[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                   OVERSIGHT OF THE FINANCIAL CRIMES
                      ENFORCEMENT NETWORK (FinCEN)
                      AND THE OFFICE OF TERRORISM AND
                      FINANCIAL INTELLIGENCE (TFI)

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

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                          ILLICIT FINANCE, AND
                  INTERNATIONAL FINANCIAL INSTITUTIONS


                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 27, 2023

                               __________

       Printed for the use of the Committee on Financial Services       
    
                          Serial No. 118-16
                          
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                          
                          
                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-394 PDF                 WASHINGTON : 2023                    
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
          Subcommittee on National Security, Illicit Finance, 
                and International Financial Institutions

                 BLAINE LUETKEMEYER, Missouri, Chairman

ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio, Ranking Member
ROGER WILLIAMS, Texas                VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia            WILEY NICKEL, North Carolina
DAN MEUSER, Pennsylvania             BRITTANY PETTERSEN, Colorado
YOUNG KIM, California, Vice          BILL FOSTER, Illinois
    Chairwoman                       JUAN VARGAS, California
ZACH NUNN, Iowa                      JOSH GOTTHEIMER, New Jersey
MONICA DE LA CRUZ, Texas
ANDY OGLES, Tennessee
                            
                            
                            O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 27, 2023...............................................     1
Appendix:
    April 27, 2023...............................................    33

                               WITNESSES
                        Thursday, April 27, 2023

Das, Himamauli, Acting Director, Financial Crimes Enforcement 
  Network (FinCEN)...............................................     6
Nelson, Hon. Brian E., Under Secretary for Terrorism and 
  Financial Intelligence, U.S. Department of the Treasury........     4

                                APPENDIX

Prepared statements:
    Das, Himamauli...............................................    34
    Nelson, Hon. Brian E.........................................    48

              Additional Material Submitted for the Record

Luetkemeyer, Hon. Blaine:
    Study by the The Anti-Human Trafficking Intelligence 
      Initiative and the University of New Haven's Center for 
      Forensic Investigations of Trafficking in Persons..........    56
    Written statement of the American Gaming Association.........    79
    Financial Crimes Compliance (FCC) Rulebook...................    94
    Written statement of FinClusive..............................   101
    Letter to Attorney General Merrick Garland, dated February 1, 
      2023.......................................................   107
    Project on Government Oversight Fact Sheet...................   109
    Texas Association of Business report entitled, ``Anti-Money 
      Laundering Regulation, Correspondent Banking, and the 
      Adverse Economic Effects for the U.S.-Mexico Bilateral 
      Relationship,'' by Robert Shapiro, with Isaac Yoder, dated 
      April 2022.................................................   112
    Transparency International U.S. report entitled, ``Up to the 
      Task? The state of play in countries committed to freezing 
      and seizing Russian dirty money''..........................   164
    War on the Rocks report, ``Incentivizing Whistleblowers to 
      Combat Sanctions Evasion,'' by Alex Zerden and Arshan 
      Barzani, dated April 27, 2023..............................   217
Loudermilk, Hon. Barry:
    Letter to Himamauli Das from the American Fintech Council, 
      dated April 3, 2023........................................   226
    Letter from Treasury, dated April 26, 2023...................   232
Pettersen, Hon. Brittany:
    Opening statement of Representative Beatty...................   235
Nelson, Hon. Brian E.:
    Written responses to questions for the record from Chairman 
      McHenry....................................................   236
    Written responses to questions for the record from Ranking 
      Member Waters..............................................   260
Das, Himamauli:
    Written responses to questions for the record from Chairman 
      McHenry....................................................   242
    Written responses to questions for the record from Ranking 
      Member Waters..............................................   270
    Written responses to questions for the record from 
      Representative Luetkemeyer.................................   282
    Written responses to questions for the record from 
      Representative Beatty......................................   284
    Written responses to questions for the record from 
      Representative Meuser......................................   286

 
                   OVERSIGHT OF THE FINANCIAL CRIMES
                    ENFORCEMENT NETWORK (FinCEN) AND
                      THE OFFICE OF TERRORISM AND
                      FINANCIAL INTELLIGENCE (TFI)

                              ----------                              


                        Thursday, April 27, 2023

             U.S. House of Representatives,
                 Subcommittee on National Security,
                 Illicit Finance, and International
                            Financial Institutions,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:03 p.m., in 
room 2220, Rayburn House Office Building, Hon. Blaine 
Luetkemeyer [chairman of the subcommittee] presiding.
    Members present: Representatives Luetkemeyer, Barr, 
Williams of Texas, Loudermilk, Meuser, Kim, Nunn, De La Cruz, 
Ogles; Gonzalez, Nickel, Pettersen, Vargas, and Gottheimer.
    Also present: Representative Davidson.
    Chairman Luetkemeyer. The Subcommittee on National 
Security, Illicit Finance, and International Financial 
Institutions will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Welcome to our humble and confining room today. Sorry about 
this, but we have multiple hearings going on, and we drew the 
short straw. But anyway, today's hearing is entitled, 
``Oversight of the Financial Crimes Enforcement Network 
(FinCEN) and the Office of Terrorism and Financial Intelligence 
(TFI).''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Under Secretary Nelson, Director Das, thank you both for 
being here today. Proper oversight of administrative agencies 
by Congress is an important responsibility we exercise to 
ensure those very agencies are fulfilling their statutory 
responsibilities and adhering to congressional intent. For far 
too long, FinCEN has operated under the radar, quietly amassing 
new authorities that, frankly, would shock the American 
citizens. The amount of information FinCEN has access to likely 
makes our intelligence community very jealous. It is imperative 
that Congress pull back the curtain on these authorities and 
the ways in which FinCEN uses them. Along with a seemingly 
ever-expanding list of authorities, it has become clear that 
the burden on investment for the immense regulatory burdens 
FinCEN places on financial institutions is lacking.
    In February, I sent a letter to Attorney General Garland 
about Section 6201 of the Anti-Money Laundering Act (AMLA) of 
2020. This letter was my response to a jaw-dropping report that 
outlines the Department of Justice's (DOJ) failure to track 
statistics on how it uses Bank Secrecy Act (BSA) reports, 
despite statutory mandates. The DOJ's disregard for that 
section of AMLA 2020 and its inability to state the usefulness 
of the data begs the question of whether the burdensome 
reporting is worthwhile.
    Without objection, I request unanimous consent to submit a 
copy of this letter into the record.
    Without objection, it is so ordered.
    Neither of our witnesses sustained control of how the DOJ 
uses BSA data. I know that. But this is DOJ's issue, and it is 
emblematic of the larger problem before us today. FinCEN and 
the Treasury Department have shown themselves to be unable to 
properly balance national security with limiting burdens on 
those they regulate, for example the ongoing Beneficial 
Ownership rulemaking.
    Earlier this month, I joined a letter, led by Chairman 
McHenry and Senator Whitehouse, on your most recent notice and 
request for comment on the Beneficial Ownership form that small 
businesses will have to fill out. We had six Members of the 
House and six Members of the Senate, including Chairs and 
Ranking Members, join a letter to push back on what should have 
been a straightforward notice. This FinCEN notice was so off-
base that Congress had to put forward a bicameral and 
bipartisan response to tell you that enough is enough. During a 
time in American politics where Republicans and Democrats can 
rarely agree, we all are able to rally around the fact that 
FinCEN is not getting it right. I hope you read our message 
loud and clear.
    The Corporate Transparency Act (CTA) was created to be a 
strategic tool to target bad actors abusing our financial 
system, while simultaneously reducing the editorial burden on 
both small businesses and regulated entities. FinCEN's proposed 
Beneficial Ownership rule fails to reduce the burden on 
financial institutions by forcing them to collect information 
that the law clearly states that FinCEN should be collecting.
    Moving on to sanctions, we need to demand accountability 
from Treasury for its refusal to stop Russia from waging war on 
Ukraine. As the Institute of International Finance has shown, 
Russian imports are stable from a year ago, with Chinese 
exports making up for Western goods. The Treasury has allowed 
sanctioned Russian banks to use the U.S. financial system to 
rake in energy-related revenues, and it worked to roll back 
tough European Union (EU) sanctions on Russian crude. Treasury 
appears to care more about the oil market and Democrats' 
electoral prospects than Putin's war or Putin's war crimes. 
This is shameful.
    In China, the Chinese Communist Party (CCP) continues to 
perpetuate genocide against the Uyghurs. While Treasury has 
sanctioned a number of foreign leaders around the world, top 
officials in the Chinese Politburo have been spared. There is 
no excuse for this inaction. History will not judge this 
Administration kindly if Under Secretary Nelson and his 
colleagues refuse to punish Beijing for its controversies.
    With that, the Chair now recognizes the vice ranking member 
of the subcommittee, the gentlewoman from Colorado, Ms. 
Pettersen, for 5 minutes for an opening statement.
    Ms. Pettersen. Thank you, Mr. Chairman, and I am sitting in 
the seat today as vice ranking member of the subcommittee 
because Ranking Member Beatty is unavailable, and I would like 
to ask for unanimous consent to include her opening statement 
in the record.
    Chairman Luetkemeyer. Without objection, it is so ordered.
    Ms. Pettersen. Thank you. And I thank you all for being 
here today, and for the critical work that you are doing to 
protect our country from domestic and international terrorism 
and to stop criminals who specialize in drug, human, and 
firearms trafficking from utilizing the American financial 
system to exploit people throughout our communities.
    One area of your focus that is a top priority for me is 
working together to stop the flood of fentanyl into this 
country. Like too many Americans, my family has been impacted 
by the opioid crisis. My mom's addiction began with the over-
prescription of opioids, which led to heroin, and ultimately 
fentanyl, when it started to take over the drug supply chain in 
2016. Unfortunately, my mom's story is not unique in Jefferson 
County or in Colorado or in the United States as a whole. The 
opioid epidemic is now more lethal than ever as we continue to 
see drugs become more and more potent and easier to traffic.
    We have seen the devastating impacts of overdoses and 
fentanyl poisoning across this country and around the world. 
Addressing this crisis with the urgency and dedication needed 
to save lives and protect our kids is going to require 
significant resources for agencies like yours to stop the drug 
cartels from utilizing our financial system to launder money, 
and to support better coordination between agencies, as well as 
stopping the widespread distribution and sale of illicit drugs 
through social media platforms and payment apps. The agencies 
you represent play an essential role in all of this.
    TFI and FinCEN are not solely working in prevention. 
Instead, your agencies specialize in identifying criminal 
activities and then using the intelligence to detect and 
disrupt their activities. As a mom of a 3-year-old, I want to 
thank you for what you and your team are doing to protect our 
country, and I look forward to discussing your essential work 
in more depth, including the updates on the Anti-Money 
Laundering Act of 2020 and the Corporate Transparency Act of 
2020, which, after being fully implemented, will likely 
represent one of the most-significant efforts in decades to 
combat the financing of terrorism and other criminal activity 
that threatens the United States.
    I am deeply concerned with the budget reductions that were 
just passed out of the House yesterday and what this means for 
our national security and the future of our country. The Office 
of TFI and its subagencies, like FinCEN and the Office of 
Foreign Assets Control (OFAC), are already understaffed. If the 
cuts that just passed in the House budget were to go into 
effect, the capacity and capability of these agencies to 
effectively do their jobs will be seriously curtailed. We will 
see significant staff cuts, and potentially, program cuts. I 
know that my colleagues on the other side of the aisle also 
care deeply about these issues, and and we must forcefully 
speak up against these budget cuts that will make our country 
less-safe and will hinder the important work that agencies like 
yours are undertaking every day. I yield back.
    Chairman Luetkemeyer. Thank you.
    With that, today we welcome, first, Brian Nelson, the Under 
Secretary for Terrorism and Financial Intelligence at the U.S. 
Department of the Treasury. Prior to joining Treasury, Mr. 
Nelson was the chief legal officer at LA28, the organizing 
committee for the 2028 Olympic and Paralympic Games in Los 
Angeles. His previous government service includes roles as a 
senior policy advisor, policy chief, and general counsel in the 
California Department of Justice.
    And second, Himamauli Das, the Acting Director of the 
Financial Crimes Enforcement Network (FinCEN). Prior to his 
role as Acting Director of FinCEN, Mr. Das was most recently 
chief legal officer with Compliance Consultancy, K2 Integrity, 
as well as an advisor with CM International, Global Government 
Relations and Public Policy, and Crowell & Moring LLP. His 
prior roles at the Treasury include General Counsel, Assistant 
General Counsel for International Affairs, and Acting Deputy 
Assistant Secretary for Trade and Investment.
    We thank each of your taking the time to be here today. 
Each of you will be recognized for 5 minutes to present your 
oral testimony. And without objection, each of your written 
statements will be made a part of the record.
    Under Secretary Nelson, you are now recognized for 5 
minutes for your remarks. Thank you.

