    [Senate Hearing 117-345]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-345

    INTERNATIONAL POLICY UPDATE: THE TREASURY DEPARTMENT'S SANCTIONS POLICY
                            REVIEW AND OTHER ISSUES

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

                                    HEARING

                                   before the

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

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                     EXAMINING INTERNATIONAL POLICY ISSUES

                                   __________

                                OCTOBER 19, 2021

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

                      [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                                     ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    48-365 PDF                WASHINGTON : 2022

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                         SHERROD BROWN, Ohio, Chairman

    JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
    ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
    JON TESTER, Montana                  MIKE CRAPO, Idaho
    MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
    ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
    CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
    CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
    TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
    KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
    JON OSSOFF, Georgia                  JERRY MORAN, Kansas
    RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                         STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                     Brad Grantz, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                        Colin McGinnis, Policy Director

                     Dan Sullivan, Republican Chief Counsel

              Dylan Clement, Republican Professional Staff Member

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                        Charles J. Moffat, Hearing Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                           TUESDAY, OCTOBER 19, 2021

                                                                       Page

    Opening statement of Chairman Brown..............................     1
            Prepared statement.......................................    34

    Opening statements, comments, or prepared statements of:
        Senator Toomey...............................................     3
            Prepared statement.......................................    35

                                    WITNESS

    Wally Adeyemo, Deputy Secretary, Department of the Treasury......     5
        Prepared statement...........................................    36
        Responses to written questions of:
            Chairman Brown...........................................    38
            Senator Toomey...........................................    41
            Senator Cortez Masto.....................................    52
            Senator Sinema...........................................    56
            Senator Rounds...........................................    59
            Senator Tillis...........................................    61
            Senator Hagerty..........................................    62

                  Additional Material Supplied for the Record

    U.S. Department of the Treasury Sanctions Review Release.........    65
    The Treasury 2021 Sanctions Review...............................    67

                                     (iii)

    INTERNATIONAL POLICY UPDATE: THE TREASURY DEPARTMENT'S SANCTIONS POLICY
                            REVIEW AND OTHER ISSUES

                                  ----------

                           TUESDAY, OCTOBER 19, 2021

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met via Webex and in room 538, Dirksen Senate
    Office Building, Hon. Sherrod Brown, Chairman of the Committee,
    presiding.

              OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

        Chairman Brown. The Senate Committee on Banking, Housing,
    and Urban Affairs will come to order. This hearing is in a
    hybrid format. Members have the option to appear both in person
    or virtually. Our sole witness is in person. Mr. Adeyemo,
    welcome.
        If there is a technology issue we will move on to the next
    person. Our speaking order will be as usual, that is by
    seniority of the Members who have checked in, alternating
    Democrat and Republican.
        Today we welcome Deputy Secretary Wally Adeyemo to this
    Committee for an update on international policy issues.
    Sanctions policy is an area where we have done important,
    bipartisan work on this Committee. I thank Senator Toomey and
    especially Senator Crapo, who was Chair when I was Ranking, up
    until this year. We were able to make important progress in
    holding countries like Russia and North Korea accountable.
    Senator Toomey and I worked together to pass tough new fentanyl
    sanctions, to help stem the flow of illegal opioids from China
    and Mexico that have taken such a toll. Another heartbreaking
    story on public radio today about what has happened in far too
    many families in this country.
        I am confident that we will be able to build on the
    progress this year, in conjunction with President Biden and
    Deputy Secretary Adeyemo.
        Two weeks ago in this Committee, we explored the economic
    and humanitarian crisis in Afghanistan, as Senator Toomey asked
    us to, the role of sanctions, and how we can get more aid to
    the Afghan people, without resources falling into the hands of
    the Taliban.
        Last week, a broad coalition of countries agreed to
    substantially increase aid to Afghanistan. We continue to work
    with our allies to ensure that aid can be delivered effectively
    to the people there, despite sanctions against the Taliban.
        Today, we will focus primarily on the findings and
    recommendations of the months-long sanctions policy review that
    Secretary Yellen, Deputy Secretary Adeyemo, and others directed
    the Treasury Department to undertake.
        The Department consulted with agencies across the
    Government--State, Commerce, the intelligence community, and
    others--as well as an array of private sector actors, including
    banks, businesses, nonprofits, international NGO's, and
    sanctions experts.
        That comprehensive review examined important questions of
    our current sanctions policy: Does the U.S. Government have the
    right sanctions tools? Are we using them effectively with our
    allies? Are we reassessing their application and adapting them
    as we go? Are we targeting the right people, the right
    entities, the right countries, in the right way, with the right
    sanctions? Ultimately, are we actually changing the behavior of
    targeted countries, entities, or people, where that is
    obviously our goal?
        I know that Treasury has recommendations on these and other
    questions.
        There are some guiding, bipartisan principles that this
    Committee has recognized for years regarding sanctions, and let
    me just briefly outline those. Number one, we should impose
    sanctions on a multilateral basis whenever possible. They are
    more effective, and they garner broader political and
    diplomatic support if we impose them in coordination with our
    allies.
        Number two, preserving and strengthening humanitarian
    exceptions and licensing are important to ensure that people do
    not suffer from shortages of food, medicine, and other
    necessities because of sanctions.
        Number three, for sanctions to be effective they must have
    clear targets, goals, and objectives. If we are trying to
    change countries' and other actors' behavior, they need to
    understand how, once they do better, they can free themselves
    from sanctions.
        Fourth, the U.S. must do a better job of regularly
    assessing the effectiveness of sanctions. We need to
    communicate those findings better to banks and other entities
    that are implementing sanctions policy.
        And last, the Executive branch must continue to support and
    empower the dedicated public servants across the Government
    charged with implementation and enforcement. As with any job,
    workers are our greatest assets, whether at Treasury, at State,
    on the Senate Banking, Housing, and Urban Affairs Committee or
    in the intelligence community in our Government. They must have
    the funding, the analytical tools, the technical expertise--
    including in cryptocurrencies, as we have discussed--which need
    a much closer look. They need the technology and the time to do
    their jobs, particularly as we have increased the use of
    sanctions all around the world.
        Today's hearing will give Members a chance to survey other
    international policy issues within our jurisdiction, and pose
    any questions to the Deputy Secretary, which I am sure he is
    prepared to address.
        I thank Deputy Secretary Adeyemo for your work on these
    issues, and look forward to your testimony.
        Senator Toomey.

             OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

        Senator Toomey. Thank you, Mr. Chairman. Deputy Secretary
    Adeyemo, welcome back. Under President Biden, the Treasury
    Department has advanced a number of troubling international
    policies, some of which are clearly intended to circumvent the
    will of Congress.
        Let us take sanctions to start with. The Administration has
    offered sanctions relief to our adversaries in the unrealistic
    hope that they will make concessions inimical to their own
    interests and nature. Consider Iran, for instance. To entice
    Iran to reenter the flawed JCPOA, the Administration appears
    willing to lift sanctions on Iran. Then the Administration
    hopes Iran will commit to cease supporting terrorism and to
    curb its ballistic missile program.
        But let us be clear. Once sanctions are lifted, Iran will
    never limit its malign behavior. The Administration clearly
    intends to repeat the mistakes of the Obama administration and
    reenter a treaty with Iran, despite bipartisan opposition and
    without Senate approval.
        In addition, the Administration has repeatedly failed to
    comply with mandatory sanctions laws. Also, let us look at
    Iran. Since President Biden was elected, according to the
    International Energy Agency, Iran has doubled the amount of
    crude oil it is selling to China to 600,000 barrels each day
    this year. Even though these sales are illegal under sanctions
    laws, the Administration has refused to impose congressionally
    required sanctions on the Chinese buyers.
        Take the case of Russia. The Administration has also chosen
    to ignore a law requiring sanctions on Russia's Nord Stream 2
    pipeline. The pipeline's project manager has been using
    sanctioned Russian entities to construct and finance Nord
    Stream 2, meaning the manager's integral role in the pipeline
    is predicated on a massive sanctions evasion campaign.
        Congress passed the Countering America's Adversaries
    Through Sanctions Act, or CAATSA, to punish, among other
    things, this very type of conduct: sanctions evasion. Congress
    did this because sanctions evasion harms U.S. national security
    interests, and in this instance, it is increasing Putin's
    malign influence over Europe. But the Administration continues
    to violate this statute in order to give Putin a pass.
        Take the OECD tax agreement. As if all this were not
    enough, the Administration is trying to enact an international
    tax treaty that will harm U.S. competitiveness, and to do it
    without obtaining the necessary two-thirds approval of the
    Senate.
        You will recall the tax increase consists of two pillars.
    Pillar One is an unprecedented treaty change that would allow
    foreign countries to tax American companies based on the
    American companies' sales overseas. It is a tax revenue
    transfer from us to them. Unsurprisingly, this is the priority
    for other countries, who have long sought this tax transfer.
        Pillar Two is a 15 percent global minimum tax on
    multinationals' foreign income. Now this is the
    Administration's attempt to justify the huge tax increase it
    wants to impose on U.S. companies. Unsurprisingly, this is the
    Administration's priority since it is an integral part of
    dismantling the successful 2017 tax reforms.
        But by imploring other countries to implement a global
    minimum tax that will harm their own workers and businesses,
    the Administration has implicitly acknowledged that their
    proposed multinational tax increase will make U.S. workers and
    businesses less competitive, if other countries either do not
    implement a global minimum tax of their own or implement a
    significantly lower rate than what the Administration is
    proposing.
        But here is a problem. There is a very real possibility
    that other countries will not implement a global minimum tax.
    They have only reluctantly agreed to that global minimum tax as
    a condition, I mean, in return for getting Pillar One, the U.S.
    tax revenue transferred to them. But as I say, implementing
    Pillar One requires two-thirds approval in the Senate, and I do
    not think that is going to happen.
        So the Administration is either going to impose its global
    minimum tax increase on American companies anyway, without the
    countries we compete with having enacted a corresponding tax
    increase, or they are going to violate the Constitution by
    modifying our existing tax treaties without obtaining the two-
    thirds consent of the Senate.
        Let us turn quickly to the FSOC Climate Risk Report. This
    is the latest troubling international policy proposal from the
    Administration. We expect this report to come out soon. It is
    likely to claim that global warming poses a systemic risk to
    the financial system.
        Now I acknowledge that global warming is real. However, it
    does not follow from this that there is a new systemic risk to
    the financial system. We have had severe weather events since
    the dawn of time. And as the economist, John Cochrane, has
    explained to this Committee, major weather events, and I quote,
    ``have never come close to causing systemic financial crises,''
    end quote, and there is no scientifically validated possibility
    to change this in the near future.
        Our Democratic colleagues should acknowledge this reality
    and offer their proposals on climate change through the
    legislative process, which they are doing, including calling
    for a ``carbon'' tax, in which this very dangerous tax-and-
    spend measure they are contemplating will make energy prices
    higher.
        But that legislative approach is not enough for our
    Democratic colleagues. They also want to use unaccountable
    financial regulators to really misuse their power and
    essentially cutoff the supply of capital to fossil fuel
    companies.
        Well, all across America we are already seeing what happens
    when the regulatory environment discourages the development of
    necessary energy sources. Energy prices spike. This dynamic
    will only get much worse if financial regulators are pressured
    to starve the energy sector of the capital it needs to provide
    Americans the energy they need.
        Deputy Secretary Adeyemo, I look forward to discussing
    these issues with you today.
        Chairman Brown. Thank you, Senator Toomey.
        Wally Adeyemo was sworn in as Deputy Secretary of the
    Treasury in March of 2021. He has spent the majority of his
    career in public service convening Governments and companies
    and organizations to move toward achieving common goals. He
    came to the Treasury Department from the Obama Foundation,
    where he served as president beginning August 2019. He served
    as a senior advisor before that at the Center for Strategic and
    International Studies and at BlackRock. He held a number of
    roles in public service before this. He holds a BA from the
    University of California at Berkeley and a JD from Yale Law
    School.
        Deputy Secretary Adeyemo, it is good to have you here.
    Welcome. Please begin.

