Below is a rough auto-transcript of a hearing held yesterday entitled “Illicit Use of Virtual Currency and the Law Enforcement Response”. The House Financial Services Subcommittee had officials from USCIS (ICE), FinCEN (Treasury) and the Secret Service on the stand, ostensibly to testify on the above-titled topic. However, due to the contemporaneous border family separation debacle, a large portion of the hearing was pre-empted by this issue, so virtual currencies did not get the full treatment originally expected. Nevertheless, the transcript with links to the hearing video is reproduced anyway, as it might be useful to some. (Watch this space for further excerpts and comments, once we analyze this record fully).
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- [00:19:27] without objection the chair is authorized to declare a recess of the subcommittee at any time members of the full committee who are not members of the Subcommittee on terrorism and illicit finance may participate in today’s hearing all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record this hearing is entitled illicit use of virtual currency and the law enforcement response and now recognize myself for three minutes to give an opening statement I want to thank everyone for joining us today today’s hearing is going to examine the exploitation of virtual currencies and how law enforcement is working to identify and disrupt the use they’re used to fund illicit activities through both mainstream and dark web marketplaces with today’s advancements in the evolving world of financial technology the ability to deposit transfer and raise money is at our fingertips while this is a significant improvement for those who struggle to access the financial system the ease of transacting also opens the doorway for abuse by bad actors the appeal of virtual currencies to criminals is their ability to transact across the globe and the low cost of resolution virtual currencies are also known well known for being the preferred means to purchase drugs illicit goods and criminal services from online forums on the dark web including places like the Silk Road and alpha bay there’s also anecdotal evidence of terrorist groups transferring money and the attempting and attempting to raise funds using virtual currencies moving forward as this technology becomes cheaper and more prevalent globally it must be aware of the risks the abuse of the virtual currencies can pose to our financial system criminal groups infect computers and networks with ransomware and asked for payments and virtual currency or use online marketplaces to buy sew and advertise illicit goods and services as members of Congress we should work to remain as informed as possible about the current and emerging risks around us and in fact members of this subcommittee have our already been active in this arena last week I was happy to speak in support of the find trafficking act a bill that would require the Government Accountability Office to study and report how virtual currencies and online marketplaces can be used for illicit means this bill is a first step into finding the issues surrounding virtual currency exploitation as well as creating solutions to help law enforcement and protect our citizens I also applaud congressman Ted Budd for introducing the financial technology Protection Act earlier this year which would bring industry insiders and federal regulators together to find best practices and solutions to help our law enforcement solve this problem today’s hearing is an opportunity to learn more about law enforcement investigations and responses to the illicit use of virtual currencies I hope our members will take this chance to learn from our witnesses about the current issues facing law enforcement in the detection of criminal activity in this area and explore what additional tools may be necessary to combat threats to the US financial system we’d also like to thank our witnesses for being here today I look forward to your testimony it would now recognize mr. foster for five minutes and Thank You chairman there’s and thank you to our witnesses here the illicit use of virtual currency is a very important topic and under normal circumstances I would say that it deserves our full attention however there are extraordinary circumstances today hundreds of children are sitting in cages who have been forcibly separated from their families and so I think this is really the the issue that is the more pressing to discuss mr. Navarro as the highest ranking ice official who’s being allowed to testify before Congress we Democrats have some questions that we will be asking you just last last month ice agents rounded up and incarcerated immigrants as well as people who simply appeared to look like immigrants to them in and around my district in Illinois without any apparent cause our reason and uncertain attention paid to adequate rules and procedures on our southern border ice agents are ripping children out of their parents arms and we don’t need a new law to put an end to this trauma and the president could very easily put a stop to any of these policies with one phone call a week ago or simply never put these policies in place at all instead he chose to manufacture a humanitarian crisis that was unnecessarily and easily preventable the United States has served for a beacon of hope and freedom since its founding we are watch watching that hope and freedom erode right before our eyes as thousands of these children spend another night in a metal cage mr. Namba no history does not look kindly on our government when we do not uphold our commitment to human rights and basic morality I strongly believe that the American people deserve a government that embodies the values on which it was founded we look forward to your testimony and the answers that we will you will be providing to this committee thank you I yield back down recognized
- [00:24:46] gentleman from North Carolina mr. Pittenger for two-and-a-half minutes Thank You mr. chairman and ranking member promotor for your leadership and holding this hearing today this day I’d also like to thank our distinguished panelists for lending of their expertise to our subcommittee this afternoon a special note his financial service intern and UVA student Hugo banila for his exceptional research on virtual currencies one of the greatest emerging threats to u.s. national security is illicit use of virtual or crypto currencies domestic and international law enforcement agencies have begun taking the steps necessary to combat this new model of criminal transactions it is our duty to provide the tools and the oversight of said tools required to maintain our edge over our adversaries virtual currency due to its higher degree of anonymity is seen as a very lucrative opportunity for those with nefarious intentions the risk that rises from this anonymity is a criminals can use virtual currencies to store and transmit their trend their financial gains from illegal practices such as dealing or human trafficking under the guidance of the Department of Homeland Security the Secret Service and the National Computer forensics Institute they provided our state and local law enforcement personnel with the training necessary to investigate in combat cyber crime including the illicit use of virtual currency and this is like this must be continued and expanded by Congress to combat this emerging threat I’ve hosted a dozen parliamentary intelligence security forums over the last five years in which delegates from 68 nations have met to address the issues such as this the United States must continue acting as a global leader in the realm of cyber security is my hope that today we can thoroughly examine this threat to determine what additional tools and resources we need to combat it Thank You mr. chairman I yield back the balance of my time
- [00:26:50] gentleman yields back the chair would
- [00:26:51] now recognize the gentlelady from California miss waters for three minutes thank you very much thank you for
- [00:26:59] scheduling today’s hearing to examine the illicit uses a virtual currency and the law enforcement response it is alarming how virtual currencies especially newer ones are being used to finance terrorism launder money and purchase drugs and weapons on the dark web this is an important topic however it is not the only topic that we must discuss today despite the fact that the witness from the Department of Homeland Security works for us Immigration and Customs Enforcement commonly known as ice and it’s not the agency task was working on the border it would be a dereliction of duty if I did not share my concerns about the human rights abuses occurring on our border at president Trump’s the direction and at least find out what ices role is in this issue the world has watched and listened in horror and with overwhelming sadness as children have been ripped from their parents and separated from their families they are young alone and terrified without their families and made to live in literal cages it is not clear when this child abuse will in the White House has made every argument it can to deflect the bank blame for their zero-tolerance policy that led to the forcible separation of over 2,000 children from their parents in just six weeks they have quoted the Bible denied the policy and begrudgingly acknowledged it the president in an attempt to convince the American public that up is down and down is up even tried to blame Democrats for his own policy this is donald trump’s abhorrent policy this is child abuse neither of those statements is refutable it is time for the president Department of Homeland Security Secretary Nielsen and Department of Justice attorney general sessions to admit that their actions were not thought-out and that the consequences of those actions are inhumane and completely inconsistent with the values of this country and I’m hoping that doing the period where we can raise some questions that you will be able to help us understand what your role is and with that I yield back the balance of my time
- [00:29:20] gentlelady yields back the chair is now