STATEMENT OF THE HONORABLE BRIAN E. NELSON, UNDER SECRETARY FOR 
 TERRORISM AND FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF THE 
                            TREASURY

    Mr. Nelson. Thank you so much, and good afternoon, Chairman 
Luetkemeyer, Vice Ranking Member Pettersen, Chairman McHenry--
who joined us earlier--as well as the distinguished members of 
the subcommittee. Thank you for the opportunity to speak with 
you about the Treasury Department's efforts and achievements on 
Anti-Money Laundering/Countering the Financing of Terrorism 
(AML/CFT) and the critical work that Treasury's Terrorism and 
Financial Intelligence Office (TFI) does to safeguard the U.S. 
and international financial systems.
    In the past few years, the demand for expertise has grown 
exponentially. In the past year alone, the Department has 
played a central role in a range of national security 
priorities, including in the response to Russia's further 
invasion of Ukraine. Simultaneously, we understand that illicit 
actors have taken advantage of gaps within the U.S. and 
international financial systems.
    One of TFI's core missions is to close these exploitable 
gaps. We do this in a number of ways, including by promulgating 
regulations for a comprehensive and risk-based AML/CFT 
framework, identifying typologies of illicit finance, 
collecting, analyzing, and sharing information, strengthening 
international AML/CFT standards, taking enforcement actions, 
and engaging the private sector and non-governmental 
organizations. This approach gives TFI flexibility in 
responding to systemic threats to the domestic and 
international financial systems. It also enables us to balance 
national security and economic considerations while mitigating 
the unintended consequences of our authorities, including 
sanctions.
    Sanctions continue to be a very effective tool of U.S. 
foreign policy. In response to Russia's aggression in Ukraine, 
our efforts included issuing 4 Executive Orders, over 80 new or 
amended general licenses, over 200 frequently-asked questions, 
and more than 2,300 new or amended designations. Working with 
allies, we have immobilized Russia's central bank reserves held 
in partner countries and sanctioned and de-SWIFTed some of 
Russia's largest banks.
    Our sanctions have degraded Russia's ability to replace 
over 10,000 tanks and pieces of equipment lost since the start 
of this war, forced production shutdowns at key defense 
facilities, and caused shortages of essential components for 
tanks and aircraft. Russia is also running out of munitions, 
and they are turning to Soviet-era weapons. Meanwhile, with 
your support, we and our allies and partners have provided 
Ukraine with state-of-the-art military equipment. Our work, of 
course, continues, and we are focusing on disrupting Russia's 
efforts to evade our sanctions.
    As the largest economy in the world, the U.S. must close 
the gaps in our own domestic AML/CFT regime, while increasing 
transparency and accountability globally. The latest AML/CFT 
tools are available because of the bipartisan Anti-Money 
Laundering Act of 2020 (AMLA). Implementing the AMLA and the 
Corporate Transparency Act is my top priority. For example, 
starting on January 1, 2024, many companies formed or operating 
in the United States will need to begin to report information 
about their Beneficial Owners to FinCEN. This is a key step to 
making our financial system harder for illicit actors to 
exploit. We are also developing guidance materials and a 
helpline to assist small businesses and help minimize reporting 
burdens while ensuring the information remains valuable for law 
enforcement.
    Beyond our regulatory agenda, we must continue to address 
the de-risking of financial institutions, which can 
disproportionately affect the humanitarian community, small 
nation-states, and underserved populations. This work is 
critical to maintaining the strength of the U.S. financial 
system. On April 25th, the Treasury Department released its 
first-ever de-risking strategy, which identifies key customer 
categories often impacted by de-risking, top causal factors 
behind de-risking, and policy options for combating it.
    Through all of this work, our partnership with the private 
sector and civil society is truly paramount. I am focused on 
further bolstering this needed dialogue. We also are continuing 
to lead the world in mitigating the illicit finance risks of 
emerging technologies and other evolving threats, including the 
use of digital assets. TFI has published multiple risk 
assessments on the topic of digital assets, including releasing 
this month a decentralized finance risk assessment, the first 
by any country in the world.
    I will conclude, but I just want to stress that this work 
has only been possible because of the dedicated men and women 
of TFI, and I am deeply grateful to work side by side with them 
every day. I look forward to your questions.
    [The prepared statement of Under Secretary Nelson can be 
found on page 48 of the appendix.]
    Chairman Luetkemeyer. Thank you, Under Secretary Nelson.
    Director Das, you are now recognized for 5 minutes.

 STATEMENT OF HIMAMAULI DAS, ACTING DIRECTOR, FINANCIAL CRIMES 
                  ENFORCEMENT NETWORK (FinCEN)

