Promoting the Health of the Banking Sector: Reforming Resolution and Broadening Funding Access for Long-Term Resilience

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                 EVALUATING THE FINANCIAL CRIMES5                       ENFORCEMENT NETWORK6=======================================================================78                                HEARING910                               BEFORE THE1112                   SUBCOMMITTEE ON NATIONAL SECURITY,13                  ILLICIT FINANCE, AND INTERNATIONAL14                         FINANCIAL INSTITUTIONS1516                                 OF THE1718                    COMMITTEE ON FINANCIAL SERVICES19                     U.S. HOUSE OF REPRESENTATIVES2021                    ONE HUNDRED NINETEENTH CONGRESS2223                             FIRST SESSION2425                               __________2627                           SEPTEMBER 9, 20252829                               __________3031                           Serial No. 119-373233       Printed for the use of the Committee on Financial Services34[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]3536                            www.govinfo.gov3738                               __________3940                        U.S. GOVERNMENT PUBLISHING OFFICE4163-032 PDF                      WASHINGTON : 202642=======================================================================4344                 HOUSE COMMITTEE ON FINANCIAL SERVICES4546                    FRENCH HILL, Arkansas, Chairman4748BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking49    Chairman                             Member50FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice51PETE SESSIONS, Texas                     Ranking Member52ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York53ANDY BARR, Kentucky                  BRAD SHERMAN, California54ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York55TOM EMMER, Minnesota                 DAVID SCOTT, Georgia56BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts57WARREN DAVIDSON, Ohio                AL GREEN, Texas58JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri59BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut60WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois61    Carolina                         JOYCE BEATTY, Ohio62MARLIN STUTZMAN, Indiana             JUAN VARGAS, California63RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey64DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas65YOUNG KIM, California                SEAN CASTEN, Illinois66BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts67ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan68SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York69MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia70MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado71MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana72ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon73ZACHARY NUNN, Iowa                   SAM LICCARDO, California74LISA McCLAIN, Michigan75MARIA SALAZAR, Florida76TROY DOWNING, Montana77MIKE HARIDOPOLOS, Florida78TIM MOORE, North Carolina7980                      Ben Johnson, Staff Director8182                                 ------8384 SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND INTERNATIONAL85                         FINANCIAL INSTITUTIONS8687                    WARREN DAVIDSON, Ohio, Chairman8889ZACHARY NUNN, Iowa, Vice Chairman    JOYCE BEATTY, Ohio, Ranking Member90FRANK D. LUCAS, Oklahoma             JOSH GOTTHEIMER, New Jersey91PETE SESSIONS, Texas                 JUAN VARGAS, California92ANDY BARR, Kentucky                  BILL FOSTER, Illinois93ROGER WILLIAMS, Texas                VICENTE GONZALEZ, Texas94YOUNG KIM, California                RITCHIE TORRES, New York95ANDREW OGLES, Tennessee              SEAN CASTEN, Illinois96LISA McCLAIN, Michigan               SAM LICCARDO, California97MARIA SALAZAR, Florida98                         C  O  N  T  E  N  T  S99100                              ----------101102                       Tuesday, September 9, 2025103                           OPENING STATEMENTS104105                                                                   Page106Hon. Warren Davidson, Chairman of the Subcommittee on National107  Security, Illicit Finance and International Financial108  Institutions, a U.S. Representative from Ohio..................     1109Hon. Joyce Beatty, Ranking Member of the Subcommittee on National110  Security, Illicit Finance and International Financial111  Institutions, a U.S. Representative from Ohio..................     3112113                               STATEMENTS114115Hon. French Hill, Chairman of the Committee on Financial116  Services, a U.S. Representative from Arkansas..................     4117Hon. Maxine Waters, Ranking Member of the Committee on Financial118  Services, a U.S. Representative from California................     4119120                               WITNESSES121122Ms. Andrea Gacki, Director, Financial Crimes Enforcement Network123  (FINCEN).......................................................     5124    Prepared statement...........................................     8125126                                APPENDIX127128                   MATERIALS SUBMITTED FOR THE RECORD129130Hon. Warren Davidson:131    September 8, 2025 Letter to Secretary Bessent................    46132    The Independent Community Bankers of America (ICBA)..........    54133    April 2, 2025 Press Release, Fraud on ActBlue: New Report134      Details Potential Illegal activity on the Democrat Platform    57135Hon. Joyce Beatty:136    Democrats Abroad (DA)........................................    59137Hon. Young Kim:138    American Land Title Association (ALTA).......................    66139Hon. Maxine Waters:140    American Association of Retired Persons (AARP)...............    86141    Financial Accountability and Corporate Transparency (FACT)142      Coalition..................................................   104143    Transparency International U.S...............................   108144145                 RESPONSES TO QUESTIONS FOR THE RECORD146147Written responses to questions for the record from Representative148  French Hill....................................................   113149Written responses to questions for the record from Representative150  Warren Davidson................................................   116151Written responses to questions for the record from Representative152  Young Kim......................................................   118153Written responses to questions for the record from Representative154  Zachary Nunn...................................................   120155Written responses to questions for the record from Representative156  Maxine Waters..................................................   121157Written responses to questions for the record from Representative158  Joyce Beatty...................................................   127159Written responses to questions for the record from Representative160  Vicente Gonzalez...............................................   128161162          Evaluating the Financial Crimes Enforcement Network163164                              ----------165166                       Tuesday, September 9, 2025167168             U.S. House of Representatives,169Subcommittee on National Security, Illicit Finance,170          and International Financial Institutions,171                           Committee on Financial Services,172                                                    Washington, DC.173174    The subcommittee met, pursuant to notice, at 10:09 a.m., in175room 2128, Rayburn House Office Building, Hon. Warren Davidson176[chairman of the subcommittee] presiding.177    Present: Representatives Davidson, Hill, Lucas, Sessions,178Barr, Williams of Texas, Kim, Ogles, Nunn, Salazar, Beatty,179Waters, Gottheimer, Vargas, Foster, Casten, Liccardo.180    Also present: Representative Tlaib.181    Chairman Davidson. The Subcommittee on National Security,182Illicit Finance, and International Financial Institutions will183come to order.184    Without objection, the chairman is authorized to declare a185recess of the committee at any time.186    This hearing is titled ``Evaluating the Financial Crimes187Enforcement Network.''188    Without objection, all members will have five legislative189days within which to submit extraneous materials for inclusion190in the record.191    I now recognize myself for 4 minutes for an opening192statement.193194  OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIRMAN OF THE195    SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND196  INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE197                           FROM OHIO198199    This is the third hearing with the director of the200Financial Crimes Enforcement Network (FinCEN), as required by201Section 5336(c)(11) of the Corporate Transparency Act.202    Today provides a public forum to examine FinCEN's203operations, the troubled status of the Beneficial Ownership204Information reporting regime, the Anti-Money Laundering Act of2052020, and the history and impact of the Bank Secrecy Act.206    The goal of this hearing is to assess these tools for207targeted reforms that enhance security without trampling on208privacy and innovation.209    This testimony should help Congress assess how these210frameworks target real threats, like terrorist and cartel211financing networks, scam centers, and other illicit finance.212    The big question is how they do it all while avoiding213surveillance of law-abiding Americans and small businesses.214    The Bank Secrecy Act was enacted in 1970 with a narrow good215intention: to create transparency against organized crime's216infiltration of our financial system.217    Over decades, the Bank Secrecy Act (BSA) has morphed into a218bloated surveillance machine demanding endless reports from219banks, businesses, and individuals without delivering220proportional results.221    Today, this framework is dangerously outdated, and the222BSA's one-size-fits-all mandates are tying up lots of223resources. Are they being used effectively?224    In recent years, the Bank Secrecy Act, Corporate225Transparency Act, and Anti-Money Laundering Act of 2020 have226proven sometimes ineffective, but always cumbersome.227    For example, FinCEN's own data shows that from 2014 to 2023228law enforcement agencies only accessed about 5.4 percent of the229millions of currency transaction reports filed under the Bank230Secrecy Act, highlighting how this flood of paperwork buries231real leads in bureaucracy instead of focusing on bad actors.232    On the CTA front, we have seen FinCEN issue overbroad rules233that treat every mom-and-pop shop around the country as234potential money launderers, forcing disclosure of personally235identifiable information into a Federal database that is not236well-safeguarded against hacks or misuse. That is not security;237that is an invitation for abuse, and we have witnessed it in238other cases, like Operation Chokepoint.239    While millions of American businesses are relieved by240March's delayed enforcement of the Corporate Transparency Act's241Beneficial Ownership Information mandates, they await clear242guidance from FinCEN about what the future looks like.243    We appreciate the interim rule, and we are happy to work to244finalize it. We are, in fact, working on a law to cement it.245The market really wants clarity and certainty on where things246are headed.247    Meanwhile, true threats--like Chinese fentanyl cartels are248laundering billions through U.S. real estate or Russian249oligarchs sometimes evading sanctions. They slip through250because resources are tied up with collection rather than251analysis.252    We need to index outdated Currency Transactions Reports253(CTR) thresholds for inflation. We should codify the full254repeal of CTA's Beneficial Ownership Information mandate on255U.S. businesses and focus it on external threats.256    This hearing is our chance to demand accountability.257    With that, I yield the balance of my time.258    I now recognize the ranking member of the subcommittee,259Mrs. Beatty, for 4 minutes for her opening statement.260261 OPENING STATEMENT OF HON. JOYCE BEATTY, RANKING MEMBER OF THE262    SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND263  INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE264                           FROM OHIO265266    Mrs. Beatty. Thank you, Mr. Chairman.267    Certainly thank you for being here, Director Gacki.268    You are going to have a lot coming at you today as our only269witness sitting up there, and I think you should take that as270because you have so much experience. You have worked through271President Trump's Administration, President Biden's272Administration.273    So we are hoping that today's hearing will shed light on274the national security consequences if we cripple your office275and our financial crime programs.276    Because one thing I can tell you is that we all are against277corruption. No one wants to be engaged sitting on this278committee by the very nature of the title that my Republican279colleagues have named it.280    I am very anxious to hear from you today.281    We know that the Financial Crimes Enforcement Network is282small, but it is of vital, vital importance in a bureau at the283Treasury Department that is tasked with protecting our284financial system from traffickers, from money launderers, from285terrorist facilitators, and other bad actors.286    To put this work in perspective, let us look, for example,287at something that we have all been engaged with on both sides288of the aisle, and that is illicit fentanyl, that trade that has289devastated our communities over the last decade. I can say--as290well as I am sure our chairman will, because we are both from291Ohio--and what has happened in our districts.292    FinCEN follows the money to the origins of these drug293supply chains to disrupt finance streams wherever it can;294hopefully, preventing synthetic opioids like fentanyl from295entering our country.296    When my constituents ask me what we are doing in Congress297to stop fentanyl deaths and protect our communities, I tell298them about the important work that we do on this committee to299make it tougher, to make