- [00:29:23] welcomes the testimony of our two witnesses the third is stuck in traffic reportedly somewhere on new york I’m assuming that’s the Avenue not the city but we’ll introduce mr. OTT when it comes he’s representing fencin here today but mr. Robert Novi is a Deputy Assistant Director of the United States Secret Service Office of investigations with oversight of criminal investigations operations strategy and policy related to cyber and financial crimes mr. Novi was detailed to the staff of the National Security Council at the White House as the director for cyber security incident response intelligence and defense policy and was a Deputy Assistant Director for the congressional affairs in a special agent and charge for public affairs mr. Novi has previously served as the supervisor of the electronic Crimes Task Force in the New York field office and was member of the Washington field offices electronic crimes a special agent program in addition to his expertise in cybercrime mr. nobley served as on the presidential protective division during both the Clinton and Bush administration’s prior to the Secret Service career mr. nobley was an assistant branch chief for the US Securities and Exchange Commission also served in the US Navy mr. Novi received his master’s of Public Administration from Troy State University and serves on the Board of Advisors for the University of Texas at Austin mr. Gregory navona is a Deputy Assistant Director in Homeland Security Investigations illicit trade travel and finance division with oversight of all financial narcotics document and benefit fraud criminal gang exploitation in several targeting and fusion centers previously mr. Navarro served as the chief of staff to the deputy director of the u.s. immigration Customs Enforcement ice as the associate Deputy Assistant Director for the investigative services division and as the unit chief for the asset forfeiture unit mr. de Manos long career also included assignments as an assistant special agent in charge in the ice in Boston field office a group supervisor of the new are the narcotics and violent gang group the gang super group supervisor of the operational support group as a detail to the FBI’s Joint Terrorism Task Force mr. de mano Navarro received his Bachelors of Science in political science from Boston College the we’ll go ahead and introduce mr. odd and we’ll then just move into his testimony when he comes but he is the associate director for the Financial Crimes enforcement network or fence ins and forcement division with oversight of the fencin Bank Secrecy Act compliance and enforcement program mr. rod joined FinCEN in 2014 as a senior adviser to the director and was responsible for providing guidance on various matters regarding law enforcement and transnational crime prior to joining fencin mr. OTT was a prosecutor for over 25 years with both attacks and criminal divisions of the United States Department of Justice most recently serving for eight years as deputy chief of the Oregon crime and racketeering section throughout mr. arts career with the DOJ he prosecuted and supervised prosecutions of cases involving Rico public corruption national security tax evasion financial fraud and money laundering mr. OTT received his Juris Doctorate degree from the University of Baltimore Law School of Law each of you will now be recognized for five minutes
- [00:32:56] to give an overall presentation we have testimony without objection teacher your written test the statements will be made part of the record mr. neva no you’re recognized for five minutes
- [00:33:08] chairman Pearce ranking member Perlmutter distinguished members in my fellow law enforcement colleagues thank you for the opportunity to appear before you today to discuss the use of virtual currency and the efforts of US Immigration and Customs Enforcement to target investigate those who exploit virtual currency to carry out nefarious activity Isis Homeland Security Investigations has long stood at the forefront of combating transnational criminal activity that seeks to exploit our trade travel and financial systems for illicit purposes HSI is the largest investigative agency within the US Department of Homeland Security with more than 6,000 special agents assigned to more than 200 domestic offices in 67 international offices in 50 countries HSI has the authority to enforce more than 400 US federal statutes to include Financial Crimes and the use of virtual currency virtual currency is not a new phenomenon virtual currency in the form of airline mileage reward programs have been in existence since the early 1980s the challenge for law enforcement however began in 2009 when Bitcoin was introduced as the first decentralized virtual currency what its introduction an entirely new world was created in relation to money laundering and financial investigations following its introduction Bitcoin quickly became the currency of choice on the darknet as buyers and sellers enjoyed the pseudo anonymity it provided the good news for law enforcement however is that despite the pseudo anonymity exploited by the users of Bitcoin and other virtual currencies as well as their ease to transfer at some point criminals need to convert their cash into virtual currency or their virtual currency and cash whenever monetary exchanges are made a choke point is created this is the time when criminals are most vulnerable and can be identified by law-enforcement means and methods utilizing the traditional investigative methods coupled with financial and blockchain analysis HSI is able to disrupt and dismantle the criminals and the TCOs utilizing virtual currencies legitimate uses of virtual currencies are more than willing to conduct business with a legitimate virtual currency exchange legitimate exchanges are registered with the US Department of Treasury’s Finance Crimes enforcement Network also known as Vincent Vincent issued guidance in 2013 identifying persons or companies involved in the exchange of virtual currency as money service businesses requiring them to follow regulatory and reporting protocols those who use virtual currency for illegal purposes however more often than not stay away from registered exchanges in an attempt to conceal their own identities instead these criminals look to illicit or unregistered peer-to-peer exchanges that don’t require ass for personal identifying information they illegally generate revenue by charging a premium for allowing their customers to remain anonymous they will sell cryptocurrencies above market value and buy below market value from those customers who wish to remain anonymous as part of a commitment to combating the opioid crisis in the United States HSI has engaged in a multi-year effort to increase its cyber enabled workforce by training employees to conduct online investigations additionally HSI has conducted virtual currency and darknet training for federal state local tribal and international partners in fiscal year 2018 HSI has conducted more than 50 outreach and training sessions both nationally and internationally reaching over 4,000 law enforcement partners HSI not only collaborates with fellow law enforcement agencies we also understand the importance of partnering with the private industry we expanded the focus of operation cornerstone which was created in 2003 what a primary focus and goal of detecting and closing vulnerabilities within the u.s. financial trade and transportation sectors with the rapid growth of virtual currency and with the expansion of private companies involved in virtual currency HSI has expanded opera cornerstone to include private industry involved in the virtual currency space HS is increased commitment to conducting virtual currency investigations has steadily increased as evidenced by our increase in training and collaboration in fiscal year 2011 HSI initiated only one investigation of virtual currency however by 2017 we initiated 203 as of May of 2018 HSI has already initiated 144 virtual currency investigations with the increase in our investigations HSI has also seen a large increase in our seizures for example in FY 14 HSI sees one hundred and fifty thousand in virtual currency however by the end of fiscal year 17 we see is nearly seven million in virtual currency and right now in this fiscal year through April of 18 is AI has already seized more than 25 million in virtual currency technology will never leak continue to evolve and law enforcement agencies everywhere must continue to adapt and evolve as well HSI will continue to partner with all law enforcement agencies along with cutting-edge technology partners in closing I appreciate your interest in the burgeoning field of virtual currency and thank you again for the opportunity to appear before you today I look forward to answering any of your questions Thank You mr. no we are recognized for five minutes
- [00:38:17] Jeremy Pearce ranking member Perlmutter members of the subcommittee thank you for allowing me to testify today the challenge of the illicit use of digital currency spans across sectors of Industry and areas of criminal law as such the response necessarily requires a whole-of-government approach that is why I am so pleased to be here today with two of our partners from FinCEN and ice I would like to commend them for their important work and for continuing their productive partnership with us at the United States Secret Service at its most basic level the challenge of digital currencies mirrored those challenges faced by the broader financial system the key to success in countering crime is to identify the beneficiary of the crime so that’s why we follow the money this rule has held true for thousands of years and continues for crimes in cyberspace and crimes involving digital currencies as one of the nation’s original investigative agencies the United States Secret Service has for over 150 years – Criminal Investigations to protect the American public financial institutions and critical infrastructure from criminal exploitation in 1982 the Secretary of Treasury directed us to investigate crimes related to electronic funds transfer two years later in 1984 the Congress passed legislation to expand the Secret Service’s responsibilities to include investigating a range of computer hacking and access device violations and today we have extensive authorities to safeguard financial and payment systems from criminal exploitation especially from those enabled by the internet to perform our mission the United States Secret Service has long kept pace with new technologies used by the financial sector accordingly over the past 30 years we have successfully investigated and arrested some of the world’s most significant and most sophisticated cyber criminals today with respect to digital currencies our primary focus is around three core areas number one criminal schemes that undermine the integrity of the financial systems number two money laundering and number three fraud schemes that include computer access device identity theft and other forms of fraud over the past decade working our lawn working with our law enforcement partners here and around the world we have investigated and shut down two major centralized digital currencies both of which supported extensive criminal activity eagled in 2007 and Liberty Reserve in 2013 the Secret Service continues to work on a range of Investigations evolving digital currencies a few of these cases are referenced in my written testimony let me stress there are real and legitimate commercial applications for digital currencies that said in recent years some digital currencies have been widely adopted for illicit purposes for example eagled and Liberty Reserve – centralized digital currencies were used a to purchase illicit goods and services such as drugs credit card information personally identifiable information child pornography and range of criminal services and B to launder illicit proceeds particularly as a means of facilitating overseas money transfers more recently the growing use of decentralized digital currencies such as Bitcoin has enabled additional criminal activities these include crypto jackin which is the use of malware or compromised websites hijacked the computing power of others to obtain cryptocurrencies through mining the theft of crypto assets directly gently by targeting the private encryption keys of users ransomware in which digital currencies are demanded as part of an extortion scheme and attacks on the blockchain networks themselves as these decentralized currencies proliferate and evolve new risks are emerging criminals are increasingly leveraging and in enmity enhanced currencies and services such as cryptocurrency tumblers and mixers to obscure transactions on the blockchain in order to counter all these diverse illicit activities effective law enforcement requires robust cooperation both domestically and internationally between law enforcement regulatory agencies as well as thoughtful partnerships with industry consequently the Secret Service remains squarely focused on hiring developing and retaining a skilled and experienced and investigative work force we are committed to working with partners across the law enforcement community to jointly train and develop shared technical solutions the constant development of investigative capabilities is how we maintain our ability to effectively respond to innovations of technology now and into the future lastly continued attention is needed to ensure that law enforcement agencies maintain lawful access to critical sources of evidence regardless of where or in what form that information is stored in closing let me speak directly to those who seek to further the illicit activities through the use of digital currencies as the investigative work of the United States Secret Service and our law enforcement partners continues to demonstrate we are relentless in enforcing the law and we will not be stopped by the perceived anonymity of digital currencies or the broader Internet thank you again for your opportunity to testify and I look forward to your questions Thank You mr. OTT we have introduced you previously and recognized that you’re just in time Manufacturing has walked in just in time if you are settled we will recognize you
