▶ 0:20:39Good 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 legislative days within which to submit extraneous materials to the chair for inclusion in the record.
▶ 0:21:07I 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 moneyaundering networks known as and how they enable cartel drug trafficking. I appreciate my ranking member, Mr. grain uh for being here as well. Uh importantly uh CML also finance scam centers and other fraud against Americans.
▶ 0:21:38So this directly ties in with um this committee's other oversight work. These networks are not comprised of petty criminals. They are professional moneyaunderers who move billions through our financial system. Today, Chinese moneyaundering 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.
▶ 0:22:08Additionally, the moneyaundering 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 Fininsson, between 2020 and 2024, approximately $312 billion in suspicious activity was associated with cartel linked Chinese money laundering activities.
▶ 0:22:37Uh that is 312 billion flowing through 489 unique depository institutions that were uncovered over 200 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.
▶ 0:23:03These networks are also key to the cartel's procurement of precursor chemicals that produce fentinyl. Fentinyl remains the leading cause of death for Americans aged 18 to 45. Families have been destroyed, communities ruined, our health care systems overwhelmed. At the 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.
▶ 0:23:31In July of last year, six members of a moneyaundering ring entered guilty p for funneling over $92 million in funds for cartels. In January of this year, do DOJ charged Yan Linn alleging him of laundering at least 27 million in fentinyl, cocaine, and uh meth proceeds.
▶ 0:23:52Accordingly, the FSC Oversight and Investigation Subcommittee, this committee will begin investigating Chinese money laundering organizations, 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.
▶ 0:24:18very 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, increase penalties, or whatever other advice and suggestions you have. I 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, Mr.
▶ 0:24:47Green for four minutes for his opening statement.
▶ 0:24:51Thank you, Mr. Chairman. I thank the witnesses for appearing and of course I thank you as well for conducting this hearing today. Uh Mr. Chairman, it is my belief that a better title for the hearing would be exposing converging President Trump's crypto schemes and facilitation of crypto crimes in the US financial system.
▶ 0:25:16Republicans, 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.
▶ 0:25:43[laughter] uh this time would be much better spent focused on cryptocurrency, the tool Trump cartels, CMLNs, and terrorists In 2025, there was a staggering 694% increase in cryptocurrency funds received by sanctioned entities.
▶ 0:26:05These criminal networks now rely on cryptocurrency because it enables the rapid transfer of funds on pseudonmous 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.
▶ 0:26:34For example, in March 2025, Binance, the world's largest cryptocurrency exchange, helped World Liberty Financial, a cryptocurrency company pseudonm, pardon me, predominantly owned by President Trump and his family. It was launched and they assisted in that launch. It was USD Stablecoin.
▶ 0:26:57In 2023, 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.
▶ 0:27:26And dubiously in in October 2025, Trump pardoned Binance's founder just 7 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.
▶ 0:27:55Currently, many of my Republican colleagues are gutting anti-money laundering tools like the Corporate Transparency Act that law enforcement agencies use to crack down on criminal schemes and scams that often target vulnerable Americans.
▶ 0:28:13Regrettably, 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.
▶ 0:28:41This 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, Mr. Chairman, and look forward to our time with the
▶ 0:29:02Gentlemen's time is expired. Gentleman yields. Uh we will now move to witness testimony. Uh today we welcome uh our witnesses. First off, Miss Lyanna Rosen. Miss Rosen is a specialist in international sanctions and financial crimes in the foreign affairs, defense, and trade division at the Congressional Research Service. Miss Rosen received her bachelor's degree from Duke University and her master degree from Georgetown University. So, welcome. Uh, next we have Mr. Leland Lazarus. Mr.
▶ 0:29:31Lazarus is the founder and chief executive off officer of Lazarus Consulting LLC. Mr. Lazarus formerly worked for the US Southern Command and served as a State Department diplomat in China and the Caribbean. Mr. Lazarus received his bachelor's degree from Brown University, his master's degree from Fletcher School of Law and Diplomacy at Tus University. So, welcome. Thank you. Uh Mr. John Casara. Mr. Casara is a retired special agent for the US Treasury where he investigated money laundering among other things. During his time at Treasury, Mr.
▶ 0:30:01Casaro worked for both the Financial Crimes Enforcement Network and within Treasury's Office of Terrorism and Financial Intelligence. Mr. Casaro received his bachelor's degree, University of California, San Diego, and his master degree from the American Graduate School of International Management. So, thank you very much. And next, we have Mr. Lewis Dito. Mr. Dito is the chief executive officer of mission litics where he advises entities on their detection, analysis, and disruption of financial and criminal networks. Mr.
