    [Senate Hearing 118-510]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-510

                  COMBATING THE NETWORKS OF ILLICIT FINANCE
                                AND TERRORISM

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

            EXAMINING HOW TO COMBAT THE NETWORKS OF ILLICIT FINANCE
                                   AND TERRORISM

                                   __________

                                OCTOBER 26, 2023

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                                    __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    57-728 PDF                  WASHINGTON : 2025

    -----------------------------------------------------------------------------------

               COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                         SHERROD BROWN, Ohio, Chairman

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                   Lila Nieves-Lee, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                      Amber Beck, Republican Chief Counsel

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                           Pat Lally, Assistant Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                           THURSDAY, OCTOBER 26, 2023

                                                                       Page

    Opening statement of Chair Brown.................................     1
            Prepared statement.......................................    40

    Opening statements, comments, or prepared statements of:
        Senator Britt................................................     3

                                   WITNESSES

    Matthew Levitt, Director, Reinhard Program on Counterterrorism
      and Intelligence, Fromer-Wexler Senior Fellow, The Washington
      Institute for Near East Policy.................................     6
        Prepared statement...........................................    42
        Responses to written questions of:
            Senator Warren...........................................    69
            Senator Cortez Masto.....................................    70
            Senator Rounds...........................................    71
    Danielle Pletka, Distinguished Senior Fellow in Foreign and
      Defense Policy Studies, AEI....................................     7
        Prepared statement...........................................    59
        Responses to written questions of:
            Senator Cortez Masto.....................................    71
            Senator Rounds...........................................    72
    Shlomit Wagman, Affiliated Scholar and Former Chair, Harvard
      Kennedy School, Israel Money Laundering and Terror Financing
      Prohibition
      Authority......................................................     9
        Prepared statement...........................................    61
        Responses to written questions of:
            Senator Cortez Masto.....................................    73
            Senator Rounds...........................................    75

                  Additional Material Supplied for the Record

    Letter submitted by Senator Cynthia M. Lummis and Representative
      French Hill....................................................    76
    Statement submitted by Justice for 9/11..........................    79
    Letter submitted by Blockchain Innovation Project................    80

                                     (iii)

            COMBATING THE NETWORKS OF ILLICIT FINANCE AND TERRORISM

                                  ----------

                           THURSDAY, OCTOBER 26, 2023

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Subcommittee met at 10 a.m., in room SD-538, Dirksen
    Senate Office Building, Hon. Sherrod Brown, Chair of the
    Committee, presiding.

                OPENING STATEMENT OF CHAIR SHERROD BROWN

        Chair Brown. The Senate Committee on Banking, Housing, and
    Urban Affairs will come to order. Welcome our new, perhaps
    permanent now, Ranking Member, but at least in her first year
    on the Committee she is Ranking Member today. Nice to see you,
    Senator Britt.
        Senator Britt. Thank you. Nice to see you.
        Chair Brown. Earlier this month, the world watched in
    horror as Hamas committed brutal acts of terrorism against the
    people of Israel. Hamas murdered innocent women and men and
    children. They attacked teenagers at a music festival. They
    took hostages--families, kids. All of us are horrified. In the
    days and weeks that follow, the United States has taken strong,
    swift actions to support Israel as they defend their country
    against terrorism and to aid civilians in Gaza. Now it is vital
    to our national security that we provide critical assistance to
    Israel, including robust military, economic, and humanitarian
    aid desperately needed for those harmed by Hamas' terrorism.
        We must stand with both Ukraine and Israel as they fight
    back against two of the world's biggest threats: Putin and
    Iranian-backed terrorists like Hamas. This is not a time to
    play politics. We must stand united with our allies, and we
    must defend American interests. We need to confirm key national
    security nominees who play a critical role in working with
    their Israeli partners. We have had too many delays already.
    Right now, politics holds up several key positions: the
    Ambassador to Israel and at least 12--12--key military
    personnel that directly impact that part of the world,
    preventing important work in the Middle East. It is why people
    think Washington does not work. Political grandstanding,
    especially as we have seen in the House, but way more than
    that, is hurting America's ability to effectively protect our
    interests at home and abroad, keeping talented Ambassadors and
    career military personnel on the sidelines.
        On this Committee, as the Ranking Member knows, Senator
    Kennedy knows, Senator Tester knows, we have a long history of
    keeping politics out and working together to address threats
    from Russia, North Korea, and China and Iran. In the aftermath
    of October 7th, we are again confronting a challenge to the
    civilized world. Our humanity compels us to combat terrorism
    and to hold State sponsors of terrorism, like Iran,
    accountable. We must be clear. We must speak with one voice.
    There is no justification for terrorism, none, ever.
        On this Committee, we have a unique role to play, working
    to understand the financing behind Hamas' attacks so we can
    work to cutoff funding for terrorism at its source and work to
    prevent future attacks. Iran has an alarming history of
    supporting terrorist proxies engaged in unspeakable atrocities.
    It is clear they provide significant funding for the military
    wing of Hamas. They provide training. They provide
    capabilities. We will assess what additional economic tools we
    need to stop State sponsors of terrorism, including Iran, from
    supporting Hamas, Hezbollah, Palestinian Islamic Jihad, and
    other terrorist proxies. We will examine multiple terrorist
    funding streams, including cryptocurrency. We will consider
    additional measures to stop the flow of these funds.
        In response to the brutal and horrific attacks, last week,
    the Treasury Department's Office of Foreign Assets Control
    imposed additional sanctions on key Hamas terrorist group
    members, operatives, and financial facilitators located in Gaza
    and elsewhere, including Sudan and Turkey and Qatar and
    Algeria. This action specifically targeted those managing
    assets within a secret Hamas investment portfolio, a Qatar-
    based financial facilitator with close ties to the Iranian
    regime, a key Hamas commander, and a Gaza-based virtual
    currency exchange and its operator.
        That is not enough. The Administration must take additional
    steps to impose sanctions, and dedicate resources toward a
    multilateral effort to coordinate with allies to track and to
    freeze and to seize any Hamas-related assets, and take steps
    necessary to deny Hamas terrorists the ability to raise funds.
    We need to not only identify the bad actors, but identify their
    money pipelines so we can shut off their funding. We must
    undertake a more robust approach to identifying and preventing
    transactions that take place not only through financial
    institutions, but also through trade-based money laundering,
    cryptocurrency transactions, and other channels designed to
    avoid detection.
        On this Committee, we have raised the alarm about crypto
    and its role in illicit finance, including the use of crypto to
    fund terrorists and enable rogue Nations financing them. Crypto
    platforms too often do not use the same commonsense protections
    that keep illicit money out of the traditional banking system,
    safeguards like knowing their customers or suspicious
    transaction reporting. Some crypto services and tokens even
    help users keep their transactions anonymous, and when law
    enforcement attempts to trace or block crypto funds, it becomes
    a game of Whack-a-Mole. They stop one transaction, and
    criminals move on to another platform with another alias again
    and again and again. Terrorists know they can use crypto in
    ways they could never use dollars. It is why President Trump's
    Justice Department warned back in 2020 that terrorists groups,
    including ISIS, al Qaeda, and the military arm of Hamas, were
    raising funds using cryptocurrency. Not surprisingly, after the
    attack it was reported that Hamas had raised millions of
    dollars in crypto to fund their operations. We need to crack
    down on the use of crypto to fund terrorism and evade
    sanctions.
        Last week, Senator Warren and I, along with more than a
    hundred of our colleagues of both parties, wrote to the
    Administration to voice concern about these issues. I am glad
    that Members of this Committee, including Senator Reed and
    Senator Warner, have put forth bipartisan plans for closing
    gaps around digital assets in our illicit finance rules. These
    are important steps forward. I welcome more ideas from anybody
    on this Committee and anybody at the witness table and anybody
    in the audience. We will work together on this Committee in a
    bipartisan way to make sure terrorists and bad actors cannot
    exploit crypto. This Committee and the Senate have a bipartisan
    history of combating the ways in which Iran threatens the
    region, not just nuclear weapons development, but also its
    support for terrorism.
        There has been a steady drumbeat recognizing the need for
    the United States and our allies to maintain and ramp up
    sanctions on Iran's harmful and destabilizing activities. The
    Senate voted overwhelmingly to support the Countering America's
    Adversaries Through Sanctions Act to impose sanctions on Iran
    and North Korea and Russia. We passed the Hezbollah
    International Financing Prevention Amendments Act, which
    imposed sanctions on Russia, Iran, or any other foreign
    Government supporting Hezbollah. And do not forget, this
    Committee acted together to tighten the rules around anonymous
    shell companies, which too often operate here in the U.S. and
    which fund criminal syndicates and terrorists alike. We
    strengthened our money laundering rules and our sanctions tools
    in a bipartisan way. We will do it again. We need a
    comprehensive approach to shutting off Iran's funding sources,
    not just the $6 billion, but the many more billions of dollars
    Iran uses to continue its destabilizing activities around the
    world.
        Now is the time to act. I look forward to working with
    colleagues on this Committee to stem terrorist financing, to
    address the problems posed by crypto, and to further strengthen
    sanctions. Ranking Member Britt.

             OPENING STATEMENT OF SENATOR KATIE BOYD BRITT

        Senator Britt. Thank you, Mr. Chairman. On behalf of
    Ranking Member Scott and my fellow Republican colleagues, we
    would like to welcome Senator Butler as the newest Member of
    this Committee.
        On October 7th--it is a date that will forever live in
    infamy--it has been nearly 3 weeks since Hamas terrorists
    crossed into Israel to attack our great ally and our friend.
    Make no mistake, this was an act of pure evil. I just returned
    from a trip from Saudi Arabia, Israel, and Egypt just this past
    weekend. I traveled with a bipartisan group of colleagues to
    send a message loud and clear to the world that the United
    States of America stands with Israel.
        We saw firsthand what was truly unimaginable. These
    barbaric terrorists wore GoPro cameras as they committed these
    atrocities, so you can watch as babies were decapitated,
    children shot to death in front of their parents, parents
    slaughtered in front of their children, young women raped,
    entire families burned to death, daughters and sons, sisters
    and brothers kidnapped and taken into Gaza as hostages and
    human shields. Over 1,400 innocent people were murdered in
    Israel that day, and more than 200 were taken hostage. The
    State Department reports that at least 10 Americans remain as
    hostages and that at least 33 U.S. citizens were killed on
    October 7th. As we sit here, we know who committed these acts
    of evil, these acts of terror--Hamas--and we know who funds
    them and trains them. That is the Iranian regime.
        That brings me to why we are here today. This Committee has
    jurisdiction over our Nation's economic national security
    tools, including sanctions. We must use every tool at our
    disposal to ensure that those who carried out these attacks and
    those who financially supported them will never be able to do
    that again. This Committee is also responsible for providing
    oversight to ensure that every Administration enforces the laws
    that safeguard our national security and the security of our
    allies. That includes holding the Administration accountable
    when it chooses to waive or neglect those tools. That is why I
    would like to echo Ranking Member Scott's request that Treasury
    Secretary Yellen testify before this Committee as soon as
    possible.
        There is no question that Iran is complicit in supporting
    Hamas. Remember, evil cannot exist if the good are unafraid.
    Iran is the world's leading State sponsor of terrorism,
    providing hundreds of millions of dollars to support
    organizations like Hamas and Hezbollah, as well as military
    training, weapons, and munitions. Despite decades of Iranian
    support for similar atrocities, including those that have
    killed Americans, the Biden administration has opted to
    continue the failed policies of appeasement that began during
    the Obama administration.
        We all know that money is fungible. Despite the
    Administration's claim that when you release $6 billion to
    Iran, that frees up an equivalent of $6 billion in other funds
    to be dedicated somewhere else, such as supporting proxy
    terrorists in Gaza. The Administration should permanently
    restrict these funds, but since they were recklessly willing to
    release them in the first place, I urge all of my colleagues
    here today to support Ranking Member Scott's Revoke Iranian
    Funding Act, of which I am an original cosponsor, and this
    would take care of it.
        The Administration took actions last week to sanction a
    number of Hamas operatives and financial facilitators, but it
    was too little, too late for what happened on October 7th. How
    long has the Administration known about these financers of
    terror and yet failed to act? These are answers that we need
    from Secretary Yellen. The Executive branch largely has the
    tools it needs to sanction State sponsors of terrorism. This
    Administration needs to actually use those tools that are in
    their toolbox and enforce them. We need to return to a Maximum
    Pressure posture toward Iran, imposing bone-crushing,
    comprehensive sanctions that squeeze Iran financially dry.
        I also want to address one more important topic about this
    issue here at home, in a literal sense. On college campuses and
    in cities across the country, including this week in our
    Nation's Capital City and even in the halls of Congress, we
    have seen anti-Semitic protests justifying and even glorifying
    the actions of Hamas. This is spreading propaganda, and it is
    absolutely unacceptable. I never thought that in the United
    States of America, in this time, we would struggle to just call
    evil, evil. The actions of Hamas should not be applauded,
    celebrated, or praised by any American. They are not only
    contrary to the core values of our Nation, but to every fiber
    in our being.
        Remember, the State of Israel was created following the
    Holocaust so that Jewish people would never have to hide again,
    but yet that is what we are seeing happen today. And as
    Americans, we have pledged since World War II, never again.
    Since October 7th, that promise has been under attack, both in
    Israel and here at home. We have a moral obligation to fulfill
    our promise and that under our watch, never again means never
    again.
        And I will wrap up by saying I have sat in rooms with
    families whose loved ones are being held hostage twice, both
    here in the United States and when I was in Israel just a few
    days ago. You see pictures like this of precious Abigail, 3
    years old, that Hamas is using as a human shield, who, when you
    learn her story and the story of the remaining hostages, it
    will tear your heart out. We must do more. This Committee has
    the power to help ensure this never happens again. This
    Committee has the power to prove that America still knows good
    from evil.
        I look forward to hearing from today's witnesses about
    solutions, ways that we can work together that will allow the
    United States to stand shoulder to shoulder with Israel,
    projecting unwavering American strength to deter more hostile
    aggression, and hold accountable both those who carried out
    these terrorist attacks and those who supported them. Thank
    you, Mr. Chairman.
        Chair Brown. Thank you, Senator Britt. In spite of
    challenges, we will continue to do bipartisan work in this
    Committee.
        I will introduce today's witnesses. Dr. Matthew Levitt is
    the Director of the Reinhard Program on Counterterrorism and
    Intelligence. He is a Fromer-Wexler Senior Fellow at the
    Washington Institute for Near East Policy. He has authored
    numerous publications on terrorism and illicit finance.
    Welcome, Dr. Levitt.
        Ms. Danielle Pletka is a Distinguished Senior Fellow in
    Foreign and Defense Policy Studies at AEI, previously a staff
    member for Middle East and Southeast Asia for the
        Senate Committee on Foreign Relations. Welcome back to the
    Senate, Ms. Pletka.
        And Dr. Shlomit Wagman is an Affiliated Scholar at the
    Harvard Kennedy School, a former Chair at the Israel Money
    Laundering and Terror Financing Prohibition Authority. She has
    extensive experience and expertise in financial regulation,
    digital assets, money laundering, and terrorism financing.
    Thank you for making the trip to testify here.
        Dr. Levitt, you can begin.

      STATEMENT OF MATTHEW LEVITT, DIRECTOR, REINHARD PROGRAM ON
    COUNTERTERRORISM AND INTELLIGENCE, FROMER-WEXLER SENIOR FELLOW,
             THE WASHINGTON INSTITUTE FOR NEAR EAST POLICY

        Mr. Levitt. Chairman Brown, Ranking Member Britt,
    distinguished Members of the Committee, thank you for the honor
    and opportunity to testify before you today. The bipartisanship
    I see on this issue is a welcome breath of fresh air.
        I think we need to recognize that the attack on October 7th
    was one of the worst acts of international terrorism by any
    measure, including if only by measuring the number of American
    victims that were targeted. As we think about how Hamas is
    financed, we need to understand a few things. There will be a
    tendency to try and figure out right now how this attack was
    financed. There will be time for that, but I think we need to
    take a step back. This attack was financed over decades. Hamas
    has been able to raise funds through multiple means over a long
    period of time. That is the underlying issue here, not just the
    money that came in for this particular attack.
        There have been constants and there have been developments
    in Hamas' financing over the decades. The constant is Iran,
    full stop. Iran has funded Hamas since it was founded in late
    1987, generally a continual uptick in funding. Even when Hamas
    and Iran broke over Hamas' refusal to back the Assad regime in
    Syria, the funding from Iran did not completely stop. They cut
    back some of their funding for the political activities, but
    the funding for the military activities did not stop at all,
    and pretty soon after, it picked up in full measure.
        One of the things that is a development, however, is that
    in 2007, Hamas took over the Gaza Strip by force of arms, force
    of arms, it should be noted, not against the Israelis, who had
    already withdrawn, but against fellow Palestinians. When they
    did that, they created a problem that we just saw and
    experienced with the Islamic State. What happens when a
    terrorist group controls territory? You are able to tax. You
    are able to extort. You are able to racketeer. You are able to
    control borders. You are able to control customs, and you raise
    a tremendous amount of money.
        So recently, Hamas' single largest source of income has
    been controlled territory, probably at least 2 or 3 times as
    much money as they get from the Iran, and the U.S. Government
    says that that is at least $70 to $100 million a year from
    Iran. It is probably somewhere between $300 million and $450
    million that they have been able to raise through control of
    territory. If the Israelis succeed in dislodging Hamas from
    their governance and military infrastructure project in Gaza,
    that will be the single most significant way to deny them
    funds, but it will also remove from Hamas their largest
    expenses. They will not have to pay teachers' salaries and
    collect garbage, so they will need less money to continue
    terrorism, as we saw with the Islamic State. We are not going
    to destroy Hamas, we did not destroy Islamic State, but we can
    inflict territorial defeat on them, Hamas, as we did with the
    Islamic State.
        There are two other primary ways that Hamas has raised
    money over time. One is abuse of charity. At one point, the
    largest Muslim charity in the United States was a charity
    created by Hamas, The Holy Land Foundation for Relief and
    Development, in Richardson, Texas, outside Dallas, designated
    by Treasury. Later, several of its leaders were convicted on
    all counts for material support to Hamas.
        There was a period of time when this became less of an
    issue. It never stopped, but it was less of an issue. Now it is
    a bigger issue again, and just in the past few weeks, we see
    the Union of Good, an umbrella organization created by Hamas to
    oversee Hamas charities, designated by the U.S. Treasury years
    ago, active again soliciting funds. We see the revival of the
    Islamic Heritage Society, again, designated charity tied also
    to al Qaeda, based in Kuwait, raising money, millions of
    dollars for Hamas in the wake of the October 7th attack.
        We should expect to see more. In fact, after every conflict
    that Hamas has started, we have been an uptick in funding,
    including not only through crypto, and we should anticipate
    that that will be the case here, too. Crypto is an important
    way of raising funds through crowdfunding, but I think it is an
    even more important thing in terms of how they move money,
    which I will get to in a second. And finally, the Hamas Finance
    Committee and its investment committees. There have been three
    Treasury designations about that, as the Committee just noted a
    moment ago. There is a lot to talk about there, in particular,
    the role of Hamas ``politicians'' overseeing these funds.
        Finally, I will just say, we need to pay as much attention
    to how terrorist groups like Hamas transfer funds as we do to
    how they raise funds, and I am happy to talk about that, if
    there is interest, in the questions and answers. And we need to
    pay attention also not only to the funding, but the resourcing.
    Seventy to $100 million a year from Iran, that is cash, but
    there are also weapons. Look at all the weapons the Israelis
    confiscated--Kalashnikovs, RPGs, anti-tank guided missiles. How
    did those move? How did they get there? I am interested not
    only in the cash but in the resources. At the end of the day,
    we can do even better than we have done on this target, and I
    think one thing we are going to have to do is better balance
    great power competition and counterterrorism. They are not
    mutually exclusive. Thank you so much for your time today.
        Chair Brown. Thank you, Dr. Levitt. Ms. Pletka, welcome.

