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COULD AMERICA DO MORE? AN 

EXAMINATION OF U.S. EFFORTS 

TO STOP THE FINANCING OF TERROR 

HEARING 

BEFORE THE

TASK FORCE TO INVESTIGATE 

TERRORISM FINANCING 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 9, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–48 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

TASK FORCE TO INVESTIGATE TERRORISM FINANCING

MICHAEL G. FITZPATRICK, Pennsylvania, Chairman 

ROBERT PITTENGER, North Carolina, Vice 

Chairman 

PETER T. KING, New York 

STEVE STIVERS, Ohio 

DENNIS A. ROSS, Florida 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

DAVID SCHWEIKERT, Arizona 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

FRENCH HILL, Arkansas 

STEPHEN F. LYNCH, Massachusetts, 

Ranking Member 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

AL GREEN, Texas 

KEITH ELLISON, Minnesota 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

KYRSTEN SINEMA, Arizona 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

September 9, 2015 ............................................................................................ 1 

Appendix: 

September 9, 2015 ............................................................................................ 43 

WITNESSES 

WEDNESDAY, SEPTEMBER 9, 2015 

Larkin, Daniel, retired FBI Unit Chief, and Founder of the National Cyber 

Forensics and Training Alliance ......................................................................... 9 

Modell, Scott, Managing Director, the Rapidan Group ........................................ 5 

Rosenberg, Elizabeth, Senior Fellow and Director, Energy, Economics, and 

Security Program, Center for a New American Security .................................. 11 

Shelley, Louise, Director, Terrorism, Transnational Crime and Corruption 

Center, George Mason University ...................................................................... 7 

APPENDIX 

Prepared statements: 

Larkin, Daniel ................................................................................................... 44 

Modell, Scott ..................................................................................................... 52 

Rosenberg, Elizabeth ........................................................................................ 57 

Shelley, Louise .................................................................................................. 66 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

King, Hon. Peter: 

Report of the American Gaming Association entitled, ‘‘American Gaming 

Association Best Practices for Anti-Money Laundering Compliance,’’ 

dated December 2014 ................................................................................... 80 

(1) 

COULD AMERICA DO MORE? AN 

EXAMINATION OF U.S. EFFORTS 

TO STOP THE FINANCING OF TERROR 

Wednesday, September 9, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

TASK FORCE TO INVESTIGATE

TERRORISM FINANCING, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The task force met, pursuant to notice, at 10:04 a.m., in room 

HVC–210, the Capitol Visitor Center, Hon. Michael Fitzpatrick 

[chairman of the task force] presiding. 

Members present: Representatives Fitzpatrick, Pittenger, Stivers, 

Ross, Barr, Rothfus, Schweikert, Williams, Hill; Lynch, Sherman, 

Meeks, Green, Ellison, Himes, Foster, Kildee, and Sinema. 

Ex officio present: Representative Waters. 

Chairman FITZPATRICK. The Task Force to Investigate Terrorism 

Financing will come to order. The title of today’s task force hearing 

is, ‘‘Could America Do More? An Examination of U.S. Efforts to 

Stop the Financing of Terror.’’ 

Without objection, the Chair is authorized to declare a recess of 

the task force at any time. 

Also, without objection, members of the full Financial Services 

Committee who are not members of the task force may participate 

in today’s hearing for the purpose of questioning the witnesses. 

The Chair now recognizes himself for 3 minutes for an opening 

statement. 

As expert witnesses in prior hearings have correctly noted, the 

threat of new, expansive criminal networks capable of self-funding 

and financing terror is a very real risk around the globe. From the 

Middle East to South America to the U.S. financial institutions, the 

threats posed by an evolving sphere of terror syndicates require a 

robust response both internationally and domestically. While the 

United States has significant tools at its disposal to degrade and 

inhibit terrorist financing and money laundering, it is unclear to 

what extent such tools have been effectively utilized. 

As part of this task force’s vital mission, today’s hearing will examine the current state of counterterrorist financing efforts within 

the Federal Government to ensure that they are meeting their intended purpose and, should they not be, to identify areas which 

need improvement. 

Furthermore, it must prepare us to evaluate the degree of cooperation between the various Federal agencies involved in counVerDate Nov 24 2008 16:48 Sep 14, 2016 Jkt 099727 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\99727.TXT TERI
2 

tering terrorist financing and assess whether there should be more 

involvement between the government and the private sector to increase successful outcomes. Throughout the life of this task force, 

we have heard from a myriad of experienced professionals who 

have expressed insight from both the public and the private sectors. There have been several mentions of legislative actions Congress could take to strengthen U.S. anti-money laundering and 

counterterror finance measures, such as revising the Bank Secrecy 

Act to allow greater communication and data sharing among banks 

or amending beneficial ownership and control rules to ensure local 

and State enforcement personnel have the ability to get information pertinent to any AML/CTF investigation. 

Improving the U.S. counterterrorism finance capabilities could be 

a simple matter of increased funding for agencies which are currently overwhelmed. Since its inception, FinCEN has taken on an 

increasing number of responsibilities, thanks in part to the everevolving field of cyber warfare, payment systems, and the inclusion 

of policing money services businesses. With the addition of so many 

responsibilities, isn’t it necessary to provide additional resources to 

ensure effective implementation? 

This is a small selection of topics I wish to discuss with our panel 

today. This task force has clearly sounded the alarm of the threat 

posed by self-financing terrorist organizations and must ensure 

every option is considered in the U.S. response to this danger. Today’s hearing is an important part of accomplishing the mission of 

this group in better protecting American lives from increasingly 

well-funded and financed terror syndicates. I look forward to the 

testimony of our witnesses and the discussion between our Members. 

I now recognize for an opening statement the ranking member of 

the task force, the gentleman from Massachusetts, Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I also want to thank Vice Chairman Pittenger for holding today’s 

hearing. And I want to thank our distinguished witnesses for their 

willingness to help us with our work on this task force. I am 

pleased with the efforts our task force has made since it was created earlier this year. During our first congressional hearing this 

past April, we confronted the diversity and scope of terrorist 

threats which have become more varied and localized since the 

September 11th attacks. Our subsequent hearings have investigated outstanding challenges related to terrorist financing, including beneficial ownership, cybersecurity threats, the nexus between crime, corruption, and terrorism, and the Iran nuclear deal 

and the implications that may have on our antiterrorist financing 

efforts. 

At today’s fifth and final hearing in this iteration of the task 

force, we will examine policy proposals that aim to help improve 

our Nation’s efforts to combat terrorist financing. Detecting and 

disrupting the flow of funding to terrorist groups is essential in our 

fight against terrorism. And we are all very aware of the threats 

presented by terrorist organizations, such as the Islamic State and 

Hezbollah in the Middle East, and Boko Haram and Al-Shabaab in 

Africa. Without financial resources, these organizations will not be 

able to fund their attacks, pay their fighters, and otherwise support 

3 

their operations. Thus, to effectively stop these groups, we must cut 

off their funding. 

One of the ways we can do this is by supporting regional financial intelligence units (FIUs). This is why I am pleased with our 

witness Scott Modell’s recommendations that we take full advantage of the information collected and stored by FIUs. I also agree 

with Mr. Modell’s suggestion that we explore new ways to better 

analyze and use that information collected by FIUs in order to stop 

illicit money flows. During overseas codels, I try to make it a point 

to meet with regional FIUs to get updates on efforts to combat terrorist financing around the world. Witnessing the important work 

of FIUs around the globe demonstrates the need for the United 

States to continue to support international government efforts to 

develop robust legal, regulatory, and operational frameworks to 

combat terrorist financing and money laundering. It is also crucial 

to strengthen the relationship between FIUs, particularly with the 

Financial Crimes Enforcement Network, our FIU, the U.S. financial intelligence unit. This should be done in accordance with the 

landmark recommendations issued by the Financial Action Task 

Force, which is an intergovernmental body consisting of over 30 

member jurisdictions dedicated to strengthening worldwide 

antiterrorist financing and anti-money laundering policies. I look 

forward to hearing from our witnesses so that we can examine 

these issues further. I yield back the balance of my time. 

Chairman FITZPATRICK. I now recognize for an opening statement 

the vice chairman of the task force, the gentleman from North 

Carolina, Mr. Pittenger, for 2 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

And thank you, Mr. Ranking Member, for your hard work and 

dedication to these issues throughout the efforts of the task force. 

Over the past five hearings, briefings, and roundtables, we have 

gained important insight into the threats facing our Nation, how 

they are funded, and the many obstacles we face in intercepting 

those funds. 

Just last week, the chairman, my friend, Mr. Meeks, and myself 

had the chance to meet with officials in Europe and the Middle 

East to further understand these threats and those obstacles. The 

theme of my discussions was Iran and the $100 billion it will receive as part of this Administration’s deal. Preventing those dollars 

from funding terror should be a major priority. The delegation visited FATF in Paris, Turkey, Qatar, and Kuwait. We got a chance 

to see firsthand the challenges that they face. 

While I oppose this Iran deal, it should be a diplomatic priority 

for this Administration to reach out to those countries and others 

in the region to ensure that they utilize their resources, capabilities, and incentives to fully enforce their counterterrorism finance 

laws within their sovereign borders. But this hearing is on the 

challenges we face domestically. Over these past few months, we 

have often heard about information sharing. And increasing the information we have and use will give us a better opportunity to stop 

the flow of funds to terrorists. Our hearing today will focus on exactly that, the steps we can take to better ensure that we are cutting the funding to terrorists, and protecting the security of America against our enemies. 

4 

I look forward to the testimony from the witnesses before us and 

the opportunity to strengthen our efforts. And I look forward to 

working with my colleagues on this task force in a bipartisan manner to implement the ideas before us today. 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. I now recognize the gentlelady from Arizona, Ms. Sinema, for an opening statement. 

Ms. SINEMA. Thank you, Chairman Fitzpatrick, and Ranking 

Member Lynch. The title of today’s hearing is, ‘‘Could America Do 

More? An Examination of U.S. Efforts to Stop the Financing of Terror.’’ The answer is clearly yes. I appreciate our witnesses’ testimony and I agree that the Federal Government must change its 

approach and mindset to counter the financing of terrorism. My 

focus throughout these hearings has been on countering ISIL funding. ISIL fights locally and inspires terror internationally. But it is 

different from other transnational terror organizations. Its economic engagement with the outside world is limited. And it derives 

most of its funds from areas near or under its control. 

This task force has received testimony that the internal sale of 

oil is a significant source of income. But it is the taxation, extortion, and theft throughout the entire supply chain that funds the 

organization. ISIL levies taxes and fees at every stage of production, at key roadway crossings, ports of entry, and areas under its 

control. It replicates this model in other markets, like banking, 

where it robs and then operates local bank branches, gaining 

money through the taxation or extortion of the population and 

businesses it controls. Given the closed nature of the majority of 

ISIL’s revenue streams, how can we do more to counter ISIL’s revenue sources? I look forward to hearing more from our witnesses 

today about how we should restructure our counterfinance operations so we have the flexibility to effectively counter ISIL’s largely 

domestic revenue streams and fight other terrorist organizations 

with different funding models. 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. We now welcome our witnesses. 

And I recognize Mr. Rothfus of Pennsylvania for the purpose of 

introducing his constituent from Pennsylvania. 

Mr. ROTHFUS. Thank you, Mr. Chairman. It is my pleasure to 

welcome and to introduce Mr. Dan Larkin from my hometown of 

Pittsburgh, Pennsylvania. Mr. Larkin served in the FBI for more 

than 24 years and established the first cyber fusion unit for the 

Federal Government, enabling government and law enforcement to 

effectively co-locate with subject matter experts from industry and 

academia. This unit substantially enhances resource sharing to the 

mutual benefit of all participants. Private sector partners include 

numerous financial services organizations, telecommunications, 

technology, and e-commerce. Law enforcement partners include a 

growing list of Federal, State, and local agencies, as well as international investigators from more than a dozen countries. 

Mr. Larkin also developed one of the first high-tech crime task 

forces in the United States. This unique collaboration of assets also 

led to the development of the first national public-private alliance 

to identify and combat cybercrime. It is known as the National 

5 

Cyber Forensics and Training Alliance. Mr. Larkin also co-authored the FBI National Cybercrime Strategy in 2002. 

Again, it is my pleasure to welcome Mr. Larkin here today. And 

I am sure that we will all benefit from his experience and expertise 

on these important issues. 

Chairman FITZPATRICK. Welcome, Mr. Larkin. 

Mr. Scott Modell is managing director at the Rapidan Group. Mr. 

Modell is a highly decorated former Central Intelligence Agency officer who served for 13 years in the Directorate of Operations with 

five tours conducting Iranian operations in Latin America, Western 

Europe, and the Middle East. He also participated in post-9/11 operations in Afghanistan as a member of paramilitary counterterrorism teams composed of CIA officers and local Afghan forces. Mr. 

Modell is fluent in Spanish, Farsi, and Portuguese, and received 

his master’s degree from the Georgetown School of Foreign Service. 

Dr. Louise Shelley is founder and director of the Terrorism 

Transnational Crime and Corruption Center at George Mason University. Dr. Shelley is also the Omer L. And Nancy Hirst Endowed 

Chair and professor at George Mason University. Dr. Shelley is a 

leading expert on the relationship between terrorism, organized 

crime, and corruption, as well as human trafficking, transnational 

crime, and terrorism. From 1995 until 2014, Dr. Shelley ran programs in Russia and Ukraine, with leading specialists on the problems of organized crime and corruption. Dr. Shelley holds a master’s degree in criminology and a Ph.D. in sociology, both from the 

University of Pennsylvania. She received her undergraduate degree 

from Cornell University in Russian literature and penology. 

