11 p.m. eastern o cnn we will feature highlights from the evening including the prime minister's white arrival and toast given at the dinner. you canls watch online at c-span.org or on the free c-span now the app. ♪ ♪ >> c-span has been delivering unfiltered congressional coverage for 45 years. here's a highlight from the key moment. >> and although the city was a patient's capital for only a short time, from those early days the eyes of the world continued to be on new york. one year ago this great center of history, enterprise and creativity suffered the greatest cruelties that showed itself to be a place of valor and generosity and grace. here were so many innocent lives were suddenly taken, the world

saw acts of kindness and heroism that will be remembered forever. >> c-span, powered by cable. >> next hearing examining the role ofe, shell companies in facilitating transnational crime such as fentanyl trafficking. the corporate transparency act was passed in 2021 with contingent of outlawing these show companies in the u.s. the hearing was held by the senate caucus on international narcotics control. it runs just over one hour. >> let me welcome everybody to the hearing, and thank you very much for participating. i will start with my opening remarks, turn to the distinguished cochair for his opening remarks and for a brief video that he will play.

and then we will turn to our distinguished panel of witnesses, at a thank you all very much for being here. and modern drug cartel runs more like a fortune 500 conglomerate than like a street gang, with departments specializing in logistics, encounter, recruitment, and chemical signs, cartels manage their empires with deadly sophistication. they operate like enormous businessest, because they profit like enormous businesses. globally, drug trafficking much as $652 billion. $652 according to dollars. according to estimates from global financial integrity.pr mexican drug cartels operate in the billions. enforcement agencies massive workstations usually focuses on the distribution networks which makes some sense. the product is contraband, and the cases are easy once the

drugs are found. but the distribution network is only a part of their operation. they have international supply chains bringing precursor chemicals from china for the fentanyl. that networks of shell entities and accounts to launder their dirty profits. both the supplyat chains and the revenuee management operate through show companies and enablers. this includes u.s. shell entities, i'm sorry to say. in 2021, treasury secretary yellen said, quoting her, there's a good argument that the best place to hide and launder ill-gotten gains is actually the united states. yes, the u.s. has allowed cartels,un terrorist groups, roe states, chinese money laundering organizations and foreign oligarchs to use phony u.s. shell corporations into illicit schemes. these show companies mayor exist only on paper, but they enable

deadly threats to american slides and security. nearly 108,000 americans died of overdose in 2022 according to the cdc. 436 rhodepe islanders. the death of the 436 people were also crossed my small state in a type ofer heartbreak. fentanyl and other synthetic opioids are being many of these deaths. sentinels death toll is a a dt result of a shell corporations, shell corporations the height of the rate of precursor chemicals, and shell corporations that hide profits from sales. one doj indictment last year alleged cartel operatives decide to network of shell companies in wyoming to launder millionsd of dollars for the sinaloa cartel. companies in wyoming to launder millions of dollars for the

sinaloa cartel. in another case, narcotraffickers in new jersey were charged with using a shell company to buy fentanyl related substances from china which they pressed into counterfeit pills. the united states recently sanctioned syrian drug traffickers who used seemingly legitimate businesses to launder money. these examples are the tip of an iceberg. while this hearing is focused on the threats posed by shell companies serving the drug companies serving the drug use the same opaque corporate structures. let me be clear, , a network of shell corporations surfacing these those and enablers who facilitate them are a clear and present threat to our national security. in the battle with narco lords, a little somewhat intors the shadows of the dark economy can go a long way. so i think cochair grassley for our years of work together to shine beings of sunlight into

that shadow economy. our corporate transparency act is one such beam of light. on january 1 for this to the treasury department established a so-called beneficial ownership register to sort out this anonymous shell company mess. at long last, helping law enforcement and nationals could officials identify who is behind the webs of american show companies that facilitate corruption and criminality. we can make it no longer true that the best place to hide and launder ill-gotten gains is actually the united states. this year treasury also announced proposalie to send daylight into dirty money in investment advisory industry and residential real estate sector. i will be submitting encouraging comments into course and recommending comments guardrails on commercial real estate purchases. it is regrettable that well-paid white-collar american professionals, lawyers on investment advisors, workers and accounts provide services to

that actors. again, this is a national security frontier in the global clash of civilizations between world of law and corruption. my enabling act would crack down on those aiding and abetting america's enemies by beaming some daylight into key sectors like the legal and accounting industries. we can organize our effort to better against a global dark economy. i think it is able to establish a cross-border financial crime center to coordinate across all federal agencies investigations and information related to financial crimes with a nexus to the u.s. border. finally, we should provide greater resources to the treasury department, the department of justice and other federal agencies on the frontlines against financial crime and corruption. time and again we see the seeking to harm the u.s. used opaque corporation to cover their tracks and evade accountability. we passed the beneficial ownership transparency law to defend our safety and security against enemies who do their

