Lawmakers Take Aim at Financial Reporting Requirements in Hearing on Illicit Finance – Unchained

The House Financial Services Committee hearing settled along partisan lines as lawmakers continued their efforts to crack down on crypto as a tool of criminals.

In a House Financial Services Committee hearing Wednesday, lawmakers continued their efforts to crack down on crypto as a tool of criminals. Treasury Department Under Secretary for Terrorism and Financial Intelligence (TFI) Brian Nelson and Financial Crimes Enforcement Network (FinCEN) Director Andrea Gacki, updated the committee on the strides Treasury has made in countering money laundering and illicit financing for terrorist groups. 

The hearing comes a day before another hearing on crypto and illicit finance, illustrating a continued focus on a contentious issue between lawmakers and the crypto industry.

But from the outset, the hearing settled along partisan lines, with the committee chair, Rep. Patrick McHenry (R-NC.), accusing FinCEN of targeting individuals by political affiliation and denouncing the onerous nature of financial transactions data that companies had to produce. 

Reporting Requirements

The hearing centered on the Corporate Transparency Act (CTA), which took effect on Jan. 1, 2024. The act requires companies to submit a Beneficial Ownership Information report to FinCEN, which includes the names of owners of at least 25% of the business or who exercise “substantial control” to counter money laundering. Companies founded before the act went into effect will have until next year to do so. 

The lawmakers also tackled whether the agencies needed more funding to expand their operations. 

“We’re gonna have people find out this year that they have this massive new requirement to a domestic intelligence gathering organization and they’ll find out for the first time that FinCEN exists,” said McHenry. “The average small business will find out for the first time FinCEN exists, then they’ll start asking questions about what you do, and then they’ll find out you collect all their bank records as well.”

In contrast, Rep. Maxine Waters (D-CA.) praised the work of TFI and FinCEN and the work they did, particularly when it came to helping bring charges against Binance, one of the world’s largest crypto exchanges by volume, using the tools at their disposal. 

“It was Treasury that brought the criminal crypto exchange by Binance and its executives to justice with a $4.3 billion settlement for the taxpayers,” said Waters. “Republicans don’t want you to know how valuable the Bank Secrecy Act data is, and how it has led to the arrest of human traffickers, fentanyl dealers and fraudsters on a regular basis.”

Crypto Caught Up in Illicit Finance Yet Again

The use of crypto in illicit finance has been a topic of concern for years but is heating up again. 

Sen. Elizabeth Warren’s (D-Mass.) Digital Asset Anti-Money Laundering Act (DAAMLA) was introduced in 2023 and has been a point of conflict between the senator — who is largely critical of crypto — and industry advocates. 

“[DAAMLA] would just completely cripple the innovation and the integrity of this industry,” Cody Carbone, chief policy officer at the industry group Chamber of Digital Commerce, told Unchained recently.

“And so we agree that we need to do something on illicit finance. There is consensus across the industry right now that if there is any amount of digital assets being used by terrorist groups, by money launderers or by rogue nations, we want to combat that as much as possible to protect consumers and investors,” Carbone added.

Nelson’s testimony included mention of terrorist organizations utilizing crypto, particularly Hamas during the ongoing Israel and Palestine conflict. 

“While we continue to assess that terrorists’ use of digital assets remains a small fraction of more established mechanisms to move money, we recognize that terrorist groups have and may continue to turn to digital assets to raise, transfer, and store their illicit proceeds,” said Nelson in his testimony. 

“That is why we are focused on disrupting these groups’ ability to leverage digital assets, such as our recent multilateral action against several of Hamas’s funds-transfer networks that relied on several key exchanges to funnel proceeds to the group,” he added.

Overall, the hearing did not focus solely on digital assets, but recognized they are only a part of a larger problem when it comes to curbing illicit finance. That didn’t stop some lawmakers from taking aim at them though. 

“I have opposed cryptocurrencies whose promoters have made it plain that they regard the United States as an illegitimate player on the world stage,” said Rep. Brad Sherman (D-CA). “They regard our sanctions policies in [an effort to] affect world policy as illegitimate, and they are promoting crypto, in part, to defang the United States federal government.”