[House Report 115-981]
[From the U.S. Government Publishing Office]


115th Congress    }                                    {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                    {      115-981

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



 
  EMPOWERING FINANCIAL INSTITUTIONS TO FIGHT HUMAN TRAFFICKING ACT OF 
                                  2018

                                _______
                                

 September 26, 2018.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 6729]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 6729) to allow nonprofit organizations to 
register with the Secretary of the Treasury and share 
information on activities that may involve human trafficking or 
money laundering with financial institutions and regulatory 
authorities, under a safe harbor that offers protections from 
liability, in order to better identify and report potential 
human trafficking or money laundering activities, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose and Summary

    On September 6, 2018, Rep. Ann Wagner introduced H.R. 6729, 
the ``Empowering Financial Institutions to Fight Human 
Trafficking Act,'' which would instruct the Secretary of the 
Treasury to establish a mechanism for nonprofit organizations 
to qualify for a safe harbor when sharing specific information 
with financial institutions that facilitates their duties of 
customer due diligence and the reporting of suspicious 
activities relating to human trafficking.
    Registered nonprofit organizations that share information 
in compliance with these regulations will receive safe harbor 
protections in order to protect themselves from retaliation, 
defamation suits, and other actions.
    Under this legislation, the Secretary of the Treasury is 
given the authority to develop regulations to register 
nonprofit organizations that meet certain qualifications before 
qualified to be protected through this mechanism, determine 
what information may be shared under this protection, which 
financial institutions may receive information, how financial 
institutions may share information received through currently 
regulated and protected information sharing programs, and make 
the processes outlined in the bill coexistent with current 
information sharing mechanisms.

                  Background and Need for Legislation

    The goal of H.R. 6729 is to establish a pathway for 
financial institutions to receive intelligence about human 
trafficking from nonprofit organizations to aid in the 
identification of money laundering and other suspicious 
activity. Human trafficking is recognized by the Treasury 
Department's Financial Crimes Enforcement Network (FinCEN) as 
inherently connected to the offense of money laundering by and 
through the transacting of revenues and profits from the 
business of exploitation. During the last few years, the 
connection between human trafficking to the banking industry 
has received increasing attention, first by the Financial 
Action Task Force (FATF), and more recently by UN Security 
Council Resolution 2331.
    The International Labor Organization (ILO) estimates that 
approximately $150 billion is generated in profit from human 
trafficking. Modern labor and sex trafficking are intrinsically 
linked to private sector business and therefore to the banking 
system. The financial industry has increasingly sought to 
reduce their exposure to the problem. However, banks still 
often fall short of information and intelligence about their 
exposure necessary to make comprehensive assessments.
    Oftentimes, however, lack of liability protections is too 
great a risk factor for those with information to share with 
our financial institutions. Current methods of providing 
information through other channels clash against the time 
sensitive needs of investigators. Without liability 
protections, outside groups and nongovernmental organizations 
(NGOs) have uncertain legal exposure to defamation suits by 
those on which they report, and other potentially dangerous 
attacks. NGOs serving victims of human trafficking and 
vulnerable populations have access to critical information 
useful to and already sought out by the financial services 
industry in identifying the activities of human traffickers and 
their criminal associates. NGOs, however, face obstacles in 
sharing this information with financial institutions due to 
serious risk of retribution by bad actors. While financial 
institutions are given safe harbor for performing information 
sharing roles, NGOs--which lack the resources for extensive 
court proceedings--are unprotected from defamation suits and 
other actions brought by those who do not want to see their 
crimes unveiled.
    NGOs are protected when sharing information with law 
enforcement and do so regularly. However, law enforcement is 
not properly equipped to be the sole actor responding to money 
laundering activity. Providing information through 
intermediaries rather than directly to industry harms time-
sensitive delivery and dilutes the information available.
    Organizations such as Western Union, MoneyGram, and Liberty 
Asia support the bill because it provides NGOs with a mechanism 
to share specific information relating to human trafficking 
with financial institutions after they qualify for a safe 
harbor from the Secretary of the Treasury. NGOs include small 
organizations that do not have the ability to defend themselves 
against the burden of multiple lawsuits from well-funded 
adversaries. It is in a NGOs interest to provide the best and 
most accurate analysis of the available information.
    NGOs are currently less willing to provide such information 
with a financial institution due to concerns with retaliation 
or civil law suits. NGOs are often the key sources of 
intelligence for law enforcement as they are the primary points 
of contact for reports of abuse. NGOs also play a crucial role 
in fighting human trafficking and the financial flows that 
derive from it, and they can ensure that essential information, 
including on who is profiting from the trafficking, reaches 
financial institutions and authorities as victims are often 
fearful of reaching out to the authorities themselves.
    The bill creates a process where responsible nonprofits 
that professionally analyze information and create intelligence 
products that help financial institutions better identify these 
crimes can share information without worrying about whether 
sharing this information is going to end their organizations. 
Criminals who want to shield their activities can use 
defamation suits and other means of retaliation to hit back at 
nonprofits that are trying to serve the common good but would 
crumble under the burden of expensive lawsuits. There is 
currently nothing stopping a named adversary from filing 
Freedom of Information Act (FOIA) requests or lawsuits to gain 
access to the contact information of analysts and identifiable 
information on sources submitted by nonprofits to a regulator 
or bank. This legislation solves this problem and empowers the 
financial industry to do better in protecting the most 
vulnerable of our society.