Elizabeth Rosenberg is the senior fellow and director of the Energy, Economics, and Security Program at the Center for a New 

American Security. Ms. Rosenberg served as a senior advisor at the 

U.S. Department of the Treasury, where she helped to develop and 

implement financial and energy sanctions. She also helped to formulate anti-money laundering and counterterrorist financing policy 

and oversee financial regulatory enforcement activities. Ms. Rosenberg received an MA in Near Eastern Studies from New York University and a BA in politics and religion from Oberlin College. 

The witnesses will now be recognized for 5 minutes each to give 

an oral presentation of their written testimony. 

And without objection, the witnesses’ written statements will be 

made a part of the record. Once the witnesses have finished presenting their testimony, each member of the task force will have 

5 minutes within which to ask questions. On your table, there are 

three lights: green; yellow; and red. Yellow means you have 1 

minute remaining. And red means your time is up. The microphone 

is sensitive, so please make sure you are speaking directly into it. 

With that, Mr. Modell, you are recognized for 5 minutes. 

Welcome. 

STATEMENT OF SCOTT MODELL, MANAGING DIRECTOR, THE 

RAPIDAN GROUP 

Mr. MODELL. Chairman Fitzpatrick, Ranking Member Lynch, 

and members of the task force, good morning. Thank you for the 

opportunity to testify today. Terrorism financing has become one of 

the most pressing national security challenges. Yet, in my opinion, 

6 

the plans, programs, and practitioners are falling short of where 

they need to be. My contention today is simple: many in the U.S. 

Government know just enough to be dangerous about finance or 

transnational organized crime but not enough to significantly impact crime or terror organizations. 

For the past decade or so, the U.S. Government has attempted 

to develop a professional cadre of law enforcement agents, civilian 

and military intelligence officers, analysts, and others to pursue a 

new field of operations which has been called counter threat finance. Their purpose was to effectively counter the financial and 

logistical depth and sustain the capacity of our adversaries who are 

engaged in irregular warfare. It was thought that hitting the finances, financiers, and illicit networks would become an important 

means of warfare. But progress has been limited. 

Looking ahead, it would serve us well to take an agency-by-agency account of what we collectively know about terrorism finance, an 

audit of each agency’s CTF track record and current trajectory, and 

ways to either add or pare down their respective roles and missions 

as part of a whole-of-government approach. This should not seek to 

bring all agencies together all the time. Threat mitigation working 

groups or interagency task forces and the like are usually stood up 

with the best of intentions and may last for a while but often end 

with poor results. 

A few of my recommendations today include the following: Number one, we need a detailed and comprehensive starting point for 

ourselves and for our liaison partners. We need to agree on how to 

better prosecute a results-dependent intelligence and law enforcement campaign, not just a series of one-off strikes, arrests, or asset 

recruitments. The way to begin is by building a CTF order of battle 

that maps key networks on a global scale, along with a tactically 

flexible and transnational plan of attack. 

Number two, I say we need to take the gloves off. I think that 

intelligence collection, law enforcement actions, and even covert action must take place inside some of the worst financial havens and 

terrorist-enabling states such as Kuwait, Qatar, and Lebanon. Too 

many U.S. missions around the world maintain an ultra-cautious 

posture when it comes to investigations, arrests, and other operational activities inside countries where financial terrorism targets 

are active. 

A prime example is Hezbollah. We too often avoid operations 

against Hezbollah’s illicit financial apparatus inside Lebanon because we don’t want to destabilize the Lebanese banking system or 

embarrass corrupt Lebanese government officials who work alongside Hezbollah. 

Number three, we need to develop career professionals who better understand finance and transnational organized crime. To attack prime terror pipelines that run through the international 

trade and banking system, we need to have more officers who have 

hands-on expertise to be able to think creatively in this space in 

order to understand the constantly evolving illicit trade craft and 

sophistication employed by truly transnational organizations. This 

requires basic and advanced training in international finance banking and trade, of which there is not nearly enough today. 

7 

Number four, I think we need to rebuild the operational capacity 

of our Treasury attaches, start by taking complete after-action account of OFAC designations on key target sets, starting with Iran. 

If you want to put Treasury on a war footing, it needs to better understand precisely how our sanctions designations and so forth 

have affected banks, investment companies, exchange houses, and 

other financial nodes of terrorist networks, how those entities and 

individuals have countered, and the degrees to which they have 

been disrupted, dismantled, or destroyed. 

Stronger Treasury force should be engaged in up-close and personal investigations of banks, hawalas, exchange houses, and others that continue to operate even after being designated. The last 

two things I would suggest are, one, information operations, usually reserved for the military, but it is a capability that I think 

could be used effectively in the CTF realm. To magnify the impact 

of CTF law enforcement operations, information operations should 

use U.S. and local media outlets to expose terrorists and their supporters, educate publics that are largely unaware of how terrorists 

move money through corrupt financial systems, and warn them of 

the consequences of abetting terrorists. Information operations can 

also be used to positively bolster the reputation of foreign police, 

intel and military efforts, or to negatively embarrass governments, 

companies, and individual collaborators. 

Finally, I would say the Rewards for Justice Program—in my experience, money is probably the single biggest incentive to sources, 

facilitators, and testifiers who assist U.S. law enforcement investigations and operations or intelligence operations, for that matter. 

I think we need to think about how to use Rewards for Justice in 

a much more creative way as a tool to motivate not only individual 

sources, but also our foreign liaison partners. A coalition of wellintentioned states, which I think we have, that is based on a common aversion to transnational organized crime is good, but it will 

only go so far. I think we will have a lot more success when it is 

linked to potential financial reward. Thank you. 

[The prepared statement of Mr. Modell can be found on page 52 

of the appendix.] 

Chairman FITZPATRICK. Thank you, Mr. Modell. 

Dr. Shelley, you are now recognized for 5 minutes. 

STATEMENT OF LOUISE SHELLEY, DIRECTOR, TERRORISM, 

TRANSNATIONAL CRIME AND CORRUPTION CENTER, 

GEORGE MASON UNIVERSITY 

Ms. SHELLEY. Thank you. It is a great honor to be here and address this task force. I think we need to broaden our concept away 

from terrorist financing and focus on the concept of the business 

of terrorism. Why do I believe this? Terrorism financing looks at 

what has been done and is being done to fund a terrorist organization. It is reactive, rather than proactive. But terrorist groups function like multinational businesses and are always looking for future 

opportunities to stay in business. Therefore, the business of terrorism examines more broadly the way terrorists generate funds 

and solicit personnel for future activity, just as we have seen with 

ISIS and its sophisticated recruiting schemes. The business of terrorism looks at marketing strategies, targets of opportunity, and 

8 

other methods that they use. And terrorist financing fails to address the fact that terrorists are acting like businesspeople and 

need to be countered as business competitors. That is why it is very 

useful to partner much more with the business community, as I 

will be talking about. 

Almost all terrorism these days is funded by crime, although 

much of transnational crime remains independent of terrorism. 

Therefore, we need to stop stovepiping the separate responses to 

crime and terrorism and to analyze them together and have countermeasures that work in this way. This is being done successfully 

by the New York and Los Angeles Police Departments, integrating 

local efforts with Federal efforts. And it needs to be expanded to 

other jurisdictions. We need to focus more on the drug trade and 

concentrate not only on the drug trade but concentrate on the 

smaller scale illicit trade that supports so much terrorism in the 

United States, Europe, and North Africa. One of the Kouachi brothers responsible for the Charlie Hebdo massacre in Paris traded in 

counterfeit Nikes and cigarettes. Similar crime is found as crucial 

support to terrorists by NYPD. 

Terrorists use corruption to execute their business activities just 

as organized crime always has. Therefore, we need to integrate 

analyses of corruption into crime and terror analyses. Public-private partnerships are key in addressing the business of terrorism. 

Businesses have insights on how to combat business competitors. 

And these insights need to be shared with governmental personnel 

who have less experience with business. And I also give illustrations in my written testimony of concrete examples of successes. 

And I am sure we will hear more about this in the cyber area. We 

can hear about this in the energy sector. 

And we need to collect intelligence on terrorist financing derived 

from diverted and counterfeit examples of commodities. But I 

should also add that I think we need to also be focusing on money 

laundering by terrorist groups into the real estate sector. We have 

a hole in the PATRIOT Act in reference to real estate. And I believe it is being exploited not just generally but even in the Washington, D.C. area, talking to real estate agents. So I think that this 

is an area that needs much more focus. 

What do we need to be doing? We need to be focusing on terrorist 

business rather than just financing, looking at trade and products, 

targets of opportunity, use of technology, as we are going to hear, 

and recruitment of personnel. We need to establish working and 

advisory groups with sectors of the business community whose 

products are likely targets of terrorists. I know there have been 

good working relationships with the technology sector, but not as 

much with those in manufacturing goods, pharmaceuticals, cigarettes, and oil, that need to be integrated into this. As I mentioned 

previously, we need to be using terrorists or antiterrorist models 

based on LAPD and NYPD. And we need to develop more controls 

over crypto currencies such as bitcoin and many other emerging 

Web-based currencies that are hard to trace and are key to the financing and the trade of terrorists that is going on both in the real 

and the virtual world. Thank you. 

[The prepared statement of Dr. Shelley can be found on page 66 

of the appendix.] 

9 

Chairman FITZPATRICK. Thank you, Dr. Shelley. 

Mr. Larkin, you are recognized for 5 minutes. 

STATEMENT OF DANIEL LARKIN, RETIRED FBI UNIT CHIEF, 

AND FOUNDER OF THE NATIONAL CYBER FORENSICS AND 

TRAINING ALLIANCE 

Mr. LARKIN. Good morning, Chairman Fitzpatrick, Ranking 

Member Lynch, and members of the task force. I appear today as 

a former FBI Unit Chief and the founder of the National Cyber 

Forensics and Training Alliance, better known as the NCFTA. 

Thank you for the opportunity to share some personal experiences 

I have had in my 24-plus years with the FBI in developing models 

of better cyber threat collaboration between the public and private 

sectors. I understand the task force is interested in functional models that might foster additional public-private partnerships to assist in the fight against international money laundering and terrorist financing. I believe the NCFTA serves as an excellent model 

for such collaboration. 

Successful public-private collaborations are essential in combatting cyber threats. The vast majority of computer networks belong 

to the private sector. And, as a result, most of the intelligence on 

those threats resides with the private sector as well. Effective public-private collaboration also depends on trust amongst the parties, 

which has to be earned, as well as strong privacy protections and 

transparency to ensure the trust of the public. 

The genesis of the successful NCFTA model actually began in the 

1990s after I was reassigned from FBI headquarters to the Pittsburgh division of the FBI. In the late 1990s, it was apparent that 

business was rapidly moving to the Internet and, not surprisingly, 

so were the criminals. FBI Pittsburgh had a long history of working multiagency task forces to address a variety of criminal activity. And at this time, the idea was developed to launch a new, hightech, cyber task force. I initially gained support of the law enforcement community for this task force and also suggested that we include representatives from the CERT Coordination Center, which 

was established in the 1980s at Carnegie Mellon University in 

Pittsburgh. Representatives from that organization at that time 

had become experts in cyber threats. And they were essentially in 

our backyard. 

Ultimately, the relationship between law enforcement and the 

CERT Coordination Center would prove instrumental to the formation of the NCFTA. But first, we had to overcome some reluctance 

on the part of CERT Coordination Center members to work with 

the FBI and other law enforcement. This was largely due to the 

concerns that information shared with law enforcement regarding 

potential vulnerabilities might become public. To overcome these 

concerns, I suggested that we detail an FBI cyber agent to the 

CERT Coordination Center to essentially serve as a fly on the wall 

and to offer support for the CERT Coordination Center and their 

clients. This program demonstrated that the FBI could actually 

work with the CERT Coordination Center members and help them 

more fully understand the scope of the threats they are facing and 

that the CERT team and its clients could actually work cooperatively work with the FBI without negative consequences. This imVerDate Nov 24 2008 16:48 Sep 14, 2016 Jkt 099727 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\99727.TXT TERI
10 

mersion program also encouraged individuals to get to know each 

other, gain a better understanding of resources that might be 

shared, and to collaborate. 

This environment helped to develop trusted relationships among 

participants and became an early principle of the NCFTA model. 

This early success of this immersion program led to a focus group 

meeting in 1988 with approximately 30 cross-sector organizations 

that came together to consider embedding resources in a common 

location in their common fight against international cyber threats. 

Out of this focus group, a White Paper was developed which summarized the core objectives of a new public-private alliance which 

eventually became the NCFTA. 

These objectives include the continuation of a neutral, meet-inthe-middle environment to foster public-private collaboration, including the sharing of knowledge and expertise among public and 

private subject matter experts; the identification of joint initiative 

based primarily on a consensus view of the private sector on priority threats; use of nondisclosure agreements among parties to 

protect confidential and proprietary information; and training programs to help ensure common understanding of permissible private 

sector involvement in information sharing, as well as best practices 

for identifying and combatting cyber threats. 

As a result of these efforts and the work of numerous individuals, the NCFTA was officially incorporated in 2002 as a 501(c)(3) 

nonprofit. Since that time, numerous investigative initiatives have 

been developed through the NCFTA with cross-sector partners 

spawning hundreds of investigations, both domestically and foreign. A common thread through many of these investigations has 

been international organized crime, money laundering, and, in 

some cases, ties to terrorist financing. 

Today, numerous private sector organizations imbed resources at 

the NCFTA, alongside a growing pool of domestic and international 

law enforcement. Hundreds of additional subject matter experts 

connect to the NCFTA through various realtime communications 

channels. 

