Lawmakers eye crackdown on illicit trade

Lawmakers eye crackdown on illicit trade
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Lawmakers are seeking to crack down on the billions of dollars that flow through illicit trade ahead of a potential vote later this year on President Obama’s massive Asia-Pacific agreement. 

Terror groups, drug cartels and criminal networks often fund their illegal businesses through complicated chains of transactions. Goods can be overpriced or underpriced to move monetary value between parts of a network as opposed to directly moving currency. Trade-based money laundering also includes counterfeiting products and falsifying information in customs reports.

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Lawmakers are mulling ways to make it easier for federal officials to fight back in an attempt to shore up support for the Trans-Pacific Partnership (TPP), the trade deal pending congressional approval.

"I want America to drive trade. I want to kick everybody's fanny. But I have to really see what TPP says,” said Rep. Roger WilliamsJohn (Roger) Roger WilliamsNew spotlight on secretaries of state as electoral battlegrounds GOP divided on anti-Biden midterm message The Hill's Morning Report - Bidens to visit Surfside, Fla., collapse site MORE (R-Texas). “We've got to be careful that we don't get all of these countries up in there that could do business with each other, money-launder and come back and kill our guys."

Hundreds of billions of dollars move through trade-based schemes each year, according to federal data.

U.S. officials this month arrested several members of Hezbollah who purchased weapons in Syria with drug revenue laundered through a Lebanese business. Some lawmakers said they worry Iran could bolster its funding of terror groups through trade-based money laundering now that some of the economic sanctions on the country have been lifted.

The national security and economic concerns are spurring action from lawmakers.

The House Financial Services Committee's Task Force to Investigate Terrorism Financing is in the early stages of crafting legislation intended to curb trade-based money laundering.

Members of the task force plan to meet with banking and industry experts as they work on a draft of legislation.

"Right now it's too early because we don't really have our hands around it,” said Williams, who sits on the task force. “We're learning more all of the time."

The fight over passage of the TPP is creating new urgency for the effort.

Congress isn’t expected to vote on the Asia-Pacific deal until after the November elections, and members of both parties have expressed reservations with the agreement. While Republicans are concerned with the deal’s impact on several industries — including tobacco and pharmaceuticals — Democrats fear it will lead to job losses and depressed wages in the U.S.

The possibility of the deal opening new funding opportunities for terrorist groups and organized crime has only heightened concerns about the agreement.

"Irrespective of whether we have TPP passing or not, we've got to make sure we're protecting ourselves and locking down all avenues where people are trying to get terrorist dollars transported,” said Rep. Gregory Meeks (D-N.Y.), who supports the TPP.

Concerns about trade-based money laundering have emerged from several of the TPP’s signatories, including Canada, Malaysia, Mexico and Singapore. That’s left a few lawmakers who voted to speed the deal through Congress looking for reassurance.

"We need to see what are the safeguards we have in there,” said Rep. Dennis Ross (R-Fla.), who voted for the “fast track” authority that prevents the deal from being amended by Congress. Ross said he hasn’t read the TPP yet.

"It would definitely turn my head on it. These things never seem to turn out the way they're supposed to, and that safeguard ... is going to be very important,” said Ross, a task force member.

Williams, another task force member, also voted for fast track and hasn’t made up his mind on the deal.

"It's a real issue that we're going to really look at as we move forward on whether we're going to pass TPP,” he said. “Things that are meant to be good, like the TPP, you need to take an extra look at, because you might have a faction in there that at the end of the day doesn't make it so good, and it could be funding terrorism."

The Treasury Department and Office of the United States Trade Representative (USTR) did not comment on how TPP would impact or address trade-based money laundering. The deal does require signatories “maintain legal regimes that prohibit anticompetitive business conduct, as well as fraudulent and deceptive commercial activities that harm consumers,” according to the USTR. 

Regardless of what happens with the TPP, a fix for trade-based crime is a priority for the terrorism finance task force. The panel probed experts on how they could halt illicit trade in a Feb. 3 hearing, all of whom urged lawmakers to focus on data sharing and international cooperation. 

“It all comes down to enforcement,” said John Cassara, a former U.S. intelligence officer and Treasury special agent. “If you want to get at these underground financial systems abuses by our adversaries, we need to encourage international trade transparency.”

Cassara suggested expanding Immigration and Customs Enforcement trade transparency monitoring throughout the Middle East, and bringing in multiple federal agencies bolster cooperation between countries and banks. 

Nikos Passas, a criminology professor at Northeastern University, called for increased data sharing so countries and businesses could put together otherwise distant pieces.

“The private sector does not want to deal with terrorists,” said Passas. “Countries very much want to see each others data ... especially if they can have our data.”

The task force will focus on a creating a crackdown system “that would be feasible, would be workable, would be efficient, but would be through enough to clean the bad actors out from that transaction,” said Rep. Stephen Lynch (D-Mass.), the panel’s ranking Democrat.

"I'm not sure that there's anything in the TPP that actually addresses that,” he said. "This is just another argument for going slow.”