                                Hearings

    The Committee on Financial Services Subcommittee on 
Oversight and Investigations held a hearing examining matters 
relating to H.R. 6729 on January 30, 2018 and the Subcommittee 
on Terrorism and Illicit Finance held a hearing examining 
matters relating to H.R. 6729 on March 20, 2018.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
September 13, 2018 and ordered H.R. 6729 to be reported 
favorably to the House by a recorded vote of 44 yeas to 5 nays 
(recorded vote no. FC-204), a quorum being present. An 
amendment in the nature of a substitute offered by Ms. Waters 
was not agreed to by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House as amended. The motion 
was agreed to by a recorded vote of 44 yeas to 5 nays (Record 
vote no. FC-204), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 6729 
will protect victims of human trafficking by increasing 
cooperation among financial institutions and nonprofit 
organizations regarding sources of information on human 
trafficking and money laundering by providing a safe harbor for 
information providers and requiring the Secretary of the 
Treasury to provide reports to the financial services industry 
and Congressional committees.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    The Committee has not received an estimate of new budget 
authority contained in the cost estimate prepared by the 
Director of the Congressional Budget Office pursuant to Sec. 
402 of the Congressional Budget Act of 1974. In compliance with 
clause 3(c)(2) of rule XIII of the Rules of the House, the 
Committee opines that H.R. 6729 will not establish any new 
budget or entitlement authority or create any tax expenditures.

                 Congressional Budget Office Estimates

    The cost estimate prepared by the Director of the 
Congressional Budget Office pursuant to Sec. 402 of the 
Congressional Budget Act of 1974 was not submitted timely to 
the Committee.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 6729 as the ``Empowering Financial 
Institutions to Fight Human Trafficking Act.''

