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STOPPING TERROR FINANCE: A 

COORDINATED GOVERNMENT EFFORT 

HEARING 

BEFORE THE

TASK FORCE TO INVESTIGATE 

TERRORISM FINANCING 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 24, 2016 

Printed for the use of the Committee on Financial Services 

Serial No. 114–91 

( 

(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: 

May 24, 2016 ..................................................................................................... 1 

Appendix: 

May 24, 2016 ..................................................................................................... 41 

WITNESSES 

TUESDAY, MAY 24, 2016 

Calvery, Jennifer Shasky, Director, Financial Crimes Enforcement Network 

(FinCEN), U.S. Department of the Treasury ..................................................... 5 

McDonald, Larry, Deputy Assistant Secretary, Office of Technical Assistance, 

U.S. Department of the Treasury ....................................................................... 7 

APPENDIX 

Prepared statements: 

King, Hon. Peter T. .......................................................................................... 42 

Calvery, Jennifer Shasky ................................................................................. 48 

McDonald, Larry ............................................................................................... 43 

(1) 

STOPPING TERROR FINANCE: A 

COORDINATED GOVERNMENT EFFORT 

Tuesday, May 24, 2016 

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 10:03 a.m., in room 

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

[chairman of the task force] presiding. 

Members present: Representatives Fitzpatrick, Pittenger, Ross, 

Barr, Rothfus, Schweikert, Williams, Poliquin, Hill; Lynch, Ellison, 

Himes, Foster, Kildee, Sinema, and Carney. 

Ex officio present: Representative Hensarling. 

Chairman FITZPATRICK. The Task Force to Investigate Terrorism 

Financing will come to order. 

The title of today’s task force hearing is, ‘‘Stopping Terror Finance: A Coordinated Government Effort.’’ 

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 purposes of making an opening statement 

and questioning the witnesses. 

The Chair now recognizes himself for 5 minutes for an opening 

statement. 

I want to thank everyone for joining us at this hearing of the 

House Financial Services Committee’s Task Force to Investigate 

Terrorism Financing. I would like to again thank Chairman Hensarling and Ranking Member Waters, as well as my colleagues 

here, for their consistent and unwavering support as we continue 

to investigate the threat of terror finance. 

During our term, this body has attended investigative hearings 

with policy experts and briefings by administrative personnel to 

better understand how terrorist organizations finance their activities around the world. In addition to investigating the evolution of 

illicit finance flows, we continue to review the rules and the regulations of the United States Government that we have in place in 

order to determine whether they are effective or whether those 

rules require modifications or whether modifications are necessary. 

We know the United States is central to understanding and combating the funding of terror. The Treasury’s June 2015 National 

Terrorist Financing Risk Assessment, which was the first of its 

2 

kind, clearly stated that the central role of the U.S. financial system within the international finance system, and the sheer volume 

and diversity of international financial transactions, that in some 

way pass through U.S. financial institutions, expose the U.S. financial system to terrorist financing risks that other financial systems 

may not face. 

This task force continues to note that illicit actors are adaptive, 

constantly evolving their money laundering and financing techniques to better avoid detection. These techniques and practices, 

such as trade-based money laundering, or the narcotics trade, often 

cross the jurisdictions of several different U.S. Government agencies, making communication, coordination, and information sharing 

amongst agency personnel paramount. These findings have pushed 

us toward a common conclusion. In order to properly combat the 

financing of terrorism, government coordination is a necessity. Yet 

unbelievably, the Federal Government does not maintain a single 

strategic document or interagency implementation plan for combating the financing of terrorism. 

Today’s hearing will focus on Federal efforts to combat terrorism 

financing and explore how the U.S. Department of the Treasury coordinates with relevant agency and law enforcement personnel to 

fill this current gap. 

At this time, I would like to recognize this task force’s ranking 

member, my colleague, Mr. Lynch, from Massachusetts. 

Mr. LYNCH. Thank you very much, Mr. Chairman, and Vice 

Chairman Pittenger. I really appreciate you holding this hearing. 

I also want to thank our witnesses today, Director Calvery and 

Deputy Assistant Secretary McDonald, for helping this task force 

with its work. And thank you for your good work every day. 

I am pleased that we are holding this hearing so we can examine 

how to best coordinate a strategy within the Treasury Department 

and across government agencies to stop the flow of financing to terrorist organizations. Detecting and disrupting the flow of funding 

to terrorist groups is crucial in our fight against terrorism. While 

it has proven to be challenging work, I also think it is extremely 

worthwhile. 

In March of last year, House Financial Services Committee 

Chairman Jeb Hensarling and Ranking Member Maxine Waters 

created a 21-member bipartisan task force and charged it with ensuring that our government is using every tool at its disposal to deprive groups like the Islamic State and Boko Haram and other terrorist organizations of the funds they rely on to advance their destructive ideology. Through this task force, we have learned that 

we must mentor and support Financial Intelligence Units in vulnerable countries that lack the rule of law. Some of my colleagues 

on this task force, both sides of the aisle, have recently returned 

from a congressional delegation to Latin America to examine these 

issues. 

My own work in this field, along with many other members on 

this committee, has been focused on the Middle East, where I have 

had the opportunity to work on some ongoing counterterrorism financing efforts. In particular, we have been actively involved in establishing Financial Intelligence Units in Jordan, Afghanistan, and 

in Morocco. These FIUs have served as national centers that proVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
3 

mote information sharing by receiving, investigating, and sharing 

financial intelligence with law enforcement agencies and international financial intelligence counterparts across the globe. 

Given this focus on strengthening FIUs, I am pleased to learn 

more about the Treasury Department Office of Technical Assistance collaboration to strengthen FIUs in Guatemala and in Cambodia. As we are all aware, countries with weak financial institutions and ineffective financial sector oversight serve as a breeding 

ground for terrorist activity. They seek to raise and move funds 

without detection. And witnesses at our previous hearings have 

emphasized how the United States could play a more productive 

role in addressing these risks by providing technical assistance to 

countries that fail to implement adequate anti-money laundering 

and counterterrorism financing measures. This can be accomplished by thorough, robust, dedicated teams of Treasury attaches 

and contract advisers who are posted in relevant countries that are 

high-risk countries. 

During a recent codel, Congressional Delegation Donnelly, Joe 

Donnelly over in the U.S. Senate, we visited Bahrain, Iraq, and the 

UAE. And I had the opportunity to meet with Bill Rich, one of our 

young Treasury attaches. He is one of only 17. I was very impressed with Mr. Rich and the good work he is doing in his field. 

Although he is a very bright and capable person, he is responsible 

for a very wide portfolio with many countries that cover many challenges, and a portfolio that I believe is too robust for one single 

person to properly manage. They need help, all of our attaches 

need help. And we need more of them. 

In order to effectively combat terrorist financing threats both in 

the United States and abroad, it is imperative that the United 

States implements a cohesive strategy to determine the roles and 

responsibilities of Department of the Treasury attaches and contract advisers. We have to deploy these people more effectively, and 

they need more resources. And as I said, we need more of them. 

My colleagues and I in Congress have an important role here too. 

Through the appropriations process we have to support the vital 

work the Treasury Department and the Financial Crimes Enforcement Network and other relevant agencies engage in to safeguard 

our financial system from illicit activity. 

I look forward to this hearing, and the testimony of our witnesses 

today, so we can better understand the U.S. Government effort to 

combat illicit finance. I yield back the balance of my time. Thank 

you, Mr. Chairman. 

Chairman FITZPATRICK. Thank you, Mr. Lynch. I now recognize 

for an opening statement the vice chairman of the task force, the 

gentleman from North Carolina, Mr. Pittenger, for 1 minute. 

Mr. PITTENGER. Thank you, Chairman Fitzpatrick, Ranking 

Member Lynch, and our distinguished panelists, Ms. Shasky 

Calvery and Mr. McDonald, for your presence with us here today. 

In my opinion, both panelists represent the most significant government agencies dedicated towards combating money laundering 

and illicit finance initiatives. And we thank you for your continued 

hard work. Through this task force, I have had the opportunity to 

travel and learn about both U.S. and foreign responses to terror financing. Recently, we traveled to Colombia, Panama, Paraguay, 

4 

and Argentina to meet firsthand with many South American officials, FIUs, and others tasked with combating money laundering 

and drug smuggling. 

With the utmost confidence, I can say that every official we met 

with had a genuine interest in promoting and ending money laundering and smuggling initiatives. However, each official also echoed 

the financial and technological hurdles in place that prevent a foreign government from living up to their own capabilities and to 

FTF enforcement standards. 

The Financial Crimes Enforcement Network and the Office of 

Technical Assistance provide critical capacities to track terrorism 

financing while improving financial institution infrastructures 

around the world. However, I truly believe we can do much more 

in certain areas around the world to educate and assist with antimoney laundering capabilities. 

Thank you, Mr. Chairman, and to our distinguished panelists. I 

look forward to hearing from you, and I yield back. 

Chairman FITZPATRICK. I now recognize the gentlewoman from 

Arizona, Ms. Sinema, for 1 minute. 

Ms. SINEMA. Thank you, Chairman Fitzpatrick and Ranking 

Member Lynch. 

The Islamic State is a serious threat to the United States and 

our allies. While coalition forces have succeeded in recapturing 

some IS-controlled territory, IS maintains a global network capable 

of funding and carrying out deadly attacks on civilians here and 

around the world. This task force has received testimony that the 

internal sale of oil is a significant source of income for IS, but it 

is the taxation, extortion, and theft throughout the entire supply 

chain that funds the organization. 

As IS continues to diversify its revenue streams, we must have 

up to date information and a coordinated strategy to disrupt its 

funding sources and keep money and resources out of its control. 

This is why Chairman Fitzpatrick and I offered an amendment to 

the NDAA to direct the Secretary of Defense to establish a whole 

of government strategy to destroy their funding networks. This 

strategy must include a comprehensive assessment of IS’s revenue 

sources, a valuation of best practices to combat IS financing, and 

clear ways to measure the effectiveness of efforts to weaken IS. 

DOD must also specifically address how it will deny IS revenue 

from the sale of Libyan oil. 

I look forward to working with my colleagues on both sides of the 

aisle to keep money out of terrorists’ hands and build on our 

progress to strengthen America’s security. 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. We now welcome our witnesses. Ms. Jennifer Shasky Calvery is the Director of the Financial Crimes Enforcement Network, or FinCEN, at the U.S. Department of the 

Treasury. 

This will be Ms. Shasky Calvery’s last congressional testimony 

for FinCEN. She is stepping down after having served as Director 

since September 23, 2012. Prior to joining Treasury, Ms. Shasky 

Calvery had a 15-year career at the Justice Department, where she 

focused on combating money laundering and organized crime. Notably, she was a prosecutor with the organized crime and racketVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
5 

eering section, and more recently Chief of the Asset Forfeiture and 

Money Laundering section. 

Ms. Calvery holds a law degree from the University of Arizona 

College of Law. She graduated summa cum laude with an undergraduate degree in international affairs from George Washington 

University, where she was also an all-star basketball player. 

And I just want to say as you conclude your work at FinCEN, 

we all appreciate your incredible work for our Nation, and that you 

would take some time at this point to brief our task force here on 

our issues of mutual concern. So we appreciate that. 

Mr. Larry McDonald is Deputy Assistant Secretary for the Office 

of Technical Assistance, or OTA, at the U.S. Department of the 

Treasury. He oversees a program that provides financial technical 

assistance to approximately 50 countries. In 2004, Mr. McDonald 

received the Secretary’s honor. Mr. McDonald has served in several 

senior roles at Treasury since joining the Department in 1987. Previously, Mr. McDonald worked at the Organization for Economic 

Cooperation and Development. Mr. McDonald has a master’s degree from the Fletcher School of Law and Diplomacy and an undergraduate degree from Middlebury College. 

The witnesses will now have 5 minutes to give an oral presentation of their 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. 

For the witnesses, 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. 

And with that, Ms. Shasky Calvery, you are recognized now for 

5 minutes. 

STATEMENT OF JENNIFER SHASKY CALVERY, DIRECTOR, FINANCIAL CRIMES ENFORCEMENT NETWORK (FinCEN), U.S. 

DEPARTMENT OF THE TREASURY 

Ms. CALVERY. Chairman Fitzpatrick, Ranking Member Lynch, 

and distinguished members of the task force, I appreciate the opportunity to appear today to discuss FinCEN’s role in countering 

the financing of terrorism. We value the committee’s attention to 

this issue. 

Today, I will discuss FinCEN’s view of the terrorist financing 

landscape and ways that we understand current and future 

threats, risks, and vulnerabilities. FinCEN’s mission is to safeguard the financial system from illicit use, combat money laundering, and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use 

of financial authorities. 

We serve two roles> First, as the Financial Intelligence Unit, or 

FIU of the United States, we collect, analyze, and disseminate financial intelligence to help fight money laundering and the financing of terrorism. Second, we serve as the lead anti-money laundering countering the financing of terrorism regulator for the Federal Government. 

6 

The Treasury Department combats terrorist financing by identifying and disrupting the flow of financial resources to terrorists 

and terrorist organizations and hardening the international financial system from abuse by illicit actors. FinCEN supports these 

broader efforts by identifying sources of revenue for terrorist organizations and identifying their attempts to access the international 

financial system. 

FinCEN then uses its authorities to eliminate these access 

points. ISIL, of course, is one of the primary terrorist threats we 

are focused on today. FinCEN receives approximately 55,000 financial institution filings each day. Most of this financial intelligence 

comes from two reporting streams: large cash transactions exceeding $10,000; and suspicious transactions identified by financial institutions. To manage this collection, we use business rules or algorithms to identify reports meriting further review. 

Currently, we run 22 rules aimed at: one, cutting off ISIL’s 

sources of revenue and attempts to access the international financial system; and two, identifying potential foreign terrorist fighters. 

These rules generate over 1,000 matches each month, and about 10 

percent of those matches result in reports sent to domestic authorities and foreign FIUs. 

FinCEN also employs its unique regulatory authorities to obtain 

special collections of financial intelligence from industry, which has 

been used to inform government efforts to counter ISIL’s financial 

activities. This work confirms our belief in industry’s desire to assist our efforts, not merely out of a sense of obligation, but as active participants. 

Financial intelligence plays an important role in preventing terrorist attacks. Authorities worldwide have an interest in identifying potential foreign terrorist fighters, many of whom have engaged in terrorist acts in jurisdictions outside the conflict zone. 

FinCEN shares its financial intelligence through secure channels 

to authorized stakeholders on the widest possible basis. We disseminate information to our law enforcement partners, intelligence 

authorities, and border police. For example, financial intelligence 

has allowed us to assist U.S. Customs and Border Protection with 

the watch listing of potential terrorists, as well as identifying individuals of concern that have subsequently had their visas revoked 

or denied, or have been placed on the U.S. no-fly list. 

We also share with relevant foreign FIUs. We do this because 

terrorists and terrorist facilitators move from one jurisdiction to 

the next, and we do not hold all the pieces of the puzzle. The feedback suggests we are taking the right approach. Over the past 8 

months, we have received 354 positive responses from 41 foreign 

FIUs that the financial intelligence we provided either corroborated 

information related to an ongoing investigation or provided new investigative leads. 

Financial transparency is also key to our counterterrorist financing efforts. On May 6th, the President announced several developments to strengthen our work in this area, including a customer 

due diligence, or CDD rule, and proposed beneficial ownership legislation. The CDD rule requires that covered financial institutions 

know and verify the identities of the natural persons who own, conVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
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trol, and profit from the legal entities the financial institutions 

service. 

Treasury also sent beneficial ownership legislation to Congress 

that would require companies to know and report adequate, accurate, and current beneficial ownership information at the time of 

a company’s formation and transfer. These two initiatives actually 

dovetailed together, and are critical to aid law enforcement efforts 

to safeguard the financial system. Being able to identify who the 

real people are that are involved in a transaction is critical to our 

work to combat money laundering and terrorism. 

The terrorist financing landscape is complex and dynamic. We 

must continue our dialogue to ensure we have the right regulatory 

and statutory structure to prevent abuse of our financial system, 

while striking the right balance between personal privacy and financial transparency. 

Thank you for the opportunity to testify, and I welcome your 

questions. 

[The prepared statement of Director Calvery can be found on 

page 48 of the appendix.] 

Chairman FITZPATRICK. Thank you. Mr. Larry McDonald, you 

are now recognized for 5 minutes. 

STATEMENT OF LARRY MCDONALD, DEPUTY ASSISTANT SECRETARY, OFFICE OF TECHNICAL ASSISTANCE, U.S. DEPARTMENT OF THE TREASURY 

Mr. MCDONALD. Chairman Fitzpatrick, Ranking Member Lynch, 

and members of the task force, thank you very much for the opportunity to testify today. It is a pleasure to participate with my colleague, Jennifer Calvery. 

Treasury’s technical assistance program, specifically the Economic Crimes Team within that program, has a close and effective 

partnership with FinCEN based on our institutional mandates and 

our special expertise. We are, respectively, the capacity building 

and the operational arms of the Treasury’s work to combat terrorist 

financing and financial crimes. Together, we are part of a coordinated, overall U.S. Government effort. 

