[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
EVALUATING THE FINANCIAL CRIMES
ENFORCEMENT NETWORK
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON NATIONAL SECURITY,
ILLICIT FINANCE, AND INTERNATIONAL
FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 9, 2025
__________
Serial No. 119-37
Printed for the use of the Committee on Financial Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
63-032 PDF WASHINGTON : 2026
=======================================================================
HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking Member
ANN WAGNER, Missouri NYDIA M. VELAZQUEZ, New York
ANDY BARR, Kentucky BRAD SHERMAN, California
ROGER WILLIAMS, Texas GREGORY W. MEEKS, New York
TOM EMMER, Minnesota DAVID SCOTT, Georgia
BARRY LOUDERMILK, Georgia STEPHEN F. LYNCH, Massachusetts
WARREN DAVIDSON, Ohio AL GREEN, Texas
JOHN W. ROSE, Tennessee EMANUEL CLEAVER, Missouri
BRYAN STEIL, Wisconsin JAMES A. HIMES, Connecticut
WILLIAM R. TIMMONS, IV, South BILL FOSTER, Illinois
Carolina JOYCE BEATTY, Ohio
MARLIN STUTZMAN, Indiana JUAN VARGAS, California
RALPH NORMAN, South Carolina JOSH GOTTHEIMER, New Jersey
DANIEL MEUSER, Pennsylvania VICENTE GONZALEZ, Texas
YOUNG KIM, California SEAN CASTEN, Illinois
BYRON DONALDS, Florida AYANNA PRESSLEY, Massachusetts
ANDREW R. GARBARINO, New York RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
MIKE FLOOD, Nebraska NIKEMA WILLIAMS, Georgia
MICHAEL LAWLER, New York BRITTANY PETTERSEN, Colorado
MONICA DE LA CRUZ, Texas CLEO FIELDS, Louisiana
ANDREW OGLES, Tennessee JANELLE BYNUM, Oregon
ZACHARY NUNN, Iowa SAM LICCARDO, California
LISA McCLAIN, Michigan
MARIA SALAZAR, Florida
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
------
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND INTERNATIONAL
FINANCIAL INSTITUTIONS
WARREN DAVIDSON, Ohio, Chairman
ZACHARY NUNN, Iowa, Vice Chairman JOYCE BEATTY, Ohio, Ranking Member
FRANK D. LUCAS, Oklahoma JOSH GOTTHEIMER, New Jersey
PETE SESSIONS, Texas JUAN VARGAS, California
ANDY BARR, Kentucky BILL FOSTER, Illinois
ROGER WILLIAMS, Texas VICENTE GONZALEZ, Texas
YOUNG KIM, California RITCHIE TORRES, New York
ANDREW OGLES, Tennessee SEAN CASTEN, Illinois
LISA McCLAIN, Michigan SAM LICCARDO, California
MARIA SALAZAR, Florida
C O N T E N T S
----------
Tuesday, September 9, 2025
OPENING STATEMENTS
Page
Hon. Warren Davidson, Chairman of the Subcommittee on National
Security, Illicit Finance and International Financial
Institutions, a U.S. Representative from Ohio.................. 1
Hon. Joyce Beatty, Ranking Member of the Subcommittee on National
Security, Illicit Finance and International Financial
Institutions, a U.S. Representative from Ohio.................. 3
STATEMENTS
Hon. French Hill, Chairman of the Committee on Financial
Services, a U.S. Representative from Arkansas.................. 4
Hon. Maxine Waters, Ranking Member of the Committee on Financial
Services, a U.S. Representative from California................ 4
WITNESSES
Ms. Andrea Gacki, Director, Financial Crimes Enforcement Network
(FINCEN)....................................................... 5
Prepared statement........................................... 8
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. Warren Davidson:
September 8, 2025 Letter to Secretary Bessent................ 46
The Independent Community Bankers of America (ICBA).......... 54
April 2, 2025 Press Release, Fraud on ActBlue: New Report
Details Potential Illegal activity on the Democrat Platform 57
Hon. Joyce Beatty:
Democrats Abroad (DA)........................................ 59
Hon. Young Kim:
American Land Title Association (ALTA)....................... 66
Hon. Maxine Waters:
American Association of Retired Persons (AARP)............... 86
Financial Accountability and Corporate Transparency (FACT)
Coalition.................................................. 104
Transparency International U.S............................... 108
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative
French Hill.................................................... 113
Written responses to questions for the record from Representative
Warren Davidson................................................ 116
Written responses to questions for the record from Representative
Young Kim...................................................... 118
Written responses to questions for the record from Representative
Zachary Nunn................................................... 120
Written responses to questions for the record from Representative
Maxine Waters.................................................. 121
Written responses to questions for the record from Representative
Joyce Beatty................................................... 127
Written responses to questions for the record from Representative
Vicente Gonzalez............................................... 128
Evaluating the Financial Crimes Enforcement Network
----------
Tuesday, September 9, 2025
U.S. House of Representatives,
Subcommittee on National Security, Illicit Finance,
and International Financial Institutions,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:09 a.m., in
room 2128, Rayburn House Office Building, Hon. Warren Davidson
[chairman of the subcommittee] presiding.
Present: Representatives Davidson, Hill, Lucas, Sessions,
Barr, Williams of Texas, Kim, Ogles, Nunn, Salazar, Beatty,
Waters, Gottheimer, Vargas, Foster, Casten, Liccardo.
Also present: Representative Tlaib.
Chairman Davidson. The Subcommittee on National Security,
Illicit Finance, and International Financial Institutions will
come to order.
Without objection, the chairman is authorized to declare a
recess of the committee at any time.
This hearing is titled ``Evaluating the Financial Crimes
Enforcement Network.''
Without objection, all members will have five legislative
days within which to submit extraneous materials for inclusion
in the record.
I now recognize myself for 4 minutes for an opening
statement.
OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIRMAN OF THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM OHIO
This is the third hearing with the director of the
Financial Crimes Enforcement Network (FinCEN), as required by
Section 5336(c)(11) of the Corporate Transparency Act.
Today provides a public forum to examine FinCEN's
operations, the troubled status of the Beneficial Ownership
Information reporting regime, the Anti-Money Laundering Act of
2020, and the history and impact of the Bank Secrecy Act.
The goal of this hearing is to assess these tools for
targeted reforms that enhance security without trampling on
privacy and innovation.
This testimony should help Congress assess how these
frameworks target real threats, like terrorist and cartel
financing networks, scam centers, and other illicit finance.
The big question is how they do it all while avoiding
surveillance of law-abiding Americans and small businesses.
The Bank Secrecy Act was enacted in 1970 with a narrow good
intention: to create transparency against organized crime's
infiltration of our financial system.
Over decades, the Bank Secrecy Act (BSA) has morphed into a
bloated surveillance machine demanding endless reports from
banks, businesses, and individuals without delivering
proportional results.
Today, this framework is dangerously outdated, and the
BSA's one-size-fits-all mandates are tying up lots of
resources. Are they being used effectively?
In recent years, the Bank Secrecy Act, Corporate
Transparency Act, and Anti-Money Laundering Act of 2020 have
proven sometimes ineffective, but always cumbersome.
For example, FinCEN's own data shows that from 2014 to 2023
law enforcement agencies only accessed about 5.4 percent of the
millions of currency transaction reports filed under the Bank
Secrecy Act, highlighting how this flood of paperwork buries
real leads in bureaucracy instead of focusing on bad actors.
On the CTA front, we have seen FinCEN issue overbroad rules
that treat every mom-and-pop shop around the country as
potential money launderers, forcing disclosure of personally
identifiable information into a Federal database that is not
well-safeguarded against hacks or misuse. That is not security;
that is an invitation for abuse, and we have witnessed it in
other cases, like Operation Chokepoint.
While millions of American businesses are relieved by
March's delayed enforcement of the Corporate Transparency Act's
Beneficial Ownership Information mandates, they await clear
guidance from FinCEN about what the future looks like.
We appreciate the interim rule, and we are happy to work to
finalize it. We are, in fact, working on a law to cement it.
The market really wants clarity and certainty on where things
are headed.
Meanwhile, true threats--like Chinese fentanyl cartels are
laundering billions through U.S. real estate or Russian
oligarchs sometimes evading sanctions. They slip through
because resources are tied up with collection rather than
analysis.
We need to index outdated Currency Transactions Reports
(CTR) thresholds for inflation. We should codify the full
repeal of CTA's Beneficial Ownership Information mandate on
U.S. businesses and focus it on external threats.
This hearing is our chance to demand accountability.
With that, I yield the balance of my time.
I now recognize the ranking member of the subcommittee,
Mrs. Beatty, for 4 minutes for her opening statement.
OPENING STATEMENT OF HON. JOYCE BEATTY, RANKING MEMBER OF THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
FROM OHIO
Mrs. Beatty. Thank you, Mr. Chairman.
Certainly thank you for being here, Director Gacki.
You are going to have a lot coming at you today as our only
witness sitting up there, and I think you should take that as
because you have so much experience. You have worked through
President Trump's Administration, President Biden's
Administration.
So we are hoping that today's hearing will shed light on
the national security consequences if we cripple your office
and our financial crime programs.
Because one thing I can tell you is that we all are against
corruption. No one wants to be engaged sitting on this
committee by the very nature of the title that my Republican
colleagues have named it.
I am very anxious to hear from you today.
We know that the Financial Crimes Enforcement Network is
small, but it is of vital, vital importance in a bureau at the
Treasury Department that is tasked with protecting our
financial system from traffickers, from money launderers, from
terrorist facilitators, and other bad actors.
To put this work in perspective, let us look, for example,
at something that we have all been engaged with on both sides
of the aisle, and that is illicit fentanyl, that trade that has
devastated our communities over the last decade. I can say--as
well as I am sure our chairman will, because we are both from
Ohio--and what has happened in our districts.
FinCEN follows the money to the origins of these drug
supply chains to disrupt finance streams wherever it can;
hopefully, preventing synthetic opioids like fentanyl from
entering our country.
When my constituents ask me what we are doing in Congress
to stop fentanyl deaths and protect our communities, I tell
them about the important work that we do on this committee to
make it tougher, to make it less profitable for drug
traffickers to conduct their crimes and FinCEN is central to
that effort and thank you.
Given that, Director Gacki, I am proud of the work that we
have done in recent years to bolster our national security and
crack down on financial crime. However, today's hearing, our
first FinCEN oversight hearing since the administrations
change, comes in the wake of a series of dangerous rollbacks in
our illicit finance regulatory framework.
And just to name a few, the Trump Administration has
endeavored to unlawfully eliminate the Consumer Financial
Protection Bureau, the agency responsible for protecting
Americans from fraud and abuse.
The President has changed the way the United States
enforces the Foreign Corrupt Practices Act, which prohibits
Americans from bribing foreign officials.
