[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

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________


                           FEBRUARY 14, 2024

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-74





                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]






                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

56-279 PDF                WASHINGTON : 2024











                 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, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director









                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 14, 2024............................................     1
Appendix:
    February 14, 2024............................................    65

                               WITNESSES
                      Wednesday, February 14, 2024

Gacki, Andrea M., Director, Financial Crimes Enforcement Network 
  (FinCEN).......................................................     6
Nelson, Hon. Brian E., Under Secretary for Terrorism and 
  Financial Intelligence (TFI), U.S. Department of the Treasury..     5

                                APPENDIX

Prepared statements:
    Gacki, Andrea M..............................................    66
    Nelson, Hon. Brian E.........................................    78

              Additional Material Submitted for the Record

Beatty, Hon. Joyce:
    Written statement of Democrats Abroad........................    88
Huizenga, Hon. Bill:
    Written statement of the Mercatus Center at George Mason 
      University.................................................    91
Luetkemeyer, Hon. Blaine:
    Written statement of AICPA...................................    99
    Written statement of the American Bankers Association (ABA)..   101
    Written statement of America's Credit Unions.................   108
    Written statement of the Bank Policy Institute (BPI).........   111
    Written statement of the Independent Community Bankers of 
      America (ICBA).............................................   116
Nunn, Hon. Zach:
    Bloomberg, ``The Oil Was From Iran. The Insurance Was From 
      New York,'' dated February 8, 2024.........................   118
    Written statement of the NFIB................................   128
Pressley, Hon. Ayanna:
    FACT Coalition: ``Dirty Money and the Destruction of the 
      Amazon,'' 2023.............................................   131
Waters, Hon. Maxine:
    Written statement of the Bank Policy Institute (BPI).........   204
    Written statement of the Free Speech Coalition...............   209
    The Global Anticorruption Blog, ``A Welcome Mat for 
      Corruption,'' dated December 2023..........................   213
    Written statement of the Small Business Majority.............   216
    Transparency International U.S., ``Guest Post: Corporate 
      Transparency Is Easy,'' dated November 14, 2023............   218
Gacki, Andrea M.:
    Written responses to questions for the record from 
      Representative De La Cruz..................................   252
    Written responses to questions for the record from 
      Representative Fitzgerald..................................   240
    Written responses to questions for the record from 
      Representative Garbarino...................................   244
    Written responses to questions for the record from 
      Representative Hill........................................   246
    Written responses to questions for the record from 
      Representative Kim.........................................   234
    Written responses to questions for the record from 
      Representative Luetkemeyer.................................   230
    Written responses to questions for the record from 
      Representative Nickel......................................   256
    Written responses to questions for the record from 
      Representative Rose........................................   233
    Written responses to questions for the record from 
      Representative Velazquez...................................   250
    Written responses to questions for the record from 
      Representative Waters......................................   265
    Written responses to questions for the record from 
      Representative Nikema Williams.............................   260
    Written responses to questions for the record from 
      Representative Roger Williams..............................   236
Nelson, Hon. Brian E.:
    Written responses to questions for the record from 
      Representative De La Cruz..................................   281
    Written responses to questions for the record from 
      Representative Fitzgerald..................................   279
    Written responses to questions for the record from 
      Representative Nickel......................................   283
    Written responses to questions for the record from 
      Representative Ogles.......................................   299
    Written responses to questions for the record from 
      Representative Waters......................................   287







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

                              ----------                              


                      Wednesday, February 14, 2024

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:08 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the committee] presiding.
    Members present: Representatives McHenry, Lucas, Sessions, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Emmer, Loudermilk, Mooney, Davidson, Rose, Steil, 
Timmons, Norman, Meuser, Fitzgerald, Garbarino, Kim, Flood, 
Lawler, Nunn, De La Cruz, Houchin, Ogles; Waters, Sherman, 
Meeks, Lynch, Himes, Foster, Beatty, Vargas, Gottheimer, 
Gonzalez, Casten, Pressley, Tlaib, Torres, Garcia, Williams of 
Georgia, Nickel, and Pettersen.
    Chairman McHenry. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Oversight of the Financial 
Crimes Enforcement Network (FinCEN) and the Office of Terrorism 
and Financial Intelligence (TFI).
    I now recognize myself for 4 minutes to give an opening 
statement.
    Welcome, Under Secretary Nelson, and Director Gacki. More 
than 4 years ago, Republicans worked in good faith with our 
colleagues on the other side of the aisle to pass the Corporate 
Transparency Act, or CTA. With the CTA, Congress intended to 
enhance our national security by preventing bad actors like 
China, Russia, and Iran from using the financial system for 
illicit purposes. We did so by creating a new beneficial 
ownership (BO) reporting regime. This reporting regime was 
supposed to rid the financial system of bad actors by going 
after the shell companies often used by foreign adversaries to 
hide their proceeds of trafficking and terror financing.
    Throughout this process, Republicans were clear: Our 
national security tools must be balanced with the protection of 
small business owners' privacy rights. Republicans fought for 
and secured key provisions to ensure that the burdens imposed 
on small businesses are limited, and the beneficial ownership 
information is protected just like tax returns; it is very 
important that these things are protected just like tax 
returns.
    However, the Biden Administration has failed to implement 
Congress' intent. It has added unnecessary complexity and 
confusion to the reporting regime, potentially risking our 
national security and further burdening small businesses. The 
Administration has transformed what was a simple and direct 
program into a Frankenstein's monster of complexity. For 
example, the CTA required four pieces of information from 
people who are reporting as beneficial owners. The filing form 
now consists of 51 data points.
    Additionally, Republicans secured the strongest privacy and 
disclosure protections ever for America's small businesses. We 
fought for guardrails on the collection, maintenance, and 
disclosure of beneficial ownership information. Instead of 
adhering to the bipartisan agreement and treating this 
sensitive data just like our tax information, the Biden 
Administration opted to completely reinvent the wheel. We now 
have a new, overly-complex, and less-secure access regime.
    Finally, it is unclear what Treasury and FinCEN are doing 
to communicate key compliance and process information to its 
small businesses. This is the opposite of transparency. Every 
single small business in America will be forced to comply with 
this regime, yet 90 percent do not know they have a new 
reporting responsibility, and that is according to the National 
Federation of Independent Business' (NFIB's) new survey.
    Republicans have been sounding the alarm for years about 
the Biden Administration's failed implementation of the CTA. 
This committee has advanced several bills to deliver much-
needed transparency and accountability to FinCEN while bringing 
these rulemakings closer to congressional intent. We all agree 
that to protect national security, we must prevent foreign 
adversaries from using our financial system for illicit 
purposes. FinCEN has a critical role in achieving this goal, 
and Congress has already granted the agency tremendous power to 
that end.
    We were told that the beneficial ownership reporting regime 
would be the silver bullet that FinCEN needed to catch and 
deter bad actors, yet, even after enactment, we have been 
inundated with never-ending requests for new authorities and 
more money.
    Now, we see reports indicating that the agency may be 
abusing its existing authority. According to these reports, 
law-abiding citizens, American citizens, have been targeted by 
FinCEN because they have differing political views than the 
White House. That is unacceptable. No matter the 
Administration, no matter the ideology, no matter the politics, 
that is unacceptable. Until FinCEN can show Congress it can do 
its current job and appropriately use its existing authorities, 
I am skeptical of providing greater authorities and resources. 
FinCEN is one of the least-known but most-powerful agencies in 
the entire Federal bureaucracy, but when Congress gives you an 
inch, you don't get to take a mile. I yield back.
    I will now recognize the ranking member of the committee, 
Ms. Waters, for 4 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman, and I would 
like to welcome Under Secretary Nelson and Director Gacki.
    Good morning. Right now, our national security is being 
increasingly challenged all across the globe. We see in it 
Russia's aggression towards Ukraine and NATO, and in the 
trafficking of deadly fentanyl from China, and we see it with 
the rise of White nationalist extremists who threaten elected 
officials and government workers. These nation-state 
adversaries and homegrown terrorists and their destabilizing 
bad acts are directly making threats to the American-led peace 
and prosperity that has existed since the end of World War II. 
So, it is so important that we discuss how Treasury plays a 
role in countering these national security threats and why it 
is so important that they have the resources necessary to 
confront these challenges.
    In fact, Committee Democrats have worked to address these 
threats for a long time. That is why in 2020, under my 
leadership, Committee Democrats led the bipartisan effort to 
pass landmark financial crimes legislation, including the Anti-
Money Laundering Act of 2020, and the Corporate Transparency 
Act of 2020. While there is still more to do, through these 
laws, we have empowered Treasury and its partners to make 
significant progress in bringing bad actors to justice.
    Unfortunately, Marjorie Taylor Greene and extreme MAGA 
Republicans are working just as hard to undo this progress. Not 
only are they politicizing critical national security decisions 
at the direction of the twice-impeached, four-times-criminally-
indicted former President, but the GOP is also trying to 
undercut those in our government who protect the United States.
    Republicans don't want you to know that it was Treasury 
that brought the criminal crypto exchange, Binance, and its 
executives to justice with a $4.3-billion settlement to 
taxpayers. Republicans don't want you to know how valuable the 
Bank Secrecy Act (BSA) data is and how it has led to the 
arrests of human traffickers, fentanyl dealers, and fraudsters 
on a regular basis. And they don't want the public to know that 
it is Treasury that has been sanctioning Iran and Russia and 
busting shell companies so Russian oligarchs can't hide their 
stolen funds in the United States.
    Ultimately, Mr. Chairman, extreme MAGA Republicans are the 
biggest threat to our national and economic security as they 
continue to undermine aid to our allies, threaten the funding 
of vital programs for countless Americans, and dismantle the 
ability of the House of Representatives to function as it 
should under the Constitution.
    While Democrats continue to put people, peace, and 
prosperity over politics, MAGA Republicans prioritize only one 
person: Donald Trump. If my Republican colleagues are serious 
about combating oligarchs, frauds, fentanyl, kingpins, and 
Hamas terrorists, then they must support increased, not 
drastically reduced, funding and authorities for Treasury and 
other national security agencies. Thank you very much, and I 
yield back the balance of my time.
    Chairman McHenry. The ranking member yields back the 
balance of her time. We will now recognize the gentleman from 
Missouri, Mr. Luetkemeyer, who is also the Chair of our 
Subcommittee on National Security, Illicit Finance, and 
International Financial Institutions, for 1 minute.
    Mr. Luetkemeyer. Thank you, Chairman McHenry, for yielding, 
and welcome, Director Gacki and Under Secretary Nelson. Thank 
you both for being here today to discuss the operation of 
FinCEN and Treasury's Office of Terrorism and Financial 
Intelligence more broadly. The work you and your teams do is 
vitally important to our national security because you are the 
tip of the spear for financial intelligence, sanctions, and 
countering the financing of terror and other criminal activity.
    However, it has been disturbingly clear from the work of 
both this committee as well as the Weaponization Subcommittee 
that FinCEN has trained its broad, powerful, and often opaque 
authorities not just on foreign assets, but also on law-abiding 
Americans, merely on the suspicion that they may disagree with 
the Administration now in power. The American public deserves 
to know if the Federal Government is collecting their bank 
records simply because they wore a red hat to a bank or went 
shopping at a sporting goods store. FinCEN and TFI must be 
focused on America's enemies, not innocent American citizens. 
With that, Mr. Chairman, I yield back.
    Chairman McHenry. The gentleman yields back. We will now go 
to the ranking member of our Subcommittee on National Security, 
Illicit Finance, and International Financial Institutions, Mrs. 
Beatty of Ohio, for 1 minute.
    Mrs. Beatty. Thank you, Mr. Chairman, and Ranking Member 
Waters, for hosting this hearing today, and to Under Secretary 
Nelson, we are very glad to have you back and look forward to 
your testimony. Director Gacki, congratulations on your recent 
appointment as FinCEN Director. I want to thank you both for 
the essential work that you do to protect our financial system 
from terrorists, facilitators, money launderers, drug 
traffickers, and other national security threats.
    TFI and FinCEN have made significant strides to increase 
transparency, pursue bad actors, and implement historic 
bipartisan legislation, like the Anti-Money Laundering Act and 
the Corporate Transparency Act. I am very eager to hear about 
your offices' developments over the last several months to 
combat illicit finance and preserve the integrity of our 
financial system, and I associate myself with all of the words 
of Ranking Member Waters. I yield back.
    Chairman McHenry. The gentlelady yields back.
    We will now welcome the testimony of: the Honorable Brian 
Nelson, Under Secretary for the Office of Terrorism and 
Financial Intelligence (TFI) at the U.S. Department of the 
Treasury; and Ms. Andrea Gacki, Director of the Financial 
Crimes Enforcement Network (FinCEN), also at the U.S. 
Department of the Treasury.
    Under Secretary Nelson, Director Gacki, thank you for being 
here. You will each be recognized for 5 minutes to give an oral 
presentation of your testimony, and without objection, your 
written statements will be made a part of the record.
    Under Secretary Nelson, you are now recognized for 5 
minutes.

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

    Mr. Nelson. Thank you so much, and good morning, Chairman 
McHenry, Ranking Member Waters, and distinguished members of 
the committee. Thank you for the opportunity to speak with you 
once again. Since I was last here, the Treasury Department's of 
Office of Terrorism and Financial Intelligence (TFI) has made 
important strides on anti-money laundering and countering the 
financing of terrorism, as well as safeguarding the United 
States and international financial systems. Today, I would like 
to discuss the threats to the U.S. financial system as well as 
the approaches that we are taking when encountering those 
threats abroad and closer to home.
    One of our key missions is to protect the financial system 
by making it harder for illicit actors to exploit domestic and 
international financial systems. We do this here by focusing on 
our own anti-money laundering/combating the financing of 
terrorism (AML/CFT) regime, and internationally by deploying 
economic measures, enforcing those measures, and engaging with 
key stakeholders. This gives us the ability to remain flexible 
to the changing national security landscape while mitigating 
unintended consequences of our authorities.
    Our response to Russia's illegal invasion of Ukraine 
exemplifies this flexible approach. Our Russian sanctions have 
two core objectives that we continue to pursue in coordination 
with the G7 and other allies: first, limiting Russia's ability 
to fund this war by taking steps to restrict its revenues from 
energy and its access to the global financial system; and 
second, restricting Russia's access to items that it needs to 
prosecute the war on the battlefield.
    We also designed a novel price cap policy to pursue what 
appear to be contradictory goals: to maintain a reliable supply 
of crude oil and petroleum products to the global market, while 
also reducing the revenues that the Russian Federation earns 
from the sale of those commodities.
    We have pursued multiple successive rounds of sanctions 
against actors who have violated the price cap, including 
shipping companies, vessel owners, and opaque traders, without 
causing significant oil market volatility. We have also 
launched a push to crack down on sanctions evasion and the 
provision of goods and services for Putin's war machine. On 
December 22nd, President Biden issued a new Executive Order 
which further targets Russian sanctions evasion, making it 
clear to foreign financial institutions that facilitating 
significant transactions relating to Russia's military 
industrial base may expose them to U.S. sanctions.
    While the events of October 7th have caused us to redouble 
our efforts on countering terrorist financing in the Middle 
East, disrupting Hamas' financing operations is not new to TFI. 
We have been doing this work for many, many years. Treasury is 
implementing a sustained global campaign against Hamas 
financing that includes our full suite of tools, including 
sanctions designations, public alerts and advisories, the 
convening of public-private partnerships, and the use of our 
regulatory authorities.
    We are also closely following the situation in Yemen and 
are increasingly concerned with the growing number of Houthi 
attacks against vessels in the Bab al-Mandeb Strait. In both of 
these contexts, while we do not risk further regional 
escalation, we work to make sure that we are mitigating the 
unintended consequences of using our authorities, including our 
sanctions authorities. The Administration strongly supports the 
delivery of humanitarian assistance to the Palestinian people, 
and we also seek to make it clear that U.S. sanctions do not 
stand in the way of these lifesaving efforts.
    Just a word on China. As Treasury Secretary Yellen has 
stated, our approach to the People's Republic of China in the 
national security context is very clear: We will safeguard our 
priority interests, along with those of our allies and 
partners, and we will protect human rights. Our aim has been to 
take specific, targeted actions where our concerns have been 
clearly communicated and it becomes necessary to defend our 
vital national interests, not to seek a competitive advantage.
    We continue to lead the world in mitigating illicit finance 
risk, as you will hear from Director Gacki, and we are very 
focused on all of the regulatory support and rulemaking 
communication around the work that we are doing to implement 
the bipartisan Anti-Money Laundering Act of 2020.
    With that, I will stop, and I just wanted to say we are 
excited to have this conversation and appreciate the 
opportunity to engage with you all. Thank you.
    [The prepared statement of Under Secretary Nelson can be 
found on page 78 of the appendix.]
    Chairman McHenry. We will now recognize Director Gacki for 
5 minutes.

   STATEMENT OF ANDREA M. GACKI, DIRECTOR, FINANCIAL CRIMES 
                  ENFORCEMENT NETWORK (FINCEN)