Treasury’s Office of Technical Assistance, or OTA as we call it, 

is comprised of five teams: economic crimes; banking; revenue; 

budget; and debt management. OTA’s economic crimes team promotes compliance with international standards and best practices, 

in particular the Financial Action Task Force recommendations. 

The crimes team partners with foreign Financial Intelligence Units 

as well as regulatory, analytical, law enforcement, and judicial authorities tasked with developing effective AML/CFT regimes. 

OTA is a relatively small program, and the Economic Crimes Team is smaller still. Total OTA funding is approximately $50 million per year, which supports about 100 projects in 50 countries. 

Total funding for the Economic Crimes Team is about $7.5 million 

per year, which currently supports 15 projects in Asia, sub-Saharan 

Africa, Latin America and the Caribbean, and the Middle East. 

While small, OTA is, we believe, a cost-effective program that 

punches above its weight. 

As Secretary Lew put it during this committee’s March hearing 

on the international financial system, Treasury gets, ‘‘more bang 

8 

for the buck’’ out of OTA than anything else. I refer you to my written testimony and to OTA’s annual report to Congress for examples 

of successful engagements by the Economic Crimes Team and other 

parts of OTA. 

Let me share with you a few lessons from our experience regarding effective technical assistance. Effective technical assistance depends on many things. Assistance providers for their part must 

show some restraint, allowing potential country partners to step 

forward of their own volition with clear expressions of interest. 

Once interest has been manifested, technical assistance providers 

must be good listeners and patient analysts in order to understand 

the real underlying problems and the capacity of the requester to 

absorb assistance. This is the essence of demand-driven assistance. 

Technical assistance providers must also demonstrate a commitment to coordination. Coordination may entail doing a project differently or not doing it at all depending upon what other assistance 

providers are doing. There are cases when OTA changes its project 

or even declines a request to provide technical assistance when we 

determine that another provider is already involved and our work 

would be duplicative. Effective coordination is also facilitated when 

assistance providers focus their work on areas where they have 

special expertise and an institutional mandate. 

OTA’s Economic Crimes Team has special expertise in building 

the human capacity of Financial Intelligence Units and working 

through those Financial Intelligence Units to enhance the effectiveness of other AML/CFT regime stakeholders. For AML/CFT assistance to be effective, recipients for their part must be genuinely 

committed to a systemic approach to AML/CFT development. The 

weak link breaks the chain. Effective AML/CFT regime development requires strengthening and integrating the work of the entire 

spectrum of AML/CFT stakeholders. The goal is a system in which 

both prevention and enforcement measures are mutually reinforcing. 

Governments that receive technical assistance must show a commitment to creating and retaining a core of professionals, career 

professionals. It is disheartening when a change of government in 

our partner countries results in the departure of our technical level 

colleagues. 

Finally, and most importantly, technical assistance must be 

backed up in our partner countries by a commitment at the policy 

and the political levels to push forward transparency and accountability in public finance when, inevitably, entrenched interests resist. 

In conclusion, let me reemphasize that combating terrorist financing, money laundering, and other financial crimes is a top priority for the Treasury Department and the U.S. Government. 

I want to thank you for the opportunity to testify today. I appreciate your support and interest, and welcome your questions. 

[The prepared statement of Deputy Assistant Secretary McDonald can be found on page 43 of the appendix.] 

Chairman FITZPATRICK. We thank the witnesses for their opening 

statements. 

The Chair now recognizes himself for 5 minutes for questions. 

Ms. Calvery, could you talk to us about the impact that technology 

9 

has had on the fight against terror finance and how Treasury and 

FinCEN plan to adapt? 

Ms. CALVERY. Yes. I think there has been both positive and negative ramifications of advances in technology. On the positive end, 

we are using advanced analytics at FinCEN to comb through the 

data we receive. As I mentioned earlier, we receive 55,000 filings 

on average from financial institutions each day. 

So the idea that we would have human beings able to comb 

through all of that information and understand it is I think beyond 

our capacity for sure. And we need technology to help us go 

through that data. We use advanced analytics and business rules 

to help us understand what is important and get it to law enforcement in a timely manner. 

So now, from the time that a bank files a suspicious activity report, to the time we get it in the hands of law enforcement, may 

be 24 to 48 hours. If it is a terrorism-related issue, they will call 

our hotline and we will get it to them even faster. But for just 

things going through the normal system, it takes 24 to 48 hours 

for us to get it in the hands of people who can take action. So that 

is the positive benefits of technology. 

Of course with technological innovation we also have advances in 

the finance industry and new products and services coming onboard. Many of those products and services provide potential opportunities for greater efficiencies, lowering costs, and providing better 

services. But we also need to keep abreast of what financial crimes 

risks they pose. And are they covered by regulations? Are we still 

going to be able to collect information? So that is one of the challenges we take on at FinCEN to try to stay abreast of the everchanging technology in the fintech arena. 

And we have also attempted to reflect some responsibility back 

on industry itself, encouraging the developers of fintech to also be 

thinking about compliance and thinking about information sharing 

when they are developing their products and services so that they 

can accomplish those ends as well. 

Chairman FITZPATRICK. Thank you. 

Mr. McDonald, can you comment on the role that the National 

Security Council plays in prioritizing and directing interagency efforts, the role of the Treasury with respect to the Council? And Ms. 

Calvery, you might want to also comment. 

Mr. MCDONALD. The National Security Council plays a role in 

both the setting of what I would call the strategic outlines of our 

technical assistance strategy and also, in cases where it is required, 

helping to break through instances where there might be a lack of 

mutual understanding among agencies about what is a priority 

country, what is a priority region, what is a priority engagement. 

Our coordination work truly begins before it gets to the National 

Security Council within the Treasury Department, working with 

our colleagues on terrorist financing and financial crimes in the 

first instance, working with the State Department, both its regional bureaus, with INL, the international narcotics and law enforcement part of the State Department, working with the State 

Department’s office on counterterrorism. 

So in most instances, I would say, we are able to agree on a plan 

of action and a game plan without necessarily involving the NaVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
10 

tional Security Council. But there are instances, certainly at the 

beginning, the very beginning of that process when you are looking 

at the broad outlines of a strategy, and then in those instances 

where there is something that needs to be worked out and the 

NSC’s participation is important or essential. 

Chairman FITZPATRICK. Director Calvery? 

Ms. CALVERY. I think Larry put it well. Essentially, the National 

Security Council sets the strategic direction based on the coordinated input of all of the agencies, and then holds us accountable 

for actually implementing what we said we would do. 

Chairman FITZPATRICK. Director, can you comment on the methodologies that FinCEN uses in looking for or spotting trade-based 

money laundering schemes, particular methodologies? 

Ms. CALVERY. Sure. I think most recently the methodologies we 

have employed have been with the use of our Geographic Targeting 

Order, which is an authority that enables the Director to put in 

place a special collection of information for a limited time period, 

120 days. So we have been using that most recently in California 

and in south Florida, where from working closely with our law enforcement partners, we understood that there was an issue of 

trade-based money laundering in the garment district in LA and 

the electronics district in south Florida. And essentially law enforcement believed that drug cash was making its way into businesses and then back down to Mexico and/or Colombia. 

So we used the Geographic Targeting Order to collect additional 

information. Law enforcement was able to see how the criminal actors diverted their actions, what evasive steps they took. And most 

recently it resulted in over 20 arrests in south Florida, and has 

really helped both us and law enforcement to understand the 

typologies much better. 

Chairman FITZPATRICK. Thank you. I recognize Mr. Lynch for 5 

minutes. 

Mr. LYNCH. Thank you. And Ms. Calvery, I want to join the 

chairman in thanking for your service to your country and wishing 

you well. Let’s stay right on that topic. I know that one of the 

things that we are working on with my staff and with Treasury is 

to work on legislation to expand that Geographic Targeting Order. 

Would you elaborate a little bit on why that would be helpful? 

Ms. CALVERY. Sure. And thank you for the question. So right 

now the Geographic Targeting Order enables us to collect information when there is a transaction involving monetary instruments 

like cash, currency, or checks. We would propose expanding that 

for us to collect information when there is a transaction involving 

funds, the more broad definition. So that would include, for instance, wire transfers. And an example of where that is important 

is with our real estate GTO. There we are focused on criminals who 

are taking their illicit proceeds and using them to purchase luxury 

residential real estate. 

Right now we have GTOs focused in Manhattan and in Miami 

County. And with those two geographic targeting orders, we are 

able to collect information when someone uses cash or a check to 

purchase real estate, some portion of real estate. We are not able 

to do it, however, when someone wires funds to purchase real esVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
11 

tate. And that is becoming the more and more common way that 

people engage in transactions. 

Mr. LYNCH. Right. Let me ask—and this is for both of the witnesses—the Panama papers, that whole incident. It just shed light 

on the role of offshore financial mechanisms to move and store 

money anonymously. That issue, along with the beneficial ownership issue, creates a real problem for all of us on this committee 

and law enforcement as well. 

To what extent, as far as it has been reported—I am not sure 

how to put this. What role, if any, do you think FATF might have 

in verifying the information contained in the Panama papers? And 

how might we use this information to address the terrorism-related 

issues? 

Ms. CALVERY. All right. I would be happy to field that one. I 

would not look to FATF in the first instance as the body to engage 

in the investigation and operational activity surrounding the Panama papers. 

Mr. LYNCH. Maybe I am just looking for lessons learned from 

what we understand what has been going on. And I understand it 

is powerful individuals being able to move their money offshore. 

Well, they could do that for terrorist financing as well if they are 

coming out of the Gulf or something like that. So are there some 

lessons learned that we might use in our context, which is terrorist 

financing? 

Ms. CALVERY. Yes. Actually, now that I better understand the 

question, FATF does have a role. And I think they have been playing it. First, they have set an international standard around the 

collection of beneficial ownership information. They have made it 

clear that countries should be collecting beneficial ownership information to better enable their ability to fight money laundering and 

terrorist finance. So that is the international standard. 

Here in the United States, we have made some progress but have 

some work to do on that front. The CDD rule I think was a definite 

step forward in terms of the collection of beneficial ownership information. What that enables us to do is to have our banks collecting 

information on legal entities when their customers, or when they 

are providing them services, no matter where that legal entity was 

forms, whether it was formed in the U.S., the B.V.I., et cetera, et 

cetera. 

The beneficial ownership information that we recently proposed 

dovetails with that, because that would require the collection of 

beneficial ownership information at the time a U.S. legal entity is 

formed in the United States or when it is transferred. And that is 

important because we often will see illicit actors take U.S. legal entities outside of the United States to use them to establish bank 

accounts. And that money ends up right back in the U.S. financial 

system indirectly through correspondent accounts. And so to be 

able to deal with both risks, we need both authorities in place. 

Mr. LYNCH. Thank you. And in closing, I just want to say—and 

Mr. McDonald, you could obviously add to this if you wish. 

From a lot of people that we talked to in this area, the United 

States facilitates some of this because of our laws, because of our 

unwillingness to deal with the beneficial ownership issue. We basiVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
12 

cally turn a blind eye to this and let this happen. Is that correct? 

Is that your— 

Mr. MCDONALD. What I was going to do was add just quickly to 

Jen’s point about Panama to say that the technical assistance program is engaged in Panama. I have visited myself the Financial Intelligence Unit there and met with their team. They are not the 

worst. They are not the best around the world. They do have a Financial Intelligence Unit that has good leadership. But they are 

still in the relatively early stages of implementing improved laws 

related to reporting requirements. 

And we are still in sort of the middle ground of trying to build 

their capacity to make them more effective in that role. 

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

Chairman FITZPATRICK. The Chair now recognizes the vice chairman of the task force, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. Thank you to each of 

you again. My question relates to our collaborative efforts with our 

partners around the globe. In our meetings in South America with 

Colombia, and Paraguay, and Panama, and Argentina, we found, 

as I said earlier, willing partners. But Mr. McDonald, as you said 

earlier in your statement, that we are only as strong as our weakest link. And in the discussions I have had previously with President al-Sisi and other foreign leaders, they have also expressed a 

willingness, but did not have the capacity to really be a strong 

asset in our efforts. 

How do you all work together? Kind of walk through with me assessing the needs and what needs to be done through OTA, and the 

role that you play with FinCEN, Ms. Calvery. How do you all address that? And then how do we establish that relationship with 

them and then provide them the leadership and the support that 

they need? 

Mr. MCDONALD. I will kick it off. Central America is a good place 

to look at as an example of this. Our technical assistance efforts 

begin in most regions, including in Central America, with an expression of interest, a request by the potential counterparts. It 

might be from the Financial Intelligence Unit, it might be at a 

more senior level when a finance minister or central bank governor 

is in Washington talking to the Secretary at the time of IMF-World 

Bank annual meetings or something like that, and for one reason 

or another, they have a recognition that they need to do better. It 

might be because they are aware, more aware of the threat of illicit 

finance. 

It might be that they are seeing the departure of foreign banks 

who are trying to deal with this problem of derisking. And they will 

ask us if we can be helpful to them in strengthening their system. 

We will typically get in touch with the State Department both in 

Washington and with the embassy. In Central America, I can tell 

you that there is a particularly good collaboration between the 

State Department, INL responsible for Central America. The Central American Regional Security Initiative is one in which we cofund projects in Central America and talk to each other about a 

game plan for TA. 

13 

Then ultimately, it does require a follow-through on the part of 

leadership in our partner countries to implement the strength and 

capacities that we try to help them build. 

Guatemala is an interesting case in point. They, over a number 

of years, built their capacity to identify and address money laundering cases. In 2014, they took down a money laundering operation and sentenced the ringleader and seven of their participants 

to a number of years in jail. 

I would just say one last point about our collaboration with 

FinCEN. While FinCEN is really the operational arm of the Treasury’s efforts, as I said earlier, and OTA is the capacity-building 

arm, we know that FinCEN has expertise that we can benefit from. 

So at a staff level, we are frequently in interaction with each other 

about things that FinCEN knows a lot about. Thank you. 

Mr. PITTENGER. Thank you. Ms. Calvery? 

Ms. CALVERY. Yes. I think to just give a real practical example 

in the area of terrorist financing of how we help some of the FIUs 

that might have less capacity to do their job, recently, in this last 

year, we brought 40 FIUs together. The United States FinCEN and 

the Netherlands FIU led an effort where 40 FIUs focused on the 

issue of foreign terrorist fighters and trying to understand what 

they look like in financial data. 

What are their financial patterns? What do they look like before 

they get to the conflict zone? What do they look like when they are 

in transit? And what do they look like when they get back? Because we all have an interest in identifying these individuals. So 

40 countries came together. We looked at patterns all across the 

world. We came up with red flags for industry of what type of activity they should be looking out for. We then drafted an advisory 

to financial institutions. Here in the United States, we issued it securely to our financial institutions. And then we provided a sample 

to over 150 FIUs of that same advisory for them to issue to their 

financial institutions. 

So in that way you have 40 FIUs that are better situated to perhaps understand the threats, articulate the threats, help the other 

members of the Egmont Group of FIUs to take information and get 

it out to their industry and thereby get better reporting from industry back to FIUs. 

Mr. PITTENGER. My time has expired. 

Chairman FITZPATRICK. I now recognize the gentleman from Illinois, Mr. Foster, for 5 minutes. Thank you. 

Mr. FOSTER. Thank you, Mr. Chairman. 

And thanks to both of our witnesses for their very important 

service to our country. 

As you are certainly aware, one of the issues in the Iran nuclear 

deal was the possibility of Iran diverting some fraction of their 

funds that were released under the JCPOA for terrorist purposes. 

So I actually have a pair of related questions. 

The first one is how specifically does FinCEN guard against Iran 

illicitly accessing the U.S. financial system? And secondly, recently 

the Secretary of State and the Secretary of the Treasury both stated that Iran at that time had access to only about $3 billion of the 

amount made available to it under the JCPOA. 

14 

And so I was wondering, has that number increased since those 

statements were made? Do we have the ability to track actually 

how much they have received? And could you explain how that 

funding is being made available to Iran so far and how we are able 

to follow it under the state sponsorship of terrorist sanctions? 

Ms. CALVERY. Sure. Let me focus on FinCEN’s role in understanding and tracking financial transactions from Iran. 

Our data is collected from U.S. financial institutions, and of 

course U.S. financial institutions are still embargoed from dealing 

with Iran in almost all circumstances. So we don’t tend to have a 

lot of direct open data about Iranian financial transactions. We do, 

however, receive information and keep on alert for any type of front 

companies that might be used to access the dollar, the U.S. financial system, and work very closely with our colleagues at OFAC to 

understand those financial transactions and to follow their funds. 

In terms of some of your more specific questions about the 

amount of money that Iran has at its disposal at this moment, I 

really would have to defer to some of my colleagues at OFAC to 

help me answer that question. So I would be happy to take that 

back and get you— 

Mr. FOSTER. I would appreciate it. That is a number that I think 

Congress will have a great interest in tracking. And so if there was 

some information channels so we could have some authoritative 

statement about what that number was, that would be very useful. 

Second question, sort of unrelated, many of the financial services 

players that are involved in the payment chain are actually regulated and supervised at the State level. And so could you describe 

the coordination between FinCEN and the States since it is obviously critical to ensuring the financial services sector is not used 

for illicit purposes? 