So, what are some of the key takeaways from the NCFTA both 

in combatting cybercrime and considering future public-private 

partnerships? Significant global threats may initially manifest 

themselves only to the private sector. Their true significance and 

scope, however, may not be realized until those dots are fully connected through resources like those at the NCFTA. Cybercriminals 

will enlist many different and creative schemes to generate funds. 

And efforts to respond must also continue to evolve with the same 

or more advanced creativity. 

The NCFTA leverages existing resources in giving them a better 

environment in which to perform. From this perspective, it is a 

very efficient workforce multiplier. Relationships are vital to making the collaboration work. And they can be fragile. Making it personal, knowing your partner’s perspectives and needs is essential. 

And the human capital development aspects of the NCFTA are substantial. Thank you again for the opportunity to address the task 

force. I am pleased to respond to any questions at the appropriate 

time. 

11 

[The prepared statement of Mr. Larkin can be found on page 44 

of the appendix.] 

Chairman FITZPATRICK. Thank you. 

And, finally, Ms. Rosenberg, you are recognized for 5 minutes. 

STATEMENT OF ELIZABETH ROSENBERG, SENIOR FELLOW 

AND DIRECTOR, ENERGY, ECONOMICS, AND SECURITY PROGRAM, CENTER FOR A NEW AMERICAN SECURITY 

Ms. ROSENBERG. Thank you, Chairman Fitzpatrick, Vice Chairman Pittenger, Ranking Member Lynch, and distinguished members of this task force. I appreciate the opportunity to testify before 

you today on U.S. efforts to stop the financing of terrorism. The 

proliferation of terrorist threats and the growing diffusion and autonomy of terrorists cells internationally demands a whole-of-government response. Stemming the flow of terrorist financing is critical to this effort. The most important defenses against terrorist financing are rigorous Know Your Customer (KYC) and customer 

due diligence (CDD) practices. With robust KYC and CDD measures, financial institutions can detect and freeze terrorist-linked financial flows and suspicious activity. 

Financial policymakers, regulators, and law enforcement officials, 

of course, have responsibility for ensuring that requirements for 

such safeguards in the U.S. financial system are strong and that 

they are upheld. They use the suspicious activity reporting by financial institutions, often produced as a result of KYC and CDD 

practices along with intelligence analysis, to stem terrorist financing and activity. This may occur in the form of Treasury Department sanctions designations, legal enforcement actions against terrorists, and Defense Department targeting of terrorist threats 

abroad. To close a critical gap in U.S. efforts to combat terrorist financing, policymakers should advance new requirements for tougher CDD practices and disclosure of beneficial ownership information for legal entities. 

The Treasury Department is working on a new CDD rule, as I 

am sure many of you are aware. And the 2016 Federal budget includes new requirements for beneficial ownership information gathering and sharing tied to the corporate formation process. These 

initiatives should be swiftly and fully advanced as crucial measures 

to improve sanctions enforcement and combat criminal and terrorist activity. 

Additional steps that would further strengthen financial sector 

resiliency against terrorist financing threats include new measures 

to extend anti-money laundering and countering the financing of 

terrorism or CFT requirements to unregulated financial entities, 

including investment advisers and real estate agents, as was just 

mentioned, and, as well, to new digital currencies. Congress should 

take the leading role in setting new policy in these areas. 

To address another serious deficiency in U.S. CFT efforts, policymakers should work to remove barriers that prevent the flow of 

customer and beneficial ownership data across national boundaries. 

Such barriers make it difficult for global financial institutions to 

identify and track illicit finance across the jurisdictions in which 

they operate. These restrictions also make it difficult for government officials to identify and target sanctions evasion or criminal 

12 

activity to connect the dots. And the restrictions also hinder efforts 

to identify new nodes in terrorist networks and links between terrorist groups and criminal enterprises or their criminal activities. 

To be sure, sharing information related to terrorism threats presents civil liberties, competition, and financial inclusion challenges. 

Nevertheless, to facilitate effective law enforcement and successfully combat terrorist financing, policymakers must urgently contemplate new strategies for facilitating the flow of financial data 

across national borders. A good policy goal would be to significantly 

ease the transfer of beneficial ownership data between banks with 

correspondent relationships that are in different jurisdictions. 

To achieve this, Treasury Department officials and financial 

services policy leaders in Congress should engage foreign counterparts, advocating for legislative changes, where appropriate, to 

allow such information sharing. They can also explore the idea of 

safe harbor frameworks between the United States and foreign financial jurisdictions to create mechanisms, including appropriate 

safeguards, for cross-border financial data flows. As terrorist 

threats are global, we rely significantly on the strength of foreign 

financial systems and the will of our foreign financial regulatory 

and law enforcement counterparts to combat terrorist financing. Investing in partner capacity building to combat this threat is directly beneficial to our own national interests. Congress should expand current Federal efforts to help foreign partners strengthen 

KYC and CDD requirements in their own jurisdictions, as well as 

laws that criminalize the financing of terrorism or support for terrorism. Allocating funds in the current budget to the new counterterrorism partnership fund will help advance these efforts. 

Finally, as an additional measure to combat terrorist financing, 

legislators should set the tone for ensuring that our government 

aggressively exposes and targets terrorist financing with financial 

sanctions. This involves careful oversight of the Treasury and State 

Departments, which have the responsibility for implementing sanctions and, crucially, the appropriation of sufficient resources to 

these agencies and to the intelligence community to fulfill this important mission. Thank you for the opportunity to testify today. I 

look forward to answering any questions you may have for me. 

[The prepared statement of Ms. Rosenberg can be found on page 

57 of the appendix.] 

Chairman FITZPATRICK. Thank you, Ms. Rosenberg, and I thank 

all of the witnesses for not just your testimony, but also for the 

many different roles you have played, and for your service to our 

Nation in protecting the safety and security of our institutions, and 

ultimately our citizens and our country. 

I now recognize myself for 5 minutes. Each of the members of the 

task force will have 5 minutes to ask questions. 

Each of you, in your testimony, has identified challenges or gaps 

in anti-money laundering and counterterror financing efforts and 

laws currently on the books here in the United States. 

Mr. Larkin, you have identified a 501(c)(3), sort of a private effort in which you have engaged. And I just want to start by asking 

you to identify those gaps in policy that the NCFTA, the National 

Cyber Forensics and Training Alliance, seeks to address. 

13 

Mr. LARKIN. Thank you. Primarily, the NCFTA leverages, as I 

mentioned, existing cross-sector resources. And I think, as pointed 

out by Dr. Shelley and some others, the information that is out 

there available to us that possibly will identify early warning signs 

of terrorist financing or other significant activity might manifest 

itself in a number of different ways, across a number of different 

sectors. The NCFTA allows for those cross-sector groups to come together and have a more active discussion on what they are seeing 

that is relevant on that radar screen. 

Also, the NCFTA has become sort of a unique workforce development entity. They actually bring in three cycles of grad students 

every year to train alongside industry and law enforcement and to 

become better cyber analysts for all of us to leverage. So that has 

become a phenomenal human capital development project. Actually, as well, it has become an unprecedented coordination 

deconfliction entity with domestic and international law enforcement working very actively together in this environment where 

they don’t typically do that in other settings. 

Chairman FITZPATRICK. Dr. Shelley, you testified that you believe that U.S. efforts to date have been more reactive than 

proactive. And you actually identified a gap that you see and you 

identified the PATRIOT Act in the real estate space, a loophole 

that is being exploited by those who want to do us harm. And I 

would ask each of the witnesses, if you could, to identify the gap 

that you think is most serious, and a legislative fix, if you have 

one, a suggestion that you might make, whether regulatory or legislative, I will say. 

And we will start with Mr. Modell. 

Mr. MODELL. Again, I think Congress needs to look very closely 

at covert authorities to reexamine the possibility of going beyond 

the military. One of the things I mentioned was looking at ways 

of better using resources overseas, giving Treasury and law enforcement the authority it needs to work closely with the military 

to actually magnify the impact of CTF operations overseas. A lot 

of it has to do with education overseas, awareness. And I think 

that the ability to operate with just relying entirely on financial intelligence units simply isn’t enough. 

Chairman FITZPATRICK. Mr. Modell, do you see the Treasury officials who are serving us overseas in different embassies more as 

representatives or diplomats or law enforcement? 

Mr. MODELL. In my experience, they are much more diplomatically inclined. They are representatives. And they are not involved 

to the degree they need to be in rolling up their sleeves and doing 

day-to-day investigations. They don’t have the support. They don’t 

have the coverage. And they don’t have the resources. 

Chairman FITZPATRICK. Dr. Shelley? 

Ms. SHELLEY. I would also add that I think we need to have 

more funding of research. Just as Mr. Larkin was talking about 

having graduate students at CERT and how helpful this is, I think 

to help locate some of these new areas of financing, we need analysis. 

To give an example, on ISIS, working with my former graduate 

students, I had the identification of Captagon, which is a drug that 

is produced synthetically in the Middle East, and seems to be used 

14 

extensively as a funding source for terrorism, but is not cropping 

up in our research and analysis. So part of this is we need to have 

financial support and authorization in different government agencies to help fund cross-national research in this area that allows us 

to see things that other people are not identifying. 

Chairman FITZPATRICK. Mr. Larkin? 

Mr. LARKIN. One of the existing inhibitors that is still out there 

today is clarity on what are the safe harbor provisions. Within the 

financial services industry, I think there are clearer safe harbor 

provisions within PATRIOT Act 314(b) and obviously the SARs, 

safe harbor. But the reality is that the stakeholder community that 

actually has the information and that needs to share is much 

broader than financial services. So some of the early warning signs 

will manifest within telecommunications, and some will be in retail, merchant, e-commerce, and other areas where there is a hesitation to share information because they don’t truly feel there is a 

clear safe harbor that protects those organizations from doing so. 

Chairman FITZPATRICK. Thank you. 

Ms. Rosenberg? 

Ms. ROSENBERG. Thank you. I will speak to this briefly. The 

greatest area of concern I would highlight is the inadequacy of current laws requiring or inadequacy of laws that could require the 

gathering and sharing of beneficial ownership information, particularly at the company formation process. It requires a congressional 

fix. Regulation cannot do it alone. It is an area that was publically 

identified almost a decade ago by the Financial Action Task Force 

in which the United States has a critical deficiency. It does not 

lead the world in this area. And it should. 

Chairman FITZPATRICK. Have you taken a look at any legislation 

currently pending here in Congress? There are some bills. 

Ms. ROSENBERG. Yes. Particularly the language that is written 

into the current 2016 budget that would create the opportunity for 

gathering beneficial ownership information by the IRS and its 

sharing without a court order in the process of conducting investigations would go a long way to helping but it is not fully adequate. 

Chairman FITZPATRICK. I thank the witnesses again. 

And I will recognize Mr. Lynch for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

The typical way that we have been addressing anti-money laundering and counterterrorism efforts on this task force has been, and 

I think for our FIUs as well, partnering with central banks in other 

countries and setting up FIUs. I know that the members on this 

task force have been to Tunisia, Jordan, Morocco, obviously Afghanistan and Iraq, a bunch of countries, just trying to get them 

to adopt anti-money laundering legislation and then enforce that. 

And the idea there is to squeeze out the terrorists from using the 

formal financial system. 

We have a different animal in ISIL. They are autonomous. A lot 

of the things that we normally do to shut them out are not effective 

because they rely on, they have rolled over a couple of Iraqi banks, 

a couple of Syrian financial institutions. They are using taxation in 

cities like Mosul and other places. They are using antiquities sales. 

They have a pretty active oil or at least petroleum trade program 

15 

going in terms of the Syrian and, until recently, the Turkish border. So they are generating all this revenue. And it just seems that 

our model that we usually use to fight this is not effective against 

them because they are a different situation. 

Do you have any ideas about how to approach that problem? Because, obviously, the successful things we have been using against 

other situations where you have Al Shabaab or Hezbollah raising 

money sort of on the margins or on the seams of a legitimate banking system or using hawalas or hawaladars to finance small operations. Again, if you go back to what ISIL is doing, they are autonomous. And we can’t seem to get at them using our usual toolbox. 

Do you have any ideas about how we might be more effective 

against them? 

Mr. Modell? And I will go right down the line. 

Mr. MODELL. In my brief experience in working with DOD, the 

answer to that question, I think, in short is this is brute force on 

the ground, doing the things that you just referred to. This isn’t 

them penetrating banks in Switzerland. This requires brute force. 

You have to take a very close look at the DOD processes that are 

involved in getting the proper authorities for taking action, kinetic 

action, against legitimate targets in country. And I think it is too 

cumbersome to get to key targets in places like Syria where, again, 

you have a terrorist force that is exercising its will by brute force 

and terrorism. So, for me, it is a military authorities issue to a 

large degree. 

Mr. LYNCH. I understand. Our problem is separating them from 

the population. If we just use brute force in Mosul, we are going 

to have a lot of folks signing up for ISIL pretty quickly because of 

the civilian casualties. That is the problem. 

Mr. MODELL. I think there is enough information about validated 

targets to actually reduce the potential for collateral damage. It is 

just a matter, to a large degree, from what I heard, of political will 

to actually go forward and do things on the ground. 

Mr. LYNCH. Thank you for sharing that. Thank you. 

Dr. Shelley? 

Ms. SHELLEY. The problem that you are describing with ISIL is 

in large part a problem of trade-based money laundering and fundraising. And I think there are things that can be done other than 

military action. For example, the Captagon trade, which is being 

taxed and has become a much more important revenue source according to colleagues in the Middle East, has precursor chemicals. 

And we could be following much more in cutting off some of the 

precursor chemicals that are leading to this production. 

We could be working with some of the problems of corruption 

that have been identified in Kurdish Iraq that have helped move 

the oil into Iraq. We could be working more in Turkey trying to follow the initial financial flows. So there are things that business 

does, an analysis of what is going on in anomalies in their market 

that would be extremely helpful in trying to identify and target 

their opportunities. 

