[House Report 118-485]
[From the U.S. Government Publishing Office]


118th Congress }                                            {    Report
                        HOUSE OF REPRESENTATIVES
 2d Session    }                                            {    118-485

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



 
              FINANCIAL TECHNOLOGY PROTECTION ACT OF 2023

                                _______
                                

  May 6, 2024.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 2969]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2969) to establish an Independent Financial 
Technology Working Group to Combat Terrorism and Illicit 
Financing, and for other purposes, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     4
Related Hearings.................................................     4
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     8
Performance Goals and Objectives.................................     8
Congressional Budget Office Estimates............................     8
New Budget Authority, Entitlement Authority, and Tax Expenditures     8
Federal Mandates Statement.......................................     8
Advisory Committee Statement.....................................     9
Applicability to Legislative Branch..............................     9
Earmark Identification...........................................     9
Duplication of Federal Programs..................................     9
Section-By-Section Analysis of the Legislation...................     9

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Financial Technology Protection Act of 
2023''.

SEC. 2. INDEPENDENT FINANCIAL TECHNOLOGY WORKING GROUP TO COMBAT 
                    TERRORISM AND ILLICIT FINANCING.

  (a) Establishment.--There is established the Independent Financial 
Technology Working Group to Combat Terrorism and Illicit Financing (in 
this section referred to as the ``Working Group''), which shall consist 
of the following:
          (1) The Secretary of the Treasury, acting through the Under 
        Secretary for Terrorism and Financial Intelligence, who shall 
        serve as the chair of the Working Group.
          (2) A senior-level representative from each of the following:
                  (A) Each of the following components of the 
                Department of the Treasury:
                          (i) The Financial Crimes Enforcement Network.
                          (ii) The Internal Revenue Service.
                          (iii) The Office of Foreign Assets Control.
                  (B) The Department of Justice and each of the 
                following components of the Department:
                          (i) The Federal Bureau of Investigation.
                          (ii) The Drug Enforcement Administration.
                  (C) The Department of Homeland Security and the 
                United States Secret Service.
                  (D) The Department of State.
                  (E) The Central Intelligence Agency.
          (3) Five individuals appointed by the Under Secretary for 
        Terrorism and Financial Intelligence to represent the 
        following:
                  (A) Financial technology companies.
                  (B) Blockchain intelligence companies.
                  (C) Financial institutions.
                  (D) Institutions or organizations engaged in 
                research.
  (b) Duties.--The Working Group shall--
          (1) conduct research on terrorist and illicit use of new 
        financial technologies, including digital assets; and
          (2) develop legislative and regulatory proposals to improve 
        anti-money laundering, counter-terrorist, and other counter-
        illicit financing efforts in the United States.
  (c) Reports.--
          (1) In general.--Not later than one year after the date of 
        the enactment of this Act, and annually for the 3 years 
        thereafter, the Working Group shall submit to the Secretary of 
        the Treasury, the heads of each agency represented in the 
        Working Group pursuant to subsection (a)(2), and the 
        appropriate congressional committees a report containing the 
        findings and determinations made by the Working Group in the 
        previous year and any legislative and regulatory proposals 
        developed by the Working Group.
          (2) Final report.--Before the date on which the Working Group 
        terminates under subsection (e)(1), the Working Group shall 
        submit to the appropriate congressional committees a final 
        report detailing the findings, recommendations, and activities 
        of the Working Group.
  (d) Travel Expenses.--Members of the Working Group shall serve 
without pay, but shall receive travel expenses in accordance with 
sections 5702 and 5703 of title 5, United States Code.
  (e) Sunset.--
          (1) In general.--The Working Group shall, subject to 
        paragraph (3), terminate on the date that is 4 years after the 
        date of the enactment of this Act.
          (2) Expiration and return of appropriated funds.--On the date 
        on which the Working Group terminates under paragraph (1)--
                  (A) all authorities granted to the Working Group 
                under this section shall expire, subject to paragraph 
                (3); and
                  (B) any funds appropriated for the Working Group that 
                are available for obligation as of that date shall be 
                returned to the Treasury.
          (3) Authority to wind up activities.--The termination of the 
        Working Group under paragraph (1) and the expiration of 
        authorities under paragraph (2) shall not affect any 
        investigations, research, or other activities of the Working 
        Group ongoing as of the date on which the Working Group 
        terminates under paragraph (1). Such investigations, research, 
        and activities may continue until their completion.

