[Congressional Record Volume 165, Number 167 (Tuesday, October 22, 2019)]
[House]
[Pages H8316-H8339]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CORPORATE TRANSPARENCY ACT OF 2019
General Leave
Ms. WATERS. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days in which to revise and extend their remarks on
H.R. 2513 and to insert extraneous material thereon.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from California?
There was no objection.
The SPEAKER pro tempore. Pursuant to House Resolution 646 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the state of the Union for the consideration of the bill, H.R. 2513.
The Chair appoints the gentlewoman from Illinois (Ms. Underwood) to
preside over the Committee of the Whole.
{time} 1355
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the state of the Union for the consideration of the bill
(H.R. 2513) to ensure that persons who form corporations or limited
liability companies in the United States disclose the beneficial owners
of those corporations or limited liability companies, in order to
prevent wrongdoers from exploiting United States corporations and
limited liability companies for criminal gain, to assist law
enforcement in detecting, preventing, and punishing terrorism, money
laundering, and other misconduct involving United States corporations
and limited liability companies, and for other purposes, with Ms.
Underwood in the chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
General debate shall be confined to the bill and amendments specified
in House Resolution 646 and shall not exceed 1 hour equally divided and
controlled by the chair and ranking minority member of the Committee on
Financial Services.
The gentlewoman from California (Ms. Waters) and the gentleman from
North Carolina (Mr. McHenry) each will control 30 minutes.
The Chair recognizes the gentlewoman from California.
Ms. WATERS. Madam Chair, I yield myself such time as I may consume.
Madam Chair, I rise in support of H.R. 2513, the Corporate
Transparency Act of 2019, a bill introduced by Representative Carolyn
B. Maloney of New York.
H.R. 2513 closes significant loopholes in the law that are commonly
abused by bad actors and will make it harder for terrorists,
traffickers, corrupt officials, and other criminals to hide, launder,
move, and use their money.
Today, anyone can create a company without providing any information
about the company's actual owners. This ability to remain anonymous
gives criminals and terrorists unimpeded, hidden access to our banking
and commercial systems.
It also makes it more difficult for law enforcement and even our
banks, which have a duty to know their customers and evaluate risk, to
detect illicit activity.
For example, unbeknownst to authorities for years, the skyscraper at
650 Fifth Avenue in New York City was owned by Iranian-controlled
entities through shell companies. The Corporate Transparency Act closes
these loopholes by requiring firms which do not already report
ownership, for example through public SEC filings, to share this
information with the Financial Crimes Enforcement Network, FinCEN.
This beneficial ownership database created by the bill will be
accessible only by FinCEN-approved law enforcement agencies and by
financial institutions, with customer consent, to fulfill requirements
to identify their beneficial owners. Unapproved sharing of this
information would be subject to criminal penalties, as would lying on
or intentional omission of beneficial ownership information. For most
firms, which have only one or two owners, this process would require
only a few lines of data. But for law enforcement agencies, the
additional information will have great benefit, as their investigations
will no longer be stymied by anonymous shell companies.
The bill has also been broadened to include the entirety of H.R.
2514, the Coordinating Oversight, Upgrading and Innovating Technology,
and Examiner Reform Act of 2019, the COUNTER Act, a bill introduced by
Representative Emanuel Cleaver. The COUNTER Act closes loopholes in the
Bank Secrecy Act, the key law aimed at countering money laundering,
terrorist financing, and other criminal uses of the banking system.
{time} 1400
For example, the bill requires the identification of owners behind
high-risk commercial real estate transactions and transactions
involving arts and antiquities, which are often used by criminals to
launder money.
The COUNTER Act examines Chinese and Russian money laundering, an
issue that is seen in opioid and methamphetamine production, as well as
human and wildlife trafficking.
The bill also creates a national strategy to fight trade-based money
laundering, which is considered the most pernicious but hard-to-detect
form of money laundering.
Mrs. Maloney and Mr. Cleaver's bill also works to lower the
compliance burden on financial institutions, most of which are
community banks, by establishing several tools to allow for more
targeted sharing of BSA-AML-related information.
The bill makes modest increases to the currency transaction reporting
limit and studies ways to reduce the costs associated with researching
and writing suspicious activity reports.
The bill also creates a new privacy and civil liberties officer, as
well as an innovation officer in each of the Federal financial
regulators.
Importantly, the bill imposes new penalties on financial institutions
and personnel that violate the law and creates a whistleblower program
to encourage and protect those who identify such bad acts.
H.R. 2513, as amended, has the strong support of financial
institutions. It is also supported by NGOs like the AFL-CIO, Global
Witness, Oxfam America, Friends of the Earth U.S., Jubilee USA Network,
and the Small Business Majority, all of which are members of the
transparency-focused FACT Coalition. It is widely supported by law
enforcement organizations such as the Fraternal Order of Police, the
National District Attorneys Association, and the Federal Law
Enforcement Officers Association. In addition, this legislation is
supported by the Department of the Treasury and the Federal Bureau of
Investigation.
I commend Congresswoman Maloney and Congressman Cleaver for their
very hard work on the legislation, as well as their collaboration to
put together a comprehensive bill to reform how this country fights
against illicit finance.
I urge passage of H.R. 2513, and I reserve the balance of my time.
Mr. McHENRY. Mr. Chairman, I yield myself such time as I may consume.
I am opposed to H.R. 2513, and I want to begin by outlining my
opposition.
This bill before us is a new small business mandate on the smallest
businesses in America. The bill before us today requires some of the
smallest businesses in America, those with fewer than 20 employees and
those with less than $5 million in receipts, to file annually a list of
all of their owners with the Financial Crimes Enforcement Network, or
FinCEN.
For those who are watching on C-SPAN, I have a trivia question for
them, Mr. Chairman. I bet most of them have never heard of FinCEN. I
bet those in the House office buildings, Mr. Chairman, have not heard
of FinCEN. It is a little-known agency even here in Washington that
deals with financial crimes, in the Treasury Department.
Imagine you are a small business owner. You are getting a notice from
the Financial Crimes Enforcement Network mandating that you disclose
the owners of your entity. This would be the first consumer-facing
intelligence bureau that we would have in the Federal Government.
This bill would require small business owners and small business
investors to submit their personal information to a new Federal
database without adequate privacy protections. This new Federal
database will be accessible to law enforcement without a warrant and
without a subpoena, a disturbing violation of due process, in my view.
This has the fewest civil liberties protections of any Federal
intelligence
[[Page H8317]]
bureau database. It is a lower standard of accountability than what
Congress provides in the PATRIOT Act, which largely targets foreign
actors.
According to the National Federation of Independent Business, this
bill would also add more than $5.7 billion in new regulatory costs for
America's small businesses.
Supporters of the bill are calling for these changes without any
direct evidence to justify the mandate. There is plenty of anecdote,
but no data.
For several months leading up to the committee's consideration of
this bill, I sought data from the intelligence bureau called FinCEN and
from the Treasury Department, along with the Department of Justice, to
better understand the need for this legislation. They provided none.
They gave anecdotes of very scary stories to try to compel me as a
legislator to vote for what is a very specific threshold in law and a
very specific new small business mandate.
I refuse to legislate based off of anecdotes. I would like to have
hard data. My questions have not been answered by FinCEN, the Treasury
Department, or the Department of Justice.
We have no information on how beneficial ownership information will
be protected, in addition to that. We do not have information on how
the privacy of small businesses will be preserved. In fact, we have an
amendment here considered on the House floor that could further expose
their data to the public, so even that determination is not in stone
now with the bill before us.
We don't have information on how many law enforcement agencies will
have access to the database, how many financial institutions will have
access to the database, or what threshold for amount of sales and the
number of employees will yield the most effective outcome.
In the bill, we have $5 million of revenue and under, and 20
employees and under. We have no data to back up that that is the right
threshold for either the dollar amount or the number of employees.
We will have stories, and we will have Members come to the House
floor telling us stories of bad actors, but that is anecdote. That is
not data to provide for this threshold.
If we are going to have such an encroachment on America's personally
identifiable information of small businesses across this country,
shouldn't we have solid data? I believe so.
I believe we have a number of issues that need to be dealt with to
make this bill sustainable and provide protections for civil liberties.
I believe that combating illicit finance is a nonpartisan issue that
all Members want to address. Our actions must be thoughtful and data-
driven.
For example, in committee, we came together in support of H.R. 2514,
the COUNTER Act, introduced by the gentleman from Missouri (Mr.
Cleaver) and the gentleman from Ohio (Mr. Stivers). H.R. 2514 is a
compilation of bipartisan policies that modernize and reform the Bank
Secrecy Act and anti-money laundering regimes. It balances security and
privacy. I think we have a nice bipartisan bill that was reported out
of the committee without a dissenting vote. It provides the Treasury
Department and other Federal agencies with the resources they need to
help catch bad actors.
There have been years of work in the production of that bill that is
wrapped up in this larger bill. I am disappointed that the COUNTER Act
is not being considered as a standalone bill, instead being swept into
this bill. Because I believe as a standalone bill, we could get that
bill through the House, through the Senate, and signed by the President
into law this year. I think it is unfortunate that we are not
considering that as a standalone measure.
I thank my colleagues on the other side of the aisle for listening to
some of our concerns on the Republican side of the aisle. We will have
some Republican Members who vote for this bill. I, however, will not.
The encroachment on the question of civil liberties, the lack of
separation of powers, the lack of the use of a subpoena, and the lack
of regulatory relief for those who are collecting this data, both in
terms of small businesses and financial institutions, has not been
fixed nor dealt with.
In particular, the Rules Committee last night rejected amendments
that would require law enforcement to obtain a subpoena before
accessing--I am sorry, during committee, there was a rejection of a
subpoena in our discussions, and then last night, the Rules Committee
rejected my amendment that would provide greater certainty for small
businesses and for community banks by repealing the customer due
diligence rule, which requires financial institutions to collect
similar data that is being required in this bill.
I believe that issue still merits a more thoughtful solution that
doesn't treat legitimate small businesses as collateral damage, like
the current bill does.
Mr. Chair, I am opposed to the bill, and I reserve the balance of my
time.
Ms. WATERS. Mr. Chair, I yield 5 minutes to the gentlewoman from New
York (Mrs. Carolyn B. Maloney), the sponsor of the bill and chair of
the Subcommittee on Investor Protection, Entrepreneurship, and Capital
Markets.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I thank the
gentlewoman for yielding and for her leadership on the Financial
Services Committee and on this bill.
Mr. Chair, I rise in support of H.R. 2513, the Corporate Transparency
Act. This bill would crack down on the illicit use of anonymous shell
companies. This is one of the most pressing national security problems
that we face as a country because anonymous shell companies are the
vehicle of choice for money launderers, criminals, and terrorists.
The reason they are so popular is because they cannot be traced back
to their true owners. Shell companies allow criminals and terrorists to
move money around in the United States financial system and finance
their operations freely and legally.
Unfortunately, we know that the U.S. is one of the easiest places in
the entire world to set up an anonymous shell company. The reason why
these shell companies are anonymous is because States do not require
companies to name their true beneficial owners, the individuals who are
collecting the profits and who outright own the company.
As any FBI agent or prosecutor will tell you, far too many of their
investigations hit a dead-end at an anonymous shell company. They know
there is illegal money, yet they can't pursue and stop it.
Because they can't find out who the real owner of that shell company
is, they can't follow the money past the shell company, past this pile
of cash that they know is financing illegal activity. The trail goes
cold, and the investigation is stopped dead in its tracks.
Treasury actually conducted a pilot program a couple of years ago
when they collected beneficial ownership information for real estate
transactions in Manhattan and Miami over a 6-month period. The results
were stunning.
Treasury found that about 30 percent of the transactions reported in
those 6 months involved a beneficial owner or purchaser representative
that had previously been the subject of a suspicious activity report.
In other words, these were potentially suspicious people buying these
properties. And this was after the Treasury Department had announced to
the world through the press that they would be collecting beneficial
ownership information in these two cities for 6 months, so this didn't
even capture the money launderers who simply avoided those two cities
for that 6-month period.
Our bill would fix this problem by requiring companies to disclose
their true beneficial owners to the Financial Crimes Enforcement
Network, or FinCEN, at the time the company is formed. This information
would only be available to law enforcement and to financial
institutions so they can comply with their know-your-customer rules.
This bill would plug a huge hole in our national security defenses
and would be a massive benefit to law enforcement.
We have a very large coalition supporting the bill. We have the
support of 127 NGOs. All of the law enforcement groups in our Nation
support this bill, all of the banking trade associations, the credit
union trade associations, human rights groups, antitrafficking groups,
State secretaries of state, and
[[Page H8318]]
most of the real estate industry, and many more because law enforcement
has said that enacting this bill will make our residents and our
country safer.
I want to specifically thank the FACT Coalition, Global Witness, and
Global Financial Integrity for their support. I want to thank the Bank
Policy Institute, which has been a strong supporter from the beginning.
And I want to thank my personal staff, especially Ben Harney.
{time} 1415
I also want to thank my Republican partners on this bill, most
notably Peter King from New York and Blaine Luetkemeyer from Missouri.
They have been both fantastic to work with, and I believe the changes
that they negotiated in good faith on this bill have made it an even
better bill.
The two people I want to thank the most are Congresswoman Waters, who
has been a steadfast supporter of this bill for years, and Congressman
Cleaver, who has worked so hard on the COUNTER Act, which has been
added to this bill. His leadership on the anti-money laundering reforms
in the COUNTER Act have been indispensable.
Mr. Chairman, this bill will make our country safer, and I urge a
strong ``yes'' vote for this bill.
Mr. McHENRY. Mr. Chair, I yield myself such time as I may consume.
Mr. Chairman, I would like to commend the chair of the Investor
Protection, Entrepreneurship, and Capital Markets Subcommittee, Mrs.
Maloney, for the work that she has put into this bill. She has been
willing to address many concerns from Republicans about her
legislation, though we are not able to come to final terms between her
and me; but, as she knows and as I have stated clearly, it is for lack
of data from the Treasury Department and from FinCEN itself, and those
issues still remain.
It is not because of a lack of good will on her behalf or her staff's
behalf, but an enormous amount of frustration we have from one of our
intelligence bureaus that is not complying with reasonable oversight
from Congress.
So I want to commend Mrs. Maloney for her work that she put into this
important piece of legislation, and I do wish that we were able to come
to terms on the details in the finer points of this bill.
Mr. Chairman, I yield 3 minutes to the gentleman from Kentucky (Mr.
Barr), who is the Oversight and Investigations Subcommittee ranking
member.
Mr. BARR. Mr. Chairman, I thank my friend from North Carolina for
yielding.
Mr. Chairman, I rise today in opposition to H.R. 2513, the Corporate
Transparency Act. I do so regrettably.
While I agree with the objective of the bill to help law enforcement
crack down on the financing of illegal operations, this bill's solution
places undue burdens on small businesses and presents unacceptable due
process concerns for millions of small business owners whose sensitive
personally identifiable information will be collected and stored in a
new Federal database accessible without a warrant or a Federal
subpoena.
I want to thank my friend, the sponsor of this bill, for her good
faith attempt to streamline beneficial ownership reporting. I agree
with her that we need to do more to combat terrorist financing, money
laundering, drug trafficking, and other national security threats. I am
sympathetic, also, to the needs of law enforcement to identify the
financing sources of illicit operations and shut them down.
That said, the bill before us today seeks to achieve these ends
unnecessarily on the backs of America's small businesses. The bill
would create additional regulatory reporting requirements for existing
and newly created small businesses. These businesses do not have the
compliance resources comparable to larger firms. This reporting
requirement will take a toll on their productivity and their bottom
line.
According to the U.S. Small Business Administration, 95 percent of
new firms begin with fewer than 20 employees and, thus, would most
likely be subject to the reporting and compliance burdens of this bill.
Accounting for this growth and conservative estimates of the time and
expenses associated with completing the paperwork required by the bill,
the National Federation of Independent Business forecasts that the bill
would cost America's small businesses $5.7 billion over 10 years and
result in 131 million new hours of paperwork. These are dollars that
companies could spend on making new investments or hiring new staff and
time they could spend on building their businesses.
H.R. 2513 would require small business owners or officers to report
personally identifiable information such as name, Social Security
number, and driver's license number to a newly created Federal
Government database operated by FinCEN. Law enforcement can access this
database without due process, and the sensitive personal information
contained in it is subject to the ever-growing threat of malicious
cybercriminals.
Even with all the new requirements and privacy concerns created by
this bill, it still does not fully address the root issue with current
beneficial ownership reporting rules. The supposed justification of the
bill is to ease the burden on financial institutions associated with
implementing FinCEN's customer due diligence rule. However, H.R. 2513
fails to repeal and replace the CDD rule, and the rule will continue to
coexist with the additional regulatory burdens on small businesses
created by the bill.
Finally, the bill falls short if the goal is to relieve financial
institutions of burdensome reporting requirements that do not
materially contribute to countering money laundering and illicit
finance. That is because it fails to make inflation-adjusted changes to
the thresholds for filing suspicious activity reports and currency
transaction reports.
While I recognize the need to combat financing of illicit operations,
this bill attempts to do so by placing unjustified reporting
requirements on our small businesses that could cost them time and
money and hinder their growth.
The Acting CHAIR (Mr. Cuellar). The time of the gentleman has
expired.
Mr. McHENRY. Mr. Chairman, I yield the gentleman from Kentucky an
additional 30 seconds.
Mr. BARR. So, to conclude and to summarize, Mr. Chairman, we can and
should update our AML/BSA laws, and we can and should give FinCEN and
law enforcement better visibility into the beneficial ownership
information of firms vulnerable to money laundering and illicit
finance, but this is the wrong solution. I am hopeful that the concerns
of Main Street small businesses can be addressed if this bill moves to
the U.S. Senate.
Ms. WATERS. Mr. Chairman, I yield 3 minutes to the gentleman from
Illinois (Mr. Foster), who is the chair on the Task Force on Artificial
Intelligence.
Mr. FOSTER. Mr. Chairman, I thank the chairwoman for yielding, and I
thank my friend from New York, Chairwoman Maloney, for her leadership
on this issue.
Mr. Chairman, I rise in support of H.R. 2513, which would help to end
the abuse of anonymous shell companies. These entities have a well-
documented history of being used to hide money in a wide variety of
crimes, including sanctions evasion, terrorist financing, human
trafficking, drug trafficking, illegal arms dealing, tax evasion, and
corruption. Anonymous shell corporations are also being subverted by
criminals in ever-evolving schemes involving emerging digital
technologies.
One of the many hats that I wear is being a co-chair of the
Blockchain Caucus. Just in the past week, I have had disquieting
updates from officials from the FBI and FinCEN about trends in the
abuse of cryptocurrencies for nefarious purposes.
What was clear from these briefings is that the use of anonymous
shell companies has greatly inhibited the ability of law enforcement to
go after criminals who use cryptocurrency to engage in illicit
financing. The use of anonymous shell companies also makes it extremely
difficult to uncover abusive trading practices in unregulated crypto
exchanges.
In short, criminals and law enforcement officers are engaged in a
very sophisticated cat-and-mouse game in which law enforcement is
always playing catch-up. Passing the Corporate Transparency Act will
give law enforcement officers a significant new
[[Page H8319]]
tool that could potentially lead them to taking down more of the bad
guys.
Let us not forget, the use of the beneficial ownership registries is
not some wild-eyed, crazy concept where the U.S. would be going out on
a limb. This is an area where the U.S. is significantly behind other
developed nations.
The Financial Action Task Force, a respected intergovernmental
policymaking body established by the G7 countries in 2016, gave the
U.S. a failing grade for its efforts to prevent the laundering of
criminal proceeds by shell companies. According to FATF's report, the
U.S. has not done enough to rein in corporate secrecy, which presents
serious gaps in law enforcement efforts, leaving our financial system
vulnerable to dirty money.
They were blunt. We were scored as noncompliant--the lowest possible
score--on our ability to determine the true owners of shell companies.
That is simply unacceptable.
I would like to think that the U.S. should be a standard setter
amongst nations when it comes to things like anti-money laundering
enforcement. The current status quo, however, woefully fails to measure
up to our lofty goals. We need to do better, and that is why I support
the commonsense measures put forth in H.R. 2513.
Mr. Chairman, I thank Congresswoman Maloney for her determined and
dogged leadership on this issue for many years, and I urge a ``yes''
vote on H.R. 2513.
Mr. McHENRY. Mr. Chairman, I yield 4 minutes to the gentleman from
Little Rock, Arkansas (Mr. Hill).
Mr. HILL of Arkansas. Mr. Chairman, I thank the ranking member.
I am grateful for the opportunity to come to the floor and talk about
H.R. 2513, the Corporate Transparency Act.
I want to thank my good friend from New York (Mrs. Carolyn B.
Maloney) for her leadership in this area for well over a decade, her
hard work, and her determination on improving our anti-money laundering
and Bank Secrecy Act rules.
I appreciate the chair of the committee and her work as well.
The legislation addresses how we might combat illicit finance
activities by appropriately strengthening the collection of beneficial
ownership information.
Now, Mr. Chairman, a beneficial owner is a person who enjoys the
benefits of ownership even though the title to some form of property is
in another name. We have long debated in Congress the best way for this
information to be collected. Let's be clear here. It is being collected
by our financial services industry under our know-your-customer rules.
The ability to set up legal entities without accurate beneficial
ownership information, however, has long represented a key
vulnerability in the U.S. financial system.
As I say, all U.S. banks, brokerage firms, and financial services
companies have a know-your-customer obligation to collect ownership
information and, importantly, collect beneficial ownership information.
This was further defined in May 2008 by a FinCEN rule.
But not all shell companies are established for malicious purposes.
Owners might create one temporarily to finance a company that has not
yet started operations or to proceed with an acquisition in coming
years. But in this instance, they would have no employees and no
revenue, so the structure would look like a shell company, but it would
be otherwise legal.
It is true, though, there are too many instances of anonymous shell
companies serving as a vehicle for ill-intended activities, including
money laundering and terrorist financing. The anti-money laundering
system and the sanctions system, both independently and in tandem, are
more important than ever before, as we have seen in recent debates.
For well over a decade, Congresswoman Maloney, author of the
legislation, has been leading and working hard to pass a bill that
would enhance our AML regime, including on beneficial ownership. She
and I agree, as do all the Members of this House, Mr. Chair, that it is
vital to U.S. national security to have a vigorous and good AML/BSA
system.
