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SAFEGUARDING THE FINANCIAL SYSTEM 

FROM TERRORIST FINANCING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TERRORISM 

AND ILLICIT FINANCE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

APRIL 27, 2017 

Printed for the use of the Committee on Financial Services 

Serial No. 115–18 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MacARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

KIRSTEN SUTTON MORK, Staff Director 

(III) 

SUBCOMMITTEE ON TERRORISM AND ILLICIT FINANCE

STEVAN PEARCE, New Mexico Chairman 

ROBERT PITTENGER, North Carolina, Vice 

Chairman 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

ED PERLMUTTER, Colorado, Ranking 

Member 

CAROLYN B. MALONEY, New York 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

RUBEN KIHUEN, Nevada 

STEPHEN F. LYNCH, Massachusetts 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

April 27, 2017 ................................................................................................... 1 

Appendix: 

April 27, 2017 ................................................................................................... 31 

WITNESSES 

THURSDAY, APRIL 27, 2017 

El-Hindi, Jamal, Acting Director, Financial Crimes Enforcement Network, 

U.S. Department of the Treasury ....................................................................... 4 

APPENDIX 

Prepared statements: 

El-Hindi, Jamal ................................................................................................ 32 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Perlmutter, Hon. Ed: 

Department of the Treasury Financial Crimes Enforcement Network 

Guidance dated February 14, 2014, ‘‘BSA Expectations Regarding Marijuana-Related Businesses’’ ........................................................................... 45 

El-Hindi, Jamal: 

Written responses to questions for the record submitted by Representatives Pearce, Hill, Love, Messer, Pittenger, and Foster ............................ 52 

(1) 

SAFEGUARDING THE FINANCIAL SYSTEM 

FROM TERRORIST FINANCING 

Thursday, April 27, 2017 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON TERRORISM

AND ILLICIT FINANCE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:23 p.m., in room 

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

Members present: Representatives Pearce, Pittenger, Rothfus, 

Tipton, Williams, Poliquin, Love, Hill, Emmer, Zeldin, Davidson, 

Budd, Kustoff; Perlmutter, Maloney, Himes, Foster, Kildee, 

Delaney, Sinema, Vargas, Gottheimer, Kihuen, and Lynch. 

Ex officio present: Representatives Hensarling and Waters. 

Also present: Representative Royce. 

Chairman PEARCE. The Subcommittee on Terrorism and Illicit 

Finance will come to order. 

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

the subcommittee at any time. Also, without objection, members of 

the full Financial Services Committee who are not members of the 

Subcommittee on Terrorism and Illicit Finance may participate in 

today’s hearing. 

Today’s hearing is entitled, ‘‘Safeguarding the Financial System 

from Terrorist Financing.’’ 

I now recognize myself for 5 minutes to give an opening statement. Today, most of us are very fortunate to have a more modern 

and secure means of storage for our hard-earned money. Unfortunately, so do terrorists, cartels, and other criminals around the 

world. In an ever-evolving world, this is the driving mission of our 

subcommittee: How can we continue to provide the safety and security in our markets that American families have come to expect 

while rooting out the bad actors in the system? What actions is our 

Nation taking to ensure markets for legitimate users? What in our 

current AML/CFT structure is working and what needs improvement? 

Today’s hearing is the first in a series this subcommittee will 

hold on the Bank Secrecy Act and the regulatory structure the 

United States has in place to combat money laundering, terrorist 

financing, and other illicit financing activities. It is only fitting that 

the subcommittee begins its work by examining the role and the 

function of the Financial Crimes Enforcement Network, more comVerDate Nov 24 2008 16:44 Jun 06, 2018 Jkt 027419 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\27419.TXT TERI
2 

monly known as FinCEN, which was established in 1990 by the 

Secretary of the Treasury. 

FinCEN was upgraded to official bureau status in 2002 with the 

passage of the PATRIOT Act. The bureau is not only the primary 

regulator of the BSA, but it also acts as the United States’ financial 

intelligence units (FIUs). FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and 

promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial 

authorities. 

From the most traditional forms of financial transactions to the 

ever-evolving world of financial technology, it is essential that our 

Nation has an efficient, effective, and modern set of rules and regulation to safeguard our Nation’s financial system. This hearing 

starts the conversation and ensures our subcommittee is taking 

pragmatic and complete look at the laws and regulations we currently have in place. 

I thank our witnesses for being here today and I look forward to 

the conversations to come. 

With that, I will now recognize the ranking member of the subcommittee, the gentleman from Colorado, Mr. Perlmutter, for 5 

minutes for an opening statement. 

Mr. PERLMUTTER. Thanks, Mr. Chairman, for holding this hearing so our subcommittee can design policies to update, modernize, 

and strengthen the Bank Secrecy Act. 

FinCEN plays a critical role in safeguarding our Nation’s financial system through the collection and analysis of suspicious activity reports (SARs) and currency transaction reports (CTRs). In fact, 

FinCEN has collected over 200 million filings. The U.S. continues 

to be the financial capital of the world whereby essentially all payments move through or touch the United States’ financial system. 

Therefore, the U.S. plays an important role in reducing the threat 

of terrorism and disrupting illicit and illegal financial flows. So it 

is important we evaluate how our current regulatory regime is 

functioning, what is lacking or needs updating, how we can better 

strike a balance between law enforcement and civil liberties, and 

how we can build in efficiencies without overburdening our financial institutions. 

I want to thank Mr. El-Hindi for your testimony today. 

Chairman PEARCE. If you will hold here, let me yield one of my 

minutes to Mr. Pittenger, and then that gives us a second there 

to— 

Mr. PERLMUTTER. All right. I will yield. 

Chairman PEARCE. Mr. Pittenger is recognized for 1 minute. 

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

Ranking Member Perlmutter, for organizing such an important 

hearing and such a timely reason to meet with our Financial 

Crimes Enforcement Network. 

Director El-Hindi, thank you for your excellent service and your 

friendship, and thank you for lending your time to our subcommittee today. 

Earlier today, FinCEN associates of Mr. El-Hindi joined our subcommittee members and staff at a roundtable meeting with several 

major financial institutions to discuss the importance of informaVerDate Nov 24 2008 16:44 Jun 06, 2018 Jkt 027419 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\27419.TXT TERI
3 

tion sharing as a tool to combat terror finance. Specifically, we 

were discussing how Section 314 of the USA PATRIOT Act can be 

codified to improve the information-sharing process for our financial institutions. Information sharing for financial institutions is a 

critical component of our domestic capabilities to stop the flow of 

illicit funds to support terror, both domestic and abroad. 

Director El-Hindi, thank you for your service. I look forward to 

hearing your testimony. 

I yield back. 

Chairman PEARCE. The gentleman yields back. 

Mr. PERLMUTTER. I will yield the balance of my time back to the 

Chair. 

Chairman PEARCE. Okay. And when we get an opportunity, we 

will try to recognize that. 

Today, we welcome the testimony of Mr. Jamal El-Hindi, who 

has served since May of 2015 as the Deputy Director of the Financial Crimes Enforcement Network, or FinCEN, a bureau of the 

Treasury Department. Mr. El-Hindi has served at FinCEN in various positions since June of 2006. Prior to joining FinCEN, Mr. ElHindi served as the Associate Director for the Program on Policy 

and Implementation at Treasury’s Office of Foreign Asset Control, 

or OFAC. Mr. El-Hindi first joined Treasury in December of 2000 

in the Office of General Counsel. Prior to that, he served as an associate at Patton Boggs in Washington, D.C.. 

Mr. El-Hindi graduated from the University of Michigan Law 

School, and received a master of arts in modern Middle Eastern 

and North African studies from the University of Michigan, a diploma in international relations from the London School of Economics and Political Science, and an undergraduate degree in journalism from the University of North Carolina. 

Mr. El-Hindi, you will now be recognized for 5 minutes to give 

an oral presentation of your testimony. And without objection, your 

written statement will be made a part of the record. 

And I recognize the gentleman from Colorado. 

Mr. PERLMUTTER. Thanks, Mr. Chairman. I notice the ranking 

member has just joined us, and if I could have unanimous consent 

to— 

Chairman PEARCE. Yes. The gentleman is recognized to yield 

time to the gentlelady from California. 

Mr. El-Hindi, if you will suspend here for a second. 

Mr. PERLMUTTER. I would like to yield to the ranking member of 

the full Financial Services Committee, the gentlelady from California, Ms. Waters, for her statement. 

Ms. WATERS. Thank you very much. I appreciate your consideration. Thank you, Mr. Chairman. 

One of the key issues this subcommittee will be looking at is the 

adequacy of current information-sharing authorities and the degree 

to which they strike the right balance between security and civil 

liberty concerns. Last Congress, we heard from a number of experts 

and Administration officials who spoke to the benefits and efficiencies that would accrue from increased information sharing between financial institutions and the government, as well as financial institutions themselves. But I would also like to note that 

nearly every expert who spoke in favor of improved information 

4 

sharing also acknowledged that these efforts must be cognizant of 

the need to protect privacy and civil liberties. 

So, Mr. Chairman, as we explore legislative efforts to codify current authorities or otherwise enhance information sharing, I 

strongly agree that we have a responsibility to solicit views from 

all interested stakeholders, and we need to hear and discuss these 

views and concerns in a public setting, such as this hearing today, 

and not only in private meetings. 

I would also like to touch upon another important issue, which 

is the gaping hole in our anti-money-laundering framework with 

respect to the real estate sector. While I appreciate, Mr. El-Hindi, 

that your written testimony notes the ‘‘outstanding concerns’’ that 

FinCEN has had with the money laundering risk in real estate, I 

must say that I find it disturbing that FinCEN continues to largely 

exempt the real estate sector from even the most basic anti-moneylaundering requirements, given that high-end real estate is a key 

sector used by corrupt foreign leaders, drug traffickers, and other 

criminals to launder illicit money. I believe FinCEN should take 

more urgent action to address these risks nationwide and on a permanent basis. 

And with that, I yield back the balance of my time. And thank 

you very much. 

Mr. PERLMUTTER. I yield back. Thank you. 

Chairman PEARCE. The gentleman yields back. 

Now, Mr. El-Hindi, I will recognize you for 5 minutes. 

STATEMENT OF JAMAL EL-HINDI, ACTING DIRECTOR, FINANCIAL CRIMES ENFORCEMENT NETWORK, U.S. DEPARTMENT 

OF THE TREASURY 

Mr. EL-HINDI. Chairman Pearce, Vice Chairman Pittenger, 

Ranking Member Perlmutter, and the distinguished members of 

the subcommittee, thank you for inviting me to appear before you 

today to discuss the role of the Financial Crimes Enforcement Network in collecting, analyzing, and disseminating Bank Secrecy Act 

data. I appreciate the subcommittee’s interest in FinCEN’s mission 

and your continued support of our efforts. My oral remarks are 

brief. I am submitting a more comprehensive written statement. 

FinCEN, as we are commonly known, is a Treasury Department 

bureau charged with safeguarding the financial system from illicit 

use, combating money laundering, and promoting national security 

through the collection, analysis, and dissemination of BSA information, and the strategic use of our authorities. We are one of five 

components reporting to the Under Secretary for Terrorism and Financial Intelligence collectively focused on Treasury’s mission in 

this area. 

FinCEN serves two roles. First, as the financial intelligence unit 

for the United States, we collect, analyze, and disseminate financial intelligence to help fight money laundering and the financing 

of terrorism. Second, we are the lead regulator for the Federal Government with respect to anti-money-laundering and countering the 

financing of terrorism, also known as AML/CFT. 

FinCEN’s ability to work closely with regulatory, law enforcement, industry, and international partners promotes consistency 

across our regulatory regime. In short, we strive for responsible use 

5 

of financial information for greater security and integrity in the 

U.S. financial system. 

The Bank Secrecy Act is the primary Federal anti-money-laundering law. It requires a broad range of U.S. financial institutions 

to establish anti-money-laundering programs, maintain records, 

and provide reports to FinCEN. The majority of BSA data FinCEN 

collects comes from two reporting streams. Financial institutions 

must file currency transaction reports, known as CTRs, with 

FinCEN for cash transactions totaling more than $10,000. They 

must also file suspicious activity reports, known as SARs, to report 

suspected illicit transactions. 

The objective reporting in CTRs and the subjective reporting in 

SARs are both critically important. They provide a wealth of potentially useful information to FinCEN and other agencies working to 

detect and prevent money laundering, other financial crimes, and 

terrorism. 

Thanks to funding from Congress, FinCEN successfully completed an information technology modernization program in 2014 

updating the process of collecting, analyzing, and disseminating 

BSA data. 

FinCEN receives an average of roughly 55,000 new financial institution filings each day. These filings come from more than 

80,000 financial institutions and 500,000 individual foreign bank 

account holders through FinCEN’s modernized e-filing system. 

FinCEN maintains over 200 million of these BSA filings in our 

database. FinCEN makes this information available to more than 

10,000 law enforcement and other government users through a 

search tool designed to meet their specialized needs. We call it 

FinCEN Query. Our users, internal and external, perform approximately 30,000 searches of the data per day. 

E-filing has streamlined the reporting process for financial institutions and individual filers, and has significantly improved users’ 

ability to exploit BSA data by making it more accessible and 

searchable. 

The protection of the sensitive information received is a critical 

part of our mission. FinCEN safeguards BSA data through a continual process of reviewing IT security measures and procedures, 

adjusting to current and emerging risks, and ensuring that security 

is a consistent requirement considered throughout the life cycle of 

each system. FinCEN systems are accredited to high Federal information security management levels and employ strong security 

measures, such as two-factor authentication, encryption, and activity monitoring to protect BSA data. 

FinCEN works with others in the Department of the Treasury 

and the Department of Homeland Security in its focus on cybersecurity within the general context of security operations and mitigation activities. 

FinCEN delivers BSA information and related analysis to law 

enforcement, regulatory, foreign, and private sector partners following a five-stage cycle. The cycle involves: one, collection; two, 

data processing and exploitation; three, analysis; four, dissemination; and five, the direction of future BSA collection efforts. 

In the first stage of the cycle, FinCEN not only collects the types 

of reports I mentioned previously, such as SARs and CTRs, but 

6 

also has the ability to collect other data. FinCEN can proactively 

target certain financial intelligence for collection using a variety of 

authorities and special measures that might involve focus on particular areas or financial institution. 

Data processing and exploitation is the second stage of the cycle. 

With approximately 55,000 filings per day, advanced technology solutions are needed to review, analyze, and quickly disseminate 

time-sensitive information. 

To combat our most significant money laundering and terrorist 

financing threats, FinCEN employs automated business rules to 

screen filings on a daily basis and identify reports that merit further review by analysts. 

For the analysis and dissemination stages of the cycle, the third 

and fourth stages, over the past few years we have consolidated our 

analytic capabilities and expanded the scope of our work to create 

products that address critical priority threats for our stakeholders, 

including the financial industry. 

With respect to dissemination in particular, financial intelligence 

is most effective when information flows in both directions between 

the public and private sectors. FinCEN is a critical hub between 

financial institutions, law enforcement, regulators, and international colleagues. Providing information back to the financial industry based on our analysis of their reporting is a force multiplier. 

One of the tools FinCEN uses to disseminate information to industry is our financial institution advisory program. FinCEN can 

issue public and nonpublic advisories to alert financial institutions 

of specific illicit finance risks. Advisories often contain illicit activity typologies, red flags to facilitate monitoring, and guidance on 

complying with FinCEN requirements. 

In addition to close collaboration with domestic partners, 

FinCEN works to establish and strengthen mechanisms for the exchange of information globally. We engage with, encourage, and 

support international partners to take steps to strengthen their 

own regimes. Much of this involves FinCEN’s interaction with 

other financial intelligence units. 

FinCEN and most other FIUs are members of the Egmont 

Group, through which we collectively serve as conduits for information requests from each other’s law enforcement agencies. 

The fifth and final stage of the intelligence cycle involves using 

everything we have learned to help inform future planning and direction. Once threats and vulnerabilities have been identified, 

FinCEN can adjust the regulatory framework protecting the U.S. 

financial system. FinCEN uses its regulatory rulemaking authority 

to, among other things, define the reporting that financial institutions and others must provide. These rulemaking activities, together with the special information collections and advisories I previously mentioned, expand or improve the information that 

FinCEN collects. The dovetailing of this final stage with the collection I outlined as the first stage confirms the iterative and cyclical 

nature of our financial intelligence activities. 

I will conclude by noting that the annual CFT landscape is complex and dynamic. It requires ongoing adaptation by FinCEN and 

our many partners. As we have to adjust to ever-evolving threats, 

we will continue to use the tools at our disposal to collect financial 

7 

intelligence information, analyze it, and deploy it in support of our 

mission to safeguard the system from illicit use, and promote national security. 

On behalf of all the hardworking and dedicated FinCEN staff, I 

want to thank you again for the opportunity to testify today, and 

I look forward to your questions. 

[The prepared statement of Acting Director El-Hindi can be 

found on page 32 of the appendix.] 

Chairman PEARCE. Thank you, Mr. El-Hindi. 

The Chair now recognizes himself for 5 minutes for questions. 

Mr. El-Hindi, on page 3, you talk about the number of filings 

each day, and those numbers seem very large. Of those filings, 

which ones actually turn into actionable information, just roughly? 

Mr. EL-HINDI. In terms of trying to associate each filing with a 

particular action, that is a little bit difficult. I realize that the number of filings that we have is large, but you have to understand 

how it is used. The filings could be a tip in and of themselves alerting law enforcement to something that they hadn’t known before. 

They can be used to expand law enforcement investigations. They 

are also used to identify trends in terms of what is going on in 

terms of the financial sector, and new methodologies with respect 

to illicit activity. 

Chairman PEARCE. How many people do you have assigned to review these reports? 

Mr. EL-HINDI. At FinCEN, we currently have on staff 280— 

Chairman PEARCE. I am not asking the number on staff. I am 

asking the number of people who are directed to this. Surely you 

have some people who open the mail and who answer the phones 

to just walk-in traffic, so not every one of your people. How many 

are assigned to go through the 55,000 new filings every day? 

Mr. EL-HINDI. At FinCEN, we have an intelligence division staff 

of approximately 70. But keep in mind that because we have 

10,000 other users of the database throughout the government, 

there are others who are also looking at the information on a daily 

basis. 

Chairman PEARCE. That gives me a scope of what I am looking 

at. 

Now, on page 12, you are talking about the amount of money 

that you returned. Do you have estimates of how much is lost every 

year? 

Mr. EL-HINDI. I think that you are referring to the portion in the 

written testimony where I talk about business email compromise. 

Just by way of background, that is a situation in which we have 

been working with the FBI to have reported to us situations in 

which someone has compromised an email account and directed a 

financial institution to send funds, maybe a payment or something 

else, instead of the usual place that it should go, to a new place 

to go. 

The estimates of that type of fraud, business email compromise, 

are in the hundreds of millions. I don’t have specific numbers on 

it. 

Chairman PEARCE. Hundreds of millions a year or— 

Mr. EL-HINDI. Yes. 

Chairman PEARCE. Yes. Okay. 

8 

Mr. EL-HINDI. This is a phenomenon that has started over the 

past few years. So I think that is cumulative. 

We have been able, through our contacts with other financial intelligence units, when we can alert them quickly to the fact that 

funds have fraudulently gone overseas, we have been able to work 

with them to have a transaction stopped and have money returned 

to the United States. Over the past year and a half, 2 years, we 

have been able to assist in the recovery of approximately $250 million. 

Chairman PEARCE. Okay. You talk in your testimony about IT 

modernization. How long had you all been working on that, and did 

the modernization actually work? I ask that because, as a pilot, I 

watch the FAA and their continual attempts to change the way 

they process data, and it never works and it is always extremely 

expensive and it is always behind time. Give me a little bit of an 

update on that? 

Mr. EL-HINDI. With respect to our modernization program, I 

think we do consider it complete. We are now in the operation and 

maintenance phase of continuing it. It was a program that was a 

multiyear effort, but we delivered it on time and under budget. And 

in terms of external review of it, it was one of those few situations 

where we got no recommendations from our auditors in terms of 

how we might have been able to— 

Chairman PEARCE. So you feel satisfied with what you got? 

Mr. EL-HINDI. Yes. 

Chairman PEARCE. Okay. 

Mr. EL-HINDI. We actually—I will say, there is always room— 

Chairman PEARCE. All right. I don’t need any qualifiers here. 

The process does not appear to have undergone much change 

since you all were stood up as an organization. Does that process 

need review? 

Mr. EL-HINDI. In terms of the premise of the question that the 

process hasn’t changed much since we were stood up, I might disagree with that. 

Chairman PEARCE. Okay. 

Mr. EL-HINDI. I think that the rules and the requirements have 

pretty much stayed the same, but we collect information from the 

financial sector. The ways in which we have analyzed that information and begun to disseminate it and more actively target some of 

our information collection with industry have changed over the 

course of time. 

Chairman PEARCE. Okay. My time has expired. 

I will now recognize the ranking member, the gentleman from 

Colorado, for 5 minutes. 

Mr. PERLMUTTER. Thanks, Mr. Chairman. And we have a lot of 

Members here today, so I am just going to focus on one subject and 

then yield back. 

First, I would like to introduce into the record FinCEN–2014- 

G001, dated February 14, 2014, ‘‘BSA Expectations Regarding 

Marijuana-Related Businesses.’’ 

Chairman PEARCE. Without objection, it is so ordered. 

Mr. PERLMUTTER. Thank you. 

Mr. PERLMUTTER. So my focus is going to be, obviously, on marijuana. We are now at 29 States that have some level of medical 

9 

marijuana or fully legalized marijuana usage, plus eight or nine 

States with cannabis oil for seizures and other maladies. So today, 

I introduced the Secure and Fair Enforcement Banking Act, which 

was formerly the Marijuana Business Access to Banking Act, to try 

and get us here in the Congress to say if a State has a regulatory 

structure in place, then all of the different Bank Secrecy Act and 

SARs and things like that are sort of set to the side, and if individuals are operating as legitimate businesses in their State, then 

they will be given authority to continue to do business. 

But my questions are to you, Mr. El-Hindi—and thank you for 

your service to the country—what is the status of the guidance that 

I just listed, otherwise known as the Cole memo? Are you going to 

follow it? That is my question. 

Mr. EL-HINDI. The Cole memo actually came from the Department of Justice. 

Mr. PERLMUTTER. Right. 

Mr. EL-HINDI. And I will say— 

Mr. PERLMUTTER. In concert with FinCEN. 

Mr. EL-HINDI. And our guidance followed on that. The Cole 

memo specified some priority areas for law enforcement focus in 

the marijuana space. Our guidance was designed, within the financial sector space, to provide law enforcement with information that 

would be useful with respect to following those priorities. 

We feel that the guidance has worked. There is information in 

the database that, under the guidance, helps financial institutions 

distinguish between situations in which they are providing service 

to a marijuana business where it seems to be consistent with the 

State law and does not touch upon any of the priorities in the Cole 

memo. That is one type of filing that they can do. 

They can do a type of filing where they indicate that there are 

other activity—there is more suspicion— 

Mr. PERLMUTTER. They are out of—there are irregularities of 

some kind. 

Mr. EL-HINDI. Yes. And then they file reports when they have 

terminated the relationship as well. 

The construct there actually came from what we saw the banks 

filing even prior to the guidance coming out. In a situation where 

you have a conflict of a Federal law and a State law, we wanted 

to see how the banks were actually dealing with it. And when we 

looked at the data that they had already been providing, they were 

making those distinctions in terms of situations where they would 

say, the only reason we are filing this suspicious activity report is 

essentially because marijuana trade remains illegal under Federal 

law. 

So we saw the distinctions that they were making. We felt that 

going forward with guidance in the way that we did would provide 

law enforcement in States, whether legalized or nonlegalized, it 

would provide them with information that they could use. 

In our context, for us, it is all about the information and making 

sure that law enforcement has the information that it needs. 

We will continue to work with law enforcement and the Department of Justice on that front. And to the extent that they—you will 

provide any further indication of what their needs are, we will be 

working with them. 

10 

Mr. PERLMUTTER. So far, you are operating under that guidance 

that I read into the record? 

Mr. EL-HINDI. That guidance still stands. 

Mr. PERLMUTTER. Yes. Thanks. 

I yield back. 

Chairman PEARCE. The gentleman yields back. 

The Chair now recognizes the gentleman from North Carolina, 

Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. And thank you again, 

Mr. El-Hindi. 

Mr. El-Hindi, just for clarity, your interest in FinCEN is to receive the data from the financial institutions, these SARs reports, 

and analyze this data and then send that out for certain investigations. Is that correct? 

Mr. EL-HINDI. That is one of the many things that we do in 

terms of our support to law enforcement. 

Mr. PITTENGER. In that framework. 

Mr. EL-HINDI. Yes. 

Mr. PITTENGER. What I would like to assess here is the impact 

that could be achieved by the banks also having access to data 

from the government and how that might limit or greatly restrict 

the number of potential SARs reports that need to truly be evaluated or to be processed out for investigation. Is that a good assumption? 

Mr. EL-HINDI. I think that you are touching upon some of the 

work that we have been trying to do with industry and law enforcement to target information-collection efforts. 

Mr. PITTENGER. Given the impediments that we have in terms of 

restrictions in data sharing, would it be reasonable to assume that 

we can achieve better results with less proactive engagement 

through a broad range of data over the financial institutions? If we 

had a safe harbor for banks where they could share with each 

other, and if they had access to government data, would that enhance our ability and make it a more fluid approach that would 

make us to not have to address as many data points as are acquired at this point? 

Mr. EL-HINDI. I think the enhanced sharing of information across 

financial institutions, based on what we have seen and how we 

have worked with them, really would be helpful. Each of them only 

has so much of a view of a particular transaction. And some of the 

special projects that we have engaged with them, we have been 

quite happy to bring them together, have them share information 

with each other and share information with ourselves, and we do 

view that as bringing added efficiencies to our regime. The benefits 

with respect to that type of information sharing are clear. 

Mr. PITTENGER. We heard this morning from Andrea Sharrin, 

your associate, and with a number of banks who were there who 

were wanting to achieve the best results but believe that we may 

have less interest—or less cause for privacy issues if we— 

through—if that data-sharing capacity was there, and that we 

wouldn’t infringe on privacy issues as much if we would be able to 

enhance the data-sharing capabilities. Would you concur with that? 

Mr. EL-HINDI. I think that the opportunities for greater data 

sharing among the banks and among the banks with government 

11 

are great. And I think that, as was mentioned earlier, we have to 

be sensitive to the privacy issues that come up both with respect 

to general reporting under our rules as well as with respect to information sharing among the banks. 

Mr. PITTENGER. One other question quickly, as you work with 

other FIUs and the Egmont Group, what is your assessment in 

terms of their technological capabilities, admitted extraordinary 

software capabilities that are already there at FinCEN, do you believe that we need to do greater work with our allies and friends 

in terms of enhancing their technological capabilities to have better 

engagement with us and collaboration with us? 

Mr. EL-HINDI. One of the things that we have been talking about 

within the FIU community generally is making sure that FIUs are 

well-positioned to do the work that they are supposed to be doing. 

Different FIUs in different jurisdictions are at different points, but 

as a group, we work on trying to elevate each other as much as 

possible. And there are ways in which some of them could benefit 

from greater capacities technologically as well as greater support 

within their own legal systems. 

Mr. PITTENGER. But to the extent that they are weak, it weakens 

the entire system. Isn’t that correct? 

Mr. EL-HINDI. Yes. We always say that within a global system, 

the weakest link can hurt the chain. 

Mr. PITTENGER. Yes, sir. Thank you. 

Chairman PEARCE. The gentleman’s time has expired. 

The Chair now recognizes the gentlelady from New York, Mrs. 

Maloney, for 5 minutes. 

Mrs. MALONEY. Thank you, Mr. Chairman, and thank you to the 

ranking member. And thank you to our witness for being here 

today. 

You mentioned in your testimony that FinCEN issued two geographical targeting orders, or GTOs, covering two sites, Manhattan 

and Miami, that would require title insurers to collect beneficial 

ownership information for any legal entity making an all-cash real 

estate transaction over a 6-month period. And I am very pleased 

that FinCEN extended these GTOs in February, so I want to thank 

you and your organization for doing that. But the findings from the 

first 6 months were absolutely startling. 

As you noted, about 30 percent of the transactions reported in 

those 6 months involved a beneficial owner or purchaser representative that had previously been the subject of a suspicious activity 

report. And I would say it is unusual to be buying real estate with 

all cash. It is usually in the banks and everything. So the fact that 

it is an all-cash transaction and that there also is a suspicious activity report, and 30 percent is really, I think, problematic. I would 

characterize it as a shockingly high number, especially since you 

announced to the world that you would be collecting this information on beneficial ownership in these two cities for that exact period of time. So I would think that money launderers or bad actors 

would just know not to go to those two cities during this timeframe, since it was so widely reported. 

