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TRADING WITH THE ENEMY: 

TRADE-BASED MONEY 

LAUNDERING IS THE 

GROWTH INDUSTRY IN 

TERROR FINANCE 

HEARING 

BEFORE THE

TASK FORCE TO INVESTIGATE 

TERRORISM FINANCING 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

FEBRUARY 3, 2016 

Printed for the use of the Committee on Financial Services 

Serial No. 114–70 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

TASK FORCE TO INVESTIGATE TERRORISM FINANCING

MICHAEL G. FITZPATRICK, Pennsylvania, Chairman 

ROBERT PITTENGER, North Carolina, Vice 

Chairman 

PETER T. KING, New York 

STEVE STIVERS, Ohio 

DENNIS A. ROSS, Florida 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

DAVID SCHWEIKERT, Arizona 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

FRENCH HILL, Arkansas 

STEPHEN F. LYNCH, Massachusetts, 

Ranking Member 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

AL GREEN, Texas 

KEITH ELLISON, Minnesota 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

KYRSTEN SINEMA, Arizona 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

February 3, 2016 .............................................................................................. 1 

Appendix: 

February 3, 2016 .............................................................................................. 41 

WITNESSES 

WEDNESDAY, FEBRUARY 3, 2016 

Bock, Lou, former Senior Special Agent, U.S. Customs and Border Protection . 8 

Cassara, John A., former Intelligence Officer, and Treasury Special Agent ...... 6 

Mesko, Farley M., Co-Founder and Chief Executive Officer, Sayari Analytics .. 9 

Passas, Nikos, Professor of Criminology and Criminal Justice, Northeastern 

University ............................................................................................................. 11 

APPENDIX 

Prepared statements: 

Bock, Lou ........................................................................................................... 42 

Cassara, John A. ............................................................................................... 67 

Mesko, Farley M. .............................................................................................. 78 

Passas, Nikos .................................................................................................... 81 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Fitzpatrick, Hon. Michael: 

DEA press release entitled, ‘‘DEA and European Authorities Uncover 

Massive Hizballah Drug and Money Laundering Scheme,’’ dated February 1, 2016 ................................................................................................. 98 

(1) 

TRADING WITH THE ENEMY: 

TRADE-BASED MONEY 

LAUNDERING IS THE 

GROWTH INDUSTRY IN 

TERROR FINANCE 

Wednesday, February 3, 2016 

U.S. HOUSE OF REPRESENTATIVES, TASK FORCE TO INVESTIGATE

TERRORISM FINANCING, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The task force met, pursuant to notice, at 10:01 a.m., in room 

2128, Rayburn House Office Building, Hon. Michael G. Fitzpatrick 

[chairman of the task force] presiding. 

Members present: Representatives Fitzpatrick, Pittenger, Ross, 

Barr, Rothfus, Schweikert, Williams, Poliquin, Hill; Lynch, Sherman, Meeks, Green, Himes, and Sinema. 

Ex officio present: Representative Waters. 

Also present: Representative Royce. 

Chairman FITZPATRICK. The Task Force to Investigate Terrorism 

Financing will come to order. The title of today’s hearing is, ‘‘Trading with the Enemy: Trade-Based Money Laundering is the Growth 

Industry in Terror Finance.’’ 

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

the task force at any time. 

The Chair now recognizes himself for 3 minutes for an opening 

statement. 

On March 25, 2015, under the leadership of Chairman Jeb Hensarling, the House Committee on Financial Services adopted a resolution creating the Task Force to Investigate Terrorism Financing. 

The aim of this task force has been to assess the effectiveness of 

our current money-laundering and counter-terror finance efforts 

and tools when faced with a world containing new and evolving 

threats. 

With Ranking Member Stephen Lynch, Vice Chair Robert 

Pittenger, and a bipartisan group of 21 Members, the Task Force 

has been able to conduct five hearings, and several briefings and 

information sessions, as well as a CODEL to meet with regional 

partners and discuss their efforts to counter terrorism financing. 

The initial 6 months of operation shed significant light on multiple issues with regards to counter-threats finance and anti-money 

laundering initiatives. First was the discovery of the various revenue streams ISIS utilizes to fund its terror operation, and the 

2 

ways in which the United States may effectively counter them, 

such as continuing to target ISIS oil infrastructure, working with 

regional allies to close porous borders, and a better police to travel 

with foreign fighters. 

Second, the task force brought about a consensus that there is 

a need for greater information-sharing throughout the financial 

system and between government agencies, as well as an increased 

integration of government databases. Finally, it became evident 

through witness testimony and numerous briefings, that Congress 

needs to act on beneficial ownership and to provide the appropriate 

agencies sufficient resources to address current challenges. 

Building on what we know and have learned, this session will 

take a much closer look at several lesser-known methodologies that 

have been mentioned in previous briefings and hearings, including 

trade-based money laundering, terror-funding streams from Latin 

America, developing our regional partners’ capabilities to combat 

terror financing, and the funding of foreign-based terrorists. 

Today, we aim to take a closer look at trade-based money laundering, the process of disguising the proceeds of crime and moving 

value through the use of trade transactions in an attempt to legitimize their illicit origins. This practice allows hundreds of billions 

of dollars to be laundered annually and cannot be allowed to continue. 

It is our hope that with the help of our expert witnesses, this 

body will walk away with a better understanding of the problem 

as well as an effective measure to curb and combat this practice. 

On Monday, DEA and European authorities were able to uncover 

a massive Hezbollah drug and money-laundering scheme that was 

intent on providing financial assets to militants in Syria. This development depicts the scale of this problem and the urgent need to 

devote more focus towards it. 

Unless there is any objection, I will ask for unanimous consent 

to put this DEA release into the record. 

Without objection, it is so ordered. This hearing marks the beginning of another 6 months of investigation, and an additional step 

towards snuffing out the resources necessary for these nefarious 

groups to grow and to thrive. 

I now recognize for an opening statement the ranking member of 

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

Mr. LYNCH. Thank you, Mr. Chairman, and I thank Chairman 

Hensarling, Ranking Members Water, and Vice Chair Pittenger for 

holding today’s hearing. I also want to thank our witnesses for 

helping this task force with its important work. This hearing will 

give us a much-needed opportunity to examine the trade-based 

money laundering nexus to terrorism financing. 

Trade-based money laundering involves using trade and products 

or commodities for value in order to divert and obscure the true nature of illicit wealth. Currently, there is ample opportunity for terrorist groups to exploit the international trade system, with low 

risk of being caught. According to the Financial Action Task Force 

(FATF), key characteristics of the international trade system, including the enormous volume of trade flows and the complexity 

therein, can arise from the practice of co-mingling illicit funds with 

the cash flows of legitimate businesses, and the limited recourse to 

3 

verification procedures or programs to exchange customs data between countries, have made it both attractive and vulnerable to illicit exploitation. 

A few years ago my colleagues at FinCEN briefed me on an 

elaborate trade-based money laundering scheme that was linked to 

the terrorist organization Hezbollah. Under the scheme, the Lebanese-Canadian Bank and multiple foreign-exchange houses facilitated the laundering of South American drug proceeds through the 

Lebanese financial system and through trade-based money laundering schemes involving cars and consumer goods. Cars would be 

purchased in the United States and shipped to Senegal and other 

areas of West Africa. The proceeds from the car sales would be funneled back to Lebanon through bulk cash deposits among conspiring exchange houses. 

Now as the Chair has noted, we are back at it again with the 

Lebanese-Canadian bank, and the same stream of illicit funding 

has been encountered again. I note that our witnesses, Lou Bock 

and John Cassara, suggested that a network of global trade transparency units (TTUs) would help us bring the opaque system used 

by Hezbollah and many others into the light of day, and I am inclined to agree. 

The United States is already at the forefront of trade transparency. In 2004, the United States created the first transparency 

unit within the Department of Homeland Security to analyze data 

in order to identify global trade-based money laundering trends. A 

further expansion of TTUs would allow the United States to trade 

paperwork and set international standards for trade. 

And as Lou Bock and John Cassara propose, we need a system 

of TTUs that is analogous to the Egmont Group’s financial intelligence units. I am happy to see that Dr. Nikos Passas of Northeastern is with us today, and he recommends highly that we need 

to collect this data in one place so it can be easily analyzed. 

So in closing, I just appreciate the work of the Chair and the 

Vice Chair, and the work of our witnesses as well. This is important work that needs to be addressed. 

I would like to yield 1 minute to the ranking member of the full 

Financial Services Committee, Ms. Maxine Waters. 

Ms. WATERS. First, I would like to say that I am pleased that our 

committee voted to extend the mandate of our Task Force to Investigate Terrorism Financing for an additional 6 months, and I commend the good work of the task force, work that they have done 

during the past year under the leadership of Ranking Member 

Lynch, Chairman Fitzpatrick, and Vice Chairman Pittenger. 

By providing the opportunity to hear from a wide range of experts, we have been better able to understand the threats we currently face, as well as the challenges we must meet in order to 

overcome the identities, intentions, and resources of fanatics who 

are plotting violence against innocent people both here and abroad. 

I very much welcome the topic of today’s hearing and I look forward to this examination into the scope and dimension of tradebased money laundering and the threat it poses to our security. 

The written testimony of our witnesses makes an overwhelmingly persuasive case that trade-based money laundering is one of 

the most widespread, pernicious, and least understood forms of 

4 

money laundering. Although the enormity of the problem may be 

daunting, I hope as we learn more about the issue, we will be able 

to hone in and act on some discrete policy responses within our 

committee’s jurisdiction, in particular those that address the role 

financial institutions play in detecting and disrupting trade-based 

money laundering schemes. 

I look forward to the witnesses’ statements, and I yield back the 

balance of my time. 

Mr. LYNCH. At this point, Mr. Chairman, I would like to yield 1 

minute to Ms. Sinema of Arizona. 

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

Member Lynch. Arizona’s top export market is Mexico, and crossborder trade is essential to our economy. Despite its importance to 

Arizona’s economy, cross-border trade is often used to facilitate 

international money laundering. For the past 20 years, official figures put Mexican exports to America well above American imports 

from Mexico. According to Global Financial Integrity, the discrepancy can be attributed to Mexican groups using trade-based money 

laundering to bring dollars into Mexico. 

We need to find ways to stop trade-based money laundering, 

while promoting the efficient and cost-effective movement of goods 

and services across borders. Given the volume and complexity of 

trade-based money laundering, how can we do more to counter the 

misuse of international commerce and the threat it poses to our national security? How can we address this national security threat 

without limiting access to banking services for legitimate enterprises in border States like mine? I look forward to hearing more 

from our witnesses today about how we can better combat international money laundering without creating costly red tape and inhibit commercial trade flows. 

Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. The Chair now recognizes the vice chairman of the task force, Mr. Pittenger, for 1 minute. 

Mr. PITTENGER. Thank you, Chairman Fitzpatrick, and thank 

you to Chairman Hensarling and Ranking Member Waters, and I 

particularly want to thank Ranking Member Lynch of this task 

force for its continued dedication to these issues and all the Members who have committed their time and efforts in this important 

work. And thank you to the witnesses who have come and brought 

their experience to this task force. 

Criminal enterprises have relied on this method of illicit financing for years. However, many believe that this is an emerging technique now being used by terrorist groups to finance their violent 

and oppressive operations. 

With over $100 billion flowing in Iran, the world’s largest state 

sponsor of terror, the risk of terror financing has never been greater. Similarly, the Administration has done nothing to diminish the 

number of ISIS soldiers on the battlefield in Iraq and Syria. ISIS 

members have remained consistently 20,000 to 30,000 soldiers for 

the past several years despite over 10,000 Saudi air strikes. 

Since we have not removed ISIS from the battlefield, they will 

continue to require resources to fund their oppression. As we enter 

into the new year, Congress should prioritize efforts to stop the 

flow of money and resources to terrorist organizations. We must 

5 

ensure that organizations like the Financial Crimes Enforcement 

Network (FinCEN) receive the resources and intelligence necessary 

to combat trade-based money laundering and other methods of illicit financing. 

With that, I thank the Chair and the ranking member once 

again, and I yield back. 

Chairman FITZPATRICK. And I recognize the gentleman from 

Texas, Mr. Williams, for 1 minute. 

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

all of the witnesses today for being here. As previous task force 

hearings have explored, the use of trade to launder money is nothing new and is most definitely on the rise. Although trade-based 

money laundering is widely recognized as one of the most common 

ways terrorist organizations seek funding, it is my hope that this 

task force continues to explore solutions to an ever-growing problem that often hits too close to home. 

When I talk about that, I am talking about my home. As a second generation auto dealer, my industry has not been immune to 

trade-based money laundering. Through the sale of used cars as 

well as other legitimate products, terrorist organization have funneled billions of dollars through U.S. markets. 

While many high-profile cases have been discussed in prior hearings, criminal organizations will continue to exploit new methods 

when it comes to laundering money unless strict government oversight enforcement is improved. 

It is my belief that this task force has an important role to play 

in the combating of terrorist financing, and I look forward to hearing from our witnesses on how best to do it, and especially on how 

my industry can do what they need to do to stop it. So thank you, 

Mr. Chairman. I yield back. 