    Ms. Gacki. Chairman McHenry, Ranking Member Waters, and 
distinguished members of the committee, thank you for the 
opportunity to testify this morning on behalf of the Financial 
Crimes Enforcement Network, or FinCEN.
    Since joining FinCEN 5 months ago, I have been struck by 
the range of functions that the organization performs, and by 
what a staff of about 300 Federal employees can accomplish. The 
past year has seen an extraordinary amount of activity by 
FinCEN. I would like to briefly touch on some of these 
accomplishments, organized around three themes: transparency; 
our swift responses to priority threats; and accountability.
    First, on transparency, FinCEN is bringing greater 
transparency to various structures or sectors that are vehicles 
of or destinations for illicit finance. Since the bipartisan 
Anti-Money Laundering Act (AMLA), including the Corporate 
Transparency Act (CTA), was enacted, FinCEN's highest priority 
has been achieving the successful implementation of the 
beneficial ownership information reporting requirements.
    The beneficial ownership registry successfully launched on 
January 1st of this year. In the first week alone, more than 
100,000 companies successfully filed their beneficial ownership 
information, and I am pleased to report that today, so far, 
FinCEN has received more than half-a-million reports 
successfully filed. The now-ongoing collection of beneficial 
ownership information, paired with the forthcoming phased 
provision of access to the database by law enforcement and 
other authorized users, will close what has long been 
identified as a gap in the United States' anti-money laundering 
and countering the financing of terrorism (AML/CFT) regime.
    FinCEN has also taken two recent and significant regulatory 
actions to bring transparency to two distinct areas marked by 
illicit finance risk. Last week, FinCEN advanced its efforts to 
prevent bad actors from misusing anonymous all-cash purchases 
of residential real estate to launder or hide the proceeds of 
crime by proposing a rule to bring greater transparency to 
transactions in the residential real estate sector.
    FinCEN is also working to address the known risks 
associated with investment advisors, which are not subject to 
consistent or comprehensive AML/CFT obligations in the United 
States. This week, FinCEN proposed applying AML/CFT obligations 
to certain investment advisors.
    Shifting gears, I am proud of the successes that the FinCEN 
team has achieved in supporting law enforcement and national 
security agencies as the United States Government responds to 
significant and multiple threats, both international and 
domestic. Much of our work is necessarily behind the scenes due 
to the sensitive information that we safeguard and analyze, but 
I am grateful for the opportunity to call out just a few 
specific examples of FinCEN's good work.
    Perhaps no issue has been more front and center since I 
joined FinCEN than addressing the ongoing crisis in the Middle 
East, and through our focus on the financing of terror, 
identifying steps we can take to aid our allies in Israel. We 
are supporting our colleagues at the Office of Foreign Assets 
Control (OFAC) who have been implementing financial sanctions 
to degrade and disrupt Hamas' and other terrorist 
organizations' financial networks, and we are directly engaging 
with stakeholders, including financial institutions, to ensure 
they are taking steps to prevent illicit financial flows to 
these organizations, without stopping legitimate humanitarian 
support.
    FinCEN has also been working tirelessly with our law 
enforcement and foreign partners to combat our nation's opioid 
crisis. As one example, FinCEN has convened multiple public-
private exchanges focused on fentanyl. Just last week, FinCEN 
convened a fentanyl exchange in Los Angeles to share 
information about fentanyl trafficking and related money 
laundering typologies.
    Also, last week FinCEN participated in the second U.S.-
Mexico Public-Private Roundtable with Mexican authorities and 
financial institutions to advance the fight against this 
scourge. FinCEN has also continued its wide-ranging efforts to 
counter Russian illicit finance, including by issuing Russia-
related alerts and driving reporting by U.S. financial 
institutions regarding sanctions and export control evasion. We 
have poured through over 16,000 Russia-related filings to 
identify actionable reports of particular interest to partner 
agencies since the start of the invasion.
    Finally, on accountability, FinCEN's responsibilities as a 
regulator include ensuring that regulated entities are held 
accountable, and we take enforcement action where necessary, 
and this has been a banner year for FinCEN and enforcement.
    To highlight one important case, FinCEN took the 
enforcement action late last year and assessed a civil monetary 
penalty of $3.4 billion, the largest in FinCEN's and the 
Treasury Department's history, on Binance Holdings and several 
affiliates. This was a significant achievement made through the 
partnership of our Treasury partners at OFAC and at IRS-CI, but 
also with our partners at the Department of Justice and the 
Commodity Futures Trading Commission (CFTC). It was truly a 
collaborative interagency effort.
    To conclude, it has been an extremely productive year at 
FinCEN, and it quickly became clear when I arrived in September 
that the FinCEN workforce is steadfast in its commitment to 
keeping our financial systems safe, and I am proud to represent 
them before you today. I look forward to your questions.
    [The prepared statement of Director Gacki can be found on 
page 66 of the appendix.]
    Chairman McHenry. Thank you both for your testimony, and I 
will now recognize myself for 5 minutes for questions.
    Under Secretary Nelson, I am trying to understand 
Treasury's thought process with respect to beneficial 
ownership. We have three separate rules. The first is the 
reporting rule on the collection of data, the second is the 
access rule that goes into effect on Monday--if that is right, 
Director Gacki, Monday--and the third is a rule that has not 
yet been proposed, which rescinds the 2018 customer due 
diligence (CDD) requirement. So, how many companies have filed 
beneficial ownership information?
    Mr. Nelson. About half-a-million.
    Chairman McHenry. About half-a-million. And how many do we 
expect to file?
    Mr. Nelson. Thirty-two million.
    Chairman McHenry. Thirty-two million. So, we have about 
500,000 out of 32 million. Okay. And at the same time, all 32 
million are required to adhere to the CDD requirement, so they 
are already providing this information. The NFIB survey found 
that 90 percent of small businesses don't even know that this 
rule exists, so we have a massive problem, but we also have a 
massive problem about who can access this database.
    Under Secretary, you said a small pilot program of users 
will access the registry first. What agencies are part of that 
pilot?
    Mr. Nelson. Just a clarification, the small businesses 
wouldn't be subject to the customer due diligence rule.
    Chairman McHenry. They are subject to it through their 
banks. The banks are subject to it.
    Mr. Nelson. Right, yes. The financial----
    Chairman McHenry. So, just because I put the obligation on 
a colleague, to put an obligation on you, doesn't mean that you 
are not obligated.
    Mr. Nelson. Right. If they have an account at a financial 
institution, that is correct.
    Chairman McHenry. Okay. So how many parts of the pilot 
program are there to access the information?
    Mr. Nelson. We are thinking about phased access in about 
five tranches. The first phase would be those Federal partners 
that FinCEN works most closely with: FBI, HSI, DEA, and the 
like.
    Chairman McHenry. Okay.
    Mr. Nelson. IRS-CI of course.
    Chairman McHenry. And they will have full access to the 
registry?
    Mr. Nelson. I will defer to Director Gacki on that.
    Ms. Gacki. Mr. Chairman, yes, access to the extent with 
guardrails. Any user will have to engage in training and meet 
the requirements of the Corporate Transparency Act to be able 
to access that information, but through the pilot program, we 
will first focus on those high-volume users we have seen with 
Bank Secrecy Act reporting, kind of the big law enforcement 
agencies.
    Chairman McHenry. And when do you think we will have a 
proposed rule to rescind the CDD requirement?
    Ms. Gacki. That is something we are presently and actively 
working on, so at the latest----
    Chairman McHenry. Is there a goal?
    Ms. Gacki. The statute envisions the rule by, I believe, 
January 2025.
    Chairman McHenry. Right, but this current requirement, the 
reporting requirement, is obligated for that deadline as well. 
So, we are going to have people find out this year that they 
have this massive new requirement to a domestic intelligence-
gathering organization, and they will find out for the first 
time that FinCEN exists. The average small business will find 
out for the first time that FinCEN exists. Then, they will 
start asking questions about, what do you do, and then, they 
will find out that you collect all of their bank records as 
well. This is an enormously cumbersome and complicated thing.
    Director Gacki, as I have told you in private, you have a 
heavy obligation here, trying to fix a mess created by your 
predecessor and trying to dig out of that mess and preserve and 
protect American civil liberties. In doing so, we have not yet 
seen you adhere to these exchanges of letters that we have had, 
and I expect better from your agency. We need you to be better 
for American civil liberties and to make sure the people are 
protected.
    But let me get into this question. We currently have 
suspicious activity reports (SARs) under the Bank Secrecy Act 
(BSA). You process these. You had over 300,000 suspicious 
activity reports in January, a 240-percent increase from the 
number of reports we received just a decade ago, in January of 
2014. In 2017, there was a report by the Bank Policy Institute 
that suggests that about 4 percent of SARs are acted on by law 
enforcement.
    Director Gacki, do you agree with that percentage?
    Ms. Gacki. Mr. Chairman, I respectfully question that 
statistic.
    Chairman McHenry. What is the statistic then?
    Ms. Gacki. I would like to get back to you on that, but I 
think that we are doing our best to improve the feedback loop 
so we can actually draw and explain the value of suspicious 
activity reports.
    Chairman McHenry. Okay, but let me ask you this question: 
Do you collect statistics on the percentages of SARs that are 
used by law enforcement?
    Ms. Gacki. That is something that we are beginning to do. 
It is actually----
    Chairman McHenry. You have been collecting SARs for how 
many decades as an agency?
    Ms. Gacki. Several decades.
    Chairman McHenry. And yet, we don't know how law 
enforcement uses them, and at the same time, this 
Administration has just proposed a new collection for 
investment bankers of new Bank Secrecy Act requirements, yet we 
don't know what we are doing with the existing information, the 
effectiveness of it. We are saying 4 percent of SARs are used 
for law enforcement, and you are saying that is not correct, 
but you don't have data to back that up. You should have data 
to back it up. The agency should be better. And it is not just 
a question of public policy. This is about Americans' 
protection. It is about American civil liberties. It is a high 
obligation.
    With that, I yield back, and I recognize the ranking member 
for an equivalent period of time.
    Ms. Waters. Thank you very much, Mr. Chairman. Under 
Secretary Nelson, first, I would like to congratulate 
Treasury's Office of Terrorism and Financial Intelligence 
(TFI), the Financial Crimes Enforcement Network (FinCEN), and 
the Office of Foreign Assets Control (OFAC) on a very 
impressive year. Since we saw you for your last annual hearing 
in April, hundreds of individuals and entities have been 
sanctioned, including many from Russia, Iran, and China. 
Rulemakings on residential real estate, investor advisors, and 
beneficial ownership have been posted or finalized.
    Treasury has also been bold in developing new solutions to 
old problems, whether it is collaborating with allies to cap 
the price of Russian oil, or it is taking on new crypto 
criminals committing old-school crimes, including the record-
breaking Binance settlement that will garner $4.3 billion in 
penalties for the American taxpayer.
    Our Republican colleagues have misguidedly rejected the 
$229 million requested by the Biden Administration for FinCEN 
for Fiscal Year 2024, reducing that to an astonishingly low 
$166 million in their appropriations bill. TFI, which includes 
our sanctions agency, OFAC, suffers similar cuts in the 
Republican budget as compared to the President's request. How 
would reducing the resources available for your mission affect 
the ability of TFI and its staff to respond to national 
security threats, and what would it mean for Bank Secrecy Act/
Anti-Money Laundering (BSA/AML) compliance?
    Mr. Nelson. Thank you, Ranking Member Waters, for the, I 
think, accurate description of the key priorities that TFI and 
FinCEN have sought to support our overall national security 
mission over the last year, identifying how important it is to 
close those critical gaps in our AML/CFT infrastructure to 
protect our financial system. And with the three rulemakings 
you noted, we believe we have successfully started down the 
path to do that.
    In terms of resources, as you noted, I think, from our 
perspective, to the extent our budget doesn't match the 
challenges as you described, we will be less effective in the 
use of our tools. That is the range of tools from our sanctions 
authorities to the regulatory authorities that Director Gacki 
oversees in managing FinCEN. We would not be able to enforce 
the economic measures that we are engaged in, in support of our 
national security in the ways that I think you and policymakers 
would find meaningful, and I think we would also not have the 
capacity to address new national security challenges as they 
come up.
    Ms. Waters. Thank you very much. Last year, the Treasury 
Department released a long-awaited U.S. Government-wide de-
risking strategy as mandated by the Anti-Money Laundering Act 
of 2020. Having worked for years with those most heavily 
impacted by de-risking, including many Caribbean nations and 
territories that are effectively cut off from the international 
banking community, I was pleased to see the release of this 
strategy. Its importance was underscored in a 2022 hearing I 
chaired where Prime Minister Mia Amor Mottley of Barbados gave 
historic testimony about the negative effects of de-risking on 
the people and businesses in the region. Your strategy 
recommended several follow-up actions, et cetera, et cetera, et 
cetera, so I am very pleased about the response and would like 
to continue to work with Treasury to see what we can do to 
strengthen the Caribbean with involvement with the United 
States banking community.
    Mr. Nelson. We would welcome it. We welcome your 
leadership, and we have some ideas, so hopefully we can work 
with your office on that.
    Ms. Waters. Thank you, and I yield back.
    Chairman McHenry. The gentlelady yields back. I will now go 
to the gentleman from Texas, Mr. Sessions, for 5 minutes.
    Mr. Sessions. Mr. Chairman, thank you very much. Under 
Secretary Nelson, thank you for taking the time to be here. And 
Director Gacki, we are glad that you are here as well. You have 
heard some conversation this morning from Members about White 
nationalists or some circumstances maybe related to them 
attempting to undermine the financial needs of this country. 
Then, you heard from the young chairman about his ideas about 
getting into personal matters, perhaps, maybe dealing with the 
purchase of weapons and other things. Can you please talk more 
directly about the threat that you think is out there?
    Mr. Nelson. Thank you for the question. In our recently-
released National Risk Assessment on Countering the Terrorist 
Threat, we talk about both international and domestic 
terrorism. Obviously, we are working across our government with 
law enforcement partners on indicators that would express 
domestic terrorism but that are very cognizant of 
constitutionally-protected speech. Those indicators are largely 
associated with indicators of violence.
    Mr. Sessions. So, you get involved in a law enforcement 
exercise----
    Mr. Nelson. Yes.
    Mr. Sessions. ----as opposed to a financial integrity 
issue?
    Mr. Nelson. Let me step back and just describe a little bit 
about how we support law enforcement through our financial 
intelligence.
    Mr. Sessions. I really want to go high, how big is this, 
because I have heard both of you give testimony today and 
nobody asked for help. We got a happy face from you about how 
effective and efficient you are, and about how your employees 
are all happy and doing their jobs, and yet, now we are 
hearing, well, maybe this is an issue. Is it an issue or not?
    Mr. Nelson. I don't think it is an issue in the----
    Mr. Sessions. Okay. Thank you very much. Director, we are 
very concerned about the numbers that we see here: according to 
data from the FTC, in 2023, $2.5 million of fraud reports 
totaling $10 billion, and in 2019, it just went up to $2.4 
billion more. What is causing this increase over this period of 
time from 2019 to 2023?
    Ms. Gacki. Representative Sessions, thank you for that 
question. We are digging into the data to determine the core 
causes of fraud but have, like you, seen fraud be a leading 
indicator. I think that this was reflected in the recent 
national risk assessments put out by the Treasury Department to 
show the climb in fraud. It is something we are still digging 
into. We have a Research and Analysis Division----
    Mr. Sessions. Has anything jumped out at you in your day-
to-day operations of seeing trends, seeing things to where you 
were able to pinpoint something, or did this simply come back 
as an aggregate and you said, wow, look at that large amount?
    Ms. Gacki. I think I owe you a better answer. I don't have 
one single indicator at this point to jump out at this, but it 
is----
    Mr. Sessions. I am interested in that because, once again, 
I have heard both of you, thankfully, coming and reporting the 
good work that you are doing, and the commitment that not only 
employees have, but coming back to report successes to us. And 
yet, I would like to see where you are able to drill down to 
see these huge losses that occurred, where they are, and what 
you are doing about that. When do you think that would be 
available to you for your review, and then, perhaps, to 
approach the committee on a bipartisan basis to make sure we 
saw the same things you did? When do you think that would be?
    Ms. Gacki. Sir, if it is okay, we will get back to you, but 
it is something I will definitely get my team working on right 
away.
    Mr. Sessions. Okay. When do you think you are going to call 
your 15th favorite Congressman or write me and say, by the way, 
we were in this committee hearing on Valentine's Day, and here 
is the answer? When do you think you are going to get back to 
me, because, ``10 months,'' is not a good answer. Yes, thank 
you, and maybe the gentlewoman agrees with me about when.
    Ms. Gacki. We are going to endeavor to get back to you in a 
month.
    Mr. Sessions. One month. Okay. Thank you very much.
    I want to thank both of you. This committee, on a 
bipartisan basis, is concerned about real threats, not bogus 
ideas and things we throw around. I appreciate you both very 
much. Mr. Chairman, I yield back.
    Chairman McHenry. The gentleman from California, Mr. 
Sherman, is recognized for 5 minutes.
    Mr. Sherman. I yield 31 seconds to the gentleman from 
Massachusetts.
    Mr. Lynch. Thank you. Ms. Gacki and Mr. Nelson, thank you 
so much. I really do appreciate FinCEN and all the work you do. 
I have one request and then one question. I need to have a 
briefing on fentanyl in the Boston area, similar to the one 
that you provided for the West Coast folks, and we can either 
do that on Zoom or we could work that out, but a briefing on 
fentanyl. And also, we are seeing a lot of crystal meth in our 
area, which hasn't been an issue before. My question goes to 
the chairman's remarks around the cash transaction reports 
(CTRs), and the collection of suspicious transaction reports, 
which the banks complain about all the time. Could the use of 
artificial intelligence help us to re-engineer that process so 
that we don't have to be as burdensome as we have been in the 
past?
    Mr. Sherman. I will interrupt the gentleman from 
Massachusetts----
    Mr. Lynch. Okay. Go ahead.
    Mr. Sherman. ----and ask that that question be responded to 
for the record.
    Mr. Lynch. Excellent. Thank you. I appreciate your 
courtesy.
    Mr. Sherman. Having spent 28 years on the House Foreign 
Affairs Committee, and 28 years on this committee, I want to 
commend our witnesses and the agencies they represent, since 
our ability to impose sanctions and economic penalties is such 
a critical, I think the most critical, element of American 
national power. It is certainly more usable than our military 
power. And that is why I have opposed cryptocurrencies, whose 
promoters have made it plain that they regard the United States 
as an illegitimate player on the world stage, they regard our 
sanctions policies and efforts to affect world policy as 
illegitimate, and that they are promoting crypto, in part to 
defang the United States Government.
    I would join with the chairman on a concern for civil 
liberties because we may be seeing Trump 2.0 in the White 
House. It is not impossible. Revenge Trump will certainly go 
after his enemies, and it is important that we build, whether 
it be for 2024 or for the future of this century, civil 
liberties laws that would stand up to someone who is trying to 
bend them and break them, and the most important of these may 
be our civil service laws that protect government employees 
from being pushed to bend and break our statutes.
    As the chief Democrat on our Capital Markets Subcommittee, 
I have to comment on what a government shutdown would mean. It 
would shut down the most significant part of our capital market 
system because you couldn't have IPOs or other public offerings 
that bring money from the capital markets into the operating 
economy, and, of course, our $100-trillion capital market 
system would be basically without a cop on the beat.
    Let me quickly ask our witnesses here. It is my 
understanding that if there was a government shutdown, the 
majority of your staff would be furloughed. Is that correct? 
Can you just answer yes or no?
    Mr. Nelson. Close to the majority, yes.
    Mr. Sherman. Close to the majority?
    Ms. Gacki. Yes, sir.
    Mr. Sherman. Gee, what could go wrong? That is a rhetorical 
question. An awful lot of attention is paid to banks because 
long before your agencies existed, we had the prudential 
regulators. They are huge agencies. They are there to enforce 
our Anti-Money Laundering/Bank Secrecy Act, so we would expect 
criminals to go where they are less likely to be detected, so 
you have the nonbank sector. What is being done as to the 
registered money services businesses? They are subject to the 
same laws, but laws don't mean anything if there is no 
enforcement. What is being done to ensure that there is 
sufficient supervision of nonbanks in this area?
    Ms. Gacki. Representative Sherman, thank you for that 
question. A significant amount of our small compliance team at 
FinCEN actually works with our delegated examiners to ensure 
that examinations are focused and that we participate in those 
examinations where we can. We absolutely agree with the 
critical need to make sure that money services businesses are 
regulated and examined where we see risk.
    Mr. Sherman. The prudential regulators are not there. You 
are the only one there. You need to be there. And I will 
finally point out that there are only thousands of transactions 
every day in Bitcoin, tens of thousands. There are billions of 
transactions in dollars. If Bitcoin ever becomes a currency----
    Chairman McHenry. The gentleman's time has expired.
    Mr. Sherman. ----you are going to have a tough time. I 
yield back.
    Chairman McHenry. We will now recognize the gentleman from 
Oklahoma, Mr. Lucas, for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman. During the past year, 
Iranian oil production reached a 5-year high. In fact, the 
International Energy Agency (IEA) estimates that Iran produced 
roughly 445,000 barrels of oil a day, more in 2023 than it did 
in 2022. It should be concerning that Iran has been able to 
boost output in the face of U.S. sanctions, generating billions 
of dollars that can be directed towards militia groups across 
the Middle East.
    Under Secretary Nelson, could you elaborate on how Treasury 
tracks where Iranian money is being held around the world?
    Mr. Nelson. I'm happy to do that, and thank you for that 
question, Congressman.
    Mr. Lucas. And along with that, which countries hold the 
bulk of it?
    Mr. Nelson. Yes. Just one really brief step back, which is 
that, as I think you know, the State Department has the primary 
designation authority as it relates to services of the sale of 
Iranian petroleum and petrochemicals, but what we have seen at 
Treasury using our own authorities, and I think to the point of 
your question, is a lot of those funds are associated with 
terrorist activities or are going to terrorist operators in the 
region.
    The thing that we have focused on is identifying those 
pieces of the international financial system that Iran relies 
on in order to facilitate the transfer of those funds. We have 
seen, I think, as you have noted in the uptick of Iranian oil 
sales, that many of the customers are in China, so we have 
focused and, as recently as this past week, identified and 
designated a Chinese petroleum buyer in the context of funds 
that we perceived would then move onward to one of the malign 
militia groups operating in the region.
    Mr. Lucas. Which countries do we believe hold the bulk of 
the Iranian monies as these transactions flow through the 
international financial service system?
