requires DOJ to
provide a report on the value of BSA information, and in
January of this year, DOJ delivered such a report. That reports
states that the value of BSA information for DOJ cannot be
overstated. IT staff has searched BSA records over 2 million
times over the past 5 years, and it is used in tens of
thousands of investigations. The GAO, in a survey conducted
from the years 2015 to 2018, as well indicated that three-
fourths of the staff of six law enforcement agencies have used
BSA reporting in the context of their investigations. And that
study also noted that three-fourths of those personnel also
indicated that they either did not have an alternative, or that
an alternative to BSA reporting was less efficient. I
recognize, however, that the information that I have provided
is our qualitative measures of success. They are not
quantitative measures of success.
Mr. Himes. Mr. Das, that is interesting information about
the DOJ. I think you told me that there are just shy of 500 law
enforcement agencies that have access to the database. When
they query that database, are they then required to report what
they did with the information that was obtained as part of that
query, therefore enabling you to see what the outcome is of the
use of that information?
Mr. Das. They are not required to respond specifically to
the use of the data that they receive when they do a query.
However, we proactively engage with law enforcement across-the-
board. We have a number of liaison officers from law
enforcement agencies who sit at FinCEN, whom we engage with
regularly in terms of the challenges that they are facing, in
terms of using our data, how they use their data, and how we
can help them more effectively use their data. We regularly
engage with our law enforcement counterparts and provide
products to them. We flag--
Mr. Himes. I'm sorry. Thank you. In my last 20 seconds, the
data is important, but so are the anecdotes. We are very
focused on Ukraine and Russia right now. In my very limited
remaining time, tell us what FinCEN is doing, maybe an anecdote
or a story, an example of how you have used this data to go
after oligarchs or otherwise illicitly--
Mr. Das. Absolutely. We have identified over 2,000
suspicious activity reports (SARs) that relate to Russian
oligarch activity and Russian sanctions evasion. We have
reviewed all of those reports. We have sent 271 of those
reports to law enforcement, and to OFAC, and the intelligence
community to understand what is happening with respect to
illicit financial transactions, which they can use for
prosecutions, and to trace assets and seize and freeze assets.
The information that we receive, we have also provided directly
to OFAC, so that they can use it in their sanctions
investigations and then designate and target illicit actors
across-the-board, including Russian oligarchs, shell companies,
cryptocurrency companies, and others. A number of the recent
actions were based on information that we have provided to OFAC
as well.
Mr. Himes. Thank you, Mr. Das. My time has expired.
The ranking member of the committee, Mr. McHenry, is now
recognized for 5 minutes.
Mr. McHenry. Thank you, Mr. Chairman. And thank you, Acting
Director Das.
I think there is a lot of confusion about what FinCEN does.
And I want to piggyback on Mr. Himes' question here, but let's
just kind of walk through the basics. Last month, there were
roughly 325,000 suspicious activity reports filed with FinCEN.
That is a massive amount of data. Let's talk through what
FinCEN does with this sort of flood of data. What percentage of
Bank Secrecy Act reports and FinCEN's monthly database lead to
convictions?
Mr. Das. I appreciate the question, Ranking Member McHenry.
Again, we do not have precise metrics in terms of a one-to-one
correlation between information that we receive from financial
institutions with respect to suspicious activity reports and
direct prosecutions. But in response to the DOJ report, it is
clear that these reports are being used by the Justice
Department and by other law enforcement agencies to investigate
actions and to prosecute actions as well. We have had a law
enforcement awards program in place since 2015, and that law
enforcement awards program is designed to identify instances in
which BSA information has translated into actual prosecutions.
So it is anecdotal in nature, but it shows that our information
is being used by law enforcement, especially the--
Mr. McHenry. The anecdotes here are very few and far
between. We have talked about this, so I think that is a
problem. Mr. Himes' question and my follow-up to basically the
same question here is, show us the results. You are able to
talk about what you said as qualitative rather than
quantitative. We would like to see these statistics on what is
being done. Mr. Himes said that 500 individual agencies have
access to these databases, the currency transaction reports,
and suspicious activity reports, 500 agencies. How many
individuals have access to these databases?
Mr. Das. Thank you for that question. Your first point, in
terms of metrics and better understanding how the information
is being used, we intend to work with you as well as the law
enforcement agencies to hone those metrics and to provide
better assessments of how that information is being used. In
terms of the number of individuals who have access to the
database, from law enforcement, from the intelligence community
and other agencies as well, again, there are 471 agencies that
have access to the information. The number of law enforcement
personnel and other personnel who have access fluctuates, but
it is in the 13,000 to 16,000 range.
Mr. McHenry. Okay. Then, how do you keep track of how those
users use that information? How do you police that?
Mr. Das. I appreciate the question. We have a robust
framework in place. With respect to each of the 471 agencies,
we negotiate separate memorandums of understanding (MOUs) with
each of the agencies after having a discussion with them to
ensure that they have appropriate reasons under the purposes of
the Bank Secrecy Act to use that information. The MOUs
identified protocols for access, protocols for security, and
protocols for use of that information.
Mr. McHenry. But how do you police those MOUs?
Mr. Das. It is part of sort of an overall suite of efforts
in terms of those MOUs. In terms of access to the database,
individuals who have access need to go through a robust
training program. They need to undergo a background check. Each
of their searches--
Mr. McHenry. Okay. So, what is then the proscriptive?
Mr. Das. We track each of their searches. They need to
enter in a justification. It goes into a query audit log, and
then we do two things. One is we conduct an annual audit of the
searches that are being done by each of the agencies that have
access to ensure that they are being used appropriately and
that there is no misuse. We engage with the agencies on an
individual basis to ensure that there are no questions and that
all questions are answered. And then finally, we identify
anomalous searches on a quarterly, on a monthly, and on an
annual basis to identify whether or not there are any
inappropriate uses of the database, and we reach out to the
agencies to try to remedy that as well.
Mr. McHenry. Okay. I want to be respectful of everyone's
time, but what if an MOU is breached, or if individuals have
breached that responsibility, what is the enforcement action?
Mr. Das. We will do two things. First of all, we will
engage with the agency and seek responses to an investigation
in terms of what that individual is doing, and whether or not
they were doing it appropriately, and we will refer the issue
to the Inspector General's office as well.
Mr. McHenry. Okay. Would you provide data on that, on those
referrals?
Mr. Das. Yes, sir. We can.
Mr. McHenry. Thank you. Thanks for your testimony.
Mr. Himes. The gentleman's time has expired.
The gentlewoman from New York, Ms. Velazquez, who is also
the Chair of the House Committee on Small Business, is now
recognized for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman. Director Das, in
December of 2019, FinCEN released a statement entitled, ``Bank
Secrecy Act Reports Filed by Financial Institutions Protect
Elders from Fraud and Theft of Their Assets.'' In this
statement, former FinCEN Director, Ken Blanco, acknowledged
that understanding the trends and potential exploitation
methods included in these reports can help banks and consumers
protect themselves. Can you briefly tell us how financial
institutions and older consumers use these reports to protect
themselves from financial exploitation?
Mr. Das. Thank you, Congresswoman Velazquez. Elder abuse is
a terrible problem and one that we and our partners from across
the government have been focused on for many years, and we
provide ongoing support to numerous task forces and multi-
agency groups working to address this problem. In February, we
joined with other Federal agencies in an awareness-raising
campaign about romance scams, which often target the elderly.
In this campaign, we highlighted our Rapid Response Program. In
this program, FinCEN partners with law enforcement agencies
that receive complaints of abuse, and incorporates with Foreign
Financial Intelligence Units, our counterpart agencies in
foreign governments, to help recover stolen funds.
We have done a lot more on this front, too. Our first
public advisory to financial institutions on elder financial
exploitation dates back to 2011. Since then, in 2017, we issued
a joint memorandum with the Consumer Financial Protection
Bureau (CFPB) on financial institution and law enforcement
efforts to combat elder financial exploitation. In 2019, we
issued a financial trend analysis describing how our elders
face increased financial threats from domestic and foreign
actors, and it is critical that we work with law enforcement,
regulatory, and national security partners to use our
information. Public documents like the one I just mentioned
that highlight typologies, educate financial institutions so
that they can appropriately use risk-based mitigating measures,
and monitor to detect potential elder abuse. This ultimately
protects consumers. And this reports also led to an incredible
increase in SAR reporting, and has ultimately led to numerous
successful prosecutions of bad actors.
Ms. Velazquez. Thank you for the response. Director Das,
like elders, survivors of intimate partner violence are at high
risk of financial exploitation. In fact, 58 percent of
survivors, approximately 19.1 million individuals in the United
States, report that their abuser has accessed, withdrawn from,
or otherwise controls their bank account. This means that over
half of survivors in the U.S. do not have access to a safe and
protected bank account. Wouldn't you agree this is a
significant problem that must be addressed?
Mr. Das. Thank you for that question. I agree that victims
of domestic violence and all victims of financial abuse should
be able to obtain banking access and extricate their accounts
from their abuser. We are very focused on financial inclusion,
and we want to work with you and your offices to ensure that
FinCEN does its part to ensure that survivors have access to
the banking services.
Ms. Velazquez. Thank you. One of the bills that we are
reviewing here today is a discussion draft of legislation I am
working on, the Survivors Safe Banking Act, which will require
FinCEN to compile and publish reports on statistics and trends
of customers and potential customers of covered financial
institutions who are a survivor of domestic violence or
economic abuse. Wouldn't you agree that a similar report will
likewise help protect consumers who are survivors of intimate
partner violence from financial exploitation?
Mr. Das. Thank you, Congresswoman. Without commenting on
the specifics of the draft legislation, FinCEN has and will
continue to urge financial institutions to report all forms of
suspicious transactions and to be attentive to any abnormal
patterns or behaviors, whether in their customer's accounts or
in their interactions with them. Again, as you are well aware,
and as FinCEN has highlighted through advisories and notices
and alerts, there are a myriad of illicit finance threats
facing consumers today. And sadly, vulnerable populations, such
as the elderly, or those in abusive relationships can be
victimized and financially exploited by those close to them. We
will continue to educate and equip financial institutions on
these threats, what to look for, and how to report a suspicious
transaction.
Ms. Velazquez. I am looking forward to working with you.
Mr. Das. Thank you. As am I.
Ms. Velazquez. Thank you. I yield back.
Mr. Himes. The gentlelady's time has expired.
The gentleman from Florida, Mr. Posey, is now recognized
for 5 minutes.
Mr. Posey. Thank you very much, Mr. Chairman. Mr. Das, can
you please describe your strategic plan for protecting the
privacy of the individuals and firms you collect data from?
Mr. Das. Pardon me, Congressman, if you could repeat your
question? It didn't quite come through clearly. My apologies.
Mr. Posey. Could you please describe your strategic plan
for protecting the privacy of the individuals and firms you
collect data from?
Mr. Das. Yes. Thank you, Congressman. Again, that is a very
important issue for us. The privacy of our database and the
sensitive information that we collect is fundamental to me and
is fundamental to our institution more generally. We have a
number of processes in place to ensure that the information is
safeguarded and used appropriately, and we are continuing to
work to do more on this front, to identify any gaps or issues
and to remedy those gaps. We have a robust framework in place
both from an IT perspective and from a procedural perspective
in ensuring and safeguarding the use of this information. From
an IT perspective, we have robust controls and a significant
segment IT architecture, which is robust, and constrains access
to the database by hackers and other malicious threats to the
database.
Second, we conduct regular penetration testing to ensure
that the database is not exposed to malicious threats as well,
and we subject the database to the highest standards of
security controls. It is Federal Information Security
Modernization Act (FISMA) high level with respect to the
security structure of the IT database.
With respect to the privacy considerations, again, as I
mentioned previously, we have robust controls in terms of
access to the data and the use of the data. We negotiate MOUs
in place with each of the agencies that have access to our
database. Those MOUs include provisions which ensure that the
database is used appropriately and that there are appropriate
audit and oversight functions. We provide regular training to
those who have access to the database to ensure that they
understand what the parameters are in terms of their use of the
database, and that they use it appropriately and for purposes
that are consistent with their agency's access to the database,
and consistent with the purposes of the Bank Secrecy Act as
well.
And then, we audit those uses. Again, we have a query audit
log where we track each of the searches and the justifications
made for those searches. Where there are anomalous searches, we
refer those searches and concerns to the home agency as well as
to the Inspector General's Office. We investigate, and if there
are shortcomings in terms of those searches, we work with the
agencies to either restrict access or to terminate those
individuals.
Mr. Posey. Have there ever been any breaches?
Mr. Das. There have been no IT breaches that we are aware
of to the overall database.
Mr. Posey. Does FinCEN share information and data with the
Internal Revenue Service?
Mr. Das. One of the purposes of the Bank Secrecy Act, in
terms of use of the information, is to combat tax evasion, and
the IRS has access to our database to support their law
enforcement efforts and efforts to combat tax evasion. The IRS
Criminal Investigations Unit as well is a partner in our--
Mr. Posey. I think that is a yes.
Mr. Das. Pardon me?
Mr. Posey. I think that is a yes, isn't it?
Mr. Das. It is a yes.
Mr. Posey. Can you explain the cost-benefit analysis in
your rulemaking and how that compares with other agencies?
Mr. Das. Yes, sir. We conduct cost-benefit analyses under
the Regulatory Impact Act for each of our rulemakings. It is
required by law. And when we renew regulations, as we are
required to do on a periodic basis, we conduct cost estimates
in terms of what the cost might be with respect to those
regulation renewals.
