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MANAGING TERRORISM FINANCING 

RISK IN REMITTANCES AND 

MONEY TRANSFERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TERRORISM 

AND ILLICIT FINANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JULY 18, 2017 

Printed for the use of the Committee on Financial Services 

Serial No. 115–32 

( 

(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 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MacARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

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 

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 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

KIRSTEN SUTTON MORK, Staff Director 

(III) 

SUBCOMMITTEE ON TERRORISM AND ILLICIT FINANCE

STEVAN PEARCE, New Mexico Chairman 

ROBERT PITTENGER, North Carolina, Vice 

Chairman 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

ED PERLMUTTER, Colorado, Ranking 

Member 

CAROLYN B. MALONEY, New York 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

RUBEN KIHUEN, Nevada 

STEPHEN F. LYNCH, Massachusetts 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

July 18, 2017 ..................................................................................................... 1 

Appendix: 

July 18, 2017 ..................................................................................................... 33 

WITNESSES 

TUESDAY, JULY 18, 2017 

Cassara, John, Member, Board of Advisors, Center on Sanctions and Illicit 

Finance, Foundation for Defense of Democracies .............................................. 9 

DeVille, Duncan, Global Head of Financial Crimes Compliance & US BSA 

Officer, The Western Union Company ............................................................... 5 

Oppenheimer, Matthew, Co–Founder and Chief Executive Officer, Remitly, 

Inc. ......................................................................................................................... 7

Paul, Scott T., Chief Humanitarian Policy Advisor, Oxfam America .................. 10 

APPENDIX 

Prepared statements: 

Cassara, John ................................................................................................... 34 

DeVille, Duncan ................................................................................................ 51 

Oppenheimer, Matthew ................................................................................... 58 

Paul, Scott T. .................................................................................................... 62 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Pearce, Hon. Stevan: 

Written statement of Bradley S. Lui, on behalf of The Money Services 

Round Table .................................................................................................. 73 

Ellison, Hon. Keith; and Vargas, Hon. Juan: 

Written responses to questions for the record submitted to Duncan 

DeVille ........................................................................................................... 81 

Written responses to questions for the record submitted to Matthew 

Oppenheimer ................................................................................................. 89 

Written responses to questions for the record submitted to Scott T. Paul .. 93 

Perlmutter, Hon. Ed: 

Written statement of the Electronic Transactions Association .................... 98 

Written statement of various undersigned organizations ............................. 99 

Letter to Hon. Mike Rogers from Bradley S. Lui, on behalf of The Money 

Services Round Table, dated May 2, 2017 .................................................. 100 

Letter to Hon. Paul Battles from Western Union and MoneyGram, dated 

February 3, 2017 ........................................................................................... 106 

(1) 

MANAGING TERRORISM FINANCING 

RISK IN REMITTANCES AND 

MONEY TRANSFERS 

Tuesday, July 18, 2017 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON TERRORISM

AND ILLICIT FINANCE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:40 p.m., in room 

2128, Rayburn House Office Building, Hon. Stevan Pearce [chairman of the subcommittee] presiding. 

Members present: Representatives Pearce, Pittenger, Rothfus, 

Messer, Tipton, Williams, Poliquin, Love, Hill, Emmer, Zeldin, Davidson, Budd, Kustoff; Perlmutter, Maloney, Himes, Foster, 

Sinema, Vargas, Gottheimer, Kihuen, and Lynch. 

Ex officio present: Representatives Hensarling and Waters. 

Also present: Representatives Heck and Ellison. 

Chairman PEARCE. The Subcommittee on Terrorism and Illicit 

Finance will come to order. Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. 

Also, without objection, members of the full Financial Services 

Committee who are not members of the Subcommittee on Terrorism and Illicit Finance may participate in today’s hearing. 

Without objection, the gentleman from Washington, Mr. Heck, is 

permitted to participate in today’s subcommittee hearing. Mr. Heck 

is a member of the Financial Services Committee, and we appreciate his interest in this important topic. Welcome, Mr. Heck. 

Today’s hearing is entitled, ‘‘Managing Terrorism Financing Risk 

in Remittances and Money Transfers.’’ I now recognize myself for 

5 minutes to give an opening statement. 

I want to thank everyone for joining us today for this hearing. 

Today, we are examining the terrorism financing risk for money 

services, businesses, and remittances. As the Treasury Department 

noted in its 2015 National Terrorism Financing Risk Assessment, 

the fight against money laundering and terrorist financing is a pillar of U.S. national security and a strong financial system. It is essential that we work closely together to develop and effectively implement strong, focused, and reasonable laws and regulations to detect, disrupt, deter, and prevent terrorist finance. 

The threat from terrorist financing in particular is constantly 

evolving and requires diligent adaptation by law enforcement, fiVerDate Nov 24 2008 13:42 May 01, 2018 Jkt 029451 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\29451.TXT TERI
2 

nancial regulators, intelligence agencies, policymakers, and the financial sector. 

This hearing will explore the terrorist illicit financing risks that 

are inherent in the use of money services business (MSBs), remittance payments, and other value transfer systems, as well as how 

efforts to combat this activity have unintentionally contributed to 

the problem of de-risking. 

The hearing will explore both formal and informal value transfer 

systems, including the extent to which de-risking excludes entire 

groups of customers from the financial system and less transparent 

underground, unregulated systems which are more difficult to 

track and easier for bad actors to successfully transfer funds. 

The scourge of terrorist finance isn’t a new problem, but I hope 

that today we can shed some new light on this issue and help inform this subcommittee on ways in which we can help disrupt that 

flow of money. I would like to thank our witnesses for being here 

today and I look forward to the conversation to come. 

I now recognize the ranking member of the subcommittee, the 

gentleman from Colorado, Mr. Perlmutter, for 2 minutes for an 

opening statement. 

Mr. PERLMUTTER. Thanks, Mr. Chairman. I want to thank all of 

our witnesses for testifying today, but in particular I want to welcome Duncan DeVille of Western Union, and also my friend, Tim 

Daly, whom I see sitting behind you. Western Union is the largest 

money transmitter in the world. It is located in the Denver metropolitan area just outside of my Congressional district. Thank you 

for being here. 

We live in a world of rapidly evolving threats and rapidly evolving technology. The adoption of technology has not only reduced the 

cost of sending money abroad, but created efficiencies benefiting 

consumers, markets, and the law enforcement community. But as 

technology has advanced, so too have the terrorists and criminals. 

I am certain we already are and will continue to harness new 

technologies to stop the flow of funds to the bad guys. Criminals 

will always search out the unregulated channels to access funding, 

but if we strike the appropriate balance, we can mitigate the concern of this de-risking phenomena and ensure that companies like 

Western Union are not at risk of losing their settlement banking 

relationships. This would drive all activity underground, only exacerbating the national security risks. 

So I hope the conclusion we come to today is that we can manage 

terrorist financing risks associated with remittances and money 

transfers without destroying the marketplace either through excessive compliance regimes or taxing remittances. 

Let me also say at the outset, I strongly oppose H.R. 1834, the 

Taxing Remittances to Pay for the Border Wall Act, and I look forward to discussing further this subject further with our witnesses. 

And with that, I yield back. 

Chairman PEARCE. The gentleman yields back. 

The Chair now recognizes Mr. Pittenger for 1 minute. 

Mr. PITTENGER. Thank you, Mr. Chairman. I would like to thank 

all of our distinguished panelists for lending their expertise to our 

subcommittee today. 

3 

I am particularly glad to see our good friend, John Cassara, on 

the panel testifying today. I am so grateful for the exceptional partner he has been with us over the last few years, having spoken at 

a number of our parliamentary security forums for members of parliament. 

Mr. Chairman, this hearing is particularly timely and relevant to 

my interests in reforming financial institution information-sharing 

mechanisms. As many of you know, I have worked to streamline 

and improve Sections 314(a) and (b) of the USA PATRIOT Act, 

which govern bank-to-government and bank-to-bank informationsharing. When we make it easier for banks and money services 

businesses to talk to each other and better identify money laundering terror financing threats, we not only improve government 

enforcement, but we also improve institutional compliance with the 

laws and support our efforts related to privacy. 

And in the process of improving compliance, we actually offset 

many of the concerns related to de-risking and creating financial 

services vacuums in the very areas where we seek better enforcement. Mr. Chairman, thank you for hosting today’s important hearing, and I yield back. 

Chairman PEARCE. The gentleman’s time has expired. The Chair 

now recognizes Mr. Emmer for 2 minutes. 

Mr. EMMER. Thank you, Mr. Chairman, for yielding, and for organizing this important hearing. 

I would also like to thank our witnesses for being here. Your insights and experiences are extremely valuable to this subcommittee 

and this Congress as we examine the intricate and evolving nature 

of how terror organizations finance their operations. 

The hundreds of billions of dollars in remittances and other 

value transfer payments sent around the globe each year play an 

important role in the lives of millions. These transfers can help stabilize an individual’s household or even an entire economy’s finances, and in many cases serve as an important and vital lifeline 

among family members and loved ones separated around the globe. 

That is why today’s hearing is so important. 

While much of the estimated $575 billion in remittances sent 

globally in 2016 went to support livelihoods and the well-being of 

relatives, these transfers were also vulnerable to exploitation by 

criminal and terror organizations. For decades, our intelligence and 

terror financing communities have held that without money, there 

is no terrorism. 

I believe this mantra holds true and I am encouraged to see the 

subcommittee undertake the important challenge of reviewing our 

Nation’s anti-money-laundering and counterterrorist financing laws 

to ensure our regulatory framework allows for the continued flow 

of money to friends and family members abroad while eliminating 

the use of remittances as a means to conduct acts of terror both 

overseas and here at home. 

Striking this important balance, however, is especially relevant, 

as I represent one of the largest and most diverse refugee populations in the country. Many are surprised to learn that Minnesota 

has the largest number of refugees per capita in the United States 

and ranks first in the Nation for secondary migration, or refugees 

who have resettled in Minnesota from other U.S. States. 

4 

The Sixth Congressional District in particular is home to one of 

the largest populations of Somali-Americans in the country, a population that relies heavily on the use of money services businesses 

and other forms of transfer to send money to family members 

abroad. While an estimated $200 million in remittances is sent to 

Somalia every year, the channels to send these funds are rapidly 

changing. 

The lack of sufficient banking infrastructure and the spread of 

Al-Shabaab in countries like Somalia have made it difficult for 

money remittance transmitters and financial institutions to verify 

their customers and ensure remittances are being used for legitimate purposes. 

Although the practice of de-risking is not a new phenomenon 

that financial institutions have employed to mitigate risk associated with remittances, I am concerned that the continued use of 

such techniques may have a wider, more detrimental impact to our 

ability to track the flows of money to finance terror operations globally. 

Eliminating funding streams to terrorists and keeping families 

connected do not have to mutually exclusive, and I have no doubt 

we can improve our regulatory system to accomplish these goals. 

Again, I want to thank the chairman for holding this important 

hearing today. 

Chairman PEARCE. The gentleman’s time has expired. 

We now welcome the testimony of our witnesses. First, Mr. Duncan DeVille is senior vice president at Western Union where he 

serves as global head of financial crimes compliance, and as BSA 

officer. Previously, Mr. DeVille served as head of the Office of Compliance and Enforcement at FinCEN; as a Senior Financial Enforcement Adviser at the U.S. Treasury Department Office of International Affairs; as an Adviser with the Department of Defense in 

Iraq; and in a series of prosecutorial positions at the Federal, 

State, and local government levels. Mr. DeVille has earned his law 

degree from the University of Denver, and other graduate degrees 

from Harvard University and Oxford University, and his bachelor’s 

degree from the University of Louisiana. Thanks for being here, 

Mr. DeVille. 

Next, we have Mr. John Cassara. Mr. Cassara is a member of 

the board of advisers for the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies. Mr. Cassara 

began his 26-year government career as an intelligence officer during the Cold War. He later served as a Treasury Special Agent in 

both the U.S. Secret Service and the U.S. Customs Service, where 

he investigated money laundering, trade fraud, and international 

smuggling. He was an undercover arms dealer for 2 years. Assigned overseas, he developed expertise in Middle East money 

laundering, value transfer, and underground financial systems. Mr. 

Cassara also worked 6 years for Treasury’s Financial Crimes Enforcement Network and was detailed to the Department of State’s 

Bureau of International Narcotics and Law Enforcement Affairs. 

Mr. Scott T. Paul is the humanitarian policy lead at Oxfam 

America, where he spearheads the organization’s advocacy on a 

number of crises and cross-cutting humanitarian issues. Mr. Paul 

previously worked for the Civic, an organization that seeks to make 

5 

warring parties more responsible to civilians, where he initiated 

civics work on the conflict in Somalia and directed its Making 

Amends campaign. Mr. Paul also serves as deputy director, government relations, at Citizens for Global Solutions, where he led numerous coalition-based campaigns to promote a vision of U.S. foreign policy centered on cooperation, pragmatism, and the rule of 

law. 

Mr. Heck will introduce our next witness, Mr. Oppenheimer. So, 

Mr. Heck, you are recognized for the introduction. 

Mr. HECK. Thank you, Mr. Chairman, very much. I am proud to 

be able to introduce my friend, Matthew Oppenheimer, the cofounder and CEO of Remitly, which is yet another Seattle-based 

success story of a company. They provide low-cost remittances to 

Latin America, India, and the Philippines. 

Matthew’s resume is impressive, indeed. It combines almost all 

the issues that make me excited about the opportunity to work together on this committee. He worked for Barclays Bank, where he 

rose to become head of mobile banking in Kenya. If you understand 

that, you understand that is quite a success story in and of itself. 

And he co-founded Remitly to bring fintech innovation to bear on 

an old problem. 

And in dealing day in and day out with Bank Secrecy Act regulation, I know for a fact he has lots of ideas on how these can be 

made to be more efficient and effective. I look forward to hearing 

his testimony, and I am sure that if we all do so, we can, indeed, 

find several opportunities to work across the aisle on mobile banking and fintech regulation and Bank Secrecy Act modernization 

and strike, as my dear friend, Mr. Perlmutter, says, that appropriate balance. 

Welcome to the committee. And thank you for making that trip 

I make a couple of times of a week. 

Chairman PEARCE. Each of you is going to be recognized for 5 

minutes to give an oral presentation of your testimony. And without objection, each of your written statements will be made a part 

of the hearing record. 

Mr. DeVille, you are now recognized for 5 minutes. 

STATEMENT OF DUNCAN DEVILLE, GLOBAL HEAD OF FINANCIAL CRIMES COMPLIANCE & US BSA OFFICER, THE WESTERN UNION COMPANY 

Mr. DEVILLE. Good afternoon, Chairman Pearce, Ranking Member Perlmutter, and members of the subcommittee. Thank you for 

inviting me here today to discuss ways to detect and combat the 

use of money services businesses, or MSBs, by terrorist organizations and to talk about Western Union’s efforts and how various 

programs in our compliance umbrella have changed over time. 

Western Union’s worldwide network includes more than a half 

million agent locations in over 200 countries and territories. In 

2016, across all our products and platforms, Western Union averaged 31 transactions per second and over 900 per second at peak 

times. For Western Union, a critical part of serving our customers 

is complying with regulatory requirements. Even though regulatory 

compliance costs money and inhibits our ability to drive down 

transaction costs for our customers, we do not view these compliVerDate Nov 24 2008 13:42 May 01, 2018 Jkt 029451 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\29451.TXT TERI
6 

ance and customer service goals as conflicting, but as complementary. 

Our business model depends upon trust. We cannot build and 

maintain our business unless we create a safe global environment 

for the people, families, and businesses who use our services. To 

that end, Western Union has increased its overall compliance funding by more than 200 percent over the last 5 years and now spends 

more than $200 million annually on compliance. Approximately 

2,400—two thousand, four hundred—full-time employees, over 20 

percent of our workforce, are exclusively dedicated to compliance 

functions. 

We have added more employees with banking and legal and law 

enforcement and regulatory expertise. Our chief compliance officer, 

Jacqueline Molnar, who is here today, and I are proud to be some 

of the hundreds of compliance professionals recruited by Western 

Union in the last few years. 

Our compliance program is comprehensive and has 12 components. Today, I will just discuss briefly two of those components, 

two that are especially relevant to this committee’s work: agent 

oversight; and our financial intelligence unit (FIU.) 

Agent oversight is a key component of an MSB’s compliance program. In designing our program, we have been cognizant that 

Western Union’s retail money services business operates through 

company partnerships with our network of agent locations around 

the world. In addition to regional store chains, convenience stores, 

small businesses, and other retailers, in most other countries, 

banks and post offices act as Western Union agents. But for those 

small businesses, revenue generated through offering Western 

Union products is very significant, and we are proud to help spur 

job growth and contribute to the larger economy. 

We have established a dedicated compliance team specifically to 

conduct due diligence on our agents prior to entering the relationship with them, upon renewal of contracts and at other triggering 

events such as a change of ownership. We also provide training and 

we do field visits. 

We monitor all transactions that flow through agents. In addition 

to the back-end traditional automated transaction monitoring— 

which I know other witnesses have spoken to you about—which 

looks for patterns post-transaction on a weekly or monthly basis, 

Western Union has something unique. We do upfront monitoring. 

We call it real-time risk assessments. And these are rules and algorithms that are designed to stop transactions before they go 

through. This is just one example. We hold 26 patents related to 

categorizing and identifying data patterns. 

The other component of our compliance program I will briefly describe to you is our FIU. Modeled after intelligence programs in the 

government and law enforcement communities, our FIU, in addition to doing in-depth financial analysis and investigations, develops and maintains collaborative relationships with key law enforcement and other government partners. 

For example, within hours of recent European terrorist attacks, 

our FIU’s rapid response team provided actionable intelligence to 

law enforcement via confidential reports, suspicious activity reports 

(SARs), and suspicious transaction reports (STRs). Providing this 

7 

type of immediate insight into active investigations has in at least 

one case—and law enforcement told us this—helped identify additional terrorists before they carried out more attacks. 

In conclusion, on behalf of Western Union, I thank the members 

of the subcommittee for having me here today and for your critical 

work in this area. I will be happy to answer any questions you may 

have. 

[The prepared statement of Mr. DeVille can be found on page 51 

of the appendix.] 

Chairman PEARCE. Thank you, Mr. DeVille. I now recognize Mr. 

Oppenheimer for 5 minutes. 

STATEMENT OF MATTHEW OPPENHEIMER, CO–FOUNDER AND 

CHIEF EXECUTIVE OFFICER, REMITLY, INC. 

Mr. OPPENHEIMER. Good afternoon. My name is Matt 

Oppenheimer, and I am the co-founder and CEO of Remitly, an online remittance provider based in Seattle, Washington. I thank the 

subcommittee for the opportunity to explain why our country has 

an interest in ensuring that legitimate remittance services are accessible, affordable, and safe. 

Remittances matter for the millions who rely on these services, 

but equally matter as a matter of national security. I founded 

Remitly in 2011 after living in Kenya and seeing firsthand how difficult it was to send money across borders. Not only that, but it 

was expensive, costing 8 percent to 10 percent of the total transfer 

just to send the money. 

Looking at the technology available to solve this problem, I knew 

there had to be a better way. When I moved back, I started 

Remitly to make remittances easier, faster, and more transparent. 

By replacing the cash-based brick-and-mortar model with a purely 

digital one, we sought to build a better, more affordable service for 

customers. 

By focusing on that vision, we have cut the cost of service from 

8 percent to under 2 percent, putting hard-earned money back into 

consumers’ pockets, while delivering a better user experience. I am 

humbled to say that our team of over 400 employees now helps customers send $3 billion a year to recipients in India, Mexico, Latin 

America, and the Philippines. 

While our technology has improved remittances, the basic reasons for sending money have not changed. Our customers send 

money to pay for basic needs of their family members—housing, 

food, water, power, medical care, and education—things we take for 

granted here, but which can be unattainable for millions abroad. 

Our customers are heroes. They sacrifice to provide a better life 

for their families. When they send, it is more than money. It is a 

lifeline. Paying their family’s rent or their child’s tuition, if you add 

up all these transfers, you will find that remittances contribute 

nearly 4 times the funds provided by all foreign aid. 

Beyond the human impact, when remittances are sent through 

modern, legitimate channels, they strengthen our national security. 

As a regulated provider, we invest heavily to comply with AML 

laws and other requirements using the latest technology to detect 

and report suspicious activity. 

8 

Digital providers like Remitly provide an additional security by 

serving only customers with U.S. bank accounts and by embedding 

KYC, OFAC screens, and risk features directly into our product. 

This creates a more secure, lower-risk service compared to the traditional model. 

This approach is also a powerful weapon against illegal activity. 

When our machine-learning systems or our trained staff spot something suspicious, we report it. This provides law enforcement with 

a high-resolution view into global money flows, an invaluable tool 

in fighting against illegal activity, money laundering, and terrorism. 

Licensed remittance companies keep money in the light by processing legitimate transactions while detecting and reporting those 

that are not. By contrast, there is an underground market of unlicensed remittance providers that don’t comply with these obligations. These informal networks operate without oversight and can 

be associated with black market activity. 

If policies are enacted that raise the cost of legitimate services, 

money will flow into these shadowy alternatives. That is why I am 

troubled by recent proposals to tax remittances to fund a border 

wall. A 2 percent tax would radically increase the cost of sending 

money, far more than you might expect. Remitly charges less than 

2 percent for our service, so this tax would more than double 

prices. 

Do that and money will flow to underground channels, funding 

the very activities we want to stop. The worst thing Congress could 

do to our customers and to border security would be to tax remittances to build a wall. It is just bad policy. 

Congress should focus on low-risk means to reduce regulatory 

burdens and enhance competition. While there is no silver bullet to 

AML reform, a few lead bullets include revisiting SAR reporting 

thresholds, aligning KYC requirements with international trends 

and improving OFAC sanctions list to reduce the operational burden posed by false positives. 

These improvements would focus private sector and law enforcement resources on higher-risk activities. It makes sense to realitycheck our risk-based approach from time to time, so I applaud the 

subcommittee’s focus on these issues. 

Making legitimate remittance services more accessible, affordable, and secure benefits consumers and strengthens national security. Smart policies and continued innovation put this goal within 

reach. 

I thank you again for the opportunity to be here. I welcome any 

questions the Members may have. 

[The prepared statement of Mr. Oppenheimer can be found on 

page 58 of the appendix.] 

Chairman PEARCE. Thank you, Mr. Oppenheimer. 

I now recognize Mr. Cassara for 5 minutes. 

9 

STATEMENT OF JOHN CASSARA, MEMBER, BOARD OF ADVISORS, CENTER ON SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE OF DEMOCRACIES 

Mr. CASSARA. Chairman Pearce, Ranking Member Perlmutter, 

and members of the subcommittee, thank you for the opportunity 

to testify today. It is an honor for me to be here. 

I am joined by experts from the formal remittance industry, so 

I will limit my remarks to the informal, underground remittances 

sometimes known as informal value transfer systems, parallel 

banking, underground banking, or sometimes just hawala. 

There are an estimated 244 million migrant workers around the 

world. Globalization, demographic shifts, regional conflicts, income 

disparities, and the instinctive search for a better life continues to 

encourage more and more workers to cross borders in search of jobs 

and security. Many countries are dependent on remittances as an 

economic lifeline. 

Although estimates vary, according to the World Bank, global remittances may have reached approximately $575 billion in 2016. 

That is an estimate of what is officially remitted. Unofficially, nobody knows. 

However, using IMF and World Bank assessments, unofficial remittances may be greater than $850 billion per year, with a substantial portion of that originating from the United States. Although diverse alternative remittance systems are found around 

the world, most share a few common characteristics. 

The first is that they all transfer money without physically moving it. Another is that they all offer the three ‘‘Cs’’: they are certain, convenient, and cheap. They are all ethnic-based. They are sophisticated and efficient and, finally, historically and culturally, 

most alternative remittance systems use trade as a primary mechanism to settle accounts or balance the books between brokers. 

In my written testimony, I go into some detail about how they 

operate. Informal remittance networks are found throughout our 

country. The overwhelming percentage of money transfers generated by the use of these informal systems is benign. We, of 

course, do not wish to interfere with migrants sending money back 

home to support their loved ones. 

However, these informal systems are also abused by criminal and 

terrorist organizations. They avoid our primary anti-money-laundering counterterrorism finance countermeasures. As Osama bin 

Laden once said, jihadists are aware of the ‘‘cracks’’ in the Western 

financial system. Informal remittances are not just a crack. They 

are a Grand Canyon. 

There have been many incidents relating to terror finance, both 

in the United States and overseas. Some examples include the use 

of hawala in areas our adversaries operate, such as Afghanistan, 

the Horn of Africa, and ISIS-controlled Syria and Iraq. Hawala was 

used to help fund the 2010 Times Square bombing in New York 

City. In 2013, a Federal judge in San Diego sentenced three Somali 

immigrants for providing support via hawala to Al-Shabaab, a designated terrorist organization. 

Hawala is legal in the United States, as long as a service is registered with Treasury’s FinCEN and adheres to State licensing 

10 

guidelines. Yet our government’s own statistics suggest our money 

services business registration is not successful. 

And from an investigative standpoint, it is very hard to penetrate 

these networks. To use just a few examples, law enforcement does 

not have many Gujarati, Farsi, Pashtu, or Urdu speakers, and even 

if we recruited some sources to walk into some of these networks, 

the question may well be, well, who is your uncle in the village 

back in the old country? And if you can’t answer that question, 

they are probably not going to have much to do with you. 

Because these systems are closed and opaque and based on trust, 

there are no easy countermeasures. But I do include a number of 

recommendations in my written statement. These include steps to 

improve our registration of underground money services businesses 

using trade transparency as the backdoor into these networks, better exploiting data and advanced analytics, improving financial inclusion by lowering the cost of formal remittances, and improving 

training and analytics so that compliance and law enforcement officers and analysts can better detect the systems. 

I also urge that we begin to pay attention to the worldwide Chinese underground financial systems, sometimes known as Fei-chien 

or ‘‘flying money.’’ 

Once again, it is an honor to be here and I am happy to answer 

any questions you may have. 

[The prepared statement of Mr. Cassara can be found on page 34 

of the appendix.] 

Chairman PEARCE. Thank you, Mr. Cassara. And I now recognize 

Mr. Paul for 5 minutes. 

STATEMENT OF SCOTT T. PAUL, CHIEF HUMANITARIAN 

POLICY ADVISOR, OXFAM AMERICA 

Mr. PAUL. Chairman Pearce, Ranking Member Perlmutter, and 

members of the subcommittee, on behalf of Oxfam America, I 

thank you for the opportunity to testify here today. 

Oxfam envisions a world without poverty, where all people are 

able to enjoy the full range of their human rights. Both financial 

exclusion and terrorism stand in the way of achieving that vision. 

Therefore, we need to make remittance services accessible, affordable, and accountable, both to law enforcement authorities and to 

the families sending and receiving money. 

As you know, remittances help fight poverty and aid humanitarian response worldwide. But they are particularly crucial in the 

world’s poorest countries and during humanitarian emergencies. 

Oxfam works in many countries where state institutions and the 

private sector are very weak or have collapsed. In these countries 

especially, remittances are a powerful stabilizing force. They help 

communities build resilience to crises, weather the storm, and then 

build back better. 

Unfortunately, we are witnessing a market failure in the financial sector today that is threatening to reduce and obscure remittance flows. Money transfer operators like Western Union or 

Remitly, also called MTOs, are the primary providers of remittance 

services to many migrants, and they typically rely on banks to perform financial services for them, including wiring money. But 

11 

banks are closing the accounts of legitimate MTOs at an alarming 

rate. 

Oxfam has commissioned research and conducted extensive outreach to banks, MTOs, community groups, and government agencies to gain a greater understanding of the problem and its possible 

consequences and solutions. The 9/11 terrorist attacks and 2008 financial crisis created pressure to crack down hard on abuse in the 

financial sector. In this environment, many banks view MTOs as 

high risk and are deciding that the benefits of maintaining their 

accounts just don’t justify the costs and consequences that come 

with it. So rather than manage the AML/CFT risk of their MTO 

customers, many banks are instead terminating MTO accounts. 

It is important to bear in mind that high-risk businesses like 

some MTOs are not bad actors. They are just viewed as vulnerable 

to abuse, which means they require more resources and expertise 

to oversee. Closing MTO accounts may, in fact, be a rational decision for banks, but it likely means a decline in remittances and an 

increase in the share of remittances transmitted through informal 

networks, which makes money more difficult for law enforcement 

officials, regulators, and money senders to trace. 

Somalia presents a unique and illustrative case. Remittances 

make up roughly a third of Somalia’s entire economy and are generally spent on basic survival needs. One Somali-American I interviewed told me that without the money we are sending them, he 

didn’t think the entire Somali nation would exist. 

Another confessed to me tearfully that the thought of not being 

able to send money to his sick mother for food and medicine made 

him consider going back to face drought and conflict. ‘‘I can’t even 

eat thinking about it,’’ he told me. 

Because of the security situation, most international banks and 

well-known MTOs are no longer present in Somalia, leaving only 

lesser-known Somali MTOs operating in the U.S. as a viable option. These MTOs are registered, examined, and regulated. They 

have collaborated with law enforcement during prosecutions of AlShabaab supporters. Nonetheless, banks have closed nearly all of 

their accounts, forcing them to find alternatives that make remittances more costly and much less secure. 

Let’s remember, banks will manage risk in the right circumstances. In today’s business environment, banks have thought 

it prudent to participate in multi-billion-dollar money laundering 

schemes, yet barely offer any service to MTOs whose core business 

is the transmission of $50 or $100 each month to a migrant who 

wants to build a better life for her family. It is obvious that the 

size and profitability of a customer matters a great deal to its 

bank. 

U.S. law and regulation have made the costs and consequences 

of managing money laundering and terrorist financing a lot steeper, but the revenue potential of MTOs for banks, particularly small 

MTOs, remains very low. I would urge this subcommittee to work 

with the Treasury Department, the State Department, USAID, and 

the Federal banking agencies to refine the risk-based approach in 

order to encourage more investment in risk management and less 

risk avoidance, including of MTOs operating in high-risk jurisdictions. That will mean more money in the hands of people looking 

12 

to escape poverty and less opportunity for terrorists and other financial criminals to transact business. 

I look forward to your questions. Thank you. 

[The prepared statement of Mr. Paul can be found on page 62 of 

the appendix.] 

Chairman PEARCE. Thank you, Mr. Paul. 

The Chair now recognizes himself for 5 minutes for questions. So 

without getting too deep into it, last year, about a year ago, I found 

myself in the middle of Bangladesh, in the middle of the night, 

needing cash to fill up a small airplane that needed to fly to 

Muscat, Oman, where I needed cash again. So finding that black 

and gold logo was somewhat reassuring. I didn’t actually use it, but 

something about hitting the ATM machine in the middle of the 

night from Bangladesh, then Muscat, Oman, caused some alarm 

back in the U.S. and caused those cards to be summarily dismissed 

and turned off. 

Again, thanks for what each of you do, because you serve a very 

real purpose for real people trying to just do things and live lives. 

So I appreciate that. 