    Mr. Nelson. I would say the bulk of it, obviously, is in 
Iran, but where we see it going is countries like Lebanon, 
which is the location of Lebanese Hezbollah. Obviously, there 
are a number of militia groups, including Kata'ib Hezbollah 
operating in Iraq, and, of course, Hamas operating out of Gaza.
    Mr. Lucas. I would like to focus on the Iranian money that 
is in Oman bank accounts. As you know, in July of last year, 
the U.S. allowed $10 billion in transfers from Iranian accounts 
in Iraq to Oman. From my understanding, any transaction using 
these funds must be approved by the United States Treasury.
    Under Secretary, could you explain the need to transfer 
Iranian funds from restricted accounts in Iraq to restricted 
accounts in Oman? Do we have certain agreements in place with 
Oman to give us enhanced oversight of such transactions?
    Mr. Nelson. No agreements with Iran. None of the money is 
going to Iran, and just to correct the record, it is about $500 
million that was transferred from the restricted account in 
Iraq, at the Trade Bank of Iraq, to Omani financial 
institutions. I would defer, of course, to the State Department 
on the policy justifications for the transfer, but as an 
overall matter, it was designed in the reflection that Iran has 
used the buildup of these funds within Iraq to apply political 
pressure on Iraq, and respecting that, underlined the desire to 
move the money into Oman, the $500 million. And there have 
been, as of this date, only two transactions out of that 
account, both of which we have reviewed.
    Mr. Lucas. Turning our attention to China, China is able to 
extract significant discounts from countries with heavy Western 
sanctions. Accordingly, China purchases the vast majority of 
both Russian and Iranian oil exports.
    Under Secretary, do you know how many Chinese financial 
institutions the United States has sanctioned for facilitating 
this trade with Iran and Russia?
    Mr. Nelson. I don't know the number off the top of my head. 
We sanctioned a number of Chinese-based institutions in March 
of last year in the context of a large shadow banking network 
that was facilitating the flow of billions of dollars of 
Iranian oil sales, and as I said, just last week, we sanctioned 
a front company in China that was facilitating these sales as 
well.
    Mr. Lucas. If you could provide follow-up information on 
that for the record, I would be very appreciative.
    And with that, I yield back, Mr. Chairman.
    Chairman McHenry. The gentleman yields back. We will now 
recognize the gentleman from New York, Mr. Meeks, for 5 
minutes.
    Mr. Meeks. Thank you, Mr. Chairman. Under Secretary Nelson, 
the Biden Administration announced the historic Outbound 
Investment Protection Security Program in 2023. For the first 
time, we will have mechanisms in place to ensure American 
capital and know-how do not fund the up-and-coming military 
companies of our adversaries. Can you explain why the 
Administration settled on the approach laid out in its August 
2023 Executive Order rather than an OFAC-only sanctions 
approach?
    Mr. Nelson. I am happy to take that. I will just note that 
Outbound Investment and the implementation of both the 
Executive Order and the follow-on regulations are a separate 
office, not in TFI. But the theory of the case, which I think 
you would appreciate, is that sanctions would not necessarily 
get at the core challenge that we see in terms of investment 
into sensitive technologies that China seeks to develop and 
would create, I think, from the State Department's view, the 
potential to diminish the overall bilateral relationship we 
have with China with very little additional uptake, versus the 
Executive Order approach that the Administration has taken.
    Mr. Meeks. Thank you for that, and, again, Under Secretary, 
the Biden Administration's approach to sanctions on Russia, I 
believe has been unprecedented, has been impactful, and has 
meaningfully limited Russia's ability to conduct its illegal 
and unjustifiable war of aggression against Ukraine. Sanctions 
on semiconductors have forced Russia to use dumb missiles 
rather than precision-guided ones. Oil bans have limited 
Putin's ability to fund his war, and the Russian ruble has 
collapsed in value, hindering the Kremlin's ability to pay for 
necessary imports, but I think more can be done. Can you speak 
to the Administration's recent effort to sanction vessels 
transporting Russian oil and how that has impacted Putin's war 
funding efforts?
    Mr. Nelson. Thank you for that question. We do believe that 
the price cap is succeeding in diminishing oil revenue 
generated by Russia, while keeping energy markets stable, and 
we saw at the deployment of the policy a little over a year 
ago, the success in driving a discount for Russia. And we have 
seen through the enforcement actions that we have taken over 
the last number of months that that is continuing to drive a 
discount that Russia is able to receive from its oil sales. We 
have seen over 2023, a 30-percent decrease when compared to 
2022, so we do think that the price cap policy continues to be 
very successful. And as we are continuing to take enforcement 
and compliance actions, we will also look to ensure, as we talk 
to partners around the world, that they understand the reliance 
on the ghost fleet and these other vessels which are oftentimes 
environmentally unsound, aren't well insured, and the like.
    The decision not to use G7 services comes with some serious 
downside consequences. To the extent Russia is going to invest 
in creating a separate fleet or a new fleet, they have to 
provide significant investment, and that will decrease their 
capacity, of course, to build tanks and do other things that 
will be meaningful to their prosecution of the war on the 
battlefield in Ukraine.
    Mr. Meeks. Thank you. Let me see if I can squeeze in a 
question to Director Gacki. Yesterday, FinCEN released an 
analysis of money laundering risk in the investment advisor 
sector, which found more than 80 American investment advisors 
manage funds in which Russian oligarchs have invested or 
otherwise had significant ties. The report notes that the scale 
of these investments is significant and may include billions of 
dollars. How do we guarantee that Treasury has all of the tools 
needed to ensure that investment advisors are not being seen as 
an entry point to the U.S. market for illicit proceeds or 
foreign cooperation?
    Ms. Gacki. Congressman Meeks, thank you for that question. 
We will work through the comments we have for that proposed 
rule to ensure that we are appropriately crafting that, and I 
just appreciate this committee's support, now, previously, and 
ongoing, to ensure that FinCEN has the resources it needs to 
ensure that we can keep up with this grave threat.
    Mr. Meeks. Thank you. My time has expired.
    Mr. Luetkemeyer. [presiding]. Thank you. The gentleman's 
time has expired. With that, the Chair recognizes himself for 5 
minutes for questions. Thank you.
    Director Gacki, as a former member myself of the House 
Small Business Committee, the ranking member, in fact, I am 
painfully aware of the numerous reporting requirements that 
these small businesses face, and now, we have added another 
requirement on top of all the other ones. The burden is getting 
very heavy, and people wonder why our small businesses are 
struggling sometimes and why they are going out of business and 
why they are consolidating. It is just one straw after another 
until finally one breaks the camel's back, and we are getting 
close on a lot of stuff, and this is another one of these 
rules.
    And it begs the question--I think, Under Secretary Nelson, 
you made a comment that there are 32 million small businesses 
in the country, and apparently, you are going to have to have a 
data report on every single one of them. Is that correct?
    [Nonverbal response.]
    Mr. Luetkemeyer. Thirty-two million businesses in your 
database. The chairman made a comment while ago about how you 
are really only required to ask 4 questions, and yet, you have 
51 different data points. Why? Why did you expand your ability 
to ask more questions than what you are supposed to ask?
    Ms. Gacki. Thank you, Representative Luetkemeyer. I want to 
stress that the data points are merely fields that go after the 
core requests in a beneficial ownership report. And just to 
step back for a second, I have appreciated your comments here 
and in conversations I have had with you about ensuring that 
this obligation is workable for small business. And we are 
taking pains to ensure that our filing system is simple, 
secure, easy to use, and something that can be done without the 
need for professional help, and we have been told that it is 
taking most entities with simple structures no more than 20 
minutes to fill out this form.
    Mr. Luetkemeyer. There are 20 minutes here, 20 minutes 
there. By the end of the day, your whole day is busy filling 
out reports. You take 20 minutes. This agency takes 20 minutes. 
That local entity takes 20 minutes. Enough is enough. You 
already have this information. Are you getting any information 
from this that you couldn't get from a warrant?
    Ms. Gacki. Sir, I think at this point, we are populating 
the database, so I do think that this provides a greater degree 
and a greater way of getting transparency and compelling those 
shell companies that are acting as fronts for the movement of 
illicit money----
    Mr. Luetkemeyer. I certainly agree that we have a problem, 
and we need to be going after them, but what you are doing is 
enlisting all of the financial institutions. You are deputizing 
them basically to become law enforcement officers, which is 
wrong, and if they don't do what you say, what you ask them to 
do, then they get fined. That is not what their intent is. They 
are not law enforcement. They are financial folks. Now, you 
said you got a big settlement a while ago from Binance, is that 
right, $3 billion-plus?
    Ms. Gacki. Yes.
    Mr. Luetkemeyer. Did anybody go to jail over that?
    Ms. Gacki. I will defer to the Department of Justice for 
that, but I believe the founder of Binance--that process is 
ongoing.
    Mr. Luetkemeyer. Okay. So, somebody may go to jail yet. 
Very good. One of my concerns, and the chairman had the same 
concern a while ago, is with regards to the access to this 
data, and a while ago, you gave a whole list of different 
agencies. And I think the eight different Federal agencies have 
already shown they are not very good guardians of people's data 
to begin with, i.e., the IRS, and the FDIC, among others. This 
is almost ridiculous. Whenever you do this, for instance, the 
Small Business Administration, that is documented with the 
Inspector General report of $200 billion worth of fraud. Are 
you working with them to try and find ways to see if there is a 
way that you can be helpful with them? Are you correlating data 
with the Small Business Administration and all the fraud that 
they found?
    Ms. Gacki. We have worked very closely with the Small 
Business Administration in building the rules, but there are 
probably greater areas for our partnership when it comes to 
areas of fraud.
    Mr. Luetkemeyer. Okay. Under Secretary Nelson, you talked a 
while ago about how one of your duties is protecting human 
rights. Is that correct?
    Mr. Nelson. Yes, absolutely.
    Mr. Luetkemeyer. What are you doing with China?
    Mr. Nelson. We have designated a number of individuals for 
human rights violations in China, as you know, particularly 
associated with the treatment of the Uyghurs----
    Mr. Luetkemeyer. Along that line, can I ask you a follow-up 
question?
    Mr. Nelson. Of course.
    Mr. Luetkemeyer. We just had a Super Bowl.
    Mr. Nelson. We did.
    Mr. Luetkemeyer. Temu had a big ad during the Super bowl. 
They use slave labor to make their garments, to make their 
products. They don't deny that. They say, no, we don't, but 
they don't make any effort to hide the fact that they don't 
really care one way or the other. Are they on your list, or are 
they getting ready to be on your list of sanctioned entities?
    Mr. Nelson. Under our Global Magnitsky human rights 
authorities, we take referrals from civil society, and 
obviously, there are colleagues here----
    Mr. Luetkemeyer. There are a couple of articles that have 
appeared in the last week or so about them, and now they have a 
big ad in the Super Bowl. They are out there, so I don't know 
why you can't do something about this.
    Mr. Nelson. Again, I appreciate the concern, and certainly, 
we will take on board that concern.
    Mr. Luetkemeyer. Okay.
    Mr. Nelson. I can't give you a potential----
    Mr. Luetkemeyer. Thank you very much. My time has expired. 
With that, we go to the gentleman from Illinois, Mr. Foster, 
for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman, and Ranking Member 
Waters, and thank you also to our witnesses.
    Director Gacki, last month, FinCEN published a financial 
trend analysis of Bank Secrecy Act (BSA) data which found that 
approximately 1.6 million BSA reports, 42 percent of reports 
received, were related to identity fraud. These reports alone 
were equivalent to $212 billion in suspicious activity. The 
analysis described ways that the fraud can occur at every step 
in the identity process, from initial onboarding at a BSA-
compliant firm to the day-to-day operation of an account, and 
while our monitoring of this type of fraud has evolved over the 
years, so have the scammers. My first question is, this report 
was a snapshot of the identity fraud landscape as of 2021, so 
would you estimate that the problem of identity fraud has 
gotten better or worse since then?
    Ms. Gacki. Thank you, Representative Foster. We are 
beginning now the next stage of our identity project, following 
up on the financial trend analysis regarding identity, to look 
at more recent reporting. We have no indication that things 
have gotten better in terms of fraud when it comes to identity.
    Mr. Foster. Thank you. New technologies, like artificial 
intelligence and digital assets, give scammers many new tools, 
and, frankly, I worry that our regulators will be quickly 
outgunned by things like open source generative AI models. 
Deepfakes replicating individuals' voices or images are 
becoming more convincing. Many of us took notice but were not 
entirely shocked by the recent report of a $25-million 
fraudulent transfer that took place by an employee who had 
attended a Zoom meeting entirely populated by deepfake 
impersonations of his boss and co-workers.
    In your report, FinCEN noted that public-private 
partnerships and applications of emerging technology present 
many opportunities to combat identity fraud. I have spoken to 
you about this in the past, particularly about a Digital ID, 
which is one potential solution that is listed in your report. 
Given these developments, could you sort of quickly summarize 
what the benefits might be of a robust Digital ID system that 
would allow citizens who wish to use it with a tool to prove 
they are who they say they are in online transactions, and a 
tool that would be securely backed up with biometric 
information like passports or REAL ID, and how valuable could 
that be in the fight against financial fraud?
    Ms. Gacki. Thank you, Mr. Foster, and I think, because we 
have worked closely with your office, my team does, that we are 
committed to working on a workable solution that can set up 
systems and guardrails related to a Digital ID. We do think it 
could pay dividends, especially as the financial system 
modernizes and technology is embodied, and we are committed to 
working with you on this.
    Mr. Foster. Yes, and it is not just the SARs where this 
will be an issue. My colleague mentioned SBA fraud, and I am 
sure some significant fraction of that was effectively identity 
fraud as well, so this will have huge benefits for the Federal 
taxpayer.
    Now, as you also know, many countries around the world are 
moving rapidly toward privacy-enhancing Digital IDs, so has 
FinCEN been engaging with other governments in Europe, 
Australia, Korea, or Japan, the free democracies of the world, 
for example, who have already rolled out or are in the process 
of rolling out a secure Digital ID for their residents?
    Ms. Gacki. Sir, I think in international fora, identity is 
a core issue that we face when it comes to suspicious activity 
and fraud. So, it is something that we are engaging in not only 
domestically, but also internationally through our Egmont 
partnership with financial intelligence units (FIUs) around the 
world.
    Mr. Foster. Yes. What are the biggest obstacles that you 
have identified that are maybe slowing down our adoption of the 
systems that are starting to prove very successful around the 
world?
    Ms. Gacki. Sir, that is a great question. I think I would 
need to get back to you on that as to the biggest obstacle.
    Mr. Foster. That is fine. If you would respond for the 
record, that would be great.
    Now, AI presents, as you know, many new risks, as I 
mentioned, by assisting bad actors in fooling businesses and 
consumers about perpetrating fraud, but it also has the 
potential to improve financial crimes compliance, finding 
patterns and trends in data that human analysis alone may not 
be able to spot. It can also lower costs by assisting financial 
institutions to have more reliable and efficient Know Your 
Customer (KYC) verification. Can you describe what you are 
planning to do with regards to using AI to detect fraud in 
FinCEN?
    Ms. Gacki. Thank you, sir. Through our Bank Secrecy Act 
advisory group and other provisions we are implementing under 
the Anti-Money Laundering Act, we are actually engaged in an 
active dialogue with our regulated entities to see how 
artificial intelligence could be a benefit to some of the more-
simple reporting structures that need to be made pursuant to 
the Bank Secrecy Act, and to see how we can leverage this in 
technology to really get smarter when it comes to reporting----
    Mr. Foster. Thank you. My time has expired. I yield back.
    Mr. Luetkemeyer. The gentleman's time has expired. Mr. Hill 
is now recognized for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman, and welcome to the 
witnesses. We are proud to have both of you here to provide us 
information. We're always pleased to have Treasury here.
    Mr. Under Secretary, I want to start with the beneficial 
ownership provisions that you are attempting to implement now, 
that Congress passed in the last Congress. That was a bill 
that, as you may recall, I voted against in committee, and I 
voted against it on the House Floor because I thought it was 
not the right way to go about collecting the information. I 
urged Secretary Mnuchin to take a different course, and he 
didn't, so we have what we have. How many small businesses, do 
you estimate, are going to be required to comply with this 
rule?
    Mr. Nelson. I think our estimation is 32 million existing 
businesses, and every year, there would be about 5 million new 
businesses.
    Mr. Hill. Right. By coincidence, at noon today, I have a 
Zoom meeting with CPAs in Arkansas, who contacted me through 
the Speaker of the House in the State of Arkansas, who were 
stunned to learn about this new requirement, and these are our 
tax preparers. These are our front-line accounting and tax 
professionals. So, what are you doing to ensure that all small 
business owners are educated about these requirements?
    Mr. Nelson. We are doing a number of things. We are using 
all of the available channels, social media, and we have 
created a number of guides for small businesses. I have been 
engaging with all of the key associations, including the CPA 
associations, and I am happy to engage with that group in 
Arkansas. I have been working, obviously, with chambers of 
commerce, and we have a big team at FinCEN who are doing the 
types of sort of educational materials, both in the format of 
videos but also in the context of documents----
    Mr. Hill. Let me----
    Mr. Nelson. ----and websites and the like. But we recognize 
that a number of these small businesses have never heard of 
FinCEN, so there is a big educational campaign----
    Mr. Hill. Yes. This is why I think we should have used the 
LLC passthrough tax form to collect this information, since 
this information is already on every K-1 issued by the Internal 
Revenue Service, and it was turned down by the Treasury's own 
management to use their own bureau, saying that it would be an 
exception to share that information with FinCEN when Treasury 
and the IRS already shares this information with 35 other 
exceptions in the statute, so I want to say this was 
absolutely, I think, how we should do it. Are you putting a 
notice in 1060 filings, for example, ``Hey, taxpayer, do you 
know you need to file this form with FinCEN,'' and are you 
asking the Secretaries of State, at their expense, to send out 
that notification and link to FinCEN?
    Mr. Nelson. We are engaging Secretaries of State on exactly 
that question, obviously voluntarily, but I have been in direct 
contact with all of the largest Secretaries of State.
    Mr. Hill. Good. Thank you for that. Let me change subjects 
to another subject that's very, very important to this country, 
and to the Administration, with great leadership from the 
Treasury, and that is our efforts in Congress and the House 
Foreign Affairs Committee and the Senate Foreign Relations 
Committee to pass the REPO Act, which would authorize the 
President, under IEPA, to seize and take title to Russian 
Federation assets in our country, but the bigger issue is to 
compel and encourage and nurture all of our partner and allied 
countries to do the same. Does the Administration support the 
REPO Act as marked up in the House Foreign Affairs Committee?
    Mr. Nelson. We support it in principle. I think the thing 
that we feel strongly about is the capacity to have 
flexibility, as we approach our partners and from a policy 
perspective, the need to move in concert with partners that are 
housing these----
    Mr. Hill. We understand that the bulk of liquid assets of 
the Russian Central Bank are in Brussels, approximately $300 
billion in round numbers, but here in the United States, I 
think there has been a lack of clarity, and you see a lot of 
different open source discussions about that. Is it $30 
billion? Is it closer to $5 to $8 billion? Can you tell us how 
much Russian Federation sovereign money is in the United 
States, that you have eyes on?
    Mr. Nelson. I can't provide you a precise figure at this 
time, but I can, as you noted, refer to the public reporting. 
That is a total amount at somewhere around $5 billion.
    Mr. Hill. So, $5 billion? Thank you, and that is why it 
demonstrates how it is important for our European partners and 
our Asian partners to pass this legislation, and as you know, I 
support majority-controlled Russian Federation state-owned 
enterprise assets being on the list as well. It doesn't mean 
that countries have to do it. Do you like the idea that Russian 
Federation-owned shares in Gazprom in a foreign country should 
also be on the list?
    Mr. Nelson. I think that is a question that is currently 
being discussed in the interagency, so I will have to get back 
to you on that one.
    Mr. Hill. Thank you. I look forward to continuing that 
discussion.
    I yield back, Mr. Chairman.
    Mr. Luetkemeyer. The gentleman's time has expired. The 
gentlelady from Ohio, Mrs. Beatty, is recognized for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman, and thank you, 
Ranking Member Waters. Director Gacki, I would like to applaud 
you and your agency for making the significant and necessary 
changes to the final Corporate Transparency Act access rule 
that your agency issued, I think it was in December. As I 
expressed to FinCEN during the rulemaking process, I was very 
concerned that financial institutions' proposed use of the 
beneficial ownership information was so narrow, narrower than 
we had drafted or intended in the law, and that it would 
undercut the utility of the access. I was also concerned that 
FinCEN's draft rule seemed to hinder efficient State, local, 
and tribal law enforcement's access to the database in ways 
that were contrary to the statute.
    With all that said, the final rule, which is important, 
fixes both of these issues. So, I want to thank you and your 
staff, not only for your hard work on completing the rules, but 
for your responsiveness. So often, people come here and we say 
to them, we wrote, we asked you this. So this is a perfect 
scenario for me, when no matter what side of the aisle you sit 
on, I can say to you, I don't like this, this is harmful to my 
constituents, to America, to corporate America, or whomever. 
You listened, you took it into consideration, and I think that 
is noteworthy for the record. I know those concerns came from 
Congress. I know you heard it from the industry. I know you 
have heard it from law enforcement and transparency advocates 
alike.
    I would now like to shift to some privacy concerns we have 
heard in regard to the Beneficial Ownership Secure System 
(BOSS) database. Can you explain for us what security protocols 
are in place to ensure that personally-identifiable information 
stored in the database will not get into the wrong hands, or 
what will be in a secure system?
    Ms. Gacki. Thank you, Congresswoman, and thank you for the 
recognition on the access rule. On the security of the 
database, I want to assure you that the database storing 
beneficial ownership information, which is incredibly important 
for us to keep secure, has been established with the highest 
level of security for a non-classified system set to Federal 
standards, the Federal Information Security Modernization Act 
(FISMA) standards.
    And not only is the database held to a high standard, but 
we will have protections in place for anyone who is authorized 
to access that information. We will do it through agreements 
that we will enter into with different agencies or financial 
institutions or their regulators to ensure that they are also 
keeping this secure, accessing this information only for 
purposes authorized by the Corporate Transparency Act, not for 
other purposes, and that we have the ability to audit that 
access.
    Mrs. Beatty. Thank you. Now, let me go to this whole issue 