Section 2. Anti-money laundering information providers

    This section amends Subchapter II of chapter 53 of title 
31, United States Code, by adding Section 5333, ``Anti-money 
laundering information providers.''
    Section 5333, ``Anti-money laundering information 
providers,'' includes the following:
    Not later than the end of the 120-day period beginning on 
the date of enactment of this section, the Secretary of the 
Treasury shall issue regulations to allow nonprofit 
organizations, that the Secretary of the Treasury determines to 
be qualified, to share information with financial institutions, 
associations of financial institutions, their regulatory 
authorities, and law enforcement agencies regarding 
individuals, entities, organizations, and countries suspected 
of possible human trafficking or related money laundering 
activities.
    These regulations may include or create procedures for 
cooperation and information sharing focused on matters 
specifically related to those benefitting directly and 
indirectly from human trafficking, the means by which human 
traffickers transfer funds within the United States and around 
the world, and the extent to which financial institutions, 
including depository institutions, asset managers, and insurers 
in the United States, are unwittingly involved in such matters 
or transfers and the extent to which such entities are at risk 
as a result.
    These regulations may also include the means of 
facilitating the identification of accounts and transactions 
involving human traffickers and facilitating the exchange of 
information concerning such accounts and transactions between 
nonprofit organizations, financial institutions, regulatory 
authorities, and law enforcement agencies.
    These regulations may be made coextensive with the 
regulations adopted pursuant to other programs, regulated by 
the Secretary of the Treasury, for sharing information on 
unlawful activities between financial institutions and 
establish a registration process overseen by the Secretary of 
the Treasury that requires a nonprofit organization to 
demonstrate that they meet certain qualifications that the 
Secretary of the Treasury determines appropriate, including the 
establishment of policies and procedures reasonably designed to 
ensure the prompt identification and correction of inaccurate 
information.
    The Secretary of the Treasury may disqualify nonprofit 
organizations that do not meet these qualifications, and the 
Secretary of the Treasury may terminate the registration of a 
nonprofit organization at any point if the Secretary of the 
Treasury determines such termination is appropriate and 
provides sufficient notice of such termination to the 
applicable nonprofit organization.
    A nonprofit organization is required to register with the 
Secretary of the Treasury before sharing information that will 
be subject to the safe harbor, and ensure that financial 
institutions, associations of financial institutions, their 
regulatory authorities, law enforcement authorities, and any 
other appropriate entities are made aware of those nonprofit 
organizations that are registered with the Secretary of the 
Treasury.
    The Secretary of the Treasury shall determine those 
financial institutions which are eligible to be recipients of 
information from nonprofit organizations made in compliance 
with these regulations. Such eligible financial institutions 
may include those already participating in existing information 
sharing programs regulated by the Secretary of the Treasury 
regarding unlawful activity. If a nonprofit organization shares 
information with a financial institution that is not eligible, 
such sharing of information shall not be subject to the safe 
harbor.
    These regulations may be coextensive with other regulations 
governing the sharing of information between financial 
institutions on suspected unlawful activities, and shall allow 
financial institutions that receive information in compliance 
with the regulations to share such information with other 
financial institutions through existing information sharing 
programs.
    A nonprofit organization, financial institution, 
association of financial institutions, regulatory authority of 
a financial institution, or law enforcement agency in 
compliance with the regulations that transmits or shares 
information for the purposes of identifying or reporting 
activities that may involve human trafficking acts or related 
money laundering activities shall not be liable to any person 
under any law or regulation of the United States, any 
constitution, law, or regulation of any State or political 
subdivision thereof, or under any contract or other legally 
enforceable agreement (including any arbitration agreement), 
for such disclosure or for any failure to provide notice of 
such disclosure to the person who is the subject of such 
disclosure, or any other person identified in the disclosure, 
except where such transmission or sharing violates this section 
or regulations issued pursuant to this section.
    A nonprofit organization, financial institution, 
association of financial institutions, regulatory authority of 
a financial institution, or law enforcement agency that 
transmits or shares information shall not be required to 
demonstrate that such transmission or sharing was made on a 
good faith basis in order to receive the benefit of the safe 
harbor.
    This section may not be construed as requiring a nonprofit 
organization to comply with the regulations before sharing 
information with a financial institution, association of 
financial institutions, regulatory authority of a financial 
institution, or law enforcement agency.
    Beginning 10 months after the date of the enactment of this 
section, and at least semiannually thereafter, the Secretary of 
the Treasury shall publish a report containing a detailed 
analysis identifying patterns of suspicious activity and other 
investigative insights derived from the regulations issued 
under this section and investigations conducted by Federal, 
State, local, and Tribal law enforcement agencies to the extent 
appropriate, distribute such report to financial institutions, 
and provide such report upon publication to the Committee on 
Financial Services of the House of Representatives and the 
Committee on Banking, Housing, and Urban Affairs of the Senate.
    The term `nonprofit organization' means an organization 
described in section 501(c)(3) of the Internal Revenue Code of 
1986 and exempt from taxation under section 501(a) of such 
Code.''.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                      TITLE 31, UNITED STATES CODE




           *       *       *       *       *       *       *
SUBTITLE IV--MONEY

           *       *       *       *       *       *       *


                   CHAPTER 53--MONETARY TRANSACTIONS


               SUBCHAPTER I--CREDIT AND MONETARY EXPANSION

Sec.
5301. Buying obligations of the United States Government.
     * * * * * * *
5333. Anti-money laundering information providers.