So in light of the findings from these two GTOs, would you say 

that collecting beneficial ownership information is important for 

12 

catching money launderers and stopping terrorism financing and 

other illegal activity like gun running or other illegal activities? 

Mr. EL-HINDI. Yes. Beneficial ownership information and the collection of it and greater transparency in that space are definitely 

something that will help law enforcement in their efforts. 

Mrs. MALONEY. And what do you think about the 30 percent who 

are using cash to— 

Mr. EL-HINDI. Let me also clarify that in the context of the geographic targeting order, when we talk about a cash transaction in 

real estate, we are essentially saying, and we clarified this in the 

rollout of the GTO, that we were focused on non-loan-related transactions. The cash component of it comes into play with respect to 

the confines of our 8300 requirement and our geographic targeting 

order, generally. 

The way the requirement works, if it is a non-loan-related transaction, and some portion of that transaction involved cash or a 

monetary instrument and was done by a legal entity and within 

the thresholds that we set with respect to the value of the property, 

then it was reportable. 

So the geographic targeting order was very specific. There are 

certain things that would not be captured within that reporting, for 

example, an all wire transfer of funds, even though it was—there 

was no loan involved with a bank, would not have been covered by 

that geographic targeting order. 

Mrs. MALONEY. There have been a number of reports in New 

York that real estate over $2 million is almost always an LLC. 

Beneficial ownership is hidden. Have you done any reports looking 

at LLCs, which is the prime form of hiding the ownership, the 

number of them in the country now? Could you look at it if you 

haven’t? 

Mr. EL-HINDI. I would have to get back to you in terms of precisely what our analysts might have researched. We are all familiar 

with some of the things that we see in the press reports. And real 

estate has been an area that we know that we need to focus on. 

It has been an evolutionary process for us. 

I would just go back and say that with respect to how we have 

covered residential real estate in the past, since roughly 75 percent 

of the market involves a bank or a bank loan, we feel that the involvement of the banks in those contexts provides us with a certain 

amount of coverage, but we do have to focus on areas where banks 

aren’t involved. 

Mrs. MALONEY. Actually, we just came from a meeting that Mr. 

Pittenger organized, and the banks were saying they don’t know 

the ownership either in an LLC. They have no idea. 

So I just would just like to ask very quickly, do you think it 

would be easier if companies had to disclose the beneficial owners 

at the time the company is formed? 

Mr. EL-HINDI. Yes. That kind of transparency would certainly be 

of benefit to law enforcement. 

Mrs. MALONEY. As many people on this committee know, I have 

a bill that would do just that. So I want to thank you for your 

thoughts and input on it. 

13 

Mr. EL-HINDI. If it would be helpful, and to the extent that Congress is going to focus on this issue, we would be happy to work 

with them. 

Mrs. MALONEY. Thank you very much. My time has expired. 

Chairman PEARCE. The gentlelady’s time has expired. 

The Chair now recognizes the gentleman from Pennsylvania, Mr. 

Rothfus. 

Mr. ROTHFUS. Thank you, Mr. Chairman. And thank you, Mr. ElHindi, for being here today. 

Talk a little bit more about these real estate transactions. Does 

the government have any idea of how many real estate transactions involve money originating from foreign accounts? 

Mr. EL-HINDI. I would have to get back to you on that in terms 

of any work that we have done particularly in that context. I will 

say that the real estate market is complicated. It is something that 

varies, the information requirements and processing requirements 

vary by State, and vary by county. So it is something where we feel 

that we still are in the process of collecting information to find out 

precisely what information is out there and how we should approach it. 

Mr. ROTHFUS. I may want to follow up with you on that. 

Do you foresee a need to expand the use of geographic targeting 

orders to more localities in the U.S.? 

Mr. EL-HINDI. The geographic targeting order authority that we 

have had, we have been using more of, of late, just as part of 

FinCEN being more active in this space. Law enforcement has 

asked us, and we have worked with them on geographic targeting 

orders in Los Angeles with respect to garment manufacturing. We 

have done work in Miami with respect to trade in electronics equipment, both of those on a trade-based money laundering context. It 

is a useful tool and it is something that we continue to explore the 

best use of with law enforcement. 

If you are asking with respect to real estate in general, I am not 

in a position right now to talk about any future regulatory efforts. 

I can just tell you in general that we find the tool useful and continue to discuss it. 

Mr. ROTHFUS. What about the 180-day duration of a GTO? Is 

that long enough? 

Mr. EL-HINDI. To the extent that a GTO needs to be extended, 

we can extend it for another 180 days under the statute. 

Mr. ROTHFUS. Do you know whether there would be certain domestic real estate markets that are exposed to cartel-owned real estate, real estate that the cartels from Latin America might be going 

to certain geographic regions? 

Mr. EL-HINDI. I can tell you that in terms of some of the criteria 

that we looked at and discussed with law enforcement when we 

identified regions of focus, we were looking at the market, we were 

looking at to the extent that there was an active use of shell companies within that real estate market, we were looking at value, we 

were looking at the amount of foreign interest in those jurisdictions. So that is how we made selections in terms of the scope of 

the geographic targeting order. 

14 

Mr. ROTHFUS. The difference between our larger institutions and 

smaller ones, are smaller banks and credit unions more vulnerable 

to money laundering versus the bigger banks? 

Mr. EL-HINDI. Small banks and bigger banks, they are both 

banks, they both process transactions. They have different ways of 

knowing who their customers are. I would say that both can be vulnerable, and that is why both are subject to our rules. We say that 

banks need to comply on a risk-based approach. They need to assess their risks and act accordingly. 

I would just say that with respect to smaller institutions, for example in the terrorism context, some might assume that they may 

not have the same type of information that large banks might 

have, or be able to look at thousands and thousands of records, but 

we have seen that in the terrorism context, small banks are contributing, I think it is 10 or 12 percent of some of the most useful 

reporting in that regard. 

There are differences among those institutions and there are differences in the way they approach things, but both large institutions and small institutions have a very important role in what we 

do. 

Mr. ROTHFUS. I thank the gentleman. 

I yield back. 

Chairman PEARCE. The gentleman yields back. 

The Chair notes that votes have been called. It is my intention 

that if Mr. Foster, who is next in the queue, desires to go ahead 

and ask questions now, we will do that. We will come back and 

complete the hearing afterwards, but you can go now or wait till 

after the votes, Mr. Foster. It is your choice. 

Mr. FOSTER. I am happy to proceed. 

Chairman PEARCE. Okay. The gentleman is recognized for 5 minutes. 

Mr. FOSTER. Thank you for everything you do here. I would like 

to return to the real estate issue a little bit. You mentioned the 

value of just eliminating anonymous shell corporations, which is 

something—do you know roughly what fraction of countries on 

Earth allow anonymous shell corporations and what don’t? 

Mr. EL-HINDI. I do not have that information. 

Mr. FOSTER. Would you feel comfortable in saying the majority 

do not allow anonymous shell corporations? 

Mr. EL-HINDI. Again, I would have to— 

Mr. FOSTER. Okay. I would be interested in knowing that, because it is my impression that we are sort of an oddity in allowing 

this, and it is the—makes—one of the reasons that the U.S. is not 

on the center for financial activity generally, but also unfortunately 

for a lot of money laundering. 

The other thing, some countries, it is my impression, have what 

is often called a cadastre. This is a legally binding registry of who 

owns which parcel of land, so you can sometimes literally just go 

to the Federal map and mull over a certain plat of land, and it 

gives you the whole ownership history and all the transactions. 

This is information that is publicly accessible in the U.S., but often 

only by going into the basement of some dusty courthouse to get 

that information. And if there was a national legally binding registry of who owns which parcel of land—and I think some States 

15 

are doing this, for example, Minnesota, areas of Canada, I believe, 

do this—would that really simplify the whole procedure of figuring 

out what each transaction was about? 

Mr. EL-HINDI. I would just say that in general, greater transparency with respect to beneficial ownership in this space would be 

useful. Precisely how we get there is something that, again, we 

would be happy to work with the Congress on to the extent that 

they are focused on this issue. 

Mr. FOSTER. Now, you go through title insurance companies to 

attempt the geographical targeting. In what ways is that satisfactory or unsatisfactory or complete or incomplete? 

Mr. EL-HINDI. When we looked at the geographic targeting orders, we were trying—and as we would do in any regulatory context where we are trying to collect information, we are looking for 

nodes and places where we can efficiently collect information. In 

that context, given their role in the transactions and the information that they could obtain as part of that, we felt that it made 

sense. 

Mr. FOSTER. All right. And is title insurance mandatory for these 

cash transactions and so on? 

Mr. EL-HINDI. I had mentioned before that what happens in each 

particular part of the country in terms of the jurisdiction—there 

are different rules in different places, whether it is mandatory, 

whether it is something that is essential—has become essential by 

virtue of practice, I would have to get back to you on. I just would 

say that part of the complications in the real estate sector is the 

variety of rules that exist. 

Mr. FOSTER. Thank you. I think this is something where Congress should really have a look at this, because the anonymous 

ownership of land is—not only having to do with terrorist financing, but there is a lot of just ordinary corruption associated with 

secret ownership of land in this country. And it would be, I think, 

in the interest of good government, general governance generally to 

have some improvements here. So thank you. 

I yield back. 

Chairman PEARCE. The gentleman yields back. 

It is the intent of the Chair to reconvene the hearing immediately after votes. For now, the subcommittee stands in recess. 

[recess] 

Chairman PEARCE. The subcommittee will come to order. 

We will resume with questions. We left off with Mr. Foster from 

the minority side, and we will proceed to Mr. Williams from Texas. 

You are recognized for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. And thank you, Mr. 

Director, for being here today. 

I wanted to first start by exploring the topic of trade-based 

money laundering (TBML) this afternoon, then discuss in more 

depth the use of geographic targeting orders, GTOs as we know 

them, by FinCEN and the use of trade transparency units. 

As you know, trade-based money laundering is a process in 

which someone, whether that be a criminal or terrorist organization, attempts to disguise the proceeds of crime, in this case using 

trade to legitimize their illicit behavior. And although it is difficult 

to put a price tag on how much money is laundered annually 

16 

through trade, I think it is safe to say it is in the billions of dollars. 

In fact, a 2010 advisory report on TBML issued by FinCEN stated 

that from 2004 to 2009, more than 17,000 suspicious activity reports described TBML involving transactions totaled $276 billion. 

And although the practice of TBML is common, combating it remains very difficult, especially when companies change names, locations, and schemes so frequently. 

So let me start by asking you this: Is that normal? Is it routine 

for the names to change and the businesses to go on operating? 

Mr. EL-HINDI. I would say that is definitely a methodology we 

have seen in some of our work and certainly with our work with 

law enforcement. 

Mr. WILLIAMS. Okay. Is the U.S. Government not providing adequate resources to help you combat these schemes? 

Mr. EL-HINDI. Congressman, I think that, as you have seen from 

the things that we have put out, we know that trade-based money 

laundering is an issue, and we continue to work on it and we work 

with financial institutions on it. We work with the trade transparency units as well. They have access to the data that comes to 

us through the financial institutions, and we work with them to 

make sure that they are in a position to use it. We have ongoing 

discussions with them on that. It is definitely an issue and it is 

something that we are focused on. 

Mr. WILLIAMS. Do you think it is all about resources, or does 

Congress need to give more authority in this space? 

Mr. EL-HINDI. I am really not in a position right now to talk 

about our authorities. I can just tell you that within the authorities 

that we do have, and the information that we are currently collecting, we are working with other parts of the government. 

Mr. WILLIAMS. Okay. In your testimony, you spoke about GTO 

authority, which Congress gave Treasury the authority to use in 

the 1980s. And although back then, criminal organizations were 

mostly cash and other monetary instruments, wire transfers are 

not covered in the GTO authority. And as we had talked about in 

past hearings, and something that is personal to me as an auto 

dealer, the trade-based money laundering scheme using used cars 

relies heavily on money transfers for completing a sale. Do you believe Congress needs to go back and update this authority? 

Mr. EL-HINDI. To the extent that Congress is interested in looking at that authority, and looking at some of the issues that have 

been raised with respect to the limits on what we are able to collect 

currently, we would be happy to work with Congress on that. 

Mr. WILLIAMS. Good. In your opinion, what industry that GTOs 

are intended to target can circumvent these orders by using wire 

transfers? 

Mr. EL-HINDI. I’m sorry. Could you repeat that? 

Mr. WILLIAMS. What industry the GTOs are intended to target 

can circumnavigate these orders by using wire transfers? 

Mr. EL-HINDI. To the extent that the authority right now is limited to our ability to use geographic targeting orders when there is 

cash involved, any type of transaction that goes through wire 

transfers wouldn’t be within the scope of what we could do. So I 

would say that that is going to apply to a variety of different businesses. 

17 

Mr. WILLIAMS. Okay. Finally, something that this committee has 

talked extensively about expanding is the use of trade transparency 

units (TTUs) to help combat trade-based money laundering. Most 

of the active TTUs reside in countries located in South America. In 

addition, the importance of knowing trends and conducting ongoing 

analysis of trade data provided through partnerships with other 

countries, trade transparency unit is vital. I think we would agree. 

So, Director, although FinCEN doesn’t run these units, can you 

talk to the committee about the importance of sharing data with 

other countries and maybe how expanding these units will help you 

better do your job? 

Mr. EL-HINDI. A lot of other parts of government that are focused 

on the TTUs address the TTU aspect of it. I can just tell you again 

that, domestically, we work with the TTUs and we are focused on 

making sure that they have the data that we have and they are 

able to use it. And then generally speaking, in terms of the way 

we as a financial intelligence unit work with our counterparts overseas, we have definitely been pushing for more and more appropriate sharing on a secure and efficient basis of the information 

that each of us have. So, I think in the FIU context, with respect 

to financial intelligence, we definitely see the value of working with 

our counterparts overseas. 

Mr. WILLIAMS. Thank you for your testimony. 

And I yield back. 

Chairman PEARCE. The gentleman’s time has expired. 

The Chair now recognizes the gentleman from Minnesota, Mr. 

Emmer. 

Mr. EMMER. I thank you very much. I want to thank you for 

being here today, and the chairman and the ranking member for 

setting this up. 

As I understand it, you have been the acting Director—well, actually, not the acting Director. You have been the acting Director 

since the new Administration came in, of FinCEN? 

Mr. EL-HINDI. I have been acting Director since— 

Mr. EMMER. 2015? 

Mr. EL-HINDI. I have been the Deputy Director since 2015, and 

in May 2016, I became the acting Director. 

Mr. EMMER. Thank you. 

FinCEN has how many total employees? 

Mr. EL-HINDI. Onboard right now, we have about 280, and our 

target is 340. 

Mr. EMMER. And your total budget, annual budget, is in the 

neighborhood of what? 

Mr. EL-HINDI. Historically, it has been in the $110 million to 

$115 million range. I am not prepared to get into budget specifics 

right now. 

Mr. EMMER. No. I was just asking for a ballpark, and it is nothing—these aren’t ‘‘gotcha,’’ whatever. I am just asking— 

Mr. EL-HINDI. Thank you. 

Mr. EMMER. —mostly for my own knowledge. 

And you are divided up into six divisions, as I understand it? 

Mr. EL-HINDI. Yes. 

18 

Mr. EMMER. And since you have been at FinCEN, has the organization been remodeled in any way or changed, or has this always 

been the way it has been since it was created? 

Mr. EL-HINDI. Actually in 2013, we went through a restructuring 

of the organization under the previous Director. I was onboard at 

that point and I headed one of the divisions at the time. And that 

restructuring, we undertook because FinCEN, as I mentioned before, bridges the financial community, the law enforcement community, the regulatory community, and our international counterparts. 

Mr. EMMER. Right. 

Mr. EL-HINDI. And under our previous structure, we found that 

the divisions that were focused on regulatory seemed to view only 

the financial sector as their customers. The division that was focused on analysis and liaison only viewed law enforcement as their 

customers. A division focused on international issues only focused 

on other FIUs. 

The reality is, for an organization like ours, every one of our 

stakeholders is a customer of the whole organization. And in the 

new structure, we tried to break that down a bit, and we really 

stressed the fact that every external stakeholder is a customer of 

every part of FinCEN and every part of FinCEN is a customer of 

every other part. So it is six divisions— 

Mr. EMMER. If I can interrupt you, because I am going to run out 

of time. I am not interested—and forgive me if I sound a little 

sharp—in customers of FinCEN. I am more interested in you are 

collecting all this information, 154,000 reporting entities, which I 

would suggest you would call one of your customers if you are looking at this whole thing. 

I am really concerned about private information and how you ensure that law abiding people are not drawn into this net: 55,000 

reports every day based on suspicious activity. I was trying to look 

at the law. How is suspicious activity defined and who makes the 

determination as to whether it is suspicious or not? 

Mr. EL-HINDI. With respect to the reporting that we get, keep in 

mind that some of it is the currency transaction reporting, which 

is objective reporting of the value of the transaction if it is more 

than $10,000 of cash coming in and out. 

Mr. EMMER. Right. 

Mr. EL-HINDI. That is objective reporting. That is roughly 15 million reports a year. 

Suspicious activity is more subjective, and our regulations— 

Mr. EMMER. Who determines it? 

Mr. EL-HINDI. Our regulations instruct the bank. 

Mr. EMMER. Yes. So you send out a guideline, right? 

Mr. EL-HINDI. To the bank, yes. 

Mr. EMMER. And what is your guideline— 

Mr. EL-HINDI. Banks and other financial institutions. 

Where they have reason to believe that the source of funds might 

be illicit, where the transaction might not seem to have an apparent business purpose— 

Mr. EMMER. What happens if they don’t—so what if they are just 

putting money into a savings account? 

19 

Mr. EL-HINDI. To the extent that an individual is putting money 

into a savings account, a bank might not find that suspicious. 

Mr. EMMER. But it seems to be so vague. What is suspicious activity? And if you are putting the onus on the reporting institution, 

what is the consequence if they don’t— 

Mr. EL-HINDI. I understand. So let me just work through a story. 

Say, I am a customer of the bank—maybe I am a student; I am 

a student customer of the bank. The bank understands that I am 

a student and I have opened up an account. To the extent that as 

a student I begin to engage in incredibly large and repeated transactions, that is going to be something that the bank, in terms of 

knowing its customer and what it might expect from a student, 

would say, that looks suspicious. That is different from a transaction that you would normally expect from a student. That is just 

one category. 

The guidance that we provide to banks walks through—helps 

them identify red flags in certain situations in which they could be 

identifying that type of activity. 

Mr. EMMER. I see my time has expired. If I could get a copy of 

your guidance afterwards— 

Mr. EL-HINDI. Sure. 

Mr. EMMER. —I would appreciate it. 

Mr. EL-HINDI. Of course. 

Mr. EMMER. Thank you. 

Chairman PEARCE. The gentleman’s time has expired. 

The Chair now recognizes the gentleman from Maine, Mr. 

Poliquin, for 5 minutes. 

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

you very much for being here, sir. 

You folks, in my terminology anyway, are the financial cops for 

the U.S. Government, intelligence and the cops. Is that right, 

roughly? 

Mr. EL-HINDI. Yes. We assist. We assist the cops and— 

Mr. POLIQUIN. Good. 

Mr. EL-HINDI. —we assist the financial institutions. 

Mr. POLIQUIN. Great. So we know how important your work is, 

Mr. El-Hindi. We are quite proud of our State of Maine. We consider ourselves one of the safest States, and statistically are one of 

the safest States in the country. However, all of us, I think, here 

in Congress have been alarmed by knowing that there are terrorist 

investigations going on in each of the 50 States, I should say. And 

one of the things that really frightened us last summer was, actually, an individual who had settled in Maine as a refugee ended up 

dying on the battlefield for ISIS in the Middle East. So we all want 

to make sure we help you make sure this process is as efficient as 

possible. 

Now, Mr. Emmer and other folks have mentioned the huge volume of SARs every day, about 55,000. Based on 70 or 80 folks you 

have working on this at your shop, if I understand this, that is 

about 800 per day. So, that is a lot. And I am not quite sure. I am 

guessing it probably doesn’t make a lot of sense to spend a lot of 

manhours on 800 filings per day. I am guessing some of those 

aren’t of great quality. 

20 

And is there anything—and if I am wrong, I know you will correct me—that we can do to help you, any legislation we can pass, 

any rulemaking that you folks can go through with our support 

that allows you to use different technology to get to a better place 

so this is more efficient, to make sure we drill down on what filings 

are actionable? 

Mr. EL-HINDI. I will just try to provide a little context with respect to all that information that comes in. It is varying types of 

information. As I mentioned before, some of it is objective reporting. Some of it is suspicious activity reports. And when you think 

about the percentage of things that come in on a daily basis, the 

percentage of SARs is actually going to be lower in comparison 

with currency transaction reports. That is just the math. 

But people need to—we try to make sure that industry and the 

public understand that the way this information is used is in a variety of contexts. It is not easy to associate any one particular filing 

with any one particular action. In fact, in terms of our metrics and 

how we measure our success, we try to emphasize the fact that it 

is not as if every single piece of information is going to lead to some 

individual arrest. 

Mr. POLIQUIN. Okay. Let me drill down a little bit, if I can, Mr. 

El-Hindi. I only have a couple of minutes left here. Under the Bank 

Secrecy Act, is there liability for a financial institution to—not permit; that is not the right word—but is there a financial liability, 

and otherwise responsibility for a financial institution if some of 

the money laundering issues and other illicit activities flow 

through their institution? Is there liability? 

Mr. EL-HINDI. Under the Bank Secrecy Act, they are required to 

have programs in place that enable them— 

Mr. POLIQUIN. And if they don’t, there is liability? 

Mr. EL-HINDI. If they don’t, there are liabilities. 

Mr. POLIQUIN. Okay. You— 

Mr. EL-HINDI. We have an Enforcement Department, and they, 

on occasion, will take action. 

Mr. POLIQUIN. Okay. In our healthcare industry, for example, in 

our great country, there are instances where doctors—I don’t want 

to be accusatory here. But there are narratives where some folks 

in the healthcare profession will overuse procedures—or testing, I 

should say, instead of procedures—because of fear of liability down 

the road, defensive medicine. 

Do you find that might be analogous to the situation we have 

here where financial institutions will file these suspicious activity 

reports in abundance to make sure they are protecting themselves 

against future liability, and, therefore, it gums up your work, and 

we are missing opportunities to really drill down on actionable 

items? 

Mr. EL-HINDI. This issue actually came up prior to the financial 

crisis, and we actually looked at the SARs to try to discern whether 

or not we found that data was coming into the database on a defensive basis where it had no value. And we could not see that. 

The financial institutions themselves, we feel, are making good 

decisions about what to file and what not to file. We don’t ask for 

perfection. We ask for them to have systems in place so that they 

21 

can meet the requirements and generally provide the information 

that is necessary. 

And, again, as we have looked at it, we have not been able to 

discern this so-called defensive filing. 

Mr. POLIQUIN. Mr. El-Hindi— 

Mr. EL-HINDI. We are sensitive to a lot of the concerns that industry has in terms of the costs and the resources that go into it. 

And we continue to discuss with them better ways of making the 

system more efficient. 

Mr. PEARCE. The gentleman’s time has expired. 

Mr. POLIQUIN. Thank you, Mr. Chairman. 

Chairman PEARCE. The Chair now recognizes the gentleman 

from Arkansas, Mr. Hill, for 5 minutes. 

Mr. HILL. Thank you, Mr. Chairman. 

I appreciate you being here, Mr. Director. Thanks for sharing 

your thoughts about FinCEN. 

I want to follow up on some of Mr. Emmer’s questions. I have 

looked at a lot of material and found a number of different authorized and FTE positions. So I am just going to try to clarify that. 

It looks like there are 373 FTEs for FinCEN, with about 280 current positions. Is that— 

Mr. EL-HINDI. I think it is closer to 340. 

Mr. HILL. Okay. That is what I am saying. I have some confusing 

information. 

And it is my understanding that there are a number of unfilled 

staff positions at FinCEN based on those numbers. How many exactly are unfilled, and what is the average unfilled slots for the 

past year or two? And is it fair to just look at FTEs versus— 

Mr. EL-HINDI. I will focus on the FTEs. Currently, we have 

roughly 70 vacancies that we are looking to fill. Of that, roughly 

half are in what I will call an active recruitment process or a selection process where we are waiting for people to get through security clearances. 

We have had some issues with respect to our hiring, and we are 

working on that. One of the things that— 

Mr. HILL. What is an example of—I mean, you have security 

clearances. That gets backlogged. 

Mr. EL-HINDI. Yes, security clearances— 

Mr. HILL. Do you have a competitive pay issue at all? 

Mr. EL-HINDI. Given the interest in what we do, there are instances where we lose people to the private sector. 

Mr. HILL. What is the average tenure of an intel investigator for 

you? 

Mr. EL-HINDI. I would have to get back to you on that. I don’t 

have that. 

Mr. HILL. But you do a good job of training, I would— 

Mr. EL-HINDI. We do do a good job of training. And because we 

have a great mission, I think that we are in a position to recruit 

the talent that we need. 

I will just say that you lose a person in about 2 weeks. The 

amount of time that it takes from the posting of an announcement 

to the selection and primarily the security clearance, the average 

is sometimes over a year. So that is something that we continue 

to work to address. 

22 

Mr. HILL. Really, for us, and the work that we do on this Terrorism Subcommittee, that is a national security problem, isn’t it, 

that you have a year lag time in that process? As I understand it, 

some aspects of national security intel analysts are—have a fasttrack hiring authority. Is that correct? 

Mr. EL-HINDI. That is correct. 

Mr. HILL. And are your slots not covered by that authority? 

Mr. EL-HINDI. We are not covered by that. 

Mr. HILL. Does it take legislative action to have you covered 

under that authority? 

Mr. EL-HINDI. I would have to get back to you in terms of precisely how something like that might work. 

Mr. HILL. It seems like somebody like the Secretary of the Treasury could make that happen. 

So how many, roughly—is that the 70 intel analyst slots that 

would be covered by that— 

Mr. EL-HINDI. Actually, the intel division is, I believe, almost 

fully staffed at this point. 

Mr. HILL. Okay. If slots go unfilled and you have them authorized, which means you have the appropriated money to pay them, 

but they go unfilled for a year, you don’t risk losing that Federal 

funding; it is authorized— 

Mr. EL-HINDI. We have done a number of things. We work to 

bring on Presidential Management Fellows. We work with the 

Workplace Recruitment Program to try to bring people on faster. 

We do have the ability to use some of that money to bring in contractors on a basis to make sure that we are able to get the work 

done. 

Mr. HILL. If you don’t mind just following up maybe with a memo 

on this subject that talks about authorized positions and steps you 

have taken to compress the hiring time and any additional authority you think the Secretary needs to have the critical national security analytic jobs be covered under that fast-track authority, that 

would be, I think, very helpful to the committee. 

Mr. EL-HINDI. We can provide you with the information, I think. 

Mr. HILL. And in the intelligence community inside the government, do people pay retention bonuses or things of that nature 

within the government scale to retain key employees who are 

sought after by the private sector? 

Mr. EL-HINDI. Keep in mind that we are not part of the intelligence community. 

Mr. HILL. I am throwing you in with a great group of people. You 

can just say thank you. 

But in the law—in Federal law enforcement—I will rephrase and 

say, ‘‘within Federal law enforcement.’’ 

Mr. EL-HINDI. Yes. I will just say, within FinCEN, that we do 

have the ability to use retention bonuses. 

Mr. HILL. Okay. Thank you for your time. 

Thank you, Mr. Chairman. 

Chairman PEARCE. The gentleman’s time has expired. 

The Chair now recognizes the gentlelady from Utah, Mrs. Love, 

for 5 minutes. 

Mrs. LOVE. Thank you. Thank you, Mr. Chairman. 

Thank you for being here today. 

23 

One of the concerns we hear is that financial institutions are 

spending so much time and money to gather information. But there 

is a great desire, at the same time, to make sure that the effort 

that is being spent to gather—is spent to gather actionable information rather than just more information. So there is a concern— 

and I apologize if this was covered already. We have been in and 

out. I just need them for my information. 

There is a concern that FinCEN gets too much information and, 

thus, is unable to sort through it for all important indicators of 

crimes. Can you please address that? 

Mr. EL-HINDI. It is true that we get a lot of information. And we 

get more information now than we did 10, 20 years ago. Actually, 

this is FinCEN’s anniversary week. We are now 27 years old. But 

the capacity to digest that information and use it and disseminate 

it quickly has also increased over the course of time. We are in an 

electronic era now where the information can come in faster and 

can be analyzed more quickly. And we work on that. 

