[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





 
                       STOPPING TERROR FINANCE: A


                     COORDINATED GOVERNMENT EFFORT

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

                                HEARING

                               BEFORE THE

                       TASK FORCE TO INVESTIGATE

                          TERRORISM FINANCING

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 24, 2016

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-91
                           
                           
                           
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
             Task Force to Investigate Terrorism Financing

             MICHAEL G. FITZPATRICK, Pennsylvania, Chairman

ROBERT PITTENGER, North Carolina,    STEPHEN F. LYNCH, Massachusetts, 
    Vice Chairman                        Ranking Member
PETER T. KING, New York              BRAD SHERMAN, California
STEVE STIVERS, Ohio                  GREGORY W. MEEKS, New York
DENNIS A. ROSS, Florida              AL GREEN, Texas
ANN WAGNER, Missouri                 KEITH ELLISON, Minnesota
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
DAVID SCHWEIKERT, Arizona            DANIEL T. KILDEE, Michigan
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine
FRENCH HILL, Arkansas
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 24, 2016.................................................     1
Appendix:
    May 24, 2016.................................................    41

                               WITNESSES
                         Tuesday, May 24, 2016

Calvery, Jennifer Shasky, Director, Financial Crimes Enforcement 
  Network (FinCEN), U.S. Department of the Treasury..............     5
McDonald, Larry, Deputy Assistant Secretary, Office of Technical 
  Assistance, U.S. Department of the Treasury....................     7

                                APPENDIX

Prepared statements:
    King, Hon. Peter T...........................................    42
    Calvery, Jennifer Shasky.....................................    48
    McDonald, Larry..............................................    43


                       STOPPING TERROR FINANCE: A



                     COORDINATED GOVERNMENT EFFORT

                              ----------                              


                         Tuesday, May 24, 2016

             U.S. House of Representatives,
                          Task Force to Investigate
                               Terrorism Financing,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The task force met, pursuant to notice, at 10:03 a.m., in 
room HVC-210, the Capitol Visitor Center, Hon. Michael 
Fitzpatrick [chairman of the task force] presiding.
    Members present: Representatives Fitzpatrick, Pittenger, 
Ross, Barr, Rothfus, Schweikert, Williams, Poliquin, Hill; 
Lynch, Ellison, Himes, Foster, Kildee, Sinema, and Carney.
    Ex officio present: Representative Hensarling.
    Chairman Fitzpatrick. The Task Force to Investigate 
Terrorism Financing will come to order.
    The title of today's task force hearing is, ``Stopping 
Terror Finance: A Coordinated Government Effort.''
    Without objection, the Chair is authorized to declare a 
recess of the task force at any time.
    Also, without objection, members of the full Financial 
Services Committee who are not members of the task force may 
participate in today's hearing for the purposes of making an 
opening statement and questioning the witnesses.
    The Chair now recognizes himself for 5 minutes for an 
opening statement.
    I want to thank everyone for joining us at this hearing of 
the House Financial Services Committee's Task Force to 
Investigate Terrorism Financing. I would like to again thank 
Chairman Hensarling and Ranking Member Waters, as well as my 
colleagues here, for their consistent and unwavering support as 
we continue to investigate the threat of terror finance.
    During our term, this body has attended investigative 
hearings with policy experts and briefings by administrative 
personnel to better understand how terrorist organizations 
finance their activities around the world. In addition to 
investigating the evolution of illicit finance flows, we 
continue to review the rules and the regulations of the United 
States Government that we have in place in order to determine 
whether they are effective or whether those rules require 
modifications or whether modifications are necessary.
    We know the United States is central to understanding and 
combating the funding of terror. The Treasury's June 2015 
National Terrorist Financing Risk Assessment, which was the 
first of its kind, clearly stated that the central role of the 
U.S. financial system within the international finance system, 
and the sheer volume and diversity of international financial 
transactions, that in some way pass through U.S. financial 
institutions, expose the U.S. financial system to terrorist 
financing risks that other financial systems may not face.
    This task force continues to note that illicit actors are 
adaptive, constantly evolving their money laundering and 
financing techniques to better avoid detection. These 
techniques and practices, such as trade-based money laundering, 
or the narcotics trade, often cross the jurisdictions of 
several different U.S. Government agencies, making 
communication, coordination, and information sharing amongst 
agency personnel paramount. These findings have pushed us 
toward a common conclusion. In order to properly combat the 
financing of terrorism, government coordination is a necessity. 
Yet unbelievably, the Federal Government does not maintain a 
single strategic document or interagency implementation plan 
for combating the financing of terrorism.
    Today's hearing will focus on Federal efforts to combat 
terrorism financing and explore how the U.S. Department of the 
Treasury coordinates with relevant agency and law enforcement 
personnel to fill this current gap.
    At this time, I would like to recognize this task force's 
ranking member, my colleague, Mr. Lynch, from Massachusetts.
    Mr. Lynch. Thank you very much, Mr. Chairman, and Vice 
Chairman Pittenger. I really appreciate you holding this 
hearing. I also want to thank our witnesses today, Director 
Calvery and Deputy Assistant Secretary McDonald, for helping 
this task force with its work. And thank you for your good work 
every day.
    I am pleased that we are holding this hearing so we can 
examine how to best coordinate a strategy within the Treasury 
Department and across government agencies to stop the flow of 
financing to terrorist organizations. Detecting and disrupting 
the flow of funding to terrorist groups is crucial in our fight 
against terrorism. While it has proven to be challenging work, 
I also think it is extremely worthwhile.
    In March of last year, House Financial Services Committee 
Chairman Jeb Hensarling and Ranking Member Maxine Waters 
created a 21-member bipartisan task force and charged it with 
ensuring that our government is using every tool at its 
disposal to deprive groups like the Islamic State and Boko 
Haram and other terrorist organizations of the funds they rely 
on to advance their destructive ideology. Through this task 
force, we have learned that we must mentor and support 
Financial Intelligence Units in vulnerable countries that lack 
the rule of law. Some of my colleagues on this task force, both 
sides of the aisle, have recently returned from a congressional 
delegation to Latin America to examine these issues.
    My own work in this field, along with many other members on 
this committee, has been focused on the Middle East, where I 
have had the opportunity to work on some ongoing 
counterterrorism financing efforts. In particular, we have been 
actively involved in establishing Financial Intelligence Units 
in Jordan, Afghanistan, and in Morocco. These FIUs have served 
as national centers that promote information sharing by 
receiving, investigating, and sharing financial intelligence 
with law enforcement agencies and international financial 
intelligence counterparts across the globe.
    Given this focus on strengthening FIUs, I am pleased to 
learn more about the Treasury Department Office of Technical 
Assistance collaboration to strengthen FIUs in Guatemala and in 
Cambodia. As we are all aware, countries with weak financial 
institutions and ineffective financial sector oversight serve 
as a breeding ground for terrorist activity. They seek to raise 
and move funds without detection. And witnesses at our previous 
hearings have emphasized how the United States could play a 
more productive role in addressing these risks by providing 
technical assistance to countries that fail to implement 
adequate anti-money laundering and counterterrorism financing 
measures. This can be accomplished by thorough, robust, 
dedicated teams of Treasury attaches and contract advisers who 
are posted in relevant countries that are high-risk countries.
    During a recent codel, Congressional Delegation Donnelly, 
Joe Donnelly over in the U.S. Senate, we visited Bahrain, Iraq, 
and the UAE. And I had the opportunity to meet with Bill Rich, 
one of our young Treasury attaches. He is one of only 17. I was 
very impressed with Mr. Rich and the good work he is doing in 
his field. Although he is a very bright and capable person, he 
is responsible for a very wide portfolio with many countries 
that cover many challenges, and a portfolio that I believe is 
too robust for one single person to properly manage. They need 
help, all of our attaches need help. And we need more of them.
    In order to effectively combat terrorist financing threats 
both in the United States and abroad, it is imperative that the 
United States implements a cohesive strategy to determine the 
roles and responsibilities of Department of the Treasury 
attaches and contract advisers. We have to deploy these people 
more effectively, and they need more resources. And as I said, 
we need more of them.
    My colleagues and I in Congress have an important role here 
too. Through the appropriations process we have to support the 
vital work the Treasury Department and the Financial Crimes 
Enforcement Network and other relevant agencies engage in to 
safeguard our financial system from illicit activity.
    I look forward to this hearing, and the testimony of our 
witnesses today, so we can better understand the U.S. 
Government effort to combat illicit finance. I yield back the 
balance of my time. Thank you, Mr. Chairman.
    Chairman Fitzpatrick. Thank you, Mr. Lynch. I now recognize 
for an opening statement the vice chairman of the task force, 
the gentleman from North Carolina, Mr. Pittenger, for 1 minute.
    Mr. Pittenger. Thank you, Chairman Fitzpatrick, Ranking 
Member Lynch, and our distinguished panelists, Ms. Shasky 
Calvery and Mr. McDonald, for your presence with us here today.
    In my opinion, both panelists represent the most 
significant government agencies dedicated towards combating 
money laundering and illicit finance initiatives. And we thank 
you for your continued hard work. Through this task force, I 
have had the opportunity to travel and learn about both U.S. 
and foreign responses to terror financing. Recently, we 
traveled to Colombia, Panama, Paraguay, and Argentina to meet 
firsthand with many South American officials, FIUs, and others 
tasked with combating money laundering and drug smuggling.
    With the utmost confidence, I can say that every official 
we met with had a genuine interest in promoting and ending 
money laundering and smuggling initiatives. However, each 
official also echoed the financial and technological hurdles in 
place that prevent a foreign government from living up to their 
own capabilities and to FTF enforcement standards.
    The Financial Crimes Enforcement Network and the Office of 
Technical Assistance provide critical capacities to track 
terrorism financing while improving financial institution 
infrastructures around the world. However, I truly believe we 
can do much more in certain areas around the world to educate 
and assist with anti-money laundering capabilities.
    Thank you, Mr. Chairman, and to our distinguished 
panelists. I look forward to hearing from you, and I yield 
back.
    Chairman Fitzpatrick. I now recognize the gentlewoman from 
Arizona, Ms. Sinema, for 1 minute.
    Ms. Sinema. Thank you, Chairman Fitzpatrick and Ranking 
Member Lynch.
    The Islamic State is a serious threat to the United States 
and our allies. While coalition forces have succeeded in 
recapturing some IS-controlled territory, IS maintains a global 
network capable of funding and carrying out deadly attacks on 
civilians here and around the world. This task force has 
received testimony that the internal sale of oil is a 
significant source of income for IS, but it is the taxation, 
extortion, and theft throughout the entire supply chain that 
funds the organization.
    As IS continues to diversify its revenue streams, we must 
have up to date information and a coordinated strategy to 
disrupt its funding sources and keep money and resources out of 
its control. This is why Chairman Fitzpatrick and I offered an 
amendment to the NDAA to direct the Secretary of Defense to 
establish a whole of government strategy to destroy their 
funding networks. This strategy must include a comprehensive 
assessment of IS's revenue sources, a valuation of best 
practices to combat IS financing, and clear ways to measure the 
effectiveness of efforts to weaken IS. DOD must also 
specifically address how it will deny IS revenue from the sale 
of Libyan oil.
    I look forward to working with my colleagues on both sides 
of the aisle to keep money out of terrorists' hands and build 
on our progress to strengthen America's security.
    Thank you, Mr. Chairman. I yield back.
    Chairman Fitzpatrick. We now welcome our witnesses. Ms. 
Jennifer Shasky Calvery is the Director of the Financial Crimes 
Enforcement Network, or FinCEN, at the U.S. Department of the 
Treasury.
    This will be Ms. Shasky Calvery's last congressional 
testimony for FinCEN. She is stepping down after having served 
as Director since September 23, 2012. Prior to joining 
Treasury, Ms. Shasky Calvery had a 15-year career at the 
Justice Department, where she focused on combating money 
laundering and organized crime. Notably, she was a prosecutor 
with the organized crime and racketeering section, and more 
recently Chief of the Asset Forfeiture and Money Laundering 
section.
    Ms. Calvery holds a law degree from the University of 
Arizona College of Law. She graduated summa cum laude with an 
undergraduate degree in international affairs from George 
Washington University, where she was also an all-star 
basketball player.
    And I just want to say as you conclude your work at FinCEN, 
we all appreciate your incredible work for our Nation, and that 
you would take some time at this point to brief our task force 
here on our issues of mutual concern. So we appreciate that.
    Mr. Larry McDonald is Deputy Assistant Secretary for the 
Office of Technical Assistance, or OTA, at the U.S. Department 
of the Treasury. He oversees a program that provides financial 
technical assistance to approximately 50 countries. In 2004, 
Mr. McDonald received the Secretary's honor. Mr. McDonald has 
served in several senior roles at Treasury since joining the 
Department in 1987. Previously, Mr. McDonald worked at the 
Organization for Economic Cooperation and Development. Mr. 
McDonald has a master's degree from the Fletcher School of Law 
and Diplomacy and an undergraduate degree from Middlebury 
College.
    The witnesses will now have 5 minutes to give an oral 
presentation of their testimony. And without objection, the 
witnesses' written statements will be made a part of the 
record.
    Once the witnesses have finished presenting their 
testimony, each member of the task force will have 5 minutes 
within which to ask questions.
    For the witnesses, on your table there are three lights: 
green; yellow; and red. Yellow means you have 1 minute 
remaining, and red means your time is up.
    And with that, Ms. Shasky Calvery, you are recognized now 
for 5 minutes.