So Mr. Oppenheimer mentions three suggestions in his testimony. Mr. Cassara, have you had a chance to—did you pick up 

those basically, saying that the reporting thresholds for suspicious 

activity across banks, non-banks should be consistent? And then 

the travel rule update, and then finally OFAC to build a more complete, updated sanctions list, that sort of—do you have an opinion 

on those recommendations, something that you would see to be productive? If you don’t, it is fine. 

Mr. CASSARA. At first hearing, they seem very reasonable to me, 

but I have not studied them. 

Chairman PEARCE. You would like more time to look, but there 

wasn’t anything that said, hey, this is not—it is a track we ought 

to consider, is what I hear. 

Mr. CASSARA. Yes. Nothing there is just outside the pale. 

Chairman PEARCE. Okay, fine. Mr. Oppenheimer, you heard Mr. 

DeVille say that 20 percent of their time is spent on regulations. 

Do you find that much of your time going into regulations? 

Mr. OPPENHEIMER. I certainly spend a lot of my time on regulatory matters, and we have a compliance team that we hired very 

early. Our second hire was our compliance officer. I think that one 

advantage of digital channels is because it is centralized, our regulators appreciate everything that a customer enters in. There is no 

human intervention. We don’t have a lot of cash agents. 

Chairman PEARCE. Okay, so— 

Mr. OPPENHEIMER. So the number of people is less. 

Chairman PEARCE. Yes, if I can interrupt here for a second, of 

that 20 percent, do you find all of it to be very productive, or half 

of it, or you don’t want to say with the IRS watching? I don’t know. 

Mr. OPPENHEIMER. It is a great question, Congressman. And I 

think that some of the recommendations that you just mentioned 

in terms of reducing the number of false positives from OFAC 

screening, some of that work I think is less productive. And if we 

expand the number of criteria right now for OFAC matches, for instance, it is name, location, and date of birth. And building the 

company from day one, those false positives, once they got through 

13 

our systems, and then it went through a manual review, I was 

doing personally, and we basically collect additional information 

from the customer to make sure that it is not on a terrorist watch 

list. That is not the individual. 

And so I think that some of the recommendations about expanding that criteria, so that can be automated and collected and 

screened in an automated fashion, so good customers don’t go 

through that false positive experience and we still catch nefarious 

activity, that is important. 

Chairman PEARCE. I appreciate it. I just need to keep moving 

here. Mr. DeVille, if you want to answer the same question, what 

percent of your 20 percent do you think is really productive in improving the security of the transfer of money, improving your operations, and improving the security of your customers? 

Mr. DEVILLE. In the current regulatory environment, of course, 

it is a requirement. But your question is somewhat different. There 

is no doubt that there is a tick-the-box regime on the part of regulators, rather than the things in which I would like to focus, which 

is like our financial intelligence unit, which as I said provides actionable information to law enforcement. 

In fairness to the regulators, however, they are excluded from 

the law enforcement investigations by definition. So they don’t 

have insight into what is really important to law enforcement. 

Chairman PEARCE. Okay, I am just trying to get the big picture. 

Are the regulations well-directed or are they not well-directed? And 

we will keep working on that. How many SARs do you file each 

year? 

Mr. DEVILLE. We are actually the largest SAR filer in the country, nearly 200,000 SARs last year and an equivalent number overseas, STRs, we call them generally. 

Chairman PEARCE. What is the turnaround time that you get? 

Mr. DEVILLE. The turnaround time? We have—it is a complicated regulation, but in simple form, 30 days from the alert to 

file a SAR. Certainly if it is a terrorist finance SAR, we file it 

quicker and we pick up the phone to call. 

Chairman PEARCE. Do you ever get any responses from FinCEN? 

Mr. DEVILLE. We do get occasional responses from FinCEN, I 

think in large part because I used to work there. 

Chairman PEARCE. Would it be more productive if you had a little bit more feedback? Or would that— 

Mr. DEVILLE. The feedback has improved. It is easier for me because I used to work there. But I do hear from my counterparts 

that they wish they had more feedback, but I have been pleased 

with it. And they have improved it over the last few years. 

Chairman PEARCE. My time has expired. I now recognize the 

gentleman from Colorado, Mr. Perlmutter, for 5 minutes. 

Mr. PERLMUTTER. Thanks, Mr. Chairman, and thank you to the 

panel for your testimony today. Let’s get this out of the way. The 

first questions I have are on H.R. 1834, the border tax, or the remittance tax. So I would like to direct these to you, Mr. DeVille, 

and to you, Mr. Oppenheimer. And I also want to introduce into 

the record a letter dated February 3, 2017, from Western Union, 

and a letter from the Electronic Transactions Association, objecting 

to the bill dated May 1, 2017, and finally a letter from Morrison 

14 

and Foerster on behalf of the Money Services Roundtable, all in objection to the remittance tax. 

Chairman PEARCE. Without objection, it is so ordered. 

Mr. PERLMUTTER. Mr. DeVille, why don’t you go first? Talk to us 

a little bit. Mr. Oppenheimer gave us a little opening about it. 

What effect would this tax have in connection with your operations? 

Mr. DEVILLE. Thank you, Representative Perlmutter. It is a very 

good question and timely. 

It is especially important to understand how price-sensitive the 

money transmitter business is. Mr. Oppenheimer and I did not talk 

beforehand, but my statistic is the same as his, that a 2 percent 

tax would nearly double in our case the cost of the average transmittal of funds between Western Union clients. 

Mr. PERLMUTTER. Do you agree with him that this could drive 

these transactions underground, which would then make them less 

transparent to law enforcement— 

Mr. DEVILLE. Yes, it almost certainly would drive them underground. There are so many opportunities underground as it is, even 

without the tax. And the relationship part we have with law enforcement, the SARs I discussed with the chairman, those would 

not be as readily available, if at all, from an underground money 

transmitter. 

Mr. PERLMUTTER. Thank you. Mr. Oppenheimer? 

Mr. OPPENHEIMER. Yes, thank you for the question, Congressman. As I mentioned in my oral testimony, I think that for the reasons that Mr. DeVille mentioned and that we have talked about, 

funding a border wall with remittance tax would be both bad for 

our national security and would be harmful for consumers trying 

to get money back home. So I think regardless of one’s views on 

a border wall, taxing remittances to fund it is just not good policy. 

Mr. PERLMUTTER. Okay, thank you. Mr. Cassara, Mr. Paul, I 

really do want to understand. You gave us an overview, Mr. 

Cassara, of hawala. And I would like a couple of examples. I know 

you give them in your written testimony. But for oral testimony 

today, give me an example of how the money goes underground and 

how it could get to a terrorist organization. Mr. Pearce said that 

you had been a gun dealer or an arms dealer at some point in your 

past— 

Chairman PEARCE. That was an underground, legitimate— 

Mr. PERLMUTTER. An underground— 

Chairman PEARCE. Undercover, excuse me. 

Mr. PERLMUTTER. Undercover, pardon me. So explain to me—I 

understood you were doing it on behalf of all of us, and I appreciate 

that, all right, thank you—so give us some examples of how this 

goes underground. And then, Mr. Paul, what I would like you to 

talk about is, what is the effect to just law-abiding people in Minneapolis or Denver or wherever it may be, if we really tighten down 

on this stuff? 

Mr. CASSARA. Congressman, here in the United States, I believe 

that underground financial networks, such as hawala, are found 

throughout the country. So, for example, there could be a Somali— 

and I am not picking on Somalis; it could just as easily be an Afghan or a Bangladeshi or whomever, it doesn’t make any difVerDate Nov 24 2008 13:42 May 01, 2018 Jkt 029451 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\29451.TXT TERI
15 

ference—individual who wants to remit money back to his home 

country, for example, Somalia. Maybe he wants to help support AlShabaab. 

There are limitations and real concerns why he would not want 

to go into a formal financial institution, which I outline in my 

paper, as well as, for example, a money services business. So he 

feels comfortable in talking to somebody from his extended family, 

clan or tribe, somebody that may be called a hawaladar. He gives 

them some money that he wants transmitted back to Somalia, back 

to the old country. The money does not physically leave the United 

States. It stays here in the United States. 

The hawaladar here in the United States contacts his counterpart in Somalia. The equivalent of money, less small fees at both 

ends, is then delivered to the destination that he designates. That 

destination could be affiliated with, for example, an Al-Shabaab. 

That money could go for nefarious purposes. 

Mr. PERLMUTTER. Okay, so the money is here, but it is like security for the money over there? Like having a certificate of deposit 

that is on loan to somebody who puts up the money in the old country? 

Mr. CASSARA. Correct. It is money transfer without money movement. In a sense, it is what Western Union does. 

Mr. PERLMUTTER. Mr. Paul—and I know my time is up— 

Mr. PAUL. Yes, I will just quickly agree with Mr. Cassara and 

just say, on top of the consequences for our national security, consider also the perspective of the individual money sender. Once 

that money gets out of his pocket and into the hawaladar’s pocket, 

there is no recourse. You can’t sue. You can’t call someone who has 

any authority over the person who has just taken your money. 

That money, for all intents and purposes, is out of his or her hands. 

Mr. PERLMUTTER. Thank you. And I yield back. 

Chairman PEARCE. The gentleman’s time has expired. The Chair 

now recognizes the gentleman from North Carolina, Mr. Pittenger, 

for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. DeVille and Mr. Oppenheimer, do your companies share information on terror financing and other illicit financial threats with 

each other and with other financial institutions? 

Mr. DEVILLE. Yes, we participate in 314(b), Congressman. 

Mr. PITTENGER. Yes, sir. Is that the same as you, Mr. 

Oppenheimer? 

Mr. OPPENHEIMER. That is correct, yes. 

Mr. PITTENGER. Do you have any impediments or challenges 

there in the respect of that exchange of information? 

Mr. DEVILLE. I know my counterparts at other financial institutions have had impediments. We actually have not. It has worked 

well for us. 

Mr. PITTENGER. Okay. 

Mr. DEVILLE. Perhaps because we are a bigger player, it could 

be. 

Mr. PITTENGER. Sure. Mr. Cassara, you have testified previously 

and also written regarding the trade transparency units. And give 

us some detail, if you would, on how these trade transparency units 

16 

can be helpful in identifying illicit financing in remittances, wire 

transfers, hawalas, and other regard. 

Mr. CASSARA. It depends on the geographic location in the world, 

but historically and culturally, most underground financial systems, particularly hawala and Fei-chien, they settle accounts or 

balance the books through trade, value transfer, over- and underinvoicing, for example, sometimes called ‘‘countervaluation.’’ 

I have testified here before on the idea of establishing trade 

transparency units around the world. There are approximately 16 

today. We have one here in the United States in homeland security 

investigations. The idea is very simple. Looking at one country’s 

targeted imports comparing those with a corresponding country’s 

exports, you can spot anomalies. Those anomalies could be an indication of simple customs fraud. It could also be an indication of 

some form of underground financial system, like hawala or a black 

market peso exchange. 

Some people have called this a possible backdoor into these networks. I think the trade transparency unit initiative deserves some 

funding and some more manpower to see if this network could be 

expanded as a real countermeasure to underground financial systems. 

Mr. PITTENGER. Very good. How then, Mr. Cassara, does tradebased money laundering itself—how is it tied into illicit remittance 

payments or other non-bank means of financing? 

Mr. CASSARA. I’m sorry. I did not get that question. 

Mr. PITTENGER. The trade-based money laundering, how is it tied 

into illicit remittance payments or other non-bank? 

Mr. CASSARA. Underground banking is tied into trade-based 

money laundering simply because it is part of the countervaluation 

process. And if you include things like hawala, like Fei-chien, like 

the black market peso exchange, like padala in the Philippines, like 

all these others, as I said, historically and culturally, they all use 

trade-based value transfer. 

So you can’t separate them out. All these— 

Mr. PITTENGER. Mr. DeVille, would you like to comment? We are 

looking to try to streamline and try to clarify 314(a) and (b) so as 

to provide sharing and provide a capacity for financial institutions 

to be protected, to have a safe harbor in those transfers with each 

other and with the government. And would you find this helpful, 

not just in sharing information, but do you believe it would reduce 

the amount of oversight and engagement that you have to have 

with multiple SARs, accounts? You could be identifying those individuals so that data that is really relayed to you by the Federal 

Government or by each other. Would that be a supportive effort for 

you? 

Mr. DEVILLE. Yes, if I may, Congressman, it would be. We certainly, like all financial institutions, receive 314(a) requests. I 

think the biggest help to us would be is if we could share SARs 

with our foreign subsidiaries. You have a Western Union license in 

the U.S., you have a Western Union license in Europe. We cannot 

share SARs even though they are all Western Union. Now, whether 

a Congress would put that under 314(a) or something else is another question. But that inhibits our information-sharing. 

17 

Mr. PITTENGER. Very interesting. Thank you very much. I yield 

back. 

Chairman PEARCE. The gentleman’s time has expired. The Chair 

now recognizes the ranking member of the full Financial Services 

Committee, the gentlelady from California, Ms. Waters. 

Ms. WATERS. Thank you very much, Mr. Chairman. It is very important for all of us that you are holding this hearing today. As a 

matter of fact, this past weekend, I was in Jamaica and had an opportunity to talk with a number of the parliamentarians and the 

former prime minister. And they talked about correspondent banking relationships that were not available to them anymore from 

major banks. 

And I had representatives from Saint Vincent’s and the Grenadines in my office last week, where they came to tell us they have 

no bank that will do business with them, and that they can’t pay 

the salaries of the people working in the embassies and pay their 

bills, and they want us to help them in some way. 

And then, of course, they talked about remittances and the important role that it plays in all of these Caribbean countries. And 

so I want to know, why is the Caribbean being hit so hard? And 

what suggestions do you have? I certainly don’t think that taxing 

remittances would be a good thing to do. It would be a terrible 

thing to do. Even for those banks that were—those countries that 

were able to hold onto some banking relationships, they have increased the charges for providing the services and so, I think taxing would be terrible. 

And we should all be appreciative of these remittances and the 

role that it is playing in these countries to help with poverty problems and education and health and all of that. And so I guess my 

big question is, can you comment, Mr. Paul, on the effect that this 

trend is having in terms of the transparency of overall remittance 

flows? And can you elaborate on the regions where the adverse effects of this trend are more pronounced? For example, you wrote 

in your testimony that Caribbean governments at the highest levels have raised concerns about the impact of bank closures on remittances flows. What have these adverse effects entailed? 

Mr. PAUL. Thank you, Representative Waters. It is an incredibly 

critical issue, correspondent banking. And the issue of correspondent banking and banks—foreign banks’ access to the U.S. 

financial system is very closely related and in a lot of ways parallel 

to the issues that MTOs have had accessing the U.S. financial system. 

Essentially, the costs and consequences of maintaining correspondent banking relationships are outweighing the profitability 

of maintaining those relationships. And the cascading effects of the 

breakdown in correspondent banking is having horrific effects on 

remittance flows, on the ability of organizations like Oxfam and 

other nonprofit organizations to move money around the world, 

also for trade finance. So this is an issue that absolutely demands 

the subcommittee’s attention. 

I would say the region that has been hit hardest would be the 

Caribbean. Belize has come forward to say they may not have any 

correspondent relationships with the U.S. at all at the moment. Jamaica, you mentioned. The other one that has come out very 

18 

strongly is the Pacific. A lot of small island states in the Pacific are 

finding it more and more difficult to connect to the global financial 

system. And I would say that is a systemic risk. 

Ms. WATERS. Do you have any ideas about what we can do to 

deal with this? We can’t make the banks do what they don’t want 

to do, but they can’t say that it is not at all profitable, because actually they can charge and they have been increasing the charges 

for quite some time. We don’t want them to continue to do this, but 

what I recognize, talking with those in the Caribbean, is that many 

of these small countries spend a lot of money in the United States. 

For example, in Florida, whether you are talking about the Bahamas or any of these countries, they come and they do business, 

they shop, what have you. We should have a good relationship with 

them. 

And we should respect the fact that they have to maintain these 

embassies, and we want them to do that. Do you have any ideas 

about what we can do? 

Mr. PAUL. Absolutely. Thank you, Representative Waters. There 

are a few different ways to deal with this—so we have costs and 

consequences on the one hand, and we have profitability on the 

other. So one way to do it is to find a way to minimize the cost 

and consequences. 

There are a number of ways to do that. The most simple way is 

probably just to clarify exactly what banks’ responsibilities are 

when managing risks of correspondent relationships. A second way 

is to be creative and think about how to create more incentives to 

bank otherwise unprofitable correspondent banks. 

But lastly, and I think maybe the most practical, immediate step 

that the subcommittee could take is to bring all the stakeholders 

together to make sure that the right people are in the room, and 

as concerns the U.S. Government, to bring in some of the voices 

that are more inclusion-minded. So the International Affairs Directorate at Treasury, parts of the State Department, parts of USAID 

that have a lot of equities in this issue, but aren’t always writing 

policy. 

Ms. WATERS. Thank you very much. I yield back. 

Mr. EMMER [presiding]. The gentlewoman’s time has expired. 

The Chair now recognizes the gentleman from Pennsylvania, Mr. 

Rothfus. 

Mr. ROTHFUS. Thank you, Mr. Chairman. Mr. Cassara, can you 

please explain how charitable organizations fund hawalas? And 

have you seen U.S.-based charities involved with funding hawalas? 

Mr. CASSARA. I personally have not seen U.S. charities use 

hawala, although there were cases immediately after 9/11 where 

those charities were alleged to have been involved. Again, it depends on the area of the world that we are talking about. In certain areas in Afghanistan, or Somalia, there are not that many alternatives for regular businesses, for nonprofits. They are almost 

forced to use these underground systems to transmit funds. So, yes, 

it is conceivable that this is happening. 

Mr. ROTHFUS. On page nine of your testimony, you mentioned 

Iran’s form of hawala is havaleh. On that same page, you mentioned 300,000 Iranians are in Dubai, with reports that billions in 

capital is invested in Dubai real estate to launder Iranian money. 

19 

Are Iranian actors using hawala to launder and integrate this 

money? Or do they use the Western banking system? 

Mr. CASSARA. I believe they are using hawala, havaleh, to transfer funds from Iran into Dubai to purchase properties, et cetera, 

yes. 

Mr. ROTHFUS. How would they use havaleh to launder large 

sums? How does that work? How much are we talking here? 

Mr. CASSARA. I can’t give you an estimate. I don’t know whether 

our government, whether the intelligence community and others 

have studied that issue. I don’t know whether those numbers are 

available. 

Mr. ROTHFUS. You also mentioned that the hawala system is 

based on trust, but that terrorists also use the hawala networks, 

as ISIS does in Iraq and Syria. The Treasury Department designated the Al-Kauthar money exchange in December 2016 as an 

ISIS-linked MSB. Is there a network of ISIS-controlled hawalas? 

Or was this a unique situation where ISIS managed to gain the 

trust of non-ISIS controlled hawalas? 

Mr. CASSARA. I don’t have specific intelligence on this one instance. I don’t believe there is an ISIS-controlled network. This is 

my own impression. I think there are hawaladars of opportunity 

out there that cooperate with ISIS. I also think you have to look 

at the whole issue of trade-based value transfer in the region. But 

most definitely, hawala is present in ISIS-controlled territories in 

Iraq and Syria. 

Mr. ROTHFUS. With respect to the unregistered MSBs and 

hawala brokers here in the United States, is the fact that they are 

unregistered a function of a lack of Federal agents and resources 

to enforce compliance? Or are there other factors at play here? 

Mr. CASSARA. I was at FinCEN in the late 1990s. At that time, 

the Director of FinCEN commissioned a study—how many MSBs 

are there in the United States? This happened right before 9/11. 

The answer came back approximately 240,000 in the United States. 

I am sure that number has increased. 

I believe that the number of registered MSBs here in this country today is probably in the area of 30,000. So if that original study 

was correct, there was a missing two-hundred-some-odd thousand. 

Why aren’t more registering? There are a number of reasons. Number one, lack of outreach. There are a lot of communities here that 

aren’t aware of the requirements to register. FinCEN, the IRS is 

supposed to do much more in that regard. 

Second of all, it comes down to enforcement. There should be 

agents knocking on the doors. Why aren’t you registered? Why 

aren’t you licensed? And that is not happening. 

Mr. ROTHFUS. Is it a function of insufficient resources? Do we 

need more agents working on this? 

Mr. CASSARA. I think part of it is resources and part of it is priorities. 

Mr. ROTHFUS. Can you explain the mechanism of how wealthy 

Chinese individuals purchase high-end real estate in the United 

States through their flying money system? 

Mr. CASSARA. Thank you for that question. I am very concerned 

about Fei-chien, flying money, and its use here in the United 

States. There is a lack of reporting on this issue in our government 

20 

and in open source information. But as you well know, in China 

itself, Chinese citizens are limited to about $50,000 a year they can 

take out of the country. And even if they use smurfing networks, 

family members, et cetera, et cetera, there is a massive amount of 

capital flight leaving China going into the United States, purchasing high-end properties, and I feel that Fei-chien plays a part 

in this. 

The same thing is also happening in places like Canada, in London, in Australia, and elsewhere. And we are not paying any attention to it. 

Mr. ROTHFUS. I yield back. 

Mr. EMMER. The gentleman’s time has expired. The Chair now 

recognizes the gentlewoman from New York, Mrs. Maloney. 

Mrs. MALONEY. Thank you. And I thank so much the Chair and 

the ranking member for calling this hearing and all of your testimony. Mr. DeVille, your testimony notes that a current area of 

focus for Western Union’s financial intelligence unit is the continued analysis of transaction controls and other risk measures in 

Iraq, Syria, Turkey, and Libya, to ensure that you appropriately 

manage risk while at the same time serving the very real humanitarian needs. 

But as you know, most other American financial institutions are 

not operating in these countries. They have pulled out. So why do 

you think Western Union has been able to continue to serve higher-risk countries such as Syria when so many firms have not continued, have pulled out? You are alone in so many countries. What 

is the difference? And why are you able to succeed where others 

are not able to stay and serve? And thank you for doing that, too. 

Mr. DEVILLE. Thank you, Congresswoman Maloney. I appreciate 

that. And you are correct. In many instances, we are the only 

Western institution in these countries. Take the example of Syria, 

for instance. We have zoned the country off into zone one and zone 

two. We shut down the agents in zone one. We apply a lot of due 

diligence controls in zone two. We don’t talk about our specific controls publicly, but limiting thresholds, limiting the velocity. 

We also look for individuals who will transmit—do a Western 

Union transfer on the Turkish side and then go into Syria and vice 

versa, or go from a western European country. The bottom line is, 

it takes a lot of resources and a lot of data analysis to allow us to 

be there. 

I will say, in all my conversations with the State Department 

and the Treasury Department, they are glad we are there, because 

we are, within the constraints of privacy laws, a source of financial 

information for them. 

Mrs. MALONEY. Well, congratulations, and thank you for your 

service. 

Mr. Paul, as you know, one of the reasons that financial institutions have been de-risking entirely from certain countries rather 

than trying to manage the risk of doing business in that country 

is the lack of clarity from the banking regulators about what they 

need to do to comply with their anti-money-laundering obligations. 

And what kind of regulatory action do you think would give financial institutions sufficient clarity on their anti-money-laundering obligations so they can continue to provide essential finanVerDate Nov 24 2008 13:42 May 01, 2018 Jkt 029451 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\29451.TXT TERI
21 

cial services and humanitarian support? And could you really—and 

anybody—talk about this, because this is a problem. How could we 

clarify it so that they would feel comfortable? Can you expand on 

it? 

Mr. PAUL. Thank you, Congresswoman. As you know, in recent 

years, the Treasury Department has tried to issue guidance statements, either policy guidance, in some cases blog posts, with the 

expectation that financial institutions would hear that message 

and be heartened that they don’t have to be infallible, they don’t 

need to know their customer’s customer, and that the risk-based 

approach means taking a proportionate approach in all of these different places, and they should take heart and do business in some 

of these high-risk jurisdictions. 

Unfortunately, I think it is fair to say that for the most part, 

that hasn’t worked. I would encourage regulators to continue the 

program of outreach that they have begun in general. But specifically, in jurisdictions that are extremely high-risk and at the margins of the formal financial sector, where people are getting pushed 

out, people might have nonprofit organizations or correspondent 

banks or remittance services may only have a single bank account 

and maybe under threat of losing that account, that is where some 

sort of hybrid risk-sharing approach might be more useful, where 

you have regulators being willing to promulgate more concrete 

rules as opposed to a more amorphous risk-based approach and actually take on and share some of that risk by being specific about 

what is expected. 

Mrs. MALONEY. And would anyone else like to clarify in this 

area, which is a reason why many people are not continuing to 

serve? Yes? 

Mr. DEVILLE. Yes, if I may, thank you. I think we are on the 

same page. More specifically, if we could have joint guidance from 

all the regulators on the requirements for banking and MSB, I 

think that would be helpful. The last time there has been joint 

guidance was in 2005 on MSBs. That would certainly help. 

Mrs. MALONEY. And when you say joint guidance, who all would 

be part of this joint guidance? 

Mr. DEVILLE. It would be—FinCEN did in 2014 guidance on 

banking MSBs. Maybe that could be a starting point. But you 

would have to have the OCC, the Fed, the banking regulators involved, as well, for it to carry weight. 

Mrs. MALONEY. Maybe that is something we can work on together in a bipartisan way to accomplish. It is a tremendous challenge for our country. And we have to be concerned about it, particularly in our own country, the money laundering taking place. 

My time has expired. Thank you. Thank you for having the hearing. 

Mr. EMMER. The Chair now recognizes himself for 5 minutes. 

Mr. Oppenheimer and Mr. DeVille, and I am going to put it in 

more simplistic terms and give you a little bit of room to run—and 

I don’t care who starts—but can you give the committee a better 

understanding of the current regulatory environment for money 

transmitters from an industry perspective? 

Mr. DEVILLE. I think it sort of segues from the last question. The 

current environment is, I think, difficult for the banks in many 

22 

ways because there is a lack in some ways of what is a clear guidance on the part of what MSBs have to comply with. So that is a 

problem from the banks. 

Another issue is just divorcing the de-risking argument from 

this, which we have been talking about, is very often at an MSB 

we have to extrapolate from banking regulations, because oftentimes there are not specific regulations for MSBs. So more clarity 

there would certainly be helpful, as well. 

I think probably the main point from my perspective at Western 

Union is the lack of a level playing field in the MSB industry. Mr. 

Cassara mentioned registered MSBs. As of yesterday, there were 

25,939 registered MSBs, but as you said, there are countless unregistered MSBs. 

And both the smaller registered MSBs and certainly the unregistered MSBs, frankly, do not get examined. And so there is not a 

level playing field. And let’s forget about Western Union, because 

I am biased, but there is not a level playing field between them 

and the PayPal, Xoom, Moneygram, Remitly, those like us. 

Mr. EMMER. Mr. Oppenheimer, do you have anything to add? 

Mr. OPPENHEIMER. Thank you for the question, Congressman. I 

think that the environment for registered money services businesses is one that is robust. I think that there is a lot of work in 

the industry around streamlining the various regulators we have, 

and I think efforts to do that are welcome. And I think that we are 

regulated by both State agencies, and then we also, obviously, register with FinCEN. We are also under the purview of the CFPB. 

So the more streamlining that can happen, partnering between regulators, the States are doing a lot of streamlining between various 

State agencies I think is welcome. 

And I think that the other thing is aligning bank and non-bank 

regulations. And I mentioned some of that in my written testimony. 

Mr. EMMER. By the way, Mr. Oppenheimer, has your company 

ever had to deal with the issue of de-risking? 

Mr. OPPENHEIMER. We have. When I started the company in 

Boise, Idaho, when I came back from Kenya—I am from Boise 

originally—I set up a bank account and filled out on the form that 

I was a money transmitter. It took the bank about 6 months to go 

through their internal process, but after that point, we had raised 

about $750,000 in capital to get the business off the ground. We 

had not processed a single transaction. 

But they went through the process, saw we were an MSB, and 

I got a letter in the mail saying we saw that you are a money 

transmitter, we are going to be mailing the balance on your account to the registered address. Thanks for being a customer. 

And those experiences, I think, happen to a lot of money services 

businesses. Thankfully, I knew about de-risking, and so I had been 

working to get a redundant bank account. We transferred it over. 

And now we have multiple bank accounts. But I think the story 

that we experienced—there are countless stories out there for 

MSBs that are not able to get bank accounts and, unfortunately, 

just have to shut down. 

Mr. EMMER. Mr. DeVille, same question. Has Western Union 

dealt with de-risking? 

23 

Mr. DEVILLE. We have. As one of the bigger players, it doesn’t 

perhaps affect us as much, but, Mr. Cassara said earlier that the 

way Western Union settles up is like a hawala. Well, aside from 

our—and I know you didn’t mean that—huge compliance program, 

there is a difference. 

We require a correspondent bank to settle between us in Denver 

and our agents overseas, so that is where our de-risking risk comes 

in. And then for our agents, who are not as big, of course, they certainly face a de-risking risk, as well, if you will. 

Mr. EMMER. And I am sorry that I am picking on these two, but 

I am going to stick with it, because I am interested to know, I 

asked you about the regulatory environment to start with. So now 

with de-risking, how much does the regulatory environment actually impact de-risking? Mr. Oppenheimer or Mr. DeVille or the 

other two witnesses? 

Mr. DEVILLE. I will give you an example. Mr. Paul’s organization, Oxfam, is obviously a very reputable organization and it is a 

customer of ours. They have 11 accounts with us. I pulled the numbers, and we had to do 77 investigations on Oxfam last year because of alerts. 

We knew Oxfam was good, but you can’t just put it aside. A regulator is going to come and look and say, why did you not file a 

SAR? So that is a perspective from the other side, as opposed to 

us being de-risked, it is our view into perhaps de-risking a good 

customer like Oxfam. So it is quite expensive to have a high-risk 

customer, be it an MSB or a charity. 

Mr. EMMER. I see my time has expired. At this point, the Chair 

will recognize the gentleman from Illinois, Mr. Foster, for 5 minutes. 

Mr. FOSTER. Thank you, Mr. Chairman. And thank you to all our 

witnesses for your testimony today. 

Mr. Paul, one thing that I sort of find missing in this discussion 

is the human element. As you mentioned in your testimony, remittances are particularly important to developing countries. For one 

thing, remittances have helped lift millions out of poverty, and 

thereby unquestionably saved hundreds of thousands of lives 

through access to medical care, et cetera, that would not otherwise 

be available. 

A recent study conducted by the U.N. International Fund for Agricultural Development stated that approximately 200 million migrants globally send more than $445 billion in 2016 as remittances 

back to their families. And there is a lot of good that is done by 

that money when it arrives in poor countries. 

And in many cases, the majority of this money just helps people 

meet their most basic needs—food, shelter, education, medical 

treatment. Remittances also play a crucial role during humanitarian emergencies, particularly in institutions where state institutions and the private sector have unfortunately failed. 

However, despite being viewed as, by and large, law-abiding consumers, financial institutions have increasingly moved to de-risk 

the accounts perceived to be higher risk, often with a sort of broadbrush approach that restricts many consumers from any access to 

financial services. 

24 

And while effective BSA and AML compliance is important, the 

remittance services, as you stated in your testimony, must be accessible, affordable, and accountable. Can you just talk briefly 

about the human impact of such wholesale and broad-brush derisking? 