     STATEMENT OF DANIELLE PLETKA, DISTINGUISHED SENIOR FELLOW IN
                FOREIGN AND DEFENSE POLICY STUDIES, AEI

        Ms. Pletka. Thank you very much. Mr. Chairman, Senator
    Britt, Members of the Committee, I am honored to be here, and I
    am honored to be with these two witnesses.
        Let me underscore at the outset that the big money, the
    big, big money in this terror financing story comes from Iran,
    and specifically from its oil sales. But let's talk for a
    moment about the $6 billion in cash that the Biden
    administration transferred to Qatar from accounts in South
    Korea for Iran's use in September. That $6 billion was
    advertised as payment for the release of five hostages, but it
    was also widely understood to be the consideration paid for an
    understanding between the Biden administration and the Iranian
    regime about its conduct over the coming months, an
    understanding constructed, of course, to evade congressional
    review under the terms of the Iran Nuclear Agreement Review Act
    of 2015.
        The Biden administration has said that it will not allow
    the money to be used right now. Qatar has sent mixed signals
    about whether that is correct or not. Should Qatar defy the
    wishes of the U.S. Government and proceed with the disbursal to
    Iran, there are steps that you can take. First, it is important
    for Congress to ascertain whether the Government of Qatar has
    agreed to make Iran whole while it withholds that particular $6
    billion from South Korea. In that scenario, Qatar could simply
    hand over its own cash to Iran and then pay itself back later.
    Second, if Qatar is actually disbursing the cash from South
    Korea, focus on the banks. If it chooses to become a financier
    of the Islamic Republic of Iran, the U.S. Government has
    options under law, as do you.
        But let's talk about the really big money. Iran's total
    revenue from oil exports since 2021 is between $81 and $91
    billion. Iranian foreign exchange reserves have doubled,
    growing from $12.4 billion in 2020 to $21 billion in 2023.
    Since 2021, the estimated value of Tehran's additional oil
    sales, the difference between its realized revenue and what it
    would have earned had its exports remained at the Maximum
    Pressure level, was $26 to $29 billion. How did that happen? It
    is simple. The U.S. Government allowed it to happen. Iranian
    oil sales have skyrocketed in the last 2\1/2\ years. Why? It is
    one thing: enforcement.
        It is no secret that President Biden hoped to reenter the
    JCPOA. Simply, the White House or, more accurately, the
    Treasury Department, stopped imposing serious sanctions on
    Iranian oil exports. Who was buying it? Mostly the Chinese,
    although there are plenty of others that I have listed in my
    testimony.
        Now the cost to Iran of supporting its terror proxies is
    not cheap. In 2018, the Treasury Department pegged Iranian aid
    to Hezbollah at more than $700 million per annum. Hamas
    reportedly costs Iran about $100 million, but there are other
    estimates that suggest that it is up to $350 million a year. As
    Matt suggested, some of that is the cost of weaponry.
    Palestinian Islamic Jihad gets tens of millions.
        To give you a sense of what happens when Iran has less
    money at its disposal, during the height of the so-called
    Maximum Pressure campaign, transfers to Iran's terrorist
    proxies dropped dramatically with Hezbollah is complaining to,
    of all places, the Washington Post about furloughs, cut
    salaries, and necessary withdrawal from Syria, where they were
    fighting to support the Assad regime. Hezbollah was so strapped
    for money, it doubled down on the organ trafficking, which also
    helps it earn.
        Terrorist groups do have other sources of income. Hamas, as
    Matt said, earns substantial amounts from corruption, from
    taxes, from holding that territory of Gaza. But senior Hamas
    officials, who are located in both Gaza and Qatar, are worth
    billions. The head of Hamas is worth an estimated $4 billion.
    His predecessor is worth an estimated $2\1/2\. That is a lot of
    money.
        So I want to turn back for a second to Qatar because we do
    not talk enough about it. What role does it play in the Middle
    East? It enjoys positioning itself as an entrepot, just a
    middleman with no real favorites. That is, if I may use a term
    of art, garbage. Qatar's favorites are the Islamist extremists
    it promotes with its pet TV channel, Al Jazeera. Who lived in
    Qatar? The Taliban, al Qaeda, Hamas, ISIS leaders, all of them
    cheek by jowl with one of the U.S.' most important bases in the
    region, Al Udeid. Now is the moment Congress should be asking
    questions of Qatar.
        What else should you do? Expose how U.S. assistance to both
    the West Bank and Gaza is enabling the perpetuation of Hamas'
    rule. Expose how UNRWA, the recipient of almost $6 billion in
    U.S. assistance since 1950, has aided, nurtured, and fronted
    for Hamas. Ask why it is that Lebanon, a country ruled by
    Hezbollah, a beachhead of anti-Israel attacks at its northern
    border, has been able to skate without a State-sponsored
    designation. And if I may have about 20 more seconds to finish
    up. And most importantly, shut down the loopholes in sanctions
    enforcement that since 2021 have been permitted to facilitate
    Iran's accumulation of cash that funds and arms and trains
    Hamas, Palestinian Islamic Jihad, Hezbollah, and so many
    others. Specifically, use the language in existing legislation,
    like INKSNA--the Iran, North Korea Sanctions Act--to require
    that the Executive branch notify you of every instance in which
    it has credible information that there has been a sanctions
    violation, and justify to you its inaction in the case that it
    does not impose sanctions.
        Second, use the language of CAATSA, which the Chairman
    mentioned, to require every waiver of sanctions to be notified
    to Congress with 30 days' notice, and put in place expedited
    procedures for an up-or-down vote in both chambers on whether
    to approve or disapprove that waiver. Go after the big money
    funneled to the terrorists by Iran. Go after the oil sales. Go
    after the terrorist enablers. That is what fuels the savagery
    of October 7th. Thank you.
        Chair Brown. Thank you. Dr. Wagman, welcome.

      STATEMENT OF SHLOMIT WAGMAN, AFFILIATED SCHOLAR AND FORMER
      CHAIR, HARVARD KENNEDY SCHOOL, ISRAEL MONEY LAUNDERING AND
                 TERROR FINANCING PROHIBITION AUTHORITY

