[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE TRAFFICKERS' ROADMAP: HOW BAD.
ACTORS EXPLOIT FINANCIAL SYSTEMS.
TO FACILITATE THE ILLICIT TRADE IN.
PEOPLE, ANIMALS, DRUGS, AND WEAPONS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON NATIONAL SECURITY,
INTERNATIONAL DEVELOPMENT AND
MONETARY POLICY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
MARCH 4, 2020
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-88
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
42-863 PDF WASHINGTON : 2021
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California ANN WAGNER, Missouri
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
DENNY HECK, Washington TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee
KATIE PORTER, California TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin
BEN McADAMS, Utah LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on National Security, International
Development and Monetary Policy
EMANUEL CLEAVER, Missouri, Chairman
ED PERLMUTTER, Colorado FRENCH HILL, Arkansas, Ranking
JIM A. HIMES, Connecticut Member
DENNY HECK, Washington FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California ROGER WILLIAMS, Texas
JUAN VARGAS, California TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey ANTHONY GONZALEZ, Ohio
MICHAEL SAN NICOLAS, Guam JOHN ROSE, Tennessee
BEN McADAMS, Utah DENVER RIGGLEMAN, Virginia, Vice
JENNIFER WEXTON, Virginia Ranking Member
STEPHEN F. LYNCH, Massachusetts WILLIAM TIMMONS, South Carolina
TULSI GABBARD, Hawaii VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
C O N T E N T S
----------
Page
Hearing held on:
March 4, 2020................................................ 1
Appendix:
March 4, 2020................................................ 41
WITNESSES
Wednesday, March 4, 2020
Adkins, Travis L., Lecturer, African & Security Studies, Walsh
School of Foreign Service, Georgetown University............... 6
Kassenova, Togzhan, Senior Fellow, Project on International
Security, Commerce, and Economic Statecraft (PISCES), Center
for Policy Research, Suny-Albany............................... 8
Peters, Gretchen, Executive Director, Center on Illicit Networks
and Transnational Organized Crime (CINTOC), and Chair, Alliance
to Counter Crime Online (ACCO)................................. 10
Realuyo, Celina B., Adjunct Professor, The George Washington
University Elliott School of International Affairs............. 5
Swift, Angel Nguyen, Founder and Director, STAT (Stand Together
Against Trafficking), and Advisor, Enigma Technologies......... 12
APPENDIX
Prepared statements:
Adkins, Travis L............................................. 42
Kassenova, Togzhan........................................... 51
Peters, Gretchen............................................. 63
Realuyo, Celina B............................................ 80
Swift, Angel Nguyen.......................................... 97
THE TRAFFICKERS' ROADMAP: HOW BAD
ACTORS EXPLOIT FINANCIAL SYSTEMS
TO FACILITATE THE ILLICIT TRADE IN
PEOPLE, ANIMALS, DRUGS, AND WEAPONS
----------
Wednesday, March 4, 2020
U.S. House of Representatives,
Subcommittee on National Security,
International Development
and Monetary Policy
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:02 a.m., in
room 2128, Rayburn House Office Building, Hon. Emanuel Cleaver
[chairman of the subcommittee] presiding.
Members present: Representatives Cleaver, Perlmutter,
Sherman, Vargas, Gottheimer, McAdams, Garcia of Illinois; Hill,
Lucas, Williams, Emmer, Gonzalez of Ohio, Rose, Riggleman,
Timmons, and Taylor.
Ex officio present: Representative McHenry.
Also present: Representatives Gonzalez of Texas and
Pressley.
Chairman Cleaver. The Subcommittee on National Security,
International Development and Monetary Policy will come to
order. Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time. Also, without
objection, members of the full Financial Services Committee who
are not members of this subcommittee are authorized to
participate in today's hearing.
Today's hearing is entitled, ``The Trafficker's Roadmap:
How Bad Actors Exploit Financial Systems to Facilitate the
Illicit Trade in People, Animals, Drugs, and Weapons.
I now recognize myself for 5 minutes to give an opening
statement.
My district is the hometown of former President Harry
Truman. He lived in Independence, Missouri, which is sort of a
suburb of Kansas City, Missouri. It is also the site of the
Harry S. Truman Presidential Library, and the home of many,
many hardworking middle-class Americans.
In November of last year, a Federal raid involving
Independence, Missouri, police officers resulted in the arrest
of 21 individuals in a human trafficking sting operation. The
arrest reminds me that the scourge of trafficking is all around
us. My home State of Missouri ranks 16th in the country for
human trafficking cases, with 114 cases reported just last
year.
Our country is among the top three origin points for this
wicked scheme and system. Today, 24.9 million people worldwide
are victims of human trafficking. This reality grips our heart
and grabs our attention. However, it is a slice of a much
broader and invidious structure. Trafficking in all forms--
drugs, animals, weapons, humans, whatever--is a mechanism to
move and clean dirty money. It allows for criminal systems to
flourish, from ISIS fighters who have looted World Heritage
sites and sold ancient artifacts to bankroll their war machine,
to those who sell counterfeit medication to desperate and
ailing people.
Trafficking is an enormous financial enterprise, amounting
to somewhere between $1.6 trillion and $2.2 trillion. The
Department of the Treasury's 2020 National Strategy for
Combating Terrorists and Other Illicit Financing highlights
that, ``the same strength that makes the United States an
attractive destination for legitimate investment--a large
economy; and an open business climate for investment and
financial services--also can attract criminals and other
illicit actors seeking to hide or disguise their ill-gotten
gains or fund their dangerous plots.''
This illicit system knows no race, creed, nor party
affiliation. It unifies us as a potential victim, and today
unites us in opposition to this common threat.
It is for this reason that I am excited, under the
leadership of Full Committee Chairwoman Waters, to join with
Subcommittee Ranking Member Hill in launching this initiative
to directly confront trafficking in all forms. This hearing
will be the first in a series aimed at examining curtailing
trafficking at its roots. As many of my colleagues will agree,
we have done a lot of legislative nipping at the fringes of
this problem. It is now time for us to strike at its core.
This hearing will lay the framework for this conversation,
and hopefully will provide our committee with insight and
future direction. As we start this dialogue, it is important to
engage from a frame of common understanding. We know that there
is cross-cutting and collaboration across trafficking networks
within our system. There is a convergence in human trafficking
and drug trafficking roots as well as the weapons of mass
destruction (WMD) trafficking and narcotics trafficking
networks.
There are common mechanisms and vulnerabilities that
trafficking facilitators are exploiting within our financial
system to enable their illicit activities. We also know that
the crime of trafficking, itself, is evolving. This past
January, a joint investigation involving the United States,
Germany, the Netherlands, Northern Ireland, and the United
Kingdom helped take down a website which the Justice Department
says sold billions of stolen usernames, passwords, and other
data. One credit union in my district notes that 20 percent of
their cards were affected by data breaches in 2019. And CNBC
reported that hackers may have accessed over $8 billion in
consumer records in 2019.
So, I am eager to start this conversation and hear from you
all about these issues as well as the legislative issues before
us today, championed by my colleague, Mr. Foster, and
Congressman McAdams. I look forward to hearing from all of you.
I now recognize the ranking member of the subcommittee, Mr.
Hill, for 4 minutes for an opening statement.
Mr. Hill. Thank you, Mr. Chairman, for convening this
hearing. And I thank our witnesses for participating today.
This is indeed a topic that we care about deeply on both sides
of this dais. I appreciate Chairwoman Waters caring about it
and helping lead this human trafficking initiative within our
committee.
Similar to our last subcommittee hearing, in the 5 years
that I have been working on illicit finance issues, I don't
remember analyzing it from the point of view of trafficking, so
I look forward to an interesting dialogue and learning ways to
mitigate these threats.
In my home State of Arkansas, drug trafficking continues to
be a heightened concern. I have heard stories from many
heartbroken Arkansans detailing the opioid crisis that has
claimed the lives of their young ones. We cannot allow more
families to be destroyed by the opioid crisis, which is killing
more than 130 Americans a day.
Overdoses are rising across Arkansas and fentanyl continues
to be a growing threat in our communities. That is why I am
proud to lead H.R. 2483, the Fentanyl Sanctions Act, with my
friend, Congressman Rose of New York, which is the first-ever
fentanyl sanctions effort in the House. The legislation would
apply pressure on the Chinese government to honor their
commitment to make fentanyl illegal, and provide the United
States with more tools and resources to go after illicit
traffickers in China, Mexico, and other countries.
A couple of years ago, I had the pleasure of meeting
Vanessa Neumann, a Venezuelan-American diplomat who now
consults on ways to dismantle illicit finance. Her 2017 book,
``Blood Profits: How American Consumers Unwittingly Fund
Terrorists,'' details a variety of ways that the $400 billion
counterfeiting industry is funding terrorism around the world.
She outlines that 11 percent of the approximately 5.7
trillion cigarettes smoked every year are illicitly traded. The
illicit tobacco trade is larger than the illicit trade of oil,
wildlife, timber, arts and cultural property, and blood
diamonds, combined. Furthermore, the funding of tobacco
trafficking often comes from developed economies, including the
United States. To that end, I am disappointed that we were not
able to have a tobacco trafficking witness here today for the
panel. I understand that this industry can often be politically
charged in nature and can take away from the larger discussion.
However, it would have been valuable to learn just how
persistent tobacco trafficking is financed and how it is
benefitting terror organizations.
Today, I am also interested in learning more about the
financing of trafficking and how and when the lines between
terror financing and trafficking financing become blurred. As I
understand it, following the aftermath of the 9/11 attacks,
President Bush invoked an Executive Order which has made it
more difficult for terrorist groups to access their funding. As
a result, global terrorism has merged with organized crime to
create financing workarounds. These intertwined transnational
relationships are complex and very adaptive.
And with that, let me yield the balance of my time to my
friend from North Carolina, the ranking member of the Full
Committee, Mr. McHenry.
Mr. McHenry. I thank the ranking member for yielding, and I
thank the panel for being here. This is quite a challenging
issue for us to tackle. This committee has the capacity, and
has the jurisdiction to limit, inhibit, impair, and delay the
ability of traffickers to fund themselves. So we are looking
for ideas to meet this challenge, and there is consensus on
both sides of the aisle that we have to do something. We have
to take action.
So I am grateful that we have a bipartisan panel and a
bipartisan hearing, and I thank Chairman Cleaver for convening
this hearing, and I look forward to the testimony.
Chairman Cleaver. Thank you. Today, we welcome the
testimony of five witnesses. Our first witness today is Dr.
Togzhan Kassenova. Thank you for being here. Dr. Kassenova is a
Senior Fellow with the Project on International Security,
Commerce, and Economic Statecraft at the Center for Policy
Research, SUNY-Albany; a Senior Nonresident Scholar at the
Institute of International Science and Technology Policy at the
Elliott School; and a Nonresident Fellow at the Nuclear Policy
Conference at the Carnegie Endowment for International Peace
from 2011 to 2015. She has served on the United Nations
Secretary-General Advisory Board on Disarmament Matters.
Our second witness, Mr. Adkins, has nearly 20 years of
experience working with vulnerable populations in over 50
nations across Africa, the Middle East, and Latin America. He
has held leadership positions at the National Democratic
Institute; InterAction; and the Subcommittee on Africa, Global
Health, Human Rights and International Organizations, among
others. He is currently a Lecturer on U.S. Policy, and African
and Security Studies at Georgetown University.
Our third witness is Celina B. Realuyo. Thank you for being
here. She is Professor of Practice at the William J. Perry
Center for Hemispheric Defense Studies at the National Defense
University, where she focuses on U.S. national security,
illicit networks, transnational organized crime,
counterterrorism, and threat finance issues in the Americas. As
a former U.S. diplomat, an international banker with Goldman
Sachs, a U.S. counter-terrorism official, and a Professor of
International Security Affairs at the National Defense
Georgetown, George Washington, and Joint Special Operations
Universities, Professor Realuyo has over 2 decades of
international experience in the public, private, and academic
sectors.
Our fourth witness is Gretchen Peters, an authority on the
intersection of crime and terrorism, money laundering, and
transnational crime. She is Executive Director of the Center on
Illicit Networks and Transnational Organized Crime. She chairs
the Alliance to Counter Crime Online. She serves on the
Advisory Board of the Center on Economic and Financial Power,
and previously co-chaired an OECD Task Force on Wildlife and
Environmental Crime.