    Mr. Das. Thank you very much. Subcommittee Chairman 
Luetkemeyer, Subcommittee Vice Ranking Member Pettersen, and 
Full Committee Chairman McHenry, thank you for the opportunity 
to testify before this subcommittee.
    First, I would like to thank both the Subcommittee and the 
Full Committee for your support of FinCEN's work. As you know, 
our mission is to promote national security and protect the 
American public by working with our partners and stakeholders, 
law enforcement and national security agencies, financial 
regulators, and financial institutions to prevent financial 
crimes from undermining the integrity of the U.S. financial 
system. And I would like to thank those same partners for their 
collaboration in ensuring an effective AML/CFT framework, one 
that protects the American public while at the same time works 
to minimize burdens for the American taxpayer and small 
businesses. I would also like to take a moment to express my 
heartfelt appreciation to the FinCEN team. They continue to 
make Herculean efforts and deliver amazing results despite 
significant headwinds.
    I am pleased to report that FinCEN is working hard to meet 
our many new and longstanding mandates, and I would like to 
highlight a few of our efforts over the past year.
    First of all, as Under Secretary Nelson mentioned, 
implementation of the Beneficial Ownership information 
framework continues to be a top priority. We have dedicated 
significant resources and all of our recent annual funding 
increases to this effort because enhancing corporate 
transparency and exposing anonymous shell companies will have 
real benefits.
    Criminals too often take advantage of opaque shell 
companies in ways that hurt American taxpayers. In fact, just 
10 days before we issued the final reporting rule on Beneficial 
Ownership information, DOJ announced Federal criminal charges 
against 47 defendants for their alleged roles in a $250-million 
fraud scheme that exploited a federally-funded child nutrition 
program during the COVID-19 pandemic. Among other things, the 
defendants created dozens of shell companies to receive and 
launder the proceeds of their fraudulent schemes.
    And opaque shell companies are being abused by foreign 
actors and drug trafficking organizations to undermine national 
security. For example, opaque shell companies were used to 
facilitate sanctions evasion by a Chinese national who used 
U.S. businesses to facilitate the supply of military and 
metallurgical items to Iran. In the future, the Beneficial 
Ownership information database will help to provide enforcement 
with efficient access to the Beneficial Ownership information 
that it needs to investigate and indict criminals who hide 
behind shell companies.
    Increased transparency can also help honest U.S. businesses 
that are both being defrauded and are being put at a 
disadvantage when competing against criminals who exploit 
vulnerabilities in our system in order to evade taxes and hide 
their illicit wealth. That is why we are working hard to get 
three things done before the new rules go into effect.
    First, we are carefully reviewing public comments so that 
we can finalize the regulatory framework and the forms needed 
to report Beneficial Ownership information. Second, we are 
designing and building the IT framework so that we can ensure a 
secure and confidential database. And third, and most 
importantly, we are reaching out to stakeholders, small 
business groups, and State agencies, and at the same time, 
working on guidance so that we can ensure that small 
businesses, many of whom may never have heard of FinCEN, 
understand their obligations, and so that reporting Beneficial 
Ownership is as streamlined and as straightforward as possible.
    We also continue to work hard to ensure that the U.S. has 
an effective and risk-based AML/CFT framework. The Anti-Money 
Laundering Act (AMLA) provides a clear roadmap to achieve these 
objectives, to enhance feedback loops, to allow financial 
institutions to focus on high-value reporting and higher risks, 
to provide examiner training and focus on risk-based 
supervision, and to modernize the AML/CFT framework. We 
recognize that we have a lot of work to do and that these 
efforts will require sustained engagement over time, close 
collaboration with all stakeholders, and a fully-staffed FinCEN 
team.
    In closing, I would like to stress two important points. 
First, the reporting that FinCEN receives from financial 
institutions is invaluable to policymakers, to OFAC, and to law 
enforcement and national security agencies to stop the Russian 
government from misusing the global financial system to fund 
Russia's war efforts, and to track fraudsters who prey on 
Americans and small businesses. Simply speaking, America is 
safer because of it. And second, trust and confidence in how we 
manage and secure this information is fundamental. That is why 
we are working closely with the Office of the Inspector General 
(OIG) to address their concerns on an expedited basis.
    I would like to close by reaffirming that FinCEN is 
dedicated to the mission of protecting U.S. national security, 
and the integrity of the U.S. in global financial systems, and 
we look forward to continuing this collaborative relationship 
with all of you. Thank you again, and I look forward to 
answering your questions.
    [The prepared statement of Acting Director Das can be found 
on page 34 of the appendix.]
    Chairman Luetkemeyer. Thank you, gentlemen. You both did 
very well, and you stayed at the 5-minute mark. I appreciate 
your respect of time.
    I will now recognize myself for 5 minutes for questions.
    In my opening statement, I mentioned that DOJ has failed to 
track BSA statistics. I was referencing an August 2022 GAO 
report entitled, ``Bank Secrecy Act: Action Needed to Improve 
DOJ's Statistics on Use of Reports on Suspicious Financial 
Transactions.''
    Acting Director Das, are you familiar with that report and 
my letter about the lack of findings?
    Mr. Das. Yes, I am, sir.
    Chairman Luetkemeyer. Okay. Within the report, GAO 
highlighted only two agencies, the IRS Criminal Investigation 
(IRS-CI) and the United States Secret Service, as having the 
ability to collect data on their use of BSA reports. Has FinCEN 
worked with either of those agencies to connect them with all 
of the other law enforcement partners that have failed to track 
and report this data to DOJ?
    Mr. Das. Yes, sir. We have worked with IRS-CI, we have 
worked with the U.S. Secret Service, and we have worked with 
other law enforcement agencies to have a conversation around 
how to better improve their tracking of statistics around the 
use of BSA reporting, and we will continue to engage with them 
on this effort to be able to improve those statistics. In fact, 
we recently published a FinCEN 2022 Year in Review, which 
included a number of statistics where we engage with law 
enforcement to better track some of this information, and we 
continue to work to improve that tracking of information. This 
will be a continuing effort, and I am committed to doing it.
    Chairman Luetkemeyer. Under Secretary Nelson, can you 
describe how you have encouraged the DOJ to improve statistics 
on their use of the BSA report?
    Mr. Nelson. We have consistently heard from law enforcement 
partners about the usefulness of SAR reporting, and, of course, 
as Mr. Das noted, we are making efforts to track their use of 
the reports more closely. I would just step back and note that 
FinCEN has really, I think, done an admirable job of playing 
the broker between financial institutions and law enforcement 
to ensure that the BSA reporting that law enforcement is 
receiving is very valuable in connecting financial institutions 
directly to law enforcement and continuing to make sure that 
there is an effective feedback loop between both law 
enforcement and financial institutions.
    Chairman Luetkemeyer. If I have time, I want to come back 
to this issue, but I have a couple of questions that I want to 
make sure we get to first.
    Director Das, you talked about the IG report, working with 
the IG on some things. The IG report is coming out shortly. We 
haven't gotten it yet, but I understand that there are 28 areas 
of concern in that report. Are you working with the IG to 
address all of those issues?
    Mr. Das. Yes, sir. We are engaged in a constructive 
relationship with the Office of the Inspector General, and we 
are working with them constructively in terms of addressing the 
concerns that they have already raised to us with respect to 
the various dimensions of their reports. While we haven't seen 
the draft reports yet, with respect to each of the four 
elements of the audit, we have already started aggressively 
working to implement and address their concerns. And, in fact, 
we are making substantial progress on that front, and we are 
engaged with the Office of Inspector General on a regular basis 
to be responsive.
    Chairman Luetkemeyer. When we get our hands on the report, 
we are going to look at it very carefully, and we may either 
have another hearing or ask you to report in written form to 
some of the stuff that is in there. So, we will continue to 
work with whatever they find.
    Under Secretary Nelson, you are kind of all things with 
regards to sanctions. I sit on the China Select Committee. We 
are concerned about China invading Taiwan. We have just had a 
very instrumental situation, a learning moment from Russians 
invading Ukraine. We weren't ready with regards to sanctions. 
We did everything after the fact. My question to you is the 
same one I posed to Fed Chairman Powell a few weeks ago. 
Knowing that this is going to happen--I don't think anybody 
would deny that it is not a matter of if, it is a matter of 
when--have you folks at Treasury started to work on a program 
where you start identifying individuals, entities, and 
countries that you are getting ready to sanction?
    Mr. Nelson. As you know, we don't preview our sanctions 
actions, but Treasury Secretary Yellen has been clear as 
recently as last week that we will use all of the tools in our 
toolbox.
    Chairman Luetkemeyer. You don't have to tell what the plan 
looks like. Are you putting together a plan? That is all you 
have to say.
    Mr. Nelson. As I said, I appreciate the question and the 
spirit of the question. We just don't preview the work that we 
are doing.
    Chairman Luetkemeyer. Okay. I assume you won't answer this 
question either, but I am curious, because what we did against 
Russia was to get our allies together to help us with the 
sanctions. Are you doing this now, talking with allies and 
getting more allies together so that we can have some friends 
when this all happens, to be able to put something together 
very quickly?
    Mr. Nelson. One of the conversations that we have engaged 
in quite significantly with allies and partners is supply chain 
resilience, diversifying supply chains, and, ``friendshoring,'' 
as the Secretary has described it, so that is a conversation 
that is ongoing. I was just in Europe last week having those 
conversations with partners and allies.
    Chairman Luetkemeyer. Okay. Thank you very much. My time 
has expired. I now recognize the vice ranking member, Ms. 
Pettersen, for 5 minutes.
    Ms. Pettersen. Thank you, Mr. Chairman, and thank you 
again, Under Secretary Nelson and Director Das, for being with 
us.
    As I have mentioned, something that is very important to me 
is addressing the opioid epidemic. And I think that any 
American, any citizen that you talk to would support in general 
the work that you are doing, but they would probably have a 
harder time tying back to the impact that your work is bringing 
to their community. And when I think about the opioid epidemic 
specifically, all of us who are sitting up here today are 
losing countless lives every day needlessly in our districts 
because of fentanyl. Can you give a real-life example of what 
you have been able to do to disrupt drug cartels and the 
distribution of illicit drugs like fentanyl?
    Mr. Nelson. Thank you. Thank you for that question, and as 
you can imagine, this is a top priority for me, and for the 
Treasury Department. The very first trip I took as Under 
Secretary was to Mexico and I was just recently at the border 
having exactly this conversation.
    At Treasury, we have been focused on how we can disrupt the 
money laundering activity that really is the base of the flow 
of not only fentanyl to the United States, but also the 
precursors and the equipment that it takes to press the pills. 
And frankly, recently, we have done a number of actions to go 
after both the transnational criminal organizations that are 
involved in the fentanyl production, but also really focused, 
as recently as, I guess, 2 weeks ago, on working across the 
whole of government with partners at DOJ, DEA, and DHS to go 
after whole networks of individuals.
    We designated, again, a number of the suppliers of the 
precursors from Treasury designation. There were a number of 
indictments also revealed, but it was a multi-jurisdictional 
global effort to really try to get after the networks that are 
supporting this. And that is sort of the key, I think, the 
value add that we bring at the Treasury Department is we focus 
on those sorts of financial networks that really undergird the 
shipment of these drugs. That includes mapping the networks, 
trying to identify what they are, and then opportunities for 
disruption, which include the use of our sanctions.
    Ms. Pettersen. Great. Thank you. And I have already 
mentioned how important your work is to the security of the 
United States and the security of the people in our 
communities. I am deeply concerned about the budget that was 