However, I cannot support the legislation as currently written. In my
view, H.R. 2513 places a significant burden on small business and, in
my view, unnecessarily. The rules have been outlined here.
I believe there is a better path forward, which is why I have long
supported aligning tax filing with the collection of beneficial
ownership information. Small businesses are already familiar with
filing taxes.
A small business already files their taxes, which includes disclosing
their owners, their capital, and their business structure. On their
returns, they declare domestic and foreign aspects of their business--
all subject to common existing processes and parameters, all subject to
privacy, and all subject to existing penalties for failure to
accurately report.
I think we can all agree that closing off access to illicit finance
is laudable, necessary, and appropriate; and I expect that we can agree
that the collection of accurate beneficial ownership information is a
step in the right direction. I would just like to see us get there
without subjecting small businesses to new, unnecessarily complicated
reporting with the burden of exceedingly severe penalties for failure
to comply.
Mr. Chairman, I hope that we can reach a simple compromise that sees
stronger collection without jeopardizing small business.
{time} 1430
Ms. WATERS. Mr. Chairman, I yield 5 minutes to the gentleman from
Missouri (Mr. Cleaver), who is the sponsor of the COUNTER Act which is
part of this bill. He is also the chair of the Subcommittee on National
Security, International Development and Monetary Policy.
Mr. CLEAVER. Mr. Speaker, I thank the chairwoman for her work in this
area, and for allowing those of us who are interested in this
legislation to play a major role.
As many of my colleagues are aware, national security is one of the
most pressing matters facing the United States of America and the
world. I am excited for the opportunities that this moment presents to
address these issues head on.
Our most profound responsibility as Members of Congress is to
preserve America's national security and the United States' global
position as an international leader in free and fair markets.
Since the last major anti-money laundering reforms of 2001, the
national security threats that face our country have evolved profoundly
and significantly, and frighteningly. Cyber and technological attacks
have risen to the top of our most recent worldwide threat assessment as
a paramount national security risk.
Underground online trafficking now allows for simplified avenues to
transport illicit material across the Nation and around the globe, and
cryptocurrencies now allow for streamlined means to fund criminal
organizations. With virtual currency, dark web marketplaces and illicit
technologies expanding to threaten citizens safety and hard-earned
savings, it is critically important, Mr. Speaker, that our federal
agencies evolve to meet and conquer these new challenges.
The COUNTER Act will do just that. This legislation will empower the
Treasury Department to protect our national security and explicitly
safeguard our financial systems through the Bank Secrecy Act.
It codifies a voluntary information-sharing program between law
enforcement, financial institutions, and the Treasury Department,
better ensuring the capture of illicit activities.
It balances national security and personal privacy by requiring
Treasury and financial regulators to create the position of civil
liberty and privacy officer. This officer will ensure that policies
being developed and implemented are not intruding or undermining
citizens' constitutional rights.
While the bill will close a number of loopholes that have allowed for
financial crimes to be committed, it will also pull us into the 21st
century by positioning the United States to face tomorrow's challenges.
The bill encourages financial regulators to work with companies to
implement innovative approaches to meet the requirements in complying
with existing law and encourages the use of innovative pilot programs.
Financial regulators will establish an innovation lab that will
provide outreach to law enforcement, financial institutions, and
others, to coordinate on
[[Page H8320]]
innovative and new technologies, ensuring they comply with existing law
while fostering the implementation of new technologies. An innovation
council will also be created, represented by the directors from each
innovation lab, who will coordinate on active Bank Secrecy Act
compliance.
It is imperative that we modernize our efforts to combat financial
crimes because our adversaries will continue to modernize. I am happy
that this bill is coming before us, the COUNTER Act, as an amendment to
Congresswoman Maloney's bill, the Corporate Transparency Act, which I
know she and her team have worked very hard to produce.
The straightforward bill, Mr. Speaker, provides needed visibility by
requiring companies and the United States to disclose the financial
beneficiary in order to prevent criminals and wrongdoers from
exploiting their status as a company.
Mr. Speaker, these are critical proposals. I urge my colleagues to
support this legislation, and I thank Chairwoman Waters.
Mr. McHENRY. Mr. Speaker, I yield 3 minutes to the gentleman from
Ohio (Mr. Stivers), the ranking member of Subcommittee on Housing,
Community Development and Insurance.
Mr. STIVERS. Mr. Speaker, I rise in opposition to H.R. 2513, although
I do want to acknowledge that the sponsor has worked hard and in good
faith to try to make the bill work, and I think the bill is well-
intended.
There are two primary reasons why I oppose the legislation:
Number 1, it imposes an undue burden on small business, and;
Number 2, it doesn't adequately protect personally identifiable
information of millions of Americans from cyberattacks.
First, it imposes a new burden on millions of small businesses, our
constituents, who aren't aware we are having this debate today. In
fact, most of them don't even know what FinCen is, but they will be
forced to provide sensitive personal information to FinCen, an agency
almost nobody knows, and failure to do so could lead to up to 3 years
of imprisonment.
I feel the bill was well-intended, though, because I know that shell
companies are used by criminals to move illicit money through our
financial system. But there is a better way to address the problem. In
committee, the gentleman from Arkansas (Mr. Hill), my colleague,
offered an amendment that would transfer the information collected
under this bill from FinCen to the IRS as part of the annual tax filing
process. That approach will impose less burden on our constituents, the
small businesses that create jobs in this country.
But a bigger obstacle would be here on the Hill, because it would
result in shared jurisdiction with the Ways and Means Committee, so
that ``good idea'' couldn't work because of jurisdictional lines.
Second, my issue is this agency, FinCen, will be the repository of a
lot of data from millions of Americans with personally identifiable
information. It is Cybersecurity Awareness Month; yet, there is not
enough adequate protections in this bill to ensure that private data is
secure from cyberattacks.
For these reasons, I can't vote for the bill, but I do want to
congratulate the gentlewoman from New York (Mrs. Carolyn B. Maloney),
my colleague, and sponsor of this bill, for her hard work in trying to
make the bill work.
Finally, I want to thank and recognize my colleague, Representative
Cleaver, whose bill, the COUNTER Act, H.R. 2514, was rolled into this
bill. Representative Cleaver worked with Republicans and Democrats to
ensure our anti-money laundering and Bank Secrecy Act regime was
reformed in a bipartisan way that makes our national security stronger.
I want to thank him and congratulate him on that work. And if that
bill was a standalone bill, I think it would pass this institution
nearly unanimously, if not unanimously. Again, unfortunately, I have to
oppose H.R. 2513.
Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentleman from
Florida (Mr. Lawson).
Mr. LAWSON of Florida. Mr. Speaker, I thank the chairwoman for
yielding me time.
Mr. Speaker, I rise to support H.R. 2513, the Corporate Transparency
Act.
The bill would close loopholes that bad actors have taken advantage
of in order to aid terrorist organizations, corrupt officials, and
other criminal enterprises. Specifically, this bill requires that those
who form corporations must disclose who the true beneficial owners are
in order to thwart hidden criminal activity.
Instilling these measures in place will benefit consumers and small
businesses by preventing unfair contracting practices, including false
billing, fraudulent certifications, and defrauding taxpayers.
In addition, this bill will help to curb and prevent human
trafficking, which is very prevalent now, by eliminating anonymous
companies who hide the identities of criminals engaged in trafficking
enterprises masked by a legitimate business structure.
According to a study by the University of Texas, among over 100
countries studied, the United States ranked the easiest place for
suspicious individuals to incorporate an anonymous company.
Further, according to a 2017 GAO study, it found that GAO was unable
to identify ownership information for about one-third of the GSA's high
security leases.
Mr. Speaker, the Corporate Transparency Act will fix these issues and
provide much-needed transparency into the corporate governing
structure. I encourage my colleagues on both sides to support this
bill.
Mr. McHENRY. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Missouri (Mrs. Wagner), the ranking member of the Subcommittee on
Diversity and Inclusion, and the vice ranking member of the Committee
on Financial Services.
Mrs. WAGNER. Mr. Speaker, I thank the gentleman from North Carolina
(Mr. McHenry), ranking member, for yielding.
Mr. Speaker, I rise today in support of H.R. 2513, the Corporate
Transparency Act. I thank my friend, Carolyn Maloney, for her
tremendous work to fight trafficking and expose criminals who make
money for exploitation; and my friend and colleague, Blaine
Luetkemeyer, the ranking member of the Subcommittee on Consumer
Protection and Financial Institutions for all his work on this issue of
beneficial ownership.
I agree with my colleagues that we should not place unnecessary
requirements on small businesses, and I believe that this legislation
strikes the right balance.
It helps hardworking law enforcement officials expose traffickers who
are laundering money through shell companies without placing onerous
mandates on small businesses.
Human trafficking is an incredibly lucrative industry, with profits
estimated at $150 billion a year. America lags behind our peers in
other countries in collecting the beneficial ownership information that
helps us to go after these anonymous companies that are exploiting the
most vulnerable in our society.
Mr. Speaker, my amendment further simplifies the reporting process,
and prevents identity theft and fraud. It creates a fast-tracked
process for beneficial ownership where any citizen who is a frequent
investor can be pre-verified. I am glad to see my amendment included in
this underlying bill today.
Mr. Speaker, I urge my colleagues to join me in voting ``yes'' so
that Congress can finally close the loopholes that allow criminals to
rapidly move money and conceal illicit profits in the U.S. banking
process.
Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentleman from
Illinois (Mr. Casten).
Mr. CASTEN of Illinois. Mr. Speaker, I rise in support of H.R. 2513.
As a member of the Committee on Financial Services, I have witnessed
firsthand Representative Maloney's commitment to advancing this
important piece of legislation, and I am so glad that we are discussing
it on the floor today.
Sunlight is the best disinfectant. The need for sunlight is
especially urgent today as it relates to the involvement of foreign bad
actors in our economy and our political process. We have, all of us
here, taken an oath to support and defend the Constitution of the
United States against all enemies, foreign and domestic, but regardless
of whether you take that oath, I would submit to you that all patriotic
Americans feel that obligation. I certainly
[[Page H8321]]
do, and this bill is a furtherance of that oath.
Before I got here, I was a CEO of an LLC. In fact, I was the CEO of a
lot of LLCs. I couldn't even tell you how many LLCs I was the CEO of.
And the reason is, because like a lot of modern companies, we set up a
corporate structure to have a nested set of LLCs that could isolate
liabilities to be matched to different rounds of investors in our
company.
Now, that is a great feature of LLCs, but as is so often the case, a
strength is also a weakness. It is a weakness because if it allows us
to hide investors who want to use our financial system in a nefarious
way--like to launder money--they can take advantage of that strength.
And that is why this bill is so necessary. Because companies like
mine already collect the data. Because FinCen data is already
classified as FISMA high, which is the highest level of cybersecurity
for government agencies. So the argument that data of all filers is not
protected is simply not true. But ultimately, because sunlight is the
best disinfectant, and because we are in a moment when too many
powerful people are seeking to hide their sources of capital, putting
the trust in our government and financial system at risk.
This is the right bill for business. It is the right bill for our
financial system. And it is the right bill for our country.
Mr. McHENRY. Mr. Speaker, I yield 2 minutes to the gentleman from
Troy, Ohio (Mr. Davidson).
Mr. DAVIDSON of Ohio. Mr. Speaker, I thank my colleagues for the
important reforms that have been included in this bill, very
thoughtfully, to reform our Bank Secrecy Act.
The United States puts heavy burdens on banks to know their
customers, to protect our country and our financial system, and to make
it easier for the folks in law enforcement, and, frankly, all layers of
national security to defend America.
It is an important way that our sanctions regime works. It is an
important way that we detect and prosecute crime. And it has worked
very successfully for years in the current form.
The biggest complaint is often that we required too much of banks.
And so that led to this consumer due diligence rule that FinCen put out
that put an extra burden on banks, some would say a redundant burden on
banks, to report the beneficial ownership of their companies.
And so that created this provision that is now blended into a single
bill rather than a standalone bill that was known as the Corporate
Transparency Act. This is a horrible solution to a real problem. And
the solution is horrible because it presumes that everyone that would
own a company that has fewer than 20 employees is somehow part of an
illicit finance scheme in America. The smallest, least-sophisticated
businesses are now required to report annually and more frequently if
they change the composition of the beneficial owners.
This is a violation of civil liberties and constitutional rights that
our body should take seriously. Historically, that has been something
that has united the parties.
{time} 1445
When Congress did the reforms to the PATRIOT Act and the Foreign
Intelligence Surveillance Act, they put these provisions in place with
great hesitation because it created a big database and collected a
great deal of information.
This data would not be subject to subpoena or control. It is a
horrible solution to a real problem, and I urge greater consideration
of alternatives in opposition to this bill.
Mr. McHENRY. May I inquire of the Chair the time remaining.
The Acting CHAIR. The gentleman from North Carolina has 7\1/2\
minutes remaining. The gentlewoman from California has 8\1/2\ minutes
remaining.
Mr. McHENRY. Mr. Chair, I reserve the balance of my time.
Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.
Mr. Chair, the United States is vulnerable. According to a 2017
report by the Government Accountability Office, ``GAO was unable to
identify ownership information for about one-third of GSA's 1,406 high-
security leases as of March 2016 because ownership information was not
readily available for all buildings.''
This finding was a leading factor in Congress voting to adopt a
provision in the fiscal year 2018 National Defense Authorization Act
for the Department of Defense to collect beneficial ownership
information for all high-security office space it leases.
As a matter of fact, there is more information required to obtain a
library card. According to a 2019 Global Financial Integrity analysis,
``The Library Card Project: The Ease of Forming Anonymous Companies in
the United States,'' in all 50 States and the District of Columbia,
``more personal information is needed to obtain a library card than to
establish a legal entity that can be used to facilitate tax evasion,
money laundering, fraud, and corruption.''
The British model: The United Kingdom has a beneficial ownership
directory, and an analysis found that the average number of owners per
business in the U.K. is 1.13. Eighty-eight percent had two or fewer
owners. The most common number of owners is one. More than 99 percent
of businesses listed less than six owners.
According to the U.S. Small Business Administration, approximately 78
percent of all businesses in the U.S. are nonemployer firms, meaning
there is only one person in the enterprise. This suggests that the
experience in the U.S. would be similar to that in the U.K.
Mr. Chair, I would like to share with you that this legislation has
tremendous support, for example, from Main Street Alliance, a network
of over 30,000 small businesses; American Bankers Association; Bank
Policy Institute; Mid-Size Bank Coalition of America; National Foreign
Trade Council; Consumer Bankers Association; Financial Services Forum;
Bankers Association for Finance and Trade; American Land Title
Association; National Association of Realtors; One; FACT Coalition, a
collection of 100-plus NGOs, including AFL-CIO, Global Witness, Oxfam
America, Friends of the Earth U.S., Jubilee USA Network, Public
Citizen, and Small Business Majority.
We could go on and on and on, but I think it is important to know
that members of the Financial Services Committee, Representatives
Maloney, Luetkemeyer, and Cleaver, have worked in good faith, along
with the Department of the Treasury, nonprofit groups, and the
financial services sector, to find consensus to close a massive
loophole in our anti-money laundering framework.
The resulting pieces of legislation to modernize the anti-money
laundering processes and to create a secure financial ownership
registry of legal entities held at the Financial Crimes Enforcement
Network at the Department of the Treasury represent the best path
forward to provide law enforcement with needed information to pursue
money criminals looking to exploit our financial system.
Mr. Chair, I reserve the balance of my time.
Mr. McHENRY. Mr. Chair, I include in the Record a letter from the
National Federation of Independent Businesses in opposition to this
bill and a letter dated October 18, 2019, in opposition to the bill.
NFIB,
Washington, DC, October 21, 2019.
Dear Representative: On behalf of NFIB, the nation's
leading small business advocacy organization, I write in
strong opposition to H.R. 2513, the Corporate Transparency
Act of 2019. This bill saddles America's smallest businesses
with 131.7 million new paperwork hours at a cost of $5.7
billion, and treats small business owners as criminals by
threatening them with jail time and oppressive fines for
paperwork violations. To make matters even worse, the
legislation puts the personal information of small business
owners at serious risk.
The Corporate Transparency Act of 2019 requires
corporations and limited liability companies with 20 or fewer
employees to file new reports with the Treasury Department's
Financial Crimes Enforcement Network (FinCEN) regarding the
personally identifiable information of businesses' beneficial
owners and update that information every year. The
legislation imposes its reporting mandates only on America's
small businesses, those least equipped to handle new
paperwork requirements. Moreover, the legislation makes it a
federal crime to fail to provide completed and updated
reports, with civil penalties of up to $10,000, criminal
penalties of up to 3 years in prison, or both.
The nonpartisan Congressional Budget Office (CBO) agrees
that this legislation would
[[Page H8322]]
impose a significant new regulatory burden on small
businesses. The CBO wrote, ``Because of the high volume of
businesses that must meet the new reporting requirements and
the additional administrative burden to file a new report,
CBO estimates that the total costs to comply with the mandate
would be substantial.'' The Corporate Transparency Act would
generate between 25 million to 30 million new reports
annually.
NFIB members report that the burden of federal paperwork
ranks in the top 20% of the problems they encounter as small
business owners. While large businesses and financial
institutions may have access to teams of lawyers,
accountants, and compliance experts to gather beneficial
ownership information and report it to the government, small
business owners do not. Small business owners have difficulty
affording accounting and legal experts to help them
understand and comply with federal reporting requirements.
And small business owners lack the time to track and gather
information to fill out yet more forms for the government.
When NFIB surveyed its membership concerning beneficial
ownership reporting in August 2018, 80% opposed the idea of
Congress requiring small business owners to file paperwork
with the Treasury Department each time they form or change
ownership of a business.
The Corporate Transparency Act of 2019 raises serious
privacy concerns for small businesses. This bill would allow
federal, state, tribal, local, and even foreign law
enforcement access to business owners' personally
identifiable information, via the FinCEN database, without a
subpoena or warrant. The potential for improper disclosure or
misuse of private information increases as the number of
people with access to the information increases.
The Corporate Transparency Act of 2019 establishes a first
of its kind federal registry of small business owners. While
this registry will not be publicly available initially, NFIB
has serious concerns that this legislation would be a first
step towards establishing a publicly accessible federal
registry, which can be used to name and shame small business
owners.
NFIB strongly opposes H.R. 2513, the Corporate Transparency
Act of 2019 and will consider it a Key Vote for the 116th
Congress.
Sincerely,
Juanita D. Duggan,
President & CEO,
NFIB.
____
October 18, 2019.
Dear Representative: While we support the goal of
preventing wrongdoers from exploiting United States
corporations and limited liability companies (LLCs) for
criminal gain, the undersigned organizations write to express
our strong opposition to H.R. 2513, the Corporate
Transparency Act of 2019.
The Corporate Transparency Act would impose burdensome,
duplicative reporting burdens on millions of small businesses
in the United States and threatens the privacy of law-
abiding, legitimate small business owners.
The Financial Crimes Enforcement Network's (FinCEN)
Customer Due Diligence (CDD) rule became applicable on May
11, 2018. The CDD rule requires financial institutions to
collect the ``beneficial ownership'' information of legal
entities with which they conduct commerce. This legislation
would attempt to shift the reporting requirements from large
banks--those best equipped to handle reporting requirements--
to millions of small businesses--those least equipped to
handle reporting requirements.
The reporting requirements in the legislation would not
only be duplicative, they would also be burdensome. Under
this legislation, millions of small businesses would be
required to register personally identifiable information with
FinCEN upon incorporation and file annual reports with FinCEN
for the life of the business. Failure to comply with these
reporting requirements would be a federal crime with civil
penalties up to $10,000, criminal penalties up to 3 years in
prison, or both.
The Congressional Budget Office wrote, ``Because of the
high volume of businesses that must meet the new reporting
requirements and the additional administrative burden to file
a new report, CBO estimates that the total costs to comply
with the mandate would be substantial.'' The Corporate
Transparency Act would generate between 25 million to 30
million new reports annually.
This legislation contains a definition of ``beneficial
ownership'' that expands upon the current CDD rule. The CDD
rule requires disclosure of individuals with a 25 percent
ownership interest in a business and an individual with
significant responsibilities to control a business. The
Corporate Transparency Act would expand that definition,
requiring disclosure of any individual who ``receives
substantial economic benefits from the assets of'' a small
business. The legislation defers to regulators at the
Department of Treasury to determine ``substantial economic
benefits.''
In addition, this legislation would impose a ``look-
through'' reporting requirement, necessitating small business
owners to look through every layer of corporate and LLC
affiliates to identify if any individuals associated with
such entities are qualifying beneficial owners. Ownership of
an entity by one or more other corporations or LLCs is
common. Corporate and LLC shareholders would already have
their own independent reporting obligation under this bill to
disclose any beneficial owners, making this provision
excessively burdensome.
The Corporate Transparency Act raises significant privacy
concerns as the proposed FinCEN ``beneficial ownership''
database would contain the names, dates of birth, addresses,
and unexpired drivers' license numbers or passport numbers of
millions of small business owners. This information would be
accessible upon request ``through appropriate protocols'' to
any local, state, tribal, or federal law enforcement agency
or to law enforcement agencies from other countries via
requests by U.S. federal agencies. This type of regime
presents unacceptable privacy risks.
The Corporate Transparency Act also introduces serious data
breach and cybersecurity risks. Under the legislation, FinCEN
would maintain a database of private information that could
be hacked for nefarious reasons. As the 2015 breach of the
Office of Personnel Management demonstrated, the federal
government is not immune from cyber-attacks and harmful
disclosure of information. In addition, millions of American
companies would be required to maintain and distribute
information about owners and investors in the company, thus
creating another point of vulnerability for attack. This risk
is particularly acute because the Corporate Transparency Act
is focused only on small businesses and those entities are
often the least equipped to fight off cyber intrusions.
While this letter does not enumerate every concern, it
highlights fundamental problems the Corporate Transparency
Act would cause for millions of small businesses in the
United States.
Because of the new reporting requirements and privacy
concerns, the undersigned organizations urge a no vote on
H.R. 2513, the Corporate Transparency Act.
Sincerely,
Air Conditioning Contractors of America, American Business
Conference, American Farm Bureau Federation, American Foundry
Society, American Hotel and Lodging Association, American
Rental Association, Asian American Hotel Owners Association,
Associated Builders and Contractors, Associated General
Contractors of America, Auto Care Association, Family
Business Coalition, International Foodservice Distributors
Association, International Franchise Association.