Mr. PAUL. Thank you, Congressman Foster. I have had the privilege now in my 51⁄2 years with Oxfam to travel to regions around 

the world where people have been able to benefit from different 

kinds of financial inflows, foreign direct investment, remittances, 

U.S. development and humanitarian assistance. Each has its comparative advantage, but one of the most interesting things about 

remittances is, it is entirely in the hands of the recipients. It gives 

people an incredible amount of agency over their lives. It is more 

insulated from global economic shocks and stresses, not completely 

insulated, but more insulated, and more insulated also from political shifts than, say, foreign assistance flows. 

So really, it is the sort of financial inflow that allows people to 

identify their most immediate needs. And I have seen that recently 

in humanitarian emergencies in three countries facing famine—Nigeria, Somalia, and Yemen—where remittances are essentially the 

firewall from destitution and death. And also in places where remittances enable people to identify their most promising opportunities, be it a college education or a small business, or investment in 

a family member. So it has been really amazing to see that. 

Mr. FOSTER. Well, thank you. Because we have to bear that in 

mind. My next question I guess is probably directed to Mr. DeVille 

and Mr. Oppenheimer. What fraction of all of the uncertainties and 

liabilities that you have to deal with have to do with identity fraud, 

either at the host country end or the home country end? And would 

some sort of approach where having a high-quality authenticated 

digital ID on both ends of the transaction, in exchange for some 

sort of legal safe harbor, is there a useful arrangement to be made 

along those lines? 

Mr. DEVILLE. Yes, certainly. And I understand it is a controversial issue, a national ID, but we accept—we will view in some cases 

record an ID. And we do checks. Our templates are designed—if it 

is a California ID and there are the wrong number of digits, then 

the transaction will be rejected. But we don’t have a means other 

than that to determine the validity of the ID, at least not in the 

U.S., so that would be enormously helpful. 

Mr. FOSTER. And also, you are talking about how a lot of these 

are immigrants, immigrants or guest workers here, for which presumably the political resistance to having a very high-quality ID 

mandated might be a lot smaller. So this might not be a solution 

for everyone, but might be a significant factor. Especially, it must 

be more important online than for someone appearing in person. 

Mr. OPPENHEIMER. Yes, and just to reiterate that point, I will 

just add on the systems we have, not only help from a compliance 

perspective, but we also have similar systems in place, machine 

learning, rules-based engines, that help us prevent any sort of 

fraudulent attempts to go through our platform. 

Mr. FOSTER. But those have to do with big commercial databases 

that know everything about you, that are more difficult to use by 

the Federal Government. 

25 

Mr. DEVILLE. Ours is an IBM product, so, yes, similar. 

Mr. FOSTER. But it is the big databases from these companies 

that analyze everything produced by your cellphone and everything 

else that are different. 

Chairman PEARCE. The gentleman’s time has expired. The Chair 

now recognizes the gentleman from North Carolina, Mr. Budd, for 

5 minutes. 

Mr. BUDD. Thank you, Mr. Chairman, and thank you to the 

panel. 

Mr. Cassara, a question for you. Are these payments in the 

hawala networks identifiable by law enforcement and our intelligence community on the block chain, thereby breaking the tradition of hawala transfers, not maintaining a record of these transactions? 

Mr. CASSARA. Congressman, I wish I could answer your question 

about the block chain. 

Mr. BUDD. Sure. 

Mr. CASSARA. I just can’t. I just don’t have access to that type 

of information. But one thing I am concerned about is the fact that 

bitcoins and cyber currency in general in the coming years will be 

used more and more to settle up between hawaladars. 

Mr. BUDD. Okay. Is that valid that there is a tradition of not 

maintaining a record in hawalas? 

Mr. CASSARA. They do maintain temporary records. I have interviewed hawaladars. I have seen their general—they use—again, it 

depends on the region of the world. Sometimes these are on Excel 

spreadsheets. Sometimes they are just paper ledgers. But yes, 

there are records, but it is not like a bank that has to keep these 

records, say, for 5 years, et cetera, et cetera, et cetera. They use 

them, then they dispose of them. 

Mr. BUDD. Okay, thank you. Is there anything the U.S. can be 

doing differently to counter this growth without infringing on the 

largely peaceful users in the network? And that is for you or anyone on the panel. So would you say that we are on the right track? 

Mr. CASSARA. Regarding hawala? No. We use this overused expression. There is no silver bullet. This issue is so complex and it 

involves, again, macroeconomics, microeconomics, literacy rates. 

That is a huge issue. There are certain areas in the world, for example Pakistan, where about 80 percent of the people are illiterate. 

So they do not want to go into a bank or a formal money services 

business simply because they are intimidated. It is hard for them 

to fill out forms. But they feel very comfortable talking to their 

local hawaladar, their tea shop owner who doubles as the 

hawaladar in their village, that type of thing. 

So there is a lot of—and the devaluation of currencies and costs, 

all these things factor in. I wish I could say this is what we need 

to do, but there is just not that one silver bullet. We have to do 

a combination of things. 

Mr. BUDD. Understood. Thank you. Mr. Chairman, I yield back. 

Chairman PEARCE. The gentleman yields back. The Chair now 

recognizes the gentleman from Massachusetts, Mr. Lynch, for 5 

minutes. 

Mr. LYNCH. Thank you, Mr. Chairman, and thanks for holding 

this hearing. I also want to thank our witnesses for your help. 

26 

Mr. Paul, with Oxfam, are we seeing a heightened use of bitcoin 

or alternative currencies in areas where you are doing most of your 

work? 

Mr. PAUL. I couldn’t say. I am not aware of any. 

Mr. LYNCH. Okay. Let’s go back. Mr. Cassara, one of the 

vulnerabilities that we see on this committee in places like Afghanistan, Pakistan, Iraq, Syria, and Yemen is that, first of all, our 

folks, our State Department folks are understaffed, number one, 

but oftentimes there is a mismatch in terms of, we don’t have 

enough FinCEN or Treasury staff onsite. We just did a CODEL to 

the Gulf, and I think we have one young man who has three or 

four countries there, Bahrain, Dubai, a couple of others, that he is 

responsible for. 

Do you think it would be helpful either to train up State Department personnel so they would be more tuned into this situation, or 

do you think it would be better—and I don’t want to put you on 

the spot, I know the funding issues and all—every year, I put an 

amendment in to hire some more folks for FinCEN and give them 

a little bit more money to do their job. But do you think we could 

do a plus-up and help us in some of these tougher areas where we 

are seeing some illicit finance going on? 

Mr. CASSARA. Thank you, Congressman. I think one issue is that 

there are not enough intelligence reporting requirements for embassies overseas and this whole area of illicit finance. I used to collect intelligence, and it was always helpful if headquarters, if you 

will, would say, ask these questions. I don’t think that is happening enough, not in the area of illicit finance. 

I also think there is not enough knowledge and awareness of 

many of our embassy staff overseas, whether it be State Department officials or others about these areas of illicit finance. Frankly, 

they are hard, and they are tasked to do many, many, many 

things. 

Regarding FinCEN, let’s understand that FinCEN is not law enforcement. They do not have law enforcement capabilities. They 

have analysts, or they have regulators, but they are not law enforcement. I am all in favor of re-energizing the Department of 

Treasury’s Office of Enforcement, which was decimated at the creation of the Department of Homeland Security. Customs is gone. 

ATF is gone. Secret Service is gone. This is just me talking as an 

old-time Treasury Special Agent. I would love to see a revitalization of Treasury law enforcement that could get out overseas and 

understand these issues. They get the money in the value transfer. 

That is what they do. 

Mr. LYNCH. Thank you. Mr. DeVille, I know you talked about 

your early efforts at FinCEN. And we actually had a role to play 

in standing up some of these financial intelligence units (FIUs) in 

some of these countries. And so are you involved right now in 

terms of your private business with Western Union, are you involved in Somalia at all or are you completely out of there? 

Mr. DEVILLE. No, Congressman, we are in Somalia. I have the 

numbers here. We are in Somaliland, and it has been difficult to 

find an agent in Somalia. 

Mr. LYNCH. We have just recently been authorized to go into 

Mogadishu, but are pretty much restricted to the airport and a few 

27 

other secure sites. Do you have anything in Mogadishu? Because 

I understand that the Somali nationals are actually coming over to 

Kenya, but there are a couple of safe sites, and are doing their 

business, remittances and all that. But that is less than ideal. 

Mr. DEVILLE. It is—and I am sure Mr. Paul can testify—an area 

that really needs remittance support. We have been able to find an 

agent with whom we are satisfied in Somaliland, but we have not 

been able to find a satisfactory agent in Somalia. So we are not 

there at the moment. 

Mr. LYNCH. Okay, great. Mr. Paul, I only have 20 seconds left, 

but Somalia, any ideas, any answers about how we might better 

service the people in that area, given the problems with AlShabaab? 

Mr. PAUL. Yes, thanks for the question, Congressman. There are 

about a dozen Somali MTOs that operate in the United States. As 

I said, they are licensed, they are regulated, they are regularly examined, they cooperate with law enforcement. They have now been 

pushed to the very margins of the banking system. Most of them 

are unbanked. A few of them have one bank account through which 

they can transmit some funds. 

They are very efficient and trusted by Somali-Americans and by 

Somalis in the country. But they need more—they need stronger 

intervention and more assistance to stay within the banking system. 

Chairman PEARCE. The gentleman’s time has expired. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Chairman PEARCE. The gentleman’s time has expired. The Chair 

now recognizes the gentleman from Ohio, Mr. Davidson, for 5 minutes. 

Mr. DAVIDSON. Mr. Chairman, thank you, and thank you, witnesses, for your testimony. I really appreciate the things I have 

been able to learn from you today and from previous discussions 

with some of you. 

I am curious, if you go down the line—there are only two who 

are in the business of moving money. U.S. origin to U.S., we are 

talking about illicit finance and we are talking generally from a 

U.S. destination to a non-U.S. destination. And other times from a 

non-U.S. destination into the United States. 

But it mostly flows out. And to talk about a portion of illicit finance it seems to be much easier to get the heroin into the country 

than it is to get the cash out. That is what they are after. But in 

a lot of cases, the cash out goes for other purposes. 

I am curious about the cash movements between people in the 

United States to people in the United States. How much of that is 

happening? 

Mr. DEVILLE. I will start. Actually, both by volume and by principal, U.S. to U.S. is—it is the highest in both, at least at Western 

Union. And U.S. to Mexico is second. And then you can imagine 

U.S. to China, U.S. to India. 

Mr. DAVIDSON. Right. And so do you have a way to track U.S. 

citizen to U.S. citizen? Or do you track U.S. person, non-U.S. citizen to— 

Mr. DEVILLE. We certainly track the transactions, just as we 

would if they were cross-border transactions, we track them in the 

28 

United States. As I mentioned earlier, there are ID thresholds at 

which review—we are actually stricter than what the law requires. 

And then we also have an IBM product called Galactic ID, which 

affixes a number to every customer, and it has these incredibly 

complex algorithms. But if a customer uses a false ID but the same 

phone number, it would unite those together. So we try to get—it 

gives us a unique identifier to every customer, not perfect, but it 

does. 

Mr. DAVIDSON. Thank you. Does your system allow you to discern 

and differentiate between U.S. citizens and non-U.S. citizens? 

Mr. DEVILLE. No, there is no ability to do that, short of requesting a passport. But most— 

Mr. DAVIDSON. So you create some form of identity, unique identifier to the citizen. I guess my question is, do you assume that the 

risk posed by a U.S. citizen is equal to the risk posed by a nonU.S. citizen? 

Mr. DEVILLE. In the risk calculation, there is no differentiation 

made. And of course, when you think of non-U.S. citizens, I know 

there are certainly illegal aliens here, but then there are also foreigners who are here under visa. So there is no way to distinguish 

those in terms of risk. 

Mr. DAVIDSON. And any other products you are using? 

Mr. OPPENHEIMER. The only other thing I would add, as part of 

the discussion around domestic transfers, we do all international 

money transmission, but it is really important to understand the 

benefit of having a digital platform, because when you take out the 

brick-and-mortar component, customers have already gone through 

that KYC system to be part of the financial system, and then there 

is a lot of innovation that is happening to be able to offer customers 

better solutions. 

So the more that I think Congress can encourage innovation and 

getting people into the formal banking system, the less risky it is. 

Mr. DAVIDSON. I guess I am curious about the risk—at the most 

basic level, do U.S. citizens have an increased confidence of privacy? Citizenship is differentiated in that respect. In terms of risk, 

if you have somebody who is known to already be illegal, we can 

say that their respect for the law is at least different from the getgo. And it seems that your current products don’t differentiate. I 

guess the next question I have relates to international. 

And so, Mr. Cassara, Mr. Paul, you guys may be able to comment. A lot of the money transfers that are happening outside the 

United States are moving through mobile telephone networks, particularly in Africa. U.S. persons aren’t necessarily involved in that, 

so some of the current provisions that apply here don’t. What best 

practices are you aware of that are going on there that give us 

some insight into the illicit transfer of money there? 

Mr. PAUL. Thanks for the question, Congressman. Mobile payment systems have been more or less useful in different jurisdictions. And a lot of that has to do with the telecommunications regulation of the jurisdiction and the interoperability of the networks 

within the jurisdictions. So Mr. Oppenheimer can probably talk a 

bit more about M-Pesa, which has been increasingly valuable and 

useful in Kenya. 

29 

In Somalia, for example, I have seen a couple of different mobile 

payout systems, all of which incredibly useful for identifying customers, all of which are incredibly useful for efficient payouts, but 

aren’t interoperable with one another, so they are of limited value. 

Mr. DAVIDSON. Thanks. My time has expired. I guess my last 

question would be, because it is somewhat sensitive, if you who are 

willing would respond to any gaps that you see in our current system, whether it is inside the United States or with our ability to 

track outside the United States transfers, that would be terrific. I 

would much appreciate it. 

Mr. Chairman, I yield back the time I no longer have. 

Mr. DAVIDSON. The gentleman’s time has expired. The Chair now 

recognizes the gentlelady from Utah, Mrs. Love. 

Mrs. LOVE. Thank you all for being here today. I know we have 

talked a lot about terrorist financing, which is incredibly important. But I would like to focus on a different aspect of illicit financing, namely activities pertaining to human and sex trafficking. 

Could you tell me a little bit about the work that Western Union 

is doing in regards to sex trafficking? In other words, we had somebody from your office come in and talk to us a little bit about how 

transactions or certain things are set up that raise red flags when 

it comes to those specific issues. Would you mind telling me a little 

bit about that? 

Mr. DEVILLE. Certainly, Congresswoman Love. And it is one of 

the things that we take the most seriously. In August of 2013, 

Western Union partnered with DHS on the Project Blue campaign, 

which is designed to combat human trafficking. I know you are familiar with it. 

We have also, specifically to your question, developed transaction 

controls that are designed specifically to detect transactions that 

are possibly related to exploitation of children. I’ll give you an example. Again, I will be vague, because we don’t like to reveal our— 

Mrs. LOVE. Right, you don’t want to let it out. 

Mr. DEVILLE. —controls, because right away, the bad guys find 

out. 

Mrs. LOVE. I get it. 

Mr. DEVILLE. But these RTRA rules I mentioned, the up-front 

rules in my opening statement, there are three that come to mind 

in the Philippines. A payee is stopped from receiving more than a 

certain number, and we have a fixed number of transactions in a 

rolling period. I won’t say the period of time. 

We also stop the transaction if a payee is receiving more than 

a certain number of transactions from senders in a rolling period. 

And then we also do it by dollar amount and transaction amount. 

And there is one example that comes to mind in the Philippines, 

as well, where information we gave—it wasn’t solely us, but it was 

also two other banks—actually led to the local authorities kicking 

down a door and rescuing children. It was a photo shop where they 

were being held, and then people were paying online to view the 

children, as you can imagine. So that was particularly gratifying. 

And there was some media on it, as well. 

Mrs. LOVE. Is there a way that you interact with law enforcement that is different in the realm of human trafficking than in regards to other, for instance, terrorist activities? When you are reVerDate Nov 24 2008 13:42 May 01, 2018 Jkt 029451 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\29451.TXT TERI
30 

acting to law enforcement, do you see specific behaviors and react 

with the local law enforcement a little differently? 

Mr. DEVILLE. We established something—I will briefly describe— 

it is called our rapid response team within our financial intelligence unit. And within—there are really two categories to which 

it will respond. One is exactly the two you mentioned, the terrorist 

attack, and the other is child trafficking, human trafficking. 

And as soon as a suspect is identified, within 48 hours the rapid 

response team will have scrubbed all the transactions in the Western Union system across all our platforms to look for connections. 

And we also take it out another layer, as well. And those SARs get 

priority, and we also have a formalized procedure where we will 

pick up the phone and call law enforcement. DHS is usually the 

agency involved in child trafficking, and other agencies in terrorist 

finance. And we will call them to alert them to the information we 

have found. We don’t wait for a subpoena. 

Mrs. LOVE. Okay. Do you think that there is anything that we 

could be doing or doing better to disrupt and stop the money flow 

that is surrounded around human trafficking? 

Mr. DEVILLE. The best thing, Congresswoman, would be—it is 

similar to on the OFAC side with terrorist names—if law enforcement can get us names and identifying information, we will scan 

all our transactions. We don’t wait for that. It is just like with terrorist financing. You stop and think about it. We certainly have the 

lists from the government against which we screen and various 

governments around the world, but we are also—and we accept 

this burden—we are also expected to find things that law enforcement cannot based upon transaction analysis. 

Mrs. LOVE. Right, and you are missing parts of the puzzle, also. 

Mr. DEVILLE. Yes, exactly. 

Mrs. LOVE. Yes. 

Mr. DEVILLE. Even things they can’t find. But we readily accept 

that responsibility. 

Mrs. LOVE. Mr. Oppenheimer, I know that Remitly has been 

doing some work also surrounding that. Can you tell me just briefly if there are any ways or any type of set-ups or transactions that 

you realize have popped up that put up a red flag for you, also? 

Mr. OPPENHEIMER. Yes, I think that we have built our system 

from day 1 to detect—I am really happy you brought up this 

issue—all sorts of nefarious activity. And similarly, we try to track 

that proactively, work with law enforcement if we see anything, 

such that we are a partner in being part of the solution. 

Mrs. LOVE. Okay, thank you so much for being here. At this 

time, I yield back. Thank you. 

Chairman PEARCE. The gentlelady’s time has expired. The Chair 

now recognizes the gentleman from Washington State, Mr. Heck, 

for 5 minutes. 

Mr. HECK. Thank you, Mr. Chairman. So I was sitting here 

thinking about somebody in my hometown of Olympia, Washington, who goes down to the credit union for a remittance, which 

they may be doing business with Remitly, who has a correspondent 

bank relationship that then sends it overseas where it is maybe 

met by another correspondent bank before it is transferred to a 

bank. And I just wondered in the spirit I think it was of Mr. 

31 

Oppenheimer’s streamlining observation, what is the particular 

value add of requiring multiple SARs for the same transaction? 

Elemental question, but I don’t really understand, why do we 

need—in that instance, we would have three domestically. What is 

it that we really get out of that, that helps us achieve what we are 

trying to do here? Anybody? 

Mr. DEVILLE. Thank you, Congressman. I assume you mean multiple SARs filed by multiple financial institutions? 

Mr. HECK. Correct. 

Mr. DEVILLE. This is something I have talked to my colleagues 

about. And there are duplicative SARs certainly being filed on the 

same individuals. Now, law enforcement would say—and there is 

certainly some validity to it—that you and the financial institutions don’t see the whole picture. There might be a small dollar 

amount SAR at Western Union, a small one at Citi, a small one 

at PayPal, but combined together to law enforcement, they do, in 

fact, have value. 

The other thing is that under 314(b), we could share that information, and that is a value of 314(b). So to answer your question, 

often there probably is no value in duplicative SARs, but there are 

instances where they are needles in a haystack that law enforcement can bring together. 

Mr. HECK. But is it not possible for that data to be rolled up into 

the single SARs by one of the institution when there are multiple 

financial institutions involved? 

Mr. DEVILLE. There is a consortium that we have recently been 

invited to that tries to do that very thing, and it has gained permission from FinCEN for a pilot program. Another example is— 

somewhat related is, we have—are about to start a terminated 

agent database, where we will—with FTC and FinCEN authority 

share when a Western Union agent is terminated by us—they 

could go across the street and become a Moneygram agent or vice 

versa. We have secured permission to have a database that we can 

query when signing up a new agent to make sure it is not one that 

Moneygram has recently suspended. And we thank FinCEN and 

the FTC for allowing that. 

Mr. HECK. So are there other countries that do things better 

than we do that strike, in Mr. Perlmutter’s words, the appropriate 

balance between the issues of national security and counterterrorism and efficiency? Do we have anything to learn from any other 

countries’ practices in this regard? 

Mr. DEVILLE. Honestly, I would say that the information sharing, particularly in terrorist finance in Europe, is far less than in 

the U.S. We really see duplicative SARs. After the Paris attacks, 

for instance, and we have spoken about this publicly, so it is okay. 

And we diagramed it where we receive from a dozen different entities in Europe a duplicative request where it was clear to us they 

were not talking to each other. 

It is much harder to de-conflict in those situations. And you can 

file a voluntary SAR, for instance, in the United States. In many 

countries, you cannot. So certainly improvement to be made here, 

but I find it even more problematic in Europe. 

Mr. HECK. Mr. Oppenheimer, you said earlier about considering 

raising the threshold. I have to tell you, it has been my observation 

32 

that once a threshold is enacted, it is the most stubborn thing in 

the world. I think of CTRs 1972, the index for inflation, holy cow. 

I also think about SIFIs. And there are a considerable number of 

voices, myself included, who would argue that what we ought to be 

doing in the area of SIFIs is looking more qualitatively and not 

quantitatively, i.e., what is the risky behavior you are engaged in? 

Is that at all a parallel here? Is it—should we have thresholds at 

all? Or is this about qualitative risk assessment? 

Mr. OPPENHEIMER. I appreciate the question, and I think that 

the important thing with things like the travel rule, as you mentioned, it has not, I think, with the travel rule been updated since 

1995. And so going back and looking at what those thresholds are, 

in my written testimony, I talk about decreasing the threshold to 

$1,000. We have to collect right now SSN and passport for any 

transaction over $3,000, decreasing that to $1,000, but then actually doing KYC on those customers, and doing a more in-depth 

identification process. I think that certainly those rules can be revisited, which would be a good thing for national security. 

Mr. HECK. Thank you. I yield back, and I appreciate the opportunity to participate, Mr. Chairman. 

Chairman PEARCE. The gentleman’s time has expired. I would 

like to thank each one of you for your testimony today. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

Seeing no other participants, this hearing is adjourned. Thank 

you. 

[Whereupon, at 4:20 p.m., the hearing was adjourned.] 

(33) 

A P P E N D I X 

July 18, 2017 

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Chairman Pearce, Ranking Member Perlmutter and members of the House Financial Services 

Subcommittee on Terrorism and Illicit Finance, thank you for the opportunity to testify today. It 

is an honor for me to be here. 

"Without money, there is no terrorism." 

This simple truism was recognized early on. A few days after the deadliest terrorist attack in 

U.S. history, President George W. Bush stated, "Money is the lifeblood of terrorist operations. 

Today we are asking the world to stop payment." 

Almost sixteen years after the September II attacks, we arc meeting here in part to ask, "Has 

America and the world stopped payment?" 

The answer is not simple, particularly when it comes to both formal and informal remittance 

systems. Unfortunately, we have seen how successful terrorist and organized criminal groups 

diversify their funding sources and methods. These include remittance networks. Moreover, our 

adversaries are creative. They adapt to our countermeasures. 

I am joined by colleagues with tremendous expertise in the formal remittance industry. So, l 

would like to primarily address my remarks to informal remittances sometimes known as 

informal value transfer systems (IVTS), parallel banking, underground banking, or sometimes 

just "hawala." 

Long before the September 11 terrorist attacks, I was concerned about informal value transfer 

and remittance systems. I investigated some of these networks in Europe and the Middle East. 

Through subsequent books and articles I have been trying to draw attention to them. These 

systems exist here in the United States and though regulated as money services businesses after 

9/11,' for the most part, continue to operate under the radar screen of many U.S. law enforcement 

and regulatory bodies. 

I would like to briefly discuss the magnitude of the problem; how hawala and similar systems 

operate; why they are attractive to their customer base; how hawala brokers settle accounts; the 

futility of our current countermeasures, worrisome links to terror finance and criminality; 

vulnerabilities; and some suggested steps forward. 

Magnitude 

There are an estimated 244 million migrant workers around the world. ii Globalization, 

demographic shifts, regional conflicts, income disparities, and the instinctive search for a better 

life continue to encourage ever more workers to cross borders in search of jobs and security. 

Many countries are dependent on remittances as an economic lifeline. Although estimates vary, 

according to the World Bank global remittances may have reached approximately $575 billion in 

2016.;;; Western Union, Money Gram, Ria Money Transfer, Dahabshill arc just a few of the 

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well-known companies that provide official remittance services for the world's migrants. Of 

course, banks and non-bank financial institutions are also used. In 2013, some of the top 

recipients for officially recorded remittances were India (an estimated $71 billion), China ($60 

billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($20 

billion). Pakistan, Bangladesh, Vietnam, and the Ukraine were other large beneficiaries of 

remittances. As a percentage ofGDP, some of the top recipients were Tajikistan (48 percent), the 

Kyrgyz Republic (31 percent), Lesotho (25 percent), and Moldova (24 perc$200ent).iv 

In 2015, approximately $133,552,000,000 in remittances was sent from the United States to 

other countries. Top recipients include Mexico, China, the Philippines, and Vietnam.v 

The above are estimates of what is official(v remitted. Unofficially, nobody knows. However, 

the International Monetary Fund believes, "Unrecorded flows through informal channels are 

believed to be at least 50 percent larger than recorded flows."vi So, using the above World Bank 

and IMF estimates, unofficial remittances may be greater than $850 billion per year, with a 

substantial portion of that originating from the United States. 

Informal channels operate outside of the ironically labeled "traditional" channels. It's ironic 

because for most of the migrants involved, the alternatives to Western-style or formal 

remittances are very traditional for them. 

Infom1al remittances are sometimes touted as a new phenomenon and a symptom of the 

emerging borderless world. They have also erroneously been labeled ·'a measure of success" in 

our efforts to combat international money laundering and terrorist finance due to our crack down 

on illicit money moving through formal banking channels. Yet diasporas and remittances have 

existed since ancient times. For example, the Chinese practice offei-chien, or "flying money," 

dates back to the T' ang Dynasty ( 618-907 AD). vii 

The following is a partial list of worldwide informal remittance systems. The names vary based 

on a number of factors including geographical locations and ethnic groups: 

• Hawala- India, Afghanistan, Africa, the Middle East, Gulf, parts of the Americas 

• Hundi -Pakistan, Bangladesh 

• Undiyal - Sri Lanka 

• Havalch- Iran 

• Door-to-door I padala- the Philippines 

• Black market currency exchanges Nigeria, South America, Iran 

• Stash houses I casas de cambio Latin America 

• Phoei kuan- Thailand (Teochew Chinese) 

• Hui kuan China- (Mandarin Chinese) 

• Fei-chien "flying money" China 

• Ch' iao hui -overseas remittances--- (Mandarin Chinese) 

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• Chop shop foreigners sometimes use this term for one of the Chinese systems 

• Chili-banking (refers to the "chit" used for receipt or proof of claim in transactions; 

introduced by the British in China) 

The two largest underground remittance systems are hawala (and its various sister systems such 

as hundi and undiyal) and the Chinese fei-chien (and its corollaries). They arc both global in 

scope. While there arc no reliable estimates as to the magnitude of these two informal 

remittance systems, both are probably responsible for hundreds of billions of dollars in 

unregulated (and non-taxed) money transfers a year. viii 

Although diverse, alternative remittance systems are found throughout the world, most share a 

few common characteristics. The first is that they all transfer money without physically moving 

it. Another is that they all offer the three C's: they are certain, convenient, and cheap. They are 

all ethnic based. They are sophisticated and efficient. And finally, historically and culturally, 

most alternative remittance systems usc trade as the primary mechanism to settle accounts or 

balance the books between brokers. 

I would like to emphasize that I have the utmost respect tor these systems. 

The overwhelming percentage of money transfers generated by the nse of these informal 

remittance systems is benign. They are primarily used to remit a portion of migrants' earned 

wages back to their home countries to support their families. We, of course, do not wish to 

interfere with this process. 

However, because these systems are opaque and based on trust, they avoid our primary antimoney laundering and counter-terrorist finance (AMLICFT) countermeasures. As Osama bin 

Laden once said, jihadists are aware of the "cracks'" in our Western financial system. ix Informal 

remittances arc not jnst a crack but a Grand Canyon. There is no doubt that in addition to 

remitting wages, they are also abused by criminal and terrorist organizations. 

How They Operate x 

The definition of hawala was concisely expressed during the 1998 U.S. federal trial of Iranian 

drug trafficker and money launderer, Jafar Pour Jelit Rayhani and his associates. During the 

trial, prosecutors called hawala "money transfer without money movement." That is, a broker on 

one side of the transaction accepts money from a client who wishes to send funds to someone 

else. The first broker then communicates with the second broker at the desired destination who 

distributes the funds to the intended recipient (less small commissions at both ends). The money 

does not physically move from Point A to Point B. The key ingredient is trust. Most brokers are 

of the same ethnic group and many arc members of the same family, tribe, or clan. 

To illustrate how the hawala remittance process works, we will use a typical example. Ali is an 

Afghan national, recent immigrant, and a construction worker in Your District. (Note: While in 

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this example Ali is Afghan, he could just as easily be Pakistani, Iraqi, Syrian, Somali, North 

African, Lebanese, Indian, Chinese, etc.) Ali emigrated to the United States years ago and earns 

money that helps support his family. He periodically sends a portion of his salary back to his 

elderly father, Jafar, who lives in a village outside of Kandahar in southern Afghanistan. To 

make his monthly transfer- usually about $200 - Ali uses hawala. This is very common in 

Afghanistan. About 30 percent of its population is externally and internally displaced, and 

remittances from outside of Afghanistan arc received by about 15 percent of the rural population. 

Hawala has been described as the de facto national banking system of Afghanistan. 

If Ali went to a bank in Your District to send the money home to his father, he would have to 

open an account. He doesn't want to do that for a number of reasons. First, Ali grew up in an 

area of the world where banks are not common. He is not used to them and doesn't trust them. 

Next, Ali has little faith in governments and wants to avoid possible scrutiny. Many immigrants 

believe the government is monitoring their immigration status and/or will make them pay taxes. 

He also doesn't want the U.S. government to screen his money transfers to Afghanistan. In 

addition, although Ali has lived in Your District for a few years, he is still a bit intimidated. His 

English is marginal. He is only semi-literate (the literacy rate in Afghanistan is quite low) and 

cannot fill out the necessary forms. Moreover, banks charge their customers assorted transfer 

fees and offer unfavorable exchange rates. If Ali only earns a little money and is sending $200, 

bank transfer fees of I 0 percent or more are quite substantial. 