    STATEMENT OF WALLY ADEYEMO, DEPUTY SECRETARY, DEPARTMENT OF THE
                                TREASURY

        Mr. Adeyemo. Chairman Brown, Ranking Member Toomey, and
    Members of the Committee, thank you for giving me the
    opportunity to speak to you today about the National Advisory
    Council on International Monetary and Financial Policies report
    to Congress, the Treasury Department's priorities, and our
    outlook for the global financial system.
        As you know, the international financial institutions form
    the core of the international financial architecture that is
    consistent with our economic interest. It is no accident that
    the U.S. economy is the largest in the world, that our
    financial markets are the deepest and most liquid, and that
    dollar is the world's reserve currency. Our economic success is
    the result of the policy choices we made coming out of World
    War II, alongside the hard work and determination of the
    American people.
        America's interest in a strong, stable, and rules-based
    economic order is also deeply entwined with our foreign policy
    and national security interest. Our economic objectives cannot
    succeed if the international financial system facilitates the
    illicit flow of funds to oppressive regimes, terrorist groups,
    cybercriminals, and other malign actors.
        Bearing this in mind, Secretary Yellen requested a review
    of Treasury's use of financial and economic sanctions since the
    terrorist attacks of September 11, 2001. The review identified
    four primary challenges to the continued effectiveness of our
    sanctions regime: one, our adversaries' attempts to build
    payment systems allowed them to avoid the dollar-based
    financial system; two, technological changes like the growth of
    digital currencies; three, the need to permit the flow of
    legitimate humanitarian assistance and avoid collateral impact
    on nontarget populations; and finally, four, ensuring that
    sanctions are always deployed alongside other measures as part
    of an overarching national security strategy.
        I want to briefly describe to the Committee the five
    initiatives Treasury is advancing to respond to these
    challenges and modernize the use of sanctions.
        One, adopting a policy framework. Treasury will adopt the
    use of a structured policy framework in order to inform its
    recommendations on the use of sanctions. This framework will
    seek to ensure that sanctions support clear policy objectives
    within a broad strategy; reflect input from technical experts
    and other critical sources of information, including the
    intelligence community; incorporates multilateral cooperation
    and are easily understood, enforceable, and reversible. The
    framework will be a tool to improve the use of sanctions, not a
    means to prevent it.
        Two, improving access to humanitarian assistance. Treasury
    will work to expand sanctions exceptions, where appropriate, to
    support the flow of legitimate humanitarian assistance,
    incorporating lessons learned from the last 20 years. The
    Department is committed to consistently providing clear
    guidance in the context of all applicable sanctions regimes,
    including the continued flow of legitimate humanitarian aid to
    heavily sanctioned jurisdictions.
        Three, regular assessment of sanctions programs. Treasury
    plans to use the sanctions policy framework on a regular basis
    to review sanctions programs and authorities and make
    recommendations to augment, adapt, or wind down individuals'
    authorities, or to list or delist particular entities.
        Four, improve sanctions coordination and communication. The
    threat of sanctions alone, not even the imposition, remains a
    powerful tool of economic statecraft. In order to calibrate the
    use of this tool, Treasury needs to communicate and coordinate
    more effectively with stakeholders affected by the use of
    financial sanctions. This includes U.S. allies and partners,
    financial institutions, and other actors within the financial
    system, nonprofit organizations, and the media. We will do this
    by using existing forms where we meet with our allies and
    partners to coordinate and collaborate on sanctions as well as
    build a more formal mechanism for receiving feedback and advice
    and providing information to stakeholders.
        Five, we plan to modernize our operational capabilities. As
    the threats to our Nations change, sanctions must also adapt.
    Treasury must invest in changes to its workforce and technical
    capabilities to meet these evolving threats. This will involve
    streamlining current functions as well as making workforce and
    infrastructure investments to take on growing threats like
    ransomware and other cybercrime. This effort will require
    building on current processes in some areas and changes in
    others. Certain changes may be implemented in the near term
    while other will require further deliberation and analysis to
    determine the best path forward in collaboration with the State
    Department and other Executive branch partners. In many cases,
    support and advice from key partners like Congress will be
    critical.
        Members, sanctions are not only an important tool of the
    United States, they play an important role in maintaining the
    rules-based global economy, which has benefited the world for
    generations. I look forward to working with Members of this
    Committee to continue advancing U.S. international economic
    leadership abroad and creating opportunities for Americans at
    home. I am happy to take your questions.
        Chairman Brown. Thank you, Mr. Deputy Secretary. Your staff
    has put a lot of time and work into this. You have laid out
    general principles and recommendations. What are the most
    important and urgent findings and recommendations, and will any
    of them require congressional approval?
        Mr. Adeyemo. Thank you, Senator, and I want to thank you
    and your staff and the staff of this Committee for spending a
    great deal of time with those of us at Treasury, talking about
    the sanctions review. As you will see from the report and also
    from my testimony this morning, the findings we have largely
    align with the principles this Committee has outlined.
        The key for us is making sure that as we think about
    sanctions on a go-forward basis we are making the investments
    today to keep up with innovations, not only technology but
    innovations by our adversaries that are attempting to bypass
    our sanctions. This will require us to do more multilaterally,
    frankly by doing more multilaterally put ourselves in a place
    where when we decide to act unilaterally we have greater power
    in terms of our ability to effect change, the change of
    behavior, which is the ultimate goal of sanctions.
        We are going to need to work with Congress to advance
    things like creating the type of opportunities within the
    Executive branch to hire staff who understand issues like
    crypto going forward, so looking to Congress to help us with
    hiring authorities. The President's fiscal year 2022 budget
    includes additional resources which will allow us to build on
    the technological expertise that we need in the Treasury
    Department, and will also help us bring on the type of
    workforce we need to ensure that we are able to meet these
    challenges going forward.
        A great deal of the work that we need to do will need to
    happen with our Executive branch colleagues, but we look
    forward to also working with Congress to advance these
    important goals.
        Chairman Brown. Thank you. This review strikes me as
    especially important because the last time U.S. sanctions were
    reviewed comprehensively was 20 years ago, and it resulted in
    the enactment of a new law requiring exclusion of trade and
    agriculture and medicine and medical products from sanctions.
    Clearly we need to work harder to avoid collateral consequences
    in sanctions on humanitarian aid.
        So my question is this. Especially as the pandemic
    continues to put all of us at risk, as variants mutate around
    the globe, what specific new steps are you recommending that
    Treasury take to mitigate the harm to humanitarian aid efforts?
        Mr. Adeyemo. Senator, it is critical that especially in
    areas where sanctions are used, humanitarian assistance is able
    to continue to flow. We have learned a great deal from what we
    have done over the last 20 years. You will see that some of
    that has been applied to some of the sanctions programs that we
    have introduced recently. For example, the President's
    Executive order with regard to actions occurring in Ethiopia.
    When we issued that Executive order we also put out general
    licenses at the same time to assure that humanitarian
    assistance would continue to flow.
        One of the challenges that we have is that we often will
    announce sanctions programs and then wait to hear from
    humanitarian groups before we then issue guidance to provide
    them with the ability to continue to flow humanitarian
    assistance into these areas. Our goal now needs to be to ensure
    that we take the lessons that we have learned from the last 20
    years and ensure that humanitarian assistance can be provided
    alongside our sanctions programs in order to meet the needs of
    people who are suffering in these areas. Especially during this
    moment of COVID, ensuring that medicine and food can get to
    these affected people is not only consistent with our values
    but it will help us end the pandemic globally.
        Chairman Brown. A number of critics have argued that the
    sort of clumsy use or the overuse of sanctions, of unilateral
    sanctions by the U.S., especially during the Trump
    administration, played into the hands of our adversaries. How
    concerned are you about efforts by China and Russia and others
    to insulate themselves from U.S. sanctions, including by moving
    away from dollarized transactions, creating new financial
    messaging systems, or taking other similar steps? Do you view
    these efforts, if they were to persist and intensify, as posing
    a threat to the U.S. dollar as the world's reserve currency?
        Mr. Adeyemo. Senator, my view is that the U.S. dollar as
    the world's reserve currency will remain, for a number of
    reasons, including the fact that we have made the needed
    investments in America. Ultimately, people are going to want to
    invest in America and do business here because of the strength
    of our economy and the openness of our system and the certainty
    of our laws.
        But it is true that if we do not use sanctions
    appropriately it will drive not only our adversaries but a
    number of others to look for ways around the use of the dollar
    in their financial dealings. Our goal then needs to be to make
    sure that we do two things. One is that in using our sanctions
    we need to use a framework that is consistent with the
    principles, frankly, that this Committee has been outlining for
    a long time, but in addition to doing that we need to try and
    multilateralize our sanctions whenever possible. While it is
    hard to avoid being engaged in financial transactions that
    avoid the dollar, it is even harder to avoid financial
    transactions that avoid the dollar, the euro, the pound, and
    the yen. That is why it is critical that more often we try to
    do things multilaterally with our allies and partners going
    forward.
        Chairman Brown. Thank you. Senator Toomey.
        Senator Toomey. Thank you, Mr. Chairman. Deputy Secretary
    Adeyemo, I cannot help but note the irony of your discussing
    how and why it is so important that we preserve the ability to
    impellent a sanctions regime in the future when you and the
    Administration choose not to implement sanctions that statute
    currently requires.
        Let us take the case of Iranian oil sales to China. The
    Iran Freedom and Counter-Proliferation Act, IFCA, prohibits the
    purchase of Iranian oil. Yet according to the International
    Energy Agency satellite data, since January of this year China
    has been importing around 600,000 barrels of Iranian oil per
    day.
        And the Administration knows it. On September 28, Reuters
    reported that, and I quote, ``A senior U.S. official said, `We
    are aware of the purchases that Chinese companies are making of
    Iranian oil,' '' end quote.
        Now I am sure you acknowledge that IFCA requires sanctions
    on purchase of Iranian oil, right?
        Mr. Adeyemo. Senator, the law does require that.
        Senator Toomey. OK. And you acknowledge that Chinese
    companies are buying Iranian oil in very significant
    quantities, right?
        Mr. Adeyemo. Senator, I am aware that a number of people
    are attempting to buy Iranian oil, and our goal is to make sure
    that----
        Senator Toomey. OK. But we are not talking about attempts.
    It is a factual matter that Chinese entities are routinely,
    daily, buying hundreds of thousands of barrels of Iranian oil,
    in direct violation of our sanctions regime, right?
        Mr. Adeyemo. Senator, we continue to monitor purchases of
    Iranian oil, and we look forward to using----
        Senator Toomey. OK. So you are making my point. I am going
    to submit a written question, and for the sake of time I would
    appreciate a written answer as to why it is that you believe
    that the mandatory nature of this sanctions statute is somehow
    optional, because it is actually not, and we all know that this
    is going on.
        Let us move on to Nord Stream 2. So since early July,
    several other Senators and I have been very concerned that the
    Administration is again violating the statute by not
    sanctioning the project manager of the Nord Stream 2 pipeline,
    that is Nord Stream 2 AG, under Section 228 of CAATSA. And here
    is the problem. Nord Stream 2 pipeline project, the whole
    project is riddled with sanctioned Russian entities, ranging
    from the project owner to various contractors, vessels, certain
    employees, they are all subject to sanctions, already
    established sanctions.
        OK. So Gazprom illustrates why the Treasury Department is
    violating this law. The Obama administration imposed sectoral
    sanctions, or SSI sanctions, on Gazprom due to Russia's efforts
    to destabilize Eastern Ukraine. Now I am sure you do not
    dispute that Gazprom is currently subject to SSI sanctions,
    right?
        Mr. Adeyemo. Yes, Senator.
        Senator Toomey. OK. So CAATSA Section 228 goes after
    entities facilitating sanctions evasions on behalf of, and I
    quote, ``any person subject to sanctions imposed by the United
    States with respect to the Russian Federation,'' end quote. On
    OFAC, that is to say the Treasury's own website, the answer to
    FAQ Number 546 explicitly makes it clear that persons subject--
    I am quoting now--``Persons subject to sanctions imposed by the
    United States with respect to the Russian Federation includes
    persons listed on the SDN list or the SSI list,'' end quote.
        So we have established that Gazprom is a party sanctioned
    by the U.S. Government for the purpose of CAATSA 228, so you
    could ask, OK, so what does that have to do with Nord Stream 2
    AG? Well, on its own website, Nord Stream 2 AG describes itself
    as a project company established by Gazprom for the purpose of
    planning construction and subsequent operation of Nord Stream 2
    pipeline. And again, I am sure you agree that Gazprom did, in
    fact, set up Nord Stream 2 AG to construct and operate the
    pipeline, right?
        Mr. Adeyemo. Senator, we have talked about this issue
    several times, and I agree with you that we need to do
    everything we can to implement CAATSA. As I have said to you
    previously, we are currently working with intelligence
    community to----
        Senator Toomey. I understand. But let me just finish this,
    because this is important and we are going to run out of time.
        So we also know that Nord Stream 2 AG has facilitated
    sanctions evasions for Gazprom. Now you might ask, well, how do
    we know that? Well, we know this because the State Department
    has told us this, right? In a May 2021 report, the State
    Department said that Nord Stream 2 AG has, and I quote,
    ``knowingly facilitated deceptive or structured transactions to
    provide vessels for the construction of Nord Stream 2
    pipeline.'' And just adding on, and I am sure you will confirm
    again, that it was, in fact, Treasury lawyers signed off on the
    evidentiary package that the State Department used for this
    determination.
        So you have acknowledged that Gazprom is sanctions. You
    acknowledged that Gazprom set up Nord Stream 2 AG. I believe
    you acknowledged that Nord Stream 2 AG has facilitated
    sanctions evasions, and certainly your lawyers did when the
    State Department concluded that Nord Stream 2 AG has
    facilitated sanctions evasions to get vessels involved in this.
        Do you acknowledge that Nord Stream 2 AG did all this on
    behalf of Gazprom?
        Mr. Adeyemo. Senator, as I have said, we are committed to
    working with you and this Committee to hold Gazprom responsible
    for its activities that violate our sanctions.
        Senator Toomey. But you are not answering a direct question
    here. Do you knowledge that Nord Stream 2 AG has engaged in the
    activity that is laid out by the State Department, on behalf of
    Gazprom?
        Mr. Adeyemo. Senator, we support the State Department's
    report. We worked with them on that report. Their report was
    based on a separate authority than the one that we are talking
    about today, which is CAATSA. With regard to CAATSA, we are
    committed to making sure that we work with----
        Senator Toomey. Let me just close by saying, look, it is
    very clear what is going on here. Gazprom created Nord Stream 2
    to evade sanctions. That was the entire purpose. Everything
    around this picture are the sanctioned entities, and they
    needed Nord Stream 2, they needed an unsanctioned entity in
    order to bypass the sanctions. That is exactly what we passed
    CAATSA for, on a bipartisan basis, and it is completely
    unacceptable that it is not being implemented.
        Chairman Brown. Thank you, Senator Toomey. Senator Tester
    is recognized for 5 minutes, from Montana.
        Senator Tester. Yeah. Thank you, Mr. Chairman. Look, your
    testimony highlighted the important work of countering China's
    unfair trade practices, and it is true they are the pacing
    threat to us and the world today. It is a key focus of mine in
    the Defense Subcommittee, which I chair, and it is why I pushed
    so hard to get the Bipartisan Infrastructure Bill across the
    finish line in the Senate, and will continue to push to get
    across the finish line in the House.
        But from your perspective, in your role as Deputy
    Secretary, what is the most effective way to address what China
    is doing with particularly currency manipulation?
        Mr. Adeyemo. Senator, thank you for the question and thank
    you for your work on those important issues. My view is that
    the most important thing that we can do with regard to
    competing with China is making the investments in the United
    States that you have taken a leadership role on, like the
    Infrastructure Bill that has passed the Senate and is currently
    in the House.
        In terms of the issue of currency manipulation, the
    President and Secretary have been very clear that we will not
    allow any country to unfairly use its currency to push for more
    exports. As you know, on a semiannual basis the Treasury
    Department puts out a report on foreign exchange intervention
    that highlights countries that violate the international rules
    in this area. When it comes to China, we are committed to
    holding them accountable for all of their unfair actions, both
    unilaterally, in the United States, but also working
    multilaterally with our allies and our partners, because know
    that fundamentally the actions that China takes do not only
    hurt American consumers and American workers but they hurt the
    consumers and workers around the world.
        Senator Tester. So let me ask you this. Is there anything
    that you need from Congress, specifically this Committee, any
    additional authorities?
        Mr. Adeyemo. Senator, at the moment I think that Congress
    providing us with the authorities to pull together the foreign
    exchange report is what we need. We are working actively with
    the USTR and other agencies within the Government to use our
    tools to hold China and others accountable, and we look forward
    to continuing to consult with you if there are additional
    authorities that we need.
        Senator Tester. OK. From the standpoint of cryptocurrency,
    has that changed how the Treasury Department deals with
    sanctions?
        Mr. Adeyemo. Senator, as we highlighted in the sanctions
    review, cryptocurrencies has required us to look at ways that
    we can try to deal with potential sanctions evasions, and we
    have highlighted this by taking certain actions with regard to
    cryptoactors who are using this means of payment for things
    like ransomware. It will require us to also invest more in
    different parts of our workforce going forward and improving
    our technology infrastructure.
        Senator Tester. How often are you seeing cryptocurrencies
    being used to avoid sanctions?
        Mr. Adeyemo. Senator, we recently put out a report, just
    last week, highlighting the use of cryptocurrencies in
    ransomware, to the tune of several hundred million dollars of
    collections through cryptocurrencies. We recognize that a
    number of actors who seek to impact our national security are
    using cryptocurrencies to try and get around our sanctions
    regimes. In terms of a quantifiable number, we know it is more
    than several hundred million dollars, and our goal has got to
    be to try and identify those where it exists and to stop it
    using the tools that Congress has provided us.
        Senator Tester. So from your perspective, do you think that
    cryptocurrency should be a regulated market in a way that is
    similar to our conventional monetary system?
        Mr. Adeyemo. Senator, from my perspective, one of the
    things that we have benefited from a great deal in the United
    States is innovation. Innovation has helped drive our economy,
    and financial innovation has done that. But it is important
    that as we think about those innovations we also have a
    regulatory regime that protects consumers and protects our
    national security. We are going to need to use the tools like
    the BSA and AML laws to make sure that we are protecting our
    national security, but there is also going to be a need to work
    with Congress to decide on whether we need additional tools in
    this space as well.
        Senator Tester. OK. Last question. You talked about reserve
    currency quickly, and you talked about the fact that we have it
    and we are probably not going to lose it. I have a little
    different perspective, but I want to hear yours. Could you tell
    me what impact defaulting on the debt might have on our status
    with reserve currency and the uncertainty that might create?
        Mr. Adeyemo. Senator, as Secretary Yellen has said, a
    default on the U.S. debt would be catastrophic from the
    standpoint of our credibility, not only to our creditors but
    our credibility in the world, and would have a clear impact on
    people's trustworthiness in the United States and our ability
    to meet our commitments.
        Senator Tester. And so you would see that as a giant step
    in the wrong direction as far as maintaining our reserve
    currency status?
        Mr. Adeyemo. Yes, Senator. Ultimately, the reason that the
    United States dollar is the reserve currency in the world is
    because people trust the United States economy. They have
    confidence in the investments and the decisions that we make.
    And if we were to not pay our bills on time it would send
    ricochets through those people who have confidence in our
    economy.
        Senator Tester. OK. Thank you, Mr. Chairman. Thank you.
        Chairman Brown. Thank you, Senator Tester. Senator Scott is
    recognized from South Carolina, from his office.
        Senator Scott. Thank you, Mr. Chairman, and thank you, Mr.
    Adeyemo, for being with us today. I have a couple of questions
    for you. I noticed that Senator Tester started asking questions
    about the plan to make sure that we do not default on our debt,
    or the consequences of us defaulting on our debt, and without
    any question I have read a number of reports that suggest that
    the plan that was going to be in place to make sure that we did
    not default on our debt was already being thought through, wise
    planning from my perspective.
        Here is a question, though, that is not related to
    sanctions, even though I know that we are talking about
    sanctions, but it would be impossible for me not to ask a
    question about the current proposals coming out of the
    Administration as it relates to the ability to investigate and/
    or have access to every transaction in every American's banking
    accounts or financial accounts, based on simply $600 of flow
    coming through. I know that some proposals have $600, others
    have $10,000.
        The challenge is, whether it is $600 or $10,000, it
    captures basically the same number of accounts. Ultimately, if
    someone pays $800 a month in rent, that is $9,600. With any
    other transactions you break the $10,000 threshold. If you were
    a senior citizen receiving Social Security, with the average
    Social Security check being around $1,500, or $18,000 a year,
    your financial institution then has to report to the IRS your
    account.
        I do not know what in the world the IRS will do with the
    information that they receive from these financial
    institutions. I say this with the backdrop of the last Democrat
    administration. We saw the IRS not peering into but
    investigating nonprofit religious organizations and
    conservative organizations without expanding their power or
    their reach.
        So my concern is that as we see this Administration's
    proposal to give more access to the IRS to peer in and
    investigate, frankly, $600 of flow in and out of accounts of
    every American, that essentially captures all Americans'
    transactions in this country. If you are looking for tax
    cheats, that is a terrible way of figuring it out. But if you
    are, in fact, looking at a big Government proposal to have the
    ability to investigate every single transaction of a financial
    institution of your account, my account, and their accounts,
    well, this might be a good direction to go in. And I would love
    to hear why you think it is important for every American's
    transactions to be made available to the IRS.
        Mr. Adeyemo. Senator, thank you for that question because
    it gives me an opportunity to make clear the President's policy
    goal, which is to make sure that wealthy taxpayers who are
    avoiding taxes in this country pay the taxes that they owe. As
    you know, the top 1 percent of income earners in this country
    fail to pay more than $150 billion in taxes each year. And the
    reason for this is because they do not earn income the same way
    that most of your constituents do, which is by getting a W-2,
    which is information that a teacher or a truck driver or any
    other employees' company provides to them, but also then
    provides to the IRS.
        The reality is wealthy people often earn their income
    through partnerships or other ways in which they can sell an
    asset for $2 million, put that $2 million in the bank account,
    and tell the IRS that they only earned $100,000.
        What the President seeks to do is level the playing field
    so that wealthy individuals are forced to pay taxes in the same
    way that working-class people do every day in this country. We
    are committed to----
        Senator Scott. Thank you. Let me just follow up on your
    answer, because I do think you raise an important point, and I
    hope everyone who is watching is listening to what I think is
    an explanation that requires a little more questions.
        Let me think of it this way. The top 2 percent of Americans
    make about $18 out of every $100 but they pay about $36 out of
    every $100 in taxation. Sixty percent of Americans pay no
    Federal taxes. Here is my question. For those 60 percent that
    pay no Federal taxes, you are literally going to be having the
    access to investigate their accounts too.
        So if you are looking to simply find the tax cheats of the
    top 1 percent or 2 percent of Americans, you do not need a
    threshold of $600. You do not need a threshold of $10,000.
    Frankly, you do not even need a threshold of $100,000. What
    this threshold of $600 or $10,000 does, it captures all the
    information, all the transactions of everyday Americans, not
    the rich ones but the ones working paycheck to paycheck, should
    not be forced to have an additional burden on their plates
    about whether or not the IRS is going to be investing them,
    whether or not someone is going to be harassing them. That is
    not about millionaires and billionaires. That is an actual
    additional burden on working-class Americans. We can do better
    than that.
        Thank you for your answer.
        Mr. Adeyemo. Can I just respond quickly?
        Chairman Brown. Mr. Secretary, of course.
        Mr. Adeyemo. The President is willing to work with Congress
    on the threshold, on ways to protect those who earn W-2s, and
    those who get Social Security payments. Our ultimate goal is
    making sure that wealthy people who do not pay the taxes that
    they owe, pay those taxes in order to make sure that we have
    the money to pay for things like infrastructure and childcare
    in this country.
        Chairman Brown. Senator Menendez----
        Senator Scott. Mr. Chairman, I appreciate you giving my
    time to the witness to respond. I will simply say this, that if
    you are looking for a way to make sure that people pay their
    fair share of taxes, I have got to tell you that this proposal
    is not in the same universe of accomplishing that goal. This
    proposal, whether it is $600 or $10,000, if you exclude the
    Social Security recipients at $1,500, you still have the vast
    majority of Americans, working paycheck to paycheck, with an
    additional burden, with another thing to be concerned about,
    from their Government. That is not the way the free market
    should work. It is certainly not the way that we want our
    country working, that every single American has to be concerned
    about the IRS. Those three letters are scary enough without
    giving them more access to our accounts unnecessarily,
    especially for working-class Americans.
        Thank you very much for your response.
        Chairman Brown. Senator Menendez from New Jersey is
    recognized.
        Senator Menendez. Thank you, Mr. Chairman. Mr. Secretary,
    would you agree that sanctions are one of the few peaceful
    tools of diplomacy?
        Mr. Adeyemo. Senator, I do agree that sanctions are an
    effective tool of diplomacy that are peaceful.
        Senator Menendez. I appreciate that the Treasury Department
    is thinking through how to ensure that sanctions remain an
    effective tool, but I am concerned that this review does not
    reflect a holistic approach to sanctions. I mean, I see the
    Treasury Department as basically the entity that once an
    Administration decides to pursue sanctions in pursuit of
    peaceful diplomacy somewhere in the world is the executor of
    those sanctions.
        I think most people would agree that sanctions are a
    foreign policy tool, but this review is basically a Treasury-
    centric product that does not address the many sanctions
    authorities implemented by the State Department and largely
    pays lip service to the State Department's role in sanctions.
        At the same time, I get the sense that the State Department
    often struggles to play an effective role. They do not match up
    well to Treasury's resources and capacity in this area.
        So my question to start off is, why spend all of this time
    and effort on a review when it is a single-agency product
    rather than one that is reflective of the overall foreign
    policy component that should be the driving force, I think, in
    our sanctions policies?
        Mr. Adeyemo. Senator, I completely agree that sanctions are
    a tool that are driven by foreign policy decisions that are
    made, and mainly driven by the State Department and the
    National Security Council. But given the importance of this
    tool and the use of the tool, we wanted to make sure that we
    are ensuring that the tool is effective going forward, and we
    worked closely with the State Department with regard to this
    report, and we look forward to working closely with them----
        Senator Menendez. Well, let me ask you this. I do not know
    how closely you worked, but would you consider a join effort
    with State, moving forward?
        Mr. Adeyemo. We do plan a joint effort with State, going
    forward.
        Senator Menendez. Let me ask you, you know, sanctions are
    only as good as they are enforced, like any other law. If you
    have a law--you know, there is a red light and you go through
    the red light, unless there is the likelihood there will be an
    enforcement against you for doing so, you will go through the
    red light. Same thing in terms of sanctions, in a more
    significant context.
        I have raised this before, but I am deeply concerned that
    China is continuing to buy oil, in significant--significant--
    quantities, from Iranians, both subverting international
    sanctions and impacting the oil market. I am disappointed that
    the United States, and for that fact the rest of the
    international community, does not seem to be holding China
    accountable for these violations.
        What steps are you taking to enforce sanctions on China to
    comply with the law?
        Mr. Adeyemo. Senator, at the Treasury Department we are
    committed to complying with the law and to seeking intelligence
    on the companies and entities that are purchasing illegal oil
    and to holding them accountable. We are happy to provide you
    and your staff with a classified briefing on the steps we are
    taking with regard to those entities.
        Senator Menendez. Well, I appreciate that you are committed
    to it, but only sanctioning actually makes it relevant, at the
    end of the day. And this is being done in plain view. I mean,
    we are talking about, you know, millions and millions of
    barrels of oil that are being purchased by China from Iran, in
    clear view of everyone in the international community. I do not
    know how much due diligence is ultimately necessary to find out
    that which is available to the public eye. So I really look
    forward to hearing what you are going to do in that regard.
        I also look forward to understanding, for example, you
    know, Turkey and the S-400. They are talking about making more
    purchases. When we wrote this law, we wrote it in such a way so
    that certain actions are mandatory in nature, not
    discretionary, but yet we have seen, both the past
    Administration and this Administration, not necessarily
    enforcing the mandatory nature of the sanctions. Why not?
        Mr. Adeyemo. Senator, I am committed to enforcing mandatory
    sanctions where we have the proof and evidence to do so. We
    rely heavily on the counsel of career lawyers at the Treasury
    Department and the DOJ in terms that enforcement and also on
    the intelligence that we have at hand.
        Senator Menendez. Well, I love lawyers but they can kill
    every process in the world. The reality is that I find that
    Congress' intent is habitually subverted by both the previous
    Administration, and so far, in some cases, this Administration.
        Last question. When can expect to see designations related
    to the Executive order on imposing sanctions on certain persons
    with respect to the humanitarian and human right crisis in
    Ethiopia that was issued by the Administration on September
    17th?
        Mr. Adeyemo. Senator, we are committed to finding a
    peaceful resolution to the situation in Ethiopia, and the
    President has issued an Executive order and we continue to work
    with parties to bring them to the table. But it made it very
    clear that we are also willing to use that Executive order to
    do so. As the process continues, we will continue to evaluate
    sanctions targets and are committed to keeping you informed as
    we do so.
        Senator Menendez. OK. I appreciate you are very committed,
    but I have to be honest with you, I do not see the commitment
    in action, and so I am looking forward to the action on these
    and others. And I have other questions I will submit for the
    record.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Menendez. Senator Daines
    from Montana is recognized from his office.
        Senator Daines. Mr. Chairman, thank you, and I want to
    extend a warm welcome to our witnesses, and I appreciate this
    opportunity to discuss a few matters that are affecting the
    security of our Nation.
        Over the past year, China has exerted increasing pressure,
    both militarily as well as financially on Taiwan, its neighbors
    in the South China Sea, while at the same time hedging itself
    from international pressure with new antisanctions laws.
        Mr. Adeyemo, how does China's decision not to extend
    antisanctions laws into Hong Kong inform our own strategy for
    deterring aggression and assuring our allies in the South
    Pacific?
        Mr. Adeyemo. Senator, thank you for the important question,
    and I think this speaks to why we believe it is critical that
    as we move forward on sanctions we look for, at every
    opportunity, the ability to do them multilaterally. Frankly,
    our adversaries are seeking to find ways around our sanctions
    every day, and the best way to ensure that they are unable to
    do that is by making sure that our sanctions are not just
    driven by the United States but by the international community
    made up of our allies and partners.
        While the economic impact of our sanctions is great, my
    bringing along our allies and partners we increase the
    political impact of isolation, which matters to our adversaries
    and puts us in a better position to enforce these sanctions
    over the long term.
        Senator Daines. Mr. Adeyemo, I agree with you, the
    multilateral approach is a good approach, and I would encourage
    you to head in that direction.
        In addition to these antisanctions laws, China's main goal
    in the development of the digital yuan is to establish an
    alternative to the U.S. financial system and one that is immune
    to sanctions. How can we ensure that our sanctions policy does
    not risk the centrality of the U.S. dollar as a dollar-based
    institution and the U.S. payment networks that carry importance
    that are far beyond the specific country that is being
    sanctioned?
        Mr. Adeyemo. Senator, again I think that one of the things
    we need to do as we think through how to make sure that we
    further enhance the dollar-based financial system is ensuring
    that our allies and our partners remain bought into that
    system, by working more with them going forward.
        In addition to doing that, we need to do many of the things
    this Committee has been calling for, for a long time, in terms
    of the principles that you have outlined, making sure that when
    we do use sanctions we are using them as part of a clearly
    defined strategy, that we are allowing for humanitarian access
    to continue to flow. When it comes to a country like China, it
    is true that they are trying to find means around our financial
    system to avoid sanctions, but it is difficult for countries,
    our adversaries, to find a means around not only the U.S.
    financial system but the financial systems of our partners and
    allies as well.
        Fundamentally, by taking actions in unison with other
    countries, we put ourselves in a better position to make sure
    that we maintain the dollar-based financial system globally and
    also that we are able to hold our adversaries accountable for
    actions that they take that are in violation of international
    laws and norms.
        Senator Daines. Thank you. Speaking of adversaries, just
    earlier this month, without warning or explanation, the Biden
    administration lifted sanctions on two Iranian entities
    involved in the military missile programs, the Mammut
    Industrial Group and a subsidiary, Mammut Diesel. This action
    contradicts earlier assurance by President Biden that he would
    not ease sanctions until Iran reversed its course on the
    pursuit of a nuclear weapon.
        Mr. Adeyemo, why did the Administration lift sanctions on
    these two entities?
        Mr. Adeyemo. Senator, I want to assure you this was not in
    response to a change in Administration policy but rather in
    response to legal actions that were taking place. I am happy to
    provide you with a more detailed briefing on those legal
    actions in another setting.
        Senator Daines. Of course, it gave us, I think, great
    concern. And so perhaps a more direct question would be, does
    the President remain committed to preventing Iran from
    obtaining a nuclear weapon, or should we expect to see more of
    these, I think what I would call them, quiet concessions?
        Mr. Adeyemo. So Senator, again, I want to make clear that
    this was not a concession but rather in response to a legal
    action. The President remains committed to ensuring that Iran
    does not have a nuclear weapon. He has made that if Iran
    reenters the JCPOA we are willing to take steps in that regard,
    but not before.
        Senator Daines. Last, on Afghanistan, as the Nation
    continues to deal with the terrible aftermath of President
    Biden's very abrupt withdrawal from Afghanistan, questions
    remain as to how the U.S. is going to prevent the rise of
    terrorism and address the growing humanitarian crisis in that
    Nation. Do you foresee a scenario where the United States would
    relinquish the frozen Afghan Central Bank reserve to the
    Taliban?
        Mr. Adeyemo. Senator, I see no situation in which we would
    allow the Taliban to have access to the reserves that belong to
    the Afghan people. We believe that it is essential that we
    maintain our sanctions against the Taliban, but at the same
    time find ways for legitimate humanitarian assistance to get to
    the Afghan people, and that is exactly what we are doing.
        Senator Daines. Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Daines. Senator Van
    Hollen of Maryland is recognized for 5 minutes.
        Senator Van Hollen. Thank you, Mr. Chairman. Welcome, Mr.
    Adeyemo. Good to see you. And I agree that sanctions are only
    one tool in our national security and foreign policy toolbox,
    but as you indicated, they can play an important role in
    enforcing a rules-based international system.
        You would agree, would you not, that China grossly violated
    its international obligations when it cracked down on democracy
    in Hong Kong.
        Mr. Adeyemo. I agree, Senator.
        Senator Van Hollen. And while we know that sanctions cannot
    always succeed in reversing malign conduct, if we raise the
    costs of those actions we send a signal that, whether it is
    China or another country, if they want to engage in this kind
    of aggressive behavior elsewhere they will pay a price. But
    that only works if they actually pay a significant price.
        After China's actions in Hong Kong, the Congress passed
    legislation--Senator Toomey and I authored legislation, the
    Hong Kong Autonomy Act--which requires the Executive branch to
    impose sanctions on officials that are complicit in the
    crackdown in democracy, and importantly, on financial
    institutions that helped facilitate those individuals.
        Senator Toomey and I wrote to Secretary Yellen back in
    June, applauding the Administration for sanctioning some
    individuals, but raising the question about whether or not the
    Administration had been successful in identifying any financial
    institutions that facilitated those.
        There have been conversations since, but as of today, is it
    your testimony that the Department of Treasury cannot identify
    any financial institutions that facilitate the individuals that
    you have applied sanctions to?
        Mr. Adeyemo. Senator, as we said then, we have not found
    financial institutions that facilitate those types of
    transactions, but it is something we are continuing to look at.
    I think you made a clear point that one of the goals is to
    increase the cost to people who take these types of actions,
    and from our perspective, not only doing this unilaterally but
    working with our allies to raise the cost is critically
    important as well.
        Senator Van Hollen. Well, let me turn to another piece of
    legislation that Senator Toomey and I, and Senator Brown
    passed, called the BRINK Act, which applied sanctions against
    any financial entities facilitating North Korea's malign
    activities. And it was modeled after the Iran sanctions
    legislation so it was mandatory and secondary sanctions.
        To date, despite the fact that a U.N. group identified lots
    of financial institutions that they say are helping North Korea
    evade those sanctions, the Administration, neither the previous
    one nor the current Administration, the Biden administration,
    has imposed sanctions on any of these financial institutions
    since the passage of the BRINK Act. Is it your testimony today
    that we have not identified any financial institutions that are
    helping North Korea violate the sanctions?
        Mr. Adeyemo. Senator, as you know well, over the last
    decade we have sanctioned a number of financial institutions
    that have been facilitating trade with North Korea and holding
    responsible a number of people who have taken these actions.
    While we may not have taken sanctions under the act that has
    been passed, we do appreciate the authority that Congress has
    given us that will allow us, in the future, to do so. And as we
    find financial institutions that violate the law and facilitate
    this trade we are committed to taking these actions.
        Senator Van Hollen. Yeah, here is the issue. The issue is
    that it is not just authority in the BRINK Act. It is a
    requirement. They are mandatory sanctions. And they are
    mandatory sanctions on any entities, anywhere in the world,
    that are facilitating the North Korean regime. And so my
    question remains--and you can get back to me--are you familiar
    with the U.N. reports that have been done, where they actually
    identify, by name, entities around the world that are helping
    North Korea violate the sanctions regime? Are you aware of
    those reports?
        Mr. Adeyemo. Senator, I am aware of those reports.
        Senator Van Hollen. OK. And have we looked at the reports,
    and have we concluded that they are wrong?
        Mr. Adeyemo. Senator, we have not concluded that the
    reports are wrong. What we have not done is found evidence
    sufficient for the mandatory sanctions that are required under
    the BRINK Act. But we look forward to continuing to look for
    that evidence and to working with you and your staff to use the
    mandatory sanctions that have been passed by Congress to hold
    North Korea accountable and to make sure that we are able to
    prevent them from advancing their weapons of mass destruction
    program.
        Senator Van Hollen. Well, I appreciate that. You know, the
    Appropriations Committee, we just released our appropriations
    bills for public review yesterday. I chair the FSGG
    Subcommittee, and we have language in there really directing
    the Executive branch to provide us with an update. Because we
    have, on the one hand, the U.N. report that identifies, by
    name, these entities, and yet we have not seen any action. And
    if the reason is that we do not have sufficient evidence, I
    would love to sit down with you and go over that.
        Thank you, Mr. Chairman.
        Mr. Adeyemo. Senator, I am happy to do that.
        Chairman Brown. Thank you, Senator Van Hollen. Senator
    Cramer from North Dakota is recognized for 5 minutes.
        Senator Cramer. Thank you, Chairman Brown. Thank you,
    Ranking Member Toomey. Thank you, Mr. Secretary, for being
    here.
        I want to follow up on a couple of things. First of all,
    both Senator Toomey and Senator Menendez and others, but
    especially the two of them, have certainly emphasized the
    expressions of commitment have not led to action in terms of
    enforcing, and in the case of Nord Stream 2, where I want to
    drill down a little bit, certainly CAATSA.
        And that is a pretty big problem, because you said
    something else about, I think it was to Senator Scott, about
    multilateral coordination is really important. Nord Stream 2
    has been strongly opposed by the European Union Parliament, I
    mean on two votes of like 400-100, and that is just rounding up
    the lower number and down the higher number.