        Mr. Wagman. Thank you very much, Mr. Chairman Brown,
    Senator Britt, and distinguished Committee Members. I am
    honored to be here today and discuss with you terrorism
    financing. But before getting into the professional aspects, I
    would like to share with you a personal story, the story of two
    kids from my children's school in Israel, the Green Village.
        Iftak and Yonathan, 8th and 11th graders from our school,
    spent the weekend of October 7th in the south of Israel getting
    ready for a peace festival organized by their father, Aviv in
    which they were supposed to send up to the sky dozens of kites
    to send a message to their neighbor, Palestinian, about peace
    and coexistence. On Saturday morning, instead of eating their
    pancakes, a group of terrorists broke into their house, placed
    all of them in their parents' bedroom, and slaughtered all of
    them together in their parents' bed. A family of five, three
    innocent children--two of them went to school with my
    children--were buried together last week.
        At the same time, another person, Romi Gonin, a 23-year-old
    student, a nephew of one of my colleagues at the Israeli
    fintech, Rapyd, was dancing in a music festival. That morning,
    the terrorists started to attack them. She got shot while
    escaping from the terrorists' bullets and kidnapped. There is a
    voice recording of hearing her saying that she was captured and
    that they are taking her. She is now being kept hostage in
    Gaza.
        The Katz family is one of 1,400 people who were brutally
    slaughtered, burned alive, beheaded, and raped while at their
    home or at the music festival. Romi is part of 2,200 people
    from 37 nationalities, including women, children, and elderly,
    that are held hostage by Hamas in Gaza. Those horrifying
    stories against civilians seems to be taken directly from
    ISIL's playbook, and those creeds actually appeared in booklets
    of guidance found on ground after the attack.
        And by talking about these attacks, I just want to take
    this opportunity to make it clear, especially in light of the
    conversations that are now being held over campuses in the
    U.S., including Harvard University, where I am located right
    now, that those people are not freedom fighters, full stop.
    Freedom fighters do not murder, brutally and in purpose,
    slaughter and rape, and all the other things, women, children,
    and elderly. Those are crucial terrorists who conducted
    horrible actions toward innocent civilians, and they are also
    taking very bad actions against their own people as well.
        So as Hamas adopted obviously ISIS' practices, we, the
    global community, should also treat them in a similar manner
    and impose the full package of financial sanctions over Hamas,
    as was done with respect to al Qaeda and ISIS. As we all know,
    terror organizations cannot exist without funding. Those
    activities cost a lot of money, and there are many counterparts
    that fund that. In order to efficiently combat terrorism, we
    need to cut their oxygen, their funding, exactly like the U.S.
    did after September 11 and with respect to ISIS.
        I was asked to focus in the discussion of my testimony
    today about the field that I am researching and writing about
    at Harvard and after leaving the Israeli Government and the
    FATF, about cryptocurrencies, and I will answer all your
    question on that respect and propose an action plan. But at the
    same time, I do want to highlight, let's do not lose sight and
    focus from the big picture.
        Crypto is currently a very small part of the puzzle. The
    major funding channels are, were, and remain State funding.
    Iran and others, those are the major players. Most of the funds
    are still being transferred by the traditional channels that we
    all know from the past--banks, money transmitter, payment
    system, Hawala money exchange, trade-based terrorism financing,
    charity, cash, shell companies, and crypto.
        The effort should be global and focus on imposing global
    sanctions on Hamas and their sponsors, as was the case with
    ISIS. We should ensure that we are doing the right designations
    and enforcing them, not only designation by certain countries
    like the U.S., the EU and others, but actually to create a
    global environment to make sure that all currency and all
    States are covered. We need to make sure that we have full
    transparency regarding the involvement of neighboring economies
    and additional measures.
        As I see that my time is about to end, I will save my
    additional comments to the Q&A session. But I do want to
    highlight that the fight against terrorism financing indeed is
    a complex and challenging one, but it is a fight that we must
    win. We must protect our citizens from the threat of terrorism,
    and we must do it by cutting off the flow of money in terrorism
    organizations. Let us find a way to ensure that those actions
    will not happen again, not in Israel, and also not in other
    countries in the world. Thank you so much.
        Chair Brown. Thank you, Dr. Wagman. Before I begin
    questions, I would like to introduce the Senator from
    California, Senator Butler, for her first hearing on Housing,
    Banking, and Urban Affairs. Welcome. Glad you are here.
        Dr. Levitt, I will start with you. Given Iran's role in
    funding terrorist groups and the array of financing
    possibilities available to Hamas, two questions about that.
    What is the most effective terrorist financing measure to
    restrict funding for Hamas, and does the same apply to
    Hezbollah?
        Mr. Levitt. So we are going to need to take a basket of
    actions regarding Hamas. If there was one thing I could do
    right now, it would be to take the Hezbollah International
    Finance Prevention Act model and expand it. Somebody explain to
    me, please, why we only apply secondary sanctions to some
    foreign terrorist organizations. One of the things I think we
    are already seeing, Treasury officials are going to the Gulf,
    Treasury officials are going to Europe, and this issue, Hamas
    financing, is top of the agenda. Anticipate that one of the
    things they are doing is very firm sanctions diplomacy.
        I will give you an example. The most recent Treasury
    designation of Hamas targets, the finance committee and the
    investment committee, the third round of targets on these
    issues came this week. It is great. They targeted some
    important people. It has made a difference. At least one of
    those people, according to the designation, was still working
    for a Hamas front company in Turkey that was designated last
    time. If sanctions diplomacy alone will not convince, in this
    case, the Turks to do the right thing, secondary sanctions
    offer some pretty significant leverage to be able to get that
    done. The investment committees alone are raising hundreds of
    millions of dollars for Hamas. It is not illiquid, but it is
    there, and this is a very important issue, especially as Hamas
    loses control of territory, and we have to look at charity,
    investments, and Iran.
        Second, I am kind of tired of people debating what role did
    Iran play in this attack. It will all come out eventually.
    There was a joint operations committee--their term, not mine--
    that Iran, Hezbollah, and Hamas have been running in Beirut for
    at least the last 2 years. Just yesterday, leaders of these
    terrorist groups were back meeting with Iranian leaders. Iran
    has funded, armed, trained, wound up, and pointed at Israel,
    Hamas, and other terrorist groups for decades, and we are
    pretending that we are surprised that Hamas is doing something
    like this.
        Iran is ultimately responsible, and, therefore, there have
    to be consequences. Whether it is the $6 billion, whether it is
    other things, Iran's ability to finance terrorism has to be
    dealt with today. And the idea of putting these Iran issues in
    silos, prioritizing only the nuclear program--which is
    important, do not get me wrong--at the expense of its
    sponsorship of terrorism and malign activities in the region,
    well, we saw the consequences. The runt of the Iran threat
    network, the smallest and least capable of Iran's proxies, just
    brought the region hopefully just to the brink of regional war.
    Imagine what Lebanese Hezbollah, the Iraqi Shia militias, the
    Houthis could do, so the time to act is now.
        Chair Brown. Thank you. Dr. Wagman, a few years ago, the
    way terrorist groups exploited crypto was pretty simple. They
    raised money with Bitcoin. Walk through, if you would, how bad
    actors innovated, understanding that, as all of you said, one
    way or another, crypto is not the major source of funding. But
    talk, as it is growing and we learn more and more about crypto
    activities, whether it is drug running or child trafficking or
    financing terrorism, how are they innovating in how they use
    crypto? How do our legal and technological tools need to evolve
    so that we can keep up?
        Mr. Wagman. Thank you very much for the question. So indeed
    crypto currencies can be a paradise for illicit actors because
    they preserve some sort of anonymity and coverage. In order to
    combat that, the international community via the Financial
    Action Task Force--the FATF--established a toolbox in order to
    be able to trace that. So now we have those standards, we are
    actually enforcing a set of rules in order to follow those
    activities and those actions.
        We see that there is a major impact for that rules, and I
    could deliberate on that a little bit later, but at the same
    time we do see that bad actors are trying to avoid that. And
    with respect to people speak about Hamas, we see that there are
    two channels in which they are using that, first for
    fundraising from, you know, the public, doing crowdsourcing and
    so forth, and another way is to transfer fund between the
    organizations. However, as I mentioned, this is not a large
    part of their budget, but there is a tendency they may grow in
    the future.
        The overall package of potential regulation--or not
    potential--actual regulation that is already enforced in many
    countries have proven to be very effective. Law enforcement
    community developed tools to investigate that, trace that, and
    follow that. And for example, the Israeli authorities were able
    to seize and freeze about $7 million from Hamas in fundraising
    campaign that they ran, so this is one of the examples on how
    we could actually trace that. We see many organizations around
    the world that are still trying to work on that. They are early
    adopters, to some extent, but like any other field of terrorism
    financing and money laundering, this is a game, you know,
    between the good guys and bad guys.
        Chair Brown. Thank you. Senator Britt.
        Senator Britt. Thank you, Mr. Chairman, and on behalf of
    the Ranking Member and my Republican Colleagues, Senator
    Butler, we want to welcome you to your first Banking Committee
    hearing today.
        As I mentioned, having just returned from Israel and seeing
    the evil that Hamas firsthand, I, along with my colleagues that
    went, a bipartisan delegation, are more committed now than ever
    to making sure that we look at every single opportunity to
    cutoff funding to Iran and to end all of this once and for all.
        Mr. Levitt, you said, and you have served in various roles,
    obviously, when it comes to, you know, counterterrorism and
    financial intelligence, in both at the State Department and
    there at Treasury. I would like to know, given your experience
    in this space, you talked about both the raising of money by
    Hamas and the transfer of money. I want to focus on the
    transfer. Tell me, practically speaking, how that works from
    money going from Iran to Hamas or Hezbollah.
        Mr. Levitt. Thank you for the question. There are multiple
    ways that Iran transfers money. First of all, it is able to fly
    money and goods to Syria, transfer them physically to
    Hezbollah, and then be able to transfer them on by trade-based
    money laundering, by Hawaladars, by money exchange houses,
    trade-based money laundering, into the West Bank or the Gaza
    Strip. We have even seen Iran and Hezbollah do things like
    deposit money into a third person's account who is not actually
    a Hamas member, maybe their wife's hairdresser, but, you know,
    when Hamas says do that, you are not really in a position to
    say no. We have seen them send people with credit cards, and so
    there are multiple ways to move the money.
        Senator Britt. So when you look at these multiple ways, if
    you were to just give an estimate of the percentage of Hamas
    and Hezbollah, their total revenue that comes from Iran, what
    would that number be? What would that percentage be?
        Mr. Levitt. The number that the U.S. Government has been
    using--and this is money, not other things, so it is total
    more--is about $100 million for Hamas, fluctuating between $70
    and maybe $120 probably at the higher end recently, and $700
    million to $1 billion for Hezbollah, much, much larger budget.
        Senator Britt. So on the percentage-wise, though, if you
    were to kind of sort of take the total picture there, what
    number would you give that?
        Mr. Levitt. For Hezbollah, nobody knows is the simple
    answer. For Hezbollah----
        Senator Britt. But your guess.
        Mr. Levitt. ----it is the overwhelming majority.
        Senator Britt. OK. Ninety percent?
        Dr. Levitt. They have their own----
        Senator Britt. I have heard on the ground, maybe 90 percent
    of their funding comes from Iran.
        Mr. Levitt. It is possible. Hezbollah has its own
    independent illicit financial streams, which are significant,
    probably less than 90, but it is a lot----
        Senator Britt. A lot.
        Mr. Levitt. ----and it is constant.
        Senator Britt. So I want to shift gears just a little bit.
    Obviously, this Administration with regards to not enforcing
    Iran sanctions on the oil trade with countries like China,
    Russia, Venezuela, allowing Iran to profit over about $80
    billion since President Biden took office, I think without
    question the Iranian regime has used this $80 billion in
    profits for a number of illicit activities, a lot of which we
    are talking about here today. So with adversaries like China,
    when they are unwilling and they just disregard U.S. sanctions
    and the Iranian regime directly benefits, I believe it is
    totally and completely unacceptable. My question to you is,
    what can we do better as a Nation, looking back, to stop this?
    What has the U.S. not done, and also, Mrs. Pletka, I would like
    for you to answer this. What are we not doing from a U.S.
    perspective that we should be doing right now to stop this? Go
    ahead, Mr. Levitt.
        Mr. Levitt. So first of all, as I said earlier, we need to
    spend more time paying attention to how they transfer the funds
    because there are things we can do to frustrate their efforts.
    That is important because at the end of the day, for all these
    billions----
        Senator Britt. Mm-hmm.
        Mr. Levitt. ----Iran is able to prioritize a billion, a
    billion bit. Even under Maximum Pressure, they were financing
    Hamas and Hezbollah. Second, we need to do more to target this
    income that Iran has because it uses so much of its income to
    finance not only Hamas and Hezbollah, but Houthis and Shia
    militias, too.
        Senator Britt. Absolutely, and I am so sorry. I am running
    out of time. Mrs. Pletka, do you mind speaking directly to that
    and what more the U.S. can do to crack down on these sanction
    violations?
        Ms. Pletka. We can crack down on the sanctions violations.
        Senator Britt. That is what I am talking about.
        Ms. Pletka. That is what is not happening. What we have
    done in the last 2\1/2\ years, there have been absolutely
    sanctions imposed, a lot of sanctions imposed on Iran, but in
    the oil sector, they have mostly been small ball.
        Senator Britt. OK.
        Dr. Pletka. We have gone after small traders. We need to go
    after the big purchasers, especially the Chinese, but India,
    Russia, and others. We do actually have leverage in the form of
    secondary sanctions, trade, and other tools at our disposal.
        Senator Britt. And last, I am running out of time, but you
    spoke specifically about loopholes that are being used. Can you
    speak into that so that we can know what we need to be doing
    differently?
        Ms. Pletka. As the Chairman noted, I used to be a
    congressional staffer, so I pay a lot of attention to
    legislation. The problem in a lot of legislation is that it
    does not force action. In other words, it does not force the
    Executive branch--Republican, Democrat, Martians, whatever they
    are--into doing something once they know. There are no good
    triggers in a whole series of important pieces of legislation,
    but that model exists in the Iran, North Korea Sanctions Act,
    which is when you see it, you must notify--you. And then you
    must tell us what you have done, and if you have done nothing,
    you must tell us why. That is a loophole big enough to drive
    billions of dollars of earnings for Iran through that then goes
    to our friends, the terrorists.
        Senator Britt. Thank you. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Britt. Senator Reed of
    Rhode Island is recognized.
        Senator Reed. Thank you very much, Mr. Chairman, and like
    Senator Britt, I had the opportunity to travel to Israel and
    the region last weekend, and the horrific events of the last
    several days have really, I think, focused the whole world on
    how we can disrupt and degrade these terrorist organizations.
    Mr. Levitt, one point I think you made, though, is even under
    the Maximum Pressure Campaign of President Trump, Iran was
    still funding these organizations at a robust level. Is that
    accurate?
        Mr. Levitt. It is. It is not pointing a finger at any one
    Administration.
        Senator Reed. Right.
        Mr. Levitt. But the fact is the numbers of $100 million to
    Hamas and $700 million to a billion to Hezbollah, were numbers
    that came out in the Trump administration. Because Iran does
    not care about its citizenry and does not prioritize it, it
    does not matter if people are freezing in a cold winter and do
    not have gas for their homes. They are going to prioritize, and
    because Iran is a big economy, even under sanction, it can do
    this.
        Senator Reed. Right, but that has to be considered when we
    think about imposing sanctions on Iran because, in fact, what
    they do is deprive, as you said, their own people of basic
    necessities in order to keep funding these revolutionary
    movements, in their view. Is that fair?
        Mr. Levitt. At the end of the day, Iran has to be held
    responsible for its significant role in these heinous attacks.
    Some of that is going to have to be sanctions.
        Senator Reed. Yeah. No, I agree. One of the issues, I
    think, is because of the proximity and also the controls that
    the State of Israel has on Gaza, particularly, and Hamas, is
    what role can we play with Israel to effectively interrupt the
    flow of resources, weapons materiel to Hamas?
        Mr. Levitt. I really appreciate that question because I
    think this is something that needs to get a lot more attention.
    How did all those weapons that Hamas just used get in? There is
    going to have to be a more robust maritime effort. There is
    going to have to be more robust surveillance of what goes into
    Syria. It cannot be all on the Israelis to do airstrikes
    targeting Iranian weapons supplies to Hezbollah in particular.
    We failed here. All of us failed here when you look at the
    weapons that got in, and we are going to have to do better.
    U.S. has unique capabilities here, and I think the
    Administration has been very, very clear that it intends to use
    them to help Israel.
        Senator Reed. And this would be a collaborative effort.
    Both the world community and Israel has to focus on these
    networks by both covert and overt means, such as tracking bank
    accounts, et cetera. But I think, frankly, this was an area
    that we all missed, you know, or we tolerated in that we knew
    this money was going into Hamas, but there was no preemptive
    action by any of the major powers. Is that fair?
        Mr. Levitt. There was a lot that was missed, but there was
    also a major policy error, by everybody involved, on the
    calculation that Hamas was deterred, and that so long as money
    went in for salaries, and it is not just that we knew it. We
    encouraged it. The Israelis encouraged it so that there would
    be calm in Gaza. That calculation failed miserably----
        Senator Reed. Yes. Yes.
        Mr. Levitt. ----and is going to have to be revisited.
        Senator Reed. No, I think you are absolutely right. I think
    there was a perception that Hamas had become just another sort
    of organized crime operation with no serious plans to attack
    Israel, and as long as we paid them off, we would be OK. That
    is a little bit vernacular, but I think that since has some
    relevance.
        Mr. Levitt. Sir, I think it is spot on. I cannot reiterate
    enough Hamas did not attack because of occupation. Hamas did
    not attack because there is no two-State solution. Hamas is
    dead-set against a two-State solution or any solution that
    would have anything but an Islamist State and no Israel.
        Senator Reed. You know, again, I think Hamas hates Israel
    and has no regard for the Palestinians either. They are pawns
    in their operations, and we have to recognize that as well as
    their profound hatred of Israel and the State of Israel. Dr.
    Wagman, one of the things that we have been working on with my
    colleagues, Senator Warner, Senator Rounds, and Senator Romney,
    is legislation that would go after the intermediaries, the
    decentralized financed arrangements. Could you comment very
    briefly--I am running out of time--about that?
        Mr. Wagman. Yeah, sure. So in order to conform to the
    threats of this technology--like any other technology, it can
    be used in many different ways--a toolbox should be developed
    and actually has been developed and should be continued
    developing, in order to be able to do some tracing and to have
    some accountable parts that we will be able to identify the bad
    acts that are going there. Because most of the activities is
    going over the blockchain and there is a lot of transparency,
    we could actually use this technology in order to trace the bad
    actors.
        One of the things that we have recently seen is that Hamas
    stopped its fundraising through Bitcoin because the Israeli
    authorities were able to trace that. And perhaps to add to
    that, it is not only the intelligence community that is able to
    do that, but here, because everything is transparent, we could
    do a lot of work by the private sector. And we see a lot of
    crowdsourcing activities of people that actually go after and
    try to find those networks and then report that to the
    authorities. So that is a very interesting balance that changed
    in intelligence communities.
        Senator Reed. Thank you very much. Just for the record, the
    bill number is S. 2355, so I ask for support.
        Chair Brown. Thank you, Senator Reed. Senator Tillis from
    North Carolina is online, I think, from his office.
        Senator Tillis. Thank you, Chairman, and thanks to the
    panel for being with us today. Ms. Pletka, I wanted to talk a
    little bit more, drill down a little bit more, based on your
    opening statement, about the complex web through which Iran
    funds terrorist operations, including Hamas and Hezbollah, but
    I would like to shift a bit more toward Qatar. We know that
    they provide aid. We know that money is fungible. Can you tell
    me, if you have any information available for the Committee,
    give me an idea of what we should be concerned with in terms of
    those money flows and, with money being fungible, being used
    for malign purposes versus the purposes originally intended?
        Ms. Pletka. Thank you for the question. So I think, as Dr.
    Levitt mentioned, part of the challenge here is that Qatar
    plays a double role. The first is helpful interlocutor, a
    neutral Government that provides money to Hamas to take the
    pressure off, something that the Israelis and the Americans and
    others have long been aware of. The problem is that, first of
    all, this arrangement, a deeply, deeply Faustian deal that
    ended up helping Hamas gather the money necessary to do what it
    did on October 7th, but there is blame to go around. But the
    broader problem is that Qatar is a home, a home for terrorists,
    a home for terrorist money. It is a place where Ismail Haniyeh,
    the head of Hamas, lives in enormous wealth, $4 billion. Yes,
    part of that is in real estate in Gaza. Part of that is in real
    estate elsewhere. Part of that is in villas.
        This cannot be. We cannot have, on the one hand, a U.S.
    base and a nominal friend who also presents a homeland for
    every single terrorist group that, by the way, has been
    responsible not simply for the murder of Israelis, not simply
    for the murder of Americans in Israel, but responsible for the
    murder of Americans in Iraq, responsible for the murder of
    Americans all around the world. This is the challenge, and my
    most important priority here is to ask the question, what are
    they doing? How are they doing it? Are they providing financial
    flows to Hamas outside the arrangements they made? Of course
    they are. Are they providing financial arrangements to ISIS and
    to Hezbollah, as has been alleged in years past? Probably. They
    have unique influence with those groups, and unique influence
    does not just come from being a nice guy in the Middle East.
        Senator Tillis. Yeah, and honestly I think you have
    answered those questions. I believe probably that you are
    correct, and we need to get to the bottom. I want to talk a
    little bit about the Biden administration where I am at odds
    with their Middle East strategy and the assumption that Iran is
    a rational and could potentially be a good-faith actor. I do
    not see any logic behind that, and I think it was that logic
    that led, at least initially, to the $6 billion that was going
    to be released to Iran.
        So does anything--and Ms. Pletka, this is for you or anyone
    on the panel that may want to answer--does anything lead you
    all to believe that having that posture from this
    Administration is productive and has any foundation or
    justification? And, Ms. Pletka, we will start with you, but I
    am just trying to get why we would think that Iran has any role
    to play in deescalating the tensions in the Middle East, based
    on their past behavior.
        Ms. Pletka. Well, this was a conceit of the Obama
    administration, that, in fact, if we could get Iran to step
    away from its aggressive nuclear weapons program, that they
    would eventually evolve into a more constructive player in the
    region. The reverse has been true. I do not think there is any
    reason on earth--after Iran has armed the Hashd al-Sha'bi, the
    Popular Mobilization units in Iraq, Hezbollah in Lebanon, the
    Houthis in Syria, Hamas, Palestinian Islamic Jihad, and
    numerous other groups--there is no reason to believe why Iran
    has a constructive role to play in any sense.
        And let's not forget, please, we talk about what Iran does
    to these countries, how Iran has been responsible for the death
    of Americans and Israelis. Let's not forget what Iran does to
    its own people. Mahsa Amini was a great cause for us last year.
    Last week, they murdered another 16-year-old girl for exactly
    the same reason. This is an execrable regime. I am going to
    leave a second for you, Matt.
        Senator Tillis. Yes, Mr. Chair, if I may, because I want to
    be mindful of time, if anyone on the panel disagrees with the
    position that I have taken or the response from Ms. Pletka, I
    would like to give them equal time.
        Mr. Levitt. Thank you so much for the question. I am too
    smart a man to disagree with Danielle Pletka publicly, but I do
    think, at least in my conversations with Administration
    officials, I have yet to hear anybody use that type of
    language. I do not know anybody in the Biden administration who
    thinks Iran has a constructive role to play. I think there were
    people who think----
        Senator Tillis. Then maybe perhaps you could get to why we
    would actually--well, we know the mistakes of the Obama
    administration--but why we would even put $6 billion on the
    table if, in fact, that is not true.
        Mr. Levitt. I think the $6 billion, which I had problems
    with, was entirely about securing the release of American
    citizens. And if someone else had a better idea for how to
    secure the release of these Americans, I would be all ears.
    Giving Iran $6 billion was extremely uncomfortable, but I think
    it was not in a vacuum. We were trying to secure the release of
    Americans, which is a national priority.
        Senator Tillis. But I think the irony of it is, money being
    fungible, it could be those very dollars that now have some 200
    people being held hostage by Hamas. Thank you, Mr. Chair.
        Chair Brown. Thank you, Senator Tillis. Senator Menendez of
    New Jersey is recognized.
        Senator Menendez. Thank you, Mr. Chairman. Through Iran's
    funding of terrorist organizations, it continues to work toward
    the delegitimization of Israel. Iran has to be held accountable
    for its role in funding Hamas and other terrorist groups, and
    while I applaud the Treasury Department's recent sanctions on
    individuals identified as key Hamas terrorist group members,
    operatives, and financial facilitators, much, much more has to
    be done to prevent malign actors like Iran from financing proxy
    terrorist groups.
        Ms. Pletka, in a recent article, you wrote that the United
    States has chosen not to enforce its sanctions on Iran. It is
    certainly bothersome to me since I was the architect and author
    of most of those sanctions. What do you mean by that, and what
    recommendations do you have for the U.S. to do better
    enforcement of existing sanctions?
        Ms. Pletka. Thank you, sir, and Menendez-Kirk is great
    legislation, so thank you for your leadership on that. As I
    said in my opening testimony, I think there is a lot that
    Congress can do to tighten the screws. Why do I think the
    Administration is not enforcing sanctions? There is a hope,
    there has been a hope, that the United States could either
    modernize or reenter the JCPOA as it was if it was able to
    secure Iranian cooperation. To me, that is a fantasy land, but
    it certainly represented the ambition at the beginning of the
    Administration. I hope it is no longer.
        What can you do? First of all, we need to go after
    everything, and that, I think, has been the message from the
    entire table. We need to go after all spigots that are funding
    Iran and enabling Iran to fund its proxies around the region.
    That means oil sales. It means every other activity that the
    Iranians are involved in. We see these illicit oil sales. We
    also see, by the way, illegal transfers between Russia and Iran
    exchanging grain for oil. All of these are opportunities.
        We have task forces in the Persian Gulf that can be used to
    interdict ships. We have options at our fingertips to deny even
    ships on the high seas insurance, to go after them in a whole
    variety of ways, but the most important thing is to impose a
    cost on the buyers. They are the ones helping Iran fund these
    groups, and most importantly in that group is the Chinese
    Government, the Communist Chinese Government in Beijing.
        Senator Menendez. Yeah, and that is an issue I have raised
    before, which is the Chinese are buying enormous amounts of
    Iranian oil and Russian as well, and so at the end of the day,
    you have to make a conscious decision. If you really want to
    sanction and stop the flow of money, you have to pursue, as you
    suggest, the buyer because without a buyer, there is not a flow
    of money at the end of the day.
        In September, you know, the U.S. agreed that it would
    unfreeze $6 billion in Iranian funds. However, in light of
    Hamas' attack on Israel, the U.S. and the Qatari Government
    have agreed to temporarily prevent Iran from obtaining access
    to the $6 billion. It seems to me that the goal of any
    sanctions regime is to use economic leverage to bring about
    changes in a foreign actor's behavior. With that said, Iran is
    obviously openly hostile toward Israel. It supports Hamas, and
    while it denies that it assisted Hamas' terrorist attack
    against Israel, Hamas does not have the intelligence and
    technological capabilities to launch such an operation. That
    can only come from a State actor, and the only State actor who
    would help Hamas is Iran.
        Dr. Wagman, should not one of the conditions for unfreezing
    the $6 billion is the cutting of all ties by Iran to Hamas and
    its flow of money to it?
        Mr. Wagman. Thank you for the question. I am not fully
    familiar with the U.S. policy and approach in those aspects,
    but I would say that obviously Iran is financing Hamas, and I
    do believe that any action that can prevent that should be
    taken, anything that stop the funding to Hamas.
        Senator Menendez. Well, it just seems to me, and of course
    we always want to get American citizens back, but that brings a
    larger question. We should not let American citizens travel to
    countries where they are likely to be hostages, i.e., Iran,
    Russia, and others, because then we put ourselves in a hostage
    situation. But it also, I think, encourages other countries to
    say if you detain Americans illegally, then you can hit a cache
    of gold, and that is something that we just simply should not
    allow. Thank you.
        Chair Brown. Senator Kennedy of Louisiana is recognized.
        Senator Kennedy. Thank you, Mr. Chairman. Dr. Levitt, Hamas
    runs Gaza. Is that correct?
        Mr. Levitt. Yes, sir.
        Senator Kennedy. And lots of people help Hamas, do they
    not?
        Mr. Levitt. There are people who help. There are lots of
    people in Gaza who oppose Hamas as well.
        Senator Kennedy. Well, Qatar sends Hamas $10 million a
    month to run the place, does it not?
        Mr. Levitt. It has.
        Senator Kennedy. The Palestinian Authority, which the
    people of Gaza rejected in favor of Hamas, pays Gaza's
    electricity bill. They keep the lights on for Hamas, do they
    not?
        Mr. Levitt. Well, to be clear, the people of Gaza did not
    reject the Palestinian Authority. Hamas took over----
        Senator Kennedy. I do not want to----
        Mr. Levitt. ----with force of arms.
        Senator Kennedy. I do not want to debate that.
        Mr. Levitt. There is not much to debate.
        Senator Kennedy. Yes----
        Mr. Levitt. The Palestinian Authority does provide salaries
    to its people in Gaza.
        Senator Kennedy. Does the Palestinian Authority pay for
    keeping the lights on in Gaza?
        Mr. Levitt. They pay for some of it, yes.
        Senator Kennedy. The U.N. sends Hamas money to educate the
    children, does it not?
        Mr. Levitt. The U.N. pays for some education in Gaza. They
    do that----
        Senator Kennedy. Is that a yes?
        Mr. Levitt. ----through their own agencies.
        Senator Kennedy. Is that a yes?
        Mr. Levitt. They provide the money into Gaza, yes.
        Senator Kennedy. I will take that as a yes. The U.N. gives
    Hamas money to run hospitals, does it not?
        Mr. Levitt. The U.N. runs hospitals in Gaza, too, yes.
        Senator Kennedy. And, in fact, does Hamas not tax, at the
    rate of 16\1/2\ percent, every bit of food and aid that comes
    into Gaza?
        Mr. Levitt. They do tax everything. I do not know the exact
    percentage.
        Senator Kennedy. And Hamas levies a tax on even fish
    caught, does it not?
        Mr. Levitt. They tax everything.
        Senator Kennedy. And Hamas also levels an income tax, does
    it not?
        Mr. Levitt. That, too.
        Senator Kennedy. OK. President Biden's administration has
    not enforced the sanctions on Iranian oil, has it?
        Mr. Levitt. No.
        Senator Kennedy. OK. So you agree with Ms.--I am sorry, I
    cannot see your----
        Ms. Pletka. Pletka.
        Senator Kennedy. Pletka. So you agree?
        Mr. Levitt. I tend to make it a policy to try to agree with
    Ms. Pletka whenever possible.
        Senator Kennedy. Yeah. Well, you are smart. You told us you
    were smart. President Biden has not chosen to impose the
    snapback sanctions under the JCPOA, has he?
        Mr. Levitt. Correct.
        Senator Kennedy. OK. Ms. Pletka, who has the $6 billion?
        Ms. Pletka. It is in a bank in Qatar.
        Senator Kennedy. OK. So Qatar has control of it.
        Ms. Pletka. In essence, that is correct, although----
        Senator Kennedy. Well, let me put it this way. There is a
    Qatar bank. If Qatar tells them to do something, the United
    States tells them not to do something, who is the bank going to
    listen to?
        Ms. Pletka. Well, that is the question before us right
    now----
        Senator Kennedy. Who is the bank going to listen to?
        Ms. Pletka. Qatar.
        Senator Kennedy. Of course.
        Ms. Pletka. Their Government.
        Senator Kennedy. OK. And is it not a fact that back in
    2021, Treasurer Yellen, through special drawing rights at the
    International Monetary Fund, gave Iran $4\1/2\ billion?
        Ms. Pletka. That is what I understand, yes.
        Senator Kennedy. And she would like to give them more.
        Ms. Pletka. That is what I understand, yes.
        Senator Kennedy. That is like cash money. It is really a
    dividend you can cash in for U.S. dollars. Is that right?
        Ms. Pletka. That is what I understand.
        Senator Kennedy. Wow. It seems to me that we could cutoff
    Hamas, or at least go a long way toward doing that, by actually
    just enforcing the things that we already say we are enforcing.
        Ms. Pletka. Every authority that is necessary to cutoff
    Iran, Hamas, and every other terrorist group is already in the
    President's hands. The question is never whether the President
    can. It is whether the President will.
        Senator Kennedy. Well, why has the Biden administration
    been so soft on Iran? If we know Iran is funding Hezbollah,
    Hamas, the Houthis, their surrogates in Syria, their surrogates
    in Iraq, why has President Biden's administration been so soft
    on them?
        Ms. Pletka. Well, I am not----
        Senator Kennedy. Do they just think love is the answer and
    that this is not a bar fight? I mean, it just looks to me like
    this Administration is quoting Socrates in the middle of a
    prison riot.
        Ms. Pletka. That is a very apt picture. I am not a
    spokesman for the Biden administration, so I can only give you
    my estimation. There has always been a problem in our
    compartmentalization in dealing with Iran. We have prioritized
    their nuclear weapons program, understandably, but we have not
    ignored but diminished the importance of their support for
    terrorism, their regional disruptions, and their human rights
    record. Those things need to change. We need to tighten the
    screws on Iran in every single aspect.
        Senator Kennedy. Peace through weakness never works, does
    it?
        Ms. Pletka. No.
        Chair Brown. Thank you, Senator Kennedy. Senator Cortez
    Masto from Nevada is recognized.
        Senator Cortez Masto. Thank you. Thank you, Mr. Chair and
    Ranking Member. Thank you for the panelists as well. This
    really requires us to work in a bipartisan way without
    ``gotcha'' moments. And I appreciate the discussion today, but
    I do think let's be candid and at the same time tell the facts.
    We are concerned about previous actions as they led to where we
    are today and then how we address moving forward, working
    together. If I recall, in 2018 it was the Trump administration
    that pulled us out of the JCPOA. It was the Trump
    administration who refused to impose sanctions under CAATSA. So
    there is enough blame to go around, but let's focus on where we
    are today because I think this is where we should be and what
    we need to do.
        Let me just start with the first question. I think what I
    have been hearing, and I have been listening this morning as
    well to the conversation from the panelists--and thank you,
    very esteemed panelists--we all agree that we need to make sure
    that Israel has the support it needs to defend against the
    threats posed by Hamas and other terrorist organizations. I am
    also concerned about the threat by Hezbollah that it continues
    to pose against Israel's security. We all know, and we are
    hearing from all of you, much of the support comes from Iran's
    State sponsorship of terrorism with Hezbollah, Hamas, and the
    like. I also recognize that Hezbollah and Hamas still receive
    funding from private donations and organized crime syndicates
    across the globe.
        My question to all of you is, how can and is the
    Administration working with our European allies to really crack
    down on the illegal funding of terrorist organizations like
    Hamas, like Hezbollah, like we have been talking about? What is
    it that is happening with our European allies, and what more
    should we be doing? And maybe, Mr. Levitt, I will start with
    you.
        Mr. Levitt. Thank you so much. The Deputy Secretary of the
    Treasury is about to take off for Europe on this exact issue,
    and so you are seeing top-level engagement on this issue in
    general and specifically on the issue of Hamas, which
    traditionally has not gotten as much traction with our foreign
    partners, including the Europeans, who have seen Hamas as a
    lesser threat, not a threat to the international community,
    just to Israel.
        The October 7th attack was one of the worst acts of
    international terrorism ever--number of countries that were
    affected, number of people killed, number of people wounded,
    number of people kidnapped--and so there is an opportunity now
    to see Hamas for what it is and to get better buy-in and
    activity. When the President of France goes to Israel and says
    the Counter ISIS Coalition should take on the job of countering
    Hamas, that is not likely to happen, but a coalition of its own
    to get together and do more, in particular on the financing, is
    a very smart idea. Whether it happens or not, when the
    President of France says this, not someone who has typically
    been so hard on Hamas, that is a big step forward.
        Senator Cortez Masto. Thank you. Anyone else?
        Mr. Wagman. Yeah, I am happy to respond. I do think the
    Coalition Against Hamas is required, like was done with ISIS,
    and I think that there are many tools that have not been used
    so far. First, to have a global designation on Hamas as a
    terror organization as was done on ISIL, meaning that all
    countries will have to impose that in all currencies, not only
    in U.S. dollars or euro. In addition, we need to make sure that
    secondary sanctions are being imposed. For example, it is known
    intelligence that Turkish exchanges and banks are constantly
    working in order to support Hamas, and the world is just
    putting, you know, a blind eye on that.
        Another thing is to make sure that we have enough
    transparency on the economies of the region. For example,
    Lebanon is hosting, or is having internally Hezbollah. We have
    not seen a report, for example, by FATF, that is actually doing
    the analysis of how to treat the Lebanonian economy and what
    should be done in order to make sure that Hezbollah does not
    control it or use that in order to do those actions.
        And last but not least, also the Palestinian Authorities
    have never been evaluated by FATF in order to check what is
    going on on the financial system of the Palestinian Authority,
    and this should be examined so we will better understand the
    relationship between the economies of Gaza and the rest of the
    Palestinian Authorities, and actually also answer previous
    questions about how do we know where the funds are going. If we
    do not know what happens in the Palestinian Authority economy
    in general, we will never know what actually is going in
    practice.
        Senator Cortez Masto. And I only have a few seconds left,
    but you touched on something that was the next question, was
    Turkey because we also know where Erdogan basically stated
    Hamas are not terrorists. So how do we address the concerns
    that you brought up, which was my question, is how do we
    address the terrorist financing that potentially may be going
    through that country?
        Mr. Wagman. So I think that after the event of this month,
    no question mark should still be there. This is pure terrorism,
    and this is why we need, you know, the international pressure,
    if that was not clear until now.
        Senator Cortez Masto. Thank you. Thank you all. Appreciate
    it.
        Chair Brown. Thank you, Senator Cortez Masto. Senator
    Hagerty of Tennessee is recognized.
        Senator Hagerty. Thank you, Mr. Chairman. There has been a
    lot of discussion among Members of Congress about the role of
    cryptocurrencies in funding the recent attack on Israel that
    was carried out by Iran-backed Hamas. Policymakers that are
    hostile to cryptocurrency have even gone so far as to suggest
    that by eradicating the crypto industry, perhaps the attack
    would never have happened. I find that amazing to hear, but
    that is some of the claims. I would like to provide some
    context to these claims.
        The Wall Street Journal recently reported that Hamas and
    Palestine Islamic Jihad, since 2021, have received roughly $130
    million in crypto financing via offshore exchanges and
    platforms like Binance. It is important to note that these
    figures are disputed and per independent analysis that was
    released just this week, could be overestimated by as much as
    99 percent. The data analytics firm cited in this Wall Street
    Journal report has even disputed the estimates that were
    reported, stating that there is no evidence to suggest that
    Hamas fundraised anything close to this $130 million reported.
        Make no mistake. Any such funding is unconscionable and
    should be addressed in a thoughtful, targeted way in order to
    choke off these terrorists, but we should do this without
    pushing the crypto industry overseas. In this case, we need a
    scalpel, not a sledgehammer. What seems to be lost in the
    discussion is the billions of dollars--I am talking about
    billions with a ``B''--that have been funneled to these very
    organizations we are concerned about their principle sponsor,
    Iran--with the blessing of the Biden administration.
        Until recently, this appeasement policy was led by Special
    Envoy for Iran, Rob Malley. Rob Malley, who has had his
    classified security clearances ripped away, who has been kicked
    out of the State Department, and whose team included at least
    one person who it has been reported is a member of the Iranian
    Experts Initiative, which is a foreign influence and collusion
    network that is run by the Iranian regime.
        Biden's lax sanctions enforcement on Iranian crude sales
    have allowed the terrorist regime's oil revenues to surge from
    $7.9 billion during the final year of the Trump Maximum
    Pressure Campaign--I might add that the secondary sanctions I
    was involved in imposing in that Administration worked--from
    $7.9 billion in the final year of the Trump administration to
    more than $42 billion in 2022. According to estimates, the
    Iranian regime has been able to amass up to $91 billion in
    illicit oil revenue since the Biden administration came into
    office.
        President Biden has also greenlighted a $10 billion payment
    from Iraq to Iran for electricity. Further, President Biden has
    sent UNRWA over $730 million. UNRWA nominally provides direct
    relief and works programs for Palestinian refugees in Gaza and
    the West Bank, but these funds are fungible. And UNRWA has an
    abhorrent track record of supporting anti-Semitic curricula
    that refer to Israel as the enemy and teach math--I am not
    making this up--they teach math by counting martyred
    terrorists. I have seen the materials. At the same time, Qatar
    has over the past decade provided more than $2 billion in
    fungible economic and humanitarian aid.
        So my first question is a simple one, Dr. Wagman. Is tens
    of billions of dollars in Iranian oil revenue and sanctions
    relief from this Administration, plus whatever direct monetary
    relief to Hamas-controlled Gaza that has flowed that way, is
    that in any way comparable to the $130 million that allegedly
    has flowed through, which is probably overstated, from the
    crypto markets?
        Mr. Wagman. Yeah. So as I mentioned, I mean, crypto right
    now is not the main source of funding for Hamas, but definitely
    the old traditional ways in which we see that State funding is
    the most dominant thing that is funneling into the Gaza Strip,
    from cash----
        Senator Hagerty. Let me follow up on that. Is it fair to
    say, then, that these oil revenues, the sanctions relief, and
    the direct monetary relief revenue streams have done far more
    than any crypto financing to either directly support these
    terror groups or to buildup the resources that they could then
    divert to other malign activities?
        Mr. Wagman. Generally speaking, the funding of Hamas comes
    from State funding in many different channels. It goes through
    Turkey, to money exchanges, through trade-based terrorism
    financing, cash deliveries being sent, banking system,
    underground banking, many variety of ways.
        Senator Hagerty. Yeah.
        Mr. Wagman. Crypto is only one of them, and right now it is
    a limited part.
        Senator Hagerty. The point being that we brought those
    revenues down dramatically through the Maximum Pressure
    Campaign. They have skyrocketed because of non-enforcement of
    sanctions. And what seems to be happening here is that we are
    trying to divert attention from that fact, attacking an
    industry that we should be moving onshore. We want to actually
    have control and promote it and be able to deal with it.
    Instead pushing it offshore strikes me as a very bad idea.
        Dr. Wagman, one last question. Do you agree that
    international entities are harder to work with to combat these
    illicit flows? Would providing clarity to the crypto industry
    and encouraging these companies to move to the United States
    and within our jurisdiction rather than forcing them offshore
    not be a more straightforward way to reduce these illicit
    flows?
        Mr. Wagman. I think that having a global regime is
    extremely important in order to make sure that there are no
    weakest links because you could impose whatever you want
    internally, but then everything is being pushed away to other
    jurisdictions. So you have to have it both internally and
    internationally, and with that respect we do see that the
    weakest link is in other countries that do not enforce FATF
    regulations. And I do think that the U.S. can push very
    strongly the FATF in asking it to actually publish gray list of
    countries and jurisdictions that do not enforce the regulation
    and that do not impose the travel rule, and all the other
    regulations which can actually create a safer global
    environment.
        In addition, the U.S. could also choose and go and sanction
    or designate particular exchange platforms that are being used,
    in fact, for terrorism and criminals as like mixers because
    they do not fully support or fully contact the way that this is
    required.
        Senator Hagerty. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Hagerty. Senator Warner of
    Virginia is recognized.
        Senator Warner. Thank you, Mr. Chairman. Thank you for
    holding this critical hearing. I have got to say to my friend,
    Senator Hagerty, and I know another advocate, Senator Lummis,
    around the areas of crypto, I believe strongly in the value of
    decentralized ledger. But I do think--and I see more of this,
    frankly, from a classified setting as Chairman of the
    Intelligence Committee--that, unfortunately, crypto is being
    used in a disproportionate way, I think particularly around
    rogue regimes like North Korea.
        I think one of the things that really ought to be incumbent
    upon me and others on the intel side to get more of this
    information declassified so we can at least have more facts out
    there on this subject matter. There has been some
    documentation, I think there will be more coming out, about
    literally some the payments to Hamas being made through crypto.
    It is one of the reasons why a lot of us on the Committee, in a
    bipartisan way, worked for years literally on the Anti-Money
    Laundering Act. That was 3-plus years ago. Took a lot of time.
    Mike Crapo was very active, the Chair was very active, and the
    implementation of that bill is still being, unfortunately, too
    slow.
        It is one of the reasons why, recently, I have been working
    with Senator Reed and Senator Rounds, Senator Romney on Senate
    Bill 2355, the CANSEE Act, which actually goes and tries to put
    a definitional approach and some responsibility around DeFi.
    Just as a commentary, I do not accept the premise that there is
    no father or mother of any DeFi system. Somebody is making
    money off of that, and we try to grapple on that. That is why
    more recently, we have been taking some of the ideas around
    DeFi and also thinking about secondary sanctions, particularly
    when it comes to terrorist organizations. And what we have used
    as a template--and I am going to come to you, Mr. Levitt, in a
    moment--is we have actually passed a law in this area. Back in
    2015, we passed a secondary sanctions law against Hezbollah
    using traditional areas around banking sanctions because in
    2015, there was no part of the crypto industry.
        I am still working with Senator Reed as well on a bill that
    would apply secondary sanctions, restrictions on transactions
    with foreign parties who facilitate transactions with terrorist
    organizations, and not just using traditional financial tools,
    banks, but also using crypto. This----
        [Voice.] What the hell?
        Senator Warner. You will have a chance to rebut my question
    in a moment, whoever was making those comments.
        Under our bill, using the Hezbollah bill as a baseline,
    using our definition of DeFi, and under this bill, Treasury
    must identify any foreign bank or foreign cryptocurrency
    entity, which we have called a digital asset transaction
    facilitator, known as an FTO, so that there would be then
    secondary sanctions placed on these entities, whether it be
    traditional banks or these FTOs. Again, as I said, we would
    include using the definitions we had on DeFi from CANSEE.
        So let me actually get to the question in my last minute,
    Dr. Levitt. In your testimony, you cite the Hezbollah
    International Financing Prevention Act, and said it is long
    time past that we go beyond Hezbollah to cover these other
    foreign terrorist organizations. This approach that would both
    build on the Hezbollah Act, take on foreign terrorist
    organizations, include their usage not only of traditional
    financial tools but of crypto with a DeFi definition included,
    would this make some sense, or not?
        Mr. Levitt. Tremendous sense and long overdue. Terrorists
    are still using banks, but they are using other methods, too.
    And while I think that the Wall Street Journal figure is
    probably exaggerated, there is no question we have seen DOJ
    action targeting Hamas crypto and other actions. The Israelis
