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



 
     FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS
                    FOR FISCAL YEAR 2023

                              ----------                              


                         TUESDAY, JUNE 14, 2022

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met at 2:37 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Chris Van Hollen (Chairman) 
presiding.
    Present: Senators Van Hollen, Coons, Manchin, Hyde-Smith, 
and Boozman.

                      U.S. DEPARTMENT OF TREASURY


             opening statement of senator chris van hollen


    Senator Van Hollen. All right. Good afternoon. The hearing 
will come to order. And I want to start by saying I am pleased 
to be joined by my Ranking Member, Senator Hyde-Smith, also 
just joined by Senator Manchin, and Senator Coons, I think will 
be returning soon. I want to welcome our witness, Deputy 
Secretary of the Treasury, Wally Adeyemo.
    And Mr. Deputy Secretary, thank you so much for being here 
today and for your work at the Department of Treasury. This 
subcommittee oversees the annual budget for the Department of 
Treasury, including funding for the IRS.
    Just a few months ago, our subcommittee provided the IRS 
with its largest funding increase in 20 years in order to cut 
down on the tax return processing backlog, which continues to 
need to be addressed and to improve service for working 
families. It was a big step forward.
    We know that we need to continue that effort this year. For 
today's hearing, we are going to zero in on the budgets of two 
specific agencies within the Department of Treasury to help 
keep money out of the hands of terrorists, criminals, and other 
bad actors, and help to keep Americans safe.
    The first is the Office of Terrorism and Financial 
Intelligence, also known as TFI. The second is the Financial 
Crimes Enforcement Network, also known as FinCEN. At the 
outset, I would like to cover the special importance of these 
two agencies to America's safety and security, and to the 
safety and security around the world.
    The Office of Terrorism and Financial Intelligence has been 
cracking down on terrorist funding and financing for over a 
decade. The mission of TFI is simple, identify, disrupt, and 
disable criminals, terrorists, and other National Security 
threats to the United States and protect the U.S. financial 
systems from abuse by illicit actors. That work has taken 
center stage in the wake of Vladimir Putin's brutal invasion of 
Ukraine.
    The men and women of TFI have been leading America's effort 
to implement our sweeping sanctions against Russia in concert 
with our allies. Because of the work of TFI and your colleagues 
at the Department of Commerce and State, we have made 
significant strides in cutting Russia off from the world 
financial system.
    Hundreds of international companies have left Russia and 
the IMF projects that Russia's economy will shrink by more than 
8 percent in the year 2022. But Mr. Deputy Secretary, we know 
you know that Vladimir Putin and his cronies will do everything 
in their power to evade the sanctions and to hold on to their 
ill-gotten gains, no matter the risk. Which is why the work of 
the second agency we are here to focus on, FinCEN, is more 
important than ever.
    Since its creation in 1990, FinCEN has been dedicated to 
combating money laundering and safeguarding our financial 
system from abuse. That mission has gained fresh urgency as 
Russian entities and oligarchs attempt to evade America 
sanctions by laundering money and hiding their assets across 
the world. FinCEN is one of the main tools we have to stop that 
from happening.
    So we can see how both TFI and FinCEN are working hand-in-
hand to hold Russia to account. I am pleased and proud of the 
actions that Congress has taken to supply these agencies with 
additional resources that they need to do that job. The omnibus 
bill from fiscal year 2022 included $44 million in emergency 
supplemental funding to help TFI and FinCEN respond to the 
situation in Ukraine.
    And the Ukraine supplemental bill passed this April 
provided an additional $23 million for FinCEN. That is on top 
of the $20 million increase the subcommittee secured for the 
annual TFI budget and the $48 million increase the subcommittee 
secured for the annual FinCEN budget. With those funds, 
Congress increased the budgets of TFI and FinCEN over fiscal 
year 2021 by 26 percent and 76 percent, respectively.
    Today, I hope to hear more about how those monies are being 
put to use. I am proud of the work that the Department is doing 
and that you are doing, Mr. Deputy Secretary, to push back 
against Putin's brutal war, and I want to thank you for your 
leadership. You know as well as anybody that the fight is far 
from over.
    And today, I look forward to discussing how we can 
strengthen sanctions against Russia, avoid leakage in our 
current sanctions, and ensure other countries and foreign 
companies are not taking advantage of the strong sanctions for 
their own financial gain and windfall. Unfortunately, we 
continue to see new reports every day of countries and 
companies that are not just maintaining but actually increasing 
their trade or economic relations with Russia, including 
increased imports of Russian oil.
    We cannot stand by while these countries and foreign 
corporations engage in war profiteering that further lines 
Putin's pockets at the expense of everybody else. I think we 
need to be doing more in this area.
    And as you know, Mr. Deputy Secretary, we are in the 
process of drafting legislation focused on secondary sanctions 
to provide additional muscle and ammunition to this effort. And 
we look forward to any input that you and your team have, not 
just today, but in the coming days.
    These are important topics, and I know Russian sanctions 
have been front page news recently, but it is also a fact that 
TFI and FinCEN's work goes beyond Russia, it is worldwide, and 
I want to thank the men and women at these agencies for the 
work they are doing.
    Just 2 years ago, Congress passed the Anti-Money Laundering 
Act of 2020, which requires FinCEN to establish uniform 
beneficial owner reporting requirements for corporations, 
limited liability companies, and other similar entities, and to 
develop a database so that information can be easily reported 
and shared with law enforcement.
    The basic goal of that effort is to ensure who the real 
owners are often behind anonymous shell companies and prevent 
criminals and others from abusing U.S. corporations to launder 
their money and hide their ill-gotten gains. It is a major new 
undertaking, and the subcommittee provided FinCEN with an 
increase of $34 million to your annual budget in the omnibus 
bill for fiscal year 2022 to address these responsibilities.
    It was the right thing to do, but we all know our work is 
not over. We must continue to support funding for these 
agencies. And I and the Ranking Member have indicated to both 
TFI and FinCEN that they should let us know when they need 
additional resources.
    And that is true as well for you, Mr. Deputy Secretary, and 
the Department. We have got a lot of work to do. Look forward 
to the discussion in this hearing. And let me now turn it over 
to the Ranking Member, Senator Hyde-Smith, for her opening 
statement.


             opening statement of senator cindy hyde-smith


    Senator Hyde-Smith. Thank you, Mr. Chairman. And we are 
glad to have you back. Also welcome the Treasury Deputy 
Secretary to our hearing today, and I certainly enjoyed our 
conversation we had on the telephone. We look forward to your 
testimony this afternoon. And today, we will review the fiscal 
year 2023 budget request for the Treasury Department's Office 
of Terrorism and Financial Intelligence and the Financial 
Crimes Enforcement Network, two very critical areas that are 
very important.