   STATEMENT OF JENNIFER SHASKY CALVERY, DIRECTOR, FINANCIAL 
  CRIMES ENFORCEMENT NETWORK (FinCEN), U.S. DEPARTMENT OF THE 
                            TREASURY

    Ms. Calvery. Chairman Fitzpatrick, Ranking Member Lynch, 
and distinguished members of the task force, I appreciate the 
opportunity to appear today to discuss FinCEN's role in 
countering the financing of terrorism. We value the committee's 
attention to this issue.
    Today, I will discuss FinCEN's view of the terrorist 
financing landscape and ways that we understand current and 
future threats, risks, and vulnerabilities. FinCEN's mission is 
to safeguard the financial system from illicit use, combat 
money laundering, and promote national security through the 
collection, analysis, and dissemination of financial 
intelligence and strategic use of financial authorities.
    We serve two roles> First, as the Financial Intelligence 
Unit, or FIU of the United States, we collect, analyze, and 
disseminate financial intelligence to help fight money 
laundering and the financing of terrorism. Second, we serve as 
the lead anti-money laundering countering the financing of 
terrorism regulator for the Federal Government.
    The Treasury Department combats terrorist financing by 
identifying and disrupting the flow of financial resources to 
terrorists and terrorist organizations and hardening the 
international financial system from abuse by illicit actors. 
FinCEN supports these broader efforts by identifying sources of 
revenue for terrorist organizations and identifying their 
attempts to access the international financial system.
    FinCEN then uses its authorities to eliminate these access 
points. ISIL, of course, is one of the primary terrorist 
threats we are focused on today. FinCEN receives approximately 
55,000 financial institution filings each day. Most of this 
financial intelligence comes from two reporting streams: large 
cash transactions exceeding $10,000; and suspicious 
transactions identified by financial institutions. To manage 
this collection, we use business rules or algorithms to 
identify reports meriting further review.
    Currently, we run 22 rules aimed at: one, cutting off 
ISIL's sources of revenue and attempts to access the 
international financial system; and two, identifying potential 
foreign terrorist fighters. These rules generate over 1,000 
matches each month, and about 10 percent of those matches 
result in reports sent to domestic authorities and foreign 
FIUs.
    FinCEN also employs its unique regulatory authorities to 
obtain special collections of financial intelligence from 
industry, which has been used to inform government efforts to 
counter ISIL's financial activities. This work confirms our 
belief in industry's desire to assist our efforts, not merely 
out of a sense of obligation, but as active participants.
    Financial intelligence plays an important role in 
preventing terrorist attacks. Authorities worldwide have an 
interest in identifying potential foreign terrorist fighters, 
many of whom have engaged in terrorist acts in jurisdictions 
outside the conflict zone.
    FinCEN shares its financial intelligence through secure 
channels to authorized stakeholders on the widest possible 
basis. We disseminate information to our law enforcement 
partners, intelligence authorities, and border police. For 
example, financial intelligence has allowed us to assist U.S. 
Customs and Border Protection with the watch listing of 
potential terrorists, as well as identifying individuals of 
concern that have subsequently had their visas revoked or 
denied, or have been placed on the U.S. no-fly list.
    We also share with relevant foreign FIUs. We do this 
because terrorists and terrorist facilitators move from one 
jurisdiction to the next, and we do not hold all the pieces of 
the puzzle. The feedback suggests we are taking the right 
approach. Over the past 8 months, we have received 354 positive 
responses from 41 foreign FIUs that the financial intelligence 
we provided either corroborated information related to an 
ongoing investigation or provided new investigative leads.
    Financial transparency is also key to our counterterrorist 
financing efforts. On May 6th, the President announced several 
developments to strengthen our work in this area, including a 
customer due diligence, or CDD rule, and proposed beneficial 
ownership legislation. The CDD rule requires that covered 
financial institutions know and verify the identities of the 
natural persons who own, control, and profit from the legal 
entities the financial institutions service.
    Treasury also sent beneficial ownership legislation to 
Congress that would require companies to know and report 
adequate, accurate, and current beneficial ownership 
information at the time of a company's formation and transfer. 
These two initiatives actually dovetailed together, and are 
critical to aid law enforcement efforts to safeguard the 
financial system. Being able to identify who the real people 
are that are involved in a transaction is critical to our work 
to combat money laundering and terrorism.
    The terrorist financing landscape is complex and dynamic. 
We must continue our dialogue to ensure we have the right 
regulatory and statutory structure to prevent abuse of our 
financial system, while striking the right balance between 
personal privacy and financial transparency.
    Thank you for the opportunity to testify, and I welcome 
your questions.
    [The prepared statement of Director Calvery can be found on 
page 48 of the appendix.]
    Chairman Fitzpatrick. Thank you. Mr. Larry McDonald, you 
are now recognized for 5 minutes.

STATEMENT OF LARRY MCDONALD, DEPUTY ASSISTANT SECRETARY, OFFICE 
    OF TECHNICAL ASSISTANCE, U.S. DEPARTMENT OF THE TREASURY