Ms. CALVERY. Sure. This is an issue that we focus on quite a bit 

at FinCEN, and particularly in the last year we really have been 

focused on money services businesses and their supervision. So 

they are licensed by States, money services businesses in this country are licensed by States, and supervised both by States and the 

IRS. And then FinCEN is responsible for any enforcement actions 

that might come out of that. 

So as a result of the Money Remittances Improvement Act of 

2014, we have been coordinating more than ever between the Federal and the State system. So the States have, for instance, a data 

system in which they can collect licensing information and put 

their supervisory exams and all of this type of information to one 

data system. And we have signed a memorandum of understanding 

so that we too now get access to that data. And together, the Federal Government and the States—there are about 30 States that 

participate at this point—are able to look at trends and identify 

risks and better focus our exams. 

We are doing coordination of our exams. We are doing joint 

exams. And that is in the money services business arena, but we 

also coordinate quite closely across depository institutions, and 

other types of financial institutions. 

Mr. FOSTER. Thank you. So you view the situation as improving 

at a satisfactory rate in terms of the State-regulated— 

15 

Ms. CALVERY. I do think it is improving. Actually, a major area 

of focus has been to communicate to our banks and to our Federal 

banking agencies the supervision that is in place for money services businesses. I think there had been a lack of understanding and 

a lack of communication on how well they are regulated and what 

that regulation looks like in detail so that there could be some understanding of how that works. 

Mr. FOSTER. All right. Thank you. 

And I was also interested in your comments about shell corporations and real estate transactions. 

First, I am wondering if you have any comments on proposals 

that have been floating around in Congress for a while to basically 

pierce the corporate veil in the United States, to just not allow 

anonymous shell corporations to be made, which I guess is what 

many countries have. 

Would that have a big influence on your ability to do your job? 

Ms. CALVERY. It would have a very large influence on our ability 

to do our job. I think this is actually the fourth time over 8 years 

that I have testified in front of Congress on this issue. And the one 

thing that I think has been consistent throughout—and some of 

that was at the Department of Justice and some of that has been 

with Treasury—is that criminals, terrorists, and other illicit actors 

use shell companies and hide behind the corporate veil as a means 

of engaging in illicit transactions anonymously. And so anything we 

can do to take that away and provide greater financial transparency would be of great aid to law enforcement and to combating 

money laundering and terrorist finance. 

So the beneficial ownership legislation that the President sent up 

to Congress recently I think sets out a good plan on how to do that. 

But we are certainly interested in working with Congress on a proposal that will work. 

Mr. FOSTER. Thank you. I guess at this point I am out of time, 

so I will yield back. 

Chairman FITZPATRICK. The gentleman from Maine, Mr. 

Poliquin, is recognized for 5 minutes. 

Mr. POLIQUIN. Thank you, Mr. Chairman. And thank you, Ms. 

Calvery and Mr. McDonald, for being here. We appreciate your 

leadership on this issue and your service to our country. I think everybody knows with the activities we have seen around the globe 

over the past couple of years that it is absolutely critical for our 

own national security that we win this war on terror. And part of 

that is making sure we stop the money flows to terrorist organizations around the world. 

In particular, I would like focus a little bit here on the Patriot 

Act and Section 314(b) that deals with information sharing, financial information sharing among financial institutions. So my question to you, Ms. Calvery, first, is I am sure you are familiar with 

that section of the law. Do you see those rules as being too restrictive for financial institutions to be able to share this information 

such that they can see patterns of money flows around the world 

such that they can pinpoint a way to interrupt this flow of funding? 

Ms. CALVERY. Thank you, Congressman, for the question. I am 

very familiar with Sections 314(b) and 314(a). We use them quite 

extensively at FinCEN. I think there are some improvements that 

16 

could be made to the statute, and in particular clarifying right now 

so 314(b), of course, allows financial institutions to share information with one another concerning suspicious activity related to 

money laundering and terrorist finance. It would be helpful to clarify that that authority extends beyond a strict reading of money 

laundering and terrorist finance, but applies to all crimes. 

Money laundering, of course, has many, many predicates to it. 

And we think it would be helpful to make it clear that financial 

institutions can share information with one another about suspicious activity involving violations of criminal law and regulations. 

Likewise, there have been some issues in the courts and there is 

now an inconsistency in the court rulings on whether or not the 

safe harbor that financial institutions get when they file a suspicious activity report, whether they had to have a good faith belief 

that the criminal activity occurred. And we see that as chilling on 

financial institutions. And we would certainly support a change to 

make it clear that a good faith belief that criminal activity has occurred is not required to file a SAR. 

Mr. POLIQUIN. Let’s drill down a little bit deeper, if I can, Ms. 

Calvery. Talk to me a little bit about the sharing of information, 

of course with relevant safeguards, among financial institutions in 

the Federal Government. 

Could you please comment on that? How is that working? Can 

you see any changes that government can make to make that better? You have listed a couple when it comes to dealing with financial institutions themselves. Now, let’s throw the government in. 

Ms. CALVERY. Yes, so there is less needed in terms of authorities 

to make that better, and more needed in terms of innovation and 

activity on the ground. And I think that is happening. It has really 

been an exciting development over the last year. We have been 

partnering, FinCEN has been partnering with law enforcement and 

financial institutions, using the 314(a) and (b) authorities, to share 

information on a more real-time iterative basis, where FinCEN will 

have a meeting with specific financial institutions that can help on 

a specific problem and provide context of the request we are about 

to make to them, to enable them to go back and look in their data 

and do a better job of finding relevant information. 

It also enables them to talk amongst themselves, the financial institutions to talk and share information amongst themselves. And 

that type of joint iterative activity, we found to be much more productive. 

Mr. POLIQUIN. Great. I represent a very highly rural part of 

America. We have the largest congressional district in Maine east 

of the Mississippi River. Is this problem of funding or stopping the 

flow of funds to terrorist organizations unique to large money center institutions? What advice can you give our folks back in Maine 

who deal with small financial institutions and mostly in rural 

areas that they can be on the lookout for these sort of activities 

that ordinarily they might not catch? 

Ms. CALVERY. Unfortunately, I think we have seen that individuals have been radicalized in all different types of communities of 

different sizes in cities, in rural areas. And so then the money 

flows also follow where the radicalization occurs. To put it more 

concretely, of those business rules I was talking about earlier and 

17 

the alerts that we get on activity related to potential terrorist activity, ISIL activity specifically, most of that reporting comes from 

depository institutions. About 60-some percent comes from depository institutions, maybe 37 percent from money services businesses. Most of it comes from large financial institutions, which by 

the way are also in smaller areas at the retail level. But some of 

it is also coming from small community banks and small MSBs. 

I recall seeing at least one report where it was a mom-and-pop 

money services convenience store/money services business operation, and they provided some very important reporting for law enforcement. 

Mr. POLIQUIN. Mr. Chairman, I am just about out of my time, 

but if I could ask one more question. Is that possible, sir? 

Chairman FITZPATRICK. Your time has expired. 

Mr. POLIQUIN. My time has expired. Thank you, Mr. Chairman. 

Chairman FITZPATRICK. Thank you, Mr. Poliquin. The Chair now 

recognizes Mr. Kildee of Michigan for 5 minutes. 

Mr. KILDEE. Thank you, Mr. Chairman. And I thank the witnesses for their participation. 

I would like to start with Ms. Calvery, if you could offer some 

comments on the basic subject of Iran and sanctions. And I refer 

to a speech that Secretary Lew gave back in March, where he indicated it was his view that the credibility of sanctions themselves 

is at stake if the promise of sanctions relief can’t be fully realized. 

So I guess I am curious to what extent you think that criticism 

is valid, how it might apply more broadly than just to Iran’s sanctions, and how effective you think Treasury’s sanctions regime has 

been effective? If you could comment on that, I would appreciate 

it. 

Ms. CALVERY. I have not left government service yet. That will 

be next week. So I am going to start by saying that whatever the 

Secretary said, I agree with. Actually, I do agree. 

Mr. KILDEE. I am sure he will be very much encouraged by that. 

Ms. CALVERY. Even next week, he will get that same answer. But 

joking aside, at FinCEN, we are not the sanctions experts. We support our colleagues at OFAC in their investigations by getting them 

the financial intelligence they need. 

What I can tell you is I am very impressed by their seriousness 

of effort and their ability to fashion sanctions in a very targeted 

manner, their ability to work with a changing scenario on the 

ground, a changing diplomatic situation on the ground to impose 

sanctions and to be flexible in moving those sanctions as needed. 

But in terms of the specifics, I really need to refer you to my colleagues at OFAC. 

Mr. KILDEE. Then if I could zero in on something where FinCEN 

would clearly have some role, and that is implementation of the 

Hezbollah International Financing Prevention Act. Could you comment on the extent to which that is being implemented and how 

you feel it is succeeding in limiting the ability of Hezbollah to raise, 

to move, to use funds in pursuit of their terrorist aims? 

Ms. CALVERY. Yes. FinCEN’s role when it comes to the financing 

of Hezbollah is, again, in the collection of information and sharing 

that, whether it is with OFAC to focus on the sanctions side, or the 

implementation of the Act, sharing it with law enforcement and the 

18 

intelligence community. We have used both our traditional authorities to collect that information, so the suspicious activity reporting 

and that type of thing, but we have also used some of our targeted 

authorities. 

We have used, for instance, Section 311 of the Patriot Act to 

focus on foreign financial institutions that we believed were moving 

funds on behalf of Hezbollah, and to cut them off from the U.S. financial system, and to collect additional information. 

We did that in the case of the Lebanese Canadian Bank, and in 

the case of a couple of money services businesses, Halawi and 

Rmeiti. So that is where we kind of fit into this bigger Hezbollah 

picture. 

Mr. KILDEE. And the last question I have returns to the issue I 

think Mr. Foster had raised to a certain extent. And coming from 

Michigan, one of my long-time mentors is former Senator Carl 

Levin, who has spoken out pretty clearly on this issue of beneficial 

ownership and various methods that have shielded true ownership 

or true beneficiaries of ownership. I dealt with it on a much smaller scale. For many years, I was a county treasurer trying to deal 

with abandoned properties and trying to locate owners through 

various clouds of ownership and shell corporations. 

And I am just curious if you would comment on what you think, 

either of you or both of you, would be the essential elements of beneficial ownership legislation that would actually get at the question? I know Senator Levin had some concern that, from a regulatory standpoint, allowing only managers to be named rather than 

true owners might really be a step backward rather than a step 

forward. I wonder if you would comment. 

Ms. CALVERY. Sure. I, too, am from Michigan. I grew up in 

Michigan, and Senator Levin spoke at my eighth grade Constitutional Convention Day. So I look at Senator Levin a bit as a mentor 

myself. 

However, I do disagree with him on the characterization of the 

definition of beneficial ownership in the CDD rule in a fairly fundamental way. The definition requires—it has two prongs to it. It 

would require individuals to provide information about someone 

who controls a company. So that could be the manager, director, et 

cetera, someone who has actual control over the company, and 

those individuals who have an equity stake in the company, at 

least 25 percent of an equity stake in the company. So it requires 

both of those things. And the reason that we went in that direction—and I first got involved in this definition when I was at the 

Department of Justice and I was being asked personally, what does 

law enforcement need? We know that criminals are going to try to 

hide. They will never actually give their names. So what does law 

enforcement need to actually be able to take the next step in their 

investigation? And our response, my response, was we need something more than a nominee. When law enforcement looks at a 

name on a piece of paper, they need to be able to go out, knock on 

someone’s door, and that person has to have some connection to the 

bad guy, because now they have something to work with. If it is 

a nominee who doesn’t know the bad guy, it is a dead end. And 

that is the situation we have been in, a dead end. 

19 

Now there is someone for law enforcement to go talk to, someone 

who controls the company and someone who has an equity interest 

in the company on paper. No bad guy is going to stay very far away 

from the person who is actually able to control their money day to 

day. They are going to have some connection back and forth, and 

that enables law enforcement to take the next step in their investigation. And that is why I think that definition will prove helpful 

and effective in the CDD context. But through the beneficial ownership legislation that we have proposed, it requires a rulemaking 

process. And I think it is fair game to again examine, is that the 

right definition in that context, or is there a better definition that 

we should put in place? And that is what the rulemaking process 

is for. 

Mr. KILDEE. All right. I see my time has expired. I do think it 

is a subject that requires a lot more exploration. My experience has 

been that it is difficult sometimes to separate a designated manager from an equity owner. And I have seen it where it might appear as if you are dealing with someone who has a real stake but 

often—and this again is in a limited scale, but I can’t imagine it 

is less complicated in terrorism financing. I think it is a difficult 

area that we need to explore further. 

With that, Mr. Chairman, I thank you for your flexibility. 

Chairman FITZPATRICK. Thank you. 

Mr. Rothfus of Pennsylvania is recognized for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. McDonald, I wondered if I could ask you a couple of questions. From your position at OTA, can you tell us how receptive developing countries are, particularly in Africa and the Middle East, 

to integrating efforts to block terrorist financing as a priority concern and accepting assistance from the United States, other G-20 

countries, or the IMF, or development banks to identify and address issues in their nation? 

Mr. MCDONALD. Africa and the Middle East cover a lot of territory. There are a lot of different countries and very different circumstances. So I will try—I am going to avoid giving you just one 

paintbrush description of it. In Africa—in sub-Saharan Africa, in 

particular, I think the overriding challenge and problem is not so 

much one of a lack of willingness to give attention to this issue and 

to try to do better. It is fundamentally and primarily one of very 

low capacity, very limited, sometimes nonexistent, technology. We 

talked earlier about the role of technology. 

I will give you an example. In Liberia, where we are engaging, 

our Economic Crimes Team in their assessment mission went to 

the financial intelligence unit. It was ankle deep in water. There 

were plastic chairs. Maybe one computer. It is really unbelievably 

limited in terms of the human and kind of material capacity to do 

that job. That is an extreme example. There are other parts of subSaharan Africa that are far better. We work, for example, in Kenya 

and Tanzania, different picture. But, by and large, in sub-Saharan 

Africa, it is fundamentally a challenge of having the resources and 

the capacity. 

In the Middle East, I don’t want to say that capacity is not at 

issue; it certainly is. Depending on the country you are talking 

about, whether it is Saudi Arabia, where we have an engagement, 

20 

or Iraq, where we are resuming engagement, it is a very mixed picture. It is a combination of limited capacity. Certainly, it is the 

case in Iraq. But, also, in Iraq in particular, a very—a political and 

security environment that is turbulent, to say the least. So our 

technical assistance efforts in a country like Iraq, where I went on 

mission in November to try to re-establish our engagement, is one 

where there are some improvements. The legal regime has been 

strengthened by passage of new legislation. There has been a kind 

of a—there have been some changes within the central bank and 

the financial intelligence unit that are promising. But it is a region 

that is characterized by tremendous political and security— 

Mr. ROTHFUS. You mentioned a willingness on the part of subSaharan African countries to look at these issues, but there is a capacity issue. In the Middle East, there are some capacity issues. 

But can you address the willingness issue with those Middle East 

countries, Gulf states, other countries in the Middle East? 

Mr. MCDONALD. I would hesitate to characterize the willingness 

of all the countries in the Middle East. The ones that I am the 

most familiar with are Iraq. We almost had an engagement in 

Yemen until things went in a different direction there. We have 

worked in Jordan, where I think one of the other members of the 

panel noted there have been improvements in their FIU work and 

their AML/CFT regime. So it really depends on the country. I 

would just say that it is highly country-specific. 

Mr. ROTHFUS. I would like to ask maybe about the impact on the 

willingness of countries, whether in Africa or the Middle East, with 

respect to recent activity. Do you think that these countries are 

more or less receptive to working with us when they see the Secretary of State holding public meetings with some of the biggest 

banks in Europe to encourage investment and business in Iran, the 

world’s largest state sponsor of terror? Is there an inconsistency 

there? 

Mr. MCDONALD. I haven’t talked to them about that. I couldn’t 

say that is a—let me put it this way: I have never had any of my 

interlocutors in the Middle East tell me that they felt differently 

about the issue because of the factor that you mentioned. 

Mr. ROTHFUS. Ms. Shasky Calvery, I just commend you on your 

work and congratulate you and wish you well in your next endeavor. 

As you look back on your service, where do you think the United 

States has failed with respect to the prevention of terrorism financing? And where do you see the biggest vulnerabilities going forward? 

Ms. CALVERY. I don’t know if I would characterize it as failure 

as much as needing to consistently improve. So I think it was Winston Churchill who said something to the effect of change is good, 

and constant change is to be perfect. We need to constantly be 

changing in the government and evolving with the threat. And the 

threat—you have state actors. You have illicit actors who have billions of dollars at their disposal to be able to pay the best attorneys, the best accountants, the best bankers to come up with the 

most sophisticated schemes to hide illicit assets. And that is the 

charge we have, to keep up with that. So we need to remain vigiVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
21 

lant with a determined adversary and ensure that we keep changing with the times and understanding the risks. 