I think that one of the things that we also try to do is make sure 

that the financial sector knows the many ways in which we use the 

information and how valuable it is. 

Mrs. LOVE. Do you need to gather that much information? Are 

you focused on specific actionable information that you gather? Or 

because of the technology, do you decide to get as much as you possibly can and try and analyze it? 

Mr. EL-HINDI. Keep in mind that FinCEN is a bridge between 

law enforcement users and the financial sector. I think one of the 

things that we like to point out is that law enforcement would 

probably want more information on basically everything that they 

can. As a regulator in this space, we are responsible for making 

sure that we are balancing burden and benefit and trying to hit 

the— 

Mrs. LOVE. Okay. So who looks at the 55,000 reports that come 

in every day? 

Mr. EL-HINDI. 55,000 filings come in each day. They go into the 

database. Within the database, they are subject to queries by 

10,000 stakeholders. And essentially there are— 

Mrs. LOVE. So 10,000 stakeholders are the ones who look into 

the— 

Mr. EL-HINDI. They have the ability to use that information and 

access that information. But they are not—would 10,000 people be 

looking at every single filing that came in? That is not how it 

works. 

Mrs. LOVE. Okay. 

Mr. EL-HINDI. What we try to stress is that there is—for each 

filing, it has its individual value, but then collectively they have aggregate value as well. And different pieces of information filed by 

different financial institutions with respect to different transactions 

can be connected in that system. 

Mrs. LOVE. Okay. Let me— 

Mr. EL-HINDI. That is how we develop and understand better 

networks of illicit activity, by putting all of this information together. 

Mrs. LOVE. Okay. Let me delve a little bit more specifically into 

your operations. Does FinCEN report on the commonalties found 

24 

between SARs and, namely, these common items: addresses; ID 

numbers; phone numbers; email addresses; IP addresses? 

Mr. EL-HINDI. Commonality? I think that what—when the information is in the database, one of the things that our modernization 

has enabled us to do is use business rules and algorithms to help 

identify situations in which there may be common elements, such 

as you said, for example, a phone number and address that may 

be appearing in multiple reports coming in with respect to different 

transactions and particularly across different institutions. So that 

is a way in which those data points can be connected and we can 

identify network activity. 

Mrs. LOVE. So, according to you, FinCEN proactively analyzes 

the above to find common attributes and share with law enforcement so that investigations can be initiated. 

So how do the rules—how do—I am losing time. If there is extra 

time, I would like some extra time. 

Chairman PEARCE. The gentlelady’s time is extended. 

Mrs. LOVE. Thank you. Oh, thank you. 

How do the searches within the database work daily? What are 

the rules that you use when you are searching within the database 

daily? 

Mr. EL-HINDI. I will give you an example in the terrorism context. We will identify a situation, and we will work with our team 

to figure out what types of terms or what types of situations might 

be most associated with a terrorist-type activity. 

We will put that into the system, use that as a business rule, 

and then that will help us flag items of particular interest for further follow-up. 

That is just one example of the development of a business rule. 

Mrs. LOVE. So are they basically glorified Google searches? How 

long does— 

Mr. EL-HINDI. Some types of searching of the database might be 

based on a simple watch list or a name type thing. Others are 

going to be much more complicated, weighted, multifactor analysis. 

I have to apologize. I am not one of the experts with respect to 

the development of these types of rules. But we can certainly get 

back to you in terms— 

Mrs. LOVE. I would like to have some details as to what the rules 

are. You are talking about quite a bit of information daily. I would 

just like to dive into that a little bit more and understand how it 

works. 

Thank you, Mr. Chairman. 

Chairman PEARCE. The gentlelady’s time has expired. 

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

Mr. DAVIDSON. Thank you, Mr. Chairman. 

And thank you for being here and thanks for the information and 

the time that it takes to answer all these questions. 

I am new to the committee and new to the topic as a Member 

of Congress anyway, but certainly right at the intersection of a lot 

of things where you say, ‘‘Just follow the money.’’ And you are the 

folks who make that possible. So it is nice to talk with you, and 

I think it is an incredibly important mission. 

25 

I am particularly concerned about, how do we do that and not 

forget about our Bill of Rights? How do we not forget about who 

we are as Americans? 

And one of the things that is very relevant is something in your 

testimony regarding Section 314(b). I am just going to read what 

you stated here briefly: ‘‘One issue that FinCEN frequently hears 

about from the financial services industry regarding information 

sharing is the scope of their safe harbor for information sharing 

under Section 314(b). The statute currently only provides safe harbor from liability for disclosing information under this section for 

activities that may involve terrorist activities. Activities that are 

predicate offenses for money laundering are not exclusively included in the provision.’’ 

So, serious activity that could lead to money laundering. When 

we provided the USA PATRIOT Act, we basically said: ‘‘Hey, we 

are going to kind of stretch the parameters of our civil liberties 

here because we really want to get after terrorists.’’ 

Then we said: ‘‘Well, let’s go a little deeper because these things 

might actually lead to that.’’ 

So what kinds of safeguards are in place? Historically, that was 

a warrant or a subpoena. You get all this information. People are 

querying it. Could you go into some of the safeguards that protect 

civil liberties in this? 

Mr. EL-HINDI. In terms of the 314, we have 314(a), which is 

about industry—the government sharing information back and 

forth between industry and government, and 314(b), which enables 

the institutions to share with one another. 

The 314(a) authorities, as we put them in place, we have been— 

again, I mentioned before, we are between law enforcement and the 

financial sector. Part of our responsibility is to make sure that, 

when we are putting out requests from law enforcement for information, we do that in a responsible— 

Mr. DAVIDSON. Do those requests from law enforcement come in 

the forms of warrants or subpoenas? 

Mr. EL-HINDI. They come to us in—not in warrants or subpoenas. They come into us with respect to ongoing significant investigations. 

Keep in mind that the requests come to us, and under 314(a), we 

are able to send that information out to financial institutions. They 

then say whether or not they have anything that meets— 

Mr. DAVIDSON. Right now, this is a little bit like playing Go Fish 

and saying: ‘‘Got any transactions?’’ 

Mr. EL-HINDI. But after that, when law enforcement reaches out 

to the financial institution, they then proceed with engaging with 

them in the normal course and— 

Mr. DAVIDSON. This isn’t yet personalized. In some cases, where 

it is just like we have this big set of data, and we just say: ‘‘Hey, 

do we have any transactions that look like clubs? Do you have any 

clubs?’’ To put it in Go Fish language: clubs, hearts, or diamonds. 

So whatever the parameter is that you are looking for, and then 

you go: We have these five people who have completed a transaction like that. 

Or is it, instead, personalized, where you say, ‘‘I am looking for 

this person right here or this LLC?’’ 

26 

Mr. EL-HINDI. The way the requests come in to us, they are 

going to be much more particular. Again, the particular information we receive from law enforcement that involves their investigations is—the names are—shared with the financial institutions, 

and they say: Do you have transactions where these individuals or 

entities are involved, or do you have accounts? 

If they say yes or no, then law enforcement is able to follow up 

with them. 

It is a very efficient system. I think that one of the things that, 

over the course of time, because we have been able to mete out the 

requests and work with the financial institutions on it, it has 

worked very well for law enforcement. They have been—the average connection of identifying ways in which they can expand their 

accounts—for every request they make, they are able to identify 

roughly 50 transactions or accounts of interests. 

Mr. DAVIDSON. Thank you for that. Most of that is (a). 

But (b)—you highlight some of the categories under (a) that are 

the government’s interaction with the bank. But then, frankly, we 

didn’t get to all the safeguards. And we, perhaps, can schedule a 

briefing to go into that. 

But then you go to the next layer. Now banks can share this 

stuff iteratively back to one another. And I don’t want to dismiss 

that it could be effective, but I want to understand what are the 

civil liberty safeguards, which is something we didn’t quite get to. 

So I would like to try to schedule time with your office to follow 

up. 

My time has expired. 

Mr. EL-HINDI. We would be happy to do that. 

Chairman PEARCE. The gentleman’s time has expired. 

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

Zeldin, for 5 minutes. 

Mr. ZELDIN. Thank you, Mr. Chairman. 

Thank you, Mr. El-Hindi, for being here today. 

The issue of illicit financing and money laundering is hitting 

home in the most personal and tragic way in my district where we 

have seen ongoing violence perpetuated by MS-13 and other Central American gangs taking innocent lives and threatening the 

safety of our schools. 

Money laundering is a key tool for these violent criminal organizations. They are tearing apart peaceful communities on Long Island and across our country. It allows them to hide their drug-trafficking revenue and transfer it illicitly across the border. That is 

how they buy weapons, and it fuels the growth of their dangerous 

criminal enterprises. 

Earlier this month, we saw the senseless and tragic murders of 

four young men in Suffolk County, New York, which only further 

cemented our need to solve the gang violence problem on Long Island and nationwide. These murders have gotten the attention of 

both President Trump and Attorney General Sessions. Two of the 

victims of these murders perpetuated by MS-13 were residents of 

my district, and tomorrow, Attorney General Jeff Sessions will be 

visiting this community of Central Islip, which has been shattered 

by these senseless murders and other acts of transnational gang violence. 

27 

Mr. El-Hindi, we know that FinCEN, as the national experts on 

combating money laundering, is playing a key role to defeat threats 

to America’s safety and security. Now more than ever we need coordination on all fronts so that our local law enforcement on our 

front lines can respond to this grave threat, working with other 

State and Federal agencies. 

My first question is asking for you to speak on the effort currently to combat the threat of MS-13. 

Mr. EL-HINDI. With respect to priorities that we have in FinCEN 

in terms of our focus, transnational organized crime, narcotrafficking, gang activity are within those priorities. When you mention 

Federal, State, and law enforcement working together, Federal, 

State, and law enforcement all have access to the data that 

FinCEN has, and they all have access to the support that we can 

provide. 

To the extent that law enforcement is focused in terms of investigations and gang activity, we are there to support them and make 

sure that they have the best use of the information that we have. 

Mr. ZELDIN. Can you walk me through how FinCEN flags suspicious activity at the local level and shares this intel with local 

law enforcement, especially in dealing with transnational criminal 

organizations like MS-13? 

Mr. EL-HINDI. We have a memorandum of understanding (MOU) 

that allows access to our database at the Federal level, at the State 

level, and, in many situations, at the local level with certain municipalities. 

When we have an MOU with a municipality, they have direct access to the data. In many instances, however, they can work 

through a State coordinator to have access to the data as well. 

In terms of the products that we put out where we identify a 

methodology or a trend, those can go out to a wide variety of our 

law enforcement stakeholders. 

Mr. ZELDIN. The Bank Secrecy Act puts the onus of reporting 

suspicious financial activity on banks. But what about violent 

gangs that are increasingly using apps and other technology, prepaid cards and various other nonbank instruments to launder 

money? How is FinCEN intercepting and monitoring those transactions and working with the local agencies on that front? 

Mr. EL-HINDI. We cover more than just banks. Money transmitters are subject to our regulations. And some of the methods that 

you mentioned for moving money electronically might involve apps. 

To the extent that that activity gets into the realm of money transmission, which it often does, those financial institutions—we consider them financial institutions—are covered under the scope of 

our requirements. They are required to file suspicious activity reports. They are required to have programs in place to enable them 

to identify illicit activity and make themselves resilient to that. So 

that is the type of information that will go into the database. 

In terms of new methods, for example, FinCEN clarified in 2013 

that virtual currency exchangers, administrators of virtual currency are actually money transmitters and subject to the scope of 

our regulations. And we find that, by working with that industry, 

we are able to get valuable information to law enforcement. 

28 

Mr. ZELDIN. I appreciate that. And we certainly have law enforcement from all different levels of government and elected and 

community leaders. Everyone is engaged in this very important 

issue in Suffolk County. Again, as I mentioned, Attorney General 

Sessions is coming to Suffolk County tomorrow, and the President 

himself often talks about this issue that is in our community in 

Suffolk. So anything that you can possibly do to be able to assist 

with this effort, it is an urgent effort for my local community. And 

I would certainly appreciate all of your help. 

I yield back. 

Mr. EL-HINDI. Thank you. 

Chairman PEARCE. The gentleman yields back. 

The Chair now recognizes the gentleman from California, Mr. 

Royce, chairman of the House Foreign Affairs Committee, and a 

member of the full Financial Services Committee, for 5 minutes. 

Mr. ROYCE. Thank you, very much, Mr. Chairman. I appreciate 

that. 

Mr. El-Hindi, in November, the Treasury Department acknowledged to Congress that it was seeking to detail 15 FinCEN personnel to the Office of Intelligence and Analysis on a temporary 

basis. This committee raised concerns about the impact of the reorganization on Treasury’s ability to disrupt and inhibit the financing 

of terrorism and other financial crimes. It was also a puzzling development in light of the fact that the Obama Administration had 

requested an increase in FinCEN’s 2017 budget to expand the use 

of contractors to support FinCEN’s efforts to disrupt the financing 

of terrorist groups, including ISIS. 

So, Mr. El-Hindi, can you provide the committee with an update 

on the reorganization and how it is impacting your work? Is the 

Trump Administration supportive of or aware of the changes that 

their predecessor made shortly before leaving office? 

Mr. EL-HINDI. I can just provide you with a little bit of context 

in terms of within Treasury— 

Mr. ROYCE. That would be helpful. 

Mr. EL-HINDI. —a focus on—I mentioned in my testimony that 

we are one of five components that report to the Under Secretary 

for Terrorism and Financial Intelligence. 

There were thoughts about how we could all work better together. One aspect of that involved the idea of detailing staff from 

FinCEN to another component part. The status of that is it has not 

occurred. 

Mr. ROYCE. Let me ask you another question. In its advisories, 

FinCEN recommends U.S. financial institutions use risk-based 

policies, procedures, and practices regarding jurisdictions with antimoney-laundering deficiencies. This is appropriate, but some institutions would argue that the Federal banking regulators do not 

themselves use a risk-based approach when they develop AML/CFT 

reporting requirements. To the contrary, many bankers complain 

that their regulators take a dragnet approach focused on burdensome and, in their view, time-consuming reporting inputs over 

quality outcomes. 

So, Mr. El-Hindi, is it fair for FinCEN to ask financial institutions to meet a standard that the regulators do not meet? Would 

you agree with The Clearing House’s conclusion that many, if not 

29 

most, of the resources devoted to AML/CFT by the financial sector 

have limited law enforcement or national security benefit? That 

would be one question I would ask. 

And what can Congress do to refocus the Bank Secrecy Act and 

other legal tools on outcomes over inputs? 

Mr. EL-HINDI. I will just respond to that by noting that I personally, and FinCEN generally, have talked about the fact that, along 

with a risk-based approach on the financial industry’s part in 

terms of complying with our regulations, there should be a riskbased approach to regulation as well. 

We have been very clear on that. And to the extent that we have 

to make decisions on the industries or the types of activities that 

we fold within the scope of our regulations, that risk-based approach to regulation is very much a part of it. 

A number of things were raised in The Clearing House report 

that you mention. I think it is an example of a situation where industry reaches out to discuss concerns that they have with respect 

to how situations could be improved. FinCEN has always been 

eager to work with industry and discuss those ideas. 

We have a forum called the Bank Secrecy Act Advisory Group 

where we are able to bring together law enforcement, the regulatory community, and the industry sector together with us where 

we can have very frank and open discussions about what is working, and what is not working. A lot of the issues that are raised 

in the paper that you mention are things that we discuss and are 

working on within that context. But we have always been eager to 

work with industry and law enforcement to make sure that we are 

on the right track and that we are doing the right things. 

That is why we have—I continue to say that we are a bridge between both worlds. To the extent that neither is completely satisfied with the results that we sometimes come up with, it probably 

is an indication that we are doing the right thing. 

Mr. ROYCE. Mr. El-Hindi, thank you very much. 

I yield back. 

Chairman PEARCE. The gentleman yields back. 

Mr. El-Hindi, you have been very gracious with your time. If you 

could spare just a couple more minutes. 

You are part of a group of about 150 FIUs worldwide. Of those, 

which would you estimate has probably the best information technology sharing? 

Mr. EL-HINDI. I am not in a position right now to comment on 

particular jurisdictions. We have strong relationships with many of 

our FIU partners, and there are other relationships that we would 

like to improve. At the same time, there are some of our FIUs that 

are in great shape in terms of their ability to do things and others 

that would need to improve. 

In some of the rulemaking that we have discussed, if you go 

through past FinCEN records, you can see a close involvement that 

we have with our Canadian counterparts, our Australian counterparts, and other counterparts as well. But I am not in a position 

to comment on the strengths— 

Chairman PEARCE. If you could reach out and grab someone’s 

technology and put it into FinCEN, whose would that be? Do you 

have an opinion about that? 

30 

Mr. EL-HINDI. I am not in a position to comment on that right 

now. I would just say that one of the great things about being an 

FIU and having a forum that we can compare the tools that we 

have and the authorities that we have is that it does create opportunities for us to think along those lines. And that happens. 

I mentioned virtual currency earlier today. When we came out 

with our interpretation of virtual currency, our FIU counterparts 

from other jurisdictions were on the phone, and we were comparing 

notes. And in terms of how we approach that situation, the same 

could be true with respect to the technology as well. And we do 

have workshops with them in which we can compare ideas. 

Chairman PEARCE. And if you were going to take a guess—again, 

these are highly speculative things—how many of the 150 would 

like to take ours and implement? I am still trying to drive— 

Mr. EL-HINDI. How many of them— 

Chairman PEARCE. Would like to use our technology instead of 

the one they have? Half? Three quarters? All of them? 

Mr. EL-HINDI. I would—given— 

Chairman PEARCE. I am just trying to figure out kind of where 

we stand in the world as far as our expertise and our capabilities 

from the IT point, not the human capacity. 

Mr. EL-HINDI. I think that we are up there. And others are up 

there as well. 

Chairman PEARCE. Okay. So we are in the top 10 percent or so? 

Top 30 percent? 

Mr. EL-HINDI. I will just say we are up there, and others are up 

there as well. 

Chairman PEARCE. You have been very gracious. We appreciate 

everything. 

I would like to thank you for your testimony today and for answering all of our questions. 

The Chair notes that some Members may have additional questions for this witness, 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 this witness 

and to place his 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. 

This hearing is adjourned. 

[Whereupon, at 4:35 p.m., the hearing was adjourned.] 

(31) 

A P P E N D I X 

April 27, 2017 

32 


27419.001

STATEMENT OF 

JAMAL EL-HINDI, ACTING DIRECTOR 

FINANCIAL CRIMES ENFORCEMENT NETWORK 

UNITED STATES DEPARTMENT OF THE TREASURY 

BEFORE THE 

UNITED STATES HOUSE OF REPRESENTATIVES 

COMMITTEE ON FINANCIAL SERVICES 

SUBCOMMITTEE ON TERRORISM AND ILLICIT FINANCE 

APRIL 27,2017 

NOT FOR PUBLICATION UNTIL RELEASED BY THE HOUSE COMMITTEE ON 

FINANCIAL SERVICES, SUBCOMMITTEE ON TERRORISM AND ILLICIT 

FINANCE 
33 


27419.002

Chairman Pearce, Vice Chairman Pittenger, Ranking Member Perlmutter, and distinguished 

members of the Subcommittee, thank you for inviting me to appear before you today to discuss 

the role of the Financial Crimes Enforcement Network (FinCEN) in collecting, analyzing, and 

disseminating Bank Secrecy Act (BSA) data, and to share with you some new and evolving 

money laundering and terrorist financing challenges. I appreciate the Subcommittee's interest in 

these important issues and your continued supp011 of our efforts. 

FinCEN ·-a bureau of the U.S. Department of the Treasury within the Office of Terrorism and 

Financial Intelligence (TFJ)- is charged with safeguarding the financial system from illicit use, 

combating money laundering, and promoting national security through the collection, analysis, 

and dissemination of BSA information and strategic use of BSA authorities. We strive for the 

responsible use of financial information for greater security and integrity of the U.S. financial 

system. FinCEN works to achieve its mission through a broad range of interrelated strategies, 

including: 

• Implementing, administering, and enforcing the BSA the United States' primary antimoney laundering and countering the financing of terrorism (AMLICFT) regulatory regime; 

• Supporting law enforcement, intelligence and regulatory agencies through the sharing and 

analysis of BSA information; 

• Serving as the Financial Intelligence Unit (FlU) for the United States; and 

Building international cooperation and technical expertise among the global network of FlUs. 

To accomplish these activities, FinCEN employs a team of dedicated employees with a broad 

range of expertise in illicit finance, financial intelligence, the financial industry, the AMLICFT 

regulatory regime, technology, and enforcement. FinCEN's ability to work closely with 

regulatory, law enforcement international, and industry partners promotes consistency across 

our regulatory regime and protects the U.S. financial system. 

Collection, Analysis and Dissemination of Bank Secrecy Act Data 

2 
34 


27419.003

The BSA is the primary federal AML law. It requires a broad range of U.S. financial institutions 

to establish AML programs, maintain records, and provide reports to finCEN. The majority of 

BSA data FinCEN collects comes from two reporting streams: Currency Transaction Reports 

(CTRs) and Suspicious Activity Reports (SARs). Financial institutions' must file CTRs with 

FinCEN for cash transactions totaling more than $10,000 and file SARs to report suspicious 

transactions. Both the objective reporting in CTRs and the subjective reporting in SARs arc 

critically important; they provide a wealth of potentially useful information to FinCEN and other 

agencies working to detect and prevent money laundering, other financial crimes, and terrorism. 

Thanks to funding from Congress, FinCEN successfully completed an Information Technology 

(IT) modernization program in 2014, updating the process of collecting, analyzing and 

disseminating BSA data. FinCEN accomplished five significant goals through this program: 

FinCEN 1) assumed responsibility for maintaining BSA data in a FinCEN-based system; 2) 

shifted from paper filings ofBSA reports to the electronic filing ofBSA reports; 3) developed a 

new IT system for approved law enforcement and regulatory partners to access BSA data; 4) 

strengthened IT security through implementation of two-factor authentication and other 

mechanisms; and 5) developed foundational advanced analytics capabilities to enhance 

FinCEN's ability to exploit BSA data. 

FinCEN receives an average of roughly 55,000 new financial institution filings each day. These 

filings come from more than 80,000 financial institutions and 500,000 individual foreign bank 

account holders through FinCEN's modernized E-filing system. FinCEN maintains over 200 

million of these BSA filings in our database. FinCEN makes this information available to more 

than 1 0,000 law enforcement and other government users through a search tool designed to meet 

their specialized needs, known as FinCEN Query. These users, in tum, perform approximately 

30,000 daily searches of the data. E-filing has streamlined the reporting process for financial 

institutions and individual filers and significantly improved users' ability to exploit BSA data by 

making it more accessible and searchable. 

1 Examples of institutions that file SARs and/or CTRs include: banks and credit unions, money remitters, check cashers, virtual 

currency exchangers, casinos and card clubs. and dealers in foreign exchange. 

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The protection of the sensitive information we receive is also a critical part of our mission. 

FinCEN safeguards BSA data through a continual process of reviewing IT security measures and 

processes in place, adjusting to current and emerging risks, and ensuring that security is a 

consistent requirement considered throughout the lifecycle of each system. FinCEN systems are 

accredited to High Federal Information Security Management Act (FISMA) levels and employ 

strong security mechanisms such as two-factor authentication, encryption, and activity 

monitoring to protect BSA data. FinCEN works with the Department of the Treasury and the 

Department of !lome land Security cyber security organizations for security operations and 

mitigation activities. 

The FinCEN Financiallnlelligence C)cle 

FinCEN delivers BSA information and related analysis to law enforcement, regulatory, foreign, 

and private sector partners following an intelligence cycle methodology. This cycle involves the 

collection, processing, exploitation, and dissemination ofBSA-derived financial intelligence, and 

the direction of future BSA collection efforts 

In terms of collection, the first stage of the financial intelligence cycle, FinCEN has the ability to 

collect more than routinely filed BSA data. FinCEN can proactively target certain financial 

intelligence for collection using a variety of authorities and special measures. Some of these 

targeted financial intelligence collection tools include: 

• Section 314(a) of the USA PATRIOT Act, which authorizes FinCEN to share law 

enforcement and regulatory information with financial institutions on individuals, entities, 

and organizations reasonably suspected of engaging in terrorist acts or money laundering 

activities, in order to collect related financial intelligence. 

• Geographic Targeting Order (GTO) authority, which enables FinCEN to impose additional 

recordkeeping or reporting requirements on domestic financial institutions or other 

businesses in a specific geographic area identified in the order for !80 days. 

• Foreign Financial Agency authority, which enables FinCEN to impose additional reporting 

requirements on U.S. financial institutions about their transactions with designated foreign 

financial entities. 

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• Demand Letters, which are requests by FinCEN for records relating to international funds 

transfers of $3,000 or more. The scope of the requested information can vary depending on 

the specific circumstances of the request. 

Processing is the second stage of the financial intelligence cycle. With approximately 55,000 

filings per day, advanced technology solutions are needed to review, analyze, and quickly 

disseminate time-sensitive information. To manage a data collection of this size and to rapidly 

identify nodes and patterns of potentially illicit activity for further action, FinCEN employs a 

number of advanced analytic approaches. 

To combat our most significant money laundering and terrorist financing threats, FinCEN 

employs automated business rules to screen filings on a daily basis and identify reports that merit 

further review by analysts. The rules range in complexity from traditional "watch list'' rules 

designed to identify known illicit actors to complex multi-variable weighted rule sets capable of 

identifying potential illicit activity. 

These algorithms search the reporting for key terms, entities, and typologies of interest daily, 

across six priority areas: transnational security threats; cybercrime; transnational organized 

crime; significant fraud; compromised financial institutions or third party money laundering; and 

data quality, benchmarking, and anomaly detection. The business rules produce approximately 

5,000 rule findings per month, pointing FinCEN analysts to specific filings for hands-on review 

and focusing their efforts on the filings most likely to be key to defending against priority 

threats. This produces an important stream of timely financial intelligence for FinCEN analysts 

and external stakeholders. 

FinCEN analysts work, often with input from investigators internal and external to FinCEN, to 

design models and analytic techniques that identify newly trending illicit typologies; monitor 

responses to FinCEN advisories, geographic targeting orders, and other regulatory actions; locate 

potential data quality issues; and flag matters that potentially exhibit behavior patterns indicative 

of significant money laundering activity. 

For the analysis and dissemination stages of FinCEN's financial intelligence cycle, we have 

consolidated analytic capabilities and expanded the scope of our work to create products that 

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address critical priority threats for our stakeholders, including the financial industry. FinCEN 

combines BSA data with additional infonnation, commercial data sources, and other open source 

material to develop proactive targets and strategic assessments of money laundering trends and 

vulnerabilities for dissemination to our partners, both domestic and international. 

Lastly, the financial intelligence cycle helps inform future planning and direction. Once threats 

and vulnerabilities have been identified. FinCEN can adjust the regulatory framework protecting 

the U.S. financial system. FinCEN uses its regulatory rulemaking authority to, among other 

things, define the reporting that financial institutions and others must provide. FinCEN also 

develops advisories to infonn industry about money laundering and terrorist financing threats, 

including the red flag indicators in their data that might be indicative of suspicious activity. 

These rulemaking activities and advisories expand and/or improve the infonnation that FinCEN 

collects. The dovetailing of this phase with the collection phase confinns the iterative and 

cyclical nature of our financial intelligence activities. 

Information Sharing 

Financial intelligence is most effective when information flows in both directions between the 

public and private sectors. FinCEN serves as a communication point between financial 

institutions and law enforcement, regulatory, and international colleagues. Providing 

infonnation to the tinancial industry, based on our analysis of their own reporting, is a forcemultiplier. 

One of the tools FinCEN uses to report suspicious behaviors possibly related to money 

laundering and terrorist financing threats to industry- and thus generate additional reporting that 

may address these suspicions is our Financial Institution Advisory Program. FinCEN can issue 

public and non-public advisories to alert financial institutions of specific illicit finance risks. 

Advisories often contain illicit activity typologies, red flags to facilitate monitoring, and 

guidance on complying with FinCEN regulations to address threats and vulnerabilities. 

Financial institutions may use this infonnation to enhance their AML monitoring systems for 

more valuable suspicious activity reporting. 