        So it is hard for me to see much commitment when the
    President announces, just sort of out of the blue, the lifting
    of sanctions on Nord Stream 2, an authority he does not even
    have.
        And I think that we have concluded that the State
    Department determined that Nord Stream 2 AG has facilitated
    sanctions evasion. On whose behalf? On whose behalf? I mean,
    who is the winner here? Why did the President lift the
    sanctions? Why are we facilitating this? I mean, on whose
    behalf is this being done?
        Mr. Adeyemo. Senator, I appreciate the concerns, and they
    are concerns that we share. What we are doing, within the
    Treasury Department, is making sure that we are looking for any
    evidence that we can that will allow us to use the mandatory
    sanctions that Congress provided to us. We have met, on several
    occasions, with Members of the Committee staff here to hear
    from them in terms of the evidence that they have. We have also
    worked closely with the Department of Justice to make sure that
    we have a good understanding of the legal authorities that we
    have in order to be in a place where we can take actions when
    we have the appropriate evidence.
        Senator Cramer. But the President's actions are completely
    unilateral, they were outside of the law, and I want to know on
    whose behalf it was done? I mean, the European Union or
    multinational relationship, overwhelmingly opposed this
    completing of Nord Stream 2.
        And let me tell you a couple of good reasons why it is a
    bad idea, in the first place, Nord Stream 2. Because it has
    natural gas, produced in Russia, moved via pipeline, like Nord
    Stream 2. Besides captivating European allies to a single
    source, setting that aside for a moment, has, through the
    lifecycle of that gas, a 41 percent higher greenhouse gas
    emission footprint than natural gas produced in the United
    States and liquified and sent to the same European allies. And
    that does not even include the methane leakage.
        So what I am trying to wrap my mind around is what is the
    good reason for lifting sanctions? And I know you are looking
    for every legal reason to enforce the law, which is interesting
    to me, but what is your theory, if you do not know, why the
    President would have done something like this?
        Mr. Adeyemo. Senator, we share your concerns with regard to
    the Nord Stream 2 project. Ultimately, our goal here is the
    same as yours, which is to make sure that we provide for the
    security of our key allies while doing it in a way that does
    not further those that seek to destabilize the region.
        Our role, at Treasury, is to make sure that we use the
    mandatory sanctions authorities that you have provided, and
    that is what we are committed to doing when we have the
    sufficient evidence to do so.
        Senator Cramer. Well, I am concerned about the bigger
    picture. I mean, here we are going to send the President, and
    most of the Cabinet, it seems, to Glasgow, to try to convince
    the world to be as good as we are. Although we have a Secretary
    of Energy who, in North Dakota last week, said we, the United
    States, does not have the moral authority to hold China
    accountable when they are emitting three times more greenhouse
    gas emissions than we are. They are on a trajectory to become
    responsible for 100 percent of greenhouse gas emissions growth,
    while we are on the decline.
        And I am just having a heck of a time understanding why we
    apologize for the United States while covering for China, who
    just, as you know, we just learned, had a very successful
    circumventing of the globe of a missile. It is very, very
    concerning, and I am just concerned about whose side this
    Administration is on when it comes to both our economy and,
    frankly, even, frankly, to climate change.
        What I see is a transfer of climate guilt to big polluters
    as somehow making us feel better, and then I do not know what
    they are going to say in Glasgow that is going to be convincing
    to our allies. But thank you for your testimony, and I yield.
        Mr. Adeyemo. Senator, ultimately the President believes
    that climate change is a global responsibility, but the
    transition to a clean energy economy is an opportunity for the
    United States, in which if we make the investments that are
    needed we can become a leader in selling American goods and
    service around the world that help to meet the needs of climate
    change.
        Senator Cramer. And I am all on board. I argued to stay in
    Paris with the last Administration for those very reasons. But
    I am not seen that kind of leadership anymore. I mean, the
    approval of Nord Stream 2, there are multiple bad things about
    it, and I have not found one good one, including on whose
    behalf we facilitated these sanctions breaches.
        Chairman Brown. Senator Warren from Massachusetts is
    recognized for 5 minutes.
        Senator Warren. Thank you, Mr. Chairman. So giant
    corporations and the wealthy have worked hard to rig the tax
    code so that they can pay lower taxes than everyone else. And
    now the Democrats are looking to try to make the tax code just
    a little bit fairer, and hordes of lobbyists are fighting us,
    tooth and nail, to stop it.
        The whole thing is disgusting, but one fight is downright
    breathtaking, even in this cesspool, and that is the lobbyists'
    fight to protect the ability of their wealthiest clients to
    cheat on their taxes.
        Millions of hardworking Americans file their taxes honestly
    every year. Their employers send them W-2 forms that say
    exactly how much they earned in wages, right down to the penny.
    And then the employers also send a copy of that to the IRS.
    This is called third-party reporting, and it helps taxpayers
    fill out their tax forms accurately. It also helps the IRS zero
    in on tax cheats if the numbers do not add up.
        Wage earners, from cashiers to teachers, are subject to
    third-party reporting, but the wealthy get their money in other
    ways, and mostly the IRS does not get any information, no
    third-party reporting, to keep them honest.
        So Deputy Secretary Adeyemo, let us consider a
    multimillionaire with several mansions, who sells one of those
    mansions for several million dollars more than they paid for
    it. That is taxable income. But does the IRS get third-party
    verification of how much profit they made?
        Mr. Adeyemo. No, they do not, Senator.
        Senator Warren. All right. Let us ask about a partner in a
    law firm or a private equity fund. When they get millions of
    dollars as a distribution of profits from their firm, does the
    IRS get true, third-party verification of how much money they
    make?
        Mr. Adeyemo. No, they do not.
        Senator Warren. OK. So when rich people rake in millions in
    sales or profit distributions, they are on the honor system. So
    tell me, Deputy Secretary, how is the honor system working
    right now?
        Mr. Adeyemo. It is not working well, Senator. As you know
    the top 1 percent of earners in America underpay their taxes by
    more than $150 billion each year, almost $2 trillion over the
    course of 10 years.
        Senator Warren. More than $150 billion a year is lost by
    these top earners. And that is exactly why Congress is
    considering a simple new, third-party reporting requirement.
    Under this proposal, banks would report just two very general
    numbers to the IRS each year: total dollars that come into an
    account and total dollars that have gone out. This means the
    IRS can spot wealthy tax cheats that have millions of dollars
    flowing into an account but they are not reporting any money on
    their tax return.
        Now many rich people are happy now with the current system,
    and the banks who serve them are also happy. So they have
    started a campaign to keep the IRS in the dark about tax
    cheating, and some of these folks are just outright lying about
    the proposal, claiming, for example, that it would give the IRS
    information on individual transactions. And some Republicans
    have picked up on these lies.
        So let us go through some of these. Deputy Secretary
    Adeyemo, just to set the record straight, under this proposal
    if I bought new tires or a couch or a cow, would the IRS know
    about it?
        Mr. Adeyemo. No, they would not, Senator.
        Senator Warren. Well, if I paid my friend, Sherrod, back
    for buying me a cup of coffee, would the IRS know about it?
        Mr. Adeyemo. No, they would not, Senator.
        Senator Warren. Would anything, anything at all in this
    proposal, cause the IRS to increase audit rates on folks making
    less than $400,000 a year?
        Mr. Adeyemo. No, Senator. It would actually allow us to
    reduce audits on those individuals and increase our ability to
    go after those who are more likely to cheat the system by
    underpaying their taxes, which are wealthy taxpayers.
        Senator Warren. Well thank you, Deputy Secretary. You know,
    this proposal would help unrig our tax system just a little
    bit, making sure that the wealthy have to pay the taxes they
    owe, just like everyone else does.
        So tell me, why have the lobbyists been fighting this
    proposal so fiercely? Small businesses have been putting
    together W-2s for their employees every year for a zillion
    years. Do not tell me that the banks cannot do this.
        Mr. Adeyemo. Senator, those who do not seek to pay their
    fair share will go to no ends to try and avoid taxation, and
    that is exactly what we are seeing here. The President's goal,
    ultimately, is to level the playing field so that wealthy
    individuals have to pay taxes in the same way that working
    class pay every day in America.
        Senator Warren. Well, thank you very much. You know, the
    Democrats are fighting for tax reforms that will help ensure
    that the very rich and giant corporations start paying their
    fair share. And I get it that the lobbyists and the rich people
    that they represent are going to fight us with everything they
    have got, including spending millions and millions of dollars
    on these campaigns. But we need to make the tax system fairer,
    and this is one of the critical ways we can do it.
        Thank you for your help on this. Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Warren.
        I am not clear. No one is in the room, although Senator
    Hagerty is about to return, I understand. Senator Cortez Masto,
    or Senator Tillis from his office, perhaps, or Senator Cortez
    Masto from hers?
        [No response.]
        Chairman Brown. Senator Ossoff from his?
        [No response.]
        Chairman Brown. Senator Smith from hers?
        [No response.]
        Chairman Brown. One moment.
        [Pause.]
        Chairman Brown. Senator Hagerty is just a couple of moments
    out. I will ask one more question to the Deputy Secretary.
        The White House gathered, as you know, over 30 Nations last
    week and called for accelerated cooperation to combat
    international ransomware efforts. This effort shows your focus,
    the Administration's focus on protecting the community of U.S.
    companies from such attacks.
        How can Congress work more effectively and cooperatively,
    Mr. Deputy Secretary, with Treasury to address the problems of
    sanctions violations through cryptocurrency in cases of
    ransomware?
        Mr. Adeyemo. Senator, thank you for the important question,
    and as you know, recently we sanctioned our first
    cryptoexchange for the facilitation of ransomware payments. We
    are committed to continuing to look at using our sanctions
    authorities to go after those that use cryptopayments to
    violate our laws by committing crimes.
        We want to work closely with Congress. One of the most
    important areas for us, frankly, is ensuring that we have a
    workforce that understands these issues, going forward. So we
    look forward to both looking for the authorities to hire the
    people we need but also to the budget increases that are part
    of the President's fiscal year 2022 budget, in order to make
    sure that we have the personnel needed to address the issues
    cryptocurrency, but also other changes that are happening in
    the payment system that are making it harder for our sanctions
    regimes to effectuate the type of behavioral changes we want
    from our adversaries.
        Chairman Brown. Talk for a moment, too, about international
    cooperation to disrupt ransomware.
        Mr. Adeyemo. As you know, Senator, many of these
    cryptoexchanges and cybercriminals that facilitate ransomware
    exist outside the United States and have an impact here. Our
    goal is to work closely with our allies and partners to disrupt
    those actors that exist in their countries, and a big piece of
    this is going to be ensuring that these countries also take
    actions to make sure that anti- money laundering rules are
    followed by cryptoexchanges that exist in their countries, and
    that they are extending the protections that exist within their
    traditional financial sector to cryptocurrencies and to
    financial technologies that are started in their jurisdictions.
        Chairman Brown. Thank you, Mr. Secretary. Senator Toomey
    has one more question.
        Senator Toomey. Thank you, Mr. Chairman. Mr. Adeyemo, my
    question is this. Does the Administration intend to try and
    bypass the Senate's treaty approval process to implement Pillar
    One of the international tax agreement that the Administration
    is pursuing?
        Mr. Adeyemo. Senator, we, of course, look forward to
    working closely with you on the implementation of the
    international tax agreement. As the agreement is not completed
    I cannot speak to the process for working with Congress on
    those portions. But what we do know, based on the conversations
    we have had with our international partners, with Congress, and
    with the business community, is that the American business
    community is supportive of Pillar One, because they see it as a
    way of creating a level playing field throughout the world for
    them, going forward.
        Senator Toomey. Well, some of the business community are
    supportive and some are not. I would point out that the U.S.
    has 58 bilateral tax treaties in force. All of them were
    approved by a two-thirds vote in the U.S. Senate.
        And here is the problem. If you cannot answer the question
    of how you are going to impellent this, that obviously suggests
    there is some uncertainty about whether it will be implemented.
    It was Pillar One that was the motivation for other countries
    to agree to Pillar Two, which is the increase in the global
    minimum tax. If they do not know for sure that they are going
    to get Pillar One, and they have good reason to doubt it, then
    it is not at all clear to me that they are going to go ahead
    and impose Pillar Two, which they were reluctant to do in any
    case.
        So my suggestion would be before the Administration and our
    Democratic colleagues go ahead and impose this huge tax
    increase on American multinationals, which might not be met by
    a corresponding tax increase with other countries'
    multinationals, you might want to pause and get this figured
    out.
        Mr. Adeyemo. Senator, as you know, countries like Germany,
    France, the U.K., have higher minimum taxes than we do. Ireland
    and a number----
        Senator Toomey. Not with respect to the income of foreign
    subsidiaries.
        Mr. Adeyemo. These countries are all committed to
    increasing them to the global minimum tax.
        Senator Toomey. Yes. But as I said, that was as a
    condition. It was conditioned on them getting Pillar One, and
    you are not able to explain how you are going to get Pillar One
    implemented. So you have to question their commitment if they
    are not going to get what they bargained for.
        Chairman Brown. Senator Ossoff from Georgia is recognized
    from his office.
        Senator Ossoff. Thank you, Mr. Chairman, and thank you Mr.
    Adeyemo for your service and your testimony today.
        The comprehensive sanctions review that Treasury has
    undertaken in the first 6 months of the Administration--I
    appreciate the details that have been referred to the
    Committee--you have highlighted a number of what you assess to
    be success stories in that document. Could you please identify
    for the Committee one or two high-profile instances where U.S.
    sanctions have been ineffective, have not achieved their
    objectives, or where the cost or externalities of the sanctions
    have exceeded the benefit, from Treasury's perspective?
        Mr. Adeyemo. Senator, as we say in the sanctions review we
    did not conduct a comprehensive review of each one of the 37
    sanctions programs that are authorized by the Executive branch
    or Congress. Rather, this review was focused on a forward-
    looking assessment of what we can do to make sure this remains
    an effective tool.
        What we learned, though, was that the places where we can
    improve sanctions going forward speak to some of the things
    that we could have done better in the past, for example,
    ensuring that we continue to use a framework for evaluating
    when sanctions are imposed and ensuring that humanitarian
    assistance is able to be provided to people in conflict zones.
        We have learned a great deal about doing both of these
    things over the last 20 years, and we look forward to applying
    them on a go-forward basis to our sanctions program.
        Senator Ossoff. Thank you, Mr. Adeyemo, but you do specify
    a number of cases where you believe U.S. sanctions policy has
    been effective. So I think in the interest of ensuring that we
    are improving U.S. policy, having undertaken a clear review of
    past policy, can you please specify cases where U.S. sanctions
    policy has not functioned as intended or effectively? The
    cases, for example, that inform the general assessment that you
    just shared with respect to humanitarian aid in conflict zones.
        Mr. Adeyemo. Senator, I think one of the challenges that we
    identified was the fact that because we did not have a clear
    framework for evaluating the imposition of sanctions in each
    one of the instances in the past it makes it hard to evaluate
    the success of those sanctions programs. As we said in the
    report and I said earlier, we did not evaluate each sanctions
    program or each sanction that was put in place, so I am not in
    a position to tell you where one could have been done better or
    done differently.
        What I can tell you is that on a go-forward basis we look
    forward to applying a framework that aligns with the principles
    that this Committee has spoken of, going forward, to ensure
    that we are in a place where we can evaluate the success of
    sanctions and decide where we need to do more or do less in
    order to effectuate our foreign policy goal and to ensure that
    sanctions are usable well into the future, as a foreign policy
    tool.
        Senator Ossoff. Mr. Adeyemo, the report--and I believe I am
    looking here at the full review and Executive summary--
    specifies cases in Iran, a case with respect to the Cali
    Cartel, sanctions targeting Libyan assets following the fall of
    Khadafi's regime in 2011, the designation of over 1,600
    terrorist entities as success stories, I am asking you where
    our sanctions have not succeeded. Is it that you have not
    identified any such cases, or is there a lack of willingness to
    acknowledge policy failure in public?
        Mr. Adeyemo. No, Senator, you are right that in the report
    we do acknowledge a number of cases where we have seen clear
    success. As we said in the report, we did not focus in on each
    individual program or authority but rather we looked for
    themes, and we highlighted those themes, and I did so earlier
    in my testimony, of places where we need to make sure that we
    address challenges.
        Some of those challenges are challenges that we need to
    address that are internal challenges, one making sure that we
    are able to allow humanitarian assistance to flow and to making
    sure that sanctions are used as part of an overarching
    strategy. But some of the challenges are created by our
    adversaries and changes in technology. For example, our
    adversaries are attempting to find ways to get around our
    sanctions program, and the advent of cryptocurrencies and
    things of that nature make it harder for sanctions to be
    effective.
        Senator Ossoff. Mr. Adeyemo, with respect to my time being
    limited--and I may already be over my time--what I am asking is
    for you to identify. We are trying to learn lessons here. You
    have conducted a review of U.S. sanctions policy. You have
    identified in that review specific success stories. Please,
    with my remaining time, identify one or two specific examples
    where U.S. sanctions policy has been ineffective, so that the
    Congress can benefit from the review you have undertaken and
    deliberate how best to improve the statutes that govern these
    policies.
        Mr. Adeyemo. Senator, as I said, the review was focused on
    the idea of us looking into the future as to what we can do to
    use sanctions going forward. We did not spend time looking at
    the individual sanctions policies. I am more than happy to
    follow up with you and your staff to talk about any of the
    sanctions programs that you would particularly like to discuss,
    but our goal of the review was to look at what we could do
    going forward to make sure that sanctions remain an effective
    tool. In order to do that, we do need to address the challenges
    that the review found, which we have clearly articulated, both
    in the report and I have done in my testimony today, in order
    to make sure that going forward this tool is effective.
        Senator Ossoff. Yeah. Mr. Adeyemo, we will need to meet in
    person, because the purpose of this hearing is a policy update
    on the Treasury Department's sanctions policy review, and if we
    are unable, in a public setting, to articulate or discuss any
    specific cases where U.S. sanctions policy has been
    ineffective, beyond generalities, then I think we have more
    work to do. So I look forward to meeting with you so that we
    can work together to improve U.S. policy. Thank you.
        Chairman Brown. Senator Hagerty from Tennessee is
    recognized for 5 minutes.
        Senator Hagerty. Chairman Brown, Ranking Member Toomey,
    thank you for holding this important hearing, and Deputy
    Secretary, it is very good to be with you today.
        As I have said before, the financial system in America is
    the envy of the world, and we need to do everything that we can
    to safeguard it from malicious activity and malign behavior.
    The ability to access America's financial markets is a
    privilege. We must also appreciate the national security
    importance of using the financial tools in our arsenal to
    counter America's adversaries and to constrict our enemy's
    financial lifeblood.
        Just this weekend, we saw reports that the Chinese
    Communist Party surprised the U.S. intelligence community over
    the summer as they tested nuclear-capable hypersonic weaponry.
    This is a missile that circles the globe at speeds more than
    five times the speed of sound in a way that is harder to track
    and defend against before racing toward its target.
        Reports of such activity underscore the challenging
    environment that faces America today. We must use every tool in
    our arsenal to defend our interests and make it clear to our
    adversaries that America means business. We must do so in a
    manner that does not inadvertently harm U.S. dollar's current
    status in the world and make certain that we remain the world's
    reserve currency.
        Mr. Deputy Secretary, I agree with a number of the
    recommendations in the report that you have been discussing
    today. For example, clarity around sanctions is critical for
    enforcement, and we must ensure that costs to American small
    businesses are minimized. The report notes that if allowed to
    proliferate unchecked, digital assets could offer our
    adversaries a means to end-run our sanctions and harm the
    efficacy of those sanctions. The Chinese Communist Party has
    taken the extreme approach of banning all private sector
    cryptocurrency activity.
        Your predecessor at the Treasury Department recently wrote
    about the need to protect security in a manner that does not
    crush innovation, and I agree, and I think you do too. And we
    must understand China's ambitions in this space with its
    digital yuan, China's potential desire to facilitate sanctions
    evasion, and the associated national security implications for
    the United States.
        So I would like to ask you, how will the Biden
    administration and the Department of Treasury continue to lead
    in the digital assets arena in a way that protects us from the
    malign behavior of actors that we have been discussing and
    criminal activities that we might foresee?
        Mr. Adeyemo. Senator, thank you for the question, and I
    think one of the most important things for us is to remind
    ourselves that innovation is something that has been good for
    our economy, and we need to make sure that we create an
    environment that allows that innovation to exist but that we
    want to make sure that we have regulatory rules for the road
    that protect consumers, investors, and our national security.
        Doing that will require us to extend our existing
    regulatory apparatus to address these issues but also
    potentially work with Congress where we may need new regulatory
    rules of the road to address new innovation. But the thing that
    we want to make sure that we continue to do is that we create
    room for helpful innovation that will help advance our economic
    interest.
        Senator Hagerty. I appreciate the perspective, and I think
    that many of us look forward to working with you in that
    regard.
        I would like to turn to another point, and that has to do
    with the World Bank and the IMF and the influence of Communist
    China. Last month, the law firm of WilmerHale released findings
    from its investigation into data irregularities with the
    important World Bank's Doing Business Reports. These reports
    bill themselves as providing objective measures of business
    regulations for local firms in some 190 economies.
        The report found that the data describing the business
    climate in China was changed because of pressure by then-World
    Bank CEO Kristalina Georgieva. Her goal evidently was to
    inflate China's ranking at precisely the time that China was
    going to help the World Bank increase its capital, a clear
    conflict of interest. Despite legitimate issues and concerns,
    the Biden administration continues to support Dr. Georgieva to
    continue to lead the IMF.
        So Deputy Secretary, what steps is Treasury taking to
    ensure that the World Bank and the IMF are safeguarded against
    corruption by the Chinese Communist Party?
        Mr. Adeyemo. Senator, when we reviewed the Wilmer report we
    saw issues that were of serious concern, and that is why the
    Secretary demanded that the IMF look into this closely by
    speaking to the lawyers from WilmerHale and speaking with the
    managing director. Based on the evidence that we reviewed, we
    did not find that it was appropriate at this point to remove
    the managing director, but we did make very clear, during those
    meetings and directly to the managing director, that changes
    needed to be made to ensure that whistleblowers' rights are
    protected, that the integrity of the institutions are
    protected, which is our overarching goal, and that we will be
    holding her and the other leaders of the international
    financial institutions accountable for making these changes.
        Senator Hagerty. Well, I think the WilmerHale report
    highlighted clear concerns about conflict of interest, and I
    hope that you will continue to work with us to ensure
    transparency as you hold the IMF and the World Bank and
    agencies like this accountable to prevent them from being
    influenced by malign actors like the Chinese Communist Party.
        Mr. Adeyemo. We are committed to working with you on that,
    Senator.
        Senator Hagerty. Thank you very much.
        Chairman Brown. Thank you, Senator Hagerty. Senator Cortez
    Masto from Nevada is recognized from her office.
        Senator Cortez Masto. Thank you, Mr. Chairman. Deputy
    Secretary, thanks for joining us today.
        Let me talk a little bit about ransomware, which we know
    the attacks have doubled from 2019 to 2020, and there is no
    doubt they are a criminal menace and a national security
    threat. And I also know that in Nevada companies have been
    attacked by ransomware by criminals.
        So two questions for you. One, what does the U.S.
    Government recommend firms in the private sector do to address
    this, and then two, how should local governments and businesses
    be looking to address this, and is there some support at the
    Federal level that they can seek to help really prevent or
    prepare and what to do if they are somehow attacked through
    ransomware?
        Mr. Adeyemo. Senator, thank you for that important
    question, and I think the important thing for us all to
    recognize is that ransomware is a symptom of a larger
    challenge, which is that of cybersecurity. The most important
    thing that companies, our Government, individuals can do is
    make sure that they are focused on improving their
    cybersecurity in order to prevent criminal actors from being
    able to get into their system and potentially use them to
    ransom them in order to turn those systems back on.
        If a company or Government is attacked, the first thing we
    recommend that they do is get in contact with the FBI and to
    notify them immediately of these attacks. Our goal, ultimately,
    is to make sure that payments do not flow into the hands of
    criminal actors and that especially those payments do not flow
    into the hands of those people who have been sanctioned by the
    United States. So oftentimes those who have been attacked need
    to also contact the Federal Government and the Office of Asset
    Control in order to make sure that we are in a position to best
    help them resolve the situation and hold those accountable who
    are taking criminal actions against these enterprises.
        Ultimately, the President is committed to a whole-of-
    Government effort, which involves not only the FBI and the
    Treasury Department but all agencies of our Government to hold
    people accountable. And as I discussed with Senator Brown
    earlier, it is going to be critical that we not only do this in
    the United States but that we have a global effort, because
    many of these cybercriminals are domiciled outside of our
    country.
        So we look forward to working with Members of Congress to
    address these issues and to making sure that we work with our
    allies and partners to do so as well.
        Senator Cortez Masto. Thank you, because listen, count me
    in. We need to address this and work together.
        Let me ask you this. Do you think sanctioning
    cryptoexchanges makes it riskier for firms to pay ransoms?
        Mr. Adeyemo. Senator, I do think that paying a ransom is
    something that a firm should--that is risky. Ultimately, our
    goal is to make sure that we stop these criminal enterprises
    from using ransomware as a tool to gain economic resources. So
    our goal is to make sure that when a company is attacked they
    notify us immediately. Treasury is committed to using all the
    tools in our arsenal to go after those who are committing these
    ransomware attacks.
        As you know, we recently sanctioned a cryptoexchange that
    predominantly facilitated ransomware attacks. We are also
    looking at other exchanges and other mixers that are doing the
    same, in order to hold them accountable, and working with our
    international counterparts to do so as well.
        Senator Cortez Masto. Thank you. Let me jump to something
    else. In 2018, I joined Senator Flake to request a report from
    the GAO on remittances to fragile Nations, and fragile Nations,
    as you know, have a weak financial system, high levels of
    poverty, and active criminal or terrorist activities. Can you
    expand on the sanctions review recommendations for careful
    calibration to limit the impact of sanctions on the flow of
    legitimate humanitarian aid to those in need, and how will you
    carefully calibrate sanctions to limit humanitarian suffering?
        Mr. Adeyemo. Senator, this is a critical issue. When we use
    our sanctions regime, our goal is to go after actors who
    violate our national security but to permit for humanitarian
    assistance to continue to flow. What we have learned over the
    last 20 years is that oftentimes when we do not permit
    humanitarian assistance as we are announcing a new authority it
    creates a gap between, and some uncertainty for those who are
    acting in this space.
        So part of our goals is to ensure that as we go forward we
    find ways to create exceptions, where possible, early on, so
    that humanitarian assistance can continue to flow, and to make
    sure that we are clearly communicating with the financial
    institutions that are facilitating humanitarian assistance
    going forward about what our policy intent is, and making clear
    what legitimate humanitarian assistance is permittable in order
    to make sure that as we hold people accountable for their
    violations of international laws and our national security we
    continue to allow people to receive the humanitarian assistance
    they need, going forward.
        Senator Cortez Masto. Thank you. Thank you again, Deputy
    Secretary.
        Chairman Brown. Thank you. Senator Moran from Kansas is
    recognized for 5 minutes.
        Senator Moran. Chair, thank you very much. Mr. Secretary,
    good morning. I want to echo, before I ask a couple of
    questions, I want to echo the concerns that I have heard a
    number of my colleagues raise in regard to sanction
    enforcement, and in that regard think about North Korea and
    Nord Stream 2, Iran. My point I would make to you is it seems
    like we have seen no change or modification in behavior in a
    positive way by any of those entities, those countries, while
    we are seemingly paused on our enforcement of sanctions.
        Let me now ask a couple of--and I hope the Administration,
    maybe there is an explanation for that, but I hope that we are
    forceful in our efforts to change behavior in all those
    instances.
        Let me start with this one in case I run out of time. I am
    trying to prioritize. Since 2014, the central banks of China,
    Russia, Iran, and Venezuela have all explored the creation of a
    central bank digital currency. As of now, China is well on its
    way to issuing its first CBDC. There is no question our
    adversaries will use Government-issued digital currency to
    evade U.S. sanctions, fund authoritarian regimes, and surveil
    civilian populations.
        How do central bank digital currencies allow for bad actors
    to accomplish their goals without detection, what steps are
    being taken to promote stability of our dollar based on the
    international financial system, and how does the Treasury plan
    to mitigate the blatant attempts by these countries to
    circumvent our sanctions?
        Mr. Adeyemo. Senator, thank you so much for that question,
    and I think from my perspective the best way to maintain the
    dollar's rule in the world is by making the needed investments
    here at home. Ultimately, the reason that the dollar is the
    world's reserve currency is because of the underlying strength
    of our economy, so by investing in that strength, by continuing
    to maintain a stable, rules-based system in the United States,
    we will continue attract capital.
        But you are right that other countries are developing
    things like the digital central bank currencies that will have
    an impact. Fundamentally, many of these countries seek to do
    this for a number of internal reasons, frankly, in order to
    better monitor their people and to make sure that they have
    greater control. But it will have an impact on the
    international financial system, but ultimately in order for any
    currency to have staying power it needs to be permitted to be
    used outside of that country, going forward.
        And what we are going to do, in terms of as we think about
    our sanctions regime, is to ensure that we are thinking through
    how we design sanctions in a way where, if a country attempts
    to subvert the U.S. financial system it will be harder for them
    to do that if we are taking sanctions actions with our partners
    and allies. While it is hard to get around the dollar-based
    financial system, it is nearly impossible to get around the
    dollar, the euro, the pound, and the yen. So when we are able
    to take actions together it puts us in a better position to
    hold our adversaries accountable.
        Senator Moran. Thank you. In fiscal year 2019, the NDAA
    provided for waivers under CAATSA, specifically, I think, with
    India in mind. Given India's importance as a partner in the
    Indo-Pacific, observers across the political spectrum note
    sanctions would do significant harm to our relationship.
        Does India meet the waiver requirements Congress passed 3
    years ago, and why is it taking a very long time to reach a
    decision?
        Mr. Adeyemo. Senator, that is a question that is driven by
    a foreign policy decision that I am not in a position to make.
    But what I can tell you is that we are committed to following
    the mandatory laws that Congress has passed and to using the
    authorities you provided appropriately, going forward.
        Senator Moran. You are sending me to the State Department?
        Mr. Adeyemo. I am saying that this is definitely a question
    that the Secretary of State is well positioned to answer, in
    consultation with others in the Administration.
        Senator Moran. You know, a similar circumstance arose in
    regard to Turkey, and it highlights, for me, that countries are
    making decisions that, regardless of our sanctions, they are
    continuing the behavior that the sanctions are designed to
    prevent or deter. Turkey is an example of that. India now
    presents, apparently, a similar kind of outcome. And it then
    highlights again--I would raise in the 16 seconds I have left,
    that there was a 2019 GAO report that found that officials at
    Treasury, State, and Commerce, quote, ``stated they do not
    conduct agency assessments on the effectiveness of sanctions in
    achieving broader policy goals.'' I would hope that this
    Treasury Department and others are responding to that GAO
    report to help us determine which sanctions work and in what
    circumstances, so that we can better mold our sanction policy.
        Mr. Adeyemo. And Senator, I appreciate the work of this
    Committee to lay out a set of principles that I think help us
    in doing that work. I think you are right that one of the most
    important things we can do is evaluate how these tools work,
    going forward. But in addition to new sanctions, a key is how
    do we enforce the sanctions that are on the books. That is not
    always done by making new announcements but rather in our
    engagement with our partners and allies to cutoff funding to
    countries that are malign actors, going forward. There are also
    interdictions at sea that are done in collaboration and
    coordination with our colleagues at the Defense Department. And
    we know that ultimately these things are in service of a
    foreign policy that is driven by decisions made by Congress and
    the President.
        So we appreciate the close working relationship with this
    Committee and the Foreign Relations Committee on making sure
    that we are enforcing Sanctions in a way that is in keeping
    with our national security.
        Senator Moran. Mr. Secretary, thank you.
        Chairman Brown. Thank you, Senator Moran. The Senator from
    Rhode Island, Senator Reed, the most senior Member in
    attendance on this Committee today, is recognized.
        Senator Reed. Thank you very much, Mr. Chairman. Mr.
    Secretary, welcome.
        We are facing a very challenging, very daunting, and very
    complex situation in Afghanistan. We have sanctions in place
    upon the Taliban and are unlikely to lift them. In fact,
    Secretary Blinken has said that if behavior is not acceptable
    further we could increase those sanctions. But at the same time
    there is a humanitarian crisis in the country, caused by many
    factors--the violence, the climate effects, et cetera.
        How do we manage this difficult balance between providing,
    or at least not interfering with the humanitarian assistance,
    and still maintaining sanctions effective sanctions against the
    Taliban?
        Mr. Adeyemo. Senator, thank you for your question, and you
    are correct that the situation in Afghanistan for the Afghan
    people is quite challenging, and those challenges are being
    brought on both by environmental circumstances, a number of
    circumstances that are unique to Afghanistan, but also by the
    lack of management of the Afghan economy by the Taliban.
        Fundamentally, our goal is to make sure that we are
    implementing our sanctions regime against the Taliban and the
    Haqqani Network but at the same time allowing for the
    permissible flow of humanitarian assistance into the country.
        To that end, we have met on a regular basis with
    humanitarian groups that are doing business in Afghanistan as
    well as our international partners, including the U.N. We have
    issued a series of general licenses that allow for the
    permissible flow of that humanitarian assistance going forward,
    and we are also consulting with these groups on specific issues
    that they continue to have.
        We believe that ultimately in order for humanitarian
    assistance to flow the Taliban has to allow that to happen
    within the country, but we are in a position where we are
    taking every step we can, within our sanctions regime, to make
    clear to humanitarian groups that we want to facilitate the
    flow of legitimate humanitarian assistance to the Afghan
    people.
        Senator Reed. Now I presume that the State Department--
    well, I cannot presume that, because we have very little
    presence on the ground. Who is actually monitoring the
    distribution of these humanitarian support systems to ensure
    that they are not being abused, and, in fact, it is getting to
    the people who need it?
        Mr. Adeyemo. In many cases we are working directly with the
    State Department and USAID on these sets of issues, but a lot
    of the humanitarian assistance that flows around the world,
    including in Afghanistan, goes through the United Nations. As
    you know well, the U.N. themselves has a sanctions regime when
    it comes to certain actors within the Taliban. A number of
    these groups that are doing this work are familiar with doing
    work and providing humanitarian assistance in conflict zones,
    where they are forced to do so where there are sanctions in
    use, and they have done this for a long time. By consulting
    actively with us and working closely with our international
    partners we feel confident that we can allow the flow of
    assistance to get to the Afghan people without having to
    provide undue benefit to the Taliban.
        Senator Reed. Thank you. And I appreciate this, and this
    is, again, as I said initially, complex and challenging, and it
    is almost on a day-to-day basis, I presume, that you and your
    colleagues in the State Department are looking at this issue
    and making judgments about the effectiveness of the program.
    And that is, I think, a fair statement.
        Mr. Adeyemo. It is, sir.
        Senator Reed. Thank you very much, Mr. Secretary.
        Chairman Brown. Thank you, Senator Reed.
        Mr. Secretary, thank you for joining us today. It has been
    a comprehensive, useful survey of the policy issues surfaced in
    the course of your months-long sanctions policy review, and we
    are so glad you did that review. I thank you for sharing your
    insights and findings and recommendations for this Committee.
    This will be but the first in a series of ongoing
    conversations, a good beginning.
        Senators who wish to submit questions for the record, those
    questions are due 1 week from today, Tuesday, October 26. Mr.
    Deputy Secretary, you will have 45 days to respond to any
    questions.
        Thank you again for your public service. It is a pleasure
    always to work with you.
        [Whereupon, at 11:45 a.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                  PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
        Today we welcome Deputy Secretary Adeyemo to the Committee for an
    update on international policy issues.
        Sanctions policy is an area where we have done important,
    bipartisan work on this Committee, across Administrations of both
    parties.
        Working with then-Chair Crapo, we were able to make important
    progress in holding countries like Russia and North Korea accountable.
    Senator Toomey and I worked together to pass tough new fentanyl
    sanctions, to help stem the flow of illegal opioids from China and
    Mexico that have taken such a toll on both of our States.
        I'm confident that we'll be able to build on that progress this
    year and into the future, in conjunction with President Biden and
    Deputy Secretary Adeyemo.
        Two weeks ago in the Committee, we explored the economic and
    humanitarian crisis in Afghanistan, the role of sanctions, and how we
    can get more aid to the Afghan people, without resources falling into
    the hands of the Taliban.
        Last week, a broad coalition of countries, led by the United States
    and Europe, agreed to substantially increase aid to Afghanistan. And we
    continue to work with our allies to ensure that aid can be delivered
    effectively to the people there, despite sanctions against the Taliban.
        Today, we'll focus primarily on the findings and recommendations of
    the months-long sanctions policy review that Secretary Yellen directed
    the Treasury Department to undertake.
        The department consulted with agencies across the Government--
    State, Commerce, the intelligence community, and others--as well as an
    array of private sector actors, including banks, businesses,
    nonprofits, international NGOs, and sanctions experts.
        That comprehensive review examined important questions of our
    current sanctions policy: Does the U.S. Government have the right
    sanctions tools? Are we using them effectively with our allies?
        Are we reassessing their application and adapting them as we go?
    Are we targeting the right people, entities, or countries, in the right
    way, with the right sanctions?
        And--ultimately--are we actually changing the behavior of targeted
    countries, entities, or people, where that's our goal?
        I know that Treasury has recommendations on these and other
    questions, and I look forward to hearing from Deputy Secretary Adeyemo
    today.
        There are some guiding, bipartisan principles that this Committee
    has recognized for years regarding sanctions policy:
        First, we should impose sanctions on a multilateral basis whenever
    possible. They're more effective, and garner broader political and
    diplomatic support if we impose them in coordination with our allies.
        Second, preserving and strengthening humanitarian exceptions and
    licensing are important, to ensure that people do not suffer from
    shortages of food, medicine, and other necessities because of
    sanctions.
        Third, for sanctions to be effective, they must have clear targets,
    goals, and objectives. If we're trying to change countries' and other
    actors' behavior, they need to understand how they can free themselves
    from sanctions.
        Fourth, the U.S. must do a better job of regularly assessing the
    effectiveness of sanctions. And we need to communicate those findings
    better to banks and other entities that effectively implement sanctions
    policy.
        Finally, the Executive branch must continue to support and empower
    the dedicated public servants across the Government charged with
    sanctions implementation and enforcement. As with any job, workers are
    our greatest asset--whether at Treasury, at State, in the intelligence
    community or elsewhere in our Government.
        They must have the funding, the analytical tools, the technical
    expertise--including in cryptocurrencies, which need a much closer
    look--and they need the technology and the time to do their jobs--
    particularly as we have increased the use of sanctions all around the
    world.
        Today's hearing will also give Members a chance to survey other
    international policy issues within our jurisdiction, and pose any
    questions to the Deputy Secretary that they may want him to address.
        I thank Deputy Secretary Adeyemo for your work on these issues, and
    look forward to your testimony.
                                     ______

                PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
        Thank you, Mr. Chairman Deputy Secretary Adeyemo, welcome. Under
    President Biden, Treasury has advanced a number of troubling
    international policies, some of which are clearly intended to
    circumvent the will of Congress.
        Take sanctions. The Administration has offered sanctions relief to
    our adversaries in the unrealistic hope that they will make concessions
    inimical to their own interests and nature.
        Consider Iran. To entice Iran to reenter the flawed JCPOA, the
    Administration appears willing to lift sanctions on Iran. Then, the
    Administration hopes Iran will commit to cease supporting terrorism and
    curb its ballistic missile program.
        Let's be clear: Once sanctions are lifted, Iran will never limit
    its malign behavior. The Administration clearly intends to repeat the
    mistakes of the Obama administration and reenter a treaty with Iran
    despite bipartisan opposition and without Senate approval.
        In addition, the Administration has repeatedly failed to comply
    with mandatory sanctions laws. Since President Biden was elected,
    according to the International Energy Agency, Iran has doubled the
    amount of crude oil it's selling to China to 600,000 barrels each day
    this year. Even though these sales are illegal under sanctions laws,
    the Administration has refused to impose congressionally required
    sanctions on them.
        The Administration has also chosen to ignore a law requiring
    sanctions for Russia's Nord Stream II pipeline. The pipeline's project
    manager has been using sanctioned Russian entities to construct and
    finance Nord Stream II--meaning the manager's integral role in the
    pipeline is predicated on a massive sanctions evasion campaign.
        Congress passed the Countering America's Adversaries Through
    Sanctions Act, or CAATSA, to punish, among other things, this exact
    type of conduct: sanctions evasion. Congress did this because sanctions
    evasion harms U.S. national security interests, and in this instance,
    it is increasing Putin's malign influence over Europe. But the
    Administration continues to violate that law in order to give Putin a
    pass.
        As if all that were not enough, the Administration is trying to
    enact an international tax treaty that will harm U.S. competiveness,
    and to do it without obtaining the necessary two-thirds approval of the
    Senate. This tax increase consists of two pillars.
        Pillar One is an unprecedented change that would allow foreign
    countries to tax American companies based on their sales overseas. It's
    a tax revenue transfer from us to them. Unsurprisingly, this is the
    priority for other countries, who have long sought this tax transfer.
        Pillar Two is a 15 percent global minimum tax on multinationals'
    foreign income. This is the Administration's attempt to justify
    burdensome tax increases on U.S. companies. Unsurprisingly, this is the
    Administration's priority since it's integral to their efforts to
    dismantle the successful 2017 tax reforms.
        By imploring other countries to implement a global minimum tax that
    will harm their own workers and businesses, the Administration has
    implicitly acknowledged that their proposed multinational tax increases
    will make U.S. workers and businesses less competitive, if other
    countries either don't implement a global minimum tax of their own, or
    implement a significantly lower rate than what the Administration is
    proposing.
        But there is a real possibility that other countries will not
    implement a global minimum tax. They have only reluctantly agreed to
    Pillar Two in return for Pillar One, which is the transfer of U.S. tax
    revenue to them. But implementing Pillar One in the U.S. requires the
    approval of two-thirds of the Senate through the treaty process. And
    that's not going to happen.
        Therefore, the Administration is either going to impose its global
    minimum tax increase on American companies without the countries we
    compete with enacting a corresponding tax increase, or violate the
    Constitution by modifying our existing tax treaties without obtaining
    the two-thirds consent of the Senate.
        The latest troubling international policy proposal from the
    Administration will soon come in a report from FSOC. That report is
    likely to claim that global warming poses a systemic risk to the
    financial system.
        I acknowledge that global warming is real. However, it does not
    follow from this that there is a new systemic risk to the financial
    system. We have had severe weather events since the dawn of time.
        As the economist John Cochrane has explained to this Committee,
    major weather events ``have never come close to causing systemic
    financial crises'' and there's no scientifically validated possibility
    to change this in the future. Democrats should acknowledge this reality
    and offer their proposals on climate change through the legislative
    process, which they are doing--including calling for a ``carbon'' tax
    in their reckless tax-and-spend measure that will make energy prices
    higher.
        But that's not enough for them. They also want to use unaccountable
    financial regulators to abuse their power and essentially cut off the
    supply of capital to fossil fuel companies.
        All across America, we are already seeing what happens when the
    regulatory environment discourages the development of necessary energy
    sources: Energy prices spike. This dynamic will only get much worse if
    financial regulators are pressured to starve the energy sector of the
    capital it needs to provide Americans the energy they need.
        Deputy Secretary Adeyemo, I look forward to discussing these issues
    with you today.
                                     ______

