H. Rept. 115-905 - IMPROVING STRATEGIES TO COUNTER WEAPONS PROLIFERATION ACT115th Congress (2017-2018)
Committee Report
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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-905
======================================================================
IMPROVING STRATEGIES TO COUNTER WEAPONS PROLIFERATION ACT
_______
August 24, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 6332]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 6332) to require the Director of the Financial
Crimes Enforcement Network to submit a report to Congress on
the way in which data collected pursuant to title 31 is being
used, and for other purposes, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
Purpose and Summary
On July 12, 2018, Representative Scott Tipton introduced
H.R. 6332, the ``Improving Strategies to Counter Weapons
Proliferation Act.'' The legislation would require the
Financial Crime Enforcement Network (FinCEN) to report to
Congress annually for five years on the intelligence products
it generates from Bank Secrecy Act (BSA) filings on
proliferation finance transactions moving through the U.S.
financial system; its collaboration with law enforcement
agencies, the Intelligence Community, and foreign financial
intelligence units; and on its advisory reports issued to
financial institutions to make maximum use of BSA data.
Background and Need for Legislation
H.R. 6332 amends Section 310 of title 31, United States
Code, to require the Director of the Financial Crime
Enforcement Network (FinCEN) to report to Congress annually for
five years on the financing of weapons proliferation and to
provide guidance to financial institutions on how to best
identify procurement patterns and implement these identifiers
into their anti-money laundering and ``Know Your Customer''
processes like they do with other illicit and terror finance.
Countering the financing of weapons proliferation is a key
foundation of U.S. counter-proliferation efforts. The Financial
Action Task Force (FATF) encourages financial entities to check
customers against sanctions lists to avoid any assistance in
the financing of weapons proliferation activities. As the U.S.
assumed the presidency of FATF in July 2018, there is an
opportunity to provide more leadership to the financial
industry to help identify and counter the financing of weapons
proliferation.
Proliferation finance generally receives less attention
than other illicit finance threats such as money laundering and
terror financing. It is often difficult for government
authorities or financial institutions to identify the financing
of weapons proliferation. The networks of procurement agents
involved may be complex and often involve ``front'' companies
which operate in a number of different jurisdictions. The goods
and materials involved are, for the most part, standard
industrial or occasionally dual-use items. The latter, although
subject to export controls, still may be hard to identify. For
due diligence, most financial institutions rely on screening
both transactions and customers against lists of sanctioned
individuals or entities. Governments and regulators generally
require nothing more of financial institutions.
Publicly available material about the characteristics of
the financing of weapons proliferation, or documented
methodologies, has also been relatively sparse. The most
comprehensive study of typologies of the financing of
proliferation to date was published by the FATF in 2008, which
included case studies and a list of 20 possible indicators,
including, for example, transactions connected with designated
individuals or entities or with countries of proliferation
concern. These case studies involve classic and established
financial mechanisms--wire transfers, trade finance products,
cash, checks, and, in a few cases, credit cards.
Financing schemes fund illicit weapons proliferation. These
operations cannot continue if the Federal government can
frustrate or more importantly end these financing
opportunities. H.R. 6332 will help to further these goals by
studying what specific activities may indicate engagement in
proliferation financing and deny bad actors with the ability to
take advantage of the global financial system.
Hearings
The Committee on Financial Services Subcommittee on
Terrorism and Illicit Finance held a hearing examining matters
relating to H.R. 6332 on July 12, 2018.
Committee Consideration
The Committee on Financial Services met in open session on
July 24, 2018 and ordered H.R. 6332 to be reported favorably to
the House without amendment by a recorded vote of 56 yeas to 0
nays (recorded vote no. FC-198), a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without. The motion was
agreed to by a recorded vote of 56 yeas to 0 nays (Record vote
no. FC-198), a quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 6332
will provide a focus on the financing of weapons proliferation
by providing for a report to Congress on FinCEN's intelligence
products relating to the financing of proliferation financing,
how FinCEN collaborates with other agencies and foreign
partners, and FinCEN's advisory notices to financial
institutions.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 2, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 6332, the
Improving Strategies to Counter Weapons Proliferation Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 6332--Improving Strategies to Counter Weapons Proliferation Act
H.R. 6332 would require the Financial Crimes Enforcement
Network (FinCEN) in the Department of the Treasury to submit an
annual report to the Congress on FinCEN products and other
agency activities that address the financing of weapons
production and distribution. Based on the cost of similar
reports, CBO estimates that implementing the bill would cost
less than $500,000 annually; such spending would be subject to
the availability of appropriated funds.
Enacting H.R. 6332 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting H.R. 6332 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2029.
