Evaluating the Financial Crimes Enforcement Network

House Subcommittee on National Security, Illicit Finance, and International Financial Institutions

2025-09-09

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Source: Congress.gov

Summary

This meeting of the International Financial Institutions focused on evaluating the Financial Crimes Enforcement Network (FinCEN) and its operations, particularly regarding the Corporate Transparency Act (CTA), the Anti-Money Laundering Act of 2020 (AMLA), and the Bank Secrecy Act (BSA)[ 00:13:07 ] . Director Andrea Gacki testified on FinCEN's efforts to combat illicit finance, streamline regulations, and address emerging threats like those related to digital assets[ 00:25:02 ]

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Themes

Effectiveness and Modernization of Anti-Money Laundering Regulations

Members expressed concerns that the Bank Secrecy Act (BSA) has become an overly burdensome "bloated surveillance machine" that demands extensive reporting from financial institutions without delivering proportional results[ 00:13:50-00:14:01 ] . For instance, FinCEN data indicates that only a small percentage of Currency Transaction Reports (CTRs) are accessed by law enforcement, suggesting that a flood of paperwork may obscure real leads[ 00:14:15-00:14:22 ] . Director Gacki acknowledged the burden of reporting, including Suspicious Activity Reports (SARs) and CTRs, and outlined FinCEN's initiatives to streamline these processes and modernize the BSA regime to be more risk-based and focused on significant threats. Some members advocated for indexing outdated CTR thresholds for inflation and suggested focusing reporting obligations solely on relevant information for investigations to improve effectiveness[ 00:15:43 ]

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[ 00:48:40-00:48:48 ]

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Beneficial Ownership Information (BOI) Reporting

The implementation of the Corporate Transparency Act (CTA) and its beneficial ownership reporting regime was a central point of contention[ 00:13:17 ] . Republican members largely supported FinCEN's interim rule to exempt U.S. companies from reporting, viewing it as a necessary step to ease regulatory burdens on small businesses and protect their privacy[ 00:14:27-00:14:36 ] [ 00:27:06-00:27:37 ]

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. Director Gacki confirmed that the administration's policy shifted to reduce these burdens, and FinCEN plans to finalize the rule and delete previously collected data that is no longer legally required[ 00:28:32-00:28:45 ]

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[ 01:08:43-01:08:57 ]

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. Conversely, Democratic members expressed strong concerns that this exemption, which covers over 99% of companies, would undermine efforts to combat money laundering and national security by making the U.S. a haven for illicit finance[ 00:19:22-00:19:32 ]

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[ 00:32:05-00:32:27 ]

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Combating Illicit Finance and Fraud

FinCEN's strategic priorities include countering cartels and drug trafficking, particularly fentanyl, as well as addressing Iranian financing, child sexual exploitation, and various forms of fraud[ 00:25:08-00:25:15 ]

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. Director Gacki detailed actions such as identifying Mexico-based financial institutions involved in opioid trafficking, issuing alerts to financial institutions, and conducting public financial trend analyses on fentanyl and Chinese money laundering networks[ 00:25:30-00:25:58 ]

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. FinCEN is actively working to combat fraud, which is identified as the highest revenue-generating crime involving money laundering, through educating financial institutions, issuing specific alerts (e.g., elder financial exploitation, sextortion), and operating the Rapid Response Program to repatriate stolen funds.

Residential Real Estate Transfer Rule

The discussion covered FinCEN's new nationwide rule requiring real estate professionals to report non-financed purchases of residential real estate[ 00:39:20 ]

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. Members raised concerns about the substantial compliance costs, estimated at over $630 million, and the burden this places on small title companies[ 01:09:40-01:09:53 ]

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. Director Gacki justified the rule by highlighting the success of previous Geographic Targeting Orders (GTOs) in aiding law enforcement and noted that the rule targets shell companies making all-cash purchases, not individuals[ 00:59:08-00:59:27 ]

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. She indicated FinCEN is working with title companies on education and might explore providing more time for implementation if needed, while reaffirming the rule's scheduled December 2025 effective date.

Digital Assets and Technology in Illicit Finance

FinCEN is committed to supporting the responsible growth of digital assets while deterring their misuse by illicit actors. Concerns were raised about crypto ATMs being magnets for drug dealing and scams, especially targeting older adults, due to anonymity-enhancing features of virtual currencies. Director Gacki mentioned FinCEN's use of blockchain analytic tools and exploration of regulations for mixers and decentralized finance (DeFi)[ 01:04:36-01:04:57 ]

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[ 01:05:55-01:06:09 ]

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. The potential for blockchain to assist law enforcement through transparency was also acknowledged[ 01:17:14-01:17:15 ]

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. Additionally, the use of AI for deepfakes and identity fraud was discussed, with calls for regulatory clarity for financial firms to utilize secure digital IDs for Know Your Customer (KYC) purposes[ 01:24:53-01:25:01 ]