dirty work through u.s. anonymous shell companies. with that i turn it over to cochair grassley. >> first of all i want to thank you for mentioning are working together on this very important piece of legislation, and i wish we could get more out the cooperation that there is a bipartisan way in the united states senate so i wouldn't have people at the back of my town hallle meetings bella how can yu guys can't ever get along? i tried to explain to the that we can get along, , but i'm not sure if theyth believe it. launder money. corporate transparency act is an important part of that conversation, but it's only a part of the equation. criminals also use shell companies and muddled corporate structures to secure the tools of the drug trade. today i would like to focus on one particularly troubling

example, the u.s. registered planes are used and are critical tool by the cartels to move drugs. before speaking further of want to show you a brief video have cartels use these planes to cause chaos, and then i will carry on about that. so let's seede the video if we can. i hope this is not an example of how video doesn't work. >> drug cartels use shell companies and government loopholes to get their hands on american planes. that same open market also supplies a a key part of the logistics here. you can still see in full the committee the plane originated in the united states. >> u.s. planes are caring cartels poison to our shores,

killing americans and causing deadlyme destruction. >> we can't let thatt actors put our security at risk. close the loopholes. protect americansh lives. >> now, certain date on april 20, 2020, send a lower cartel crash landed -- sinaloa -- crash landed a plane in the guatemala force. the plane was little with over 1600 kilos of cocaine and that cocaine was destined for the united states. u.s. law enforcement tracked the cartels movement, and the guatemalan military sprang into action. the first teamr to arrive had just ten soldiers here you know there were met with a cartel army of 150.

this same scene repeated itself hundreds of times in countries throughout central america, leaving many to wonder how cartels get her hands on american planes. the answer is buried in a rain, reams of fraudulent paperwork piled up at the federal aviation administration, faa for short. criminals disguise my show companies duped the faa into registering planes with u.s. tail numbers. those tailal numbers shield the planes from foreign law enforcement scrutiny. this allows millions of dollars worth of drugs to sail through the airspace undetected. in the drugs reach their destination, the plane is destroyed, and the criminals walk away with net profits.

the faa is aware of this problem, but hasn't changed its registration process. ten years ago we had a 2013 inspector general report warning the fbi about vulnerabilities in this system. those warnings went largely ignored. then, in 2020 the government accountability office, gao, report raised the issue once again. gao recommended the faa make 15 corrections to its registration process. four yearsis later the fbi has only implemented three of those 15 recommendations. we have all seen the damage a a plane can do in the hands of an enemy. none of us will ever forget how

airplanes turned into weapons of mass distraction during the worst terrorist attack on american soil, 9/11 as you know. 23 years later the faa still appears to act like rubber stamp instead of a watch guard. i to thank senator whitehouse for holding the support hearing, and eyewitnesses for being here. i'm particularly glad to have ms. rebecca shea here to speak about what the gao 2020s report says. lastly, i want to thank u.s. law enforcement, military and our allies at the risk their lives to keep us safe from criminals. i look forward to discussing how congress can provide needed tools for this fight. >> thanks very much, senator grassley. again i think our witnesses being you. i will give quick introduction

and then you will each have five minutes to make your oral remarks. and your full test when it we made a part of the record of this hearing. our first witness, elaine dezenski, serves as the director and head of the center on economic and financial power at the foundation for defense of democracies. ms. dezenski is globally recognized expert and founded on geopolitical risk, supply chain security,of anticorruption and national security. she was a senior director of the world economic forum from 2010-2015 where she led the partnering against corruption initiative and launched the forms global risk response network. she hasse held both political ad career positions of the u.s. department of homeland security, including deputy and acting assistant secretary for policy, and director of cargo and trade policy. don and return from a 32 federal law enforcement career in 2022. he served as an assistant special agent in charge in dea

special operations division where he led the office of financial operations, middle eastern asian section, and a chemical pharmaceutical and cyber section. throughout his career mr. im led investigation into the illicit financial schemes of the cartels, asian trias, hezbollah, chinese and mexican synthetic opioid producers and their corporate enablers. i think mr. im force years of service and for being here today. rebecca shea construct on a forensic audit investigative service team atei the government accountability office where she oversees audit certified fraud, waste, abuse at a wide array of government programs and agency. in 2020 she led a gao team and examining issues at the federal aviation administration aircraft registration process that senator grassley for two. failures that enable cartel operatives, oligarchs and of the bad actors to secret to highly

desirable u.s. registration numbers. ms. shaye worked at gao for 25 and holds a doctorate in sociology from vanderbilt university. air canada check government affairs director of the financial accountability and corporate transparency coalition, the fact coalition, where she leads the groups encasement with federal policymakers. before joining the fact coalition, ms. hanichak work with u.s.-based nonprofits focus on advancing transparent corporate governance accountability and roll along in the middle east. her work support the passage of the networks that fuel mass human rights violations in series and the middle east, and she campaigned to augment counter terror finance measure to prevent the diversion and abuse of using military aid. i appreciate all of you being here and ms. dezenski please proceed. i i would also like to recommend senator hassan has jaundice, a valuable member of this caucus.

