Legislature(2021 - 2022)BARNES 124
04/22/2022 09:00 AM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB404 | |
| Board of Chiropractic Examiners | |
| HB405|| HB406 | |
| HB408 | |
| HB392 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 333 | TELECONFERENCED | |
| += | HB 405 | TELECONFERENCED | |
| += | HB 406 | TELECONFERENCED | |
| *+ | HB 408 | TELECONFERENCED | |
| += | HB 91 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 404 | TELECONFERENCED | |
| += | HB 392 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 22, 2022
9:04 a.m.
MEMBERS PRESENT
Representative Zack Fields, Co-Chair
Representative Ivy Spohnholz, Co-Chair
Representative Calvin Schrage
Representative Liz Snyder
MEMBERS ABSENT
Representative David Nelson
Representative James Kaufman
Representative Ken McCarty
COMMITTEE CALENDAR
HOUSE BILL NO. 404
"An Act repealing the requirement that the Alaska Housing
Finance Corporation make a dividend available to the state, and
repealing associated definitions."
- MOVED CSHB 404(L&C) OUT OF COMMITTEE
CONFIRMATION HEARING(S):
Board of Pharmacy
Ramsey Bell, RPh Eagle River
- HEARD AND HELD
Board of Massage Therapists
Amanda Nosich, LMT Anchorage
Kelli Shew, LMT - Chugiak
- HEARD AND HELD
Board of Dental Examiners
Dominic Wenzell, DMD Girdwood
- HEARD AND HELD
Board of Nursing
Jody Miller, LPN Haines
- HEARD AND HELD
Board of Chiropractic Examiners
Walter Campbell, DC - Palmer
- HEARD AND HELD
HOUSE BILL NO. 405
"An Act relating to the establishment of trusts; requiring the
filing of certain trust information; and requiring compliance
with a federal law."
- HEARD & HELD
HOUSE BILL NO. 406
"An Act relating to the validity of trusts involving persons
sanctioned by the United States Department of the Treasury; and
relating to the recording of documents conveying land to persons
sanctioned by the United States Department of the Treasury."
- HEARD & HELD
HOUSE BILL NO. 408
"An Act relating to the business of money transmission; relating
to money transmission licenses, licensure requirements, and
registration through the Nationwide Multistate Licensing System;
relating to the use of virtual currency for money transmission;
relating to authorized delegates of a licensee; relating to
acquisition of control of a license; relating to record
retention and reporting requirements; authorizing the Department
of Commerce, Community, and Economic Development to cooperate
with other states in the regulation of money transmission;
relating to permissible investments; relating to violations and
enforcement of money transmission laws; relating to money
transmission license exemptions; relating to payroll processing
services; repealing currency exchange licenses; and providing
for an effective date."
- HEARD & HELD
HOUSE BILL NO. 392
"An Act relating to advanced practice registered nurses; and
relating to death certificates, do not resuscitate orders, and
life sustaining treatment."
- MOVED CSHB 392(HSS) OUT OF COMMITTEE
HOUSE BILL NO. 333
"An Act extending the termination date of the Board of Certified
Direct-Entry Midwives; and providing for an effective date."
- BILL HEARING CANCELED
HOUSE BILL NO. 91
"An Act exempting veterinarians from the requirements of the
controlled substance prescription database."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 404
SHORT TITLE: REPEAL AK HOUSING FINANCE CORP. DIVIDEND
SPONSOR(s): LABOR & COMMERCE
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C, FIN
04/04/22 (H) L&C AT 3:15 PM BARNES 124
04/04/22 (H) <Bill Hearing Canceled>
04/18/22 (H) L&C AT 3:15 PM BARNES 124
04/18/22 (H) Heard & Held
04/18/22 (H) MINUTE(L&C)
04/22/22 (H) L&C AT 9:00 AM BARNES 124
BILL: HB 405
SHORT TITLE: ESTABLISHMENT OF TRUSTS
SPONSOR(s): LABOR & COMMERCE
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C
04/08/22 (H) L&C AT 9:00 AM BARNES 124
04/08/22 (H) -- MEETING CANCELED --
04/15/22 (H) L&C AT 9:00 AM BARNES 124
04/15/22 (H) Heard & Held
04/15/22 (H) MINUTE(L&C)
04/18/22 (H) L&C AT 3:15 PM BARNES 124
04/18/22 (H) Heard & Held
04/18/22 (H) MINUTE(L&C)
04/20/22 (H) JUD REFERRAL ADDED AFTER L&C
04/20/22 (H) BILL REPRINTED
04/22/22 (H) L&C AT 9:00 AM BARNES 124
BILL: HB 406
SHORT TITLE: MORATORIUM ON TRUSTS/PROPERTY ACQUISITION
SPONSOR(s): LABOR & COMMERCE
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C
04/08/22 (H) L&C AT 9:00 AM BARNES 124
04/08/22 (H) -- MEETING CANCELED --
04/15/22 (H) L&C AT 9:00 AM BARNES 124
04/15/22 (H) Heard & Held
04/15/22 (H) MINUTE(L&C)
04/20/22 (H) JUD REFERRAL ADDED AFTER L&C
04/20/22 (H) BILL REPRINTED
04/22/22 (H) L&C AT 9:00 AM BARNES 124
BILL: HB 408
SHORT TITLE: MONEY TRANSMISSION; VIRTUAL CURRENCY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
04/04/22 (H) READ THE FIRST TIME - REFERRALS
04/04/22 (H) L&C, FIN
04/22/22 (H) L&C AT 9:00 AM BARNES 124
BILL: HB 392
SHORT TITLE: EXPAND ADV. PRAC. REG. NURSE AUTHORITY
SPONSOR(s): SNYDER
02/22/22 (H) READ THE FIRST TIME - REFERRALS
02/22/22 (H) HSS, L&C
03/24/22 (H) HSS AT 3:00 PM DAVIS 106
03/24/22 (H) -- MEETING CANCELED --
03/29/22 (H) HSS AT 3:00 PM DAVIS 106
03/29/22 (H) Heard & Held
03/29/22 (H) MINUTE(HSS)
03/31/22 (H) HSS AT 3:00 PM DAVIS 106
03/31/22 (H) -- MEETING CANCELED --
04/14/22 (H) HSS AT 3:00 PM DAVIS 106
04/14/22 (H) Moved CSHB 392(HSS) Out of Committee
04/14/22 (H) MINUTE(HSS)
04/20/22 (H) HSS RPT CS(HSS) NEW TITLE 4DP
04/20/22 (H) DP: FIELDS, SPOHNHOLZ, SNYDER, ZULKOSKY
04/20/22 (H) L&C AT 3:15 PM BARNES 124
04/20/22 (H) Heard & Held
04/20/22 (H) MINUTE(L&C)
04/22/22 (H) L&C AT 9:00 AM BARNES 124
WITNESS REGISTER
BRITTANY SMART, Special Assistant to the Mayor
Mayor's Office
Fairbanks North Star Borough
Fairbanks, Alaska
POSITION STATEMENT: Provided testimony on HB 404.
TOM WADSWORTH, PharmD
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to the appointment
of Ramsey Bell to the Board of Pharmacy.
RAMSEY BELL, RPh, Appointee
Board of Pharmacy
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Eagle River, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Pharmacy.
ROD GORDON, RPh
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to the appointment
of Ramsey Bell to the Board of Pharmacy.
DAN NELSON, PharmD
Director of Pharmacy
Tanana Chiefs Conference
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to the appointment
of Ramsey Bell to the Board of Pharmacy.
