[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                     WHEN BANKS LEAVE: THE IMPACTS
                     OF DE-RISKING ON THE CARIBBEAN
                      AND STRATEGIES FOR ENSURING
                            FINANCIAL ACCESS

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

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 14, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-97
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
48-837                   WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------  

                 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             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   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
CINDY AXNE, Iowa                     TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois                ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
RITCHIE TORRES, New York             BRYAN STEIL, Wisconsin
STEPHEN F. LYNCH, Massachusetts      LANCE GOODEN, Texas
ALMA ADAMS, North Carolina           WILLIAM TIMMONS, South Carolina
RASHIDA TLAIB, Michigan              VAN TAYLOR, Texas
MADELEINE DEAN, Pennsylvania         PETE SESSIONS, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   RALPH NORMAN, South Carolina
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 14, 2022...........................................     1
Appendix:
    September 14, 2022...........................................    55

                               WITNESSES
                     Wednesday, September 14, 2022

Delmar, Wendy, CEO, Caribbean Association of Banks (CAB).........    14
Mottley, Hon. Mia Amor K.C., M.P., Prime Minister of Barbados; 
  Minister of Finance, Economic Affairs and Investment; and 
  Minister of National Security and Civil Service [with 
  responsibility for culture and CARICOM matters]................     4
Mowla, Wazim, Assistant Director, Caribbean Initiative, Adrienne 
  Arsht Latin America Center, Atlantic Council...................    12
Shah, Wayne, Senior Vice President, Wells Fargo & Company; and 
  Vice Chair, Financial and International Business Association 
  (FIBA).........................................................    16
Sharma, Amit, CEO & Founder, FinClusive..........................    18
Shetret, Liat, Director, Global Policy and Regulation, Elliptic..    19

                                APPENDIX

Prepared statements:
    Delmar, Wendy................................................    56
    Mottley, Hon. Mia Amor.......................................    61
    Mowla, Wazim.................................................    75
    Shah, Wayne..................................................    81
    Sharma, Amit.................................................    86
    Shetret, Liat................................................   100

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of BAFT (Bankers Association for Finance 
      and Trade).................................................   105
    Written statement of the Caribbean Community (CARICOM) 
      Secretariat................................................   108
    Written statement of the Embassy of Antigua and Barbuda, 
      ``Ten Practical Ideas for International Co-operation to 
      Maintain the Caribbean's Inclusion in the Global Financial 
      and Trading System,'' by the Honorable Gaston Browne, Prime 
      Minister of Antigua and Barbuda............................   114
    Written statement of the Embassy of Saint Vincent and the 
      Grenadines.................................................   138
    Memo from the Director of the Financial Intelligence Unit of 
      Saint Vincent and the Grenadines...........................   139
    Response from the Financial Services Authority of Saint 
      Vincent and the Grenadines.................................   141
    Written statement of MoneyGram International, Inc............   144
Garcia, Hon. Sylvia:
    Report of the Texas Association of Business, the Texas State 
      Chamber, ``Anti-Money Laundering Regulation, Correspondent 
      Banking, and the Adverse Economic Effects for the U.S.-
      Mexico Bilateral Relationship,'' dated April 2022..........   147
Delmar, Wendy:
    Written responses to questions for the record from Chairwoman 
      Waters.....................................................   201
    Written responses to questions for the record from 
      Representative Sylvia Garcia...............................   199
    Written responses to questions for the record from 
      Representative Nikema Williams.............................   210
Shah, Wayne:
    Written statement of the Financial and International Business 
      Association (FIBA).........................................   213
    Position Paper on De-Risking Correspondent Banking and Trade 
      Finance, the Cost of Doing Business, and Basel III.........   218
    Written responses to questions for the record from Chairwoman 
      Waters.....................................................   224

 
                     WHEN BANKS LEAVE: THE IMPACTS
                     OF DE-RISKING ON THE CARIBBEAN
                      AND STRATEGIES FOR ENSURING
                            FINANCIAL ACCESS

                              ----------                              


                     Wednesday, September 14, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:17 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Velazquez, 
Sherman, Meeks, Cleaver, Perlmutter, Himes, Beatty, Vargas, 
Gottheimer, Lawson, San Nicolas, Axne, Casten, Pressley, Lynch, 
Adams, Dean, Garcia of Illinois, Garcia of Texas, Williams of 
Georgia, Auchincloss; McHenry, Posey, Luetkemeyer, Huizenga, 
Wagner, Williams of Texas, Hill, Zeldin, Mooney, Davidson, 
Gonzalez of Ohio, Timmons, and Sessions.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``When Banks Leave: The 
Impacts of De-Risking on the Caribbean and Strategies for 
Ensuring Financial Access.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    I would like to welcome the Prime Minister of Barbados, the 
Honorable Mia Amor Mottley, to the Financial Services 
Committee, and thank her for being here to discuss an issue 
that I have long dedicated my time to solving: the crisis of 
bank de-risking in the Caribbean. By appearing here today, 
Prime Minister Mottley is giving voice to a topic that matters 
to every person in the Caribbean and, as we will discuss, 
everyone in the United States too. Today's testimony by Prime 
Minister Mottley isn't just timely. It is historic. It marks 
the first time in nearly 40 years that a Prime Minister will 
testify before Congress. Her presence today underscores the 
gravity of this issue and the urgent need to take serious steps 
to end the deterioration of global financial access for her 
nation and the whole of the region. Prime Minister Mottley, I 
am so pleased to welcome you to the United States, and I look 
forward to hearing your testimony and listening to the ways we 
can all work together to reverse de-risking.
    I am also pleased to acknowledge Dr. Keith Rowley, the 
Prime Minister of Trinidad and Tobago. Thank you, Mr. Prime 
Minister, for joining us to lend your support. For too long, 
the lack of financial access faced by Caribbean nations and 
their majority Black populations has been blatantly ignored. As 
chairwoman of the committee, and even long before I became the 
Chair, I have worked with stakeholders to combat the de-risking 
we have seen harm businesses and families across the Caribbean 
and the United States for more than 10 years.
    Financial access is key to a nation's stability, but for 
our neighbor island nations whose economies rely on cross-
border transactions, they are being denied this path to 
prosperity and resiliency. The Caribbean is very close to the 
United States, not only in geography, but also in its shared 
economy, culture, and security. This is reflected in the mutual 
trade and tourism, which fuels jobs and economic growth here 
and in the region, as well as in the 8.5 million members of the 
Caribbean diaspora community who have chosen the United States 
as their home. We must acknowledge that our nation's security 
and well-being is directly linked to that of the Caribbean 
nations, and that dwindling financial access endangers these 
mutual benefits.
    That is why back in April, Prime Minister Mottley and I led 
the Caribbean Financial Access Roundtable with nearly a dozen 
heads of state, Members of Congress, and other stakeholders to 
discuss concrete solutions. In addition, my committee worked to 
secure key anti-money laundering provisions in the 2021 
National Defense Authorization Act, including a mandate for a 
United States Government-wide strategy to address financial de-
risking. Without action on this issue, we risk ceding our 
leadership in this region to countries like China and Russia, 
which have been working hard in recent years to become more 
active in the Caribbean. It is clear that combating the loss of 
United States correspondent banking relationships in the 
Caribbean should be a mutual priority for both the Caribbean 
and the United States.
    Solving this crisis requires us to work together, from 
government examiners, to correspondent banks, to civil society 
organizations, to international financial institutions and 
standard-setting organizations. Congress has a role, too. Under 
my leadership, the committee continues to press for action on 
the collaborative solutions needed, solutions like removing any 
unsubstantiated stigma of the region, and government reports 
and helping to streamline bank examinations to name a few. Now 
is the time to move on these measures. Thank you.
    And I now recognize the ranking member of the committee, 
the gentleman from North Carolina, Mr. McHenry, for 5 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman, and Prime 
Minister, thank you for being here. It is an honor to have you 
before our committee, and Madam Chairwoman, thank you for 
having this hearing.
    De-risking is a critical issue, and the last time we talked 
about de-risking in a committee hearing was back in 2008. But 
that was domestic de-risking, and that was led by the 
subcommittee ranking member, then-Chair of the Financial 
Institutions Subcommittee, and it was analyzing the impact of 
Operation Choke Point in the then-Obama Administration and the 
impact that Operation Choke Point had on consumers, small 
businesses, and communities. But that was a domestic walk.
    Today, we are looking at the global landscape and the 
implications of de-risking at a macro level, and that is 
important, but those issues are similar, whether they are 
domestic or international. The underlying factors of de-risking 
remain the same between both domestic and international 
functions, and overly-punitive supervisory examination tactics 
employed by Federal financial regulators can have serious 
implications.
    Take, for example, the availability of banking services in 
jurisdictions deemed high risk, like the Caribbean, as well as 
towns along the southern U.S. border. It is one thing if de-
risking is an evidence-based response to illicit finance, and 
let me be clear, we support that, and I think that we have 
bipartisan support to do that. But when innocent people and 
legitimate businesses are being shut off from financial 
services, we need to take a step back. We should re-examine our 
approach to ensure that we are not lumping the good in with the 
bad.
    And the problem is this. The penalty for failing to comply 
with any money laundering regulation can be so devastating for 
financial institutions, especially small and medium-sized 
banks, that they turn to defensive approaches to ensure 
compliance. Republicans have raised this issue numerous times 
in the context of suspicious activity reports (SARs). Many 
banks carry out defensive SAR'ing to ensure that they don't get 
penalized. In 2021 alone, this resulted in over 3 million 
reports being generated, and I expect that we will see a new 
record set every year moving forward.
    It is through this lens that we approach Caribbean de-
risking. U.S. banks were faced with a difficult decision. 
Regulatory compliance costs and the penalties for noncompliance 
are so steep that financial institutions would rather end 
customer relationships than run afoul of regulators. The result 
is large-scale de-risking and de-banking for entire geographic 
areas that can sweep up ordinary people and small businesses, 
and have severe economic consequences and severe consequences 
for friends, allies, and neighbors. And the question of the day 
is this: Where do those de-banked customers go? I will tell 
you--China--and these are our neighbors. These are our friends. 
These are our traditional allies. These should be some of the 
closest relationships the United States has in the world.
    According to the report entitled, ``Financial De-Risking in 
the Caribbean,'' which was authored by one of today's witnesses 
on the second panel, from 2009 to 2016, Chinese correspondent 
banking relationships grew from 65 to 2,246. To put it in 
another way, over an 8-year span, China gained 2,181 new ways 
to engage with partners in developing regions like the 
Caribbean. As a matter of American policy, why are we driving 
people away from our friendship as a nation and towards seeking 
a country that does not adhere to our rules of law, our concept 
of human rights, and our struggle to improve human rights?
    Think about this. Our current regime that compels banks to 
over-file reports to not get penalized is actually driving 
customers to regions that regulators deemed high risk, 
underperforming, or worse, in the financial arms of the Chinese 
Communist Party (CCP). I would argue it is in the best interest 
of our financial system communities of law enforcement and the 
Federal Government to be able to monitor and maintain these 
global banking relationships and friendships.
    I look forward to hearing from the Prime Minister today, as 
well as the witnesses on the second panel. Thank you, Madam 
Chairwoman.
    Chairwoman Waters. Thank you, Mr. McHenry. As a reminder, 
we will have two separate witness panels today. After the first 
panel concludes, we will take a very brief recess before 
proceeding with the second panel.
    The sole witness on our first panel is the Honorable Mia 
Amor Mottley, the Prime Minister of Barbados. Prime Minister 
Mottley is an attorney, a member of parliament, her nation's 
minister of finance, economic affairs, and investment, as well 
as minister of national security and civil service. She is a 
leader in the Caribbean Community (CARICOM) Secretariat, and 
one of Time magazine's 100 Most Influential People for 2022.
    Prime Minister Mottley, you will have 5 minutes to present 
your oral testimony. You should be able to see a timer that 
will indicate how much time you have left.
    And without objection, your written statement will be made 
a part of the record.
    You are now recognized for 5 minutes to present your oral 
testimony.

STATEMENT OF THE HONORABLE MIA AMOR MOTTLEY, K.C., M.P., PRIME 
MINISTER OF BARBADOS; MINISTER OF FINANCE, ECONOMIC AFFAIRS AND 
  INVESTMENT; MINISTER OF NATIONAL SECURITY AND CIVIL SERVICE 
     [WITH RESPONSIBILITY FOR CULTURE AND CARICOM MATTERS]