Perhaps the most alarming of all, Treasury Secretary Scott
Bessent gutted the bipartisan Corporate Transparency Act, which
President Trump signed into law during his first term,
exempting over 99 percent of the companies that Congress
intended the law to cover.
This stunning reversal eliminates a critical new tool for
law enforcement to unmask anonymous shell companies,
effectively making the United States the preferred haven for
money laundering, traffickers, and fraudsters.
Instead of working with Congress to make key reforms to the
law that would ease small business compliance concerns, the
administration chose to directly ignore the law as it was
passed and intended to be implemented by a strong bipartisan
Congress.
Further, these recent actions threaten our national
security, weaken our efforts to fight money laundering and the
finance of terrorism, and give us fewer tools to protect
hardworking Americans.
Good luck today, and we are excited to hear from you.
I yield back.
Chairman Davidson. Thank you.
I now recognize the chairman of the full committee, Mr.
Hill, for 1 minute for an opening statement.
STATMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON
FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS
Chairman Hill. Thank you, Mr. Chairman.
I want to thank FinCEN Director Gacki for joining us today.
It is good to see you. Glad to have you back before the
committee.
FinCEN plays a crucial role in safeguarding our Nation's
financial system from illicit activity. Today's hearing will
give committee members the opportunity to hear from and
question the FinCEN director on the agency's operations,
including the current status, as noted by the ranking member,
of the Beneficial Ownership reporting rule and other efforts to
fight financial crime.
I was pleased to see Treasury's interim rule issued in
March exempting U.S. companies from Beneficial Ownership
reporting requirements. It marks an important step toward
easing regulatory burdens on some 32 million hardworking
American small businesspeople nationwide and I look forward to
learning more about the forthcoming rule.
We will also assess the Bank Secrecy Act's performance over
the past five decades and explore ways to modernize it and
ensure it remains effective in protecting our national
security.
I look forward to the hearing. I yield back.
Chairman Davidson. Thank you, Chairman.
I now recognize the ranking member of the full committee,
Ms. Waters, for 1 minute for an opening statement.
STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
CALIFORNIA
Ms. Waters. Thank you, Chairman Davidson and Ranking Member
Beatty.
While I am pleased to welcome back Director Gacki, I am
disappointed we are not more closely reviewing the Trump
Administration's and congressional Republicans' actions that
weaken America's capacity to stop money laundering and fraud.
Today, American consumers are less protected from fraud and
corruption thanks to Trump's closure of agencies like the
Consumer Financial Protection Bureau.
Today, America is less secure thanks to Trump's firing of
government examiners, investigators, prosecutors, and
inspectors general; and drug and human traffickers will thrive
due to the GOP's gutting of crime-fighting tools like the
Corporate Transparency Act and the Investment Advisers Rule.
If we really want to stop fraud, we should not eliminate
the very government workers who are charged with doing so.
I yield back.
Chairman Davidson. I thank the ranking member.
Today we welcome the testimony of Ms. Andrea Gacki,
director of the Financial Crimes Enforcement Network.
Thank you for taking your time to be here.
You will be recognized for 5 minutes to give an oral
presentation of your testimony. Without objection, your written
statement will be made part of the record.
Ms. Gacki, you are now recognized for 5 minutes for your
oral statement.
STATEMENT OF MS. ANDREA GACKI, DIRECTOR, FINANCIAL CRIMES
ENFORCEMENT NETWORK (FINCEN)
Ms. Gacki. Thank you, Chairman Davidson, Ranking Member
Beatty, Chair Hill, Ranking Member Waters, and distinguished
members of this subcommittee. I thank you for the opportunity
to testify here today on behalf of the Financial Crimes
Enforcement Network, or FinCEN.
I want to say at the outset how much I appreciate the
support of Congress and of this subcommittee in general in our
collective efforts to combat illicit financial activity.
Today I plan to discuss how FinCEN has leveraged our tools
to advance this administration's highest national security and
law enforcement priorities to ultimately protect the lives and
livelihoods of the American people.
First, FinCEN is deploying our resources against a number
of threat priorities, including countering cartels and drug
trafficking, imposing maximum pressure on Iran, fighting child
sexual exploitation, and combating fraud.
In these remarks today, I want to focus a bit on our
efforts to counter cartels and drug trafficking.
In one of his first executive orders, President Trump
established a policy of ensuring the total elimination of
terrorist-designated cartels in the United States.
To implement this policy, this past June, pursuant to the
Fentanyl Sanctions Act, FinCEN identified three Mexico-based
financial institutions as being of primary money laundering
concern in connection with illicit opioid trafficking.
FinCEN also issued alerts to financial institutions
targeting both cash smuggling by Mexico-based transnational
criminal organizations, as well as oil smuggling schemes along
the southwest border associated with Mexico-based cartels.
We also published two comprehensive public financial trend
analyses, one on fentanyl-related illicit finance and one on
the key role of Chinese money-laundering networks to promote
disruption of key vectors of illicit finance and we have
leveraged these publications in public-private partnerships in
the fight against cartel finance.
In June, we convened two FinCEN Exchange events along the
southwest border in Texas focused on combating money movements
associated with drug-trafficking organizations.
This week FinCEN and our Treasury colleagues are convening
here in D.C. a cross-border dialog, together with the
Government of Mexico, the largest Mexican banks, and U.S.
correspondent banks to further efforts to eliminate Mexico-
based drug cartels on both sides of the border.
Next, FinCEN is focused on efforts to streamline regulatory
requirements and reduce industry compliance burdens, including
through further implementation of the Anti-Money Laundering Act
of 2020, so that the Anti-Money Laundering/Combating the
Financing of Terrorism (AML/CFT) regime in the United States is
risk-based and focused on the greatest threats to financial
institutions and to national security.
One key aspect of modernizing the Bank Secrecy Act regime
involves reporting, especially Suspicious Activity Reports, or
SARS, and Currency Transaction Reports, or CTRs.
SARS and CTRs can provide critical information to law
enforcement partners. However, FinCEN recognizes the burden
this reporting imposes on institutions and individuals.
We are currently exploring ways to streamline SARS and CTR
reporting, including by improving the forms, which will be
beneficial for law enforcement and national security data
users, as well as for filers.
To further reduce the regulatory burden on U.S. companies
and U.S. persons, FinCEN modified our approach to Beneficial
Ownership Information, which I look forward to discussing in
this hearing.
FinCEN is reviewing comments on the interim final rule
issued this past March, and we intend to issue a final rule
this upcoming year.
Finally, let me highlight FinCEN's efforts to promote the
administration's goal of supporting the responsible growth and
use of digital assets.
Digital assets, like other financial assets, are subject to
misuse by illicit actors. To unleash the full potential of
digital assets in the United States, certain measures should be
adopted to deter illicit finance and combat financial crime
that targets Americans. Faithfully and expeditiously
implementing the The Guiding and Establishing National
Innovation for U.S. Stablecoins (GENIUS) Act is one of those
measures.
As FinCEN initiates rulemaking efforts necessary to
implement the GENIUS Act's required regulations, we will
continue our ongoing engagements with the digital asset
industry and with law enforcement. We also look forward to
engaging with Financial Services Committee members as Congress
considers further legislation in this area.
Thank you again to this committee for your support and
partnership in combating illicit finance and I look forward to
your questions.
[The prepared statement of Ms. Gacki follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Davidson. Thank you, Director Gacki.
We will now turn to member questions, and I recognize
myself for 5 minutes for questioning.
Director Gacki, in your very thorough opening statement and
written testimony, I appreciate that you highlight your efforts
and the efforts of FinCEN to counter cartels; to counter Iran
and other threats to the United States; to confront human, sex,
child trafficking; to look at scam centers that are exploiting
our seniors in particular; and to modernize your tools that you
are using both internally and also responding to the market in
an era where digital assets have the opportunity to thrive and
people are also finding ways to use those, as they have every
other form of payment, for illicit finance.
Thank you for your work.
I appreciate your openness to some reforms on how to be
more effective in that. I want to highlight one of those, is
the Beneficial Ownership disclosure, because it seems that you
have made a decision, frankly, to focus on collecting
information about U.S. citizens differently than you collect
about noncitizens.
I think that is important because our Constitution limits
the ability to presume that someone is guilty of a crime. You
are supposed to have probable cause and a warrant to get some
information.
Beneficial Ownership, as drafted in the previous
administration, basically assumed every business was engaged in
illicit finance, and they had to provide collected material.
I think it is unconstitutional, but as the courts fight
this out, you have stepped in. So could you give us an update
on progress toward that and what issues would be helpful for
Congress to clarify?
Ms. Gacki. Thank you, Chair Davidson, for your question. I
also wanted to recognize the letter that you and other Members
and Senators sent to Secretary Bessent yesterday on the
Corporate Transparency Act and the way forward and wanted to
stress that the March 2025 interim final rule that FinCEN
issued took a different approach consistent with administration
priorities.
As a career civil servant, I have served across
administrations and am proud of my track record in implementing
Presidential policy. The Presidential policy changed with
respect to the Corporate Transparency Act, focusing and making
sure that the burdens on 30-plus million small businesses were
taken into account.
So FinCEN adjusted the reporting structure for the interim
final rule in this past March and opened it up for questions.
The present rule requires reports from foreign reporting
companies that are not subject to any exemptions, and they are
required only to report foreign beneficial owners.
We intend to finalize this rule in the upcoming year. That
is our public commitment. We are working through
administration, making sure we have administration guidance,
and working through the number of comments that we received to
the interim final rule.
Along with the resolution of the rule, we intend to resolve
questions around the data that we gained and dispose of data
that is no longer legally required to be filed.
So we look forward to concluding that this year.
Chairman Davidson. Thank you. I will ask, without
objection, unanimous consent to submit the letter that I sent
to Secretary Bessent and others as addressed.
[The information referred to can be found in the appendix
on page 46.]
Thank you for addressing that and look forward to your
answer and working with you to get the law to match what the
administration's intent is. I appreciate your effort and
FinCEN's efforts to align there.
I would also like to ask unanimous consent, without
objection, to submit for the record a press release from the
Judiciary Committee on fraud. It is titled ``Fraud on ActBlue:
New Report Details Potential Illegal Activity on the Democrat
Fundraising Platform,'' from April 2, 2025.
[The information referred to can be found in the appendix
on page 57.]
This is an example of financial crime where people are
being attributed to have given substantial sums of money, and
then when they are interviewed, they do not even have that kind
of money. They are not giving it. The question is, where is
that money coming from?
Can you comment on that ongoing investigation?
Ms. Gacki. Thank you, Chair Davidson.
I know that my team is actively working with Members in
Congress to review our data to ensure that we are providing up-
to-date information on that ongoing investigation----
Chairman Davidson. Are you working with the Department of
Justice on it?
Ms. Gacki. We are working with congressional oversight
committees looking at the----
Chairman Davidson. So at this point DOJ is inactive?
Ms. Gacki. I am sorry. I do not have--I do not know the
status of DOJ's----
Chairman Davidson. But they are not active with FinCEN?
