Chinese Money Laundering Networks and Cartel Financing in U.S. Financial System

Good morning. The subcommittee on oversight and investigation will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. Today's hearing is titled "Converging Criminal Enterprises, Chinese Money Laundering Networks, and Cartel Financing in the US Financial System." Without objection, all members will have five legislated days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for four minutes for an opening statement. Uh, I would like to very much thank our witnesses being here today to discuss Chinese money laundering networks known as CMLNs and how they enable cartel drug trafficking. I appreciate my ranking member, Mr. Green. uh for being here as well. Uh importantly uh CML's, CMLN's also finance scam centers and other fraud against Americans. So this directly ties in with um this committee's other oversight work. These networks are not comprised of petty criminals, they're professional money launderers who move billions through our financial system. Today, Chinese money laundering networks are the dominant money money laundering partner for drug cartels. These groups offer near instant transfers, charge fees low enough to undercut every other competitor and assume the risk of laundering money. Additionally, the money laundering organizations often guarantee payments to the cartels, even in cases where law enforcement seizes the illicit funds. For cartels, the appeal is obvious, lower cost, zero risk, faster access to their illegal drug profits. According to Finston, uh between twenty twenty and twenty twenty four approximately three hundred and twelve billion dollars in suspicious activity was associated with cartel linked, Chinese money money laundering activities. Uh that is three hundred and twelve billion flowing through four hundred and eighty nine unique depository institutions that were uncovered over two hundred money service businesses and dozens of other financial institutions here in the United States. More concerning That figure likely represents a fraction of the true scale, given it it only captures suspicious activity that was detected and reported. These networks are also key to the cartel's procurement of precursor chemicals that produce fentanyl. Fentanyl remains a leading cause of death for Americans aged eighteen to forty five. Families have been destroyed, communities ruined, our health care system is overwhelmed. At the o- origin of that devastation, are the chinese money launderers thankfully the trump administration has been taking action eight cartels have been designated as foreign terrorist organizations in july of last year six members of a money laundering ring entered guilty pleas for funneling over ninety two million dollars in funds for cartels january of this year doj charged yan lin alleging him of laundering at least twenty seven million in fentanyl cocaine and uh meth proceeds. Accordingly, the FSC oversight and investigation subcommittee, uh this committee, will begin investigating Chinese money la laundering organizations to determine the full extent of their operations and how to best dismantle them. Today's hearing is about understanding the full scope of this threat, the connection with drug cartels, and the tactics and methods used uh uh by these groups. As well, during the course of our questioning Very much looking forward to hearing from you, our witnesses, what you believe uh we can do here in this committee, in Congress, uh to defeat the CMLNs through legislation, increased penalties, or whatever other advice and suggestions you have. Uh thank you and I look forward to your testimony, and I do yield back. Um I now, the chair now recognizes the ranking member of the subcommittee, the gentleman from Texas, Mister Green, for four minutes for his opening statement.

Thank you, Mister Chairman. I thank the witnesses for appearing and of course I thank you as well uh for conducting this hearing today. Uh Mister Chairman, it is my belief that a better title for the hearing would be "Exposing Converging Machinations, President Trump's Crypto Schemes, and Facilitation of Crypto Crimes in the US Financial System". Republicans, my colleagues, are setting this hearing up to analyze how Chinese money laundering networks are laundering money through the US financial system on behalf of drug cartels. This time would be much better spent focused on cryptocurrency, the tool, excuse me, this may be the President. Sorry, Mr. President. That was a joke. Uh, this time would be much better spent focused on cryptocurrency, the tool Trump cartels, CMLNs and terrorists use. In twenty twenty five, there was a staggering six hundred and ninety-four percent increase in cryptocurrency funds received by sanctioned entities. These criminal networks now rely on cryptocurrency because it enables the rapid transfer of funds on pseudonymous blockchains. that make it difficult for law enforcement to trace them. This reliance on cryptocurrency coupled with President Trump's own meme coins and deregulatory agenda, signals reckless cryptocurrency executives and these criminal enterprises, that they may commit crimes with impunity. For example, in March twenty twenty five, Binance, the world's largest cryptocurrency exchange, helped World Liberty Financial, a cryptocurrency company, pseudonym pardon me, predominantly owned by President Trump and his family. It was launched and they assisted. In that launch it was USD stable coin. In twenty twenty three, because of Binance's failure to implement an effective know your customer program, Binance facilitated transactions on its platform, involving terrorist groups, fraudsters, scammers and sanctioned persons in Iran. Binance founder was found guilty for helping its users bypass sanctions. Binance did something that was unacceptable, obviously, and dubiously in in October twenty twenty five, Trump pardoned Binance's founder just seven months after Binance helped the president and his family launch their stable coin. I appreciate my Republican colleagues for holding this hearing on foreign criminal threats to the American financial system, but it is a disservice to the American public to ignore the very same crimes when they are made in America. Currently, many of my Republican colleagues are gutting anti-money laundering tools, like the Corporate Transparency Act, that law enforcement agency's use crackdown on criminal schemes and scams that often target vulnerable Americans. Regrettably, this past March, the bipartisan China, US-China Economic and Security Review Commission concluded the US anti-money laundering regime may be ill-equipped for the challenge of stopping transactional transnational crime syndicates from exploiting cryptocurrency to launder the billions of dollars they steal from Americans each day. This hearing could have been a constructive bipartisan discussion of protecting American families from foreign and domestic cryptocurrency scams and criminal networks. But instead, my colleagues are ignoring these homegrown problems while Americans suffer. I thank you, Mister Chairman, and look forward to our time with the witnesses.

The gentleman's time is expired.

I yield back.

The gentleman yields. Uh, we will now move to witness testimony. Uh, today we welcome uh our witnesses. Uh, first off, uh, Miss Liana Rosen. Miss Rosen is a specialist in international sanctions and financial crimes in the foreign affairs defense and trade division of the congressional research service. Miss Rosen received her bachelor's degree from Duke university and her master's degree from Georgetown university. So welcome. Uh, next we have Mister Leland Lazarus. Uh, Mister Lazarus, the founder and chief executive office. Officer of Lazarus Consulting LLC, Mister Lazarus formerly worked for the US Southern Command and served as a State Department Diplomat in China, and the Caribbean. Mister Lazarus received his Bachelor's degree from Brown University, his Master's degree from Fletcher School of Law and Diplomacy at Tufts University. So welcome, thank you. Uh, Mister John Cassara, Mister Cassara is a retired special agent for the US Treasury where he investigated money laundering among other things during his time at Treasury. Mister Cassara worked for both the Financial Crimes Enforcement Network and within Treasury's Office of Terrorism and Financial Intelligence. Mister Cassara received his bachelor's degree from University of California, San Diego, and his master's degree from the American Graduate School of International Management. So thank you very much. And next we have Mister Luis De Tito. Mister De Tito is the Chief Executive Officer of MissionLytics, where he advises entities on their detection analysis and disruption of financial Mister DiTito has previously served as Senior Vice President and Head of Financial Crime Analytics at Bank of America, and a special agent at the Bureau of Alcohol, Tobacco and Firearms. Mister DiTito received his bachelor's degree from West Chester University and his master's degree from Wake Forest University School of Law. So thank you as well. Um, so again, thank you for your time to be here. Each of you will now be recognized for five minutes to give an oral presentation of your testimony. Without objection, your written statements will be made part of the record. Miss Rosen, you are now recognized for five minutes for your oral remarks.