Chairman FITZPATRICK. The gentleman yields back. We now welcome our witnesses. First, Mr. John Cassara is a former United 

States Intelligence Officer and Treasury Special Agent. Mr. 

Cassara has over 26 years of experience in the Federal Government 

intelligence and law enforcement communities. He is an expert in 

anti-money-laundering and terrorist financing. Mr. Cassara invented the concept of trade transparency units and recently released a book on that topic this past fall entitled, ‘‘Trade-Based 

Money Laundering: The Next Frontier in International Money 

Laundering Enforcement.’’ 

Mr. Cassara has lectured around the world on a variety of transnational crime issues. He is currently an industry adviser to the 

analytics company SAS. He holds a master’s degree in international management from the American Graduate School of International Management in Phoenix, Arizona. He also graduated 

magma cum laude from the University of California, San Diego. 

Second, Mr. Louis Bock is a former Senior Special Agent at U.S. 

Customs and Border Protection. Mr. Bock has had a successful career as a U.S. Government criminal investigator with experience 

targeting trade fraud and money laundering with the United States 

Immigration and Customs Enforcement, U.S. Customs and Border 

Protection, the Department of Agriculture, and the Drug Enforcement Agency. 

6 

Mr. Bock was named the godfather of trade-based money laundering by Mr. Cassara in his recent book due to his pioneering efforts to systematize the analysis of trade data. Mr. Bock holds a 

bachelor’s degree in behavioral and statistical measurement from 

Brooklyn College, and a master’s degree in education and behavioral and statistical measurement from King College. 

Third, Mr. Farley Mesko is co-founder and chief executive officer 

of Sayari Analytics. Mr. Mesko started after spending 5 years 

building the C4ADS, a non-profit organization focused on data-driven technology enabled analysis of conflict and security issues. 

Sayari Analytics conducts open source resource of public records to 

uncover financial and other networks of illicit actors. 

Prior to his time at C4ADS, Mr. Mesko was a special correspondent for the East African Magazine. Mr. Mesko holds a bachelor’s degree in environmental studies and government from 

Bowdoin College. At this time, I will ask Mr. Lynch to recognize 

and introduce his constituent from Northeastern University. 

Mr. LYNCH. Thank you for that courtesy, Mr. Chairman. Dr. 

Nikos Passas is a professor of criminology and criminal justice at 

Northeastern University, one of our fine institutions in Boston. 

And he is co-director of the Institute of Security and Public Policy. 

He has served as corruption program director at the Ethics and 

Compliance Officer Association, and as an adjunct law professor at 

Case Western Reserve University. 

His law degree is from the University of Athens, his master’s degree is from the University of Paris, and his Ph.D. is from the University of Edinburgh Faculty of Law. He specializes in the study 

of corruption, illicit financial trade flows, sanctions, informal fund 

transfers, remittances, terrorism, white collar crime, financial regulation, organized crime, and international crimes. 

He has published more than 200 articles, books, chapters, and 

reports in 13 languages. His next book is entitled, ‘‘Trade-Based Financial Crime and Illicit Flows,’’ and another is entitled, ‘‘Corruption and Crisis in Greece.’’ So welcome, Dr. Passas. 

Chairman FITZPATRICK. The witnesses will now be recognized for 

5 minutes each to give an oral presentation of your testimony. And 

without objection, the witnesses’ written statements will be made 

a part of the record. Once the witnesses have finished presenting 

their testimony, each member of the task force will have 5 minutes 

within which to ask questions. 

For the witnesses, on your table there are three lights: green; 

yellow; and red. Yellow means you have 1 minute remaining, and 

red obviously means your time is up. Be advised that the microphone is very sensitive so please make sure you are speaking directly into it. With that, Mr. Cassara you are recognized for 5 minutes. 

STATEMENT OF JOHN A. CASSARA, FORMER U.S. 

INTELLIGENCE OFFICER, AND TREASURY SPECIAL AGENT 

Mr. CASSARA. Good morning. Chairman Fitzpatrick, Ranking 

Member Lynch, and members of the task force, thank you for the 

opportunity to testify today. It is an honor for me to be here. Not 

long after the September 11th attacks, I had a conversation with 

a Pakistani entrepreneur. This businessman could charitably be deVerDate Nov 24 2008 15:56 Mar 23, 2017 Jkt 023565 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\23565.TXT TERI
7 

scribed as being involved in international gray markets and illicit 

finance. 

We discussed many of the subjects addressed in this hearing including trade-based money laundering, terror finance, value transfer, hawala, fictitious invoicing, counter-valuation, and others. At 

the end of the discussion he looked at me and he said, ‘‘Mr. John, 

don’t you know that your adversaries are transferring money and 

value right under your noses? But the West doesn’t see it. Your enemies are laughing at you.’’ 

That businessman knew that the United States and the international community had devoted attention, countermeasures, and 

resources to counter a variety of money laundering and terror finance methodologies. However, trade-based money laundering 

(TBML) for the most part has been ignored. TBML is defined as 

the process of disguising the proceeds of crime and moving value 

through the use of trade transactions in an attempt to legitimize 

their illicit origins. 

The key word in that definition is ‘‘value.’’ The magnitude of 

TBML has never been systematically examined. Nevertheless, one 

academic study examining the 2013 U.S. trade data found that almost $220 billion of the illicit value was moved out of the United 

States in the form of value transfer. That figure represents almost 

6 percent of U.S. trade. 

Approximately $340 billion was moved into the country via suspect trade transactions representing about 9 percent of U.S. trade. 

TBML is also involved with tax evasion, export incentive fraud, 

VAT fraud, capital flight or the transfer of wealth offshore, evading 

capital controls, barter trade, underground financial systems such 

as fei-chien, the Chinese flying money system, the black market 

peso exchange and commercial trade-based money laundering such 

as trade diversion, transfer pricing, and abusive trade 

misincoming. 

In discussing terror finance, TBML is also intertwined with 

hawala, the misuse of the Afghan transit trade, Iran and Dubai 

commercial connections, the tri-border region in South America, 

suspect international Lebanese-Hezbollah trading syndicates, nonbank lawless regimes such as those in Somalia and Libya, the ISIS 

regime in Syria and Iraq, and many more. 

So considering all of its varied forms, I can make the argument 

that trade-based money laundering is perhaps the largest and most 

pervasive money laundering methodology in the world. Unfortunately, it is also the least understood, recognized, and enforced. In 

its primary form, TBML revolves around invoice fraud and the associated manipulation of supporting documents. The primary techniques are over- and under-invoicing of goods, multiple invoicing of 

goods, and falsely described goods. 

For example, did you know that we are importing plastic buckets 

from the Czech Republic and each bucket costs $972? Do you know 

that we are importing toilet tissue from China at the price of over 

$4,000 a kilogram? And that we are exporting live cattle to Mexico 

at $20 a head? Because of the magnitude of U.S. and global merchandise trade, these transactions and millions of others like them 

are not recognized, and simply get comingled. 

8 

Successful enforcement efforts are practically nil. Nevertheless, I 

am hopeful. First of all, theoretically, international trade transparency can be achieved because of the exponential growth in data 

and the incredible advances in analytics. I am also optimistic because trade transparency is also a revenue enhancer. I have found 

that the carrot of empowering our partners to strive for trade 

transparency and increased revenue can be much more effective 

than the stick of heavy-handed measures that have proven to be 

unsuccessful. 

I have a number of recommendations in my written statement, 

and in my new book, ‘‘Trade-Based Money Laundering: The Next 

Frontier in International Money Laundering Enforcement.’’ These 

include reaching a consensus on the magnitude of the problem, a 

Financial Action Task Force recommendation on TBML, and supporting the trade transparency unit initiative. 

Thank you, and I would be very happy to answer any questions 

you may have. 

[The prepared statement of Mr. Cassara can be found on page 67 

of the appendix.] 

Chairman FITZPATRICK. Thank you, Mr. Cassara. 

Mr. Bock, you are recognized for 5 minutes. 

STATEMENT OF LOU BOCK, FORMER SENIOR SPECIAL AGENT, 

U.S. CUSTOMS AND BORDER PROTECTION 

Mr. BOCK. Good morning. I would also like to thank the chairman and the members of the task force for this opportunity. I appreciate your interest in the program that I have helped to develop 

for the past 25 years. 

My name is Lou Bock, and I am a retired Senior Special Agent 

who worked as an investigator with DEA and USDA, later at Customs, which later became ISDHA. I worked on and supervised financial fraud and intelligence programs. For much of my career, I 

generated and worked large, complicated criminal cases involving 

trade fraud and money laundering schemes totaling billions of dollars. 

I did so with the help of a team of import and tax specialists, 

agents, and analysts. We identified patterns of criminal behavior 

that stretched across large volumes of trade and financial data. 

The software methodology that my team and I pioneered was successfully deployed in over two dozen countries. 

This led, with the insight and vision of John Cassara, to the development of trade transparency units (TTUs). I believe that TTUs 

have veered from their initial financial and Customs focus in part 

because of the changing culture within the Department of Homeland Security. Cassara writes in his book, ‘‘Trade Based Money 

Laundering,’’ that the forced merger with the former INS, and expansion of Customs missions into immigration enforcement, has 

not been successful. 

Its expertise, skill sets, budgets, and staffing were deluded. The 

resulting dysfunction within the DHS has been less well-documented. DHS has neither the Customs nor financial expertise to 

make the TTU a success. The loser here is our ability to tackle 

trade-based money laundering and trade and tax revenue loss on 

a grand scale. 

9 

It is a missed opportunity to target funds belonging to terrorist 

groups such as ISIS, which necessarily do participate in their local 

trade. What is needed in support of a TTU? Detailed transactional 

import and export data, as well as records of the movement of 

money for the United States and partner nations. 

Movement of trade goods should include bills of lading and manifest records for both imports and exports of the United States. Intermediate container movements, which are readily available, are 

also useful. ESA data which includes suspicious activity reports 

will greatly enhance the targeting veracity of the items mentioned 

above. 

At present, the existing DHS TTU’s attention is focused 90 percent on South America. That perhaps makes some sense given that 

DHS’ focus is on immigration and drugs. However, I believe this 

view does little to attack current evolving terrorist threats. The 

real money flowing to ISIS involves trade from the Middle East, 

Europe and including Turkey. 

With the proper focus on terrorist financing and trade-based 

money laundering, housed in a financial organization such as 

FinCEN, which has existing agreements with revenue agencies, we 

can make a serious dent in the core funding sources of entities 

such as ISIS. 

I recommend the creation of a reinvigorated TTU with an associated budget line from Customs. I also think that a TTU should be 

housed at FinCEN under Treasury. Treasury is an agency capable 

of addressing the nexus of trade-based money laundering and tax 

revenue loss within the existing international agreements. 

I believe DHS ICE is not a revenue agency and the Treasury Department is. Giving FinCEN this focus immediately, and full access 

to the necessary trade data, is the obvious next step, whatever the 

eventual status of the TTU initiative is within DHS. 

Let’s return to our earlier vision: focus and effectiveness, built on 

a rapidly increasing number of TTUs analogous to the Egmont 

Group’s financial intelligence units. 

I would like to get back on track with this. Thank you for listening. 

[The prepared statement of Mr. Bock can be found on page 42 

of the appendix.] 

Chairman FITZPATRICK. Mr. Mesko, you are now recognized for 

5 minutes. 

STATEMENT OF FARLEY M. MESKO, CO-FOUNDER AND CHIEF 

EXECUTIVE OFFICER, SAYARI ANALYTICS 

Mr. MESKO. Chairman Fitzpatrick, Ranking Member Lynch, and 

members of the task force, I want to thank you for the opportunity 

to be here today. I want to dive deeper into the real-world example 

of Hezbollah terror financing through TBML. It was referenced in 

the opening statements by the Members. 

I want to do so in order to illustrate some of the challenges and 

opportunities in targeting these schemes. 2011 is part of a larger 

sanctions package. U.S. regulators and law enforcement identified 

a Cotonou Benin-based group of import-export companies known as 

the Alissa Group that dealt primarily in used-car imports into West 

Africa from the United States, Canada, and Europe. 

10 

Treasury data from the original 2011 action indicates that at 

least 6 of the sanctioned companies shared an address in Cotonou. 

Several also shared the same phone number and key personnel. 

We went to the public records in the Chamber of Commerce in 

Cotonou and Benin, and found that another company co-located 

with the Alissa Group at the time of the original 2011 designation 

was Ramadi SRL. And further, that a new company, Abou Merhi 

Lines began to use the same shared address and phone number 

shortly after the 2011 sanctions designation. 

It took 2 more years to identify the Ramadi SRL as a participant 

in the original scheme. And 2013 FinCEN 311 designation. It took 

another 2 years on top of that to identify and sanction Abou Merhi 

Lines in 2015. These entities were operating for years out of the 

same location in Benin, with the same address, and the same 

phone number, by the same key people. 

What I haven’t mentioned so far is that in addition to the 

Ramadi SRL and Abou Merhi Lines, public data shows that at 

least five other companies and two individuals were and possibly 

continue to be active at the shared Alissa Group address in Benin, 

in some cases listed in care of Alissa Group on their public documents and operating in the used vehicle trade. 

I share this example because it illustrates several key points 

about detecting and deterring trade-based money laundering. 

