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115th Congress    }                                 {    Rept. 115-781
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                 {           Part 1

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



 
           FIGHT ILLICIT NETWORKS AND DETECT TRAFFICKING ACT

                                _______
                                

 June 25, 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. 6069]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 6069) to require the Comptroller General of the 
United States to carry out a study on how virtual currencies 
and online marketplaces are used to buy, sell, or facilitate 
the financing of goods or services associated with sex 
trafficking or drug trafficking, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Fight Illicit Networks and Detect 
Trafficking Act'' or the ``FIND Trafficking Act''.

SEC. 2. FINDINGS.

  The Congress finds the following:
          (1) According to the Drug Enforcement Administration (DEA) 
        2017 National Drug Threat Assessment, transnational criminal 
        organizations are increasingly using virtual currencies.
          (2) The Treasury Department has recognized that: ``The 
        development of virtual currencies is an attempt to meet a 
        legitimate market demand. According to a Federal Reserve Bank 
        of Chicago economist, U.S. consumers want payment options that 
        are versatile and that provide immediate finality. No U.S. 
        payment method meets that description, although cash may come 
        closest. Virtual currencies can mimic cash's immediate finality 
        and anonymity and are more versatile than cash for online and 
        cross-border transactions, making virtual currencies vulnerable 
        for illicit transactions.''.
          (3) Virtual currencies have become a prominent method to pay 
        for goods and services associated with illegal sex trafficking 
        and drug trafficking, which are two of the most detrimental and 
        troubling illegal activities facilitated by online 
        marketplaces.
          (4) Online marketplaces, including the darkweb, have become a 
        prominent platform to buy, sell, and advertise for illicit 
        goods and services associated with sex trafficking and drug 
        trafficking.
          (5) According to the International Labour Organization, in 
        2016, 4.8 million people in the world were victims of forced 
        sexual exploitation, and in 2014, the global profit from 
        commercial sexual exploitation was $99 billion.
          (6) In 2016, within the United States, the Center for Disease 
        Control estimated that there were 64,000 deaths related to drug 
        overdose, and the most severe increase in drug overdoses were 
        those associated with fentanyl and fentanyl analogs (synthetic 
        opioids), which amounted to over 20,000 overdose deaths.
          (7) According to the U.S. Department of the Treasury 2015 
        National Money Laundering Risk Assessment, an estimated $64 
        billion is generated annually from U.S. drug trafficking sales.
          (8) Illegal fentanyl in the United States originates 
        primarily from China, and it is readily available to purchase 
        through online marketplaces.

SEC. 3. GAO STUDY.

  (a) Study Required.--The Comptroller General of the United States 
shall conduct a study on how virtual currencies and online marketplaces 
are used to facilitate sex and drug trafficking. The study shall 
consider--
          (1) how online marketplaces, including the darkweb, are being 
        used as platforms to buy, sell, or facilitate the financing of 
        goods or services associated with sex trafficking or drug 
        trafficking (specifically, opioids and synthetic opioids, 
        including fentanyl, fentanyl analogs, and any precursor 
        chemicals associated with manufacturing fentanyl or fentanyl 
        analogs) destined for, originating from, or within the United 
        States;
          (2) how financial payment methods, including virtual 
        currencies and peer-to-peer mobile payment services, are being 
        utilized by online marketplaces to facilitate the buying, 
        selling, or financing of goods and services associated with sex 
        or drug trafficking destined for, originating from, or within 
        the United States;
          (3) how virtual currencies are being used to facilitate the 
        buying, selling, or financing of goods and services associated 
        with sex or drug trafficking, destined for, originating from, 
        or within the United States, when an online platform is not 
        otherwise involved;
          (4) how illicit funds that have been transmitted online and 
        through virtual currencies are repatriated into the formal 
        banking system of the United States through money laundering or 
        other means;
          (5) the participants (state and non-state actors) throughout 
        the entire supply chain that participate in or benefit from the 
        buying, selling, or financing of goods and services associated 
        with sex or drug trafficking (either through online 
        marketplaces or virtual currencies) destined for, originating 
        from, or within the United States;
          (6) Federal and State agency efforts to impede the buying, 
        selling, or financing of goods and services associated with sex 
        or drug trafficking destined for, originating from, or within 
        the United States, including efforts to prevent the proceeds 
        from sex or drug trafficking from entering the United States 
        banking system;
          (7) how virtual currencies and their underlying technologies 
        can be used to detect and deter these illicit activities; and
          (8) to what extent can the immutable and traceable nature of 
        virtual currencies contribute to the tracking and prosecution 
        of illicit funding.
  (b) Scope.--For the purposes of the study required under subsection 
(a), the term ``sex trafficking'' means the recruitment, harboring, 
transportation, provision, obtaining, patronizing, or soliciting of a 
person for the purpose of a commercial sex act that is induced by 
force, fraud, or coercion, or in which the person induced to perform 
such act has not attained 18 years of age.
  (c) Report to Congress.--Not later than 1 year after the date of 
enactment of this Act, the Comptroller General of the United States 
shall submit to the Committee on Banking, Housing, and Urban Affairs of 
the Senate and the Committee on Financial Services of the House of 
Representatives a report summarizing the results of the study required 
under subsection (a), together with any recommendations for legislative 
or regulatory action that would improve the efforts of Federal agencies 
to impede the use of virtual currencies and online marketplaces in 
facilitating sex and drug trafficking.