Generally speaking, the average cost of transferring funds through an alternative remittance 

system such as hawala between major international cities is about 2-5 percent of the value 

transferred. (Globally, the cost of sending $200 through formal remittance companies averaged 

7.45 percent in the first quarter of2017, although this was significantly higher than the 

Sustainable Development Goal (SDG) target of3 percent.';) The price differential is in large 

part due to the fact that hawaladars (hawala brokers) generally don't have large brick and mortar 

businesses. Since they operate in the shadows, taxes and regulatory fees are minimal as well as 

administrative and personnel costs. Of course, prices in both the formal and informal remittance 

industries are influenced by a variety of factors. Hawala networks are most competitive when 

they operate in areas where banking systems and overt money remittance chains find it difficult, 

expensive, or high risk to operate- particularly in areas where our terrorist adversaries operate. 

Delivery of a bank transfer to Jafar would pose additional problems. The number oflicensed 

banks in Afghanistan is still small. They are used by only about ten percent of the population."' 

Particularly in a poorly secured area such as Kandahar, Jafar docs not want to leave his village 

home and travel a far distance to a bank. 

In light of these problems and concerns, Ali uses a hawaladar in Your District who is a member 

of his extended clan and family. He feels comfortable dealing with him. The hawaladar also 

owns and operates an "import/export" company in Your District. The hawaladar completes the 

transaction for a lower commission than banks or money service businesses charge. In addition, 

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he obtains a much better exchange rate. Delivery direct to Jafar's home in the Kandahar area 

village is also included in the price. In fact, in certain areas of the world, hawala is advertised as 

"door-to-door" money remitting. 

Ali gives the $200 to the hawaladar in Your District that he wants to transfer. The hawaladar 

takes his small commission. Ali is not given a receipt because the entire relationship is based on 

trust. This is a different kind of"know your customer" (KYC) procedure. For purposes of 

illustration, particularly if this is a first-time transfer, Ali may be given a numerical or other 

code, which he can then forward to Jafar. The code is used to authenticate the transaction. But in 

the nature ofhawala networks, codes are not always necessary. As opposed to the often-lengthy 

formal operating requirements of bank-to-bank transfers, this informal transaction can be 

completed in the time it takes for the hawaladar in Your District to make a few telephone calls or 

send a fax or e-mail to the corresponding hawaladar in his network that handles Kandahar. 

Hawaladars maintain very few records, offering customers near anonymity. They only keep 

simple accounting records, and even these are often discarded after they settle-up with one 

another. This means the paper trail is limited or nonexistent, making transactions very difficult to 

track for law enforcement. Even when records are kept, they are often in a foreign language or 

code, making them very challenging for Western authorities to decipher.xiii 

Although some transactions arc arranged directly between the two hawaladars involved, many 

are cleared or pass through regional hawala hubs such as Dubai, Mumbai, Karachi, and Kabul. 

So generally speaking, money can be delivered directly to Jafar's home within 24 hours and the 

transaction will not be scrutinized by either U.S. or Afghan authorities. 

The above scenario with Ali in Your District could just as easily take place in Minneapolis with 

its large Somali community, northern Virginia with its large Indian community, or Detroit with 

its large Arab community. 

Similarly, hawala transfers are very common in London, Frankfurt, Dubai, Damascus, Baghdad, 

Tehran, Karachi, Zanzibar, Durban, the Colon Free Tmdc Zone in Panama, the Tri-Border region 

of South America, and many other locations around the world. For example, according to the 

U.S. State Department 2015 INCSR report in the West African country of Gabon, "There is a 

large expatriate community engaged in the oil and gas sector, the timber industry, construction, 

and general trade. Money and value transfer services, such as hawala, and trade-based 

commodity transfers are often used by these expatriates, particularly the large Lebanese 

community, to avoid strict controls on the repatriation of corporate profits."xiv 

Settling Accounts 

Hawaladars eventually have to settle their accounts with each other. Frequently, the close 

relationships between the brokers help facilitate the settlement. Remember, the key ingredient in 

hawala is trust. So kinship, family and clannish ties often enable the settlement process. For 

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John Cassara July 18,2017 

example, in Afghanistan, intermarriages between the families ofhawaladars arc common 

because they help cement confidence between the parties. Brothers, cousins, or other relations 

often operate in the same hawala network. Lebanese family members that operate in the same 

hawala networks can be found in Beirut, Dubai, the Colon Free Trade Zone, and various 

locations in Africa. Yet even though they may have familial or other ties, they are still in 

business to make money. Somebody is running a surplus and somebody a deficit. Payments go 

in both directions. For example, remittances may flow into South Asia from the United States 

and Europe but money and various goods flow back as welL Periodically, accounts must be 

settled. Generally, money transfers between hawaladars arc not settled on a one-to-one basis but 

arc bundled over a period of time after a series of transactions. A variety of methods are used to 

make payments and settle the accounts. 

Trade: From the earliest times - betore modem banking and before modem monetary 

instruments- trade based value transfer was used between hawala brokers to settle accounts and 

balance their books. The use of trade remains widespread. Settling accounts through 

import/export clearing is somewhat similar to bilateral clearing using bank transfers, but it uses 

the import/export of trade goods. That is why many import/export concerns are associated 

directly or indirectly with hawaladars. If a debt needs to be settled, hawaladar A could simply 

send goods to hawaladar B such as gold, electronics, or a myriad of other trade items. Or at the 

end of a reporting period, if an outstanding balance exists between hawaladar A in Somalia and 

hawaladar B in Dubai, B can use, for example, a Japanese bank account to purchase cars for 

export to Somalia. Once the cars arrive, they would be transferred to A to settle the debt and/or 

sell them for profit. The transaction would clear the debt between the two hawaladars. 

Invoice fraud and manipulation is also widespread. To move money/value out of a country, a 

hawaladar or his agent will import goods at overvalued prices or export goods at undervalued 

prices. To move money/value in, a hawaladar or his agent will import goods at undervalued 

prices or export goods at overvalued prices. This type of procedure is called counter-valuation. 

Most other worldwide alternative remittance systems or informal value transfer networks arc 

similarly based on trade. Historically and culturally, trade is still the preferred method of 

account settlement xv 

Banks: Most major hawala networks have access to financial institutions either directly or 

indirectly. A majority of international hawaladars have at least one or more accounts with 

formal financial institutions. Bi-lateral wire transfers between brokers to settle accounts are 

sometimes used. If a direct wire transfer is made between international brokers, hawaladar A 

would have to wire money directly to hawaladar B's account to clear a debt This could be 

problematical because the banks' foreign exchange rate procedures would be triggered. So in 

this case, hawaladar A might choose to deposit the funds into B's foreign account. 

Cash couriers: Direct cash payments are also used to settle debts. This is particularly true in 

areas of the world that have cash based economies. Sometimes overlooked is that hawala 

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networks also operate domestically between states and provinces. For example, in Afghanistan, 

hawala networks arc found in each of the 34 provinces. Periodically, the brokers settle accounts 

and often use cash. Hawala couriers have been identified transporting money within Afghanistan 

and across the border into Pakistan. Cash couriers representing hawala networks also frequently 

travel from Karachi to Dubai to settle accounts. 

Other methods: Over the last few years, there arc indications that new payment products and 

services (NPPS)""i are being added to the mix: virtual currencies and transfers, mobile payments, 

and other forms of person to person (P2P) money transfers. 

Although open source reporting is very sparse, there is reason to believe that some underground 

remittance networks are now using virtual currencies, including bitcoins. For example, Indian 

police raided a money exchanger/hawaladar that allegedly used bitcoins.xvii Over time, the usc 

of virtual currencies could potentially have a great impact on the haw ala settlement process. 

Moreover, I can envision how an enterprising hawaladar will acquire bitcoins and use them not 

only to settle accounts between fellow brokers, but also usc them as cash-out service for their 

clients. Cross border mobile payments network for emerging markets are currently processing 

air-time top-ups and money transfers in multiple currencies in real-time for duly licensed 

financial institutions, organizations, and merchants. And since most hawaladars have side 

businesses, bitcoins could also be used to purchase his product for example, mobile phone 

credits. 

In many areas of the world, mobile payments or M-Payments- particularly via the use of cell 

phones - are an increasingly popular vehicle for the remittance of wages. It is also quite possible 

forM-Payments to be used in the settling of accounts between underground money remitters 

including hawaladars.xviii M-Payments are recognized as a growing money laundering threatparticularly in areas of the world where our terrorist adversaries operate. xix 

Etisalat Afghanistan, the Afghan telecommunications company, is now offering "M-Hawala." 

From its website, Etisalat Afghanistan boasts that "M-Hawala is an innovative mobile financial 

services solution that will enable Etisalat Afghanistan's customers to purchase airtime directly 

from their handsets, send money from their mobile phones to family and friends, pay their bills 

via their mobile phones, purchase goods and services from shops and or retail outlets and deposit 

or withdraw cash from Etisalat authorized M-Hawala distributors or Etisalat partner banks." xx 

Over the last few years P2P money transfers have grown exponentially. There are many 

domestic and global services (some are interoperable) that make it easy to transfer money from 

one party to another via a phone number or email. Parties can send cash from an attached digital 

wallet account, or a linked debit card, bank account, or credit card. It is also easy to receive 

money; some services offer payments in brick-and-mortar stores as well. 

In many respects, the growing use ofP2P could mitigate the widespread use ofhawala for 

traditional remittance purposes. I am not aware ifP2P transfers are being used in the hawala 

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settlement process. If it is occurring, I suspect it is happening overseas and is linked to other 

fom1s ofM-Payments (see above). 

Consequently, one of the challenges to law enforcement is where regulatory regimes have not 

kept pace with the rapidly evolving business models and payments schemes. 

Worrisome Links 

Unfortunately, hawala is abused by terrorists. Hawala networks are used by ISIS in war-tom 

Syria and lraq.xxi Hawala is used in Europe to support terror groups. For example, a network of 

250 to 300 shops - such as butchers, supermarkets and phone call centers - run hy mostly 

Pakistani brokers across Spain have supported ISIS and the al-Qaeda-affiliated Nusra Front 

through their hawala operations.xx>i There are reports that hawala was used to help finance the 

2015 ISIS attacks in Paris. xxlll 

Ilawala is widespread in South Asia and is heavily used by drug warlords and both the Afghan 

and Pakistani Taliban. Hawala networks exist in other troublesome spots where our adversaries 

operate such as the Hom of Africa.xxiv Hawala is "central'' to Libya's underground economy.xxv 

Boko IIaram's funding is likely to withstand most restrictions on accessing the banking sector, as 

it uses hawala and cash couriers to move funds, some of which originates from supporters 

outside Nigcria!xvi 

Media reports indicate a surge in hawala funding from charity organizations in the Persian Gulf 

to madrassas and seminaries in the Kashmir Valley used to indoctrinate local youth!xv;; 

Iran, a U.S. designated state sponsor of terror, also uses hawala -locally known as havaleh. 

The underground money transfer system has also been used to circumvent sanctions. xxviii 

Reportedly some financial exchanges between Iran and Pakistan are routed through hawala 

instead ofthc legal channels of the Asian Clearing Union. xxix 

Iran's merchant community makes active use of money and value transfer systems, including 

hawala and moneylenders. Many hawaladars and traditional bazaari are linked directly to the 

regional hawala hub in Dubai. Over 300,000 Iranians reside in Dubai, with approximately 8,200 

Iranian-owned companies based there. The trading companies are instrumental in settling 

accounts between hawaladars (see above). There are reports that billions of dollars in Iranian 

capital have been invested in the United Arab Emirates, particularly in Dubai real estate. Iran's 

real estate market is also used to launder money. xxx 

The United States is not immune. Hawala has repeatedly been used to finance terror attacks 

against the U.S., including the 1998 bombing against our embassy in Nairobi, attacks against our 

troops in Afghanistan and Iraq, and the 2010 Times Square bombing in New York City. xxxi In 

2013, a federal judge in San Diego sentenced three Somali immigrants for providing financial 

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support to al-Shabaab--a designated terrorist organization. Evidence presented during trial 

showed that the defendants conspired to transfer funds to Somalia via hawala to wage jihad."'xii 

Hawala is often used in other criminal activity. For example, in 2013 a naturalized U.S. citizen 

and his wife were indicted for medical billing fraud in Texas, and for sending the illicit proceeds 

to Iran via hawala.xxxiii In November, 2015, authorities in Los Angeles announced they had 

broken up an international hawala network with ties between Canada, India, the United States 

and other locations that moved millions of dollars for the Sinaloa drug cartel aud other criminal 

groups.xxxiv And international criminal organizations from sex traffickers in Nigeria, fraudsters in 

Eastern Europe, to drug traffickers in Southeast Asia use hawala. Many of these criminal 

networks impact the U.S. 

Countermeasures and Steps Forward 

Registration 

Similar to Western Union, Pay-Pal, casas de cambio, and "Mom and Pop'' check cashing 

services, Treasury's Financial Crimes Enforcement Network (FinCEN) classifies hawala as a 

money services business or MSB. 

As a result, hawala and similar money transfer systems are legal as long as the operation is 

registered with FinCEN and meets individual state licensing requirements. Unfortunately, the 

regulatory response hasn't worked. According to the 2007 National Money Laundering Strategy, 

"While the exact number of money service providers in the United States is difficult to 

determine, estimates suggest that fewer than 20 percent ofMSBs are registered with FinCEN. It 

is not known what percentage of unregistered MSBs are exempt from registration, .due for 

example to their low business volumes or agent status. Regardless, the result is that the vast 

majority of MSBs operate without direct Federal regulatory supervision."xxxv 

Hawaladars are also supposed to file Suspicious Activity Reports (SARs). I believe very few do. 

Should we be surprised? Hawala is based on trust. Why would a hawaladar file a suspicious 

activity report on an extended family, tribe, clan, or ethnic group member? 

The IRS/Criminal Investigation Division has the law enforcement mandate to ensure MSB 

compliance. Unfortunately, due to budget cuts and manpower constraints the IRS has been 

unable to conduct necessary assessments or compel MSBs to register. Mandated "outreach" 

programs that are designed to advise informal remittance networks of their registration and 

reporting responsibilities have also fallen short. 

Before a strategy for enhanced MSB registration can be formulated I suggest this committee 

request the following information from FinCEN: 

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John Cassara July 18,2017 

I. Over the last five years, how many hawaladars, fei-ehien brokers, and other similar 

informal remittance operators have actually registered with FinCEN? Please ask that the 

registration totals be listed by year. 

2. Of those that have registered, how many SARs have been filed? Per year? 

3. A FinCEN request should be made to the Egmont Group of Financial Intelligence Units 

(FlUs) to poll its international members regarding questions I and 2 above. For the 

Egmont FlUs, a precursor question will be whether or not registration is required for 

hawala in their jurisdiction and, if so, under what authority. 

4. Request that FinCEN estimate the number of informal unregistered money remitting 

entities currently in operation in all 50 states. 

5. For the last five years, have FinCEN and the IRS detail their "outreach" programs to 

ethnic communities throughout the United States regarding the obligation to register and 

license money remitters. 

6. Ask IRS/CI what it would need in additional budget and personnel to launch an 

aggressive campaign that targets unregistered and unlicensed money remitters. 

7. Ask the FinCEN Intelligence Group to provide, on a classified basis as required, 

information related to the instance of emerging payments such as bitcoin and other virtual 

currencies used as hawala systems or financing. 

8. Request that FinCEN provide any statistics or case examples related to its 314 program 

regarding inquiries related to hawala and terrorist financing, on a classified bases, as 

required. 

Accountability 

The U.S. government's 2007 Inter-Departmental National Money Laundering Strategy report's 

goal #2 is to "Enhance Financial Transparency in Money Service Businesses." The laudable goal 

contains eight ''action items;" most are pertinent to this hearing. I urge Congress to exercise its 

oversight responsibilities and determine whether or not the action items were fulfilled and hold 

the departments, offices, and bureaus involved responsible if they have not. 

Examine the "back door" of Trade 

Hawaladars are most vulnerable to law enforcement, customs, and intelligence agencies when 

they settle accounts. As discussed above, historically and culturally, in many parts of the world 

settling accounts via trade-based value transfer is the preferred technique. One does not 

understand hawala and underground remittance systems unless one understands this concept. 

Particularly in areas where our adversaries operate, examining trading records for signs of 

"counter-valuation" or a method of settling account.~ between hawala traders could be the 

backdoor into their operations. Systematically cracking down on associated trade fraud could 

also be a boon to revenue strapped governments. (Sometimes offering the "carrot" of increased 

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John Cassara July 18,2017 

revenues to cash-strapped governments is often more effective than the "stick" of heavy handed 

enforcement.) 

In 2003 I proposed the creation of Trade Transparency Units or TTUs to spot trade anomalies 

that could be indicative of customs fraud, money laundering, or even undeq,>round financial 

systems such as hawala.xxxvi The concept is now part of our national anti-money laundering 

strategy. To date there are approximately 16 international TTUs. Many additional countries 

have expressed interest in joining the TTU network. Congress should create a specific line item 

that funds the expansion of the U.S. TTU to include additional dedicated personnel and advanced 

analytics. 

Over the last few years, there has been an explosion in trade and related data. Advanced 

analytic programs arc available. Trade anomalies can be identified such as over-and-under 

invoicing by making a comparison to market norms. xxxvii We could specifically risk-score the 

probability of informal value transfer /counter-valuation. Analytics are available to help over 

worked analysts and investigators prioritize trade-based money laundering (TBML)-related 

investigations and help with investigative decision making. For example, we can apply 

subjective logic analytics to the high levels of uncertainty inherent in hawala networks. 

Potentially models could be built to help prioritize which cases of potential TBML should be 

pursued. 

Funds should also be provided to the U.S. TTU and the State Department's Bureau of 

International and Narcotics Affairs (INL) that will assist with the creation of additional foreign 

TTUs. Any funds expended will be more than made up by enhanced revenue collected by 

cracking down on associated customs fraud. 

Examine Fei-Chien 

While hawala gets attention because of its links to terror finance, the Chinese equivalent feichicn or "flying money" is undoubtedly as large and pervasive. As I outline in my book TradeBased Money Laundering: The Next Frontier in International Money Laundering 

Enforcement,uxvw fei-chien is ancient; it operates in the same manner as hawala; Chinese flying 

money is international in scope; it relies on trade to settle accounts between brokers; and while 

used primarily for remittances, the underground system has also been linked to criminal 

organizations and capital t1ight. 

I believe flying money is used by wealthy Chinese to help purchase high-end residential real 

estate (including in the United States xxxix) in probable violation of China's own capital controls. 

FinCEN is currently studying the purchase of high-end real estate and its links with money 

laundering in specific geographic areas. xxx'x 

Unfortunately, our law enforcement, intelligence, and regulatory communities have little 

knowledge or interest in fei-chien and other forms of underground Chinese remittance systems. 

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John Cassara July 18,2017 

Open source infonnation on fei-chien is limited and I fear there is little classified information as 

well. I suggest this Committee task FinCEN to develop a strategic study on the prevalence of 

Chinese flying money and how it impacts the United States. 

Data and Analysis 

Since many hawaladars and similar underground financial networks often use financial 

institutions, advanced analytics should be employed to provide the transparency that the hidden 

systems seek to deny. AML/CFT compliance software could be coded to provide red-flag alerts 

and/or risk scoring specifically for informal remittance systems such as hawala. Diverse data 

sets (financial, social media, etc.) could be examined and suspicious activity indicators installed 

for transfers to/from suspect locations, suspect businesses, individuals on designated lists, etc. 

Applicable overseas data sets could be analyzed and cross-referenced against suspect remittance 

service providers in the United States. 

The same should be done with financial institutions that deal heavily in trade finance. 

AMLICFT compliance software should be engineered to flag alerts for indications of trade-based 

money laundering which, per the above, could be the back door into underground remittance 

networks. 

Inclusion 

One of the primary reasons immigrants use informal remittances is cost. As a result, the formal 

financial system-banks and remittance services- should improve their services and reduce 

charges and fees for remittances. This will attract more customers into the formal and 

transparent banking and remittance sectors. Lower cost structures are currently one of the major 

marketing features ofM-payments in emerging markets. 

Training 

In my opinion, a staggering amount of compliance officers and those involved with trade finance 

do not understand informal remittance systems and how to recognize them. Only with specific 

insight into hawala and other similar systems will AMLICFT compliance staff responsible for 

risk monitoring be able to properly react to flagged transactions or adjust risk exposure. 

Financial institutions and MSBs that are exposed to informal remittance systems and TBML 

should do more to provide training and assistance to staff. Training in this area should be part of 

AMLICFT compliance review. 

I have firsthand knowledge that law enforcement personnel at the federal, state, and local levels 

as well as intelligence officers, regulators, analysts, etc. similarly do not understand informal 

remittance systems and TBML and do not know how to recognize them in their area of 

operations. 

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John Cassara July 18,2017 

Even though I can demonstrate how informal remittances and TBML at1ects state and local law 

enforcement, most often the consensus opinion is, "This is a federal issue and doesn't concern 

us." 

Yet it is precisely because law enforcement officers are on the front lines in their communities 

and know their operating environment well that they should notice if a local business or 

commercial activity does not make market or economic sense. For example, a normal business 

should not remain in operation for long with sporadic commercial activity or when consistently 

selling goods far above or below market norms. Numerous businesses in the U.S. and elsewhere 

are involved at the local level in TBML schemes and deal with goods that are frequently 

manipulated to transfer value. Underground remittance networks such as hawala and fei-chien 

arc found in local communities throughout our country and they often depend on trade and local 

business networks. 

Accordingly, I urge my state and local law enforcement colleagues to become more familiar with 

issues surrounding TBML and informal remittance schemes and how they affect the local 

community. Where appropriate, trade fraud and associated crimes should be part of their 

financial investigations education. The State and Local Anti-Terrorism Training (SLATT) 

program'1 funded by the U.S. Department of Justice, Bureau of Justice Assistance (BJA) is an 

excellent starting point. The SLA TT program is dedicated to providing specialized multiagency 

antiterrorism detection, investigation, and interdiction training and related services at no cost to 

our nation's law enforcement officers, who face the challenges presented by the terrorist and 

violent criminal extremist threat including the detection of opaque underground financial 

systems sometimes employed by terrorists. 

It is of paramount importance the SLATT program continues to be offered in the field. 

John A. Cassara is a former U.S. intelligence officer and Treasury Special Agent. More 

information is available at www.JohnCassara.com 

'Section 359 of the USA PATRIOT Act expanded the definition of "financial institution" to include not only a 

licensed sender of money but any other person who engages as a business in the transmission of funds, including 

any person who engages as a business in an informal money transfer system or any network of people who engage 

as a business in facilitating the transfer of money domestically or internationally outside the conventional financial 

institution system. See 31 U.S.C.5312(a)(2)(R) 

"United Nations; available online at http://www.un.org/sustainabledevelopment/blog/2016/0l/244-millioninternational-migrants-living-abroad-worldwide-new-un-statistics-revealf 

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John Cassara 

'"The World Bank; available online at: http://www.worldbank.org/en/news/pressrelease/2017 /04/21/remittances-to-developing-cou ntries-decline-for-second-consecutive-year 

July 18,2017 

''The World Bank; available online at: http://www.worldbank.org/en/news/press-release/2013/10/02/developingcountries-remittances-2013-world-bank 

'The World Bank; available online at http:/ /www.pewglobal.org/interactives/remittance-map/ 

'' Dilip Ratha, "Remittances, Funds for the Folks Back Home," International Monetary Fund; available online: 

http://www.imf.org/external/pubs/ft/fandd/basics/remitt.htm 

vH Leon ides Buencamino and Sergei Gorbunov, "Informal Money Transfer Systems: Opportunities and Challenges 

for Development Finance," November, 2002, United Nations; available online: 

http:/ /www.un.org/esa/esa02dp26.pdf 

'"'Estimates vary as to how much money is pumped annually through the global hawala network but according to 

Gretchen Peters research in Seeds of Terror, St. Martins Press, 2009, p. 170, economists put the total figure at 

about $100 billion per year. Others estimate hawala transfers approach $400 billion annually; see Jack Moore, 

Hawala, The Ancient Banking Practice Used to Finance Terror Groups, Newsweek, February 24, 2015; available 

online at: http://www.newsweek.com/underground-european-hawala-network-financing-middle-eastern-terrorgroups-307984. Because the global nature of the Chinese diaspora, I believe "flying money" is at least equal to or 

surpasses the magnitude of hawala. 

ix Chairman Evan Bayh, "Hearing on "Hawala and Underground Terrorist Financing Mechanism," November 14, 

2001; available online: https://www.banking.senate.gov/01_1lhrg/111401/bayh.htm 

'The information in this section is taken from John Cassara, Trade-Based Money Laundering: The Next Frontier in 

lnternatianal Money Laundering Enforcement, Wiley, 2015; see chapter on Hawala: An Alternative Remittance 

System, pages 49-69 and original references. 

''The World Bank; available online at: http://www.worldbank.org/en/news/pressrelease/2017/04/21/remittances-to-developing-countries-decline-for-second-consecutive-year 

'" International Narcotics Strategy Report Volume II on Money Laundering, State Department, 2015, see 

Afghanistan country report; available online at: 

https://www.state.gov/j/inl/rls/nrcrpt/2015/supplemental/239124.htm 

"''Financial Crimes Enforcement Network (FinCEN) # 33, March, 2003; available online at: 

https://www.fincen.gov/sites/default/files/advisory/advis33.pdf 

xiv International Narcotics Control Strategy Report, Volume II, Money laundering, Department of State, 2015; 

available online at: https://www.state.gov/j/inl/rls/nrcrpt/2015/vol2/index.htm See Gabon country report. 

m Trade-based money laundering being used as counter valuation for hawala and other informal value transfer 

systems is described in detail in my book Trade-Based Money Laundering; see ix 

~• See Guidance for a Risk-Based Approach: PREPAID CARDS, MOBILE PAYMENTS AND INTERNET-BASED PAYMENT 

SERVICES, Financial Action Task Force (FATF). June, 2013. 

mii "Bitcoins May be Used by Hawala Traders: Official," The Times of India, December 29, 2013; available online 

(http:/ /timesofindia.indiatimes.com/city/ahmedabad/Bitcoin-may-be-used-by-hawala-tradersOfficials/articleshow/28067184.cms) 

xvHI For an overview of Mobile Payments see John A Cassara, Written Statement for the Hearing On "The Next 

Terrorist Financiers: Stopping Them before They Start" Before the Task Force to Investigate Terrorism Financing 

Of the House Financial Services Committee, June 23, 2016; available online at: 

https://financia I services. house .gov /uploadedfiles/hhrg-114-baOO-wstate-jcassara-20160623.pdf 

xix Ibid 

"See Etisalat press release; available online: http:!/www.etisalat.af/about-us/press-releases/183-etisalatlaunches-mhawala-mobile-financial-services-in-afghanistan and the Mhawala website; http://mhawala.af/ 

"'See Yaya J. Fanusie and Alex Entz," Islamic State- Financial Assessment," Foundation for the Defense of 

Democracies, March 2017; available online at: 

http://www.defenddemocracy .org/content/uploads/docu ments/CSI F _ISIS _Finance.pdf 

""Jack Moore, Hawala, The Ancient Banking Practice Used to Finance Terror Groups, Newsweek, February 24, 

2015; available online at: http://www.newsweek.com/underground-european-hawala-network-financing-middleeastern-terror-groups-307984 

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John Cassara July 18,2017 

!«iii Rukmini Callimachi, Alissa J Rubin, Laure Fouquet, Paris attacks: terrifyingly fatal layers of resources and tactics, 

The Irish Times, March 20, 2016; available online at: http:/ /www.irishtimes.com/news/world/europe/parisattacks-terrifyingly-fatal-layers-of-resources-and-tactics-1.2580749 

~;v See Yaya J. Fanusie and Alex Entz," AI-Shabaab- Financial Assessment," Foundation for the Defense of 

Democracies, May, 2017; available online at: 

http://www.defenddemocracy.org/content/uploads/documents/CSIF _TFBB_AI-Shabaab_vOS_web.pdf 

'~ Yaya Fanusie and Landon Heid, Foreign Affairs, June 17, 2016; available online at; 

https:/ /www. forbes.com/sites/realspin/20 16/06/17 /what -isis-is-banking-on/#SOfe 1cc1165 1 

xxvi See Yaya J. Fanusie and Alex Entz, 11Boko Haram Financial Assessment," Foundation for the Defense of 

Democracies, May, 2017; available online at: 

http://www.defenddemocracy.org/content/uploads/documents/CSIF Boko Haram.pdf and Kathleen 

Caulderwood, "Fake Charities, Drug Cartels, Ransom and Extortion: Where Isla mist Group Boko Haram Gets 

Its Cash," International Business Times, May 16, 2014; available online at: http:/ I 

www.ibtimes.com/fake-charities-drug-cartels-ransom-extortionwhere-islamist-group-boko-haram-gets-its1585743 

=""Gulf funds being used to radicalize Kashmir youth", Daily Excelsior, 24 April 2016; available online at: 

http://www.dailyexcelsior.com/gulf-funds-used-radicalise-kashmir-youth/ 

xxviil Rlck Gladstone, "Iran Finding Some Ways to Evade Sanctions, Treasury Department Says," New York Times, 

January 10, 2013; available online at: http://www.nytimes.com/2013/01/11/world/middleeast/iran-finding-waysto-drcumvent-sanctions-treasury-department-says.html 

~;, Reschikov, Oleg, "Iran: Opposition to Western Sanctions in the Banking Sector", New Eastern Outlook, January 

30, 2015 available online at: http:/fjournal-neo.org/2015/01/30/rus-iran-protivodejstvie-zapadny-m-sanktsiyam-vbankovskoj-sfere/ 

~'International Narcotics Control Strategy Report, Volume II on Money Laundering, U.S. Department of State, 

2015, See Iran country report; available online: 

https:/ /www.state.gov /j/inl/rls/nrcrpt/2015/ supplementa 1/239219. htm 

~,;"Manhattan U.S. Attorney Charges long Island Man with Engaging in Hawala Activity That Funded Attempted 

Times Square Bombing," FBI Press Release, September 15, 2010; available online at: 

https://archives.fbi.gov/archives/newvork/press-releases/2010/nyfo091510a.htm 

xxxii HThree Somali Immigrants Sentenced for Providing Support to Foreign Terrorists," FBI Press Release, November 

18, 2013; available online at: https:/ /archives.fbi.gov/archives/sandiego/press-releases/2013/three-somaliimmigrants-sentenced-for-providing-support-to-foreign-terrorists 

'""; "Healthcare Fraudsters Sent $1.1 Million to Iran," Money Jihad, March 26, 2013; available online at: 

)1ttps://moneyj ihad. wordpress.com/20 13/03/26/hea lth -ca re-fraudsters-sent -1-1-million-to-iran/ 

xxxiv Joel Rubin, "Drug cartel money-laundering indictment is first major effort against hawala tactics," Los Angeles 

Times, October 2, 2015, available online at: http://www.latimes.com/local/crime/la-me-hawala-drug-money20151003-story.html 

"" 2007 National Money Laundering Strategy Report; available online at: https://www.treasury.gov/resourcecenter/terrorist-illicit-finance/Documents/nmls.pdf 

xxxvi See my February 3, 2016 testimony before the Task Force to Investigate Terrorism Financing of the House 

Financial Services Committee available online at: https://financialservices.house.gov/uploadedfiles/hhrg-114-

ba00-wstate-jcassara-20160203.pdf; Also, see John Cassara, Trade-Based Money Laundering: The Next Frontier in 

International Money Laundering Enforcement, 2016 John Wiley & Sons, Hoboken, New Jersey; see chapter 9 page 

145 on "Monitoring Trade." 

l(XlNii Ibid 

locxviillbid, Cassara TBML; see chapter 5 on uChinese Flying Money." 

xxxix John Cassara, "Flying moneyu may land in U.S. -Is Chinese money laundering uflying" into real estate?" 