National Apartment Association, National Association for
the Self-Employed, National Association of Home Builders,
National Association of Wholesaler-Distributors, NFIB,
National Grocers Association, National Lumber and Building
Material Dealers Association, National Pest Management
Association, National Restaurant Association, National Retail
Federation, National Roofing Contractors Association.
National Small Business Association, National Tooling and
Machining Association, Petroleum Equipment Institute,
Petroleum Marketers Association of America, Policy and
Taxation Group, Precision Machined Parts Association,
Precision Metalforming Association, Service Station Dealers
of America and Allied Trades, S-Corporation Association,
Small Business & Entrepreneurship Council, Specialty
Equipment Market Association, The Real Estate Roundtable,
Tire Industry Association.
Mr. McHENRY. Mr. Chair, I include in the Record an article on behalf
of the Due Process Institute, the American Civil Liberties Union, and
FreedomWorks in opposition to this bill.
[From the Due Process Institute, ACLU, and FreedomWorks]
No Benefit to a Beneficial Ownership Reporting System That Increases
America's Over-Incarceration Problem and Fails To Adequately Protect
Privacy
H.R. 2513 would require people who form or already own
businesses, particularly small businesses, to submit
extensive personal, financial, and business-related
information to the government's Financial Crimes Enforcement
Network (FinCEN). Legislative efforts to stop international
crime by trying to ``follow the money'' such as H.R. 2513
likely have the best intentions in mind. However, the Due
Process Institute, the American Civil Liberties Union, and
FreedomWorks have serious concerns with several provisions of
the Corporate Transparency Act of 2019 and believe the House
should vote no TODAY on H.R. 2513 until these issues are
fully addressed.
In sum, the creation of at least 5 new federal crimes for
first-time ``paperwork'' violations that are felony criminal
offenses calling for prison time is a dramatic step in the
wrong direction. No matter how well-intentioned, this bill
bears no real relation to combatting terrorism or money
laundering and instead eliminates a significant amount of
personal and financial privacy. On that score, the bill fails
to adequately address how all of the personal and financial
information disclosed to, and collected by, the government
will be used solely for legitimate purposes or specifically
address how privacy interests will be protected.
Key Terms are Too Vague
Importantly, numerous key terms and phrases in the bill are
poorly defined. For example, the current definition of
``beneficial owner'' includes anyone who ``directly or
indirectly'' exercises substantial control or receives
substantial economic benefit from an
[[Page H8323]]
entity. What does it mean to indirectly control an entity?
The bill does not explain. We also cannot look to current
FinCEN regulations to divine meaning. The bill does not
replicate current FinCEN definitions of beneficial ownership
and broadens the current definition to include an individual
that ``receives substantial economic benefits from the assets
of a corporation.'' Again, the bill does not explain the
term. This lack of clarity has very serious consequences when
a bill creates at least 5 new federal criminal laws that do
nothing but increase this nation's overreliance on
criminalization as a cure for every problem. Vague or overly
broad statutory text leaves people vulnerable to unfair
criminal investigations and prosecutions.
Complex Criminal Compliance Laws Unfairly Burden Small Businesses &
Nonprofits
Furthermore, this bill exempts most large entities with the
compliance teams necessary to help them navigate new and
burdensome requirements. Determining what is to be reported,
when, and by whom, in a complex regulatory scheme is
difficult. Large corporations are exempt--leaving the
reporting burdens solely to small or independent
businessowners as well as many nonprofits. Compounding this
problem, these new disclosure requirements would apply not
only to newly formed entities but also to those that have
already been in existence--yet a businessowner (even a first-
time offender) who fails to comply with any aspect of the
requirements could face a prison sentence, as might a non-
profit organization that inadvertently fails to meet all of
the requirements to qualify for an exemption in the bill.
These kinds of requirements easily set traps for honest
people trying to faithfully comply with complex laws,
particularly owners who lack experience or significant funds
and volunteer-based nonprofits also lacking in funds and
expertise to retain sophisticated business lawyers who can
help them.
Beneficial Ownership Information Would Lack Sufficient Privacy
Protection
The bill currently would permit beneficial ownership
information to be shared with local, Tribal, State, or
Federal law enforcement under nearly any circumstances where
they may assert an existing investigatory basis and agree to
abide by vague privacy standards. The receiving agency may
then use that information, without meaningful limitation, for
any other law enforcement, national security, or intelligence
purpose. These standards are entirely too broad and leave far
too much personal information vulnerable to disclosure. The
bill should permit FinCEN to disclose beneficial ownership
information only when presented with a warrant based on
probable cause. Without a clear standard limiting information
disclosure, there would be few if any limits on the sharing
of this information. Search warrants based on probable cause
are the standard for obtaining information in criminal
investigations and it would be reasonable to require them in
this context. Moreover, the bill contains inadequate
safeguards for protecting against the improper disclosure of
information or for appropriately limiting the use of the
information disclosed. At a minimum, the bill should limit
use of the information to the investigative purposes for
which it was collected and require the deletion of
information after it is no longer useful for its
investigative purpose. And it fails to provide either.
The truth is: there are already hundreds of federal
criminal laws on the books, along with a wide swath of
powerful investigative tools and authorities, that the
government can use to adequately address or prevent money
laundering and this bill is an unnecessary step in the wrong
direction.
We hope you share our bipartisan concerns and oppose this
legislation when voting today unless serious amendments are
made.
Mr. McHENRY. And, Mr. Chair, I include in the Record two newspaper
pieces, or news articles, if you will, from The Wall Street Journal and
from The Verge.
From The Verge, it says: ``FBI violated Americans' privacy by abusing
access to NSA surveillance data, court rules.'' And the second, from
The Wall Street Journal, says: ``FBI's Use of Surveillance Database
Violated Americans' Privacy Rights, Court Found.'' These are two recent
articles that have been published in the last 10 days.
[From The Verge, Oct. 8, 2019]
FBI Violated Americans' Privacy by Abusing Access to NSA Surveillance
Data, Court Rules
(By Nick Statt)
FBI Agents made tens of thousands of unauthorized searches on American
Citizens
The Federal Bureau of Investigation made tens of thousands
of unauthorized searches related to US citizens between 2017
and 2018, a court ruled. The agency violated both the law
that authorized the surveillance program they used and the
Fourth Amendment of the US Constitution.
The ruling was made in October 2018 by the Foreign
Intelligence Surveillance Court (FISC), a secret government
court responsible for reviewing and authorizing searches of
foreign individuals inside and outside the US. It was just
made public today.
THE FBI MADE UNAUTHORIZED, WARRANTLESS ELECTRONIC SEARCHES ON AMERICAN
CITIZENS
The program itself, called Section 702 and part of the
broad and aggressive expansion of US spy programs in the
years after 9/11, granted FBI agents the ability to search a
database of electronic intelligence, including phone numbers,
emails, and other identifying data. It's intended for use
primarily by the National Security Agency.
There's a key limitation on Section 702: it can only be
used to search for evidence of a crime or as part of an
investigation into a foreign target. The idea is to monitor
terrorism suspects and cyberthreats.
Yet the FBI vetted American sources using the database,
according to The Wall Street Journal. The agents also used
the database to search for information about themselves. Less
amusingly, they also looked up friends, family, and
coworkers. The court deemed this a clear violation of the
Fourth Amendment, which protects against unreasonable search
and seizure, because none of the searches of US citizens had
proper warrants attached.
The FISC is responsible for evaluating the use of these spy
tools in secret as part of the Foreign Intelligence
Surveillance Act of 1978, which pushed these governmental
deliberations behind closed doors under the guise of
protecting national security. That's why this ruling went a
full year before seeing the light of day.
It's public now because the government lost an appeal in a
separate, secret appeals court, the WSJ says. The FBI must
now create new oversight procedures and a compliance review
team to protect against further surveillance abuse.
____
[From WSJ, October 8, 2019]
FBI's Use of Surveillance Database Violated Americans' Privacy Rights,
Court Found
(By Dustin Volz and Byron Tau)
U.S. discloses ruling last year by Foreign Intelligence Surveillance
Court that FBI's data queries of U.S. citizens were unconstitutional
Washington--Some of the Federal Bureau of Investigation's
electronic surveillance activities violated the
constitutional privacy rights of Americans swept up in a
controversial foreign intelligence program, a secretive
surveillance court has ruled.
The ruling deals a rare rebuke to U.S. spying programs that
have generally withstood legal challenge and review since
they were dramatically expanded after the Sept. 11, 2001,
attacks. The opinion resulted in the FBI agreeing to better
safeguard privacy and apply new procedures, including
recording how the database is searched to detect possible
future compliance issues.
The intelligence community disclosed Tuesday that the
Foreign Intelligence Surveillance Court last year found that
the FBI's efforts to search data about Americans ensnared in
a warrantless internet-surveillance program intended to
target foreign suspects have violated the law authorizing the
program, as well as the Constitution's Fourth Amendment
protections against unreasonable searches. The issue was made
public by the government only after it lost an appeal of the
judgment earlier this year before another secret court.
The court concluded that in at least a handful of cases,
the FBI had been improperly searching a database of raw
intelligence for information on Americans--raising concerns
about oversight of the program, which as a spy program
operates in near total secrecy.
The October 2018 court ruling identifies improper searches
of raw intelligence databases by the bureau in 2017 and 2018
that were deemed problematic in part because of their
breadth, which sometimes involved queries related to
thousands or tens of thousands of pieces of data, such as
emails or telephone numbers. In one case, the ruling
suggested, the FBI was using the intelligence information to
vet its personnel and cooperating sources. Federal law
requires that the database only be searched by the FBI as
part of seeking evidence of a crime or for foreign
intelligence information.
In other instances, the court ruled that the database had
been improperly used by individuals. In one case, an FBI
contractor ran a query of an intelligence database--searching
information on himself, other FBI personnel and his
relatives, the court revealed.
The Trump administration failed to make a persuasive
argument that modifying the program to better protect the
privacy of Americans would hinder the FBI's ability to
address national security threats, wrote U.S. District Judge
James Boasberg, who serves on the PISA Court, in the
partially redacted 138-page opinion released Tuesday.
In one case central to the court's opinion, the FBI in
March 2017 conducted a broad search for information related
to more than 70,000 emails, phone numbers and other digital
identifiers. The bureau appeared to be looking for data to
conduct a security review of people with access to its
buildings and computers--meaning the FBI was searching for
data linked to its own employees.
Judge Boasberg wrote that the case demonstrated how a
``single improper decision or assessment'' resulted in a
search of data belonging to a large number of individuals. He
said the government had reported since April 2017 ``a large
number of FBI queries that
[[Page H8324]]
were not reasonably likely to return foreign-intelligence
information or evidence of a crime,'' the standard required
for such searches.
``The court accordingly finds that the FBI's querying
procedures and minimization procedures are not consistent
with the requirements of the Fourth Amendment,'' Judge
Boasberg concluded.
The legal fight over the FBI's use of the surveillance tool
has played out in secret since the courts that adjudicate
these issues under the Foreign Intelligence Surveillance Act
of 1978 rarely publicize their work. It was resolved last
month after the government created new procedures in the wake
of losing an appeal to the U.S. Foreign Intelligence
Surveillance Court of Review--a secret appeals court that is
rarely consulted and seldom releases opinions publicly. That
resolution cleared the way for the disclosure Tuesday.
Additionally, FBI Director Chris Wray ordered the creation
of a compliance review team following the October decision, a
bureau official said.
The program in question, known as Section 702 surveillance,
has roots in the national-security tools set up by the George
W. Bush administration following the Sept. 11, 2001,
terrorist attacks. It was later enshrined in law by Congress
to target the electronic communications of nonAmericans
located overseas. The program is principally used by the
National Security Agency to collect certain categories of
foreign intelligence from international phone calls and
emails about terrorism suspects, cyber threats and other
security risks.
Information from that surveillance is often shared with
relevant federal government agencies with the names of any
U.S. persons redacted to protect their privacy, unless an
agency requests that identities be unmasked.
Privacy advocates have long criticized the Section 702 law
for allowing broad surveillance that can implicate Americans
and doesn't require individualized warrants. U.S.
intelligence officials have defended it as among the most
valuable national-security tools at their disposal, even as
intelligence agencies have acknowledged that some
communications from Americans are swept up in the process.
The court documents released Tuesday reveal unprecedented
detail about how communications from Americans were ensnared
and searched by intelligence collection programs that U.S.
officials have publicly said are aimed mainly at foreigners.
They cast doubt on whether law-enforcement and intelligence
agencies are carefully complying with privacy procedures
Congress has mandated.
Sen. Ron Wyden (D., Ore.), a critic of U.S. surveillance
programs, said the disclosure ``reveals serious failings in
the FBI's backdoor searches, underscoring the need for the
government to seek a warrant before searching through
mountains of private data on Americans.''
President Trump signed into law a six-year renewal of the
Section 702 program in early 2018. Changes to the law allowed
the court to review the FBI's data handling ultimately led to
the October ruling.
The surveillance court opinions are the latest setback for
U.S. surveillance practices during the Trump administration.
The NSA last year turned off a program that collects domestic
phone metadata--the time and duration of a call but not its
content--amid at least two compliance issues involving the
overcollection of data the spy agency wasn't authorized to
obtain.
The FBI has also been under intense political pressure from
Mr. Trump and his allies, who allege that the bureau's
surveillance of a Trump campaign associate was improper. That
surveillance of the aide, Carter Page, fell under a different
provision of the foreign intelligence law but has
nevertheless sparked a major debate about the scope of the
bureau's authorities.
Corrections & Amplifications
U.S District Judge James Boasberg's opinion on FBI
surveillance was 138 pages long. An earlier version of this
article incorrectly called it a 167-page opinion. (Oct. 8,
2019)
Mr. McHENRY. Mr. Chair, I yield 2 minutes to the gentleman from
Tennessee (Mr. John W. Rose), from Temperance Hall.
Mr. JOHN W. ROSE of Tennessee. Mr. Chair, I rise in opposition to
H.R. 2513, the Corporate Transparency Act.
As a farmer and as someone who has started a small business from the
ground up, I know firsthand the unnecessary burden government
regulations can place on small business owners.
Unlike large corporations, America's 5 million small businesses do
not have the manpower, time, or resources to comply with more undue
regulatory burdens.
Furthermore, it is concerning that H.R. 2513 lacks provisions that
would ensure our small business owners' privacy. Under H.R. 2513, small
business owners, after submitting their personal information, cannot
trust that it would be safe or protected. As offered, H.R. 2513 lacks
the safeguards necessary to provide our small business owners the
confidence that their personal information will be safe and protected,
once submitted.
At a minimum, if Big Government demands personal information, it must
protect that data.
In addition, H.R. 2513 is built around arbitrary thresholds. I have
yet to see a convincing explanation for why the threshold is a maximum
of 20 employees or $5 million in gross receipts.
Under this legislation, if small business owners are unable to submit
the required personal information, they may face criminal penalties of
$10,000 and 3 years in prison. That would kill any small business.
Let us not forget, small businesses are the heart and drivers of job
creation in many rural communities, as is the case for many of the
communities I proudly represent in Tennessee's Sixth District.
We cannot unleash innovation in our country when we continue to force
Big Government on America's small farmers and business owners.
The esteemed ranking member from North Carolina and I urge our fellow
Members to join us in voting against H.R. 2513, the latest rendition of
burdensome regulations and personal privacy invasions.
Ms. WATERS. Mr. Chair, I yield 3 minutes to the gentlewoman from New
York (Mrs. Carolyn B. Maloney) sponsor of the legislation, H.R. 2513.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, critics on the other
side of the aisle have made wild claims about the bill costing small
businesses millions of dollars. But in the U.K., where they already
collect this information, the cost of compliance for the average small
business was only about $200, and that is a one-time cost. To me, that
is a very modest price to pay for national security.
Every law enforcement agency in this country is asking for this
reform, in order to make us safer.
In the U.K., the median company had 1.1 owners, which means that the
vast majority of small businesses only have one owner, so that these
businesses only have to file one name.
We are asking for only four pieces of information, and it is basic:
name, date of birth, current address, and driver's license.
Does that sound burdensome? For most small business owners, it would
take less than 5 minutes to fill out the form.
According to studies, it was pointed out earlier, you have to
disclose more information to get a library card than you need to
disclose to create a corporation or an LLC. And you don't hear people
complaining about filling out forms for library cards.
I think the idea that the disclosure would be unduly burdensome is
simply and completely false.
The bill also goes out of its way to exempt every category of
business that already discloses their beneficial owners, either to
regulators or the public filings. This includes banks, credit unions,
insurance companies, and investment advisers, brokers, utilities, and
nonprofits.
The bill even exempts companies with more than 20 employees and over
$5 million in revenues because, if you have 20 employees, you are
actually generating a significant amount of revenues and you are,
certainly, a real business and not a shell company that is being used
to launder money.
In fact, in almost all the cases where law enforcement has uncovered
a shell company that is being used for illicit purposes, the company
had either zero employees or one employee. That is why we felt very
comfortable exempting companies with more than 20 employees.
I think we have gone way out of our way to ensure that the bill is
appropriately tailored and is not burdensome to small businesses.
I would like to repeat that, usually, national security bills are
bipartisan, and I am proud that we had significant support in the vote
from our friends on the other side of the aisle. I urge my colleagues
on both sides of the aisle to support this important bill that will
make our citizens safer, will help law enforcement do their jobs, and,
therefore, will save lives in our country.
This is a serious bill. Most countries already have it, and we are
way behind. We are the money laundering capital of the world. It is
just plain common sense to protect our citizens.
Vote for national security, and vote for this bill.
Mr. McHENRY. Mr. Chair, I am prepared to close, and I yield myself
the remainder of my time.
[[Page H8325]]
Mr. Chair, this is a disappointing bill. According to the National
Federation of Independent Businesses, this will create $5.7 billion in
new regulatory costs for America's smallest businesses.
My friend and colleague just said one or two employees, but the bill
before us today says 20 or fewer employees. Traditionally, Congress has
exempted small businesses from onerous government regulation, and
Congress, in its wisdom, has set a threshold of small businesses that
is 50 and above for most regulations that are of national import.
This bill turns all that on its head. It turns it all on its head and
says: No, no, no. We are going to have a special carve-out for all
small businesses, $5 billion and under of revenue and 20 employees and
fewer.
The whole mindset here is absolutely wrong. We are putting a new
small business mandate on America's smallest businesses, and we have an
intelligence bureau that is going to go out to the public and request
information directly from the public.
We don't do that with NSA to look at your cell phone records. In
fact, we require the NSA to go before a court in order to look at a
cell phone database, and there is an enormous amount of litigation
around that.
What we have here is a new Federal Government database by an
intelligence bureau most people haven't heard of, and it is a mandate
on small businesses.
There are no due process protections here. You don't have to go
before a court in order to look at this. In fact, they can just peruse
it at will.
You have no data security standards, so we don't even know if this
will be held to the same standard of data breaches that have already
occurred in our intelligence bureaus and for Federal employees, nor the
same liability standards for Federal users as the private sector has to
protect personally identifiable information.
Again, there is not regulatory relief. Our friends in the banks want
this because they want to be relieved of the burden of collecting this
information. I certainly understand that. But they are still going to
have to collect that information.
There is no repeal of the underlying rule that requires the banks to
collect that type of information in order to transact business with
those small businesses and businesses of other sizes.
{time} 1500
So there is no regulatory relief, with few civil liberty protections.
We don't have a cybersecurity standard in the database. And it is a new
mandate on small businesses.
But if you are content with that, vote ``yes,'' and if you don't
think that is sufficient, vote ``no.''
I am going to stand with the NFIB, the American Farm Bureau, the
National Association of Home Builders, National Association of General
Contractors of America, the National Retail Federation, the Real Estate
Roundtable, and other organizations here in Washington, like the ACLU,
Heritage Action for America, the FreedomWorks Foundation, and the
American Civil Liberties Union, as I mentioned, but I want to mention
them twice so that people hear that clearly.
There is bipartisan opposition to this, and so I encourage my
colleagues to vote ``no'' against this new mandate. Stand with your
small business folks, and we will come to a better compromise than what
we have here before us today. Please vote ``no.''
Mr. Chair, I yield back the balance of my time.
Ms. WATERS. Mr. Chairman, I would like to inquire as to how much time
I have left.
The Acting CHAIR. The gentlewoman from California has 1\1/2\ minutes
remaining.
Ms. WATERS. Mr. Chair, I would like to thank Representatives Maloney
and Cleaver for their work on these reforms.
I would like to just add that H.R. 2513 is an important, commonsense
measure that stops criminals from being able to hide behind anonymous
shell companies. It closes loopholes in the Bank Secrecy Act, increases
penalties for those who break the law, and helps provide financial
institutions with new tools to more easily and accurately fulfill their
obligations under the law.
Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. All time for general debate has expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule.
The amendment in the nature of a substitute recommended by the
Committee on Financial Services, printed in the bill, modified by the
amendment printed in part A of House Report 116-247, shall be
considered as adopted. The bill, as amended, shall be considered as the
original bill for the purpose of further amendment and shall be
considered as read.
The text of the bill, as amended, is as follows:
H.R. 2513
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
DIVISION A--CORPORATE TRANSPARENCY ACT OF 2019
SECTION 1. SHORT TITLE.
(a) In General.--This Act may be cited as the ``Corporate
Transparency Act of 2019''.
(b) References to This Act.--In this division--
(1) any reference to ``this Act'' shall be deemed a
reference to ``this division''; and
(2) except as otherwise expressly provided, any reference
to a section or other provision shall be deemed a reference
to that section or other provision of this division.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Nearly 2,000,000 corporations and limited liability
companies are being formed under the laws of the States each
year.
(2) Very few States require information about the
beneficial owners of the corporations and limited liability
companies formed under their laws.
(3) A person forming a corporation or limited liability
company within the United States typically provides less
information at the time of incorporation than is needed to
obtain a bank account or driver's license and typically does
not name a single beneficial owner.
(4) Criminals have exploited State formation procedures to
conceal their identities when forming corporations or limited
liability companies in the United States, and have then used
the newly created entities to commit crimes affecting
interstate and international commerce such as terrorism,
proliferation financing, drug and human trafficking, money
laundering, tax evasion, counterfeiting, piracy, securities
fraud, financial fraud, and acts of foreign corruption.