▶ 0:30:31Dito has previously served as senior vice president, head of financial crime analytics at Bank of America and a special agent at the Bureau of Alcohol, Tobacco, and Firearms. Mr. Dito received his bachelor's degree from Westchester 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.
▶ 0:30:59Without objection, your written statements will be made part of the record. Miss Rosen, you are now recognized for five minutes for your oral remarks.
▶ 0:31:10Thank you, Chairman Muer, 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 Lyanna Rosen and I'm a CRS specialist on international sanctions and financial The subcommittee asked CRS to provide an introduction to what Chinese moneyaundering networks are, why they've emerged as a major moneyaundering threat, who is involved, and where, and how they operate.
▶ 0:31:37I'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 To start, Chinese moneyaundering networks or CMLNs generally refer to a type of professional moneyaundering services provider that operates in the United States and involves moneyaundering associates that may be located in multiple foreign countries, including the People's Republic of China.
▶ 0:32:03The 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 moneyaundering services provider for drug trafficking organizations and other transnational criminal organizations.
▶ 0:32:32CMLNs have also been characterized as able to offer cheaper, faster, and more reliable moneyaundering services than their CMLNs are also not necessarily new. However, the prevalence of ties between CMLNs and transnational criminal organizations of particular interest to you to the US does appear to have grown over the past decade or so.
▶ 0:32:55During this time frame, Mexico-based criminal groups have sought out CML 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 Hiliscoco New Generation Cartel.
▶ 0:33:18CMLN customers include not only foreignbased criminal groups, but also certain PRC citizens seeking access to more foreign currency than they can legally access. CMLNs 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.
▶ 0:33:42And on the other hand, they help foreign criminal groups gain access to the 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, policymakers can piece together some anecdotal insight into how CMLN's operate. For example, CMLNs are known to purchase from Mexican criminal groups US dollars that originated as proceeds of illicit drug sales.
▶ 0:34:12Once 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 nationals demand for those US dollars. The CML will also advertise the funds for sale for to potential buyers.
▶ 0:34:36Payment 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.
▶ 0:35:03CMLNs 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 a variety of money mules, straw purchasers, and complicit employees who use their positions at banks and other companies to facilitate laundering schemes.
▶ 0:35:25Congress has an important role in shaping the US response to CMLNs, especially in the context of ongoing counternarcotics policy efforts to combat fentanyl related trafficking through a follow- approach. Legislation passed in recent congresses reflects consistent policy interest in anti-moneyaundering and sanctions focused policy solutions, including the anti-moneyaundering act of 2020, the fentanyl sanctions act, the fendoff fentanyl act, and most recently the bust fentanel act.
▶ 0:35:53Thank you for the opportunity to provide you with this overview. I'd be happy to answer any follow-up questions you may have.
▶ 0:36:01Thank you. Um Mr. Lazareth, you are now recognized for your fiveminute remarks. Chairman Muer, 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.
▶ 0:36:28I've had the privilege of serving this nation as a US diplomat 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 moneyaundering 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.
▶ 0:36:54As you mentioned, Chairman Muer, the Treasury Department's own reporting shows a scale of this danger. From 2020 through 2024, suspected Chinese moneyaundering network activities was linked to more than 137,000 bank secrecy act reports totaling roughly $312 billion in suspicious Then in 2024, Operation uh Fortuner, US authorities alleged that the Cena lower cartel and Chinese criminals laundered more than $50
▶ 0:37:24million in drug proceeds. In another case with the name of Jidong Jang, he laundered more than 77 million dollars through more than 100 shell companies in the US, Mexico, and Cuba and China. His network was involved in fentinel precursors, cocaine, methamphetamine, logistics, and cartel But this isn't confined to just the US and Mexico.
▶ 0:37:52We're seeing the 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?
▶ 0:38:20Well, 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 sorry in se 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.
▶ 0:38:44Beijing has a capacity to crack down on underground banking just as they're trying to do with fentinel 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 should strengthen the corporate transparency act on beneficial ownership uh transparency.
▶ 0:39:07If 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 moneyaundering networks.
▶ 0:39:26Congress 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 AI researcher Dr. Emanuel Dorley have been developing Dragon Tracker, which is an AI enabled dashboard that maps Chinese linked criminal activity in the US and around the globe.
▶ 0:39:52And I hope that a platform like Dragon Tracker can help be a force multiplier for investigators, prosecutors, and bank compliance teams. Fourth, we've got to expand and update existing legislation to cover Chinese moneyaundering activities. This includes expanding section 314A and 314B of the Patriot Act, as well as special measure six of section 311 to cover fraud, um, cyber activities, and sanctions.