That is not easy to do. What I see as the primary risks going forward are really what we had in the threat assessment, the threat 

assessment that we handed in to FATF. This idea that the chairman raised at the beginning that we have an incredibly complex 

financial system, the largest financial system, brings with it unique 

threats. We need to understand the full gamut of how all our financial industry works, all the different aspects of it, the various products and services, and then understand that the volume of transactions that go through the U.S. financial system is immense. So 

it is trying to remain focused on a big field of vulnerabilities to find 

a very narrow stream of illicit activity that is flowing through it. 

That is probably our biggest challenge moving forward. 

Mr. ROTHFUS. Thank you, and I yield back. 

Chairman FITZPATRICK. The gentleman from Arizona, Mr. 

Schweikert, is recognized for 5 minutes. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

And, Ms. Shasky Calvery, so only a week left? 

Ms. CALVERY. 3 days. 

Mr. SCHWEIKERT. Okay. So let’s, actually, because I think we always make a mistake of—in some of these discussions, at one 

point, we are talking about our sort of formal networks and informal and terrorism financing and other bad actors and these dollar 

scales. So let’s just do a quick thought experiment. You have been 

doing this for how long? 

Ms. CALVERY. Almost 20 years. 

Mr. SCHWEIKERT. Okay. So you have seen lots of creativity and 

things you never thought of all of a sudden appearing. So if I took 

you and put on the other side of the world tomorrow and said, 

‘‘Here is a half million dollars in cash,’’ because that is the type of 

threat that we often worry about because that buys people who 

mean harm to us, and said, ‘‘You are on the other side of the world; 

here is your half million dollars; give it to someone somewhere in 

North America, and you have 10 days to do it,’’ you could do that. 

Ms. CALVERY. I am not offering those for sale, but yes. 

Mr. SCHWEIKERT. No, no, I am not saying how. We are not going 

to put on the ‘‘how.’’ But look, I sit here on this committee, and I 

know I could do it. 

Ms. CALVERY. Yes. 

Mr. SCHWEIKERT. Through breaking it up and all sorts of different networks, and some in hard commodities, some in this, some 

in that, some in a DHL package. It is quite doable, isn’t it? 

Ms. CALVERY. Potentially, yes. 

Mr. SCHWEIKERT. Potentially, or just it is doable? 

Ms. CALVERY. It is doable. 

Mr. SCHWEIKERT. And there becomes sort of my concern of 

some—so much of our resources we fixate on: Okay. We are going 

to watch the SWIFT system. We are going to track this, track that. 

At the same time, a handful of diamonds shoved into a package 

is being sent to—there are lots of ways to move resources to finance bad actors. 

And so I want to sort of bounce on to the next concept. Someone 

in a very similar position for another three-letter agency who is an 

22 

acquaintance talked me through saying that some of the networks 

that wash money for someone selling copyright violations or illicit 

drugs also, that these networks are basically for sale. So they don’t 

really care where you got the money. If you are moving money for 

terrorism, if you are moving money for a cartel, if you are moving 

money for this, there are entire networks basically that sell their 

services. Is that a fair characterization? 

Ms. CALVERY. That is a fair characterization. 

Mr. SCHWEIKERT. So, functionally, money laundering, money 

movement, asset movement is actually a formal business in a corrupt sector. 

Ms. CALVERY. Yes. I would call them professional money 

launderers. 

Mr. SCHWEIKERT. Okay. So, in many ways, isn’t that one of our 

mistakes? Being someone from a border State, some of the crazy 

things that we have come across—in a previous life when we were 

rehabbing houses, we walked into a house that had a bundle of 

cash in it that was getting ready to be loaded up and taken back 

south. I mean, the things you come across. So my concern is, do 

we spend too much in the way of our resources saying, ‘‘We are 

going to monitor and build algorithms and look at the SWIFT system,’’ and not us understanding that there are hundreds and hundreds of different ways to be creative or break it up or use parts— 

so much of our focus on the formal banking sector, that there is 

massive leakage around us. 

Ms. CALVERY. I think you need financial intelligence to identify 

those professional money launderers and facilitators to be able to 

go after them. And I think they in turn ultimately need the formal 

financial system to be able to move money globally, particularly 

when you start talking about large sums of money. So when you 

are talking about something like a Sinaloa Cartel that by all estimates has billions of dollars that it needs to launder, they need to 

do that through the formal financial system. 

Mr. SCHWEIKERT. You just moved to where I was trying to do 

this. So it is the very large scale amounts of money that are going 

to use—try to access our more formal networks because of the efficiencies. 

Ms. CALVERY. Not necessarily. We also see it, for instance, in the 

case of foreign terrorist fighters who have extremely small amounts 

of money. They are essentially trying to pay for their travel to the 

conflict zone or perhaps for the weaponry that they are going to 

need when they are in the conflict. 

Mr. SCHWEIKERT. But they also have access to the ability to move 

small dollars in lots of informal sort of networks. 

Ms. CALVERY. But they are doing it through the formal financial 

system. 

Mr. SCHWEIKERT. So, in the formal sector, how many—let’s just 

use an example. How many Iranian institutions now have access 

to SWIFT? 

Ms. CALVERY. I don’t know the answer to that question. 

Mr. SCHWEIKERT. Okay. Because that is one of the things we 

have been tracking, because I believe there now are some SWIFT 

relationships with some Iranian institutions to European banks. 

And once that money hits a European institution, the ability to 

23 

move money back into North America, even if we still have—what 

is it—311 sanctions on that institution, they still basically have access to the world’s backbone. Is that sort of—am I heading in the 

right direction there? 

Ms. CALVERY. Not necessarily. I think we have—in terms of 

Iran’s access to the U.S. financial system, I don’t think they have— 

Mr. SCHWEIKERT. But if they have access to Europe and the ability, then—so if I can SWIFT money through a European institution, strawman it out, wash it back out, and then send it SWIFT 

back through under a different sender, I am just—my concern is 

our resources seem to focus on formal networks. And my understanding is the scale of what we will refer to as sort of informal 

networks are also massive. And in our example, if I give you the 

half million and put you on the other side of the world, you might 

mix it up and use all sorts, and then when it hits the other side, 

it comes back together. 

And I have always—and I know I am way over time—but I thought it was absurd that we have a system where if I do $9,999, 

I don’t get reported, but if I do $10,000, I do get reported. So bad 

actors just do $9,999 and use the other alternatives instead of just 

the fixation of, let’s just use an algorithm system to look for a dollar—because a dollar threshold in some ways is absurd. 

Ms. CALVERY. So there are a lot of things— 

Mr. SCHWEIKERT. Yes, I know. A lot of moving parts there. And 

we are way over time. But— 

Ms. CALVERY. Let me perhaps try to address some of it. We seek 

to collect financial intelligence and have transparency over those 

parts of the financial system that we think are the most vulnerable 

to illicit finance. And when you start talking about things like cash 

and following a bare instrument like cash, we have focused on 

thresholds. But even with a threshold, we still have the suspicious 

activity reporting regime to support it. So if someone is doing 

transactions at $9,999, we expect to have a suspicious activity report. If someone is structuring several different transactions to get 

above $10,000, we expect to get a suspicious activity report. 

Mr. SCHWEIKERT. Thank you, Ms. Calvery. 

Mr. Chairman, thank you for your patience. I know we are way 

over time. 

Chairman FITZPATRICK. Thank you. 

The gentleman from Texas, Mr. Williams, is recognized. 

Mr. WILLIAMS. Thank you, Chairman Fitzpatrick. And thanks to 

both of you for being here today. 

Mr. McDonald, one of the key themes of these task force hearings 

has been international cooperation. We in the United States can 

only do so much on our own. While I believe our countryis making 

great strides in combating the financing of terrorism, we still can 

do more, and we need to do more. In previous task force hearings, 

the committee has explored the idea of trade transparency units 

which seek to identify trade-based money laundering trends and 

conduct ongoing analysis of trade data provided through partnerships with other countries. One of our past witnesses, John 

Cassara, who is a former U.S. intelligence officer and Treasury special agent, testified that having TPP signatories agree to these 

TTUs would promote trade transparency. It would also be a revVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
24 

enue enhancer and, in his opinion, not derail implementation of 

current or future trade deals. I wanted to get your thoughts on this 

idea of making sure that our trading partners are following the 

same set of rules as we do. 

Mr. MCDONALD. Let me kick it off. And I think Ms. Calvery has 

something that she could add to that. So certainly the trading system, the international trading system, is one of the vehicles for 

money laundering and transmitting terrorist financing. And it is 

one of the areas where we work with our partner countries to try 

to get them better positioned to be the front line of shutting that 

off. So we work with customs officials. We work with officials in 

countries that are responsible for managing and overseeing the 

trading—trade flows in those countries to try to strengthen their 

capacity—and I think this is part of your question—for them to 

work more closely with others in the United States and in other 

countries who are involved in trying to combat trade-based money 

laundering. So that is part of our work. 

Jen, I don’t know if you have something you would like to add 

to that? 

Ms. CALVERY. Sure. FinCEN works very closely with Homeland 

Security investigations on a number of different matters—and 

CBP—on trade-based money laundering. So we are very familiar 

with the TTUs and think that they have really done a good job over 

the years. So a good example is the TTU that we have here and 

the relationship we have with Mexico. They are able to share trade 

information, extensive trade information, to find where there has 

been over-invoicing or under-invoicing of export and import trade 

between the two countries and thereby find money that is being 

laundered. When you put that type of data together with the data 

we collect at FinCEN, we are really able to start to hone in on 

some professional money launderers and facilitation networks and 

to take action. 

Mr. WILLIAMS. Thank you. 

Mr. McDonald, last week I was encouraged to see G7 members 

agree to enhanced information sharing and cooperation when it 

comes to terror financing. This follows a similar agreement by the 

G-20 nations. But when it comes to TPP, not all of the current signatories are part of the larger discussion. How receptive are developing countries to integrating efforts to block terrorist financing as 

a priority concern and in turn accepting assistance from the United 

States? In other words, when it does—or in other words, does it become beneficial for them to actually engage in this topic instead of 

turning a blind eye to it? 

Mr. MCDONALD. So, broadly, I would say that developing countries are receptive to assistance and interested in strengthening 

their AML/CFT regimes in different ways. Part of it is a growing 

recognition on their part that terrorist financing, dirty money of 

different kinds, can harm them. Terrorist financing or funding that 

is being laundered in the direction of the United States doesn’t always end up only here. The countries of Central America, South 

America, and other parts of the developing world, I think, are increasingly aware of their stake in trying to address this issue. 

As I said earlier, it is not only their concern about funding of 

criminal activity within their own countries but also the loss of corVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
25 

respondent banking accounts upon which their financial system depends. So I do believe that they do recognize the importance of this 

issue. And while I can’t speak for the—it is on a country-by-country 

basis whether they want to have a technical assistance program 

with us—they are interested. 

Mr. WILLIAMS. Really quickly, should TTU be a part of the TPP 

agreement? 

Mr. MCDONALD. I don’t know the answer to that question. 

Mr. WILLIAMS. That is why I ask it. 

Mr. MCDONALD. I will find out. Can I find out and get back to 

you? 

Mr. WILLIAMS. Would you do that for me? 

Mr. MCDONALD. We will do it today. 

Mr. WILLIAMS. Thank you. I appreciate it. 

Mr. Chairman, I yield back. 

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

is recognized. 

Mr. HILL. Thank you, Mr. Chairman. I appreciate you and Ranking Member Lynch for your steady leadership of our task force. 

Director Calvery, best wishes to you in your next step in your career. 

And, Mr. McDonald, thank you for your service at Treasury. As 

a former Deputy Assistant Secretary of the Treasury, I always appreciate hearing from a fresh one. And I appreciate your work. 

I led the technical assistance design to all of Central and Eastern 

Europe to the Finance Ministries from the Treasury back a quarter 

century ago. So it is good to see you continuing to do that good 

work. 

I am grateful to both of you for your leadership around the world 

to make our efforts to fight terror finance more robust, more coordinated, and more successful. 

This information sharing and collecting, one thing in your testimony, Director Calvery, I was interested in your discussion about 

sharing with other financial intelligence units around the world— 

and that makes complete sense to me—and sharing with other public entities in the United States like your work with Homeland Security and border security. Excellent work. But whenever I talk to 

people in the private sector, they always seem more interested in 

targeting rather than sharing. And so the question I have for you 

is, how can we focus on targeting rather than just funneling 

terabytes of information into Treasury’s IT center and analytics 

center? It seems like we are missing the power of hundreds of people out there on the front lines every day in our biggest banks 

around the globe. 

So can you reflect on sharing essentially with the private sector’s 

financial intelligence units and our biggest banks in the world and 

also how we can better target getting them engaged on the front 

lines of terror finance? 

Ms. CALVERY. Sure. I think there has been some real innovation 

in this space over the last year, which I referenced briefly earlier. 

Both in the United States, and the United Kingdom as well, there 

has been a fair amount in the press about the JMLIT, the joint 

money laundering task forces that they are operating. But both are 

doing essentially the same thing, and that is doing targeted inforVerDate Nov 24 2008 16:57 Sep 07, 2017 Jkt 024137 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\24137.TXT TERI
26 

mation sharing between government and industry, financial institutions. So focusing on a very specific problem set—maybe it is 

something related to ISIL; maybe it is something very targeted and 

specific, not the broad topic—and sharing targeted information and 

then seeing what each side, what government can do, what industry can do, what industry can do by speaking to one another and 

sharing information, by putting all of our efforts together, what 

kind of progress can be made in targeting some of the financial 

facilitators that we are trying go after? We are seeing promising results. Many of those efforts are still ongoing and in investigative 

stages. So I can’t speak to the specifics. But I can tell you there 

is a lot of excitement on this topic right now. There is a lot of excitement in industry. This is what they would prefer to be doing, 

the people who staff their financial intelligence units. And it is 

what government and the law enforcement area would like to be 

doing. So I am expecting that there is going to be great development in this area just because of the concentration of effort of some 

very talented people in the year ahead. 

Mr. HILL. Thanks. 

On the subject of beneficial ownership, I congratulate Treasury 

for finding and plugging the gap in single member non-citizenowned LLCs. I think that was a good proposal you made to Congress in your disclosure in the recent days. But I still have trouble, 

and we have had this discussion at a number of these hearings, understanding your push for bank collection of beneficial ownership 

at the 25-percent ownership level through the normal customer ID 

process, when instead under the Code, Section 6103, why don’t we 

grant FinCEN the ability to get IRS data, which has much more 

up-to-date, much more accurate beneficial ownership for C corps 

and LLCs, particularly if you plug the foreign single member question. Why do we keep going back to something that is dated and 

not very reliable, frankly? 

Ms. CALVERY. Sir, I think that is an important question. And it 

is important to understand the distinction between—government 

understanding beneficial ownership to help it with its investigations. So, like the proposed legislation to collect information at the 

time of company formation, that would help law enforcement. It is 

important to distinguish that from a bank’s responsibilities as well 

to understand who their customers are and to be able to assess 

whether there is a suspicious activity occurring within those accounts. It is only a financial institution that is going to have insight into whether their customer is engaged in suspicious activity 

and file those reports that will get to law enforcement and potentially initiate an investigation. 

So, for instance, if they know who the beneficial ownership is of 

a legal entity customer, they are going to be better positioned to 

implement their sanctions obligations. They are going to be in a 

better position to understand whether the activity is the type of activity they should expect from that customer. 

Mr. HILL. Yes. I am out of time, Mr. Chairman, and I understand 

that. But the issue is they already have that obligation under the 

Bank Secrecy act now on filing a SAR. They don’t need more directives about documenting beneficial ownership when they gather 

that information a lot now, both on the deposit side and the loan 

27 

side, including who is responsible for filing the tax return for the 

LLC, et cetera. Banks know that information, and they have an obligation if there is something suspicious to report it. 

I am talking about the timeliness and accuracy of actual beneficial ownership that you want to try to sort through. And I am arguing that the IRS has a much better source of that data, that it 

is much more current, much more accurate than Secretaries of 

State or bank credit files. That is the argument I am making. And 

that it is a much more robust source of that data if you had access 

to it as a law enforcement agency under something like 6103’s normal power arrangements for IRS data. 

Ms. CALVERY. So I think when—that seems to be more of a reference to the beneficial ownership legislation proposal. And there 

we are focused on having FinCEN collect the information or have 

the information because it is a part of our statutory mandate to 

make that information available to law enforcement more broadly, 

State, Federal, law enforcement, to enable them to do their jobs, to 

provide it to regulatory authorities and to provide it as appropriate 

to the intelligence community to fight international terrorism and 

other national security threats. Whereas, in the tax context, there 

is much more limited abilities to be able to share that information 

with the broader community. And so that is the— 

Mr. HILL. But that is a problem I think you need to solve. 

Thank you, Mr. Chairman, for the extra time. 

Chairman FITZPATRICK. Sure. 

The gentleman from Florida, Mr. Ross, is recognized for 5 minutes. 

Mr. ROSS. Thank you, Mr. Chairman. 

And I want to thank our witnesses today for being here, Ms. 

Shasky Calvery, especially, for your service, as well as Mr. McDonald. 

I want to focus on something, because you hit on something in 

your opening statement, Mr. McDonald. You stated that the goal 

is a system in which both prevention and enforcement measures 

are robust and mutually reinforcing. It would seem to me that, absent enforcement, you won’t have prevention, because one would 

lead to the deterrent of the other and hopefully be a good system. 