just passed yesterday and the impacts that it will have on your 
ability to continue to do your work and protect the United 
States. Can you talk about exactly what these cuts would mean 
for your agencies?
    Mr. Nelson. I really appreciate that question. As the 
Secretary noted just a few weeks ago, should we be faced with 
such a cut, TFI, writ large, but really, OFAC, would be 
particularly challenged in the imposition of our sanctions 
authorities. As you all know, we have imposed sanctions to 
address really every issue at the forefront of national 
security. Their effectiveness and our ability to enforce them 
would be diminished significantly. Our ability to go after 
future bad actors would be compromised. And we are, as you can 
imagine, constantly investigating ways we can strengthen our 
sanctions, and that work would also suffer.
    We also think it would come at a particularly terrible time 
given all of the work that we are doing in support of Ukraine 
in the context of Russia's illegal invasion of that country, 
and the signal it would send to partners and allies to receive 
that cut and going to the point of closing gaps within our own 
system, the ability to identify Russian money and assets here. 
I will stop there.
    Ms. Pettersen. I only have 30 seconds left, but I wanted to 
discuss what additional authority you all could utilize to 
actually address the mass distribution of illicit drugs through 
the social media platforms and other cash apps, so I will 
follow up with you in writing. Thank you. I yield back.
    Chairman Luetkemeyer. Thank you. The gentlelady yields 
back. I now recognize the gentleman from Kentucky, Mr. Barr, 
who is also the Chair of our Subcommittee on Financial 
Institutions, for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman, for holding this very 
important hearing. Under Secretary Nelson, we will work with 
you on your budget, and a 1-percent increase every year is not 
a cut--let me clarify--but we do need to prioritize funding for 
OFAC because you have a lot of important work to do. I am 
currently working on legislation that would block all U.S. 
investment in Chinese military and surveillance companies 
listed on Treasury's Non-SDN Chinese Military-Industrial 
Complex Companies List (NS-CMIC List), as well as DOD's Chinese 
Military Companies List, and Commerce's Entity List and 
Military End User List. Can you describe the impact a U.S. 
investment ban would have on these companies' access to 
capital, and what impact would this have beyond the ban on 
publicly-traded securities?
    Mr. Nelson. I am tracking your bill, and I appreciate the 
question and certainly the spirit behind it, and I would note 
that is actually a different part of the Department of the 
Treasury. It is the Office of Investment Security that will do 
outbound investments, so I am happy to take that back and work 
closely with them and provide technical assistance on that 
piece of legislation.
    Mr. Barr. Thank you. And I know the Administration is 
working on an outbound investment screening effort as well. We 
want to work with Treasury on that.
    Mr. Nelson. We are happy to do that.
    Mr. Barr. As Treasury promulgates the CMIC list, what 
sectors specifically should OFAC pay particular attention to in 
order to make sure U.S. investors are not unwittingly financing 
Chinese entities that threaten our national security?
    Mr. Nelson. At Treasury, we have obviously been 
particularly focused on those entities that have been involved 
in gross human rights abuses. As recently as a couple of weeks 
ago, we designated an entity that was providing satellite 
support for the Wagner Group. So, we are deeply focused on 
getting after those entities within China and, frankly, 
anywhere in the world that are providing support that is going 
to be meaningful to Russia on the battlefield, and that has 
been our focus.
    Mr. Barr. And also I would just, and my bill will get at 
this, but critical sectors--semiconductors, AI, dual-use 
technologies that could compromise our national security, 
military surveillance companies--we want those entities 
targeted. Can you describe China's sanctions evasions 
capabilities in light of its anti-foreign sanctions' laws, its 
pursuit of a central bank digital currency (CBDC), the increase 
in de-dollarized cross-border trade, and also their attempt to 
create their own Society for Worldwide Interbank Financial 
Telecommunications (SWIFT) system that would run counter to the 
West's SWIFT program?
    Mr. Nelson. Yes. Obviously, we are watching that very 
closely. We at Treasury just put out a report on the future of 
money and payments, which called for a Treasury-led interagency 
group. And my office is responsible for the national security 
implications of a CBDC here, and obviously we are developing 
that in the context of looking at the eCNY.
    Clearly, China has a really poor record of responsible 
behavior in cyberspace and has used technology to surveil and 
repress its population. So, this is something that we think can 
pose a heightened risk and create a significant consumer 
protection risk as well as risks for illicit finance. We are 
tracking it very closely, and we are working on sort of policy 
options in the context of the work group.
    Mr. Barr. Yes. And as we look to a potential response and a 
multilateral sanctions response to a cross-strait invasion of 
Taiwan, we need to be very aware of China's sanctions evasions 
capabilities with this alternative to SWIFT. I think they are 
learning from what is happening in Ukraine. I would note also 
that not a single member of the Politburo standing committee of 
the Chinese Communist Party has been sanctioned by OFAC despite 
the global pandemic, the genocide against the Uyghurs, the spy 
balloon over key sensitive military sites, and the illegal 
police stations in our country. That is something I would ask 
Treasury to take a look at.
    Finally, on fentanyl, a follow-up to the good question from 
my colleague, how important is it that we target the Chinese 
government officials who allow for and support fentanyl 
trafficking and precursor production? I think we need to do a 
more vigorous effort to sanction entities that are ultimately 
responsible up the chain for fentanyl production and poisoning 
our people.
    Mr. Nelson. Thank you for that perspective. We are working 
very closely with partners at DEA, DHS, and really across our 
government to try to identify those entities in China and 
globally that are critical nodes in the production and then the 
facilitation of fentanyl to the United States. So, that is 
something that we will continue to focus on and we welcome, 
again, sort of the partnership and thinking through what is the 
best way to get after those facilitators.
    Mr. Barr. Thank you, Under Secretary. I yield back.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
we recognize the gentleman from Texas, Mr. Gonzalez, for 5 
minutes.
    Mr. Gonzalez. Thank you, Mr. Chairman, and thank you to the 
ranking member, and I really appreciate you being here, Under 
Secretary Nelson and Acting Director Das. I have some questions 
that are a follow-up to a hearing that we had just recently in 
this committee, which was called, ``Follow the Money.'' It was 
a hearing related to the fentanyl crisis in this country, which 
is a top issue for me, and I think it is a top issue for many 
Members of Congress.
    Representing a border district, we are regularly a backdrop 
in the news in this country. What we are trying to see is how 
we can be helpful in this committee to both of your 
organizations in creating policy that allows you to access more 
information, to attract the money, and also work with our 
counterparts in Mexico. I would like to ask what ideas you have 
that you would suggest to this committee, that would be helpful 
and are not available now to you.
    Mr. Nelson. Thank you for that, and I would offer that we 
are certainly open to all additional suggestions. But let me, 
if I can, just step back and give you a sense of what our 
multi-pronged strategy has been. First, we work largely using 
FinCEN, in partnership with FinCEN, mapping the transnational 
criminal organizations and financial networks. And then, we 
require financial institutions, again, using FinCEN's 
authorities, to report suspicious activity to generate leads 
for law enforcement.
    We work closely with the private sector, of course, and 
then we work to target sanctions to the extent we are able to 
identify and then cut off those transnational criminal 
organizations from their members and the enablers from the 
international financial system because, again, for a lot of the 
precursors, Chinese money-laundering organizations rely on the 
international financial system. We are looking to see if there 
are regulatory gaps that we need to close, and we are happy to 
get back to you on that.
    Mr. Gonzalez. I would love to hear from you on that issue.
    Mr. Nelson. And then obviously, working with international 
partners, because it is just not a U.S. problem, but it is one 
that touches everyone around the globe.
    Mr. Gonzalez. That is right. And in the same hearing, it 
was indicated that the administration in Mexico, the present 
administration under President Andres Manuel Lopez Obrador has 
not been as helpful as previous administrations. How would you 
assess the state of the relationship between Treasury and your 
Mexican counterparts with respect to our shared counter-
narcotics priorities?
    Mr. Nelson. Yes, I would assess that it is strong. I 
visited with counterparts in Mexico City right after I was 
confirmed, and I joined the high-level security dialogue here 
in Washington, D.C., a couple of months ago. I have been to the 
border to hear more from our partners on our side about ways we 
can work more closely with Mexico to get after this. And I 
think all of that work is starting to show up in the way we 
have gone after these organizations. In fact, just today, we 
designated a Jalisco network that was involved in timeshare 
fraud, which is a huge money generator for them. And again, 
significantly, being able to get at these networks that are 
doing a lot of things--drug trafficking, human trafficking and 
the like--has been sort of a critical strategy, that using 
Treasury authorities, we have been able to support the overall 
governmental effort.
    Mr. Gonzalez. Thank you. Director Das, in terms of FinCEN 
dealing with their counterparts in Mexico, how is that going, 
and are you all making some headway? Are you working together 
in finding and tracking how resources are being transferred not 
only through apps, but obviously wire transfers, trade-based 
money laundering, and other sorts of things?
    Mr. Das. Absolutely, and thank you for that question. We 
have a positive relationship with our counterpart, the 
Financial Intelligence Unit (FIU), and a positive and 
constructive information-sharing relationship with them. We 
share suspicious activity reporting involving opioids and 
fentanyl as well. We are working collaboratively with them on a 
number of different fronts in terms of cooperation with law 
enforcement and cooperation with the FIU. We recently 
participated in the North American Drug Dialogue with Canada 
and our Mexican counterparts to consider ways to collaborate 
and cooperate and share information more proactively. In the 
near term, we will have a trilateral working group that will 
essentially be a workshop to enhance ways to share typologies, 
red flags associated with money laundering and fentanyl. And 
then, we are also working on enhancing our memorandum of 
understanding and our collaborative relationship with the FIU.
    Mr. Gonzalez. Thank you. I think I am out of time, so I 
yield back.
    Chairman Luetkemeyer. Thank you. The gentleman yields back. 
Everybody has done a great job of hitting the 5-minutes' worth 
of speaking and asking questions. We want to make sure we 
continue that. We probably have folks here at 4:00, so we want 
to make sure we get to everybody. We should be able to do that 
if we are all respectful of each other's time.
    With that, the Chair now recognizes the gentleman from 
Texas, Mr. Williams, who is also the Chair of the House Small 
Business Committee, for 5 minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. Thank you 
very much. And thank you all for being here. FinCEN has 
identified combating human trafficking and smuggling as one of 
its top priorities. Reports are showing a concerning increase 
in online child sexual exploitation being monetized through the 
U.S. financial sector. FinCEN has the ability to enforce 
existing regulatory requirements through the Patriot Act to 
prevent the facilitation of online child exploitation and sex 
trafficking through the U.S. financial sector. However, I have 
not seen any steps taken by FinCEN to address the risk of 
monetizing these horrific crimes.
    So, Acting Director Das, please elaborate to us on what 
actions FinCEN is taking in its oversight role of the financial 
services industry to prevent the monetization of child abuse 
and sex trafficking?
    Mr. Das. Thank you for that question. We take this issue 
incredibly seriously. It is a top priority of ours. We work 
very hard to combat online child sexual exploitation, and we 
are working with law enforcement and financial institutions 
with respect to online child sexual exploitation. We have done 
so through a number of different fronts.
    First of all, a key part of the issue is raising awareness 
with financial institutions and other stakeholders. We have 
issued advisories and alerts around human smuggling and around 
human trafficking. In fact, in 2021, we issued a notice on 
child sexual exploitation and child sexual abuse materials as 