Mr. Posey. Thank you very much. Mr. Chairman, my time is
about to expire, so I yield back. Thank you.
Mr. Himes. The gentleman yields back.
The gentleman from Missouri, Mr. Cleaver, who is also the
Chair of our Subcommittee on Housing, Community Development,
and Insurance, is now recognized for 5 minutes.
Mr. Cleaver. Thank you very much. I have a number of
questions that I would like to raise with you, Acting Director
Das. Compared to many, probably most of the Federal agencies,
you are a small, either an agency or a bureau; I am not sure
which is the appropriate term. But I am wondering, Congress
approved $161 million and the President had requested $191
million. Does the fact that we didn't meet the President's
request have any negative impact on your work?
Mr. Das. Thank you for that question, Congressman. We are a
bureau of the Treasury Department. We have 300 full-time
equivalents (FTEs) at this point. First of all, I want to
express my appreciation for the funding in the Fiscal Year 2022
appropriations. We received about $34 million over previously-
enacted levels in that legislation. And that funding is
incredibly important to us in terms of being able to ensure
operations of our IT system and our IT database. It is also
incredibly important in terms of our design and build of the
beneficial ownership database. So, it is a valuable
contribution in terms of our overall effort.
It does fall short, however, in terms of our ask of, I
believe, $64.5 million over previously-enacted levels. The
amount of money that we did not get was intended to be used for
FTE staffing for all of our efforts to implement the AML Act.
We had asked for 80 FTEs to support our staffing and
implementation of the AML Act. That includes drafting
regulations and the rules being able to conduct the cost-
benefit analyses and to perform all of the other functions
under the AML Act, including hiring foreign FIU liaisons, and
domestic liaisons to do outreach to financial institutions
across the country to help them understand how we use data and
how it is effective. It would be used to hire innovation
officers, and security and information officers as well, who
would be able to help steer and lead the charge with respect to
our engagement on innovative technologies and how the
regulatory framework meets the innovative technologies as well.
Again, even with the resources that we have and that we are
using, we are working full tilt to be able to work thoroughly,
and effectively and efficiently, to complete all of the
mandates required under the AML Act, but we need more.
Mr. Cleaver. Yes, you just hit on the point that I was
going to raise, which is what is not getting done because you
didn't receive the amount that was requested in the President's
budget. And I am assuming you are saying that everything is
getting done; it is just not at the level that the Bureau
required.
Mr. Das. I have two points on that. One is that we are
missing deadlines, as I mentioned in my testimony, and we will
continue to miss deadlines because we just don't have the
staffing to be able to carry through on all of the efforts
required under the AML Act. The second is we are making
tradeoffs. We are making tradeoffs against resources that can
be used to engage in enforcement and compliance work that can
be used to ensure implementation of our whistleblower program,
that can be used to track ransomware actors, and to be able to
support law enforcement, and to perform all of the other
activities that we are doing and are required to do under the
BSA.
Mr. Cleaver. I am paranoid about the whole cryptocurrency
issue, and I think I am going to remain paranoid for some time.
In November of 2021, a FinCEN advisory on ransomware and the
use of the financial system to facilitate ransom payment noted
that cybercriminals usually require ransom payments to be
denominated in convertible virtual currency, most commonly in
Bitcoin. However, they are also increasingly requiring or
incentivizing victims to pay an anonymity enhanced
cryptocurrency. Now, what is the incentive for malicious actors
to demand payment in an anonymity-enhanced cryptocurrency? I am
presuming they believe they are maximizing their chances for
getting away, for escaping.
Mr. Das. That is correct, Congressman. I think that
anonymity-enhancing currencies is another way in which
ransomware actors and other criminal actors are working to
avoid the financial system, and evade the financial system, and
to hide illicit transactions. Again, we are very focused on
ransomware. We have taken a number of enforcement actions with
respect to cryptocurrency exchanges that support ransomware
actors, and we are doing our best on this front.
Mr. Cleaver. Thank you very much.
Mr. Himes. The gentleman's time has expired.
The gentleman from Missouri, Mr. Luetkemeyer, is now
recognized for 5 minutes.
Mr. Luetkemeyer. Thank you, Mr. Chairman, and welcome,
Director Das. You and I have had multiple conversations over
the last few weeks about independent ATM operators, and today,
I would like to put a few facts on record and discuss this
issue with you again.
The fact is, for years the members of the Federal Financial
Institutions Examination Council (FFIEC)and FinCEN supported
the notion that independently-owned ATMs are at high risk for
money laundering. This was evident in the FFIEC BSA/AML
Examination Manual, which contains many disparaging remarks
about the industry and the so-called risk they pose to money
laundering. Because the members of the FFIEC took the stance
that financial institutions for the last several years have
been refusing to provide financial services to independent ATM
operators. However, because of the extensive conversations I
have had with you and members of FFIEC, it has been determined
and acknowledged that independently-owned ATMs do not, in fact,
pose a high risk of money laundering. This became apparent when
after multiple bipartisan meetings with Members of Congress,
FFIEC changed its examination manual to accurately portray that
independent ATMs are not inherently at risk for money
laundering. In addition, I directly asked representatives of
the FFIEC whether independent ATMs are a high-risk industry,
and each of them individually said no.
Despite the changes made to the examination manual, I still
hear reports of financial institutions cutting off access to
services for independent ATM owners. That is because the
regulators, the examiners for years have intimidated financial
institutions into eliminating services to illegally-operating
industries. The perception is still there, similar to an
Operation Choke Point activity. It is now up to you and them to
fix it, Director Das. That is why I am calling on all the
prudential regulators and FinCEN to issue a policy statement to
all financial institutions clarifying that independently-owned
ATMs are not a high-risk industry for money laundering.
One excuse has been that we will be setting a precedent.
This is not a precedent. In 2020, the agencies and FinCEN
issued a fact sheet to all FDIC-insured institutions about
nonprofit organizations (NPOs). Specifically, this fact sheet
stated that, ``NPOs do not present a uniform or acceptably high
money laundering terrorist financing risk.''
Mr. Chairman, I ask unanimous consent to enter into the
record the document dated November 19, 2020.
Mr. Himes. Without objection, it is so ordered.
Mr. Luetkemeyer. Thank you. The reason I am bringing this
all up today is I want to get these facts on the record of what
has actually been going on with some of these agencies. They
made up the charge that the money laundering was going on. They
got caught, and now they need to fix it. And part of that fix
is to fix the manual, which they have already done and are
working on with the industry itself, and I applaud those
efforts. The second part of it, though, is to clear up the
perception that is still there with the financial institutions
that this is a high-risk industry, and that these banks, if
they want to go back and finance them, can do this again
without punitive action taken by the regulators if they do it
in a prudent, risk-free manner.
My question to you is very simple: Will you join the other
agencies and send a statement clarifying that independent ATM
operators do not have a high risk of money laundering?
Mr. Das. Thank you for that question, Congressman
Luetkemeyer, and I appreciate the conversations that we have
had over the past weeks on this issue. Again, we agreed that
this is an ongoing issue in terms of clarifying the scope of
this issue for examiners and for financial institutions as
well. We are working with the banking agencies and the specific
agencies to clarify this issue and to issue a joint statement,
and we would join any such joint statement with the Federal
banking agencies.
Mr. Luetkemeyer. I thank you for that. I take that as a
yes. In the future, I would just make the comment that your
Agency should be a check on these other agencies to make sure
this doesn't happen again. You should be pushing back on them
when they do things like this, where there is no evidence that
there was money laundering going on. Can you be a watchdog on
that?
Mr. Das. We will continue to engage with the banking
agencies and to ensure that the record is clear on this point
in terms of no particular customer type, including independent
ATMs, present any automatically higher risk with respect to
money laundering, correct.
Mr. Luetkemeyer. Thank you very much for that. My time is
about up. I have some more issues to discuss, expansion of some
of the definitions with regards to benefit ownership rules and
regulations, but we are out of time.
With that, I will yield back the rest of my time, Mr.
Chairman. Thank you.
Mr. Himes. The gentleman yields back.
The gentleman from New York, Mr. Meeks, who is also the
Chair of the House Committee on Foreign Affairs, is now
recognized for 5 minutes.
Mr. Meeks. Thank you, Mr. Chairman. Good morning, and as
indicated, I am the Chair of the House Foreign Affairs
Committee, but I am also a member of this committee. And one of
the issues that pops up now on both of our committees is
dealing with Russia's illegal and immoral invasion of Ukraine.
All of us have come together on both committees to impose
significant sanctions on Russia and Russian oligarchs. As
always, when it comes to sanctions, we are worried about how
the sanctions can be circumvented, and sanctions have
traditionally been scouted through shell companies in real
estate, for example. And in FinCEN's March guidance, it is
noted that the United States needs to also look out for the
Central Bank of Russian Federation using import or export
companies to engage in foreign exchange transactions on its
behalf. Can you explain how FinCEN is monitoring these specific
types of traditional means of sanction evasions, and what are
some of the persisting issues that FinCEN is seeing with these
techniques, not only as it relates to Russia, but also other
sanctioned countries?
Mr. Das. Thank you, Congressman. Our team has been working
incredibly hard since the Russian invasion of Ukraine, on both
the sanctions efforts and law enforcement efforts. We have
worked incredibly hard to raise awareness on the part of
financial institutions--that is, banks, cryptocurrency
exchanges, and other financial institutions as well--about
Russia's abuse of the financial system and their efforts to
evade sanctions. We have issued two alerts so far: one on
sanctions evasion specifically; and one on the efforts of
Russian oligarchs to evade sanctions more generally and to hide
their illicit assets, so that we can ensure that financial
institutions understand the ways in which Russian actors might
abuse the financial system.
We also recently issued an advisory on cryptocracy as well.
Those advisories and alerts alert financial institutions in
terms of the red flags of either sanctions evasion or
typologies with which Russian actors, oligarchs, proxies, and
elites seek to evade sanctions. This allows financial
institutions to better understand what types of transactions
bad actors might engage in to evade sanctions. We have also
reached out to financial institutions and to law enforcement
across-the-board. This includes the FBI, the Department of
Homeland Security Investigations (HSI), and the Department of
Commerce's Bureau of Industry and Security, with respect to
export controls, and others to participate in FinCEN exchanges
with financial institutions so we can exchange information with
financial institutions and law enforcement so that we can
understand how to better trace and identify Russian sanctions
evasions efforts, so we can get quality suspicious activity
reporting from financial institutions that is actionable and
that we can provide back to law enforcement as well.
We are very active in terms of reviewing the suspicious
activity reports that we get, and we take those suspicious
activity reports and distill those reports into summaries for
law enforcement to use, and for OFAC to be able to use in their
sanctions designations efforts and their targeting efforts as
well. So, we have a number of different fronts, in terms of
both working with financial institutions to collect more
information in terms of trends or typologies of sanctions
evasion, and then to take that information and translate it for
OFAC and law enforcement to be able to use that information to
go after Russian oligarch assets and to be able to identify
other bad actors for sanctions designations as well.
Mr. Meeks. Thank you for that. And I really can go deep,
but I have another question, because you mentioned crypto, and
I heard also conversations from Congressman Cleaver. We all
have certain concerns about crypto. I am trying to find that
balancing act, because I see there are some good purposes of
it, and some people who try to utilize and get around have been
concerned about Russia trying to use crypto to evade sanctions
also, specifically. My question in the little time that I have
is, is FinCEN thinking about new ways to implement Anti-Money
Laundering/Know Your Customer (AML/KYC) procedures in this
evolving world in a way that strikes a balance, and I want to
know, what is, ``to strike a balance?'' And can you explain
what FinCEN is already seeing with respect to crypto being used
to evade sanctionsc, in 2 seconds?
Mr. Das. I appreciate the question. As part of one of the
alerts that we issued at the outset of the Russian invasion of
Ukraine, the alert on sanctions evasion specifically
highlighted the risks of cryptocurrency being used to evade
sanctions. Again, we have not seen large-scale evasion through
the use of cryptocurrency, but we are mindful of that and we
are working with financial institutions so that they are aware
of that potential so that we can identify a large-scale evasion
using cryptocurrency and act on it as well. So, thank you.
Mr. Himes. The gentleman's time has expired.
The gentleman from Kentucky, Mr. Barr, is now recognized
for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman. Thanks for holding the
hearing. Mr. Das, again, thank you for appearing here, and let
me pick up right where Chairman Meeks left off on these
advisories and alerts on Russian sanctions evasion efforts. I
appreciate that FinCEN is issuing these advisories and alerts
for law enforcement for financial institutions. I appreciate
the communications between your Agency and law enforcement.
But, Acting Director Das, can you go into a bit more detail
about the data analytics that your Agency engages in, in
providing that to OFAC? And can you give us a little bit
greater granular detail about the analysis that FinCEN provides
to OFAC to give OFAC the tools to thwart these sanctions
evasion efforts?
Mr. Das. I appreciate that. We do a number of different
things on the analysis of information that we get with respect
to Russia sanctions. First of all, we receive suspicious
activity reports. We review those reports. We have reviewed
over 2,000 Russia-related SARs, and we have referred 271 of
them for further action to OFAC and to law enforcement as well.
We have sent these reports to the FBI, and to the Department of
Commerce's Bureau of Industry and Security as well.
Mr. Barr. Do you know whether or not OFAC has acted upon
those 271 SARs that you have flagged for them?