Thank you. Chairman Muser, Ranking Member Green, distinguished members of the subcommittee, thank you for the opportunity to testify on behalf of the Congressional Research Service. My name is Liana Rosen, and I'm a Sierra specialist on international sanctions and financial crimes. This, the subcommittee asked Sierra provide an introduction to what Chinese money laundering networks are, why they've emerged as a major money laundering threat, who is involved and where and how they operate. I'll use my time today to begin to offer top lines on all of these questions, drawing from a range of US government and other public reporting. To start, Chinese money laundering networks, or CMLNs, generally refer to a type of professional money laundering services provider that operates in the United States, and involves money laundering associates that may be located in multiple foreign countries including the People's Republic of China. The actors involved may include US nationals with kinship or cultural ties to China as well as PRC citizens among others. According to the State Department, the PRC government is not involved in the laundering of illicit drug proceeds. Earlier this year, the US Department of the Treasury described CMLN's as the quote unquote " dominant professional money laundering services provider for drug trafficking organizations and other transnational criminal organizations. CMLNs have also been characterized as able to offer cheaper, faster, and more reliable money laundering services than their competitors. CMLNs are also not necessarily new. However, the prevalence of ties between CMLNs and transnational criminal organizations of particular interest to U to the US does appear to have grown over the past decade or so. During this time frame, Mexico-based criminal groups have sought out CMLN assistance in repatriating illicit drug proceeds from the US to Mexico. Publicly reported US law enforcement investigations have revealed connections between CMLN's and some of the most powerful Mexican cartels, including the Sinaloa cartel and the Jalisco new generation cartel. CMLN customers include not only foreign-based criminal groups, but also certain PRC citizens seeking access to more foreign currency, than they can legally access. CMLN's thus offer black market services to two separate categories of customers. On the one hand, they offer a way for some PRC citizens to gain access to US dollars in excess of currency control limits. And on the other hand, they help foreign criminal groups gain access to their their proceeds of crime, cleaned through various laundering methods to obscure their illicit origin. Through reporting on US law enforcement investigations and trends in suspicious financial activity policy makers can piece together some anecdotal insight into how CMLNs operate for example CMLNs are known to purchase from Mexican criminal groups, US dollars that originated as proceeds of illicit drug sales. Once they collect the US-based bulk cash they remit to Mexico based criminal groups the equivalent amount minus a fee. In this way, the dirty US dollars actually stay in the US, sometimes deposited into various bank accounts by money mules. Tapping into PRC National's demand for those US dollars, the CMLNs will also advertise the funds for sale for to potential buyers. Payment for the dollars is made in the PRC in Chinese currency, and the equivalent amount minus a fee would then be accessible to the buyer or their associates in the United States. In this way, too, Chinese currency would not need to leave the PRC, thus avoiding red flags of potential capital flight. The true purpose of these transactions, however, is obscured by layers and layers of complex laundering schemes that make these transactions appear legitimate. CMLNs will disguise the transactions through global trade, real estate, gift card and credit card purchases, shell companies, gaming activity, and cryptocurrencies. CMLNs will also recruit a r- a variety of money mules, straw purchasers, and complicit employees who use their positions at banks and other companies to facilitate laundering schemes. Congress has an important role in shaping the US response to CMLN's, especially in the context of ongoing counter-narcotics policy efforts to combat fentanyl-related trafficking through a follow-the-money approach. Legislation passed in recent Congresses reflects consistent policy interest in anti-money laundering and sanctions-focused policy solutions. including the Anti-Money Laundering Act of twenty twenty, the Fentanyl Sanctions Act, the Fendoff Fentanyl Act, and most recently the Bust Fentanyl Act. Thank you for the opportunity to provide you with this overview. I'd be happy to answer any follow-up questions you may have.

Thank you. Um, Mr. Lazarus, you are now recognized for your five minute remarks.

Chairman Muser, Ranking Member Green, and distinguished members of the subcommittee, thank you for the opportunity to testify today. My name is Leland Lazarus, and for more than a decade I've had studied China's economic, political, and security footprint in the Western hemisphere. I've had the privilege of serving this nation as a US Tiffelmat in China and the Americas, and as a Special Assistant to two combatant commanders at US Southern Command. Today, I want to be very clear. Chinese money laundering networks have become the financial fuel for cartels to poison Americans and threaten our borders. We're seeing a silk road of crime across the Americas. As you mentioned, Chairman Muser, the Treasury Department's own reporting shows a scale of this danger. From twenty twenty through twenty twenty four, suspected Chinese money laundering network activities was linked to more than one hundred and thirty-seven thousand Bank Secrecy Act reports. totaling roughly three hundred and twelve billion dollars in suspicious activity. Then in twenty twenty four, Operation uh Fortune Runner, US authorities alleged that the Sina Loa cartel and Chinese criminals laundered more than fifty million dollars in drug proceeds. In another case, with the name of Zhidong Zhang, he laundered more than seventy-seven million dollars through more than one hundred shell companies in the US, Mexico, and Cuba. and China. His network was involved in fentanyl precursors, cocaine, methamphetamine, logistics, and cartel finance. But this isn't confined to just the US and Mexico. We're seeing this Silk Road of crime expanding to Canada, Brazil, Chile, the Caribbean, Paraguay, and even across the pond in the UK. The pattern is the same. They're leveraging free trade zones, e-commerce platforms, exchange houses, shell companies, students, and commercial fronts. So what should Congress do about this problem, and the administration as well? Well first, I would like to call on President Trump to raise this issue directly and persistently with Xi Jinping, specifically at their next meeting in December, uh here in, uh sorry, in Sep- in September here in DC. This Silk Road of Crime should be treated with the same urgency as trade, tariffs, critical minerals, and artificial intelligence. Beijing has a capacity to crack down on underground banking, just as they're trying to do with fentanyl uh manufacturers in some cases. When Beijing wants to act, it can, and the question is whether we will pressure them to do so. Second, Congress should threaten uh should strengthen the Corporate Transparency Act on Beneficial Ownership uh transparency. If cartel-linked Chinese laundering networks rely on shell companies and front firms, then weakening it moves the United States in exactly the wrong direction. Third, we need to create an inter-agency, public-private task force on how to leverage AI against Chinese money laundering networks. Congress should encourage pilot efforts that fuse suspicious activity reports, customs information, beneficial ownership data, and law enforcement intelligence to identify network hubs rather than just isolated transactions. I, along with uh AI researcher Doctor Emmanuel Dorley, have been developing DragonTracker, which is an AI-enabled dashboard that maps Chinese linked criminal activity in the US and around the globe. And I hope that a platform like DragonTracker can help be a force multiplier for investigators prosecutors and bank compliance teams. Fourth, we've got to expand and update legislation to cover Chinese money laundering activities. This includes expanding section three fourteen A and three fourteen B of the Patriot Act as well as special measure six of section three eleven to cover fraud, um, cyber activities and sanctions. Now I'm heartened by the fact that there is more reporting on this growing issue, but we have just begun to scratch the surface of this. The good news is you, Congress, have the power to develop the right authorities, partnerships, technology, and political will to sever the Silk Road of crime and protect the American people. Thank you.

Thank you, Mr. Lazarus. Uh, we now ha- uh, ask Mr. Kassara to uh for for for your five minutes of oral remarks, sir.

