Transcripts For CSPAN3 Hearing 20240702

Cspan. Org. We take you now to a hearing on transNational Crime, including the financing and trafficking of synthetic opioids such as fentanyl. Youre watching live coverage on cspan. Let me welcome everybody to the hearing, and thank you very much for participating. I will start with opening remarks. We will turn to the distinguished cochair for his opening remarks and a brief video. We thank you all very much for being here. A modern day cartel runs more like a fortune 500 conglomerate than like a street gang with departments specializing in logistics, accounting, recruitment, chemical science, and they manage their empires with deadly sophistication. They operate like enormous businesses because a prophet like enormous businesses. Globally, drug traffic revenue totals as much as 652 billion. According to estimates from Global Financial integrity. Mexican cartels like sinaloa and you generation operate in the billions. Enforcement against these massive organizations usually focuses on their Distribution Networks, which makes some sense. The product is contraband, and the cases are easy once the drugs are found. But the Distribution Network is only a part of their operation. They have International Supply chains, bringing precursor chemicals from china. They have networks of shell entities and accounts to launder their dirty profits. Both are supply chains and their Revenue Management operate through Shell Companies and enablers. This includes u. S. Shell entities, im sorry to say. In 2021, treasury secretary yellens head, theres a good argument that the best place to hide and launder illgotten gains is actually the United States. Yes, the u. S. Has allowed cartels, terrorist groups, rogue states, chinese Money Laundering organizations to use phony u. S. Shell corporations and their illicit schemes. These Shell Companies may exist only on paper, but they enable deadly threats to americans lives and security. Nearly 108,000 americans died of overdose in 2022, according to the cdc. 436 were rhode islanders. The death of those 436 people ripples across my small state in a tide of heartbreak. Fentanyl and other synthetic opioids are behind many of these deaths. Fentanyls death toll was the direct result of shell corporations. Shell corporations that hide the delivery of precursor chemicals and shell corporations that hide the profits from sales. What doj indictment last year design a network of Shell Companies in wyoming to launder millions of dollars for the Sinaloa Cartel. In another case, narcotraffickers in new jersey were charged with using a Shell Company to buy fentanyl related substances from china which they pressed into counterfeit pills. The United States recently sanctioned syrian drug traffickers who used seemingly legitimate businesses to launder money. These examples are the tip of an iceberg. While this hearing is focused on the threats posed by Shell Companies serving the drug cartels, we cannot forget that terrorist groups, oligarch cronies, north korean operatives, and many others who wish harm to americans use these same opaque corporate structures. Let me be clear. A network of shell corporations servicing these foes and the enablers who facilitate them are a clear and present threat to our National Security. In the battle with narco lords, into the shadows of the dark economy can go a long way. So i think cochair grassley for our years of Work Together to shine beams of sunlight into that shadow economy. Our corporate Transparency Act is one such beam of light. On january 1st of this year, the Treasury Department established a Beneficial Owner registry to sort out this anonymous Shell Company mess. At long last, helping Law Enforcement and National Security officials find out who is behind american Shell Companies that facilitate criminality. The best place to hide and launder illgotten gains is actually the United States. This year, the treasury also announced puzzles related to dirty money and in the Residential Real Estate sector. I will be submitting encouraging comments in due course, and recommend comments on commercial real estate purchases. It is regrettable that well paid whitecollar american professionals, lawyers, brokers, and accountants provide services to bad actors. This is a National Security frontier in the global clash of civilizations between rule of law and corruption. My enablers crackdown on those aiding and abetting americas enemies by beaming some daylight into key sectors. We can organize our efforts better against the global dark economy. Ive introduced a bill to introduce a crossborder crime center to coordinate across all federal agencies investigations related to financial crimes as a nexus to the u. S. Border. Finally, we should provide greater resources to the Treasury Department, the department of justice, and other federal agencies on the front line against National Crime and corruption. Through u. S. Anonymous Shell Companies. With that, i turn it over to co chair grassley. I want to thank you for mentioning our work on this very recent legislation we can get more cooperation in the United States senate so i wouldnt have people at the back of my town meetings yelling out, how come you guys cant ever get along . I tried to explain to them that we can get along. Congress often talks about how criminals use Shell Companies to launder money. The corporate Transparency Act is an important part of that conversation. But its only a part of the equation. Criminals also use Shell Companies and muddled corporate structures to secure the tools of the drug trade. Today, id like to focus on one particularly troubling example. The u. S. Registered planes are used and are a critical tool i the cartels to move drugs. Before speaking further, i want to show you a brief video of the cartels using these planes to cause chaos, and then i will carry