[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EVALUATING THE EFFECTIVENESS
OF U.S. SANCTIONS PROGRAMS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON MONETARY
POLICY AND TRADE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 30, 2017
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-62
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
31-293 PDF WASHINGTON : 2018
HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Kirsten Sutton Mork, Staff Director
Subcommittee on Monetary Policy and Trade
ANDY BARR, Kentucky, Chairman
ROGER WILLIAMS, Texas, Vice GWEN MOORE, Wisconsin, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan BILL FOSTER, Illinois
ROBERT PITTENGER, North Carolina BRAD SHERMAN, California
MIA LOVE, Utah AL GREEN, Texas
FRENCH HILL, Arkansas DENNY HECK, Washington
TOM EMMER, Minnesota DANIEL T. KILDEE, Michigan
ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California
WARREN DAVIDSON, Ohio CHARLIE CRIST, Florida
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
C O N T E N T S
----------
Page
Hearing held on:
November 30, 2017............................................ 1
Appendix:
November 30, 2017............................................ 31
WITNESSES
Thursday, November 30, 2017
Billingslea, Hon. Marshall, Assistant Secretary for Terrorist
Financing, U.S. Department of the Treasury..................... 4
Smith, John E., Director, Office of Foreign Assets Control, U.S.
Department of the Treasury..................................... 6
APPENDIX
Prepared statements:
Billingslea, Hon. Marshall................................... 32
Smith, John E................................................ 37
Additional Material Submitted for the Record
Huizenga, Hon. Bill:
Washington Post article entitled, ``He ran North Korea's
secret moneymaking operation. Now he lives in Virginia.''.. 46
Billingslea, Hon. Marshall and Smith, John E.:
Written responses to questions for the record submitted by
Representative Sherman..................................... 50
EVALUATING THE EFFECTIVENESS
OF U.S. SANCTIONS PROGRAMS
----------
Thursday, November 30, 2017
U.S. House of Representatives,
Subcommittee on Monetary Policy and Trade,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:24 p.m., in
room 2128, Rayburn House Office Building, Hon. Andy Barr
[chairman of the subcommittee] presiding.
Present: Representatives Barr, Williams, Huizenga,
Pittenger, Hill, Mooney, Davidson, Tenney, Hollingsworth,
Moore, Foster, Sherman, and Crist.
Chairman Barr. The committee will come to order. Without
objection, the Chair is authorized to declare a recess of the
committee at any time, and all members will have 5 legislative
days, within which to submit extraneous materials to the Chair
for inclusion in the record.
This hearing is entitled, ``Evaluating the Effectiveness of
U.S. Sanctions Programs.'' I now recognize myself for 5 minutes
to give an opening statement.
I am pleased to welcome our colleagues and our witnesses to
this subcommittee's hearing on U.S. sanctions. From Iran, to
North Korea, to Russia and Venezuela, sanctions are
increasingly used as an instrument in our foreign policy
toolkit, and Congress must ensure that they be held accountable
for results.
This hearing will examine major sanctions programs as we
seek to evaluate their effectiveness. Let me highlight three
points that may provide context for this discussion.
First, sanctions are key to bringing about behavioral
change abroad, and this committee has stressed that they should
be designed accordingly. That means calibrating sanctions, and
sanctions relief, based on specific and achievable actions we
wish to see from a foreign actor. Tailoring sanctions in this
way is especially important for secondary sanctions, given how
banking restrictions tend to have broader and less predictable
effects than primary measures.
In October, the Financial Services Committee reported, and
the full House overwhelmingly passed the Otto Warmbier North
Korea Nuclear Sanctions Act, a piece of legislation that I was
proud to sponsor with our Ranking Member, the gentlelady from
Wisconsin. The bill would impose financial sanctions targeting
every area of North Korea's economy, including all petroleum
imports, and any deployment of laborers abroad. This week's
test launch by the DPRK (Democratic People's Republic of Korea)
of an ICBM (intercontinental ballistic missile) that can reach
any part of the United States underlines why maximum pressure
is needed.
Our bill outlines the principles that the majority and
minority here consider essential for the use of secondary
sanctions, not only with respect to North Korea, but other
countries as well. Namely, we should strike with as much
strength as possible, provide the President with flexibility,
and link the termination of sanctions to a narrow set of
realistic objectives.
This approach is distinguished from what we might call,
quote, ``symbolic sanctions,'' unquote; that is, devoting
scarce resources to designations with no real impact on our
foreign policy objectives, or tying sanctions to a list of
outcomes that no one expects to emerge in the foreseeable
future.
For sanctions to retain their credibility, we must guard
against such half measures. If sanctions are akin to
antibiotics, then we should ask what indiscriminate use will do
for antibiotic resistance. At the same time, if we want to
preserve the trust that the world continues to hold in the U.S.
financial system, we must think clearly about what it means to
restrict access to that system, and communicate with equal
clarity so that others understand the rationale that governs
both the imposition and lifting of our sanctions.
The second point to underscore is the need for continuous
engagement with Congress, when the Executive chooses to wield
its sanctions' powers. As we know, the Executive possesses
broad authorities under the International Emergency Economic
Powers Act (IEEPA). What may be less well-known is that IEEPA
lays out explicit provisions for regular Congressional
consultations and reports, so that these authorities are
exercised with appropriate oversight.
The committee would encourage our witnesses to examine
whether the Office of Terrorism and Financial Intelligence
(TFI) is upholding the letter and spirit of these provisions.
TFI has been the recipient of bipartisan goodwill, and using
emergency powers accountably will help ensure that such
goodwill is sustained.
This brings me to point number three. As our country
becomes more reliant on economic sanctions to carry out its
foreign policy, the Treasury Department will be increasingly
called upon to make its voice heard on the substance of that
policy.
We have already seen bureaucratic changes that reflect the
shift. In August, for instance, the President signed into law
the Countering America's Adversaries Through Sanctions Act
(CAATSA), which included the secretary of the Treasury as a
member of the National Security Council.
In light of this trend, we should expect that Congress will
look more and more to the department, and particularly, to TRI,
not only to implement sanctions, but to help shape their goals,
scope, and strategy, and to answer for sanctions' shortcomings,
if they fail to meet their objectives. Of course, Treasury
undertakes these things to a certain extent already, but its
accountability will only grow with its prominence in these
debates.
I want to thank our witnesses for testifying today, and
look forward to working with them so that our sanctions
programs are coherent, realistic, and impactful.
The Chair now recognizes the Ranking Member of the
subcommittee, the gentlelady from Wisconsin, Gwen Moore, for 5
minutes for an opening statement.
Ms. Moore. Thank you so much, Mr. Chairman. Before I begin
my comments, let me thank our guests from the Treasury
Department. I always look forward to hearing from these
experts, and information is a powerful tool.
Let me begin by thanking our Chairman for calling this
hearing, and as he indicated before, I am a part of the
bipartisan work on the North Korea sanctions; so proud to have
worked on that in a bipartisan matter. I do believe that we
have passed a strong bill, and I certainly hope that the
Administration does the hard work of implementing this bill.
With that said, I can't pretend that I am not concerned
about the general state of United States foreign policy, and
this Administration's commitment to implementing our sanctions
programs. I can tell you that as an American, I think there are
many other people who join me in feeling that we are isolated
and weak, with even the British debating whether or not the
President of the United States is welcome in England. This is
stunning.
My constituents are very concerned about the extent and
depth of the relationships with human rights violators; with
Putin, a relationship that has the President and many of his
cabinet and advisers mired in deepening and widening scandals
relating to Kremlin connections.
I am concerned with reports that the Department of State
eliminated the office of the coordinator for sanctions policy.
We did the hard work in this committee to draft this North
Korea sanctions bill, and I am sure that our witnesses are
aware that the U.S. currently has sanctions against Russia, and
that Congress recently passed further sanctions against Russia.
So it is puzzling to me why the Department of State would
eliminate the office that would coordinate these sanctions
policies. I think you can catch my drift, and perhaps even
empathize with me. Cutting out some people who could help you
all--
I am sure you are also aware that the Administration seems
not to be implementing these Russian sanctions. Forgive me, but
I grew up in a time and era where, as a public school student,
as a little girl, we were diving under our desks, we were so
afraid of Russia.
It is puzzling to me why we are not implementing those
Russian sanctions at this point. I am worried that the
Administration is more interested in implementing the goals of
the Kremlin, and to not have sanctions through the statutory
mandates of this Congress to expand and strengthen the Russian
sanctions. I really am interested in hearing about the
Treasury's efforts to make sure it is implementing
Congressional intent and vigorously enforcing sanctions against
Russia.
I am going to apologize in advance for bowing out of the
meeting somewhat early, because I have a conflict of another
meeting that is extremely important as well. But I do look
forward to hearing your testimony. I will be here to hear your
testimony and answer some of these questions.
Thank you so much, and Mr. Chairman, I yield back.
Chairman Barr. The gentlelady yields back. Thank you for
that opening statement.
Today we welcome the testimony of Marshall Billingslea, the
Assistant Secretary of the Treasury for Terrorist Financing. In
this role, he helps oversee the Administration's efforts in
administering economic sanctions programs globally.
Prior to joining Treasury, Mr. Billingslea served as
Managing Director for Business Intelligence Services at
Deloitte Advisory. He had previously held positions at the
Department of Defense, where he served as Deputy Undersecretary
of the Navy, and Principal Deputy Assistant Secretary of
Defense for Special Operations and Low Intensity Conflict.