Mr. LYNCH. Thank you, Dr. Shelley. 

Mr. Larkin? 

16 

Mr. LARKIN. I have to say that being almost 5 years removed 

from the FBI, I don’t have enough detail on what you are talking 

about to actually speak to it. So, I apologize. 

Mr. LYNCH. That is fair enough, Ms. Rosenberg? 

Ms. ROSENBERG. In addition to the military options that were 

laid out, there are a number of options I would bring to your attention in the financial services sector that can be brought to bear 

against this challenge. Specifically, working with the banks that 

have local bank branches in this area to ensure as a basic principle 

that this can be the area under ISIS control is a closed economy 

and to try and prevent money that comes in and out. Of course, the 

local bank branches inside the territory is one area. So creating restrictions on any wire transfers moving in and out or additional 

precautions on deposits made there or removed from there. Additionally, working with the local financial regulators and neighboring jurisdictions, Turkey, in particular, to ensure that where 

money comes into those financial institutions there from the smugglers, from the truck drivers, from anyone who is moving these 

counterfeit goods, stolen antiquities, illegally marketed oil, that 

they are stopped and the money is arrested before it can enter the 

formal financial system and be moved. 

Additionally, looking at the cash that is couriered into ISIS territory by foreign fighters, who are asked, they are solicited by ISIL 

leaders to bring with them money into this territory. That is an 

issue for border control to arrest cash moving in, as well as for 

cyber financial authorities looking at the movement by wire of 

money into ISIS territory by these foreign fighters. 

Mr. LYNCH. Thank you. I yield back. 

Chairman FITZPATRICK. The vice chairman of the task force, Mr. 

Pittenger, is recognized for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Ms. Rosenberg, in your testimony you talked about the necessity 

for information sharing, those obstacles that exist. When David 

Cohen testified last year, when he was with Treasury, he said that 

we are looking to do our part to improve the sharing of information 

by exploring changes to the rules governing information sharing 

among financial institutions and between financial institutions and 

the government. This included the flow of information from the 

government to financial institutions and between financial institutions themselves. Are you aware of any changes that have been 

made since that time? And what changes should we make to 

achieve this goal that would give us an increase in information? 

Ms. ROSENBERG. Thank you for the question. I believe you mean 

changes since Undersecretary Cohen’s testimony. I am not aware 

of particular changes that have occurred since his testimony. Although the effort to try and expand opportunities for sharing information between government and the private sector moving in both 

ways presents a particular challenge, as well as you mentioned between financial institutions themselves. The option I suggested in 

the context of across national border information sharing contemplating safe harbor arrangements I think may pose an interesting 

example to explore. Creating protections or a comfort, if you will, 

for financial institutions to be able to bring forward potential risks 

17 

or threats without the fear of liability in such a safe harbor arrangement is critical. 

One option that already exists is specific outreach by government 

institutions to stakeholder communities within certain financial 

sectors, for example, through people who have security clearances 

outside of the government and who are able to, in a confidential 

manner, discuss potential threats. Of course, there are competition, 

anticompetition challenges associated with that. But much more 

needs to be done in that area to make sure that everyone, they are 

common stakeholders in preventing terrorist movement, terrorist 

financial movement, they are able to do their job. 

Mr. PITTENGER. Thank you very much. As a result of the Iran 

deal, there are 46 banks in Iran that will be lifted in their sanctions and be able to transmit funds through the SWIFT authority. 

The Administration says it will impose sanctions on these banks if 

they continue to transfer funds for financial terror. How can the Financial Services Committee and the Congress enforce this statement made by the Administration? And what support would you 

give of congressional efforts to remove the Administration’s waiver 

authority to lift sanctions from Iranian banks? 

Mr. Modell, we will start with you. 

Mr. MODELL. One of the biggest things that I have been asking 

myself as I am looking at the Iran deal and I am looking at it play 

out and wondering how the implementation is going to go, assuming we get that far, is how are you going to recalibrate our own 

government resources overseas to figure out if they are cheating, 

if they are not cheating, if they are going to go back to doing what 

they have done for so long, which is their own whole-of-government 

approach? It uses the private sector. It uses charities. It uses 

banks. So what you are talking about is a massive problem. So for 

Congress to figure, to start thinking about what is it the U.S. Government can better do to figure out how Iran is going to honor its 

agreement or not. We need to start thinking about all of our existing relationships with financial intelligence units, all the ways in 

which, whether it is the FBI or the agency overseas, how they are 

collecting, what they are collecting on, how they are going to work 

with the IAEA. The reintegration of Iranian banks causes a huge 

problem because that illicit apparatus hasn’t gone away. It was frozen. When it is unfrozen, it is going to go back to doing what it 

did before, to a large degree. 

Mr. PITTENGER. Dr. Shelley? 

Ms. SHELLEY. I don’t have Mr. Modell’s specialization on this. 

But I will add that there is another component other than foundations and their use that he enumerated, which is the problem of 

Iranian involvement in criminal activity, such as trafficking in 

women to Turkey as a way of generating funds. This has been written about and researched in Turkey. So what we are looking at is 

not just an overt network, but a criminal network that will be generating funds that needs to be watched of how that money moves 

and how it integrates with the financial system. 

Mr. PITTENGER. Thank you. 

Mr. Larkin, quickly? 

Mr. LARKIN. I apologize, I don’t have the background or expertise 

to answer that. 

18 

Mr. PITTENGER. All right. 

Ms. Rosenberg? 

Ms. ROSENBERG. Thank you, Congressman. 

There are a couple of suggestions I would make. The first is to 

ensure that additional sanctions under E.O. 13224 for terrorism 

concerns are aggressively pursued against Iranian financial institutions. Successful efforts in that domain will rely on excellent new 

intelligence work which I think needs greater resources in order to 

make sure that the kind of diverse money laundering schemes associated with terrorism can be found that may come forward in the 

future. 

In addition, the 311 action taken by Treasury’s FinCEN previously could be revised and updated to highlight particular concerns related to Iran’s support for terrorism and its use of financial 

institutions in order to give clarity and information to financial institutions in the United States and, of course, elsewhere about the 

particular methodologies of concern that they may anticipate seeing in the future. 

Mr. PITTENGER. Thank you very much. 

I yield back. 

Chairman FITZPATRICK. We have been joined by the ranking 

member of the full Financial Services Committee, Ms. Waters, and 

I recognize her for questions. 

Ms. WATERS. Thank you very much. 

I wish we had a lot more time to talk about the agreement in 

Iran because it has been stated so many times that when we lift 

the sanctions, over $100 billion will be available to Iran. And some 

say that much of that would be used for terrorist activities, et 

cetera. 

However, I think I better go to Dr. Louise Shelley. In your prepared remarks, you wrote that the New York and Los Angeles Police Departments are particularly effective at following the money 

connected to terrorism. And you suggest that the model they employ where resources for combatting crime and terrorism are 

shared could be replicated across the country. That is very impressive. And since I am from Los Angeles, I would like to get a sense 

of how that works. And what kind of systems do they have to track 

the financing of terrorism? 

Ms. SHELLEY. Thank you for this very good question. In my book, 

‘‘Dirty Entanglements: Corruption, Crime, and Terrorism,’’ I provide an illustration and quite significant detail of how the joint activities between the crime and analytical branch of the police and 

the terrorism branch are coordinated so that literally the police are 

going out and doing their undercover work, undercover work on the 

crime. And that often leads to hints of terrorist activity. And then 

they have regular meetings where they integrate their observations 

and their insights from their informants with Federal law enforcement. 

So, in this remarkable case, they found a linkage between a 

Chechen funding cell that was working with an Armenian organized crime group through a front charity that was shipping hundreds of cars out of Los Angeles to raise money that were going 

back to support Chechens in the attack in Beslan that killed hundreds of children and family members. And recently we had a joint 

19 

French-American meeting, which we called Track 11⁄2 Diplomacy, 

and we had a presenter from LAPD present to this group because 

the French have had so many tragedies lately by not having this 

integrated analysis. And they thought this was one of the best lessons learned and hoped to bring this over to inform the French government soon. 

Ms. WATERS. So given that information and that fine example 

that you just shared with us, can you see any possibility of Federal 

legislation that would incentivize or inspire police departments 

across the country to develop those kind of integrated systems 

where they would have those working on crime talking with those 

working on terrorism, sharing that information, and making it 

work to be able to identify money laundering and terrorism, et 

cetera? Do you have any thoughts about possible legislation that 

could help? 

Ms. SHELLEY. I think that is your bailiwick is to come up with 

the legislation. But that is exactly why I wanted to bring it to your 

attention so that there would be efforts made in this. Thank you. 

Ms. WATERS. We better start thinking about that. Thank you 

very much. 

I yield back the balance of my time. 

Chairman FITZPATRICK. The gentleman from Pennsylvania, Mr. 

Rothfus, is recognized for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. Larkin, I would like to talk a little bit with you. CyFin, one 

of the National Cyber Forensics and Training Alliances’ initiativebased models, is dedicated to identifying, mitigating, and neutralizing cyber threats targeted at the financial services industry. As 

I understand it, the initiative has grown to include more than 75 

members and played a key role in developing and advancing significant investigations by domestic and international law enforcement agencies. This has resulted in millions of dollars in compromised accounts that had been secured before financial losses 

could occur. CyFin and the NCFTA generally seem to be great examples of private-public partnerships and the benefits of information sharing. Do you know whether these instructions are being 

replicated anywhere? 

Mr. LARKIN. That is being considered. I know that the FBI and 

other agencies are considering how this model is working today and 

whether or not it can be replicated in other regions. But one of the 

prime considerations in doing that is to ensure that it is a complimentary project and not something that is viewed as competing. 

Mr. ROTHFUS. Would there be anything that would inhibit the 

development of such other organizations? 

Mr. LARKIN. Not that I am aware of. I think it is just attending 

to the fundamental premises that the NCFTA holds and to make 

sure that, again, those succeeding models are set up in a way that 

they are complementary and coordinated with the current one. 

Mr. ROTHFUS. Mr. Modell, you mentioned in your testimony that 

there should be greater oversight of correspondent banking between financial institutions and foreign entities. I agree that correspondent accounts present a great challenge. And I would be interested to hear whether you have any specific recommendations on 

20 

policy changes to address this issue or suggestions on how this 

greater oversight might be structured. 

Mr. MODELL. We did a number of things with DEA and a couple 

of other government agencies looking at the way that Hezbollah 

runs transnational organized crime, particularly trade-based money 

laundering. And we were looking at the ways that they were working with the Iranians running money through correspondent accounts through the United States. We were looking at it from a 

very operational perspective, correspondent baking accounts 

emerged as a clear target set that we need to do more against. 

From a legislative perspective, I have to apologize, I don’t have any 

recommendations specific for you. 

Ms. ROSENBERG. Congressman, could I speak to that? 

Mr. ROTHFUS. Yes. 

Ms. ROSENBERG. Thank you. From my perspective, the best way 

that financial institutions that maintain correspondent banking accounts with each other have to make sure that the money flowing 

through customer accounts, wire transfers, what have you, is safe 

and legitimate money is to make sure that they can properly exchange information about the client, including beneficial ownership 

information. National level restrictions that prevent the flow of 

that information make it such that that information cannot always 

be shared, even within the same financial institution that crosses 

a national boundary, which can mean that it is possible for the financial institution and the financial system broadly to be abused. 

So the ability for financial institutions to make their decisions 

about which correspondent banking relationships to maintain is 

significantly affected and will be supported if that information can 

be shared across national boundaries. 

Mr. ROTHFUS. Thank you. 

If I could just pop back to Mr. Modell for a second. You suggest 

that informational operations campaigns should be used to educate 

the public on how terrorist organizations move their illicit money 

and to embarrass foreign governments, businesses, and individuals 

in an effort to keep them out of corrupt financial systems. You suggest that this is particularly appropriate for Iran. And as we consider the Iran deal, we know that part of the deal, as Congressman 

Pittenger reminded us, is that many Iranian banks, companies, 

and individuals will be delisted for purposes of both U.S. and international sanctions. Some have suggested that this delisting brings 

new legitimacy to these entities, even if they are part of the Islamic 

revolutionary guard corps. With that in mind, how harmful do you 

think the nuclear agreement will be to this effort of keeping people 

out of the corrupt Iranian financial system? 

Mr. MODELL. I think that—one of the biggest oversights of the 

agreement is exactly that. If we are going to go forward and try 

to figure out how to build a compliance and verification mechanism 

on Iran’s nuclear program, in other words, are they going to live 

by the fundamental tenets of the agreement, how are we not all on 

the same page with regard to illicit procurement or their re-entering into the banking system? To answer your question, I think 

when you are going to bring back IRGC-related entities, when you 

are going to bring back banks online, you are doing a real disservice to the international financial systems. So when you are 

21 

talking about information operations and their ability to actually 

deal with this gap in the Iran deal, it is about exposing things that 

need to be exposed. 

Mr. ROTHFUS. Would businesses in Europe, China, and Russia— 

really, are they going to be shamed out of entering the Iranian 

marketplace? 

Mr. MODELL. In my opinion, I think people underestimate the degree to which the European businesses see the risk in returning to 

Iran, particularly if the United States is going to maintain a 

hardline approach. I think some will not be deterred. I think when 

you talk about China, for instance, and certain partners that are 

already ready to engage or have been engaging despite sanctions, 

like the Chinese and the North Koreans, there are going to be certain business environments that aren’t going to be affected whatsoever. And information operations in those environments wouldn’t 

work because we wouldn’t have the local support of local media 

outlets and partners in any case. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

The Chair now recognizes the gentleman from New York, Mr. 