    Ms. Mottley. Thank you very much, Chairwoman Waters, and 
Ranking Member McHenry, and thank you for having me here. I 
want to acknowledge my colleague and brother, the Prime 
Minister of Trinidad, the Honorable Keith Rowley, who is also 
here this morning, and appropriately so, because even though 
they don't have an offshore banking sector, they are the owners 
of 2 of the 5 banks in Barbados, and, therefore, have a vested 
interest in this issue. I want to say especially to the ranking 
member that you can be assured that while Barbados sent the 
first seven governors to the Carolinas, I am not here for that 
purpose at all today, and therefore, you need not worry. But I 
am here to tell you who we are and what faces us when banks 
leave.
    Our reality is that we in the Caribbean community are a 
community of sovereign nations of 15 countries, and we have a 
collective GDP of $82 billion. There are 41 States in the 
United States of America that have a larger GDP than all 15 
member states of CARICOM. It is important that we appreciate 
that context first. The irony is that the State that is closest 
to us in terms of GDP, at $80 billion, is the State of 
Delaware. But that speaks to other opportunities, I suspect, as 
to why Delaware and Wyoming, which is also smaller than us, 
have also pursued this area of financial services with the 
keenness that they have in recent years.
    We are here because we are fighting for the global public 
good, and we are fighting for the human rights of our citizens. 
This committee has already expressed its concern about 
financial exclusion of the American population, persons who 
have been excluded here. Our people are no different. When we 
were growing up, opening a bank account was a part of our rites 
of passage in becoming an adult. Today, it is now a gargantuan 
obstacle for us to have our people do so given that businesses 
come into our region and it sometimes weeks or months just to 
open a bank account as individuals to live and as companies to 
trade and do business.
    Our economies cannot function on their own. We do not make 
enough clothes, we do not produce our own food, we do not 
produce our own equipment, and, therefore, unless we are able 
to trade with the rest of the world, we are at risk of becoming 
financial pariahs. We are here because the listing process that 
has taken place, whether through the Financial Action Task 
Force (FATF), or the Organisation for Economic Co-operation and 
Development (OECD), or, further, as a result of actions taken 
for enhanced due diligence by those who take the listings from 
the FATF and the OECD, it means that those correspondent banks 
over the course of the last 10 to 12 years have made a judgment 
that we are simply too small, as I have just told you, in order 
to get involved because the enhanced due diligence means 
increased costs of regulation, and increased costs of 
compliance. And rather than do business with us, they say, 
thank you, but no thank you.
    What it has meant is that almost every country in our 
region over the course of the last decade, with the exception 
of two or three, have had a loss of more than 30 percent of 
their correspondent banking relationships. The truth is that we 
have also seen others use alternative mechanisms, as the 
ranking member just appropriately referred to in his opening 
statement. And, therefore, what we face is a situation where 
the very thing that you set out to achieve, which is the 
avoidance of terrorism financing, the avoidance of money 
laundering on which we are all agreed, is likely to happen 
because you are driving people underground. There is no benefit 
in driving our citizens underground or making our countries 
uncompetitive, such that our economies are at risk of becoming 
underdeveloped or failed states. And we now have to determine 
whether this is capable of being a continued acceptable course 
of action.
    We have been making noise for nearly a decade, and we want 
to thank this committee for hearing us today, because that 
noise cannot continue. And ironically, with the technological 
developments that have taken place, and as recent as the 
issuance of the digital yuan on which the Economist magazine 
wrote a column last week, there are options becoming available 
to countries to opt out of the SWIFT (Society for Worldwide 
Interbank Financial Telecommunications)system, and to find 
other ways of being able to transmit money to their citizens.
    For us in this region, it is not yet here, but given long 
enough, nature abhors a vacuum, and we will find a way. And why 
should this matter to you? This is a country of immigrants. We 
have as many immigrants here as from Africa, Asia, Europe, all 
over. And you need to recognize that part of the pattern of 
being an immigrant is that when you are able to do better, you 
want to send money back home to those who have not been able to 
make the journey. When correspondent banking relationships are 
removed from our people, there is no longer the luxury of being 
able to do so, but the love doesn't stop. You don't stop loving 
your family. You don't want to stop sending back the money. 
And, therefore, you will find whatever mechanism you can to be 
able to do so.
    Similarly, our economies require not just investment from 
local savings, but the attraction of foreign direct investment 
to survive. If we cannot keep our country safe, you already 
know in this country the spectacle of immigration from 
Caribbean countries. And you already have vigorous debates 
about what is acceptable and what is not acceptable, sometimes 
in ways that cause a little difficulty, too. If we want to be 
true to the declaration that we signed in Los Angeles, in the 
City of Angels, 3 months ago with respect to migration, then it 
is important that we create conditions where our countries can 
benefit and where our countries can have a level playing field 
in order to be able to achieve prosperity for our citizens who 
expect education, healthcare, and opportunities for trading.
    We, the majority of our countries, also depend on tourism. 
What happens when your tourists come? What happens when your 
investors want to build hotels? This is the most nonsensical 
thing that we have seen in public policy. And why do we say 
that we are at risk of offending a human right and a global 
public good? Every citizen of the world ought to have the right 
to be able to have a bank account if they are to walk the 
streets without fear of crime, if they are to have the 
opportunity to save, if they are to have the opportunity to do 
as the capitalist system tells us we should do: to leverage our 
savings to be able to invest in order to grow our economy and 
to increase our wealth.
    And every country in the world ought to be able to have 
access to affordable banking services to fuel trade and to 
foster and enable remittances. And in this entirely-globalized 
world that has come out of the bottle and can't go back in, 
there is no chance of putting the genie back in the bottle. 
What we do is force countries to find alternative means to 
trade.
    Now, the SWIFT system sounds familiar. Why? In this 
committee, I am sure you have had a lot of discussion about who 
should be excluded from the SWIFT banking system in this year. 
And we know that the attempts to keep Russia out through 
sanctions, as you have done with other countries, simply has 
treated them as pariahs, but they have found ways to trade 
outside of the SWIFT banking system, too.
    The reality also is that if you don't use this example to 
show you why this is an appropriate time to take different 
action, we will continue the injustice. And what do I mean by 
that? Russia didn't choose the Caribbean to hide its money. 
Russians didn't choose the Caribbean to hide its money. They 
chose the metropoles. They chose London, and New York, and 
Switzerland, and Luxembourg. And you only have to, as Tom 
Cruise told us in that famous movie, ``Follow the money.'' 
Where has the money gone? It hasn't come to the Caribbean. And 
what we have is listings from the Financial Action Task Force 
that are perhaps well-intentioned, but are focused on process 
and form and are not focused on substantive prosecution of 
money laundering. That is the equivalent of saying that I am 
more interested in whether you adhere to rules than in finding 
where the money launderers are.
    When you wanted to find the money launderers with respect 
to Russia, you didn't come to the Caribbean. You went to 
London. You went to New York. You went to Zurich. You went to 
Luxembourg. And I say this because there has to be a 
fundamental injustice in the system that puts on a list not 
Luxembourg, not the United States of America, not the United 
Kingdom, but perhaps Jamaica, Trinidad, Ghana, Barbados, all of 
which were put on a list, not even because we were having 
substantive money laundering there, but because in 2020, there 
was a determination to change the criteria by which we assess 
countries, looking at the definition of money supply from M2 to 
M3.
    Now, for most of my constituents, that sounds as though we 
are playing a game, but that reality of changing the definition 
of money supply led to the listing of our countries. And what 
did it mean? An investor wanting to come to Barbados from 
Europe goes into a bank and says, ``I want to transfer X 
million dollars for an investment.'' The bank says, ``Oh, 
Barbados, no, we have to do enhanced due diligence because they 
are on a list, or Belize, we have to do enhanced due 
diligence.'' When that happens, they say, ``But guess what? The 
enhanced due diligence is too costly for us. You need to go and 
find another bank.''
    It doesn't only happen with de-risking of institutions. It 
also happens with categories of business. So, you have bankers 
saying to people who trade gold, oh, you can't bank with us 
anymore. Come for your millions of dollars. Where are they 
going to carry it? How does that enhance the opportunities for 
crime? How does that enhance human insecurity? People who trade 
in casinos, do you believe that the owners of casinos in Las 
Vegas keep their money in a safe or do they keep it in a bank?
    In the Caribbean and Trinidad where the casinos and then 
the rest of us, they tell the people who have casinos and slot 
machines, you can't bank in a bank anymore, in spite of the 
fact that we still have correspondent banking relationships. 
Why? Because to keep the remaining relationships that we have, 
they go overboard with the level of compliance and regulatory 
compliance that make us now as countries uncompetitive and make 
the conduct of certain businesses prohibitive. This can't be 
fair, and if it is not fair for your people to be excluded 
financially, then we say equally it is not fair for their 
family in the islands and in the other countries from which 
they come to be excluded financially. This is a global public 
good that we must protect, and this is a human right that we 
must protect. And I want to thank this committee for seeing us 
today, for hearing us, and for feeling us because far too 
often, that has not been done.
    The last point I will make is this. Do not let this be 
recorded as an act of unconscious bias, and why do I say so? 
Look at the list of countries who are listed, and you will see 
that they are almost all former colonies and people of color. 
And look at the countries who, in spite of being able to open a 
bank account within hours in Delaware or Wyoming, within hours 
in Luxembourg or Zurich, and they remain off of these lists 
that speak about the risk to money laundering, and look and see 
where the divide comes. I believe that this committee has a 
keen eye for fairness and equity, and all we ask today is for a 
level playing field.
    One of the solutions we will leave you with is that the 
Treasury ought to be truthful to its mandate. It says that it 
wants to be risk-sensitive. If it wants to be risk-sensitive, 
then it needs to focus on where the money is rather than 
creating rules that act as a proxy to money laundering or 
terrorism financing, and it has found the answer, even if 
fortuitously or serendipitously this year, by following the 
money with the Russian sanctions.
    I thank you and I pray that we can use technology, 
communication, sharing of information, but above all else, 
fairness and transparency to ensure that our people are not 
further punished from being able to participate in their lives, 
through their economies, through their savings, and with their 
families across borders and businesses. Thank you very much.
    [The prepared statement of Prime Minister Mottley can be 
found on page 61 of the appendix.]
    Chairwoman Waters. Thank you so very much, Prime Minister 
Mottley.
    Now, without objection, I would like to submit statements 
for the record from the Caribbean Community Secretariat, the 
Government of Antigua and Barbuda, and MoneyGram International, 
Incorporated, that echo many of the things that Prime Minister 
Mottley stated in her testimony.
    Without objection, it is so ordered.
    I now recognize myself for 5 minutes for questions.
    Prime Minister Mottley, thank you again for your testimony 
on this vexing issue of bank de-risking. In your testimony, you 
explained that the international community, including the 
United States, tends to incorrectly perceive the volume and 
impact of financial crime that moves through the Caribbean as 
compared to other countries like Switzerland, the United 
Kingdom, and even the United States. The European Union has 
high-profile examples of years-long anti-money laundering 
failures, such as Danske Bank, through which Russian oligarchs, 
including Russian President Putin, have laundered billions of 
dollars. And yet, instead of looking inward, it is Caribbean 
nations and non-sovereign territories that the United States 
blacklists for money laundering or tax reporting deficiency.
    You have argued that such blacklists and similar reports 
are one reason why the Caribbean is incorrectly perceived by 
correspondent banks to be riskier. For example, the United 
States Department of State prepares an annual report with input 
from the listed countries called the International Narcotics 
Control Strategy Report, or INCSR. The purpose of this report 
is to describe the efforts to combat all aspects of the 
international drug trade, including money laundering and 
financial crimes.
    INCSR is an important and useful report, but it only 
provides negative information about listed nations without 
describing their efforts to improve their ability to fight 
financial crime. This seems to not provide a full picture of 
the actual risks that exist. That is why I proposed H.R. 8798, 
the INCSR Improvement Act, which would amend the law to require 
INCSR to include examples of anti-money laundering improvements 
made in the list of countries. I believe that including such 
information will also be useful for the Congress in 
understanding the countries whose activities are being 
reviewed.
    Prime Minister Mottley, can you please comment on the 
effects that international blacklists and reports like INCSR 
have had on perception about the banking risk in the Caribbean, 
especially in terms of how correspondent banks incorporate that 
information in their risk evaluation and decisions about 
whether to offer services within a listed country? And 
specifically, can you comment on my proposal to make changes to 
the INCSR report?
    Ms. Mottley. Thank you very much for that question, and it 
is very appropriate. The reality is, as I said, the listing has 
been recognized by the Bank of International Settlements as 
perhaps the greatest reason why correspondent banks leave and 
remove their relationships, and, therefore, these lists are 
deleterious. We believe that if we can move these lists off, we 
are in a position to be able to at least have a better chance 
to make the case that the substantive concerns that we all have 
to fight crime are being met.
    The reality is that the State Department's report--and once 
again, we have been complaining for years--is prepared by 
junior officers. It is not robust, it does not allow us a right 
of response, and it does not take into account when 
improvements have been made during the course of the year. This 
is not an exam. This is our life, and this is real for our 
people. When banks remove themselves and say they are not doing 
business, and an investor has a choice between a country in the 
Caribbean or a country elsewhere where he can seamlessly move 
his investments, he is going to go elsewhere.
    And that is why we say that these reports have a 
disproportionate consequence in excluding us and making us 
financial pariahs and making us uncompetitive. And we feel that 
if you can pass legislation that: one, includes a right for us 
to respond; and two, since we live in a world of real time, if 
we have improvements, they ought to be taken in real time 
rather than waiting for the next year's report in order to take 
account of the improvements that have been made by countries. 
Why? Because in the course of the year, that country can lose 5 
percent of its economic activity, 7 percent, 2 percent, all as 
a result of its failure to be able to attract investment.
    And equally, what I haven't spoken about is the millions of 
dollars that we have to spend as a small state to try to 
satisfy those considerably-larger questionnaires that exist in 
circumstances where we know that the money isn't in us, and 
that it is not us where the money launderers are hiding their 
money in plain sight. But you are coming to us to give yourself 
a sense of comfort, and that is our concern with these lists.
    And secondly, when we comply with the list, what happens? 
The goalpost has moved, and a new list comes out with different 
concerns, and we have seen it whether in terms of money 
laundering and terrorism finance or in terms of tax 
transparency with the OECD. And that is why if you go back, we 
are continuously on these lists, facing the consequences of 
that withdrawal. Thank you.
    Chairwoman Waters. Thank you. I agree with you, Prime 
Minister. And as we heard several months ago at the roundtable 
in Barbados, and as we are likely to continue to hear today, 
the incompleteness of these international reports can have a 
profound impact on whether a correspondent bank decides to cut 
off all business to a country.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 5 minutes for 
questions.
    Mr. McHenry. Thank you, Madam Chairwoman, and thank you, 
Prime Minister, for being here. This is an important issue, but 
in de-risking, we want to make sure that the knock-on effects 
of this are not so severe that we actually go against our 
common interest here. But the way this de-risking is carried 
out is because of jurisdiction, or industry, or an area is 
deemed to be high risk for money laundering. That is at least 
what the financial regulators will say, what these institutions 
that are moving out of territories will say.
    My question to you is just a very direct one. What is your 
government or your country doing to counter that perception, or 
what they would say is fact, but I think we would say is 
perception. What are you doing to counter that perception?
    Ms. Mottley. Thank you. We have had to pass substantive 
laws to deal with these issues since 9/11. I was attorney 
general when 9/11 happened. I was around when Resolution 1373 
and all of those other resolutions were passed when the U.S.A. 
Patriot Act was passed. The U.S.A. Patriot Act has not stopped 
money laundering in this country. The U.S. Patriot Act has not 
stopped money laundering in Europe. You have seen the evidence 
of it this year as you have gone after the oligarchs and as you 
have put sanctions on others.
    At the same time, our country has had to divert money away 
from social spending and critical infrastructure spending in 
order to ensure that we do not have our banks cut off from the 
rest of the world. And to that extent, that is why my citizens 
have to face 4 weeks or 5 weeks to open a bank account as a 
young kid with no background of any kind of problems in any 
society because you are now coming into an adulthood.
    Similarly, if you decided to have a company here, to try to 
invest in Barbados, more often than not, it will take 4 or 5 
weeks to open an account. If you go to Delaware, you can open 
it up within matter of hours, in a twinkle of an eye. If you go 
elsewhere in Europe, in a twinkle of an eye. In spite of all of 
those things, we have had to spend this money just to be able 
to not be level, but to come close to having a chance of having 
economic activity.
    Mr. McHenry. So, what are you using? Are you using 
technology to speed up that process?
    Ms. Mottley. We are using technology. In Barbados, we have 
just introduced a national digital identity verification card, 
and that is to help us expedite the process in spite of what 
else we are fighting for in terms of our advocacy.
    Mr. McHenry. But you are talking about a digital 
identification card?
    Ms. Mottley. Digital identity card.
    Mr. McHenry. We don't have that in the United States. 
Explain to me what that is.
    Ms. Mottley. A card that helps you to validate who you are 
digitally to give you access to other services so that the 
banks can take a chance on you in a more credible way, but that 
costs us millions of dollars to do. In the same way equally, 
our banks are using a metric, which is, in fact, far more 
rigorous than yours. You have a metric of $10,000 for money 
laundering. Our metric is the equivalent of $5,000, so that 
every transaction over $5,000 has to be able to be monitored 
and examined. And the bottom line is that in every instance, we 
are doing--I say this with Madam Chairwoman, like women, we are 
doing twice as much as you to be considered half as good as 
you.
    Mr. McHenry. I have no follow-up because I, in fact know it 
is true, sadly, but I also know the effects, which is that you 
are working twice as hard and actually are twice as good, 
perhaps more. So along those lines, you are taking active 
concerted efforts to address these concerns, and you are 
working actively to do that. I think that is an important 
message.
    And Madam Chairwoman, thank you for holding this hearing 
because it does bring up a big issue that we talked about a 
couple of Congresses ago domestically, but we need to talk 
about in terms of our trusted trading partners. In a 
complicated world, we need to make sure that our closest 
countries are our closest friends, and we need to treat them 
like our closest friends.
    And I think for too long, we have thought of many of our 
neighbors to the South as great places to go visit without 
thinking, we need a trading relationship, not a visiting 
relationship, and we need to change this mentality of our 
closest neighbors, who are actually deeply moored with us and 
in our economy, and that is an exchange. That is not a one-way 
street. It is a two-way street. We need to make sure it is done 
that way. So Madam Prime Minister, thank you for being here. 
Thank you for your testimony.
    Ms. Mottley. If I may, the reality is that we are family, 
and apart from being family, there are opportunities that can 
exist to improve your conditions and our conditions. But 
nothing has happened between the U.S. and the Caribbean since 
the passage of the Caribbean Basin Initiative Act more than 40 
years ago. And if we don't create the opportunity to expand the 
trade, which now stands at $35 billion, with which you have a 
trade surplus of $12 billion, there is far more work that can 
be done, far more investment that can be done. And there are 
issues. For example, even as we fight the issue of fertilizer, 
Trinidad has surplus capacity on natural gas and fertilizer, 
but they can't get it here because of other issues that you 
have resolved for Europe, and you have resolved for Chevron, 
but not for Trinidad and Tobago. There are a number of issues 
that I believe again--
    Mr. McHenry. Okay. This is also a trading relationship 
conversation, I see.
    Ms. Mottley. Yes, it is more than trade, and we are family 
there too.
    Mr. McHenry. Yes.
    Ms. Mottley. But basically, what really is happening is 
that we are not having the opportunity to do what we should be 
doing: trade with each other substantively and to create and 
work together collaboratively to fight crime. And we have that 
relationship with Southern Command. We have that relationship 
with other agencies in this country, but it is almost as if the 
left hand and the right hand don't know what the other is 
doing.
    And all we are asking you to do in this committee is to 
bring clarity and to have a sensitization that if Treasury 
wants to really fight crime and fight money laundering, do not 
drive the transactions underground by forcing us to find 
alternative means to trade and to send money to each other. And 
whether it is a digital one or whether it is the unregulated 
crypto exchanges, or whether it is buying jewelry, people will 
find ways to send remittances and will find ways to continue to 
trade because we do not produce all that we need in order to 
live.
    Mr. McHenry. Thank you.
    Chairwoman Waters. Thank you, Mr. McHenry, and I would like 
to thank our distinguished witness for her testimony today.
    Without objection, all Members will have 5 legislative days 
within which to submit additional written questions for the 
Prime Minister through the Chair, which will be forwarded to 
the witness for her response.
    We will now take a brief recess to bring forward our second 
panel of witnesses. Thank you very much.
    [brief recess]
    Chairwoman Waters. The committee will come to order. I 
would like to welcome our second panel of distinguished 
witnesses to the committee: Mr. Wazim Mohamed Mowla, the 
assistant director and lead of the Caribbean Initiative at the 
Adrienne Arsht Latin America Center, Atlantic Council; Ms. 
Wendy Delmar, the CEO of the Caribbean Association of Banks; 
Mr. I. Wayne Shah, the senior vice president of financial 
institutions and the head of the Caribbean region at Wells 
Fargo Bank, as well as the executive director of the Financial 
and International Business Association; Mr. Amit Sharma, the 
CEO, founder, and director of FinClusive; and Ms. Liat Shetret, 
the director of global policy and regulation of Elliptic.
    You will each have 5 minutes to present your oral 
testimony. You should be able to see a timer that will indicate 
how much time you have left. I would ask you to be mindful of 
the timer so that we can be respectful of everyone's time.
    And without objection, your written statements will be made 
a part of the record.
    Mr. Mowla, you are now recognized for 5 minutes to present 
your oral testimony.

    STATEMENT OF WAZIM MOWLA, ASSISTANT DIRECTOR, CARIBBEAN 
   INITIATIVE, ADRIENNE ARSHT LATIN AMERICA CENTER, ATLANTIC 
                            COUNCIL

    Mr. Mowla. Good morning, Chairwoman Waters, Ranking Member 
McHenry, and distinguished members of the committee. It is my 
privilege to address you this morning on the impacts of de-
risking in the Caribbean and strategies for ensuring financial 
access.
    First, I congratulate the committee for prioritizing the 
withdrawal of correspondent banking relations and, by virtue of 
holding this hearing, underscoring your commitment to 
addressing this issue, one that is critical to both the 
Caribbean and the United States. I would also like to note that 
it was an honor to accompany Chairwoman Waters to Barbados 
earlier this year and participate in the Caribbean Financial 
Access Roundtable in which the issue of de-risking was raised.
    Before I begin, I would also like to acknowledge the much-
needed comments and insights from the Honorable Prime Minister 
Mia Mottley of Barbados, as well as the other witnesses who are 
joining me today, including Wendy Delmar and Wayne Shah, who 
are both part of the Atlantic Council's Financial Inclusion 
Task Force.
    Members of the committee, as you have heard today and will 
continue to hear, the withdrawal of correspondent banking 
relations, or de-risking, is having a significant impact on the 
health, functioning, and development of Caribbean economies. 
Financial institutions list the Caribbean as the most effective 
region globally, with some countries losing close to half of 
all correspondent banking relations over the past decade. De-
risking has adverse effects on key economic sectors including 
tourism, remittance flows, and access to international trade, 
finance, and credit. To put it simply, de-risking is 
effectively cutting the Caribbean off from the rest of the 
world, bringing any means of economic development and 
resilience to a halt.
    Because of the extreme vulnerabilities these countries 
face, they are in a constant state of economic survival, 
consistently depending on global finance to rebuild after 
hurricanes to attract foreign investment into emerging 
industries, and whose citizens rely on the imports of food, 
fuel, and goods to maintain the quality of life. All of this is 
only possible if these countries have access to correspondent 
banking. And while de-risking has severe impacts in the 
Caribbean, the United States, its national security, and its 
interests are not spared.
    First, de-risking limits Caribbean countries' ability to 
access the U.S. dollar. This presents a challenge for U.S. 
agencies as it is counterproductive to addressing money 
laundering concerns if businesses and individuals are forced to 
use alternative currencies or avenues to transact payments. 
Often, this can become a place for criminal networks to hide 
illicit flows, making it more difficult for U.S. agencies to 
combat them. Here, there is a clear national security risk. 
Because of the Caribbean's proximity to countries that house 
illicit actors, such as Venezuela and Cuba, the region is then 
exposed to becoming the future hub for criminal financing if 
de-risking goes unaddressed.
    De-risking also limits U.S. economic influence. U.S. 
companies seeking to shorten supply chains near shore to the 
region are likely to face barriers such that they cannot pay 
service and product suppliers. For companies looking to invest 
in emerging industries, such as the energy markets of Ghana, 
Trinidad and Tobago, and Suriname, correspondent banking will 
be vital to ensuring that the U.S. private sector is able to 
compete for contracts. Further, continued de-risking and loss 
of access to the U.S. dollar presents an opportunity for 
Caribbean governments and financial institutions to seek new or 
strengthen existing relationships abroad, notably with China.
    While Caribbean governments and people rely on the U.S. 
dollar, it is not the only internationalized currency. While 
the euro is an alternative, Caribbean governments face similar 
de-risking challenges with banks in the European Union. The 
result is an opportunity for the Chinese RMB and its banks to 
strengthen ties with the region. The draw of new banks and RMB 
usage from China is likely to be attractive for most Caribbean 
countries and can even influence Taiwan's allies in the region. 
At present, 5 of Taiwan's 14 remaining allies are CARICOM 
members. Except for Haiti, these countries have each lost more 
than 30 percent of the correspondent banking counterparties 
since 2011. If the severity and frequency of de-risking rises 
in the region, this can be an added incentive for Taiwan's 
allies to pursue a switch in diplomatic recognition.
    Members of the committee, I urge you to take legislative 
steps to address de-risking in the Caribbean to promote 
financial inclusion and safeguard U.S. interests. Never has 
there been more of an appetite for the United States and the 
Caribbean to expand cooperation and strengthen their 
partnership, but doing so will require tangible and decisive 
action. The INCSR Improvement Act is one such example, which 
will help Caribbean financial actors and government leaders 
annually underscore actions taken to address money laundering, 
drug trafficking, and financial crimes, and the Caribbean 
Stakeholders Engagement Act is another, which will ensure that 
those that are most affected by de-risking have a seat at the 
table.
    Members of the committee, I speak to you today as a 
Caribbean American, someone who has a vested interest in the 
well-being, prosperity, and security of both the Caribbean and 
the United States, and I can clearly and sincerely state that 
correspondent banking underpins the core of the U.S.-Caribbean 
economic relationship. It has an impact, not just on Caribbean 
citizens, but on U.S. citizens as well. Taking actions today 
and in the future can ensure that we as neighbors, as Americans 
and Caribbean citizens, can build a future that is safe and 
prosperous for everyone.
    Thank you once again for the honor and the opportunity to 
appear before the committee today. I look forward to answering 
your questions.
    [The prepared statement of Mr. Mowla can be found on page 
75 of the appendix.]
    Chairwoman Waters. Thank you. Next, we have Ms. Wendy 
Delmar, who is the CEO of the Caribbean Association of Banks.