    Mr. McDonald. Chairman Fitzpatrick, Ranking Member Lynch, 
and members of the task force, thank you very much for the 
opportunity to testify today. It is a pleasure to participate 
with my colleague, Jennifer Calvery.
    Treasury's technical assistance program, specifically the 
Economic Crimes Team within that program, has a close and 
effective partnership with FinCEN based on our institutional 
mandates and our special expertise. We are, respectively, the 
capacity building and the operational arms of the Treasury's 
work to combat terrorist financing and financial crimes. 
Together, we are part of a coordinated, overall U.S. Government 
effort.
    Treasury's Office of Technical Assistance, or OTA as we 
call it, is comprised of five teams: economic crimes; banking; 
revenue; budget; and debt management. OTA's economic crimes 
team promotes compliance with international standards and best 
practices, in particular the Financial Action Task Force 
recommendations. The crimes team partners with foreign 
Financial Intelligence Units as well as regulatory, analytical, 
law enforcement, and judicial authorities tasked with 
developing effective AML/CFT regimes.
    OTA is a relatively small program, and the Economic Crimes 
Team is smaller still. Total OTA funding is approximately $50 
million per year, which supports about 100 projects in 50 
countries. Total funding for the Economic Crimes Team is about 
$7.5 million per year, which currently supports 15 projects in 
Asia, sub-Saharan Africa, Latin America and the Caribbean, and 
the Middle East. While small, OTA is, we believe, a cost-
effective program that punches above its weight.
    As Secretary Lew put it during this committee's March 
hearing on the international financial system, Treasury gets, 
``more bang for the buck'' out of OTA than anything else. I 
refer you to my written testimony and to OTA's annual report to 
Congress for examples of successful engagements by the Economic 
Crimes Team and other parts of OTA.
    Let me share with you a few lessons from our experience 
regarding effective technical assistance. Effective technical 
assistance depends on many things. Assistance providers for 
their part must show some restraint, allowing potential country 
partners to step forward of their own volition with clear 
expressions of interest. Once interest has been manifested, 
technical assistance providers must be good listeners and 
patient analysts in order to understand the real underlying 
problems and the capacity of the requester to absorb 
assistance. This is the essence of demand-driven assistance.
    Technical assistance providers must also demonstrate a 
commitment to coordination. Coordination may entail doing a 
project differently or not doing it at all depending upon what 
other assistance providers are doing. There are cases when OTA 
changes its project or even declines a request to provide 
technical assistance when we determine that another provider is 
already involved and our work would be duplicative. Effective 
coordination is also facilitated when assistance providers 
focus their work on areas where they have special expertise and 
an institutional mandate.
    OTA's Economic Crimes Team has special expertise in 
building the human capacity of Financial Intelligence Units and 
working through those Financial Intelligence Units to enhance 
the effectiveness of other AML/CFT regime stakeholders. For 
AML/CFT assistance to be effective, recipients for their part 
must be genuinely committed to a systemic approach to AML/CFT 
development. The weak link breaks the chain. Effective AML/CFT 
regime development requires strengthening and integrating the 
work of the entire spectrum of AML/CFT stakeholders. The goal 
is a system in which both prevention and enforcement measures 
are mutually reinforcing.
    Governments that receive technical assistance must show a 
commitment to creating and retaining a core of professionals, 
career professionals. It is disheartening when a change of 
government in our partner countries results in the departure of 
our technical level colleagues.
    Finally, and most importantly, technical assistance must be 
backed up in our partner countries by a commitment at the 
policy and the political levels to push forward transparency 
and accountability in public finance when, inevitably, 
entrenched interests resist.
    In conclusion, let me reemphasize that combating terrorist 
financing, money laundering, and other financial crimes is a 
top priority for the Treasury Department and the U.S. 
Government.
    I want to thank you for the opportunity to testify today. I 
appreciate your support and interest, and welcome your 
questions.
    [The prepared statement of Deputy Assistant Secretary 
McDonald can be found on page 43 of the appendix.]
    Chairman Fitzpatrick. We thank the witnesses for their 
opening statements.
    The Chair now recognizes himself for 5 minutes for 
questions. Ms. Calvery, could you talk to us about the impact 
that technology has had on the fight against terror finance and 
how Treasury and FinCEN plan to adapt?
    Ms. Calvery. Yes. I think there has been both positive and 
negative ramifications of advances in technology. On the 
positive end, we are using advanced analytics at FinCEN to comb 
through the data we receive. As I mentioned earlier, we receive 
55,000 filings on average from financial institutions each day.
    So the idea that we would have human beings able to comb 
through all of that information and understand it is I think 
beyond our capacity for sure. And we need technology to help us 
go through that data. We use advanced analytics and business 
rules to help us understand what is important and get it to law 
enforcement in a timely manner.
    So now, from the time that a bank files a suspicious 
activity report, to the time we get it in the hands of law 
enforcement, may be 24 to 48 hours. If it is a terrorism-
related issue, they will call our hotline and we will get it to 
them even faster. But for just things going through the normal 
system, it takes 24 to 48 hours for us to get it in the hands 
of people who can take action. So that is the positive benefits 
of technology.
    Of course with technological innovation we also have 
advances in the finance industry and new products and services 
coming onboard. Many of those products and services provide 
potential opportunities for greater efficiencies, lowering 
costs, and providing better services. But we also need to keep 
abreast of what financial crimes risks they pose. And are they 
covered by regulations? Are we still going to be able to 
collect information? So that is one of the challenges we take 
on at FinCEN to try to stay abreast of the ever-changing 
technology in the fintech arena.
    And we have also attempted to reflect some responsibility 
back on industry itself, encouraging the developers of fintech 
to also be thinking about compliance and thinking about 
information sharing when they are developing their products and 
services so that they can accomplish those ends as well.
    Chairman Fitzpatrick. Thank you.
    Mr. McDonald, can you comment on the role that the National 
Security Council plays in prioritizing and directing 
interagency efforts, the role of the Treasury with respect to 
the Council? And Ms. Calvery, you might want to also comment.
    Mr. McDonald. The National Security Council plays a role in 
both the setting of what I would call the strategic outlines of 
our technical assistance strategy and also, in cases where it 
is required, helping to break through instances where there 
might be a lack of mutual understanding among agencies about 
what is a priority country, what is a priority region, what is 
a priority engagement.
    Our coordination work truly begins before it gets to the 
National Security Council within the Treasury Department, 
working with our colleagues on terrorist financing and 
financial crimes in the first instance, working with the State 
Department, both its regional bureaus, with INL, the 
international narcotics and law enforcement part of the State 
Department, working with the State Department's office on 
counterterrorism.
    So in most instances, I would say, we are able to agree on 
a plan of action and a game plan without necessarily involving 
the National Security Council. But there are instances, 
certainly at the beginning, the very beginning of that process 
when you are looking at the broad outlines of a strategy, and 
then in those instances where there is something that needs to 
be worked out and the NSC's participation is important or 
essential.
    Chairman Fitzpatrick. Director Calvery?
    Ms. Calvery. I think Larry put it well. Essentially, the 
National Security Council sets the strategic direction based on 
the coordinated input of all of the agencies, and then holds us 
accountable for actually implementing what we said we would do.
    Chairman Fitzpatrick. Director, can you comment on the 
methodologies that FinCEN uses in looking for or spotting 
trade-based money laundering schemes, particular methodologies?
    Ms. Calvery. Sure. I think most recently the methodologies 
we have employed have been with the use of our Geographic 
Targeting Order, which is an authority that enables the 
Director to put in place a special collection of information 
for a limited time period, 120 days. So we have been using that 
most recently in California and in south Florida, where from 
working closely with our law enforcement partners, we 
understood that there was an issue of trade-based money 
laundering in the garment district in LA and the electronics 
district in south Florida. And essentially law enforcement 
believed that drug cash was making its way into businesses and 
then back down to Mexico and/or Colombia.
    So we used the Geographic Targeting Order to collect 
additional information. Law enforcement was able to see how the 
criminal actors diverted their actions, what evasive steps they 
took. And most recently it resulted in over 20 arrests in south 
Florida, and has really helped both us and law enforcement to 
understand the typologies much better.
    Chairman Fitzpatrick. Thank you. I recognize Mr. Lynch for 
5 minutes.
    Mr. Lynch. Thank you. And Ms. Calvery, I want to join the 
chairman in thanking for your service to your country and 
wishing you well. Let's stay right on that topic. I know that 
one of the things that we are working on with my staff and with 
Treasury is to work on legislation to expand that Geographic 
Targeting Order. Would you elaborate a little bit on why that 
would be helpful?
    Ms. Calvery. Sure. And thank you for the question. So right 
now the Geographic Targeting Order enables us to collect 
information when there is a transaction involving monetary 
instruments like cash, currency, or checks. We would propose 
expanding that for us to collect information when there is a 
transaction involving funds, the more broad definition. So that 
would include, for instance, wire transfers. And an example of 
where that is important is with our real estate GTO. There we 
are focused on criminals who are taking their illicit proceeds 
and using them to purchase luxury residential real estate.
    Right now we have GTOs focused in Manhattan and in Miami 
County. And with those two geographic targeting orders, we are 
able to collect information when someone uses cash or a check 
to purchase real estate, some portion of real estate. We are 
not able to do it, however, when someone wires funds to 
purchase real estate. And that is becoming the more and more 
common way that people engage in transactions.
    Mr. Lynch. Right. Let me ask--and this is for both of the 
witnesses--the Panama papers, that whole incident. It just shed 
light on the role of offshore financial mechanisms to move and 
store money anonymously. That issue, along with the beneficial 
ownership issue, creates a real problem for all of us on this 
committee and law enforcement as well.
    To what extent, as far as it has been reported--I am not 
sure how to put this. What role, if any, do you think FATF 
might have in verifying the information contained in the Panama 
papers? And how might we use this information to address the 
terrorism-related issues?
    Ms. Calvery. All right. I would be happy to field that one. 
I would not look to FATF in the first instance as the body to 
engage in the investigation and operational activity 
surrounding the Panama papers.
    Mr. Lynch. Maybe I am just looking for lessons learned from 
what we understand what has been going on. And I understand it 
is powerful individuals being able to move their money 
offshore. Well, they could do that for terrorist financing as 
well if they are coming out of the Gulf or something like that. 
So are there some lessons learned that we might use in our 
context, which is terrorist financing?
    Ms. Calvery. Yes. Actually, now that I better understand 
the question, FATF does have a role. And I think they have been 
playing it. First, they have set an international standard 
around the collection of beneficial ownership information. They 
have made it clear that countries should be collecting 
beneficial ownership information to better enable their ability 
to fight money laundering and terrorist finance. So that is the 
international standard.
    Here in the United States, we have made some progress but 
have some work to do on that front. The CDD rule I think was a 
definite step forward in terms of the collection of beneficial 
ownership information. What that enables us to do is to have 
our banks collecting information on legal entities when their 
customers, or when they are providing them services, no matter 
where that legal entity was forms, whether it was formed in the 
U.S., the B.V.I., et cetera, et cetera.
    The beneficial ownership information that we recently 
proposed dovetails with that, because that would require the 
collection of beneficial ownership information at the time a 
U.S. legal entity is formed in the United States or when it is 
transferred. And that is important because we often will see 
illicit actors take U.S. legal entities outside of the United 
States to use them to establish bank accounts. And that money 
ends up right back in the U.S. financial system indirectly 
through correspondent accounts. And so to be able to deal with 
both risks, we need both authorities in place.
    Mr. Lynch. Thank you. And in closing, I just want to say--
and Mr. McDonald, you could obviously add to this if you wish.
    From a lot of people that we talked to in this area, the 
United States facilitates some of this because of our laws, 
because of our unwillingness to deal with the beneficial 
ownership issue. We basically turn a blind eye to this and let 
this happen. Is that correct? Is that your--
    Mr. McDonald. What I was going to do was add just quickly 
to Jen's point about Panama to say that the technical 
assistance program is engaged in Panama. I have visited myself 
the Financial Intelligence Unit there and met with their team. 
They are not the worst. They are not the best around the world. 
They do have a Financial Intelligence Unit that has good 
leadership. But they are still in the relatively early stages 
of implementing improved laws related to reporting 
requirements.
    And we are still in sort of the middle ground of trying to 
build their capacity to make them more effective in that role.
    Mr. Lynch. Thank you, Mr. Chairman. I yield back.
    Chairman Fitzpatrick. The Chair now recognizes the vice 
chairman of the task force, Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman. Thank you to each 
of you again. My question relates to our collaborative efforts 
with our partners around the globe. In our meetings in South 
America with Colombia, and Paraguay, and Panama, and Argentina, 
we found, as I said earlier, willing partners. But Mr. 
McDonald, as you said earlier in your statement, that we are 
only as strong as our weakest link. And in the discussions I 
have had previously with President al-Sisi and other foreign 
leaders, they have also expressed a willingness, but did not 
have the capacity to really be a strong asset in our efforts.
    How do you all work together? Kind of walk through with me 
assessing the needs and what needs to be done through OTA, and 
the role that you play with FinCEN, Ms. Calvery. How do you all 
address that? And then how do we establish that relationship 
with them and then provide them the leadership and the support 
that they need?
    Mr. McDonald. I will kick it off. Central America is a good 
place to look at as an example of this. Our technical 
assistance efforts begin in most regions, including in Central 
America, with an expression of interest, a request by the 
potential counterparts. It might be from the Financial 
Intelligence Unit, it might be at a more senior level when a 
finance minister or central bank governor is in Washington 
talking to the Secretary at the time of IMF-World Bank annual 