    Both offices play a crucial role in collecting and 
analyzing financial intelligence, as well as implementing U.S. 
sanctions. Treasury is requesting significant increases for 
these offices in fiscal year 2023 compared to the fiscal year 
2022 enacted levels.
    This additional funding would be on top of funding received 
from both of the Ukraine supplemental packages and I hope we 
hear more today about how these funds are being spent, 
particularly those that are used to counter Russian aggression. 
And you have publicly stated that the overarching goal of the 
Administration's foreign policy strategy is to end the invasion 
in Ukraine, but right now it appears to be no end in sight, 
even after imposing hundreds of sanctions.
    Several months after invading Ukraine, Vladimir Putin has 
not reversed course and even appears to have doubled down. It 
has become clear that the previously enacted sanctions have 
failed to make Putin feel the pain and that more must be done. 
I would like to reiterate my and the Committee's commitment to 
helping Ukraine and our NATO allies, and I look forward to 
hearing from you today about the proposed budgets and how we 
may actually stop Russian aggression that we all thought would 
only last a few days.
    I cannot end without acknowledging record high inflation 
hardworking Americans are facing and the Treasury Department's 
repeated denial of the state of the economy. I hope today we 
can discuss the current economic outlook and the inflationary 
impacts of this Administration's spending and energy policies. 
Thank you, Mr. Chairman.
    Senator Van Hollen. Thank you, Senator. And as you can see, 
we don't have a court reporter in the room, but it is been a 
live stream. And I understand the court reporter is doing their 
job from offsite. With that, Mr. Deputy Secretary, welcome 
again and the floor is yours.
STATEMENT OF HON. WALLY ADEYEMO, DEPUTY SECRETARY, 
            DEPARTMENT OF THE TREASURY
    Mr. Adeyemo. Well, let me start out by saying thank you, 
Mr. Chairman, and also to Senator Hyde-Smith for the time you 
took to speak with me yesterday, but also for your leadership 
of the subcommittee.
    I recognize that the issues that you deal with in the 
subcommittee are important. They are both about the domestic 
economy, but also about our National Security. And I want to 
thank you and the Members of this Subcommittee for not only 
your leadership, but your support of the Treasury Department 
and for the funding that you provided both in the omnibus bill, 
but also in the supplemental legislation that has been passed 
over the course of this year.
    And as you well know, we meet today at a moment of historic 
significance, facing the largest land war in Europe since World 
War II, as well as making progress in our fight against the 
public health and economic consequences of the most significant 
pandemic in more than 100 years.
    The hardworking men and women of the Treasury Department 
play a central role in addressing these challenges. I want to 
thank these dedicated public servants for what they do every 
day to advance our mission of creating strong economic growth 
and strengthening our National Security across Administrations.
    Over the past 6 months, Treasury has taken swift and bold 
action to hold Russia accountable for its brutal war of choice. 
We view sanctions in service of two objectives. First, denying 
the Kremlin access to the resources needed to prop up Russia's 
economy or invest in its military.
    And second, degrading Russia's ability to project power. 
Sanctions fundamentally are a tool. They are a part of a larger 
foreign policy strategy. And as a tool, these sanctions have 
had an effect on Russia's economy. You need only listen to 
President Putin, or their central bank governor talk about how 
degraded their economy is and the fact that they are going to 
need to transform it in response to the sanctions that we have 
levied today.
    But there isn't--but what we have made very clear is that 
as long as Russia's aggression continues in Ukraine, we are 
going to continue to take sanctions actions to further degrade 
their ability to fight the war in Ukraine, but also to project 
power into the future, and also trying to take steps that will 
deny them access to revenues that they can use to prop up their 
economy going forward or to continue to build out their 
military industrial complex.
    This work is done primarily by individuals at the Treasury 
Department, both in our TFI unit, which is led by Brian Nelson, 
but also by the dedicated men of our Office of Foreign Assets 
Control, as well as FinCEN. In addition to the work that we do 
at Treasury, we have worked internationally to build up 
coalitions that have done things to not only implement our 
sanctions, but also go after sanctions evasion.
    Efforts like the multilateral Russian elite's proxies and 
oligarchs task force have enabled us to identify and seize the 
assets of those supporting Putin and his war, even where those 
assets are hidden using novel and complex structures. These new 
actions and initiatives require substantial resources, from the 
personnel to conduct the analysis needed to target the right 
entities, to the technology and systems needed to mount a 
global response.
    It is critical that the Treasury as a whole be properly 
resourced to carry out these responsibilities, and we are 
grateful for the funding that you have provided us over the 
course of the last year. But in order to continue this work 
into the future, the President's fiscal year 2023 budget 
request includes a $49 million increase in funding for FinCEN 
to add personnel required to implement the Anti-Money 
Laundering Act and to continue to build the systems we need to 
track beneficial ownership and leverage that information to 
pursue critical National Security objectives.
    Second, the fiscal year 2023 budget request includes an 
increase of $50 million for the Treasury Department offices, 
and $135 million for a system wide investment in cybersecurity. 
The budget also includes an increase of $17 million for the 
Office of Terrorism and Financial Intelligence, which oversees 
our National Security priorities, as well as sanctions.
    These funds will be used to add critical staff and make key 
investments in our classified information systems and other 
tools we use to execute U.S. sanctions policy. But of course, 
we know that fiscal resources are finite, and we do not ask for 
these funds lightly. As the Federal agency tasked with managing 
our national--Nation's finances, we at Treasury are acutely 
aware of the need to raise the revenues needed to fund our 
Government.
    That is why we are asking Congress to properly fund the IRS 
and provide it with the resources needed to enforce our 
Nation's tax laws, especially against those who use tax 
shelters, loopholes, and accounting tricks to starve our 
country of the fiscal resources needed to pay for our domestic 
and National Security priorities.
    Today, economists estimate that more than $160 billion is 
lost every year from taxes the wealthiest 1 percent of 
Americans choose not to pay. In total, we will lose 
approximately $7 trillion in tax revenues over the next decade 
due to unpaid taxes. Unfortunately, it is easy to see how the 
situation developed.
    The IRS budget has decreased by more than 15 percent in 
real terms over the last decade, and its workforce is roughly 
the same size as it was in 1974, even though the U.S. 
population has grown by 60 percent and the complexity of our 
economy has increased exponentially. Moreover, the IRS's 
technology is decades out of date, written in a programming 
language no longer taught, and incredibly expensive to 
maintain.
