H. Rept. 115-981 - EMPOWERING FINANCIAL INSTITUTIONS TO FIGHT HUMAN TRAFFICKING ACT OF 2018115th Congress (2017-2018)
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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-981
======================================================================
EMPOWERING FINANCIAL INSTITUTIONS TO FIGHT HUMAN TRAFFICKING ACT OF
2018
_______
September 26, 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
together with
MINORITY VIEWS
[To accompany H.R. 6729]
The Committee on Financial Services, to whom was referred
the bill (H.R. 6729) to allow nonprofit organizations to
register with the Secretary of the Treasury and share
information on activities that may involve human trafficking or
money laundering with financial institutions and regulatory
authorities, under a safe harbor that offers protections from
liability, in order to better identify and report potential
human trafficking or money laundering activities, having
considered the same, report favorably thereon without amendment
and recommend that the bill do pass.
Purpose and Summary
On September 6, 2018, Rep. Ann Wagner introduced H.R. 6729,
the ``Empowering Financial Institutions to Fight Human
Trafficking Act,'' which would instruct the Secretary of the
Treasury to establish a mechanism for nonprofit organizations
to qualify for a safe harbor when sharing specific information
with financial institutions that facilitates their duties of
customer due diligence and the reporting of suspicious
activities relating to human trafficking.
Registered nonprofit organizations that share information
in compliance with these regulations will receive safe harbor
protections in order to protect themselves from retaliation,
defamation suits, and other actions.
Under this legislation, the Secretary of the Treasury is
given the authority to develop regulations to register
nonprofit organizations that meet certain qualifications before
qualified to be protected through this mechanism, determine
what information may be shared under this protection, which
financial institutions may receive information, how financial
institutions may share information received through currently
regulated and protected information sharing programs, and make
the processes outlined in the bill coexistent with current
information sharing mechanisms.
Background and Need for Legislation
The goal of H.R. 6729 is to establish a pathway for
financial institutions to receive intelligence about human
trafficking from nonprofit organizations to aid in the
identification of money laundering and other suspicious
activity. Human trafficking is recognized by the Treasury
Department's Financial Crimes Enforcement Network (FinCEN) as
inherently connected to the offense of money laundering by and
through the transacting of revenues and profits from the
business of exploitation. During the last few years, the
connection between human trafficking to the banking industry
has received increasing attention, first by the Financial
Action Task Force (FATF), and more recently by UN Security
Council Resolution 2331.
The International Labor Organization (ILO) estimates that
approximately $150 billion is generated in profit from human
trafficking. Modern labor and sex trafficking are intrinsically
linked to private sector business and therefore to the banking
system. The financial industry has increasingly sought to
reduce their exposure to the problem. However, banks still
often fall short of information and intelligence about their
exposure necessary to make comprehensive assessments.
Oftentimes, however, lack of liability protections is too
great a risk factor for those with information to share with
our financial institutions. Current methods of providing
information through other channels clash against the time
sensitive needs of investigators. Without liability
protections, outside groups and nongovernmental organizations
(NGOs) have uncertain legal exposure to defamation suits by
those on which they report, and other potentially dangerous
attacks. NGOs serving victims of human trafficking and
vulnerable populations have access to critical information
useful to and already sought out by the financial services
industry in identifying the activities of human traffickers and
their criminal associates. NGOs, however, face obstacles in
sharing this information with financial institutions due to
serious risk of retribution by bad actors. While financial
institutions are given safe harbor for performing information
sharing roles, NGOs--which lack the resources for extensive
court proceedings--are unprotected from defamation suits and
other actions brought by those who do not want to see their
crimes unveiled.
NGOs are protected when sharing information with law
enforcement and do so regularly. However, law enforcement is
not properly equipped to be the sole actor responding to money
laundering activity. Providing information through
intermediaries rather than directly to industry harms time-
sensitive delivery and dilutes the information available.