February 21, 2016, Banking Exchange; available online at: http://www.bankingexchange.com/newsfeed/item/6079-flying-money-may-land-in-u-s 

XXXIX See https://www.fincen.gov/news/news-releases/fincen-expands-reach-real-estate-geographic-targetingorders-beyond-manhattan FinCEN recently expanded its Real Estate Geographic targeting orders beyond 

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John Cassara July I 8, 2017 

Manhattan and Miami to identify natural persons behind shell companies used to pay for high end real estate in six 

major metropolitan areas. 

'

1 The Institute for Intergovernmental Research (IIR) serves as the technical service provider for ongoing training, 

research, and analysis services to the SLAIT Program through the support of grant awards received from the 

Bureau of Justice Assistance. 1\R supports the SLAIT Program by providing project coordination activities, training 

assessment, and meeting coordination. See the IIR/SLAIT website for additional information; 

(https://www.iir.com/WhatWeDo/Criminai_Justice_Training/SLAIT/) 

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Testimony of 

Mr. Duncan DeVille 

Global Head of Financial Crimes Compliance & 

US BSA Officer 

The Western Union Company 

Submitted to the 

United States House of Representatives 

Financial Services Subcommittee on 

Terrorism and Illicit Finance 

"Managing Terrorism Financing Risk in Remittances and Money Transfers" 

July 18, 2017 
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Introduction and Background 

Good afternoon Chairman Pearce, Ranking Member Perlmutter, and members of 

the Subcommittee. My name is Duncan DeVille, and I am Global Head of Financial 

Crimes Compliance and US Bank Secrecy Act Officer for Western Union, based in our 

Colorado headquarters. Prior to joining Western Union in 2013, I headed the Office of 

Compliance and Enforcement at the Financial Crimes Enforcement Network (FinCEN) in 

the US Department of Treasury; before this I was with the consulting firm Booz Allen 

Hamilton, and prior to this an Assistant US Attorney in Los Angeles. In each position I 

worked on Anti-Money Laundering/Counter Financing of Terrorism (AMLICFT) 

matters. I am also an adjunct professor at Georgetown Law School. Thank you for the 

opportunity to be here today to discuss Western Union's efforts to detect and combat the 

use of money services businesses (MSBs) by terrorist organizations. 

The Western Union Company is a global leader in innovative, cross-border and 

cross-currency money transmission services. Western Union moves money for better, 

enabling individuals and families to transfer money safely around the world in 

increasingly easier, faster ways. Western Union's worldwide network includes more than 

a half-million agent locations in over 200 countries and territories, as well as more than 

I 00,000 A TMs and kiosks, with the ability to send money to billions of accounts. In 

addition to person-to-person money transfers and other primary services such as money 

orders and bill payment options, the company offers a full suite of payment solutions and 

cash management strategies for global companies, small businesses, charities, nongovernmental organizations, and universities through Western Union Business Solutions. 

We also own two international banks. In 2016, across all products and platforms, Western 

Union averaged 31 transactions per second, and over 900 per second at peak times. 

At Western Union, we strive to provide ease of transaction and convenience to 

our customers. As our customers move to digital platforms, we continue to connect with 

them through online applications and mobile services. This is a critical area of focus for 

the company. Over 50% of Western Union's digital transactions originate from a smart 

phone. 

Commitment to Compliance, Critical Component of Western Union's Identity and 

Organizational Structure 

For Western Union, a critical part of serving our customers is complying with 

regulatory requirements. Even though regulatory compliance costs money and inhibits 

our ability to drive down transaction costs for our customers, we do not view the two 

goals as conflicting, but as complementary. This is because we value our customers' 

confidence and trust, and we think that they in tum value dealing with a reputable 

company that conducts business in accordance with the spirit and letter of the law. 

As a money transmitter, Western Union is subject to regulation and examination 

by 48 states, the District of Columbia, and multiple territories, as well as by the federal 

government and numerous financial regulators overseas. We are subject to the Bank 

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Secrecy Act (BSA), the USA PATRIOT Act, and sanctions laws administered by 

Treasury's Office of Foreign Assets Control (OF A C). We register with FinCEN and are 

subject to examination by the Consumer Financial Protection Bureau (CFPB). In addition 

to regulator examinations, each year Western Union's compliance program is reviewed 

by banking partners, audited internally and externally, and provides detailed license and 

registration information. 

I am here today to talk about Western Union's anti-money laundering and 

counter-terrorist financing efforts, and how various programs under our compliance 

umbrella have changed over time. This evolution can be attributed to many factors 

including the changing nature of the threats posed by bad actors, the introduction of new 

products and delivery platforms, increased regulator expectations, and other key events 

that have presented opportunities for Western Union to grow as a company. 

Earlier this year, Western Union entered into settlement agreements with the 

Department of Justice (DOJ), Federal Trade Commission, FinCEN and 51 state attorneys 

general to resolve previously disclosed investigations focused primarily on oversight of 

certain agents and whether our employees' actions in connection with the 

maintenance of our anti-fraud program and anti-money laundering controls failed to 

prevent misconduct by those agents and third parties. The conduct at issue mainly 

occurred from 2004 to 2012. As detailed in the deferred prosecution agreement, "Since at 

least September 2012, Western Union took remedial measures and implemented 

compliance enhancements to improve its anti-fraud and anti-money laundering 

programs." These remedial measures and compliance enhancements, many of which will 

be outlined in my testimony today and as acknowledged in the deferred prosecution 

agreement, reflect Western Union's " ... ongoing commitment to enhance compliance 

policies and procedures." These efforts will be reviewed by an independent compliance 

auditor for three years. 

Western Union's business model depends upon trust. We cannot build and 

maintain our business unless we create a safe global environment for the people, families, 

and businesses who use our services. To that end, Western Union has increased its overall 

compliance funding by more than 200 percent over the past five years, and now spends 

more than 200 million dollars annually on compliance. Approximately 2,400 full-time 

employees, over 20 percent of our workforce, are exclusively dedicated to compliance 

functions. We have added more employees with law enforcement, national security and 

regulatory expertise, strengthened consumer education and agent training, and bolstered 

technology-driven controls. I am proud to have been one of the people recruited with a 

specific background in this area, and we have added many other experts with similar 

experience. The cumulative impact of these changes has been enormous in terms of 

strengthening compliance safeguard capabilities at the company and ensuring that our 

workforce understands the top-down commitment Western Union is making to regulatory 

compliance. 

In fact, Western Union today is a recognized leader in the fight against many 

types of illicit activity including fraud, human smuggling, sex trafficking, child 

2 
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exploitation, transnational criminal organizations, gang activity, counterfeit goods, and 

narcotics. While Western Union has a global scope and our Compliance Department 

targets latent and emerging threats in a wide variety of areas, my testimony today will 

focus on teJTorist finance and Western Union's work with US law enforcement to provide 

actionable, forward-looking intelligence analysis. 

As a global company, in addition to following US laws and regulations including 

FinCEN guidance, Western Union has adopted AMLICFT standards established by the 

Financial Action Task Force (FATF) and the Wolfsberg Group of international financial 

institutions. In many cases we apply global standards and targeted risk mitigation that are 

more restrictive than FA TF recommendations or those required by the countries in which 

we operate. 

We have established an AML Risk Assessment Framework to detect, deter, 

prevent, and report illicit transactions with dedicated teams of employees who are 

responsible for risk assessment, risk modeling, and ongoing analysis. This framework 

requires a multifaceted approach to assessing and managing risk including but not limited 

to analysis such as: 

• Consumer-level monitoring, investigation, and assessment 

• Agent-level due diligence, monitoring, investigation, and assessment 

• Product risk assessment 

• Country and regional level risk assessments 

• Emerging risk and strategic intelligence analysis 

• Control testing, audit, and assessments 

This framework establishes a process for Western Union to address its risk and 

implement appropriate controls. 

Primary compliance risks for terrorist finance generally derive from two sources: 

our agent network and our customers. Accordingly, as a company we are particularly 

focused on these areas. In addition, our compliance program has specific components 

dedicated to identifying geographic and emerging risks in order to proactively identify 

and respond to latent threats before they become widespread. 

In designing our compliance program, we have been cognizant that Western 

Union's retail money service business operates through company partnerships with our 

network of agent locations around the world. Agent relationships with Western Union are 

defined by how the agent operates its retail locations. Some agents act as program 

managers that oversee many sub-agents. Others are independent or have multiple retail 

locations within the same company. In addition to regional store chains, convenience 

stores, small businesses, and other retailers, in many cases banks and post offices act as 

Western Union agents. For the small businesses, revenue generated through offering 

Western Union products is very significant and we are proud to help spur job growth and 

contribute to the larger economy. 

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We have established a dedicated team specifically to conduct research on our 

agents prior to entering a relationship with them, upon renewal of contracts, and at other 

triggering events such as a change of ownership. Agent due diligence includes criminal 

background checks, screens against the US Treasury's Office of Foreign Assets Control 

(OF AC) Specially Designated Nationals and Blocked Persons lists and other appropriate 

government sanctions lists. Agents are trained through initial and ongoing AMUCFT and 

consumer fraud modules that cover applicable laws and regulations as well as Western 

Union's own policies, and common criminal typologies that we want our agents to 

monitor. Western Union has also built and patented the Comprehensive Model to 

Prioritize Strategy (CMPS), a statistical-indexing model that combines and enhances 

various risk indices and is used to measure agent risk across many categories. Risk scores 

are determined by factors such as transaction volume, transaction corridors, fraud data, 

and suspicious activity reports (SAR) data. The CMPS model helps guide agent 

compliance visits and program reviews for AMUCFT and consumer fraud purposes. 

To assess and manage risk posed by our customers, Western Union has developed 

patented systematic and automated controls to detect and prevent suspicious and illicit 

payments, including transaction thresholds at which additional information, identification 

or supporting documentation is required from the consumer. In some cases, telephone 

interviews are prompted so that the purpose of the transaction, nature of the relationship 

between sender and receiver, and source of funds for the transaction can be determined. 

Examples of transaction limit controls include single and aggregate transaction limits, 

corridor specific limits, and currency or foreign exchange limits. As a company, we have 

the proven ability to use data analytics in many areas and have leveraged this to track 

and/or stop transactions and ensure that those initiated outside of established parameters 

receive heightened due diligence. In addition to CMPS described above, Western Union 

holds 26 patents related to categorizing and identifYing data patterns that allow us to 

make more informed decisions about agent and consumer oversight. 

In addition to the traditional back-end automated transaction monitoring 

rules/algorithms that banks have which look for patterns on a weekly or monthly basis 

post-transaction, we have something unique: up-front monitoring (Real Time Risk 

Assessment [RTRA]) rules/algorithms that can be designed to stop transactions with 

indicia of crime before they go through. 

While it is not the primary focus oftoday's hearing, I want to bring to the 

subcommittee's attention another key program Western Union has established to help 

detect scam-related fraud and protect consumers at the point-of-sale. Our Courtesy 

Callback Program places some high-risk transfers on hold pending an interview with the 

sender, and resulted in $300 million in customer refunds in 2016. This program has 

grown exponentially since its inception in 2006 and today covers over 300 transaction 

corridors and has a staff of nearly 200 people. I have listened to the recordings of some of 

these calls and customers can be quite irate, insisting that they are not fraud victims and 

demanding that their transactions go through. Nonetheless, if the evidence shows that 

they are in fact victims of fraud, we will not process the transactions. 

4 
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Western Union also has a program specific to sanctions compliance where OFAC 

and other applicable government lists are uploaded daily so that a person whose name 

appears on these lists will be blocked from conducting transactions anywhere around the 

world. 

Working with Law Enforcement to Combat Terror Finance, Western Union's 

Financial Intelligence Unit 

Identification, reporting and mitigation of terrorist finance risk is a top priority for 

Western Union's Financial Intelligence Unit (FIU). Modeled after intelligence programs 

in the government and law enforcement community, our FlU is another part of our 

Compliance Department and helps inform strategic decision making. The FIU develops 

and maintains collaborative, trust-based relationships with key law enforcement and other 

government partners to ensure that intelligence and information necessary to combat 

terrorism and terrorist finance can flow to the right people at the right time. For example, 

within hours of recent European terrorist attacks our FIU's Rapid Response team 

provided actionable intelligence to law enforcement via confidential reports- both 

Suspicious Activity Reports (SARs) and Suspicious Transaction Reports (STRs). 

Providing this type of immediate insight into active investigations has in at least once 

case helped identify additional terrorists before they carried out more attacks. 

Western Union recognizes and supports the bipartisan work of Subcommittee 

Vice Chairman Robert Pittenger (R-NC) and full Committee Ranking Member Maxine 

Waters (D-CA) and others to enhance safe harbor provisions for the sharing of SAR 

information. Of particular interest to Western Union is one day having the legal authority 

to share these reports with our own overseas subsidiaries. As the largest SAR/STR filer in 

the world, with nearly 200,000 filed in the US and an additional 200,000 filed abroad last 

year alone, Western Union is committed to maximizing the potential impact of these 

important reports. In fact, we have established a structured system that allows us to 

formally identify SARs that may be related to terrorism. We immediately share these 

reports with law enforcement so they can prioritize them at their discretion. The ultimate 

goal of our FIU is to "see around the corner", i.e., to proactively identify bad actors not 

otherwise visible from internal detection systems and external referrals, and to provide 

advance warning and risk mitigation options for potential threats. 

Despite Western Union's cooperation with law enforcement and commitment of 

resources to combatting terror finance, the fact remains that identifying terrorists and 

facilitators is extremely difficult. There is no distinctive profile for a terrorist based solely 

on an individual's consumer activity, and we are not aware that any financial institution 

has yet been able to develop effective predictive analytical capacity to identify terrorists 

through their transactional activity. On the contrary, it is most often the case that the 

volume, frequency and other characteristics associated with terrorists' transactions are 

consistent with routine patterns the company sees for legitimate purposes such as 

humanitarian aid, charitable giving, and sending money to family and friends. This 

underscores the importance of identifying terrorist finance activity through collaborative 

public-private partnerships where information flows back and forth in real time. It also 

5 
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underscores the importance of both the public and private sector looking beyond raw 

transaction data and combing other sources such as social media to paint a more complete 

picture of subjects that may be moving money for illicit purposes. 

Key current areas of focus for Western Union's Financial Intelligence Unit 

include: 

• Analysis of Turkey and Lebanon as transit areas for people and funds ultimately 

intended to support ISIS. 

• Focus on potential ISIS "provinces" and/or affiliated groups such as those in 

Libya, Egypt, Tunisia, Philippines, Bangladesh and elsewhere. 

• Continued analysis and adjustments to transactions controls and other risk 

mitigation measures in Iraq, Syria, Turkey, Libya, and Lebanon to ensure that we 

are appropriately managing risk while still serving the great humanitarian need in 

these challenging areas. 

The deep, ongoing relationships Western Union has with law enforcement are a 

critical part of what we do. Terrorists and global criminal organizations threaten the 

individuals, families and businesses we serve. They also threaten our own agents and the 

foundation of our business. It is in our interest to keep our services out of the hands of 

those who would use them to do harm, and we remain committed to that effort. Western 

Union has proved to be a valuable and trusted government partner in protecting US 

national security, and we consider this to be a paramount responsibility and core aspect of 

our mission. We believe that we are helping, as evidenced by the recognition that we 

have received from law enforcement, in the form of dozens of thank you letters for our 

work; as well as formal, written recognition by regulators for SARs that have helped with 

critical cases. Our best strategy to successfully combat an evolving and increasing 

complex threat landscape is to do so together. 

In conclusion, I want to recognize The Money Remittances Improvement Act of 

2014 signed into law during the ll3'h Congress with the help of many of the members 

here today. This legislation provided much-needed streamlining of the examination 

process for Western Union and other money transmitters, and freed up resources for the 

Treasury Department to focus on anti-money laundering and counter-terrorist financing 

efforts. I would also like to acknowledge the work of the Conference of State Bank 

Supervisors in aiding many of these streamlining efforts including joint examinations 

where appropriate. We will continue to work with members of the subcommittee on 

legislative efforts to combat the financing of terrorism and other illicit activities and to 

help stop the many bad actors who operate today. 

On behalf of Western Union, I thank the members of this subcommittee for 

having me today and for your work in this area. I would be happy to answer any 

questions you may have. 

6 
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Statement for the Record 

Honse Financial Services Committee- Subcommittee on Terrorism and Illicit Finance 

Matthew Oppenheimer- Co-Founder & CEO, Remitly, Inc . 

. July 18, 2017 

Good afternoon. My name is Matthew Oppenheimer and I am the Co-Founder and CEO ofRemitly, an 

online remittance provider based in Seattle, Washington. 

Remitly thanks the Subcommittee for the opportunity to explain why our country has a strong interest in 

making sure that remittance services are accessible, affordable, and secure. The availability of legitimate, 

licensed remittance services matters, both to the millions who rely on these services, but equally as a 

matter of national security. 

I founded Remitly in 2011 after living in Kenya and seeing firsthand how difficult it was to transfer 

money across borders. Not only that, but it was expensive-- costing 8 to 10% of the total transfer just to 

send the funds. Looking at the technology that was becoming increasingly available to solve this 

problem, I knew there had to be a better way. And with over $600 billion in remittances sent around the 

world annually, I knew that tl1is was a problem that affected a lot of people. 

When I moved back, I started Remitly to make sending money abroad easier, faster, and more transparent. 

By replacing the traditional cash-based brick-and-mortar model with a purely digital one we sought to 

deliver a better, more affordable remittance service to customers. 

By focusing on that vision, we have cut the cost of service by more than half-- from 8 to I 0% to under 

2% -- putting hard-eamed money back into customers· pockets while delivering a better overall user 

experience. I am humbled to say that our team of over 400 employees around the world now helps 

customers in the United States, Canada, and the U.K. send $3 billion a year to recipients located in India. 

Mexico, Latin America, and the Philippines. 

While our technology has improved remittances, the basic reasons for sending haven't changed. A recent 

survey of Remitly' s customers revealed that nearly all arc using our service to send money intended to 

pay for the basic needs of their fan1ily members - housing. food, water, electricity, medical care, and 

education - basic things we take for granted in the United States but can be unattainable for millions 

living abroad. 

I see our customers as heroes. They sacrifice and save to provide a better lite for their families. When they 

send, it's not just money, it's a lifeline- paying for their family's rent or their child's tuition. 

The simple act of sending money abroad is how these unsung heroes deliver on their promises to loved 

ones. Consider Dalia Maldonado, a Remitly customer who lives and works in California. Dalia sends 

$250 a month from her real estate job to help pay for her father's knee surgery and a friend's leukemia 

treatment, in addition to providing regular assistance for staples like food and utilities. Hers is one of 
59 


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Written Testimony of Matthew Oppenheimer 

CEO - Remitly, Inc. 

countless stories of the immensely personal reasons people use remittances and the true reliance that 

people all over the world have on money sent from the United States. 

Add all of these individual transfers up and you would find that remittances alone contribute nearly four 

times the funds provided by all foreign aid globally -- and more than all foreign direct investment if you 

exclude China.' In some nations, remittance inflows are a substantial component of the country's GDP. 2 

Remittances provide a foundation of stability and opportunity not just for individual recipients, but for 

entire countries. 

Beyond the human impact, when remittances are sent through modem, legitimate channels, they 

strengthen our national security. As a licensed money transmitter operating in all 50 States, we are 

registered with the Treasury Department's FINCEN Bureau and maintain a strict compliance program. 

We invest heavily to comply with anti-money laundering (AML) requirements, the Bank Secrecy Act, 

OFAC regulations, and other requirements, using the latest technology to detect suspicious activity and 

report it to the authorities. 

Digital remittance providers like Remitly provide an additional layer of security against consumer fraud 

and money laundering risks by not accepting cash and by providing services directly to the end customer 

without relying upon the use of an agent network or other intermediary. As a digital-only provider, 

Remitly provides service to customers who currently have a bank account or a debit or credit card. This 

approach eliminates placement risk, the first stage in the money laundering process. In addition to being 

subject to our own Know Your Customer process that independently verifies the customer's identity with 

high confidence, our customers have also already been identified and verified by a U.S. bank or credit 

card issuer. 

By offering services directly to customers, Remitly's product is built with consumer protection and AML, 

OF AC screening, and Bank Secrecy Act compliance features incorporated by design. This eliminates the 

vagaries and variance in compliance inherent in a distributed agent network, while also providing 

regulators with a direct end-to-end means to confirm the compliance of every transaction. Further, by 

accessing our service through digital means, the customer's device, location, and other digital metadata is 

available to us, providing additional data points that enable us to confirm or refute the customer's KYC 

information. The cumulative effect of these factors makes our digital approach a more secure and lower 

risk product compared to traditional remittance services. 

This approach also turns our technology to protect our customers' identities and fight fraud into a 

powerful weapon to fight illegal activity. When our machine-learning systems or trained staff spot 

something suspicious, we say something; reporting this activity to authorities as required by our BSA 

obligations. This reporting provides law enforcement with a high resolution view into global money 

World Bank, Migration and Remittances Factbook 2016 at pg. 34. See also NPR, Who Gives More To The 

Developing IYorld: Aid Donors Or Migrant Workers? (Apr. 13, 2016). 2 Id See also Meyer & Shera, Economia, The Impact of Remittances on Economic Growth: An Econometric 

Model (2016). 

2 
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Written Testimony of Matthew Oppenheimer 

CEO- Remitly, Inc. 

flows, an invaluable tool in the fight against illegal activity, money laundering, and terrorism. Licensed 

money transmitters like Remitly keep the money "in the light" by efficiently processing legitimate 

transactions, while detecting and deterring those that may not be. 

By contrast, there exists an underground market of unlicensed remittances providers who do not comply 

with any of these obligations. 3 These informal networks operate without oversight and can be associated 

with black market activity. If policies are enacted that drive up the costs of legitimate remittance services 

or clear the field of healthy competition, money will be pushed towards these shadowy alternatives. 

That is why Remitly is particularly troubled by recent proposals that would tax remittances to fund a 

Border Wall. This "2%" tax would actually increase the costs of sending money through legitimate 

channels dramatically, far more than might be initially expected. In our industry, the entire revenue 

opportunity for companies like ours is a combination of fee and foreign exchange revenue against the 

balance of the transaction. Historically, fees in our industry have been in the range of 8%, meaning that a 

2% tax on the balance would effectively raise prices by 25% up to 10%. For Remitly, a company that 

charges less 2% of the amount sent, a 2% tax would more than double the prices experienced by 

consumers. A pricing increase of this magnitude would lead customers to abandon licensed, regulated 

service options like Remitly and engage in black market alternatives. By pushing this money 

underground we would be funding the very illicit activities that we want to stop.' It would be harmful to 

our customers and to border security to tax remittances to pay for a wall. 

We submit that Congress, and this Committee in particular, should focus on reducing regulatory burdens 

and enhancing competition without creating additional risk. While there is no single policy solution to an 

issue as complex as AML and BSA reform, there are several areas of low banging fruit that the 

Subcommittee should consider. We present the following suggestions: 

• Congress should align the reporting thresholds for suspicious activity across banks and non-bank 

providers and update the reporting thresholds which have not been updated for over 15 years5 

This would reduce regulatory burdens and focus both private sector and government resources on 

higher risk behavior and law enforcement priorities. 

• Congress should update the so-called "Travel Rule" recordkeeping requirement for the first time 

since 1995. We suggest replacing the rule with an explicit safe harbor on customer data 

verification for transactions under $1,000 for bank account or card-funded transfers. Over $1,000 

FinCEN, Report on Informal Value Transfer Systems (2002). 

World Bank, Economist Blog, Why Taxing Remittances is a Bad Idea (March 24, 2017), available at the 

World Bank website. See also Catalina Amuedo-Dorantes, Cynthia Bansak, and Susan Pozo, "On the Remitting 

Patterns of Immigrants: Evidence from Mexican Survey Data," Economic Review, Federal Reserve Bank of Atlanta, 

vol. 90. no. I (2005); and Raul Hernandez-Cess, "The U.S.-Mexico Remittance Corridor: Lessons on Shifting from 

lnfonnal to Fonnal Transfer Systems" (working paper, Series No. 47, Washington, D.C.: 2005). 5 31 U.S.C. § 5318(g); as transposed into 12 CFR 208.62, 211.5(k), 211.24(!), and 225.4(!) (Board of 

Govemors of the Federal Reserve System) (Federal Reserve); 12 CFR 353 (Federal Deposit Insurance 

Corporation)(FDIC); 12 CFR 748 (National Credit Union Administration)(NCUA); 12 CFR 21.11 and 12 CFR 

163.180 (Office of the Comptroller ofthc Currency)(OCC); and 31 CFR I 020.320 (FinCEN). 

3 
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Written Testimony of Matthew Oppenheimer 

CEO- Remitly, Inc. 

threshold would require customer data collection and verification, an assumption in the risk-based 

approach that should be made more explicit. This would streamline low risk transactions that are 

already within the financial system, while simultaneously maintaining the flexibility of a 

risk-based approach that is the hallmark of our anti-money laundering regulations. This would 

also provide regulatory clarity regarding KYC obligations which are in line with global AML 

trends without being overly prescriptive. 

• Congress should work with OFAC to build more complete and updated sanctions lists to reduce 

the significant operational burden created by false positive matches that cannot be dismissed due 

to incomplete or vague entries on name, location, and date ofbitih. 

These improvements would focus private sector and law enforcement efforts on activities and transactions 

that pose greater risks. Given that the underlying assumptions of the above requirements have changed 

with the introduction of increasingly advanced teclmologies and recognizing the dollar thresholds have 

not changed in many years, it is time to revisit these assumptions and adjust our risk-based approach 

accordingly. Remitly is encouraged by the Subcommittee's focus on these important issues. 

Making legitimate money transfers more accessible, affordable, and secure benefits consumers and 

strengthens national security. While innovation can solve part of this problem, a more comprehensive 

solution requires the attention of Congress. However, with sound policy and continued innovation, 

Remitly is confident that this goal is within reach. 

4 
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Statement of Scott T. Paul, Humanitarian Policy Lead, 

Oxfam America 

U.S. House Committee on Financial Services Subcommittee on Terrorism and Illicit Finance 

Hearing on: Managing Terrorism Financing Risk in Remittances and Money Transfers 

July 18, 2017 

Chairman Pearce, Ranking Member Perlmutter, Members of the Subcommittee: 

I greatly appreciate the opportunity to testify before the Subcommittee on the critical and 

timely issue of managing terrorism risk in remittances and money transfers. I am testifying in my 

capacity as the Humanitarian Policy Lead for Oxfam America. As part of the global Oxfam 

confederation, we and our local partners work in more than 90 countries around the world to 

tackle the root causes of poverty and save lives in humanitarian crises. In order to be 

independent advocates for effective US foreign assistance and foreign policy, Oxfam America 

does not accept US government funding. 

Oxfam first became concerned about the subject of today's hearing during the 2011-12 

humanitarian emergency in Somalia. At the time, a large part of the country was experiencing a 

catastrophic famine that ultimately claimed the lives of approximately 258,000 people, most of 

them children under five years of age.1 Oxfam was working with local partners to help Somalis, 

particylarly women and children, access food, procure clean and safe water, and prevent 

disease. We also endeavored, as we do in each emergency, to raise the voices of the most 

vulnerable. In this instance, vulnerable Somalis told us that, more than any other operational or 

policy issue affecting them, the most important threat to their lives was the possibility of a 

disruption in remittance flows from the United States to Somalia. Oxfam took their concerns 

very seriously. With partner agencies, we subsequently published two reports on remittances to 

Somalia' and an additional study on the broader, global phenomenon of banks' exiting or 

limiting relationships with MTOs among other types of bank customers.' 

1 "Mortality among populations of southern and central Somalia affected by severe food insecurity 

and famine during 2010-2012." May, 2013; Food and Agriculture Organization and the Famine 

Early Warning Systems Network (FEWS NET), available online at 

http://www.fsnau.org/downloads/Somalia Mortality Estimates Final Report 8May2013 upload. 

Qflf. 

2 See Orozco, Manuel and Yansura, Julia. "Keeping the Lifeline Open: Remittances and Markets 

in Somalia" July, 2013; Oxfam and Adeso, available at 

https://www.oxfamamerica.org/static/media/files/somalia-remittance-report-web.pdf; "Hanging By 
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Both financial exclusion and terrorism stand in the way of achieving Oxfam's vision of a world 

without poverty where all people are able to enjoy the full range of their human rights. In many 

places where we work, remittances represent a community's collective effort toward a better 

life, as well as its only firewall against destitution. We also see terrorist groups trap many of 

those same communities in poverty, insecurity, and horrific cycles of violence. In my travels 

through Somalia, Yemen, El Salvador, and Nigeria, I have seen firsthand the dreadful effects of 

indiscriminate violence and attacks on civilians. Any coherent, principled, prudent, and 

compassionate approach to the financial sector must aim to both enable bona fide remittances 

and reduce financing for extremist violence. 

In my view, a strategy that aims to maximize remittances, keep them within the formal financial 

system, and curb illicit financial flows will achieve the twin aims of poverty alleviation and 

combating the financing of terrorism. To do this, remittance services must be accessible, 

affordable, and accountable- both to law enforcement authorities and to the families sending 

and receiving money. 

Remittances Fight Poverty and Aid Humanitarian Response 

In 2016, migrants sent $575 billion in remittances to their countries of origin, including $429 

billion to developing countries.' In the world's poorest countries, remittances are particularly 

crucial. At the household level, remittances may be used to put children through school, pay 

rent, access medical treatments, or as start-up costs for a business. Remittances received by 

women and in woman-headed households have been shown to increase women's economic 

empowerment and investment in social capital.' At the national level, particularly in low-income 

countries, remittances are often drivers of the economy. Remittances accounted for more than 

10 per cent of GOP in at least 28 countries and more than 20 per cent in at least nine ofthem.6 

a Thread: The Ongoing Threat to Somalia's Remittance Lifeline." February, 2015; Oxfam, Adeso, 

& Global Center on Cooperative Security, available at 

https://www.oxfam.org/en/research/somalia-remittances-hanging-by-thread. 