▶ 0:40:22Now, 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.
▶ 0:40:45Thank you, Mr. Lazareth. Uh, we now ask Mr. Casser to uh for for your five minutes of oral remark, sir.
▶ 0:40:56Good morning, Chairman Muer, Ranking Member Green, and distinguished members, thank you for the opportunity to testify today. It is an honor for me to be here. According to Mr. Ron Paul, a respected international anti-moneylaundering authority.
▶ 0:41:13He says, and I quote, "Anti-moneylaundering 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-moneylaundering efforts fail 99.9% of the time.
▶ 0:41:38In 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 see it in their families and their communities. The opioid, heroin, and cocaine epidemics are devastating.
▶ 0:42:01Gang 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.
▶ 0:42:21In my written statement before discussing the Chinese moneyaundering threat, I thought it important to first emphasize how pervasive money laundering is and the vulnerability of the US financial I discussed what I call the metrics that matter, forfeitures and convictions. In summary, our federal forfeite rate is less than 1% of the money laundered.
▶ 0:42:48And 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-moneylaundering environment is increasingly exacerbated because China has become the biggest transnational criminal actor and moneyaundering threat in the world today. Yes, China's involvement with fentanyl production and cooperation with cartels rightfully deserves attention.
▶ 0:43:19But instead of focusing on a single issue, we should examine what I call the totality of CCP Inc.'s involvement in criminal activity, moneyaundering methodologies, and enablers. They are intertwined and mutually supportive. In my latest book, I showed how China leads the world in the top 12 categories of transnational crime.
▶ 0:43:44In 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 1/ half of the money laundering worldwide. Chinese actors, sometimes working with the cartels, are actively pushing what I call an evolution in money laundering.
▶ 0:44:10Increasingly, money is no longer money in the conventional sense of the term. Chinese money launderers are experts at money transfer without money movement. The dirty money increasingly stays in place. Value is exchanged or swapped.
▶ 0:44:30Law enforcement is challenged to follow the money when illicit money doesn't China is the largest trading nation in the world, $6 trillion in 2025. Analysis shows that perhaps one quarter of this is suspect or deserves closer scrutiny. And this is important because trade is is involved in the movement of capital and China leads the world in capital flight. Trade is wrapped up in Chinese underground banking systems.
▶ 0:45:00Trade historically and culturally is also involved with value transfer and fight chen or flying money. And our primary anti-moneyaundering counter measure, the bank secrecy act or the 25 million pieces of financial intelligence that files with finen every year is not very effective against many of these Chinese- ccentric moneyaundering methodologies.
▶ 0:45:23In 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 launderers and dyu 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.
▶ 0:45:53I look forward to our discussion. Thank you. Thank you, Mr. Cassara. Uh we now recognize Mr. Dito. You are now recognized for five minutes for your oral remarks.
▶ 0:46:07Education 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 moneyaundering networks or CMLNs and cartels inside the US financial For the past two decades, I've worked at the intersection of federal law enforcement, finance, and advanced analytics, focusing on organized crime, elicit finance, and network
▶ 0:46:38My central point is this. CMLNs are not peripheral peripheral actors. They're essential financial clearing houses 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.
▶ 0:47:04These 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 elicit cash with overwhelming speed and accuracy while bypassing traditional perimeters.
▶ 0:47:34Simultaneously, 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 renmbby inside China and cleanly redirected in supply chains, real estate, shell companies, and seemingly legitimate commerce.
▶ 0:47:59By design, no single bank or agency can see this full cycle from end to end. In addition to cartels, CMLNs 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 moneyaundering problem. This a human exploitation problem as well.
▶ 0:48:29CMLN's operate a converged business model, move seamlessly across cyber crime, fraud, and moneyaundering. 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.
▶ 0:48:51CMLNs 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 CMLS is no longer just identifying suspicious entities. It's mapping and understanding the hidden relationships that connect them.
▶ 0:49:15To structurally disrupt CMLN's, we must organize our defense around education framework and analytics. First, education. We must mandate cross trainining across fraud, cyber, AML, and national security lines so investigators and analysts recognize how these threats Second framework establish a sustained whole of government and
▶ 0:49:45public 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.
▶ 0:50:12When leveraged properly, structured analysis shifts our posture from passive 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.
▶ 0:50:34If we allow TCOs and CMLNs to operate with mineral f 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 Uh thank you. Uh thank you all. Uh we'll now turn to member questions.