Organizations such as Western Union, MoneyGram, and Liberty
Asia support the bill because it provides NGOs with a mechanism
to share specific information relating to human trafficking
with financial institutions after they qualify for a safe
harbor from the Secretary of the Treasury. NGOs include small
organizations that do not have the ability to defend themselves
against the burden of multiple lawsuits from well-funded
adversaries. It is in a NGOs interest to provide the best and
most accurate analysis of the available information.
NGOs are currently less willing to provide such information
with a financial institution due to concerns with retaliation
or civil law suits. NGOs are often the key sources of
intelligence for law enforcement as they are the primary points
of contact for reports of abuse. NGOs also play a crucial role
in fighting human trafficking and the financial flows that
derive from it, and they can ensure that essential information,
including on who is profiting from the trafficking, reaches
financial institutions and authorities as victims are often
fearful of reaching out to the authorities themselves.
The bill creates a process where responsible nonprofits
that professionally analyze information and create intelligence
products that help financial institutions better identify these
crimes can share information without worrying about whether
sharing this information is going to end their organizations.
Criminals who want to shield their activities can use
defamation suits and other means of retaliation to hit back at
nonprofits that are trying to serve the common good but would
crumble under the burden of expensive lawsuits. There is
currently nothing stopping a named adversary from filing
Freedom of Information Act (FOIA) requests or lawsuits to gain
access to the contact information of analysts and identifiable
information on sources submitted by nonprofits to a regulator
or bank. This legislation solves this problem and empowers the
financial industry to do better in protecting the most
vulnerable of our society.
Hearings
The Committee on Financial Services Subcommittee on
Oversight and Investigations held a hearing examining matters
relating to H.R. 6729 on January 30, 2018 and the Subcommittee
on Terrorism and Illicit Finance held a hearing examining
matters relating to H.R. 6729 on March 20, 2018.
Committee Consideration
The Committee on Financial Services met in open session on
September 13, 2018 and ordered H.R. 6729 to be reported
favorably to the House by a recorded vote of 44 yeas to 5 nays
(recorded vote no. FC-204), a quorum being present. An
amendment in the nature of a substitute offered by Ms. Waters
was not agreed to by a voice vote.
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 as amended. The motion
was agreed to by a recorded vote of 44 yeas to 5 nays (Record
vote no. FC-204), 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. 6729
will protect victims of human trafficking by increasing
cooperation among financial institutions and nonprofit
organizations regarding sources of information on human
trafficking and money laundering by providing a safe harbor for
information providers and requiring the Secretary of the
Treasury to provide reports to the financial services industry
and Congressional committees.
New Budget Authority, Entitlement Authority, and Tax Expenditures
The Committee has not received an estimate of new budget
authority contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to Sec.
402 of the Congressional Budget Act of 1974. In compliance with
clause 3(c)(2) of rule XIII of the Rules of the House, the
Committee opines that H.R. 6729 will not establish any new
budget or entitlement authority or create any tax expenditures.
Congressional Budget Office Estimates
The cost estimate prepared by the Director of the
Congressional Budget Office pursuant to Sec. 402 of the
Congressional Budget Act of 1974 was not submitted timely to
the Committee.
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. 6729 as the ``Empowering Financial
Institutions to Fight Human Trafficking Act.''
Section 2. Anti-money laundering information providers
This section amends Subchapter II of chapter 53 of title
31, United States Code, by adding Section 5333, ``Anti-money
laundering information providers.''
Section 5333, ``Anti-money laundering information
providers,'' includes the following:
Not later than the end of the 120-day period beginning on
the date of enactment of this section, the Secretary of the
Treasury shall issue regulations to allow nonprofit
organizations, that the Secretary of the Treasury determines to
be qualified, to share information with financial institutions,
associations of financial institutions, their regulatory
authorities, and law enforcement agencies regarding
individuals, entities, organizations, and countries suspected
of possible human trafficking or related money laundering
activities.