Our final witness is Angel Nguyen Swift, who is an Advisor
and Independent Consultant with Enigma Technologies, a data
intelligence company, where she most recently worked as the
Vice President of Compliance and Financial Crime Solutions. She
is also the creator of the Stand Together Against Trafficking
(STAT) project, which connects the anti-human-trafficking
community to identify and share financial indicators of human
trafficking activity. To further this mission, she has
partnered with Polaris, the Association of Certified Anti-Money
Laundering Specialists, and Enigma to leverage technology to
empower the sharing of these financial indicators across the
anti-financial-crime community.
Thank you all for being here. Witnesses are reminded that
your oral testimony will be limited to 5 minutes. And without
objection, your written statements will be made a part of the
record.
We will begin with you, Ms. Realuyo. You have 5 minutes.
STATEMENT OF CELINA B. REALUYO, ADJUNCT PROFESSOR, THE GEORGE
WASHINGTON UNIVERSITY ELLIOTT SCHOOL OF INTERNATIONAL AFFAIRS
Ms. Realuyo. Thank you, Chairman Cleaver, Ranking Member
Hill, and members of the House Financial Services Subcommittee
on National Security, International Development and Monetary
Policy for this opportunity to appear before you today to
testify on the threat posed by global illicit networks to U.S.
national security.
Illicit networks include terrorists, criminals, rogue
states, and their facilitators. They engage in a diverse set of
activities including human, drug, and arms trafficking;
kidnapping; extortion; and money laundering. These nefarious
networks share land, air, maritime, and cyber domains, tactics,
and financial facilitators around the world.
While the crimes they commit are not new, globalization has
supercharged criminality in terms of scale, geography, income,
and sadly, the violence that accompanies it. From unprecedented
drug overdose deaths here in the United States to record
cocaine production in Colombia, and the dramatic humanitarian
crisis in Venezuela, global illicit networks are threatening
the prosperity and security of the Western hemisphere.
In Venezuela, external actors like Cuba, Russia, China,
Iran, Hezbollah, Turkey, and Colombian armed groups, along with
the illegal gold, oil, and narcotics trade, are sustaining
Nicolas Maduro's authoritarian regime, whose tyranny and
economic malpractice has led to over 5 million Venezuelans
fleeing their country.
Meanwhile, Mexican cartels capitalize on Mexico's proximity
to the U.S. as a destination country for migrants and for
illegal drugs. The cartels operate like corporations, assessing
market supply and demand, securing supply chains, and financing
their operations. They engage in all types of trafficking,
including drugs, migrants, guns, gasoline, and even avocados.
Just as they diversify their criminal activities, they launder
their proceeds through banks, money services businesses, bulk
cash smuggling, trade-based money laundering, front companies,
and in cyberspace.
Sadly, a culture of corruption, impunity and weak
government institutions enables these Mexican cartels. They are
extremely well-armed and use violence to empower themselves,
resulting in a record 35,588 homicides in Mexico in 2019. They
continue to control lucrative smuggling corridors across our
southwest border and partner with Colombian traffickers,
Central American gangs, and international facilitators.
Despite the extradition of the notorious leader of the
Sinaloa cartel, El Chapo Guzman, Sinaloa remains powerful and
has gone global, distributing drugs to over 50 countries as far
away as Australia, and engaging with Russian arms dealers and
Chinese money launderers to support its operations.
The Mexican cartels are actually fueling our opioid
epidemic in our country. Illicit fentanyl, 50 times more potent
than heroin, is smuggled into the U.S. directly through the
Postal Service from China, but increasingly across our southern
border. Orders and purchases from China are brokered online,
and financed through a variety of mechanisms, including online
payment processors and virtual currencies.
The marketplace for narcotics like heroin, fentanyl, and,
increasingly, methamphetamines, has expanded with the use of
technology and the darknet that provides efficiency, ease of
payment, anonymity, and convenient delivery by mail. This
online evolution is truly disrupting the traditional marketing
and distribution aspects of narcotics trafficking.
So you might ask, what are we doing to counter the Mexican
cartels and address the opioid epidemic? The U.S. and Mexico
continue to strengthen their close cooperation to reduce
demand, interdict drug flows, cut off the funding, and
dismantle these cartels. Since the start of the Merida
Initiative in 2008, the U.S. has helped Mexico more effectively
eradicate poppy, detect labs, follow the money, prosecute drug
traffickers, and enhance border security.
Cartel violence in Mexico made world headlines last
October, when Mexican Security Forces, overpowered by the
Sinaloa cartel in a violent gun battle, were forced to release
one of El Chapo's sons who was wanted for drug trafficking in
the United States. Then in early November, criminal gangs
ambushed and killed nine U.S.-Mexican women and children from
the LeBaron family in Sonora, Mexico, sparking outrage on both
sides of the border.
To counter the cartels and the opioid epidemic and the
evolving drug trade, our two countries must continue to reduce
demand and supply, counter money laundering, and enhance our
cyber measures to monitor and, more importantly, fight the
scourge of how these illicit networks are financing themselves.
Both countries need to keep up with the rapid changes in the
production, marketing, financing, and delivery of narcotics,
particularly synthetics that are threatening the security and
prosperity of our region.
Thank you for your attention, and I look forward to your
questions.
[The prepared statement of Ms. Realuyo can be found on page
80 of the appendix.]
Chairman Cleaver. Thank you very much. Mr. Adkins, you are
now recognized for 5 minutes.
STATEMENT OF TRAVIS L. ADKINS, LECTURER, AFRICAN & SECURITY
STUDIES, WALSH SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY
Mr. Adkins. Chairman Cleaver, Ranking Member Hill, and
members of the subcommittee, thank you so much for the honor of
inviting me to testify today. I would like to begin with a note
of sincere thanks for your leadership and elevation of the
critical issues related to illicit trafficking and the ways in
which it devastates individual lives, families, and
communities, as well as the environment and national and global
security.
I want to congratulate you all and thank you for launching
the bipartisan Counter-Trafficking Initiative. This is exactly
the kind of high-level and comprehensive effort needed to
advance our legislative and law-enforcement capacities, as well
as our efforts at transnational cooperation, providing us with
the data, oversight, and information-sharing capacity to close
the gaps in operational agility that we have in comparison to
bad actors and illicit traffickers.
Over the course of today's hearing, we will hear much in
the way of data and statistics, outlining the scope and scale
of illicit flows. My hope is that the quantitative data will
always be wed to the qualitative nightmare of the human beings
caught in the web of trafficking in persons. This global
phenomenon has destructive and far-reaching social, economic,
and political implications for individuals and governments at
the local, national, regional, and international levels. Though
there is some variance by subregion in the form of
exploitation, women and girls are the primary targets of human
trafficking worldwide. While the exploitation of trafficked
human beings takes place in a variety of forms, the two most
prevalent are sexual exploitation and forced labor.
In terms of recent trends in the flows and movement of
trafficked people, while human trafficking is a global and
transnational challenge, the overwhelming majority of those
detected are still within their countries of origin, not in
foreign destination countries. Trend lines also make it clear
that the international movements of trafficked persons is
overwhelmingly from more impoverished regions into wealthier
and more affluent countries in the world.
Since the almost universal ratification of the United
Nations' Trafficking in Persons Protocol in 2003, there has
been a surge in nations creating legislative schemes to
criminalize human trafficking worldwide. This surge coincides
with the increased reports of the detection of trafficking
victims over the past several years. While this could indicate
an increase in the number of trafficked persons, it is likely
to also indicate the national capacity improvement of nations
for data collection, trafficking, and detection of human
trafficked individuals, and that they have improved.
While the subregions of sub-Saharan Africa and North Africa
and the Middle East have seen improvements as well, they lag
behind in detection and convictions, making them regions of
relative impunity for human traffickers.
While human trafficking and its convergence with other
forms of illicit trade are justifiably viewed as security
threats in their utility to finance transnational criminal
organizations and terrorist groups, these threats are also
rooted in the deep development challenges posed by weak and
ineffectual states, including poor governance, official
corruption, extreme poverty, regional instability, unresolved
conflict, and excessive disease burdens, issues which place
African populations at greater risk for the abuse,
exploitation, and trauma of human trafficking.
The illicit market for trafficking in persons has been
linked to multiple crimes which enrich transnational criminal
organizations and terrorist groups, including kidnapping,
fraud, rape, commercial sex work, and the breaking of
immigration and border laws, as well as money laundering and
tax evasion. Trafficking in persons both converges with and
helps to sustain transnational criminal organizations as well
as terrorist organizations.
I will close by saying that to get to the heart of this
challenge, we certainly must address the methods, tactics, and
the financing mechanisms of criminal organizations, but also
the enabling environments that support their existence and
growth.
Thank you.
[The prepared statement of Mr. Adkins can be found on page
42 of the appendix.]
Chairman Cleaver. Thank you, Mr. Adkins. Dr. Kassenova, you
have 5 minutes.
STATEMENT OF TOGZHAN KASSENOVA, SENIOR FELLOW, PROJECT ON
INTERNATIONAL SECURITY, COMMERCE, AND ECONOMIC STATECRAFT
(PISCES), CENTER FOR POLICY RESEARCH, SUNY-ALBANY
Ms. Kassenova. Chairman Cleaver, Ranking Member Hill, and
distinguished members of the subcommittee, thank you for the
opportunity to contribute to this hearing.
If a 10-kiloton nuclear bomb, like the one that North Korea
tested, is dropped on Washington, D.C., a fireball of almost
500 feet in radius will cover the City. Within a half-mile
radius, up to 90 percent of people could die without medical
help, some of them within hours.
Stealing or buying a ready-made weapon is a next-to-
impossible feat. The main path to a bomb is to procure
components on the international market and then build a weapon.
Proliferators buy good-quality goods from American, European,
and Asian suppliers. This means they pay for these goods
through the formal financial system, making financial
institutions part of their proliferation schemes.
Financial institutions struggle with identifying
transactions related to procurement, fundraising, and movement
of money for illicit WMD programs. They do not have technical
expertise on which goods are sensitive. They lack information
on who will use these goods and for what purpose. The sanctions
related software returns a high number of false positives,
while such lists contain names of known proliferators and are
not used for catching new bad actors or identifying those who
hide under false identities.
Proliferators extensively use shell and front companies.
They also abuse correspondent accounts, and that is the main
vulnerability to the U.S. financial system. At the same time,
financial institutions can be important players in the fight
against proliferation, but to do that they need to improve
their capacity for detection, and there are some simple steps
that they can take.
For example, they can request more detailed information on
the type of business from customers as part of service
suitability for high-risk products like trade finance or wires.
They can better scrutinize phone numbers and addresses. It is
common for front and shell companies associated with WMD
procurement to share managers' addresses and phone numbers.
They can adopt new tech solutions to monitor and trade finance
instead of a manual review of trade documentation. This can
involve, for example, blockchain-based trade finance platforms.
They can also incorporate tailored geographical factors into
transaction monitoring. We know, for example, that many front
companies working on behalf of North Korea reside in specific
municipalities in China.
Similar to money launderers, proliferators favor formal
financial systems and rely on shell and front companies to
avoid detection. But there are also important differences.
Transactions related to WMD procurement look like legitimate
commercial activity, and in addition to individuals' entities
and transactions, the recent emphasis on goods on which
financial institutions do not have expertise.
Despite the differences, it is worth approaching various
kinds of illicit financing holistically. We know that
proliferation agents engage in other types of financial crime.
The most notorious case is North Korea. It fundraises, moves
the funds, launders money, and pays for its WMD program via a
global financial system. In some cases, proliferation financing
was uncovered because of suspicious indicators related to money
laundering.
As far as public-private partnerships are concerned,
creating opportunities for all relevant actors to share
information can help uncover such networks. For example, export
control authorities have expertise on dual use and military
goods and information on export license approvals and denials,
as well as blacklists of violators. Customs and border security
agencies have information on the movement of sensitive goods.
This information can be extremely helpful to financial
institutions. While financial institutions are constrained in
terms of disclosing proprietary information, they can share
their insights on the patterns that they see of suspicious
financial flows, and these can detect proliferators as well as
add to our understanding of how these networks operate and how
they finance their activities.
Existing public-private partnerships, such as the FinCEN
Exchange, or the Joint Money Laundering Intelligence Task Force
(JMLIT) in the UK, and others are a great start. Going forward,
it is worth considering how to involve small and medium-sized
banks into such partnerships.
Finally, academic institutions, NGOs, and think tanks are
becoming increasing indispensable in confronting proliferation
financing by contributing to research and capacity-building
efforts, and they should be recognized as important actors and
utilized fully as an available resource.
Thank you.
[The prepared statement of Dr. Kassenova can be found on
page 51 of the appendix.]