    took an action just the other day. This is a growth area, and
    so we need to try and get, I do not know if it is still safe to
    say ahead or maybe catch up, on crypto and DeFi and recognize
    that this is a space where legitimate transactions can happen
    and illegitimate transactions can happen. And what you are
    proposing, to me, makes tremendous sense.
        Senator Warner. And I appreciate, Mr. Chairman, that I know
    you and your staff are working on this as well. Hopefully, we
    can combine efforts. And frankly, to my colleagues who have
    been strong advocates of crypto, I think if we can decrease the
    illicit use, particularly terrorist organizations like Hamas,
    and add that secondary sanction in, it might bring actually
    more legitimacy to this form of transaction, wherever they are
    located in the world. Thank you, Mr. Chairman.
        Chair Brown. And thank you, Senator Warner, and the uses of
    crypto on child trafficking and drug running and all of that
    and understanding it better, thank you. Senator Lummis of
    Wyoming is recognized.
        Senator Lummis. Well, thank you, Mr. Chairman. I am so glad
    we are having this discussion, and I agree with Senator Warner.
    This is an area where crypto is being used to finance
    terrorism, and we have to provide the tools necessary to stop
    that. In fact, earlier this year, I worked with my colleagues
    on both sides of the aisle to add an amendment to the NDAA that
    would require examination standards for crypto asset
    intermediaries and request a report from FinCEN on mixers and
    tumblers, the way that information is scrambled to prevent
    detection.
        Furthermore, let's get after Binance and Tether. These are
    offshore companies that are financing illicit activities and
    terrorism. We have got to prevent Hamas, Hezbollah, and other
    terrorist organizations from using digital assets, using
    cryptocurrency as a means to finance their activities. So mixed
    in with the talk of stronger sanctions on Iran and other
    avenues to prevent the flow of illicit finance, we have heard a
    lot about crypto assets today. We should be hearing a lot about
    crypto assets today. I think it is because our panel is, in
    part, missing the perspective of FinCEN and the law enforcement
    agencies that are actively fighting the finance of terrorism.
        When we ask FinCEN and others what authorities they need to
    combat illicit finance in crypto assets, they say they do not
    need more laws. They need more resources. I have heard from law
    enforcement that in many ways, crypto assets are more traceable
    than cash. In fact, we have had people testify under oath in
    this Committee that crypto assets are easier to trace than cash
    because the data is permanently available for everyone to see
    on a distributed ledger. If you want to download on a computer
    the entire distributed ledger of Bitcoin, you can do it in your
    office. It will take you--plug in a computer, sign on--take you
    about 100 hours. You can download the entire distributed ledger
    of Bitcoin from day one in 2009, currently, and it will update
    every 10 minutes. It is remarkable the information that is
    available there. So what we need to do is give FinCEN and our
    regulators the resources to carry out the mission.
        Now, we address this in the Responsible Financial
    Innovation Act that Senator Kirsten Gillibrand of New York and
    I have sponsored. It is a comprehensive framework for digital
    asset regulation. It provides these resources. As a starting
    point, it gives FinCEN $150 million to carry out its mission in
    regard to crypto assets and provides the flexibility to hire
    and retain highly qualified individuals.
        Now, let's turn for a minute to intermediaries like Binance
    and Tether. We know that Hamas and other terrorist groups have
    on literally hundreds of occasions been able to open accounts
    with Binance, even after public reporting about the issue.
    Binance is knowingly facilitating violations of sanction laws
    and the Bank Secrecy Act by failing to carry out adequate
    customer screening when it is aware the exchange is being used
    to finance terrorism.
        It is also well known that Tether is a favored on and off
    ramp for illicit activities to interact with crypto asset
    markets and is knowingly facilitating violations of the law. It
    was recently reported that Israeli law enforcement directed
    Tether to freeze 32 addresses controlled by Hamas- and Russian-
    linked entities in Israel and Ukraine. Tether is failing to
    conduct adequate consumer and customer due diligence and
    screening, despite being aware that its product is used to
    facilitate terrorism and other illicit activities.
        That is why today, I sent a letter with Representative
    French Hill, who is the Chairman of the House Digital Assets
    Subcommittee, to Attorney General Merrick Garland, asking the
    Department of Justice to wrap up its investigation and consider
    criminal charges against Binance and Tether for their
    involvement in illicit finance. And we now know, as Senator
    Hagerty noted, that the role of crypto assets in funding Hamas
    has been overstated, but even $1 going to support the recent
    heinous attacks is too much. Binance and Tether have knowingly
    been allowing terrorists to move funds using their unregulated
    exchanges. They are based in the Seychelles, in the Caymans, in
    the British Virgin Islands. It is time they are brought to
    justice.
        Mr. Chairman, I ask unanimous consent that my letter to
    Attorney General Garland be entered into the record.
        Chair Brown. Without objection, so ordered.
        Senator Lummis. We have tried the status quo where crypto
    asset intermediaries operate in an environment without clear
    paths to registration. As policymakers, we need to be making it
    more difficult to operate a crypto asset intermediary in the
    shadows offshore. But we also need to make it possible to
    operate a compliant exchange in the United States. By providing
    robust regulation, the United States can force bad actors out
    of the crypto asset space and ensure financial innovation can
    continue in our Nation in a manner that does not allow illicit
    finance to occur.
        I have used up my time and more, so I do not have any
    questions for you, but Mr. Chairman, thank you kindly for
    holding this hearing. I yield back.
        Chair Brown. Thank you, Senator Lummis, for your comments.
    Senator Smith of Minnesota is recognized from her office.
        Senator Smith. Thank you very much, Chair Brown, and thanks
    to our panelists for being with us today.
        So just over 2 weeks ago, this brutal terrorist
    organization, Hamas, perpetrated a vicious attack on Israel,
    murdering 1,400 civilians and taking over 200 hostages, most of
    whom are still being held in unknown conditions. And I know
    that everybody on this Committee and in our country has been
    horrified and heartbroken at the devastation and terror and
    violence that unfolded on that day and that has since unfolded.
    I agree with the Biden administration that the United States
    must stand with Israel as it defends itself against this
    existential threat posed by Hamas, and we also need to work
    with Israel and all of our regional partners to address the
    humanitarian crisis in Gaza and minimize further harm to
    innocent civilians.
        So I want to ask a question to you, Mr. Levitt. The mission
    to stop Hamas must include cutting off their access to
    financial resources, and it seems to me that we need to focus
    not just on what they have done in the past to raise money, but
    what they will do next, that we need to look forward and be
    proactive. For example, this past April, Hamas stopped
    soliciting donations in Bitcoin because of enforcement actions
    taken against their donors and, instead, are now leveraging
    other digital assets and technology. And to be clear, I heard
    the important testimony earlier that what goes on in crypto is
    a small portion of what it is that we need to do to stop the
    flow of money to this terrorist organization.
        But, Mr. Levitt, could you talk about how, as we work with
    our international partners to cutoff Hamas access to financing
    through crypto and other means, how can we be more forward
    looking? How can we anticipate what their next strategies are
    going to be as we go forward?
        Mr. Levitt. Thank you so much for the question. When I was
    in Government, we used to do this all the time, look at what we
    did now and try and anticipate how our adversaries would react
    because they are not just going to stop. As Hamas is defeated
    in the Gaza Strip and it cannot raise money through governance,
    it is going to rely more on Iran. It is likely going to try and
    move more toward crypto, though probably not in big numbers. It
    is definitely going to try and rely more on abuse of charity.
        In the wake of this war that Hamas brought on, starting
    with their slaughter on August 7th, there is lots of suffering.
    And you will have good people raising money to help innocents,
    and you will have bad people who are using this as a pretext,
    saying they are raising money for innocents when they are
    really raising money for Hamas. As I have written in my
    testimony, we have already seen just in the past few weeks
    since the attack, in some cases, previously designated entities
    ratcheting up their fundraising, crowdsourcing, and
    ``charitable campaigns.''
        I also applaud the Treasury Department's focus, now a third
    tranche just this week, on Hamas' finance and investment
    committees, which have successfully raised hundreds of millions
    of dollars for Hamas. So it is important to note that is not
    liquid cash. It is held up in investments.
        Senator Smith. Mm-hmm. So following up on that, we know
    that terrorist organizations exploit charity and the suffering
    of innocent people for their own evil purposes. Are there best
    practices or things that Americans should know if they are
    seeking to participate in the humanitarian needs that are
    unfolding for these innocent civilians in Gaza who are not
    Hamas and are not supporting Hamas? Is there anything that, you
    know, Americans out there should be thinking about as they are
    wondering what they can do to help?
        Mr. Levitt. Absolutely, and here again I applaud Treasury's
    FinCEN just the other day issuing an alert to financial
    institutions to counter Hamas financing. Among the several red
    flags they highlighted were indicators focused on charitable
    giving to help detect, prevent, and report suspicious
    activities related to abuse of charity. So we need to
    communicate to the public the type of things to look for, and
    Treasury just did that the other day.
        Senator Smith. Thank you. And I just have a couple of
    minutes left, but, you know, we know that Hamas has solicited
    donations through various social media platforms, posting
    addresses and so forth. And while many platforms have banned
    Hamas, accounts aligned with Hamas continue to emerge. And so I
    am wondering, what responsibilities do we think that these
    platforms bear for facilitating such payments? You know, for
    example, Mr. Levitt, X has recently started boosting content
    from paid verified users and has adopted this arrangement to
    share revenues. How concerned should we be with this kind of
    activity?
        Mr. Levitt. I am very concerned by it. I am very concerned
    that we do not hold platforms sufficiently responsible for the
    real-life consequences of what they allow on their platforms,
    whether or not they then monetize that on top of it.
        Senator Smith. Right.
        Mr. Levitt. And if you look at what the platforms have been
    doing the past few weeks, it is just disgusting.
        Senator Smith. If you want to change the outcomes, you have
    to change the incentives, and I think the incentives are all
    wrong there. Thank you.
        Chair Brown. Thank you, Senator Smith. Senator Daines of
    Montana is recognized.
        Senator Daines. Chairman Brown, thank you. Five weeks
    before the October 7th terror attack in Israel, I was in the
    Hezbollah terror tunnels on the border of Lebanon seeing it
    firsthand, descending 80 feet down with IDF soldiers, and the
    next day, I met with Prime Minister Netanyahu in Jerusalem. I
    was the last U.S. Senator, I believe, to meet with Bibi prior
    to the attack, and we talked about three things: Iran, Hamas,
    and Hezbollah.
        It has been very clear to many of us, including clear to
    many leaders in Israel, that the appeasement strategy of the
    Biden administration is a failed policy. It has not only
    failed. It is also dangerous. The Maximum Pressure Campaign
    against the Iranians is the right policy position to take. And
    I will just tell you, I speak for many who have been very
    disappointed with this Administration's kind of standing back
    on the linkages between Iran, Hezbollah, Hamas, as well as the
    Houthis in Yemen. I mean, good grief, they have got the USS
    Crane in the Red Sea shooting down cruise missiles and drones.
    This is a shooting war, and the U.S. is involved in this at
    this moment.
        And all three of these groups, I mean, two being Shiites
    with the Houthis and Hezbollah, Sunnis with Hamas, I hope this
    Administration will develop moral clarity at this moment in
    history. It is a dangerous moment. It is a dangerous moment
    that we hope and pray does not escalate. But this appeasement
    strategy, starting with JCPOA with the Iranians leading to
    unleashing billions of dollars to Iran, has absolutely failed,
    and not only has it failed, it is a threat to the stability of
    the entire world. We all know that Iranian funds flow into
    illicit finance networks that directly support Hezbollah,
    Hamas, the Palestinian Islamic Jihad, and other terror networks
    across the world. And much of this support, Iran's support, is
    derived from oil exports.
        The Biden administration has irresponsibly relaxed the
    sanctions and the enforcement on these Iranian oil exports,
    resulting in a massive windfall for the regime in Tehran. The
    regime in Tehran calls out death to America. They call us the
    Big Satan and Israel the Little Satan. And yet this
    Administration is rewarding that with billions of dollars
    through relaxed sanctions relating to oil exports. Estimates
    place the revenue of Iranian oil exports under the Biden
    administration between $80 and $90 billion. These rockets,
    these missiles, the other arms these terrorists have have to be
    funded somewhere, and they are coming from Iran. And why can
    the Administration not be clear on that and move away from
    trying to bring Iran to the table and instead bring Iran to its
    knees through Maximum Pressure Campaign?
        To make matters worse, the Biden administration was
    committed to providing Iran yet another $6 billion. At a time
    when the State of Israel is under attack by Iranian-backed
    proxies, it is unthinkable--unthinkable--that an American
    President would even consider the idea of letting billions of
    dollars find their way into the hands of terrorists. While
    those funds have now reluctantly been refrozen, there is
    currently nothing stopping the Administration from seeking to
    reinstate this unconscionable policy. And that is why I have
    introduced legislation that would repurpose that $6 billion,
    and instead of giving it to Iran, why do we not repurpose it
    and give that $6 billion for the defense of Israel?
        Ms. Pletka, it seems the biggest opportunity to impact
    Iran's financing of Hamas and Hezbollah is directly linked to
    the enforcement of Iranian oil sanctions. OFAC maintains a
    sanctions evaders list. This list only has one entity on it. Do
    you believe that this list is being used to its full potential,
    and how can we better use it to disrupt Iran's oil exports?
        Ms. Pletka. No, I do not believe the list is being used to
    its full potential. There is no question that the
    Administration needs to both widen its aperture on who to
    sanction but also to step up its enforcement. And when I say
    ``step up,'' I really mean transform their attitude toward
    enforcement so that Iran is not able to earn the revenues that
    it has been earning, so that it does not have the windfall that
    it has had over the last 2\1/2\ years because that and only
    that is going to be a message to them that we are more serious
    about their financing of terror.
        Senator Daines. You used the words ``change your
    attitude.'' I just call it a 180-degree change in their foreign
    policy related to Iran in terms of moving away from an
    appeasement strategy, which is very, very dangerous and gets
    increasingly more dangerous every day that goes by as we watch
    what is happening right before our very eyes in the Middle
    East. Dr. Levitt, you host a podcast titled ``Breaking
    Hezbollah's Golden Rule''.
        Chair Brown. Please ask your last question quickly, and if
    you will answer.
        Senator Daines. OK.
        Chair Brown. We have been called to a vote 15 minutes ago,
    so thank you, Senator Daines.
        Senator Daines. Thank you, Chairman. I will cut right to
    this. Their golden rule is the less you know, the better, from
    Hezbollah. In your opinion, what does the U.S. need to do to
    better attack illicit financial flows from bad actors like
    Muhammed, Qusayr, Illumix, or other fronts owned by Hezbollah
    family members? And we will need a quick answer, and it is my
    fault, not yours.
        Mr. Levitt. There is a lot more that has to be done, but I
    do think, per the title of the podcast, a lot of it is exposing
    it and making it public, in part so that the financial system,
    the financial community knows how to follow up. But there is a
    lot more to do, and I will pause because of the time.
        Senator Daines. Yes, that is my fault, not yours. Thank
    you.
        Chair Brown. Thank you, Senator Daines. Senator Van Hollen
    of Maryland is recognized.
        Senator Van Hollen. Thank you. Thank you, Mr. Chairman.
    Thank all of you for your testimony today. Dr. Levitt, in your
    opening remarks, you made the important distinction between the
    sources of Hamas funding and the transfer of those funds and
    wanted to spend more time on the transfer issue. I know it has
    been covered a little bit, but can you talk about that network
    and what more we can do to confront it?
        Mr. Levitt. Thank you so much for the question, and not
    only because I am your constituent. It is very important to
    stop as much funds as possible. We will never drain the swamp,
    and so we need to also look at how they are moving the money.
    If some bad guy has money in Point A but cannot get it to Point
    B, I will take that as a win. We have not been doing enough
    there. It also applies not only to money but to other
    resources. All the weapons that we saw in the Gaza Strip just
    now, that came from someplace. There is a lot more that can be
    done on trade-based money laundering. There is a lot more that
    can be done on cash couriers.
        We know, FinCEN just informed this week, that Hamas has
    been transferring money through Hezbollah-affiliated banks.
    This is low-hanging fruit, and we have opportunities now. And
    by ``we,'' I do not only mean the United States. Sanctions
    diplomacy by the United States can get buy-in from our allies
    in Europe and elsewhere. Now is the time. If the heinous attack
    of October the 7th does not push people to act, I do not know
    what will.
        Senator Van Hollen. Right. So and the major tool that you
    are suggesting in that regard are the secondary sanctions on
    Hamas. Is that correct?
        Mr. Levitt. Correct.
        Senator Van Hollen. And then it comes to FinCEN, we, the
    United States, has been asking them to do a lot more in a short
    period of time. I chair the Appropriations subcommittee that
    oversees the Treasury and funding for that. I hope actually as
    part of one of the supplementals we deal with, emergency
    supplemental, we increase funds for FinCEN, and I think all the
    issues that you are talking about here are part of that.
        Dr. Wagman, you have had experience, you know, through the
    Israeli efforts to crack down on these money launderings. What
    lessons have you learned that could be helpful to us in terms
    of the transfer?
        Mr. Wagman. Thanks for the question. Actually, there are
    many things that could still be done. First of all,
    international collaboration and cooperation, there is not
    enough of it. Like the ransomware mechanism that was
    established, 24/7 response, I think that it is very important
    to disrupt terrorism. Second, to make sure that sanctions are
    being enforced, sanctions and secondary sanctions. We still
    see, as was mentioned here before, low-hanging fruits, Turkey
    still being a major channel to accept those funds. We see that,
    you know, Hezbollah and Hamas and the trade-based, there are
    still many areas that we could do much more.
        In addition, to make sure that law enforcement have the
    right capabilities and resources, as you rightfully mention.
    And we would just like for FinCEN perhaps to add to their
    authorities also the suspension, the temporary freezing,
    something that is common and exists in Europe that is, in
    particular, relevant to disturb terrorism financing. So this is
    some of the sources, and also I think that the U.S. could
    actually, through the international organizations, such as
    FATF, could actually promote international response to those
    actions.
        Senator Van Hollen. No, I appreciate those lessons learned,
    and the putting the fund on pause, this is an authority that
    FinCEN does not currently have. OK. We look forward to pursuing
    that. Just in closing, Dr. Levitt, and I only raise this
    question because Senator Kennedy made some remarks about, for
    example, transfers from the Qataris, the transfer from the P.A.
    I think you are well aware of the fact those transfers took
    place with the concurrence of the Israeli Government and Prime
    Minister Netanyahu earlier on. Is that not right?
        Mr. Levitt. It is right. The Israelis wanted stability and
    quiet, thinking that would buy deterrence and calm.
    Unfortunately, that has been proven wrong, but it was the
    policy. It was the U.S. policy as well.
        Senator Van Hollen. Right. And so I just think it is
    important because we have heard that a couple of times today.
    We want to get after all the illicit financing, but just to be
    clear, those transfers were done with the concurrence of both
    the United States and Israel, right?
        Mr. Levitt. Yes, sir.
        Senator Van Hollen. OK. And in fact, there has been much
    written about how part of Prime Minister Netanyahu's
    motivations at the time actually were to prevent the
    Palestinian Authority from gaining in greater legitimacy. I am
    sure you are aware of different things that have been written.
    What is your sense of what the motivation for this was?
        Mr. Levitt. I will leave Israeli domestic politics aside. I
    think across Israeli administrations, it was a clear policy to
    try and keep the calm, and the way to keep the calm was to make
    sure that there was at least enough economic activity in Gaza.
    The week before this attack, the Netanyahu Government, that
    Government increased the number of Gazans who were going to be
    allowed into Israel to work. So this was the policy to buy calm
    at the time, and everyone was caught off guard and everyone was
    found wrong on all sides of the partisan divide.
        Senator Van Hollen. Yeah. Thank you. Thank you all. Thank
    you, Mr. Chairman.
        Chair Brown. Thank you, Senator Van Hollen. Senator Warren
    of Massachusetts is recognized.
        Senator Warren. Thank you, Mr. Chairman. On October 7th,
    Hamas militants killed 1,400 people and took more than 200
    hostages. So where did they get the money to outfit their
    fighters with guns and rockets and radios? I mean, after all,
    Hamas is already one of the world's most heavily sanctioned
    organizations. That means that the traditional channels for the
    global movement of money are largely closed off to them. Any
    money laundering rules that banks, gold traders, stockbrokers
    all follow make it hard to finance terrorism, but terrorists
    have found ways around those rules. One big one? Crypto.
        Dr. Levitt, as a Treasury official, you saw firsthand how
    terrorists structure their transactions to evade detection.
    Recent reporting has suggested that Hamas and Islamic Jihad-
    linked crypto wallets, identified in seizure orders by the
    Israeli Government, received an estimated $134 million in the
    2\1/2\ years leading up to the attacks. So here is my question.
    Do you think that Government authorities know the full extent
    of all the crypto funds that Hamas and Islamic Jihad received
    over that time period?
        Mr. Levitt. By definition, they cannot know the extent of
    it, but I do think that number is very likely exaggerated. It
    is happening. They are getting money through crypto, there is
    no question, but the experts who follow this closely think that
    number is inflated.
        Senator Warren. So you think that they do not know all of
    the transactions that are occurring, so there are more
    transactions that are just out there in the dark and, I take
    it, no real way to estimate how big or how small they are?
        Mr. Levitt. You know, it is not anonymous, but you have to
    be able to put a long set of numbers to a person's name, and
    because of that, it can be complicated. Most of this is not
    ending up in an account of Hamas, Incorporated, or Islamic
    Jihad, Incorporated. By definition, because this is still an
    emerging technology and we are all catching up with it--we are
    behind--I cannot imagine anybody sitting in front of you and
    saying, yeah, we know the full scope of this.
        Senator Warren. OK. Fair enough. So the reason that
    conclusion is so important is because crypto industry players
    acknowledge that Hamas was financing itself through crypto, but
    they claim that the terrorist organization--and I am going to
    quote them--``stopped soliciting crypto donations because they
    were traceable.'' Now obviously, the industry's claim is false.
    In fact, just last week, the head of Cyber Defense Division of
    Israel's National Cyber Defense Directorate said, ``In this
    period of war, cryptocurrency is a major issue for financing
    terror because there are no other options,'' and that the
    amount of crypto flowing to terrorist groups has, ``super-
    increased since the attack began.''
        Now, Senator Marshall and I, along with 14 of our Senate
    colleagues, including Senator Cortez Masto, Senator Smith, and
    Senator Fetterman right here on the Banking Committee, believe
    that Congress has talked about the threat of illicit crypto
    finance for long enough, and now it is time for Congress to
    act. We have a bill called the Digital Asset Anti-Money
    Laundering Act, which closes loopholes in our anti-money
    laundering and anti-terrorism financing, or AML/CFT rules, and
    cuts off terrorists and other criminals from using crypto to
    fund their illegal activities.
        Dr. Wagman, you were the Director General of the Israel
    Money Laundering and Terrorism Financing Prohibition Authority.
    Last year, you wrote that, ``In their attempt to avoid being
    traced, illegal actors have adopted ever-more sophisticated
    cryptocurrency technologies, such as noncustodial wallets.''
    You wrote that Hamas uses noncustodial wallets to evade
    detection. Do those wallets pose a particularly high risk of
    attracting terrorists and other very dangerous people?
        Mr. Wagman. Thank you for the question. It is important,
    perhaps if I may, just to refer to your earlier comments about
    the funding of Hamas. The major funding of Hamas,
    unfortunately, the current sanction regime is far from being
    sufficient, and most of its budget and funds are still going
    through the traditional channels. And I want to put it clear
    because crypto is a problem, but this is not the major problem,
    and we have to look, you know, in other traditional channels,
    like banking and exchanges, money exchanges and cash and so
    forth. So let's not forget that.
        Having said that, crypto, it is a technology like any other
    technology that could be used for legitimate and illegitimate
    purposes. We do see trends on both sides. As long as we are
    able to create a framework of compliance into those systems, we
    are able to create environments in which we could trust some of
    the transactions that are going there, even most of them, when
    the platform is compliant. Therefore, I think that it is really
    important to make sure going forward that we are creating those
    environments that we could actually inspect and put forward the
    relevant technologies to ensure compliance.
        Senator Warren. OK, so I appreciate that----
        Chair Brown. There is a vote call----
        Senator Warren. OK. I will be really quick. I just want to
    point out, you wrote that decentralized finance and peer-to-
    peer transactions between unhosted wallets are ``higher-risk
    structures.'' Two days ago, the Treasury Department wrote to
    lawmakers here, ``There are steps that Congress could take that
    would bolster Treasury's resources and authorities to combat
    both terrorist financing and mitigate illicit finance risks
    posed by virtual assets.'' Hamas is using crypto to help
    finance terrorism. Our current laws are inadequate. We have the
    power to choke off that lifeline, and I think that is what we
    should do. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Warren. Senator Warnock of
    Georgia is recognized.
        Senator Warnock. Thank you very much, Chair Brown. The
    heinous acts of terrorism committed by Hamas were horrific and
    are rightly condemned by all who believe in human dignity and
    seek a lasting peace. What these events make clear is that
    there are those who are afraid of peace, and they seek to
    sabotage it at any cost. We must not let them win, and we must
    recommit ourselves to the hard work of a lasting peace,
    grounded in justice and in human dignity for all of God's
    children, both our Israeli and Palestinian brothers and
    sisters.
        Shortly after the terrorist attack in Israel, I joined
    Senators Warren, Marshall, and many on this Committee in urging
    Treasury to immediately investigate and halt the illicit usage
    of cryptocurrency by Hamas, by Hezbollah and other terrorist
    groups for money laundering and financing of their terrorist
    operations. I am glad that Treasury has made some moves here to
    clamp down on some of the crypto technologies being utilized by
    Hamas, but the threat does persist. There is debate and
    conversation here that is very helpful here about the extent of
    the threat, but I think there is agreement that the threat
    persists.
        Dr. Wagman, why are cryptocurrencies apparently a method of
    choice for these terrorist groups to transfer funds, and are
    these factors intrinsic to crypto?
        Mr. Wagman. So yeah, crypto does have advantages for
    illicit counterparts to work in because the [Speaking foreign
    language] or the compliant environment at least used to be
    lower than the other financial system, and this is why they
    were using that. I mean, the technology is there whether we
    like it or not, and it is really important to look forward and
    to continue our process, and make sure that we are creating
    environments that are secure enough.
        And even when we are getting to DeFi and all other
    technologies, there is a way, there is a technology that could
    also inspect that. And because of everything is transparent on
    the blockchain, we should focus our efforts on how to make sure
    that we have the ability to designate bad actors, and we see
    many exchange platforms that are working under countries which
    do not enforce the AML/CFT regulation that was adopted by the
    international regulators, and there are countries that do
    impose that. And we see differentiation in the way that
    terrorists are using those platforms. In the supervised and
    compliant platforms, there is less use. So I would suggest to
    put our efforts on making sure that we are sanctioning and
    supervising the unlicensed or those that are not compliant in
    order to reduce the activity there and also to ensure that we
    have better monitoring tools to continue to supervise that.
        Senator Warnock. We have seen the ways in which crypto has
    been proven to be widely used by criminals and terrorists the
    world over. Even executives at Binance, the largest crypto
    exchange in the world, are accused by the CFTC of being
    seemingly dismissive of the risk that Hamas is utilizing their
    platform to fund terrorism, and authorities have closed over
    100 accounts linked just to Hamas on Binance since Hamas'
    attack on Israel. Dr. Levitt, what considerations do you make
    when examining the use of crypto in financing these terror
    groups?
        Mr. Levitt. Like Shlomit, I am concerned about the ability
    not only to raise funds but to move funds as a means of
    transfer because there are no borders. And so as we crack down
    on other means of Hamas financing, they are going to, you know,
    squeeze that balloon. It will expand elsewhere. And so while I
    do not think that Hamas has made tremendous amounts of money by
    crypto, I am concerned that it is a growing industry. It is a
    place where they will try to expand their opportunities, and so
    it is something we have an opportunity now, I do not know if we
    can say get ahead, but to hurry up and catch up and prevent it
    from becoming something big before it does.
        Senator Warnock. Thank you so much. I look forward to
    working with my colleagues to find ways of clamping down on
    this issue and making sure that we are not making it easy for
    these groups, like Hamas, to finance their awful crimes against
    humanity. Thank you.
        Chair Brown. Thank you, Senator Warnock. Senator Fetterman
    of Pennsylvania is recognized.
        Senator Fetterman. Thank you, Mr. Chairman. Thank you for
    all being here today, experts, and it is always a treat to be
    here when I am able to talk to people much smarter than I am.
    And this last time I was in this very same chair, we were
    talking about crypto, and I asked the experts and I said a
    couple of questions, and they were kind of fundamentalist-like.
    And I just want to ask you as well, too, as experts, should
    crypto exist? In other words, you know, where should it exist?
    Like, you know, why should it endure, if anyone has any
    answers.
        Mr. Wagman. Happy to assist. Actually, that is the exact
    question that I was asked by the Minister of Finance in Israel
    a couple of years ago, and he asked me, you know what, let's
    just outlaw, you know, this entire crypto. It is going to be
    used for bad purposes. And I told him, Mr. Minister,
    unfortunately, the technology is out there, so it is not a
    question whether you like it or not. You need to manage the
    risk and find the ways to actually supervise that and make sure
    that it will be compliant.
        So there are good uses of crypto, financial inclusion and
    many others. At the same time, we have to be very strict to
    make sure that the legislative framework is addressing the
    concerns that we have. We have to make sure that all platforms
    are compliant, that we have very clear rules, that all
    countries are enforcing them in a similar manner, and that we
    are not letting other countries to get off the hook and
    actually encourage environment in which bad actors can work. We
    could create, together with the FATF, a gray list of those
    countries and make sure that they are publicly announced, and,
    you know in addition to other tools, we will have a better way
    to monitor what is going on there rather than just, you know,
    assume that it is not happening.
        Senator Fetterman. Yeah. And so where does the value
    assigned to crypto come from? Where does it come from because
    it is really just a mathematical idea. You know, kind of for
    me, it feels like it is a gimmick. But you know, where does the
    value of that come from other than there is not somebody kind
    of less informed, that I will pay more than what you just, you
    know, bought it for. So anyone have any thoughts on that?
        Mr. Wagman. Well, I can answer again. I mean, there are
    some rationales, you know, having a more decentralized economy
    and theories behind that. But, I mean, at the end of the day, I
    think that this discussion, even if it was relevant a couple of
    years ago, it does not matter anymore because the technology is
    there, and it is not something that is possible now, you know,
    to decide. I mean enough people think that there is value, and
    they are spending the money on it, and, of course, illicit
    actors are using that as well, no doubt about it. So I think
    that the major challenge that we should focus our energy on is
    how to make sure that their options are being smaller and that
    we are closing the gaps as much as possible these days.
        Senator Fetterman. So let me ask you, why did Hamas not use
    its American Express card to finance that awful terrorism? Why?
    Why would they not use their AMEX or PayPal?
        Mr. Wagman. So actually, they are using bank accounts and
    credit cards and payment cards. I know that firsthand because
    many Israelis are now monitoring all, you know, campaigns, and
    they see that.
        Senator Fetterman. Oh, so it is traceable then, right?
        Mr. Wagman. Yes. No, no, no. What I just want to say is
    that, you know, I do not want us to fall into the, you know,
    the assumption that crypto will solve everything. Other
    traditional channels are also being used. This is all just I
    want to say.
        Senator Fetterman. Yeah. Well, I was just trying to drill
    down. It is, like, of course, you know, it seems that they used
    crypto because it is really difficult or impossible to trace,
    so, you know, the bug is the feature, it seems, you know, to
    me. And if you are able to remove that ability to be anonymous,
    would crypto even endure because to me, it seems like whether
    you are financing terrorism or purchasing illicit drugs, you
    know, on the dark web, or other kinds of illegal things, no one
    is doing that using, you know, Apple Pay or whatever. They are
    using crypto. So really, is the one major reason why crypto
    exists is to finance things that are either illegal or they
    would not want to be attached to that kind of a thing? Is that
    a fair question?
        Mr. Wagman. I mean, I do not want to step up like
    encouraging the industry, because that is not my purpose. But
    it is important also to mention that because everything here is
    digital, in many aspects, sometimes as law enforcement
    community, there are better monitoring tools to go on crypto
    and blockchains rather than cash, for example, because there
    are always alternative for that. So we should, I think, focus
    our efforts on how to improve the monitoring resources and
    tools that we have, how to impose more compliance, and how to
    differentiate between those environment of legal and illegal
    activities. And there are ways to do that, and once you are
    putting them aside, you could have better things. By the way,
    there are some cryptocurrencies that you could actually
    confiscate from afar, from a distance, just by disabling them.
    So this is something, like one of the solutions that some
    actors from private sector came up with in order to minimize
    the options to misuse crypto.
        Again, it is not that I am supporting the industry. I am
    just in a place in which it exists, and we have to find a way
    to deal with it because outlawing that altogether just will
    create a black market that we will not able to supervise at
    all, and that actually I am more afraid of than, you know,
    having some monitoring tool and working on improving them and
    making sure that law enforcement authorities may have the
    option of doing that, and being realistic because money
    laundering and terrorism financing happen in many platforms.
        Senator Fetterman. Mr. Chairman, may I indulge for 30
    seconds?
        Chair Brown. Go ahead.
        Senator Fetterman. Oh, thank you, sir. It is more of a
    statement where it is, like, to me, my question is, like, if
    you are able to effectively track it or document, you know, it,
    would anybody really use it anymore, you know? To me, that is
    what I am really trying to get to, and I am not saying there is
    an answer. That is why I am asking the experts. It is, like, if
    you are able to effectively track it, would it really be
    attractive for anyone to traffic in that, especially because
    how volatile it is. And I really hope Hamas and everyone took a
    bath in crypto, you know, with the rest of everyone else, too,
    so they got a lot less guns for what they used to have, maybe.
        Mr. Wagman. So we are definitely hearing a lot of use cases
    in the market of people that are using that, you know, in order
    to make sure that they are not attached to a certain currency
    but have something that, you know, is linked to the dollar,
    that they want to put their funds in places or to transact with
    lower cost to have more financial inclusion options. So there
    are some legitimate use cases for that, and the blockchain
    technology, generally speaking, has its advantages in the way
    that it is easier to transact around the globe.
        Chair Brown. Thank you, Senator Fetterman. Thank you to the
    panel for being here. Thank you for providing testimony and
    your responses.
        Senators who wish to submit questions for the record, those
    questions are due 1 week from today, November 2nd. For the
    witnesses, you have 45 days to respond to those questions.
        Thank you again. The Committee is adjourned.
        [Whereupon, at 12:12 p.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIR SHERROD BROWN
        This hearing will come to order.
        Earlier this month, the world watched in horror as Hamas committed
    brutal acts of terrorism against the people of Israel.
        Hamas murdered innocent women and men and children. They attacked
    teenagers at a music festival. They took hostages--families, kids.
        We are horrified.
        In the days and weeks that have followed, the United States has
    taken strong, swift actions to support Israel as they defend their
    country against terrorism, and to aid civilians in Gaza.
        Now, it's vital to our national security that we provide critical
    assistance to Israel--including robust military, economic, and
    humanitarian aid that is desperately needed for those harmed by Hamas'
    terrorism.
        We must stand with both Ukraine and Israel as they fight back
    against two of the biggest threats facing the world: Putin and Iranian-
    backed terrorists like Hamas.
        This isn't a time to play politics--we must stand united with our
    allies and we must defend American interests.
        We also need to confirm key national security nominees who play a
    critical role in working with their Israeli partners. We've had too
    many delays already.
        Right now, politics is holding up several key positions--including
    the Ambassador to Israel and at least 12 key military personnel--
    preventing important work in the Middle East.
        This is why people think Washington doesn't work. Political
    grandstanding is hurting America's ability to effectively protect our
    interests at home and abroad, and keeping talented ambassadors and
    career military personnel on the sidelines.
        On this Committee, we have a long history of keeping the politics
    out, and working together to address threats from Russia, North Korea,
    China, and Iran.
        In the aftermath of October 7th, we are again confronting a
    challenge to the civilized world, and our humanity compels us to combat
    terrorism and hold State sponsors of terrorism, like Iran, accountable.
        We must be clear, and speak with one voice: There is no
    justification for terrorism. None.
        On this Committee, we have a unique role to play, working to
    understand the financing behind Hamas' attacks, so we can work to cut
    off funding for terrorism at its source and work to prevent future
    attacks.
        Iran has an alarming history of supporting terrorist proxies
    engaged in unspeakable atrocities.
        It's clear they provide significant funding for the military wing
    of Hamas--they provide training, they provide capabilities.
        We will assess what additional economic tools we need to stop State
    sponsors of terrorism, including Iran, from supporting Hamas,
    Hezbollah, Palestinian Islamic Jihad, and other terrorist proxies.
        And we will examine multiple terrorist funding streams, including
    cryptocurrency, and consider additional measures to stop the flow of
    those funds.
        In response to the brutal and horrific attacks, last week the
    Treasury Department's Office of Foreign Assets Control imposed
    additional sanctions on key Hamas terrorist group members, operatives,
    and financial facilitators located in Gaza and elsewhere, including
    Sudan, Turkey, Algeria, and Qatar.
        This action specifically targeted those managing assets within a
    secret Hamas investment portfolio, a Qatar-based financial facilitator
    with close ties to the Iranian regime, a key Hamas commander, and a
    Gaza-based virtual currency exchange and its operator.
        But that is not enough.
        The Administration must take additional steps to impose sanctions
    and dedicate resources toward a multilateral effort to coordinate with
    allies to track, freeze, and seize any Hamas-related assets, and take
    steps necessary to deny Hamas terrorists the ability to raise funds.
        We need to not only identify the bad actors, but also their money
    pipelines, so we can shut off their funding.
        We must undertake a more robust approach to identifying and
    preventing transactions that take place not only through financial
    institutions, but also through trade-based money laundering,
    cryptocurrency transactions, and other channels designed to avoid
    detection.
        On this Committee, we've raised the alarm about crypto and its role
    in illicit finance--including the use of crypto to both fund terrorists
    and enable the rogue Nations financing them.
        Too often, crypto platforms don't use the same commonsense
    protections that help keep illicit money out of the traditional banking
    system--safeguards like knowing their customers, or suspicious
    transaction reporting. Some crypto services and tokens even help users
    keep their transactions anonymous.
        And when law enforcement attempts to trace or block crypto funds,
    it becomes a game of whack-a-mole.
        They stop one transaction.and the criminals have moved on to
    another platform, with another alias.
        Terrorists know they can use crypto in ways they could never use
    dollars.
        That's why President Trump's Justice Department warned back in 2020
    that terrorist groups--including ISIS, al Qaeda, and the military arm
    of Hamas--were ``raising funds using cryptocurrency.''
        Not surprisingly, after the attack it was reported that Hamas has
    raised millions of dollars in crypto to fund their operations.
        We need to crack down on the use of crypto to fund terrorism and
    evade sanctions.
        Last week, Senator Warren and I, along with more than 100 of our
    colleagues of both parties, wrote to the Administration to voice our
    concerns about these issues.
        And I'm glad that Members of this Committee, including Senator
    Warren, Senator Reed, and Senator Warner, have put forward bipartisan
    plans for closing gaps around digital assets in our illicit finance
    rules. These are important steps forward, and I welcome more ideas.
    We'll work together on this Committee, in a bipartisan way, to make
    sure terrorists and bad actors can't exploit crypto.
        This Committee and the Senate have a bipartisan history of
    combating the ways in which Iran threatens the region--not just its
    nuclear weapons development, but also its support for terrorism.
        There has been a steady drumbeat recognizing the need for the
    United States and our allies to maintain and ramp up sanctions on
    Iran's harmful and destabilizing activities in the region. The Senate
    voted overwhelmingly to support the Countering America's Adversaries
    Through Sanctions Act to impose sanctions on Iran, North Korea, and
    Russia.
        We also passed the Hezbollah International Financing Prevention
    Amendments Act, which imposed sanctions on Russia, Iran, or any other
    foreign Government supporting Hezbollah.
        And let's not forget that this Committee acted together to tighten
    the rules around anonymous shell companies--which too often operate
    here in the United States--and which fund criminal syndicates and
    terrorists alike.
        We've strengthened our money laundering rules and our sanctions
    tools in a bipartisan way, and we can do it again.
        We need a comprehensive approach to shutting off Iran's funding
    sources--not just the $6 billion, but the many more billions of dollars
    Iran uses to continue its destabilizing activities in the middle east
    and around the world.
        Now is the time, once again, to act. I look forward to working with
    my colleagues on this Committee to stem terrorist financing, address
    the problems posed by crypto, and further strengthen sanctions.
                      PREPARED STATEMENT OF MATTHEW LEVITT
       Director, Reinhard Program on Counterterrorism and Intelligence,
      Fromer-Wexler Senior Fellow, The Washington Institute for Near East
                                     Policy
                                October 26, 2023
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                     PREPARED STATEMENT OF DANIELLE PLETKA
     Distinguished Senior Fellow in Foreign and Defense Policy Studies, AEI
                                October 26, 2023
        Mr. Chairman, Senator Scott, thank you for including me in today's
    hearing. I'm especially glad to be testifying with two outstanding
    witnesses.
        We are here today to talk about terrorist financing in the wake of
    the most serious assault on the Jewish people since the Holocaust. For
    many of us, the horror of the brutality of Hamas was compounded by the
    one of the most dreadful displays of public antisemitism since, well,
    the Holocaust. Hatred of Jews is perhaps the last remaining widely
    tolerated ``ism,'' and it has reminded many of us of the reason Israel
    must exist as a homeland and a safe haven for the Jewish people.
        In the important discussions in Congress about how to stem the tide
    of cash to terrorist groups, Hamas among them, much attention has been
    given to the $6 billion in cash the Biden administration transferred to
    Qatar from accounts in South Korea for Iran's use in September. That $6
    billion was advertised as payment for the release of five hostages, but
    widely understood to be the consideration paid for an ``understanding''
    between the Biden administration and the Iranian regime about its
    conduct over the coming months, including a pause on attacks on
    Americans and a slowdown in Tehran's accumulation of highly enriched
    uranium. All carefully constructed, of course, to evade the
    congressional review requirements of the Iran Nuclear Agreement Review
    Act of 2015.
        An additional $10 billion sitting in Oman for the same purpose--
    Iran--was also transferred from Iraq.
        A few things: If this $6 billion was our only problem with Iran, I
    would thank our lucky stars. This is the tip of the iceberg. But let's
    start with the $6 billion. The Biden administration, which came in for
    substantial criticism for allowing Iran access to this money, has said
    it will not allow it to be used right now. As Brett McGurk, the White
    House Coordinator for the Middle East and North Africa, explained, the
    system for disbursal will work something like a joint signature on a
    checking account, that should be the end of the story. However, Qatar
    has contradicted our Government.
        Should Qatar, a topic I will return to later in this testimony,
    defy the wishes of the U.S. Government and proceed with a disbursal to
    Iran, you have options. First, it is important for Congress to
    ascertain whether the Government of Qatar has agreed to make Iran whole
    while it withholds the $6 billion from South Korea. In that scenario,
    Qatar could simply hand over its own cash to Tehran and pay itself back
    later from the South Korean funds once the pressure is off. We don't
    know if that's the case, but Iran's pro-forma protestations don't sound
    like those of a Government that's just been deprived of $6 billion.
        Second, if Qatar is actually disbursing the cash from South Korea,
    focus on the bank. If it chooses to become a financier to the Islamic
    Republic of Iran, the U.S. Government can choose to designate that bank
    as a primary money laundering concern. Should that not deter the
    Qataris, a designation of that country as a State sponsor of terrorism
    is an option. Both are Executive actions, but Congress can force a
    decision with legislation. But I'm getting ahead of myself.
        Let's move on from the $6 billion for now. Since 2021, ``the
    estimated value of Tehran's additional oil sales--the difference
    between its realized revenue and what it would have earned had its
    exports remained at the maximum pressure period's average level--was
    $26.3 to $29.5 billion dollars,'' per research by the Foundation for
    Defense of Democracy. From 2019 through the end of 2020, Iranian oil
    exports averaged .775 bpd. In 2021, per the same report, they rose to
    an average of 1.14 mbpd, and this year jumped to an average of 1.38
    mbpd. Iran's total revenue from oil exports since 2021 is between $81
    and $90.7 billion. Iranian foreign exchange reserves have doubled,
    growing from $12.4 billion in 2020 to $21.1 billion in 2023. Oil and
    oil-related exports are Iran's primary money earner; numbers 2 and 3
    are iron and steel and. edible fruits and nuts. So, it's the oil that
    is at the heart of the Islamic Republic's finances.
        How did that happen? Simple. The U.S. Government allowed it to
    happen. To review the bidding, in 2016, Iranian oil exports were 2
    mbpd. In 2018, they hit 2.8 mpbd. After President Trump pulled the plug
    on the JCPOA, they dropped to somewhere between half-a-million and
    three-quarters-of-a-million mbpd. Many, myself included, were skeptical
    of Trump's ability to stuff the genie back into the bottle after the
    wave of JCPOA sanctions waivers opened the spigots to Iran. But sure
    enough, he did just that.
        The simple reason the Trump administration was able to execute this
    miracle was the President's complete and utter indifference to
    conventional wisdom, his willingness to link trade to sanctions
    violations, and a keen sense that if forced to weigh America and Iran
    in the balance, even difficult players like the Chinese would make the
    right choice. They did.
        That all ended the month Joe Biden came to office. Why? One thing:
    Enforcement. It was no secret that the President hoped to reenter the
    JCPOA; his lead Iran negotiator took such an expansive approach to
    propitiating Iran that his deputy and other staff chose to resign in
    disgust. So, Iran began to make money again. The issue was not the lack
    of sanctions on the books or necessary authorities. Simply, the White
    House, or more accurately, Treasury stopped imposing sanctions.

