Fentanyl. Youre watching live coverage on cspan. Let me welcome everybody to the hearing, and thank you very much for participating. I will start with opening remarks. We will turn to the distinguished cochair for his opening remarks and a brief video. We thank you all very much for being here. A modern day cartel runs more like a fortune 500 conglomerate than like a street gang with departments specializing in logistics, accounting, recruitment, chemical science, and they manage their empires with deadly sophistication. They operate like enormous businesses because a prophet like enormous businesses. Globally, drug traffic revenue totals as much as 652 billion. According to estimates from Global Financial integrity. Mexican cartels like sinaloa and you generation operate in the billions. Enforcement against these massive organizations usually focuses on their Distribution Networks, which makes some sense. The product is contraband, and the cases are easy once the drugs are found. But the Distribution Network is only a part of their operation. They have International Supply chains, bringing precursor chemicals from china. They have networks of shell entities and accounts to launder their dirty profits. Both are supply chains and their Revenue Management operate through Shell Companies and enablers. This includes u. S. Shell entities, im sorry to say. In 2021, treasury secretary yellens head, theres a good argument that the best place to hide and launder illgotten gains is actually the United States. Yes, the u. S. Has allowed cartels, terrorist groups, rogue states, chinese Money Laundering organizations to use phony u. S. Shell corporations and their illicit schemes. These Shell Companies may exist only on paper, but they enable deadly threats to americans lives and security. Nearly 108,000 americans died of overdose in 2022, according to the cdc. 436 were rhode islanders. The death of those 436 people ripples across my small state in a tide of heartbreak. Fentanyl and other synthetic opioids are behind many of these deaths. Fentanyls death toll was the direct result of shell corporations. Shell corporations that hide the delivery of precursor chemicals and shell corporations that hide the profits from sales. What doj indictment last year design a network of Shell Companies in wyoming to launder millions of dollars for the Sinaloa Cartel. In another case, narcotraffickers in new jersey were charged with using a Shell Company to buy fentanyl related substances from china which they pressed into counterfeit pills. The United States recently sanctioned syrian drug traffickers who used seemingly legitimate businesses to launder money. These examples are the tip of an iceberg. While this hearing is focused on the threats posed by Shell Companies serving the drug cartels, we cannot forget that terrorist groups, oligarch cronies, north korean operatives, and many others who wish harm to americans use these same opaque corporate structures. Let me be clear. A network of shell corporations servicing these foes and the enablers who facilitate them are a clear and present threat to our National Security. In the battle with narco lords, into the shadows of the dark economy can go a long way. So i think cochair grassley for our years of Work Together to shine beams of sunlight into that shadow economy. Our corporate Transparency Act is one such beam of light. On january 1st of this year, the Treasury Department established a Beneficial Owner registry to sort out this anonymous Shell Company mess. At long last, helping Law Enforcement and National Security officials find out who is behind american Shell Companies that facilitate criminality. The best place to hide and launder illgotten gains is actually the United States. This year, the treasury also announced puzzles related to dirty money and in the Residential Real Estate sector. I will be submitting encouraging comments in due course, and recommend comments on commercial real estate purchases. It is regrettable that well paid whitecollar american professionals, lawyers, brokers, and accountants provide services to bad actors. This is a National Security frontier in the global clash of civilizations between rule of law and corruption. My enablers crackdown on those aiding and abetting americas enemies by beaming some daylight into key sectors. We can organize our efforts better against the global dark economy. Ive introduced a bill to introduce a crossborder crime center to coordinate across all federal agencies investigations related to financial crimes as a nexus to the u. S. Border. Finally, we should provide greater resources to the Treasury Department, the department of justice, and other federal agencies on the front line against National Crime and corruption. Through u. S. Anonymous Shell Companies. With that, i turn it over to co chair grassley. I want to thank you for mentioning our work on this very recent legislation we can get more cooperation in the United States senate so i wouldnt have people at the back of my town meetings yelling out, how come you guys cant ever get along . I tried to explain to them that we can get along. Congress often talks about how criminals use Shell Companies to launder money. The corporate Transparency Act is an important part of that conversation. But its only a part of the equation. Criminals also use Shell Companies and muddled corporate structures to secure the tools of the drug trade. Today, id like to focus on one particularly troubling example. The u. S. Registered planes are used and are a critical tool i the cartels to move drugs. Before speaking further, i want to show you a brief video of the cartels using these planes to cause chaos, and then i will carry on. So lets see the video if we can. I hope this is not an example that video doesnt work. Drug cartels use Shell Companies and government loopholes to get their hands on american planes. That same open market also supplies a key part. You can still see in full there, meaning this plane originated in the United States. U. S. Planes carry cartel poison to u. S. Shores, killing americans and causing deadly destruction. We cant let bad actors put our security at risk. Protect american lives. Now, a certain date on april 20th, 2020, the Sinaloa Cartel crash landed on american airplane in guatemala. The plane was loaded with over 1600 kilos of cocaine, and that cocaine was destined for the United States. U. S. Law enforcement tracked the cartels movement, and the Guatemalan Military spring into action. The first provided just 10 soldiers. They were met with a cartel army of 150. The same scene repeated itself hundreds of times in countries throughout central america, leaving many to wonder how cartels get their hands on american planes. The answer is buried in reams of fraudulent paperwork piled up at the federal aviation administration, faa for short. Criminals disguised by Shell Companies duped the faa into registering planes with u. S. Tail numbers. Those tail numbers shield the planes from foreign Law Enforcement scrutiny. This allows millions of dollars worth of drugs to sail through the airspace undetected. Once the drugs reach their destination, the plane is destroyed, and the criminals walk away with net profits. The faa is aware of this problem, but hasnt changed his registration process. 