The Financial Crimes Enforcement Network (FinCEN) faces significant challenges in balancing effective financial crime detection with regulatory burden on financial institutions. The Bank Secrecy Act's reporting thresholds, unchanged since 1970, result in millions of reports with minimal law enforcement value, while compliance costs $52 billion annually. FinCEN is working to modernize the AML/CFT framework through risk-based approaches and has issued proposed rules to address SAR and CTR thresholds, though implementation timelines remain uncertain. The agency continues to face criticism for expanding reporting requirements through Geographic Targeting Orders while simultaneously working to delete beneficial ownership data collected on small businesses under the Corporate Transparency Act.
Hearing Entitled: Oversight of the Financial Crimes Enforcement Network
Added:The subcommittee on national security, elicit finance, and international financial institutions will come to order. Without objection, the chairman is authorized to declare a recess of the committee at any time. This hearing is titled Oversight of the Financial Crimes Enforcement Network. Without objection, all members will have five legislative days within which to submit extraneous materials uh for inclusion in the record. I now recognize myself for four minutes for an opening statement. Our witness today is Finen Director Andrea Gaki. Uh director, welcome and thank you for making time among all your travels to be with us today. Um this is the fourth hearing with the director of fencin as required by uh section 5336 C11 of the corporate transparency act.
One of the only provisions I like of the act by the way. Uh today uh it provides a public forum to examine Finson's operations, the troubled status of the beneficial ownership information reporting regime and the anti-moneyaundering act of 2020.
Finally, the history and impact of the bank secrecy act. The bank sec secrecy act was enacted in 1970 to address organized crimes infiltration of our financial system. In the half ccentury since it has grown into a bloated surveillance apparatus demanding endless reports without delivering proportional results. Every year financial institutions file nearly 5 million suspicious activity reports or SARS and over 21 million currency transaction reports CTRs. These reporting thresholds have never been adjusted for inflation.
And then worse, GAO reports that only 5.4% of the CTRs are even looked at by law enforcement. While uh BSA enforcement drives financial institutions to file copious amounts of defensive SARS, uh there serve no meaningful law enforcement purposes. The metrics have become how many do you file as a benchmark instead of whether they're effective. So what does all this reporting achieve? Only 1% of laundered proceeds are ever intercepted. And it comes uh with real costs. The BSA compliance reportedly costs $52 billion each year. That is why I was pleased to see Finson release its AML program notice of proposed rulemaking in April.
While it is disappointing that the rulem does not address CTR and SAR thresholds uh and we hope to do so in the final rule, this effort is a welcome attempt to shift away from check the box defensive compliance to reenter AML on true risk. Now I would like to turn to the corporate transparency act. Under the bid administration implementation followed the same pattern of growing the hay stack of reports rather than finding the money uh the laundering needle.
Finen issued overly broad rules that treated every mom and pop shop around the country as a potential money launderer. Forcing disclosure of personally identifiable information into a federal database that isn't safeguarded against hacks or misuse. 30 million small businesses were required to file. even people leading homeowners association who don't own anything. To get a sense of how absurd this is, consider an HOA with a volunteer board and a presidency that changes every few months. The Biden Treasury would have compelled the homeowners association to file PII on all these officers and update it every time something changed in the off chance that one of them was engaged in moneyaundering. I mean, this is a corruption of our constitution. and it assumes that if you control a bank account, uh, you must be engaged in illicit finance. So, replicate that all over the country and you get the sense that big brother's always watching you.
Thankfully, our constitution doesn't say that. This was running into problems in the courts and the Trump administration rolled this uh rule back. So, I'm grateful my colleagues on this committee voted to advance my repelling big brother overreach act to codify the administration's rule. As we work on the legislation, we look forward to fence in finalizing the rule.
But BSA uh BSA doesn't stop at beneficial ownership. Uh there are rules like the residential real estate rule.
There's a lot to address. Uh we find lots of noise in the approach and little signal. So, I'm glad that Director Gaki, you're leading an effort to review that.
I look forward to highlighting some of these things in today's hearing and the work that we're doing together. uh much of which is bipartisan uh and I hope all of it becomes so. Uh with that I yield my time and I recognize the ranking member of the subcommittee Miss Batty for four minutes for her opening statement.
>> Thank you Mr. Chairman and good afternoon to Director Ghaki. It's certainly good to see you again and thank you for appearing before us today for our annual Financial Crimes Enforcement Network oversight hearing.
Although Finson is a relatively small bureau within the Treasury Department, it plays an outsized role in protecting the integrity of the United States financial system and safeguarding our national security. It is responsible, as you know, for helping law enforcement detect and disrupt money laundering, terrorist financing, trafficking, sanction, evasion, and other forms of illicit finance that threaten American communities by making it harder for criminals to move and hide their money.
Finen helps the law enforcement stop crimes before they occur and protects families, businesses, and communities across this country. Director Gaki, I want to thank you uh and the dedicated career staff at Fininsen for the work that you have done to defend our national security and help stop financial crime. However, I am deeply concerned by recent efforts that would weaken our illicit finance safeguards and undermine decades of bipartisan progress in combating financial crime.
These efforts include proposals to significantly narrow bank secrecy uh requirements, attempts to weaken or repeal the Corporate Transparency Act, firing of examiners, top watchd dogs, investigators, and prosecutors, efforts to postpone and to reopen the investment advisory rule, and advancement of crypto legislation that contains major illicit finance gaps.
Taken together, these actions would make it actually easier for bad actors to exploit our financial system while making it harder for law enforcement to identify and stop them. And we should be clear about the environment that we're operating in. According to the FBI data, Americans lost nearly $21 billion in cyber enabled crimes in 2025, up from 16 billion in 2024. That's because criminal organizations are increasingly using cryptocurrency, artificial intelligence, and other emerging technologies to make scams more sophisticated, move money across borders more quickly, and evade evade traditional detection methods. At precisely the moment when these threats are becoming more complex, I am concerned that this administration and Republicans in Congress are moving to weaken the very tools that help investigators follow the money, protect consumers, and hold bad actors accountable. These roll backs would not only increase the risk of fraud and abuse, they would also weaken the broader anti-money laundering and counterterrorism financing framework and leave the United States with fewer tools to respond to foreign threats and protect hardworking Americans. Let me just say again, I look forward to hearing directly from you about the state of affairs at Fininsen and how these recent policy changes will affect the AY's ability to combat emerging threats. And lastly, let me just say thank you for all your bipartisan uh work and always being uh forthright with us. So again, I thank you and Mr. Chairman, I yield back.
>> Um thanks, Miss Batty. I now recognize the ranking member of the uh or the the chairman of the full committee, Mr. Hill, for one minute for an opening statement.
>> Thank you, Chair Davidson, Director Gaki. It's great to have you back before the subcommittee. Finson sits at the center of our efforts to combat money laundering, terrorist financing, fraud, scams, and other illicit financial activity that undermine our financial system. And we thank you for your leadership. Today, we'll talk about the corporate uh transparency acts beneficial ownership reporting regime.
We'll also review the administration's proposed AML program rule to determine whether or not it will achieve an effective riskbased framework for the Bank Secrecy Act compliance. Hopefully, we'll get some answers as to why Fininsen has not revised BSA reporting thresholds as a push to update AML standards when doing so is necessary to allow financial institutions to truly focused on risk. As financial crimes grow more sophisticated, our framework needs to keep pace without imposing unnecessary burdens on American business. Appreciate your contributions to the committee today and I look forward to the discussion. I yield back.
>> Thanks, Chairman Hill. My All right.
All right. So, today we welcome the testimony of uh Miss Andrea Gaki, director of the Financial Crimes Enforcement Network. Director Gaki, thank you for taking time to be here today. Uh, you will be recognized for five minutes to give an oral presentation of your written testimony.
Without objection, your written statement will be made part of the record. Director Gaki, you're now recognized for five minutes.