                          PURPOSE AND SUMMARY

    On June 12, 2018, Representative Juan Vargas introduced 
H.R. 6069, the ``Fight Illicit Networks and Detect Trafficking 
Act'' or the ``FIND Trafficking'' Act. The legislation would 
require the Comptroller General of the United States to carry 
out a study on how virtual currencies and online marketplaces 
are used to buy, sell, or facilitate the financing of goods or 
services associated with sex trafficking or drug trafficking. 
Not later than one year after enactment, the legislation would 
require the Comptroller General to submit the report to the 
Committee on Banking, Housing, and Urban Affairs and the 
Committee on Financial Services a report that summarizes the 
result of the study and include recommendations for legislative 
or regulatory action that would improve the efforts of Federal 
agencies to impede the use of virtual currencies and online 
marketplaces in facilitating sex and drug trafficking.

                  BACKGROUND AND NEED FOR LEGISLATION

    The goal of H.R. 6069 is to have the Government 
Accountability Office (GAO) study and report to Congress on how 
virtual currencies and online marketplaces are used to buy, 
sell, or facilitate the financing of goods or services 
associated with sex trafficking and drug trafficking. The GAO 
study must also include any legislative or regulatory actions 
that would improve the efforts of Federal agencies to impede 
the use of virtual currencies and online marketplaces in 
facilitating sex trafficking and drug trafficking. H.R. 6069 
compliments the work of the President's Commission on Combating 
Drug Addiction and the Opioid Crisis, which issued its final 
report on November 1, 2017. The report noted the Administration 
``will employ tools to disrupt the flow of illicit drugs into 
our country, and reduce drug trafficking domestically.'' The 
final report recommended to the President that, ``federal law 
enforcement agencies expressly target Drug Trafficking 
Organizations and other individuals who produce and sell 
counterfeit pills, including through the internet.''
    The study will also include a review of how the Dark Net is 
used to facilitate illicit activity, including the buying and 
selling of opioids, and how virtual currencies and peer-to-peer 
mobile payment services are exploited. The study will also 
review how illicit funds are repatriated into the formal 
banking system of the United States through money laundering
    According to the Drug Enforcement Administration's (DEA) 
2017 National Drug Threat Assessment, transnational criminal 
organizations are increasingly using virtual currencies. 
Although virtual currencies can be used for legal purchases, 
they have become a preferred financial payment method for 
criminals.
    Virtual currencies also have become a prominent method to 
pay for goods and services associated with illegal sex 
trafficking and drug trafficking, which are two of the most 
detrimental and troubling illegal activities facilitated by 
online marketplaces.
    Online marketplaces, including the dark web, have become a 
prominent platform to buy, sell, and advertise for illicit 
goods and services associated with sex trafficking and drug 
trafficking. According to the International Labour 
Organization, in 2016, 4.8 million people in the world were 
victims of forced sexual exploitation, and in 2014, the global 
profit from commercial sexual exploitation was $99 billion.
    In 2016, within the United States, the Center for Disease 
Control estimated that there were 64,000 deaths related to drug 
overdose, and the most severe increase in drug overdoses were 
those associated with fentanyl and fentanyl analogs (synthetic 
opioids), which amounted to over 20,000 overdose deaths.
    According to the U.S. Department of the Treasury's 2015 
National Money Laundering Risk Assessment, an estimated $64 
billion is generated annually from U.S. drug trafficking sales. 
Illegal fentanyl in the United States originates primarily from 
China, and it is readily available to purchase through online 
marketplaces.

                                HEARINGS

    The Committee on Financial Services, Subcommittee on 
Terrorism and Illicit Finance held a hearing examining matters 
relating to H.R. 6069 on June 8, 2017; March 15, 2018; and 
March 20, 2018.

                        COMMITTEE CONSIDERATION

    The Committee on Financial Services met in open session on 
June 14, 2018, and ordered H.R. 6069 to be reported favorably 
to the House as amended by a recorded vote of 53 yeas to 0 nays 
(recorded vote no. FC-187), a quorum being present. Before the 
motion to report was offered, the Committee adopted an 
amendment offered by Mr. Emmer 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-187), 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, June 22, 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. 6069, the FIND 
Trafficking 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. 6069--FIND Trafficking Act

    H.R. 6069 would direct the Government Accountability Office 
(GAO) to prepare a study for the Congress within one year on 
how virtual currencies and online marketplaces are used to 
facilitate sex and drug trafficking. The study would include 
recommendations for federal actions.
    Based on the costs of similar studies, CBO estimates that 
it would cost less than $500,000 over the 2019-2020 period for 
GAO to compete the study; any spending would be subject to the 
availability of appropriated funds.
    Enacting H.R. 6069 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 6069 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 6069 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 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. 6069 as the ```Fight Illicit 
Networks and Detect Trafficking Act'' or the ``FIND Trafficking 
Act.''