           *       *       *       *       *       *       *


SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS

           *       *       *       *       *       *       *



Sec. 5333. Anti-money laundering information providers

  (a) Cooperation Among Financial Institutions and Sources of 
Information on Human Trafficking and Money Laundering.--
          (1) In general.--Not later than the end of the 120-
        day period beginning on the date of enactment of this 
        section, the Secretary of the Treasury shall issue 
        regulations to allow nonprofit organizations that the 
        Secretary determines to be qualified to share 
        information with financial institutions, associations 
        of financial institutions, their regulatory 
        authorities, and law enforcement agencies regarding 
        individuals, entities, organizations, and countries 
        suspected of possible human trafficking or related 
        money laundering activities.
          (2) Cooperation and information sharing procedures.--
        The regulations required under paragraph (1) may 
        include or create procedures for cooperation and 
        information sharing focused on--
                  (A) matters specifically related to those 
                benefitting directly and indirectly from human 
                trafficking, the means by which human 
                traffickers transfer funds within the United 
                States and around the world, and the extent to 
                which financial institutions, including 
                depository institutions, asset managers, and 
                insurers in the United States, are unwittingly 
                involved in such matters or transfers and the 
                extent to which such entities are at risk as a 
                result; and
                  (B) means of facilitating the identification 
                of accounts and transactions involving human 
                traffickers and facilitating the exchange of 
                information concerning such accounts and 
                transactions between nonprofit organizations, 
                financial institutions, regulatory authorities, 
                and law enforcement agencies.
          (3) Method of regulation.--The regulations required 
        under paragraph (1) may--
                  (A) be made coextensive with the regulations 
                adopted pursuant to other programs, regulated 
                by the Secretary, for sharing information on 
                unlawful activities between financial 
                institutions;
                  (B) establish a registration process overseen 
                by the Secretary that--
                          (i) requires a nonprofit organization 
                        to demonstrate that they meet certain 
                        qualifications that the Secretary 
                        determines appropriate, including the 
                        establishment of policies and 
                        procedures reasonably designed to 
                        ensure the prompt identification and 
                        correction of inaccurate information 
                        shared under paragraph (1);
                          (ii) allows the Secretary to 
                        disqualify nonprofit organizations that 
                        do not meet such qualifications; and
                          (iii) allows the Secretary to 
                        terminate the registration of a 
                        nonprofit organization at any point if 
                        the Secretary determines such 
                        termination is appropriate and provides 
                        sufficient notice of such termination 
                        to the applicable nonprofit 
                        organization;
                  (C) require a nonprofit organization to 
                register with the Secretary before sharing 
                information that will be subject to the safe 
                harbor provided under subsection (b); and
                  (D) ensure that financial institutions, 
                associations of financial institutions, their 
                regulatory authorities, law enforcement 
                authorities, and any other appropriate entities 
                are made aware of those nonprofit organizations 
                that are registered with the Secretary.
          (4) Recipients of information.--
                  (A) In general.--The Secretary shall 
                determine those financial institutions which 
                are eligible to be recipients of information 
                from nonprofit organizations made in compliance 
                with the regulations issued under subsection 
                (a). Such eligible financial institutions may 
                include those already participating in existing 
                information sharing programs regulated by the 
                Secretary regarding unlawful activity.
                  (B) No safe harbor for information provided 
                to other financial institutions.--If a 
                nonprofit organization shares information with 
                a financial institution that is not eligible 
                under subparagraph (A), such sharing of 
                information shall not be subject to the safe 
                harbor provided under subsection (b).
          (5) Information sharing between financial 
        institutions.--The regulations adopted pursuant to this 
        section--
                  (A) may be coextensive with other regulations 
                governing the sharing of information between 
                financial institutions on suspected unlawful 
                activities; and
                  (B) shall allow financial institutions that 
                receive information in compliance with the 
                regulations issued under subsection (a) to 
                share such information with other financial 
                institutions through existing information 
                sharing programs.