H.R. 6332 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Mark Grabowicz.
The estimate was reviewed by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This Section cites H.R. 6332 as the ``Improving Strategies
to Counter Weapons Proliferation Act.''
Section 2. Financial crimes enforcement network reporting requirement
Section 310 of title 31, United States Code, is amended by
adding at the end the following:
``(e) Reports Relating to Use of Collected Data.''
Not later than 1 year after the date of enactment of this
subsection and every year thereafter, the Director shall submit
to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate a report on intelligence products
created by FinCEN on finance transactions for the proliferation
of weapons from filings submitted pursuant to subchapter II of
chapter 53; FinCEN's efforts to collaborate with law
enforcement agencies, the intelligence community, and foreign
financial intelligence units to maximize the use of data that
is collected pursuant to subchapter II of chapter 53; and
advisory notices issued to financial institutions (as defined
under section 5312(a)) on financial activity related to the
proliferation of weapons.
Any part of the report that involves information that is
properly classified under criteria established by the President
shall be submitted to the Congress separately in a classified
annex.
No report is required after the end of the 5-year period
beginning on the date of enactment.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
TITLE 31, UNITED STATES CODE
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SUBTITLE I--GENERAL
* * * * * * *
CHAPTER 3--DEPARTMENT OF THE TREASURY
* * * * * * *
SUBCHAPTER I--ORGANIZATION
* * * * * * *
Sec. 310. Financial Crimes Enforcement Network
(a) In General.--The Financial Crimes Enforcement Network
established by order of the Secretary of the Treasury (Treasury
Order Numbered 105-08, in this section referred to as
``FinCEN'') on April 25, 1990, shall be a bureau in the
Department of the Treasury.
(b) Director.--
(1) Appointment.--The head of FinCEN shall be the
Director, who shall be appointed by the Secretary of
the Treasury.
(2) Duties and powers.--The duties and powers of the
Director are as follows:
(A) Advise and make recommendations on
matters relating to financial intelligence,
financial criminal activities, and other
financial activities to the Under Secretary of
the Treasury for Enforcement.
(B) Maintain a government-wide data access
service, with access, in accordance with
applicable legal requirements, to the
following:
(i) Information collected by the
Department of the Treasury, including
report information filed under
subchapter II of chapter 53 of this
title (such as reports on cash
transactions, foreign financial agency
transactions and relationships, foreign
currency transactions, exporting and
importing monetary instruments, and
suspicious activities), chapter 2 of
title I of Public Law 91-508, and
section 21 of the Federal Deposit
Insurance Act.
(ii) Information regarding national
and international currency flows.
(iii) Other records and data
maintained by other Federal, State,
local, and foreign agencies, including
financial and other records developed
in specific cases.
(iv) Other privately and publicly
available information.
(C) Analyze and disseminate the available
data in accordance with applicable legal
requirements and policies and guidelines
established by the Secretary of the Treasury
and the Under Secretary of the Treasury for
Enforcement to--
(i) identify possible criminal
activity to appropriate Federal, State,
local, and foreign law enforcement
agencies;
(ii) support ongoing criminal
financial investigations and
prosecutions and related proceedings,
including civil and criminal tax and
forfeiture proceedings;
(iii) identify possible instances of
noncompliance with subchapter II of
chapter 53 of this title, chapter 2 of
title I of Public Law 91-508, and
section 21 of the Federal Deposit
Insurance Act to Federal agencies with
statutory responsibility for enforcing
compliance with such provisions and
other appropriate Federal regulatory
agencies;
(iv) evaluate and recommend possible
uses of special currency reporting
requirements under section 5326;
(v) determine emerging trends and
methods in money laundering and other
financial crimes;
(vi) support the conduct of
intelligence or counterintelligence
activities, including analysis, to
protect against international
terrorism; and
(vii) support government initiatives
against money laundering.
(D) Establish and maintain a financial crimes
communications center to furnish law
enforcement authorities with intelligence
information related to emerging or ongoing
investigations and undercover operations.
(E) Furnish research, analytical, and
informational services to financial
institutions, appropriate Federal regulatory
agencies with regard to financial institutions,
and appropriate Federal, State, local, and
foreign law enforcement authorities, in
accordance with policies and guidelines
established by the Secretary of the Treasury or
the Under Secretary of the Treasury for
Enforcement, in the interest of detection,
prevention, and prosecution of terrorism,
organized crime, money laundering, and other
financial crimes.
(F) Assist Federal, State, local, and foreign
law enforcement and regulatory authorities in
combatting the use of informal, nonbank
networks and payment and barter system
mechanisms that permit the transfer of funds or
the equivalent of funds without records and
without compliance with criminal and tax laws.