STATEMENT OF WENDY DELMAR, CEO, CARIBBEAN ASSOCIATION OF BANKS 
                             (CAB)

    Ms. Delmar. Chairwoman Waters, Ranking Member McHenry, and 
distinguished members of the committee, good morning. I am 
honored for the opportunity to shed light on a matter that may 
be deemed the proverbial thorn in the side for banks and 
financial institutions in the Caribbean. As a Caribbean 
national and career banker, the onslaught of de-risking 
activity, and its resultant adverse impact on the banking 
industry and economies of the region, has been both 
disheartening and deeply concerning.
    As chief executive officer of the Caribbean Association of 
Banks (CAB), I am proud to state that the CAB was the first 
regional organization to sound the alarm as early as 2015 
relating to de-risking activity in the Caribbean. Since then, 
we have worked assiduously to bring to the forefront the 
challenges faced by the region resulting from the loss of 
correspondent banking relationships, while concurrently 
striving to identify and execute possible solutions.
    It is agreed that prior to the increase in regulatory 
requirements aimed at addressing money laundering and the 
financing of terrorism, banks and other financial institutions 
within the Caribbean enjoyed mutually-beneficial correspondent 
banking relationships with the United States' correspondent 
banks. However, as noted by Ian De Souza in 2017, in a research 
paper commissioned by the CAB on the unintended consequences of 
de-risking, the scaling up of efforts related to anti-money 
laundering and combating the financing of terrorism ultimately 
resulted in a deteriorated cost-benefit position for the 
business of Caribbean banks and other financial institutions. 
Yet, regrettably, and quite candidly, the current arrangements 
through which the international financial system has chosen to 
relate to Caribbean banks and other financial institutions has 
rendered the region disproportionately dependent on 
correspondent banking services, thereby exacerbating the 
adverse effects of de-risking.
    In my written submission, I have developed the foremost 
areas of concern related to the matter. Noting however the time 
restrictions for this morning's hearing, I will provide a brief 
summary.
    The Caribbean is comprised primarily of small island 
developing states. As such, foreign direct investment is 
significant to the gross domestic product of Caribbean 
economies. De-risking perpetuates the perception of the region 
as high risk, which negatively impacts investor appetite. The 
likely resultant decline in foreign direct investment (FDI) has 
a multiplicity of ramifications from the macro to micro 
economic levels.
    Moreover, access to international financial markets is 
paramount for Caribbean jurisdictions given that most countries 
are, in fact, net importers. Therefore, the availability and 
access to goods, from grocery store items to vehicles, is 
dependent on well-functioning correspondent banking 
relationships. At the height of de-risking activity, Belize, 
for example, lost nearly all correspondent banking 
relationships. Wire transfer services, the processing of credit 
card payments, and the clearing of checks issued by United 
States banks were unavailable. In a jurisdiction heavily 
dependent on tourism, the ramifications of the previous would 
die off.
    Additionally, banks and other financial institutions within 
the Caribbean continue to contend with significant increases in 
operational costs, driven almost primarily by compliance 
initiatives. This is representative of one of the most 
deleterious unintended consequences of de-risking, which is the 
burden inadvertently placed on all banks within the region to 
discredit the relentless perception and perpetuation of the 
region as a high-risk jurisdiction.
    In this regard, I draw attention to the annual 
International Narcotics Control Strategy report, previously 
mentioned by PM Mottley. Though this may not be the committee 
responsible for the report, I wish to commend Chairwoman Waters 
for her interventions resulting in proposed amendments to the 
text of the report, which, if successfully adopted, will 
increase the validity of the report, and hopefully result in a 
more factual and less disparaging representation of the 
Caribbean.
    With the foremost in mind, I offer the committee the 
following strategies for improvement: one, the development and 
implementation of common and preset international compliance 
standards; two, the consideration of correspondent banking 
services as an economic and humanitarian good; three, the 
support of a regional approach to improve the cost-benefit 
position of correspondent banks; and four, to improve the 
provision of information to inform the International Narcotics 
Control Strategy report.
    Ladies and gentlemen, I thank you for the opportunity again 
to present to you this morning, and I am open to any questions 
that you may have.
    [The prepared statement of Ms. Delmar can be found on page 
56 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Delmar. Next, we will go 
to Mr. Shah. You are now recognized for 5 minutes to present 
your oral testimony.

 STATEMENT OF WAYNE SHAH, SENIOR VICE PRESIDENT, WELLS FARGO & 
 COMPANY; AND VICE CHAIR, FINANCIAL AND INTERNATIONAL BUSINESS 
                       ASSOCIATION (FIBA)

    Mr. Shah. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, good morning. I am Wayne Shah, senior 
vice president of the Financial Institutions Group at Wells 
Fargo and Company and a board member on the executive committee 
of the Financial and International Business Association (FIBA), 
of which Wells Fargo is a longstanding member. I appreciate the 
opportunity to be here today and I look forward to sharing with 
you the many ways in which Wells Fargo is working to support 
our correspondent bank customers in the Caribbean.
    I will speak to you today in two capacities: first, I will 
discuss Wells Fargo's activity in the Caribbean; and second, I 
will discuss FIBA's efforts in this area. I work for Wells 
Fargo Corporate and Investment Bank and support both domestic 
and international financial institutions through a dedicated 
industry coverage team. Wells Fargo has provided strategic 
correspondent banking services to the Caribbean banks for more 
than 50 years. Our commitment to the region's growth and 
development is underscored by our market share and the number 
of countries where Wells Fargo services are available. Wells 
Fargo provides correspondent banking services to banks at the 
regional, head office, and country level. Today, we provide 
services to over 20 countries in the region.
    Following the 2008 financial crisis, the process known as 
de-risking began to show up in the Caribbean. De-risking refers 
to the phenomenon of financial institutions terminating or 
restricting business relationships with clients or categories 
of clients to avoid risk rather than manage it. In 2007, Wells 
Fargo and FIBA created the Caribbean Roundtable to highlight 
and discuss pressing matters for the Caribbean banking 
community. FIBA ultimately attributed de-risking to a change in 
perception that the Caribbean banks have become high risk. 
According to FIBA, de-risking seemed to impact smaller banks to 
the greatest extent. These banks were no longer able to access 
international markets, execute foreign payment and trade 
services, or support cross-border credit cards. However, during 
this time, banking services necessary to support the region 
continued to be available through larger, unaffected financial 
institutions.
    Instead of exiting banks, Wells Fargo embarked on a 
significant effort to work with respondents on enhancing their 
Bank Secrecy Act/Anti-Money Laundering (BSA/AML) programs. 
Wells Fargo's focus was to understand, improve, and align risk 
management objectives. Wells Fargo established and funded an 
annual Caribbean conference whose purpose was to create a forum 
to work with Caribbean banks in navigating change. The 
conference is focused on building a better, safer, and 
financially-inclusive Caribbean ecosystem.
    As a FIBA board member, I would like to also take a few 
minutes to talk about the contributions FIBA made in response 
to de-risking in the Caribbean. Built on a legacy that spans 
over 40 years, FIBA is a non-profit trade association, and an 
international center for financial excellence. Their membership 
includes the largest financial institutions from Europe, the 
United States, Latin America, and the Caribbean. FIBA is 
recognized by the financial services industry, regulators, and 
law enforcement as a center of excellence with deep knowledge 
and expertise in AML Compliance, and high-level education and 
training programs.
    In 2009, FIBA first raised concerns about the potential 
loss of support for correspondent banking in the Caribbean. 
Over the next several years, FIBA invited stakeholders from 
Caribbean governmental agencies, Caribbean financial 
institutions, the U.S. Treasury Department, and U.S. regulatory 
agencies to debate and discuss potential solutions. To date, 
FIBA could not find any empirical evidence to believe that 
Caribbean banks had lesser abilities regarding BSA/AML. In 
fact, FIBA's view is that the Caribbean banks that remain in 
the market have invested heavily in BSA/AML compliance and risk 
management measures.
    Caribbean banks are also currently highly compliant with 
international guidelines and industry best practices. In FIBA's 
opinion, the era of de-risking small Caribbean banks has long 
been over. However, many challenges remain that still 
jeopardize financial inclusion for the Caribbean. These 
include: one, making sure history does not repeat itself and 
de-risking does not affect the larger Caribbean banks; two, 
encouraging correspondent banks to return to the region; three, 
establishing a view that the Caribbean is a region of safety 
and soundness for financial services; four, encouraging 
independent country and counterparty risk analysis; and five, 
calibrating regulatory mandates and addressing unintended 
consequences of legislation and regulations.
    On behalf of Wells Fargo and FIBA, thank you for letting me 
speak today, and I welcome your questions.
    [The prepared statement of Mr. Shah can be found on page 81 
of the appendix.]
    Chairwoman Waters. Thank you, Mr. Shah. Mr. Sharma, you are 
now recognized for 5 minutes to present your oral testimony.

      STATEMENT OF AMIT SHARMA, CEO & FOUNDER, FINCLUSIVE

    Mr. Sharma. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and the distinguished members of the committee. I am 
honored by your invitation to testify before you today. I look 
forward to sharing my views on the impacts of de-risking to our 
national, international, and economic security, as well as the 
capabilities of new technology and innovations happening in the 
traditional and non-traditional financial services industry, in 
particular as they represent many solutions to de-risking as 
well as the inherent contents of financial system integrity.
    By way of background, I am the CEO and founder of 
FinClusive. We are a hybrid financial and regulatory technology 
company that connects traditional banking with blockchain-
enabled payments and virtual asset networks. And we do this by 
providing a full stack embedded anti-money laundering set of 
capabilities, bringing a number of integrations globally for 
Know Your Customer (KYC) transaction monitoring, analytics, 
digital identity solutions, and legal entity identifiers, all 
to provide a utility for Know Your Customer, AML, and other 
financial crimes compliance protocols.
    My colleagues here today have provided a thorough 
definition and description of de-risking itself and the manner 
in which financial exclusion in the Caribbean consequentially 
is linked to the growth and continued uncertainty of growing 
anti-money laundering obligations over many, many years. And I 
wish to focus my oral statement on the attendant risk of de-
risking and the uncertainty that we believe provides more 
financial solutions than detriments to the financial services 
industry.
    First, it is important to note that financial excluded or 
underserved is disproportionately the vulnerable parts of our 
society from low/moderate income to global poor, those lacking 
in financial and credit history, jurisdictions labeled by many 
governments, including our own, and global standard setters 
like the Financial Action Task Force as being particularly weak 
in anti-money laundering or consequently working through 
corruption issues, as well as certain types of activities like 
money services businesses, remittances and trade finance, 
mobile and web-based applications, and, increasingly, those 
that are in the financial technology and the blockchain 
industry that are increasingly looked at by traditional 
institutions as inherently higher risk.
    The importance of financial inclusion cannot be overstated, 
and much of this has been discussed today, but, in fact, the 
remittances and economic consequences for just global trade 
also cannot be overstated. In fact, over 3 times official 
development assistance is happening through global remittance 
flows and many times, for certain jurisdictions, that is one-
third or more of their GDP.
    To formulate solutions to de-risking and financial 
exclusion, we must take note of a couple of really important 
trends, and the first is the recognition that there continues 
to be an exponential increase in non-bank, technological, and 
web-based applications for finance and banking. And these are 
very important peer-to-peer transactions, virtual asset level 
transactions, and, alike, are increasingly available to many 
who just do not have access to traditional financial services.
    Secondly, this growth has given a lot of regulatory 
agencies pause because of the uncertainty and unknown 
considerations associated with technologies that just look and 
operate differently from traditional financial services, 
banking, and payments.
    And finally, this growing body of regulations is, in fact, 
causing significant challenges for new and emerging entrants 
that are trying to provide financially-inclusive opportunities 
that then have to put policies, procedures, licensing, and 
other applications in place that are often costly and 
burdensome.
    There are several important areas where solutions are being 
orchestrated within the context of the Caribbean and, indeed, 
globally in the service of financial inclusion and addressing 
de-risking. Several of them include enabling marginalized 
communities to be furnished digital wallets directly so that 
virtual assets can be funded directly into them, and to provide 
them access to vital economic resources to pay between each 
other and merchants providing vital assistance.
    Linking those digital wallets to accounts provides a 
gateway between fiat stores of value and virtual assets. 
Governments themselves are issuing their own digital 
currencies, which can automate financial access, and, in fact, 
provide official assistance and other necessary services. 
Globally, donors are increasingly using virtual assets to 
provide needed assistance directly to recipients in need, and 
also issuing digital identity credentials that can be served as 
not only global Know Your Customer (KYC) utilities, but to 
verify and validate individuals and the transactions that they 
undertake.
    In sum, we must look at these tools as not only driving 
financial inclusion activities, but inherently, these very 
attributes of the technologies serve to strengthen the 
financial crimes compliance and anti-money laundering 
objectives themselves. While financial innovation continues 
unabated, we must stop with this false binary choice of a 
system that may provide financial access versus threaten 
financial system integrity, because inherently they are linked.
    I thank you again for your time, and I look forward to your 
questions.
    [The prepared statement of Mr. Sharma can be found on page 
86 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Sharma. Next, we will 
have Ms. Shetret. You are now recognized for 5 minutes to 
present your oral testimony.