it less profitable for drug300traffickers to conduct their crimes and FinCEN is central to301that effort and thank you.302    Given that, Director Gacki, I am proud of the work that we303have done in recent years to bolster our national security and304crack down on financial crime. However, today's hearing, our305first FinCEN oversight hearing since the administrations306change, comes in the wake of a series of dangerous rollbacks in307our illicit finance regulatory framework.308    And just to name a few, the Trump Administration has309endeavored to unlawfully eliminate the Consumer Financial310Protection Bureau, the agency responsible for protecting311Americans from fraud and abuse.312    The President has changed the way the United States313enforces the Foreign Corrupt Practices Act, which prohibits314Americans from bribing foreign officials.315    Perhaps the most alarming of all, Treasury Secretary Scott316Bessent gutted the bipartisan Corporate Transparency Act, which317President Trump signed into law during his first term,318exempting over 99 percent of the companies that Congress319intended the law to cover.320    This stunning reversal eliminates a critical new tool for321law enforcement to unmask anonymous shell companies,322effectively making the United States the preferred haven for323money laundering, traffickers, and fraudsters.324    Instead of working with Congress to make key reforms to the325law that would ease small business compliance concerns, the326administration chose to directly ignore the law as it was327passed and intended to be implemented by a strong bipartisan328Congress.329    Further, these recent actions threaten our national330security, weaken our efforts to fight money laundering and the331finance of terrorism, and give us fewer tools to protect332hardworking Americans.333    Good luck today, and we are excited to hear from you.334    I yield back.335    Chairman Davidson. Thank you.336    I now recognize the chairman of the full committee, Mr.337Hill, for 1 minute for an opening statement.338339  STATMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON340    FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS341342    Chairman Hill. Thank you, Mr. Chairman.343    I want to thank FinCEN Director Gacki for joining us today.344    It is good to see you. Glad to have you back before the345committee.346    FinCEN plays a crucial role in safeguarding our Nation's347financial system from illicit activity. Today's hearing will348give committee members the opportunity to hear from and349question the FinCEN director on the agency's operations,350including the current status, as noted by the ranking member,351of the Beneficial Ownership reporting rule and other efforts to352fight financial crime.353    I was pleased to see Treasury's interim rule issued in354March exempting U.S. companies from Beneficial Ownership355reporting requirements. It marks an important step toward356easing regulatory burdens on some 32 million hardworking357American small businesspeople nationwide and I look forward to358learning more about the forthcoming rule.359    We will also assess the Bank Secrecy Act's performance over360the past five decades and explore ways to modernize it and361ensure it remains effective in protecting our national362security.363    I look forward to the hearing. I yield back.364    Chairman Davidson. Thank you, Chairman.365    I now recognize the ranking member of the full committee,366Ms. Waters, for 1 minute for an opening statement.367368    STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE369  COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM370                           CALIFORNIA371372    Ms. Waters. Thank you, Chairman Davidson and Ranking Member373Beatty.374    While I am pleased to welcome back Director Gacki, I am375disappointed we are not more closely reviewing the Trump376Administration's and congressional Republicans' actions that377weaken America's capacity to stop money laundering and fraud.378    Today, American consumers are less protected from fraud and379corruption thanks to Trump's closure of agencies like the380Consumer Financial Protection Bureau.381    Today, America is less secure thanks to Trump's firing of382government examiners, investigators, prosecutors, and383inspectors general; and drug and human traffickers will thrive384due to the GOP's gutting of crime-fighting tools like the385Corporate Transparency Act and the Investment Advisers Rule.386    If we really want to stop fraud, we should not eliminate387the very government workers who are charged with doing so.388    I yield back.389    Chairman Davidson. I thank the ranking member.390    Today we welcome the testimony of Ms. Andrea Gacki,391director of the Financial Crimes Enforcement Network.392    Thank you for taking your time to be here.393    You will be recognized for 5 minutes to give an oral394presentation of your testimony. Without objection, your written395statement will be made part of the record.396    Ms. Gacki, you are now recognized for 5 minutes for your397oral statement.398399   STATEMENT OF MS. ANDREA GACKI, DIRECTOR, FINANCIAL CRIMES400                  ENFORCEMENT NETWORK (FINCEN)401402    Ms. Gacki. Thank you, Chairman Davidson, Ranking Member403Beatty, Chair Hill, Ranking Member Waters, and distinguished404members of this subcommittee. I thank you for the opportunity405to testify here today on behalf of the Financial Crimes406Enforcement Network, or FinCEN.407    I want to say at the outset how much I appreciate the408support of Congress and of this subcommittee in general in our409collective efforts to combat illicit financial activity.410    Today I plan to discuss how FinCEN has leveraged our tools411to advance this administration's highest national security and412law enforcement priorities to ultimately protect the lives and413livelihoods of the American people.414    First, FinCEN is deploying our resources against a number415of threat priorities, including countering cartels and drug416trafficking, imposing maximum pressure on Iran, fighting child417sexual exploitation, and combating fraud.418    In these remarks today, I want to focus a bit on our419efforts to counter cartels and drug trafficking.420    In one of his first executive orders, President Trump421established a policy of ensuring the total elimination of422terrorist-designated cartels in the United States.423    To implement this policy, this past June, pursuant to the424Fentanyl Sanctions Act, FinCEN identified three Mexico-based425financial institutions as being of primary money laundering426concern in connection with illicit opioid trafficking.427    FinCEN also issued alerts to financial institutions428targeting both cash smuggling by Mexico-based transnational429criminal organizations, as well as oil smuggling schemes along430the southwest border associated with Mexico-based cartels.431    We also published two comprehensive public financial trend432analyses, one on fentanyl-related illicit finance and one on433the key role of Chinese money-laundering networks to promote434disruption of key vectors of illicit finance and we have435leveraged these publications in public-private partnerships in436the fight against cartel finance.437    In June, we convened two FinCEN Exchange events along the438southwest border in Texas focused on combating money movements439associated with drug-trafficking organizations.440    This week FinCEN and our Treasury colleagues are convening441here in D.C. a cross-border dialog, together with the442Government of Mexico, the largest Mexican banks, and U.S.443correspondent banks to further efforts to eliminate Mexico-444based drug cartels on both sides of the border.445    Next, FinCEN is focused on efforts to streamline regulatory446requirements and reduce industry compliance burdens, including447through further implementation of the Anti-Money Laundering Act448of 2020, so that the Anti-Money Laundering/Combating the449Financing of Terrorism (AML/CFT) regime in the United States is450risk-based and focused on the greatest threats to financial451institutions and to national security.452    One key aspect of modernizing the Bank Secrecy Act regime453involves reporting, especially Suspicious Activity Reports, or454SARS, and Currency Transaction Reports, or CTRs.455    SARS and CTRs can provide critical information to law456enforcement partners. However, FinCEN recognizes the burden457this reporting imposes on institutions and individuals.458    We are currently exploring ways to streamline SARS and CTR459reporting, including by improving the forms, which will be460beneficial for law enforcement and national security data461users, as well as for filers.462    To further reduce the regulatory burden on U.S. companies463and U.S. persons, FinCEN modified our approach to Beneficial464Ownership Information, which I look forward to discussing in465this hearing.466    FinCEN is reviewing comments on the interim final rule467issued this past March, and we intend to issue a final rule468this upcoming year.469    Finally, let me highlight FinCEN's efforts to promote the470administration's goal of supporting the responsible growth and471use of digital assets.472    Digital assets, like other financial assets, are subject to473misuse by illicit actors. To unleash the full potential of474digital assets in the United States, certain measures should be475adopted to deter illicit finance and combat financial crime476that targets Americans. Faithfully and expeditiously477implementing the The Guiding and Establishing National478Innovation for U.S. Stablecoins (GENIUS) Act is one of those479measures.480    As FinCEN initiates rulemaking efforts necessary to481implement the GENIUS Act's required regulations, we will482continue our ongoing engagements with the digital asset483industry and with law enforcement. We also look forward to484engaging with Financial Services Committee members as Congress485considers further legislation in this area.486    Thank you again to this committee for your support and487partnership in combating illicit finance and I look forward to488your questions.489    [The prepared statement of Ms. Gacki follows:]490    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]491492    Chairman Davidson. Thank you, Director Gacki.493    We will now turn to member questions, and I recognize494myself for 5 minutes for questioning.495    Director Gacki, in your very thorough opening statement and496written testimony, I appreciate that you highlight your efforts497and the efforts of FinCEN to counter cartels; to counter Iran498and other threats to the United States; to confront human, sex,499child trafficking; to look at scam centers that are exploiting500our seniors in particular; and to modernize your tools that you501are using both internally and also responding to the market in502an era where digital assets have the opportunity to thrive and503people are also finding ways to use those, as they have every504other form of payment, for illicit finance.505    Thank you for your work.506    I appreciate your openness to some reforms on how to be507more effective in that. I want to highlight one of those, is508the Beneficial Ownership disclosure, because it seems that you509have made a decision, frankly, to focus on collecting510information about U.S. citizens differently than you collect511about noncitizens.512    I think that is important because our Constitution limits513the ability to presume that someone is guilty of a crime. You514are supposed to have probable cause and a warrant to get some515information.516    Beneficial Ownership, as drafted in the previous517administration, basically assumed every business was engaged in518illicit finance, and they had to provide collected material.519    I think it is unconstitutional, but as the courts fight520this out, you have stepped in. So could you give us an update521on progress toward that and what issues would be helpful for522Congress to clarify?523    Ms. Gacki. Thank you, Chair Davidson, for your question. I524also wanted to recognize the letter that you and other Members525and Senators sent to Secretary Bessent yesterday on the526Corporate Transparency Act and the way forward and wanted to527stress that the March 2025 interim final rule that FinCEN528issued took a different approach consistent with administration529priorities.530    As a career civil servant, I have served across531administrations and am proud of my track record in implementing532Presidential policy. The Presidential policy changed with533respect to the Corporate Transparency Act, focusing and making534sure that the burdens on 30-plus million small businesses were535taken into account.536    So FinCEN adjusted the reporting structure for the interim537final rule in this past March and opened it up for questions.538    The present rule requires reports from foreign reporting539companies that are not subject to any exemptions, and they are540required only to report foreign beneficial owners.541    We intend to finalize this rule in the upcoming year. That542is our public commitment. We are working through543administration, making sure we have administration guidance,544and working through the number of comments that we received to545the interim final rule.546    Along with the resolution of the rule, we intend to resolve547questions around the data that we gained and dispose of data548that is no longer legally required to be filed.549    So we look forward to concluding that this year.550    Chairman Davidson. Thank you. I will ask, without551objection, unanimous consent to submit the letter that I sent552to Secretary Bessent and others as addressed.553554    [The information referred to can be found in the appendix555on page 46.]556557    Thank you for addressing that and look forward to your558answer and working with you to get the law to match what the559administration's intent is. I appreciate your effort and560FinCEN's efforts to align there.561    I would also like to ask unanimous consent, without562objection, to submit for the record a press release from the563Judiciary Committee on fraud. It is titled ``Fraud on ActBlue:564New Report Details Potential Illegal Activity on the Democrat565Fundraising Platform,'' from April 2, 2025.566567    [The information referred to can be found in the appendix568on page 57.]569570    This is an example of