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On Sept. 18, 2024, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing entitled, “Protecting Americans’ Savings: Examining the Economics of the Multi-Billion Dollar Romance Confidence Scam Industry.” 

  • Overall Impression – Transnational criminal enterprises, primarily in Southeast Asia, are increasingly using romance scams to steal Americans’ savings. While Representatives Foster (D-IL) and Beatty (D-OH) highlighted cryptocurrency’s role, witnesses and members instead focused on the need for stronger financial reporting, public education, and international law enforcement cooperation to directly dismantle these criminal networks. 
  • Summary: The atmosphere was collegial, as the witnesses worked together in their respective positions. The topic was sobering, focusing mostly on the human cost to Americans. Attempts to ‘blame’ crypto were largely rebuffed by witnesses. 
     
  • Republican Position: Republicans focused on how government agencies, law enforcement, and financial institutions are, or could, coordinate with domestic and international partners to educate potential victims and dismantle related criminal organizations. 
     
  • Democratic Position: Democrats criticized Republicans for the budgetary and Continuing Resolution (CR) negotiations that will damage law enforcement’s ability to pursue enforcement actions against scammers. Rep. Bill Foster (D-IL) and Ranking Member Joyce Beatty (D-OH) emphasized the role of cryptocurrency in pig butchering scams, which was acknowledged, but not strongly endorsed, by witnesses in response. 

Witnesses 

  • Ms. Dara Daniels: Associate Director, Research & Analysis Division, Financial Crimes Enforcement Network (FinCEN) – Testimony Link  
  • Mr. Matthew Noyes: Cyber Policy & Strategy Director, United States Secret Service – Testimony Link 
  • Mr. Scott Rembrandt: Deputy Assistant Secretary for Strategic Policy, Office of Terrorist Finance & Financial Crimes, Department of the Treasury – Testimony Link  
  • Ms. Erin West: Deputy District Attorney, Santa Clara County District Attorney’s Office – Testimony Link 

Key Points 

Republican Theme: Cryptocurrency’s role in romance scams should be addressed, but more emphasis should be placed on other components of these schemes. 

  • Overview: While cryptocurrency plays a role in romance scams, the focus should extend beyond digital assets. Greater emphasis is needed on enhancing public awareness, improving traditional financial oversight, and fostering international collaboration to disrupt the broader criminal networks behind these schemes. Addressing these components will have a more significant impact than trying to stifle blockchain development. 
  • Rep. Dan Meuser (R-PA): “Do you agree that there has been a significant effort by the private sector and significant investment to protect customers and prevent fraud?” 
  • Mr. Scott Rembrandt (Treasury): “There’s no question that financial institutions in the U.S. writ large have stepped up their efforts… But it is a different story in many jurisdictions around the world that may lack the same legal frameworks, lack enforcement, lack supervision, lack of any action.” 
  • Rep. Zach Nunn (R-IO): “Law enforcement does have a crucial advantage against these criminals, and that’s something called Blockchain Technology.” 
  • TDC Perspective: We recognize that cryptocurrency plays a role in romance scams and agree with the need to prioritize the social engineering, human trafficking, and cybersecurity aspects of these schemes. Blockchain technology provides law enforcement with a unique tool to trace and combat fraud. Further, efforts to combat pig-butchering should emphasize public awareness, improve traditional financial oversight, and strengthen international collaboration to dismantle transnational criminal organizations. 

Democrat Theme 1: Republican obstruction regarding budgeting and appropriation and the ongoing CR debate inhibits law enforcement’s ability to combat fraud and illicit finance in crypto. 

  • Overview: Democrats argue that Republican obstruction on budgeting and appropriations, along with the ongoing CR debate, hampers law enforcement’s ability to effectively combat fraud and illicit finance in cryptocurrency. 
  • Rep. Maxine Waters (D-CA): “Extreme MAGA Republicans are attacking our nation’s law enforcement officers and… shutting down the government, which will defund the police and other agencies responsible for pursuing these criminals.” 
  • TDC Perspective: Highlighting the CR debate is a short-term partisan approach that detracts from the urgent need to combat fraud and illicit finance. Stable funding for law enforcement and regulatory agencies is essential but using these critical issues as political leverage distracts from the core issue of the hearing. We support bipartisan solutions that foster innovation while protecting consumers and addressing financial crime effectively. 
     