well. As a result of those notices and advisories, we have had 
a significant uptick in the number of suspicious activity 
reports that have been filed by financial institutions, which 
provides a significant baseline for law enforcement to be able 
to identify, investigate, and prosecute this type of activity, 
and we will continue to do so.
    Mr. Williams of Texas. Thank you. And as a Representative 
from Texas--I represent the great State of Texas--I might say 
that things are not good at the border, and they are not under 
control. Have you been to the border in the last year?
    Mr. Das. I have not been to the border, sir.
    Mr. Williams of Texas. I have seen firsthand the crisis 
happening at our southern border. With these millions of 
migrants flooding across our borders, human trafficking has 
become a growing issue, as you know, and this increase in human 
trafficking has led to an increase in the online hosting of 
child sexual abuse material. A major concern right now is that 
age verification and consent controls implemented by online 
platforms are being bypassed.
    Again, Mr. Das, how is FinCEN working to develop an 
effective standard for age and consent verification?
    Mr. Das. Thank you for that question. Again, we work with 
financial institutions with respect to suspicious activity 
reporting. And where financial institutions identify that they 
have reason to know of suspected violations of law or 
regulation, we receive those reports. We work with law 
enforcement to review those reports and then to support law 
enforcement in their efforts to investigate and prosecute these 
crimes. Again, we are working to review those reports as well 
to raise awareness with respect to those issues.
    In terms of the southwest border, in 2023, just a few 
months ago, we issued a human smuggling/human trafficking alert 
with respect to the southwest border specifically because of 
the concerns with respect to human smuggling and human 
trafficking in that area. And we continue to focus on that 
region in terms of the concerns there.
    Mr. Williams of Texas. Okay. Last month, the Treasury 
Inspector General appeared before our Oversight and 
Investigations Subcommittee, and in his testimony, the 
Inspector General highlighted a robust plan to release four 
major reports throughout the year regarding FinCEN's management 
of the Bank Secrecy Act database. I want to highlight that the 
Treasury Office of Inspector General (OIG) has over 30 findings 
and recommendations for FinCEN management as a result of these 
audits. That is an astounding number, a large number of 
recommendations considering the size of FinCEN in combination 
with the scope of the audit.
    One part of the audit that alarms me is the number of 
external users that have access to the FinCEN database. Your 
office has 470 memorandums of understanding (MOUs) with local, 
State, and Federal law enforcement and intelligence components. 
This means that thousands of people have access to financial 
transactions other than the sensitive Bank Secrecy Act (BSA) 
database, which sometimes FinCEN itself may not even know 
about. Quickly, how do you plan to address the numerous 
recommendations made by the OIG, and when will that work begin?
    Mr. Das. Thank you for that question. It has already begun. 
We, again, take the protection of BSA data and the management 
of BSA data incredibly seriously. Again, as I mentioned, we 
have a constructive relationship with the Office of Inspector 
General. We have received their findings and recommendations 
and are reviewing their concerns. We have already started 
action to implement a number of their recommendations with 
respect to various dimensions of the report even though we 
haven't gotten the reports yet. And we will continue to press 
for it on an expedited basis to implement the recommendations.
    Mr. Williams of Texas. Thank you very much, and I yield 
back.
    Chairman Luetkemeyer. The gentleman yields back. The 
gentleman from North Carolina, Mr. Nickel, is recognized for 5 
minutes.
    Mr. Nickel. Thank you, Chairman Luetkemeyer, and Vice 
Ranking Member Pettersen, and thank you to our witnesses for 
joining us today.
    My first question is regarding the Financial Crimes 
Enforcement Network's (FinCEN's) Exchange Program. And I just 
have to say I have only been here for 4 months, and maybe this 
is an area of bipartisan agreement, but the use of acronyms in 
Washington is just off the charts. Maybe at some point, I will 
just give in and keep using the acronyms all the time, but I am 
still at the stage now where it is a lot to talk in a language 
that my constituents just don't understand. But at least one 
time, when I can say FinCEN over and over, I said, ``Financial 
Crimes Enforcement Network.''
    Acting Director Das, my first question is to you. This past 
February, the Federal Trade Commission released data 
demonstrating that American consumers reported losing $8.8 
billion to fraud last year. That is an annual increase of over 
30 percent. Unfortunately, North Carolina ranks 12th among 
States in fraud reports, costing my constituents and other 
North Carolinians almost $150 million in losses.
    Fraudsters and scammers often employ the same techniques 
and technologies to abuse financial and government systems and 
the like with the ultimate goal of stealing money. FinCEN's 
Exchange Program, which facilitates public/private sector 
collaboration and information sharing to combat financial 
crime, is critical. Can you speak to whether the FinCEN 
Exchange Program's resources have kept pace with the increase 
in financial fraud and scams we are experiencing, and if not, 
what more can Congress do to support FinCEN's Exchange Program?
    Mr. Das. Thank you for that question. We are very focused 
on concerns around fraud, around cyber events associated with 
fraud, and around business email compromise. And we are very 
focused on ensuring that we develop the information, review 
suspicious activity reports, and work with law enforcement to 
be able to combat fraud in many different dimensions. We 
recently issued something called a financial trends analysis, 
with respect to business email compromise associated with 
business intrusions and fraud associated with that. We have 
also issued a notice or an advisory around mail theft-enabled 
fraud, and check fraud, which is another serious issue, just to 
be able to highlight for financial institutions some of the 
typologies and red flags associated with these types of fraud. 
So, this is an issue on which we are incredibly focused.
    With respect to responding to fraud as well, we have 
something called a Rapid Response Program, which helps us work 
with law enforcement here in the United States and our foreign 
counterparts to be able to track and then freeze funds 
associated with fraud that occurs here in the United States, 
cyber-enabled fraud that occurs here in the United States. And 
that program has had an incredible amount of success in terms 
of freezing funds associated with cyber-enabled fraud. In the 
past year, we have frozen $174 million associated with cyber-
enabled fraud.
    With respect to FinCEN exchanges, this is an incredibly 
useful tool for us to be able to bring together law enforcement 
and financial institutions to discuss a range of different 
types of predicate crimes and illicit activity. We focused on 
issues around Russian sanctions evasion and a number of other 
dimensions as well. This year, we conducted, so far, eight 
FinCEN exchanges, and we have more on the horizon as well, and 
we will be open to considering U.S. FinCEN exchanges around 
fraud.
    Mr. Nickel. And what more can we do, briefly?
    Mr. Das. Again, from our perspective, it is incredibly 
important, again, against the backdrop of the resource 
constraints that we have, to be able to ensure that we have the 
teams to be able to work with law enforcement and financial 
institution to continue to consider the types of reporting that 
we receive and then to engage proactively with financial 
institutions.
    Mr. Nickel. Thank you. Switching gears a little here, I 
wanted to share my gratitude and appreciation to sanctions 
officials at the Treasury Department's Office of Terrorism and 
Financial Intelligence for their hard work and dedication. Over 
the years, demands on the Department have risen dramatically 
given U.S. sanctions on Russia in response to Putin's 
unprovoked attack on Ukraine. Under Secretary Nelson, given the 
increase in U.S. sanctions, is the current budget of the Office 
of Terrorism and Financial Intelligence sufficient? Do you have 
the resources you need?
    Mr. Nelson. Given obviously the work, as you noted, to 
support Ukraine and continue with the strategic aim of limiting 
the resources Russia has to continue to prosecute this war, as 
well as to diminish its war-fighting capacity by going after 
his critical material, we are surging obviously, not only in 
OFAC, but across TFI. In our requested budget for the coming 
fiscal year, we have asked for additional resources to meet 
those needs.
    Chairman Luetkemeyer. The gentleman yields back. Now, we go 
to the distinguished gentleman from Georgia, Mr. Loudermilk, 
who is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. And thank you both 
for being here today.
    Mr. Das, I would like to thank you for Treasury's swift 
response to a letter that Chairman Luetkemeyer and I sent to 
you about Sections 6204 and 6205 of the AML Act of 2020, which 
I would like to insert for the record, Mr. Chairman.
    Chairman Luetkemeyer. Without objection, it is so ordered.
    Mr. Loudermilk. One thing I have noticed since I have been 
in Congress is that agencies tend to respond a lot quicker 
around appropriations season. I am not saying that was the 
intention there, but I did notice in the letter that the lack 
of funding was highlighted as one of the reasons that we 
haven't received the reports that were required by Sections 
6204 and 6205. Those were supposed to be to Congress within a 
year of January 1, 2021, and we still have not received those 
reports.
    Now, the reason we ask for information, and my concern is, 
I am not sure, based on what was in the letter and some 
comments that you have made recently, that you are really 
taking congressional oversight very seriously. The reason that 
we want this is for legislative purposes. Now, you may not 
agree with the legislative purpose we have, but that is our 
role, and by law, that is what you are supposed to respond to.
    Mr. Das, my first question is, when specifically did FinCEN 
begin working to carry out the requirements of Sections 6204 
and 6205?
    Mr. Das. Thank you for that. Again, it is incredibly 
important for us to think through how to improve and enhance 
and make the AML/CFT framework more effective. We have been 
working on the suite of reports in the AML Act around enhancing 
and improving and modernizing the AML/CFT framework since I 
have been on the job.
    Mr. Loudermilk. When did that begin?
    Mr. Das. That was in September of 2021, and we have been 
working incredibly hard across the full range of dimensions 
with respect to enhancing the AML/CFT framework. We issued a 
request for information (RFI) with respect to the Section 6216 
report, which is the report to modernize, streamline, and 
update the AML/CFT regulations, in December of 2021. The 
comment period closed. We received 140 comments, and we have 
been reviewing those comments in consulting with over two dozen 
agencies in terms of identifying and developing recommendations 
with respect to Section 6216.
    A number of the comments that we received in the context of 
that request for information also applied to some of the issues 
covered by the 6204 and 6205 reports, which relate to SAR and 
CTR thresholds and automation around Suspicious Activity 
Reports (SARS) and Currency Transaction Records (CTRs). We have 
been actively considering the various comments that have been 
made, and we have been thinking through how to best address 
those comments, the recommendations made in those comments, and 
then to think through how to best work with our counterpart 
agencies in terms of finalizing the best recommendations.
    Mr. Loudermilk. Let me reclaim my time, because I have some 
other questions, and I am not sure we really got the answer 
that we are looking for in there, because I am still looking 
for the reports that are supposed to come to Congress, and now 
we are over a year beyond that time frame. And I understand 
resources are an obstacle, but let me also bring up that in 
2022, FinCEN received over 4.3 million SARs across all 
industries, which is a 43-percent increase from 2021.
    Now, if you are looking for a needle in a haystack, that 
haystack is growing, and I don't see how you store that much 
data securely, let alone analyze this amount of data. In this 
committee's conversations with former FinCEN leadership, they 
agree that the data is overwhelming, and they called into 
question whether the BSA reporting framework is useful at all. 
Given the fact that the DOJ has failed to provide information 
on the usefulness of BSA data, do you think that FinCEN would 
be more effective and less strained for resources if the 
monetary thresholds for CTRs and SARs were raised?
    Mr. Das. Thank you for that question. Again, law 
enforcement and our national security partners have 
consistently reaffirmed the value of SARs as well as the other 
information that we receive. Again, as part of our efforts to 
develop the reports under Sections 6204 and 6205, one of the 
key issues that we are considering is how and whether to raise 
the thresholds across a number of dimensions, as well as 
considering whether or not to automate the filing.
    Mr. Loudermilk. So, that is something that you are looking 