>> Thank you. Um, Chairman Davidson, Ranking Member Batty, Chairman Hill, Ranking Member Waters, and distinguished members of this subcommittee. Thank you for the opportunity to appear before you today to testify on behalf of the US Department of the Treasury's Financial Crimes Enforcement Network, known as Vincen. Today, I'd like to focus on providing an update on Fininsson's work to combat fraud schemes that take money away from hardworking Americans. I'll also discuss our efforts to modernize the Bank Secrecy Act regime to address illicit finance threats of today and ensure we are well positioned to adapt to new risks. Combating fraud has long been a focus for Vincen given that it continues to be one of the largest sources of illicit proceeds in the United States. Vincen works closely with law enforcement and other partners to support the administration's whole of government approach to unleash every available tool to stop criminal networks from exploiting American taxpayers and the federal programs they rely on.
Fininsen's rapid response program, a partnership between Fininsen, US law enforcement, and foreign partners, helps cyber enabled victims and their financial institutions recover stolen funds sent abroad and repatriate those funds to US victims. Since its inception in 2015, the RA rapid response program has facilitated the interdiction of nearly $2 billion in stolen proceeds for over 5,700 US individuals and businesses. In addition, Fininsen has severed the Way One Group, responsible for laundering at least $4 billion in illicit proceeds from the US financial system this past October 2025 using authorities granted to us by Congress.
We took follow-on action last month against Waywan Group's successor entities, guarding against Wayan Group's attempts to circumvent being cut off from the US financial system. In support of the White House uh task force to eliminate fraud and under the leadership of Secretary Bessant, Vincent has taken decisive actions to identify typologies associated with fraud schemes, including those being perpetrated by organized crime groups and transnational criminal organizations against government health care and other benefit programs. We have alerted financial institutions, the public and law enforcement to these schemes, provided expert analysis of potential fraudulent activity for law enforcement. trained government stakeholders on how to use BSA data in their investigations and issued guidance making it clear how financial institutions can share information on fraud with each other in real time.
Finally, Fininsen is taking action to fully operationalize its whistleblower program to reward whistleblowers who come forward with tips that lead to successful enforcement actions. In February, Secretary Besson announced the launch of Fininsson's dedicated web page to confidentially accept whistleblower tips from the public. This was followed in April by our whistleblower program proposed rule, setting forth the procedures and eligibility criteria for making awards as well as confidentiality requirements. Vincen is actively triaging incoming tips and directing them appropriately. And once the criteria for granting awards is determined through issuance of the final rule, Fininsson will begin processing and paying awards. Shifting gears to BSA modernization as criminals evolve their methods of laundering money and hiding illicit proceeds. A modernized BSA regime is critical to protecting our financial system against emerging threats. At the same time, we want to ensure that financial institutions are not spending their time and money reporting activity of little to no value to law enforcement. Vincent's suspicious activity report frequently asked questions issued last October aimed to strike this balance. The FAQs clarify certain SAR obligations to help financial institutions focus their resources on providing law enforcement with the most critical information needed to detect, combat, and deter criminal activity. In April, Vincent issued a proposed rule to fundamentally reform AMLCFT programs under the Bank Secrecy Act. The proposed program rule refocuses AMLCFT programs on effectiveness rather than mere technical compliance, leading to better outcomes for financial institutions, law enforcement, and national security agencies. Notably, the proposed rule proposes a new rule for Fininsen in the supervisory process to promote riskbased reasonably designed programs and greater consistency on how banks are evaluated for effectiveness. Finen also issued two proposed rules to implement AML and customer identification program requirements for permitted payment stable coin issuers as required by Congress under the Genius Act. The necessary resources for Fininsen to fulfill additional supervisory responsibilities, to fully implement the Genius Act, to address fraud, and to tackle other priorities are included in Fininsson's FY 2027 budget request. So, as I close my remarks today, I'd like to again thank the committee for the opportunity to talk to to you today for your partnership and your interest in Fininsson's work, and I look forward to our continued engagement, and I welcome your questions.
>> Thank you, Director Gaki. We'll now turn to member questions and I recognize myself for five minutes for questioning.
I ask unanimous consent to submit into the record letters on today's hearing from the American Bankers Association, the Bank Policy Institute, and the American Land Title Association. Without objection.
So, Director Gaki, when you testified in September, you said that Fenson intended to finalize its CTA rulemaking sometime next year. Next year is now this year, and it's halfway over. Um what's the holdup?
>> Chair Davidson, thank you for that question and thank you for your interest in this issue. Um Vincent is will very soon finalize the interim final rule on the beneficial ownership information reporting regime, the corporate transparency act. Um I uh we are very close to the finish line. Um and so I hope to come back to you soon to talk to you about it.
>> Well, thank you for that. We're hoping for it to be soon as well. You also testified that Finson would delete data that was collected on American small businesses under the CTA when the final rule comes out. Are you still prepared to do that?
>> Finen is prepare. Finen will address the deletion of information, intends to de address the proposed deletion of information in the rule when finalized.
Um, and I look forward to further engagement on the process of that um uh when the when the rule is um issued. It sounds like you're leaving room for not deleting all of it. So, I hope that uh that's not the intent. Hopefully, it works out and um look forward to working with you to get this across the finish line. Uh the administration's AML programs notice proposed rulemakings are welcome, but Finson's had difficulty finalizing rules in the past. Um do you have a timeline for when you expect to issue a final rule on that? um on the uh I Dinsen is working diligently on the proposed rules that we've issued which are um which are BSA modernization being uh one of the key administration priorities at the Treasury Department.
Um Fininsen is working hard to resolve um any policy um uh questions and bring these rules to final as quickly as possible.
>> Yeah. So, as an example of that, one of the things the administration's asked for is under know your customer provisions, it seems reasonable to average Americans to know whether your customer is lawfully present in the United States. Is that something that you will address?
>> Thank you for that question, Chair Davidson. Um under the recent executive order the president issued on financial integrity, um Vincent has a role to play including um certain uh regulatory requirements involving the customer due diligence rule and customer identification uh program uh requirements. We uh are working with the administration with with Treasury officials uh to maintain those commitments as um as to as um as uh directed by the president. Yeah, thanks.
And hopefully we'll get it into the rulemaking so that banks begin to actually do it. I understand that's a change in the way they've done business, but that's one of the big hooks in the US, the financial system. Uh, and it seems like a really basic thing. Are you even lawfully present in the United States? And we have we have people who aren't lawfully present in the United States. Uh, with mortgages, bank accounts, massive, uh, you know, cash flowing out of the United States back uh, in remittances. And it just seems like a really fundamental question. I mean, if you want to access to our financial system, you should be lawfully present in our country. Um, you know, the residential real estate reporting rule. Um, look, uh, director Gagi, I understand you're working on that. Uh, could you give us a little bit of an update on that?
>> Absolutely. Thank you, Chair Davidson.
So the residential real estate uh reporting rule um issued and has went after going into effect was challenged in court and a district court in um Texas has vacated the rule. So currently uh we are not accepting reports um under that uh residential uh under that regime and there is no penalty for not filing those reports by any people who may fall into it. Um the Treasury Department through the Department of Justice is appealing that uh that decision and our view is that um over 10 years of geographic targeting orders focused on non- financed um purchases of real estate by um by corporations um that we've achieved a a narrow targeted rule that focus on focuses on an illicit finance typology. And um so while I cannot speak to the outcome of the court process, you're >> still still litigating. All right. But thank you. It's suspended and and so thanks for that clarification. I'll have a couple for for the uh uh written questions [clears throat] uh for further response. But in uh Fininsson's 2013 2019 interpretive guidance uh concluded that technology providers who only supply non-custodial software or hardware and never obtain independent control over customer value are not money transmitters. Um, as Vincent coordinates with FATIF on upcoming inter international standards, will you explicitly commit today to preserving this bright line distinction so American software and hardware developers are not improperly regulated as financial intermediaries?
>> Uh, Chair Davidson, let me uh >> I apologize. My time's expired, so I'll ask for that in writing. And uh I'll now recognize the ranking the ranking member of the full committee, Miss Batty, for five minutes. Thank you, Mr. Chairman.
Director Ghaki, one of the top complaints that I hear from banks and credit unions in my district is the burden of compliance obligations for suspicious activity reports or SARS in the current transaction reports. With the anti-money laundering uh act, Congress tried to streamline SARS and reduce compliance burdens while still meeting law enforcement needs.
