tv Deputy Treasury Secretary Testifies on Sanctions Policy Review CSPAN October 19, 2021 2:21pm-4:01pm EDT
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testified on the department's sanctions policy before the senate banking committee. the hearing is an hour and 45 minutes. >> the hearing will come to word. senator brown: this hearing is in a hybrid format. members have the option to appear both in person or virtually or witnesses in person, mr. adeyemo welcome. if there is a technology issue, we'll move on to the next person. our speaking order will be as usual. by seniority the members who checked in. alternativing democrat and -- alternating democrat and republican. today we welcome weapon deputy secretary wally adeyemo for an
update on sanctions policy issues where we have done important bipartisan work on this committee. i thank senator toomey and especially senator crapo who was 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 tep stem the flow of illegal opioids from china and mexico that have taken such a toll and heartbreaking story about what's happened to -- in far too many families across this country. i'm confident department we'll be able to build on the progress we made this year in conjunction with president biden and deputy secretary adeyemo. two weeks ago on this committee we explored 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 aid can be delivered effectively to the people there despite sanctions against the taliban. today we'll focus primarily on the findings and recommendations of the month's long sanctions policy review that second yellen, deputy secretary adeyemo and others directed the treasury department to undertake. department consulted with agencies across the government, state, commerce, intelligence community and others as well as an array of private sector actors, including banks, business, nonprofits, international n.g.o.'s and sanctions experts. that conference examined important questions over sanctions pocy the u.s. government have the right sanctions tools? with reusing them effectively? reassessing their application and adapting them as we go? are we targeting the right people? right entities? right countries in the right way with the right sanctions. are we changing the behavior of
targeting countries. that's our goal. i know the treasury has a recommendations on these other questions. there are some guiding bipartisan principle that is this committee's recognized for years regarding sanctions. let me just briefly outline those. number one, we should impose sanctions multilateral basis whenever possible. there are more effective and garner broader political and diplomatic support if we impose them in coordination with allies. two, preserving strengthening humanitarian exceptions and license important to ensure that people don't suffer from shortages of food and medicine and other necessities because of the sanctions. 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 the effectiveness of sanctions we need to communicate
those findings better to banks and other entities that are implementing sanctions policy. last, the executive branch must continue to support and empower the dedicated public servants across the government charged with implementation and enforcement. as with any job workers are our greatest assets whether at treasury, state, senate banking housing and urban affairs committee or the intelligence committee in our government. they must have the funding and analytical tool and technical expertise, including en -- in crypto currencies. they need the technology and time to do their jobs particularly as we have 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, pose any questions to the deputy secretary, which i'm sure he's prepared to address. i thank deputy secretary adeyemo for your work on these issues. i look forward to your testimony. senator toomey. senator toomey: thank you, mr. chairman.
depp secretary adeyemo, welcome back. under president biden the president department has advanced a number of troubling international policies, some of which are clearly intended to circumvent the will of congress. take sanctions to start with. the administration has offered sanctions relief to some our adversaries and the unrealistic hope they'll make concessions aeconomicable to people. iran to re-entered flaw the j jcpoa they want to lift sanction os n iran. thenned at the administration hopes they'll cease to support terrorism and curb its ballistic missiles program. 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's 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's 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 nord stream 2 pipeline. the pipeline's project manager has been using sanctioned russian entities to construct and finance nord stream 2. meaning the managers' integral role in the pipeline is predicated on a massive sanctions evasions campaign. congress passed the countering america's adversaries through angsts -- sanctions act to punish among other things this type of conduct. sanctions evasion. congress did this because sanctions evasion harms u.s. national security interest. and in this instance it's increasing putin's maligned
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 this weren't enough, the administration is trying to enact an international tax treaty that will harm u.s. competitiveness and do it without obtaining the necessary 2/3 approval of the senate. you will recall the tax increase consists of two pillars. one is an unprecedented treaty change that would allow foreign countries to tax american companies based on the american companies sales overseas. it's 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 two is the 15% global minimum tax on multinational's 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's an integral part of
dismantling the 2017 tax reforms. but by imploring other countries to implement a global minimum tax that will harm their own workers and business, the administration is implicitly acknowledged their proposed multinational 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 problem, it's a very real possibility that other countries will not implement the global minimum tax. they have only reluctantly agreed to that global minimum tax as a condition -- in return for■c getting pillar one. the u.s. tax revenue transfer to them. but as i say, implementing pillar one requires 2/3 approval in the senate and i don't think that's 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
an corresponding tax increase, or they are going to violate the constitution by modifying our existing tax treed treaties without obtaining the 2/3 consent of the senate. let's turn quickly to the fsoc climate risk report. this is the latest troubling international policy proposal from the administration. we expect this report to come out soon. it's likely to claim that global warming poses a systemic risk to the financial system. i acknowledge that global warming is real. however, it does not follow from this that there is a new systemic risk to the financial system. we have had severe weather events since the dawn of time. and as the economist johncock ran has explained to this committee, major weather events, i quote, have never come close to causing a systemic financial crisis, end quote. there is no scientifically val lated possibility to change this in the near future. our democratic colleagues should acknowledge this reality and offer their proposals on climate change through the legislative proscies, which they are doing,
including calling for a carbon tax in which this very dangerous tax and spend measure they are contemplating there make energy prices higher. 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 few companies. all across america we are already seeing what happens when the regulatory environment discourages the development of necessary energy sources. energy prices spike. this dynamic will get much worse if financial regulators are pressured to starve the energy sector of the capital it needs to provide america the energy we all need. deputy secretary adeyemo, i look forward to using these issues with you today. chair brown: thank you. secretary adeyemo was sworn in march of 2021. he spent the career convenienting companie and organizations to move toward achieving common goals.