3 Shetret, Liat and Durner, Tracey. "Understanding Bank De-Risking and Its Effects on Financial 

Inclusion." November, 2015; Oxfam & Global Center on Cooperative Security, available at 

https://www.oxfam.org/sites/www.oxfam .org/files/file attachments/rr-bank-de-riskinq-181115-

en O.pdf. 4 "Migration and Development Brief 27," April, 2017; World Bank, available at 

http://pubdocs. worldbank.org/en/992371492706371662/MigrationandDevelopmentBrief27. pdf. 5 "Gender, Migration and Remittances," International Organization for Migration (10M), available 

at https://www.iom.int/sites/defaultlfiles/about-iom/Gender-migration-remittances-infosheet.pdf. 6 See "Migration and Remittances Data as of October 2015," World Bank, in "Report to the G20 

on Actions Taken to Assess and Address the Decline in Correspondent Banking," note 1; 
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Remittances play a particularly crucial role in humanitarian emergencies, especially when state 

institutions and the private sector have collapsed. In Somalia and Yemen- two countries that 

face the threat of famine in the midst of complex humanitarian emergencies- remittances have 

been a relatively stable financial inflow. In Yemen, businesses have been decimated by fighting 

and a de facto blockade on the country's Red Sea ports, and public sector salaries on which a 

quarter of all Yemenis depend have not been paid for nearly a year. 7 In Somalia, governmentprovided social services are nearly nonexistent, and 26 years of civil war have undermined 

essentially all domestic industry other than subsistence farming, herding, and fishing, which 

themselves have been threatened by climate change and illegal, unreported and unregulated 

(IUU) fishing. In both countries- as well as for the surrounding region- money transfers from 

migrants abroad have been a stabilizing force. They have been more consistent than aid, 

investment, or social welfare programs. In Somalia, famine would have been declared long ago if 

not for money from the diaspora. At every phase of an emergency- the pre-crisis phase, the 

crisis phase, and the recovery phase- remittances help families and communities survive. They 

build resilience to crises, help communities weather the storm, and then help them build back 

better.8 

Remittances are transmitted in a variety of ways- through banks, fintech enterprises, cash 

couriers, trust-based networks- known primarily in the United States by their Arabic name, 

hawolos- and non-bank money transfer operators (MTOs). MTOs are often the only remittance 

option for many poor migrants and their families who have no other point of access to the 

formal financial sector. MTOs themselves typically rely on banks to provide financial services, 

such as check collection, deposit services, payroll services, and most critically, wire transfers, as 

well as for their typically more robust anti-money laundering/combating the financing of 

terrorism (AML/CFT) information technology infrastructure. MTOs rely on cross-border wires in 

order to settle its accounts. If an MTO is unable to access this service in a country where it sends 

or receives money, it will be forced to identify another way to move money in or out of the 

jurisdiction, and otherwise may shut down its operations there. 

Banks are Closing MTO Accounts 

November, 2015; Financial Stability Board, available at http:l/www.fsb.org/wpcontent/uploads/Correspondent-banking-report-to-G20-Summit.pdf. 

7 For more information on remittances and Yemen's financial sector in the context of its current 

humanitarian crisis, see Salisbury, Peter. "Bickering While Yemen Burns: Poverty, War, and 

Political Indifference." June, 2017; Arab Gulf States Institute in Washington, available at 

http:/lwww.aqsiw.org/wp-contentluploads/2017/06/Salisbury Yemen ONLINE.pdf. 8 Savage, Kevin and Harvey, Paul. "Remittances during crises: implications for humanitarian 

response." May, 2007; Overseas Development Institute, available at 

https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/317.pdf. 
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Unfortunately, MTOs are one of a number of types of customers losing access to banking 

services, both in the United States and globally. A 201S World Bank study that interviewed 

representatives of governments, MTOs, and banks in G20 countries reported that 46 per cent of 

MTO respondents had experienced bank account closures. 9 28 per cent reported that they could 

no longer access banking services, with a staggering 4S per cent reporting that some of their 

agents were unable to use banks.10 Neither banks nor MTOs interviewed for the study cited 

money laundering or terrorist financing-related violations or sanctions as one of the top five 

reasons for account closures. In short, MTOs are losing their bank accounts despite being 

viewed as law-abiding customers. 

MTOs are not alone. MTOs are just one of a number of segments of the banking customer base 

losing financial services without regard to their AML/CFT compliance records. Other segments of 

the customer base include nonprofit organizations, respondent banks, foreign embassies and 

diplomatic missions, fintech enterprises, payday lenders, and other merchant categories viewed 

as high-risk. 11 The most widely used term for these practices is "bank de-risking," which former 

U.S. Under Secretary of the Treasury Adam Szubin defined as, "instances in which a financial 

institution seeks to avoid perceived regulatory risk by indiscriminately terminating, restricting, 

or denying services to broad classes of clients, without case-by-case analysis or consideration of 

mitigation options.''12 1 prefer not to use this term, for two reasons. First, the term "de-risking" 

masks the fact that pushing law abiding customers out of the formal financial system actually 

increases, rather than decreases, money laundering/terrorist financing (ML/TF) risk. Second, 

"de-risking," as defined by Mr. Szubin and others, is concerned only with the indiscriminate 

denial of services to broad classes of clients. We should be equally concerned when any financial 

flow is forced to the margins of formal banking system, even if it is the result of careful, case-bycase analysis by each bank. Instead, I will discuss these practices as a decline in access to 

financial services. 

All of the customer types experiencing this decline in access have a trait in common: they are all 

viewed widely in the financial sector as inherently "high-risk." It is important to note in this 

context that the level of risk associated with a customer does not describe the likelihood that 

9 "Report on the G20 Survey on De-Risking Activities in the Remittance Market" October, 2015; 

World Bank, available at 

http:l/documents.worldbank.org/curated/en/679881467993185572/pdf/1 01 071-WP-PUBLICGPFI-DWG-Remittances-De-risking-Report-2015-Final-2. pdf. 10 Ibid. 11 Shetret and Durner. 12 "Remarks by Acting Under Secretary Adam Szubin at the ABA/ABA Money Laundering 

Enforcement Conference," November, 2015, available at https://www.treasury.gov/presscenter/press-releases/Pages/jl0275.aspx. 
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the customer will violate the law. Rather, it connotes the likelihood of the customer's being 

exploited for the purposes of terrorist financing, money laundering, or other financial crimes. 

Even the most stringent AML/CFT controls may not save a customer from being perceived or 

rated as high-risk, depending on the nature of its business, the jurisdictions in which it operates, 

or other factors. 

The decline in financial access for customers perceived as high-risk appears to stem from the 

less tolerant political environment in which banks have operated following the 9/11 terrorist 

attacks and the 2008 financial crisis. We see this in number of ways, including: 

High fines for Bank Secrecy Act (BSA) noncompliance, particularly related to AML/CFT 

failings; 

Reputational risk for association with AML/CFT failings; 

Higher capital requirements and liquidity thresholds; 

Compliance costs related to BSA compliance; 

Shift from corporate to individual liability, including criminal liability; 

Risk of private civil litigation related to AML/CFT failings; and 

Pressure from bank examiners related to the maintenance of high-risk accounts, 

particularly in the wake of the 2008 financial crisis. 

These factors have combined to dramatically reduce banks' risk appetites.13 Consequently, 

banks are deciding that it is easier and more profitable to avoid any risk associated with 

customers like MTOs than to manage that risk. 

There is little agreement over the relative importance of each of these factors, but from my 

experience and conversations with bank representatives, banks of different sizes have different 

rationales. large banks tend to be more concerned with reputational risk, but at the same time 

more willing to maintain relationships with large MTOs. The UK legal dispute between Barclays 

Bank and Dahabshiil, a Somali MTO, provides fascinating insight into the decision-making 

13 See Shetret and Durner. See also "Unintended Consequences of Anti-Money Laundering 

Policies for Poor Countries," November, 2015; Center for Global Development, available at 

https://www.cgdev.org/sites/default/files/CGD-WG-Report-Unintended-Consequences-AMLPolicies-2015.pdf. 
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process on account retention of one large bank. The judgment publishes the "Minimum 

Standards" used by Barclays for MTOs customers, which include a minimum revenue 

requirement and a high net tangible assets requirement. 14 1n other words, Barclays had decided 

that no small MTO could be account-worthy, no matter how strong its AML/CFT compliance 

program. 

On the other hand, small banks appear to withdraw accounts immediately following 

examinations. On occasion, banks have told me that examiners explicitly discourage banking 

MTO customers. More commonly, I hear examiners appropriately asking to see details and 

asking probing questions about MTO accounts at the beginning of examinations, which simply 

makes examiners nervous about maintaining these accounts. It is possible that many small 

banks simply do not have the capacity to conduct effective due diligence on complex MTO 

customers, but the likely alternative- pushing the compliant MTO and its remittance flows out 

of the banking sector altogether- seems much worse. 

Pressures on Correspondent Banking Are Compounding and Globalizing the Challenges to 

MTO Financial Access 

As I mentioned earlier, correspondent banks are one of the types of customers viewed as highrisk that are experiencing rapid account closures.15 Foreign banks in particular rely on 

correspondent banking to access the US financial system and currency. For many, losing the 

ability to conduct transactions in US dollars is a death sentence. 

like MTOs, correspondent banks have been targeted as vulnerable to money laundering and 

terrorist financing (Ml/TF) abuse. 16 And as with MTOs, banks are deciding that the costs and 

consequences of managing these interbank relationships outweigh the benefits (one 

representative of a large bank told me that the cost of onboarding a new respondent customer 

exceeded $60,000). Like MTOs, however, not all correspondent bank accounts are equal when it 

comes to account maintenance and retention. Large banks with lower risk profiles are viewed as 

more attractive customers than small banks with higher risk profiles. In 2015, the World Bank 

14 Dahabshiil Transfer Services Ltd vs. Barclays Bank Pic, judgment of Henderson, J. [2013] 

EWHC 3379 (Ch), Available at http://www.bailii.org/ew/cases/EWHC/Ch/2013/3379.html. 15 Correspondent banks provide services for and on behalf of other banks, often to provide 

access to different jurisdictions. Those services include foreign exchange, wire transfers, 

business transactions, and settlement of accounts. 16 See, e.g., "Money Laundering: A Banker's Guide to Avoiding Problems," December, 2002; 

Office of the Comptroller of the Currency (OCC), available at https:f/www.occ.gov/topics/bankoperations/financial-crime/money-laundering/money-laundering-2002.pdf. 
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concluded that roughly half of the emerging market and developing economy jurisdictions 

surveyed have experienced a decline in correspondent banking systems.17 

For customers that depend on banking services in both wealthy and developing countries alikeincluding MTOs and charities such as Oxfam- this decline compounds the financial access 

problem in two ways. First, fewer interbank connections means more difficulty routing crossborder transactions, particularly to high-risk jurisdictions. Second, banks are desperate to make 

themselves more attractive customers for larger correspondent banks. This is especially true for 

foreign banks looking to maintain correspondent relationships with US financial institutions, 

which are insisting that their respondent banks reduce their risk profiles. Cutting MTO accounts, 

appears to be an easy way to do that, at least superficially. 

The impacts of MTO account closures on remittances are unclear 

It is certain that MTOs are experiencing bank account closures at an alarming rate. What is less 

clear is what effect this is having on actual remittance flows- the extent to which they are 

declining or moving outside of the formal financial system. 

The evidence is mixed. Here's what we do know: 

An investigation into MTO bank account closures in Australia showed that the account 

closures had forced a number of MTOs to go out of business, but also showed that 

overall financial outflows from Australia remained constant.18 

Global remittances declined in 2016 from an all-time high of 2015, the first decline since 

the 2008 financial crisis, despite predictions that they would continue to increase.19 

In a number of instances, governments have raised concern at the highest levels about 

the impacts of bank account closures on remittance flows, particularly in the Caribbean 

region. 20 

17 "Report to the G20 on Actions Taken to Assess and Address the Decline in Correspondent 

Banking." 

18 "Bank De-Risking of Remittances Businesses," November, 2015; AUSTRAC, available at 

http:ffwww.austrac.qov.aufbank-de-riskinq-remittance-businesses. 

19 "Migration and Development Brief 27." 20 Torbati, Yeganeh. "Caribbean Countries Caught in U.S. Crackdown on Illicit Money." 12 July 

2016; Reuters, available at http:ffwww.reuters.com/investigatesfspecial-reportfusa-bankingcaribbeanf; The Hon. Audley Shaw CD, MP. Presentation at 20161MF/World Bank Annual 

Meetings, available at 
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Even in the absence of more convincing evidence that remittance flows are declining or 

going underground, the World Bank MTO study shows that MTOs are coping with 

account closures by employing other MTOs' bank accounts, cash couriers, or personal 

bank accounts.'' This means higher costs and less transparency in money flows. 

Remittances to Somalia: a case for more aggressive intervention 

As I mentioned at the beginning of my testimony, I first became aware of these problems 

following an outcry from our partners in Somalia during the last famine in 2011-12. Somalia 

presents a unique case: 

Somalia is one of the most remittance-dependent countries in the world, with money 

from the diaspora comprising roughly a third of its entire economy. At more than $1.3 

billion annually, the flow of remittances to Somalia is greater than the humanitarian aid, 

development assistance, and foreign direct investment it receives- combined. 22 

Most of this money helps people meet their most basic needs, such as food, shelter, 

school fees, and basic medical expenses. 23 

Most international banks and MTOs that are well-known in the US are almost entirely 

absent from Somalia. The only realistic channel through which to send money to 

Somalia are a set of Somali-owned MTOs offering low fees and an impressive ability to 

deliver throughout the country. 24 

With the internationally designated terrorist group ai-Shabaab present throughout 

much of South and Central Somalia and only the most nascent oversight of the financial 

sector, Somalia is viewed as an extremely high-risk destination for cross-border 

transactions. 

One Somali-American I interviewed two years ago told me: "Without the money we're sending 

them, I don't think the Somali nation would exist." Another confessed to me tearfully that the 

thought of not being able to send money to his sick mother for food and medicine made him 

consider going back to face drought and conflict. "I can't even eat thinking about it," he told me. 

http://www.mof.qov.jm/downloads/speeches/presentations/2016 annual meetings small states 

form speech.pdf. 21 "Report on the G20 Survey on De-Risking Activities in the Remittance Market." 22 Orozco and Yansura. 23 /bid. 24 /bid. 
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Many people have expressed a concern that they were being targeted by the U.S. government 

because of their nationality or religion?5 

Somali MTOs operating in the United States are registered with the Financial Crimes 

Enforcement Network (FinCEN) and are regularly examined by state authorities and the Internal 

Revenue Service. I am not aware of any Somali MTO that has been subject to civil or criminal 

penalties. I am aware of a number of instances in which Somali MTOs have provided information 

that has been used in the prosecution of individuals accused of sending money to al Shabaab. I 

should note here that in Somali, these companies are known as hawalas, which simply means 

money transfer. In English, hawa/a is used to designate money value transfer systems as 

informal and unregulated. For that reason, Somali MTO professionals forcefully reject this label. 

No large bank has agreed to a relationship with a Somali MTO in at least six years. In response to 

community pressure, one large bank publicly announced in 2014 that it was considering opening 

an account for the largest Somali MTO. This MTO told me that the bank requested two costly 

audits and then declined to provide an account. 

Small banks, for one reason or another, have almost all closed their Somali MTO accounts over 

the past five years. In official communications, they simply said they had decided to exit the 

relationships without providing any reasons/6 but Oxfam and the MTOs opened lines of 

communication with a number of them following the account closures. One community 

development bank said it was concerned about criminal liability. A few banks claimed that 

recent examinations demonstrated to them that they did not have the capacity to conduct due 

diligence over the accounts. The last bank serving many of the MTOs, a bank that holds itself out 

as a specialist bank for MTO and other money service business customers, felt unable to 

maintaining the accounts while operating under a Consent Agreement with the U.S. Office of 

the Comptroller of the Currency. 

The effect of these account closures is difficult to ascertain without better evidence. One survey 

conducted by the Food Security, Nutrition, and Analysis Unit (FSNAU) of the World Food 

Programme found that in the period following Somali MTOs' last major bank account closure, 35 

per cent of urban Somalis outside the capital of Mogadishu reported receiving less money than 

before?7 1t is difficult to draw other strong conclusions from the survey due to its methodology 

25 Ibid. 26 Ibid. 27 "Assessment of External Remittances in Selected Urban Areas and Among Displaced 

Populations Across Somalia," September, 2015; FSNAU, available at 

http://www.fsnau.org/downloads/FSNAU-Assessment-of-Remittance-Fiows-in-Selected-UrbanAreas-of-Somalia-October -2015.pdf. 
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and coincidental timing with other disruptions, but in my opinion, it indicates a connection 

between bank account closures and a decline in life-saving income for many Somali households. 

The consultations I have done with communities in Somalia and in Somali diaspora communities 

in the United States support that conclusion. 

Somalia's banking system, financial oversight, and mobile-based remittance systems are all 

developing, but it will take years before we know whether these will give rise to a reliable 

remittance system and a stable economy in Somalia. Today, as parts of Somalia teeter on the 

verge of famine and ai-Shabaab continues to assert itself throughout South-Central Somalia, 

remittances from the United States to Somalia remain on the precipice of a serious disruption. 

With many Somali MTOs remaining unbanked, some have resorted to carrying cash abroad to 

settle accounts- a legal option that has the blessing of the Treasury Department, but one that 

puts people and funds in great jeopardy.28 1n 2017, I'm convinced we can come up with options 

preferable to suitcases full of cash when it comes to our national security and the Somali 

people's lifeline. 

Our goal is a fully inclusive and transparent financial system 

We're witnessing a market failure in the financial sector today. In a perfectly functioning market, 

some banks would be providing service to MTOs, correspondent banks, nonprofit organizations, 

and others that are associated with high risk and low revenue potential. Those banks would be 

conducting better due diligence and potentially charging higher fees for MTOs and be in regular 

dialogue with MTOs on improving their AML/CFT controls. The reduced profit margins and 

additional costs passed on to individuals sending money aren't ideal, but they're preferable to 

the alternative that we're watching unfold. Market, regulatory, and political incentives are 

pushing banks to drop MTOs altogether, especially small MTOs specializing in money transfers 

to high-risk jurisdictions. If these MTOs aren't banked, we're not only likely to see a decline in 

remittances, but also an increase in the share of remittances being transmitted though informal 

networks- where law enforcement officials, regulators, and money senders can't trace it. That 

means less money in the hands of people looking to escape poverty and more opportunity for 

designated terrorists and other financial criminals to transact business. 

A better approach would be to affirmatively encourage access to financial services for all 

regulated MTOs, including those at the high-risk end of the market. Government should be the 

first mover. In that regard, I would like to offer a few recommendations to the Committee. 

28 Trindle, Jamila. "Money Keeps Moving Toward Somalia, Sometimes in Suitcases.' 15 May 

2015, Foreign Policy. Available at http:/lforeignpolicy.com/2015/05/15/money-keeps-movingtoward-somalia-sometimes-in-suitcases. 
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Recommendations 

1. Get more and better data. The GAO is currently undertaking four interrelated studies 

related to this issue which should make an important contribution to our understanding 

of the topic. I would encourage the Committee to more regularly request information 

on remittance outflows from the United States and, to the extent practicable, to follow 

up on these information requests to determine the causes and consequences of any 

disruptions. 

2. Urge the Treasury and State Departments to increase technical assistance for 

improved financial controls in high-risk countries. Both Treasury and State have 

initiated this process with the Government of Somalia. Similar processes should be 

replicated and supported where there is an interested government partner whose weak 

financial governance contributes to its perception by banks as a high-risk jurisdiction. 

3. Request input from government agencies and offices concerned with financial 

inclusion. As concerns terrorist financing, Treasury's Office of Terrorist Financing and 

Financial Crime (TFFC) and the federal banking agencies tend to play the leading roles in 

policymaking. Officials in these agencies have done an incredible job in recent years 

reaching out to and soliciting input from interested parties over the past few years. Still, 

I believe that officials at the State Department, USAID, and officials at Treasury more 

focused on financial inclusion should have a stronger role in the policymaking process 

and informing public debate around these issues. 

4. When there is a strong public interest, support public-private partnerships to maintain 

money flows at the periphery of the banking system. These could take many forms. As 

an example, Section 271 of the Countering Iran's Destabilizing Activities Act, currently 

under consideration in by the House of Representatives would require a feasibility study 

to determine whether the Treasury Department could assist private banks or credit 

unions wishing to facilitate remittances to Somalia. Another approach would be for the 

Federal Reserve Banks to utilize Fedwire to transmit funds on behalf of certain 

unbanked customers. I don't advocate these options in all cases, but in circumstances 

such as Somalia's remittance corridor, or for unbanked organizations delivering lifesaving assistance in Syria, these options are worthy of consideration. 
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MORRISON I FOERSTER 

Written Statement of 

Bradley S. Lui 

on behalf of The Money Services Round Table 

Submitted to the 

United States House of Representatives 

Financial Services Subcommittee on 

Terrorism and Illicit Finance 

Hearing on Managing Terrorism Financing Risk in Remittances and Money Transfers 

July 18,2017 
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MORRISON I FOERSTER 

I am Bradley Lui, a Partner with the law firm of Morrison & Foerster LLP and 

counsel to The Money Services Round Table ("TMSRT"). On behalf of TMSRT, I am 

pleased to have the opportunity to submit these remarks for the record on the role of money 

transmitters in detecting and combatting money laundering and countering the financing of 

terrorism. 

TMSRT was founded in 1988 as an information-sharing and advocacy group for the 

nation's leading non-bank money transmitters. Its current members are American Express 

Travel Related Services Company, Inc., MoneyGram Payment Systems, Inc., RIA Financial 

Services, Sigue Corporation, Viamericas Corporation, and Western Union Financial 

Services, Inc. These companies offer services including bill payments and funds transfers 

(domestic and international) through retail points of sale, the Internet, and mobile phones, as 

well as the sale and reloading of stored value products and other money transmission 

services. They are licensed in all states that have nonbank licensing laws currently in effect1 

-48 states plus the District of Columbia-and are Money Services Businesses ("MSBs'') as 

defined in the regulations implementing the Bank Secrecy Act, 31 USC § 5311 et seq. and 31 

C.F.R. Chapter X (collectively, the "BSA"). 

Since its founding, TMSRT has been active in the passage and implementation of 

more than 27 state licensing laws, and participates in the Treasury's Bank Secrecy Act 

Advisory Group. TMSRT comments on pertinent state and federal legislation and 

regulations involving safety and soundness and/or anti-money laundering/terrorist financing 

issues. TMSRT also for many years has worked closely with the Money Transmitters 

Regulators Association, the leading national organization of state non-bank money 

transmitter regulators, and the Conference of State Bank Supervisors. TMSRT has also 

participated with the Financial Action Task Force on international anti-money laundering 

standards. 

Money Transmitter Services 

Licensed money transmitters provide a diverse array of valuable services to 

consumers throughout the world. They provide a safe, reliable and affordable way to send 

money to family and friends, to pay bills and to obtain other financial services. In recent 

years, consumers have increasingly begun to rely on money transmitters for a diverse array 

of services including bill payment, online and app-based peer-to-peer transfers, domestic and 

international remittances, and stored value (i.e., prepaid) cards and other devices. In many 

cases, consumers have foregone or reduced the use of traditional banking services because of 

the ability ofmoncy transmitters to offer affordable, prompt and convenient services. 

TMSRT members, like many other licensed money transmitters, primarily serve their 

customers through agents at physical locations throughout the United States, such as 

drugstores and convenience stores, large grocery chains and small comer markets, and many 

businesses in between. Many agents are small business owners that offer money 

1 With the exception of one member that has a license application pending in New York State. 
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MORRISON I FOERSTER 

transmission services as part oftheir overall business operations. These businesses, by 

operating as agent locations, benefit from the revenues generated directly from offering the 

services of the licensed money transmitter and also indirectly because of the general business 

traffic they can generate by offering the services. 

TMSRT members, like many other licensed money transmitters, provide services 

valued by consumers and other businesses alike. It is important to note, however, that funds 

transfer activity that takes place through licensed money transmitters-such as those 

operated hy TMSRT members-also provides significant benefits to law enforcement. As 

discussed further below, money transmitter licensees, as MSBs under the BSA, are required 

to implement comprehensive anti-money laundering programs that include substantial 

recordkeeping and reporting obligations. This information, as well as other steps taken by 

MSBs discussed below, facilitates law enforcement efforts to combat money laundering, 

crime, and the financing of terrorism. 

The Current Regulatory Environment 

The collective purposes of the regulatory regimes under which TMSRT members 

operate is twofold: (I) to develop, implement and maintain effective anti-money laundering 

programs; and (2) to ensure the safety and soundness of money transmitters to protect 

consumers. TMSRT members operate in a complex regulatory environment, with multiple 

regulators at the state and federal level. 

As MSBs, non-bank money transmitters arc subject to regulation under the BSA. 

MSBs are required to have, and all TMSRT members have in place, anti-money laundering 

programs reasonably designed to prevent the MSB from being used to facilitate money 

laundering and the financing of terrorist activities.2 These so-called "BSA/AML" programs 

must be in writing, and must include what are known as the "four pillars": 

(I) Policies, procedures, and controls reasonably designed to assure compliance with the 

requirements of the BSA, including its transaction monitoring, recordkeeping, and 

reporting requirements; 

(2) A designated person to oversee the BSAIAML program and assure its compliance 

(i.e., a "compliance officer"); 

(3) Training of appropriate personnel on their responsibilities under the program; and 

(4) Independent review of the program.3 

The Financial Crimes Enforcement Network ("FinCEN") implements and interprets 

the BSA, and facilitates the reporting obligations of licensees under the BSA. Licensees, and 

all MSBs, are subject to examination by the Internal Revenue Service ("IRS") for BSA 

compliance pursuant to the regulations established by FinCEN. Many state money 

transmission licensing laws incorporate the requirements of the BSA by reference or 

2 31 C.F.R. § !022.2IO(a). 3 See id. at § I 022.2 10( d) 

2 
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MORRISON I FOERSTER 

otherwise impose obligations on licensees under state law with respect to aspects ofBSA 

compliance, and state examinations (discussed further below) include assessments ofBSA 

compliance. In addition, licensees are also subject to examination by the Consumer 

Financial Protection Bureau for compliance with the Remittance Transfer Rule, which 

imposes specific requirements including disclosures and error resolutions on international 

consumer remittances.4 

In addition, money transmitters currently are required to be licensed in each of the 

individual states in which they do business (except Montana and South Carolina). Because 

TMSRT members have licenses and offer services to residents throughout the United States 

(both through physical in-state agent locations and through the Internet), they are subject to 

examinations by regulators in 48 different states and the District of Columbia. While there is 

some variance among state money transmission laws, each ofthe laws contains robust 

requirements to ensure safety and soundness of the licensees. The state regulatory 

framework for licensees typically provides safeguards including permissible investments, 

bonding, net worth, examinations, reporting protocols, and other mechanisms for oversight 

so that users of their services have reasonable assurance regarding the funds entrusted to the 

money transmitter. 

To monitor and enforce compliance with licensing requirements, state banking 

departments conduct regular on-site examinations of money transmitter licensees to review 

their financial condition, monitor financial reserves, assess their funds transfer activities and, 

as noted above, examine for BSA and anti-money laundering compliance. These 

examinations are similar in scope and purpose to the examinations conducted at statechartered banks though, as noted, money transmitters generally must be licensed in all states 

in which they do business, including through agent locations. 

Simply put, money transmitters are very heavily regulated and closely scrutinized by 

multiple regulators at the state and federal level. 

The Role of Money Transmitters in the Fight against Money Laundering 

As part of their BSN AML programs, MSBs are subject to significant transaction 

monitoring, recordkeeping and reporting obligations. These obligations include: 

• Monitoring transactions and filing with FinCEN Suspicious Activity Reports 

("SARs") if a transaction is conducted or attempted, at or through the money 

transmitter, which involves or aggregates funds or assets of at least $2,000 and the 

money transmitter knows, suspects or has reason to suspect that the transaction (or a 

pattern of transactions of which the transaction is a part) is suspicious5

; 

4 Subpart B of Regulation E, at 12 CFR § 1005.30 et seq. 5 See 31 C.P.R.§ 1022.320 

3 
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MORRISON I FOERSTER 

• Filing Currency Transaction Reports ("CTRs") for transactions involving more than 

$10,000 (inclusive of fees) in cash6

; and 

• Maintaining records of a customer's identity (including name, address, date of birth 

and Social Security number) for certain funds transfers of $3,000 or more, as well as 

beneficiary information, though we note that many industry participants, including 

TMSRT members, collect and verify customer identifying information for 

transactions at thresholds lower than $3,000? 

Like banks, money transmitters may be targeted by money launderers and other illicit 

actors who seek to exploit the world's financial system to facilitate criminal activities. 

TMSRT members have made it a priority to prevent their services from being used as 

conduits for illicit activity. Our members have spent many years and hundreds of millions of 

dollars in the aggregate on building and maintaining comprehensive AML programs to 

enable them to identify and report suspicious activity to FinCEN, and they continue to 

increase their spend on technology and personnel. Their efforts including building, 

implementing, and refining robust monitoring programs that include the use of sophisticated 

software systems to help identify and monitor high-risk customers and transactions and to 

block such transaction as appropriate.8 TMSRT members have also heavily invested in the 

personnel necessary to run their compliance programs; for some TMSRT members more than 

20% of their workforce is dedicated to compliance functions. And, as part of their programs, 

TMSRT members also educate and oversee their agent locations with respect to their 

BSA/AML obligations, including by conducting due diligence on potential agents, visiting 

agent locations (including unannounced "mystery shopping" visits), and reviewing and 

monitoring transactions. 

Money transmitters' BSA/ AML programs provide tremendous value to Jaw 

enforcement. The terabytes of transaction data that MSBs collect, parse, and report facilitate 

Jaw enforcement investigations and the fight against money laundering and terrorism 

financing. In addition, TMSRT members have also forged strong, direct relationships with 

law enforcement officials in the United States and throughout the world. 

In short, compliance costs and regulatory overhead are significant for TMSRT 

members. Nevertheless, our members appreciate the value that their efforts provide to law 

6 See id. at§ 1010.330. 7 See id. at § 10 10.410( e). As FinCEN recently noted, some money transmitters implement standards that go 

beyond BSA requirements. See GAO Report, international Remittances: Money Laundering Risks and Views 

on Enhanced Customer Verification and Recordkeeping Requirements, at p. 22 (GAO -16-65, January 2016) 

("GAO Remittance Report'"). 

'As part of their BSA/AML compliance programs, money transmitters have in place risk-based policies and 

procedures to comply with the sanctions programs administered by the Office of Foreign Asset Control of the 

United States Department of the Treasury ("OFAC"). The sanctions laws enforced by OFAC bar engaging in 

trade or financial transactions with certain specified countries and/or "specially designated nationals," and thus 

TMSRT members monitor transactions they process to ensure to the extent reasonably possible that transactions 

prohibited by OFAC sanctions occur. 

4 
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29451.045

MORRISON I FOERSTER 

enforcement and are proud to play a role in effort to detect and prevent financial crimes and 

illicit activities including money laundering and the financing of terrorism. 

De-Risking and Similar Challenges 

Although money transmitters face a very heavy regulatory burden, TMSRT members 

take their regulatory obligations very seriously. In particular, TMSRT members-like their 

customers and regulators-appreciate the importance of formal, well-regulated money 

transfer networks. Not only does the provision of funds transfer services through regulated 

channels enable law enforcement to have visibility into the movement of funds, but it also 

ensures that consumers are protected when they entrust their funds to an intermediary. 

The industry, however, faces significant challenges due to a phenomenon known as 

"de-risking" as well as efforts to impose taxes on remittances. De-risking is generally 

understood to be the practice of hanks eliminating, or significantly curtailing, their 

relationships with MSBs and related entities such as agents and foreign correspondent hanks. 