10 years ago, in 2013, on Inspector General report warning the fbi about vulnerabilities in the system. Those warnings went largely ignored. Then in 2020, the Government AccountabilityOffice Report raised the issue once again. They recommended the faa make 15 corrections towards registration process. Four years later, the fbi has only implemented three of those 15 recommendations. Weve all seen the damage a plane can do in the hands of an enemy. None of us will ever forget how airplanes turned into weapons of mass destruction during the worst terrorist attack on american soil. 9 11, as you know. But 23 years later, the faa still appears to act as a representative rather than a watch guard. Id like to think our witnesses for being here. Particularly glad to have miss rebecca shay here to speak about what the geo 2020 report says. Lastly, i want to thank u. S. Law enforcement, military, and our allies who keep us safe from criminals. I look forward to discussing how congress can provide needed tools for this fight. Thank you. Thanks very much, senator grassley. I think our witnesses for being here. Ill give each a quick introduction and they will each have five minutes to make oral remarks. Your full testimony will be made a part of the record. Our first witness serves as senior director at head of the center of economic and financial power at the foundation for defense of democracy. She is a thought leader on geo lit political risk, anticorruption, and National Security. She was a senior director of the World Economic forum from 2010 to 2015, where she led the partnering against Corruption Initiative that launched the deeper Risk Response network. She sellable political and career positions with the u. S. Department of homeland security, including assistant secretary for policy and cargo and trade policy. Retired from a 32 year federal as an assistant special agent in charge, special educations division, where he led the office of Financial Operations through the chemical pharmaceutical and cyber section. His career, mr. Im supported investigations into the illicit financial schemes of the cartel, asian triads, chinese, and mexican synthetic opioid producers and their corporate enablers. I think mr. Im for his years of service and for being here today. Rebecca shay is a director on the audit and Investigative Service team at the Government Accountability office where she oversees fraud waste and abuse across a wide array of Government Programs and agencies. In 2020, she led a team examining issues in the faas process. Failures that enable cartel operatives, oligarchs, and other bad actors to secretly obtain highly desirable u. S. Registrations. Misshaped worked at geo for 25 years and holds. The Government Affairs director, the financial accountability and corporate transparency coalition. The Fact Coalition, where she leads groups engaged in federal policy wagers. Before joining the Fact Coalition, ms. Hanichak worked with nonprofits focused on Government Accountability and rule of law in the middle east. Her work supported the passage of Bipartisan Legislation targeting networks that fuel mass Human Rights Violations in syria and the middle east, and she campaigned to augment Counter Terrorism financing measures and prevent the abuse of u. S. Humanitarian aid. I appreciate all of you being here. I would also like to recognize a senator hassan has joined us. Chairman, white house, chairman grassley, members of the caucus. You so much for the opportunity to be here to discuss the corporate Transparency Act and the important work to abolish the opaque corporate structures that would facilitate transnational terminal activity, undermining accountability and threatening u. S. National security. No financial has aided enemies of america more than the anonymous Shell Company. It is the Gold Standard of secrecy. Allowing dirty money to move effortlessly across state lines and over National Borders without any risk that the underlying actors are indemnified. In 2021, Congress Passed the corporate Transparency Act outlawing anonymous american Shell Companies by requiring all Shell Companies to provide information about Beneficial Owners. The real persons behind the corporate form. Reliable information provides a critical boost to Law Enforcement, allowing investigators to truly follow the money, rather than chasing and list rings are Shell Companies, offshore entities, and disguised owners. The cta replaces the proverbial Law Enforcement dead end with a critical door to essential information. Drug trafficking operations have long exploited anonymous Shell Companies to launder money and aid in the transport of deadly narcotics into the u. S. In february 2022, a new york man pled guilty to laundering 650 million in drug proceeds through anonymous shell corporations, sending the funds to both domestic and foreign entities in china and hong kong. In 2018, a Chinese National and his father were indicted for operating a global synthetic Drug Trafficking organization that shipped fentanyl analogs in over 250 other drugs to 25 countries in 35 states within the u. S. , often relying upon Shell Companies for distributional Money Laundering. The drugs sold by the changs are confirmed to have resulted in at least two known fatalities in ohio. For every case uncovered, it is reasonable to assume that there are countless cases where the Successful Use of anonymous vehicles stymies Law Enforcement, and the cases never closed. The examples that follow are likely just the tip of the financial iceberg for an illicit industry that is estimated to generate as much is 650 billion a year globally. In idaho, a victim paid thousands of dollars to an online website called pharmacy website that purported to sell prescription drugs. In reality, the pills contained other substance is, including fentanyl and its analogues. They extradited a dominican citizen for transferring narcotics to the pharmacy website, but only after the idaho victim died of an opioid overdose in 2017. Consistent with what we see across Drug Trafficking networks, the suspect had used Shell Companies to launder money from the website. Just last month, a las vegas man was sentenced to eight years for processing and distributing hundreds of thousands of opioid pills. How did he launder the proceeds from their sale . Not surprisingly, it was shell corporations. Unfortunately, we tied our own hands, gifting drug cartels and their Money Laundering is a magic curtain to shield their identity and hide their wealth. The National Security risks of anonymity extend far beyond Drug Trafficking alone. Americas adversaries have been actively exploiting anonymous Shell Companies for decades to further nefarious plots and make america and the world less safe. No example illustrates this risk is concretely as victor bout, the Notorious International arms dealer who was convicted in 2011 for selling millions of dollars to terrorist organizations that aim to kill americans as well as fuel conflict in africa, latin america, and the middle east. They leveraged anonymous Shell Companies to hide his activities, including a dozen new Shell Company set up in texas, florida, and delaware. Vladimir putins allies have used two by 15 million mansions in washington, d. C. , while the iranian government has used Anonymous Companies