SEC. 3. PREVENTING ROGUE AND FOREIGN ACTORS FROM EVADING SANCTIONS.

  (a) Report and Strategy With Respect to Digital Assets and Other 
Related Emerging Technologies.--
          (1) In general.--Not later than 180 days after the date of 
        the enactment of this Act, the President, acting through the 
        Secretary of the Treasury and in consultation with the head of 
        each agency represented on the Independent Financial Technology 
        Working Group to Combat Terrorism and Illicit Financing 
        pursuant to section 2(a)(2), shall submit to the appropriate 
        congressional committees a report that describes--
                  (A) the potential uses of digital assets and other 
                related emerging technologies by States, non-State 
                actors, foreign terrorist organizations, and other 
                terrorist groups to evade sanctions, finance terrorism, 
                or launder monetary instruments, and threaten the 
                national security of the United States; and
                  (B) a strategy how the United States will mitigate 
                and prevent the illicit use of digital assets and other 
                related emerging technologies.
          (2) Form of report; public availability.--
                  (A) In general.--The report required by paragraph (1) 
                shall be submitted in unclassified form, but may 
                include a classified annex.
                  (B) Public availability.--The unclassified portion of 
                each report required by paragraph (1) shall be made 
                available to the public and posted on a publicly 
                accessible website of the Department of Treasury--
                          (i) in precompressed, easily downloadable 
                        versions, in all appropriate formats; and
                          (ii) in machine-readable format, if 
                        applicable.
          (3) Sources of information.--In preparing the reports 
        required by paragraph (1), the President may utilize any 
        credible publication, database, or web-based resource, and any 
        credible information compiled by any government agency, 
        nongovernmental organization, or other entity that is made 
        available to the President.
  (b) Briefing.--Not later than 2 years after the date of the enactment 
of this Act, the Secretary of the Treasury shall brief the appropriate 
congressional committees on the implementation of the strategy required 
by subsection (a)(2).

SEC. 4. DEFINITIONS.

  In this Act:
          (1) Appropriate congressional committees.--The term 
        ``appropriate congressional committees'' means--
                  (A) the Committee on Banking, Housing, and Urban 
                Affairs, the Committee on Finance, the Committee on 
                Foreign Relations, the Committee on Homeland Security 
                and Governmental Affairs, the Committee on the 
                Judiciary, and the Select Committee on Intelligence of 
                the Senate; and
                  (B) the Committee on Financial Services, the 
                Committee on Foreign Affairs, the Committee on Homeland 
                Security, the Committee on the Judiciary, the Committee 
                on Way and Means, and the Permanent Select Committee on 
                Intelligence of the House of Representatives.
          (2) Blockchain intelligence company.--The term ``blockchain 
        intelligence company'' means any business providing software, 
        research, or other services (such as blockchain tracing tools, 
        geofencing, transaction screening, the collection of business 
        data, and sanctions screening) that--
                  (A) support private and public sector investigations 
                and risk management activities; and
                  (B) involve cryptographically secured distributed 
                ledgers or any similar technology or implementation.
          (3) Digital asset.--The term ``digital asset'' means any 
        digital representation of value that is recorded on a 
        cryptographically secured digital ledger or any similar 
        technology.
          (4) Foreign terrorist organization.--The term ``foreign 
        terrorist organization'' means an organization that is 
        designated as a foreign terrorist organization under section 
        219 of the Immigration and Nationality Act (8 U.S.C. 1189).
          (5) Illicit use.--The term ``illicit use'' includes fraud, 
        darknet marketplace transactions, money laundering, the 
        purchase and sale of illicit goods, sanctions evasion, theft of 
        funds, funding of illegal activities, transactions related to 
        child sexual abuse material, and any other financial 
        transaction involving the proceeds of specified unlawful 
        activity (as defined in section 1956(c) of title 18, United 
        States Code).
          (6) Terrorist.--The term ``terrorist'' includes a person 
        carrying out domestic terrorism or international terrorism (as 
        such terms are defined, respectively, under section 2331 of 
        title 18, United States Code).