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The threat posed by al-Qaida, the Islamic State of Iraq and Syria (ISIS), their respective branches 

and affiliates, and associated foreign terrorist fighters is a key focus for FinCEN and TFI as a 

whole. The reporting by financial institutions is an essential component in identifying foreign 

terrorist fighters, financial and logistical facilitators, and their methods of moving funds. In May 

2015, FinCEN issued a non-public advisory related to ISIS financing. Following the publication 

of the advisory, financial institutions used FinCEN's 24/7 reporting hotline to notify FinCEN of 

possible terrorist financing activity. This included amendments to previously reported suspicious 

activity where the filer had not realized at the time a potential ISIS connection, as well as new 

reporting of suspicious activity specifically referencing the advisory. It is important to note that 

both large and small financial institutions made reports, which demonstrates the utility of our 

collection process and the seriousness with which the financial industry takes its reporting 

obligations. 

In December 2015, FinCEN issued another non-public advisory to U.S. financial institutions, 

providing some "red flag" indicators to help financial institutions identify and report financial 

transactions that may be associated with foreign terrorist fighters who support ISIS, al-Qaida, 

and their affiliates in Iraq and Syria. The advisory resulted in new terrorist financing-related 

SARs. the amending of past SARs to indicate possible terrorist financing, and more terrorist 

financing tips to FinCEN's 24/7 reporting hotline. 

The suspicious activity that financial institutions have identified based in part on these 

advisories, coupled with their own analyses, generates extremely valuable financial intelligence 

that FinCEN shares with our law enforcement partners. 

Another useful tool tor sharing information is Section 314 of the USA PATRIOT Act. FinCEN 

has placed significant emphasis on our public-private partnerships and on information sharing 

under Section 3!4 of the USA PATRIOT Act. Section 314(a) essentially involves sharing of 

information between financial institutions and government, while Section 3!4(b) involves 

sharing of information among financial institutions themselves. 

FinCEN has a well-established domestic and international program implementing Section 

314(a), which allows FinCEN to request certain information from financial institutions related to 

money laundering and terrorist financing. This authority is used to canvass the financial system 

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27419.008

to identify accounts or transactions at the request of law enforcement. The 3 14(a) process has 

proven to be an effective tool in many law enforcement investigations with 95 percent of the 

3 I 4(a) requests contributing to arrests or indictments. 

Section 314(b) allows financial institutions to voluntarily share information with one another 

under a safe harbor that offers protections from liability in order to better identify and report 

potential money laundering or terrorist activities. While information sharing under the 314(b) 

program is voluntary. it can help financial institutions enhance compliance with their AMLICFT 

obligations. most notably with respect to: 

• Gathering additional information on customers or transactions potentially related to money 

laundering or terrorist financing, including previously unknown accounts. activities, and/or 

associated entities or individuals; 

• Shedding more light upon overall financial trails, especially if they are complex and appear 

to be layered amongst numerous financial institutions. entities, and jurisdictions; 

• Building a more comprehensive and accurate picture of a customer's activities where 

potential money laundering or terrorist financing is suspected, allowing for more precise 

decision-making in due diligence and transaction monitoring; 

• Alerting other participating financial institutions to customers whose suspicious activities 

those institutions may not have been previously aware; 

• Facilitating the filing of more comprehensive SARs than would otherwise be filed in the 

absence of 314(b) information sharing; 

• Identifying and aiding in the detection of money laundering and terrorist financing methods 

and schemes; and 

• Facilitating efficient SAR reporting decisions by enabling financial institutions to obtain a 

more complete picture of activity through the voluntary information sharing process. 

One issue frequently noted by industry regarding information sharing is the scope of their safe 

harbor for information sharing under Section 314(b ). The statute currently provides a safe 

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harbor from liability for disclosing infonnation under Section 314(b) for activities that may 

involve terrorist actions or money laundering activities. Activities that arc the predicates for 

money laundering, like fraud, drug trafficking, cybcrcrimes, and others, arc not explicitly 

included in the safe harbor. FinCEN issued guidance on the expansive scope of permissible 

information sharing covered by Section 314(b) safe harbor in 2009 .. 

In addition to close collaboration with domestic partners, FinCEN works to establish and 

strengthen mechanisms f(Jr the exchange of information globally, and to engage with, encourage, 

and support international partners in taking necessary steps to construct regimes to combat 

money laundering, terrorist financing, and other financial crimes. FinCEN responds to requests 

from FlUs that are members of the Egmont Group and acts as a conduit for requests from 

domestic law enforcement to foreign FlUs. We also proactively share information with this 

global network of FlUs. By leveraging the network of more than 1 50 FlUs globally to exchange 

valuable financial intelligence, we are able to work together to combat terrorist financing and 

money laundering threats across jurisdictional boundaries. 

New and Evolving Money Laundering and Terrorist Financing Challenges 

To effectively counter money laundering and the financing of terrorism, we must understand the 

threats, risks, and vulnerabilities posed to the U.S. and global financial systems by the broad 

array of illicit financial activity. We must keep a constant watch for new and emerging 

challenges and threats and be more creative in using our existing authorities and exploring new 

tools that will aid in the fight against money laundering and terrorist financing. I would like to 

highlight three focus areas: real estate, virtual currency, and cybcrsecurity. 

Real Estate 

FinCEN is working actively to address money laundering and terrorist financing risks in the real 

estate sector. FinCEN has had longstanding concerns that ''all-cash" real estate transactions, i.e., 

those without bank financing, which arc largely outside the scope of most existing AML 

requirements, may present money laundering vulnerabilities, particularly where a purchaser uses 

a shell company to conceal the true buyer. FinCEN issued Geographic Targeting Orders in 

January 2016 covering the Borough ofManhattan in New York, and Miami, Florida, to further 

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27419.010

evaluate the extent of this potential money laundering vulnerability. These GTOs required 

certain U.S. title insurance companies to record and report the beneficial ownership information 

oflegal entities making "all-cash" purchases of high-value residential real estate in these two 

geographic areas. In July 2016, FinCEN renewed the GTOs and extended coverage to additional 

areas in New York City, South Florida, California, and Texas. The GTOs, including the 

extended coverage, were renewed in February 2017. 

At the time of the most recent renewal, approximately 30 percent of the real estate transactions 

reported under the GTOs involved a beneficial owner or purchaser representative that also had 

previously been the subject of a SAR. In other words, the beneficial owners or purchaser 

representatives in a significant portion of transactions reported under the GTO had been 

previously connected to suspicious activity. As a result of the attention generated by the GTOs, 

we have seen additional SAR filings related to potential money laundering involving real estate. 

ln total, these SARs, along with the information generated by the GTOs, are advancing law 

enforcement's ability to identify potentially illicit activity and are helping inform FinCEN's 

broader AML approach towards the real estate sector. 

While the GTO authority is a useful tool to obtain additional targeted information to inform 

regulatory and law enforcement efforts, there are significant limitations on the types of 

information that can be collected using a GTO. Under the authorizing statute, such orders may 

only be used to collect infonnation on transactions involving currency or similar monetary 

instruments. Transactions that do not involve such instruments, such as wire transfers, may not 

be covered. When FinCEN works to gather information on transactions that are conducted 

through means other than currency or monetary instruments, as is the case with real estate 

transactions where the use of wires is common in many locations, the data we can gather is more 

limited. 

Virtual Currency 

The global financial industry is experiencing a period of technological innovation and growth 

that also creates new vulnerabilities that FinCEN and our partners must understand to prevent 

gaps in regulation and information collection on terrorist financing and other illicit activity. 

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27419.011

For instance, in the virtual currency space, FinCEN has been at the forefront of engagement that 

balances these interests. [n 2013, FinCEN released interpretive guidance on virtual currencies to 

provide regulatory consistency to a nascent area of the financial industry that implicated 

significant AMLICFT equities. 

Any financial institution, payment system, or medium of exchange has the potential to be 

exploited for money laundering or terrorist financing. Virtual currency is not different in this 

regard. As with all parts of the financial system, FinCEN seeks to understand the specific 

attributes that make virtual currency vulnerable to illicit use, and then employ a smart regulatory 

approach and encourage industry to develop mitigating features in its products. Financial 

institutions that deal in virtual currency must put effective AMLICFT controls in place to protect 

themselves from illicit actors that attempt to exploit identified vulnerabilities. To that end, in 

May 2015, in coordination with federal law enforcement partners, FinCEN assessed the first civil 

monetary penalty against a virtual currency exchanger, Ripple Labs Inc., for failure to register 

with FinCEN as a money services business and implement and maintain an adequate AML 

program designed to protect its production from use by money launderers or terrorist financiers. 

Cybersecurity 

The size, reach, speed, and accessibility of the U.S. financial system make financial institutions 

attractive targets to traditional criminals, cybercriminals, terrorists, and state actors. These actors 

target financial institutions' wcbsites, systems, and employees to steal customer and commercial 

credentials and proprietary infonnation; defraud financial institutions and their customers; or 

disrupt business functions. Financial institutions play an important role in safeguarding 

customers and the financial system from these threats through timely and thorough reporting of 

cyber-events and cyber-related information in SARs. In 2016, FinCEN received more than 

60,000 cyber-related SA Rs describing a range of cyber-enabled financial crimes. 

Improved financial transparency and increased information sharing can help address the 

challenges posed in the cybersccurity domain. FinCEN issued an advisory in October 2016 to 

raise awareness among financial institutions about the intersection between cybcr and AML/CFT 

issues. The advisory clarifies how financial institutions should approach cyber issues as they 

relate to SAR obligations. It also encourages coordination between AML and cybersecurity staff 

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27419.012

to mitigate risks. In addition to the advisory. FinCEN published answers to Frequently Asked 

Questions concerning the liling of related SARs. We are also actively sharing indicators of 

suspicious cyber activity with industry, publishing more than 18,000 indicators since the launch 

of the program in late 2016. 

In September 2016, FinCEN issued an advisory on e-mail compromise fraud schemes. It 

describes a variety of e-mail fraud schemes and details red flags developed in consultation with 

law enforcement, including the Federal Bureau of Investigation and the U.S. Secret Servicethat financial institutions may use to identify and help prevent such frauds. The schemes focus 

on using compromised e-mail accounts to mislead financial institutions and their customers into 

conducting unauthorized wire transfers. In addition to alerting industry to the types of schemes 

to look out for, the advisory encourages rapid communication to law enforcement when a 

fraudulent transaction occurs. Where U.S. businesses or financial institutions quickly alert law 

enforcement FinCEN often has been able to work with its foreign counterparts to assist in the 

return of funds sent overseas by business email compromise schemes. Over the past two years, 

with respect to the illicit overseas transfer ofroughly $491 million brought to our attention, we 

have been able to help in the return of over $275 million. 

FinCEN and law enforcement agencies regularly use BSA data reported by financial institutions 

to initiate investigations, identify and track criminals, and disrupt and dismantle criminal 

networks. FinCEN strives to share actionable infonnation with industry to help financial 

institutions identify and report on cyber-relatcd suspicious activity. FinCEN will continue to 

share information about such threats regularly with our partners in both government and 

industry. 

Conclusion 

The current AMLICFT landscape is complex, dynamic, and requires ongoing adaptation by 

FinCEN and our many partners. As we continue to adjust to ever-evolving threats, we will 

continue to use the tools at our disposal to collect financial intelligence infonnation, analyze it, 

and deploy it in support of FinCEN's mission to safeguard the financial system from illicit usc, 

combat money laundering and terrorist financing, and promote national security. 

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27419.013

Chairman Pearce, Vice Chainnan Pittenger, Ranking Member Perlmutter, and members of the 

Subcommittee, thank you again for the opportunity to testify today and for your continued 

support ofFinCEN's important mission. I look forward to your questions. 

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27419.014

Department of the Treasury 

Financial Crimes Enforcement Network 

Guidance 

FIN-2014-GOOl 

Issued: February 14,2014 

Subject: BSA Expectations Regarding Marijuana-Related Businesses 

The Financial Crimes Enforcement Network ("FinCEN") is issuing guidance to clarify Bank 

Secrecy Act ("BSA") expectations for financial institutions seeking to provide services to 

marijuana-related businesses. FinCEN is issuing this guidance in light of recent state initiatives 

to legalize certain marijuana-related activity and related guidance by the U.S. Department of 

Jnstice.("DOJ") concerning marijuana-related enforcement priorities. This FinCEN guidance 

clarifies how financial institutions can provide services to marijuana-related businesses 

consistent with their BSA obligations, and aligns the information provided by financial 

institutions in BSA reports with federal and state law enforcement priorities. This FinCEN 

guidance should enhance the availability of financial services for, and the financial transparency 

of, marijuana-related businesses. 

Marijuana Laws and Law Enforcement Priorities 

The Controlled Substances Act ("CSA") makes it illegal under federal law to manufacture, 

distribute, or dispense marijuana. 1 Many states impose and enforce similar prohibitions. 

Notwithstanding the federal ban, as of the date of this guidance, 20 states and the District of 

Columbia have legalized certain marijuana-related activity. In light of these developments, U.S. 

Department of.Tustice Deputy Attorney General James M. Cole issued a memorandum (the 

"Cole Memo") to all United States Attorneys providing updated guidance to federal prosecutors 

concerning marijuana enforcement under the CSA2 The Cole Memo guidance applies to all of 

DOJ' s federal enforcement activity, including civil enforcement and criminal investigations and 

prosecutions, concerning marijuana in all states. 

The Cole Memo reiterates Congress's dete1mination that marijuana is a dangerous drug and that 

the illegal distribution and sale of malijuana is a serious crime that provides a significant source 

of revenue to large-scale criminal ente1prises, gangs, and cmiels. The Cole Memo notes that 

DOJ is committed to enforcement of the CSA consistent with those determinations. It also notes 

that DOJ is committed to using its investigative and prosecutorial resources lo address the most 

:Controlled Substances Act, 21 U.S.C. § 801, et seq. 

-James M. Cole, Deputy Attomey General, U.S. Department of Justice, Memorandum for All United States 

Attonwys: Guidance Regarding Marijuana Enforcement (August 29, 2013), available at 

http:/ lwww .justice.gov/iso/opa!rcsourccs/3 0520 J 38291 3 27 56857 46 7 .pdf. 

www.finC'en.gov 
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27419.015

significant threats in the most effective, consistent, and rational way. In furtherance of those 

objectives, the Cole Memo provides guidance to DOJ attorneys and law enforcement to focus 

their enforcement resources on persons or organizations whose conduct interferes with any one 

or more of the following important priorities (the "Cole Memo prioritics"): 3 

• Preventing the distribution of marijuana to minors; 

• Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, 

and cartels; 

Preventing the diversion of marijuana from states where it is legal under state law in some 

form to other states; 

Preventing state-authorized marijuana activity from being used as a cover or pretext for the 

trafficking of other illegal drugs or other illegal activity; 

• Preventing violence and the use of firemms in the cultivation and distribution of marijuana; 

• Preventing drugged driving and the exacerbation of other adverse public health 

consequences associated with marijuana use; 

• Preventing the growing of marijuana on public lands and the attendant public safety and 

environmental dangers posed by marijuana production on public lands; and 

• Preventing marijuana possession or use on federal property. 

Concurrently with this FinCEN !,>Uidancc, Deputy Attorney General Cole is issuing supplemental 

guidance directing that prosecutors also consider these enforcement priorities with respect to 

federal money laundering, unlicensed money transmitter, and BSA offenses predicated on 

marijuana-related violations of the CSA. 4 

Providing Financial Services to Marijuana-Related Businesses 

This FinCEN guidance clarifies how financial institutions can provide services to marijuanarelated businesses consistent with their BSA obligations. In general, the decision to open, close, 

or refuse any particular account or relationship should be made by each financial institution 

based on a number of factors specific to that institution. These factors may include its particular 

business objectives, an evaluation of the risks associated with offering a particular product or 

service, and its capacity to manage those risks effectively. Thorough customer due diligence is a 

critical aspect of making this assessment. 

In assessing the risk of providing services to a marijuana-related business, a financial institution 

should conduct customer due diligence that includes: (i) verifYing with the appropriate state 

authorities whether the business is duly licensed and registered; (ii) reviewing the license 

application (and related documentation) submitted by the business for obtaining a state license to 

operate its marijuana-related business; (iii) requesting from state licensing and enforcement 

authorities available information about the business and related parties; (iv) developing an 

understanding of the nonnal and expected activity for the business, including the types of 

3 The Cole Memo notes that these enforcement priorities are listed in general terms; each encompasses a variety of 

conduct that may merit civil or criminal enforcement of the CSA. 4 James M. Cole, Deputy Attorney General, U.S. Department of Justice, Memorandum for All United States 

Attorneys: Guidance Regarding Mm·ijuana Related Financial Crimes (Febmary 14, 2014). 

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27419.016

products to be sold and the type of customers to be served (e.g., medical versus recreational 

customers); (v) ongoing monitoring of publicly available sources for adverse infommtion about 

the business and related parties; (vi) ongoing monitoring for suspicious activity, including for 

any of the red flags described in this guidance; and (vii) refreshing infonnation obtained as part 

of customer due diligence on a periodic basis and commensurate with the risk With respect to 

information regarding state licensure obtained in connection with such customer due diligence, a 

financial institution may reasonably rely on the accuracy of information provided by state 

licensing authorities, where states make such information available. 

As part of its customer due diligence, a financial institution should consider whether a 

marijuana-related business implicates one of the Cole Memo priorities or violates state law. This 

is a particularly important factor for a financial institution to consider when assessing the risk of 

providing fmancial services to a marijuana-related business. Considering this factor also enables 

the financial institution to provide information in BSA reports pertinent to law enforcement's 

priorities. A financial institution that decides to provide frnancial services to a marijuana-related 

business would be required to file suspicious activity reports ("SARs") as described below. 

Filing Suspicious Activity Reports on Marijuana-Related Businesses 

The obligation to file a SARis unaffected by any state law that legalizes marijuana-related 

activity. A fmancial institution is required to [J]e a SAR if, consistent with FinCEN regulations, 

the financial institution knows, suspects, or has reason to suspect that a transaction conducted or 

attempted by, at, or through the financial institution: (i) involves funds derived from illegal 

activity or is an attempt to disguise funds derived from illegal activity; (ii) is designed to evade 

regulations promulgated under the BSA, or (iii) lacks a business or apparent lawful purpose. 5 

Because federal Jaw prohibits the distribution and sale of marijuana, financial transactions 

involving a marijuana-related business would generally involve funds derived from illegal 

activity. Therefore, a financial institution is required to file a SAR on activity involving a 

marijuana-related business (including those duly licensed under state law), in accordance with 

this guidance and FinCEN's suspicious activity reporting requirements and related thresholds. 

One of the BSA 's purposes is to require financial institutions to file reports that are highly useful 

in criminal investigations and proceedings. The guidance below furthers this objective by 

assisting financial institutions in determining how to file a SAR that facilitates law 

enforcement's access to information pertinent to a priority. 

"Marijuana Limited" SAR .filings 

A financial institution providing fmancial services to a marijuana-related business that it 

reasonably believes, based on its customer due diligence, does not implicate one of the Cole 

Memo priorities or violate state law should file a "Marijuana Limited" SAR The content of this 

5 See, e.g,, 31 CFR § 1020.320. Financial institutions shall file with FinCEN, to the extent and in the manner 

required, a report of any suspicious transaction relevant to a possible violation oflaw or regulation, A financial 

institution may also file with FinCEN a SAR with respect to any suspicious transaction that it believes is relevant to 

the possible violation of any law or regulation but whose reporting is not required by FinCEN regulations. 

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SAR should be limited to the following information: (i) identifying information of the subject 

and related parties; (ii) addresses of the subject and related parties; (iii) the fact that the filing 

institution is filing the SAR solely because the subject is engaged in a marijuana-related 

business; and (iv) the fact that no additional suspicious activity has been identified. Financial 

institutions should use the term "MARIJUANA LIMITED" in the narrative section. 

A financial institution should follow FinCEN's existing guidance on the timing of filing 

continuing activity reports for the same activity initially rep01tcd on a "Marijuana Limited" 

SAR. 6 The continuing activity report may contain the same limited content as the initial SAR, 

plus details about the amount of deposits, withdrawals, and transfers in the account since the last 

SAR. However, if, in the course of conducting customer due diligence (including ongoing 

monitoring for red flags), the financial institution detects changes in activity that potentially 

implicate one of the Cole Memo priorities or violate state law, the financial institution should tile 

a "Marijuana Priority" SAR. 

"Marijuana Priority" SAR Filings 

A financial institution filing a SAR on a marijuana-related business that it reasonably believes, 

based on its customer due diligence, implicates one of the Cole Memo priorities or violates state 

law should file a "Marijuana Priority" SAR. The content of this SAR should include 

comprehensive detail in accordance with existing regulations and guidance. Details particularly 

relevant to law enforcement in this context include: (i) identifying infonnation of the subject and 

related parties; (ii) addresses of the subject and related parties; (iii) details regarding the 

enforcement priorities the financial institution believes have been implicated; and (iv) dates, 

amounts, and other relevant details of financial transactions involved in the suspicious activity. 

Financial institutions should use the term "MARIJUANA PRIORITY" in the narrative section to 

help law enforcement distinguish these SARs7 

"Marijuana Termination" SAR Filings 

If a financial institution deems it necessary to terminate a relationship with a marijuana-related 

business in order to maintain an effective anti-money laundering compliance program, it should 

6 Frequently Asked Questions Regarding the FinCEN Suspicious Activity Report (Question #16), available at: 

http://fincen.gov/whatsnew/html/sarjaqs.html (providing guidance on the filing timeframe for submitting a 

continuing activity report). 7 FinCEN recognizes that a financial institution filing a SAR on a marijuana-related business may not always be 

well-positioned to detennine whether the business implicates one of the Cole Memo priorities or violates state law, 

and thus which terms would be most appropriate to include (i.e., uMarijuana Limited" or "Marijuana l)riority"). For 

example, a financial institution could be providing services to another domestic financial institution that, in turn, 

provides financial services to a marijuana-related business. Similarly, a financial institution could be providing 

services to a non-financial customer that provides goods or services to a marijuana-related business (e.g., a 

commercial landlord that leases property to a marijuana-related business). In such circumstances where services are 

being provided indirectly, the financial institution may file SARs based on existing regulations and guidance without 

distinguishing between "Marijuana Limited" and "Marijuana Priority." Whether the financial institution decides to 

provide indirect services to a marijuana-related business is a risk-based decision that depends on a number of factors 

specific to that institution and the relevant circumstances. In making this decision, the institution should consider 

the Cole Memo priorities, to the extent applicable. 

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27419.018

file a SAR and note in the narrative the basis for the termination. Financial institutions should 

usc the term "MARDUANA TERMINATION" in the natrative section. To the extent the 

financial institution becomes aware that the marijuana-related business seeks to move to a 

second financial institution, FinCEN urges the first institution to use Section 314(b) voluntary 

information shruing (if it qualifies) to alert the second financial institution of potential illegal 

activity. See Section 314(b) Fact Sheet for more information8 

Red Flags to Distinguish Priority SARs 

The following red flags indicate that a marijuana-related business may be engaged in activity that 

implicates one of the Cole Memo priorities or violates state law. These red flags indicate only 

possible signs of such activity, and also do not constitute an exhaustive list. It is thus important 

to view any red flag(s) in the context of other indicators and fact.~, such as the financial 

institution's knowledge about the underlying parties obtained through its customer due diligence. 

Furtber, the presence of any of these red flags in a given transaction or bnsiness atrangement 

may indicate a need for additional due diligence, which could include seeking information from 

other involved financial institutions under Section 314(b ). These red flags are based primarily 

upon schemes and typologies described in SARs or identified by our law enforcement and 

regulatory partners, and may be updated in future guidance. 

A customer appears to be using a state-licensed marijuana-related business as a front or 

pretext to launder money derived from other criminal activity (i.e., not related to 

marijuana) or derived from marijuana-related activity not permitted under state law. 

Relevant indicia could include: 

o The business receives substantially more revenue than may reasonably be 

expected given the relevant limitations imposed by the state in which it operates. 

o The business receives substantially more revenue than its local competitors or 

than might be expected given the population demographics. 

o The business is depositing more cash than is commensurate with the amount of 

marijuana-related revenue it is reporting for federal and state lax purposes. 

o The business is unable to demonstrate that its revenue is derived exclusively from 

the sale of marijuana in compliance with state law, as opposed to revenue derived 

from (i) the sale of other illicit drugs, (ii) the sale of marijuana not in compliance 

with state law, or (iii) other illegal activity. 

o The business makes cash deposits or withdrawals over a short period of time that 

are excessive relative to local competitors or the expected activity of the business. 

8 Information Shating Between Financial Institutions: Section 314(b) Fact Sheet, available at: 

http :1/fincen.govistatutes _regs!patriot!pdf!314bfactsheet.pdf 

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o Deposits apparently structured to avoid Currency Transaction Report ("CTR") 

requirements. 

o Rapid movement of funds, such as cash deposits followed by immediate cash 

withdrawals. 

o Deposits by third parties with no apparent connection to the accountholdcr. 

o Excessive commingling of fhnds with the personal account of the business's 

owner(s) or manager(s), or with accounts of seemingly unrelated businesses. 

o Individuals conducting transactions for the business appear to be acting on behalf 

of other, undisclosed parties of interest. 

o Financial statements provided by the business to the financial institution are 

inconsistent with aetna! account activity. 

o A surge in activity by third parties offering goods or services to marijuana-related 

businesses, such as equipment suppliers or shipping servicers. 

• The business is unable to produce satisfactory documentation or evidence to demonstrate 

that it is duly licensed and operating consistently with state law. 

The business is unable to demonstrate the legitimate source of significant outside 

investments. 

A customer seeks to conceal or disguise involvement in marijuana-related business 

activity. For example, the customer may be using a business with a non-descript name 

(e.g., a "consulting," "holding," or "management" company) that purports to engage in 

commercial activity unrelated to marijuana, but is depositing cash that smells like 

marijuana. 

Review of publicly available sources and databases about the business, its owner(s), 

manager( s ), or other related parties, reveal negative information, such as a criminal 

record, involvement in the illegal purchase or sale of drugs, violence, or other potential 

connections to illicit activity. 

The business, its owner(s), manager(s), or other related parties are, or have been, subject 

to an enforcement action by the state or local authorities responsible for administering or 

enforcing marijuana-related laws or regulations. 

A marijuana-related business engages in international or interstate activity, including by 

receiving cash deposits from locations outside the state in which the business operates, 

making or receiving frequent or large interstate transfers, or otherwise transacting with 

persons or entities located in different states or countries. 

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The owncr(s) or manager(s) of a marijuana-related business reside outside the state in 

which the business is located. 

A marijuana-related business is located on federal property or the ma:tijuana sold by the 

business was grown on federal property. 

A marijuana-related business's proximity to a school is not compliant with state law. 

A marijuana-related business purporting to be a "non-profit" is engaged in commercial 

activity inconsistent with that classification, or is making excessive payments to its 

manager(s) or employec(s). 

Currency Transaction Reports and Form 8300's 

Financial institutions and other persons subject to FinCEN's regulations must report currency 

n·ansactions in connection with marijuana-related businesses the same as they would in any other 

context, consistent with existing regulations and with the same thresholds that apply. For 

cxa:tnplc, banks and money services businesses would need to file CTRs on the receipt or 

withdrawal by any person of more than $10,000 in cash per day. Similarly, any person or entity 

engaged in a non-fmancial trade or business would need to report transactions in which they 

receive more than $10,000 in cash and other monetary instruments for the purchase of goods or 

services on FinCEN Fonn 8300 (Report of Cash Payments Over $10,000 Received in a Trade or 

Business). A business engaged in marijuana-related activity may not be treated as a non-listed 

business under 31 C.F.R. § 1 020.315(e)(8), and therefore, is not eligible for consideration for an 

exemption with respect to a bank's CTR obligations under 31 C.F.R. § 1020.315(b)(6). 

***** 

FinCEN' s enforcement priorities in connection with this guidance will focus on matters of 

systemic or significant failures, and not isolated lapses in technical compliance. Financial 

institutions with questions about this guidance are encouraged to contact FinCEN's Resource 

Center at (800) 767-2825, where industry questions can be addressed and monitored for the 

purpose of providing any necessary additional guidance. 

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Questions for the Record for FinCEN Acting Director Jamal El-Hindi 

House Committee on Financial Services 

Hearing before the Subcommittee on Terrorism and Illicit Finance entitled 

"Safeguarding the Financial System from Terrorist Financing" 

Thursday, Apri/27, 2017 

Questions for the Record Submission from Representative Steve Pearce (NM-2) 

Analysis and Analytics 

Question 1: Can you describe FinCEN's analytic process for financial intelligence? 