of de-risking. I would like to turn to the ongoing debanking of 
many, whether it is small businesses, their employees, 
freelance workers, et cetera. Banks and credit unions routinely 
point to FinCEN guidance and suspicious activity report filings 
as justification for closing accounts, cutting off access to 
reliable banking services, despite Federal laws providing no 
authority for account cancellations under these conditions. So, 
I was glad to see last year that Treasury issued a report 
outlining its de-risking strategies.
    Under Secretary Nelson, can you describe the steps that 
Treasury has taken to implement the strategy to minimize the 
unintentional de-risking of customers engaging in lawful 
activities?
    Mr. Nelson. Thank you for the question. One of my 
priorities over the next year is to lead the implementation of 
that strategy because I think it is so important for the 
reasons you identified. I will be brief. I think we found that 
the main thing that we heard and was validated is that 
profitability drives a lot of these decisions, but there are 
things that we can do on the government side, like regulatory 
clarity and working with the Federal banking agencies, which we 
are doing, and working with the examiners, examiners' training, 
the examiner manual, to ensure that there is regulatory clarity 
across our entire system so that the expectations of financial 
institutions are clear to avoid exactly the really negative de-
risking effects that we----
    Mrs. Beatty. Thank you, and my time is up.
    Mr. Luetkemeyer. The gentlelady's time has expired. With 
that, we will go to the gentleman from Michigan, Mr. Huizenga, 
for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate the 
witnesses being here. I am going to jump right in. I have a 
number of issues here.
    Last December, our Oversight and Investigations 
Subcommittee, which I Chair, held a hearing in order to better 
understand how the Iranian regime accesses money around the 
world due to relaxed sanctions enforcement and waivers, both 
here in the U.S. and abroad.
    Under Secretary Nelson, Iran is the leading state sponsor 
of terrorism around the globe. That is acknowledged virtually 
around the globe.
    Mr. Nelson. Yes.
    Mr. Huizenga. They continue to back groups that target 
Americans and our allies. We know they support Hamas, who last 
October committed a brutal attack on the State of Israel. In a 
few weeks, on March 12th, the Biden Administration will be 
faced with a decision to waive sanctions on Iran and allow 
billions of dollars' worth of Iranian assets held in Iraq to be 
transferred to other jurisdictions. They have done this 
previously. It is what is currently happening. I know that this 
decision is left up to the State Department, but given your 
experience and, frankly, your title, do you believe that the 
Biden Administration should continue to allow Iran access to 
these funds, whether it is directly or indirectly?
    Mr. Nelson. Just to be very clear, Iran is not getting 
access to the funds. These are in restricted accounts.
    Mr. Huizenga. They are in restricted accounts. We know 
that. However, they are there and they are moved for a reason, 
and it is a handshake agreement with the Qataris. It is a 
handshake agreement with the Omanis. And we know, based on 
testimony that we had in this committee previously, that there 
were at least two instances where there were, ``problems with 
transfers out of Oman.'' So, details of that have to be 
discussed in a SCIF. I am not sure why, ``yes or no'', was a 
classified answer from the State Department previously. But 
based on your title, and let me make sure I get it right, Under 
Secretary for Terrorism and Financial Intelligence----
    Mr. Nelson. That is it.
    Mr. Huizenga. ----for the Department of the Treasury. 
Congratulations. Awesome. Well-deserved. Has the State 
Department consulted with Treasury previously or now to extend 
those waivers? Have they consulted with you?
    Mr. Nelson. They do consult with the Treasury Department, 
and those waivers have existed across many Administrations.
    Mr. Huizenga. On including this specific waiver, this 
upcoming potential waiver?
    Mr. Nelson. I don't believe the upcoming waiver has been 
teed up for consultation yet.
    Mr. Huizenga. So, they have not done that for March. That 
window is closing. Okay.
    Switching topics here, Director Gacki, I want to follow up 
on sort of Chairman Luetkemeyer's line of questioning. I was 
here at the beginning of my congressional career during 
Operation Choke Point, and, frankly, it was wrong then, and it 
is wrong now, whatever it is called. It doesn't matter what the 
name is. It is the action of that. I am very concerned about 
FinCEN providing financial institutions with, ``suggested 
search terms and merchant category codes,'' that would be used 
to identify transactions. This was something that Mrs. Wagner 
did in our last hearing. I shop at Cabela's. I buy ammo. Am I 
on a list somehow? That is what a lot of people, including me, 
were asking when we heard this. Your agency was created to 
protect Americans and our national security, not to spy on 
them.
    And as you know, our committee, along with Judiciary 
Committee Chairman, Jim Jordan, sent you a letter in January 
which you responded to last week. We have asked for an in-
person staff briefing. We are not asking you to move the world 
here. This is an in-person staff briefing. Can you provide an 
update to me on when we can expect that briefing to be 
scheduled?
    Ms. Gacki. Representative Huizenga, we will definitely get 
with your staff, and we will put that briefing on the books for 
you.
    Mr. Huizenga. Time frame?
    Ms. Gacki. In the coming weeks.
    Mr. Huizenga. Okay. And, Mr. Chairman, I would like to 
submit for the record a letter from the Mercatus Center: 
``Financial Privacy Limits: Developments and Ideas for 
Reform.''
    Mr. Luetkemeyer. Without objection, it is so ordered.
    Mr. Huizenga. Thank you. Director Gacki, I want to briefly 
discuss the Customer Identification Program (CIP) and your 
interpretation of it. I believe this issue came up during 
former Director Das' last testimony before the committee. Do 
you believe it is a good idea to collect consumers' full nine-
digit Social Security number in order to comply with CIP's 
rules?
    Ms. Gacki. Thank you, sir. That is something we are 
studying. We understand that new financial technology firms 
usually collect a subset of that information, and we are taking 
this in and evaluating the best approach as we look at the 
Customer Identification Program.
    Mr. Huizenga. Okay. So, it sounds like you are leaning 
towards that. We know that there are State-chartered banks that 
are working with fintech companies and not banks at the Federal 
level, right?
    Ms. Gacki. Right. There is a divergence of approaches that 
we want to understand and get right.
    Mr. Huizenga. Do you believe it should be done through a 
formal rulemaking process, not regulation by enforcement, or do 
we just need to move ahead with this?
    Ms. Gacki. I think it is appropriate for formal regulation.
    Mr. Huizenga. I would think so, too, and do you not believe 
that this opens consumer institutions----
    Mr. Luetkemeyer. The gentleman's time has expired.
    Mr. Huizenga. ----collecting data to identity theft? That 
is a concern, and I will have you answer that in writing.
    Thank you, Mr. Chairman. I yield back.
    Mr. Luetkemeyer. The gentleman's time has expired. The 
gentleman from Texas, Mr. Gonzalez, is recognized for 5 
minutes.
    Mr. Gonzalez. Thank you. And I thank the witnesses for 
being here.
    Director Gacki, in 2023, Mexico received a record $63 
billion in remittances, a 7.6-percent increase from 2022, of 
which more than 95 percent came from the United States. With a 
recent surge in remittances, I am concerned that this has 
inadvertently made it easier for Mexican drug cartels to 
launder drug money. Cartels use civilians as conduits for 
remittances and then hand the money back to cartel workers or 
the cartels themselves, a practice, as you know, commonly known 
as, ``smurfing.'' What is being done to limit or monitor these 
remittances as an avenue to finance illicit activities, and 
what can we do to better identify and monitor these laundering 
schemes through our committee?
    And one more thing. Are you working with your counterparts 
in Mexico, and how cooperative are they being on this issue? I 
clearly believe there is a lot more to this than what we know 
at this point in time, but that surge in remittances has really 
kept the peso strong and stable, even competing against some of 
the global currencies. It is a real concern for me as a Member 
whose district sits on the border. We find huge bulk cash, and 
we know a lot of it is being moved electronically, and it is 
quite a concern of funding being used for campaigns in Mexico 
and to make these cartels even stronger.
    Ms. Gacki. Thank you, Mr. Gonzalez. The FinCEN team is very 
focused on this issue. Immediately after we had an exchange 
with a public-private partnership in Los Angeles on fentanyl 
last week, that team joined other colleagues from Treasury in 
Mexico City for a public-private partnership with the Mexican 
Government. We have good relationships with the Mexican 
Financial Intelligence Unit, the UIF. But we are working on 
making sure that Mexican banks and U.S. banks are working 
together to ensure that we have robust, and with guardrails up, 
ability to share typologies, and ensure that both sides are 
looking at the flow of funds between our countries, and 
ensuring it is not abused for narcotics trafficking.
    It is a high priority for us, and I know Under Secretary 
Nelson has taken a trip to the border and has focused on this 
issue previously. I need to get there, and so I will look 
forward to working with you and your staff in order to 
highlight this critical area of work for us.
    Mr. Gonzalez. Certainly. I actually will be traveling to 
Mexico this next week and meeting with officials. Is there 
anything that you think I should be urging officials in Mexico?
    Ms. Gacki. I would just ask that you express support for 
the work with the Treasury Department as a whole. We think that 
working with our Mexican counterparts is so important on these 
issues.
    Mr. Gonzalez. Okay. Thank you, and I will follow up with 
you and your staff.
    Under Secretary Nelson, I was pleased to see the recent 
announcement of sanctions, obviously, on entities who violated 
the Russian price cap set in place by the Group of Seven and 
the European Union and Australia. This cap bolstered American 
energy production and created a stronger economy that is 
resilient to geopolitical shocks and economic fluctuations.
    While the price cap has caused a squeeze on Russia, it 
still has its shortcomings, as we know, for example, the 
enforcement of this price cap is not absolute, and countries 
like India are using refining loopholes to buy Russian crude 
oil, refine it, and even sell it back to the United States and 
the European Union markets at a higher cost, thereby 
circumventing the price cap and keeping money in Russia's 
pocket. So I ask, what is being done to prevent these loopholes 
and third-party sales, and how are we targeting shadow fleets 
to bolster our enforcement capabilities?
    Mr. Nelson. Thank you for that question, and we are doing a 
number of things. One obviously is focused on enforcement, so 
identifying those entities and vessels that are involved in 
schemes to violate the price cap, either by using G7 services 
and then sending energy payments back to Russia in excess of 
the cap, but we are also requiring more attestation per voyage 
so we have more visibility into the underlying documentation 
and support by those that move this energy. And we are also 
working, of course, with coverage service providers and 
engaging on an education campaign to ensure that we are 
achieving the level of compliance----
    Mr. Gonzalez. Thank you, and I hope we keep urging our 
partners around the world to do the same, because it is a 
global effort. Thank you. Thank you so much for being here.
    Mr. Luetkemeyer. The gentleman's time has expired. The 
gentlelady from Missouri, Mrs. Wagner, is recognized for 5 
minutes.
    Mrs. Wagner. Thank you, Mr. Chairman. Director Gacki, last 
week, Treasury Secretary Yellen was woefully unable to reply to 
my questions about the Biden Administration's surveilling 
private citizens' bank transactions. My question to you today 
is, what legal authority do you have to justify a search and 
request for individual bank customer records?
    Ms. Gacki. Thank you, Congresswoman Wagner. I would point 
to the Bank Secrecy Act as a primary authority for the ability 
to collect suspicious activities about financial transactions. 
I do not equate that with surveillance of all financial 
activity at all, and I do not think that----
    Mrs. Wagner. Are you are talking about 314(a) or what are 
you talking about here?
    Ms. Gacki. I was actually talking about the statute as a 
whole that allows us to collect. I will say 314(a), I agree, is 
a statutory structure that allows us to request information 
about----
    Mrs. Wagner. But that, ma'am, is for terrorism and money 
laundering, not for legal purchases made by United States 
citizens. Absent a warrant, Ms. Gacki, my constituents in 
Missouri and Missouri's 2nd District should not have their 
legal purchases at Dick's Sporting Goods or the purchase of a 
Bible become the knowledge of Federal regulators like FinCEN. 
Were any warrants issued by a judge, any subpoenas issued by a 
court, or any legal opinion provided by your General Counsel 
about legal requirements under which banks would be required to 
provide this type of information, ma'am?
    Ms. Gacki. I want to step back and talk a little bit about 
what I understand was going on, and to be fair, I was not at 
FinCEN at the time, and I understand the FinCEN Exchange 
Program that brought together law enforcement and financial 
institutions began immediately after January 6th in the last 
Administration, and continued for a few weeks into the present. 
But what I understand is that the overwhelming focus of this 
information was on violence.
    Mrs. Wagner. Was on what?
    Ms. Gacki. It was on sharing key terms around acts of 
violence, words----
    Mrs. Wagner. Bibles? Gun violence or gun purchases? I am 
trying to understand here. These are legal purchases. These 
have nothing to do with terrorism or money laundering or 
anything that would come under data privacy and such. Were 
there warrants issued by a judge and a court that required them 
to provide this information?
    Ms. Gacki. Respectfully, I would have to defer to my 
Department of Justice colleagues on that question.
    Mrs. Wagner. Okay. Let me ask this then. Director Gacki, 
are there any limits to what the Federal Government can ask for 
from banks or that a bank can provide in response to a request?
    Ms. Gacki. I do believe there are limits. FinCEN has not 
taken----
    Mrs. Wagner. Well, I sure hope there are limits, especially 
about legal purchases by U.S. citizens of Bibles. Are there 
certain questions or criteria, such as targeting speech or 
religious activities, that trigger constitutional concerns?
    Ms. Gacki. FinCEN does not give advice that it is okay to 
file suspicious activity solely on constitutionally-protected 
activity.
    Mrs. Wagner. How reasonable must the government's belief in 
the relevance of the data be before requesting this 
information? For example, could the government ask a bank for 
the records on all customers who use a bank product in a city 
on the day of a crime?
    Ms. Gacki. Respectfully, ma'am, FinCEN was not in the role 
of asking for any of this information.
    Mrs. Wagner. Who was?
    Ms. Gacki. These were public-private partnerships where 
financial institutions and law enforcement were sharing 
typologies and best practices to look for violent actors. That 
is what the inquiry was: violent actors.
    Mrs. Wagner. I need a full debriefing on this, and I want 
FinCEN and Treasury to come before this committee, before our 
members, before the people of the United States of America, and 
explain how it is that the Federal Government and Treasury and 
arms of Treasury are asking for information from banks about 
legal purchases that may be politically triggered, that may be 
triggered by the fact that they are purchasing a firearm or 
religiously triggered by the purchase of a Bible. I am not 
happy with any of the answers that I have received, both from 
the Treasury Secretary, and quite frankly, from you, Ms. Gacki. 
My time has expired, but I want a full briefing, and the United 
States public deserves one, too. I yield back.
    Mrs. Kim. [presiding]. Thank you. The gentleman from 
Illinois, Mr. Casten, is now recognized for 5 minutes.
    Mr. Casten. Thank you both so much for being here. I want 
to talk about crypto and illicit finance, and I just want to 
thank you for your exchange on the last question. Not related, 
but the idea that most acts of terrorism in the United States 
are not committed by domestic White nationalists would be news 
to anybody who has read a book on American history, so thank 
you for prosecuting anybody who commits terrorism.
    Director Gacki, I want to come through with just a couple 
of quick questions for you just to sort of level set here. My 
understanding is that about 2 to 5 percent of global GDP has 
been estimated to be tied to illicit finance. I realize that is 
a hard number, but is that roughly--you are nodding your head--
consistent?
    Ms. Gacki. Yes.
    Mr. Casten. Okay. Chainanalysis estimated that perhaps 0.3 
percent of crypto transactions, and that is down from 0.4 
percent--is entirely tied to on-chain transactions, so that is 
a floor, not a ceiling. Is that correct?
    Ms. Gacki. That would be my understanding. Yes, sir.
    Mr. Casten. Okay. The National Bureau of Economic Research 
recently said that in exchange sales of Bitcoin, so not on the 
chain, but trading in the exchange, is 10 times the volume of 
the on-chain transactions. Is it theoretically possible that, 
in fact, the Chainanalysis view, by leaving out the in-exchange 
transactions, is undercounting the total volume by a factor of 
10?
    Ms. Gacki. Yes, sir. I think we would agree with that.
    Mr. Casten. Okay. Moving away from exchanges, which we 
should be tracking and monitoring if we care about illicit 
finance, and onto mixers, the Treasury's 2024 National Risk 
Assessment memo highlighted that criminals are using mixers to 
obfuscate the source, destination, or amount involved in a 
transaction.
    Under Secretary Nelson, could you just briefly explain why 
the bad guys like mixers?
    Mr. Nelson.. Yes. Mixers allow for the capacity to 
obfuscate the attribution to who owns whatever that virtual 
asset is, and they do that in a number of ways, by pulling a 
bunch of different types of coins together, and then when it 
comes out of the pool, basically disaggregating the attribution 
that went into the mixer.
    Mr. Casten. Okay. I appreciate it because FinCEN, the rule, 
I think, last year would require financial institutions to 
collect report details on transactions that they suspect may 
involve mixing activities.
    Director Gacki, is there anything you want to add about why 
FinCEN thought it was useful to include mixers in some of that 
reporting requirement?
    Ms. Gacki. Just to echo Under Secretary Nelson, we have 
seen the mixers are used to create anonymity in a way that 
shields illicit finance, so we thought this was an appropriate 
use of our tool, and I will just leave it there.
    Mr. Casten. Okay. I am with you. There have been some folks 
who have argued, including to some degree in this hearing, that 
the proposals from FinCEN are too burdensome, and would require 
financial institutions to report a bunch of data on mixers and 
IP addresses, but help me out. Under existing AML rules, aren't 
banks and institutions already required to collect that 
information?
    Ms. Gacki. Indeed. We would agree. However, we have 
received a lot of comments on this proposed rule, and we are 
looking through them all.
    Mr. Casten. Okay. I appreciate your brevity because I want 
to get to sort of the big meaty question at the end. But I 
think you all have been extremely effective at shutting down 
some of these networks from Garantex. You know all of the high-
profile work that you are doing, but it feels like there is 
this whack-a-mole process going on because now we see this data 
that the bad guys are moving to chain hopping, which is this 
whole separate thing, and we probably don't have time in a 
minute to explain what that is, although if you would like to, 
feel free, but I would welcome thoughts from either of you.
    Do we have reason to believe: first, that crypto is less 
likely to be used for illicit finance than the 2 to 5 percent 
of global GDP in fiat currencies; and second, is that question 
even answerable with the structure of crypto networks right 
now? Can we actually get at the data to answer that question? 
Do either of you have any thoughts on that?
    Mr. Nelson. I think the technology is obviously going to 
evolve, and we have been focused, to your point, I think, on 
working through the Financial Action Task Force (FATF), working 
bilaterally with jurisdictions across the globe to ensure that 
our AML/CFT approach is consistent to avoid sort of the 
opportunity of jurisdictional arbitrage. I think recognizing 
that there continues to be a need for additional clarity, 
although FinCEN has been great for the last 10 years at being 
clear that AML/CFT obligations apply to virtual assets, we will 
look forward to working with Congress on ways to ensure that 
our regulatory authority is clear in this area to address 
exactly that concern.
    Mr. Casten. I am out of time, but I welcome the chance to 
work with you, because we talk a lot about this 0.3-percent 
number, which is clearly wrong and----
    Mrs. Kim. The gentleman's time is up.
    Mr. Casten. ----we would like to understand how big a 
problem this is. I yield back.
    Mrs. Kim. The gentleman from Kentucky, Mr. Barr, is now 
recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman, and thank you, Under 
Secretary Nelson. It's good to see you again. I appreciate you 
coming to my district in August to hear from my constituents, 
especially small businesses and financial institutions, and 
State and local law enforcement, about how the beneficial 
ownership reporting requirement updates will impact their 
operations. I was pleased to see, following this meeting in 
Lexington, Kentucky, that FinCEN released its Small Entity 
Compliance Guide, as we heard from many stakeholders that the 
compliance standards for this rulemaking will be especially 
onerous on small institutions.
    Director Gacki, since the release of this compliance guide, 
what actions has FinCEN taken to properly educate small 
businesses on these requirements?
    Ms. Gacki. Thank you, Representative Barr, for that 
question. We have taken a number of steps beyond the Small 
Entity Compliance Guide, which we have translated into 11 
different languages. We have also expanded into social media in 
order to get the word out about it. We have partnered with 
organizations, Federal and national. We have partnered with 
professional organizations. We are working, for new companies 
being created, to meet them at the point of creation. We have 
worked with the IRS to ensure that they have information. We 
have opened up new areas, new for FinCEN, areas to reach out to 
FinCEN and ask questions, including the first-ever use of a 
chatbot.
    Mr. Barr. Reclaiming my time, you all are taking steps, and 
I appreciate that, and the fact that the Under Secretary came 
to my district shows a responsiveness to all of these concerns. 
But I do share Chairman McHenry's concerns that this is a lot 
for these small businesses.
    Under Secretary Nelson, will Treasury allow small 
businesses who cannot report their beneficial ownership 
information electronically to FinCEN, and for very good 
reasons--for example, my Amish constituents, who do not have 
access to technology--to file paper registrations with 
Treasury?
    Mr. Nelson.We really appreciated that feedback, and I know 
that Andrea and her colleagues at FinCEN are working through a 
solution to meet that need, and we totally appreciate that we 
are going to have to develop something to address that concern.
    Mr. Barr. Thank you for that as well, and again, I 
appreciate you coming to my district to talk about this. Let me 
switch gears to Russia and our sanctions strategy, and I 
appreciate your testimony, Under Secretary Nelson, but look, 
here is the thing. The Administration and the Senate have now 
passed this huge supplemental over to the House, $60 billion in 
security assistance to Russia. There are a lot of Republicans 
on this side of the aisle who want to support the assistance 
package, but here is the problem. The problem that many of us 
have is not that we don't want to support the Ukrainian 
resistance and provide the assistance. The problem is that it 
is perplexing to all of us why this Administration's strategy 
with respect to defending Ukraine and their sovereignty is 
working at completely cross-purposes with the Administration's 
obsession with climate.
    The Administration banned liquid natural gas exports just a 
couple of weeks ago, and Treasury is inexplicably pursuing an 
oil price cap strategy that, despite your testimony, sir, is 
not working. It is not working because it is unenforceable, and 
it is not working because Russian crude is trading above the 
cap, and the Center for Strategic International Studies has 
produced a study on this. A think tank called the Centre for 
Research on Energy and Clean Air shared a report at the end of 
2023 that said widespread circumvention and gaping loopholes in 
the ongoing fuel business means that Moscow is still earning 
billions from its flagship exports that it can use to prolong 
the war, and the fact that Treasury has issued eight general 
licenses on the sanctions on Russian banks that allow Russia to 
process these energy-related transactions.
    The bottom line is that the Administration's climate 
strategy is compromising our national security because we can't 
export energy to our NATO partners and allies. We are giving 