Unfortunately, there's been no resolution of these since the AMLA became law. Can you just talk briefly about how Finen plans to take the mandated steps required by the [snorts] AMLA to enhance the effectiveness of SARS and CTRS and it relieves some of the regulatory burden on banks and credit unions are more than just changing the threshold numbers?
Ranking member baby, thank you for that question. And um Vincent is is working hard to strike the right balance between burden and benefit to law enforcement when it comes to suspicious activity reports. mindful of the burden it places on financial institutions. Um but also um making sure that not only the thresholds but the um the types of information that Fininsen requests um through SARS and CTRs um that we work through that. Um we are actively Fininsson is actively discussing the issue of SAR and CTR um thresholds and requirements with Treasury leadership and we are consulting with um with financial institutions and law enforcement on that. Um this is one of the uh one of the highest priorities that Fininsen has as part of the BSA modernization um initiative. But Fininsson is taking action while we work on that. And one such action we took were certain SAR frequently asked questions issued this past October um uh which alleviated burden for um financial institutions across the country and we have heard anecdotally that this has saved um thousands if not millions of dollars for financial institutions across the country.
Uh let me uh express another concern that we've heard from from some of the financial institutions and that is that they feel that their anti-money laundering examinations bear no connection to national security priorities and that they receive uh little or no feedback from law enforcement. Financial institutions, as you know, often report that examiners emphasize process over results and discourage innovation, which results in catching fewer bad actors. The anti-moneyaundering act of 2020 address some of this by shifting the focus of the bank secrecy act, but clearly more is required. How could maybe cross agency training for examiners on the BSA mission and the AML CFT priorities be useful to that end? Ranking member Batty, thank you for that question. And Vincent is hearing the same concerns and has heard the same concerns from financial institutions, you know, that the examiners um are not focused on the right things that um that they uh want more and a better feedback loop between law enforcement um to um to justify the resources they're expending in their AML CFT programs. So what uh some of this we hope to address through our open rulemaking the program rule um uh that would fundamentally reform AMLCFT programs across 11 different types of financial institutions and over 350,000 financial institutions regulated by Fininsen and other credential regulators. Um we are hoping uh to um make sure that we focus AMLCFT programs on what really matters going beyond technical compliance. And for banks the proposal is that Fininsen will take on a new role um and will provide some consistency um in the supervisory and enforcement process across banks. Um in addition, Fininsen is dedicated to improving the feedback loop between law enforcement and the financial sector.
Congress has given us a lot of tools to do that. One important tool is the Fininsen exchange, a public private partnership. Fininsen can um convene law enforcement with financial institutions to really have a direct connection.
>> Okay. Uh I'm not going to have time probably for you to answer my last question, but let me just say uh thank you. you've spoken directly with myself and chairman Davidson about fraud and scam prevention efforts at Finen. So maybe you can send to us. You've heard the numbers uh the mill billions of dollars uh how Fininsen is working to address this spike. We know crypto is here. We know that AI is here. Uh so maybe we can talk about that offline.
Thank you, Mr. Chairman. And I yield back.
>> Yep. Thanks, Miss Batty. The gentleman from Arkansas, chairman of the full committee, Mr. Hill, is now recognized for five minutes. Thank you, Chairman. U Director Gaki, last year you testified that um law enforcement interest had led to the development of a broader residential real estate rule and u we need to see concrete outcomes from that and uh this has been going on for 10 or 15 years. You've broadened it from the more narrow targeting previously. Can you tell the committee how many elicit assets have been recovered as a result of the residential real estate targeting program?
>> Chair Hill, thank you for that question.
Um, I uh I would need to get back to you on the d on the act. I don't have that answer off the top of my head, but I'm happy to work to try to get that to you.
So, you know, I think we all support uh the administration's efforts to crack down on benefits fraud and illicit finance, particularly at the southern border, but I question whether these uh GTOs are really serving the goals created that or if they're just creating more bureaucracy. Um how many indictments and convictions have been produced from GTOs?
>> Jer Hill, thank you for that question.
Again, I I I don't have that answer off the top of my head. And we've issued Fininsson has issued GTOs across a number of different um not just in the residential real estate, but uh in general. Um happy to take this question back.
>> It'd be helpful. I think it'd be helpful to the committee's work.
We've had a lot of conversation about what a good job I think our financial institutions, our depository institutions do in interdicting inday suspicious activity even before they've filed us. So, this is just good operations on the part of our our banks, our credit unions out there. They're very alert to that. They usually have weekly operating meetings on the telephone between banks and a city looking for suspicious humans or activities digital or physical in a bank facility. Again, irrespective of whether they filed a SAR or not, probably those phone calls produce some legitimate SARS.
But I'm concerned in the in reading that Circle the other day uh did not take action in her day in business to freeze and burn potentially suspicious elicit accounts uh in their dollarback stable coin arguing they had to be ordered to do that by the the government. What what are they talking about? And what lack of authority does quote circle have to act just like every other sort of financial fintech or financial services company do in the middle of a day when they spot a transaction they don't like? Are they missing something? Do they have some gap in their directives?
>> Chair Hill, thank you for that question.
Um, this is something I'm not personally tracking and would like to get back to you on this. However, I will note that um both Fininsen and our sister agency, the Office of Foreign Asset Control, OFAC, under the um under the Genius Act, has a proposed rule that would apply to permitted payment stable coin issuers like the entity you noted. Um would place AMLCFT and um sanctions obligations directly on them. This is fulfilling Congress's act. Um but I would be happy to look into this. I'm not tracking uh Circle's rational. Yeah, I think I'd like to hear your your views on that. I mean, I don't believe that there needs to be a new law in Congress that if someone who is handling a financial transaction and they believe it to be suspicious that they can uh take action to protect the transactions integrity. Uh but I'm curious if there is a gap and if that gap is in this particular instance filled by the Treasury rule making on genius or not.
So I appreciate your attention to that.
Uh every banker I know if they see something says something and they may be sort of outside the bounds of some particular statute but smart in defending their own customers resources and the integrity of their own enterprise by saying this looks suspicious. We're going to town to 10 before we do something. And I just was surprised by the public reporting that it was asserted, oh, we can't take that kind of defensive effort without a direct order from a court. Well, good luck with that because that's not how crime takes place. I yield back to the chairman.
>> Thank you, chairman. I now recognize the gentle the gentleoman from California, Miss Waters, who's the ranking member of the full committee for five minutes.
>> Thank you very much, [clears throat] Director Gaki. The anti-money laundering act of 2020 required uh the treasury department to issue the national anti-money laundering and calering the finances of terrorism priorities.
Congress mandated this list to give financial institutions a road map on the types of crimes to focus their bank secrecy act compliance efforts. Benson issued his first list in 2021 and your agency is completing the rule making that will tell banks and others how they are expected to use this list. The last list has eight priorities. Am I correct?
>> Yes, ranking member Waters, I believe you are.
>> And one of these eight priorities is corruption. Am I correct?
>> Yes.
>> Thank you.
In fact, the defense says in the priorities, quote, "Corruption, both domestic and foreign, threatens US national security by eroding citizens faith in government, distorting economies and weakening democratic institutions. Corruption rots uh democracy uh from the inside and in increasingly weaponized [clears throat] by authoritarian states to undermine their own democratic institutions. Quote unquote. This description certainly sounds true and unfortunately familiar.
I've raised their alarm about corruption in our own country. Some influenced by overseas in every hearing and markup.
The Trump family has taken or reportedly solicited literally billions for their own firms like the World Liberty Financial from domestic and foreign actors including those from those who targeted uh by your own agency for facilitating money laundering and terror finance. Many of these same people and dozens of others convicted of fraud and financial crimes have been pardoned.
It's hard to see how this isn't a payto-play scheme. I ask unanimous consent uh to submit this list of pardons of frosters in his second term to the hearing record. Without objection.
>> Director Gaki, when the rule making for the priorities is completed, will banks be required to look for hallmarks of corruption in their customers and transactions, including those of companies owned and controlled by the president of the United States and his family?
>> Thank you, Member Waters. Thank you for that question. Um as as as you may know um Vincen is currently in the um rulemaking stage with the for the AML CFT program rule. At that point upon resolution we'll turn to the AMLCFT priorities which are due to be updated.
Um I will I I thank you for your comments which we will certainly take into account.