It reminds me of a commercial that I saw on TV for LifeLock where 

you have a bank guard standing in the middle of a robbery and one 

of the victims says, ‘‘Do something,’’ and the bank guard says, ‘‘I 

am just a monitoring guard; I don’t do anything to prevent the actual robbery.’’ My focus here is going to be on enforcement. 

Ms. Shasky Calvery, are we doing enough in enforcement? 

Ms. CALVERY. I think we are. The United States is doing more 

than any other country around the world in terms of enforcing the 

Bank Secrecy Act. If anything, the criticism internationally is that 

we are doing too much. But— 

Mr. ROSS. But are other countries cooperating with the enforcement? In other words, are we just—we are gathering data. We are 

monitoring. We find specific targets. We find dynamic targets that 

require some of the developing countries to assist us. Do they enforce to the level that we need them to enforce in order to lead to 

prevention? 

28 

Ms. CALVERY. There is not one answer—because there are so 

many countries out there, I can’t answer one way for all of them. 

Each is a different situation. But I think we are seeing a trend 

moving in a positive direction where more and more of our partners 

around the world are enforcing their anti-money laundering provisions. And now, in FATF, there has been a move. Before it was 

enough just to have laws on the books criminalizing or otherwise 

prohibiting money laundering in terrorist finance. Now there is a 

move when we do mutual evaluations, when we do assessments of 

other countries as peers, to say whether they are in compliance 

with the international anti-money laundering standards. Now we 

are looking at the effectiveness. It is not enough just to have rules 

on the books. Are you actually implementing them, and are they 

effective? 

Mr. ROSS. And what can we do if they are not implementing 

them? If they are not— 

Ms. CALVERY. At least in the FATF context, there is a system to 

have kind of increasing sanctions on countries for failing to comply 

with those standards. 

Mr. ROSS. That is what I would ask you, especially as you reflect 

on 20 years there, what would you suggest we need to do more in 

terms of what resources or tools would be necessary to strengthen 

enforcement, not so much with us as a country but with our allies 

in trying to stop the money laundering in the terrorist financing? 

Ms. CALVERY. Well— 

Mr. ROSS. Do the sanctions work? 

Ms. CALVERY. So, two separate questions. The first one in terms 

of enforcement of our AML/CFT regime, what more do we need to 

do there? I think we need to give the push on effectiveness in 

FATF a chance to work. There are going to be some very important 

conversations that are going to come out of that. We are in the first 

round of those reviews right now, and already, it is starting to 

highlight some issues for us to be focused on in the years ahead. 

In terms of the sanctions regime and whether that works, I really would have to refer you to my colleagues at OFAC who do that 

for a living every day. 

Mr. ROSS. Okay. Mr. McDonald, would you say that there are obstacles to cooperation that Congress should know about with some 

of our cooperating countries? 

Mr. MCDONALD. Could you repeat the question? 

Mr. ROSS. Yes. Would you say that there are obstacles to cooperation, and if so, what could we do to try to overcome those obstacles? 

Mr. MCDONALD. So, certainly, there are obstacles. I already mentioned and won’t repeat, the obstacle of there being extremely, extremely low capacity and just terribly rudimentary work spaces 

and technology in the countries where we work. Another obstacle 

is, as I sort of alluded to in my oral remarks, the inevitability that 

entrenched interests will manifest themselves at some point when 

you get to the point where— 

Mr. ROSS. Can we provide them any incentives? Can we provide 

them any incentives to invest more on their end without having to 

appropriate more on our end? 

29 

Mr. MCDONALD. I think I will piggyback on a couple of things 

that Jen referred to. I do think that there is evidence that the 

FATF procedures and the FATF monitoring process does, if you 

will accept the expression, put the squeeze in a positive way on 

countries that are subject to that. An example is Cambodia. They 

were in the FATF ICRG review process not doing well. They saw 

the writing on the wall. They asked us for technical assistance to 

help them build the capacity to do better. It took years, but they 

did emerge from that process. Of course, it will be important for 

them to sustain it. Getting out of the ditch is just the first step. 

But I do think that there are examples—there is evidence that 

the FATF process can be an effective way of focusing attention. 

Case in Panama, another country that we have been talking about. 

Mr. ROSS. Thank you. 

And I see my time is up. I yield back. 

Chairman FITZPATRICK. The gentleman from Kentucky, Mr. Barr, 

is recognized. 

Mr. BARR. Thank you, Mr. Chairman. 

And, to Ms. Calvery and Mr. McDonald, thank you for your testimony today. Thank you for your service. Thanks to the work of the 

Office of Technical Assistance and FinCEN. It’s very critical work 

in terms of coordinating the government’s efforts to stop terror financing. 

I wanted to start with Treasury’s monitoring of the implementation of the Iran nuclear deal and specifically the data on any Iranian sanctions relief moving to terror proxies. 

I know, Ms. Calvery, you indicated that FinCEN really is not 

doing a whole lot of that, that you would defer to the Office of Foreign Asset Control (OFAC). But to either of you, has Treasury 

made a finding about whether any sanctions relief has found its 

way into the hands of terrorists? 

Ms. CALVERY. I don’t believe that there has been a finding one 

way or the other. But I am not certain. 

Mr. BARR. And from the Office of Technical Assistance, same conclusion? 

Mr. MCDONALD. Yes. I do not know the— 

Mr. BARR. What about with your colleagues with OFAC? Any 

communications within Treasury from OFAC about their monitoring of the implementation of the agreement? 

Ms. CALVERY. I would have to defer to OFAC on that. 

Mr. BARR. The reason why I would ask, and it is kind of a fundamental question in terms of Congress’ oversight of the agreement, 

is that Secretary Kerry, about 5 months ago, in Switzerland, at the 

World Economic Forum, acknowledged that sanctions relief will 

likely go to terrorists. That is our own Secretary of State defending 

the agreement acknowledged that maybe one of the core weaknesses of the agreement that he negotiated was that some of the 

sanctions relief would end up in the hands of the Iran Revolutionary Guard Corps or other terrorist proxies. And so it is troubling that Treasury, which is charged with the mission of monitoring terror financing, doesn’t really have an answer to that basic 

and fundamental question. 

And by the way, the Secretary of State in making that declaration indicated that there would be consequences if Iran uses the 

30 

money to fund terrorism. How can we know to impose consequences if we don’t know whether or not any of the sanctions relief has in fact found its way into the hands of terrorists? 

Ms. CALVERY. Congressman, I want to make sure that I didn’t 

misspeak. I did not mean to suggest that Treasury does not have 

answers to these questions. Instead, as the Director of FinCEN, I 

don’t have answers to those questions, but I would be happy to 

take them back. 

Mr. BARR. Thank you. 

Mr. MCDONALD. The same for me. It is just not in my area of 

responsibility. But I feel confident that there is an answer to that 

question in Treasury. 

Mr. BARR. We would like to know. And so thank you for—and I 

recognize that Technical Assistance and FinCEN are not at the 

core of that question. But, presumably, the Office of Foreign Assets 

Control would be. Someone at Treasury—this is a pretty critical 

question that Treasury should be well aware of, everyone within 

Treasury in the area of countering terror finance. 

Let me quickly move on to the Office of Technical Assistance specifically. And, Mr. McDonald, in your testimony, you indicated that 

OTA has a relatively smaller footprint in the Middle East. Given 

that the locus of most terrorism activity is in the Middle East, 

shouldn’t we be more—and I understand that you have to have a 

willing government as a partner here—but shouldn’t we be more 

proactively and aggressively interjecting ourselves into those Middle Eastern embassies? 

Mr. MCDONALD. When I made my remarks about the importance 

of demand-driven technical assistance, I did not mean to suggest 

that we should be sitting back on our heels and waiting for others 

to come to us and not doing anything on our own. So, certainly, 

part of my job is to make sure that potential partners for our technical assistance program are aware of our program, of how it relates to U.S. national interests and their interests. And I would 

also say that an important part of the role of the Treasury’s attaches overseas is to serve as advocates for this kind of awareness. 

So, certainly, that is— 

Mr. BARR. Just in terms of prioritization of the scarce resources 

that Treasury has in this area, and maybe it is too scarce, but do 

we have enough attaches in our Middle Eastern embassies? 

Mr. MCDONALD. I asked this question before I came up today. 

What is the answer if the question is, are there enough attaches 

out there? And, certainly, we would welcome and benefit from additional resources, not only to support additional attaches but even 

the ones that we have. So the rising cost of doing business at embassies internationally, which is affecting all agencies, not just 

Treasury, is one of concern just for our existing footprint. And in 

order to do more, certainly additional Treasury attaches would be 

helpful. I am very aware of the benefit that I get out of our attaches in Afghanistan and Iraq and in many, many countries. Well, 

not that many. Actually, 17 countries where we have attaches. But, 

certainly, that would be a helpful addition to the picture. 

Mr. BARR. Thank you. 

I yield back. 

31 

Chairman FITZPATRICK. The gentleman from Minnesota, Mr. Ellison, is recognized. 

Mr. ELLISON. I thank the chairman and the ranking member. 

And I also want to thank our witnesses today. 

I represent Minneapolis, Minnesota, which is home to probably 

the most Somali-Americans in our country, in North America, perhaps. We have as many Somali-Americans in the Minneapolis area 

as they do anywhere outside of Somalia. I could tell you, and I 

think you are well-aware, that there is a crisis going on, and it is 

not getting better. Many U.S.-based Americans who find their roots 

in that part of the world are unable to provide critical assistance 

to their loved ones. Some of this is food. Some of this is school fees. 

A lot of it is just the basic sustenance of life. Upwards of 40 percent 

of the GDP of Somalia is foreign remittance. Now, licensed money 

remitters, as you know, are known as money service businesses, or 

MSBs. And I am sure you all are aware that they are losing their 

ability to open bank accounts and send money overseas. 

Increasingly, correspondent banks are declining to provide wire 

transfers to many nations, including Somalia, and many who have 

opened up these accounts are having them closed. And every day, 

it feels like the window is a little smaller and smaller. 

And I can tell you I have talked to these banks and these credit 

unions, and they don’t have a problem remitting money. But they 

feel that the financial and liability risks are so great to them that 

it just doesn’t cost out for them. So they are making a business decision to close accounts and to not open them. 

In November 2014, FinCEN published a statement on providing 

banking services to money services businesses. I found the statement very clear. But since then, the situation really hasn’t improved very much. And I guess my first question is, why did 

FinCEN’s 2014 statement not really turn the trick? Why didn’t it 

provide necessary assurance to bankers that they can meet their 

requirements and still provide services to regulatory compliant 

MSBs? 

Ms. CALVERY. Ultimately, the banking industry has to assess the 

risks, what controls it can put in place, and what its appetite is to 

deal with those risks. And I think, as Larry can tell you from the 

work that he and his team do in Somalia, that Somalia presents 

a lot of challenges around the illicit finance risks present in the 

country and the state of its financial system and its ability to control those risks. Here in the United States, what FinCEN is able 

to do and what we have been doing beyond issuing the statement 

in 2014 is to move on the Money Remittances Improvement Act 

that you proposed and President Obama signed into law in 2014 

to ensure that there is good supervision of the money services business industry and that banks and banking regulators, examiners, 

know that supervision system is strong so that we have the conditions on this side to ensure that banks can have comfort that MSBs 

operating in the United States and how they are examined and supervised in the United States is something they can be comfortable 

with. 

That doesn’t necessarily help them with the risks on the side in 

Somalia. 

Mr. ELLISON. Okay. Would you like to respond, Mr. McDonald? 

32 

Mr. MCDONALD. Only to mention that our technical assistance 

program is working with the Somalia authorities, in particular in 

the area that Jen mentioned, to strengthen bank supervision capacity in the central bank. We are fortunate to have the collaboration 

of the U.S. Embassy in Kenya and the Kenyan School of Monetary 

Studies, where we conduct those training activities because the security environment doesn’t allow us to do so in Somalia. So it is 

a tough undertaking, but it is one that we are committed to. 

Mr. ELLISON. I want to thank you for doing what you are doing. 

And I just want to encourage you to do more because if our effort 

is to thwart and stop the terrorists and Al Shabaab, if we drive the 

money underground, it is just more opaque. It is not a better situation. 

Let me see if I can squeeze one more question in. I have heard 

from banks that their regulators do not acknowledge that MSBs 

are regulated by State banking supervisors and the IRS. So banks 

feel that they must not only know their customer, but their customer’s customer. Do you see this phenomenon? Is there a way we 

can get through this? How do you see this? 

Ms. CALVERY. That is the effort that we have been particularly 

focused on I would say over the last 6 months. And I do see improvements. And that is the communication between money services businesses, their trade associations, their regulators, the 

States themselves, the IRS, communicating to banks and their supervisors about how that supervision regime works. I think there 

was a fair amount of surprise among some of the banks and banking supervisors to see how much they are actually supervised. And 

we are also working with money services businesses on putting together a best practices guide for them so that they can give even 

further comfort. 

Mr. ELLISON. Let me tell you, I am about 40 seconds past my 

time. But if there is another round, I have a few more questions 

for you. Thank you. 

I yield back. 

Chairman FITZPATRICK. The gentleman from Delaware, Mr. Carney, is recognized. 

Mr. CARNEY. Thank you, Mr. Chairman and Mr. Ranking Member, for this hearing today and for your very good work on this task 

force. Thank you to both of you for coming in and for your work 

for our country. 

I am not a member of the task force, so I appreciate an opportunity to be here and to listen to the testimony and to ask a few 

questions. And I will try to end with just a general question, which 

is if both of you could kind of underscore after this full discussion 

the top three threats that keep you up at night in this area. 

Mr. MCDONALD. We were going to flip a coin to see who went 

first. But so, certainly, Iraq is a country, an area of concern. It is 

part of a broader region of concern. I am hopeful that our technical 

assistance engagement there as part of a broader, significantly 

broader, set of steps on the security front will be beneficial and be 

fruitful. So Iraq is a country of concern. 

Mr. CARNEY. Is it getting better or worse? 

Mr. MCDONALD. Pardon me? 

Mr. CARNEY. Is it getting better or worse? 

33 

Mr. MCDONALD. I think on the—we are having to postpone our 

scheduled mission, next mission, because of the very—the recent 

unrest in the international zone. So that is not better. 

Afghanistan, a country that I have visited many times, where we 

have resumed a technical assistance engagement, is a very important part of the world, that keeps me up at night in some respects. 

I do have a feeling, a sense of hope that the current leadership, 

President Ghani, whom I know well from when he was the Finance 

Minister of Afghanistan, understands the issues, understands the 

importance of building institutional capacity. But he obviously has 

a tremendous number of security, political, and other challenges he 

is confronting. 

Mr. CARNEY. I am running out of time. Number three? 

Mr. MCDONALD. So I will—why don’t I just— 

Mr. CARNEY. Anything else that you would like to add to that? 

And I have one other point I would like to make. 

Ms. CALVERY. I will go quickly: number one would be the idea 

that ensuring that we get, collect, and share any information we 

possibly can to prevent a foreign terrorist fighter or a homegrown 

violent extremist from engaging in violent activity in this country; 

number two, that we are doing everything within our power at 

FinCEN to protect the financial system from cyber actors, illicit 

cyber actors; and number three, that we at the same time stay focused on professional money-laundering networks that are responsible for laundering billions of dollars for organized crime and other 

illicit actors. 

Mr. CARNEY. So it doesn’t sound like you guys sleep very well at 

night with those concerns. 

I am disappointed that Mr. Hill is not here because I would like 

to follow up on the last point that he made. I represent the State 

of Delaware. Most corporations, LLCs, are formed in Delaware, and 

the concerns raised about beneficial ownership concern elected officials and leaders in Delaware as well as elsewhere. Mr. Hill talked 

about and Senator Carper on the other side of the Capitol is working on legislation that would give access to law enforcement agencies to the data that is already being collected at the IRS and to 

expand on some of that data so that law enforcement had better 

tools around beneficial ownership to kind of get beyond the socalled corporate veil. 

Do you have a view of that? You had a back-and-forth, but I 

wasn’t clear on what your view was on using that IRS data and 

making it available to law enforcement agencies. 

Ms. CALVERY. Yes. Treasury and the Administration set up a 

proposal just a few weeks ago—a legislative proposal—on the collection of beneficial ownership information that we think is the 

right solution. We are definitely open to continuing the conversation to come to a solution on this issue. But that proposal would 

focus on FinCEN collecting information. One of the benefits to that 

proposal over some of the others I have seen over the years that 

would have put the onus on the States to collect information and 

make it available is that it doesn’t require States to do anything 

extra. It also has a 50-State solution, so to speak, in the sense that 

you can’t have arbitrage between different States if they do things 

differently. But that is the proposal that we have been pushing. 

34 

Mr. CARNEY. Thank you very much. 

Again, to the Chair and the ranking member, thanks very much 

for the opportunity to sit in. 

Chairman FITZPATRICK. With that, we are going to proceed to a 

second round of questions. There shouldn’t be too many. I just actually have—I want to recognize myself first for 5 minutes. 