Chairman Cleaver. Thank you very much. Ms. Peters, you are
now recognized for 5 minutes.
STATEMENT OF GRETCHEN PETERS, EXECUTIVE DIRECTOR, CENTER ON
ILLICIT NETWORKS AND TRANSNATIONAL ORGANIZED CRIME (CINTOC),
AND CHAIR, ALLIANCE TO COUNTER CRIME ONLINE (ACCO)
Ms. Peters. Chairman Cleaver, Ranking Member Hill, and
distinguished members of the subcommittee, thank you for giving
me an opportunity to testify today. I also want to thank my
daughter, Isabella, who came with me.
I am the Executive Director of the Center on Illicit
Networks and Transnational Organized Crime, and I also co-
founded the Alliance to Counter Crime Online. I have a long
history of tracking organized crime and terrorism. I was a war
reporter in Afghanistan and Pakistan, and I authored a book
about the Taliban and the drug trade, which got me recruited by
the U.S. military to support our intelligence community. I
mapped transnational illicit networks for Special Operations
Command, the DEA, and CENTCOM, and I still provide training to
the intelligence community.
In 2014 and 2015, I received grants from the State
Department and U.S. Fish and Wildlife to map wildlife supply
chains from Africa to Asia, running investigations in South
Africa, Kenya, Tanzania, Gabon, and Cameroon. These projects
illuminated two important trends: one, at the transnational
level, wildlife supply chains converged directly with other
serious organized crime, from drugs to human trafficking; and
two, an enormous amount of organized crime activity has moved
online. I am going to discuss that later.
Criminal supply chains look the same no matter what
commodity they move. I have submitted this graphic of what I
like to call the ``martini glass model.'' It breaks down the
criminal supply chain into three sectors: the production
sector, where raw materials are cultivated or produced; the
distribution sector, where goods are shipped transnationally;
and the retail sector, where goods are sold to consumers.
Both ends of the criminal supply chain, the production and
retail sectors, are characterized by having many actors who
earn lower profit margins. These might be the farmers growing
drug crops in Colombia or Afghanistan, or the guys selling dime
bags on street corners. They are the highly visible aspects of
the criminal activity and, therefore, they are the most
frequent targets of law enforcement. But they are
inconsequential to the operation of the supply chain and they
are easily replaced if arrested.
Controlling the supply chains are those in the middle of
it, in the stem of the martini glass, the distributors or
traffickers. They tend to finance the entire supply chain. They
have much higher profit margins and they are much harder to
replace when interdicted.
In 2017, I published an article called, ``The Curse of the
Shiny Object,'' which was submitted as part of my testimony
today. The shiny object curse happens when the visible or
attention-grabbing aspect of a problem or a crime distracts
from identifying and countering its core drivers. The shiny
object curse impacts crime policy. Think of the billions of
dollars the U.S. Government spent spraying drug crops in
Colombia and Mexico, or stop-and-frisk policies here at home.
Congress has also poured millions of dollars into anti-
poaching projects across Africa, aiming to stem a conservation
crisis that threatens rhinos and elephants and other iconic
species with extinction. But poachers, like drug farmers, are
inconsequential to the overall supply chain.
It is more efficient, and you are going to have more impact
to target the traffickers--if you break the stem of the martini
glass, you disrupt the supply chain for longer and you
disconnect the actors at either end. The martini stem is where
convergence occurs, since traffickers move multiple types of
illicit goods. Their skill set is to move shipments through the
global transport system, and money launderers clean those
illicit profits and they don't care if the money comes from
human trafficking, drugs, nuclear material; it is just money.
In 2016, when I was supporting DEA's Special Operations
Division, I had the opportunity to screen undercover recordings
of a major African trafficking network. The kingpin was
bragging to the undercovers about moving drugs, ivory, and
people, and he would say, ``We have a route through Mombasa. We
also have a route in and out of Dar es Salaam. We have a route
into Maputo.'' He wasn't talking about roads or runways. He was
talking about corrupt pathways.
Distinguished members of the subcommittee, U.S. law
enforcement is organized around what is in the box being
smuggled, but what we should be focusing on is disrupting the
corrupt systems and pathways that allow smuggling to occur.
Lastly, I would like to address the issue of online crime.
Just like commercial commerce and communications, a large
portion of illicit activity has shifted online, but the laws
governing the tech industry are out of date. Section 230 of the
Communications Decency Act (CDA) still grants expansive
immunity to tech firms for user-generated content, even when it
is criminal activity and even when the tech firms know it is.
Take the fentanyl crisis, which is now killing more than
60,000 Americans every year. It is well-known that Chinese
traffickers are marketing fentanyl-laced opioids through fake
pharmacies that are advertised on platforms, search engines,
and social media. Google and Facebook both host thousands of
these illegal pharmacies, and somehow that is still not against
the law.
Distinguished subcommittee members, I want to request your
support as a committee to support reform to CDA 230, to make
tech firms liable for hosting serious crime content, just like
the financial services industry is liable for hosting criminal
content. I have submitted amendments to both proposed bills,
the CONFRONT Act, and the Stopping Trafficking Act, to specify
the need for government research into how criminal networks are
exploiting cyberspace.
Thank you for focusing on this important issue.
[The prepared statement of Ms. Peters can be found on page
63 of the appendix.]
Chairman Cleaver. Thank you. Ms. Swift, you are recognized
now for 5 minutes.
STATEMENT OF ANGEL NGUYEN SWIFT, FOUNDER AND DIRECTOR, STAT
(STAND TOGETHER AGAINST TRAFFICKING) AND ADVISOR, ENIGMA
TECHNOLOGIES
Ms. Nguyen Swift. Thank you. Chairman Cleaver, Ranking
Member Hill, and members of the subcommittee, I am honored to
appear before you today to discuss an issue that is so
incredibly important to the fabric of who we are as a society,
and that is ripe for meaningful solutions and progress.
I have been very fortunate to be a part of a passionate and
dedicated community of professionals who work tirelessly
protecting the financial system from illicit and nefarious
activity. The community I am referring to is the anti-money
laundering and counter financing of terrorism community, more
modernly known as the anti-financial-crime community. This
includes financial institutions, law enforcement, government
agencies, nonprofit organizations, and even now technology
companies.
For the past 18 years, I have seen criminal networks, time
and time again, exploit and abuse our financial systems. First,
as I joined the Manhattan District Attorney's Office as a
prosecutor on September 4, 2001; then, as I sat in the World
Financial Center, right across from ground zero, leading
efforts to build a financial intelligence unit at American
Express; and most recently, in my position at Enigma
Technologies, where I intimately learn how data and technology
can play a crucial role in our Anti-Money Laundering/Combating
the Financing of Terrorism (AML/CFT) ecosystem.
Due to these experiences, I am more convinced than ever
that the only way to successfully dismantle trafficking
organizations which so brazenly exploit multiple aspects of
humanity and environment and safety is through coordinated,
collaborative communities that build and share financial
intelligence. It is with this conviction that the Stand
Together Against Trafficking (STAT) initiative was created 3
years ago.
There are three main points I hope to convey in both my
oral and written testimony. One, financial intelligence and
evidence is crucial to secure successful prosecution of all
trafficking networks, and we need to help law enforcement
better understand the financial services system.
Two, financial institutions are well-positioned to assist
law enforcement in identifying strong investigative leads,
given that, as you have heard from the entire panel, even
though trafficking networks are different, they exhibit
overlapping financial indicators, and, in fact, there are many
proactive, ongoing efforts led by financial institutions to
identify these indicators.
Three, in order to truly step up progress, a more unified,
multi-dimensional collaborative ecosystem to share knowledge
must be established, ideally with support and coordination
through government agencies.
Financial intelligence allows law enforcement to secure
irrefutable evidence that defines business models of criminal
enterprises; affirms traffickers' motivations; alleviates
burdens for victims and eyewitnesses; assists in identifying
third-party facilitators like gatekeepers, attorneys,
accountants, and real estate professionals, all of whom we
should be holding more accountable; and allows law enforcement
to go after primary motivating factors for the business of
trafficking. It allows us to go after the profits. There needs
to be more focus on the financial investigations aspect of all
trafficking investigations.
Financial institutions are here to help. First, with the
AML regulations from the Know Your Customer program to CDD to
the requirement to monitor for and report suspicious activity,
financial institutions have a prime vantage point. However,
they are often operating with little actionable information.
They can see the data but they need to know what the data is
telling them. If given more context and/or reliable
information, financial institutions can integrate trafficking-
specific factors or lists into already existing risk
assessments and/or screening processes. They can develop
specific topology-driven criteria into their transaction
monitoring systems and programs. They can provide more targeted
information to law enforcement through the reporting of
suspicious activity reports (SARs), and potentially even
restrict or cut off access to the financial services to these
trafficking organizations.
So, how can we get financial institutions more information?
Simple: collaboration. There are many proactive efforts
underway today. However, these proactive efforts are often met
by people where time and resources are limited, often leading
to a lot of missed opportunities to explore and analyze how
they build upon all of these collaborations together.
It is with all these concepts in mind that STAT, Stand
Together Against Trafficking, was created. At the core of this
work is a platform that, with trusted partners from law
enforcement, nonprofits like Polaris, and financial
institutions like Truist, Ally, Western Union, and U.S. Bank,
we have come together to identify a methodology and a structure
to share all of this great knowledge that is available to the
industry today. While focusing first on human trafficking, we
know that the financial indicators across the networks share
the commonalities and therefore can be leveraged across all
areas of trafficking.
I have also submitted comments along the lines of the two
bills that are before the subcommittee today, and I urge the
subcommittee to consider involving every community that is
involved in the anti-trafficking space. I also urge the
committee to consider the framework around Presidential
Decision Directive 63, later updated by Homeland Security under
Presidential Decision Directive 7, which led to the creation of
the Financial Services Information Sharing and Analysis Center,
FS-ISAC, to focus on sharing targeted data intelligence to
reduce cyber risk in the global systems. I think that this can
be leveraged for addressing trafficking today. To disrupt and
dismantle a network, we must get ours together. Thank you.
[The prepared statement of Ms. Nguyen Swift can be found on
page 97 of the appendix.]
Chairman Cleaver. Thank you very much. I thank all of you
for your testimony. I now recognize myself for 5 minutes for
questions.
One of the concerns I have, that hopefully the panel can
help clear up, is the issue of whether or not trafficking
creates a national security threat. Is it a national security
issue, Dr. Kassenova?
Ms. Kassenova. It is both a national and international
security issue, without a doubt, because in my written
statement, I had more time to go into this, but basically, we
have the commercial market in which we obviously still use
components and technology and material, and this material is
available, and the raw export controls systems in place and
sanctions regimes, but those who illicitly procure WMD-related
items are still able to do it. And so, the financial sector is
among the most important actors in terms of trying to limit
this access. And if they continue to have access to these
components and continue to improve their WMD programs and
missile programs, unfortunately, we might have an event that
will absolutely show and prove to us that it is a major
national and international security threat.
Chairman Cleaver. Well, that is unsettling. That doesn't
make me feel very good. But one of the issues that we discover,
at least in my experience with this committee, is that when
there is a crisis, we discover that there has not been much
communication. In 2008, we found out that the Federal Reserve
was not communicating with Treasury and the FDIC. We hopefully
resolved that.
So is there the kind of communication and coordination that
you think contributes, or the lack thereof, to the growing
problem?
Ms. Kassenova. I think compared to some other
jurisdictions, the U.S. is actually above average in terms of
interagency communication, but it is still not where it could
be or should be. There is definitely space for improvement. And
right now what I see as external and not within the government
is that issues are siloed and information and data is siloed.
Those, for example, who work on export controls see one part of
the picture. Financial institutions see another part of the
picture.
We started having initiatives that are trying to bring
these different types of data together, but there is so much
more that can be done in terms of just stepping back and
looking at all of these issues in a more comprehensive,
holistic way. So, there's definitely space for improvement. And
it is an easy thing to do. To overcome bureaucracy maybe is not
that easy, but in practical terms, it is something that can be
done immediately.
Chairman Cleaver. Okay. Mr. Adkins and Ms. Peters, if you
were sitting up here with us and you became completely
convinced that we needed to do something, and we needed to do
something now, what would it be? What would you want to do if
you were sitting in one of these seats?
Mr. Adkins. The first thing I would say, Mr. Chairman, is
to fund an initiative that is very similar to what you have
done with the bipartisan counter-trafficking initiative, and I
think to speak a little bit to the last question, one of the
things that is, I think, misunderstood about many of the
transnational and terrorist organizations is the level of
connectedness, the level of sophistication, the level of
agility, and the level of communications that they have.