he came to the treasury department from the owe bam foundation where he served as president beginning august, 2019. he served as a senior advisor before that at the center for strategy international studies. he held a mber roles in this. he holds a b.a. from the university of california at berkeley and j.d. from yale law school. deputy secretary adeyemo, good to have you here. welcome. please begin. secretary adeyemo: chairman brown, ranking member toomey, members of 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 our 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 dollars. our economic success is the result of the policy choice west made coming out of world war ii. alongside the hard work and determination of the american people. america's interest in a strong, stable, and rules-based economic order is also deeply intertwined with our fornational security i. our economic objectives cannot succeed if the international financial system facilitates the ill lease it flow of funds to oppressive regimes, terrorist groups, cyber criminals, and other maligned actors. bearing this in mind, secretary yellen requested a review of treasury's use of financial and economic sanctions since the terrorist attacks on september 11. the review identified four primary challenges to the continued effectiveness of our sanctions regime. one, our adversaries' attempts to build payment systems that allow 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. finally, four, ensuring the sanctions are throwed alongside other measures as part of an overarching national security strategy. i want to briefly describe to the committee the five initiatives treasury is advancing to respond to these challenges and modernize the use of sanctions. one, adopting a policy framework. treasury will adopt the use after structured policy framework to inform its recommendations on the use of sanctions. this framework will seek to ensure that sanctions support clear policy objectives within a broad strategy. reflect input from technical experts and other critical sources of information, including the intelligence community. incorporates multilateral cooperations and are easily understood, enforceable, and reversible. the framework will be a true -- 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 continued flow of legitimate humanitarian aid to heavily sanctioned jurisdictions. three, regular assessment of sanctions program. treasury plans to use the sanctions policy framework 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 en entities. four, improve sanctions coordination and communication. the threat of sanctions alone not even the imposition remains a powerful tool of economic
state craft n order to cal great ury needs to communicate and coordinate more effectively with stakeholders by the use of financial sanctions. 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 collaborate on sanctions, as well as build a more formal mechanism for receiving feedback and advice and providing information to stakeholders. five, we plan to modernize our operational capabilities. as the threats to our nations change, sanctions must adapt. treasury must invest in changes to its work force and technical capabilities to meet these evolving threats. this will involve streamlining current functions, as well as making work force and infrastructure investments to make on growing threats like ransomware and other cyber crime. this effort will require
building on current processes in some areas, and changes in others. certain changes will 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 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-basedlobal economy. which has been fitted the world for generations. i look forward to working with members of this committee to vin tin advancing u.s. economic leadership abroad and creating opportunities for americans at home. i'm happy to take your questions. chair brown: thank you, mr. deputy secretary. you have laid out your staff spent time in working this. you laid out general principles and recommendations. what are the most important urges and findings and recommendations, will any of them require congressional approval?
secretary adeyemo: thank you, senator. i want to thank you and your staff and the staff of this committee for spending a great teal of time with those of us at tresh talking about the sanctions review. as you will see from the report and my testimony this morning, the findings that we have largely aligned with the principles of this committee is outlined. the key for us is making sure that as we think about go forwae making the investments today to keep up with innovations not only o technology but innovation byes our adversaries that are attempting to bypass our sanctions. this will require us to do more multilaterally. frankly, by doing more multilaterally, put ourselves in a place where when we decide to act unilaterally we have greater power in terms of our ability to effect change. the change of behavior, which is the ultimate goal of sanctions. we are going to 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. looking to congress to help us. the president's f.y.22 budget includes additional resources which will allow us to build on the technology expertise we need in the treasury department and help us bring on the type of work force we need to ensure we are able to meet these challenges going forward. a great deal of the work that we need to do will need to happen with our executive branch colleagues but we look forward with congress to advance these goals. chair brown: the importance of your -- strikes me this is especially important because the last time u.s. sanctions were reviewed competitively was 20 years ago -- competitively -- competitively -- comprehensively was 20 years ago. 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 this at risk.
what specific 23450u steps -- new steps are you recommending that treasury takes to mitigate the harm to humanitarian efforts. secretary adeyemo: it's critical where sanctions are used humanitarian assistance is able to flow. we have learned a great deal there what we have done over the last 20 years. you'll see some of that has applied to. so sanction programs we have used additionally. the president's executive order with regard to sanctions occurring in ethiopia. when we issued that executive order, we also put out general licenses at the same time to ensure that humanitarian assistance would continue to flow. one of the challenges we have is that we often will announce sanctions programs and then wait to hear from humanitarian groups before we then issue guidance to provide them with the ability to continue to flow humanitarian assistance into these areas. our goal need to ensure we take the lessons we learned from the last 20 years and ensure humanitarian assist abc can be
provided alongside our sanctions programs in order to meet the needs of people who are suffering in these areas. especially during this moment of covid, ensuring that medicine and food can get to these affected people is not only in the -- not only consistent with our values, but will help us end the pandemic globally. chair brown: a number of critics have argued that the clumsy use, overuse of sanctions by the u.s., especially during the trump administration, played into the hands of our adversaries. how concerned about you -- efforts by china and others to insulate themselves from u.s. sanctions including by moving away from dollarrized transactions creating new financial messaging systems or taking other similar efforts. do you view these efforts if they were to persist and intensifies phi as oppose -- posing a threat to the u.s. dollar? secretary adeyemo: the u.s.
dollar will remain for a number of reasons, including the fact that we have made the needed investments in america. ultimately people are going to want to invest in america and do business here because of the strength of our economy and the openness of our system and the certainty of our laws. but it is true that the -- 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 dollar in their financial dealings. our goal needs to be to make sure we do two things. one is in using our sanctions we need to use a framework that's consistent with the principles that this committee has been outlining for a long time. but in addition to doing that, we need to try to multilaterallize our sanctions whenever possible. while it's hard to avoid being engaged in financial transactions to avoid the dollar, it's even hardtory avoid
financial transaction that is avoid the dollar, the europe, the pound, and the yen. that's why it's critical more often we thigh trie to do things with our partners going forward. senator toomey: thank you, mr. chairman. deputy secretary adeyemo, i can't help but note the irony of your discussing how and why it is so important that we preserve the ability to implement a sanctions regime in the future when you and the administration choose not to implement sanctions that statute currently requires. take the case of iranian oil sales to china. the iran freedom and counter proliferation act prohibits the purchase of iranian oil. according to the international agency satellite data, since january of this year, china's been importing around 600,000 barrels of iranian oil ber -- per day. the administration knows t on september 28 reuters reported that, i quote, a senior u.s. official said, we are aware of
the purchases the chinese companies are making of iranian oil, end quote. i'm sure you acknowledge that ifca requires -- senator adeyemo: the law does require that. senator toomey: you acknowledge chinese companies are buying ukraine yain oil in significant quantities, right? secretary adeyemo: i am aware a number of people are attempting to buy ukrainian oil. our goal is to make sure -- senator toomey: we are not talking about attempts. it is factual matter chinese entities are routinely, daily, buying hundreds of thousands of barrels of iranian oil in direct violation of our sanctions regime, right? secretary adeyemo: we continue to monitor purchases of iranian oil -- senator toomey: you are making my point. i'm going to submit a written question. for the sake of time i would like a written answer. why it is you believe the andtory nature of this sanctions statute is optional.
