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115th Congress    }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                    {       115-553

======================================================================



 
NATIONAL STRATEGY FOR COMBATING THE FINANCING OF TRANSNATIONAL CRIMINAL 
                           ORGANIZATIONS ACT

                                _______
                                

 February 13, 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. 4768]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4768) to require the President to develop a 
national strategy to combat the financial networks of 
transnational organized criminals, and for other purposes, 
having considered the same, reports favorably thereon with 
amendments and recommends that the bill as amended do pass.
    The amendments (stated in terms of the page and line 
numbers of the introduced bill) are as follows:
  Page 2, line 2, strike ``the Director'' and insert ``the 
Director of the Financial Crimes Enforcement Network, the 
Director of the United States Secret Service, the Director of 
the Federal Bureau of Investigation, the Administrator''.

  Page 3, line 11, after ``United States'' insert ``or to the 
U.S. and international financial system''.

  Page 3, line 12, after ``cyber criminals,'' insert 
``kleptocrats,''.

   Page 3, line 13, after ``relevant'' insert ``state and non-
state''.

  Page 3, line 13, after ``including those'' insert 
``threats''.

  Page 3, line 17, after ``networks'' insert ``(including 
terrorist organizations, if any)''.

  Page 3, line 24, insert after ``including'' the following: 
``money laundering using real estate and other tangible goods 
such as art and antiquities,''.

   Page 4, beginning on line 6, strike ``, quantifiable''.

                          PURPOSE AND SUMMARY

    On January 11, 2018, Representative David Kustoff 
introduced H.R. 4768, the ``National Strategy for Combating the 
Financing of Transnational Criminal Organizations Act'', which 
requires the President, acting through the Treasury Secretary, 
in consultation with other officials, and appropriate Federal 
banking agencies, to develop a national strategy to combat the 
financial network of transnational organized criminals and 
submit that strategy to Congress not later than one year after 
the Act's enactment and biennially thereafter.