Mr. Das. We have provided OFAC with a substantial amount of
information, either directly or through the Office of
Intelligence and Analysis at the Treasury Department. We are
aware that they review that information very carefully and they
have acted on that information in the context of their
designation--
Mr. Barr. Did they report back to you, hey, this has been
helpful, we have now closed a sanctions evasion loophole or
effort?
Mr. Das. We remain in close communication with OFAC. We are
part of a working team in terms of ensuring that OFAC has the
information that we are seeing, and that we can engage with
OFAC in terms of the sanctions designation and how they are
using it. The short answer to your question is, yes, they do
use our information. It has been used in sanctions
designations, both in the context of Russia and in many other
contexts as well.
Mr. Barr. Okay. Great. Keep up the good work there. FinCEN
is asking Congress to authorize a sixth special measure, which
would allow you to block fund transfers on a transaction-by-
transaction basis, including for digital assets. However,
special measures 1 through 4 appear to be rarely used, and
FinCEN has often rescinded proposals to impose the fifth
special measure against foreign financial institutions. Less
than 2 years ago, you voluntarily withdrew a fifth special
measure designation against Banco Delta Asia, which had been
tied to North Korean money laundering. Why should Congress
grant FinCEN a new sixth special measure to go after digital
assets when the effectiveness of the first 5 special measures
is unclear?
Mr. Das. Thank you for that question. Again, we are very
focused on the use of our Section 311 authority, as well as the
authority in Section 97.14 of the NDAA from 2021, which
includes a special measure sixth. Again, Section 311 was
enacted in a time when most financial relationships and
transactions were done through the traditional banking system,
where there are traditional correspondent account
relationships. Nowadays, cross-border transactions often
include money services businesses, payment systems, and well
foreign exchange houses, as well as cryptocurrency.
So if we were to use the Section 311 authority against, for
example, Chinese ransomware actors, those using dark markets
and the like, we would not be able to use the Section 311
authority with respect to those transactions to prohibit those
actors from abusing and engaging in money laundering with
respect to the U.S. financial system. Currently, the Section
311 authority is not the right size for the types of threats
that we are seeing through the use of cryptocurrency.
Mr. Barr. One final question. I do want to echo the
concerns of the ranking member on FinCEN's development of its
beneficial ownership database, and I want to highlight the leak
of the SARs by a FinCEN employee. You talked about no hacking,
that there has been no hack, but there was this very troubling
report of a FinCEN employee in 2017-2018, as well as
ProPublica's recent disclosure of details from a leaked IRS
document. Data security looks to be not just a FinCEN problem,
but a Treasury problem. What specific steps have you taken to
ensure that these illegal disclosures never happen again?
Mr. Das. When that disclosure happened, we referred the
matter both to our Inspector General's office as well as to law
enforcement. That individual was removed from the premises,
detained, prosecuted, and served time. We are very focused on
that. We took a number of steps in terms of the mechanism used
by that individual in terms of being able to use a thumb drive.
Thank you.
Mr. Himes. The gentleman's time has expired.
Mr. Das. Sorry. Very quickly, to use a thumb drive. We have
ceased that use except under limited circumstances. And again,
we have a robust internal security program to ensure that the
database is used properly.
Mr. Barr. Thank you.
Mr. Das. Thank you.
Mr. Himes. The gentleman's time has expired.
The gentleman from Colorado, Mr. Perlmutter, who is also
the Chair of our Subcommittee on Consumer Protection and
Financial Institutions, is now recognized for 5 minutes.
Mr. Perlmutter. Thank you, Mr. Chairman, and if my Wi-Fi
goes out, just move on to the next participant here.
I would like to first thank Director Das for his service to
our country at a very difficult time when sanctions have been
imposed in many different ways against Russia, and obviously,
the role of FinCEN has really grown by leaps and bounds as we
deal with them. The ranking member talked about how you have
massive amounts of information coming to you, and compared to
what the normal person has, I would say that is true. But as
compared to the Big Tech companies and other major
institutions, you get a fraction of the information that they
vacuum up every day. I just want to let the record reflect
that, as massive amounts of information has to be compared to
what and what.
Several of us visited the Caribbean recently and one of the
things that came up again and again was money laundering
issues, de-risking issues, and what appeared to be kind of
redlining of that entire region, which has left the
correspondent banking services to the Caribbean in really
pretty sad shape. With the exception of Wells Fargo, it appears
that correspondent banking has pretty much left the Caribbean.
And so, I would like you to talk about, is FinCEN, is our
ability to do the money laundering and Know Your Customer, can
we do that on a nation-by-nation basis, or do you guys look at
regions, or how does that work?
Mr. Das. Congressman Perlmutter, thank you for that
question and for the opportunity to discuss this topic. Again,
financial inclusion and de-risking is incredibly important to
FinCEN and to Treasury writ large. It is critical that
countries, jurisdictions, and customers have access to
financial services. De-risking is a real problem, and we are
aware that it has impacted a variety of customers and sectors.
There has been a lot of work that we have done to understand
the root causes of de-risking, to identify what more that we
can do on this front. And, in fact, the AML Act, under Section
6215, requires that we identify and develop a strategy to be
able to respond to de-risking, and we have contributed to the
GAO report on de-risking as well that was also required by
Section 6215. Again, it is clear that the root causes for de-
risking are complex, and that they really come down to the
cost-benefit considerations and calculations that financial
institutions are making when they decide with whom to do
business. Some of these considerations are commercial and focus
on business strategy and profitability.
It is also very important just to note that there are
considerations that are related to jurisdictions'
implementation of their AML/CFT rules in ensuring that they
have robust AML/CFT frameworks within jurisdictions. We at
FinCEN and at Treasury engage on a regional basis and on a
country-by-country basis to ensure that countries are
implementing high and robust AML/CFT standards as well. And to
be able to encourage them to do so, we work through a number of
different institutions as well, including the Financial Action
Task Force (FATF), to raise standards and to ensure that
countries are able to implement those standards, and that will
provide confidence to financial institutions that they can
continue to bank customers within specific countries and
jurisdictions.
Mr. Perlmutter. Let me stop you for a second.
Mr. Das. Yes.
Mr. Perlmutter. Let me stop you for a second because it
appeared to us that there really wasn't a case-by-case or
country-by-country kind of review of this, and not in a very
frequent fashion, that there was just sort of this carte
blanche against this region and really has affected
individuals, and companies, and businesses down there because
they can't get correspondent banking, and it has made it very
difficult. I appreciate the general approach you take, but
let's say with respect to this region, are you updating on a
pretty continuous basis whether you think you need more de-
risking or everything is okay?
Mr. Das. Congressman, thanks for that question. With
respect to specific details about how Treasury is engaging,
particularly in the Caribbean region, I am happy to follow up
on that and provide you specific answers to your questions.
Mr. Himes. The gentleman's time has expired. The gentleman
from Texas, Mr. Williams, is now recognized for 5 minutes.
Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
you for being here today, Mr. Das. When the Bank Secrecy Act
was updated in the 2020 NDAA, the small business community
expressed serious concerns about burdensome new regulations
that would accompany this law. And Congress intended to strike
this balance between tracking down bad actors within the
financial system without hurting small businesses by directing
your Agency to only collect four simple pieces of information.
However, in the proposed rule, FinCEN is requiring businesses
to report more information than is required by statute. Can you
explain this decision and also shed some light on your
communications with financial institutions as you have been
developing these new regulations?
Mr. Das. Thank you very much for that question, Congressman
Williams. We are very mindful of the impact that the AML/CFT
framework and the rules that we have to implement have on small
businesses and the business community, more generally. In the
context of the Beneficial Ownership rule, again, we are
required to develop a beneficial ownership framework that is
highly useful to law enforcement, while at the same time
minimizing the costs and burdens to small businesses, and we
are very mindful of that fact. We received a number of comments
in the rulemaking process about the burdens that small
businesses will face. We are taking into consideration very
seriously those comments in the context of working towards the
final rule as well.
Mr. Williams of Texas. Yes, that is important, because
small business is the heart of our economy, and they are
getting buried right now. Everybody says I am for small
businesses, but they add more regulations to what they need to
do, so thank you for looking at that. And to keep on the topic
of small businesses, the proposed rule estimates that there
will be over 2.5 million new covered entities under this rule.
For many of these businesses, this will be the first time that
they have ever heard of FinCEN, and additionally, many will be
wary of turning over their information to a new government
agency, like most of us are. Again, how will you build trust
within the small business community as well as educate them on
what will now be required of them?
Mr. Das. Thank you for that question. As we work through
the rulemaking process, with respect to all of the three
different rules that we have to issue in the context of the
Corporate Transparency Act, we are planning an outreach process
to reach out to industry groups, to financial institutions, to
State-level secretaries of state, and others to be able to
ensure that the business community, stakeholders, and
individuals across America understand what the rules do, what
they require of small businesses and others within in terms of
reporting, and we plan on proactively engaging. This requires
an extensive strategic plan.
And again, when it comes back to resources, this is part of
the reason that we are asking for additional resources to be
able to support our FTE hiring so that we have the people
available to develop an outreach strategy, to implement that
outreach strategy, and to engage with a high number of industry
groups, again States and secretaries of states, businesses, and
to do the type of stakeholder outreach that we need to do to
ensure that everybody understands the scope of the rules, what
they are required to do, and how that information is going to
be used.
Mr. Williams of Texas. Small businesses are scared to death
of new government agencies, and when you start talking about
hiring more, hiring more, that really worries small businesses.
I am a small business owner, and I hear what you are saying,
but it is worrisome. We have heard about the massive inflow of
CTRs and SARs coming into the Agency. One solution that many of
my Republican colleagues and I have advocated is to raise the
monetary thresholds to file these reports.
As a reference point, when this law was first adopted in
the 1970s, a brand new Corvette--I am in the car business, so I
measure by this--a brand new Corvette sticker price was $5,000.
Today, the same model car costs over $100,000. And even with
this huge increase in prices, the thresholds to file these
reports has stayed the same. So, I do not see how you can
effectively recognize bad actors when they are being obscured
among the hundreds of thousands of other reports that are
filed. Another question, how do you think we can make the
reportings regime more effective so FinCEN is receiving fewer
overall reports from the financial institutions?
Mr. Das. Thank you for that question. Again, Section 6204
and Section 6205 of the AML Act require us to review the
reporting thresholds for currency transaction reports (CTRs) as
well as suspicious activity reports. That is something that we
are currently undertaking. We are engaging with a number of
other agencies at the State and Federal level in terms of
understanding the use of the report and a number of proposals
in terms of both raising the thresholds as well as considering
lower thresholds in terms of developing what is most useful for
law enforcement. That is an ongoing review. We also intend to
sort of link up that review with our review of information
coming in through Section 6215--
Mr. Himes. The gentleman's time has expired.
Mr. Williams of Texas. I yield back. Thank you.
Mr. Himes. The gentleman from Illinois, Mr. Foster, who is
also the Chair of our Task Force on Artificial Intelligence, is
now recognized for 5 minutes.
Mr. Foster. Thank you, Mr. Chairman, and thank you, Acting
Director Das, for your service in a very challenging time. And
I also have to say, as a former and successful small business
owner myself, I share my Republican colleague's enthusiasm for
the role of small business, and I hope that we can both
applaud, on a bipartisan basis, the record number of startups
that are happening under President Biden's economic recovery.
Now, I understand that FinCEN has had notable success in
combating some classes of illicit cryptocurrency cases through
either blockchain analysis or through other more traditional
detection methods. I presume that you have also been mostly
successful in preventing illicit crypto use in transactions
involving exchange accounts or hosted wallets that comply with
AML/KYC standards. However, I worry that we are much less
equipped to handle instances where transactions involve self-
hosted wallets or generally off-exchanges.
In a hearing a few months ago in this committee, when we
had several crypto industry leaders, they acknowledged that if
we wish to prevent crypto from being used for ransomware and
other illicit payments, that there is no alternative to having
all crypto transactions pseudonymously attached to a legally-
traceable, secure digital identity from a country with which we
have extradition treaties. And this is something that they
acknowledged was sort of a logical necessity here.
In late 2020, FinCEN proposed a rule that would amend the
implementation of the Bank Secrecy Act regulations and require
banks to provide KYC information and digital asset transaction
records for unhosted or self-hosted digital wallets. However,
if we end up with a regulatory regime where bank accounts are
not needed to create or access a digital wallet, what might the
regime that works to prevent money laundering, ransomware, and
so on--how would you monitor something like KYC compliance if
it is not tied to a bank account?
Mr. Das. Thank you for that question, Congressman Foster.
In terms of the rule, first of all, for the NPRM that was
issued in 2020, a number of comments were made. I think we
received over 8,000 comments to the NPRM. We are reviewing
those comments and considering next steps in terms of the
overall approach. With respect to the risks presented by
unhosted wallets, again, it is not that unhosted wallets are
entirely opaque. Unhosted wallets often engage in transactions
with cryptocurrency exchanges, which are subject to AML/CFT
regulation, and those are subject to SAR reporting requirements
as well. Law enforcement can engage with cryptocurrency
exchanges with respect to suspicious activity reporting and
other reports that might be applicable to them in terms of
getting some degree of understanding in terms of transactions
with unhosted wallets as well.
Mr. Foster. Yes, but there are limits to that, which we
probably shouldn't talk about here, but there are limits to
your ability when you start to use privacy-enhanced coins when
you go through multiple devices designed to obscure the origin
of transactions in them.