            ``In the first 6 months of the Biden administration,'' United
            Against a Nuclear Iran's research shows, ``no new sanctions
            were introduced on Iran's oil sector. Finally, in August 2021,
            amid an extended break in the nuclear negotiations, the U.S.
            Treasury Department imposed new sanctions on an Omani
            businessman and companies linked to him, alleging that he was
            involved in an oil-smuggling network whose proceeds benefited
            the Islamic Revolutionary Guard Corps (IRGC)'s Quds Force.
            However, in the next 9 months, the Biden administration largely
            failed to levy new sanctions to stanch the flow of oil
            revenue.''

        Who was buying the oil? Businesses in the People's Republic of
    China, among others. So as China escalated threats against the U.S. and
    Taiwan in the Pacific, sanctions against Chinese companies for buying
    Iranian oil dropped off. The UANI chart below makes clear who Iran's
    buyers are.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        By the way, that's not the only sanctions break we see. According
    to the Wilson Center, ``between 1995 and 2022, five Administrations--
    Clinton, Bush, Obama, Trump, and Biden--sanctioned 11 Iranian proxy
    groups in five countries. They also sanctioned 89 leaders from 13
    groups supported by Tehran.'' Per the same report, the Trump
    administration imposed 40 percent of those sanctions--7 groups and 32
    leaders tied to Iran. ``The Biden administration removed designation
    from one group (Ansar Allah) and sanctioned three leaders.''
        The cost to Iran of supporting these proxies isn't cheap. In 2016,
    Hezbollah Secretary General Hassan Nasrallah credited Iran for
    ``Hezbollah's budget, everything it eats and drinks, its weapons and
    rockets, comes from the Islamic Republic of Iran.'' In 2018, the
    Treasury Department pegged Iranian aid to Hezbollah at more than $700
    million per annum. Hamas reportedly costs Iran about $100 million a
    year, though new reports estimate it could be up to $350 million a
    year. Palestinian Islamic Jihad (whose failed rocket inflicted the
    casualties at the al Ahli hospital) receives in the tens of millions as
    well.
        To give you a sense of what happens when Iran has less money at its
    disposal, during the height of the so-called maximum pressure campaign,
    transfers to Iran's terrorist proxies dropped dramatically, with
    Hezbollahis complaining to the Washington Post about furloughs, cut
    salaries, and necessary withdrawal from Syria where they had been
    fighting to support Bashar al Assad. Hezbollah was so strapped for
    money, it doubled down on organ trafficking, reportedly an important
    source of cash. In short, evidence suggests that when Iran doesn't have
    money, terrorists don't have money. That doesn't shut down terrorist
    operations, but it curtails them dramatically.
        Terrorist groups do have other sources of income. Hamas in
    particular earns substantial amounts from corruption, with almost every
    import into Gaza subject to ``taxes'' that go into Hamas leaders'
    pockets. Indeed, while the U.N. bemoans the plight of Gaza residents--
    and rightly so--we should note that senior Hamas officials in both Gaza
    and Qatar, where the Hamas leader resides, have gotten very, very rich.
    Numerous reports cite Doha-based Hamas leader Ismail Haniyeh's net
    worth at $4 billion. His predecessor Khaled Meshaal is said to be $2.6
    billion, with money in Qatar and Egypt. And there are others in Hamas
    worth billions.
        Another source of money for terrorist groups is the illegal
    captagon trade. You'll remember that some of the Hamas killers were
    found with the drug in their pockets. Hezbollah apparently makes
    millions from the illicit trade in the drug, in partnership with the
    Syrian Assad dictatorship.
        And then there's Qatar. There has been an unholy understanding
    between Israel and Qatar for some time: While Israel maintained its
    embargo of Gaza, carefully filtering employees and imports across the
    Israel-managed crossings, Qatar has been allowed to act as a pressure
    valve, funneling cash into Gaza to allow Hamas to buy peace with
    occasional distributions of energy and basic goods. But Israel's
    dealings with Qatar are not a get out of a jail card from U.S.
    congressional scrutiny.
        Indeed, I would ask you, what role does Qatar play in the Middle
    East? It enjoys positioning itself as an entrepot--just a middle man
    with no favorites. That's garbage. Qatar's favorites are the Islamist
    extremists it promotes with its pet television channel, Al Jazeera. Who
    lives or has lived in Qatar? The Taliban. al Qaeda. The Hamas
    leadership. ISIS leaders. All of them, cheek by jowl with one of
    America's major airbases in the region, Al Udeid. Now should be the
    moment Congress begins to scrutinize Qatar.
        So, what else should Congress do?