As Ms. Peters gave a beautiful anecdote about listening to
traffickers' communication and they are talking about all of
the different routes that they have, and the fact is that they
outstrip us in their ability to connect to one another, to
share data and information, to be able to track movements more
thoroughly. And so, in that instance where we fail, they thrive
in the gaps of the disconnections and the lack of information
that we have.
The other thing that I will say, which I think is somewhat
shared between the testimony of Ms. Peters and myself, is the
idea that we can go after trafficking networks all that we
want, but if we do not address and recognize and acknowledge
the things that sustain them, the things that give them oxygen,
the conditions that give them the space to operate, then we are
essentially trying to chuck water out of a boat with a hole in
it, and that is these ideas of poverty, instability, official
corruption, and conflict, which contribute greatly to the
conditions that make people fall victim to trafficking,
specifically in persons.
Chairman Cleaver. Thank you. I wish we had much more time
than we have, but my time is up.
I now recognize the gentleman from Arkansas, the ranking
member of the subcommittee, Mr. Hill.
Mr. Hill. Thank you, Mr. Chairman. And I want to thank the
panel for their excellent testimony. Thanks for being with us
today. I just got back from a trip to the desert in Arizona 2
weeks ago, and that was a keen description, Mr. Adkins, of
those gaps, even in our own country, where human trafficking
across the desert is significant. It is primarily a drug and
trafficking location across the Sonoran Desert between Nogales
and Lukeville, Arizona, and there you have gaps, because we are
just now putting up the kind of integrated towers that will
give us both the camera and radio transmission technology to
back up our Border Patrol there and other local law
enforcement. And they are really at a disadvantage to the
cartels who run a much more sophisticated communication
operation there on the border.
I wanted to ask Ms. Peters about this issue of hitting in
between the two martini glasses. There are a lot of people in
that mix, obviously the cartels, the transnational drug groups,
the people who have merged terrorism with traditional
smuggling, but the gatekeepers, let's talk a little bit about
that. We have SARs and the financial system and we really
monitor the banks. We make the banks our co-partners in this
effort.
But what are other ways in that gatekeeper arena to
interdict some of those trading routes--lawyers, notaries,
accountants, people who offer services in those countries? How
do we attack all of that, Ms. Peters?
Ms. Peters. If I can put it most simply, I think that the
strategy should be network-focused as opposed to commodity-
focused. I have seen operation after operation just focused on,
say, narcotics, or just focused on wildlife, or just focused on
human trafficking, in part because our agencies, our law
enforcement agencies are restricted by the authorities that
they have. And there has been some effort to get around that by
grouping agencies together, mainly out at the Special
Operations Division of DEA. But even there I have seen case
after case where a lot of data has been left on the table about
an organization's criminal activities, just because they don't
have the team working. It doesn't have the authorities.
You never see criminals get wrapping around the axle about
what it is that they will traffic in. If they are going to make
money off of it, they will do it. I think Hezbollah, for
example, which the U.S. Government has repeatedly targeted for
drug trafficking, makes more money off of the illegal timber
trade, and we don't touch them for that. They make a lot of
money off of trading diamonds. That is terrorist financing, and
we ought to be going after them for those things.
And so, I think if we can think about all of the different
illicit activities a network is involved in, and especially to
go after the financing of those activities, to be looking for
the money, taking the money away from them, those are the ways
that I would strengthen some of the operations--
Mr. Hill. I appreciate that. That is why I emphasized--and
we have talked about it for years--a fusion center operation
between our financial sector and our law enforcement sector,
reading those financial services people into it on a need-to-
know basis, to look for those patterns of these practices. This
is also why I raised the issue of cigarettes, which, because of
trade-based money laundering, just pass through our ports of
entry all day long, every day, undetected, because they are not
an illegal narcotic, and yet the money is used to finance
transnational crime.
You also raised about the dark web, and of course, I want
to thank the Trump Administration and leadership in Congress
both for shutting down Backpage and taking a number of
coordinated efforts to stop human trafficking in the worst
ways. But Ms. Realuyo, could you talk about what else we should
do to shut down the internet aspect of illicit trading?
Ms. Realuyo. What we are seeing is that these groups are
very innovative and they are actually much more adaptive than
our governments. And what is frightening is that we see also,
because of the clientele who tend to be younger and more
comfortable in the internet, we are seeing this explosion and
transformation and evolution of the drug trade from plant-
based, which used to be heroin, marijuana, and cocaine, over to
these synthetics, which are much more potent.
In your opening statement you talked about the opioid
epidemic, and what is even more frightening is we are seeing an
increase in the U.S., because methamphetamine is being now
marketed as the safer alternative to fentanyl, and they are
combined. And kind of supporting and by echoing the other
witnesses' testimony about how we should be looking at the
gatekeepers are the same. They are out to make money, and it
doesn't matter what they are trafficking in.
The other thing we see in the case of groups like the
Mexican cartels is they are physically controlling the supply
chain and the routes, whether that be migrants or actual drugs
that are passing through, or avocados to take advantage of the
Super Bowl.
Mr. Hill. Thank you very much.
Ms. Realuyo. These are the types of things we are seeing.
Mr. Hill. Thank you.
Chairman Cleaver. Thank you. I now recognize the gentleman
from Colorado, Mr. Perlmutter, for 5 minutes.
Mr. Perlmutter. Good morning, everybody. Thank you for your
testimony today. Some of you have testified here before, and I
just want to thank you for your continued vigilance in this
area.
I am going to switch gears. I want to start kind of in the
crypto areas with a general question to begin with, and this is
to anybody who wants to take it. Cash has long been king for
economics generally, but certainly within the trafficking
world. And as we move more to cryptocurrencies and the like,
have you seen that change?
Ms. Peters, let's start with you, and then Dr. Kassenova.
Ms. Peters. Thank you for that important question, and I
also wanted to address something that Ranking Member Hill said
in his commentary about the dark web. Criminals aren't in the
dark. They are operating in the dark web but they are using
surface web platforms as much as any dark web. That is where
the customers are. I don't know how to get on the dark web; I
don't know about any of you. If you want to sell drugs to
people or you want to sell sex or ivory, it is on Facebook. It
is on Instagram. These platforms provide the same anonymities
as the dark web and a far greater reach of customers.
With regards to your question about crypto, we haven't seen
evidence that major criminal organizations have moved
institutionally into blockchain currency. In fact, they seem to
be as concerned about the risk and the instability of
cryptocurrencies as regular consumers are.
That being said, there is an increase, and particularly in
Europe it is being tracked, but what I see looking at money
laundering all the time, is that criminals still want to get
their money into the U.S. dollar or the euro. They want to be
in major currencies.
Mr. Perlmutter. Okay. Dr. Kassenova, did you have a
comment?
Ms. Kassenova. Yes. The cyber domain and crypto domain is
what we see as an emergent threat and a threat that we do not
understand fully yet. I will just give you an example of North
Korea. They have been extremely successful with cyber attacks
on financial institutions. For transferring money from banks,
for example, they also attack cryptocurrency exchanges. And so
on crypto, for example, they not only mine cryptocurrency, they
also steal it, both from exchanges but also from other users,
and then they engage in those layers of multiple online
transactions so that the tail of it is completely lost, and it
is extremely difficult to track what they use this money for.
And then eventually, we know that for North Korea, their
WMD program is one of their most important national projects.
So for sure, some of that money is being used for proliferation
activity. And just to give you a data point, it is believed
that North Korea illegally obtained up to $2 billion U.S.
dollars through cyber activities.
Mr. Perlmutter. Okay. So let me follow up with that, and
again, to the entire panel, North Korea, Iran, Russia maybe,
can you all discuss the role on corruption in foreign
governments and how it may or may not affect our efforts to
stem this international trafficking?
Mr. Adkins, why don't you take a shot at that?
Mr. Adkins. Sure. I think that it is at the heart of this
trafficking piece. And so what I have submitted in my written
testimony is the notion that trafficking is, in fact, a symptom
and a driver of official corruption. And one of the things that
folks who traffic in persons are doing is, yes, they are
criminals, but they are also doing bribes and kickbacks to
political officials, to border control and law enforcement
agents, and essentially utilizing the networks that are
supposed to defend against them as part of their efforts to
make the kinds of illicit trade that we do see. And in many
governments, of course, there is this idea of actual
complicitness from the very senior levels of the government on
down, in having certain countries be transit points. And I
think that is one of the reasons that we see specific countries
at the top of the list for efforts like this.
Mr. Perlmutter. So in your vernacular up there, these
countries would be, in effect, big facilitators.
Mr. Adkins. Absolutely.
Mr. Perlmutter. Okay. I yield back to the Chair. Thank you.
Chairman Cleaver. Thank you. The ranking member of the Full
Committee, the gentleman from North Carolina, Mr. McHenry, is
now recognized.
Mr. McHenry. Thank you, Mr. Chairman. Ms. Peters, I want to
start with you. Give me the contours of this. In terms of
trafficking, for us as American policymakers, how many people
are we talking about, who are directly involved, who have the
logistical capacity for the larger-scale movement of people and
products for illicit trade?
Ms. Peters. Well, I am not sure I could give you a number
globally for that but it is a much smaller number than, say,
the farmers growing drugs or the people selling drugs on the
streets. I can give you examples of a number of networks that I
have worked on. It has been a handful of people at the top. I
am talking about a dozen or less, including their financial
operation.
Now what you will see is that a trafficking network will
often outsource aspects of its work. They might outsource the
money laundering to a fixer or organization; Mossack Fonseca is
a good example that was catering to a lot of illicit
organizations. But I have worked on a number of big projects
where there was a dozen or less, or just a few dozen people at
the top of the bureaucracy. But these are identifiable
bureaucracies. In every operation--
Mr. McHenry. Okay. So what are those vulnerabilities? You
have identifiable bureaucracies. What are some of those key
vulnerabilities that I need to understand?
Ms. Peters. The key vulnerabilities are the brokers who
have the capacity to move containers through the transnational
system. There are not a lot of people who have that capacity.
Mr. McHenry. So, policing the brokers. Okay.
Ms. Peters. Identifying who are the folks that have the
capacity to move illicit containers through transnationally.
There are not a lot of networks that have the capacity to do
that.
Mr. McHenry. Okay.
Ms. Peters. And then identifying the financial--the teams
within those big networks that are running the financial
aspects of it. If you can interdict them, it is often more
impactful to the overall operation of the network than simply
arresting or killing the kingpin.
Mr. McHenry. Okay. So tell me the most uninteresting
product that has been used to illicitly finance terrorism and
other activities that you have talked about.
Ms. Peters. The most uninteresting?
Mr. McHenry. Yes, uninteresting, because we hear ivory all
the time. But when you say timber, I think, well, this is not
the normal discussion we have as policymakers. We understand,
Ms. Realuyo, your explanation of the illicit drug trade. We
hear that a lot. We don't hear timber, though. So, why timber?
Ms. Peters. What you see is a phenomenon in places when
there has been a crackdown, say, on narcotics or ivory, that
criminals will diversify into another profit-making sector
where they perceive there to be lower risk. Africa has these
incredible forests of 1,500-year-old hardwoods that are in high
demand in China, where there are timber shortages and a lot of
demand for wooden furniture. So, the trunks of these trees will
sell for $150,000 each. That is a huge amount of money, and
nobody is really looking at it. So, we have seen a lot of
groups move into that.
Mr. McHenry. Okay. This is helpful. It is helpful to have
this in the conversation.
Ms. Realuyo, I mentioned that we hear a lot about the drug
trade, but when we hear fentanyl, we commonly think of China.
But we have an issue that you are an expert on in terms of what
is happening right now in Mexico. Can you walk us through the
contours of that? Because my district, like all of us here, has
been severely impacted by the opioid epidemic. We have five
deaths a day in North Carolina as a result of opioids. So if
you could speak to that, it would be quite helpful.
Ms. Realuyo. Sure. China continues to be the source country
of not just fentanyl but also other precursor chemicals that
fuel the other types of drugs that are coming to our shores.
What we are seeing, though, is the U.S. Postal Service has
really stepped up its detection and monitoring operations. As
Gretchen explained, these groups are adjusting. So what is
happening is they are diverting into the ports in Mexico where
the clashes among the cartels that are very violent lately are
starting to take place, and in Mexico there has been proof that
laboratories there are themselves now manufacturing fentanyl,
as well as methamphetamine.