on. So lets see the video if we can. I hope this is not an example that video doesnt work. Drug cartels use Shell Companies and government loopholes to get their hands on american planes. That same open market also supplies a key part. You can still see in full there, meaning this plane originated in the United States. U. S. Planes carry cartel poison to u. S. Shores, killing americans and causing deadly destruction. We cant let bad actors put our security at risk. Protect american lives. Now, a certain date on april 20th, 2020, the Sinaloa Cartel crash landed on american airplane in guatemala. The plane was loaded with over 1600 kilos of cocaine, and that cocaine was destined for the United States. U. S. Law enforcement tracked the cartels movement, and the Guatemalan Military spring into action. The first provided just 10 soldiers. They were met with a cartel army of 150. The same scene repeated itself hundreds of times in countries throughout central america, leaving many to wonder how cartels get their hands on american planes. The answer is buried in reams of fraudulent paperwork piled up at the federal aviation administration, faa for short. Criminals disguised by Shell Companies duped the faa into registering planes with u. S. Tail numbers. Those tail numbers shield the planes from foreign Law Enforcement scrutiny. This allows millions of dollars worth of drugs to sail through the airspace undetected. Once the drugs reach their destination, the plane is destroyed, and the criminals walk away with net profits. The faa is aware of this problem, but hasnt changed his registration process. 10 years ago, in 2013, on Inspector General report warning the fbi about vulnerabilities in the system. Those warnings went largely ignored. Then in 2020, the Government Accountability Office Report raised the issue once again. They recommended the faa make 15 corrections towards registration process. Four years later, the fbi has only implemented three of those 15 recommendations. Weve all seen the damage a plane can do in the hands of an enemy. None of us will ever forget how airplanes turned into weapons of mass destruction during the worst terrorist attack on american soil. 9 11, as you know. But 23 years later, the faa still appears to act as a representative rather than a watch guard. Id like to think our witnesses for being here. Particularly glad to have miss rebecca shay here to speak about what the geo 2020 report says. Lastly, i want to thank u. S. Law enforcement, military, and our allies who keep us safe from criminals. I look forward to discussing how congress can provide needed tools for this fight. Thank you. Thanks very much, senator grassley. I think our witnesses for being here. Ill give each a quick introduction and they will each have five minutes to make oral remarks. Your full testimony will be made a part of the record. Our first witness serves as senior director at head of the center of economic and financial power at the foundation for defense of democracy. She is a thought leader on geo lit political risk, anticorruption, and National Security. She was a senior director of the World Economic forum from 2010 to 2015, where she led the partnering against Corruption Initiative that launched the deeper Risk Response network. She sellable political and career positions with the u. S. Department of homeland security, including assistant secretary for policy and cargo and trade policy. Retired from a 32 year federal as an assistant special agent in charge, special educations division, where he led the office of Financial Operations through the chemical pharmaceutical and cyber section. His career, mr. Im supported investigations into the illicit financial schemes of the cartel, asian triads, chinese, and mexican synthetic opioid producers and their corporate enablers. I think mr. Im for his years of service and for being here today. Rebecca shay is a director on the audit and Investigative Service team at the Government Accountability office where she oversees fraud waste and abuse across a wide array of Government Programs and agencies. In 2020, she led a team examining issues in the faas process. Failures that enable cartel operatives, oligarchs, and other bad actors to secretly obtain highly desirable u. S. Registrations. Misshaped worked at geo for 25 years and holds. The Government Affairs director, the financial accountability and corporate transparency coalition. The Fact Coalition, where she leads groups engaged in federal policy wagers. Before joining the Fact Coalition, ms. Hanichak worked with nonprofits focused on Government Accountability and rule of law in the middle east. Her work supported the passage of Bipartisan Legislation targeting networks that fuel mass Human Rights Violations in syria and the middle east, and she campaigned to augment Counter Terrorism financing measures and prevent the abuse of u. S. Humanitarian aid. I appreciate all of you being here. I would also like to recognize a senator hassan has joined us. Chairman, white house, chairman grassley, members of the caucus. You so much for the opportunity to be here to discuss the corporate Transparency Act and the important work to abolish the opaque corporate structures that would facilitate transnational terminal activity, undermining accountability and threatening u. S. National security. No financial has aided enemies of america more than the anonymous Shell Company. It is the Gold Standard of secrecy. Allowing dirty money to move effortlessly across state lines and over National Borders without any risk that the underlying actors are indemnified. In 2021, Congress Passed the corporate Transparency Act outlawing anonymous american Shell Companies by requiring all Shell Companies to provide information about Beneficial Owners. The real persons behind the corporate form. Reliable information provides a critical boost to Law