it's not. we know 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, under section 228 of catsa. here's the problem. nord stream 2 pipeline project, the whole product jeblght is riddled with sanctioned russian entities ranging from the project other, various contractors, employees, they are all subject to sanctions. already establishedt= sanctions. it illustrates why the treasury department is violating this law. the obama administration imposed secretary torial sanctions or exercised sanctions on gas prom due to russia's efforts to destabilize eastern ukraine. i'm sure you don't dispute that. secretary adeyemo: yes, senator. senator toomey: it goes after
entities facilitating sanctions evasions on behalf of, i quote, any person subject to sanctions imposed by the united states with respect to the russian federation, end quote. on opec, the treasury's own website, the answer to faq number 546 makes it clear that persons subject, i'm quoting, persons subject to sanctions imposed by the united states with respect to the russian federation includes persons listed on the sdm list or s.s.i. list. enquote. so we have established that gazprom is a party sanctioned by the u.s. government for the purpose of 228. what does that have to do with nord stream? on its own website, it describes itself as a project company established by gazprom for the purpose of planning construction and subsequent operation of nord stream 2 pipeline. again, i'm sure you agree that gazprom did set up nord stream
2a.g. to construct and operate the pipeline, right? secretary adeyemo: senator, we have talked about this issue. several times and i agree with you that we need to do everything we can to implement catsa. as i said previously, we are currently working with the community -- senator toomey he: let me finish this. this is important. we also know that nord stream 2a.g. has facilitated sanctions of asians for gazprom. how do we know that? because the state department told us this. in a may 2021 report the state department said, i quote, knowingly facilitated deceptive or structured transactions to provide vessels for the construction of nord stream 2 pipeline. and i'm sure you'll confirm again it was treasury lawyers signed off on the evidentiary package that the state department used for this determination.
you acknowledge that gazprom is sanctioned. set up nord stream two a.g. i believe you acknowledged that nord stream 2a.g. has -- your lawyers did. when the state department concluded that nord stream 2a.g. has facilitated angsts evasions to get vessels involved in this. do you acknowledge that nord stream 2a.g. did this on behalf of gazprom? secretary adeyemo: as i said, we are committed to working with you and this committee to hold gazprom responsible for its activities that violate our sanctions. senator toomey: you are not answering a direct question. do you acknowledge that nord stream 2a.g. has engaged in the activity laid out by the state department on behalf of gazprom? secretary adeyemo: we supported state department's report. their report was based on a separate authority than the one we are talking about today. with regard to catsa we are -- senator toomey: look, it's clear
what's going on here. gazprom created nord stream 2 to evade sanctions. everything around this picture are the sanction entities they needed nord stream 2, an unsanctioned entity in order to bypass the sanctions. that's what we passed catsa for on a bipartisan basis. it's unacceptable and not being implemented. chair brown: senator castor is recognized. >> thank you, mr. chairman. your testimony highlighted the important work of unfair trade practices. it is true they are the threat to us in the world today. it's a key focus of mine in the definance subcommittee which i chair. it's why i pushed so■! hard to t the bipartisan infrastructure bill across the finish line in the senate, and will continue to push to get it across the finish
line in the house. senator tester:: from your perspective, your role as deputy secretary, what is the most effective way to address what china's doing particularly with currency manipulation. secretary adeyemo: thank you for the question and your work on those important issues. my view is the most important thing that we can do with regard to competing with china is making the investments in the united states that you have taken the leadership role on like the infrastructure bill that has passed the senate and currently in the house. in terms of the issue of currency manipulate plays, the we have been very clear we will not allow any country to unfairly use its currency to push for more experts. exports. 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 their unfairfaxes, both -- unfairfaxes, working multilaterally with our allies and our partners because bewee know that fumly the -- fundamentally the angsts china take not only hurt the american consumers and workers, they hurt consumers around the world. senator tester: is there anything you need from congress, specifically this committee, any additional authorities? secretary adeyemo: at the moment i think congress providing us with the authorities in the -- pull together the foreign exchange report is what we need. we are working actively with the ustr and other agencies within the government to use our tools to hold china and others accountable. we look forward to continuing to consult with you if there are additional authorities we need. senator tester: from a standpoint of crypto currency,
has that changed how the treasury department deals with sanctions? secretary adeyemo: senator, as we highlighted in the sanctions review, crypto currencies has required us to look at way that is we can try to deal with potential sanctions evasions, and we have rye highlighted this by taking certain actions with regard to crypto actors using their -- using this means of payment for things like ransomware. it will require us to invest more in different parts of our work force going forward. and improving our technology infrastructure. senator tester: how often are you seeing crypto currencies being used to avoid sanctions? secretary adeyemo: we recently put out a report just last week highlighting the use of crypto currencies in ransomware to the tune of several hundred million dollars of collections through crypto currencies. we recognize that a number of actors who seek to impact our
national security are using crypto currency to get around our sanctions regimes. in terms of a quantifiable number, we know it's more than several hundred million dollars and our goal has to be to try to identify those where they exist and stop it using the tools that congress provided us. senator tester: from your perspective do you think the crypto currency should be regulated market in a way similar to our conventional monetary system? secretary adeyemo: from my perspective one of the things that we been fitted from a great deal in the united states is innovation. innovation has helped drive our economy and financial innovation has done that. it's important that as we think about those innovations, we also have a regulatory regime that protects consumers and protects our national security. we are going to need to use the tools like our -- the b.s.a. and a.m.l. laws to make sure we are protecting our national security. but there is also going to need to work with congress to decide on whether we need additional