    The master file that under-grids the tax system dates back 
to the 1960s, when there was no Internet, no cell phones, and 
no spreadsheets or automatic payments. To begin to remedy this 
mismatch between the IRS responsibilities and its resources, 
the President's fiscal year 2023 budget request an increase in 
the IRS budget of 12 percent from total fiscal year 2022 
enacted levels.
    We want to thank this Committee for the increase that 
occurred last year, which was the largest increase in more than 
20 years. But we recognize that more needs to be done to bring 
the IRS into the 21st century going forward.
    And we know that working with you, Members of this 
Committee, we can do that in order to make sure that the money 
that we collect at the IRS can be used to fund the priorities 
we have, including our military, our infrastructure, and 
providing for our children.
    I look forward to the conversation and the opportunity to 
answer your questions and work together to make sure that we 
address the Treasury Department's needs and our country's needs 
at large. Thank you.
    Senator Van Hollen. Well, thank you, Mr. Deputy Secretary. 
We are now going to start questions. We will start with 5 
minute rounds. We may go to longer rounds later. And we are 
going to start with Senator Manchin. Senator Manchin.
    Senator Manchin. Thank you for the consideration, Chairman. 
I thank you very much. I have to run to another committee 
meeting, but I would like to ask a question, a couple. The 
Financial Crimes Enforcement Network or FinCEN was first 
established by the Bank Secrecy Act in 1970.
    Since that time, it has found a careful balance in 
successfully monitoring, prosecuting, money laundering and 
other major financial crimes while also maintaining the privacy 
that we need to feel safe entrusting our money to the American 
financial system.
    Last year, I reintroduced my See Something, Say Something 
Act with Senator John Cornyn, which requires social media 
companies to report suspicious activity to law enforcement, 
similar to the way that the banks are required to report 
suspicious transactions over $10,000 or others that might 
signal criminal activity.
    It also creates an Office in the Department--DOJ, to act as 
a clearinghouse for these reports of major crimes, which is 
similar to FinCEN. So, given that my bill adopts the same 
approach as FinCEN for Internet crime, what are some of the 
lessons that you have learned in information sharing that we 
could apply for sharing information about drug trafficking and 
other major crimes online?
    Mr. Adeyemo. Well Senator, let me start out by saying that 
we support the goal that you have outlined there. And I think 
some of the most important lessons that we have learned in 
terms of FinCEN is one around the idea of, as you put it, 
maintaining privacy, but also making sure that the information 
is available to law enforcement widely.
    So the FinCEN database is available to more than 400 law 
enforcement entities throughout the country in order to help 
them connect the dots. Because ultimately the goal for FinCEN--
--
    Senator Manchin. With that, what--sorry to interrupt you. 
With that, what are you all seeing in regards to terrorist 
financing through the social media and the dark web? Since you 
are sharing that information, what are you receiving back?
    Mr. Adeyemo. So, Senator, the place where we have the best 
insight is probably when it comes to the dark web. And I think 
that what we are seeing is that both criminals and those who--
and terrorists and those who want to use illicit finance are 
trying to use every means to get around the formal financial 
system.
    So the more that we can shine a light on these activities, 
the better we are able to protect our citizens against the 
activities that they are taking there.
    Senator Manchin. That leads me right into the next one on 
cryptocurrency. So there is regulations for virtual currency. 
Many financial regulations can still be evaded if money is 
converted to crypto, as you know.
    So my question would be, in addition to the aforementioned 
reporting, what is the Treasury doing to help account for the 
practice and be able to apply current financial regulations on 
cryptocurrency? And what would be your recommendations on 
putting guardrails on crypto?
    Mr. Adeyemo. Senator I think this is one of the places 
where I am increasingly focusing my attention, and I think 
there are some places where we are going to need to work with 
you in terms of legislation when it comes to crypto.
    When it comes to illicit financing, I do think we have some 
rulemaking authority around things like, how do we make sure 
that some un-hosted wallets are regulated, and we make sure 
that we extend a know your customer regime that currently 
exists for traditional banking sector to cryptocurrency.
    In light of what they do, I think it is going to be 
important for us to think through this carefully, but we are 
going to need to do it in order--
    Senator Manchin. But Treasury has always been pretty good 
at people, you know, find people illegally laundering money. We 
have had a pretty good network and be able to check that back. 
FBI has been pretty successful that.
    Crypto has an awful lot of illicit applications, if you 
will, and there are people that have learned to use it very 
effectively. I am sure you all have been watching that to give 
us some recommendations on what you would suggest would be just 
adequate guardrails that would protect the citizen but also 
bring it into mainstream currency. Do you believe there is 
going to be a mainstream currency?
    Mr. Adeyemo. Senator, I have my doubts that it will ever be 
a mainstream currency, but I do think that it is going to be 
used by all kinds of actors, including some people who want to 
illicitly move money. And I think one of the things that we 
have done so far is that we have sanctioned some of these 
crypto exchanges.
    But I think going beyond sanctions, we do need to make sure 
that our regulatory rules expand in order to cover them. And 
where we find that we can expand our rules, we are going to 
want to work with you to design legislation that gives us more 
authority.
    Senator Manchin. Thank you, Mr. Chairman. Appreciate it.
    Senator Van Hollen. Senator--Senator Hyde-Smith.
    Senator Hyde-Smith. Thank you, Mr. Chairman. And Mr. 
Adeyemo, as we have discussed, I remain really concerned about 
the number of employees on telework status, and it is the 
utmost importance that we bring these employees back to the 
office, as we discussed on the phone.
    And it really leads from another incident that happened 
with another agency this week when I realized there are so many 
people at home and I have constituents tell me that no one is 
answering the phone in these other agencies. But what 
percentage of Treasury employees are currently teleworking? 
Does that include the IRS?
    Mr. Adeyemo. So, Senator, in terms of Treasury employees, 
at the moment, we have every employee has a plan--every 
employee at the Departmental offices is required to have a plan 
in terms of how often they will be in the Treasury Department.
    Senator Hyde-Smith. So how many are teleworking?
    Mr. Adeyemo. So Senator, I can't tell you today how many 
employees are in the office versus which ones are teleworking. 
But what I can tell you is that any employee that needs to be 
in the Department, anyone who works on National Security or 
anyone who needs to be in the office, is in the office.
    What I can say is that before even the pandemic, a number 
of employees of the Treasury Department either had telework 
plans or work from alternative locations. For example, if you 
worked on IT, you didn't necessarily work in the Treasury 
Department building. Sometimes you worked in an offsite 
location.
    But for example, anyone who is working on any of the 
National Security issues that we are discussing today, those 
individuals have to be in the office because you can't do that 
work from home. So they are there on a regular basis. Even 
before I came back to the Treasury Department last year, 
Treasury employees were coming back into the office.