financial crime where people are571being attributed to have given substantial sums of money, and572then when they are interviewed, they do not even have that kind573of money. They are not giving it. The question is, where is574that money coming from?575    Can you comment on that ongoing investigation?576    Ms. Gacki. Thank you, Chair Davidson.577    I know that my team is actively working with Members in578Congress to review our data to ensure that we are providing up-579to-date information on that ongoing investigation----580    Chairman Davidson. Are you working with the Department of581Justice on it?582    Ms. Gacki. We are working with congressional oversight583committees looking at the----584    Chairman Davidson. So at this point DOJ is inactive?585    Ms. Gacki. I am sorry. I do not have--I do not know the586status of DOJ's----587    Chairman Davidson. But they are not active with FinCEN?588    Ms. Gacki. Well, DOJ has access to our data.589    Chairman Davidson. Direct?590    Ms. Gacki. And they are able to view it, consistent with591the protections we have in place, and I defer to them on their592investigation.593    Chairman Davidson. Thank you.594    My time has expired. I now recognize the ranking member of595the subcommittee, Mrs. Beatty from Ohio, for 5 minutes.596    Mrs. Beatty. Thank you, Mr. Chairman.597    Thank you for that response to the chairman's last question598about the investigation with ActBlue. We know investigations,599whether it is ActBlue or the Epstein files, go both ways with600what we are looking at and what we read in articles. I note601that we are moving forward to looking at the Epstein files as602well but that is an aside.603    Let me say thank you again because last year I had the604distinct honor of having you in my district with former Under605Secretary Nelson for our small business information session on606the Beneficial Ownership Rule. At that event we talked at great607length about how critical this information is to law608enforcement, and many of them were present in our AML/CFT609regime.610    Let us fast forward to March of this year, and the Trump611Administration has done a total about-face, violating the clear612intent of the Congress to include domestic companies that are613not otherwise exempt from the law. In my opinion, they were614included because, in fact, there had been crime with the615domestic companies.616    Director Gacki, we applaud you for working across all617lines, but my question is, do you still agree that domestic618companies could present a money-laundering risk?619    Ms. Gacki. Ranking Member Beatty, thank you so much for620that excellent question.621    I want to thank you for welcoming me to your district last622year. It was a terrific experience to get to interact with your623constituents.624    I do want to step back and reiterate that, as a career625civil servant working across administrations, I will implement626the policy of the administration as it applies to Beneficial627Ownership Information.628    I would say the current administration has taken a look at629the reporting structure and assessed that the burdens on small630business fell too greatly and needed to be alleviated, and that631is what FinCEN did through the interim final rule.632    However, as you point out, there are still instances where633domestic shell companies can be leveraged in financial crime634and there I can point to other sources of information that can635help law enforcement if the Beneficial Ownership Information636regime is not being used.637    For example, FinCEN's Customer Due Diligence Rule on638financial institutions does require a collection of information639at the point at which accounts are opened, and financial640transactions and financial accounts are usually critical to all641forms of shell companies in the United States.642    That being said, we will be carefully reviewing the643responses to our interim final rule to see if any adjustments644need to take place. As this is an ongoing, open rulemaking, I645cannot discuss the ultimate resolution of that, but we look646forward to reviewing all comments on all sides of the647Beneficial Ownership issue.648    Mrs. Beatty. Thank you.649    Then let me make this comment, and I will phrase it versus650in a question to what I believe.651    I believe that it is accurate to say that the Treasury's652recent decision to exclude domestic reporting companies from653enforcement exempts the vast majority, I believe roughly 99654percent of covered entities, from the reporting rule.655    Also, I believe that, therefore, this decision to exempt656U.S. companies makes it easier for fentanyl traffickers and657other criminals to launder money through the United States,658endangering the safety of our constituents.659    Do not want to put you on the spot. There are many who660believe that. We have records to show from drug trafficking661coming into Ohio and across many of our highways.662    So let me just say that I am going to continue to be an663advocate against illicit crimes. If that means us doing due664diligence of asking for information about who owns a business--665I am a business owner--you would have no reason in supplying666the information.667    I suggest to some of my colleagues, if they pull up the668form and look at the questions that are being asked, they669appear to me to be standard questions that any business doing670good business, legal business, should want to do.671    Thank you. I yield back.672    Chairman Davidson. Thank you.673    Ms. Gacki. Thank you.674    Chairman Davidson. I thank the ranking member.675    The gentleman from Arkansas, the chairman of the full676committee, Mr. Hill, is now recognized for 5 minutes.677    Chairman Hill. Thank you, Chairman.678    Both before and after the passage of the Corporate679Transparency Act back in 2021, I spent a lot of time advocating680for alternatives to the rulemaking that was taken, even the681statutory language that the Congress agreed to in a National682Defense Authorization Act (NDAA) amendment. That includes683debating vigorously with former Ways and Means Chair Brady and684former Treasury Secretary Mnuchin.685    I have advocated for is not there a better way, instead of686creating a new database that can be breached, hacked,687collecting more information that can only be filed online for68832 million small businesses? Every heating and cooling owner689out there with a truck and three employees is going to be690captured by this, for example.691    While, as I noted in my opening comments, the March interim692rule was helpful, I think there is a better way, which is693simply using the existing Form 1065, which every pass-through694entity has to file, and the resulting K-1s that are issued.695    Let me say in front of the whole committee, why was that696not treated as a real possibility, number one? The Ways and697Means Committee and the Treasury said: We just do not want any698more exceptions to sharing IRS data. Well, there are 35 or so699now.700    If this is such a national security essential element, why701would this not be a worthy additional sharing?702    Under CTA companies are required to report four key pieces703of information--full legal name, date of birth, current704address, and a unique identifier.705    Of course, that is all available, except for the birth706date, which I think we can figure out. I believe we have open-707source data on everybody's birthday. We will refer the FinCEN708to Facebook for that, if you need help on that but I really709think that this is a better approach. You do not have to710express an opinion on it. You are implementing the law. I got711it but I think this is a good opportunity to illustrate we712never, ever really tried to minimize the cost of 32 million713people.714    Would you not agree, though, that this would be an easier715way to use data that the Federal Government already has legal716access to?717    Ms. Gacki. Chair Hill, thank you so much for that question718and those excellent points and I appreciate your focus on this719issue.720    I think that the idea that the congressional and executive721branches should look at existing pools of data and determine722how best to use those in the first instance is very well-taken.723I look forward to working with Treasury leadership on this724particular issue to explore whether this is a possibility.725    Chairman Hill. Thank you for that.726    Let me switch subjects to the important one of Geographic727Targeting Orders, which has been actually a big successful728strategy of FinCEN for many decades and was actually tackling729the issue of shell companies and people hiding assets but there730has been a recent change, which is that there is a new731nationwide rule as opposed to limited geography, requiring real732estate professionals to report all nonfinance purchase of real733estate. According to FinCEN's estimates, the real estate734industry is expected to bear over $630 million in compliance735costs or about $600 per report filed based on some 850,000736transactions a year.737    Based on our years of experience with geographic targeting,738what is your--how do you justify that cost related to the739actual crime--I mean, law enforcement goals being objected--740obtained, I should say?741    Ms. Gacki. Thank you, Chair Hill.742    I think to the point we have been--FinCEN has been issuing,743using the tool of the Geographic Targeting Order for 10 years744across administrations, to seek information on shell companies,745entity--legal entities purchasing real estate in a nonfinanced746way.747    The thing about the Geographic Targeting Order is it is a748temporary measure that can only be renewed if there is a law749enforcement need for that information. Over 10 years, we have750seen an incredible thirst among law enforcement for this751information and this information being used in active and752successful law enforcement prosecutions.753    That drove the decision to make what was a temporary754measure into a permanent measure widely applicable to be the755Residential Real Estate Rule, which is scheduled to come into756effect in December 2025.757    We do think the benefits of this data----758    Chairman Hill. If you could provide me with some of that759information in writing, and then also the results of the law760enforcement successes in the past decade, that would be761helpful.762    I yield back, Mr. Chairman.763    Chairman Davidson. Thank you, Chairman.764    The gentlewoman from California, the ranking member of the765full committee, Ms. Waters, is now recognized for 5 minutes.766    Ms. Waters. Thank you very much.767    Director Gacki, last month your agency, FinCEN, sounded the768alarm on Chinese money-laundering networks. In more than a769dozen examples you warned that these organizations use U.S. and770foreign corporate structures to hide, launder money, park771assets, and repatriate the illicit funds from criminal772activities, including human trafficking and smuggling across773and beyond the southwest border.774    Yes or no, was Under Secretary of Treasury for Terrorism775and Financial Intelligence John F. Hurley--John K. Hurley--776correct when he stated on the documents release that the777Chinese money-laundering network enabled cartels to, quote,778poison Americans with fentanyl, conduct human trafficking, and779wreak havoc among communities across our great Nation?780    Ms. Gacki. Yes, ma'am. Under Secretary Hurley said that781question--said that statement.782    We have seen Chinese money-laundering networks to be a783prevalent form of money laundering that are increasingly being784leveraged by cartels to facilitate narcotics trafficking.785    It is a way--it is leveraging--it is taking advantage of786laws, both in Mexico and in the People's Republic of China,787against funds flows out of those countries or into those788countries of U.S. dollars and there is an informal789decentralized network being leveraged by cartels to launder the790sums being used to export narcotics and other drugs to the791United States.792    Ms. Waters. Thank you for that.793    I want to move on to some work that I have been doing on794the Caribbean on de-risking.795    In 2023, as required by the Anti-Money Laundering Act of7962020, the Treasury Department released its U.S. Government-wide797de-risking strategy.798    Having worked for years with those most heavily impacted by799de-risking, including many Caribbean nations and territories800that are effectively cutoff from the international banking801community, I was pleased to see the release of this strategy.802    Its importance was underscored at a 2022 hearing that I803chaired where Prime Minister Mia Amor Mottley of Barbados gave804historic testimony about the negative effects of de-risking on805the people and businesses in the region.806    The Treasury strategy recommended several follow up807actions, including a joint study by the Federal banking agency808and FinCEN, revision of money service business oversight809standards, and improvement of international cooperation.810    Can you please elaborate on what exactly FinCEN and partner811Treasury offices have done to pursue the steps laid out in the812strategy? What does your agency have planned for the next year813related to de-risking, especially in the Caribbean region,814especially related to access to correspondent banking service?815    Ms. Gacki. Ranking Member Waters, thank you for that816question and for your longstanding interest in this issue.817    I want to assure you that, since the President issued an818executive order this past August guaranteeing fair banking for819all Americans, Treasury is working to implement the President's820executive order to guarantee that for all Americans.821    Beyond that, for many years FinCEN has noted that its822policies should not equate to the de-risking of populations. So823I want to focus on FinCEN's work here. In the broader--on the824broader Treasury response to de-risking, I look forward to825getting back to you and your staff on that.826    As FinCEN noticed in a statement on customer due diligence827issued by FinCEN and the Federal banking agencies, banks that828operate in compliance with their Bank Secrecy Act obligations829and effectively mitigate and manage their illicit finance risks830are not prohibited or discouraged from providing banking831customers of any specific