    STATEMENT OF LIAT SHETRET, DIRECTOR, GLOBAL POLICY AND 
                      REGULATION, ELLIPTIC

    Ms. Shetret. Good morning, Chairwoman Waters, Ranking 
Member McHenry, and distinguished members of the committee. It 
is my privilege to address you at today's hearing on the topic 
of de-risking. Thank you for prioritizing this important topic. 
I will focus my testimony on why de-risking happens, the 
consequences of de-risking, and how technological innovations 
can help minimize the practice of de-risking.
    My name is Liat Shetret. I am the director of global policy 
and regulation at Elliptic, the global leader and provider of 
anti-money laundering compliance solutions to virtual assets 
businesses and regulators globally for nearly a decade. We 
equip financial institutions, crypto asset businesses, law 
enforcement, and regulators with the tools and insights they 
need to manage risk, including, for example, to identify, 
assess and act upon illicit and criminal crypto transactions 
recorded on the blockchain. Elliptic makes sense out of 
blockchain data and identifies trends and typologies that help 
our customers understand and evaluate the risk exposure and 
make risk-based decisions.
    De-risking is not a new issue. In 2015, I co-authored a 
report commissioned by Oxfam U.S., entitled, ``Understanding 
Bank De-Risking and its Effects on Financial Inclusion.'' In 
that report, we explored the drivers and responses to de-
risking, highlighted case studies of financial access, and 
provided recommendations for banks, regulators and bank 
customers who have been de-risked.
    Not much has changed in terms of the complexity and 
detriment of the de-risking problem. However, the urgency of 
addressing de-risking of correspondent banking relationships, 
specifically in the Caribbean and other regions, is 
significantly heightened. We have heard about this at length in 
testimonies before mine. One piece that has not been mentioned 
is the stark gender gap in financial resilience in the 
Caribbean, where 56 percent of men can reliably access 
emergency money, but only 39 percent of women report being able 
to do so.
    While de-risking practices have not been localized in any 
particular population, community, or industry, in recent years 
there has been an aggregation of results best described as a 
trend towards de-risking of sectors, including correspondent 
banks and specific financial corridors and regions. These 
account closures have had a ripple effect on financial access 
for individuals and businesses who rely on access to financial 
services with regional and national security implications. 
Financial institutions have significantly scaled back their 
risk appetites. These declining risk appetites, coupled with 
rising global scrutiny of anti-money laundering and countering 
the financing of terrorism rules, are the most commonly-cited 
reasons for de-risking.
    Digging deeper, we note that underlying the practice of de-
risking is the assumption that the affected customers present a 
higher risk of utilizing their bank accounts as a medium for 
raising, moving, and storing funds that are somehow tainted by 
illicit activities, such as money laundering, terrorist 
financing, or tax evasion. Specifically, correspondent banks 
which provide back-end services such as check clearing, foreign 
exchange trading, and fund transfers on behalf of other 
financial institutions have been identified as a key 
vulnerability in Anti-Money Laundering/Combating the Financing 
of Terrorism (AML/CFT) regimes. In short, the risk is simply 
not worth the reward.
    De-risking is an issue that impacts entire markets. All 
invested stakeholders, bank regulators, and bank customers and 
clients appear to be acting rationally and in their own best 
interests. However, in doing so, they have created unintended 
consequences for market integrity, financial inclusions AML/CFT 
objectives, and, worryingly, have compromised national security 
interests. A lack of structured and systemic response to the 
issue of de-risking is perpetuating the challenge of regulatory 
arbitrage, which is the practice of utilizing more favorable 
laws in one jurisdiction to circumvent less-favorable 
regulation elsewhere.
    International standards urge institutions to adopt a risk-
based approach. Regulators proactively advise financial 
institutions to assess their policies and allocate resources 
according to their unique risk profiles and risk exposure. 
Although this approach is designed to allow for flexibility, it 
also introduces ambiguity. Inappropriate risk avoidance has 
replaced effective risk management. Rather than reducing the 
risk of criminal activity in the global financial sector, de-
risking potentially increases systemic vulnerability.
    How can these objectives be balanced? De-risking is a 
problem of exclusion that is remedied by inclusion, 
specifically the inclusion of technology actors. For the 
Caribbean, convening an action-oriented task force or committee 
of affected parties, including financial institutions, 
regulators, and trusted members of the private sector, such as 
tech companies, will bring innovative solutions to 
historically-challenging problems.
    Congress should explore legislation to facilitate the 
acceleration of digital identification, offering clarity and 
certainty to a liquidated banking concept. As the digital 
economy has evolved, the need to update and expand the 
definition of compliance concepts such as customer due 
diligence and Know Your Customer rules must also evolve. New 
legislation should explore KYC elasticity, the idea that these 
rules can be expanded to fit economic development and security 
realities straddling digital and traditional markets.
    Congress should expedite the thorough exploration of 
blockchain-based technology solutions that enhance U.S. dollar 
dominance globally, including a stablecoins framework and 
central bank digital currencies (CBDCs) which will ensure that 
market efficiency, privacy concerns, and interoperability with 
economic blocks, such as their Caribbean counterparts, will be 
considered.
    Many challenges remain in addressing the balance between 
financial integrity and inclusion. However, there are also many 
opportunities to address these issues by operationalizing 
public/private sector initiatives that address concepts such as 
identity and transaction monitoring. Moving into a digitized 
economy gives banks the opportunity to innovate, manage, and 
mitigate risks effectively. Technology innovations, such as 
blockchain, serve as an enabler to every stakeholder involved 
in a de-risking conundrum.
    On behalf of Elliptic, thank you for the opportunity to 
speak here today, and I welcome your questions.
    [The prepared statement of Ms. Shetret can be found on page 
100 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Shetret. I now recognize 
myself for 5 minutes for questions.
    Ms. Delmar, as the CEO of the Caribbean Association of 
Banks, you represent the collective interest of banks domiciled 
in the Caribbean to strengthen the regional banking sector. I 
understand it can take weeks or even months to open up a bank 
account or to get transactions approved through the 
correspondent banks. What are the reasons given by the 
correspondent banks to the respondents or from correspondents 
to the individual and entity customers with such delays?
    Ms. Delmar. Thank you for the question. As it would have 
been submitted in one of the exhibits by the Caribbean 
Association of Banks for our discussions this morning, what we 
have found is there is very little to no communication 
specifically as it pertains to the closure of respondent banks 
by the correspondent. As far as the opening of accounts, the 
banks have now been forced into a position of extreme 
monitoring, as I tend to put it, where we are spending 
inordinate amounts of time trying to ensure that, from a KYC 
perspective, the customers meet the regulatory requirements 
necessary to ensure that we are operating above the line or 
within compliance with regulatory standards. It is not, 
however, a situation where the correspondent bank necessarily 
dictates what is required for the opening of accounts, but 
rather, the respondent banks' attempts at ensuring that every 
transaction that stems from these accounts will be deemed 
appropriate by the correspondent, thereby not jeopardizing the 
relationship with the correspondent banks.
    Chairwoman Waters. Could you take a moment to tell me what 
steps your member banks have taken to address the concerns of 
the correspondent banks in order to attract these services? 
Have any of these efforts been successful, and why or why not?
    Ms. Delmar. Okay. As far as the relationship with the 
correspondent banks is concerned, the respondent banks at this 
stage have spent inordinate amounts of money in ensuring that 
we have invested in technology so that there is easy and 
significant monitoring of transactions through the processes 
that come in. We have also ensured that the relationships are 
maintained with the correspondent banks by being able to 
respond to questions that may come back to us, depending on the 
transactions that will be processed through the correspondent 
banks in the very shortest periods of time. As far as the 
information coming back, we have not seen any reentrance of 
correspondents who have left the banking region, aside from one 
more recently, which was really spurred by an increase in the 
volume of transactions that we would have seen being processed, 
primarily because of an acquisition that was made of an 
international bank, which, of course, then drove up the amount 
or the volume of transactions being processed.
    Again, the question on our end remains whether it is a 
situation of noncompliance from an AML perspective, or whether 
or not it holds true that because of the size of the 
transactions being processed, as well as the volume of 
transactions being processed, that we are being penalized from 
ensuring that these correspondent banking relationships remain 
strong.
    Chairwoman Waters. Mr. Shah, in April of this year, Prime 
Minister Mottley and I co-hosted the Caribbean Financial Access 
Roundtable, which brought together heads of state, Members of 
Congress, financial institutions, industry associations, think 
tanks, international organizations, and other stakeholders to 
advance concrete solutions to this continued problem of de-
risking in the Caribbean. One idea that I raised, which 
received a great deal of support from across the spectrum of 
roundtable participants, was a proposal to establish an 
examiners academy here in the United States to train State, 
local, and Federal examiners on Bank Secrecy Act issues, and 
also train foreign examiners to ensure that baseline standards, 
mission, and evaluation are uniform. My idea was inspired in 
part by the stories from banks in the U.S. about the dramatic 
differences in the reviews of banks and services typical to 
rural America versus the types of activities that one sees in 
Miami or other centers of international finance.
    You were there. What is your perspective on this proposal, 
both as a leading correspondent banker in the region and as a 
representative of the financial and international bank business 
association whose members are banks of all sizes and types 
doing business overseas?
    Mr. Shah. Thank you very much for the question, Chairwoman 
Waters. I support 100 percent the idea of a training academy. 
In fact, one of FIBA's cornerstones is a training academy where 
they train regulators and bankers and provide a lot of feedback 
for the industry.
    There are two main issues when it comes to looking at a 
training academy. We know that our examiners are very well 
versed with the Federal Financial Institutions Examination 
Council (FFIEC) manual, and they understand the BSA/AML 
regulations. The problem is that it is not a one-size-fits-all 
approach. So, a regulator that just spent a lot of time in the 
Midwest working with retail banks comes into Miami and almost 
has a heart attack when he sees international transactions from 
Colombia and Brazil, and the Caribbean. It is not an 
opportunity where he is very familiar with those transactions. 
Sometimes what you find is that when you look at his approach, 
our members have told us that he starts with his enhanced due 
diligence hat, and everything is high risk. That makes the 
examination a little different from how it would have been if 
he were with a small regional bank.
    The second part is, when you look at assessing a bank's 
risk and you are training for it, that the risk-based approach 
that we have been taught to apply is usually very subjective, 
so we would need two things to happen: first, we would need 
guidance that talks about exactly what we are being examined 
against; and second, when we have a business that is 
correspondent banking, for example, automatically, everybody 
thinks that is high risk. It is high risk for a bank that does 
not have a program in place to manage those risks, but it is 
just business where a bank that spends a lot of time putting in 
programs and technology to be able to manage the risk and do 
the business successfully.
    I do agree with you that we need some sort of training 
academy. I think it would help the industry. I think it would 
be something that would level the playing field so that 
examiners are all reading from the same book, but I do believe 
that we would need proper guidance as to how the rules and 
regulations are applied. And every bank is specific, and every 
bank has a different risk profile, so--
    Chairwoman Waters. Thank you.
    Mr. Shah. Thank you.
    Chairwoman Waters. Thank you very much. The gentleman from 
Arkansas, Mr. Hill, is now recognized for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman, and thanks for 
holding this hearing. Many of us have lamented President 
Obama's, and President Trump's, and President Biden's lack of 
emphasis on the Western Hemisphere, the Caribbean, Central 
America, and all of Latin America, so I commend you for 
engaging with our great friends in the Caribbean. It's so 
critical to our economy and their economy. We are inextricably 
linked. Thank you for holding this hearing, and I am intrigued 
by what I have heard today. I think the presentations have been 
excellent. I am delighted to have had her excellency, Prime 
Minister Mottley, with us as well. She is a great global leader 
on financial matters.
    The Caribbean has its share of challenges. If you Google 
fraud and schemes in the Caribbean, a long list by country 
comes up of real challenges out there for the citizens and 
individual Caribbean countries. And, of course, we have had 
testimony in this panel for many, many years over our own 
citizens here in the United States who were victims of, ``Sir 
Allen Stanford's'' crimes in Antigua, which certainly didn't 
help the reputation of the region.
    My question first to Mr. Shaw is, do you believe that the 
financial action task forces and the financial intelligence 
bureaus of our Caribbean nations are up to par? Are they doing 
good work, because that is where some of this starts?
    Mr. Shah. Yes, I do believe that those organizations do 
good work, and they have been very helpful in raising the bar. 
A lot of the issues that you see in the Caribbean are not 
specific to the Caribbean. They happen all over the world, and 
the impact from those issues are looked at differently. So, the 
same financial crime occurring in Europe or the United States, 
when it happens in the Caribbean, it is magnified. In the case 
of Mr. Stanford, he was actually from Texas.
    Mr. Hill. Yes. We don't need to delve into that. Just, do 
you think they are doing a good job?
    Mr. Shah. I think they are doing a great job.
    Mr. Hill. Thank you for saying that. You have an eyewitness 
to that.
    Ms. Delmar, do you agree that the governments in the 
Caribbean are doing a good job in their financial action task 
forces and their financial intelligence bureaus?
    Ms. Delmar. Absolutely. And I wanted to lean on what was 
said a little bit earlier in that bad actors exist everywhere. 
And I think that given the limited resources that we have in 
the Caribbean, and again, based on the scale of these islands, 
any one infraction against the law is seen as a significant 
infraction. However, I believe that everyone involved is having 
a similar dialogue, and in terms of ensuring that from a 
legislative and regulatory perspective, we are keeping up to 
standard. And from a banking perspective, we are also ensuring 
that we show up what is required from a KYC and monitoring 
process as well.
    Mr. Hill. Thank you for that.
    Ms. Shetret, you talked a lot about, and this applies to 
Mr. Shaw's testimony, too, that fintech, of course, can help 
lower compliance costs. One of the largest banks in Florida is 
in my constituency in Arkansas, and I know what their AML/BSA 
compliance burden is monthly trying to comply with FinCEN, but 
they use fintech to lower that cost. Isn't that a way to really 
help our Caribbean nations be a more banked place and make it 
easier for correspondent banking if we used technology to sort 
through the AML/BSA compliance?
    Ms. Shetret. Thank you. Absolutely. Fintechs do lower 
compliance costs in a way, and the way they do that is by 
removing the noise. So reducing false positives, compliance 
teams can be focused on high-risk areas. They can utilize their 
resources more smartly in a place with lower capacities or 
lower resources. You get to focus on your work and your teams.
    Mr. Hill. Yes. Thank you. That is helpful. I think that 
helps our citizens in the Caribbean nations and it helps our 
correspondent banks as well. And this de-risking thing comes 
from a lot of regulation put on by this Congress that raises 
the cost that makes it more difficult to comply, so I think 
fintech is part of that solution.
    But, Mr. Shah, if the U.S. financial institutions are 
exiting from correspondent banking, who is stepping into the 
Caribbean market? Who are you seeing stepping into the 
correspondent banks there?
    Mr. Shah. We have seen a couple of payment processors 
stepping in.
    Mr. Hill. Who is that?
    Mr. Shah. There is--
    Mr. Hill. You can submit it for the record. Any other 
commercial banks that have stepped in from Europe or elsewhere?
    Mr. Shah. There are a couple of banks, well, banking-type 
organizations, financial organizations from Europe.
    Mr. Hill. If you would submit those for the record, that 
would be very, very helpful to outline who is coming into that 
market, if U.S. financial institutions are stepping out due to 
the regulatory burden. Thank you, Madam Chairwoman. I yield 
back.
    Chairwoman Waters. You are welcome. Thank you, Mr. Hill. 
The gentlewoman from New York, Ms. Velazquez, who is also the 
Chair of the House Committee on Small Business, is now 
recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman. This is an 
important hearing, and I really appreciate you doing this.
    Mr. Shah, Puerto Rico possesses a high number of CBRs given 
its integration with the U.S. banking system. As the only 
member of this panel representing a major U.S. financial 
institution, could you please provide us with an overview of 
these connections, and what are your suggestions for deepening 
their impact?
    Mr. Shah. Pardon me. I didn't hear the beginning of your 
question as people were leaving the room. Could you repeat that 
for me?
    Ms. Velazquez. Puerto Rico possesses a high number of 
constituent bank relationships (CBRs) given its integration 
with the U.S. banking system. As the only member of this panel 
representing a major U.S. financial institution, could you 
please provide us with an overview of these connections, and 
what are your suggestions for deepening their impact?
    Mr. Shah. Currently, we support Puerto Rico with 
correspondent banking, and one of the largest banks there is a 
customer of ours with over 40 or 50 percent market share. So, 
we are supporting that region. It is not in my purview, it is 
not part of the English-speaking Caribbean, but I will be more 
than happy to have someone respond to you with some of the 
details.
    Ms. Velazquez. Thank you. What options do we have for 
breaking the stigma about the concentration of illegal 
activities in Puerto Rico and other Caribbean nations, like we 
have been this past year, that triggers financial institutions 
decision to de-risk?
    Mr. Shah. I think financial institutions make their 
decision to de-risk based on their risk appetite and the 
profiles of banks that they want as customers. Individual banks 
need to make that determination themselves. The stigma, I 
think, should be driven by what we see in terms of prosecution 
of financial crime and actual cases of financial crime. And in 
the Caribbean, there are very, very few areas and instances 
where we see high-level financial crime being prosecuted, or 
the instance of validated cases of financial crime. That is 
part of the problem where the perception does not meet the 
reality.
    Ms. Velazquez. Thank you. Ms. Delmar, does the rise of 
cryptocurrency in the region pose a threat to your 
harmonization efforts?
    Ms. Delmar. Thank you for the question. At this stage, we 
have not seen a significant influence in the region, which 
suggests that this is not an ongoing issue or something that we 
need to be absolutely concerned about. However, we also 
recognize, as was previously discussed on some of these panels, 
that people will find unique and creative ways of ensuring that 
they are able to get through the banking system in ways other 
other than banking. And so, again, from the banking community, 
we have been keeping a very clear focus on activities around 
crypto within the region, but to date, we have not seen 
anything that is suggestive of a significant concern.
    Ms. Velazquez. Thank you.
    Mr. Mowla, how does the steadily-reduced access to 
financial services in the Caribbean due to banks' de-risking 
efforts affect the prosperity and security of not only the 
Caribbean region, but the United States as well?
    Mr. Mowla. Sorry. Could you please repeat the first part of 
the question?
    Ms. Velazquez. How does the steadily-reduced access to 
financial services in the Caribbean due to banks' de-risking 
efforts affect the prosperity and security of not only the 
Caribbean region, but also the United States as well?
    Mr. Mowla. Thank you for the question. Mostly, 
correspondent banking is vital for cross-border payments. So if 
people want to send remittances back to the Caribbean, want to 
invest in certain sectors in the region, they are likely unable 
to do so if correspondent banking is not available. When we 
talk about nearshoring, when we talk about new U.S. economic 
policy, growing investment in our own hemisphere, we need to 