    For example, at the IRS, individuals who opened the mail, 
they came back to work, back to the office in July of 2020, 
long before we had a vaccine, and since then, they have been 
ramping up the number of people who have been in IRS offices 
throughout the country. In addition to those employees, we have 
employees who have been back since the summer of the pandemic 
helping to do things like print currency.
    And today, our goal is to make sure that we are having 
every employee who needs to be in the office, in the office, 
and that we are making sure that we are monitoring 
productivity. My goal is to try and optimize what we are 
getting out of our employees so that the employees we need in 
the office are in the office--
    Senator Hyde-Smith. Okay, my time is running a little short 
here, if you don't mind me interrupting you. And what was the 
pre-pandemic percentage of Treasury employees that teleworked? 
Before COVID and anybody had the need to do that, what was the 
percentage of your employees or the employees at the Department 
that were working from home before the pandemic? Not the 
ability to, but the ones that were doing it.
    Mr. Adeyemo. So Senator, I can get you that data, but I 
think that my understanding is less than 20 percent of 
employees were working from home before the pandemic. And 
today, I think that you probably find that we are in the same 
neighborhood in terms of people who full time work from home is 
probably still less than 20 percent of time.
    We do have a number of employees who have hybrid schedules, 
who come into the office maybe 3 to 4 days a week and work from 
home maybe 1 day a week. But the thing that we have now that is 
better than before the pandemic is we have better technology 
that allows us to both make sure that they are fully engaged in 
their work, but also allows us to make sure that we don't need 
to request additional space.
    Because one of the challenges we have at Treasury is that 
we have limited space. So by being able to have a bit of 
flexibility, we are also able to manage our space better so 
that we don't have to rent additional space.
    Senator Hyde-Smith. Do you intend for the Department to go 
full time, no one working from home unless it is absolutely 
necessary? Or do you continue to plan to have about 20 percent 
at home?
    Mr. Adeyemo. So, Senator, I don't have a target in terms of 
the percentage. My goal is to make sure that anyone we need in 
the office to do their job is in the office full time, and then 
for other employees to make sure that they are in the office as 
needed, partially because I think that from my standpoint, that 
gives us the flexibility to both optimize space, but also to 
optimize retention.
    What we found was in some of the positions when we required 
them to be full time, for example, in some of the HR 
operational functions, we were losing some of those employees 
to places where they would have flexibility in their 
employment.
    So if we had the ability to give flexibility because we 
don't need the person to be in the office, they are working in 
HR, they are working in IT and things where they don't need to 
interact with other employees, we may give them flexibility 
going forward. But my goal and the thing that I appreciate is 
making sure that when we need people in the office, we have 
them in the office full time.
    Senator Hyde-Smith. Well, I just feel the FT, when they 
fill out that application means full time and in the office for 
any Federal Government employee unless it is absolutely 
necessary that they are not there.
    Because we just had a lot of issues with constituents in my 
office dealing with people who are not at work. And I just hope 
you have got the controls in place to ensure that they are 
working when they are teleworking. And how do you monitor that?
    Mr. Adeyemo. So one of the things that we have had to do is 
do training with managers to make sure that they are monitoring 
employees who are working from home to ensure that they are 
working.
    But in addition, one of the things that we did when we came 
into this Administration was we made investments in 
technologies like Zoom so that instead of just doing conference 
calls, we would be able to see people to make sure that when we 
are in meetings, we can see them in order to make sure that 
they are engaging.
    If, Senator, there are issues that your constituents have 
with regard to Treasury employees, please feel free to bring 
them to me. But I think one of the things that we have been 
very focused on is making sure that we are training our 
managers to supervise employees who may be in the office 1 day, 
may not be in the office the next day in order to make sure 
that we are able to do things in a hybrid fashion.
    I think that you are right that this is one of the 
challenges we face, but it is frankly a challenge that 
private--when I talk to CEOs, all of them are dealing with this 
as well in terms of how do I have a hybrid workforce, because 
that is the only way we are going to be able to recruit the 
talent that we need.
    But I want to reassure you that for positions where people 
need to be in the office, we are requiring them to be in the 
office full time.
    Senator Hyde-Smith. But does that give the managers extra 
duty that they are having to spend extra time on it to go to 
this training and to spend the time to ensure they are working 
from home? Doesn't that make the manager have more 
responsibilities throughout the day?
    Mr. Adeyemo. My sense as a manager myself in the 
institution is that, no, I don't think it increases your 
duties. What it does is, for example, how do you run a hybrid 
meeting? And it is something that we have had to do regardless.
    You are going to have to learn how to do regardless, 
because frankly, we never--at Treasury, all of the same people 
don't work in the same building. So if you are a manager, you 
may be managing people who work in main Treasury, but they may 
also have employees who work in West Virginia or work out of 
State or work in a foreign country if you are working 
international sections.
    So you have had to do this work already in terms of having 
to deal with some employees who are sitting in front of you, 
and some employees were sitting in different offices. Now, 
instead of sitting in a different office, they may be sitting 
in their home. But ultimately, the type of responsibilities are 
the same. We have increased the training because now we have 
new technology that is helping to make that easier to do.
    For example, you are not just talking to them on the phone 
anymore. Now you are able to talk to them on Zoom or use other 
products. But ultimately, these are the type of 
responsibilities that if you are a manager in a global business 
or in a global--in a global Federal agency like the Treasury 
Department, you are going to need in order to advance.
    Senator Hyde-Smith. Okay. One last thing. So you are 
telling me that about 20 percent were working from home before 
the pandemic and you have got about 20 percent that are 
currently working from home now, is that correct?
    Mr. Adeyemo. So, Senator, I want to get you the precise 
number. Please give me time to come back to you. That is what I 
believe--that is where I would estimate it to be. But I want to 
make sure that I give you precision on that. And I am committed 
to coming back to you with that after this hearing.
    Senator Hyde-Smith. Thank you.
    Senator Van Hollen. Thank you, Senator. And the Ranking 
Member anticipated the fact I was going to go to 8 minute 
rounds next. And so we will do that back and forth just so that 
we can get into some in-depth questioning, which I think is 
helpful. Mr. Deputy Secretary, as you know, in order to ensure 
that Putin's invasion of Ukraine is seen as a strategic failure 
by history, we are going to require a sustained effort.
    And that means making sure that Ukrainians have the 
military support they need, and it also means making sure we 
have an effective sanctions regime. So I want to cover a couple 
areas where I am very worried about leakage in sanctions. Some 
of the--we don't have secondary sanctions in place right now 
for the most part, but it seems to me we want to explore that 
option going forward.