huge sanctions relief to Russia's war machine, allowing Russia 
to export its energy instead of sanctioning Russian energy. The 
price cap is not working. My point is this: Why is the Biden 
Administration greenlighting billions of dollars that fund 
Moscow's war in Ukraine, even as you ask Congress to provide 
supplemental budget funding for Ukraine?
    Mr. Nelson. I would respectfully disagree. In terms of the 
working of the price cap, at the beginning of the 
implementation of the price cap, Russia's revenue from oil 
sales was significantly reduced by 30 percent. To your point, 
they, of course, sought to circumvent our price cap, so in 
response, we have started to do a number of enforcement actions 
working with our Price Cap Coalition----
    Mr. Barr. My time has expired, and I know about what you 
are doing. The problem is that oil and gas revenues to Russia 
have more than doubled, and Russia oil and gas revenues exceed 
$17 billion a month. We are not cutting off the funding for 
Russia. When you ask us for money to support the----
    Mrs. Kim. The gentleman's time is up.
    Mr. Barr. ----Ukraine assistance, we need to shut down the 
financing to Moscow. I yield back.
    Mrs. Kim. Thank you for the passionate exchange. I now 
recognize the gentlewoman from Massachusetts, Ms. Pressley, for 
5 minutes.
    Ms. Pressley. Thank you for joining us, Under Secretary 
Nelson, and Director Gacki. In recent years, environmental 
crimes have been on the rise. From wildlife trafficking to 
illegal logging, mining, and fishing, global environmental 
crime is estimated to generate hundreds of billions in illicit 
proceeds every year, making it the third-most profitable crime 
in the world. These crimes perpetuate and contribute to the 
climate crisis.
    I think about those devastating images of the Amazon 
rainforest burning. In 2022, the Amazon lost more than 10 
football fields every minute. That was not a naturally-
occurring phenomenon. Illegal mining and illegal forestry 
contributed to the problem. The nonpartisan FACT Coalition 
released a report last October entitled, ``Dirty Money and the 
Destruction of the Amazon.'' It highlights how profits from 
environmental crimes in the Amazon rainforest make their way 
into the U.S. financial system. I would like to submit this 
report for the record.
    Mrs. Kim. Without objection, it is so ordered.
    Ms. Pressley. While environmental crimes are damaging in 
their own right, they are also associated with other convergent 
crimes, such as drug trafficking, corruption, and money 
laundering, which endanger public safety and corrode democracy. 
Financial transparency reforms are critical.
    Director Gacki, can you speak to what FinCEN is doing to 
tackle environmental crimes and their links to the U.S. 
financial system?
    Ms. Gacki. Thank you, Congresswoman Pressley. We agree that 
this is an incredibly important concern for us, and I can 
highlight a couple of things that we are working on. We are 
bringing together public-private partnerships and exchanges 
between law enforcement and financial institutions to highlight 
the risk of environmental crime. A few weeks ago, we did a 
FinCEN exchange specifically focused on illegal wildlife 
trafficking, and then, a few weeks ago, I had the opportunity 
to meet with financial intelligence units from around the world 
as part of the Egmont Group, of which FinCEN is a leading 
member, and had the opportunity to meet with the heads of the 
financial intelligence units of South Africa and of Brazil.
    In Brazil, we specifically focused on how we can partner to 
ensure that our systems are highlighting reporting involving, 
as you note, illegal mining, illegal forestry, et cetera. And 
in South Africa, building on Secretary Yellen's trip there, I 
think it was last year, we are trying to strengthen the 
partnership with the Financial Intelligence Unit of South 
Africa, both to highlight reporting that we can get from 
destination points, transit points, and origin points when it 
comes to illegal wildlife trafficking. In short, this is a high 
priority for us----
    Ms. Pressley. Thank you.
    Ms. Gacki. ----and we are trying our best to contribute.
    Ms. Pressley. Thank you. Thank you, Director. The 
Republican Majority is trying to defund our nation's financial 
intelligence unit by cutting the budget of FinCEN.
    Director Gacki, if the Republican Majority succeeds in 
making these cuts to your funding, what are the possible 
consequences for FinCEN's ability to fight financial crimes and 
to finalize rules that will close money laundering loopholes?
    Ms. Gacki. Thank you, Congresswoman. I want to express my 
appreciation for all of the funding support we have had for 
FinCEN over the years, but I do want to point out that in the 
last 2 budget cycles, FinCEN has been funded under the 
President's budget by $20 million and $30 million, 
respectively. We will, of course, meet our congressional 
obligations in terms of implementation, but what I worry about 
is actually our ability to dedicate resources to important 
things like the FinCEN Exchange. We have record requests to do 
more and more exchanges focused around fentanyl, around illegal 
wildlife trafficking, around environmental crimes. These 
things, I think, will suffer for lack of funding.
    Ms. Pressley. Thank you. With environmental crimes 
devastating indigenous communities and contributing to climate 
change, I urge you, Under Secretary Nelson, to encourage 
Treasury to lead the development of a whole-of-government 
strategy to curb illicit finance associated with environmental 
crimes in the coming months. In your opinion, Under Secretary, 
is this something on which Congress and Treasury can partner?
    Mr. Nelson. I think it is. We did a report maybe a year and 
a half ago looking at illicit finance risk and how it sort of 
fuels these nature crimes. And I had the opportunity in this 
job to go to Brazil and South Africa and Kenya most recently to 
talk about exactly these issues, and particularly in Kenya, you 
hear things that were a little surprising, at least to me, 
about how they have a big population of sandalwood trees that 
are being deforested and may go extinct as a result of exactly 
this issue. So it is, as Director Gacki noted, a very high 
priority of the Department.
    Ms. Pressley. Thank you.
    Mrs. Kim. Thank you. The gentleman from Texas, Mr. 
Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman. I am a 
small business owner, Main Street America, in the great State 
of Texas, and the crisis at our Southern border has spiraled 
out of control, and the Biden Administration has done nothing 
to secure the border and keep American citizens safe, much less 
keep small businesses safe.
    These open border policies continue to provide bad actors 
with opportunities to engage in more illegal activities and 
exploit our system's weaknesses, and the increase in migrants 
coming across the border will certainly have consequences that 
trickle down to all aspects of American lives, from physical 
safety to financial well-being. Our cities are not equipped to 
deal with the influx of migrants who put a significant strain 
on our public resources. Yet last week, when Secretary Yellen 
testified before this committee, she could not give me or many 
other Members a straight answer on whether illegal immigration 
posed a threat to the security of our financial system.
    Mr. Nelson, you have previously worked on efforts to combat 
transnational crime organizations, human trafficking, and money 
laundering, which means you understand firsthand the dangerous 
effects these types of crimes have on communities, large and 
small, and the larger financial system.
    So, Mr. Nelson, do you believe that the crisis at the 
Southern border and illegal immigration pose a threat to our 
nation's financial security, and could you please elaborate on 
the risk posed by the influx of illegal immigrants?
    Mr. Nelson. Thank you for the question, and I think, as you 
know, my office, in particular, has been very focused on how we 
can support all of the Administration's efforts to manage 
migration to the United States. And one of the things that we 
have particularly been focused on in the context of the work 
that we do is exactly this question of the role of 
transnational criminal organizations and the role of sort of 
the dirty money that facilitates all of the unlawful human 
smuggling and human trafficking that we see that are underlying 
this migration.
    Also, the work that my colleague, Director Gacki, is doing 
to provide transparency in our financial system through 
beneficial ownership, our new proposed real estate rule, and 
through investment advisors, will help to close off that 
opportunity for these bad actors.
    Mr. Williams of Texas. So, illegal immigration does pose a 
threat to the financial security of our country?
    Mr. Nelson. I certainly think those who facilitate it do.
    Mr. Williams of Texas. Yes. Okay. Part of this beneficial 
ownership effort includes FinCEN collecting and storing massive 
amounts of personal information in the BOI database, to which 
tens of thousands of external users, mostly law enforcement, 
will have access. Given Treasury's imperfect track record of 
protecting sensitive personal information, it is imperative 
that FinCEN puts protections in place to protect the data of 
small businesses which are subject to reporting this private 
information because of this new burdensome rule.
    Director Gacki, quickly, what is the approval process for 
gaining access to the database?
    Ms. Gacki. Thank you, Representative Williams. I agree with 
the premise of your question and just want to quickly note that 
we will only give access to those constituencies approved in 
the statute. And to do so, for the approval process, we will 
set up a framework through a memorandum of understanding (MOU) 
or other agreements to ensure that people who access the 
information keep it at the highest security levels, and that 
they can access it only for authorized purposes under the 
statute, and do not disclose it beyond for any reason that is 
not authorized.
    Mr. Williams of Texas. Okay. As we have discussed at length 
today, FinCEN's beneficial ownership reporting requirements 
have been open for filing since January 1st of this year, 
despite numerous calls from members of this committee to 
withdraw or delay implementation so FinCEN could provide more 
clarity on compliance guidelines. When talking to small 
businesses like the ones I represent--I Chair the Small 
Business Committee back in my district--most of them are either 
unaware of these new obligations or they are concerned about 
the higher costs and possible penalties for their lack of 
knowledge about this BOI rule. It is your duty to educate 
business owners on how to comply and file returns properly, 
while ensuring they are not held liable or penalized for 
compliance on a rule that they have never heard of, and it is a 
real issue. So quickly, how are you planning on reaching rural 
business owners, like those that I represent, who may not have 
reliable access to the internet to inform them of these new 
requirements?
    Ms. Gacki. Thank you, sir. Quickly, we are employing all 
strategies--I ticked through a number of them already, and I 
don't want to repeat for time--but just to note that we are 
open to trying to be as creative as possible, including 
bringing on a small public relations contract to ensure that we 
can get to constituencies that aren't natural for us, and so we 
are working this way. We will take all ideas. I want to stress 
that when it comes to enforcement, the statute is clear. We can 
only take enforcement action for willful violations, and we are 
not out to take, ``gotcha,'' enforcement actions. We want to 
educate about the requirement, promote----
    Mr. Williams of Texas. My time is up.
    Mrs. Kim. Thank you. I now recognize the gentlewoman from 
Michigan, Ms. Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman, and thank you, 
Under Secretary and Director, for being here. I know that both 
of you have talked about this, but in general, the incredibly 
important role that you all have, especially around the real 
estate industry, has been a very attractive target for corrupt 
foreign actors seeking to hide their money by paying with cash 
or relying on shell companies. We already know, and my 
colleagues should know that 20 percent to 30 percent of 
residential real estate purchases in our country are not 
financed and, therefore, do not face the same level of anti-
money laundering oversight as other more common transactions. 
Again, it should ring alarms for many of my colleagues.
    Huge influxes of illicit cash can destroy markets and 
further incentivize developers to build luxury real estate and 
commercial property instead of affordable housing. That is also 
something I put aside as something that is important. Consider 
rentals, for instance. Criminals often make bad landlords. In 
some cases, buildings sit vacant for years. In others, 
residents pay the price as rents go up and services decline.
    In FinCEN's proposed residential real estate rulemaking--
thank you, by the way--you touched on some of the dynamics. The 
notice stated, ``While money laundering may appear to be 
concentrated in high-end real estate properties in luxury 
markets, it is a spillover effect that, if left unchecked, 
could, in some instances, disproportionately affect low-income 
and otherwise high-risk communities.''
    Director, can you unpack this statement a bit and help us 
understand how money laundering works, since the housing crisis 
impacts communities like mine?
    Ms. Gacki. Thank you, Representative Tlaib. I just want to 
stress that the flow of illicit money into the residential real 
estate sector, I think, as that statement notes, raises the 
costs of the real estate sector altogether. Allowing illicit 
actors to store their money in this could have an effect that 
disadvantages homeowners across the country, so we feel that 
this is an important measure not only to stem the flow of 
illicit finance, but also is an overall benefit to the 
residential housing sector in the nation.
    Ms. Tlaib. Yes. Rulemaking is not enough. Implementation 
matters, and it is going to take resources. FinCEN needs to 
roll out the new reporting form, and conduct stakeholder 
outreach and engage in compliance monitoring, among other 
activities. This requires, again, resources. I know many of my 
colleagues on this committee, the House Republicans, have 
proposed $166 million for FinCEN for 2024. Director, would this 
level be sufficient enough in implementing the rule 
successfully?
    Ms. Gacki. Thank you, Representative. I want to stress that 
we are grateful for the support we have received, but this 
funding amount does fall short of the President's budget. And I 
think we need full funding to be able to adequately implement, 
including not just issuing a proposed rule, but bringing it to 
final, putting in place all the necessary forms, and all the 
outreach necessary to make sure it is effective across this and 
other regimes that we have to implement.
    Ms. Tlaib. I commend this move, which will bring much-
needed transparency to our housing market. I also encourage you 
to advance similar requirements in the commercial real estate 
sector where the lack of transparency puts tenants at risk and 
serves as a major, huge loophole for criminals to park money in 
U.S. real estate in our country.
    Director, can you commit today to finalize a crucial rule 
by this September?
    Ms. Gacki. Congresswoman Tlaib, this is something we are 
definitely looking at next in commercial real estate. I can't 
commit at this time, but we will be happy to work with you and 
your staff to make sure you are updated on our efforts.
    Ms. Tlaib. Okay. Thank you, and I yield back.
    Mrs. Kim. The gentleman from Minnesota, Mr. Emmer, is now 
recognized.
    Mr. Emmer. Thank you, Madam Chairwoman, and I want to thank 
Chairman McHenry for holding this important hearing today, and 
I want to thank all of our witnesses for your testimony.
    On October 10, 2023, The Wall Street Journal reported that 
between August 2021 and June 2023, Hamas received $41 million 
in digital assets, and the Palestinian Islamic Jihad received 
$493 million in digital assets.
    Under Secretary Nelson, is this Treasury's assessment, too, 
because the world's leading blockchain analytics firms have 
called this a misinterpretation of the data, and that the 
amount that any terrorist might have received is significantly 
smaller?
    Mr. Nelson. Thank you for that question, Congressman, and, 
yes, I think that assessment largely tracks with our own. The 
numbers noted in The Wall Street Journal piece talked about 
wallets but did not necessarily disaggregate among the wallets.
    Mr. Emmer. Right. It is assets that people had in their 
wallets as opposed to what was specifically going to the 
Palestinian Islamic Jihad and Hamas.
    Mr. Nelson. That is what we think is most likely, and we 
also assessed that terrorists still prefer, frankly, to use 
traditional old products and services, but this is something 
that we are obviously monitoring very closely.
    Mr. Emmer. And I appreciate that. How much do you think 
actually got into the hands of Hamas or the Palestinian Islamic 
Jihad (PIJ)?
    Mr. Nelson. I think we can have a classified conversation 
about precise numbers or expectations. I think we have done, on 
both Hamas and the PIJ, a good job of identifying the virtual 
asset service providers that they have relied on and the 
financial facilitators that they have historically relied on 
that would tend to use virtual assets. So, we don't expect the 
number is very high, particularly----
    Mr. Emmer. I would love to take you up on that, because I 
sent a letter with several other Members right after this 
erroneous Wall Street Journal report asking for specific 
information, so I will take you up on that offer.
    Under Secretary Nelson, you said that digital assets are 
not the preferred means of terrorist financing, but I want to 
be clear: Digital assets were not even a popular tool for Hamas 
or the Palestinian Islamic Jihad, correct?
    Mr. Nelson. I think that is correct, and one of the reasons 
that is, is because of our work with our counterparts in Israel 
prior to October 7th----
    Mr. Emmer. I will give you credit for that, but I am going 
to reclaim my time because I really want to just make a record 
here because, regardless, to be clear, Hamas is using crypto in 
relatively small amounts compared to what has been widely 
reported. That is correct, isn't it?
    Mr. Nelson. That is our assessment, yes.
    Mr. Emmer. Does Treasury have a responsibility to correct 
the record here? And perhaps this is involving some of the 
classified information you are talking about, because I 
understand that, like today with FinCEN, Treasury has 
acknowledged that digital assets are not the preferred 
financial product for terrorists. But Treasury has the data to 
paint the correct narrative of crypto and how it is used, and 
instead, we have Senators who are legislating on these false 
figures and major CEOs using these figures to inform their 
perspectives on digital assets. Sure, we can go to 
Chainanalysis and use their third-party reporting, but Treasury 
already has the data, so doesn't Treasury have a responsibility 
to correct the record here?
    Mr. Nelson. We have put out a number of reports on illicit 
finance risk in the context of virtual assets, and I think we 
have clearly stated that while there is not a significant 
uptake that we perceive currently, it is an area of opportunity 
that we know terrorist groups could use. And we have seen some, 
not Hamas, necessarily, but other terrorist organizations 
particularly focus on the ability to use crypto to move their 
funds.
    Mr. Emmer. I appreciate that, but I am talking about the 
misinformation that The Wall Street Journal has suggested and 
that certain Senators are trying to base legislation on that 
would literally destroy innovation in this country. I take it 
that you don't have a position, then, as to whether Treasury 
has an obligation to correct this record with the data that 
they have? It seems to me that they would. I again want to 
thank you and your colleague for being here today, and, in my 
opinion, the Treasury must do a better job with all the data it 
has to paint an accurate narrative of digital assets and not 
perpetuate a false one. And with that, I yield back.
    Mr. Rose. [presiding]. The gentleman yields back. The 
gentleman from New York, Mr. Torres, is now recognized for 5 
minutes.
    Mr. Torres. Thank you. On December 16, 2023, The New York 
Times wrote an expose about, ``the money machine that generates 
terrorism financing for Hamas.'' Here is a relevant excerpt 
from the expose: ``The ledgers from the computer of a senior 
Hamas official listed assets worth hundreds of millions of 
dollars: Hamas-controlled mining, chicken farming, and road 
building companies in Sudan, two skyscrapers in the United Arab 
Emirates, a property developer in Algeria, and a real estate 
firm listed on the Turkish stock exchange.'' It continues, 
``The Israeli agents who obtained the records shared them 
inside their own government, and in Washington, nothing 
happened.''
    So, did the financial intelligence unit of the United 
States know that Hamas had a multinational network of companies 
from which it could generate terrorism financing?
    Mr. Nelson. Thank you for the question, and just to step 
back one step, we were obviously very aware of that press 
reporting, and indeed, in March of or May of 2022, we 
designated the entity on the Turkish stock market, because of 
this concern. And in that context, we talked about this 
significant investment portfolio and our long, historic efforts 
to try to dismantle exactly that----
    Mr. Torres. You designated it when?
    Mr. Nelson. Trend GYO, it was, I think, May of 2023, so 
this is prior to May of 2022.
    Mr. Torres. How long before then did you know that company 
was connected to Hamas?
    Mr. Nelson. We go through a process where we have to 
develop an evidentiary package that meets legal sufficiency and 
work through our interagency, but we have been targeting Hamas 
and Hamas' financial infrastructure for literally decades, so 
this is something that----
    Mr. Torres. But specifically, the Turkish company and the 
companies that appeared in The New York Times expose, when did 
you first receive financial intel about those companies?
    Mr. Nelson. Again, we get intelligence from a lot of 
sources, we work through the evidentiary package, and then once 
we have legal sufficiency, we will either move to designation 
or certainly have an interagency policy conversation.
    Mr. Torres. I am not clear if your answer is responsive to 
my question, but apart from the Turkish company----
    Mr. Nelson. Yes.
    Mr. Torres. ----did the U.S. sanction all of the known 
companies generating terrorism financing for Hamas?
    Mr. Nelson. We have been, and I have personally been 
focused on going around the globe, working with Gulf partners 
to identify and target all financial infrastructure that 
touches the international financial system. As you know, Hamas 
has historically generated----
    Mr. Torres. I am just pressed for time. Did the United 
States----
    Mr. Nelson. The majority of money domestically----
    Mr. Torres. Did the United States sanction any Hamas-
connected company beyond the Turkish firm that you referenced?
    Mr. Nelson. Just in the last number of months, we have done 
five rounds of designations and have sanctioned a number of 
entities and people, including those associated with that 
Turkish company.
    Mr. Torres. I have a question about CVC mixing, and I share 
the concern that the abuse of CVC mixing is a genuine security 
concern. But if you are a financial institution and you see a 
suspicious transaction involving CVC mixing, you are presently 
required to file a suspicious activity report with FinCEN. So 
what new information would you obtain under the proposed rule 
that you could not obtain under existing regulations?
    Ms. Gacki. Thank you, Representative Torres. The CVC mixing 
notice of proposed rulemaking just closed, so I expect that 
this is a comment that we will review. We will certainly look 
to minimize burden and make sure that this is a new 
requirement, but our experience in reviewing suspicious 
activity reports didn't reveal that we were getting all the 
reporting that we thought we would expect regarding mixing. So, 
this is something we will look closely at and take your point 
on this.
    Mr. Torres. The United States has a strategic interest in 
maintaining a unipolar financial system built on the U.S. 
dollar, but I wonder if America has been too aggressive in the 
use of sanctions? Do you worry at all about the unintended 
consequences of incentivizing de-dollarization? If the world 
were to shift from a unipolar financial system to a multipolar 
financial system, it could render U.S. sanctions far less 
enforceable and far less effective. So, how are you thinking 
about that trade off?
    Mr. Nelson. It is a great question. We don't think 
sanctions are going to lead to de-dollarization or lead to the 
dollar not being an international reserve currency, but we have 
gone through a process of identifying ways we can make our 
sanctions regime much more effective, and we have a new unit, 
the Sanctions Economic Analysis Division (SEAD), to look at 
these questions as well.
    Mr. Rose. The gentleman's time has expired. The Chair 
recognizes the gentleman from Georgia, Mr. Loudermilk, for 5 
minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. And I thank you 
both for being here today, and, Director Gacki, it is good to 
meet you for the first time, and congratulations on your new 
position. I am a very strong believer in accountability, which 
is part of our role, accountability of the Executive Branch, 
and I hope that you will return to testify here on a recurring 
basis to update us on FinCEN's activities.
    Something else that is very important is understanding the 
roles of the different branches that our founders intended: it 
is the role of the Legislative Branch to make the laws; and the 
role of the various agencies and departments and bureaus under 
the Executive Branch to carry out those laws that Congress 