▶ 0:51:04Uh 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.
▶ 0:51:22We want to determine what is it is what's going on what's being done to uh defeat it to mitigate uh these 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 broad view of things.
▶ 0:51:44So what's what's happening is that uh from China the so-called precursors of fentinel are being shipped to Mexican cartels uh Mexican cartels are developing fentinel shipping it to the US making the sales take place within the US 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
▶ 0:52:14US 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 it's actually pretty simple.
▶ 0:52:35So, so everything's laundered and meanwhile uh they're um you know uh engaged in in me in developing and causing uh illegal drugs to be heavily sold within the United States. So, it's a it's a business. It's a machine. So, Mr. Rosen.
▶ 0:52:53Um, can you uh help describe or Miss Rosen, my apologies, um, what the Chinese moneying networks or CML uh, CMLNs are uh, are based upon my my description what your description would be.
▶ 0:53:13Yes, that's right. CMLNs are 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 CMLN's will operate with other activities as well. So in reality, there's a lot more complications.
▶ 0:53:36For example, uh on the trade-based moneyaundering side, the individuals involved may not realize that they're engaging in illicit drug proceeds. Trade can also go to other countries across the Middle East, internationally, other parts of South America, um as well as in
▶ 0:53:56So, the picture in reality can
▶ 0:54:00potentially be much more vast.
▶ 0:54:02Okay. Yeah, I was in South America recently and there's no question this is a serious concern there. Uh Mr. Casser, I'm going to jump to you quickly. The mules that you described, can you define what what you mean by the mules?
▶ 0:54:17Sure. Money laundering is 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.
▶ 0:54:35The 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 need a number of people to do that. Generally taking smaller sums of money and then placing it into an area where it can be further laundered, layered and then integrated.
▶ 0:55:02Okay. Um AI is coming into everything of course and there's I read through how there the flags go up for how to catch some of this uh you know moneyaundering from taking place and drug sales. Uh are we utilizing technology as Fininsen? uh is uh is law enforcement using uh our technology as as a weapon or is it being used against us? Mrs. Mr. Lazarus,
▶ 0:55:29thank you for that question. chairman, you know, I think that the Chinese moneyaundering 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.
▶ 0:55:54And 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 so that we really get a whole bigger picture of what's going on here.
▶ 0:56:24Thank 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.
▶ 0:56:34Thank you very much. Mr. De Tito, some of today's witnesses have highlighted uh the money laundering uh 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.
▶ 0:57:00They'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.
▶ 0:57:14Transparency 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 launder money, finance corruption, and evade US transactions." End quote.
▶ 0:57:42As a former law enforcement investigator and a banker focused on financial crime, Mr. Deito, 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?
▶ 0:58:16Thank 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.
▶ 0:58:37So if I can get more information that completes the picture on how comprehensive these 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.
▶ 0:59:00Uh 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 permanent. Shell companies have been used for years by money launderers to move and hide illicit funds with few restrictions through the US.
▶ 0:59:29Now 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.
▶ 0:59:49Just 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 that are used to gain access to and through the banking In my view and in my experience, I want to know who is who are the beneficial owners
▶ 1:00:20of the of companies that I'm Not only from a positive perspective of hey, these are the beneficial owners. We need to target these individuals. It also serves an exculpatory capacity as well because 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,
▶ 1:00:50it becomes exculpatory as well. So I want more information on the ownership and as one of my colleagues stated Genai the CMLNs are using Genai to establish shell companies day after day. So I want to know even even if the intelligence is false we can still gather patterns and conduct pattern analysis on information that may even be false.
▶ 1:01:18So I want more intelligence. 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.
▶ 1:01:47Gentle lady yields. The chair now recognizes the gentleman from Florida, Mr. Herodopoulos, for five minutes.
▶ 1:01:52Thank you, Mr. Chairman. And Mosen, I have first question for you, please. Uh, the Chinese money laundering 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 fentanyl drug trafficking.
▶ 1:02:21Part of this is through sanctions actions um and authorities related to that um in recent
▶ 1:02:29Well, again, I just it's a simple question. In your opinion, I really respect the work that CRS does. I love the group. They did 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?
▶ 1:02:49Congress has done a lot in terms of 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,
▶ 1:03:01I don't think there's again I'm not confrontational. So I just wonder if you had to do one thing, what do you what of all the things we've done, which is the most effective and which should we put more weight behind?
▶ 1:03:10I 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.
▶ 1:03:17Okay. Thank you. Um Mr. Casara, uh you were on the front lines. You get it. I I' I'd ask the same question. I I really like to know what the folks 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?
