[Senate Hearing 114-129]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 114-129


                      NOMINATION OF ADAM J. SZUBIN

=======================================================================




                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

      NOMINATION OF ADAM J. SZUBIN, OF THE DISTRICT OF COLUMBIA, 
TO BE UNDER SECRETARY FOR TERRORISM AND FINANCIAL CRIMES, DEPARTMENT OF 
                              THE TREASURY
                               __________

                           SEPTEMBER 17, 2015
                               __________




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                                Affairs





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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

MICHAEL CRAPO, Idaho                 SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
DAVID VITTER, Louisiana              CHARLES E. SCHUMER, New York
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
MARK KIRK, Illinois                  JON TESTER, Montana
DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
TIM SCOTT, South Carolina            JEFF MERKLEY, Oregon
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
JERRY MORAN, Kansas

       William D. Duhnke III, Staff Director and General Counsel

                 Mark Powden, Democratic Staff Director

                    Dana Wade, Deputy Staff Director

    John V. O'Hara, Senior Counsel for Illicit Finance and National 
                            Security Policy

               Colin McGinnis, Democratic Policy Director

                       Dawn Ratliff, Chief Clerk

                      Troy Cornell, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)













                            C O N T E N T S

                              ----------                              

                      THURSDAY, SEPTEMBER 17, 2015

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     2

                                NOMINEE

Adam J. Szubin, of the District Of Columbia, to be Under 
  Secretary for Terrorism and Financial Crimes, Department of the 
  Treasury.......................................................     3
    Prepared statement...........................................    24
    Biographical sketch of nominee...............................    27
    Responses to written questions of:
        Chairman Shelby..........................................    32
        Senator Vitter...........................................    35
        Senator Kirk.............................................    39
        Senator Toomey...........................................    43
        Senator Sasse............................................    44
        Senator Cotton...........................................    46

                                 (iii)







 
NOMINATION OF ADAM J. SZUBIN, OF THE DISTRICT OF COLUMBIA, TO BE UNDER 
    SECRETARY FOR TERRORISM AND FINANCIAL CRIMES, DEPARTMENT OF THE 
                                TREASURY

                              ----------                              


                      THURSDAY, SEPTEMBER 17, 2015

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:03 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Richard Shelby, Chairman of the 
Committee, presiding.









        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The hearing will come to order.
    This morning, we will hear testimony on the nomination of 
Mr. Adam Szubin, of Washington, DC, to be the Under Secretary 
of he Treasury for Terrorism and Financial Crimes. Mr. Szubin, 
if confirmed, will be the third Under Secretary of the Treasury 
with the responsibility for the Office of Terrorism and 
Financial Intelligence. The Under Secretary reports directly to 
the Secretary.
    This position, as most of us realize, is responsible for 
executing the dual mission of combating terrorist financing and 
money laundering while overseeing enforcement of the Nation's 
constantly evolving sanctions programs. The Under Secretary 
also oversees a number of separate policy, regulatory, and 
enforcement offices, such as the Office of Terrorism and 
Financial Crimes, the Office of Foreign Assets Control, the 
Office of Intelligence and Analysis, the Treasury Executive 
Office for Asset Forfeiture, and the Financial Crimes 
Enforcement Network.
    Mr. Szubin comes to the Under Secretary's office with over 
14 years of Government experience. He has participated in 
several international negotiations, including the President's 
recent Iran nuclear deal that is being considered, as you know, 
here in the Senate. Ironically, the nominee who has helped to 
assemble and to enforce the most comprehensive sanctions 
architecture against the world's leading state sponsor of 
terrorism may now be tasked by the President with dismantling a 
lot of it.
    Given this context, today's hearing is both important and, 
I believe, timely. The Committee looks forward to Mr. Szubin's 
testimony and his responses to our questions.
    Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman. I appreciate your 
willingness to allow a hearing on this nomination.
    Acting Treasury Under Secretary Adam Szubin has served in 
both Republican and Democratic administrations in senior 
positions relating to economic sanctions in countering 
terrorist financing. He is eminently qualified for this 
position and I welcome him here. I welcome his children, his 
wife, his parents, and in-law, I believe, and he will introduce 
them, I am sure.
    Before I describe Under Secretary Szubin's superb 
credentials and experience, I want to underscore a point my 
Democratic colleagues and I have been making repeatedly to the 
Chairman for months--for months--about pending Banking 
Committee nominations. For 9 months, the Committee has failed 
to carry out its duty to consider and act upon the President's 
nominees. Before today, in this calendar year, we have not held 
a single nomination hearing. I am grateful for today. We have 
been unhappy for eight-plus months about this.
    By contrast, in 2007, the seventh year of the Bush 
administration, when Senate and White House control were also 
divided, the Banking Committee held three nomination hearings 
before the August recess. The Senate had confirmed more than a 
dozen nominees coming out of this Committee.
    Given all the concerns surrounding terrorist financing, you 
would think this nomination would be a priority. In the past, 
it has been. Mr. Szubin's mentor, Bush Under Secretary Stuart 
Levey, was confirmed by the Senate just 3 weeks after his 
nomination was sent to this Committee. Mr. Szubin's immediate 
predecessor took us two-and-a-half months to consider. Some of 
the pending nominees have been waiting since January just for a 
hearing. They deserve hearings. They deserve votes. I hope the 
Chairman will promptly move them through the Committee process 
and onto the Senate floor for consideration.
    That said, I am delighted that Under Secretary Szubin is 
again before us this time to discuss the critical role of the 
Terrorism and Financial Intelligence Office of the Treasury 
Department and the U.S. Government's broader approach to 
combating terrorist financing. That office marshals the 
Department's intelligence and enforcement functions with the 
dual aims of safeguarding the financial system against illicit 
use and combating rogue nations, terrorist facilitators' 
weapons of mass destruction, proliferators, money launderers, 
drug kingpins, and other national security threats.
    Over the last 15 years, Mr. Szubin has distinguished 
himself as a tough, aggressive enforcer of our Nation's 
sanctions laws against countries like Russia and Iran and North 
Korea and against money launderers, terrorists, and narco 
traffickers.
    After earning undergraduate and law degrees with high 
honors, Mr. Szubin was a Fulbright Scholar in Israel before 
joining the Department of Justice. He served as counsel to the 
Deputy Attorney General. He was a trial attorney on the 
Terrorism Litigation Task Force, receiving the Justice 
Department's Special Commendation Award for his work countering 
terrorism.
    From 2006 to 2015, he directed Treasury's Office of Foreign 
Assets Control, where many of us first came to know him as a 
thoughtful policymaker and a superb lawyer. The Anti-Defamation 
League in a recent letter endorsing Adam's nomination described 
him, quote, ``as an intellectual heavyweight who has worked 
effectively with global partners to amplify the effects of U.S. 
sanctions,'' unquote. I could not agree with that assessment 
more.
    I welcome him back to the Committee. I look forward, Mr. 
Szubin, to your testimony today. Thank you so much.
    Chairman Shelby. Thank you, Senator Brown?
    Mr. Szubin, will you stand and raise your right hand. Do 
you swear or affirm that the testimony that you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Mr. Szubin. I do.
    Chairman Shelby. Do you agree to appear and testify before 
any duly constituted committee of the Senate in the future?
    Mr. Szubin. Yes.
    Chairman Shelby. You may be seated.
    Your written testimony, Mr. Szubin, will be made part of 
this record in its entirety. Before you begin your oral 
remarks, I invite you to introduce your family members in 
attendance today.

   STATEMENT OF ADAM J. SZUBIN, OF THE DISTRICT OF COLUMBIA, 
  NOMINATED TO BE UNDER SECRETARY FOR TERRORISM AND FINANCIAL 
               CRIMES, DEPARTMENT OF THE TREASURY

