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tv   Deputy Treasury Secretary Testifies on Sanctions Policy Review  CSPAN  November 2, 2021 3:47pm-5:35pm EDT

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minutes. >> this hearing is in a hybrid format. members have the option to appear both in person or virtually. welcome. if there is a technology issue we'll move on to the next person. our speaking order will be as usual by seniority of the members who have checked in alternating democrat and republican. today we welcome deputy secretary to this committee for an update on international policy issues, sanctions policies, an area where we've done important bipartisan work on this committee. i thank senator toomey and especially chair when i was ranking up until this year. we were able to make important progress holding countries like russia and north korea accountable. senator toomey and i have worked together to pass tough new fentanyl sanctions to help stem the flow of illegal opioids from china and mexico that have taken such a toll. another heart breaking story on
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public radio today about what's happened to far too many families in this country. i am confident we'll be able to build on the progress we've made this year in conjunction with president biden and deputy secretary. two weeks ago on this committee we explored the economic and humanitarian crisis in afghanistan as senator toomey asked us to, the role of sanctions and how we can get more aid to the afghan people without resources falling into the hands of the taliban. last week a broad coalition of countries agreed to substantially increase aid to afghanistan. we continue to work with allies to ensure they can be delivered effectively to the people despite sanctions against the taliban. today we'll focus primarily on findings and recommendations for the months long sanctions, policy review secretary yellen and deputy secretary and others in treasury, directed the treasury department to undertake, the department consulted with agencies across the government, state, commerce,
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intelligence committee as well as an array of private sector actors including banks, businesses, nonprofits, international ngos and sanctions experts. that examined current questions over our current sanctions policy. does the u.s. government have the right sanctions tools? are we using them effectively with allies, re-assessing the application and adapting as we go, are we targeting the right people, right entities, right countries in the right way with the right sanctions? ultimately are we changing the behavior of targeted countries, entities, or people? that is obviously our goal. i know treasury has a recommendation for these other questions. there is guiding bipartisan principles this committee has recognized for years regarding sanctions. let me briefly outline those. number one we should impose sanctions on a multi lateral basis whenever possible. they are more effective. this he garner broader political and diplomatic support if imposed in coordination with allies. number two preserving
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strengthening humanitarian exceptions and license, important to ensure that people don't suffer from shortages of food and medicine and other necessities. number three for sanctions to be effective they must have clear targets and goals and objectives. if we are trying to change countries and other actors' behavior they need to understand how once they do better they can free themselves from sanctions. fourth the u.s. must do a better job of regularly assessing effectiveness of sanctions. we need to communicate the findings better to banks and other entities that are implementing sanctions policies. last the executive branch must continue to support and empower dedicated public servants across the government charged with enforcement. workers are our greatest asset. they must have the funding and analytical tools, technical
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expertise, including in cryptocurrencies as we've discussed which need a much closer look. they need the technology and the time to do their jobs particularly as we've increased the use of sanctions around the world. today's hearing will give members a chance to survey other international policy issues within our jurisdiction, impose any questions to the deputy secretary, which i'm sure he is prepared to address. i thank the deputy secretary for your work on these issues and look forward to your testimony. senator toomey. >> thank you. welcome back. under president biden the treasury department has advanced a number of troubling international policies some of which are clearly intended to circumvent the will of congress. let's take sanctions to start with. the administration has offered sanctions relief to some of our adversaries in the unrealistic hope they'll make concessions against their very nature. consider iran for instance to entice iran to re-enter the administration appears willing to lift sanctions on iran.
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then the administration hopes that iran will commit to cease supporting terrorism and curb its ballistics missiles program. let's be clear. once sanctions are lifted iran will never limit its behavior. the administration clearly intends to repeat the mistakes of the obama administration and re-enter a treaty with iran despite bipartisan opposition and without senate approval. in addition the administration has repeatedly failed to comply with mandatory sanctions laws. also let's look at iran. since president biden was elected according to the international energy agency, iran has doubled the amount of crude oil it is selling to china to 600,000 barrels each day this year. even though these sales are illegal under sanctions laws the administration has refused to impose congressionally required sanctions on the chinese buyers. take the case of russia. the administration has also chosen to ignore a law requiring sanctions on russia's pipeline.
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the project manager has been using sanctioned russian entities to construct and finance nord stream 2 meaning the manager's integral role in the pipeline is predicated on a massive sanctions evasion campaign. congress passed the countering america's adversaries through sanctions act to punish among other things this very type of conduct, sanctions evasion. congress did this because sanctions evasion harms u.s. national security interests. in this instance it is increasing putin's influence over europe but the administration continues to violate this statute in order to give putin a pass. take the oecd tax agreement. as if all this weren't enough the administration is trying now to enact an international tax treaty to harm u.s. competitive and do it without obtaining the necessary two-thirds approval of the senate. you will recall the tax increase consists of two pillars. pillar one is an unprecedented treaty change that would allow foreign countries to tax
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american countries based on the american companies' sales overseas. it is a big tax revenue transfer from us to them. unsurprisingly, this is the priority for other countries who have long sought this tax transfer. pillar 2 is the 15% global minimum tax on multi nationals' foreign income. this is the administration's attempt to justify the huge tax increase it wants to impose on u.s. companies. unsurprisingly this is the administration's priority since it is an integral part of dismantling the successful 2017 tax reform. by imploring other countries to implement a global minimum tax that will harm their own workers and businesses the administration is implicitly acknowledged that their proposed multi national tax increase will make u.s. workers and businesses less competitive if other countries either don't implement a global minimum tax of their own or implement a significantly lower rate than what the administration is proposing. there is a very real possibility
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that other countries will not implement the global minimum tax. they've only reluctantly agreed to the global minimum tax as a condition, in return for getting pillar 1, the u.s. tax revenue transferred to them. but as i say, implementing pillar 1 requires two-thirds approval in the senate and i don't think that is going to happen. so the administration is either going to impose its own global minimum tax increase on american companies anyway without the countries we compete with having enacted a corresponding tax increase or they're going to violate the constitution by modifying our existing tax treaties without obtaining the two-thirds consent of the senate. let's turn to the climate risk report. this is the latest troubling international policy proposal from the administration. we've expected this report to come out soon. it is likely to claim global warming poses a systemic risk. i acknowledge global warming is
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real. however it does not follow there is a new systemic risk to the financial system. we've had severe weather events since the dawn of time and as the economist john cochran explained to this committee major weather events and i quote is never come close to causing a systemic financial crisis end quote and there is no scientifically validated possibility to change in in the near future. our democratic colleagues should acknowledge this reality and offer their proposals on climate change through the legislative process which they are doing including calling for a carbon tax in which this very dangerous tax and spend measure they are contemplating will make energy prices higher. but that legislative approach is not enough for our democratic colleagues. they also want to use the unaccountable financial regulators to really misuse their power and essentially cut off the supply of capital to fossil fuel companies. all across america we are already seeing what happens when the regulatory environment discourages the development of necessary energy sources.
