Cyber Criminals and Fraudsters: How Bad Actors Are Exploiting the Financial System During the Covid-19 Pandemic

CYBER CRIMINALS AND FRAUDSTERS: HOW BAD ACTORS ARE EXPLOITING THE FINANCIAL SYSTEM DURING THE COVID-19 PANDEMIC VIRTUAL HEARING BEFORE THE SUBCOMMITTEE ON NATIONAL SECURITY, INTERNATIONAL DEVELOPMENT AND MONETARY POLICY OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS SECOND SESSION JUNE 16, 2020 Printed for the use of the Committee on Financial Services Serial No. 116–96 ( U.S. GOVERNMENT PUBLISHING OFFICE 42–896 PDF WASHINGTON : 2021 VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\HBA168.100 TERRI HOUSE COMMITTEE ON FINANCIAL SERVICES MAXINE WATERS, California, Chairwoman CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina, NYDIA M. VELA´ ZQUEZ, New York Ranking Member BRAD SHERMAN, California ANN WAGNER, Missouri GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma WM. LACY CLAY, Missouri BILL POSEY, Florida DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri AL GREEN, Texas BILL HUIZENGA, Michigan EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio ED PERLMUTTER, Colorado ANDY BARR, Kentucky JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado BILL FOSTER, Illinois ROGER WILLIAMS, Texas JOYCE BEATTY, Ohio FRENCH HILL, Arkansas DENNY HECK, Washington TOM EMMER, Minnesota JUAN VARGAS, California LEE M. ZELDIN, New York JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia AL LAWSON, Florida WARREN DAVIDSON, Ohio MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee KATIE PORTER, California TREY HOLLINGSWORTH, Indiana CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio SEAN CASTEN, Illinois JOHN ROSE, Tennessee AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin BEN MCADAMS, Utah LANCE GOODEN, Texas ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas TULSI GABBARD, Hawaii ALMA ADAMS, North Carolina MADELEINE DEAN, Pennsylvania JESU´ S ‘‘CHUY’’ GARCIA, Illinois SYLVIA GARCIA, Texas DEAN PHILLIPS, Minnesota CHARLA OUERTATANI, Staff Director (II) VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\HBA168.100 TERRI SUBCOMMITTEE ON NATIONAL SECURITY, INTERNATIONAL DEVELOPMENT AND MONETARY POLICY EMANUEL CLEAVER, Missouri, Chairman ED PERLMUTTER, Colorado FRENCH HILL, Arkansas, Ranking Member JIM A. HIMES, Connecticut FRANK D. LUCAS, Oklahoma DENNY HECK, Washington ROGER WILLIAMS, Texas BRAD SHERMAN, California TOM EMMER, Minnesota JUAN VARGAS, California ANTHONY GONZALEZ, Ohio JOSH GOTTHEIMER, New Jersey JOHN ROSE, Tennessee MICHAEL SAN NICOLAS, Guam DENVER RIGGLEMAN, Virginia, Vice BEN MCADAMS, Utah Ranking Member JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas TULSI GABBARD, Hawaii JESU´ S ‘‘CHUY’’ GARCIA, Illinois (III) VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\HBA168.100 TERRI VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\HBA168.100 TERRI C O N T E N T S Page Hearing held on: June 16, 2020 .................................................................................................... 1 Appendix: June 16, 2020 .................................................................................................... 35 WITNESSES TUESDAY, JUNE 16, 2020 Coleman, Kelvin, Executive Director, National Cyber Security Alliance ........... 9 Jaffer, Jamil N., Founder and Executive Director, National Security Institute, and Assistant Professor of Law and Director, National Security Law & Policy Program, Antonin Scalia Law School, George Mason University ......... 10 Kellermann, Tom, Head, Cybersecurity Strategy, VMware, Inc. ........................ 5 Senn, Amanda, Chief Deputy Director, Alabama Securities Commission, and Chair, Cybersecurity Committee, North American Securities Administrators Association (NASAA), on behalf of NASAA ....................................................... 7 APPENDIX Prepared statements: Coleman, Kelvin ............................................................................................... 36 Jaffer, Jamil N. ................................................................................................. 41 Kellermann, Tom .............................................................................................. 53 Senn, Amanda ................................................................................................... 57 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Cleaver, Hon. Emanuel: Written statement of Americans for Financial Reform ................................. 68 Written statement of NAFCU ......................................................................... 