First, that sanctions, 311 actions, and indictments are a starting 

point and not an endpoint in the government’s efforts to target 

money launderers and terror financiers. Networks change over 

time but they rarely go away, and TBML networks in particular 

often leave a large footprint companies and individuals as a result 

of their efforts to seem legitimate. 

Working in our favor, more often than not there is a trail leading 

back from these seemingly legitimate entities to already known and 

already identified illicit actors. The data to help us draw these connections is often publicly available. It may not be easy to find, but 

it is out there. 

Working against us, however, is the fact that the types of relationships that we should be concerned about within a network don’t 

always comport with the types of relationships that regulators have 

told banks, insurance companies, and the transportation sector 

that they need to be concerned about. 

This is an area where I think the task force could have real impact, and the clearest example in my mind is that of the singular 

focus on majority ownership by Treasury’s Office of Foreign Assets 

Control (OFAC) when they guide financial institutions in their 

dealings with related parties, especially designated nationals such 

as those identified as part of the Alissa Group sanctions package. 

OFAC has stated that banks need only block transactions related 

to parties on 50 percent or more by an SDN, but only ‘‘urges caution when dealing with parties where an SDN has a significant minority interest or may exercise control by means other than majority ownership.’’ 

Never mind the lack of clarity on what regulators mean in practical terms when they urge caution. But what about an entity in 

a terror financing network that is 49 percent owned by a narcotrafficker working with Hezbollah? What about entities that share 

11 

key personnel, identifiers, and selectors with a group of SDNs and 

operate in the same industry segment, in the same place as those 

SDNs? 

Do we really want to allow financial institutions, transportation 

companies, insurance brokers—whomever it is, to service these clients? It strikes me that especially in the terror financing context, 

and doubly true in the case of the complex webs of relationships 

that characterize TBML, clarifying and expanding the scope of 

what the private sector needs to be concerned about is long overdue. 

I thank you for the opportunity to be here today, and I look forward to your questions. 

[The prepared statement of Mr. Mesko can be found on page 78 

of the appendix.] 

Chairman FITZPATRICK. Thank you, Mr. Mesko. 

And Dr. Passas, you are recognized for 5 minutes. 

STATEMENT OF NIKOS PASSAS, PROFESSOR OF CRIMINOLOGY 

AND CRIMINAL JUSTICE, NORTHEASTERN UNIVERSITY 

Mr. PASSAS. Good morning, Chairman Fitzpatrick, and Ranking 

Member Lynch. Thank you for the kind introduction. Vice Chairman Pittenger, distinguished members of the task force, it is an 

honor to testify before you. 

The threat of trade-based money laundering is serious, but effective responses are feasible and within reach. The switch to turn the 

lights on to what is now shadowy economic activities is in your 

hands. I will list the challenges and outline some solutions. 

Despite substantial efforts against money laundering, too little 

attention is paid to trade, which constitutes the biggest security 

and crime liability, a black hole undermining the entire control 

framework. Even if all current rules were to be perfectly enforced 

throughout the world, billions of dirty funds could still be moved 

undetected. 

Trade can hide both illegal shipments and illicit finance. Countering the finance of terrorism is about financial vigilance: to understand the operations of terror groups, respond effectively and 

strategically. For this, financial information and commercial flows 

must be monitored. Most of our attention focuses on the first two, 

while trade is neglected and is wide open to abuse. 

Many terror groups have used commodities for finance, including 

ISIS. Some work was done in 2003 at FinCEN on trade-connected 

hawala and other informal value transfer systems, a term I coined 

back in the 1990s, but no proper assessment of trade 

vulnerabilities or updated hawala review has taken place. 

When it comes to trillions of dollars in annual trade, our vision 

is blurred. Relevant information is scattered. Some of it is collected 

by Customs, FinCEN, the Department of Commerce, and port authorities and counterparts overseas. 

Other data are in the hands of banks, insurance companies, logistics companies, importers, and exporters. No one has the full 

picture because no one aggregates the data in one place. Banks are 

expected to focus on transactions and check-the-box monitoring 

that yields massive false positives, rather than centering on the 

12 

highest risks, identifying offenders and working more closely with 

controllers. 

Finally, the value of open source information helpful for investigations and due diligence relative to criminal networks, beneficial 

ownership, adverse news, and corruption is underestimated. Yet, it 

can point to knowledge gaps, misunderstandings, and new insights. 

The answer is to stop missing opportunities. 

The necessary data are not in one place but do exist, hawala is 

a challenge but also an intelligence resource because intermediaries can help. Agencies should share information. Businesses 

and academia can assist with new data collection and policy useful 

analysis. 

Our view is blurred unnecessarily. It is like having a 4K TV that 

we use for analog programs. The means are there to create a feed 

for a high-definition picture of illicit trade and finance. Several 

data types can be assembled. Inbound and outbound manifests on 

what goods are received, where, when and who is involved. Import 

and export declarations when goods enter or leave the economy. 

Some of it is published online, and some is provided by companies for a fee. Business documents, BSA, trade finance, insurance, 

storage, crime, medical, satellite imaging, and cash movement data 

can be added too. 

Concrete steps the U.S. Government should consider include the 

following: ensure that government data are gathered and analyzed 

in one place—FinCEN would be ideal. Assemble private and open 

source data through a trusted third party such as a university that 

securely stores and analyzes them in a consolidated way, collaborates with FinCEN to identify irregularities, generate typologies 

and red flags, map criminal networks, issue guidance, and produce 

evidence-based investigative clues. Update information on hawala 

in the United States and regions of concern. Methods keep changing and adapting, and we need to know what changed 

None of this is new. At Northeastern, we collaborated with 

FinCEN, DHS, and NIJ to do exactly this kind of work on hawala, 

gold, diamonds, and tobacco trade. Working with the Arizona attorney general, we combined MSB and trade data to analyze a TBML 

case involving textiles in the United States, Mexico, and China. 

Partners in Europe and the Middle East stand ready to be enlisted in a collective action targeting, for example, ISIS, a group 

with enemies in and around the territory controls. Instead of shooting in the dark, we can shed light on black markets and go after 

well-defined targets. 

Official networks and records, networks to produce new data, 

technology, analytical capacity, experience, and willingness to collaborate are all there. I urge you to turn the switch. Thank you. 

[The prepared statement of Dr. Passas can be found on page 81 

of the appendix.] 

Chairman FITZPATRICK. We thank the witnesses for their testimony. We will now go to members of the task force for 5 minutes 

of questions each. I will first recognize myself. 

Mr. Bock, given your longstanding experience in seeking to uncover trade-based money laundering schemes, are you satisfied 

with the U.S. Government’s efforts since the 1990s to uncover and 

ultimately dismantle this type of illicit activity? And obviously, we 

13 

know that there have been some great successes, but we are most 

interested in where you think the U.S. Government can do better. 

Mr. BOCK. When the effort is made to collect the data and organize it and analyze it, lots of material is created. The biggest problem I have seen in my experience with both the Customs Service 

and with DHS was that once you found something, you had difficulty bringing it to people who were interested in making the 

cases. 

The priorities out in the field—it was easier for the agents in 

charge to have arrests made for small quantities of dope or for illegal aliens. In the cases that we came across, such as gold, it is 

mind-staggering how much money moves there and the amount of 

things that look good but confuse people. As a result, it needs lots 

of resources to make the cases, and that is something that the field 

is not very often interested in doing. And that is our biggest problem. 

This case you had in the papers today with DEA is a large case. 

There wasn’t a lot of energy in the field to makes cases like this. 

That is my biggest complaint. And we had a difficult time getting 

it out to the field. 

Chairman FITZPATRICK. On the issue of information-sharing between agencies, we can think back to the 9/11 Commission. One of 

the big criticisms of our intelligence agencies was that they were 

doing a pretty good job individually in a stovepipe setting, but they 

weren’t sharing information with each other. 

Mr. Bock, how would you grade the cooperation between law enforcement and the other Federal agencies—Customs, Border Protection, ICE, the Financial Crimes Enforcement Network? Are they 

sharing information with each other, and is there opportunity for 

improvement there? 

Mr. BOCK. Yes, they are sharing the information. The financial 

networks are part of the system that we were using in the trade 

transparency units within DHS. However, it is difficult to get 

things—I have to be careful with this. 

The things that come from the atmosphere that are captured, it 

is difficult to get that information put into a report to identify and 

say, here is some further evidence. It is one thing to say, we see 

a massive trade flow problem, there are unbelievable amounts of 

gold coming from a country that doesn’t have it. It is another thing 

to have somebody tell you, we know where the bank accounts are 

and we know of people making these transactions, and then not 

being able to tell anybody about it. 

So that, in my experience, has been the biggest problem. I think 

that would have convinced many people to take the cases. 

Chairman FITZPATRICK. Mr. Cassara, while you say it is logical 

that the early trade transparency units were sort of originating in 

and around Latin America, what was a little surprising is there 

was not a movement of those TTUs beyond that region. Why do you 

think that was the case? 

Mr. CASSARA. I think originally, when the TTUs were first stood 

up back about 2004, 2005, it made sense to kind of focus on Latin 

America in general. They were specifically concerned about the 

black market peso exchange methodology. and this was considered 

one of the primary countermeasures that we had. 

14 

The concept, in fact, has proven successful. We have about a 

dozen TTUs right now and there been about a billion dollars of seizures. But at the same time, it is like operating with one hand tied 

behind your back because the system has never really had, has 

never really accelerated, has never reached that next level, and 

there are a lot of reasons behind that we could get into, but a lot 

of it had to do with lack of resources, lack of personnel, raiding of 

personnel and resources, et cetera. 

There have been countries around the world that have wanted to 

create TTUs. In fact, that was the original concept behind the 

TTUs: to have an Egmont-like financial intelligence umbrella for 

trade transparency units. I still think that is feasible. I think that 

is the next frontier in international money-laundering enforcement. 

I think we will be moving in that direction, but we can’t continue 

the status quo. We are just treading water and I think we need to 

get to the next level. 

It is certainly attainable. We just have to have the will to do it. 

And as I keep harking back in my testimony, this should be a nobrainer. We can do that. The data exists and it is a revenue 

enhancer. Why wouldn’t we want do it? 

Chairman FITZPATRICK. I now recognize the ranking member of 

the task force, Mr. Lynch, for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. Several of the witnesses 

today have mentioned the fact that we have deployed a lot of antiterrorist financing assets. We have them in ICE, we have them at 

the Treasury in FinCEN, but they are somewhat scattered. And I 

know Mr. Bock and Dr. Passas, you both mentioned that more 

properly the resources should be deployed at FinCEN because it is 

a revenue agency, part of Treasury. They are doing a great job on 

the FIUs. 

Members of this task force and committee were involved very 

early on when we were standing up FIUs in Afghanistan and Jordan and Morocco, so is it the general feeling of the panel that that 

should take place? Mr. Cassara? 

Mr. CASSARA. I spent 6 years of my life at FinCEN. I was the 

Customs Liaison to FinCEN. This was in the late 1990s, in the era 

around 9/11. 

Mr. LYNCH. Yes. I don’t have a lot of time. I am just trying to 

get an assessment of whether you think that is a good idea or a 

bad idea? 

Mr. CASSARA. My personal opinion is no, it is not a good idea. 

TTU belongs in what is Customs, and a lot of this has to do with 

Customs, the Custom-Customs agreements we reach with other 

countries. The other thing is, we can debate FinCEN, but in my 

opinion, FinCEN has never achieved its full potential, and there is 

a host of issues over there right now. I don’t think they are ready 

for the TTU. 

Mr. LYNCH. Okay. Mr. Bock? 

Mr. BOCK. I think you can look at Colombia. OEF is there, FIU, 

and they are spectacularly successful with what they are doing. 

They have taken some of the information all the way back for 14 

years ago when we gave them to it, and they working on the gold 

cases now. Even as we speak, they are making the cases. So— 

Mr. LYNCH. All right. 

15 

Mr. Mesko, do you have an opinion on this? 

Mr. MESKO. I will defer to my colleagues on where this thing 

should be housed, but I think what I would say is that I would encourage whatever form it takes to properly include open source 

data and better integration with the private sector. 

Mr. LYNCH. Okay, fair enough. 

Dr. Passas? 

Mr. PASSAS. I agree that it has to be in the same place. With 

Customs, it hasn’t worked as well as it could. The advantage of 

FinCEN is that you have the A1 group in the network for collaborations with sister agencies overseas, so this kind of consolidation 

is easier. 

Mr. LYNCH. Okay. My next question: When we stood up these 

FIUs, we initially had resistance from some of the banks because 

we were asking for cash transaction reports, we were asking for 

suspicious transaction reports (STRs), a lot of paperwork for the 

banks. And in the early days, we weren’t really set up to process 

all that, so some of it was a waste. 

Are we getting pushback? Look, I represent the Port of Boston, 

and we get a lot of bulk cargo coming in there. We are not Long 

Beach, we are not Manhattan, and we are not New Jersey, but we 

have a lot of cargo coming in. Should I expect pushback, should the 

committee expect pushback from the shipping community in terms 

of trying to put this overlay of analysis on everything that they are 

doing? Have we experienced that? 