Mr. Das. And that is something that we are very concerned
about. Again, the illicit finance risks of transactions that
are not transparent create significant illicit finance risks,
and that is something that we are very focused on in the
context of understanding more effectively the cryptocurrency
industry and how cryptocurrencies use this to be able to better
assess what those channels of illicit finance risk are, and to
be able to find ways to identify an appropriate regulatory
regime so that appropriate AML/CFT controls are in place. But
again, this is a question that we are very focused on with
respect to unhosted wallets as well as other types of
convertible cryptocurrencies.
Mr. Foster. Yes. I think ultimately, it seems like what you
are going to need is some sort of an internationally-operable
crypto driver's license that you attach to every crypto
transaction, that you can use. When you see a crime has been
committed, for example, you can go to a trusted court system
and get that de-anonymized and find out when your screen locks
up with ransomware, you have to be able to go to a judge and
say, here is the proof that a crime has been committed, and I
want to know who owns that wallet. And to have the judge in a
trusted jurisdiction is an important part. And that seems to
only work if you have something like a crypto license attached
pseudonymously to every transaction. I don't see a logical
alternative to that. And if you are aware of one, I would be
very interested as you interpret all of these comments coming
in.
Mr. Das. I appreciate that, and that is something we can
follow up on with you.
Mr. Foster. Thank you.
Mr. Himes. The gentleman's time has expired. The
gentlewoman from Missouri, Mrs. Wagner, is now recognized for 5
minutes.
Mrs. Wagner. Thank you, Mr. Chairman. Good morning, Acting
Director Das. As you are aware--and I do appreciate your
meeting with me and my staff--the pandemic caused a horrific
spike in the amount of child sexual abuse material (CSAM) found
online. In 2021 alone, the National Center for Missing and
Exploited Children received nearly 30 million reports of online
child sexual exploitation, which is a staggering 70-percent
increase in this illegal, illicit exploitation from 2019.
The financial sector plays a vital role in combating the
distribution and sale of these disturbing images and videos of
children being sexually abused, but clearly, much more needs to
be done. Title 31 of the U.S. Code requires the financial
sector to implement effective anti-money laundering compliance
controls. Combating human trafficking, including crimes against
children, is one of FinCEN's anti-money laundering priorities.
I would like to submit for the record, Mr. Chairman, two
reports compiled by separate anti-trafficking organizations
using different investigatory methods, both of which found
extremely troubling results on a website that also grew
massively during the pandemic, and that is known as
OnlyFans.com.
Mr. Himes. Without objection, it is so ordered.
Mrs. Wagner. I thank the Chair. Currently, major U.S.
credit card companies must comply with Title 31 regulations to
allow their products to be used to purchase content on this
website. Although there is no legal issue with purchasing
content involving consenting adults, this report by the Avery
Center found, ``A clear correlation between third-party
traffickers and minor victims on OnlyFans.'' And the platform
has, ``no screening procedures to identify situations where
exploitation or abuse are occurring.''
The other report by the Anti-Human Trafficking Intelligence
Initiative and the University of New Haven found again, ``A
high value of OnlyFans profiles possessing commonly understood
indicators of CSAM--again, CSAM is child sexual abuse
material--and sex trafficking within less than 2 hours.'' These
reports assert that the U.S. financial sector is enabling this
illegal commerce by, ``failing to adequately comply with their
existing regulatory requirements mandated by Title 31.''
Acting Director Das, what are the regulatory requirements
that credit card companies must comply with in order to prevent
the use of their products to purchase CSAM and non-consensual
sexual imagery?
Mr. Das. Thank you for that question, Congresswoman Wagner.
Again, credit card companies are subject to defined AML/CFT
program requirements under our rules where they need to focus
on whether or not their partner financial institutions are
engaged in money laundering or terrorism financing. However, in
the overall framework, credit card companies act as
intermediaries in the overall financial system in terms of
payments between merchants and financial institutions. The
financial institutions at the end that deal with customers who
might be malign actors are required to file suspicious activity
reports when they see information that they may suspect is
linked to illicit finance activity. And the financial
institutions do file suspicious activity reports in relation to
online child sexual exploitation.
Mrs. Wagner. I know that we are going to run out of time,
and I just want to thank you and your office for working with
me. And I would implore my colleagues on the committee to also
get on board and work with our office in this regard. More has
to be done to ensure that this child sexual abuse material
cannot be purchased using mainstream financial tools like a
credit or a debit card. So, I am imploring my colleagues and
FinCEN to work with me to find a solution to keep our children
safe; A 70-percent increase during the pandemic is
unacceptable.
I thank you, Director Das, for your support on this, and I
appreciate the Chair giving me the indulgence of time, and I
yield back.
Mr. Himes. The gentlewoman's time has expired. The
gentlewoman from Ohio, Mrs. Beatty, who is also the Chair of
our Subcommittee on Diversity and Inclusion, is now recognized
for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman, and thank you also,
Acting Director Das, for being here today. I have a two-part
question, but, first, for the record and for the sake of time,
I won't repeat Congressman Perlmutter's question. But I, too,
was on that same CODEL with him, and I also want to associate
myself with the words of Congressman Foster.
With that said, Mr. Das, what we heard, and I will say it a
little differently, as Mr. Perlmutter referenced being
redlined--we heard this repeatedly from heads of states to the
point that they felt they were being punished by United States
secretaries of states in how our process works as it looked to
blaming them for money laundering or blaming them for crimes
that they didn't believe were necessarily the case. We all
understand it is a delicate balance, but I guess I, too, share
a concern that these are people of color, and they were a lot
stronger than the redlining. They thought part of it dealt with
systemic racism. And I made a commitment, like the others on
the CODEL, that we would come back and really take a look at
this. I would like to join you in that dialogue when you have
it with Mr. Perlmutter.
But let me also say, like most of us, or all of us rather,
I represent people who are amongst the 9 million Americans who
live abroad. And one of those constituents by the name of
Rebecca emails my staff frequently. She lives in England, and
she raised this issue with us specifically for this hearing.
And it has to do with FinCEN Form 114, the Report of Foreign
Bank and Financial Accounts, or FBAR, which people are required
to file, as you know, if they have aggregate foreign holdings
of over $10,000. And for a lot of people living abroad, the
FBAR is another confusing form on top of the special reporting
that they also have to do to the IRS. Now, as I understand it,
the $10,000 threshold hasn't been updated in decades, and I
think the BSA was sometime around 1970. And since it is
aggregate, once you have assets above that amount, you have to
file the information on all of your accounts, regardless of how
small they might be.
Now, I want to be clear again, I don't want to advocate for
anything that impedes your ability to weed out money laundering
or any type of illicit financing, but at the same time, my
question is, is it worth us taking a look at making an
adjustment to that? If you would look at inflation over the
decades since it was established, from $10,000, if I wanted to
do legislation to say, take it to $70,000, accounting from the
1970s to the present, is that something that you could support?
Mr. Das. Thank you very much for that question,
Congresswoman Beatty. I think the answer is that we would
review the thresholds for FBAR reports as well. I think it is
an important issue to review, and, in fact, we are in the
context of Section 6204 and Section 6205 of the AML Act. We are
reviewing the thresholds with respect to CTRs as well as with
respect to SARs.
In the context of Section 6216 of the AML Act, we are also
reviewing, more generally, the effectiveness of the reports
that we receive, and in that context, I think it is important
to review the thresholds with respect to FBARs. But I would
like to say that FBARs are incredibly important to law
enforcement, and they are incredibly important to the IRS as
well. Some law enforcement agencies, particularly those
investigating tax-related crimes such as the IRS CI, work
mainly with FBARs and/or the absence of FBARs to be able to
generate cases. And they use the account and ownership
information to generate cases and to target tax evaders and the
like.
Mrs. Beatty. My time is almost up. Mr. Director, let me
just say this because the clock is running out. I think I hear
you, and I get the gist of it. I am not trying to impede them.
I am just saying, let us take a look at the $10,000, keep the
same rules, but let us lift the bar.
Mr. Das. We can take a look at that.
Mrs. Beatty. Thank you. And thank you, Mr. Chairman.
Mr. Himes. The gentlelady's time has expired.
The gentleman from Arkansas, Mr. Hill, is now recognized
for 5 minutes.
Mr. Hill. Thank you, Mr. Chairman. I appreciate you being
the Chair. I join with the ranking member in wishing Chairwoman
Waters a speedy recovery from COVID. Nobody's family has
suffered more than hers, losing her sister very early in the
pandemic. And thank you, Acting Director, for being here today,
with very helpful testimony.
Would you be willing to come once a year and visit with the
committee on behalf of FinCEN?
Mr. Das. Of course, yes.
Mr. Hill. Thank you. That would be very helpful. I think we
were all so pleased with your briefing the other day. We just
don't have access to this level of detail, so I think it is
very helpful to Members. Mrs. Beatty raised the issue of
thresholds. Others did as well. I just would remind the Acting
Director that neither Secretary Lew nor Secretary Mnuchin were
particularly forthcoming or helpful in trying to review or
raise those thresholds. We had bipartisan bills here, I think,
Mr. Himes, for three Congresses that would have done some
modest inflation adjustment of the CTR and SAR threshold. So, I
am glad to hear you are going to look at them, and we would
welcome Secretary Yellen being a more forthcoming interlocutor
on trying to raise those somewhat without impeding law
enforcement. I think that is possible. Would you agree?
Mr. Das. Again, Section--
Mr. Hill. Don't repeat the section numbers. Just, do you
agree or not agree? Do you agree that raising the thresholds is
a possibility and might be beneficial to both sides?
Mr. Das. We are looking at a number of proposals with
respect to raising thresholds and seeing what the impact will
be.
Mr. Hill. Yes, okay. Good. I appreciate that. Have you done
a cost/benefit analysis at Treasury using your great macro
resources on the new Corporate Transparency Act proposal for
beneficial ownership?
Mr. Das. The reporting rule, NPRM, that we published last
December includes a regulatory impact analysis that includes
evaluation of what the costs would be to business, yes.
Mr. Hill. When it was proposed, I was very opposed to this
style. I am not opposed to improving beneficial ownership, but
I was very opposed to Mrs. Maloney's bill. I worked very hard
against it and offered alternatives. Again, our mutual good
friend, Secretary Mnuchin, didn't agree, nor did the Chair of
the Ways and Means Committee, so I lost out on my approach. But
I think you are going to find this is going to be one of the
most expensive regulations ever imposed on American business,
so I want to associate myself with Mr. Williams' comments.
And just in the last 16, 17 months of the Biden
Administration, the American Action Forum has released that the
Administration's regulatory costs in the economy are up about
$200 billion annualized from the Trump level, so we are all
very sensitive to the imposition and cost of regulations on our
small businesses.
And I think Mr. Williams summarized some of the concerns we
have about the beneficial ownership rule. Would you be willing,
when you get ready for that notice for final rulemaking, to
brief and receive some final comments, not approval, we
understand separation of powers, but some final comments from
Ranking Member McHenry and Chairwoman Waters, because I know
they have divergent views on this. That makes it hard on you.
We recognize that, but would you be willing, before that
rulemaking is published, to visit with Ranking Member McHenry
about it?
Mr. Das. Thank you for that question. Again, we are subject
to APA requirements with respect to notice-and-comment
rulemaking. To the extent that, from my perspective, from a
FinCEN perspective, we are happy to brief you on the rules and
the contours of the rules as well, but it would have to be
subject to the notice-and-comment rules and we would have to
follow those rules in terms of any--
Mr. Hill. Let's think about that, because we are concerned
about the cost of this rule. Let me shift comments and talk
about the topic really of the day for Mr. Himes, Ms. Waters,
Mr. McHenry, and all of us, and that is what we are doing to
track down Russian oligarchs. You were very helpful and
forthcoming the other day in our briefing, but of course, we
have sanctioned Russia, and Russian people, and Russian
entities, particularly since the Crimean invasion back in 2014.
And you cited the SARs and the possible connection of SARs, 271
out of 2,000 that were referred to law enforcement. Let me
narrow that a little further and ask you, since 2014, are you
aware of a prosecution of a Russian connected to sanctions
evasion that was related to a SAR filed in the United States?
Mr. Das. We have taken compliance efforts with respect to
entities linked to Russian ransomware activities. In terms of a
specific Russian prosecution with respect to sanctions evasion,
I would have to refer you to DOJ on that question. And I am
happy to follow up with you on any questions that you may have.
Mr. Hill. Yes, let's follow up on that. Thank you. I yield
back, Mr. Chairman.
Mr. Himes. The gentleman's time has expired. The gentleman
from Illinois, Mr. Casten, who is also the Vice Chair of our
Subcommittee on Investor Protection, Entrepreneurship, and
Capital Markets, is now recognized for 5 minutes.
Mr. Casten. Thank you, Mr. Chairman. Acting Director Das,
it's nice to see you again. I want to follow up on a
conversation you and I had a couple of weeks ago, specifically
about the Deutsche Bank mirror trades in 2014 and the degree to
which we have closed that barn door. This was, of course, the
situation where Russians were executing simultaneous buy and
sell trades to move rubles into hard currency. And when we
talked about it a couple of weeks ago, I was thinking about it
in the context of, if we close the barn door, Russia can't use
that to either influence foreign politicians as they were using
in 2014, or to get hard currency to prosecute their war crimes
in Ukraine. It is, of course, back in the news this week with
the news of Val Broeksmit's death, who was the whistleblower,
who, among other things, disclosed what was happening at
Deutsche.