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energy prices spike. this dynamic will only get much worse if financial regulators are pressured to starve the energy sector of the capital it needs to provide america the energy that we all need. deputy secretary, i look forward to discussing these issues with you today. >> thank you, senator toomey. our witness was sworn in march of 2021 and spent his career convening governments and companies and organizations to move toward achieving common goals. he came to the treasury department from the obama foundation where he served as president beginning august 2019. he served as senior adviser before that at the center for strategic and international studies and at black rock. he held a number of roles in public service before and holds a b.a. from university of california berkeley and jd from law school. it is good to have you here. welcome. please begin. >> chairman brown, ranking member toomey, and members of
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the committee, thank you for giving me an opportunity to speak to you today about the national advisory council on international monetary and financial policies report to congress. the treasury department's priorities and outlook for the global financial system. as you know, the international financial institutions form the core of the international financial architecture that is consistent with our economic interest. it is no accident that the u.s. economy is the largest in the world. that our financial markets are the deepest and most liquid and that the dollar is the world preferred currency. our economic success is a result of policy choices we made out of world war ii along side the hard work and determination of the american people. america's interest in a strong, stable, and ruled economic order is also deeply entwined with our foreign policy and national security interest. our economic objectives cannot succeed if the international
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financial system facilitates the flow of funds to oppressive regimes, terrorist groups, cyber criminals, and other malign actors. bearing this in mind, secretary yellen requested the use of actions since the terrorist attack of 2001. one, our adversaries' attempt to build payment systems allowed them to avoid the dollar based financial system. two, technological changes like the growth of digital currencies. three, the need to permit the flow of legitimate humanitarian assistance and avoid collateral impact on nontarget populations and finally four ensuring sanctions are always deployed alongside other measures as part of an over arching national security strategy. i want to briefly describe to the committee the five initiatives treasury is advancing to respond to these
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challenges and modernize the use of sanctions. one adopting a policy frame work. treasury will adopt the use of a structured policy frame work to inform its recommendations on the use of sanctions. this frame work will seek to ensure sanctions support clear policy objectives within a broad strategy, reflect input from technical experts and other critical sources of information including the intelligence community, incorporate multi lateral corporations and are easily understood, enforceable, and reversible. the framework will be a tool to improve the use of sanctions not a means to prevent it. two, improving access to humanitarian assistance. treasury will work to expand sanctions exceptions where appropriate to support the flow of legitimate humanitarian assistance. incorporating lessons learned from the last 20 years. the department is committed to consistently providing clear guidance in the context of all applicable sanctions regimes including the legitimate flow of
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humanitarian aid to heavily sanctioned jurisdictions. three regular assessment of sanctions program. treasury plans to use the sanctions policy frame work on a regular basis to review sanction programs and authorities and make recommendations to augment, adapt, or wind down individuals' authorities or to list or delist particular entities. four, improve sanctions coordination and communication. the threat of sanctions alone not even the imposition remains a powerful tool of economic state craft. in order to calibrate the use of this tool treasury needs to communicate and coordinate more effectively with stake holders affected by the use of financial. this includes u.s. allies and partners, financial institutions, and other actors within the financial system, nonprofit organizations, and the media. we will do this by using existing forms where we meet with our allies and partners to coordinate and collaborate on sanctions as well as build a
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more formal mechanism for receiving feedback and advice and providing information to stakeholders. five, we plan to modernize our operational capabilities. as our threats to our nation changes, we must adapt. this will involve stream looing current functions as well as making work force and infrastructure investments to take on growing threats like ransom ware and other cyber crime. this effort will require building on current processes in some areas and changes in others. certain changes may be implemented in the near term while others will require further deliberation and analysis to determine the best path forward in collaboration with the state department and other executive branch partners. in many cases important advice from key partners like congress will be critical. members, sanctions are not only an important tool of the united states, they play an important role in maintaining the rules
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based global economy which has benefited the world for generations. i look forward to working with members of this committee to continue advancing u.s. economic leadership abroad and creating opportunities for americans at home. i'm happy to take your questions. >> thank you, mr. deputy secretary. you've laid out, your staff has put a lot of time and work in this. you laid out general principles and recommendations. what is the most important and urgent findings and recommendations and will any of them require congressional approval? >> thank you, senator. i want to thank you and your staff and the staff of this kmutee for spending a great deal of time with those of us at treasury talking about the sanctions review. as you will see from the report and also from my testimony this morning, the findings we have largely align with the principles this committee has outlined. the key for us is making sure that as we think about sanctions on a go forward basis we are making investments today to keep up with innovations not only technology but by our
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adversaries that are attempting to bypass our sanctions. this will require us to do more multi laterally frankly putting ourselves in a place where when we decide to act unilaterally we have greater power in terms of our ability to effect change of behavior which is the ultimate goal of sanctions. we'll need to work with congress to advance things like creating the type of opportunities within the executive branch, to hire staff who understand issues like crypto going forward, so looking to congress to help us with hiring authorities. the president's fy-22 budget includes additional resources to allow us to build upon the technological expertise we need in the treasury department and also help us bring on the type of work force we need to ensure we're able to meet these challenges going forward. a great deal of the work we need to do will need to happen with our executive colleagues. >> thank you. the importance of your -- it
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strikes me as this review was especially important because the last time u.s. sanctions were reviewed comprehensively was 20 years ago and resulted in the enactment of a new law requiring the exclusion of trade and agriculture and medical operations from sanctions. clearly we need to work harder to avoid collateral consequences of sanctions on humanitarian aid. my question is this. especially as the pandemic continues to put all at risk as variants mutate around the globe what specific new steps are you recommending the treasury take to mitigate the harm to humanitarian aid efforts? >> it is critical especially in areas where sanctions are used humanitarian assistance is able to continue to flow. we've learned a great deal from the last 20 years. you'll see some of that has opinion applied to some of the programs we have introduced recently. for example the president's executive order with regard to actions occurring in ethiopia.
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when we issued the executive order we put out general licenses at samt time to ensure humanitarian assistance would continue to flow. one challenge is we will often announce sanctions programs and wait to hear from humanitarian groups before we issue guidance to provide them the ability to continue to flow humanitarian assistance into these areas. our goal needs to be ensure that we take the lessons from the last 20 years and ensure humanitarian assistance can be provided along side our sanctions programs to meet the needs of people who are suffering in these areas especially during this moment of covid ensuring medicine and food can get to these affected people is not only consistent with our values but will help us end the pandemic globally. >> a number of critics have argued that sort of clumsy use or over use of sanctions of
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unilateral sanctions by the u.s. especially during the trump administration played into the hands of our adversaries. how concerned are you about efforts by china and russia and others to insulate themselves from u.s. sanctions including by moving away from dollarized transactions creating new financial messaging systems or taking other similar efforts? do you view these efforts if they were to persist and intensify as posing a threat to the u.s. dollar as the world reserve currency? >> senator, my view is that the u.s. dollar will remain for a number of reasons including the fact we have made needed investments m america. ultimately people want to do business here because of the strength of our economy and openness of our system and the certainty of our laws. it is true that if we do not use sanctions appropriately it will drive not only our adversaries but a number of others to look for ways around the use of the
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dollar in financial dealings. our goal needs to be to ensure we do two things. we need to use a frame work consistent with the principles this committee has been outlining for a long time but in addition we need to try and multi lateralize our sanctions whenever possible. while it is hard to avoid being engaged it is even harder to avoid transactions that involve the dollar, euro, pound, and the yen. that is why it is critical that more often we try and do things multi laterally with our allies and partners going forward. >> thank you. >> thank you, mr. chairman. deputy secretary, i can't help but note the irony of you discussing how and why it is so important we preserve the ability to implement a sanctions regime in the future when you and the administration choose
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not to implement sanctions that the statute currently requires. take the case of iranian oil sales to china. the iran freedom and counterproliferation act prohibits the purchase of iranian oil. according to the international agency satellite data since january of this year china has been importing around 600,000 barrels of iranian oil per day. the administration knows it. on september 28th reuters reported that and i quote a senior u.s. official said we are aware of the purchases that chinese companies are making of iranian oil, end quote. i'm sure you acknowledge sanctions are required on purchases of iranian oil, right? >> senator, the law does require -- >> okay. you acknowledge chinese companies are buying iranian oil in very significant quantities right? >> i am aware a number of people are attempting to buy iranian oil and our goal is to make