                      PREPARED STATEMENT OF WALLY ADEYEMO
                  Deputy Secretary, Department of the Treasury
                                October 19, 2021
        Chairman Brown, Ranking Member Toomey, and Members of the
    Committee, thank you for giving me the opportunity to speak to you
    today about the National Advisory Council on International Monetary and
    Financial Policies (NAC) report to Congress, the Treasury Department's
    priorities, and our outlook for the global financial system.
        The NAC report focuses on U.S. involvement with international
    financial institutions (IFIs) that represent part of our Nation's
    legacy of leadership in international economic affairs. The Bretton
    Woods Institutions--the International Monetary Fund (IMF) and World
    Bank--were founded in the aftermath of World War II to help rebuild and
    stabilize the global economy. Working through these institutions, the
    United States helped establish an international economic system that
    supported historic growth during the second half of the 20th century.
    From 1950 to 2000, for example, the volume of world trade increased to
    more than 21 times its size in 1950, delivering prosperity to millions
    of people around the world.
        Today, the IFIs advance American interests by fighting poverty,
    supporting robust and inclusive global growth, combating climate
    change, and promoting stable and transparent markets around the world.
    They also play a critical role in marshalling global economic resources
    in times of crisis. This past year, as COVID-19 ravaged economies
    around the world, numerous international financial institutions took up
    the mantle of fighting the pandemic. In 2020, the IMF approved more
    than $100 billion in emergency lending, concessional financing, debt
    service relief, and precautionary support to fund pandemic response and
    economic recovery efforts, while the World Bank Group offered more than
    $42 billion in financing to fight the virus. In addition, this year the
    IMF approved a historic $650 billion allocation of Special Drawing
    Rights to support global liquidity and spur recovery from the pandemic.
    We know that COVID-19 does not respect borders or boundaries. We must
    continue to fight this virus globally, with all of our policy tools and
    the resources of the international financial institutions.
        The IMF and World Bank form the core of an international financial
    architecture that is consistent with our economic interest. It is no
    accident that the U.S. economy is the largest in the world, that our
    financial markets are the deepest and the most liquid, and that the
    dollar is the world's reserve currency. Our economic success is the
    result of the policy choices we made coming out of World War II,
    alongside the hard work and determination of the American people.
        The IFIs have played a key role in reinforcing these choices and
    strengthening the global economy by supporting market development,
    promoting strong institutions and good governance, and encouraging
    efforts to protect vulnerable populations around the world, including
    minority groups like the LGBTQI+ community. Maintaining our leading
    economic position will require us to make a number of critical policy
    choices to adapt this architecture to the needs of the 21st century
    economy.
        Our work to reform the international tax system represents an
    important step in that process. Today, the global minimum tax rate on
    multinational corporations is zero. Too often, countries compete over
    who can offer the lowest tax rate rather than who has the most
    innovative ideas, the strongest workforce, or the best infrastructure.
    This dynamic has led companies to move production and jobs offshore to
    take advantage of tax loopholes, increasing their profits at the
    expense of American workers. We are on the precipice of changing that.
    In response to Secretary Yellen's leadership, more than 135 countries
    have signed onto a reform framework that would set a global minimum tax
    of at least 15 percent and put in place rules to minimize tax avoidance
    and ensure corporations pay their fair share.
        America's interest in a strong, stable, and rules-based global
    economy is also deeply entwined with our foreign policy and national
    security interests. Our economic objectives cannot succeed if the
    international financial system facilitates the illicit flow of funds to
    oppressive regimes, terrorist groups, cybercriminals, and other malign
    actors. Bearing this in mind, Secretary Yellen requested a review of
    Treasury's use of sanctions since the terrorist attacks of September
    11, 2001. An important finding of this review is that, in light of the
    growing interconnectedness of global finance, trade, and supply chains,
    it is critical that Treasury use a rigorous framework to guide its
    recommendations on imposition of economic and financial sanctions. The
    review also recommended a number of strategic, operational, and
    procedural actions to help preserve and enhance this tool.
        First, whenever possible, we as an Administration must use
    sanctions in coordination and collaboration with our allies, taking
    advantage of the greater impact that comes from acting together. While
    we can inflict significant economic costs unilaterally, multilateral
    action brings advantages that cannot be achieved without cooperation:
    broad condemnation and a clear signal that other economies will not
    offer targets the opportunity to evade our sanctions.
        Second, Treasury must modernize its sanctions infrastructure,
    technology, and workforce to adapt to evolving threats from
    cybercriminals, ransomware, and others. Third, we must take further
    steps to minimize the collateral costs of sanctions. This includes
    costs on domestic groups, like small businesses and community banks, as
    well as international ones, such as populations in sanctioned
    jurisdictions struggling to access legitimate humanitarian aid.
    Intelligence and facts on the ground must be placed at the center of
    our decision making, informing our pursuit of these objectives.
        This commitment to multilateralism and the restoration of U.S.
    international leadership lies at the foundation of President Biden's
    foreign policy. International challenges like combating climate change,
    defeating COVID-19, securing critical supply chains, and countering
    China's unfair practices must be addressed cooperatively, working
    closely with the Department of State and alongside our international
    partners and allies, including through the international financial
    institutions and international organizations such as the U.N., where
    possible.
        Our efforts to reform international taxation, enhance Treasury
    sanctions policy, and support the IFIs reflect President Biden's
    fundamental goal to build a foreign policy for the middle class.
    Collectively, they embody our belief that the international economy
    must be governed by fair rules of the road that protect American
    workers and businesses and promote market competition that rewards hard
    work and innovation. Where corrupt and malign actors seek to undermine
    these rules and our values, we will continue to use sanctions and other
    tools at our disposal to safeguard the security and integrity of the
    international financial system. And we will continue to work through
    the IFIs to facilitate global coordination, enable information sharing,
    and promote a commitment to democratic values and a rules-based
    international economic system.
        Thank you for your time. I look forward to working with you to
    continue to advance U.S. international economic leadership abroad and
    create opportunities for Americans at home. I am happy to take your
    questions.

            RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                           FROM WALLY ADEYEMO

    Q.1. Bolstering the Sanctions Workforce Across the Government--
    During the hearing, I noted that strengthening the sanctions
    workforce across Government is one of the Treasury Department's
    key recommendations. What new resources or authorities, if any,
    do you expect to need to address these U.S. Government
    ``sanctions infrastructure'' issues identified in the review?
    Do you expect there will need to be any structural changes to
    the sanctions workforce, either within Treasury's Office of
    Terrorism and Financial Intelligence, or more broadly, to
    ensure consistency and effectiveness of sanctions policies and
    procedures? Will the expanded hiring authority provided to
    Treasury in AMLA help in this regard?

    A.1. We are conducting an ongoing evaluation of how to best
    implement the recommendations from the Sanctions Review,
    including ensuring the Department has the right expertise,
    technology, and staff to support a robust and effective
    sanctions policymaking, implementation, and enforcement
    process. This includes assessing TFI's sanctions workforce and
    operational capabilities, with an emphasis on current staffing
    for key TFI components, including OFAC. We are also continuing
    to evaluate our internal and external information technology
    systems that support our sanctions workforce. As we conclude
    this evaluation, we look forward to briefing you and other
    Members of the Committee on any structural changes we are
    contemplating in order to ensure the consistency and
    effectiveness of sanctions policies and procedures.
        We appreciate and continue to use the direct hire authority
    provided by the AMLA to enhance our TFI workforce, as we seek
    to hire additional staff with technical expertise in data
    analysis and digital assets, as well as individuals with
    relevant financial services industry experience.

    Q.2. Measuring Sanctions Effectiveness--It's often difficult to
    define the precise impact of sanctions, and to measure their
    effectiveness in meeting their policy purpose--whether it is to
    change the behavior of a targeted Nation, like Russia, and its
    election interference, or to cut off funds going to non-State
    terrorist actors like Hezbollah, ISIS or al Qaeda. What new
    analytical tools or methods do you recommend using to measure
    the overall effectiveness of our sanctions policies? How will
    those tools be used in your work with this Committee, and other
    appropriate committees of Congress like Senate Foreign
    Relations and House Foreign Affairs?

    A.2. Let me acknowledge there are several ways to measure the
    effectiveness of sanctions. The Sanctions Review recommends
    institutionalizing an assessment of sanctions programs using a
    structured policy framework built around the key policy
    considerations outlined in the report published on October 18.
    This will help ensure sanctions continue to support evolving
    policy priorities. Congress is a critical partner on sanctions,
    and we look forward to working with Members and staff on key
    aspects of sanctions.

    Q.3. Consistency Across Sanctions Programs--The Taliban's
    designation as a Specially Designated Global Terrorist group
    combined with its takeover of Afghanistan has created serious
    challenges for NGOs on the ground working to support and
    protect the people of Afghanistan focusing on increasing human
    rights during a particularly turbulent and challenging time.
    The general licenses issued for Afghanistan are limited to
    humanitarian activities, while recent sanctions imposed on
    Ethiopia were issued alongside a broader set of general
    licenses that appropriately included exceptions for conflict
    mitigation and development work in addition to humanitarian
    activities. Did Treasury's review focus on the need to ensure
    consistency across sanctions programs, including with respect
    to licensing? Is Treasury planning to issue additional general
    licenses for Afghanistan to protect legitimate peacebuilding,
    human rights, and development work in Afghanistan?

    A.3. The Treasury review did focus on the need for consistency
    across sanctions programs with respect to licensing. As the
    situation in Afghanistan continues to evolve, Treasury is
    prepared to provide additional guidance in support of
    humanitarian assistance. As you know, Treasury has also
    provided guidance directly to NGOs and the private sector about
    a wide range of matters, including evacuation efforts, the
    provision of humanitarian assistance, and the export of
    agricultural goods and medicine. Furthermore, on September 24,
    2021, consistent with the U.S. Government's long-standing
    practice across Administrations of authorizing humanitarian-
    related transactions and activities that support basic human
    needs in territories affected by sanctions, OFAC issued two
    General Licenses (GLs), which explicitly authorize: (1) the
    U.S. Government, NGOs, and certain IOs and other entities
    (including the U.N. and World Bank) to provide humanitarian
    assistance to Afghanistan or other activities that support
    basic human needs in Afghanistan; and (2) the exportation or
    reexportation of agricultural commodities, medicine, medical
    devices, replacement parts, components for medical devices, or
    software updates for medical devices to Afghanistan. For
    transactions not otherwise authorized by OFAC GLs, OFAC
    considers specific license requests on a case-by-case basis and
    prioritizes license applications, compliance questions, and
    other requests related to humanitarian support.

    Q.4. Assessment of Compliance Supervision Within the Sanctions
    Review--Banks are the front line for U.S. sanctions
    implementation and sometimes raise concerns about a seeming
    lack of coordination between Treasury and the banking agencies
    that examine them for compliance. Did the Treasury sanctions
    review include this issue? If so, did you develop any
    recommendations on how best to ensure improved coordination and
    consistency on sanctions-related policies?

    A.4. During the Sanctions Review, we engaged with a number of
    financial institutions on issues of sanctions compliance and
    some of the challenges they have faced. The Review recognized
    the important role that engagement and information-sharing with
    the private sector play in facilitating the assessment of
    customer risk and application of the risk-based approach to
    sanctions compliance. Going forward, Treasury seeks to build
    upon and expand existing OFAC outreach to key sectors and
    regulators affected by or involved in implementing complex
    sanctions actions and assessing sanctions compliance.

    Q.5. Sanctions Technical Assistance to Congress--Congress works
    most effectively with the Executive branch when it cooperates
    on a bipartisan basis to develop effective, durable sanctions
    programs. That requires technical assistance to be provided by
    sanctions experts at Treasury and State consistently, starting
    early on in the legislative process. Have you considered
    creating a ``strike team'' of Treasury sanctions experts whose
    job it would be to consult with sanctions oversight committees
    and respond to technical assistance requests quickly, drawing
    on Treasury-wide expertise to ensure greater coordination on
    these issues?

    A.5. The Sanctions Review did consider a number of options for
    strengthening our ability to provide Congress with technical
    assistance, including by expanding the number of staff members
    tasked with working directly with Congress. We are happy to
    discuss with you in more detail the creation of a ``strike
    team'' and other ways we can improve our coordination.

    Q.6. Easing the Delivery of Humanitarian Aid in Sanctioned
    Jurisdictions--The Sanctions Review notes that ``Treasury must
    address more systematically the challenges associated with
    conducting humanitarian activities through legitimate channels
    in heavily sanctioned jurisdictions. Where possible and
    appropriate, Treasury should expand sanctions exceptions to
    support the flow of legitimate humanitarian goods and
    assistance.'' As you implement the review recommendations, what
    form or forms does Treasury envision these expanded sanctions
    exceptions or exemptions will take? Would they be in the form
    of general licenses, a temporary global general license,
    humanitarian exemptions written into Executive orders, or some
    other form? Is Treasury considering broadening its licensing
    activities to include other areas in which international non-
    Governmental organizations work--including, for example, long-
    term development projects related to infrastructure, schools
    and education-related services, and other projects that are
    often equally inhibited by sanctions?