We have some of these set up. Have we experienced pushback 

from our shipping consortiums here and overseas? 

Mr. BOCK. If I can answer that, I believe that they would very 

much want to give us the data. It was my experience after 9/11 

that Commissioner Bonner demanded the information and they 

gave it to us willingly. 

Mr. LYNCH. Yes. 

Mr. BOCK. Now, it is a problem that is very large and it needs 

resources to process the data. But they are not against giving it. 

It is something that they transmit constantly. 

Mr. LYNCH. Certainly, it would shield them from some liability 

if they were cooperating with us. 

Mr. BOCK. I believe that is true, but they would need a little bit 

of protection on their own because you can find lots of little things 

they do wrong and they would—that is their main concern, a lot 

of ‘‘gotchas.’’ 

Mr. LYNCH. I see, yes. 

Dr. Passas? 

Mr. PASSAS. The private sector does not want to deal with terrorists or financiers, so the general will is there. The data are collected with no new cost for them to add, and consolidating the risk 

management is a cost-saver. 

Mr. LYNCH. Okay. My time has just about expired. 

Thank you. I yield back. 

Chairman FITZPATRICK. I now recognize the gentleman from 

North Carolina, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. Is there any reason 

why the data could not be shared with Customs and with FinCEN 

in a joint effort in collaboration? Mr. Bock? 

16 

Mr. BOCK. No. The data belongs to FinCEN and to Treasury. 

These are collection documents that are used to collect taxes and 

duties. They actually belong to Treasury. To hold them from 

FinCEN is kind of silly. 

Mr. PITTENGER. Mr. Cassara, any more comment on that? 

Mr. CASSARA. Approximately 2004-ish, 2005, right when the TTU 

was being stood up, there was a delegation that went over to 

FinCEN. And what we tried to do at the time was to co-locate the 

TTU with the FIU, because that, as Lou has made perfectly clear, 

is the ideal. But FinCEN, at the time, turned it down. They did not 

want any part of it. 

Mr. PITTENGER. Thank you. 

There has been some criticism regarding the lack of robust intelligence support on the ground in the Middle East. What would you 

do to enhance that, to effectively address trade-based money laundering? 

Mr. BOCK. The difficulty isn’t that they will share it. They make 

it available, but you have to have such high clearance to get to it. 

And then once you find the material, it is an arduous process to 

get it downgraded to the point where you can use it in the field. 

I don’t know—I am not an expert in that field, but I can tell you 

that I found really good stuff there. I just couldn’t give it to anybody. 

Mr. PITTENGER. Yes, sir? 

Mr. CASSARA. I have done a lot of training, technical assistance 

mentoring in the Middle East. And what I found is that in most 

countries of the world, customs services do not follow the U.S. 

model. They are not enforcement-oriented. They are involved with, 

say, inspection and control. 

So when they find something that perhaps is suspicious, they are 

content to, say, maybe collect a duty and all these other things, but 

they don’t hand it off to an investigative body. There is a lack of 

capacity, a lack of training as well. There are corruption issues involved. It is not a simple formula. 

But if you can make the right connections, there are things that 

can be done. And the other thing I get back to, again, is that it is 

a revenue-enhancer. So this should be the carrot to drive their cooperation. 

Mr. PITTENGER. Thank you. 

Dr. Passas? 

Mr. PASSAS. Yes, this is one of the additional reasons why open 

source data is a good thing to look at. Sometimes the news and the 

information is in the local newspaper. It may be in another language, but there is easily accessible technology to get that so that 

everybody can read the local newspaper and put it together. 

Mr. PITTENGER. Very good. 

As we have discussed, the Egmont Group and its working 

through the trade transparency units, enhancing that, what obstacles to you see going forward to overcome with this informationsharing prototype? If we were to try to advance that further, what 

should we be looking out for? 

Mr. BOCK. Using again the example in Colombia, in order to get 

around this, we actually set up two units. We had a unit with 

DIAN, with is their treasury, and as a Customs officer, I was able 

17 

to communicate directly with DIAN. DIAN wasn’t the law enforcement agency. The ULIEF was their FIU. And ULIEF is the one 

that is prosecuting these cases, to my understanding, at this point. 

So, it was a small thing to have two operations set up. But the 

two operations in Colombia don’t talk to each other. It was okay 

because we were talking to both of them. 

Mr. PITTENGER. Very good. Thank you. 

I yield back. 

Chairman FITZPATRICK. The Chair now recognizes the ranking 

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

5 minutes. 

Ms. WATERS. Thank you very much. I have a number of questions I would like to get some clarification on. 

And I suppose the big question for, I guess Mr. Bock and Mr. 

Cassara is: Do you believe action should be taken to require the 

disclosure of beneficial ownership information upon incorporation? 

And to require financial institutions to check that information 

against lists of known terrorists and those who are known to finance terrorism before new accounts can be opened on their behalf? 

Mr. CASSARA. As a criminal investigator, yes, we should require 

beneficial ownership information, not only because it is the right 

thing to do—obviously, if we are trying to follow the money and 

value trails, there is a labyrinth of hidden financial networks. And 

without beneficial ownership information, it makes it very, very 

difficult to follow those trails. 

The other thing I would like to bring to the task force’s attention, 

is because again I have done work overseas, and time and time 

again, I have been asked by our counterparts overseas: ‘‘But Mr. 

John, I am following the dirty money trail from my country, and 

it leads to your country. Have you ever heard of this place called 

Delaware or Nevada or Wyoming? Can you please help us get information?’’ 

And there is nothing we can do. It is embarrassing. Thank you. 

Ms. WATERS. Mr. Bock? 

Mr. BOCK. That is not my area of expertise. I handle documents 

and things, and computer operations. I can’t answer that. 

Ms. WATERS. Would anyone else like to share information or 

thoughts on that? If not, let me just ask a very basic question. 

I thought that ‘‘know-your-customer’’ in banking really meant to 

know your customer, which would mean that you would know who 

the people are. You would have disclosure of beneficial ownership, 

on and on and on. Am I incorrect in thinking that ‘‘know-your-customer’’ should mean all of that? 

Mr. PASSAS. It is good to remember that due diligence and the 

idea of ‘‘know-your-customer’’ came from the private sector at the 

beginning. It was the Wolfsberg Group that identified that as a 

problem for their own business. You don’t want to give money to 

someone you do not know. You do not want to do business with 

someone you do not know. 

So, that is something for self-protection. And for their bottom 

line, private entities will, and do. The question is: How much detail? And are you going to do that with the partners of the partners? And how are you going to handle correspondent relations and 

things overseas? 

18 

And that is where the details need to be worked out on what gets 

outsourced to the private sector, and what is the duty for guidance 

on the part of the authorities. When the authorities give good guidance, fantastic results can come when you have targeted action on 

the part of the banks. But when the general culture is to go out 

and check for everything, then we get a sea of data and we have 

a hard time analyzing from the government side. 

Ms. WATERS. Let me just say that without even dealing with the 

issue of terrorism and just money laundering, for example, we have 

been in this discussion for many, many years. I can recall the discussions we had about Mexico and about the fact that banks were 

basically serving as private bankers for drug dealers coming out of 

Mexico some years ago. I don’t know what is going on now. 

And we talked a lot about making the financial institutions a lot 

more responsible. And it was not just Mexico. It was Africa and it 

was a lot of other places. All of that discussion seems to have been 

lost and it is not a part of the discussion as we deal with terrorism. 

And so, I hear some of the recommendations, and I wonder about 

them. 

But I am going to continue to listen and I’ll leave you with this 

thought. For Mr. Bock or for those of you who are talking about 

expanding the role of FinCEN, I have often wondered if FinCEN 

wasn’t always overloaded, always with too much responsibility for 

looking at everything from $10,000—over $10,000 transactions, 

which just comes in by the boatloads and other kinds of things. 

And would they really be able to deal with what we are trying to 

focus on, terrorism and money laundering through trade? 

Mr. PASSAS. Right after 9/11, I worked with FinCEN for 3, 4 

years. We worked on hawala as well as diamonds, gold, tobacco, 

and a number of other items. The problem was that there weren’t 

enough resources to focus on everything. It is a question of resources. It is a question of how many analysts you are going to 

have; how many people will do meetings; how many people will do 

analysis; how many people will do the liaising with other agencies 

that need to investigate. 

So once you get down to that and you give the guidance, then 

you can get better results. 

Ms. WATERS. Thank you very much. 

And I yield back. 

Chairman FITZPATRICK. The gentleman from Florida, Mr. Ross, is 

recognized for 5 minutes. 

Mr. ROSS. I thank the chairman. 

And I thank the panelists for being here. 

Over the several months that we have had this task force and 

we have had our hearings, we have learned of various sources of 

funding for terrorism financing. There have been the black markets, prostitution, human trafficking, and just theft. And now we 

are looking at trade-based money laundering. 

This is a general question to the panel. What is the most common form of trade-based money laundering that is out there today 

that is benefiting the terrorist organizations? Whomever? 

Mr. PASSAS. Mis-invoicing. You mis-declare the destination, the 

value or the quantity of a product: cargo theft, counterfeiting and 

trade diversion. 

19 

Mr. ROSS. Anybody else? Mr. Cassara? 

Mr. CASSARA. As a follow-up to that, I would like to add that in 

my opinion, the commodity of choice for trade-based money laundering is now, and has been for a long time, gold—the misuse of 

the international gold trade. 

Just to give you a very, very quick visual— 

Mr. ROSS. It was exempt, wasn’t it, as a form of currency, from 

some of the sanctions? 

Mr. CASSARA. Gold has unique properties. It is both a commodity 

and a negotiable instrument, if you will. There are couriers every 

day, for example, that travel from Milan’s Malpensa Airport to, 

say, Karachi, Dubai. And they declare gold. 

And they declare this gold as $500,000 worth of gold. And they 

have all the documentation. But is that 18-carat Italian gold chain? 

Is that 24-carat Saudi gold or Indian gold? Is it 12-carat Walmart 

specials at $500,000, $50,000, or $750,000? 

That is the way trade-based money laundering works. 

Mr. ROSS. And how do we track that? Through the TTUs? Or can 

you do it through the TTUs? 

Mr. CASSARA. A TTU can spot anomalies in the data. 

Mr. ROSS. Right. 

Mr. CASSARA. Then what is required is you have to write a report, and the report has to be given to an agent, a Customs agent 

or— 

Mr. ROSS. Right. And I guess my concern is this, first of all, we 

just released over $100 billion in assets to the central bank of terrorism, which is Tehran. We know that they give money to terrorist organizations such as Hezbollah and Hamas, and then down 

to the Houthis. We feel confident they are going to continue to do 

this even at a greater level. 

How do we prevent, or at least be able to follow through TTUs, 

if necessary? Is that what we are going to need, are we ever going 

to get them with Iran? How do we go about now making sure that 

trade-based money laundering isn’t becoming a predominant factor 

and a source of funds with Iran? 

Mr. MESKO. One thing that I think I can offer here is—as we just 

heard from Mr. Cassara, the typologies of trade-based money laundering are notoriously difficult to detect, which for someone from 

my perspective means that we should be focused not just on 

typologies but on the actual networks. The data to help map these 

networks and relationships is far more easy to access— 

Mr. ROSS. And that is done with the TTUs, as I understand it, 

correct? 

Mr. MESKO. Whether it is the TTUs or whether it is the financial 

sector or whether it is the transportation sector, they all have 

pieces of the puzzle to bring to the table. 

Mr. ROSS. Dr. Passas? 

Mr. PASSAS. With Lou Bock actually, in an afternoon we sat 

down, and we found hundreds of millions of dollars of irregularities 

that we passed on and nobody acted on. You could see diamonds, 

rough diamonds coming from countries that don’t have mines. You 

could see brokers declaring themselves as importers of record. You 

could see the value disparities huge, so mis-invoicing was massive. 

20 

When you have these things, these are obvious. You put it together with the networks and the open source information, and no 

matter what you call it, the entity that has all the information together can turn the lights on. 

Mr. ROSS. And that is the point that I think I want to get at 

here, is regardless of how well we can do in tracking, including the 

relationships that we have with our trading partners through 

TTUs, and Mr. Cassara you hit upon this in your opening statement, it is all about enforcement. 

Prosecutorial discretion—whomever it may be. Mr. Bock, as you 

explained when dealing with Colombia, one side doesn’t speak to 

the other side but at least they are speaking to us. But when it 

comes time to find where the source is, what do we do? Is not enforcement probably the biggest hurdle that we have to overcome, 

and how do we go about enforcing? Mr. Cassara? 

Mr. CASSARA. It is a real challenge but I want to emphasize what 

you just said. It all comes down to enforcement. We can pass all 

the rules, regulations, and laws in the world but it comes down to 

enforcement. 

And the other thing I would like to drive home for those of you 

who are concerned about areas of the world where adversaries operate, in the United States we have the best, most robust customs 

enforcement in the world. We have the best data in the world. We 

have the best analytics in the world. We have the most motivated— 

Mr. ROSS. I agree. 

Mr. CASSARA. —staff in the world, and we are doing a horrible 

job at— 

Mr. ROSS. It is the rules of engagement. We are not able to engage. So if we have somebody from Treasury in Qatar, we are still 

not able to do anything about it. 