What I would like to understand with you, from a FinCEN
perspective is, do you have jurisdiction or do you receive SARs
reports if a non-U.S. actor is laundering money through non-
U.S. markets? I think the answer is no, but I just want to
clarify that my understanding is right.
Mr. Das. Your question is whether or not we receive SAR
reporting when a non-U.S. actor launders money through non-U.S.
markets, is that correct, sir?
Mr. Casten. Yes.
Mr. Das. If there is a touchpoint to the U.S. financial
system, and the financial institution is able to identify any
illicit activity, we would receive a suspicious activity
report. If the action is entirely outside of U.S. jurisdiction,
and it doesn't have a touchpoint with respect to a U.S.
financial institution, I am just struggling to see a situation
in which we would see a suspicious activity report.
Mr. Casten. Okay. So if I understand it, FinCEN is a member
of the Egmont Group, which is sort of trying to tie that with
your peers in other countries. Let's say a bad actor, not a
U.S. flag, doesn't trigger a SARs report and they are in two
other countries. Would you find doubt about it? Do you have
jurisdiction? Can you put the appropriate walls up if that is
flagged by one of your partners in the Egmont Group? Is that
what the Egmont Group is intended to do? Do I have that right?
Mr. Das. You have that right, Congressman. It would depend
on a couple of different considerations. One is we have the
ability to ask questions of our Egmont Group partners with
respect to law enforcement actions or investigations that might
be ongoing in the United States and to identify whether or not
our counterpart FIUs might have that information. There may be
some situations in which Egmont Group partners spontaneously
disclose that information to FinCEN. And if they did disclose
that information when they think that the United States might
have an interest, we would review that information, and, if
appropriate, pass it on to law enforcement agencies.
Mr. Casten. Okay. This is rapidly going to get into areas
where this may not be the appropriate forum to discuss this,
but let me just sort of walk through where my concern is, and
you can comment as you see fit. We know from the mirror trading
scandal that Deutsche Bank broke the law. They were fined.
Thank you. We know that they were influenced to some degree by
Russian money. They were tempted by the commissions. And we
know that Russian money has been used to corrupt an awful lot
of people in our world, sadly, and that is a part of what they
have been using that laundered money to do.
As we now try to make sure that they don't have the
resources to continue to commit these acts across cities in
Ukraine, that all of our sanctions are effective, have we and
our international partners sufficiently closed that down, or
are we at risk that just one bad corrupted actor, one bad
country can still provide the gap so that Russia could find
their way through that and all of a sudden the money is into
somebody whom we don't know about or some company that is not
triggering any flags for us? Are we doing enough to close that
down? Is this a U.S. law issue? Is it an international law
issue?
And some of that gets well beyond the jurisdiction of this
committee, but I would like to understand, as we impose these
sanctions, so that we have a good understanding that they are
actually going to affect the people intended and are, at the
very least, consistent with where those gaps are in
international. I realize it is a big, meaty question. I would
welcome your comments and maybe continued conversation given
the time.
Mr. Das. I would be happy to continue the conversation with
you. I think on our part, and in terms of ensuring that we
understand how Russia is evading sanctions or abusing the
financial system, we have actually set up a group with our
counterpart FIU, our closest partners, for example, the U.K.,
the EU, Australia, and others, to be able to work together to
identify key issues with respect to Russian illicit finance and
to be able to exchange information quickly and on an effective
basis to be able to support law enforcement and the intel
community in terms of targeting exactly the types of activity
that you are discussing.
Mr. Casten. Okay. Thank you, and let's have a follow-up
conversation. I yield back.
Mr. Himes. The gentleman's time has expired.
The gentleman from Georgia, Mr. Loudermilk, is now
recognized for 5 minutes.
Mr. Loudermilk. Thank you, Mr. Chairman. Acting Director
Das, it's good to see you again. I would like to start off by
discussing the implementation of the anti-money laundering and
beneficial ownership reporting law. The proposed rule's
definitions of, ``substantial control,'' and, ``ownership
interests,'' are quite complicated, which would make it hard to
apply them consistently. This problem is going to be
compounded, in my opinion, for financial institutions if FinCEN
uses those same definitions in an updated customer due
diligence rule. My first question is, will FinCEN take steps to
simply define these definitions before the rule is finalized?
Mr. Das. Thank you for that question. The substantial
control rule is a rule that is covered in the NPRM. We received
a number of comments on the substantial control rule, the
contours of it, the benefits that it might provide in terms of
providing a highly-useful database for law enforcement, as well
as some of the complexities in terms of implementation of that
substantial control role. We are taking a hard look at those
comments in the context of moving towards a final rule, and we
will consider issues that were raised in the comments,
including by a number of you in terms of the contours and the
costs imposed as well.
Mr. Loudermilk. Okay. I would appreciate if you would keep
us informed on the direction that you are going and the
decisions that you make there. Another question is, the law
requires FinCEN to minimize burdens on businesses, but it
appears that FinCEN is not following that requirement. For
example, FinCEN has expanded the scope of who is required to
file, expanded the types of information that must be filed, and
set very short compliance deadlines. My question is, are there
examples in the rule where FinCEN has minimized compliance
burdens, as the law requires?
Mr. Das. We proposed a rule that would develop a highly-
effective database for law enforcement to use. We evaluated the
impacts that businesses and particularly small businesses would
have. We estimated that the costs of the rule for small
businesses would be at $45 per business for a filing, for the
initial filing, which is comparable to the cost that small
businesses would have to pay just to establish an LLC, which
ranges anywhere from $40 to $500, depending on which State is
involved in terms of incorporating it. Again, we received a
number of comments around both the costs and the implications
for small businesses as well as the complexity of the rules. We
found the comments to be incredibly helpful and instructive,
and we are taking all of those into account in terms of next
steps as we work towards a final role.
Mr. Loudermilk. And I trust you will keep us informed on
the direction that you are going, and again, as the law
requires, minimize those burdens as much as possible. I would
like to follow up on something that my colleague, Mr. Williams,
discussed, and that is Section 6205 of the Anti-Money
Laundering Act, which requires Treasury to conduct a rulemaking
to consider changing the dollar threshold for SARs and CTRs.
This is badly needed because institutions are currently
required to file more than 20 million CTRs and SARs every year,
most of which have no value to law enforcement. In fact, a 2018
study indicated that 4 percent of SARs and 0.44 percent of CTRs
warranted additional review from law enforcement. That is a
very low number compared to the amount of data that businesses
are required to report. What is the status of the reports and
rulemaking required by Section 6205?
Mr. Das. Could you repeat the question? I'm sorry.
Mr. Loudermilk. Okay. What is the status of the reports and
rulemaking required by Section 6205? How are you going to
modernize this reporting requirement?
Mr. Das. We are working on the reports under Sections 6204
and 6205. We have engaged with all of the consulting agencies
that are involved. We are reviewing a number of different
proposals from a number of different sources. With respect to
the CTR and the SAR reporting threshold, we expect to issue
that report later this year in conjunction with the two reports
together. And again, we are currently evaluating the issue. We
are very focused in terms of priorities, given there are
resource constraints on getting the beneficial ownership rule
done and the real estate process moving forward as well. But
this is something that we are actively working on, and we hope
to get it done as quickly as possible.
Mr. Loudermilk. Thank you. I see my time has expired, so
any other questions I have, I will submit for the record. And I
yield back the balance of my time.
Mr. Himes. The gentleman's time has expired.
The gentleman from California, Mr. Sherman, who is also the
Chair of our Subcommittee on Investor Protection,
Entrepreneurship, and Capital Markets, is now recognized for 5
minutes.
Mr. Sherman. Thank you. Acting Director, when Secretary
Yellen testified before us a few weeks ago, I asked about the
time frame by which we can expect the beneficial ownership
database to be established. As you know, that database is
required under the Corporate Transparency Act, which passed in
January of last year. Under the law, the database is supposed
to be implemented within 1 year, so it is a few months late.
Secretary Yellen pointed out that FinCEN has proposed one of
the two rules that the Agency believes are necessary to
establish the database. I know you are a few months late now.
Can you give us some detail as to what is preventing you from
meeting the timeline and, more importantly, when we can expect
the database to be established?
Mr. Das. Thank you so much for that question. Again, the
Corporate Transparency Act requires that we issue three rules:
first, a reporting rule that governs the information that is
provided to FinCEN that goes into the database; second, the
access rule, which provides the guidelines and rules for how
law enforcement agencies and others access the database; and
third, it requires us to issue revisions to the Customer Due
Diligence (CDD) rule, which needs to be issued 1 year after the
effective date of the reporting rule. As the Secretary
mentioned, we are very focused in terms of the use of our
resources in getting the access rule NPRM done by the end of
the year, and we are working hard to do it. At the same time,
in parallel, we are working on the comments to the reporting
rule. We received a substantial number of comments. It is an
incredibly complex issue, and it is incredibly important for
some of the reasons stated here today that we just get it
right.
Mr. Sherman. Okay. Congress gave you a year to do it. You
think it will take 2 years to do it. You are confident, or how
confident are you that you will be able to get it done by the
end of this year?
Mr. Das. Again, we are committed to getting the access rule
NPRM done by the end of this year.
Mr. Sherman. Will that then lead to the establishment of
the database, or do you have to then do the revisions to the
third rule?
Mr. Das. I do not have a timeline for the establishment of
the database. Again, we are working incredibly hard given the
resource constraints that we have and the complexity of the
issues.
Mr. Sherman. Okay. I will urge you to get this done as
quickly as you can. It is important.
Mr. Das. Again, we are very focused on getting it done as
quickly as possible.
Mr. Sherman. When Secretary Yellen came before this
committee last month, I highlighted a recently-published
article in The Washington Post saying that yachts and mansions
are easier for us to track down when we are going after the
Russian oligarchs than interest in hedge funds and equity
funds, venture capital funds, et cetera, because they are not
required to disclose beneficial ownership information to you or
to the SEC. In February, the House passed the America COMPETES
Act, which included an amendment I offered, which would require
issuers of exempt securities to file beneficial ownership
information with the SEC with regard to large transactions.
Would you agree that increased Federal Government
visibility into our $11 trillion private securities market,
especially knowledge as to beneficial ownership, would help us
combat the Russian oligarchs?
Mr. Das. Thank you for that question. As we have noted in
our unified regulatory agenda, we are actively considering a
proposed rule that would address existing gaps in regulatory
coverage for investment advisors, taking into account the
comments that were submitted during the NPRM process that
occurred in 2015. Again, we are working from a FinCEN
perspective with Treasury's Office of Terrorist Financing and
Financial Crimes in a number of different efforts to be able to
better understand the risks presented by investment advisors as
we think about what the appropriate rule might look like and
what the scope and coverage might look like as well. In the
meantime, we are very focused on this issue in the context of
Russian illicit finance and the way Russian oligarchs are
abusing the financial system. And again, we are working--
Mr. Sherman. Let me try to squeeze in one more question. We
have sanctioned 400 individuals and entities, as well as, of
course, the Russian government. The crypto world is not big
enough to handle the major governmental transactions, but they
are big enough for some of the oligarchs. We hear that the
crypto industry transactions is a technology which would allow
for traceability. However, privacy coins, like Monero, and
protocols, like Lightning Network, can be effective in
obscuring transactions. How focused is FinCEN on looking at
crypto at the oligarch level?
Mr. Das. We are focused on it. Again, we issued a sanctions
evasion alert around potential evasion using cryptocurrency.
And again, we are very focused on this issue in terms of trying
to identify means through which cryptocurrency might be used to
evade sanctions or to bolster the Russian economic system as
well.
Mr. Sherman. Thank you.
Mr. Himes. The gentleman's time has expired.
The gentleman from Ohio, Mr. Davidson, is now recognized
for 5 minutes.
Mr. Davidson. I thank the chairman, and I thank Acting
Director Das. Thank you. Thank you for your time and, frankly,
taking the time to meet individually with some of our Members,
including me and my staff. We appreciate the challenge that you
are up against.
As Mr. Hill highlighted, I have worked passionately and
vigorously to stop some of the things you are working on, but
they passed anyway, and so there is a law. I understand that
you are implementing them. I do hope that we can make them less
bad than they would potentially be. And I share some of the
concerns that he, and Mr. Williams, and others have
highlighted, so thanks for listening, and we hope that we can
continue to collaborate as we go through this development
process.
Today, I am in the process of introducing the Financial
Crimes Enforcement Network Improvements Act, which would
provide additional accountability. It would provide a path for
your role as the Director to be a Senate-confirmed position and
provide some of the things that you have personally been
willing to do, like come before this committee and testify in
an open setting, and also meet with us in a classified setting,
because it is really important for our nation to have the
world's best financial intelligence organization. I know that
we have an advantage because we have the power and influence of
the U.S. dollar, but we hope that advantages also not just
great people, but great authorities for our FinCEN.
And when you look at how we go about, inherently in America
in intelligence, we are also constrained in some ways that
maybe more authoritarian regimes wouldn't feel hindered by,
which is we need to protect civil liberties, and we need to do
these things in a way that provides privacy and due process and
is concerned about the impact on our economy. So, we probably
disagree on what the costs are for compliance for small
businesses.
But I highlighted another thing. Just recently, talking to
the Congressional Budget Office, they thought that student debt
was going to be better when the government operated student
lending programs, and they said we were going to save $68
billion by taking over student lending. What we know is
actually just in defaults alone, it is going to cost half a
trillion dollars, so the financial modeling on all this is
pretty bad. When we just have these debates and you say one
thing, it is just words. When you look at the financial models,
it is really just understanding what is it really like.