>> Well, thank you. Uh, still I'd like to know when you take up these priorities, uh, will you include, uh, the information that I just described by the president of the United States and his family?
>> Ranking member Waters, I I I cannot speak to that at this moment.
>> Why can't you speak to it at this moment?
Ranking member warers. I you know today I want to talk about what Fininsen has done um and what we're doing um for this upcoming rule making um which uh uh which will remain a deliberative process that we will work through.
>> Thank you. Reclaiming my time. I respect what you would like to talk about. You are before this committee now. I'm talking about the president of the United States and what you must do relative to uh corruption as one of the priorities and I'm asking are you going to take up what is necessary to deal with what we know about the president of the United States and his family as one of the corruption measures that you must do.
>> Ranking member Waters, thank you for your question. Fininsen. I'm here to talk about Fininsen and Fininsson's work. Um, not beyond Fininsson's work.
Um, Fininsen their mission is to um, protect the US financial system against illicit finance, which is what the hardworking, dedicated individuals at Fininsen do every day. And that's what I can commit to you that we will do.
>> Thank you very much. Let the record show that the witness evaded the question and that we will continue uh to point to the corruption that's undermining this country and it must be dealt with. I yield back the balance of my time.
>> Thank you, Miss Waters. The gentleman from Oklahoma, Mr. Lucas, who's also the [clears throat] chairman of the finan of the monetary policy task force is now recognized for five minutes.
>> Thank you for thank you [clears throat] for holding this hearing, Mr. Chairman, and thank you Director Gaki for testifying today.
Director Gaki, you can you provide an update on Finen's repatriation efforts through the rapid response program and what barriers need to be addressed to get America's money back from bad actors?
>> Well, Representative Lucas, thank you for that question. Um, Finsson's very proud of the of the um of the rapid response program, a partnership between law enforcement, financial sector, and our international um international partners. Since I last testified before this hearing, um, Fininsen has interdicted $152 million and recovered 38 I, excuse me, $83.5 million for 381 US victims. Since the program began in 2015, we have interdicted more than 1.8 billion and recovered more than one billion for 6,000 um or more US victims.
This is um this is a um a great program that Fininsson has uh but it's not our only way of combating fraud. um which as I know this committee recognizes um is the um single um most um single largest source of elicit proceeds in the United States.
>> During our last conversation, you acknowledged the need to update the CTR and ZAR thresholds to ensure that Vincent is getting relevant and actionable reports. Can you explain why the AML proposed rule does not include any threshold updates?
Representative Lucas, thank you for that uh question. And we have actually received comments including from members of this committee on the AML um CFT on the SAR and CTR thresholds um with regard to the program rule. Since that remains an open rule making, I'm not able to comment on it, but I can assure you that the requirements and the thresholds for SARS and CTRs are um being uh discussed at the highest levels of Treasury leadership. We are consulting with financial institutions and law enforcement and we hope to bring this to resolution soon.
I would simply suggest again that the AML programs would be more efficient if only received necessary reports and the current CTR threshold has not been updated since 1970 which is no longer relevant to our world today.
The US District Court for the Eastern District of Texas recently vacated fencenins's residential real estate rule which would have imposed incredibly burden on small business. I know you can speak with specivity due to the ongoing litigation, but can you talk about some of the industry feedback you're receiving on the rule and will you make adjustments to any future rule to ensure that it limits compliance cost and isn't unreasonably unduly burdensome?
Thank you, Representative Lucas. Yes, as noted, the residential real estate rule, which is in cha been challenged and vacated by a court in Texas, um is something that Fininsson, the Treasury Department through our Department of Justice is appealing. Um we continue, however, to receive feedback from industry on ways to improve the role. I cannot speak to that or the prospect of that, but I can tell you that Fininsen is always um open for improvement and considering ways to um to uh to improve the regime. However, at this time, because the rule remains in active litigation, I can't speak further to it.
>> Thank you, director. And I believe, Mr. Chairman, I'm going to give up trying to talk. I yield back.
>> Yeah. Thank you, Mr. Lucas. Uh the gentleman from California, Mr. Vargas who's the ranking member of the monetary policy task force now recognized for five minutes.
>> Thank you very much Mr. Chair and ranking member for setting this up and of course to the witness. Thank you very much and appreciate uh you. I also want to say by before I begin I know you're a dedicated public servant and I know you're trying hard and I appreciate that very much. As you know we're all politicians up here. We have very specific views. Um and our views are are deeply held. Unfortunately for some of us, we we we really do believe that this uh regime, this administration is doing things that are outside of the law. I don't want you to comment in any way. Um but that's why we say it. We say it loud and aggressively because we have to. Um but I know that it's out of your lane and I and I know you're here to testify and I appreciate that. I do want to ask you this. Um, in your testimony you say that here that what you're really looking at is this is under the modernization the bank secrecy regime that you don't want technical compliance you want better outcomes and and really you're looking for outcomes and I think that that is what all of us want to see because I I know the ranking member mentioned this and I would mention it too when I talk to the banks the community banks the banks in my area they all say the same thing that the bureaucracy is heavy and yet often times they're just technical things that they need to do that have in their view no value. Could you comment on that?
Thank you, Representative Vargas um for the question and you know I I I share your I share your sense. financial institutions across the country have consistently told us told me that um that they they want to make sure the what they're doing is actually helping law enforcement and national security.
They want improved feedback loops. They want to make sure that the reports that Vincent is asking for aid that >> because a lot of the community banks in my district say, you know, they and I represent the border. They say a lot of the reports that they make really have virtually no value. It's people buying cars that's over $10,000 and someone paying cash and all a sudden they're doing these reports. They say they have no value really. They they know the customer. It's not really suspicious to them, but you know, they're doing the they make these reports and they have to they don't want to get dinged because when they get dinged, it's for a lot of money.
>> Yeah. Yeah. Representative Vargas, I think um I I share your I share your sense of um of of the feedback that Fininsen receives from um financial institutions, specifically small um including community banks. And this is something that we are actively evaluating and striking the right balance between burden and benefit when it comes to reports like the currency transaction report.
>> Okay. I do want to ask you a little bit of a pointed question and that is do you have any evidence at all that citizens versus non-citizens commit more fraud?
>> Representative Varys, I I don't have an answer to that question.
>> Okay. The reason I say it is the Kato Institute has done studies on this and show that their studies that in fact non-citizens commit commit less fraud.
That's why I think it's interesting when my colleagues on the other side the president creates more bureaucracy to try to single out non-citizens, people who are here permanent residents, people on visas because there's no evidence that shows that. But they're a good scapegoat. Immigrants are always a good scapegoat. It's always kind of like their go-to. Again, I don't want you to answer your publicated dedicated public servant, but I do want to make this statement because my colleagues always talk about bureaucracies and yet they're the ones that seem to be larding this with bureaucracies and more reports for banks, financial institutions that really have no value other than a political value for them.
They continue to do that. And I think that that's disappointing. It's as disappointing as I know we're going to take some votes and I hear up here all the time that you know we have to do something about the deficit. We have to do something about the debt and yet once again they're going to add a hundred billion dollars onto the deficit and the debt without any any pay for it all.
They're just simply do don't shake your head because you get in trouble. Just shake it just sit there and listen. I don't want to get you in trouble.
[laughter] Um but that's what's going to happen.
And again, I I find that disappointing.
Um, again, it just seems to be the the hypocrisy of it all. And again, the warrantless intrusions that you have into people's homes searching for non-citizens. Again, it's warrantless.
There's no there's no right to do that.
And yet, my colleagues seem to be fine with that. And the reason I mention that is again because of the bureaucracy they're creating without any real facts.
So, with that, I I yield back. And I do thank you once again. Remember when you're doing the policy, just sit there and stare.
>> Thank you. I yield back.
>> Thank you, Mr. Vargas. The gentleman from Texas, Mr. Sessions, is now recognized for five minutes.
>> Mr. Chairman, thank you very much. Miss Gekki, I've got a series of questions that I'd like to engage you on. You do not have to give me an answer on all of them now, but back in writing would be fine.
Uh the currency transaction report uh was $10,000 and has been since 1970.
Inflation drives that up. I don't know, someone estimated about $80,000 today.