- [00:43:20] for five minutes chairman Pearce ranking member Perlmutter and members of the subcommittee thank you for inviting me to speak today on behalf of the Financial Crimes enforcement network commonly known as FinCEN Vinson is a leading role in the regulation of virtual currency activity and supports lon four investigations involving virtual currency and related financial crimes so I appreciate the opportunity opportunity to discuss our work in this space and the national security implications and illicit finance risks presented by virtual currency Vinson also works to combat the threats presented by both traditional and emerging payment systems while promoting responsible technological innovation throughout the financial sector in 2011 FinCEN issued a regulation that defined money transmissions services as the acceptance and transmission of currency funds and other value that substitutes for currency by any means the 2011 rule serves as the foundation of our regulation of certain virtual currency activity in March 2013 Vinson issued guidance to clarify that virtual currency exchangers and administrators generally qualify as money transmitters under the Bank Secrecy Act virtual currency payments pose illicit financing risks that necessitate necessitate careful assessment and mitigation in particular we are concerned about the growing use of decentralized convertible virtual currency to facilitate cybercrime fraud extortion drug trafficking money laundering and other transnational crimes FinCEN estimates that at least 4 billion in virtual currency has moved through the darknet marketplaces since 2011 while traditional financial methods we made the primary vehicle for illicit activity FinCEN believes virtual currency presents specific illicit finance risks and that without vigilance and targeted action the scale of this activity could grow FinCEN has increasingly prioritized identifying tracing and disrupting the flow of illicit virtual currency activity to that end vincent examines financial institutions for compliance with their regulatory obligations to prevent money laundering and terrorist financing in 2014 Vincent together with its delegated examiner’s at the IRS have conducted examinations at more than one-third of all registered virtual currency money transmitters in the United States FinCEN has also taken significant enforcement actions in July 2017 acting in coordination with our law enforcement partners Vincent assessed a penalty of over 110 million dollars against btc-e an internet-based foreign located money transmitter for various BSA violations as part of this accident action FinCEN also assessed a 12 million dollar penalty against one of bt seas operators the highest penalty we have ever assessed against an individual collaboration is critical to combat the growing threats presented by virtual currency just last month I met with my enforcement counterparts at the CFTC and the SEC my staff and others at fin Sun carefully and closely coordinate with these agencies on an ongoing basis one area where we continue to work together is on the illicit finance risks surrounding the recent growth of an initial coin offerings or icos well ICO arrangements vary and depending on their structure may be subject to different authorities one fact remains clear FinCEN along with our partners at the SIA SEC and CFTC expect businesses involved in icos to meet all of their AML CFT obligations as both a former police officer and a former federal prosecutor I also want to highlight the important collaborations FinCEN has with our partners in law enforcement FinCEN has provided support in over 100 cases since 2016 Vincennes experts traced different types of virtual currency activities identify suspicious sources of funds target unregistered MSBs that do business in whole or in substantial part within the United States and help disrupt transnational criminal networks operating in virtual currency for most among our challenges in combating this activity is the lack of consistent AML CFT regulations and supervision of virtual currency activity in most jurisdictions around the world FinCEN and other treasury components are working with the Financial Action Task Force or FATA and the Egmont group to engage key jurisdictions directly to address these vulnerabilities FinCEN looks forward to working with the committee with law enforcement partners the public sector and our regulatory partners to identify strategies to help the United States remain both a global hub for innovation and a safe and secure financial system thank you again for having me here today I’m happy to answer any of the questions you may have thank you mr. hunt now recognize myself for five minutes for questions the so I guess mr. nobley you quote and paid-for of your document about the different crypto currencies of different exchanges that exist how do you many times these are very dark how do you go about establishing those how easy is it to find out about them Thank You mr. chairman so in the Secret Service will we conduct our investigations we target any and all technologies or currencies that can be used for illicit activity and so therefore digital currencies or virtual currencies are one of those types of technologies or means of transacting so what we do is in our undercover operations or through our operations and our Criminal Investigations we investigate and look for different currencies different transactions different ways that that crimes are committed and then we look to see how they’re doing it we also do that through criminal informants criminal informants introduce us to those different areas as well and so that’s how we we learn these things I guess my question is do you know what you don’t know do you know how many currencies are out there that they have not yet service do you have a good feeling for that and how do you go about identifying them right that’s a that’s a very good question mr. chairman the answer is is is we have a we have an understanding that there’s a lot of digital currencies out there we don’t know every single one of them Digital current we we understand a majority of the the major ones but currencies and coins can be created through technology and so we don’t know every single one of them but through our partners of our electronic Crimes Task Forces which are both are members of academia of the private sector as well as other law enforcement we collaborate together to learn and teach each other what each of us learns and that’s how we keep up with it but the answer is sorry I couldn’t tell you how many digital currencies or virtual currencies are out there but but as they as they come up and they’re used by Chris sure you also quote fairly significant numbers of transactions and are you pretty comfortable that those are accurate mr. out let me ask you that because the thing don’t you all have an intersection of responsibilities right here just this point aren’t you both kind of looking at the same issues yes chairman we have through our intelligence division we regularly track the incoming BSA filings analyze those based on our business rules and be able to analyze that put together a piece that would disseminate that to me are pretty comfortable that that you know what’s going on we feel that the the financial institutions are a very great partner and the best resource for that type of information yes sir I guess one of my deeper concerns is but let me switch over to a different question not all the transactions are illicit with the digital currencies is that correct that’s that’s correct we were not and so if digital currencies are used for legitimate transactions how does how to say the IRS identify tax liabilities for legitimate operations if you have a digital currency again there would be I’m not familiar with the IRS procedures as it’s a response to virtual currency we been sent focuses on money transmissions I know that we certainly worked very closely with all law-enforcement agencies as well as available yeah if I could interrupt sort of running out of time here I kind of want to drill down on this a bit if any of you have an idea because this to me is one of the biggest exposures that we have is legitimate goods and services being bought by very difficult to track transaction methods and at some point you undermine the entire stability of society because Society does work with its safety nets with with government spending off of taxation and if that becomes more difficult to pursue if it’s more difficult to identify what those transactions are then I I’m just wondering is anybody thinking about this aspect maybe right now the digital currencies are not not that prevalent but in a matter of time they will be unless we kind of understand what we’re dealing with so somebody want to wrap up in the thirty second the answer here Jim and I’ll take that question it’s my understanding that the IRS treats virtual currency as property and therefore the sale of virtual currency actually is subject to capital gains tax okay but that’s assuming they can see it and your your all of your talking in your testimony about many of them are invisible and so how are they going to identify how they can identify it as a property if they if it’s if it’s not too visible that’s my question I’ll leave it dangling in the air here we go to mr. foster now for five minutes Thank You mr. chairman a deputy assistant director Devon Oh um are you aware of any higher ranking ice officials who will be testifying before Congress who might address the crisis being caused by this administration’s policies of children being deliberately separated from their parents congressman at this time I am not aware of any so you’re all we have okay now first on the issue of family separation I understand the administration has announced plans to expand its city for holding children who have been separated from their parents in facilities sometimes known as baby jails and I was wondering if you can give this committee any further information about what this expanded capacity will look like specifically will ice be constructing more cages to separate children from their parents and will this expanded capacity be in the same location as the children’s parents where they’re being held or elsewhere and what sort of child care training the personnel running these facilities are being given and are the background checks for these personnel up to the standards that we expect for childcare in the United States chairman thank you