These regulations may include or create procedures for
cooperation and information sharing focused on matters
specifically related to those benefitting directly and
indirectly from human trafficking, the means by which human
traffickers transfer funds within the United States and around
the world, and the extent to which financial institutions,
including depository institutions, asset managers, and insurers
in the United States, are unwittingly involved in such matters
or transfers and the extent to which such entities are at risk
as a result.
These regulations may also include the means of
facilitating the identification of accounts and transactions
involving human traffickers and facilitating the exchange of
information concerning such accounts and transactions between
nonprofit organizations, financial institutions, regulatory
authorities, and law enforcement agencies.
These regulations may be made coextensive with the
regulations adopted pursuant to other programs, regulated by
the Secretary of the Treasury, for sharing information on
unlawful activities between financial institutions and
establish a registration process overseen by the Secretary of
the Treasury that requires a nonprofit organization to
demonstrate that they meet certain qualifications that the
Secretary of the Treasury determines appropriate, including the
establishment of policies and procedures reasonably designed to
ensure the prompt identification and correction of inaccurate
information.
The Secretary of the Treasury may disqualify nonprofit
organizations that do not meet these qualifications, and the
Secretary of the Treasury may terminate the registration of a
nonprofit organization at any point if the Secretary of the
Treasury determines such termination is appropriate and
provides sufficient notice of such termination to the
applicable nonprofit organization.
A nonprofit organization is required to register with the
Secretary of the Treasury before sharing information that will
be subject to the safe harbor, and ensure that financial
institutions, associations of financial institutions, their
regulatory authorities, law enforcement authorities, and any
other appropriate entities are made aware of those nonprofit
organizations that are registered with the Secretary of the
Treasury.
The Secretary of the Treasury shall determine those
financial institutions which are eligible to be recipients of
information from nonprofit organizations made in compliance
with these regulations. Such eligible financial institutions
may include those already participating in existing information
sharing programs regulated by the Secretary of the Treasury
regarding unlawful activity. If a nonprofit organization shares
information with a financial institution that is not eligible,
such sharing of information shall not be subject to the safe
harbor.
These regulations may be coextensive with other regulations
governing the sharing of information between financial
institutions on suspected unlawful activities, and shall allow
financial institutions that receive information in compliance
with the regulations to share such information with other
financial institutions through existing information sharing
programs.
A nonprofit organization, financial institution,
association of financial institutions, regulatory authority of
a financial institution, or law enforcement agency in
compliance with the regulations that transmits or shares
information for the purposes of identifying or reporting
activities that may involve human trafficking acts or related
money laundering activities shall not be liable to any person
under any law or regulation of the United States, any
constitution, law, or regulation of any State or political
subdivision thereof, or under any contract or other legally
enforceable agreement (including any arbitration agreement),
for such disclosure or for any failure to provide notice of
such disclosure to the person who is the subject of such
disclosure, or any other person identified in the disclosure,
except where such transmission or sharing violates this section
or regulations issued pursuant to this section.
A nonprofit organization, financial institution,
association of financial institutions, regulatory authority of
a financial institution, or law enforcement agency that
transmits or shares information shall not be required to
demonstrate that such transmission or sharing was made on a
good faith basis in order to receive the benefit of the safe
harbor.
This section may not be construed as requiring a nonprofit
organization to comply with the regulations before sharing
information with a financial institution, association of
financial institutions, regulatory authority of a financial
institution, or law enforcement agency.
Beginning 10 months after the date of the enactment of this
section, and at least semiannually thereafter, the Secretary of
the Treasury shall publish a report containing a detailed
analysis identifying patterns of suspicious activity and other
investigative insights derived from the regulations issued
under this section and investigations conducted by Federal,
State, local, and Tribal law enforcement agencies to the extent
appropriate, distribute such report to financial institutions,
and provide such report upon publication to the Committee on
Financial Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the Senate.
The term `nonprofit organization' means an organization
described in section 501(c)(3) of the Internal Revenue Code of
1986 and exempt from taxation under section 501(a) of such
Code.''.
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
* * * * * * *
SUBTITLE IV--MONEY
* * * * * * *
CHAPTER 53--MONETARY TRANSACTIONS
SUBCHAPTER I--CREDIT AND MONETARY EXPANSION
Sec.