(5) Law enforcement efforts to investigate corporations and
limited liability companies suspected of committing crimes
have been impeded by the lack of available beneficial
ownership information, as documented in reports and testimony
by officials from the Department of Justice, the Department
of Homeland Security, the Department of the Treasury, and the
Government Accountability Office, and others.
(6) In July 2006, the leading international antimoney
laundering standard-setting body, the Financial Action Task
Force on Money Laundering (in this section referred to as the
``FATF''), of which the United States is a member, issued a
report that criticizes the United States for failing to
comply with a FATF standard on the need to collect beneficial
ownership information and urged the United States to correct
this deficiency by July 2008. In December 2016, FATF issued
another evaluation of the United States, which found that
little progress has been made over the last ten years to
address this problem. It identified the ``lack of timely
access to adequate, accurate and current beneficial ownership
information'' as a fundamental gap in United States efforts
to combat money laundering and terrorist finance.
(7) In response to the 2006 FATF report, the United States
has urged the States to obtain beneficial ownership
information for the corporations and limited liability
companies formed under the laws of such States.
(8) In contrast to practices in the United States, all 28
countries in the European Union are required to have
corporate registries that include beneficial ownership
information.
(9) To reduce the vulnerability of the United States to
wrongdoing by United States corporations and limited
liability companies with hidden owners, to protect interstate
and international commerce from criminals misusing United
States corporations and limited liability companies, to
strengthen law enforcement investigations of suspect
corporations and limited liability companies, to set a clear,
universal standard for State incorporation practices, and to
bring the United States into compliance with international
anti-money laundering standards, Federal legislation is
needed to require the collection of beneficial ownership
information for the corporations and limited liability
companies formed under the laws of such States.
SEC. 3. TRANSPARENT INCORPORATION PRACTICES.
(a) In General.--
(1) Amendment to the bank secrecy act.--Chapter 53 of title
31, United States Code, is amended by inserting after section
5332 the following new section:
``Sec. 5333 Transparent incorporation practices
``(a) Reporting Requirements.--
``(1) Beneficial ownership reporting.--
``(A) In general.--Each applicant to form a corporation or
limited liability company under
[[Page H8326]]
the laws of a State or Indian Tribe shall file a report with
FinCEN containing a list of the beneficial owners of the
corporation or limited liability company that--
``(i) except as provided in paragraphs (3) and (4), and
subject to paragraph (2), identifies each beneficial owner
by--
``(I) full legal name;
``(II) date of birth;
``(III) current residential or business street address; and
``(IV) a unique identifying number from a non-expired
passport issued by the United States, a non-expired personal
identification card, or a non-expired driver's license issued
by a State; and
``(ii) if the applicant is not a beneficial owner, also
provides the identification information described in clause
(i) relating to such applicant.
``(B) Updated information.--Each corporation or limited
liability company formed under the laws of a State or Indian
Tribe shall--
``(i) submit to FinCEN an annual filing containing a list
of--
``(I) the current beneficial owners of the corporation or
limited liability company and the information described in
subparagraph (A) for each such beneficial owner; and
``(II) any changes in the beneficial owners of the
corporation or limited liability company during the previous
year; and
``(ii) pursuant to any rule issued by the Secretary of the
Treasury under subparagraph (C), update the list of the
beneficial owners of the corporation or limited liability
company within the time period prescribed by such rule.
``(C) Rulemaking on updating information.--Not later than 9
months after the completion of the study required under
section 4(a)(1) of the Corporate Transparency Act of 2019,
the Secretary of the Treasury shall consider the findings of
such study and, if the Secretary determines it to be
necessary or appropriate, issue a rule requiring corporations
and limited liability companies to update the list of the
beneficial owners of the corporation or limited liability
company within a specified amount of time after the date of
any change in the list of beneficial owners or the
information required to be provided relating to each
beneficial owner.
``(D) State notification.--Each State in which a
corporation or limited liability company is being formed
shall notify each applicant of the requirements listed in
subparagraphs (A) and (B).
``(2) Certain beneficial owners.--If an applicant to form a
corporation or limited liability company or a beneficial
owner, or similar agent of a corporation or limited liability
company who is required to provide identification information
under this subsection, does not have a nonexpired passport
issued by the United States, a nonexpired personal
identification card, or a non-expired driver's license issued
by a State, each such person shall provide to FinCEN the full
legal name, current residential or business street address, a
unique identifying number from a non-expired passport issued
by a foreign government, and a legible and credible copy of
the pages of a non-expired passport issued by the government
of a foreign country bearing a photograph, date of birth, and
unique identifying information for each beneficial owner, and
each application described in paragraph (1)(A) and each
update described in paragraph (1)(B) shall include a written
certification by a person residing in the State or Indian
country under the jurisdiction of the Indian Tribe forming
the entity that the applicant, corporation, or limited
liability company--
``(A) has obtained for each such beneficial owner, a
current residential or business street address and a legible
and credible copy of the pages of a non-expired passport
issued by the government of a foreign country bearing a
photograph, date of birth, and unique identifying information
for the person;
``(B) has verified the full legal name, address, and
identity of each such person;
``(C) will provide the information described in
subparagraph (A) and the proof of verification described in
subparagraph (B) upon request of FinCEN; and
``(D) will retain the information and proof of verification
under this paragraph until the end of the 5-year period
beginning on the date that the corporation or limited
liability company terminates under the laws of the State or
Indian Tribe.
``(3) Exempt entities.--
``(A) In general.--With respect to an applicant to form a
corporation or limited liability company under the laws of a
State or Indian Tribe, if such entity is described in
subparagraph (C) or (D) of subsection (d)(4) and will be
exempt from the beneficial ownership disclosure requirements
under this subsection, such applicant, or a prospective
officer, director, or similar agent of the applicant, shall
file a written certification with FinCEN--
``(i) identifying the specific provision of subsection
(d)(4) under which the entity proposed to be formed would be
exempt from the beneficial ownership disclosure requirements
under paragraphs (1) and (2);
``(ii) stating that the entity proposed to be formed meets
the requirements for an entity described under such provision
of subsection (d)(4); and
``(iii) providing identification information for the
applicant or prospective officer, director, or similar agent
making the certification in the same manner as provided under
paragraph (1) or (2).
``(B) Existing corporations or limited liability
companies.--On and after the date that is 2 years after the
final regulations are issued to carry out this section, a
corporation or limited liability company formed under the
laws of the State or Indian Tribe before such date shall be
subject to the requirements of this subsection unless an
officer, director, or similar agent of the entity submits to
FinCEN a written certification--
``(i) identifying the specific provision of subsection
(d)(4) under which the entity is exempt from the requirements
under paragraphs (1) and (2);
``(ii) stating that the entity meets the requirements for
an entity described under such provision of subsection
(d)(4); and
``(iii) providing identification information for the
officer, director, or similar agent making the certification
in the same manner as provided under paragraph (1) or (2).
``(C) Exempt entities having ownership interest.--If an
entity described in subparagraph (C) or (D) of subsection
(d)(4) has or will have an ownership interest in a
corporation or limited liability company formed or to be
formed under the laws of a State or Indian Tribe, the
applicant, corporation, or limited liability company in which
the entity has or will have the ownership interest shall
provide the information required under this subsection
relating to the entity, except that the entity shall not be
required to provide information regarding any natural person
who has an ownership interest in, exercises substantial
control over, or receives substantial economic benefits from
the entity.
``(4) FinCEN id numbers.--
``(A) Issuance of fincen id number.--
``(i) In general.--FinCEN shall issue a FinCEN ID number to
any individual who requests such a number and provides FinCEN
with the information described under subclauses (I) through
(IV) of paragraph (1)(A)(i).
``(ii) Updating of information.--An individual with a
FinCEN ID number shall submit an annual filing with FinCEN
updating any information described under subclauses (I)
through (IV) of paragraph (1)(A)(i).
``(B) Use of fincen id number in reporting requirements.--
Any person required to report the information described under
paragraph (1)(A)(i) with respect to an individual may instead
report the FinCEN ID number of the individual.
``(C) Treatment of information submitted for fincen id
number.--For purposes of this section, any information
submitted under subparagraph (A) shall be deemed to be
beneficial ownership information.
``(5) Retention and disclosure of beneficial ownership
information by fincen.--
``(A) Retention of information.--Beneficial ownership
information relating to each corporation or limited liability
company formed under the laws of the State or Indian Tribe
shall be maintained by FinCEN until the end of the 5-year
period (or such other period of time as the Secretary of the
Treasury may, by rule, determine) beginning on the date that
the corporation or limited liability company terminates.
``(B) Disclosure of information.--Beneficial ownership
information reported to FinCEN pursuant to this section shall
be provided by FinCEN only upon receipt of--
``(i) subject to subparagraph (C), a request, through
appropriate protocols, by a local, Tribal, State, or Federal
law enforcement agency;
``(ii) a request made by a Federal agency on behalf of a
law enforcement agency of another country under an
international treaty, agreement, or convention, or an order
under section 3512 of title 18 or section 1782 of title 28;
or
``(iii) a request made by a financial institution, with
customer consent, as part of the institution's compliance
with due diligence requirements imposed under the Bank
Secrecy Act, the USA PATRIOT Act, or other applicable
Federal, State, or Tribal law.
``(C) Appropriate protocols.--
``(i) Privacy.--The protocols described in subparagraph
(B)(i) shall--
``(I) protect the privacy of any beneficial ownership
information provided by FinCEN to a local, Tribal, State, or
Federal law enforcement agency;
``(II) ensure that a local, Tribal, State, or Federal law
enforcement agency requesting beneficial ownership
information has an existing investigatory basis for
requesting such information;
``(III) ensure that access to beneficial ownership
information is limited to authorized users at a local,
Tribal, State, or Federal law enforcement agency who have
undergone appropriate training, and that the identity of such
authorized users is verified through appropriate mechanisms,
such as two-factor authentication;
``(IV) include an audit trail of requests for beneficial
ownership information by a local, Tribal, State, or Federal
law enforcement agency, including, as necessary, information
concerning queries made by authorized users at a local,
Tribal, State, or Federal law enforcement agency;
``(V) require that every local, Tribal, State, or Federal
law enforcement agency that receives beneficial ownership
information from FinCEN conducts an annual audit to verify
that the beneficial ownership information received from
FinCEN has been accessed and used appropriately, and
consistent with this paragraph; and
``(VI) require FinCEN to conduct an annual audit of every
local, Tribal, State, or Federal law enforcement agency that
has received beneficial ownership information to ensure that
such agency has requested beneficial ownership information,
and has used any beneficial ownership information received
from FinCEN, appropriately, and consistent with this
paragraph.
``(ii) Limitation on use.--Beneficial ownership information
provided to a local, Tribal, State, or Federal law
enforcement agency under this paragraph may only be used for
law enforcement, national security, or intelligence purposes.
``(b) No Bearer Share Corporations or Limited Liability
Companies.--A corporation or limited liability company formed
under the laws of a State or Indian Tribe may not issue a
certificate in bearer form evidencing either a whole or
fractional interest in the corporation or limited liability
company.
[[Page H8327]]
``(c) Penalties.--
``(1) In general.--It shall be unlawful for any person to
affect interstate or foreign commerce by--
``(A) knowingly providing, or attempting to provide, false
or fraudulent beneficial ownership information, including a
false or fraudulent identifying photograph, to FinCEN in
accordance with this section;
``(B) willfully failing to provide complete or updated
beneficial ownership information to FinCEN in accordance with
this section; or
``(C) knowingly disclosing the existence of a subpoena or
other request for beneficial ownership information reported
pursuant to this section, except--
``(i) to the extent necessary to fulfill the authorized
request; or
``(ii) as authorized by the entity that issued the
subpoena, or other request.
``(2) Civil and criminal penalties.--Any person who
violates paragraph (1)--
``(A) shall be liable to the United States for a civil
penalty of not more than $10,000; and
``(B) may be fined under title 18, United States Code,
imprisoned for not more than 3 years, or both.
``(3) Limitation.--Any person who negligently violates
paragraph (1) shall not be subject to civil or criminal
penalties under paragraph (2).
``(4) Waiver.--The Secretary of the Treasury may waive the
penalty for violating paragraph (1) if the Secretary
determines that the violation was due to reasonable cause and
was not due to willful neglect.
``(5) Criminal penalty for the misuse or unauthorized
disclosure of beneficial ownership information.--The criminal
penalties provided for under section 5322 shall apply to a
violation of this section to the same extent as such criminal
penalties apply to a violation described in section 5322, if
the violation of this section consists of the misuse or
unauthorized disclosure of beneficial ownership information.
``(d) Definitions.--For the purposes of this section:
``(1) Applicant.--The term `applicant' means any natural
person who files an application to form a corporation or
limited liability company under the laws of a State or Indian
Tribe.
``(2) Bank secrecy act.--The term `Bank Secrecy Act'
means--
``(A) section 21 of the Federal Deposit Insurance Act;
``(B) chapter 2 of title I of Public Law 91-508; and
``(C) this subchapter.
``(3) Beneficial owner.--
``(A) In general.--Except as provided in subparagraph (B),
the term `beneficial owner' means a natural person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise--
``(i) exercises substantial control over a corporation or
limited liability company;
``(ii) owns 25 percent or more of the equity interests of a
corporation or limited liability company; or
``(iii) receives substantial economic benefits from the
assets of a corporation or limited liability company.
``(B) Exceptions.--The term `beneficial owner' shall not
include--
``(i) a minor child, as defined in the State or Indian
Tribe in which the entity is formed;
``(ii) a person acting as a nominee, intermediary,
custodian, or agent on behalf of another person;
``(iii) a person acting solely as an employee of a
corporation or limited liability company and whose control
over or economic benefits from the corporation or limited
liability company derives solely from the employment status
of the person;
``(iv) a person whose only interest in a corporation or
limited liability company is through a right of inheritance;
or
``(v) a creditor of a corporation or limited liability
company, unless the creditor also meets the requirements of
subparagraph (A).
``(C) Substantial economic benefits defined.--
``(i) In general.--For purposes of subparagraph (A)(ii), a
natural person receives substantial economic benefits from
the assets of a corporation or limited liability company if
the person has an entitlement to more than a specified
percentage of the funds or assets of the corporation or
limited liability company, which the Secretary of the
Treasury shall, by rule, establish.
``(ii) Rulemaking criteria.--In establishing the percentage
under clause (i), the Secretary of the Treasury shall seek
to--
``(I) provide clarity to corporations and limited liability
companies with respect to the identification and disclosure
of a natural person who receives substantial economic
benefits from the assets of a corporation or limited
liability company; and
``(II) identify those natural persons who, as a result of
the substantial economic benefits they receive from the
assets of a corporation or limited liability company,
exercise a dominant influence over such corporation or
limited liability company.
``(4) Corporation; limited liability company.--The terms
`corporation' and `limited liability company'--
``(A) have the meanings given such terms under the laws of
the applicable State or Indian Tribe;
``(B) include any non-United States entity eligible for
registration or registered to do business as a corporation or
limited liability company under the laws of the applicable
State or Indian Tribe;
``(C) do not include any entity that is--
``(i) a business concern that is an issuer of a class of
securities registered under section 12 of the Securities
Exchange Act of 1934 (15 U.S.C. 781) or that is required to
file reports under section 15(d) of that Act (15 U.S.C.
78o(d));
``(ii) a business concern constituted, sponsored, or
chartered by a State or Indian Tribe, a political subdivision
of a State or Indian Tribe, under an interstate compact
between two or more States, by a department or agency of the
United States, or under the laws of the United States;
``(iii) a depository institution (as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813));
``(iv) a credit union (as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752));
``(v) a bank holding company (as defined in section 2 of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841)) or a
savings and loan holding company (as defined in section 10(a)
of the Home Owners' Loan Act (12 U.S.C. 1467a(a));
``(vi) a broker or dealer (as defined in section 3 of the
Securities Exchange Act of 1934 (15 U.S.C. 78c)) that is
registered under section 15 of the Securities Exchange Act of
1934 (15 U.S.C. 78o);
``(vii) an exchange or clearing agency (as defined in
section 3 of the Securities Exchange Act of 1934 (15 U.S.C.
78c)) that is registered under section 6 or 17A of the
Securities Exchange Act of 1934 (15 U.S.C. 78f and 78q-1);
``(viii) an investment company (as defined in section 3 of
the Investment Company Act of 1940 (15 U.S.C. 80a-3)) or an
investment adviser (as defined in section 202(11) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(11))), if
the company or adviser is registered with the Securities and
Exchange Commission, has filed an application for
registration which has not been denied, under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or the
Investment Adviser Act of 1940 (15 U.S.C. 80b-1 et seq.), or
is an investment adviser described under section 203(l) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(l));
``(ix) an insurance company (as defined in section 2 of the
Investment Company Act of 1940 (15 U.S.C. 80a-2));
``(x) a registered entity (as defined in section 1a of the
Commodity Exchange Act (7 U.S.C. 1a)), or a futures
commission merchant, introducing broker, commodity pool
operator, or commodity trading advisor (as defined in section
1a of the Commodity Exchange Act (7 U.S.C. 1a)) that is
registered with the Commodity Futures Trading Commission;
``(xi) a public accounting firm registered in accordance
with section 102 of the Sarbanes-Oxley Act (15 U.S.C. 7212)
or an entity controlling, controlled by, or under common
control of such a firm;
``(xii) a public utility that provides telecommunications
service, electrical power, natural gas, or water and sewer
services, within the United States;
``(xiii) a church, charity, nonprofit entity, or other
organization that is described in section 501(c), 527, or
4947(a)(1) of the Internal Revenue Code of 1986, that has not
been denied tax exempt status, and that has filed the most
recently due annual information return with the Internal
Revenue Service, if required to file such a return;
``(xiv) a financial market utility designated by the
Financial Stability Oversight Council under section 804 of
the Dodd-Frank Wall Street Reform and Consumer Protection
Act;
``(xv) an insurance producer (as defined in section 334 of
the Gramm-Leach-Bliley Act);
``(xvi) any pooled investment vehicle that is operated or
advised by a person described in clause (iii), (iv), (v),
(vi), (viii), (ix), or (xi);''.
``(xvii) any business concern that--
``(I) employs more than 20 employees on a full-time basis
in the United States;
``(II) files income tax returns in the United States
demonstrating more than $5,000,000 in gross receipts or
sales; and
``(III) has an operating presence at a physical office
within the United States; or
``(xviii) any corporation or limited liability company
formed and owned by an entity described in this clause or in
clause (i), (ii), (iii), (iv), (v), (vi), (vii), (viii),
(ix), (x), (xi), (xii), (xiii), (xiv), (xv), or (xvi); and
``(D) do not include any individual business concern or
class of business concerns which the Secretary of the
Treasury and the Attorney General of the United States have
jointly determined, by rule of otherwise, to be exempt from
the requirements of subsection (a), if the Secretary and the
Attorney General jointly determine that requiring beneficial
ownership information from the business concern would not
serve the public interest and would not assist law
enforcement efforts to detect, prevent, or prosecute
terrorism, money laundering, tax evasion, or other
misconduct.
``(5) Fincen.--The term `FinCEN' means the Financial Crimes
Enforcement Network of the Department of the Treasury.
``(6) Indian country.--The term `Indian country' has the
meaning given that term in section 1151 of title 18.
``(7) Indian tribe.--The term `Indian Tribe' has the
meaning given that term under section 102 of the Federally
Recognized Indian Tribe List Act of 1994.
``(8) Personal identification card.--The term `personal
identification card' means an identification document issued
by a State, Indian Tribe, or local government to an
individual solely for the purpose of identification of that
individual.
``(9) State.--The term `State' means any State,
commonwealth, territory, or possession of the United States,
the District of Columbia, the Commonwealth of Puerto Rico,
the Commonwealth of the Northern Mariana Islands, American
Samoa, Guam, or the United States Virgin Islands.''.
(2) Rulemaking.--
(A) In general.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall
issue regulations to carry out this Act and the amendments
made by this
[[Page H8328]]
Act, including, to the extent necessary, to clarify the
definitions in section 5333(d) of title 31, United States
Code.
(B) Revision of final rule.--Not later than 1 year after
the date of enactment of this Act, the Secretary of the
Treasury shall revise the final rule titled ``Customer Due
Diligence Requirements for Financial Institutions'' (May 11,
2016; 81 Fed. Reg. 29397) to--
(i) bring the rule into conformance with this Act and the
amendments made by this Act;
(ii) account for financial institutions' access to
comprehensive beneficial ownership information filed by
corporations and limited liability companies, under threat of
civil and criminal penalties, under this Act and the
amendments made by this Act; and
(iii) reduce any burdens on financial institutions that
are, in light of the enactment of this Act and the amendments
made by this Act, unnecessary or duplicative.
(3) Conforming amendments.--Title 31, United States Code,
is amended--
(A) in section 5321(a)--
(i) in paragraph (1), by striking ``sections 5314 and
5315'' each place it appears and inserting ``sections 5314,
5315, and 5333''; and
(ii) in paragraph (6), by inserting ``(except section
5333)'' after ``subchapter'' each place it appears; and
(B) in section 5322, by striking ``section 5315 or 5324''
each place it appears and inserting ``section 5315, 5324, or
5333''.
(4) Table of contents.--The table of contents of chapter 53
of title 31, United States Code, is amended by inserting
after the item relating to section 5332 the following:
``5333. Transparent incorporation practices.''.
(b) Authorization of Appropriations.--There is authorized
to be appropriated $20,000,000 for each of fiscal years 2020
and 2021 to the Financial Crimes Enforcement Network to carry
out this Act and the amendments made by this Act.
(c) Federal Contractors.--Not later than the first day of
the first full fiscal year beginning at least 1 year after
the date of the enactment of this Act, the Administrator for
Federal Procurement Policy shall revise the Federal
Acquisition Regulation maintained under section 1303(a)(1) of
title 41, United States Code, to require any contractor or
subcontractor who is subject to the requirement to disclose
beneficial ownership information under section 5333 of title
31, United States Code, to provide the information required
to be disclosed under such section to the Federal Government
as part of any bid or proposal for a contract with a value
threshold in excess of the simplified acquisition threshold
under section 134 of title 41, United States Code.
SEC. 4. STUDIES AND REPORTS.