have access to the correspondent banking in order to have that 
sort of influence.
    Ms. Velazquez. Thank you. Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The ranking member 
of the committee, the gentleman from North Carolina, Mr. 
McHenry, is now recognized for 5 minutes.
    Mr. McHenry. Thank you, and thank you, Madam Chairwoman, 
for hosting this hearing today or organizing the hearing today. 
We have heard a lot about risk management, compliance, and 
profitability, and I appreciate the witnesses on this panel.
    Ms. Shetret, is it fair to say that when a customer is 
unbanked or de-risked, they do not simply disappear or go away?
    Ms. Shetret. Yes. That is correct.
    Mr. McHenry. Okay. So, the customer still needs to be 
banked regardless of the risk, correct?
    Ms. Shetret. Yes, also correct.
    Mr. McHenry. Okay. Is it accurate to say that when one bank 
terminates a customer's account through, ``de-risking,'' it is 
not really de-risking at all, but it is re-risking?
    Ms. Shetret. Absolutely, that is correct. I would agree 
with that statement. The reason I agree with that is because 
the risk doesn't disappear into the ether. It is simply moved 
or shifted into another space. That other space might be a 
smaller bank, a smaller institution that can't cope with the 
size of risk that is being shifted on to it. It doesn't have 
the anti-money laundering controls in place. It doesn't have 
the framework to deal with it. It might also shift into other 
more unsavory jurisdictions that are not observing any kinds or 
maybe minimal or lacks regulatory structures in place, and that 
is the concept of regulatory arbitrage. And then, it might 
shift altogether underground, which is something we need to 
avoid.
    Mr. McHenry. Okay. And are we talking about illicit 
businesses here on the main, or are we talking about legal 
businesses?
    Ms. Shetret. Both legal and illegal businesses.
    Mr. McHenry. Is there a mechanism to get to illegal 
businesses? We are not going to ask the bankers to do this, 
right? We are going to ask the accountants, the FBI to do it, 
right? It seems like this is shifting the responsibility of a 
government obligation onto the private sector in some ways.
    Ms. Shetret. The private sector does need to step up and 
become police of sorts to make sure that they are keeping bad 
actors out of their platforms and systems.
    Mr. McHenry. Okay. Let's shift to the legal businesses, 
maybe disfavored businesses, maybe people, businesses catering 
more to those who are living on the wrong side of the tracks, 
maybe mostly engaging in cash, because that is how they have to 
manage their credit risk because they don't have credit, right? 
So, you are taking those perhaps small businesses--they are 
illegal--that are disfavored, and you are taking them into 
less-sophisticated institutions, and saying we have done a good 
job, right?
    Ms. Shetret. Yes.
    Mr. McHenry. It doesn't seem like that should be sound 
public policy, or it shouldn't be a sound policy outcome.
    Ms. Shetret. I will bring it back to the risk-based 
approach that both international standards and jurisdictions 
ask of financial institutions to account by, which is that you 
need to, as a financial institution, assess the risk of the 
customer in front of you, medium, small, whatever, whomever is 
standing in front of you--legal, illicit--understand the source 
of the funds, and then based on that, mitigate those risks. 
Smaller institutions or institutions that do not observe AML/
CFT frameworks are not equipped to handle those kinds of 
businesses, and they get shut out of the system as they sort of 
jump between banks trying to access financial services.
    Mr. McHenry. Okay. And is this driven by AML/BSA 
requirements? You are seeing de-risking?
    Ms. Shetret. Partially driven by that, and also a 
profitability calculation where in some instances, it just 
doesn't reward financially to bank high-risk customers, for 
example, nonprofit organizations that are moving funds for 
humanitarian needs to different parts of the globe that require 
more due diligence.
    Mr. McHenry. Okay. But the due diligence piece--that means 
you have to have more people, more employees reviewing these 
account-level transactions?
    Ms. Shetret. Not necessarily. This is where we would say 
that fintech solutions come into play, and we need to innovate 
around to--
    Mr. McHenry. They come into play, but that is not the 
driver here.
    Ms. Shetret. Right, not the driver.
    Mr. McHenry. Right. We just passed our AML/BSA reform 
package last Congress, with a major rewrite of FinCEN, the 
beneficial ownership regime here. The goal here, or at least 
the goal when we started the conversation when Republicans were 
in charge was to drive the expense structure away from people 
into technology. And this could be a less-burdensome thing so 
that these types of accounts could actually still be banked.
    Ms. Shetret. Yes, 100 percent.
    Mr. McHenry. And that apparently is not the case.
    Ms. Shetret. That is not what is happening right now.
    Mr. McHenry. Okay. Anybody think it is happening?
    [No response.]
    Mr. McHenry. No? Okay. We have our public policy work cut 
out for us still, Madam Chairwoman, and while we have made 
strides, we have more strides to make. Thank you all for your 
testimony and for being here. Thank you for raising this 
important international and domestic challenge here. Thank you, 
Madam Chairwoman.
    Chairwoman Waters. Thank you, Mr. McHenry. The gentleman 
from California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. Thank you. I believe I am the only former tax 
collector in Congress. Why I would then be able to get elected 
is something to be studied elsewhere. But I do think that it is 
critical that we look at our anti-money laundering and our tax 
enforcement laws, and accomplish those purposes that could 
involve trillions of dollars to the U.S. economy, and then take 
a look at making sure that we are good neighbors and friends to 
those in the Caribbean, and help our Caribbean neighbors engage 
in every kind of economic development, except financial 
obfuscation and the tax shelter business. And I realized that, 
especially for the Cayman Islands, those businesses are very 
profitable, and they may not want to give them up. We should be 
willing to provide technical assistance to help our Caribbean 
friends deal with money laundering, et cetera, et cetera.
    I will ask our witnesses, are there countries in the 
Caribbean that want that kind of help, and others, perhaps the 
Cayman Islands and others that specifically don't want that 
kind of help? Ms. Delmar?
    Ms. Delmar. Thank you, Congressman Sherman. It certainly is 
always in the best interests of our people when we can receive 
support that will consider all of the challenges that we are 
facing and all of the opportunities and solutions in addressing 
challenges of this nature. Certainly, from a legislative 
perspective, I believe that there is adequate monitoring, as 
mentioned previously, and laws to ensure that even those 
companies, for example, those banks are being monitored, so 
that their transactions fall within the required compliance 
regimes. However, as you have indicated, from a technical 
support perspective, I have no doubt in my mind that we would 
welcome the opportunity.
    Mr. Sherman. Thank you. Without objection, I would like to 
put in the record an article from the Global Financial 
Integrity organization, dealing with financial crime in Latin 
America and the Caribbean and understanding each country's 
challenges.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Sherman. So, we ought to be providing technical 
assistance. I'll shift to a different question. Many banks are 
ending their correspondent relationship, not because of 
anything that a government has done, but because of what a 
government might do. They are concerned that Caribbean 
countries will apply bank secrecy laws or come up with other 
legal requirements that then conflict with American Know Your 
Customer laws.
    Would it be helpful, Mr. Mowla, if Caribbean countries were 
to pass laws explicitly stating that complying with U.S. Know 
Your Customer laws is fully legal under their legal system, 
eliminate the risk that banks would be whipsawed?
    Mr. Mowla. Thank you for the question. I think what is 
really important here is dialogue, perhaps more dialogue 
between the U.S. and Caribbean counterparts.
    Mr. Sherman. Do you think there are Caribbean countries 
willing to pass a law saying, go ahead, do business here, and 
you can also comply with American law, we are not going to tell 
you that you can't comply with American law?
    Mr. Mowla. I believe so. Caribbean countries and leaders 
are pragmatic actors. All that they are looking out for is the 
quality of life of their citizens, and if that is something 
that it would take, I think they would be open to doing so. I 
can't speak for any Caribbean leader and what exactly he or she 
may do, but it is something I think would be up for discussion, 
which is why I think dialogue is the way to go.
    Mr. Sherman. I would point out that Antigua, the Cayman 
Islands, the Bahamas, Bermuda, the British Virgin Islands, and 
Turks and Caicos currently have zero corporate tax that makes 
them a tax shelter. The G7 has recently put together a program 
that we are almost in compliance with ourselves applying a 15-
percent minimum corporate tax. And it would certainly be 
helpful if our Caribbean friends were to join that scheme until 
all the corporations in the world, at least all the 
multinational corporations in the world, need to pay a 15-
percent tax. I look forward to working on these issues, and I 
yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Florida, Mr. Posey, is now recognized for 5 minutes.
    Mr. Posey. Thank you very much, Madam Chairwoman. Ms. 
Shetret, what does research say about the effectiveness of 
anti-money laundering laws in combating underlying crimes, such 
as drug trafficking and terrorism?
    Ms. Shetret. We are fairly effective in having the criminal 
framework in place. What now matters is the implementation and 
to ensure that the implementation occurs across jurisdictions 
in a standardized manner. So, what we are seeing is that while 
some countries are stepping up to implement those and adapting 
those broad principles into their local legislation frameworks, 
the challenge becomes across countries and communicating, 
prosecuting, investigating cases when they don't interact, or 
when they don't have the same standards in place, or perhaps 
more lax standards.
    Mr. Posey. Thank you. Anti-money laundering regulations 
have shifted substantial law enforcement costs burden to 
financial institutions. How can the Federal Government 
contribute to reducing those costs?
    Ms. Shetret. I'm sorry. Could you repeat the question, 
please?
    Mr. Posey. Sure. Anti-money laundering regulations shift 
substantial law enforcement costs to financial institutions. 
How can the Federal Government contribute to reducing those 
costs?
    Ms. Shetret. Yes. One of the things that needs to happen is 
an additional kind of practical clarity and guidance around, 
what do these concepts mean in practice? We have seen now that 
we are almost in a hybrid economy that is both digitized and 
both cash-intensive in many countries, and so redefining a lot 
of the same bread and butter concepts from compliance just into 
the new practical behaviors in which we operate with updating 
these principles. And clarifying, basically removing ambiguity 
is what needs to happen.
    Mr. Posey. Okay. Thanks. What role might the Federal 
Government play in improving the quality of data available to 
financial institutions to form their anti-money laundering 
regulation responses?
    Ms. Shetret. When it comes to data at the moment, it is 
spread across different agencies. And one thing that could be 
useful is sharing back with industry and with banks, financial 
institutions, a holistic view of, for example, insights from 
suspicious activity reports. What is it that are sort of macro 
trends that are being observed around criminality or 
typologies, or regions, or specific areas as the 
susceptibility, so that industry can respond? At the moment, 
there is a lot of communication coming towards government, and 
a lot of work is being done to process those amounts of data, 
but having more dialogue around actionable insights could be 
more timely in helping banks respond.
    Mr. Posey. Do you personally think the reforms instituted 
by Congress and the Executive Branch in the wake of Operation 
Choke Point have effectively addressed the abuses of that 
program?
    Ms. Shetret. I'm sorry, sir. Could you please repeat the 
question?
    Mr. Posey. Sure. Do you believe the reforms that were 
instituted by Congress and the Executive Branch in the wake of 
Operation Choke Point effectively addressed the abuses of that 
program?
    Ms. Shetret. Yes. Operation Choke Point from 2013 really 
gave the Department of Justice actionable work in which it 
subpoenaed over 50 different agencies across industries to 
bring forward activities from organizations that were really 
not both legal and illegal, stigmatizing them and offering them 
a reputational risk, which, since then, banks have really not 
been able to shake off. There is an opportunity to understand 
that definitions of risk--high, medium, and low risk--must be 
tailored and unpacked specifically to industry and actors to 
avoid kind of sweeping, and thus, sectoral or industrial 
stigmatization, which is a little bit of a leftover ripple 
impact from Operation Choke Point.
    Mr. Posey. Okay. Thank you. What types of changes do you 
think Congress should make to improve the efficiency and 
fairness of our anti-money laundering laws?
    Ms. Shetret. The United States has a big role to play and 
plays it quite actively in a variety of international fora. The 
Financial Action Task Force has been mentioned, the Wolfsberg 
Group. There is a real opportunity when it comes to the 
Caribbean and other regions to utilize regional organizations 
to help use American clout in those forums, to push for 
additional detail and ambiguity, dispelling a lot of those 
regulations that are being put out. Additionally, there is an 
opportunity to push on innovation and bring innovative actors 
to the table and make sure that we have an opportunity to share 
solutions for some public policy issues that are continuing to 
trouble Congress and otherwise.
    Mr. Posey. Thank you. My time has expired, and I yield 
back. Thank you, Madam Chairwoman.
    Chairwoman Waters. Thank you very much. The gentleman from 
New York, Mr. Meeks, who is also the Chair of the House 
Committee on Foreign Affairs, is now recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman. And I thank all of 
our panelists. Let me start out with Mr. Mowla. I represent one 
of the most diverse districts in the country, and a significant 
number of my constituents are immigrants who use banking 
services to remit money back home to their family members, and 
loved ones, and their home country. But the ability to send and 
receive these funds is dependent on the ability to use the 
banking services and access them at reasonable costs.
    You noted in your testimony that fee hikes and 
correspondent banking services, for example, and the use of 
wire transfers are an obvious negative impact on the customer, 
but it also seems to have a trickle effect. And the more that 
these individuals turn away from using banking services, the 
harder it will be for correspondent banking, which is typically 
fee-based, to cover the cost of compliance.
    My question is, we always focus on underbanked communities 
here in the United States, but we also must assess the policy 
that exacerbates circumstances for underbanked communities 
abroad. Can you please explain what the impact of de-risking is 
on our diaspora and immigrant communities here in the United 
States, like many of the people that reside in my Congressional 
District?
    Mr. Mowla. Thank you for the question. I have been living 
in Queens for quite some time. I definitely would love to 
answer this. First, in the Caribbean, remittances basically 
supplement working-class income. We saw this in Jamaica during 
the pandemic, where remittances actually went up because it was 
seen, like Prime Minister Mottley said, that we are all family. 
We needed to help Jamaica when the tourism industry closed down 
because of the pandemic. Now, it has the same effect in 
immigrant communities, especially the Caribbean diaspora 
population as well, because they are disproportionately 
affected, especially as people of color. And if they cannot pay 
the fees in order to send remittances home, then they have 
family members who are unable to sort of have their own 
incomes, but also travel back to the United States.
    As you well know, many in the Caribbean diaspora don't just 
come for a week, or a weekend or two. They come for weeks. They 
come to shop, they eat at restaurants, they stay in hotels, and 
it actually becomes a vibrant part of the U.S. economy. 
Thinking about Queens, you are thinking about a tristate area. 
Texas, California as well, so it all has a circular effect. So, 
being able to help sort of the Caribbean populations who 
receive these remittances has an effect that allows them also 
to purchase goods from the United States. The Caribbean is 
reliant on importing goods for most of their local businesses, 
and the tourism industry. Bed sheets, pillowcases, all of that 
is really bought in the United States. Now, how are they able 
to buy it? They are only able to buy to it if they can receive 
remittances from the diaspora in the United States.
    Mr. Meeks. Thank you for that. And let me go to Ms. Delmar 
quickly. Caribbean countries require access to the 
international capital markets, and most of their economies run 
large and persistent physical trade deficits with the rest of 
the world and they heavily rely on imports for food, fuel, and 
capital goods not produced domestically. So, I was heartened to 
see that, for example, Barbados led the Colombian Trade and 
Investment Forum earlier this month. This exploration and 
potential collaboration, I think, could be just the type of 
innovation needed to foster prosperity in CARICOM countries and 
on the continent of Africa. In what ways do you think we in the 
United States can support unique solutions to the challenges of 
growth and prosperity by drawing on the talent and potential of 
diaspora communities?
    Ms. Delmar. Thank you for that question. You are correct in 
that. The Caribbean remains very receptive to opportunities for 
innovation and creativity in terms of ensuring that we maintain 
vibrant economies. And like you rightly mentioned and pointed 
out, Barbados' initiative in ensuring relationships are being 
established with the African Export-Import Bank (Afreximbank) 
in Africa is one of those areas that we see as a potential 
opportunity for us to continue to maintain that vibrancy that 
we need to maintain healthy markets.
    Similarly, with the U.S., we are hoping that the 
relationships that we have lost through correspondent banking 
will be returned based on the discussions that are happening 
now, but also the opportunities to continue to trade in more 
meaningful ways. For example, we want to ensure that U.S. 
citizens will see the Caribbean, and certainly through the 
diaspora will see the Caribbean as a place to invest, and 
invest safely, because the Caribbean maintains the same levels 
of monitoring that the U.S. requires that we do. And so, we 
should be seen as a safe zone as opposed to the perception of a 
high-risk jurisdiction. The Caribbean sees itself as a third 
border to the U.S., and through that alone, it says that we are 
here to do business. We want to ensure the safety of the 
financial services sector, and the Caribbean Association of 
Banks and our members always ensure that we conform to the 
requirements of regulation to ensure that the markets remain 
safe.
    Mr. Meeks. Thank you very much. I yield back.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Luetkemeyer, is now recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. Ms. Shetret, 
I think you mentioned a minute ago the words, ``reputational 
risk,'' and I looked up the definition of this. According to a 
supervisory regulation letter from the Federal Reserve, 
``Reputational risk is the potential that negative publicity 
regarding an institution's business practices, whether they are 
true or not, will cause a decline in the customer base, cost of 
litigation, or revenue reductions.'' Whether it is true or not, 
and that's according to the Federal Reserve, so when examiners 
go in and they intimidate the banker, the loan officers, the 
executive board, the board itself by saying there is a 
reputational risk to what you are doing, not even knowing 
whether it is true or not, it is their interpretation, it is 
their idea, it is their belief that it could be happening 
rather than factually saying it is happening, is to me a very 
poor way of going about regulation. Do you think it is 
appropriate to monitor banking services based on risks that are 
not based in fact?
    Ms. Shetret. I agree that it is important to make sure that 
we are based in facts and in factual assessments, particularly 
utilizing on-the-ground information that examiners are 
obtaining. Attempting to leave all biases at the doorstep is 
very important. The relationship building between an examiner 
and a financial institution should be an open one, one that 
allows for influencing each other with information.
    Mr. Luetkemeyer. You made a comment ago about Operation 
Choke Point. Do you understand what I am talking about here? 
Operation Choke Point was when they were doing this 
intentionally, knowing that they were trying to drive a 
business out of business that was not doing something illegal. 
They were trying to intimidate the banks into getting rid of 
financial services or squeezing an industry or an individual 
whenever you don't even know if it is true. This is the 
horrible part about Operation Choke Point is that they were 
going in with their own personal biases versus fact, and that 
can't happen.
    I just spent the last several months working with the FDIC 
Comptroller, the CFPB Comptroller, the FDIC, the Federal 
Reserve, and FinCEN, as well as credit union folks, trying to 
take out the independent ATM operators based on the fact they 
believe there is money laundering going on, which they finally 
admitted was not going on. They were intimidating the banks 
into cutting off financial services based on something that 
wasn't true. What is the recourse that these industries, these 
individuals have when they get squeezed out of being able to 
have accounts in banks?