    Mr. Szubin. Thank you very much, Mr. Chairman and Ranking 
Member Brown.
    I would like to introduce first my amazing wife, Miriam, my 
beloved sons Nathan, Micah, and Josiah, my mother, Laurie 
Szubin, my father-in-law, Steven Weiner, and I want to thank in 
particular my wife, Miriam, for her unwavering support over the 
past years. This job can be a difficult one and I could not 
have done any part of it without her.
    Chairman Shelby. You can proceed as you wish.
    Mr. Szubin. OK. Chairman Shelby, Ranking Member Brown, 
distinguished Members of the Committee, it is an honor to be 
appearing before this Committee today.
    I am honored to have been nominated to serve as Under 
Secretary of the Treasury for Terrorism and Financial Crimes. I 
want to thank President Obama for the confidence he has placed 
in me and Secretary Lew for his recommendation and strong 
support.
    I do not take this opportunity for granted. Indeed, I do 
not take for granted the fact that I have been allowed to serve 
my Government at all for the last 16 years.
    My father was not born here. He was born in Poland in 1933. 
His parents fled the Nazis at the outbreak of World War II and 
were captured by the Soviet army and exiled to Siberia, where 
they lived out the war years. Siberia was a place of great 
hardship, but it turned out that their capture and exile had 
saved their lives. Nearly all of my father's aunts, uncles, and 
cousins were wiped out by the Nazis. There are today, sadly, 
just a few remnants of a family that should have numbered in 
the thousands.
    My parents raised us to be vigilant against evil in the 
world, evil not as an abstract concept but as an all too real 
threat that they had seen in their lifetimes. But we were not 
raised in an environment of fear or anger or sadness. To the 
contrary, we were raised to savor life, to seek out joy, and to 
be aware of and grateful for the many gifts that we enjoyed.
    High among those gifts was the ability to grow up in 
America, the goldene medina, or golden land, to which my father 
had come. He has never stopped marveling at this country, at 
our brilliant Constitution and legal system, our openness to 
new immigrants, our work ethic, and our enduring hopefulness 
that we can improve the world and leave it a little better for 
our children. For all of these, I was taught to be grateful.
    So, while it is perhaps not a surprise that I sought out a 
career in Government service, I have been amazed that this 
country has allowed the child of an immigrant to take on 
positions of trust and to participate in shaping our national 
security policies. This truly is a country like no other.
    I appreciate how significant the responsibilities of this 
office are. Eleven years ago, I followed Stuart Levey, my 
mentor, from the Justice Department when he was named the first 
Under Secretary for TFI, and I have served in Treasury and TFI 
ever since, as the Director of the Sanctions Office, OFAC, for 
9 years, and most recently as the Acting Under Secretary for 
the last 6 months, overseeing the more than 700 exceptional 
individuals who make our organization what it is.
    Congress created TFI to bring together under one roof an 
array of capabilities--intelligence, enforcement, regulation, 
and policy--to confront and challenge our adversaries on the 
financial battlefield. It is an easy mission to describe, but a 
challenging one to execute. Nonetheless, I believe the office 
has accomplished amazing things in its short history.
    When I started at TFI, the conventional wisdom in schools 
of international affairs was that sanctions did not, could not 
work, that the targets of sanctions would always find ways to 
circumvent them, money being like water that would find its way 
downhill. Thanks to the remarkable and dedicated women and men 
of TFI, I do not hear that conventional wisdom as much anymore. 
People have seen that smart, persistent, and creative efforts, 
when backed by the superb support of the U.S. intelligence 
community, can strangle illicit organizations, shake regimes, 
and change their behavior.
    Our efforts have been a key plank in the Government's 
broader efforts against terrorist groups, against murderous 
groups like al Qaida, ISIL, Hezbollah, and Hamas. We continue 
to have so much critical work ahead of us. But every bank 
account frozen, every charitable front exposed, every 
procurement company neutralized, and every fundraiser 
designated or deterred strikes a blow against these groups.
    TFI has worked with governments and financial institutions 
around the world to strengthen their counterterrorism laws and 
procedures and to empower them to track and stop illicit money 
flows. The world's financial system is, in every arena and on 
every continent, more transparent, more resilient than it was 
10 years ago.
    In the field of human rights, we have used sanctions to 
combat government oppression and abuse, facilitating positive 
changes in places like Burma, though, of course, there is still 
much to be done.
    In the arenas of narcotics trafficking and money 
laundering, we have dealt once powerful cartels, like the Cali 
Cartel, the Sinaloa Cartel, major setbacks by exposing and 
bankrupting their financial holding companies and their money 
launderers, hitting them where it hurts most, in their wallets.
    And we have used sanctions to combat North Korea's attempts 
to access the world's financial system, closing out front 
companies and banks that were willing to launder the regime's 
money for a cut.
    When we saw Russia violate Ukraine's territorial 
sovereignty, we worked with our allies in Europe to devise a 
powerful and innovative set of sanctions that not only went 
after the key cronies and businessmen surrounding President 
Putin, but also cutoff some of Russia's largest banks and 
energy companies from the things they depend on--Western 
technology, Western financing. Even where as in this context 
our ultimate goals have not yet been reached, TFI is making a 
concrete difference in advancing our country's foreign policy.
    Finally, under Stuart Levey's and then David Cohen's 
leadership, TFI devised and executed a strategy to dramatically 
intensify the pressure against the government of Iran due to a 
range of concerns, its illicit nuclear program chief among 
them. Over a steady campaign, we were able to cut Iran's banks 
off from the world's financial centers, badly wounding its 
trade and financial capabilities.
    In 2010, Congress, with this Committee at its center, then 
dramatically advanced the effort, passing bipartisan measures 
that brought Iran's crude oil sales down by 60 percent, 
escrowed its foreign reserves, and ensured that Iran's leaders 
knew that it would not recover economically until it verifiably 
closed off all pathways to a nuclear weapon. These efforts led 
to the election of President Rouhani and culminated in the 
diplomatic process that produced the joint comprehensive plan 
of action. And the women and men of my office have worked 
incredibly hard over the past decade to build and then enforce 
these measures and to combat every effort to circumvent them.
    Even now, as we prepare to suspend our secondary nuclear 
sanctions should Iran fulfill its commitments under the deal, 
we are simultaneously readying a battery of sanctions against 
Iran's activity outside of the nuclear file, its human rights 
abuses inside of Iran and its destabilizing activities in the 
region pursued through the IRGC and Qods Force, through 
Hezbollah and other Iranian partners and proxies in Syria, 
Iraq, Yemen, and beyond, and we will be building this pressure 
in close cooperation with our partners in Europe, Israel, and 
the Gulf.
    None of TFI's successes would have been possible without 
strong bipartisan support from the House and Senate and from 
the Members and staff of this Committee, in particular. If 
confirmed, I intend to build upon the close relationship we 
have enjoyed with this Committee and to take on the pressing 
challenges ahead.
    I can also commit to you that, if confirmed, I will not 
rest. I sit in a skiff every morning to read the latest 
intelligence, and the threats we face are, indeed, serious. We 
need to be vigilant, smart, and aggressive. And as the 
international landscape evolves, I am confident that TFI will 
remain at the forefront of our Government's efforts to protect 
our national security.
    Thank you very much for your time and consideration. I will 
be glad to answer any questions that you may have.
    Chairman Shelby. Mr. Szubin, you have been acting as the 
Under Secretary since February of this year. In your August 5 
testimony before this Committee, you agreed with former 
National Security Advisor Susan Rice that we can expect some 
portion of Iran's current frozen assets to fund more terror and 
other illicit activity. You concluded that Treasury's Office of 
Terrorism and Financial Intelligence needs to ramp up its 
efforts to go after Iran's illicit funding streams. How would 
you lead now the ramping up of such efforts?
    Mr. Szubin. Thank you, Senator. Thank you, Mr. Chairman. It 
is obviously a key campaign as we move forward and one I think 
I will be spending a lot of my personal time on, because there 
are a lot of aspects to this effort. Obviously, the most 
visible effort is deploying new sanctions, and we have done 
quite a lot against Hezbollah, the Qods Force, the IRGC over 
recent years. I had the analysts in my office set out a link 
chart for me and it is over 200 companies and officers that are 
sanctioned, and, of course, all of them remain under sanctions, 
notwithstanding this deal, and those sanctions, thanks to 
Congress, have extraterritorial effect, by which I mean foreign 
banks who do business with anyone on that list do so at their 
own peril and the risk of being cutoff from the U.S. financial 
system.
    But, in addition to the targeting effort to continue to go 
after the nodes, the networks, the officers of these terrorist 
groups and proxies, we have a lot to do in terms of outreach 
diplomatically and I think we have a lot of willing 
counterparts. When I talk to officials in the Gulf these, in 
Saudi Arabia and UAE--and my next foreign trip I expect will be 
to those countries--I hear a different attitude when it comes 
to taking on Iran's proxies, and I think there is a real 
opportunity there to harness that attention and to use it to 
disrupt a lot of money flows which have been going through 
places like Dubai and banks in the region.
    Of course, we continue to work very closely with our 
counterparts in Israel and we need to do even more with Europe 
and beyond.
    Chairman Shelby. Since November of 2011, the entire Iranian 
financial system has been designated as a, quote, ``primary 
money laundering concern'' under Section 311 of the Patriot Act 
for reasons other than nuclear proliferation. The Financial 
Action Task Force has also issued numerous global warnings on 
Iran's money laundering and terrorist financing risk. It is my 
understanding that most Iranian banks will receive sanctions 
relief under the Iran deal. Do you expect, sir, that their 
deceptive financial practices will continue, and if so, what 
are your greatest concerns here?
    Mr. Szubin. Well, first, Mr. Chairman, I want to note the 
finding that FinCEN issued with respect to Iran's banking 
sector remains in place. It is not affected by the JCPOA.
    Chairman Shelby. Mm-hmm.
    Mr. Szubin. And U.S. sanctions with respect to Iran's 
banking sector remain untouched by the JCPOA. That means no 
Iranian banks can access the U.S. financial system, not to open 
an account, not to purchase a security, and not even to execute 
a dollarized transaction where a split-second's worth of 
business is done in a New York clearing bank. That, too, 
remains off limits to all Iranian banks, whether on the list or 
off the list.
    But, with respect to how I expect to see Iran's banks 
perform or behave in the coming months, I think it remains to 
be seen. We have made very clear to Iran's leaders that if we 
see any banks who were removed from the list engaging in 
support to Hezbollah, support to the Qods Force, support to 
Iranian illicit ballistic missile activity, they will find 
themselves back onto the list, and the Iranians, I believe, 
understand that. So, we will have to see how they behave, but 
the choice will be theirs.
    Chairman Shelby. Sanctions, as you have pointed out, are 
crucial tools of U.S. policy. I worry that the U.S. Government 
is not taking maximum advantage of these tools. When thinking 
about maximizing sanctions affecting this in the future, I 
believe that we need to approach sanctions policy from both a 
tactical and a strategic basis for long-term planning and 
contingency scenarios.
    In your opinion, how can the Government organize itself 
better and approach strategic and contingency planning for 
sanctions more effectively? In other words, how can we do a 
better job?
    Mr. Szubin. Well, it is a question we have to ask ourselves 
continuously, and I can say, having been a part of TFI almost 
from day one, I have seen the office improve and I have seen us 
evolve. I think some of our greatest strides have come in our 
Intelligence Office, and it truly is unique in the world. I do 
not know of another finance ministry in any other country that 
has an intelligence office that is focused on using our 
financial expertise and using our financial information that 
they are really masters of to be able to track illicit flows. 
It is an area where our analysis has gotten so much more 
sophisticated and it is drawn upon by policymakers, including 
the White House, on a regular basis.
    But in terms of what more we can do to improve, I think you 
are right. The longer-term strategic thinking is critical, 
because the world has now taken notice of how powerful these 
tools are, and with that, we see new and more adaptive 
techniques at evading sanctions and we see efforts to try to 
turn these tools against us. We have to be very careful with 
how we use these tools. We have to be judicious in how we use 
them. But we also have to be prepared to combat them should we 
see others trying to draw on these same tools to weaken our 
national security.
    Chairman Shelby. Senator Brown?
    Senator Brown. Yes, Chairman.
    Thank you again, Mr. Szubin, for joining us. You have one 
of the most difficult jobs in this city serving taxpayers. When 
I think about the unending number of hours--it seems to be an 
unending number of hours--time away from your family, special 
thanks again to Miriam and your children, who I know you miss, 
and I know as you have traveled the world, especially during 
the Iran negotiations and put so much effort into this. Thank 
you again for that.
    Thank you also, in meetings that I have had with you and 
Members have had with you and Secretary Lew and Secretary 
Kerry, especially, thank you for your response and putting in 
proactive efforts to deal with and to enhance and expand those 
efforts prescriptively, proactively to address the issues of 
Iranian financing of terrorism and what I know that you will be 
expecting to do and you will do, so thank you for that.
    A couple of questions. I know TFI has a lot of critical 
national security responsibilities within its portfolio. I 
would like to get a sense of your priorities--sanction 
enforcement, countering money laundering, terrorism financing, 
other illicit finance issues. Describe to this Committee, if 
you will, your priorities, how Treasury's efforts will fit into 
the sort of broader Government efforts in illicit finance.
    Mr. Szubin. Well, in terms of my priorities for the office 
going forward, I put Iran at the forefront, and that is not 
just making sure that they adhere to all their commitments 
where sanctions are really the ``or else'' that serves as a 
deterrent to keep them in mind, but also, of course, all of the 
non-nuclear activity that I referenced in my opening statement. 
Alongside that, our counterterrorism effort--it is why we were 
created, it is in our name, the Office of Terrorism and 
Financial Intelligence--has to be right at the forefront, as 
well, and particularly, of course, our efforts against ISIL, 
which has proposed a very serious challenge in terms of cutting 
off its financing.
    I can say that when you look at a group like ISIL and 
compare it with a group like al Qaida, the financing challenges 
are night and day, given the territory that ISIL controls and 
its ability to extort funds from people in its territory and to 
draw on the natural resources, oil or otherwise, in the 
territory it controls. It is a massive challenge, but it is one 
that we are focused on, not just with the other members of the 
U.S. Government, the intelligence community, DOD, but also a 
huge coalition internationally, and it is one of our strengths 
here, is how unanimous the international community is in trying 
to check and constrain and ultimately defeat ISIL.
    And alongside those two, I would mention cyber, which is a 
threat that over my time in TFI has grown more and more 
prominent, I think more and more worrisome. And here, too, 
sanctions are one part of the strategy. Law enforcement, 
diplomacy, intelligence, we have a whole array of tools, but 
thanks to President Obama's issuance of a new Executive Order, 
we now have the sanctions tool, as well, and where we see 
malicious actors targeting our infrastructure, going after U.S. 
companies, we now have the sanctions capability to use that 
both to prevent and to deter bad activity.
    Senator Brown. Thank you.
    Mr. Chairman, I want to ask a question perhaps a bit more 
parochial, if you will. We met several times to discuss the 
situation with respect to remittances to Somalia from 
communities in the United States. The second-largest community 
in this country of Somalis is in Columbus, Ohio. A few months 
ago, we met separately with the Prime Minister of Somalia to 
discuss these issues. I know you have been working to mitigate 
the AML concerns of banks while ensuring that terrorist 
financing standards are upheld and that Treasury and the World 
Bank are providing technical assistance to the Somali 
government to build its capacity in this area, but I remain 
very concerned about this issue.
    Can you give the Committee an update on Treasury's efforts 
in this area and on progress toward restoring a free flow of 
remittances from Somalis, particularly in Columbus and 
Minneapolis, to Somalis in Africa?
    Mr. Szubin. Yes. I would be happy to speak to our efforts 
here. I was just in Minneapolis last month on a delegation that 
Congressman Ellison organized to meet with the Somali remitter 
community, to meet with their banks, to meet with NGO's and 
other State and local officials, because, obviously, 
Minneapolis, too, has a huge concentration of Somali Americans 
and they are very worried.
    One thing I can say is the funds flows have not stopped. 
They are worried because they see a pattern. They see that bank 
accounts have been closed. But at this point, I have been told 
that the funds continue to go and that remittances are arriving 
in Somalia.
    But, the situation is far from ideal, and the worries 
actually are not about the remitters in the United States. The 
concerns with respect to money laundering and terrorist 
financing, of course, go to what is happening to the money when 
it gets to Somalia, and that is an intensely challenging issue 
because there is almost no central bank, almost no regulatory 
system when it comes to oversight of remitters or banks in 
Somalia.
    And, so, the ability to restore confidence that will allow 
those remittances to flow more easily is going to depend on the 
efforts of the Prime Minister, and I had the opportunity to 
speak with him, too, when he visited. He is undertaking a lot 
of very serious steps, and as you noted, the World Bank, the 
State Department, the Treasury Department are going to do 
everything we can to assist him to build strength and thereby 
inspire confidence that funds flows are, indeed, safe when they 
go to Somalia.
    Senator Brown. Thank you, Mr. Chairman.
    Chairman Shelby. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman, and Adam, thank 
you for your service to our country. I very much appreciate you 
telling us a little bit about your family history and your 
family's support. I think you know I have had tremendous 
support for what TFI does and the 700 people that you work with 
there.
    And, in spite of the great work that you have done and 
others, David Cohen before you, I think you understand there is 
a bipartisan majority here that feels that not you, but the 
Administration squandered those efforts, and instead of ending 
Iran's nuclear program, we basically are allowing the 
industrialization of that program. Again, I know that was not 
your negotiation to lead, but, obviously, many of us--most of 
us here in a bipartisan way, very, very disappointed at that 
squandered opportunity, and had the President achieved what he 
said he wanted to do, which was to end the program, we would 
have 100 people here in the Senate cheering and supporting 
that. But that is not what has occurred. So, again, that is no 
reflection on you.
    There are some sanctions that we put in place, the ISA Act, 
and it expires at the end of 2015. And I assume that since the 
snap-back provisions that were negotiated as part of the deal 
rely on the fact that there have to be sanctions to snap back 
to, that you would be very supportive of us extending ISA 
immediately so that those sanctions are there to snap back to.
    Mr. Szubin. Thank you very much, Senator Corker, for your 
kind words about TFI, and I could not agree with you more about 
the talent and dedication of the men and women of the office.
    With respect to the Iran deal, of course, you are right. I 
am not a diplomat and did not lead the talks, although I did 
have the opportunity to participate in a number of rounds, and 
I believe the deal to be a strong one and to have achieved the 
President's objectives of closing off all of the pathways for 
Iran to obtain a nuclear weapon for 15 years and beyond. But, I 
also know that that is a point on which I am not likely to 
convince you.
    Senator Corker. And it would be good, probably, if you did 
not really talk about that.
    [Laughter.]
    Senator Corker. I would say that the fact is, the President 
said he was going to end their nuclear program, and we did not 
do that. We are industrializing, or agreeing to the 
industrialization. So, I know that they evolved in their goals 
over time. It is unfortunate, I would say, capitulated. I do 
not really want to focus with you on that because I respect 
your service and, hopefully, you will respect my position in 
disagreement.
    But, what I would like to hear is that we can reauthorize 
with your support the sanctions that were in place under ISA 
and do so immediately.
    Mr. Szubin. So, the Administration, with respect to 
preserving the full leverage of snap-back, I think the 
Administration's position has been very clear and is entirely 
aligned with your own, Senator. We need to have that leverage 
in order to deter breaches, in order to punish any breaches 
that occur.
    With respect to the Iran Sanctions Act, my understanding is 
that it does not expire until the close of next year, of 2016, 
and the Administration's position has been that it is premature 
to bring up the sunset--the renewal until we get to that sunset 
period.
    Senator Corker. Why would that be the case?
    Mr. Szubin. Typically----
    Senator Corker. We pass things way in advance all the time. 
It leads us to believe that there are concerns that maybe you 
all have made commitments to Iran that that is not going to be 
the case, so I think it is always good to have certainty. I 
mean, one of the reasons people rushed to pass Dodd-Frank, 
unfortunately, was to create certainty. Obviously, that has not 
been the case with Dodd-Frank. But, again, back to this, I 
think that it would be very good for the world to know that 
those sanctions are going to exist and that can provide 
certainty, and I would hope you would support, if we were to 
pass those over the next 60 days, those extensions taking 
place.
    Mr. Szubin. Senator, from a sanctions perspective, the 
certainty is there. The Iran Sanctions Act is in effect and 
every aspect of it is in effect and people know we will 
implement it. There is no uncertainty until the provision is 
due to expire, and at that time, the Administration has said 
they are fully ready to have the conversation about renewal. 
But, I do want to clarify, at least from a sanctions 