                          PURPOSE AND SUMMARY

    Introduced on April 27, 2023, by Representative Zach Nunn, 
H.R. 2969, the Financial Technology Protection Act, establishes 
the Independent Financial Technology Working Group to Combat 
Terrorism and Illicit Financing (the ``Working Group'') under 
the Department of the Treasury. The bill directs the Working 
Group to research terrorists' use of new financial 
technologies, including digital assets, and issue a report on 
its findings. The Working Group is also required to develop 
legislative and regulatory proposals to improve anti-money 
laundering (AML) efforts in the United States.

                  BACKGROUND AND NEED FOR LEGISLATION

    Advances in technology and the widespread use of the 
Internet and mobile communication devices have helped fuel the 
growth in financial technology products and services. Digital 
assets in particular can make for speedier, more secure, more 
cost-efficient, disintermediated, cross-border settlements of 
transactions. The increase in the use of digital assets has 
prompted significant discussions about the nexus between the 
use of digital assets and financial crime.
    As emphasized in the 2022 National Money Laundering Risk 
Assessment, the use of digital assets for money laundering 
remains far below that of fiat currency and more traditional 
methods. Nevertheless, bad actors may seek to use digital 
wallets, mixers, and digital asset trading platforms to 
transact and obfuscate the movements of digital assets. Given 
the primary concern is with digital asset platforms that have 
``substantially deficient'' anti-money laundering programs that 
operate outside of the U.S., it's imperative to work towards 
regulatory proposals that would ensure that digital asset 
service providers operate within U.S. borders.
    Although rates of illicit activity remain low in the 
digital asset ecosystem, the ease by which digital asset 
transactions can be carried out and settled has been proven to 
be used by bad actors. Digital assets are a nascent and 
evolving technology. As a result, law enforcement bodies around 
the world have struggled to keep pace with emerging trends and 
types of crime in the ecosystem. Yet, the immutability and 
transparency of blockchain networks can provide law enforcement 
with a unique insight into the movement of illicit funds. 
Indeed, several high-profile cases have been solved because law 
enforcement was able to leverage the unique features of a 
blockchain network to trace bad actors and reclaim ill-gotten 
gains.
    There has been considerable focus by the Administration and 
Congress to curb this illegal activity. On September 16, 2022, 
the Treasury Department published its Action Plan to Address 
Illicit Financing Risks of Digital Assets, which highlighted 
``engaging with the private sector'' as one of its priority 
action items. H.R. 2969 would provide a forum for engagement 
between federal law enforcement and intelligence professionals, 
and private sector technologists and researchers to report to 
Congress on how to counter the illicit use of digital assets.

                            RELATED HEARINGS

                             118TH CONGRESS

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop H.R. 2969:
    The Subcommittee on National Security, Illicit Finance, and 
International Financial Institutions of the Committee on 
Financial Services held a hearing on April 27, 2023, 
``Oversight of the Financial Crimes Enforcement Network 
(FinCEN) and the Office of Terrorism and Financial Intelligence 
(TFI).''
    The Subcommittee on Digital Assets, Financial Technology 
and Inclusion of the Committee on Financial Services held a 
hearing on March 9, 2023, ``Coincidence or Coordinated? The 
Administration's Attack on the Digital Asset Ecosystem.''

                             117TH CONGRESS

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.R. 2969:
    The Subcommittee on National Security, International 
Development, and Monetary Policy of the Committee on Financial 
Services held a hearing on September 20, 2022, ``Under the 
Radar: Alternative Payment Systems and the National Security 
Impacts of Their Growth.''
    The Committee on Financial Services held a hearing on 
February 8, 2022, ``Digital Assets and the Future of Finance: 
The President's Working Group on Financial Markets' Report on 
Stablecoins.''
    The Committee on Financial Services held a hearing on 
December 8, 2021, ``Digital Assets and the Future of Finance: 
Understanding the Challenges and Benefits of Financial 
Innovation in the United States.''
    The Subcommittee on National Security, International 
Development, and Monetary Policy of the Committee on Financial 
Services held a hearing on June 16, 2021, ``Schemes and 
Subversion: How Bad Actors and Foreign Governments Undermine 
and Evade Sanctions Regimes.''