Meeks, for 5 minutes. 

Mr. MEEKS. Thank you, Mr. Chairman. 

Let me first thank you, Mr. Chairman, for leading a great trip 

where we did a lot of investigations in talking to individuals, 

whether it was from France, Turkey, Qatar, or Kuwait. And I know 

we tried to get into Lebanon, but unfortunately, we couldn’t get in 

there. But we had a good conversation with its prime minister. So 

I very much appreciate the trip and I gained a lot of knowledge on 

the travel talking about this very subject matter. I want to first 

thank you for that. It was very good. 

And given that, because one of the things that seemed clear to 

me on this trip is that the group that is a threat to everybody, 

whether it is the United States, whether it is Israel, whether it is 

even Iran and Russia and France, is this group called ISIL or 

Daesh. And everybody seems to be very much concerned about how 

they were being funded and how the dollars would go through. 

So, to that, let me ask, first, Mr. Modell, because I believe in 

your writing, you discussed how intelligence collection for law enforcement and covert action needs to take place within countries 

that, using your words, are the most financial safe havens and terrorism enablers. Now, I was really taken aback to some degree 

when we were in Kuwait and Qatar, particularly, because they 

seemed to be very forward with what they were trying to do and 

what they could not do, or had not been done. A lot of that had 

to deal with some of the cultural questions, like a lot of people utilize cash as opposed to credit cards or anything else. Cash is harder to trace, et cetera, and a lot of them were making new laws with 

regards to the charity law because money was being funneled 

through that. But there also seem to be some concerns culturally, 

because culturally they bank differently than, say, Westerners 

have, different things, and that nature. 

So my question to you is, how would such actions take place in 

these areas where they have the potential of destabilizing? When 

I talk about the Kuwait, for example, the June 26th date, for the 

first time, they had their own bombing at a mosque. They seem to 

22 

be very focused on doing what they need to do to try to be very 

helpful here, but at the same time, they said, we have to move 

things to give confidence to our people. So how do you balance, 

what do you see the balance of the two, so that we could make sure 

we don’t destabilize other regions of the area as we try to make 

sure we prevent them from passing dollars through? 

Mr. MODELL. Yes, thanks for your question. I think it goes down 

to the fundamental issue of liaison relationships. You have to have 

more people who are constantly engaging with the Qataris, and the 

Kuwaitis, and saying: Listen, we have priorities. We realize you 

can’t subvert your entire banking system because it is totally corrupt with terrorist financiers. But there have to be priorities. There 

has to be more action. 

In the case of Qatar, there are serious Al Qaeda and ISIS financiers sitting in Doha, and they know it. So it is not a cultural 

issue. It is not an unawareness issue. It is that they have their own 

motivations for doing what they do. And they have their red lines. 

For us to strike the right balance between understanding where 

their red lines and limitations are and our need to actually stop the 

flow of money into Syria and Iraq, that is why I am calling for a 

different type of engagement overseas. 

If you have Treasury people who are covering four, five, or six 

different countries or FBI or agency people who don’t have the adequate amount of resources to actually engage in a fulsome way 

with financial intelligence units, with the police, with the military, 

with law enforcement, and incentivize them and really develop a 

systematic way of creating a culture there, a liaison relationship 

culture, where they natural incentives—and I talked about some of 

the things that we can offer them to do that—you are not going to 

get any changes. 

I will give you an example. The DEA has told me very frequently 

in certain places in the Gulf, when they approach the financial intelligence units or when they approach their police counterparts or 

their counterdrug counterparts, they get nowhere. They get the requests delivered and they say, we will get back to you, and they 

don’t get back to you. So if it is financial issues, there are the blank 

stares. If it happens to be really serious narcotic issues, they will. 

Again, I think it is a matter of political pressure combined with 

changing the culture and changing the incentives on the ground, 

and that starts at liaison relationships overseas. 

Mr. MEEKS. Let me try to get one question in with the time I 

have remaining to Mr. Larkin. Because, Mr. Larkin, you talk about 

in your remarks cybersecurity landscape, law enforcement, needs 

private industry’s help more than the reverse. So, given this, what 

types of incentives exist that we might give and how might they 

be improved to ensure that government has the appropriate level 

of access to actual threat information, and how do we protect, utilize public-partnerships? How should they be structured so that we 

can also have privacy and promote transparency? 

Mr. LARKIN. Thank you for the question. I think the model that 

the NCFTA presents is one that has been given a lot of thought 

in setting up the policies and procedures for how information is 

shared and how those relationships are developed. I think, as I 

mentioned earlier, the incentives, or I guess the confusion around 

23 

how information can and should be shared and when largely comes 

from a misunderstanding on what the safe harbors are, what the 

appropriate sharing of information can be. I think the FBI and 

other agencies have gotten better about sharing information back 

with industry, and I think they have learned over the years that 

there are a lot of good things that come from that; when you arm 

industry with more specifics about what the threat looks like from 

your side, they can actually go find more information and bring it 

to you in a more timely and more effective manner. 

Chairman FITZPATRICK. The gentleman’s time has expired. 

I recognize the gentleman from Florida, Mr. Ross, for 5 minutes. 

Mr. ROSS. Thank you, Mr. Chairman. Mr. Chairman, it is my understanding that this is the last meeting of this task force. Is that 

correct? 

Chairman FITZPATRICK. I’m sorry? 

Mr. ROSS. It is my understanding this is the last meeting of this 

task force? 

Chairman FITZPATRICK. Yes, it is. 

Mr. ROSS. And that is a shame, because I think the task force 

with you, Mr. Chairman, and with the ranking member has done 

a very diligent job objectively identifying some of the greatest 

threats that we see today in terrorism financing. And I would implore Chairman Hensarling to do more to keep this task force 

going. 

Because what we have learned, I think, in the brief period this 

task force has been around is undisputed that Iran is the largest 

state sponsor of terrorism. And despite ongoing sanctions, they continue to finance terrorism activity throughout the world, that they 

are led by extremist clerics, who are committed to the destruction 

of Israel and Iran, and that if this Iranian deal goes through, the 

relief of at least $100 billion in sanctions would flow more money 

to terrorist groups throughout the world and make this world even 

less safe. 

Ms. Rosenberg, you speak of allowing for other opportunities, if 

you will, when we are in an engagement of usual and customary 

financial transactions through the infrastructure of the financial 

services arena, for example, continued stronger anti-money laundering, increased sanctions. Those sound good. How do we go about 

implementing that? In other words, we are about ready to probably 

see the release of sanctions against what has been deemed to be 

the central bank of terrorism, Iran, and yet, we know that we have 

to do something so long as they are within the infrastructure, if 

you will, of financial services, and those would include further 

sanctions. What would you propose? 

Ms. ROSENBERG. Thank you for the question. In order to counter 

the threat that Iran poses to our financial system and, indeed, to 

our national interests as the state sponsor of terror, there are a 

number of things that we can do from a policy and regulatory perspective to address this. One is the modification of the 311 on Iran, 

as I mentioned previously. Additionally, I would suggest doubling 

down on sanctions targeting the IRGC and its links to terrorism. 

So though many sanctions including all the most significant economically punishing ones on Iran will be lifted on implementation 

day under this deal, assuming that takes place, sanctions on IRGC 

24 

and those that are imposed under terrorism theories are not going 

to be lifted, and secondary penalties would still be associated with 

them. 

Mr. ROSS. And that has proven to be very effective too, the lifting 

of sanctions. 

Ms. ROSENBERG. Yes. I agree. It seems that way to me, at a minimum, from the perspective of identifying, naming, and shaming 

entities associated with that and arresting their ability to use the 

financial system. 

Mr. ROSS. Thank you. I appreciate that. 

Mr. Modell, quickly, I know—and I will have you address that 

as well. But I think you had a point that I think is very important 

that we have to realize. And for those terrorist organizations out 

there that avail themselves of what we consider to be terrorist, traditional terrorist means, which don’t use the infrastructure of the 

financial services arena, brute force is an element, and is it not an 

element that we have to consider as one of the tools if we are going 

to successfully combat the financing of terrorism throughout this 

world? 

Mr. MODELL. Yes. Unfortunately, in a place like Syria, based on 

the stories that I have heard, trying to compel truck drivers to 

abide by the laws, try to create greater border security, all of those 

things I think would eventually have to happen, and we have to 

focus on that in the next phase. I think now, unfortunately, there 

has to be smart, designated, kinetic activity, at least setting ourselves up to do that. 

Mr. ROSS. I agree. And I think we have to realize that as an essential tool in our tool box in order to combat this. Really quickly, 

yesterday, 15 governors, one of which is my governor from the 

great State of Florida, sent a letter to the President essentially saying that the Iranian deal highlights concerns that lifting Federal 

sanctions would only result in Iran having more money available 

to fund terrorism. They quote the Acting Under Secretary of the 

Treasury for Terrorism and Financial Crimes as saying that he expects to continue to see Iran funding Hezbollah and its other violent terrorist proxies. 

The States do have sanctions. These States do have sanctions 

against Iran. They don’t want to be forced into it because this has 

been deemed not to be a treaty, and therefore, State law preempts 

right here, and they are not required to lift for their sanctions. 

My concern is that if these 15 States don’t lift their sanctions, 

which I support them not doing, are we going to see Iran then look 

at this deal and say, U.S., you have breached—you are in violation 

of this deal, because you haven’t lifted all sanctions? Is that a viable consequence, which then could lead to Iran saying, ‘‘Look, you 

breached the deal, U.S., all bets are off. It doesn’t matter what you 

have done with the sanctions, because you have lifted them, but we 

are going to go forward with what you want to do?’’ 

Mr. Modell, I will start with you. 

Mr. MODELL. There are two things I would consider. I think the 

number one goal of the Iranians in the removal of lifting sanctions 

and pressure and the normalization of the nuclear program was to 

restore normal trade relations with Asia and Europe. America 

would be a bonus potentially down the road. But if U.S. States 

25 

start causing problems, keep sanctions on, start changing the fabric 

of the deal to some degree, or at least the spirit of the deal, I don’t 

think it will have an impact, to be honest with you. 

But let me just go back really quickly to what you were saying 

before. I think one of the things that we can do as Iran comes back 

into the financial system is expose the fact that they don’t have a 

financial intelligence unit. They don’t report suspicious transactions. They don’t abide by FATF regulations. They are large 

state-run terrible foundations, which control billions and millions of 

dollars, unreportable to any authority whatsoever. And they have 

long been linked to terrorism. So an exposure of that in the media, 

in a positive media campaign for education, transparency would go 

a long way. 

Mr. ROSS. Thank you. 

And I see my time has expired, Mr. Chairman. Thank you. 

Chairman FITZPATRICK. The Chair now recognizes the gentleman 

from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. I would echo the commentary made by my colleague with reference to the benefits that 

we have derived from these various hearings, and I salute you and 

my ranking member for the way you have worked together to help 

facilitate the free flow of information. Thank you very much. 

With reference to information sharing, there are arguments 

made with reference to technology being a problem, and then there 

are other arguments that are made with reference to organizational inertia, infrastructure, and culture. 

How much of the fusion of information between various agencies 

is impeded by culture, organizational inertia, and structure within 

the various entities that should be conversing with each other? 

Ms. Shelley, you ventured into this a little bit earlier. Would you 

care to respond? 

Ms. SHELLEY. Yes. I would be happy to. 

I see that in many areas, what I would call emerging areas of 

terrorist financing such as wildlife, our research is showing that 

the trade in this is going through key facilitators, some of whom 

are linked to terrorist organizations. 

But we have such a segmentation of the way we are looking at 

drug issues, illicit wildlife trade, trafficking in animals, movement 

of money, that we are not coordinating and seeing that the same 

networks are doing them. And then, we are are not targeting the 

individuals who are doing this properly in terms of denying them 

visas to the United States, denying them access to American financial institutions and, particularly, American real estate. 

And so we are much better with looking at banks and looking at 

financial institutions, but many of the areas of trade that intersect 

with this have links to the United States, and our institutions are 

not working together to help cut this off. 

Mr. GREEN. How much of that, if you can in some way quantify 

it, is related to technology, the inability to automate a system that 

will allow this type of information to flow between entities? How 

much of it is related to the technology versus the culture within the 

various organizations? 

26 

Do we have organizations that have somehow structured themselves such that it is very difficult for them to pass information on 

even when there is a desire to do so? 

Ms. SHELLEY. I am not sure that it is necessarily a failure to 

pass information. I think it is a failure to have adequate coordination among different branches of the U.S. Government that never 

thought that they were dealing with the same crime and terrorist 

networks so that you do not have the enforcement arm of Fish and 

Wildlife working in the past with DEA, working with the Defense 

Department. 

And so it is not so much a problem in this case that I have given 

you of lack of information—of technology, but of absence of coordination within our structures. 

And as the point has been—and I have tried to make is that we 

also have linked it between this trade-based money laundering that 

is funding terrorism and our own economy. And we are also not 

making those connections either. 

Mr. LARKIN. If I can speak to that? 

Mr. GREEN. Yes, sir. 

Mr. LARKIN. I can say from my experience it is largely cultural. 

And I can say from what we have witnessed in developing the 

NCFTA and getting the agencies to come together that previously 

hadn’t and a lot of cross-sector organizations to, it has never been 

a technology challenge. It has been a cultural mindset challenge. 

It has been a lack of incentive to come together as opposed to just 

saying, what is the right thing to do? So I think that is getting better than it used to be, but I don’t think technology been a significant issue in that regard. 

Mr. GREEN. I see one additional person—Mr. Modell, you are 

nodding. Do you have something you would like to say? 

Mr. MODELL. I would just say, one of the things that Dr. Shelley 

mentioned before is the Captagon issue. Captagon is a drug used 

widely throughout the Middle East. And when you look at the U.S. 