Today you have problems and a lot of people do in federal law enforcement treasury going through and staying up with these uh CTRs.
Uh, I'm just interested if you want to write us back in writing or if you want to give it now. Yes, you're thinking about it. No, you're not. Go for it.
Representative Sessions, thank you for the question. Um, you know, this is this definitely comes to a a area of active um work that Fininsson has working closely with Treasury leadership on the um the requirements but also the threshold for the currency transaction report.
>> Okay. So you are thinking about it or you are not?
>> We are. We are thinking.
>> Okay. Thank you very much. There was a question that my very dear friend and and and I mean that sincerely, Mr. Vargas asked and it made me think of something. He brings out some of my thinking. So Juan, with great respect to you, I'm not trying to blow open things here, although it's possible. We understand in law enforcement there's something called a sanctuary city.
philosophy and that is where people who might be arrested are not charged.
They're let out that given different circumstances as opposed to a citizen that may have committed the same crime.
Does sanctuary city this kind of policy exist in financial services and things you do as you deal with cities? Is there uh law enforcement uh as you do your job? Is there such a thing as a sanctuary cities type of policy in your area of the business?
>> Representative Sessions, this is not something I'm familiar with.
>> Good. So, in other words, if you dealt with uh local law enforcement, federal law enforcement, mostly state, local, and they were considered a sanctuary city, New York City, San Francisco, Los Angeles, Seattle, Chicago, I could go on and on. They do not those local people deal with you on a straightup basis.
They do not block you because of their consideration of someone being in the country illegally. Is that your testimony?
>> Well, represent what I would say is that um I think Fininsen what Fininsen does is is it collects um financial intelligence um SARS CTRs millions of records. We make it available at all levels state, local, federal. But do you find where people do not comply with your requests or the things that you send them based upon an overwhelming philosophy that's known sanctuary cities in those states in those areas? That's the question.
>> Sir, that is not something I'm tracking.
>> Okay. So, why don't you get back to me in writing and tell me you do not track that. So, I don't know whether that means that it exists or not, but we'll dealt with that later. Uh, director, I have had an opportunity to go to the Texas Financial Crimes Intelligence Center in Tyler, Texas. It is an organization that has been based upon English either stood up or st it stands as a law enforcement uh area fusion center to gain intelligence to to know what happens in the state of Texas. Are you aware of this Texas Financial Crimes Intelligence Center FCIC?
>> Representative Pessions, I am indeed aware of it. I've had the privilege of talking to the leadership there and we have um agreement with them to make sure they are accessing our data. We've actually been sending uh Fininsen trainers to them to make sure that they are getting the most out of the bank secrecy act. That is awesome because I believe that this is the kind of circumstance intelligence center data gathering of information, sharing of information. Do you have any problems with them sending you information, you taking referrals from them or you to them?
>> Represent Sessions, we have a great relationship with them, an active collaboration. Um, I'd be happy for any information that they want to provide to us.
>> Great. I appreciate that. I found uh them to be very important in that process, especially as it relates to intelligence. I want to thank you for the things that you do. I'm very close to the Texas Bankers Association, Community Bankers Association of Texas, and certainly the credit unions who are attempting to work with the issues that you do every day. And I appreciate what you do. Mr. Chairman, I yield back my time.
>> Uh thank you, Mr. Sessions. The gentleman from Illinois, Mr. Foster who is also the ranking member of the financial institutions subcommittee is now recognized for five minutes.
>> Uh thank you m chair um and to our witness. Uh first a quick request when you answer the the questions from the chairman about uh about GTOs and the loss recoveries and so on. Uh could you also attempt to estimate how much financial crime has been prevented because the bad guys know about the existence of GTOs? uh perhaps by looking at other countries that have more greater or lesser ability to identify fraudulent or criminal property transfers.
>> Certainly.
>> Yeah. It's it's one of these things like the argument that well there's not that much bank robbery and so all of the the money we spend preventing bank robberies is wasted and that's you know not a correct analysis. Um and secondly, uh without objection, I'd like to enter into the record uh article from April 27th in the American Banker entitled Circle won't freeze stolen crypto, Tether will. Now what? All right. And that that is seems like um you know a major a major thing that we have to resolve. And if I just read a little bit from that article, it said that uh North at some point North Korean hackers drained about $280 million from a crypto exchange on April 1st. spent the next eight hours moving the stolen money through Circle Internet Group's stable coin network. Uh, and amongst the the the public clamor as I guess the whole crypto world was watching this happen, Circle chose not to intervene. Uh, Circle, which issues USDC stable coin can freeze the tokens at any wallet address. Um, a power that it its user terms say it can um exercise at its sole discretion. Um, and this is something in fact as the article has pointed out that Tether did under some circumstances. And so is this an area where you actually need some clarity out of Congress because it seems to me this seems like a major question in the eyes of the Supreme Court if there ever was one.
>> Represent Foster, thank you for that question. I this is something I would like to look into. um the uh you know the um I know the Treasury my colleagues at the Treasury Department work um very closely with stable coin uh issuers like servo like tether to freeze and seize assets. I would I'd like to understand this a little bit more before I can provide an answer.
>> Yeah. No, if you do and if there's a need for congressional clarity on this, I think that's uh useful. Another issue that comes up I think in probably all of our districts is the issue of Bitcoin ATMs. You know, these are the payout vector for so many of the romance scams and stuff like this. You know, I hear from all basically all the banks that consumerf facing banks have encountered a situation where they're elderly people who've been scammed. come in, they're crying, they're they pour their life savings or they ask for their life savings out in cash and then they go next door and dump it into a Bitcoin ATM and then they come back two hours later and say, "How do we get our money back?"
And this is a tragedy that's repeated over and over. A handful of states have actually just outright banned them. Uh, you know, Indiana, Tennessee, and others have just banned them. Others, uh, others like Georgia, I think, have just said, "Okay, there's a limit on the size of the transfer." and and various other things to prevent them from being used.
And could you have a look and see if you see a difference in the states that have banned these versus the states that have allowed them? Is that an effective thing that we might want to consider doing nationally because this is um you know it's a big thing and I know it's a bipartisan concern here. Um now a third thing is you know the rise of agentic AI. you spend a lot of your time dealing with identity fraud and when people are trying now to define how agentic AI is actually going to run one of the first question when my agent starts talking to your agents is who the heck are you who authorized you and uh we don't have the infrastructure to support that uh so my question is are are you working on this and and secondly do you have the personnel and budget to actually do a decent job of this that's going to be one of the major questions in aenic AI Thank you, Representative Foster. I I will say that, you know, looking at Agentic AI, both uh both incorporating it into our systems to make sure that we are um using using our operating most efficiently um using it to support law enforcement. Um that is something we are working on. We're also looking on the threats the threats of agenda agent AI especially as it comes to identity and um looking at how um how what guidance we uh could do. We we're are working across the government on these important issues when it comes to budget in our fiscal in our FY2027 uh budget request. We are seeking um further resources um for um for uh um for AI and um advanced technologies.
>> Thank you. And it's, you know, it's good that the whole government is supposed to be working on them, but I just saw that the, you know, one of the key agencies in this is uh is NIST and their center for AI security whose uh leader has just apparently quit after only three months on the job. So, this is trying to get these adequately resourced is important and yield back.
>> Thank you, Mr. Foster. The gentleman from Kentucky, Mr. Far who's the chairman of the financial institutions subcommittee is now recognized for five minutes.
>> Thank you chairman and uh director gaki welcome back to the committee. Thank you for your service. Uh I want to follow up uh chairman hills questions uh to you about the um the regulations for the residential real estate transfers rule.
Um during the rules implementation window, small title companies have communicated to us that the rule as currently written causes significant operational and compliance challenges for their business. Um h help us understand how uh things went during the three weeks uh before the courts intervened. Uh can you tell me how many reports were submitted to Fininsen under the real estate rule?
Representative Bar, thank you for that question. Unfortunately, I don't have that off the top of my head. I would be happy to get back to you on that.
>> Well, um, how many do you know how many of those reports led to actionable information for law enforcement? I think, uh, Chairman Hill asked you this question. You didn't know. Um, this is of significant interest to the Congress.