One particular issue has to do with asset forfeiture. So my question would be to you, Mr. McDonald. Recently, there was a series 

of meetings in South and Central America that Representative 

Pittenger and Representative Ellison and I attended with a number 

of others. And as we traveled and met with different governmental 

and FIU professionals in those countries, there was an area of common concern. I think we take for granted sometimes that, in this 

country, most States have asset forfeiture laws in place. And so you 

find a bad actor, a law breaker, you can not only let the prosecution take their liberty, but you can hurt them a second time by getting to their assets. Most of the times those assets were had with 

ill-begotten gains. You can convert them to cash. You can, using 

our laws, take that cash and pay things like police overtime at the 

local level or the State level or Federal to investigate the next law 

breaker. 

So one of the things we noticed and, specifically, when we were 

in Paraguay, and I will just give you an example: The plane landed 

on a tarmac in Ciudad del Este near the tri-border area. And there 

was a somewhat legendary jet that was sitting there, that had 

been, I guess, forfeited. And it looked like it had been there for 

about 10 years or so. It was covered with moss. And so we questioned, and the answer was: We don’t really have the process or the 

ability, technical assistance, I guess, to actually complete the forfeiture process. So what was a valuable asset at one point in time 

is just wasting away. It is probably going to cost the government 

funds and resources to get rid of it, as opposed to actually using 

it against the terrorists or the money launderers or the narcotraffickers or wherever it came from. 

So does OTA—what can you tell us about some of these countries 

that we work with and their ability to use asset forfeiture and our 

assistance to help them get their job done? 

Mr. MCDONALD. First, we do provide technical assistance to help 

countries establish and implement asset forfeiture regimes. 

You are right that it is an unattended area or a nonexistent area. 

And in a number of countries, it is one of the important areas of 

the work of our Economic Crimes Team. It is something that I 

think if we had been there when the plane first got to that tarmac 

and became possibly available for being part of an asset forfeiture 

action, it would have been a good thing. 

But we are working with—I am going to confirm this—but part 

of our work in Paraguay is, I believe, on asset forfeiture. It is certainly part of our work in other countries and Central America, 

Latin America, and the Caribbean. In Haiti, frankly, one of our— 

and it is, unfortunately, not a long list—one of the examples of 

progress that we made in our engagement in Haiti was on asset 

forfeiture. 

35 

So, bottom line, you are absolutely right. That is an important 

part of the AML/CFT regime-strengthening effort. It is something 

that we do. 

So, in a demonstration of OTA efficiency, the head of OTA’s enforcement—Economic Crimes Team, Erin Schenck, just reminded 

me that we began asset forfeiture management work in Paraguay. 

There was a mission, a TDY, earlier this month, and it is an area 

of high demand. I don’t think that—I have actually seen that 

plane. And I don’t think that we are going to get much money out 

of that plane. But we are going to fix the asset forfeiture regime 

so that sort of thing is not repeated. 

Chairman FITZPATRICK. There won’t be much money out of that 

plane at this point in time. It has been sitting there—appears as 

though—a long time, a decade or more. But it is just an example 

where sometimes you have to invest money to get money back. And 

if you want to suggest some additional resources OTA could use, 

I would like to see funds properly invested in providing technical 

assistance to some of these countries so they can get more of their 

own resources, and we can do a better job together. 

But I appreciate the fact that you guys are on top of that particular case, which, as I said, was somewhat legendary there. We 

spoke to the prosecutor about it, and we couldn’t really get a clear 

answer. 

Mr. MCDONALD. If I may, just quickly, note that in addition to 

technical assistance in the asset forfeiture area, a big part of our 

work across other teams is domestic resource mobilization more 

generally, so trying to help these countries mobilize more resources 

in their own country to the benefit of efforts to combat money laundering and terrorist financing but also so that they can provide 

basic public services more effectively than they are able to do now. 

Chairman FITZPATRICK. I recognize Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Let me just follow up. We had a situation here several months 

ago where we had cyber hackers get into the central bank in Bangladesh and send instructions to the New York Federal Reserve 

Bank to wire—actually, they requested $951 million to be sent to 

various locations around the globe. They ended up successfully getting the New York Fed to wire $81 million to certain casinos in the 

Philippines. And they successfully stole the $81 million. It was a 

payout. I know we have Abu Sayyaf operating there out in the 

smaller islands in the Philippines. 

Is there any indication—this is a pretty sophisticated operation. 

I know that the Philippine government has issued—or taken away 

people’s passports because they think it was an inside job. I am not 

so sure it was. But are you folks involved in that? And what can 

you tell us about it? 

Ms. CALVERY. I can’t say a whole lot in this forum because there 

are ongoing investigations and so forth happening. What I can tell 

you is, at the highest level, the threat of malicious cyber actors is 

a top priority of the U.S. Government. The idea that they are going 

to attack our financial institutions or financial infrastructure is a 

top priority of the Treasury. And there are many people at Treasury who are working on this issue every day. 

36 

At FinCEN specifically, our role is to collect information through 

suspicious activity reports, and we do get a lot of information in 

those SARs on different cyber threats. 

Mr. LYNCH. A little wrinkle here because the Philippine senate 

had a bill to require reporting of suspicious transactions, the suspicious activity reports, and the casinos lobbied against them in the 

Philippine legislature and defeated the amendment. So they don’t 

have that. So we have this gap in the Philippine anti-money laundering protocols. And here we are in the meantime basically signing a trade agreement with these folks. So it is problematic. 

Are there other measures that we might—we have this vulnerability in the Philippines because of the lack of this anti-money 

laundering legislation. Are there other ways that we can fill that 

gap to help you do your job? 

Ms. CALVERY. One of the things that we are currently doing to 

fill that gap is, at FinCEN, we have a program known as the Global Rapid Response Program. We work it together with the FBI, the 

Secret Service, and I believe Homeland Security just signed on. 

And what we have been doing is when there are cyber incidents 

like this and the money moves—it moves very quickly, and of 

course, it is moving internationally—is law enforcement gets information from the victim, usually a big business, and they get that 

information to us. We work with our partner FIUs around the 

world to get that money either refused, turned around, or arrested 

before the bad guy actually gets his hands on it. In the last 18 

months, I believe we have recovered around $186 million on behalf 

of U.S. businesses. And it is a program that, unfortunately, I think 

is going to keep increasing. 

Mr. LYNCH. Mr. McDonald, do you have anything to add? 

Mr. MCDONALD. No, not on this topic. 

Mr. LYNCH. Okay. This was all done via SWIFT, which is a huge 

problem for us. You mentioned the recovery that we have had on 

behalf of U.S. businesses. Was that with international partners 

where SWIFT would be involved, or are those internal within the 

United States where SWIFT would not be involved? 

Ms. CALVERY. It was with international partners where wire 

transfers would have gone, yes, internationally. 

Mr. LYNCH. Okay. All right. Thank you. 

I yield back. 

Chairman FITZPATRICK. I recognize the vice chairman, Mr. 

Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Sometime back, we had a briefing with the four major banks, 

who came to discuss their role in our combined efforts. And in that 

discussion, of course, these 4 banks receive 90 percent of the foreign funds that come into our country, and they shared with us the 

problems that they have under 314(b) in sharing information with 

each other but also in 314 in receiving information from the government. 

And one thought that came out at that time was establishing 

some type of nonprofit which could be in receipt of data. I am 

aware that in Pittsburgh, Carnegie Mellon, the government, and 

the financial institutions have joined together, and there is a 

501(c)(3) that has been established. Do you envision something like 

37 

that for cyber? That is for cybercrimes. Do you envision that something like that could be established? 

Ms. CALVERY. I am familiar with the outfit in Pittsburgh, and I 

have certainly been involved in many of these discussions with our 

big four financial institutions as we and others have been exploring 

ideas of how best to share information and what we might want 

to try to set up. I think the thinking—we will see—but my sense 

is that the thinking has evolved a bit away from this idea of establishing a nonprofit. As some of these institutions are trying out different mechanisms for sharing information with one another under 

314(b) and 314(a), they are kind of learning by doing in terms of, 

what are going to be the most effective ways to share information? 

And we at FinCEN are supporting them. We have had a number 

of meetings and discussions about it, and we have been very open 

to issuing guidance or administrative rulings on any questions that 

industry might have. 

Mr. PITTENGER. Clearly, we need to modify 314 in terms of the 

safe harbor rules, because they feel the impediments there in terms 

of receiving data from the government that they feel like is important for them. 

Regarding FATF, do you envision that the TTUs could be or 

should be incorporated as the recommendations with FATF? 

Ms. CALVERY. Wow. I haven’t been privy to much of this discussion of whether TTUs are going to be incorporated into FATF, so 

I just don’t know the answer to that question. 

Mr. PITTENGER. From your experience of 20 years, do you feel 

like that is a valid option that we should be looking at? 

Ms. CALVERY. I think it is worth continuing to explore information sharing in all its forms. I do know the FATF is very focused 

on that. They are interested not just in how our FIU is sharing 

with one another, but how also is law enforcement doing that? And 

I would put it under that kind of rubric. So I wouldn’t be surprised, 

with some of the efforts that they have ongoing to look at that 

issue, whether TTU isn’t a part of it or whether it couldn’t be a 

part of it. 

Mr. PITTENGER. Ms. Shasky Calvery, how many members are 

there in Egmont? 

Ms. CALVERY. I believe it is 151. 

Mr. PITTENGER. 151. 

And, Mr. McDonald, the OTAs, how many countries do we serve 

or work with? 

Mr. MCDONALD. In the economic crimes area, we work in 15 

countries. 

Mr. PITTENGER. Fifteen countries? 

Mr. MCDONALD. Fifteen, one-five. 

Mr. PITTENGER. One-five. What do you say would be the ideal 

number to get a complete—the best communication, establish relationships, the best collaboration, the best impact? What number 

would you like to see our working relationship with in terms of 

countries? 

Mr. MCDONALD. We did an exercise along those lines internally 

once, and we kind of thought, setting aside all financial considerations, what would be our dream— 

Mr. PITTENGER. Yes, sir, that is what I want to hear. 

38 

Mr. MCDONALD. —footprint for the whole program. And we are 

at, overall, about 50 countries for the whole program, 15 in the economic crimes area. Ultimately, we did not come down to a specific 

number. And the reason is it really doesn’t matter if you are not 

in a country that is determined to use your assistance well. And 

it is very difficult to know that ahead of time. We do our best to 

do good assessments. 

I would say, look, if I had to pull a number out of my back pocket 

here, we certainly see an increasing number of demands, requests 

for our technical assistance on AML/CFT matters, whether it is because Central American or other countries know that criminality in 

their own countries is a great threat to them, and so they want to 

do more to reduce the financing of that, or because they see banks 

picking up and decamping. So we have their attention. 

Mr. PITTENGER. Excuse me. How many cooperating countries 

would you say that there are out there? You stated that, clearly, 

there are those who would be difficult and a challenge to work 

with. But what is the universe of those whom you believe would 

be willing to cooperate with us? 

Mr. MCDONALD. I could easily see us working with 20 to 25 countries in the AML/CFT area. But that is based on what we know 

now about emerging needs. 

Mr. PITTENGER. What is the distinction, please clarify for me, 

Ms. Shasky Calvery and Mr. McDonald, the 150 members, FIUs, 

members of Egmont, and the more limited numbers of countries 

that are engaged with us with OTA? 

Mr. MCDONALD. Well, OTA—Egmont includes member countries 

from the entire globe. 

Mr. PITTENGER. I understand. 

Mr. MCDONALD. We are authorized by statute to work in developing countries and transitional countries. The ‘‘transitional country’’ term goes back to when we were created, the former Soviet 

Union, and so on transitioning. So we are only a subset of the total 

membership potential of Egmont. 

Mr. PITTENGER. I got that. Would you say that your major impediment then is financing? Is it resources on your part? Is it talented people that we could send in, attaches? 

Mr. MCDONALD. We would definitely benefit from additional resources in terms of financing to support our technical advisory 

work in terms of attache presence. But I would also—so the answer 

to that is yes; that is an impediment that we would benefit from 

more resources. But we have to be judicious in how we use those 

resources and to focus it on those countries where we think we are 

going to be able to get something done. 

Mr. PITTENGER. You mentioned one cooperating country, that 

they had a computer and a chair in a room. That was— 

Mr. MCDONALD. Liberia. 

Mr. PITTENGER. How do we support them financially? What are 

the entities that would participate? Is it us or our State Department, the World Bank, IMF? 

Mr. MCDONALD. In a place like Liberia, where there is pretty 

much everything to be done, we would focus our efforts on just getting the financial intelligence unit functioning in a basic way. We 

would reach out to the World Bank, possibly USAID, to see if they 

39 

could finance the acquisition of basic information technology, basic 

stuff that would allow banks to report suspicious transactions electronically rather than on written pieces of paper. We might reach 

out to other bilateral providers—the U.K. is active in this area— 

to see if they could complement our work. So, in a country like Liberia, where there is everything to be done, we would be reaching 

out to a number of different parties. 

Mr. PITTENGER. Thank you. 

I appreciate both of you. 

Ms. Shasky Calvery, I look forward to continued dialogue with 

you in the private sector. 

Ms. CALVERY. Thank you. 

Mr. PITTENGER. And, Mr. McDonald, in your position now, I look 

forward to more dialogue. Thank you. 

Mr. MCDONALD. Thank you very much. 

Chairman FITZPATRICK. I would like to thank our witnesses 

again for their time and their testimony to the task force here 

today. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

With that, the task force is adjourned. 

[Whereupon, at 12:14 p.m., the hearing was adjourned.] 

(41) 

A P P E N D I X 

May 24, 2016 

42 


24137.001

Peter T. King Statement for the Record 

Task Force to Investigate Terrorism Financing hearing titled "Stopping Terror 

Finance: A Coordinated Government Effort" 

May 24,2016 

I would like to thank the Chairman for holding this important hearing and thank 

the witnesses for sharing their unique perspective. I applaud FinCEN on the final 

Customer Due Diligence rule the rule is an important step in combatting terrorist 

financing and I was pleased to see that the final rule incorporated many comments 

from stakeholders. I also agree with the Treasury Secretary that Congress should 

pass meaningful beneficial ownership legislation to ensure that terrorists do not use 

shell corporations established in the U.S. to set up accounts in other countries. 

While protecting privacy is important and there are legitimate business reasons that 

"beneficial owners" of companies remain undisclosed, we need legislation to 

ensure that law enforcement can stop criminals and prevent attacks. Specifically, I 

believe that legislation should: 

• first, require that companies report their true beneficial ownership 

information - not just a lawyer or a nominee; 

• second, should allow for law enforcement to obtain the information quickly 

when they are investigating terrorist threats or criminal activities; 

• third, it should not put new burdens on states and should minimize any 

burden on businesses; and 

• fourth, any information filed with the federal government should not be 

disclosed to the public- this isn't an effort to target business with legitimate 

privacy concerns, it is an effort to stop drug traffickers, criminal 

organizations and terrorists. 

I'm proud to be the lead Republican on Congresswoman Maloney's H.R. 4450, the 

Incorporation Transparency and Law Enforcement Assistance Act of2016, which 

is currently the only bill in the House that addresses the issue of beneficial 

ownership. I think the bill general adheres to the principles that I just outlined, but 

I know that there are stakeholders that have concerns with that bill as currently 

written and I welcome suggested changes or alternative proposals that also adhere 

to those principles. I applaud Congresswoman Maloney on her bill and thank her 

for her leadership on this issue and look forward to working with my colleagues on 

the Task Force to stop terrorist financing. 
43 


24137.002

EMBARGOED FOR DELIVERY 

Testimony of Treasury Deputy Assistant Secretary for Technical Assistance and 

Afghanistan, Larry McDonald 

United States House ofReprescntatives Committee on Financial Services 

Task Force to Investigate Terrorism Financing 

"Stopping Terror Finance: A Coordinated Government Effort" 

May 24,2016 

Chairman Fitzpatrick, Ranking Member Lynch, and Members of the Committee, thank you for 

the invitation to testify today. I appreciate the opportunity to discuss the role of Treasury's 

technical assistance program in the overall U.S. Government effort to combat terrorist financing 

and financial crimes. Following a brief description of Treasury's Office of Technical Assistance 

(OTA), I will highlight the important work ofOTA's Economic Crimes Team. 

Overview of OTA 

The mission of the Department of the Treasury's Offiee of Technical Assistance (OTA) is to 

help developing and transitional countries strengthen their ability to manage public finances 

effectively and safeguard their financial sectors. OT A is comprised of five teams- Economic 

Crimes; Banking and Financial Services; Revenue; Budget; and Debt Management. OTA's 

work supports the Treasury Department's strategic goals to promote international financial 

stability and more balanced global growth, to safeguard the U.S. financial system, and to use 

financial measures to counter national security threats. 

OTA is a relatively small program. Currently, OTA implements approximately I 00 projects in 

50 countries. Most projects are located in Latin America, Africa and Asia OTA has a relatively 

smaller footprint in the Middle East and Central and Eastern Europe. Total OTA funding is 

approximately $50 million, of which $23.5 million is from direct appropriation and roughly $25 

million is from transfers from other U.S. government agencies. OTA is often referred to as a 

small, cost-effective program that punches well above its weight. As Secretary Lew put it during 

this Committee's March hearing on the international financial system, Treasury gets "more bang 

for the buck out of OTA than anything else." 