Good morning. Chairman Muser, Ranking Member Greene, and distinguished members. Thank you for the opportunity to testify today. It is an honor for me to be here. According to Mister Ron Paul, a respected international anti-money laundering authority, he says and I quote, "anti-money laundering legislation is the least effective of any anti-money anti-crime measure anywhere." Why does he make such a powerful statement? Primarily because of the magnitude of the problem. And the metrics that show our anti-money laundering efforts fail ninety-nine point nine percent of the time. In other words, as my friend and colleague Raymond Baker says, quote, " Total failure is just a decimal point away." The failure to successfully combat money laundering has dramatic impact. Your constituents see it in their families and their communities. The opioid, heroin, and cocaine epidemics are devastating. Gang violence, fraud in government programs, corruption, human trafficking, e-commerce fraud, texting scams directly impact Americans. These and other criminal activities exist because of the illicit money they generate. Criminals are motivated by greed. In my written statement, before discussing the Chinese money laundering threat, I thought it important to first emphasize how pervasive money laundering is, and the vulnerability of the US financial system. I discussed what I call the metrics that matter, forfeitures and convictions. In summary, our federal forfeiture rate is less than one percent of the money laundered. And to be caught and convicted for money laundering in the United States, a criminal has to be really, really stupid, or really, really unlucky. Our anti-money laundering environment is increasingly exacerbated because China has become the biggest transnational criminal actor at money laundering threat in the world today. Yes, China's involvement with fentanyl production and cooperation with cartels rightfully deserves attention. But instead of focusing on a single issue, we should examine what I call the totality of CCP Inc.'s involvement in criminal activity, money laundering methodologies, and enablers. They are intertwined and mutually supportive. In my latest book, I show how China leads the world in the top twelve categories of transnational crime. In total, China and Chinese actors are involved with at least two trillion of specified unlawful activities every year. Another way of looking at it is that China is responsible for approximately one half of the money laundering worldwide. Chinese actors, sometimes working with the cartels, are actively pushing what I call an evolution in money laundering. Increasingly, money is no longer money in the conventional sense of the term. Chinese money launderers experts at money transfer without money movement. The dirty money increasingly stays in place. Value is exchanged or swapped. Law enforcement is challenged to follow the money when illicit money doesn't move. China's largest trading nation in the world, six trillion dollars in twenty twenty five. Analysis shows that perhaps one quarter of this is suspect or deserves closer scrutiny. And this is important because trade is a is involved in the movement of the capital, and China leads the world in capital flight. Trade is wrapped up in Chinese underground banking systems. Trade historically and culturally is also involved with value transfer and or flying money. And our primary anti-money laundering countermeasure, the Bank Secrecy Act, or the twenty-five million pieces of financial intelligence that is filed with FinCEN every year, is not very effective against many of these Chinese-centric money laundering methodologies. In my written testimony, I briefly explained some of the most challenging, including the manipulation of trade, black market exchanges, capital flight, mirror swaps, and flying money. I also briefly discussed new challenges that we're seeing, such as Chinese students acting as mules and money launders and die goo, or buying on behalf of, and that how that is used to launder illicit proceeds. I conclude my written statement with a number of recommendations. I look forward to our discussion. Thank you.

Thank you, Mr. Kassara. Uh, we now recognize Mr. Dittito. You are now recognized for five minutes for your oral remarks.

Education, Framework, and Analytics. Chairman, Ranking Member, and Distinguished Members of the Committee. Thank you for the opportunity to testify on the growing convergence between Chinese money laundering networks or CMLNs and cartels inside the US financial system. For the past two decades, I've worked at the intersection of federal law enforcement, finance, and advanced analytics, focusing on organized crime, illicit finance, and network intelligence. My central point is this, CMLNs are not peripheral peripheral actors. They're essential financial clearinghouses for a global marketplace of transnational crime. They connect drug proceeds, Chinese capital flight, fraud, and trade-based money laundering into a single adaptive fluid system. The challenge we face is not just scale, it's structure. These networks are intentionally decentralized and segmented to exploit the structural blind spots between our institutions, jurisdictions, regulatory frameworks, and our government agencies. Chinese money brokers solve a critical market problem for transnational criminal organizations. How to remove illicit cash with overwhelming speed and accuracy while bypassing traditional perimeters. Simultaneously, they solve a separate problem for Chinese nationals seeking to evade domestic capital controls. This dual function is highly efficient. Bulk narco cash is purchased in the United States, matched via ledger balancing with renminbi inside China, and cleanly redirected in supply chains, real estate, shell companies, and seemingly legitimate commerce. By design, no single bank or agency can see this full cycle from end to end. In addition to cartels, CMLN's also support Chinese organized crime-linked operations such as human trafficking, human smuggling, labor trafficking, counterfeit pharmaceuticals, illicit marijuana grows, and cyber-enabled scams. It's not just a narcotics problem or a money laundering problem, it's a human exploitation problem as well. CMLNs operate a converged business model, move seamlessly across cybercrime, fraud, and money laundering. They actively exploit our operational silos and skills gaps, presenting a threat that traditional government and industry frameworks struggle to fight. This is a national security crisis. CMLN's erode trust in our financial systems, manipulate our identity protocols, infiltrate our corporations, and embed durable criminal infrastructure inside the United States. The challenge when facing CMLNs is no longer just identifying suspicious entities, it's mapping and understanding the hidden relationships that connect them. To structurally disrupt CMLNs, we must organize our defense around education, framework, and analytics. First, education. We must mandate cross-training across fraud, cyber, AML, and national security lines. So investigators and analysts recognize how these threats converge. Second, framework. Establish a sustained whole of government and public-private counter-network strategy that aligns financial institutions, law enforcement, treasury, state, intelligence, national security agencies, and policy makers around this common mission. Third, analytics. We must recognize that we don't necessarily need more data. We need structured data analysis to truly understand the data we have. When leveraged properly, structured analysis shifts our posture from passive collection to deep operational insight, allowing us to accurately map how these networks function and proactively detect emerging threat patterns at the onset of the criminal behavior. If we allow TCOs and CMLNs to operate with minimal fri- minimal friction, these networks will continue to scale. By shifting our focus to education, framework, and analytics, we can move from reactive defense to proactive and systematic disruption. Thank you. I look forward to your questions.

Uh, thank you. Uh, thank you all. I will now turn to member questions. Uh, the chair, uh, I now recognize myself for five minutes. So, again, this is a very, I think, revealing and important hearing, one that maybe isn't all that well known by the the the American public, or perhaps even Congress, and that's what we're here for. We wanna determine what is it is, what's going on, what's being done to uh defeat it, to mitigate, uh these uh transactions that include drug cartels, that include human trafficking and death of many Americans, and what we can do about it moving forward. Um just to give a a a broad view of things, so what's what's happening is that uh from China, the so-called precursors of fentanyl are being shipped to Mexican cartels, uh Mexican cartels are developing uh fentanyl, shipping it to the US, making the sales take place, within the US, the various players and actors there, both for the cartels and for some some Chinese foreign nationals that are here, are uh laundering the money, uh taking the US dollars they received and converting it into pesos for the most part, shipping those pesos back to Mexico, where Mexico then converts them again from pesos to uh, Chinese currency, which goes back to, which goes back to China. I mean it sounds a little complex, but it's not. It's actually pretty simple. So, so everything's laundered. And meanwhile, uh, they're um, you know, uh, engaged in in met- in developing and causing uh, illegal uh, drugs to be heavily sold w- within the United States. So it's a, it's a business, it's a machine. So, Mister Rosen, um, Can you uh uh help describe, or Miss Rosa, my apologies, um what the Chinese money laundering networks or CMLNs uh CMLNs are uh are based upon my my description, what your description would be?