AMANDA NOSICH, LMT, Appointee
Board of Massage Therapists
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Massage Therapists.
KELLI SHEW, LMT, Appointee
Board of Massage Therapists
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Chugiak, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Massage Therapists.
DOMINIC WENZELL, DMD, Appointee
Board of Dental Examiners
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Girdwood, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Dental Examiners.
JODY MILLER, LPN, Appointee
Board of Nursing
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Haines, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Nursing.
WALTER CAMPBELL, DC, Appointee
Board of Chiropractic Examiners
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community, and Economic Development
Palmer, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Chiropractic Examiners.
KAISA DE BEL, Policy Analyst
Global Financial Integrity
Washington, DC
POSITION STATEMENT: Provided invited testimony during the
hearing on HB 405 and HB 406.
ROBERT SCHMIDT, Director
Division of Banking and Securities
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
answered questions.
ANDRES KNOBEL, Lead Researcher on Beneficial Ownership
Tax Justice Network
Buenos Aires, Argentina
POSITION STATEMENT: During the hearing on HB 405 and HB 406,
provided a PowerPoint presentation titled "Addressing the risks
created by Trusts," dated 4/21/22.
ROBERT SCHMIDT, Director
Division of Banking and Securities
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: On behalf of the governor, introduced HB
408 by way of a PowerPoint presentation titled "Alaska Uniform
Money Transmission Modernization Act HB 408 / SB 238," dated
4/11/22.
TRACY RENO, Chief of Examinations
Division of Banking and Securities
Department of Commerce, Community, and Economic Development
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 408, answered
questions.
MATTHEW LAMBERT, Esq., Non-Depository Counsel
Conference of State Bank Supervisors
Washington, D.C.
POSITION STATEMENT: During the hearing on HB 408, answered a
question.
ACTION NARRATIVE
9:04:30 AM
CO-CHAIR ZACK FIELDS called the House Labor and Commerce
Standing Committee meeting to order at 9:04 a.m.
Representatives Schrage, Snyder, Spohnholz, and Fields were
present at the call to order.
HB 404-REPEAL AK HOUSING FINANCE CORP. DIVIDEND
9:04:39 AM
CO-CHAIR FIELDS announced that the first order of business would
be HOUSE BILL NO. 404, "An Act repealing the requirement that
the Alaska Housing Finance Corporation make a dividend available
to the state, and repealing associated definitions." [Before
the committee was Version I, the proposed committee substitute
(CS) for HB 404, Version 24-LS1638\I, Klein, 4/15/22, adopted on
4/18/22.]
9:05:02 AM
CO-CHAIR SPOHNHOLZ reminded members that the changes made in
Version I of HB 404 [a bill sponsored by the committee] were
made at the recommendation of Alaska Housing Finance Corporation
(AHFC), which wanted the dividend to remain on the books due to
its importance in ensuring that AHFC's bond rating remains high
to keep the rates low in Alaska, allowing AHFC to be effective.
She said Version I requires the dividend be designated for
affordable and workforce housing, given the statewide housing
crisis in Alaska that includes a strategic problem for the
military in Fairbanks where military housing needs to be
upgraded and the issue in Anchorage where the average home now
is $420,000. In recent years of tight budgets, she continued,
the dividend has been spent on other state departments rather
than on workforce and affordable housing, so HB 404 will ensure
that AHFC continues to be effective moving forward and increases
the state's strategic investments without increasing overhead.
No new programs would be created, rather it would turn up the
dose of AHFC's investment in affordable and workforce housing.
9:07:12 AM
CO-CHAIR FIELDS opened public testimony on HB 404.
9:07:35 AM
BRITTANY SMART, Special Assistant to the Mayor, Mayor's Office,
Fairbanks North Star Borough (FNSB), testified that neither the
assembly nor the administration has taken a formal stance on HB
404 but are grateful that the state is looking at options to
help address the housing issue in the Fairbanks community and
statewide. She noted that she has served as the point of
contact working on the military housing issue in the community.
Housing is a challenge across Alaska and nationwide, she stated,
and tools should be looked at to help communities meet this
need. The borough looks forward to working with the committee
on this issue, she said.
9:09:09 AM
CO-CHAIR FIELDS closed public testimony on HB 404 after
ascertaining that no one else wished to testify.
9:09:18 AM
CO-CHAIR SPOHNHOLZ moved to report CSHB 404, Version 24-
LS1638\I, Klein, 4/15/22, from committee with individual
recommendations and the accompanying [zero] fiscal notes. There
being no objection, CSHB 404(HL&C) was moved out of the House
Labor and Commerce Standing Committee.
^CONFIRMATION HEARING(S):
CONFIRMATION HEARING(S):
^Board of Pharmacy
Board of Pharmacy
^Board of Massage Therapists
Board of Massage Therapists
^Board of Dental Examiners
Board of Dental Examiners
^Board of Nursing
Board of Nursing
^Board of Chiropractic Examiners
Board of Chiropractic Examiners
9:09:39 AM
CO-CHAIR FIELDS announced that the next order of business would
be consideration of the governor's appointees to various boards.
9:10:07 AM
TOM WADSWORTH, PharmD, testified in opposition to the
appointment of Ramsey Bell to the Board of Pharmacy. He related
that he is an Alaska pharmacist of 20 years, and his opinion
today is his own. He said the Board of Pharmacy is statutorily
mandated to establish and enforce professional standards,
competence, and rules of conduct for the pharmacy profession in
Alaska. Members of the board, he continued, should be
experienced pharmacists who demonstrate competence and
commitment with evidence based best practices and standards of
care. Dr. Wadsworth stated that Ramsey Bell's social media
posts over the last few years demonstrate extreme politicized
and conspiratorial views that are strongly at variance with the
profession's established time proven standards and best
practices. He maintained that Dr. Bell's sentiments are in
direct contradiction to the mission of the Board of Pharmacy and
her views will be imposed through the Board of Pharmacy and its
regulations. He said he therefore strongly opposes her
appointment.
9:12:01 AM
CO-CHAIR FIELDS noted that it was his error to not have first
turned to the appointee, Ramsey Bell, for testimony. He invited
Ms. Bell to testify.
9:12:37 AM
RAMSEY BELL, RPh, Appointee, Board of Pharmacy, Division of
Corporations, Business and Professional Licensing, Department of
Commerce, Community, and Economic Development (DCCED), testified
as appointee to the Board of Pharmacy. She said she arrived in
Alaska five years ago from Illinois and is a pharmacist with 22
years of experience. She stated that the biggest asset she
brings to her appointment is that she values truth over comfort.
She related that she became a pharmacy manager within nine
months of her graduation and licensure in 2000.
DR. BELL stated that she did not hesitate in applying for the
Board of Pharmacy as she is ready to serve Alaskans and the
profession of pharmacy in general. She said she will bring to
the table her ability to effectively communicate with people
from diverse backgrounds, personalities, beliefs, and styles of
communication, regardless of how they feel about her. She
expressed surprise at Mr. Wadsworth's testimony and said she had
not been approached by him regarding her abilities to serve.
DR. BELL related that she would bring to the table her desire to
seek and share truth regardless of the discomfort it brings to
others or the attacks it will bring on herself. She said she
has spoken openly over the past two years about her support of
several things that have been labeled as controversial. She
believes in early treatment for all health conditions and off-
label uses of drugs, she continued, and those concepts are not
just limited to COVID-19. She added that she believes in every
person's right to decide with their health provider what is best
for them, as well as fully informed consent regarding medicines
and vaccines, beliefs that are not limited to COVID-19.