Ms. Gacki. Well, DOJ has access to our data.
Chairman Davidson. Direct?
Ms. Gacki. And they are able to view it, consistent with
the protections we have in place, and I defer to them on their
investigation.
Chairman Davidson. Thank you.
My time has expired. I now recognize the ranking member of
the subcommittee, Mrs. Beatty from Ohio, for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman.
Thank you for that response to the chairman's last question
about the investigation with ActBlue. We know investigations,
whether it is ActBlue or the Epstein files, go both ways with
what we are looking at and what we read in articles. I note
that we are moving forward to looking at the Epstein files as
well but that is an aside.
Let me say thank you again because last year I had the
distinct honor of having you in my district with former Under
Secretary Nelson for our small business information session on
the Beneficial Ownership Rule. At that event we talked at great
length about how critical this information is to law
enforcement, and many of them were present in our AML/CFT
regime.
Let us fast forward to March of this year, and the Trump
Administration has done a total about-face, violating the clear
intent of the Congress to include domestic companies that are
not otherwise exempt from the law. In my opinion, they were
included because, in fact, there had been crime with the
domestic companies.
Director Gacki, we applaud you for working across all
lines, but my question is, do you still agree that domestic
companies could present a money-laundering risk?
Ms. Gacki. Ranking Member Beatty, thank you so much for
that excellent question.
I want to thank you for welcoming me to your district last
year. It was a terrific experience to get to interact with your
constituents.
I do want to step back and reiterate that, as a career
civil servant working across administrations, I will implement
the policy of the administration as it applies to Beneficial
Ownership Information.
I would say the current administration has taken a look at
the reporting structure and assessed that the burdens on small
business fell too greatly and needed to be alleviated, and that
is what FinCEN did through the interim final rule.
However, as you point out, there are still instances where
domestic shell companies can be leveraged in financial crime
and there I can point to other sources of information that can
help law enforcement if the Beneficial Ownership Information
regime is not being used.
For example, FinCEN's Customer Due Diligence Rule on
financial institutions does require a collection of information
at the point at which accounts are opened, and financial
transactions and financial accounts are usually critical to all
forms of shell companies in the United States.
That being said, we will be carefully reviewing the
responses to our interim final rule to see if any adjustments
need to take place. As this is an ongoing, open rulemaking, I
cannot discuss the ultimate resolution of that, but we look
forward to reviewing all comments on all sides of the
Beneficial Ownership issue.
Mrs. Beatty. Thank you.
Then let me make this comment, and I will phrase it versus
in a question to what I believe.
I believe that it is accurate to say that the Treasury's
recent decision to exclude domestic reporting companies from
enforcement exempts the vast majority, I believe roughly 99
percent of covered entities, from the reporting rule.
Also, I believe that, therefore, this decision to exempt
U.S. companies makes it easier for fentanyl traffickers and
other criminals to launder money through the United States,
endangering the safety of our constituents.
Do not want to put you on the spot. There are many who
believe that. We have records to show from drug trafficking
coming into Ohio and across many of our highways.
So let me just say that I am going to continue to be an
advocate against illicit crimes. If that means us doing due
diligence of asking for information about who owns a business--
I am a business owner--you would have no reason in supplying
the information.
I suggest to some of my colleagues, if they pull up the
form and look at the questions that are being asked, they
appear to me to be standard questions that any business doing
good business, legal business, should want to do.
Thank you. I yield back.
Chairman Davidson. Thank you.
Ms. Gacki. Thank you.
Chairman Davidson. I thank the ranking member.
The gentleman from Arkansas, the chairman of the full
committee, Mr. Hill, is now recognized for 5 minutes.
Chairman Hill. Thank you, Chairman.
Both before and after the passage of the Corporate
Transparency Act back in 2021, I spent a lot of time advocating
for alternatives to the rulemaking that was taken, even the
statutory language that the Congress agreed to in a National
Defense Authorization Act (NDAA) amendment. That includes
debating vigorously with former Ways and Means Chair Brady and
former Treasury Secretary Mnuchin.
I have advocated for is not there a better way, instead of
creating a new database that can be breached, hacked,
collecting more information that can only be filed online for
32 million small businesses? Every heating and cooling owner
out there with a truck and three employees is going to be
captured by this, for example.
While, as I noted in my opening comments, the March interim
rule was helpful, I think there is a better way, which is
simply using the existing Form 1065, which every pass-through
entity has to file, and the resulting K-1s that are issued.
Let me say in front of the whole committee, why was that
not treated as a real possibility, number one? The Ways and
Means Committee and the Treasury said: We just do not want any
more exceptions to sharing IRS data. Well, there are 35 or so
now.
If this is such a national security essential element, why
would this not be a worthy additional sharing?
Under CTA companies are required to report four key pieces
of information--full legal name, date of birth, current
address, and a unique identifier.
Of course, that is all available, except for the birth
date, which I think we can figure out. I believe we have open-
source data on everybody's birthday. We will refer the FinCEN
to Facebook for that, if you need help on that but I really
think that this is a better approach. You do not have to
express an opinion on it. You are implementing the law. I got
it but I think this is a good opportunity to illustrate we
never, ever really tried to minimize the cost of 32 million
people.
Would you not agree, though, that this would be an easier
way to use data that the Federal Government already has legal
access to?
Ms. Gacki. Chair Hill, thank you so much for that question
and those excellent points and I appreciate your focus on this
issue.
I think that the idea that the congressional and executive
branches should look at existing pools of data and determine
how best to use those in the first instance is very well-taken.
I look forward to working with Treasury leadership on this
particular issue to explore whether this is a possibility.
Chairman Hill. Thank you for that.
Let me switch subjects to the important one of Geographic
Targeting Orders, which has been actually a big successful
strategy of FinCEN for many decades and was actually tackling
the issue of shell companies and people hiding assets but there
has been a recent change, which is that there is a new
nationwide rule as opposed to limited geography, requiring real
estate professionals to report all nonfinance purchase of real
estate. According to FinCEN's estimates, the real estate
industry is expected to bear over $630 million in compliance
costs or about $600 per report filed based on some 850,000
transactions a year.
Based on our years of experience with geographic targeting,
what is your--how do you justify that cost related to the
actual crime--I mean, law enforcement goals being objected--
obtained, I should say?
Ms. Gacki. Thank you, Chair Hill.
I think to the point we have been--FinCEN has been issuing,
using the tool of the Geographic Targeting Order for 10 years
across administrations, to seek information on shell companies,
entity--legal entities purchasing real estate in a nonfinanced
way.
The thing about the Geographic Targeting Order is it is a
temporary measure that can only be renewed if there is a law
enforcement need for that information. Over 10 years, we have
seen an incredible thirst among law enforcement for this
information and this information being used in active and
successful law enforcement prosecutions.
That drove the decision to make what was a temporary
measure into a permanent measure widely applicable to be the
Residential Real Estate Rule, which is scheduled to come into
effect in December 2025.
We do think the benefits of this data----
Chairman Hill. If you could provide me with some of that
information in writing, and then also the results of the law
enforcement successes in the past decade, that would be
helpful.
I yield back, Mr. Chairman.
Chairman Davidson. Thank you, Chairman.
The gentlewoman from California, the ranking member of the
full committee, Ms. Waters, is now recognized for 5 minutes.
Ms. Waters. Thank you very much.
Director Gacki, last month your agency, FinCEN, sounded the
alarm on Chinese money-laundering networks. In more than a
dozen examples you warned that these organizations use U.S. and
foreign corporate structures to hide, launder money, park
assets, and repatriate the illicit funds from criminal
activities, including human trafficking and smuggling across
and beyond the southwest border.
Yes or no, was Under Secretary of Treasury for Terrorism
and Financial Intelligence John F. Hurley--John K. Hurley--
correct when he stated on the documents release that the
Chinese money-laundering network enabled cartels to, quote,
poison Americans with fentanyl, conduct human trafficking, and
wreak havoc among communities across our great Nation?
Ms. Gacki. Yes, ma'am. Under Secretary Hurley said that
question--said that statement.
We have seen Chinese money-laundering networks to be a
prevalent form of money laundering that are increasingly being
leveraged by cartels to facilitate narcotics trafficking.
It is a way--it is leveraging--it is taking advantage of
laws, both in Mexico and in the People's Republic of China,
against funds flows out of those countries or into those
countries of U.S. dollars and there is an informal
decentralized network being leveraged by cartels to launder the
sums being used to export narcotics and other drugs to the
United States.
Ms. Waters. Thank you for that.
I want to move on to some work that I have been doing on
the Caribbean on de-risking.
In 2023, as required by the Anti-Money Laundering Act of
2020, the Treasury Department released its U.S. Government-wide
de-risking strategy.
Having worked for years with those most heavily impacted by
de-risking, including many Caribbean nations and territories
that are effectively cutoff from the international banking
community, I was pleased to see the release of this strategy.
Its importance was underscored at a 2022 hearing that I
chaired where Prime Minister Mia Amor Mottley of Barbados gave
historic testimony about the negative effects of de-risking on
the people and businesses in the region.
The Treasury strategy recommended several follow up
actions, including a joint study by the Federal banking agency
and FinCEN, revision of money service business oversight
standards, and improvement of international cooperation.
Can you please elaborate on what exactly FinCEN and partner
Treasury offices have done to pursue the steps laid out in the
strategy? What does your agency have planned for the next year
related to de-risking, especially in the Caribbean region,
especially related to access to correspondent banking service?
Ms. Gacki. Ranking Member Waters, thank you for that
question and for your longstanding interest in this issue.
I want to assure you that, since the President issued an
executive order this past August guaranteeing fair banking for
all Americans, Treasury is working to implement the President's
executive order to guarantee that for all Americans.
Beyond that, for many years FinCEN has noted that its
policies should not equate to the de-risking of populations. So
I want to focus on FinCEN's work here. In the broader--on the
broader Treasury response to de-risking, I look forward to
getting back to you and your staff on that.
As FinCEN noticed in a statement on customer due diligence
issued by FinCEN and the Federal banking agencies, banks that
operate in compliance with their Bank Secrecy Act obligations
and effectively mitigate and manage their illicit finance risks
are not prohibited or discouraged from providing banking
customers of any specific class or type.
I look forward to working with our Federal banking agency
colleagues to further clarify that as needed.
Ms. Waters. Thank you.
I am just interested in follow up to see if changes should
be made based on long-time policy, what kind of factual
information is being used in examining this de-risking issue.
I yield back.
Ms. Gacki. We will get back to you on that.
Chairman Davidson. I thank the ranking member.
The gentleman from Oklahoma, the chairman of the Monetary
Policy Task Force, Mr. Lucas, is recognized for 5 minutes.
Mr. Lucas. Thank you for holding this hearing, Mr.
Chairman.
Thank you, Director Gacki, for testifying today.
Director Gacki, fraud in our financial service system
continues to be one of the top burdens facing my home State.