at. That is something we are looking at that as well.
    Mr. Das. That is something that we are looking at.
    Mr. Loudermilk. That is why these reports are so critical, 
and I am moving forward with legislation to increase those 
thresholds. I will give you an example. When the CTRs were done 
in the 1970s, it was a $10,000 threshold. If we were to adjust 
those for inflation today, it would be over $80,000. We want to 
be able to make your job more effective, to get to the bad guys 
and filter through less, and basically make the haystack 
smaller. It is more effective that way. From an intelligence 
background, and from a military and security background, you 
are more effective when you have less noise in what you are 
looking for.
    Again, I am out of time, and I want to respect the 
chairman's request, so I will submit the rest of my questions 
for the record. But, Mr. Das, we expect to have those reports 
sooner rather than later.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
we will go to the distinguished gentleman from California, Mr. 
Vargas, for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. I appreciate 
your convening this very important hearing, and Vice Ranking 
Member Pettersen, thank you very much for being here as well.
    Today, the Department of the Treasury's Office of Foreign 
Assets Control (OFAC) sanctioned four senior officials of 
Iran's Islamic Revolutionary Guard Corps Intelligence 
Organization. I appreciate that the Treasury Department has 
increased the pace of sanctions designations targeted in Iran 
over the past year. However, I believe the pace of designations 
is woefully inadequate, given the scope of Iran's violations.
    Under Secretary Nelson, what are you doing to increase the 
effectiveness of our Iran sanctions?
    Mr. Nelson. I just want to affirm that we are profoundly 
concerned about Iran in a range of activities, including the 
abuse of its people, destabilizing activities in the region 
obviously, the development of its nuclear program, and what we 
perceive to be a growing role in Russia's war of aggression 
against Ukraine.
    As you noted, we have dramatically increased the pace of 
designations in all of those categories. I can just give you a 
flavor of what we are focused on. We have designated a number 
of individuals involved in aiding the regime's crackdown on 
peaceful protests and demonstrators, including 11 just last 
month, 4 earlier this week, and 73 since last year. We have 
issued a general license to expand the availability of U.S. 
communications-related services and software to be available to 
Iranians, given the regime's crackdown on communications 
technology, and that is something that I have been following 
very closely.
    And then, we have continued to sanction people and 
companies that support Russia's unjust war, and just last week, 
we sanctioned a procurement network supporting Iran's UAV drone 
program, which is a significant area of concern for us. We have 
previously designated 19 individuals and 9 entities involved in 
that program. We are also taking action against Iran trade and 
petroleum and petrochemicals. Obviously, that is a huge source 
of revenue for them.
    Mr. Vargas. Let ask you a little bit about that----
    Mr. Nelson. Yes, please.
    Mr. Vargas. ----if I may interrupt you.
    Mr. Nelson. Of course.
    Mr. Vargas. Again, thank you for that answer. I think that 
Iran is one of the most dangerous countries in the world and 
especially, obviously, as they are racing towards a nuclear 
weapon. Do you know how much oil Iran is currently exporting, 
and how much revenue is generated from these exports, and how 
do these figures compare to 3 years ago?
    Mr. Nelson. I don't have that in front of me, but 
obviously, I can----
    Mr. Vargas. Could you give me a sense of how much?
    Mr. Nelson. I don't have a sense for you, although I can 
say that just a couple of weeks ago, we designated 36 or so 
entities that were part of a network of facilitating the sale 
of petrochemicals, and we believe that network is worth 
billions of dollars.
    Mr. Vargas. Again, I am very concerned about that because I 
don't think that our efforts have been very successful in doing 
this, just to be honest with you, so I hope that we continue to 
push on this.
    Now, I did want to talk a little bit about fentanyl. 
Obviously, it is a problem that we have all heard about. You 
said today, I believe, that you have been down to the border. 
When you were there, did you speak to anybody to ask, where 
does most of the fentanyl come through the border? Does it come 
through the land port of entries or in between the land port of 
entries?
    Mr. Nelson. I believe, as I recall, it was all of the 
above, was a form of the answer.
    Mr. Vargas. No, it is not.
    Mr. Nelson. No?
    Mr. Vargas. No, it is not. Over 90 percent of the fentanyl 
comes through the actual land port of entry, not in between. In 
fact, I am always interested when people start talking about 
all these millions of people who are crossing without 
documents. Very little fentanyl comes through there. It mostly 
comes to the actual port of entry, and, in fact, it usually 
comes through trucks that are examined, but not very 
thoroughly, and also through vehicles.
    I have been there many, many times. I live in San Diego. I 
live on the border. I have represented the actual California-
Mexico border for 30 years. I do ride-alongs and other things, 
and it is very interesting how some of the sophisticated 
technology that we have now captures it. But I am always 
interested in understanding that. When you talk to the Border 
Patrol, they all tell you that most of it comes right through 
there. In fact, it is going down now, but during this whole 
time of COVID-19, over 75 percent of the people who actually 
get caught sneaking in this fentanyl, this terrible drug that 
is killing our people, are American citizens.
    Mr. Nelson. I had the opportunity to visit one of the 
stations that scans the trucks and made the point about sort of 
the networks of drivers to move the fentanyl through these--
that is your point--very large vehicles.
    Mr. Vargas. My time is up, and I thank the Chair very much. 
Thank you.
    Chairman Luetkemeyer. The gentleman yields back. The Chair 
now recognizes the gentleman from Pennsylvania, Mr. Meuser, one 
of the new members of our committee, for 5 minutes.
    Mr. Meuser. Thank you, Mr. Chairman. I thank the ranking 
member as well. First question, regarding sanctions on the 
fentanyl issue, funding coming out of China, payments being 
made into Mexico, which, by the way, has turned, in many parts, 
into a gangland, not due to ports of entry but due to the 
horrific situation at the border. And 75 percent, we talk about 
100,000 deaths, 80,000 or so from fentanyl, and yet, we are 
trying to make excuses or not do anything about it. So, maybe 
you are doing something about it by cutting off some of that 
funding. Have you found any? Have you found any funding? Have 
we sanctioned? Have we put people in jail?
    Mr. Nelson. Are you talking about Chinese Money Laundering 
Organizations?
    Mr. Meuser. Yes. Precisely, through the drug dealers, the 
very wealthy drug dealers that have been created throughout 
Mexico.
    Mr. Nelson. Yes. We have done a risk assessment on this, 
and we have found that these professional money laundering 
organizations are being used to finance, frankly, using our 
infrastructure----
    Mr. Meuser. My only question is, have you caught any?
    Mr. Nelson. We have, yes. We have designated Chinese Money 
Laundering Organizations (CMLOs) in the past, and we can send 
that----
    Mr. Meuser. Okay. So, we are catching them. That is where I 
wanted to go. Thank you.
    Acting Director Das--and I am changing subjects--Congress 
passed the Corporate Transparency Act (CTA) in 2021 to increase 
information sharing between financial institutions and the 
Federal Government. CTA goes into effect next year and would 
require most companies to report information known as 
Beneficial Ownership, with which you are well familiar. My 
understanding is that FinCEN's proposed rule does not allow 
banks to use this information beyond the opening of an account. 
Do you think that financial institutions should be able to use 
this Beneficial Ownership information and the registry for 
purposes other than onboarding the customer?
    Mr. Das. Thank you for that question. Again, our proposed 
rule proposes specific scope for the access that financial 
institutions have to Beneficial Ownership information as well 
as the purposes for which they could use Beneficial Ownership 
information. There were a number of comments on this point.
    Mr. Meuser. Yes, there were.
    Mr. Das. We have been reviewing those comments intensively 
and considering how best to approach the final rule on this 
point. So, we are working on that, and, again, we are still in 
the policy process with respect to an outcome on that.
    Mr. Meuser. Good, because it seems to make a lot of sense 
to be able to use the information for other important purposes. 
And that is the criticism that you have been receiving, but it 
is very good to hear that this is going to be very carefully 
reviewed, and that you will take industry input and come up 
with what you think is best. That is very encouraging to hear. 
I don't need to ask any more questions on it then. That is 
good.
    I do want to ask you, within the customer information 
program which is designed to ensure customer certainty without 
burdensome regulations for the fintechs, it has come to me that 
getting the full Social Security number on fintechs, where 
credit cards mostly need the four digits, is a concern for 
those types of lenders. Is there a good reason that is the 
case, or is that something that you are considering looking at 
making more efficient for these lenders?
    Mr. Das. Thank you for that question. That is an issue that 
has come to us. We are taking a look at it. We have an 
application pending as to whether or not to permit that. And 
again, that is something that we are considering internally and 
working through, and looking at it fairly across all of the 
different dimensions for the purposes of ensuring that we can 
confirm identity, and ensuring that we implement a risk-based 
approach towards our regulatory framework, but also to ensure 
that we are able to ensure that financial institutions know who 
the actors are behind the accounts as well. So, that is a 
question at which we are taking a serious look.
    Mr. Meuser. That is very good to hear as well. I look 
forward to following up with you on that. Lastly, I am just 
going to go back to the China trade related to fentanyl. If you 
have an initiative, first question is, is that a core mission 
for FinCEN, finding out who is delivering and the type of 
funding that is taking place, the illicit financing of this 
huge, illicit drug industry that is taking place? And second, 
if you provided a request for funding for that purpose, my 
guess is you will have strong bipartisan support to catch this 
awful cartel, right? I have run out of time, so I will yield 
back.
    Chairman Luetkemeyer. Do you want to answer that very 
quickly, Director Das?
    Mr. Das. Yes, absolutely. We have a dedicated team focused 
on the issue of fentanyl. We are using all of our tools and 
authorities to be able to better understand the financial flows 
associated with fentanyl in our work that we are doing with the 
DEA as well. This is an issue in which we are engaging, we are 
using our authorities on to collect information, and then we 
are trying to better understand the money laundering networks 
associated with opioid trafficking on this front and engaging 
with law enforcement.
    Mr. Meuser. Thank you, Mr. Chairman.
    Chairman Luetkemeyer. Very good. The gentleman yields back. 
With that, we will go to Mr. Nunn, the distinguished gentleman 
from Iowa, for 5 minutes.
    Mr. Nunn. I am very grateful, Mr. Chairman, and to the 
witnesses, thank you so much for being here today. As we look 
at what the Financial Services Committee, and actually, the 
Agriculture Committee, is doing in the digital assets space, 
there are just a few of us who are serving in this crossover 
role between commodities and securities. One of the things that 
we have found in both, and I was just coming between each 
committee right now, is that there seems to be a lack of a 
regulatory environment or structure that really provides the 
rules of the road. And there is a lot of talk about people 
jumping in and framing it without necessarily talking to each 
other, which is where I applaud the Chairs of both the 
Financial Services and the Agriculture Committees for working 
well on this in the House.
    I also, as a military member myself and someone who spent 
over a decade in counterintelligence working in illicit 
financing, want to thank the Treasury for being such a strong 
leader in this. And that is why this morning, I introduced the 
bipartisan, bicameral Financial Technology Protection Act of 
2023, with my colleagues, Representative Himes, Senator Budd, 
and Senator Gillibrand. Specifically, what this legislation 
would aim to do is look at an independent financial technology 
working group to include terrorism and illicit financing. 
Treasury was very helpful in providing some feedback to that 
and helping us shape it. Specifically, in this working group, 
Mr. Nelson, I want to highlight that this includes our senior 
levels from the DOJ, the FBI, the CIA, and FinCEN as partners 
in this, just to name a few.
    As we look forward on this, Mr. Das, I would like to begin 
with you. This working group's intent is to conduct independent 
research on terrorists, how their illicit financing works, and 