>> I'd be happy to look into this.
Um can you can you uh understand for us uh that that for for most of these title companies uh there are very practical concerns about uh you know compliance issues with this rule and are you prepared to make refinements >> represent bar? Thank you >> to to address those concerns. I you know as as um noted the rule's been vacated.
Um the Tensson is currently appealing through the Department of Justice. Um and we're we're uh repealing the rule as um as it currently stands. Um and so I won't comment on that, but I will say as a general proposition, we are always open to improvements. Although I cannot forecast any changes we might make, we are happy to take on further further um suggestions for refinements of this uh rule.
>> Well, I I can tell you from my interaction with my constituents who are in the title business, they they totally appreciate the goals of Fininsen. They want to help Fininsen um prevent illicit activity, but there are some very practical compliance concerns, operational uh concerns, and uh we would appreciate your consideration of of of their concerns. Um uh without objection, I'd like to um enter into the record a letter um sent to uh Director Gekcki um from a bipartisan group of members of Congress uh part of the real estate caucus um expressing those concerns.
>> Without objection. Uh thank you very much. question. Uh despite Fininsen's recognition that CTR and SARS thresholds are outdated and have produced millions of useless reports, Fininsen has consistently failed to update the thresholds. Why were the threshold changes not included in the AML programs rule uh notice of proposed rulem?
>> Representative Bar, um thank you for that question. Also, thank you for your comment letter from you and Chair Hill on this very issue to the um program rule. Um, and because this remains an open rulemaking, I'm not able to um speak to it. I can assure you, however, that SARCTR requirements and thresholds are an area of active work that we are closely working with Treasury leadership to resolve.
>> Well, thank you. And as you know, our colleague uh Congressman Loudermilk has been a real leader on this. We do need to update these thresholds. We want to focus on uh elicit activity and not uh kind of useless uh busy work for for for uh financial institutions. Um Fininsen um uh said that that it would finalize CTA rule making in 2026. It's halfway through the year. When can small businesses expect a final rule?
>> Representative Bar, thank you for that question. Um uh very soon. uh is Yes.
Thank you.
>> Okay. So, 2026 this year.
>> I'm very optimistic.
>> Okay. Okay. Uh you also testified that Fininsson would delete uh and this is uh to to Chairman uh Davidson's question earlier. You testified that Finson would delete beneficial ownership information collected on small businesses that are no longer reporting companies. Uh is Finen on track to do so by the end of this year?
>> Thank you, Representative Bar. Uh, Dinsen would intend to um to address the question of deletion in a final rule um consistent with other rules and regulations we would need to follow, including the Federal Records Act.
>> I I appreciate Chairman Davidson's leadership on this and I I do urge urgency with respect to his request.
Thank you. I yield back.
>> Thank you, Mr. Bar. The gentleman from Texas, Mr. Gonzalez, is now recognized for five minutes.
>> Thank you, Mr. Chairman. And uh thank you uh Director Gaki for joining us this morning. I want to begin by recognizing the importance of the United States, Mexico, Canada agreement that has been transformational for trade for America.
And um last year we traded into Mexico over $300 billion of goods and services.
125 billion of those come in from Texas.
And uh this has been an an agreement that's created millions of jobs and it's been transformational for our country and it's positioned us in a better place globally. However, at this time, I want to talk about some issues that have concerned me recently about uh Mexican cartels that are increasingly infiltrating legitimate supply lines uh by extorting trucking companies and exporters, moving goods and services uh not only in the border, but throughout other portions of Mexico. And um in my district recently, a banker showed me a spreadsheet of uh of of tolls they had to pay. These weren't legitimate tolls.
There were proceeds that go to fund transnational organizations. Uh and this is through legitimate trade.
Um my question is is Finson does Finston have uh the authorities and analytical tools necessary to identify and disrupt this type of financial networks that uh that enable uh cartels this cartel extortion and if not what additional authorities or resources or partnerships would help fencen better target these illicit financial flows and are we are we talking to our counterparts in Mexico uh right now that we're revisiting the USMCA agreement. I think it would be a very important time to to bring these issues up. Um I tried the last cycle when it was kind of towards the end and and the agreement uh obviously was ratified and and and you know I'm a supporter of USMCA but when we when we talk about free trade uh it's not free trade if we're being extorted through other or criminal organizations and this comes from the largest corporations in America down to the smallest businesses.
Um, and it's happening not only in the border, but other places. And I'm curious uh what what is being done and what more can be done and what can we do here in the Congress to improve these uh conditions for American businesses that are at the end of the day are having a direct impact on not only businesses but consumers in in our country.
>> Representative Gonzalez, thank you for raising this. I want to note how um I share this concern, the concern of what cartels are doing to trucking companies, exporters, and the like. It's something that Fininsson is very focused on, very focused on with law enforcement. Just a few weeks ago, we issued um an an alert on fiscal fuel theft, which involves the cartels, you know, stealing um crude in Mexico and um selling it to complicit buyers in the United States. And we are working very closely with our Mexican counterparts. Specifically, um, Fininsen works very closely with, uh, the Mexican financial intelligence unit, the WEF. We have regular engagement and we have a Fininsen um a Fininsen liaison um in stationed in Mexico City to work on these very types of issues to make sure that we are working very closely to to um to to uh highlight to stop this uh this abusive cartel activity.
>> Yep. because recently um I was also told that even the custom brokers on the other side of the border actually had line items that were being buil to American businesses. Um I'd love to work with you on this issue. I think it's very important for for for certainly for my district in Texas and the American people to to fix this. Um I think on the our counterparts could do so much more if they really engaged on what's happening right there in in places where we're transacting a lot of business. Um, lastly is I I know that we've talked a lot about it recently. Um, last week we sent a letter. Representative Quay Escobar and Vargas sent you a letter regarding Finson's continued expansion of the southwest border uh, geographic targeting order. I first want to thank you for the engagement and I appreciate Finson's September 25th decision to raise the reporting threshold from $200 to $1,000 after hearing concerns from members and stakeholders. But I remain deeply concerned that Finson continues to expand this order without publicly demonstrating that it's producing results. In South Texas, money service businesses are a financial lifeline for retirees, working families, and small businesses. Um, we we've heard directly from many businesses that they've lost 30% of of their customers since the GTO took effect. Instead of making it easier to catch criminals, we may be pushing legitimate customers out of the regulated financial system. all together. And I I know I'm running out of time. You could respond uh to me in writing. What evidence led Finson to conclude that expanding the GTO was justified? And can you point to a measurable law enforcement or intelligence results that outweigh the severe compliance of burdens placed on lawful businesses and families on border communities?
>> Thank you.
>> Thank you, Mr. Gonzalez. Uh gentleman's time has expired. And the gentleman, another gentleman from Texas, Mr. Williams is who's the chairman of the small business committee is recognized for five minutes.
>> Thank you, Mr. Chairman. Thank you for being here today. Uh the Biden administration's BOI reporting regulations required millions of small business owners to submit personal information to a federal database. And since taking office, the Trump administration has revised this disastrous rule and American businesses are no longer required to submit this data. And Fininsson still holds the data collected under Biden's regulations. I like many business owners, I'm a business owner in Texas, have concerns that large federal databases of private inh present a privacy risk. If that database were ever breached or misused, the effects would be devastating for business across the country. I know you've answered this sometime today. I'm going to ask you again. We'll get the same answer. Uh when you testified before the committee last year, you told us that Fininsson would delete the beneficial ownership information it had collected. And I know as we've said today, my colleagues touched on this before, but can you elaborate any that Finen still is on track to delete this data by the end of this year 2026?
>> Represent Williams, thank you for this question and thank you for your engagement on these issues. Um, as noted to chair Davidson, to um, Representative Bar also to you Vincent is um, hopes to very soon um, resolve the um, finalize the um, beneficial ownership um, interim final rule. In that final rule, we expect to to address the um issue of data deletion and we expect to uh to you know um assuming deletion, we expect to do so consistent with law and regulation including the federal records act.
>> In 2025, Finson issued a geographic targeting order for businesses along the US Mexico border to crack down on illegal activity from drug cartels and foreign terrorist organizations. These new reporting requirements have now been in effect for a year. And I think we'll all agree that we should use every tool available to crack down on cartels. But these tools must be producing results.