Mr. Billingslea has also worked as a NATO Assistant
Secretary General for Defense Investment, and as a staff member
on the Senate Foreign Relations Committee. He is a recipient of
the Defense Medal for Distinguished Public Service.
John Smith is the Director of the Treasury Department's
Office of Foreign Assets Control, OFAC, which is responsible
for administering economic and trade sanctions to advance U.S.
national security and foreign policy goals. Mr. Smith has
previously served as OFAC's Acting Director, Deputy Director,
and Assistant Director.
Prior to joining OFAC, Mr. Smith served as an expert to the
United Nations' Al Qaida and Taliban Sanctions Committee from
2004 to 2007, and as a trial attorney at the U.S. Department of
Justice from 1999 to 2004.
Each of you will be recognized for 5 minutes to give an
oral presentation of your testimony. Without objection, each of
your written statements will be made part of the record.
Mr. Billingslea, you are now recognized for 5 minutes.
STATEMENT OF THE HONORABLE MARSHALL BILLINGSLEA
Mr. Billingslea. Chairman Barr, Vice Chairman Williams,
Ranking Member Moore, and members of the committee, thank you
for inviting me here today to offer testimony on the
effectiveness of sanctions, and to talk about a number of the
matters that you, Chairman, and you, Ranking Member, have
raised in your opening statements.
The Treasury Department has, in my view, pioneered the use
of targeted sanctions as a tool of statecraft, and we are
continually refining how we employ financial pressure. In the
interest of time, I will skip to the bottom line up front,
which is that I believe that there are several reasons why
sanctions are quite effective tools. Chairman, I do actually
agree with the way you laid out the overall context of
sanctions.
But I believe I can name, and I will name numerous examples
in which our sanctions have been effective, and I would like to
provide four specific reasons, or four specific matters which I
think affect the effectiveness of sanctions, when we choose to
employ them.
Now, this Administration has aggressively targeted ISIS
leaders and operatives for their operational and financial
support around the world, and the result has been that we have
engaged--John and OFAC have engaged in over 70 actions against
ISIS leaders, their facilitators, recruiters, and affiliated
money services businesses worldwide.
U.S. and U.N. designations, along with close cooperation
between United States and Iraqi authorities, in particular--in
fact, I just came back from Baghdad a little more than a week
ago--have effectively shut down a number of exchange houses
that were functioning as key nodes for ISIS--or Daesh, as we
might call them and their financial facilitating networks.
Separately, we continue the effort against al Qaida and
other terrorist groups through both unilateral and multilateral
actions. Secretary Mnuchin, as you may know, recently announced
the opening of a rather significant and rather innovative
breakthrough, which is the creation of a multinational
Terrorist Financing Targeting Center, the TFTC, that is housed
in Saudi Arabia.
In conjunction with that announcement, the six Gulf
Cooperation Council member states--so seven of us altogether,
seven nations--imposed sanctions on a network of al Qaida and
ISIS financiers and weapons traffickers in Yemen. This was, in
fact, one of the biggest multinational designations ever
outside of the United Nations.
We have also targeted, and I am sure you will hear more
about the way we have gone after dozens of North Korean
individuals and entities, including coal companies, banks,
financial facilitators--any revenue that North Korea generates
that can be used to support--or actually, any revenue they
generate, period, is used to support the various weapons
programs that the regime has, and we are determined to cut that
off.
Finally, and I know we will want to talk more about Iran
today. Sanctions were the dominant factor in forcing Iran to
the negotiating table over their nuclear weapons program, and
we are committed, the Administration is committed to combating
Iran's malign behavior around the globe. Even Hezbollah's
leader, Hassan Nasrallah, has acknowledged that their donors
are scared to continue remitting funds as a result of U.S.
sanctions.
Now, I mentioned four specific reasons why I think
sanctions are effective. First is that we employ these against
the backdrop of an international financial system that we are
continuously working to improve to create capabilities to
create standards through the Financial Action Task Force to
cause the international financial system to embrace anti-money
laundering (AML), and countering the financing of terrorism
standards, and to create regimes that are enforceable across
the globe.
This has been a patient and long-standing effort of the
Treasury Department. It is a bipartisan, nonpartisan endeavor
that has stretched across multiple Administrations, and it is
because of this backdrop of driving the creation of these
regimes that we are, in fact, able to cause our partner nations
to work with us, and to embrace and enforce these measures.
In the interest of time, a second reason that sanctions are
so effective is because of the financial diplomacy that goes
with the actions we undertake. A specific Treasury action by
OFAC or by FinCEN (Financial Crimes Enforcement Network) is
often preceded by, and almost always followed up with
engagement by the Treasury and State Departments, with our
allies, our partners in the public and private sectors. As a
general proposition, sanctions are most effective, as the
Ranking Member indicated, when they are implemented
multilaterally.
That said, of course, this Administration, and in fact, no
Administration would hesitate to take action unilaterally to
defend the American people as necessary. But when and where
possible, we do work with other nations to amplify our message,
and drive concerted action.
We, of course, pursue financial diplomacy through a variety
of multilateral and multinational organizations, such as the
United Nations, but I also mentioned the TFTC that was just
established as another example.
I am at time, but simply to summarize the final two
reasons, which I can come back upon, as you wish. The third
reason, and a third important criteria is that we have to be
clear and consistent in our messaging: When we sanction; what
is it that we are seeking to achieve. I would suggest, how we
have approached Venezuela is a good example.
The fourth that influences the effectiveness--and Mr.
Chairman, you mentioned this specifically--is the extent to
which the targeted individual, their finances, do they touch
the international financial system? I would agree with you that
symbolic sanctions probably are not worth the candle, though
there are times and places where that is worthwhile.
Again, I appreciate the chance to appear before the
committee, Mr. Chairman.
[The prepared statement of Mr. Billingslea can be found on
page 32 of the appendix.]
Chairman Barr. Thank you. The gentleman's time is expired.
Director Smith, you are recognized now for 5 minutes.
STATEMENT OF JOHN SMITH
Mr. Smith. Thank you, Chairman Barr, Vice Chairman
Williams, Ranking Member Moore, and distinguished members of
the committee. Thank you for inviting me here to discuss the
important role of sanctions in addressing some of our Nation's
most prominent national security and foreign policy challenges.
As the Director of the Treasury Department's Office of
Foreign Assets Control, or OFAC, I will speak to the sanctions
my office has imposed against supporters of the destabilizing
and provocative actions of governments such as North Korea,
Iran, and Russia, as well as a range of other actors engaged in
conduct antithetical to our Nation's ideals and interests.
When deployed strategically and with precision, sanctions
are a highly effective way of pressuring regimes and malign
actors to change their behavior. These regimes and actors
ultimately rely on funding to operate, and by freezing their
assets, cutting them off from the U.S. financial system, and
restricting their ability to interface in the international
financial system, the choice to them becomes clear: Either
modify your behavior, or accept the isolation and negative
economic effects of our financial blacklists.
One of our highest priorities is targeting the North Korean
regime and its key financial vulnerabilities. This year, OFAC
has issued eight rounds of sanctions related to North Korea,
adding 112 individuals and entities to our Specially Designated
Nationals and Blocked Persons List--what we call the SDN List.
The regime requires revenue to maintain and expand its nuclear
and ballistic missile programs, and we have focused our efforts
on areas where we can have the maximum disruptive impact.
Just last week, OFAC sanctioned several Chinese trading
companies that were responsible for hundreds of millions of
dollars of imports from and exports to North Korea over the
last few years. Earlier this year, we designated a number of
Chinese companies that had imported nearly half a billion
dollars' worth of North Korean coal between 2013 and 2016. That
action, combined with diplomatic pressure and multilateral
sanctions, helped pressure China to announce that it would halt
all coal imports from North Korea, representing a blow to the
regime's revenue generation capabilities.
Iran is another top priority, and since January OFAC has
issued eight tranches of sanctions involving Iran, designating
78 targets around the globe in connection with the Islamic
Revolutionary Guard Corps, the IRGC, and Iran's ballistic
missile program, support for terrorism, human rights abuses,
cyberattacks, transnational criminal activity, and other
destabilizing regional activity. We recently designated the
IRGC, under the Global Terrorism Executive Order, pursuant to
the Countering America's Adversaries Through Sanctions Act, the
CAATSA legislation that you mentioned.
Just last week, we sanctioned an IRGC-Quds Force
counterfeiting network that deceived European suppliers to
procure advanced equipment and materials to print counterfeit
Yemeni bank notes potentially worth hundreds of millions of
dollars.
Another significant priority for OFAC is addressing
Russia's destabilizing activities in Ukraine. This summer, we
continued our regular pattern of sanctions, and designated 38
individuals and entities involved in the ongoing conflict in
Ukraine. More recently, we have been hard at work implementing
requirements and publishing guidance related to the CAATSA
legislation passed by Congress. I want to be clear and
emphasize: The Treasury has fully implemented every CAATSA
requirement delegated to it within the statutory deadlines.
We have also used our sanctions this year to address the
erosion of democracy in Venezuela; disrupt major narcotics
traffickers in Mexico, Colombia, Peru, and Venezuela; increased
pressure on the Assad regime in Syria; denied terrorist groups
like ISIS and Hezbollah the ability to access the U.S.
financial system; and shine a spotlight on various governments
for serious human rights abuses.