DR. BELL stressed that she doesn't back down from opening
dialogue because of what people might say or think; she
advocates for what is right and discusses points. It would have
been easy to scrub herself from media once appointed as was
suggested by several people, she continued, but then people
would not get the full picture of who she is and what she stands
for. Health care and pharmacy will never be one size fits all,
she stated, and she will never advocate for a solution that that
is the case. She argued that the public's trust in the medical
profession, including pharmacy, has decreased significantly due
in part to a lack of transparency, respect, and discussion. She
said that in her role on the Board of Pharmacy she wants to help
restore the public's trust in health care and she will serve the
people of Alaska regardless of the attacks that come at her.
9:19:13 AM
CO-CHAIR FIELDS opened public testimony on Ms. Bell's
appointment. He said Dr. Wadsworth's comments are included in
public testimony.
9:19:36 AM
ROD GORDON, RPh, testified in opposition to the appointment of
Ramsey Bell to the Board of Pharmacy. He stated he has been a
pharmacist for 42 years, the last 22 years being in Alaska. He
said the Board of Pharmacy matters in how pharmacy is provided
in the state of Alaska, and Ramsey Bell may not be the best
person for the board given her public media posts. A board
member's primary concern, he maintained, must be for the general
public's safety and health, and a board member's mindset must be
based on objective data driven science, not influenced by
political bias. Regarding use of drugs off label, he stated
that using drugs off label in pharmacy is only appropriate when
there is clinical data to support the safety and efficacy of
that drug. He related that on social media Dr. Bell has
represented strong support for the use of ivermectin to treat
COVID-19, and she has stated that the Centers for Disease
Control and Prevention (CDC) had restricted the use of
monoclonal antibodies to boost the bottom line of pharmaceutical
companies. That that is not the mindset of a person who puts
objective science-based medicine at the forefront, Dr. Gordon
argued. He urged that thought be given to the appointment of
someone else.
9:24:20 AM
DAN NELSON, PharmD, Director of Pharmacy, Tanana Chiefs
Conference, testified in opposition to the appointment of Ramsey
Bell to the Board of Pharmacy. He stated he is a pharmacist of
20 years in Alaska and is speaking on behalf of himself and his
employer Tanana Chiefs Conference. He said Alaska Natives have
been especially hard hit by the effects of the COVID-19 pandemic
with higher rates of hospitalization, death, and other long-term
effects.
DR. NELSON recounted that throughout the pandemic, medical and
scientific knowledge and information changed, grew, and improved
as additional studies were done and analyzed, which led to an
ever-changing landscape of medical literature, best practices,
and clinical guidelines. New vaccines and therapeutic options
to treat the SARS-CoV-2 virus were done at a breakneck pace, he
added, a pace where changes can and do become confusing.
Medical decisions and recommendations must be made from looking
at the basics and what the scientific evidence says, he argued,
they should not be unmoored from their scientific basis and
morphed into political based ideology.
DR. NELSON said he feels that Ramsey Bell has gone offtrack in
her privilege to practice in pharmacy. He maintained that her
approach to literature evaluation, and application of that
evaluation, is not in line with professional standards, and is
not in the best interest of Alaska residents and is dangerous to
Alaska Native and American Indian communities. He urged members
to not vote for Dr. Bell's confirmation.
9:27:09 AM
CO-CHAIR FIELDS stated he has informed the governor's staff that
he is unable to support Dr. Bell's confirmation for many of the
reasons stated by the testifiers.
9:27:37 AM
AMANDA NOSICH, LMT, Appointee, Board of Massage Therapists,
Division of Corporations, Business and Professional Licensing,
Department of Commerce, Community, and Economic Development
(DCCED), testified as appointee to the Board of Massage
Therapists. She noted that she served on this board directly
after its conception, took a break after that term ended, and
would now like to serve again. She said she has had an
extensive relationship with this bill from its conception and
representing it to the state and other massage therapists and to
the public.
9:28:16 AM
KELLI SHEW, LMT, Appointee, Board of Massage Therapists,
Division of Corporations, Business and Professional Licensing,
Department of Commerce, Community, and Economic Development
(DCCED), testified as appointee to the Board of Massage
Therapists. She stated she has been a massage therapist since
2011, having been originally licensed in another state and then
licensed in Alaska in 2013. She said she looks forward to
serving on the board to help protect the public and help advance
the massage therapy profession. She has worked in a variety of
settings and types of employment, she added, so she is versed in
how and why any issues would affect massage therapists.
9:29:13 AM
DOMINIC WENZELL, DMD, Appointee, Board of Dental Examiners,
Division of Corporations, Business and Professional Licensing,
Department of Commerce, Community, and Economic Development
(DCCED), testified as appointee to the Board of Dental
Examiners. He stated that he received his Doctor of Dental
Medicine from Oregon Health and Sciences University. He noted
that prior to his being appointed to this board the first time
he was chair of the Alaska Dental Society peer review for three
years. He said he is a dental licensing examiner for the
Commission on Dental Competency Assessments and for the Western
Regional Examining Board. He further stated that he believes in
patient protection through self-regulation.
9:30:31 AM
JODY MILLER, LPN, Appointee, Board of Nursing, Division of
Corporations, Business and Professional Licensing, Department of
Commerce, Community, and Economic Development (DCCED), testified
as appointee to the Board of Nursing. She stated she has over
42 years of nursing experience, including experience in the
emergency room and critical care. She said she has been working
with the Southeast Alaska regional Health Consortium (SEARHC) in
Haines since 1994. She added that she looks forward to serving
and sharing her knowledge and experience as there are different
challenges to being a nurse in a hospital compared to a rural
community.
9:31:49 AM
WALTER CAMPBELL, DC, Appointee, Board of Chiropractic Examiners,
Division of Corporations, Business and Professional Licensing,
Department of Commerce, Community, and Economic Development
(DCCED), testified as appointee to the Board of Chiropractic
Examiners. He stated he has been in chiropractic practice for
17 years in Alaska and is humbled and honored by the
appointment.
[Advancements of the appointees were held over.]
HB 405-ESTABLISHMENT OF TRUSTS
HB 406-MORATORIUM ON TRUSTS/PROPERTY ACQUISITION
9:32:17 AM
CO-CHAIR FIELDS announced that the next order of business would
be HOUSE BILL NO. 405, "An Act relating to the establishment of
trusts; requiring the filing of certain trust information; and
requiring compliance with a federal law." and HOUSE BILL NO.
406, "An Act relating to the validity of trusts involving
persons sanctioned by the United States Department of the
Treasury; and relating to the recording of documents conveying
land to persons sanctioned by the United States Department of
the Treasury."
CO-CHAIR FIELDS [continued] invited testimony on HB 405 [and HB
406]. He said this additional invited testimony will address
Representative Kaufman's question about identifying the problem
statement that [HB 405 and HB 406] are trying to address.
9:32:48 AM
KAISA DE BEL, Policy Analyst, Global Financial Integrity (GFI),
provided invited testimony during the hearing on HB 405 and HB
406. She said she is a policy analyst affiliated with Global
Financial Integrity (GFI), a Washington DC-based think tank
focused on providing evidence-based research and solutions to
counter ways in which criminal actors abuse the US economy to
hide their illicit profits. She paraphrased from a document in
the committee packet titled "Illicit Finance and Real Estate
Opacity in Alaska," dated 4/22/22. Ms. de Bel spoke as follows:
Sanctioned governments, kleptocrats, and drug
traffickers have long used the US real estate sector
as a vehicle to evade sanctions and hide their ill-
gotten gains. Simply put, real estate is an
attractive safe haven for illicit money because it
retains value, while also creating the opportunity for
long-term profits through rentals, property flips, and
land development. Most significantly, the US real
estate market permits the anonymous purchase of real
estate through shell companies and trusts. This makes
it easy for bad actors and criminals to hide their
identity and, in turn, protects their wealth from
asset recovery efforts as well, both in their home
jurisdiction and in countries where they are
sanctioned.