Why the Mexican cartels are so important is that they are
actually now being used as the route, instead of through the
Postal Service. Almost every day you hear about news in
airports and Postal Service workers being much more aware of
what we are doing.
So we are seeing it in terms of awareness, detection, but
more importantly the nimbleness of these groups, and more
importantly, fentanyl and laced fentanyl products are actually
much more lucrative and much easier to make.
Mr. McHenry. So this means we have to have heightened
awareness for Customs, right?
Ms. Realuyo. Right.
Mr. McHenry. At our borders, to understand that Customs
agents, in their capacity, that their technological capacity is
supremely important when it comes to human trafficking and
trafficking of all kinds.
Ms. Realuyo. That is right, and we are trying to protect
both on the U.S. and Mexican side, those who are the first
responders and the law enforcement agents, because it is even
overwhelming our dogs that are doing detection.
Mr. McHenry. Thank you.
Chairman Cleaver. The gentleman from California, Mr.
Vargas, is recognized for 5 minutes.
Mr. Vargas. Thank you very much, Mr. Chairman, and Ranking
Member Hill for this hearing, and, of course, I thank the
witnesses. The number of people who are victims of human
trafficking really is staggering, the suffering we are seeing
in our own country, and I am from San Diego, so we certainly
have it there in large quantities, unfortunately. And the
suffering that happens around the world is, again, something
that is monstrous.
And I do think it is, as stated earlier, a national and
international security issue. Trafficking has the victims who
are directly abused but also the funding for terrorism and
other illicit crimes like drugs, that was spoken about.
And interestingly, and, Ms. Peters, you brought up the
issue of the tech companies, how they are involved in a sense,
not actively in that they want their technology to be used in
this way but it is being used in this way. I am from
California, and I was in the legislature there for some time,
and to be truthful we always protected the tech companies to
make sure that this new technology, this creed of industry that
we had could flourish because it was in its infancy, and we saw
the opportunities that it provided. And so, we haven't leaned
on it very hard. We haven't burdened it very hard, as we have
the banking systems and other systems, because they are more
mature.
So I do want to dig down a little bit on that, because it
is intriguing when you say that we need to do more, in a sense,
and you juxtaposed it to the banking system. Could you go a
little deeper in that, on your comment?
Ms. Peters. Yes. When the Communications Decency Act
Section 230 was passed a quarter century ago, there were only
about 25 million Americans using the internet, and most of them
connected through a telephone dial-up. Social media was not a
thing. The iPhone was not a thing. Smartphones were not a
thing. And the tech algorithms that connect people did not
exist either.
Today, we live in a world, first of all, where the tech
industry is no longer in its infancy. It no longer, I think,
warrants the protections that it was--
Mr. Vargas. They are, in fact, the wealthiest companies--
Ms. Peters. The wealthiest companies in the world. There is
also an enormous amount of venture capital in Silicon Valley
supporting the emergence of new firms. They don't need the
support that they used to get, in my opinion.
Second of all, their tech algorithms are connecting buyers
and sellers of illicit goods faster than these companies' own
beleaguered moderators can remove the material. So I think they
would get a lot better at moderating illicit activity and
removing illicit activity if they were facing serious
liabilities for hosting it.
Our motto at the Alliance to Counter Crime Online is if it
is illegal in real life, it should be illegal to host it
online. I am not talking about getting rid of the liability
shield for tortious commentary. I still think there should be
Yelp reviews and people should be allowed to forward emails
without risk of liability to the tech firms. But we need to
have carve-outs for serious criminal activity.
And I am very pleased to see that Senators Graham and
Blumenthal have put forward new legislation about human
trafficking, but I want to ask them, why only human
trafficking? We have upwards of 60,000 Americans dying a year
from drug overdoses, most of which is being bought and marketed
online. Why is that still allowed? Why are terrorist
organizations still allowed to have Facebook pages? It is
crazy. This should not be happening.
I have a fact sheet that I have turned in with my testimony
that gives you an overview of the types of crime we are
tracking online and it is breathtaking.
Mr. Vargas. Thank you. You didn't mention cryptocurrency,
though. You did earlier. I do have a bill that passed out of
here last year, H.R. 502, the FIND Trafficking Act, that asks
the--well, actually it didn't ask, but directed the Comptroller
General to carry out a study to find out how cryptocurrency is
being used. Could someone address that, because I agree with
you, it is hard for us just to be frank. We don't like to put
regulations, the Republicans don't, the Democrats, on industry.
The Democrats don't like to do it on new creative industry. And
I think that is why we have given tech a pass. And with all the
things that are happening now, I don't think we should give
them a pass. I think that we should drill down deeper.
But could someone--and I only have 30 seconds left--talk
about cryptocurrency? Yes, Ms. Realuyo, go ahead?
Ms. Realuyo. We haven't seen a mass movement from
traditional criminals to the crypto space because cash is still
king to pay your assassins and your distributors. There is a
move afoot among the terrorist groups, particularly returning
foreign fighters of ISIS who have gone underground, to use
other ways to communicate, but also to try to raise money and
support themselves. It is no secret that Hamas actually has
advertised that you can donate to their organization using a
bitcoin, and they even give you the instructions on how to do
it. What they don't really know is it is not fully anonymous,
but we will keep that amongst ourselves in terms of being able
to track.
Mr. Vargas. Yes, let's keep that one among ourselves. My
time has expired. Thank you, Mr. Chairman. I yield back.
Chairman Cleaver. Thank you. The gentleman from Texas, Mr.
Williams, is now recognized for 5 minutes.
Mr. Williams. Thank you, Mr. Chairman, and it is
heartbreaking to hear the horrific stories coming from human
trafficking survivors. As a father of two daughters and a
beautiful granddaughter, I cannot begin to imagine any of them
being subjected to this type of abuse. So before I begin with
my questions, I want to sincerely thank the chairman for
calling this hearing. And I want to thank all of the witnesses
for being here today to share your expertise with all of us.
Monopoly Market, Empire Market, DarkMarket, and White House
Market are just a few of the more than 40 online vendors where
you can buy thousands of different types of drugs over the
internet. These websites are operating in plain sight, as we
have said today, and you can find information about each with a
simple Google search, as you said, and customers can leave
reviews. Vendors say exactly how their drugs will be shipped,
how the websites will walk you through the payment process,
step by step. White House Market publishes that they have over
15,000 listings from 1,300 vendors on their platform alone.
Almost 200 Americans die every single day from drug
overdoses, yet all of these websites are still online as we
speak, and we have touched on that. So, Ms. Peters, let me ask
you, what can be done to allow our government to be more
aggressive in taking down these illegal online marketplaces
that are hubs for trafficking drugs?
Ms. Peters. We would like to see Congress remove the
liability shield that the tech industry currently enjoys for
hosting serious organized crime content. Having spoken to them,
I believe that the authors of CDA 230 intended that liability
shield only to pertain to speech, which I agree should be
protected, as opposed to illicit activity. So we believe that
there should be carveouts for that issue specified, as was done
with Fost Assesto when it passed, with regards to human
trafficking. We believe that tech firms should be legislated
similar to the financial industry to hand over data they have
about illicit activity on their platforms to law enforcement,
and we would also like to see Congress appropriate more
resources to the law enforcement community to deal with what
will inevitably be a deluge of data.
And I will give you an example. Facebook only began
tracking drug sales on its platform last year, which is kind of
incredible, and in the first quarter of last year, they removed
4.4 million postings that were selling drugs. To put that in
perspective, that is 400 times larger than this notorious dark
website, the Silk Road, ever was: 4.4 million postings.
Mr. Williams. Thank you. Any sustainable long-term
solutions to shut down these complicated trafficking networks
will require a coalition of countries from across the globe, I
think, since some other countries might not have the same
resources or capabilities to go after human traffickers. So Mr.
Adkins, what can the United States do to help those nations
that we will need to bring in as partners to stop this horrible
practice?
Mr. Adkins. That is a great question. I think that when we
talk about technical support, when we talk about the support
that we have over the last decade or so that has been
diminishing for democracy and governance, support from the
United States to countries that have issues with weak
governance, what is our engagement in international conventions
and data sharing types of initiatives that can help support
those types of countries to improve in those sectors? But I
think the real issue is that they are not just falling behind
because of lack of capacity, but mostly because of the lack of
resources.
And this is kind of the main thrust of my appearance today,
is that these are generally poor countries, many of whom are
mired in unresolved conflict, many of whom cannot even provide
the most basic services for their citizens. And so, when you
get into the higher-order level of things around border
protection, around legislation, and law enforcement, these
nations would be weaker in those areas across-the-board, so
human trafficking is only a small slice of the deficiencies
that they would have in being able to protect their territories
and their citizens.
Mr. Williams. Okay. Quickly, Dr. Kassenova, can you discuss
how North Korea most regularly accesses the global financial
system, and the role that Chinese financial institutions play
in their ability to obtain critical WMD technologies?
Ms. Kassenova. China is among the jurisdictions that
actually are of great concern to the nonproliferation
community. Over the years, we have seen progress both on export
controls and then nonproliferation policies and clamping down
on this kind of activity, but it is still not enough.
Specifically on North Korea, most of North Korea's sanction
evasion and illegal access to international markets and
financial systems does involve China, and I shouldn't say
China, but middlemen, agents, brokers, and front companies that
are based in China.
Mr. Williams. Thank you.
Ms. Kassenova. I want to recognize that over the years,
there have been improvements, but it is not where we want to
see the government.
Mr. Williams. Okay. Thank you. I yield back.
Chairman Cleaver. Thank you. The gentlewoman from
Massachusetts, Ms. Pressley, is now recognized for 5 minutes.
Ms. Pressley. Thank you, Chairman Cleaver, for waving me
on, and Ranking Member Hill, for holding this hearing, and
thank you to our witnesses for sharing your expertise with us
today.
The deprivation of women's bodily autonomy for political
ends is not a phenomenon limited to one time or place--from
Boko Haram and Al-Shabaab kidnappings to small-scale Boston
traffickers, exploiters are making a profit by trading trauma
and condemning families to a lifetime of fear for their
children's safety.
Mr. Adkins, how is trafficking used to further the goals of
these insurgencies, and why is human trafficking, including
sexual exploitation specifically, so effective in terrorizing
local communities?
Mr. Adkins. Thank you for your question, Representative
Pressley. The first thing that I would say is that there is a
general overarching sense in the world of essentially
patriarchy and the diminishment of the value, worth, and
protection of women in our society, and certainly in many
nations abroad. That would be kind of the overarching piece of
this.
The second piece is that even though terrorist
organizations don't have very strong links in terms of the
actual transport and kind of cross-border movement of
trafficked persons, they certainly are consumers of trafficked
women and children as porters, as sex slaves, as concubines, as
people to be forced into marriage.
And so essentially, what trafficked people create for many
of these terrorist organizations is a base of consumption, to
feed themselves, to sustain their movements, to keep the morale
of their soldiers high, to actually entice young men to join
terrorist movements with this idea that you would have power at
the point of a gun and that you would have access to women, all
the way up to your liking.
The other piece of this is that, again, even though the
ties are not strong in terms of linking them directly to doing
trafficking, they actually create the conditions that induce
vulnerability for more people.
Ms. Pressley. Okay.
Mr. Adkins. And because of what Boko Haram has been doing
in Nigeria, trafficking writ large in Nigeria has become a more
serious problem, and it is a more serious problem for more
vulnerable people. So, any type of organizations that create
displacement, that create refugee flows, that create internally
displaced persons, are, by dint of that action, creating more
people who will be disconnected from state services and
protection, disconnected from their families, and then by dint
of that, more vulnerable to being brought into the dark
underworld of transnational criminal organizations and
terrorist groups.
Ms. Pressley. Thank you. Thank you for that comprehensive
response, Mr. Adkins. Just in the interest of time, I will try
to conflate my two final questions and hear from whomever would
like to contribute.
I want to bring a survivor into this discussion. I
represent the Massachusetts Seventh District and I work closely
with a survivor-level organization called My Life My Choice,
and the Eva Center as well, which works with survivors of
trafficking to rebuild and recover. Now, survivors face
obstacles in reclaiming their financial agency, and this is
something we don't often talk about. My Life My Choice shared
the story of one such survivor, Kendra. She grew up in state
care due to parental substance use and sexual abuse in the
home. By age 13, she had met her first exploiter. Kendra
continued to face sexual exploitation through her teens and her
early 20's. By the time she escaped for good, her Social
Security number had been stolen by her exploiters, and credit
cards and an auto loan fraudulently taken out in her name.