- [00:55:34] for your congressman thank you for your question I’m here to testify today regarding virtual currency I work for the director within the Department of Homeland Security that’s Homeland Security Investigations and our mission is basically to combat transnational criminal organizations that seek to basically you know exploit our immigration and customs laws I do not work for the director within Department of Homeland Security that handles the matters that you have addressed I’d be happy to take your questions back and have someone appropriately answer those questions but that would not be me sitting in my position with Homeland Security Investigations so I will be submitting those for the record and and look forward to your responses on them because this is just a crucial issue no more locally in my district ice in the last month or so has executed a number of raids ice conducted six day enforcement action in and around my district I was told from advocates on the ground which were later confirmed by the Chicago Tribune and others that ice agents pulled over and detained one Victor Cortez a Mexican national who was here legally visiting a friend in Joliet Illinois in my district mr. Cortes was in the country legally with a valid visa mr. Cortes produced this visa for ice agents and yet despite this he was still detained for several hours and so my first question is um is it a common practice for ice to pull over and detain anyone simply because they look Hispanic or speaks with an accent again congressman I appreciate your concerns and your questions I’m not familiar with the situation that you’re describing again I work for the Homeland Security Investigations Directorate and that does not sound like something that HSI would have been involved in like happy to take the questions back for the record and and provide you the answers that you require sir okay um so you know this this issue of pulling people over where they actually had there is no legal you know they’re here legally and are being pulled over it’s a little bit personal to me my wife is an immigrant from Korea we here obviously legally can she expect also be pulled over because someone thinks that she doesn’t look like an American again congressman I’m not familiar with the situation I will tell you that all HSI agents go through specific training are trained to not to profile and to do conduct targeted law enforcement investigations again the specific circumstances you’re talking about I’m not prepared to testify here today with those circumstances but I would be happy to take those questions back and provide your response yeah I would be interested specifically on the profiling of a mr. Cortez is it a common practice for ice to impersonate police officers and conduct traffic stops or is that is that part of your training and standard operating procedure well ice deportation office as well as special agents are considered in our view police office we are law enforcement officers but they deal with the specific you know questions that you’re talking about you know I don’t know the specifics so it’s hard for me to provide you an answer without knowing those specifics again happy to take those questions back and respond appropriately you know once those questions are submitted for the record thank you and I also think all of Congress looks forward to your superiors having the courage to appear before Congress to answer for the outrage that’s happening on our southern border gentleman yields back and the chair
- [00:59:12] would now recognize the gentleman from North Carolina mr. Pittenger for five minutes Thank You mr. chairman again thank each of you for your statements today in your insights into these critical issues I would ask you in these elicit cases that you’ve identified are the perpetrators that you’ve previously flagged are they suspicious or they regarded as being engaged in other activities outside of cryptocurrency are they this is this a traditional group of people the same plot of actors or is this a new breed congressman I could take that so majority of the cyber criminals that we go after a majority of them are using some type of virtual currency to to move their money to launder their money to either make sales or purchases of illicit items or to further their crimes we’re actually going after the criminals and then as we’re going after the criminals we we come across the ways that they’re moving money in the ways that they’re they’re they’re laundering money and so as Secret Service agents were financial crimes investigators as we have been since 1865 and so like I said in my testimony we follow the money yes sir so these are the traditional criminals that have been involved in previous criminality they could be they could be and but the thing is sir they’re they’re pretty pretty sophisticated these days these days they’re the cyber criminals of today are a little bit different than the bank robbers of yesterday but they’re still doing the same thing trying to steal the money yes sir there’s also evidence suggesting that cryptocurrencies are increasingly used in many laundering schemes of organized criminal groups but there’s US law enforcement see any trends in the use of crypto currencies for money laundering related to drug traffickers human traffickers are trade based money laundering as my colleague from The Secret Service stated you know we investigate all crimes all crimes in the darknet so yes we would be concerned with drug traffickers human traffickers all individuals who involved in nefarious activity I think the goal of using these crypto currencies is the is the anonymity that they believe it provides so we in law reform it obviously face challenge at times to determine who they are some of these individuals still use traditional means such as third party money laundering trade based money laundering but those who want to be pseudo anonymous actually you know use these decentralized cryptocurrency to conduct their businesses on the darknet do we have any estimates in terms of percentage the amount of these crimes that are conducted cyber otherwise that with just the illicit use of cryptocurrencies how much of a factor is it I can’t Congress but I can’t come up with an exact percentage right now but I can’t tell you that a good majority of the crimes that the Secret Service investigates virtual currencies are used in those transactions primarily because when they’re transacting online in the in the dark web or using criminal forums that’s how they can easily move money without having to talk to each other or communicate but it also uses anonymity do you have the legal latitude to perform your duties are there any legislative interests that you have that would give you greater capability to be successful in your duties and stopping illicit finance well for the for the Secret Service or I think I’m not comfortable with the Secret Service suggesting that but I will tell you that as technology increases we use the laws and authorities that we have today but with that being said we always have to look to see what’s gonna be the next crime where is it going to be the next step and so we would say that that we’re always looking to make sure that laws and and statutes are always kept up-to-date so that we can maintain and keep active what we can get is anything that you see now were there any impediments now legally that impede your ability to perform I would say I would say currently currently I would say the cloud act was a very good step in in moving forward and being for us to be able to get access to evidence digital evidence and and in such an area I would say as we use that and as as we move forward I would look that to make sure that we still maintain access to lawful lawful access to did you evidence that we can get from from when we serve subpoenas and court orders yes sir anybody else want to comment on that point well my last question be related to just do you believe that that there are additional factors that would limit terrorist exploitation of virtual currencies and how could they impact the domestic or international counterterrorism community focus on this front I think have we stated you know all transnational criminal organizations people involved in nefarious activities there is obviously a desire to be anonymous and and the use of crypto currencies would be once so I think it’s definitely a possibility that we all need to be concerned about yes sir thank you my time is expired the gentleman’s time has expired the chair would now recognize the ranking member of the full committee mr. waters for five minutes thank you very much mr. Navarro I know that you here to testify about the illicit use of virtual currency but that’s only one aspect of your job as I see it you are responsible you are the Deputy Assistant Director responsible for illicit trade travel and finance division home land security investigations and US Immigration and Customs Enforcement is that right that is correct okay can you tell me what you do with that aspect of your job that’s described as US Immigration and Customs Enforcement so I work for the Department of Homeland Security which Immigration and Customs Enforcement is a Directorate under Department of Homeland Security within Immigration and Customs Enforcement there are several components Homeland Security Investigations being one enforcement removal operations being another I do not work for enforcement removal operations I work for the criminal investigation side which is Homeland Security Investigations are you familiar with zero-tolerance policy of the agency yes I I have heard of it I know it’s all over the news oh yeah I need you to help me understand a few things if a mother and child or children go to what is known as the port of entry to claim amnesty do you have anything or you to do with that at all or your Department under Immigration and Customs Enforcement have anything to do with that aspect of the agency so if an individual shows up at a port of entry and claims asylum they be dealt with by our Customs and Border Patrol which is basically under the Department of Homeland Security how my director would be involved in individuals who are claiming asylum is more from the fraud standpoint if there was facilitators who are actually organizing frivolous claims of asylum here in the United States there would be my Directorate that would actually look into those frivolous claims but we are not the frontline who are dealing with these individuals when they call explain to me how