    A.6. Though the review was not designed to offer a detailed
    roadmap for specific changes in law and policy on humanitarian
    exceptions to sanctions, it makes clear that facilitating flows
    of legitimate humanitarian aid through transparent channels
    while continuing to deny support to malign actors is a priority
    for Treasury. This is an area into which Treasury plans to look
    more closely, alongside U.S. Government partners such as the
    State Department and USAID, including examining the most
    effective ways to operationalize this recommendation. The
    review also underscored the need to enhance existing engagement
    with civil society and humanitarian groups, as well as to
    continue to provide clear guidance on the impact of sanctions
    on the flow of humanitarian assistance early in the sanctions
    process.

    Q.7. Bank Access for NGOs in World Hotspots--Questions of bank
    derisking in the delivery of aid were partially addressed at
    the hearing. What specific strategies has Treasury found to
    have worked best over the years to improve bank access for
    international NGOs working in humanitarian crises, and how
    specifically is the Department continuing to work to improve
    such access in hotspots like Afghanistan, Yemen, Ethiopia, and
    elsewhere?

    A.7. We have found that direct engagement with financial
    institutions and NGOs is critical to addressing these issues.
    It is the U.S. Government's long-standing practice across
    Administrations to authorize humanitarian-related transactions
    and activities that support basic human needs in territories
    affected by sanctions. OFAC's Sanctions Compliance and
    Evaluation Division maintains a hotline and feedback email
    through which financial institutions, NGOs, and others can
    request guidance on specific sanctions compliance questions.
    OFAC prioritizes humanitarian-related compliance questions in
    hotspots like Afghanistan, Yemen, Ethiopia, and elsewhere. Over
    the years, Treasury has found that this prioritization has been
    effective in addressing the derisking issues that you raise. As
    noted above, Treasury also works closely with our interagency
    partners, including the State Department and USAID, to ensure
    that our licenses align with the U.S. Government's policy
    objectives. In addition, Treasury regularly engages with U.S.
    and international NGOs working in areas affected by
    humanitarian crises to receive recommendations and feedback to
    address the derisking issues that you raise.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                           FROM WALLY ADEYEMO

    Q.1. Climate--I remain concerned that the Financial Stability
    Oversight Council (FSOC) is seeking to pressure financial
    regulators to enact backdoor environmental policy, not based on
    actual risks but as part of a political effort. Last week, the
    FSOC issued a report arguing that climate-related financial
    risks are an ``emerging threat to the financial stability of
    the United States.'' \1\ The FSOC reached this conclusion
    despite acknowledging ``significant challenges to assessments
    of risks to financial stability from climate change,''
    including data and methodological challenges.
    ---------------------------------------------------------------------------
         \1\ https://home.treasury.gov/system/files/261/FSOC-Climate-
    Report.pdf
    ---------------------------------------------------------------------------
        Do you believe that climate change poses a threat to U.S.
    financial stability and, if so, on what basis do you reach that
    conclusion given the data and modeling challenges associated
    with measuring potential climate-related financial risks?

    A.1. In its Report on Climate-Related Financial Risk, the
    Council identified climate-related financial risks as an
    emerging threat to the financial stability of the United
    States. One of the purposes of the Council under the Dodd-Frank
    Act is to respond to emerging threats to the stability of the
    U.S. financial system, and its assessment of climate-related
    financial risks is consistent with that mandate. Over the past
    decade, there has been growing attention from financial
    regulators, business leaders, investors, and policymakers
    around the world to the threat climate change poses to
    financial systems and economies at global, national, and local
    scales.
        The Council's assessment of climate-related financial
    risks, which is described in detail in its report, is also
    informed by ongoing economic research, the analysis of its
    members, and the extensive work of international counterparts,
    including the Financial Stability Board and the Basel Committee
    on Banking Supervision.
        Though the report acknowledges data and modeling
    challenges, Council members recognize that the need for better
    data and tools cannot justify inaction, as climate-related
    financial risks will become more acute if not addressed
    promptly. The report makes several recommendations for how its
    members can improve data and tools to help the Council expand
    its understanding of climate-related impacts on individual
    institutions and markets and related spillover effects.
        Concerns about the threat posed by climate change are also
    shared by the private sector. Notably, S&P Global, an
    independent credit-rating agency, estimated that, ``Almost 60
    percent of companies in the [S&P 500] (market capitalization of
    $18.0 trillion) and more than 40 percent of companies in the
    S&P Global 1200 (market capitalization $27.3 trillion) hold
    assets at high risk of physical climate change impacts.
    Wildfires, water stress, heatwaves, and hurricane (or typhoons)
    linked to increasing global average temperatures represent the
    greatest drivers of physical risk.''

    Q.2. Do you believe there are risks from disfavoring
    traditional energy sources before alternative sources are
    capable of meeting customer demand?

    A.2. As the Council's report outlined, there are both climate-
    related physical risks, such as risks from increased severe
    weather events and forest fires, and climate-related transition
    risks, including a disorderly or delayed transition to a low-
    carbon economy. The transition to a net-zero emission economy
    will require significant investments in clean energy generation
    and technologies, and I support the President's proposals to
    begin making those investments.

    Q.3. Digital Currencies--Does the Treasury believe that
    privately issued stablecoins should be allowed to coexist with
    any Government-backed digital currency?

    A.3. If well-designed and appropriately regulated, stablecoins
    could support faster, more efficient, and more inclusive
    payments options. But, in the absence of appropriate regulatory
    safeguards, stablecoins could also pose risks to investors,
    consumers, and the financial system, and raise concerns about
    illicit finance issues.
        The central recommendation in the PWG report is for
    Congress to enact legislation to ensure that stablecoins used
    for payment purposes are subject to a Federal prudential
    framework on a consistent and comprehensive basis. The
    relationship between stablecoins and a central bank digital
    currency would depend largely on the design features of any
    potential central bank digital currency, which is the subject
    of ongoing analysis by the Federal Reserve Board.

    Q.4. When recently appearing before this Committee, SEC
    Chairman Gensler appeared to be unwilling to say that some
    stablecoins are not securities. Does Treasury view all
    stablecoins as securities?

    A.4. Depending on the facts and circumstances, a stablecoin may
    constitute a security, commodity, and/or derivative,
    implicating the jurisdiction of the SEC, and be subject to U.S.
    Federal securities laws, or implicating the jurisdiction of the
    CFTC, and be subject to the Commodity Exchange Act. Treasury
    supports efforts by the SEC and the CFTC to ensure compliance
    with the laws they are charged with enforcing.

    Q.5. As you know, Treasury and the President's Working Group on
    Financial Markets (PWG) intends to release a report on
    stablecoins in the near future. Many U.S. companies have
    developed stablecoins and related services, so domestic
    regulations that stifle the industry could have international
    implications to our competitiveness and leadership in emerging
    technologies.
        Does Treasury intend to highlight the benefits stablecoins
    could have in this report?

    A.5. The PWG recently released a report on stablecoins, which
    outlines potential benefits and risks associated with
    stablecoins. If well-designed and appropriately regulated,
    stablecoins could support fast, efficient, and inclusive
    payments options. But if not appropriately regulated, there are
    risks of stablecoin runs, payment system disruptions, and
    concentration of economic power. The PWG recommended that
    Congress address these risks by promptly enacting legislation
    to ensure that stablecoins are subject to appropriate Federal
    prudential oversight on a consistent and comprehensive basis.
        While today stablecoins are primarily used in the United
    States to facilitate trading, lending, or borrowing of other
    digital assets, stablecoins could become widely used in the
    future by households and businesses as a means of payment. If
    well-designed and appropriately regulated, stablecoins could
    support fast, efficient, and inclusive payments options.
    Regulatory clarity will support beneficial innovation, while
    also protecting stablecoin users and the broader financial
    system against potential risks.

    Q.6. Has Treasury considered discussing the international
    market changes that could result with additional domestic
    regulation of stablecoins?

    A.6. The PWG report considers and builds on the work of
    international forums, including work that has led to
    recommendations, standards, principles, and guidance that may
    apply to stablecoin arrangements. The Financial Stability Board
    in October 2020 set out ten high-level recommendations that
    seek to promote coordinated and effective regulation,
    supervision, and oversight of global stablecoin arrangements.
        Treasury and the U.S. financial regulators are committed to
    continuing engagement at the FSB and international standard-
    setting bodies to help ensure comprehensive oversight of
    stablecoin arrangements, further common regulatory outcomes
    across jurisdictions, and reduce opportunities for regulatory
    arbitrage.

    Q.7. The entities known as money service businesses (MSB) that
    FinCEN regulates in the context of cryptocurrencies are the
    equivalent of what the Financial Action Task Force (FATF)
    refers to as a virtual asset service provider (VASP). In June
    2019, FinCEN issued guidance for what constitutes a MSB
    involved in the use of convertible virtual currencies (i.e.,
    cryptocurrencies). On October 28, 2021, the FATF is expected to
    issue guidance for VASPs that aligns with FinCEN's June 2019
    guidance. Do you agree that no new guidance will be needed from
    FinCEN in the wake of FATF's recent publication on virtual
    asset service providers as it relates to the regulation of
    MSBs?

    A.7. The United States has been a global leader in setting
    anti- money laundering and countering the financing of
    terrorism (AML/CFT) standards. In 2013, FinCEN issued guidance
    that set out the regulatory obligations for virtual currency
    users, administrators, and exchangers. FinCEN issued additional
    regulatory guidance in May 2019 that covered a wide spectrum of
    activity involving convertible virtual currency.
        We will continue to regularly engage with industry, law
    enforcement, and other regulators to monitor the virtual asset
    industry and determine if additional guidance is needed in the
    future.

    Q.8. The FATF guidance mentioned above also advocates for
    broader adoption by VASPs of know your customer (KYC) and anti-
    money laundering (AML) policies that the U.S. has adopted. What
    other efforts is Treasury making to encourage more countries to
    adopt these policies?

    A.8. In June 2019 the Financial Action Task Force (FATF)
    amended its standards, recommending all countries regulate and
    supervise virtual asset service providers (VASPs), including
    exchanges, and work to mitigate illicit financing risks when
    engaging in virtual asset transactions. Among other things,
    countries are expected to impose customer due diligence (CDD)
    requirements and suspicious transaction reporting obligations
    across VASPs, which can help inhibit cybercriminals'
    exploitation of virtual assets while supporting investigations
    into these illicit finance activities.
        Treasury supported this update and has contributed to
    several resources, including the Updated Guidance for a Risk-
    Based Approach to Virtual Assets and VASPs. This guidance was
    published to help jurisdictions implement the existing FATF
    standards for VASPs. Guidance does not alter the existing FATF
    standards. The United States is committed to continued work at
    the FATF and with other countries and multilateral forums to
    implement the FATF standards, and we welcome the FATF's ongoing
    work on this issue. We are also engaging bilaterally with
    countries to encourage implementation of the FATF standards.

    Q.9. Treasury and its Office of Foreign Assets Control recently
    took actions to warn cryptocurrency exchanges, including over-
    the-counter (OTC) trading providers, of their responsibility to
    take measures to avoid facilitating ransomware payments.
    Treasury also took steps to separate clear criminal behavior
    from the underlying technology and the positive aspects of
    cryptocurrency networks. What potential benefits does Treasury
    see regarding cryptocurrency and domestic investments in
    related technologies?

    A.9. Cryptocurrency service providers represent a diverse set
    of business models, and each cryptocurrency's specific design
    determines its features and potential benefits.
        At a broad level, digital assets, including
    cryptocurrencies, are a form of financial innovation with the
    potential to be transformative. America's ability to promote
    and harness innovation has been a key ingredient in our ability
    to seed new industries, generate new jobs and opportunities,
    and maintain our global economic leadership and
    competitiveness. We don't know how digital assets technologies
    will evolve, but we know that like other innovations, they
    offer the potential to unlock new opportunities. Experience has
    also shown that digital assets create certain risks, including
    issues of consumer and investor protection; issues of financial
    stability; and national security concerns related to money
    laundering, terrorist financing, proliferation financing, and
    ransomware.
        The President's Working Group (PWG), joined by the FDIC and
    the OCC, recently issued a report pertaining to a specific
    subset of digital assets, stablecoins.
        The PWG report outlines potential benefits and risks
    associated with stablecoins. If well-designed and appropriately
    regulated, stablecoins could support faster, more efficient,
    and more inclusive payments options. But if not appropriately
    regulated, there are risks of stablecoin runs, payment system
    disruptions, and concentration of economic power. The PWG
    recommended that Congress address these risks by promptly
    enacting legislation to ensure that stablecoins are subject to
    appropriate Federal prudential oversight on a consistent and
    comprehensive basis.

    Q.10. Special Drawing Rights (SDR)--I opposed the 2021
    International Monetary Fund (IMF) general allocation of SDRs,
    as it was both untargeted and an inappropriate use of this
    tool. Among other things, I was concerned that these funds
    would be used contrary to American interests, such as repaying
    China's predatory belt-and-road loans. As we have seen over the
    past month, these worries appear to have been well founded.
    Several countries have announced how they plan to use their new
    SDRs. These plans include repaying Chinese loans \2\ and
    bailing out a State-owned oil company. \3\
    ---------------------------------------------------------------------------
         \2\ https://www.businessdailyafrica.com/bd/economy/kenya-seeks-
    imf-aid-repay-chinese-loans-3557198
         \3\ https://www.bloomberg.com/news/articles/2021-09-06/mexico-is-
    refinancing-pemex-debt-after-receiving-imf-reserves
    ---------------------------------------------------------------------------
        What has Treasury done, and what does it plan to do, to
    prevent abuses of SDRs?

    A.10. The Treasury Department is closely monitoring the use and
    economic benefits of the SDR allocation and is working with the
    Department of State to jointly engage to promote SDR best
    practices, including transparency and accountability, by
    Governments who wish to use their SDRs. Treasury has also been
    working with the State Department to encourage allies and
    partners to refrain from exchanging SDRs with countries with
    whom we have significant policy concerns.
        At Treasury's urging, the IMF published a detailed guidance
    note as part of the SDR allocation to help authorities
    implement best practices with regard to SDR usage and
    transparency. In addition to its regular monthly topline
    reporting, the IMF also agreed to release enhanced quarterly
    reports showing country-level changes in SDR transactions and
    to publish an annual report on SDR trading operations.

    Q.11. Will Treasury provide dollars via the IMF SDR program to
    fund repayments of China's belt-and-road initiative?

    A.11. Treasury has the ability to decline any request from the
    IMF to exchange SDRs for dollars. Treasury closely scrutinizes
    each of the requests we receive.
        Moreover, Treasury, the IMF, and the rest of the
    international community are exploring ways for major economies
    to lend some of their SDRs through the IMF to countries in
    need. These loans will be used to help enable strong economic
    recoveries and build climate and health resilience, not to fund
    repayments to China. Channeling SDRs through the IMF in this
    way will greatly magnify the benefits of the SDR allocation by
    providing additional, targeted support to help countries
    continue to respond to and recover from the pandemic. As this
    SDR lending will occur through the IMF, it will be subject to
    IMF lending safeguards, including strong governance and
    transparency requirements on borrowers, and it will be overseen
    and approved by the IMF's Executive Board.

    Q.12. Sanctions--According to leading ship tracking websites
    and the International Energy Agency (IEA), China has boosted
    purchases of Iranian oil to 600,000 barrels a day, five times
    more than in the first 9 months of 2020. \4\ Purchases of
    Iranian oil by Chinese companies are keeping Iran's economy
    afloat despite U.S. sanctions, \5\ such as the Iran Freedom and
    Counter-Proliferation Act (IFCA), that are designed to choke
    off such sales. According to Reuters, U.S. officials have
    acknowledged that they are watching these breaches of U.S. law
    and Deputy Secretary of State Wendy Sherman raised the issue
    with her Chinese counterpart in July 2021. \6\ Nonetheless, the
    Biden administration has not sanctioned a single Chinese
    transgressor.
    ---------------------------------------------------------------------------
         \4\ https://www.wsj.com/articles/iran-boosts-oil-exports-amid-
    nuclear-deal-talks-11618497634
         \5\ See the Iran Freedom and Counter-Proliferation Act of 2012
    (P.L. 112-239) and Section 1245 of the Fiscal Year 2012 National
    Defense Authorization Act (P.L. 112-81).
         \6\ https://www.reuters.com/business/exclusive-us-has-reached-out-
    china-about-cutting-oil-imports-iran-officials-say-2021-09-28/
    ---------------------------------------------------------------------------
        Do you believe that China's ongoing violation of the U.S.
    sanctions regime is a problem? Please answer ``yes'' or ``no.''
    If your answer is ``no,'' please explain.

    A.12. Treasury has sanctioned Chinese entities for the purchase
    of Iranian oil, and we continue to rigorously enforce our
    sanctions authorities. In addition to sanctions, diplomacy
    plays a critical role in reducing sanctions evasion. We can
    offer you more information in a classified setting.

    Q.13. Why have Chinese violators of Iran oil sanctions not been
    sanctioned?

    A.13. OFAC continues to enforce our sanctions, and U.S.
    sanctions on Iranian oil and petrochemicals remain fully in
    place. We can offer you more information in a classified
    setting.

    Q.14. What specific steps are you taking to uphold the law and
    properly enforce U.S. sanctions on Chinese importers of Iranian
    oil?

    A.14. OFAC continues to enforce our sanctions, and U.S.
    sanctions on Iranian oil and petrochemicals remain fully in
    place. We can offer you more information in a classified
    setting.

    Q.15. Do you agree that if U.S. adversaries perceive the United
    States to be unwilling or unable to enforce U.S. sanctions,
    then they will be more likely to violate sanctions?

    A.15. We will continue to enforce our sanctions until and
    unless Iran chooses a path of diplomacy and a path to a mutual
    return to compliance with the JCPOA.

    Q.16. Do you agree that the blatant nonenforcement of sanctions
    on Chinese purchasers of illicit Iranian oil undermines the
    effectiveness and legitimacy of the U.S. sanctions regime?

    A.16. OFAC continues to enforce our sanctions, and U.S.
    sanctions on Iranian oil and petrochemicals remain fully in
    place. We can offer you more information in a classified
    setting.

    Q.17. China has taken an increasingly authoritarian and
    belligerent tone towards its neighbors, including Taiwan. One
    of the most potent national security weapons we have in our
    arsenal is sanctions.
        Has Treasury considered what steps it would have to take in
    the wake of a scenario in which China took severe aggressive
    action, such as an invasion, against Taiwan?

    A.17. The Administration opposes any unilateral change in the
    status quo with respect to Taiwan. We work closely with our
    interagency partners to prepare for a variety of national
    security contingencies.

    Q.18. Do you commit to working with Congress to consider
    legislation that will impose significant costs on China if it
    continues to engage in--or escalate--its aggressive activity
    towards Taiwan?

    A.18. We are always available to provide Congress with input
    regarding legislation on this issue and others.

    Q.19. Enacted in July 2020 with unanimous support, the Hong
    Kong Autonomy Act (HKAA) (P.L. 116-49) is an essential tool in
    holding individuals and foreign banks accountable when they
    assist Beijing in violating China's obligations to Hong Kong
    under the Joint Declaration and Basic Law. HKAA requires
    sanctions on entities that materially contribute to the erosion
    of Hong Kong's autonomy, and foreign banks conducting
    significant transactions with those entities. On March 16,
    2021, the Biden administration identified 24 previously
    sanctioned officials undermining Hong Kong's freedoms pursuant
    to Section 5(a) of the HKAA, yet it failed to identify any
    foreign financial institutions (FFIs) doing business with
    persons identified under Section 5(a).
        Why has Treasury not yet identified any foreign financial
    institution (FFI) that knowingly conducts a significant
    transaction with a foreign person sanctioned under Section 5(a)
    of the HKAA?

    A.19. The Treasury Department continues to administer and
    enforce all our sanctions authorities, including under the
    HKAA. While Treasury cannot comment on possible or pending
    sanctions investigations, Treasury has not found any
    information on significant transactions with the identified
    foreign persons but continues to actively monitor for
    information as to whether any FFI may have knowingly conducted
    a significant transaction with any of the foreign persons
    identified in either of the State Department's reports
    submitted in the Section 5(a) Report or the Update following
    the dates of the reports' submissions (October 14, 2020, and
    March 16, 2021). Treasury has also conducted outreach to
    foreign Governments to help ensure they understand the
    reporting requirements and sanctions risks under the HKAA.
    Treasury will also continue to engage foreign Governments and
    FFIs to help ensure they understand the requirements and
    sanctions risks under the HKAA and other authorities, as well
    as any relevant public guidance OFAC has issued.