Although case managers were able to help Kendra appeal this
credit fraud in court, many survivors lack access to this
support.
So I just want to make sure that we are thinking both about
prevention and recovery. Ms. Nguyen Swift, how can banks better
help survivors appeal and correct fraud and reclaim ownership
of their finances?
Ms. Nguyen Swift. Thank you. This is an extremely important
issue. I think there are two connected items here that you have
hit upon: one, how do we restore credit for the survivors; and
two, how do we get them access once they have extracted
themselves from their experience?
There are a lot of efforts that are being done today with
banks through the Liechtenstein Initiative, which is trying to
create internal policies and procedures in order to evaluate,
with social work organizations, new accounts that are being
created for survivors so that they can get their foot in the
door. Once they get their foot in the door, then their accounts
can go through the normal system and they can build their
credit that way.
But I think the root cause really is, how do we restore
credit for the survivors, because if we are able to help them
restore their credit, and we are able to help that conversation
start, then they can apply for any type of financial services.
So, I think we need to bring those agencies who are responsible
for evaluating credit to the table, to have that conversation
to identify solutions, the credit bureaus and agencies and
things like that. Banks, unfortunately, cannot, because once
bad activities happen--
Mr. Perlmutter. [presiding]. The gentlelady's time has
expired. Thank you.
Ms. Nguyen Swift. Thank you.
Mr. Perlmutter. The gentleman from Ohio, Mr. Gonzalez, is
recognized for 5 minutes.
Mr. Gonzalez of Ohio. Thank you to our witnesses for being
here, and thank you, Chairman Cleaver and Ranking Member Hill,
for holding this hearing on such an important topic. I am
thrilled to know that this is the first in a series of
hearings. It is good to know that we are going to beef up our
understanding of what is a critical issue in Ohio, where I am
from, but also across the country. We have been, in many
respects, ground zero for the opioid crisis, fentanyl
trafficking, but also human trafficking, which is something
that our office has been working on for the past year or so.
Ms. Peters, I want to start with you, because I think this
is a really interesting point that you touched on with respect
to Section 230. I have an open question, which I am just
curious for your thoughts on. I think there are kind of two
minds that I could take with that. One would be liability moves
to the platforms themselves, like Facebook, YouTube, et cetera.
The other could be maybe liability in some respects, at least
for these dark websites, it could move to the hosting services,
right?
Do you have a sense of--I guess, why would you go in the
direction you have gone as opposed to the hosting services? And
I am curious, generally curious, because I think this is a
tough topic.
Ms. Peters. We believe that the platforms hosting the data,
as opposed to the website host, should hold the liability
because they are mainly talking about platforms that are free
to use. So, these platforms make money by harvesting the data
of their users. The notion that they don't know what is going
on is absurd to me.
Mr. Gonzalez of Ohio. Yes. I agree with you.
Ms. Peters. And I think that, in particular, those
platforms should have a lower liability shield.
To me, putting that liability on the web hosting devices
would be kind of akin to putting liability onto a telephone
service that is just carrying messages. However, if you have
illicit organizations like, say, the Sinaloa cartel or
Hezbollah, that actually have a website, I don't think they
should be allowed to--
Mr. Gonzalez of Ohio. Yes, and there are certain hosting
services that specifically focus on the Sinaloas of the world,
right?
Ms. Peters. And they should be targeted for that, I agree,
but ordinarily, I would say if a web hosting service is hosting
a platform, and that platform is hosting illicit activity, to
me, the platform is at fault.
Mr. Gonzalez of Ohio. Yes. I think I generally agree. I am
still thinking through it, because I think there is--
Ms. Peters. I think there is also a very interesting debate
about the question of strict liability regimes or duty of care,
which I would be happy to discuss ad nauseum, but it is a very
important issue to discuss.
Mr. Gonzalez of Ohio. Okay. And then, Ms. Realuyo, with
extremism a lot of times we see that the conversation starts on
a Facebook, or a YouTube, sort of a traditional platform, and
then at a certain point it bumps off and goes into the fringe
platform world. Is your sense that that is what is happening in
the trafficking world as well, where it is starting on a
Facebook, and then it is moving to a dark website, or is it
actually transacting on Facebook directly?
Ms. Realuyo. When you take a look at all of these groups,
whether they be terrorist or criminal in nature, you still have
to have a human interface. We are now studying a lot of the
ISIS foreign fighters who have come back, and in partnership
with several of our international counterparts, we are trying
to better understand, for example, why did that Tunisian young
man--how did he get involved, and in one point, more
interestingly, in Western countries like Europe and the United
States? They get drawn in because of the accessibility of that
propaganda online, but then, more importantly, there usually is
a physical facilitator who helps them to make that voyage to
the Islamic state, and now we are much more concerned about the
ones who are coming back.
What we are seeing, too, in terms of trafficking, in terms
of whether it is drugs or people, there is still a physical,
because you have to actually--there are some goods that have to
be transferred.
Mr. Gonzalez of Ohio. Right.
Ms. Realuyo. And we need to equally watch, monitor, and
understand, but also go after both that that push online, but
more importantly, those that are actually physically engaged in
that trafficking.
Mr. Gonzalez of Ohio. Okay. And then if you can do this in
30 seconds, you highlighted how coordination is essential. I
completely agree. I think most people said that on the panel.
Legislatively, what is one thing we can do to make sure the
coordination does happen more frequently than it currently
does?
Ms. Realuyo. Having been in and out of government over the
last 20 years, once you all require a congressional report, it
actually focuses the different agencies to have a sense of
concentrated mission. And what we are seeing now, particularly
in the military, is we look at threat finance across all of the
different regions, and then, more importantly, across all of
what we call the modalities, whether it is weapons of mass
destruction, human trafficking, gold. We didn't really talk
about Venezuela, which is the true trafficker of gold, oil, and
drugs, in terms of facilitation. But we are getting better at
it.
Mr. Gonzalez of Ohio. Thank you. My time is up. I will
follow up. I yield back. Thank you.
Mr. Perlmutter. The gentleman yields back. The gentleman
from Utah, Mr. McAdams, is recognized for 5 minutes.
Mr. McAdams. Thank you, and thank you all for being here
today to share your expertise on this very important topic, and
one that I think we have to do a better job about combating.
Trafficking takes shape in many forms and has many victims,
whether it is the over 20 million people trafficked into forced
labor or sexual exploitation, or the drugs that are trafficked
into our country that devastates families and communities. And
while they have differences, for sure, in what is trafficked,
we know that they also share commonalities. So I am glad that
this hearing is exploring the topic in more depth and hopefully
will provide lawmakers some direction on how to better counter
these various forms of illicit activity.
Ms. Nguyen Swift, you noted that financial institutions are
well-situated to assist law enforcement in identifying strong
investigative leads, given that different trafficking networks
often exhibit overlapping financial indicators. Can you
elaborate on how some of these networks operate similarly, from
a financial perspective, and what type of indicators can we
see?
Ms. Nguyen Swift. Sure. At the end of the day, all types of
trafficking is a business, and financial services companies
provide a limited amount of products. And so, checking
accounts, business accounts, credit cards, prepaid cards, and
cryptocurrency have been echoed multiple times today; there are
only certain ways that you can actually get money into that
system and out of that system. And so, if you are looking at
criminal business enterprises, they have to rely on those
various products.
Some of the typologies that we have seen across multiple
levels of trafficking are business accounts that are being
opened under multiple shell company names. However, they share
similar account managers, they share similar owners, and they
share certainly similar patterns of activity in dealing with
the same third parties. So if we are able to understand more
context around what those relationships look like, and that
comes from intelligence, then we are able to pinpoint and
understand more what networks they are part of.
Mr. McAdams. And maybe a related question, do we have a
good understanding about how some of those networks may operate
differently as they flow through the regulated financial
system, different forms of trafficking? That is, do we
understand how human trafficking networks would appear as it
proceeds through the financial system, compared to how a drug
trafficking network would appear?
Ms. Nguyen Swift. There are some indicators that you can
kind of tell the difference. For example, with credit cards,
the types of purchases you might see are going to be different,
and in human trafficking, a brothel situation, you are going to
see a lot of feminine products being purchased, and in drug
trafficking, probably not, unless there is a home that is also
being leveraged where a lot of women are working.
So from a financial institution perspective, it is hard to
tell some of those nuances. The only way to do that is with
getting contextual information from experts in the industries
that are working in those specific areas. So, there are some
telltale signs, but we need to know what they are.
Mr. McAdams. Thank you. In your written testimony, several
of you talked about both potential advantages and disadvantages
to technology in the trafficking of goods. Professor Realuyo,
you noted that opioid buyers can visit dark websites
anonymously using special browsers and make purchases with
virtual currencies like Bitcoin, making transactions difficult
to trace. And Dr. Kassenova, you testified that adopting
technical solutions to monitoring trade finance transactions,
including by adopting blockchain-based trade finance platforms
can play a role in uncovering suspicious transactions.
How should we, as policymakers, be thinking about the role
that emerging technologies can play in trafficking and illicit
financing, whether that be AI or digital currencies, et cetera,
and are there ways that we can harness these technologies to
fight trafficking?
Ms. Realuyo. It's great to see you again.
Mr. McAdams. You, too.
Ms. Realuyo. I really see, more importantly, because I kind
of traverse the private and then the public sector, what we
really need is just greater research, and then at one point, on
the government side, we need much more investment in law
enforcement and intelligence training to understand what these
technologies present as an upside, but more importantly, the
dark side and what that back door is.
Because as they modify and, more importantly, adapt,
incorporating this new technology to improve the efficiency of
their businesses, they understand what our counter measures
are, and we need to step up the pace of what our measures are
in order to detect, particularly, but more importantly, trying
to figure out how to better work also the private sector so
that they become the eyes and ears of what is happening in
their sector.
Mr. McAdams. Thank you. Dr. Kassenova?
Ms. Kassenova. Thank you for this chance to kind of give a
bit of a positive side of new technology. For proliferation
financing, when I talk to the representatives of the financial
institutions, they feel a little bit overwhelmed that if we
start checking everybody so deeply, then it will slow down
their transactions. And so for them, the main challenge is how
to operationalize the risk and automate it, and this is where
technology can come in very handy.
Just to give two specific examples, it is the pilot
blockchain-based trade finance platform, Voltron, that I was
referring to, and the people behind it are more interested in
efficiency. But because it provides better transparency, you
can have a collateral, positive effect in finding out some
suspicious actors.
Artificial intelligence, for example. There are startups
that are working on that, and this is then tapped potential of
technology, and I think, from where we sit, there are
definitely--
Mr. Perlmutter. I am going to have to cut you off. The
gentleman's time has expired. He can submit more questions to
you in writing and finish that.
The gentleman from Texas, Mr. Taylor, is recognized for 5
minutes.
Mr. Taylor. Thank you, Mr. Chairman. I appreciate this
hearing. First, I appreciate the bipartisan nature of it. I
appreciate the lack of theatrics in this particular hearing. I
am the newest member of the committee, so this is a first for
me.
Also, I think the scale of what we are talking about is
really incredible. If you think about how MasterCard processes
$1.7 trillion of transactions annually, and that is about what
we are talking about here. So just to kind of give us a scale,
I think this is very impressive.
I just want to understand, and Ms. Peters, I have been
hearing about your exploits for years from my wife, Ann, who
was your roommate at college. So I just wanted to ask, crypto
versus cash wires versus hard cash, kind of thinking about
those three, electronic transactions versus cryptocurrency
versus hard cash, what are you seeing kind of as the makeup in
illicit trade broadly, in your experience?
Ms. Peters. Well, before I answer that I just wanted to
very quickly make the comment that I don't think blockchain is
necessarily something we should fear. Blockchain technology
holds the promise of actually tracking financial assets better.
I think the risk is that non-governmental actors from Facebook
to the founders of various cryptocurrencies are trying to get
involved in managing world currencies. This should be the role
of governments, not companies, and certainly not illicit
actors. So I think there is a need for the U.S. Government to
look into perhaps releasing its own blockchain currency, or
something like that. But we don't necessarily need to think of
blockchain as a bad thing.
I also want to make the point that we used to talk about--
those of us who are interested in the financing of crime, our
battle cry to our teams used to be to follow the money, and it
always takes you to the leaders. These days, when I work with a
team of investigators, I instruct them to follow the value. We
often see criminals moving illicit value through commodity
trades, whether it is a group like Hezbollah or the Taliban,
who got very deeply involved in the used car trade. You buy a
used car; how much is a used car worth? It's like asking how
long is a piece of string. You can put any value on it you want
and you move that value through the system.