perspective, that ISA remains in full effect notwithstanding 
any attempts to renew it early.
    Senator Corker. Yes. I know you are reciting the company 
line and I am not going to hold that personally against you, 
but I wish you would quit reciting the company line in that 
manner. It leads me to believe that, really, should we in a 
bipartisan way--and I think we could pass it very strongly, 
should we attempt to do that over the next 60 days--it leads me 
to believe that the Administration would oppose that, and that 
is very disappointing, but I think we are going to have an 
opportunity to see whether that is the case.
    On the new sanctions you are talking about preparing, I 
assume that you have no objection whatsoever to us preparing 
sanctions ourselves, since you are doing the same, relative to 
terrorist acts, humanitarian, human rights issues. If we were 
to begin imposing those on Iran, you would have no objection if 
we felt like their continued terrorism, their acts inside 
Syria, the things that they are doing, you have no issue with 
us doing that.
    Mr. Szubin. Senator, as I am sure you would expect, of 
course, all would depend on the content of those sanctions. To 
the extent that Congress is adding to the pressure against 
Iran's terrorist proxies and adding to our tools to be able to 
effectively combat them, I think that is something that the 
Administration would very seriously want to look at.
    If the intent, though, of a sanctions effort is to try to, 
through a back door, take away the deal, in other words, 
withdraw the gives----
    Senator Corker. I understand that.
    Mr. Szubin.----under the nuclear deal, I think that is a 
different story.
    Senator Corker. Yes, I understand.
    Just quickly--I know I am out of time--the IRGC obviously 
is involved in terrorism. You would agree with that. And this 
is something that is, again, just being looked at presently. 
But, how do you feel about designating the IRGC as a foreign 
terrorist organization and how would it impact the deal if 
Congress decided to do so?
    Mr. Szubin. The IRGC is a parent organization, has a number 
of subsidiaries, and it is involved almost in every bad aspect 
of what Iran has engaged in, whether it is the ballistic 
missile procurement, whether it is terrorism, whether it is 
regional destabilization or human rights.
    Senator Corker. Yes.
    Mr. Szubin. We have designated the Qods Force, which is 
their arm that they use to support military activity and 
terrorist groups, under our terrorism program because it was 
the most apt element of the IRGC to label with the terrorist 
brush. The IRGC parent, though, remains designated for its 
human rights abuses, and that label is not coming off and those 
sanctions are not coming off----
    Senator Corker. But if we were to take it a step further, 
because I think you understand the huge, gaping hole that 
exists, and that is that, yes, they are a holding company, but 
all of their subsidiaries are going to benefit hugely from what 
is getting ready to happen. So, those subsidiaries flow cash up 
to that holding company. So, again, if we were to designate the 
IRGC as a foreign terrorist organization, if we did that, it 
would be crippling to their terrorist activities.
    And, so, my question to you is, if we were to do so, it 
certainly would cripple them far more than what is getting 
ready to happen. Actually, they are going to benefit hugely. 
They are going to be the number one beneficiary, as a matter of 
fact, of these sanctions being lifted. If we were to counter 
their terrorist activity by sanctioning them, would you oppose 
that?
    Mr. Szubin. So, perhaps I can actually offer some 
reassurance. The sanctions on the IRGC, the parent 
organization, which apply to all of their subsidiaries, are 
just as sweeping under our human rights designation as they 
would be under a terrorism designation. And, so, all of those 
concerns about their subsidiaries coming into revenues, those 
are currently prohibited. And any foreign company that does 
business with an IRGC subsidiary--I will just be very specific, 
Khatam al-Anbia, or Sepanir, which is an oil and gas sector, 
those are IRGC subs. They remain on our list and are not coming 
off----
    Senator Corker. On ``our'' list----
    Mr. Szubin. On our list----
    Senator Corker. Not----
    Mr. Szubin.----and because of Congress, there are 
extraterritorial consequences. That would be the same with a 
terrorist designation, but it is belt and suspenders, because 
those effects are in place right now.
    Senator Corker. So, you would not object?
    Mr. Szubin. I do not--I cannot comment on Congress doing a 
designation. In my experience, it is the State Department----
    Senator Corker. Yes.
    Mr. Szubin.----who lists entities as foreign terrorist 
organizations. But, certainly, we have seen the activity 
underneath the IRGC that easily qualifies for terrorist 
support. I am commenting from a legal perspective that I do not 
think it would affect the outcome either way.
    Senator Corker. Well, I look forward to meeting with you. I 
thank you for the extra time. And in spite of the fact that we 
disagree on the outcome of the negotiations, I really thank you 
for your public service.
    Mr. Szubin. Thank you, Senator.
    Chairman Shelby. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman, for, number one, 
holding this hearing and moving forward on the nomination of 
Mr. Szubin for Under Secretary for Terrorism and Financial 
Crimes. He has appeared in front of this Committee at least one 
time that I recall, and I have always been enormously impressed 
and enormously grateful that you have decided to use your 
obvious talents in service of this country and certainly in 
service of the security of this country.
    I think there is a little boy in the back room, the 
anteroom, I do not know if that is your third son----
    Mr. Szubin. Yes.
    Senator Heitkamp. He is quite adorable, and he is already 
reading. I do not know, is he, like, one or two, already 
reading?
    [Laughter.]
    Senator Heitkamp. He takes after his dad.
    I want to address an issue that I do not think has been 
talked about, and I share Senator Corker's concern about making 
sure that this country is sure and certain about terrorism 
sanctions. You and I have talked about this when we met. And 
certainly looking at human rights sanctions and making sure 
that the American public knows that we will continue to 
sanction those entities that engage in terrorist activities, 
that engage in human rights violations, and that we have not 
given up on our commitment to use sanctions in that way.
    And, so, I think the continuing dialogue with this 
Committee, the continuing dialogue with Congress from your 
office and from the State Department will be critical moving 
forward, giving those assurances.
    But, I want to probably address an issue that has not been 
addressed, which is crude oil exports. You and I also talked 
about this. And, I am deeply concerned about the policy of this 
country which restricts American exports of crude oil, of the 
oil that we produce here, for a number of reasons. Number one, 
I think it threatens our national energy security. I think it 
is not good for our consumers. It is not fundamentally fair in 
a free enterprise system that we are restricting exports. But, 
I think, in this context, it certainly gives us a wonderful 
opportunity to be competitive with Iranian oil that will find 
its way eventually into the marketplace when this agreement 
is--if and when this agreement is implement.
    And, so, we are curious about how you see this from the 
standpoint of sanctions, how you would view the lifting of the 
oil export ban in the frame of continuing to curtail, 
continuing to put economic pressure on not only Iran, but also 
Russia and other bad actors in the world who are funding their 
bad actions with oil revenue from their own domestic 
production.
    Mr. Szubin. Well, thank you very much, Senator. 
Unfortunately, the question does go beyond my area of expertise 
in terms of what the potential impacts would be of relaxing 
those restrictions and then how it would play out----
    Senator Heitkamp. But you are a really smart guy, so you 
could just opine for me, right?
    [Laughter.]
    Mr. Szubin. No, unfortunately. I am going to disappoint you 
severely on that front.
    [Laughter.]
    Mr. Szubin. But, there are others in the Administration, 
and I think you have been in conversation with them already, in 
my agency and elsewhere, who are, of course, much more 
conversant with this and would be happy to continue the 
discussion.
    Senator Heitkamp. Well, for me, this is a critical issue 
and it has to be viewed in the frame of what we are doing right 
now with overall sanctions. It has to be addressed in this 
context, because I think it is a wonderful opportunity for our 
country to use this new growth in our energy resources for 
smart and better diplomacy, better power, and provide European 
energy security, which, I think, the lack of energy security 
among our allies has created a lot of economic disruption. And, 
so, we will continue to push for this. We will continue to push 
for increased and maintaining sanctions on anyone who engages 
in terrorism and human rights violations, and I look forward to 
continuing our discussion with you.
    And, again, to your family who are very proud behind you--
you cannot see them--I want to thank you for raising a very 
amazing young man who is using his talents for public service. 
Thank you.
    Mr. Szubin. Thank you. Thank you, Senator.
    Chairman Shelby. Senator Cotton.
    Senator Cotton. Thank you, Mr. Chairman, and thank you for 
taking the time to visit earlier this week. Congratulations on 
your nomination and congratulations to your wonderful family, 
as well.
    I want to talk a little bit about snap-back sanctions and 
their effectiveness. The President has said that sanctions were 
not stopping Iran from advancing their nuclear program. He has 
said that the only alternative to this deal is war, because 
sanctions would not stop Iran from advancing their nuclear 
program, yet he has also said that snap-back sanctions will be 
the punishment if they violate this deal, and that punishment 
will be effective.
    It seems to me logically contradictory to say that Iran's 
economy, which is currently struggling, is not going to be 
deterred by sanctions from advancing their nuclear program, but 
at some indeterminate time in the future, should they violate 
the deal when their economy is healthier and stronger and their 
conventional military is stronger, as well, that snap-back 
sanctions would be effective at that point. Could you help 
explain that seeming logical inconsistency?
    Mr. Szubin. I would be happy to try, and, of course, I 
would not presume to speak for the President or what he was 
intending with his remarks. But, I think the point that he and 
many others have made is that throughout the period, let us 
say, from 2005 to 2010, 2011, while we were ratcheting up the 
sanctions, of course, Iran continued to add to its enrichment 
program, continued to add to its stockpile, continued to add 
centrifuges.
    The sanctions were placing a very heavy thumb on the scale, 
and ultimately, I think, had a determinative impact in terms of 
how Iran behaved with the election of Rouhani and with their 
approach at the negotiating table. But the sanctions alone did 
not stop the enrichment. It was, of course, the concessions 
that they made to allow in the inspectors to export their 
stockpile by 98 percent, to bring down their centrifuges and 
infrastructure. All of those changes at the negotiating table 
are what are going to move us from the current 2- to 3-month 
breakout time to more than 12-month breakout time. And, so, it 
is those changes that we so desperately needed for all of us 
who are worried and have been worried about Iran's nuclear 
program.
    In terms of snap-back, I think it is a very potent force 
for all the reasons that you have spoken about. Iran has seen 
firsthand that despite early years where there was a lot of 
bluster on Iran's part, we will become self-sufficient, economy 
of resistance, well, the Iranian people are not looking for an 
economy of resistance. They are not looking for being wholly 
dependent on Iranian self-made goods. They are desperate for 
technology, for goods, for services from the West and from the 
rest of the world.
    And, so, the threat that they could come out from under 
these sanctions but fall back under them if they did not abide 
by the deal is, I think, a very real one and that is a 
political one for Iran's leadership, as well.
    Senator Cotton. But, if the Supreme Leader and if President 
Rouhani started the negotiations in part because of the 
economic pain the sanctions have brought, at some point in the 
future, maybe 6 months from now, maybe 6 years from now, if 
they were caught cheating, let us say they have a covert 
enrichment facility, their economy will be stronger. They will 
have demonstrated the political desire to cheat on this deal. 
And then we are going to reimpose the sanctions that were not 
enough to stop them at this point. Do you understand the 
logical inconsistency that I am worried about here?
    Mr. Szubin. I am not sure. In other words, I think everyone 
acknowledges that the sanctions were a key, if not the key, 
pressure point that brought them to the table.
    Senator Cotton. But not to stop the nuclear--the advances 
of their nuclear program.
    Mr. Szubin. So, I think--and I hesitate here because there 
is a law professor in attendance--but I think we would all 
agree that the sanctions----
    Senator Cotton. She was my professor.
    [Laughter.]
    Senator Cotton. She was a better professor than I was a 
student.
    [Laughter.]
    Senator Cotton. My time is running down here, so I want to 
move on to another topic, specifically the topic that you and 
Senator Corker were addressing, the Iran Sanctions Act. He was 
talking about advancing promptly on the reauthorization of it. 
I believe it expires at the end of 2016. That is mostly a 
political or policy question. I have more of an administrative 
or technical question.
    Since, in Congress, as oftentimes in life, things fall up 
against their deadlines, from your office's standpoint, if that 
Act is not reauthorized until, say, the last 2 months of 2016, 
would that create any kind of break in the way that you 
administer its provisions?
    Mr. Szubin. No.
    Senator Cotton. OK. Thank you for that.
    And then, finally, I want to discuss what appears to be a 
tension in the nuclear deal, in the Iran Threats Reduction Act. 
On the one hand, the Iran Threats Reduction Act says that U.S.-
owned foreign subsidiaries cannot do business with Iran. On the 
other hand, the JCPOA suggests the President will, in fact, 
license those subsidiaries. Could you explain the legal 
underpinnings for the commitment that the JCPOA appears to have 
made to Iran and to those foreign-owned----
    Mr. Szubin. Yes, Senator----
    Senator Cotton.----or U.S.-controlled and -owned 
subsidiaries?
    Mr. Szubin. Yes, and excuse me for the interruption. Should 
Iran complete all of its nuclear steps, and we are talking 
about something that is probably still 6 months away, part of 
the relief they will earn is that foreign subsidiaries, foreign 
incorporated subsidiaries of U.S. parents will once again be 
allowed to do business with Iran so long as they meet some very 
difficult conditions. They cannot be exporting any products 
from the United States. They cannot be reexporting U.S.-
controlled goods. They cannot be obtaining any services from 
their U.S. parent. It truly has to be a stand-alone operation.
    In terms of the Iran Threat Reduction Act, that provision 
contains the licensing authority that Treasury would anticipate 
using in that eventuality to allow for certain categories of 
activity for those foreign subsidiaries.
    Senator Cotton. OK. Thank you. My time has expired.
    Mr. Szubin. Thank you, Senator.
    Chairman Shelby. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Szubin, congratulations on your nomination. let me ask 
you, would it be fair to say that the Iran Sanctions Act was a 
significant tool in getting Iran to the negotiating table?
    Mr. Szubin. I would say it was probably not one of the 
primary pressure points. I think Congress in CISADA, in the 
NDAA provisions that you were so pivotal in drafting, were far 
more impactful. But, certainly, it is part of the constellation 
that brought Iran to the table and that gave us so much 
leverage.
    Senator Menendez. Mm-hmm. So, when you refer to the 2010 in 
your speech, or statement before the Committee, dramatically 
advancing--the actions of this Committee dramatically advancing 
efforts on crude oil sales and whatnot, you are referring to 
CISADA----
    Mr. Szubin. And the NDAA provisions.
    Senator Menendez.----and the NDAA provisions, which 
included the Iran Sanctions Act, did it not?
    Mr. Szubin. They reference them as a penalty structure, but 
when I talked about crude oil, I was talking about the measures 
that you know so well that said you cannot do any transactions 
with the Central Bank of Iran, including oil payments, unless 
you are bringing down significantly every 6 months your 
purchases from Iran. That is what led Iran's exports to fall 
from 2.4 million barrels a day to 1.1 million barrels a day and 
had a very dramatic impact on their----
    Senator Menendez. But there is no question that the 
secondary nature of the sanctions under the Iran Sanctions Act 
was a very significant hammer at the end of the day, would that 
be a fair statement?
    Mr. Szubin. I would say the penalties that are set out in 
the Iran Sanctions Act are then referenced in a lot of these 
other statutes I am talking about, and that penalty structure 
is a very meaningful one.
    Senator Menendez. Yes. So, is it--what view do you have as 
it relates to renewing the Iran Sanctions Act, which is up for 
reauthorization at the end of this coming year?
    Mr. Szubin. So, the Administration's view is there is no 
need for early renewal. Of course, ISA remains in full effect 
until the close of next year----
    Senator Menendez. Right.
    Mr. Szubin.----December of 2016----
    Senator Menendez. And when it lapses and collapses, then 
what?
    Mr. Szubin. That is an eventuality that we are not even 
close to at this point, but----
    Senator Menendez. Well, it is an eventuality that is a 
certainty, because the law makes it very clear that it will 
expire on that date. And if we are to talk about significant 
snap-back as a deterrent toward violation, then it seems to me 
that without the law, Iran knows that the Administration does 
not seem to be disposed to be supportive of reauthorization of 
the law, even as it is with all of the waiver authority the 
President has. So, if I know that I can wait a year and I am 
not going to face that universe of sanctions, it will be 
meaningful to me that my further deterrent concerns will be 
significantly reduced.
    Mr. Szubin. So, hopefully, I can provide some reassurance 
on this front. I am not aware of any discussions within the 
Administration that would lead to our snap-back leverage being 
dissipated--in a year, in 2 years, at any point. The whole 
structure of the deal is to keep that leverage in place, 
intact, to ensure that Iran adheres to its commitments, and we 
have been very clear with Iran on that front, as well.
    Senator Menendez. Well, it just seems to me that the JCPOA 
has language in it under the sanctions section that suggests 
that somehow the Administration is tied toward not supporting 
reauthorization, and that is not something that can tie the 
hands of the U.S. Congress, and I am convinced that if there 
was a reauthorization put on the floor, it would have a robust 
support, because it passed 99 to zero when it was authored. If 
you want deterrence, it still needs to be in existence to be a 
deterrent, too. And, so, I just do not get where the 
Administration is at on this.
    Let me ask you two other questions. One is, I get a sense 
that if Iran violates, particularly in smaller intermediate 
ways, not in a big way, that we are going to largely be on our 
own in enforcing, to send a clear message that, in fact, 
violations are not acceptable. Is that a fair statement?
    Mr. Szubin. We would certainly reach out to our foreign 
partners, and I think, in particular, the Europeans, who are 
part of the P5+1. Germany, U.K., France, as well as China and 
Russia, have a lot invested in this deal right now. And whereas 
before this deal a lot of the sanctions were United States 
only, at this point, the commitments that Iran would be 
breaking are commitments they have made not just to the United 
States, but to this entire----
    Senator Menendez. Well, I know, but the big difference is 
U.S. companies cannot invest because of other nonrelated 
nuclear sanctions. So the only companies in the world that are 
going to get into the Iranian market are European and other 
companies. Therefore, they are going to have both investments 
of major national companies, like Siemens, Airbus, and others. 
The countries themselves may use their sovereign wealth funds 
to invest in Iran. It is going to be a lot harder to get them 
to come along with us in any sanctionable item after all of 
that takes place, and I think not acknowledging that is to be 
somewhat unreal about the consequences we are going to face 
moving forward.
    If I may, Mr. Chairman, one last question. You know, as 
part of your overall portfolio and what you have been doing at 
OFAC is the question of enforcement of the law, the Libertad 
Act, which I helped write when I was in the House of 
Representatives, on the Castro regime. Now, I have a serious 
concern as to how OFAC and the Administration have interpreted 
a general license, and I want you to succinctly give me what is 
your interpretation of a general license.
    Mr. Szubin. A general license is a standing authorization 
that is issued by OFAC that allows for a set of activity that 
would otherwise be prohibited to go on, so long as it meets all 
of the specified conditions. It does not do anything that a 
specific license does not do other than that it is an 
efficiency. So, rather than meet each company's application one 
by one, if the Government's policy is to allow, let us say, 
humanitarian transactions, or the export of smart phones to 
Iran and Sudan, we originally--OFAC originally did that through 
specific licenses. So manufacturers, exporters, would come in 
and get a license to do it. But the foreign policy was 
supportive of every company when they wanted to do the export--
--
    Senator Menendez. So, basically, I would say, a general 
license is when you got the same request and you ended up with 
the same result, you gave a general license for the purposes of 
expediency----
    Mr. Szubin. That is right.
    Senator Menendez.----and efficiency.
    Mr. Szubin. That is right.
    Senator Menendez. However, when a general license subverts 
the law, when a general license ultimately swallows up the 
Congressional intent, as in the case of Cuba, where you are 
giving a general license for the purposes of travel and where 
travel under even the Administration's proposals are supposed 
to have purposeful elements, and a general license is basically 
a good honor system where you do not actually go ahead and 
enforce whether or not the person is following the criteria 
under the purported purposes of that license. Then there is no 
way to know. You have created a huge truck for unlimited 
travel, not purposeful travel, because you are not enforcing 
purposeful travel because you are depending upon the good will 
of the person to say that they are going to obey.
    So, this, beyond Cuba, creates a real concern for me, and I 
would suggest, Mr. Chairman, for the Committee, because if a 
general license in this case can be interpreted this way, that 
basically subverts the Congressional intent and the law, then 
what is to say that we are not going to see general licenses as 
it relates to Iran or any other place in which an 
Administration, this or any other one, is going to interpret a 
general license in such a way that allows them to run a Mack 
truck right through it and undermine the very purposes of the 
legislative intent and the law itself.
    And I commend that to the Chair and Ranking Member's 
attention. I certainly, based upon the experience I have seen 
here, will not be supporting any legislation that creates 
general licenses for this or any other Administration because 