>> german white house, cochair grassi, members of the congress, thank you so much for the opportunity to be here to discuss the corporate transparency act and the important work to abolish the opaque corporate structures that facilitate transnational criminal activity, undermined countable and threaten u.s. national security. no financial tool has aided drug cartels, corrupt oligarchs and enemies of america more than the anonymous shell company. it is the gold standard of secrecy. allowing dirty money to move effortlessly across state lines and of our national borders without any risk that the underlying actors are identified. in 2021 congress passed the corporate transparency act, cta, outlawing american anonymous shell companies by requiring all u.s. copies to write information about beneficial owners. the real persons behind the corporate form. reliable beneficial ownership information provides a critical boost to law enforcement allowing investigators to truly follows the money rather than

chasing in this string such shall compass, trust, entities, and disguise owners. the cda replaces the proverbial law enforcement dead-end with a a critical door to essential information. drug trafficking operations have long exploited anonymous shell companies to launder money and aid in the transport of deadly narcotic into the u.s. in february 2022, a new york man pleaded guilty to laundry $650 million in drug proceeds through anonymous shell corporations, sending the funds to both domestic entities and foreign entities in china and hong kong. in 2018 chinese national and his father were indicted for operating a global synthetic drug trafficking organization that shipp fentanyl analogs in over 250 250 other drugs at5 countries and 35 states with the u.s., often relying upon shell companies for distribution and money laundering.

the drugs sold by them are confirmed to have resulted in at least two backbone for titles in ohio. so everyry case uncovered it is result too assume that there are countless cases where the successful use of anonymous vehicles stymies law enforcement and the case is never close. in other words, the examples that follow are likely just the tip of the financial iceberg for an illicit industry that is vested to generate as much as $650 billion figure globally. in idaho a victim picked thousands to an online website called pharmacy website that purported to sell prescription drugs. in reality the pills can con other substances including fentanyl and its analogues. the dea extradited a dominican citizen for trafficking narcotics through the pharmacy website but only after the item victim died ofnt it opioid overdose in 2017. consistent what we see a cluster trafficking networks, expedited use shall come as to laundery from the website.

and just last month of las vegas man was sentenced to eight years for importing come processing and distributed hundreds of thousands of opioid pills. howw did he pay for the drugs ad plunder the proceeds from the sale? not surprisingly it was shell corporations. unfortunately the anonymous shell companies with tiger own hands, gifting drug cartels and the money launderers magic curtain to shield the identity and hide their wealth. the national security risks of anonymity extend far beyond drug trafficking alone. terrorists, kleptocrats and america's adversaries have been actively exploiting anonymous shell companies for decades to further nefarious plots and make america and the world less safe. no example illustrates this risk as concretely as viktor bout, and tours international arms dealer who was convicted in 2011 for selling billions of dollars in weaponry to terrorist organization that aim to kill americans as well as fuel conflicts in africa, latin

america and the middle east. elaborate and international network of anonymous shell companies to hide his activities including at least one doesn't you shall copies set up in texas, florida and delaware. bout is not a listing the appeal of anonymous compass. vladimir putin solace of use anonymous shell companies to buy $59 mansions in washington, d.c. while the iranian government has used anonymous companies to cover up ownership of the fifth avenue skyscraper in manhattan. the terrorist group hezbollah has use shell companies to purchase properties and businesses, dodging sanctions and consuming to enter access to the global financial system. african dictators have used anonymous shell companies to buy malibu mansions while krupp malaysian officials used anonymous shell companies to helpco steer billions from publc coffers. .. shell companies to buy malibu mansions, while corrupt malaysian officials used anonymous shell companies to help steal billions from

public coffers. unless the u.s. addresses the risk of anonymity in the financial system, we leave ourselves vulnerable to manipulation, corruption, and attacks by illicit actors. collecting beneficial information on the companies that operate >> the foundation of defensive democracies, thank you for inviting me to testify. >> thank you very much. special agent-- or former special agent. >> retired. thank you, senator whitehouse. senator whitehouse, co-chairs, senator grassley and the rest of the committee, members of the committee, i'm pleased to appear before you here today to discuss critical challenges, law enforcement, turning fentanyl, heroin, methamphetamine and narco terrorism and other serious crimes. denying the proceeds of elicit activities is one of the operate and benefit from their

own unlawful actions. however, identifying the lists of wealth are difficult when they're able to establish anonymous registered companies to conceal and protect their identities as well as their high value assets. i retired from the dea in late 2022, constructing and narco terrorism investigations. from my time as an army reserve officer assigned to special operations command we encountered businesses and business accounts in the name of a straw person, a proxy, a company and registered limited liability corporation, an llc. with no true person affiliated with the llc or presence. with the cartels or russian organized crime, chinese triads, taliban, even isis,