Mr. CASSARA. Exactly, so look at where our adversaries are in 

the Middle East, South Asia, in other places in Latin America and 

whatnot, and they—it is not happening. 

Mr. ROSS. I agree. And I appreciate all of your testimony. My 

time has expired. 

Thank you. I yield back. 

Chairman FITZPATRICK. The gentleman from California, Mr. 

Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

There was some mention of stovepiping, and I want to say a few 

words in defense of stovepiping, because back in the old days it 

used to be called a ‘‘need-to-know basis.’’ After 9/11, we decided we 

needed to connect the dots and so everybody in the intel community got to see all the dots. Bradley Manning got to see all the dots 

and he told the world about all the dots. So we need a balance of 

letting people in the intel committees see the dots and protecting 

our dots of information. 

I think that there are people at Treasury who have done an outstanding job on terrorist financing, but there are aspects where we 

are just not serious. The witnesses have brought some of that to 

our attention. Outside the realm of this task force, I would point 

out that—and perhaps this has changed recently—our policy used 

21 

to be that we didn’t bomb oil tankers hauling ISIS oil because the 

drivers might be civilian. 

Had we refused to bomb Nazi trains during World War II because the conductor was a civilian, we might live in a very different 

world today. And also, I don’t see why they are using trade when 

our IRS allows you to get a tax deduction for giving money to terrorist organizations. 

I brought to the IRS’s attention 5 years ago a group that was 

funding ViVa Palestina and Hamas, gave them the videotape, and 

as of now, the only indication that anything has happened is that 

the organization itself puts on its website, ‘‘The IRS may eventually take away our tax-exempt status,’’ and implies you ought to 

give money to them now so that you can get your money to Hamas 

and get your tax deduction. So there is a certain lack of seriousness 

in some parts of Treasury, the IRS. 

Mr. Cassara, you talked about not showing beneficial ownership, 

that Wyoming and Delaware—how big a problem is this and should 

we simply have a Federal statute that says, ‘‘If you form an entity 

anywhere in America that makes use of interstate commerce, that 

is engaged with our interstate banking system, you have to disclose 

beneficial ownership in publicly available State or Federal records.’’ 

How are we going to criticize the Cayman Islands if we have Delaware? Mr. Cassara? 

And how helpful would it be to know the beneficial ownership of 

the entities involved in business and trade? 

Mr. CASSARA. It would be extremely beneficial for law enforcement to have beneficial ownership information. I am certainly not 

an attorney, I am not a legislator—I couldn’t attempt to even craft 

the appropriate language, but all that I can say is that the system 

as it operates now is not working and yes, it is hypocritical, because we are quick to criticize others, and we have to look at ourselves in the mirror when it comes to beneficial ownership information. 

Mr. SHERMAN. How big a problem are the tax havens? They are 

not just tax havens, they are transparency havens. We could prohibit U.S. banks from doing business with those countries that act 

as tax havens and shield beneficial ownership information. How 

useful would it be if every one of these tax havens in fact was cooperating with us at least as much as, say Britain as an example? 

Mr. Bock? 

Mr. BOCK. One of the problems that in my opinion spawned the 

black market peso exchange was Colombia’s effort to control their 

currency. Early on in the 1990s, they wanted all transactions to be 

funded through banks. The banks then reported who was doing the 

imports and the exports. That is what spawned the black market 

peso exchange. 

It is called counter-trade. People have legitimate money in the 

United States, selling coffee and things that they send to the 

United States, had a surplus of money in the United States. It was 

natural for some people who needed tractors in the United States 

to say, give me that money and I will pay for the tractors. Perfectly 

legitimate. We drove people with the legislation away from the 

banks. And that black market peso, you can’t follow anywhere, except to one thing. When it is black-market-peso-funded, they usuVerDate Nov 24 2008 15:56 Mar 23, 2017 Jkt 023565 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\23565.TXT TERI
22 

ally smuggle it into the country. That is an easy way to find black 

market peso. 

Mr. SHERMAN. You say they smuggle the currency or they smuggle the goods? 

Mr. BOCK. The goods. 

Mr. SHERMAN. Gotcha. 

Mr. BOCK. Because the goods enjoy a benefit. They don’t have— 

they are not reported to DIAN. The banks report to DIAN what 

goods are coming in. 

Mr. SHERMAN. So if you want to avoid Customs, you take money 

that has been moved to the United States to avoid Colombian 

taxes, or scrutiny, or currency controls— 

Mr. BOCK. That is correct. 

Mr. SHERMAN. —you also get to avoid the Customs as well if you 

can smuggle the goods— 

Mr. BOCK. And on top— 

Mr. SHERMAN. Dr. Cassara, I know, wants to say something that 

we— 

Mr. CASSARA. I just want to follow up on what Lou Bock said. 

This concept of counter-valuation is extremely important to understand because it is a common denominator for most underground 

financial systems, alternative remittance systems in the world, 

whether it again be hawala misused by terrorists or Chinese flying 

money systems. It is this concept of counter-valuation, or balancing 

the books through value transfer, through value in one country 

being shifted via over- or under-invoicing and other methods to another country. 

So if you want to get at these underground financial systems 

abused by our adversaries, we need to promote trade transparency. 

Chairman FITZPATRICK. The gentleman’s time has expired. The 

gentleman from Texas, Mr. Williams, is recognized. 

Mr. WILLIAMS. Thank you, Mr. Chairman. Mr. Cassara, I think 

you said that every TPP signatory country should establish a trade 

transparency unit so that countries can share data and help combat trade fraud. So one of my questions is, how do think other 

countries involved in TPP would respond to a request like this? 

Mr. CASSARA. Again, in my statement I said I don’t have a position on the pros and cons of the TPP, but I am quite certain that 

if the TPP and other international trade initiatives of that type, 

they will promote trade, and what happens is the misuse of trade 

gets lost in the noise. 

So I think what would be beneficial to all countries is to have 

true trade transparency. And I think they will actually be willing 

participants because—I go back again—it is a revenue-enhancer 

and it cracks down on trade fraud. 

Mr. WILLIAMS. You don’t think it would be a deal-breaker? 

Mr. CASSARA. I do not. 

Mr. WILLIAMS. Okay. Good. 

Mr. Mesko, in your testimony you talked about an example of 

trade-based money laundering that I stated earlier, which is personal to me. In fact, I have had the pleasure of discussing this case 

in great detail with your colleague, David Asher, who has also testified before this task force. I guess what struck me most from the 

conversation I had with Mr. Asher was that—and some of the comVerDate Nov 24 2008 15:56 Mar 23, 2017 Jkt 023565 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\23565.TXT TERI
23 

ments you have made today, is how obvious the entire scheme was, 

or seemed to be. 

For example, Dr. Asher showed me aerial shots of what they 

were bringing the used cars in, and how over a short period of 

time, they grew larger and larger. As you stated in October of last 

year, another company was sanctioned by the U.S. Treasury for alleged participation in the same trade-based money laundering 

scheme identified in 2011, involving used cars. That is almost 4 

years after the original scheme was discovered. The scheme seemed 

to go on for years and years without any action being taken. So one 

of my questions is, is that normal? Is it routine for the names to 

change and businesses to go on operating? 

Mr. MESKO. I think it is absolutely normal and it just shows that 

all it takes is incremental adjustments to the networks for these 

schemes to continue to operate. Now what I do want to say though, 

is that I don’t want to fault law enforcement and regulators necessarily for the time it takes to build cases. 

What I think is potentially more important here is that in order 

to get law enforcement and regulators the best intelligence, and 

particularly the best financial intelligence available, from the financial sector, from the transportation sector, from insurance, 

wherever it may come from, there needs to be a better focus on intelligence, true intelligence, within those institutions and knowing 

how to use data to better target the people that we really care 

about, that we know we care about, rather than the mom-and-pop 

money laundering, the $10,000 in structured cash deposits here 

and there, which sort of dominates the money laundering space 

within financial institutions. 

Mr. WILLIAMS. Is the U.S. Government not providing adequate 

resources? What would you— 

Mr. MESKO. I can only really speak from the position of the financial sector at this point. 

Mr. WILLIAMS. Is it all about resources, or does Congress need 

to give more authority in this space? 

Mr. MESKO. I think one thing that could be potentially very useful, and I think that it has been discussed several times here today, 

is we talked a lot about the question of stove-piping on the government side. But within financial institutions, and between financial 

institutions, there is a tremendous amount of this stove-piping as 

well. 

A local regional branch, say, of a money-center bank that operates in Mexico has a tremendous difficulty sharing adverse information on clients or customers with global headquarters, whether 

that is in New York or London or wherever. That is to say nothing 

of banks sharing information in between different institutions. 

So I think that one way that this task force could have a tremendous impact is clarifying the guidance on what—at the very least 

in the United States—information banks can share with each other 

on the compliance side. They do it every second of every day on the 

commercial side. That is how the global economy works. But there 

is very, very little information-sharing on the compliance side. 

Mr. PASSAS. One thing that you may want to think a little bit 

about is realigning the thinking between regulators and law enforcement on our side. Because the regulators want the banks to 

24 

do what they are doing now, which is the massive transaction monitoring, whereas law enforcement wants to concentrate on targets. 

When we concentrate on targets, we get better results, much 

more focus. We did that with child pornography, we did that with 

human trafficking. Much better results there. Much better use of 

the private sector in that respect. 

Mr. WILLIAMS. Just quickly, we have heard lots of numbers. 

What is the number on used-car sales that we are sending back 

and forth? What would that number be? A million dollars? 

Mr. MESKO. At the high end, hundreds of millions. 

Mr. WILLIAMS. Okay. Thank you, Mr. Chairman. I yield back. 

Chairman FITZPATRICK. The gentleman from Texas, Mr. Green, 

is now recognized. 

Mr. GREEN. Thank you, Mr. Chairman. Let me thank you and 

the ranking member for the service that you are rendering in 

hosting these hearings. I would also like to thank the witnesses for 

appearing today, and make one observation. Looking at and judging your body language, you are all very resolute. You really have 

come to conclusions that you absolutely believe in. So I want to just 

compliment you on being so strong-willed, if you will, with reference to what you said. 

Now, I will tell you, when I heard $972 for a plastic bucket, that 

got my attention. My question to you, sir, is, is this commonplace 

or a rarity? Because I understand what you mean about the value 

of transfer. How frequent do we have these occurrences of buckets, 

or a cattle for $20. You did say cattle for $20. 

I am from Texas. From time to time, I wear a big hat. But I have 

no cattle. In Texas, that means you are really not very much of a 

cowboy or rancher. But when you tell me that you are selling cattle 

for $20, even I understand that there is a problem. 

How is it that you are able to acquire this intelligence? And I am 

not sure whether you are implying in some way that others know 

about it, but they are not acting on it. 

Mr. CASSARA. I would like to briefly answer that question, and 

then turn it over to the true expert, Lou Bock. 

Mr. GREEN. If you can do it really briefly, I probably spoke too 

long myself. But I had to get that point out. I want to hear some 

others. 

Mr. CASSARA. Some of these things could simply be outliers, so 

what it is going to require is field investigation. And that is not 

happening. But to answer your question, yes, it happens all the 

time. And I know Lou can add to that. 

Mr. BOCK. Let me give you a better example that happens all the 

time. It has happened for a long time. We were looking years ago 

at the movement of gold, all different types of gold. You are all familiar—you have wives or girlfriends, people you buy jewelry for. 

Twenty-four carat gold, best quality you can get. You can look to 

a market indicator and know what that is trading for. Anybody can 

do this. 

In a $13-per-unit market, we had stuff coming in from countries 

where gold never existed. It was being called scrap and was being 

brought into the United States for $30 a unit. There is nobody 

going to pay that. It is common sense. 

25 

I can’t tell you about the cattle, because as John said, they are 

outliers. But we can see consistent patterns of over-invoicing of 

goods of different quality, diamonds consistently. Now, why are 

they doing it? Some of it is because of money laundering. They are 

illegally transferring profits from drugs. Some of it is tax avoidance. There are any number of good reasons why they may be 

doing it. 

The problem is it is consistent, it is going on all the time, and 

it is difficult to get somebody to—we had a guy actually go into a 

place and ask, ‘‘How are you getting goods from this country, gold 

in particular, and it doesn’t exist?’’ 

And the guy said to him right to his face, a criminal investigator, 

‘‘It is not coming from there. We are smuggling it from someplace 

else.’’ 

To me, that would— 

Mr. GREEN. Let me ask, as we go to another area quickly, would 

legalizing drugs have a positive or a negative impact on this illicit 

trade? Yes, sir? 

Mr. PASSAS. Money launderers, traffickers of all kinds of things, 

and terrorism financiers, take whatever opportunity is available to 

them. If you legalize one, they will turn to something else because 

that is where the profits are going to be. When you ask how often 

these $900 buckets are identified, you can see them everywhere. 

Licorice, we import from everywhere below a dollar a unit. And 

when it comes to Syria it goes to $26, $29. You go to Taiwan, it 

goes to $200. We show exports of chicken to Colombia. You look at 

Colombia, no imports of chicken from the United States. Where did 

the chicken go? We lost the chicken, right? 