(a) Updating of Beneficial Ownership Information.--
(1) Study.--The Secretary of the Treasury, in consultation
with the Attorney General of the United States, shall conduct
a study to evaluate--
(A) the necessity of a requirement for corporations and
limited liability companies to update the list of their
beneficial owners within a specified amount of time after the
date of any change in the list of beneficial owners or the
information required to be provided relating to each
beneficial owner, taking into account the annual filings
required under section 5333(a)(1)(B)(i) of title 31, United
States Code, and the information contained in such annual
filings; and
(B) the burden that a requirement to update the list of
beneficial owners within a specified period of time after a
change in such list of beneficial owners would impose on
corporations and limited liability companies.
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Secretary of the Treasury shall
submit a report on the study required under paragraph (1) to
the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate
(3) Public comment.--The Secretary of the Treasury shall
seek and consider public input, comments, and data in order
to conduct the study required under subparagraph paragraph
(1).
(b) Other Legal Entities.--Not later than 2 years after the
date of enactment of this Act, the Comptroller General of the
United States shall conduct a study and submit to the
Congress a report--
(1) identifying each State or Indian Tribe that has
procedures that enable persons to form or register under the
laws of the State or Indian Tribe partnerships, trusts, or
other legal entities, and the nature of those procedures;
(2) identifying each State or Indian Tribe that requires
persons seeking to form or register partnerships, trusts, or
other legal entities under the laws of the State or Indian
Tribe to provide information about the beneficial owners (as
that term is defined in section 5333(d)(1) of title 31,
United States Code, as added by this Act) or beneficiaries of
such entities, and the nature of the required information;
(3) evaluating whether the lack of available beneficial
ownership information for partnerships, trusts, or other
legal entities--
(A) raises concerns about the involvement of such entities
in terrorism, money laundering, tax evasion, securities
fraud, or other misconduct;
(B) has impeded investigations into entities suspected of
such misconduct; and
(C) increases the costs to financial institutions of
complying with due diligence requirements imposed under the
Bank Secrecy Act, the USA PATRIOT Act, or other applicable
Federal, State, or Tribal law; and
(4) evaluating whether the failure of the United States to
require beneficial ownership information for partnerships and
trusts formed or registered in the United States has elicited
international criticism and what steps, if any, the United
States has taken or is planning to take in response.
(c) Effectiveness of Incorporation Practices.--Not later
than 5 years after the date of enactment of this Act, the
Comptroller General of the United States shall conduct a
study and submit to the Congress a report assessing the
effectiveness of incorporation practices implemented under
this Act and the amendments made by this Act in--
(1) providing law enforcement agencies with prompt access
to reliable, useful, and complete beneficial ownership
information; and
(2) strengthening the capability of law enforcement
agencies to combat incorporation abuses, civil and criminal
misconduct, and detect, prevent, or punish terrorism, money
laundering, tax evasion, or other misconduct.
SEC. 5. DEFINITIONS.
In this Act, the terms ``Bank Secrecy Act'', ``beneficial
owner'', ``corporation'', and ``limited liability company''
have the meaning given those terms, respectively, under
section 5333(d) of title 31, United States Code.
DIVISION B--COUNTER ACT OF 2019
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the
``Coordinating Oversight, Upgrading and Innovating
Technology, and Examiner Reform Act of 2019'' or the
``COUNTER Act of 2019''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
DIVISION B--COUNTER ACT OF 2019
Sec. 1. Short title; table of contents.
Sec. 2. Bank Secrecy Act definition.
TITLE I--STRENGTHENING TREASURY
Sec. 101. Improving the definition and purpose of the Bank Secrecy Act.
Sec. 102. Special hiring authority.
Sec. 103. Civil Liberties and Privacy Officer.
Sec. 104. Civil Liberties and Privacy Council.
Sec. 105. International coordination.
Sec. 106. Treasury Attaches Program.
Sec. 107. Increasing technical assistance for international
cooperation.
Sec. 108. FinCEN Domestic Liaisons.
Sec. 109. FinCEN Exchange.
Sec. 110. Study and strategy on trade-based money laundering.
Sec. 111. Study and strategy on de-risking.
Sec. 112. AML examination authority delegation study.
Sec. 113. Study and strategy on Chinese money laundering.
TITLE J--IMPROVING AML/CFT OVERSIGHT
Sec. 201. Pilot program on sharing of suspicious activity reports
within a financial group.
Sec. 202. Sharing of compliance resources.
Sec. 203. GAO Study on feedback loops.
Sec. 204. FinCEN study on BSA value.
Sec. 205. Sharing of threat pattern and trend information.
Sec. 206. Modernization and upgrading whistleblower protections.
Sec. 207. Certain violators barred from serving on boards of United
States financial institutions.
Sec. 208. Additional damages for repeat Bank Secrecy Act violators.
Sec. 209. Justice annual report on deferred and non-prosecution
agreements.
Sec. 210. Return of profits and bonuses.
Sec. 211. Application of Bank Secrecy Act to dealers in antiquities.
Sec. 212. Geographic targeting order.
Sec. 213. Study and revisions to currency transaction reports and
suspicious activity reports.
Sec. 214. Streamlining requirements for currency transaction reports
and suspicious activity reports.
TITLE K--MODERNIZING THE AML SYSTEM
Sec. 301. Encouraging innovation in BSA compliance.
Sec. 302. Innovation Labs.
Sec. 303. Innovation Council.
Sec. 304. Testing methods rulemaking.
Sec. 305. FinCEN study on use of emerging technologies.
Sec. 306. Discretionary surplus funds.
(c) References to This Act.--In this division--
(1) any reference to ``this Act'' shall be deemed a
reference to ``this division''; and
(2) except as otherwise expressly provided, any reference
to a section or other provision shall be deemed a reference
to that section or other provision of this division.
SEC. 2. BANK SECRECY ACT DEFINITION.
Section 5312(a) of title 31, United States Code, is amended
by adding at the end the following:
``(7) Bank secrecy act.--The term `Bank Secrecy act'
means--
``(A) section 21 of the Federal Deposit Insurance Act;
``(B) chapter 2 of title I of Public Law 91-508; and
``(C) this subchapter.''.
TITLE I--STRENGTHENING TREASURY
SEC. 101. IMPROVING THE DEFINITION AND PURPOSE OF THE BANK
SECRECY ACT.
Section 5311 of title 31, United States Code, is amended--
(1) by inserting ``to protect our national security, to
safeguard the integrity of the international financial
system, and'' before ``to require''; and
(2) by inserting ``to law enforcement and'' before ``in
criminal''.
SEC. 102. SPECIAL HIRING AUTHORITY.
(a) In General.--Section 310 of title 31, United States
Code, is amended--
(1) by redesignating subsection (d) as subsection (g); and
[[Page H8329]]
(2) by inserting after subsection (c) the following:
``(d) Special Hiring Authority.--
``(1) In general.--The Secretary of the Treasury may
appoint, without regard to the provisions of sections 3309
through 3318 of title 5, candidates directly to positions in
the competitive service (as defined in section 2102 of that
title) in FinCEN.
``(2) Primary responsibilities.--The primary responsibility
of candidates appointed pursuant to paragraph (1) shall be to
provide substantive support in support of the duties
described in subparagraphs (A), (B), (E), and (F) of
subsection (b)(2).''.
(b) Report.--Not later than 360 days after the date of
enactment of this Act, and every year thereafter for 7 years,
the Director of the Financial Crimes Enforcement Network
shall submit a report to the Committee on Financial Services
of the House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate that includes--
(1) the number of new employees hired since the preceding
report through the authorities described under section 310(d)
of title 31, United States Code, along with position titles
and associated pay grades for such hires; and
(2) a copy of any Federal Government survey of staff
perspectives at the Office of Terrorism and Financial
Intelligence, including findings regarding the Office and the
Financial Crimes Enforcement Network from the most recently
administered Federal Employee Viewpoint Survey.
SEC. 103. CIVIL LIBERTIES AND PRIVACY OFFICER.
(a) Appointment of Officers.--Not later than the end of the
3-month period beginning on the date of enactment of this
Act, a Civil Liberties and Privacy Officer shall be
appointed, from among individuals who are attorneys with
expertise in data privacy laws--
(1) within each Federal functional regulator, by the head
of the Federal functional regulator;
(2) within the Financial Crimes Enforcement Network, by the
Secretary of the Treasury; and
(3) within the Internal Revenue Service Small Business and
Self-Employed Tax Center, by the Secretary of the Treasury.
(b) Duties.--Each Civil Liberties and Privacy Officer
shall, with respect to the applicable regulator, Network, or
Center within which the Officer is located--
(1) be consulted each time Bank Secrecy Act or anti-money
laundering regulations affecting civil liberties or privacy
are developed or reviewed;
(2) be consulted on information-sharing programs, including
those that provide access to personally identifiable
information;
(3) ensure coordination and clarity between anti-money
laundering, civil liberties, and privacy regulations;
(4) contribute to the evaluation and regulation of new
technologies that may strengthen data privacy and the
protection of personally identifiable information collected
by each Federal functional regulator; and
(5) develop metrics of program success.
(c) Definitions.--For purposes of this section:
(1) Bank secrecy act.--The term ``Bank Secrecy Act'' has
the meaning given that term under section 5312 of title 31,
United States Code.
(2) Federal functional regulator.--The term ``Federal
functional regulator'' means the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the National Credit
Union Administration, the Securities and Exchange Commission,
and the Commodity Futures Trading Commission.
SEC. 104. CIVIL LIBERTIES AND PRIVACY COUNCIL.
(a) Establishment.--There is established the Civil
Liberties and Privacy Council (hereinafter in this section
referred to as the ``Council''), which shall consist of the
Civil Liberties and Privacy Officers appointed pursuant to
section 103.
(b) Chair.--The Director of the Financial Crimes
Enforcement Network shall serve as the Chair of the Council.
(c) Duty.--The members of the Council shall coordinate on
activities related to their duties as Civil Liberties Privacy
Officers, but may not supplant the individual agency
determinations on civil liberties and privacy.
(d) Meetings.--The meetings of the Council--
(1) shall be at the call of the Chair, but in no case may
the Council meet less than quarterly;
(2) may include open and partially closed sessions, as
determined necessary by the Council; and
(3) shall include participation by public and private
entities and law enforcement agencies.
(e) Report.--The Chair of the Council shall issue an annual
report to the Congress on the program and policy activities,
including the success of programs as measured by metrics of
program success developed pursuant to section 103(b)(5), of
the Council during the previous year and any legislative
recommendations that the Council may have.
(f) Nonapplicability of FACA.--The Federal Advisory
Committee Act (5 U.S.C. App.) shall not apply to the Council.
SEC. 105. INTERNATIONAL COORDINATION.
(a) In General.--The Secretary of the Treasury shall work
with the Secretary's foreign counterparts, including through
the Financial Action Task Force, the International Monetary
Fund, the World Bank, the Egmont Group of Financial
Intelligence Units, the Organisation for Economic Co-
operation and Development, and the United Nations, to promote
stronger anti-money laundering frameworks and enforcement of
anti-money laundering laws.
(b) Cooperation Goal.--In carrying out subsection (a), the
Secretary of the Treasury may work directly with foreign
counterparts and other organizations where the goal of
cooperation can best be met.
(c) International Monetary Fund.--
(1) Support for capacity of the international monetary fund
to prevent money laundering and financing of terrorism.--
Title XVI of the International Financial Institutions Act (22
U.S.C. 262p et seq.) is amended by adding at the end the
following:
``SEC. 1629. SUPPORT FOR CAPACITY OF THE INTERNATIONAL
MONETARY FUND TO PREVENT MONEY LAUNDERING AND
FINANCING OF TERRORISM.
``The Secretary of the Treasury shall instruct the United
States Executive Director at the International Monetary Fund
to support the increased use of the administrative budget of
the Fund for technical assistance that strengthens the
capacity of Fund members to prevent money laundering and the
financing of terrorism.''.
(2) National advisory council report to congress.--The
Chairman of the National Advisory Council on International
Monetary and Financial Policies shall include in the report
required by section 1701 of the International Financial
Institutions Act (22 U.S.C. 262r) a description of--
(A) the activities of the International Monetary Fund in
the most recently completed fiscal year to provide technical
assistance that strengthens the capacity of Fund members to
prevent money laundering and the financing of terrorism, and
the effectiveness of the assistance; and
(B) the efficacy of efforts by the United States to support
such technical assistance through the use of the Fund's
administrative budget, and the level of such support.
(3) Sunset.--Effective on the date that is the end of the
4-year period beginning on the date of enactment of this Act,
section 1629 of the International Financial Institutions Act,
as added by paragraph (1), is repealed.
SEC. 106. TREASURY ATTACHES PROGRAM.
(a) In General.--Title 31, United States Code, is amended
by inserting after section 315 the following:
``Sec. 316. Treasury Attaches Program
``(a) In General.--There is established the Treasury
Attaches Program, under which the Secretary of the Treasury
shall appoint employees of the Department of the Treasury,
after nomination by the Director of the Financial Crimes
Enforcement Network (`FinCEN'), as a Treasury attache, who
shall--
``(1) be knowledgeable about the Bank Secrecy Act and anti-
money laundering issues;
``(2) be co-located in a United States embassy;
``(3) perform outreach with respect to Bank Secrecy Act and
anti-money laundering issues;
``(4) establish and maintain relationships with foreign
counterparts, including employees of ministries of finance,
central banks, and other relevant official entities;
``(5) conduct outreach to local and foreign financial
institutions and other commercial actors, including--
``(A) information exchanges through FinCEN and FinCEN
programs; and
``(B) soliciting buy-in and cooperation for the
implementation of--
``(i) United States and multilateral sanctions; and
``(ii) international standards on anti-money laundering and
the countering of the financing of terrorism; and
``(6) perform such other actions as the Secretary
determines appropriate.
``(b) Number of Attaches.--The number of Treasury attaches
appointed under this section at any one time shall be not
fewer than 6 more employees than the number of employees of
the Department of the Treasury serving as Treasury attaches
on March 1, 2019.
``(c) Compensation.--Each Treasury attache appointed under
this section and located at a United States embassy shall
receive compensation at the higher of--
``(1) the rate of compensation provided to a Foreign
Service officer at a comparable career level serving at the
same embassy; or
``(2) the rate of compensation the Treasury attache would
otherwise have received, absent the application of this
subsection.
``(d) Bank Secrecy Act Defined.--In this section, the term
`Bank Secrecy Act' has the meaning given that term under
section 5312.''.
(b) Clerical Amendment.--The table of contents for chapter
3 of title 31, United States Code, is amended by inserting
after the item relating to section 315 the following:
``316. Treasury Attaches Program.''.
SEC. 107. INCREASING TECHNICAL ASSISTANCE FOR INTERNATIONAL
COOPERATION.
(a) In General.--There is authorized to be appropriated for
each of fiscal years 2020 through 2024 to the Secretary of
the Treasury for purposes of providing technical assistance
that promotes compliance with international standards and
best practices, including in particular those aimed at the
establishment of effective anti-money laundering and
countering the financing of terrorism regimes, in an amount
equal to twice the amount authorized for such purpose for
fiscal year 2019.
(b) Activity and Evaluation Report.--Not later than 360
days after enactment of this Act, and every year thereafter
for five years, the Secretary of the Treasury shall issue a
report to the Congress on the assistance (as described under
subsection (a)) of the Office of Technical Assistance of the
Department of the Treasury containing--
(1) a narrative detailing the strategic goals of the Office
in the previous year, with an explanation of how technical
assistance provided in the previous year advances the goals;
(2) a description of technical assistance provided by the
Office in the previous year, including the objectives and
delivery methods of the assistance;
[[Page H8330]]
(3) a list of beneficiaries and providers (other than
Office staff) of the technical assistance;
(4) a description of how technical assistance provided by
the Office complements, duplicates, or otherwise affects or
is affected by technical assistance provided by the
international financial institutions (as defined under
section 1701(c) of the International Financial Institutions
Act); and
(5) a copy of any Federal Government survey of staff
perspectives at the Office of Technical Assistance, including
any findings regarding the Office from the most recently
administered Federal Employee Viewpoint Survey.
SEC. 108. FINCEN DOMESTIC LIAISONS.
Section 310 of title 31, United States Code, as amended by
section 102, is further amended by inserting after subsection
(d) the following:
``(e) FinCEN Domestic Liaisons.--
``(1) In general.--The Director of FinCEN shall appoint at
least 6 senior FinCEN employees as FinCEN Domestic Liaisons,
who shall--
``(A) each be assigned to focus on a specific region of the
United States;
``(B) be located at an office in such region (or co-located
at an office of the Board of Governors of the Federal Reserve
System in such region); and
``(C) perform outreach to BSA officers at financial
institutions (including non-bank financial institutions) and
persons who are not financial institutions, especially with
respect to actions taken by FinCEN that require specific
actions by, or have specific effects on, such institutions or
persons, as determined by the Director.
``(2) Definitions.--In this subsection:
``(A) BSA officer.--The term `BSA officer' means an
employee of a financial institution whose primary job
responsibility involves compliance with the Bank Secrecy Act,
as such term is defined under section 5312.
``(B) Financial institution.--The term `financial
institution' has the meaning given that term under section
5312.''.
SEC. 109. FINCEN EXCHANGE.
Section 310 of title 31, United States Code, as amended by
section 108, is further amended by inserting after subsection
(e) the following:
``(f) FinCEN Exchange.--
``(1) Establishment.--The FinCEN Exchange is hereby
established within FinCEN, which shall consist of the FinCEN
Exchange program of FinCEN in existence on the day before the
date of enactment of this paragraph.
``(2) Purpose.--The FinCEN Exchange shall facilitate a
voluntary public-private information sharing partnership
among law enforcement, financial institutions, and FinCEN
to--
``(A) effectively and efficiently combat money laundering,
terrorism financing, organized crime, and other financial
crimes;
``(B) protect the financial system from illicit use; and
``(C) promote national security.
``(3) Report.--
``(A) In general.--Not later than one year after the date
of enactment of this subsection, and annually thereafter for
the next five years, the Secretary of the Treasury shall
submit to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate a report containing--
``(i) an analysis of the efforts undertaken by the FinCEN
Exchange and the results of such efforts;
``(ii) an analysis of the extent and effectiveness of the
FinCEN Exchange, including any benefits realized by law
enforcement from partnership with financial institutions; and
``(iii) any legislative, administrative, or other
recommendations the Secretary may have to strengthen FinCEN
Exchange efforts.
``(B) Classified annex.--Each report under subparagraph (A)
may include a classified annex.
``(4) Information sharing requirement.--Information shared
pursuant to this subsection shall be shared in compliance
with all other applicable Federal laws and regulations.
``(5) Rule of construction.--Nothing under this subsection
may be construed to create new information sharing
authorities related to the Bank Secrecy Act (as such term is
defined under section 5312 of title 31, United States Code).
``(6) Financial institution defined.--In this subsection,
the term `financial institution' has the meaning given that
term under section 5312.''.
SEC. 110. STUDY AND STRATEGY ON TRADE-BASED MONEY LAUNDERING.
(a) Study.--The Secretary of the Treasury shall carry out a
study, in consultation with appropriate private sector
stakeholders and Federal departments and agencies, on trade-
based money laundering.
(b) Report.--Not later than the end of the 1-year period
beginning on the date of the enactment of this Act, the
Secretary shall issue a report to the Congress containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a); and
(2) proposed strategies to combat trade-based money
laundering.
(c) Classified Annex.--The report required under this
section may include a classified annex.
(d) Contracting Authority.--The Secretary may contract with
a private third-party to carry out the study required under
this section. The authority of the Secretary to enter into
contracts under this subsection shall be in effect for each
fiscal year only to the extent and in the amounts as are
provided in advance in appropriations Acts.
SEC. 111. STUDY AND STRATEGY ON DE-RISKING.
(a) Review.--The Secretary of the Treasury, in consultation
with appropriate private sector stakeholders, examiners, and
the Federal functional regulators (as defined under section
103) and other relevant stakeholders, shall undertake a
formal review of--
(1) any adverse consequences of financial institutions de-
risking entire categories of relationships, including
charities, embassy accounts, money services businesses (as
defined under section 1010.100(ff) of title 31, Code of
Federal Regulations) and their agents, countries,
international and domestic regions, and respondent banks;
(2) the reasons why financial institutions are engaging in
de-risking;
(3) the association with and effects of de-risking on money
laundering and financial crime actors and activities;
(4) the most appropriate ways to promote financial
inclusion, particularly with respect to developing countries,
while maintaining compliance with the Bank Secrecy Act,
including an assessment of policy options to--
(A) more effectively tailor Federal actions and penalties
to the size of foreign financial institutions and any
capacity limitations of foreign governments; and
(B) reduce compliance costs that may lead to the adverse
consequences described in paragraph (1);
(5) formal and informal feedback provided by examiners that
may have led to de-risking;
(6) the relationship between resources dedicated to
compliance and overall sophistication of compliance efforts
at entities that may be experiencing de-risking versus those
that have not experienced de-risking; and
(7) any best practices from the private sector that
facilitate correspondent bank relationships.
(b) De-risking Strategy.--The Secretary shall develop a
strategy to reduce de-risking and adverse consequences
related to de-risking.
(c) Report.--Not later than the end of the 1-year period
beginning on the date of the enactment of this Act, the
Secretary, in consultation with the Federal functional
regulators and other relevant stakeholders, shall issue a
report to the Congress containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a); and
(2) the strategy developed pursuant to subsection (b).
(d) Definitions.--In this section:
(1) De-risking.--The term ``de-risking'' means the
wholesale closing of accounts or limiting of financial
services for a category of customer due to unsubstantiated
risk as it relates to compliance with the Bank Secrecy Act.
(2) BSA terms.--The terms ``Bank Secrecy Act'' and
``financial institution'' have the meaning given those terms,
respectively, under section 5312 off title 31, United States
Code.
SEC. 112. AML EXAMINATION AUTHORITY DELEGATION STUDY.
(a) Study.--The Secretary of the Treasury shall carry out a
study on the Secretary's delegation of examination authority
under the Bank Secrecy Act, including--
(1) an evaluation of the efficacy of the delegation,
especially with respect to the mission of the Bank Secrecy
Act;
(2) whether the delegated agencies have appropriate
resources to perform their delegated responsibilities; and
(3) whether the examiners in delegated agencies have
sufficient training and support to perform their
responsibilities.