I have seen this across the world, in multiple sectors. I
even worked on an investigation once in--
Mr. Taylor. I need to just try to refocus you back on my
original question, which was, what are you seeing in terms of
illicit transactions, and so the $1.7 trillion transactions we
are talking about today, in hard cash, right, like physical
dollars versus electronic transactions versus crypto? What is
that mix?
Ms. Peters. I am actually saying I don't think there is a
huge amount of crypto. It is growing, but I think that the bulk
of criminal transactions that we see are put into trade.
Criminal networks that I have studied across the world and
across various sectors of crime will buy commodities.
Mr. Taylor. So you are saying it is a barter--you are
saying the transfer--
Ms. Peters. A literal barter of goods.
Mr. Taylor. --it is a barter across, but obviously, there
is cash on the consumer side.
Ms. Peters. And cash will move through banks, but it will
be hidden as a trade-based money laundering operation.
Mr. Taylor. Okay. So it is electronic transactions that
are--
Ms. Peters. And there is a significant amount of cash-based
smuggling, particularly in certain sectors, and I certainly
have worked on cases where we have seen literally planeloads of
cash being moved from one country to another.
Mr. Taylor. So, hard cash is big--
Ms. Peters. Hard cash.
Mr. Taylor. --and electronic--
Ms. Peters. Cash smuggling certainly takes place, but cash
is heavy. It is physically heavy and it is hard to place back
into the financial system, so it becomes a burden.
What I see as by far the biggest phenomenon of how illicit
money moves around the world is in trade-based money laundering
transactions.
Mr. Taylor. But it is electronic transactions masked as
trade?
Ms. Peters. Ultimately, yes, it goes through the SWIFT
system.
Mr. Taylor. Okay. And then the other--we have about a
minute here, so the other question I had for you was the dark
web versus legitimate websites. So, Silk Road, and there was a
pretty good Wired magazine article a couple of years back
talking about giving taxonomy to Silk Road. They were
estimating there was about $50 million in transactions per
month that were taking place on Silk Road.
What is incredible is the amount of resources that went
into that, and literally it led to the sentencing of just one
person. Right? So, you are moving $50 million in drugs a month,
a tremendous amount of law enforcement by the United States,
and only one person went to jail on that particular website.
What are you seeing, dark web transactions versus
legitimate website transactions? In other words, if we pursued
your Section 230 liability idea, just for legitimate websites,
Facebook, what is that going to do, versus--
Ms. Peters. My organization focuses exclusively on illicit
activity that is happening on surface web platforms, simply
because we don't have the capacity to also look at the dark
web. There is so much of it happening on ordinary platforms
that are on all of our phones--Google, Facebook, Twitter,
Instagram, WeChat. There is certainly illicit activity taking
place on the dark web but most people don't know how to get
onto the dark web.
Mr. Taylor. Right. Thank you. I apologize. I am out of
time. I yield back, Mr. Chairman.
Mr. Perlmutter. The gentleman yields back. I should mention
that Mr. Hill and Mr. Foster of Illinois are working on digital
currency issues that you just brought up as to whether or not
there should be a Federal digital currency.
But I want to turn to another gentleman from Illinois, Mr.
Garcia, and he is recognized for 5 minutes.
Mr. Garcia of Illinois. Thank you, Mr. Chairman, and
Ranking Member Hill, for this hearing, and thank you to all of
the outstanding witnesses who have joined us today. Your
testimony shows how critical financial services and the global
financial system are to illegal trafficking networks, and how
connected those networks are to the wide range of policies we
consider at the Federal level, from drug policy to
international relations.
On cartels and U.S.-Mexico policy, Professor Realuyo, you
shared a lot of information with us about the cartels in
Mexico. Drugs are flooding north into the U.S., guns are
heading south into Mexico, and each side seems to blame the
other. In your written testimony, you note that 80 percent of
weapons used by criminals in Mexico come from the United
States. President Trump and Mexican president Lopez Obrador
have pledged to work together to curb arms trafficking, but
this has been a contentious issue for years.
Professor Realuyo, have there been any substantive changes
recently in how both countries deal with the smuggling of
weapons?
Ms. Realuyo. Sadly, because of what happened to the LeBaron
family in November, we have always had these bilateral security
cooperation meetings, but this time, both sides have actually
dedicated much more visibility and time to looking at the
firearms trading.
I spend lots of time at the border, and when you cross the
border, very rarely does the U.S. actually check outbound, and
even more rarely do the Mexicans check what is coming inbound.
We went to Nogales, crossed 4 times, just as a test, with
an unmarked--not a government vehicle--just to take a look, and
unfortunately, they didn't check for cash or guns. What we are
trying to do, too, is try to raise awareness, and what is also
quite interesting is once they did the study there, is a lot of
diversion, because of the corruption of the security forces in
Mexico of guns that are also being used by the cartels of
diversion.
So at least it is an agenda item that has been raised to
the higher, in terms of every meeting that is had now with
Ambassador Landau there, they are actually focusing a lot more,
because of the violence rate that was recorded last year in
Mexico.
Mr. Garcia of Illinois. And as a follow-up, what policy
changes could we make here in Congress to help curb the flood
of guns to Mexico, and a brief one, please.
Ms. Realuyo. Yes. Obviously, each State in our Federal
system has its own recognition of how they control the sale of
guns, but, more importantly, I think raising awareness of the
average American that the violence that could come to our
borders is actually caused by the firearms that are coming from
the United States. It is nothing new, but sadly it takes these
breaking news events on CNN and Fox News to actually get the
average American to realize this, and sadly, no congressional
district is immune to the opioid epidemic, as you know from
your State.
Mr. Garcia of Illinois. Thank you so much. Dr. Kassenova,
on the topic of transparency and corporate ownership, you write
that the U.S. lags behind many countries in requirements for
transparency about who owns companies and trusts. This is a
problem for the proliferation of weapons but it has effects
throughout our economy.
Dr. Kassenova, how would bringing U.S. transparency
standards for corporate ownership in line with EU standards
make it easier for law enforcement and regulators to catch bad
actors?
Ms. Kassenova. I think it will help on two levels. It will
help domestically because then we will know, in terms of in the
U.S. context, who is actually controlling the company standing
behind the companies, because we know there is so much deceit
that is happening behind the non-transparent corporate
structures.
But there is also another level, which is connected to the
international context and the norm making. The more countries
you have who require that transparency, the more you reduce the
space in which these malicious actors can operate.
Mr. Garcia of Illinois. Okay. Thank you. And at the 56-
second mark, Ms. Swift, how can industry and regulators work
together to make sure that we have the best information
possible for investigating and stopping financial crimes?
Ms. Nguyen Swift. Thank you. I think that the industry
needs to learn more from investigators. I think government is
in a very special place to be able to make that happen. Right
now, there are a lot of disparate opportunities that are
happening, conversations that are happening, intelligence
gathering that is happening. However, there is not one
coordinated effort to bring all of this knowledge and data
together so that we can learn from it collectively.
So, I think government is in a place where they can pull
together reports, pull together studies and committees with the
appropriate actors and appropriate stakeholders in order to
move that ball forward.
Mr. Garcia of Illinois. Thank you very much. Mr. Chairman,
I yield back.
Mr. Perlmutter. The gentleman yields back. Mr. Timmons from
South Carolina is now recognized for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman. Professor Realuyo, I
went to McAllen, Texas, with a number of my colleagues a year
ago, in March, and it was what I would consider maybe the
height of the challenges we were facing at the southern border.
It was really eye-opening and shocking the stories we heard
from the Customs and Border Patrol and the ICE agents. Is it
your understanding that things have improved in the last 12
months? Could you speak to that?
Ms. Realuyo. Sure. Just from the official data, when we
take a look at--we usually look at the border crisis more in
terms of the movement of migrants and people than in the
movement of drugs. And there had been some hypotheses that this
huge onslaught of taking care of people first before drugs
actually allowed the drug traffickers to take advantage of this
idea of the bubble, in terms of the balloon that you squeeze.
The numbers are quite promising in terms of the lower
number of interdictions, and more importantly, what we are
seeing in terms of people moving. And that is obviously
attributed to a lot of the cooperation with Mexico.
Earlier in the hearing, we talked about, what do we need to
do with our international partners to address these very
challenging issues of trafficking. Once in Mexico, they
realized that the problem of migrants not crossing the border
was becoming their own problem in terms of social services,
health, insecurity. They wised up, and at one point they
secured their southern border. This is what you saw last year
with the deployment of their newly minted National Guard, which
has worked hand in hand with the U.S. in terms of enforcing
border security on the southern border with Guatemala, with
technology, but more importantly, on Mexico's northern border,
which is our southern border.
Mr. Timmons. So there has been increased manpower on the
Mexico side of the border that has helped address this issue?
Ms. Realuyo. And technology and skill set. The use of
drones now to monitor, and more importantly, this way of
actually doing much more interagency collaboration to figure
out where the movement of people and possible shipments of
drugs is actually being relocated.
Mr. Timmons. In your testimony, you state that 90 percent
of heroin in the U.S. originates from Mexico. Do you have any
statistics on how much fentanyl originates from Mexico?
Ms. Realuyo. That is actually much more difficult because
of the amount that is coming through the mail service first.
But what is disturbing is that we are seeing more activity and
more interest of the Mexican cartels to dominate the synthetic,
which is not just fentanyl but methamphetamine, where we have
seen, last year, an increase of use. So while methamphetamine
is not as lethal as fentanyl, many of you know, in your
districts, it actually manifests in a much more violent and a
more addictive fashion, which then has other consequences in
terms of violent crimes and acts that are committed by meth
addicts.
Mr. Timmons. I was a State prosecutor for 4 years and we
had issues with fentanyl, but that was just--they were
tragedies. They weren't violent crimes, and meth really was a
major problem, and still is a major problem in my district.
Ms. Peters, I hate to say that I have never heard the term,
``timber trafficking,'' before today. Could you talk about how
that works? Just give me a better understanding.
Ms. Peters. Well, timber trafficking takes place around the
globe. I am not sure if it is on the list, but it is a very
large global--
Mr. Timmons. Are they timbering forests and then saying
they got the product from other places, or--
Ms. Peters. There are a range of things happening. One is
illegal deforestation of a range of woods. In some cases, it is
endangered wood species or timber species that are protected
internationally, like certain rosewood and hardwood species
that are then mislabeled and then smuggled into end consumer
states.
Mr. Timmons. So they are processed and then shipped and
they are mislabeled, and it is not--
Ms. Peters. Sometimes, it is processed in the place that it
is smuggled out of. There will be lumber factories that will
cut it down into planks or whatever, or make it into furniture.
In other cases I have seen rough logs exported in containers.
Mr. Timmons. And are the end users generally the United
States and Western Europe or is it all over the world?
Ms. Peters. It can be the United States. I am familiar with
at least one case that involved lumber liquidators who were
busted for, perhaps not knowingly, but importing wood that had
been illegally exported from, I believe it was Brazil. So,
there is a tremendous amount of this timber trafficking going
on, both in Latin America and in Africa, with a lot of the wood
going to China these days, and some of it coming into the
United States, certainly.
Mr. Timmons. Would you say that oftentimes, the end user is
not aware that the timber is illegal?
Ms. Peters. I think so, yes. Most of the time, the end user
is not aware that it is illegal. In terms of the end consumer,
I think that is often the case. I am not sure about the
companies that are purchasing the timber, in the middle part of
the supply chain.
Mr. Timmons. Sure. Mr. Chairman, I yield back.
Mr. Perlmutter. The gentleman yields back. The gentleman
from New Jersey, Mr. Gottheimer, is recognized for 5 minutes.
Mr. Gottheimer. Thank you, Mr. Chairman, and Ranking Member
Hill, for calling this hearing, and thank you to all of the
witnesses for being here today. We are very grateful.
I recently met with brave law enforcement officers from the
Port Authority of New York and New Jersey's Police Department.
As the United States' largest transportation police force, the
Port Authority Police Department (PAPD) has unique experience
and a very strong record of combating human trafficking at
ports of entry in my region.
Since it was founded in the 1970s, the PAPD's renowned
Youth Services Unit, located in the Port Authority's midtown
bus terminal, the busiest terminal in the world, has intervened
in thousands of human sexual trafficking cases, saving
countless youth from victimization by predators.
Ms. Peters, if I can ask you a question please, based on
your experience regarding trafficking methods here in the
United States, should we deploy more front-line officers
trained in detecting victims at transportation hubs like
airports, train terminals, bridges, and tunnels, and other
facilities?