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sure. >> okay. we are not talking about attempts. it is a factual matter chinese entities are routinely, daily buying hundreds of thousands of barrels of iranian oil in direct violation of our sanctions regime, right? >> we continue to monitor purchases of iranian oil and we look forward to using -- >> so you are making my point. i'm going to submit a written question and for the sake of time appreciate a written answer to why it is you believe the mandatory nature of this sanctions statute is somehow optional because it is actually not. we all know that this is going on. let's move on to nord stream 2. since early july several other senators and i have been very concerned that the administration is again violating the statute by not sanctioning the project manager of the nord stream 2 pipeline that is nord stream 2 ag under section 228. here is the problem. nord stream 2 pipeline project, the whole project is riddled with sanctioned russian entities
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ranging from the contract owner, various contracts, vendors, certain employees all subject to already established sanctions. so illustrating why the treasury department is violating this law. the obama administration imposed sanctions due to russia's efforts to destabilize eastern ukraine. i'm sure you don't dispute this is currently subject to sanctions. so capsa section 228 goes after entities facilitating sanctions of asians on maf of i quote any person subject to sanctions imposed by the united states with respect to the russian federation end quote. opec, the treasury's own website, answered to faq number 456 explicitly makes it clear that persons subject, quoting now, subject to sanctions imposed by the united states with respect to the russian
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federation includes persons listed on the scn list or ssi list end quote. we've established that gas prom is a party sanctioned by the u.s. government for the purpose of capsa 228. what does that have to do with nord stream 2 ag? on its own website it describes itself as a project company established by gas prom for the purpose of planning construction and subsequent operation of nord stream 2 pipeline. i'm sure you agree gas prom did in fact set up nord stream 2 ag to construct and operate the pipe line right? >> senator, we've talked about this issue several times and i agree we need to do everything we can to implement capsa. as i said previously we are currently working >> i understand. this is important and we are going to run out of time. we also know nord stream 2 ag
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has facilitated -- how do we know that? we know this because the state department has told us this. in a may 2021 report the state department said nord stream 2 ag has and i quote knowingly facilitated transactions to provide vessels for the construction of nord stream 2 pipeline. and i'm sure you'll confirm again it was in fact treasury lawyers signed off on the evidentiary package that the state department used for this determination. so you acknowledged that gas prom has sanctions, set up nord stream 2 ag, i believe you've acknowledged nord stream 2 ag has facilitated sanctions of asians. certainly your lawyers did when the state department concluded that nord stream 2 ag has facilitated sanctions, evasions, to get those involved in this. do you acknowledge nord stream 2 ag 2 did all this on behalf of gas prom? >> senator, as i said we are
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committed to working with you and this committee to hold gas prom responsible for its activities that violate our sanctions. >> you're not answering a direct question here. do you acknowledge nord stream 2 ag has engaged in the activity that is laid out by the state department on behalf of gas prom? >> senator, we support the state department's report and worked with them on that report. the report was based on a separate authority than the one we're talking about today which is capsa. we are committed to making sure we work with -- >> let me close by saying look. it is very clear what is going on here. gas prom created nord stream 2 to evade. that was the entire -- for everything around this picture the sanctioned entities and they needed nord stream 2, an unsanctioned entity in order to bypass the sanctions. that is exactly what we passed capsa for on a bipartisan process and it is completely unacceptable it is not being implemented. >> thank you. >> thank you, mr. chairman.
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look, your testimony highlighted important work of countering china's unfair trade practices. and it is true they are the threat to us and the world today, a key focus of mine and the defense subcommittee which i chair. it is why he push soard to get the bipartisan infrastructure bill across the finish line and the senate and will continue to get it across the finish line in the house. but from your perspective, your role as deputy secretary, what is the most effective way to address what china is doing with particularly currency manipulation? >> senator, thank you for the question and thank you for your work on those important issues. my view is that the most important thing we can do with regard to competing with china
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is making the investments in the united states that you've taken a leadership role on like the infrastructure bill that has passed the senate and is currently in the house. in terms of the issue of currency manipulation the president and secretary have been very clear we will not allow any country to unfairly use its currency to push for more exports. as you know, on a semiannual basis the treasury department puts out a report on foreign exchange intervention that highlights countries that violate the international rules in this area. when it comes to china, we are committed to holding them accountable for all of their unfair actions both unilaterally in the united states but using, also working multi laterally with our allies and our partners because we know the actions by china not only hurt american consumers and workers but around the world. >> is there anything that you
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need from congress specifically from this committee, any additional authorities? >> at the moment i think congress providing the authorities to pull together the foreign exchange report is what we need. we are working actively with ustr and other agencies within the government to use our tools to hold china and others accountable and we look forward to continuing to consult with you if there are additional authorities we need. >> from a standpoint of cryptocurrency is that -- has that changed how the treasury department deals with sanctions? >> senator, as we highlighted in the sanctions review, cryptocurrencies have required us to look at ways that we can try to deal with potential sanctions evasions and we have highlighted this by taking certain actions with regard to crypto actors who are using their, this means of payment for things like ransom ware.
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it will require us to also invest more in different parts of our work force going forward and improving our technology infrastructure. >> how often are you seeing cryptocurrencies being used to avoid sanctions? >> we recently put out a report just last week highlighting use of cryptocurrencies in ransom ware to the tune of several hundred million dollars through cryptocurrency. we recognize that a number of actors who seek to impact our national security are using cryptocurrencies to try and get around our sanctions regime. in terms of quantifiable number we know it is more than several hundred million dollars and our goal has got to be to try and identify those where it exists and stop it, using the tools that congress provided us. >> from your perspective do you think the cryptocurrency --
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>> one of the things that we benefited from a great deal in the united states is innovation. it has helped drive our economy and financial innovation has done that but it is important as we think of those innovations we also have a regulatory regime that protects consumers and our national security. we'll need to use tools like bsa and laws to make sure we protect national security but also a need to work with congress to decide on whether we need additional tools as well. >> last question. you talked about reserve currency. quickly, and you talked about the fact we have it. probably not going to lose it. i have a little different perspective but i want to hear yours. could you tell me what impact defaulting on the debt might have on our status with reserve currency and the uncertainty that might create?
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>> senator, as secretary yellen has said a default on the u.s. debt would be catastrophic from the standpoint of our credibility not only to our creditors but credibility in the world. it would have a clear impact on people's trustworthiness in the united states and our ability to meet our commitments. >> and so you would see that as a giant step in the wrong direction as far as maintaining our reserve currency status? >> yes, senator. ultimately the reason the united states dollar is the reserve currency in the world is because people trust the united states economy. they have confidence in the investments and decisions we make and if we were to not pay our bills on time it would send ricochets through those people who have confidence in our economy. >> okay. thank you, mr. chairman. thank you. >> thank you, senator chester. senator scott is recognized from south carolina from his office. >> thank you, mr. chairman. thank you, mr. adeyemo for being
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with us today. i noticed senator tester started asking questions about the plan to make sure we don't default are the consequences of us defaulting on our debt and without question i have read a number of reports that suggest the plan in place to make sure we didn't default on our debt was already being thought through, wise planning from my perspective. here is a question not related to sanctions though i know we are talking about sanctions but it would be impossible for me not to ask a question about the current proposals coming out of the administration as it relates to the ability to investigate and/or have access to every transaction in every american banking account or financial account based on simply $600 of flow coming through. i know that some proposals have $600. others have $10,000. the challenge is whether it is 600 or $10,000 it captures basically the same number of accounts. ultimately, if someone pays $800
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a month in rent that is $9,600. with any other transactions you break the $10,000 threshold. if you are a senior citizen receiving social security with the average social security check being around $1,500 or $18,000 a year, your financial institution then has to report to the irs your account. i don't know what in the world the irs will do with the information that they receive from these financial institutions. i say this with a back drop of the last democratic administration. we saw the irs not peering into but investigating nonprofit religious organizations and conservative organizations without expanding their power or their reach. so my concern is that as we see this administration's proposal to give more access to the irs to peer in and investigate frankly $600 of flow in and out
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of accounts of every american, that essentially captures all americans' transactions in this country. if you're looking for tax cheats, that is a terrible way of figuring it out. if you are in fact looking at a big government proposal to have the ability to investigate every single transaction of a financial institution of your account, my account, and their account, well, this might be a good direction to go in. i would love to hear why you think it is important for every american's transactions to be made available to the irs. >> senator, thank you for that question. because it gives me an opportunity to make clear the president's policy goal which is to make sure wealthy taxpayers
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avoiding taxes in this country pay the taxes that they owe. as you know, the top 1% of income earners in this country failed to pay more than $150 billion in taxes each year. the reason for this is because they don't earn income the same way that most of your constituents do by getting a w 2 which is information that a teacher or truck driver or any other employees' company provides but also provides the irs. the reality is wealthy people often earn income through partnerships and other ways in which they can sell an asset for $2 million, put it in the bank account and tell the irs they only earned $100,000. what the president seeks to do is level the playing field so wealthy individuals are forced to pay taxes in the same way working class people do every day in this country. >> let me just follow up on your answer. you raise an important point.