Banks have done so apparently due to concerns about their own BSAJAML risks posed by 

such customer relationships. Indeed, the Office of the Comptroller of the Currency (''OCC") 

affirmed in its most recent risk perspective that businesses including money transmitters and 

foreign corre~ondent hanks may be experiencing tennination or restriction of banking 

relationships. And. as FinCEN previously elaborated, 

[MSBs], including money transmitters important to the global flow of remittances, are losing 

access to banking services, which may in part he a result of concerns about regulatory 

scrutiny, the perceived risks presented by money services business accounts, and the costs 

and burdens associated with maintaining such accounts. 10 

De-risking directly impacts access to banking resources for large MSBs, including 

TMSRT members, as well as their agents and foreign correspondents. TMSRT also 

understands that smaller MSBs, as well as MSBs that seek to serve specific international 

corridors, have faced challenges with obtaining and maintaining banking relationships that 

enable them to provide funds transfer services. TMSRT also understands that these 

challenges are especially acute in border states, and that the inability to access banking 

resources is also affecting cross-border business activity. 

De-risking is, therefore, a significant concern to the industry from a business 

perspective. It is also, however, a very significant problem from a law enforcement 

perspective. To the extent that de-risking makes it more difficult for money transmitters to 

provide their services to consumers, such individuals may turn to informal or underground 

9 See Office of the Comptroller of the Currency, Semiannual Risk Perspective at 19 (Spring 2017), available at: 

https://www.ots.treas.gov/publications/publications-by-type/other-publications-reports/semiannual-riskperspective/scmiannual-risk-persrectivc-spring-20 I 7.pdf ("OCC Risk Perspective"). 1

° FinCEN Statement on Providing Banking Services to Money Services Businesses (Nov. I 0, 20 14), available 

at: https://www.fincen.gov/sites/default/files/news r~k?se/201411 I O.pdf. 

5 
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MORRISON I FOERSTER 

networks to transmit their money. 11 The OCC, for example, observed that the consequences 

of de-risking "may include potentially negative effects on financial inclusion internationally 

or the movement of transactions out of the regulated financial system." 12 FinCEN has 

similarly noted that MSBs play an "important role in a transparent financial system" in 

particular because they "often frovide financial services to people less likely to use 

traditional banking serviccs." 1 De-risking threatens this role. If transactions do not take 

place through regulated networks, there will be no visibility into this activity, and thus efforts 

by both money transmission licensees and law enforcement to detect and prevent money 

laundering and terrorist financing will be severely hampered. As the OCC put it, ''Such 

transactions then may not be appropriately monitored and reported for potential 

suspicious activity.''14 (Emphasis added.) 

In addition, while a discrete policy issue, recent legislative efforts to impose taxes on 

funds transfers at both the state and federal level would have the same types of negative 

impacts on the money transmission industry as de-risking, although on a broader scale. One 

prominent example of such an effort is H.R. 1813, which would impose a tax of 2% on each 

funds transmission transaction defined as a "remittance transfer" under the Electronic Funds 

Transfer Act. 15 TMSRT opposes this tax as well as similar efforts to impose remittance taxes 

in individual states. Money transmission taxes will discourage and distort economic activity 

and therefore harm American businesses and consumers. In addition, by increasing the cost 

of using regulated money transmission services, these taxes would discourage the use of 

affordable, reliable, and readily available regulated funds transfer services and would result 

in more individuals turning to informal networks. 16 As is the case with de-risking, if funds 

are driven out of regulated and monitored channels by remittance taxes, U.S. law 

11 For example, as the GAO has explained, one common type of such an informal transfer system is a "hawala." 

Under this system, "a customer hands cash to a person known as a 'hawaladar' and requests that an equivalent 

amount be delivered in local currency to a recipient in a different country. The hawaladar then contacts a 

hawaladar in the receiving country and asks that the funds be disbursed to the recipient." See GAO Remittance 

Report at p.IO. 12 OCC Risk Perspective at 19. 13 See id. This point has been echoed by others, including the then-Deputy Director ofFinCEN, Jamal ElHindi, in a 20!6 speech, and the former Comptroller of the Currency Thomas J. Curry, who noted in a recent 

speech that as a result of regulated entities losing their banking relationships "[t]ransactions that would have 

taken place legally and transparently may be driven underground." Remarks by Thomas J Curry. Comptroller 

of the Currency, Before the Institute of International Bankers (March 7, 20!6). 14 OCC Risk Perspective at 19. 15 15 U.S.C. § 1693o-l. 16 As the GAO observed in a recent study, imposing a tax or fine on money transmission activity "could result 

in a decrease in remittances in the regulated market and an increase in remittances through informal methods of 

money transfer." United States Government Accountability Office, International Remittances: Actions Needed 

to Address Unreliable Official U.S. Estimate, GA0-!6-60 (February 2016). The GAO also noted that money 

transmission providers experienced a decrease in transaction volume after Oklahoma imposed a tax on certain 

types of remittances. 

6 
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MORRISON I FOERSTER 

enforcement will be deprived of valuable insight into flows of money within and across 

America's borders. 17 

On behalf of TMSRT, I would like to thank Chairman Pearce, Ranking Member 

Perlmutter, and the members of the subcommittee for examining these issues and inviting 

TMSRT to provide these comments for the record. TMSRT would be happy to continue to 

be a resource for the subcommittee and its members. 

dc-891017 

17 Though it is not relevant to state remittance tax proposals, we also note that while H.R. 1813 is intended to 

fund a border wall, the actual funds likely to be raised by the proposed tax would not come close to meeting the 

projected cost of any actual border wall. 

7 
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September 7, 20 17 

Duncan Deville 

Global Head of Financial Crimes Compliance 

Western Union 

Questions for the Record 

"Managing Terrorism Financing Risk in Remittances and Money Transfers" 

Questions submitted by Mr. Ellison and Mr. Vargas 

1, To what extent are money transmitters (principal organization and its agents) 

experiencing account terminations by banks or reductions in services offered? For those 

that have their accounts terminated, to what extent are they able to find new accounts and 

what kinds of challenges do they face? 

Accounts terminations by hanks can pose a serious risk to Money Service Businesses 

(MSBs). their agents, and the consumers they serve. As a principal organization, Western 

Union has not been immune to de-risking challenges particularly given the cross-border 

nature of our business. Regulation and risk tolerance will inevitably change, and we 

believe the response by the banking industry should be due diligence and assessment of 

individual BSA/AML programs for risk as opposed to wholesale elimination of entire 

categories of businesses. Furthermore, financial institutions that elect to meet the needs of 

underscrvcd communities through MSBs should be recognized by examining agencies. 

As a global financial company. Western Union has relationships with over 200 banks 

from large settlement banks to correspondent banks that carry out financial transactions 

on behalf of the company. When Western Union encounters account terminations at the 

correspondent banking level it is usually on an industry basis, a geographical basis, or 

combination of industry and geographical issues. Generally speaking. account 

termination has been pm1icularly difficult for Western Union agent locations. many of 

which are small businesses. This is especially true in underserved areas where banking 

options may be limited. 

2. What are the factors driving account terminations? Are all money transmitters affected 

equally? 

Financial institutions arc not required to provide Western Union with feedback or factors 

specific to account termination. This makes it difllcult to understand what may or may 
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not have contributed to an account closure and if other MSBs arc encountering account 

terminations for the same or different reasons. For the same reason. is also difficult to 

fully understand the frequency of account terminations. 

3. To what extent is the ability of money transmitters to facilitate money transfers affected 

by correspondent banks restricting or terminating relations with respondent banks? If 

there are differences among how correspondent banks serve money transmitters. please 

explain. 

Most MSBs transmit funds and infonnation through proprietary systems. This enables 

many money transmitters to deliver funds faster and more efficiently than the traditional 

banking system. ln many cases. MSBs use correspondent banks help enable back end 

settlement. As described above. when Western Union encounters account terminations at 

the correspondent banking level it is usually on an industry basis. a geographical basis, or 

combination of industry and geographical factors. In the case of Western tlnion ·s 

business. for example. we have encountered such issues in the Caribbean and North 

Africa. Due to the restriction of information that is given when a correspondent bank 

terminates a relationship with a respondent bank. it is difficult to discern how 

correspondent banks may serve various money transmitters differently. 

4. Does the technology and expertise exist for money transmitters to build effective 

BSA/ AML compliance programs that would allow them to manage the risk associated 

with terrorist financing? Please discuss. Can smaller money transmitters build effective 

programs? 

Western Union believes technology and expertise are vital components to building 

BSA/AML compliance programs. While some smaller MSBs may have limited products 

serving a limited number of areas. building an effective BSA/ AML program inevitably 

takes a substantial amount of time. money and expertise. MSBs that offer simple and 

limited purpose products will have to make compliance investments. but f(Jr those MSBs 

operating in more complex cross-border environments investments will be more 

significant. These investments arc ongoing as regulatory and business environments are 

in a constant state of evolution. 

As discussed in my written testimony. ov.cr the past five years Western Union's 

compliance program has gro'Nn significantly in terms of funding. workforce. and targeted 

decision making. Regarding expertise to manage risk associated with terrorist financing. 

the company has made a concentrated effort to add employees with strong law 

enforcement. national security and regulatory backgrounds. Technology also plays a key 

role in how \Vestern Union's compliance systems work and compliment human capital. 

Western Union holds 26 patents related to categorizing and identifying data patterns that 

allow the company to make more informed decisions about agent and consumer 

oversight. As a company. we have the proven ability to use data analytics in many areas 

and have leveraged this to track and/or stop transactions and ensure that those initiated 

outside of established parameters receive heightened due diligence. 

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Western Union has also built and patented the Comprehensive Model to Prioritize 

Strategy (CMPS), a statistical-indexing model that combines and enhances various risk 

indices and is used to measure agent risk across many categories. Risk scores are 

determined by factors such as transaction volume, transaction corridors, fraud data. and 

suspicious activity reports (SAR) data. The CMPS model helps guide agent compliance 

visits and program reviews for AML!CFT and consumer fraud purposes. 

5. To what extent do current BSA/AML regulations and guidance as well as the 

implementation and enforcement of the regulations and guidance for both banks and 

money transmitters promote the effective management of associated terrorist financing 

risks? 

As a money transmitter, Western Union is subject to regulation and examination by 48 

states. the District of Columbia, and multiple territories. as well as by the federal 

government and numerous financial regulators overseas. Westem Union is subject to the 

Bank Secrecy Act (BSA), the USA PATRIOT Act. and sanctions laws administered by 

Treasury's Office of Foreign Assets Control (OFAC). Western Union registers with 

FinCEN and is subject to examination by the Consumer Financial Protection Bureau 

(CFPB). In addition to regulator examinations. each year Western Union's compliance 

program is reviewed by banking partners, audited internally and externally, and provides 

detailed license and registration infonnation. 

Effectively managing terrorist financing risk is a shared goal of Westem Union. Wcstem 

Union's regulators. and the law enforcement community. Clear. concise guidance 

coupled with communication efforts by both parties and a mechanism for covered entities 

to receive feedback during the implementation phase allows market participants to best 

understand regulatory expectations and comply. MSB specific regulation would also be 

helpful. Oftentimes MSBs arc lumped in with all types financial institutions without the 

uniqueness of a different business model being taken into consideration or MSBs are 

dependent on deriving regulatory expectations based on guidance written for banks. We 

have seen regulators use standards set in the OCC model validation process or regarding 

account based transaction monitoring to apply to non-account based person-to-person 

transactions. 

Western Union supports the idea of ensuring there is a level playing field among money 

transmitters which is an important part of creating a fair marketplace that protects 

consumers and meets regulatory requirements. With over 26,000 registered MSBs, it is a 

very fragmented marketplace. To create a level playing field that truly protects 

consumers, enforcement of laws and regulations should be applied equally across market 

pmticipants. 

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6. What challenges exist in trying to balance the need to meet BSA/ AML compliance 

requirements while recognizing the needs of individuals, charities, and businesses to 

transmit funds to high risk areas? How can these be overcome? 

Western Union moves money for better, enabling individuals and families to transfer 

money safely around the world in increasingly easier, faster ways. As described in your 

question, Western Union operates in many challenging areas of the world where the 

company partners with many non-governmental organizations (NGOs) to deliver 

humanitarian assistance. 

Challenges do exist as. despite Western !.Inion's cooperation with law enf<xccmcnt and 

commitment of resources to combatting ten·or finance, the fact remains that identifying 

terrorists and facilitators is extremely difficult. There is no distinctive profile for a 

terrorist based solely on an individual's consumer activity. and we are not aware that any 

financial institution has yet been able to develop effective predictive analytical capacity 

to identify terrorists through their transactional activity. On the contrary, it is most often 

the .;as.c that the volume. frequency and other characteristics associated \Vith tetTorists · 

transactions are consistent with routine patterns the company sees for legitimate purposes 

such as humanitarian aid. charitable giving. and sending money to family and friends. 

Western Union helps address these challenges. in part, by supplementing traditional 

back-end automated transaction monitoring rules/algorithms that banks have with unique 

up-front monitoring (Real Time Risk Assessment [RTRA]) rules/algorithms that can be 

designed to stop transactions with indicia of crime before they go through. For example, 

in Haiti. Western Union partners with many NGOs including Haitian Education & 

Leadership Program (HELP). UNICEF. Mercy Corps. Save the Children, the Red Cross, 

and Partners in Health. In other parts of the world we work with Oxfam International and 

a long list of additional NGOs to address poverty and basic needs. 

Western Union has implemented specific RTRA controls concerning inbound 

transactions of a certain threshold to Haiti that will be stopped before funds are sent if 

certain consumer identifying information is not adequately presented to the agent at the 

point of sale. In many cases, Western Union's RTRA rules and algorithms go above and 

beyond what is required hy any law or regulation. 

a. For example. how can regulators ensure a balance between BSA/ AML 

compliance and transparent financial t1ows between countries? Are there 

processes that could keep financial t1ows, especially remittances, from being 

driven to informal and less transparent means? 

As discussed above. etlectively managing terrorist financing risk is a shared goal of 

Western Union, Western Union's regulators. and the law enforcement community. Clear, 

concise guidance coupled with communication efforts by both parties and a mechanism 

for covered entities to receive feedback during the implementation phase allows market 

participants to best understand regulatory expectations and comply. Robust 

communication about how regulations work in practice and may impact consumers can 
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help strike the balance regarding effective AML regulations and preventing unintended 

consequences that could drive consumers to underground. less transparent markets. 

Western Union also supports the idea of ensuring there is a level playing field among 

money transmitters which is an important part of creating a fair marketplace that protects 

consumers and meets regulatory requirements. Having this type of level playing field 

among money transmitters could also be a positive first step in ensuring that the now of 

remittances stays in the formal. regulated system. It is this kind of transparency that helps 

money transmitters and law enforcement develop relationships and work toward the 

shared goal of stopping terrorist finance. 

One specific area that would promote transparency would be the adoption ofFinCE>i's 

longstanding proposal for financial institutions to report cross-border electronic funds 

transmissions at a cettain threshold. Having this centralized govemment database could 

certainly provide the government with additional transparency. 

b. Have you provided any input on this issue to federal agencies? Which agencies 

and what was the outcome? 

Westem Union routinely participates in the open comment process by which federal 

agencies develop and issues regulations as described in The Administrative Procedure 

Act. As the largest MSB. we want to serve as a resource to both regulators and 

lawmakers as various public policy issues are explored. We hope that many of the 

themes discussed at the subcommittee hearing will continue to develop. 

7. Money transmitters are subject to regulation and supervision, including regular 

examinations, by state banking supervisors and also to examination by the IRS. To what 

extent is state/IRS supervision of money transmitters leveraged by banks when 

conducting risk assessments of money transmitters and by bank examiners when 

evaluating banks' risk assessments? 

In most cases, examination results for MSBs, banks, and other financial institutions 

would be treated as conlidential supervisory information and therefore unavailable to 

banks conducting due diligence and examiners. If confidential supervisory infonnation 

were made available to financial institution examiners. all regulatory bodies should be 

able to share this information. 

8. Do you have any knowledge of how much BSAJAML compliance cost is passed on to 

money transmitters, and how much of those costs get passed on to customers who send 

money abroad? What other effects has BSA/ AML compliance had on the money 

transmitter industry? 

While these figures are difficult to quantify there clearly is a cost to the government to 

regulate money transmitters, a cost to money transmitters to comply with govcmmcnt 

regulation, and as these costs impact \Vestern Union's total operating budget, have some 

impact on the cost to consumers to use Western Union's system. At a very basic level, 

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BSA/AML compliance can be burdensome on MSBs and consumers, but communication 

between regulators and impacted entities can help streamline processes and keep systems 

and consumers safe while minimizing costs. In the case ofWestem Union, BSA/AML 

compliance has provided a framework that the company must work within to help combat 

terrorist financing and has allowed \V estern Union· s compliance program the flexibi I ity 

to evolve and go beyond regulatory requirements as warranted. 

At the same time, BSA/AML compliance costs can also be viewed from a bank's 

perspective for having MSB account holders and the associated costs. This type of 

question may be best suited for the banking industry.ln 2016, Westem Union had over 

30 in-person bank visits. and about 400 requests to provide infon11ation on the many 

levels of compliance it applies to its own customers. 

9. Last year, the Conference of State Banking Supervisors and the Money Transmitter 

Regulators Association released a report, The State of Money Services Business 

Regulation & SupervL~ion. It highlighted the coordinated enforcement and supervision of 

MSBs by state banking regulators. Below is a list of all the regulations that Money 

Services Businesses follow: 

The State of Money Services Business Regulation & Supervision 

Conference of State Banking Supervisors & Money Transmitter Regulators Association 

BSA/ A ML compliance is a substantial portion of money transmitter exams. During an exam, 

state examiners review the following: 

• Registration with FinCEN 

• Agent Monitoring 

• BSA/ AML Risk Assessment 

• Anti-Money Laundering Programs 

• Currency Transaction Reporting 

• Foreign Bank and Financial Accounts Reporting 

• Suspicious Activity Reporting 

• Purchase and Sale of Monetary Instruments Record Keeping 

• Funds Transfers Record Keeping 

• Voluntary Info1111ation Sharing 

• Intemal Controls 

• Training 

• Independent Review ofBSA/AML Program 

• lnfo1111ation Systems Adequacy 

• Office of Foreign Assets Control Requirements 

• Personal lnfo1111ation Safeguards 

• Procedures for mitigating money laundering and terrorist financing from foreign agent or 

counterparty relationships 

• International Transportation of Currency of Monetary Instruments Reporting 

s 
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Shouldn't a bank or credit union be able to provide a checking account, safe deposit box, 

or wire transfer services to an MSB as long as that money transmitter is legally 

operational with appropriate compliance paperwork, etc.? If an MSB is legally operating, 

should a financial institution assume it is fine to serve them? 

All banks and credit unions can provide the above services to MSBs; still. many choose 

not to. Financial institutions are not required to provide Western Union. or any other 

MSB, with feedback or factors specific to account termination. This makes it difficult to 

understand why financial institutions may choose not to serve an MSB. As described 

above, the MSB marketplace is highly fragmented. While Western Union is subject to a 

high level of scrutiny, clearer more robust examination of all market participants may 

give financial institutions additional ease as they evaluate partnering with an MSR. For 

example. the IRS has a limited number of examiners delegated to MSBs yet there are 

over 26.000 registered MSBs. 

10. Please explain how a financial institution can assess legality and compliance ofMSBs? 

Are they able to have access to state banking or IRS supervision information? If not, 

would it help them feel more comfortable providing services if they could? 

We are aware that under the National Mortgage Licensing System, some state regulators 

allow MSBs to submit a Call Report to help facilitate the regulatory examination process. 

This was recently developed with the goal of enhancing and standardizing the 

infonnation available to state regulators concerning the activities ofMSB licensees on a 

quarterly basis. StilL in most cases, information resulting from regulatory examinations 

vvould be treated as confidential supervisory information and therefore unavailable to 

banks that may be conducting risk assessments. Additionally. other types of financial 

institutions regulatory examinations are also confidential supervisory information and 

therefore unavailable to third parties. 

In 2016. Western Union had over 30 in-person bank visits, and about 400 requests to 

provide information on the many levels of compliance it applies to its own customers. 

Western Union believes that clear guidance, perhaps jointly issued by the federal 

!inanl"ial regulators. could help create the kind of consistency needed so lawful compliant 

businesses and the consumers they serve can effectively participate in the banking 

system. In pa11icular. it would he helpful for such guidance to recognize that it is 

appropriate and acceptable. under a risk-based approach. for a bank to provide services to 

an MSB that itself has a sophisticated AML program that has been approved by its own 

regulators. 

II. To what extent is the ability of money transmitters to facilitate money transfers affected 

by correspondent banks restricting or tenninating relations with respondent banks? 

The extent of MSB's ability to facilitate money transfers can absolutely be affected by 

correspondent banks restricting or terminating relations with a respondent bank. The 

extent of the impact is usually felt by MSBs on an industry basis. a regional basis. or 

6 
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through a combination of industry and geographical factors. Due to the restriction of 

infonnation that is given when a correspondent bank terminates a relationship with a 

respondent bank, it is difficult to discern the extent of this problem or how it may Yary 

among market participants. 

7 
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1111 Third Avenue, Suite 2100 

Seattle, WA 98101 USA 

United States House of Representatives 

Committee on Financial Services 

Washington, DC 20515 

Re: Responses to Questions for the Record 

September 11, 2017 

"Managing Terrorism Financing Risk in Remittances and Money Transfers, July 18, 2017 

Dear Mr. Ellison, Mr. Vargas, and Members of the House Subcommittee on Terrorism and Illicit Finance: 

Below please find responses to your questions posed to Remitly following our testimony before the 

Subcommittee on July 18, 2017. We have restated the question and presented our response in bold. 

1. To what extent are money transmitters (principal organization and its agents) experiencing account 

terminations by banks or reductions in services offered? For those that have their accounts terminated, to what 

extent are they able to find new accounts and what kinds of challenges do they face? 

While Remitly has not experienced a termination of its bank relationship as an operating entity, we are well 

aware of the challenges that money service businesses ("MSBs") experience in obtaining and maintaining 

reliable banking services. When Remitly began as a startup in 2012 one of its most significant initial challenges 

was to obtain the banking relationship necessary to deliver a remittance service. It required almost a year of 

solicitation, negotiation and on-site examination before a large national bank agreed to provide us the 

necessary banking services. In many ways, this exercise was as difficult as obtaining our initial State money 

transmitter licenses. Incidentally, Remitly now operates in jurisdictions around the world and we have found 

that our experience abroad in obtaining banking services is just as great in other countries as it is in the U.S. 

2. What are the factors driving account terminations? Are all money transmitters affected equally? 

Much of what we know on this topic is anecdotal but it appears the primary issue stems from regulatory scrutiny 

of banks that provide necessary services to MSB's like Remitly. Because MSBs are considered to be 1'high risk", 

regulators hold banks overly responsible for all activity of their MSB customers. The result is that banks avoid 

being in a relationship with MSB's that creates real compliance risk to the bank without the ability to exercise 

day to day control. Terminations are felt most acutely by licensed MSBs who self-disclose their intended 

operations and are therefore easily identified, while unlicensed MSBs ·· entities with that present AMl and 

terrorist financing risk -- operate within bank merchant portfolios until they are detected. 

3. To what extent is the ability of money transmitters to facilitate money transfers affected by correspondent 

banks restricting or terminating relations with respondent banks? If there are differences among how 

correspondent banks serve money transmitters, please explain. 

As an MSB operating within the jurisdictions that we currently serve we have not directly experienced this issue. 

However, as a general statement we believe that it is clear that the lack of available banking services restricts 

Remitly, 
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House Financial Services Committee 

September 11, 2017 

Page 2 of4 

the ability of new and innovative money transmitters to enter the industry. As a result, consumers pay a higher 

price for money transfers and have fewer competitive choices, especially when they want to send to "high risk" 

jurisdictions. 

4. Does the technology and expertise exist for money transmitters to build effective BSA/AML compliance 

programs that would allow them to manage the risk associated with terrorist financing? Please discuss. Can 

smaller money transmitters build effective programs? 

Yes, technology and vendors are available to smaller or emerging money transmitters to manage the risk of 

terrorist financing. We believe the most effective way to manage terrorist financing risk is perform robust KYC 

of our customer base and take full advantage of available OFAC and other sanctions lists to screen and identify 

terrorists and supporters of terrorism. For transfers to certain high risk areas, MSBs can also perform enhanced 

due diligence of customers. Finally, MSBs must work closely with their disbursement partners to ensure that 

appropriate KYC procedures are carried out at the point of payment receipt. These procedures are available to 

be implemented by all MSBs, regardless of their size. 

5. To what extent do current BSA/AML regulations and guidance as well as the implementation and enforcement 

of the regulations and guidance for both banks and money transmitters promote the effective management of 

associated terrorist financing risks? 

Regulatory guidance regarding what constitutes an "effective" anti-terrorist financing program is not as readily 

available as what generally exists for anti-money laundering programs. While BSA requirements and objectives 

are complementary to the efforts to detect and deter terrorist financing there are few specific references 

beyond OFAC screening and cautions about facilitating payments to charitable organizations. 

6. What challenges exist in trying to balance the need to meet BSA/AML compliance requirements while 

recognizing the needs of individuals, charities, and businesses to transmit funds to high risk areas? How can these 

be overcome? 

a. For example, how can regulators ensure a balance between BSA/AML compliance and transparent 

financial flows between countries? Are there processes that could keep financial flows, especially 

remittances, from being driven to informal and less transparent means? 

It would be helpful if the federal and state bank regulatory agencies made a strong statement in support 

of the need to provide services to money service businesses, including money transmitters. The goal 

should be to encourage banks to assess MSB risk on a case by case basis, as opposed to making an across 

the board judgment about our industry. 

b. Have you provided any input on this issue to federal agencies? Which agencies and what was the 

outcome? 

The topic of de-risking and the relative scarcity of bank services to MSBs is discussed in nearly every 

industry meeting, including those involving regulators. When included, the state regulators usually 

comment that they have shared the concern with their federal counterparts and received assurance 

that banks are being encouraged not to treat the money transmitter industry as extraordinarily high 

risk. To date, we do not see evidence that this message has taken root among banking institutions. 
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House Financial Services Committee 

September 11, 2017 

Page 3 of4 

7. Money transmitters are subject to regulation and supervision, including regular examinations, by state banking 

supervisors and also to examination by the IRS. To what extent is state/IRS supervision of money transmitters 

leveraged by banks when conducting risk assessments of money transmitters and by bank examiners when 

evaluating banks' risk assessments? 

We do not believe that state agency reports of examination have been used by bank or bank examiners to 

assess the risk associated with any specific money transmitter. Typically, these reports are considered to be 

property of the issuing state regulatory agency and therefore cannot be shared with third parties. 

8. Do you have any knowledge of how much BSA/AML compliance cost is passed on to money transmitters, and 

how much of those costs get passed on to customers who send money abroad? What other effects has BSA/AML 

compliance had on the money transmitter industry? 

The cost of compliance in our industry is considerable. We estimate that an amount equal to several percentage 

points of total revenue is spent on complying with applicable state and federal requirements. As any 

compliance-related fine, infraction, or finding could potentially translate into a MSB losing its license or its 

access to banking services, these investments are not optional. As a result, these costs are necessarily passed 

on in the form of higher prices paid by customers. In addition to the financial costs, the compliance burden 

creates a negative customer service experience for those offering a regulated, compliant product, which in turn 

likely drives customers into informal money transfer alternatives which carry no such compliance obligations 

or associated costs. 

9. Last year, the Conference of State Banking Supervisors and the Money Transmitter Regulators Association 

released a report, The State af Maney Services Business Regulation & Supervision. It highlighted the coordinated 

enforcement and supervision of MSBs by state banking regulators. Below is a list of all the regulations that Money 

Services Businesses follow: 

The State of Money Services Business Regulation & Supervision 

Conference of State Banking Supervisors & Money Transmitter Regulators Association 

BSA/AML compliance is a substantial portion of money transmitter exams. During an exam, state examiners 

review the following: 

• Registration with FinCEN 

• Agent Monitoring 

BSA/AML Risk Assessment 

• Anti-Money laundering Programs 

• Currency Transaction Reporting 

• Foreign Bank and Financial Accounts Reporting 

• Suspicious Activity Reporting 

• Purchase and Sale of Monetary Instruments Record Keeping 

• Funds Transfers Record Keeping 

• Voluntary Information Sharing 

• Internal Controls 

• Training 

• Independent Review of BSA/AML Program 
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Information Systems Adequacy 

Office of Foreign Assets Control Requirements 

• Personal Information Safeguards 

House Financial Services Committee 

September 11, 2017 

Page 4 of 4 

• Procedures for mitigating money laundering and terrorist financing from foreign agent or counterparty 

relationships 

• International Transportation of Currency of Monetary Instruments Reporting 

Shouldn't a bank or credit union be able to provide a checking account, safe deposit box, or wire transfer services 

to an MSB as long as that money transmitter is legally operational with appropriate compliance paperwork, etc.? 

If an MSB is legally operating, should a financial institution assume it is fine to serve them? 

We generally agree. As an MSB we are regulated by 47 state agencies and the federal government. As a result 

we are required to operate in compliance with a multitude of regulations, especially those related to antimoney laundering and consumer protections. Accordingly, in some respects we are lower risk than many other 

industries. Realistically, we would simply encourage banks to complete appropriate due diligence and risk 

underwriting. Assuming it's an appropriate and complete effort, banking examiners should give deference to 

the bank's underwriting rather than second guess it based on a judgement or pre-existing prejudice about the 

perceived riskiness of the industry. 

10. Please explain how a financial institution can assess legality and compliance of MSBs? Are they able to have 

access to state banking or IRS supervision information? If not, would it help them feel more comfortable providing 

services if they could? 

Banks are capable of assessing the adequacy of an MSB's compliance program. In many respects they are 

familiar with the AML/TF risks of an MSB, given that they are subject to many ofthe same rules and regulations. 

Some of the information readily available to banks for their review are: 1) AMl policy and procedures, 2) 

Independent Review reports, 3) copies of periodic reports sent to state agencies, and 4) custom reports with 

metrics regarding suspicious activity reports, payment exceptions, occurrence of state examinations and fraud. 

It would be more efficient if banks were able to rely upon the findings of State regulatory agencies or upon the 

fact that an MSB is licensed, leaving the assessment of legality and compliance to the applicable regulatory 

body. 

11. To what extent is the ability of money transmitters to facilitate money transfers affected by correspondent 

banks restricting or terminating relations with respondent banks? 

Again, given the nature of our business and our experience to date we are not sure how the difference between 

respondent and correspondent banks affects MBSs. However, we can state with certainty that the reluctance 

of banks to provide financial services to money transmitters is harmful to consumers. It creates a significant 

barrier to entry, limits innovation and raises costs that must passed to on customers. 

Please feel free to reach out to Aaron Gregory, VP of Legal, with any additional questions or follow-up you may 

have. 

Respectfully submitted, 

Remitly, Inc. 
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Responses by Scott T. Paul, Humanitarian Policy Lead, Oxfam America, to Questions for 

the Record submitted by Mr. Ellison and Mr. Vargas 

Questions: 

1. To what extent are money transmitters (principal organization and its agents) 

experiencing account terminations by banks or reductions in services offered? For those 

that have their accounts terminated, to what extent are they able to find new accounts and 

what kinds of challenges do they face? 