how they fund things going forward. It would be a window into 
how this is operating, particularly now that we are looking at 
digital assets as being a key mode for these individuals to 
finance themselves, everything from the Islamic Revolutionary 
Guard Corps (IRGC) to cartels south of the border. One of the 
things that you had brought up here was your wealth of 
knowledge related to illicit finance and the use of digital 
assets. In your view, is this something that Treasury, along 
with other senior representatives from both the government and 
our private-sector partners, should further explore to combat 
and really get their arms around the scope of illicit 
financing?
    Mr. Das. Thank you for that. At FinCEN, we currently have a 
number of engagements where we have public/private 
opportunities to exchange information. We have a program called 
the Innovation Hours Program, where we meet with private-sector 
stakeholders, and we use our FinCEN exchanges to exchange 
information with private-sector stakeholders and law 
enforcement around issues involving digital assets and payment 
modernization, and to be able to understand the illicit finance 
risks. Again, these are ongoing conversations. We plan on 
continuing these conversations as we think through the risks 
and the impacts on our regulatory framework.
    Mr. Nunn. Has it been helpful?
    Mr. Das. Those conversations have been incredibly helpful 
for us to be able to understand the lay of the land with 
respect to where innovation is going and what illicit finance 
risks are associated with that. They have also been incredibly 
helpful for law enforcement, and for us, to be able to 
communicate some of those illicit finance risks to those 
innovators and entrepreneurs that are developing new systems. 
Again, for us, what we see over and over again is that 
technology is incredibly important to be able to provide 
financial services to customers across-the-board. But often, it 
is important for those technology innovations to ensure that 
compliance is built in and that they understand what the 
compliance framework is.
    Mr. Nunn. Mr. Das, I appreciate that. I think the feedback, 
particularly from the private sector where the innovation is 
going, is key. Let me get to the second part of this. In 2020, 
I believe, you put out a request for feedback or FinCEN did, 
but I have not seen any of that feedback reported out. My 
question here is, when you get feedback from market 
participants, particularly on the private side, on any proposed 
rule change, what are the primary concerns with any proposal 
going forward, and do we have a timeline in which we here in 
Congress are going to get to see that?
    Mr. Das. Thank you. I think you are referring to a couple 
of proposals that were made in late 2020 with respect to 
digital assets. Those proposed rulemakings had a number of 
comments; I think one of them had about 8,000 comments, and the 
other had 2,000 comments. We have been reviewing those, and 
they raised some very complicated policy issues for us.
    Mr. Nunn. Thank you. Three years on, are we going to get to 
see that report?
    Mr. Das. We are still working through a final rulemaking 
with respect to all of those comments.
    Mr. Nunn. Okay. We would like to see that sooner rather 
than later. If there is not a need for one, then let's move 
forward.
    Under Secretary Nelson, I want to follow up on what the 
Chair asked. I know we don't advertise what our sanctions 
regimes are, but we also know the danger of not having a 
sanctions regime that is effective and timely. Sanctioning 
Russian oligarchs' yachts clearly has not slowed down the war 
in Ukraine. My concern here is, is there a plan in place for 
the situation with the Taiwanese Strait specifically?
    Mr. Nelson. Again, I will just----
    Mr. Nunn. If you are not going to comment, that is fine, 
but I do want to highlight that the intractable and secondary 
effects of a sanctions regime against a nation like China, if 
it is not thought out ahead of time, will have massive 
ramifications. Are you considering that?
    Mr. Nelson. One of the things that we have done, just 
briefly--and I would be happy to give you some more information 
on this--is to set up a Sanctions Economic Analysis Unit in 
order to really go after sort of the effect of our sanctions, 
mitigations, and then sort of do an after-action every time we 
do a sanction so that we can be more effective.
    Mr. Nunn. Very good. Thank you, Mr. Nelson. And thank you, 
Mr. Chairman. I yield back.
    Chairman Luetkemeyer. The gentleman yields back. The Chair 
now recognizes the gentlelady from Texas, Ms. De La Cruz, for 5 
minutes.
    Ms. De La Cruz. Thank you, Mr. Chairman, for holding this 
important hearing this afternoon, and thank you to the 
witnesses for taking the time to appear before the committee 
today.
    Several times, in listening to the questions from my 
colleagues, I have heard that you all are working on the 
report, you haven't had the resources yet, and there has been a 
delay of year to up to 3 years, as my colleague, Mr. Nunn, 
indicated.
    My question is for Acting Director Das. Do you still have 
any employees working remotely?
    Mr. Das. Yes, ma'am, we do.
    Ms. De La Cruz. Why are Federal employees in national 
security roles working remotely?
    Mr. Das. We have a range of employees across our 300-person 
workforce. Many of them come in to work on a regular basis in a 
classified environment to work in sensitive compartmented 
information facilities (SCIFs), and they come in regularly. 
They review the information in a classified setting, and they 
process that information in a classified setting. We are 
incredibly mindful of the security considerations around the 
use of our data, whether it be BSA data or classified 
information. We have other functions, for example, management 
functions, that don't require employees to come in on a regular 
basis, and a telework environment is a suitable environment for 
them because they are not handling classified information or 
BSA information.
    Ms. De La Cruz. So, how are you ensuring that your remote 
workers are not handling any classified or sensitive 
information?
    Mr. Das. No remote workers are handling classified 
information outside of the workplace.
    Ms. De La Cruz. Will you be bringing any of these remote 
workers back to the workforce or bringing them back to the 
office full-time?
    Mr. Das. We are currently considering the OMB guidance that 
was recently issued with respect to telework and thinking 
through what our policy will be going forward. We will be 
considering the best way forward on this front given all of the 
needs----
    Ms. De La Cruz. What guidance?
    Mr. Das. OMB guidance.
    Ms. De La Cruz. OMB. And what is OMB?
    Mr. Das. OMB is the Office of Management and Budget, out of 
the White House, and they have recently issued guidance with 
respect to consideration by agencies of their telework policies 
in light of the end of the pandemic. And that is guidance that 
we are considering and working very closely on with our 
counterparts at the Treasury Department to think through how to 
best implement it.
    Ms. De La Cruz. So, the remote workers are still as per the 
pandemic. Is that correct?
    Mr. Das. We have been changing our policy over time to meet 
health needs and security needs, but, again, we are incredibly 
mindful of the security and confidentiality of our 
information----
    Ms. De La Cruz. And you would say health needs as in COVID?
    Mr. Das. As in COVID, yes.
    Ms. De La Cruz. Okay. Under Secretary Nelson, earlier this 
year, I introduced H.R. 1076, the Preventing the Financing of 
Illegal Synthetic Drugs Act. This bill, approved by this 
committee, requires the Government Accountability Office (GAO) 
to carry out a study on how illicit finance supports drug 
traffickers peddling fentanyl and synthetic drugs. I am 
grateful to Chairman Luetkemeyer for his leadership in this 
subcommittee and I'm looking forward to my measure coming to 
the House Floor.
    Under Secretary Nelson, what steps has your office taken to 
prevent the financing of illegal drugs and the harms they have 
caused in our communities? I guess more importantly, why does 
your office repeatedly cite the International Emergency 
Economic Powers Act (IEEPA) instead of more-targeted 
authorities granted by Congress, like the Fentanyl Sanctions 
Act?
    Mr. Nelson. Thank you for that question. Just generally, we 
use all of the authorities, obviously, that we have under 
IEEPA. There is an Executive Order that President Biden issued 
at the end of 2021 which provided additional authorities to go 
after not only the supply chains undergirding fentanyl, but all 
drug trafficking. So, that is an authority that we have used 
frequently over the course of the last year. It is an authority 
that has allowed us to sanction and really escalate our 
narcotic sanctions across the global supply chain, which has 
been a strategic focus of ours because that is where we feel 
like we can have the most impact to really get after these drug 
trafficking organizations and transnational criminal 
organizations that are facilitating, obviously, the flow of 
this horrible drug.
    Ms. De La Cruz. Thank you so much.
    I have one last comment for Director Das. With COVID 
already being lifted and the rest of the world, especially the 
private sector, working, I think it is time to bring people 
back to the office.
    Chairman Luetkemeyer. The gentlelady yields back. The Chair 
now recognizes the gentleman from Tennessee, Mr. Ogles, for 5 
minutes.
    Mr. Ogles. Thank you, Mr. Chairman. I think one of the 
concerns I have for really both Agencies, the Financial Crimes 
Enforcement Network and the Terrorism and Financial 
Intelligence Office, is priorities, and this is not a hostile 
line of questioning. It is just more information-gathering.
    But when I look back since 2001, FinCEN has collected over 
350 million currency transactions in the backdrop of increased 
activity from Russia, the Mexican cartels, and Chinese 
corporations, not just the CCP but the Chinese corporations. 
What are you doing specifically because, again, when I look at 
this, it is 350 million records. That is primarily innocent 
Americans versus these actors that we know are leveraging the 
U.S. economy to finance their own military operations. They are 
using our economy to undermine our country, our own economy.
    Mr. Das, what are you doing specifically to divert 
attention away from innocent Americans and over to the CCP, to 
Russia, and to the cartels?
    Mr. Das. Thank you for that. We are very focused on current 
illicit finance threats, particularly Russia. We have done 
quite a bit of work since the Russian invasion of Ukraine in 
terms of issuing advisories and alerts on Russia's sanctions 
evasion, and on efforts by Russian oligarchs and elites and 
proxies to evade sanctions and hide their assets here in the 
United States and elsewhere. We have issued an advisory with 
respect to export control evasion jointly with the Commerce 
Department's Bureau of Industry and Security. And we have 
issued one with respect to how Russian oligarchs and actors are 
using the commercial real estate sector to hide assets as well.
    We have been reviewing the information in suspicious 
activity reports (SARs). There has been a significant uptick in 
terms of SARs related to that, and working with our 
counterparts at OFAC, at main Treasury, and in law enforcement 
to be able to evaluate the types of information that we are 
getting across those ranges of suspicious activity reports, and 
then working with them to identify the networks, and then 
helping them investigate and prosecute with respect to all of 
that. Again, that is the number-one priority for us, and we are 
taking a look at current information to address those concerns.
    Ransomware is another significant priority of ours. And we 
are working very closely with the Department of Justice and 
other agencies in better understanding ransomware actors, the 
types of technology and strains that they use to commit 
ransomware attacks, and then how they are using money 
laundering tools in cryptocurrency exchanges to hide their 
assets as well to track and trace those assets and then to go 
after those assets.
    We recently designated, under one of our tools called 
Section 9714 of the National Defense Authorization (NDAA), 
which allows us to identify foreign financial institutions that 
are a primary money laundering concern in connection with 
Russian illicit finance, an entity called Bitzlato, which is a 
Hong Kong-based cryptocurrency exchange that is linked to 
Russian illicit finance, Russian ransomware, and darknet 
markets as well, to be able to prevent that entity from 
interacting with the U.S. financial system as well. And again, 
as I have mentioned before, we are working on fentanyl and are 
very active on that front.
    And again, across a range of activities, we are very 
focused on recent threats, in collaboration with Under 
Secretary Nelson and under his leadership, as well as with law 
enforcement, OFAC, and other agencies.
    Mr. Ogles. Kind of switching to China, Mr. Nelson, Treasury 
prohibits buying securities linked to the Chinese military-
industrial complex, but a lot of the corporations that are 
privately held, secondary investment or market, are 
participating in the U.S. economy, again funding China's 
military complex. So, it is an end run around our own 
regulations. What are we going to do as we go forward to target 
these corporations that are worth billions of dollars that are, 
again, players in our own economy and funding our enemy?
    Mr. Nelson. A couple of things----
    Mr. Ogles. And you have about 30 seconds. We are out of 
time.