We have dedicated the bulk of our resources and attention
on the issues most pressing to our Nation's security. We
greatly appreciate Congress' partnership and continued efforts
to ensure that OFAC and TFI are equipped with adequate tools
and authorities.
However, I will note that our existing powers are
relatively broad, and in order to achieve maximum impact, we
need flexibility in administering and enforcing our sanctions.
Additionally, the increasing Congressional reporting
requirements and statutes with no expiration dates ultimately
draws resources away from our primary sanctions activities.
Thank you, again, for the opportunity to speak with you
today, and I look forward to continuing to work with you and
your staff as we try to maximize the impact of our sanctions.
[The prepared statement of Mr. Smith can be found on page
37 of the appendix.]
Chairman Barr. Thank you. The gentleman's time is expired,
and the Chair now recognizes himself for 5 minutes for
questioning.
Let me just first commend Treasury and the Trump
Administration for abandoning this policy of strategic patience
that has led North Korea to obtaining a nuclear arsenal,
including a hydrogen bomb, and as we saw earlier this week, an
intercontinental ballistic missile capable of reaching the
continental United States, and potentially, a reentry vehicle
for that missile. I would commend Treasury for its eight rounds
of sanctions and designations in North Korea.
However, I do want to read into the record an op-ed that
you probably saw this morning in the Wall Street Journal
entitled, ``Maximum Pressure on North Korea: China and the U.S.
Still Haven't Imposed Toughest Sanctions.'' I will just read
and quote from the article.
Quote, ``the Trump Administration has done more than its
predecessors to thwart North Korea's nuclear progress, but it
is still far from using maximum pressure. It may not work in
the end, but the alternatives are terrible: acquiescence or
war. Wednesday's ICBM test shows Kim is getting closer to his
goal of threatening U.S. cities. So why is the U.S. not using
all the tools it has to stop him?''
So my question is this, to both of you: In a hearing before
the Senate Banking Committee earlier this fall, Treasury
Undersecretary Mandelker stated that the U.N. Security Council
resolutions pertaining to North Korea represent, quote, ``the
floor, not the ceiling.'' That is why, under the House-passed
bill that we were referring to earlier, the North Korean
sanctions bill that was bipartisan, we go beyond those
resolutions to target all oil exports to the DPRK, and all of
its foreign labor.
So the question is this, if the U.N. resolution is truly
just the floor for U.S. policy, what is Treasury doing to
eliminate the petroleum and labor loopholes that are left by
the resolutions, and why should Congress tolerate the same
incremental strategy that has gotten the Kim regime where it is
today? We will start with you, Mr. Billingslea.
Mr. Billingslea. Thank you, Chairman. So obviously, the
U.N. sanctions regime is multinationally crafted, and it
requires the Chinese and the Russians to come along. In fact,
Ambassador Haley at the U.N. reengaged in wake of the recent
launch to drive again the need to further ratchet the pressure
on North Korea for its continuing behavior.
I would say we have actively worked to dry up all of the
different mechanisms by which the North Korean regime obtains
petroleum and other petroleum products, regardless of the fact
that the U.N. Security Council resolution, that they ultimately
did not agree to the U.S. position to shut off all crude oil
imports. They agreed to a reduction in crude, and to a
cessation of oil products.
The number of things that we have done along these lines--
and again, back to my point about, not everything is a
sanction, right? There are a lot of other things TFI, the
Treasury does in the financial diplomatic world that go beyond
the individual discreet sanctions acts. But John is going to be
able to tell you about the very specific sanctions designations
that we have engaged in to target the different exchange
mechanisms by which people were illicitly flowing petroleum
into North Korea.
But on top of that, we have identified the latest evasion
technique that the North Koreans are using, which involves
North Korean oil freighters pulling out into the middle of the
ocean, and linking up with commercial chartered oil tankers to
do ship-to-ship transfers. We have exposed a number of these.
We have gone after their flagging authorities with the various
nations, to yank the flagging authority, to cause the vessel to
have difficulties. We are further investigating the network of
shell and ownership structures that are created to hide the
true ownership of these ships.
On labor, I personally have engaged with a large number of
countries overseas, particularly in the Middle East, to secure
agreement to expel North Korean slave labor from these
countries, and to identify the companies that were being used
to exploit these people.
Those are just two examples of how we are--
Chairman Barr. If I could just jump in there, you did
mention in the testimony about the designation of the four
Chinese trading companies that have conducted business, and the
designations there. But I am sure you are familiar with the
recent report that indicated there are over 5,000 such
companies in China. We just want to know how Treasury can make
a dent in these Chinese firms' business with North Korea if you
are focusing on individual designations, as opposed to these
secondary sanctions on these middlemen front companies.
Mr. Billingslea. The challenge we have is when we see these
press reports and these 5,000 here, 3,000 there. The challenge
is that we have to meet evidentiary standards for the measures
that we take, legal standards. So we do need much more granular
information, so that John can take his actions.
So when we get these leads, we follow them up aggressively.
Chairman Barr. Thank you. My time is expired, and as my
questioning points out, I think as our recently passed House
bill makes clear, we believe there is a need for Treasury to
exhaust all options available, especially in light of this most
recent ballistic missile test.
At this time, I would like to recognize the Ranking Member
for 5 minutes of questioning.
Ms. Moore. Thank you so much, Mr. Chairman. Thank you
again.
One of the most horrific acts that is occurring anywhere on
planet Earth at this point is the ethnic cleansing of the
Rohingya people, who have fled to Bangladesh since late August.
I was wondering, is there any program under the Global
Magnitsky Act that targets the senior-most members of these
Burmese security forces, who likely ordered these rapes, and
murders, and acts of arson. Have you identified any of these
folks? When do we expect to see sanctions announced against
Burma?
Mr. Smith. Thank you, Ranking Member. I am glad you
mentioned the Global Magnitsky Act. We appreciate Congress'
giving us the authority to target human rights abusers and
corrupt actors worldwide. As you mentioned, this authority
gives us the opportunity to target those that are responsible
for such activity, serious human rights abuses, no matter where
they occur. Congress has given a mandate in that legislation,
asking us to report at certain periods, and take action by
certain periods, and the next period comes up in December. I
think the Treasury Department is working to make sure that we
implement this statute fully. It is something--
Ms. Moore. Have you identified any people in Burma?
Mr. Smith. We have not under Global Magnitsky.
Ms. Moore. OK.
Mr. Smith. It is authority that has just been delegated to
us--
Ms. Moore. OK, OK, thank you for that.
I was arrested hanging out with John Lewis--warn some of
the freshmen about him--for protesting at the Sudanese embassy
for crimes that have been committed in Sudan. The president, by
the way, still remains under indictment by the International
Criminal Court for War Crimes, including genocide. We impose
sanctions for human rights violations, and yet we have relaxed
them under this Administration. What did I miss?
Mr. Billingslea. Relaxed--we actually removed them.
Ms. Moore. Removed them. Why?
Mr. Billingslea. Correct. We removed them, by the way, on
the basis of criteria established by President Obama. So
President Obama established five specific criteria against
which the Sudanese would be held accountable.
Ms. Moore. OK, thank you. My time is waning. I am going to
continue on this theme of sanctions and human rights, because I
am confused by what the policy of the Administration is. We
have seen him following Obama's agenda, he is re-imposing
sanctions, strictures against Cuba. He has decided that
Venezuela has become enemy number one because of the
government's role in undermining democratic processes and
institutions.
And yet, we see that he shows a fondness for totalitarian
strongmen around the globe, including the Philippine president,
Duterte, praising the authoritarian leader of Egypt, who had
his political opponents gunned down, and jailed those
dissidents, and the President thinks that they have done a
fantastic job in a very difficult situation. Of course,
defended President Putin against accusations that he has
murdered journalists and dissidents.
So I am wondering why it seems to be such a checkerboard
approach to sanctions. Can you help me sort this out?
Also, what I want to ask you, Mr. Smith, is, sometimes you
can give waivers for--and I want to know if there are any
waivers that we don't know about. You can do it without coming
to Congress, for reducing, relinquishing waivers against
Russia.
Mr. Smith. So thank you for the questions.
With respect to the human rights-related designations, we
have continued to actively target, over the past year, human
rights-related concerns in North Korea, Iran, South Sudan, and
Venezuela, among other programs. So we have continued our focus
on human rights concerns.
In terms of waivers, with respect to Russia--
Ms. Moore. So how does this--yes, OK. Go on.
Mr. Smith. With respect to Russia, I think most of the
waivers that might exist in statutory programs have been
delegated to the State Department under the various
authorities. OFAC can issue particular licenses, and under the
CAATSA legislation, we are notified--
Ms. Moore. OK, and so I have 2 seconds left, very quickly.
My time is expired.
Chairman Barr. Gentlelady's time is expired. Chair now
recognizes the Vice Chairman of the subcommittee, and author of
the Strengthening Oversight of Iran's Access to Finance Act,
the gentleman from Texas, Mr. Williams.
Mr. Williams. Thank you, Chairman Barr, for your important
work on sanctions legislation, most recently, the House passage
of increased North Korea sanctions. Given the overwhelmingly
increased aggression under the Kim regime, this legislation
cannot be timelier.