▶ 1:03:37Thank you for the question. I think if it was one thing in conjunction with another, the one thing would be I would mandate that the US government law enforcement to whole of government approach come up with a comprehensive strategy to go after Chinese transnational crime and strategy. It's not a single agency.
▶ 1:03:55It's not a single bureau uh responsibility has to be to uh all of government and in conjunction with that as part of that I would seriously give consideration to uh task forces that are specifically focused on the Chinese uh transnational crime threat regional task forces combining federal, state and local uh And Mr.
▶ 1:04:22Lazarus, if I could, uh, is this a part of a broader Chinese strategy to undercut the United States?
▶ 1:04:30Thank 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 stateowned enterprises.
▶ 1:04:53I 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
▶ 1:05:18and back to you Mr. Uh, Casar, if I could, is are 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
▶ 1:05:35As 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 thin. There's they consistently complain that there's no feedback if they give them this amount of information.
▶ 1:06:04and they're frustrated because their anti-moneylaundering compliance programs for banks alone cost roughly about $50 billion dollar a year or about 25 times more than we actually recover criminal proceeds every year. The current system is not working.
▶ 1:06:21Mr. J, first of all, put thanks for putting this hearing together. I really appreciate it. I read some materials before we we got here today and it and again it just sounds as usual that we need to do a better job of of coordinating the folks who interact with these different uh criminals unfortunately and and and be a more uh succinct way in which we can challenge these. So with that, Mr. Chairman, I yield back.
▶ 1:06:42Gentlemen yields. The chair now recognized the gentleman from California, Mr. Licardo, for five
▶ 1:06:46Thank you, Mr. Chair. Mr. Rosen, thank you very much for your testimony and further report that CRS provided about Chinese moneyaundering 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 item that's mentioned is underground banking. Is this analogous to what folks often refer to as informal value transfer systems?
▶ 1:07:13That'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 Fen or Flying Money. Uh there's often a lack of documentation, a lot of anonymity, a lot of informal transactions. Is that right?
▶ 1:07:29The 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. U 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?
▶ 1:07:59I do want to emphasize the point that you mentioned that there are other reasons for using the informal value transfer systems including legitimate remittances as well. So one of the challenges is balancing the issue of financial institution access to various communities around the world and combating money laundering.
▶ 1:08:18Well, I'm glad you mentioned remittances uh because I happen to have a bill. I know we all have a bill. uh a bill called the remittance expense minimization and 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.
▶ 1:08:40Um as you know there's often tax avoidance uh in these kinds of situations and folks who are lawfully engaged in remittances might choose some of these informal networks because they want to avoid taxes. Is that reasonable
▶ 1:08:55I think tax avoidance is one of the um methods or issues that have been associated with informal value transfer as well.
▶ 1:09:04And last year the Trump administration proposed attacks 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 HR1. Is that is that fair? I'm sorry. Would you repeat that again?
▶ 1:09:25Yeah. 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
▶ 1:09:36through which legislation?
▶ 1:09:38HR1. Uh that is the tax on any uh sending of cash money order cashiier check uh by persons who are not I'll have to follow up on the specifics of that legislation and its implications for potential moneyaundering risks.
▶ 1:09:57It'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 related to deterring
▶ 1:10:22uh people from using legitimate uh payment systems for remittances.
▶ 1:10:29That's a possibility.
▶ 1:10:31And it's fair to say that folks who are engaged in using remittances are particularly costsensitive. They're often uh families in great need. Is that is that fair? remitt remittance payments and the fees associated in the formal financial sector can be substantial.
▶ 1:10:48Thank you. 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 questions. Casar, I appreciate very much your work and many years of service to the country.
▶ 1:11:12Uh, you mentioned that an awful lot of this crime is happening where we see money transfer but no money movement. Is that
▶ 1:11:21That'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 countervaluation, this type of thing. But we're seeing more of it today. We're seeing ancient systems combined with 21st 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.
▶ 1:11:48So since they're not moving, we can't capture it and there's little or no financial intelligence reporting on it.
▶ 1:11:56And that's particularly true with regard to crypto. uh crypto is another topic alto together 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'm particularly concerned to the extent that we have known uh Chinese nationals who control DeFi systems that are purchasing for example $200 million of Trump memecoin
▶ 1:12:26$75 million of liberty crypto. I don't know. Gentleman's time has expired.
▶ 1:12:31Investigation. Thank you very much, sir.