                  BACKGROUND AND NEED FOR LEGISLATION

    The goal of H.R. 4768 is to establish a national strategy 
to combat the financial networks of transnational criminal 
organizations. Transnational criminal organizations involve 
illicit business ventures by individuals working in more than 
one country and commonly include money laundering, cyber-crime, 
and the trafficking of drugs, humans, weapons, and endangered 
species. The United Nations Office on Drugs and Crime (UNODC) 
estimates that TCOs generate a total of $870 billion a year. 
They raise money by exploiting global supply chains, and cyber 
domains to move goods, people, services, money, and data. While 
terrorists are driven by political or religious ideology, TCOs 
are motivated by maximizing profits. While organized crime is 
global, its effects are felt locally. Every day we lose 
countless lives as a result of drugs, human trafficking, and 
the like, and these illicit activities also undermine the 
economic development of our country. TCOs threaten the security 
and prosperity of countries throughout the Western Hemisphere 
at an estimated cost of 3.5 percent of GDP to the region, 
according to the Inter-American Development Bank.
    The legislation outlines that this strategy includes an 
identification and assessment of the most significant current 
transnational organized crime threats to national security of 
the United States or to the U.S. and international financial 
system, including drug trafficking organizations, human 
trafficking organizations, cyber criminals, state and non-state 
actors, and kleptocrats. The bill also outlines that this 
strategy identify individuals, entities, networks, and 
terrorist organizations, if any, that provide financial support 
or financial facilitation to these transnational organized 
crime groups and an assessment of the methods through which 
transnational organized crime groups launder illicit proceeds, 
including money laundering using real estate and other tangible 
goods such as art and antiquities, trade-based money 
laundering, bulk cash smuggling, exploitation of shell 
companies, and misuse of digital currencies and other cyber 
technologies. The bill also calls for an assessment of the risk 
to the financial system of the United States posed by these 
transnational criminal networks.
    H.R. 4768 also requires that the national strategy includes 
a discussion of both the short-term and long-term goals, 
objectives, priorities, and actions to combat the financing of 
transnational organized crime groups and their facilitators. 
The bill also requires that this strategy include a description 
of how it is integrated into and supports the national security 
strategy, drug control strategy, and counterterrorism strategy 
of the United States. Finally, the bill requires that this 
strategy review current efforts to combat the financing or 
financial facilitation of transnational organized crime and, if 
appropriate, suggest proposed legislative and regulatory 
changes to address these issues.
    In January 2010, the U.S. Intelligence Community completed 
a comprehensive review of international organize crime--the 
first on this topic since 1995. In July 2011, President Obama's 
Administration published the ``Strategy to Combat Transnational 
Organized Crime'', which concluded that transnational organized 
crime has expanded dramatically in size, scope, and influence, 
and that it poses a significant threat to national and 
international security. The Strategy found that criminal 
networks are building new alliances around the world and 
engaging in a wide range of illicit activities, including 
providing support for terrorism. These transnational organized 
crime groups threaten U.S. interests by taking advantage of 
failed states, forging alliances with corrupt foreign 
government officials, expanding human and drug trafficking 
networks, exploiting legitimate markets and economic activity 
by concealing illicit assets in financial systems, and 
perpetrating cybercrime which costs consumers billions of 
dollars annually.
    There is currently no statutory requirement to update this 
paper. This legislation introduced by Representative Kustoff 
would therefore be the first law to require an assessment of 
such a TCO strategy, akin to the `national strategy for 
combating terrorist and other illicit financing' provisions 
found in Public Law 115-44, which President Trump signed into 
law on August 2, 2017 as part of the Countering America's 
Adversaries Through Sanctions Act, which mandated the 
imposition of sanctions against Iran, Russia, and North Korea.
    On February 9, 2017, President Trump also issued Executive 
Order 13773 on ``Enforcing Federal Law with Respect to 
Transnational Criminal Organizations and Preventing 
International Trafficking,'' which demonstrates the Trump 
Administration's commitment to combat TCOs to promote domestic 
and international security. The Executive Order recognizes that 
TCOs and subsidiary organizations--mostly transnational drug 
cartels--have spread through the nation and threaten the safety 
of our country.

                                HEARINGS

    The Committee on Financial Services Task Force to 
Investigate Terrorism Financing held a hearing entitled, ``A 
Dangerous Nexus: Terrorism, Crime and Corruption,'' focused on 
the growing threat of transnational organized crime on May 21, 
2015.

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
January 17 and 18, 2018, and ordered H.R. 4768 to be reported 
favorably to the House as amended by a recorded vote of 53 yeas 
to 0 nays (Record vote no. FC-136), a quorum being present. 
Before the motion to report was offered, the Committee adopted 
amendments offered by Rep. Kustoff and Rep. Waters by 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 53 yeas to 0 nays (Record 
vote no. FC-136), 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

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

   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, February 8, 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. 4768, the National 
Strategy for Combating the Financing of Transnational Criminal 
Organizations Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
    Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 4768--National Strategy for Combating the Financing of 
        Transnational Criminal Organizations Act

    H.R. 4768 would require the President to develop a national 
strategy to combat the financing networks of transnational 
organized criminals. Transnational crime is coordinated across 
borders and usually consists of money laundering, human 
smuggling, drug trafficking, and cybercrime. Under the bill, 
the President, acting through the Department of the Treasury 
and in consultation with Departments of Defense, Homeland 
Security, Justice, State, and the Office of the Director of 
National Intelligence, would produce a strategy within one year 
and update it every two years.
    CBO cannot determine whether comprehensive information on 
the financing of transnational organized criminal activity has 
been collected by the government, although Executive Order 
13773 instructed federal agencies to work together against 
transnational criminals. If sufficient financing information is 
already collected by the government, based on the cost of 
similar activities CBO expects that implementing the bill would 
require three employees (at a cost of about $150,000 a year for 
each) to coordinate the work of more than 10 government 
organizations. Thus, CBO estimates that implementing the bill 
would cost around $450,000 annually and about $2 million over 
the 2018-2022 period, subject to the availability of 
appropriated funds. If financing information regarding 
transnational organized crime is not currently collected by the 
government, costs could be significantly higher.
    Enacting the bill would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 4768 would not increase 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 4768 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved 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 
rulemakings: The Committee estimates that the bill requires no 
directed rulemakings within the meaning of such section.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    This section cites H.R. 4768 as the ``National Strategy for 
Combating the Financing of Transnational Criminal Organizations 
Act of 2017''.