As a small business owner, as someone who spent a lot of
time in the private sector, this is a very disruptive thing
aside from the cost, because it assumes that the citizen
somehow has to come to the government to get permission to
operate, and, in fact, that is exactly what my colleague, Mr.
Foster, highlighted. Perhaps the most disturbing thing that I
have heard is the idea that to access your own money, you need
to get some identity, some globalist-conforming identity stamp,
and then everything that you want to do is tracked and
monitored. And then, when they want to rewind the tape and
figure out who it was, they may not even need to get a warrant;
they just come and expose who that person is.
I think that the way that we protect our way of life is by
being less like China and more like America, because this is
exactly what China is in the process of implementing. And when
they hear the things that you are working on, people back home
fear that what you are part of building is a system, frankly, a
dystopian system where the average citizen needs to get
permission to access their own money. And I think that is why
the self-hosted, self-custody of crypto, basically if you
download software and you use it, somehow you could become a
criminal under this self-hosted rulemaking that has been
proposed. Could you talk about self-custody and where FinCEN is
headed with that?
Mr. Das. Thank you for that. First of all, I entirely agree
with you in terms of the importance of FinCEN's mission in
getting it right. Second of all, we are very focused on privacy
interests in the context of what we do. That is an important
concern in terms of the information that we get, as well as how
that information is used. Third, in terms of the self-hosted
custody wallet rule, the unhosted wallets rule as we call it,
and again, we received a number of comments. They raised a
number of privacy considerations in those comments, both with
respect to the unhosted wallets rule as well as the travel
rule. We are taking a close look at that and reviewing it and
our consideration of next steps.
Mr. Davidson. I hope that the Keep Your Keys Act will
feature prominently, which protects the ability of the ordinary
citizen to continue to own digital assets and, frankly, self-
custody. Thanks for the work, and I yield back.
Mr. Himes. The gentleman's time has expired.
The gentleman from Massachusetts, Mr. Lynch, who is also
the Chair of our Task Force on Financial Technology, is now
recognized for 5 minutes.
Mr. Lynch. Thank you, Mr. Chairman. Thanks for holding this
hearing. I want to thank our witness as well for his
accessibility. As Mr. Davidson noted, Mr. Das has been very
good with his availability.
I do want to ask, I look at the funding for FinCEN and I
also look at the responsibilities that you have, and I know
that despite the importance of the role that FinCEN plays, the
current funding levels are about $430 million short of what we
would recommend for your agency. And I am just curious as to
how you work around that issue? Are there tradeoffs that have
to be made? I know that Congress did make an additional
appropriation in connection with the Ukraine situation. But
where do we stand now and how are you doing that workaround
where you don't have enough resources to hire the number of
agents that would be appropriate given the scope of your
responsibilities? Could you talk about that a little bit?
Mr. Das. Sure. I appreciate that question about our budget.
Again, we appreciate the funding that was provided under the
Fiscal Year 2022 appropriations as well as the Ukraine
supplemental. The Fiscal Year 2022 appropriations will in large
part go to supporting our IT system, as well as our beneficial
ownership database. The Ukraine funding will be used in a
number of different respects to help support our analyst team
in tracking and tracing funds related to sanctions evasion and
illicit finance as well.
Where the Fiscal Year 2022 appropriations comes up short is
with respect to funding to support hiring additional FTEs to be
able to do all the work that we have to do. As a result, there
are huge tradeoffs that are made in terms of our ability to
engage in the enforcement and compliance work that our Office
of Compliance and Enforcement does, to be able to ensure that
financial institutions, cryptocurrency exchanges, and others
have reasonably-designed and effective AML/CFT programs. It
constrains our ability to get the rules and regulations done to
implement the AML Act, and that is incredibly important because
we are simply missing deadlines at this point. It constrains
our ability to hire analysts, particularly in the
cryptocurrency area, to be able to do the type of analytics
that is required to understand how cryptocurrencies are flowing
and contributing to illicit finance.
And our team is incredibly talented, but they are
incredibly small as well, and they are just outmatched by the
challenge, not in competence, but in terms of resources alone.
And we continuously run up against challenges in terms of
trying to figure out who is available to do work around
cryptocurrency issues, to be able to combat that illicit
finance. And again, we are constrained in our ability to engage
in public/private partnerships and outreach forums like the
FinCEN Exchanges and Innovation Hours, to be able to execute on
the AML Act's directive to engage more with financial
institutions so they understand how law enforcement is using
the information that FinCEN has so we can provide feedback to
those financial institutions in terms of what works and what
doesn't work. And there are a number of different fronts in
which we are just coming up short in terms of fulfilling what I
think the AML Act intends for us to do, which is to create a
robust framework.
Mr. Lynch. Great. I only have another minute, and I do want
to get another question in. With the advent of digital wallets,
we have a whole area of vulnerability now. The New York Times
just wrote a great piece about the vulnerability of these
digital wallets, and 19 million Americans last year were
scammed or had their money stolen on these platforms because of
the vulnerabilities in these digital wallets. This is sort of a
growing phenomenon. There is a big adoption rate, a very high
adoption rate in the economy right now. Those are financial
crimes. Does FinCEN have visibility on that new development?
And tell me, how are you redirecting resources to that problem?
Mr. Das. Cryptocurrency exchanges are subject to FinCEN's
AML/CFT program requirements. They are required to file
suspicious activity reports if there is any indication of a
financial crime or if they reasonably suspect a financial
crime. So, we would have a certain degree of visibility if it
filters through in our suspicious activity reporting.
Mr. Lynch. Okay. Thank you. Mr. Chairman, I yield back.
Thank you.
Mr. Himes. The gentleman's time has expired.
The gentleman from West Virginia, Mr. Mooney, is now
recognized for 5 minutes.
Mr. Mooney. Thank you, Mr. Chairman. The Russian invasion
of Ukraine has put the work that the Financial Crimes
Enforcement Network (FinCEN) does at the forefront of our
priorities here in the committee. As Russia's ruble tanked
after the sanctions took hold, the incentive for Russian
oligarchs to launder their money through the United States grew
substantially. We must remain firm in punishing these bad
actors and flexible enough to find the strategies that allow
them to launder money into the country and our financial
system. These goals are critically important to our national
security, but we also have an obligation to ensure that the
work that FinCEN does and the rules that it creates are not
overly-burdensome to small businesses.
Acting Director Das, the Corporate Transparency Act was
written to specifically exclude sole proprietors in its
definition of a reporting company. However, FinCEN has failed
to make that distinction in their reporting company definition.
Will FinCEN explicitly exclude sole proprietors from the
definition of a, ``reporting company?''
Mr. Das. As the NPRM states, reporting companies that are
required to submit beneficial ownership information include
corporations and LLCs and other similar entities that are
required or that create or form an LLC or a legal entity
through the submission of a document to a State secretary of
state. That is the scope of the rule. As we have defined it in
the NPRM, we requested a number of comments and questions
around the scope of the reporting company definition to better
understand who or what type of legal entities that definition
would capture, and we are taking stock of those comments at
this point.
Mr. Mooney. Okay. In addition to the potential regulatory
burdens of some FinCEN rules, I am also concerned about
FinCEN's cybersecurity. FinCEN's role in combating illicit
finance would make it a target of cyberattacks from Russia and
China. Acting Director Das, please talk about what you are
doing to ensure that a cyber breach of FinCEN would not
jeopardize the information of small business owners.
Mr. Das. That is an important concern. Again, we have a
robust IT framework. And as I mentioned previously, we have
what is called a segmented IT architecture, which makes our IT
system less vulnerable to hack and intrusion. We conduct
regular penetration testing to ensure that any vulnerabilities
are exposed and that we prevent any targeted efforts with
respect to our IT system. We stay in close communications with
Treasury's Office of the Chief Information Officer as well to
identify any potential threats to our system. And again, we
apply the highest level of security under the FISMA levels of
security as well. We work very hard to ensure the integrity of
our IT database, and we are taking all of the precautions
necessary to do so.
Mr. Mooney. Thank you. Obviously, it is critical that we
get the balance right between keeping illicit financing out of
our country and keeping compliance burdens low. Small
businesses are the backbone of this economy. We very much need
them to succeed in America. In addition to the regulatory
burden, we need to ensure that FinCEN can be a good steward of
information. The new beneficial ownership database will contain
personal information from millions of small business owners.
Clearly, if someone were to breach that database, it would be a
total disaster.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Mr. Himes. The gentleman yields back.
The gentlewoman from Pennsylvania, Ms. Dean, is now
recognized for 5 minutes.
Ms. Dean. I thank the Chair, and I thank you, Director Das,
for testifying today. I do apologize. I am between two
hearings, so I don't want you to think my absence here is due
to a lack of interest in your work and what you do. Thanks for
being here and for your testimony.
I would like to talk about FinCEN and combating gun
violence. I have a bill that was noticed in conjunction with
this hearing, the Gun Violence Prevention Through Financial
Intelligence Act, which would require FinCEN to collect and
analyze bank data to determine what financial indicators might
precede a mass shooting, a terrorist attack, or gun violence in
our communities, and that the FinCEN would be required to issue
an advisory on how banks should use those indicators to comply
with their suspicious activity reporting. If insufficient data
exists, FinCEN is required to report to Congress within 1 year
about why the information they collected was inadequate to
publish an advisory.
I don't need to tell you or anybody in this room that gun
violence hunts down far too many innocent Americans. Every
single year, those numbers are increasing in dramatic fashion.
And I saw a tragic statistic earlier this week that guns have
become the leading cause of death among children, the leading
cause of death in 2020. Our inaction on this issue is, I think,
shameful, unforgivable, and really intolerable. We have to have
an honest discussion around gun violence.
Director Das, right now, what does FinCEN do? Does FinCEN
collect data relative to financial indicators of gun violence?
If not, what should we be doing? How can we help financial
institutions identify risks of mass shootings, of terrorist
attacks, of gun violence? Would you tell us about FinCEN and
gun violence?
Mr. Das. I appreciate that, and the issue of gun violence
is very serious, and the impact on children is incredibly
important as well. It is tragic. In terms of suspicious
activities related to gun violence, again, our reporting regime
is one in which financial institutions identify suspicious
activities where they know, they have reason to know, or
suspect that there is some illicit financial activity that is
ongoing, they would report that information. We can work with
you in terms of identifying whether or not there may be use in
terms of identifying red flags, or typologies, and have a
conversation around that. But primarily, at this point, it is
what suspicious activity reports are filed by financial
institutions around this issue.
Ms. Dean. And do those reportings include suspicious
activity connected to gun violence? Does it specifically lift
that up?
Mr. Das. It could ultimately include that, if that is what
a financial institution reports to us. I would have to look--
Ms. Dean. Would you be able to maybe collect that and--
Mr. Das. I would have to look closer at this issue to be
able to identify whether or not suspicious activity reports
specifically raise this issue. So, I would have to get back to
you on this.
Ms. Dean. I would really appreciate that. That will help
inform the legislation that I am trying to move forward on. And
maybe that is an avenue into combating gun violence that will
not be politicized, that will be embraced in a bipartisan way.
So, if you could collect that data and share it with us so that
we can learn, that would be really terrific.
I think I have a little more time, so I will try one more
area of questions. I think you mentioned in your testimony that
FinCEN has, ``issued two Russia-related alerts to provide
financial institutions with more information about typologies
and red flags in order to support U.S. Governmental efforts to
sanction Russia.'' You talked about robust engagement with
financial institutions. Were your advisories received? In your
opinion, how well are financial institutions complying with the
sanctions that have been put in place and are continuing to be
put in place? What additional resources do you need to ensure
full implementation?
Mr. Das. I appreciate that. I believe the alerts and
advisories were well received by financial institutions in
terms of providing additional guidance with respect to red
flags and typologies. Financial institutions are sensitized to
the issue of both sanctions evasion as well as the U.S.
financial system being used to hide Russian oligarch assets as
well. And my sense is that we are seeing a number of very
useful suspicious activity reports coming from U.S. financial
institutions with respect to Russian oligarchs, as well as with
respect to sanctions evasion.
In terms of resources, again, the most important thing for
us is to get FTEs, and then funding to be able to support
hiring so that we can do the analytics necessary to evaluate
those suspicious activity reports, to evaluate the
transactional information that we receive so that we can take
that information and translate and provide it to law
enforcement as well.
Ms. Dean. Thank you.
Mr. Himes. The gentlewoman's time has expired.
The gentleman from Tennessee, Mr. Kustoff, is now
recognized for 5 minutes.
Mr. Kustoff. Thank you, Mr. Chairman. Acting Director Das,
I want to thank you for two things, first of all for your
service, and second, for agreeing to appear today. We
appreciate it.
I kind of thought it was timely that on The Wall Street
Journal's website today, there was a story that posted in the
headline as, ``Russian Sanctions Complicate Paying Ransomware
Hackers,'' and it cites FinCEN. But my question to you is, in
terms of reality or practicality, do we have American
businesses or companies that have been targeted by ransomware
hackers that have to pay ransom to entities that we have
sanctioned?
Mr. Das. There may be situations in which a U.S. business
or a company may be subject to a ransomware attack where the
ransomware actor is a sanctioned person.