(b) Report.--Not later than one year after the date of
enactment of this Act, the Secretary of the Treasury shall
submit to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate a report containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a); and
(2) recommendations to improve the efficacy of delegation
authority, including the potential for de-delegation of any
or all such authority where it may be appropriate.
(c) Bank Secrecy Act Defined.--The term ``Bank Secrecy
Act'' has the meaning given that term under section 5312 off
title 31, United States Code.
SEC. 113. STUDY AND STRATEGY ON CHINESE MONEY LAUNDERING.
(a) Study.--The Secretary of the Treasury shall carry out a
study on the extent and effect of Chinese money laundering
activities in the United States, including territories and
possessions of the United States, and worldwide.
(b) Strategy to Combat Chinese Money Laundering.--Upon the
completion of the study required under subsection (a), the
Secretary shall, in consultation with such other Federal
departments and agencies as the Secretary determines
appropriate, develop a strategy to combat Chinese money
laundering activities.
(c) Report.--Not later than the end of the 1-year period
beginning on the date of enactment of this Act, the Secretary
of the Treasury shall issue a report to Congress containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a); and
(2) the strategy developed under subsection (b).
TITLE J--IMPROVING AML/CFT OVERSIGHT
SEC. 201. PILOT PROGRAM ON SHARING OF SUSPICIOUS ACTIVITY
REPORTS WITHIN A FINANCIAL GROUP.
(a) In General.--
(1) Sharing with foreign branches and affiliates.--Section
5318(g) of title 31, United States Code, is amended by adding
at the end the following:
``(5) Pilot program on sharing with foreign branches,
subsidiaries, and affiliates.--
``(A) In general.--The Secretary of the Treasury shall
issue rules establishing the pilot
[[Page H8331]]
program described under subparagraph (B), subject to such
controls and restrictions as the Director of the Financial
Crimes Enforcement Network determines appropriate, including
controls and restrictions regarding participation by
financial institutions and jurisdictions in the pilot
program. In prescribing such rules, the Secretary shall
ensure that the sharing of information described under such
subparagraph (B) is subject to appropriate standards and
requirements regarding data security and the confidentiality
of personally identifiable information.
``(B) Pilot program described.--The pilot program required
under this paragraph shall--
``(i) permit a financial institution with a reporting
obligation under this subsection to share reports (and
information on such reports) under this subsection with the
institution's foreign branches, subsidiaries, and affiliates
for the purpose of combating illicit finance risks,
notwithstanding any other provision of law except
subparagraphs (A) and (C);
``(ii) terminate on the date that is five years after the
date of enactment of this paragraph, except that the
Secretary may extend the pilot program for up to two years
upon submitting a report to the Committee on Financial
Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate that
includes--
``(I) a certification that the extension is in the national
interest of the United States, with a detailed explanation of
the reasons therefor;
``(II) an evaluation of the usefulness of the pilot
program, including a detailed analysis of any illicit
activity identified or prevented as a result of the program;
and
``(III) a detailed legislative proposal providing for a
long-term extension of the pilot program activities,
including expected budgetary resources for the activities, if
the Secretary determines that a long-term extension is
appropriate.
``(C) Prohibition involving certain jurisdictions.--In
issuing the regulations required under subparagraph (A), the
Secretary may not permit a financial institution to share
information on reports under this subsection with a foreign
branch, subsidiary, or affiliate located in--
``(i) the People's Republic of China;
``(ii) the Russian Federation; or
``(iii) a jurisdiction that--
``(I) is subject to countermeasures imposed by the Federal
Government;
``(II) is a state sponsor of terrorism; or
``(III) the Secretary has determined cannot reasonably
protect the privacy and confidentiality of such information
or would otherwise use such information in a manner that is
not consistent with the national interest of the United
States.
``(D) Implementation updates.--Not later than 360 days
after the date rules are issued under subparagraph (A), and
annually thereafter for three years, the Secretary, or the
Secretary's designee, shall brief the Committee on Financial
Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate on--
``(i) the degree of any information sharing permitted under
the pilot program, and a description of criteria used by the
Secretary to evaluate the appropriateness of the information
sharing;
``(ii) the effectiveness of the pilot program in
identifying or preventing the violation of a United States
law or regulation, and mechanisms that may improve such
effectiveness; and
``(iii) any recommendations to amend the design of the
pilot program.
``(E) Rule of construction.--Nothing in this paragraph
shall be construed as limiting the Secretary's authority
under provisions of law other than this paragraph to
establish other permissible purposes or methods for a
financial institution sharing reports (and information on
such reports) under this subsection with the institution's
foreign headquarters or with other branches of the same
institution.
``(F) Notice of use of other authority.--If the Secretary,
pursuant to any authority other than that provided under this
paragraph, permits a financial institution to share
information on reports under this subsection with a foreign
branch, subsidiary, or affiliate located in a foreign
jurisdiction, the Secretary shall notify the Committee on
Financial Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of such
permission and the applicable foreign jurisdiction.
``(6) Treatment of foreign jurisdiction-originated
reports.--A report received by a financial institution from a
foreign affiliate with respect to a suspicious transaction
relevant to a possible violation of law or regulation shall
be subject to the same confidentiality requirements provided
under this subsection for a report of a suspicious
transaction described under paragraph (1).''.
(2) Notification prohibitions.--Section 5318(g)(2)(A) of
title 31, United States Code, is amended--
(A) in clause (i), by inserting after ``transaction has
been reported'' the following: ``or otherwise reveal any
information that would reveal that the transaction has been
reported''; and
(B) in clause (ii), by inserting after ``transaction has
been reported,'' the following: ``or otherwise reveal any
information that would reveal that the transaction has been
reported,''.
(b) Rulemaking.--Not later than the end of the 360-day
period beginning on the date of enactment of this Act, the
Secretary of the Treasury shall issue regulations to carry
out the amendments made by this section.
SEC. 202. SHARING OF COMPLIANCE RESOURCES.
(a) In General.--Section 5318 of title 31, United States
Code, is amended by adding at the end the following:
``(o) Sharing of Compliance Resources.--
``(1) Sharing permitted.--Two or more financial
institutions may enter into collaborative arrangements in
order to more efficiently comply with the requirements of
this subchapter.
``(2) Outreach.--The Secretary of the Treasury and the
appropriate supervising agencies shall carry out an outreach
program to provide financial institutions with information,
including best practices, with respect to the sharing of
resources described under paragraph (1).''.
(b) Rule of Construction.--The amendment made by subsection
(a) may not be construed to require financial institutions to
share resources.
SEC. 203. GAO STUDY ON FEEDBACK LOOPS.
(a) Study.--The Comptroller General of the United States
shall carry out a study on--
(1) best practices within the United States Government for
providing feedback (``feedback loop'') to relevant parties
(including regulated private entities) on the usage and
usefulness of personally identifiable information (``PII''),
sensitive-but-unclassified (``SBU'') data, or similar
information provided by such parties to Government users of
such information and data (including law enforcement or
regulators); and
(2) any practices or standards inside or outside the United
States for providing feedback through sensitive information
and public-private partnership information sharing efforts,
specifically related to efforts to combat money laundering
and other forms of illicit finance.
(b) Report.--Not later than the end of the 18-month period
beginning on the date of the enactment of this Act, the
Comptroller General shall issue a report to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of
Representatives containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a);
(2) with respect to each of paragraphs (1) and (2) of
subsection (a), any best practices or significant concerns
identified by the Comptroller General, and their
applicability to public-private partnerships and feedback
loops with respect to U.S. efforts to combat money laundering
and other forms of illicit finance; and
(3) recommendations to reduce or eliminate any unnecessary
Government collection of the information described under
subsection (a)(1).
SEC. 204. FINCEN STUDY ON BSA VALUE.
(a) Study.--The Director of the Financial Crimes
Enforcement Network shall carry out a study on Bank Secrecy
Act value.
(b) Report.--Not later than the end of the 30-day period
beginning on the date the study under subsection (a) is
completed, the Director shall issue a report to the Committee
on Financial Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the
Senate containing all findings and determinations made in
carrying out the study required under this section.
(c) Classified Annex.--The report required under this
section may include a classified annex, if the Director
determines it appropriate.
(d) Bank Secrecy Act Defined.--For purposes of this
section, the term ``Bank Secrecy Act'' has the meaning given
that term under section 5312 of title 31, United States Code.
SEC. 205. SHARING OF THREAT PATTERN AND TREND INFORMATION.
Section 5318(g) of title 31, United States Code, as amended
by section 201(a)(1), is further amended by adding at the end
the following:
``(7) Sharing of threat pattern and trend information.--
``(A) SAR activity review.--The Director of the Financial
Crimes Enforcement Network shall restart publication of the
`SAR Activity Review - Trends, Tips & Issues', on not less
than a semi-annual basis, to provide meaningful information
about the preparation, use, and value of reports filed under
this subsection by financial institutions, as well as other
reports filed by financial institutions under the Bank
Secrecy Act.
``(B) Inclusion of typologies.--In each publication
described under subparagraph (A), the Director shall provide
financial institutions with typologies, including data that
can be adapted in algorithms (including for artificial
intelligence and machine learning programs) where
appropriate, on emerging money laundering and counter terror
financing threat patterns and trends.
``(C) Typology defined.--For purposes of this paragraph,
the term `typology' means the various techniques used to
launder money or finance terrorism.''.
SEC. 206. MODERNIZATION AND UPGRADING WHISTLEBLOWER
PROTECTIONS.
(a) Rewards.--Section 5323(d) of title 31, United States
Code, is amended to read as follows:
``(d) Source of Rewards.--For the purposes of paying a
reward under this section, the Secretary may, subject to
amounts made available in advance by appropriation Acts, use
criminal fine, civil penalty, or forfeiture amounts recovered
based on the original information with respect to which the
reward is being paid.''.
(b) Whistleblower Incentives.--
Chapter 53 of title 31, United States Code, is amended--
(1) by inserting after section 5323 the following:
``Sec. 5323A. Whistleblower incentives
``(a) Definitions.--In this section:
``(1) Covered judicial or administrative action.--The term
`covered judicial or administrative action' means any
judicial or administrative action brought by FinCEN under the
Bank Secrecy Act that results in monetary sanctions exceeding
$1,000,000.
``(2) FinCEN.--The term `FinCEN' means the Financial Crimes
Enforcement Network.
``(3) Monetary sanctions.--The term `monetary sanctions',
when used with respect to any judicial or administrative
action, means--
``(A) any monies, including penalties, disgorgement, and
interest, ordered to be paid; and
[[Page H8332]]
``(B) any monies deposited into a disgorgement fund as a
result of such action or any settlement of such action.
``(4) Original information.--The term `original
information' means information that--
``(A) is derived from the independent knowledge or analysis
of a whistleblower;
``(B) is not known to FinCEN from any other source, unless
the whistleblower is the original source of the information;
and
``(C) is not exclusively derived from an allegation made in
a judicial or administrative hearing, in a governmental
report, hearing, audit, or investigation, or from the news
media, unless the whistleblower is a source of the
information.
``(5) Related action.--The term `related action', when used
with respect to any judicial or administrative action brought
by FinCEN, means any judicial or administrative action that
is based upon original information provided by a
whistleblower that led to the successful enforcement of the
action.
``(6) Secretary.--The term `Secretary' means the Secretary
of the Treasury.
``(7) Whistleblower.--The term `whistleblower' means any
individual who provides, or 2 or more individuals acting
jointly who provide, information relating to a violation of
laws enforced by FinCEN, in a manner established, by rule or
regulation, by FinCEN.
``(b) Awards.--
``(1) In general.--In any covered judicial or
administrative action, or related action, the Secretary,
under such rules as the Secretary may issue and subject to
subsection (c), shall pay an award or awards to 1 or more
whistleblowers who voluntarily provided original information
to FinCEN that led to the successful enforcement of the
covered judicial or administrative action, or related action,
in an aggregate amount equal to not more than 30 percent, in
total, of what has been collected of the monetary sanctions
imposed in the action.
``(2) Source of awards.--For the purposes of paying any
award under paragraph (1), the Secretary may, subject to
amounts made available in advance by appropriation Acts, use
monetary sanction amounts recovered based on the original
information with respect to which the award is being paid.
``(c) Determination of Amount of Award; Denial of Award.--
``(1) Determination of amount of award.--
``(A) Discretion.--The determination of the amount of an
award made under subsection (b) shall be in the discretion of
the Secretary.
``(B) Criteria.--In responding to a disclosure and
determining the amount of an award made, FinCEN staff shall
meet with the whistleblower to discuss evidence disclosed and
rebuttals to the disclosure, and shall take into
consideration--
``(i) the significance of the information provided by the
whistleblower to the success of the covered judicial or
administrative action;
``(ii) the degree of assistance provided by the
whistleblower and any legal representative of the
whistleblower in a covered judicial or administrative action;
``(iii) the mission of FinCEN in deterring violations of
the law by making awards to whistleblowers who provide
information that lead to the successful enforcement of such
laws; and
``(iv) such additional relevant factors as the Secretary
may establish by rule.
``(2) Denial of award.--No award under subsection (b) shall
be made--
``(A) to any whistleblower who is, or was at the time the
whistleblower acquired the original information submitted to
FinCEN, a member, officer, or employee of--
``(i) an appropriate regulatory agency;
``(ii) the Department of Justice;
``(iii) a self-regulatory organization; or
``(iv) a law enforcement organization;
``(B) to any whistleblower who is convicted of a criminal
violation, or who the Secretary has a reasonable basis to
believe committed a criminal violation, related to the
judicial or administrative action for which the whistleblower
otherwise could receive an award under this section;
``(C) to any whistleblower who gains the information
through the performance of an audit of financial statements
required under the Bank Secrecy Act and for whom such
submission would be contrary to its requirements; or
``(D) to any whistleblower who fails to submit information
to FinCEN in such form as the Secretary may, by rule,
require.
``(3) Statement of reasons.--For any decision granting or
denying an award, the Secretary shall provide to the
whistleblower a statement of reasons that includes findings
of fact and conclusions of law for all material issues.
``(d) Representation.--
``(1) Permitted representation.--Any whistleblower who
makes a claim for an award under subsection (b) may be
represented by counsel.
``(2) Required representation.--
``(A) In general.--Any whistleblower who anonymously makes
a claim for an award under subsection (b) shall be
represented by counsel if the whistleblower anonymously
submits the information upon which the claim is based.
``(B) Disclosure of identity.--Prior to the payment of an
award, a whistleblower shall disclose their identity and
provide such other information as the Secretary may require,
directly or through counsel for the whistleblower.
``(e) Appeals.--Any determination made under this section,
including whether, to whom, or in what amount to make awards,
shall be in the discretion of the Secretary. Any such
determination, except the determination of the amount of an
award if the award was made in accordance with subsection
(b), may be appealed to the appropriate court of appeals of
the United States not more than 30 days after the
determination is issued by the Secretary. The court shall
review the determination made by the Secretary in accordance
with section 706 of title 5.
``(f) Employee Protections.--The Secretary of the Treasury
shall issue regulations protecting a whistleblower from
retaliation, which shall be as close as practicable to the
employee protections provided for under section 1057 of the
Consumer Financial Protection Act of 2010.''; and
(2) in the table of contents for such chapter, by inserting
after the item relating to section 5323 the following new
item:
``5323A. Whistleblower incentives.''.
SEC. 207. CERTAIN VIOLATORS BARRED FROM SERVING ON BOARDS OF
UNITED STATES FINANCIAL INSTITUTIONS.
Section 5321 of title 31, United States Code, is amended by
adding at the end the following:
``(f) Certain Violators Barred From Serving on Boards of
United States Financial Institutions.--
``(1) In general.--An individual found to have committed an
egregious violation of a provision of (or rule issued under)
the Bank Secrecy Act shall be barred from serving on the
board of directors of a United States financial institution
for a 10-year period beginning on the date of such finding.
``(2) Egregious violation defined.--With respect to an
individual, the term `egregious violation' means--
``(A) a felony criminal violation for which the individual
was convicted; and
``(B) a civil violation where the individual willfully
committed such violation and the violation facilitated money
laundering or the financing of terrorism.''.
SEC. 208. ADDITIONAL DAMAGES FOR REPEAT BANK SECRECY ACT
VIOLATORS.
(a) In General.--Section 5321 of title 31, United States
Code, as amended by section 208, is further amended by adding
at the end the following:
``(g) Additional Damages for Repeat Violators.--In addition
to any other fines permitted by this section and section
5322, with respect to a person who has previously been
convicted of a criminal provision of (or rule issued under)
the Bank Secrecy Act or who has admitted, as part of a
deferred- or non-prosecution agreement, to having previously
committed a violation of a criminal provision of (or rule
issued under) the Bank Secrecy Act, the Secretary may impose
an additional civil penalty against such person for each
additional such violation in an amount equal to up three
times the profit gained or loss avoided by such person as a
result of the violation.''.
(b) Prospective Application of Amendment.--For purposes of
determining whether a person has committed a previous
violation under section 5321(g) of title 31, United States
Code, such determination shall only include violations
occurring after the date of enactment of this Act.
SEC. 209. JUSTICE ANNUAL REPORT ON DEFERRED AND NON-
PROSECUTION AGREEMENTS.
(a) Annual Report.--The Attorney General shall issue an
annual report, every year for the five years beginning on the
date of enactment of this Act, to the Committees on Financial
Services and the Judiciary of the House of Representatives
and the Committees on Banking, Housing, and Urban Affairs and
the Judiciary of the Senate containing--
(1) a list of deferred prosecution agreements and non-
prosecution agreements that the Attorney General has entered
into during the previous year with any person with respect to
a violation or suspected violation of the Bank Secrecy Act;
(2) the justification for entering into each such
agreement;
(3) the list of factors that were taken into account in
determining that the Attorney General should enter into each
such agreement; and
(4) the extent of coordination the Attorney General
conducted with the Financial Crimes Enforcement Network prior
to entering into each such agreement.
(b) Classified Annex.--Each report under subsection (a) may
include a classified annex.
(c) Bank Secrecy Act Defined.--For purposes of this
section, the term ``Bank Secrecy Act'' has the meaning given
that term under section 5312 of title 31, United States Code.
SEC. 210. RETURN OF PROFITS AND BONUSES.
(a) In General.--Section 5322 of title 31, United States
Code, is amended by adding at the end the following:
``(e) Return of Profits and Bonuses.--A person convicted of
violating a provision of (or rule issued under) the Bank
Secrecy Act shall--
``(1) in addition to any other fine under this section, be
fined in an amount equal to the profit gained by such person
by reason of such violation, as determined by the court; and
``(2) if such person is an individual who was a partner,
director, officer, or employee of a financial institution at
the time the violation occurred, repay to such financial
institution any bonus paid to such individual during the
Federal fiscal year in which the violation occurred or the
Federal fiscal year after which the violation occurred.''.
(b) Rule of Construction.--The amendment made by subsection
(a) may not be construed to prohibit a financial institution
from requiring the repayment of a bonus paid to a partner,
director, officer, or employee if the financial institution
determines that the partner, director, officer, or employee
engaged in unethical, but non-criminal, activities.
SEC. 211. APPLICATION OF BANK SECRECY ACT TO DEALERS IN
ANTIQUITIES.
(a) In General.--Section 5312(a)(2) of title 31, United
States Code, is amended--
(1) in subparagraph (Y), by striking ``or'' at the end;
(2) by redesignating subparagraph (Z) as subparagraph (AA);
and
[[Page H8333]]
(3) by inserting after subsection (Y) the following:
``(Z) a person trading or acting as an intermediary in the
trade of antiquities, including an advisor, consultant or any
other person who engages as a business in the solicitation of
the sale of antiquities; or''.
(b) Study on the Facilitation of Money Laundering and
Terror Finance Through the Trade of Works of Art or
Antiquities.--
(1) Study.--The Secretary of the Treasury, in coordination
with Federal Bureau of Investigation, the Attorney General,
and Homeland Security Investigations, shall perform a study
on the facilitation of money laundering and terror finance
through the trade of works of art or antiquities, including
an analysis of--
(A) the extent to which the facilitation of money
laundering and terror finance through the trade of works of
art or antiquities may enter or affect the financial system
of the United States, including any qualitative data or
statistics;
(B) whether thresholds and definitions should apply in
determining which entities to regulate;
(C) an evaluation of which markets, by size, entity type,
domestic or international geographical locations, or
otherwise, should be subject to regulations, but only to the
extent such markets are not already required to report on the
trade of works of art or antiquities to the Federal
Government;
(D) an evaluation of whether certain exemptions should
apply; and
(E) any other points of study or analysis the Secretary
determines necessary or appropriate.
(2) Report.--Not later than the end of the 180-day period
beginning on the date of the enactment of this Act, the
Secretary of the Treasury shall issue a report to the
Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate containing all findings and
determinations made in carrying out the study required under
paragraph (1).
(c) Rulemaking.--Not later than the end of the 180-day
period beginning on the date the Secretary issues the report
required under subsection (b)(2), the Secretary shall issue
regulations to carry out the amendments made by subsection
(a).
SEC. 212. GEOGRAPHIC TARGETING ORDER.
The Secretary of the Treasury shall issue a geographic
targeting order, similar to the order issued by the Financial
Crimes Enforcement Network on November 15, 2018, that--
(1) applies to commercial real estate to the same extent,
with the exception of having the same thresholds, as the
order issued by FinCEN on November 15, 2018, applies to
residential real estate; and
(2) establishes a specific threshold for commercial real
estate.
SEC. 213. STUDY AND REVISIONS TO CURRENCY TRANSACTION REPORTS
AND SUSPICIOUS ACTIVITY REPORTS.
(a) Currency Transaction Reports.--
(1) CTR indexed for inflation.--
(A) In general.--Every 5 years after the date of enactment
of this Act, the Secretary of the Treasury shall revise
regulations issued with respect to section 5313 of title 31,
United States Code, to update each $10,000 threshold amount
in such regulation to reflect the change in the Consumer
Price Index for All Urban Consumers published by the
Department of Labor, rounded to the nearest $100. For
purposes of calculating the change described in the previous
sentence, the Secretary shall use $10,000 as the base amount
and the date of enactment of this Act as the base date.
(B) Exception.--Notwithstanding subparagraph (A), the
Secretary may make appropriate adjustments to the threshold
amounts described under subparagraph (A) in high-risk areas
(e.g., High Intensity Financial Crime Areas or HIFCAs), if
the Secretary has demonstrable evidence that shows a
threshold raise would increase serious crimes, such as
trafficking, or endanger national security.