▶ 1:12:34Uh, the gentleman's time has expired. The gentle woman from Georgia, Miss Williams, is now recognized for 5
▶ 1:12:41Thank you, Mr. Chairman, and good morning everyone. I represent Georgia's fighting fifth congressional district centered in Atlanta. And I want to 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 LLC's. Here's how it works. They buy property. The LC LLC has no identifiable owner.
▶ 1:13:09The property sits while the money gets clean. And the Atlanta Journal Constitution documented exactly what anonymous LLC ownership looks like on the ground in an a community in my district, Ashue 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.
▶ 1:13:37We 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 the 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. Mr.
▶ 1:14:00Casara at a basic level why does real estate money laundering through anonymous LLC's 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.
▶ 1:14:17Thank you for the question. There have been a number of studies not only in the 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 launderers uh to uh place layer and integrate their uh illicit proceeds.
▶ 1:14:38placing cash purchases, for example, layering, you just described LLC's, lack of beneficial ownership information, and then integration, the final stage of money laundering when you want to try to legitimize it. You purchase properties, shopping centers, homes, this type of thing. Um, [sighs] time kind of limits me.
▶ 1:15:02I 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 are purchasing these properties for cash. uh Chinese for example largest foreign uh uh uh buyers of American real estate about 70% of purchases are in cash.
▶ 1:15:31We 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 wannabe home buyers. And
▶ 1:15:53and that's exactly what we're feeling at home. And that's why this issue, which seemed a little complicated, hits right home for the people that are, 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 properties 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?
▶ 1:16:25I've been in anti-moneyaundering work for well over 30 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 fact coalition and others trying to make this a reality.
▶ 1:16:54Perhaps 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 how how can we make it efficient and effective? I leave that to others, but we need that.
▶ 1:17:20So quickly, Mr. Rosen, the corporate transparency act required LLC's to disclose their beneficial owners to fencen. If that law were fully in effect today, how would it change law enforcement's ability to trace money laundering through real estate and how would it help people like those back home in Ashue Heights? Thank you for the question.
▶ 1:17:40So, the Corporate Transparency Act would have created or is creating a central database that the Financial Crimes Enforcement Network maintains regarding
▶ 1:17:52and Miss Rosen, I am sorry, but I am out of time. So, I'm going to ask that you give me that answer in the records because my constituents back home in Asheview 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 yel back, Mr.
▶ 1:18:07Gentle lady yields. The chair now recognized the gentleman from Georgia, Mr. Louderdermilk, for five minutes.
▶ 1:18:12Thank 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.
▶ 1:18:32Yes, all of the above have been involved in Chinese moneyaundering networks. What's really interesting about these Chinese money laundering networks is the variety of ways in which they launder these illicit funds.
▶ 1:18:43Are they are they becoming more
▶ 1:18:47The most recent Treasury Department report on national money laundering risk assessments um did identify that Chinese moneyaundering networks continue to adapt and evolve to avoid law enforcement detection.
▶ 1:18:59Okay. Well, thank you. Um Mr. Sara. Um, we know that these networks attempt to circumvent the bank secrecy act uh filing obligations such as SARS by structuring deposits.
▶ 1:19:12Are there other ways these networks are able to circumvent certain BSA filing 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 25 billion pieces of financial intelligence that are filed every year with Treasury's Fininsen.
▶ 1:19:40SARS 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 where we're falling down. We don't have enough agents out there to make these cases.
▶ 1:20:10We can have the best leads coming out of Treasury's Fininsen, right? But if they get referred to an office and it's just going to go in somebody's inbox, paper or digital, and sit there because they don't have enough resources,
▶ 1:20:23we're not making cases.
▶ 1:20:25So, um I I fully understand where you're going with that. needing more resources is always important. But regarding uh Fininsen and SAR filings um under the current regime or the way that it's structured, is it a timing issue that the uh are not filing real time? Is it just the mass of the data that is filed that you have to go through?
▶ 1:20:52What what is it structurally about um BSA that prohibits really from you being able to track these perpetrators? Now
▶ 1:21:03there's approximately five five million SARS filed every year with Fininsend probably about half between financial institutions and half with money service businesses. That's a lot of information to process. Historically, Fininsson has failed on their analysis of that information. Their technology systems, their analysts themselves, their management system has historically been weak. I'm not just saying this because I used to work at Fininsen.
▶ 1:21:32Look at the record, ask the questions, and 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.
▶ 1:21:59All right. Thank you, Mr. Lazarus. On June 3rd, 2026, a Chinese national residing in Buford, Georgia, plead guilty to moneyaundering charges. He was engaged in a very sophisticated trade-based money laundering scheme that involved purchasing electronics with drugs cash drug cash and exporting them to foreign conspirators. And according to the Department of Justice, Chinese National operated in Georgia, North Carolina, and South Carolina, and we see cases like this one.