Mr. Kustoff. This article again, posted this morning, said
that the U.S. Treasury Department's Office of Foreign Assets
Control (OFAC) and its Financial Crimes Enforcement Network
(FinCEN) both have highlighted ransomware payments in recent
months. OFAC said in September that it strongly discourages
extortion payments and reiterated that it can take action
against payers. I guess from a practical standpoint, if a
company has been targeted with ransomware, they have to pay a
ransom, and the ransom has to be paid to an entity that has
been sanctioned by us. What recourse do they have?
Mr. Das. I appreciate the question. Again, I am here to
represent FinCEN and FinCEN's authorities. In terms of the
answer to your question, that falls within the scope of OFAC
authorities and engagement with the Office of Foreign Assets
Control in terms of exactly how its sanctions apply, and what
the contours might be, and what flexibility there might be in a
particular situation. I am hesitant to go in that direction.
Mr. Kustoff. Fair enough. I think you have answered this,
but I am going to ask it one more time in a different way. Do
you or FinCEN know of American businesses or entities that have
been targeted with ransomware by companies or by entities in
Russia that have been sanctioned?
Mr. Das. I am not aware of particular situations in terms
of that particular question.
Mr. Kustoff. Okay. I am a former United States Attorney. I
think I may be the last Presidentially-nominated United States
Attorney who has been confirmed by the Senate and the House of
Representatives. I am asking this with that in mind, is that, I
don't know that FinCEN necessarily has an obligation to the
people. I think you do to Congress, to provide evidence of how
effectively or efficiently you work. I believe the ranking
member asked about how many convictions have been led based on
FinCEN's work and actions. I am not going to ask you anything
that specific, but if you were talking to any of my
constituents, how would you describe the effectiveness or
efficiency of FinCEN?
Mr. Das. First of all, in terms of this hearing, it is
clear that we need to do a better job in terms of communicating
how effective FinCEN's work is and how effectively we work with
law enforcement and with the intelligence community. Again, the
work that we do is invaluable in terms of supporting law
enforcement, and U.S. Immigration and Customs Enforcement's
(ICE's) efforts, and OFAC's efforts to target bad actors that
might abuse the U.S. financial system and, for that matter, the
international financial system. The information that we use is
critical for law enforcement to go after a range of criminal
threats, everything from human smuggling, human trafficking,
online child sexual exploitation, and money laundering by drug
trafficking organizations, across-the-board. All of the types
of criminal activity that are identified in our AML/CFT
national priorities, the information that we get, it cannot be
overstated in terms of how valuable it is for law enforcement
to be able to identify, target, and then prosecute individuals.
Mr. Kustoff. I appreciate that. Is there anything you think
that FinCEN could publish, not for the American people, but for
us, to demonstrate again your effectiveness and efficiency?
Mr. Das. The first step in that, again, is the report
required under Section 6201 of the AML Act that DOJ is required
to provide in terms of the value of BSA information for DOJ and
for law enforcement. I am happy to work with you in terms of
other measures or indicia of success as well to be able to make
a better case for what we do.
Mr. Kustoff. Thank you. We appreciate your service. And I
yield back.
Mr. Himes. The gentleman's time has expired.
The gentleman from New Jersey, Mr. Gottheimer, who is also
the Vice Chair of our Subcommittee on National Security,
International Development and Monetary Policy, is now
recognized for 5 minutes.
Mr. Gottheimer. Thank you, Mr. Chairman, for holding this
critical hearing.
As technology advances and terrorists continue to innovate,
Federal enforcement efforts must keep pace so that we can crack
down on each new method of financing terror, so I appreciate
this conversation. Mr. Das, thank you for being here with us
today. I am a strong proponent of establishing appropriate
guardrails around the cryptocurrency industry to ensure the
market matures in the United States. The industry wants clarity
and consistency. One of the most critical areas to me is the
area of anti-money laundering and counterterrorism financing.
What is FinCEN doing to help prevent actors, such as Hezbollah
and Russians seeking to evade sanctions, from utilizing
cryptocurrency as a finance tool?
Mr. Das. Again, thank you. FinCEN has been at the forefront
in terms of ensuring that cryptocurrency exchanges and
cryptocurrency administrators are subject to the same AML/CFT
program requirements that MSBs are and other financial
institutions are as well. Again, cryptocurrency exchanges,
because of their AML program requirements, file suspicious
activity reports where there are indicators or they may have a
reason to know or suspect that there might be illicit financial
activity. And that includes activity by foreign terrorist
organizations and other bad actors as well. When we do receive
those suspicious activity reports, we work very closely with
the intelligence community and with law enforcement.
Mr. Gottheimer. Thank you. Last year, FinCEN released its
first national anti-money laundering and counterterrorism
financing priorities list, as you know, which included domestic
terrorists such as those radicalized online. This week, I am
sending a request to the Appropriations Committee to request
additional resources for your Agency, particularly related to
targeting domestic financing. Could you elaborate on how this
funding could be helpful and how FinCEN could use this funding
to stop terrorist attacks before they even get beyond the
planning phase?
Mr. Das. I'm sorry. I am not aware of the additional
financing with respect to domestic violent extremism and this
bill.
Mr. Gottheimer. Are there more resources that you think you
could use?
Mr. Das. Yes. Again, we need additional resources across-
the-board with respect to everything that FinCEN does, in terms
of its support for law enforcement and for the intelligence
community across-the-board with respect to terrorism.
Mr. Gottheimer. In the remaining minutes we have, can you
talk a little bit more about the priorities list?
Mr. Das. Sure. The priorities list was developed over a
period of time, 180 days, in terms of significant engagement
with the law enforcement community and with respect to
regulators and others, in terms of identifying the key
priorities that the United States faces in terms of combating
criminal activity and other types of illicit activity as well.
The intent of the AML/CFT priorities list was to provide
financial institutions with an understanding of what law
enforcement priorities might be, for them to better hone and
direct their AML/CFT programs to identify suspicious activities
that might align with the interests of law enforcement and the
types of priorities that we have in the United States.
What we have heard from financial institutions is that it
has been valuable. To the extent that financial institutions
have used those AML/CFT priorities, that has been valuable in
terms of them developing their AML/CFT programs and targeting
their AML/CFT programs as well. Again, the AML Act provides
that we need to issue regulations that direct financial
institutions to incorporate those AML/CFT priorities into their
AML/CFT programs. We are working on that regulation at this
point in terms of what the contours of that might look like.
Mr. Gottheimer. Thank you. I yield back. Thank you, Mr.
Chairman.
Mr. Himes. The gentleman yields back.
The gentleman from Tennessee, Mr. Rose, is now recognized
for 5 minutes.
Mr. Rose. Thank you, Mr. Chairman, and thanks to Ranking
Member McHenry. Acting Director Das, thank you for being here
and for spending so much time with us today. It is good to see
you again, and I appreciate you meeting with me earlier this
week. It was great to discuss the issues that have been
plaguing independent ATM operators, as you discussed earlier
with my colleague, Mr. Luetkemeyer.
As many people know, independent ATM operators across the
country have had a tough time finding banks that will provide
them with services since Operation Choke Point. Despite
officially ending in August of 2017, the operation to de-bank
certain industries is still impacting ATM operators today. So,
I was thankful to hear your commitment to work with the other
agencies to issue a joint statement underscoring that there is
no particular risk associated with that category of customers.
Acting Director Das, as I mentioned in our meeting, I am
concerned about the current BSA process in which the Federal
Government deputizes financial institutions. And I would say
maybe at this point, just to broadly state my view, that the
cost of this regulatory framework, I think, is troubling, and
certainly even the path that we are headed down with respect to
beneficial ownership is troubling to me, and the cost to our
business community for that regulation is something that is
very much in my sights. I spent 10 years on a bank board where
I was tasked with looking at suspicious activity reports and
the lack of feedback that banks and other financial
institutions receive on whether a specific filing was helpful
in assisting law enforcement is extremely troubling to me. As I
have said, it is like shooting a target in the dark with a
blindfold on.
Acting Director Das, would it be possible for your Agency
to effectively do its job without the participation of
financial institutions?
Mr. Das. Financial institutions are one of our most
important partners being able to make the AML system.
Mr. Rose. Thank you. And it costs them a lot of money to
help you do your job by sending the data that law enforcement
then has access to. I think the current system is somewhat
broken, where these financial institutions are spending
tremendous amounts of time and money on BSA filings,
unfortunately, mostly without any feedback. There must be a
more efficient process, and I know you have talked today about
some of the efforts aimed at hopefully giving them some of that
feedback. How much money do you think financial institutions
spend every year on BSA filings in the United States?
Mr. Das. I don't have a particular statistic on that point,
but I--
Mr. Rose. I think we could agree it is a lot, right?
Mr. Das. Yes.
Mr. Rose. And certainly, you have talked about the resource
constraints that FinCEN faces in terms of fulfilling its
mission of dealing with that data that comes to you. Would it
be useful to tell financial institutions whether a filing was
or was not valuable to law enforcement?
Mr. Das. Again, the AML Act places a focus in terms of
helping financial institutions understand how we are using our
suspicious activity reports in relation to providing them to
law enforcement and others. We are using a number of the
vehicles through the AML Act to engage with financial
institutions, including FinCEN Exchanges, Innovation Hours, et
cetera, to help them understand better how we are using
suspicious activity reports and what is valuable in terms of
what they might be providing to us in terms of suspicious
activity reports.
Mr. Rose. In the current system, does law enforcement or
another agency user of FinCEN data have to explain on an
individual inquiry basis what the data that they are gathering
is going to be used for?
Mr. Das. There is no requirement on law enforcement to
provide a specific SAR-by-SAR analysis of how they are using
that information.
Mr. Rose. Do you believe that FinCEN's current authority
would enable you to implement some sort of requirement relative
to a requirement that the user explain what they are seeking
data for each time they access the database?
Mr. Das. In terms of our engagement with law enforcement
and financial institutions, I think that we can work under the
existing framework to provide greater transparency in terms of
how law enforcement may be using suspicious activity reports.
Again, suspicious activity reports are just one piece of what
law enforcement does in terms of an overall investigation. It
complements information coming from a number of different
sources, through subpoena authority, and through other
investigative techniques. So often, drawing a one-to-one line
between a suspicious activity report and a particular
investigation or prosecution is just challenging.
Mr. Rose. I understand that. And I guess I will just
conclude, if you will indulge me for a second, by saying that I
think what I am hearing today from a large number of the
Members is that we want to see that kind of quantitative, that
kind of actual objective data. And so, with that, I yield back.
Mr. Himes. The gentleman's time has expired.
The gentleman from Illinois, Mr. Garcia, is now recognized
for 5 minutes.
Mr. Garcia of Illinois. Thank you, Mr. Chairman, and, of
course, thank you, Acting Director Das for your testimony
today. At its best, FinCEN has the potential to set a strong
anti-corruption agenda, disrupting the shadowy world of shell
companies, oligarchs, and arms traffickers whose financial
crimes have harmful consequences for everyday people. In order
to fulfill that potential, the anti-corruption agenda requires
our support and careful oversight to ensure transparency and
progress, and I look forward to your partnership on these
issues. With that in mind, I would like to move on to my first
question.
The Corporate Transparency Act is the most important change
to U.S. anti-money laundering law in decades, and FinCEN's
proposed implementation rule is a strong step in that
direction. However, as my colleagues have noted, several phases
of rulemaking are left. Final rules have been overdue since
January 1st of this year. Will FinCEN commit to issuing final
rules by the International Anti-Corruption Conference, which
the U.S. Government will be hosting in December of this year in
Washington, D.C.?
Mr. Das. Thank you for that question, Congressman. We are
committed to completing the second notice of proposed
rulemaking and the suite of Corporate Transparency Act rules by
the end of the year, so we will be issuing a notice of proposed
rulemaking with respect to the access rule. I can't commit on a
particular timeline with respect to the additional rules. We
are doing a lot of work and we are working as hard as we can in
terms of getting those rules done.
Mr. Garcia of Illinois. Thank you. President Biden's
strategic plan for countering corruption acknowledges the
importance of a transparent and accessible beneficial ownership
registry to effectively combat terrorist financing, corruption,
and other crimes. Similar registries in the U.K. and the EU
have public accessibility requirements. They also have examples
of accountability groups, journalists, and members of the
public successfully identifying financial crimes from the
available data, but under the Corporate Transparency Act,
information from the registry can only be shared for law
enforcement purposes. As FinCEN works to implement this and
future projects, do you believe that public-facing databases
could be more effective than private databases, and how can
FinCEN harness the power of civil society in the anti-
corruption work that it does?
Mr. Das. Thank you for that question. Again, we are focused
on implementing the Corporate Transparency Act (CTA). The
Corporate Transparency Act has very specific rules with respect
to access by law enforcement, by regulators, and by other
government agencies, as well as State and local law
enforcement. It is perceptive in this regard, and again, we are
focused on implementing the CTA at this point. Again, civil
society plays an important role in anti-corruption efforts. And
from our perspective, we look forward to engaging with civil
society in terms of their feedback and perspectives, either
through the notice-and-comment process or otherwise, in terms
of the effectiveness of the database, the contours of the
database, and then the construction of the database as well.
Mr. Garcia of Illinois. Thank you for that. My final
question is on real estate. Home ownership has historically
been a way to build modest wealth for otherwise marginalized
communities, but as you know, real estate is one of global
kleptocrats' most important assets, as my constituents are
feeling the effects. While real estate investors take cash
offers from foreign kleptocrats, working-class families are
priced out from home ownership in their neighborhoods. This
problem is particularly acute in Latino and Black communities,
and the community that I represent, for example, was harmed
during the Great Recession. I was encouraged to see FinCEN
beginning to work on regulatory rules in the real estate
sector. Director Das, will you commit to having a rule
published by the International Anti-Corruption Conference this
December?