class or type.832    I look forward to working with our Federal banking agency833colleagues to further clarify that as needed.834    Ms. Waters. Thank you.835    I am just interested in follow up to see if changes should836be made based on long-time policy, what kind of factual837information is being used in examining this de-risking issue.838    I yield back.839    Ms. Gacki. We will get back to you on that.840    Chairman Davidson. I thank the ranking member.841    The gentleman from Oklahoma, the chairman of the Monetary842Policy Task Force, Mr. Lucas, is recognized for 5 minutes.843    Mr. Lucas. Thank you for holding this hearing, Mr.844Chairman.845    Thank you, Director Gacki, for testifying today.846    Director Gacki, fraud in our financial service system847continues to be one of the top burdens facing my home State.848    Can you detail FinCEN's approach to dealing with this849problem? The folks back home want to see some more progress.850    Ms. Gacki. Thank you, Representative Lucas.851    This is a huge issue for us at FinCEN and across the852Treasury Department. In fact, in many money-laundering risk853assessments facing the United States, fraud is the crime--is854the highest revenue-generating crime that features money855laundering, and this has been proven time and again, and it is856growing at an exorbitant pace.857    FinCEN is--this is one of the key areas that FinCEN is858dedicated to and let me outline a few things we are doing on859this.860    First, we are trying to educate financial institutions as861to markers of fraud so that they can be on the front end862deterring this and stopping this. We have issued financial863trend analyses, for example, on elder financial exploitation. A864few--just earlier this past summer, we issued an alert on the865abuse of basically convertible virtual currency kiosks and how866they can be used in any financial exploitation.867    Just yesterday, we issued an alert on the troubling pattern868of sextortion, a very specific type of fraud.869    Not only are we focused on different fraud typologies and870making sure financial institutions are tracking that, but we871are also actively working on repatriating funds that are taken872by means of fraud.873    FinCEN has an active program called the Rapid Response874Program that focuses on the fraud typology of business email875compromise, and we work closely with the Federal Bureau of876Investigation (FBI), Secret Service, and Internal Revenue877Service (IRS) Criminal Investigations where we can work through878international counterparts to freeze or repatriate funds taken879from Americans and brought overseas.880    Since the inception of that program, we have repatriated881over a billion dollars, and this is an incredible program that882we look forward to building and developing to bring really883meaningful action to ordinary Americans.884    Finally, I just want to note the day-to-day, everyday case885support we do for fraud investigations across the United States886at every level of law enforcement--State, local, Federal--to887make sure that Americans are getting the help they need to stop888these vectors of fraud.889    Mr. Lucas. Director, I would like to follow up on that890question.891    Part of the problem seems to be that FinCEN is overwhelmed892with data, sometimes immaterial data that dilutes the helpful893information the agency could use.894    Have you considered focusing reporting obligations so that895FinCEN only receives relevant information for law enforcement896investigations?897    Ms. Gacki. Thank you, Representative Lucas.898    Yes, and this is, I think, a broader part of modernizing899the Bank Secrecy Act regime, and very much one key element of900that is making sure that financial institutions, AML/CFT901programs, are consistent with the law, that they are effective902and risk-based, and that they are producing information that is903valid to law enforcement.904    We are in the midst of a Treasury-wide exploration of how905to reform the Bank Secrecy Act regime in the United States, and906one part of that--a key part of that--is reporting, including907Suspicious Activity Reports and Currency Transaction Reports.908    We should be collecting information that is truly important909to law enforcement and national security and to the extent that910requires adjustments of the types of information that we ask911for, to simplify the forms in the thresholds, we are actively912exploring that and hoping to bring it to conclusion as soon as913possible.914    Mr. Lucas. Let me simply note that it looks as though915FinCEN has increased the administrative burdens of small916business and credit providers, in many ways without seeing917results, which simply suggests that a targeted approach might918allow for better outcomes and a more enthusiastic support from919the providers of that information.920    With that, I yield back, Mr. Chairman.921    Chairman Davidson. Thank you, Chairman.922    The gentleman from California, who is the ranking member of923the Monetary Policy Task Force, Mr. Vargas, is now recognized924for 5 minutes.925    Mr. Vargas. Thank you very much, Mr. Chairman. Again, I926want to thank you for conducting this hearing and thanking the927ranking member and, of course, the director.928    Mr. Chairman, at the beginning you talked about the929surveillance machine. It really caught my attention because I930think that generally falls within the perspective or ideology931of a lot of my friends on the Republican side that government932should be limited, that we should not have the intrusion of933government in our private lives, that there has to be a934balance.935    I normally fall on the side of saying government is936generally good and I am very supportive of government in937general.938    I have to say, it has been fascinating to see under this939administration how incredibly intrusive the government has940grown, not only into our private lives, but interestingly now,941into business.942    I mean, we see government now taking positions in943individual companies. That used to be called socialism. That944used to be called entities owned by the government. I945understand. We have Government-Sponsored Enterprises (GSEs).946These are private companies that Congress created to make sure947that there was liquidity in the secondary mortgage market and948there is stuff like that.949    Taking positions, picking losers, picking winners has950normally not been the ideology of the Republicans. Yet you see951that in this administration, and you do not see much talk about952it on the other side, saying, wait a minute.953    If the Democrats had done this, the Democrats had put all954this surveillance on the streets, what we see now, the955militarization that we see, there would have been, of course,956people screaming left and right because of the intrusion of957government into our lives. I understand that but we do not see958it now.959    Again, I caution you because there will be a time when the960government flips, and you will say, well, wait a minute, you961cannot do this. Well, we will remind you that you did not say962anything when the Trump Administration did it and it really is963sad to see.964    Again, I am not one that is against government. I think965government generally does a good job, but I have always admired966the Republicans, really starting with Reagan, saying there967should be some limit here as to the intrusion that government968has in our lives.969    You have seen the creep become a race now, not a creep. It970is incredible the way this administration has really put the971Federal Government into our lives.972    Now, even going to the airport, they take all of this973information, biometric information. I do not know what they do974with it.975    Maybe you do, Director. I do not know. Someone must know.976    All that being said, I do want to talk about elder abuse.977You spoke about it a little bit, but I do want to get into it a978little bit more.979    You did say in April 2024, you published a financial trend980analysis looking at the patterns and data of the elder981financial exploitation according to this analysis.982    Between June 2022 and June 2023, FinCEN received more than983155,000 elder financial exploitation reports associated with984more than $27 billion in reported suspicious activity. The985filings show that scams accounted for 80 percent of the986reported elder financial exploitation activity.987    What role does FinCEN play in addressing this financial988exploitation against elder adults, older adults?989    Ms. Gacki. Thank you, Representative Vargas.990    Yes. So the financial trend analysis on elder financial991exploitation and different guidance processes--guidance992products that we have issued ask filers, financial993institutions, to use those as guideposts to provide us with994financial intelligence that law enforcement can action to995actually go after those perpetrators of fraud against our996elderly population.997    So not only does FinCEN play a role at educating financial998institutions as to what to look for so we get high-quality999financial intelligence, but we also actively support law1000enforcement.1001    Mr. Vargas. So how do you use AI, if you do? Because I know1002my time is going to run out. How do you use AI to do this?1003    Ms. Gacki. So there is a--of course, it is an1004administration priority to incorporate the use of artificial1005intelligence tools to analyze data and FinCEN, like other1006Federal Government agencies, is exploring that.1007    We do use advanced artificial intelligence products in1008terms of machine learning and other data analytics because1009FinCEN does collect and protect a large amount of data in order1010to truly support law enforcement with the highest quality1011information.1012    Mr. Vargas. My time has expired but thank you.1013    Thank you. I yield back.1014    Chairman Davidson. Thank you, Mr. Vargas.1015    I would like to recognize the gentleman from Texas, Mr.1016Sessions, for 5 minutes.1017    Mr. Sessions. Thank you very much, Ms. Gacki. I appreciate1018you being here.1019    I would like to ask for your help in helping me work1020through not the entirety, but what you have discussed here1021today about cartels, movement of money, but directly related to1022what are called anti-laundering regulations for residential1023real estate transfers.1024    Can you talk with me about that, the need for that1025information? I am old enough where I have run across people1026asking for information when I pay cash for things, and they1027were very specific of things that they wanted that were1028personal to me and not part of the transaction.1029    Can you talk with me about that part of what FinCEN has1030done?1031    Ms. Gacki. Absolutely. Thank you, Representative Sessions,1032for that question.1033    For the past 10 years, at the request of law enforcement,1034FinCEN has sought, through use of a temporary measure, the1035Geographic Targeting Order, information on nonfinanced, all-1036cash purchases of real estate if they are done not by an1037individual but by a shell company.1038    So just two important caveats there. These are not1039financed--there is no mortgage lender involved at all, no1040financial institution.1041    Mr. Sessions. So nothing about what you have done would get1042in the process of an individual buying property on a cash1043basis?1044    Ms. Gacki. That is right. The residential real estate rule,1045which makes permanent the temporary measure of the Geographic1046Targeting Order, is focused on entities, legal entities, that1047are doing this purchasing and seek reporting on those and there1048are exceptions to those, too.1049    For example, if the disposition of a property, for example,1050is by court order--it could be a settlement of an estate or1051something--that would not be covered by our rule.1052    I would be happy to work with your team to----1053    Mr. Sessions. No. I am the one that has got the problem1054with it, not my team.1055    Specifically, what happened is when I went to file for a1056loan, they requested information that I considered private and1057extraneous to that information, but they wanted personal,1058private data and information.1059    So I moved into--just to use cash instead of providing what1060I considered to be unprofessional asking of personal data.1061    So you are telling me there is nothing--I would not be1062caught up in that, you would not be looking at that, only where1063there is a shell company that is considered a shell attempting1064to purchase real estate?1065    Ms. Gacki. That is correct, Mr. Sessions. It is a rule that1066is looking to pierce who are the real people behind the shell1067company is making cash purchases of real estate, not1068individuals.1069    Mr. Sessions. Good. Well, I would reiterate, I had not1070talked to the chairman about this, but in listening to the1071chairman about data and information that is being held by you1072or any other government really, anybody, that is subject to1073being stolen by people.1074    What is the retention period that you generally have on1075issues that may have been in the past where you had completed1076the investigation? What do you do with that data and what is1077the timeframe that you would keep it? Is there a retention1078period?1079    Ms. Gacki. Thank you, Mr. Sessions.1080    So our--the information that we hold that is filed by--1081under the Bank Secrecy Act that FinCEN collects, disseminates,1082protects is held at the highest level of data protection for1083nonclassified systems in the U.S. Government.1084    In terms of a retention period, this is something----1085    Mr. Sessions. Where is that in the United States1086Government?1087    Ms. Gacki. Excuse me? Where are the data or the rules?1088    Mr. Sessions. You said it is being held by the--at the1089highest security. Well, obviously, Social Security is high1090also, and those files are purged.1091    If you could please have your staff get back to me in a1092detailed fashion and tell me about the retention of data, not1093in an active investigation, but some that may have been--that1094would have been completed or that was requested and not needed,1095what that retention is, where it goes, and how long it has been1096kept.1097    Ms. Gacki. Absolutely, sir.1098    Mr. Sessions. I would appreciate