Can you detail FinCEN's approach to dealing with this
problem? The folks back home want to see some more progress.
Ms. Gacki. Thank you, Representative Lucas.
This is a huge issue for us at FinCEN and across the
Treasury Department. In fact, in many money-laundering risk
assessments facing the United States, fraud is the crime--is
the highest revenue-generating crime that features money
laundering, and this has been proven time and again, and it is
growing at an exorbitant pace.
FinCEN is--this is one of the key areas that FinCEN is
dedicated to and let me outline a few things we are doing on
this.
First, we are trying to educate financial institutions as
to markers of fraud so that they can be on the front end
deterring this and stopping this. We have issued financial
trend analyses, for example, on elder financial exploitation. A
few--just earlier this past summer, we issued an alert on the
abuse of basically convertible virtual currency kiosks and how
they can be used in any financial exploitation.
Just yesterday, we issued an alert on the troubling pattern
of sextortion, a very specific type of fraud.
Not only are we focused on different fraud typologies and
making sure financial institutions are tracking that, but we
are also actively working on repatriating funds that are taken
by means of fraud.
FinCEN has an active program called the Rapid Response
Program that focuses on the fraud typology of business email
compromise, and we work closely with the Federal Bureau of
Investigation (FBI), Secret Service, and Internal Revenue
Service (IRS) Criminal Investigations where we can work through
international counterparts to freeze or repatriate funds taken
from Americans and brought overseas.
Since the inception of that program, we have repatriated
over a billion dollars, and this is an incredible program that
we look forward to building and developing to bring really
meaningful action to ordinary Americans.
Finally, I just want to note the day-to-day, everyday case
support we do for fraud investigations across the United States
at every level of law enforcement--State, local, Federal--to
make sure that Americans are getting the help they need to stop
these vectors of fraud.
Mr. Lucas. Director, I would like to follow up on that
question.
Part of the problem seems to be that FinCEN is overwhelmed
with data, sometimes immaterial data that dilutes the helpful
information the agency could use.
Have you considered focusing reporting obligations so that
FinCEN only receives relevant information for law enforcement
investigations?
Ms. Gacki. Thank you, Representative Lucas.
Yes, and this is, I think, a broader part of modernizing
the Bank Secrecy Act regime, and very much one key element of
that is making sure that financial institutions, AML/CFT
programs, are consistent with the law, that they are effective
and risk-based, and that they are producing information that is
valid to law enforcement.
We are in the midst of a Treasury-wide exploration of how
to reform the Bank Secrecy Act regime in the United States, and
one part of that--a key part of that--is reporting, including
Suspicious Activity Reports and Currency Transaction Reports.
We should be collecting information that is truly important
to law enforcement and national security and to the extent that
requires adjustments of the types of information that we ask
for, to simplify the forms in the thresholds, we are actively
exploring that and hoping to bring it to conclusion as soon as
possible.
Mr. Lucas. Let me simply note that it looks as though
FinCEN has increased the administrative burdens of small
business and credit providers, in many ways without seeing
results, which simply suggests that a targeted approach might
allow for better outcomes and a more enthusiastic support from
the providers of that information.
With that, I yield back, Mr. Chairman.
Chairman Davidson. Thank you, Chairman.
The gentleman from California, who is the ranking member of
the Monetary Policy Task Force, Mr. Vargas, is now recognized
for 5 minutes.
Mr. Vargas. Thank you very much, Mr. Chairman. Again, I
want to thank you for conducting this hearing and thanking the
ranking member and, of course, the director.
Mr. Chairman, at the beginning you talked about the
surveillance machine. It really caught my attention because I
think that generally falls within the perspective or ideology
of a lot of my friends on the Republican side that government
should be limited, that we should not have the intrusion of
government in our private lives, that there has to be a
balance.
I normally fall on the side of saying government is
generally good and I am very supportive of government in
general.
I have to say, it has been fascinating to see under this
administration how incredibly intrusive the government has
grown, not only into our private lives, but interestingly now,
into business.
I mean, we see government now taking positions in
individual companies. That used to be called socialism. That
used to be called entities owned by the government. I
understand. We have Government-Sponsored Enterprises (GSEs).
These are private companies that Congress created to make sure
that there was liquidity in the secondary mortgage market and
there is stuff like that.
Taking positions, picking losers, picking winners has
normally not been the ideology of the Republicans. Yet you see
that in this administration, and you do not see much talk about
it on the other side, saying, wait a minute.
If the Democrats had done this, the Democrats had put all
this surveillance on the streets, what we see now, the
militarization that we see, there would have been, of course,
people screaming left and right because of the intrusion of
government into our lives. I understand that but we do not see
it now.
Again, I caution you because there will be a time when the
government flips, and you will say, well, wait a minute, you
cannot do this. Well, we will remind you that you did not say
anything when the Trump Administration did it and it really is
sad to see.
Again, I am not one that is against government. I think
government generally does a good job, but I have always admired
the Republicans, really starting with Reagan, saying there
should be some limit here as to the intrusion that government
has in our lives.
You have seen the creep become a race now, not a creep. It
is incredible the way this administration has really put the
Federal Government into our lives.
Now, even going to the airport, they take all of this
information, biometric information. I do not know what they do
with it.
Maybe you do, Director. I do not know. Someone must know.
All that being said, I do want to talk about elder abuse.
You spoke about it a little bit, but I do want to get into it a
little bit more.
You did say in April 2024, you published a financial trend
analysis looking at the patterns and data of the elder
financial exploitation according to this analysis.
Between June 2022 and June 2023, FinCEN received more than
155,000 elder financial exploitation reports associated with
more than $27 billion in reported suspicious activity. The
filings show that scams accounted for 80 percent of the
reported elder financial exploitation activity.
What role does FinCEN play in addressing this financial
exploitation against elder adults, older adults?
Ms. Gacki. Thank you, Representative Vargas.
Yes. So the financial trend analysis on elder financial
exploitation and different guidance processes--guidance
products that we have issued ask filers, financial
institutions, to use those as guideposts to provide us with
financial intelligence that law enforcement can action to
actually go after those perpetrators of fraud against our
elderly population.
So not only does FinCEN play a role at educating financial
institutions as to what to look for so we get high-quality
financial intelligence, but we also actively support law
enforcement.
Mr. Vargas. So how do you use AI, if you do? Because I know
my time is going to run out. How do you use AI to do this?
Ms. Gacki. So there is a--of course, it is an
administration priority to incorporate the use of artificial
intelligence tools to analyze data and FinCEN, like other
Federal Government agencies, is exploring that.
We do use advanced artificial intelligence products in
terms of machine learning and other data analytics because
FinCEN does collect and protect a large amount of data in order
to truly support law enforcement with the highest quality
information.
Mr. Vargas. My time has expired but thank you.
Thank you. I yield back.
Chairman Davidson. Thank you, Mr. Vargas.
I would like to recognize the gentleman from Texas, Mr.
Sessions, for 5 minutes.
Mr. Sessions. Thank you very much, Ms. Gacki. I appreciate
you being here.
I would like to ask for your help in helping me work
through not the entirety, but what you have discussed here
today about cartels, movement of money, but directly related to
what are called anti-laundering regulations for residential
real estate transfers.
Can you talk with me about that, the need for that
information? I am old enough where I have run across people
asking for information when I pay cash for things, and they
were very specific of things that they wanted that were
personal to me and not part of the transaction.
Can you talk with me about that part of what FinCEN has
done?
Ms. Gacki. Absolutely. Thank you, Representative Sessions,
for that question.
For the past 10 years, at the request of law enforcement,
FinCEN has sought, through use of a temporary measure, the
Geographic Targeting Order, information on nonfinanced, all-
cash purchases of real estate if they are done not by an
individual but by a shell company.
So just two important caveats there. These are not
financed--there is no mortgage lender involved at all, no
financial institution.
Mr. Sessions. So nothing about what you have done would get
in the process of an individual buying property on a cash
basis?
Ms. Gacki. That is right. The residential real estate rule,
which makes permanent the temporary measure of the Geographic
Targeting Order, is focused on entities, legal entities, that
are doing this purchasing and seek reporting on those and there
are exceptions to those, too.
For example, if the disposition of a property, for example,
is by court order--it could be a settlement of an estate or
something--that would not be covered by our rule.
I would be happy to work with your team to----
Mr. Sessions. No. I am the one that has got the problem
with it, not my team.
Specifically, what happened is when I went to file for a
loan, they requested information that I considered private and
extraneous to that information, but they wanted personal,
private data and information.
So I moved into--just to use cash instead of providing what
I considered to be unprofessional asking of personal data.
So you are telling me there is nothing--I would not be
caught up in that, you would not be looking at that, only where
there is a shell company that is considered a shell attempting
to purchase real estate?
Ms. Gacki. That is correct, Mr. Sessions. It is a rule that
is looking to pierce who are the real people behind the shell
company is making cash purchases of real estate, not
individuals.
Mr. Sessions. Good. Well, I would reiterate, I had not
talked to the chairman about this, but in listening to the
chairman about data and information that is being held by you
or any other government really, anybody, that is subject to
being stolen by people.
What is the retention period that you generally have on
issues that may have been in the past where you had completed
the investigation? What do you do with that data and what is
the timeframe that you would keep it? Is there a retention
period?
Ms. Gacki. Thank you, Mr. Sessions.
So our--the information that we hold that is filed by--
under the Bank Secrecy Act that FinCEN collects, disseminates,
protects is held at the highest level of data protection for
nonclassified systems in the U.S. Government.
In terms of a retention period, this is something----
Mr. Sessions. Where is that in the United States
Government?
Ms. Gacki. Excuse me? Where are the data or the rules?
Mr. Sessions. You said it is being held by the--at the
highest security. Well, obviously, Social Security is high
also, and those files are purged.
If you could please have your staff get back to me in a
detailed fashion and tell me about the retention of data, not
in an active investigation, but some that may have been--that
would have been completed or that was requested and not needed,
what that retention is, where it goes, and how long it has been
kept.
Ms. Gacki. Absolutely, sir.
Mr. Sessions. I would appreciate that.
When do you anticipate that you would provide that?
Ms. Gacki. Sir, we will get that to you in the next few
weeks.
Mr. Sessions. Good. Thank you very much.
Mr. Chairman, I want to thank you for holding this and I
thank Ms. Gacki for taking time to be here to help me clear up
a question that I had.
I yield back my time.
Chairman Davidson. Thank you.
The gentleman from California, Mr. Liccardo, is now
recognized for 5 minutes.
Mr. Liccardo. Thank you, Mr. Chair.
I want to thank you and your team, Director Gacki, for the
really important work that FinCEN does.
I was a Federal prosecutor many years ago and relied
frequently on the great work of FinCEN as we were prosecuting
narcotrafficking at the border.
In particular, we are seeing more and more of the illegal
transactions relating to money laundering occurring in crypto,
as well as fraud. I commend you and your team for the work that
you have recently done on convertible virtual currency kiosks,
or crypto ATMs, which I know has been a particular source for
FinCEN and a lot of law enforcement.