meetings or something like that, and for one reason or another, 
they have a recognition that they need to do better. It might 
be because they are aware, more aware of the threat of illicit 
finance.
    It might be that they are seeing the departure of foreign 
banks who are trying to deal with this problem of derisking. 
And they will ask us if we can be helpful to them in 
strengthening their system. We will typically get in touch with 
the State Department both in Washington and with the embassy. 
In Central America, I can tell you that there is a particularly 
good collaboration between the State Department, INL 
responsible for Central America. The Central American Regional 
Security Initiative is one in which we co-fund projects in 
Central America and talk to each other about a game plan for 
TA.
    Then ultimately, it does require a follow-through on the 
part of leadership in our partner countries to implement the 
strength and capacities that we try to help them build.
    Guatemala is an interesting case in point. They, over a 
number of years, built their capacity to identify and address 
money laundering cases. In 2014, they took down a money 
laundering operation and sentenced the ringleader and seven of 
their participants to a number of years in jail.
    I would just say one last point about our collaboration 
with FinCEN. While FinCEN is really the operational arm of the 
Treasury's efforts, as I said earlier, and OTA is the capacity-
building arm, we know that FinCEN has expertise that we can 
benefit from. So at a staff level, we are frequently in 
interaction with each other about things that FinCEN knows a 
lot about. Thank you.
    Mr. Pittenger. Thank you. Ms. Calvery?
    Ms. Calvery. Yes. I think to just give a real practical 
example in the area of terrorist financing of how we help some 
of the FIUs that might have less capacity to do their job, 
recently, in this last year, we brought 40 FIUs together. The 
United States FinCEN and the Netherlands FIU led an effort 
where 40 FIUs focused on the issue of foreign terrorist 
fighters and trying to understand what they look like in 
financial data.
    What are their financial patterns? What do they look like 
before they get to the conflict zone? What do they look like 
when they are in transit? And what do they look like when they 
get back? Because we all have an interest in identifying these 
individuals. So 40 countries came together. We looked at 
patterns all across the world. We came up with red flags for 
industry of what type of activity they should be looking out 
for. We then drafted an advisory to financial institutions. 
Here in the United States, we issued it securely to our 
financial institutions. And then we provided a sample to over 
150 FIUs of that same advisory for them to issue to their 
financial institutions.
    So in that way you have 40 FIUs that are better situated to 
perhaps understand the threats, articulate the threats, help 
the other members of the Egmont Group of FIUs to take 
information and get it out to their industry and thereby get 
better reporting from industry back to FIUs.
    Mr. Pittenger. My time has expired.
    Chairman Fitzpatrick. I now recognize the gentleman from 
Illinois, Mr. Foster, for 5 minutes. Thank you.
    Mr. Foster. Thank you, Mr. Chairman.
    And thanks to both of our witnesses for their very 
important service to our country.
    As you are certainly aware, one of the issues in the Iran 
nuclear deal was the possibility of Iran diverting some 
fraction of their funds that were released under the JCPOA for 
terrorist purposes. So I actually have a pair of related 
questions.
    The first one is how specifically does FinCEN guard against 
Iran illicitly accessing the U.S. financial system? And 
secondly, recently the Secretary of State and the Secretary of 
the Treasury both stated that Iran at that time had access to 
only about $3 billion of the amount made available to it under 
the JCPOA.
    And so I was wondering, has that number increased since 
those statements were made? Do we have the ability to track 
actually how much they have received? And could you explain how 
that funding is being made available to Iran so far and how we 
are able to follow it under the state sponsorship of terrorist 
sanctions?
    Ms. Calvery. Sure. Let me focus on FinCEN's role in 
understanding and tracking financial transactions from Iran.
    Our data is collected from U.S. financial institutions, and 
of course U.S. financial institutions are still embargoed from 
dealing with Iran in almost all circumstances. So we don't tend 
to have a lot of direct open data about Iranian financial 
transactions. We do, however, receive information and keep on 
alert for any type of front companies that might be used to 
access the dollar, the U.S. financial system, and work very 
closely with our colleagues at OFAC to understand those 
financial transactions and to follow their funds.
    In terms of some of your more specific questions about the 
amount of money that Iran has at its disposal at this moment, I 
really would have to defer to some of my colleagues at OFAC to 
help me answer that question. So I would be happy to take that 
back and get you--
    Mr. Foster. I would appreciate it. That is a number that I 
think Congress will have a great interest in tracking. And so 
if there was some information channels so we could have some 
authoritative statement about what that number was, that would 
be very useful.
    Second question, sort of unrelated, many of the financial 
services players that are involved in the payment chain are 
actually regulated and supervised at the State level. And so 
could you describe the coordination between FinCEN and the 
States since it is obviously critical to ensuring the financial 
services sector is not used for illicit purposes?
    Ms. Calvery. Sure. This is an issue that we focus on quite 
a bit at FinCEN, and particularly in the last year we really 
have been focused on money services businesses and their 
supervision. So they are licensed by States, money services 
businesses in this country are licensed by States, and 
supervised both by States and the IRS. And then FinCEN is 
responsible for any enforcement actions that might come out of 
that.
    So as a result of the Money Remittances Improvement Act of 
2014, we have been coordinating more than ever between the 
Federal and the State system. So the States have, for instance, 
a data system in which they can collect licensing information 
and put their supervisory exams and all of this type of 
information to one data system. And we have signed a memorandum 
of understanding so that we too now get access to that data. 
And together, the Federal Government and the States--there are 
about 30 States that participate at this point--are able to 
look at trends and identify risks and better focus our exams.
    We are doing coordination of our exams. We are doing joint 
exams. And that is in the money services business arena, but we 
also coordinate quite closely across depository institutions, 
and other types of financial institutions.
    Mr. Foster. Thank you. So you view the situation as 
improving at a satisfactory rate in terms of the State-
regulated--
    Ms. Calvery. I do think it is improving. Actually, a major 
area of focus has been to communicate to our banks and to our 
Federal banking agencies the supervision that is in place for 
money services businesses. I think there had been a lack of 
understanding and a lack of communication on how well they are 
regulated and what that regulation looks like in detail so that 
there could be some understanding of how that works.
    Mr. Foster. All right. Thank you.
    And I was also interested in your comments about shell 
corporations and real estate transactions.
    First, I am wondering if you have any comments on proposals 
that have been floating around in Congress for a while to 
basically pierce the corporate veil in the United States, to 
just not allow anonymous shell corporations to be made, which I 
guess is what many countries have.
    Would that have a big influence on your ability to do your 
job?
    Ms. Calvery. It would have a very large influence on our 
ability to do our job. I think this is actually the fourth time 
over 8 years that I have testified in front of Congress on this 
issue. And the one thing that I think has been consistent 
throughout--and some of that was at the Department of Justice 
and some of that has been with Treasury--is that criminals, 
terrorists, and other illicit actors use shell companies and 
hide behind the corporate veil as a means of engaging in 
illicit transactions anonymously. And so anything we can do to 
take that away and provide greater financial transparency would 
be of great aid to law enforcement and to combating money 
laundering and terrorist finance.
    So the beneficial ownership legislation that the President 
sent up to Congress recently I think sets out a good plan on 
how to do that. But we are certainly interested in working with 
Congress on a proposal that will work.
    Mr. Foster. Thank you. I guess at this point I am out of 
time, so I will yield back.
    Chairman Fitzpatrick. The gentleman from Maine, Mr. 
Poliquin, is recognized for 5 minutes.
    Mr. Poliquin. Thank you, Mr. Chairman. And thank you, Ms. 
Calvery and Mr. McDonald, for being here. We appreciate your 
leadership on this issue and your service to our country. I 
think everybody knows with the activities we have seen around 
the globe over the past couple of years that it is absolutely 
critical for our own national security that we win this war on 
terror. And part of that is making sure we stop the money flows 
to terrorist organizations around the world.
    In particular, I would like focus a little bit here on the 
Patriot Act and Section 314(b) that deals with information 
sharing, financial information sharing among financial 
institutions. So my question to you, Ms. Calvery, first, is I 
am sure you are familiar with that section of the law. Do you 
see those rules as being too restrictive for financial 
institutions to be able to share this information such that 
they can see patterns of money flows around the world such that 
they can pinpoint a way to interrupt this flow of funding?
    Ms. Calvery. Thank you, Congressman, for the question. I am 
very familiar with Sections 314(b) and 314(a). We use them 
quite extensively at FinCEN. I think there are some 
improvements that could be made to the statute, and in 
particular clarifying right now so 314(b), of course, allows 
financial institutions to share information with one another 
concerning suspicious activity related to money laundering and 
terrorist finance. It would be helpful to clarify that that 
authority extends beyond a strict reading of money laundering 
and terrorist finance, but applies to all crimes.
    Money laundering, of course, has many, many predicates to 
it. And we think it would be helpful to make it clear that 
financial institutions can share information with one another 
about suspicious activity involving violations of criminal law 
and regulations.
    Likewise, there have been some issues in the courts and 
there is now an inconsistency in the court rulings on whether 
or not the safe harbor that financial institutions get when 
they file a suspicious activity report, whether they had to 
have a good faith belief that the criminal activity occurred. 
And we see that as chilling on financial institutions. And we 
would certainly support a change to make it clear that a good 
faith belief that criminal activity has occurred is not 
required to file a SAR.
    Mr. Poliquin. Let's drill down a little bit deeper, if I 
can, Ms. Calvery. Talk to me a little bit about the sharing of 
information, of course with relevant safeguards, among 
financial institutions in the Federal Government.
    Could you please comment on that? How is that working? Can 
you see any changes that government can make to make that 
better? You have listed a couple when it comes to dealing with 
financial institutions themselves. Now, let's throw the 
government in.
    Ms. Calvery. Yes, so there is less needed in terms of 
authorities to make that better, and more needed in terms of 
innovation and activity on the ground. And I think that is 
happening. It has really been an exciting development over the 
last year. We have been partnering, FinCEN has been partnering 
with law enforcement and financial institutions, using the 
314(a) and (b) authorities, to share information on a more 
real-time iterative basis, where FinCEN will have a meeting 
with specific financial institutions that can help on a 
specific problem and provide context of the request we are 
about to make to them, to enable them to go back and look in 
their data and do a better job of finding relevant information.
    It also enables them to talk amongst themselves, the 
financial institutions to talk and share information amongst 
themselves. And that type of joint iterative activity, we found 
to be much more productive.
    Mr. Poliquin. Great. I represent a very highly rural part 
of America. We have the largest congressional district in Maine 
east of the Mississippi River. Is this problem of funding or 
stopping the flow of funds to terrorist organizations unique to 
large money center institutions? What advice can you give our 
folks back in Maine who deal with small financial institutions 
and mostly in rural areas that they can be on the lookout for 
these sort of activities that ordinarily they might not catch?
    Ms. Calvery. Unfortunately, I think we have seen that 
individuals have been radicalized in all different types of 
communities of different sizes in cities, in rural areas. And 
so then the money flows also follow where the radicalization 
occurs. To put it more concretely, of those business rules I 
was talking about earlier and the alerts that we get on 
activity related to potential terrorist activity, ISIL activity 
specifically, most of that reporting comes from depository 
institutions. About 60-some percent comes from depository 
institutions, maybe 37 percent from money services businesses. 
Most of it comes from large financial institutions, which by 
the way are also in smaller areas at the retail level. But some 
of it is also coming from small community banks and small MSBs.
    I recall seeing at least one report where it was a mom-and-
pop money services convenience store/money services business 
operation, and they provided some very important reporting for 
law enforcement.
    Mr. Poliquin. Mr. Chairman, I am just about out of my time, 
but if I could ask one more question. Is that possible, sir?
    Chairman Fitzpatrick. Your time has expired.
    Mr. Poliquin. My time has expired. Thank you, Mr. Chairman.
    Chairman Fitzpatrick. Thank you, Mr. Poliquin. The Chair 
now recognizes Mr. Kildee of Michigan for 5 minutes.
    Mr. Kildee. Thank you, Mr. Chairman. And I thank the 
witnesses for their participation.
    I would like to start with Ms. Calvery, if you could offer 
some comments on the basic subject of Iran and sanctions. And I 
refer to a speech that Secretary Lew gave back in March, where 
he indicated it was his view that the credibility of sanctions 
themselves is at stake if the promise of sanctions relief can't 
be fully realized.
    So I guess I am curious to what extent you think that 
criticism is valid, how it might apply more broadly than just 
to Iran's sanctions, and how effective you think Treasury's 
sanctions regime has been effective? If you could comment on 
that, I would appreciate it.
    Ms. Calvery. I have not left government service yet. That 
will be next week. So I am going to start by saying that 
whatever the Secretary said, I agree with. Actually, I do 
agree.
    Mr. Kildee. I am sure he will be very much encouraged by 
that.
    Ms. Calvery. Even next week, he will get that same answer. 
But joking aside, at FinCEN, we are not the sanctions experts. 
We support our colleagues at OFAC in their investigations by 
getting them the financial intelligence they need.
    What I can tell you is I am very impressed by their 
seriousness of effort and their ability to fashion sanctions in 
a very targeted manner, their ability to work with a changing 
scenario on the ground, a changing diplomatic situation on the 
ground to impose sanctions and to be flexible in moving those 
sanctions as needed. But in terms of the specifics, I really 
need to refer you to my colleagues at OFAC.
    Mr. Kildee. Then if I could zero in on something where 
FinCEN would clearly have some role, and that is implementation 
of the Hezbollah International Financing Prevention Act. Could 
you comment on the extent to which that is being implemented 
and how you feel it is succeeding in limiting the ability of 
Hezbollah to raise, to move, to use funds in pursuit of their 
terrorist aims?
    Ms. Calvery. Yes. FinCEN's role when it comes to the 
financing of Hezbollah is, again, in the collection of 
information and sharing that, whether it is with OFAC to focus 