Enforcement, allowing investigators to truly follow the money, rather than chasing and list rings are Shell Companies, offshore entities, and disguised owners. The cta replaces the proverbial Law Enforcement dead end with a critical door to essential information. Drug trafficking operations have long exploited anonymous Shell Companies to launder money and aid in the transport of deadly narcotics into the u. S. In february 2022, a new york man pled guilty to laundering 650 million in drug proceeds through anonymous shell corporations, sending the funds to both domestic and foreign entities in china and hong kong. In 2018, a Chinese National and his father were indicted for operating a global synthetic Drug Trafficking organization that shipped fentanyl analogs in over 250 other drugs to 25 countries in 35 states within the u. S. , often relying upon Shell Companies for distributional Money Laundering. The drugs sold by the changs are confirmed to have resulted in at least two known fatalities in ohio. For every case uncovered, it is reasonable to assume that there are countless cases where the Successful Use of anonymous vehicles stymies Law Enforcement, and the cases never closed. The examples that follow are likely just the tip of the financial iceberg for an illicit industry that is estimated to generate as much is 650 billion a year globally. In idaho, a victim paid thousands of dollars to an online website called pharmacy website that purported to sell prescription drugs. In reality, the pills contained other substance is, including fentanyl and its analogues. They extradited a dominican citizen for transferring narcotics to the pharmacy website, but only after the idaho victim died of an opioid overdose in 2017. Consistent with what we see across Drug Trafficking networks, the suspect had used Shell Companies to launder money from the website. Just last month, a las vegas man was sentenced to eight years for processing and distributing hundreds of thousands of opioid pills. How did he launder the proceeds from their sale . Not surprisingly, it was shell corporations. Unfortunately, we tied our own hands, gifting drug cartels and their Money Laundering is a magic curtain to shield their identity and hide their wealth. The National Security risks of anonymity extend far beyond Drug Trafficking alone. Americas adversaries have been actively exploiting anonymous Shell Companies for decades to further nefarious plots and make america and the world less safe. No example illustrates this risk is concretely as victor bout, the Notorious International arms dealer who was convicted in 2011 for selling millions of dollars to terrorist organizations that aim to kill americans as well as fuel conflict in africa, latin america, and the middle east. They leveraged anonymous Shell Companies to hide his activities, including a dozen new Shell Company set up in texas, florida, and delaware. Vladimir putins allies have used two by 15 million mansions in washington, d. C. , while the iranian government has used Anonymous Companies to cover up ownership of the fifth avenue skyscraper in manhattan. The terrorist Group Hezbollah has used Shell Companies to purchase properties and businesses, dodging sanctions and continuing to enjoy access to the Global Financial system. African dictators have used anonymous Shell Companies to buy malibu mansions, while corrupt malaysian officials used anonymous Shell Companies to help steal billions from public coffers. Unless the u. S. Addresses the risk of anonymity in the financial system, we leave ourselves vulnerable to manipulation, corruption, and attacks by illicit actors. Collecting beneficial information on the companies that operate in america is a straightforward and powerful tool to defend the homeland. There is no legitimate reason to delay the implementation of the corporate transparent the act. On behalf of the foundation for defense of democracies, inc. You for inviting me to testify. Thank you very much. Special agent im. Or federal special agent im. Retired. Thank you. Cochairs, senator grassley, the committee. Members of the committee, i am pleased to be for you here today to discuss critical challenges Law Enforcement faces in deterring fentanyl, heroin, fentanyl, methamphetamine and narco terrorism. The proceeds of illicit activities is one of the most effective means to increase the ability to operate and benefit for their own reflections. However, its difficult when these organizations are able to establish honest registered companies that conceal and protect their identities as well as her highvalue assets. I retired from the dea in late 2022 after 31 years, supporting hundreds of Money Laundering and narco terrorism investigations. Assigned to the u. S. Operations committee, we always encountered businesses, Bank Accounts, many of which were either the name of a proxy or front company, or even a registered wounded liability with no true Person Associated with the llc, nor a physical presence. Many elements of the cevilla cartel and organized crime, chinese triads, hezbollah, al qaeda, or even isis. Each of these entities continue to use Front Companies in some form or fashion to conceal their operations and wealth. Many of these are protected and hidden behind avery veneer of legitimate law forms in countries throughout the world. In my few years with the d ea, we identified numerous Online Pharmacies shipping real pharmaceutical drugs stolen from thousands of breakins or counterfeit pharmaceutical drugs repackaged and sold online and shipped through u. S. Mail parcel systems. Many of these fake Online Pharmacies have established either a Shell Company as well as cryptocurrency to receive payments. The challenges of identifying true beneficiaries of this payment were difficult at best. Such Anonymous Companies operate. From 2004 to 2016, the Operations Division with over 32 different