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i hope everyone watching is listening to what i think is an explanation that requires a little more question. let me think of it this way. the top 2% of americans make about 1 out of every hundred dollars but pay about 36 out of every hundred dollars in taxation. 60% of americans pay no federal taxes. here is my question. for 60% that pay no federal taxes you are literally going to be having the access to investigate their accounts, too. if you are looking to simply find tax cheats of the top 1% or 2% of americans, you don't need a $600, $10,000, frankly you don't need a threshold of a hundred thousand dollars. with this threshold of $600 or $10,000, it captures all the information, all the transactions of every day americans not the rich ones but the ones working paycheck to
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paycheck should not be forced to have an additional burden on their plate about whether the irs is going to be investigating them. whether or not someone is going to be harassing them. that is not about millionaires and billionaires that is an actual additional burden on working class americans. we can do better than that. thank you for your answer. >> can i just respond quickly? >> of course. >> the president is willing to work with congress on the threshold on ways to protect those who earn w-2 its and those who get social security payments. our ultimate goal is making sure wealthy people who don't pay the taxes that they owe pay those taxes in order to make sure we have the money to pay for things like infrastructure and child care in this country. >> my time to the witness to respond i will simply say this. if you are looking for a way to make sure people pay their fair share of tackes, this proposal
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is not in the same universe of accomplishing that goal. this proposal, whether $600 or $10,000, if you exclude the social security recipients at $1,500 you still have the vast majority of americans working paycheck to paycheck with an additional burden with another thing to be concerned about from their government. that is not the way the free market should work and certainly not the way we want our country working that every single american has to be concerned about the irs. that, it's scary enough without giving them more access to our account unnecessarily especially for working class americans. thank you very much for your response. >> thank you, mr. chairman. mr. secretary, would you agree sanctions are one of the few peaceful tools of the diplomacy?
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>> i do agree sanctions are an effective tool of diplomacy. >> i appreciate the treasury department is thinking through how to ensure the sanctions to remain an effective tool but i am concerned that this review doesn't reflect a holistic approach to sanctions. i mean, i see the treasury department as basically the entity that once an administration decides to pursue sanctions in pursuit of peaceful diplomacy somewhere in the world is the executor of those sanctions. i think most people would agree that sanctions are a foreign policy tool. but this review is basically a treasury centric product that does not address the many sanctions authorities implemented by the state department and largely pays lip service to the state department's role in sanctions. i get the sense the state department often struggles to
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play an effective role and don't measure up to resources and capacity in this area. why spend all of this time and effort on a review when it is a single agency product rather than one that is reflective of the overall foreign policy component that should be the driving force i think in our sanctions policy? >> senator, i completely agree that sanctions are a tool that are driven by foreign policy decisions that are made and mainly driven by the state department and the national security council but given the importance of this tool and the use of the tool we wanted to make sure that we're ensuring the tool is effective going forward and we worked closely with the state department with regard to this report and we look forward to working closely with them. >> let me ask you this. i don't know how closely you work but would you consider a joint effort moving forward? >> we do plan a joint effort going forward. >> let me ask you. anxiouses are only as good as
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they are enforced. sanctions are only as good as they are enford like any other law. if you have a law there is a red light and you go through the red light unless there is a likelihood there is enforcement against you doing so you'll go through the red light. same thing in terms of sanctions in a more significant context. i've raised this before but i am deeply concerned that china is continuing to buy oil in significant quantities from iranians both subverting international sanctions and impacting the oil market. i am disappointed that the united states and for that fact the rest of the international community doesn't seem to be holding china accountable for these violations. what steps are you taking to enforce sanctions on china to comply with the law? >> senator, at the treasury department we are committed to complying with the law and seeking intelligence on the companies and entities
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purchasing illegal oil and holding them accountable. we're happy to provide you and your staff with a classified briefing on the steps we're taking with regard to those. >> i appreciate you are committed to it but only sanctioning actually makes it relevant. this somebodying done in plain view. we are talking about millions and millions of oil being purchased by china from iran in clear view of everybody in the international community. i don't know how much due diligence is ultimately necessary to find out that which is available to the public eye. i look forward to hearing what you are going to do in that regard and also look forward to understanding for example turkey and the s 400. they are talking about making more purchases. when we wrote this law, we wrote
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it in such a way that certain actions are mandatory not discretionary. yet we have seen both the past administration and this administration not necessarily enforcing the mandatory nature of the sanctions. why not? >> senator, i am committed to enforcing mandatory sanctions where we have the proof and evidence to do so. we rely heavily on the council of career lawyers at the treasury department, doj, in terms of how that enforcement and also on the intelligence we have at hand. >> i love lawyers but they can kill every process in the world. the reality is i find that congress's intent is habitually subverted by both the previous administration and so far in some cases this administration. when can we expect to see designations related to the executive order on certain sanctions on certain persons with respect to the humanitarian and human rights crisis and issued by the administration on
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september 17th? >> senator, we are committed to finding a peaceful resolution to the situation in ethiopia and the president has issued an executive order and we continue to work with parties to bring them to the table but made very clear we are also willing to use that executive order to do so. as the process continues we'll continue to evaluate sanctions targets and are committed to keeping you informed as we do so. >> okay. i appreciate you are very committed but i don't see the commitment action. i am looking forward to the action on these and others. i have others and i'll submit it for the record. >> senator danes from montana is recognized from his office. >> thank you. i want to extend a welcome to our witness and appreciate this opportunity to discuss the affect to the security of our nation. over the past year china has
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exerted increasing pressure both militarily as well as financially on taiwan, neighbors in the south china sea, while at the same time edging itself from international pressure with new antisanctions laws. how does china's decision not to extend antisanction laws into hong kong inform our own strategy for deterring aggression, ensuring our allies in the south pacific? >> thank you for the important question. i think this speaks to why we believe it is critical that as we move forward on sanctions we look for every opportunity, the ability to do that multi laterally. frankly our adversaries are seeking to find ways around our sanctions every day and the best way to ensure they are unable to do that is by making sure our sanctions are not just driven by the united states but by the international community made up of our allies and partners.