Government’s approach to going after a group like Hezbollah, right, 

one of our leading terrorist challenges, I agree with Mr. Larkin, it 

is a real bureaucratic problem. The intelligence community sees 

Hezbollah as not very involved in drug trafficking. They see them 

as a terrorist organization, and our main objective is to stop terrorist attacks. And I don’t disagree with that, but when you look 

at the extent to which a group like Hezbollah is a global transit 

national organized criminal network, right, and the disagreement 

among U.S. Government agencies as to that truth, that reality and 

how to approach it, you are going to run into some real problems, 

real limitations. And so for me I would just like to emphasize, it 

is really is a bureaucratic issue. We are not all on the same page 

with regard to tackling these issues. 

Mr. GREEN. I have exceeded my time. 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. The gentleman from Arkansas, Mr. Hill, 

is recognized for 5 minutes. 

Mr. HILL. Thank you, Mr. Chairman. 

And thank you, Mr. Ranking Member, for your excellent stewardship of this task force. 

27 

Dr. Shelley, I would like to begin with you and talk a little bit 

about this real estate exception to the money laundering statutes 

that you have referenced. Presuming a buyer has a bank and withdraws money from that bank, and presuming a seller has a bank 

and deposits the proceeds into that bank, describe kind of more 

specifically the gap that you have identified that is being exploited. 

And you even referenced right here in the booming real estate market of the beltway. So could you go into a little bit more detail 

about that? 

Ms. SHELLEY. I would be delighted to. 

What you can do to move this money is that you can set up a 

company, and then you have the money moved from overseas into 

the front company that is going to buy the real estate for you. And 

then you buy this piece of real estate that is quite expensive. I believe this happened in the house next to me. And nobody ever commented on this buyer. He was buying massive amounts of real estate in Washington, and nobody had to report this. It was a person 

of, I want to say, but from the Middle East, whom if you did a 

search on Google, you would find him linked to many charities that 

are marked by our law enforcement community and intelligence 

community. 

And so you could move this money through a front company very 

easily. I have had real estate agents telling me the things that are 

going on in Georgetown where money has moved out of Yemen and 

some of the purchasers are even dead people who have been buying 

property. I brought this to the attention of people in Treasury, and 

no one ever went and followed up with these real estate agents to 

find out what these anomalies were in our financial markets. 

Mr. HILL. So do you think that a solution would be that REALTORS® would be subject to filing a SAR? Is that the direction you 

would take? 

Ms. SHELLEY. That is absolutely an essential part of it. And I 

think we have to tighten up the requirements on the real estate 

community. We have to have seminars. We have to have much 

more responsibility because from what I have been observing, it 

seems to be a central target. Just as we are having many corrupt 

officials, many transnational criminals moving money into real estate, a piece of this seems to be supporting terrorist groups as well. 

Mr. HILL. And in my example, you are just suggesting they are 

not caught on the depository end of either one of those transactions 

is your presumption? 

Ms. SHELLEY. Exactly. 

Mr. HILL. So that leads me, Ms. Rosenberg, to the issue of beneficial ownership. Obviously, the IRS captures everybody who is involved as a director in a Form 990 in the nonprofit sector, and they 

have an elaborate disclosure capability that is online and publicly 

available. And for all passthrough companies, like Dr. Shelley is 

talking about, Subchapter S or an LLC, which is the most common 

form of real estate ‘‘shell company’’ process, the IRS has all that 

beneficial information and that you file, obviously, a K-1 to one of 

those beneficial owners every year on that real estate. 

So my question to you is, what is it that we are not doing? We 

have the information at the IRS, and if there is a criminal invesVerDate Nov 24 2008 16:48 Sep 14, 2016 Jkt 099727 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\99727.TXT TERI
28 

tigation, you are not suggesting that the IRS doesn’t turn that over 

to a U.S. Attorney or an FBI agent, are you? Or are you? 

Ms. ROSENBERG. I think you can with a court order, the challenge is making that information more easily accessible and movable to various authorities in a position to investigate and pursue 

appropriate legal action or who are in a position of needing to understand the methodologies in order to create better policy to prevent threats in the—from terrorist threats and others from accessing and using the financial system. Additionally, that is at the IRS 

level, and this doesn’t extend to the creation of legal entities at the 

State level, where it would be quite useful to gather additional beneficial ownership information from legal entities when they are 

formed and verifying that information over time. 

Mr. HILL. Wouldn’t you suggest, though, that the burden 

shouldn’t be there on a commercial bank but ought to be on the 

secretaries of States and on the update requirements for beneficial 

ownership change at the State level and which would be rarely 

automated, I would assume, in all 50 States? So we haven’t heard 

a lot of discussion about the responsibility of individual secretaries 

of State at the state level for incorporation standards. What should 

the—what role does the Federal Congress have on that? 

Ms. ROSENBERG. Partly because of the burden it would place collecting and verifying this information on the States and putting it 

at the Secretary of State level and others, there is not a great level 

of interest by the States in pursuing new laws and policies in this 

domain, which is one of the reasons why it was incumbent upon 

Congress to create national-level policy in this area. I don’t want 

to diminish the significance and the burden that this will be on the 

Sates, but as has been testified by my colleagues from the panel 

and by other witnesses in your prior hearings, the nature of the 

threat that is posed by abuse of our financial system by terrorists 

and entities involved in corrupt activities is commensurate with the 

burden that it would be on our financial system and on the Sates 

in order to make this a reality. 

Mr. HILL. I thank the panel. 

And I yield back, Mr. Chairman. Thank you. 

Chairman FITZPATRICK. The Chair will now recognize the gentleman from Texas, Mr. Williams, for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. I, too, would like to 

thank you and the ranking member for your leadership on this 

committee. 

Over the last few months, this task force has explored an array 

of topics and received in-depth testimony from witnesses throughout the government and the private sector that has helped members of this task force better understand the challenges we face in 

dealing with terrorism financing. These challenges are real for me 

personally—sometimes hit too close to home—because I am a car 

dealer. Now, I want to start by discussing the topic of money laundering with the witnesses today. We talked a lot about that today, 

especially the laundering that exists here in the United States. 

From some of your previous testimony and also earlier when we 

had other folks here, we heard about legitimate businesses knowingly or unknowingly supporting terrorist organizations who launder money right here in our own backyard. 

29 

My first question to you, Ms. Rosenberg, is, in your view, what 

are the key terrorist financing money laundering threats facing the 

U.S. international financial systems to date? You have talked a little bit about that. Could you repeat it? 

Ms. ROSENBERG. The key threats, maybe I could take this by offering you my views on the key vulnerable abilities by which these 

threats can enter and abuse our financial system. So I mentioned 

the hole that exists in the gathering and the sharing of beneficial 

ownership information, as well as information sharing, not just to 

highlight one particular challenge that exists across national 

boundaries. But the challenge of sharing information and, indeed, 

aligning expectation between independent regulators and overseers 

within our own financial system is a challenge. And by that, I 

mean the challenge in coordinating law enforcement financial supervisory authorities and policymakers in their various expectations and about what best practices are and what kind of activity 

should be pursued with law enforcement activity. 

Mr. WILLIAMS. ‘‘Sharing’’ is a big word here, isn’t it? 

Now, also, the private sector has a role in this in working in conjunction with the Federal authorities to stop some of the money 

laundering schemes from existing. I bring this up because there are 

legitimate businesses trying to sell a product. For example, we 

have heard testimony about terrorist groups in the United States 

using the car market to launder hundreds of millions of dollars. We 

even heard a figure of a billion dollars going back and forth. As I 

said, I am a small business owner. I am a car dealer. And when 

I heard this, it amazed me. And I know how this works, but, Mr. 

Modell, what would you—could you focus a little bit on this relationship with the car industry and all this money going back and 

forth and what you think we need to focus on and who we need 

to talk to? 

Mr. MODELL. I follow the Lebanese use of this. The used cars 

that are purchased here and sent to West Africa—I think previous 

testifiers have discussed that. In my discussions with the DEA and 

the FBI and others who have been involved in pursuing that, they 

have expressed some degree of frustration that, first of all, nothing 

is done in West Africa whatsoever. So you have massive West African car lots that are sitting there with cars piling up. The purpose 

was just to bring them to transfer drugs or to launder money en 

route to Europe or other areas in the Middle East. These are global 

things that we don’t have enough cooperation with our partners 

overseas. So starting with overseas nodes of cooperation, that has 

to improve. 

Here in the United States, I think when you go to Detroit and 

other places where there are car dealers who have been implicated 

in this, I don’t think we have been punitive enough. I think they 

are still in business. They haven’t been put out of business. So I 

think tougher measures have to be put at hand to actually stop 

this type of activity. And my sense is that is not happening. 

Mr. WILLIAMS. We need to talk to the auctions, don’t we? And we 

also need to find a track to the banks. Because I know how people 

buy cars through an auction. 

Ms. SHELLEY. Yes. 

30 

Mr. WILLIAMS. And it is a legitimate concern and one you would 

agree we need to address further, another reason I hope we continue our task force because this is something that really concerns 

me. 

One more: According to assessments, some $300 million worth of 

criminal proceeds are laundered through the U.S. financial system 

each year, probably more, I think we would agree. How significant 

is this number relative to the amount of such funds laundered 

worldwide? Dr. Shelley? 

Ms. SHELLEY. I think that the laundering of money is significant, 

and I wanted to add that there has been money traced through 

from the car industry, the used car industry, into our financial system, and this is a very significant amount of money, probably estimated at least $100 million and probably a multiple of that linked 

to just that element of terrorist financing. So we have a lot more 

that we could be doing looking at this trade-based money laundering and how it turns up in our financial system. 

Mr. LARKIN. Can I make a quick comment, too? Actually, one of 

the initiatives that I mentioned as developed out of the NCFTA 

with significant input from the industry, one of those initiatives is 

an international auto auction and sale and fraud initiative that has 

been going on for quite a number of years with significant international organized crime and money laundering. It is a great example of how law enforcement and industry can come together to better identify how these threats look at the earliest stages and empower industry with more constructive knowledge about what 

money is going through their hands that is bad money. 

Mr. WILLIAMS. We will visit some more. Thank you for your testimony. 

I yield back. 

Chairman FITZPATRICK. The gentleman from California, Mr. 

Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. Thank you. 

Certainly, one source of terrorism is Iran. We are entering into 

this deal in which we are supposed to waive the sanctions that 

were enacted to deal with their nuclear program. But in doing so, 

we are going to be waiving the sanctions that were designed to discourage them from engaging in terrorism. 

The most specific example of this is the Iran Sanctions Act, 

which in its terms, which Congress declared we had three major 

reasons, only one of which was weapons of mass destruction, and 

weapons of mass destruction includes nuclear missile and biological 

and chemical concerns. I will strike ‘‘missile’’ from that because the 

structure was the weapons, not the delivery systems. But still, nuclear was one-third of one-third of Congress’ announced reason for 

adopting the Iran Sanctions Act. Under this deal, it is going to be 

waived. 

What I am concerned with is especially designated nationals list, 

which is the no-go list for international finance. And you have a lot 

of countries that are on the list because of their involvement in nuclear activities that we never bothered to put on the list because 

of their involvement in terrorist activities, for example, Bank Melli, 

which has been involved with Palestinian Islamic jihad, Hezbollah, 

Quds force, et cetera. 

31 

Dr. Shelley, are you confident that the United States will put 

Bank Melli on the terrorist list, or are we going to ignore their support for terrorism in the future because they used to be involved 

in proliferation activities? 

Ms. SHELLEY. I think that is a great question. I think we have 

to do a lot of very careful analysis and make sure that we are not 

throwing the baby out with the bath water. And so— 

Mr. SHERMAN. I want to assure you, Bank Melli is the stinkiest 

bath water out there. This is not a beautiful baby. 

But I want to go on to something else, and that is, the real benefits to remittances. They go to the poorest people in the world. 

They do more for development than our whole foreign aid program. 

What can we do to make sure that people who want to send 400 

bucks a week are able to do so at reasonable cost without—I mean, 

yes, it is possible, ISIS could get—such small amounts of money 

could benefit a terrorist organization. But, frankly, I don’t think we 

can prevent ISIS from getting its hands on 400 bucks here, 400 

bucks there. 

Are we going—I will go back to baby and bath water. The baby 

is legitimate remittances. Are we doing too much to restrict remittances to families in Somalia, Iraq, and other places? Dr. Shelley? 

Ms. SHELLEY. In the past, we have done some superb—Treasury 

has done some superb analysis on when remittances are not being 

used for their intended purposes. That is that people are generating too many remittances based on their income, which leads to 

a geographic targeting order. And that is why I put this emphasis 

on research and analysis in that if a few individuals are sending 

$400 a month, that should not be restricted. But if you are finding 

that there are nodes that are being abused where people are sending much, much more and that can be identified, then you have a 

problem, but it is not that hard to identify. 

Mr. SHERMAN. TSA has a trusted traveler program. Should we 

have a system here in the United States where you can fill out a 

form to the government, ‘‘here is who I am, here is how much I 

make, I plan to send roughly this amount, depending upon circumstances, to my relatives in such and such a country,’’ and be 

certified as trustworthy when you lay out a plan that make sense? 

Ms. SHELLEY. I am not as concerned about the individuals being 

trustworthy, but much of what goes on behind illicit finance are 

facilitators. And so we need to be focusing on the facilitators, and 

when we see that they are being abused and go after them rather 

than the small fry who are sending their money. 

Mr. SHERMAN. And I would add, I think it was Mr. Modell talking about being tough enough, the Iraqi Government that we support with blood and treasure, is paying people in Mosul because 

they were on the civil servant list. And as far as we know is providing free electricity for which ISIS is free to collect a bill. So we 

have to start treating this economics element seriously. 