Mr. Das. We issued an NPRM last December, and we received a
number of comments at the close of the notice-and-comment
period, which was in mid-February. We are reviewing those
comments and considering next steps in terms of a potential
proposed rule. We are working incredibly hard on this, as we
also work on the beneficial ownership database, as well as the
other AML Act deliverables, so that makes it difficult for me
to commit to a precise timeline.
Mr. Garcia of Illinois. Thank you, Mr. Das.
Mr. Chairman, I yield back.
Mr. Himes. The gentleman's time has expired.
The gentleman from Ohio, Mr. Gonzalez, is now recognized
for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Mr. Chairman, and thank
you, Acting Director Das, for your testimony today. I want to
pick up on the online child sexual exploitation conversation. I
just want to understand the organization's priorities and how
you are effectively combating it. As an organization--and you
can give me ballpark--what percent of your budget is targeting
crackdowns on online child sexual exploitation?
Mr. Das. In terms of the overall budget, it is difficult
for me to provide a ballpark.
Mr. Gonzalez of Ohio. Ballpark is fine.
Mr. Das. But I can tell you that we have one staffer who is
dedicated to the issue.
Mr. Gonzalez of Ohio. One staffer?
Mr. Das. One staffer in--
Mr. Gonzalez of Ohio. One individual staffer?
Mr. Das. One individual staffer.
Mr. Gonzalez of Ohio. Does that staffer have a--
Mr. Das. It is dedicated. But in addition, a number of
other staffers and a number of other personnel support the
effort more generally, but we have somebody who is dedicated to
the effort full time across human trafficking, human smuggling,
as well as online child sexual exploitation.
Mr. Gonzalez of Ohio. So, one staffer. How does that
compare to other priorities like--the top priority and how many
staffers are leading that effort, and compare that to money
laundering.
Mr. Das. This is one full-time staffer. We have folks
focused on a number of different fronts across the whole suite
of issues around ensuring that we have effective AML/CFT
programs in place. Financial institutions are providing
suspicious activity reports, not only on the many priorities in
the national AML/CFT priorities but as well as particularly on
human smuggling, human trafficking, and online child sexual
exploitation. That individual staffer is focused on reviewing
suspicious activity reports that are filed, and then working
very closely with IRS Criminal Investigation (IRSCI), which is
very focused on this issue, as well as the Joint Criminal
Opioid and Darknet Enforcement Network (JCODE), which is also
very focused on this issue as well. So, it is a focal point in
terms of collecting the information, looking at the
information, and then providing that, and working with law
enforcement so that they can use that information to
investigate these acts.
Mr. Gonzalez of Ohio. Okay. And then, how closely does
FinCEN work with private industry to share information and best
practices to identify and stop payment methods for the purposes
of online child sexual exploitation?
Mr. Das. I apologize, Congressman. If you could repeat that
question. I didn't--
Mr. Gonzalez of Ohio. Sorry. How closely does FinCEN work
with private industry to combat online child sexual
exploitation?
Mr. Das. Again--
Mr. Gonzalez of Ohio. On the payment side specifically.
Mr. Das. We work with financial institutions in terms of
suspicious activity reports, and enhancing awareness with
respect to this issue. We have issued a couple of different
advisories and notices on online child sexual exploitation in
child sexual abuse material as well. In 2020, we issued an
advisory around this issue. Specifically, it was a supplemental
advisory. And in September of 2021, we issued a notice that
identified this as a particular issue of focus for financial
institutions, especially against the backdrop of the pandemic.
We identified a particular code around online child sexual
exploitation in the event that financial institutions were
providing a SAR on this specific issue, that it would be
identified with a particular marker that we would easily be
able to track.
And that notice actually was incredibly effective. We
received over 1,600 suspicious activity reports from the period
of September 2021 through December of 2021, and this year
through April, I believe mid-April, we have received about 650
suspicious activity reports on this issue as well. Again, we
are attuned to this issue, we are very focused on it, and we
are doing what we can.
Mr. Gonzalez of Ohio. Can I ask a quick question? Do you
think one staffer is enough, and it may be that you don't have
the budget, I get that, but do you think the one staffer has
the bandwidth to effectively monitor all of the SARs related to
child sexual exploitation?
Mr. Das. Again, this is a difficult issue. We should be
providing resources across our entire envelope. Again, we are
meeting incredibly difficult resource constraints against all
of the types of activities that we do.
Mr. Gonzalez of Ohio. Okay. Just a general observation, and
then I will yield my time back. It gives me pause to know that
there is only one staffer. And I know that you are budget-
constrained, but it is an enormous issue and there is nobody
more vulnerable than a child who is being sexually abused,
whether it is online, in a home, whatever it is. We know from
our office's work with the FBI, the local FBI office in
Cleveland, that the pandemic had a particularly nasty effect on
the increases in child sexual exploitation. My ask would be
that your office is willing to work with us on ways to get you,
whether it is more funding, more tools, more resources,
whatever it is, but this needs to be a bigger focus than just
one staffer.
And with that, I yield back.
Mr. Das. And we would like to dedicate more resources, and
we will take you up on that offer to work with you.
Mr. Himes. The gentleman's time has expired.
The gentleman from South Carolina, Mr. Timmons, is now
recognized for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman, and thank you, Acting
Director, for being with us today. I want to talk about
implementation of the Corporate Transparency Act, which is a
pretty deceptive name, in my opinion, for the bill, as its
scope goes far beyond large corporations. Before I came to
Congress, I started a number of small businesses. It was hard
work, and, honestly, probably the hardest work was dealing with
the onerous government regulations at the Federal, the State,
and the local level. Way too much of my time was spent trying
to please bureaucrats rather than trying to please my
customers. I don't think it should be that way.
So, a part of my concern with the CTA was the additional
compliance burden it places on businesses. The large
corporations will be fine. They have armies of lawyers,
accountants, and compliance departments. They can handle
everything, but for small business owners, it is a big
headache. I was my own compliance department. And by the way, I
would venture to guess that out of the tens of millions of
covered entities of this law, the vast majority have no idea
what FinCEN even is. There is a big education piece to this,
and a somewhat large potential for bad actors to take advantage
of the beneficial ownership requirements to scam these folks
and steal their identities. Do you share these concerns? Are
you striving to implement these new rules in the least
intrusive way possible on small businesses?
Mr. Das. That is what the AML Act and the CTA directs us to
do, is to do it in a way that minimizes the burden on small
businesses. Again, we are focused on developing a database that
is effective, and that minimizes the burdens on small
businesses while ensuring that we have a database that is
effective and provides highly-useful information to law
enforcement. That is our prime directive with respect to the
database.
In terms of the reliability of the database, I think again,
we are very focused on ensuring the integrity of the database
and ensuring that it meets the highest standards of IT
protection from hacks and otherwise. We are very focused on
privacy interests and considerations around those issues in the
context of the CTA. And the notice-and-comment process has
provided us with a significant amount of feedback and useful
feedback in terms of thinking through how the rules work, and
how they could be improved, and we will be working on that in
the coming months.
Mr. Timmons. How do you feel that it is going so far?
Mr. Das. We are working incredibly hard on this effort. It
is difficult in a resource-constrained environment, but we are
making a lot of progress. The team is incredibly dedicated.
They are tired, I can tell you that. But we are making progress
both in terms of the reporting rule, the access rule, and the
overall database work. It is an incredibly complicated effort.
We have to get it done right. And we are spending time and
effort in making sure that the rules work together, the
database is built appropriately, and is one that can be used
effectively by law enforcement and other stakeholders.
And I agree with your point that it is incredibly important
for companies and individuals that have to report information
to understand what the rules are, and it is very important for
us. And we are very focused on it from a FinCEN perspective to
develop an outreach strategy in an effort to engage with
stakeholders, with industry groups, with businesses, and with
State secretaries of states so that they understand what the
contours of the rules are, and they understand what the
obligations are in a way that ensures that they can do so in
the least burdensome manner as well.
Mr. Timmons. Sure. Thank you. This is going to be a huge
amount of valuable, highly-sensitive data. What is your
cybersecurity plan to make sure that it stays where it is
supposed to be?
Mr. Das. Again, we are very focused on cybersecurity. We
plan on applying high standards, the highest standards with
respect to cybersecurity for the beneficial ownership database.
With respect to our existing system of records, our database,
we apply FISMA high standards with respect to the database. We
do regular penetration testing. We engage closely with the
government security accountability committee which governs
security around IT databases as well. And we plan on doing this
with respect to the beneficial ownership database, because we
recognize that that database holds very sensitive information.
Mr. Timmons. Thank you. The government has had a lot of
breaches recently, and I would hate to have this be another
one. So, I appreciate you prioritizing that.
Thank you, Mr. Chairman. I yield back.
Mr. Himes. The gentleman yields back.
The gentleman from Wisconsin, Mr. Steil, is now recognized
for 5 minutes.
Mr. Steil. Thank you very much, Mr. Chairman. And thank you
for being here, Mr. Das. I really appreciate it.
It has been discussed a little bit, but I want to dive in a
little further on BSA data, SARs, the volume, who is looking at
it, and the effectiveness of this. BSA data is meant to be
highly useful for law enforcement. To what extent is law
enforcement providing feedback to those who file BSA data? I am
looking for that feedback loop.
Mr. Das. We regularly engage with law enforcement in terms
of the suspicious activity reports. We have a number of
liaisons from law enforcement who sit within FinCEN and that we
work closely with in terms of the use of SARs, priorities that
law enforcement has, as well as feedback that we get. When we
work with law enforcement and provide them with reports, we
often communicate with them on the value of the suspicious
activity reports that we have or other information that we give
to law enforcement, and we, across-the-board, get positive
feedback from law enforcement.
Mr. Steil. That is good. Let me just scale this, because I
think it is important. In March of this year, 325,378 SARs were
filed by financial institutions. What percentage of those might
receive feedback in a given month?
Mr. Das. Again, we do not collect SAR-by-SAR feedback.
There are a number of challenges in doing so.
Mr. Steil. Understood. Rough math, just to scale it,
because I think it is relevant on this feedback loop because I
will tell you, on my side, many people feel that the SARs
information is just going into a black hole. My concern is that
people are filing what I call defensive SARs. They are filing
SARs to be protective of themselves so they don't have an
investigation coming upon them rather than doing what we are
really trying to do, which is to identify suspicious activity
which is actually helpful in your operations. Not that you
aren't providing feedback to some and, in particular, cases
where that information is useful. But I think many people feel
that there is a giant black hole, and my concern is then that
perception can become reality for many of these banks who then
engage in filing what I view as defensive SARs, which doesn't
really help us. Finding the needle in a haystack is dependent
on a handful of things, one of them being how big the haystack
is.
And so, if we can find a way to bring this haystack down, I
think we may actually find ourselves in a position to more
easily find the needle, if you will. And I think that is one of
the things that this committee should spend time on, in
particular on the regulatory side. And on the legal side of how
we set the thresholds to file these SARs, I think it would be
quite beneficial to remove some of the noise that is in these
documentations.
Let me shift gears, because we have hit that a couple of
times today. One of the things I just want to touch base with
you on is there has been a lot of concern among some of my
colleagues, and some of the media, talking about the use of
digital assets to avoid U.S. sanctions. I think some of it is
unfounded and misplaced, especially given some of the level of
visibility we have in open ledgers maintained on blockchain. A
counselor to the Deputy Treasury Secretary recently commented
that crypto wasn't a major concern, given the huge scale of
what bad actors would have to move. Do you agree that digital
assets aren't a major sanctions-evasion mechanism?
Mr. Das. Again, in our sanctions evasion alert, we have
alerted financial institutions to the potential for
cryptocurrency being used as a channel for sanctions evasion.
We have not seen significant activity, large-scale activity, in
terms of the use of cryptocurrency for sanctions evasion. But
again, there is potential for cryptocurrency to be used for
sanctions evasion, and we are ensuring that financial
institutions are alert to this issue, and if there is such
sanctions evasion, to submit a suspicious activity report
highlighting it.
Mr. Steil. I appreciate your feedback on this. In the very
limited time we have left, one of the things I have been very
concerned about is fentanyl coming into our communities. It is
the number-one cause of death among individuals aged 18 to 45.
You are not involved in securing our borders. I am going to
park that for a moment. But I am curious as to what FinCEN is
doing to stop illicit fentanyl traffickers from laundering
their profits through our financial system.
Mr. Das. We receive suspicious activity reports with
respect to drug trafficking, narco trafficking, fentanyl as
well. We work very closely with law enforcement in terms of our
efforts to help them understand money laundering organizations
that are related to drug trafficking organizations. We work
closely with HSI, with the FBI, and with DEA, and we have a
close partnership with them in terms of helping them understand
the information that we have and helping them analyze the
information that we have to be able to better target this
issue.
Mr. Steil. Thank you very much. Thank you for being here.
Mr. Chairman, I yield back.
Mr. Himes. The gentleman's time has expired.
I would like to thank Acting Director Das for his testimony
today.
The Chair notes that some Members may have additional
questions for this witness, 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 this witness and to place his 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.
The hearing is now adjourned.
Mr. Das. Thank you.
[Whereupon, at 12:50 p.m., the hearing was adjourned.]
A P P E N D I X
April 28, 2022
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