    Ms. Shetret. The good news is Operation Choke Point is 
over, and I would caution--
    Mr. Luetkemeyer. Oh, it is not. It is going full speed. As 
I just said, I just got done working on this issue and just got 
a letter back on it about 6 weeks ago to stop the nonsense. It 
is still going on today. It is still going on from the 
standpoint of the far left. It is trying to intimidate banks 
and cutting off services to energy companies. That goes on in 
this committee right here. So, it is still going on today. I am 
going to apologize to you for interrupting here, but don't 
misunderstand. This is still there. It has just taken a 
different form. You may proceed.
    Ms. Shetret. Financial institutions were required to 
operate logistically. They are going to go where they can 
operate openly, freely, and conduct their business. If we are 
closing that opportunity for them, they will just go elsewhere, 
and they will go to the places where they can operate without 
the fear of examiners coming in. Practically, what I would say 
is that examination books and guidance needs to be updated. It 
needs to be updated from a variety of different perspectives, 
including around personal conduct, around what is actually 
tested, how it is tested, the kind of evidence that financial 
institutions need to submit. And there needs to be cautioning 
around bias and the reputational challenge and adverse media 
associated with it.
    Mr. Luetkemeyer. I have a bill, and it has actually passed 
the House, that stops the nonsense. It forces banks to disclose 
to the customer when you close an account why you did it so 
that the customer actually knows what the problem is, so they 
can then hopefully remedy that situation, or the next place 
they go, they can show that we fixed the problem, or down the 
road it can be remedied, and so that there is not this bias 
that is going on, this reputational risk threat that is going 
on, so we can stop the nonsense. So, it is important to me, and 
I think that we understand that the regulators are the ones who 
are imparting this reputational risk nonsense out there.
    The other ones they are promoting is sort of interpretation 
and this intimidation. Now, the banks have to push back on this 
and say, show me where I am wrong. Prove to me that there is a 
problem here. I don't support banks that have problems, but I 
do support the proposition that we have to make the examiners 
do their job, which is to only examine with regards to whether 
the laws are being complied with, not to make stuff up, which 
reputational risk, according to definition by the Fed itself, 
says could not be true.
    Ms. Shetret. I agree to that. Thank you.
    Mr. Luetkemeyer. Thank you very much. I yield back.
    Chairwoman Waters. Thank you very much, Mr. Luetkemeyer. 
You and I may have something we can work on together.
    Mr. Luetkemeyer. [Inaudible].
    Chairwoman Waters. Thank you.
    Mr. Luetkemeyer. Let me write this down.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, who is also the Chair of our Subcommittee on 
Consumer Protection and Financial Institutions, is now 
recognized for 5 minutes.
    Mr. Perlmutter. Thank you, and I have a question first, but 
then I want to respond to something Mr. Luetkemeyer had to say, 
so I hope he stays in the room for a few minutes. I want to 
thank the panel for being here in Washington on one of our 
busiest days where we each have, like, five committee meetings 
going at the same time. I just want to apologize in advance. 
Other people are running around. I had a chance to meet many of 
you when I visited the Caribbean with the chairwoman and 
participated in the roundtable that the Prime Minister 
established and the chairwoman put together. Mr. Shah, I am 
going to start with you, sir.
    Chairwoman Waters. Excuse me. One moment before you do 
that. Mr. Luetkemeyer is anxious to get out, and you wanted to 
engage him?
    Mr. Perlmutter. But I have to do the first question to lead 
to the second question and the response. Okay. I will start 
with Mr. Luetkemeyer, to let him get out of here. There are 
sort of three things that are potential risks--crypto, drugs, 
and tax shelters--that we saw. And one of the things that came 
up a lot was safe banking actually, Mr. Luetkemeyer, where we 
have your bill on dealing with Operation Choke Point to stop 
that reputational risk component. And to Mr. Luetkemeyer's 
credit, his bill is in the Safe Banking Act, which provides a 
safe harbor for banks that provide banking services to the 
marijuana industry. His bill has passed the House 7 times now, 
and we are going to get it passed in the Senate, I think, in 
the next few months. So, we are going to be able to deal with 
that reputational risk concern that you have because much of 
what they are facing in the Caribbean, it was clear that there 
had been some redlining going on, in my opinion, of the entire 
region, which is a doorstep to America, and they are our 
friends and we ought to treat them like friends.
    And we aren't in the banking industry, with the exception 
of Wells Fargo, quite frankly. A lot of people had withdrawn 
because of these reputational concerns, some of it dealing with 
cannabis. And we can at least address that if we get that done, 
that bill passed that has a lot of your language in it. That 
was the only thing I wanted to say to the gentleman.
    Mr. Luetkemeyer. I thank the gentleman, and we are working 
together on that bill diligently, and your efforts are to be 
commended. But yes, I think where there are problems, we need 
to be concerned about it, whether it is illegal drug dealing, 
money laundering, or whatever the illicit problem is. But I 
think reputational risk is something that should be off the 
table because the way that is defined, the way they use it as 
an intimidation tactic is something that can't be tolerated. 
But I support your efforts and anybody else's efforts here to 
make sure we have some clean entities to go to and handle money 
and transactions in an effective and efficient way.
    Mr. Perlmutter. And I thank the gentleman for sticking 
around for a second.
    Mr. Shah, welcome. I didn't forget about you. We saw Wells 
Fargo was one of the few American banks left doing 
correspondent business in the Caribbean. In your testimony, you 
described how despite the risks, your bank chose to stay in the 
region and work to mitigate those risks. Specifically, you 
described how Wells Fargo worked with other banks, other 
Caribbean banks to help them improve their anti-money 
laundering and Bank Secrecy Act programs. Can you please expand 
on what types of information and tools you provided to help 
these other institutions improve their risk management?
    Mr. Shah. Thank you for the question, and it is nice seeing 
you again. As part of our business, one of the things we do is 
conduct independent analysis and risk analysis for the 
counterparties and the countries in which we do business, so we 
take a hands-on approach to working with our respondent banks. 
In the effort to elevate them, we have done three major things. 
One is engage them to understand their programs and how that 
fits into the business type that they are doing. The second 
thing we talked about is how well they comply with the 
necessary rules and regulations that make them safe. And one of 
the safeguards that we take pride in is making sure that we 
accept transactions that are safe and sound, and we prohibit 
transactions that are in the shadows so that we protect the 
U.S. financial system. That is our main priority.
    We spent a lot of time with remediation, working with them 
to explain to them our risk management policies and procedures. 
We have an annual get-together for all of our customers where 
we talk about the new rules and regulations, our way of looking 
at them, how we manage risk, alignment of risk appetite, and 
what they should expect in terms of challenges. We also work 
with the industry through FIBA to make sure that they have 
available training, to make sure that they have a forum for 
discussion and to air their concerns, and to react with them, 
and work with them to make sure we clear that up. So, we 
provide a great deal of support not only in banking them, but 
also helping them navigate with the changes.
    Mr. Perlmutter. Thank you, sir. My time has expired. I 
yield back to the Chair.
    Chairwoman Waters. Thank you very much. The gentleman from 
Texas, Mr. Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman, and 
when we are talking about money laundering risks, we cannot 
ignore the absolute disaster at the Southern border. Over 2 
million people have been apprehended this fiscal year alone, 
and this number doesn't include those who successfully evaded 
Border Patrol agents. Even The New York Times admitted this 
summer that drug smuggling revenues are estimated to be up $13 
billion this year, up from only $500 million in 2018.
    And open borders--I live in Texas, full disclosure, so I 
have been down there a lot--are not only enriching 
multinational criminal organizations, but the consequences are 
also having a very real impact in our communities. The Texas 
Department of Public Safety alone has seized more than 340 
million lethal doses of fentanyl this year, and we all know 
what a small dose of fentanyl can do to people. Additionally, a 
record number of migrants have died along the Southern border 
this year: 750. The Biden Administration must start thinking 
about this seriously, and they are not doing it.
    Ms. Shetret, from the financial services perspective, what 
are some ways we could better track the proceeds from illicit 
activities flowing to drug and human trafficking organizations?
    Ms. Shetret. At the moment, financial institutions are able 
to follow the basic policies and procedures in place that are 
very manual and very labor-intensive. They are basically 
looking for a needle in the haystack to try and identify those 
particular proceeds within the banking system, and that is 
cumbersome. If we start thinking about how we could implement 
some innovative transaction monitoring, perhaps those that are 
blockchain-based, what we might find is that there is a concept 
of traceability that goes and provides visibility end to end. 
Where has money been? Where is money going?
    And so, when we think about innovating around the U.S. 
digital dollar, whatever that might look like, and the 
thoroughness of work that needs to go into developing that, 
something that is blockchain-based will allow us to better 
identify and track, stop, cease, confiscate, and hold illicit 
proceeds so that we are able to prescreen rather than post-
investigate those kinds of instances.
    Mr. Williams of Texas. Yes, a lot of things have been 
happening after the fact. One way to make it easier would be to 
secure the border and have fewer people in the business, right? 
But if you go down there, it is just unbelievable what you are 
seeing, the drug traffickers in there and so forth with these 
young kids. But if we would get after it and really secure the 
border, we would slow a lot of this down.
    As we talk about de-risking, I feel like I need to share my 
experience when I was targeted under Operation Choke Point. I 
am probably the only person in this room who has been affected 
by Operation Choke Point. I received a call several years ago 
from my bank, and I was told that I had 24 hours to move my 
money out of there because they no longer wanted to do business 
with me. I am a car dealer, and they didn't want to do business 
with me. This is a bank I was on the board of for 24 years, 
with no problems, and they decided in 24 hours that they didn't 
want my business because they no longer wanted to do business 
with me. And I have been with this bank, as I said, for a long, 
long time. To this day, they have never told me why.
    I can't imagine what pressure the bank had to sit down in a 
community where everybody knows everybody, would have had to 
sit down and say, okay, who is going to call Roger and tell him 
that? I can't imagine the pressure they had to stop doing 
business with me. It must have been unbelievable. And this just 
shows if this can happen to a sitting Member of Congress, on a 
board of directors, or somebody who has been in the community 
forever, it can happen to anyone, and it is a total crisis. And 
I was lucky that I had a bank that would take my business, 
which was a decent business, 89 years we have been in business, 
but some people don't have that luxury. I know you have looked 
at Operation Choke Point and its effects on the marketplace. 
You talked a little bit about it just a minute ago.
    Can you talk about the negative consequences of 
indiscriminately de-risking entire industries? There were at 
least 40 industries on a piece of paper somebody wrote down, so 
we don't do business with them. We don't want to do business 
with them. And these are family-owned businesses. This is 
capital that people have put in, their own money, and to just 
be wiped off the board is not the way that we are supposed to 
do things here in America. Quickly, can you talk about some of 
the consequences that you have seen in wiping out industries?
    Ms. Shetret. I am sorry to hear of your personal experience 
there. Thank you for sharing that. I think that the 
disappearance of brick-and-mortar banks, the disappearance of 
kind of that personal interaction is one consequence that we 
are seeing, which emphasizes the need for digital Know Your 
Customer (KYC) so that we understand who you are when you come 
to bank. The loss of sectors means that we are having entire 
swatches of business that are going where they can find banks. 
If that is out of the United States, that is where they will 
go. They will go find the first opportunity to properly bank 
and conduct their business, which means that innovation is 
leaving, which means that there is a movement. The borders are 
becoming inconsequential if the provision of services is not 
maintained here. There is a loss of intellectual property, 
there is a loss of jobs, and we need to find a way to offer 
banking services. There is a financial inclusion risk where 
people who had access, ATM businesses and so on, are unable to 
maintain bank accounts. That is challenging across-the-board, 
and is actually inhibiting financial inclusion.
    Mr. Williams of Texas. Okay. I yield my time back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from 
California, Mr. Vargas, is now recognized for 5 minutes.
    Mr. Vargas. Thank you, Madam Chairwoman. I appreciate very 
much this hearing, and I learned quite a bit. In fact, most of 
my questions have been answered. However, one of the questions 
that I did have, my good friend, Mr. Hill from Arkansas, was 
pursuing. Of course, he always has very insightful questions 
and perspectives. He has great experience both in the private 
sector and in government, and he asked, what happens when 
American financial institutions leave? Who takes their place? 
And I think he asked all of you to get back to him on that.
    But if you could maybe speak a little bit about that now, 
because my question was going to be, is it the Chinese banks 
that have established themselves? And I understand that China 
uses the U.S. disengagement as an opportunity to expand its 
Belt and Road Initiative (BRI) in the Caribbean and challenge 
U.S. diplomatic and economic regional influence. Recently, 
seven Caribbean countries--Antigua-Barbuda, Barbados, Dominica, 
Grenada, Guyana, Jamaica, and Trinidad and Tobago--have signed 
BRI agreements with China. As a result, Chinese investments in 
the Caribbean will total over $16 billion in infrastructure and 
financial partnerships over the next 25 years.
    According to the Caribbean Development Bank, Caribbean 
countries have readily grasped Beijing's offer of easy 
financing as traditional U.S. financing partners have pulled 
out of the region. To all of the panelists, can you provide 
some information about this? Because it does concern me.
    Mr. Mowla. Thank you for the question. I think the United 
States has the upper hand in the situation relative to Chinese 
engagement in the Caribbean. China has a very one-dimensional 
relationship with the Caribbean, usually economic. You 
mentioned the Belt and Road Initiative. You mentioned 
investments, potentially Chinese correspondent banks and 
Chinese currency in the region. The U.S. has a more 
multidimensional relationship. We think about politics. We 
think about security. We think about diplomacy. These are all 
things that the U.S. does well. You just have to look at the 
U.S. Southern Command and the trade winds exercise in the 
Caribbean as a prime example, and now what the U.S. needs to 
compete is more on the economic side. Their economic linkages 
do exist there, but they exist in trade. They exist in 
investment appetite. Where it is severely lacking is in the 
correspondent banking, in de-risking.
    And as I said before, many of the U.S. economic policies 
that have been recently announced specifically at the Summit of 
the Americas, PACC 2030 being announced by Vice President 
Harris, none of that will matter if correspondent banking is 
not available to Caribbean countries, to people their 
institutions.
    Mr. Vargas. Anybody else?
    Mr. Sharma. Thank you for the question. I will offer a 
couple of thoughts on this as well. Part of the challenge here 
is exacerbated by some of the thoughts conveyed earlier as 
related either to reputational risks and/or sanctions policy by 
the U.S. Government. If, for example, and I commend the great 
work, Madam Chairwoman, on looking at revisions on how, for 
example, the INCSR report works, because if banks look at an 
official U.S. Government document that effectively labels a 
region as high risk, U.S. institutions governed by U.S. 
regulators will leave that region, leaving holes for both 
investment, technological, technical assistance, and financial 
services opportunities.
    You rightly point out that one major government, China, has 
very much increased its investments not only in the Caribbean, 
but across the world, Latin America, Africa, et cetera, where 
U.S. institutions, U.S. companies, have either been denied by 
way of sanctions policy or by various U.S. Government and other 
initiatives that have either labeled directly or indirectly 
those countries, those jurisdictions as being categorically 
higher risk.
    And then, as my colleagues here explained, if an 
institution regulated by U.S. regulators is now doing the cost-
benefit analysis of saying one is higher compliance risk, and, 
therefore, I am going to be scrutinized more and potentially 
subject to sanctions, low profits, or both, there is no 
incentive to do business there. I would say that part of the 
solution set is to create incentives by way of policy and 
legislative measures that actually incentivize positive foreign 
direct investment, including financial services access, into 
one of the most vibrant financial and capital markets on the 
planet, the United States.
    And one of those ways, especially to the advent of 
financial technology applications, web-based digital asset 
applications, is one can now have the ability to put 
individuals households, corporations, and nonprofits in those 
regions into U.S.-based accounts, which would promote those 
regions, invest in those regions, and reestablish less of an 
enforcement-centric work of financial services and foreign 
policy in a much more incentivized development orientation that 
we really need to reorient our national and economic security 
policy.
    Mr. Vargas. Thank you, again. I found this hearing to be 
very positive, and I appreciate the chairwoman. Thank you.
    Chairwoman Waters. Thank you very much, Mr. Vargas. The 
gentleman from Ohio, Mr. Gonzalez, is now recognized for 5 
minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. Ms. 
Shetret, I am going to start with you and pick up on the China 
theme. We talked a little bit about this already. If you could, 
I would like you to sort of outline how does China's Belt and 
Road Initiative, from a financial standpoint and a sanctions 
avoidance standpoint, works in Africa? And then from that 
parallel, how do you see it potentially playing out in the 
Caribbean?
    Ms. Shetret. Thank you for the question. Since 2008, I have 
been working in the Horn of Africa, and I have seen the rise of 
the Chinese economic power. And I think I almost see it as the 
Back to the Future situation of the Caribbean, so I would like 
to describe it from that perspective.
    The Chinese initiative at the moment is not time-bound. 
There is patience in the making, and we have seen that unfold 
over the years in Africa. What I have specifically noted is 
that around 2013, when many of the major banks de-risked 
businesses in the Horn of Africa and essentially left, what we 
saw was that China stepped up in a variety of different ways. 
For example, all Chinese-manufactured phones are hardwired with 
wallets that are directly connected to potential Chinese 
currencies and, essentially, bypassing settlement from the U.S. 
dollar.
    Mr. Gonzalez of Ohio. Essentially pulling them away from 
the dollar-based system.
    Ms. Shetret. Exactly. And what that means when it comes to 
national security instruments such as sanctions and sanctions 
implementation is that enforcing sanctions becomes that much 
harder because the settlement is no longer against the U.S. 
dollar. We have no visibility into those transactions. We shoot 
ourselves in the foot in trying to follow the money and track 
that process.
    Mr. Gonzalez of Ohio. So, the de-risking has led to this 
situation in Africa vis-a-vis China. Can you draw a parallel to 
maybe some fears we would have from a de-risking in the 
Caribbean standpoint? Do you think China would implement a 
similar policy potentially and set up with essentially bases 
around which to bypass the dollar-based system?
    Ms. Shetret. Yes. The parallel is certainly drawn, and it 
is certainly there. I would see a situation in which again, the 
patience, the build-out of mega projects that are 
infrastructure-based are accompanied by soft-tech solutions 
from China that are meant to establish economic power, and that 
is done across industries. In a situation in which there is 
full de-risking across the Caribbean, there are still 
businesses that need to operate tourism that needs to happen, 
activities, financial accessibility globally that will need to 
be ongoing. And whomever steps up to provide those services, 
Chinese actors included, will win that business, and that is 
the only option that would be left on the table.
    Mr. Gonzalez of Ohio. Yes. The fear being what we have seen 
happen in the Horn of Africa, we will see again in the 
Caribbean, obviously.
    Ms. Shetret. Yes.
    Mr. Gonzalez of Ohio. What, in your eyes, is the best 
response from a U.S. standpoint in terms of preventing that 