that.1099    When do you anticipate that you would provide that?1100    Ms. Gacki. Sir, we will get that to you in the next few1101weeks.1102    Mr. Sessions. Good. Thank you very much.1103    Mr. Chairman, I want to thank you for holding this and I1104thank Ms. Gacki for taking time to be here to help me clear up1105a question that I had.1106    I yield back my time.1107    Chairman Davidson. Thank you.1108    The gentleman from California, Mr. Liccardo, is now1109recognized for 5 minutes.1110    Mr. Liccardo. Thank you, Mr. Chair.1111    I want to thank you and your team, Director Gacki, for the1112really important work that FinCEN does.1113    I was a Federal prosecutor many years ago and relied1114frequently on the great work of FinCEN as we were prosecuting1115narcotrafficking at the border.1116    In particular, we are seeing more and more of the illegal1117transactions relating to money laundering occurring in crypto,1118as well as fraud. I commend you and your team for the work that1119you have recently done on convertible virtual currency kiosks,1120or crypto ATMs, which I know has been a particular source for1121FinCEN and a lot of law enforcement.1122    In your August statement, you acknowledged that there is1123rising fraud in cybercrime and drug trafficking through these1124kiosks.1125    I presume that the concern arises because of the1126pseudonymity that relates to crypto transactions. Is that1127right? It is difficult often for people to identify who exactly1128is doing the transacting?1129    Ms. Gacki. Thank you, Representative Liccardo, for that1130question.1131    I think there--I do--yes, there can be some anonymity-1132enhancing aspects to convertible virtual currency.1133    I do know that our team works very closely and uses1134blockchain analytic tools in order to be able to aid1135investigations to ensure that does not remain a barrier and to1136put out guidance for financial institutions to be alert to any1137aspects of the misuse of these types of tools.1138    Mr. Liccardo. Particularly with the use of mixers and other1139tools, criminals are able to evade even some of the more1140sophisticated detection techniques in terms of identifying1141them. Is that right?1142    Ms. Gacki. Yes, sir.1143    Now, mixers are something that we are currently taking a1144look at. We issued a proposed rule on mixers in the previous1145administration and are exploring the next step on that.1146    We have to take a look at the fact that--we have to make1147sure that we tailor any approach here to be really directed at1148illicit activity and that we are not sweeping in any legitimate1149transactions.1150    Mr. Liccardo. Sure.1151    Ms. Gacki. And are trying to leverage these tools to, for1152example, shield their transactions from repressive regimes.1153    Mr. Liccardo. Sure.1154    Ms. Gacki. It is a delicate thing. We have to work through1155administration guidance, and I look forward to engaging with1156you on it.1157    Mr. Liccardo. I recognize that there is legislation1158pending, the CLARITY Act, in which we are looking to impose BSA1159requirements to help you do your job and law enforcement do1160your job with regard to centralized exchanges. Of course, there1161is also decentralized finance, DeFi, where there are no such1162requirements.1163    How exactly are you able to do your job when millions of1164dollars may be moving through DeFi, particularly given recent1165studies that showed as recently as January that 91 percent of1166fraud and theft that was occurring in the 1,100 cases that were1167examined under this study, 91 percent was happening on DeFi1168protocols? What exactly--what tools do you have left?1169    Ms. Gacki. Thank you, Representative.1170    This is something that we are actively working on, not just1171in implementing different reporting and different exploratory1172subjects set forth in the GENIUS Act, of which FinCEN is a1173critical implementer, but also outcomes from the President's1174Working Group on Digital Assets and the report there.1175    So looking at DeFi, looking at the appropriate requirements1176for--Bank Secrecy Act requirements for that industry--is1177something that my agency is taking on, and we look forward to1178working with both industry and law enforcement to make sure we1179are striking the right balance.1180    Mr. Liccardo. Perhaps I can just, given my limited time,1181identify my big concern.1182    Right now your agency, through its rulemaking, has decided1183that it would not collect Beneficial Ownership Information from1184U.S. corporations or U.S. persons. All that is required to1185satisfy those standard Beneficial Ownership Information1186requests is the name, date of birth, residential street1187address, and the ID from your driver's license. That is all1188that is required.1189    We know that U.S. companies--shell companies--can be1190created to move millions of dollars, billions of dollars1191through these illicit channels using DeFi. You will not be able1192to identify, nobody will identify who these folks are because1193we do not have beneficial ownership information (BOI)1194requirements, and you do not have any mechanism for identifying1195who they are on DeFi protocols.1196    Chairman Davidson. The gentleman's time is----1197    Mr. Liccardo. Does not this create an enormous opportunity1198for criminals?1199    Chairman Davidson. The gentleman's time has expired. I1200would encourage follow up in writing as we will have additional1201questions submitted for the record.1202    I would like to recognize the gentleman from Texas, who is1203also the chairman of the Small Business Committee, Mr.1204Williams, for 5 minutes.1205    Mr. Williams of Texas. Thank you, Mr. Chairman.1206    Thank you for being here today.1207    FinCEN's Beneficial Ownership reporting regime created a1208compliance nightmare for small business owners in my home State1209of Texas and across the Nation.1210    While I was pleased to see that Treasury was issuing an1211interim final rule that would require only foreign companies to1212report their BOI to FinCEN, I am still concerned about the data1213on domestic small businesses that were collected before the1214change in reporting requirements.1215    By holding on to this data, FinCEN has created unnecessary1216privacy and security risks for millions of small businesses1217across this great country.1218    So, Director Gacki, will you commit to deleting the1219Beneficial Ownership Information of business owners who are no1220longer required to file with FinCEN?1221    Ms. Gacki. Representative Williams, thank you so much for1222that question.1223    With the interim final rule that was issued in March, as1224you noted, FinCEN has readjusted the requirements for filing to1225really put the obligations only on foreign reporting companies1226and only to the extent they have foreign beneficial owners.1227    We are in the process of reviewing the comments to that1228rule and we expect to make that rule final this calendar year.1229    With the finalization of that rule, we expect to resolve1230any data questions involving the data that we have and it is1231our intention, along with resolution and finalization of that1232rule, to delete any information that was filed that is no1233longer required to be filed that is currently being protected1234at FinCEN.1235    Mr. Williams of Texas. Thank you.1236    I want to shift gears and discuss the residential real1237estate transfer rule.1238    This rule requires that certain businesses involved in real1239estate closings and settlements to collect and report1240Beneficial Ownership Information nationwide.1241    In practice, more than 800,000 individuals would be1242required to file reports, resulting in over 4 million hours of1243compliance work. The estimated cost of this burden is an1244astonishing $630 million, according to some of FinCEN's1245estimates. These compliance costs will inevitably raise the1246price of purchasing a home, making it even harder for families1247to achieve the American dream of ownership.1248    So, Director, again, given this rule raises compliance1249hours and costs at an alarming level, is FinCEN considering1250delaying this rule and properly rescoping it in a way that it1251does not create so much regulatory burden on small business?1252    Ms. Gacki. Representative Williams, thank you again for1253that excellent question.1254    We believe that the residential real estate rule puts in1255place what had been a temporary measure across 10 years of1256collecting information from shell companies making nonfinance1257purchases of real estate that has been incredibly beneficial to1258law enforcement. We have renewed that Geographic Targeting1259Order across administrations based on the strength of the1260reporting of the information and how vital it is for law1261enforcement.1262    We believe that the benefits to the United States and to1263Americans in gaining this information is critical and justifies1264the expense of the residential real estate rule.1265    In fact, we believe that ensuring that shell companies1266purchasing financial--purchasing residential real estate in a1267way that has not been detected can actually skew home prices,1268which is another justification for why this rule is--we believe1269is justified. We do expect--we are planning for it to come into1270effect in December.1271    Mr. Williams of Texas. Okay. Last question really quick.1272    The residential real estate transfers rule, like the1273Beneficial Ownership reporting requirements, will affect a1274large number of small businesses.1275    As we saw for the Beneficial Ownership Information1276reporting requirements, millions of small businesses in the1277United States were largely unaware that they had to comply and1278were even unaware of the existence of FinCEN.1279    My concern is that similar as before, small businesses,1280like title companies, will not be educated on those1281requirements and unfairly punished for something they are1282unfamiliar with.1283    So, Director, quickly, this new residential rule shifts a1284heavy burden on title companies, many of which are small1285businesses, and given the complexity of the rule, what has1286FinCEN done to educate and prepare these companies and has1287FinCEN engaged directly with title professionals and issued any1288public guidance to help them understand and comply?1289    Ms. Gacki. Thank you, Representative Williams, and thank1290you for another excellent question.1291    We have been working with title companies on education, but1292if we determine that more time is needed for them to be able to1293implement this rule, we will certainly explore methods and ways1294to give them that additional time to ensure a responsible1295implementation of this rule.1296    Mr. Williams of Texas. Thank you very much. I yield my time1297back.1298    Chairman Davidson. Thank you, Mr. Williams.1299    I now recognize the gentleman from Kentucky, Mr. Barr, who1300is also the chairman of the Subcommittee on Financial1301Institutions, for 5 minutes.1302    Mr. Barr. Thank you, Mr. Chairman.1303    Director Gacki, thank you for your service.1304    FinCEN is responsible for issuing guidance for section1305314(b) of the Patriot Act which allows financial institutions1306to share information with one another regarding activities that1307may involve money laundering or terrorism.1308    Only 3,626 banks out of the approximately 9,148 banks and1309credit unions nationwide are actually registered to share1310information, and in the Commonwealth of Kentucky only 471311financial institutions out of 178 participate in 314(b) data1312sharing.1313    Director Gacki, I have heard from community banks in1314Kentucky that there is a lack of clarity with the current1315guidance on the safe harbor on what is permissible to share.1316    If FinCEN's guidance better outlined what data is covered1317under the safe harbor and promoted more fraud information1318sharing, it is likely more institutions would participate.1319    What is FinCEN doing to increase the uptake in this data1320sharing?1321    Ms. Gacki. Representative Barr, thank you for that1322excellent question.1323    The 314(b) program is an important one for FinCEN, and we1324want to ensure that financial institutions are leveraging the1325information-sharing potential involved in that.1326    To the extent your banks in Kentucky or banks elsewhere are1327asking for greater clarity on the safe harbor, I can commit1328that it is something we will look into and explore providing1329it.1330    This is something that we use our FinCEN Exchange events to1331ensure is well understood, but if greater guidance is needed1332here, I will certainly look into it.1333    Mr. Barr. Thank you very much for your attention to that1334concern.1335    Also, if there is one complaint or concern that community1336financial institutions raise with me, it is the prevalence and1337increased prevalence of fraud in our financial system.1338    You noted in your written testimony that cyber-enabled1339fraud remains elevated and increased reports of fraud and1340cybercrime, we are seeing upticks in that reporting every1341single year. Elder financial exploitation, government benefits1342fraud, digital asset investment scams, account takeover1343attacks, AI-enabled fraud. So lots of theft.1344    You have talked a little bit about this in your testimony,1345but can you amplify FinCEN's focus on this and how you can help1346financial institutions that want to do right by their customers1347and limit their exposure to fraud?1348    Ms. Gacki. Absolutely, Representative Barr.1349    So I think making sure that financial institutions have the1350tools they need to help detect it, whether through alerts,1351advisories, financial trend analyses, through Exchange events1352where we bring law enforcement together with financial1353institutions and public-private events to ensure that there is1354a direct communication to act as that critical juncture between1355law enforcement and banks of all sizes, financial institutions1356of all sizes, to ensure their data--that they are looking for1357what law enforcement needs and helping protect their customers1358and in turn the American people. That is absolutely something.1359    I should also note that another thing that FinCEN does is1360we also have our own