And I yield back. 

Chairman FITZPATRICK. The gentleman from Kentucky, Mr. Barr, 

is recognized for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman, and Chairman Fitzpatrick, 

Vice Chairman Pittenger, and Ranking Member Lynch. I also want 

to join my colleagues in complimenting you all for your leadership 

32 

in convening this task force and giving the testimony that we have 

heard here today and the other hearings before this task force. We 

obviously have many gaps and deficiencies in the way in which our 

country counters terrorism financing. And I look forward to working with each of you in developing perhaps a legislative package 

that adopts some of the recommendations made here today and 

in—from the other witnesses we have heard from in other hearings. 

With respect to the proposed Iran nuclear deal, the joint comprehensive plan of action, I wanted to ask Mr. Modell a question 

about the impact that a finalized deal would have on the existing 

deficiencies that you testified about. In particular, you testified 

that terrorism finance has become one of our most pressing national security challenges, yet the plans, programs, and practitioners are falling far short of where they need to be. My question 

to you, Mr. Modell, is will we fall further behind if this deal is finalized? And, secondly, is there a way to quantify how much further behind will we be if this deal is finalized? 

In other words, how much additional pressure will this place on 

the efforts to counter the financing of terrorism? 

Mr. MODELL. Thank you for your question. The simple answer to 

your question is yes, I think we will fall further behind because if 

you look at the thousands of individuals and entities that have 

been designated as a result of Iran’s illicit activities over the years 

that are now going to be exonerated essentially by this deal, of 

course, it is a setback. Those are people who are willfully engaged 

in criminal activity on behalf of the Iranian regime. So the idea 

that they are suddenly going to be brought back into Iran or some 

sort of international system in which they behave according to laws 

and regulations and good behavior doesn’t make much sense to me. 

I don’t know why that large, very large group of people, many of 

whom we don’t have full understanding of what they are doing now 

or to the extent to which sanctions have actually impacted them 

over time, the assumption that those people no longer need to be 

watched is disturbing. So, yes, I think the answer is yes. 

Mr. BARR. Can you give us a concrete example of how the sanctions relief in the deal would complicate our efforts or make more 

difficult the existing efforts to counter the financing of terrorism 

and, specifically, you referenced Hezbollah. You talked about the 

deficiencies in operations against Hezbollah as illicit financial apparatus within Lebanon. Maybe you could take that as the example. 

How would the deal, the sanctions relief in the deal, specifically 

complicate our efforts to counter those activities in southern Lebanon? 

Mr. MODELL. If you believe that the deal was going to lead to a 

windfall of tens if not over a hundred billion dollars to the Iranian 

government, and there have been disputes as to how that takes 

place and over what time, but nevertheless a very large amount of 

money, go back to 2012 and 2013, when the U.S. Government was 

getting very clear indications that because of the sanctions entire 

units of the IRGC who were acting overseas in places like Syria 

and Iraq and Lebanon and other places where we have a real problem with them, where our interests collide, those units were put on 

33 

hold, those activities were put on hold. When President Rouhani 

was elected in Iran, and we started to move towards a deal and 

now that we have a deal in place, the economy started to turn 

around. And now we have the promise of this money, operational 

budgets have already gone up. The entire budget of the IRGC and 

the Iranian intelligence force publically, as stated, has gone up. It 

has gone up by 50 percent over the last year. So the idea that you 

are not going to have a situation where those same entities, which 

we have had problems with for 36 years are not going to increase 

their activities in things that we find problematic or contrary to 

our interests. 

Mr. BARR. Sorry. Can you elaborate also—with my limited time 

remaining, you testified about how it would be more complicated to 

verify compliance on the nuclear components of the deal if we are 

not fully tracking the flow of Iranian sanctions relief. Can you 

elaborate on that? Because Secretary Kerry has told Members of 

Congress and the public that most of the sanctions relief—he has 

attempted to assure us that most of the sanctions relief will go to 

internal improvements within Iran. So the question is, can you 

elaborate on the verification of the nuclear component to the agreement? 

Mr. MODELL. First of all, I think that when you look at Iran’s 

external apparatus for doing all the things, a lot of things with its 

nuclear program that we have found so problematic, in other 

words, illicit procurement, things that directly aid their program, 

you need to have a vast mechanism in place, U.S., U.S. allies, and 

the IAE working together. Without having an understanding of 

how that is going to work and how the Iranians are going to spend 

their money, or if you actually believe, like I do, that the Iranians 

have already strongly indicated that a significant amount of the 

money is going to be spent outside, contrary to what Secretary 

Kerry says, then you have the makings of a real problem. 

Let me just touch briefly on what you said about Lebanese 

Hezbollah. One of the things that Lebanese Hezbollah, one of the 

reasons why it is such a problem, why Iran and Hezbollah have 

created this apparatus, it is so difficult to counter, is one of the 

things that Dr. Shelley mentioned was trade-based money laundering, repeatedly mentioning that. Since the early days of 

Hezbollah, Iranians and Hezbollah have gotten together and they 

had a very clear vision of how to create a commercial apparatus 

that enabled terrorist activity, criminal activity. That exists today. 

Iran still benefits from that, whether it is Hezbollah-related or nuclear-related, and that is going to continue. 

Mr. BARR. Thank you. I yield back. 

Chairman FITZPATRICK. The gentleman from Minnesota, Mr. Ellison, is recognized for 5 minutes. 

Mr. ELLISON. Thank you, Mr. Chairman, and thank you, Mr. 

Ranking Member, for this hearing. I also would like to thank all 

of our panelists who have been so responsive and helpful to our understanding. 

My first question is to Ms. Rosenberg. Ms. Rosenberg, on this 

Iran deal, you did publish an article, for which I want to commend 

you, and I thought it was well-written. One of the things you said 

is a successful agreement is by far the best way to reduce Iran’s 

34 

nuclear threat, but for any deal to work, Tehran needs to know 

that if it cheats, economic pain will turn in full force. 

If you believe the deal, what we do have—there is a deal, there 

is a fair chance that there will remain one, how should we move 

forward given that we are going to have to monitor whatever—and 

have—provide oversight to how things are going? If we assume 

that the people who want to kill the deal are not successful, and 

that is a fair assumption at this point, what is your assessment on 

the day after, and what we should be doing? 

Ms. ROSENBERG. Thank you, Congressman, for the question. 

I think that the appropriate way to move forward for the United 

States policymakers in particular is to ensure that the deal—assuming it does move forward—is carefully and aggressively implemented, and that includes the orientation of U.S. policymakers to 

act independently if necessary or certainly collectively within the 

mechanism of the U.N. to reimpose sanctions in part or in whole 

if Iran is shown to be cheating on its commitments. There is nothing in this agreement that says that the U.N. has to completely reimpose all sanctions which puts quite a high bar on Iran’s cheating 

in order to do so. It can do so—the U.N. can snap back partial 

sanctions. The United States should also affirm its right and ability 

to reimpose sanctions or take other measures outside of those financial coercion mechanisms in order to make sure that Iran is 

complying with the deal. 

And relevant to the conversation that was just occurring before 

you had your time on the floor here, I think it is true that we 

should be concerned that Iran will be a greater threat, terrorist 

threat, through itself and through its practice in the region if the 

United States and allies abroad do nothing further. That is why we 

have heard a number of suggestions about additional steps U.S. 

policymakers should take in order to ensure that Iran is not able 

to move money around itself or through its proxies. For concerns 

about countering trade-based money laundering that Hezbollah and 

others are associated with, as well as Iran’s use of newly undesignated financial institutions, to the extent that there is a current 

evidentiary record supporting that will illuminate illicit finance 

and that Iranian banks are engaged in, that should be exposed 

publicly. The United States should designate those banks under 

terrorism authority, and we should urge our international partners 

to join us in designating those banks in order to keep them outside 

of the legal financial system and not able to move illicit Iranian 

funds around the financial system. 

Mr. ELLISON. Thank you. Let me ask you a question on a different topic. 

About the IRS, in particular, the bank secrecy examiners at the 

IRS are critical in fighting against terrorist financing. How many 

BSA examiners work at the IRS, if you know? And I hate asking 

people how many because that is like an on-the-spot question. But 

if you know, good. If you don’t, generally. Are there enough, and 

how many institutions are they responsible for examining? 

I guess my real question is, do we have the kind of—do we have 

the complement of people that we need in order for the IRS to fulfill its mission under the bank secrecy examiners—with the bank 

secrecy examiners? 

35 

Ms. ROSENBERG. Off the top of my head, I cannot remember a 

number of BSA examiners. I might have when I was still at Treasury. I am sure we can find that number. 

Mr. ELLISON. I wasn’t trying to— 

Ms. ROSENBERG. No, no problem. 

Mr. ELLISON. —put you on the spot. 

Ms. ROSENBERG. But I think to your point about whether they 

have the adequate examination capacity, much has been said about 

the inadequacy of Federal functional regulators or examiners to 

adequately cover both the financial institutions as well as the nonfinancial institutions that are at risk for terrorist financing and 

other corruption and criminal activity. There are ideas that exist 

about how to transfer some of FinCen’s for example, examination 

authorities to the IRS and to other—divulge those to other State 

regulatory authorities in order to look after potential illicit activity 

occurring at bank and nonbank financial institutions. But certainly 

the reason for such creative thinking is because there is currently 

an inadequacy in that area. 

Mr. ELLISON. I just want to say thanks for your great work, and 

I look forward to reading your next article. 

I yield back. 

Chairman FITZPATRICK. The gentleman from Arizona, Mr. 

Schweikert, is recognized for 5 minutes. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

Dr. Shelley, first, I want to compliment you, because at least in 

your testimony, both written and what you have said, you have 

come closer to anyone in this committee on my fixation, my concern. We seem to be having a discussion that somehow the terrorism financing world is out there using the SWIFT system, and 

we are seeing the wire transfers and not understanding the scale 

of the distributive opportunities. When their story is coming from 

border patrol agents of money moving in diamonds and other types 

of products, when we are seeing stories of completely informal financing mechanisms, when we are seeing stories that it is money 

laundering for hire. So today you may be a terrorist; tomorrow you 

may be a narcotrafficker; next week you may be someone engaging 

in counterfeit products; and the week after that it is the folks who 

stole data who are trying to monetize it. And it is becoming a profession out there with its own accountants, with its own systems. 

Dr. Shelley, how do I break my brothers and sisters and those 

in the bureaucracy out of the mindset that we can do this as a 

Treasury banking regulator and understanding the distributive 

world that is around us and the perverse professionalism that 

seems to be going into the movement of bad actors’ cash? 

Ms. SHELLEY. Well, thank you for your kind words, but they also 

captured my enormous concern on this issue. And I am very thankful for the support that is here, I got from the Andrew Carnegie 

Foundation, to go out and be a public intellectual on these issues 

and write more on this. 

I cannot think of a more burning issue than the need to get out 

of this stovepipe way of thinking about it, and we have, all of us 

contributing to this discussion, where Mr. Modell was talking about 

Hezbollah and its involvement in the Captagon and the drug trade, 

and Mr. Larkin, what they are doing on the computers. And there 

36 

is a whole thing that we haven’t mentioned much today of the dark 

Web in which we cannot even be following very easily, except 

through undercover law enforcement, what is going on in this illicit 

trade in the virtual world, which is something that you need to be 

looking at much more in the future. 

But I think we need a reconceptualization of this, and any advice 

or support that I can provide or way we can work together to 

change this mindset is of paramount need for our country. 

Mr. SCHWEIKERT. Dr. Shelley, in your research, in your reading, 

have you come across reasonably factual antidotes of things that 

you have been shocked on the creativity of how these bad actor dollars are moving—bad actor resources are moving and how much of 

it is actually being moved not in a cash equivalent but in commodities and our services, our documents, or even data? 

Ms. SHELLEY. I think a it is a huge amount, particularly in the 

Middle East. As I say, it’s a cultural tradition that goes back thousands of years. You go back to Hammurabi’s Code in Mesopotamia, 

and they were already dealing with fences and how to prevent illicit trade through stolen goods. 

And so, particularly in that environment, we are dealing with 

trade issues, and that is the financing core of it. But what we 

haven’t also talked about is how some of this massive illicit trade 

that we have in illicit markets in Europe is being used to help fund 

people’s passage to help join ISIS, and also the money that they are 

bringing with them. It is a global illicit trade. 

Mr. SCHWEIKERT. I had someone who was insisting that they 

have studied this world and said many of the bad actors don’t even 

like to touch cash, because it is too expensive to wash, and it is 

heavy, and they prefer moving high-value commodities, whether it 

be an exotic car or diamonds and those things. 

Ms. SHELLEY. Or ivory tusks. 

Mr. SCHWEIKERT. And my fear, Mr. Chairman, is we seem to be 

looking at this issue almost as traditional Westerners, with the accounting and finance backgrounds instead of understanding, just as 

we talk about the new distributive economy that is happening 

around us, well, I hate to say it, but those engaged in bad acts, 

whether it be terrorism, whether it be drugs, or everything else out 

there, may be also creating their own web of creativity. 

And, with that, I yield back. 

Chairman FITZPATRICK. The gentleman from Ohio, Mr. Stivers, is 

recognized for 5 minutes. 

Mr. STIVERS. Thank you, Mr. Chairman. 

I would like to commend the chairman for his leadership of this 

task force and the ranking member as well for your hard work 

here. And it is unfortunate that this is our last meeting of the task 

force because I think there is a lot more work to be done. 

Ms. Rosenberg, it has already kind of come up a little bit. Mr. 

Ross talked about this a little bit, but the fact that the Iran deal 

could give up to $50 billion to Iran immediately, which could then 

be diverted to terrorism, does that, for you, give us a reason to 

maybe continue something like this task force, to continue to monitor what is going on out is there? 