Response: FinCEN analyzes the reporting it receives and produces strategic and tactical 

financial intelligence for stakeholders, including Treasury policymakers, law enforcement, 

regulators, FinCEN's counterpart foreign financial intelligence units (FIUs), other U.S. agency 

partners, and the regulated industry. Most ofFinCEN's analytic work is collaborative and 

combines reporting to FinCEN with open source information, data, and reporting from law 

enforcement, other U.S. government agencies, and foreign partners to identifY vulnerabilities and 

risks to the U.S. financial system. Further, FinCEN analyzes emerging financial crime trends, 

cybercrime, terrorist financing and money laundering networks, regulatory violations, and other 

illicit finance methodologies. 

Question 2: Is the Intelligence Division the only part of FinCEN that conducts analysis, or 

are there other parts ofFinCEN that conduct analysis? 

Response: FinCEN's Intelligence Division focuses primarily on analysis, with other divisions 

also performing analysis to inform specific actions. For example, FinCEN's Enforcement 

Division undertakes various forms of analysis in the development of specific enforcement 

matters and investigations, including actions under Section 311 of the USA PATRIOT Act. 

Analysis is coordinated across FinCEN. 

Question 3: Can you explain your work with DARPA, or the Defense Advanced Research 

Projects Agency, to develop large scale data analysis or open source tools to utilize your 

BSAdata? 

Response: FinCEN has partnered with Defense Advanced Research Projects Agency (DARPA) 

to develop specific data analytic tools and techniques to enhance our organization's advanced 

analytic capabilities. Over the past two years, FinCEN has worked with DARPA to develop and 

transition three cutting edge, open-source analytic tools into the FinCEN environment. The tools 

have provided FinCEN with the capability to conduct geospatial analysis of Bank Secrecy Act 

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(BSA) filing patterns by countries and regions, explore and analyze illicit finance networks, and 

visualize transactional flow data to trace money movements by illicit actors. 

A. How often are these tools used? 

Response: The DARPA tools are available to all FinCEN users (with appropriate mission need) 

and are used on a varying basis to support projects which benefit from the specific analytic 

technique the tool(s) provide. DARPA tools have enabled useful analytic products, such as a 

broad geographic trends and geospatial analysis to benchmark financial activity 

Question 4: What types of advanced data analytics programs does FinCEN utilize 

currently? What is planned in the immediate future? 

Response: FinCEN's analytical program has a "toolkit" of tools and capabilities to span the 

multiple types of analysis required to perform FinCEN's mission. Tools and capabilities include: 

fast response tactical queries with ambiguous searching, multi-step data manipulation and 

analysis methods, forecasting and prediction, anomaly detection, network visualization, and 

automated rules engines. Near-term future efforts include expanding the types and complexity of 

the models to detect illicit activity, emerging trends, and anomalies; expansion of unstructured 

data capabilities; and, expanding processing technology and capacity for "Big Data" and 

machine analysis. 

Question 5: Does FiuCEN report on the commonalities found between SARs, namely these 

common items? 

o Addresses 

o ID numbers 

o Phone numbers 

o E-mail addresses 

o IP addresses 

Response: Y cs, FinCEN identifies common indicators, such as those identified above, in its 

analysis of financial crimes. 

A. Does FinCEN proactively analyze or cross-reference SARs for the above 

common attributes and share with law enforcement for further investigations? 

Response: Yes, FinCEN proactively analyzes and cross-references indicators reported in 

suspicious activity reports (SAR) for their commonalities, producing network analyses in 

collaboration with law enforcement partners. 

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Question 6: You mentioned in your written testimony that FinCEN receives 55,000 new 

filings each day, and that FinCEN collects more than just routinely filed BSA data, like 

Geographic Targeting Orders, 314(a) requests, and Foreign Financial Agency data. Does 

all of that non-routine data also get incorporated into the same database as the BSA data so 

that law enforcement and others with FinCEN access can search all of that data? 

Response: The "routine" BSA data is available to law enforcement and regulators generally 

within one business day of receipt. The "non-routine" data is made available to law enforcement 

based on the reason and type of request. For example, Geographic Targeting Orders (GTO) 

usually require filing on current BSA forms which are made available to law enforcement the 

same as "routine" BSA data. 314(a) requests are initiated and justified for a particular law 

enforcement case. When data is received from the financial institution(s), the law enforcement 

requestor is informed new information is available and the information is provided. Foreign 

Financial Agency (FFA) data is shared with the partner stakeholders associated with the effort, 

but not to all state, local, and federal law enforcement. 

Question 7: What software tools does FiuCEN use to conduct its analysis? 

Response: FinCEN uses a variety of software tools. Due to sensitivities with sources and 

methods, we would be happy to discuss the portfolio of tools and capabilities in a non-public 

venue. 

A. Please describe the amounts of money spent for each of the past five fiscal years, 

including FY 2017, which FinCEN spends on analytic tool development, support, 

and upkeep, including money spent for contractors. 

Response: FinCEN's Information Technology (IT) Modernization program was established to 

securely collect, store, and disseminate BSA data and is the foundation for FinCEN's analytics. 

Annually, FinCEN allocates approximately $1 million in development dollars to invest in new 

analytic and/or data sharing capabilities, and spends around $300,000 in maintenance costs for 

software and tools. In addition, FinCEN spends approximately $7 million in contractor support 

costs ($3.6 million for technical support, security integration, and operations; $4.2 million for 

direct analytic project support). 

B. Does FinCEN's technology posture allow for the use of new analytic tools or 

incorporation of new data sources? 

Response: Yes, FinCEN' s architecture was designed to be flexible to accommodate our 

constantly changing threat environment and incorporate new tools or data sources as the need for 

new business capabilities are identified. 

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C. Does FinCEN identify, test, evaluate, deploy, and utilize new data analysis tools, 

techniques, and best practices from commercial or other sources? If so, how? 

Response: FinCEN uses a combination of commercially available and custom developed 

analytic tools and capabilities to support the analysis ofBSA data. FinCEN continuously 

evaluates emerging data analytics technologies to determine if there are new capabilities that 

would assist the organization in exploiting the information reported in BSA filings. FinCEN 

conducts market research and assessment of peer agencies and industry to identify tools, 

techniques, and best practices. 

D. Which division is responsible for the identification, testing, evaluation, 

deployment, and utilization of new analytic tools, techniques, and best practices? 

Response: FinCEN's Intelligence, Enforcement, and Technology Divisions arc responsible for 

working together to identify, test, evaluate, and deploy new analytic technologies. Other 

divisions are incorporated into this process on an as-needed basis. 

E. Describe the process and time required to deploy and use an analytic tool, 

technique, or best practice from the initial identification to its widespread use. 

Response: New analytical techniques and best practices can be deployed very quickly, in some 

cases on the order of days, after the techniques/practices are approved. All such tools go through 

a system development lifecycle. Depending on the technology and the impact to other systems, 

potential security risks, and infrastructure changes, new capabilities can be deployed very rapidly 

or may take several months to fully deploy. 

F. Does FinCEN collaborate on analysis and the acquisition of technologies and 

analytic tools with other parts of the Treasury Department that engage in 

similar analysis of the BSA, such as the Internal Revenue Service? 

Response: FinCEN is in collaboration with other parts of the Treasury Department through 

FinCEN's Data Management Council, Treasury's Chief Information Officer, and the Office of 

Terrorism and Financial Intelligence (TFI). The Data Management Council includes FinCEN's 

regulator and law enforcement stakeholders (including the Office of the Comptroller of the 

Currency and the Internal Revenue Service) and provides input on BSA data and system 

features. The Treasury interaction includes direction, oversight, and enterprise architecture 

initiatives across the Bureaus. 

Question 8: What training or assistance currently is provided to analysts regarding 

FinCEN's analytic tools? 

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Response: Training is provided through on-line training, job aids, "brown-bag" sessions, and 

formal classes and seminars. In addition, contractor support is provided for both functional 

support questions such as "How do I?" as well as data science modeling. 

FinCEN has an extensive Analyst career-path training in addition to the training and assistance 

for the tools. 

Question 9: Do the analytic tools currently used at FinCEN provide any ofthe following 

capabilities? 

o Trend analysis and discovery 

o Real-time monitoring and alerts 

o ~achinelearning 

o Entity resolution and data matching 

o Searches of all FinCEN data 

o Searches of non-FinCEN data, such as media reporting, commercial 

databases, and open source data 

o Ability to add/upload data 

o Ability to share data and analyses between analysts 

Response: Yes, FinCEN's analytical tools provide trend analysis and discovery; real-time 

monitoring and alerts; machine learning; entity resolution and data matching; search capability 

for FinCEN data and non-FinCEN data sources; and the ability to upload and share data. The 

level of capacity varies. Due to sensitive sources and methods issues, we would be happy to 

discuss our specific analytical tools and capabilities with you in a non-public venue. 

Question 10: Please describe the analytic production cycle, particularly the amount of time 

required to conduct adequate research using FinCEN's current suite of analytic tools. 

Response: FinCEN's analytic production cycle relies on financial intelligence requirements 

generated by FinCEN priority issues and the needs of our various stakeholders in the law 

enforcement, intelligence, policy, and industry communities. FinCEN's analyst teams use these 

requirements to collect information from the BSA databases and conduct additional research 

using all of the information sources available to the bureau, including law enforcement 

databases, commercial data, and other government information. 

Depending on the specific topic, FinCEN analysts author analytic products ranging from tactical 

case support to strategic assessments of an illicit finance threat or vulnerability. Some products 

may move through this analytic cycle in a matter of a few days or weeks, while more complex 

assessments involving large volumes of data may require additional time to complete. 

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Question 11: Does FinCEN currently have access to all the tools, data sources, information 

systems, and facilities that it needs to cond net its analytic mission effectively? 

If not, what else does FinCEN need? 

o Tools'! 

o Data sources? 

o Information systems? 

o Facilities? 

• What steps is FinCEN taking to address these gaps? 

Response: FinCEN has broad access to tools, data sources, information systems and facilities to 

conduct its analytic mission. In addition, FinCEN works to continually adapt to emerging 

threats and requirements as they evolve. This continual process facilitates the ability to adjust 

resources, introduce new techniques, tools, data sources, and support mechanisms. One of 

FinCEN's strengths is being agile with the ability to prioritize and execute initiatives. 

Question 12: Does FinCEN incorporate other data sources into its analysis, such as open 

source data, commercial databases, and classified information? 

Response: Yes, FinCEN incorporates various data sources into its analysis, including open 

source data, commercial databases and classified information. 

A. How does FinCEN access classified information? 

Response: FinCEN has access to classified systems, and we would be happy to provide 

additional detail with regard to how we access such systems in a non-public setting. 

B. Does FinCEN rely on the Office of Intelligence and Analysis for classified 

research, or is FinCEN able to conduct its own classified research? 

Response: Both. FinCEN staff with access to classified systems conduct their own research. 

FinCEN also works with the Office of Intelligence and Analysis (OIA) on classified research. 

Question 13: How does FinCEN choose it~ business rules? 

Response: FinCEN employs automated business rules to combat our most significant money 

laundering and terrorist financing threats. The rules are developed using subject matter expertise 

and information collected from FinCEN analysts, law enforcement partners, and external 

stakeholders. The rules align with FinCEN's six priority areas including transnational security 

threats, cybercrime, transnational organized crime, significant fraud, compromised financial 

institutions, and third party money launderers. 

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A. How many rules are currently run? What are the search terms for these 

particular rules'! 

Response: Since 2014, FinCEN has deployed more than 95 business rules, of which 62 are 

currently active. The rules range in complexity from traditional "watch list" rules designed to 

identify known illicit actors to complex, multi-variable, weighted rule sets capable of identifying 

emerging illicit activity. The rules search the BSA reporting for key terms, entities, and 

typologies. 

B. Do these rules inform Flash Reports? 

Response: FinCEN has a number of business rules designed to identify illicit financial activity 

associated with both domestic and international terrorism. These rules form the basis for 

FinCEN's Intelligence Flash Reports. Output from the rules is screened on a daily basis and the 

most valuable intelligence is selected for inclusion in FinCEN's Flash Reports. 

C. How are these reports utilized? Who utilizes them? 

Response: Flash Reports provide critical financial intelligence to FinCEN's domestic law 

enforcement stakeholders, the intelligence community, and FlU partners around the world. 

Terrorist financing-related Flash Reports assist law enforcement efforts aimed at cutting off 

terrorist groups' sources of revenue, preventing terrorist groups' access to the international 

financial system, identifying unknown foreign terrorist fighters, and identifying information 

related to known actors. The Flash Reports direct law enforcement's attention to particular 

reporting in the database. The reports are provided for financial intelligence purposes to alert 

about possible threats and to assist in ongoing investigations. 

D. How is all of this information processed and communicated to law enforcement 

authorities? 

Response: FinCEN communicates the financial intelligence it receives(!) by providing both 

direct access to the BSA filings it receives and (2) by creating a variety of finished products for 

our federal, state, local, tribal, and foreign law enforcement partners. These law enforcement 

partners receive products ranging from brief reports on filings of note to strategic analyses of 

illicit financing methodologies through various mechanisms: encrypted email; through a 

searchable repository on the FinCEN portal; and a FinCEN special interest group on the Federal 

Bureau of investigation's (FBI) Law Enforcement Enterprise Portal (LEEP). FinCEN also works 

closely with Treasury Department's intelligence community component, OIA, to disseminate 

information from select BSA reports to national security partners via classified networks. Finally, 

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FinCEN oversees the receipt and processing of several thousands of requests for information and 

information exchanges in support of our law enforcement, regulatory, national security, and 

international partners (i.e., foreign FlUs) via the Egmont Secure Web (ESW) annually. 

E. How many "queries" or requests for information does FinCEN staff handle each 

day? 

Response: In FY 2017, FinCEN received: 

1,017 (3.9 per day) Requests for Information from Egmont FIU partners 

1,142 ( 4.4 per day) Spontaneous Disclosures of Information from Egmont FIU 

partners 

1,882 (7.2 per day) Requests for Suspicious Transaction Report Supporting 

Documents from U.S. Requesters (e.g., law enforcement, regulators, FinCEN) and 

Egmont FIU Partners 

413 (1.6 per day) Requests from U.S. Requesters to Egmont FIU partners 

396 (1.5 per day) 314(a) requests 

38 (.2 per day) Requests for BSA Certified Records 

I 8, 130 ( 69 per day) Regulatory Guidance Inquiries 

F. How do outside agencies, like the U.S. Customs and Border Patrol (CBP) or the 

Federal Bureau oflnvestigation (FBI), utilize Flash Reports? 

Response: Flash Reports are one method by which FinCEN proactively disseminates BSA 

analysis to our partners. These reports are intended to serve as lead information for our partners, 

including CBP and FBI. 

Question 14: How many finished intelligence products does FinCEN produce? How are 

those disseminated to other agencies? Which agencies does FinCEN share its finished 

products with'! 

Response: In FY 2017, FinCEN's Intelligence Division produced 2,950 products of all types, 

including, but not limited to, Intelligence Flashes, Egmont (foreign FIU) responses, 238 The 

Committee on Foreign Investment in the United States (CFIUS) responses, Investigative Memos, 

Intelligence Assessments, and Executive Alerts. The total number ofintelligence Division 

products produced in FY 2016 was 2,931. FinCEN disseminates these products to a broad list of 

customers through various mechanisms: (J) encrypted email; (2) through a searchable repository 

available to all11,000 users of the FinCEN portal; (3) via the ESW to our 156 international 

partner FIUs; and (4) via a FinCEN special interest group on the FBI's LEEP. FinCEN also 

works closely with OIA, Treasury Department's intelligence community component, to 

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disseminate information from select BSA reports to our national security partners via classified 

networks. We currently share our products with federal law enforcement agencies and inspectors 

general; regulatory agencies; state, local, and tribal law enforcement organizations; the U.S. 

intelligence cormnunity; and international partners. 

Question 15: Please provide the Subcommittee with examples ofFinCEN's analytic 

product line, including Flash Reports. The Subcommittee would be interested in reports 

examining terrorist financing, cyber-crime, virtual currencies, drug trafficking, human 

trafficking, transnational organized crime, and other illicit finance methodologies. 

Response: Due to the sensitive nature of BSA information, we would be happy to discuss these 

products in a non-public venue. 

Question 16: We hear a lot about data analytics. How does FinCEN plan to incorporate 

some of today's modern technologies? 

Response: As part of the technology roadmap and review process, FinCEN identifies, evaluates, 

pilots, and implements new technologies. Some of those technologies are adapted from external 

agencies such as DARPA (please see response to Question 3). FinCEN is on-track to be the first 

Treasury Department Bureau using big data technologies in a production system in the classified 

cloud environment. 

Question 17: Has FinCEN met with any outside organizations that use artificial 

intelligence instead of rules based software to identify anomalous behavior? 

Response: Yes, FinCEN has met with external organizations and attended industry meetings 

regarding the application of artificial intelligence (AI). The evolution of rules based, to machine 

learning, to potential AI is part of the technology roadmap for analytical capabilities. 

Question 18: What work- analytic, regulatory, and otherwise- is FinCEN doing, or does it 

anticipate doing, on emerging payment systems and virtual currencies? 

Response: FinCEN actively studies emerging payment systems and virtual currencies to identify 

how they may be exploited for financial crime, terrorist financing, and money laundering. 

FinCEN analysts are recognized as thought leaders on the potential illicit uses of new financial 

technologies, and are frequently called upon to provide training on emerging payment and virtual 

currency issues to federal law enforcement agencies, other U.S. govemment agencies, and 

international partners. FinCEN has supported several dozen law enforcement cases involving the 

exploitation of virtual currency systems, and publishes periodic analytic reports assessing 

criminal methods and vulnerabilities in emerging payment systems. 

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Emerging payment systems and convertible virtual currencies are covered by the general 

recordkeeping, reporting, and transaction monitoring requirements applicable to money services 

businesses (MSBs). In 2013, FinCEN provided guidance on how virtual currency 

administrators, exchangers, and users would be treated under the BSA. Since that time, FinCEN 

has continued to conduct outreach, provide guidance, and issue administrative rulings as this 

sector evolves. FinCEN continues to supervise virtual currency providers and exchangers. 

FinCEN has also aggressively enforced its authorities in the virtual currency space. For 

example, in coordination with the U.S. Attorney's Office for the Northern District of California, 

FinCEN assessed a $110,003,314 civil money penalty on July 27, 2017, against Canton Business 

Corporation (BTC-e ), an internet-based, foreign-located money transmitter that exchanged fiat 

and convertible virtual currencies for willfully violating U.S. anti-money laundering laws. BTCe facilitated millions of dollars of transactions involving ransom ware, computer hacking, identity 

theft, tax refund fraud schemes, public corruption, and drug trafficking while collecting little to 

no information on its customers. BTC-e and one of its operators were also indicted in July 2017 

for operating an unlicensed money services business, money laundering, and related crimes. 

Office of Intelligence and Analysis 

Question 19: Does the Office oflntelligence and Analysis (OIA) provide support to 

FinCEN? How? Please provide specific examples of the support provided by OIAanalytic and non-analytic- to FinCEN. 

Response: FinCEN works closely with OIA, Treasury's intelligence community element, to 

disseminate information from select BSA reports to our national security partners via classified 

networks. The Management Division works closely with OIA on security matters, and OIA is 

consulted on a general basis with respect to all Treasury interactions with the U.S. intelligence 

community. For example, OIA is responsible for administering access controls that make it 

possible for other parts of Treasury, including FinCEN, to access various sets of classified 

information. OIA also provides intelligence support to FinCEN's Enforcement Division in 

connection with its investigations of foreign money laundering threats. In addition, OIA provides 

FinCEN senior leadership with daily intelligence readbooks, to include OIA intelligence 

products of interest. 

A. Is the support that OIA currently provides to FinCEN sufficient for FinCEN's 

needs? 

Response: FinCEN and OIA have been working on ensuring sufficient levels ofFinCEN access 

to, and use of, classified information to add context to FinCEN's analysis ofBSAinformation, 

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while at the same time addressing appropriate safeguards with respect to access to classified 

information generally. 

B. What other support from OIA does FinCEN need, if any? 

Response: OIA's analytic products provide FinCEN and others with greater context for pursuing 

global money launderers and terrorist financiers. OIA also drives IC collection to support 

Treasury efforts, including those ofFinCEN. 

Question 20: In a letter to Michael Fitzpatrick, then-Chairman of the and House Financial 

Services Committee's Task Force to Investigate Terrorism Finance, and Sean Duffy, thenChairman of the Subcommittee on Oversight and Investigations, the Treasury 

Department's Office of Legislative Affairs stated that the purpose of the proposed 

realignment of 15 personnel with BSA analytical experience from FinCEN to OIA was 

being undertaken for the purpose of providing FinCEN better support from the intelligence 

community and more sophisticated analysis. What sophisticated analysis and support does 

OIA provide to FinCEN? 

Response: OIA's analytic production is informed by the all-source intelligence analysis it 

undertakes on a wide range of topics of interest to Treasury senior policymakers, including those 

at FinCEN. FinCEN personnel with appropriate clearances have access to OIA products on 

Treasury's classified portal. OIA is also postured to provide tailored support to FinCEN to 

address key intelligence questions that pertain to FinCEN's mission. 

A. What is the current status of this realignment? 

Response: No FinCEN personnel were ultimately detailed to OIA in connection with the 

realignment. 

Ouestion 21: Docs FinCEN provide support to OIA? How? Please provide specific 

examples of support provided to OIA- analytic and non-analytic- from FinCEN. 

Response: FinCEN provides large BSA dataset information to OIA, and OIA has access to 

FinCEN Query to do research on most issues. Under certain circumstances, and in accordance 

with 31 U.S.C. 5319 and 31 U.S. C. 310, FinCEN provides to OIA information obtained pursuant 

to FinCEN's authorities. Moreover, FinCEN in collaboration with TFI created a training series 

on illicit finance methodologies and emerging payment systems designed for OIA and TFI 

officers. This effort benefits from FinCEN's continued research on both legacy and emerging 

payment systems, resulting in written products and complimentary training modules. The TFItargeted series offers on-site presentations geared to threat finance issues and problem sets of 

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interest to TFI analysts, policy makers, and other full-time employees. FinCEN continues to 

work with TFI and OIA to solicit ideas for future research and products, and to support expertise 

building within and beyond TFI. 

Question 22: Does FinCEN still intend to pursue this realignment of intelligence analysts to 

OIA? If so, why has FinCEN asked for $1.5 million for contractor support, when it can 

afford to lose 15 FTE analysts? 

Response: As noted above, no FinCEN personnel were ultimately detailed to OIA in connection 

with tbe proposed realignment. FinCEN does not intend to pursue the proposed realignment. 

Question 23: Has FinCEN notified Secretary Mnuchin and other officials of the new 

administration about the proposed realignment? Does FinCEN intend to do this? 

Response: Treasury Department's current leadership, including the Secretary, are generally 

aware of the proposals regarding last year's proposed realignment. 

Question 24: You mentioned in your oral testimony that the goal of the realignment was 

for TFI to work better together. Please describe how FinCEN currently collaborates with 

OIA, OFAC, TFFC, and the TFI Front Office, including details about its participation in 

Integrated Mission Teams. 

Response: FinCEN works with its sister components reporting to the Under Secretary for 

Terrorism and Financial Intelligence in a number of ways. FinCEN's data and analysis and 

FinCEN's tools are used together with the tools and efforts of the other components on highprofile priority issues such as those pertaining to Iran, North Korea, other countries or regimes of 

concern, and terrorism. Integrated teams involving personnel from multiple TFI components 

work to ensure greater coordination and collaboration of efforts on such topics. FinCEN also 

works with the Office of Terrorist Financing and Financial Crimes (TFFC) on broader regulatory 

and policy issues. The TFI Front Office works to ensure that all component parts are provided 

with strategic direction on matters of greatest concern. A key element ofTFI's continued success 

in addressing national security challenges is ensuring that the various components are properly 

integrated, working closely together, and deploying the tools and authorities best suited to each 

challenge. 

A. How would sending 15 intelligence analysts impact the ability of FinCEN's 

Intelligence Division to conduct its mission? Would FinCEN need to reduce its 

analytic production? 

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Response: As noted above, no FinCEN personnel were ultimately detailed to OIA in connection 

with the proposed realignment. 

Question 25: The Subcommittee understands that since at least September 2016 there has 

been a significant decline in the numbers of security clearances, classified network 

accounts, and access to classified research, analysis, and collaboration tools granted by OIA 

to FinCEN. Is this still the case? 

Response: Since September 2016, the total number of FinCEN personnel that OIA has 

indoctrinated into SCI has increased by approximately 16% (from 153 to 178 personnel), and the 

total number of accounts for Treasury's Foreign Intelligence Network (TS/SCI computer 

network) that OIA has granted to FinCEN personnel has grown by 32% (from 75 to 99 

accounts). 

A. You just testified that roughly half of the 70 vacancies at FinCEN are in the 

"active recruitment process" but awaiting security clearance processing. What 

is the reason for this slowdown? 

Response: We understand that the National Background Investigation Bureau (NBIB) at the 

Office of Personnel Management is working through a backlog of background 

investigations. The Treasury Department, including FinCEN, is dependent upon NBIB's 

background investigation completions prior to being able to make adjudicative decisions. Once 

the investigations are received from OPM, the median average time FinCEN took to adjudicate 

its collateral clearances in 2016, was 26 days, according to OPM records. 

B. Who made the decision to halt the issuance of new clearances, accounts, and 

accesses? 

Response: Neither OIA nor FinCEN is aware of a decision to halt the issuance of new 

clearances, accounts, or accesses. 

C. How many FinCEN employees have been affected by this decrease? 

Response: As stated earlier, the total number of FinCEN personnel indoctrinated into SCI and 

with TFIN accounts has increased, not decreased, since September 2016. Nine FinCEN 

candidates have accepted tentative job offers and are awaiting security clearances/accesses 

required to onboard. The NBIB security background investigation backlog is impacting 

FinCEN's ability to onboard. 

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D. How many employees have requested clearances, accounts, and access since 

September 2016? How many clearances, classified accounts, and accesses were 

issued of this total? How many clearances, classified accounts, and accesses were 

denied of this total? How many clearances, classified accounts, and accesses are 

still pending of this total? 

Response: 

Accounts Accesses 

(Since Sept 1, 2016) Clearances' (TFIN) (SCI) 

Requested 40 69 94 

Issued 21 63 78 

Pending 18* 6 16 

Denied l 0 0 

As of May 7, 2018 

"'Of the 18 pending: 13 are pending the completion of Office of Personnel Management/National Background Investigations 

Bureau investigative acth,ities; three are pending Office of Security Programs; two are cleared but pending Entry on Duty and 

the issuance of cleaNt.nce 

E. How has the slowdown in these approvals affected FinCEN's analytic and 

enforcement missions? 

Response: All ofFinCEN's divisions and organizations are affected by lengthy background 

investigations necessitated by FinCEN's security clearance requirements. Although FinCEN is 

not at full strength, we utilize appropriated funds for a variety of support contracts that allow us 

to leverage our Federal work force to meet the growing demand for FinCEN data and emerging 

threats to the financial system. These contracts provide case support and functional specialists to 

support a number of Divisions, cyber security experts to respond to the expanding cyber threat, 

human resource expertise to support the hiring surge, and data analysis and expertise support to 

intelligence analysts 

F. What number of staff clearances, accounts, and accesses does FinCEN believe is 

necessary to fulfill its analytic and enforcement missions? 

1 NOTE: FinCEN has historically conducted its own collateral security clearance adjudications with OIA 

adjudicating its SCI access. 

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Response: FinCEN recently conducted a position designation exercise as mandated by the 

Office of the Director of National Intelligence to determine the proper position designations for 

each position required to accomplish FinCEN's mission. 19 positions were downgraded as a 

result of this exercise (e.g. from Top Secret to Secret or Public Trust, or from Secret to Public 

Trust). FinCEN's national security and law enforcement roles necessitate 329 of 339 positions 

to be sensitive, national security positions. 

Question 26: Does FinCEN produce any products or analysis jointly with OIA? 

Response: Although FinCEN and OIA have different primary customers, there are opportunities 

for collaboration in the development of certain products and some overlaps in the customer base. 

For example, both components serve TFI seniors and products may be read externally by similar 

customers. 

Question 27: Has FiuCEN delineated and differentiated its analytic responsibilities with 

those of OIA in a document called Treasury Intelligence Enterprise Management 

Guidelines? 

Response: Former Acting Under Secretary Adam Szubin disseminated guidance across TFI 

regarding Treasury's intelligence activities. The guidance was coordinated with all TFI 

components. The guidance codifies OIA's role and delineates two categories of Treasury 

intelligence activities: those that must be coordinated with OIA and those that are to be 

conducted solely by OIA. 

A. Who initiated this document? 

Response: The guidance was drafted by OIA and subject to multiple rounds of coordination with 

all TFI components. 