In your August statement, you acknowledged that there is
rising fraud in cybercrime and drug trafficking through these
kiosks.
I presume that the concern arises because of the
pseudonymity that relates to crypto transactions. Is that
right? It is difficult often for people to identify who exactly
is doing the transacting?
Ms. Gacki. Thank you, Representative Liccardo, for that
question.
I think there--I do--yes, there can be some anonymity-
enhancing aspects to convertible virtual currency.
I do know that our team works very closely and uses
blockchain analytic tools in order to be able to aid
investigations to ensure that does not remain a barrier and to
put out guidance for financial institutions to be alert to any
aspects of the misuse of these types of tools.
Mr. Liccardo. Particularly with the use of mixers and other
tools, criminals are able to evade even some of the more
sophisticated detection techniques in terms of identifying
them. Is that right?
Ms. Gacki. Yes, sir.
Now, mixers are something that we are currently taking a
look at. We issued a proposed rule on mixers in the previous
administration and are exploring the next step on that.
We have to take a look at the fact that--we have to make
sure that we tailor any approach here to be really directed at
illicit activity and that we are not sweeping in any legitimate
transactions.
Mr. Liccardo. Sure.
Ms. Gacki. And are trying to leverage these tools to, for
example, shield their transactions from repressive regimes.
Mr. Liccardo. Sure.
Ms. Gacki. It is a delicate thing. We have to work through
administration guidance, and I look forward to engaging with
you on it.
Mr. Liccardo. I recognize that there is legislation
pending, the CLARITY Act, in which we are looking to impose BSA
requirements to help you do your job and law enforcement do
your job with regard to centralized exchanges. Of course, there
is also decentralized finance, DeFi, where there are no such
requirements.
How exactly are you able to do your job when millions of
dollars may be moving through DeFi, particularly given recent
studies that showed as recently as January that 91 percent of
fraud and theft that was occurring in the 1,100 cases that were
examined under this study, 91 percent was happening on DeFi
protocols? What exactly--what tools do you have left?
Ms. Gacki. Thank you, Representative.
This is something that we are actively working on, not just
in implementing different reporting and different exploratory
subjects set forth in the GENIUS Act, of which FinCEN is a
critical implementer, but also outcomes from the President's
Working Group on Digital Assets and the report there.
So looking at DeFi, looking at the appropriate requirements
for--Bank Secrecy Act requirements for that industry--is
something that my agency is taking on, and we look forward to
working with both industry and law enforcement to make sure we
are striking the right balance.
Mr. Liccardo. Perhaps I can just, given my limited time,
identify my big concern.
Right now your agency, through its rulemaking, has decided
that it would not collect Beneficial Ownership Information from
U.S. corporations or U.S. persons. All that is required to
satisfy those standard Beneficial Ownership Information
requests is the name, date of birth, residential street
address, and the ID from your driver's license. That is all
that is required.
We know that U.S. companies--shell companies--can be
created to move millions of dollars, billions of dollars
through these illicit channels using DeFi. You will not be able
to identify, nobody will identify who these folks are because
we do not have beneficial ownership information (BOI)
requirements, and you do not have any mechanism for identifying
who they are on DeFi protocols.
Chairman Davidson. The gentleman's time is----
Mr. Liccardo. Does not this create an enormous opportunity
for criminals?
Chairman Davidson. The gentleman's time has expired. I
would encourage follow up in writing as we will have additional
questions submitted for the record.
I would like to recognize the gentleman from Texas, who is
also the chairman of the Small Business Committee, Mr.
Williams, for 5 minutes.
Mr. Williams of Texas. Thank you, Mr. Chairman.
Thank you for being here today.
FinCEN's Beneficial Ownership reporting regime created a
compliance nightmare for small business owners in my home State
of Texas and across the Nation.
While I was pleased to see that Treasury was issuing an
interim final rule that would require only foreign companies to
report their BOI to FinCEN, I am still concerned about the data
on domestic small businesses that were collected before the
change in reporting requirements.
By holding on to this data, FinCEN has created unnecessary
privacy and security risks for millions of small businesses
across this great country.
So, Director Gacki, will you commit to deleting the
Beneficial Ownership Information of business owners who are no
longer required to file with FinCEN?
Ms. Gacki. Representative Williams, thank you so much for
that question.
With the interim final rule that was issued in March, as
you noted, FinCEN has readjusted the requirements for filing to
really put the obligations only on foreign reporting companies
and only to the extent they have foreign beneficial owners.
We are in the process of reviewing the comments to that
rule and we expect to make that rule final this calendar year.
With the finalization of that rule, we expect to resolve
any data questions involving the data that we have and it is
our intention, along with resolution and finalization of that
rule, to delete any information that was filed that is no
longer required to be filed that is currently being protected
at FinCEN.
Mr. Williams of Texas. Thank you.
I want to shift gears and discuss the residential real
estate transfer rule.
This rule requires that certain businesses involved in real
estate closings and settlements to collect and report
Beneficial Ownership Information nationwide.
In practice, more than 800,000 individuals would be
required to file reports, resulting in over 4 million hours of
compliance work. The estimated cost of this burden is an
astonishing $630 million, according to some of FinCEN's
estimates. These compliance costs will inevitably raise the
price of purchasing a home, making it even harder for families
to achieve the American dream of ownership.
So, Director, again, given this rule raises compliance
hours and costs at an alarming level, is FinCEN considering
delaying this rule and properly rescoping it in a way that it
does not create so much regulatory burden on small business?
Ms. Gacki. Representative Williams, thank you again for
that excellent question.
We believe that the residential real estate rule puts in
place what had been a temporary measure across 10 years of
collecting information from shell companies making nonfinance
purchases of real estate that has been incredibly beneficial to
law enforcement. We have renewed that Geographic Targeting
Order across administrations based on the strength of the
reporting of the information and how vital it is for law
enforcement.
We believe that the benefits to the United States and to
Americans in gaining this information is critical and justifies
the expense of the residential real estate rule.
In fact, we believe that ensuring that shell companies
purchasing financial--purchasing residential real estate in a
way that has not been detected can actually skew home prices,
which is another justification for why this rule is--we believe
is justified. We do expect--we are planning for it to come into
effect in December.
Mr. Williams of Texas. Okay. Last question really quick.
The residential real estate transfers rule, like the
Beneficial Ownership reporting requirements, will affect a
large number of small businesses.
As we saw for the Beneficial Ownership Information
reporting requirements, millions of small businesses in the
United States were largely unaware that they had to comply and
were even unaware of the existence of FinCEN.
My concern is that similar as before, small businesses,
like title companies, will not be educated on those
requirements and unfairly punished for something they are
unfamiliar with.
So, Director, quickly, this new residential rule shifts a
heavy burden on title companies, many of which are small
businesses, and given the complexity of the rule, what has
FinCEN done to educate and prepare these companies and has
FinCEN engaged directly with title professionals and issued any
public guidance to help them understand and comply?
Ms. Gacki. Thank you, Representative Williams, and thank
you for another excellent question.
We have been working with title companies on education, but
if we determine that more time is needed for them to be able to
implement this rule, we will certainly explore methods and ways
to give them that additional time to ensure a responsible
implementation of this rule.
Mr. Williams of Texas. Thank you very much. I yield my time
back.
Chairman Davidson. Thank you, Mr. Williams.
I now recognize the gentleman from Kentucky, Mr. Barr, who
is also the chairman of the Subcommittee on Financial
Institutions, for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman.
Director Gacki, thank you for your service.
FinCEN is responsible for issuing guidance for section
314(b) of the Patriot Act which allows financial institutions
to share information with one another regarding activities that
may involve money laundering or terrorism.
Only 3,626 banks out of the approximately 9,148 banks and
credit unions nationwide are actually registered to share
information, and in the Commonwealth of Kentucky only 47
financial institutions out of 178 participate in 314(b) data
sharing.
Director Gacki, I have heard from community banks in
Kentucky that there is a lack of clarity with the current
guidance on the safe harbor on what is permissible to share.
If FinCEN's guidance better outlined what data is covered
under the safe harbor and promoted more fraud information
sharing, it is likely more institutions would participate.
What is FinCEN doing to increase the uptake in this data
sharing?
Ms. Gacki. Representative Barr, thank you for that
excellent question.
The 314(b) program is an important one for FinCEN, and we
want to ensure that financial institutions are leveraging the
information-sharing potential involved in that.
To the extent your banks in Kentucky or banks elsewhere are
asking for greater clarity on the safe harbor, I can commit
that it is something we will look into and explore providing
it.
This is something that we use our FinCEN Exchange events to
ensure is well understood, but if greater guidance is needed
here, I will certainly look into it.
Mr. Barr. Thank you very much for your attention to that
concern.
Also, if there is one complaint or concern that community
financial institutions raise with me, it is the prevalence and
increased prevalence of fraud in our financial system.
You noted in your written testimony that cyber-enabled
fraud remains elevated and increased reports of fraud and
cybercrime, we are seeing upticks in that reporting every
single year. Elder financial exploitation, government benefits
fraud, digital asset investment scams, account takeover
attacks, AI-enabled fraud. So lots of theft.
You have talked a little bit about this in your testimony,
but can you amplify FinCEN's focus on this and how you can help
financial institutions that want to do right by their customers
and limit their exposure to fraud?
Ms. Gacki. Absolutely, Representative Barr.
So I think making sure that financial institutions have the
tools they need to help detect it, whether through alerts,
advisories, financial trend analyses, through Exchange events
where we bring law enforcement together with financial
institutions and public-private events to ensure that there is
a direct communication to act as that critical juncture between
law enforcement and banks of all sizes, financial institutions
of all sizes, to ensure their data--that they are looking for
what law enforcement needs and helping protect their customers
and in turn the American people. That is absolutely something.
I should also note that another thing that FinCEN does is
we also have our own targeting authority through special
measures to look at foreign actors of primary money laundering
concern that are engaging in fraudulent activity.
We took one action this past year against Huione Group
based in Cambodia which was being used as a vector for elder
financial exploitation, for pig butchering, and the like. We
issued a notice of proposed rule that we hope to make final
soon.
That was a way in which we could look at a critical
external node for fraud and stop it and help financial
institutions detect it in their own systems.
Mr. Barr. Thank you.
My final time, there is a narrative that and critics of the
innovation in crypto and digital assets that the movement of
transactions to the blockchain creates additional fraud risks
and risks for criminal activity.
Can you share FinCEN's views on how the movement of
transactions to the blockchain actually could assist in law
enforcement in preventing fraud, criminal activity, money
laundering, and the like?
Ms. Gacki. Thank you, Representative Barr. I know that I
have very little time.
I can tell you that, yes, the blockchain actually brings
transparency, and with the right tools you can use it to
leverage, to really help detect illicit transactions for law
enforcement and I am happy to engage with you.