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while the economic impact of our sanctions is great by bringing along allies and partners we increase the political impact of isolation which matters to our adversaries and puts us in a better position to enforce the sanctions over the long term. >> i agree with you the multi lateral approach is a good approach and i would encourage you to head in that direction. in adeggs to antisanction laws china's main goal in the development of the digital yuan is establish an alternative to the u.s. financial system, immune to systems. how can we ensure our sanctions policy doesn't risk the centrality of the u.s. dollar, a dollar based institution and the u.s. payment net works that carry importance far beyond the specific country that is being sanctioned? >> again i think one of the
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things we do is think through how we make sure we further enhance the dollar based financial system is ensuring our allies and partners remain bought into that system by working more with them going forward. in addition to doing that we need to do many of the things this committee has been calling for for a long time in terms of the principles you've outlined making sure when we do use sanctions we use them as part of a clearly defined strategy that we are allowing for humanitarian access to continue to flow. when it comes to a community like china it is true they are trying to find means around our financial system to avoid sanctions but it is difficult for countries or adversaries to find means around not only the u.s. financial system but the financial systems of our partners and allies as well. fundamentally by taking actions in unison with other countries we put ourselves in a better position to make sure we maintain the dollar based
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financial system globally and also that we are able to hold our adversaries accountable for actions they take in violation of norms. >> earlier this month without warning or explanation the biden administration lifted sanctions on two iranian entities involved in the military missile programs. the monmouth industrial group and subsidiary monmouth diesel. this action contradicts earlier assurances by president biden that he would not ease sanctions until iran reversed its course on its nuclear weapon. why did the administration lift sanctions on these two entities? >> i assure you this was not in response to ex-achange in
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administration policy but things taking place. i am happy to provide further detail on those legal actions in another setting. >> of course it gave us great concern. so perhaps a more direct question would be does the president remain committed to preventing iran from obtaining a nuclear weapon or should we expect to see more of these quiet concessions? >> i want it to make clear this was not a concession but a response to a legal action. the president remains committed to ensuring iran does not have a nuclear weapon. he has made clear if iran re-enters the gcpoa we are willing to take steps in that regard but not before feel. >> lastly on gnt as the nation continues to deal with the terrible aftermath of president biden's abrupt withdrawal from afghanistan questions remain as to how the u.s. is going to prevent the rise of terrorism and address the growing humanitarian crisis in that
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nation. do you foresee a scenario where the united states would relinquish the frozen afghan central bank reserve to the taliban? >> senator i see no situation under which we would allow the taliban to have access to the reserves that belong to the afghan people. we believe it is essential that we maintain our sanctions against the taliban but at the same time find ways for legitimate humanitarian assistance to get to the afghan people and that is exactly what we're doing. >> thank you. >> thank you, mr. chairman. welcome mr. adeyemo. good to see you. i agree sanctions are only one tool in our national security and foreign policy tool box but as you indicated they can play an important role in enforcing a space international system. you would agree would you not
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that china grossly violated its international violations when it cracked down on democracy in hong kong? >> i agree, senator. >> while we know sanctions cannot always succeed in reversing maligned conduct if we raise the costs of those actions we send a signal that whether it is china or another country if they want to engage in this kind of aggressive behavior elsewhere they will pay a price. that only works if they actually pay a significant price. after china's actions in hong kong the congress passed legislation, the hong kong autonomy act which requires the executive branch to impose sanctions on officials complicit in the crackdown of democracy and importantly on financial institutions that help facilitate those individuals. senator toomey and i wrote to secretary yellen back in june
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applauding the administration for sanctioning some individuals but raising the question about whether or not the administration had been successful in identifying any financial institutions that facilitated those. there have been conversations since. as of today is it your testimony that the department of treasury cannot identify any financial institutions that facilitate individuals you've applied sanctions to? >> senator, we have not found financial institutions that facilitate those types of transactions but it is something we're continuing to look at. i think you made a clear point that one of the goals is to increase the costs of people who take these types of actions and from our perspective doing not only this unilaterally but working with our allies to raise the cost is critically important as well. >> well, let me turn to another piece of legislation that senator toomey and i and senator brown passed called the brain
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cast which aplud sanctions against any financial entities facilitating north korea's malign activities. it was modeled after the iran sanctions legislation so it was mandatory and secondary sanctions. to date, despite the fact that a u.n. group identified lots of financial institutions that they say are helping north korea evade those sanctions the administration neither the previous one or the current administration, the biden administration, has imposed sanctions on any of the financial institutions since the passage of the brink act. is it your testimony today that we have not identified any financial institutions that are helping north korea violate the sanctions regime? >> senator, as you know well, over the last decade we have sanctioned a number of financial
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institutions that have been facilitating trade with north korea and holding responsible a number of people who have taken these actions. while we may not have taken sanctions under the act passed we appreciate the authority congress has given us that will allow us in the future to do so. as we find financial institutions that violate the law and facilitate this trade we are committed to taking these actions. >> here is the issue. the issue is that it is not just authority in the brink act. it is a requirement. there are mandatory sanctions. and they're mandatory sanctions on any entities anywhere in the world that are facilitating the north korean regime. and so my question remains and you can get back to me because are you familiar with the u.n. reports that have been done where they actually identify by
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name entities around the world helping north korea violate the sanctions regime? are you aware of those? >> i am aware of those reports. >> okay. have we looked at the reports and have we concluded that they're wrong? >> senator, we haven't concluded that the reports are wrong. what we haven't done is found evidence sufficient for the mandatory sanctions that are required under the brink act but we look forward to continuing to look for that evidence and working with you and your staff to use the mandatory sanctions that have been passed by congress to hold north korea accountable and make sure that we're able to prevent them from advancing their weapons of mass destruction program >> i appreciate that the appropriations committee we just released our appropriations bills for public review yesterday. i chair the subcommittee and we have language in there really directing the executive branch to provide us an update because we have on the one hand a u.n. report identified by name these
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entities and yet we haven't seen any action. the reason is we don't have sufficient evidence we'll have to sit down and go over that with you. >> i'll be happy to do that. >> the senator from north dakota is recognized for five minutes. >> thank you chairman brown and ranking member toomey and thank you to mr. secretary for being here. i'll follow up on a couple things. first of all both senator toomey and senator menendez and others have certainly emphasized the expressions of commitment haven't led to action in terms of enforcing and in the case of nord stream 2 where i want to drill down a little bit. certainly capsa. that is a pretty big problem. because you said something else about i think it was to senator scott about multi lateral coordination is really important. nord stream 2 has been strongly opposed by the european union
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parliament. i mean, on two votes of 400 to 100. that is rounding up the lower number and down the higher number. so it is hard for me to see much commitment when the president announces just sort of out of the blue the lifting of sanctions on nord stream 2, authority he doesn't even have. and i think we concluded that the state department determined that nord stream 2 has facilitated sanctions evasion. on whose behalf? i mean, who is the winner here? why did the president lift the sanctions? why are we facilitating this, i mean, whose behalf is this being done sf. >> senator, i appreciate the concerns and they are concerns we share. what we are doing within the treasury department is making sure that we're looking for any evidence that we can that will allow us to use the mandatory sanctions that congress provided
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to us. we've met on several occasions with members of the committee staff here to hear from them in terms of the evidence they have. we've also worked closely with the department of justice to make sure we have a good understanding of the legal authorities we have in order to be in a place where we can take actions when we have the appropriate evidence. >> but the president's actions are completely unilateral. they were outside of the law. i want to know whose behalf, i mean european union, multi national relationship? overwhelmingly opposed to the completing, let me tell you a couple good reasons why it is a bad idea in the first place. because it has natural gas produced in russia, moved via pipe line, like nord stream 2. besides captivating the european allies to a single source, setting that aside for a moment, has through the life cycle of that gas a 41% higher greenhouse gas emission foot print than
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natural gas produced in the united states and liquified and sent to the same european allies. that doesn't even conclude the methane leakage. so what i am trying to to wrap s what's a good reason for -- i know you're looking for every legal reason to enforce the law which is interesting to me, but what's your theory if you don't know why the president would have done something like that? >> senator, we share concerns with regard to the nord stream 2 project. ultimately our goal here is the same as yours which is to make sure we provide for the security of our key allies while doing in a way that doesn't further those that seek to destabilize the region. our role at treasury is to make sure we use the sanction powers
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you provided. >> here we're going to send the president and most of the cabinet it seems to glasgow to try to convince the urld even though the secretary of energy said we as the united states doesn't have the moral authority to hold china accountable when they're emitting three times more gas emissions than we are. and i'm just having a heck of a time understanding why we apologize for the united states while covering for china who just as you know we just learned had a very successful circumventing of the globe of a
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missile. what i see is a transfer of climate guilt to big polluters as somehow making us feel better and i don't know what they're going to say in glasgow that's going to be convincing to our allies, but thank you for your testimony. >> senator, ultimately, the president believes in climate change and global responsibility, but the transition to a clean energy economy is an opportunity for the united states in which if we make the investments that are needed we can become a leader in selling american goods and services around the world that help to meet the needs of climate change. >> and i'm all onboard. but i'm not seeing that kind of leadership anymore. if approval of nordstream 2, there are multiple bad things about it, and i haven't found one good one. >> senator warren from massachusetts is recognized for five minutes.