makes.
    Just to lay the groundwork, inflation has had an impact on 
every aspect of the U.S. economy, and just about everybody, 
including the cost of government. In 1990, Congress passed the 
Federal Civil Penalties Inflation Adjustment Act (FCPIA), 
which, with its subsequent amendments, requires agencies to 
adjust civil penalties for inflation annually. So, you look at 
inflation, and you adjust it. Has FinCEN issued a rule to 
update its maximum civil penalty amounts for inflation as 
required by this Act?
    Ms. Gacki. Thank you, Representative Loudermilk. Yes, we 
have. A few weeks ago, we implemented the statute to adjust our 
penalties to keep up with inflation.
    Mr. Loudermilk. Thank you, and that is refreshing, because 
it is frustrating to us a lot of times when we pass laws and 
they are pretty much ignored by some agencies.
    There is another one I want to ask you about, and this is 
30 years later, Congress passed the Anti-Money Laundering (AML) 
Act of 2020, and Sections 6204 and 6205 of the AML. And for 
everyone's benefit, these sections require FinCEN to conduct a 
review of currency transactions and suspicious activity 
reporting frameworks. Section 6205 requires FinCEN to review 
existing filing thresholds for CTRs and SARs and report back to 
Congress. These reports are very useful to us as we look at 
updating and modernizing CTRs and SARs. However, both reports 
were due to Congress no later than 1 year after the enactment 
of this law on January 1, 2021, but FinCEN has not met the 
statutory deadlines to submit these reports. When are we going 
to see these?
    Ms. Gacki. Thank you, Representative Loudermilk. I want to 
assure you that we are hard at work on these reports, and to 
give you a sense of what has been going on, these particular 
adjustments, unlike our adjustment of our penalties, require 
extensive coordination across the U.S. Government, but we are 
actively working to examine the threshold limits and respond to 
Congress and implement these reports. We issued a request for 
information to the public in 2021 and received 140 comments 
that will help us analyze these reporting obligations. We have 
been working across the U.S. Government to determine the best 
approach, and a couple of things that we are focused on are 
looking at certain low-value----
    Mr. Loudermilk. Summarize quickly. I have a couple more 
questions.
    Ms. Gacki. Oh, I'm sorry. Okay.
    Mr. Loudermilk. Before I run out of time.
    Ms. Gacki. Okay. I will stop there.
    Mr. Loudermilk. Reclaiming my time then, it is important 
that we get these, and, as you know, CTR filing thresholds have 
not been adjusted since it was enacted in 1971, which was 
$10,000. Do you have any idea what it would be had we adjusted 
for inflation today?
    Ms. Gacki. I apologize. I don't know that offhand. I will 
say we are looking at that.
    Mr. Loudermilk. It would be over $75,000, a significant 
difference. Now, I hear what you are saying. There is work 
involved with it. It has been 3 years-plus since this bill was 
enacted, and it is troubling that FinCEN has prioritized 
following statutory requirements that bring in more money to 
FinCEN, but for a requirement that would actually benefit 
consumers, the can keeps being kicked down the road. So, it is 
important. We need to move very quickly on adjusting CTRs and 
SARS, and we need that information.
    Just as troubling is FinCEN's apparent lack of awareness 
when it comes to the real cost of compliance. In 2020, you 
estimated that it took banks less than 2 hours and $75 per SAR 
filing. According to your 2024 estimate, this cost has not 
changed.
    Director Gacki, does FinCEN really expect us to believe the 
cost of compliance hasn't increased in 4 years? Obviously, you 
have said that your costs have increased in 4 years. Everything 
else has improved. Are you saying that the costs to financial 
institutions have not increased?
    Ms. Gacki. Sir, I am not saying that. I would be happy to 
get back to you on that.
    Mr. Loudermilk. Okay.
    With that, Mr. Chairman, I yield back.
    Mr. Rose. The gentleman yields back. The Chair now 
recognizes the gentlewoman from Texas, Ms. Garcia, for 5 
minutes.
    Ms. Garcia. Thank you, Mr. Chairman, and thank you to both 
of the witnesses for coming to visit with us this morning.
    I am from Texas, and I represent a beautiful, diverse 
community that has many close personal and business ties to 
Mexico and other parts of Central and Latin America. Texas, as 
a State, sends the second-highest amount of U.S. remittances to 
Mexico within the United States, making up 15.9 percent of 
those sent in 2021. I think Mr. Gonzalez earlier outlined those 
numbers. These funds represent the fruits of the hard work and 
dedication of my constituents, who often are either unbanked or 
underbanked, despite being assets to our local economy and 
their families' businesses abroad. You may have seen the news 
last week that the Congressional Budget Office estimated that 
the immigration surge will help us bring $7 trillion more in 
the economy, and $1 trillion in revenues, which is high, 
meaning, again, that immigrants are an asset.
    As you know, these remittances are largely sent through 
money services businesses (MSBs), which transmit funds abroad 
through relationships with larger multinational financial 
institutions. That is why I read with great interest the 
Treasury Department's April 2023 De-Risking Strategy, which 
reports, ``Small MSBs continue to have significant issues 
accessing banking services, especially small MSBs that service 
certain immigrant communities.'' The Strategy goes on to 
explain the range of reasons why this occurs, and then 
discusses concrete solutions that the Department and partner 
agencies could undertake to address this problem as required by 
the Anti-Money Laundering Act of 2020.
    Director Gacki, one of the solutions proposed in this 
Strategy is the origin of the 2009 MSB Examination Manual. Has 
FinCEN started this process, and if not, when does it intend to 
do so? What other steps has Treasury taken or will take to 
address the lack of financial access for my constituents?
    Ms. Gacki. Thank you, Representative. This is an incredibly 
important issue that I know the Treasury Department as a whole 
wants to highlight. I will need to get back to you on the 
progress with updating that manual, but I can tell you it is a 
high priority and something that I will want to make sure we 
make progress on.
    Ms. Garcia. Do you have any estimated goal, or do you even 
forecast when it might get done?
    Ms. Gacki. We have put guidance out to ensure that 
regulated financial institutions, the regulated populace, 
understands there is no one type of person that demonstrates 
risk and that should be unbanked, underbanked, et cetera. We 
have tried to clarify how AML rules apply, and we will work 
without undue delay to ensure that we make sure that this 
message carries into the examination of MSBs, and I will get 
back to you on the specific timing.
    Ms. Garcia. Under Secretary, you are nodding your head. Do 
you have anything to add, sir?
    Mr. Nelson. No. I was just going to add I had the 
opportunity to join Secretary Yellen when she traveled to 
Mexico in December, and this question of remittances and ways 
that we can better support the critically important remittances 
going back to Mexico in terms of fee structure and cooperation 
amongst our financial institutions was one of the highest 
priorities in our conversations with the Mexican Government.
    Ms. Garcia. Okay. The national security mission of the Bank 
Secrecy Act, fraud provisions, and other financial crime laws 
and regulations are essential for our safety, but the goal of 
this De-Risking Strategy, mandated by our committee's 
bipartisan law, was to find a better balance. This is for both 
of you, and it is going to have to be in less than 45 seconds, 
but how can we make sure that small businesses, especially 
those owned by law-abiding immigrants or other marginalized 
communities, aren't being negatively affected by unnecessarily-
strict financial crimes regimes?
    Mr. Nelson. I would say one of the recommendations in the 
Strategy is just more transparency around account closings, 
which I had the opportunity to go to Seattle and talk to some 
diaspora communities there, and that was one of the big asks of 
those small businesses that were having trouble maintaining 
accounts at financial institutions.
    Ms. Garcia. Thank you.
    Ms. Gacki. And just to add briefly to Under Secretary 
Nelson, I think another tool we can use are public-private 
partnerships to highlight this issue and create greater 
understanding of this as an issue.
    Ms. Garcia. Thank you, and I see my time is up. Thank you, 
Mr. Chairman. I yield back.
    Mr. Rose. The gentlewoman yields back. The Chair now 
recognizes himself for 5 minutes. Thank you to our witnesses 
for being with us today.
    The Cookeville Farmers Market, in my hometown, is a place 
for commerce that many in my community love to visit. It is an 
important marketplace for many small farmers and other small 
businesses in the community where they are able to reach 
customers. However, I am extremely concerned about how the 
beneficial ownership rule would impact the micro businesses at 
farmers markets like the one in my hometown. The penalties for 
willful noncompliance would be extremely high for these micro 
businesses, going up to even $10,000.
    So, Director Gacki, does FinCEN plan to penalize micro 
businesses, such as the family craft businesses and small 
farmers that one would find at their local farmers market?
    Ms. Gacki. Thank you, Congressman Rose. I want to stress 
that we are trying to meet businesses where they are to help 
educate who falls within the definition of a, ``reporting 
company.'' One message we have recently put out is, for 
example, sole proprietorships that aren't created by the filing 
of a document with a Secretary of State or equivalent office do 
not need to report, but for those businesses that do need to 
report, we are looking to meet them and make sure the 
obligation is easily understood.
    The filing system we have set up is simple, easy to use, 
and secure, and when it comes to enforcement, we are not 
taking, ``gotcha,'' enforcement actions. We want to promote 
education and compliance, especially the communities that have 
never heard of FinCEN. And for most filers, this will be a one-
and-done requirement without the need to update annually, but 
it is something that we are going to be redoubling our efforts 
on to get to constituencies like micro businesses, farmers, and 
the like.
    Mr. Rose. Thank you. I appreciate that, and I would just 
like to take this opportunity to reinforce that it is my view 
that for regulators at the Federal, State, and local level, the 
number-one priority is to help the regulated comply, not to 
punish them when they inadvertently slip up. So when you are 
having to take enforcement actions, that doesn't just mean that 
the regulated individual has failed. It means that the agency 
has failed to help to bring about compliance.
    Shifting gears a bit, in 2022, when Acting Director Das 
testified before us, I explained my position that the Bank 
Secrecy Act regulatory cost is far too expensive, in my view. 
Like today, my colleagues and I urged acting Director Das to 
pursue reforms that would allow banks to better understand the 
quantifiable impact of the BSA and suspicious activity reports 
(SARs).
    Director Gacki, I understand that as part of the Fiscal 
Year 2022 year in review, FinCEN released information regarding 
the overall use of SARs. Are there any plans to provide, if you 
will, individualized feedback to banks with reviews that 
explain how useful the SARS that they are providing have been?
    Ms. Gacki. Thank you, Congressman. One key objective of 
ours is to implement that part of the Anti-Money Laundering Act 
that calls on us to establish feedback loops so that financial 
institutions see the value of their reporting and understand 
it. And we get law enforcement to give us, law enforcement and 
other national security professionals, information to show the 
value of this reporting that we can feed back to the financial 
institutions so that they can see the value of this reporting 
and so that we can support putting this obligation on them.
    That is something we are continuing to do is build those 
feedback loops. We have for many years established it through 
law enforcement awards that we put together where we highlight 
certain suspicious activity reports by financial institutions 
that have led to successful prosecutions. But there are a full 
range of enforcement and other actions, like sanctions, that 
could be taken based on critical tip and lead reporting that 
comes from suspicious activity, and one of the key objectives 
that we are pursuing is to ensure that we are feeding this 
information back to financial institutions.
    Mr. Rose. I just want to underscore how important I believe 
that is, having served on the board of a small community 
financial institution before coming to Congress, and I would 
describe the process that board members at community banks go 
through, and, for that matter, larger financial institutions--I 
often describe it as throwing darts with a blindfold on, in the 
dark, and never being told whether or not you hit anything. And 
the problem that manifests is that, frankly, in the years that 
I served on a board, I learned nothing. I grew not one iota in 
terms of my ability to know what would actually be useful, and 
so, no doubt, the system is flooded with information.
    I see that my time has expired, so I yield back, and I now 
recognize the gentleman from North Carolina, Mr. Nickel, for 5 
minutes.
    Mr. Nickel. Thanks so much to our Chairs, and thanks so 
much to our witnesses for being here today.
    Once again, we are holding this hearing in the name of 
national security while simultaneously jeopardizing our 
national security by failing to provide needed aid to our 
allies in Ukraine, Israel, and Taiwan. I believe that a 
majority of my colleagues in the House as a whole, and on the 
Republican Conference support standing with Ukraine, Israel and 
Taiwan, yet we continue to fail to act. We should take up the 
Senate supplemental appropriations bill as soon as possible. 
Ukraine is literally running out of bullets, and if we abandon 
them, Putin will win. Israel witnessed the brutal, barbaric, 
and calculated attack against the Jewish people and the State 
of Israel on October 7th. We must free the Israeli citizens 
wrongfully held hostage, but we also must dismantle Hamas and 
their financial system.
    Iranian-backed groups have launched over 160 attacks on 
U.S. forces in Iraq, Syria, and Jordan in recent months, 
resulting in the deaths of three U.S. servicemen and the 
wounding of dozens more. The Iranian-backed Houthis continue to 
disrupt maritime commerce and target U.S. Naval Forces in the 
Red Sea. Treasury must dramatically increase efforts to stop 
the flow of resources to Iran and its terrorist proxies.
    I would like to discuss FinCEN's recent finding that Iraq's 
Al-Huda Bank is a foreign financial institution of primary 
money laundering concern. I think this case highlights several 
potential gaps in our sanctions enforcement efforts.
    First, let me say I fully support FinCEN's action to stop 
Al-Huda's use of the U.S. financial system to launder money for 
the Islamic Revolutionary Guard Corps (IRGC) and other Iranian-
backed groups. According to FinCEN's notice of proposed 
rulemaking, since its establishment in 2008, Al-Huda Bank has 
been, ``controlled and operated by the IRGC and IRGC-QF.'' For 
15 years, Al-Huda has operated for U.S.-designated terrorist 
groups with no action by the Treasury Department.
    Director Gacki, when did Treasury first become aware that 
Al-Huda Bank was controlled by the IRGC?
    Ms. Gacki. Congressman Nickel, thank you for that question. 
I will stress that when we became aware of this information--
which I believe was in recent years, but I will get back to you 
on a specific date--we immediately invested our resources into 
investigating Al-Huda Bank as a potential target for action. 
And when FinCEN takes action, whether it is under its Section 
311 authorities or whether the Office of Foreign Assets Control 
(OFAC) takes action under sanctions, it is an action that 
doesn't take place in a vacuum. We must balance it with the 
national security and foreign policy imperatives and ensure 
that the timing is just right.
    I think we are very proud of the action that was taken, and 
the fact that we were able, over time, to build such a robust 
public record of wrongdoing and of highlighting the money 
laundering violations of Al-Huda Bank. And taking this action 
under Section 311 and pointing out AML deficiencies is actually 
a way to build an international consensus, because so many 
countries have these standards as part of the Financial Action 
Task Force (FATF). In short, we will get back to you on the 
exact time, but we did work to create a very robust public 
record of wrongdoing, and that itself took some time.
    Mr. Nickel. I certainly support those actions, but I would 
like to know when you became aware. Next question, same line of 
questioning here, when did Treasury first become aware that Al-
Huda Bank was conducting transactions through the U.S. 
financial system?
    Ms. Gacki. When it comes to the U.S. financial system, 
again, I want to get back to you, but I also want to stress 
that the seriousness of this action and the need to support it 
on an evidentiary basis is a substantial undertaking and one 
that we can't take lightly, but I can assure you that we moved 
with dispatch when we could.
    Mr. Nickel. Under Secretary Nelson, has the Iraqi 
Government cooperated with U.S. authorities in the 
investigation of Al-Huda?
    Mr. Nelson. I was in Iraq when we announced this action, 
and we have been working with the central bank and, really, the 
prime minister's office very closely on actions to move Iraqi's 
financial system off of relying on the accounts that they hold 
within the New York Fed for cash and wire transfers into a 
commercially-viable and AML/CFT compliant mode, and we have had 
great success in doing that so far. We made a lot of progress, 
more progress in terms of transaction monitoring, given the 
terrorist financing risk that exists in Iraq, but we are 
working closely with Iraqi partners on that.
    Mr. Nickel. Thank you. My time has expired. I will follow 
up in writing. I yield back.
    Mr. Rose. The gentleman yields back. Mr. Davidson of Ohio 
is recognized for 5 minutes.
    Mr. Davidson. Thank you. Thank you all for the work you do 
to keep our nation safe and secure. FinCEN is one of the 
agencies that is charged with the responsibility of financial 
intelligence, and, frankly, it is a big burden in a lot of 
ways. There is the safety requirement, but there is also the 
need to balance civil liberties there. There are a lot of folks 
who feel that America, in a way, is becoming a police state. 
Pretty benign so far, but, frankly, all the information that a 
police state would want resides in the databases that our 
government already possesses, and there seems to be an 
insatiable appetite to grow those databases.
    With that, Director Gacki, I want to thank you for your 
staff's responsiveness in scheduling a classified briefing on 
Geographic Targeting Orders (GTOs) next month. I wish this was 
accomplished before today's hearing, as Chairman Luetkemeyer 
and I sent the memo back in November of 2023, but I look 
forward to the additional opportunity to discuss geographic 
targeting orders in a classified setting. FinCEN has asked 
Congress to pass legislation to expand geographic targeting 
orders nationwide, and this request would require data 
reporting on every non-financed purchase of real estate above 
$300,000. We want to understand why.
    Instead of waiting for Congress to make a decision on GTO 
expansion, FinCEN has incrementally expanded covered geographic 
areas with little justification as to why places like Plymouth, 
Massachusetts, Sarasota, Florida, or Travis County, Texas, 
require this intrusive additional reporting requirement.
    This is why I am working on legislation that any expansion 
of GTOs by FinCEN is subject to the Congressional Review Act. 
Let me be clear: This will not inhibit FinCEN's ability to 
renew its current GTOs, but it will ensure that FinCEN makes 
the case to Congress for why expanded coverage is necessary. 
Americans are aware now more than ever that the Federal 
Government is closely watching pretty much everything, but 
especially their financial transactions. It is incumbent on 
Congress to ensure that the Treasury Department and FinCEN are 
properly using their authorities.
    Regarding FinCEN's notice of rulemaking on efforts to 
combat money laundering in the residential real estate market, 
can you detail the engagement FinCEN has had with various 
stakeholders in the real estate industry, specifically brokers 
and title insurance companies, the folks who need to collect 
this information, and, frankly, the additional obligations they 
are confronting, what kind of feedback and dialogue have you 
had with them?
    Ms. Gacki. Thank you, Congressman Davidson. In preparation 
to issue the notice of proposed rulemaking last week regarding 
cash sales of residential real estate to trust or other 
companies, FinCEN had earlier issued an advanced notice of 
proposed rulemaking, I think in 2021--I may have that date 
slightly off--where we actually sought engagement with title 
agents and other settlement agents, and engagement and input 
from industry on the proposed scoping of the rule. We got a 
number of comments that we took on board in developing and 
crafting the proposed rule.
    In now putting out this proposed rule, which will have a 
60-day comment period, we look forward to further comments to 
assess the best impact and scoping of this proposed rule. And 
we hope, to be honest, that this residential real estate rule 
will dispense with the need for Geographic Targeting Orders in 
this area, which have been expanded over time at the request of 
law enforcement and evaluated for sufficiency by us to show a 
compelling need.
    Mr. Davidson. Yes, thanks, and I look forward to that 
meeting. Thanks again for scheduling it, and I think we will 
get a lot more in a better setting, the appropriate setting. 
Let me turn briefly to digital assets, which is certainly a 
space that, while the market is comparatively small compared to 
the rest of our financial markets, the regulatory clarity isn't 
there for a lot of things. In 2019, FinCEN issued guidance that 
was, I think, important to the industry, which said that 
digital asset miners, node operators, are not classified as, 
``money services businesses.'' Is that still consistent with 
FinCEN's view?
    Ms. Gacki. I will say that I think that is our reading of 
the existing law, yes.
    Mr. Davidson. Thank you. Obviously, there are people who 
want to change that law, and so let me just follow on that and 
ask, how does FinCEN work with blockchain analytics companies 
to trace things that are on chain already? It seems like there 
are a lot of analytics. You have a permanent, immutable record. 
Is this pretty productive?
    Ms. Gacki. Yes, and FinCEN was at the forefront in 
developing expertise on virtual assets. We have some really 
great people who know this well and have sought and used tools 
that allow us to use the blockchain to evaluate and find 
illicit finance.
    Mr. Davidson. Thank you so much. My time has expired, and I 
yield back.
    Mr. Meuser. [presiding]. The gentleman yields back. The 
gentlewoman from Colorado, Ms. Pettersen, is now recognized for 
5 minutes.
    Ms. Pettersen. Thank you, Mr. Chairman, and it's great to 
have both of our witnesses here today. Thank you for the work 
you do every day.
    We have already had the opportunity to talk about my 
concerns around the fentanyl crisis, and I want to dive into 
some of the work that you all are doing. You know that this is 
the third wave of the opioid epidemic. We have more people now 
who have died in the United States than all world wars 
combined, and we have to come together with all the resources 
necessary to stop the trafficking of fentanyl into this 
country. So, I want to applaud the work that you are doing with 
the announcement in December around the launch of the Counter-
Fentanyl Strike Force to bring that coordination and 
information-sharing necessary to address this crisis.
    Under Secretary Nelson, given your role as Chair of the new 
Strike Force, can you give us an update on your work and 
comment on any additional resources and authorities you may 
need from Congress?
    Mr. Nelson. Thank you for the question. Secretary Yellen 
announced the Strike Force back in December, and we are excited 
working with IRS-CI to be able to leverage all of the tools 
that we have internal to the Department of the Treasury to more 
efficiently, I think, support law enforcement and other law 
enforcement colleagues in identifying key networks and leaders 
that are facilitating the flow, obviously, of fentanyl into the 
United States.
    I think we are focused on, with my colleague, Chief Lee, 
who is the head of IRS-CI, bringing our teams together on a 
regularized basis and identifying with other law enforcement 
partners some key cases that we can support together, using 
their particular expertise in virtual assets and the disturbing 
trend, I think, that we are seeing of the use of virtual assets 
to facilitate some of the fentanyl flows.
    I would also just note we are also participating in the 
overall U.S. Government engagements with China in the context 
of the Counter-Narcotics Working Group, and looking for ways 
that we can work on financial typologies in that context, and 
then continuing to engage the Government of Mexico, and we have 
committed to continuing to designate all parts of the supply 
chain. So, just to assure you that all parts of the Office of 
TFI are working on this issue.
    Ms. Pettersen. Thank you for those comments, and then, when 
you talk about the move to utilizing digital assets, that is 
concerning. We don't want to stop innovation here in the United 
States, we don't want it to go elsewhere, and we also want to 