Mr. Barr. Thank you. I yield back.
Ms. Gacki. Thank you.
Chairman Davidson. Thank you, Mr. Barr.
The gentlewoman from California, Mrs. Kim, is now
recognized for 5 minutes.
Mrs. Kim. Thank you, Chairman Davidson.
I want to thank Ms. Gacki for joining us today.
Last year FinCEN finalized the residential real estate
transfer rulemaking that required title insurers to provide
FinCEN with the names of the individuals who purchased a home
valued more than $300,000 in southern California and utilized
certain forms of payment.
I wanted to know, in southern California, especially in
Orange County where I represent, the medium home price there is
over $900,000, almost a million, and that placed a high burden
on many of my constituents who own small family run title
insurance companies.
In FinCEN's economic analysis of the residential real
estate reporting rule, they estimate that the first year
compliance cost could reach close to $560 million.
Can you talk about how FinCEN would tailor your approach to
this issue, so California's small businesses are not unfairly
burdened by duplicative or low-value reporting requirements?
Ms. Gacki. Thank you, Representative Kim, for that
question.
We are working very closely in the implementation of the
residential real estate rule with organizations that represent
title companies to ensure that the requirements are well
understood and that they are implemented in as cost-effective
and efficient manner as possible. To ensure that small
businesses, like the title companies in southern California,
have adequate resources and knowledge to implement this is
certainly something we will explore to ensure they have enough
time and resources.
Mrs. Kim. In your earlier exchange with my colleagues, you
talked about GTO, Geographic Targeting Orders. You said that it
is a temporary tool that is used by law enforcement and the
success of it made it permanent but the comments and the
feedback that I am hearing from my constituents about that are
that there is such little understanding about how that
information that FinCEN is collecting is actually helpful.
So can you talk about how FinCEN is utilizing the data from
the real estate GTO?
Ms. Gacki. Absolutely. Thank you, Representative Kim.
So the data is made available and accessible to law
enforcement users at local, State, Federal, and national
security professionals across the country.
We have almost 25,000 law enforcement users across 400
different agencies in the United States at all levels accessing
this information.
This provides critical tip and lead information that has
proven vital to successful prosecutions for crimes such as
narcotics trafficking, to include fentanyl, for fraud, for
terrorist-related actions across the country.
I would be happy to give you more specific details in a
follow up conversation.
Mrs. Kim. All right. Let us talk about that.
The residential real estate rule, once again, places much
of the reporting responsibility on title companies, and there
are over 90 percent of the companies being small businesses.
I want to ask you what steps you are using. I know it was
already discussed regarding the education, regarding preparing
the industry for that complex rule. You did say FinCEN is doing
your best to educate the industry.
I would like to take you up on that offer and see if you
can come to my district and have a roundtable discussion with
my constituents, my title insurance companies in my district.
That would be very helpful, and I am happy to put together a
roundtable discussion with you.
Ms. Gacki. We would welcome that opportunity. Thank you
very much.
Mrs. Kim. Great. All right.
However, I remain concerned that the expansion of the
residential real estate rulemaking nationwide will only hurt
these family owned small businesses, and the implementation of
the nationwide GTOs, which starts on December 1, seems like far
too little time to give these small businesses time to prepare.
To that end, I would like to submit this letter that I
received from the American Land Title Association into the
record, and it highlights their concerns with the timeline and
the impacts that this will have on the title industry.
I hope you will consider delaying--review this and delay
the implementation of this nationwide GTO and continue to work
with the industry so we can find effective and efficient ways
to fight the money laundering.
Chairman Davidson. Without objection.
[The information referred to can be found in the appendix
on page 66.]
Mrs. Kim. Thank you. Yield back.
Chairman Davidson. The gentlewoman's time is expired.
The gentleman from Illinois, Mr. Foster, who is also the
chairman of the Subcommittee on Financial Institutions, is now
recognized for 5 minutes.
Mr. Foster. Thank you, Chair Davidson and thank you for
joining us, Director Gacki.
Director Gacki, in November of last year FinCEN issued an
alert warning for financial institutions about the increase in
identity fraud schemes associated with the use of deepfakes and
created with Generative AI tools.
Criminals are using Gen AI to cheaply mass produce false
identity documents and circumvent live identity verification
and authentication methods in online transactions.
I appreciate FinCEN's efforts to raise awareness of these
scams and I encourage you to do more, because it is clear that
Gen AI and the deepfakes that they produce will continue to
become more believable and accessible as time goes by.
Now, I believe the best tool that we have at our disposal
today to verify identities online is a form of secure digital
ID, and the tool at hand is the mobile driver's licenses
currently being issued by several States, and, in fact, many
countries--most countries--including all countries of the EU.
Digital IDs can allow consumers to prove they are who they
say they are in online transactions. A verified credential
attached to a secure mobile device creates a reliable system
that is extremely difficult to fake.
I believe this technology would go a long way toward
stopping identity fraud in the banking system and also with
fraud in government benefits.
It is, however, my understanding that many financial firms
do not feel that they have the regulatory go-ahead to start
using digital IDs and digital driver's licenses in their AML/
Know Your Customer (KYC) processes and that they need guidance
from regulatory agencies like FinCEN to start implementing this
technology in online transactions.
I think there is also a Federal role in providing Federal
standards for what States are providing adequate digital
driver's licenses, and some may need improvements.
My question is, do you expect FinCEN will take steps to
provide the clarity, regulatory clarity, for firms to start
using these for KYC purposes in online transactions?
Ms. Gacki. Thank you, Representative Foster, for that
excellent question. I also want to thank you for your focus on
this issue across many years.
I want to note that this is certainly something that FinCEN
is looking at. Questions of identity are critical to our work
on fraud, and the misuse of identity, whether it is using
Generative AI or less sophisticated techniques, is something
that we are very much focused on and looking to ensure that we
are providing the best guidance we can to financial
institutions.
I would like to--I want to commit that I will work with my
Federal banking agency colleagues to look at what further
guidance we can provide to financial institutions on this
matter.
This past year we did work with our other financial--with
our Federal banking agency colleagues to work on how--to adjust
how financial institutions can adjust their processes,
including in terms of collecting and verifying taxpayer
identification numbers and use of customer identification
programs.
I look forward to looking at this more closely and seeing
what we need to modernize in terms of guidance for financial
institutions going forward.
Mr. Foster. Thank you.
I think there is also an important Federal role that is not
yet--does not yet exist, which is to verify--to specify which
cell phones are actually safe to deploy digital IDs on them,
because it is well-documented that certain early model cell
phones had a secure enclave that was not, in fact, secure,
meaning that someone could go and hack your cell phone and
impersonate your digital driver's license, which obviously
would be a disaster if someone used them.
So we will need at some point probably a Federal agency, or
someone they delegate it to, to call balls and strikes on this
version of a cell phone is okay, it has got an adequately
secure enclave, this one cannot be used.
That is sort of being done by Apple in its ecosystem by
just saying: We are not supporting the iOS once phones get old
enough. The Android system is a complete--it is less organized
and it will be difficult to do that, but this is an important
role.
If you can, for the record, come back and give us some
suggestions on what is needed there to specify when we can
trust the silicon in different versions of cell phones and
where that Federal agency is best housed, because right now the
Department of Defense (DOD) does some of it and other agencies
do some of it, but there is not an organized standard Federal
way to do that, and I think it is a missing piece here.
Thank you. My time is up.
Chairman Davidson. Thank you, Mr. Foster.
The gentleman from Tennessee, Mr. Ogles, is now recognized
for 5 minutes.
Mr. Ogles. Thank you, Mr. Chairman.
Thank you to the director for being here and answering the
questions so thoroughly.
I do want to perhaps emphasize what may be the key takeaway
as you hear everyone and I want to compliment or echo Mr.
Foster here in a moment.
When you look at--Mr. Sessions asked about the data
retention period, Mr. Williams asked about the notion of will
you delete data that otherwise would no longer be collected. I
would also take that a step further; if you collected data and
there has been an investigation and someone has been cleared,
then will that data be deleted because it is no longer
necessary?
We have seen Federal agencies, like Treasury, have some
security breaches, security issues. So the idea that this data
is somehow impenetrable or safe I think is a bit of a misnomer
when we have seen systems all across our government, quite
frankly, have failures in that security.
We know that China and other adverse hostile entities and
nations are trying to get access to this data.
So I think it is important that we address this data issue,
this data retention issue, and have very clear parameters--and,
quite frankly, aggressive parameters--in deleting that data
versus housing it in perpetuity because of the risk associated
therein.
Again, even in your own comments you talked about data
security and the issues with trafficking and fentanyl and such.
That is not your average small business owner who is having to
report and suddenly has a vulnerability out there.
With that, thank you for addressing those, and we look
forward to getting that information back from you.
Now, we have seen roughly 100,000 Americans die every year
from drug overdoses, most from fentanyl, and Treasury itself
has linked Mexican banks and cross-border cash-flows to the
cartels financing that flow and that poison.
How many American overdose deaths can be traced back to the
laundering networks running through Mexican banks like CiBanco,
Intercam, or Vector and why is FinCEN still granting them
extensions instead of cutting them off from the U.S. financial
system immediately?
Ms. Gacki. Thank you, Representative Ogles, for those
comments and for that excellent question.
I do not have an answer on the number of deaths that can be
traced back to these financial institutions. It is certainly
something that I can--we can try to estimate but I will say
that any death would be too much.
Mr. Ogles. Sure.
Ms. Gacki. What we found in publicly calling out these
three financial institutions as a primary money laundering
concern is we made a very public case as to how they have
supported cartel financing.
The extensions we have granted in terms of the effective
date have, as we have noted in public, because we have been
working so closely with the Mexican Government, which has taken
over those financial institutions, including replacing the
heads of their compliance departments at these financial
institutions.
It is important when we take--when we took action against
these financial institutions that we also made sure that any
innocent people, to include innocent Americans, innocent
Mexican citizens, were able to extricate their funds from these
institutions, and that is what the time period has--a delayed
implementation was able to accomplish.
Meanwhile, we have been working very closely with the
Mexican Government to ensure that these financial institutions
are being effectively regulated at the local level in Mexico
and that any further money-laundering concerns have been
removed.
Mr. Ogles. I appreciate that but I also want to give
caution, and we have seen that most, if not all, of the
institutions in Mexico are infected with cartel operatives. So
this idea that they are going to self-regulate is, I think,
somewhat laughable.
At the end of the day, this is about outcomes. Are you
ceasing the flow of illegal funds into the United States and
back to Mexico which is flooding our streets and killing our
kids? If you are not, then you need to shut it down.
Whether you like the President or not--I happen to be an
ally and advocate for the President--crime has come to a halt
in this city because the President had a will to do so.
The former administration said we could not secure the
border. In a matter of days, the border was secured.
We have to have the will to show Mexico, the cartels, and
any of their associates that if you mess with the United States
of America, we will shut you down. Period. Again, they are not
necessarily our ally when they are allowing the killing of our
children and flooding our streets with illicit drugs.