targeting authority through special1361measures to look at foreign actors of primary money laundering1362concern that are engaging in fraudulent activity.1363    We took one action this past year against Huione Group1364based in Cambodia which was being used as a vector for elder1365financial exploitation, for pig butchering, and the like. We1366issued a notice of proposed rule that we hope to make final1367soon.1368    That was a way in which we could look at a critical1369external node for fraud and stop it and help financial1370institutions detect it in their own systems.1371    Mr. Barr. Thank you.1372    My final time, there is a narrative that and critics of the1373innovation in crypto and digital assets that the movement of1374transactions to the blockchain creates additional fraud risks1375and risks for criminal activity.1376    Can you share FinCEN's views on how the movement of1377transactions to the blockchain actually could assist in law1378enforcement in preventing fraud, criminal activity, money1379laundering, and the like?1380    Ms. Gacki. Thank you, Representative Barr. I know that I1381have very little time.1382    I can tell you that, yes, the blockchain actually brings1383transparency, and with the right tools you can use it to1384leverage, to really help detect illicit transactions for law1385enforcement and I am happy to engage with you.1386    Mr. Barr. Thank you. I yield back.1387    Ms. Gacki. Thank you.1388    Chairman Davidson. Thank you, Mr. Barr.1389    The gentlewoman from California, Mrs. Kim, is now1390recognized for 5 minutes.1391    Mrs. Kim. Thank you, Chairman Davidson.1392    I want to thank Ms. Gacki for joining us today.1393    Last year FinCEN finalized the residential real estate1394transfer rulemaking that required title insurers to provide1395FinCEN with the names of the individuals who purchased a home1396valued more than $300,000 in southern California and utilized1397certain forms of payment.1398    I wanted to know, in southern California, especially in1399Orange County where I represent, the medium home price there is1400over $900,000, almost a million, and that placed a high burden1401on many of my constituents who own small family run title1402insurance companies.1403    In FinCEN's economic analysis of the residential real1404estate reporting rule, they estimate that the first year1405compliance cost could reach close to $560 million.1406    Can you talk about how FinCEN would tailor your approach to1407this issue, so California's small businesses are not unfairly1408burdened by duplicative or low-value reporting requirements?1409    Ms. Gacki. Thank you, Representative Kim, for that1410question.1411    We are working very closely in the implementation of the1412residential real estate rule with organizations that represent1413title companies to ensure that the requirements are well1414understood and that they are implemented in as cost-effective1415and efficient manner as possible. To ensure that small1416businesses, like the title companies in southern California,1417have adequate resources and knowledge to implement this is1418certainly something we will explore to ensure they have enough1419time and resources.1420    Mrs. Kim. In your earlier exchange with my colleagues, you1421talked about GTO, Geographic Targeting Orders. You said that it1422is a temporary tool that is used by law enforcement and the1423success of it made it permanent but the comments and the1424feedback that I am hearing from my constituents about that are1425that there is such little understanding about how that1426information that FinCEN is collecting is actually helpful.1427    So can you talk about how FinCEN is utilizing the data from1428the real estate GTO?1429    Ms. Gacki. Absolutely. Thank you, Representative Kim.1430    So the data is made available and accessible to law1431enforcement users at local, State, Federal, and national1432security professionals across the country.1433    We have almost 25,000 law enforcement users across 4001434different agencies in the United States at all levels accessing1435this information.1436    This provides critical tip and lead information that has1437proven vital to successful prosecutions for crimes such as1438narcotics trafficking, to include fentanyl, for fraud, for1439terrorist-related actions across the country.1440    I would be happy to give you more specific details in a1441follow up conversation.1442    Mrs. Kim. All right. Let us talk about that.1443    The residential real estate rule, once again, places much1444of the reporting responsibility on title companies, and there1445are over 90 percent of the companies being small businesses.1446    I want to ask you what steps you are using. I know it was1447already discussed regarding the education, regarding preparing1448the industry for that complex rule. You did say FinCEN is doing1449your best to educate the industry.1450    I would like to take you up on that offer and see if you1451can come to my district and have a roundtable discussion with1452my constituents, my title insurance companies in my district.1453That would be very helpful, and I am happy to put together a1454roundtable discussion with you.1455    Ms. Gacki. We would welcome that opportunity. Thank you1456very much.1457    Mrs. Kim. Great. All right.1458    However, I remain concerned that the expansion of the1459residential real estate rulemaking nationwide will only hurt1460these family owned small businesses, and the implementation of1461the nationwide GTOs, which starts on December 1, seems like far1462too little time to give these small businesses time to prepare.1463    To that end, I would like to submit this letter that I1464received from the American Land Title Association into the1465record, and it highlights their concerns with the timeline and1466the impacts that this will have on the title industry.1467    I hope you will consider delaying--review this and delay1468the implementation of this nationwide GTO and continue to work1469with the industry so we can find effective and efficient ways1470to fight the money laundering.1471    Chairman Davidson. Without objection.1472    [The information referred to can be found in the appendix1473on page 66.]1474    Mrs. Kim. Thank you. Yield back.1475    Chairman Davidson. The gentlewoman's time is expired.1476    The gentleman from Illinois, Mr. Foster, who is also the1477chairman of the Subcommittee on Financial Institutions, is now1478recognized for 5 minutes.1479    Mr. Foster. Thank you, Chair Davidson and thank you for1480joining us, Director Gacki.1481    Director Gacki, in November of last year FinCEN issued an1482alert warning for financial institutions about the increase in1483identity fraud schemes associated with the use of deepfakes and1484created with Generative AI tools.1485    Criminals are using Gen AI to cheaply mass produce false1486identity documents and circumvent live identity verification1487and authentication methods in online transactions.1488    I appreciate FinCEN's efforts to raise awareness of these1489scams and I encourage you to do more, because it is clear that1490Gen AI and the deepfakes that they produce will continue to1491become more believable and accessible as time goes by.1492    Now, I believe the best tool that we have at our disposal1493today to verify identities online is a form of secure digital1494ID, and the tool at hand is the mobile driver's licenses1495currently being issued by several States, and, in fact, many1496countries--most countries--including all countries of the EU.1497    Digital IDs can allow consumers to prove they are who they1498say they are in online transactions. A verified credential1499attached to a secure mobile device creates a reliable system1500that is extremely difficult to fake.1501    I believe this technology would go a long way toward1502stopping identity fraud in the banking system and also with1503fraud in government benefits.1504    It is, however, my understanding that many financial firms1505do not feel that they have the regulatory go-ahead to start1506using digital IDs and digital driver's licenses in their AML/1507Know Your Customer (KYC) processes and that they need guidance1508from regulatory agencies like FinCEN to start implementing this1509technology in online transactions.1510    I think there is also a Federal role in providing Federal1511standards for what States are providing adequate digital1512driver's licenses, and some may need improvements.1513    My question is, do you expect FinCEN will take steps to1514provide the clarity, regulatory clarity, for firms to start1515using these for KYC purposes in online transactions?1516    Ms. Gacki. Thank you, Representative Foster, for that1517excellent question. I also want to thank you for your focus on1518this issue across many years.1519    I want to note that this is certainly something that FinCEN1520is looking at. Questions of identity are critical to our work1521on fraud, and the misuse of identity, whether it is using1522Generative AI or less sophisticated techniques, is something1523that we are very much focused on and looking to ensure that we1524are providing the best guidance we can to financial1525institutions.1526    I would like to--I want to commit that I will work with my1527Federal banking agency colleagues to look at what further1528guidance we can provide to financial institutions on this1529matter.1530    This past year we did work with our other financial--with1531our Federal banking agency colleagues to work on how--to adjust1532how financial institutions can adjust their processes,1533including in terms of collecting and verifying taxpayer1534identification numbers and use of customer identification1535programs.1536    I look forward to looking at this more closely and seeing1537what we need to modernize in terms of guidance for financial1538institutions going forward.1539    Mr. Foster. Thank you.1540    I think there is also an important Federal role that is not1541yet--does not yet exist, which is to verify--to specify which1542cell phones are actually safe to deploy digital IDs on them,1543because it is well-documented that certain early model cell1544phones had a secure enclave that was not, in fact, secure,1545meaning that someone could go and hack your cell phone and1546impersonate your digital driver's license, which obviously1547would be a disaster if someone used them.1548    So we will need at some point probably a Federal agency, or1549someone they delegate it to, to call balls and strikes on this1550version of a cell phone is okay, it has got an adequately1551secure enclave, this one cannot be used.1552    That is sort of being done by Apple in its ecosystem by1553just saying: We are not supporting the iOS once phones get old1554enough. The Android system is a complete--it is less organized1555and it will be difficult to do that, but this is an important1556role.1557    If you can, for the record, come back and give us some1558suggestions on what is needed there to specify when we can1559trust the silicon in different versions of cell phones and1560where that Federal agency is best housed, because right now the1561Department of Defense (DOD) does some of it and other agencies1562do some of it, but there is not an organized standard Federal1563way to do that, and I think it is a missing piece here.1564    Thank you. My time is up.1565    Chairman Davidson. Thank you, Mr. Foster.1566    The gentleman from Tennessee, Mr. Ogles, is now recognized1567for 5 minutes.1568    Mr. Ogles. Thank you, Mr. Chairman.1569    Thank you to the director for being here and answering the1570questions so thoroughly.1571    I do want to perhaps emphasize what may be the key takeaway1572as you hear everyone and I want to compliment or echo Mr.1573Foster here in a moment.1574    When you look at--Mr. Sessions asked about the data1575retention period, Mr. Williams asked about the notion of will1576you delete data that otherwise would no longer be collected. I1577would also take that a step further; if you collected data and1578there has been an investigation and someone has been cleared,1579then will that data be deleted because it is no longer1580necessary?1581    We have seen Federal agencies, like Treasury, have some1582security breaches, security issues. So the idea that this data1583is somehow impenetrable or safe I think is a bit of a misnomer1584when we have seen systems all across our government, quite1585frankly, have failures in that security.1586    We know that China and other adverse hostile entities and1587nations are trying to get access to this data.1588    So I think it is important that we address this data issue,1589this data retention issue, and have very clear parameters--and,1590quite frankly, aggressive parameters--in deleting that data1591versus housing it in perpetuity because of the risk associated1592therein.1593    Again, even in your own comments you talked about data1594security and the issues with trafficking and fentanyl and such.1595That is not your average small business owner who is having to1596report and suddenly has a vulnerability out there.1597    With that, thank you for addressing those, and we look1598forward to getting that information back from you.1599    Now, we have seen roughly 100,000 Americans die every year1600from drug overdoses, most from fentanyl, and Treasury itself1601has linked Mexican banks and cross-border cash-flows to the1602cartels financing that flow and that poison.1603    How many American overdose deaths can be traced back to the1604laundering networks running through Mexican banks like CiBanco,1605Intercam, or Vector and why is FinCEN still granting them1606extensions instead of cutting them off from the U.S. financial1607system immediately?1608    Ms. Gacki. Thank you, Representative Ogles, for those1609comments and for that excellent question.1610    I do not have an answer on the number of deaths that can be1611traced back to these financial institutions. It is certainly1612something that I can--we can try to estimate but I will say1613that any death would be too much.1614    Mr. Ogles. Sure.1615    Ms. Gacki. What we found in publicly calling out these1616three financial institutions as a primary money laundering1617concern is we made a very public case as to how they have1618supported cartel financing.1619    The extensions we have granted