(G) Provide computer and data support and
data analysis to the Secretary of the Treasury
for tracking and controlling foreign assets.
(H) Coordinate with financial intelligence
units in other countries on anti-terrorism and
anti-money laundering initiatives, and similar
efforts.
(I) Administer the requirements of subchapter
II of chapter 53 of this title, chapter 2 of
title I of Public Law 91-508, and section 21 of
the Federal Deposit Insurance Act, to the
extent delegated such authority by the
Secretary of the Treasury.
(J) Such other duties and powers as the
Secretary of the Treasury may delegate or
prescribe.
(c) Requirements Relating to Maintenance and Use of Data
Banks.--The Secretary of the Treasury shall establish and
maintain operating procedures with respect to the government-
wide data access service and the financial crimes
communications center maintained by FinCEN which provide--
(1) for the coordinated and efficient transmittal of
information to, entry of information into, and
withdrawal of information from, the data maintenance
system maintained by FinCEN, including--
(A) the submission of reports through the
Internet or other secure network, whenever
possible;
(B) the cataloguing of information in a
manner that facilitates rapid retrieval by law
enforcement personnel of meaningful data; and
(C) a procedure that provides for a prompt
initial review of suspicious activity reports
and other reports, or such other means as the
Secretary may provide, to identify information
that warrants immediate action; and
(2) in accordance with section 552a of title 5 and
the Right to Financial Privacy Act of 1978, appropriate
standards and guidelines for determining--
(A) who is to be given access to the
information maintained by FinCEN;
(B) what limits are to be imposed on the use
of such information; and
(C) how information about activities or
relationships which involve or are closely
associated with the exercise of constitutional
rights is to be screened out of the data
maintenance system.
(d) Authorization of Appropriations.--
(1) In general.--There are authorized to be
appropriated for FinCEN $100,419,000 for fiscal year
2011 and such sums as may be necessary for each of the
fiscal years 2012 and 2013.
(2) Authorization for funding key technological
improvements in mission-critical FinCEN systems.--There
are authorized to be appropriated for fiscal year 2005
the following amounts, which are authorized to remain
available until expended:
(A) BSA direct.--For technological
improvements to provide authorized law
enforcement and financial regulatory agencies
with Web-based access to FinCEN data, to fully
develop and implement the highly secure network
required under section 362 of Public Law 107-56
to expedite the filing of, and reduce the
filing costs for, financial institution
reports, including suspicious activity reports,
collected by FinCEN under chapter 53 and
related provisions of law, and enable FinCEN to
immediately alert financial institutions about
suspicious activities that warrant immediate
and enhanced scrutiny, and to provide and
upgrade advanced information-sharing
technologies to materially improve the
Government's ability to exploit the information
in the FinCEN data banks, $16,500,000.
(B) Advanced analytical technologies.--To
provide advanced analytical tools needed to
ensure that the data collected by FinCEN under
chapter 53 and related provisions of law are
utilized fully and appropriately in
safeguarding financial institutions and
supporting the war on terrorism, $5,000,000.
(C) Data networking modernization.--To
improve the telecommunications infrastructure
to support the improved capabilities of the
FinCEN systems, $3,000,000.
(D) Enhanced compliance capability.--To
improve the effectiveness of the Office of
Compliance in FinCEN, $3,000,000.
(E) Detection and prevention of financial
crimes and terrorism.--To provide development
of, and training in the use of, technology to
detect and prevent financial crimes and
terrorism within and without the United States,
$8,000,000.
(e) Reports Relating to Use of Collected Data.--
(1) In general.--Not later than 1 year after the date
of enactment of this subsection and every year
thereafter, the Director shall submit to the Committee
on Financial Services of the House of Representatives
and the Committee on Banking, Housing, and Urban
Affairs of the Senate a report on--
(A) intelligence products created by FinCEN
on finance transactions for the proliferation
of weapons from filings submitted pursuant to
subchapter II of chapter 53;
(B) FinCEN's efforts to collaborate with law
enforcement agencies, the intelligence
community, and foreign financial intelligence
units to maximize the use of data that is
collected pursuant to subchapter II of chapter
53; and
(C) advisory notices issued to financial
institutions (as defined under section 5312(a))
on financial activity related to the
proliferation of weapons.
(2) Separate presentation of classified material.--
Any part of the report under paragraph (1) that
involves information that is properly classified under
criteria established by the President shall be
submitted to the Congress separately in a classified
annex.
(3) Sunset.--No report is required under this
subsection after the end of the 5-year period beginning
on the date of enactment of this subsection.
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