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Tone of the Meeting

The tone of the meeting was largely serious and often contentious, reflecting deep divisions on policy approaches[ 00:13:35-00:14:01 ] . Republican members frequently expressed skepticism regarding the effectiveness of current regulations, emphasized concerns about government overreach, and highlighted the excessive burdens placed on small businesses. In contrast, Democratic members underscored the critical importance of robust anti-money laundering frameworks for national security and combating various illicit activities[ 00:32:05-00:32:27 ]

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. Director Gacki maintained a professional and cooperative demeanor, focusing on FinCEN's operational efforts and commitment to implementing administration policies[ 00:24:46 ]

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[ 00:28:32-00:28:38 ]

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. The meeting concluded with a tense parliamentary exchange over a motion to subpoena documents related to Jeffrey Epstein, further illustrating underlying political tensions.

Participants

Transcript

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 Evaluating the Financial Crimes Enforcement Network.  Without objection, all members will have five legislative days within which to submit extraneous materials for inclusion in the record.  I now recognize myself for four minutes for an opening statement.   This is the third hearing with the Director of FinCEN as required by Section 5336 of the Corporate Transparency Act.  Today provides a public forum to examine FinCEN's operations, the troubled status of the Beneficial Ownership Information Reporting Regime, Anti-Money Laundering Act of 2020, and the history and impact of the Bank Secrecy Act.   The goal of this hearing is to assess these tools for targeted reforms that enhance security without trampling on privacy and innovation.  This testimony should help Congress assess how these frameworks target real threats, like terrorist and cartel financing networks, scam centers, and other illicit finance.  The big question is how to do it all while avoiding surveillance of law-abiding Americans and small businesses.   The Bank Secrecy Act was enacted in 1970 with a narrow, good intention to create transparency against organized crimes, infiltration of our financial system.  Over decades, the BSA has morphed into a bloated surveillance machine, demanding endless reports from banks, businesses, and individuals without delivering proportional results.   Today, this framework's dangerously outdated, and the BSA's one-size-fits-all mandates are tying up lots of resources.  Are they being used effectively?  In recent years, the Bank Secrecy Act, Corporate Transparency Act, and the Money Laundering Act of 2020 have proven sometimes ineffective but always cumbersome.   For example, FinCEN's own data shows that from 2014 to 2023, law enforcement agencies only accessed about 5.4% of the millions of currency transaction reports filed under the Bank Secrecy Act, highlighting how this flood of paperwork buries real leads in bureaucracy instead of focusing on bad actors.
And on the CTA front, we've seen FinCEN issue over broad rules that treat every mom and pop shop around the country as potential money launderers, forcing disclosure of person identifiable information into a federal database that isn't well safeguarded against tax or misuse.  That's not security, that's an invitation for abuse.  And we've witnessed it in other cases like Operation Choke Point.   While millions of American businesses are relieved by March's delay, delayed enforcement of the Corporate Transparency Act's beneficial ownership mandates, they await clear guidance from FinCEN about what the future looks like.  We appreciate the interim rule, and we're happy to work to finalize it.  We are, in fact, working on a law to cement it.   the market really wants clarity and certainty on where things are headed.  Meanwhile, true threats like Chinese fentanyl cartels are laundering billions through US real estate, or Russian oligarchs are sometimes evading sanctions.  They slip through because resources are tied up with   collection rather than analysis.  We need to index outdated CTR thresholds for inflation.  We should codify the full repeal of CTA's beneficial ownership mandate on U.S.  businesses and focus it on external threats.  This hearing is our chance to demand accountability without a yield to balance my time.  And I now recognize the ranking member of the subcommittee, Ms.  Beatty, for four minutes for her opening statement.
Thank you, Mr. Chairman, and certainly thank you for being here, Director Gacke.  You're going to have a lot coming at you today as our only witness sitting up there.  And I think you should take that as because you have so much experience.  You have worked through President Trump's administration, President Biden's administration.  And so we're hoping that today's hearing will   shed light on the national security consequences if we cripple your office and our financial crime programs.  Because one thing I can tell you is that we all are against corruption.  No one wants to be engaged sitting on this committee by the very nature of the title that my Republican colleagues have named it.  So I am   very anxious to hear from you today.  So we know that the Financial Crime Enforcement Network is small, but it is of vital importance in a bureau at the Treasury Department   that is tasked with protecting our financial system from traffickers, from money launderers, from terrorist facilitators and other bad actors.  To put this work in perspective, let's look, for example, at something that we've all been engaged with on both sides of the aisle, and that's illicit fentanyl.   that trade that has devastated our communities over the last decade.  And I can say as well as I'm sure our chairman will because we're both from Ohio and what has happened in our districts.  FinCEN follows the money to the origins of these drug supply chains to disrupt   finance streams wherever it can, hopefully preventing synthetic opioids like fentanyl from entering our country.  When my constituents ask me what we're doing in Congress to stop fentanyl deaths and protect our communities, I tell them about the important work that we do on this committee to make it tougher, to make it less profitable for drug traffickers, and to

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