in terms of the effective1620date have, as we have noted in public, because we have been1621working so closely with the Mexican Government, which has taken1622over those financial institutions, including replacing the1623heads of their compliance departments at these financial1624institutions.1625    It is important when we take--when we took action against1626these financial institutions that we also made sure that any1627innocent people, to include innocent Americans, innocent1628Mexican citizens, were able to extricate their funds from these1629institutions, and that is what the time period has--a delayed1630implementation was able to accomplish.1631    Meanwhile, we have been working very closely with the1632Mexican Government to ensure that these financial institutions1633are being effectively regulated at the local level in Mexico1634and that any further money-laundering concerns have been1635removed.1636    Mr. Ogles. I appreciate that but I also want to give1637caution, and we have seen that most, if not all, of the1638institutions in Mexico are infected with cartel operatives. So1639this idea that they are going to self-regulate is, I think,1640somewhat laughable.1641    At the end of the day, this is about outcomes. Are you1642ceasing the flow of illegal funds into the United States and1643back to Mexico which is flooding our streets and killing our1644kids? If you are not, then you need to shut it down.1645    Whether you like the President or not--I happen to be an1646ally and advocate for the President--crime has come to a halt1647in this city because the President had a will to do so.1648    The former administration said we could not secure the1649border. In a matter of days, the border was secured.1650    We have to have the will to show Mexico, the cartels, and1651any of their associates that if you mess with the United States1652of America, we will shut you down. Period. Again, they are not1653necessarily our ally when they are allowing the killing of our1654children and flooding our streets with illicit drugs.1655    With that, Mr. Chairman, I yield back.1656    Chairman Davidson. Thank you, Mr. Ogles.1657    The gentleman from Illinois, Mr. Casten, is now recognized1658for 5 minutes.1659    Mr. Casten. Thank you, Mr. Chairman.1660    Thank you for being here.1661    I want to follow up on the discussion you had with Mr.1662Liccardo around crypto ATMs.1663    Mr. Chairman, I would ask unanimous consent to enter into1664the record a Chicago Sun-Times article titled ``Chicago's1665crypto ATMs are magnets for drug-dealing and scams on older1666adults.''16671668    [The information referred to was not submitted prior to1669printing.]16701671    This has been a particular issue in Illinois, but obviously1672nationwide. I think in 2024 the FBI received more than 10,0001673complaints about crypto ATMs and reported more than $2461674million in losses.1675    In August, FinCEN published a notice that emphasized the1676irreversibility of crypto transactions on ATMs and noted that1677there is a high noncompliance with anti-money-laundering laws1678among the operators of crypto ATMs.1679    At a high level, can you give any sense of what you are1680seeing as far as the trends in suspicious activity reporting1681specific to crypto ATMs that we should be monitoring?1682    Ms. Gacki. Thank you, Representative Casten, for that1683question.1684    I will say that crypto ATMs, like other financial1685institutions, are subject to the Bank Secrecy Act, and some are1686more compliant than others.1687    We are seeing, however, as we noted in the alert, high use1688of certain crypto ATMs as a critical way of defrauding1689Americans.1690    So it is something we are looking at very closely. I do not1691have an estimate in terms of the industry but outreach to that1692industry and ensuring that industry is as compliant as possible1693is one of our key objectives.1694    Mr. Casten. Okay. I am particularly interested as you dig1695through, and maybe we can follow up offline, about the impact1696on seniors.1697    I represent Chicago suburbs, which, given the way Chicago1698is laid out, means that I have about 40 mayors who I have to1699keep in touch with lots of little, small towns and one of them1700has a very low tax base. It is one of these towns that depends1701fundamentally on the revenue from a couple convenience stores1702and liquor stores and not a lot of larger tax base in the1703community.1704    Even in that tricky financial situation, the convenience1705store operator said they removed the bitcoin ATM because the1706owner said it just broke his heart how many seniors he saw1707walking in there every day and putting money into the machine1708and then coming back later and saying this money has1709disappeared.1710    We have had at least 20 States that have adopted or are1711considering laws and regulations on crypto ATMs. Illinois did1712just enact a new law to require that operators at least impose1713daily transaction limits.1714    Would you support similar Federal requirements on ATMs to1715at least slow down some of the rush of money before we can act?1716    Ms. Gacki. Thank you, Representative Casten.1717    It is something I am going to need to look into and take1718back. I can absolutely commit that it is something that I will1719look into and work with Treasury leadership on an approach.1720    Mr. Casten. Okay. I know you had an exchange with Mr. Barr1721against Huione, if I am pronouncing that right. A part of what1722scares me about this--and I think we have done a terrible job1723this term in Congress--is we have allowed all of these1724transactions to operate overseas. The mixers are overseas; the1725transactions are overseas. It is great if we have the SAR, but1726then we do not have a way of getting in, right?1727    I guess with the time that is left, is there specific1728statutory authority that you currently lack that would allow1729you to go after the bad guys?1730    Like, I am not talking about going after the good guys but1731if you see that crime has happened, if you see that these pig1732butchering scams, where are you limited in your ability to1733prosecute that Congress can be helpful?1734    Ms. Gacki. Thank you, Representative Casten.1735    One idea that was in the report to the President on the1736Digital Assets Working Group, and you saw it with our action on1737the Huione Group, is we used an authority under section 311 of1738the Patriot Act.1739    That was actually built for a different era when the1740greatest special--the special measure that we used that was1741available to us was to cutoff correspondent payable bank1742accounting, which does not really factor in, in the virtual1743asset space but rather some newer authorities targeted to1744Russian illicit finance or synthetic opioids trafficking,17452313a, 9714, they allow us to prohibit transactions--all1746transactions--involving a group like Huione.1747    Now, we used the 311 authority on Huione to great effect1748and we are able to--and it is a very powerful authority. I am1749very proud of that action but the ability to use--to prohibit1750transactions involving fraud in other respects would be a way1751that we could modernize this authority. Regardless, my team1752very much looks forward to working with you on that.1753    Mr. Casten. Okay. I see I am out of time. I believe Mr.1754Himes has been active on the section 311 piece. Let us talk1755offline about how we might tweak that and improve it.1756    Appreciate it and yield back.1757    Chairman Davidson. Thank you.1758    I would like to recognize the gentlewoman from Florida, Ms.1759Salazar, for 5 minutes.1760    Ms. Salazar. Thank you, Mr. Chairman.1761    Wonderful to be here with you, Ms. Gacki.1762    I am Marie Salazar from Florida-27 District representing1763the city of Miami. I am sure that you are familiar that there1764is a lot of business between Miami and the regime on the island1765of Cuba, and we have discovered that 11 companies in my1766district who are blatantly, openly breaking the Cuban embargo,1767an embargo that has been codified in Congress, meaning it is1768the law.1769    These companies are doing business with the Cuban regime,1770giving them oxygen so they can feed the repressive apparatus.1771    I just sent a letter to the Secretary of the Treasury and1772to Mr. Rubio, Department of State, asking them to investigate1773and to shut them down.1774    I wanted to ask you to please help us and stop this1775madness, because you cannot be dealing--you cannot be taking1776money from Miami and from the Cuban exile community and be1777sending it to the Cuban regime to beat on the people that are1778trying to be free.1779    Do you think I could have your word for you to be able to1780help me and your office to do something about this? I mean, I1781am going to be forwarding to you the letter, but I really would1782like your commitment on the record.1783    Ms. Gacki. Thank you, Representative Salazar.1784    For many years, I worked at the Office of Foreign Assets1785Control, including as the director, prior to coming to FinCEN,1786so I am very familiar with our restrictions on dealing with the1787Cuban regime.1788    I commit to you that FinCEN will certainly take a look at1789this information and see how we can support investigations,1790whether at the Office of Foreign Assets Control (OFAC) or other1791parts of the U.S. Government.1792    Ms. Salazar. They are violating the embargo. You cannot do1793that, because that is United States law.1794    Now, another issue that is highly concerning to me as a1795United States citizen and as the Representative of the city of1796Miami.1797    Back in June your office put on the blacklist three Mexican1798banks. One of the banks is called CiBanco.1799    This is a very touchy subject, because I am concerned, not1800so much about CiBanco, but about the American banking system.1801    There has been no proof shown of money laundering from1802those people. I have met and spoken with their attorneys, I1803have investigated, and there is no proof. I am not saying that1804there is, but they have been asking for proof, and your office1805has not shown why these people need to be on that list.1806    The owner lost the bank, $400 million, just because we, the1807Americans, put him on the blacklist. We have a lot of weight1808internationally. In our system, we are innocent until proven1809guilty.1810    Are you not concerned? I mean, I would be. I am terrified1811that this could happen to any bank in my district or any bank1812in the United States.1813    Please tell me and do not tell me this is under1814investigation; we cannot talk about it.1815    Ms. Gacki. Thank you, Representative Salazar.1816    I stand by FinCEN's actions against the three financial1817institutions. CiBanco, Intercam, and Vector made very detailed1818public cases in orders issued under authority given to us by1819Congress, the Fentanyl Sanctions Act as amended by the FEND Off1820Fentanyl Act, and we showed----1821    Ms. Salazar. I know you are doing your job. I know that you1822have to look for the bad guys, but my concern is that you could1823have made a mistake that could be repeated, and that is not the1824American way of doing business.1825    Ms. Gacki. I understand.1826    Ms. Salazar. Simple terms.1827    Ms. Gacki. I understand.1828    Ms. Salazar. How come there is no proof that they--you1829insisted on keeping that bank. I have no interest in the bank,1830but it is just the principle.1831    Ms. Gacki. We followed the law set forth in the FEND Off1832Fentanyl sanctions act, as amending the Fentanyl Sanctions Act,1833and found a basis on which to call these three financial1834institutions of primary money laundering concern. We worked1835through----1836    Ms. Salazar. Why did you not show the proof?1837    Ms. Gacki. We publicly issued it in orders when we issued1838these orders and would be happy to share them with you.1839    Ms. Salazar. I read them. They are not--it is not enough,1840and you know that.1841    So what I am saying is that how can we in the banking1842system make sure that we are not going to have a little bank1843put on the blacklist and then the owner of that bank loses1844their assets and the bank?1845    Ms. Gacki. Now, I want to clarify that this authority is1846only targeted at--is only--can only be used against foreign1847sources of money laundering. They are called primary money1848laundering concerns, whether they are jurisdictions, classes of1849transactions, or primary money laundering concern. I1850respectfully disagree. I believe we have made the necessary1851legal cases against these banks.1852    Ms. Salazar. I understand what you are saying, but I think1853the message I need to send as the chairman of the Western1854Hemisphere Subcommittee within the House Foreign Affairs1855Committee----1856    Chairman Davidson. The gentlelady's time is expired.1857    Ms. Salazar [continuing]. is that we, the Americans, we1858carry a lot of weight, and we need to be more careful because1859our reputation is at stake.1860    Chairman Davidson. The gentlelady's time is expired.1861    Ms. Salazar. Thank you, Mr. Chairman.1862    Thank you, Madam.1863    Chairman Davidson. The gentleman from Iowa, who is the vice1864chairman of the subcommittee, Mr. Nunn from Iowa, is recognized1865for 5 minutes.1866    Mr. Nunn. Well, thank you, Chairman Davidson. Appreciate1867you holding this very important hearing today.1868    Director Gacki, thank you so much for coming out to Iowa.1869While we may be--you are under the Biden Administration, you1870are now serving under the Trump Administration, I want to say I1871appreciate you hearing from folks in our district and coming1872with me and holding a roundtable to actually be able to discuss1873some of the things that are working.1874    Today we are going to talk about some of the things that1875are challenges.1876    When you came out, we talked about the Corporate1877Transparency Act. We talked about the policing of over 321878million small businesses and the heavy impact that was placed1879on them, everything from $8,000 per small business to be able1880to reach compliance, and if they failed, we are talking about a1881$500-a day-fine, in some cases up to 2 years imprisonment for1882failure.1883    Now, you got some ``Iowa nice'' feedback on that, and