                             115TH CONGRESS

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop H.R. 2969:
    The Subcommittee on Terrorism and Illicit Finance of the 
Committee on Financial Services held a hearing on June 20, 
2018, ``Illicit Use of Virtual Currency and the Law Enforcement 
Response.''
    The Subcommittee on Terrorism and Illicit Finance of the 
Committee on Financial Services held a hearing on June 8, 2017, 
``Virtual Currency: Financial Innovation and National Security 
Implications.''

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
July 26, 2023, and ordered H.R. 2969 to be reported favorably 
to the House as amended by a recorded vote of 50 ayes to 0 nays 
(Record vote no. FC-78), a quorum being present. Before the 
question was called to order the bill favorably reported, the 
Committee adopted an amendment in the nature of a substitute 
offered by Mr. Nunn by 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 order to report legislation and amendments thereto. H.R. 
2969 was ordered reported favorably to the House as amended by 
a recorded vote of 50 ayes to 0 nays (Record vote no. FC-78), a 
quorum being present.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c) 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 goal of H.R. 2969 is to establish 
the Independent Financial Technology Working Group to Combat 
Terrorism and Illicit Financing under the Department of 
Treasury.

                 CONGRESSIONAL BUDGET OFFICE ESTIMATES

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:




   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee adopts as its own the 
estimate of new budget authority, entitlement authority, or tax 
expenditures or revenues contained in the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1973.

                       FEDERAL MANDATES STATEMENT

    Pursuant to section 423 of the Unfunded Mandates Reform 
Act, the Committee adopts as its own the estimate of the 
Federal mandates prepared by the Director of the Congressional 
Budget Office.

                      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 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

    Pursuant to 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 a program of 
the Federal Government known to be duplicative of another 
Federal program, including any program that was included in a 
report to Congress pursuant to section 21 of the Public Law 
111-139 or the most recent Catalog of Federal Domestic 
Assistance.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section cites H.R. 2969 as the Financial Technology 
Protection Act.

Section 2. Independent financial technology working group to combat 
        terrorism and illicit financing

    This section establishes the Working Group under the 
Department of Treasury. The Working Group will be comprised of 
the Secretary of the Treasury, as represented by the Under 
Secretary for Terrorism and Financial Intelligence, and 
representatives from the Financial Crimes Enforcement Network, 
the Internal Revenue Service, the Office of Foreign Assets 
Control, the Department of Justice, the Federal Bureau of 
Investigation, the Drug Enforcement Administration, the 
Department of Homeland Security, the United States Secret 
Service, the Department of State, the Central Intelligence 
Agency, and five individuals from the private sector appointed 
by the Under Secretary for Terrorism and Financial 
Intelligence. The Working Group is required to conduct research 
on terrorist and illicit use of new financial technologies, 
including digital assets, issue annual reports on its findings, 
and develop legislative and regulatory proposals. The Working 
Group will sunset four years after enactment of the Act.

Section 3. Preventing rogue and foreign actors from evading sanctions

    This section requires the President, acting through the 
Secretary of Treasury and in consultation with the heads of 
each agency represented in the Working Group, to submit to the 
appropriate congressional committees no later than 180 days 
after enactment a report that identifies and describes the 
potential illicit uses of digital assets and a strategy for how 
to mitigate and prevent the illicit use of digital assets and 
other related emerging technologies. The Secretary of the 
Treasury must brief the appropriate congressional committees on 
the implementation of the strategy no later than 2 years after 
enactment.

Section 4. Definitions

    This section defines the terms appropriate congressional 
committees, blockchain intelligence company, digital asset, 
foreign terrorist organization, illicit use, and terrorist.