    So I want to start with military, supporting countries or 
entities around the world that may be supporting the Russian 
military. You, at the Department of Treasury, have already 
applied a list of sanctions. As we gather here today, do you 
know of any countries or companies, foreign companies that are 
violating our sanctions regime with respect to support of the 
Russian military?
    Mr. Adeyemo. Senator, as I sit here in front of you today, 
I can't speak to any companies that I know of that are 
wittingly assisting Russia in violating our sanctions regime. 
But what I do know is that Russia is attempting to find ways 
around our sanctions regime by setting up trusts and proxy 
companies that would allow them to purchase the things that 
they are not allowed to purchase legitimately.
    Senator Van Hollen. So as of today, you don't know, for 
example, whether any Chinese entities are supplying Russia with 
weapons systems or components that are sanctioned by the United 
States?
    Mr. Adeyemo. No, I don't.
    Senator Van Hollen. And I understand that we need to, you 
know, track the efforts by the Russian military to set up, you 
know, front groups and other entities to disguise their 
efforts. The Department of Commerce, of course, also has a list 
of components that we are preventing the export to Russia of, 
and that has a sort of long arm impact.
    And I saw in June that they would put together an expanded 
entities list of companies, countries that would be barred from 
export of certain U.S. origin items. Does the Department of 
Commerce have any authorities, or do you have any role in 
implementing the Department of Commerce's sanctions, or is that 
done strictly through the Department of Commerce and DOJ?
    Mr. Adeyemo. So, Senator, that is done by the Department of 
Commerce, and I believe with assistance from DOJ. But in lots 
of circumstances, what we have done is work together with 
Commerce to figure out where export controls can play a role 
and where sanctions can play a complementary role. So if they 
put something on the export list, we may also go out and 
sanction companies that produce that thing in order to make 
sure that we help best address evasion.
    Senator Van Hollen. All right. Let me turn now to the 
energy sector, because, as you know, energy exports represent a 
large part of the Russian economy. Do you have a ballpark 
figure of what portion of the Russian economy is reflected in 
those exports, coal, gas, oil?
    Mr. Adeyemo. So in terms of Russian exports, the vast 
majority of them come from commodities, Senator.
    Senator Van Hollen. So we, of course, in the United States 
have now, you know, borrowed our--we are not importing Russian 
oil. We know that the EU is working diligently, I believe, 
toward trying to phase out their dependence on Russian oil. We 
need to move on the gas front as well.
    But there are countries that are not only continuing to 
maintain imports of Russian oil at the levels they were before 
the war but are increasing their overall imports of Russian 
oil. Can you talk about some of the countries that are at the 
top of that list?
    Mr. Adeyemo. So, Senator, it is--one of the challenges we 
have is that we don't have direct data in terms of what this 
looks like because a great deal of the oil is sent in means 
that don't allow us to produce it. But we know that the data we 
have seen is that countries that have traditionally imported a 
great deal of Russian oil include Europe, but also China, 
India, Japan, and South Korea, and Turkey.
    Senator Van Hollen. Right. But I am looking specifically at 
countries that have increased their volume of oil imports from 
Russia. And as I look at the list, China is on the list, India 
is on the list. Maybe a few other countries are on the list. Do 
you know of any other countries that have increased their 
volume of imports of Russian oil since the war began?
    Mr. Adeyemo. No, I don't. Senator.
    Senator Van Hollen. Okay. And would you agree that those 
countries that have increased their volume of imports of 
Russian oil are, in a sense, engaging in war profiteering? That 
they are benefiting from the fact that countries like our EU 
partners have reduced their imports of Russian oil.
    Mr. Adeyemo. So, Senator, I think part of what we--so, I 
think that what I would say is that right now we are in a place 
where what our goal has got to be is to find ways to limit the 
amount of revenue that Russia is making off the sale of its 
oil, partially because one of the challenges with oil is that 
you don't always know where it is coming from.
    So there may be--some of these countries may be aware that 
the oil that they are getting is directly from Russia. But what 
we have seen in the context of other sanctions programs is that 
countries do, once sanctions extend to energy, they try and 
disguise where the energy is coming from.
    So the thing that I am increasingly focused on is what can 
we do not only to stop Russian oil from flowing to our country 
and to other countries that are in our alliance, but as it 
continues to flow, how do we reduce the revenue that Russia is 
making?
    What we know today is that Russia is selling less oil in 
terms of per barrel than they were before the invasion. But 
because of the increase in price, they may be making more 
profit. So the goal for us is really to reduce that revenue 
level even as countries may purchase Russian oil going forward.
    Senator Van Hollen. So how do you do that, right. I mean, 
can you talk about your plan? Because, you know, right now we 
have a situation, whereas I indicated, and there is plenty of 
public reporting on countries that have increased their imports 
of Russian oil since the war began, and they are buying it at a 
discount, right.
    So, you know, consumers in that country are benefiting from 
the discounted oil prices, while consumers in other countries 
that are not importing as much Russian oil compared to their 
pre-war levels are seeing higher prices.
    How can we make sure that some consumers around the world 
aren't benefiting getting a windfall from reduced prices of 
Russian oil while others are paying more? How do we do that?
    Mr. Adeyemo. Yes, I think, Senator, the challenge, of 
course, is that while they are paying a discount, the truth is 
that they are paying more today from Russian oil than Russia is 
making off of their oil before the invasion because the price 
of oil in general has went up. So one of the things that we 
need to do is increase production, which is something we have 
been focused on.
    But I think that there are a number of options in terms of 
reducing Russia's revenue. There are things like introducing a 
price cap, which has been talked about in the academic 
literature in terms of a price cap, in terms of how much can be 
paid for Russian oil. There is also the idea of over time 
limiting the amount of Russian oil that can be sold.
    But all of this from our standpoint, the chief objectives 
that we have are, one, celebrating the fact that Europe has 
taken this important step in their six package to limit their 
dependance on Russian oil. Number two is, what can we do to 
limit the amount of revenue that Russia is making?
    And our final goal is making sure that we don't spike the 
price of oil overall in order to make sure that our consumers 
don't bear the cost of what we are doing here. And I think 
there are ways for us to do that in terms of looking at things 
like potential capping the price of Russian oil going forward, 
or over a period of time, reducing the amount of Russian oil 
that is able to be sold.
    But we want to make sure we do that in a manner that is 
consistent with our allies and partners. I think the fact that 
Europe is taking this important step over the next several 
months is going to put us in a position to make sure that 
Russia can't use oil as a strategic weapon against Europe going 
forward.
    Senator Van Hollen. Thank you. Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman. Thank you, 
Ranking Member--I got to get situated--Hyde-Smith, for having 
this hearing. Thank you, Mr. Secretary, for being here. I would 
like to start by asking you a few questions about beneficial 
ownership and FinCEN rulemaking. As I am sure you would agree, 
complex definitions of beneficial ownership will be hard for 
small businesses to implement. Is this something FinCEN is 
considering in its rulemaking?