▶ 1:22:27Um, what does it tell us about how deeply embedded these networks have become in in the United 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 order to uh also do uh
▶ 1:22:57drug 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.
▶ 1:23:14And 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.
▶ 1:23:38Thank you. I yield back, Mr. Chair. Gentlemen guilts, the chair recognized the chair of our subcommittee on national security, Mr. Davidson of Ohio, for five minutes. Uh,
▶ 1:23:47thank you, chairman, for organizing this hearing. Thanks to our witnesses for your work in this field and your efforts to help us make good policy here today. 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.
▶ 1:24:13Um if we want to 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.
▶ 1:24:38That 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, we take away the cartel's ability to continue targeting and hurting Americans. Mr. Rosen, Finson identified approximately 312 billion in suspicious activity tied to Chinese moneyaundering networks and cartels between 2020 and 2024. of that activity.
▶ 1:25:05Do you have any idea what percentage was ultimately disrupted or resulted in enforcement
▶ 1:25:12As a proportion of that specific amount, the $312 billion, those were from suspicious activity 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. We don't have good metrics. Mr.
▶ 1:25:33Casser, uh earlier this year, 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?
▶ 1:25:59I can't answer your question with specificity because I'm no longer in the government and I don't have, you know, the latest uh uh 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 the pro and going after the the people and the products.
▶ 1:26:28This is the emphasis of law enforcement going after the people and the products. And the reason they do that, I'm being very candid, is because it's easier than going after the money. Law enforcement is statriven, right? So they want to get the seizures.
▶ 1:26:44They want to 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 going after a longterm complex moneyaundering case because it's hard 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.
▶ 1:27:08When 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 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.
▶ 1:27:38So, you know, for our panel, um, in your experience, I mean, would at least, uh, you know, investigating, uh, the individuals that are unlawfully present in the United States would, uh, know your customer laws help us tie anything to the immigration status and their flow of funds?
▶ 1:28:02I 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.
▶ 1:28:20And I think since we've started to enforce our southern border again, I think you can see fentanyl seizures have have 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
▶ 1:28:36the border is in fact secure and we didn't have to change laws to do that. We don't necessarily have to change laws to make sure that we know your customer and you're at least lawfully president of 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.
▶ 1:29:06I yield back.
▶ 1:29:07Mr. Chairman,
▶ 1:29:09Mr. Chairman, I ask unanimous consent to enter an Atlanta Journal Constitution article, Nobody Home: How Legal Corporate Secrecy Harm One Atlanta Neighborhood for the Record. Without objection, Miss Wood.
▶ 1:29:18Thank you.
▶ 1:29:22The chair now recognizes the ranking member of our subcommittee on oversight and investigations, Mr. Green of Texas, for five minutes.
▶ 1:29:29Thank you, Mr. Chairman. I thank the witnesses and I'm appreciative for the intelligence that you've shared today. uh you have talked about CLMs and at least one of you indicated that uh Xi Jinping may not be intimately associated with this. Uh was that you Mr. Lazarus?
▶ 1:29:55Um [clears throat] 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 is not a top priority for President Trump to bring up directly with
▶ 1:30:21We also know that the CCP is of course the largest techno athoritarian country in the world and has vast surveillance um technology. They can act. They they've done it in 2024.
▶ 1:30:36Let me intercede for just a moment. Not only can they act, would would you agree that it is likely that President Xi Jinping is aware, we have not seen evidence of that, hardcore evidence of that.
▶ 1:30:53But 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 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?
▶ 1:31:23If you disagree, raise your hand. 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 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.
▶ 1:31:55And uh would you agree that with a meme you have what we would call a person who 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 Mr. Cassandra, Mr. Casara,
▶ 1:32:28thank 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.
▶ 1:32:44You'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 But in this country, we have legalized a Ponzi scheme known as a memecoin 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.
▶ 1:33:15uh he has made millions of dollars with his Ponzi scheme, his memecoin. If we want to hold Xi Jinping accountable for his transgressions, wouldn't we want to 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.
▶ 1:33:35But what the president has cleverly done with his uh securities 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.
▶ 1:34:03The 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.
▶ 1:34:27It'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. Gentlemen yields. I do need to take a moment to remind uh to avoid engaging in personalities and puging the motives of another member or the president. Uh, with that, I now recognize the chair of our subcommittee on digital assets, Mr.