I would like to also welcome Assistant Secretary
Billingslea and Director Smith to our subcommittee, and thank
them for joining us this afternoon. I appreciate your time, and
I appreciate your expert testimony. America and some of her
most important allies, such as Israel, are under the constant
threat by those who wish to harm us, and the work that both of
you do in the sanctions field helps to keep the bad actors
away. Appreciate that.
Though there are areas where we can improve, I am
specifically encouraged by the current Administration's path
forward in dealing with the world's foremost state-sponsored
terrorism in Iran. After 8 years of flawed policy toward Iran,
culminating with the terrible JCPOA (Joint Comprehensive Plan
of Action), I am encouraged by the President's direction.
So Assistant Secretary Billingslea, thank you for being
here. Iran continues to be extremely concerning to me and those
I represent. We must do all we can to ensure that appropriate
sanctions are enacted to the world's foremost state-sponsor of
terror. To that end, I recently sponsored, as you heard,
Strengthening Oversight of Iran's Access to Finance Act, which
was reported favorably out of this committee, and just
yesterday was introduced by Senator Cruz and Senator Perdue in
the Senate. My legislation will increase Congressional
oversight of aircraft sales to Iran, and their effect on
financial institutions.
So Mr. Secretary, what similar steps can be taken to
further prevent the abuse of the financial system by Iran in
the way that promotes terrorism, human rights abuses, or
assistance to the Assad regime?
Mr. Billingslea. Thank you, Vice Chairman. As you have
said, Iran is the foremost sponsor of terrorism around the
world, and they have used their newfound access to financial
resources to further support terrorism and foment instability
across the Middle East and globally.
The Iranian Quds Force, in particular, is heavily engaged
in destabilization in Syria, in Iraq. They are moving money to
Hezbollah, to Hamas, and to other terrorist organizations.
Obviously, their role in Yemen and the civil war there,
supporting the Houthis, is truly, truly incredible.
Much more needs to be done to constrain Iran's ability to
obtain and move finances to terrorist organizations. That is
why Congressional action under CAATSA with regard to the
Iranian Revolutionary Guard Corps, as the parent organization
of the Quds Force, is a major entity, or set of entities
interwoven throughout the Iranian economy.
One of the things that we have been cautioning our European
allies and others, is to be very careful as you look at doing
business with Iran, because we have sanctioned the IRGC--
actually, the Europeans have as well, and we expect that
extreme caution should be exercised before entertaining any
type of business in that country, particularly when they have
not only no safeguards and no anti-money laundering regime to
speak of, but when they are engaged in outrageous
counterfeiting behaviors that Director Smith mentioned, which
completely fly against all of the norms of the financial
services sector.
Mr. Williams. Thank you. I would also like to further
discuss the tools that the Treasury is utilizing in its fight
against Iran's destabilizing financial activity. In August,
Congress passed new sanctions and legislation, giving the Trump
Administration new tools for the fight against Iran's missile
program, terrorist assistance, and human rights abuses. I
firmly believe that Iran will continue to develop new ways to
work around U.S. and international sanctions to continue their
campaign of terror across the globe.
So another question I have is, how do we maintain pressure
on Iran's leadership and financial institutions, ensuring that
the IRGC and related financial entities do not create loopholes
to avoid these sanctions?
Mr. Billingslea. Quickly, in two ways. I will talk with
one, and then, I think Director Smith on the other.
With regard to pressure on the regime, one of the things
that they have to do is they have to create a legal framework,
and be held accountable for stopping the financing of
terrorism. They do not have sufficient laws in Iran. I don't
know that they would honor those laws, even if they had them.
But they don't have the regime in place, and we ought to insist
that until they do have an anti-money laundering set of laws
that are being enforced, counter measures should be imposed on
their financial sector.
Mr. Smith. I was just going to say, I think we also need to
keep doing what we are doing, and ramping up pressure, exposing
the bad activity where we see it across the board. We are
exposing it wherever we see around the world, no matter what
country it is involved in, no matter what type of company, and
we are exposing the different types, including the
counterfeiting ring that I mentioned earlier.
Mr. Williams. OK. Thank you. I yield my time back.
Chairman Barr. The Chair now recognizes the gentleman from
North Carolina, Mr. Pittenger, for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman. Thank you,
gentlemen, for being with us today. Appreciate your commitment
and your involvement with us.
Director Smith, and I would say to you as well, Mr.
Secretary, would you please discuss with us the tools that you
believe are effective that, at your disposal, that will allow
us to address export controls? I would like to discuss CFIUS
(Committee on Foreign Investment in the United States) as well,
and what modifications should be made, if any, to CFIUS, and
the relevance of that committee, and particularly, as we deal
with nations who have supported our adversaries, and also seek
to acquire assets in our own country. So if you could respond
to that, I would be grateful.
Mr. Smith. Thank you so much for the question. I think it
has been very helpful to have the interest from Congress in
making sure that we have the appropriate tools.
When you ask about the appropriate tools that we can use, I
think the power that Congress has given us, and the oversight
that Congress plays has been a very important role in our
success in being able to go after these types of activities of
concern. The fact that we have the authority to call out these
activities, freeze their assets, prohibit U.S. persons,
wherever they may be, from engaging in this type of behavior,
and then Congress nudging us to add additional designations or
sanctions. For example, with respect to the IRGC, where we had
designated it before, but we added to it under the terrorism
authorities and all its agents, affiliates, and officials
worldwide. That has been a very helpful all power for us to
have.
I think I will yield to my colleague, Marshall, on the
CFIUS question. OFAC plays a role in terms of reviewing some of
those, but it is not my expertise.
Mr. Pittenger. Thank you.
Mr. Billingslea. Congressman, the issue I have is that this
Administration and the CFIUS process belongs to a different
part of the Treasury, and so I am hesitant to opine, when I
think they would give you a better answer. But I will
definitely arrange that discussion.
Mr. Pittenger. I thought maybe you might have a perspective
just from--
Mr. Billingslea. I do, in the sense that we need to ensure
that the critical pieces of our economy are safeguarded from
adversarial acquisition or influence.
Mr. Pittenger. Do you feel that they are vulnerable today?
Mr. Billingslea. I do feel they are vulnerable today.
Mr. Pittenger. Do you feel that the expansion of the
oversight of CFIUS is warranted today?
Mr. Billingslea. I am not sure I understand exactly what is
implied by that, but I do believe that--
Mr. Pittenger. A greater capability for oversight.
Mr. Billingslea. Greater capability for investigation, from
understanding the origin of funds, the structure of acquiring
entities to make sure we truly understand who is behind
acquisition of different companies.
Mr. Pittenger. Joint ventures and the like.
Mr. Billingslea. Things such as that, yes, sir. Absolutely.
Mr. Pittenger. Very good. Mr. Secretary, another point:
What is the typical evidentiary standard that is needed to
designate a foreign entity for violating the U.S. sanctions?
And, when dealing with the support of terrorism proliferators,
what should that standard be?
Mr. Billingslea. I am going to defer to Director Smith on
the evidentiary standard, because he has a team of lawyers and
counsel that help him on that. But it does tend to vary.
Mr. Pittenger. Very good. Thank you. Mike.
Mr. Smith. The standard is the basic administrative
standard that is used across the Federal Government. It is the
reasonable cause to believe. It is a relatively low standard,
and in terms of when you think of the overall standards of
proof beyond the reasonable doubt in the criminal context, or
even a preponderance of evidence that says, more likely than
not. Ours is just a reasonable cause to believe, so it is
basically, are we reasonable in believing that? That is the
standard that we use in our designations programs, as well as
our enforcement of sanctions violations.
Mr. Pittenger. Given the actions of various countries like
Qatar in the past, knowing we have an MOU with Qatar at this
time, obviously, there have been concerns relative to ransoms
for kidnappings, and safe harbors for Hamas, and Al Jazeera,
and many other concerns. Do you believe that sanctions were
warranted on Qatar or other countries that have been
predisposed to be supportive of our adversaries?
Mr. Billingslea. Congressman, that is a great question. I
didn't have time to get into it, but an entire paragraph in my
testimony talks about all the non-sanctions dimensions to
financial diplomacy. One of the things I emphasized was the
importance when sanctions is a tool available to us, it is a
threat that is lying there on the table that we can use to
great effect with various third parties.
One my very first trips in my capacity when I was confirmed
by the Senate was to Qatar. I will tell you that we do have
issues with Qatar on the terrorism front. We have issues,
actually, with many countries in the Gulf on various terrorism
issues. It differs country by country.
The Qatari did, very, very recently, engage in a series of
arrests of very senior al Qaida financiers, and we view that as
crucial, and we are watching the prosecution process that is
now unfolding very, very closely.
Mr. Pittenger. Good. They have--to date, they have not
prosecuted anybody until now.
Chairman Barr. Gentleman's time is expired. The Chair
recognizes the gentleman from Arkansas, Mr. Hill.
Mr. Hill. Thank the Chairman. Appreciate you holding this
hearing that we have done so consistently now over the last few
weeks to assess how America is doing in our sanctions regime
for some of the world's most rogue nations. Sure appreciate our
witnesses' service to our country, and tackling these tough
issues, because we are not going to be successful in countering
illicit finance or terrorism without every asset at our
disposal--diplomatic, military, and financial, economic. So
thank you for leading the economic cause.