each of these entities have used and continue to operate front companies in some form or fashion to conceal their operations and wealth. many of these are protected and hidden behind the ven near of legitimate law firms and accounting firms countries throughout the world. in my years of the dea, special options division, real pharmaceutical drugs stolen from thousands of break-ins, repackaged and shipped through u.s. mail parcel system. many of the fake online pharmacies have cryptocurrency and payments. the challenges of these payments were difficult at best. when such anonymous companies operate in both the open and dark web. from 2004 to 2016, the dea special operations divisions with over 32 agencies was able

to identify hezbollah drug money laundering services using the automobile companies in the united states and africa. and legitimate and front companies were used for various bank accounts or sent billions of drug profits throughout the world. thousands of used vehicles were shipped, false invoices to africa and the middle east, and the lebanese canadian bank allowed tens of thousands of drug proceeds to flow freely into various drug companies and dea undercover operations were able to successfully identify these operations in the united states, africa, middle east, europe, australia, ultimately with key hezbollah actors and drug cartels and money brokers and coordination with the treasury and ultimately using 311 sanctions, most criminal enterprises established by

front shell or shell companies combined hybrids to create subsidiary companies with tentacles in highly elaborate corporation structures that can operate nonprofit, social or political organizations as cover. they're after the myriad of registered identities such as banking, investment, cryptocurrency and shadow bank institutions that offer various instruments such as debit cards, credit cards tied to bank accounts with unlimited slush funds or those that conceal the beneficiary of the funds. whether for tracking terrorism, fraud, corruption, we have had difficulty tracing and identifying the principals behind these activities. recently it's been disclosed chinese criminal networks as money laundering organizations have been successfully money

laundering, colombian throughout the shell companies throughout the world. chinese criminal networks, millions of dollars worth of marijuana from thousands of grows in the united states. and parallel funds and asset transfers, these proceeds ultimately end up as high value assets, investments for wealthy chinese government officials throughout united states, or to south central america and all the while facilitating to amass the wealth to continue deadly criminal crimes and money. and thank you, i welcome any questions you may have. >> thank you very much. i'll turn next to rebecca shea whose work was mentioned by senator grassley in his opening statement and take the opportunity, as she prepares to deliver her oral testimony, to

put into the record the minority report of senator charles e. grassley co-chair, is there objection? without objection, please proceed, ms. shea. >> chairman whitehouse -- (inaudible) voice that's going to carry. thank you. >> i don't know who the last witness was, but they sure worked over that microphone. >> they did, they did. am i on? okay. thank you. sorry for that. chairman whitehouse, co-chairman grassley and co-members of the caucus. thank you for the opportunity

to discuss gao's work on national economy with opaque ownership and f.a.a. aircraft registration, f.a.a.'s civil registry is the largest approximately 300,000 aircraft approved to operate with a well-known n-number on the tail end of the plane. u.s. registration is preferred because of the standards for aviation resale value. the low registration fee, $5 for a seven-year period is an active draw, but bad actors have the n-number because it can fly around with less scrutiny than with foreign registrations. the registration is usually for u.s. citizens and corporate aircraft owners, but to meet these requirements through the use of legal structures. llc, trusts and voting trusts.

while illegal, these structures and the intermediaies can hide the true identity of the owner of the aircraft. if those owners are up to no good, investigators' ability to track them down is complicated when their information is unavailable, layered or obscured. we highlight a number of cases in our 2020 report, where hidden ownership was associated with drug trafficking, sanctions evasion, money laundering and other activities. for example, in one case, an individual under sanctions for narcotic trafficking used a front man who laundered drug proceeds for them with the front man using five companies including an llc that registered the aircraft using a loading trust to meet the citizenship requirements. the 2020 national drug threat assessment noted increasingly, traffickers used private airplanes in secondary airport to augment smuggling.

in addition aircraft with high value assets, they were purchased with illicit funds and as part of trade-based money laundering schemes. with the known risks and the volume of aircraft involved f.a.a. has an important role in mapping and preventing these risks by verifying the information applicants submit and collecting relevant data for law enforcement. however, in our 2020 report, we found f.a.a. relies on applicant's self-certificate if ication and collects a minimal amount of registration. for those, this includes two documents, the application form with their name and address, which f.a.a. accepts as factually valid and a bill of sale for the aircraft. for those using more complex structures for those f.a.a. look at documents pdf files. their role is to retain publicly available information on aircraft registration. f.a.a. checks that the form is

complete and signed and relies on applicants, self-certification that the information provided is truthful and accurate. but if you've heard one thing from gao and the various ig's in almost every hearing and report on pandemic fraud over the past four years, it has that self-certification is not a control. it's a tool for prosecution, not prevention. it shows the person who they falsely attested to something when they signed. it's not a control to prevent people from lying. and yet, it is the way f.a.a. continues to do business. essentially as a rubber stamp for every application that comes in complete. according to registry officials at the time, they believed fraud was the responsibility of other f.a.a. organizations, and this is simply not accurate. all federal programs are required to manage fraud risk with a focus on prevention. in 2020, they made 15 recommendations to f.a.a. to close the critical gaps and information clarification processes.