  (b) Safe Harbor for Information Providers.--
          (1) In general.--A nonprofit organization, financial 
        institution, association of financial institutions, 
        regulatory authority of a financial institution, or law 
        enforcement agency in compliance with the regulations 
        issued under subsection (a) that transmits or shares 
        information described under subsection (a) for the 
        purposes of identifying or reporting activities that 
        may involve human trafficking acts or related money 
        laundering activities shall not be liable to any person 
        under any law or regulation of the United States, any 
        constitution, law, or regulation of any State or 
        political subdivision thereof, or under any contract or 
        other legally enforceable agreement (including any 
        arbitration agreement), for such disclosure or for any 
        failure to provide notice of such disclosure to the 
        person who is the subject of such disclosure, or any 
        other person identified in the disclosure, except where 
        such transmission or sharing violates this section or 
        regulations issued pursuant to this section.
          (2) No good faith requirement.--A nonprofit 
        organization, financial institution, association of 
        financial institutions, regulatory authority of a 
        financial institution, or law enforcement agency that 
        transmits or shares information described under 
        paragraph (1) shall not be required to demonstrate that 
        such transmission or sharing was made on a good faith 
        basis in order to receive the benefit of the safe 
        harbor provided by paragraph (1).
  (c) Non-mandatory Compliance With This Section.--This section 
may not be construed as requiring a nonprofit organization to 
comply with the regulations issued under subsection (a) before 
sharing information with a financial institution, association 
of financial institutions, regulatory authority of a financial 
institution, or law enforcement agency.
  (d) Reports to the Financial Services Industry on Suspicious 
Financial Activities.--Beginning 10 months after the date of 
the enactment of this section, and at least semiannually 
thereafter, the Secretary of the Treasury shall--
          (1) publish a report containing a detailed analysis 
        identifying patterns of suspicious activity and other 
        investigative insights derived from the regulations 
        issued under this section and investigations conducted 
        by Federal, State, local, and Tribal law enforcement 
        agencies to the extent appropriate;
          (2) distribute such report to financial institutions; 
        and
          (3) provide such report upon publication to the 
        Committee on Financial Services of the House of 
        Representatives and the Committee on Banking, Housing, 
        and Urban Affairs of the Senate.
  (e) Nonprofit Organization Defined.--For purposes of this 
section, the term ``nonprofit organization'' means an 
organization described in section 501(c)(3) of the Internal 
Revenue Code of 1986 and exempt from taxation under section 
501(a) of such Code.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 6729 is a well-intentioned bill that is aimed at 
countering human trafficking, a goal that Democrats strongly 
support. However, we remain concerned that the bill does not 
strike the right balance with protecting the civil liberties of 
innocent U.S. citizens.
    Designed to support the good work of respected anti-human 
trafficking nonprofits that combat the involuntary and often 
transnational trafficking of men, women, and children--the bill 
gives a federal safe harbor to allow nonprofits to share 
personally identifiable information (PII) about any person the 
nonprofit suspects of human trafficking with any financial 
institution. The financial institution could then close the 
account, monitor the account, or report the account to 
authorities. While a safe harbor for nonprofits who provide 
this information is well-intentioned, in the event of 
inaccurate information or mistaken identity, a wrongfully 
accused person would have no recourse to correct the record as 
the safe harbor would prohibit them from bringing defamation, 
privacy, or other lawsuits against the nonprofit. This is even 
more troubling as the nonprofits could share information on any 
person, even those who have not been arrested, indicted or 
convicted of a crime. The consequences for a wrongfully accused 
person could range from account closure to being denied access 
to the formal banking system. This concern for error in 
identification is especially heightened for immigrant 
communities within the US, possibly victimizing them twice, 
first by the human traffickers that frequently target their 
communities and then by the financial system which enables them 
to thrive.
    Further compounding this issue is that the bill explicitly 
states that the Treasury Department may not impose a 
requirement of ``good faith'' to the information sharing 
covered by the safe harbor. By removing the necessity for 
nonprofits to act in good faith, this bill could encourage the 
oversharing of information due to a nonprofit's well-
intentioned cautiousness. While most organizations will behave 
with high standards, this failure to apply good faith will 
allow less well-intentioned organizations to abuse the system 
while organizations with weak controls will be less vigilant 
about errors and errant employees.
    Additionally, even if the information that the nonprofit 
provides is accurate, we believe that nonprofits or financial 
institutions should work in tandem with law enforcement to 
avoid the unintended consequence of unknowingly interfering 
with an ongoing law enforcement investigation.
    For these reasons, we oppose H.R. 6729.

                                   Maxine Waters.
                                   Al Green (TX).
                                   Nydia Velazquez.
                                   Vicente Gonzalez (TX).
                                   Joyce Beatty.

                                  [all]