      1.  Understand how U.S. assistance to both the West Bank and Gaza is
            enabling the perpetuation of both Hamas and Fatah rule.

      2.  Understand how UNRWA, the recipient of almost $6 billion in U.S.
            support since 1950, has aided, nurtured and supported Hamas in
            Gaza.

      3.  Understand why it is that Lebanon, a country ruled by Hezbollah,
            a beachhead of anti-Israel attacks at its northern border, has
            been able to skate without a State sponsor designation.

      4.  And most importantly, shut down the loopholes in sanctions
            enforcement that, since 2021, have been permitted to facilitate
            Iran's accumulation of cash that funds and arms and trains
            Hamas, Palestinian Islamic Jihad and Hezbollah, among so many
            others.

       a.  Specifically, use the language in existing legislation like
            INKSNA to require the Executive branch to notify you of every
            instance in which it has credible information that there has
            been a sanctions violation, and justify to you its inaction any
            time it does not impose sanctions in response to that
            information.

       b.  Use the language of CAATSA to require every waiver of sanctions
            to be notified to Congress with 30 days' notice, and expedited
            procedures for an up or down vote in both chambers on whether
            to disapprove that waiver.

        You may ask me why I do not insist on stopping that $6 billion.
    There's no need; simply outline the consequences to Qatar. Go after the
    big money funneled to the terrorists by Iran. That is what fuels the
    savagery of October 7.
                                     ______

                      PREPARED STATEMENT OF SHLOMIT WAGMAN
      Affiliated Scholar and Former Chair, Harvard Kennedy School, Israel
          Money Laundering and Terror Financing Prohibition Authority
                                October 26, 2023
        I am honored to present my expert opinion before the distinguished
    Committee regarding the combat against networks of illicit finance and
    terrorism.
        As one of the experts who participated in the design of the
    international regulatory approach to virtual assets, as well as gained
    practical experience while leading numerous financial investigations of
    money laundering and terrorism financing, I am honored to share with
    you several insights and offer actionable proposals both domestically
    (in the U.S. and elsewhere) and globally (through multilateral efforts,
    such as within the framework of the FATF).
        I've served as the Chair of the Israeli Money Laundering and
    Terrorism Financing Prohibition Authority and was also the Cochair of
    the Financial Action Task Force's (FATF) Risk, Typologies and Methods
    Working Group. While serving in these capacities, I managed dozens of
    terrorism financing investigations and shaped global and national
    policy in the field. In addition, I led the Israeli accession to the
    FATF following a thorough evaluation process in which Israel achieved a
    (rare) High Effectiveness rating regarding the use of financial
    intelligence, terrorism financing investigations and confiscation.
    Currently, I am an affiliated scholar with the Mossavar-Rahmani Center
    for Business and Government and the GETTING-Plurality Network at the
    Harvard Kennedy School and the Berkman-Klein Center at the Harvard Law
    School. I am also a senior executive at Rapyd, a global payment
    company.
        The opinions presented in this testimony are my own and should not
    be attributed to any of the institutions with which I am affiliated
    with.
    A. Background
        Quite simply, funding is essential for the operations of terrorist
    organizations. Conversely, the disruption of funding channels used by
    terror organizations plays a pivotal role in countering (and even
    abolishing) their activity.
        Looking specifically at Hamas and Hezbollah--both function like any
    other terror organizations. For example, the horrifying terror attacks
    of October 7th demonstrated the extent to which Hamas adopted the ISIS
    playbook: Hamas slaughtered innocent civilians in a brutal and well-
    organized attack.
        This extensive operation, in which thousands of terror activists
    took part, required substantial funding for vehicles, weapons, drones,
    tracks, explosives, tunnels, logistic support, and more. In addition,
    substantial funding is likely required by Hamas to finance its
    continued holding of the 200+ hostages (from 33 countries) kidnapped
    from their homes and taken to Gaza.
        My goal in today's testimony is to review the funding channels used
    by illicit and terror organizations and--as per your request--focus
    specifically on the use of cryptocurrencies, which most likely funded
    (both directly and indirectly) Hamas' activities.
        This testimony document outlines the following:

        Surveys the main legal framework and regulatory
            requirements found in the domain of anti-money laundering and
            counter-terror financing (AML/CFT) with respect to terrorism
            financing.

        Discusses current terror financing trends. In light of the
            October 7th attacks, and at the request of the Honorable
            Committee, this discussion focuses on Hamas current terrorism
            financing trends, existing legal frameworks, and gaps and
            challenges in the specific context of virtual assets.