f.a.a. has taken action on three related to risk assessment, which is foundational to other recommended changes, however, f.a.a. has a lot more work to do on the remaining 12 recommendations to help prevent exploitation of the u.s. civil aircraft registry for criminal purposes. i appreciate the caucus' interest in this important topic and i look forward to your questions. thank you. >> thank you very much. and finally, miss hanicek. >> thank you for holding this important hearing. i'm hear on accountability, transparency and fact coalition to look at dangers that shell companies present to americans. they span states and continents. my hello witnesses have -- my fellow witnesses look at how

they harm profits and average americans. the harms are not new, more nor are abstract. there are lethal consequences to our communities. the opioid epidemic, consider one case involving pain management clinics in florida and tennessee. the clinics filled out medically unnecessary opioids to the tune of $21 million. the criminal overprescribing scheme led to the death of at least 700 people over four years. 700 people and that's one case among dozens where criminals have used shell companies to enrich themselves while exacerbating this crisis. they're vulnerable for financial crimes. treasury secretary janet yellen said there's a good place where they launder the ill gotten gains is actually the united states. the united nations is a stable democracy and home to the world's largest economy and it means that they don't just

shield the worst actors behind the shells. and there's a rule of law as well as the return on investment and drug profiteers have taken note. this he rely on anonymous u.s. shell companies. in 2023, 12 people were indicted in connection with the sinaloa cartels heroin operations. the defendants located in united states, mexico and canada, wanted at least 16 million dollars through wyoming based companies. they proved vital for sustaining drug cartels and the violence on their cities. we also see them used as part of other crimes that drug traffickers submit for drug operations, as well as the crimes. pseudonym ferrari, used sources through the united states as a means to launder drug money, using shell companies as well as others.

and endangered our national security. one example is particularly striking in which individuals moved $1 billion in iranian funds held in south korea through companies held in the united states and elsewhere. decades of u.s. sanctions and they still chose to move it through the united states. the cognizant dissident. it's at worse a far as, we need to correct course. one way the united states can stop the shell game, marking the significant updates to american laws in 20 years. name the true owner to a secure directory, have the network. prior, all 50 states required more information to get a library card than to form a u.s. legal entity.

now, law enforcement have new tools to follow the money. the corporate transparency act goes well and so far largely is. they've launched the data base on january 1st. more than one million businesses have filed information about true owners. second, according to a new poll by the small business majority nearly 70% of businesses filed said reporting was easy, just 18% said it was difficult. anecdotally businesses with simple ownership reports it's less than 20 minutes to complete the form and filing is free. unless their data needs to be updated businesses may never need to interact again. and shell companies, congress struck the right balance when passing this bipartisan law when keeping our country and region safe keeping the cost of businesses law. congress passed the law and should need the request of 216 million dollar for fin sen for the upcoming year.

beyond the transparency corporation act, and money to third party professionals. if u.s. shell companies are the financial get away vehicle, then they often provide them the car keys and road maps that allows them to make the escape into the financial system. they must act to prevent circumnavigation of our laws. thank you, and i look forward to your questions. >> thanks so much. let me start with where ms. hanichak ended, enablers. if you don't mind me asking, ms. dezenski, and mr. im and hanichak. describe the role of getting after the white collar enablers in addition to protecting against these opaque, anonymous

shell corporations? >> thank you for the question. very important. so, enablers are talking about the accountants and the lawyers, as you said,art dealers, financial advisors, persons, professional functions, persons, who are in physicians of authority with respect to establishing trusts and corporate entities and sometimes serving as fiduciaries. these are the people who grease the system and that's why it's so important to get to this part of the supply chain, if you will. when we're talking about shutting down this malign influence. if we have people in these trusted positions who are not accountable for the people that they're representing, that's a problem. so we need to close this loophole just as much as we need to establish a beneficial ownership registry. it all works in concert. but without the gatekeepers

piece of this and really going after that through new legislation, we won't have to fill all the gaps. >> am i correct in concluding that the professional gatekeeper professions that you just described all operate by virtue of licenses? >> that's my understanding. >> these are people, professional licenses who are going about these acts? mr. im, your role from the investigative side of the role of the enabler. >> throughout the years of conducting investigations and supporting investigations, these so-called facilitators are the ones that allow them to continue their crimes. however, the issue isn't really just going after the facilitators, that is going after the bad actors, but the facilitators. in many ways, the lawyers,

bankers, accountants and businessmen, get light sentences and no reason to cooperate. if we have no reason for them to cooperate we can't get to the next level. if we can't get to the next level we can't get to the bad actors. that's always the issue, a lot of the backers don't go to jail. accountant don't go to jail, lawyers don't go to jail. and that's the issue. >> professionals provide services to multiple bad actors. >> they do. >> if you can get one to cooperate the law enforcement benefit would be widespread. >> absolutely, absolutely. >> and miss hanichak, you spoke directly to this in your testimony. is there anything else? >> yes, i go to my colleagues for reform we talk about drug trafficking, focusing on busts