tools as well. senator tester: last question. you talked about reserve currency. quickly, you talked about the fact that we have -- 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 of reserve currency and the uncertainty that might create? secretary eye: as secretary yel- secretary adeyemo: a default on the u.s. debt would be catastrophic from the standpoint of our credible not only to our creditors but credibility in the world and a clear impact on people's trustworthiness in the united states and our ability to meet our commitments. senator tester: you see that as a giant step in the wrong direction maintaining our reserve currency status? secretary adeyemo: 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 that we make. if we were to not to not pay our bills on time, it would send rick chesapeake bays through those -- ricochets to those people who have confidence in our economy. chair brown: senator scott is recognized from south carolina from his office. senator scott: thank you, mr. chairman. thank y, mr. adeyemo, for being with us today. a couple questions four. i notice that senator tester started asking questions about the plan to make sure that we don't default on our debt. the consequences of us defaulting on our debt. without question i read a number of reports that suggest the plan that was going to be in place to make sure we didn't default on our debt was being thought through. wise planning from my perspective. here's the question that is not related to sanctions even though that we are talking about sanctions. 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's banking accounts or financial accounts based on simply $600 of flow coming through. know that some proposals have $600. others have $10,000. the challenge is whichever one you use, it captures basically the same number of accounts. ultimately if someone pays $800 a month in rent, that's $9600 with any other transactions. you make the $10,000 threshold. if you are a senior citizen receiving social security with the average social security check being around $1500 or $18,000 a year. your financial institution then has to report to the i.r.s. your account. i don't know what in the world the i.r.s. will do with the information that they receive from these financial
institutions. i say this with the backdrop of the last democrat administration, we saw the i.r.s. not peer -- peering into by investigating nonprofit religious organizations and conservative organizations without expanding their power or their reach. my concern is that as we see this administration's proposal to give more access to the r.s., to pier in and -- peer in and investigate, frankly, $600 of flow in and out of accounts of every american, that essentially captures all americans' transactions in this country. if are you 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 accounts, well, this might be a good direction to go in. i would love to hear why you think it's important for every american's -- americans' transactions to be made available to the i.r.s. secretary adeyemo: thank you for that question. it gives me an opportunity to make clear the president's policy goal which is to make sure that wealthy taxpayers who are avoiding taxes in this country pay the taxes that they owe. as you know, the top 1% of income earners in this country fail to pay more than $150 billion in taxes each year. the reason for this is because they don't earn income the same way most of your constituents do. which is by getting a w-2, which is information that teacher or truck driver or any other employees' company provide to them, but also provides to the i.r.s. the reality is wealthy people
often earn their income through partnerships or other ways they can sell an asset for $2 million, put that $2 million in the ba account, and tell the i.r.s. that 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 that working class people do every day in this country senator scott: thank you. the top americans pay about 36 out of every 100 in taxation. 60% of americans pay no federal taxes. for the 60% who pay no federal taxes, you're literally going to be having the access to
investigate their accounts too. if you're looking to simply find the tax cheats of the top 1% or 2% of merps you don't need a threshold of $600 or $10,000. you don't even need a threshold of $100,000. this threshold of $600 or $10,000 does, it captures all the information, all the transactions, of everyday americans, not the rich ones, but the ones working paycheck-to-paycheck should not be forced to have an additional burden on their plates of whether or not the i.r.s. is going to be investigating them, whether or not someone will be harassing them. that's 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. secretary adeyemo: can i just respond quickly? the president is willing to work
with congress on the threshold on ways to protect those who earn w-2's and those who get social security payments. our ultimate goal is making sure that wealthy people who don't pay the taxes 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. >> i will simply say this, if you're looking for a way to make sure people pay their fair share of taxes this proposal is not in the same universe of accomplishing that goal. this proposal, $600 or $1,000, 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. it's not the way we want our
country working. that every single american has to be concerned about the i.r.s. those three letters are scary enough without giving them more access to our accounts unnecessarily. especially for working class americans. thank you very much for your response. chair brown: senator menendez of new jersey is recognized. senator menendez: would you agree that sangs are one of the few peaceful tools of diplomacy? secretary adeyemo: i do agree sanctions are an effective tool of diplomacy that's peaceful. senator menendez: i appreciate that the treasury department is thinking through how to make sanctions remain a tool but this doesn't reflect a holistic approach to sanctions. 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 foreign policy tool but this review is basically a treasury-centric product that doesn't address the many sanctions authorities implemented by the state department and largely pays lip service to the state department's role in sanctions. at the same time i get the sense that the state department often strug tols play an effective role. they don't match up well to treasury's resources and capacity in this area. so my question to start off is, 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 policies? secretary adeyemo: i completely agree that sanctions are a tool that driven by foreign policy decisions that are made 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 that the tool sesktive going forward and worked closely with the state department with regard to this report and we look forward to working closely with them. senator menendez: i don't know how closely you work but would you consider a joint effort with state going forward? secretary adeyemo: we do plan a joint effort with state going forward. senator menendez: sanctions are only as good as they are enforced, like any other law. if you have a law and there's a red light and you go through the red light, unless there's the likelihood there'll be enforcement against you for doing so you'll go through the red light. same thing with sanctions in a more significant context. i've read this before but i'm deeply concerned that china is continuing to buy oil in significant, significant quantities from iranians, both subverting international
sanctions and impacting the oil market. i'm 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? law? >> senator, at the treasury department we're secretary adeyemo: we are committed to complying with the law and holding companies purchasing illegal oil accountable. we're happy to provide a briefing on the steps we're taking. senator menendez: i appreciate that you're committed to it but only sanctioning makes it relevant. this is being done in plain view. we're talking millions and millions of barrels of oil being purchased by china from iran in clear view of everyone in the international committee. i don't know how much due dill yens is necessary to find out
that which is available to the public eye. i really look forward to hearing what you're going to do in that regard. i also look forward townsing, for example, you know, turkey and the s-400. to understanding, for example, you know, turkey and the s-400. they are talking about making more purchases. when we wrote this law, we wrote it in such a way so that certain actions are mandatory in nature, not discretionary. but yet we have seen both the past administration and this administration not necessarily enforcing the mandatory nature of the sanctions. why not? >> senator, i'm committed to enforcing mandatory sanctions where we have the professor and -- proof and evidence to do so. we rely heavily on the counsel
of career lawyers at the treasury department, the doj in terms of that enforcement and also on the intelligence that we have at hand. >> i love lawyers, but they can kill every process in the world. the reality is, is that i find congress's intent is habitually subverted by both the previous in this administration. last question. when can we expect to see -- related today executive order on -- certain persons with respect to the humanitarian and human rights crisis in ethiopia issued by the administration on september 17th? >> senator, we're committed to finding a peaceful resolution to the situation in ethiopia and we have -- the president has issued on executive order and we continue to work with parties to bring them to the table but have made very clear that we're also still willing to use that executive order to zo so as the process continues we will continue to evaluate sanctions
