Following the Money: Tools and Techniques to Combat Fraud
House Subcommittee on National Security, Illicit Finance, and International Financial Institutions
2025-04-01
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Source: Congress.gov
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Transcript
The Subcommittee on National Security, Illicit 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. The hearing is entitled Following the Money, Tools and Techniques to Combat Fraud. Without objection, all members will have five legislative days within which to submit extraneous materials to the chairman for inclusion in the record. I now recognize myself for five minutes for an opening statement. I want to welcome our witnesses. Thank you for participating in our hearing today. It's devoted to analyzing investment fraud in the United States and reassessing the effectiveness of tools used to combat fraud in our financial system. Earlier this month, the Federal Trade Commission reported that US consumers lost $5.7 billion to investment scams in 2024. Criminals are increasingly finding ways to bypass U.S. financial regulations in order to scam Americans into draining their life savings for the sake of the criminal's illicit gain. This type of organized fraud transcends both state lines and political divides. These scammers prey on everyday Americans, often our most vulnerable senior citizens. The United States is supposed to have the world's most capable financial intelligence capabilities. We are focused in this committee on national security issues. We also need to use these resources and capabilities we have more effectively to protect our own citizens. Safety and soundness are essential to preserving our own financial well-being. Beyond our own population, America's capital markets are home to more than half of the world's invested capital, and the U.S. dollar is the world's reserve currency. Since its enactment in 1970, the Bank Secrecy Act has served as the cornerstone for USNA money laundering, counterterrorism, financing and Know Your Customer compliance measures for U.S. financial institutions. The Bank Secrecy Act's regulatory framework is intended to defend and secure our financial system from crime.
However, considering the ever-changing landscape of technology and financial crime, we must continually assess the effectiveness of the tools and techniques traditionally used to secure the financial system. Today we'll take time to learn more about investment fraud and how financial institutions, including blockchain analytics firms, contribute to combating this pervasive issue. Investment fraud, as these losses grow in the United States, it's important to consider changes that can be made to enhance the effectiveness of our reporting. Suspicious activity reports, or SARs, and currency transaction reports, CTRs, are tools used by financial institutions to flag transactions over certain monetary value that could be related to illicit activities. These reports are filed by financial institutions and maintained FinCEN, the Financial Crimes Enforcement Network, and used by law enforcement agencies over the course of their investigations. A SAR is filed when a financial institution has a transaction over $5,000, and a CTR is filed on cash transactions involving more than $10,000. Based on CPI inflation, $10,000 in 1970 would be more than $81,000 today. These numbers in the reporting requirements have never been adjusted for inflation, so the reporting burden keeps growing with no obvious improvement on the effectiveness of the reports. FinCEN estimated that an average total of 12,600 SARs and 57,000 CTRs were filed each day. This is 2023 data. According to a December 2024 GAO report, law enforcement agencies accessed only 5.4% of those CTRs filed between 2014 and 2013, or 2023. So you got a 10-year period there with data and only 5.4%. That's not very efficient.
It was long overdue for Congress to consider these clearly outdated thresholds and frameworks so that we can protect our people and our financial institutions. Even as we update old laws, it's important to consider other updates. Thankfully, the Trump administration has muted the disastrous and unconstitutional Corporate Transparency Act requiring businesses to report the beneficial ownership to FinCEN. Presumably, by the law's framework, operating a business or even a homeowners association means you're engaged in illicit finance. But our Constitution says that when the government wants to know private information, they need probable cause, at least reasonable suspicion, to get a warrant or a subpoena. Surely we can minimize the financial harm suffered by Americans exploited by scammers without infringing on their civil liberties or adding ways to make ordinary citizens As we consider legislative solutions to maximize the effectiveness of our financial intelligence architecture, I'm hopeful that we will increase and improve nationwide education on investment scams, and I'm also hopeful that we'll equip law enforcement agencies with better tools to go after criminals that are continually operating unseen. I look forward to the insights gained on these issues from today's hearing, and I yield back. Chairman now recognizes the ranking member of the committee, Ms. Beatty, for four minutes for an opening statement. Thank you, Mr. Chairman and ranking member.
Good morning and thank you to our witnesses who are here today and for holding this hearing. I want to make sure that we understand today that we really need to have this discussion to combat financial fraud. And it is no secret. We've heard comments from our chair that fraud schemes are on the rise and the bad actors are now finding new and creative ways to defraud consumers. For example, the Federal Trade Commission data showed us that in 2024, American consumers lost more than $12.5 billion to fraud, a 25% increase from the previous year.
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