it basically--I can tell you, as the author of that law, it 
totally undermines what was the Congressional intent.
    Mr. Szubin. Would it be permissible just to respond 
briefly, and I know that----
    Senator Menendez. If the Chairman permits it.
    Mr. Szubin. So, there is no ability to do with a general 
license what we could not do with a specific license. And in 
each of the instances of the travel that you are referencing, 
they have to hue to the 12 categories that are set out in 
statute in terms of purposeful travel, and they set out 
conditions to restrict that----
    Senator Menendez. But you do not check it.
    Mr. Szubin.----not being purposeful.
    Senator Menendez. You do not check it. You accept an honor 
system. Yes, I am going under one of those 12 systems. Anybody 
can say that. You go, you come back, you never know whether 
they actually went under the 12 elements.
    Mr. Szubin. I regret to say that, as an office with about 
700 people, our ability to check in on specific licenses is 
also somewhat limited. In other words, when we issue a specific 
license to a company, we are not able to do end use checks, or 
in the case of travel to Cuba, to go down and ensure that they 
are doing what they were authorized to do.
    Senator Menendez. But you would be able to get up front an 
itinerary to determine, in fact, that that itinerary was 
purposeful travel as delineated. That is not something you are 
doing now, and it is fundamentally different. And, so, to 
suggest, as you suggested earlier, that a general license is 
for efficiency purposes is fine. That is if, you know, X is the 
only requirement and you meet X and, therefore, you should get 
a general license.
    When you have 12 different criteria of what is purposeful 
travel and do not know what the person is doing to achieve 
purposeful travel--which you were doing before, travel was 
limited, had specific limitations to it, OFAC enforced those 
and very often found individuals who were outside of that field 
and would, therefore, have an enforceable action against them. 
That sends a message that you have to honestly pursue the law, 
not just generally use a general license as an open-ended 
process.
    And, if it can happen here, I am concerned about where else 
it will happen in other sanctionable entities and places in the 
world, because that basically is a green light to do what you 
want to do and circumvent the will of the Congress.
    Mr. Szubin. And I think, Senator, a lot of your question 
goes to enforcement and goes to making sure that U.S. persons 
know that we are going to take the sanctions seriously, and if 
they violate them, whether it is the terms of a general 
license, a specific license, or otherwise, that they are going 
to face real consequences. That has been, frankly, a big focus 
of mine during my 9 years at OFAC, and the enforcement of 
sanctions has never been as tough in terms of the size and 
volume of penalties.
    But, I also agree with you that, going forward, it is going 
to be critically important in the Cuba program, as it is in all 
of our sanctions programs, to ensure that people understand 
what is prohibited is truly prohibited and we are not going to 
be taking violations lightly.
    Senator Menendez. Thank you.
    Chairman Shelby. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman, and thank you, Mr. 
Szubin, for your important work.
    Now, you have been nominated to be in charge of sanctions 
enforcement and you have been serving in that role as Acting 
Under Secretary for Terrorism and Financial Crimes at Treasury 
since last February. You recently traveled to Israel to discuss 
implementing the deal to prevent Iran from developing nuclear 
weapons. Given the critical importance of implementing the Iran 
nuclear deal, countering Iran's terrorist financing, and 
performing all the other key functions of your office, I think 
the Senate should confirm you to this job as soon as possible.
    In recent testimony before this Committee, you made clear 
that if we back out of this deal, the international coalition 
that has made sanctions so effective would fracture. And while 
the United States could go it alone with its own sanctions, we 
tried that before and we know that they are just not nearly as 
effective.
    You also stated that most of the billions of dollars that 
could be released if Iran complies with the nuclear deal are 
held in the EU, in China, in Japan, in India, in South Korea 
and other foreign countries. So, the United States alone cannot 
prevent Iran from getting access to that money.
    So, I just have one question here. I want to highlight this 
again. If we walk away from this deal, is it more likely or is 
it less likely that our international partners will continue 
tough sanctions, refuse to trade with Iran, or block Iran's 
access to frozen assets?
    Mr. Szubin. I believe it is significantly less likely that 
we will see aggressive policing of sanctions if we walk away 
from the deal that we spent 2 years, along with our partners, 
negotiating.
    Senator Warren. Well, it just seems clear to me that a 
better path forward is to accept this agreement and maintain 
unity with our international partners. That way, if Iran 
cheats, we can respond with the strength and the support of the 
world behind us, which is critical for effective sanctions. So, 
I appreciate your work on this.
    Mr. Szubin. Thank you, Senator.
    Senator Warren. There is one other topic I would like to 
address and that is human traffickers' use of the international 
banking system. Human trafficking is modern day slavery and it 
is a global business, with profits estimated to be as high as 
$150 billion a year. To keep those profits coming in, the human 
traffickers have to use banks and credit cards and money 
transfer companies every single day.
    Now, money transmitted through the financial system for a 
trafficking operation falls under existing anti-money 
laundering laws, and these rules require financial institutions 
to deter money laundering and to report suspected illegal 
activity to law enforcement.
    I know we are taking steps in this area, but I am concerned 
that money laundering related to human trafficking has not 
received as much attention by financial institutions or their 
regulators as, for example, drug trafficking money or terrorist 
financing.
    So, I have legislation to ensure that the Treasury 
Department and other financial regulators work more closely 
with financial institutions to stop human traffickers' use of 
the banking system. I also want to add the anti-money 
laundering expertise that you have at Treasury to the 
President's Interagency Task Force to Monitor and Combat Human 
Trafficking in Persons.
    The Treasury Department is a key agency responsible for 
overseeing any money laundering programs. So, I want to know if 
you will commit to working with me to make sure that both the 
regulators and the financial industry are doing everything 
possible to shut down financing for human trafficking.
    Mr. Szubin. Yes. Senator, I am pleased to make that 
commitment. I could not agree more about the severity, and I 
think the escalating severity, of the threat. I think you will 
be pleased to hear that I was being briefed earlier this week 
by the Director of FinCEN, Jennifer Shasky Calvery, about their 
efforts, and they have seen a tremendous jump in reporting from 
financial institutions after FinCEN put out an advisory 
alerting financial institutions to sort of red flags or 
hallmarks of human trafficking typology. In terms of the 
financial transactions, they have gotten thousands of 
suspicious activity reports that are then accessible to and 
harnessed by law enforcement, State, local, around the country.
    So, I think there is a lot there, but there is so much more 
to do, and it all starts with intelligence or law enforcement 
work to be able to lead us to the bad actors, and we have a lot 
still ahead of us.
    Senator Warren. Well, I appreciate that very much. Human 
traffickers need the banking system, and stronger financial 
regulations give us the tools to shut them down. So, this is 
something that I want to make sure that we make a priority. It 
matters to people all around the world.
    So, thank you very much, Mr. Szubin.
    Mr. Szubin. Thank you.
    Chairman Shelby. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman, and Mr. Szubin, 
thank you and your whole family. I was going to take your boys 
out afterwards and turn them into Notre Dame football fans 
before the day is over.
    [Laughter.]
    Senator Donnelly. You may have a little work to----
    Mr. Szubin. If they are well behaved Notre Dame football 
fans, I would be proud to see you do it.
    [Laughter.]
    Senator Donnelly. And to all your family, I know how much 
you have traveled over the years and all the places you have 
gone to, and so to your family, thanks, because it is really, 
really important and it has helped make our country a stronger 
place and helped to save lives.
    Mr. Szubin, with the agreement that was just voted on, a 
big portion of this is not just the nuclear piece, as you know, 
but is what is going on on the ground in the Middle East every 
single day. And much of that success we will have is going to 
rest on what you and your colleagues do. And, so, I just want 
to make sure, what creates confidence for an Israel, for Saudi 
Arabia, for Jordan, for those Gulf States, is when they look 
and they see that Iran has not moved one more inch on the 
ground, when they see that missile shipments are being 
interdicted.
    And, so, I would like to know, for instance, with 
Hezbollah, what are the plans to interdict missile shipments, 
to interdict weapons, to make sure that their inventory goes 
down, and we hope to zero?
    Mr. Szubin. So, I have been personally and my office has 
been very focused on the threats that you are referencing. 
Sadly, I do not think we are going to bring their inventory 
down to zero, but we still need to do everything we can to 
interdict any shipments that we see or that we learn about and 
to be able to curb not just the volume of shipments they get, 
but the sophistication.
    When I was in Israel recently, I was hearing about some 
very troubling advances in terms of Hezbollah's missile 
capabilities or rocket capabilities and we have to keep them 
from making those advances because it means deaths. The more 
precise their rockets are, the more people will die, and we 
know that for a certainty. So, we have to be very focused on 
this.
    Obviously, the bulk of the intelligence and interdiction 
effort is going to be outside of my lane, outside of the 
sanctions lane, but we can be helpful in this effort in a 
secondary capacity, and that is exposing the procurement 
companies, because they do not get these parts indigenously. 
They need to order technology and some of the sophisticated 
equipment from abroad, sometimes from places like China, 
Southeast Asia. Well, that means they are doing financial 
transactions. That means they are engaging in shipping or 
airplane cargo shipments.
    All of those are vulnerabilities that we can target, and 
you have seen my office in the past year go after procurement 
fronts for Hezbollah, including for their unmanned aerial 
vehicle program, and it is an area that we are going to 
continue to be very focused on in the months ahead.
    Senator Donnelly. Yes. We cannot leave, as I know you 
agree, we cannot leave any stone unturned. If we find a 
procurement company that is providing equipment, we need to let 
everybody know who they are. We need to go after them. We need 
to create more and more additional confidence with our allies. 
We need to make sure that the actual instruments of death and 
danger are cut off. And you have a full mission from all of us 
that we need you to be one of the point people on this effort.
    Additionally, President Rouhani was talking about Iran's 
intentions in regard to certain weapons and that they would not 
ask for permission or abide by resolutions. How are you going 
to enforce the arms export and ballistic missile restrictions 
outlined under U.N. Security Council Resolution 2231?
    Mr. Szubin. So, those provisions remain in place. And 
notwithstanding President Rouhani's words, we are going to hold 
Iran to those commitments in the sense that we are going to do 
everything we can to try to cut off any intended shipments and 
try to prevent that technology from coming into Iran's 
possession.
    Senator Donnelly. Some general questions I want to make 
sure you have answered. If you have already answered them, I 
apologize.
    Under the deal, will General Soleimani and the IRGC still 
be subject to U.S. counterterrorism sanctions and human rights?
    Mr. Szubin. Yes.
    Senator Donnelly. If confirmed, will you fully enforce 
sanctions on the IRGC?
    Mr. Szubin. Yes.
    Senator Donnelly. Will you commit to this Committee that 
you will not hesitate to impose counterterrorism sanctions on 
any Iranian entity that engages in sanctionable activity, 
including entities that are receiving relief from nuclear-
related sanctions?
    Mr. Szubin. Yes.
    Senator Donnelly. I cannot stress enough to you, and I know 
how much time, effort, and heart you have put into this, but 
the additional component in this whole agreement is how we do 
on the ground. The confidence of our friends and our allies is 
going to be directly related to how successful we are in 
pushing back and in giving them space to have success, our 
friends. And, so, your nonstop efforts in that are crucial as 
we look forward to and are something that we absolutely have to 
have.
    Mr. Szubin. Thank you, Senator.
    Senator Donnelly. Thank you. Thank you, Mr. Chairman.
    Chairman Shelby. Mr. Szubin, we appreciate your appearance 
today, you and your family. I believe you are eminently 
qualified for the job. We will go from here. Thank you.
    Mr. Szubin. Thank you very much, Mr. Chairman.
    Chairman Shelby. The meeting is adjourned.
    [Whereupon, at 11:11 a.m., the hearing was adjourned.]
    [Prepared statements, biographical sketch of nominee, and 
responses to written questions supplied for the record follow:]
                  PREPARED STATEMENT OF ADAM J. SZUBIN
        To Be Under Secretary for Terrorism and Financial Crimes
                       Department of the Treasury
                           September 17, 2015
    Chairman Shelby, Ranking Member Brown, and distinguished Members of 
the Committee: It is an honor to be appearing before this Committee 
today.
    With your permission, I would like to introduce the members of my 
family who are in attendance: My wonderful wife Miriam, my beloved 
sons, Nathan, Micah, and Josiah, my mother Laurie Szubin, and my 
father-in-law Steve Weiner. I want to thank my wife Miriam in 
particular for her unwavering support--whatever I have accomplished has 
been made possible by her. Finally, I want to recognize my family 
members who weren't able to be here today but who are watching from a 
distance, including my father, Zvi Szubin, my Grandma Malkie, my sister 
Lisa and her family, my mother-in-law Roz Heifetz, and the rest of my 
loved ones. My family has provided me with endless love and strength.
    Mr. Chairman, Ranking Member Brown, and esteemed Members of this 
Committee, I am honored to have been nominated to serve as Under 
Secretary of the Treasury for Terrorism and Financial Crimes. I want to 
thank the President for the confidence he has placed in me, and 
Secretary Lew, for his recommendation and strong support.
    I do not take this opportunity for granted. Indeed, I don't take 
for granted the fact that I have been allowed to serve my Government at 
all for the last 16 years. My father was not born here; he was born in 
Poland in 1933. His parents fled the Nazis at the outbreak of World War 
II. They were captured by the Soviet army and exiled to Siberia, where 
they lived out the war years. Siberia was a place of great hardship, 
but it turned out that their capture and exile had saved their lives; 
nearly all of my father's aunts, uncles, and cousins were wiped out by 
the Nazis. There are today few remnants of a family that should have 
numbered in the thousands.
    My parents raised us to be conscious of the existence of real evil 
in the world, evil not as an abstract concept, but as an all too real 
threat that they had seen in their lifetimes: regimes--leaders and 
willing followers--who pursued murder and even genocide, in the 
Holocaust and, sadly, in other places in the decades that followed. But 
we were not raised in an environment of fear or anger or mourning. To 
the contrary, we were raised to savor life, to seek out joy, and to be 
aware of and grateful for the many gifts that we enjoyed. High among 
those gifts was the ability to grow up in America--the goldene medina 
to which my father had come. He has never stopped marveling at this 
country--at our brilliant Constitution and legal system, our openness 
to new immigrants, our work ethic, and our enduring hopefulness that we 
can improve the world and leave it a little better for our children. 
For all of these I was taught to be grateful.
    So, while it is perhaps not a surprise that I sought out a career 
in Government service, I have been regularly amazed that this country 
has allowed the child of an immigrant to take on positions of trust and 
to participate in shaping our national security policies. This truly is 
a country like no other.
    I appreciate how significant the responsibilities of this office 
are. Eleven years ago, I followed Stuart Levey from the Justice 
Department when he was named the first Under Secretary for the newly 
created Office of Terrorism and Financial Intelligence, or TFI. I have 
served in TFI ever since, as the director of its sanctions office, the 
Office of Foreign Assets Control, or OFAC, for 9 years, and, most 
recently, as the Acting Under Secretary for the last 6 months, 
overseeing the more than 700 exceptional individuals who make TFI what 
it is.
    Our office was created to bring together, under one roof, an array 
of capabilities--intelligence, regulation, enforcement, and policy--to 
confront our adversaries on the financial battlefield. The twin 
missions of TFI are to harness financial intelligence and exercise 
authorities to advance national security and foreign policy objectives, 
and to secure our financial system against abuse by criminals and other 
illicit actors. It is an easy mission to describe but a challenging one 
to execute, as I have seen firsthand. Nonetheless, this office has 
accomplished amazing things in its short history.
    When I started at TFI, a decade ago, the conventional wisdom in 
schools of international affairs and in foreign ministries was that 
sanctions did not--and could not--work; that the targets of sanctions 
would always find ways to circumvent them, money being like water that 
would always flow downhill. Thanks to the remarkable and dedicated 
women and men in TFI and across our Government, I don't hear these 
arguments as much anymore. People have seen that smart, creative, and 
persistent financial efforts, when backed by the superb support of the 
U.S. Intelligence Community, can strangle illicit organizations, shake 
regimes, and change their behavior.
    Our efforts to track and disrupt the money flows to terrorist 
groups have been a key plank in our broader strategy against murderous 
groups such as al Qaida, ISIL, Hizballah, and Hamas. We continue to 
have much critical work ahead of us, but every bank account frozen, 
every charitable front exposed, every procurement company neutralized, 
and every fundraiser designated or deterred, strikes a blow against 
these groups. And, across the Middle East and Asia, we have worked with 
governments to help them strengthen their counter terrorism laws and 
empower themselves to identify and act against illicit money flows.
    Indeed, we have raised standards and increased transparency in the 
global financial system across the board. The world's financial system 
is--in every arena and every continent--more transparent and more 
resilient than it was 15 years ago.
    In the field of human rights, we have used sanctions to combat 
abuses, facilitating positive changes in places such as Burma--though 
much remains to be done.
    In the arena of narcotics trafficking and money laundering, we 
dealt once-powerful cartels such as the Cali cartel and the Sinaloa 
cartel major setbacks due to our concerted and patient efforts to 
expose their financial holding companies and money launderers--hitting 
them in their point of greatest vulnerability--their wallets.
    We have used sanctions to combat North Korea's attempts to access 
and abuse the world's financial system, closing out front companies and 
banks that were willing to launder the regime's money for a cut. In 
perhaps the most famous example, FinCEN's action against Banco Delta 
Asia in Macau severed North Korea's primary channel for moving and 
collecting illicit revenues and showed that one well-aimed blow can 
have the impact of years of broad restrictions.
    When we saw Russia violate Ukraine's territorial sovereignty, we 
worked with our allies in Europe to devise a creative and powerful set 
of sanctions that not only went after the key cronies and business 
interests around President Putin, but also cut some of Russia's largest 
banks and energy companies off from the things they need most--Western 
technology and Western financing.
    Finally, under Stuart Levey's and then David Cohen's leadership, 
TFI devised and executed a strategy to dramatically intensify the 
pressure against the government of Iran and its malign policies, its 
nuclear program chief among them. Through a steady campaign to expose 
Iran's deceptive activities in the financial arena, we cut Iran's banks 
off from the world's financial centers, and badly wounded its trade and 
financial strength. In 2010, Congress, with this Committee at the 
center, then dramatically advanced the effort, passing bipartisan 
measures that brought Iran's crude oil sales down by 60 percent, 
escrowed Iran's foreign reserves in banks around the world, and ensured 
that Iran's leaders knew that it would not recover economically until 
it clearly and verifiably closed off all of its pathways to a nuclear 
weapon. These efforts led to the election of President Rouhani and 
culminated in the diplomatic process that produced the Joint 
Comprehensive Plan of Action. The women and men of TFI worked 
incredibly hard over the past decade to impose and enforce these 
measures, and to combat every effort to circumvent them. And, even as 
we prepare to suspend our secondary nuclear sanctions if Iran fulfills 
its commitments under the deal, we are simultaneously intensifying a 
battery of sanctions that will not change under the terms of that deal. 
These include sanctions against Iranian human rights abusers as well as 
our powerful campaign against the Iran Revolutionary Guard Corps and 
the Qods Force, as well as Hizballah and other Iranian partners and 
proxies in Syria, Iraq, Yemen, Gaza, and beyond. And we will be doing 
so in active cooperation with our partners in Europe, the Gulf, and 
Israel.
    So I have seen first-hand the power of American economic statecraft 
in advancing our national interests. And, over the past 11 years, TFI 
has been continually improving--honing our intelligence focus and 
developing more innovative, tailored measures to combat and restrain 
our adversaries. In this time, I have also gained an appreciation for 
the importance of exercising our authorities judiciously, in order to 
preserve the strength of our instruments and financial system well into 
the future. But I am also aware that we cannot rest. I sit in a SCIF 
every morning to read the latest intelligence, and the threats we face 
are serious, deadly, and adaptive. We need to be vigilant, smart, and 
aggressive.
    Mr. Chairman, I am extremely proud to have been part of TFI from 
the start, for over a decade, under four Treasury secretaries. As the 
international landscape evolves, I am confident that the organization 
will remain at the forefront of our Government's efforts to protect our 
national security. Our work has benefited greatly from strong 
bipartisan support in the House and Senate, and from the Members and 
staff of this Committee in particular. If confirmed, I intend to 
preserve and build upon the close relationship between TFI and this 
Committee to take on the pressing challenges ahead.
    Thank you again for your time and consideration. I will be glad to 
answer any questions you may have.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



 RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY FROM ADAM J. 
                             SZUBIN

Regulatory Alignment and Goal Setting
Q.1. The Bank Secrecy Act charges the Secretary of the 
Treasury, who in turn delegates the authority to FinCEN, to 
implement AML laws, including the development of compliance 
procedures and examinations.
    Significant uncertainty may result where (i) different 
regulators appear to apply different standards under the same 
legal requirement, or (ii) regulatory expectations change 
without a change in the underlying statutory or regulatory 
requirements. Moreover, this can be exacerbated where there are 
a number of conflicting policy goals with respect to antimoney 
laundering and anti-terrorist financing efforts (transparency 
vs. prevention; financial inclusion vs. regulatory risk, etc.).

   LHow is Treasury working to ensure that the 
        standards that it sets, including customer due 
        diligence standards, are implemented and enforced in a 
        consistent manner by the Federal regulators?

   LAnd how is Treasury working to resolve any 
        conflicts in the AML regime?

A.1. Consistency in the application of Bank Secrecy Act (BSA) 
compliance is a critical part of Treasury's role as a Federal 
regulator, and we work hard to achieve this goal alongside the 
other Federal regulators to whom examination responsibility is 
delegated. One way that we coordinate regulatory enforcement of 
anti-money laundering requirements, including customer due 
diligence, is through the Federal Financial Institutions 
Examination Council (FFIEC) AML Working Group (Working Group). 
Participation in the Working Group affords Treasury the 
opportunity to discuss emerging and ongoing regulatory 
initiatives with other Federal regulators, while outlining our 
expectations for proper BSA compliance examinations. 
Periodically, the FFIEC issues a revised BSA/AML exam manual 
that provides detailed information to ensure consistent 
examination across depository institutions.
    Through the FinCEN Enforcement Division's Office of 
Compliance and Enforcement, FinCEN works directly with the 
regulatory and supervisory agencies that oversee financial 
institutions on compliance and enforcement matters. For 
example: Pursuant to memoranda of understanding, regulatory and 
supervisory agencies refer to FinCEN matters involving 
significant BSA deficiencies. In those cases in which FinCEN 
shares compliance and enforcement authority, FinCEN coordinates 
its efforts with the referring agency to ensure consistent 
application of the BSA for all covered financial institutions. 
Likewise, FinCEN consistently applies the BSA in cases in which 
it has sole enforcement authority.
    Treasury also biannually convenes the Bank Secrecy Act 
Advisory Group (BSAAG), a congressionally mandated forum 
consisting of representatives from Federal regulatory and law 
enforcement agencies, financial institutions, and trade groups. 
Through the BSAAG, industry, regulators, and law enforcement 
communicate about ways to improve BSA compliance. This frank 
and open dialogue affords industry members and their regulators 
the opportunity to discuss ways to foster consistency in how 
BSA compliance is examined.
Global ``De-Risking''
Q.2. Both Treasury and the international Financial Action Task 
Force have referenced dangers of a potential global ``de-
risking'' trend where financial institutions are closing 
certain client accounts or branches in certain geographic areas 
related to money-laundering risks.
    According to your predecessor, ``de-risking reveals a 
misalignment between regulatory risk and actual risk that 
serves no one's interests,'' yet many in the industry still 
believe that they are working in a zero-tolerance enforcement 
environment.