I want to talk a minute, since we have talked a little
about North Korea. Let us talk some more about Russia. I was
particularly pleased Secretary Tillerson appointed Ambassador
Volker as our special envoy regarding trying to break the
frozen conflict around Minsk. I think this was something
missing from the previous Administration, where America really
partnered in the E.U., and heading in a different direction. I
was intrigued by your comments and your testimony, talking
about Russia's obviously destabilizing actions in the Ukraine.
But in addition to that, it continues to meddle in Eastern
Europe, generally through cyberattacks, incursions,
disinformation campaigns, and even evidence that they
interfered in Montenegro's elections last October.
It is for this reason back in June that Mr. Suozzi of New
York and I introduced Fighting Russian Corruption Act, H.R.
2820. One thing I would like you to do today is if you could
take a look at that legislation, and give me your thoughts
about it, officially, from the Treasury. It sets up an
anticorruption office over at State as a political matter, to
work particularly in the E.U. with our European partners, about
taking our knowledge, our capabilities that we have, both in
cyber, illicit finance, and partnering with them to counter
Russian political meddling.
I think it would be important, because you do so much work
in the technical assistance area, where Treasury would help
train our U.S. diplomatic efforts in that regard, and make it
part of our NATO effort, as well. We suggest that
anticorruption become part of NATO's readiness plan. So if you
would take a look at H.R. 2820. We have twelve Republicans and
four Democrats, and I appreciate the work with Mr. Suozzi on
that.
So given this political interference that you have
established both in the Ukraine, and in Montenegro, and other
Balkan countries, what is Treasury prepared to do to punish and
deter activities like this under your existing authorities you
have?
Mr. Billingslea. Congressman, I think you have highlighted
a number of worrisome activities by the Russians. I would also
add to that list, actually, the money-laundering behaviors that
we have seen them engaging in some of the Baltic nations, as
well as in Cyprus and other places, which are fundamentally,
when you talk about corruption, they are such a corrosive
behavior that strikes at the heart of the financial integrity
of these countries.
It is crucial, in particular, that we go after Russian
organized crime. We have done a number of actions, together
with the Secret Service and others, in combating Russian
organized crime. Russian organized crime tracks right back to
parts of the regime in various ways, particularly when you
start talking cyber matters. So I think you are pointing in the
direction that we have to go.
Mr. Hill. Good.
Mr. Billingslea. Which is to focus on that corruption.
Mr. Hill. Mr. Chairman, I hope that maybe we can have a
roundtable, or maybe a classified briefing on that matter, and
we spent a lot of time, as we should, on North Korea. But I
think it would be useful to learn more here.
In the time I have remaining, I know that Congress asks
FinCEN and your offices for reporting, a lot of reporting. I
think that is important. Our oversight responsibility is
critical here, and you have that both to Foreign Affairs in
some aspects, and here, at the Financial Services Committee.
Are these requirements becoming too burdensome? How could we
consolidate our requests to get the information that we want to
have for oversight? But I know it seems like every measure we
introduce has a Treasury-reporting obligation. Could you
reflect on that?
Mr. Billingslea. Congressman, we are beyond reasonable
here. The reporting burden from north of 80, 90 different
reports, some that date back 20 years, it is crushing. It is
absolutely crushing on us.
In your opening comments, you talked about how we needed to
bring every asset to bear, and I will tell you that within the
very small structure of TFI--we are talking 700 people total,
of which half are focused on banking oversight. So when you
talk about John's shop, my shop, the under-secretary's
organization, our intel shop, we are consumed by reports. As a
former Senate staffer, I can't tell you that I know that all of
these reports are even being read.
Mr. Hill. Thank you, sir, and thank you, Mr. Chairman, for
the time, and I hope we are more sensitive about our regulatory
reporting burden on these important actors. Thank you.
Chairman Barr. The gentleman yields back. The Chair
recognizes the gentleman from West Virginia, Mr. Mooney.
Mr. Mooney. Thank you. My question is for Secretary
Billingslea. You mentioned on page three of your testimony that
some circumstances providing financial intelligence to a
trusted foreign partner is all it takes to shutter terrorist
exchange houses, or freeze a proliferator's bank account. I
want to go back a step further, because we have to get that
intelligence from somebody first before we can share with
somebody. Somebody has to give it to us. We have to find it. So
the discussion today has revolved around the ways the United
States sanctions rogue nations, terrorist states, and others
that pose a threat to our people, and our economic and
financial systems.
With the conflicts around the globe we are embattled in we
have partners who want to aid the United States in these
fights, give us information. Some are countries, but some are
individuals or groups that wish to aid us, give us information
on certain activities of the funding of terrorist
organizations.
So my question to you is: Would it be helpful to our cause
in general to get this information, if your office could reward
those individuals or groups that step forward with helpful
information about where our adversaries are keeping their
finances? And if so, what incentives could be used to encourage
such assistance?
Mr. Billingslea. Congressman, I would like to talk with you
more about that and understand, but at first blush, I think
that is exactly the innovative, insightful support that,
through legislation, Congress could help us in the missions
that we have to undertake. You are spot on, in terms of the
challenges we face, and the informational gaps we often have,
particularly when it comes down to that last tactical mile of
getting to the adversary's bank account.
So the idea of a rewards program, I can tell you from my
time running the Special Operations and Low Intensity Conflict
Office for Secretary Rumsfeld, we used reward authorities to
great effect to elicit information. In my time, we used
information and paid rewards for instance, leading to the
identification of where Saddam Hussein's two sons were, and we
deployed Special Forces to bring them to justice, and that was
highly effective.
So in line with your idea, I would like to explore that
with you further. But I think, Congressman, you are onto
something there.
Mr. Mooney. Yes, I would like to talk about that further,
too. I have a little more time left, so changing questions, and
I am more specifically on a country, the IMF estimates that in
2016, the Venezuelan economy contracted by 18 percent, and saw
inflation of over 250 percent, with the further contraction of
12 percent in 2017, and inflation of 650 percent.
So our understanding is that the Executive Order the
President issued in August, which restricted dealings in
Venezuelan debt, has further affected bond liquidity, and added
to pressure on President Maduro, which I think is a great idea.
President Maduro is like a sweaty rhino running out of control
around that area.
So having said that, given the regime's resilience up to
this point, can you articulate what the endgame of Venezuelan
sanctions is? The government clearly hasn't been moderating. So
what outcome are you aiming for, and how appropriate are
existing sanctions to achieving it?
Mr. Billingslea. Venezuela's economy is in a death spiral
due to the kleptocratic policies of the Maduro regime, as they
have engaged in wholesale looting of that country, of the state
oil enterprise, and the ensuing humanitarian crisis that is
erupting around us. This is a major national security issue, on
top of a humanitarian disaster in the making, because it
affects key allies like the Colombians next door.
I am very concerned about, it looks like we are on the
verge of a malarial epidemic now, because Maduro is blocking
the bringing in of humanitarian assistance from the outside. He
is preventing--and through his own economic mismanagement, they
don't have the resources to buy the anti-malarials, in
particular. So we have a significant issue here, and the
President has made it extremely clear: We will not participate
in the looting of that country's economy. Sanctions have been
imposed--any new debt or equity, and those sanctions will only
be removed if there is a return to the normal democratic
process in that country.
Mr. Mooney. I, for one, appreciate the President's
aggressive approach in Venezuela. As you may know, my mother
fled a communist country, Cuba, and America could have stopped
that, and didn't. Now, we have really bad actors trying to
impose evil regimes on folks, and don't care about human life,
and stealing, and it is just, it is terrible. So I would like
to encourage you to keep that up, and anything we can do here
to help, I would sure appreciate.
With that, Mr. Chairman, I will yield back the balance of
my time.
Chairman Barr. The gentleman yields back. The Chair
recognizes the gentleman from California, Mr. Sherman.
Mr. Sherman. Yes. Does the Venezuelan government own major
assets in the United States? They used to own CITGO gas
stations.
Mr. Billingslea. Yes. CITGO is a wholly owned subsidiary
of--
Mr. Sherman. So how come we haven't seized those assets for
the benefit of the Venezuelan people? As long as they remain
under the control of Maduro, they are going to be looted. We
could seize them, sell them, put the money in trust for the
Venezuelan people. Are you moving in that direction, or are you
just going to let Maduro run the company into the ground, loot
it, and abscond with the money?
Mr. Billingslea. Congressman, excellent question.
Mr. Sherman. If you need any legislation, why haven't you
submitted it? I bet you we could pass it.
Mr. Billingslea. Thank you, sir. To your point, we have, in
fact, specifically moved to prevent Maduro from being able to
access any funds from CITGO. The Treasury Department, in
working with the White House when the new Executive Order on
Venezuela was issued, a specific provision was included to--
Mr. Sherman. Could he sell the company and keep the money?
Mr. Billingslea. --To prohibit any payment of dividends out
of CITGO whatsoever.
Mr. Sherman. No dividends, but can they just sell all the
stock? Could Exxon buy the stock tomorrow? Don't tell me about
antitrust law. Could Amazon buy the stock tomorrow?
Mr. Billingslea. The CITGO ownership structure, I would
have to get back to on you, but it is--
Mr. Sherman. OK, but if you don't want to--you don't want
to be here after the barn door is closed. If he can sell the
entire company tomorrow, and I don't think you need CFIUS to
de-invest in the United States. So anyway, just more work for
you when you get back.