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>> thank you, mr. chairman. so giant corporations and the wealthy have worked hard to rig the tax codes so they can pay lower taxes than everyone else. and now the democrats are looking to make a tax code just a little bit fairer and hordes of lobbyists are fighting us tooth and nail to stop it. the whole thing is disgusting. both one fight is down right breathtaking even in this cesspool, and that's the lobbyist fight to protect the ability of their wealthiest clients to cheat on their taxes. millions of hardworking americans file their taxes honestly every year. their employers send them w-2 forms that say exactly how much they earned in wages right down to the penny. and then the employers also send a copy of that to the irs. this is called third party reporting and helps taxpayers and also helps the irs zero in
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on tax cheats if the numbers don't add up. wage earners from cashiers and teachers are subject to third party reporting, but the wealthy get their money in other ways. and mostly the irs doesn't get any information, no third party reporting to keep them honest. so deputy secretary let's consider a multi-millionaire with several mansions who sells one of those mansions for several million dollars more than they paid for it. that's taxable income. but does the irs get third party verification of how much profit they make? >> no, they do not, senator. >> all right, let's ask about a partner in a law firm or private equity fund. when they get millions of dollars of a distribution of profits from their firm does the irs get true third party verification how much money they make? >> no, they do not. >> okay, so when rich people rake in millions in sales or
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profit distributions, they're on the honor system. so tell me, deputy secretary, how is the honor system working right now? >> it's not working well, senator. as you know the top 1% of earners in america underpay their taxes by more than $150 billion each year, almost $2 trillion over the course of ten years. more than $150 billion a year is lost by these top earners. and that is exactly why congress is considering a simple new third party requirement. under this proposal banks would report just two very general to the irs each year. total dollars that come into an account and total dollars that have gone out. this means the irs can spot wealthy tax cheats that have millions of dollars flowing into an account but they're not reporting any money on their tax return. now, many rich people are unhappy -- are happy now with the current system and banks who
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serve them are also happy. so they started a campaign to keep the irs in the dark about tax cheating. and some of these folks are just outright lying about the proposal, claiming, for example, if we give the irs information on individual transactions, some republicans have picked up on these lies. just to set the record straight under this proposal if i bought new tires or a couch or a cow would the irs know about it? >> no, they would not, senator. >> if i paid my friend or paid him back for buying me a cup of coffee, would the irs know about it? >> no, they would not, senator. >> would anything, anything at all in this proposal cause the irs to increase audit rates on folks making less than $400,000 a year? >> no, senator.
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it would actually allow us to reduce audits on those individuals and increase our ability to go after those who are more likely to cheat the system by underpaying their taxes which are wealthy taxpayers. >> well, thank you, deputy secretary. this proposal would help unrig our tax system just a little bit, making sure that the wealthy have to pay the taxes they owe just like everyone else does. so tell me, why have the lobbyists been fighting this proposal so fiercely? small businesses have been putting together w-2s for their employees every year for a zillion years. don't tell me that the banks can't do this. >> senator, those who don't seek to pay their fair share will go to no ends to try to avoid taxation, and that's exactly what we're seeing here. the president's goal ultimately is to level the playing field so wealthy individuals have to pay taxes the same way the working class pay every day in america. >> thank you very much. the democrats are fighting for tax reforms that will help
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ensure that the very rich and giant corporations start paying their fair share. and i get it that the lobbyists and rich people they represent are going to fight us with everything they got including sending millions and millions of dollars on these campaigns. but we need to make the tax system fairer, and this is one of the critical ways we can do it. thank you for your help on this. thank you, mr. chairman. >> thank you, senator warren. i'm not clear. senator cortez or senator tilling from his office, perhaps. or senator cortez from hers. senator ossoff from his. senator smith from hers.
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one moment. senator haggerty is just a couple moments out. i will -- i will ask one more question. the white house gathered as you know over 30 nations last week and called for accelerated cooperation to combat international ransom ware efforts. this effort shows your focus,
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the administration's focus on protecting cyber security of u.s. companies from such attacks. how does treasury work cooperatively, how does congress work cooperatively mr. deputy secretary with treasury to address the problem of sanction violations through crypto currency in cases of ransomware? >> senator, thank you for the important question. and as you know recently we sanction our first crypto exchange for the facilitation of ransomware payments. we're continuing to look at using our sanction authorities to go after those that use crypto payments to violate our laws by committing crimes. we want to work closely with congress. one of the most important areas for us, frankly, is ensuring we have a work force that understands these issues going forward, so we look forward to both looking for the authorities to hire the people we need but also the budget increases that are part of the president's fy
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22 in order to make sure we have the people needed but also the changes happening in the payment system that are making it harder for our sanctions regimes to effectuate the type of behavioral changes we want from our adversaries. >> talk about international cooperation to disrupt ransomware? >> as you know, senator, many of these crypto exchanges and cyber criminals that facilitate ransom ware exist outside the united states and have an impact here. our goal is to work closely with our allies and partners to disrupt these -- disrupt those actors that exist in their countries, and a big piece of this is going to be ensuring these countries also take actions to make sure anti-money laundering rules are followed by crypto exchanges that exist in their countries and that they're extending the protections that exist within their traditional finance sector to crypto
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currencies and to financial technologies that are started in their jurisdictions. >> thank you, mr. secretary. senator toomey has one more question. >> thank you, mr. chairman. my question is does the administration intend to try and bypass the senate's treaty approval process to implement pillar one of the tax agreement that the administration is pursuing? >> senator, we of course look forward to working closely with you on the implementation of the international tax agreement. as the agreement is not completed, i can't speak to the process for working with congress on those portions. but what we do know with congress and the business community is that the american business community is supportive of pillar one because they see it as a way of creating a level playing field throughout the world. >> well, some in the business community are supportive and some are not. i would point out the u.s. has
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58 bilateral tax treaties and of course all of them were approved by a two-thirds vote in the united states senate. and here's the problem. if you can't answer the question of how you're going to implement this, that obviously suggests there's some uncertainty about whether it will be implemented. it was pillar one if they don't know for sure they're going to get pillar one and they have good reason to doubt it, then it's not at all clear to me they're going to go ahead and impose pillar two which they were reluctant to do any case. so my suggestion would be before the administration and our democratic colleagues go ahead and impose this huge tax increase on multinational internationals you might want to pause and get this figured out. >> senator, imagine countries like germany, france, the u.k.
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have higher min pm taxes than we do. ireland and -- >> not with respect to the income of foreign subsidiaries. >> these countries are all committed to increasing them to the global min pm tax. >> but as i said it was conditioned on them getting pillar one. and you are not able to explain how you're going to get pillar one implemented. >> senator ossoff is recognized from his office. >> thank you, mr. chair. the comprehensive sections review the treasury has undertaken in the first six months of the administration, appreciate the details that have been referred to the committee. you highlighted a number of what you have have said to be success stories in that document. could you please identify for
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the community one or two high profile instances where u.s. sanctions have been ineffective, have not achieved their objectives or where the costs of the sanctions have exceeded the benefit from treasury's perspective? >> senator, as we say in the sanctions review we did not conduct a comprehensive review of each one of the 37 sanctions programs that are authorized by the executive branch or congress. rather this review was focused on forward looking assessment of what we can do to make sure this remains an effective tool. what we learned, though, is that the places where we can improve sanctions going forward speak to some of the things we could have done better in the past, for example, ensuring that we continue to use the framework for evaluating whether sanctions are imposed and ensuring that humanitarian access -- humanitarian assist sns is able to provide it to people in conflict zones.