Yes, that's right. CMLNs are horizontally networked and not hierarchically structured and operate in decentralized and compartmentalized ways. While your description provides a a nice way of completing the circle, in many ways, CMLNs will operate with other activities as well, so in reality there's a lot more complications. For example, uh, on the trade-based money laundering side, the individuals involved may not realize that they're engaging in illicit drug proceeds. Trade can also go to o- other countries across the Middle East. internationally, other parts of South America, um as well as in Asia.

Right.

So the picture in reality can

Sure.

potentially be much more vast.

OK. Yeah, I was in South America recently, and there's no question this is a a serious concern there. Uh, Mr. Kassar, I'm gonna jump to you quickly, the the mules that you describe, can you uh define what what you mean by the mules?

Sure. Money laundering is in three stages. placement, layering and integration. The first stage is placement, they try to try to get bulk cash if you will, the proceeds of crime, say drug drug proceeds into a financial institution where basically then it can go further, be layered. The problem is is picking up that bulk cash and then getting it into a financial institution, or getting it into a business that's cash intensive, that can then use those that that influx of money to make it appear legitimate. So they needed a a number of people to do that, generally taking smaller sums of money and then placing it into

Right.

an area where it could be further laundered layered and then integrated.

OK. Um, AI is coming into everything of course. And there's uh, I read through how there the flags go up for how to catch some of this um, you know, money laundering from taking place and and drug sales. Uh, are we utilizing technology as fin-sen? Uh, is uh, uh, law enforcement using uh, our technology as, as a weapon or is it being used against us, mister, mister Lazarus?

Thank you for that question, Chairman. You know, I think that the Chinese money laundering networks are becoming increasingly sophisticated in leveraging AI to, for example, open up hundreds of different shell companies, you know, at a single time. or from the digital scam um um point to use it to specifically target everyday Americans whether you're living in a rural area or in a city. And so I think that we really do need to, you know, leverage AI to get after um this issue as well. You know, I think as my my colleague had mentioned, um the issue is not having more data, the issue is to basically bring this all into a one-stop shop platform in which you're bringing in um, suspicious activity reports and beneficial ownership data, and intelligence from both local law enforcement and intelligence agencies,

My time is up.

that we really get a whole bigger picture of what's going on here.

Thank you. Thank you. More questions, but my time has expired. Um, I yield back, I now recognize ranking member of the full committee, Mrs. Waters from California for five minutes for questions.

Mm.

Uh, thank you very much. Uh, mister de Tito, some of today's witnesses have highlighted uh the money laundering a risk associated with cryptocurrencies, underscoring the need for proper safeguards uh for the crypto industry. Yet the Trump administration, with the support of congressional Republicans, has been weakening oversight of digital assets. They've jammed through weak stable coin and market structure legislation, creating rules that put the Trump family and its wealth ahead of America and its security. Transparency International US says that Republicans' proposed laws and rules are quote "opening the door to a new era of illicit finance," enabling America's adversaries, corrupt officials and other bad actors to exploit the table coin ecosystem to larger money, finance corruption, and evade US transaction." End quote. As a former law enforcement investigator and a banker focused on financial crime, mister De Tito, do you believe that crypto companies should not have to detect and report on suspected financial crime as banks and other financial companies do? Would this harm law enforcement's ability to detect and deter all kinds of Bad actors? What do you think?

Thank you for the question. In my view, and in my experience, CMLN's exploit cryptocurrency as a tool to facilitate illicit activity. So, as a career law enforcement officer, and financial intelligence analyst, I want all the information I can get. So if I can get more information that completes the picture on how comprehensive these networks are operating, how they function, and gathering more intelligence on the illicit behavior and the extent of the illicit behavior, I want all of it, including at cryptocurrency exchanges.

Uh, thank you. After years of lagging, uh the major economies of the world, The US finally established a beneficial ownership database, only to see it dismantled unilaterally by the Trump administration. Republicans are trying to make this deficiency harmony. Shell companies have been used for years by money largest to move and hide illicit funds with few restrictions, through the US. Now, the only reporting left about the identities of shell companies is really the reporting uh to banking institutions, which the Government Accountability Office concluded was not sufficient for a number of reasons with respect to money laundering investigations. Just how much more difficult is it for law enforcement's job when investigators do not have accurate and specific knowledge of who truly owns or controls the shell companies

Yeah.

that are used to gain access to and through the banking system.

In my view, and in my experience, I wanna know who is, who are the beneficial owners of the, of companies that I'm investigating. Not only from a positive perspective of, hey these are the beneficial owners, we need to target these individuals, it also serves in exculpatory capacity as well. Cuz when you're looking for source and destination of funds, and you're evaluating source of funds, if the beneficial owners have a legitimate presence, legitimate business presence, and you can trace those source of funds to legitimate activity, it becomes exculpatory as well. So I want more information on the ownership, and as one of my colleagues stated, Gen-AI, the CMLNs are using Gen-AI to establish shell companies day after day. So I wanna know, even even if the intelligence is false, we can still gather patterns and conduct pattern analysis on information that may even be false. So I want more intelligence.

Well, the thank you for that, because um I have been told over and over again that it's just too difficult. uh to find out who these beneficial owners are, uh that they have ways of doing business that keeps those who are trying to get the information from ever finding out whom they are. But I'm pleased that you talked about patterns that helps you to get to who the beneficial owner is. Thank you and I yield back.

Channel Eighty yields. The chair now recognizes the gentleman from Florida, Mister Haradopoulos, for five minutes.

Thank you, Mister Chairman, and Miss Rosen, I have the first question for you please. Uh, The Chinese money line networks are really a lifeline for the cartels. And in your opinion, what is the best or most effective way that we could take action in Congress to disrupt that current network?

Congress has taken a lot of actions already to address the counter-narcotics elements of cartel activity and criminal drug trafficking. Part of this is through sanctions actions. um and authorities related to that. Um in recent Congress's

Well, again, I just it's a simple question, in your opinion, I really respect the work that CRS does, I love the group, it's they did

Thank you.

great work for us and it's very down the middle which we appreciate. But again, if you were in charge for one day, what's the one thing that you would do or continue to do that is the most effective?

Congress has done a lot in terms of establishing priorities related to this issue. Um, and this is one of those things where there's not one single policy response that will solve this entire problem. As the witness this day.

No, I don't think there's, again, I'm not confrontational, I just wondered if you had to do one thing, what do you, what do you, of all the things we've done, which is the most effective and which should we put more weight behind?

I think broadly what we've been talking about today is a follow the money approach. That's one element of a broader counter-narcotic strategy.

OK, thank you. Um, Mister Kusara. Uh, you were on the front lines. You get it. I I'd I'd ask the same question. I I'd really like to know what the folks who are really on the front lines are doing. If you could do one thing to counter these the very element that this the chairman has brought up today, what is the most effective thing we're doing right now, and how can we accentuate that?

Thank you for the question. I think it was one thing in conjunction with another. The one thing would be I would mandate that the US government, law enforcement, tol whole of government approach come up with a comprehensive strategy go after Chinese transnational crime and strategy. It's not a single agency, it's not a a a single bureau uh responsibility, it has to be to- uh all of government. And in conjunction with that, as part of that, I would seriously give consideration to establishing uh task forces that are specifically focused on the Chinese uh, transnational crime threat, regional task forces, combining federal, state, and local uh resources.

Okay. And m- Mister Lazarus, if I could, uh, is this a part of a broader Chinese strategy to undercut the United States?