Speaking of more work, obviously, we require a lot of
reports, but that is because if we don't require reports,
sometimes we pass laws, and nothing happens.
As to North Korea, the strategy of this Administration is
to go after individual Chinese companies. That may raise the
cost of doing business for North Korea a bit. But if the top 25
Chinese companies in an industry refuse to do business with
North Korea, the 26th biggest may not care about doing business
with the United States, and they may decide to pick up the
North Korean business instead.
The only way you are going to accomplish anything is if you
at least threaten to sanction the whole country. It has to be
something that hits the government in Beijing, not just the
pocketbook of a few large companies. Because it is not a
successful sanction if you force somebody to pay a higher ATM
fee because the banks with the lower ATM fees won't do business
with them.
The goal here is not to annoy Pyongyang; it is not to
destroy Pyongyang. But it is to put them in a position where
they feel their economy might be destroyed.
Let us turn to Iran. Mahan Air is designated as a terrorist
entity given its support for the Assad regime, its involvement
in terrorism. Yet every day, Mahan Air lands at airports in
Europe, and every day the flag airline from that country flies
from that big airport to the United States. Why are we allowing
European air carriers to start their flight at a Mahan-infested
airport, and come to the United States? Why are we not going
after the airports, or are we serious about Mahan Air? Do you
have an answer?
Mr. Billingslea. It is a great question, Congressman. We
are very serious about Mahan Air. It is the aviation arm of the
Quds Force. It is what they use to traffic weapons, terrorist
assassins--
Mr. Sherman. So why are we still doing business with
airports that accommodate them? Why are American planes still
buying fuel from the same companies that sell fuel to Mahan Air
at European airports?
Mr. Billingslea. Two points on that. One is that we have
been in a departure from the previous Administration's
approach, we have been incredibly aggressive with the
European--
Mr. Sherman. Setting a rather low bar for yourself, but go
on.
Mr. Billingslea. At least we clear the bar, right? But I
think you make a good point, and I think it would be very
prudent for any company that transacts with Mahan Air to be
exceptionally cautious, going forward.
Mr. Sherman. I don't think they should be cautious. I think
you should nail. Then they will know.
But now, let us talk about the IRGC. There are about 800
IRGC companies that have yet to be sanctioned. You have
sanctioned about 80. You have sanctions on individual planes. I
am not counting those. Likewise, only a handful of companies
and individuals that have done business, or provided
significant assistance to IRGC have suffered sectionary
sanctions.
Is your standard of proof too high? Is your staffing too
low? How many Farsi-speaking individuals do you have working
full-time on this?
Mr. Smith. So Congressman, I would say that--answering a
few of your questions there quickly, on Mahan Air, I just
wanted to say we have actually done some designations in the
last few months against European airlines, Ukrainian airlines
that had been servicing Ukraine--Mahan Air. We actually took
action. We are looking for--
Mr. Sherman. So is there a flight that has been canceled as
a result of that?
Mr. Smith. There have been some routes that have been
stopped over the previous months because of Mahan Air, because
of the U.S. Government's outreach over the past year, so--
On the questions you ask on making sure the standard of
proof, it is the reasonable belief standard that we have. It is
not too high; it is something that we can live with.
But in terms of what we are trying to do with IRGC and
other targets, trying to hit the maximum impact ones. We are
not trying to do a numbers game, where we give you 20--
Mr. Sherman. How many Farsi speakers working full-time?
Mr. Smith. We have a number of them, but I can get back to
you with the answer--
Chairman Barr. The time of the gentleman is expired. We may
have a chance for a second round. The Chair now recognizes the
gentleman from Indiana, Mr. Hollingsworth.
Mr. Hollingsworth. First and foremost, I want to echo all
of what my colleagues have said in thanking you for the work
that you, your teams put in every single day. Hoosiers back in
the Ninth District feel unsafe with some of the things they see
around the world, and I know you and your teams are working
every day to ensure that the world becomes safer for Americans
at home, and American interests abroad.
I wanted to spin the globe back to Venezuela for a moment.
Mr. Billingslea, you had mentioned that there is a restriction
on new debt with regard to Venezuela. I certainly understand
that. I know, also, that that restriction is fairly broad, and
the summary of new debt, as provided by OFAC, is somewhat
difficult to parse through and better understand. With regard
to Russia, specifically, I think there were a number of
frequently asked questions that were also posted to help people
parse through what is new debt versus existing, etc.
I wanted to find out whether there is any possibility, or
whether there is expectation that more clarity will be provided
around the new debt definition for Venezuela, specifically.
That can go to either of you, frankly.
Mr. Smith. Congressman, thank you for the question. I think
we have been responding, and we have published additional FAQs
with respect to many of these questions, with respect to
Venezuela.
In fact, we did put something out with respect to what the
meaning of debt, as well. So we can refer those FAQs to you or
your constituents. We are getting a lot of calls on this. We
are trying to be responsive.
Mr. Hollingsworth. Fantastic. I think, as Mr. Sherman and
some others have mentioned, some clarity around understanding
what transactions are permissible, with regard to CITGO, as
well. I know I have had some constituent companies that have
been concerned about any dealings with them, or understanding
what level of dealings with them, and don't want to be
unnecessarily or unintentionally caught up in something that is
larger than they are. So I appreciate that as well.
Mr. Smith. I would just say, if you can have your
constituents reach out to us, we have the compliance hotline
that operates as well as the Licensing Division. We are taking
a lot of calls on this, and trying to make sure that we get the
clarity out there.
Mr. Hollingsworth. Fantastic. I know that my constituents
back home, and the companies that they own, operate, or manage
that want to do the right thing, understand, as you well said,
the humanitarian crisis, as well as the national security
crisis this presents, but they want to do the right thing, and
understand where they are with regard to the law.
Following up on Venezuela a little bit further, I know that
one of the things that economists have talked about is just the
need to restructure the debt in Venezuela. Obviously, with the
new restrictions in place, that can't happen, or may happen
only in some gray zone of understanding. Is it your
understanding that we are going to require the Madura
organization, administration, government itself to change? Or
is there any capacity in which those officials themselves can
get into compliance, such that there can be a restructuring of
the debt by IMF or other external resources?
Mr. Billingslea. So on the IMF question, this is a country,
this is a regime that has failed to publicize any of the
standard data that are expected by properly functioning
economies. On top of that, you are dealing with a regime where,
Maduro and his cronies, his vice president is a drug kingpin.
He put him in charge of the debt discussions. This is a
designated individual. On top of that, this is a country where
its constitution specifies that the national assembly is the
only organization that can authorize the issuance of new debt.
But what Maduro did is wiped out democracy.
He overturned the national assembly. These people have run
for their lives. He has now established this constituent
assembly, which is packed full of his people. This is not a--
Mr. Hollingsworth. This is certainly understandable to say
the regime needs to change, period, in order for us to be able
to accomplish that.
Mr. Billingslea. I don't think we are saying that. I think
we are saying we need a return to the democratic order.
Mr. Hollingsworth. Got it. Understood. Then, is there any
feeling what the timeframe or timeline might occur? Do you see
any weakening in resistance by the administration, the
administration's cronies, etc., or it been as obdurate as it
had proven in the past?
Mr. Billingslea. To the extent that the regime has been
enriching themselves at the expense of the Venezuelan people,
including through the wholesale theft from PDVSA, the State oil
company--it is clear that the gravy train has come to an end.
They are out of money.
They have crashed their economy. Presumably, at some point,
people are going to look around and say, ``Wow, the United
States has designated me. The Canadians have designated me. The
European Union is starting to designate officials above me.
Maybe it is time to look at doing something different.''
Mr. Hollingsworth. Yes. I hope that comes soon. Again, just
in my closing, I wanted to thank you both for the efforts that
you undertake every single day.
Mr. Billingslea. Thank you.
Mr. Hollingsworth. I will yield back, Mr. Chairman.
Chairman Barr. Gentleman's time has expired, and there has
been an interest in a second round of questioning, if our
witnesses are willing to take that responsibility on. We
appreciate your testimony today, and again, appreciate your
service in the interests of our national security, and using
every economic lever we can to deter our adversaries.
I do want to follow up on some of the questions regarding
Russia. As we discussed earlier, I had an opportunity earlier
this year to travel to Eastern Europe and visit with some of
our NATO allies. We went to Germany and Poland, Lithuania,
Estonia, and Montenegro, the newest member of NATO. I can tell
you that our allies, and the foreign leaders in these countries
were very consistent in the message that they delivered to us.
That message was that in addition to Russia's illicit
annexation of Crimea, and the frozen conflict in Ukraine, that
there is a whole range of malign activities that the Russians
are engaged in to destabilize our NATO allies, from
disinformation campaigns, to incursions into the Baltic with
their air force. The attempted coup in Montenegro was a major
topic of conversation and concern; the cyberattacks; the
militarization of Kaliningrad was of great concern to the
Baltic countries.
It has been 4 months since the enactment of the Countering
of America's Adversaries Through Sanctions Act, which was the
sanctions legislation on Russia. I want to just ask you all,
what has Treasury specifically done in implementing that
sanctions legislation? Second, what has been the response? What
has been the response of the Russians to that? What, if any,
behavioral change have we seen from the Russians? I have
probably given you too much to answer right there, so I will go
ahead and leave both of you to consider both of those issues.