5301. Buying obligations of the United States Government.
* * * * * * *
5333. Anti-money laundering information providers.
* * * * * * *
SUBCHAPTER II--RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS
* * * * * * *
Sec. 5333. Anti-money laundering information providers
(a) Cooperation Among Financial Institutions and Sources of
Information on Human Trafficking and Money Laundering.--
(1) In general.--Not later than the end of the 120-
day period beginning on the date of enactment of this
section, the Secretary of the Treasury shall issue
regulations to allow nonprofit organizations that the
Secretary determines to be qualified to share
information with financial institutions, associations
of financial institutions, their regulatory
authorities, and law enforcement agencies regarding
individuals, entities, organizations, and countries
suspected of possible human trafficking or related
money laundering activities.
(2) Cooperation and information sharing procedures.--
The regulations required under paragraph (1) may
include or create procedures for cooperation and
information sharing focused on--
(A) matters specifically related to those
benefitting directly and indirectly from human
trafficking, the means by which human
traffickers transfer funds within the United
States and around the world, and the extent to
which financial institutions, including
depository institutions, asset managers, and
insurers in the United States, are unwittingly
involved in such matters or transfers and the
extent to which such entities are at risk as a
result; and
(B) means of facilitating the identification
of accounts and transactions involving human
traffickers and facilitating the exchange of
information concerning such accounts and
transactions between nonprofit organizations,
financial institutions, regulatory authorities,
and law enforcement agencies.
(3) Method of regulation.--The regulations required
under paragraph (1) may--
(A) be made coextensive with the regulations
adopted pursuant to other programs, regulated
by the Secretary, for sharing information on
unlawful activities between financial
institutions;
(B) establish a registration process overseen
by the Secretary that--
(i) requires a nonprofit organization
to demonstrate that they meet certain
qualifications that the Secretary
determines appropriate, including the
establishment of policies and
procedures reasonably designed to
ensure the prompt identification and
correction of inaccurate information
shared under paragraph (1);
(ii) allows the Secretary to
disqualify nonprofit organizations that
do not meet such qualifications; and
(iii) allows the Secretary to
terminate the registration of a
nonprofit organization at any point if
the Secretary determines such
termination is appropriate and provides
sufficient notice of such termination
to the applicable nonprofit
organization;
(C) require a nonprofit organization to
register with the Secretary before sharing
information that will be subject to the safe
harbor provided under subsection (b); and
(D) ensure that financial institutions,
associations of financial institutions, their
regulatory authorities, law enforcement
authorities, and any other appropriate entities
are made aware of those nonprofit organizations
that are registered with the Secretary.
(4) Recipients of information.--
(A) In general.--The Secretary shall
determine those financial institutions which
are eligible to be recipients of information
from nonprofit organizations made in compliance
with the regulations issued under subsection
(a). Such eligible financial institutions may
include those already participating in existing
information sharing programs regulated by the
Secretary regarding unlawful activity.
(B) No safe harbor for information provided
to other financial institutions.--If a
nonprofit organization shares information with
a financial institution that is not eligible
under subparagraph (A), such sharing of
information shall not be subject to the safe
harbor provided under subsection (b).
(5) Information sharing between financial
institutions.--The regulations adopted pursuant to this
section--
(A) may be coextensive with other regulations
governing the sharing of information between
financial institutions on suspected unlawful
activities; and
(B) shall allow financial institutions that
receive information in compliance with the
regulations issued under subsection (a) to
share such information with other financial
institutions through existing information
sharing programs.
(b) Safe Harbor for Information Providers.--
(1) In general.--A nonprofit organization, financial
institution, association of financial institutions,
regulatory authority of a financial institution, or law
enforcement agency in compliance with the regulations
issued under subsection (a) that transmits or shares
information described under subsection (a) for the
purposes of identifying or reporting activities that
may involve human trafficking acts or related money
laundering activities shall not be liable to any person
under any law or regulation of the United States, any
constitution, law, or regulation of any State or
political subdivision thereof, or under any contract or
other legally enforceable agreement (including any
arbitration agreement), for such disclosure or for any
failure to provide notice of such disclosure to the
person who is the subject of such disclosure, or any
other person identified in the disclosure, except where
such transmission or sharing violates this section or
regulations issued pursuant to this section.