And if we're asking uh small business, if we're asking small business uh to do this uh uh then we need to show leadership in that.
>> Thank you. Thank you for that question.
And in uh and uh a um in assessing the burden against the benefit when it comes to geographic targeting orders like the southwest border um geographic charting order is something we absolutely take into consideration >> and we're striking the right balance I guess between keeping our order secure without stifling small businesses.
That's important. Lastly, Fininsen has a fine time to uh uh a fine line to walk and it must protect Americans from financial crime without crippling with overreaching regulations. And we've seen how hard it can be to strike that balance in initiatives like the real estate transfer rule which was ultimately struck down in a court for going beyond fenc statutory authority.
So my last question is director gaki as a fins re reevaluates this rule will you commit to in listening to industry voices to make sure any revised rules are targeted and are reasonable?
>> Representative Williams. Thank you. We remain open to all industry suggestions regarding the residential real estate rule which we've currently paused the implementation of while the decision remains on appeal.
>> Thank you very much. I yield my time.
>> Thank you Mr. Williams. Uh, the gentleman from Illinois, Mr. Casten, is now recognized for five minutes.
>> Thank you, Mr. Chairman. Thank you, Director Gaki. Thank you, Mr. Williams, for being so brief. [laughter] Um, I I want to follow up on on Dr. Fosters's questions with you about crypto ATMs. FBI reported that that Americans lost 388 million to crypto ATM scams last year. Presumably, it's much higher. That's just what they found out about. Um last year Fininsson published a notice um acknowledging that crypto ATMs were very attractive for scammers.
There were high rates of AML non-compliance.
Um the notice is great. Can I assume that you would support legislation that actually put some teeth on that to require ATM companies to register with Fininsen as money transfer businesses, update list of locations, verify customer identities, report fraudulent activity.
Representative Casten, thank you for the question. I would defer to Congress on any on any um on any legislation. Happy to provide um technical um support as needed. Um but the the crypto ATMs is something FinSen has been very focused on. You noted the the um the the alert um and and um they are um MSBs that are required to um to register with Pinson.
Um, well, Congresswoman Salazar and I've introduced bipartisan legislation to do that, including some daily transaction limits and a whole host more. We'll follow up with your staff about any technical guidance. You know, on the thin chance we don't get it through the floor this term when we bring it back, maybe we can tighten it up. I want to back up a level though of what causes people to go there in the first place.
And I have to start with just a completely bonkers anecdote.
senior citizen constituent of mine. I was with her son this weekend.
He basically caught It's a strange thing to say about your mom, was able to stop her at the UPS store. She'd taken out $20,000 in a certified check that she was going to mail to someone that she'd met through Facebook. Um the uh Reuters has has reported that 10% of all of Facebook's Meta's revenue across all their platforms, Facebook, etc., 16 billion dollars comes from fraudulent ads. And to get some context, I asked, you know, this friend of mine who was telling me this story what he did after they got everything shut down. They said they went to local police, 20,000 person village in Illinois. And the police officer said that it is really hard for them to prosecute because they have to go to the FBI. They have to get a warrant. They have to have access into into Meta's records. And that's a huge hassle for this small police force. But he said that in this 20,000 person town, they deal with 40 to 50 of these types of cases every month.
This is bonkers.
When you testified last year, we were talking about some of the efforts you were going through with way one to try to shut down on some of these, but my understanding is that you you had you had to go through a preliminary rule making. there was a whole process to go through and get that shut down. I I guess has that been effective and does it have any impact beyond way one or do you have to go through that rule making every time?
>> Thank you, Representative Casten. You know, the and let me just back up and say, you know, the um the way um fraud um attacks um elderly citizens in the United States is um is of great concern to me personally, but you know, I think appalling to all of us. It's something that Finson's very focused on and one way in which we do it is is we use tools given to us by Congress to go after some of the um some of the central nexus points. Way one group being one of them.
Um there we used um authority under under 311 to go after this payment group. Um it has been very effective. Um but we've had to redeploy it again as way one tries to pivot, create new names and tries to evade the controls put out um uh under um it is um we we we do the best we can with the authorities we have.
>> Okay. Um well and I see we're getting to the end of time, but I I think Congress has on a bipartisan basis been I think good at giving you tools where they're going after once we've identified the crime. So if there's fentanyl trafficking, if there's Russian sanctions evasion, we're we're working on legislation right now that I'd like to give you the tools so that you can actually go after people who are committing financial fraud without first having to have some understanding of where they're going after so that you we're not waiting for all these procedures. And I see you nodding your head for the record. But I I hope if you could just work with our staff, we'd love to get some technical on how to do that in a way that sharpens it and and gives you a little bit more cover to shut this down sooner.
>> Absolutely. We'll do.
>> Thank you, Director Gi. Yield back.
>> Thank you, Mr. Casten. The gentle lady from California, Miss Kim, is now recognized for five minutes.
>> Thank you, Chairman Davidson, for holding today's hearing. Director Gaki, good to see you again. Um, I want to thank you again for joining me at the Nixon Library early this year when you and your team came out for a um, discussion on residential real estate transfer rule and the damaging impacts it would have on small businesses. We did receive positive feedback from those who attended and so I really wanted to thank you. I'll touch on that uh topic a little later, but I want to start my questioning with you regarding the student aid fraud and [snorts] I know you've been leading the investigation at the Treasury Department on that topic.
So, let me share some statistics that we know. In 2024, one in every three California community college applications was fake. As a result of that, 10 million dollars in federal taxpayer dollars and three million in state taxpayer funds were stolen. And between January and March of 2025, nearly 5.6 million in federal student aid and nearly 1 million in state uh student aid were stolen as well. So last year I led a letter to Department of Education calling for a federal investigation into that crisis because Gavin Newsome and the California government were failing to address that issue. Uh so Director Gekki uh can you talk [snorts] to us about uh what you know what you can share regarding the status of your investigation into that uh student aid fraud?
>> Well, Representative Kim, thank you for that question. I also want to thank you for welcoming me and my team to your district and the Nixon Library um uh um a few months ago. Um so, and thank you for your leadership on the issue of student aid fraud. Um you know what Fininsen has found is that fraud rings are using stolen and fraudulent identities to enroll in educational institutions and unlawfully acquire federal student aid. And the schemes are resulting, as you noted, to um losses to the federal student aid programs and sometimes real students face difficulties enrolling in classes because of it. And uh you know, in order to you know, we see scammers creating ghost students. Fraudsters can illegally obtain PII to impersonate someone and pose as a legitimate student. and um often victims whose identities are leveraged um are unaware that these um scammers are um doing this. This is something we are actively involved in um and working with international financial intelligence units as well um who are who are trying to um root out the fraud at their source. I commend you for that diligent work on that matter because every dollar [snorts] that goes to one of these scammers is a dollar that could have gone to real student in need of that aid to receive education. Um, and it's especially important for the uh counties that I represent in the 48th district. That's Orange, San Bernardino, and Riverside counties. So, let me shift the gears now to residential real estate reporting rule. Even though the rule was only in place for three weeks, my constituents reported and you heard significant struggles in collecting data and complying with the uh rule making.
So since we hosted you at the Nixon Library, what further efforts have you made to connect with the stakeholders and what kind of uh feedback did you receive on the rule making and educate them on the implementation process?
>> Representative Kim, thank you. And we um as noted um in the round table that you convened um we received a lot of good feedback on ways to improve the regime and to improve um the uh the ways in which um we um we messaged and um gave guidance on the reporting regime. The residential reporting rule though having now been challenged and vacated by the district court in um in Texas um that decision is in litigation. It's something Vincent is appealing through the Department of Justice and we will work through the legal system to resolve that. In the meantime, however, um I remain open to all suggestions to um to uh um improve the regime, though it remains um not being enforced and under challenge.
>> Can you talk about the the of the many reports that were filed, how many of them have actually contributed to an uh investigation or resulted in a prosecution?
Thank you for that question, Representative Kim. It's something I'd like to get back to you on. I don't have the answer off the top of my head.