on the sanctions side, or the implementation of the Act, 
sharing it with law enforcement and the intelligence community. 
We have used both our traditional authorities to collect that 
information, so the suspicious activity reporting and that type 
of thing, but we have also used some of our targeted 
authorities.
    We have used, for instance, Section 311 of the Patriot Act 
to focus on foreign financial institutions that we believed 
were moving funds on behalf of Hezbollah, and to cut them off 
from the U.S. financial system, and to collect additional 
information.
    We did that in the case of the Lebanese Canadian Bank, and 
in the case of a couple of money services businesses, Halawi 
and Rmeiti. So that is where we kind of fit into this bigger 
Hezbollah picture.
    Mr. Kildee. And the last question I have returns to the 
issue I think Mr. Foster had raised to a certain extent. And 
coming from Michigan, one of my long-time mentors is former 
Senator Carl Levin, who has spoken out pretty clearly on this 
issue of beneficial ownership and various methods that have 
shielded true ownership or true beneficiaries of ownership. I 
dealt with it on a much smaller scale. For many years, I was a 
county treasurer trying to deal with abandoned properties and 
trying to locate owners through various clouds of ownership and 
shell corporations.
    And I am just curious if you would comment on what you 
think, either of you or both of you, would be the essential 
elements of beneficial ownership legislation that would 
actually get at the question? I know Senator Levin had some 
concern that, from a regulatory standpoint, allowing only 
managers to be named rather than true owners might really be a 
step backward rather than a step forward. I wonder if you would 
comment.
    Ms. Calvery. Sure. I, too, am from Michigan. I grew up in 
Michigan, and Senator Levin spoke at my eighth grade 
Constitutional Convention Day. So I look at Senator Levin a bit 
as a mentor myself.
    However, I do disagree with him on the characterization of 
the definition of beneficial ownership in the CDD rule in a 
fairly fundamental way. The definition requires--it has two 
prongs to it. It would require individuals to provide 
information about someone who controls a company. So that could 
be the manager, director, et cetera, someone who has actual 
control over the company, and those individuals who have an 
equity stake in the company, at least 25 percent of an equity 
stake in the company. So it requires both of those things. And 
the reason that we went in that direction--and I first got 
involved in this definition when I was at the Department of 
Justice and I was being asked personally, what does law 
enforcement need? We know that criminals are going to try to 
hide. They will never actually give their names. So what does 
law enforcement need to actually be able to take the next step 
in their investigation? And our response, my response, was we 
need something more than a nominee. When law enforcement looks 
at a name on a piece of paper, they need to be able to go out, 
knock on someone's door, and that person has to have some 
connection to the bad guy, because now they have something to 
work with. If it is a nominee who doesn't know the bad guy, it 
is a dead end. And that is the situation we have been in, a 
dead end.
    Now there is someone for law enforcement to go talk to, 
someone who controls the company and someone who has an equity 
interest in the company on paper. No bad guy is going to stay 
very far away from the person who is actually able to control 
their money day to day. They are going to have some connection 
back and forth, and that enables law enforcement to take the 
next step in their investigation. And that is why I think that 
definition will prove helpful and effective in the CDD context. 
But through the beneficial ownership legislation that we have 
proposed, it requires a rulemaking process. And I think it is 
fair game to again examine, is that the right definition in 
that context, or is there a better definition that we should 
put in place? And that is what the rulemaking process is for.
    Mr. Kildee. All right. I see my time has expired. I do 
think it is a subject that requires a lot more exploration. My 
experience has been that it is difficult sometimes to separate 
a designated manager from an equity owner. And I have seen it 
where it might appear as if you are dealing with someone who 
has a real stake but often--and this again is in a limited 
scale, but I can't imagine it is less complicated in terrorism 
financing. I think it is a difficult area that we need to 
explore further.
    With that, Mr. Chairman, I thank you for your flexibility.
    Chairman Fitzpatrick. Thank you.
    Mr. Rothfus of Pennsylvania is recognized for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman.
    Mr. McDonald, I wondered if I could ask you a couple of 
questions. From your position at OTA, can you tell us how 
receptive developing countries are, particularly in Africa and 
the Middle East, to integrating efforts to block terrorist 
financing as a priority concern and accepting assistance from 
the United States, other G-20 countries, or the IMF, or 
development banks to identify and address issues in their 
nation?
    Mr. McDonald. Africa and the Middle East cover a lot of 
territory. There are a lot of different countries and very 
different circumstances. So I will try--I am going to avoid 
giving you just one paintbrush description of it. In Africa--in 
sub-Saharan Africa, in particular, I think the overriding 
challenge and problem is not so much one of a lack of 
willingness to give attention to this issue and to try to do 
better. It is fundamentally and primarily one of very low 
capacity, very limited, sometimes nonexistent, technology. We 
talked earlier about the role of technology.
    I will give you an example. In Liberia, where we are 
engaging, our Economic Crimes Team in their assessment mission 
went to the financial intelligence unit. It was ankle deep in 
water. There were plastic chairs. Maybe one computer. It is 
really unbelievably limited in terms of the human and kind of 
material capacity to do that job. That is an extreme example. 
There are other parts of sub-Saharan Africa that are far 
better. We work, for example, in Kenya and Tanzania, different 
picture. But, by and large, in sub-Saharan Africa, it is 
fundamentally a challenge of having the resources and the 
capacity.
    In the Middle East, I don't want to say that capacity is 
not at issue; it certainly is. Depending on the country you are 
talking about, whether it is Saudi Arabia, where we have an 
engagement, or Iraq, where we are resuming engagement, it is a 
very mixed picture. It is a combination of limited capacity. 
Certainly, it is the case in Iraq. But, also, in Iraq in 
particular, a very--a political and security environment that 
is turbulent, to say the least. So our technical assistance 
efforts in a country like Iraq, where I went on mission in 
November to try to re-establish our engagement, is one where 
there are some improvements. The legal regime has been 
strengthened by passage of new legislation. There has been a 
kind of a--there have been some changes within the central bank 
and the financial intelligence unit that are promising. But it 
is a region that is characterized by tremendous political and 
security--
    Mr. Rothfus. You mentioned a willingness on the part of 
sub-Saharan African countries to look at these issues, but 
there is a capacity issue. In the Middle East, there are some 
capacity issues. But can you address the willingness issue with 
those Middle East countries, Gulf states, other countries in 
the Middle East?
    Mr. McDonald. I would hesitate to characterize the 
willingness of all the countries in the Middle East. The ones 
that I am the most familiar with are Iraq. We almost had an 
engagement in Yemen until things went in a different direction 
there. We have worked in Jordan, where I think one of the other 
members of the panel noted there have been improvements in 
their FIU work and their AML/CFT regime. So it really depends 
on the country. I would just say that it is highly country-
specific.
    Mr. Rothfus. I would like to ask maybe about the impact on 
the willingness of countries, whether in Africa or the Middle 
East, with respect to recent activity. Do you think that these 
countries are more or less receptive to working with us when 
they see the Secretary of State holding public meetings with 
some of the biggest banks in Europe to encourage investment and 
business in Iran, the world's largest state sponsor of terror? 
Is there an inconsistency there?
    Mr. McDonald. I haven't talked to them about that. I 
couldn't say that is a--let me put it this way: I have never 
had any of my interlocutors in the Middle East tell me that 
they felt differently about the issue because of the factor 
that you mentioned.
    Mr. Rothfus. Ms. Shasky Calvery, I just commend you on your 
work and congratulate you and wish you well in your next 
endeavor.
    As you look back on your service, where do you think the 
United States has failed with respect to the prevention of 
terrorism financing? And where do you see the biggest 
vulnerabilities going forward?
    Ms. Calvery. I don't know if I would characterize it as 
failure as much as needing to consistently improve. So I think 
it was Winston Churchill who said something to the effect of 
change is good, and constant change is to be perfect. We need 
to constantly be changing in the government and evolving with 
the threat. And the threat--you have state actors. You have 
illicit actors who have billions of dollars at their disposal 
to be able to pay the best attorneys, the best accountants, the 
best bankers to come up with the most sophisticated schemes to 
hide illicit assets. And that is the charge we have, to keep up 
with that. So we need to remain vigilant with a determined 
adversary and ensure that we keep changing with the times and 
understanding the risks.
    That is not easy to do. What I see as the primary risks 
going forward are really what we had in the threat assessment, 
the threat assessment that we handed in to FATF. This idea that 
the chairman raised at the beginning that we have an incredibly 
complex financial system, the largest financial system, brings 
with it unique threats. We need to understand the full gamut of 
how all our financial industry works, all the different aspects 
of it, the various products and services, and then understand 
that the volume of transactions that go through the U.S. 
financial system is immense. So it is trying to remain focused 
on a big field of vulnerabilities to find a very narrow stream 
of illicit activity that is flowing through it. That is 
probably our biggest challenge moving forward.
    Mr. Rothfus. Thank you, and I yield back.
    Chairman Fitzpatrick. The gentleman from Arizona, Mr. 
Schweikert, is recognized for 5 minutes.
    Mr. Schweikert. Thank you, Mr. Chairman.
    And, Ms. Shasky Calvery, so only a week left?
    Ms. Calvery. 3 days.
    Mr. Schweikert. Okay. So let's, actually, because I think 
we always make a mistake of--in some of these discussions, at 
one point, we are talking about our sort of formal networks and 
informal and terrorism financing and other bad actors and these 
dollar scales. So let's just do a quick thought experiment. You 
have been doing this for how long?
    Ms. Calvery. Almost 20 years.
    Mr. Schweikert. Okay. So you have seen lots of creativity 
and things you never thought of all of a sudden appearing. So 
if I took you and put on the other side of the world tomorrow 
and said, ``Here is a half million dollars in cash,'' because 
that is the type of threat that we often worry about because 
that buys people who mean harm to us, and said, ``You are on 
the other side of the world; here is your half million dollars; 
give it to someone somewhere in North America, and you have 10 
days to do it,'' you could do that.
    Ms. Calvery. I am not offering those for sale, but yes.
    Mr. Schweikert. No, no, I am not saying how. We are not 
going to put on the ``how.'' But look, I sit here on this 
committee, and I know I could do it.
    Ms. Calvery. Yes.
    Mr. Schweikert. Through breaking it up and all sorts of 
different networks, and some in hard commodities, some in this, 
some in that, some in a DHL package. It is quite doable, isn't 
it?
    Ms. Calvery. Potentially, yes.
    Mr. Schweikert. Potentially, or just it is doable?
    Ms. Calvery. It is doable.
    Mr. Schweikert. And there becomes sort of my concern of 
some--so much of our resources we fixate on: Okay. We are going 
to watch the SWIFT system. We are going to track this, track 
that.
    At the same time, a handful of diamonds shoved into a 
package is being sent to--there are lots of ways to move 
resources to finance bad actors.
    And so I want to sort of bounce on to the next concept. 
Someone in a very similar position for another three-letter 
agency who is an acquaintance talked me through saying that 
some of the networks that wash money for someone selling 
copyright violations or illicit drugs also, that these networks 
are basically for sale. So they don't really care where you got 
the money. If you are moving money for terrorism, if you are 
moving money for a cartel, if you are moving money for this, 
there are entire networks basically that sell their services. 
Is that a fair characterization?
    Ms. Calvery. That is a fair characterization.
    Mr. Schweikert. So, functionally, money laundering, money 
movement, asset movement is actually a formal business in a 
corrupt sector.
    Ms. Calvery. Yes. I would call them professional money 
launderers.
    Mr. Schweikert. Okay. So, in many ways, isn't that one of 
our mistakes? Being someone from a border State, some of the 
crazy things that we have come across--in a previous life when 
we were rehabbing houses, we walked into a house that had a 
bundle of cash in it that was getting ready to be loaded up and 
taken back south. I mean, the things you come across. So my 
concern is, do we spend too much in the way of our resources 
saying, ``We are going to monitor and build algorithms and look 
at the SWIFT system,'' and not us understanding that there are 
hundreds and hundreds of different ways to be creative or break 
it up or use parts--so much of our focus on the formal banking 
sector, that there is massive leakage around us.
    Ms. Calvery. I think you need financial intelligence to 
identify those professional money launderers and facilitators 
to be able to go after them. And I think they in turn 
ultimately need the formal financial system to be able to move 
money globally, particularly when you start talking about large 
sums of money. So when you are talking about something like a 
Sinaloa Cartel that by all estimates has billions of dollars 
that it needs to launder, they need to do that through the 
formal financial system.
    Mr. Schweikert. You just moved to where I was trying to do 
this. So it is the very large scale amounts of money that are 
going to use--try to access our more formal networks because of 
the efficiencies.
    Ms. Calvery. Not necessarily. We also see it, for instance, 
in the case of foreign terrorist fighters who have extremely 
small amounts of money. They are essentially trying to pay for 
their travel to the conflict zone or perhaps for the weaponry 
that they are going to need when they are in the conflict.
    Mr. Schweikert. But they also have access to the ability to 
move small dollars in lots of informal sort of networks.
    Ms. Calvery. But they are doing it through the formal 
financial system.
    Mr. Schweikert. So, in the formal sector, how many--let's 
just use an example. How many Iranian institutions now have 
access to SWIFT?
    Ms. Calvery. I don't know the answer to that question.
    Mr. Schweikert. Okay. Because that is one of the things we 
have been tracking, because I believe there now are some SWIFT 
relationships with some Iranian institutions to European banks. 
And once that money hits a European institution, the ability to 
move money back into North America, even if we still have--what 
is it--311 sanctions on that institution, they still basically 
have access to the world's backbone. Is that sort of--am I 
heading in the right direction there?
    Ms. Calvery. Not necessarily. I think we have--in terms of 
Iran's access to the U.S. financial system, I don't think they 
have--
    Mr. Schweikert. But if they have access to Europe and the 
ability, then--so if I can SWIFT money through a European 
institution, strawman it out, wash it back out, and then send 
it SWIFT back through under a different sender, I am just--my 
concern is our resources seem to focus on formal networks. And 
my understanding is the scale of what we will refer to as sort 
of informal networks are also massive. And in our example, if I 
give you the half million and put you on the other side of the 