agencies was able to identify the hezbollah drug laundering operation and activities that use automobile dealership companies in United States and africa. Legitimate Front Companies were used to establish various Bank Accounts and send and receive millions of dollars of drug profits throughout the world. Thousands of these vehicles were shipped to africa and the middle east. All the while, a Canadian Bank allowed tens of Million Dollars of proceeds to flow freely into various Front Companies with Bank Accounts controlled by hezbollah. The dea undercover operations were able to successfully identify in africa, the middle east, europe, and australia. Drug cartels, money brokers, in coordination with the treasure enforcement network, using 311 sanctions. Most criminal enterprises are established by Shell Companies are combined hybrid to create Subsidiary Companies with tentacles and highly elaborate corporate structures that can also operate nonprofit social or political organizations. They are after a myriad of registered entities connected as banking investment, cryptocurrency, and other institutions such as debit cards tied to Bank Accounts within unlimited selection. For loans that obscure and conceal the true beneficiary. Whether for tax evasion, human arms trafficking, or other crimes, fraud or government corruption, weve always had difficulty tracing and identifying the principles behind these activities. Recently it has been a disclosed that chinese and moneylaundering organizations have successfully been laundering millions of dollars for the past two decades using legitimate from Shell Companies. Currently, criminal networks are laundering billions of dollars cultivated throughout thousands of indoor grows and farms throughout the United States. Using trade based Money Laundering and parallel funds and asset transfers, these proceeds either ultimately end up as investments from wealthy Chinese Government officials, threaten me america, asia, and europe, or southcentral america. All the while, facilitating and amassing the cartels wealth that allows them to continue and reminding the world of it. Thank you, and i welcome any questions you may have. Thank you very much. I will turn next to rebecca shea , whose work was mentioned by senator grassley in his opening statement, and taking the opportunity, as she delivers her testimony, to put into the record entitled National Security assessment criminal exploitation of the federal aviation administration. Is her objection . Without objection. Please proceed, ms. Shea. Chairman whitehouse oh, thank you. I dont know who the last one was, but they sure worked over that microphone. Okay. Thank you. Sorry for that. Chairman whitehouse, coach herman grassley, embers of the caucus. Thank you for the opportunity to discuss the criminal and National Security risks associated with opaque information and faa aircraft registrations. Faas civil registry is the largest in the world with approximately 300,000 aircraft approved to operate with a well known and number on the tail of the plane. U. S. Registration is preferred because the standards for safety and maintenance that preserve resale value, the low Registration Fee five dollars for a seven year period is an added draw. The bad actors also appreciate having an and number, because it can feels that the blank in and around the United States with less scrutiny than aircraft with foreign registrations. Requirements for registration generally involve u. S. Citizenship for individuals or corporate aircraft owners, but there are also ways for non civilian individuals and entities to meet this requirement to the use of legal structures like llcs, Shell Companies, trust, and voting trust. While illegal, these structures and the intermediaries that help establish them help secure the identity of the owner of the aircraft. If those owners are up to no good, investigators ability to track them down is complicated when their information is unavailable, layered, or obscured. We highlight a number of cases in her 2021 report were hidden ownership was associated with Drug Trafficking, sanctions evasion, Money Laundering, and other activities. In one case, an individual under sanctions for narcotic track aching used a front man who launder drug proceeds for him to register his aircraft with the faa. The front man on five u. S. Companies, including an llc that register the aircraft using a voting trust to meet the citizenship requirements. The 2020 drug assessment found that they used secondary airports to augment commercial smuggling. In addition, aircraft or high value assets useful for Money Laundering were purchased with illicit funds and as part his trade based moneylaundering schemes. With these known risks and a volume of aircraft involved, the faa has an Important Role in managing and prevent these risks by verifying the information applicant submit and collecting relevant data to support Law Enforcement. However, in our 2020 report, we found the faa relies on certification and collect a minimal amount of information. For most registrants, this includes two documents. The Application Form with their name and address, which the fda accept as factually valid, and a bill of sale for the aircraft. For those more complex like the trusts, they collect trust documents, stored in imaged pdf files at the time of our review. According to registry officials, their role is to record and maintain publicly available information on aircraft registration. The faa checks that the form is complete and sign and relies on Self Certification that the information provided is truthful and accurate. If youve heard one thing from the gao and the various igs in almost every hearing and report on pandemic fraud over the past four years, it is that l certification is not a control. It is a tool for prosecution, not prevention. They falsely attested to something