    Mr. Nelson. It is a----
    Chairman Luetkemeyer. This is a very important question. I 
want an answer on this one. We are going to take whatever 
amount of time it takes.
    [laughter]
    Mr. Nelson. ----close the gap. And I think we have 
identified and have been working on a couple of really 
important areas in this respect. The first is obviously the 
work that we are doing to implement the Corporate Transparency 
Act, so we see the Beneficial Owners behind domestic and 
foreign corporations. The second thing that we are looking at 
very closely is investment advisors, because we are looking at 
the risk associated with investment advisors and not being able 
to see the true revenue source behind the investment advisor, 
and that could come from Russia, China, and a bunch of other 
places. And the third sector that we perceive there to be risk 
is real estate, so we are looking there.
    To your point, we are trying to close what we perceive to 
be gaps within our own system so that these bad actors can't do 
all of the things that I think you accurately described, take 
advantage of our people, of our American businesses for their 
own illicit gains.
    Mr. Ogles. Thank you, sir. Mr. Chairman, I will just close 
with this comment. When we look at what has happened with the 
banking system in the United States, if I am a bad actor, and 
when I say bad actor, I mean a foreign country, the next attack 
is probably economic. And the 350 million records--it is not a 
grandmother on a fixed income and you are tracking her 
transactions. We have to start doing a better job of attacking, 
targeting, and limiting China and Russia in our economy. Mr. 
Chairman, I yield back.
    Chairman Luetkemeyer. The gentleman yields back. With that, 
we go to the gentlelady from California, Mrs. Kim, for 5 
minutes.
    Mrs. Kim. Thank you, Mr. Chairman, for holding this very 
important hearing. Recently, the North Korea People's Assembly 
adopted a new law, in September 2022, that allows the Kim Jong 
Un regime to strike first with nuclear weapons if the regime 
feels threatened. In other words, that means the law will give 
the Kim Jong Un regime the unprecedented authority to utilize 
nuclear weapons for any reason. In 2022, the regime hit a 
record number of missile tests, as we know, and the Kim Jong Un 
regime, each time they do the test, they improve its ability to 
strike the continental United States with an intercontinental 
ballistic missile (ICBM), so it is concerning.
    And a recent investigation by the Financial Times exposed 
how the Kim Jong Un regime utilizes its criminal networks to 
smuggle oil into North Korea and get access to foreign currency 
to finance their nuclear weapons program. The investigation 
tracked a foreign vessel, the UNICA, that made 23 journeys into 
North Korea to deliver oil and petroleum products.
    So, Under Secretary Nelson, can you tell us what the 
Treasury is doing to stop vessels like Unica and cut North 
Korea off from their ability to get hard currency and oil 
coming from other countries, specifically from Russia and 
China?
    Mr. Nelson. Thank you for that important question. 
Obviously, North Korea's weapons of mass destruction (WMD) and 
ballistic missile program is a top priority, not only of the 
Treasury Department, but across our government, for all of the 
reasons that you have expressed. Using our tools, we have 
focused on trying to identify the procurement networks that are 
directly tied to the WMD program. And we have, I think done 
almost 2 dozen sanctions related to companies and entities that 
are supplying the actual material that North Korea needs to 
build its missiles and its weapons of mass destruction.
    The second thing that we have been focused on is, to your 
point, going after the revenue generators, and those come in a 
couple of different flavors. One, we have the IT workers who 
generate a substantial amount of revenue for the regime. 
Working with FinCEN, we have worked to identify the trends and 
typologies for financial institutions, the companies----
    Mrs. Kim. Yes, thank you. I just wanted to make sure that 
you see more urgency from the Treasury Department to make North 
Korea sanctions more effective, but now I want to switch gears 
to another topic.
    The Corporate Transparency Act directs FinCEN to collect 
information in a form and manner that ensures information is 
highly useful, but the information in the registry will not be 
highly useful unless it is validated by FinCEN. But to my 
knowledge, the Agency has not publicly stated that it intends 
to validate the information reported. Without that validation, 
bad actors may report false or inaccurate information to the 
registry. Does FinCEN intend to validate that information 
reported to the registry? If so, what validation solutions is 
FinCEN considering?
    Mr. Das. Thank you for that question. Again, in the 
response to the comments to the notice of proposed rulemaking 
(NPRM), we heard loud and clear the importance of validation, 
and we agree with the importance of validation. Again, this is 
an issue that is front and center for us in terms of thinking 
through how to achieve this, and it presents a range of 
considerations for us that are pragmatic considerations. There 
are legal considerations, cost considerations, and then a 
number of questions with respect to how to implement validation 
as well.
    Mrs. Kim. Do you need support from Congress? If so, what 
type of support do you need from us so that FinCEN can validate 
the information reported to the registry? Can you be specific 
about what help you need?
    Mr. Das. Absolutely. We are working through a number of 
considerations regarding constraints there may be with respect 
to legal constraints. Our ability to access other databases as 
well, whether they be public databases or commercial databases, 
that will allow us to validate this information in an effective 
and fluid way. That is one of the things that we are 
considering right now as we talk to stakeholders is, what is 
the range of available databases, and what is the quality of 
the databases, in our ability to validate that information. And 
these are issues that are front and center for us, along with 
the cost considerations of validation and verification. So, as 
we walk through all of these considerations--pragmatic, legal 
costs, and other related considerations--we stand ready to work 
with you, and we will get back to you on that.
    Mrs. Kim. Thank you. I will yield back, even though I had 
another question to ask.
    Chairman Luetkemeyer. The gentlelady yields back. The 
gentleman from Ohio, Mr. Davidson, who is also the Chair of our 
Subcommittee on Housing and Insurance, is recognized for 5 
minutes.
    Mr. Davidson. I thank the chairman, and I thank our 
representatives from Treasury and FinCEN as a component of 
Treasury. Thanks for the work you do, and for the people who 
aren't here that you represent and serve, thank them from us as 
well.
    Earlier this week, FinCEN announced the renewal and 
expansion of its geographic targeting orders (GTOs). This is 
the 14th time FinCEN has issued a real estate GTO, because 
these orders expire after 6 months. GTOs themselves are rarely 
noteworthy, but as the Chair of our Housing and Insurance 
Subcommittee, I believe it is important to highlight how these 
targeting orders have changed over time. GTOs began as all-cash 
purchases over $1 million in cities like Miami and New York, 
but now cover purchases of $300,000-plus residences in 10 
cities, 42 counties, 13 States, and Washington, D.C. The 
exception to this is an astonishing low threshold of $50,000 in 
the City and County of Baltimore.
    FinCEN has a difficult mission, and we understand that. 
However, I would like to reiterate that these geographic 
targeting orders should be more targeted. They are essentially 
warrantless spying on American citizens most of the time. So, I 
fear that FinCEN is hoping to chip away with every renewal 
until it eventually collects data on every cash purchase of 
every piece of real estate in every city across the country. 
And that is why I requested that my draft legislation, the, 
``Civil Liberties Protection Act of 2023,'' be attached to the 
hearing today. It would create a position of a civil liberties 
officer within FinCEN to monitor and potentially reel in these 
overly-broad actions by FinCEN, which can undermine housing 
purchases and, frankly, engage in warrantless spying of 
American assets, especially those carried out with digital 
assets.
    Acting Director Das, with regard to GTOs, at what point do 
you believe they cross the line and infringe on Americans' 
right to privacy?
    Mr. Das. Thank you for that. Again, from our perspective, 
we take privacy considerations very seriously in the work that 
we do. We work very closely with our legal counsel in terms of 
ensuring that our geographic targeting orders are appropriately 
scoped and they are within the confines of the law. With 
respect to the GTOs and the real estate GTOs, we hear 
consistently from law enforcement that they are incredibly 
valuable in their ability to be able to understand how 
criminals use real estate to launder money and the proceeds of 
crime, including drug trafficking, corruption----
    Mr. Davidson. How do you actually measure that? You get 
these reports, and I have asked in the most-classified setting 
as possible. I am happy to travel. I am happy to have you all. 
We have a SCIF that is supposed to be secure here, and we are 
saying, give us some metrics. Show me a case where something 
that you collected using these GTOs solved a crime. You pick 
your issue with the Beneficial Ownership rule. We are 
supporting, frankly, infringing on the civil liberties of 
American citizens, but give us the evidence. If people ask for 
the support, they want the law, they want to make it legal to, 
frankly, infringe on the 4th Amendment. How do you measure the 
effectiveness?
    Mr. Das. On a number of different fronts--as we prepare a 
new round of GTOs, we consult very closely with law enforcement 
in terms of----
    Mr. Davidson. I know they have a desire, but can you share 
with us a case? I am happy to schedule a meeting to look at it 
in a SCIF or anything, but show me a case where what you 
collected resulted in a solved crime.
    Mr. Das. Now, 40 percent of the GTOs, the reports that we 
receive with respect to GTOs on real estate, correlate to 
suspicious activities that we received through reporting from 
financial institutions. Again, there is a strong correlation 
between the reporting that we receive----
    Mr. Davidson. I understand, thanks, and, look, it is all 
correlated. I am looking for cause and effect. If you want to 
keep spying on American citizens, you are going to have to show 
why.
    Under Secretary Nelson, I would like to briefly touch on 
OFAC and the ongoing coordination with our allies to uniformly 
impose these sanctions. Whenever an entity or individual is 
sanctioned, does OFAC take steps to ensure that our allies are 
also utilizing their sanctioning authority, and what does that 
look like? I am particularly concerned about NATO countries, 
like Bulgaria, that aren't supporting our sanctions.
    Mr. Nelson. No, thank you for that. Yes, actually, we work 
very closely with the EU, the U.K., and the 30 other partners 
and allies every time we designate someone in the context of 
Russia's invasion of Ukraine. We have different legal 
standards. Obviously, we have different authorities. But we 
have consistently, since the time of Russia's invasion to now 
15 months later, worked with our partners and allies, and have 
coordinated around target sectors and individuals, and we 
continue to try to align our designations as closely as we 
reasonably can given that we have different legal authorities, 
but that cooperation----
    Mr. Davidson. Thanks for your follow-up, and my time has 
expired. I yield back.
    Chairman Luetkemeyer. Thank you for yielding back. With 
that, we have finished our round of questioning. I would like 
to thank the witnesses for being here today. I have one quick 
comment for Director Das. A couple of times, you have talked 
about your budget and wanting to have more money for this. We 
understand there are always more demands, but as you can see, 
with the questioning we had here today, you don't have people 
back at work, and you have so many millions of SARs and CRTs 
that are never utilized, and are never examined. And that is a 
waste of people's time and energy.
    If I was going to approve your budget, I would ask you to 
give me an outline of how you are going to save money, how you 
are going to start putting your people to work to maximize 
their ability to get the job done, cut back on all the SARs 
that don't infringe, as the gentleman just said, on people's 
civil liberties, as well as enable you to do your job. At some 
point, there has to be a point here that this can meet, and we 
are not there. And if you want to come to us for a budget 
request, if I am in this Chair to make that decision, you don't 
get a penny until you show me how you can save some money, 
because I don't think that we need to allow this kind of 
activity to go on without some accountability.
    With that, without objection, I would like to enter the 
following document into the record. It is an American Fintech 
Council letter to FinCEN regarding the customer information 
program rules.
    Without objection, it is so ordered.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And with that, this hearing is adjourned.
    [Whereupon, at 3:41 p.m., the hearing was adjourned.]

                            A P P E N D I X


                            April 27, 2023
                            
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