>> Thank you. Definitely, there needs to be a delicate balance in that rule making and considered feedback from market participants and law enforcement to ensure that we are not overburdening our small businesses, but also providing information that law enforcement actually utilizes. So, appreciate the work that you do and look forward to continuing to work with you and your team. Thank you. I yield back.
>> Thank you, Miss Kim. The gentleman from California, Mr. Licardo, is now recognized for five minutes.
>> Uh, thank you. Uh, Director Gaki, thank you very much for your work as director of Fininsen on behalf of the American people. Uh, fair to say your job and that of your 270 employees is on safeguarding the financial system that the public relies on from illicit activity, uh, countering money laundering and and financing of terrorism. Is that fair?
Indeed. Thanks, Representative Licardo.
That's true.
>> So, uh, as we look at how elicit finance works in our world, um, we often see the laundering of proceeds and funding of terrorism and and crime through shell companies. Is that right?
>> Yes, we do.
>> And some of those shell companies may obscure the identity of criminals. Um, and they may be based abroad and some may be based in the United States.
Yes.
>> And in fact, if if you're a crook, you might prefer a shell company that's based in the United States if you're elicit activity, your crime is in fact in the United States.
>> I think that is a typology we have observed. Yes.
So the corporate transparency act which was passed with overwhelming bipartisan majorities I think in 20 or 21 uh helps law enforcement to identify the beneficial owners of those companies uh by requiring individuals who exercise substantial control or substantial ownership of those companies uh to to register. Is that right?
>> Uh that that is yes. Now, in March of last year, the Trump administration uh announced it will not enforce any penalties or fines against US citizens, domestic reporting uh companies, or their beneficial owners, essentially exempting about 32 million corporations from any reporting under the Corporate Transparency Act. Is that right?
>> Yes, Representative Licardo. issued an interim final rule um striking a different balance on that rule.
>> And the report from the GAO that came out in May indicated that more than 99% of the entities covered by the CTA have now been exempted by Treasury enforcement.
>> I I don't remember the GA report off the top of my head, but I um I believe what you tell me.
>> Okay. So I I just want to be clear based on the rule that you described in your prior answer uh are we still not enforcing the law or any penalties as to US companies under the CTA?
>> Well, Representative Lardo, let me um thank you for this question and just stepping back for a second. The Corporate Transparency Act actually required the Defreary Department to assess the burden on small business in implementing the the um in the law. And in um in uh this administration, Treasury leadership decided that the balance needed to be restruuck that um that the typology of of um of shell companies did not justify placing such a burden on millions of law-abiding businesses um under the Corporate Transparency Act. And so in the interim final rule um using authority granted by the corporate transparency act to um to um authorize exemptions there's uh the treasury department in with the >> director I'm sorry I don't have a lot of time are US companies exempt or not >> uh US companies are not required to report beneficial ownership. Okay. And as you indicated, there's no question that criminal organizations use US companies, the shell companies to hide their illicit proceeds and move their funds.
>> That is true, but I'd like to elaborate.
>> Does this make Finen's job easier or harder to protect the financial system from the act criminal activity and terrorist activity related to moving illicit money?
Um, I would say that the United States continues to have the most robust, most effective elicit finance, anti- money moneyaundering regime in the world. And Fininsson has a number of different tools.
>> Does it make your job harder or easier?
>> I have no um it it is it is uh it does not make our job um I have no let me get back to you on that. I have no I have no answer on that.
>> Okay. Well, as I see it, this administration has decided that it's going to launch a global naval strategy and exempt the Pacific Ocean because apparently no American companies are involved in illicit activity. Even though, for example, one company named World Liberty Financial, owned by Trump and his sons, in fact engages in massive transactions with uh, for example, Chinese nationals who have been prosecuted and pled guilty uh, for violations of the Bank Secrecy Act. I find this entire thing uh, unbelievable and I can't believe folks are just standing by whistling.
I yield. Thank the gentleman. Gentleman from Iowa, Mr. Nun, is now recognized for five minutes.
>> Well, thank you, Mr. Chair. Thank you, Director Gaki, for joining us again.
Thank you for taking the time to come to my district and actually hear from Ians.
Look, here's the reality. Uh, you were appointed under the Biden administration. I'm a Republican, but we found ways to work together, and I think that's really important. That's what most Americans want. Now, I appreciate my friend Mr. Licardo's argument here that the CTA is something that should go after shell companies. We've identified nearly 40,000 shell companies with Chinese designators. We should absolutely empower you and Vincent to be able to aggressively hold those folks accountable. But I would also offer what we should not be doing is going after 32 million American businesses, small businesses, requiring to file unprecedented levels of regulatory requirement. And if they get it wrong, we fine them. We find them $500 a day per infraction. It's the exact reason that Treasury was tasked with saying, "What is the implication here and how do we hold these guys accountable?" So, let's work together across the aisle in the same way you and I have on being able to find out who these shell companies are, but let's not put the burden back on small businesses and find and fee America because the good guys already given the information that we need. It's the bad guys who are clearly lying on these forms. I want to highlight here a couple of things.
Following a round table that you had with us in Iowa, we were able to pass my small business from excessive paperwork act out of the house. I think that's a good start and it goes directly to what we just highlighted here on making sure good guys are taken care of. Not only that, but the Treasury Department paused implementation, as was noted here, of its burdensome ownership reporting requirements for Main Street.
Unfortunately, that doesn't seem to be the case in everything. We've seen a similar theme play out in residential real estate rule, which requires small businesses to shoulder similar burdensome reporting requirements. I'd ask that Finston continue to implement rulemaking and encouraging your team to make sure we narrow the approach by targeting criminals trying to exploit the financial system, not burying all of our lawabiding businesses and unnecessary paperwork. Now, one of the things we came together today on the National Security Subcommittee is to address what's going on in fraud. This has been massive in my home state of Iowa. I just talked with the sheriff of Aines County. It's farm county. There's an individual there, Mr. Chair, who saw his entire life savings bled out by a pig butchering act. Thought he had a romantic relationship, gave hundreds of thousands of dollars and this materialized into real world physical assault. Once the attackers from overseas knew that he had money on his farm, they sent mercenaries from New York City to drive all the way to Iowa.
There they held him up in a machine shed. They fired shots. Three individuals engaged by local law enforcement. All there to steal money that they had solicited him from a pig butchering scheme in Southeast Asia.
These things matter. It's one of the reasons I'm proud to be working with you on real bills, things like the Guard Act that passed out of this committee uh with overwhelming support to be able to provide real resources to our local law enforcement officers. Our next bill up is the Traps Act. This is being able to bring both the intelligence, law enforcement, and private sector partners together to be able to hold these accountable. In Iowa, it's often our seniors who are being targeted by these criminals for their hard-earned savings.
I understand Vincent has been tracking elder financial exploitation closely.
Could you share some of the latest data that we're looking at here on the scale of elder abuse being targeted by scams?
>> Representative Nun, thank you. Thank you for welcoming to me to your district um some time ago now and um and for your comments and for your leadership on these issues and um when it comes to um um elder financial fraud is indeed a huge problem which I know um you um you well recognize. Vincen in 2022 issued an elder fraud um exploitation advisory. It remains among the most referenced advisories that financial institutions use to report suspicious transactions to to us. To date, financial institutions have have filed more than 850,000 SARS totaling more than $443 billion in reported suspicious activity. And we see that older adults are often targeted in theft and confidence schemes. This is an area of sustained attention of of highest priority at um Fininsson and it's something we are engaging with law enforcement very um very um very robustly in order to make sure that we're supporting their efforts here.
>> Director G, I want to say thank you to the Finson team. You've been at the forefront of this. I think pairing up both our law enforcement both at the federal level but certainly at the local level gives us the best opportunity not only to protect our seniors but chairman to help protect our communities. This is a broad bipartisan support. I want to continue to work with you on this. Uh guard and traps are two of the best bills that are out there right now that have great bipartisan support with um Mr. Heims here. I think we can get these done. Thank you very much, Mr. Chair. I yield my time.
>> Uh thank you, Mr. Nun. Uh Director Gaki, thank you for your testimony here today.
Without objection, all members will have five legislative days to submit additional written questions uh for the witness to the chairman. Questions will be forwarded to the witness for her response. Director Gaki, please respond no later than August 25th of this year.
This hearing is adjourned.
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