    Q.20. On June 24, Senator Chris Van Hollen (D-MD) and I sent a
    letter to President Biden urging his Administration to use the
    HKAA to identify and sanction entities materially contributing
    to the Chinese Communist Party's assault on Apple Daily, the
    last prodemocracy newspaper in Hong Kong, and its founder Jimmy
    Lai. \7\ In June, Reuters reported that Hong Kong Security
    Secretary John Lee ordered HSBC and Citibank's respective Hong
    Kong branches to freeze Jimmy Lai's accounts. It appears both
    banks complied. \8\ After 500 policemen raided Apple Daily's
    offices in June, \9\ Hong Kong's Security Bureau ordered banks
    to freeze the newspaper's assets, leading to its closure. \10\
    Section 5 of the HKAA requires the Administration to identify
    foreign entities that are ``materially contributing'' to the
    ``inability of the people of Hong Kong to enjoy the freedom of
    assembly, speech, press, or independent rule of law.'' It seems
    very likely that the breathtaking crackdown on Jimmy Lai and
    Apple Daily involved numerous foreign persons to whom Section 5
    of the HKAA applies.
    ---------------------------------------------------------------------------
         \7\ https://www.banking.senate.gov/imo/media/doc/toomey-van-
    hollen-letter-to-pres.biden.pdf
         \8\ https://cn.reuters.com/article/exclusive-hk-0527-thur-
    idCNKCS2D80P8
         \9\ www.reuters.com/world/asia-pacific/hong-kongs-apple-daily-
    newspaper-says-police-arrest-five-directors-2021-06-16/
         \10\ https://hongkongfp.com/2021/06/21/breaking-hong-kongs-apple-
    daily-may-haltpublication-this-sat-pending-fri-board-meeting/
    ---------------------------------------------------------------------------
        Has Treasury investigated any entities involved in the
    suppression of Apple Daily and Jimmy Lai to whom Section 5 of
    the HKAA may apply, including the Hong Kong branches of HSBC
    and Citibank?

    A.20. Treasury shares your deep concern about the crackdown on
    Apple Daily and Jimmy Lai. While we cannot comment on possible
    or pending sanctions investigations, we will continue to use
    available tools, including sanctions.

    Q.21. What steps has Treasury taken to hold those responsible
    for the suppression of Apple Daily accountable?

    A.21. While we cannot comment on possible or pending sanctions
    investigations, we will continue to use available tools,
    including sanctions. Additionally, Treasury worked with the
    Department of State, Department of Commerce, and the Department
    of Homeland Security to issue the first Hong Kong Business
    Advisory to warn U.S. persons of risks arising from the actions
    that the Chinese and Hong Kong authorities are taking to
    undermine the legal and regulatory environment in Hong Kong.

    Q.22. Enacted in 2019, the Otto Warmbier Banking Restrictions
    Involving North Korea (BRINK) Act fills key gaps in the U.S.
    sanctions regime by imposing mandatory sanctions on the foreign
    banks and companies that facilitate illicit financial
    transactions for the Democratic People's Republic of Korea
    (DPRK). Treasury has not directly sanctioned any entities
    pursuant to the BRINK Act, despite reports by the United
    Nations \11\ and NGOs identifying \12\ relevant unpunished
    businesses.
    ---------------------------------------------------------------------------
         \11\ https://www.undocs.org/S/2019/171
         \12\ https://rusi.org/explore-our-research/publications/special-
    resources/project-sandstone-report-7-billion-dollar-border-town-north-
    koreas-trade-networks-dandong-part-1
    ---------------------------------------------------------------------------
        Has Treasury investigated the financial institutions
    identified in the aforementioned reports?

    A.22. While we cannot comment on possible or pending sanctions
    investigations, the Treasury Department continues to administer
    and enforce sanctions authorities with respect to the DPRK. We
    are committed to the implementation of sanctions mandated by
    Congress to maintain sanctions pressure on the DPRK.

    Q.23. What obstacles are facing Treasury that prevent the
    sanctioning of financial institutions under the BRINK Act?

    A.23. The Treasury Department continues to pursue a range of
    options to address the threat the DPRK poses to U.S. national
    security, including diplomacy and targeted pressure measures,
    and will not hesitate to use Treasury authorities where
    appropriate or mandated by law. The DRPK continues to develop
    ways to hide their transactions and disguise them from tracking
    efforts. The Department of the Treasury continues to coordinate
    closely with its interagency partners to address these
    challenges and appreciates our close cooperation with Congress
    on DPRK-related sanctions authorities, including the Otto
    Warmbier North Korea Nuclear Sanctions Act and North Korea
    Sanctions and Policy Enhancement Act, as amended by the BRINK
    Act.

    Q.24. The Danish Energy Agency issued a press release on
    October 4, 2021, announcing that ``Nord Stream 2 AG has
    fulfilled relevant conditions including conditions concerning
    certification.'' \13\ Nord Stream 2 AG's construction permit
    requires a ``Certificate of Compliance'' issued by a
    ``verifying third party,'' and it was reported earlier this
    month that Gazprom PJSC received the Danish approval for one of
    the lines to start, \14\ but that it needs approval from German
    and EU regulators before the gas can flow to Europe.
    ---------------------------------------------------------------------------
         \13\ https://ens.dk/en/press/nord-stream-2-pipeline-b-can-be-put-
    operation
         \14\ https://www.bloomberg.com/news/articles/2021-10-06/why-nord-
    stream-2-may-not-be-ready-in-time-for-europe-s-winter
    ---------------------------------------------------------------------------
        What is the name of the third party that was responsible
    for verifying Nord Stream 2 AG's compliance in order to obtain
    this Danish approval?

    A.24. We would refer you to the State Department on this
    matter, as PEESA delegates the relevant authorities to the
    Department of State.

    Q.25. Doesn't that third party meet the criteria for sanctions
    designation under Protecting Europe's Energy Security Act
    (PEESA) (P.L. 116-92) or Countering America's Adversaries
    Through Sanctions Act (CAATSA) (P.L. 115-44)?

    A.25. We would refer you to the Department of State for
    questions regarding activities that may be sanctionable under
    PEESA or CAATSA Section 232, as these authorities have been
    delegated to the Department of State.

    Q.26. The Biden administration has said it would remove
    sanctions that are ``inconsistent'' with the JCPOA, which
    grants relief for so-called nuclear-related restrictions, but
    does not include ``terrorism'' and human rights sanctions. \15\
    ---------------------------------------------------------------------------
         \15\ https://www.reuters.com/article/us-iran-nuclear-usa-
    sanctions/u-s-prepared-to-lift-sanctions-inconsistent-with-iran-
    nuclear-deal-idUSKBN2BU39F
    ---------------------------------------------------------------------------
        Can you please clarify specifically what ``inconsistent''
    with the JCPOA means?

    A.26. As the President has made clear, the United States is
    prepared to lift sanctions that are inconsistent with the JCPOA
    if Iran returns to full implementation of its commitments under
    the deal.

    Q.27. Specifically, what sanctions designations and authorities
    have you defined as ``inconsistent?'' Please provide a list of
    all such sanctions you have identified.

    A.27. Together with our State Department colleagues, we would
    be able to discuss our sanctions posture related to ongoing
    negotiations with you in a classified setting.

    Q.28. On October 19, 2021, before this Committee, in responding
    to a question from Senator Daines (R-MT) on whether you foresee
    a situation in which the Taliban could be granted access to
    over $9 billion of funds that belong to Afghanistan's central
    bank (Da Afghanistan Bank, DAB), you replied: ``I see under no
    situation in which we would allow the Taliban to have access to
    the reserves that belong to the Afghan people.'' \16\
    ---------------------------------------------------------------------------
         \16\ https://twitter.com/BankingGOP/status/
    1450907532302733320?s=20
    ---------------------------------------------------------------------------
        Can you confirm that under no circumstance will DAB funds
    blocked by the United States be provided to an Afghan
    Government controlled, directly or indirectly, by the Taliban?

    A.28. Treasury sanctions continue to deny assets to the Taliban
    and other sanctioned persons in Afghanistan, such as the
    Haqqani Network, in order to deter and prevent actions that
    threaten U.S. national security, while also facilitating the
    flow of humanitarian assistance to the Afghan people via
    legitimate and transparent channels. Treasury's OFAC continues
    to maintain and enforce sanctions against the Taliban and the
    Haqqani network. Accordingly, all property or interests in
    property of the Taliban that are in the United States, that
    hereafter come within the United States, or that are or
    hereafter come within the possession or control of any United
    States person are blocked and may not be transferred, paid,
    exported, withdrawn, or otherwise dealt in.
        Furthermore, E.O. 13224 authorizes Treasury to impose
    sanctions against persons who materially assist, sponsor, or
    provide financial, material, or technological support for, or
    goods or services to or in support of, the Taliban, as well as
    foreign financial institutions that knowingly conduct or
    facilitate significant transactions on behalf of the Taliban.

    Q.29. The Taliban, a Specially Designated Global Terrorist
    group intertwined with Al Qaida, poses new money laundering
    threats to both Afghanistan and the region. Section 311 of the
    USA PATRIOT Act (P.L. 107-56) gives the Secretary of the
    Treasury the authority to identify a foreign jurisdiction to be
    ``a primary money laundering concern.'' Once identified,
    Treasury can require U.S. financial institutions to take
    appropriate countermeasures.
        Is Treasury currently assessing if the now-Taliban ruled
    Afghanistan has become a foreign jurisdiction of primary money
    laundering concern per Section 311? If not, why?

    A.29. We are unable to discuss specific entities or
    jurisdictions that may be the subject of investigation. The
    Department of the Treasury continues to pursue its critical
    mission to safeguard the United States' financial system and
    enhance national security by identifying money laundering and
    terrorist financing typologies and actors, using all tools at
    its disposal--including information collection and regulatory
    actions--to deter and disrupt money laundering and terrorist
    financing activities.

    Q.30. Treasury added 59 company names to a new Non-SDN Chinese
    Military-Industrial Complex Companies List (NS-CMIC List)
    supplanting the now deleted Non-SDN Communist Chinese Military
    Companies List (NS-CCMC List). These designations impose a ban
    prohibiting U.S. persons from investing in publicly traded
    securities of the listed companies.
        Is Treasury currently investigating other companies that
    may warrant designation under the NS-CMIC List?

    A.30. Treasury cannot comment on possible or pending sanctions
    investigations. Treasury will continue to enforce its
    sanctions-related authorities, including with respect to
    entities that warrant identification on the NS-CMIC List.

    Q.31. When can this Committee expect a new tranche of
    designations?

    A.31. Treasury cannot preview any forthcoming sanctions
    actions.

    Q.32. In January 2021, the Defense Department identified China
    National Aviation Holding (CNAH), the State-owned parent
    company of Air China, as a ``Communist Chinese military
    company'' operating directly or indirectly in the United
    States. \17\
    ---------------------------------------------------------------------------
         \17\ https://www.defense.gov/News/Releases/Release/Article/
    2472464/dod-releases-list-of-additional-companies-in-accordance-with-
    section-1237-of-fy/
    ---------------------------------------------------------------------------
        Why is CNAH not included in Treasury's Chinese Military-
    Industrial Complex Companies List (NS-CMIC List)?

    A.32. We appreciated the opportunity to brief Senate Banking
    staff in a classified setting in July 2021. OFAC continues to
    investigate a range of targets to be added to the NS-CMIC List
    but does not comment on possible or pending sanctions
    investigations.

    Q.33. Is Treasury investigating if CNAH merits being added to
    the NS-CMIC List? If not, why?

    A.33. Treasury cannot comment on possible or pending sanctions
    investigations. Treasury will continue to enforce its
    sanctions-related authorities, and Treasury continues to
    investigate potential targets to determine if they are entities
    that warrant identification on the NS-CMIC List.

    Q.34. On September 3, 2021, Treasury designated four Iranian
    intelligence operatives who plotted to kidnap a U.S. journalist
    and human rights activist critical of the Iranian regime, a
    failed plot that led to the indictment of members of the
    network in late July. \18\ Masih Alinejad has very publicly
    revealed that she was the target of this plot. Why has the
    Treasury omitted her name in the press release about this plot?
    ---------------------------------------------------------------------------
         \18\ https://home.treasury.gov/news/press-releases/jy0343

    A.34. Treasury can provide information regarding this matter in
    the appropriate setting.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR CORTEZ MASTO FROM WALLY ADEYEMO

    Q.1. Given the uncertainty surrounding the negotiations on a
    return to the JCPOA in Vienna, it is incumbent upon Congress
    and the Administration to think through what happens if the
    talks are not successful. Clearly in that instance, increased
    pressure will be needed on Iran. China, with its purchases of
    Iranian oil and other trade with Tehran, clearly has the most
    economic leverage with Iran. In spite of the fact that Chinese
    imports of Iranian oil and other petroleum products continue,
    few Chinese entities have been sanctioned by the United States.
        What options do we have to press China to reduce and
    ultimately cutoff the economic lifeline it provides to the
    Iranian regime?

    A.1. The Administration is committed to using diplomatic
    efforts as well as our sanctions authorities to respond to
    Iranian sanctions evasion, including to address those doing
    business with China, and we will continue to do so if
    necessary. U.S. sanctions on Iranian oil and petrochemicals
    remain fully in place. We will continue to enforce them until
    and unless Iran chooses a path of diplomacy and a path to a
    mutual return to compliance with the JCPOA.

    Q.2. What changes does Treasury see in deciding how to
    implement sanctions that could be reversed if a country or
    person stops the criminal or terrorist action?

    A.2. The power and integrity of U.S. sanctions derive not only
    from their imposition, but also from their removal in response
    to changes in behavior. The primary goal of sanctions is not to
    punish, but to bring about a positive change in behavior. In
    the case of reconsidering targeted sanctions on entities or
    individuals, such as those involved in criminal or terrorist
    acts, each removal is based on a review by OFAC of relevant
    information, in consultation with our interagency partners,
    including close coordination with the State Department.
    Maintaining the integrity of U.S. sanctions is a high priority
    for OFAC and is the driving principle behind its rigorous
    review process for individually evaluating every request for
    removal on its merits and applying consistent standards to all
    of them.

    Q.3. The Office of Foreign Asset Controls just took sanctions
    actions against a cryptocurrency exchange where as much as 40
    percent of transactions were criminal.
        What role can legitimate exchanges play in ensuring
    sanctions are not violated, and law enforcement can
    appropriately intercept malicious activities?

    A.3. Virtual currencies are beginning to play an increasingly
    prominent role in the global economy. The growing prevalence of
    virtual currency as a payment method likewise brings greater
    exposure to sanctions risks-like the risk that a sanctioned
    person or a person in a jurisdiction subject to sanctions might
    be involved in a virtual currency transaction. Accordingly, the
    virtual currency industry--including technology companies,
    exchangers, mixers, administrators, miners, and wallet
    providers--plays an increasingly critical role in preventing
    sanctioned persons from exploiting virtual currencies to evade
    sanctions and undermine U.S. foreign policy and national
    security interests.
        As a general matter, U.S. persons, including members of the
    virtual currency industry, are responsible for ensuring they do
    not engage in unauthorized transactions or dealings with
    sanctioned persons or jurisdictions. OFAC strongly encourages a
    risk-based approach to sanctions compliance because there is no
    single compliance program or solution suitable to every
    circumstance or business. An adequate compliance solution for
    members of the virtual currency industry will depend on a
    variety of factors, including the type of business involved,
    its size and sophistication, the products and services offered,
    its customers and counterparties, and the geographic locations
    served.

    Q.4. Is there a potential for using blockchain technology to
    trace sanctions-evading actions and map out illicit finance
    systems and networks more effectively?

    A.4. Treasury uses a variety of tools in furtherance of
    investigations, compliance, enforcement, and regulatory
    actions. Blockchain technology is one of the tools used to
    support these efforts.

    Q.5. How would economic turmoil, specifically rising inflation
    which could result in a rapid increase in food prices, affect
    Afghanistan's women in Kabul as well as the poorest, most rural
    parts of the country?
        What strategy or combination of the strategies would work
    best to mitigate hardship and decrease the ability of the
    Taliban to access aid and development funds?

    A.5. The United States remains deeply concerned by the
    deteriorating humanitarian situation in Afghanistan. After
    years of war, Afghanistan's economy was impaired by enormous
    structural challenges, leaving the Afghan people to depend on
    international aid and remittances. International aid funded
    nearly 75 percent of Afghan public expenditures and represented
    about 40 percent of its GDP in the past few years.
        The United States is proud to be a longstanding supporter
    to the Afghan people, including as the largest single provider
    of humanitarian assistance, and we are looking at additional
    ways to support the needs of the Afghan people.
        Following the events of August 15, 2021, OFAC provided
    rapid guidance related to the provision of humanitarian
    assistance and the export of agricultural goods and medicine.
    This included providing verbal guidance regarding a
    nonenforcement posture with respect to activities and
    transactions that support evacuation efforts, humanitarian
    activities, and activities supporting critical infrastructure
    in Afghanistan, as well as personal remittances. OFAC also
    issued a specific license on August 25, 2021, to authorize the
    U.S. Government to facilitate humanitarian-related activity,
    the provision of humanitarian assistance, and other critical
    civilian assistance within Afghanistan. Subsequently, on
    September 24, 2021, consistent with the U.S. Government's long-
    standing practice across Administrations of authorizing
    humanitarian-related transactions and activities that support
    basic human needs in territories affected by sanctions, OFAC
    issued two General Licenses (GLs), which explicitly authorize:
    (1) the United States Government, NGOs, and certain IOs and
    other entities (including the U.N. and World Bank) to provide
    humanitarian assistance to Afghanistan or other activities that
    support basic human needs in Afghanistan; and (2) the
    exportation or reexportation of agricultural commodities,
    medicine, medical devices, replacement parts, components for
    medical devices, or software updates for medical devices to
    Afghanistan.
        In addition, on December 10, 2021, OFAC issued a GL
    authorizing U.S. persons to engage in transactions that are
    ordinarily incident and necessary to the transfer of
    noncommercial, personal remittances to Afghanistan, including
    through Afghan depository institutions, that may involve the
    Taliban or the Haqqani Network, or any entity in which the
    Taliban or the Haqqani Network owns, directly or indirectly,
    individually or in the aggregate, a 50 percent or greater
    interest. Prior to the issuance of this GL, OFAC provided
    guidance to financial institutions to make sure that
    remittances could continue to flow to Afghanistan.
        For transactions not otherwise authorized by OFAC GLs, OFAC
    considers specific license requests on a case-by-case basis and
    prioritizes license applications, compliance questions, and
    other requests related to humanitarian support.

    Q.6. How will the Treasury Department ensure that U.S. taxpayer
    dollars will not fall into the hands of the Taliban or other
    actors while providing aid to the Afghan civilian population?

    A.6. OFAC continues to maintain and enforce expansive sanctions
    against the Taliban, and the State Department and USAID have
    risk mitigation strategies in place. Treasury is also taking
    action to deny assets to the Taliban and other sanctioned
    persons in Afghanistan, such as the Haqqani Network. Notably,
    the Taliban and Haqqani Network continue to be sanctioned as a
    Specially Designated Global Terrorists (SDGTs) pursuant to
    Executive Order 13224, as amended (E.O. 13224). Accordingly,
    all property or interests in property of the Taliban that are
    in the United States, that hereafter come within the United
    States, or that are or hereafter come within the possession or
    control of any United States person are blocked and may not be
    transferred, paid, exported, withdrawn, or otherwise dealt in.
    U.S. persons who violate these prohibitions may face civil or
    criminal liability.
        Furthermore, E.O. 13224 authorizes Treasury to impose
    sanctions against persons who materially assist, sponsor, or
    provide financial, material, or technological support for, or
    goods or services to or in support of, the Taliban, as well as
    foreign financial institutions that knowingly conduct or
    facilitate significant transactions on behalf of the Taliban.
    In addition, the general licenses (GLs) provided on September
    24, 2021, for humanitarian assistance and provision of basic
    human needs to Afghanistan include conditions designed to
    ensure that funds are not transferred directed to the Taliban
    or the Haqqani network as describe in the GLs.

    Q.7. During the previous Administration, the U.S. developed a
    strained relationship with our closest allies and partners.
        How has this erosion of trust impacted our ability to
    conduct multilateral sanctions?

    A.7. President Biden has made clear that our alliances and
    partnerships are among our strongest assets. This is why we
    have worked hard to rebuild these relationships over the course
    of this year. The United States is committed to multilateral
    diplomacy and strengthening coordination with allies and
    partners on sanctions. As outlined in the Sanctions Review,
    sanctions actions should be coordinated with our allies and
    partners abroad where possible. Our concerted effort to engage
    allies and partners in matters of sanctions coordination has
    been very well received, as evidenced by the increasing
    regularity with which they join our sanctions actions.
    Additionally, the Administration continues to engage closely
    with allies and partners to minimize any unintended effects of
    our sanctions actions on their economic interests.

    Q.8. What remain some of our largest obstacles in conducting
    effective multilateral sanctions?

    A.8. The Treasury and State Departments are working to expand
    existing multilateral coordination mechanisms to strengthen
    sanctions policy and implementation coherence, including with
    respect to information sharing and harmonizing sanctions
    authorities where possible, because these are two of the
    biggest obstacles to conducting effective multilateral
    sanctions. Australia's recent adoption of a Magnitsky-like
    sanctions program is an example of such harmonization. Both
    Treasury and State engaged significantly with Australian
    officials to help establish this program.

    Q.9. In 2018, interpretive guidance was issued on cybersecurity
    disclosures. In June, the SEC took an enforcement action
    finding that 6 months was too long for a company to disclose a
    cyberattack.
        Do you feel that Treasury is well equipped to ensure that
    financial institutions and other market actors are not at risk
    of retaliatory ransomware attacks by sanctioned actors in
    places like Russia and Iran?