Section 2. National strategy

    The President shall develop a national strategy to combat 
the financial networks of transnational organized criminals, 
through the Secretary of the Treasury, in consultation with the 
Attorney General, the Secretary of State, the Secretary of 
Homeland Security, the Director of National Intelligence, the 
Secretary of Defense, the Director of the Financial Crimes 
Enforcement Network, the Director of the Secret Service, the 
Director of the Federal Bureau of Investigation, the 
Administrator of the Drug Enforcement Administration, the 
Commissioner of Customs and Border Protection, the Director of 
the Office of National Drug Control Policy, and the Federal 
functional regulators.
    The President shall submit the national strategy to 
Congress not later than one year after enactment of the Act, 
and not less than every two years after initial submission. A 
separate presentation may be made to Congress in a classified 
annex for parts of the national strategy that involves 
information that is properly classified.

Section 3. Contents of national strategy

    The national strategy shall contain an identification and 
assessment of the most significant current transnational 
organized crime threats to national security of the United 
States or to the U.S. and international financial system, 
including drug trafficking organizations, human trafficking 
organizations, cyber criminals, state and non-state actors, and 
kleptocrats.
    The national strategy shall identify individuals, entities, 
networks, and terrorist organizations, if any, that provide 
financial support or financial facilitation to these 
transnational organized crime groups and an assessment of the 
methods through which transnational organized crime groups 
launder illicit proceeds, including money laundering using real 
estate and other tangible goods such as art and antiquities, 
trade-based money laundering, bulk cash smuggling, exploitation 
of shell companies, and misuse of digital currencies and other 
cyber technologies. The national strategy shall also contain an 
assessment of the risk to the financial system of the United 
States.
    The national strategy shall contain a discussion of short-
term and long-term goals, objectives, priorities, and actions 
for combatting the financing of transnational organized crime 
groups and their facilitators. The national strategy shall 
include a description of how it is integrated into and supports 
the national security strategy, drug control strategy, and 
counterterrorism strategy of the United States. Finally, the 
national strategy shall contain a review of current efforts to 
combat the financing or financial facilitation of transnational 
organized crime and, if appropriate, suggest proposed 
legislative and regulatory changes to address these issues.

Section 4. Definitions

    Appropriate congressional committees are the Committee on 
Financial Services, the Committee on Foreign Affairs, the 
Committee on Armed Services, the Committee on the Judiciary, 
the Committee on Homeland Security, and the Permanent Select 
Committee on Intelligence of the House of Representatives; and 
the Committee on Banking, Housing, and Urban Affairs, the 
Committee on Foreign Relations, the Committee on Armed 
Services, the Committee on the Judiciary, the Committee on 
Homeland Security and Governmental Affairs, and the Select 
Committee on Intelligence of the Senate.
    Federal functional regulator has the meaning given that 
term in section 509 of the Gramm-Leach-Bliley Act (15 U.S.C. 
6809).
    Transnational organized crime refers to those self-
perpetuating associations of individuals who operate 
transnationally for the purpose of obtaining power, influence, 
monetary or commercial gains, wholly or in part by illegal 
means, while--(A) protecting their activities through a pattern 
of corruption or violence; or (B) while protecting their 
illegal activities through a transnational organizational 
structure and the exploitation of transnational commerce or 
communication mechanisms.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 4768 does not repeal or amend any section of a 
statute. Therefore, the Office of Legislative Counsel did not 
prepare the report contemplated by Clause 3(e)(1)(B) of rule 
XIII of the House of Representatives.

                                  [all]