Thank you for the question. You know, I think that this Silk Road of crime, there's evidence of um, instances where Chinese criminal actors also work with say local Chinese diplomats um or have worked on behalf of Chinese state-owned enterprises I don't necessarily there's no evidence that that shows direct connection to say, you know, Xi Jinping and some of these um illicit actors but I do think that there is a symbiotic relationship between the two and I think that's exactly why this needs to be further prioritized in the bilateral relationship. That's why I think President Trump should bring this up directly with Xi Jinping when he visits, when Xi Jinping visits DC in September of this year.

And back to you, Mr. Ks- uh, Kisara, if I could. Is our banks, Sinfen, and law enforcement working closely enough together now that they have that confidence and trust in each other? Or can we do more to strengthen that relationship as we take on these criminals?

As long as I've been in uh the federal government, we've talked a great deal about partnership. between uh industry the banks and law enforcement um it's been an up and down relationship we can do a lot more i've talked to a lot of people in the banking community they're frustrated uh they don't get the guidance they believe they deserve from uh law enforcement from thinsen there's they consistently complain that there's no feedback if they give them this amount of information and they're frustrated because their anti-money laundered compliance programs for banks alone cost roughly about fifty billion dollars a year, or about twenty-five times more than we actually recover criminal proceeds every year. The current system is not working.

Right. Well, Mister Chairman, first of all, put thanks for putting this hearing together. I really appreciate it. We I read some materials before we we got here today and it and again it just sounds as usual that the we need to do a better job of of coordinating that the folks who interact with these different uh criminals, unfortunately. and and and be in a more uh succinct way in which we could challenge these. So with that, Mr. Chairman, I yield back.

Chairman Yields, the chair now recognizes the gentleman from California, Mister Liccardo, for five minutes.

Thank you, Mr. Chair. Uh, Miss Rosen, uh, thank you very much for your testimony and for the r report that CRS provided about Chinese money laundering networks. Uh, on page four it describes some of the mechanisms, the methods of CMLN and how they operate and one of the, I think the first items mentioned is underground banking. is this analogous to what folks often refer to as informal value transfer systems?

That's correct.

And as we think about some of those systems, and I know there's a lot of different names, I think in China it's Feiqian or flying money. Uh, there's often a lack of documentation, lot of anonymity, lot of informal transactions. Is that right?

The purpose of using an informal value transfer system is to avoid the official reporting requirements in the formal financial system.

And so as as criminals are able to use these systems, now obviously not everybody uses them, are criminals, but there's certainly a lot of criminal activity. Um, one way for us to try to contain or reduce some of that criminal activity might be to try to choke uh financial flows from those IBTS systems, is that is that right?

I do wanna emphasize

Yeah.

So one of the challenges is balancing the issue of financial institution access to various communities around the world and combating money laundering.

Well, I'm glad you mentioned remittances. Uh, because I happen to have a bill, I know we all have a bill, so uh a bill called the Remittance Expense Minimization Integrity for Transfers Act. uh that would prevent the imposition of taxes or fees on remittances, if the treasury secretary finds that such taxes or fees would increase the potential for money money laundering or financial crime. Um as you know there's often tax avoidance uh in these kinds of situations and folks who are loftly engaged in remittances might choose some of these informal networks because they want to avoid taxes. Is that a reasonable assumption?

I think tax avoidance is one of the um methods or issues that have been associated with informal value transfer as well.

And last year the Trump administration had proposed a tax on remittances. Uh, these are of course transfers that US immigrants, uh, may send back to their families abroad. Um, and that proposal ultimately became law with the passage of H H R one. Is that is that fair?

Sorry, would you repeat that again?

Yeah, that that as a result of Trump administration proposal and now congressional enactment, we now have a tax on remittances that didn't exist before last year.

Through through which legislation?

H R one. Uh, that is the tax on any uh sending of cash, money order or cashier's check uh by persons who are not citizens.

I'll have to follow up on the specifics of that legislation and its implications for potential money laundering risks.

It's fair to say, I know that uh the GAO has done a report on this in recent years as has CRS, uh that there should be some concern about the extent to which we might deter people from using legitimate systems through the imposition of taxes and fees. Is that a fair concern?

The con concerns are related to deterring

Uh people from using legitimate uh, payment systems for remittances.

That's a possibility.

And it's fair to say that folks who are engaging using remittances are particularly cost-sensitive. They're often, uh, families in great need. Is that is that fair?

Remit remittance payments and the fees associated in the formal financial sector can be substantial.

Thank you. Uh, I think you can understand why I'm particularly concerned. And we should all be concerned uh about the impact of these taxes on families who rely on remittances uh to for their very survival. Um, now I just wanted to turn quick question to Mr. Kassar. I appreciate very much your work and many years of service to the country. Uh, you mentioned that an awful lot of this crime is happening where we see money transfer but no money movement. Is that right?

That's correct. There's always been money transfer without money movement, historically and culturally. Some of these underground financial systems that you've been talking about, are basically just that, counter-valuation, this type of thing. But we're seeing more of it today. We're seeing ancient systems combined with twenty first century technology and swapping and exchanging. And money, as I said in my testimony, is not moving like it once did. The illicit funds stay in place. So since they're not moving, we can't s- capture it, and there's little or no financial intelligence reporting on it.

And that's particularly true with regard to crypto.

Uh, crypto is another topic altogether, but ba- generally speaking, yes, it's much more difficult for law enforcement to follow the money when it comes to crypto, although we're making progress in that regard.

So I'll just uh conclude by saying I I'm particularly concerned to the extent that we have known uh Chinese nationals who control DeFi systems that are purchasing, for example, two hundred million dollars of Trump meme coin, seventy five million dollars of world liberty financial uh crypto, I don't understand why we're not in an investigation.

The gentleman's time has expired.

Thank you very much, sir.

Uh, the gentleman's time has expired. The gentlewoman from Georgia, Miss Williams, is now recognized for five minutes.

Thank you, Mr. Chairman, and good morning everyone. I represent Georgia's fighting fifth congressional district, centered in Atlanta, and I wanna talk about something that sounds a little complicated, but it's actually very simple, at least it is in my mind and the people that I serve back home. Foreign criminals laundering money through American real estate using anonymous LLCs. Here's how it works. They buy a property, the LLC LLC has no identifiable owner, the property sits while the money gets cleaned, And the Atlanta Journal-Constitution documented exactly what anonymous LSC ownership looks like on the ground and in a community in my district, Ashview Heights, when a shell company owned a blighted property and a reporter spent a week trying to find the actual owners. This is because the US law didn't require anyone to say who actually owned the property. And that is a problem. We can't know if it's a small investor, a multinational company, or a criminal network. And right now, we have no way to find out. Congress passed a corporate transparency act to fix this, but Republicans have been determined to roll it back. And that too is not okay. So I have a few questions about what that actually cost the people that I serve back home. Mister Kisara, at a basic level, why does real estate money laundering through anonymous LLCs matter as a national security and financial crime issue And why is property an attractive vehicle for criminal networks like the ones we're discussing here today?