▶ 1:34:57Style of Wisconsin, for five
▶ 1:34:59Thank you very much, Mr. 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 memecoins. 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 moneyaundering networks.
▶ 1:35:19So many Americans have been impacted by fraud, by schemes, and a lot of this money is moving offshore outside the United States, and Chinese moneyaundering networks are at the forefront of that. I want to dive right into a question with you, Mr. 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?
▶ 1:35:49Are 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.
▶ 1:36:00Thank you for this question, I'm going to follow the facts. There are facts in various countries all around the world, including here in the United States of Chinese criminal actors [clears throat] 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
▶ 1:36:31or Chinese um and also in some circumstances Chinese stateowned enterprises. And so I I like to say that this is a symbiotic Again, there is no smoking gun or hardcore evidence directly linking some of these Chinese criminal uh laundering
▶ 1:36:50Understood 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's a backdoor opportunity for the Chinese government to surveil into what is being written on on WeChat.
▶ 1:37:15Is is the Chinese Communist Party just simply looking the other way or do you think that they are benefiting by the moneyaundering that's occurring uh inside these moneyaundering 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 actually trying to circumvent the laws of the
▶ 1:37:44really significant capital controls in China. So, in a sense, some of this was created by China's own making and trying to control individuals from getting their money offshore outside the control of the Communist Party.
▶ 1:37:54Correct. But at the same time, there's other individuals that are moving these funds are probably politically connected in China. China is looking the other way. Is that your analysis?
▶ 1:38:03100%. 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?
▶ 1:38:18If so, how can the United States place leverage to get them to do Well, in bilateral conversations at the highest levels between President Trump and Xi Jinping, um fentinil is is definitely talked about, but other criminal activities including the moneyaundering, I'm not sure is actually uh brought up and so that first and foremost needs to be brought up more consistently.
▶ 1:38:45Uh, I mean, we have to um basically call out the the Chinese for turning a blind eye to these criminal activities.
▶ 1:38:55Let me let me jump to Mr. Casar. You were you were shaking your head. It seemed like you agree 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?
▶ 1:39:10China is a command state. If they want to end something, they can end something. If they want to do something, they can do something. Um, we engage China politically, uh, with intelligence, commercially on basically every single sphere. But where they are most vulnerable is where we do not engage them.
▶ 1:39:34We 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.
▶ 1:39:43I I think you're exactly right. I think we need to go after the Chinese moneyaundering networks. I think we have to use all the tools in the federal government to do that in particular forcing China to actually play their role of shutting these down. Mr. Chairman, thank you for holding today's hearing. I yield back.
▶ 1:39:58Chairman yields. Chair now recognize the gentleman from Iowa, Mr. Nun, for five Thank you very much, Mr. Chairman. 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 launderer and has become a statebacked fraudster for Americans here.
▶ 1:40:19Chinese moneyaundering networks have become the banker's cartel for poisoning our communities, including over 40,000 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, Mr. 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 back networks don't just bank the cartels.
▶ 1:40:49They 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 has 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. Lazareth, you've advised Southcom, you've helped counter China in our own backyard.
▶ 1:41:17You 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.
▶ 1:41:42What's that 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 c countries all throughout Latin America and the Caribbean.
▶ 1:41:57What has also expanded is the belt and road initiative of of criminal actors who in many ways are expanding their influence not just in moneyaundering but also wildlife trafficking like shark fins and towaba fish bladds um 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,
▶ 1:42:27and it's corroborated by multiple, you know, NOS's and and think tanks and and reporting organizations. This 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 stateown enterprises that are operating. So, this is how this whole symbiation uh has developed over the
▶ 1:42:54Thank you, Mr. Lazworth. Mr. Kasa, 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.
▶ 1:43:14Now, 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 1970 to give uh financial crimes investigators tool to follow the money.
▶ 1:43:44Those were in the days where large amounts of drug money were sloshing around through western financial institutions. We could follow the money
▶ 1:43:52Things are different today. Okay. We still have those tools. We still get 25 million pieces of financial intelligence. from what you just described where money stays in place, money transfer without money movement or swaps in 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.
▶ 1:44:18So 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, 25 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.
▶ 1:44:42Meaning, 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,
▶ 1:44:54Mr. Gasar well said and it's one of the reasons we are leading in the CCP committee my bills the bridge act and the trains act to go after these international criminals that are operating and 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.
▶ 1:45:13Gentleman yields. Well, I would seeing no more members. I want to 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. Questions will be forwarded to the witnesses for their response. Witness witnesses, please respond no later than July 14th, 2026. This hearing is adjourned. Thanks again.