when they signed. Its not a control to prevent people from lying. And yet, it is the way the faa continues to do business, essentially as a rubberstamp for every operation that comes in and complete. According to registry officials at the time, they believed fraud was the responsibility of other faa organizations, and this is simply not accurate. All federal programs are required to manage fraud programs with a focus on prevention. In 2020, we made 15 recommendations to the faa to close these critical gaps in critical information processes. The faa has taken action on three, which is foundational to other recommended changes. However, faa has a lot more work to do on the remaining 12 recommendations to help prevent exploitation of the aircraft registry for criminal purposes. I appreciate the caucuses interest in this important topic, and i look over to your questions. Thank you. Thank you very much. And finally, miss hanichak. Chair whitehouse, cochair grassley, other members of the caucus. Innkeeper holding this important hearing. Im here on behalf of the corporate trance parents the Fact Coalition and its more than 100 members to discuss the dangers that opaque Shell Companies present to americans. Illicit Shell Networks expand states and continents, threatening American Public safety and National Security. My fellow witnesses have raised how drug traffickers use them as financial getaway vehicles to peddle products, detect profits, and harm average americans. These harms are not new, nor are the abstract. The use of Anonymous Companies has lethal consequences for our communities. The evidence is damning in light of our opioid epidemic. Consider just one case involving a series of Pain Management clinics in florida and tennessee. They doled out medically unnecessary opioids to the tune of 21 million. This criminal overprescribing scheme led to the death of at least 700 people over four years. 700 people, and that is just one case amongst dozens were criminals have used Shell Companies to enrich themselves while exacerbating the Public Health crisis. Shell companies have made the u. S. Vulnerable to financial crimes. Treasury secretary janet yellen has said, quote, there is a good case that right now, the best place to hide and launder illgotten gains is actually the united dates. The United States is a stable democracy and home to the Worlds Largest economy. That means the United States doesnt just shield the worst actors. In many cases, the protection is the rule of law as well as a strong return on investment. And drug profiteers have taken note. Both down the block and across the borders for drug operations large and small relying on anonymous shell corporations. In 2023, 12 people were indicted with the Sinaloa Cartels heroin trafficking operations. United states, mexico, canada, 16 million through wyoming based Shell Companies. The secrecy afforded provides and the violence they inflict on our cities. We also see u. S. Shell Companies Used as part of other crimes the drug traffickers commit, including environmental crimes. For instance, the Peruvian National using the pseudonym Peter Ferrari and his associates allegedly used millions of dollars through the United States as a means to launder drug money, using a Shell Company and other methods. As raised by other witnesses, they also endanger our National Security. One example is particularly striking, in which individuals moved 1 billion in iranian funds held in korea through companies registered in the United States and elsewhere. Decades of u. S. Sanctions, and they still chose to move it through the United States. The cognitive dissonance here is palpable. Any u. S. Sanctions policy pursued without peril steps to close antiMoney Laundering loopholes is at best wishful thinking, and at worst, a farce. One way the United States can help stop the shell game is to incorporate the cta, which marks the most significant update to u. S. Antimonday laundering laws. It requires certain to a secure directory, housed in the financial crimes enforcement. Prior to the cta, all 50 u. S. States required more information to get a library card than it did to form a legal entity. Now Law Enforcement agencies have new tools to follow the money. So far, and largely has. They successfully launch the database on september 1st, and more than 1 million businesses have already filed. According to a recent poll by Small Business majority, nearly 70 of businesses that have already filed said reporting was easy. 18 said it was difficult. Businesses with simple ownership have reported it takes less than 20 minutes to complete the form, and filing is free. Businesses may never need to interact again. That means after nearly 20 years of deliberations for Shell Companies, congress struck the right balance on passing this law to keep our country and our regions safe while also keeping the cost of business is low. Congress passed this law, but now needs to fund its implementation. Congress should meet the president s request for 260 million for the upcoming year. The on the corporate Transparency Act, the u. S. Must also apply antiMoney Laundering protections to third party officials. If Shell Companies are the financial getaway vehicle, then the socalled enablers are offering the car keys and the road map that allows them to make the escape to the u. S. Financial system. The administration and Congress Must Work Together. Thank you, and i look forward to your questions. Thanks so much. Let me start with where miss hanichak ended, which is dealing with enablers. And if you dont mind asking miss dezenski , mr. Im , and miss hanichak each to describe the importance and the role of getting after these white collar professional enablers in addition to protecting against these opaque anonymized shell corporations. Thank you for the question. Very important. So enablers, we are talking about the