    Mr. Adeyemo. Senator, yes, it is top of mind for us in the 
rulemaking is making sure that we in term--we think about the 
regulatory burden on small businesses all over the country.
    Senator Boozman. Very good. Will FinCEN work to more 
closely align the beneficial ownership definitions with those 
that currently exist and that businesses already have 
experience providing information on?
    Mr. Adeyemo. Yes. Yes, Senator. And I know that we, as you 
know, we put out a proposed rule. And as part of that, we 
received comments from small businesses and their associations. 
And we are currently considering those because we want to make 
sure that the final rule addresses some of these comments that 
we have received.
    Senator Boozman. Very good. Also, will you work to minimize 
the reporting burdens on small businesses by allowing financial 
institutions to rely on the registry for their beneficial owner 
collection and verification requirement?
    Mr. Adeyemo. So, Senator, we share that--we share your goal 
in terms of reducing the burden. I think that there is one 
rulemaking that we have already done. The second one is around 
CCD--CDD.
    And I think we want to make sure that we align those as 
closely as possible, but we are still going through the 
rulemaking process. But I can tell you that we share the goal 
in terms of making sure that people don't have to report 
numerous times the same information or slightly different 
information going forward.
    Senator Boozman. Good. Thank you. Let's talk a little bit 
about the Treasury market. As you know, the Treasury market has 
been described as the biggest, deepest, and most essential bond 
market on the planet.
    Historically, investors view treasuries as risk free or 
near cash assets and safe havens during market crisis. However, 
the resiliency of the Treasury markets has been called into 
question by recent disruption events in which market price 
volatility increased and the amount of available liquidity 
decreased.
    As a result, some market observers have called for 
structural and regulatory changes to enhance the capacity and 
resiliency in the market. While the Treasury Department 
continues to study possible reforms, it is important to ensure 
that reforms do not harm the market and do not cause unintended 
ancillary effects.
    I believe that any proposals or recommendations on any 
structural regulatory changes should be vetted and supported by 
investors. In that light, where is the Department in its review 
of Treasury market structure? Do you expect to put out reforms 
or recommendations? And if so, how far are you in the process?
    Mr. Adeyemo. Senator, to your point, I agree that we want 
to make sure that we consult with stakeholders as we think 
through these reforms. That is why we announced recently that 
we are going to put out a request for information which will 
give the private sector and other stakeholders an opportunity 
to provide us with advice as we think through our reform agenda 
going forward.
    Late last year, we put out a framework in terms of the 
areas that we are looking to focus on with regard to reform, 
with the idea being that you are right, that the Treasury 
markets are the deepest, most liquid in the world.
    The United States takes a great deal of benefit from this. 
And what we want to do is make sure that the reforms we make 
will only strengthen those markets. And in order to do that, we 
want to make sure that we rely on information from market 
participants as we go forward.
    Senator Boozman. Do you have any ideas how you will 
actually get the views of the investors?
    Mr. Adeyemo. Yes, Senator. I think one of the things we are 
going to do is that we are going to put out a request for 
information where they can formally provide us with detailed 
feedback in terms of how they think we should think about 
reform through an open process that they can formally use.
    But in addition to doing that, we are, of course, speaking 
to market participants on a regular basis to hear from them in 
terms of the reform agenda as well, and working closely with 
the regulators as well.
    Senator Boozman. Very good. I also wanted to touch on anti-
money laundering, AML. As you know, FinCEN recently issued an 
RFI reviewing AML regulations and guidance under Section 6216 
of the Anti-Money Laundering Act.
    What are your intended steps, and can you preview some of 
the proposals you will be making in your Congressional report 
to eliminate outdated, redundant, or non-risk based AML 
expectations?
    Mr. Adeyemo. So, Senator, I think part of our goal here is 
to implement what U.S. Congress passed as part of the in terms 
of the anti-money laundering and beneficial ownership laws. But 
as we do that, to also step back and to think through now that 
we are building out this regime, which is going to allow us to 
be comprehensive, what does it allow us to do in terms of 
eliminating some of the things that we have done previously as 
stopgaps?
    And what we are hoping to do is that as we build--we have 
at the moment two more--we are going to put out a final rule 
with regard to the beneficial ownership rule we were talking 
about earlier. And we are also going to put out information in 
terms of how we are going to build out the database. And I hope 
that at that point it will put us in a position where we can 
look back and say, based on this, how do we think through our 
regulatory approach going forward?
    We look forward to working with you and the Committee on 
this and providing greater information to industry and to 
stakeholders in terms of what this will look like going forward 
once we have completed the rule makings regarding beneficial 
ownership.
    Senator Boozman. Very good. I am also concerned about 
potential rule makings around artificial intelligence in the 
insurance industry. As I am sure you know, is used in insurance 
to price risk, manage operations more efficiently, and detect 
and predict fraud.
    All of these are aimed at inclusivity in the market and 
work in tandem with the use of actuarial risk based pricing, 
and ensures all policyholders are paying the lowest possible 
premium. Further, since AI affects a consumer's insurance 
coverage, insurers are already highly regulated and are 
obligated to explain and justify decisions to customers.
    Significantly, the EU is currently in the process of 
finding finalizing a regulation designed to harmonize rules on 
AI. According to the EU, the purpose of the regulation is to 
improve the functioning of the internal market by laying down a 
uniform legal framework for the development, marketing, and use 
of AI in conformity with EU values.
    My concern is that creating new regulations for AI used by 
insurers who are already subject to regulatory frameworks which 
address the concerns would lead to regulatory duplication that 
ultimately hurts policyholders. I guess the question is, does 
Treasury have any plans to engage with the EU on this topic?
    Mr. Adeyemo. So Senator, this is a topic that I am not 
familiar with, but now that you have raised it, I am committed 
to going back to my staff and talking about it and finding out 
where we are with regard to the EU, and then we will follow up 
with you.
    Senator Boozman. Well, based on your answers to the other 
questions and the good job you have been doing, I am surprised 
that we caught you in one that you didn't have any knowledge 
of.
    Mr. Adeyemo. Well, I appreciate you bringing it up to me, 
because it does sound like an important issue and one that I 
will pay attention to and come back to you shortly on.
    Senator Boozman. No, we appreciate that. Thank you, Mr. 
Chairman.
    Senator Van Hollen. Thank you, Senator. And thank you, Mr. 
Deputy Secretary. I want to push you a little bit more where we 
left off in our question with respect to Russian oil revenues. 
I am looking at a piece that was in The New York Times 
yesterday titled, Russia's Oil Revenue Soars Despite Sanctions 
Study Finds.