        Proposed actions that can be taken in the domestic sphere
            (such as by the U.S. and other countries) and in the
            international sphere to strengthen the existing legal framework
            and target the very gaps in this framework that are exploited
            by terror organizations like Hamas and Hezbollah.
    B. Legal Framework Background--The Global Combat Against Terrorism
            Financing
        After the 9/11 attacks, a global unified framework was designed to
    combat terror financing using the same toolbox previously developed to
    combat money laundering. This toolbox included the imposition of
    administrative obligations on the private sector (such as monitoring
    customer activity and reporting suspicious transactions to designated
    intelligence and law enforcement authorities) and requiring sovereign
    countries to establish financial investigation, enforcement and
    punitive capabilities, including confiscation of funds.
        This global response was designed by the Financial Action Task
    Force (FATF), the international watchdog in the field. Today, the FATF
    is composed of 39 member countries (including most of the G20
    countries) and regional organizations, and together with its nine
    associated FATF-Style Regional Bodies (FSRBs), it encompasses over 200
    jurisdictions.
        The FATF has defined global mandatory standards in the domain of
    Anti-Money Laundering and Counter Financing of Terrorism (AML/CTF) that
    all jurisdictions must implement into their national legal systems and
    ensure their effective enforcement. The FATF and FSRBs conduct ongoing
    monitoring to review and evaluate the level of compliance of countries
    with these standards, when noncompliant jurisdictions may be listed on
    the infamous gray or blacklist. These lists are powerful signaling
    tools that put severe pressure on the listed jurisdictions to quickly
    meet FATF standards, as the listed jurisdictions are marked as high-
    risk territories for AML/CFT purposes, limiting their respective
    financial sectors' ability to participate in the global market. A place
    on the blacklist practically limits financial activities dramatically
    between the financial institutions in the blacklisted country and other
    jurisdictions.
    The Global AM/CFT Approach to Virtual Assets
        Cryptocurrencies pose substantial challenges to national security
    and the integrity of financial systems. Certain unique characteristics
    make them appealing for conducting illegal activities: (1) they are
    decentralized, unsupervised by any Government or central bank, and
    therefore, like cash, preserve a high degree of anonymity; (2) they are
    virtual and therefore generally unbounded by geographical borders; and
    (3) they do not require transactions be conducted in-person. At the
    same time, they are also reflecting financial innovation, with the
    potential to initiate a revolution in the way society transfers value,
    facilitate international commerce and cross-border financial
    activities, decrease transaction costs and barriers, and enhance
    financial inclusion.
        The FATF was the first international organization to develop a
    holistic strategic response to cryptocurrency risks. In 2018, the FATF
    amended its mandatory standards to explicitly apply cryptocurrency to
    its rules, and subsequent updates and clarifications. The FATF's
    regulatory approach to cryptocurrency is similar to the approach it has
    taken to regulating traditional financial activities. The FATF requires
    countries to impose the full AML/CFT framework, albeit with relevant
    modifications pertinent to cryptocurrencies' unique technological
    characteristics. \1\
    ---------------------------------------------------------------------------
         \1\ To ensure that the regulations are as effective as possible,
    and to avoid circumvention of its global Recommendations, the FATF
    defined cryptocurrency assets broadly. FATF chose the term ``Virtual
    Assets'' (VA) rather than ``cryptocurrency'' or ``digital asset'' to
    refer broadly to any ``digital representation of value that can be
    digitally traded, or transferred, and can be used for payment or
    investment purposes.'' The definition does not include the digital
    representation of fiat currencies.
    ---------------------------------------------------------------------------
        As it has done when regulating other financial activities, the FATF
    identified virtual asset platforms capable of monitoring the financial
    activities conducted through their systems, termed ``Virtual Assets
    Service Providers'' (VASPs). This term was defined broadly to capture
    all relevant services, including virtual currency exchanges and certain
    types of wallet providers.
        All jurisdictions must establish licensing or registration
    requirements for VASPs. At a minimum, VASPS must be licensed where they
    were legally created. Some jurisdictions may also require licensing or
    registration as a condition for conducting business. VASPs should be
    subject to the full range of preventative measures and AML/CFT
    obligations, similar to other financial intermediaries. These
    obligations include, among others, the requirements of conducting
    customer due diligence and ongoing monitoring, recordkeeping,
    submitting of suspicious transaction reports (STR) to the designated
    Financial Intelligence Unit (FIU), and screening customers and
    transactions against designation lists. In order to conduct the needed
    examinations as part of the consumer due diligence and licensing
    process, the FATF recommends using relevant tools and resources, such
    as blockchain analytic tools. Given the cross-border nature of VASPs'
    activities, the FATF is required to impose additional preventive
    measures, for example conduct Customer Due Diligence for every
    transaction above 1,000 dollars/euros.
        In addition, the FATF adopted a ``Travel Rule'' requirement for
    VASPs. The Travel Rule, a modification to its approach regarding wire
    transfers, requires VASPs to obtain, hold, and transmit required
    originator and beneficiary information, immediately and securely, when
    conducting VA transfers. These are the same obligations traditional
    financial intermediaries are required to undertake when they transmit
    transaction information via SWIFT (in a way which is compatible with
    data protection and privacy laws).
    Investigative Aspects of Virtual Assets
        Aside from the risks associated with virtual assets, their digital
    environment actually provides unique opportunities for law enforcement
    agencies (LEAs) to conduct financial investigations. Analysis of public
    blockchain ledgers allows both the private sector (VASPs and other
    financial institutions) and LEAs to trace financial activities over the
    public blockchain and identify connections to suspicious transactions
    and illegal activities even if the cryptocurrency holder is represented
    only by a wallet number. The public ledgers allow analyzing and tracing
    a long history of transactions, thereby identifying whether the funds
    were involved in a known illicit activity, comingled with illegal
    funds, processed by an unregulated VASP, or were suspiciously treated
    (e.g., they were treated with an anonymity-enhancing mixer). In
    addition, because the data is available in digital format, analysts can
    apply sophisticated techniques to process and analyze it. At the same
    time, it is important to note that blockchain analytics is not a silver
    bullet. Private ledger cryptocurrencies, such as Monero, provide very
    limited public information.
        When VASPs collect data pursuant to their AML/CFT obligations, the
    data can provide the linkage between pseudonymous wallets and
    identifiable entities, especially when virtual asset holders cash in/
    out from/to fiat currency. The information collected by VASPs as part
    of their customer due diligence obligations includes a vast repository
    of revealing data, including Government-issued identification (which is
    often crossed with biometric data), geographical location, IP
    addresses, statements regarding the source of funds, beneficial owners,
    and VASP-identified concerns based on the consumer or transaction's
    nature. This information can be obtained by LEAs as a result of
    spontaneous reporting by VASPs to the relevant FIU, or following a
    request by an LEA (either a request for additional information by the
    FIU or a court-issued warrant). When the financial intelligence held by
    LEAs is combined with other relevant intelligence (such as open-source
    intelligence (OSINT)), signals intelligence (SIGINT), and human
    intelligence (HUMINT), it empowers LEAs to trace suspicious financial
    activities and unmask the lawbreakers.
    Implementation of the FATF Standards by Countries--Statues and Gaps
        So far, only a limited number of countries have implemented this
    framework.
        As of June 2023, \2\ 4 years after the FATF's adoption of standards
    on VAs and VASPs, 75 percent of the countries that went through their
    routine reviewing process have not implemented the framework in full.
    In addition, one-third of the countries have not conducted a risk
    assessment, and a similar number have not yet decided if and how to
    regulate the VASP sector.
    ---------------------------------------------------------------------------
         \2\  https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/
    June2023-Targeted-Update-VA-VASP.pdf.coredownload.inline.pdf
    ---------------------------------------------------------------------------
        Moreover, more than half of the countries have not taken any steps
    towards Travel Rule implementation.
        It should be highlighted that this situation has a major cost.
    Platforms that are not subject to the full extent of FATF standards are
    becoming crypto mixers, as it is almost impossible to track the illicit
    assets inserted or transferred via the platform. This continues to make
    the use of VASPs attractive to terrorist organizations.
    C. Current Trends in Hamas Terror Financing
    Hamas--General Sources of Funding
        Hamas is designated as a terror organization by the U.S., EU, U.K.,
    Australia, Canada, Israel, and other countries. Unlike ISIS, it has not
    yet been designated by the U.N. as a global terror organization, hence
    the financial sanctions toolbox is somewhat limited, as described
    below.
        Hamas' funding resources include the following main channels:

        State funding, which is transmitted mainly by cash, cross-
            border payments, Hawala, trade-based terrorism financing, money
            exchanges and banks.

        Business portfolios, including real estate and investments.

        Fundraising, including through social media platforms and
            crowdfunding campaigns in which money is transmitted via bank
            accounts, payment services and crypto exchanges.

        Humanitarian aid, which is misappropriated to and stolen
            for its own activity.
    Hamas' Use of Virtual Assets
        Hamas was an early adopter of virtual assets, using them to
    circumvent global supervision on money transfers and to raise funds. In
    recent years, tens of millions of dollars in virtual assets were
    identified as being linked to Hamas, however, only a small portion of
    these funds were successfully confiscated, as detailed below.
        Starting in 2019, Hamas has been fundraising in cryptocurrency.
    Initially, Hamas received a relatively small donation of several
    thousands of dollars in Bitcoin. It used regular cryptocurrency
    wallets, later moving to noncustodial wallets, and then in 2021 adopted
    more advanced techniques, generating a unique address for each new
    donation.
        In the summer of 2021, after a conflict with Israel, Hamas
    solicited increasing sums in Bitcoin. By July 2021, following Israel's
    designation of Hamas crypto wallets, more than $7.3 million worth of
    virtual assets were seized. The designation included over 20 different
    types of virtual assets, including Bitcoin, Ether, Tether, TRON,
    Cardano, XPR, Dogecoin, and more.
        In April 2023, following a further series of Israeli asset freezing
    orders and seizure of many accounts, Hamas announced to its supporters
    that it would stop receiving fundraising via the crypto currency
    Bitcoin, citing an increase in ``hostile'' activity against donors and
    that ``this comes out of concern about the safety of donors and to
    spare them any harm.'' \3\ Such a statement demonstrates that the FATF
    approach of signaling to the market of ``blacklisted'' crypto, was
    proven to be efficient.
    ---------------------------------------------------------------------------
         \3\ www.reuters.com/world/middle-east/hamas-armed-wing-announces-
    suspension-bitcoin-fundraising-2 023-04-28/
    ---------------------------------------------------------------------------
        On October 10th, 2023, after the recent terror attacks, Israel
    police froze the cryptocurrency accounts that Hamas was using to
    solicit donations on social media to support it during the war. \4\
    ---------------------------------------------------------------------------
         \4\ www.reuters.com/technology/israel-freezes-crypto-accounts-
    seeking-hamas-donations-police-say-20 23-10-10/
    ---------------------------------------------------------------------------
        It is important to note that after each designation of a Hamas
    wallet became public, many VASPs, regulated and nonregulated,
    identified connections to the designated wallets and shared additional
    information with the Israeli authorities. Some sources communicated the
    information directly to Israel, to the National Bureau for Counter
    Terror Financing (NBCTF), while others informed the relevant LEAs in
    their respective jurisdictions or disseminated suspicious transaction
    reports to their own FIU, which in turn cooperated with the Israeli FIU
    and other relevant LEAs. The valuable information provided by VASPs
    around the globe included significant data they gathered by following
    their AML/CFT obligations, as well as through open-source information
    and blockchain analytics, and greatly assisted in tracing relevant
    wallets and seizing related funds.
        Additionally, blockchain analytics companies conducted independent
    research regarding the designated wallets, revealing connections to
    additional wallets associated with the designation and with previous
    terror financing investigations. Most findings became public when the
    companies published their investigations, which assisted in revealing
    new links to relevant suspected terrorism financing activities.
    Hamas Fundraising Via e-Commerce and Technology Platforms
        According to open-source intelligence, Hamas collects funds using
    social media and commercial platforms. They direct supporters to
    purchase certain goods and services via e-commerce platforms,
    centralized and others that connect buyers and sellers. No real goods
    change hands and the money is funneled to Hamas.They are relying on the
    relatively low onboarding KYC examination performed by those platforms,
    which are mainly lacking the context of the overall transaction.
    Humanitarian Fundraising Campings
        Hamas is known to lead a variety of fundraising campaigns on social
    media that seem to be legitimate humanitarian campaigns, and linked to
    charity organizations, making it difficult to trace by the intelligence
    community, the private sector and donors.
        After being published on social media, mainly via Telegram, the
    donations are being collected in bank transfers, payment transactions,
    and crypto.
    Hamas Use of Trade-Based Terrorism Financing
        Another typology which is constantly identified as being used by
    Hamas is ``trade-based'' financing, which is very similar to the
    ``trade-based'' money laundering'' typologies. \5\
    ---------------------------------------------------------------------------
         \5\ FATF report: https://www.fatf-gafi.org/content/dam/fatf-gafi/
    reports/Trade-Based-Money-Laundering-Trends-and-
    Developments.pdf.coredownload.inline.pdf.
    ---------------------------------------------------------------------------
        The typical use case would be State-sponsored funding which is
    sent, either in cash or Hawalla, to another country. Hamas is
    purchasing goods, and shipping them to Gaza. The products imported to
    Gaza are being sold and the cash proceeds are being collected by Hamas
    in Gaza. Many cases were inspected in which Hamas was using trade and
    commerce of physical goods to transfer value to Gaze, including toys
    and chocolate. \6\
    ---------------------------------------------------------------------------
         \6\ IMPA report (in Hebrew): https://www.gov.il/BlobFolder/
    dynamiccollectorresultitem/red-flags-typology-terror-financing-impa-
    080822/he/professional-docs-red-flags-typology-terror-financing-impa-
    080822.pdf at p.9.
    ---------------------------------------------------------------------------
    D. Proposed Action Items Going Forward
        My testimony above surveyed the global AML/CTF legal framework and
    the current trends in terror financing by Hamas (including the methods
    in which Hamas funds its own activities and, likely, the October 7
    attacks). In this chapter, I propose several practical operative
    actions that can be taken, both by the international legal community
    and the U.S., to further strengthen the international community's
    ability to disrupt terror financing channels and--ultimately--the
    financial ability for terror organizations to carry out their
    activities.
    A. Strengthening the Global AML/CTF Regime for Virtual Assets
        The issue: Many countries have yet to implement the FATF's
            regulatory framework regarding virtual assets and,
            particularly, the Travel Rule and inspections on licensed
            exchanges. This regulatory arbitrage creates a major loophole
            in the global regulatory regime by allowing for ``weakest
            link'' jurisdictions. The result is that illicit and terror
            organizations ``forum shop'' and exploit exchanges based in
            jurisdictions with weak oversight. In addition, no global
            response is available in real time to such illicit activity and
            there is no united coalition to promote a response.

        Proposed measures--global level: The following measures are
            proposed to help strengthen the existing regime and support
            better implementation and enforcement in jurisdictions with
            weak oversight:

          The FATF must take an aggressive approach to enforcing
            its global AML/CTF framework and work towards closing the
            global regulatory arbitrages which create the ``weakest
            links.'' This includes:

            (i) creating a public ``gray list'' of countries that
            have not yet adopted and implemented virtual asset-related
            controls, such as the ``Travel Rule,''

            (ii) ensure that countries are effectively supervising
            their licensed VASPs and imposing dissuasive sanctions for
            noncompliance, and

            (ii) imposing its customary sanctions regarding
            noncompliance on such countries (for example, recommending that
            member States impose advanced due diligence standards and
            suspicious activity reporting requirements on financial
            institutions engaged in virtual asset transactions with gray-
            listed countries).

          The FATF should further recommend additional measures to
            regulate Peer-to-Peer, De-Fi and smart contracts.

        Proposed measures--domestic level: In the absence of
            appropriate response by the regulating county in which an
            exchange is licensed, or in case of a nonregulated exchange, it
            is proposed that countries will consider designating the
            exchange itself, to avoid its use as a ``mixer'' to launder the
            funds.
    B. Real-Time Collaboration and Information Sharing re Virtual Assets
        Issue #1: Due to the rapid and cross-border nature of
            payment services and virtual asset transactions, there is a
            need for 24/7 international collaboration between intelligence
            and law enforcement authorities to identify, freeze and disrupt
            the flow of funds.

        Proposed measure: Establish mechanisms for collaboration
            between intelligence and law enforcement authorities, similar
            to the case of ransomware and other social engineering fraud.

        Issue #2: Public authorities require a more effective
            channel with the private sector, as most of the data relevant
            to crypto-related investigations is publicly available (over
            blockchain) and can be analyzed by the community.

        Proposed measures: Law enforcement agencies (LEAs) should
            establish channels for rapid information sharing with the
            private sector and, in particular, with financial institutions,
            ``RegTech'' companies, and blockchain analytics experts, about
            the up-to-date trends used by designated terror organizations.
            In this regard, Financial Intelligence Units (FIUs), who
            receive financial intelligence from the private sector, should
            actively share with the private sector the red flags,
            typologies, relevant keywords and even ``name codes'' which are
            indicative of illegal donations that are channeled to terror
            activity. The information sharing does not have to be public,
            but can be done with entrusted RegTech companies.

        FIUs should also publish lists of bank accounts, payment
            accounts and crypto wallet details which they have identified
            on social media or otherwise, block them and alert the entire
            financial system, on an ongoing and consistent basis.

        To make screening more effective for financial
            institutions, FIUs should make lists accessible in different
            formats and languages, with as many identifying data points as
            possible so that private sector organizations can effectively
            screen, regardless of their size or ability to dedicate
            resources to compliance.
    C. ``Sanctions'' Designations
        Issue: Hamas is currently designated by the U.S., EU and
            other countries, but not by the U.N. Therefore, it is not
            necessarily screened in all countries and in relation to
            different currencies.

        Proposed measures:

          A proposal for the U.N. Security Council should be
            submitted to designate Hamas as a terror organization, as was
            the case with ISIS. Such action will ensure that Hamas'
            financial activities will be screened and frozen by all
            financial systems, in a unified and automatic manner, across
            all countries, even in those institutions that are physically
            removed from the conflict zone or may have limited awareness of
            the nature and type of the terror financing typologies (as is
            common), or may be operating with different currencies.

          Countries that have already domestically designated
            Hamas, such as the U.S., EU, and others, should instruct their
            enforcement agencies to focus on enforcement relating to this
            specific designation and consider adding additional measures as
            a policy matter. The U.S. designation of a group of Hamas
            leaders made on October 18th is a positive, if belated, step.
            More actions of a similar nature are required.

          Additional designations should be considered as well, for
            example, charity organizations that were designated by Israel
            based on relevant intelligence that connect them to the terror
            activities.
    D. Improving Financial Investigations Capabilities--Domestically
        Issue: FinCEN currently does not have authority to ask for
            additional complementary information from financial
            institutions or to freeze funds related to terrorism financing,
            which are crucial operative capabilities needed to disrupt
            terrorism.

        Proposed measures: The following measures are proposed to
            help strengthen FinCEN's ability to effectively collect
            financial intelligence information from financial institutions
            and to take swift (if temporary) action to disrupt terror
            financing:

          FinCEN should be granted with the legal authority to
            compel all financial institutions to provide additional
            supplementary information (as opposed to requesting such
            institutions to do so voluntarily, which is the current
            situation). This is especially important in the domain of
            virtual assets, where many different VASPs and other financial
            institutions are involved.

          In addition, FinCEN should be granted the legal authority
            to order an administrative freeze on terror-financing related
            funds for specified limited periods of time (e.g., 24-72
            hours). Similar mechanisms exist throughout EU member States,
            which enable local authorities to respond swiftly to fast-
            moving funds, which is normal in today's markets, and to
            disrupt terrorism financing efficiently.
    E. Risk Assessments of High-Risk Jurisdictions
        Issue: Key stakeholders in the public and private sectors
            can serve as gatekeepers or a ``first line of defense'' against
            the exploitation of financial and monetary markets by terror
            organizations. To do this effectively, they need to understand
            the risks emanating from high-risk jurisdiction, identify their
            organizational appetite for risk; review their operations to
            identify exposure to terror financing risk; and adopt risk-
            management controlling measures.

        Proposed measures:
          A clear, professional analysis of the risks emerging from
            high-risk countries (from the perspective of terror financing)
            should be made available to stakeholders in both the public and
            private sectors. This will help facilitate the ``risk
            management'' process described above, including establishing
            effective management of risk appetite, risk exposure and risk-
            management controlling measures by these stakeholders.

          Ensuring that the FATF (and other parallel institutions)
            are working in a transparent and credible manner to undergo and
            swiftly publish their evaluations of countries that are at
            high-risk for terror financing.

          In this regard, there is a need to mention the concerns
            that were raised over the past few years regarding the
            professional capability of the MENAFATF, which is the FSRB
            mostly relevant to jurisdictions exposed to high risks of
            terror-financing (such as Lebanon, the Palestinian Authority,
            and Syria). It is critical that evaluations of these countries
            are supported by appropriate and professional experts.

          For example, Hezbollah is a major stakeholder in the
            Lebanese economy. Thus, it is critical that the ongoing
            MENAFATF review of Lebanon will include a clear and reliable
            review of its implication on Lebanon economy and its potential
            exploitation to TF risks and funnel economic resources to
            Hezbollah.