targets and are committed to keeping you informed as we do so. >> i appreciate. you are very committed. but i have to be honest with you. i don't see the commitment in action. so i'm looking forward to the action on these and other. i have other questions i'll submit for the record. thank you mr. chairman. >> senator menendez. thank you. senator daines from montana is recognized from his office. >> thank you. and i want to extend a warm welcome to our witness. appreciate this opportunity to discuss matters that are affecting the security of our nation. over the past year china's exerted increasing pressure both military as well as financially on taiwan and its neighbors in the south china sea. while at the same time edging itself from international pressure with new anti-sanctions laws. mr. adeyemo, how does china's decisions not to extend anti-sanctions laws into
>> senator, thank you for the important question, and i think this speaks to why we believe it's critical that as we move forward on sanctions, we look forward to every opportunity, the ability to do them multilaterally. frank frankly, our adversaries are seeking ways around our sanctions every day, and to ensure they're unable to do that are making sure our sanctions are not just driven by the united states but by the international community made up of our allies and partners, while the impact of our sanctions are great, we improve the political aspect of isolation and puts us in a better position to enforce these sanctions over the long term. >> mr. adeyemo, i agree with you that the isolated approach is a good approach and i would
encourage you to head that direction. in addition to these anti-sanction laws, china's main goal in the development of the digital yuan is to enhance the digital system and make sure it's immune to sanctions. how can we ensure the sanctions policy doesn't risk the centrality of the u.s. dollar as a dollar-based institution and the u.s. payment networks that carry importance that are far beyond the specific country that's being sanctioned? >> senator, again, i think that one of the things we need to do as we think through how to make sure that we further enhance the dollar-based financial system is ensuring that our allies and our 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 that you've outlined, making sure when we do use sanctions, we're using them
as part of a clearly defined strategy that we're allowing for humanitarian access to continue the flow. when it comes to a country like china, it is true that they are finding means, trying to find means around our financial system to avoid sanctions, but it is difficult for countries or adversaries to find a means not only around 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 that we maintain the dollar-based financial system globally and also that we're able to hold our adversaries accountable for actions that they take that are in violation of international laws and norms. >> thank you. speaking of adversaries, without warning or explanation, the biden administration lifted sanctions on two iranian
entities involved in the military missile programs, the mahmout industrial group and the mahmout mission. this contradicts president biden that he would not lift sanctions. why did the administration lift sanctions on these two entities? >> senator, i want to ensure you this was not a response to a change in administration policy but rather in response to legal actions that were taking place. i'm happy to provide you with a more detailed briefing 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 shall we expect to see more of these, i think, webcom quiet concessions? >> senator, again, i want to
make clear this was not a concession but rather in response to a legal action. the president remains committed to ensuring that iran does not have a nuclear weapon. he's made clear that if iran reenters the jcpa, we're willing to take steps in that regard, but not before. >> lastly, on afghanistan, as the nature continues to deal with the terrible aftermath of president biden's very abrupt withdrawal from afghanistan, questions remain on how the u.s. is going to prevent the rise of terrorism and address the growing humanitarian crisis in that 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's exactly what we're doing. >> thank you, senator daines. senator van holland is recognized. >> thank you. i agree that sanctions are one tool in our intelligence toolbox, but they can play one role in a rules-based international system. you would agree, would you not, that china grossly violated its international obligations when it cracked down on democracy in hong kong? >> i agree, senator. >> and while we know that sanctions cannot always succeed in reversing maligned conduct, if we raise the costs of those actions, we send a signal that whether it's china or another country, if they want to engage in this kind of aggressive
behavior elsewhere, they will pay a price. but that only a significant price. after china's actions in hong kong, the congress passed legislation. senator toomey and i authored legislation, the hong kong autonomy act, which requires the executive branch to impose sanctions on officials that are 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 applauding the administration for sanctioning some individuals, but raising the question about whether or not the administration had been successful in identifying a tut facilitated those. there have been conversations since, but as of today, is it your testimony that the department of treasury cannot identify any financial institutions that facilitate the individuals that you've applied
sanctions to? >> senator, as we said then, we've not found financial institutions that facilitate those types of transactions, but it's 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, not only doing 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 brink act, which applied sanctions against any financial entities facilitating north korea's maligned activities, and it was modelled around the sanctions, so it was secondary sanctions. today, despite the fact a u.n. group identified lots of
financial institutions that 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 these financial institutions since the passage of the brink act. is it your testimony today that we haven't identified any financial institutions that are helping north korea violate the sanctions regime? >> you know over the last decade we have financed a number of financial institutions that are 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 that's been passed, we do appreciate the authority that congress has given us that will allow us in the future to do so, and as we find financial institutions that violate the law and facilitate this trade, we're committed to
taking these actions. >> here's the issue. the issue is that it's not just authority in the brink act, it's a requirement. they are mandatory sanctions. and they're mandatory sanctions on any entities anywhere in the world that are facilitating the north korean regime. 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 name entities around the world that are helping north korea violate the sanctions regime? are you aware of those? >> i'm aware of those reports. >> and have we looked at the reports, and have we concluded that they're wrong? >> senator, we haven't concluded 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 to working with you and your staff to use the mandatory sanctions that have been passed by congress to hold north korea accountable and to make sure we're able to prevent them from advancing their massive destructions program. >> we just released our appropriations bill for public review yesterday. i chair the subcommittee and we have language in there directing the executive branch to provide us with an update. because we have, on the one hand, a u.n. report that identifies by name these entities, and yet we haven't seen any action, and if the reason is that we don't have sufficient evidence, i'd love to sit down with you and go over that. >> i'm happy to do that. thank you. >> senator cramer from north dakota is recognized for five minutes. >> thank you, ranking member toomey, thank you, secretary, for being here. i want to follow up on a couple