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we look forward to applying them on a going forward basis to our sanctions program. >> you do specify a number of cases where you believe u.s. sanctions policy has been effective, so i think in the interest of ensuring that we are improving u.s. policy having undertaken a clear review of past policy, can you please specify cases where u.s. sanctions policy has not functioned as intended or the cases that inform the general assessment you just shared? >> i think one of the challenges we identified was the fact because we did not have a clear framework in the past it makes it hard to evaluate those sanctions programs. as i said in the report and i said earlier, we didn't evaluate
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each sanction program or each sanction put in place, so i'm not in a position to tell you where one was done better or differently. we look forward to applying a framework that aligns with principles this committee has spoken of going forward to ensure we're in a place we can evaluate to decide to do more or less in order to effectuate or foreign policy goal. >> the report and i believe i'm look here at the full review and it specifies cases of iran with respect to the car tell sanctions following the fall of the regime in 2011, the designation of over 1,600 terrorist entities as success
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stories. i'm asking where our sanctions have not succeeded? is that you've not identified any such cases? or is there a lack of willingness to acknowledge policy failure in public? >> no, senator, you're right, in the report we did acknowledge a number of cases where we've seen clear success. as we said in the report we did not focus in on each individual program or authority but rather we look for themes. and we highlighted those themes, and i did so earlier in my testimony of places where we need to make sure we address challenges. some of those challenges are challenges we need to dress that are interm challenges. one making sure we allow internal assistance to flow and making sure sanctions are used as part of an overarching strategy. but some of the strategies are created by our adversaries and changes in technology. for example, our adversaries are attempting to find ways to get around our program and that
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makes it harder for sanctions to be effective -- >> with respect to my time being limited i may already be over my time, what i'm asking is for you to identify -- we're trying to learn lessons here. you've conducted a review of u.s. sanctions policy. you've identified in that review specific success stories. please, with my remaining time identify one or two specific examples where a u.s. sanctions policy has been ineffective so that the customers can benefit from the review you've undertaken and deliberate how best to approve the statutes that govern these policies? >> senator, as i said the review was focused on the idea of us looking into the future what we can do to sanctions going forward. we did not spend time looking at the individual sanction policies. more than happy to follow up with you and your staff to talk about any of the sanctions programs you'd like to discuss.
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but our goal was to look at what we can do going forward to make sure sanctions remain an effective tool. in order to do that we need to address the challenges the review found, which we have clearly articulated both in my report and i've done in my testimony today in order to make sure going forward this tool is effective. >> we will need to meet in person because the purpose of this hearing is a policy update on the treasury department and sanctions policy review. and if we're unable in a public setting to articulate or discuss where u.s. policies have been ineffective in generalities i think we have more work to do. i look forward to meeting with you to work together to improve u.s. policies. thank you. >> senator haggerty from tennessee is recognized for five minutes. >> thank you for holding this important hearing. and deputy secretary, it's very good to be with you today. as i said before, the financial system in america is the envy of
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the world. and we need to do everything we can to safeguard it from malicious activity and maligned behavior. the ability to access america's financial markets is a privilege. we must also appreciate the national security importance of using the financial tools in our arsenal to counter america's adversaries and to constrict our enemy's financial lifeblood. just this weekend we saw reports the chinese communist party surprised the u.s. intelligence over the summer as they tested hypersonic nuclear capability. it speeds five times the speed of sound in a way that's hard to track and defend against before racing toward its target. reports of such activity underscore the challenging environment that faces america today. and make it clear to our adversaries that america means business. we must do so in a manner that doesn't inadvertently harm the
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current status in the world and make sure we remains the worlds currency. for example, clarity around sanctions is critical for enforcement. we must ensure that cost to american small businesses are minimum. if allowed to proliferate unchecked they could harm the efficacy of those sanctions. the chinese communist party has taken the extreme approach of banning all private sector crypto currency activity. your predecessor at the treasury department recently wrote about the need to protect security in a manner that doesn't crush innovation. and i agree and i think you do, too. and we must understand china's ambition in this space. and the associated national security implications for the united states. so i'd like to ask you how will
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the biden administration and the department of treasury continue to lead in the digital assets arena in a way that protects us from the maligned behavior of actors that we've been discussing and criminal activities that we might perceive? >> senator, thank you for the question. i think one of the most important things for us is to remind ourselves innovation is something that's been good for our economy. and we need to make sure that we create an environment that allows that innovation to exist but that we want to make sure we have regulatory rules for the road to protect consumers, investors and our national security. doing that will require us to extent our existing regulatory apparatus to address these issues but also potentially work with congress where we may need new regulatory rules of the road to address new innovation, but the thing we want to make sure that we continue to do is that we create room for helpful
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innovation that will help advance our economic interests. >> i appreciate the perspective but i think many of us look forward to working with you in that regard. i want to turn to another point, and that has to do with the world bank and the imf and the influence of communist child. they released findings from its investigation into data irreg lirties with the important world bank doing business reports. the report found that the data described in the business climate in china was changed because of pressure by then world bank ceo. her goal evidently was to inflate china's ranking at precisely the time china was going to help the world bank to increase its capital, a clear conflict of interest. despite legitimate issues and concerns the biden administration continues to support the doctor to continue
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to lead the imf. so deputy secretary, what steps is treasury taking to ensure that the world bank and imf are safeguarded against corruption by the chinese communist party? >> senator, when we reviewed the report we saw issues that were serious concern and that's why the secretary demanded that the imf look into this closely by speaking to lawyers and speaking with a matching director. based on the evidence we reviewed, we did not find that it was appropriate at this point to remove the managing director, but we did make very clear during those meetings and directly to the managing director that changes need to be made to ensure that whistle-blower rights are protected, that the integrity of the institutions are protected which is our overarching goal, and we're be holding her and other leaders of the
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international financial institution accountable for making these changes. >> i think the willmer hale report highlighted conflicts of interest. and i hope you'll continue work with us to prevent them being influenced bide maligned actors. >> senator cortez from nevada is recognized from her office. >> thank you, mr. chairman. deputy secretary, thanks for joining us today. let me talk a little bit about ransom ware which we know has doubled from 2019 to 2020, and there's no doubt they're a criminal menace and national security threat. and i also know in nevada companies have been attacked by ransomware by criminals. two questions for you. one, what does the u.s. government recommend the private sector do to address this, and
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how can local businesses to address this, and is there some support at the federal level they can seek to prepare or what to do if they are somehow attacked through ransomware? >> senator, thank you for that important question. and i think the important thing for us to recognize is it's a larger symptom which is that of cyber security. the most important thing our government, companies, individuals can do is make sure they're focused on cyber security in order to prevent criminal actors from being able to get into their system and potentially use them to ransom them in order to turn those systems back on. if a company or government is attacked, the first thing we recommend that they do is get in contact with the fbi and to notify them immediately of these attacks. our goal ultimately is to make sure that payments do not flow
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into the hands of criminal actors and that especially those payments don't flow into the hands of those people who have been sanctioned by the united states. so oftentimes those who have been attacked need to also contact the federal government and the office of foreign asset control in order to make sure we're in a position to help them resolve the situation and hold those accountable who are taking criminal actions against these enterprises. ultimately the president is committed to a whole of government effort which involves not only the fbi and treasury department but allagies of our government to hold people accountable. and as i discussed with senator brown earlier, it's going to be critical we not only do this in the united states but that we have a global effort because many of these cyber criminals are domiciled outside of our country. so we look forward to working with members of congress to address these issues and making sure we work with our allies and partners who do so as well.
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>> thank you. let me ask you this. do you think sanctioning crypto exchanges makes it risk yr for firms to pay ransom? >> i do think that it's something that a firm is risky. ultimately our going is to make sure we stop these criminal enterprises from using ransomware as a tool to gain economic resources. so our goal is to use -- is to make sure when a company is attacked they notify us immediately. treasury is committed to using all the tools in our arsenal to go after those committing these ransomware attack. as you know you recently sanctioned a crypto exchange that predominantly facilitated ransomware attack. we're also looking at other exchanges and other ix mixers doing the same and working with our international counter parts to do so as well.