world, you might mix it up and use all sorts, and then when it 
hits the other side, it comes back together.
    And I have always--and I know I am way over time--but I 
thought it was absurd that we have a system where if I do 
$9,999, I don't get reported, but if I do $10,000, I do get 
reported. So bad actors just do $9,999 and use the other 
alternatives instead of just the fixation of, let's just use an 
algorithm system to look for a dollar--because a dollar 
threshold in some ways is absurd.
    Ms. Calvery. So there are a lot of things--
    Mr. Schweikert. Yes, I know. A lot of moving parts there. 
And we are way over time. But--
    Ms. Calvery. Let me perhaps try to address some of it. We 
seek to collect financial intelligence and have transparency 
over those parts of the financial system that we think are the 
most vulnerable to illicit finance. And when you start talking 
about things like cash and following a bare instrument like 
cash, we have focused on thresholds. But even with a threshold, 
we still have the suspicious activity reporting regime to 
support it. So if someone is doing transactions at $9,999, we 
expect to have a suspicious activity report. If someone is 
structuring several different transactions to get above 
$10,000, we expect to get a suspicious activity report.
    Mr. Schweikert. Thank you, Ms. Calvery.
    Mr. Chairman, thank you for your patience. I know we are 
way over time.
    Chairman Fitzpatrick. Thank you.
    The gentleman from Texas, Mr. Williams, is recognized.
    Mr. Williams. Thank you, Chairman Fitzpatrick. And thanks 
to both of you for being here today.
    Mr. McDonald, one of the key themes of these task force 
hearings has been international cooperation. We in the United 
States can only do so much on our own. While I believe our 
countryis making great strides in combating the financing of 
terrorism, we still can do more, and we need to do more. In 
previous task force hearings, the committee has explored the 
idea of trade transparency units which seek to identify trade-
based money laundering trends and conduct ongoing analysis of 
trade data provided through partnerships with other countries. 
One of our past witnesses, John Cassara, who is a former U.S. 
intelligence officer and Treasury special agent, testified that 
having TPP signatories agree to these TTUs would promote trade 
transparency. It would also be a revenue enhancer and, in his 
opinion, not derail implementation of current or future trade 
deals. I wanted to get your thoughts on this idea of making 
sure that our trading partners are following the same set of 
rules as we do.
    Mr. McDonald. Let me kick it off. And I think Ms. Calvery 
has something that she could add to that. So certainly the 
trading system, the international trading system, is one of the 
vehicles for money laundering and transmitting terrorist 
financing. And it is one of the areas where we work with our 
partner countries to try to get them better positioned to be 
the front line of shutting that off. So we work with customs 
officials. We work with officials in countries that are 
responsible for managing and overseeing the trading--trade 
flows in those countries to try to strengthen their capacity--
and I think this is part of your question--for them to work 
more closely with others in the United States and in other 
countries who are involved in trying to combat trade-based 
money laundering. So that is part of our work.
    Jen, I don't know if you have something you would like to 
add to that?
    Ms. Calvery. Sure. FinCEN works very closely with Homeland 
Security investigations on a number of different matters--and 
CBP--on trade-based money laundering. So we are very familiar 
with the TTUs and think that they have really done a good job 
over the years. So a good example is the TTU that we have here 
and the relationship we have with Mexico. They are able to 
share trade information, extensive trade information, to find 
where there has been over-invoicing or under-invoicing of 
export and import trade between the two countries and thereby 
find money that is being laundered. When you put that type of 
data together with the data we collect at FinCEN, we are really 
able to start to hone in on some professional money launderers 
and facilitation networks and to take action.
    Mr. Williams. Thank you.
    Mr. McDonald, last week I was encouraged to see G7 members 
agree to enhanced information sharing and cooperation when it 
comes to terror financing. This follows a similar agreement by 
the G-20 nations. But when it comes to TPP, not all of the 
current signatories are part of the larger discussion. How 
receptive are developing countries to integrating efforts to 
block terrorist financing as a priority concern and in turn 
accepting assistance from the United States? In other words, 
when it does--or in other words, does it become beneficial for 
them to actually engage in this topic instead of turning a 
blind eye to it?
    Mr. McDonald. So, broadly, I would say that developing 
countries are receptive to assistance and interested in 
strengthening their AML/CFT regimes in different ways. Part of 
it is a growing recognition on their part that terrorist 
financing, dirty money of different kinds, can harm them. 
Terrorist financing or funding that is being laundered in the 
direction of the United States doesn't always end up only here. 
The countries of Central America, South America, and other 
parts of the developing world, I think, are increasingly aware 
of their stake in trying to address this issue.
    As I said earlier, it is not only their concern about 
funding of criminal activity within their own countries but 
also the loss of correspondent banking accounts upon which 
their financial system depends. So I do believe that they do 
recognize the importance of this issue. And while I can't speak 
for the--it is on a country-by-country basis whether they want 
to have a technical assistance program with us--they are 
interested.
    Mr. Williams. Really quickly, should TTU be a part of the 
TPP agreement?
    Mr. McDonald. I don't know the answer to that question.
    Mr. Williams. That is why I ask it.
    Mr. McDonald. I will find out. Can I find out and get back 
to you?
    Mr. Williams. Would you do that for me?
    Mr. McDonald. We will do it today.
    Mr. Williams. Thank you. I appreciate it.
    Mr. Chairman, I yield back.
    Chairman Fitzpatrick. The gentleman from Arkansas, Mr. 
Hill, is recognized.
    Mr. Hill. Thank you, Mr. Chairman. I appreciate you and 
Ranking Member Lynch for your steady leadership of our task 
force.
    Director Calvery, best wishes to you in your next step in 
your career.
    And, Mr. McDonald, thank you for your service at Treasury. 
As a former Deputy Assistant Secretary of the Treasury, I 
always appreciate hearing from a fresh one. And I appreciate 
your work.
    I led the technical assistance design to all of Central and 
Eastern Europe to the Finance Ministries from the Treasury back 
a quarter century ago. So it is good to see you continuing to 
do that good work.
    I am grateful to both of you for your leadership around the 
world to make our efforts to fight terror finance more robust, 
more coordinated, and more successful.
    This information sharing and collecting, one thing in your 
testimony, Director Calvery, I was interested in your 
discussion about sharing with other financial intelligence 
units around the world--and that makes complete sense to me--
and sharing with other public entities in the United States 
like your work with Homeland Security and border security. 
Excellent work. But whenever I talk to people in the private 
sector, they always seem more interested in targeting rather 
than sharing. And so the question I have for you is, how can we 
focus on targeting rather than just funneling terabytes of 
information into Treasury's IT center and analytics center? It 
seems like we are missing the power of hundreds of people out 
there on the front lines every day in our biggest banks around 
the globe.
    So can you reflect on sharing essentially with the private 
sector's financial intelligence units and our biggest banks in 
the world and also how we can better target getting them 
engaged on the front lines of terror finance?
    Ms. Calvery. Sure. I think there has been some real 
innovation in this space over the last year, which I referenced 
briefly earlier. Both in the United States, and the United 
Kingdom as well, there has been a fair amount in the press 
about the JMLIT, the joint money laundering task forces that 
they are operating. But both are doing essentially the same 
thing, and that is doing targeted information sharing between 
government and industry, financial institutions. So focusing on 
a very specific problem set--maybe it is something related to 
ISIL; maybe it is something very targeted and specific, not the 
broad topic--and sharing targeted information and then seeing 
what each side, what government can do, what industry can do, 
what industry can do by speaking to one another and sharing 
information, by putting all of our efforts together, what kind 
of progress can be made in targeting some of the financial 
facilitators that we are trying go after? We are seeing 
promising results. Many of those efforts are still ongoing and 
in investigative stages. So I can't speak to the specifics. But 
I can tell you there is a lot of excitement on this topic right 
now. There is a lot of excitement in industry. This is what 
they would prefer to be doing, the people who staff their 
financial intelligence units. And it is what government and the 
law enforcement area would like to be doing. So I am expecting 
that there is going to be great development in this area just 
because of the concentration of effort of some very talented 
people in the year ahead.
    Mr. Hill. Thanks.
    On the subject of beneficial ownership, I congratulate 
Treasury for finding and plugging the gap in single member non-
citizen-owned LLCs. I think that was a good proposal you made 
to Congress in your disclosure in the recent days. But I still 
have trouble, and we have had this discussion at a number of 
these hearings, understanding your push for bank collection of 
beneficial ownership at the 25-percent ownership level through 
the normal customer ID process, when instead under the Code, 
Section 6103, why don't we grant FinCEN the ability to get IRS 
data, which has much more up-to-date, much more accurate 
beneficial ownership for C corps and LLCs, particularly if you 
plug the foreign single member question. Why do we keep going 
back to something that is dated and not very reliable, frankly?
    Ms. Calvery. Sir, I think that is an important question. 
And it is important to understand the distinction between--
government understanding beneficial ownership to help it with 
its investigations. So, like the proposed legislation to 
collect information at the time of company formation, that 
would help law enforcement. It is important to distinguish that 
from a bank's responsibilities as well to understand who their 
customers are and to be able to assess whether there is a 
suspicious activity occurring within those accounts. It is only 
a financial institution that is going to have insight into 
whether their customer is engaged in suspicious activity and 
file those reports that will get to law enforcement and 
potentially initiate an investigation.
    So, for instance, if they know who the beneficial ownership 
is of a legal entity customer, they are going to be better 
positioned to implement their sanctions obligations. They are 
going to be in a better position to understand whether the 
activity is the type of activity they should expect from that 
customer.
    Mr. Hill. Yes. I am out of time, Mr. Chairman, and I 
understand that. But the issue is they already have that 
obligation under the Bank Secrecy act now on filing a SAR. They 
don't need more directives about documenting beneficial 
ownership when they gather that information a lot now, both on 
the deposit side and the loan side, including who is 
responsible for filing the tax return for the LLC, et cetera. 
Banks know that information, and they have an obligation if 
there is something suspicious to report it.
    I am talking about the timeliness and accuracy of actual 
beneficial ownership that you want to try to sort through. And 
I am arguing that the IRS has a much better source of that 
data, that it is much more current, much more accurate than 
Secretaries of State or bank credit files. That is the argument 
I am making. And that it is a much more robust source of that 
data if you had access to it as a law enforcement agency under 
something like 6103's normal power arrangements for IRS data.
    Ms. Calvery. So I think when--that seems to be more of a 
reference to the beneficial ownership legislation proposal. And 
there we are focused on having FinCEN collect the information 
or have the information because it is a part of our statutory 
mandate to make that information available to law enforcement 
more broadly, State, Federal, law enforcement, to enable them 
to do their jobs, to provide it to regulatory authorities and 
to provide it as appropriate to the intelligence community to 
fight international terrorism and other national security 
threats. Whereas, in the tax context, there is much more 
limited abilities to be able to share that information with the 
broader community. And so that is the--
    Mr. Hill. But that is a problem I think you need to solve.
    Thank you, Mr. Chairman, for the extra time.
    Chairman Fitzpatrick. Sure.
    The gentleman from Florida, Mr. Ross, is recognized for 5 
minutes.
    Mr. Ross. Thank you, Mr. Chairman.
    And I want to thank our witnesses today for being here, Ms. 
Shasky Calvery, especially, for your service, as well as Mr. 
McDonald.
    I want to focus on something, because you hit on something 
in your opening statement, Mr. McDonald. You stated that the 
goal is a system in which both prevention and enforcement 
measures are robust and mutually reinforcing. It would seem to 
me that, absent enforcement, you won't have prevention, because 
one would lead to the deterrent of the other and hopefully be a 
good system. It reminds me of a commercial that I saw on TV for 
LifeLock where you have a bank guard standing in the middle of 
a robbery and one of the victims says, ``Do something,'' and 
the bank guard says, ``I am just a monitoring guard; I don't do 
anything to prevent the actual robbery.'' My focus here is 
going to be on enforcement.
    Ms. Shasky Calvery, are we doing enough in enforcement?
    Ms. Calvery. I think we are. The United States is doing 
more than any other country around the world in terms of 
enforcing the Bank Secrecy Act. If anything, the criticism 
internationally is that we are doing too much. But--
    Mr. Ross. But are other countries cooperating with the 
enforcement? In other words, are we just--we are gathering 
data. We are monitoring. We find specific targets. We find 
dynamic targets that require some of the developing countries 
to assist us. Do they enforce to the level that we need them to 
enforce in order to lead to prevention?
    Ms. Calvery. There is not one answer--because there are so 
many countries out there, I can't answer one way for all of 
them. Each is a different situation. But I think we are seeing 
a trend moving in a positive direction where more and more of 
our partners around the world are enforcing their anti-money 
laundering provisions. And now, in FATF, there has been a move. 
Before it was enough just to have laws on the books 
criminalizing or otherwise prohibiting money laundering in 
terrorist finance. Now there is a move when we do mutual 
evaluations, when we do assessments of other countries as 
peers, to say whether they are in compliance with the 
international anti-money laundering standards. Now we are 
looking at the effectiveness. It is not enough just to have 
rules on the books. Are you actually implementing them, and are 
they effective?
    Mr. Ross. And what can we do if they are not implementing 
them? If they are not--
    Ms. Calvery. At least in the FATF context, there is a 
system to have kind of increasing sanctions on countries for 
failing to comply with those standards.
    Mr. Ross. That is what I would ask you, especially as you 
reflect on 20 years there, what would you suggest we need to do 
more in terms of what resources or tools would be necessary to 
strengthen enforcement, not so much with us as a country but 
with our allies in trying to stop the money laundering in the 
terrorist financing?
    Ms. Calvery. Well--
    Mr. Ross. Do the sanctions work?
    Ms. Calvery. So, two separate questions. The first one in 
terms of enforcement of our AML/CFT regime, what more do we 
need to do there? I think we need to give the push on 
effectiveness in FATF a chance to work. There are going to be 
some very important conversations that are going to come out of 