OTA 's proven effectiveness is a result of a disciplined approach to technical assistance- one 

that emphasizes: (i) providing assistance in areas where Treasury has real expertise and an 

institutional kinship with foreign counterparts; (ii) a commitment to building capacity in partner 

countries, with the goal of achieving self-reliance; (iii) working side-by-side with recipient 

country counterparts to provide sustained, on-the-job mentoring and training; and (iv) selectivity, 

by identifying governments that need help and arc committed to using our assistance 

productively. 

Financial sector weaknesses are typically systemic in nature. Accordingly, OTA encourages 

partner governments to take a systemic approach in strengthening public financial management 

and safeguarding the financial sector. To the extent possible, OTA country engagements are 

comprised of several inter-related projects. Paraguay is an example of particularly robust OT A 

engagement, with mutually reinforcing projects in the areas of economic crimes, financial sector 

supervision, tax administration, budget execution, debt management, and infrastructure finance. 

1 
44 


24137.003

EMBARGOED FOR DELIVERY 

Economic Crimes Team and AML/CFT Technical Assistance 

OTA's Economic Crimes Team (ECT) plays a vital role in the Treasury Department's and the 

U.S. Government's effort to combat terrorist financing and financial crimes. ECT promotes 

compliance with international standards and best practices- in particular the Financial Action 

Task Force (F ATF) Recommendations -- aimed at the development of effective Anti-Money 

Laundering and Combating the Financing of Terrorism (AML/CFT) regimes. ECT partners with 

foreign counterpart regulatory, analytical, law enforcement and judicial authorities tasked in their 

country with: ensuring a safe, sound and transparent financial system; targeting transnational 

criminal organizations and networks, including their illicit proceeds; and upholding the rule of 

law. 

At present, the ECT footprint includes 15 programs operating in Asia (Afghanistan, Bunna), 

Sub-Saharan Africa (Cabo Verde, Liberia), Latin America and the Caribbean (Cost Rica, 

Dominica, El Salvador, Grenada, Guatemala, Jamaica, Panama, Paraguay and Peru) and the 

Middle East (Iraq and Saudi Arabia). ECT programs for 2016 are funded both from Treasury's 

direct appropriation ($2.8+ million), State Department and USAID funding ($4.5+ million), as 

well as limited self-funding by counterparts. 

As depicted below, AML/CFT regime development entails strengthening and integrating the 

work of the entire spectrum of AMLICFT stakeholders. They include reporting entities, 

regulators, financial intelligence units, law enforcement agencies, investigators, prosecutors and 

judges. The goal is a system in which both prevention and enforcement measures are robust and 

mutually reinforcing. ECT assistance tends to be anchored in the counterpart's financial 

intelligence unit, though ECT works proactively with both downstream and upstream 

stakeholders. 

2 
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24137.004

EMBARGOED FOR DELIVERY 

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Jl'fXM>t't':dS and 

ln'St:rntnffitalitin 

While AMLICFT regime improvement is a never-ending process, OTA can point to many 

engagements where assistance has made a difference. Here are three examples: 

Chana. With OTA support, the Bank of Ghana sanctioned five banks in 2015 for noncompliance with legal and regulatory obligations, ine.luding involvement in international 

transactions. OTA helped the Bank of Ghana its bank examination manuals and 

practices, adopting a risk-based approach, to incorporate international standards for noncompliance with AMLICFT obligations. 

Guatemala. In October 2014, OT A's multi-year collaboration with Guatemala's financial 

intelligence unit (FlU) contributed to a ruling that a criminal organization operating through a 

shell import/export company had laundered more than $48 million. The ringleader and seven 

currency exchange operators were sentenced to six to l 0 years in prison. OT A helped to 

strengthen the FIU's financial intelligence, analytic, and investigative capabilities, and worked 

closely with prosecutors in the Public Ministry to better understand and present in the court this 

complex case. 

ECT work in Guatemala and elsewhere in Central America is part of a State/Treasury 

collaboration- the Central America Regional Security Initiative (CARS I) involving joint 

planning and co-funding. 

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Cambodia. Reflecting broad based improvements in its AML!CFT regime, in 2015 Cambodia 

was removed from the Financial Action Task Force monitoring process and, separately, was 

invited to join the Egmont Group of Financial Intelligence Units. OTA played a major role by 

providing assistance over several years to develop the operational capabilities of Cambodia's 

FIU. In addition, the FlU and the Supervision Department at the National Bank of Cambodia 

signed an information sharing and cooperation memorandum of understanding to strengthen the 

allocation of supervisory responsibilities and coordination of examinations. OTA provided 

assistance in the drafting of the Memorandum of Understanding and worked with both parties to 

resolve ambiguities in Cambodia's Anti-Money Laundering Law. 

Effectiveness and Lessons Learned 

Effective AMLICFT technical assistance- indeed, all effective technical assistance -- depends 

on many factors, some of which are the responsibility of assistance providers and some the 

responsibility of recipients. In the first instance, providers must show restraint, allowing 

potential country partners to step forward of their own volition with clear expressions of interest. 

Once interest has been manifested, technical assistance providers must be good listeners and 

patient analysts in order to understand not only the underlying problems, but also the capacity of 

the requestor to absorb assistance. This is the essence of"demand driven" assistance. 

Technical assistance providers must also demonstrate a commitment to coordination that goes 

beyond information-exchange. Coordination may entail doing a project differently, taking into 

account what other assistance providers are doing, or not doing the project at all. There are cases 

when ECT has declined a request to provide assistance when an assessment visit determined that 

another provider was already involved and our work would be duplicative. Effective 

coordination is also facilitated when assistance providers focus their work on areas where they 

have special expertise. The ECT has special expertise in building the human capacity of 

financial intelligence units and, working through the financial intelligence unit, to enhance the 

effectiveness of other AMLICFT regime stakeholders. 

Recipients of technical assistance must be genuinely committed to implementing change, and 

willing to engage in a collaborative learning process and then to apply the lessons learned in dayto-day job functions. An additional critical component is a commitment at the policy and 

political levels to push for transparency and accountability in public finance when, inevitably, 

entrenched interests resist. Finally, governments that receive technical assistance must show a 

commitment to creating and retaining a corps of career professionals. It is disheartening when, 

with a change of government in our partner countries, OTA's technical level counterparts are 

replaced and capacity building efforts need to begin anew. 

Within the U.S. government, Treasury works closely with the Departments of State, Justice, 

Homeland Security, and Defense, as well as USAID, on technical assistance related to 

AMLICFT regime development. Coordination takes place both in Washington, D.C., by staff at 

each agency's headquarters, and in the field, both during the project development phase and 

subsequently during implementation. In the field, the respective U.S. Embassies are the locus for 

coordination work. OT A, as aU .S. government assistance provider, comes under Chief of 

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Mission authority and, as such, coordinates with U.S. government departments and agencies, 

such as the State Department, to support U.S. initiatives in host countries. 

OTA also coordinates with multilateral and bilateral assistance providers. Regarding AML/CFT 

assistance, the ECT coordinates with the IMF, the World Bank, the United Nations Office on 

Drugs and Crime (UNO DC), as well as bilateral providers such as the United Kingdom. 

Coordination of multilateral or bilateral assistance usually also occurs in the field during the 

project development phase and during implementation. OT A encourages the governments of 

recipient countries to play a proactive role in coordinating the assistance they receive. 

Conclusion 

Combating terrorist financing, money laundering and other financial crimes is a top priority for 

the Treasury Department and the U.S. Government. OT A's ECT is a, small but important, part 

of the broader U.S. Government and international efJort to build the capacity of developing and 

transitional countries in monitoring and combating illicit financing through safe, sound, and 

transparent financial systems. 

Thank you again for the opportunity to testify today regarding OTA's important work on 

AML/CFT and coordination efforts. I appreciate your support and interest, and welcome your 

questions. 

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Testimony of Jennifer Shasky Calvery, Director Financial Crimes Enforcement Network, 

United States Department of the Treasury 

United States House of Representatives Committee on Financial Services 

Task Force to Investigate Terrorism Financing 

"Stopping Terror Finance: A Coordinated Government Effort" 

May 24,2016 

Chairman Fitzpatrick, Vice-Chairman Pittenger, Ranking Member Lynch, and distinguished 

Members of the Committee on Financial Services Task Force to Investigate Terrorism 

Financing, I am Jennifer Shasky Calvery, Director of the Treasury Department's Financial 

Crimes Enforcement Network (FinCEN), and I deeply appreciate the opportunity to appear 

before you today to discuss FinCEN's role in countering the financing of terrorism. We value the 

Committee's sustained attention on far-ranging threats to the U.S. and global financial systems 

and, in particular, this Task Force's comprehensive examination over the past two years of the 

myriad issues posed by terrorist financing that those of us at FinCEN encounter on a daily basis. 

We are fortunate for the Committee's continued support of our efforts to deter, detect, and 

disrupt terrorist financing and other forms of illicit financial activity. 

Today, I want to share with you FinCEN's view of the terrorist financing landscape and ways 

that we understand current and future threats, risks, and vulnerabilities. I have seen time and time 

again how bad actors such as terrorist financiers, weapons proliferators, drug traffickers, human 

smugglers, organized crime syndicates, professional money launderers, cybercriminals, tax 

evaders, rogue regimes, and corrupt officials use the same types of mechanisms to evade 

detection by the authorities and abuse the financial system. As we continue to adapt to everevolving threats, we must have the proper legal and regulatory foundation, both in substance as 

well as process, to ensure that our law enforcement and intelligence professionals, as well as 

private sector and international partners, have the tools that they need to get the job done. Such a 

framework must also be appropriately balanced with the legitimate interests of individual privacy 

and the protection of data. 

I. FinCEN's Strategic Approach to Financial Intelligence 

FinCEN is a bureau within the Department of the Treasury, and our mission is to safeguard the 

financial system from illicit use, combat money laundering, and promote national security 

through the collection, analysis, and dissemination of financial intelligence and strategic use of 

financial authorities. FinCEN serves in two roles. First, we are the Financial Intelligence Unit 

(FlU) for the United States. Most countries around the world have an FIU that is responsible for 

collecting, analyzing, and disseminating financial intelligence to law enforcement and other 

relevant authorities to help fight money laundering and the financing of terrorism. Second, we 

arc the lead anti-money laundering/countering the financing of terrorism (AMLICFT) regulator 

for the federal government. 

At its broadest level, the Treasury Department seeks to counter terrorist financing by identifying 

and disrupting the flow of financial resources to terrorists and terrorist organizations, and 

working to harden the international financial system from abuse by these and other illicit actors. 

And, of course, lSlL is one of the primary terrorist threats that we are focused on today. FinCEN 
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supports the broader Treasury effort against ISIL by identifying sources of revenue for 

organizations such as ISIL and their attempts to access the international financial system. 

FinCEN then uses its authorities, both independently and in conjunction with other interagency 

and international partners, to eliminate those access points. 

At FinCEN, we receive approximately 55,000 new financial institution filings each day. The 

majority of the financial intelligence FinCEN collects comes from two reporting streams: one on 

large cash transactions exceeding $10,000, and the other on suspicious transactions identified by 

financial institutions. To manage this data collection, FinCEN uses "business rules" to search the 

reporting daily for key terms, entities, or typologies of interest. The rules screen daily filings and 

identify reports that merit further review by analysts. Currently, we are running 22 business rules 

related to ISIL. 

We are running several rules designed to identify reporting helpful to cutting offiSIL's sources 

of revenue. Additionally, we are running rules aimed at identifYing reporting showing attempts 

by ISIL to access the international financial system. 

We are also running rules aimed at identifying potential foreign terrorist fighters who support 

ISIL, al-Qa'ida, and their affiliates in Iraq and the Levant region. This work is less focused on 

cutting offiSIJ}s sources of revenue and more directed at efforts to prevent foreign terrorist 

fighters from traveling to the conflict zone to fight or traveling home or to a third country to 

engage in terrorist attacks. 

Our rules related to ISIL generate over 1,000 matches each month for further review. After a 

careful review by our analysts, FinCEN converts about 10 percent of these matches into 

analytical reports, which are then disseminated to domestic authorities and foreign FlUs. 

In response to growing requirements for information on the financing of terrorism, FinCEN in 

2014 stood up a completely new intelligence product line, called the Flash Report. Flash Reports 

rapidly provide critical financial intelligence to members of the U.S. law enforcement and 

intelligence communities, and FinCEN's counterpart FlUs around the world. We disseminated 

more than 300 ISIL-rclated Flash reports in 2015 to domestic and international partners: 

approximately 15 percent resulted from our business rules aimed at cutting off ISIL's sources of 

revenue, 37 percent from business rules aimed at preventing ISIL from accessing the 

international financial system, and 48 percent from business rules aimed at identifying 

previously unknown foreign terrorist fighters. Approximately 61 percent of the ISIL-related 

Flash reports were based on filings from banks and other depository institutions, 3 7 percent from 

money services businesses, and 2 percent from securities broker/dealers. Although the largest 

banks and MSBs were the leading filers of reporting disseminated in these Flash Reports, it is 

important to note that many smaller banks, credit unions, and MSBs, as well as payment 

processors and U.S. branches of international banks, submitted reporting that was disseminated 

in Flash Reports. 

Our business rules provide red flag alerts on BSA filings and have become extremely valuable to 

the intelligence and law enforcement community. In order to address emerging issues and 

provide the level of support that law enforcement and the intelligence community have come to 

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rely on, FinCEN needs additional funding to continue the current support. Expanding our 

processing capabilities for Flash and other types of reporting is why we have requested an 

additional $1.5 million in our FY17 budget, as the demand for FinCEN's financial intelligence 

has solidified the need for the bureau to continue to support critical national security activities 

whenever they arise. 

FinCEN has also successfully employed some of its unique regulatory authorities to obtain 

special collections of financial intelligence from industry, which has been used to inform 

government efforts to counter ISIL's financial activities. When exercising these special collection 

authorities, we've found that proactive engagement with industry to provide them with relevant 

context and an understanding of the value of the information that they can provide leads to a very 

productive relationship. These efforts have once again confirmed our belief in industry's desire 

to assist in our efforts, not simply out of a sense of obligation, but rather as active participants in 

our critical mission to counter terrorist financing. 

Financial intelligence can also play an important role in preventing terrorist attacks. Authorities 

worldwide have an interest in identifying potential foreign terrorist fighters (FTFs), many of 

whom have engaged in terrorist attacks in jurisdictions outside of conflict zones. The financial 

reporting provided by industry, as well as financial reporting shared by our foreign FlU partners, 

has been critical to this work. 

The analytical task is quite straight-forward. Financial transactions can be used to identify 

connections between individuals. A financial transaction between two individuals indicates an 

association between those two individuals. If one of those individuals is a known terrorist 

because, for instance, he was identified as an attacker in a completed terrorist attack or the 

planner of a thwarted terrorist attack, the associates of this known terrorist become important. 

Those associates may also be terrorists who could carry out or facilitate a future attack in the 

jurisdiction where they are currently located or a different one. Once associates are identified, 

law enforcement and intelligence partners can further work to identify whether any of those 

individuals are also engaging in activity indicative of being a terrorist, terrorist financier, or 

another type of terrorist facilitator. 

Importance of Information Sharing 

Making connections between associates is where information sharing becomes especially 

important. FinCEN disseminates its financial intelligence through secure channels to authorized 

stakeholders on the widest possible basis both domestically and internationally. The breadth of 

dissemination is particularly critical in the anti-terrorism context. We disseminate our 

information to our law enforcement partners, intelligence authorities, and border police. For 

example, financial intelligence has allowed us to assist U.S. Customs and Border Protection with 

the watch listing of potential terrorists, as well as identifying individuals of concern that have 

subsequently had their visas revoked or denied or have been placed on the U.S. no-fly list. 

Importantly, we also share information with relevant foreign FlUs and pre-authorize those FlUs 

to further share it with their domestic law enforcement and intelligence agencies. We do tbis in 

recognition of the fact that terrorists and terrorist facilitators move from one jurisdiction to the 

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next, and we, as the FlU for the United States, do not hold all the pieces of the puzzle. The 

receiving jurisdiction may have its own information that adds another piece to the puzzle, either 

right away or over time. And we never know which agency within a jurisdiction might hold the 

next piece of the puzzle so we promote broad information sharing between FlUs, law 

enforcement, intelligence agencies, and border police. 

Feedback from the receiving jurisdictions suggests we are taking the right approach in sharing 

financial intelligence. We have received 354 positive feedback responses from 41 FlU partners 

that the financial intelligence we provided to them over just the last eight months either 

corroborated information related to an ongoing investigation or provided new investigative leads. 

FinCEN is not the only FlU actively working to stimulate the collection, analysis, and 

dissemination of financial reporting on FTFs and ISIL financing. Indeed, over the last year FIUs 

from 40 countries came together as part of a multilateral effort to share information and produce 

an operational analysis of FTFs, their networks, and common financial indicators. This project 

team, which was co-led by FinCEN and the FlU of the Netherlands, also produced a 

complementary paper outlining the obstacles faced by FlUs in doing this type of operational 

work. Participating team members recommended solutions for obtaining reporting from their 

financial institutions, analyzing the material, and sharing it on the broadest basis possible both 

domestically and internationally. Further, the Egmont Group, a !54-member jurisdiction strong 

group of FlUs, adopted a series of recommendations for its members in February that were 

informed by this team's work, including in particular sharing infonnation with industry to assist 

financial institutions in identifying suspicious financial activity. 