B. Who approved this document? 

Response: The heads of all TFI components signed off on the document, which was ultimately 

approved by Acting U/S Szubin. 

C. Has this document been shared with and approved by Secretary Mnuchin and 

others at Treasury? 

Response: Treasury's senior leadership is aware of this guidance. 

D. What restrictions were placed on FinCEN by this document? 

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Response: The guidelines help to coordinate and deconflict the activities ofTFI components. 

For example, FinCEN is able to ask clarifying questions to the Intelligence Community (IC) 

about existing IC reporting, but requests for IC collection, analysis, and intelligence and 

counterintelligence needs are routed through OIA to ensure that FinCEN's requests of the IC are 

tracked and deconflicted with other Treasury intelligence needs. 

E. Does this document prevent FinCEN from interacting directly with its customers 

and partners in the Intelligence Community? 

Response: FinCEN's relationships with intelligence community agencies are outlined in signed 

Memorandum of Understanding documents with those agencies. 

F. Does this document hinder FinCEN from fulfilling its statutory mission? 

Response: No. 

Question 28: What access docs OIA have to access BSA data, including standard filings as 

well as data collected under FinCEN's special measures authority? 

Response: OIA has access to perform specific searches ofBSA data using FinCEN Query. 

A. How many user accounts are allocated to OIA? 

Response: Currently, 31 OIA employees have BSA access accounts. 

Question 29: Has FinCEN verified that OIA, as a member of the Intelligence Community, 

has the authority to receive, process, store, analyze, and disseminate the information on 

U.S. Persons contained in the BSA data to which FinCEN has given OIA access? 

Response: By statute FinCEN is directed to share information with the intelligence community. 

The intelligence community is responsible for ensuring that it appropriately uses the information 

in accordance with applicable requirements. 

A. Has FinCEN received or seen a copy of OIA's guidelines for handling U.S. 

Persons information as required by Executive Order 12333? If so, when? Please 

provide a copy to the Subcommittee. 

Response: Your request for a copy of OIA's guidelines for handling U.S. Persons information 

has been submitted to OIA for direct response. 

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B. What safeguards does FinCEN have to protect that personally identifiable 

information from misuse? 

Response: FinCEN has a Privacy Administrator (PA) responsible for implementing the 

recommendations of the 911 Commission to ensure that the bureau appropriately considers 

privacy and civil liberties concerns in executing its mission. The FinCEN ensures that 

appropriate safeguards are integrated into the policies, systems, and processes whereby FinCEN 

collects, analyzes, and disseminates personally identifiable information (PII). Additionally, the 

integrity and confidentiality of the PII that FinCEN collects, transmits, maintains, and utilizes is 

controlled through mechanisms that identifY and regulate the appropriate purposes and uses of 

the data and maintain the individuals' privacy. 

The privacy and civil liberty impacts of business and analytical processes and technology usages 

are documented in internal Privacy Threshold Analyses (PTA) and internet-accessible Privacy 

Impact Analyses (PlAs). FinCEN's quarterly and annual Federal Information Security 

Management Act (FISMA) report~ for Privacy and the annual Data Mining Report detailing 

FinCEN privacy practices are sent on a regular basis to Treasury Department's Director of 

Privacy. These documents and reports also describe the secure architecture and data security 

tools used in managing FinCEN's technology systems. Additionally, System of Record Notices 

are reviewed, minimally, every three years and re-published on the internet. 

FinCEN has published a directive that mandates policy and procedures for reporting privacy 

incidents and for breach response. FinCEN's Breach Review Group (BRG) maintains a plan 

which is used to promptly and efficiently assess the risk created by an incident and to determine 

its impact to individual privacy rights. The BRG then recommends an appropriate response, 

appropriate notifications and remediating actions, and uses "lessons learned" to mitigate future 

threats. 

Privacy training and awareness at FinCEN include both formal course materials and promotional 

awareness ofPII safeguarding practices. All staff must complete mandatory, annual privacy 

training. Situational awareness activities in a variety of delivery formats occur throughout the 

year along with role-based privacy training as needed. 

Facilities and Resources 

Question 30: Does FinCEN currently have adequate SCIF space, to include classified 

computers, classified phones, classified video conference capability, and other such 

equipment and facilities necessary to conduct its counter terrorist financing mission? 

Response: Yes, FinCEN has adequate SCIF facilities. 

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Question 31: The FY17 Budget Request mentions an efficiency savings of $1.3 million, 

including reductions in travel. Please provide information adequate to support how 

FinCEN arrived at this figure. Given FinCEN's close cooperation with international 

partners, why is FinCEN reducing travel? 

Response: The FY 2017 Budget Request proposed $1.3 million in efficiency savings. Of the 

$1.3 efficiency savings, $550,000 is from commercial database contracts and $750,000 is from 

re-evaluation or negotiation of other contractual efforts. FinCEN did not reduce travel funding, 

but has made plans to use travel funds more efficiently. 

Data and Data Security 

Question 32: What kind of Bank Secrecy Act data does FinCEN compile? 

Response: FinCEN compiles data as obtained from the different reports required to be filed 

under the Bank Secrecy Act: 

FinCEN Suspicious Activity Report (Form Ill): Reports made by a financial 

institution about suspicious or potentially suspicious activity. 

FinCEN Currency Transaction Report (Form 112): Reports for each deposit, 

withdrawal, exchange of currency, or other payment or transfer, by, through, or to the 

financial institution which involves a transaction in currency of more than $10,000. 

Form 8300: Reports of cash payments over $10,000 received in a Trade or Business 

over a twenty-four-hour period. Each person engaged in a trade or business who, in 

the course of the trade or business, receives more than $10,000 in cash in one 

transaction or in two or more related transactions, must file Form 8300. 

Currency and other Monetary Instruments Report (CMIR) (Form 105): Reports 

international transportation or currency and/or other monetary instruments exceeding 

$10,000. 

Foreign Bank and Financial Accounts (FBAR) (Form 114): Reports financial interest 

in or signature authority over a foreign financial account. A United States person that 

has a financial interest in or signature authority over foreign financial accounts must 

file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 

at any time during the calendar year. 

Designation of Exempt Persons Report (DoEP) (Form II 0): Report to provide an 

effective means for a bank to exempt eligible customers from currency transaction 

reporting and to reduce the bank's burden of filing Currency Transaction Reports 

(CTR). Banks are the only type of financial institutions that may exempt customers 

from CTR filing requirements. 

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Registration of Money Services Business (RMSB) (Fonn 107): This form provides 

FinCEN with infonnation that registrants are required to provide in order to be 

registered and allows MSBs that are required to be registered to provide data that 

allows their registration to be accepted. Generally, MSBs must register with the 

Department of the Treasury. However, not all MSBs are required to register. For 

example, if you are an MSB solely because you are an agent of another MSB, you are 

not required to register. 

Question 33: There is a viewpoint that FinCEN gets "too much" information and thus is 

unable to sort through it for important indicators of crimes. Could you please address 

that? 

Response: While the volume ofBSA reporting has increased, so has FinCEN's capacity to 

extract valuable information from these reports. For instance, through the use of algorithms, and 

the alertness of financial institutions, we are now able to identifY funds and persons related to 

potential foreign terrorist fighters that otherwise could have gone unnoticed a decade ago. We 

constantly seek ways to improve the BSA system's effectiveness and utility. 

Question 34: Who at FinCEN looks at the 55,000 reports that come in every day? 

Response: FinCEN leverages several different strategies to review the 55,000 BSA filings 

financial institutions submit on a daily basis. FinCEN employs automated business rules to 

screen all filings for information associated with our most significant money laundering and 

terrorist financing threats. Findings from the rules point FinCEN analysts to specific filings for 

hands-on review and focus efforts on the filings most likely to be related to priority threats. In 

addition, FinCEN analysts independently execute queries to screen for information associated 

with their areas of responsibility. Finally, FinCEN has a group of data scientists that conduct 

analysis using advanced algorithms to surface information associated with entities that are most 

prevalent in the data or whom may be engaging in sophisticated money laundering, significant 

fraud, or terrorist financing schemes. 

Question 35: Is FinCEN concerned with the number of SARs filed or the quality of SARs 

filed? 

Response: We expect financial institutions to fulfill their regulatory requirements and file the 

appropriate BSA forms accurately and completely as part of meeting their overall BSA 

obligations. When systemic errors in a financial institution's CTRs or SARs are identified, 

FinCEN contacts the financial institution and works wilh them to develop a program and 

timeline for correcting the errors. 

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27419.040

Question 36: What can be done to address so-called "defensive SAR filing?" 

Response: FinCEN has studied the issue of"defensive filing" by reviewing samples ofSAR 

filings and has found little evidence of unnecessary SAR filings. To the contrary, FinCEN 

believes financial institutions are doing a good job of spotting and reporting suspicious activity 

that is of high-value to law enforcement. It is worth noting that the value of reporting suspicious 

activity is multiplied when many financial institutions are watching for, and sharing information 

on, similar activity. What, in isolation, seems to be a minor report from one institution may, in 

fact, be illustrative of a broad and dangerous trend when viewed in context of other filings. 

Question 37: Can you discuss the various kinds of information collected through FinCEN's 

special measures authorities, such as Geographic Targeting Orders (GTOs), demand 

letters, Foreign Financial Agency data, and the like? 

Response: A GTO is an order issued by FinCEN under the BSA that imposes additional 

rccordkeeping or reporting requirements on domestic financial institutions or other businesses in 

a specific geographic area. 

A Demand Letter is a request by FinCEN, under 12 U.S.C. § 1829b(b)(3)(C) for records relating 

to international funds transfers of $3,000 or more. The scope of the requested information can 

vary depending on the specific circumstances of the request. 

A Foreign Financial Agency rule (FF A Rule) is a rulemaking issued by FinCEN under the BSA 

that imposes additional reporting requirements on domestic financial institutions. The regulation 

requires identified domestic financial institutions to report transactional information involving 

identified Foreign Financial Agencies. 

A. Does FinCEN have any data to show the effectiveness of the 314(b) program? 

Response: Section 314(b) of the USA PATRJOT Act is a voluntary information sharing 

program. 314(b) provides financial institutions with the ability to share information with one 

another, under a safe harbor that offers protections from liability, in order to better identify and 

report potential money laundering or terrorist activities. Since 2012, more than 46,000 BSA 

filings have been submitted that reference 314(b) information sharing within the narrative of the 

BSA report. From 2012-2016, the prevalence of terrorist financing SARs referencing 314(b) has 

increased significantly, from 25 SARs in 2012, to 96 in 2016. This indicates financial 

institutions are using 314(b) more frequently in their efforts to detect and report suspected 

terrorist financing. 

B. Does FinCEN have any data to show if financial institutions comply or don't 

comply with incoming 314(b) requests? 

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Response: No, section 314(b) of the USA PATRIOT Act is a voluntary information sharing 

program. 314(b) provides financial institutions with the ability to share information with one 

another, under a safe harbor that offers protections from liability, in order to better identify and 

report potential money laundering or terrorist activities. FinCEN regulations (31 CFR 101 0.540) 

set forth the requirements that must be satisfied in order to benefit from 314(b) safe harbor 

protection. 

C. Does FinCEN have any plans to make financial institutions accountable ifthey 

don't respond to 314(b) requests? 

Response: No, 314(b) is a voluntary program that provides financial institutions with the ability 

to share information with one another, under a safe harbor that offers protections from liability, 

in order to better identify and report potential money laundering or terrorist activities. 

However, FinCEN does monitor for compliance with 314(a) requests. If a determination is made 

that a financial institution is not in compliance with 314( a), the matter generally would be 

referred to their federal regulator for action. FinCEN also considers 314(a) compliance as part of 

its own BSA investigations into financial institutions. 

Question 38: Does FinCEN's BSA database include all BSA data, including that 

information collected under FinCEN's special measures authority? 

Response: Currently, FinCEN's System of Record (SOR) only stores the structured data 

collected via the FinCEN forms noted in the response to Question 32. In some cases, special 

collections require submitting forms, so in those instances, special collections data is also stored 

in the SOR. We are in the process of developing the capability and tools to also store the more 

unstructured special measures data in the SOR. Currently, the more unstructured special 

measures data is stored on protected share drives. 

A. Do law enforcement and others have access to that special measures data? 

Response: Where the information collected through a special measure comes to FinCEN via the 

use of one of FinCEN's standardized formats, special measures data is available to law 

enforcement and others through FinCEN Query. Unstructured special measures data may be 

disseminated to law enforcement, if appropriate, on a case-by-case basis. 

B. Where is special measures data stored? 

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Response: Unstructured special measures data is stored on protected share drives within 

FinCEN. 

C. Who controls the storage of special measures data? 

Response: FinCEN's Enforcement Division controls the storage of the unstructured special 

measures data on protected share drives, which are managed by tl1e Technology Division. 

D. How is special measures data disseminated? 

Response: Unstructured special measures data may be disseminated to law enforcement and 

other governmental entities, if appropriate, on a case-by-case basis. 

E. To whom is special measures data disseminated'? 

Response: Unstructured special measures data may be disseminated electronically to law 

enforcement and other governmental entities, if appropriate, on a case-by-case basis. 

F. What access controls and data security measures are currently in place 

protecting special measures data? 

Response: In some cases, special collections require submitting forms, so in those instances, 

special collections data is stored in the SOR and subject to the same controls and data security 

measures applicable to other BSA infonnation. For unstructured special collections, FinCEN 

requests that the information be submitted through the Secure Information Sharing System 

(SISS) that is managed by FinCEN or via password-encrypted files. SISS nscs a direct 

communications path with a multi-step, authentication process for incoming data and that data is 

scanned for viruses. If a virus is found, it is rejected. If accepted, files are transferred to internal 

protected share drives. Access to share drives is limited to data owners by an Administrator with 

data owners controlling access to the data. 

Question 39: In your testimony, you mentioned previously that over 10,000 federal, state, 

and local users have access to the BSA database. How do you ensure that the data is not 

being misused or improperly shared? 

Response: Users of BSA data, both at an organizational and individual level, agree to terms and 

conditions under Memorandums of Understanding (MOU) executed with FinCEN. At the outset 

of establishing an MOU and on a periodic basis thereafter, users are provided with BSA ReDissemination Guidelines and guidance for properly safeguarding BSA information. Every year, 

FinCEN makes contact with the more than 400 agencies with BSA data access MOUs. After an 

electronic review of the agency's use of the system, FinCEN conducts a telephonic inspection. 

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The FinCEN Query system has built-in query audit logs which capture each user's activity 

within the BSA system of record. Monthly reports are run to detect certain anomalies within the 

query audit logs. Mandatory on-line training must be taken by a!! users prior to their access of 

the BSA data, including acceptance of a user acknowledgment. This helps FinCEN to ensure all 

users are aware of the proper use of the data. FinCEN also investigates suspected unauthorized 

disclosure ofBSA information and audits FinCEN employees' use of the BSA data. 

Information Technology 

Question 40: Does FinCEN have an IT strategy or risk mitigation plan in place to protect 

against cyber criminals or other threats like the breach of OPM's systems? 

Response: FinCEN systems are accredited at the FISMA High level. FinCEN continuously 

monitors and adapts to emerging threats using risk management. Specific security related 

information is considered sensitive for public record. FinCEN is willing to brief security 

information privately, if requested. 

Question 41: Have there been any breaches of the BSA database or the Egmont Secure 

Web? 

Response: Specific security related information is considered sensitive for public record. 

FinCEN is willing to brief security information privately, if requested. 

Question 42: Has there been any misuse of the BSA database or the Egmont Secure Web? 

Response: Insuring the responsible and proper use of sensitive BSA data is a priority for 

FinCEN, and, as noted above FinCEN investigates unauthorized disclosures ofBSA information. 

Specific security related information is considered sensitive for public record. FinCEN is willing 

to brief security information privately, if requested. 

Question 43: Have there been any investigations or audits of the BSA system or Egmont 

Secure Web to gauge possible misuse? Have there been any incidents of misuse or 

unauthorized sharing of data? 

Response: FinCEN has an inspection program, training outreach, and system monitoring 

capabilities to gauge possible misuse. Potential incidents are investigated by FinCEN Office of 

Special Investigations. Specific security related information is considered sensitive for public 

record. FinCEN is willing to brief security information privately, if requested. 

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Question 44: How does FinCEN protect against the spillage or misuse of personally 

identifiable information (PII)? 

Response: FinCEN systems are accredited at the FISMA High level. FinCEN continuously 

monitors and adapts to emerging threats using risk management. 

Question 45: You mentioned in your testimony that FinCEN completed its Information 

Technology modernization program in 2014. What strategy and goals is FinCEN pursuing 

to further modernize, update, and upgrade its information technology capabilities? 

Response: FinCEN Technology Division uses roadmap sessions with other FinCEN divisions, as 

well as an Investment Review process to continually update and enhance mission capabilities 

supported by technology. Enhancements have included delivering new tools, pilots in Hadoop 

and other "Big Data" technologies to scale data analysis and allow for new techniques, pilots in 

Cloud Computing to increase adaptability and decrease implementation time, and increase 

automation in collection and dissemination processes to reduce cycle time. 

Question 46: Can you describe how FinCEN's recent IT project has helped modernize BSA 

data management? 

Response: The IT Modernization project established BSA data management processes such as 

the Data Management Council, Integrated Project Teams, and governance processes to provide 

transparency into data management issues and ensure business requirements and impacts were 

incorporated into the planning and prioritization process. In addition to process improvements, 

IT Modernization also improved data collection by standardizing data across forms, shifting to a 

data-centric design, incorporating additional data validations, and implementing technical data 

standards to increase data quality and increase analytical capability. 

Question 47: How do the technological capabilities of other FlUs, such as Australia's 

AUSTRAC, Canada's l<'INTRAC, and the Netherlands' FlU, compare to those ofFinCEN? 

Response: FinCEN coordinates with other FlUs regarding collection and analytical capabilities. 

The Australian Transaction Reports and Analysis Centre (AUSTRAC), the Financial Transaction 

and Reports Analysis Centre of Canada (FINTRAC), and the Netherlands' FIU have slightly 

different operating models and collection requirements. AUSTRAC, FINTRAC, and others have 

visited FinCEN during their modernization efforts and as part of the Egmont Group, FinCEN is 

the Vice Chair of the Information Exchange Working Group to lead and exchange technical 

capabilities. 

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Question 48: Does FinCJ<~N utilize, or has FinCEN examined utilizing the cloud computing 

or "as-a-service" model? 

Response: Yes, FinCEN is currently working on developing, implementing and obtaining 

appropriate security accreditations for initial cloud solutions. 

Special Measures 

Question 49: How does FinCEN decide which entities and individuals to target with its 

special measures authorities? 

Response: The Office of Special Measures within FinCEN's Enforcement Division executes 

FinCEN's unique enforcement and information request authorities to detect, disrupt, and deter 

key illicit finance threats, including money launderers, the financial institutions they exploit, and 

the methods they employ. For example, under Section 311 of the USA PATRIOT Act, FinCEN 

can identify a foreign financial institution, jurisdiction, class of transactions, or type of account 

as being of primary money laundering concern. Upon making such a finding, FinCEN may 

impose one or more of five special measures on U.S. financial institutions, from enhanced 

recordkceping and reporting requirements up to prohibitions on correspondent account access. 

In making such a finding and determining which special measure is most appropriate, FinCEN 

considers the factors outlined in the statute. For example, for a particular jurisdiction, FinCEN 

may consider jurisdictional factors such as evidence that organized criminal groups, international 

terrorists, or entities involved in the proliferation of weapons of mass destruction or missiles 

have transacted business in that jurisdiction. For a foreign financial institution, class of 

transaction, or type of account, FinCEN may consider factors such as the extent to which the 

subject of the finding is used to facilitate or promote money laundering or is used for legitimate 

business purposes. FinCEN is also required to consult with the Attorney General, the Secretary 

of State, and the heads of the federal functional regulators. 

Question 50: What does FinCEN do with the special measures information? 

Response: FinCEN collects a variety of information under the BSA outside the standard filings 

that covered financial institutions make as a matter of course, such as SARs and CTRs. For 

example, in order to further the purposes of the Bank Secrecy Act and prevent evasions thereof, 

FinCEN may impose temporary enhanced reporting requirements on financial or nonfinancial 

businesses under Geographic Targeting Orders pursuant to 31 U.S.C. 5326. FinCEN can also 

collect certain transactional records under special authorities to request information, such as the 

Foreign Financial Agency authority under 31 U.S.C. 5314 and the authority to obtain certain 

international funds transfers under 12 U.S.C. 1829b. The use of these authorities depends on the 

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specific facts and circumstances of each matter, but in general, FinCEN may exercise these 

authorities to support its own investigations; to identify money laundering trends and typologies 

that can be shared with other agencies or the private sector; and to assist law enforcement or 

other U.S. government entities in furtherance of a criminal, tax, or regulatory investigation or 

proceeding, or in the conduct of intelligence or counterintelligence activities to protect against 

international terrorism. 

Question 51: How is special measures information actually collected- how do financial 

institutions and other responsive entities send that information to FinCEN? 

Response: FinCEN generally instructs financial institutions and businesses subject to a special 

information request to submit the information to FinCEN via the standard Bank Secrecy Act 

database (often using pre-existing forms, such as the FinCEN Form 8300) or through FinCEN's 

SISS, which is a secure mechanism to communicate with financial institutions. 

Question 52: How is the special measures information stored, analyzed, and disseminated? 

Response: Reports that are responsive to special information requests that are submitted via the 

standard Bank Secrecy Act database are stored in the same manner as SARs, CTRS, and other 

such forms. Such reports are also available for analysis to Jaw enforcement and other users with 

access to the BSA database. Information sent through FinCEN's SISS is stored on FinCEN's 

servers. 

Question 53: To whom is special measures information disseminated, and in what form? 

Response: FinCEN may disseminate reports filed under the Bank Secrecy Act, including 

information obtained pursuant to its special authorities to request information, to other 

governmental agencies, including Jaw enforcement and regulators, in accordance with 31 USC 

5319 and 31 USC 310. FinCEN may disseminate such information electronically with explicit 

warnings that the information may not be released, disseminated, disclosed, or transmitted 

outside the receiving organization without the prior, written approval ofFinCEN. 

Geographic Targeting Orders (GTOs) 

Question 54: Can you speak to the law enforcement concerns regarding the potential 

misuse of anonymous shell companies for illicit purposes in the real estate sector'? 

Response: Shell companies generally include non-publicly traded corporations and limited 

liability companies that typically have no physical presence and generate little to no independent 

economic value. Many shell companies are formed for legitimate tax and liability purposes, but 

the anonymity they can provide may also be abused by illicit actors seeking to hide their 

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involvement in a particular transaction. The misuse of shell companies to launder money is a 

systemic concern for law enforcement and regulators across the financial system, but it is 

particularly problematic in the "all-cash" (i.e., purchases of real estate made without external 

financing or a mortgage) segment of the real estate market, which currently has relatively few 

anti-money laundering protections. 

In January 2016, FinCEN issued GTOs to require U.S. title insurance companies to report 

beneficial ownership information on legal entities, including shell companies, used to purchase 

certain luxury residential real estate in Manhattan and Miami-specifically, luxury residential 

property purchased by a shell company without a bank loan and made at least in part using a 

cashier's check or similar instrument. In July 2016 and February 2017, FinCEN reissued the 

original GTOs and extended coverage to all boroughs of New York City, two additional counties 

in the Miami metropolitan area, five counties in California (including Los Angeles, San 

Francisco, and San Diego), and the Texas county that includes San Antonio. Following the 

enactment of Countering America's Adversaries through Sanctions Act in August 2017, FinCEN 

issued revised GTOs to capture a broader range of transactions and included transactions 

involving wire transfers. FinCEN also expanded the GTOs to include transactions conducted in 

the City and County of Honolulu, Hawaii. These expanded GTOs will further help Jaw 

enforcement and inform FinCEN's future efforts to assess and combat the money laundering 

risks associated with luxury residential real estate purchases. 

In March 2018, FinCEN extended the GTO in response to the useful information that we have 

been receiving under the new authority to include wire transfers and we continue to define 

methods to address the vulnerabilities of this sector. 

Question 55: President Trump recently extended Geographic Targeting Orders to all title 

companies in six major metropolitan areas. Can you explain what these GTOs have 

provided? 

Response: At the time of the most recent renewal, approximately 30 percent of the real estate 

transactions reported under the GTOs involved a beneficial owner or purchaser representative 

who had previously been the subject of a SAR. In other words, the beneficial owners or 

purchaser representatives in a significant portion of transactions reported under the GTO had 

been previously connected to suspicious activity. As a result of the attention generated by the 

GTOs, we have seen additional SAR filings related to potential money laundering involving real 

estate. In total, these SARs, along with the information generated by the GTOs, are advancing 

law enforcement's ability to identify potentially illicit activity and are helping inform FinCEN 's 

broader AML approach towards the real estate sector. 

Question 56: When you say that 30 percent of transactions covered by these GTOs 

"involved a beneficial owner ... that was also the subject of a previous suspicious activity 

report,'' does that mean they are all illicit financiers? 

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Response: No. A financial institution may be required to file a SAR if it knows, suspects, or has 

reason to suspect a transaction conducted or attempted by, at, or through the financial institution 

involves funds derived from illegal activity; attempts to disguise funds derived from illegal 

activity; is designed to evade regulations promulgated under the BSA; lacks a business or 

apparent lawful purpose; or involves the use of the financial institution to facilitate criminal 

activity. See, e.g., 31 C.F.R. l 020.320. The filing of a SAR does not necessarily mean that the 

subject engaged in criminal activity, only that the filing institution identified suspicious activity. 

A. How many transactions were covered by the GTO? 

Response: As of December 2017, FinCEN has received 764 reports of covered transactions. 

B. And 30% of that figure is ... ? 

Response: As of December 2017, FinCEN has received 243 reports of covered transactions that 

involved a beneficial owner or purchaser representative who had previously been the subject of a 

SAR. 

Question 57: Real estate purchases funded solely through wire transfers are not included 

in the GTO, is that correct? Couldn't a savvy financier easily navigate around FinCEN's 

rules? 

Response: On August 2, legislation was signed into law that closed the wire transfer loophole in 

the GTO authority. Purchases funded through wire transfers must be reported pursuant to 

FinCEN's most recent real estate GTOs issued on August 22,2017, and the March 19, 2018 

GTOs. 

Question 58: Are these wire transfers captured in any of the other reporting requirements? 

Response: As noted above, purchases funded through wire transfers must be reported pursuant 

to FinCEN's most recent real estate GTOs issued on August 22,2017, and the March 19, 2018 

GTOs. 

Question 59: Has FinCEN conducted any analysis on the possibility of money laundering 

that employs a transaction involving outside financing? 

Response: For the Real Estate GTOs, FinCEN's focus was on all-cash transactions because in 

situations where bank financing is involved--even a small proportion-the lenders are required 

under existing AML rules to monitor and report suspicious activity. 

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Beneficial Ownership 

Question 60: FinCEN issued rules last May-that will come into effect in 2018--requiring 

banks and other financial institutions to find out the identities of people hidden behind 

shell companies the so-called beneficial owners of companies. How would this rule work? 

Response: On May 11,2016, FinCEN issued the final rule on Customer Due Diligence 

Requirements for Financial Institutions ("CDD Rule") under the Bank Secrecy Act to clarify and 

strengthen customer due diligence requirements for covered financial institutions. Covered 

financial institutions are defined as federally regulated banks and credit unions, brokers or 

dealers in securities, mutual funds, futures commission merchants, and introducing brokers in 

commodities. The Rule imposes customer due diligence requirements on covered financial 

institutions that include the obligations to request the identity of beneficial owners, as defined 

under the Rule, from their customers and to verify the identity of those beneficial owners, subject 

to certain exclusions and exemptions. 

Under the Rule, "beneficial owners" include any natural person that directly or indirectly holds a 

25% equity interest in the legal entity customer, as well as an individual that controls the day-today operations of the legal entity customer. Financial institutions may rely on the representations 

of their customers without conducting further due diligence, unless they have reason to believe 

the information provided is inaccurate or unreliable. The designated legal entity customers 

include entities that can be described as "shell companies" due to their complex or anonymous 

corporate ownership structures. The CDD Rule became effective on July 11,2016 and has an 

applicability date for mandatory compliance of May II, 2018, at which time all covered financial 

institutions will be expected to be compliant. 

Question 61: Aren't there legitimate business reasons that the "beneficial owners" of 

companies remain undisclosed? Is there a way to get such information into the hands of 

law enforcement but allow these legitimate privacy concerns to remain'! 