accountant and lawyers, as you said. Dealers, financial advisers, personal and professional functions, persons who are in positions of authority with respect to establishing trust and corporate entities, and sometimes serving as fiduciaries. These are the people who grace the system, and that is why it is so important to get to this part of the supply chain, if you will, when we are talking about shutting down this wide influence. If we have people in these trusted positions who are not accountable for the people they are representing, thats a problem. So we need to close this loophole just as much as we need to establish a Beneficial Ownership registry. It all works in concert. But without the gatekeepers piece of this, and really going after that through new legislation, we wont have filled all the gaps. Am i correct in concluding that the professional gatekeeper professions that you just described all operate by virtue of licenses . That is my understanding. So these professional licenses are going about these acts . Yes. Mr. Im, your role from the investigative side. Well, throughout the years of holding investigations, the socalled facilitators actually allow these bad actors to read their profits and continue their crimes. However, the issue isnt really just going after the facilitators, going after the bad actors, but the facilitators. In many ways, these lawyers and bankers and accountants and businessmen only get a reduced sentence, very light sentences. Theres no incentive for them to cooperate. And when you dont have any incentive for those individuals to cooperate, you cant get to the next level. Youll never be able to get to the bad actors, and thats always been the issue, is that a lot of bankers dont go to the gym. Accountants dont go to jail. Lawyers dont go to jail. Thats the issue. And they can provide services to multiple bad actors, correct . They do. If they wanted to cooperate, the Law Enforcement benefit would be widespread. Absolutely. Is or anything else youd like to add . Yes. I join my colleagues in calling for this very important reform. When we talk about Drug Trafficking, chasing after the product these arent crimes of passion. These are crimes of profit. The best place we can actually tackle the problem of drug traffickers is to go after their pocketbook. And so it truly is the role of many of these enablers to facilitate drug traffickers and other bad actors in bringing their money into Global Financial insiders, including the United States. Im thinking of one example in particular for texas, going to the press releases recently. He was found guilty in 2020 of laundering nearly 500,000 a month on behalf of the narcotics ring and put together opioid trafficking. And in a conversation with an undercover agent, he said of his lawyer, hes a thug. He just got a law degree. And so there are professionals that make this a matter business. We all know the stereo typical mafia lawyer, there are those who are unwittingly caught up in the schemes. They do a great job of making sure these professionals are not accomplices. Thank you. Thank you. Let me just ask this to miss hanichak. We talked a little bit about Law Enforcement, Public Safety concerns related to these shell corporations, and mr. Im is obviously an expert in that area. Theres an enormous amount of overlap between Law Enforcement and National Security comes and what you might call nonLaw Enforcement National Security concerns. Can i ask each of you briefly, because my time has run out, to highlight a few of the nonlawn were spent security concerns for important u. S. Safety and diplomatic and Strategic Initiatives . First miss dezenski, then miss hanichak, and i will turn it over to senator grassley. Thank you for the question. I think the place to start on this is recognizing that opacity is a key enabler of kleptocracy. When we are talking about americas foreign adversaries and other kleptocratic regimes, there is really no better tool to exert malign influence than it shell organization. Thats really the connection point when we are talking about National Security and the ability to use our own system for the purposes of malign actors. It is but one way that its done, but its one of the most important. And so this is absolutely critical. We think about, how do we push back against date sponsored corruption . How do we push back against dictators that are pilfering their own coffers and moving that money into western Financial Systems like ours . All of this points to the Beneficial Ownership question, and how we close that down. Theres really no way to separate the National Security and trust from what we are talking about. Miss hanichak . I only had one particular example that really illustrates this from a diplomatic also very much military angle. There was a case a few years back in which a u. S. Entity was hired on the department of defense as a u. S. Contractor. That same entity was later found to be related to folks in afghanistan, locals that were also supplying weapons to the caliban, directly putting our groups in danger. This presents a very real National Security threat. Compared registry data to the state department Money Laundering country list and found 251 registrations with addresses located in these countries. Their team also compared the registry to the office of foreign assets control records and found six planes registered to entities subject to u. S. Sanctions. Does the faa have access to those same records that you used to conduct urinalysis . Thankfully, this is working now. Faa does have access to that information for that kind of analysis. It is public information. The sanctions list is public, and all citizens are required to comply with it. Followup question to the same one. What did the faa tell you about its authority to deny registration to sanctioned individuals in Due Diligence it conducts . Faa told us