(2) No good faith requirement.--A nonprofit
organization, financial institution, association of
financial institutions, regulatory authority of a
financial institution, or law enforcement agency that
transmits or shares information described under
paragraph (1) shall not be required to demonstrate that
such transmission or sharing was made on a good faith
basis in order to receive the benefit of the safe
harbor provided by paragraph (1).
(c) Non-mandatory Compliance With This Section.--This section
may not be construed as requiring a nonprofit organization to
comply with the regulations issued under subsection (a) before
sharing information with a financial institution, association
of financial institutions, regulatory authority of a financial
institution, or law enforcement agency.
(d) Reports to the Financial Services Industry on Suspicious
Financial Activities.--Beginning 10 months after the date of
the enactment of this section, and at least semiannually
thereafter, the Secretary of the Treasury shall--
(1) publish a report containing a detailed analysis
identifying patterns of suspicious activity and other
investigative insights derived from the regulations
issued under this section and investigations conducted
by Federal, State, local, and Tribal law enforcement
agencies to the extent appropriate;
(2) distribute such report to financial institutions;
and
(3) provide such report upon publication to the
Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing,
and Urban Affairs of the Senate.
(e) Nonprofit Organization Defined.--For purposes of this
section, the term ``nonprofit organization'' means an
organization described in section 501(c)(3) of the Internal
Revenue Code of 1986 and exempt from taxation under section
501(a) of such Code.
* * * * * * *
MINORITY VIEWS
H.R. 6729 is a well-intentioned bill that is aimed at
countering human trafficking, a goal that Democrats strongly
support. However, we remain concerned that the bill does not
strike the right balance with protecting the civil liberties of
innocent U.S. citizens.
Designed to support the good work of respected anti-human
trafficking nonprofits that combat the involuntary and often
transnational trafficking of men, women, and children--the bill
gives a federal safe harbor to allow nonprofits to share
personally identifiable information (PII) about any person the
nonprofit suspects of human trafficking with any financial
institution. The financial institution could then close the
account, monitor the account, or report the account to
authorities. While a safe harbor for nonprofits who provide
this information is well-intentioned, in the event of
inaccurate information or mistaken identity, a wrongfully
accused person would have no recourse to correct the record as
the safe harbor would prohibit them from bringing defamation,
privacy, or other lawsuits against the nonprofit. This is even
more troubling as the nonprofits could share information on any
person, even those who have not been arrested, indicted or
convicted of a crime. The consequences for a wrongfully accused
person could range from account closure to being denied access
to the formal banking system. This concern for error in
identification is especially heightened for immigrant
communities within the US, possibly victimizing them twice,
first by the human traffickers that frequently target their
communities and then by the financial system which enables them
to thrive.
Further compounding this issue is that the bill explicitly
states that the Treasury Department may not impose a
requirement of ``good faith'' to the information sharing
covered by the safe harbor. By removing the necessity for
nonprofits to act in good faith, this bill could encourage the
oversharing of information due to a nonprofit's well-
intentioned cautiousness. While most organizations will behave
with high standards, this failure to apply good faith will
allow less well-intentioned organizations to abuse the system
while organizations with weak controls will be less vigilant
about errors and errant employees.
Additionally, even if the information that the nonprofit
provides is accurate, we believe that nonprofits or financial
institutions should work in tandem with law enforcement to
avoid the unintended consequence of unknowingly interfering
with an ongoing law enforcement investigation.
For these reasons, we oppose H.R. 6729.
Maxine Waters.
Al Green (TX).
Nydia Velazquez.
Vicente Gonzalez (TX).
Joyce Beatty.
[all]