National Security Subcommittee Explores Tools and Techniques to Combat Financial Fraud

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Cmte Financial Services (R)
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National Security Subcommittee Explores Tools and Techniques to Combat Financial Fraud

Washington, Apr 2 -

Yesterday, the Subcommittee on National Security, Illicit Finance, and International Financial Institutions, led by Chairman Warren Davidson (OH-08), held a hearing entitled, "Following the Money: Tools and Techniques to Combat Fraud." The hearing explored the growing threat of financial fraud in the U.S., analyzed tools and practices used to "follow the money" when it comes to countering investment scams, and assessed the effectiveness of Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) in the U.S. financial system.

Watch the hearing online HERE.

As part of the hearing, the subcommittee reviewed several bills that would help combat investment fraud. A full list of the attached bills can be found HERE.

On updating and improving the Bank Secrecy Act:

"Since its enactment in 1970, the Bank Secrecy Act has served as the cornerstone for all anti-money laundering, counter terrorist financing, and know-your-customer compliance measures at U.S. financial institutions. The BSA’s regulatory framework is intended to defend and secure the U.S. 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 our financial system," said Subcommittee Chairman Davidson.

On how we can help prevent financial fraud:

"Fraudsters do not discriminate when it comes to who they steal from. We need to focus on that problem and give our law enforcement the tools it needs to stop these criminals rather than just more paperwork," said Rep. Frank Lucas (OK-03).

Witnesses echoed their support for the work of the Committee.

Jacqueline Burns Koven, Head of Cyber Threat Intelligence, Chainalysis stated, "This hearing could not be more timely. Americans are facing a growing threat by scammers and fraudsters as a result of numerous factors, including the convergence of technological developments such as social media, cryptocurrencies, and artificial intelligence. Of particular focus, cryptocurrency adoption and the application of blockchain technologies has expanded into a vibrant, innovative ecosystem, but fraudsters can always be counted on to abuse novel technologies and are leveraging cryptocurrency as a tool in a broader, more diverse set of criminal activity. ...The utilization of cryptocurrency should fundamentally place scammers at a disadvantage due to the traceable nature of these assets. Cryptocurrency transactions are inherently public and the data from those transactions is preserved on a transparent, immutable ledger. ...However, the current reality is that scammers are exploiting the disjointed and siloed nature of how the public and private sector respond to their schemes. Today, scam victims have multiple state, local, and federal agencies they can report to, yet there is no easy mechanism or obligation for these agencies to share reported information with each other or those in the private sector."

Darrin McLaughlin, Executive Vice President - Chief BSA/AML & Sanctions Officer, Flagstar Bank, on behalf of the American Bankers Association added, "There are thousands of talented Bank Secrecy Act (BSA) and anti-fraud professionals across the country who have dedicated their entire careers to protecting their customers and the U.S. financial system. We want nothing more than to accomplish that critical mission – and it is clear, despite all our efforts, there is more work to be done. Effectively combatting these attacks by bad actors requires proactive steps from both the federal government and other industries. We need transparency and actionable feedback from the government, and we need important regulatory reforms to let us focus on the real threats. ...The federal government and other private sector industries, including telecommunications and social media, must do their part. Combating fraud requires a whole-of-government approach, partnered with the private sector."

Jeff Brabant, Vice President, Federal Government Relations, National Federation of Independent Business, added, "One constant threat is the reality that a single computer click can open a business up to targeted scams and fraud. As technology advances, small businesses must adapt to the everyday changes of a digitized economy. ...It is especially frustrating for small businesses when congressionally mandated reporting requirements open their businesses up to data privacy threats. A prime example of this is the Corporate Transparency Act (CTA). Under the CTA, small businesses with fewer than 20 employees and $5 million in revenue are required to report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). ...Small businesses are optimistic that the Trump administration and 119th Congress will provide certainty for small businesses to grow, invest, and hire new employees. But doing so requires Congress to roll up its sleeves and get busy providing tax certainty, reducing regulatory burdens, and eliminating overly broad statutes like the CTA."