Ms. ROSENBERG. Absolutely. And, unfortunately, that $50 billion 

is only a marginal constituency in a broader threat about which 

37 

this task force and indeed many other stakeholders should be concerned. 

Mr. STIVERS. Thank you. 

Mr. Modell, you and Dr. Shelly talked a little bit about and 

emerging means of financing. I think you talked about mobile payment technology, trade-based methods. Dr. Shelley just referred to 

bitcoin a few minutes ago and the dark Web. 

Are we creating sufficient protections against these emerging 

means of financing terrorism activities? 

Mr. MODELL. In my opinion, no. And I think it goes back to what 

Dr. Shelley and others have alluded to, and that is we don’t have 

enough people in government who have the sophistication to be 

able to understand what the current illicit mechanisms are, and 

what the next generation of illicit mechanisms will be. I keep going 

back to Hezbollah, because they have been so successful at evolving 

into an organization that epitomizes the problems we are talking 

about here. First, it is used cars. Then, they are involved in diamonds. Then, it is used clothing. So you are avoiding the use of 

cash. They have had mastery of it, and it has been part of their 

long-term vision, and it will go on. 

Mr. STIVERS. Thank you. 

Dr. Shelley, you and Mr. Larkin, kind of following on what Mr. 

Modell just said, have suggested that we do a better job of publicprivate partnerships. And Mr. Larkin is sort of advocating for how 

effective it has already been, the one that he is involved in. You 

talk about how DHS doesn’t do enough corporate advisory work 

where they work with people who know what is going on out there. 

To both of you, wouldn’t that help? Whoever wants to start. 

Ms. SHELLEY. I couldn’t agree with you more. The Overseas Security Advisory Council (OSAC) at the State Department has 

helped them. I think we need that in this area as well with many, 

many corporations feeding in information and sharing and giving 

insights. 

Mr. LARKIN. I agree. And part of my written and oral testimony 

was intended to say that we have to be careful about defining the 

threat too quickly and not backing off in looking at the whole landscape because, as pointed out by my colleagues, they are going to 

generate funds through any means possible. 

Mr. STIVERS. It is an evolving threat, to your point, and we need 

a very mobile and robust defense. 

Mr. LARKIN. Right. And I think there can be more. It has gotten 

better, but I think there can be more information coming back from 

law enforcement as to what they found that the true terrorism 

groups are doing. 

Mr. STIVERS. Just like in cyber defense, we don’t do a very good 

job of sharing information back from the government to the people 

who face the threat. 

Mr. LARKIN. Right. It’s getting better, but there is still a lot of 

room for improvement. 

Mr. STIVERS. And I think your organization, by the way, is a 

great model we can learn from. I really appreciate your being here, 

Mr. Larkin. 

Mr. LARKIN. Thank you. 

Mr. STIVERS. Mr. Modell, you are putting your finger in the air. 

38 

Mr. MODELL. I just want to throw something out there, as you 

are looking for a congressional going forward with the Iranian implementation— 

Mr. STIVERS. And that is what I would like to talk about here, 

yes. 

Mr. MODELL. I would just say, according to the structure, the 

way, the deal, the way I have read it is every 90 days and every 

180 days, the Obama Administration and future Administrations 

are going to have to report to Congress the extent to which they 

are complying with the deal. Having a task force continue and having them look specifically at the extent to which they are complying 

with financially related issues, whether it is terrorism or nuclearrelated, would probably be very useful. 

Mr. STIVERS. Great idea. One last follow-up for Dr. Shelley, the 

other thing you suggested is because of the tie between crime and 

terrorism financing that we better coordinate our efforts. Could 

DHS do a better job of helping communities? I know the New York 

and Los Angeles Police Departments have done a pretty good job. 

But could DHS do a better job of helping build capacity across our 

country in local law enforcement, and if so, how? 

Ms. SHELLEY. I think that they could help take the model that 

has been developed in New York and Los Angeles—that face so 

many threats and have had so few acts of terrorism—and put this 

together and have lessons learned, handbooks that we would do, 

and generally a much greater operational effort to change the culture in many urban areas and regions of the United States. 

Mr. STIVERS. Thank you. 

Mr. Chairman, with your indulgence, could the panelists show by 

hands, could you raise your hand if you think the task force should 

continue? I will note that was unanimous. 

Thank you, Mr. Chairman, for your great work. 

And thank you, Mr. Lynch, for your work. 

You guys have worked together on this in a way that Congress 

needs to continue. And I hope it continues through extending this 

task force. And I will certainly personally urge the chairman of the 

Financial Services Committee to allow you to continue the incredible work you have started. Thank you to the panelists. 

I yield back. 

Chairman FITZPATRICK. Without objection, two additional Members will be recognized for follow-up questions, beginning with the 

ranking member, Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. And thank you for your 

kind words. Mr. Larkin, we had an opportunity a couple months 

ago to go into Gaziantep in southern Turkey to meet with a group 

of Syrian rebels who are largely engaged in opposition to Bashar 

al-Assad and his regime in Syria but also against ISIL on occasion. 

We met with them to determine what efforts that we might bring 

to that fight, especially against ISIL. In our conversations, a number of these different rebel leaders indicated that they used a messaging platform called WhatsApp. It is pretty common. It provides 

full encryption, not end-to-end encryption. But, interestingly, it 

now has a banking app so that they can transfer funds in and out. 

The depository bank that is connected to that I think is Axis Bank 

in India. And we have a great relationship with India, especially 

39 

with the anti-money laundering and terrorist financing implications considered. 

But if the rebels are using this as a regular funding app, I am 

sure that ISIL and others are doing exactly the same thing. And 

I wanted to know what are the implications here for us to try to 

wall off ISIL, even if, as Mr. Modell indicated, it is great that Turkey is in the fight now. And, actually, it looks like they are beginning to police their border in an effective way. Syria is still a mess, 

a very porous border. We have been out there to Al Qaim on the 

Iraq border. It is tough enough physically to close off that border. 

If this financing is going on through WhatsApp and I am sure it 

will just morph into something else. These things seem to be—they 

trend from time to time. What are the implications though for us 

to try to shut off financing if it is so easy to do wirelessly? And 

there seems to be great connectivity in that area to use these apps. 

What are the implications from a cyber security standpoint? 

Mr. LARKIN. Thanks for the question. I can speak from my view 

of what we do and what we have done at the NCFTA in working 

with the technology experts out there. One of the regular discussions that occurs is, what is the implication of this new product or 

service that is out there, this new app, what are the impacts that 

we are going to see, and what are the things that we can potentially do to help be more proactive about the intelligence or the capabilities that can be brought together? I don’t know the specific 

details of how that app works. But that is a good example of how 

the resources that come together at the NCFTA literally brainstorm on those things every day. And it is an environment that you 

can do that where you really couldn’t do that in government space 

or probably had difficulty doing it in individual corporate space. 

But you can in a sort of a meet-in-the-middle neutral environment 

where that kind of conversation is a regular part what is discussed. 

I think there is good opportunities. The implications—I can’t speak 

to the specifics of what those are if we don’t do that. But I can tell 

you that I think we are moving in the right direction. 

Mr. LYNCH. Maybe that is a conversation I should have with 

FinCEN off-line then. 

Ms. ROSENBERG. May I speak to that issue? 

Mr. LYNCH. Sure, Ms. Rosenberg. Absolutely. 

Ms. ROSENBERG. Congressman, I think you have just laid out the 

perfect argument for why it is important for the bank, that banks, 

that app, to have a strong AML program. Now, that bank has correspondent banks which may exist in the United States. And there 

are financial regulators in the United States and in India which 

have a responsibility to ensure that app banked by that bank in 

India does not engage in money laundering or terrorist financing 

activities. So U.S. financial regulators have an opportunity directly 

for institutions in our jurisdiction to require them to engage in appropriate customer due diligence, to make sure that none of any illicit finance moving through that app can come back into our financial system. 

Mr. LYNCH. It works well, KYC, know your customer, works very 

well when the person is walking into the bank. I guess I have problems conceptualizing how that happens electronically when we are 

40 

doing it as a wireless messaging platform, and it is instantaneous. 

I guess I have a— 

Ms. ROSENBERG. If that bank in India is doing its job, what it 

will have, doing a good job, what it will do is gather adequate information about that app, who the beneficial owners are of this app, 

the kind of activity that app will be engaged in domestically, internationally, et cetera. And if anything moves beyond, they should 

have a requirement to file any kind of suspicious activity reports 

which, if it is properly shared with law enforcement in the United 

States and internationally, then that information will be disclosed. 

There are many links in that chain that can be weak ones. Nevertheless, that is the argument you have just laid out for a strong 

program. 

Mr. LYNCH. All right. Thank you very much. 

I yield back. Thank you. 

Chairman FITZPATRICK. The vice chairman of the task force, Mr. 

Pittenger, is recognized as well. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

I would just like to probe a little bit further with data integration. We have had discussions with Secretary Lu, as well as those 

who are involved in our border control, and find out that we have 

limitations in terms of data sharing there, albeit FinCEN has very 

sophisticated software in great capacities. We, as well, have had 

discussions with the major banks and how their capacities could be 

enhanced with closer integration with our systems. What structures would you recommend potentially with the private sector, 

and/or what oversight legislation or regulatory change would you 

recommend considering the privacy issues that would enable our 

data capacities to be better shared among agencies and among the 

private sector? 

Mr. Larkin, we will start with you. 

Mr. LARKIN. Okay. Thanks for the question. In my experience, in 

developing the NCFTA in particular, we have learned that sensitive information regarding personally identifiable information 

(PII) is often not needed. So anything that can be done to strip out 

PII from that information that we are trying to share is typically 

something that is not part of what we recommend sharing. It is the 

threat data. So if we can get people to understand that the inbound 

threat, how it looks coming at the company or coming at the person 

is specific to the threat actor and specific to the device they are 

using or the technique they are using or the malware they are 

using, that is the valuable information that we want to share, as 

well as where the exfiltration is headed, whether it is data or funds 

or other things that are going to be monetized. So the inbound and 

the outbound side of the information sharing are the critical pieces. 

If there are ways to strip off the PII in the middle and then move 

towards creating sort of a broader safe harbor for information sharing among cross-sector stakeholders, I think that is a worthwhile 

conversation to have. 

Mr. PITTENGER. Your response, Ms. Rosenberg? 

Ms. ROSENBERG. Thank you. You mentioned border control. So 

one of the challenges for U.S. financial institutions, such as Bank 

of America, Citibank, et cetera, exists when they are trying to put 

together suspicious activity that exists within their own financial 

41 

institution across borders. So, for the United States and in Mexico, 

for example, if they suspect there is activity associated with bulk 

cash movement, drug, narcotrafficking and the movement of drug 

money across a national border, the U.S.-Mexico one in particular, 

it can be difficult for them to move suspicious activity reports within their own financial institution that are not designed to ever 

move outside of it in order to put these pieces together and communicate them to Federal regulators. In addition, the idea that I had 

mentioned previously about contemplating safe harbor arrangements that would allow the sharing of this information and possibly a self-certification mechanism similar to what exists organized by the Commerce Department for technology sharing, technology information sharing, may be a model that can be borrowed 

from in the case of financial services. 

Mr. PITTENGER. Thank you. How can FinCEN better track tradebased money laundering with our Customs data? 

Ms. ROSENBERG. One of the challenges for FinCEN is, of course, 

putting together the appropriate—understanding the methodologies 

that are used by criminals. The case you just mentioned is tradebased money laundering. Having the adequate reporting from financial institutions when they flag certain suspicious activities 

that they identify as associated with trade-based money laundering—and the Hezbollah example is an excellent one—allows 

them to then comb through their own, organize and analyze their 

own massive bank of SAR material in order to create the methodologies that they can then share with the law enforcement community either as particular leads or in the form of illuminating the 

particular methodology that would exist from a criminal enterprise, 

which can then allow law enforcement counterparts to build cases 

and pursue them. 

Mr. PITTENGER. Thank you. 

I yield back my time. 

Chairman FITZPATRICK. The gentleman yields back. 

With that, the questions are completed for the hearing today. I 

do want to thank the witnesses here today. You have identified 

some risks, some gaps in our system. You have identified some potential legislative fixes. And you have been very responsive. So we 

appreciate your time and your service. 

And I have to say that during our 6 months of hearings, we have 

had some outstanding panelists who have come to help us to do our 

work, which we believe is important. And we know that you believe 

that as well. 

And during those 6 months, in my work with Ranking Member 

Lynch, Vice Chairman Pittenger, and really all the members of the 

task force, there has been no light between us on the work that is 

set out before us, identifying the gaps, finding the solutions, protecting our people, our country, and our constituents, including our 

constituents who work in the important financial service areas and 

industries, not just in this country but abroad. So all of you have 

helped us do that. 

And I do want to recognize the hard work of the committee staff, 

especially Mr. Joe Pinder, Mr. Bill You, Chris Matarangas, of my 

staff, the staff of the ranking member, Mr. Lynch, and all the memVerDate Nov 24 2008 16:48 Sep 14, 2016 Jkt 099727 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 K:\DOCS\99727.TXT TERI
42 

bers of the committee, of course, without which the staff, I am sure 

we agree that we wouldn’t— 

Mr. LYNCH. And Jackie Cahan. She’s on my staff. 

Chairman FITZPATRICK. We appreciate all that work. And I think 

we all agree we still have a lot of work to do. And you have helped 

us accomplish that. 

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. 

So with that, the hearing is adjourned. Thank you. 

[Whereupon, at 12:17 p.m., the hearing was adjourned.] 

(43) 

A P P E N D I X 

September 9, 2015 

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