   LIs this a zero-tolerance environment and is it the 
        standard?

   LIf not, what are you doing to clarify what should 
        be the standard?

A.2. This is not a zero tolerance environment, and zero 
tolerance is not the standard. To provide clarity with respect 
to both illicit finance risks and U.S. legal and regulatory 
expectations, and in order to maintain an effective AML/CFT 
framework, Treasury will continue to maintain an open line of 
communication with industry, conveying our expectations through 
guidance, advisories, and private sector engagement, including 
discussions with industry in the Bank Secrecy Act Advisory 
Group (BSAAG). BSAAG provides a forum for industry and a wide 
variety of government actors to discuss the BSA, including any 
possible differences between actual and regulatory risk.

Majority-Owned Entities / 50 Percent Rule
Q.3. According to Treasury's Office of Foreign Assets Control 
guidance, a U.S. person may not engage in transactions with an 
entity that is majority-owned by a ``blocked'' person, unless 
authorized by the Office, whether or not such entity appears on 
a Specially Designated Nationals list of sanctioned individuals 
and companies.

   LHow are industry participants expected to find 
        these nonlisted majority-owned entities when the Office 
        has not identified them?

   LShould the Office revise its guidance to provide 
        more clarity and to ease compliance, or potentially 
        even identify such entities?

A.3. In response to a then-growing interpretation in the 
regulated community that once a blocked person owns 50 percent 
or more of an entity, the entity becomes blocked, OFAC 
published guidance in February 2008--later revised in August 
2014--to explain that property owned 50 percent or more by one 
or more blocked persons is considered blocked. The rule ensures 
that sanctioned parties cannot shield their assets from the 
reach of sanctions merely by setting up a new corporate 
structure and is critical to maintaining effective sanctions 
programs.
    Financial institutions subject to U.S. jurisdiction should 
know when they maintain an account relationship with an entity 
covered by the 50 percent rule, because they are required by 
other regulations to conduct customer due diligence. To assist 
the regulated community, OFAC regularly updates its SDN List to 
include entities blocked because they are owned or controlled 
by blocked persons.
    In addition, in response to requests from industry 
participants for clarifying guidance on the application of the 
50 percent rule, OFAC published Frequently Asked Questions 
(FAQs) on its Web site that clarify its expectations for due 
diligence by financial institutions on entities owned 50 
percent or more by blocked persons. For example: To ease 
compliance, the FAQs clarify that OFAC does not expect 
intermediary financial institutions to conduct due diligence on 
transaction parties with whom they do not maintain a direct 
account relationship for the purposes of determining ownership 
by blocked persons, unless such an intermediary party has 
reason to know of a transaction party's ownership by blocked 
persons.
``U-Turn'' Transactions
Q.4. In 2008, Treasury revoked authorization for U.S. 
depository institutions to process so-called ``U-Turn 
transactions'' involving Iran, which prevented offshore foreign 
bank customers from processing dollar-denominated transactions 
through their bank's correspondent accounts in the United 
States. The revocation was necessary on both nonproliferation 
and anti-money laundering grounds.

   LHow will ``U-Turn transactions'' be handled by your 
        Office in the aftermath of the Iran Deal?

A.4. The Joint Comprehensive Plan of Action (JCPOA) does not 
reinstate the authorization for so-called ``U-Turn 
transactions.'' After Implementation Day, U.S. financial 
institutions will continue to be generally prohibited from 
processing funds transfers that fit the description of ``U-Turn 
transactions,'' because such transactions will continue to 
constitute an unauthorized exportation of services to Iran. 
OFAC will continue to take enforcement action in response to 
apparent violations of the Iran Transactions Sanctions 
Regulations (ITSR) by U.S. persons and other persons who 
process unauthorized Iran-related transactions to or through 
the United States.
Beneficial Ownership
Q.5. The 2015 National Money Laundering Risk Assessment 
identifies as a main vulnerability the creation of corporate 
vehicles that do not have accurate beneficial ownership 
information.
    Treasury currently has a proposal to obtain beneficial 
ownership information through the Employer Identification 
Number system at the IRS. This proposal appears to require 
significant resources from an already overburdened IRS.

   LIn your opinion, how will this proposal be 
        effective?

   LWill you commit to working with your authorizing 
        Committee and regularly informing the Committee on any 
        further developments related to beneficial ownership 
        concerns?

A.5. Increased transparency, including the availability of 
beneficial ownership information to law enforcement, is an 
essential component of the United States' broader financial 
transparency strategy, which aims to curb criminal activity.
    Under current law, most entities formed in the United 
States must request an Employer Identification Number (EIN) 
from the Internal Revenue Service to open a bank account or for 
tax reasons. Entities applying for an EIN must include 
information about the individuals who are responsible parties 
for the entity. The definition of the responsible party of an 
entity for Federal tax purposes is similar to the anti-money 
laundering/counter terrorism financing (AML/CTF) definition of 
the beneficial owner of a private banking account at a 
financial institution. Therefore, the responsible party of an 
entity for Federal tax purposes will generally be considered a 
beneficial owner of a private banking account nominally owned 
by the entity for AML/CTF purposes.
    Our proposal would leverage responsible party information 
that is in most cases already being collected by the IRS, but 
authorizing the IRS to provide law enforcement with better 
information about beneficial owners of companies formed in the 
United States. Because most legal entities formed in the United 
States already obtain an EIN, we expect the incremental burden 
on the IRS of additional applications for EINs to be minimal. 
The Department of Justice has indicated that making such 
information more readily available would advance money 
laundering and other financial crime investigations.
    If confirmed, I would work closely with this Committee, and 
other relevant committees, on all efforts to combat money 
laundering and terrorist financing, including on work to 
enhance the transparency of legal entities such as the 
Administration's beneficial ownership proposal.
                                ------                                


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR VITTER FROM ADAM J. 
                             SZUBIN

Lifting of Sanctions
Q.1. Your position is responsible for executing the dual 
mission of combating terrorist financing and money laundering 
while overseeing enforcement of the Nation's constantly 
evolving sanctions programs. Based upon previous Administration 
statements and available information Iran has not been 
determined to have ceased supporting international terrorism or 
meet any of the other requirements for termination of 
Comprehensive Iran Sanctions, Accountability and Divestment Act 
(CISADA). As a member of the intelligence community, in your 
opinion has Iran not satisfied the conditions set out by the 
CISADA law that would terminate the application of that law?

A.1. The United States will not waive, lift, or seek to 
terminate any secondary sanctions provision under the 
Comprehensive Iran Sanctions, Accountability, and Divestment 
Act of 2010 (CISADA) as part of the sanctions relief under the 
Joint Comprehensive Plan of Action (JCPOA). To be clear, the 
Administration will continue to enforce the sanctions under 
CISADA, including those sanctions under Section 104(c) that 
apply to money laundering, transactions with the IRGC, and any 
transaction conducted or facilitated for persons designated in 
connection with Iran's support for terrorism or proliferation 
of weapons of mass destruction or their means of delivery. On 
Implementation Day, certain Iran-related designated persons 
included in Attachment 3 to Annex II of the JCPOA will be 
removed from the List of Specially Designated Nationals and 
Blocked Persons (SDN List), meaning that secondary sanctions 
under CISADA Section 104(c) will no longer attach to 
transactions with those persons; however, none of these persons 
has been designated in connection with Iran's support for 
terrorism.
    We will continue to vigorously enforce all U.S. sanctions 
targeting Iran's support for terrorism, human rights abuses, 
regional destabilization, and Iran's ballistic missile program. 
We will retain our sanctions authority, including under CISADA, 
to target foreign financial institutions that conduct 
significant financial transactions with Iran-related designated 
persons--including those designated in connection with Iran's 
support for international terrorism.

U.S. Hostages
Q.2. You helped assemble and enforce the most comprehensive 
sanctions architecture against the world's leading state 
sponsor of terrorism. Were you ever consulted in the decision 
or issue of the American hostages being held in Iranian jails 
to the lifting of sanctions against Iran as part of the Iran 
Nuclear Agreement negotiations?

   LDo you support the decision to not conjoin the two 
        negotiations?

   LDid you ever advocate withholding certain sanctions 
        relief from the Iranian government to secure the 
        release the U.S. hostages being held in Iran or to 
        their negotiations?

A.2. The negotiations were about one issue and one issue only: 
addressing Iran's nuclear program. The Administration did not 
want to tie the fate of American citizens to a political 
negotiation that it knew might or might not succeed. The 
Administration will continue to press for the release of Saeed 
Abedini, Amir Hekmati, and Jason Rezaian, and for Iran's help 
in locating Robert Levinson.
Funding and Resource Constraints
Q.3. There is previous documented resource, funding, and 
operational needs related to the U.S. and international 
agencies ability to properly ensure appropriate oversight of 
matters related to this agreement, including: geographic, 
technical, and other limitations that might undermine the 
ability to determine whether Iran is conducting covert or 
clandestine nuclear activities. Additionally, according to 
available information, including a 2014 Department of Treasury 
Foreign Assets Control Federal Employee Viewpoint Survey 
(enclosed for the record), only 37 percent of Terrorism and 
Financial Intelligence (TFI) and just 28 percent of OFAC 
respondents said there were sufficient resources for the 
mission. Additionally, the Office of Inspector General 
Department of the Treasury has previously reported that OFAC 
specifically has encountered insufficient resources to 
accomplish the mission it is tasked to do, including reports by 
OFAC personnel that OFAC does not have sufficient resources to 
handle increasing case workload. How has OFAC addressed this 
resource issue?

Q.3.a. As OFAC Director for roughly 7 years, how does OFAC plan 
on addressing increased demands and an expanding realm of 
oversight?

A.3.a. OFAC has received additional funding in recent years and 
is today staffed 64 percent above when I began as Director in 
2006. OFAC is also able to address increased demands and 
requirements through the reallocation of internal resources. 
OFAC conducts internal reviews and determines what resources 
can be reallocated to address any new or emerging threats. 
Further, OFAC's assessment is conducted in close collaboration 
with TFI leadership so that additional resources may be 
provided to program offices when available.

Q.3.b. Has TFI and OFAC used all money appropriated?

A.3.b. Yes, TFI and OFAC have obligated over 99 percent of all 
appropriated funds.

Q.3.c. Are other parts of Treasury utilizing TFI's or OFAC's 
appropriations?

A.3.c. TFI appropriations are used for each appropriated TFI 
component office in Departmental Offices, a portion of the 
Treasury attache program, and overall TFI mission-related 
administrative expenses.

Q.3.d. If so, who or where and when has approval for any such 
reallocation of appropriations been provided?

A.3.d. N/A.

Q.3.e. How many FTE's and how many contractors are working 
within or for TFI?

A.3.e. There are currently 414 FTEs and 84 contractors in TFI's 
Departmental Office components, and 340 FTEs and 172 
contractors in TFI's Financial Crimes Enforcement Network.

Q.3.f. How many FTE's and how many contractors are working 
within or for OFAC?

A.3.f. OFAC currently has 207 FTEs and 65 contractors working 
within the office.

Q.3.g. What has been OFAC's vacancy rate in recent years?

A.3.g. OFAC's vacancy rate has ranged between 16 and 27 percent 
at different points in recent years.
State Efforts and Iran Sanctions
Q.4. In recent years, Congress has enacted legislation 
authorizing States to prohibit investments in, or divest assets 
from, Sudan and Iran. The primary targets are companies doing 
business in Iran. This divestment was specifically authorized 
by Congress in 2010 as part of the Comprehensive Iran 
Sanctions, Accountability and Divestment Act, specifically 
Section 202. The laws passed include nonpreemption language. In 
fact, in 2007 President Obama introduced legislation S. 1430, 
Iran Sanctions Enabling Act (introduced as a companion bill 
passed the U.S. House of Representatives on July 31, 2007), to 
authorize State and local governments to direct divestiture 
from, and prevent investment in, companies with investments of 
$20 million or more in Iran's energy sector, companies that 
sell arms to the Government of Iran, and financial institutions 
that extend $20 million or more in credit to the Government of 
Iran for 45 days or more. Do you believe States are obligated 
by the JCPOA to suspend the application of divestment laws 
targeting companies doing business in Iran?

   LBased on the agreement (JCPOA), Iran and the six 
        powers agreed that economic and financial sanctions 
        against Iran will be removed through a Security Council 
        resolution. However, of note is the issue of State law 
        passed in connection with Iran's sponsorship of 
        terrorism. More importantly, the Federal nonpreemption 
        law passed in 2010 remains in effect until terrorism 
        label is removed. In the Administration's own words, 
        this agreement does not address terrorism and provides 
        more funds for Iran's terrorist activities. On July 9th 
        a State Department official stated, ``We are of course 
        aware and concerned that, despite the massive domestic 
        spending needs facing Iran, some of the resulting 
        sanctions relief could be used by Iran to fund 
        destabilizing actions.'' Based on existing law and 
        Iran's ongoing support for terrorism, do you believe 
        States are allowed to continue terrorism related 
        divestment targeting companies doing business in Iran?