Thank you for the question. There have been a number of studies, not only in United States but around the world, that has shown that uh the purchase of real estate, commercial residential real estate, is one of the most popular means by money launders uh to uh place, layer, and integrate their uh illicit proceeds. Placing cash purchases, for example. Layering, you just described, LLCs, lack of beneficial ownership information, non-transparency, and then integration, the final stage of money laundering when you wanna try to legitimize it. You purchase properties, shopping centers, homes, this type of thing. Um, time kind of limits me. I could go here in a lot of different directions, but We see this increasingly as a problem for American citizens, when you have a large amount of foreign capital coming in, a lot of this from China, but not just China, that, you know, purchasing these properties for cash, uh, Chinese, for example, largest foreign, uh, uh, uh, buyers of American real estate, about seventy percent of purchases are in cash. We don't know where this cash is coming from. some of the money that we do know is here, it's illicit, proceeds of drugs for example, and they're swapping this money out, as we kind of described in the testimonies. Um, and so you've got illicit funds purchasing up these properties, driving up prices for wanna-be home buyers, it's ex-

And that's exactly what we're feeling at home, and that's why this issue,

Yes.

which seemed a little complicated, hits right home for the people that I represent.

Everybody can feel this.

We're seeing the housing market, across the board, whether it's in Atlanta, whether it's somewhere in rural America, we're all experiencing the same thing. So beyond the financial crime itself, what does this actually do to the communities where the property sit? And what do neighborhoods have to lose when a shell company owns property on their block and no one can even find who's responsible for the ownership?

I've been in anti-money laundering work for well over thirty years, and I've seen a slow steady progression of of Legislation, rules and regulations, and if I can say the one missing link that law enforcement needs is beneficial ownership information. I'm not saying that corporate transparency act was the best thing since sliced bread. I personally came up here with the Fat Coalition and others trying to make this a reality. Perhaps the end product was not what we wanted. There's room for improvement. But I'm not I'm not here to argue the pros and cons of the CTA, but what I am telling you from a law enforcement perspective is, that's the one missing piece that we need. We need beneficial ownership information. How w- how can we make it efficient and effective? I leave that to others. But we need that.

So quickly, Mister Rosen, the corporate transparency act required LLCs to disclose their beneficial owners to FinCEN. If that law were fully in effect today, how would it change law enforcement's

Thank you for the question. So the corporate transparency act would have created or is creating a central database that the financial crimes enforcement network maintains regarding certain

And Miss Rosen, I am sorry, but I am out of time, so I'm gonna ask that you give me that answer on the records because My constituents back home in Ashview Heights are counting on me to get answers, to bring some relief to the housing market, and this is all related. Thank you so much and I yield back, Mr. Chairman.

General Eddie Yields. The chair now recognize the general from Georgia, Mister Loudermilk, for five minutes.

Thank you, Mr. Chairman. Uh, Miss Rosen, in your research have you identified particular sectors or industries outside traditional banking that Chinese money laundering networks are exploiting to move cartel drug proceeds? For instance, uh, cash incentive businesses, real estate, or money uh, service businesses.

Yes, all of the above have been involved in Chinese money laundering networks. What's really interesting about these Chinese money laundering networks is the variety of ways in which they launder these illicit funds.

Are they are they becoming more innovative?

The most recent Treasury Department report on national money l laundering risk assessments um, did identify that Chinese money laundering networks continue to adapt and evolve to avoid law enforcement detection.

Okay. Well, thank you. Um, Mister Kisara, um, we know that these networks attempt to circumvent the Bank Secrecy Act uh filing obligations such as SAR's by structuring deposits. Are there other ways these networks are able to circumvent certain BSA filing requirements?

Unfortunately for a lot of these underground methods, that basically is the problem, and trade related things, our um Bank Secrecy Act reporting requirements just don't do a very good job of capturing it. We've got roughly twenty five billion pieces of financial intelligence that are filed every year with Treasury's FinCEN. SARS could possibly be the the best, and there are some SARS that capture it, but not enough. And one thing if you, if I, if I may, We've got a lot of intelligence. We could use more, I I agree with my colleagues, but what we're really lacking are agents on the street to take this intelligence and to work the cases. That's what we're falling down. We don't have enough agents out there to make these cases. We can have the best leads coming out of Treasury's FinCEN,

Right.

but if they get referred to an office and it's just gonna go in somebody's inbox, paper or digital and sit there because they don't have enough resources, we're not making cases.

So, um, I I fully understand where you're going with that, uh, needing more resources is always important. But regarding uh, VINs and and SAR filings, um, under the current regime or the way that it's structured, is it a timing issue that the uh institutions uh, are not filing real time? Is it just the mass of the data that is filed that you have to go through? What, what is it structurally about, um, BSA that prohibits really from, uh, you being able to track these perpetrators now?

There's approximately five, five million SARs filed every year with FinCEN, probably about half between financial institutions and half with money service businesses. That's a lot of information to process.

Right.

Historically, FinCEN has failed on their analysis of that information, their technology systems, their analysts themselves, their m- management system has historically been weak. I'm not just saying this because I used to work at FinCEN. Look at the record, ask the questions, and it, what I'm saying is absolutely accurate. So the problem is not so much the intelligence, although we can always improve on it, it's getting the information, focusing on it, prioritizing it, most importantly getting it out to the agents in the field, and then having the mandate and the resources to work the cases. That's that's the problem. It's in the field, we don't have enough people out there to work the cases.

Alright, thank you. Mister Lazarus, on June third, twenty twenty six, a Chinese national residing in Beaufort, Georgia, pled guilty to money laundering charges. He was engaged in a very sophisticated trade-based money laundering scheme. that involve purchasing electronics with drug's cash drug cash and exporting them to foreign conspirators. And according to the Department of Justice, this is Chinese national operated in Georgia, North Carolina and South Carolina. And we see cases like this one. Um, what does it tell us about how deeply embedded these networks have become in in the United States?

I I think, sir, that this is one example of a growing trend that we've seen. of Chinese criminal individuals who are able to not just launder money but also engage in other types of illicit activities, wildlife trafficking, human smuggling, um leveraging real estate in in order to uh also do uh drug trafficking, and increasingly ties or connections to Chinese government officials. And we're not just seeing that in the United States as well, we're also seeing that in um Canada, in Brazil, um in Paraguay certainly in Southeast Asia with the digital scam farms and so it is a growing trend that um I think we definitely need to uh figure out a way to try to find a one stop shop system to share information about these trends so that law enforcement agents whether um they're in Georgia whether they are in um where I am in Miami or if they're in Latin America or anywhere else can get a sense of lessons learned and uh tools to get after this issue.

Thank you. I I yield back, Mr. Chair.

Chairman Yates, the chair recognize the chair of our subcommittee on national security, Mister Davidson of Ohio, for five minutes.

Uh, thank you, Chairman, for organizing this hearing. Thanks to our witnesses for your work in this field and your efforts to help us uh make good policy here today. Uh, we know cartels engage in criminal activity for one basic reason, it's profitable. Uh, they traffic fentanyl because it generates lots of revenue, and when one drug becomes less profitable, they pivot to another. They shift routes, tactics, and operations, um, the same way any business responds to market conditions. Um, if we wanna weaken the cartels, we need to stop focusing solely on the products they move and start focusing on the money they make. A lot of times our government focuses with different agencies on different kinds of activities. The reality is the same transnational criminal organization is involved in all sorts of these things and all of it for the money. The most effective way to disrupt cartel operations is to make their crime unprofitable. That means following the money, targeting illicit financial networks, and cutting off uh the flow of funds that allow these organizations to continue to operate and expand. When we take away their profit and their cash, uh we take away the cartel's uh ability to continue targeting and hurting Americans. Miss Rosen, F- Finsen identified approximately three hundred and twelve billion in suspicious activity tied to Chinese money laundering networks and cartels between twenty twenty and twenty twenty four. Of that activity, do you have any idea what percentage was ultimately disrupted or resulted in enforcement action?