and chasing the products. these aren't crimes of passion, they're crimes of profit and the best place to tackle the problem of drug traffickers is to go after their pocket book and the rule of many of these enablers to facilitate the drug traffickers and bad actors, bringing their money into global financial and including in the united states. i'm thinking of one example in particular from texas that i was going through, the department of justice recently, and he was found guilty in 2020 of nearly 500,000 a month on the behalf of a narcotics ring particularly opioid trafficking. in conversation with an undercover agent he said his lawyer, one of the dealer said the lawyer is a thug, he just got a law degree. >> there are some that have a business, and mafia lawyer, and i think the enablers act would do a great job making sure

these professionals are caught. >> let me ask, we've talked a lot about the law enforcement public safety concerns related to these shell corporations and mr. im in this area. and there are military or nonlaw enforcement and national security concerns. can i ask you briefly because my time has run out to highlight a few of the law enforcement national security concerns where important u.s. safety and diplomatic and strategic initiatives may be implicated? first ms. dezenski and then i'll turn it over to senator grassley. thank you for the question. i think the place to start is recognizing that opacity is the eenabler of kleptocracy.

when we're talking with challenges with america's foreign adversaries and kleptocratic regimes, there's no other influence than the shell corporation. that's the point when we're talking about national security and the ability to use our own system for the purpose of malign actors. it's one way that's done, but one of the most important. so this is absolutely critical. when we think about how do we push back against state sponsored corruption. how do we push back against those pilfering their own coffers and moving that into financial systems like ours, there's all of this points to the beneficial ownership question and how we close that down. so, there's really no way to separate the national security interest from what we're talking about. >> ms. hanichak, any final

thoughts before senator grassley. >> and one from a diplomatic, but very much military angle, there is a case a few years back in which a u.s. entity was hired on by the department of defense as a u.s. contractor. na same entity was later found to be related to folks in afghanistan, locals that were also supplying weapons to the taliban, directly putting our troops in danger, so this presents a real and present national security threat. >> senator grassley? >> well, ms. shea, your team compared registry data to the state department major money laundering country list and found 251 registrations with addresses located in these countries. your team also compared the registry to the office of foreign assets control records and found six planes registered to entities subject to u.s. sanctions. does the f.a.a. have access to

the same records you used to conduct your analysis? >> f.a.a.-- thankfully this is working now. f.a.a. does have access to that information for the-- for that kind of analysis. it's public, and all citizens are required to comply with it. >> follow-up question to the same one. what did the ffa-- f.a.a. tell you about its authority to deny registration through sanctions, individuals and due diligence it conducts? >> f.a.a. told us that it does not have the authority to deny registration to sanctioned individuals or in situations where an aircraft is sanctioned. i'll leave whether that's accurate or not to the lawyers.

but one of the things that does indicate is a significant red flag, that f.a.a. red flag and a risk that f.a.a. should be managing and as a result of that, being very close collaboration and communication with law enforcement about that and ofac about that and handling the issue and one of the things we found in sanctioning the individual, the case there, while there's two different registries, there's the owner registry and the dealer registry and while the f.a.a. had placed a flag for that sanctioned individual and the owner registry, there's no communication between the dealer and owner registries, and the intermediary that had established the registration for the sanctioned individual who's later sanctioned himself, he's also registered as a dealer, and because there's no connection and awareness on f.a.a.'s part, he had

registered that for over a year as a dealer so is able to use and fly that aircraft through a valid certificate in the dealer registry because f.a.a. was not able to connect the two data sources. >> if the f.a.a. were a private company regular administering aircraft in the u.s. for that $5 fee, and it failed to check with the registry, would it be in violation of u.s. sanction law? >> it would be in violation of u.s. sanctions. all u.s. citizens are required to apply with sanctions designations and i would also add if that u.s. company were charging just a $5 fee it would long have been out of business. >> i referred to the report that i released and it's about your recommendations to this day, 12 of your recommended collective actions are

outstanding despite f.a.a.'s agreeing with them. in your experience has the f.a.a. been unusually slow on dangerous place negligent and acting on your recommendations. >> so i will give f.a.a. a little bit of grace for 2020. we issued our report and recommendations in march of 2020. but it's been three years then and they've completed three actions, it's a good foundation, it's a start, but there are many things that should not have taken as long as they have, taken three years in order to implement. >> in your 2020 report, ms. shea, you noted that the f.a.a. identified a risk that terrorists may access the f.a.a. registry. could you explain the access terrorists have to the

registry, as well as their ability to register aircraft? >> so, one of the things that we talk about in our report is f.a.a.'s rubber stamp approach, essentially to accepting registrations. they collect limited amount of information and they're looking to see that the t.d.'s the application form and the bill of sale is present and the application is complete. they did not verify that information and in our review f.a.a. did not mention anything about checking the terror watch list to identify whether terrorists are seeking to register their aircraft. but because of the approach that they take, the essentially not requiring significant information and the minimal verification, i don't see how they could possibly know if terrorists were registering aircraft in the u.s. >> so my last question, i think

you just answered so i'll make it as a statement, your report is more like saying that the ffa -- f.a.a. hasn't taken any steps to deny terrorists access. >> i don't think they would know if they have or have not. >> okay. thank you. now, senator grassley is interested in pursuing a second round. i just wanted to thank him for his work in this area. >> do you want-- >> no i'm good. and look forward to working with him on remedial legislation and our appreciation to gao for all of their support as we look at this problem and with that, let me turn it back to senator grassley. >> well, i'll just have two questions then and probably submit some for answer in writing. i got one more from miss shea and one for mr. im.