things. first of all, both senator toomey, senator menendez and others, but certainly toomey, have emphasized the expressions of commitment haven't led to action in terms of enforcing in the case of nordstrom, too, where i want to drill down a little bit, and that's a pretty big problem. you said something else about -- i think it was to senator scott about multilateral coordination is really important. nordstrom 2 has been strongly opposed by the european union parliament, on two votes of like 400 to 100 and that's rounding up the lower number and down the higher number. so it's hard for me to see much commitment when the president announces just sort of out of the blue the lifting of sanctions. i'm noticing, too, an authority he doesn't even have. i think that we concluded the
state department determined that nordstream 2 has invaded sanctions. why did the president lift the sanctions? why are we facilitating this? on whose behalf is this being done? >> senator, i appreciate the concerns, and they're concerns that we share. what we're 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 pvided to us. we've met on several occasions with members of the committee staff here to hear from them in terms of the evidence that they have. we also work closely with the department of justice to make sure that we have a good understanding of the legal authorities that 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 are outside of the law, and i want to know on whose behalf.
european union or multinational relationship overwhelmingly opposed the release of nordstream 2. it has natural gas produced in russia, moved via pipeline like nordstream 2. besides captivating european allies to a single source, setting that aside for the moment, has through the life cycle of that gas a 41% higher greenhouse gas emission footprint than natural gas produced in the united states and liquefied and sent to the european allies. that doesn't include the methane leakage. what's the good reason for lifting sanctions? 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 this. >> senator, we share your concerns with regard to the nordstream 2 project. ultimately our goal here is the same as yours, which is to make sure we provide for the undersecurity of our key allies while doing it 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 mandatory sanction authorities you've provided, and that's what we're committed to doing when we have sufficient evidence to do so. >> i'm concerned about the bigger picture here. we're going to send the president and most of the cabinet, it seems, to glasgow to try toonld to be as good as we are? although we have a secretary of energy who in north dakota last week said we, the united states, doesn't he the moral authority to hold china accountable when they are emitting three times more greenhouse gas emissions than we are? they're on the trajectory to
become responsible for 100% for greenhouse gas emissions growth while we are on the decline. 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 missile. it's very, very concerning, and i'm just concerned about whose side this administration is on when it comes to both our economy and, frankly, even to climate change. what i see is a transfer of climate guilt to big polluters is 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. thank you for your time. i yield. >> ultimately the president believes climate change is a global responsibility, but the transition to a clean energy
economy is an opportunity for the united states, which if we make the investments that are needed, we can become a leader in selling american goods and meet the needs of world that climate change. >> i'm all on board. i argued to stay in paris with the last administration for those very reasons, but i've not seen that kind of leadership anymore. the approval of nordstream 2, there were multiple bad things about it, and i haven't found one good one, including on whose behalf we facilitated these sanctions breaches. >> senator warren from massachusetts is recognized for five minutes. >> thank you, mr. chairman. so giant corporations and the wealthy have worked hard to rid the tax code so they can pay lower taxes than everyone else. and now the democrats are looking to try to make the 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, but one fight is downright
breathtaking even in this cesspool, and that's the lobbyist's fight to protect the ability of their wealthiest clients to cheat on their taxes. millions of honest americans file their taxes honestly every year. their employers send them w-2 forms that show exactly how much they earned in wages right down to the penny. then the employer also sends a copy of that to the irs. this is called third party reporting and it helps taxpayers fill out their tax forms accurately. it also helps the irs zero in on tax cheats if the numbers don't add up. wage earners from cashiers to 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 adeyemo, let's consider a multimillionaire 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 made? >> no, they do not, senator. >> all right, let's ask about a partner in a law firm or a private equity fund. when they get millions of dollars as distribution of profits from their firm, does the irs get true third-party verification of how much money they make? >> no, they do not. >> okay. so when rich people rake in millions in sales or 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 two years. >> more than $150 billion a year
is lost by these top earners. that is exactly why congress is considering a simple new third-party reporting requirement. under this proposal, banks would report just two very general numbers to the irs each year. total dollars have 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 -- or are happy now with the current system, and the banks who serve them are also happy. so they've 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, that it would give the irs information on individual transactions. and some republicans have picked up on these lies. so let's go through some of these. deputy secretary adeyemo, just
to set the record straight, under this proposal, if i bought new tires or a couch or a cow, would theirs know about it? >> no, they would not, senator. >> well, if i paid my friend sharrod, 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, it would actually allow us to reduce audits on those individuals and increase going after those who you are underpaying the system which are wealthy taxpayers. >> thank you, deputy secretary. this proposal would help unrig our tax system just a little bit, making sure 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 avoid taxation, and that's what we're seeing here. the president's goal is to lower the playing field so wealthy individuals have to pay the same taxes that americans pay in everyday america. >> thank you. we are fighting tax reforms to make sure the very rich start paying their fair share. i get it that the lobbyists and the rich people they represent will fight us with everything they've got, including spending 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.
senator haggerty is just a couple moments out. i will ask one more question to the deputy secretary. the white house gathered, as you know, over 30 nations last week and called for accelerated cooperation to combat international ransomware efforts. this effort shows your focus, the administration's focus on protecting cybersecurity of u.s. companies from such attacks. how does treasury -- how does congress work cooperatively with the treasury to avoid
ransomware? >> we made the first of our sanctions to avoid crypto payments. we want to work closely with congress. one of the most important areas is ensuring we have a work force for these issues going forward. we look forward to looking for the authorities to hire the people we need and also to the budgeting increases that are part of the president's fy22 budget to make sure we ever the personnel needed to avoid cryptocurrency, but also the changes in our payment system that are making it harder for our regimes to better make changes that we want to with our adversaries. >> talk more about cooperation to disrupt ransomware.