          In addition, the global financial community requires more
            clarity regarding the financial ecosystem of the Palestinian
            Authority and Gaze to allow it better manage TF risk. For a
            variety of reasons, the PA has not gone through an objective
            international assessment regarding their compliance with global
            AML/CTF standards as set by the FATF. Based on publicly
            available information, I estimate that the outcome of such an
            evaluation would have likely been unsatisfactory and would have
            led to the PA being placed on the FATF's ``gray list.'' The
            result of such a listing is that countries which implement
            FATF-recommended controls would require their domestic
            financial institutions to impose enhanced measures in relation
            to transactions with the Palestinian Authority (for example,
            reporting transactions exceeding certain monetary thresholds).
            Moreover, a reliable evaluation could have assisted in mapping
            the compliance gaps in the Palestinian Authority's financial
            system and clarifying how sources of funds enter Gaza without
            supervision and get distributed through illicit channels to
            Hamas (a situation that is common to the provision of
            humanitarian aid to Gaza). Such an evaluation, if conducted by
            a credible and professional team, needs to be conducted without
            undue delay.
    F. Following additional funding channels and social media platforms
        Issue #1: Hamas was recently inspected to expand its
            activities to commerce and technology platforms. This typology
            can be seen, for example, in temporary housing websites, etc.
            Those platforms have limited ability to identify and monitor
            risks, and additional discussion on this is required.

        Proposed measures: It is suggested to consider

        Issue #2: Certain social media platforms, such as Telegram,
            are hosting a substantially large volume of terrorism financing
            solicitation.

        Proposed measures:

          The EU's Digital Service Act enforces on large social
            media platforms certain liabilities, including to ensure the
            content is not infringing the safety of the public and does not
            call to illegal activities etc. This applies, among others, to
            Meta, TikTok and such. A reduced level of responsibilities and
            liabilites is imposed on ``host'' platforms, such as Telegram,
            to the content included there. A further discussion is needed
            on this topic, including references to explicit solicitation
            for terrorism financing.
            RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                          FROM MATTHEW LEVITT

    Q.1. On October 7, 2023, Hamas militants killed 1,400 people
    and took more than 200 hostages. \1\ In the days following,
    reports emerged suggesting that crypto wallets linked to Hamas,
    Palestinian Islamic Jihad, and other terrorist organizations
    received tens of millions in crypto over the years and months
    preceding the October 7 attacks, and continue to use crypto to
    fundraise and transact. \2\
    ---------------------------------------------------------------------------
         \1\ NPR, ``New Details Emerge About the Hamas-Led Attackers Who
    Massacred Israelis'', Daniel Estrin, Aby Bakr Bashir, Samantha Balaban,
    Claire Harbage, October 27, 2023, https://www.npr.org/2023/10/27/
    1208836319/israel-hamas-islamic-jihad-militants-videos-details.
         \2\ Wall Street Journal, ``Hamas Militants Behind Israel Attack
    Raised Millions in Crypto'', Angus Berwick and Ian Talley, October 10,
    2023, https://www.wsj.com/world/middle-east/militants-behind-israel-
    attack-raised-millions-in-crypto-b9134b7a; Financial Times, ``Israel
    Orders Freeze on Crypto Accounts in Bid To Block Funding for Hamas'',
    Scott Chipolina, October 17, 2023, https://www.ft.com/content/e03a370b-
    777f-46c2-8576-d1cee731efe2?accessToken=; CNN, `` `They're
    Opportunistic and Adaptive': How Hamas Is Using Cryptocurrency To Raise
    Funds'', Scott Glover, Curt Devine, Majlie de Puy Kamp, and Scitt
    Bronstein, October 12, 2023, https://www.cnn.com/2023/10/12/us/hamas-
    funding-crypto-invs/index.html.
    ---------------------------------------------------------------------------
        In an attempt to minimize the role that it is has played in
    the financing of terrorist organizations, including Hamas and
    Palestinian Islamic Jihad, crypto industry players are now
    working furiously to downplay reports that claiming that ``[i]t
    is not known what proportion of the funds received by those
    wallets are directly attributable to PIJ or other terrorist
    groups.''
        But the facts remain clear. As Elliptic, one of the
    blockchain analytics firms whose crypto terrorist financing
    findings were reported in the Wall Street Journal in early
    October, \3\ stated in the release it issued to quell intense
    industry pressure, ``[i]n July this year, the NBCTF [National
    Bureau for Counter Terror Financing of Israel] issued a seizure
    order for crypto wallets linked to Palestinian Islamic Jihad
    (PIJ), a terrorist organization active in the Gaza Strip.
    Elliptic analysis of the wallets seized by the NBCTF shows that
    these wallets received transactions totalling just over $93
    million between 2020 and 2023.'' \4\
    ---------------------------------------------------------------------------
         \3\ The Wall Street Journal, ``Hamas Militants Behind Israel
    Attack Raised Millions in Crypto'', Angus Berwick and Ian Talley,
    October 10, 2023, https://www.wsj.com/world/middle-east/militants-
    behind-israel-attack-raised-millions-in-crypto-b9134b7a.
         \4\ Elliptic, ``Setting the Record Straight on Crypto Crowdfunding
    by Hamas'', October 25, 2023, https://www.elliptic.co/blog/setting-the-
    record-straight-on-crypto-crowdfunding-by-hamas.
    ---------------------------------------------------------------------------
        The industry group claims, ``[i]t is likely that some of
    the wallets listed by the NBCTF belonged to small service
    providers such as brokers that were used by PIJ.'' \5\ The
    industry is using this possibility to minimize the role that
    crypto as played in the financing of PIJ, Hamas, and other
    terrorist groups.
    ---------------------------------------------------------------------------
         \5\ Elliptic, ``Setting the Record Straight on Crypto Crowdfunding
    by Hamas'', October 25, 2023, https://www.elliptic.co/blog/setting-the-
    record-straight-on-crypto-crowdfunding-by-hamas.
    ---------------------------------------------------------------------------
        Are ``small service providers'' that transmit funds to or
    from terrorist organizations immaterial to the financing of
    those terror groups?
        Are ``small service providers'' that transmit funds to or
    from terrorist organizations responsible for their role in the
    financing of those terror groups? Should they be held
    responsible for that role?
        On October 18, 2023, the U.S. Treasury Department
    (Treasury) imposed sanctions on one such service provider, a
    Gaza-based crypto exchange service ``for having materially
    assisted, sponsored, or provided financial, material, or
    technological support for, or goods or services to or in
    support of, Hamas.'' \6\ According to the U.S. Treasury
    Department, that crypto exchange was involved in Hamas
    fundraising, and ``has also been used to transfer funds by
    affiliates in other terrorist groups,'' including an al Qaeda
    affiliate and individuals acting on behalf of the Islamic State
    of Iraq and Syria (ISIS). \7\
    ---------------------------------------------------------------------------
         \6\ U.S. Department of the Treasury, ``Following Terrorist Act on
    Israel, Treasury Sanctions Hamas Operatives and Financial
    Facilitators'', press release, October 18, 2023, https://
    home.treasury.gov/news/press-releases/jy1816.
         \7\ Id.
    ---------------------------------------------------------------------------
        Do you believe that these Treasury actions were appropriate
    based on the role that this exchange may have played in
    providing material support to terrorists, even if we are not
    certain that all funds that passed through this exchange went
    directly to or in support of Hamas?
        More broadly, do you believe that these service provider
    can materially assist, sponsor, or provide financial, material,
    or technological support for terrorist organizations even if
    terrorist organizations may only receive a small portion of the
    funds flowing through them?

    A.1. I have met with Israeli officials on this subject, and
    they concur that while Hamas and PIJ both use cryptocurrencies
    to move funds, especially funds raised via crowd funding
    campaigns, crypto is not a major financing tool for either
    group compared with other means of raising and moving funds.
    Expect to see more actions targeting those entities that do
    provide crypto services for Hamas and PIJ, which is good, but
    this should not be made out to be more than it is. The WSJ
    report in question vastly overstated the amounts involved,
    according to Israeli officials with whom I have spoken.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR CORTEZ MASTO FROM MATTHEW LEVITT

    Q.1. What have we learned from FinCEN's enforcement efforts
    since 2020?
        FinCEN has raised concerns with illicit finance of
    terrorism through crypto currencies. Do you agree with the
    current approach FinCEN is taking to preventing these types of
    finance from occurring?

    A.1. I do agree with FinCEN's approach. As discussed at the
    hearing, while Hamas does use crypto to send funds, mostly via
    crowd funding campaigns, it is far less of an issue that some
    of made it out to be (like the WSJ story). I recently held
    meetings with Israeli counterterror finance officials, and they
    confirm that crypto is used by Hamas but that it's not a major
    aspect of the group's financing, at least today.

    Q.2. What more can Treasury do to better block Hamas from
    raising revenue across the Middle East?
        UAE comes up a lot in Treasury designations (as an example)
    related to sanctions evasion regarding Russia and Iran. Why is
    this and what makes the UAE a seemingly desirable jurisdiction
    for money laundering and terrorist financing?
        Are there meaningful measures the UAE can take to stop this
    facilitation through its financial system?

    A.2. Treasury is working hard to block Hamas fundraising,
    including several recent designations and other actions, some
    done jointly for foreign partners. It is also active in a task
    force with foreign partners aimed to coordinate efforts to
    counter Hamas financing.
        The UAE was placed on the FATF grey list in 2022 due to
    AML/CFT shortcomings, some of which remain. Enforcement remains
    spotty in the UAE, but the country has adopted in mutual
    evaluation report and the State Department reports it is making
    significant progress. The UAE is also a member of the U.S.-
    Saudi cochaired Terrorist Financing Targeting Center (TFTC).

    Q.3. How often does FinCEN update reporting forms like the SAR
    form? When can we expect this issue to be fixed?

    A.3. I have no special insight into this issue.

    Q.4. Social media compliance, and the programs those companies
    put in place, appears to be collapsing, with layoffs of many
    staff who covered this issue. Has there been an increase of
    terrorist groups and other illicit actors using social media
    platforms as a result?
        Do Hamas and other designated terrorist groups leverage
    social media to raise money?

    A.4. Hamas engages in crowd funding campaigns. The concern is
    that with the Hamas attack on Oct. 7 and the war that followed,
    these will pick up pace. According to Israeli authorities, this
    has already been the case. Much of this activity occurs on
    social media platforms.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                          FROM MATTHEW LEVITT

    Q.1. As you know, cryptocurrencies operate on a global scale,
    making international cooperation crucial. Some jurisdictions
    have introduced regulations, but global implementation is
    relatively poor and compliance remains low. U.S. exchanges do
    AML/KYC checks and screen all potential customers for
    sanctions. However, according to the Financial Action Task
    Force--an international standard setting body--73 of the 98
    jurisdictions assessed by the task force are either partially
    or noncompliant. Noncompliant exchanges are often the way bad
    actors can turn their digital currency into cash. What actions
    could Treasury or even Congress take to stymie the use of these
    noncompliant virtual asset service providers by bad actors?

    A.1. I am not a crypto expert, so I defer here to my
    colleagues.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR CORTEZ MASTO FROM DANIELLE PLETKA

    Q.1. What have we learned from FinCEN's enforcement efforts
    since 2020?
        FinCEN has raised concerns with illicit finance of
    terrorism through crypto currencies. Do you agree with the
    current approach FinCEN is taking to preventing these types of
    finance from occurring?

    A.1. Cryptocurrency is not my area of expertise.

    Q.2. What more can Treasury do to better block Hamas from
    raising revenue across the Middle East?
        UAE comes up a lot in Treasury designations (as an example)
    related to sanctions evasion regarding Russia and Iran. Why is
    this and what makes the UAE a seemingly desirable jurisdiction
    for money laundering and terrorist financing?

    A.2. The issue for the United States is enforcement and
    sanctions. A vigilant enforcement regime will push the Emiratis
    to end their role as an entrepot for terrorist financing.
    Seizures and bank designations, removal of liaison
    relationships and other serious legal efforts will prove to
    them that the United States is serious. So far, that proof has
    not been forthcoming.

    Q.3. Are there meaningful measures the UAE can take to stop
    this facilitation through its financial system?

    A.3. This is easy for the Emiratis to, but requires will on
    their part to ensure they are not a middle ground for terror
    financing. Should it be useful, the Treasury Department could
    send a team to help scrub their system. My guess is that they
    will resist this.

    Q.4. How often does FinCEN update reporting forms like the SAR
    form? When can we expect this issue to be fixed?

    A.4. Not my area of expertise.

    Q.5. Social media compliance, and the programs those companies
    put in place, appears to be collapsing, with layoffs of many
    staff who covered this issue. Has there been an increase of
    terrorist groups and other illicit actors using social media
    platforms as a result?
        Do Hamas and other designated terrorist groups leverage
    social media to raise money?

    A.5. Almost certainly yes, but this is an area the other
    witnesses can speak to more seriously.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                          FROM DANIELLE PLETKA

    Q.1. As you know, cryptocurrencies operate on a global scale,
    making international cooperation crucial. Some jurisdictions
    have introduced regulations, but global implementation is
    relatively poor and compliance remains low. U.S. exchanges do
    AML/KYC checks and screen all potential customers for
    sanctions. However, according to the Financial Action Task
    Force--an international standard setting body--73 of the 98
    jurisdictions assessed by the task force are either partially
    or noncompliant. Noncompliant exchanges are often the way bad
    actors can turn their digital currency into cash. What actions
    could Treasury or even Congress take to stymie the use of these
    noncompliant virtual asset service providers by bad actors?

    A.1. Again, not my area, but the key is clarity in regulation/
    law, enforcement, sanctions. The reason for lack of compliance
    is because it it possible. We have seen that when the United
    States is serious (periods after 9/11, periods under the Trump
    administration), compliance improves. There is a clear link.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR CORTEZ MASTO FROM SHLOMIT WAGMAN

    Q.1. What have we learned from FinCEN's enforcement efforts
    since 2020?
        FinCEN has raised concerns with illicit finance of
    terrorism through crypto currencies. Do you agree with the
    current approach FinCEN is taking to preventing these types of
    finance from occurring?

    A.1. In recent years, the Financial Crimes Enforcement Network
    (FinCEN) has taken several significant steps to address the
    potential risks associated with virtual assets and to promote
    the implementation of the FATF standards on them. Among others,
    it clarified the regulations by issuing guidance on how
    existing AML/CFT rules apply to virtual currencies and
    businesses dealing with them (2018). It established reporting
    and record-keeping requirements for exchanges and
    administrators, and updated FinCEN's reporting forms and
    advisories, and improved its ability to track and analyze
    suspicious activity involving virtual assets, particularly in
    ransomware payments and terrorist financing.
        Recently, on October 19, 2023, FinCEN published Notice of
    Proposed Rulemaking (NPRM) on Beneficial Ownership Information
    for Convertible Virtual Currency Transactions. This NPRM
    identifies international Convertible Virtual Currency Mixing
    (CVC mixing) as a class of transactions of primary money
    laundering concern. This NPRM highlights the risks posed by the
    extensive use of CVC mixing services by a variety of illicit
    actors throughout the world and proposes a rule to increase
    transparency around CVC mixing to combat its use by malicious
    actors including Hamas, Palestinian Islamic Jihad, and the
    Democratic People's Republic of Korea (DPRK).
        FinCEN also took enforcement actions, including the civil
    enforcement actions against the cryptocurrency exchange BitMEX,
    and imposing a fine of $100 million for violating AML/CFT
    regulations, including failing to implement a proper anti-money
    laundering program (2021); and against Hydra Market, a darknet
    marketplace that primarily used virtual currencies, for
    facilitating the sale of illegal goods and services (2023).
    These cases had a major impact on the markets, expressing
    FinCEN's mission in cracking illegal activities facilitated by
    virtual assets.
        In addition, FinCEN urges countries to adopt the FATF
    framework into its domestic legislation, as part of its
    membership at the U.S. delegation to the Financial Action Task
    Force.
        I do support finCEN's approach regarding virtual assets and
    believe they are crucial in order to reduce situations under
    which virtual assets may be used for terrorism financing.
        At the same time, I do think that the U.S., as other
    countries, should urge the FATF to take more actions against
    countries who do not fully implement the FATF standards
    regarding virtual assets. In addition, I believe that the U.S.
    Treasury should consider publishing designations on particular
    VASPs, especially from noncompliant jurisdictions, in order to
    combat their activity, which has severe negative implications
    for the global economy.

    Q.2. What more can Treasury do to better block Hamas from
    raising revenue across the Middle East?
        UAE comes up a lot in Treasury designations (as an example)
    related to sanctions evasion regarding Russia and Iran. Why is
    this and what makes the UAE a seemingly desirable jurisdiction
    for money laundering and terrorist financing?

    A.2. UAE's level of compliance with the global AML/CFT
    standards has been evaluated by the Financial Action Task Force
    (FATF). Based on its finding, the overall level of compliance
    was not satisfactory and met the FATF's criteria to be included
    under its gray list. Currently, the UAE is subject to a
    scrutiny review of its national efforts to strengthen the
    effectiveness of its AML/CFT framework, and it will be removed
    from the gray list only after the needed improvements will be
    fully implemented.
        Given the systematic deficiencies identified by FATF,
    illicit stakeholders are also likely to take advantage of this
    situation and try hiding illicit activities in its financial
    system.
        Based on publicly available information, it seems that
    Hamas is/was operating in the UAE and holds there certain
    assets. See, for example, the recent NYTimes report on Hamas'
    assets identified around the globe, which includes assets in
    the UAE.

    Q.3. Are there meaningful measures the UAE can take to stop
    this facilitation through its financial system?

    A.3. Yes. The UAE should continue strengthening the
    effectiveness of its AML/CFT framework and ensure efficient
    implementation of it, on a risk based approach. It should
    create intelligence collaboration with other agencies and act
    upon receiving data from its counterparts, including freezing
    assets related to suspected terror activities, initiate
    investigations, submit indictments and ensure it understands
    the risks and design tools to mitigate them. It should join a
    global task force and share information with it on a regular
    basis, in order to identify suspicious assets and freeze them.

    Q.4. How often does FinCEN update reporting forms like the SAR
    form? When can we expect this issue to be fixed?

    A.4. Unfortunately, I do not have data on this matter. I
    believe this question should be addressed to FinCEN.

    Q.5. Social media compliance, and the programs those companies
    put in place, appears to be collapsing, with layoffs of many
    staff who covered this issue. Has there been an increase of
    terrorist groups and other illicit actors using social media
    platforms as a result?
        Do Hamas and other designated terrorist groups leverage
    social media to raise money?

    A.5. Yes, Hamas uses social media for fundraising campaigns.
    The most common platform is Telegram, which does not easily
    collaborate on removing such content. We have seen in the past
    months campaigns calling directly for donations to Hamas, and
    others that do not provide explicit indication, but seem to
    have some ties to Hamas. The later cases are usually being
    reported to LEAs. To the best of my knowledge, most other
    social media outlets, mainly those who are subject to the EU's
    Digital Services Act and have AML/CFT as well as violence free
    monitoring measures in place, and they try removing such
    content upon notice or following their internal monitoring and
    review.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                          FROM SHLOMIT WAGMAN

    Q.1. As you know, cryptocurrencies operate on a global scale,
    making international cooperation crucial. Some jurisdictions
    have introduced regulations, but global implementation is
    relatively poor and compliance remains low. U.S. exchanges do
    AML/KYC checks and screen all potential customers for
    sanctions. However, according to the Financial Action Task
    Force--an international standard setting body--73 of the 98
    jurisdictions assessed by the task force are either partially
    or noncompliant. Noncompliant exchanges are often the way bad
    actors can turn their digital currency into cash. What actions
    could Treasury or even Congress take to stymie the use of these
    noncompliant virtual asset service providers by bad actors?

    A.1. Indeed, many countries have yet to implement the FATF's
    regulatory framework regarding virtual assets and,
    particularly, the Travel Rule and inspections on licensed
    exchanges. This regulatory arbitrage creates a major loophole
    in the global regulatory regime by allowing for ``weakest
    link'' jurisdictions. The result is that illicit and terror
    organizations ``forum shop'' and exploit exchanges based in
    jurisdictions with weak oversight. In addition, no global
    response is available in real time to such illicit activity and
    there is no united coalition to promote a response.
        There are a couple of actions that may assist in
    strengthening the existing regime and support better
    implementation and enforcement in jurisdictions with weak
    oversight.
        The U.S. should urge the FATF to take a more aggressive
    approach in order to enforce the global AML/CTF framework in
    all jurisdictions and work towards closing the global
    regulatory arbitrages which create the ``weakest links.''
        This includes the following suggested actions:

      1.  Creating a public ``gray list'' of countries that have
            not yet adopted and implemented virtual asset-related
            controls, such as the ``Travel Rule,''

      2.  Ensure that countries are effectively supervising their
            licensed VASPs and imposing dissuasive sanctions for
            noncompliance, and

      3.  Imposing its customary sanctions regarding noncompliance
            on such countries (for example, recommending that
            member States impose advanced due diligence standards
            and suspicious activity reporting requirements on
            financial institutions engaged in virtual asset
            transactions with gray-listed countries).

      4.  The U.S. and FATF should further recommend additional
            measures to regulate Peer-to-Peer, De-Fi, and smart
            contracts.

        In addition, on the domestic level, given the absence of
    appropriate response by certain regulating counties in which an
    exchange are licensed, or in case of a nonregulated exchange,
    it is proposed that the U.S. will consider designating the
    exchange itself, to avoid its use as a ``mixer'' to launder the
    funds.
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