A.4. We expect to speak to relevant State and local governments 
about the contours of the JCPOA in order to inform their 
decisions moving forward and to encourage them to take into 
account the changes in U.S. policy reflected in the lifting of 
nuclear-related sanctions under the JCPOA, which will occur 
only after Iran has completed its key nuclear steps. A number 
of States have passed laws regarding investment of public funds 
and State government contracting with companies doing business 
with Iran, in response to the Iranian nuclear program as well 
as other issues, and it is only reasonable that we would inform 
them of Iran's commitments in the JCPOA to roll back its 
nuclear program--and the change to U.S. foreign policy 
reflected in the lifting of nuclear-related sanctions under the 
JCPOA.
    Our JCPOA commitment to take ``appropriate steps'' only 
applies if a law at the State or local level is preventing 
implementation of the specific sanctions relief under the 
JCPOA, which is to be provided only after Iran has taken its 
key nuclear steps. Accordingly, we do not expect to take any 
such action at this time.
Terrorist Groups
Q.5. U.S. policy has long been long been not to recognize a 
difference between a military and political wing of terrorist 
groups such as Hamas and Hezbollah. Do you support a policy 
that changes that long-standing position?

A.5. No, we do not support a change in this policy, and we do 
not see a distinction between the political and military wings 
of terrorist organizations like Hamas and Hezbollah.
Transparency
Q.6. As a member of the intelligence community, if your 
analysis determines a sanctions violation has occurred, but the 
White House or State Department objects to the imposition of 
sanctions for whatever reason, will you commit to notify this 
Committee of your view?

A.6. The Intelligence Community (IC) component of the Treasury 
Department, the Office of Intelligence & Analysis (OIA), 
produces timely, accurate, and objective all-source analysis 
relating to U.S. sanctions programs and contributes to IC-wide 
analytical products and briefings related to such conduct. 
OIA's analysis will continue to be reflected in both IC-wide 
and standalone Treasury products, which are disseminated to 
customers throughout the U.S. Government. I commit to ensuring 
that such products continue to be submitted to Congress as 
appropriate.
    Please note, however, that analytic assessments do not, in 
and of themselves, constitute a determination of a sanctions 
violation. Any such determination must be made against the 
legal threshold of the relevant sanctions authority, and by the 
agency to which the authority is delegated. I can commit that 
TFI's components will exercise their sanctions authorities 
aggressively.
                                ------                                


  RESPONSE TO WRITTEN QUESTIONS OF SENATOR KIRK FROM ADAM J. 
                             SZUBIN

Q.1. At my request, the Congressional Research Service (CRS) 
researched and produced a memorandum that lays out unclassified 
and open-source estimates of how much Iran annually spends to 
fund terrorism and militancy in the Middle East. The CRS memo, 
the full text of which is available on my Web site,\1\ offers 
the following conservative, ``low-ball'' estimates of Iran's 
annual funding to malign actors:
---------------------------------------------------------------------------
    \1\ See Congressional Research Service, ``Iranian Assistance to 
Groups in Yemen, Iraq, Syrian, and the Palestinian Territories,'' 
Research Memo. July 31, 2015, at http://1.usa.gov/1OVPwJK.

 
----------------------------------------------------------------------------------------------------------------
              Iranian Funding Recipient                                 Estimated Annual Funding
----------------------------------------------------------------------------------------------------------------
Hezbollah............................................                                         $100-$200 million
Hamas................................................                                      ``tens of millions''
Syria's Assad regime.................................                                            $6-$15 billion
Shiite Militias in Syria/Iraq........................                              tens-to-hundreds of millions
Houthi Rebels in Yemen...............................                                        ``tens of millions
----------------------------------------------------------------------------------------------------------------

    Source: CRS, ``Iranian Assistance to Groups in Yemen, Iraq, 
Syrian, and the Palestinian Territories,'' Research Memo. July 
31, 2015.

Q.1.a. Please provide the Treasury Department's unclassified 
estimate of how much Iran spent in support to (a) Hezbollah, 
(b) Hamas, (c) Syria's Assad regime, (d) Shiite militias in 
Syria and Iraq, and (e) Houthi Rebels in Yemen in calendar year 
2014?

A.1.a. We are limited in what we can provide in an unclassified 
answer and can provide additional details in a classified 
setting. That said, Iran remains the world's most active state 
sponsor of terrorism, planning terrorist attacks, providing 
lethal aid, and delivering hundreds of millions of dollars per 
year in support to extremist groups across the globe. Hizballah 
and the Asad regime, for example, have received significant 
monetary payments from Iran to fund their brutal activities in 
Syria. And during the past several years, Iranian weapons 
shipments, reportedly destined for Shia militants in Bahrain 
and Huthi rebels in Yemen, have been interdicted by local 
authorities.

Q.1.b. What is the Treasury Department's estimate of how much 
Iran will increase funding to terrorists and militants after 
Iran gets access to over $100 billion in unfrozen assets and 
other forms of sanctions relief under the Joint Comprehensive 
Plan of Action in calendar year 2015 and calendar year 2016?

A.1.b. We will continue to use all of our authorities to combat 
aggressively Iran's support for terrorist groups and other 
destabilizing activities and we will continue to raise the 
costs to Iran of these activities.
    Of Iran's approximately $100 billion in overseas foreign 
reserves, we estimate that, after sanctions relief, Iran will 
be able to access slightly more than half of the amount. That 
is because over $20 billion is dedicated to projects with 
China, where it cannot be freely spent, and tens of billions in 
additional funds are effectively nonperforming loans to Iran's 
energy and banking sector that are unlikely to be repaid, at 
least not in the next few years.
    This likely explains why recent statements by Iranian 
officials, including the CBI Governor and Iran's Economy 
Minister, have suggested that liquid assets available to the 
central bank may even be as low as $30 billion. And Iran will 
likely need a significant portion of these remaining funds to 
finance pent-up import demand, unify the official and 
unofficial exchange rates, and maintain an adequate foreign 
exchange buffer against future external shocks.
    Our sanctions, which we imposed together with the 
international community, have exacted a major toll on Iran's 
economy. Iran needs at least half a trillion dollars to meet 
pressing investment needs and government obligations, including 
$100 billion to satisfy government obligations, such as 
unfunded State and military pensions and debts to the domestic 
banking sector; $100 billion to complete needed infrastructure 
projects; and $170 billion to develop oil and gas potential and 
replace lost capacity, among other costs. Moreover, the Iranian 
people--and its leadership--are desperate to see the economic 
benefits of a deal. Iranian President Hassan Rouhani was 
elected on a platform of economic revitalization and faces a 
political imperative to live up to his promises. Notably, Iran 
has used the funds released under the interim JPOA to buy gold 
and prop up its currency.
    It is also important to note that Iran's ability to support 
terrorism relies less on financial resources, and more on 
military and other political influence since terrorism and 
Iran's other malign regional activities are, unfortunately, not 
expensive. The constraints on greater Iranian activities in the 
region are primarily nonfinancial.

Q.2. I have introduced with Senator Robert Menendez the Iran 
Sanctions Relief Oversight Act of 2015 (S. 1682), a bipartisan 
bill to reauthorize the Iran Sanctions Act of 1996 (Public Law 
104-172), which expires at the end of 2016, for 10 additional 
years.
    On September 17, 2015, you told this Committee ``the 
penalties that are set out in the Iran Sanctions Act are then 
referenced in a lot of these other [Iran sanctions] statutes 
I'm talking about, and that penalty structure is a very 
meaningful one.''
    That said, you and other Administration officials have also 
repeatedly told U.S. lawmakers that it is ``premature to bring 
up the sunset, the renewal, until we get to that sunset 
period'' to bring up the reauthorization of the Iran Sanctions 
Act of 1996.

   LWhile the Administration alleges it is 
        ``premature'' to renew ``very meaningful'' penalty 
        structure of the Iran Sanctions Act of 1996 right now, 
        does the Administration, as a matter of long-term 
        policy, support the basic principle of reauthorizing 
        the Iran Sanctions Act before the law expires on 
        December 31, 2016? I request that any answer you 
        provide begin with a ``yes'' or a ``no.''

A.2. The Administration's view is that it is premature to renew 
a statute that does not expire for another 15 months. We agree 
that it is critical to maintain sanctions leverage to ensure 
the threat and force of snapback.

Q.3. Consider a hypothetical scenario in which a foreign 
financial services provider pools U.S. dollar-denominated bond 
payments on behalf of the Islamic Republic of Iran into that 
financial services provider's correspondent account at a U.S. 
bank in New York. As each cash payment from a bond issuer to 
Iran enters the correspondent account in New York of the 
foreign financial services provider, that financial services 
provider makes a book entry at its overseas home office to 
credit an equal amount to the Central Bank of Iran. The foreign 
financial service provider then alleges that, at the end of 
this book-entry process, Iran's U.S. dollars in the New York 
account have been moved overseas and no longer exist in the New 
York account.

   LDoes this theoretical book-entry system violate the 
        regulations of the Treasury Department's Office of 
        Foreign Assets Control (OFAC) prohibiting the 
        exportation of financial services to Iran?

   LIn this hypothetical scenario, if the U.S. bank 
        were aware that it received payments from bond issuers 
        for Iran's benefit after Iran's assets were blocked by 
        Executive Order 13599, would the U.S. bank have been 
        required to block those payments?

   LIf the payments from bond issuers were received by 
        the U.S. bank after Iran's assets were blocked by 
        Executive Order 13599, could the foreign financial 
        institution circumvent the block through this book-
        entry system?

   LDo not Executive Order 13599 and the OFAC 
        regulations exist specifically to prevent Iran from 
        availing itself of the U.S. financial markets? Is this 
        theoretical book-entry system a loophole, or is the 
        described conduct illegal?

   LAdditionally, what differentiates such a system of 
        book entries from the hawala networks that the United 
        States has criminally prosecuted in the past?

A.3. Answers to your questions would depend on the specific 
facts and circumstances at issue, which cannot be addressed 
fully in a hypothetical situation. As a general matter, many 
financial institutions and companies transfer funds between 
internal ledger accounts and customer accounts (and vice versa) 
in their daily operations. This is an ordinary process by which 
financial institutions allocate incoming credits to their 
customers; make payments on behalf of customers; manage cash 
positions on their correspondent accounts; and anticipate end-
of-day balances. For companies, this process is used to 
allocate credits on account-to-account receivables and manage 
the cash-flow for their account payables.
    In general, processing a transaction involving an Iranian 
person (i.e., individual or entity) to or through the United 
States would be a prohibited exportation of services from the 
United States to Iran, assuming the transaction did not fall 
within a statutory exemption or was not authorized by OFAC. 
Were such a violation to occur, OFAC would, as it would with 
any apparent sanctions violation, take an appropriate response 
using the standards set forth in its Economic Sanctions 
Enforcement Guidelines (found in Appendix A to 31 C.F.R. Part 
501). Among the factors that OFAC would consider are whether 
the person (including a financial institution) had actual 
knowledge or reason to know that the conduct giving rise to an 
apparent violation took place, as well as any willfulness or 
recklessness in violating, attempting to violate, conspiring to 
violate, or causing a violation of the law. OFAC's ultimate 
enforcement response could range from a finding that no action 
is warranted to the imposition of a civil monetary penalty and 
referral for criminal prosecution.
    All U.S. persons, including U.S. financial institutions, 
are required to comply with the regulations and Executive 
orders administered by OFAC. In general, U.S. financial 
institutions implement a risk-based approach in developing and 
implementing OFAC compliance programs in order to interdict or 
otherwise identify customers, transactions, or other property 
that they are required to block or reject in accordance with 
U.S. sanctions laws.
    As demonstrated in recent years, OFAC and other Federal and 
State government agencies have taken aggressive action against 
attempts to circumvent U.S. sanctions laws--particularly with 
respect to transactions processed to, through, or within the 
United States--and we will continue to do so moving forward.

Q.4. Between 2008 and 2012, Clearstream received approximately 
$1.6 billion in interest and principal payments on bonds 
beneficially owned by Bank Markazi (the ``Markazi Payments'') 
in an account that Clearstream held at JPMorgan in New York.\2\
---------------------------------------------------------------------------
    \2\ Clearstream admitted to a Federal court that it processed $1.6 
billion worth of assets through its JPMorgan account in New York, that 
those assets were beneficially owned by Bank Markazi, and that it 
attempted to move those assets from New York to Luxembourg via book 
entries. See Peterson v. Islamic Republic of Iran, No. 13-9195 (KBF), 
DE 166 at 4-5 (S.D.N.Y. Feb. 20, 2015).

   LDid regulations of the Treasury Department's Office 
        of Foreign Assets Control (OFAC) prohibit Clearstream 
        from crediting those payments to any account, from 
        assuming ownership of the Markazi Payments, or from 
        otherwise moving those assets from the JPMorgan 
---------------------------------------------------------------------------
        account?

   LBy crediting an account located in Luxembourg 
        simultaneously with Clearstream's receipt of the 60 
        Markazi Payments that it received between 2008 and 
        2012,\3\ did Clearstream illegally export services from 
        the United States to Iran in violation of OFAC 
        regulations?
---------------------------------------------------------------------------
    \3\ Id.

   LAre these ``book entry'' transfers legally 
        impossible under OFAC regulations such that the Markazi 
        Payments remain in Clearstream's control in the 
        JPMorgan account in New York? Or has Clearstream 
        discovered a means to legally bypass sanctions 
---------------------------------------------------------------------------
        administered by OFAC?

   LAre the Markazi Payments that were present in the 
        JPMorgan account in New York (by operation of law or 
        otherwise) after the signing of Executive Order 13599 
        blocked?

A.4. In January 2014, OFAC announced a $152 million agreement 
with Clearstream Banking, S.A. (Clearstream), of Luxembourg, to 
settle its civil liability for apparent violations surrounding 
Clearstream's use of its omnibus account with a U.S. financial 
institution as a conduit to hold securities on behalf of the 
Central Bank of Iran. With respect to conduct that may have 
occurred outside of this case, Treasury does not comment on 
specific alleged activities by a particular individual, 
including whether or not any enforcement action may be 
appropriate or pending.
                                ------                                


  RESPONSE TO WRITTEN QUESTION OF SENATOR TOOMEY FROM ADAM J. 
                             SZUBIN

Q.1. Many States, including Pennsylvania, have enacted laws 
that impose their own sanctions on Iran. These laws were 
formulated in accordance with the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act (CISADA) and were explicitly 
authorized by Congress in 2010.

   LIn your view, do States have any legal obligation 
        under the JCPOA to suspend the application of their own 
        divestment sanctions with respect to companies doing 
        business with Iran?

   LWould you support efforts by the Administration to 
        compel a change in the behavior of State and local 
        governments?

   LSecretary Kerry said that the Administration would 
        ``actively encourage'' States to lift their sanctions. 
        How do you interpret his intent to ``actively 
        encourage?''