>> as you know, many of these crypto exchanges and cyber criminals that facilitate ransomware had an impact here. our goal was to work closely with our allies and partners to disrupt those actors that exist in their countries. a big piece of this is going to be ensuring that these countries also take actions to make sure that 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 financial sector to cryptocurrencies and to financial technologies that are started in their jurisdictions. >> thank you, mr. secretary. senator toomey has one more question. >> thank you, mr. chairman. mr. adeyemo, my question is does the administration intend to try to bypass the senate approval process to ensure the tax
agreement that they are pursuing? >> we look forward to working with you on the implementation of the international tax agreement. as the agreement is not completed, i can't speak to the process of working with congress on those portions. what we do know, based on the conversations we've had with our international partners with congress and the business community, is that the american business community is supportive of pillar 1 because they see it as a way of creating a level playing field throughout the world going forward. >> some in the business community are supportive and some are not. i would point out that the u.s. has 58 bilateral tax treaties in force. all of them were approved by a two-thirds vote in the united states senate. here's the problem. if you can't answer the problem of how you're going to implement this, it also suggests there is some uncertainty about whether it will be implemented. it was pillar 1 that was the motivation for other countries to agree to pillar 2, which is the increase in the minimum global tax, global minimum tax.
if they don't know for sure that they're going to get pillar 1, and they have good reason to doubt it, then it's not at all clear to me that they'll go ahead and impose pillar 2, which they were reluctant to do in any case. my suggestion would be, before the democrats go ahead and push this tax increase on multinationals, which might not meet the other multinationals, you might want to pause and get this figured out. >> as you know, countries like germany, france, the u.k. have higher minimum taxes than we do. >> not with respect to the income of foreign subsidiaries. >> these countries are all committed to increasing them to the global minimum tax. >> but as i said, that was as a condition -- it was conditioned on them getting pillar 1. you are not able to explain how you're going to get pillar 1 implemented. so you have to question their commitment if they're not going to get what they bargained for.
>> senator ossoff from georgia is recognized from his office. >> thank you, mr. chairman, and thank you, mr. adeyema, for your service and testimony today. the comprehensive sanctions review the treasury has undertaken in the first six months of the administration, i appreciate the details that have been referred to the committee. you've highlighted a number of what you assess to be success stories in that document. could you please identify for the committee one or two high-profile instances where u.s. sanctions have been ineffective, have not achieved their objectives, or where the costs or externals have exceeded the benefit from treasury's ■y 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 a forward-looking assessment of what we can do to make sure this is an etool. what we learned, though, is the places where we can improve sanctions going forward speak to some of the things where we can do better than in the past, for example, ensuring that we continue to use a framework for evaluating when sanctions are imposed and ensuring that humanitarian assistance is able to provide it to people in conflict zones. we've learned a great deal about doing both of these things over the last 20 years, and we look forward to applying them on a go forward basis to our sanctions program. >> thank you, mr. adeyema, but you do specify a number of cases where you believe u.s. sanctions policy has been effective, so i think in the interests 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 effectively, the cases, for example, that inform the general assessment you just shared with respect to humanitarian aid? >> senator, i think one of the challenges we identified was the fact that because we did not have a clear framework for evaluating the position of sanctions in each one of the instances in the past, it makes it hard to evaluate the success of those sanctions programs. as we said in the report, and i said earlier, we didn't evaluate each sanctions program or each sanction that was put in place, so i'm not in a position to tell you where one could have been done better or done differently. what i can tell you is that on a go-forward basis, we look forward to applying a framework that aligns with the principles that this committee has spoken of going forward to ensure that we're in a place where we can evaluate the success of sanctions and decide where we need to do more or do less in
order to effectuate our foreign policy goal and to ensure the sanctions are usable well into the future as a foreign policy tool. >> mr. adeyemo, the report, and i believe i'm looking here at the full review on executive summary and specifies cases in iran, a case with regard to the cartel targeting libyan assets following the fall of gadhafi in 2011 as success stories. i'm asking where our sanctions have not succeeded. is it that you haven't identified any such cases, or is there a lack of willingness to acknowledge policy failure in public? >> senator, you are right that in the report we do 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 looked 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 that we need to addr■ks that are internal challenges. one, making sure that we're able to allow humanitarian assistance to flow, and two, make sure the sanctions are used as part of an overarching strategy, but some of the changes are changes in adverse technology. looking to get around a science program and the advent of cryptocurrency makes it harder for sanctions to be effective. >> with respect to my time being limited, and i may 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 congress can benefit from the review you've undertaken and deliberate how best to improve the statutes that govern these policies. >> senator, as i said, the review was focused on the idea of us looking into the future as to what we can do to use sanctions going forward. we did not spend time looking at the individual sanctions policies. i'm more than happy to follow up with you and your staff to talk about any of the sanctions programs that you would particularly like to discuss, but our goal of the review was to look at what we could do going forward to make sure the sanctions remain an effective tool. in order to do that, we do need to address the challenges that the review found, which we have clearly articulated both in the report, and i've done in my make sure that going forward this tool is effective. >> mr. adeyema, we will need to meet in person because the purpose of this hearing is a policy update on the treasury department's sanctions policy
review, and if we're unable, in a public setting, to articulate or discuss any specific cases where u.s. sanctions policy has been ineffective beyond generalities, then i think we have more work to do, so i look forward to meeting with you so we can work together to improve u.s. policy. thank you. >> senator haggerty from tennessee is recognized for five minutes. >> chairman brown, ranking member toomey, thank you for holding this important hearing. deputy secretary, it's very good to be with you today. as i've said before, the financial sector of america is the best in the world, and we need to do what we can to protect it from maligned behavior. we must also appreciate the security importance to counter our adversaries and to constrict our enemies' life blood.