    And they cite a study from the Center for Research on 
Energy and Clean Air out of Helsinki, Finland, that points out 
that while the EU reduced its imports of Russian crude by 18 
percent in May, that dip was made up by India and the United 
Arab Emirates, leading to no net change in Russia's oil export 
volumes.
    And they point out that China continues to be the largest 
importer of Russian fossil fuels overall over the 100 day 
period they looked at. And as you know, Secretary Yellen has 
been talking about this idea that you referenced today about 
essentially, you know, countries forming a bloc that would 
negotiate, demand a price reduction in Russian oil, because 
right now we have the totally unfair situation where some 
countries are getting bargain prices by increasing their 
volumes and helping offset the pressure on Russia that the EU 
and others have put in place.
    So could you just talk a little bit more about how this 
design would work? Because we need to figure this out pretty 
quickly. And if not, we are going to have to be applying 
secondary sanctions and maybe having to apply secondary 
sanctions as part of getting more countries on board. Can you 
just spell out in a little more detail what you are thinking of 
at the Department?
    Mr. Adeyemo. Yes, I am happy to do that, Senator. I think 
part of this I will reserve for maybe a classified setting, but 
I am happy to talk to you about this in detail. But I think 
part of the goal here is that fundamentally at the moment, as 
you know, energy prices are far higher post-invasion than 
before invasion.
    And even if you are buying Russian crude at a discount, the 
price you are paying for Russian crude today is higher than you 
paid pre-invasion. So even there, if there is a discount, the 
truth is that Russia is making more today off of crude than 
they were pre-invasion.
    And our analysis at least tells us this is slightly 
different than what you have seen in The New York Times, that 
Russia is probably not producing as much crude as they were 
pre-invasion, but they are potentially making more resources--
more revenues because they are selling at a higher price.
    So the goal is to make sure that you reduce the price that 
they are able to gain from selling their crude going forward by 
working with other countries to agree to a certain level that 
you will pay for Russian crude going forward.
    It really is trying to make sure that you are in a place 
where Russia is not benefiting from the fact that because of 
their invasion of Ukraine, prices of not only Russian crude, 
but crude in general have gone up.
    This is something that we are talking about with our allies 
and partners. And I think I am happy to brief you in more 
detail about in terms of where those conversations stand in a 
classified setting.
    Senator Van Hollen. Okay. Let me turn to the sanctions that 
we have imposed on Russian oligarchs who have been complicit 
with Putin and other corrupt actors. And as you know, this is 
also an area where sanctions are only as effective as our 
ability to stop those oligarchs from being able to hide their 
assets in other places. Sometimes they do it surreptitiously.
    Sometimes they do it in countries that are willing to look 
the other way. Can you talk a little bit more about that 
effort? To my knowledge, we have not imposed any secondary 
sanctions on any other countries or entities. I know we have 
given some warnings, but I continue to read about 
circumvention.
    In fact, you were yourself quoted in the May 13 New York 
Times piece saying that you have seen a number of Russian 
yachts move from ports in countries that have extended 
sanctions to countries that haven't.
    And that same article mentioned the UAE, especially Dubai, 
as one of these destination points. What are we doing to make 
sure that we are having an effective sanctions regime on 
oligarchs who can, you know, take their yacht from port to 
port?
    Mr. Adeyemo. And Senator, what I will do is I will make 
sure we send this to you. But a few weeks ago, we actually put 
sanctions on a yacht servicing company. So this was us using 
the material support provision of our sanctions to go after a 
company that we found that was providing material support to 
the yachts of those who had already been sanctioned.
    So we have actually went after companies in third countries 
where we have seen them providing material support to those who 
have been sanctioned, using our--using the sanctions authority 
that has been given to us by Congress and by the President.
    I think what we have been trying to do, in addition to 
using our material support provision, is building a coalition 
with other countries that will not only be in a position to 
freeze some of these assets, but actually to seize them going 
forward. And we have seen the seizure of a number of property 
tied to many of these Russian elites, not only here in the 
United States, but around the world, which is different in kind 
than what we have seen in other sanctions programs.
    And our goal here is to make sure that we strengthen this 
coalition so that it is not just our traditional allies, but we 
also have partners that are joining us in this effort so that 
these Russian elites know that there is not a place where they 
can hide their assets outside of the realm of the sanctions 
that we and 29 other countries have implemented.
    So we have already started to take action in third 
countries. We are planning to take more. Part of our goal is to 
have conversations with not only financial institutions, 
because I think what we have found is that financial 
institutions understand the scope of our sanctions. We haven't 
largely seen financial institutions that have been willing to 
do business with individuals or entities that have been 
sanctioned.
    But when it comes to other companies in an economy, be it 
companies that help service yachts or planes or deal in real 
estate that aren't as familiar with our sanctions regime, that 
is the place where we have had to act, and we have had to spend 
time with authorities and also with those companies to explain 
to them that ultimately the providing material support to an 
individual or an entity that has been sanctioned could make you 
subject to sanction.
    And we have used that authority already in third countries, 
and we think that doing that has sent a clear message to these 
companies that ultimately, if you provide material support, no 
matter where you are, we are going to be willing to use our 
sanctions authority to go after you.
    Senator Van Hollen. All right. I look forward to following 
up with you and your team. I am about to turn to another 
category of questions, so why don't I--Senator Hyde-Smith, I 
don't--let me turn it over to you. I don't know if you have 
another round of----
    Senator Hyde-Smith. I do.
    Senator Van Hollen. Absolutely.
    Senator Hyde-Smith. Thank you very much. Let's talk about 
the Bank Enterprise Program. It is pretty popular in 
Mississippi, and it is well received by local banks and credit 
unions because it allows them to leverage their own assets to 
invest in the small businesses and the startups, which gives 
them the ability to support job creation and retention in areas 
that really need it in a lot of States.
    But I was really disappointed to see that the budget cuts 
from the Bank Enterprise Program by $11 million from the fiscal 
year 2022 enacted level. What were the reasons for these cuts?
    Mr. Adeyemo. Senator, let me start out by sharing your 
commitment to these communities where the Bank Enterprise 
Program has been effective in helping. And I think what we are 
trying to do is figure out where we can most effectively put 
the limited dollars that we have available to have the impact 
that we both care about.
    As you know well, in many of these communities, you have 
CDFIs and MDIs that are also doing business there. And what we 
have done, based on the funding that Congress provided us, is 
provide a great deal of capital to these institutions. So more 
than 9--about $9 billion of capital through the Emergency 
Capital Investment Program went to CDFIs over the course of 
this year that we have placed in them.