As I mentioned in my written testimony, MTOs are one of a number of types of customers losing 

access to banking services, both in the United States and globally. A 2015 World Bank study that 

interviewed representatives of governments, money transmitters, and banks in G20 countries 

reported that 46 per cent of money transmitter respondents had experienced bank account 

closures. 1 28 per cent reported that they could no longer access banking services, with a 

staggering 45 per cent reporting that some of their agents were unable to use banks.2 

In the United States, I am not aware of any study that has analyzed a statistically significant 

sample of money transmitters to determine the extent to which they are losing access to the 

financial services that banks provide. However, there is overwhelming anecdotal evidence that 

this is a serious problem. Somali-American money transmitters, with which I have had the most 

extensive contact on the subject, have almost entirely lost access to banking services. This has 

left them to use a combination of coping mechanisms, including sending large volumes of 

physical cash abroad, that are less secure, transparent, and affordable than wire transfers. 

Representatives of many other money transmitters have also told me that maintaining bank 

account access and wire services are some of the most significant operational challenges that 

they face. 

2. What are the factors driving account terminations? Are all money transmitters affected 

equally? 

The reasons behind account terminations are numerous, complex. interrelated, and vary 

depending on the type and size of the bank and the type and size of the money transmitter. In 

general, regulatory and market changes have resulted in a decline in banks' risk appetites and an 

increase in the perceived risk associated with money transmitters. Those regulatory and market 

changes include higher fines for Bank Secrecy Act noncompliance; higher capital requirements 

and liquidity thresholds; a shift from corporate to individual liability, including criminal liability; 

an increase in private civil litigation for anti-money laundering/countering the financing of 

terrorism (AMLICFT) failings; and increased pressure from bank examiners related to the 

maintenance of high-risk accounts, particularly in the wake of the 2008 financial crisis. These 

1 "Report on the G20 Survey on De-Risking Activities in the Remittance Market." October, 2015; World 

Bank, available at http:l/documentsworldbank.org/curated/en/679881467993185572/pdf/1 01 071-WPPUBLIC-GPFI-DWG-Remittances-De-risking-Report-2015-Final-2.pdf. 

2 /bid. 
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factors have made banks more conscious of the legal and reputational consequences of their 

various business lines and, in some cases, have increased the costs of compliance. 

The revenue potential of money transmitter accounts has not increased to keep pace with the 

rising costs and consequences of maintaining them. I have found that small money transmitters 

have a more difficult time maintaining and opening bank accounts than large money transmitters. 

3. To what extent is the ability of money transmitters to facilitate money transfers affected 

by correspondent banks restricting or terminating relations with respondent banks? If 

there are differences among how correspondent banks serve money transmitters, please 

explain. 

Correspondent banking is a critical enabler for remittance flows. The decline in correspondent 

banking, which has taken place for similar reasons as the decline in banking for money 

transmitters, hurts money transmitters in two ways. First, banks are under tremendous pressure to 

reduce their risk profiles in order to maintain their correspondent relationships. In some 

instances, they terminate the accounts of money transmitters in order to do this. Second, some 

countries' banks have lost or almost lost all of their correspondent accounts with banks in the 

U.S. This leaves money transmitters working in and serving those countries unable to settle 

remittances paid in US dollars and paid out in local currencies. 

4. Does the technology and expertise exist for money transmitters to build effective 

BSA/AML compliance programs that would allow them to manage the risk associated 

with terrorist financing? Please discuss. Can smaller money transmitters build effective 

programs? 

I am not enough of an expert in BSA/ AML compliance mechanisms or technologies to offer 

an informed opinion on this issue. 

5. To what extent do current BSA/AML regulations and guidance as well as the 

implementation and enforcement of the regulations and guidance for both banks and 

money transmitters promote the effective management of associated terrorist financing 

risks? 

In general, BSA/ AML regulations, guidance, and enforcement over the past fifteen years appear 

to have resulted in much greater investment by banks in compliance and money transmitters. 

This may have resulted in better risk management as concerns most high-profit or low-risk 

customers and transactions. 

However, the rising costs and consequences of managing customers viewed as high risk has 

pushed banks to end relationships with those customers, and sometimes entire classes of 

customers and business lines viewed as high risk. This seems particularly true of large banks, 

which have the best capacity to invest in compliance and risk management mechanisms. The 

result appears to be less and worse management of risk when it comes to low-profit, high-risk 

customers and transactions. 
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6. What challenges exist in trying to balance the need to meet BSA/AML compliance 

requirements while recognizing the needs of individuals, charities, and businesses to 

transmit funds to high risk areas? How can these be overcome? 

a. For example, how can regulators ensure a balance between BSA/AML 

compliance and transparent financial f1ows between countries? Are there 

processes that could keep financial flows, especially remittances, from being 

driven to informal and less transparent means? 

b. Have you provided any input on this issue to federal agencies? Which agencies 

and what was the outcome? 

I believe that there are a few steps that regulators could take to effectuate stronger risk 

management and better service for individuals, charities, and businesses looking to transmit 

funds to high-risk areas. I will emphasize two suggestions that my organization, along with a 

number of coalition partners, has made directly to the Treasury Department and federal banking 

agencies. 

First, federal banking agencies should take steps to emphasize the importance of maintaining 

accounts and managing the risk associated with individuals, charities, and businesses 

transmitting funds to high-risk areas. Presently, the examination process recognizes only the 

negatives of banking these customers. On occasion, banks have told me that examiners explicitly 

discourage banking these types of customers, which are viewed as high-risk. More commonly, I 

hear examiners asking probing questions and seeking details about money transmitters accounts 

at the beginning of examinations. This is consistent with what the agencies view as best practice, 

but it understandably makes examiners nervous about maintaining these accounts. I would 

suggest that the bank examination manual be reviewed and revised. The revision should state 

that banks are not required to know their customer's customer and that not all money 

transmitters, charities, and foreign financial institutions are high-risk. Most importantly, it should 

emphasize that even for the accounts presenting the highest risk, risk management and account 

maintenance are preferable to risk avoidance and account termination. 

A revision of the manual is cun·ently underway. r have provided this input to federal banking 

agencies and the Treasury Department, which have taken it under advisement. 

Second, in extraordinary cases when there is a strong public interest in maintaining financial 

flows that are being pushed out of the formal system, the Treasury Department should enter into 

public-private partnerships to keep those f1ows secure and transparent. This could take many 

forms, including a joint effort between FinCEN or another Treasury office and a private bank to 

manage critical accounts that banks believe would otherwise be unprofitable or unmanageable. 

Oxfam has advocated for such an initiative to be put in place for Somali-American money 

transmitters since 2014 and for Syrian-American charities since 2016, but the Treasury 

Department is not receptive to this suggestion. 
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7. Money transmitters are subject to regulation and supervision, including regular 

examinations, by state banking supervisors and also to examination by the IRS. To what 

extent is state/IRS supervision of money transmitters leveraged by banks when 

conducting risk assessments of money transmitters and by bank examiners when 

evaluating banks' risk assessments? 

I do not have sufficient information to answer this question. 

8. Do you have any knowledge of how much BSA/AML compliance cost is passed on to 

money transmitters, and how much of those costs get passed on to customers who send 

money abroad? What other effects has BSA/AML compliance had on the money 

transmitter industry? 

I do not have any insight to offer on this question. 

9. Last year, the Conference of State Banking Supervisors and the Money Transmitter 

Regulators Association released a report, The State of Money Services Business 

Regulation & Supervision. It highlighted the coordinated enforcement and supervision of 

MSBs by state banking regulators. Below is a Jist of all the regulations that Money 

Services Businesses follow: 

The State of Money Services Business Regulation & Supervision 

Conference of State Banking Supervisors & Money Transmitter Regulators Association 

BSA/AML compliance is a substantial portion of money transmitter exams. During an exam, 

state examiners review the following: 

• Registration with FinCEN 

• Agent Monitoring 

• BSA/AML Risk Assessment 

• Anti-Money Laundering Programs 

• Currency Transaction Reporting 

• Foreign Bank and Financial Accounts Reporting 

• Suspicious Activity Reporting 

• Purchase and Sale of Monetary Instruments Record Keeping 

• Funds Transfers Record Keeping 

• Voluntary Information Sharing 

• Internal Controls 

• Training 

• Independent Review of BSA/ AML Program 

• Information Systems Adequacy 

• Office of Foreign Assets Control Requirements 

• Personal Information Safeguards 
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29451.064

• Procedures for mitigating money laundering and terrorist financing from foreign agent or 

counterparty relationships 

• International Transportation of Currency of Monetary Instruments Reporting 

Shouldn't a bank or credit union be able to provide a checking account, safe deposit box, 

or wire transfer services to an MSB as long as that money transmitter is legally 

operational with appropriate compliance paperwork, etc.? If an MSB is legally operating, 

should a financial institution assume it is fine to serve them? 

Banks should conduct their own review of an MSB's compliance systems and detennine whether 

they have the capacity to manage their accounts. However, it is distressing to see many banks 

arrive at the conclusion, largely aided by public pronouncements by regulators over the past 15 

years and communicated directly by bank examiners, that they should be wary of MSBs. At a 

minimum, passing the extensive examination that MSBs undergo at the state level should at a 

minimum create a presumption that an MSB is responsibly managing AMLICFT risk. 

10. Please explain how a financial institution can assess legality and compliance ofMSBs? 

Are they able to have access to state banking or IRS supervision information? If not, 

would it help them feel more comfortable providing services if they could? 

I do not have sufficient information to answer this question. However, allowing banks to access 

information about an MSB collected during supervision and examination should give them more 

information about the MSB's business model and compliance practices, and enhance banks' 

confidence in their ability to manage the MSB account. 

11. To what extent is the ability of money transmitters to facilitate money transfers affected 

by correspondent banks restricting or terminating relations with respondent banks? 

As I mentioned in my written testimony, customers that depend on banking services in both 

wealthy and developing countries alike- including MTOs and charities such as Oxfam- are 

affected by the decline of correspondent banking in two ways. First, fewer interbank connections 

means more difficulty routing cross-border transactions, particularly to high-risk jurisdictions. 

Second, banks arc desperate to make themselves more attractive customers for larger 

correspondent banks. This is especially true for foreign banks looking to maintain correspondent 

relationships with US financial institutions, which are insisting that their respondent banks 

reduce their risk profiles. Cutting MTO accounts, appears to be an easy way to do that. at least 

superficially. 

In addition, in certain jurisdictions without any correspondent links to provide them access to the 

US financial system, the cost of remittances appears to be skyrocketing. More data is needed to 

deterrnine the damage that the decline of correspondent banking is inflicting on families relying 

on remittances, but it appears to be substantial. 
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29451.065

ET~ 

The Honorable Mike Rogers 

United States House of Representatives 

2184 Rayburn HOB 

Washington, DC 20515 

Dear Congressman Rogers: 

May I, 2017 

On behalf of the Electronic Transactions Association (ETA), I write to oppose H,R, 1813, which would amend the 

Electronic Fund Transfer Act (EFTA) to impose a 2 percent tax on remittance transfers to certain countries. 

ETA opposes this proposed tax on remittance transfers, and therefore HK !813, for several reasons. 

First, imposing a tax on remittance transfers will distort the marketplace and ultimately harm consumers and businesses 

by driving up the cost of doing business and limiting products and service offerings. The market should be consumerdriven, where the development of products and services is based upon demand from consumers. For example, the ability 

to remit money digitally has provided many benefits for users. Digital remittances can cost almost half of what traditional 

channels charge, and can be done easily with little to no friction for the parties in the process. [mposing a tax will 

negatively impact this market and limit the availability of these types of beneficial services for customers. 

Second, imposing an additlonal tax on consumers and therefore increa"iing the cost of using a transfer service will drive 

traffic to altemative, likely unregulated channels. For example, Americans sent roughly $25 billion dollars to Mexico in 

2015- if an additional tax or fee was jmplemented for these transfers at the expense of the sender, the sender will be 

incentivized to find cheaper alternatives, such as illegal or black-market channels. Driving traffic to a black-market 

economy has important consequences for our nation's security, including law enforcement's ability to track money that is 

sent overseas and to ensure that money is not being used for illegal and dangerous activities such as: money-laundering. 

terrorist activities, and drug trafficking. 

ETA urges you to reconsider the implications that H.R. 1813 would have for American businesses and consumers. 

ETA is the leading international trade association for the payments industry, representing more than 500 companies that 

offer electronic transaction processing products and services. ETA's members include financial institutions, payment 

processors. and licensed money transmitters. 

Please let me know if ETA can ever be of assistance on issues related to payments or financial services. 

Respectfully, 

Scott Talbott, Senior Vice President, Government Affairs 

Electronic Transactions Association 

StalbQ!1@2electran.Q!:g 
99 


29451.066

May 17,2017 

To: Members of the U.S. House of Representatives 

Re: Opposition to H.R. 1813, the Border Wall Funding Act of 2017 

On behalf of our member companies, many of which engage in the facilitation of remittance transfers, 

we write to express our concern with H.R. 1813, the Border Wall Funding Act of 2017. This legislation, 

which would subject remittance transfers from the U.S. to certain countries to a 2% user fee, is an illadvised consumer tax on a legal and heavily regulated financial product used by millions of Americans. 

As a matter of principle, taxes on consumer financial products and services are bad policy, no matter 

what the stated goal. The consumer tax in H.R. 1813 would increase the cost of remittance transfers, 

driving consumers out of regulated financial services and forcing these money flows underground. 

When consumers utilize banks and other regulated financial institutions for remittance transfers- firms 

that have robust anti-money laundering programs- it provides law enforcement and financial regulators 

visibility into potentially illegal activities. Policies that encourage alternative channels reduce 

transparency and the ability to properly monitor transactions. 

For these reasons, we urge opposition to H.R. 1813. 

Sincerely, 

American Bankers Association 

Consumer Bankers Association 

Electronic Transactions Association 

Financial Services Roundtable 

Independent Community Bankers of America 

Money Services Business Association 

Money Services Round Table 

National Money Transmitters Association 
100 


29451.067

MORRISON I FOERSTER 

May2, 2017 

Via Overnight Delivery and FAX 

The Honorable Mike Rogers 

United States House of Representatives 

2184 Rayburn HOB 

Washington, DC 20515 

FAX (202) 226-8485 

2000PENNSYJ.VANJA AVE., NW 

WJ\SIUNGTON,D.C. 

2(K)()6-18B8 

TELEPI lONE: 202.887.1500 

FACSIMILE: 202.887.0763 

WWW.MOFO.COM 

Re: Remittance Transfer Tax (H.R. 1813) 

Dear Congressman Rogers: 

Writer's Direct Contact 

+] (202) 887.8766 

BLui@mofo.com 

I write on behalf of The Money Services Round Table ("TMSRT") 1 to oppose H.R. 1813, 

which would impose a tax of 2% on each funds transmission transaction defined as a 

"remittance transfer" under the Electronic Funds Transfer Act ("EFT A"). As explained 

herein, TMSRT opposes this tax for a number of reasons. It will discourage and distort 

economic activity and therefore harm American businesses and consumers. In addition, by 

increasing the cost of using regulated channels for funds transfer services, H.R. 1813 will 

harm American national security by driving these transactions to informal or other 

unregulated and unmonitored channels, which will deprive U.S. law enforcement of valuable 

insight into flows of money across America's borders. Finally, while the ostensible purpose 

ofH.R. 1813 is to fund a border wall, the actual funds likely to be raised by the proposed tax 

would not come close to meeting the projected cost of any actual border wall. 

Background 

As the General Accounting Office ("GAO") noted in a recent studl (the "GAO Study"), 

there are a number of ways that individuals can transfer funds abroad, including through cash 

payments to individuals and bank accounts, using prepaid cards, or transfers initiated online 

1 TMSRT is comprised of leading national non-bank money transmitters including RIA Financial Services, 

Sigue Corporation, Viamericas Corporation, Western Union Financial Services, Inc., and MoneyGram Payment 

Systems, Inc. These companies offer a variety of funds transmission services including bill payments and funds 

transfers (domestic and international) through retail points of sale, the internet, and mobile phones, as well as 

the sale and reloading of stored value products and other money transmission services. With the exception of 

one member company whose license application is pending in New York, each of these companies is licensed 

in all U.S. states that have non-bank licensing laws and is a Money Services Business as defined in the 

regulations implementing the Bank Secrecy Act, 31 USC§ 5311 et seq. and 31 C.F.R. Chapter X (collectively, 

the "BSA"). 

dc-877625 
101 


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MORRISON I FOERSTER 

The Honorable Mike Rogers 

May2, 2017 

Page Two 

and through mobile devices. These types of transactions are generally subject to federal 

oversight under the Bank Secrecy Act, and in many eases (including for money transmitters) 

to state regulation and oversight as well. Alternatively, as the GAO noted, individuals can 

use informal, unregulated channels to transfer money, including the use of"hand-carried 

cash, courier services, and agents known as hawalas."3 Transactions through these channels 

are not subject to any oversight. 4 

H.R. 1813 would impose a tax of2% on funds transfers that meet the definition of a 

"remittance transfer" and that are sent to the countries of Central America, South America, 

and the Caribbean Islands, and other island nations in the Atlantic Ocean. The EFT A defines 

a "remittance transfer" as an electronic transfer of funds initiated by a remittance transfer 

provider that is sent for personal, family, or household purposes from the United States to a 

"designated recipient," which is a person located in a foreign country identified by the sender 

of the funds as the authorized recipient of the funds. 5 And, a "remittance transfer provider" 

is defined as "any person or financial institution that provides remittance transfers for a 

consumer in the normal course of it~ business."6 

Therefore, regardless of the means by which a consumer initiates a funds transfer to a 

recipient in any of these designated countries-whether online, at a brick-and-mortar retail 

location, at a bank branch, and so on-the transaction would be subject to the tax. Thus this 

tax will be imposed on a diverse array of consumer financial products and services, and on 

consumers that frequent a diverse array of businesses including large banks and credit 

unions, online payment~ companies, and traditional money transmission businesses that otter 

their services through physical locations such as grocery store chains and other major 

retailers as well as through smaller convenience stores and other local American businesses. 

As discussed below, the breadth of this tax will have a detrimental impact on American 

businesses and consumers, and on law enforcement efforts to detect and counter money 

laundering and the financing of terrorism. And, perhaps most importantly, for all of these 

burdens on the economy and national security, the tax will likely raise far less revenue than 

H.R. 1813's proponents may be hoping for. 

2 United States Government Accountability Office, International Remittances: Actions Needed to Address 

Unreliable Official U.S. Estimate, GA0-16-60 (February 2016). 3 /d. at7. 4 In addition, in light of recent innovations, it is possible that the use of virtual currency as a means to initiate 

remittances will become significantly more appealing. Currently, attempting to move money in this fashion is 

generally not competitive with the safe and efficient services offered by licensed money transmitters. But, if a 

tax were imposed on licensed money transmission services, the tax would likely make virtual currency 

services-which offer much less transparency and receive much less oversight-more economically appealing 

to U.S. consumers. 5 See 15 U.S.C. § l963o-l(g)(l), (2), (4). 6 !d. at§ l963o-l(g)(3). 

dc-877625 
102 


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MORRISON I FOERSTER 

The Honorable Mike Rogers 

May 2, 2017 

Page Three 

TMSRT therefore opposes H.R. 1813 and a tax on remittance transfers. 

Regulated Money Transmission Activity Benefits Law Enforcement 

A remittance tax will be detrimental to national security. Imposition of the proposed tax will 

increase the costs of using formal, licensed money transmission networks to transmit 

remittances. This, in turn, will create significant incentives for remitters to discontinue using 

these networks to transmit funds and instead turn to unregulated, informal networks for their 

money transmission needs. 

Licensed money transmission networks are heavily regulated and monitored. In particular, 

money transmitter licensees must comply with detailed transaction recordkeeping and 

reporting requirements, and strict anti-terrorism and anti-money laundering laws and 

regulations under the BSA and under state laws as well. The records and reports that 

licensed money transmitters maintain enable regulators and law enforcement to have 

visibility into the money transmission transactions conducted by licensees, and enable 

licensees to work with law enforcement at all levels to help detect and prevent illegal or 

criminal activities from being facilitated by the use of money transmitters. 

More specifically, the BSA requires that money transmitters register with the Financial 

Crimes Enforcement Network ("FinCEN"), have an effective anti-money laundering 

compliance program in place, and, among other things: (1) file Suspicious Activity Reports 

("SARs") for certain types of transactions that are considered suspicious7

; (2) file Currency 

Transaction Reports ("CTRs") for transactions involving more than $10,000 in cash8

; and 

(3) maintain records of a customer's identity (including Social Security number) for certain 

funds transfers of$3,000 or more. 9 State money transmission laws also require licensed 

money transmitters to maintain transaction records including customer identifying 

information. 

By taxing all remittance transfers to designated countries, H.R. 1813 is likely to discourage 

senders from using formal, regulated channels including licensed money transmitters. 10 

Instead, as the GAO Study noted, imposing a tax or fine on international remittances "could 

result in a decrease in remittances in the regulated market and an increase in remittances 

through informal methods of money transfer." 11 Transactions driven to informal or 

underground networks will not be tracked, monitored, and regulated. Consequently, 

H.R. 1813 is likely to hamper law enforcement efforts to detect and prevent money 

laundering and terrorist financing. In addition, increasing the volume of transactions sent 

7 See 31 C.P.R.§ 1022.320 

'See id. at§ 1010.330. 9 See id. at§ 1010.410(c). 10 The GAO Study notes that money transmission providers experience a decrease in transaction volume after 

Oklahoma imposed a tax on certain types of remittances. 11 SeeGAOStudyat 10. 

dc-877625 
103 


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MORRISON I FOERSTER 

The Honorable Mike Rogers 

May2, 2017 

Page Four 

through informal networks is also likely to encourage the development and strengthening of 

such networks because it increases the attractiveness of these types of businesses. 

Harm to Businesses 

As noted above, and as indicated by the GAO Study, a remittance tax is likely to discourage 

senders from using regulated channels such as licensed money transmitters for their 

remittance transfer needs. Of course discouraging economic activity is generally harmful to 

any enterprise, but TMSRT members and the businesses they partner with to offer money 

transmission services will face particular challenges. This is because TMSRT members, and 

many other licensed money transmitters, primarily serve their customers through agents at 

physical locations throughout the United States, such as grocers, markets, etc. Many agents 

are small business owners that offer money transmission services as part of their overall 

business operations. 

The tax will discourage consumers from using money transmission services. This, in turn, 

will lead to a loss of revenues to these small business agents both in terms of their money 

transmission business and their other businesses as overall consumer visits are reduced. In 

other words, this fee, like any other significant tax increase, will depress consumption and 

directly affect American businesses. 

TMSRT members (as well as other remittance transfer providers) also will face significant 

costs in connection with collecting the tax. As the GAO Study noted, collecting and 

processing a remittance tax might require the development of new computer infrastructure 

and databases, staff training, and compliance. In addition, it will also require a lengthy 

process of development, testing, validation and deployment of software to ensure compliance 

with the tax, further impacting legitimate money transmitters. 12 TMSRT members would 

also likely face increased compliance and auditing costs related to the tax. None of these 

costs, however, will be borne by underground money transfer networks. This will further 

impact the ability oflegitimate licensed money transmitters to compete with such 

underground networks. 

Harm to American Consumers 

Licensed money transmitters provide customers with a safe, reliable and afforda\:lle way to 

send money to family and friends, to pay bills and to obtain other financial services. And, 

the current disclosures and related requirements for transactions that covered by the EFT A, 

as remittance transfers, provide additional protections and transparency for consumers. The 

tax imposed by H.R. 1813 would likely discourage many individuals from using the services 

of licensed money transmitters like TMSRT members as well as of other financial 

12 The GAO Study noted that development efforts and related costs in connection with the remittance transfer 

disclosures initially required by the Dodd-Frank Act were up to $3 million for some money transmitters. 

dc-877625 
104 


29451.071

MORRISON I FOERSTER 

The Honorable Mike Rogers 

May2, 2017 

Page Five 

institutions. Consumers that choose alternative channels to transfer funds will lose these 

protections. And, for consumers who continue to use licensed money transmitters, the tax 

would significantly increase the cost of these services. 

Finally, it is important to note that this this tax would be imposed on any sender of funds 

who chooses to transmit funds to countries selected by H.R. 1813. The tax would thus be 

paid using funds on which consumers have likely already paid income taxes. 13 These 

consumers will thus be forced to pay taxes on the same money twice-first for earning the 

money, and then for deciding what to do with it. 

The Proposed Tax Would Not Raise a Material Amount of Fnnds to Pay for a Border 

Wall 

If implemented, the tax would not be likely to raise a material amount offunds even in the 

best case. Currently, the higher end of estimates of global remittances from the United 

States to a recipient in any country in the world is in the range of $60 billion. 14 According to 

the GAO Study, of the top five countries that are recipients of remittance transfers from the 

United States, onl(: one is on the list of specified countries in H.R. 1813 that would be 

subject to the tax. 5 Given that the majority of the dollar volume of remittance transfers from 

the United States would likely not be covered by H.R. 1813, it is unlikely that this tax would 

raise more than a very small fraction of the projected cost of the border wall, even if one 

were to make the unrealistic assumption that the tax would not result in substantial changes 

in consumer behavior. And, if more realistic assumptions are made, including the 

assumption that the GAO Study makes that an international remittance tax would likely 

result in the diversion of transfers to unregulated and unmonitored networks, as well as 

accounting for the increased costs for the cost of enforcement of money laundering laws, and 

the cost of administering the tax, the proposed tax is even less likely to raise significant sums 

for the border wall. 16 On the other hand, it will likely decrease the effectiveness of antimoney laundering efforts. 

+++ 

13 American citizens, other individuals lawfully present in America, and others who earn income in America 

r,enerally pay income taxes and/or payroll taxes. 4 For example, the most recent World Bank Remittance Outflows analysis, based on calculations using 

numbers reported by country authorities to the IMF Balance of Payments, estimated that $6!.3 billion was 

remitted from the United States in 2015. though this number includes employee compensation and not personal 

transfers only. 15 And, of the top 10 countries to which remittances are sent from the United States, only three are on the list of 

countries that would subject to the tax. 16 H.R. 1813 would also provide that remittance transfer providers may retain 5% of the taxes collected from 

five years from enactment of the legislation to cover their administrative costs in connection with the fee, thus 

further decreasing the tax revenues that would be available to the government. 

dc-877625 
105 


29451.072

MORRISON I FOERSTER 

The Honorable Mike Rogers 

May 2, 2017 

Page Six 

In short, H.R. 1813 would depress legitimate money transmission activity to the detriment of 

law enforcement and American businesses, would harm consumers, and would ultimately 

raise a negligible amount of the funds apparently necessary to pay for the construction of a 

border wall. TMSRT thus opposes H.R. 1813. 

On behalf ofTMSRT, I thank you for taking the time to consider these issues, and would be 

happy to discuss them further or address any questions you may have. 

Sincerely, 

B!::!j: 

Counsel to The Money Services Round Table 

dc-877625 
106 


29451.073

February 3, 2017 

The Honorable Paul Battles 

House Ways and Means Committee 

Chairman, Subcommittee on Tax Reform 

226 State Capitol 

Atlanta, GA 30334 

Re: Opposition to H.B. 66, legislation taxing certain money transmission transactions 

Dear Chairman Battles: 

On behalf of Western Union Financial Services Inc. (Western Union) and MoneyGram 

International, Inc. (MoneyGram), the top leaders in global payment services which provide 

consumers and businesses with fast, convenient and reliable ways to send money, we write today 

regarding H.B. 66. This bill, scheduled to be heard in your subcommittee, would impose a tax on 

certain money transmission transactions that would negatively impact Georgia businesses and 

residents. We have serious concerns about the unintended consequences of efforts to tax money 

transmission services in Georgia and appreciate the opportunity to comment on this legislation. 

Impact on Georgia Consumers and Businesses 

Western Union and MoneyGram facilitate money transfer services, from paying utility bills to 

sending money to family members and friends, for Georgia residents from all walks of life. The 

average transfer in Georgia is about $200 and nearly half of the transactions that originate in 

Georgia stay in the United States when the transaction is settled. Western Union and 

MoneyGram help to meet the financial needs of Georgia consumers through 3,900 agent 

locations, many of which are independent small businesses. 

As you know, H.B. 66 would add a fee of$10 to any transmission under $500 and 2% of the 

principal amount of any transmission exceedingly $500. Not only would H. B. 66 make the 

money transfer process more expensive for Georgia residents, it would limit consumer choice. A 

new tax would place a burden on Western Union and MoneyGram agents who may choose to 

cease offering such services instead of subjecting themselves to a burdensome process to comply 

with the law. Western Union and MoneyGram partner with over 3,900 business locations in 

Georgia from convenience stores to mid-size grocery stores to community banks. Making money 

transmission services more expensive could significantly impact the number and frequency of 

customers who patronize these businesses which would disproportionately affect smaller 

businesses. 

While H. B. 66 seeks to· allow Georgia residents to recoup the proposed fee through income tax 

return filings, this bureaucratic approach would be onerous for those who meet the requirements 
107 


29451.074

and leave other important segments of the population behind altogether. For example, our 

nation's military personnel stationed in Georgia may be non-residents and, therefore, ineligible 

to utilize a tax credit to recoup the fee. 

Reporting Requirements and Important Work with Law Enforcement 

All licensed money transmission providers are subject to strict oversight by state and federal 

authorities, and must comply with detailed record keeping and reporting requirements. These 

include strict anti-terrorism and anti-money laundering laws and regulations. 

Western Union and MoneyGram have robust compliance and anti-money laundering efforts 

resulting in the ability to track transactions and provide real-time assistance to local, state, and 

federal law enforcement on a wide range of security issues including terrorist finance, drug 

trafficking, human trafficking, and fraud. Western Union's and MoneyGram's work in this 

regard has been presented to the Department of Treasury, the Federal Bureau of Investigation, 

and various foreign law enforcement agencies. One specific example is Western Union's and 

MoneyGram's work with the U.S. Department of Homeland Security's Blue Campaign. This 

initiative provides information, training, and outreach to raise public awareness about human 

trafficking. 

If enacted, H.B. 66 would encourage illicit money to move underground and outside of 

reputable, regulated money transmitters. This would negatively impact law enforcement's ability 

to stay one step ahead of unscrupulous actors. Furthermore, when Oklahoma instituted a 

similarly structured tax in 2009, Western Union's and MoneyGram's transaction volumes 

significantly decreased, so, not only did law enforcement lose the visibility of these transactions, 

the state captured far less revenue than projected. The loss of visibility and revenue should be 

considered with respect to H.B. 66. 

Based on our experience and in an effort to ensure Georgia consumers and small businesses are 

well served and protected from the unintended consequences outlined above, we respectfully 

express our opposition to the passage of H.B. 66. 

Thank you for your time and attention to this matter. Western Union and MoneyGram welcome 

the opportunity to serve as a resource should you have questions or concerns about this issue. 

Sincerely, 

Western 

Senior Vice President, Global Public Policy 

720-332-4757 

MoneyGram 

Vice President and Associate General 

Counsel, External Relations 

202-372-5719 

cc: The Honorable Jay Powell, Chairman, House Ways and Means Committee 

0