Recent investigative efforts like the Pandora Papers
are just one in a long line of reports exposing high-
profile real estate money laundering cases that span
the country. Last year, GFI published a report that
found that more than $2.3 billion was laundered
through US real estate in cases reported between 2015
and 2020. [Global Financial Integrity's] analysis of
those cases shows two very clear trends.
First, the most common money laundering technique in
the real estate sector is the use of complex legal
structures to purchase properties. The use of trusts
and companies makes it easy for criminals to hide
ownership of real estate, while at the same time being
able to flaunt in plain sight the evidence of ill-
gotten wealth. Sometimes these were companies and
trusts registered domestically, but it also often
featured companies registered abroad.
The second trend found in GFI's analysis, is that the
US real estate sector particularly attracts actors
with political ties to foreign regimes, including
foreign adversaries like North Korea, Iran, and
Venezuela. In 82 percent of the analyzed cases, the
illicit money invested in the real estate sector had
foreign origins. And in more than half of the cases,
the beneficial owner of the property was a foreign
politician or their associate who obtained their
wealth through corrupt activities. This high influx
of foreign and corrupt money poses a serious threat to
US national security and global democratic norms.
Unfortunately, the Alaskan real estate market has not
been excluded from this trend. For instance, between
2011 and 2014, an Alaskan resident helped the Iranian
government transfer $1 billion to various businesses
and individuals around the world, in violation of the
US sanctions regime. This Alaskan resident received
$10 million dollars for his role in the scheme and
laundered this money through real estate purchases in
Alaska. Through various shell companies, he held more
than 20 condominiums and homes in Anchorage and Eagle
River.
And despite these known risks across the country, real
estate transactions are subject to limited federal
oversight. The only binding federal regulation
focused on real estate risks are Geographic Targeting
Orders or GTOs. These temporary orders require title
insurance companies to report the beneficial owner of
residential real estate purchases but they only
apply in a select group of 22 counties across the
country.
This policy has several serious shortcomings and is
inadequate to address real estate money laundering and
sanctions evasion risks. First, the GTOs do not apply
in Alaska. In fact, GFI's research found that the
majority of real estate money laundering cases
involved properties located outside of the GTO
geographic scope, with Alaska proven to be one of the
bigger real estate money laundering hubs as you can
see on this map. Even if the GTOs would apply in
Alaska, it would be very easy to get around them
because title insurance is only mandatory when the
buyer takes out a loan. Kleptocrats, oligarchs, and
high net worth criminals have plenty of cash at their
disposal to acquire real estate without a loan or
title insurance, thereby evading the GTOs. And while
the Corporate Transparency Act, which was passed by
Congress last year, will address some of the opacity
in the US real estate sector, it will not help in
identifying the beneficial owner when a foreign
company or trust buys real estate, which is just as
common.
Given the loopholes in the federal regulatory system,
it is critical to seek solutions at the state level to
address these gaps. [Global Financial Integrity]
therefore supports House Bills 405 and 406 as an
important step to address the opacity in the real
estate sector in Alaska. To ensure that HB 406 brings
greater transparency without loopholes for bad actors
to exploit, GFI urges Alaska to incorporate the
following policy recommendations:
First, at a minimum, the basic goal of HB 406 should
be to create a clear picture of the beneficial
ownership of real estate in Alaska. The requirement
of identifying the beneficial owner should apply to
all legal entities buying real estate, including LLCs
[limited liability companies], trusts and other legal
entities formed and registered in the US, as well as
abroad.
Second, in addition to beneficial ownership, the
source of funds and the identification of politically
exposed persons should also be reported. These two
additional key pieces of information are critical to
spot red flags in a transaction and identify high-risk
actors.
Third, instead of putting the reporting burden on one
gatekeeper, it should be placed on multiple real
estate professionals in cascading order. This creates
a shared responsibility among real estate
professionals and prevents bad actors from evading the
requirement by bypassing a title agent.
Fourth and finally, the bill should apply to all real
estate transactions that were not financed with a loan
from US-based financial institutions, because those
are currently the only actors who are required under
federal law to conduct any type of anti-money
laundering checks in a real estate transaction in the
US. These reforms would make HB 406 more effective
while at the same time ensure it has minimal costs on
Alaskan real estate professionals.
In conclusion, Alaska has the opportunity to counter
the use real estate as an easy mechanism for bad
actors to evade sanctions, gain access to the US
dollar, and the US financial system. We encourage you
to take this opportunity.
9:40:18 AM
CO-CHAIR FIELDS encouraged Ms. de Bel to work with his staff on
crafting amendments to tighten HB 406. He inquired whether
preventing money laundering and hiding ill-gotten gains by
sanctioned individuals requires both state and federal laws or
whether it is sufficient to wait for the federal government.
MS. DE BEL replied that there isn't any important federal
legislation underway. But the federal Corporate Transparency
Act [of 2021], she specified, was a very important step in
addressing some of the issues of the past in the real estate
sector and the illicit use of legal entities such as LLCs and
trusts general. Some things remain unclear under the Corporate
Transparency Act, she advised, and those are crucial issues.
Under the Corporate Transparency Act, corporations, limited
liability companies, and other similar entities formed and
registered to do business in the US in any US state will be
required to disclose their beneficial owner to a directly housed
financial entity and that includes foreign companies but only
when they are registering in the US to do business. Because of
the qualification "to do business," she explained, it is unclear
whether the use of foreign LLCs or trusts for the purchase of,
for example, residential real estate would be covered by that
because that might not qualify as doing business. That weakness
means that if, for example, a Russian LLC or trust buys property
in Alaska, that would not qualify as doing business and would
therefore not necessarily be captured by federal legislation.
Another loophole, Ms. de Bel explained, is that the application
of the [contractual trust arrangement] (CTA) to trusts remains
unclear to this day, so it is very important that states are
proactive about addressing that loophole with state level
legislation.
9:42:19 AM
CO-CHAIR FIELDS thanked Ms. de Bel for her testimony. He said
the Pandora Papers have provided a window into how criminals
exploit trusts and launder money through real estate, yet the
full extent to which criminals have exploited trusts within
Alaska is unknown because the view of the Pandora Papers is
limited. He inquired about what can be said to policymakers in
states where a limited degree of leaks has suggested that the
scope of this problem could be significant, but the full scope
cannot be understood until there are greater transparency laws.
MS. DE BEL remarked that that is an important question to look
at. She said GFI's research was based on real estate money
laundering cases that are in the public domain, which were cases
reported by journalists such as the Pandora Papers or law
enforcement and actions. It is unknown what else is out there,
she continued, because it is unknown across the US who owns
these properties or who owns these legal entities or trusts. It
is very important to get into that, she advised, since the
Pandora Papers and GFI research are just the tip of the iceberg.
She noted that cases are being seen in places where real estate
money laundering wasn't expected, such as Alaska, which points
that it is likely a much bigger problem than is known.
9:44:35 AM
CO-CHAIR FIELDS inquired about Kenneth Zong, an identified money
launderer in Alaska.
MS. DE BEL answered that he was indicted and his properties
across Alaska and elsewhere in the US seized because it was
proven they were purchased with money he received for helping
the Iranian government evade sanctions.