it works so a mother and children show up at the port of entry claiming amnesty and as I understand zero-tolerance policy they are not facilitated in the way that we thought the law works they could be subject to detention at that point what happens to the child at that point again congressman I’m not familiar with the current practices along the border because I do not work for that Directorate so like I cannot comment but I’d be happy to take those questions back for the record you are the deputy assistant director and US Immigration and Customs Enforcement is part of your responsibility or oversight do you supervise anybody in that division so again I do work for Immigration and Customs Enforcement but specifically for homeland security investigations and we do not have people on the front line who are making those determinations of admissibility when an individual enters the United States what and how do you investigate someone who’s claiming amnesty who is thought not to be eligible for amnesty what happens to them at that point we don’t investigate every single person who claims it the ones that you do investigate what happens you do they are looking more to the facilitators the organizations who are exploiting these individuals who are claiming asylum taking their money filing frivolous claims that is more what Homeland Security Investigations does we are not looking at every single person I know you may not be looking at every single individual but those that you do look at maybe it’s a mother with children who you think may be part of a ring where they are trying to get folks into the United States at the port of entry you have to investigate them you don’t investigate all of them but when you do how does it work what do you do from that point and if you want to continue the investigation because you’re suspicious you have enough information that would lead you to believe that something is going on what happens to the child who has a responsibility for taking the child if you’re going to retain the woman or the family what what happens at that point again congressman I do not deal with the detention of individuals those decisions are made by another directorate we are on the backend we are investigating when people have already made an entry into the United States they may have a hearing before an immigration judge here in the United States we’re not involved in that oh you are not involved in the supervision of that aspect of your job at all is that right that is correct thank you very much I yield back the
- [01:09:28] balance of my time it only deals back the chair now recognizes the main man from Maine mr. pelikan for five minutes thank you very
- [01:09:38] much mr. chairman thank you you out gentlemen for being here very much I appreciate you folks deal with criminal activity at the federal level or from a federal standpoint and you have a lot of tools available to you that we don’t have up in Bangor Maine or Lewiston Maine both of which I represent I represent the rural part of Maine and Bangor and Lewiston are part of our of my district um tell me a little bit about the type of training that you folks might extend to law enforcement officials on at the local level in our great state in other parts of our country mr. Navarro who wants to take a shot at that I’ll take I’ll take that one yep so the Secret Service we actually have partnered with the state of Alabama and we have the national computer forensics Institute and right Alabama fantastic operation fantastic organization and what we do there is we train solely state and local law enforcement prosecutors and judges the Secret Service we focus on the law enforcement portion of it while the state of Alabama District Attorneys Association focuses on the prosecutors and judges and what we do is we take the same level of training that we give our Secret Service agents and we provide that to state locals especially for your for someone like your folks in Maine upstate downstate wherever wherever you’re gonna go the idea is is we’re looking to train a cyber supply chain if you want to call it all the way from law enforcement all the way up the judges so that they completely understand but we don’t leave them alone the main thing is is after they get their training they actually leave with the equipment that they’re trained on because many times they can’t afford a digital forensic lab of their own so when they leave there whatever equipment they’re trained on they actually get that equipment they take it back to their Police Department and use that at their police department to work on any investigation doesn’t have to be a cyber crime it could be it could be a rape it can be a murder it could be a bank robbery it could be any type of crime the main thing though is when it deals with cyber cyber is really difficult technology and sometimes it takes a little bit more and so we don’t leave people hanging out there as well what we do is we connect them to our electronic Crimes Task Forces by doing that let’s say an officer in Maine has a hard time trying to figure out a forensic tool or something along those lines we’ll work with them through our electronic Crimes Task Force primarily in Boston but will actually send agents up to Maine if we need to to help them understand or work on whatever they need to work on my primary constitutional responsibilities mr. Novi is is to protect our families and I’m there’s no one who’s more Pro jobs Pro business Pro national security Pro protecting our families than I am so I’m really appreciate you you give me that information because it’s all hands on deck we have to make sure that the folks at the local level who are the frontline that thin blue line have the tools they need to do all of this work in this cryptocurrency and everything else is is new to a lot of folks and very very complicated let me let me morph in a little bit and maybe mr. navona this would be for you but if not someone else jump in a ransomware where we’re you know bad actors are able to put a virus or something else on your on your system whether it be personally or at a business and it effectively come you know contact you can say unless you pay us X amount of money you know we don’t let this virus run rampant and destroy your system and interrupt your workflow which could kill jobs and so forth and so on what about the use of cryptocurrency to pay that ransomware that excuse me that that ransom if you will to remove that that that problem from your network do you folks run into that and how in the heck do you fight that and how do I folks at the local level fight that I’ll take that one as well calm thank you so so ransomware ransom actually we believe in the Secret Service has proliferated from the use of digital currencies because it’s used just about every payment that you can imagine for ransomware and because the anonymity and the quickness that you can make a transaction that’s that’s why people use virtual currencies for ransomware the the tough thing about ransomware is it does take preparation people should take into consideration basic cyber security and basic cyber practices people should have backups to their systems in the secret service we’ve actually gone out and done a whole bunch of workshops all around the nation with us as well as with the financial services information information sharing analysis center as well as the FBI where we’ve gone we’ve taught different courses and classes on how to defeat or how to get prepared for ransomware but to answer your question virtual currency virtual currency has actually been the propagator for ransomware we believe if I call bill O’Malley who’s the chief of police in Bangor or or Phil crow who’s the chief of police in Auburn Maine would they know who to call at your shop to get help for any of these issues you folks pretty good as far as outreach to our local folks in the ground yeah absolutely so we have we have we have an office in Portland Maine and that office in Portland Maine is actually there to go in liaison with all the law enforcement agencies no matter how big or small they are in your state yes sir I’m familiar with your AOR being from New England and I know that we have multiple task force’s we have an office in Portland Maine Bangor Maine as well as Houlton Maine and I know that we have several task force’s in those areas where we work every day and collaborate with state and local law enforcement officers in your district great well thank you very much and I do want answers expired how do you divide your loyalties between the Red Sox and the Nationals if you’re from New England it’s not easy Thank You mr. chairman you about my time the witness does not have to answer that question it was not the lapse of time that was your problem it’s the last day most thank you but uh now recognize the gentlelady from New York mrs. Maloney for five minutes thank you I thank the chairman for yielding
- [01:15:30] mr. navona first of all I’d like to thank all of the panelists for being here but mister Nevada I’m sure you’re aware of what is happening at our southern border children including babies are being ripped out of their parents arms and these people were just merely looking for a better life for their families here in the United States it is nothing short of government-sanctioned child abuse and runs counter to everything that we stand for as a nation I’ve seen photos of children and cages heard recordings of children crying and spoken with fathers at a detention center this past weekend in New Jersey where they came legally seeking asylum and were put into detention prisons and one father said at 3 o’clock in the morning they came and tore his daughter from his arms and just last night the Associated Press reported that babies and toddlers are being shipped literally hundreds of miles away from their parents to be housed in so-called tender-age facilities make no mistake I don’t care what they’re called these are prisons prisons for babies and has this administration no soul have they no basic human empathy this is not governance this is not enforcing existing law this is law that was made up by this administration and it is stone cold evil and is entirely the the choice of this administration and a reflection of a heartless ideology so my question mr. navazio is that surely many ice agents are mothers and fathers in addition to their role with the agency is there any concern among your colleagues about the irreparable damage this policy of separation will have on these children Carmen thank you for your question again working for Homeland Security Investigations that we’re not involved in that aspect of what you’re speaking about I am I am a parent and of course I understand exactly what you’re saying I’ve been doing this job for 27 years I’m a law enforcement officer and I certainly understand what you’re saying but I’m not here to comment on that because I’m here to testify on virtual currency and be happy to take any specific questions you have back for the record well this administration is deliberately chosen this path and would you agree that the administration has the authority to change this policy well now I know you’re not going to answer but I do believe they could change it but before I close I would like to play a very troubling recording that has been widely circulated in the news this week [Music] notice [Music] [Laughter] well III just want to close by saying as the mother of two children I III find this this policy absolutely unconscionable I cannot imagine to have your children torn from your arms and these are people that are just seeking a better life for their families they’re coming here seeking asylum we’ve always been a beacon of hope to the world and and and and persecuting and separating children from their families is just unamerican and just plain wrong and it’s an outrageous policy it needs to end and and we need to make sure the administration absolutely never does it again I thank you very much and I yield back