Ms. Peters. I believe there are important ways that, yes,
front-line law enforcement and security forces in places like
bus terminals and airport can be better trained to identify and
potentially disrupt trafficking events. There have also been
some initiatives by different industries, both the trucking
industry and members of the transport industry, including firms
like UPS and some airlines, to train their drivers to look for
what appears to be trafficking and to report it. So, I think
those are important initiatives that should be incentivized.
Mr. Gottheimer. Thank you. Just following up on that, would
you support the establishment of a regional center of
excellence for human trafficking training for transportation
and other specialized police to share techniques and expertise
and undergo rigorous training and learn to deal with vulnerable
youth and predatory traffickers?
Ms. Peters. Yes. I think that would be a great idea, and,
in particular, if it were placed in some of the hotspots in
this country where there is a large amount of trafficking going
on.
Mr. Gottheimer. And, of course, in New Jersey and New York
and that area, in the regional area, there is a large amount,
correct?
Ms. Peters. New Jersey, I believe, as well as Georgia has a
big problem. Texas has a big problem. California. Honestly, it
is a nationwide issue, but certain States that are on big
trucking routes really are hit hard.
Mr. Gottheimer. Thank you. It is why I believe the center
is so important.
Ms. Nguyen Swift, if I can ask you a question please, given
your experience as an attorney with the New York County
District Attorney's Office, and your time in the private
sector, can you speak to the importance of financial
information-sharing and the ability to collect data to share to
identify patterns and enable criminal investigations?
Ms. Nguyen Swift. I think that is the only way we do it.
The only way we can successfully prosecute cases is to tell the
story through financial evidence, which supports and
corroborates victim eyewitness testimony. As a prosecutor, we
know how difficult it is to bring a case and to be able to rise
up to the evidentiary standards that we must prove in terms of
the elements of the crime.
So the only way that we can absolutely succeed in this is
to bring together, again, the data from all aspects and
perspectives, and then we learn from that. So as we continue to
look at these cases, to be able to successfully prosecute and
understand what data is important, we will be able to continue
to learn and then give back to the financial community, and the
cycle goes on.
Mr. Gottheimer. Thank you. Do you believe that the current
financial intelligence system we have in place is effective in
providing the proper data and law enforcement to combat
trafficking?
Ms. Nguyen Swift. I think it is getting there, but I think
we can do a lot better. I think there are a lot of mechanisms
that are currently in place that attempt to get us to that
point, but I think it is still very difficult for financial
institutions to share information with each other and not so
much with law enforcement, but also the ability for non-
financial institutions such as nonprofit organizations, and
other government agencies, to also share back data to financial
institutions is extremely important.
Mr. Gottheimer. Just one more for you, when a
transportation police officer makes an arrest of an individual
in connection with a trafficking investigation, what
information can be used by investigators to track down a wider
network?
Ms. Nguyen Swift. Anything that person has on them--
identification, any sort of understanding in terms of, if there
are funds that are on them, phones, any electronic devices.
Everything is being done electronically these days, so
identification for the machine ID, user IDs, any of those
things can be traced to financial records, and then ultimately,
financial transactions that are contained in the wire.
Mr. Gottheimer. Thanks. Shifting a little bit, I proposed
bipartisan legislation called the FASTER Act to help law
enforcement freeze the assets of terrorists or other extremists
to prevent these funds from being hidden in the system, and
used to carry out another attack by friends or family or
unknown accomplices. It also calls for a national home-grown
terrorism incident clearinghouse for law enforcement to collect
and share information on incidents to help investigate and
thwart future attacks. I believe this data-sharing and other
data-sharing is essential, and anything we can do in Congress
to the facilitate information-sharing, that you were talking
about, I think will help, especially in this effort.
Ms. Nguyen Swift. Absolutely.
Mr. Gottheimer. Thank you so much for your time today,
everyone. Thank you. I yield back.
Mr. Perlmutter. The gentleman from New Jersey yields back.
The gentleman from Virginia, Mr. Riggleman, is recognized for 5
minutes.
Mr. Riggleman. Thank you, Mr. Chairman, and thank you all
for being here. I am sorry if I am a little bit excited. The
day before I was elected, I was a senior consultant at the
Pentagon actually dealing with, and hearing about attack
modalities, title authorities, application machine learning,
and then talking about selectors. I got pretty excited. So, we
should have some fun today, with all of the things I have done
in the last 26 years.
And this is pretty timely for me. I have a huge district,
10,000 square miles. In Axton, Virginia, we just had four
members of the Jalisco cartel caught, and they are actually in
court now, just last week. When we talk about methamphetamines,
and I appreciate that that seems to be the drug of choice right
now, we have opioid activity, heroin, K2, you know, synthetic
marijuana, but we also have a massive methamphetamine problem.
So, I thank you all for being here today.
I want to start with you, Ms. Realuyo. You said,
``modality,'' so I got really excited about that. We are
talking about attack modalities and technologies that we see at
the border right now. What do you think the most challenging
segment or attribute portions of those modalities are when you
are trying to figure out the technology issues that you have?
For example, when you are looking at an attack modality, is it
knowing our own environment? Is it information-sharing? Is it
technology within the network? Where do you see those gaps
specifically on those modalities when we are talking about on
the border and those specific technologies?
Ms. Realuyo. I teach cybersecurity as well, but we are
never going to get to the point that technology will replace an
actual human being. We work with a lot of military and law
enforcement. We always talk about that sixth sense that
something is not right, or a red flag.
What we are trying to do is better incorporate the use,
whether it is unmanned drones or detection devices, to figure
out what is in a container. You still have to have a trained
human being and an analyst and law enforcement agent who can
actually understand what they are seeing.
I had the privilege, a couple of weeks ago, to go to Santo
Domingo, which is a huge container port that is the transit
point for a lot of Colombian cocaine, going through the
Dominican Republic, coming to the United States, but even more
so, going towards Europe. And those x-ray machines are
fantastic, but unless we are able to train our counterparts,
who are the eyes and ears pushing that border out, it is all
for naught, because the technology will never actually replace
human beings.
And what I fear is that the technology, and more
importantly, the illicit networks, are gaining so much ground
because they are so nimble and have tremendous resources, to
have the better equipment of night vision goggles, and our own
soldiers do, we need to get much more nimble and also hire a
different profile, in terms of cyber analysts who can actually
help to understand how cyber is the new domain, and then more
importantly, what the cyber instruments that we can use to
complement our military intelligence and financial instruments
in national power.
Mr. Riggleman. It is amazing that you say that, because we
were actually trying to template human behavior with machine-
learning rules and finding out that we were missing some key
segments. Even when we thought we had it right, we just
couldn't get it down.
And Ms. Peters, when you talked about transnational
networks analysis, and you talked about information-sharing,
again, I got pretty excited. I don't hear much when people are
talking about title authorities, which is one of the biggest
problems that we had in DoD and also in NSA was actually the
information-sharing component.
Right now, do you see that the biggest issue is technology,
is it funding, or do you actually think it is the policies that
are in place for information-sharing that are preventing us
from doing a little bit more as far as doing analysis or
aggregation of data?
Ms. Peters. That is a very good question. I would actually
probably say all three of those issues, to some extent, combine
to create the challenges we have. Information-sharing, having
been on the operational side of some of these investigations,
is a really challenging aspect, particularly if you are
operating in a multinational environment and you don't quite
trust the folks that you are working with. But even within the
U.S. interagency, I have seen one group of law enforcement or
intelligence operatives try to get credit for something another
group does. There are incentives for people not to share data.
Mr. Riggleman. That is correct.
Ms. Peters. And we have to accept that those incentives
exist, and that there is also a constant challenge between
information-sharing and operational security. The more
information gets passed around, the less secure it is.
And I guess I have seen some operations that have worked
really well, but it is very much personality-driven between the
different agents from different agencies, such that if they can
get along, they work together great. But I think programs to
help those interagency groups in a particular region or on a
particular supply chain, get to know each other, hang out
together, drink some beers together, those are the kind of
things that might sound silly but they actually --
Mr. Riggleman. No, they work. I own a distillery. It works.
Trust me, it does work. And I think it is really about kicking
over rice bowls, isn't it?
Ms. Peters. I am the author of, ``The Martini Glass.''
Mr. Riggleman. So, we could get along very well. I wish I
had more than 10 seconds, because I was going to go to Ms.
Nguyen Swift and talk about AI/ML and actually some of the
issues that you have. But I only have 5 seconds, and I want to
yield my time back, so thank you all very much for being here
today.
Mr. Perlmutter. The gentleman from Virginia yields his time
back. If he has other questions, he can submit them in writing
to the panel.
The gentleman from California, Mr. Sherman, who is also the
Chair of our Subcommittee on Investor Protection,
Entrepreneurship, and Capital Markets, is recognized for 5
minutes.
Mr. Sherman. I know it will come as a shock to my
colleagues, but I want to talk a little bit about
cryptocurrency. Right now, the biggest currency is Bitcoin. The
disadvantage of Bitcoin is you can't really go buy a turkey
sandwich with a Bitcoin anywhere around here. There are onramps
and offramps, and eventually you need to convert.
We had, sitting where you are now, Dr. Kassenova, our
friend, Mr. Zuckerberg, who is putting forward the Libra, the
``Zuck buck,'' which, if he is successful, will be Bitcoin on
steroids, and he has envisioned there to be a way where you
wouldn't need an onramp and an offramp because you could
actually spend Libra.
There are two organizations that are allies, Hezbollah and
Hamas, and if you are engaged in a criminal enterprise it helps
to have the ideological cohesions of some political cause.
Hezbollah has used that very successfully to be an effective
drug dealer.
Behind you is a screenshot from a video from the Qassam
Brigade of Hamas, and it is nice enough that this video has it
in both Arabic and English, and we have translated the Arabic
and we find out that Hamas does a good job of translating into
English. They have it right there on the screen, ``Bitcoin is a
cryptocurrency that cannot be traced.''
Ms. Realuyo, the video that I have referred to provides
Hamas supporters with detailed instructions on how to donate to
the terrorist group without tipping off law enforcement.
According to The New York Times, in the most recent version of
the Hamas website, every visitor is given a unique Bitcoin
address where he or she can send digital currency, a method
that makes donations nearly impossible to track. A recent
report by the think tank, the International Institute for
Counter-Terrorism (ICT), indicates that one Hamas-controlled
Bitcoin wallet traded 3,370 Bitcoins, or over $29 million in
just one day.
How can criminals, terrorists, and sanctions evaders use
cryptocurrency to evade our efforts? And then, I will ask if
anyone else on the panel has a comment on this.
Ms. Realuyo. Sure. As we have seen over the past 20 years
since the tragic attacks of 9/11, we have been focusing on
following the money, but more importantly, our counterparts and
our adversaries have been evolving in the way that they are
trying to finance themselves and then physically move money.
I have seen, and more importantly, have been following this
issue of Hamas, and it is very innovative--you have to give
them credit--fundraising schemes. But as we also know, Bitcoin
tracing is actually not totally anonymous. What we are worried
about is the evolution of thousands of other cryptocurrencies
that are much more difficult to trace, that are becoming
anonymizers.
We have also seen that other groups closer to home--in
Venezuela, as many of you know, they are actually using
cryptocurrencies to engage not just in criminal activities but
actually how to send remittances. So we have to take a look at
how those types of criminal activities in the cyber space are
being co-opted by criminal insurgencies and groups, not just
what we would see as the traditional Islamist terrorist groups.
We have to be better about monitoring and understanding how
they are doing it, but I am more fascinated by who is actually
going on there, and then more importantly, giving the money,
because that is the next generation of fighters that we are
going to be--
Mr. Sherman. Hamas and Hezbollah have ideological appeal.
ISIS has been destroyed territorially but not ideologically or
theologically. And the more capable, the more used these
cryptocurrencies are, the more powerful tool they will be for
those trying to escape international, especially U.S., law
enforcement.
Does anyone else have a comment? Yes, Dr. Kassenova?
Ms. Kassenova. In the 9 seconds that I have, I will just
give you another example. With North Korea, for example, when
they do cyber attacks and then do ransomware, they force their
victims to pay in cryptocurrency and then they recycle through
several stages. They don't cash out immediately, but they cash
out eventually.
Mr. Sherman. Thank you. I yield back.
Mr. Perlmutter. The gentleman from California yields back.
I would like to thank our witnesses for their testimony
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.
This hearing is now adjourned.
[Whereupon, at 12:02 p.m., the hearing was adjourned.]
A P P E N D I X
March 4, 2020
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