Section 2. Findings

    The Congress finds the following:
    (1) According to the Drug Enforcement Administration (DEA) 
2017 National Drug Threat Assessment, transnational criminal 
organizations are increasingly using virtual currencies.
    (2) The Treasury Department has recognized that: ``The 
development of virtual currencies is an attempt to meet a 
legitimate market demand. According to a Federal Reserve Bank 
of Chicago economist, U.S. consumers want payment options that 
are versatile and that provide immediate finality. No U.S. 
payment method meets that description, although cash may come 
closest. Virtual currencies can mimic cash's immediate finality 
and anonymity and are more versatile than cash for online and 
cross-border transactions, making virtual currencies vulnerable 
for illicit transactions.''
    (3) Virtual currencies have become a prominent method to 
pay for goods and services associated with illegal sex 
trafficking and drug trafficking, which are two of the most 
detrimental and troubling illegal activities facilitated by 
online marketplaces.
    (4) Online marketplaces, including the darkweb, have become 
a prominent platform to buy, sell, and advertise for illicit 
goods and services associated with sex trafficking and drug 
trafficking.
    (5) According to the International Labour Organization, in 
2016, 4.8 million people in the world were victims of forced 
sexual exploitation, and in 2014, the global profit from 
commercial sexual exploitation was $99 billion.
    (6) In 2016, within the United States, the Center for 
Disease Control estimated that there were 64,000 deaths related 
to drug overdose, and the most severe increase in drug 
overdoses were those associated with fentanyl and fentanyl 
analogs (synthetic opioids), which amounted to over 20,000 
overdose deaths.
    (7) According to the U.S. Department of the Treasury 2015 
National Money Laundering Risk Assessment, an estimated $64 
billion is generated 8 annually from U.S. drug trafficking 
sales.
    (8) Illegal fentanyl in the United States originates 
primarily from China, and it is readily available to purchase 
through online marketplaces.

Section 3. GAO Study

    The GAO study shall include a review of:
    (1) How online marketplaces, including the darkweb, are 
being used as platforms to buy, sell, or facilitate the 
financing of goods or services associated with sex trafficking 
or drug trafficking (specifically, opioids and synthetic 
opioids, including fentanyl, fentanyl analogs, and any 
precursor chemicals associated with manufacturing fentanyl or 
fentanyl analogs) destined for, originating from, or within the 
United States;
    (2) How financial payment methods, including virtual 
currencies and peer-to-peer mobile payment services, are being 
utilized by online marketplaces to facilitate the buying, 
selling, or financing of goods and services associated with sex 
or drug trafficking destined for, originating from, or within 
the United States;
    (3) How virtual currencies are being used to facilitate the 
buying, selling, or financing of goods and services associated 
with sex or drug trafficking, destined for, originating from, 
or within the United States, when an online platform is not 
otherwise involved;
    (4) How illicit funds that have been transmitted online and 
through virtual currencies are repatriated into the formal 
banking system of the United States through money laundering or 
other means;
    (5) The participants (state and non-state actors) 
throughout the entire supply chain that participate in or 
benefit from the buying, selling, or financing of goods and 
services associated with sex or drug trafficking (either 
through online marketplaces or virtual currencies) destined 
for, originating from, or within the United States;
    (6) Federal and State agency efforts to impede the buying, 
selling, or financing of goods and services associated with sex 
or drug trafficking destined for, originating from, or within 
the United States, including efforts to prevent the proceeds 
from sex or drug trafficking from entering the United States 
banking system;
    (7) How virtual currencies and their underlying 
technologies can be used to detect and deter these illicit 
activities; and (8) To what extent can the immutable and 
traceable nature of virtual currencies contribute to the 
tracking and prosecution of illicit funding.
    For the purposes of the study required, the term ``sex 
trafficking'' means the recruitment, harboring, transportation, 
provision, obtaining, patronizing, or soliciting of a person 
for the purpose of a commercial sex act that is induced by 
force, fraud, or coercion, or in which the person induced to 
perform such act has not attained 18 years of age.
    Not later than 1 year after the date of enactment of this 
Act, the Comptroller General of the United States shall submit 
to the Committee on Banking, Housing, and Urban Affairs of the 
Senate and the Committee on Financial Services of the House of 
Representatives a report summarizing the results of the study 
required, together with any recommendations for legislative or 
regulatory action that would improve the efforts of Federal 
agencies to impede the use of virtual currencies and online 
marketplaces in facilitating sex and drug trafficking.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H.R. 6069 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]