>> in 2020, gao recommended that the f.a.a. create written agreements for information sharing with law enforcement. it's been four years and the f.a.a. still hasn't signed an agreement. why did you make the recommendation? >> we made that recommendation based on quite a few interviews that we had conducted with agents and homeland security investigations, the trade transparency unit, the drug enforcement agency and even f.a.a.'s own law enforcement assistant unit and in those discussions we heard over and over about the difficulties that law enforcement has in identifying the beneficial ownership -- owner of aircraft that are associated with money laundering cases or associated with drug trafficking cases and you know, the difficulty that they had with the information

that f.a.a. collects that could support those investigations, but also the difficulty in receiving that information from f.a.a. one of the date a points in particular relates to declarations of international operations. with the dio's, they helped expedite the registration for an aircraft so that the owner can take the aircraft out of the u.s. within three days. and you would imagine that when somebody registers an aircraft at the same time that they file a declaration or international operation, the dio presents a money laundering risk and investigators know this. so, these could be very valuable pieces of information to the investigators if they were to receive them timely. takes a lot of time to identify and trace funds to issue warrants and seizures. but f.a.a. provides them on an ad hoc basis and sometimes monthly. certainly after the point at which the aircraft has already left the u.s.

so that was one of the areas where we recommended that f.a.a. do a better job of sharing daily information with, you know, with law enforcement. i don't think it would require much because there's no barriers that f.a.a., you know, identified to us in sharing those, they already share them, but just doing that on a daily basis, that was one. things that we recommended and it's unclear to us why f.a.a. has not done that as yet. >> well, it seems like four years is not a reasonable period of time to negotiate information sharing agreement. are you aware of any barriers to entering such agreements? >> no, not aware of any barriers, again, f.a.a. did not raise any. they share them on an ad hoc basis, that means that they can share them. one of the things that we've also done is added some recommendations to the prior recommendation list so they get enhanced attention. we do a biannual report

focusing on special recommendations and some of these are among them. >> mr. im, your question is only for comparative purposes to what ms. shay has said. you served 31 years, i believe, and collaborated with other agencies. on average how long did it take to the dea to sign a sharing agreement with other agents? >> less than a year. some took within a matter of months. >> okay. did you say originally no more than a year? >> no more than a year from what i recall. >> thank you very much. i'm done. >> thanks. let me turn to mr. im's experience also for a moment related to-- let me make a confession, first. i said in my opening remarks that i felt there was more effort against the narcotics empires on the distribution side than with respect to their supply chains or with respect

to their finances and financiers, and i will confess that i have been guilty of that myself. i've done those investigations, i've made those arrests, i've made those cases and laid out the drugs on the table with the guns and the cash and all of that, even where we did a-- my major money laundering case it was actually a seizure of assets and gold bars and we seized all of them, so it's very much similar to what you would consider to be a traditional bust and seize case. i didn't see back-- this was some time ago when i was u.s. attorney and attorney general, a whole lot of infrastructure to plug into if you were a u.s. attorney or a state attorney general of criminal enforcement responsibilities to look at the finance side. at how these organizations operated through the dark economy.

i know there's going to be a very rough number or comparison, but i would say it's probably 90% of the enforcement effort goes to the distribution element of these cartels operations with 10% left for supply chain and finance. am i very wrong about that? have you seen that gone up? is that an order of magnitude that come ports with your experience? how much more room is there for effort on the finance side? >> now, that's a good question. unfortunately, financial drug money laundering investigations have gone down and in the 2000's, it was pretty robust. dea was seizing annually, a billion, billion and a half off the streets. including removing assets and

banks. and i know that the dea financial operations used to have a division and now it's just a unit. our capability to go after from the street level to even online pharmacies, the dark web and internationally, it's not as robust as it used to be or it could be. >> relatedly, we would see a.t.f. investigations that bumped into money laundering aspects and disposition of finances from the sale of illicit products. you'd see, obviously, dea, fbi would run into all of this. the state police investigations might very well run into this. my sense is there's not a very robust office for coordinating between agencies the various