- [01:19:44] you gentlelady yields back the chair
- [01:19:45] would now recognize the gentleman from Ohio mr. Davidson for five minutes Thank You mr. chairman and thank you to
- [01:19:52] our witnesses I appreciate your expertise on financial crimes enforcement illicit finance and particularly related to crypto currencies today hopefully we can stay on topic during the my five minutes I’ll try to stay focused on the topic at hand because it’s hard to get these hearing scheduled so thank you we can’t change course on hearings all the time because of the news of the day pressing as it is I trust that we are on a path to a better policy in all sorts of arenas including this one which we’re here to work on so the past several years I’ve I’ve been watching the growth of digital assets and crypto currencies and I’m excited about the opportunities they create and I am curious just in terms of framing this issue it’s very important that your tool tools and your kit bag stay in compliance with current laws and we have illicit finance denominated in u.s. dollars correct you know yet congressman can be denominated in in a in a number of things the the the cost for the value of a digital currency no no I’m not talking about crypto currencies I’m just cash cash and bags duffel bags of cash hey Bill’s full of cash you know ship containers full of cash rail cars full of cash suitcases full of cash we transact in cash right there’s also illicit finance in hawala networks right these things aren’t illegal we’re looking for ways to be able to you know US dollars aren’t illegal carrying cash in any satchel is not illegal though we’ve set trip wires in place like crossing a border with too much cash without reporting that you’re crossing a border too much cash these are the things that help you catch that still struggling last I heard about hawala networks and and things like that though operating hawala network isn’t illegal operating one to do illicit things is and I guess how do we apply those sort of kitbag things to crypto currencies so that we protect the use of crypto currencies yet have the tripwires that help us detect illegal activity with the crypto currencies so when we conduct our investigations as you’re mentioning all tools in our – back I use whether its traditional schemes to attack money laundering which would be as you’re mentioning bulk cash smuggling third party money laundering trade based money laundering we also as my colleague from Secret Service mentioned use of confidential informants use of undercover operations whatever we can do to basically detect disrupt and dismantle those organizations whether they’re using the traditional methods that you’re speaking about the crypto currencies we are we are trained to actually attack the problem as it exists in general once something moves across an electronic format is it easier to have record-keeping on that then say hawala or cash even crypto currencies there’s a record right a searchable record or a queryable record so congressman so the answer is is usually yes usually when it creates a record and there’s an electronic record that can be followed however in in in virtual currencies sometimes it can be obscured through tumblers or mixers or something along those lines as well so so there is a record and it you can find it but but sometimes it’s it’s a little bit harder to find okay and so additional guidance has been given to provide compliance for his money service businesses for people that are doing these transactions in u.s. we have places that don’t comply with those laws just like we have it for people who don’t comply with it for wires and you know other other ways that we do it with cash I’m concerned about you know in the States we have all sorts of regs that are duplicative Wyoming has some laws related to crypto but so does New York I’m not sure why New York needs such a heavy-handed AML provision do you use the duplication as counterproductive would it be easier to have a uniform rag across the country or is it easier to have state-based systems as well well congressman in Vincennes perspective of course we’re on the federal level but many we recognize that you know we work very closely with some of our state regulators as well they adopt many of the similar provisions as are found in the Bank Secrecy Act and what we find in terms of the biggest challenge that we have in regulating virtual currency is in fact the inconsistent or lack of consistent AML CFT regulations internationally that opened up vulnerabilities within the United States and I believe you know while we’re working with our foreign counterparts to try to correct that situation we feel that there will still be a vulnerability until we have that international cooperation thank you my time is expired the gentleman’s time has expired the chair would now recognize mr. Vargas
- [01:25:28] for five minutes thank you very much mr. chairman I appreciate the opportunity again they want to thank the three witnesses here today I especially want to thank them for your diligent work against the illicit use of crypto currency especially in sex trafficking and drug trafficking again thank you very much I do however want to ask some questions to mr. nevado I’m I’m taking a look here at the information that you sent to us and it does say US Immigration and Customs Enforcement right at the top and I think when you were introduced we heard that you had more experience than your present job could you repeat again what your your career has been long it’s been 27 years and law enforcement we appreciate that what other experiences what other jobs that you have with ice congressman I started my career as an immigration inspector that’s where I started my career I became a special agent worked my way up to be a group supervisor assistant special agent in charge as you’re probably aware in in 2003 Immigration and Naturalization Service and Customs actually merged to form immigration and cuffs it’s enforcement Homeland Security Investigations since my time in headquarters I’ve worked as a unit chief and asset forfeiture I was the chief of staff for the deputy director of Immigration and Customs Enforcement and I was also now in my position I am the Deputy Assistant Director for illicit trade travel and finance so you do have quite a bit of experience beyond simply working in the position that you have today I think some of the questions that we were asking a viewer questions may be that you do have some experience and I I do want to ask some myself are you familiar with the family the family case management program I’ve heard of it sir I know it’s part of the enforcement removal operations plat folio I’m not intimately though knowledgeable about it it had an almost 100% court appearance rate so this is where the families were not separated instead they were able to stay together and then they had to come back for court appearances it almost had a 100 percent rate of people coming back for their court appearance it was very very successful it didn’t they did this for families that weren’t flight risks and they weren’t dangerous it was quite successful I don’t know why we stopped it that’s one of the reasons why there has to be the separation of families the president says there does not have to be one in fact president’s claim that DHS is required to separate families under current law that I don’t understand that maybe you could explain that to me contrary to claims by the Attorney General the Bible in Romans 13 which I know well I started to be a priest for a number of years it’s not statutory authority it doesn’t justify this horrific and unconscionable policy but can you point to any statutory authority mandating the families be separated because I can point you to these the the family case management program that didn’t do this didn’t separate the families I am not familiar with any statutes that require that congressman okay I can tell you this and and I think you would agree with this I represent the border in California and I do go and visit not only with ice but CBP and and and BP Border Patrol I can tell you this what they’re doing today your agents they’re bringing diapers that they’re paying for themselves milk for kids other things that these children need because they know they’re going to be separated and they think because like you their parents they think they need these things if you ask your own agents out there you’ll tell they’ll tell you they do not like what they’re doing they’re not happy about it they’re spending their own money trying to help these kids are you familiar with any of that congressman again I think you’re speaking about Border Patrol agents no no I’m also speaking about the CBP and I’m also speaking about ice CBP is not under my Directorate so again our special agents more than likely unless you’re investigating some type of transnational criminal organization and during the border would not be involved in some of the circumstances you’re speaking about but I think you’re being very technical because you do have experience within all of the range there if you as you understand as you described to me earlier you were in fact the line officer you didn’t so what I would tell you is this this policy is you have now I wish you would go back and and look at and talk to your agents on the on the ground they don’t like it they know it’s not their values when you go and you see like I had the opportunity to see on Monday these children just want their moms they just want their dads what we’re doing is wrong it’s certainly not based in Christianity or any type of religion that I’m aware of and it has to be reversed your own agents if you talk to them they’ll tell you and you can go there and see the diapers that they buy the food that they buy for these children because they’re concerned about their own safety the safety and the well-being of these kids when they’re separated from their moms their parents – thank you you’ve got if you’d like to answer the questions not a congressman I you know in my 27 years career I’ve worked under several different administrations and you know during those administrations with the change laws continually change the way we’re enforcing laws and again what you’re speaking about now in the current you know environment I am NOT involved with what you’re speaking about we are involved in the aftermath if there are individuals who are being exploited who are victims you know who are being exploited by organizations that is where we will come in to try to look at the facilitate the people who are facilitating this activity thank you I
- [01:31:13] yield back thank you very much time has expired chair would now recognize mr.