Response: FinCEN acknowledges that there can be legitimate reasons for beneficial owners of 

companies to desire limited disclosure of their ownership interest. FinCEN has not sought to 

make this information publicly available. FinCEN has weighed the desire to use legal entities to 

protect disclosure of individuals' activities against the positive advantages of a transparent 

financial system, and determined that national security, public safety, and the health of the 

national financial system benefit most from seeking greater transparency among legal entities. 

Clarifying and strengthening CDD requirement.~ for U.S. financial institutions, including with 

respect to the identification of beneficial owners, advance the purposes of the BSA by: 

l. Enhancing the availability to law enforcement, as well as to the Federal functional 

regulators and self-regulatory organizations, of beneficial ownership information about 

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legal entity customers obtained by U.S. financial institutions, which assists law 

enforcement financial investigations and a variety of regulatory examinations and 

investigations; 

2. Increasing the ability of financial institutions, law enforcement, and the intelligence 

community to identify the assets and accounts of terrorist organizations, corrupt actors, 

money launderers, drug kingpins, proliferators of weapons of mass destruction, and other 

national security threats, which strengthens compliance with sanctions programs designed 

to undercut financing and support for such persons; 

3. Helping financial institutions assess and mitigate risk, and comply with all existing legal 

requirements, including the BSA and related authorities; 

4. Facilitating reporting and investigations in support of tax compliance, and advancing 

commitments made to foreign counterparts in connection with the provisions commonly 

known as the Foreign Account Tax Compliance Act; 

5. Promoting consistency in implementing and enforcing CDD regulatory expectations 

across and within financial sectors; and 

6. Advancing Treasury's broad strategy to enhance financial transparency oflegal entities. 

Question 62: How do these rules ensure active verification of beneficial owners on the part 

of the financial institutions? 

Response: The CDD Rule requires the collection and verification of the beneficial owners of 

legal entity customers at the time a new account is established for a legal entity at a financial 

institution. Institutions may rely on the representations of their customers without conducting 

further due diligence, unless the institution has reason to believe the information supplied is 

inaccurate. Covered financial institutions are also required, on a risk basis, to update the 

beneficial ownership information previously collected that has become inaccurate or unreliable. 

As with other BSA requirements, during the examination process, examiners from the Federal 

banking agencies or self-regulatory organizations will actively monitor a financial institution's 

compliance with the Rule. 

Question 63: How will this rule work for states that allow the formation of business entities 

without disclosure of a beneficial owner? 

Response: Certain states may allow the formation of business entities without the disclosure of 

their true beneficial owners, and the CDD Rule does not cover this process. However, the CDD 

Rule will require all covered financial institutions to obtain from their legal entity customer the 

beneficial ownership information at the time of account opening, irrespective of whether the 

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legal entity was formed in a state, or a foreign jurisdiction, that allows anonymous formation of 

business entities. 

Question 64: Isn't there consensus that identifying beneficial ownership should be 

collected and verified at the time a legal entity is formed, not necessarily through the 

financial institutions with which their customers do business? Does FinCEN believe that 

financial institutions have the same tools and qualifications as FinCEN and State at their 

disposal to adequately determine this information? Would FinCEN support legislation 

requiring this? 

Response: Historically, Treasury has taken a three-pronged approach related to combating the 

misuse oflegal entities: the first is strengthening the customer due diligence (CDD) obligations 

of financial institutions in the United States, including a requirement that they collect and verify 

the beneficial ownership information of new legal entity accountholders. The second prong is 

increasing the transparency of U.S. legal entities through the collection of beneficial ownership 

information at the time of company formation. The final prong is leveling the playing field 

internationally so countries are effectively implementing international beneficial ownership 

standards, and providing law enforcement with access to current and accurate beneficial 

ownership information in order to combat all forms of illicit finance. The key elements of 

effective CDD include: (i) identifying and verifying the identity of customers; (ii) identifying and 

verifying the identity of beneficial owners of! ega! entity customers (i.e., the natural persons who 

own or contro !legal entities); (iii) understanding the nature and purpose of customer 

relationships; and (iv) conducting ongoing monitoring of the aforementioned criteria. 

Collectively, these elements are best addressed by covered financial institutions and comprise the 

minimum standard of CDD, which FinCEN believes is fundamental to an effective AML 

program. 

Beneficial ownership can, and does, fluctuate from the time at which an entity was formed. 

Therefore, requiring financial institutions to perform effective CDD at the time legal entity 

customers transact is essential to understanding who their customers are and what type of 

transactions they conduct. This is a critical aspect of combating all forms of illicit financial 

activity, from terrorist financing and sanctions evasion to more traditional financial crimes, 

including money laundering, fraud, and tax evasion. 

Forming a company in the United States provides another key point of access to the international 

financial system. As demonstrated through the Panama Papers, companies formed in one 

jurisdiction may bank in a different jurisdiction. For example, a person can form a company 

abroad and use that company to open a bank account in the United States, or a person can form a 

company in the United States and use the company to open an account abroad. Therefore, it is 

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critical to have beneficial ownership information collected at both the time an account is opened 

and when a company is fonned. 

FinCEN does not collect beneficial ownership information, except on a case by ease basis 

through a request for such information from a third party (i.e. a private sector vendor of such 

information or public sector partners through information sharing). Although FinCEN and 

financial institutions may have different tools, compliance with the CDD Rule does not require 

covered financial institutions to have or use additional tools beyond those already required to 

maintain compliance under the Customer Identification Program Rule. 

FinCEN welcomes the opportunity to work with the Congress on any additional measures that 

will increase transparency into shell corporations. 

Question 65: Does FinCEN currently use any other databases to find or investigate 

beneficial ownership? 

Response: Yes, and we continually assess additional tools for obtaining beneficial ownership 

information. 

Financial Intelligence Unit (FlU) 

Question 66: How active is FinCEN currently in international training and technical 

assistance to foreign financial intelligence units (FlUs)? 

Response: For the U.S. government, Treasury's Office of Technical Assistance (OTA) has the 

lead in providing anti-money laundering/countering the financing of terrorism (AMLICFT) 

technical assistance and training for FlUs. FinCEN and OTA collaborate on FIU issues. FinCEN 

provides to FlUs operational support, including analytical exchanges and workshops, as well as 

wide-ranging assistance to FIUs within the Egmont Group framework. As part of the Egmont 

Group, FinCEN carries out broad initiatives that help develop principles and best practices for 

FIUs and help advance FinCEN's strategic and operational objectives. For example, FinCEN 

proactively engages with FlUs in strategically important jurisdictions to discuss best practices 

and develop joint analytic projects. FinCEN engages bilaterally and multilaterally in best 

practices discussions with other FlUs and in operational engagements (e.g., exchange and 

analysis of financial intelligence regarding priority topics). FinCEN also mentors some FIUs as 

part of candidate FlUs' application for membership in the Egmont Group. 

Question 67: Has FinCEN clarified how Treasury's Office ofTcchnical Assistance (OTA) 

can best provide assistance to countries developing FlUs? How actively is FinCEN 

cooperating with the IMF and World Bank on such technical assistance for AML and CFT? 

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Response: FinCEN coordinates closely with OTA primarily when OTA is providing training 

and technical assistance to FlUs of strategic interest for FinCEN. FinCEN does work closely 

with OTA in determining how OTA can most effectively target its resources so that developing 

FlUs receive the training that is most necessary to promote the strengthening of a jurisdiction's 

AMLICFT regime. Previously, FinCEN had coordinated with donor agencies, including the IMF 

and World Bank, through their participation in the Egmont Group's Training Working Group. 

However, the last two years, FinCEN has devoted its efforts to help establish an Egmont training 

center to address technical assistance and training issues ofFIUs and coordination with donor 

agencies. 

Question 68: Does FinCEN work with any other agencies, like the State Department or the 

Department of Defense, to provide training or technical assistance? 

Response: Although FinCEN does not directly engage in the provision of training or technical 

assistance, we do regularly work with U.S. agencies such as the State Department's Bureau of 

International and Narcotics and Law Enforcement Affairs and U.S. Department of Justice's 

Office of Overseas Prosecutorial Development Assistance and Training (OPDAT) in the 

provision of AMLICFT-related training and technical assistance programs. 

Question 69: Can you talk about FinCEN's partnership and contribution to the Egmont 

Group? 

Response: The Egmont Group of FlU's ("Egmont Group") provides a critical forum for FinCEN 

to actively promote information sharing and FlU best practices to support U.S. government 

AMLICFT priorities. Since the beginning of the Egmont Group in 1995, FinCEN has taken a 

leading role by helping to run the organization, shape the organization's strategic vision, set 

operational policy objectives, encourage FlUs to improve their capabilities and actively share 

information with partner FlUs to address priority threats. FinCEN also administers the secure 

network through which member FlUs communicate. FinCEN provides leadership in major 

Egmont Group projects aimed at sharing information to identifY illicit actors and typologies 

related to terrorist financing, money laundering and other illicit financial activities. For example, 

FinCEN co-leads the Egmont Group's ISIL project that focuses on sharing strategic and tactical 

information to develop financial typologies and identification of previously unknown foreign 

terrorist fighters and their networks. The findings of this project have been shared with law 

enforcement and other parts of government, other 150-plus FlU members of the Egmont Group, 

the Financial Action Task Force (FATF), and financial sectors. The project's improved 

multilateral information sharing enabled FinCEN and partner FlUs, in collaboration with law 

enforcement and others, to identify unknown foreign terrorist fighters and their financial 

facilitation networks leading to multiple sanctions listings, prosecutions, sharing of relevant 

information before terrorist attacks, and listings on national terrorist watchlists. In addition, 

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FinCEN also co-leads an Egmont Group Business Email Compromise project team to analyze 

and target networks defrauding businesses in the United States. Since October 2014, FinCEN, in 

partnership with U.S. law enforcement agencies, Egmont Group FlUs, and financial institutions, 

has successfully recovered over $290 million for U.S. businesses. 

Question 70: Are countries such as Russia contributing as much as they are benefiting 

from membership in The Egmont Group? 

Response: Egmont member FlUs differ greatly in their legal and technical capabilities and 

resourcing, which impacts their ability to contribute to global anti-money laundering and 

countering the financing of terrorism efforts. The United States, Canada, New Zealand, and 

Australia are the most active FIU contributors to Egmont. The Russian FIU is also a very active 

Egmont member. 

Question 71: How does FinCEN interact with Russia? What sorts of information are 

passed to Russia? 

Response: As with other foreign FlUs, FinCEN has, on a limited basis, interacted and shared 

information with the Russian FIU under the auspices of the Egmont Group and information 

sharing principles. IfFinCEN responds to Egmont requests by the Russian FIU for financial 

intelligence on a specific subject or entity that is suspected of conducting or facilitating a 

criminal activity in Russia, FinCEN de-conflicts responses with U.S.Iaw enforcement agencies 

and other agencies as appropriate. Russia's FIU provides financial intelligence and law 

enforcement information in response to FinCEN and U.S. law enforcement requests for 

information. 

Question 72: China is seeking membership in The Egmont Group. What are the criteria to 

joining The Egmont Group? 

Response: fn general, the admission of an FIU as a member of the Egmont Group is subject to 

the recognition that an applicant meets the definition of"FIU" and fulfils the requirements as set 

out in the Egmont standards. Specifically, the following requisite criteria delineate the general 

requirements for membership consideration: 

There should be only one entity acting as FIU in the jurisdiction, namely, receiving 

suspicious transaction reports and other relevant disclosures, analyzing the information, 

disseminating the results of the analysis, and exchanging information with the FlUs of 

other countries; 

Money laundering should be criminalized in line with the FATF standards; 

Terrorist financing should be criminalized in line with the FATF standards; 

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Financial Institutions and Designated Non-Financial Businesses and Professions should 

be obliged to report suspicions promptly to the FIU when they suspect or have reasonable 

grounds to suspect that funds are the proceeds of a criminal activity, or are related to 

terrorist financing, in line with the FA TF standards. 

The FIU should be operationally independent and autonomous in performing its functions 

of receipt, analysis and dissemination, in making use of the powers available to perform 

these functions, in carrying out international cooperation; 

The FIU must have the authority and capacity to request information from reporting 

entities and other sources; 

The FIU should conduct operational and strategic analysis; 

The FlU should have access to the widest possible range of financial, administrative, and 

law enforcement information; 

The FIU should exchange information freely, spontaneously and upon request, on the 

basis of reciprocity; and 

The FIU should rapidly, constructively and effectively provide the widest range of 

International cooperation to counter money laundering, associated predicate offence and 

the financing of terrorism. 

Question 73: Does FinCEN support China's Egmont membership? How? 

Response: FinCEN and the FIU of Spain are co-sponsoring the membership application of the 

Chinese FIU to the Egmont Group. FinCEN has sent teams of experts to visit China's FIU and 

their FIU has visited FinCEN to consult on the Egmont membership process and FIU best 

practices and policies. FinCEN has collaborated closely with the State Department and our 

Treasury Department colleagues on US-China foreign policy issues. FinCEN and the Chinese 

FlU also exchange financial intelligence on a variety of cases pursuant to an MOU. 

Information Sharing 

Question 74: How does FinCEN share its analysis with its counterparts? 

Response: FinCEN regularly presents the findings of its analysis at conferences and briefings 

throughout the country and in international fora such as the biannual Egmont Plenary. FinCEN 

disseminates these products to a broad list of customers through a number of mechanisms: via 

encrypted email; through a searchable repository available to all II ,000 users of the FinCEN 

portal; via the Egmont Secure Web to our !56 international partner FIUs; and via a FinCEN 

special interest group on the FBI's LEEP. FinCEN also works closely with Treasury's 

intelligence community component, the OIA, to disseminate information from select BSA 

reports to our national security partners via classified networks. We currently share our products 

with federal law enforcement agencies and inspectors general; several state, local, and tribal law 

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enforcement organizations; the U.S. intelligence community; our international law enforcement 

partners, and certain foreign regulatory counterparts. 

Question 75: How does FinCEN determine which counterparts with whom to share? Does 

FinCEN share every analytic product with everyone? 

Response: We target the distribution of our analytical products to the appropriate agencies. In 

general, FinCEN has customized email distribution lists for different sets of customers. These 

are typically topic-based, such as cyber or counterterrorism. For products posted to the FinCEN 

portal, we separate our recipient audiences based on whether or not they are a law enforcement 

or regulatory partner. 

Question 76: How does FinCEN gather feedback on its products? What sorts of feedback 

does FinCEN get, and how does it receive that feedback? 

Response: FinCEN solicits feedback on its products via both explicit (electronic feedback forms 

and surveys) and implicit (product views and downloads) mechanisms. FinCEN use a variety of 

data collection methods. These methods include online feedback surveys, as well as meeting 

with representatives from both domestic law enforcement and foreign FlUs. Feedback is also 

collected from stakeholders via feedback forms that are included with FinCEN products, as well 

as email correspondence and formal HUMINT Online Tasking and Report evaluations of our 

Intelligence Information Reports (IIR) shared through classified channels. 

Question 77: How does FinCEN share its analysis with foreign partners? 

Response: FinCEN shares its analysis with foreign FlU partners via the Egmont Secure Web. 

Question 78: Does FinCEN share only with other FlUs, or does it share with non-FlU 

foreign counterparts, like law enforcement agencies, intelligence authorities, and 

regulators? 

Response: Besides our FIU partners, FinCEN also shares our analytical products with federal 

Jaw enforcement and regulatory agencies and inspectors general; several state, local, and tribal 

Jaw enforcement organizations; the U.S. intelligence community; international law enforcement 

partners, and certain foreign regulatory counterparts. 

Question 79: Can you describe how you are currently expanding your dissemination 

system to move away from point to point delivery?, 

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Response: FinCEN is currently in the middle of posting all of our financial intelligence products 

and Flash reports to the FinCEN portal in order to facilitate access to all 11,000 portal users. We 

are also posting a limited number of products to a classified SharePoint portal for our 

intelligence and law enforcement customers. 

Question 80: How does FinCEN disseminate its classified products? 

Response: FinCEN disseminates its classified products via a SharePoint portal, classified email, 

and through the joint program with OIA to create I!Rs. The IIR program produced 567 IIRs in 

FY17. These reports provide FinCEN's national security stakeholders with unique financial 

intelligence in a format that can be readily indexed and searched by U.S. national security 

systems. 

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Questions for the Record for FinCEN Acting Director Jamal El-Hindi 

House Committee on Financial Services 

Hearing before the Subcommittee on Terrorism and Illicit Finance entitled 

"Safeguarding the Financial System from Terrorist Financing" 

Thursday, Apri/27, 2017 

Questions for the Record Submission from Representative French Hill (AR-2) 

Question 1: During the hearing, you agreed to provide a memo describing unfilled 

vacancies and hiring challenges at FinCEN. Please ensure that the memo describes: 

o The number of vacancies compared to authorized FTEs for each of the last five 

Federal fiscal years, and a general description of the types of vacancies (e.g., 

analyst, support, etc.). 

o The number of positions assigned to each FinCEN division, including the number 

of positions in each division that are filled, that are currently unfilled but with job 

offers made, and the number that are unfilled and awaiting further action. 

o The reasons such spots were unfilled. 

o The average length a position was vacant, the extent to which security clearance 

investigations contributed to vacancies, and what other structural problems 

contributed to vacancies. 

o The average length of time to fill a vacancy, starting from initial vacancy (because 

of the creation of the position, departure of an employee, etc.) to the entry on duty 

of an employee hired to till that billet. 

o The yearly attrition rate of FinCEN employees for any reason, including 

retirement, change of employment, etc. 

o The process by which FinCEN prioritizes which vacancies to hire first, and the 

reasons or strategy used to justify prioritizing one position over another. 

o The current process FinCEN uses to hire a new employee, including classification 

of a position, advertising of a position, interviewing, offering a job, background 

and clearance investigation, and onboarding the employee. 

o The steps being taken to speed up hiring. 

o Any current or proposed recruitment, hiring, and retention strategies (if any) 

designed to address the gap in FinCEN personnel. 

o The anticipated amount of time FinCEN believes necessary to fill all existing 

vacancies. 

o The number of personnel in the Human Resources office, including the number of 

personnel dedicated to processing and filling job vacancies. 

o The effect on FinCEN's mission of having so many vacancies. 

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o The amount of funding provided by Congress for FTE salaries that was unused 

for such salaries because of these vacancies. 

o The uses to which funding for such vacancies was put (e.g., returned to Treasury, 

used for other purposes and if so which purposes) 

o Why FinCEN did not bring the number of vacancies to Congressional attention. 

o Any legislative steps necessary to correct problems that have slowed the hiring 

process. Such as giving FinCEN "fast track" authority for hiring analysts, such as 

other elements of the intelligence community. 

Response; 

INFORMATION MEMORANDUM FOR REPRESENTATIVE FRENCH IDLL 

FROM: Jamal EI-Hindi, Acting Director 

SUBJECT: FinCEN Vacancies and Hiring Challenges 

This is in response to your questions about FinCEN hiring during my testimony before the 

Subcommittee on Terrorism and Illicit Finance on April27, 2017 and your subsequent Questions 

for the Record. 

The following chart shows FinCEN's Full Time Equivalents (FTE) targets that were included in 

the President's budget requests to Congress, the FTE targets included in the appropriations bills 

enacted by Congress, actual FTE, new hires, employee departures, and FinCEN's attrition rate 

for the past six years. 

FinCEN Full Time Equivalents (FTE), Average On-Board, and Attrition Rate 

1----

FY FY --FY,-- FY FY FY 

2012 2013 2014 2015 2016 2017 

FTE Funded in President's Budget 304 322 340 345 343 343 

FTE in Enacted Level 327 341 345 345 343 343 

~ctualFTE 299 300 279 275 278 274 

New Hires 35 21 23 36 26 2o 

Employee Departures -31 -38 -34 -36 -29 -25 

Attrition Rate 10.3% 12.6% 12% 13% 10.4% 9.1% ·--'----

FinCEN has had a high number of vacancies over the past five years. A number of factors have 

contributed to these vacancies, including FinCEN's controlling hiring to meet the lower FTE 

target in the President's budget in 2012-2013, implementation of a major reorganization in 2013-

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2014, a substantial number of internal hires, promotions, and reassignments, and significant 

delays in background investigation processing at the Office of Personnel Management. 

FinCEN's attrition rate has also been consistently higher than the government-wide rate of 

around 6%, adding to FinCEN's staffing issues, as it takes significantly more time to clear and 

onboard new personnel than it takes for an employee to submit his or her resignation and depart 

from the organization. The timeframe for actual onboarding varies from weeks to over a year 

and is largely dependent upon factors outside ofFinCEN's control (e.g. candidate's clearance 

status and OPM background investigation process and backlog). 

Since my testimony on April27, 2017, FinCEN has on-boarded 51 new personnel and 

promoted/reassigned 30 FinCEN employees. This progress was offset, however, by 52 

separations and the 30 additional vacancies created by the internal moves, leaving FinCEN with 

58 current vacant positions. Of these 58 positions, 16 arc in the early stages of recruitment (e.g. 

position analysis and classification), and all vacancies identified in the TFI-approved hiring 

surge initiated on January 8, 2018, arc on track to be posted to USAJobs by June 15, 2018. 

When filling vacancies, FinCEN focuses priority attention on key leadership positions and those 

positions most critical to accomplishing FinCEN's mission. Currently these priorities are in the 

Enforcement, Policy, Management, and Liaison Divisions. With few exceptions, FinCEN 

positions are filled using the competitive procedures outlined in Title 5 of the Code of Federal 

Regulations. To help speed the part of the recruitment process that FinCEN can control, the 

Human Resources Office has worked directly with supervisors in the recruitment process and has 

used contract employees to support position classification and development of evaluation 

questions, crediting plans, and other recruitment materials. FinCEN is also using the Bureau of 

Fiscal Services' Administrative Resource Center to issue vacancy announcements and evaluate 

qualified candidates. These contracts help augment FinCEN's two Human Resources FTEs. 

FinCEN completed the Office of the Director ofNational Intelligence-directed position review 

and designation activity in July 2017. As a result, 17 positions were reduced from Top Secret 

(requiring an average of335 days for OPM background investigation) to Secret (requiring I 07 

days) or Public Trust (requiring 165 days), and two Secret positions were reduced to Public 

Trust, thereby reducing the amount of time required to recruit and hire personnel into these 

positions in the future. (For reference, it takes about 100 days from the start of the staffing 

process to the tentative offer that initiates the backj,rround investigation process.) 

FinCEN's current vacancies as of May 7, 2018, are shown by division in the following chart. 

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Office of 15 16' 0 0 0 0 0 FinCEN 

Director Director 

Chief 14 12 2 0 1 0 1 Attorney 

Counsel Advisors 

Technology 39 28 11 1 1 5 4 Infonnation 

Technology 

Specialists 

Management 43 34 9 0 2 6 1 Human 

Resources, 

Financial 

Management, 

andFOIA 

Specialists 

Intelligence 85 74 11 l 7 2 l Intelligence 

Research 

Specialists 

Enforcement 52 40 13* 0 3 5 5 Enforcement 

f----cc---· -· Specialists 

Policy 27 22 5 0 1 2 2 Regulatory 

and Strategic 

Policy 

Specialists 

Liaison 65 60 5 I 2 2 Liaison and 

Case 

Management 

Specialists, 

Editors 

Total 340 286 56 2 16 22 16 

* FznCEN manages to proJected vacancres, creatmg an appearance of dzscrepancy m " Onboard " and " Vacant 

numbers. 

" 

All funding provided to FinCEN is used to meet a growing critical national security mission and 

to ensure continued focus and analysis on new and existing threats to the financial system. 

Although the workforce is not at full strength, FinCEN uses funding for a variety of support 

contracts that enable the Bureau to leverage the federal workforce to meet the growing demand 

for FinCEN data and to address emerging threats to the financial system. These contracts 

provide case support and functional specialists, cyber security experts to respond to the 

expanding cyber threat, human resources expertise to support critical hiring priorities, and data 

analysts and expertise to support financial intelligence analysis. 

Question 2: FinCEN intelligence analyst positions are not "excepted," which especially in 

view of other hiring issues would seem to put FinCEN at a particular disadvantage should 

an analyst leave. What is the average tenure of an intelligence investigator at FinCEN? 

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a. What steps would be necessary to "except" those positions-must that be done 

legislatively or could that be done by the Treasury Department Secretary or Under 

Secretary? Are there other analytic positions that are essential enough that they 

ought to be excepted as well? Please elaborate. 

Response: The average tenure of a FinCEN's intelligence research specialists is 16.1 years 

(compared to an overall tenure of 14.8 years for all FinCEN employees). FinCEN would 

welcome any opportunity to explore expanding our hiring authorities. IfFinCEN were to be 

granted excepted service hiring authority, it would allow us to compete for talent the same way 

as many of our excepted service agency counterparts do. For example, we could increase our 

diversity of skillsets and backgrounds. We would be open to working with this Committee on 

any proposal you may have. 

Question 3: You said FinCEN has job-retention tools available to help hold onto topquality staff who might be tempted by other jobs. Please describe the range oftools 

available, how they compare to other Federal agencies with retention tools (bonuses, pay 

surcharges, over-scale payments, etc.), and specifically how they have been used in each of 

the last five years, including the frequency of use, the process for determining when to use 

the retention tools, the reasons used to justify the use of the tools, and the effectiveness of 

the tools, such as the numbers of employees actually retained because of the tools' use. Also, 

please inquire with division heads for their impressions about whether the retention tools 

are adequate and adequately used, or whether they believe they have lost staff because such 

tools are inadequate or not used enough. 

Response: Similar to other Federal agencies, FinCEN has the authority to pay recruitment and 

relocation bonuses for hard-to-fill positions. FinCEN also may hire an employee at a higher rate 

of pay if he or she has superior qualifications. However, FinCEN's challenge is generally not in 

attracting qualified candidates; most vacancy announcements receive a significant number of 

well-qualified applicants. FinCEN does have-and utilizes-authority to pay employees a 

retention bonus. FinCEN uses this mechanism rarely, however, as it only applies when the 

employee receives a bona fide job offer in the private sector. (Employees leaving to pursue a 

higher paying job in another Federal agency are not eligible for retention bonuses). 

In lieu of financial incentives, FinCEN has focused attention recently on improving employee 

morale and engagement as a means to improve retention and to reduce the attrition rate. In 

particular, FinCEN established an employee-led group to define a desired culture for the 

organization and lead efforts to reach that desired state. FinCEN has also taken steps to enhance 

the onboarding experience and improve the start of its relationship with new employees. 

Questions for the Record for FinCEN Acting Director Jamal El-Hindi 

House Committee on Financial Services 

Hearing before the Subcommittee on Terrorism and Illicit Finance entitled 

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"Safeguarding the Financial System from Terrorist Financing" 

Thursday, April 27, 2017 

Questions for the Record Submission from Representative Mia Love {UT-4) 

Question 1: How does FinCEN choose its business rules? 

Response: FinCEN employs automated business rules to combat our most significant money 

laundering and terrorist financing threats. The rules are developed using subject matter expertise 

and information collected from FinCEN analysts, law enforcement partners, and external 

stakeholders. The rules align with FinCEN's six priority areas including transnational security 

threats, cybercrime, transnational organized crime, significant fraud, compromised financial 

institutions, and third party money launderers. 

Question 2: Who approves or disapproves new business rules, and what criteria are used 

to judge the suitability of a particular rule? 

Response: FinCEN has a business rules management team that oversees the design, 

development and implementation of all new business rules. All requests for new rules are 

submitted via an application process. Applications are reviewed by the business rules 

management team to ensure the rule aligns with FinCEN priorities. Once approved, the 

application is then reviewed by FinCEN Counsel to ensure the rule does not violate the privacy 

or civil liberties of United States citizens. Once the rule has been approved by the management 

team and FinCEN Counsel, the rule development team conducts an impact assessment to ensure 

the rule will perform within accepted standards and not capture excessive volumes of 

information not relevant to the rule's intended purpose. 

Question 3: Are rules ever retired from use? If so, why? 

Response: FinCEN conducts a 45-day efficacy assessment of all new rules deployed in our 

production environment to ensure the rule is performing within accepted standards and is not 

capturing excessive volumes of information not relevant to the rule's intended purpose. If the 

rule is capturing an excessive volume of information or is not performing within accepted 

standards, the rule is modified or retired. If the rule is modified, it will be re-evaluated again 

after six months to ensure the rule's performance has improved. 

All existing business rules are continually monitored for efficacy (both quantitative and 

qualitative) and each undergoes a formal bi-annual review and certification process. If the rule is 

not performing within acceptable standards, then it is retired. 

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Question 4: How many rules are currently run? 

Response: Since 2014, FinCEN has deployed 95 business rules. Currently, there are 62 active 

business rules. 