Now, any commodity you look at, you have no idea. If you sit 

down with Lou Bock in an afternoon, you are going to see that with 

any commodity you look at, legal commodity, you will find that 

problem. 

Mr. GREEN. Let me get one more question in, please. If we do 

some of the things that I contemplate doing, my suspicion is that 

we will have some legitimate business persons who will give a little 

bit of pushback. I am being a bit euphemistic with my terminology. 

What would you say to the legitimate business people who will 

voice their concerns in a legitimate way? 

Mr. BOCK. One of the problems we experienced when we first 

brought this out was we did not want to tell the foreign governments exactly who the U.S. exporters were, because there are so 

many things that are going on where pricing is over and under, 

they are moving money from one place to another. 

I am making this up, so please don’t—Lou Bock Enterprises, I 

sell tons of electronic goods. The minute you find somebody who 

has deep pockets and is doing some various small infraction, that 

is who they go after. We want them to go after the people who are 

truly laundering money. We don’t want them looking at General 

Motors. We don’t want them looking at IBM. They are doing something. It may be tax fraud, but it is not what we are looking for. 

Mr. GREEN. Can Mr. Cassara respond? I see that he wants to, 

Mr. Chairman. 

Chairman FITZPATRICK. Can you do so quickly, Mr. Cassara? 

26 

Mr. CASSARA. Just to my opinion on your last question, I think 

legitimate businesses will welcome trade transparency because it is 

a level playing field—particularly American businesses should welcome this. 

Chairman FITZPATRICK. The gentleman from Kentucky, Mr. Barr, 

is recognized. 

Mr. BARR. Thank you, Mr. Chairman. And thanks to our witnesses. 

To Mr. Cassara, thank you for your career in addressing tradebased money laundering. I know you have—in your testimony, you 

stated that trade-based money laundering and value transfer, including all its varied forms, is perhaps the largest and most pervasive money laundering methodology in the world. 

My question to you is a pretty simple one. Compared to other 

forms of terror finance, how problematic is trade-based money 

laundering as a method for terrorists? 

Mr. CASSARA. I believe trade-based money laundering is a major 

problem. But it depends on the part of the world you are talking 

about. Certainly, if you are talking about South Asia, you are talking about Afghanistan, Pakistan, the Afghan transit trade, it is absolutely huge. Areas in Libya and Somalia, it is huge. In other 

areas, perhaps not as important. 

But what is overlooked is the fact of trade-based value transfer, 

particularly the counter-valuation we were talking about earlier 

and its relationships to all kinds of indigenous, underground financial systems employed by our adversaries. We have not focused on 

that. We should. 

Mr. BARR. A common theme has kind of come up in all the testimony, at least that I can discern. When Mr. Mesko’s testimony— 

I think he puts it probably most succinctly where he says that nobody has the whole picture. In other words, nobody is making full 

use of the range of data available to them in the public domain. 

The key to detecting and preventing increasingly complex TBML 

schemes is data integration within the government, within the private sector, between the two, and for all stakeholders. Everybody 

needs to aggregate the information to connect the dots, so to speak. 

And others have said something similar to that. So to that end, 

is the solution Mr. Cassara’s invention, which is these TTUs? And 

what is the key to standing up more of them in other places around 

the world? 

Mr. MESKO. I will let them speak to the TTU question. But I 

think one sort of illustrative way of thinking about this is, let’s say 

that all of our different banks are stove-piped. They are not sharing their compliance data with one another. We have five top banks 

in Mexico, and we go in and we say, ‘‘Look, one of them says I used 

this open-source data. I found that there were some relationships 

of concern with this party. He has been transacting with a known 

Hezbollah operative,’’ whatever the case may be. 

That account gets closed down. Without information-sharing between those banks, he just goes around the corner to a peer institution and opens another account. I think that is the problem I am 

trying to—that I am trying to address in that testimony. 

Mr. BARR. Dr. Passas? 

27 

Mr. PASSAS. And that is the problem with the cost and the duplication of the effort, because if one bank finds me as a terrorist financier and chases me away, they do not tell anyone else about this. 

And I go all around until I find a bank that will welcome me and 

I will change my name in the process. So if you have one place that 

does the consolidated risk management and red flags that then you 

get that saving. 

Mr. BARR. Is part of the problem that we don’t have TTUs involving trade transactions outside of the United States where the 

United States is not a party? How do we encourage countries 

where there is a trade transaction—a fraudulent trade transaction 

and the United States is not a party? I would think that would be 

because we have a more sophisticated and aggressive approach to 

this problem that a lot of these illicit transactions are occurring between parties where the United States is not in the middle. 

Mr. PASSAS. In my experience, in many different countries you 

have different government structures. So you have the customs on 

one hand and you have the entity that does the FIU function. They 

are located in different parts. Some times it is police, sometimes it 

is the central bank, sometimes it is a ministry. 

Having one definition where everything has to fit may not be the 

way to go forward. Define the function and the kind of information 

that needs to come together and then find what are the entities in 

different countries that need to contribute. So it is the concept of 

what needs to be done. The data integration and analysis and the 

sharing and then move with a labelling. 

Mr. BARR. Mr. Cassara, is there any way we can encourage more 

TTUs in other parts of the world? 

Mr. CASSARA. I would like to see regional TTUs. For example, we 

are talking about threat finance. One of the reasons we established 

TTUs originally was to get at terror finance. So if you had a regional TTU—for example Afghanistan, Pakistan, Dubai, that whole 

area there—would be great. You could set up another one around 

Iraq and the surrounding areas—Turkey and other logical trading 

partners. 

I would like to see TTUs in theory under the HSI-ICEu umbrella 

but they don’t have to be. Any country can stand up their own TTU 

using trade data, financial intelligence, and other data they have. 

Mr. BARR. Thank you. 

I yield back. 

Chairman FITZPATRICK. The gentleman from Maine, Mr. 

Poliquin, is recognized. 

Mr. POLIQUIN. Thank you very much, Mr. Chairman. 

And I thank everyone for being here. 

I think we can all agree that one of the primary or the primary 

responsibility of government is to keep American families safe. And 

I think we can also probably agree that for all kinds of reasons, we 

are losing the war on terror. Now, we can turn this around. We all 

know we can do that and one of the key things to do that is in fact 

make sure we choke off the funding that goes to terrorist organizations, which is in part what this is all about. 

Now, we also all know that a stable government—whatever type 

of system it is—promotes a stable economy and when you have 

both that are stable you have more opportunity, better lives, better 

28 

jobs, better futures. And that in itself promotes more stability and 

less likelihood to embrace terrorist organizations. 

Now, Mr. Cassala, I would like you to talk a little bit if you can, 

please, about what spots around the world you have seen where in 

particular the activity of stealing goods, selling them cheaply in 

order to provide funding for terrorist organizations, is starting to 

or has destabilized local economies and therefore local governments, and therefore breeding grounds for terrorist activities that 

can keep our families in jeopardy? 

Mr. CASSARA. Global Financial Integrity, a non-profit—in fact 

there are a few representatives of it sitting behind me—has done 

some incredibly useful studies about illicit financial flows from the 

developing world. And literally, trillions of dollars—about $1.3 trillion if I am not mistaken—over the last 10 years has gone out of 

the developing world, mostly through abusive trade mis-invoicing. 

This type of thing directly affects the developing world, it affects 

the standard of living, it enables kleptocrats, it is all different 

kinds of wealth transfers and this is a type of thing on almost a 

social level that breeds corruption. It also brings unstability. 

Mr. POLIQUIN. Sure. So Mr. Cassara, let’s drill down a little bit 

more on that if we can. Is there a way that we can use the data 

that is available to us through all the good work that is done in 

the non-profit sector, the private sector, and various governments 

around the world, to identify or give a head’s up to countries who 

may in fact be susceptible to this sort of activity that would destabilize their economies and therefore their governments, and therefore invite terrorist activity? 

Is there a way we can identify the types of products or goods and 

services that they should be on the lookout for because of the inherent nature of the country itself or the existing economies? Is 

there a way we can mine the data to give them a head’s-up so we 

can work with them? 

Mr. CASSARA. There are some real experts here that have a very, 

very good understanding of the data that is available. But the kind 

of thing that you just talked about—yes, it is possible to do that. 

It is possible to do that. And the other thing, because we just briefly touched on corruption, for example—the great enabler, the great 

facilitator for a lot of this stuff that goes on in this areas—in theory, that analysis could be done outside of the countries. It could 

be done here. It could be done in our intelligence communities. 

Mr. POLIQUIN. Dr. Passas, you were about to try and— 

Mr. PASSAS. I can give you one example, and that is the pharmaceutical industry. 

Mr. POLIQUIN. Say that again? 

Mr. PASSAS. The pharmaceutical industry. There you have not 

only mis-invoicing but you also have counterfeiting, which is a public health as well as a cost issue. And you also have cargo theft, 

and we do not know who is stealing, who is selling and who is 

making use of the funding. We haven’t looked. 

What we know in the private sector is that these are problems 

that affect the bottom line and the public health of the sick populations. But no one is looking. We need to look. 

Mr. POLIQUIN. Who would be the entity that in fact would perform that function, to the best of your knowledge? 

29 

Mr. PASSAS. We have started an initiative with a number of 

pharmaceutical companies to do exactly that. We are in the initial 

stages but in Boston, at Northeastern, we are beginning this. 

Mr. POLIQUIN. Okay. Thank you very much, gentlemen. I really 

appreciate this. We need to learn as much as we can to stop this 

and keep our families safe. 

Thank you, Mr. Chairman. I yield back my time. 

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

is now recognized. 

Mr. HILL. Thank you, Mr. Chairman. 

I thank this distinguished panel for being with us. And I appreciate your leadership. Clearly, in this war on terrorism, diplomatic, 

military, and financial means are all equally important to winning 

this global war. And so I commend the chairman and the ranking 

member for renewing our task force. 

On standing up TTUs in select regions so setting a priority to do 

that, what is the enabling organization to do that? How do we diplomatically through the Treasury, on a multi-lateral basis, carry 

out that mission and then aid that being accomplished in a region, 

Mr. Cassara? 

Mr. CASSARA. Part of that, as you said, is kind of a multi-pronged 

approach. Some of this does get done via the State Department. 

Some of it gets done via funding by the Bureau of International 

Narcotics and Law Enforcement Affairs—INL. Of course we have 

Customs attaches assigned overseas and they also participate in 

the facilitation of that. There are a lot of delegations that go back 

and forth. So it is a multi-pronged effort. There is not one particular model. 

Mr. HILL. During the Bush Administration, when Treasury was 

standing up with—and as you talked about, Mr. Bock, unfortunately moving bureaus into the new Homeland Security Department, I agree with the comments made that some of that has not 

been done in the right way. There was a lot of high-level engagement on terror finance, trade-based terror finance, money terror finance. 

My question is, to your knowledge does the NSC staff treat this 

as a top priority and therefore do a coordinative effort on the White 

House staff to keep a focus on this international security apparatus? Because to your point, these interagency things just don’t 

get done. You have Commerce people, you have Customs people, 

you have DEA attaches out in our embassies, and everybody works 

up their chain of command. 

And so, while I think Treasury is in charge of this in a general 

way, had they exhibited that in a regular sort of NSC briefing process? Who wants to tackle that one? And I know you don’t work in 

the government now. You are giving your opinion about how it 

should be done. 

Mr. CASSARA. In my opinion, this whole issue of trade-based 

money laundering there continues to be a lack of awareness. And 

you mentioned for example DEA, IRS, even FinCEN, whatever. As 

far as trade-based money laundering and associated issues, at the 

Federal, State, and local levels, there still is a lack of awareness 

and understanding of this. There just is. 

Mr. HILL. Anybody else want to add anything? Dr. Passas? 

30 

Mr. PASSAS. Yes. This relates also to the need-to-know question 

that was raised earlier. You don’t need to know necessarily the details of the information. All you need is the target. When you know 

what the target is, then you can give a head’s up to institutions 

that collect that information, reverse engineer that into indicators 

of abuse and red flags and then you can have a guidance that everybody looks out for. That is a much better way to do it and you 

do not have to reveal methods or sources—anything. Because then 

it becomes a law enforcement case that is usable in court. 

Mr. HILL. Right. I have been a banker for 30 years, and I am certainly familiar with the money laundering aspect of it, and I have 

been a Treasury official in my past. So I respect both sides, but you 

talked about massive false positives and that is a theme that we 

have heard about consistently over the past months of this task 

force. We collect a lot of data but nobody does anything with it. 

And the very people who could help us on a targeting basis are not 

privy to how to help in a way. 

So to me, setting priorities, how that is done, sharing information 

and having liability protection and sharing that information like 

we have in SARS now for civil liability in a loan-type situation. Integrating that data and then focusing on it is the only way we are 

going to tackle this. And our vice chairman, Mr. Pittenger, had an 

excellent roundtable on Bank Secrecy Act issues where 80 percent 

of the cash transaction people in the world were sitting at that 

table. 

And they said, ‘‘We could be so much more effective if you just 

would tell us what you are looking for.’’ 

We do that in criminal investigations. In my old bank branches, 

an FBI agent or a U.S. attorney would walk in and say, ‘‘Hey, we 

need to know all about Joe,’’ and that was just to a branch manager. There was no legal person involved in it. 