have a standard in place to get out ahead of it. Can you talk 
briefly about what additional things we could consider, bills 
that are going through gaps that we currently face with the 
legislative proposals? And also, I would love to know what we 
are doing around engaging China in particular, because we know 
that when they had pressure around the distribution of 
fentanyl, they started distributing the supplies to make it in 
Mexico and bring it over. So, what additional tools do we need 
to stop that production?
    Mr. Nelson. Yes, thank you for the question. I think we are 
looking forward to working with Congress on a couple of things. 
Are there ways that we can better get out and address the 
challenge of compliance through additional regulatory clarity, 
and I think we have some ideas that we can get you on that, and 
then we're also focused on how do we get at the question of 
jurisdictional arbitrage, and are there ways to extend sort of 
AML/CFT compliance to entities that are operating abroad?
    Certainly, just in the context of China, I think out of 
President Biden's conversation with President Xi, we have 
already seen that the Chinese have taken steps to provide 
guidance to those precursor companies and restrict their 
forward export to Mexico where, to your point, the fentanyl is 
made, and I think we also understand that they are starting to 
take some law enforcement actions as well. And as I noted, a 
colleague just came back from China out of the Counter-
Narcotics Working Group, and out of that engagement, I think we 
do want to look at ways we can work with them on an operational 
level on financial typologies.
    Ms. Pettersen. I would love to have a longer conversation. 
Obviously, we are already out of time, and I didn't even get to 
ask you my questions, so I will follow up in writing. I really 
appreciate the work you do. Thank you for being with us.
    Mr. Meuser. The gentlelady yields back. The gentleman from 
South Carolina, Mr. Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. I decided to run for 
office because I was a frustrated small business owner. I was 
spending all my time dealing with taxes and regulations--State, 
local, Federal--and this beneficial ownership rule is really 
just kind of shocking to me. I own seven LLCs with my business 
partner, and I am part owner in probably another dozen LLCs, 
but let's just do the seven LLCs that I own with my business 
partner; we both are 50/50. He is the managing member because 
of the congressional ethics rules. I am a passive investor. So, 
he technically has to fill out 7 of these forms that take 20 
minutes. He is not a lawyer. He has no idea what he is doing, 
so he is going to then pay a lawyer. And that lawyer is 
probably going to charge for half an hour for each one, so 
let's just say 300, 400 bucks an hour. This is a $2,000 burden 
to just my businesses. Do you think that is reasonable, 
Director Gacki?
    Ms. Gacki. Thank you, Representative Timmons.
    Mr. Timmons. Oh, and by the way, he has no idea this 
exists. So technically, we are in noncompliance.
    Ms. Gacki. I just want to stress that we are working to 
enhance and build outreach and education regarding this 
requirement. We have built a----
    Mr. Timmons. Are you going to pay for it?
    Ms. Gacki. Pardon me?
    Mr. Timmons. Are you going to pay for it?
    Ms. Gacki. We do not require a fee to be paid.
    Mr. Timmons. I understand that----
    Ms. Gacki. Right.
    Mr. Timmons. ----but most people who are intelligent are 
going to hire an attorney, and that is going to cost hundreds 
of dollars, but if you have multiple LLCs, it will cost 
thousands of dollars. So, what is the plan to cover those 
costs?
    Ms. Gacki. Among the many things that we are looking at, we 
stress that it does not require an attorney to file this 
information----
    Mr. Timmons. What if you get it wrong? It is pretty 
complicated. I was just looking at it. Allegedly, it takes 20 
minutes.
    Ms. Gacki. Again, we are not in the business of taking, 
``gotcha,'' enforcement, the statute. We would only take----
    Mr. Timmons. Tens of millions of people have not filled 
this out, and they are technically in noncompliance. What is 
the----
    Ms. Gacki. Existing businesses have a calendar year to 
apply. They are not out of compliance.
    Mr. Timmons. We can talk in February of next year. I can 
promise you the answer will be that tens of millions of people 
will not have complied.
    Ms. Gacki. We will be working to ensure that there is broad 
awareness and compliance throughout.
    Mr. Timmons. As a small business owner, I get dozens of 
pieces of mail from all these different bizarre things. You 
can't tell if they are actually offering something. Businesses 
literally intentionally create mail that they want you to open. 
It is just a sales, whatever it is. So you are going to at some 
point send mail, and people are going to throw that away. You 
are going to do digital. I ignore everything that people do 
digitally. What is the plan to create, because there are 
technically penalties, both financial and also for willful 
noncompliance. It is a felony. So, this just seems kind of 
crazy to me.
    Ms. Gacki. Among the many things we are doing, we are 
partnering with not only with other Federal Government 
agencies, to include our colleagues at the IRS, but also with 
State Secretaries of State, and with professional 
organizations. We are building information toolkits and 
packages. There are a number of Secretaries----
    Mr. Timmons. Have you thought about letting the IRS manage 
this and say, in addition to filing your taxes, you have to 
also fill this form out? That might make it at least easier so 
that everybody who is filing taxes will know.
    Ms. Gacki. We are certainly working with the IRS to 
leverage their network. For example, a new business created in 
this calendar year which goes to the IRS website for an 
employee identification number now gets an exact link and 
knowledge of the fact to report to FinCEN. So, it is something 
we are definitely working on.
    Mr. Timmons. Can CPAs fill out the beneficial ownership 
form?
    Ms. Gacki. We don't limit the types of third parties that 
can help, so yes, ostensibly, a CPA could, and we have been 
working----
    Mr. Timmons. But a CPA would say that they are not a lawyer 
and that a lawyer needs to fill this out because they don't 
want to create additional liability. Could you give CPAs 
specific authority to fill this out?
    Ms. Gacki. Let me look into that. I don't know if that is 
necessary, but it's certainly something that we are looking 
into. Our overwhelming objective is to make this easier on 
small businesses. They are not the target of this. The target 
is the opaque, nontransparent flow, the way shell companies are 
used to move illicit funds at ultimate cost to small business. 
This should be, for most businesses, a one-and-done reporting 
requirement, and when it comes to enforcement, we are going 
to----
    Mr. Timmons. Just for me alone, it is a one-and-done, 
$3,000 to $5,000 fine, because you are trying to get to people 
who are doing things that they shouldn't do. This is not 
helping small businesses; it is hurting them. Mr. Chairman, I 
yield back. Thank you.
    Mr. Meuser. The gentleman yields back. I now recognize 
myself for 5 minutes. Thank you very much to our witnesses.
    So, 4 questions were laid out, and my understanding is that 
turned into 51 questions, perhaps. Maybe there were just 
subsets to those 4 questions, but 51 questions, and I know you 
covered a number of things regarding the beneficial ownership 
reporting plan. Let me just ask this first, Mr. Nelson. What do 
we want to glean from those questions?
    Mr. Nelson. Thank you for that question, and the idea 
behind this new reporting requirement as expressed through the 
Corporate Transparency Act is to identify the shell companies, 
the front companies that are really the doorways for 
facilitating abuse of our financial system in order to make 
possible a range of illicit activities that affect our national 
security, that affect the ability of our colleagues----
    Mr. Meuser. I don't mean to interrupt----
    Mr. Nelson. ----small businesses.
    Mr. Meuser. ----but my question is, is it going to work? 
Have you gone over this? Have you done focus groups where 
businesses have said, hmm, I can understand the practicality 
and usefulness of this to national security? I was a small 
business person for a long time as well, and here, I advocate 
for small businesses, but I obviously advocate for the national 
security of our country. I just feel that this is a very broad 
net, heavy-handed approach to trying to gain information from 
those who are in the business of defrauding or are involved in 
criminal activity. What makes you think they are going to fill 
these questions out in an honest manner or that only the lawful 
are going to be the ones who actually fill it out in an honest 
manner?
    Mr. Nelson. The reporting entities are statutorily required 
under the corporate transaction----
    Mr. Meuser. We know that, and I am getting feedback from my 
constituents of, what, I now have to fill this out? Is this 
legitimate? I don't want to fill this out. I am just quoting 
some of my constituents. There is too much information, a 
government organization I have never heard of. I will close my 
business first. Nobody knows about this. It is amazing. The 
idea that the numbers show as many as 32 million small 
businesses, and in a way, think about it again. Again, I was in 
business for a while. It is like making a product and then 
sending out an email telling all customers to buy it. That 
doesn't work, right?
    Ms. Gacki, you were mentioning the outreach program, which 
is probably going to take a little while, but they have a year 
to engage in it. I am just not sure, frankly, how effective 
this is going to be for the purpose that you are seeking, 
because it is a noble one, national security, you are FinCEN, 
but to what degree are we actually going to have the outcomes 
that we are seeking? I will ask you, Ms. Gacki?
    Ms. Gacki. Just to echo Under Secretary Nelson, I think one 
of the key objectives that we will do is as small businesses 
apply to us, we will also be able to investigate the delta, 
those companies that register but don't actually report to 
FinCEN, and that will be a great area of inquiry. Is that for 
lack of awareness, is that unintentional, or is there a willful 
obfuscation? So, that is a good tool we can use to find those 
bad actors who need to register to get a shell company to move 
but somehow forget to file with FinCEN, if they even know about 
it. So, that is something on which we will work closely and 
look closely.
    Mr. Meuser. I was Revenue Secretary in Pennsylvania for 4 
years, and I removed most of the questions that were being 
asked initially, and we just took, not an original idea, but 
the dashboard approach. If something wasn't right there, then 
we would ask for more. Have you gone through these questions 
and determined what a red flag is going to be, because you 
can't possibly have enough people, and the IT systems probably 
won't do it either, to engage in targeting those that you think 
might fall within this category?
    Ms. Gacki. Sir, we are going to be leveraging technological 
solutions where we can to ensure that we are fairly and 
accurately looking through this data----
    Mr. Meuser. Lastly, I am running out of time, but I would 
like you to get back to us on what the penalties will be for 
those who file after the time frame that you have laid out, 
okay?
    I yield back, and the gentleman from Wisconsin, Mr. Steil, 
is recognized for 5 minutes.
    Mr. Steil. Thank you for being here today. I would like to 
start with you if I can, Mr. Nelson. In preparation for today's 
hearing, did you watch Secretary Yellen's testimony before us a 
week ago?
    Mr. Nelson. I did see a good chunk of it.
    Mr. Steil. Great, and OFAC sits under your authority at 
TFI, correct?
    Mr. Nelson. Yes.
    Mr. Steil. My question for you is, last week I had a 
dialogue with Secretary Yellen about Chinese purchases of 
Iranian oil. She said she wanted to get back to me. In that 
regard, as we both, I think, know, oil revenues are a major 
source of the funds for the Iranian regime, in particular as it 
relates to Iran continuing to fund terrorism across the globe. 
In 2020, sanctions helped reduce Iran's oil exports by or to 
400,000 barrels a day. In 2023, with the eased-up enforcement, 
Iran managed to export 2 million barrels a day, and much of it 
went to China. So if we want to make it harder for Iran to fund 
terrorism around the globe, we have to look at the entities 
purchasing this Iranian oil.
    My question is: one, is it a concern for you and your 
Department; and two, what steps is TFI taking to address the 
Chinese purchases of sanctioned Iranian oil?
    Mr. Nelson. Thank you for the question. Obviously, this is 
a priority of ours. We are working with the State Department, 
which can directly designate those entities that are associated 
with the sale of Iranian oil and petrochemicals. We can get at 
the problem in a couple of ways. One, I think to your point, we 
know that the revenue is going to fund terrorist activities, so 
one of the things that we have sought to do is identify those 
pieces of the international financial system----
    Mr. Steil. But Mr. Nelson, if I can, in our limited time, 
you stated, which I agree with, that we know that these funds 
are going to support terrorism.
    Mr. Nelson. Yes.
    Mr. Steil. We know that it is being purchased by Chinese 
entities. You have said you have worked with your counterparts 
at the State Department. How many Chinese financial 
institutions have you sanctioned for facilitating the trade?
    Mr. Nelson. Just last week, we designated an IRGC-QF front 
company--it is called China Oil and Petroleum Company--which 
had arranged contracts and sold hundreds of millions of 
dollars' worth of Iranian commodities, and back in March, we 
designated 39 entities that were part of a shadow banking 
network that involved a number of Chinese touchpoints. We 
obviously are also thinking about, as we are engaging in our 
Economic Working Group and Financial Working Group and the 
Counter-Narcotics Working Group with the Chinese engaging on 
AML issues, and particularly the the Financial Action Task 
Force (FATF)----
    Mr. Steil. Let me jump in. I appreciate the work you are 
doing in this area, and you rattled a bunch off, but I think 
there is more work that needs to be done. I think we have 
continued to see the sale of Iranian oil to China. We have seen 
it increasing, so I think that there is a lot more work that 
needs to be done, and I would like you to engage with us if you 
need additional authority to be able to block this. Only 
because----
    Mr. Nelson. We absolutely appreciate that support.
    Mr. Steil. Thank you. Only because of the limited time, I 
want to jump over to you, Ms. Gacki. In your written testimony, 
you highlighted the Administration's commitment to delivering 
humanitarian assistance to the people of Gaza, being supportive 
of making sure that people have key aspects to continue their 
lives, but I want to look back at what occurred, in particular 
as to what played out of the United Nations Relief and Works 
Agency (UNRWA). You have a seat at the table of reviewing these 
entities. It is U.S. policy to not provide support to Hamas, 
yet we now know, rough math, that 10 percent of the individuals 
who were engaged at UNRWA--10 percent were either Hamas or PIJ. 
What went wrong? How did we miss it?
    Ms. Gacki. Representative Steil, thank you for that 
question. I don't know that I am best placed to answer it. 
Sorry, Under Secretary Nelson.
    Mr. Nelson. I think we have been focused on Hamas financing 
for obviously a long time, and the intel community is looking 
at these questions, and I think they are probably best 
addressed in a closed session.
    Mr. Steil. I will respect that, and maybe we can find the 
time to do that in a secure setting.
    In my very limited time left, I will come back to you, Ms. 
Gacki. I think this does fall under your authority. In 
particular, when we look at crypto, obviously, there is a piece 
of it that probably is involved in illicit financing, but that 
is actually a small piece. The primary vehicle is elsewhere, 
but we do see issues in concentrated locations in places like 
Russia. Can you just briefly describe how FinCEN works with our 
foreign counterparts as it relates to that concentration?
    Ms. Gacki. Yes. A few weeks ago, I had the opportunity to 
meet with a number of other heads of financial intelligence 
units around the world where a big topic of discussion was 
sharing expertise when it came to virtual assets. I had notable 
conversations with my Indian counterpart and with my Saudi 
Arabian counterpart, to look at virtual currency, digital 
currency as a vehicle for illicit finance.
    Mr. Steil. I appreciate your work in the area. Only because 
I am cognizant of the time, Mr. Chairman, I yield back.
    Mr. Meuser. The gentleman yields back. The gentleman from 
South Carolina, Mr. Norman, is now recognized for 5 minutes.
    Mr. Norman. Thank you all for being here. There are over 
32, I think, million or 32 reports that will be filed with 
FinCEN, I guess, within a year, the beneficial ownership 
database. What are you doing to make sure that all businesses 
are aware of the regulations that are coming down the pipe?
    Ms. Gacki. Thank you, Representative Norman. One thing we 
have done is we have taken pieces of guidance, a Small Entity 
Compliance Guide, which is translated into 11 different 
languages, frequently asked questions, and other information 
that we have created on a dedicated part of our website, and we 
are doing our level best to make sure that different 
communities which have never heard of FinCEN before get access 
to this information. We have implemented key partnerships. We 
are working with Secretaries of State of the individual States. 
We are partnering with them to ensure that information which we 
give to them is passed along, giving them a toolkit for 
information using those networks. We are working with other 
parts of the U.S. Government, the IRS, the Small Business 
Administration, and others.
    We have also put in place dedicated ways to contact FinCEN 
about this obligation. We have stood up a dedicated contact 
center with the first novel use for FinCEN of a chatbot to be 
able to engage on individual filers' questions. We are ramping 
up our efforts, including bringing in support from use of a 
small public relations contract, in order to communicate these 
requirements in plain language and as simply as possible 
because we believe that the system that we have set up is 
simple, secure, and safe to use.
    Mr. Norman. Do you have a mechanism for knowing who is not 
in compliance?
    Ms. Gacki. When it comes to noncompliance, I want to stress 
that we are not in the business of playing, ``gotcha,'' when it 
comes to enforcement. The statute is very clear. We can only 
take enforcement action against willful violations, and this is 
not about punishing small business but looking for those actors 
that are willfully evading the requirements.
    Mr. Norman. What are the fines, what is the timeline, and 
when is somebody subject to a penalty or a fine?
    Ms. Gacki. I want to stress that for this first year, 
existing companies have a full calendar year to file with 
FinCEN. The timeline, we have set this out in our rule, and for 
companies that are created in this calendar year, they have 90 
days as opposed to 30 days, and we have tried hard to meet them 
at the point of creation, for example, working with the IRS. 
When a business needs an employee identification number, they 
get access to FinCEN at that website.
    When it comes to enforcement, the statute, this Corporate 
Transparency Act, sets the level of enforcement, but again, I 
want to just return to my earlier statement that this is not 
about playing, ``gotcha,'' enforcement and going after or 
punishing small business for innocence or just lack of 
awareness. It is our job to make sure that the American public 
understands this obligation. It is something we take very 
seriously, and we don't anticipate using enforcement as a way 
to educate them.
    Mr. Norman. Well, a lot of companies have never heard of 
FinCEN, and to be subject to a penalty is not fair. Will you 
publicize the regulations ahead of time?
    Ms. Gacki. Yes, we have done that, and we are working to 
make sure that the plain language explanation of those 
regulations gets out to more and more constituencies.
    Mr. Norman. And your website?
    Ms. Gacki. Yes. We have set up a dedicated part of our 
website, which is modernized and made more user-friendly, to 
reach different constituencies.
    Mr. Norman. That is really important to the businesses. The 
more they know, the better off they are, and particularly with 
fines today, and with everything else going on, it is a real 
problem for them. Okay. Thank you. I yield back the balance of 
my time.
    Mr. Meuser. The gentleman yields back. The gentleman from 
Wisconsin, Mr. Fitzgerald, is now recognized for 5 minutes.
    Mr. Fitzgerald. Thank you, Mr. Chairman. The U.S. Secret 
Service investigates a variety of cyber-related criminal 
activities, including the illicit use of digital assets through 
its global network of 44 cyber fraud task forces. Significant 
aspects of this illicit activity involve unlicensed money 
transmitting businesses, the illicit structuring of 
transactions, and other criminal activity against organizations 
that are not federally-insured financial institutions. Some of 
those are financial institutions as defined by the Bank Secrecy 
Act.
    Two weeks ago, I was proud to introduce the Combating Money 
Laundering in Cybercrime Act, along with a number of my 
colleagues--Mr. Meeks, Mr. Nunn, Mrs. Dean--to harmonize 
criminal and banking statutes and clarify the Secret Service's 
investigative authority over crimes related to illicit digital 
asset transactions. Could you both briefly touch on the 
important role of the Secret Service in fighting illicit 
transactions as well as the FinCEN exchanges?
    Mr. Nelson. I would just note that the Secret Service 
obviously is a critical partner, and particularly critical, I 
think, in terms of the technical exchanges and the leadership, 
which I believe your bill touches on, in the context of the 
International Monetary Fund's (IMF's) work with the FATF in 
creating anti-money laundering (AML) and combating the 
financing of terrorism (CFT) standards that are consistent 
internationally. So, we're very happy to work with you on the 
bill.
    Mr. Fitzgerald. Very good.
    Ms. Gacki. And thank you, Representative Fitzgerald. I just 
want to note, I think an important aspect of that bill, too, if 
I am correct, is a renewal of the FinCEN Exchange Program----
    Mr. Fitzgerald. Right.
    Ms. Gacki. ----which is important. I just want to call that 
out and thank you for that. And just to touch briefly on our 
partnership with the Secret Service, I can tick off three 
things. They are an incredible partner for us. First, we run a 
Rapid Response Program where we work internationally to ensure 
that proceeds of fraud are able to be recovered through 
international means, and the Secret Service is critical to that 
effort in our Rapid Response Program. We also frequently bring 
them in on FinCEN exchanges. They are a valuable partner to 
offer their law enforcement expertise with private actors, like 
financial institutions, to ensure that we are highlighting 
financial risks and giving financial institutions the 
information they need to make sure that they are looking at 
financial crime in a way that actually serves law enforcement.
    And finally, we have been very lucky to have a strong 
investigative partnership with the Secret Service, 
specifically, as you note, their expertise in digital currency. 
We have worked very closely with them. They have leveraged our 
research and analysis to provide insights into some of their 
investigative targets.
    Mr. Fitzgerald. Okay. There is one other topic I want to 
cover quickly. In a recent response to Senator Tim Scott, the 
Treasury Department confirmed terms like, ``MAGA,'' and 
``Trump,'' were included in the push by Federal investigators 
for banks to surveil private financial transactions following 
the January 6, 2021, protests at the Capitol. The letter states 
that the Bank Secrecy Act (BSA) requires that a bank or other 
financial institution file a suspicious activity report 
whenever it identifies a suspicious transaction relevant to a 
possible violation of law or regulation. If that is an accurate 
interpretation of the BSA, that would suggest that if a bank 
suspected I was speeding, they could somehow flag a gas station 
purchase.
    The Office of Management and Budget (OMB) has estimated 
that total BSA/AML costs are between $5 billion and $8 billion 
per year, while the FBI's money laundering conviction numbers 
suggest a per-conviction cost between $107 and $178. This is 
not just a highly-inefficient system, but is also highly 
intrusive to the privacy of citizens. Who decides what is 
suspicious enough to warrant this suspicious activity report, 
Ms. Gacki?
    Ms. Gacki. Thank you, Representative Fitzgerald, and I 
could offer some of what I have learned, not having been at 
FinCEN at that time, but looking back at what may have 
happened. FinCEN exchanges surrounding the events of the 
violent attack on the Capitol on January 6th, and in 
anticipation of potentially more violence at the inauguration, 
were pulled together with financial institutions and law 
enforcement to share expertise as to how to look for indicators 
of violence, primarily violence using violent terms that may be 
associated with political events. The ultimate responsibility 
to determine whether or not an action is suspicious and to file 
that report remains with financial institutions. The exchanges 
that were organized at this time were information-sharing 
mechanisms, and FinCEN does not suggest that reporting based on 
constitutional rights is an indicator for suspicious activity.
    Mr. Garbarino. [presiding]. The gentleman's time has 
expired. The gentlewoman from California, Mrs. Kim, is now 
recognized for 5 minutes.
    Mrs. Kim. Thank you, Mr. Chairman, and I want to thank 