sort of thing from happening?
    Ms. Shetret. I would encourage us to expedite our 
exploration of the U.S. digital dollar, understanding what it 
could look like, assessing its opportunities and risks 
globally. There needs to be a U.S. dollar dominance assessment 
that encourages innovations.
    Mr. Gonzalez of Ohio. I don't want to go too far on this. 
Dollar dominance is, frankly, a priority of mine, and I think 
of most members of this committee. I am not a CBDC digital 
dollar guy, but I know it is being negotiated, and I think if 
we are smart about articulating a stablecoin bill that mandates 
U.S. dollar-based reserves and makes sure that the stablecoins 
that are proliferating across the globe, the private 
stablecoins are dollar-backed essentially, I think that 
strengthens the dollar. I think that adds to our ability to 
implement sanctions and from both national security and 
innovation standpoints, puts the U.S. at the forefront of what 
I believe is one of the most exciting technological advances of 
my adult life. And I say that to encourage those negotiating on 
the bill to continue on, be thoughtful, and solicit feedback 
from those of us on the committee who spent a lot of time in 
this area. And with that, I yield back.
    Chairwoman Waters. Thank you so very much. And those who 
are negotiating, I hear you loud and clear. Thank you very 
much.
    The gentlewoman from Ohio, Mrs. Beatty, who is also the 
Chair of our Subcommittee on Diversity and Inclusion, is now 
recognized for 5 minutes.
    Mrs. Beatty. First of all, let me thank Chairwoman Waters 
for holding this hearing today, and to all of our witnesses, 
thank you for being here today. I think we have all learned a 
lot. I am going to take about 20 seconds of my time for 
personal privilege, to thank the chairwoman for allowing me to 
join her at the chairwoman's CODEL to Barbados and to the 
Bahamas earlier this year. I had the honor of meeting with 
Prime Minister Mottley, who was on the panel before this one, 
and I want to make sure the record indicates that I thank her 
for her testimony and for participating in this hearing. Again, 
this chairwoman is making history.
    When we talk about de-risking and its impact not just on 
the Caribbean, but the United States as well, certainly we have 
heard and we all know that it is a critical issue, and I am 
glad that we are calling attention to it. For all of those who 
are watching us, many of our brothers and sisters from the 
Caribbean, we hear you, and this is very real. I would like to 
begin by touching on some of the topics that we discussed, 
Chairwoman Waters, on your CODEL because many of the things we 
are hearing here today from our witnesses, we also heard in our 
roundtable.
    Mr. Mowla, let me start with you. I know we have covered a 
lot today, and some of the things I am going to ask about, 
maybe several of you have touched on. But I want to talk about 
how we can provide technical assistance for legal and 
regulatory uniformity across the region or how we could support 
a consortium, I think, pilot, maybe that goes across the 
region. Do you have any thoughts or suggestions on anything we 
could do that would be particularly effective with this issue?
    Mr. Mowla. Thank you for the question. I think, as I stated 
before, dialogue is very important. Being in the region to 
CODEL was a prime example of doing so by having regulators, 
banks in the region, meeting their different counterparts in 
the Caribbean, and understanding that yes, this is about 
business, but it is also about personal lives, about quality of 
life, and having that personal relationship is very, very 
important.
    Technical assistance, not just being in the embassies in 
the Caribbean, but across the Eastern Caribbean, only where 
they usually are only worked out of because of Barbados being 
in some of the smaller islands that are maybe not part of 
CARICOM. Building a consortium, yes, making sure that policies 
are harmonized. Harmonized, yes, but also contextualized to the 
different circumstances of each Caribbean country, even 
subregions as well.
    The Atlantic Council is currently alongside some of our 
partners here on the panel, looking to promote a U.S.-Caribbean 
banking forum alongside CAB, alongside FIBA, alongside a lot of 
other organizations that have been in the space for the past 
decade. Ensuring that there is a space for dialogue, that there 
is a way for U.S. regulators, U.S. legislators to go down to 
the region on an annual basis to ensure that there is much more 
harmony between what we are essentially talking about is just 
access to the global financial system, access to be able to buy 
food, access to be able to buy goods, access to affordable 
healthcare, and to purchase healthcare outside of the Caribbean 
region.
    Mrs. Beatty. Okay. I want to thank you for that, and I 
think the key word is, ``communicating.'' Look, this is not 
new. I can remember coming on to the Financial Services 
Committee, and meeting with the World Bank, and talking about 
the same issues with remittances and how much money we could 
withdraw from accounts to send back home. One of the things 
that we are hearing is that there has been this whole list of 
evaluating nations' risks deals dealing with money laundering 
and the financing of territories, and these lists certainly 
flag certain countries, many of which are the island nations in 
the Caribbean, as high risk and in need of greater monitoring.
    Can you tell me, Ms. Delmar, how we can come up with a 
better system or any ideas you can give us to help us be able 
to properly assess money laundering? How do we assess this and 
the risks objectively and fairly, because I do believe that it 
is unfair. I do believe that just as we deal with systemic 
racism in our countries, there are things that happen that are 
not just, and I know Chairwoman Waters has some legislation. I 
only have a few seconds left, so you may have to respond in 
writing to me.
    Ms. Delmar. Okay. Thank you so much for the opportunity. 
Certainly, I think that there is a place for the INCSR report. 
I think, unfortunately, as it is being utilized now, it does 
not allow us to get the full gist of what is happening in the 
Caribbean, how we are actually fighting and combating the 
scourge of anti-money laundering and terrorist financing. I 
would be more than happy to submit to you a more formal 
response in respect of time, but certainly I think that this 
perhaps is an actual gateway to addressing and understanding a 
little bit more of the specific nuances of each Caribbean 
Island. Thank you.
    Mrs. Beatty. Thank you, and thank you, Madam Chairwoman.
    Chairwoman Waters. You are certainly welcome. Thank you. 
The gentleman from Guam, Mr. San Nicolas, is now recognized for 
5 minutes.
    Mr. San Nicolas. Thank you very much, Madam Chairwoman, and 
thank you so much for hosting this hearing, and thank you to 
the panelists also for your excellent presentations. I wanted 
to begin by making it very plain that Guam and the Territories 
of the United States empathize with you. We get blacklisted 
multiple times, usually by the European Union. It is very 
frustrating, especially being a member on this committee and 
having to contend with the European Union blacklisting us for 
being a money laundering risk and a terrorism financing risk. 
And our own banks in our Territories, including Guam, are FDIC-
insured, are regulated by the Treasury, and are regulated by 
the Comptroller of the Currency. We have all the trappings of 
U.S. options, and yet we suffer circumstances very similar to 
yours. And so, I wanted to first begin by thanking Chairwoman 
Waters for having this hearing to call attention to this issue, 
and to also put on the record the circumstances of our U.S. 
Territories that are very much the same as our brothers and 
sisters in the Caribbean.
    My question is pretty simple, and it is related to 
something that we contend with on our end. If a U.S. Territory, 
which is part of the U.S. financial system, is still suffering 
the consequences of being blacklisted by these so-called 
watchdog types of operations, how does the Caribbean propose to 
be able to remedy their circumstances when Territories of the 
United States themselves are suffering the same? I guess I will 
pose it to Ms. Delmar.
    Ms. Delmar. Certainly, there are challenges for us in 
wrapping our minds around, how do we consistently get ourselves 
off of these blacklists, as you are clearly experiencing as 
well in Guam. We continue to ensure that we highlight the 
positives that are being done in the Caribbean region from a 
legislative perspective. We continue to be open to dialogue. 
Opportunities like this are not missed by the Caribbean. But it 
really boils down to whether or not, like we previously said, 
there is adequate communication and understanding the nuances 
that govern the various jurisdictions within the Caribbean.
    We have islands now that are subject to U.S. law, where we 
have Caribbean islands that are subject to European law just by 
virtue of the fact that we were established in more instances 
than not under the U.K. systems. So, I think it is something 
that has to be dealt with as a common good, that has to be seen 
as a common opportunity by the European watchdogs, as you put 
it, as well as the U.S. Government, and the members of CARICOM, 
and the wider Caribbean in ensuring that we are able to outline 
succinctly the ways in which the Caribbean will be viewed. And 
that comes across also in the written submission provided by 
the Caribbean Association of Banks.
    Mr. San Nicolas. Thank you for your response. Does anyone 
else on the panel wish to add to the question or the 
conversation?
    Ms. Shetret. I would like to add in two quick points, 
please. One is that the methodology that is used to assess a 
particular jurisdiction being put onto a particular list can 
absolutely be revisited. There is an opportunity to look at the 
methodology not just from an anti-money laundering and 
counterterrorism finance perspective, but to consider other 
components, for example, the stage of development of that 
country. Is there a famine in that country? What is the 
financial inclusion methodology that could also be coupled into 
that so that there is more of a holistic approach to 
methodologies that put particular countries and jurisdictions 
on lists?
    The other piece is that there needs to be a strengthening 
of a dispute resolution or an ombudsperson capability of 
getting removed off of that list, so that once you are on the 
list, it doesn't need to take years and years to get off the 
list. What are some ways in which parliamentary action, swift 
action could potentially get you an expedited removal from the 
list to hopefully remediate any potential concerns, 
reputational concerns that the jurisdiction is absorbing?
    Mr. Shah. I would like to add, from the industry 
perspective, that every time one of these lists gets updated 
and we see some islands on there, some countries on there, we 
ask the question, what is the consultative process and 
communication for you to get on the list? Is somebody making 
these decisions in a vacuum? Where is the communication? How do 
you have a dialogue to verify that these countries need to be 
on the list? That is one thing I would think from an industry 
perspective makes sense, that before somebody gets on a list, 
just like we are trying to do with the INCSR report, let's have 
that dialogue. Let's have that confirmation and make sure that 
the place on the list is deserved.
    Mr. San Nicolas. My time has expired, Madam Chairwoman, but 
those are all excellent points that I very much support. Thank 
you very much for the opportunity.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from North Carolina, Ms. Adams, is now recognized for 5 
minutes.
    Ms. Adams. Thank you, Madam Chairwoman, for hosting today's 
hearing. Most of the correspondent banks are the largest 
financial institutions, like your bank, Mr. Shah, Wells Fargo, 
and others, including Citibank and Bank of America. There are 
some small financial institutions offering this service, but it 
is not too common. I would imagine that is because it is 
expensive to maintain the overseas staff and branches, and 
because the anti-money laundering and sanctions compliance is 
expensive. Mr. Sharma, Mr. Shah, Ms. Shetret, is it a good idea 
to facilitate the entry of more small and medium-sized 
financial institutions into the correspondent banking services, 
and if so, how do you think Congress can help facilitate that 
entry? Mr. Sharma, do you want to go first?
    Mr. Sharma. Yes, thank you very much for the question. I 
absolutely agree that smaller and medium-sized institutions 
should certainly be encouraged and facilitated, both by way of 
regulatory as well as legislative enablements and 
encouragements. In addition, as several of us talked about 
earlier, the advent and innovation of non-bank financial 
services, web-based applications that are actually providing 
access also give a very good opportunity to provide direct 
access for cross-border payments that are either remittance 
bound, corporate payments, and trade finance. And some of these 
innovations actually do not require the dependencies on global 
clearing banks, or custodians, or correspondent banks at all. 
And I think that part of the Stablecoin Act, part of the work 
that this committee has been doing in looking at digital assets 
and blockchain-enabled financial services can absolutely 
stimulate those while also enabling and reinforcing U.S. dollar 
strength, especially with respect to U.S. dollar-backed digital 
currencies that also serve to enable immediately small and 
medium-sized institutions in the United States.
    And I would say finally that we already have a great 
opportunity to do so by some of the comments that were made 
earlier, the diaspora communities and those regions of the 
country that have direct connections to Caribbean nations. 
Those diaspora communities, be they small businesses or 
households, can be enabled for direct connections for financial 
access in ways that are enabled. And I would also look to--
    Ms. Adams. I want to move on and give some time to Mr. 
Shah.
    Mr. Sharma. --CRA and other enablements that way, too.
    Ms. Adams. Okay. Thank you. Mr. Shah?
    Mr. Shah. When you look at the environment for 
correspondent banking, usually the large banks have a 
significant infrastructure and program to manage those risks. 
It is always a good idea to have many providers of the service. 
Small and medium-sized banks would also have to invest in a 
similar infrastructure and program, and also be able to respond 
to the regulators like a big bank would. From my perspective, 
it is always a good idea to have more and more folks providing 
the service as long as they can manage the risks appropriately.
    Ms. Adams. Okay. Ms. Shetret?
    Ms. Shetret. I agree with what has been said so far. Thank 
you.
    Ms. Adams. Okay. Thank you very much. Let me ask Mr. 
Sharma, can you briefly discuss how new fintechs are playing a 
role in the correspondent banking space in the Caribbean?
    Mr. Sharma. Absolutely, and I want to commend a previous 
panelist, the Prime Minister from Barbados. Barbados and many 
other Caribbean nations are exploring the use of technology, 
particularly blockchain technology, for purposes of asset 
issuance--in other words, digital assets, including central 
bank digital currencies. Secondly, the ability for peer-to-peer 
payments directly that do not require a specific financial 
intermediary that enables both the secure and equitable access 
between counterparties, again, corporates and otherwise, and 
that innovation is being seen in the Caribbean, in particular.
    A previous question on how Caribbean nations can actually 
prove what they are doing to provide security and risk should 
also assess the level of inclusion opportunities that are 
provided, including through the use of financial technology 
applications, and that should be leveraged, that should be 
assessed and considered when thinking about the security risk 
management, AML, and other considerations that they are 
actually undertaking because some of those innovations are, in 
fact, providing inclusion and greater transparency in tandem. 
Those are some examples.
    Ms. Adams. Thank you, sir. I am out of time, Madam 
Chairwoman, so I yield back.
    Chairwoman Waters. Thank you so very much. The gentleman 
from Wisconsin, Mr. Steil, is now recognized for 5 minutes.
    Mr. Steil. Thank you very much, Madam Chairwoman. Ms. 
Shetret, we have spoken today about the breakdown of 
correspondent banking relationships and its impact on Latin 
American and Caribbean countries, rightfully so, but these also 
are one-sided. And I would love for you to shed a little light 
about the other end, the correspondent banking relationships 
with U.S. financial institutions that facilitate business with 
American companies. And can you talk about how American 
businesses and workers would be impacted when international 
financial flows would be disrupted?
    Ms. Shetret. I'm sorry, could you clarify the question?
    Mr. Steil. We have a little bit of noise there with the 
door, but we have talked about the impact that this would have 
on Latin American and Caribbean nations. What is the impact 
here in the United States of America, the other side of the 
coin, if you will?
    Ms. Shetret. Yes. One of the things that we are seeing here 
is that there is a brain-drain innovation, and things are not 
quite flourishing as much as we would like to see, because, 
essentially, businesses are moving to where they can operate 
openly and freely, and that is difficult to see. America is a 
wonderful place to innovate, and we would like to keep that in 
this country, so there is a concern around brain drain there. 
The other piece is that the regulatory framework requires a 
little bit more adjustment to be clear and to allow for 
innovation to bloom here, and that is something I would point 
out.
    Mr. Steil. Thank you. Let me continue on with you. In your 
opening statement, you spoke about how de-risking is, I think, 
``perpetuating the challenge of regulatory arbitrage.'' Can you 
explain how this dynamic plays out, and does aggressive de-
risking from the U.S. potentially yield global financial flows 
to countries such as China, which may have very different 
standards?
    Ms. Shetret. The concern of regulatory arbitrage is real, 
and what happens is that there is no standardization globally 
that is being enforced. What we see is that one country 
implements particular frameworks that then doesn't get 
translated. This impacts the opportunity to investigate, to 
share information. The criminal codes are different. The 
legislation varies, and there is no common language. Sharing 
information under very complicated memorandums of understanding 
becomes an ordeal. It is not timely. This is particularly 
difficult when we look at governments that are not necessarily 
cooperative with international frameworks; we do require 
information sharing because criminality does know no boundaries 
or barriers, and we do need information sources around the 
globe.
    One of the things that we have been seeing is that the 
ambiguity of the risk-based approach, national regulators are 
coming out to put more detail behind that, but that is 
happening at a different pace. It is happening at a different 
speed and at a different level of detail across countries. So, 
I do hope that the Financial Action Task Force and its 
counterparts by region, for example, in the Caribbean, the 
Caribbean Financial Action Task Force will spend more time kind 
of putting those details behind expectations around how to 
manage high-risk customers.
    Mr. Steil. Thank you. Let me shift gears somewhat here with 
you. When we look at ways to mitigate the impacts of broad-
based de-risking, I think it is important to consider the role 
that digital currencies can play in bringing marginalized 
regions safely back into the financial system, and this is 
especially true for island nations where it is more challenging 
to move physical currency. One concern that is often brought 
up, I think incorrectly, is that cryptocurrency can't be part 
of the solution in this, and some will make arguments that 
crypto is a conduit for illegal activity. I disagree with that 
premise. Do you think crypto, in particular, presents an 
outside risk with respect to illicit finance?
    Ms. Shetret. I disagree with that premise as well. Thank 
you for sharing that. I think that criminals are opportunistic. 
They will go wherever they can manage loopholes, wherever they 
see gaps. And we see that they have been successfully utilizing 
all sorts of instruments globally, including the traditional 
financial sectors. And it is not a surprise that they are also 
using crypto in the virtual asset space, non-fungible tokens as 
well to act. But what we have seen by and large is that because 
of the capability to trace illicit finance, we actually have 
eyes and ears on the ground, so to speak, as to where illicit 
financing is ongoing. The capabilities of prescreening are 
really helping us understand where it is happening so we don't 
cash out. There are opportunities with crypto specifically that 
allow companies and centralized exchanges that are regulated to 
stop transactions that they see are illegal and illicit.
    Mr. Steil. I agree with you that crypto provides 
opportunities to actually mitigate the impacts of de-risking.
    Ms. Shetret. Absolutely.
    Mr. Steil. Recognizing the time, Madam Chairwoman, I yield 
back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Massachusetts, Ms. Pressley, who is also the Vice Chair of our 
Subcommittee on Consumer Protection and Financial Institutions, 
is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman. As the 
Representative of the third-largest Caribbean diaspora in the 
United States, this hearing really resonates deeply with me. In 
my district, the Massachusetts 7th, many of my constituents, 
many of my neighbors send remittances to their families in 
Haiti and throughout the Caribbean, which have really proven to 
be a lifeline amidst the financial hardships of the pandemic 
and, of course, global inflation as well. Remittances help 
working-class families stay afloat when they need it the most 
and have demonstratively reduced poverty in several countries.
    Mr. Mowla, according to the Atlantic Council report, which 
you co-authored, the Caribbean has seen a decline in 
correspondent banking relationship since 2015, with the World 
Bank citing the region as the most severely affected by this 
phenomenon from a global perspective. As a result, remittances 
to my constituents and to their families have become more 
expensive, if not denied or delayed entirely. Can you please 