we saw that they surprised us over the summer as they tested nuclear cyber weaponry. this circles the globe faster than the speed of sound which is hard to defend against before racing for its target. reports of such activity underscore the challenging environment that faces america today. we must use every tool in our arsenal to defend our interests and make it clear to our adversaries that america means business. we must do so in a manner that doesn't inadvertently harm the u.s. dollar's status in the world. mr. deputy secretary, i agree with the number of recommendations in the report you've been discussing today. for example, clarity around sanctions is critical for enforcement. we must ensure that costs to america's small businesses are minimized. the report notes that if allowed to proliferate unchecked, digital assets could offer our adversaries a means to end run
our sanctions and harm the efficacy of those sanctions. the chinese communist party has taken the extreme approach of banning all private sector cryptocurrency activity. your predecessor at the department recently wrote about protecting security in a manner that doesn't crush innovation. i agree, and i think you do, too. we understand china's ambitions in this space with its digital wand. in the associated national security implications for the united states. so i'd like to ask you, how will the biden administration and our 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 we might foresee? >> senator, thank you for the question. i think one of the most important things is to remind ourselves that innovation is something that is being 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 that we have regulatory rules for the road that protect consumers, investors and our national security. doing that will require us to extend our existing regulatory apparatus to address these issues, but also respect congress where we may need new rules of the road innovation, but we need to make sure we have helpful innovation that improve our acts in congress. >> i appreciate that and i'm sure we're all looking forward to working with you in that regard. i'd like to turn to the world bank and imf and communist china. they released from their investigation with the important world bank doing business reports. these reports bill themselves as
providing objective measures of business regulations for local firms in some 190 economies. the report found that the data describing the business climate in china was changed because of pressure by then-world bank ceo crystalina georgiva. her goal, apparently, was to change that at the same time china improved their capital. in spite of those concerns, the biden administration continues to support her to continue to lead the imf. mr. deputy secretary, what steps are we ting to safeguard against the communist china? >> we saw issues that were of serious concern, and that's why the secretary demanded that the imf look into this closely by speaking to the lawyers from
wilmer hale and speaking to the managing 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 it very clear during those meetings and directly to the managing director that changes need to be made to ensure that whistleblowers' rights are protected, that the integrity of the institution is protected, which is the overarching goal, and that we will be holding her and other heads of financial institutions accountable for making these changes. >> i think the wilmer-hale report clearly outlined conflicts of interest. i hope you will hold them accountable from being maligned like the communist china.
>> the senator is recognized from her office. >> thank you, deputy secretary, for joining us today. let's talk about ransomware which we know taxing doubled from 2019 to 2020 and know they are a security threat. we know others have been attacked by ransomware criminals. what does the u.s. government recommend for firms to privately address this? and, two, how should local governments and businesses address this, and is there something at the federal level they can seek to help really prevent or prepare what to do if they are somehow attacked through ransomware? >> senator, thank you for that important question. i think the important thing for all of us to recognize is that ransomware is a symptom of a
larger challenge, that of cybersecurity. the most important thing our companies, individuals, governments can do is make sure they're focused on improving cybersecurity 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 a government is attacked, the first thing we recommend that they do is get in contact with the fbi and to notify them
enterprises. ultimately the president government effort, which involves not only the fbi and the treasury department but all agencies of our government to hold people accountable. as i discussed with senator brown earlier, it's going to be critical that we not only do this in the united states but that we have a global effort because many of the cyber criminals are domiciled outside our country. we look forward to working with congress to address these issues and making sure we work with our allies and partners to do so as well. >> thank you. count me in, we need to address this and work together. let me ask you sanctioning cry exchanges makes it riskier for firms to pay ransoms? >> senator, i do think paying a ransom is risky. ultimately our goal is to make sure we stop these criminal enterprises from using ransomware as a tool to gain
economic resources. so our goal is to make sure that when a company is attacked, they notify us immediately. treasury is committed to using all the tools in our arsenal to go after those who are committing these ransomware attacks. as you know, we recently sanctioned a crypto exchange that predominantly facilitated ransomware attacks. we're also looking at other exchanges and other mixers that are doing the same in order to hold them accountable and working with our international counterparts to do so as well. >> thank you. let me jump to something else. in 2018, i joined senator flake to request a report from the gao on remittances to fragile nations. fragile nations, as you know, have weak financial systems, high levels of poverty and active criminal or terrorist activities. can you expand on the sanctions review recommendation for careful calibration to limit the
impact of sanctions on a flow of legitimate humanitarian aid to those in need? and how will you carefully calibrate sanctions to limit humanitarian suffering? >> senator, this is a critical issue. when we use our sanctions 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 past 20 years is oftentimes when we do not permit humanitarian assistance as we're announcing a new authority, it creates a gap between and some uncertainty for those who are acting in the space. so part of our goals is to ensure that as we go forward, we find ways to create exceptions more possible early on so humanitarian assistance can continue 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 in order to make sure that as 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 again, will chair. senator moran is recognized for five minutes. >> i want to 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 nordstream 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 -- and i hope the administration -- maybe there is 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 one in kacy run out of time. i'm trying to prioritize. since 2014, the central banks of china, ssia, iran and venezuela have all explored the creation of a central bank digital currency. as of now, china is well on its way to issuing its first cbdc. there is no question our adversaries will use government-issued currency to avoid sanctions, carry on regimes and surveil civilian populations. how do we accomplish those goals without detection?
how do we use a financial-based international system and how does congress plan on evading these blatant attempts to circumvent our systems? >> thank you, and i think the best way to obtain the dollars in the world are to make the dollars here at home. by investing in that strength, by continuing to maintain a stable rules-based system in the united states, we'll continue to attract capital. but you're right that 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 that they have greater control, but it will have an impact on the international financial system. but ultimately, in order for any