Under Secretary Nelson and Director Gacki for joining us today.
    I want to address a very important issue today that is a 
life-or-death issue for many: 6,959 Californians died of 
opioid-related overdoses in 2023 alone, and that is an 115-
percent increase from just 2019. Many of these deaths were 
preventable tragedies involving fentanyl, and while these are 
just statistics, let's remember that there is a family involved 
in every one of these cases.
    So I want to ask you, Director Gacki, what private sector 
tools does FinCEN utilize to help provide data for 
investigations and enforcement on curbing the flow of fentanyl 
into the United States, and, of course, we are concerned about 
illicit drugs also coming into our country. So, do you have an 
opinion on effective data and information products from the 
private sector that can help combat the money laundering that 
facilitates this drug trafficking?
    Ms. Gacki. Thank you, Congresswoman Kim. This is an 
incredibly important topic for the Treasury Department as a 
whole, and just last week, a FinCEN team was in Los Angeles 
with law enforcement and financial institutions, sharing 
information with financial institutions to help them detect 
evidence of fentanyl trafficking so that they can support law 
enforcement efforts, knowing that the fentanyl supply chain 
often begins with precursors and different types of die molds, 
often in China, coming to Mexico, where it is then trafficked 
into the United States.
    Understanding this and sharing those typologies, this is 
something that FinCEN has been working hard to do, and the 
event in Los Angeles last week was one of several that we have 
done over the past year, including at the border, and the 
borders of Ohio and Kentucky and other places.
    Mrs. Kim. Director Gacki, sorry to stop you, but last 
month, I know the U.S. and the People's Republic of China (PRC) 
launched a Bilateral Counter Narcotics Working Group to counter 
this manufacturing and trafficking of illicit synthetic drugs, 
but here is my concern. I am afraid that we may be giving away 
some of our leverage by lifting some sanctions, and once again, 
we are caving into the empty promises made by Chinese 
officials.
    So, I want to direct this question to you, Mr. Nelson. Can 
you tell us about the role of Treasury in the working group?
    Mr. Nelson. Yes. Thank you for the question, and we did 
participate at a high level in the Counter-Narcotics Working 
Group, and I think coming out of the meeting between President 
Biden and President Xi, we have seen China start to take 
meaningful action. They have sent guidance to the chemical 
companies that make these precursors about export restrictions. 
They did that in 2019, and we saw a meaningful drop in the 
import into the United States of those fentanyl precursors. We 
also understand that they have started to take law enforcement 
action as well. So, we do think there is an opportunity, from 
the Treasury perspective, to work on an operational level with 
China to identify those typologies for the use of sort of money 
launderers and other illicit financiers in support of the 
transfer of these precursors.
    Mrs. Kim. Thank you. We know from experience that we cannot 
solely rely on the commitments made by Xi Jinping or Chinese 
officials. So, I just want to make sure that we do everything 
we can to ensure that PRC officials are abiding by their 
commitments in the Working Group.
    Let me move on to the next issue. While I understand that 
there is a need to engage the PRC on national security and 
economic matters, I don't believe in rewarding the regime 
without significant concessions on their part. We also know the 
so-called, ``teapot,'' refineries in China can help Iran evade 
Western sanctions. And Bloomberg reported that Chinese imports 
on sanctioned Iranian oil are running at the highest level in 
at least a decade. I know this issue was brought up, but has 
Treasury discussed Iranian exports of crude oil to China in the 
Bilateral Economic Working Group?
    Mr. Nelson. I don't know that it is been discussed in 
either the Economic Working Group or the Financial Working 
Group to date. I know China, as a member of the Financial 
Action Task Force--this is an AML/CFT issue. So I think in that 
context, there will be opportunities to engage our Chinese 
counterparts on this issue going forward.
    Mrs. Kim. Thank you very much. My time is up. I yield back.
    Mr. Garbarino. The gentlelady yields back. I now recognize 
myself for 5 minutes of questions.
    Director Gacki, I would like to follow up on a question 
that my colleague, Representative Loudermilk, asked a moment 
ago. He mentioned Treasury has far exceeded the deadline to 
comply with Section 6204 of the Anti-Money Laundering Act of 
2020, which pertains to a review of the reporting requirements 
on suspicious activity reports and currency transaction 
reports. While I understand that you mentioned that this review 
is in progress, and there was a request for information issued, 
I am wondering what the holdup is on Treasury's end, and can 
you provide a timeline for when we will receive this report?
    Ms. Gacki. Thank you, sir. Just to reiterate, we issued our 
request for information in 2021, and received 140 comments in 
2022, and these particular reports require a tremendous amount 
of coordination. We are working with nearly 2 dozen Federal and 
State Government agencies to work through this. We are looking 
at certain low-value SARs. Some of the things that we are 
looking at would be to potentially automate certain low-value 
SARs to ease impact on industry modifying or removing the 
aggregation requirement of currency transaction reports. We are 
looking at streamlining or automating the continuing activity 
reviews and evaluating, of course, the applicable filing 
thresholds.
    I would like to get with my team and give you an informed 
response as to when we will be able to file these important 
reports with you, but I want to assure you that this is 
something that we are taking very seriously and are working 
toward completing in the near term.
    Mr. Garbarino. Okay. So, 2022 was when you received the 
comments, and we are now in 2024, so I just want to reiterate 
that this is very outdated. The existing SARs are very outdated 
and ineffective, in my opinion, and we need to be encouraging 
some innovation, so the quicker you can get back to us on those 
reports, the better. Thank you.
    Under Secretary, for years we have had warnings from the 
intelligence community about state-sponsored cyber actors, and 
now we have them as a reality. Earlier this week, the 
Cybersecurity and Infrastructure Security Agency (CISA), the 
National Security Agency (NSA), the FBI, and other governmental 
agencies confirmed that the People's Republic of China has 
successfully infiltrated the networks of U.S. critical 
infrastructure. PRC-sponsored Volt Typhoon hackers are pre-
positioning themselves on IT networks to enable lateral 
movement to IoT assets to disrupt functions within our water, 
energy, and communication sectors, among others. This advisory 
comes on the heels of OFAC's decision to sanction six members 
of the Islamic Revolutionary Guard Corps for their role in 
exploiting industrial control devices used in water systems and 
other critical infrastructure sectors, including the 
Pennsylvania Water Authority.
    While the recent sanctions are a positive step, the 
Administration needs to do more to hold nations like Iran and 
China accountable. My question to you is, what is OFAC doing to 
counter these PRC cyber incursions now that the Administration 
has acknowledged so publicly that they are currently in our 
networks?
    Mr. Nelson. I really appreciate the question, and I think 
you identified our overall strategy at Treasury partially to 
identify and then obviously designate/disrupt those malicious 
cyber actors, and then, in the context of what we can do to 
better protect critical infrastructure and, from the Treasury 
Department's perspective, obviously our financial 
infrastructure. Those are two significant lines of effort that 
we are undergoing, but I think in terms of more specifics on 
sort of our tactics and strategy, that conversation is best had 
in a classified setting.
    Mr. Garbarino. I understand that there are classified 
portions of this, and I understand that we have to do better at 
making sure not just our government networks, but also our 
critical infrastructure, which, I think, 80 percent of it is 
privately held, that those networks are protected. But 
publicly, I think people want to know what we are doing to hold 
the PRC and the bad actors accountable. I know there were some 
sanctions, but what else is in the works? I don't need to know 
the classified stuff, but can we know what is being done 
publicly so people can see that this is being addressed?
    Mr. Nelson. It is a great question, and I think it goes to 
really the whole-of-government approach to this, because 
sometimes Treasury tools are the most appropriate and going to 
be the most impactful, either from a disruption perspective or 
creating deterrence. Sometimes, it is obviously the Department 
of Justice's tools. Sometimes, it is other tools. So, a lot of 
our conversation is trying to identify what is going to be the 
most effective disruptive action----
    Mr. Garbarino. Are additional sanctions on the table?
    Mr. Nelson. Not to preview additional sanctions, but we are 
always working with our interagency partners about whether 
sanctions are the best tool in this context when we identify 
actors who are either in our systems or engaged in other, 
frankly, malicious cyber activity.
    Mr. Garbarino. My time has expired. I now recognize the 
gentleman from Nebraska, Mr. Flood, for 5 minutes.
    Mr. Flood. Thank you, Mr. Chairman. One thing I think about 
as it relates to FinCEN is the cybersecurity efforts associated 
with the data that you collect. FinCEN is collecting 
information pursuant to the Bank Secrecy Act, the Patriot Act, 
and the Corporate Transparency Act. This information from all 
of these different statutory sources can be sensitive in 
nature. It is critically important to me and the people I 
represent that FinCEN is able to properly safeguard that 
information. For example, the beneficial ownership reporting 
requirements put FinCEN in charge of a centralized database of 
beneficial owner information for small businesses across the 
country. Director Gacki, how does FinCEN plan to safeguard 
beneficial ownership information, which it is beginning to 
collect on a large scale, from cyberattacks?
    Ms. Gacki. Thank you, Congressman Flood. I want to state at 
the outset that we take this obligation very seriously and have 
built the database to the highest security of FISMA standards 
for unclassified systems. Having built in security to the 
database, we now are putting up the appropriate guardrails to 
govern access to this information. Access to this information 
is set by statute. There are only certain categories of law 
enforcement, Federal, State, local, tribal, and different 
national security professionals that can get access to it, and 
financial institutions and their regulators.
    In order to get access to this information, we have built a 
system and will set in place agreements to ensure that 
information is only accessed according to the procedures we put 
in place and kept secure and that it is auditable so that we 
are able to ensure that this information is kept secure, and 
that this information is not re-disclosed unless it is 
authorized by the statute. And we are currently working through 
a phased implementation plan to the data as it is being 
populated, and we will be setting in place these appropriate 
structures for access.
    Mr. Flood. One of the benefits we have in Nebraska is that 
as a motor vehicle operator in the State of Nebraska, I can 
file a public records request with the DMV, and they will tell 
me who has accessed my information from the Committee on 
Foreign Investment in the United States (CFIUS) or the law 
enforcement registry so that I, as a citizen, can know who has 
had access to my information. Will that be available to a 
citizen of the United States not associated with law 
enforcement?
    Ms. Gacki. Sir, I believe that the records are exempt from 
requests under the Privacy Act like that or from the Freedom of 
Information Act (FOIA), so I don't believe that is the case, 
but if I am wrong, we will certainly get back to you.
    Mr. Flood. And my point here is I want a way to know that 
the audits are happening and that they are being carried out, 
and that a citizen can police the government if there are 
abuses. We are dealing with this in other areas. And I am 
confident that you are working to accomplish that, but knowing 
that you have a system with an audit in place, and maybe the 
Inspector General needs to participate here, but I would like 
to know that there is a third party not associated with the 
agency that is policing this.
    One concern I have--and I am on the AI Task Force--relates 
to the use of artificial intelligence and the potential that it 
could be used by bad actors in a targeted way to penetrate 
guarded systems. I guess as FinCEN, you presented the other 
day, your agency did. Can you talk about artificial 
intelligence in that scope.
    Ms. Gacki. Oh, thank you so much, Congressman Flood. When 
it comes to artificial intelligence, we see a couple of 
different ways it intersects with FinCEN's work. First off, we 
are very cognizant that it could lower the barriers for bad 
actors to commit fraud, et cetera, and we need tools to be able 
to both look at that and articulate it and provide different 
red flag indicators to help financial institutions and law 
enforcement look for that.
    But we also see it as a potential technological innovation 
to actually help and aid in the compliance with our Bank 
Secrecy Act and other obligations. And we have been working 
through our Bank Secrecy Act advisory group, with different 
financial institutions and other players, to understand the 
technology advances that can be brought to bear and can 
actually help in meeting Bank Secrecy Act obligations.
    But finally, we also want to be sensitive to any built-in 
biases or any other types of issues with AI and other 
technology. And that is why we recommend responsible innovation 
but also testing and audit to make sure that the tools are 
being used appropriately and as intended.
    Mr. Flood. Thank you for your comments. I yield back.
    Mr. Garbarino. The gentleman yields back. The gentleman 
from Iowa, Mr. Nunn, is now recognized for 5 minutes.
    Mr. Nunn. Thank you very much, Mr. Chairman. I appreciate 
you both being here today. It's good work that you are trying 
to do.
    I want to highlight a couple of things. Your offices and 
agencies are trusted, independent bodies, and we appreciate 
that very much, with the mission of protecting Americans from 
nefarious actors. I would like to note that since my short time 
in office here of just less than 13 months, I have witnessed 
continuous decisions that have hurt small businesses back in my 
home State of Iowa, so I would like to have a conversation 
about this.
    One of the most concerning rules out of Treasury is the new 
beneficial ownership reporting requirement. I hear from small 
businesses across Iowa every day on this, whether it is a Main 
Street business or a family farm, which is why I am proud to 
have co-led the Protect Small Business and Prevent Illicit 
Financial Activity Act by Congresswoman Beatty. And I fail to 
understand why the Department did not adopt two other critical 
parts of this bill that were passed by the House of 
Representatives 420-1. Now, we all know in this city, that type 
of bipartisan agreement is something that should be celebrated, 
and I am hoping it is going to be considered by Treasury.
    Director Gacki, let me begin with you. My State has over 
270,000 small businesses. We are a small State of 3 million 
people. I want to thank you for moving the filing deadline for 
new businesses to 90 days, which my bill codified. However, 
there are two crucial parts of that bill that you did not 
adopt, so let's begin there. Why did FinCEN choose not to 
extend the filing deadline for small businesses from 1 year to 
2 years?
    Ms. Gacki. Thank you, Congressman. In consultation, we 
believe that it is important to get this database populated 
because of the critical need it serves to unmask shell and 
front companies that are being used for narcotics trafficking, 
for----
    Mr. Nunn. We are going to get into that, and I fully 
appreciate it. But Congress has said overwhelmingly that we 
want a 24-month runway for this, and you are continuing with a 
12-month runway, which might be great for the big guys but it 
is crushing my small guys. So I will re-emphasize to you, we 
need time to execute on this and do it the right way.
    Second, you did not close the loopholes that would prevent 
bad actors from exploiting those loopholes and avoiding 
disclosures of a potentially nefarious beneficial owner. I 
think I understand why, but do you want to highlight again from 
your perspective, quickly?
    Ms. Gacki. Again, I just think that it is critical to get 
this data in on an expedited timeline so it can serve and be 
useful and critical for law enforcement and national security, 
which is why we proceeded as we have.
    Mr. Nunn. Understood. I think we are all there on the 
national security front. Let's make sure we are doing it the 
right way, and again, I would ask you to look at those 
loopholes. I think that is something on which we all 
collectively agree.
    Mr. Nelson, I understand your position as Under Secretary 
is a full-time job. At the same time, I want to switch gears to 
what we are trying to do against Iran right now, a country that 
has benefited from $80 billion in illicit oil trade, primarily 
through a ghost armada. We have spoken to Treasury multiple 
times on this issue, and multiple times, Treasury Department 
has come back and told me there is nothing that they can do on 
U.S. soil. However, the United Against Nuclear Iran Group is 
highlighting ghost armadas being covered in part or in whole by 
a New York-based company right here on U.S. soil, where 
Treasury has the authority, called the American Club.
    On January 12th, you did announce sanctions on one of those 
ships only after our comments here, and mine particularly in 
December, calling them out, at which point Treasury came back 
and told me that there was no insurance company providing that 
to a ghost fleet. Clearly, that was wrong. Now, Treasury has 
moved forward and sanctioned, including the SINCERE 02--here it 
is fueling up with illicit fuel--and specifically said that 
this was linked to Houthi rebels who had fired multiple times 
on U.S. carrier strike groups, most recently, sadly, resulting 
in the loss of American lives. So, yes or no, did Treasury look 
into the American Club yet?
    Mr. Nelson. I think our staff has been in touch with your 
staff. We are looking at it.
    Mr. Nunn. You wrote me a tersely-worded letter that said 
there is nothing to see at the American Club. Yes, I have that 
here.
    Mr. Nelson. We are looking at it. We will continue to look 
at it. We are taking it seriously.
    Mr. Nunn. Let me read in part what was reported in 
Bloomberg. Your office says that it announced that SINCERE 02 
was part of a network link to al-Jamal, an Iran-based financer 
of Houthi rebels in Yemen, that Houthi then launched rocket 
attacks based on those funds provided. What are we doing to 
shut down the ghost fleet? I would like a tangible example.
    Mr. Nelson. I will answer as quickly as I can, but it goes 
to effectively trying to constrain the fleet that has engaged 
in this obfuscation behavior that we are seeing, that is 
relying on behavior so that----
    Mr. Nunn. Mr. Nelson, is this ship currently under sanction 
for carrying illicit----
    Mr. Flood. [presiding]. The gentleman's time has expired.
    Mr. Nunn. ----SINCERE 02, yes or no?
    Mr. Nelson. I can't----
    Mr. Nunn. It is the SINCERE 02.
    Mr. Flood. Mr. Nunn, your time has expired.
    Mr. Nelson. We will come back and either provide a briefing 
or----
    Mr. Flood. The gentleman from New York, Mr. Lawler, is now 
recognized.
    Mr. Lawler. Thank you, Mr. Chairman.
    Mr. Nunn. It is a U.S. insurance company.
    Mr. Lawler. Really quickly, can you answer his question?
    Mr. Nelson. Again, I will have to come back and provide a 
precise answer for you.
    Mr. Lawler. Do you not know or you just can't say in this 
setting?
    Mr. Nelson. I think it is worthwhile to describe the work 
that we are doing with the P&I clubs here and in other flagged 
jurisdictions, in the context of how we are investigating 
vessels to----
    Mr. Lawler. The question has been asked of you at least 3 
times since November. Can you provide an answer expeditiously, 
like, this week?
    Mr. Nelson. We will try to provide an answer expeditiously.
    Mr. Lawler. We are here today at a time of heightened 
concern with America and our allies around the globe facing 
serious crises and threats from adversaries and terrorist 
regimes emboldened and on the march. These adversaries are 
working together to undermine our national interests and 
advance their agendas. In the wake of the appalling terrorist 
attack against Israel on October 7th, it is clear that we must 
work to confront Iran and its surrogates in the region with a 
strong sanctions regime.
    It has been reported that the impacts of this 
Administration's relaxed approach to enforcing economic 
sanctions has resulted in over $80 billion flowing into the 
Iranian regime's pockets. Some of these funds have almost 
certainly ended up in the hands of Iranian-backed proxies and 
terrorist groups in the region. Since October 7th, these 
proxies have waged hundreds of attacks on American troops, 
military installations, and on international maritime trade in 
the Red Sea. Funding for these attacks could have come from 
Iran's oil trade, which is primarily driven by China's 
significant purchases.
    With that said, I would like to follow up on something Mr. 
Lucas touched on, which is my concern regarding China 
purchasing the vast majority of Iranian exports. I know you 
said earlier that you couldn't say exactly how many Chinese 
financial institutions you have sanctioned for facilitating 
this trade. It appears there is still a serious and potentially 
growing issue. So, I would just follow up with, why are we 
allowing Chinese banks to get away with evading these sanctions 
and funding these groups, and do you believe that we are fully 
addressing this relationship between China and Iran with the 
tools you have or is there more that must be done?
    Mr. Nelson. Thanks for the question, and obviously, we 
share the concern. I think the dynamic with the smaller, 
``teapot,'' refineries that are purchasing this oil is twofold. 
One, the refined product is used for a domestic audience, so 
there isn't a touchpoint to the international financial system 
in terms of necessarily the easy repatriation of those profits 
back to Iran. And two, the challenge that we often find 
ourselves in is the financial institutions that are being 
relied on for those transfers, again, don't have touchpoints to 
the international financial system.
    What we are trying to do is nonetheless focus on those 
touchpoints to the international financial system that do rely 
on in how Iran is getting the profits from those sales back 
into country, focused on ways we can further inhibit the 
transfer of the oil. Designating the ships and the vehicles and 
the ghost fleet that are carrying sanctioned oil because they 
carry it for Iran, they carry it for Russia, they carry it for 
a bunch of these rogue regimes, and we have had some success in 
identifying those touchpoints. Just as recently as last week, 
we sanctioned an IRGC-QF front company that was a China oil and 
petroleum company. As we are seeing those touchpoints to the 
international financial system, we can take disruptive action, 
and the DOJ was able to seize $110 million that was going to 
the IRGC-QF. We are doing that, but the touchpoints to the 
international financial system are really where we have been 
focused.
    Mr. Lawler. Okay. I want to touch on something raised by 
Mr. Issa. ActBlue Charities allowed a Palestinian academic and 
cultural boycott of Israel to fundraise on its platform for 2 
years until repeated calls by the examiner to address this were 
heeded. The Palestinian Campaign for the Academic and Cultural 
Boycott of Israel (PACBI) is a founding member organization of 
the Palestinian BDS National Committee, which is a committee 
that has included Palestinian national and Islamic forces, a 
coalition represented by U.S.-designated terror groups, such as 
the Popular Front for the Liberation of Palestine, the 
Palestinian Islamic Jihad, Hamas, the Palestinian Liberation 
front, and others.
    Under Secretary Nelson, Mr. Issa sent you this letter on 
September 21, 2023, asking multiple questions regarding whether 
ActBlue Charities has raised funds for international terrorism 
through its fundraising, collaboration, and inquiring about a 
review. It is my understanding he has still not received a 
response, so can you answer? Have you conducted any such 
review, and will you respond to Representative Issa?
    Mr. Nelson. We will, of course, respond to the letter.
    Mr. Lawler. Have you conducted any such review yet?
    Mr. Nelson. I will have to go back and talk to my staff, 
but we will respond to the letter.
    Mr. Lawler. So at this moment, you are not aware of any 
such review?
    Mr. Nelson. I am not currently aware of any.
    Mr. Flood. Gentleman, your time has expired.
    Mr. Nelson. And just to confirm, we----
    Mr. Flood. Mr. Nelson, his time has expired. You will have 
the opportunity to respond in writing.
    I would like to thank Under Secretary Nelson and Director 
Gacki for their testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    I ask you, our witnesses, to please respond no later than 
April 12, 2024.
    With that, this hearing is adjourned.
    [Whereupon, at 1:40 p.m., the hearing was adjourned.]

                            A P P E N D I X


                           February 14, 2024

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