A.1. We have not made any commitments in the JCPOA that would 
require States to change their existing Iran-related divestment 
and procurement laws.
    Rather, we expect to speak to relevant State and local 
governments about the contours of the JCPOA in order to inform 
their decisions moving forward and to encourage them to take 
into account the changes in U.S. policy reflected in the 
lifting of nuclear-related sanctions under the JCPOA, which 
will occur only after Iran has completed its key nuclear steps. 
A number of States have passed laws regarding investment of 
public funds and State government contracting with companies 
doing business with Iran, in response to the Iranian nuclear 
program as well as other issues, and it is only reasonable that 
we would inform them of Iran's commitments in the JCPOA to roll 
back its nuclear program--and the change to U.S. foreign policy 
reflected in the lifting of nuclear-related sanctions under the 
JCPOA.
    Our JCPOA commitment to take ``appropriate steps'' only 
applies if a law at the State or local level is preventing 
implementation of the specific sanctions relief under the 
JCPOA, which is to be provided only after Iran has taken its 
key nuclear steps. Accordingly, we do not expect to take any 
such steps at this time.
                                ------                                


  RESPONSE TO WRITTEN QUESTIONS OF SENATOR SASSE FROM ADAM J. 
                             SZUBIN

Q.1. Mr. Szubin, in August you appeared before this Committee 
alongside Undersecretary of State Sherman, and the two of you 
testified that the IRGC's ``business empire,'' including the 
``companies it controls, that it's deriving revenue from will 
remain under sanctions.'' During the same hearing, however, 
former Deputy National Security Advisor for Combatting 
Terrorism Juan Zarate testified that the IRGC will benefit 
immediately and deeply from the deal because they control much 
of Iran's economy, and use their control to ``profit, 
strengthen its hand, and repress internal threats to the 
regime.'' I'd like to explore these divergent perspectives with 
you.
    Is Mr. Zarate wrong in assessing that the IRGC will 
directly benefit from the lifting of sanctions under the JCPOA?

A.1. Actually, many hardliners in Iran, including senior 
officials in the IRGC, have opposed the negotiations and 
conclusion of the JCPOA, which they see as weakening their 
influence in Iran. Furthermore, the United States is not 
providing relief to the Islamic Revolutionary Guard Corps 
(IRGC), the IRGC-Qods Force (IRGC-QF), or their subsidiaries as 
part of the JCPOA. Secondary sanctions will also remain in 
place targeting non-U.S. persons who knowingly facilitate 
significant financial transactions with or provide material 
support to any of the more than 200 Iran-related individuals 
and entities that remain on OFAC's Specially Designated 
Nationals and Blocked Persons List, including IRGC-linked 
companies operating in significant sectors of the Iranian 
economy. Foreign companies and investors pursuing business 
opportunities in Iran under the terms of the Joint 
Comprehensive Plan of Action (JCPOA) will need to continue due 
diligence efforts to avoid engaging in conduct that remains 
sanctionable under U.S. legal authorities, even after 
Implementation Day.

Q.2. The President's National Security Advisor has admitted 
that sanctions relief will directly fund Iran's ``bad 
behavior;'' but, you have testified that the IRGC will not 
benefit from sanctions relief. How do you explain this 
discrepancy?

A.2. Iran's ability to support terrorism and engage in other 
malign activities depends less on financial resources and more 
on military and other political influence. Even with 
comprehensive U.S. and European sanctions in place, Iran has 
been able to continue support for regional proxies engaged in 
destabilization and other malign activities. The constraints on 
greater Iranian activities in the region are primarily 
nonfinancial. Nonetheless, we will continue to raise the costs 
on Iran for engaging in these activities. We will retain all 
the legal authorities necessary to aggressively combat these 
malign activities, and we are intensifying our collaboration 
with Israel and the Gulf States to better track support 
networks and to put them out of business.

Q.3. AEI's Critical Threats Project identifies at least 31 
organizations and individuals who support the IRGC and who will 
receive sanctions relief under the JCPOA. How can you then, 
claim that the IRGC will not benefit from sanctions relief?

A.3. The AEI Critical Threats Project contains several 
inaccuracies regarding the JCPOA. First and foremost, the 
United States is not providing sanctions relief to the IRGC, 
the IRGC-QF, or their subsidiaries as part of the JCPOA. Our 
sanctions on the IRGC and these related entities will remain, 
including powerful secondary sanctions that can be applied to 
foreign persons, including financial institutions, who transact 
with these designated persons.
    EU sanctions relief will include the parts of the IRGC in 
the late stages of the JCPOA, but some IRGC individuals and 
entities will remain sanctioned in the EU, including IRGC-Qods 
Force, IRGC Commander Mohammad Ali Jafari, and IRGC-Qods Force 
Commander Qassem Soleimani. Notwithstanding the relief that the 
EU will be providing to parts of the IRGC, our secondary 
sanctions will remain a powerful deterrent to anyone 
considering doing business with an IRGC-related entity or 
person whom the EU is delisting.

Q.4. How much control over a company must the IRGC exercise 
before you will admit it is part of the group's ``business 
empire?''

A.4. We have designated the IRGC under various authorities 
relating to, among other malign activities, ballistic missiles 
and human rights violations. These authorities allow Treasury 
to designate any person determined to be owned or controlled by 
a designated person. We will continue to investigate the IRGC 
and its fronts and aggressively target them for designation. In 
addition, OFAC's public guidance provides a bright line: 
Entities that are 50 percent or more owned by one or more 
blocked persons, such as the IRGC, are considered blocked, 
regardless of whether they are included on the SDN List. OFAC's 
guidance further urges caution when considering a transaction 
with entities that are not blocked persons but in which one or 
more blocked persons have a significant ownership interest that 
is less than 50 percent or which one or more blocked persons 
may control by means other than a majority ownership interest.

Q.5. Will sanctions remain on every company that sends any 
revenue to the IRGC?

A.5. The United States is not providing relief to the IRGC, the 
IRGC-QF, or its subsidiaries, including key revenue generators 
such as Khatam Ol Anbia, one of a number of major IRGC firms 
that will remain blocked. The sanctions that will remain in 
place include powerful secondary sanctions that can be applied 
to foreign persons that facilitate a significant transaction 
with the IRGC. In addition, we retain all of our authorities to 
designate persons acting for or on behalf of, or providing 
support to, the IRGC, and we will use these authorities to 
aggressively enforce sanctions on the IRGC.

Q.6. Will any sanctions--U.S., EU, or UN--be lifted from 
Iranian General Qassem Suleimani, commander of the IRGC's Qods 
Force at any time under the JCPOA?

A.6. No. The JCPOA does not relieve U.S. sanctions on IRGC-QF 
Commander Qasem Soleimani. Furthermore, the JCPOA provides no 
relief for the EU sanctions related to terrorism and Syria 
imposed on IRGC-QF Commander Qasem Soleimani.
    We will continue to have significant unilateral authorities 
to counter Soleimani and the rest of the IRGC. These 
authorities include powerful secondary sanctions that will 
apply to foreign individuals and entities, including foreign 
financial institutions that knowingly engage in significant 
transactions with persons such as Soleimani that remain on our 
SDN List.

Q.7. The National Iranian Oil Company (NIOC) has previously 
been identified as an ``agent'' or ``affiliate'' of the IRGC 
and yet, they will be receiving sanctions relief under the 
JCPOA. Is the NIOC still in any way connected with the IRGC 
and, if so, why is it getting relief?

A.7. The affiliation between NIOC and the IRGC has changed over 
time. For example: In 2013, IRGC Brigadier General Rostam 
Qasemi was replaced as the head of Iran's Ministry of 
Petroleum, which owns NIOC, by Bijan Namdar Zangeneh, who had 
previously held that post from 1997 to 2005. In light of 
current circumstances, it is most appropriate to categorize 
NIOC alongside other major economic firms and Government of 
Iran entities.
                                ------                                


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR COTTON FROM ADAM J. 
                             SZUBIN

Foreign Subsidiary Licensing
Q.1. The Administration has repeatedly told Congress that 
``primary'' sanctions will remain intact and that the embargo 
on U.S. persons conducting business with Iran will remain in 
place for the foreseeable future. Does that still hold?

A.1. Yes. The broad U.S. embargo that prohibits U.S. persons 
from engaging in most transactions or dealings with Iran, as 
implemented in the Iranian Transactions and Sanctions 
Regulations (ITSR), 31 CFR Part 560, will remain as is, with 
three discrete exceptions. Specifically, once the International 
Atomic Energy Agency (IAEA) has verified that Iran has 
completed its nuclear steps under the JCPOA, the U.S. Treasury 
Department's Office of Foreign Assets Control (OFAC) will issue 
specific licenses that provide limited relief from the 
prohibitions of the ITSR for exports and leasing to Iran of 
commercial passenger aircraft, parts, and services for civil 
end use, a general license for imports into the United States 
of Iranian-origin carpets and foodstuffs, and a general license 
for activities involving Iran by non-U.S. entities that are 
owned or controlled by U.S. persons that are consistent with 
the JCPOA and applicable U.S. laws and regulations. Unless 
authorized by OFAC, U.S. persons, including U.S. companies, 
will continue to be broadly prohibited from engaging in 
transactions or dealings with Iran, including the making of 
investments in Iran, importing Iranian-origin goods or 
services, and exporting goods or services to Iran, including 
financial services such as U.S. dollar clearing.

Q.2. Is Sec. 218 of the Iran Threat Reduction Act of 2012, 
dealing with the liability of parent companies for violations 
of sanctions by foreign subsidiaries, intended to be suspended 
or repealed by the JCPOA?

A.2. To give effect to the United States' commitment in the 
JCPOA, OFAC will issue a general license authorizing foreign 
subsidiaries of U.S. persons to engage in certain activities 
involving Iran that are consistent with the JCPOA and U.S. law. 
This general license will only be issued and effective once the 
IAEA confirms that Iran has completed its nuclear-related steps 
under the JCPOA. To the extent a foreign subsidiary's 
activities involving Iran are inconsistent with the scope of 
the OFAC general license, those activities would create 
liability under Section 560.215 of the ITSR (which implements 
the prohibition described in Section 218 of the Iran Threat 
Reduction and Syria Human Rights Act of 2012 (TRA)) for the 
U.S. parent company.

Q.3. That section appears to be compulsory--``the President 
shall prohibit''--and there does not seem to be a corresponding 
waiver authority. Is that your reading as well?

A.3. Section 601 of TRA provides that the President may 
exercise all authorities granted to him under sections 203 and 
205 of the International Emergency Economic Powers Act 
(IEEPA)--which includes licensing authority--to implement 
section 218 of the TRA. The President has delegated the 
relevant authority under sections 218 and 601 of the TRA to the 
Secretary of the Treasury. Treasury expects to exercise that 
authority to give effect to the relevant commitment in the 
JCPOA.

Q.4. Sec. 218 was intended to close what's known as the 
``foreign subsidiary loophole'' in sanctions enforcement. That 
is, foreign subs of U.S. persons must be held to the same 
standard as U.S. persons with respect to Iran; thus, if an 
activity is not permitted under OFAC ``primary'' sanctions, 
i.e., current regulations, for a U.S. person to conduct a 
transaction with Iran, then it follows that neither can the 
foreign sub conduct the same transaction with Iran. Is that 
correct?

   LIf the President intends to license foreign subs, 
        then logic and current law would hold that he would 
        have to also license the same transactions for U.S. 
        persons. Is that correct?

   LHow would the President purport to license 
        transactions as obligated in the JCPOA (Annex II  
        5.1.2), which Congress expressly forbade in the Threat 
        Reduction Act and which OFAC has correctly interpreted 
        in regulatory guidance (31 CFR 560.215)?

A.4. Under Sec. 218 of the TRA, as implemented in 31 CFR Sec.  
560.215, a foreign entity that is owned or controlled by a U.S. 
person (a ``U.S.-owned or -controlled foreign entity'') is 
prohibited from knowingly engaging in any transaction that 
would be prohibited under the ITSR if undertaken by a U.S. 
person (including a U.S. parent company). However, if Iran 
completes all of its nuclear steps, U.S.-owned or -controlled 
foreign entities will be licensed to engage in certain 
activities with Iran that are consistent with the JCPOA and 
U.S. law. As noted above, section 601 of the TRA authorizes the 
President to exercise all authorities granted to him under 
sections 203 and 205 of IEEPA--which includes the authority to 
license otherwise prohibited conduct--to implement section 218 
of the TRA. Nothing in the JCPOA or U.S. law requires that a 
general license extended to U.S.-owned or -controlled foreign 
entities also be extended to U.S. persons, and in fact U.S. 
sanctions programs typically do not apply to the activities of 
U.S.-owned or -controlled entities.
Additional Sanctions/Legislation
Q.5. Section 5(b) of the Iran Sanctions Act states that the 
President shall impose sanctions, should any goods services, or 
technology, be provided to Iran, knowing that the provision of 
such would contribute materially to the ability of the ability 
of Iran to ``acquire or develop destabilizing numbers of 
advanced conventional weapons.'' In this context, do you 
support sanctioning Russian entities who provide the S-300 
Iran?

A.5. This Administration opposes the sale by Russia of S-300 
missiles to Iran, and has conveyed that message to Moscow in 
strong terms. Enforcement of Section 5(b) of the Iran Sanctions 
Act is delegated to the Secretary of State, and we respectfully 
refer you to the State Department on its application.

Q.6. To make terrorists and their allies pay for their crimes, 
some have suggested legislation that would require the Justice 
Department's Asset Forfeiture Fund to compensate American 
terror victims with court judgments seized from these same 
terrorists and their enablers. In your opinion, would such 
legislation make it more expensive for terrorist-sponsoring 
states to continue to fund those activities against American 
citizens if they thought we might be able to reach their 
assets?

A.6. Treasury's Office of Terrorism and Financial Intelligence 
(TFI) is committed to effectively advancing the twin objectives 
of safeguarding the U.S. financial system against illicit use 
and combating terrorism and its facilitators. To this end, TFI 
administers Treasury's authorities to block terrorist assets, 
depriving terrorist organizations of needed funding and making 
their evil acts increasingly expensive and difficult to 
execute. Depriving terrorists and their patrons of funds 
increases the costs of their activity, regardless of the 
disposition of the funds. TFI is unwavering in its commitment 
to combat terrorism and its facilitators and will continue to 
use Treasury's powerful authorities both responsibly and 
aggressively.