- [01:31:14] Bubb for five minutes Thank You mr. chairman and again thanks to the witnesses for your time today for your expertise all you do for security for our country and I want to shift a bit to the topic the original topic at hand tarah financing in virtual currencies so the foundation for defense of democracies are FDD they’ve been a great resource to me and staff on issues like this and they recently reported the first publicly verifiable instance of an online propaganda unit it was based in Gaza and the Gaza Strip calling for Muslims worldwide to donate funds for terrorist purposes they only raised a few hundred dollars but even this is an early sign I’m thinking and is you know it’s disturbing that terrorist financing mechanism are evolving using this technology I’ve also seen evidence of Hamas groups embracing the technology and promoting wallet apps like telegram so the question is what’s the likelihood that we see more propaganda or terrorists the campaign’s from groups like this in the future and what can be done to prevent it from happening I’m familiar with the the article that you mentioned and I would agree with you that I believe there was only two individuals that actually volunteered the donate was somewhere in the vicinity of $500 that was that was received so although it was a low turnout as far as volunteers it did something that law enforcement would be concerned about because as virtual currency continues to grow it’s certainly an avenue that could be used for those type of propaganda situations to collect money in support of terrorist organizations so even at a few hundred dollars we still shouldn’t dismiss something like this absolutely not okay thank you can you tell me what factors are limiting terrorist exploitation of the virtual currencies basically what’s working and how that should impact a counterterrorism community and Congress focus on this front so one of the challenges I think is terrorist organizations are used to the traditional money laundering / bulk cash smuggling hawala situations I think one of the challenges that we may be facing for the traditional terrorist organizations that we’re speaking about is maybe some of the resources logistics some of the locations that their involvement that they don’t have the technology right now but you know over time with as technology advances etc you know that certainly would be a concern in lone wolf terrorist type of situations where you may have a domestic terrorism situation that to me would be a concern because they would have the technology they would have the access to the internet etc working right home from their computers and that certainly would be a concern thank you gentlemen do you care to comment on what’s working and how you would ask Congress to focus on this front from the Secret Service standpoint where our areas not terrorism or counterterrorism but what we see is though is that on the criminals with the exploitation of of digital currency to move forward their crimes we know that terrorists look to and gain education from how the criminals are doing things and so however the criminals are moving money and then they can learn from that so so from my expertise is I see it going as I see it rising in criminal activity I would assume that at some point the terrorists will start learning from the criminals good from Vincent’s perspective I would just mention that we work very closely in partnership with the financial institutions in terms of our outreach and we see have seen from 2016 to 2017 a 90 percent increase in the BSA filings involving some type of cryptocurrency across a variety of criminal activities whether that is terrorist financing narcotics trafficking money laundering or other illicit activities so to that extent we are very pleased with the increase of that type of law enforcement intelligence that we can share with our counterparts thank you all for this and a little bit different type of a question but I’d like to get law enforcement perspective on this and it’s a hot topic right now especially here in DC as we look at this as legislators but how should we classify virtual currencies is it a security is it a commodity another form of property and what’s the appropriate framework for us to use to work on legislation legislation addressing virtual currencies Thank You congressman I’ve I think from again from Vincennes perspective we certainly recognize that this is a complex area we focus on money transmissions specifically so our concern is the transmission of the either either currency funds or what we say is a subset substitutes for currency and our we’ve said that in our guidance and in our legislation that the current virtual currency is also included in that definition of other value that substitutes for currency so we feel that our certain regulatory regime right now that we have in place is sufficient to cover virtual currency and to be provide the correct reporting and I’d also say that that that applies to whether or not an MSB or a money transmitter is located within the continental United States or outside the United States but does substantial you know either substantial business within the United States or other times X parrot I yield back
- [01:36:57] the chair would now recognize gentleman
- [01:37:05] from Georgia mr. Scott for five minutes Thank You mr. chairman I’m sitting here and I’m absolutely amazed you all are sitting here and sort of just seemingly and knowledgeable about one of the greatest tragedies that we are faced with with the treatment of these little children at the borders no mr. diviner several members have asked you in question you and reminded you that you do have responsibilities here you keep saying you don’t your entity deals with ms-13 the gangs the drug cartels all of the very reason that we’ve got this situation today these people are putting their children first I looked up there I saw this picture of this little girl I wish they put it back up there at the truck and she’s looking up and you know when I saw from then I said what the Lord said suffer the little children to come unto me for of such is the kingdom of God I mean if you really understand that scripture isn’t because people were trying to push this one up to see you that one up but he said no it’s their children that come first that’s why this nation is crying out to stop this meanness there is a picture right there look at it missus no there it is right there would you mind that is the image of the United States of America we’ve got to stop it now and if you can’t give information to us you are the representatives of this administration that I need two Democrats causing this it is President Trump and take a message back to him that the Lord said first suffer the children to come unto me for of such is the kingdom of God that’s the scripture that they should be admonishing tell me miss Anna Bono when was the first tolerance and a zero tolerance policy first put into place congressman I’m not specifically aware of when it was put in place my recollection from hearing it in the news was maybe sometime around April how many children have been reunited since the zero policies put in place again I do not work in that Directorate so I do not have that information you can see from the pictures there that most have not been reunited what’s gonna happen to these children how many people who legally entered this country to seek asylum have been detained as a result of this policy again I do not have those numbers with me how any children separated from their families on the us-mexican border have had to enter the foster homes the foster care as a result of this administration’s decision I do not have that information yeah how many children may never see their mothers or their families again because of what this administration has decided to do on the borders think about it I’m telling you man we got to stop this if there’s any message to take back to the White House take him to stop it this country has been blessed by God divine intervention is throughout our history from the soldiers at Valley Forge to those who went to the mouths of Montezuma fighting we are the beacon of hope liberty freedom of the world the little girl on these pictures looking up that in America please will you take that message back to the president may gentleman’s time has expired the chair would now recognize mr. Crist for five minutes Thank You mr. chairman I just have a few questions for you mr. neva no how many children have been separated from their families since the Trump administration announced this zero tolerance policy on April 6 2018 I don’t have that information happy to take it back for the record and see if our enforcement removal or other component within DHS can get that information for you thank you and I’ll provide these for you before you leave what’s the plan to reunite the children with their parents again I know not involved in the policy-making or that side of you know the enforcement you know how so I don’t have that information but again happy to take that back for the record physically where is your office it’s located at 12th and D Street sir and your colleagues there have you had any conversations about what’s all over the news for the past 72 or so hours any concern about it I mean I watch the news every morning like everyone else and obviously see what’s what’s going on but it’s not a topic of conversation within my Directorate because again you know we’re not involved in that that nobody there is talked about this absolutely it’s on the news everyone’s watching it but it’s not a conversation that I have I was here to prepare for virtual currency and that’s how I spent you know my past week or so you know preparing for this this hearing on virtual currency you’ve dedicated your life it sounds like to appropriate law enforcement 27 years I have do you think this is the right kind of law enforcement for the United States of America again I’m not here to give my opinion I am a sworn law enforcement officer that I was sworn to defend the laws of the United States but I’m not here to comment on my personal situations happy to you know take any questions you may have I’m not asking about your personal situation I’m just asking your opinion sir I don’t have an opinion on that sir okay that’s interesting you have no opinion on this I have an opinion on what my job is and what I am required to do and I’m talking about what we’re talking about congressman anyone who looks at that picture obviously would you know have concerns looking at that picture I face several of these you know situations in my career as an immigration inspector and what I what I’ve done is if I was directed to do something I would do what the direction of the my superiors and my administration told me what to do even if you thought it was wrong that is my job I sworn to old hold the the Constitution of the United States and what if it’s not a constitutional act they’re asking you to do it maybe a directive that we’re following that’s that’s from our leadership and that is what I do on a day-to-day basis if I get you know direction from my leadership I follow what my leadership’s directives are follow right or wrong it’s not my decision to make congressman yeah it is yeah you’re a citizen of this country you don’t have to do everything you’re told to do if you think it’s wrong at her moral if it was something that was a morally correct or is not legal then obviously I would not do that but I’m glad to hear that yeah absolutely I’m 27 years you know and I’ve been doing my job for 27 years I’m a family member obviously you know situations like that when you see that touch everyone’s heart but again we’re not the ones to blame for this situation meaning me as a special agent within my homeland security Directorate if laws need to be changed they need to be changed but it’s not me to make the change in the law I’m not blaming you I didn’t say that who do you think is to blame for this I think obviously the laws need to be changed I’m not here to say who’s responsible for it but if the laws need to be changed it’s not for me as a Deputy Assistant Director at my level to be making those changes do you know if any children have been physically harmed or died while in this custody since April that I’m not sure about can you find out happy to take any questions you have and get it to the appropriate locations within Department of Homeland Security thank you for your help Jerell but now I recognize mr. heck for