CO-CHAIR SPOHNHOLZ asked how Kenneth Zong's fraud and laundering
were identified.
MS. DE BEL replied that she doesn't know the specifics of how
law enforcement detected this case. She pointed out that only
after a lead is found can the threads be pulled to find all
properties someone owns, and that is why it is very helpful to
have more beneficial ownership information behind those
entities. She offered to get back to the committee with more
details on the Zong case.
9:46:17 AM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community, and Economic Development
(DCCED), related that his understanding of Mr. Zong's indictment
comes from a 1/5/21 press release issued by the US Attorney's
Office for the District of Alaska announcing the indictment.
According to the press release, he said, Mr. Zong laundered
money in Korea, then the laundered money came into Anchorage and
other places, and Mr. Zong and his son invested it. At the time
of the press release, he continued, Mr. Zong was serving time in
Korea for violating Korea's money laundering laws, as well there
was police action/law enforcement action being taken by the
United Arab Emirates and the Republic of Georgia.
9:47:45 AM
CO-CHAIR SPOHNHOLZ asked whether the US's ability to prosecute
was driven by another government's prosecution or whether the US
was able to document something that allowed it to prosecute.
MR. SCHMIDT answered that the indictment happened when Mr. Zong
was already in jail in Korea, which suggests that the Korean
action significantly pre-dated any law enforcement action in the
US. The press release, he continued, said the prosecution would
not have been possible but for coordination with the law
enforcement agencies of other countries.
9:48:35 AM
CO-CHAIR FIELDS continued invited testimony on HB 405 and HB
406.
9:48:59 AM
ANDRES KNOBEL, Lead Researcher on Beneficial Ownership, Tax
Justice Network, during the hearing on HB 405 and HB 406,
provided a PowerPoint presentation titled "Addressing the risks
created by Trusts," dated 4/21/22. He paraphrased from the
second slide which stated [original punctuation provided]:
The Tax Justice Network believes our tax and financial
systems are our most powerful tools for creating a
just society that gives equal weight to the needs of
everyone. But under pressure from corporate giants
and the super-rich, our governments have programmed
these systems to prioritise the wealthiest over
everybody else wiring financial secrecy and tax havens
into the core of our global economy. This fuels
inequality, fosters corruption and undermines
democracy. We work to repair these injustices by
inspiring and equipping people and governments to
reprogramme their tax and financial systems.
MR. KNOBEL moved to the third slide titled "Risks created by
Trusts." He paraphrased from the slide, which stated [original
punctuation provided]:
Although many trusts are used for legal and legitimate
purposes, trusts' secrecy and asset protection
properties can be exploited by anyone (e.g. criminals,
money launderers, etc)
Not even authorities know how many trusts exist, the
assets they hold nor the people who benefit from them.
MR. KNOBEL displayed slide 4 to provide an example of the risks
created by trusts [as reported by The Guardian]. He paraphrased
from the slide, which stated [original punctuation provided]:
Alisher Usmanov's assets may be out of reach of
sanctions regime
Alisher Usmanov, the Russian oligarch once said to be
the UK's richest person, claims to have placed
hundreds of millions of pounds of his assets into an
irrevocable trust, potentially leaving them outside
the sanctions regime established by western
governments.
MR. KNOBEL showed slide 5 to provide another example of the
risks created by trusts [as reported by The Washington Post].
He paraphrased from the slide, which stated [original
punctuation provided]:
A Texas billionaire evaded $2 billion in taxes, feds
say. Now he's charged in the 'largest-ever' tax fraud
case.
MR. KNOBEL proceeded to slide 6 and continued his discussion of
risks created by trusts. He paraphrased from the slide, which
stated [original punctuation provided]:
World Bank & UNODC' "The puppet masters":
Investigators interviewed as part of this study argued
that the grand corruption investigations in our
database failed to capture the true extent to which
trusts are used. Investigators and prosecutors tend
not to bring charges against trusts, because of the
difficulty in proving their role in the crime.
FATF & EGMONT Group "Concealment of Beneficial
ownership"
The interaction of the trust with other legal persons
adds an additional layer of complexity and helps
prostrate efforts to discover beneficial ownership it
is also possible that the use of legal arrangements
may increase the difficulty of investigating and
identifying the beneficial owner, thereby explaining
their relatively low prevalence in the case study
sample.
MR. KNOBEL spoke to slide 7 titled "Solutions," which stated
[original punctuation provided]:
Require Trust Registration:
-To obtain legal validity (eg Puerto Rico, Czech
Republic, France)
-Whenever a trust: (i) is created according to local
laws, (ii) has local assets or operations, or (iii)
has local parties (eg any local settlor, trustee,
protector, beneficiary) [eg Argentina]
-To include information on beneficial owners (natural
persons) for every party of the trust that is an
entity, eg "corporate beneficiary" [eg the UK, EU]
MR. KNOBEL addressed slide 8 titled "Implementation," regarding
"FATF I 2022," "obtaining legal validity," trusts created
according to local laws, local assets or operations, or local
parties, and 12 EU countries that will also give public access.
[Due to technical difficulties, slide 8 was only partially
visible due to connectivity issues and the speaker was
indiscernible].
9:55:37 AM
The committee took a brief at-ease.
9:55:57 AM
MR. KNOBEL continued his PowerPoint presentation [but slides
still were not visible due to connectivity issues].
9:56:27 AM
The committee took another brief at-ease.
9:56:34 AM
CO-CHAIR FIELDS stated that the connectivity issues were
continuing, so the committee would try to get the testimony on
the record. He announced that the committee is working on
amendments to HB 405 and HB 406. He clarified that the intent
with HB 405 is not to provide public transparency of every trust
beneficiary, but to provide oversight through DCCED so the
department would be able to review who are trust beneficiaries,
compare them against the sanctions lists, and as necessary make
referrals to the US Department of the Treasury and the Office of
Foreign Assets Control (OFAC), which does not mean publicly
disclosing who is in a trust.
[HB 405 was held over.]
[HB 406 was held over.]
HB 408-MONEY TRANSMISSION; VIRTUAL CURRENCY
9:58:04 AM
CO-CHAIR FIELDS announced that the next order of business would
be HOUSE BILL NO. 408, "An Act relating to the business of money
transmission; relating to money transmission licenses, licensure
requirements, and registration through the Nationwide Multistate
Licensing System; relating to the use of virtual currency for
money transmission; relating to authorized delegates of a
licensee; relating to acquisition of control of a license;
relating to record retention and reporting requirements;
authorizing the Department of Commerce, Community, and Economic
Development to cooperate with other states in the regulation of
money transmission; relating to permissible investments;
relating to violations and enforcement of money transmission
laws; relating to money transmission license exemptions;
relating to payroll processing services; repealing currency
exchange licenses; and providing for an effective date."
CO-CHAIR FIELDS noted that HB 408, a bill by request of the
governor, addresses issues of transparency and financial
integrity. He said the bill was developed by staff at the
Department of Commerce, Community, and Economic Development
(DCCED). He invited the department to explain the bill.
9:58:31 AM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community, and Economic Development
(DCCED), on behalf of the governor, introduced HB 408 by way of
a PowerPoint presentation titled "Alaska Uniform Money
Transmission Modernization Act HB 408 / SB 238," dated 4/11/22.