I1884appreciate you being there to hear from them but it will be no1885surprise to you I would like to talk about some of the red tape1886that is impacting us today.1887    Right now FinCEN receives close to 20 million CTRs and 51888million SARs. These are financial reporting requirements.1889Challengingly, it is believed that most of that information1890that was done by financial institutions, including very small1891institutions, was never used.1892    To make matters worse, it was found that these can take1893over 21 hours to complete each one of those.1894    So let us put this in real world terms. In Main Street,1895Iowa, that means we have folks spending upwards of 533 million1896hours filing reports for FinCEN and the Federal Government.1897    I would like to ask, do we have any perspective on how many1898of those reports resulted in actual prosecutions?1899    Ms. Gacki. Thank you, Representative Nunn and I want to1900thank you again for welcoming me and my team to Iowa.1901    So one of the key objectives of this administration that we1902are focused on is reforming the Bank Secrecy Act regime, the1903AML/CFT regime in the United States, to ensure that it is risk-1904based and focused on the highest threats impacting our law1905enforcement and national security, and that law enforcement is1906directing its resources to those highest priority threats.1907    Mr. Nunn. Understood.1908    Ms. Gacki. And part of that is taking a look at reporting,1909the reporting that we gained. We work very hard to try to1910ensure that we are engendering that feedback loop between law1911enforcement and financial institutions to show that the1912reporting is being used. I think that it is not just1913prosecutions that have it, but that this reporting helps----1914    Mr. Nunn. Director Gacki, I appreciate that.1915    Here is the reality. We did this with CTA. We went after191640,000 bad actors, but we snared 32 million Americans in the1917process.1918    My concern here is we are looking at 25, 26 million1919reports. How many arrests were made as a result of this1920reporting? Can you just give me a number?1921    Ms. Gacki. Sir, I am sorry, I do not have the number off1922the top of my head.1923    Mr. Nunn. Okay. That is fair.1924    Let me ask this. Can you commit to publishing the1925effectiveness of those numbers?1926    Ms. Gacki. Certainly, I can. What we do in an annual report1927that we put out is we try to----1928    Mr. Nunn. I am going to look at the last year's numbers,1929and I am going to compare them to 26 million and the 5331930million hours of reporting. We need to do some analysis on1931this.1932    The other part is our community banks are drowning in red1933tape while cartels are clearly laundering billions in fentanyl1934dollars. We need to focus on the real results, not on the1935compliance reports requirements coming out of banks. Let us1936agree to go after the bad actors.1937    I want to quickly get to the Treasury hack that occurred1938earlier this year when the Chinese Communist Party went after1939Treasury systems.1940    Who at Treasury was fired for allowing the Chinese into1941Treasury systems?1942    Ms. Gacki. I am sorry, sir, I do not have a response to1943that question.1944    Mr. Nunn. Okay. The hacks showed exactly why sensitive1945small business ownership data that does not belong on1946government systems was intentionally hacked. There is no1947indication that anyone was held accountable.1948    If this happened to one of my small banks or my small1949credit unions, those guys would be out on the street and there1950would be a full inspection into what happened. I have not seen1951that happen at Treasury.1952    So here is my ask right now. For those banks and lending1953institutions that have data on your systems that were hacked by1954the Chinese that I think are arbitrarily being kept on data1955servers, are you willing to help us commit to deleting those1956before another breach occurs?1957    Ms. Gacki. Sir, I am happy to make sure that the1958information that we collect and protect is held to the highest1959security standards. I am aware of no breach of the Bank Secrecy1960Act data that we protect.1961    Mr. Nunn. Well, let us look and see the after-action of1962what happened with the Chinese, because I have seen no1963accountability to be able to actually hold whether that is true1964or not. I look forward to opportunities to work together on1965that.1966    Finally, Director Gacki, I think one of the things we have1967worked on together is the Guard Act, making sure money1968laundering does not take place. I would like to thank you for1969giving our team technical assistance on going after this,1970protecting seniors, and helping our local and State law1971enforcement.1972    Is there anything you would like to add about what we are1973doing to help protect through the Guard Act?1974    Ms. Gacki. I would just like to thank you for your focus on1975an important issue in the Guard Act and just want to--if you1976need any further technical assistance, we are happy to supply1977it.1978    Thank you.1979    Mr. Nunn. Appreciate to working together.1980    Thank you, Mr. Chair. I yield the remainder of my time.1981    Thank you, Director.1982    Chairman Davidson. Thank you, Mr. Nunn.1983    I would like to ask unanimous consent to submit for the1984record a report by the Independent Community Bankers of1985America, ``The Financial Crimes Enforcement Network:1986Recommendations for Better Coordinated and More Effective1987Policies and Enforcement.''1988    Without objection.19891990    [The information referred to was not submitted prior to1991printing.]19921993    Chairman Davidson. We will pause for a swap out on1994microphones. We have a failing microphone.1995    [Audio malfunction in hearing room.]1996    Chairman Davidson. The gentlewoman from Michigan, Ms.1997Tlaib, is now recognized for 5 minutes.1998    Ms. Tlaib. Thank you, Mr. Chair.1999    Director, do you know--have you heard about in July how2000Senator Wyden announced that the Treasury Department has2001Suspicious Activity Reports on Jeffrey Epstein's financial2002network details? I think thousands of transactions totaling2003$1.5 billion.2004    Ms. Gacki. Thank you, Representative Tlaib.2005    I am familiar with Senator Wyden's communication.2006    Ms. Tlaib. Among the largest transactions are two that2007JPMorganChase reported with Russian banks for as much as $1002008million. Are you aware of that one?2009    Ms. Gacki. I am aware of Senator Wyden's communication,2010yes.2011    Ms. Tlaib. Can you tell the committee more in regard to--I2012mean, yesterday it was revealed that--just yesterday--that2013Chase employees knew of these suspicious transactions for more2014than a decade and they were ignored. Are you familiar with2015that?2016    Ms. Gacki. Thank you, Representative Tlaib, for these2017questions.2018    Given the sensitivity of the data that we obtain through2019the Bank Secrecy Act, to include these SARS, I want to assure2020you that Treasury is taking this very seriously.2021    Ms. Tlaib. We, as committee members, can we have access to2022that information? It should be public, correct?2023    Ms. Gacki. This is highly sensitive----2024    Ms. Tlaib. Can you be subpoenaed for the records?2025    Ms. Gacki. We are working with Representative Comer to2026ensure that we provide----2027    Ms. Tlaib. Okay. Well, I am going to yield the rest of my2028time, Director, to my Ranking Member Beatty, she would like to2029put a motion, because I think the Financial Services Committee2030should also have oversight in regard to any banking2031institution.2032    As somebody that serves on Oversight, sat at a roundtable2033with girls that were as young as 13 years old who asked us to2034follow the money, and I think it is our responsibility as2035Members of Congress to do that.2036    With that, I yield the rest of my time to Ranking Member2037Beatty.2038    Mrs. Beatty. Thank you, Congresswoman Tlaib.2039    Mr. Chairman, pursuant to clause 2(m) of House rule XI and2040clause 2(k)(6) of the House rule XI, I move that this committee2041issue a subpoena to the Secretary of Treasury to return to the2042majority and minority of the Subcommittee on National Security,2043Illicit Finance, and International Financial Institutions of2044the Committee on Financial Services and the Committee on2045Financial Services all complete and unredacted documents2046related to Jeffrey Epstein or individuals and entities2047associated with Jeffrey Epstein, including but not limited to2048wire transfers, bank accounts, and other transactions, other2049accounts, account holders that were party to any such2050transactions, Currency Transactions Reports, Suspicious2051Activity Reports, and other Bank Secrecy Act data, any2052documents related to a description or review of the network of2053Jeffrey Epstein's conducted by any party, including but not2054limited to any law enforcement investigation and/or2055investigations or review by any other party, and any document2056or review that addresses any connections to any Russian-based2057financial institutions, individuals, and entities, including2058but not limited to entities that are currently under United2059States or allied sanctions.2060    Chairman Davidson. The gentlelady has moved to authorize a2061subpoena.2062    For what purpose does the gentleman from Oklahoma seek2063recognition?2064    Mr. Lucas. Mr. Chairman, I seek a point of order on the2065motion.2066    Chairman Davidson. Point of order has been reserved. The2067committee will suspend and consider the pertinence of this2068motion.2069    [Discussion off the record.]2070    Chairman Davidson. The subcommittee will now consider the2071motion offered by Representative Beatty to authorize a2072subpoena.2073    Does the gentleman from Oklahoma insist on his point of2074order?2075    Mr. Lucas. Mr. Chairman, I do not insist on my point of2076order.2077    Chairman Davidson. For what purpose does the gentleman from2078Oklahoma seek recognition?2079    Mr. Lucas. Mr. Chairman, I move to table the motion.2080    Chairman Davidson. The gentleman has moved to table the2081motion. The motion is not debatable, and the question now2082occurs on the motion to table.2083    Those in favor shall signify by saying aye.2084    All those opposed shall signify by saying nay.2085    In the opinion of the chair, the ayes have it.2086    Mrs. Beatty. I request a roll call vote.2087    Chairman Davidson. A recorded vote is requested.2088    All those in favor of a recorded vote, raise your hand.2089    A sufficient number having raised their hand, a recorded2090vote is ordered. We will now take the vote on the motion to2091table, and we will suspend until the clerk has set things in2092motion to do that.2093    [Discussion off the record.]2094    Chairman Davidson. The clerk will call the roll.2095    The Clerk. Mr. Lucas?2096    Mr. Lucas. Yes.2097    The Clerk. Mr. Sessions?2098    Mr. Sessions. Aye.2099    The Clerk. Mr. Barr?2100    [No response.]2101    The Clerk. Mr. Williams?2102    Mr. Williams. Aye.2103    The Clerk. Mrs. Kim.2104    [No response.]2105    The Clerk. Mr. Ogles?2106    Mr. Ogles. Aye.2107    The Clerk. Mr. Nunn?2108    Mr. Nunn. Aye.2109    The Clerk. Mrs. McClain?2110    [No response.]2111    The Clerk. Ms. Salazar?2112    [No response.]2113    The Clerk. Chairman Hill.2114    Chairman Hill. Aye.2115    The Clerk. Ranking Member Beatty?2116    Mrs. Beatty. No.2117    The Clerk. Mr. Gottheimer?2118    Mr. Gottheimer. No.2119    The Clerk. Mr. Vargas?2120    [No response.]2121    The Clerk. Mr. Foster?2122    Mr. Foster. No.2123    The Clerk. Mr. Gonzalez?2124    [No response.]2125    The Clerk. Mr. Torres?2126    [No response.]2127    The Clerk. Mr. Casten?2128    Mr. Casten. No.2129    The Clerk. Mr. Liccardo?2130    [No response.]2131    The Clerk. Ranking Member Waters?2132    Ms. Waters. No.2133    The Clerk. Chairman Davidson?2134    Chairman Davidson. Yes.2135    The Clerk. Ms. Salazar?2136    Ms. Salazar. Yes.2137    The Clerk. Yes.2138    Chairman Davidson. Would the clerk read how each member2139voted.2140    The Clerk. Chairman Davidson, aye. Mr. Lucas, aye. Pete2141Sessions, aye. Mr. Williams, aye. Mr. Ogles, aye. Mr. Nunn,2142aye. Ms. Salazar, aye. Chairman Hill, aye. Ranking Member2143Beatty, no. Mr. Gottheimer, no. Mr. Foster, no. Mr. Casten, no.2144Ranking Member Waters, no.2145    Chairman Davidson. Has any member not voted or wished to2146change their vote?2147    Ms. Waters. Parliamentary inquiry.2148    Chairman Davidson. The ranking member is recognized for a2149parliamentary inquiry.2150    Ms. Waters. I want to make sure of what we are voting on or2151what has been attempted to be tabled.2152    Is this a motion that this subcommittee issue a subpoena to2153the Secretary of the Treasury to return to the majority and2154minority of the Subcommittee on National Security, Illicit2155Finance, and International Financial Institutions of the2156Committee on Financial Services all complete and unredacted2157documents related to Jeffrey Epstein or individuals associated2158with Jeffrey Epstein, including but not limited to wire2159transfers, bank accounts, and other transactions, other2160accounts, and account holders that were parties to any such2161transactions----2162    Chairman Davidson. Would the gentlelady yield for an2163answer?2164    It is not a question on the subpoena. It is a question on2165tabling the subpoena.2166    The clerk will report.2167    The Clerk. The ayes are eight and the nays are five.2168    Chairman Davidson. A majority having voted in favor, the2169motion to table is agreed to.2170    I would like to thank Director Gacki for her testimony2171today.2172    Without objection, all members will have five legislative2173days to submit additional written questions for the witness to2174the chairman. Questions will be forwarded to the witness for2175her response.2176    Ms. Gacki, please respond no later than October 14, 2025.2177    This hearing is adjourned.21782179    [Whereupon, at 12:08 p.m., the subcommittee was adjourned.]21802181                                APPENDIX21822183                              ----------21842185                   MATERIALS SUBMITTED FOR THE RECORD2186[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]21872188                                 [all]