that it does not have the authority to deny registration to sanctioned individuals or situations where an aircraft is sanctioned. I will leave whether that is accurate or not to the lawyers, but one of the things that does indicate is a significant red flag that a risk that faa should be managing. As a result, that will be a very close collaboration and communication with lawn were spent about how to be handling that particular issue. One of the things that we also found in relation to that sanctioned individual in the case there while theres two different registries theres the owner registry of the dealer registry. And while the faa had placed a flag for that sanctioned individual in the owner registry, there was no communication between the dealer and owner registries. In the intermediary that had established the registration for the sanctioned individual was later sanctioned himself and he was also registered as a dealer. And because there is no connection and awareness on faas part, he had registered that aircraft for over a year as a dealer, so was able to use and fly that aircraft through a valid certificate in the dealer registry because faa was not able to connect those sources. If the faa were a private Company Registry aircraft in the u. S. For that five dollar fee and failed to check the registry, would it be in violation of u. S. Sanction law . It would be in violation of u. S. Sanctions. All u. S. Citizens are required to come i was sanctions designations, and i would also add if that u. S. Company were charging just a five dollar fee, it would long have been out of business. I referred to the report that i released, and its about your recommendations. To this day, 12 of you recommended corrective actions are outstanding, despite faa agreeing with them. In your experience, has the faa been unusually slow, or dangerously negligent in acting on your recommendations . So i will give faa a little bit of grace for 2020. We issued our report and recommendations in march of 2020, but it has been three years since then, and they have only completed action on three of the recommendations related to fraud risk assessment. Its a good recommendation, its a good start. There are many things that should not have taken as long as they have, taken years in order to implement. In your 2020 report, you noted that the faa identified a risk that terrorist may access the faa registry. Could you explain the access terrorists have to the registry, as well as their ability to register aircraft . So one of the things that we talk about in our report is faas rubberstamp approach, essentially, to accepting registrations. They collect limited amounts of information, and they are looking to the that the Application Form and a bill of sale is present and the application is complete. They do not verify that information. And in our view, the faa did not mention anything about checking the terror watch list to identify whether terrorists are seeking to register their aircraft. But because of the approach that they take, essentially, not requiring significant information and the minimal verification, i dont see how they could possibly know if terrorist were registering aircraft in the u. S. So my last question, so i will make it as a statement your report is more or less saying that if the faa hasnt taken any steps to deny terrorists access. I dont think they would know if they have or have not. Okay. Thank you. Senator grassley is interested in pursuing a second round. Id like to thank him for his work in this area. And i look forward to working with him on remedial legislation. Our appreciation to je oh for all their support as we look at this problem. And with that, let me turn it back to senator grassley. I just have two questions and will probably submit some for answering. I got one for miss shea and one for mr. Im. In 2020, you recommended the faa create written agreements for information sharing with i dont think it would require much reporter because ive identified this just doing this at a daily basis, this is what we recommended. The fma has not done that as of yet. This is for the information sharing agreement. Are you aware of any barriers to hiring on such agreements . The faa did not raise any. They can share them. There are the priority recommendation list. We do a biannual report focusing on the report. Your question is only for comparative purposes for what ms. Shay has said. You served 38 years at bay, how long did it take the d. A. To sign the information sharing agreement with other agencies . Some took within a matter of months. No more than a year . No more than a year form what i recall. Let me make a confession, first. I said that i felt there was more effort against the narcotics empires then in respect to the plight chains or the finances and i will confess that i have been guilty of that myself. I have done those investigations and made those arrests and made those cases. Laying out the drugs on the table with the guns and the cash. My major Money Laundering case was actually a seizure of contraband from the money wander with gold bars and we seized all of them. It is a traditional bust and sees case. This was back some time ago when i was u. S. Attorney, with a lot of infrastructure to plug into with your u. S. Attorney and state attorney general. To look at the finance side at how these organizations operated through the dark economy. It will be a very rough number or comparison. Its 90 of the Enforcement Effort that goes to the distribution effort of the cartels operations with 10 left for supply chain and finance. In my wrong about that . Is that going up . The order of magnitude. Goes with your experience . How much more room is there for effort on the finance side . That is a good question. Moneylaundering investigations have gone down. In the 2000 it was pretty robust. D. A. Was seizing 1 billion per year in