He recounted that in 1880 a person wanting to wire $20 to
someone would give the $20 to a money transmitter, say, Western
Union, and place faith in Western Union that the $20 would reach
the other person minus a pre-determined fee. That act of trust
placing money in the hands of others, he continued, resulted in
money transmission becoming regulated. Today, he related, the
Division of Banking and Securities serves as the primary
regulator for over 150 money transmitters in Alaska, and these
money transmitters follow the Alaska Uniform Money Services Act
(AS 06.55), passed in 2007 and implemented in 2008.
MR. SCHMIDT displayed slide 2, "Introduction." He said HB 408
would amend and modernize the Alaska Uniform Money Services Act,
which provides the legal framework for money transmission
functions, including currency exchange; transferring or wiring
of money; and loading and reloading of payment instruments,
including stored value cards. When passed in 2007, he stated,
the Act had not contemplated virtual or cryptocurrencies like
Bitcoin, nor the rate of money service business expansion and
innovations; HB 408 would update the licensing, recordkeeping,
and enforcement provisions to support these business activities
and protect Alaska consumers. Mr. Schmidt further specified
that HB 408 would adopt pertinent sections of the Uniform Money
Transmission Modernization Act, which was developed by state
regulators, the Conference of State Bank Supervisors (CSBS), and
with input and participation from industry stakeholders. He
related that a letter of unconditional support of HB 408 has
been received from the Money Service Business Association of
America addressed to the co-chairs.
10:02:40 AM
MR. SCHMIDT proceeded to slide 3, "What is covered by the 2008
Act?" He explained that when the current Act went into effect
in 2008, money transmission was sending a wire transfer at a
local grocery store or purchasing a money order or traveler's
checks at a bank. This bill, he continued, would modernize
Alaska's money transmission laws to include cryptocurrency, also
known as virtual currency, such as Bitcoin, Ethereum, and
DogeCoin. Alaska does not currently regulate cryptocurrency, he
pointed out, which is one of the top tools of rogue actors, such
as Russian oligarchs and North Korean kleptocrats, to evade
sanctions. He further pointed out that 28 states currently
regulate cryptocurrency. He said the model law being discussed
today has been passed and adopted in West Virginia. The
Conference of State Bank Supervisors finalized the model law in
September 2021, he related, and it has been introduced in many
other states.
MR. SCHMIDT continued to slide 4, "Money Transmission Licenses."
He reiterated that when passed in 2007, the Act did not
contemplate virtual or cryptocurrency nor the rates of money
service business expansion. He said HB 408 would update the
licensing, recordkeeping, and enforcement provisions to support
these business activities and protect Alaska consumers. In the
past, he advised, DBS has found licensed money transmitters of
fiat currency (real money) that have had very poor compliance
with the Bank Secrecy Act and the Office of Foreign Assets
Control. If companies do not have a compliance management
system in place, he further advised, Alaskans could be scammed,
and the funds they send may not be received by their intended
recipients. He explained that Alaska participates in a multi-
state money transmitter examination system using a risk-based
approach to streamline state supervision to be more effective
and to efficiently utilize state resources. In an examination,
DBS staff reviews a company's compliance with applicable state
and federal laws and regulations and areas deemed likely to
affect the safety and soundness of the licensee. The DBS staff
reviews the financial condition, business model, internal
controls and auditing management systems and technology in the
compliance management system of a licensee. Utilizing network
supervision with other states, Mr. Schmidt continued, allows the
division to reduce regulatory burden on companies by conducting
less frequent examinations and reducing the time, travel, and
expense for the licensee and the department. Examinations
ensure that policies or procedures are being followed and
consumers are protected, he added.
MR. SCHMIDT continued speaking to slide 4. He said the most
common form of money transmission in 2022 is activity like
PayPal, Venmo, and Zelle. He advised that money transmission in
Alaska keeps growing - as of 12/31/21, Alaska had 153 money
transmitter licenses, with 40 of those conducting virtual
currency business activity that is not currently regulated. He
further advised that over the last five years money transmission
licenses have increased 68 percent. He explained that this data
comes from three different buckets. Bucket one is a company
that only does real money transmission (fiat currency), and DBS
issues them a license and periodically examines them. Bucket
two is becoming much more common and is a company that does both
real money and virtual currency money transmission. The
division issues these companies a license to transmit real
money, but then specifically enters into an agreement with them
that says Alaska does not regulate virtual currency and the
company is not allowed to hold itself out as being licensed or
approved by the State of Alaska to manage real or virtual
currency. Bucket three is a company that only does virtual
currency, and the company doesn't get licensed and doesn't get
regulated under the current law.
MR. SCHMIDT moved to slide 5, "Money Transmission Volume." He
said the graphic depicts the annual Alaska money transmission
volume [for 2019, 2020, 2021]. The dollar amounts are from
buckets one and two, he specified, bucket three isn't included.
10:06:20 AM
REPRESENTATIVE SNYDER requested an example of business names
that manage these three buckets.
MR. SCHMIDT listed the names PayPal, Venmo, Zelle, Stripe,
Western Union, and Robinhood. In further response, he said
those are the big actors and each of them is at least in the
first bucket of real money and most of them are in the second
bucket of both virtual and real money.
10:07:13 AM
MR. SCHMIDT returned to slide 5 and reiterated that the graphic
represents buckets one and two. He pointed out that money
transmission in Alaska that is reported to the division has gone
from $1.7 billion in 2019, to $2.8 billion in 2020, and to $7.1
billion in 2021. Key and important, he emphasized, is that
bucket three is not included here - no companies are included
here that do only virtual currency transmission, but the graphic
does include bucket two which is both real and virtual money.
10:07:56 AM
CO-CHAIR SPOHNHOLZ asked whether the intent of HB 408 is to
incorporate those companies that only do virtual currency.
MR. SCHMIDT confirmed that the intent is to bring in virtual
currency to the regulated sphere of money transmission.
10:08:28 AM
MR. SCHMIDT moved to slide 6, "Money Transmission Volume -
Virtual Currency." He said the graphic depicts the virtual
currency transmission volume in Alaska that is reported to the
division, which means buckets one and two, none of bucket three,
and the numbers depicted are a floor. He stated that the
virtual currency transmitted within Alaska was $33.6 million in
2019, $91.7 million in 2020, and in 2021 it exploded to $2.3
billion. He related that after this bill was adopted by the
Conference of State Bank Supervisors, his staff was reporting to
him that something was going on because the numbers the division
was getting were astronomical.
10:09:41 AM
REPRESENTATIVE SNYDER requested an explanation of the
distinction between virtual currency and cryptocurrency.
MR. SCHMIDT replied that for purposes of this discussion he is
using the two interchangeably.
10:10:02 AM
CO-CHAIR SPOHNHOLZ asked what happened between 2020 and 2021
that resulted in this exponential growth in cryptocurrency use
in Alaska.
MR. SCHMIDT responded that because Alaska does not regulate
virtual currency the division never looks at these businesses on
their virtual currency products and the division never gets to
examine them, so DBS doesn't have a good ability to tell the
committee what is going on. He said he has received data at the
company level where companies that were doing a few thousand or
tens of thousands of virtual currency transmission in 2020 went
to doing tens of millions of dollars of virtual currency
transmission in Alaska in 2021. Some virtual currency
transmitters, he related, have gone from $2 million a few years
ago to $6 [million] to $9 [million], and some tens of millions
of dollars. One of the biggest virtual currency transmitters in
2021 grew from less $100 million to over a billion dollars of
virtual currency transmission in 2022, and because Alaska does
not regulate or examine this the division doesn't know. Virtual
currency price is very dynamic, Mr. Schmidt added, and has gone
up a lot in value. It is being utilized more, he continued, but
he is not comfortable in saying that the increase in value of
virtual currency, and Alaskans doing more virtual currency
transmission, alone explain this growth.