69 Written statement of Third Way ..................................................................... 71 Gottheimer, Hon. Josh: Letters of support from various organizations for the Senior Investor Pandemic and Fraud Protection Act ........................................................... 116 Hill, Hon. French: Written statement of the American Securities Association .......................... 134 Written statement of the Consumer First Coalition ..................................... 140 Jaffer, Jamil: Written responses to questions for the record from Representative Hill .... 142 Kellermann, Tom: Written responses to questions for the record from Representatives Perl- mutter and Hill ............................................................................................. 145 (V) VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 K:\DOCS\HBA168.100 TERRI VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 K:\DOCS\HBA168.100 TERRI CYBER CRIMINALS AND FRAUDSTERS: HOW BAD ACTORS ARE EXPLOITING THE FINANCIAL SYSTEM DURING THE COVID-19 PANDEMIC Tuesday, June 16, 2020 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON NATIONAL SECURITY, INTERNATIONAL DEVELOPMENT AND MONETARY POLICY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The subcommittee met, pursuant to notice, at 12:01 p.m., via Webex, Hon. Emanuel Cleaver [chairman of the subcommittee] pre- siding. Members present: Representatives Cleaver, Perlmutter, Himes, Heck, Sherman, Vargas, Gottheimer, Wexton, Lynch, Garcia of Illi- nois; Hill, Lucas, Williams, Emmer, Gonzalez of Ohio, Rose, Timmons, and Taylor. Ex officio present: Representative Waters. Chairman CLEAVER. The Subcommittee on National Security, International Development and Monetary Policy will come to order. Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. Also, without objection, members of the full Financial Services Committee who are not members of this subcommittee are authorized to participate in today’s hearing. Members are reminded to keep their video function on at all times, even when they are not being recognized by the Chair. Mem- bers are also reminded that they are responsible for muting and unmuting themselves, and to mute themselves after they have fin- ished speaking. Consistent with the regulations accompanying H. Res. 965, staff will only mute Members and witnesses as appropriate when not recognized to avoid inadvertent background noise. Members are reminded that all House rules relating to order and decorum apply to this remote hearing. Today’s hearing is entitled, ‘‘Cyber Criminals and Fraudsters: How Bad Actors Are Exploiting the Financial System During the COVID-19 Pandemic.’’ I now recognize myself for 4 minutes for an opening statement. Let me, first of all, thank Lisa and the rest of the committee staff who have worked so hard to make this and all of our committee hearings possible. (1) VerDate Nov 24 2008 16:24 Feb 09, 2021 Jkt 095071 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\HBA168.100 TERRI 2 As the pandemic continues to move through our communities and our country, and to devastate the physical health of our citizens, it has managed to also infect the economic health of our nation. Congress, through a bipartisan effort, passed the CARES Act, which unlocked unprecedented relief to families and small busi- nesses, relief that, according to the Federal Reserve, may not be enough to prevent a long and protracted economic downturn. Nev- ertheless, significant investments were made to rescue millions of working citizens. In this time of suffering and hardship for so many, we are seeing criminal actors here at home and around the world redoubling their efforts to target families, financial institutions, and even arte- ries of government. Poverty and exploitation are indivisible evils. They have been long-time sidekicks. Just last month, the FBI unsealed a criminal indictment of what looks to be the first case of COVID-19-related money laundering and fraud brought by the Department of Justice. The criminal charge relates to a healthcare provider claiming to offer free COVID tests, but billions of Medicare dollars are being wasted. According to the Federal Trade Commission, there are nearly 1,000 reports of COVID-19-related fraud totaling over $0.5 million in my home State of Missouri. This is a fraction of the nearly 100,000 fraud reports nationwide totaling $60 million reported by the Commission. I would like to highlight that these reports do not even fully capture the full landscape of COVID-19-related fraud. The FBI’s Criminal Investigative

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