Democrat Theme 2: Cryptocurrency and digital assets represent a unique challenge to law enforcement’s ability to stop scams. 

  • Overview: Democrats argue that cryptocurrencies present a unique challenge for law enforcement due to their speed and anonymity in scams. However, witnesses emphasized that while crypto can be misused, its traceability through blockchain offers law enforcement a valuable tool to track illicit activities. 
  • Ranking Member Joyce Beatty (D-OH): “I understand that 90%, if not more, of these scams involve bad actors requesting victims obtain and send funds in cryptocurrency – why is that?”
  • Ms. Dara Daniels (FinCEN): “Cryptocurrency, like any financial instrument, can be and is exploited for illicit use…there are several attributes that make it easier to trace and [make it] interdictable by law enforcement, but these require a compliant AML/CFT framework across all jurisdictions.” 
  • Rep. Bill Foster (D-IL):  
    • “I’d like to highlight again the centrality of anonymous self-hosted crypto to this fraud.” 
    • “We often hear ‘If it’s legal for cash, it should be legal for crypto.’ The fundamental difference is the speed of escape [for digital assets] from the scene of the crime… It is much easier to use crypto as the instantaneous means of transfer.” 
       
  • Rep Juan Vargas (D-CA): “Is crypto good? Is crypto bad?” 
  • Ms. Erin West (Santa Clara DA): “I think it can be both. Crypto is how bad guys move money, but the fact that we can trace cryptocurrency on the blockchain gives us a unique ability to follow where this money went… Just because we can trace this money doesn’t mean we can seize the money.” 
  • Mr. Matthew Noyes: “I agree. [Treasury] describes it as similar to the highway system: that criminals use highways does not make highways bad.” 
  • Perspective: It is our continued position that cryptocurrencies are not unique in their use in scams and money laundering and focusing on crypto as ‘the problem’ will stifle innovation without addressing the core threat. Education remains essential to help the public identify romance scams. Finally, it was heartening to hear Rep. Nunn, Mr. Noyes, Ms. West, and Ms. Daniels speak to blockchain technology’s transparency as a technology for enforcing an AML/CFT regime. 

Legislative Proposals Discussed: 

  • The “Protect Small Business from Excessive Paperwork Act. (H.R. 9278)” 
    • This bill proposes to provide existing small businesses with an additional year to file beneficial ownership information. 
  • Additionally, the “BRAVE Burma Act (H.R. 8863)” was posted to the hearing. 
    • This bill extends the sunset, to require a determination with respect to the imposition of sanctions on certain persons of Burma. 
    • Southeast Asia, including Myanmar (Burma), is a hub for international pig butchering scams targeting US citizens.
  • Rep. Waters referenced the “Protecting Americans from Payment Scams Act (H.R. 9303).” 
    • This bill protects consumers when they are defrauded into initiating a transfer to a bad actor, lose funds through fraudulent bank wire transfers, and when accounts are inexplicably frozen or closed.
  • Rep. Nunn emphasized the importance of the bipartisan “Empowering Law Enforcement to Combat Financial Fraud Act (H.R. 9480)” as “Common sense legislation.” 
    • This bill permits State, local, and Tribal law enforcement agencies that receive eligible Federal grant funds to use such funds for investigating senior financial fraud, pig butchering, and general financial fraud. 
    • The bill also clarifies that Federal law enforcement agencies may assist State, local, and Tribal law enforcement agencies in the use of tracing tools for blockchain and related technology. 

Conclusion  

The hearing underscored the increasing prevalence of transnational romance scams and highlighted the need for a comprehensive approach beyond just focusing on cryptocurrency. Strengthening traditional financial oversight, public education, and international law enforcement cooperation are key to effectively dismantling these criminal networks. 

If you have any questions, please reach out to Policy@digitalchamber.org.