(2) GAO ctr study.--
(A) Study.--The Comptroller General of the United States
shall carry out a study of currency transaction reports. Such
study shall include--
(i) a review (carried out in consultation with the
Secretary of the Treasury, the Financial Crimes Enforcement
Network, the United States Attorney General, the State
Attorneys General, and State, Tribal, and local law
enforcement) of the effectiveness of the current currency
transaction reporting regime;
(ii) an analysis of the importance of currency transaction
reports to law enforcement; and
(iii) an analysis of the effects of raising the currency
transaction report threshold.
(B) Report.--Not later than the end of the 1-year period
beginning on the date of enactment of this Act, the
Comptroller General shall issue a report to the Secretary of
the Treasury and the Congress containing--
(i) all findings and determinations made in carrying out
the study required under subparagraph (A); and
(ii) recommendations for improving the current currency
transaction reporting regime.
(b) Modified SARs Study and Design.--
(1) Study.--The Director of the Financial Crimes
Enforcement Network shall carry out a study, in consultation
with industry stakeholders (including money services
businesses, community banks, and credit unions), regulators,
and law enforcement, of the design of a modified suspicious
activity report form for certain customers and activities.
Such study shall include--
(A) an examination of appropriate optimal SARs thresholds
to determine the level at which a modified SARs form could be
employed;
(B) an evaluation of which customers or transactions would
be appropriate for a modified SAR, including--
(i) seasoned business customers;
(ii) financial technology (Fintech) firms;
(iii) structuring transactions; and
(iv) any other customer or transaction that may be
appropriate for a modified SAR; and
(C) an analysis of the most effective methods to reduce the
regulatory burden imposed on financial institutions in
complying with the Bank Secrecy Act, including an analysis of
the effect of--
(i) modifying thresholds;
(ii) shortening forms;
(iii) combining Bank Secrecy Act forms;
(iv) filing reports in periodic batches; and
(v) any other method that may reduce the regulatory burden.
(2) Study considerations.--In carrying out the study
required under paragraph (1), the Director shall seek to
balance law enforcement priorities, regulatory burdens
experienced by financial institutions, and the requirement
for reports to have a ``high degree of usefulness to law
enforcement'' under the Bank Secrecy Act.
(3) Report.--Not later than the end of the 1-year period
beginning on the date of enactment of this Act, the Director
shall issue a report to Congress containing--
(A) all findings and determinations made in carrying out
the study required under subsection (a); and
(B) sample designs of modified SARs forms based on the
study results.
(4) Contracting authority.--The Director may contract with
a private third-party to carry out the study required under
this subsection. The authority of the Director to enter into
contracts under this paragraph shall be in effect for each
fiscal year only to the extent and in the amounts as are
provided in advance in appropriations Acts.
(c) Definitions.--For purposes of this section:
(1) Bank secrecy act.--The term ``Bank Secrecy Act'' has
the meaning given that term under section 5312 of title 31,
United States Code.
(2) Regulatory burden.--The term ``regulatory burden''
means the man-hours to complete filings, cost of data
collection and analysis, and other considerations of chapter
35 of title 44, United States Code (commonly referred to as
the Paperwork Reduction Act).
(3) SAR; suspicious activity report.--The term ``SAR'' and
``suspicious activity report'' mean a report of a suspicious
transaction under section 5318(g) of title 31, United States
Code.
(4) Seasoned business customer.--The term ``seasoned
business customer'', shall have such meaning as the Secretary
of the Treasury shall prescribe, which shall include any
person that--
(A) is incorporated or organized under the laws of the
United States or any State, or is registered as, licensed by,
or otherwise eligible to do business within the United
States, a State, or political subdivision of a State;
(B) has maintained an account with a financial institution
for a length of time as determined by the Secretary; and
(C) meet such other requirements as the Secretary may
determine necessary or appropriate.
SEC. 214. STREAMLINING REQUIREMENTS FOR CURRENCY TRANSACTION
REPORTS AND SUSPICIOUS ACTIVITY REPORTS.
(a) Review.--The Secretary of the Treasury (in consultation
with Federal law enforcement agencies, the Director of
National Intelligence, and the Federal functional regulators
and in consultation with other relevant stakeholders) shall
undertake a formal review of the current financial
institution reporting requirements under the Bank Secrecy Act
and its implementing regulations and propose changes to
further reduce regulatory burdens, and ensure that the
information provided is of a ``high degree of usefulness'' to
law enforcement, as set forth under section 5311 of title 31,
United States Code.
(b) Contents.--The review required under subsection (a)
shall include a study of--
(1) whether the timeframe for filing a suspicious activity
report should be increased from 30 days;
(2) whether or not currency transaction report and
suspicious activity report thresholds should be tied to
inflation or otherwise periodically be adjusted;
(3) whether the circumstances under which a financial
institution determines whether to file a ``continuing
suspicious activity report'', or the processes followed by a
financial institution in determining whether to file a
``continuing suspicious activity report'' (or both) can be
narrowed;
(4) analyzing the fields designated as ``critical'' on the
suspicious activity report form and whether the number of
fields should be reduced;
(5) the increased use of exemption provisions to reduce
currency transaction reports that are of little or no value
to law enforcement efforts;
(6) the current financial institution reporting
requirements under the Bank Secrecy Act and its implementing
regulations and guidance; and
(7) such other items as the Secretary determines
appropriate.
(c) Report.--Not later than the end of the one year period
beginning on the date of the enactment of this Act, the
Secretary of the Treasury, in consultation with law
enforcement and persons subject to Bank Secrecy Act
requirements, shall issue a report to the Congress containing
all findings and determinations made in carrying out the
review required under subsection (a).
(d) Definitions.--For purposes of this section:
(1) Federal functional regulator.--The term ``Federal
functional regulator'' has the meaning given that term under
section 103.
(2) Other terms.--The terms ``Bank Secrecy Act'' and
``financial institution'' have the meaning given those terms,
respectively, under section 5312 of title 31, United States
Code.
[[Page H8334]]
TITLE K--MODERNIZING THE AML SYSTEM
SEC. 301. ENCOURAGING INNOVATION IN BSA COMPLIANCE.
Section 5318 of title 31, United States Code, as amended by
section 202, is further amended by adding at the end the
following:
``(p) Encouraging Innovation in Compliance.--
``(1) In general.--The Federal functional regulators shall
encourage financial institutions to consider, evaluate, and,
where appropriate, responsibly implement innovative
approaches to meet the requirements of this subchapter,
including through the use of innovation pilot programs.
``(2) Exemptive relief.--The Secretary, pursuant to
subsection (a), may provide exemptions from the requirements
of this subchapter if the Secretary determines such
exemptions are necessary to facilitate the testing and
potential use of new technologies and other innovations.
``(3) Rule of construction.--This subsection may not be
construed to require financial institutions to consider,
evaluate, or implement innovative approaches to meet the
requirements of the Bank Secrecy Act.
``(4) Federal functional regulator defined.--In this
subsection, the term `Federal functional regulator' means the
Board of Governors of the Federal Reserve System, the
Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the National Credit Union Administration, the
Securities and Exchange Commission, and the Commodity Futures
Trading Commission.''.
SEC. 302. INNOVATION LABS.
(a) In General.--Subchapter II of chapter 53 of title 31,
United States Code, is amended by adding at the end the
following:
``Sec. 5333. Innovation Labs
``(a) Establishment.--There is established within the
Department of the Treasury and each Federal functional
regulator an Innovation Lab.
``(b) Director.--The head of each Innovation Lab shall be a
Director, to be appointed by the Secretary of the Treasury or
the head of the Federal functional regulator, as applicable.
``(c) Duties.--The duties of the Innovation Lab shall be--
``(1) to provide outreach to law enforcement agencies,
financial institutions, and other persons (including vendors
and technology companies) with respect to innovation and new
technologies that may be used to comply with the requirements
of the Bank Secrecy Act;
``(2) to support the implementation of responsible
innovation and new technology, in a manner that complies with
the requirements of the Bank Secrecy Act;
``(3) to explore opportunities for public-private
partnerships; and
``(4) to develop metrics of success.
``(d) FinCEN Lab.--The Innovation Lab established under
subsection (a) within the Department of the Treasury shall be
a lab within the Financial Crimes Enforcement Network.
``(e) Federal Functional Regulator Defined.--In this
subsection, the term `Federal functional regulator' means the
Board of Governors of the Federal Reserve System, the
Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the National Credit Union Administration, the
Securities and Exchange Commission, and the Commodity Futures
Trading Commission.''.
(b) Clerical Amendment.--The table of contents for
subchapter II of chapter 53 of title 31, United States Code,
is amended by adding at the end the following:
``5333. Innovation Labs.''.
SEC. 303. INNOVATION COUNCIL.
(a) In General.--Subchapter II of chapter 53 of Title 31,
United States Code, as amended by section 302, is further
amended by adding at the end the following:
``Sec. 5334. Innovation Council
``(a) Establishment.--There is established the Innovation
Council (hereinafter in this section referred to as the
`Council'), which shall consist of each Director of an
Innovation Lab established under section 5334 and the
Director of the Financial Crimes Enforcement Network.
``(b) Chair.--The Director of the Innovation Lab of the
Department of the Treasury shall serve as the Chair of the
Council.
``(c) Duty.--The members of the Council shall coordinate on
activities related to innovation under the Bank Secrecy Act,
but may not supplant individual agency determinations on
innovation.
``(d) Meetings.--The meetings of the Council--
``(1) shall be at the call of the Chair, but in no case may
the Council meet less than semi-annually;
``(2) may include open and closed sessions, as determined
necessary by the Council; and
``(3) shall include participation by public and private
entities and law enforcement agencies.
``(e) Report.--The Council shall issue an annual report,
for each of the 7 years beginning on the date of enactment of
this section, to the Secretary of the Treasury on the
activities of the Council during the previous year, including
the success of programs as measured by metrics of success
developed pursuant to section 5334(c)(4), and any regulatory
or legislative recommendations that the Council may have.''.
(b) Clerical Amendment.--The table of contents for
subchapter II of chapter 53 of title 31, United States Code,
is amended by adding the end the following:
``5334. Innovation Council.''.
SEC. 304. TESTING METHODS RULEMAKING.
(a) In General.--Section 5318 of title 31, United States
Code, as amended by section 301, is further amended by adding
at the end the following:
``(q) Testing.--
``(1) In general.--The Secretary of the Treasury, in
consultation with the head of each agency to which the
Secretary has delegated duties or powers under subsection
(a), shall issue a rule to specify--
``(A) with respect to technology and related technology-
internal processes (`new technology') designed to facilitate
compliance with the Bank Secrecy Act requirements, the
standards by which financial institutions are to test new
technology; and
``(B) in what instances or under what circumstance and
criteria a financial institution may replace or terminate
legacy technology and processes for any examinable technology
or process without the replacement or termination being
determined an examination deficiency.
``(2) Standards.--The standards described under paragraph
(1) may include--
``(A) an emphasis on using innovative approaches, such as
machine learning, rather than rules-based systems;
``(B) risk-based back-testing of the regime to facilitate
calibration of relevant systems;
``(C) requirements for appropriate data privacy and
security; and
``(D) a requirement that the algorithms used by the regime
be disclosed to the Financial Crimes Enforcement Network,
upon request.
``(3) Confidentiality of algorithms.--If a financial
institution or any director, officer, employee, or agent of
any financial institution, voluntarily or pursuant to this
subsection or any other authority, discloses the
institution's algorithms to a Government agency, such
algorithms and any materials associated with the creation of
such algorithms shall be considered confidential and not
subject to public disclosure.''.
(b) Update of Manual.--The Financial Institutions
Examination Council shall ensure--
(1) that any manual prepared by the Council is updated to
reflect the rulemaking required by the amendment made by
subsection (a); and
(2) that financial institutions are not penalized for the
decisions based on such rulemaking to replace or terminate
technology used for compliance with the Bank Secrecy Act (as
defined under section 5312 of title 31, United States Code)
or other anti-money laundering laws.
SEC. 305. FINCEN STUDY ON USE OF EMERGING TECHNOLOGIES.
(a) Study.--
(1) In general.--The Director of the Financial Crimes
Enforcement Network (``FinCEN'') shall carry out a study on--
(A) the status of implementation and internal use of
emerging technologies, including artificial intelligence
(``AI''), digital identity technologies, blockchain
technologies, and other innovative technologies within
FinCEN;
(B) whether AI, digital identity technologies, blockchain
technologies, and other innovative technologies can be
further leveraged to make FinCEN's data analysis more
efficient and effective; and
(C) how FinCEN could better utilize AI, digital identity
technologies, blockchain technologies, and other innovative
technologies to more actively analyze and disseminate the
information it collects and stores to provide investigative
leads to Federal, State, Tribal, and local law enforcement,
and other Federal agencies (collective, ``Agencies''), and
better support its ongoing investigations when referring a
case to the Agencies.
(2) Inclusion of gto data.--The study required under this
subsection shall include data collected through the
Geographic Targeting Orders (``GTO'') program.
(3) Consultation.--In conducting the study required under
this subsection, FinCEN shall consult with the Directors of
the Innovations Labs established in section 302.
(b) Report.--Not later than the end of the 6-month period
beginning on the date of the enactment of this Act, the
Director shall issue a report to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives
containing--
(1) all findings and determinations made in carrying out
the study required under subsection (a);
(2) with respect to each of subparagraphs (A), (B) and (C)
of subsection (a)(1), any best practices or significant
concerns identified by the Director, and their applicability
to AI, digital identity technologies, blockchain
technologies, and other innovative technologies with respect
to U.S. efforts to combat money laundering and other forms of
illicit finance; and
(3) any policy recommendations that could facilitate and
improve communication and coordination between the private
sector, FinCEN, and Agencies through the implementation of
innovative approaches, in order to meet their Bank Secrecy
Act (as defined under section 5312 of title 31, United States
Code) and anti-money laundering compliance obligations.
SEC. 306. DISCRETIONARY SURPLUS FUNDS.
(a) In General.--Section 7(a)(3)(A) of the Federal Reserve
Act (12 U.S.C. 289(a)(3)(A)) is amended by striking
``$6,825,000,000'' and inserting ``$6,798,000,000''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on September 30, 2029.
The Acting CHAIR. No further amendment to the bill, as amended, shall
be in order except those printed in part B of House Report 116-247.
Each such further amendment may be offered only in the order printed in
the report, may be offered only by a Member designated in the report,
shall be considered as read, shall be debatable for the time specified
in the report equally divided and controlled by the proponent and an
opponent, shall not
[[Page H8335]]
be subject to amendment, and shall not be subject to a demand for
division of the question.
Amendment No. 1 Offered by Mr. Burgess
The Acting CHAIR. It is now in order to consider amendment No. 1
printed in part B of House Report 116-247.
Mr. BURGESS. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 36, after line 8, insert the following:
(d) Annual Report on Beneficial Ownership Information.--
(1) Report.--The Secretary of the Treasury shall issue an
annual report to the Committee on Financial Services of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate with respect to the
beneficial ownership information collected pursuant to
section 5333 of title 31, United States Code, that contains--
(A) aggregate data on the number of beneficial owners per
reporting corporation or limited liability company;
(B) the industries or type of business of each reporting
corporation or limited liability company; and
(C) the locations of the beneficial owners.
(2) Privacy.--In issuing reports under paragraph (1), the
Secretary shall not reveal the identities of beneficial
owners or names of the reporting corporations or limited
liability companies.
The Acting CHAIR. Pursuant to House Resolution 646, the gentleman
from Texas (Mr. Burgess) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Texas.
Mr. BURGESS. Mr. Chairman, amendment No. 1 to H.R. 2513 requires an
annual report to Congress of anonymized, aggregate data on the number
of beneficial owners per reporting corporation or limited liability
company, the industry of each reporting corporation or limited
liability company, and the location of the beneficial owners.
One of the greatest beneficiaries of the crisis on our southern
border has been the cartels and coyotes. They charge from $6,000 to
$10,000 to smuggle people into our country who do not have legal
documentation.
Despite the danger, these individuals borrow money from normal banks
in their home country. Their family members put up collateral--their
farms, their houses--to pay these cartels and coyotes. If the
individual makes it into the United States, they will send remittances
home through the same legitimate financial transaction to pay back
those family loans.
Throughout this process, the coyotes and cartels are making a
significant amount of money off of these very vulnerable individuals.
While many of them likely deal mostly in cash, the possibility exists
that they are using shell companies to store or move this illicit
money.
Providing data to Congress on how many beneficial owners are behind a
company, the industries of the reporting companies, and the locations
of the beneficial owners will help identify trends and patterns that
could aid in the fight to combat money laundering and the financing of
human trafficking.
We should not be facilitating coyotes and cartels to take advantage
of desperate people. Providing this aggregate, anonymized data to
Congress will provide some transparency on the networks behind the
illicit financing of human and drug smuggling and other nefarious
financial activities.
I urge the support of this amendment, and I reserve the balance of my
time.
Ms. WATERS. Mr. Chair, I claim the time in opposition, although I do
not oppose the amendment.
The Acting CHAIR. Without objection, the gentlewoman from California
is recognized for 5 minutes.
There was no objection.
Ms. WATERS. Mr. Chairman, the Burgess amendment would require an
annual report to Congress that examines the aggregated submissions to
the beneficial ownership database, thus providing a snapshot of the
size, type, and location of reporting entities.
I agree that an examination of this data will be helpful to FinCEN as
it contemplates rulemakings and to Congress should we consider future
refinements of the law. So I would encourage Members to support the
amendment.
I reserve the balance of my time.
Mr. BURGESS. Mr. Chairman, I urge support of the amendment, and I
yield back the balance of my time.
Ms. WATERS. Mr. Chairman, I yield the balance of my time to the
gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of
this important legislation.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, I support this
amendment, which would simply require Treasury to submit an annual
report to Congress with basic statistics on the beneficial ownership
information that is filed under the bill.
This is very similar to a recent report that the U.K. conducted, that
they started collecting beneficial information. The U.K.'s report was
very helpful because it highlighted that the vast majority of companies
have only one beneficial owner, which makes compliance with the bill
extremely easy.
I think that the data that Treasury would be required to report to
Congress under this amendment would be helpful in case we decide that
we need to tweak the bill in the future to address any unforeseeable
future issues that arise.
So I want to thank the gentleman from Texas for offering the
amendment. I think it is a very good idea, and I urge my colleagues to
support it and to support the underlying bill, which will increase
national security for our country.
Ms. WATERS. Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Texas (Mr. Burgess).
The question was taken; and the Acting Chair announced that the ayes
appeared to have it.
Ms. WATERS. Mr. Chairman, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Texas will
be postponed.
Amendment No. 2 Offered by Mr. Hill of Arkansas
The Acting CHAIR. It is now in order to consider amendment No. 2
printed in part B of House Report 116-247.
Mr. HILL of Arkansas. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 17, after line 19, insert the following:
``(D) Access procedures.--FinCEN shall establish stringent
procedures for the protection and proper use of beneficial
ownership information disclosed pursuant to subparagraph (B),
including procedures to ensure such information is not being
inappropriately accessed or misused by law enforcement
agencies.
``(E) Report to congress.--FinCEN shall issue an annual
report to Congress stating--
``(i) the number of times law enforcement agencies and
financial institutions have accessed beneficial ownership
information pursuant to subparagraph (B);
``(ii) the number of times beneficial ownership information
reported to FinCEN pursuant to this section was
inappropriately accessed, and by whom; and
``(iii) the number of times beneficial ownership
information was disclosed under subparagraph (B) pursuant to
a subpoena.''.
The Acting CHAIR. Pursuant to House Resolution 646, the gentleman
from Arkansas (Mr. Hill) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Arkansas.
Mr. HILL of Arkansas. Mr. Chair, I want to again thank my friend from
New York for her hard work on crafting this legislation. While we have
had differences along the way, it is critical that we strengthen our
national security and AML BSA system and strengthen the transparency of
beneficial ownership.
As I have previously discussed, I am concerned with several aspects
of the bill, and I am offering this amendment which I believe will help
improve its overall purpose.
When we heard testimony, a retired FBI agent testified to our
committee acknowledging that law enforcement wants this data, this new
database at FinCEN to search, essentially, without a warrant or a
subpoena.
My amendment would require the Financial Crimes Enforcement Network
to develop stringent procedures around the beneficial ownership
database pertaining to who and how it has been accessed.
Per the bill's requirements, many businesses will be providing this
information into a repository that will contain sensitive information.
Who can access and how they can access it should
[[Page H8336]]
have clearer guidelines and ensure that this information is not being
inappropriately accessed.
Additionally, the amendment requires FinCEN to report to Congress,
annually, the number of times law enforcement, banks, or other parties
access the database, how many times it was inappropriately accessed,
and the number of subpoenas obtained to gain access to the database.
This will ensure that Congress maintains oversight of the database and
that banks or law enforcement are not abusing this new system.
Our committee has heard hours of testimony about Federal Government
data breaches over these years: OPM, the SEC, IRS, CFPB. As such, we
have to make sure this information is as secure as possible.
As previously mentioned, this information is highly sensitive and
should remain extremely confidential to the extent possible. As
policymakers, we have an obligation to our constituents to ensure that
we uphold their privacy, and this amendment will better help us achieve
that goal.
I urge my colleagues to support this commonsense amendment. It is
good for businesses, good for our bankers and lawmakers, and,
ultimately, good for our citizens.
Mr. Chair, I reserve the balance of my time.
Ms. WATERS. Mr. Chair, I claim the time in opposition, although I do
not oppose.
The Acting CHAIR. Without objection, the gentlewoman from California
is recognized for 5 minutes.
There was no objection.
Ms. WATERS. Mr. Chairman, the Hill amendment requires FinCEN to
develop protocols governing how law enforcement and others can access
the beneficial ownership database.
Today, in order for law enforcement to access FinCEN's Bank Secrecy
Act database, they must comply with a stringent process requiring
assessment, training, and review.
H.R. 2513 also includes protocols governing access to the new
beneficial ownership database, including creating an audit trail of the
law enforcement agencies that access the data.
Mr. Hill's amendment would provide an added measure of protection,
reinforcing the importance of clear procedures to ensure that such
information is not inappropriately accessed or misused by law
enforcement agencies. I will vote in support of this amendment.