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>> thank you. let me jump to something else. in 2018 i joined senator flake to request a report from the gao on remitness to fragile nations. and fragile nations have weak financial systems, high levels of poverty and access to criminal or terrorist activity. can you expand on these sanctions where these recommendations or careful calibration to limit the impact on the flow of legitimate humanitarian aid to these in need. and how will you calculate those sanctions? >> senator, this is a critical issue. when we use our sanction regime our goal is to go after actors who violate our national security but to permit for humanitarian assistance to continue to flow. what we've learned over the last 20 years is oftentimes when we do not permit humanitarian
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assistance as right now it creates a gap between and some uncertainty for those who are acting in this space. so part of our goals is to ensure that as we go forward we find ways to create exceptions where possible early on so humanitarian assistance continues to flow and make sure we're clearly communicating with the financial institutions that are facilitating humanitarian assistance going forward about what our policy intent is and making clear what legitimate humanitarian assistance is permitable to make sure we hold people accountable for their violations of international laws and international security, we continue to allow people to receive the humanitarian assistance they need going forward. >> thank you. >> thank you. senator muran from kansas is recognized for five minutes. >> chairman, thank you very much. mr. secretary, good morning. i want to echo before i ask a couple of questions i want to
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echo the concerns i've heard a number of my colleagues raise in regard to sanction enforcement. and in that regard think about north korea and nord stream 2, iran. my point i would make to you is it seems like we've seen no change or modification in behavior in a positive way by any of those entities, those countries while we are seemingly paused on our enforcement of sanctions. let me now ask a couple of -- and i hope the administration -- maybe there's an explanation for that, but i hope that we are forceful in our efforts to change behavior in all those instances. let me start with this in case i run out of time. i'm trying to prioritize -- since 2014 the central banks of china, russia, iran and venezuela have all explored the creation of a central bank digital currency. as of now china is well on its
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way to issuing its first cbdc. there is no question our adversaries will use government issue digital currency to fund authoritarian regimes. how does the central bank allow for bad actors to accomplish their goals without protection? and how does the treasury plan to mitigate the blatant teams by these countries to surcomvent our sanctions? >> senator, thank you for that question. i think from my perspective the best way to maintain is to main thane these investments here at home. ultimately the reason that the dollar of the world reserve currency is because of the strengthen of our economy. by investing in that strength and continuing to maintain a stayable rules based system in the united states we'll continue to attract capital, but you're
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right other countries are developing things like digital central bank currencies that will have an impact. fundamentally many of these countries seek to do this for a number of internal reasons, frankly, in order to better monitor their people and to make sure they have greater control, but it will have an impact on the international financial system. but ultimately in order for any currency to have staying power it needs to be permitted to be used outside of that country going forward. and what we're going to do in terms of as we think about our sanctions regime is to ensure that we're thinking through how we design sanctions in a way where if a country attempts to subvert the u.s. financial system it'll be harder for them to do that if we're taking sanctions actions with our partners and allies. while it's hard to get around the dollar based financial system, it's nearly impossible to get around the dollar, the
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euro, the pound and the yen. so when we're able to take actions together it puts us in a better position to hold our adversaries accountable. >> thank you. in fy 2019 the ndaa provided for wavers specifically i think with india in mind. given india's importance as a partner in the endo pacific observers across the political spectrum note sanctions would do significant harm to our relationship. does india meet the waver requirements congress passed three years ago, and why is it taking a very long time to reach a decision? >> senator, that is a question that's driven by a foreign policy decision i'm not in a position to make. but what i can tell you is we're committed to following the mandatory laws congress has pass asked to using the authorities you provided appropriately going forward. >> you're saying the state
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department. you know, the same similar circumstance arose in regard to turkey, and it highlights for me that countries are making decisions that regardless of our sanctions they are continuing the behavior that the sanctions are designed to prevent or deter. turkey is an example of that. india now presents apparently a similar kind of outcome. and it then highlights, again, i would raise in the 16 seconds i have left that there was a 2019 gao report that found that officials at treasury, state and commerce, quote, stated they do not conduct agency assessment on the effectiveness of sanctions in achieving broader policy goals. i would hope that this treasury department and others are responding to that gao report to
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help us determine which sanctions work and in what circumstances so that we can better mold our sanction policy. >> senator, i want to appreciate the work of this committee to lay out a set of principles to help us in doing that work. i think you're right one of the most important things we can do is evaluate how these tools work going forward. but in addition to new sanctions the key is how do we enforce the sanctions that are on the books? that isn't always done by making new announcements but rather in our engagement with our partners and allies to cut off funding to countries that are maligned actors going forward. there are often intradictions that are done in collaboration with our public at the defense department. and we know ultimately these things are in service of foreign policy driven by decisions made by congress and the president. so we appreciate the close working relationship with this committee and the foreign relations committee on making sure we're enforcing sanctions
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in a way that is keeping with our national security. >> thanks, senator moran. the senator from rhode island, the most senior member in attendance on this committee today is recognized. >> thank you very much, senator. mr. secretary, welcome. we are facing a very challenging, very daunting and very complex situation in afghanistan. we had sanctions in place and in fact secretary blinken has said if their behavior is not acceptable further we could increase these sanctions. but at the same time there's a humanitarian crisis in the country caused by many factors, the violence, the climate and et cetera. how do we manage this difficult balance between providing or at least not interfering with humanitarian assistance and
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still maintain the sanctions, effective sanctions against the taliban? >> thank you for your question. and you're correct the situation in afghanistan for the afghan people is challenging. and those challenges are brought on both by environmental circumstances, a number of circumstances unique to afghanistan but also by the lack of management of the afghan economy by the taliban. fundamentally our goal is to make sure that we are implementing our sanctions regime against the taliban and haqqani network but at the same time allowing for the permissible flow of humanitarian assistance into that country. to that end we've met on a regular basis with humanitarian groups doing business in afghanistan as well as our international partners including the u.n. we've issued a series of general licenses that allow for the permissible floel of that humanitarian assistance going forward, and we're also consulting with these groups on specific issues they continue to have. we believe that ultimately in
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order for humanitarian assistance to flow, the taliban has to allow that to happen within the country. but we're in a position where we're taking very step we can within our sanctions regime to make clear to humanitarian groups that we want to facilitate the flow of humanitarian assistance to the afghan people. >> i presume that the state department -- well, i can't presume that because we have very little presence on the ground. who is actually monitoring the distribution of these humanitarian support systems to ensure that they're not being abused, and in fact it's getting to the people who need it? >> in many cases we're working with the state department and u.s. aid on these sets of issues. but on a lot of humanitarian assistance that flows through the world and including afghanistan goes through the united nations. a number of these groups that
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are doing this work are familiarual doing work and providing humanitarian assistance in conflict zones where they are forced to do so where there are sanctions in use, and they've done this for a long time by consulting actively with us and working closely with our international partners. we feel confident we can allow the flow of the system to get to the afghan people without providing undue assistance to the taliban. >> i appreciate this. and this as i said, again, an initially complex and challenging and almost on a day-to-day basis i presume you and your colleagues at the state department are working on this issue and making judgments about the effectiveness of the program. i think that is a fair statement. >> it is, sir. >> thank you very much, mr. secretary. >> thank you, senator, reid. secretary, thanks for joining us
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today. it's been a comprehensive useful survey of the months long sanctions policy review. we're so glad you did that review. thank you for sharing your insights and finding a recommendation for this committee. this will be but the first in a series of ongoing conversations. senators who wish to submit questions for the record, those questions are due one week from today, tuesday, october 26th. mr. deputy secretary, you'll have 45 days to respond. thank you and it's a pleasure as always to work with you.
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on wednesday fbi and homeland security officials testify on efforts to counter domestic terrorism before the house intelligence committee. watch live at 9:30 a.m. eastern on c-span 3, online at or watch full coverage on c-span now, our new video app.
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>> download c-span's new mobile app and stay up-to-date with live video coverage of the day's events from live streams at the house and senate floor and key congressional hearings to white house events and supreme court oral arguments. even our live interactive morning program, "washington journal," where we hear your voice every day. c-span now has you covered. download free today. texas congressman joaquin castro spoke at the atlantic council about u.s. diplomacy after the trump administration. he also talked about legislation to establish a federally funded research center for translating and analyzing documents from china and other countries. >> good afternoon, and thank you all for joining us today. i'm ema ashferred, a senior fellow in the new american engagement initiative here at the atlantic council. this event today is part


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