that. We are in the first round of those reviews right now, and 
already, it is starting to highlight some issues for us to be 
focused on in the years ahead.
    In terms of the sanctions regime and whether that works, I 
really would have to refer you to my colleagues at OFAC who do 
that for a living every day.
    Mr. Ross. Okay. Mr. McDonald, would you say that there are 
obstacles to cooperation that Congress should know about with 
some of our cooperating countries?
    Mr. McDonald. Could you repeat the question?
    Mr. Ross. Yes. Would you say that there are obstacles to 
cooperation, and if so, what could we do to try to overcome 
those obstacles?
    Mr. McDonald. So, certainly, there are obstacles. I already 
mentioned and won't repeat, the obstacle of there being 
extremely, extremely low capacity and just terribly rudimentary 
work spaces and technology in the countries where we work. 
Another obstacle is, as I sort of alluded to in my oral 
remarks, the inevitability that entrenched interests will 
manifest themselves at some point when you get to the point 
where--
    Mr. Ross. Can we provide them any incentives? Can we 
provide them any incentives to invest more on their end without 
having to appropriate more on our end?
    Mr. McDonald. I think I will piggyback on a couple of 
things that Jen referred to. I do think that there is evidence 
that the FATF procedures and the FATF monitoring process does, 
if you will accept the expression, put the squeeze in a 
positive way on countries that are subject to that. An example 
is Cambodia. They were in the FATF ICRG review process not 
doing well. They saw the writing on the wall. They asked us for 
technical assistance to help them build the capacity to do 
better. It took years, but they did emerge from that process. 
Of course, it will be important for them to sustain it. Getting 
out of the ditch is just the first step.
    But I do think that there are examples--there is evidence 
that the FATF process can be an effective way of focusing 
attention. Case in Panama, another country that we have been 
talking about.
    Mr. Ross. Thank you.
    And I see my time is up. I yield back.
    Chairman Fitzpatrick. The gentleman from Kentucky, Mr. 
Barr, is recognized.
    Mr. Barr. Thank you, Mr. Chairman.
    And, to Ms. Calvery and Mr. McDonald, thank you for your 
testimony today. Thank you for your service. Thanks to the work 
of the Office of Technical Assistance and FinCEN. It's very 
critical work in terms of coordinating the government's efforts 
to stop terror financing.
    I wanted to start with Treasury's monitoring of the 
implementation of the Iran nuclear deal and specifically the 
data on any Iranian sanctions relief moving to terror proxies.
    I know, Ms. Calvery, you indicated that FinCEN really is 
not doing a whole lot of that, that you would defer to the 
Office of Foreign Asset Control (OFAC). But to either of you, 
has Treasury made a finding about whether any sanctions relief 
has found its way into the hands of terrorists?
    Ms. Calvery. I don't believe that there has been a finding 
one way or the other. But I am not certain.
    Mr. Barr. And from the Office of Technical Assistance, same 
conclusion?
    Mr. McDonald. Yes. I do not know the--
    Mr. Barr. What about with your colleagues with OFAC? Any 
communications within Treasury from OFAC about their monitoring 
of the implementation of the agreement?
    Ms. Calvery. I would have to defer to OFAC on that.
    Mr. Barr. The reason why I would ask, and it is kind of a 
fundamental question in terms of Congress' oversight of the 
agreement, is that Secretary Kerry, about 5 months ago, in 
Switzerland, at the World Economic Forum, acknowledged that 
sanctions relief will likely go to terrorists. That is our own 
Secretary of State defending the agreement acknowledged that 
maybe one of the core weaknesses of the agreement that he 
negotiated was that some of the sanctions relief would end up 
in the hands of the Iran Revolutionary Guard Corps or other 
terrorist proxies. And so it is troubling that Treasury, which 
is charged with the mission of monitoring terror financing, 
doesn't really have an answer to that basic and fundamental 
question.
    And by the way, the Secretary of State in making that 
declaration indicated that there would be consequences if Iran 
uses the money to fund terrorism. How can we know to impose 
consequences if we don't know whether or not any of the 
sanctions relief has in fact found its way into the hands of 
terrorists?
    Ms. Calvery. Congressman, I want to make sure that I didn't 
misspeak. I did not mean to suggest that Treasury does not have 
answers to these questions. Instead, as the Director of FinCEN, 
I don't have answers to those questions, but I would be happy 
to take them back.
    Mr. Barr. Thank you.
    Mr. McDonald. The same for me. It is just not in my area of 
responsibility. But I feel confident that there is an answer to 
that question in Treasury.
    Mr. Barr. We would like to know. And so thank you for--and 
I recognize that Technical Assistance and FinCEN are not at the 
core of that question. But, presumably, the Office of Foreign 
Assets Control would be. Someone at Treasury--this is a pretty 
critical question that Treasury should be well aware of, 
everyone within Treasury in the area of countering terror 
finance.
    Let me quickly move on to the Office of Technical 
Assistance specifically. And, Mr. McDonald, in your testimony, 
you indicated that OTA has a relatively smaller footprint in 
the Middle East. Given that the locus of most terrorism 
activity is in the Middle East, shouldn't we be more--and I 
understand that you have to have a willing government as a 
partner here--but shouldn't we be more proactively and 
aggressively interjecting ourselves into those Middle Eastern 
embassies?
    Mr. McDonald. When I made my remarks about the importance 
of demand-driven technical assistance, I did not mean to 
suggest that we should be sitting back on our heels and waiting 
for others to come to us and not doing anything on our own. So, 
certainly, part of my job is to make sure that potential 
partners for our technical assistance program are aware of our 
program, of how it relates to U.S. national interests and their 
interests. And I would also say that an important part of the 
role of the Treasury's attaches overseas is to serve as 
advocates for this kind of awareness. So, certainly, that is--
    Mr. Barr. Just in terms of prioritization of the scarce 
resources that Treasury has in this area, and maybe it is too 
scarce, but do we have enough attaches in our Middle Eastern 
embassies?
    Mr. McDonald. I asked this question before I came up today. 
What is the answer if the question is, are there enough 
attaches out there? And, certainly, we would welcome and 
benefit from additional resources, not only to support 
additional attaches but even the ones that we have. So the 
rising cost of doing business at embassies internationally, 
which is affecting all agencies, not just Treasury, is one of 
concern just for our existing footprint. And in order to do 
more, certainly additional Treasury attaches would be helpful. 
I am very aware of the benefit that I get out of our attaches 
in Afghanistan and Iraq and in many, many countries. Well, not 
that many. Actually, 17 countries where we have attaches. But, 
certainly, that would be a helpful addition to the picture.
    Mr. Barr. Thank you.
    I yield back.
    Chairman Fitzpatrick. The gentleman from Minnesota, Mr. 
Ellison, is recognized.
    Mr. Ellison. I thank the chairman and the ranking member.
    And I also want to thank our witnesses today.
    I represent Minneapolis, Minnesota, which is home to 
probably the most Somali-Americans in our country, in North 
America, perhaps. We have as many Somali-Americans in the 
Minneapolis area as they do anywhere outside of Somalia. I 
could tell you, and I think you are well-aware, that there is a 
crisis going on, and it is not getting better. Many U.S.-based 
Americans who find their roots in that part of the world are 
unable to provide critical assistance to their loved ones. Some 
of this is food. Some of this is school fees. A lot of it is 
just the basic sustenance of life. Upwards of 40 percent of the 
GDP of Somalia is foreign remittance. Now, licensed money 
remitters, as you know, are known as money service businesses, 
or MSBs. And I am sure you all are aware that they are losing 
their ability to open bank accounts and send money overseas.
    Increasingly, correspondent banks are declining to provide 
wire transfers to many nations, including Somalia, and many who 
have opened up these accounts are having them closed. And every 
day, it feels like the window is a little smaller and smaller.
    And I can tell you I have talked to these banks and these 
credit unions, and they don't have a problem remitting money. 
But they feel that the financial and liability risks are so 
great to them that it just doesn't cost out for them. So they 
are making a business decision to close accounts and to not 
open them.
    In November 2014, FinCEN published a statement on providing 
banking services to money services businesses. I found the 
statement very clear. But since then, the situation really 
hasn't improved very much. And I guess my first question is, 
why did FinCEN's 2014 statement not really turn the trick? Why 
didn't it provide necessary assurance to bankers that they can 
meet their requirements and still provide services to 
regulatory compliant MSBs?
    Ms. Calvery. Ultimately, the banking industry has to assess 
the risks, what controls it can put in place, and what its 
appetite is to deal with those risks. And I think, as Larry can 
tell you from the work that he and his team do in Somalia, that 
Somalia presents a lot of challenges around the illicit finance 
risks present in the country and the state of its financial 
system and its ability to control those risks. Here in the 
United States, what FinCEN is able to do and what we have been 
doing beyond issuing the statement in 2014 is to move on the 
Money Remittances Improvement Act that you proposed and 
President Obama signed into law in 2014 to ensure that there is 
good supervision of the money services business industry and 
that banks and banking regulators, examiners, know that 
supervision system is strong so that we have the conditions on 
this side to ensure that banks can have comfort that MSBs 
operating in the United States and how they are examined and 
supervised in the United States is something they can be 
comfortable with.
    That doesn't necessarily help them with the risks on the 
side in Somalia.
    Mr. Ellison. Okay. Would you like to respond, Mr. McDonald?
    Mr. McDonald. Only to mention that our technical assistance 
program is working with the Somalia authorities, in particular 
in the area that Jen mentioned, to strengthen bank supervision 
capacity in the central bank. We are fortunate to have the 
collaboration of the U.S. Embassy in Kenya and the Kenyan 
School of Monetary Studies, where we conduct those training 
activities because the security environment doesn't allow us to 
do so in Somalia. So it is a tough undertaking, but it is one 
that we are committed to.
    Mr. Ellison. I want to thank you for doing what you are 
doing. And I just want to encourage you to do more because if 
our effort is to thwart and stop the terrorists and Al Shabaab, 
if we drive the money underground, it is just more opaque. It 
is not a better situation.
    Let me see if I can squeeze one more question in. I have 
heard from banks that their regulators do not acknowledge that 
MSBs are regulated by State banking supervisors and the IRS. So 
banks feel that they must not only know their customer, but 
their customer's customer. Do you see this phenomenon? Is there 
a way we can get through this? How do you see this?
    Ms. Calvery. That is the effort that we have been 
particularly focused on I would say over the last 6 months. And 
I do see improvements. And that is the communication between 
money services businesses, their trade associations, their 
regulators, the States themselves, the IRS, communicating to 
banks and their supervisors about how that supervision regime 
works. I think there was a fair amount of surprise among some 
of the banks and banking supervisors to see how much they are 
actually supervised. And we are also working with money 
services businesses on putting together a best practices guide 
for them so that they can give even further comfort.
    Mr. Ellison. Let me tell you, I am about 40 seconds past my 
time. But if there is another round, I have a few more 
questions for you. Thank you.
    I yield back.
    Chairman Fitzpatrick. The gentleman from Delaware, Mr. 
Carney, is recognized.
    Mr. Carney. Thank you, Mr. Chairman and Mr. Ranking Member, 
for this hearing today and for your very good work on this task 
force. Thank you to both of you for coming in and for your work 
for our country.
    I am not a member of the task force, so I appreciate an 
opportunity to be here and to listen to the testimony and to 
ask a few questions. And I will try to end with just a general 
question, which is if both of you could kind of underscore 
after this full discussion the top three threats that keep you 
up at night in this area.
    Mr. McDonald. We were going to flip a coin to see who went 
first. But so, certainly, Iraq is a country, an area of 
concern. It is part of a broader region of concern. I am 
hopeful that our technical assistance engagement there as part 
of a broader, significantly broader, set of steps on the 
security front will be beneficial and be fruitful. So Iraq is a 
country of concern.
    Mr. Carney. Is it getting better or worse?
    Mr. McDonald. Pardon me?
    Mr. Carney. Is it getting better or worse?
    Mr. McDonald. I think on the--we are having to postpone our 
scheduled mission, next mission, because of the very--the 
recent unrest in the international zone. So that is not better.
    Afghanistan, a country that I have visited many times, 
where we have resumed a technical assistance engagement, is a 
very important part of the world, that keeps me up at night in 
some respects. I do have a feeling, a sense of hope that the 
current leadership, President Ghani, whom I know well from when 
he was the Finance Minister of Afghanistan, understands the 
issues, understands the importance of building institutional 
capacity. But he obviously has a tremendous number of security, 
political, and other challenges he is confronting.
    Mr. Carney. I am running out of time. Number three?
    Mr. McDonald. So I will--why don't I just--
    Mr. Carney. Anything else that you would like to add to 
that? And I have one other point I would like to make.
    Ms. Calvery. I will go quickly: number one would be the 
idea that ensuring that we get, collect, and share any 
information we possibly can to prevent a foreign terrorist 
fighter or a homegrown violent extremist from engaging in 
violent activity in this country; number two, that we are doing 
everything within our power at FinCEN to protect the financial 
system from cyber actors, illicit cyber actors; and number 
three, that we at the same time stay focused on professional 
money-laundering networks that are responsible for laundering 
billions of dollars for organized crime and other illicit 
actors.
    Mr. Carney. So it doesn't sound like you guys sleep very 
well at night with those concerns.
    I am disappointed that Mr. Hill is not here because I would 
like to follow up on the last point that he made. I represent 
the State of Delaware. Most corporations, LLCs, are formed in 
Delaware, and the concerns raised about beneficial ownership 
concern elected officials and leaders in Delaware as well as 
elsewhere. Mr. Hill talked about and Senator Carper on the 
other side of the Capitol is working on legislation that would 
give access to law enforcement agencies to the data that is 
already being collected at the IRS and to expand on some of 
that data so that law enforcement had better tools around 
beneficial ownership to kind of get beyond the so-called 
corporate veil.
    Do you have a view of that? You had a back-and-forth, but I 
wasn't clear on what your view was on using that IRS data and 
making it available to law enforcement agencies.
    Ms. Calvery. Yes. Treasury and the Administration set up a 
proposal just a few weeks ago--a legislative proposal--on the 
collection of beneficial ownership information that we think is 
the right solution. We are definitely open to continuing the 
conversation to come to a solution on this issue. But that 
proposal would focus on FinCEN collecting information. One of 
the benefits to that proposal over some of the others I have 
seen over the years that would have put the onus on the States 
to collect information and make it available is that it doesn't 
require States to do anything extra. It also has a 50-State 