With that, Mr. Chairman, I yield back.
Chairman Davidson. Thank you, Mr. Ogles.
The gentleman from Illinois, Mr. Casten, is now recognized
for 5 minutes.
Mr. Casten. Thank you, Mr. Chairman.
Thank you for being here.
I want to follow up on the discussion you had with Mr.
Liccardo around crypto ATMs.
Mr. Chairman, I would ask unanimous consent to enter into
the record a Chicago Sun-Times article titled ``Chicago's
crypto ATMs are magnets for drug-dealing and scams on older
adults.''
[The information referred to was not submitted prior to
printing.]
This has been a particular issue in Illinois, but obviously
nationwide. I think in 2024 the FBI received more than 10,000
complaints about crypto ATMs and reported more than $246
million in losses.
In August, FinCEN published a notice that emphasized the
irreversibility of crypto transactions on ATMs and noted that
there is a high noncompliance with anti-money-laundering laws
among the operators of crypto ATMs.
At a high level, can you give any sense of what you are
seeing as far as the trends in suspicious activity reporting
specific to crypto ATMs that we should be monitoring?
Ms. Gacki. Thank you, Representative Casten, for that
question.
I will say that crypto ATMs, like other financial
institutions, are subject to the Bank Secrecy Act, and some are
more compliant than others.
We are seeing, however, as we noted in the alert, high use
of certain crypto ATMs as a critical way of defrauding
Americans.
So it is something we are looking at very closely. I do not
have an estimate in terms of the industry but outreach to that
industry and ensuring that industry is as compliant as possible
is one of our key objectives.
Mr. Casten. Okay. I am particularly interested as you dig
through, and maybe we can follow up offline, about the impact
on seniors.
I represent Chicago suburbs, which, given the way Chicago
is laid out, means that I have about 40 mayors who I have to
keep in touch with lots of little, small towns and one of them
has a very low tax base. It is one of these towns that depends
fundamentally on the revenue from a couple convenience stores
and liquor stores and not a lot of larger tax base in the
community.
Even in that tricky financial situation, the convenience
store operator said they removed the bitcoin ATM because the
owner said it just broke his heart how many seniors he saw
walking in there every day and putting money into the machine
and then coming back later and saying this money has
disappeared.
We have had at least 20 States that have adopted or are
considering laws and regulations on crypto ATMs. Illinois did
just enact a new law to require that operators at least impose
daily transaction limits.
Would you support similar Federal requirements on ATMs to
at least slow down some of the rush of money before we can act?
Ms. Gacki. Thank you, Representative Casten.
It is something I am going to need to look into and take
back. I can absolutely commit that it is something that I will
look into and work with Treasury leadership on an approach.
Mr. Casten. Okay. I know you had an exchange with Mr. Barr
against Huione, if I am pronouncing that right. A part of what
scares me about this--and I think we have done a terrible job
this term in Congress--is we have allowed all of these
transactions to operate overseas. The mixers are overseas; the
transactions are overseas. It is great if we have the SAR, but
then we do not have a way of getting in, right?
I guess with the time that is left, is there specific
statutory authority that you currently lack that would allow
you to go after the bad guys?
Like, I am not talking about going after the good guys but
if you see that crime has happened, if you see that these pig
butchering scams, where are you limited in your ability to
prosecute that Congress can be helpful?
Ms. Gacki. Thank you, Representative Casten.
One idea that was in the report to the President on the
Digital Assets Working Group, and you saw it with our action on
the Huione Group, is we used an authority under section 311 of
the Patriot Act.
That was actually built for a different era when the
greatest special--the special measure that we used that was
available to us was to cutoff correspondent payable bank
accounting, which does not really factor in, in the virtual
asset space but rather some newer authorities targeted to
Russian illicit finance or synthetic opioids trafficking,
2313a, 9714, they allow us to prohibit transactions--all
transactions--involving a group like Huione.
Now, we used the 311 authority on Huione to great effect
and we are able to--and it is a very powerful authority. I am
very proud of that action but the ability to use--to prohibit
transactions involving fraud in other respects would be a way
that we could modernize this authority. Regardless, my team
very much looks forward to working with you on that.
Mr. Casten. Okay. I see I am out of time. I believe Mr.
Himes has been active on the section 311 piece. Let us talk
offline about how we might tweak that and improve it.
Appreciate it and yield back.
Chairman Davidson. Thank you.
I would like to recognize the gentlewoman from Florida, Ms.
Salazar, for 5 minutes.
Ms. Salazar. Thank you, Mr. Chairman.
Wonderful to be here with you, Ms. Gacki.
I am Marie Salazar from Florida-27 District representing
the city of Miami. I am sure that you are familiar that there
is a lot of business between Miami and the regime on the island
of Cuba, and we have discovered that 11 companies in my
district who are blatantly, openly breaking the Cuban embargo,
an embargo that has been codified in Congress, meaning it is
the law.
These companies are doing business with the Cuban regime,
giving them oxygen so they can feed the repressive apparatus.
I just sent a letter to the Secretary of the Treasury and
to Mr. Rubio, Department of State, asking them to investigate
and to shut them down.
I wanted to ask you to please help us and stop this
madness, because you cannot be dealing--you cannot be taking
money from Miami and from the Cuban exile community and be
sending it to the Cuban regime to beat on the people that are
trying to be free.
Do you think I could have your word for you to be able to
help me and your office to do something about this? I mean, I
am going to be forwarding to you the letter, but I really would
like your commitment on the record.
Ms. Gacki. Thank you, Representative Salazar.
For many years, I worked at the Office of Foreign Assets
Control, including as the director, prior to coming to FinCEN,
so I am very familiar with our restrictions on dealing with the
Cuban regime.
I commit to you that FinCEN will certainly take a look at
this information and see how we can support investigations,
whether at the Office of Foreign Assets Control (OFAC) or other
parts of the U.S. Government.
Ms. Salazar. They are violating the embargo. You cannot do
that, because that is United States law.
Now, another issue that is highly concerning to me as a
United States citizen and as the Representative of the city of
Miami.
Back in June your office put on the blacklist three Mexican
banks. One of the banks is called CiBanco.
This is a very touchy subject, because I am concerned, not
so much about CiBanco, but about the American banking system.
There has been no proof shown of money laundering from
those people. I have met and spoken with their attorneys, I
have investigated, and there is no proof. I am not saying that
there is, but they have been asking for proof, and your office
has not shown why these people need to be on that list.
The owner lost the bank, $400 million, just because we, the
Americans, put him on the blacklist. We have a lot of weight
internationally. In our system, we are innocent until proven
guilty.
Are you not concerned? I mean, I would be. I am terrified
that this could happen to any bank in my district or any bank
in the United States.
Please tell me and do not tell me this is under
investigation; we cannot talk about it.
Ms. Gacki. Thank you, Representative Salazar.
I stand by FinCEN's actions against the three financial
institutions. CiBanco, Intercam, and Vector made very detailed
public cases in orders issued under authority given to us by
Congress, the Fentanyl Sanctions Act as amended by the FEND Off
Fentanyl Act, and we showed----
Ms. Salazar. I know you are doing your job. I know that you
have to look for the bad guys, but my concern is that you could
have made a mistake that could be repeated, and that is not the
American way of doing business.
Ms. Gacki. I understand.
Ms. Salazar. Simple terms.
Ms. Gacki. I understand.
Ms. Salazar. How come there is no proof that they--you
insisted on keeping that bank. I have no interest in the bank,
but it is just the principle.
Ms. Gacki. We followed the law set forth in the FEND Off
Fentanyl sanctions act, as amending the Fentanyl Sanctions Act,
and found a basis on which to call these three financial
institutions of primary money laundering concern. We worked
through----
Ms. Salazar. Why did you not show the proof?
Ms. Gacki. We publicly issued it in orders when we issued
these orders and would be happy to share them with you.
Ms. Salazar. I read them. They are not--it is not enough,
and you know that.
So what I am saying is that how can we in the banking
system make sure that we are not going to have a little bank
put on the blacklist and then the owner of that bank loses
their assets and the bank?
Ms. Gacki. Now, I want to clarify that this authority is
only targeted at--is only--can only be used against foreign
sources of money laundering. They are called primary money
laundering concerns, whether they are jurisdictions, classes of
transactions, or primary money laundering concern. I
respectfully disagree. I believe we have made the necessary
legal cases against these banks.
Ms. Salazar. I understand what you are saying, but I think
the message I need to send as the chairman of the Western
Hemisphere Subcommittee within the House Foreign Affairs
Committee----
Chairman Davidson. The gentlelady's time is expired.
Ms. Salazar [continuing]. is that we, the Americans, we
carry a lot of weight, and we need to be more careful because
our reputation is at stake.
Chairman Davidson. The gentlelady's time is expired.
Ms. Salazar. Thank you, Mr. Chairman.
Thank you, Madam.
Chairman Davidson. The gentleman from Iowa, who is the vice
chairman of the subcommittee, Mr. Nunn from Iowa, is recognized
for 5 minutes.
Mr. Nunn. Well, thank you, Chairman Davidson. Appreciate
you holding this very important hearing today.
Director Gacki, thank you so much for coming out to Iowa.
While we may be--you are under the Biden Administration, you
are now serving under the Trump Administration, I want to say I
appreciate you hearing from folks in our district and coming
with me and holding a roundtable to actually be able to discuss
some of the things that are working.
Today we are going to talk about some of the things that
are challenges.
When you came out, we talked about the Corporate
Transparency Act. We talked about the policing of over 32
million small businesses and the heavy impact that was placed
on them, everything from $8,000 per small business to be able
to reach compliance, and if they failed, we are talking about a
$500-a day-fine, in some cases up to 2 years imprisonment for
failure.
Now, you got some ``Iowa nice'' feedback on that, and I
appreciate you being there to hear from them but it will be no
surprise to you I would like to talk about some of the red tape
that is impacting us today.
Right now FinCEN receives close to 20 million CTRs and 5
million SARs. These are financial reporting requirements.
Challengingly, it is believed that most of that information
that was done by financial institutions, including very small
institutions, was never used.
To make matters worse, it was found that these can take
over 21 hours to complete each one of those.
So let us put this in real world terms. In Main Street,
Iowa, that means we have folks spending upwards of 533 million
hours filing reports for FinCEN and the Federal Government.
I would like to ask, do we have any perspective on how many
of those reports resulted in actual prosecutions?
Ms. Gacki. Thank you, Representative Nunn and I want to
thank you again for welcoming me and my team to Iowa.
So one of the key objectives of this administration that we
are focused on is reforming the Bank Secrecy Act regime, the
AML/CFT regime in the United States, to ensure that it is risk-
based and focused on the highest threats impacting our law
enforcement and national security, and that law enforcement is
directing its resources to those highest priority threats.
Mr. Nunn. Understood.