Mr. Smith. I can start out and say that we have been very
busy to make sure that we are implementing the requirements of
CAATSA, and we are doing it on time, as per the legislation.
Just about every 30 days, starting at, I think, day 60,
Congress in that statute required that we do some type of
implementation of the Act with respect to Russia, as well as
the other parts. On day 60, we started modifying our directives
that were put out under the Russia-Ukraine sanctions programs
to tighten the restrictions in there. We have done that at day
60; we have done that at day 90.
So we started a few months ago, and in fact, we just,
earlier this week, did additional modifications to continue
tightening, and make sure that we also explain that to
industry, and to the rest of the world so they know what they
are and are not allowed to do.
Chairman Barr. What has been the Russian response to this?
Mr. Smith. So the Russians haven't been happy, as you can
imagine. They were concerned with the legislation. I think they
probably aired that publicly with you all at the time. I think
we have heard that as well. I haven't had any conversations
directly with the Russians myself.
Chairman Barr. Have you seen major behavioral change? The
disinformation campaigns, the destabilization efforts, the
Russian aggression continues. Is that correct?
Mr. Smith. I think the Russian aggression has continued in
many of the respects that Congress--
Chairman Barr. That brings to mind the question of how we
can make sanctions more effective in better changing behavior,
and deterring Russian aggression. I want to focus on energy,
the Russian energy sector. Many of our NATO allies have
expressed interest in the United States helping Eastern Europe
achieve energy independence; certainly independence from
Russian gas. Also, in the case of Lithuania, the Astravets
nuclear facility is being constructed about 30 miles from
Vilnius. In Belarus--so the question is, should we consider
sanctioning and getting more aggressive on the Nord Stream 2
project, Astravets, other energy projects that the Russians are
endeavoring to interfere with NATO, and get NATO countries
dependent and reliant on Russian energy?
Mr. Smith. So I think you probably heard--I know you all
heard up in Congress as well--as the Administration, on the
views of European partners and allies with respect to energy
independence. I think in the CAATSA legislation, Congress did
impose additional restrictions, additional tightening of the
sanctions, with respect to many of those features. My
understanding is that Congress engaged with the European
partners, as well as did the Administration.
From my perspective, I think we are still hearing from
Europe as we implement those sanctions. I am not sure that
there is anything that I have seen that is needed at this
point.
Chairman Barr. I can tell you that if the Russians do not
respond to what we have done so far, we ought to send a message
to the Russians, that if they continue their aggressive
behavior, their energy exports to our NATO allies should be in
the crosshairs of our sanctions regime. That is the view of one
Member of Congress, but I would say that there are other
Members of Congress who feel the same way, as well.
With that, my time is expired, and so I will now recognize,
for a second round of questioning, the gentleman from
California, Mr. Sherman.
Mr. Sherman. OK. I would like to go back, first, to
Venezuela. Do I understand, you will be going back to your
office to make sure that Venezuela can't just sell CITGO, and
take the money back to Caracas? Do I have that right?
Mr. Billingslea. It is actually prohibited under law.
Mr. Sherman. So they can't--neither the dividends--
Mr. Billingslea. The dividends are not--
Mr. Sherman. Right. But what they can, of course, do is
overpay for oil. One way to dividend, if you have the retailer,
is just have them pay $70 a barrel for the oil that comes out
of Venezuela, and when the world price is closer to $50. Are we
monitoring that?
Mr. Billingslea. I will verify, but I--
Mr. Sherman. Please answer for the record.
Mr. Billingslea. Yes, sir.
Mr. Sherman. But you are saying they can't sell the stock
of CITGO, nor can they pay a dividend.
Mr. Billingslea. So they cannot pay the dividends under the
Executive Order. A wholesale sale of CITGO would likely trigger
a number things. Let me--
Mr. Sherman. What would it trigger? If they were going to
buy a major American company, that would trigger CFIUS, but I
don't know what it would trigger to sell--
Mr. Billingslea. My understanding is PDVSA--
Mr. Sherman. Or they could just sell some of the stock. So
please answer for the record, but more promptly than we usually
get questions for the record. What are we doing to make sure
that CITGO is not overpaying its Venezuelan affiliate for
either refined or non-refined petroleum products; but second,
what are we doing to prevent them from selling some, or a
majority of, or all of the stock?
Now, as to Mahan Air, it seems like Ukraine was the low-
flying fruit, because it just so happens the Ukrainian airline
is also in the airline servicing business. United doesn't
refuel American Airlines flights, but in some airports, the
airline is also the--
But it is not just sanctioning in that circumstance. Mahan
Air is flying into Milan, and into Munich. Are we going to
continue to allow American planes to fly into Milan and Munich,
and are we going to continue to allow foreign planes to fly
from Milan and Munich into the United States?
Mr. Smith. Sir, I can't talk about what we would do in the
future, but what I can tell you is that the Treasury
Department--
Mr. Sherman. Why haven't we done it already in the past?
Mr. Smith. The Treasury--
Mr. Sherman. This is Mahan Air. Why should American towns
be connected by direct routes into airports that are servicing
Mahan Air?
Mr. Smith. The Treasury Department is engaged exclusively--
Mr. Sherman. We try to prevent American airplane travelers
from coming close to terrorists. You are flying in, and the
terrorist airline is already on the ground.
Mr. Smith. We have been engaging extensively with our
European partners, who do not have Mahan Air on their sanctions
list. We have been trying to make sure to provide them the
information on Mahan Air that they need to have, and at the
same time, enforcing and implementing the most major impactful
sanctions designations.
Mr. Sherman. I will ask you to answer for the record, why
we should allow Americans to fly in and out of airports, when
as they land, there are the terrorists, right there. Sounds
pretty dangerous.
I will go back to the question of staffing. Do you have
enough staff to do your job, gentlemen?
Mr. Billingslea. Congressman, that is always a challenging
question. The formalistic view is that I would need to
coordinate with OMB, and so on and so forth, and we are putting
the budget request forward.
The practical reality is that when you look at the use of
Treasury authorities, we are burning hot. In fact, I think we
just submitted to the Finance Committee the survey that is
taken of our employees, and if you parse through the survey
data, what you see is that maintaining work/life balance for
our people is something we are keeping a very close eye on.
Mr. Sherman. So your people are working enough so that
their spouses are complaining. Sounds like we should get you
some more people.
Mr. Billingslea. I would say the taxpayers are getting
their--
Mr. Sherman. Getting their money to work--all the people
you have now. I am told that between the two of you, you have
maybe two Farsi-speaking individuals? Can either of you be
confident that between the two of you, you have more than two
that are working on Iran, and that actually speak Farsi? You
can't tell me, hey, you have five or six that you happen to
know of, or anything like--
Mr. Smith. I can go back and ask. We actually do a list
every year to make sure, and update it. We do have Farsi-
speaking individuals, and that is, when we find a talent, a
language talent that we need, we bring--
Mr. Sherman. I have 30 people in my district, native Farsi-
speakers. Let me know.
Mr. Billingslea. Chairman, I am always on the lookout for
great resumes.
Chairman Barr. Gentleman's time is expired. The Chair
recognizes the Vice Chairman of the subcommittee, Mr. Williams.
Mr. Williams. Secretary Billingslea, the Obama Treasury
Department authorized U.S. banks to draw on American savings to
finance aircraft--we are back at that now--for the world's
foremost state sponsor of terrorism in jurisdiction primary
money-laundering concerns. This allows our deposits to be used
for state-owned airline, Iran Air, that was sanctioned in 2011
for providing support to the Islamic Revolutionary Guard Corps,
and the Assad regime in Syria.
So in a committee hearing last April, we learned that Iran
Air flew at least 114 flights from Iran to Syria between the
JCPOA's implementation day and March 30, 2017, likely as an
airlift in support of the Syrian's government's atrocities. So
this is an easy question here, a simple yes or no. Can you
certify for us today that Iran Air has ceased all sanctionable
activities?
Mr. Billingslea. I need to get back to you on that,
Congressman.
Mr. Williams. OK, if you would.
Mr. Billingslea. Vice Chairman. Yes, sir.
Mr. Williams. Next question: Which financial institutions,
if any, have contacted Treasury with respect to aircraft
finance for Iran?
Mr. Smith. I am not sure of the answer to that. I am not
aware that any have, but we can get back to you.
Mr. Williams. Would you, please.
Third, can you assure us that a U.S. bank, or a foreign
bank with a U.S. nexus, would not be exposed to any significant
illicit finance risk if it did business with Iran Air?
Mr. Smith. I am not sure of the question. If you are
saying, can we assure you that if a U.S. bank engaged in this
transaction, in any transaction that was licensed, they would
be part of a transaction that we authorized. But where the
money goes to in Iran, I can't assure you, or give you any
guarantee of where that goes.
Mr. Williams. OK. Do you agree that Congress has a right to
know whether aircraft finance for Iran may benefit persons that
engage in sanctionable activities, including support for
terrorism, weapons proliferation, and human rights abuses?
Mr. Billingslea. Absolutely. Absolutely, you should know
that, and we commit to engage with you at any point that is--
Mr. Williams. OK.
Mr. Billingslea. --You want to have the discussions.