    A.9. The Treasury Department works closely with regulatory
    agencies, financial institutions, and other market participants
    through bodies such as the Financial Banking and Information
    Infrastructure Committee and the Financial Services Sector
    Coordinating Council. We need better incident reporting in
    order to better protect the financial system and the entire
    economy, and we look forward to working with you and others in
    Congress on how we can enhance information sharing.
        On November 18, 2021, the Office of the Comptroller of the
    Currency, the Board of Governors of the Federal Reserve System,
    and the Federal Deposit Insurance Corporation issued a final
    rule that requires any financial institution subject to their
    respective jurisdictions to notify its primary Federal
    regulator of any ``computer security incident'' that rises to
    the level of a ``notification incident,'' as those terms are
    defined in the Final Rule, as soon as possible and no later
    than 36 hours after the institution determines that a
    notification incident has occurred.
        As the Sector Risk Management Agency for the financial
    services sector, Treasury seeks to improve baseline protections
    throughout the sector, facilitate information sharing, support
    incident management, and identify, assess, and prioritize
    risks, among other activities. Treasury supports incident
    reporting legislation that would require financial-sector
    entities to report ransomware attacks and other cybersecurity
    incidents to the Department of Homeland Security and Treasury
    within 24 hours, as well as processes to streamline and
    harmonize reporting for entities that face multiple reporting
    requirements. Such reporting would enable Treasury to increase
    the sector's situational awareness of retaliatory and other
    cyberattacks and would help inform other U.S. Government
    agencies' actions to deter and disrupt such attacks.

    Q.10. What can we do to ensure the Treasury Department is
    appropriately equipped to ensure proper protections for our
    economy from malicious cyberactors?

    A.10. The Treasury Department supports modernization of its
    technology and innovations for its cyberworkforce to protect
    its operations and tools and to improve the financial sector's
    resilience. Treasury faces growing workforce challenges,
    primarily in the area of compensation, given resource and pay
    limitation constraints.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                           FROM WALLY ADEYEMO

    Q.1. Money laundering and terrorist financing remains a threat
    to Arizona's safety and security. Sanctions are sometimes used
    to deter foreign Governments from funding organizations that
    carry out criminal or terrorist activities that threaten our
    national security. How do you assess the effectiveness of the
    current sanctions process in preventing financing of illicit
    organizations? What proposed changes to the current sanctions
    process will make its use more effective in deterring illicit
    financing?

    A.1. We have had some notable success disrupting the financial
    networks supporting a range of illicit and malign actors. For
    example, in coordination with U.S. and foreign law enforcement
    action, Treasury froze and seized billions of dollars in assets
    from front companies used by the Cali Cartel (at one point the
    world's largest drug trafficking organization), culminating in
    the 2014 dismantling of the cartel and the arrest and
    imprisonment of its leaders. U.S. sanctions so significantly
    impaired Hizballah funding streams that in 2019 the
    organization had to reduce salaries for its military arm and
    media efforts and publicly solicit donations.
        To enhance our sanctions and ensure they remain a critical
    tool of U.S. foreign policy, the Sanctions Review identified
    the following key recommendations:

        Adopt a structured policy framework;

        Renew our commitment to multilateralism;

        Calibrate sanctions to mitigate unintended impact;

        Ensure sanctions are easily understood,
            enforceable, and adaptable; and

        Invest in modernizing our sanctions technology,
            workforce, and infrastructure.

    Q.2. While sanctions issued by Treasury are meant to change the
    behavior of a foreign Nation or of an organization, these
    sanctions can also have unintended consequences for Arizona-
    based and other U.S.-based businesses. In reviewing the
    sanctions process, did Treasury examine the effects of
    sanctions on small businesses that depend on imports from
    sanctioned Nations or on exports to these Nations? What changes
    can be made to the sanctions process to minimize unintended
    consequences for Arizona businesses?

    A.2. During the review, Treasury heard from some private sector
    stakeholders about the compliance costs that can be imposed on
    small businesses, which may lack the resources to bear these
    costs while competing with large companies at home and abroad.
    A first step is to make compliance simpler for businesses and
    people who can't afford armies of lawyers and accountants. That
    means communicating and providing guidance in simple, plain
    language. It also means updating our website and technology to
    ensure these communications are accessible to businesses of all
    sizes.
        Treasury can also expand engagement with small- and medium-
    sized businesses, particularly exporters. Additionally,
    applying a strategic and targeted approach to sanctions,
    including a thorough analysis of market impacts and sufficient
    time to develop mitigation measures, will help avoid
    unnecessarily cutting off U.S. businesses from key export
    markets or suppliers.

    Q.3. The SWIFT system is the most widely used interbank
    messaging network globally. The SWIFT system offers certain
    financial crime compliance services to assist financial
    institutions in complying with national and international
    regulations, including sanctions. In 2015, China's Government
    launched the Cross-Border Interbank Payment System (CIPS) as an
    alternative to SWIFT to settle international claims in yuan.
    How does the development of alternatives to SWIFT impact the
    implementation of Treasury sanctions?

    A.3. As noted in the Sanctions Review report, technological and
    structural changes in the global financial system could have a
    profound impact on the efficacy of American sanctions. This
    includes the development of new financial and payments systems
    that may have the effect of, among other things, evading
    sanctions and diminishing the dollar's global role. Over the
    long term, these could reduce the economic leverage and
    benefits afforded by the prominent role of the U.S. dollar and
    U.S. financial institutions in global funds transfers and a
    wide range of economic and financial activity.
        This is one of several reasons to take a thoughtful and
    judicious approach to the use of sanctions, including by
    applying a consistent policy framework, analyzing potential
    unintended consequences, multilateralizing sanctions actions
    where possible, modernizing our operational capabilities, and
    making commensurate investments in our workforce to drive the
    effective and tailored use of sanctions now and in the future.

    Q.4. Over the last decade, we have witnessed the rise of
    innovative decentralized finance (DeFi) products such as
    cryptocurrencies and nonfungible tokens, the majority of which
    utilize blockchain technology to complete and record
    transactions. How does the growing popularity of DeFi products,
    including by illicit organizations and other bad actors, affect
    the implementation and effectiveness of sanctions? Do the
    transaction records provided by blockchain technology aid in
    tracking and deterring activity affected by Treasury sanctions?

    A.4. Depending on how it is implemented, blockchain technology
    can increase the overall transparency of transactions in some
    cases, including by creating a permanent virtual paper trail,
    and can improve regulatory reporting, record keeping, and
    monitoring. This is also true for decentralized finance (DeFi)
    products that use public blockchains, as opposed to those that
    use private blockchains where certain elements of transactions
    may be hidden.
        In the context of illicit finance, blockchain technology
    can be viewed as an obstacle for criminals who want to remain
    anonymous and disguise the original source of funds. We have
    already seen numerous instances where law enforcement and
    regulators successfully conducted blockchain analytics to
    ``follow the money'' and either stop or impose costs on illicit
    actors, as well as recover significant amounts of illicit
    proceeds. For instance, the IRS recently announced that it
    recovered billions of dollars in cryptocurrency this past year.
    OFAC has also listed digital currency wallets as identifiers
    associated with designated persons on the specially designated
    nationals list to help financial institutions and block
    transactions associated with designated persons; transactions
    associated with these wallets can often be traced using
    blockchain analytics platforms, leading to more regulatory
    reporting and law enforcement action. Like any other asset,
    digital assets can be used for illicit purposes, including
    sanctions evasion, but the unique characteristics of
    blockchains may allow for better after-the-fact investigations
    into illicit activity, including sanctions evasion.
        However, the use of public blockchains alone will not
    prevent fraud, money laundering, or the financing of terrorism,
    especially given the pseudonymity and sometimes anonymity-
    enhanced features programmed into many existing blockchains.
    Both FinCEN and OFAC have issued guidance to help financial
    institutions, and in particular virtual asset service providers
    (VASPs), which may include persons and entities involved in
    DeFi arrangements, navigate, and comply with their AML/CFT
    obligations, including those related to OFAC sanctions.
    Blockchain technology has upsides and downsides, and Treasury
    seeks to maximize blockchain technology's benefits and mitigate
    its risks.

    Q.5. This review of the sanctions process resulted in several
    recommendations for reforms. How will Treasury implement these
    recommendations to further the goal of integrated deterrence?
    Will Treasury move to collaborate further with other
    departments and agencies, as well as international Governments
    and organizations, to strengthen the effectiveness of the
    sanctions process?

    A.5. As noted in the report, some of these recommendations can
    be implemented in the near-term by internal policy or
    procedural changes, while others will require further
    deliberation and analysis. We look forward to coordinating
    closely with key interagency partners, such as the National
    Security Council, the Office of Management and Budget, the
    Department of State, U.S. Agency for International Development,
    Department of Justice, and others, as well as Congress, in
    making needed changes and investments in future sanctions
    capabilities.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR ROUNDS
                           FROM WALLY ADEYEMO

    Q.1. Mr. Adeyemo, it has been claimed the cost burden of the
    Administration's proposed IRS tax reporting requirement would
    fall squarely on financial institutions, not taxpayers. I
    cannot see how that is possibly the case. This proposed
    reporting requirement would significantly expand Form 1099
    reporting to include millions of accounts not currently subject
    to reporting. Each Form 1099 contains highly personal
    information, including the account holder's name, address, and
    taxpayer identification number. Given that this new information
    will be used specifically for audit detection, combined with
    the fact that the low-income taxpayers are among the groups
    most likely to get audited, it is highly likely that new tax
    preparation procedures will be needed, resulting in additional
    costs to both average taxpayers, as well as small business
    owners who often conduct both personal and business
    transactions within the same account.
        As such, with the above in mind, how can the Administration
    claim that there will be no additional burden for taxpayers?
    Further, are you confident in the ability of the IRS to
    securely handle this massive additional influx of confidential
    data?

    A.1. The bank reporting proposal was designed to minimize any
    costs for financial institutions associated with providing this
    information to the IRS. Our ambition is that financial
    institutions will be our partners in ensuring America's tax
    system is equitable, efficient, and effective--one in which
    everyone follows the law and pays their fair share--and that
    their customers are not disadvantaged by others who skirt tax
    laws.
        Under the proposal, compliant taxpayers would report their
    taxes as usual, and they would face lower audit probabilities
    if the IRS had access to information that allowed them to
    better target audits toward those evading tax.
        Indeed, rather than be burdened by a new reporting regime,
    compliant taxpayers would benefit from it: When the IRS
    determines who to audit today, it is essentially shooting in
    the dark, since it has no lens into opaque income streams that
    allow it to ascertain which taxpayers may be skirting their tax
    liabilities and which taxpayers are likely fully compliant.
    Honest small business owners--who are the vast majority--would
    benefit from the IRS's ability to better target enforcement
    actions against those who are evading their tax obligations.

    Q.2. Mr. Adeyemo, the Treasury Greenbook explicitly states that
    it would look to obtain certain transaction-level data through
    an information return. Yet, the Secretary, as recent as last
    week, stated emphatically they are not looking for transaction-
    level information. Can you confirm for us if the Administration
    is no longer supporting the financial account reporting
    proposal as described in the Green Book?

    A.2. We support the proposals that Congress has considered in
    this space, and all financial reporting proposals considered by
    Congress do not mandate that individual transactions of any
    amount be reported to the IRS. Instead, the proposals direct
    banks to report basic, high-level information on aggregate
    account inflows and outflows.

    Q.3. The United States holds 16.5 percent of the vote at the
    IMF, and will need significant support from other countries to
    keep billions in loans out of the Taliban's hands. Does the
    Administration support keeping international funding from the
    Taliban, and if so, how can the United States work
    diplomatically to build the global support it would need to
    keep international funding away from the Taliban?

    A.3. The IMF has paused its interactions with Afghan
    authorities due to the lack of clarity among IMF members
    regarding the governance of Afghanistan. As a consequence,
    Afghanistan's access to IMF resources, including its SDRs, is
    on hold. In situations such as this, the IMF staff consults
    with IMF membership to determine whether a majority of the
    voting interest of the members recognize or deal with a regime.
    The United States will continue to engage closely with the IMF
    management and staff throughout this process to help safeguard
    Afghanistan's resources for its people.

    Q.4. Some people believe that the Taliban is moderating its
    behavior, and that it is doing so to be recognized as the
    legitimate Government of Afghanistan. What I see is an
    organization that has changed little since the late 1990s. It
    has already shown its commitment to oppress and marginalize
    women and ethnic minorities, and to work closely with al Qaeda.
    That isn't speculation. A recent report commissioned by the
    U.N. Security Council found that al Qaeda was currently active
    in nearly half of Afghanistan's provinces. Another U.N. report
    found that the Taliban regularly consulted with al Qaeda during
    negotiations leading to the Doha Agreement with the Trump
    administration. At that time, the Taliban guaranteed to al
    Qaeda that they would honor their historical ties.
        Do you believe that if the United States offers the Taliban
    recognition as the legitimate Government of Afghanistan, and
    offers economic sanctions relief, that the Taliban will cut its
    ties with al Qaeda and moderate its positions on women and
    ethnic minorities?

    A.4. For questions on any engagement or dealings with the
    Taliban, we refer you to the Department of State.

    Q.5. Do you believe that sanctions relief for the Taliban makes
    the Afghan and American people safer, or less safe?

    A.5. Treasury shares your concerns about the activities of the
    Taliban in Afghanistan. As noted above, the Taliban continue to
    be sanctioned as an SDGT pursuant to E.O. 13224. For questions
    on any changes to the status of the Taliban under E.O. 13224,
    we refer you to the Department of State. Treasury continues to
    maintain and enforce expansive sanctions against the Taliban.
        These expansive sanctions include the prohibition on U.S.
    persons with regard to all property or interests in property of
    the Taliban that are in the United States, that hereafter come
    within the United States, or that are or hereafter come within
    the possession or control of any United States person, which
    are blocked and may not be transferred, paid, exported,
    withdrawn, or otherwise dealt in. U.S. persons who violate
    these prohibitions may face civil or criminal liability.
        These expansive sanctions also include secondary sanctions
    against persons who materially assist, sponsor, or provide
    financial, material, or technological support for, or goods or
    services to or in support of, the Taliban, as well as foreign
    financial institutions that knowingly conduct or facilitate
    significant transactions on behalf of the Taliban.
        Additionally, OFAC has designated 19 Afghanistan-related
    drug traffickers and entities linked to the Taliban under our
    counter narcotics trafficking sanctions.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                           FROM WALLY ADEYEMO

    Q.1. The Treasury 2021 Sanctions Review report notes:

            In addition, technological innovations such as digital
            currencies, alternative payment platforms, and new ways
            of hiding cross-border transactions all potentially
            reduce the efficacy of American sanctions. These
            technologies offer malign actors opportunities to hold
            and transfer funds outside the traditional dollar-based
            financial system. They also empower our adversaries
            seeking to build new financial and payments systems
            intended to diminish the dollar's global role. We are
            mindful of the risk that, if left unchecked, these
            digital assets and payments systems could harm the
            efficacy of our sanctions.

        Your report appropriately characterizes the risk that our
    adversaries are deploying technologies to ``work around'' U.S.
    sanctions. Can you elaborate on the specific concerns as
    pertains to digital assets and payments systems?

    A.1. Virtual assets can be used for illicit activity through
    peer-to-peer exchangers, anonymity enhancement technologies,
    and noncompliant exchanges. Some evaders may seek to transact
    in virtual assets to avoid the sanctions enforcement that comes
    with the international banking system, especially the use of
    the U.S. dollar. This includes the facilitation of sanctions
    evasion, ransomware schemes, and other cybercrimes.
        Sanctions work best when compliance works. Those in the
    virtual asset industry play a critical role in implementing
    appropriate AML/CFT and sanctions controls to prevent
    sanctioned persons and other illicit actors from exploiting
    virtual currencies to undermine U.S foreign policy and national
    security interests. Additionally, under the U.S. Presidency,
    the Financial Action Task Force (FATF) in June 2019 amended its
    standards to recommend that all countries regulate and
    supervise virtual asset service providers (VASPs) and mitigate
    against such risks when engaging in virtual asset transactions.
        The United States is committed to continued work at the
    FATF and with other countries to implement the FATF standards,
    and we welcome the FATF's ongoing work on this issue.

    Q.2. One of the important international initiatives advanced by
    Treasury in the previous Administration was promoting data
    connectivity in financial services. As you know, data flows are
    critical to secure and efficient operations in this sector, and
    support innovation and choice in financial services for small
    businesses and workers. Will you commit to maintaining
    Treasury's global push for data connectivity in financial
    services, including through bilateral dialogues and in any new
    agreements negotiated by USTR?

    A.2. Treasury continues to support policies that further the
    growth of the global digital economy, including promoting
    cross-border data connectivity in financial services. My team
    and I engage regularly with a wide range of jurisdictions in
    regulatory and trade dialogues on the importance of cross-
    border data flows in financial services to economic growth,
    financial innovation, fraud prevention, financial stability,
    AML/CFT compliance, and operational resilience.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR HAGERTY
                           FROM WALLY ADEYEMO

    Q.1. The recent reports about the Chinese Communist Party's
    (CCP's) hypersonic military capabilities, if true, are very
    concerning. Will the Biden administration consider restricting
    financial access to entities that are funding to the CCP's
    development of weapons that pose existential threats to the
    United States?

    A.1. We cannot comment on possible or pending sanctions
    actions.

    Q.2. North Korea continues to produce nuclear weapons and
    conduct provocative missile tests. It is critical for the
    United States to build on the maximum pressure campaign that
    began under the Trump administration. Should the Treasury
    Department continue to apply pressure by designating entities
    and individuals that violate U.S. law?

    A.2. The Department of the Treasury shares your concern
    regarding North Korea's recent missile tests. With interagency
    partners, the Treasury Department continues to pursue a range
    of options to address the threat DPRK poses to U.S. national
    security, including diplomacy and targeted pressure measures.
    We will continue to administer and enforce all our sanctions
    authorities with respect to North Korea.

    Q.3. Will the Biden administration continue to put financial
    pressure on China, including pursuing enforcement against it if
    it is found to be violating sanctions imposed on Iran?

    A.3. Treasury has used our sanctions authorities to respond to
    Iranian sanctions evasion, including those doing business with
    China, and will continue to do so wherever appropriate. U.S.
    sanctions on Iranian oil and petrochemicals remain fully in
    place. We will continue to enforce them together with our
    allies and partners around the world until and unless Iran
    chooses a path of diplomacy and a path to a mutual return to
    compliance with the JCPOA.

    Q.4. I continue to be very concerned about the Biden
    administration's actions toward Russia and in particular not
    sanctioning entities involved in Nord Stream 2. What risks do
    you assess the pipeline poses to the energy security of Ukraine
    and Eastern Europe?

    A.4. Treasury remains committed to implementing sanctions
    imposed under PEESA, including most recently in November 2021.
    However, sanctions are just one element to counter Russia's
    attempts in this space. It is essential to work with our allies
    and partners to reduce vulnerabilities that Russia has long
    exploited for energy coercion, as well as reforms that would
    improve the viability and efficiency of Ukraine's energy sector
    and reduce Russia's ability to manipulate energy infrastructure
    for political gain. Such efforts are underway by the Treasury
    and State Departments.

    Q.5. The Biden administration's Treasury has been advocating
    for a global minimum corporate tax rate and tax increases here
    at home. Realistically, when do you think the OECD will fully
    implement their Pillar II minimum corporate tax rate? Why
    should the United States unilaterally disarm by raising taxes
    on American job creators--thereby reducing job creation,
    opportunity, and wages for American workers--before other
    countries we compete with firmly do? Aren't we standing way out
    on a wobbly limb hoping the branch doesn't break, while
    everyone else sits in the middle of the tree?

    A.5. We expect other Nations to move quickly to implement the
    model rules of Pillar Two, which are in their final draft. The
    agreement commits countries to do this in 2022, with the rules
    coming into force in 2023, just like the House draft
    legislation brings the GILTI changes into effect in 2023.

    Q.6. During her testimony on September 28, 2021, Secretary
    Yellen and I discussed how my constituents are very concerned
    about the ability of the IRS to keep their tax information
    confidential. As you know, the Biden administration is
    proposing to expand reporting of private citizens' bank
    transactions to the IRS--which places an increased burden on
    our community lenders and will cause a lot of Americans to
    remove their money from them. Can you update the Committee on
    the additional steps you have taken to safeguard Americans'
    private tax information from politicized and criminal leaks?
    Can you assure the Committee that Treasury is doing everything
    it can to find the criminal perpetrators of the leaked
    information to ProPublica? Can you update the Committee on the
    additional steps you have taken to safeguard Americans' private
    tax information from politicized leaks by the IRS?

    A.6. Both Secretary Yellen and I are deeply troubled by any
    unauthorized disclosure of taxpayer information, which is a
    crime. The Secretary has referred the matter to the appropriate
    authorities. We still do not know what occurred, but work is
    being done to get to the bottom of this criminal activity. As
    we learn more, we will update Congress as appropriate.

    Q.7. The Office of the Comptroller of the Currency (OCC) is an
    independent bureau within the Treasury Department. It regulates
    and supervises over 1,100 banks and savings associations that
    hold more than two-thirds of all U.S. commercial banking
    assets. President Biden recently nominated Dr. Saule Omarova to
    lead the OCC. Forget about a $600 or a $10,000 threshold for
    reporting bank accounts and transactions to the IRS. Dr.
    Omarova has argued that an effect option to expand the Federal
    Reserve's role in the economy would be to transition each and
    every single private bank deposit to the Federal Reserve. Do
    you agree with her position to effectively end private banking?

    A.7. Dr. Omarova testified before the Senate Committee on
    Banking, Housing, and Urban Affairs on November 18, 2021, and
    stated that she does not want to end ``banking as we know it,''
    in response to a question posed by Chairman Brown. Furthermore,
    on December 7, 2021, President Biden accepted Dr. Omarova's
    request to withdraw her name from nomination to be Comptroller
    of the Currency.
                  Additional Material Supplied for the Record

            U.S. DEPARTMENT OF THE TREASURY SANCTIONS REVIEW RELEASE

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                       THE TREASURY 2021 SANCTIONS REVIEW

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