- [01:46:46] five minutes Thank You mr. chairman thanks to all the witnesses for being here today I’m not sure who can answer this question anybody that has the answer I’d appreciate how how long is the list of mothers with young children who have been detained at the border that are suspected or known to have used cryptocurrency for illicit purposes I’m not aware of that any so we can at least eliminate that category of reason to be afraid of young mothers with young children mr. nevah know you’ve had a distinguished career and I sincerely thank you for that at ice I’d like to ask you if you believe that the current resources provided ice and the staffing levels that result therefrom are 100% sufficient for the agency to fulfill its mission in a robust fashion congressman we have plus and minus six 6500 special agents within the Homeland Security Investigations we could obviously use sir I asked about the agency overall drawing upon your 27 years the question is very straightforward does the agency overall from where you sit based on your 27 years of experience have a hundred percent of the resources and staffing it needs in order to fulfill its mission in a robust fashion again I am familiar with my Directorate which is homeland security investigations I’m not familiar with the other components went within DHS there’s over 22 components within DHS I’m not familiar with every other component is it your impression you have all the staffing and resources you need with in Homeland Security Investigations we could certainly use more so if that is also true at the other divisions at ice we can reasonably and logically conclude that if they were asked to do anything additional it would only come at the compromise or resulted in compromise of their effort to fulfill their mission there is a federal prison mr. neva no and Victorville California where we a now have about a thousand ice detainees do you know whether or not the guards there have been trained to deal with the non criminal occupants and immigrants at that facility no I’m not congressman I wear do you know whether or not the immigrant detainees are being accorded the same rights and privileges as the prisoners violators of crimes such as visitation and access to counsel and recreational opportunities I’m not familiar with the situation in that facility I have a facility in my district it’s called the Selma Carson home at which 16 and 17 year old unaccompanied boys are kept do you know if the current population includes anyone that has been separated from their parent I do not I guess I’d like to make an observation if I may about this overall issue because the truth of the matter is I completely understand somebody that is deeply concerned about our nation’s security in general and as it even relates to some degree with respect to borders what’s difficult for me to understand is the obsession on just one border and the obsession on on only one fix to the issue there I guess I kind of can’t forget the fact that the a goodly number of the people who helped plot and implement the 9/11 attack on our soil the deadliest sin our nation’s history came in through the northern border not a lot of talk about enhanced northern border security and I am very mindful of the fact that nearly 50% of the people who are here without the appropriate documents came in legally and just stayed and yet all the focus seems to be on one of our four borders the water on our east and west kind of take care of that nothing on the north for all practical purposes nothing on the way that people who come here legally but stay I guess in simpler terms this strikes me as if somebody owned a home and they felt that they had a security risk of being robbed they decide to build two walls not for two in order to protect themselves or even one wall leaving the other two or three open I guess that’d be one way to try to protect themselves not very effective or they could buy an alarm system or they could put up increased lighting or they could trim the bushes that provide cover for people or they could buy a dog or-or-or my point being that the issue of security has to be solved intelligently not just with a half-baked half idea on how to provide for our nation’s security Thank You mr. chairman and I yield back the gentleman’s time
- [01:52:01] has expired the chair would now recognize mr. Capuano for five minutes Thank You mr. chairman thank you John
- [01:52:07] for being here and honestly I was looking forward to having a hearing on the subject matter that was advertised but with today’s crisis I assume by now you figured out we just can’t do that we can’t remain silent mr. mr. Devon oh I see you have an excellent education I’m a BC guy too my son is as well I don’t remember being taught by any of the Jesuits it was okay to separate parents from children and I want to be real clear you have been incredibly professional under some tough questionings and I respect your position and I’m not gonna try to make you put you in a tough position because I think you’ve done a good job today defending the indefensible or actually avoiding defending the indefensible and I really do I appreciate what you’re doing I don’t want to put you in a tough position but you know you’re the guy who’s here you’re the guy we got and I’m sorry but is there anybody behind you who can answer any of the questions that have been asked today I don’t know I mean sometime there anybody else from ice that I hear that can answer these questions I don’t believe there’s anybody with me here today from Customs and Border Protection enforcement rural operations that may have some of those answers to your questions okay I expected that I know you’ve heard the audio before but I want to play that audio just one more time because I do have a question to it I think I don’t know exactly all this technology stuff which but there’s a guy in the back room doing some magic so [Music] the only offensive by the official I appreciate thank you did you hear any ms-13 members in that audio I did not I didn’t either any other gang members did you could tell you know that secret code that we could tell that these children were somehow associated with an international gang that’s come here to terrorize us I did not know I did need us I’m kind of interesting that the president was able to hear that I don’t know I know you’ve been testifying for a while I don’t know if they’re caught up in the news you probably not but if you had it’s been announced that the president has just signed an order reversing his previous order so I assume you’re his agency’s gonna get some new orders but I’m interested I just heard the last three days the president knighted States telling me repeatedly on the news very publicly that he didn’t have the authority to change his own zero-tolerance policy and now he’s done it could you explain to me how the president could say on four three four or five days in a row we didn’t have the authority and now somehow have the authority is anybody at ice gonna ask questions as to who actually has the authority to make a determination whether children can be ripped from the arms of their mother I don’t have that answer for you today sir I I just I’m just kind of curious because it strikes me if the president says for day after day at the day on TV that he doesn’t have the authority and then now he does I don’t know but I’m just guessing that if that was somebody else that he didn’t like that the president would say that person was lying and had been lying for day after day after day I’m just I’m just confused how the president can do that and I know that again I gonna carry out the orders and I respect that I really do I respect that but at some point somebody at DHS somebody at ice is gonna have to look in the mirror and ask themselves whether they want to keep doing this you from massagist were lucky enough to go to BC now I am from Massachusetts and you you remember the name Elliot Richardson I will form a state attorney general who became the US Attorney General I am familiar with that name Elliot Richardson quit when the President of the United States ordered him to take action he found to be immoral he quit his job now I’m not asking any lying guy a 27-year career guy to do that that’s a little much but somebody somewhere at DHS and ice at some point he’s gonna have to ask themselves when is it too much one of the others too much I can’t do them and again I’m not suggesting it should be you or anybody in particular and I really hate even putting that question to a career guy I really would rather put that question to a political appointee that would be people above your paygrade and I get it but again and I apologize as I did earlier I have to say some of these things to you I don’t really mean to direct them to you you seem like a nice guy doing your job but until and unless we have access in a public forum to the people that can’t answer these questions and can make those decisions unfortunately you’re kind of stuck in I actually feel bad that your superiors put you in this position today they have to take this abuse and again it’s not directed to you but I will be very clear it is unequivocally directed at your superiors who do have the authority to say no and should have said no to this policy Thank You mr. chairman gentleman’s time has expired I’d like to thank our witnesses for your testimony today without objection all members who have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for the response ask our witnesses to please respond this promptly is you’re able this hearing is adjourned you