Question 5: How frequently are the business rules run? Are they real-time? 

Response: FinCEN's business rules are run on a daily basis against all incoming Bank Secrecy 

Act (BSA) data. 

Question 6: What are the search terms for these particular rules? 

Response: FinCEN's business rules range in complexity from traditional "watch list" rules 

designed to identify known illicit actors to complex multi-variable weighted rule sets capable of 

identifying emerging illicit activity. The rules search the BSA filings for key terms, entities, and 

typologies. 

Question 7: What subjects or topic areas are currently the subjects of business rules? 

Response: FinCEN's business rules align with the organization's six priority areas including 

transnational security threats, cybercrime, transnational organized crime, significant fraud, 

compromised financial institutions and third party money launderers. 

Question 8: How frequently are the business rules updated or changed with new terms or 

methodologies? 

Response: FinCEN updates business rules on a weekly deployment/release cycle. For national 

security issues or in emergency situations, FinCEN has the ability to update and/or deploy new 

rules within 24 hours. 

Question 9: How frequently are the business rules run? Are they real-time? 

Response: FinCEN's business rules are run on a daily basis against all incoming BSA data. 

Question 10: What output do the business rules provide? 

Response: FinCEN's business rules produce more than 5,000 rule findings per month. The rule 

findings point FinCEN analysts to specific filings for hands-on review and focus their efforts on 

the filings most likely to be key in defending against priority threats. 

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Question 11: How are the business rules evaluated for effectiveness? 

Response: FinCEN conducts a 45-day efficacy assessment of all new rules deployed in our 

production environment to ensure the rule is performing within accepted standards and is not 

capturing excessive volumes of information not relevant to the rule's intended purpose. If the 

rule is capturing an excessive volume of information or is not performing within accepted 

standards, the rule is modified or retired. If the rule is modified, it will be re-evaluated again 

after six months to ensure the rule's performance has improved. All existing business rules are 

continually monitored for efficacy (both quantitative and qualitative) and each undergoes a 

formal bi-annual review and certification process. If the rule is not performing within acceptable 

standards, then it is retired. 

Question 12: Do these rules inform Flash Reports? 

Response: FinCEN has a number of business rules designed to identifY illicit financial activity 

associated with both domestic and international terrorism. These rules form the basis for 

FinCEN's Intelligence Flash Reports. Output from the rules is screened on a daily basis and the 

most valuable information is selected for inclusion in FinCEN's Flash Reports. 

Question 13: How are these reports utilized? Who utilizes them? 

Response: Flash Reports provide critical financial intelligence to FinCEN's domestic law 

enforcement stakeholders, the Intelligence Community, and Financial Intelligence Unit (FIU) 

partners around the world. Terrorist financing-related Flash Reports assist law enforcement 

efforts aimed at cutting off terrorist groups' sources of revenue, preventing terrorist groups' 

access to the international financial system, identifYing unknown foreign terrorist fighters, and 

identifYing information related to known actors. The Flash Reports direct law enforcement's 

attention to particular reporting in the database. The reports are provided for financial 

intelligence purposes to alert about possible threats and to assist in ongoing investigations. 

Question 14: How is all of this information processed and communicated to law 

enforcement authorities? 

Response: FinCEN communicates the financial intelligence it receives by: (I) providing both 

direct access to the BSA filings it receives and (2) creating a variety of finished products for our 

federal, state, local, tribal, and foreign law enforcement partners. These law enforcement 

partners receive FinCEN products ranging from brief reports on filings of note to strategic 

analyses of illicit financing methodologies through various mechanisms: encrypted email; 

through a searchable repository on the FinCEN portal; and a FinCEN special interest group on 

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the FBI's Law Enforcement Enterprise Portal. FinCEN also works closely with Treasury's 

intelligence community component, the Office of Intelligence and Analysis, to disseminate select 

BSA reports to law enforcement partners via classified networks. Finally, FinCEN oversees the 

receipt and processing of several thousands of requests for information and information 

exchanges in support of our law enforcement, regulatory, national security, and international 

partners (i.e., foreign FlUs) via the Egmont Secure Web annually. 

Question 15: How many "queries" or requests for information does FinCEN staff handle 

each day? 

Response: In FY 2017, FinCEN received: 

1,017 (3.9 per day) Requests for Information from Egmont Fill partners 

1,142 (4.4 per day) Spontaneous Disclosures ofinformation from Egmont Fill 

partners 

1,882 (7.2 per day) Requests for Suspicious Transaction Report Supporting 

Documents from U.S. Requesters (e.g., law enforcement, regulators, FinCEN) and 

Egmont Fill Partners 

413 (1.6 per day) Requests from U.S. Requesters to Egmont Fill partners 

396 (1.5 per day) 314(a) requests 

38 (2 per day) Requests for BSA Certified Records 

18,130 (69 per day) Regulatory Guidance Inquiries 

Question 16: How do outside agencies, like the U.S. Customs and Border Patrol (CBP) or 

the Federal Bureau of Investigation (FBI), utilize Flash Reports? 

Response: Flash Reports are one method by which FinCEN proactively disseminates BSA 

analysis to our partners. These reports are intended to serve as lead information for our partners, 

including CBP and FBI. 

Question 17: Can outside agencies submit business rules to FinCEN for use? 

Response: FinCEN currently operates business rules for external stakeholders on a very limited 

basis. 

Question 18: Do outside agencies receive the output of the business rules? 

Response: The business rules are automated queries or algoritluns applied to BSA data to 

identify records of interest and point FinCEN analysts to specific filings for hands-on review. 

This helps analysts examine and exploit large volumes ofBSA data and enables more complex 

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search capabilities. The output of these business rules are reviewed by analysts and often turned 

into analytical products that are shared with relevant stakeholders. 

Question 19: Please provide an example of a business rule and a product produced from 

the results of a business rule. 

Response: FinCEN continually leverages automated rules in the fight against Islamic State in 

Iraq and Syria (ISIS). FinCEN has employed fifteen rules pertaining to ISIS and its 

activities. These rules are instrumental in producing an important stream of timely financial 

intelligence on ISIS for FinCEN analysts and external stakeholders. Jn addition to the 

Intelligence Flash Reports FinCEN has developed from our ISIS business rules, FinCEN also 

uses the output from business rules to develop Executive Alerts, Intelligence Assessments, and 

Targeting Reports. 

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Questions for the Record for FinCEN Acting Director Jamal El-Hindi 

House Committee on Financial Services 

Hearing before the Subcommittee on Terrorism and Illicit Finance entitled 

"Safeguarding the Financial System from Terrorist Financing" 

Thursday, Apri/27, 2017 

Questions for the Record from Representative Luke Messer aN-6) 

Question 1: There is a viewpoint that FinCEN gets "too much" information and thus is 

unable to sort through it for important indicators of crimes. Could you please address 

that? 

a. Is FinCEN concerned with the number of SARs filed or the quality of SARs 

filed? 

Response: FinCEN focuses on the quality ofCTRs and SARs filed by an institution. We expect 

financial institutions to fulfill their regulatory requirements and file the appropriate BSA forms 

accurately and completely as part of an overall risk based approach. There is no quota system or 

regulatory expectation regarding how many CTRs and SARs an institution "should be filing." 

Moreover, FinCEN has studied the issue of "defensive filing" by reviewing samples of SAR 

filings and has found little evidence of unnecessary SAR filings. To the contrary, FinCEN 

believes financial institutions are doing a good job of spotting and reporting suspicious activity 

that is of high-value to law enforcement. It is worth noting that the value of reporting suspicious 

activity is multiplied when many financial institutions are watching for, and sharing information 

on, similar activity. What, in isolation, seems to be a minor report from one institution may, in 

fact, be illustrative of a broad and dangerous trend when viewed in context of other filings. 

While it is true that the volume of this information has increased, so has our capacity to extract 

valuable information. Through the use of algorithms, and the alertness of financial institutions, 

we are now able to identify flows or funds and persons related to potential foreign terrorist 

fighters that otherwise would have gone unnoticed a decade ago. In studying those patterns, we 

are also seeing terrorist organizations resorting to more common illicit activity to generate funds 

or hide them. We are always looking for ways to improve our system and are always interested 

in the thoughts that industry and law enforcement have on ways to make the system more 

effective. 

Question 2: How active is FinCEN current in international training and technical 

assistance to foreign financial intelligence units (FlUs)? 

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a. Does FinCEN work with any other agencies, like the State Department or 

the Department of Defense, to provide training or technical assistance? 

Response: For the U.S. government, Treasury Department's OTA has the lead in providing 

AMLICFT technical assistance and training for FlUs. FinCEN and OTA collaborate on Fill 

issues. FinCEN provides to Fills operational support, including analytical exchanges and 

workshops, as well as wide-ranging assistance to Fills within the Egrnont Group framework. 

As part of the Egmont Group, FinCEN carries out broad initiatives that help develop principles 

and best practices for FlUs and help advance FinCEN's strategic and operational objectives. For 

example, FinCEN proactively engages with FlUs in strategically important jurisdictions to 

discuss best practices and develop joint analytic projects. FinCEN engages bilaterally and 

multilaterally in best practices discussions with other Fills and in operational engagements (e.g., 

exchange and analysis of financial intelligence regarding priority topics). FinCEN also mentors 

some Fills as part of candidate FlUs' application for membership in the Egmont Group. 

Although FinCEN does not directly engage in the provision of training or technical assistance, 

we do regularly work with U.S. agencies such as the State Department's Bureau of International 

and Narcotics and Law Enforcement Affairs and U.S. Department of Justice's OPDAT in the 

provision of AMLICFT-related training and technical assistance programs. 

Question 3: How does FinCEN share its analysis with its counterparts? 

Response: FinCEN shares products and analysis with federal law enforcement agencies and 

inspectors general; several state, local, and tribal law enforcement organizations; the U.S. 

intelligence community; and international partners. FinCEN disseminates its products to this 

broad list of customers through a number of mechanisms: (1) encrypted email; (2) a searchable 

repository available to allll,OOO users of the FinCEN portal; (3) the ESW to our 156 

international partner FlUs within the Egrnont Group; and the FBI's Law Enforcement Enterprise 

Portal to a FinCEN special interest group. FinCEN also works closely with Treasury's 

intelligence community component, the Office of Intelligence and Analysis, to disseminate 

information from select BSA reports to our national security partners via classified networks. 

Question 4: How docs FinCEN determine which counterparts with whom to share? Does 

FinCEN share every analytic product with everyone'! 

Response: FinCEN does not share every analytic product with everyone. In general, FinCEN 

has customized email distribution lists for different sets of customers. These are typically topicbased, such as cybcr or counterterrorism. For products posted to the FinCEN portal, we separate 

our recipients based on whether or not they are a law enforcement or regulatory partner. 

Question 5: How does FinCEN share its analysis with foreign partners? 

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Response: FinCEN shares its analysis with foreign partners via the ESW, particularly, if there is 

suspicion of a crime in that partner's jurisdiction or if we believe that a jurisdiction may have 

information that may forward one of our own investigations. In addition, FinCEN shares 

information about suspected terrorism or terrorist financi~g broadly with select partner FIUs 

regardless of whether there is a direct link with the jurisdiction; FinCEN recognizes that when 

FlUs work multilaterally to share their information, they are more effective at shining light on 

potential criminal subjects and suspected illicit networks. FinCEN co-led an important analytical 

project in the Egmont Group on countering financing related to foreign terrorist fighters (FTFs) 

and ISIL by assembling a coalition ofFIUs for more than two years. The results of the 

multilateral information sharing led to the detection of suspected FTF subjects, an identification 

of indicators of FTF financing and a recognition of challenges that FIUs are having in CFT. 

Question 6: In March 2015, Italy, Saudi Arabia, and the United States launched the first 

meeting of the Counter-ISIL Finance Group. Now that almost two years has since passel!, 

what early lessons can be gleaned from the U.S. and international response to combating 

Islamic State finances? Where were the early policy obstacles? What was needed to 

overcome them? What would have improved outcomes and hastened response times? 

Response: The Counter ISIS Finance Group (CIFG), which the United States leads with Italy 

and Saudi Arabia, is an integrated part ofthe broader Defeat ISIS Coalition. The working group 

is unique in that it is the only multilateral body focused exclusively on disrupting ISIS's sources 

of wealth and its access to the international financial system. The CIFG is made up of a diverse 

and knowledgeable group of 40 members and observers, including key Coalition partners and 

international bodies such as the Financial Action Task Force, the United Nations Monitoring 

Team, and the Egmont Group of financial intelligence units. As part of its ongoing work, the 

CIFG is focused on information exchange, the future of non-oil revenues, and ISIS's abuse of 

money services businesses. The CIFG has provided an important platform for member countries 

to highlight successes and lessons learned in combatting terrorist financing, develop coordinated 

countermeasures, and increase our understanding ofiSIS's finances. 

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Questions for the Record for FinCEN Acting Director Jamal El-Hindi 

House Committee on Financial Services 

Hearing before the Subcommittee on Terrorism and Illicit Finance entitled 

"Safeguarding the Financial System from Terrorist Financing" 

Thursday, Apri/27, 2017 

Questions for the Record from Representative Robert Pittenger (NC-9) 

Question 1: Can you please provide examples of how law enforcement uses BSA data? 

Specifically, please provide examples of BSA data that has led to arrests, prosecutions, 

and/or convictions. 

Response: In 2015, FinCEN began recognizing law enforcement agencies that effectively used 

BSA data to obtain a successful prosecution, and to provide concrete evidence of the value of 

BSA data to the reporting financial industry. Below are the summaries of the award winning 

cases from the FinCEN's 2017 Law Enforcement Awards: 

(1) SAR Review Task Force: New York State Police 

The New York State Police Special Investigations Unit at the Financial Crimes Unit 

identified suspicious transactions occurring in the Hudson Valley Region indicative of 

money laundering as part of SAR review initiatives. The impetus of the investigation was a 

single financial institution reporting an unusual pattern of cash deposits. The reporting bank 

indicated that it believed much of the cash was derived from the illegal sale of 

marijuana. The funds were rapidly withdrawn from ATM locations across the United 

States. Investigators identified many additional reports containing sensitive financial 

information, dating back another year, indicating similar activity in this account. 

Further investigation demonstrated that these individuals were connected to a larger criminal 

organization than originally believed, allowing the organization to be considered an 

"enterprise" and eligible to be charged under the Racketeer Influenced and Corrupt 

Organizations Act 

Investigators discovered extensive criminal histories for many of the individuals associated 

with this organization, including narcotics and firearms possession charges on several 

individuals. The Special Investigations Unit initiated a criminal investigation, and the two 

parallel investigations led to the identification of expansive criminal organizations 

responsible for bringing large quantities of narcotics into the region, operating business 

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fronts used to launder funds, weapons trafficking, bulk cash smuggling, and extensive gang 

activity, including murder. Over 100 individuals belonging to several different street and 

prison gangs were identified, ranging from leadership to low-level associates, along with 

residences and vehicles belonging to these individuals. 

As a result of this multi-agency investigation, law enforcement successfully seized 16 

firearms, 14 kilos of cocaine, 12 pounds of marijuana, 90 grams of crack cocaine, 153 grams 

of heroin, 75 oxycodone pills, $200,000 in cash, and several vehicles. Thirty defendants 

have been convicted or pleaded guilty in the Northern and Southern Districts of New York, 

and prosecution is ongoing for 16 others. 

(2) Transnational Organized Crime: Federal Bureau of Investigation 

The FBI initiated an investigation after receiving a referral from local law enforcement 

regarding an individual suspected of carrying out various fraud and money laundering 

schemes. A review of sensitive financial information identified a high volume of data 

enabling investigators to identify 80 accounts controlled by the primary target and identify 

funds that appeared to be derived from criminal activity. The individual was arrested and 

charged with money laundering, which subsequently led to his cooperation with law 

enforcement. 

Based on information this individual provided after agreeing to cooperate with the FBI, 

investigators uncovered a network of criminal actors located in the United States and 

Canada. Investigators then used this information to identify additional accounts and 

transactions involving these newly identified targets at financial institutions located 

throughout the United States. These financial institutions described suspected money 

laundering activity though a series of businesses and trust accounts located in several 

countries. Investigators also identified additional ongoing criminal investigations by other 

agencies targeting this same network of individuals. 

Investigators began working closely with the other agencies to identify the full scope of this 

criminal organization. The information obtained during this coordination led the FBI to 

consider this criminal organization one of its highest priority transnational organized crime 

targets. Working closely with foreign and domestic law enforcement partners, investigators 

identified members of this criminal organization operating from all over the world. Analysis 

of financial activity indicated that this organization was bringing in $100-$300 million in 

annual criminal proceeds in North America alone. 

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Authorities arrested and indicted the targets on various money laundering, fraud, and 

conspiracy charges. Several suspects pled guilty before their cases went to triaL Several 

targets went to trial, where all defendants were convicted on all counts. 

(3) Transnational Security Threats: Federal Bureau oflnvestigation 

The FBI used a high volume of sensitive financial information over several years during the 

course of its investigation into a criminal organization moving hundreds of millions of U.S. 

dollars to support foreign nuclear and ballistic missile programs. 

This investigation identified two families engaged in criminal activities. These families each 

operated a network of exchange houses, precious metals companies, trading companies, and 

front companies throughout the Middle East to carry out financial activity for the benefit of 

multiple Office of Foreign Assets Control-sanctioned entities, as well as several entities with 

close ties to foreign military organizations. 

This investigation utilized information gleaned from financial data to confirm information 

necessary to issue search warrants and subpoenas to multiple U.S. financial 

institutions. Piecing together many pieces of financial data, they determined that the targets 

were operating one particular exchange house for foreign remittances. The investigation 

ultimately identified millions of transactions totaling over $200 billion. 

During the FBI investigation, foreign authorities took legal action against several of the 

targets, who were arrested on a range of charges, including billions of dollars in bribery, 

corruption, and embezzlement. While most of these charges were ultimately dropped, the 

FBI was able to compare data about the foreign law enforcement investigation with evidence 

it had obtained through its own investigation and determined that many significant elements 

of the foreign investigation supported conclusions the FBI had drawn based on email, bank, 

and other data. As a result of the publicity generated by the foreign investigation, law 

enforcement gathered additional and previously unknown details on the identified individual 

targets and their hundreds of associated shell companies. This allowed the FBI to expand its 

search and more completely map out the criminal network and its funding mechanisms. 

The investigation ultimately led to criminal charges of bank fraud, money laundering, and 

conspiracy to eommit money laundering, bank fraud, and sanctions violations through two 

separate indictments against 13 individuals. Prosecution of these individuals is ongoing. 

Criminal forfeiture totals are expected to reach hundreds of millions of dollars. 

( 4) Cyber Threats: Internal Revenue Service-Criminal Investigation 

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A multi-year, multi-agency investigation, led by IRS-CI focused on several targets selling 

narcotics on the dark web and distributing them throughout the United States through the 

U.S. Postal Service. The primary targets of this investigation conducted their online activity 

through The Onion Router which provided them with encryption and decryption of peer-topeer connections. This method provided the targets with access to several dark web sites, on 

which they sold methamphetamine and marijuana. 

The targets disguised their shipments of narcotics through the Postal Service inside packages 

filled with markers and drawing paper. Despite the targets' use of multiple return addresses 

and sender names, Postal inspectors were able to determine that the suspected narcotics 

mailings were originating from the same individuals based on several telling packaging 

characteristics. 

Investigators intercepted multiple packages as a result of search warrants. Investigators were 

then able to determine through internet service provider records that the username associated 

with several undercover purchases on the dark web belonged to the same individual sending 

the narcotics through the Postal Service. Investigators determined that over a 6-month 

period, this individual sent 435 suspicious packages on at least 50 different occasions. 

Sensitive financial information identified during the course of this investigation detailed 

specific information that corroborated the financial and personal information of the subjects 

of the investigation. The data also indicated that the subjects were using Bitcoins in an effort 

to conceal their illicit proceeds. The information identified in the financial data and from 

subpoenas issued to numerous financial institutions and Bitcoin exchangers helped clarify the 

convoluted series of transactions conducted to launder the funds. 

The targets only accepted payment for the narcotics in the form ofBitcoin. The Bitcoins 

were then sent through a Bitcoin "blender" to conceal their source. The Bitcoins would then 

be redistributed back to the targets through several Bitcoin exchangers before being 

converted into U.S. dollars and deposited into several bank accounts. 

The targets of this investigation were arrested on various drug charges, at which point several 

search warrants were issued on several locations where methamphetamine, marijuana, and 

numerous firearms were discovered. The targets were subsequently indicted and pled guilty 

to various drug and money laundering charges. This is notable since this is the first case in 

this particular Midwest district where money laundering charges were approved based on 

Bitcoin transactions. 

(5) Significant Fraud: Defense Criminal Investigative Service 

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DCIS initiated a long-term investigation based on structuring and excessive credit card 

charges identified by multiple financial institutions on a single individual. Two different 

working groups identified the transaction data and referred it for further 

investigation. Investigators determined that one of the subjects was transferring funds to a 

company providing subcontractor support for a military contract in Afghanistan. Further 

investigation determined that the company receiving the funds was a shell company owned 

by a U.S. military official to conceal bribery payments he was receiving in exchange for 

helping the primary target win contracts. 

Further financial analysis identified $24 million in transactions in the personal accounts of 

the primary target. The majority of the transactions were multi-million dollar deposits from 

his employer, which was a U.S. Department of Defense prime contractor providing logistical 

support and training to foreign military units. These deposits were followed immediately by 

transfers to several bank accounts and structured cash withdrawals. 

A detailed analysis of sensitive financial information and contract documents revealed that 

the U.S. military official received bribes from the primary target in exchange for sensitive 

bidding data, including bid amounts of competitors and actual government estimates. The 

official was also responsible for establishing those estimates and assembling the team 

responsible for reviewing bids. In return for his assistance in winning $54 million in bids, 

the primary target paid the official over $9 million through an extensive network of shell 

companies and bank accounts. 

The targets of this investigation eventually pled guilty to various conspiracy, money 

laundering, obstruction, and fraud charges. Investigators seized $12.3 million in assets from 

the primary target and his employer and the military official, including real property, 

vehicles, boats, aircrafts, firearms, gold coins, and bank accounts. 

(6) Third-Party Money Launderers: Homeland Security Investigations 

Over the course of 18 months, HSI investigators utilized an extensive volume of sensitive 

financial information to assist in their investigation into a large-scale illegal third-party 

money laundering organization. The investigation began based largely on information 

gleaned from a FinCEN-issued GTO. This GTO required armored car services importing or 

exporting funds through two specific geographies in the southwest border region to acquire 

additional identifying information on certain transactions. 

The information that investigators discovered as a result of the GTO led them to focus on one 

particular armored car company that appeared to be facilitating a money laundering scheme 

outside southern California. Investigators discovered that the company was importing U.S. 

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dollars and Mexican pesos from casas de cambio in Mexico and depositing them into shell 

company bank accounts that were opened and operated by the two individuals who owned 

and operated the company. 

Law enforcement was able to identify and connect an address for the armored car company 

that was shared by several other companies owned by the same individuals. Two of these 

newly identified companies were registered as MSBs. Further investigation and a detailed 

analysis of financial data indicated that these additional companies were simply shell 

companies that the two individuals used to funnel millions of U.S. dollars back into Mexico. 

Subpoenas were issued to the banks used by each of these companies, as well as to all of the 

people known to be involved with the companies. Transaction records identified cash 

deposits of $45 million over a IS-month period, which were then transferred in and out of the 

accounts of the various companies owned by the individuals before ultimately being wired to 

Mexico. 

As a result of the investigation and discovery of the money laundering scheme, both 

individuals pled guilty to violations regarding failures to maintain an effective anti-money 

laundering program. They also lost all licenses necessary to operate as an MSB and forfeited 

hundreds of thousands of U.S. dollars and Mexican pesos. 

Question 2: Please articulate the importance of Patriot Act Section 314(a) and (b) and bow 

this information sharing structure helps our government combat terror and illicit financing 

operations. Do you have any suggested legislative improvements to these sections? 

Response: Effective information sharing between the government and financial industry, as well 

as among financial institutions, is critical to combating money laundering and protecting the U.S. 

financial system. Section 314(a) of the USA PATRIOT Act requires the Secretary of the 

Treasury to adopt regulations to encourage regulatory and law enforcement authorities to share 

with financial institutions information regarding persons suspected of engaging in terrorism or 

money laundering. Pursuant to this authority, FinCEN issued regulations that enable federal, 

state, local and foreign (European Union) law enforcement agencies and other components of 

Treasury, through FinCEN, to contact over 16,000 financial institutions to locate accounts and 

transactions of such persons. In a tYpical 314(a) request, FinCEN, on behalf of a law 

enforcement agency, provides a list of subjects/entities to all participating financial institutions, 

which must respond if they have a positive match. 

FinCEN also encourages financial institutions to share information with each other related to 

money laundering, relying on the safe harbor protection of Section 314(b ). Section 314(b) 

provides a safe harbor from liability that would otherwise arise because of the disclosure of 

certain customer information between financial institutions. While information sharing under the 

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314(b) Program is voluntary, it can assist financial institutions in enhancing compliance with 

their AMUCFT requirements. 

One issue frequently noted by industry regarding information sharing is the scope of their safe 

harbor for information sharing under Section 314(b ). The statute currently provides a safe 

harbor from liability for disclosing information under Section 314(b) for activities that may 

involve terrorist actions or money laundering activities. Activities that are the predicates for 

money laundering, like fraud, drug trafficking, cybercrimes, and others, are not explicitly 

included in the safe harbor. FinCEN did issue guidance on the expansive scope of permissible 

information sharing covered by Section 314(b) safe harbor in 2009. FinCEN looks forward to 

working with Congress on ways to continually improve our regulations and the AMLICFT 

framework. 

Question 3: Is FinCEN willing to work with Congress to streamline and modernize the 

flow of BSA data between financial institutions and the Treasury Department? Can you 

please provide examples of ways in which we can modernize this process? 

Response: FinCEN consistently seeks to improve the efficiency and effectiveness with which it 

collects and distributes data collected under the Bank Secrecy Act and related statutes, 

supporting an AMLICFT regime that is one of the most effective in the world. FinCEN is 

committed to working with the private sector and federal partners through the Bank Secrecy Act 

Advisory Group and other venues to identify topics and areas for enhancement, ensuring that all 

stakeholder interests are considered before committing to any solutions. 

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27419.078

Questions for the Record for FinCEN Acting Director Jamal El-Hindi 

House Committee on Financial Services 

Hearing before the Subcommittee on Terrorism and Illicit Finance entitled 

"Safeguarding the Financial System from Terrorist Financing" 

Thursday, Apri/27, 2017 

Questions for the Record from Representative Bill Foster GL-11) 

Question 1: Over the last decade, we have seen terrorist financiers apply increasingly 

sophisticated techniques to launder and finance terrorist activities around the world. 

Which is why effective anti-money laundering and counter-terrorist financing laws are 

critical to combating the terrorist financing system. Yet, in recent years, financial 

institutions have paid ont billions of dollars in fines, penalties, and forfeitures for violations 

of the Bank Secrecy Act, the Foreign Corrupt Practices Act, and U.S. sanctions programs. 

The failure of a financial institution to comply with AML/CFT regulations often has farreaching consequences for our national security interests. To what extent do these fines and 

penalties play an important role in enhancing the deterrent value of our AML/CFT 

framework, and in turn promoting our national security and foreign policy interests? 

a. Given the record number of fines against some of these institutions, do you believe 

that the penalties are commensurate with the nature of the violations? 

b. If not, do you have any recommendations in how to address this issue? 

Response: FinCEN is the administrator of the BSA. FinCEN does not have authority to 

administer or enforce the Foreign Corrupt Practices Act; nor does it have the authority to impose 

economic sanctions. 

The maximum statutory civil money penalty for each BSA violation allows for a potential total 

amount that, if imposed, could often be deemed excessive and disproportionate to the overall 

conduct. Accordingly, it is FinCEN's practice to consider all facts and circumstances relevant to 

an enforcement action, and to impose civil penalties and other remedies that are consistent, fair, 

and commensurate with the conduct. For example, a financial institution's history of repeat or 

related violations and noncompliance will militate in favor of significant penalties to ensure 

future compliance. FinCEN also has the authority to impose undertakings, including 

monitorships and injunctions to compel remedial action, or to prohibit certain activity, to ensure 

a financial institution fully complies with its AMLICFT obligations. FinCEN also has the 

authority to conduct AMLICFT examinations of a financial institution to ensure compliance. 

FinCEN's written assessment of penalties routinely details the facts underlying the violations, 

and is issued publicly to inform financial institutions and to serve as a deterrent. 

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