points in which criminal enterprises that the agencies are investigating touch on the dark money, dark economy networks through which the finances tend to flow. is that your sense as well? and do you think there's a heidened need for interagency coordination around money laundering and the dark economy? >> no, absolutely, senator whitehouse. we tried that on numerous occasions and even going back to the 1990's where dea, using its title 21 narcotic authority allowed for the maximum punishment when it comes to crimes and attempted to host an interagency component of law enforcement, including the intelligence community, to really identify the big players involved and using all of these authorities, bringing in the irs, bringing in customs legacy or hsi and bringing in the fbi

and going after the financial underpinnings of these entities, whether it was drugs or tax evasion, having that component in like a special operations division, where there's always over 32 agencies, and i had a component of that when i was over there at special operations division, and i give you an example where we identified an organization that was actually purchasing drugs using irs income tax refund checks and we expanded it out and determined with the irs that there were 26 billion dollars in fraud that was taking place using income tax refunds and having an entity working in the same location like the special operations division, it can go a long way. >> where should it be housed? >> the special operations division has over 32-some odd

agencies. it's been there for -- since 1992, it has intelligence community, has law enforcement, has five i-partners, has defense department entities as well. >> that would be a natural place? >> it would be not only a natural place, but probably the most effective place there is right now because there are also prosecutors there as well. >> yes. on that coordination question, the last word to ms. dezenski or ms. hanichak if you care to add anything? >> thank you, not much to add. i would just emphasize that, you know, particularly if we're talking about solving the narcotics challenge and the connection into beneficial ownership and closing the financial loop, i think part of the challenge for law enforcement is that it just takes too long to get to the bottom of these financial transactions and following the money has just been too

difficult and too time consuming and the resources have to go somewhere and they may go more towards the interdiction than spending the time. so, this reinforces why the beneficial ownership information is so critical and why the information sharing across law enforcement, also at the state and local level becomes absolutely essential to solving these cases quickly and allowing for better interdiction sooner in the investigation process. so it's all related. i think that's the kind of the key here and you know, based on my experience, going back to the post 9/11 days dhs. when we were looking for the terrorist threat, the bomb in the box, knowing how difficult it is to find the needle in the hay stack, we really have a similar problem around the fentanyl challenge where most of the focus has been on interdiction and it certainly needs to be there, but being able to really cut the financial elements of the money laundering transactions and the role of chinese money

launderers in the u.s. and how the funds are flowing, and potentially getting some cooperation from china at some point would make a huge difference balancing out what we do on interdiction side and the front end work that could stop the flow before it actually hits the border. >> i would only add that this brings us back to your point of funding. elaine raised the need for information to be a core of the component investigative tools. one of the important things to make sure that law enforcement, state, local, federal, and international level know they have this tool in their toolbox to actually be used for their investigation. one thing i'm considering in addition, besides this training element to the beneficial ownership time. these cases are often transnational and we have to

look at this transnationally and what training around that and who do we have in place in region that can be supportive to international law enforcement and making these types of requests. we've looked at this mostly around the environmental criminal issue, but also as applies to narcotics. considering putting them in embassies could help facilitate additional focus on the financial element rather than just the interdiction. >> great. well, thank you all. let me particularly thank ms. shea, and i think your work is in the traditions of gao who work with and i'll be supporting senator grassley in his efforts to pursue legislative remedies to solve this problem and thank him for his attention here. for the other witnesses i'll close with my customary observation that we are, as a famous author once proposed in a clash of civilizations, but i

think that author got the boundaries of the clash just a bit wrong. i see the boundaries in that clash of civilization is between rule of law and kleptocracy and corruption. and i think when you look at the national security dangers that america has faced, whether it be the invasion of ukraine made possible by corrupt leaders and oligarchs in russia, whether it's extremism in the middle east funded through secret channels, whether it's covert and cyber efforts by china to steal american intellectual property and interfere with american democratic processes, or whether it's international corruption in the various

security dangers that that creates, over and over and over again, it all touches on a vibrant, secret, dark economy that will help whatever corrupt criminal or autocrat comes to it with money. very often, those are americans and european rule of law, white collar professionals, who for money are willing to aid and abet the construct of some of our most dangerous enemies. and we really have to get to the bottom of it. we have to understand that it's a national security danger to our country. it is not just some peripheral thing that happens off in some strange foreign country that we otherwise won't pay attention to, but maintains bank accounts and opaque corporations and all

of that. it is a dark network that supports an enormous amount of really dangerous behavior and it does it for money. and we need to put a spotlight into it because national security of the-- national security imperatives of our country demand it and i think the other three witnesses who are here all spoke to that and understand it and i want to thank you for your work to advance that understanding and particularly for your testimony here today. with that, the hearing will be adjourned. do we need to hold the record open for any purposes at this point? okay. so there'll be questions for the record coming your way most likely. when they do, please try to answer them as quickly as possible, but for now, the hearing is adjourned.

thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> today, on c-span, the hse is back for general eees. at 10 a.m. eastern. then at noon membersonsider the rules for debate on four bills, including legislation that reauthorize and make changes to the foreign intelligence surveillaect section 702, warrantless surveillance authori s to expire on april 19th.

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