expand upon how the decline in correspondent banking 
relationships is harming working-class families in the region? 
I just wanted to build upon that question from my colleague, 
Congressman Meeks, earlier.
    Mr. Mowla. Thank you for the question. Mostly, as I 
mentioned to Congressman Meeks, remittances supplement working-
class populations' incomes. It is what people use, especially 
when there is job loss and poverty. We saw this with the 
pandemic, where 10 CARICOM countries have tourism-dependent 
economies. During the pandemic, tourism shut down, which meant 
that they were unable to go to work. Where were they able to 
get an income supplement to buy food, to purchase healthcare, 
to access education? It came from remittances. We saw this in 
Haiti. We saw this in Jamaica.
    Now, the pandemic was just 2, 3 years, still ongoing, but 
we think about disasters and extreme weather events. 
Remittances help. They help with taxes. They help across-the-
board. At the same time, remittances, when they are delayed, 
when they are much more costly, it affects the people who are 
in the U.S. itself. They are then going to be unable to send 
remittances, and they themselves, especially people in 
Massachusetts, New York, and Florida, who are already living in 
sort of underserved communities, are going to have to pay more 
and more each time.
    Ms. Pressley. Thank you. Again, I would like to explore 
this a bit more. For countries like Haiti and Jamaica, we know 
that remittances accounted for 20 percent of their GDP in 2020 
alone. So if the decline in correspondent banking relationships 
continues, what will be the impact on these nations' economies?
    Mr. Mowla. For countries like Jamaica, it is 20 percent of 
the GDP, but then you have tourism, which is about 25 percent 
of GDP, so almost half of their GDP has been wiped out during 
the pandemic. And when there are limited remittances, what 
happens is that when you have limited economic stability, it 
can create political instability. When people don't have jobs, 
when people are impoverished, they have to find other ways of 
making money. It can lead to sort of petty crime. Women and 
children are disproportionately affected. They can become 
victims of human trafficking. It creates broad political 
instability when you couple that with other factors such as 
climate change, energy insecurity, and high food prices. This 
creates a very worrisome picture in the Caribbean, especially 
over the long term.
    Ms. Pressley. Worrisome, devastating. And for a region 
disproportionately vulnerable to climate disasters and 
dependent on the tourism industry, finding a solution to this 
de-risking problem is really critical. Mr. Mowla, in the report 
you co-authored, you listed a number of possible solutions to 
this problem. Specifically, you discussed categorizing 
correspondent banking as critical market infrastructure for the 
important role these relationships play in Caribbean economies. 
Can you elaborate how this categorization would increase access 
to financial services in the region?
    Mr. Mowla. Yes. Both in the U.S. and globally, it would 
identify correspondent banking as a global public good, as a 
human right basically. As Prime Minister Mottley stated in the 
previous panel, doing this will give added justification for 
international financial institutions to incorporate 
correspondent banking as critical market infrastructure in 
development packages and development finance, and USAID 
assistance after extreme weather events. It also helps to sort 
of underscore the vulnerabilities that these countries are 
facing, even high- and middle-income countries, allowing them 
another justification to be able to access concessional 
financing and blended finance as well.
    Ms. Pressley. Thank you, and thank you to our distinguished 
Chair for this historic hearing. This is certainly an issue of 
critical economic, racial, and immigrant justice, and we can't 
sit idly by.
    Chairwoman Waters. Thank you. The gentlewoman's time has 
expired. The gentlewoman from Texas, Ms. Garcia, who is also 
the Vice Chair of our Subcommittee on Diversity and Inclusion, 
is now recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and I 
want to thank you for bringing this very important topic to the 
table. I, too, was on the trip with you when we visited 
Barbados and the Bahamas and started looking at this issue. It 
is good to see the Prime Minister back. It is good to see so 
many of you that we met during that trip, and we hope that we 
can build on this and come to some solutions and some 
legislation that would be of assistance. I wanted to start with 
Mr. Sharma, Mr. Shah, and Ms. Shetret.
    Most of the correspondent banks with the largest financial 
institutions, like your bank, Mr. Shah, Wells Fargo--and I was 
really pleased with the remarks you made earlier. And of 
course, we also included Citibank and Bank of America. There 
are some small financial institutions offering services, but it 
is unusual, I would imagine, just because it is expensive to 
maintain the overseas staff I think you all talked about during 
the forum, and our branches because the anti-money laundering 
and sanctions compliance is expensive. I think the Prime 
Minister mentioned that. It is a good idea to facilitate the 
entry of more small and medium-sized financial institutions 
into correspondent banks. Do you think we need to do more of 
that, or what specifically do you think, Mr. Shah, we need to 
be doing to help to just get more banking in the Caribbean?
    Mr. Shah. When you look at some of the reasons outlined for 
banks leaving, there were largely three major reasons. The 
first one was that the Caribbean was now recognized as a high-
risk jurisdiction for a multitude of reasons and maybe the 
wrong perception. That was the catalyst that basically said, if 
I am going to be in a high-risk jurisdiction, it is easier for 
me to exit than to mitigate the risks, because operating in 
that jurisdiction will require an immense amount of resources 
and investment.
    The second thing that a lot of the banks looked at is how 
well did the region itself respond to new legislation and the 
ability to mirror risk appetite with U.S. financial 
institutions, so that was the second challenge. And when we 
talk about encouraging banks to go back in there, there is this 
notion and everybody talks about it, the risk-based approach. 
So for a small or medium-sized bank, their view on a risk-based 
approach for correspondent banking might be totally different 
from a bank that has a program equipped to manage correspondent 
banking risks. I think small banks going in there need to be 
wary that they face the same challenges larger banks face.
    Ms. Garcia of Texas. Right. As you may recall, during that 
forum I mentioned that, to me, just listening to all of you, it 
reminded me a lot of the challenges I have with bringing banks 
into my district, which is 77-percent Latino, very heavy with 
Spanish-language speakers, because banks are really not 
interested in having branches in some parts of Houston. You 
were sort of redlined. And similarly, it appears that you all 
have been redlined from the U.S. banking system. To quote the 
Prime Minister, I do see you, and I do hear you, and I feel 
you, and I think we are committed to making some changes, and 
again, to focus on how similar it is. We don't want to 
duplicate in any changes any of the exclusionary regulations. 
We need to be more and more about being inclusive. And I wanted 
to ask Ms. Delmar, can you be more specific about how de-
risking practices impact remittance payments?
    Ms. Delmar. Certainly. As far as the cost of remittances 
goes, it is one of the major factors that impedes the ability 
to send money back home to families. The other thing that we 
need to be mindful of that is remittances form part of the core 
of our existence in the Caribbean region. We have a number of 
families whose children go to school in the United States, and 
it is tantamount to their survival that we are able to transfer 
money between the countries, between the jurisdictions. The 
cost of remittances at this stage is highly prohibitive, and it 
has a resultant impact on the overall operational expenses of 
the Caribbean banks, the majority of which now are also 
indigenous banks. So they are small banks, trying to find 
innovative ways of ensuring that they are able to serve the 
populations, and that is one of the critical areas. Of course, 
I am happy to provide you a written report with a little bit 
more in-depth responses, given the time constraints.
    Ms. Garcia of Texas. Okay. Thank you. Madam Chairwoman, I 
would like to insert in the record a study that was made by the 
Texas Association of Businesses just this last year, ``Anti-
Money Laundering Regulation, Correspondent Banking, and the 
Adverse Economic Impacts for the U.S.-Mexico Bilateral 
Relationship,'' because, Madam Chairwoman, as you know, this is 
not just the Caribbean, although that is our focus today. It 
impacts all of the Western Hemisphere Latin American countries. 
And I thank you again, Madam Chairwoman, for your leadership.
    Chairwoman Waters. You are welcome.
    Ms. Garcia of Texas. I will look forward to working with 
you on your bill.
    Chairwoman Waters. Thank you.
    The gentleman from West Virginia, Mr. Mooney, is now 
recognized for 5 minutes.
    Mr. Mooney. Thank you, Madam Chairwoman. Fossil fuels are 
essential for affordable energy here in the United States. 
Under President Trump, the United States achieved energy 
independence. According to the major accounting firm, 
PricewaterhouseCoopers, the oil and natural gas industry 
supports 9.8 million jobs, which is 5.6 percent of total U.S. 
employment. Coal is a lifeline for West Virginia's economy. In 
the State that I am blessed to represent, West Virginia, coal 
supports over 29,000 jobs. West Virginia is the second-largest 
coal producer in the nation, accounting for 13 percent of the 
total U.S. coal production. Yet President Biden, as he did when 
he was Vice President under President Obama, has made it his 
mission to wage war on the fossil fuel industry. Some of his 
more-objectionable nominees have openly called for banks to 
deny financing to fossil fuel companies. De-risking is when 
banks limit certain services or relationships with customers to 
avoid regulatory concerns or problems, like money laundering.
    Ms. Shetret, the current Administration has made its 
opinions on the fossil fuel industry very clear. Given your 
work on de-risking, especially in a post-Operation Choke Point 
world, can you explain the effects of de-risking entire 
industries and what impact that can have on the United States 
and our competitiveness?
    Ms. Shetret. Thank you for the question. To be clear, 
sectoral de-risking is counter guidance and counter 
international standards. That is absolutely not the goal of 
regulation, and it is not the goal of the framework that is 
being touted. In fact, it is quite the opposite of risk-based 
approach, case-by-case analysis, and so in blanketing sectors, 
we are actually shooting ourselves in the foot, so to speak. 
And we spoke about the concept of re-risking where if we do 
ultimately de-risk entire sectors, what happens is that risk 
goes elsewhere. It is re-risked into potentially smaller 
businesses or smaller financial institutions that can't manage 
the compliance burdens that come with that, or it might go into 
Chinese counterparts. Wherever it might go, the challenge is 
that the risk does not disappear, and that is the bottom line, 
and we run the risk of doing that by eliminating sectors 
altogether.
    Mr. Mooney. Thank you. The point I am making here is that 
everything we are hearing from our witnesses today about the 
effects of de-risking in the Caribbean can also be said about 
this current Administration's approach towards fossil fuels. 
For example, Ms. Delmar, you stated, ``De-risking activity 
perpetuates the perception of the region as a high-risk 
jurisdiction, which in turn has an adverse effect on investor 
appetite.'' The same holds true in the United States. The Biden 
Administration seeks to negatively affect investor appetite and 
steer capital away from fossil fuel companies, while killing 
millions of American jobs. It is critical that we do not 
abandon the fossil fuel industry in this country. The so-called 
Inflation Reduction Act raises taxes on West Virginia's coal 
industry to provide subsidies for electric vehicles in big 
cities. That is devastating to West Virginia workers, while 
doing nothing to bring down energy costs. Thank you, Madam 
Chairwoman, and I yield back.
    Chairwoman Waters. Thank you. This is the Financial 
Services Committee. The gentleman from Missouri, Mr. Cleaver, 
who is also the Chair of our Subcommittee on Housing, Community 
Development, and Insurance, is now recognized for 5 minutes on 
financial services issues.
    Mr. Cleaver. Thank you, Madam Chairwoman. Yes, that is what 
I hoped we would talk about today, but there has been 
digression. Ms. Delmar, would it be of any value if the U.S. 
Department of the Treasury would work with the Caribbean 
Financial Action Task Force to help build a greater technical 
capacity?
    Ms. Delmar. Thank you for the question. Certainly, we 
believe that there is the opportunity to continue the dialogue 
so that we ensure that, again, the policies are reflective of 
what happens in the Caribbean islands and sets us apart from 
perhaps the rigorous nuances associated with these policies and 
legislations that are implemented in the United States?
    One of the things that has to be considered in decision-
making is the size and scale of the Caribbean islands and our 
ability to respond effectively and efficiently to the changes 
that we seek on a constant, ongoing basis around policy change. 
And so, yes, I believe it is something that we will be open to, 
to working with you to ensure that there are policies that are 
put in place that also take into consideration what makes the 
Caribbean a third border to the U.S., small, interconnected 
islands, that are, to a large extent, in more instances than 
one, heavily reliant on the opportunities to trade with the 
U.S. to remain viable vibrant economies.
    Mr. Cleaver. Thank you. I was here with our children and 
increasingly very few others in the aftermath of the 2008 
economic collapse, but it was infinitely easier for us through 
the Dodd-Frank Act to deal with our entire system because all 
of the banks in the United States operate under the same laws 
and requirements. And I am just wondering, and I have become a 
fan of USAID--I have seen what they have done all around the 
world, in Africa for example, where I have many relatives, at 
least in Tanzania. And I am thinking that I don't know how 
active the USAID is in the Caribbean. I think you probably 
could answer that one first. Are you aware of USAID presence 
in--
    Mr. Mowla. Yes. They are extremely important to disaster 
response, especially after hurricanes, as well as currently on 
food security production.
    Mr. Cleaver. Yes. They do a lot of that around the world. 
The point I am trying to make is that USAID may be able to help 
build the technical capacity in the Caribbean. When you list 
the things that you need most desperately, I am assuming that 
for us to get rid of this redlining, I can't think of another 
blacklining, brownlining, whatever we want to call it. But it 
would seem to me if you know where that sits on your priority 
list, maybe that ought to be a request from a USAID, either 
from the task force or from this committee, to develop a 
program so that they can help build this technical capacity, 
but do so with some kind of standardized compliance 
requirements connected with Dodd-Frank.
    Mr. Mowla. I would say--
    Ms. Delmar. Sorry. From my perspective, the concern there 
for me would be whether or not this would be considered 
recognized by the regulators, the U.S. regulators specifically, 
noting that while we may build technical, it has to be done in 
conjunction with the U.S. regulators, of course, I would 
imagine, to ensure that it is identified, it is recognized as 
acceptable, so that we are re-onboarded in some instances and 
are able to establish relationships. And I say that in the 
context that the Caribbean has consistently, from 2015 up until 
the present day, spent inordinate amounts of money trying to 
figure out what are the challenges, specifically, why are we 
consistently being faced with the issues of de-risking? And 
today, we find that the conversation keeps changing in terms of 
what should we do, and all of these things are capital-
intensive for us. But wouldn't it be better if we had 
standardized compliance?
    Mr. Cleaver. Yes, absolutely. And maybe that is one of the 
requests we need to make to USAID. My time has run out. Thank 
you, Madam Chairwoman.
    Chairwoman Waters. You are welcome. The gentleman from 
Massachusetts, Mr. Auchincloss, who is also the Vice Chair of 
the committee, is now recognized for 5 minutes.
    Mr. Auchincloss. Madam Chairwoman, I appreciate you hosting 
this hearing. It has been educational for me. My questions are 
for Ms. Shetret on stablecoins' usage for correspondent 
banking. You said in page 4 of your written testimony, in a 
section entitled, ``Innovation and Technological Solutions to 
De-Risking,'' that Congress should explore legislation to 
facilitate the acceleration of digital dollars. And you 
described that CBDCs have a high adoption rate in the 
Caribbean, with eight countries fully deploying one, and that 
if the U.S. develops our own digital dollar, it should be 
interoperable with other nations' CBDCs.
    Now, I am a committed CBDC skeptic in terms of the United 
States and the Federal Reserves, the statutory authority to do 
it without getting Congress' approval and to the necessity of 
it here in the United States when we have a flourishing 
ecosystem of private stablecoin issuers. Can you describe 
whether you see any particular need for it to be a CBDC that 
would be interoperable with Caribbean CBDCs or whether if we 
mandated interoperability for private stablecoin issuers here 
in the United States, that would fulfill the same end state?
    Ms. Shetret. Thank you for the question. I think it is the 
latter piece that is important here. It is the interoperability 
piece of integrating into economic blocks. I think the concern 
whether it is a CBDC or a stablecoin is isolationism and 
creating a closed loop in which there is no way to conduct 
trade, to conduct transaction monitoring, and to be able to 
have visibility into risk and properly risk manage. I think the 
suggestion and the proposal is to essentially make sure that 
whichever direction we take that interoperability with the 
Caribbean and globally is considered front and center.
    Mr. Auchincloss. Agreed. And adding to the comments from my 
friend from Ohio, Mr. Gonzalez, the stablecoin has tremendous 
potential to amplify the U.S. dollar as the world's reserve 
currency, which has been a huge source of strength for us 
really since World War II. I want to give you the floor for 
maybe 30 seconds to a minute, as well as any of your fellow 
witnesses, who want to jump in here. Let's imagine that we have 
a scenario where stablecoins are interoperable and are properly 
collateralized both in the Caribbean and the United States, how 
might they assist with correspondent banking and/or the 
facilitation of remittances?
    Ms. Shetret. The first piece of stablecoins I would like to 
emphasize is the power of financial inclusion. It enhances the 
opportunity for accessibility to services that, at the moment, 
the unbanked or the de-banked don't have access to, and that is 
a huge win. We, with correspondent bank de-risking, have 
created an exclusionary barrier that stablecoins will allow us 
to overcome. I think the other piece that comes with that is 
that, again, it allows us to do anti-money laundering, 
counterterrorism finance, transaction monitoring, customer due 
diligence, all of the things that we need to be doing more 
efficiently, and more effectively. It is faster. It is 
potentially cheaper if we leverage technology properly. I think 
I will allow other colleagues to share their views, but that 
would be my bottom line.
    Mr. Sharma. Yes. I will just add a couple of things. I 
agree entirely with what Ms. Shetret has just said. The 
underlying technology that facilitates stablecoins provides 
through its attributes the immutability of ledgers, and the 
traceability of transactions in much of the sector. And I 
believe that it is very additive to the broader financial 
services economy insofar as both inclusion metrics for direct 
access as well as to alleviate leakage, waste, fraud, and 
abuse, because again, the underlying technology provides some 
of those capabilities from an anti-money laundering perspective 
as well.
    Mr. Auchincloss. Mr. Shah and Ms. Delmar, do you want to 
jump in about the ability of stablecoins or the underlying 
technology to assist or augment correspondent banking?
    Mr. Shah. When you look at some of the major risks, the 
actual mode of transmission of transactions is not really the 
number-one issue. Ultimate beneficial ownership, figuring out 
whom you are doing business with, the type of transactions, 
whom you bank, and whom you choose not to bank, those are some 
of the things that still continue to remain challenges, 
regardless of whether you use hard currency or digital 
currency.
    Ms. Delmar. And I am also inclined to agree with Mr. Shah's 
perspective, that we would need to do a bit more investigation 
into ensuring that if this becomes the option or an 
opportunity, that it actually addresses the issues posed by 
correspondent banking.
    Mr. Auchincloss. It is not a solution in search of a 
problem in other words, as I fear that the U.S. CBDC would be. 
Thank you, and, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. I am so pleased 
that Prime Minister Mottley came today and she not only set the 
stage for, but participated with us being able to move forward 
with an illuminating discussion. I do believe that we face the 
issues, that the discussion was well-thought-out and well-
presented by all of you on the second panel, and I am very 
optimistic, as a matter of fact. I think I almost joined with 
someone on the opposite side of the aisle in ways that I never 
thought I would, to deal with this issue. And so, I want to 
thank the second panel for being here, for the time that you 
have spent, and to say absolutely, again, thank you for your 
testimony today.
    The Chair notes that some Members may have additional 
questions for these witnesses, 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.
    The hearing is adjourned.
    [Whereupon, at 1:38 p.m., the hearing was adjourned.]

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