proceeds off the streets including moving assets and going after banks. It decreased dramatically. They used to have a division. Now it is just a unit. Even Online Pharmacies, the dark web, and internationally. It is not as robust as it used to be or it could be. We would see etf investigations i would go into the finances and sale of illicit products. Dea and fbi would run into this. State Police Investigations my run into this. Mine is not a very Robust Office for coordinating between agencies at various points where criminal enterprises and agencies are investigating to touch on me dark economy networks through which the finances tend to flow. As i your sense as well and do you think there is a heightened need for interagency coordination around Money Laundering and the dark economy . Absolutely, senator whitehouse. We tried that on numerous occasions back into the 1990s it allowed for the maximum punishment when it came to crimes and attempted to host the interagency component of Law Enforcement at the intelligence level to identify the big players involved and bring in the irs and customs legacy for going after the underpinnings of these entities having that component in the special Investigations Unit over 32 agencies, i had a component of that when i was in the special Operations Division. I will give you an example. We identified an organization that was purchasing drugs using refund checks and we determined that there was 26 billion worth of fraud that had taken place using income tax refunds. Having the entity, working together from the same location like the special Operations Division can go a long way. The special Operations Division has 32 operations. It has been there since 1992. It has Law Enforcement and Defense Department entities as well. That would be a natural place, the most effective place there is right now. There are prosecutors there as well. On the coordination question, have you been able to rule out anything . Thank you. Not much to add. I would emphasize that particularly if we are talking about Beneficial Ownership and the clues in the financial loop, part of the challenge for Law Enforcement is that it takes too long to get to the bottom of these transactions and following the money has been too difficult they need to go somewhere. This is why the ownership information is so critical and information sharing across Law Enforcement at the state and local level becomes essential to solving these cases quickly and allowing for better interdiction in the process. It is all related, that is the key here, based on my experience going back to the post 9 11 days of dhs, when we were looking for the terrorist threat, knowing how difficult it is to find the needle in the haystack, we have a similar problem around fentanyl. Most of the focus has been on interdiction. Being able to cut the Money Laundering transactions in the u. S. And hows those funds are flowing and potentially getting cooperation from china at some point, would make a huge difference in terms of balancing out what we do on the interdiction side with the work that can stop the flow, before it actually hits the border. I would only add that this brings us back to the point of funding. The need for Beneficial Ownership information to be key in the investigative tools. Making sure that state, local, federal, know that they have this new tool in the toolbox. So that it can be used for their investigations. One thing im considering besides the training element is that these cases are often transnational. We have to think about how the information can be shared in particular and what types of trainings are done around the and with who we have in place that can be supportive to international Law Enforcement making these types of requests. We look around the environmental and criminal issue with the way it applies to our products. This could be something that could help facilitate this additional focus on the financial element. Thanks. Great, thank you all. Let me think ms. Shea, i think your work is in the best traditions. We love to work with and i will be supporting senator grassley in his efforts for the legislative remedies to solve this problem. I will close with my customary observation that we are, as a famous author once proposed, in a clash of civilizations. I see the boundaries of the clashes between rule of law and corruption. I think when you look at the National Security dangers that america has faced, whether it is the invasion of ukraine made possible by corrupt leaders and oligarchs in russia, whether it is extremism in the middle east funded through secret channels. Whether it is covert and Cyber Efforts by china to steal intellectual property and interfere with democratic processes, or if it is International Corruption and the various security dangers that creates over and over and over again, it all touches a vibrant, secret, dark economy that will help whatever correct criminal comes to it with money. Very often it is american and european professionals who are willing to aid and abet the conduct of some of our most dangerous enemies. We really have to get to the bottom of it. We have to understand it is a National Security danger to our country. It does not happen off in some strange foreign country. They maintain fake accounts and opaque corporations and all of that. It is a dark network that supports an enormous amount of really dangerous behavior and does it for money. We need to put a spotlight into it. National security imperatives of our country demanded. The other three witnesses who are here all spoke to that and understand it. Thank you for your work to advance that understanding and for your testimony here today. With that, the hearing will be adjourned. Do we need to hold the record open for any purpose at this point . Okay, there will be questions for the record coming your way, most likely, answer them as