And I don’t think we need to have this information-sharing. Instead of collecting the hay, we just need to be told where the pen 

is, and let us go get them. 

Mr. PASSAS. I think it is exactly right. And the banks right now, 

all they care about is avoiding heavy sanction and reputational 

damage. They are not looking for bad guys. They are not looking 

for offenders, and terrorist financiers 

Mr. HILL. And they are spending millions on it. Thousands of 

people working on that box-checking piece. But they are all willing 

to do, I think, they are all very— 

And when you are targeted to do a better job on behalf of the 

American people by being—letting in, is you say, not without the 

sources and methods now, but just, ‘‘Here is the target list. You 

need to help us.’’ 

Mr. PASSAS. And the targets can be formed with this work. If you 

look at the diagrams in my written statement, it just jumps out 

like a fly in the milk. And that is not the sort of thing that you 

need any clearance for. It is out there. It is public. 

Mr. HILL. Thank you for your forbearance, Mr. Chairman, on the 

time. I yield back. 

Chairman FITZPATRICK. The gentleman from Arizona, Mr. 

Schweikert, is recognized. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

31 

In many ways, Mr. Hill was actually sort of grabbing some of the 

direction I wanted to go. 

My understanding is, as of yesterday, we now have nine running 

banks that have access to the SWIFT system. How does that work 

in a world where an institution anywhere in the world now has the 

traditional backbone moving money through? SWIFT and its charter is supposed to eliminate dodgy actors. But in this case, we 

know a couple of those nine actually have some really interesting 

things in their history. 

So if you are collecting data, but it is coming through the legitimate backbone—and this may be more for Mr. Mesko with your 

data analytics background—comes in in a very legitimate platform, 

but parts of that transaction may be also moving bad actors’ 

money. How do you segment it? 

Mr. MESKO. Excellent question. Unfortunately, I don’t think 

there is necessarily an easy answer to it. Our financial sector and 

the financial sectors in our partner nations, friendly nations, are 

always going to be at the mercy of the controls that their downstream—that their correspondent partners have, their banking 

partners in emerging markets and frontier markets have in place. 

Mr. SCHWEIKERT. If you use the term ‘‘frontier markets,’’ can I 

beg of you to go a couple of steps further? Let’s use a Hezbollah 

example where they had some very legitimate-looking front ends 

that had, what was it, Lebanese banking interests or relationships. 

In some ways, you just put them back into the mainstream system. 

How do you identify the bad actors here when the conduit is what 

the international system uses? 

Mr. MESKO. Right. And I think—I have obviously spoken a lot on 

open source today, and the use of open-source data, and how you 

can map these networks and identify bad actors. I don’t want to 

leave you with the impression that you are going to necessarily 

find to some degree—some evidentiary standard that some transaction coming out of Lebanon is linked to Iran, or whatever. 

I think the point is that, as Dr. Passas said as well, we need to 

refine our understanding of what the actual typologies are of these 

new threats, so that banks, whether or not they can put the full 

picture together, can get better information to law enforcement, 

and to regulators, to be able to pursue— 

Mr. SCHWEIKERT. Dr. Passas, I see you. A little bit of refining. 

I have a personal fixation that we are allowing our own networks 

to be used against us. 

Mr. PASSAS. Right. Well, the crooks like to hide in the crowd. 

That is the way it happens. In the economic crime, in organized 

crime, in terrorism finance, it is the same thing. So the whole point 

is to find in the big crowds the bad elements, the irregularities. 

That is what these analytics do. This is the process that has been 

in use. 

In fact, we have been doing this with Lou Bock to find precisely 

what is wrong. We were in the Dominican Republic for 3 days. It 

was a gold case that was more than $100 million, as it turned out. 

It was just there. 

Mr. SCHWEIKERT. Okay. In the last 60 seconds I have, we had 

some testimony in one of our earlier hearings that the confluence 

of terrorism, people who were producing fake products, copyrightVerDate Nov 24 2008 15:56 Mar 23, 2017 Jkt 023565 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\23565.TXT TERI
32 

type infringements, cartels, and in many ways they were using 

some of the very same brokers to wash money. It was actually a 

profession. 

My question: Professional money laundering, what is the fee 

structure these days? Are they guns for hire? Do they care whether 

they are washing and moving money for terrorism or a drug cartel? 

And how formal are those networks out there now for moving 

money around for these bad actors? 

Mr. PASSAS. It depends on the terrorist group that you look at. 

It depends on the commodity and the part of the world you are 

looking at. If you are looking at the Islamic State, you want to see 

who is buying oil, who is buying antiquities, who is providing the 

finance, who is driving it around, who is providing insurance. 

Maybe there can be barter deals. So you want to see who are the 

supporters, who are the facilitators— 

Mr. SCHWEIKERT. And I know I am out of time, but if you look 

over the last couple of decades, we had a number of terrorism 

groups that financed their bad activities through opium, through 

cocaine, whether it be FARC, whether it be in Afghanistan. And so 

it was almost a bilateral trade mechanic where they were selling 

an illicit commodity, gaining cash, and then buying their weapons 

of destruction. So I have a great interest in the movement of both 

the commodity and the cash. 

With that, I yield back, Mr. Chairman. 

Chairman FITZPATRICK. The gentleman from Pennsylvania, Mr. 

Rothfus, is recognized. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. Cassara, I just want to follow up a little bit—Congressman 

Williams had brought in the subject of TPP, which you mentioned 

in your testimony. 

You suggest that every TPP signatory country should establish 

a trade transparency unit, and share appropriate targeted trade 

data to spot anomalies that could be indicative of trade fraud and 

money laundering. Do you know whether this was ever proposed by 

the Administration during the TPP negotiations? 

Mr. CASSARA. I do not know. 

Mr. ROTHFUS. Should it have been? 

Mr. CASSARA. Short answer, yes. 

Mr. ROTHFUS. You mentioned in your written testimony that 

there is a network of operational trade transparency units which 

includes the following 11 countries: Argentina; Australia; Colombia; 

the Dominican Republic; Ecuador; Guatemala; Mexico; Panama; 

Paraguay; Peru; and the Philippines. 

Of these, the United States currently has free trade agreements 

with seven: Australia; Colombia; the Dominican Republic; Guatemala; Mexico; Panama; and Peru. To your knowledge, do any of 

these trade agreements include provisions that directly relate to 

trade transparency, or otherwise advance the goal of establishing 

TTUs? 

Mr. CASSARA. I do not know. I’m sorry. 

Mr. ROTHFUS. Mr. Bock, according to a December 2015 report by 

the non-profit group Global Financial Integrity, the largest exporter of illicit money over the last decade has been China. Moreover, last September U.S. authorities charged a group of ColomVerDate Nov 24 2008 15:56 Mar 23, 2017 Jkt 023565 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\23565.TXT TERI
33 

bians with participating in a China-based criminal operation that 

laundered more than $5 billion from the United States, parts of Africa, Europe, and countries in Latin America. 

According to the indictment, the Guangzhou organization used 

Chinese casinos, currency exchange houses, and export companies 

and factories to receive billions of dollars in illicit drug proceeds. 

With that said, how big of a problem is China with respect to 

trade-based money laundering? 

Mr. BOCK. As I remember it, the relationship between Colombia 

and the United States was that Colombia gave us data that was 

only U.S.-centric. And John had mentioned before about regional 

trade transparency units. It depends on the agreement we have. If 

the country only gives us the information between their country 

and our country, that is all we can focus on. 

This material you are talking about in China would have been 

nice to see, but I don’t know whether or not they are supplying it 

to us. It would have been found if we had been looking at the entire Colombia database. These countries want to share each other’s 

data. 

And if we can act as a broker—for instance, Colombia very much 

wanted to see what Panama was doing. The arrangement was between Colombia and the United States; and Panama and the 

United States. I don’t know if they ever got together and created 

the regional TTU. But all these countries want to share the data, 

especially if they can have our data in exchange. 

Mr. ROTHFUS. Can any of the panelists address what we could 

be doing to better address trade-based money laundering with 

China? 

Mr. PASSAS. I think one way—in my view, you always provide incentives for people to do the right thing. And I think the incentive 

is the revenue raising and the fighting of illicit financial flows. 

That is a top concern in China as well. And I think that can be 

the focus of attention. 

Mr. ROTHFUS. Mr. Cassara, the 2007 national money laundering 

strategy identified attack trade-based money laundering at home 

and abroad as one of its key goals. An action item in the strategy 

was the stablishment of TTUs in the Philippines and Malaysia. To 

date, however, there are no TTUs formally established outside of 

the Western Hemisphere. What has the President and his Administration done, if anything, to carry out this goal? 

Mr. CASSARA. It is a very difficult question to answer. I am not 

privy to internal conversations, obviously, within the Administration. But the reason we are here is that not enough has been done 

to combat trade-based money laundering in general, establish trade 

transparency units in particular, which is part of the U.S. national 

anti-money laundering strategy. 

Mr. ROTHFUS. General question for the panel: Do we know of any 

countries where government officials are actively and affirmatively 

facilitating trade-based money laundering as opposed to some kind 

of neglect? Do we have any information on that? Anybody? 

Mr. BOCK. There have been times when we pointed out to different governments that there were big issues with very large industries, and for some reason, unbeknownst to me— 

Mr. ROTHFUS. What would some of those countries be? 

34 

Mr. BOCK. Most of the countries in South America. 

Mr. ROTHFUS. Okay. 

Mr. BOCK. When you have something that is a linking to the 

largest industries in the countries, they are protective of their industries. Whether it is corruption, I am not sure. 

Mr. ROTHFUS. I yield back. 

Chairman FITZPATRICK. Without objection, we are going to recognize the gentleman from California, Mr. Royce, for 5 minutes for 

questions. 

Mr. ROYCE. Thank you, Mr. Chairman. I appreciate that. 

I guess the real surprise here is just how much money we are 

talking about in terms of revenues to these governments in the 

Western hemisphere, and across the developing world. You are 

talking about hundreds and hundreds of billions of dollars in terms 

of helping us balance our books and helping those governments as 

well. 

So I think civil society, if it was really focused on just how much 

money you are talking about here, would bolt upright in terms of 

trying to figure out a structure in which to capture this information 

in order to try to capture the revenue flows back to the governments related to this. 

The World Customs Organization, is that the entity that we 

should consider may be the platform for enforcement if we were to 

work internationally or is it the OECD? Is it their financial action 

task force that has that 40 plus 9 recommendations? 

Is there a way to maybe incorporate this into that entity with the 

understanding there of how much we are talking about in terms of 

potential revenue? And therefore, that certainly could compensate 

for taking on that added burden on the part of that institution. 

Where would you begin, and first, what would be the practical 

problems with establishing such a platform? And second, what 

would be the political problems maybe in doing it? 

Mr. PASSAS. If I could, I will be doing this in the near future at 

the International Anti-Corruption Academy, to engage in concrete 

collective actions against lack of integrity, including in trade. So 

the answer to your question is all of the above. GFI and other 

NGOs are engaged in this. The OECD is focused on that. 

There are U.N. conventions against transnational organized 

crime, against terrorism finance and against corruption, that have 

the relevant provisions that all countries on the planet are bound 

by. So you have the handles to do all this, and what you can do 

then with the incentive for revenue raising and better governance 

and therefore development for investment in all the things that— 

the good stuff that comes after this, you provide the incentives for 

integrity. 

You bring all of the actors together. They contribute their brains 

and the data. You do the analysis, you feed it back, you turn the 

lights on. That is why I was saying that the answer is within 

reach. 

Mr. ROYCE. Would anyone else care to comment? 

Mr. BOCK. Since 9/11, either myself with people who work for me 

and the group that I managed, visited 40 countries on behalf of 

Commissioner Bonner, who was in charge of customs at the time. 

And we were trying to extend our borders out with the container 

35 

security initiative. Of the countries that we visited, and some of 

these were former Soviet countries, every single person we demonstrated the program to asked, ‘‘Where do we get a copy of this?’’ 

I had permission to give this to the law enforcement people. And 

we often made it available. They got the program. We handed it— 

we own the program, so we were able to give it to them. 

We had countries that don’t give us anything. The Netherlands 

wanted to hand us a disc and actually did hand us a disc and said, 

here is our data. We couldn’t go back to our organization. The programmers wanted the Netherlands to pay for the processing of 

their data. 

When we had funding, we were able to take this data and do it. 

The biggest problem is going to be that when you have a country— 

the United States has a different bookkeeping system than everywhere else in the customs world. That is a blanket statement. 

Most other countries use a system called ASYCUDA. We don’t 

use that. Their data is in one format, and we don’t accept it, according to our IT people, unless they present it in our format. It 

costs a lot of money to do this. We could just as easily have it done 

ourselves. And we did while we were funded. Now, when you go out 

to somebody, they want money to convert the data. 

These people just want to give it to us, as long as we share with 

them. And I would be willing to bet that we could extend this thing 

to 40 countries, probably within very short order, if we had money 

to do it. 

Mr. CASSARA. In the international community, the Financial Action Task Force (FATF) makes things happen regarding antimoney-laundering and counterterrorism finance. One of the recommendations I have in my book and in my prepared statement is 

that I believe we should go to our U.S. Department of the Treasury, which heads up our U.S. Government Financial Action Task 

Force delegation, and ask them to study the possibility of having 

trade-based money laundering be the next FATF recommendation. 