10:11:42 AM
CO-CHAIR SPOHNHOLZ said she understands Mr. Schmidt may not be
able to disclose which companies are doing this, but requested a
description of the industries in which the growth is being seen.
MR. SCHMIDT answered that the division does not have a sense of
that because the data reported to the division from virtual
currency is only from bucket two and does not disclose which
type of industry, such as tourism or natural resources.
10:12:29 AM
REPRESENTATIVE SCHRAGE asked whether other states are seeing
this kind of growth.
MR. SCHMIDT replied that he has a limited understanding of this
in talking to colleagues and others throughout the US, but when
he explains Alaska's growth, Alaska is a standout. Yes, the
industry is growing, he continued, but even in that context
Alaska is a standout and, yes, that concerns him.
10:13:09 AM
CO-CHAIR SPOHNHOLZ asked whether Mr. Schmidt has a sense of
scale of how Alaska is standing out.
MR. SCHMIDT answered that he has spoken with about five industry
groups or people involved at a national level, and all have a
sense that this is growing, and Alaska's numbers are big.
Everyone with whom he has discussed the numbers seen on slide 6,
he related, has been surprised by this level of growth. Because
Alaska does not regulate this and the division does not perform
any examinations other than what is reported, he added, anything
behind these numbers is very opaque.
10:14:19 AM
MR. SCHMIDT returned to slide 6. He reiterated that the graphic
shows the explosive growth of reported annual virtual currency
transmission in Alaska and that bucket three is not included in
the graphic. He said reported virtual currency transmission in
Alaska grew 6,782 percent from 2019 to 2021 and grew 2,420
percent in 2021 alone. Virtual currency transactions have
fundamentally changed the financial services world, he advised,
and are having exponential growth in Alaska. He explained that
HB 408 would add virtual currency activities to the definition
of money transmission to allow DBS to regulate this activity
that accounted for nearly one-third of the total money
transmission volume in Alaska in 2021. Based on licensing
inquiries from companies that have only virtual currency
activity, he continued, DBS expects reported volume to increase
significantly when the bill goes into effect.
MR. SCHMIDT moved to slide 7, "Fiscal Impact and Request for
Additional Staff," and stated that HB 408 contains a fiscal
note. He reported that the division's receipts have grown 53
percent from fiscal year (FY) 2012 to FY 2021, with receipts in
FY 2021 at $19.6 million and at $21.5 million in calendar year
2021, while the DBS budget for FY 2021 was only $4 million. The
DBS budget in FY 2012, he pointed out, was $3.5 million [and
receipts in FY 2012 were $12.8 million]. He said DBS will
require additional staff and support cost to respond to growth
in the money service activities, the complexity of new business
models, and use of third-party partnerships. He explained that
the positions will allow DBS to implement the new law,
incorporate changes in the operation of the Nationwide
Multistate Licensing System (NMLS), develop proficiency in the
examination of electronic systems, and assessment of
cybersecurity measures in a high-risk environment. New program
receipt revenue is estimated to be at the low end, a minimum of
$110,000 for 35 new license applications by FY 2025, he
continued. It is difficult to anticipate the number of new
applications and annual renewal fees and assessments and
resulting revenue for future years, Mr. Schmidt added. The
division expects to adopt an assessment fee model for new
regulations that would ensure actual cost of supervision of the
industry would be covered through annual program receipts and is
expected to range between $750,000 and $1.2 million. He pointed
out that as part of the regulations that will implement this
bill the division anticipates adopting a volume-based licensing
fee. A fee based on volume would be appropriate given there are
smaller local Alaskan businesses as well as big businesses like
PayPal and Venmo.
MR. SCHMIDT addressed slide 8, "Why Change the Act?" He
explained that the current law has not kept up with the
industry's explosive growth and innovation. Consumer protection
is insufficient, he stressed, as every regulator commenting on
top threats facing investors identifies cryptocurrency and other
digital assets as one of the highest risks for fraud. Under the
current act, he reiterated, virtual currency is not included in
the definition of money transmission.
MR. SCHMIDT moved to slide 9, "What Does HB 408 / SB 238 do?"
He explained that the bill would reduce regulatory burden by
streamlining initial licensing and license renewal utilizing the
NMLS, which is fully digitized and uniform. The NMLS, he noted,
was developed in the late 2000s following the great recession
and was originally intended for the mortgaging industry, but it
has now grown to include licensing and registration for all
kinds of financial industries.
10:19:24 AM
CO-CHAIR SPOHNHOLZ referenced a letter opposing HB 408 from the
Independent Payroll Providers Association (IPPA) and The Payroll
Group [dated 4/15/22]. She requested Mr. Schmidt to address the
concern that the bill would bring payroll processors into the
NMLS, in which they don't currently participate.
MR. SCHMIDT answered that there may be differences in business
models that might take a particular business out of payroll
processing but broadly speaking payroll processing is covered
within the scope of the current money transmission law - current
law includes payroll processing. He emphasized that payroll
processing is in no way a problematic industry and DBS is not
highlighting or singling out the industry for enhanced scrutiny.
However, he continued, payroll processing is in a position of
trust in handling other people's money; in the last 10 years
there has been a half a billion dollars of documented theft
within the payroll processing industry. One attribute of the
payroll processing industry that is a little bit different, Mr.
Schmidt explained, is that the criminal prosecutions have shown
that the payroll processing industry, when there is fraud, lends
itself to a Ponzi scheme. Scams that have come public show a
literal robbing of Peter to pay Paul where the payroll processor
covered one employer's payroll with another employer's fund. He
reiterated that there is nothing about the state of Alaska
payroll processing industry that he believes needs heightened
scrutiny, it is merely a matter that that industry is already
included in the existing law and would be within the NMLS in
this proposed bill.
CO-CHAIR SPOHNHOLZ surmised that payroll processors do not
currently participate in the NMLS and would be required to do
so. She asked whether payroll processors must currently
register or get licensed in the state of Alaska.
MR. SCHMIDT replied that currently there are payroll processors
that are licensed. He deferred to Ms. Tracy Reno to answer the
question further.
CO-CHAIR FIELDS noted that Ms. Reno is not presently online.
10:22:59 AM
CO-CHAIR SPOHNHOLZ stated she needs follow-up information to
understand the way the payroll processing industry is currently
regulated, the way it is proposed to be changed, and what would
be the impacts. She offered her understanding that West
Virginia adopted something similar, but that significant bonding
is required and the average cost per payroll processor is about
$50,000. She said she is therefore concerned about how this
bill would potentially impact mom-and-pop companies as compared
to big companies which can afford that.
MR. SCHMIDT shared that yesterday he, his staff, and a
representative of the Conference of State Bank Supervisors spent
about three hours with Senator Kiehl discussing changes to the
bill that would reduce entry barriers in a way that is
appropriate for Alaska, the size of Alaska's economy, and the
size of Alaska businesses.
CO-CHAIR SPOHNHOLZ said she would like to learn more about that.