Mr. Williams. So I think we have two questions we need to
get, if you get back with us on that.
Now, another question I have. As part of the omnibus
package that was passed earlier, we requested that the Treasury
Department issue a report on entities that were delisted under
the JCPOA, and whether such entities have engaged in
sanctionable activity since the JCPOA. We have not got that
result yet, so if you could help us there. So what is the
status of that report? Do you feel that any entities that had
their sanctions lifted under the JCPOAs have continued to
engage in sanctionable activity since the deal began to be
enforced?
Mr. Smith. So we continue working on those reports. As we
said, we have about 90 a year that we are working on, and most
of those, we get in on time. Some are more difficult, because
they are time-consuming.
If we see sanctionable activity, if we see sanctionable
conduct, we act against it.
Mr. Williams. OK. Mr. Chairman, I yield my time back.
Chairman Barr. Gentleman yields back. The Chair now
recognizes the gentleman from Michigan, Mr. Huizenga, the
Chairman of the Capital Markets, Securities, and Investment
Subcommittee.
Mr. Huizenga. Thank you, Mr. Chairman, and appreciate your
testimony today. Good to see you again, and a couple quick
questions; one, I want to touch on China, and then, I want to
talk a little bit about North Korea.
In 2005, the U.S. designated China's Banco Delta Asia as a
financial institution of, quote, ``primary money laundering
concern'' and Treasury Department recently did the same thing
with China's Bank of Dandong. However, these banks are
relatively small institutions, and are there larger foreign
financial institutions that Treasury is going after?
Mr. Billingslea. Thanks for the question, Congressman. We,
as a matter of practice, don't tip our hand in advance of any
actions.
Mr. Huizenga. I don't want to know names. I want to know
whether there are bigger--there certainly are bigger fish to
fry. I am looking for some reassurance that Treasury is looking
at this, and is looking to pursue this.
Mr. Billingslea. I think the best reassurance I can give
you, because it is out there, is that we put out an advisory to
all of our financial institutions through FinCEN, which
delineated, which showed the typology the Bank of Dandong was
engaged in, and then highlighted other areas where our banks
need to be wary, and pointed them right at a particular part of
China adjacent to North Korea, where we urge our banks to be
vigilant.
You can interpret directly from that that we have a lot of
concerns, and we continue to investigate.
Mr. Huizenga. Mr. Chairman, maybe--We had a great
classified briefing yesterday, and maybe this would be an issue
and a subject that we could, if we needed to go into a
classified, bipartisan briefing, we might want to look at doing
that.
Quickly, in a July 13th Washington Post article, a high-
level North Korea defector who was part of routinely evading
sanctions noted how even when North Korean firms are on the
blacklist, he said, quote, ``North Korea is 100 percent state
enterprise, so these companies just change their names the day
after they are sanctioned. That way, the company continues, but
with a different name than the one on the sanctions list,''
endquote. Without objection, Mr. Chairman, I would like to
enter that article into the record as well. So I assume I--
without objection, I would like to enter an article into the
record.
Chairman Barr. So ordered.
Mr. Huizenga. Thank you.
We have also seen North Korean entities designated by
Treasury--is there more energy being devoted to enablers in
China, or Southeast Asia and elsewhere? Rather than just play
Whack-a-mole with the DPRK entities.
Mr. Billingslea. Yes, sir. The key is not to play Whack-a-
mole. The key is to map these networks out, and then to take
the networks down simultaneously, employing not just sanctions
authorities from OFAC, but working with our law enforcement
community, partner nations and their communities, the
intelligence community and so on--diplomatic endeavors.
Otherwise, you are treating symptoms of the problem, not the
root cause.
Mr. Huizenga. Yes, treating those symptoms, I
wholeheartedly agree, yes. It just--this one stunned me. There
are media reports that there is a proposal circulating within
the U.N. Security Council that would have frozen North Korean
leaders' assets. I said to myself, ``I didn't know there wasn't
an asset that wasn't frozen already.'' If it hasn't been
frozen, why not? This was the sixth missile launch test that
they have done. If we haven't gotten to everybody, every
Korean, significant Korean, North Korean leaders' assets
internationally--which, reports are, they are significant--we
know that they have no problem starving their own people for
advancement of both the weapons, as well as their own
aggrandizement.
But what is Treasury doing? Is Treasury going after those
banks that hold those assets, as well?
Mr. Billingslea. We are.
Mr. Huizenga. OK. I would look forward--maybe we can unpack
this a bit more in a slightly different setting, but I think
this is a significant, significant issue, and this is one of
the few tools that we know has worked in the past, and that we
need to continue to implement that.
So with that, Mr. Chairman, I yield back.
Chairman Barr. The gentleman yields back. The Chair now
recognizes the gentleman from West Virginia for 5 minutes.
Mr. Mooney. Thank you. OK, continuing right along on the
North Korea issue line of questioning, and I think my first
question is relating to the Office of Foreign Assets Control,
so direct this first one to Mr. Smith. On September 26, OFAC
announced it was designating eight North Korean financial
institutions, along with 26 representatives of North Korea,
banks abroad. So how is it that as of September 2017, there
were still any North Korean banks that remained unsanctioned,
and how many more still have not been designated?
Mr. Smith. So when we identify a bank--and we use a
specific terminology--when we identified those banks, we were
identifying them for the ease of the public. But the state-
owned banks had already been designated as a matter--their
assets would have been frozen in the United States, because
they were government of North Korea. So we use the term. We
identified those banks, and then we sanctioned the additional
financial representatives around the world, because we were
adding them to our list.
So it is very important for us, because our SDN List is
used around the world. We want to make sure that is on every
bank's filter, no matter in the United States, but also around
the world, so that they get a hit, even if it is not in the
United States.
Mr. Mooney. OK, so you have it covered, then.
Mr. Smith. We have it covered.
Mr. Mooney. They have all been designated, one way or
another, for sanctions, then. OK.
Second then, what is the real impact of blocking a North
Korean bank's property in the United States? What is the
magnitude of their assets? How would they have access to them
under existing U.S. trade restrictions?
Mr. Smith. So the impact of sanctions can be different,
depending on the entity that is sanctioned. A North Korean bank
would likely not have had assets in the United States, because
we had already prohibited that activity.
But when I say the impact of sanctions is freezing the
assets in the United States. It is putting on them on our
blacklist, so no U.S. person around the world can deal with
them. But it is also, our SDN List is used around the world, by
banks around the world, by major companies and conglomerates
around the world. So that is the impact, is making sure that
not just in the United States, but the rest of the world can
follow suit and hit our alarm.
Mr. Mooney. OK.
Mr. Billingslea. It is not just banks that use the OFAC SDN
List. There are certain governments--and we don't talk much
about this, but there are certain governments that actually
will pursue parallel blocking actions on their own, based on an
OFAC sanction. So we do get a magnifying effect from a number
of key countries when OFAC takes action.
Mr. Mooney. Thank you. Second question, still on North
Korea, either one of you who has more information, try to
answer this one.
I am going to cite a New York Times article. As a
conservative, I don't often cite the New York Times articles,
but in this particular case, I think they have done some good
work.
In their article on September 8th, it was reported in this
New York Times article that North Korea may now be exporting
less to China, but North Korea may also be receiving trade
credits from China to finance continued imports. Of course,
these trade credits would help nullify the effect of sanctions,
even if North Korea were having problems coming up with hard
currency. So if Chinese entities, including banks, are
negotiating the impact of trade sanctions, shouldn't the
Treasury be designating them?
Mr. Billingslea. That is a great point, and I think we are
seeing, as they evolve in response to U.N. Security Council
resolutions, the constant effort to evade sanctions and barter
is one of the ways they are--
So trade credits, or maybe just plain old barter is another
way that they are trying to evade the effect of the financial
hammerlock that we are endeavoring to put on them. So we are
tracking that, and if you trade with North Korea--I don't care
whether you are trading dollars, or won, or whatever, any
barter relationship exposes you to U.S. sanctions.
Mr. Mooney. OK. Thank you, Mr. Chairman. I will yield back.
Yield my time to the Chair.
Chairman Barr. The gentleman yields back, and there is 1
minute left remaining from the gentleman's time, and if I could
just ask one final question to our witnesses with respect to
North Korea.
A lot of the questions today on North Korea focused on
secondary sanctions on Chinese entities, and we have talked a
lot about the fact that those secondary sanctions may not yet
have been fully exhausted. To the extent that is the case, is
that because of U.S. fear or concern that we may lose Beijing
cooperation, or is it merely a resource issue for OFAC and
Treasury?
Mr. Billingslea. It is not a fear in any stretch of the
imagination. We have a game plan. We have a strategy, and we
are executing that strategy, and that strategy involves a
number of different prongs of activity, of which Treasury
action is but one. We are maintaining synchronization with our
activities in the United Nations, with our Ambassador there,
with State Department, with law enforcement, intelligence, and
the Department of Defense.
When it sometimes seems like you are not quite sure why we
are synchronizing things the way we are, we would be happy to
come up and explain to you, because there is a method to this
full-on economic pressure campaign.
Chairman Barr. I would like to thank our witnesses not only
for testimony today, but your service, and the work that you
are putting in to keep the American people safe, and to advance
the national security interests of our country.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
[Whereupon, at 3:54 p.m., the subcommittee was adjourned.]
A P P E N D I X
November 30, 2017
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