Mr. ROYCE. I thank you, Mr. Chairman. And I thank the panel 

and I thank you for your continued focus on this. And I think later 

we can have some conversations between the Members here who— 

some like Mr. French Hill, who got a little bit of understanding 

from being over in Treasury as to some of the bureaucratic impediments. 

Maybe we can keep a dialogue going, Mr. Chairman, with the 

panel, as we try to work with some of the government agencies 

here on the next step. But thank you again for the hearing. 

Chairman FITZPATRICK. Great. The gentleman from New York, 

Mr. Meeks, is recognized. 

Mr. MEEKS. Thank you, Mr. Chairman. And thank you to the 

panelists. I have been listening to some of the questions and some 

of your testimony. And this is complicated. 

I guess I will direct my first question to Mr. Bock because—and 

just thinking about it, what makes this hard, I think, to fight 

against TBML, among other things, and I—another reason why I 

wanted to make sure I come down, I am a big guy who believes 

in trade. 

And the world is much smaller and interconnected when we are 

trading back and forth. We enter into trade agreements and you 

36 

look at the enormous volume of trade flows which obscures individual transactions and provides abundant opportunity for criminal 

organizations to transfer value across borders. 

The complexity of it, as I think that you were just talking about, 

associated with foreign exchange transactions and then the additional complexity that can arise from the practice of co-mingling illicit funds with the cash flows of legitimate businesses and then 

the limited recourse to verification procedures or exchange customs 

data between countries. 

So, when I look at how complicated all these challenges are, it 

becomes clear. And then, what you were just talking about on our 

side, looking on our side of what we can do in our government, but 

wouldn’t it seem that there should be—we are doing some kind of 

international harmonization with cross-border systems of 

verification and data exchange? 

Do you see any harmonization of international cooperation to 

combat TBML? 

Mr. BOCK. I think that we are on the right path to it. The government already—all the governments follow a harmonized system 

of tariffs. That is a description of the goods. And when we look at 

the rest of the world, they are all in harmony with the way they 

do their business. 

We are the ones who are out of harmony, but we are the biggest 

economy. And we set the rules. We did it long before anybody else 

did, so we are set in our ways. We can easily adjust our data to 

match the rest of the worlds. It is not difficult. The problem is, we 

need the wherewithal to do it, and of course, I am not with the government anymore so I am not asking you for any money. 

But the agencies need the money to normalize our data with the 

foreign countries. 

Mr. MEEKS. So it would be a matter of money. It wouldn’t be 

like—one time, we were the ones still using inches and everybody 

else is using centimeters. And so, we just couldn’t get used to 

change to a different dialogue. 

So that complicated it, as far as differences are concerned. Is it 

just a matter of trying to—some financing and some money to put 

it all on pause so we can do some harmonization? 

Mr. BOCK. That is what I would say, yes. We have already—the 

government has already paid to take our data and make it match 

everybody else. 

Mr. MEEKS. Yes, sir. 

Mr. PASSAS. In addition to that, what you have is pretty standardized private sector records and data. People, beyond what the 

governments require, need to communicate. So the equivalent of 

the SWIFT messaging that you have for financial transactions exists with respect to trade transactions. 

It is massive, however, and you need infrastructure to receive it 

and analyze it. But that is part of the data set that you can put 

together. 

Mr. MEEKS. And the other thing that comes into mind, because 

when we do these trade agreements, I have been a big proponent 

of it, but I will also want to bring in some of the less-developed 

countries because I want them to get involved in the global economy. 

37 

But of course, less-developed countries by nature have huge informal economies where it is hard to sometimes trace and verify 

even a legitimate commercial transaction. So, what would you say? 

Do they—how do we bring them in? Do they have even the capacity 

to work with us also to meet some of these challenges? 

Mr. BOCK. Look, even if the countries don’t even have computers 

in them, all the countries that supply goods to these foreign countries, to this country, have records. They get there on a ship. That 

ship is making records of how it got there. It is telling everybody 

this thing one from our place to your place. 

Whether the person who got it tells us anything, we can still 

know what is going on. And that is the part we are trying to push 

here. When I read to you about the manifest data, these cut—the 

shipping companies actually gave us the data of all the worldwide 

movements of cargo. We put it in a database. 

Mr. BOCK. You could watch all the zigs in the zags of the container. We built a system around that. They are willing to do that. 

It costs them nothing to give us that. All we have to do is put a 

computer in place to make it work. That gives you a chance to look 

into the country that does not have the data. And that is where the 

value comes from building this thing and it may sound crazy, but 

it actually works and we had it working. It was funded. I don’t 

want to get into that part of it all, but when the funding went 

away all the advancement of moving this forward kind of came to 

a halt. And I think in fact so did the acquisition of new TTUs because you need some money to go back and forth and whatever. I 

don’t want to lecture you. Does that help you? 

Mr. MEEKS. It’s very informative— 

Mr. PASSAS. Could I add something to that? When the American 

Embassies were bombed in Africa, in the court—in the trial that 

we had in New York we had part of the evidence—the $1,000 that 

went from Kuwait and Yemen to Nairobi to help finance it. So that 

was way before 9/11 and the new rules requiring records for informal remitters. They had those records that were produced in evidence. There are records. It is a myth that there is no paperwork 

trail to follow in informal economies and in informal hawala business. 

We have used in the United States and in Britain indicators of 

abuse so that you can identify which transactions are okay—honest 

money from migrants to their families—and what is not. This is 

the kind of red-flagging exercise that we can do even in places 

where you only have paper records and no computers. And you 

combine all of that together with the other data that we have. 

And the World Bank and it is like USAID and so on. They do 

governance and capacity building everywhere in the world. It can 

be part of that program. 

Chairman FITZPATRICK. Without objection, with the permission of 

the panel, we are going to have an expediated second round of 

questions. We will begin with Ranking Member Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. 

Dr. Passas, in your testimony—or I might have read it in one of 

your previous articles—you took the position that the work we are 

doing with hawalas is perhaps overdone, that the amount of attention that hawalas have received is probably too much. Is that beVerDate Nov 24 2008 15:56 Mar 23, 2017 Jkt 023565 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\23565.TXT TERI
38 

cause you feel that we have bigger fish to fry with trade-based 

money laundering, or do you feel that hawalas are so small or the 

risk is so small that we shouldn’t be focusing on them as much? 

Mr. PASSAS. There are risks with hawala and we do have cases 

both of terrorism finance and trade-based money laundering or 

other money laundering that goes through them. They can be of 

use just like any financial instrument or institution. Not as much 

perhaps because what we have not done well is to actually leverage 

the information nodes in the hawala networks. When you go to ask 

the right questions, you get the right answers. 

In Mumbai, the attacks of Mumbai and the Indian parliament, 

those cases were solved because of hawala collaboration. In Dubai, 

the Dubai police and the DEA made a big money laundering case 

with trade because of hawala information. 

Mr. LYNCH. Right. 

Mr. PASSAS. They are a resource. We are not using it. Instead, 

we are regulating as if it were a formal institution and we are requiring things they cannot provide, and as a result we do not have 

the kind of collective action with the Somalis. We had a meeting, 

and in fact we lost a dear colleague. He was assassinated in Somalia last year. He was trying to separate the good from the bad 

money in Somalia. 

You can do this. There are ways of achieving this, but what we 

have done is just regulate them in a way that requires things that 

cannot be accomplished. They are ready to collaborate. They are 

ready to provide the evidence. They are ready to put the data in 

a clearinghouse that can be analyzed. That is what we need. 

Mr. LYNCH. Yes. The problem for us is—you are right and we 

were very early on. When we were setting up FIUs, we saw that 

there was a gap on hawalas. So we asked the host governments to 

begin to register hawalas and hawaladars. So that much—at least 

we have them on the grid in many cases. And many of them keep 

meticulous records of each and every transaction because the success of any hawaladar is really on their reputation. 

And so, there is a huge risk of reputational damage if they are 

seen as facilitating funds for a terrorist organization and they 

are—it is over for them. But still, the informal nature of that value 

transfer system, in my mind, means we need to do more with them 

and not less. 

Mr. PASSAS. The Federal regulatory regime is fine. The problem 

that we have is the state regulatory regime that requires all kinds 

of resources that are not available. And I can share that with you 

in detail. With respect to the risks, they know their customer much 

better than banks sometimes, especially in parts of the world 

where banks aren’t there. This is an intelligence asset. This is an 

ally against terrorism. 

The Islamic State and Shabaab are going after these guys. They 

are enemies. That is what I meant by saying they have enemies 

everywhere. Let’s use the enemies and go after the easy—the lowhanging fruit like ISIS and like al-Shabaab that everybody is 

against and we can bring all that together. So that information can 

be leveraged—that information can be provided and once we have 

the communities together they can smell the rat, they do not want 

39 

terrorists, they will work with us. That is the best community policing against terrorism. 

Mr. LYNCH. One last quick question, we are having a very, very 

difficult time in Somalia. All of the traditional banks and money 

processes are out of there now, so the only opportunity I think we 

have in the short term is really to deal with the hawalas in that 

area. Is that something that you think is possible or should we try 

to stay away from that? 

Mr. PASSAS. It is possible, and what we had was we were with 

the 18 companies from Somalia. We were in Vienna, the United 

Nations, and we were trying to do exactly this. That is how our 

French colleague was killed. 

Mr. LYNCH. Right. 

Mr. PASSAS. And a British former Scotland Yard colleague. It can 

be done and it must be done. And there is an initiative—the Safe 

Corridors—that is under way. There has been work also by NGOs 

on looking at what the impact of current regimes is. There are 

questions about risk and how we define it and how we do the derisking in a way that we do not grow the systemic risk. There are 

handles, there are ways of doing this and I can send you separately 

if you wish the recommendations that we worked out. 

Mr. LYNCH. Okay. We are having problems—even Somali families in the United States are having difficulty getting remittances 

back to that country because there is no institution that we can go 

through right now. But I thank you and I will take any recommendations you have off-line. Thank you. 

Chairman FITZPATRICK. Vice Chairman Pittenger is now recognized. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. Mesko, I would like you just to clarify what you mean by 

non-indexed data. 

Mr. MESKO. Certainly. A better term for that might be ‘‘unGoogleable,’’ not available on search engines. 

Mr. PITTENGER. Okay. That is helpful. I would like to summarize 

some of what you all have presented today, which has been extraordinarily helpful. As I see it from Mr. Bock, you said that this 

data is accessible. The countries have it, they want to present it, 

we need to consolidate it, we need to analyze it, and then through 

that we need to be able to have an enforcement capacity, all of 

which requires funding. And is it your assessment that those resources are available through the revenue from this expanded 

transparency? 

Mr. BOCK. Yes, absolutely. Over the years we have had cases 

that countries—Argentina, Peru—had $100 million recoveries. We 

have a United States case where they recovered $100 million of tax 

on freon back in the days of the ozone-depleting chemicals, the hole 

in the sky. They recovered $100 million. This whole project didn’t 

cost $30 million. 

Mr. PITTENGER. Very good— 

Mr. BOCK. Twenty years. 

Mr. PITTENGER. My last observation is that water finds its way 

downhill, and if it hits a block here, it goes another way. Another 

way the speaker has put it quite well is in ice hockey, you look 

where the puck is headed and not where it is today. 

40 

And as you assess the funding requirements for these terrorist 

organizations, and certainly we have a continual need to track and 

intercept the transfer of money through these financial institutions. 

I am particularly concerned about Iran with these banks now that 

are open to SWIFT access. 

But given if we will utilize the data and share the data, I know 

FinCEN has extraordinary data capacities if it can be shared with 

the private sector as well as with their own government. 

Yet while we are somewhat effective in that, it seems to me that 

our adversaries recognize that we haven’t been effective in TBML. 

Do you believe that this will as such be a growing factor that we 

should be looking at, that should be more the focus? They are pretty smart people. They know what we are good at and what we are 

not good at. 

Mr. BOCK. When you have all this data amassed, the beauty of 

it all is it is like fishing in a barrel, okay? They can do what they 

want to hide. You catch them here. We have stopped things. There 

have been big cases that Customs made, D.A. made, poll a cop and 

this and that. And you could see when you squeeze it here, it 

popped up somewhere else. If you have the database in place, and 

you are looking at trade, you can see it. 

When we squeeze one place—Mexico went up. All of a sudden, 

Mexico was shipping gold. It is exactly—the analogy of water is 

perfect. It will find another level, but if you have the data in a 

place where you are looking back, you can see the bulges elsewhere. And that is probably the most interesting part of this whole 

exercise for me. You can do some predictive work. 

Mr. PITTENGER. Thank you. This has been extraordinarily helpful. I very much appreciate you being with us. I yield back. 

Chairman FITZPATRICK. I would like to again thank our witnesses for their testimony here today and it is our hope that if you 

have continuing thoughts or suggestions for us that you will provide it either to individual Members or to the panel as a whole. 

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. 

Without objection, this hearing is adjourned. 

[Whereupon, at 12:11 p.m., the hearing was adjourned.] 

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A P P E N D I X 

February 3, 2016 

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