Ms. Gacki. And part of that is taking a look at reporting,
the reporting that we gained. We work very hard to try to
ensure that we are engendering that feedback loop between law
enforcement and financial institutions to show that the
reporting is being used. I think that it is not just
prosecutions that have it, but that this reporting helps----
Mr. Nunn. Director Gacki, I appreciate that.
Here is the reality. We did this with CTA. We went after
40,000 bad actors, but we snared 32 million Americans in the
process.
My concern here is we are looking at 25, 26 million
reports. How many arrests were made as a result of this
reporting? Can you just give me a number?
Ms. Gacki. Sir, I am sorry, I do not have the number off
the top of my head.
Mr. Nunn. Okay. That is fair.
Let me ask this. Can you commit to publishing the
effectiveness of those numbers?
Ms. Gacki. Certainly, I can. What we do in an annual report
that we put out is we try to----
Mr. Nunn. I am going to look at the last year's numbers,
and I am going to compare them to 26 million and the 533
million hours of reporting. We need to do some analysis on
this.
The other part is our community banks are drowning in red
tape while cartels are clearly laundering billions in fentanyl
dollars. We need to focus on the real results, not on the
compliance reports requirements coming out of banks. Let us
agree to go after the bad actors.
I want to quickly get to the Treasury hack that occurred
earlier this year when the Chinese Communist Party went after
Treasury systems.
Who at Treasury was fired for allowing the Chinese into
Treasury systems?
Ms. Gacki. I am sorry, sir, I do not have a response to
that question.
Mr. Nunn. Okay. The hacks showed exactly why sensitive
small business ownership data that does not belong on
government systems was intentionally hacked. There is no
indication that anyone was held accountable.
If this happened to one of my small banks or my small
credit unions, those guys would be out on the street and there
would be a full inspection into what happened. I have not seen
that happen at Treasury.
So here is my ask right now. For those banks and lending
institutions that have data on your systems that were hacked by
the Chinese that I think are arbitrarily being kept on data
servers, are you willing to help us commit to deleting those
before another breach occurs?
Ms. Gacki. Sir, I am happy to make sure that the
information that we collect and protect is held to the highest
security standards. I am aware of no breach of the Bank Secrecy
Act data that we protect.
Mr. Nunn. Well, let us look and see the after-action of
what happened with the Chinese, because I have seen no
accountability to be able to actually hold whether that is true
or not. I look forward to opportunities to work together on
that.
Finally, Director Gacki, I think one of the things we have
worked on together is the Guard Act, making sure money
laundering does not take place. I would like to thank you for
giving our team technical assistance on going after this,
protecting seniors, and helping our local and State law
enforcement.
Is there anything you would like to add about what we are
doing to help protect through the Guard Act?
Ms. Gacki. I would just like to thank you for your focus on
an important issue in the Guard Act and just want to--if you
need any further technical assistance, we are happy to supply
it.
Thank you.
Mr. Nunn. Appreciate to working together.
Thank you, Mr. Chair. I yield the remainder of my time.
Thank you, Director.
Chairman Davidson. Thank you, Mr. Nunn.
I would like to ask unanimous consent to submit for the
record a report by the Independent Community Bankers of
America, ``The Financial Crimes Enforcement Network:
Recommendations for Better Coordinated and More Effective
Policies and Enforcement.''
Without objection.
[The information referred to was not submitted prior to
printing.]
Chairman Davidson. We will pause for a swap out on
microphones. We have a failing microphone.
[Audio malfunction in hearing room.]
Chairman Davidson. The gentlewoman from Michigan, Ms.
Tlaib, is now recognized for 5 minutes.
Ms. Tlaib. Thank you, Mr. Chair.
Director, do you know--have you heard about in July how
Senator Wyden announced that the Treasury Department has
Suspicious Activity Reports on Jeffrey Epstein's financial
network details? I think thousands of transactions totaling
$1.5 billion.
Ms. Gacki. Thank you, Representative Tlaib.
I am familiar with Senator Wyden's communication.
Ms. Tlaib. Among the largest transactions are two that
JPMorganChase reported with Russian banks for as much as $100
million. Are you aware of that one?
Ms. Gacki. I am aware of Senator Wyden's communication,
yes.
Ms. Tlaib. Can you tell the committee more in regard to--I
mean, yesterday it was revealed that--just yesterday--that
Chase employees knew of these suspicious transactions for more
than a decade and they were ignored. Are you familiar with
that?
Ms. Gacki. Thank you, Representative Tlaib, for these
questions.
Given the sensitivity of the data that we obtain through
the Bank Secrecy Act, to include these SARS, I want to assure
you that Treasury is taking this very seriously.
Ms. Tlaib. We, as committee members, can we have access to
that information? It should be public, correct?
Ms. Gacki. This is highly sensitive----
Ms. Tlaib. Can you be subpoenaed for the records?
Ms. Gacki. We are working with Representative Comer to
ensure that we provide----
Ms. Tlaib. Okay. Well, I am going to yield the rest of my
time, Director, to my Ranking Member Beatty, she would like to
put a motion, because I think the Financial Services Committee
should also have oversight in regard to any banking
institution.
As somebody that serves on Oversight, sat at a roundtable
with girls that were as young as 13 years old who asked us to
follow the money, and I think it is our responsibility as
Members of Congress to do that.
With that, I yield the rest of my time to Ranking Member
Beatty.
Mrs. Beatty. Thank you, Congresswoman Tlaib.
Mr. Chairman, pursuant to clause 2(m) of House rule XI and
clause 2(k)(6) of the House rule XI, I move that this committee
issue a subpoena to the Secretary of Treasury to return to the
majority and minority of the Subcommittee on National Security,
Illicit Finance, and International Financial Institutions of
the Committee on Financial Services and the Committee on
Financial Services all complete and unredacted documents
related to Jeffrey Epstein or individuals and entities
associated with Jeffrey Epstein, including but not limited to
wire transfers, bank accounts, and other transactions, other
accounts, account holders that were party to any such
transactions, Currency Transactions Reports, Suspicious
Activity Reports, and other Bank Secrecy Act data, any
documents related to a description or review of the network of
Jeffrey Epstein's conducted by any party, including but not
limited to any law enforcement investigation and/or
investigations or review by any other party, and any document
or review that addresses any connections to any Russian-based
financial institutions, individuals, and entities, including
but not limited to entities that are currently under United
States or allied sanctions.
Chairman Davidson. The gentlelady has moved to authorize a
subpoena.
For what purpose does the gentleman from Oklahoma seek
recognition?
Mr. Lucas. Mr. Chairman, I seek a point of order on the
motion.
Chairman Davidson. Point of order has been reserved. The
committee will suspend and consider the pertinence of this
motion.
[Discussion off the record.]
Chairman Davidson. The subcommittee will now consider the
motion offered by Representative Beatty to authorize a
subpoena.
Does the gentleman from Oklahoma insist on his point of
order?
Mr. Lucas. Mr. Chairman, I do not insist on my point of
order.
Chairman Davidson. For what purpose does the gentleman from
Oklahoma seek recognition?
Mr. Lucas. Mr. Chairman, I move to table the motion.
Chairman Davidson. The gentleman has moved to table the
motion. The motion is not debatable, and the question now
occurs on the motion to table.
Those in favor shall signify by saying aye.
All those opposed shall signify by saying nay.
In the opinion of the chair, the ayes have it.
Mrs. Beatty. I request a roll call vote.
Chairman Davidson. A recorded vote is requested.
All those in favor of a recorded vote, raise your hand.
A sufficient number having raised their hand, a recorded
vote is ordered. We will now take the vote on the motion to
table, and we will suspend until the clerk has set things in
motion to do that.
[Discussion off the record.]
Chairman Davidson. The clerk will call the roll.
The Clerk. Mr. Lucas?
Mr. Lucas. Yes.
The Clerk. Mr. Sessions?
Mr. Sessions. Aye.
The Clerk. Mr. Barr?
[No response.]
The Clerk. Mr. Williams?
Mr. Williams. Aye.
The Clerk. Mrs. Kim.
[No response.]
The Clerk. Mr. Ogles?
Mr. Ogles. Aye.
The Clerk. Mr. Nunn?
Mr. Nunn. Aye.
The Clerk. Mrs. McClain?
[No response.]
The Clerk. Ms. Salazar?
[No response.]
The Clerk. Chairman Hill.
Chairman Hill. Aye.
The Clerk. Ranking Member Beatty?
Mrs. Beatty. No.
The Clerk. Mr. Gottheimer?
Mr. Gottheimer. No.
The Clerk. Mr. Vargas?
[No response.]
The Clerk. Mr. Foster?
Mr. Foster. No.
The Clerk. Mr. Gonzalez?
[No response.]
The Clerk. Mr. Torres?
[No response.]
The Clerk. Mr. Casten?
Mr. Casten. No.
The Clerk. Mr. Liccardo?
[No response.]
The Clerk. Ranking Member Waters?
Ms. Waters. No.
The Clerk. Chairman Davidson?
Chairman Davidson. Yes.
The Clerk. Ms. Salazar?
Ms. Salazar. Yes.
The Clerk. Yes.
Chairman Davidson. Would the clerk read how each member
voted.
The Clerk. Chairman Davidson, aye. Mr. Lucas, aye. Pete
Sessions, aye. Mr. Williams, aye. Mr. Ogles, aye. Mr. Nunn,
aye. Ms. Salazar, aye. Chairman Hill, aye. Ranking Member
Beatty, no. Mr. Gottheimer, no. Mr. Foster, no. Mr. Casten, no.
Ranking Member Waters, no.
Chairman Davidson. Has any member not voted or wished to
change their vote?
Ms. Waters. Parliamentary inquiry.
Chairman Davidson. The ranking member is recognized for a
parliamentary inquiry.
Ms. Waters. I want to make sure of what we are voting on or
what has been attempted to be tabled.
Is this a motion that this subcommittee issue a subpoena to
the Secretary of the Treasury to return to the majority and
minority of the Subcommittee on National Security, Illicit
Finance, and International Financial Institutions of the
Committee on Financial Services all complete and unredacted
documents related to Jeffrey Epstein or individuals associated
with Jeffrey Epstein, including but not limited to wire
transfers, bank accounts, and other transactions, other
accounts, and account holders that were parties to any such
transactions----
Chairman Davidson. Would the gentlelady yield for an
answer?
It is not a question on the subpoena. It is a question on
tabling the subpoena.
The clerk will report.
The Clerk. The ayes are eight and the nays are five.
Chairman Davidson. A majority having voted in favor, the
motion to table is agreed to.
I would like to thank Director Gacki for her testimony
today.
Without objection, all members will have five legislative
days to submit additional written questions for the witness to
the chairman. Questions will be forwarded to the witness for
her response.
Ms. Gacki, please respond no later than October 14, 2025.
This hearing is adjourned.
[Whereupon, at 12:08 p.m., the subcommittee was adjourned.]
APPENDIX
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