10:24:36 AM
MR. SCHMIDT proceeded to slide 10, "HB 408 / SB 238 Protects
Consumers." He said the bill would protect Alaska consumers by
conducting criminal background checks through the NMLS on
individuals who control a money transmission business. He noted
that criminal background checks are currently done by DBS staff
using third party software, which takes about 140 hours of staff
time a year. He stated that HB 408 would ensure that regulatory
costs of supervision keep pace with growth by allowing
implementation of a volume-based assessment - licensees would be
required to report money transmission volume, which would ensure
licensees are treated fairly and equitably based on the level of
volume and business conducted in Alaska. The bill would broaden
the definition of money transmission to include virtual currency
transactions and other methods of moving or transferring
monetary value to better protect Alaskans. He said the bill
would provide consumer protections for Alaskans. He paraphrased
from slide 10, which stated [original punctuation provided]:
HB 408 / SB 238 protects consumers as it will
Require licensees to comply with federal laws,
including suspicious activity reporting.
Increase the record retention schedule to five
years for greater transparency.
Allow criminal background checks to be run on
licensees.
Update enforcement provisions by allowing a broader
spectrum of orders to be issued.
Ensure DBS can coordinate with other states in all
areas of regulation, licensing, and supervision to
reduce regulatory burden on the industry and more
effectively utilize regulator resources.
Define crypto/virtual currency money transmission
activities and allow regulation of those activities
(aka "virtual currency," Bitcoin, Ethereum,
DogeCoin).
MR. SCHMIDT concluded his presentation with slide 11, "Virtual
Currency and Money Transmission." He stated that the bill would
define virtual currency and add the business activity to the
definition of money transmission requiring licensure and
supervision. He said the definition is in the bill at AS
06.55.290(5). Virtual currency, he continued, is a money-like
asset that is managed, stored, or exchanged on computer systems
and transmitted by the internet. Virtual currency is issued and
controlled by its developers and used and accepted
electronically among the members of a specific virtual
community. It is accepted by natural or legal persons as a
means of payment and can be stored, transferred, or traded
electronically.
10:27:21 AM
REPRESENTATIVE SNYDER offered her understanding that digital
assets are typically bought and sold using cryptocurrency. She
asked whether Mr. Schmidt has any sense of the degree that non-
fungible token (NFT) transfers have played in the large increase
in virtual currency transmission that is being seen.
MR. SCHMIDT responded that NFTs are "all the rage." He said
that if his 17-year-old and 20-year-old sons are buying NFTs
like they are buying sneakers, then there is a lot of it out
there. That is not scientific or rigorous and he is being
somewhat humorous, he allowed, but he is unable to point to data
that there is significant activity in that space.
10:28:35 AM
CO-CHAIR SPOHNHOLZ restated her question regarding opposition to
the bill by the Independent Payroll Providers Association (IPPA)
and The Payroll Group. She asked what is currently required of
payroll processors in the state of Alaska and what would be
required under HB 408 if it were passed. She reiterated that
her main concern is about the small, mom-and-pop payroll
processors that might do bookkeeping and process the payroll for
a few companies.
10:29:50 AM
TRACY RENO, Chief of Examinations, Division of Banking and
Securities, Department of Commerce, Community, and Economic
Development (DCCED), replied that payment processors are not
exempt in the current act for money transmitter licensing, and
several are licensed currently with the State of Alaska. The
intention in this bill, she said, is to make it clear and
specifically call out that they are required to be licensed in
the state of Alaska, that it is transparent to them so they
would know what the requirements would be. The NMLS allows
[states] to have online electronic applications, renewals, and
fee payments. This streamlines the process so that it is the
same for everyone across all states in the US, which reduces
burden on the companies that are required to be licensing;
Alaska would not be unique. She deferred to Mr. Matthew Lambert
of CSBS to speak further to the question.
10:31:40 AM
MATTHEW LAMBERT, Esq., Non-Depository Counsel, Conference of
State Bank Supervisors (CSBS), responded that Ms. Reno's
synopsis is par for the course nationally. He said states
regulate money transmissions, money received from transmission,
and typically don't get into details about different business
models. So, when a company receives money for transmission,
whether that is at a counter through a Western Union agent to
send out of the country or for payroll processing, the intent is
to make sure that those funds are kept safe and that they are
there yet. The reason that payroll got explicitly added to the
model law, he explained, was a string of failures of payroll
companies, most of which had a background in fraud and a lot of
criminals. It is a case-by-case thing as to whether these are
folks that had bad intentions at the outset, or it just became a
way of covering losses, but both of those scenarios have come to
light in the past decade. So, Mr. Lambert continued, it seemed
important to make clear that if someone receives money for
transmission and is a payroll provider there is no payroll
processor exemption.
10:33:19 AM
CO-CHAIR SPOHNHOLZ referred to Ms. Reno's statement that payroll
processors are already legally required to be licensed in Alaska
and only a few are currently doing so. She surmised that that
implies there is a large number of them that are not doing so,
and the proposal is a one-size-fits all process. She requested
a description of what is required to get licensed as a payroll
processor in the state of Alaska.
MS. RENO answered that the licensing process for money
transmitters is that they pay a fee and are required to go into
the NMLS where they fill out information about their business,
provide financial statements and their business plan, and
provide information on the people who own the company and those
who are in control and making decisions for the company. She
explained that those people do not currently have background
checks run through the system, DBS does that manually in its
office. So, she continued, this bill would allow DBS to run
criminal background checks through the FBI for all money
transmitters and for owners and individuals who make those
decisions for the company. Also required, she said, are
quarterly reporting on volumes as well as annual reporting for
audited financial statements.
MS. RENO continued her response. She said DBS currently has a
set surety bond and the bill proposes a sliding scale surety
bond for volume-based or asset-based businesses. The bill
therefore takes into consideration the risk for national or
international companies while considering mom-and-pops and not
putting up a barrier to entry. She said the bill currently has
proposals for raising the net worth, but because there is
concern that that may be a barrier to entry DBS is looking at
lowering that to where people think it is a better fit. The
division is listening to industry groups, money transmitters,
and payroll processors and is looking at some minor adjustments
in amending the bill. Ms. Reno further specified that annual
renewal is required, and that the renewal assessment is
currently a flat fee regardless of the volume size in Alaska.
So, Ms. Reno continued, DBS is looking at doing risk-based
assessments based on the size and volume of a company to provide
a better fit for smaller and larger businesses in Alaska.
10:36:47 AM
REPRESENTATIVE SNYDER inquired how the everyday Alaskan might be
impacted by this bill, if at all.
MR. SCHMIDT replied that he expects virtual currency to continue
to increase as a means of payment. He said he wouldn't be
surprised if businesses in Juneau put up signs this summer that
they accept payments in virtual currency like Bitcoin. That is
coming, he continued, as people get more and more comfortable
utilizing virtual currency, appreciate the confidentiality that
virtual currency provides, and international tourists would love
to avoid money exchange issues. Because virtual currency is
going to be used more and more, he advised, this bill would
increase the confidence that consumers can have that virtual
currency is not a Wild West, that it is being appropriately
regulated, and they can have faith in the systems to get the
money where it is going to go in an appropriate way.
[HB 408 was held over.]
HB 392-EXPAND ADV. PRAC. REG. NURSE AUTHORITY
10:38:59 AM
CO-CHAIR FIELDS announced that the final order of business would
be HOUSE BILL NO. 392, "An Act relating to advanced practice
registered nurses; and relating to death certificates, do not
resuscitate orders, and life sustaining treatment." [Before the
committee was CSHB 392(HSS).]
CO-CHAIR FIELDS noted that no amendments had been received for
the bill.
10:39:13 AM
CO-CHAIR FIELDS opened public testimony on HB 392, then closed
it after ascertaining that no one wished to testify.
10:39:29 AM
CO-CHAIR SPOHNHOLZ moved to report CSHB 392(HSS) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 392(HSS) was moved
out of the House Labor and Commerce Standing Committee.
10:39:51 AM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
10:39 a.m.