As a proportion of that specific amount, the three hundred and twelve billion dollars, those were from suspicious activity ro- reports and other transaction reports that Treasury received. That is the starting point for investigations, and it's not clear in the public domain how they connect specifically to certain law enforcement cases.

Yeah, we don't have good metrics. Mister Kisara, uh earlier this year, the just to build on that question and then also follow up on this, um earlier this year the administration designated several cartels as foreign terrorist organizations. From a sanctions and financial enforcement perspective, what practical authorities become available when an organization is designated as a terrorist organization that aren't available when it's treated solely as a transnational criminal organization?

I can't answer your question with specificity because I'm no longer in the government, and I don't have the, you know, the the latest of of guidance, if you will, about what new authorities you have. Obviously, it's a powerful tool. We're happy to have it, speaking for law enforcement. One thing I would like to just follow up on you, I I really appreciated your description about the importance of following the money and and the pro and going after the po the people and the products. This is the emphasis of law enforcement, going after the people and the products. And the reason why they do that, I'm being very candid, is because it's easier than going after the money. Law enforcement is stat-driven, right? So they wanna get the seizures, they wanna go after, you know, the the thing, the product, and they'll go after the people, including the low-level couriers and mules. But they are reluctant to spend two or three years and it's time-consuming, and at the end of the day they may strike out. So they'll go for the quick buy bus for the people and the pro and the product and not the money.

Yeah.

When you think about incentives, you know, we we created the Bank Secrecy Act to basically spy on everyone's financial transactions, all to help us catch these kind of people. Uh, a lot of times, uh, the agencies there track the activity. How many SARs, CTRs did you file versus a comparable bank? You don't really track the effectiveness of the system we're building. And so it just keeps growing. It's out of control, and it isn't producing good results. Um, we we aren't even using that framework to tell who's even lawfully in our country. These people have full access to our financial system. So, you know, for our panel, um, in your expenis- experience, I mean, would it at least, uh, you know, investigating, uh, the individuals that are unlawfully present in the United States, would, uh, know your customer laws, uh, help us tie anything to the immigration status and their flow of funds?

I thought for a long time that controlling our border, uh, was probably the most important thing we could do to combat a number of these issues that we're focusing on today. Whether they be, you know, associations with the cartels, whether it be, uh, fentanyl trafficking, whether it be human trafficking or whatever. And I think since we've started to enforce our southern border again, I think you can see fentanyl seizures have, uh, have fallen and it is um enforcement of the border is is uh one of the most efficient methods we can take to combat some of these issues.

The border is in fact secure and we didn't have to change laws to do that.

Correct.

We don't necessarily have to change laws to make sure that we know your customer and you're at least lawfully present in the United States.

Correct.

That's a recent initiative by the executive branch. It's a common sense initiative. You've got people that are committing crimes already illegally in the country, and we're not even filtering that out. So I I think this burdensome regime foisted on the American citizens, uh, should at least be effective in denying access to our financial system to people who aren't even supposed to be in our country. I yield back.

Mister Chairman?

Yes.

Mister Chairman, I ask unanimous consent to enter an Atlanta Journal of Constitution article, Nobody Home? How Legal Corporate Secrecy Harmed One Atlanta Neighborhood for the Record.

Without objection, Miss Williams.

Thank you.

The chair now recognizes the ranking member of our subcommittee on oversight and investigations Mr. Green of Texas for five minutes.

Thank you, Mr. Chairman. I thank the witnesses and I'm appreciative for the intelligence that you've shared today. Uh, you have talked about CLM ends and at least one of you indicated that uh Xi Jinping may not be intimately associated with this. Uh, was that you, Mr. Lazarus? Um, do you um, you think that making it known to him is going to make a difference?

I think, sir, that um, this is such a growing issue that it doesn't make sense that it is not a top priority for President Trump to bring up directly with Xi Jinping.

Yeah.

We also know that the CCP is of course the largest techno-authoritarian country in the world and has vast surveillance um uh technology. They can act, they've they've done it in twenty twenty four,

Let me intercede for just a moment.

through

It, not only can they act, would would you agree that it is likely that uh President Xi Jinping is aware?

We have not seen evidence of that, hardcore evidence of that, but it is definitely safe to say that we need to be putting much more pressure on the CCP to get after this issue. We should not be giving them a free pass to a, to allow the globalization of this Silk Road of crime.

Well, I appreciate what you're saying. I, and I think that the president of a country should not be involved in schemes and scams that are illicit. You would agree with that, would you not? Would everybody agree? If you disagree, raise your hand. Alright, let the record reflect that everybody agrees. Uh, let's talk for just a moment about something called a Ponzi scheme. Uh, would you agree that a Ponzi scheme is contrived, uh, such that there is no real investment in something other than persons buying in and paying more than the last person to buy in. Uh, if you differ with me, uh kindly raise your hand so that I may hear your, your difference of opinion. And uh, would you agree that with a meme coin, you have what we would call a person who buys, a person who sells, and the seller sells to the buyer at a higher price than the seller paid. And this scheme goes on. How does that differ from a Ponzi scheme, uh, mister Cassandra? Mister Cassara.

Thank you for the question. Unfortunately, I don't have the expertise in this area, but from what you just described, it sounds very similar, but I don't have any kind of background or in or insight in this particular area.

Uh, uh, you're with treasury, um, I googled just a moment ago, if I am concerned about a Ponzi scheme, who do I report it to? You report it to the FBI. And then the FBI investigates. But in this country, we have legalized a Ponzi scheme known as a meme coin, because that's what it is. It's a Ponzi scheme that we have legalized. And the President of the United States of America is engaged in this activity. Uh, he has made millions of dollars with his Ponzi scheme, his meme coin. If we wanna hold Xi Jinping accountable for his transgressions, wouldn't we wanna hold the President of the United States of America accountable as well for transgressions? I think so, and I'm I'm sure you would agree. But what the president has cleverly done with his uh securities uh agents is legalized the crime. In the United States of America, we have a Ponzi scheme that is lawful, that the president of the United States himself engages in. Now, I'm all for going after President Xi for what he's doing, but I also think that President Trump should be held accountable for what he's doing. The tone and tenor for much of what is happening in cryptocurrency um deals, is set by the person at the top of this country. The President of the United States himself is setting the tone and tenor for this. And as a result, people down the line assume that they can do with impunity what the President does regularly. It's very unfortunate, but I I think that all persons who are engaged in these sorts of activities ought to be penalized. not just foreign actors, but those who do it domestically as well. I yield back.

Jeremy Yields. I do need to take a moment to remind members uh to avoid engaging in personalities and puning the motives of another member or the president. Uh with that I now recognize the chair of our subcommittee on digital assets, Mister Stile of Wisconsin, for five minutes.

Thank you very much, Mister Chairman, I'll just take a minute to say uh I am also disappointed in Chairman Gensler's unwillingness to address uh the crypto space, in particular the rise of meme coins. Uh, I think there was a big missed opportunity in the previous administration. Let's dive in to what we're talking about here today. Chinese money laundering networks, so many Americans have been impacted by fraud, by schemes, and a lot of this money is moving offshore outside the United States, and Chinese money laundering networks are at the forefront of that. I wanna dive right into a question with you, mister Lazarus, if I can. We know that a lot of this is ultimately being operated by Chinese nationals. The question then becomes, what's the role of the Chinese government in this space? Are they knowledgeable about what's going on? Are they intentionally not knowledgeable about what's going on? Are they complicit? Give us a little color as to how the Chinese Communist Party is viewing this criminal enterprise and how it's operating.