Mr. Chair, I reserve the balance of my time.
Mr. HILL of Arkansas. Mr. Chairman, may I ask how much time I have
remaining.
The Acting CHAIR. The gentleman from Arkansas has 2\1/2\ minutes
remaining.
Mr. HILL of Arkansas. I yield such time as he may consume to the
gentleman from North Carolina (Mr. McHenry).
Mr. McHENRY. Mr. Chair, I appreciate my colleague for yielding.
I do believe, notwithstanding the lack of warrant or subpoena, the
gentleman's amendment gives us greater confidence that the agency and
law enforcement officials will be using this database more
appropriately. I think this is a necessary amendment for this bill to
move forward, though we still have greater issues to contend with.
I appreciate the gentleman working in such a constructive way and
bipartisan way.
Ms. WATERS. Mr. Chairman, I yield the balance of my time to the
gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of
this important legislation.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I support this
amendment, and I would like to thank Mr. Hill for offering it.
This amendment would require FinCEN to establish stringent procedures
to ensure the beneficial ownership information isn't being
inappropriately accessed or misused by law enforcement agencies.
I believe the underlying bill already addresses these issues--
certainly, it was the intent to protect against unauthorized access and
misuse of beneficial ownership information--but I am not opposed to
making that language even more explicit.
His amendment would also require FinCEN to submit an annual report to
Congress detailing the number of times beneficial ownership information
was accessed, either by law enforcement or by financial institutions.
{time} 1515
I think this information would be very helpful because it would tell
us how useful the information is to both law enforcement and financial
institutions. So while Mr. Hill and I have had disagreements over this
bill, I think this amendment is a helpful addition to the bill, and I
want to thank him for offering it.
I urge my colleagues to support it and the underlying bill.
Ms. WATERS. Mr. Chairman, I yield back the balance of my time.
Mr. HILL of Arkansas. Mr. Chairman, I want to thank my friend from
New York for her working with me on this amendment. I thank her for
accepting it. And I want to thank the Chair of the full committee for
its report.
I want to just close and emphasize that under the law as drafted
today there are about 10,000 law-enforcement qualified people that can
access that database. That is a lot of people, Mr. Chair, that have
access to this database that we are concerned about in making sure that
it is maintained in a very confidential manner.
I appreciate the consideration of the amendment, and I appreciate its
adoption. Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Arkansas (Mr. Hill).
The amendment was agreed to.
Amendment No. 3 Offered by Mr. Brown of Maryland
The Acting CHAIR. It is now in order to consider amendment No. 3
printed in part B of House Report 116-247.
Mr. BROWN of Maryland. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 16, line 8, after ``training,'' insert the following:
``and refresher training no less than every two years,''.
The Acting CHAIR. Pursuant to House Resolution 646, the gentleman
from Maryland (Mr. Brown) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Maryland.
Mr. BROWN of Maryland. Mr. Chair, I yield myself such time as I may
consume.
I want to thank my colleague from California, the chairwoman of the
committee, Chairwoman Waters, for her leadership on the Financial
Services Committee. And I want to recognize the hard work of my
colleague and friend from New York, Chairwoman Carolyn B. Maloney, on
the underlying bill. I also want to thank you, Representative Maloney,
for inviting me last Congress to visit several European countries to
explore and better understand how those countries address the problems
that this bill seeks to address.
Currently, no state requires companies to provide the identities of
their true beneficial owners. This lack of oversight and transparency
makes it easy for criminals, dictators, and kleptocrats to launder
money, hide their illicit activities, and invade law enforcement
through anonymous shell companies.
These anonymous shell companies can be used for everything from
funding terrorist organizations, supporting human traffickers, and
helping corrupt foreign leaders evade sanctions and threaten our
national security. These so-called companies have no employees, no
physical offices but are established simply to access our banking
system.
The 2016 Panama Papers leak exposed just how powerful and corrupt
these anonymous shell companies are. And the United States is the only
advanced economy in the world that doesn't already require this
disclosure. To combat this, this bill requires corporations to disclose
their beneficial owners at the time the company is formed. This is a
commonsense requirement, considering you often need more documentation
to get a library card than to start a company or an LLC.
This bill provides much needed transparency without being burdensome
on legitimate businesses. The bill also protects the privacy of
Americans by ensuring law enforcement officials at the State and
Federal level with access
[[Page H8337]]
to this new information are properly trained, have an existing
investigatory basis before searching, and maintain an audit log.
Mr. Chair, my amendment strengthens and builds upon these
protections. It requires law enforcement officials tasked with handling
a beneficial owner's personal information to go through retraining at a
minimum of every 2 years. This will ensure they are keeping up with the
latest rules, systems, and processes and will lower the risk of misuse
or improper disclosure.
The retraining is critical to ensuring that our law enforcement
officials, at all levels of government, are undertaking best practices
when handling sensitive information during their investigations.
Together we can finally tackle the issues surrounding shell companies
and their opaque beneficial ownership structure and give law
enforcement the tools they need to track the money that threatens our
national security.
I strongly encourage my colleagues to support the underlying bill and
my amendment. I yield back the balance of my time
Mr. McHENRY. Mr. Chair, I claim the time in opposition to the
amendment, even though I am not opposed to it.
The Acting CHAIR. Without objection, the gentleman from North
Carolina is recognized for 5 minutes.
There was no objection.
Mr. McHENRY. The gentleman's amendment would ensure that law
enforcement professionals who access the beneficial ownership's
database understand the importance of protecting the privacy of
beneficial owners. I think this is a necessary and proper addition to
the bill. I think this highlights the fact that we don't have the basic
due process rights or constitutional protections that we have under the
FISA court or under the Patriot Act.
The Wall Street Journal recently reported that the FISA ``court
concluded that in at least a handful of cases, the FBI had been
improperly searching a database of raw intelligence for information on
Americans--raising concerns about oversight of the program.''
This refresher training is an important step to ensure individuals
who have access to highly sensitive and private information of millions
of Americans are properly trained. Authorized users should only be able
to access information for officially sanctioned uses.
I thank the gentleman for offering this amendment. And while this
amendment is not a sufficient replacement for a warrant or subpoena, it
recognizes that law enforcement must know how to handle personal
information and the need to protect that information. I urge its
adoption.
Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Maryland (Mr. Brown).
The amendment was agreed to.
Amendment No. 4 Offered by Mr. Levin of Michigan
The Acting CHAIR. It is now in order to consider amendment No. 4
printed in part B of House Report 116-247.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, I rise as the
designee of the gentleman from Michigan (Mr. Levin) to offer amendment
No. 4.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 17, after line 19, insert the following:
``(D) Disclosure of non-pii data.--Notwithstanding
subparagraph (B), FinCEN may issue guidance and otherwise
make materials available to financial institutions and the
public using beneficial ownership information reported
pursuant to this section if such information is aggregated in
a manner that removes all personally identifiable
information. For purposes of this subparagraph, `personally
identifiable information' includes information that would
allow for the identification of a particular corporation or
limited liability company.''.
The Acting CHAIR. Pursuant to House Resolution 646, the gentlewoman
from New York (Mrs. Carolyn B. Maloney) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentlewoman from New York.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, this amendment is
a clarifying amendment. It would clarify that FinCEN can actually use
the beneficial ownership information it is collecting under the bill.
This was always our intent, but we were concerned that because FinCEN
technically isn't a law enforcement agency, their authority to use the
information under the bill might be unclear.
Mr. Levin's amendment fixes this by explicitly stating that FinCEN
can use the information to issue public advisories and to share the
information with financial institutions in order to improve compliance
with their know-your-customer rules. However, FinCEN would only be able
to disclose the information in an aggregated format so that it protects
the disclosure of personally identifiable information.
I want to thank Mr. Levin for working closely with my office and with
the committee on this amendment. I urge my colleagues to support the
amendment and the underlying bill, and I reserve the balance of my
time.
Mr. McHENRY. Mr. Chair, I rise in opposition to the amendment.
The Acting CHAIR. The Gentleman from North Carolina is recognized for
5 minutes.
Mr. McHENRY. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, this amendment exposes the very problem I have with
this new governmental database. We put enormous protections into the
collection of foreigners into our database and intelligence bureaus. We
have granted rights to special courts and that is for information that
is less specific than the information that will be a part of this
beneficial owner or ownership database of America's small businesses.
The amendment here says that basically you redact the specific
personally identifiable information of the beneficial owners of the
small business.
Now, it doesn't have provision for small areas. Let's say that you
are from my hometown or you are from the town I lived in for nearly a
decade, a small town that only has a handful of businesses, and so, you
aggregate the data, but you can still expose people to enormous amounts
of unwanted targeting.
It also exposes to me the additional issues that we have with another
government database, that a future Congress could then take this data
and make it public or some congressional investigator could just want
this for partisan political reasons and try to seek it out of the
executive branch.
This amendment highlights to me the grave concerns I have with a mass
collection of this type of data, no matter how justified the anecdotes
are from law enforcement.
The amendment specifically allows FinCEN to ``issue guidance and
otherwise make materials available to financial institutions and the
public using beneficial ownership information.'' That is deeply
problematic, and I do not believe appropriate protections are in place
for an amendment like this to be made reasonable. I think if you have
civil liberties concerns, I would say that this amendment highlights
the very civil liberties concerns you would have with the new Federal
Government database.
I would like to ask the bill's sponsor, though he is not here, about
the intent of creating this type of information, but he is not here. I
don't think this is a wise amendment. I think it should be rejected for
a number of different counts. I would urge my colleagues to vote
``no,'' and I reserve the balance of my time.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I have no further
speakers, and I yield back the balance of my time.
Mr. McHENRY. Mr. Chairman, I yield myself the balance of my time. I
include in the Record a letter in opposition to this very amendment
from the National Federation of Independent Business opposing this
amendment.
[From NFIB]
House Makes Last Minute Bait-and-Switch on Corporate Transparency Act
In advance of today's vote, an amendment filed last night
shows the true motivations of those pushing the Corporate
Transparency Act of 2019 (H.R. 2513).
Despite months of rhetoric about protecting the privacy of
small business owners, this last-minute amendment would allow
the Treasury Department's Financial Crimes Enforcement
Network to make public the individual names, addresses, birth
dates, and even the driver's license numbers of small
business owners. This is a complete reversal of what
promoters of this bill have been saying over the last several
months.
Purportedly about national security, in reality, this bill
shifts a burden from big
[[Page H8338]]
banks, something they said today is merely ``a client pain
point,'' to small businesses who simply cannot absorb an
additional 131.7 million hours of paperwork over the first 10
years at a cost of $5.7 billion. And, with the last-minute
amendment, it allows for the creation a public registry.
``Supporters of this bill have revealed their cards
today,'' said Brad Close, NFIB's Senior Vice President,
Public Policy. ``This amendment confirms one of small
business owners' greatest fears--that the true intention of
those pushing this bill is to establish a public registry of
every small business owner--something that can be used to
shame law-abiding small business owners for free speech
activities or political purposes. This is a serious breach of
the privacy and first amendment rights, and we urge members
of the United States House of Representatives to defeat this
amendment today.''
The amendment filed last night would prohibit FinCEN from
making public the names of specific businesses but would not
prohibit FinCEN from listing the names of business owners or
the personally identifiable information of business owners
such as home addresses.
This morning, The Hill published an op-ed by NFIB President
and CEO Juanita D. Duggan on the significant risks and
penalties the Corporate Transparency Act imposes on small
business owners. This followed on the heels of an
announcement by NFIB of a coalition of 38 business groups,
including NFIB, who joined together in strong oppositior of
this legislation.
To read more on NFIB's efforts to protect small business
privacy, visit https://nfib.com/protectprivacy.
Mr. McHENRY. Mr. Chair, again, I would highlight that the civil
liberties concerns here are enormous. When you do minimal redaction of
specific personally identifiable information, you could still expose
data in certain jurisdictions of small business owners in a way that I
don't think is warranted, nor do I think the bill's sponsor would like
to seek, and I think this is deeply problematic.
I would urge my colleagues to look at the contents of this amendment
and then to think through the concerns that they would have if it were
their information exposed in a minimally redacted way. I don't think
they would be quite comfortable with it.
Now, think of asking every small business owner in your district to
submit this information to another Federal database and then explain to
them that they will minimally redact their information, maybe not their
name, maybe their address, right, and then otherwise the explanation of
their business would be exposed to the public.
I don't think it is a smart way to go here. I don't think this is the
way we should be legislating. I do think it outlines the underlying
concerns I have with this type of database, in not being required to
get a subpoena in order to access it. And then an amendment that says
that we are going to basically, I don't know, outline in Cherryville,
North Carolina, every small business ownership structure in our little
town or in Denver, North Carolina, which is an unincorporated area that
I live in, likewise, taking a small population with a few small
businesses and exposing the ownership structure of small businesses.
I don't think this is a smart amendment. I don't think it is what we
should be intending as Members of Congress, and I think both folks on
the left and the right and in the middle can look at this and think
this is not the way to go. So I urge you to vote against this
amendment, and I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentlewoman from New York (Mrs. Carolyn B. Maloney).
The question was taken; and the Acting Chair announced that the ayes
appeared to have it.
Mr. McHENRY. Mr. Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentlewoman from New York
will be postponed.
{time} 1530
Amendment No. 5 Offered by Mr. Davidson of Ohio
The Acting CHAIR. It is now in order to consider amendment No. 5
printed in part B of House Report 116-247.
Mr. DAVIDSON of Ohio. Mr. Chairman, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Strike sections 1 through 5 and insert the following:
SECTION 1. TERMINATION OF CDD RULE.
The final rule of the Department of the Treasury titled
``Customer Due Diligence Requirements for Financial
Institutions'' (published May 11, 2016; 81 Fed. Reg. 29397)
shall have no force or effect.
SEC. 2. FINCEN STUDY.
(a) Study.--FinCEN shall carry out a study that shall
include--
(1) a review of all existing data collected by the
Department of the Treasury (including the Internal Revenue
Service), by State Secretaries of State, by financial
institutions due to current statutory and regulatory mandates
(excluding the CDD rule), or by other Federal Government
entities, that in whole or in part would allow FinCEN to
discern the beneficial owners of companies operating in the
United States financial system;
(2) recommendations for the sharing of information
described under paragraph (1) with FinCEN along with proposed
safeguards for protecting personally identifiable information
from unauthorized access, including by Federal intelligence
and law enforcement officials, as well as internal risk
control mechanisms for prevention of unauthorized access
through a cyber breach; and
(3) an estimation of the cost of the compliance burden for
the CDD rule.
(b) Report.--Not later than September 30, 2019, FinCEN
shall issue a report to the Congress containing all findings
and determinations made in carrying out the study required
under subsection (a).
(c) Definitions.--For purposes of this section:
(1) CDD rule.--The term ``CDD rule'' means the final rule
of the Department of the Treasury described under section 1.
(2) Financial institution.--The term ``financial
institution'' has the meaning given that tem under section
5312 of title 31, United States Code.
(3) FinCEN.--The term ``FinCEN'' means the Financial Crimes
Enforcement Network.
The Acting CHAIR. Pursuant to House Resolution 646, the gentleman
from Ohio (Mr. Davidson) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Ohio.
Mr. DAVIDSON of Ohio. Mr. Chairman, today, I offer an amendment to
address the serious flaws within the underlying bill.
Under the guise of tracking money laundering, this bill imposes a
crushing paperwork burden squarely targeted at small business owners.
It creates a massive new Federal Government database containing the
addresses of innocent American citizens and will do nothing to track
down criminals.
Under the Obama administration, FinCEN issued regulations that banks
collect the beneficial ownership information of these businesses. The
regulations have proven so confusing, burdensome, and unnecessary that
banks have sought relief from these regulations.
This bill effectively shifts the reporting burden onto mom-and-pop
businesses that have never even heard of FinCEN.
The bill adopts a different definition of beneficial ownership that
is even more confusing and vague than the one used by Treasury's rules,
which has already puzzled regulators and banks for years.
According to the Congressional Budget Office, the bill would generate
25 to 30 million new filings every year. Failure to comply could result
in jail time up to 3 years, thousands of dollars in fines, compromise
of private information, and more.
The bill also raises serious privacy concerns by creating yet another
database that is effectively the first-of-its-kind Federal registry of
small businesses and small business ownership. It contains no subpoena
or warrant-type restrictions for Federal law enforcement to access.
In the era of naming and shaming of companies and owners for
political purposes, and findings that Federal law enforcement have
abused their existing authorities in accessing section 702 FISA data,
this bill should give serious pause about how we as Members of Congress
protect civil liberties for American citizens.
My amendment would simply strike the underlying bill's burdensome
mandate, nullify the Obama-era regulations on banks, and instead
require FinCEN to go back to the drawing board by reviewing how already
existing Federal datasets from banking know-your-customer and anti-
money laundering rules can assist law enforcement in determining the
beneficial owners of businesses.
As my colleague French Hill has offered, the IRS already contains all
of this information.
[[Page H8339]]
Lastly, I would say that if we are going to criminalize private
ownership of businesses, why not do that in the beginning rather than
criminalize failure to report to an agency that doesn't exist.
All of these questions have failed to be addressed directly by the
executive branch, and they are blown through with the way this bill
addresses the problem.
This type of information already exists. We do not need another
Federal database prone to be abused or a crushing mandate that will
harm law-abiding Americans and be ignored by criminals.
Mr. Chair, I urge support for my amendment and opposition to the bill
without it.
Mr. Chair, I reserve the balance of my time.
Ms. WATERS. Mr. Chair, I claim the time in opposition to the
amendment.
The Acting CHAIR. The gentlewoman from California is recognized for 5
minutes.
Ms. WATERS. Mr. Chair, I firmly oppose the Davidson amendment because
it would gut the bill.
After years of working to ensure that criminals, terrorists, and
enemies of the United States can no longer use loopholes to cloak their
dangerous acts from law enforcement, this amendment heedlessly tries to
jettison this significant layer of defense.
If the amendment is adopted, there would be no requirement to share
the identities of the beneficial owners of corporations and LLCs that
currently do not make such disclosures.
If adopted, there would be no ability for law enforcement to get
information that it needs to unmask the wrongdoers who abuse State laws
to hide their global criminal activities.
To make things worse, the amendment would repeal the FinCEN customer
due diligence, or CDD, rule, which currently requires banks to identify
and verify the beneficial ownership of corporate customers. It prevents
criminals, kleptocrats, and others looking to hide ill-gotten proceeds
from accessing the financial system anonymously.
The Director of FinCEN said that the CDD rule is ``but one critical
step toward closing this national security gap. The second critical
step . . . is collecting beneficial ownership information at the
corporate formation stage.''
An outright and immediate repeal of this rule endangers the financial
system by leaving a dangerous new gap in information about bank
customers while the implementation of H.R. 2513 gears up.
The safer approach, and one supported by the financial institutions,
is to require the Treasury to remove identified redundancies after the
database becomes operational. This is precisely what H.R. 2513 already
does.
Mr. Chairman, the AFL-CIO, Oxfam, the FACT Coalition, FBI, Treasury,
DOJ, FinCEN, as well as the Fraternal Order of Police, the Federal Law
Enforcement Officers Association, and most State attorneys general have
urged Congress to pass H.R. 2513 to develop a Federal beneficial
ownership database.
The Davidson amendment would undermine this effort before it can
begin.
Mr. Chair, I urge my colleagues to vote ``no'' on this amendment, and
I reserve the balance of my time.
Mr. DAVIDSON of Ohio. Mr. Chairman, may I inquire as to the balance
of my time.
The Acting CHAIR. The gentleman from Ohio has 2 minutes remaining.
Mr. McHENRY. Will the gentleman yield?
Mr. DAVIDSON of Ohio. I yield to the gentleman from North Carolina
(Mr. McHenry).
Mr. McHENRY. Mr. Chair, I appreciate my colleague for yielding.
I think this highlights the very fact that this bill provides no
regulatory relief for financial institutions to collect information
under the customer due diligence rule. It highlights the nature of this
obligation, especially on small businesses, and the paperwork burden on
small businesses and, on top of that, the paperwork burden on financial
institutions to collect enormous amounts of information.
The very nature of this amendment highlights the missing elements of
the underlying bill.
Mr. Chair, I appreciate my colleague for yielding.
Mr. DAVIDSON of Ohio. Mr. Chairman, I yield myself the balance of my
time to close.
In closing, I would simply say that this would presume that criminals
are somehow going to cease their criminal activity, all because they
have to file a report.
The reality is this is going to criminalize business ownership,
violate the civil liberties of business owners across America, and make
them vulnerable to further abuse by criminals.
Mr. Chair, I urge support for this amendment and opposition to the
underlying bill without its adoption.
Mr. Chair, I yield back the balance of my time.
Ms. WATERS. Mr. Chair, I yield the balance of my time to the
gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of
this important legislation.
Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, I thank the
chairwoman for yielding.
Mr. Chair, I strongly oppose this amendment, which would completely
gut the bill and would dramatically weaken our national security.
Right now, the only protection we have in place against bad actors
using anonymous shell companies to launder their money through the U.S.
is FinCEN's customer due diligence rule, which requires financial
institutions to find out the beneficial owners of the corporations and
the entities that open accounts with them.
The FinCEN rule, which is very important, is still only half a
measure. When FinCEN passed the rule, they explicitly said that
Congress still needed to pass the bill that is before us today.
Mr. Davidson's amendment would not only delete the underlying bill
but would also repeal the FinCEN rule. In other words, it is worse than
the status quo and practically invites criminals and money launderers
to use the U.S. financial system.
Mr. Chair, this is a deeply irresponsible amendment, and I strongly
urge my colleagues to oppose it and to support the underlying bill.
Ms. WATERS. Mr. Chair, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Ohio (Mr. Davidson).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Ms. WATERS. Mr. Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Ohio will be
postponed.
Ms. WATERS. Mr. Chair, I move that the Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Pappas) having assumed the chair, Mr. Cuellar, Acting Chair of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 2513) to
ensure that persons who form corporations or limited liability
companies in the United States disclose the beneficial owners of those
corporations or limited liability companies, in order to prevent
wrongdoers from exploiting United States corporations and limited
liability companies for criminal gain, to assist law enforcement in
detecting, preventing, and punishing terrorism, money laundering, and
other misconduct involving United States corporations and limited
liability companies, and for other purposes, had come to no resolution
thereon.
____________________