solution, so to speak, in the sense that you can't have 
arbitrage between different States if they do things 
differently. But that is the proposal that we have been 
pushing.
    Mr. Carney. Thank you very much.
    Again, to the Chair and the ranking member, thanks very 
much for the opportunity to sit in.
    Chairman Fitzpatrick. With that, we are going to proceed to 
a second round of questions. There shouldn't be too many. I 
just actually have--I want to recognize myself first for 5 
minutes.
    One particular issue has to do with asset forfeiture. So my 
question would be to you, Mr. McDonald. Recently, there was a 
series of meetings in South and Central America that 
Representative Pittenger and Representative Ellison and I 
attended with a number of others. And as we traveled and met 
with different governmental and FIU professionals in those 
countries, there was an area of common concern. I think we take 
for granted sometimes that, in this country, most States have 
asset forfeiture laws in place. And so you find a bad actor, a 
law breaker, you can not only let the prosecution take their 
liberty, but you can hurt them a second time by getting to 
their assets. Most of the times those assets were had with ill-
begotten gains. You can convert them to cash. You can, using 
our laws, take that cash and pay things like police overtime at 
the local level or the State level or Federal to investigate 
the next law breaker.
    So one of the things we noticed and, specifically, when we 
were in Paraguay, and I will just give you an example: The 
plane landed on a tarmac in Ciudad del Este near the tri-border 
area. And there was a somewhat legendary jet that was sitting 
there, that had been, I guess, forfeited. And it looked like it 
had been there for about 10 years or so. It was covered with 
moss. And so we questioned, and the answer was: We don't really 
have the process or the ability, technical assistance, I guess, 
to actually complete the forfeiture process. So what was a 
valuable asset at one point in time is just wasting away. It is 
probably going to cost the government funds and resources to 
get rid of it, as opposed to actually using it against the 
terrorists or the money launderers or the narcotraffickers or 
wherever it came from.
    So does OTA--what can you tell us about some of these 
countries that we work with and their ability to use asset 
forfeiture and our assistance to help them get their job done?
    Mr. McDonald. First, we do provide technical assistance to 
help countries establish and implement asset forfeiture 
regimes.
    You are right that it is an unattended area or a 
nonexistent area. And in a number of countries, it is one of 
the important areas of the work of our Economic Crimes Team. It 
is something that I think if we had been there when the plane 
first got to that tarmac and became possibly available for 
being part of an asset forfeiture action, it would have been a 
good thing.
    But we are working with--I am going to confirm this--but 
part of our work in Paraguay is, I believe, on asset 
forfeiture. It is certainly part of our work in other countries 
and Central America, Latin America, and the Caribbean. In 
Haiti, frankly, one of our--and it is, unfortunately, not a 
long list--one of the examples of progress that we made in our 
engagement in Haiti was on asset forfeiture.
    So, bottom line, you are absolutely right. That is an 
important part of the AML/CFT regime-strengthening effort. It 
is something that we do.
    So, in a demonstration of OTA efficiency, the head of OTA's 
enforcement--Economic Crimes Team, Erin Schenck, just reminded 
me that we began asset forfeiture management work in Paraguay. 
There was a mission, a TDY, earlier this month, and it is an 
area of high demand. I don't think that--I have actually seen 
that plane. And I don't think that we are going to get much 
money out of that plane. But we are going to fix the asset 
forfeiture regime so that sort of thing is not repeated.
    Chairman Fitzpatrick. There won't be much money out of that 
plane at this point in time. It has been sitting there--appears 
as though--a long time, a decade or more. But it is just an 
example where sometimes you have to invest money to get money 
back. And if you want to suggest some additional resources OTA 
could use, I would like to see funds properly invested in 
providing technical assistance to some of these countries so 
they can get more of their own resources, and we can do a 
better job together.
    But I appreciate the fact that you guys are on top of that 
particular case, which, as I said, was somewhat legendary 
there. We spoke to the prosecutor about it, and we couldn't 
really get a clear answer.
    Mr. McDonald. If I may, just quickly, note that in addition 
to technical assistance in the asset forfeiture area, a big 
part of our work across other teams is domestic resource 
mobilization more generally, so trying to help these countries 
mobilize more resources in their own country to the benefit of 
efforts to combat money laundering and terrorist financing but 
also so that they can provide basic public services more 
effectively than they are able to do now.
    Chairman Fitzpatrick. I recognize Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Let me just follow up. We had a situation here several 
months ago where we had cyber hackers get into the central bank 
in Bangladesh and send instructions to the New York Federal 
Reserve Bank to wire--actually, they requested $951 million to 
be sent to various locations around the globe. They ended up 
successfully getting the New York Fed to wire $81 million to 
certain casinos in the Philippines. And they successfully stole 
the $81 million. It was a payout. I know we have Abu Sayyaf 
operating there out in the smaller islands in the Philippines.
    Is there any indication--this is a pretty sophisticated 
operation. I know that the Philippine government has issued--or 
taken away people's passports because they think it was an 
inside job. I am not so sure it was. But are you folks involved 
in that? And what can you tell us about it?
    Ms. Calvery. I can't say a whole lot in this forum because 
there are ongoing investigations and so forth happening. What I 
can tell you is, at the highest level, the threat of malicious 
cyber actors is a top priority of the U.S. Government. The idea 
that they are going to attack our financial institutions or 
financial infrastructure is a top priority of the Treasury. And 
there are many people at Treasury who are working on this issue 
every day.
    At FinCEN specifically, our role is to collect information 
through suspicious activity reports, and we do get a lot of 
information in those SARs on different cyber threats.
    Mr. Lynch. A little wrinkle here because the Philippine 
senate had a bill to require reporting of suspicious 
transactions, the suspicious activity reports, and the casinos 
lobbied against them in the Philippine legislature and defeated 
the amendment. So they don't have that. So we have this gap in 
the Philippine anti-money laundering protocols. And here we are 
in the meantime basically signing a trade agreement with these 
folks. So it is problematic.
    Are there other measures that we might--we have this 
vulnerability in the Philippines because of the lack of this 
anti-money laundering legislation. Are there other ways that we 
can fill that gap to help you do your job?
    Ms. Calvery. One of the things that we are currently doing 
to fill that gap is, at FinCEN, we have a program known as the 
Global Rapid Response Program. We work it together with the 
FBI, the Secret Service, and I believe Homeland Security just 
signed on. And what we have been doing is when there are cyber 
incidents like this and the money moves--it moves very quickly, 
and of course, it is moving internationally--is law enforcement 
gets information from the victim, usually a big business, and 
they get that information to us. We work with our partner FIUs 
around the world to get that money either refused, turned 
around, or arrested before the bad guy actually gets his hands 
on it. In the last 18 months, I believe we have recovered 
around $186 million on behalf of U.S. businesses. And it is a 
program that, unfortunately, I think is going to keep 
increasing.
    Mr. Lynch. Mr. McDonald, do you have anything to add?
    Mr. McDonald. No, not on this topic.
    Mr. Lynch. Okay. This was all done via SWIFT, which is a 
huge problem for us. You mentioned the recovery that we have 
had on behalf of U.S. businesses. Was that with international 
partners where SWIFT would be involved, or are those internal 
within the United States where SWIFT would not be involved?
    Ms. Calvery. It was with international partners where wire 
transfers would have gone, yes, internationally.
    Mr. Lynch. Okay. All right. Thank you.
    I yield back.
    Chairman Fitzpatrick. I recognize the vice chairman, Mr. 
Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    Sometime back, we had a briefing with the four major banks, 
who came to discuss their role in our combined efforts. And in 
that discussion, of course, these 4 banks receive 90 percent of 
the foreign funds that come into our country, and they shared 
with us the problems that they have under 314(b) in sharing 
information with each other but also in 314 in receiving 
information from the government.
    And one thought that came out at that time was establishing 
some type of nonprofit which could be in receipt of data. I am 
aware that in Pittsburgh, Carnegie Mellon, the government, and 
the financial institutions have joined together, and there is a 
501(c)(3) that has been established. Do you envision something 
like that for cyber? That is for cybercrimes. Do you envision 
that something like that could be established?
    Ms. Calvery. I am familiar with the outfit in Pittsburgh, 
and I have certainly been involved in many of these discussions 
with our big four financial institutions as we and others have 
been exploring ideas of how best to share information and what 
we might want to try to set up. I think the thinking--we will 
see--but my sense is that the thinking has evolved a bit away 
from this idea of establishing a nonprofit. As some of these 
institutions are trying out different mechanisms for sharing 
information with one another under 314(b) and 314(a), they are 
kind of learning by doing in terms of, what are going to be the 
most effective ways to share information?
    And we at FinCEN are supporting them. We have had a number 
of meetings and discussions about it, and we have been very 
open to issuing guidance or administrative rulings on any 
questions that industry might have.
    Mr. Pittenger. Clearly, we need to modify 314 in terms of 
the safe harbor rules, because they feel the impediments there 
in terms of receiving data from the government that they feel 
like is important for them.
    Regarding FATF, do you envision that the TTUs could be or 
should be incorporated as the recommendations with FATF?
    Ms. Calvery. Wow. I haven't been privy to much of this 
discussion of whether TTUs are going to be incorporated into 
FATF, so I just don't know the answer to that question.
    Mr. Pittenger. From your experience of 20 years, do you 
feel like that is a valid option that we should be looking at?
    Ms. Calvery. I think it is worth continuing to explore 
information sharing in all its forms. I do know the FATF is 
very focused on that. They are interested not just in how our 
FIU is sharing with one another, but how also is law 
enforcement doing that? And I would put it under that kind of 
rubric. So I wouldn't be surprised, with some of the efforts 
that they have ongoing to look at that issue, whether TTU isn't 
a part of it or whether it couldn't be a part of it.
    Mr. Pittenger. Ms. Shasky Calvery, how many members are 
there in Egmont?
    Ms. Calvery. I believe it is 151.
    Mr. Pittenger. 151.
    And, Mr. McDonald, the OTAs, how many countries do we serve 
or work with?
    Mr. McDonald. In the economic crimes area, we work in 15 
countries.
    Mr. Pittenger. Fifteen countries?
    Mr. McDonald. Fifteen, one-five.
    Mr. Pittenger. One-five. What do you say would be the ideal 
number to get a complete--the best communication, establish 
relationships, the best collaboration, the best impact? What 
number would you like to see our working relationship with in 
terms of countries?
    Mr. McDonald. We did an exercise along those lines 
internally once, and we kind of thought, setting aside all 
financial considerations, what would be our dream--
    Mr. Pittenger. Yes, sir, that is what I want to hear.
    Mr. McDonald. --footprint for the whole program. And we are 
at, overall, about 50 countries for the whole program, 15 in 
the economic crimes area. Ultimately, we did not come down to a 
specific number. And the reason is it really doesn't matter if 
you are not in a country that is determined to use your 
assistance well. And it is very difficult to know that ahead of 
time. We do our best to do good assessments.
    I would say, look, if I had to pull a number out of my back 
pocket here, we certainly see an increasing number of demands, 
requests for our technical assistance on AML/CFT matters, 
whether it is because Central American or other countries know 
that criminality in their own countries is a great threat to 
them, and so they want to do more to reduce the financing of 
that, or because they see banks picking up and decamping. So we 
have their attention.
    Mr. Pittenger. Excuse me. How many cooperating countries 
would you say that there are out there? You stated that, 
clearly, there are those who would be difficult and a challenge 
to work with. But what is the universe of those whom you 
believe would be willing to cooperate with us?
    Mr. McDonald. I could easily see us working with 20 to 25 
countries in the AML/CFT area. But that is based on what we 
know now about emerging needs.
    Mr. Pittenger. What is the distinction, please clarify for 
me, Ms. Shasky Calvery and Mr. McDonald, the 150 members, FIUs, 
members of Egmont, and the more limited numbers of countries 
that are engaged with us with OTA?
    Mr. McDonald. Well, OTA--Egmont includes member countries 
from the entire globe.
    Mr. Pittenger. I understand.
    Mr. McDonald. We are authorized by statute to work in 
developing countries and transitional countries. The 
``transitional country'' term goes back to when we were 
created, the former Soviet Union, and so on transitioning. So 
we are only a subset of the total membership potential of 
Egmont.
    Mr. Pittenger. I got that. Would you say that your major 
impediment then is financing? Is it resources on your part? Is 
it talented people that we could send in, attaches?
    Mr. McDonald. We would definitely benefit from additional 
resources in terms of financing to support our technical 
advisory work in terms of attache presence. But I would also--
so the answer to that is yes; that is an impediment that we 
would benefit from more resources. But we have to be judicious 
in how we use those resources and to focus it on those 
countries where we think we are going to be able to get 
something done.
    Mr. Pittenger. You mentioned one cooperating country, that 
they had a computer and a chair in a room. That was--
    Mr. McDonald. Liberia.
    Mr. Pittenger. How do we support them financially? What are 
the entities that would participate? Is it us or our State 
Department, the World Bank, IMF?
    Mr. McDonald. In a place like Liberia, where there is 
pretty much everything to be done, we would focus our efforts 
on just getting the financial intelligence unit functioning in 
a basic way. We would reach out to the World Bank, possibly 
USAID, to see if they could finance the acquisition of basic 
information technology, basic stuff that would allow banks to 
report suspicious transactions electronically rather than on 
written pieces of paper. We might reach out to other bilateral 
providers--the U.K. is active in this area--to see if they 
could complement our work. So, in a country like Liberia, where 
there is everything to be done, we would be reaching out to a 
number of different parties.
    Mr. Pittenger. Thank you.
    I appreciate both of you.
    Ms. Shasky Calvery, I look forward to continued dialogue 
with you in the private sector.
    Ms. Calvery. Thank you.
    Mr. Pittenger. And, Mr. McDonald, in your position now, I 
look forward to more dialogue. Thank you.
    Mr. McDonald. Thank you very much.
    Chairman Fitzpatrick. I would like to thank our witnesses 
again for their time and their testimony to the task force here 
today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    With that, the task force is adjourned.
    [Whereupon, at 12:14 p.m., the hearing was adjourned.]

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                              May 24, 2016
                              
                              
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