These examples provide a sample of the type of work that FinCEN and its partners conduct on a 

daily basis to combat terrorist financing threats from ISIL and others. This current paradigm of 

information collection, analysis, and sharing demonstrates a profound and ongoing evolution 

since 9/ll in how FinCEN and the Treasury Department approach the threats, risks, and 

vulnerabilities posed by terrorist financing, as well as the resources that we bring to the fight. 

II. Regulatory Framework to Combat Money Laundering and the Financing of 

Terrorism 

As we examine the methods used, we have seen repeatedly that terrorist financing thrives in the 

same space where other forms of illicit financial activity occur. To effectively counter money 

laundering and the financing of terrorism, we must understand the threats, risks, and 

vulnerabilities posed to the U.S. and global financial systems by the broad array of illicit 

financial activity. We also must always strike a balance between the transparency that allows us 

to detect and combat these threats and the personal privacy that we cherish in the United States. 

While FinCEN's financial intelligence work thrives on data, our regulatory role serves to ensure 

that we obtain the right data while carefully balancing privacy interests of citizens and costs to 

industry. 

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Financial Transparency 

Over a nearly two-decade career as a Department of Justice prosecutor and now a senior leader 

in the Treasury Department, I have witnessed firsthand how the facilitators of terrorist financing 

benefit from the same legal and regulatory loopholes that other criminals exploit such as shell 

companies, professional enablers, secrecy jurisdictions, and lax enforcement for certain illicit 

activities. Targeting third-party money launderers, the intermediaries who help tum dirty money 

clean, remains a top priority for FinCEN. While terrorist financing facilitators often seek to move 

money in the other direction, i.e. by making clean money dirty, they still make use of these same 

mechanisms. Therefore, in order to deter, detect, and disrupt terrorist financing, we must root out 

the gaps that allow illicit actors and activities to thrive. 

It is within this context that I would like to address the issue of financial transparency. While we 

have been dealing with gaps in financial transparency for a long time, in recent weeks the 

disclosure of the so-called "Panama Papers"-millions ofleaked documents reportedly revealing 

the use of anonymous offshore shell companies-has brought the issues of illicit financial 

activity and tax evasion into the public spotlight. For both government and industry, it is in our 

mutual interest to create an environment in which it is harder for illicit actors to hide their 

financial activities behind legal entities. On a daily basis, I see how individuals, organizations, 

and jurisdictions seek to evade and thwart lawful attempts to collect information about their 

activities, including through the use of shell companies and similar legal entities. For example, a 

shell company is registered with the state as a legal entity, but has no physical operations or 

assets. Shell companies can serve legitimate purposes such as holding property rights or financial 

assets. But shell companies can also be used to conceal the source, ownership, and control of 

illegal proceeds by concealing the identity of the natural people who control the entity. 

As many of you know, on May 6th, the President announced several developments focusing on 

strengthening financial transparency. Key among these initiatives, were the rollout of the 

Customer Due Diligence (COD) rule and proposed beneficial ownership legislation. 

The COD rule amends existing Bank Secrecy Act (BSA) regulations to clarify and strengthen 

obligations of covered financial institutions, specifically banks, brokers or dealers in securities, 

mutual funds, futures commission merchants, and introducing brokers in commodities. The COD 

rule adds a new requirement that these financial institutions know and verify the identities of the 

natural persons who own, control, and profit from the legal entities the financial institutions 

service. The rule requires that financial institutions have to identify and verify the identity of any 

individual who owns 25 percent or more of a legal entity and an individual with significant 

responsibility to control, manage, or direct the company. And to be clear, a nominee or lawyer 

working on behalf of a company would not satisfy the requirements of the control prong. 

We are confident that the COD final rule will increase financial transparency and augment the 

ability of financial institutions and law enforcement to identify the assets and accounts of 

criminals and national security threats. We anticipate that the COD rule will also facilitate 

compliance with sanctions programs and other measures that cut off financial flows to these 

actors. 

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But the COD rule is just one piece of the financial transparency puzzle. Treasury, on behalf of 

the Administration, also sent beneficial ownership legislation to Congress that would require 

companies to know and report adequate, accurate, and current beneficial ownership information 

at the time of a company's formation. The text of that proposed language is available in the press 

release on Treasury's website. The legislation would authorize Treasury to require that legal 

entities formed or qualified to do business within the United States file beneficial ownership 

information with FinCEN, or else face penalties for failure to comply. It would also expand 

FinCEN's Geographic Targeting Order (GTO) authority to permit such orders to require 

reporting on transactions that do not involve a monetary instrument, such as transactions 

conducted through wire transfers. Geographic Targeting Orders, which FinCEN can issue to 

impose temporary reporting requirements on financial institutions and other businesses, is a 

critical tool in enhancing the financial transparency of high-risk transactions. 

These two initiatives-the COD rule and the beneficial ownership draft legislation-dovetail 

together. The COD rule focuses on financial institutions knowing who their legal entity 

customers are, regardless of where those entities are formed, as part of due diligence at the time 

of account opening. The proposed legislation focuses on making sure that legal entities formed in 

the United States are more transparent to law enforcement regardless of where they conduct their 

financial activity. Given the fact that illicit actors use U.S. legal entities to establish bank 

accounts outside the United States and access the U.S. financial system indirectly, both 

initiatives are critical to aid law enforcement efforts and to safeguard the financial system. Being 

able to identify who the real people are that are involved in a transaction is critical to our work to 

combat money laundering and terrorism, enforce sanctions, and stop other illicit abuses of the 

U.S. financial system. 

Shell Companies and Real Estate 

Shell companies used to purchase real estate with illicit funds pose another related risk that 

FinCEN and Congress have been working to address for many years. FinCEN is working 

actively to address money laundering and terrorist financing risks posed by real estate, so I 

would like to explain some recent developments. 

The money laundering risks posed by real estate are not theoretical. Analyses by FinCEN and the 

Department of Justice regarding asset forfeiture cases continues to reveal corrupt politicians, 

drug traffickers, and other criminals using shell companies to purchase luxury real estate with 

cash. We see wire transfers originating from foreign banks in offshore havens where shell 

companies have established accounts, but in many cases we also see criminals using U.S. 

incorporated limited liability companies to launder their illicit funds through the U.S. real estate 

market. 

As part of an incremental approach to regulating the real estate industry, FinCEN issued 

Geographic Targeting Orders (GTOs) in January 2016 requiring certain U.S. title insurance 

companies to record and report the beneficial ownership information of legal entities making 

"all-cash" or rather "non-mortgaged" purchases of high-value residential real estate in Manhattan 

and in Miami-Dade County, Florida. When there is a mortgage involved in the purchase of real 

estate, existing requirements on banks and other mortgage providers help shed light on 

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potentially illicit activity. By contrast, "all-cash" purchases can be utilized by individuals 

attempting to hide their assets by purchasing residential properties. In many cases, law 

enforcement sees criminals using U.S. incorporated limited liability companies to launder their 

illicit funds through the U.S. real estate market. The criminals will instruct the person involved in 

the settlement and closing to put the deed in the name of the shell company to hide the names of 

the actual owner or owners. This often dramatically increases the difficulty of tracking the true 

owner of a property in a transaction. The GTOs were designed to produce valuable data about 

some of these opaque transactions to assist law enforcement and inform our broader efforts to 

identify where we see the greatest risks in the real estate sector. 

One of the limitations FinCEN has encountered in gathering this vital information is a limit on 

the types of infonnation that can be collected using a GTO. Such orders may only be used to 

collect information on transactions involving monetary instruments, like cash or checks. When 

we are working to gather information on transactions that are often conducted through other 

means, as in real estate transactions where the use of wires is common in many locations, the 

data we can gather is more limited. This is why we included in the proposed beneficial 

ownership legislation the amendment to our GTO authority that would allow FinCEN to use this 

valuable tool to gather information on any transaction involving funds more broadly defined. 

Finding the appropriate balance amongst the competing concerns of personal privacy, financial 

transparency to combat illicit finance and limiting regulatory burden is particularly challenging 

in the real estate sector. FinCEN has had productive discussions with different state regulatory 

and trade association partners to increase our understanding of the diverse regulatory and 

licensing coverage in this area. To navigate these issues well, we must continue to engage our 

congressional, regulatory, law enforcement, and real estate industry partners while taking a datadriven approach. These discussions are a crucial part of determining where the most significant 

risks lie, whether additional AML requirements are needed, and how best to mitigate identified 

vulnerabilities while balancing the benefits of information gathering tools like Geographic 

Targeting Orders with the potential burden imposed on industry. 

Financial Technology (FinTech) and Financial Regulation (FinReg) 

While the issues related to money laundering in real estate have been a topic of concern for 

several years, we at FinCEN are also focused on the fact that the U.S. financial system is always 

evolving. FinCEN recognizes that the U.S. and global financial industry is experiencing a period 

of technological innovation and growth. While promising, this also creates new vulnerabilities 

that FinCEN and our partners must understand to prevent gaps in regulation and information 

collection on terrorist financing and other illicit financial activity. 

For instance, in the virtual currency space, FinCEN has been at the forefront of pragmatic 

engagement that balances these interests. In 2013, we released interpretive guidance on virtual 

currencies to provide regulatory consistency to a nascent area of the financial industry that 

implicated significant AML!CFT equities. In May 2015, in coordination with federal law 

enforcement partners, FinCEN assessed the first civil monetary penalty against a virtual currency 

exchanger, Ripple Labs Inc., for failure to register with FinCEN as a money services business as 

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well as its failure to implement and maintain an adequate AML program designed to protect its 

products from use by money launderers or terrorist financiers. 

In its role as both an FlU and an AMLICFT regulator, FinCEN sits at the intersection of 

regulation, technology, and illicit finance. As new technologies emerge to serve the financial 

industry, FinCEN recognizes the need for sustained industry cooperation and a flexible legal and 

regulatory architecture that encourages innovation while allowing appropriate regulatory 

engagement and effective AMLICFT oversight. The goals of fostering financial technology 

(Fin Tech) innovation and requiring adequate financial regulation (FinReg) oversight capabilities 

are not mutually exclusive; to the contrary, successful FinTech and FinReg innovations should 

seek to enhance financial transparency that will deny terrorist financiers and other illicit actors 

the opportunity to evade detection and abuse the financial system. At the same time, such 

innovations could offer solutions that increase the efficiency and effectiveness of compliance 

programs while reducing their costs. Emerging technology has the potential to provide new 

vehicles to achieve our regulatory goals. We strongly encourage developers to combine their 

innovative approaches in developing financial products with parallel innovation in developing 

compliance solutions that fulfill the goals of combating money laundering and terrorist finance. 

We also encourage our regulatory partners, both in the United States and around the world, to 

provide industry with an opportunity to experiment with products and services in a way that 

encourages innovation while providing appropriate safeguards. Some call this the "sandbox 

approach" because it involves allowing industry a certain amount of latitude to be creative in 

finding internal solutions to address risks rather than solely expecting regulators to proscribe 

solutions from the outside. 

Cybersecurity 

While the majority of emerging technologies present positive opportunities, FinCEN also 

acknowledges that other actors may pose a wider threat to the financial industry itself by using 

technology as a sword against the financial institutions. This Task Force has previously 

identified similar concerns about structural vulnerabilities to the financial system, and FinCEN 

shares these concerns. The magnitude and severity of cyber-attacks targeting financial 

institutions have increased in recent years. Cybercriminals target financial institutions' websites, 

systems, and employees to disrupt business flmctions, steal customer and propriety information, 

or defraud financial institutions and their customers. 

FinCEN believes that improved financial transparency and increased information sharing can 

help address the challenges posed in the cybersecurity domain. FinCEN and law enforcement 

agencies regularly usc BSA data reported by financial institutions to initiate investigations, 

identify and track criminals, and disrupt and dismantle criminal networks. For example, BSA 

reporting by more than 20 financial institutions of transactions related to cyber-enabled crimes 

played an important role in the investigation of an internet-based company, its co-founders, and 

others. This company acted as an unregistered online money transmitting business that offered 

digital currency services specifically designed to provide anonymity to facilitate international 

crime and money laundering. Criminals used this company to engage in illicit financial 

transactions, estimated at $6 billion dollars, related to cyber-attacks, stolen credit cards, child 

pornography, Ponzi schemes, identity theft, fraud, narcotics, and other contraband. 

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To combat cybersecurity challenges, FinCEN has established a number of initiatives, both 

internally and externally, to address new and evolving cybersecurity threats. Through the work 

of our Liaison Division, FinCEN created a Global Rapid Response Team to serve as a liaison 

between domestic law enforcement and partner foreign Financial Intelligence Units to intervene 

during Business Email Compromise (BEC) and similar incidents. In BEC, cybercriminals seek to 

fraudulently obtain money from businesses by tricking unwitting employees into remitting 

money to the cybercriminals' bank accounts, where the money is then almost immediately sent 

out of the United States. Over the past 18 months, we have recovered over US $186 million. We 

work with agency partners through Treasury's Office of Critical Infrastructure Protection and 

Compliance Policy to share information to help protect our critical infrastructure and provide for 

cybersecurity both in government and private industry. We also work with the Financial Services 

Information Sharing and Analysis Center (FS-ISAC) to share information regarding threats, 

particularly cyber threats, to industry. 

An important aspect ofFinCEN's work in the cyber area has been to focus on sharing actionable 

information with industry to help them identify and report on cyber-related suspicious activity. 

FinCEN will continue to share information about such threats regularly with our partners in both 

government and industry and we continue to analyze that information to determine whether 

regulatory changes need to be made to address emerging methodologies. 

Public-Private Partnership 

A critical theme you will see running through my testimony today is FinCEN's partnership with 

industry. The institutions we regulate provide information that is the foundation of our work to 

combat the wide range of illicit activity that impacts our national security, including terrorist 

financing. As in our work to combat other types of global criminal organizations, some of the 

most critical information that we can usc to identify and dismantle terrorist networks is financial 

information, and our source for that information is industry. As a result, FinCEN has placed 

significant emphasis on our public-private partnerships and on our information sharing under 

section 314 of the USA PATRIOT Act. In a nutshell, section 314(a) essentially involves sharing 

of information between financial institutions and government, while 314(b) involves sharing of 

information among financial institutions themselves. FinCEN is taking a number of steps to 

improve our technology systems that support 314(a) and 314(b) information sharing, but the 

most dramatic examples of the impact of information sharing and public-private partnerships 

involve how those authorities can refine our information collection to better detect terrorist 

financing and other illicit activity. 

FinCEN has been taking steps to use our section 314 authorities more proactively. Part of this 

effort involves taking more care to meet or have calls with financial institutions that are involved 

in a particular targeted information gathering activity like a GTO. This can help us better frame 

or implement the targeted information collection. I have led meetings where the FinCEN team 

sits with industry participants and, under our 314(a) authority, explains to industry what we are 

doing and what will be required, as well as giving as much relevant context as is appropriate. I 

have also seen how the FinCEN team has responded to observations and suggestions from 

industry in these contexts and has worked to continually improve our processes. In the same 

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context, we can also foster information sharing across institutions via the 314(b) authority. 

Again, through the sharing of information, we end up with better results, and are able to identify 

illicit networks and take steps with others to address them. With respect to FinCEN's ongoing 

counter-terrorism financing efforts focus, such critical partnerships have been particularly 

effective. 

One issue that we frequently hear about from industry regarding information sharing is the scope 

of their safe harbor for information sharing under section 314(b). The statute currently only 

provides a safe harbor from liability for disclosing information under section 314(b) for activities 

that may involve terrorist actions or money laundering activities. Activities that are the 

predicates for money laundering, like fraud, drug trafficking, cybercrimes, and others, are not 

explicitly included in the safe harbor. Giving institutions an explicit safe harbor to share 

information on other potential serious criminal activity that may lead to money laundering or that 

may be related to terrorism (like suspicious purchases of explosives) can allow institutions to 

work together to detect criminal activity that is spread across a number of different financial 

institutions. 

III. Conclusion 

As the Task Force may know, I am leaving my position at the end of this week. I am honored to 

end my tenure by appearing before your esteemed group to address how FinCEN has worked to 

combat the financing of terror, an issue of paramount concern to me during my tenure as 

Director. I am proud to have served at the helm of FinCEN during a period of substantial 

transition both at the bureau and in the broader AMLICFT space as we take on the fight against 

ISIL, other terrorist financing threats, and myriad other forms of illicit financial activity. 

The current terrorist financing landscape is a complex and dynamic threat environment that 

requires ongoing adaptation by FinCEN and our many partners, including Congress. We must 

continue our ongoing dialogue amongst industry, regulators, law enforcement, and Congress to 

ensure that we have the right regulatory and statutory structure to prevent abuse of our financial 

system and are striking the right balance between personal privacy and financial transparency in 

that structure. I deeply value the opportunity to testify before this Task Force on this topic and 

welcome any questions you may have. Thank you. 

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