Thank you for this question, Congressman. I'm gonna follow the facts. There are facts in various countries all around the world, including here in the United States, of Chinese criminal actors who also use their networks and their influence in, say, Chinese business associations or Chinese friendship associations to also engage with Chinese officials um with the Chinese embassy or Chinese consulates um and also in some circumstances Chinese state owned enterprises. And so I I like to say that this is a symbiotic relationship uh again there is no smoking gun or hardcore evidence directly linking some of these Chinese criminal uh laundering networks.

No I understood that it maybe not isn't direct I think the symbiotic relationship that you just referenced is actually quite poignant. China has one of the largest surveillance networks globally. Many of these individuals are using WeChat, WeChat, we we know, more or less know, that there is a backdoor opportunity for the Chinese government to surveil into what is being written on on WeChat. Is is the Chinese Communist Party just simply looking the other way, or do you think that they are benefiting by the money laundering that's occurring uh inside these money laundering networks?

Well in certain instances, um, these Chinese money laundering networks are actually helping Chinese citizens who can't get their money out because of the uh foreign exchange restrictions, uh, coming out of China. So in in certain senses they're c- actually trying to circumvent the laws of the Chinese.

There's there's there's really significant capital controls in China.

Exactly.

So in a sense, some of this was created by China's own making and trying to control individuals in getting their money offshore outside the control of the Communist Party.

Correct. Correct.

But at the same time, there's other individuals that are moving these funds are probably politically connected in China and China's looking the other way. Is that your analysis?

Hundred percent.

And so how should the United States be engaged in placing enforcement upon the Communist Party of China to actually crack down on this? Because maybe maybe two steps. Can the Communist Party of China crack down on this operation? If so, how can the United States place leverage to get them to do that?

Well, in bilateral conversations at the highest levels between Ch- President Trump and Xi Jinping, um, fentanyl is, is definitely talked about. But other criminal activities, including the money laundering, I'm not sure is actually, uh, brought up. And so that first and foremost needs to be brought up more consistently. Uh, second, I mean, we have to, um, basically call out the, the Chinese for t- turning a blind eye to these criminal activities.

Let me, let me jump to Mister Kassar. You were, you were shaking your head. It seemed like you agreed that we need to put more pressure in our negotiations with China. Can you comment? Do you, do you think we should be engaged with China to try to shut down these networks? And is China capable of doing that, if they so chose?

China is a command state. They, if they wanna end something they can end something, if they wanna do something they can do something. Um We engage China politically, diplomatically, uh, with intelligence, commercially, on basically every single sphere. But where they are most vulnerable is where we do not engage them. We need to call them out and tell them that they are the largest transnational criminal actor in the world and they are the largest money launderer in the world.

I I think you're exactly right, I think we need to go after the Chinese money laundering networks, I think we have to use all the tools and the

Chairman Yields. Chair, now I recognize the gentleman from Iowa, Mr. Nunn, for five minutes.

Thank you very much, Mr. Chairman, and I think it's important that this group of witnesses uh help us understand the full extent to which China has become the world's leading money launder, and has become a state-backed fraudster for Americans here. Chinese money laundering networks have become the banker's cartel for poisoning our communities, including over forty thousand shell companies that are operating right here in the United States today. Every dollar that is laundered buys more fentanyl, more guns, more product, and it's moving directly into our country. In my home state of Iowa, Mister Chair, fentanyl now kills more people my daughter's age to my age, a direct threat to the health and future of our country. The CCP backed networks don't just bank the cartels, they launder money for North Korean hackers, for what's happening in Iran terrorism, and certainly for Russian crime rings. So today, let's follow the money. Let's cut the financial engine and starve out these cartels. As a two-decade member of the intelligence community, somebody who's been inside China watching these things happen, I appreciate everyone on this witness stand who's working to help in this and protect our country here domestically. So, Mr. Lazarus, you've advised SouthKom. You've helped counter China in our own backyard. You highlighted here that this is a symbiotic relationship between the drug cartels and the Chinese. I'll be even more clear. This is a direct threat to the United States and they are preying on a market that is target rich here in the US. You've been helping shut this down. Help us, you know, begin by saying draw the connection from what happens in Beijing to what shows up in the Western hemisphere and how it ends up poisoning and killing kids right here, in the United States. What's that tether?

I think that we've seen over the past two decades, the expansion of the Belt and Road Initiative. Various projects, various Chinese companies, uh, in various co- countries all throughout Latin America and the Caribbean. What has also expanded is the Belt and Road Initiative of, of criminal actors, who in many ways are expanding their influence, not just in money laundering but also wildlife trafficking like shark fins and Totoaba fish bladders. um uh jaguar skins that are also satiating the demand of uh traditional Chinese medicine back in China right? Also a multi-billion dollar um illicit industry. Um and so what you see and it's corroborated by multiple you know NGO's and and think tanks and and r- r- reporting organizations, this uh this idea of crime convergence, the fact that you've got you know one actor or one group that's engaged in all kinds, a whole menu of these illicit activities, And in many ways they are also connected to the local Chinese embassies or local uh uh state-owned enterprises that are operating there. So this is how this whole symbiotic relationship uh has developed over the years.

Thank you, Mr. Lazarus. Mr. Kassar, you've been working at Treasury for quite some time, in fact you've literally written the book on how this is happening. When we talk about China as the largest money launderer that's out there, we also have to recognize that not only are they killing our kids, they're making a profit while doing this. And that alone should be concerning to all of us. Now, most folks back in my farm state of Hawkeyes in Iowa don't know what something called a mere transaction is. But it's a transaction where money settles without a single dollar, actually even crossing the border. In plain terms, why do these networks make it so much harder to catch than our old form of just bags of cash leaving the country and how do we get after it?

We established the Bank Secrecy Act about nineteen seventy to give uh financial crimes investigators tool to follow the money. Those were the days where large amounts of drug money were sloshing around through Western financial institutions. We could follow the money trail.

Right.

Things are different today, OK? We still have those tools, we still get twenty-five million pieces of financial intelligence, but w- from what you just described, where money stays in place, money transfer without money movement, or swaps and exchanges, the money no longer moves, the illicit money stays in place, things are settled up overseas, Mexico, China, wherever, and there's no trail to follow. So the financial intelligence that we're we rely on, right, to fight the war on drugs is basically ineffective. The other problem we have, we have so much financial intelligence being filed now, twenty five million pieces, we can't separate it out. It's all junk. We need to focus, we need analysis, but most importantly, we need boots on the grounds, meaning we need criminal investigators to work the streets, to work the ports, to work cases, and to be educated up on these underground systems that were that are so problematical now.

Mr. Gussara, well said, and it's one of the reasons we are leading in the CCP committee. My bill is the Bridge Act and the Trains Act to go after these international criminals that are operating and sp bleeding out nearly half a trillion dollars annually from our US economy not to mention fight for these families who have lost kids. Thank you very much. I yield my time.

Gentlemen yields. Well, I would, seeing no more uh members, I wanna thank all witnesses for your testimony today. Without objection, all members will have five legislative days to submit additional written questions for the witnesses to the chair. The questions will be forwarded to the witnesses for their response. Witnesses, please respond no later than July fourteenth, twenty twenty six. This hearing is adjourned. Thanks again.

Alright.