    In order to make sure that that money is invested well, we 
have asked for additional money for the CDFI program to help 
monitor but also provide resources to those institutions. I 
think I am happy to talk to you about how we are thinking about 
this, but I think our goal largely is to make sure that we are 
building up an ecosystem there that is based on providing 
resources to those lenders, then also ensuring that we have 
provided support to them.
    So it wasn't--our goal is not to step away from these 
communities, but rather to try to most effectively to provide 
funding to them going forward.
    Senator Hyde-Smith. So I think he just answered the program 
is oversubscribed compared to other programs because it is so 
popular. But how do you intend to support investments in 
economically distressed areas with reduced funding? I mean, you 
are saying you are going in another direction and how do you 
expect that to compensate?
    Mr. Adeyemo. Well, Senator, I think our goal is to make 
sure that on top of the public money that Congress has provided 
to these communities, that we attract private money as well. So 
the--our goal, similar to what we are doing with the Small 
Business Credit Initiative, is to make sure that we attract 
private investment into these communities, because we know that 
that is the sustain--is a sustainable way to make sure that 
they have the access, the resources they need.
    We think that we have a real opportunity to do that, 
working closely through our CDFI office with the money that you 
have already provided. And that is what we would want to do 
here, is to ensure that in areas where there is a need for 
additional capital because all these programs are 
oversubscribed, that we would work to attract private capital.
    Senator Hyde-Smith. And what is the status of the 2022 
grants right now?
    Mr. Adeyemo. Senator, I would have to get the team to 
provide you with an update on where we are in the grant making 
process at the moment, but we haven't completed it. But I am 
happy to get you--to provide you with an update after this 
hearing.
    Senator Hyde-Smith. Has it been implemented well, or I 
mean, do you have any idea if it has been beneficial or----?
    Mr. Adeyemo. So my view is that, as you know well, this is 
a program that has been very popular and has been implemented 
well by staff across Administrations, and that continues to be 
the case. I think my overarching goal is to make sure that 
across the suite of programs that Congress has authorized, we 
take your resources, and we try and find creative and 
interesting ways to try and pull the private sector in as well 
to crowd in private capital.
    Because ultimately, what we know about these communities 
where we have these programs right now is that they have 
unfortunately been starved of the type of private capital that 
is needed to building housing, to starting small businesses, to 
making sure that those small businesses can thrive.
    So a big push from my standpoint, from Secretary Yellen's 
standpoint, is what can we do to take the resources you have 
provided and use them in a way that attracts private capital to 
join them in a way that is sustainable over time?
    Senator Hyde-Smith. And the--one other thing I wanted to 
talk about was the, in February, Treasury received the $61 
million in the supplemental funding to address the war in 
Ukraine and the Russian invasion. About a month ago, an 
additional $52 million was provided to the Treasury in the 
second Ukraine supplemental appropriations package. So how much 
of these funds right now have been obligated?
    Mr. Adeyemo. So, Senator, I don't have the precise number 
in terms of the obligated amount today, but I am happy to get 
that to you. But I can tell you that money has been used. We 
have done really two things with that funding. One, is invest 
in additional personnel, and two, is invest in technology.
    On the personnel front, one of the things that we have 
needed is additional people to help, not just in the 
traditional areas where we have dealt with sanctions in the 
past but given the complexity of Russia's economy and how 
interconnected it is with the global economy, we need 
additional staff in places like economic policy to help us do 
economic analysis on how we can better target Russia's economy 
while mitigating the impact on our economy.
    Given how interconnected Russia is to the financial system, 
we have needed additional resources in domestic finance so we 
can understand the interconnections between Russia's financial 
system and our own financial system.
    When it comes to technology, a big deal--a great deal of 
what we have had to do is invest in technology in places like 
FinCEN, because one of the things we want to make sure is that 
the information that we are collecting on Russia and on the 
illicit behavior that they are conducting is analyzed and 
provided to law enforcement in our country, but also to our 
partners around the world.
    So we have made huge investments both in personnel and in 
technology, in order to put us in a position to better address 
what is happening in Russia, Ukraine, and also in prosecuting 
some of the criminal enterprises that we are seeing develop 
around this.
    As I mentioned earlier, one of the things that Russians 
have perfected in terms of evading our sanctions is setting up 
proxies and trust companies that allow them to get around our 
sanctions, and that is around the world. So we are doing 
everything we can to go after those as well.
    Senator Hyde-Smith. So you have done a lot. So would you 
think that over 50 percent have been allocated--obligated so 
far?
    Mr. Adeyemo. So, Senator, I think--I want to make sure that 
I come back to you with a precise number in terms of how much 
has been obligated. But I do know that one of the things that 
we have been focused on is both getting the technology in place 
as fast as possible and hiring people as quickly as possible. 
In terms of when that has gone from being in the budget to 
actually being obligated, I want to get you precise numbers.
    Senator Hyde-Smith. Thank you.
    Senator Van Hollen. Thank you, Senator. Mr. Deputy 
Secretary, we have talked a little bit in this hearing about 
the updated Corporate Transparency Act, as well as the broader 
Anti-Money Laundering Act, which I think are important 
authorities and tighten the regime that we have to prevent 
people from anonymous ownership of different companies in the 
United States.
    But I am concerned about what I see as a loophole in that 
overall architecture with respect to private investment 
companies like hedge funds who are exempt from reporting 
information on the identity of their clients, as we require for 
banks, mutual funds, and other parts, other segments of the 
financial sector.
    As I understand it in any way, under current law, a hedge 
fund manager can manage large sums of money without knowing the 
real identity of their investors, which would allow corrupt 
actors to evade sanctions.
    My understanding is the Department of Treasury has 
authority to require these private entities to report on the 
identity of their clients. Let me first ask if that is your 
understanding. Do you have that authority?
    Mr. Adeyemo. So Senator, my understanding is that in the 
legislation, Congress did provide an exception for certain 
businesses. I think the scope of that exemption is something 
that we are still working through in terms of the rule writing 
process.
    My goal, of course, is to try and cover as much of the 
world as possible with regard to the beneficial ownership rule, 
because the last thing we want is to create avenues for illicit 
money to flow. But I don't want to get ahead of the rulemaking 
process. What I can commit to you is that we are going to be as 
expansive as we are legally permitted to do.
    And if we find that ultimately we can't get at some of the 
companies that exist in our ecosystem, and we think that there 
is--that that is a place where illicit money might flow, we 
will come back to Congress and request that you take additional 
action.
    Senator Van Hollen. Well, let me ask you, how do we know? 
Do we have any idea what the magnitude of this loophole might 
be?
    Mr. Adeyemo. So, I think the real question, Senator, is how 
broadly can we define--how broadly are we legally permitted to 
define this? And then the question becomes, how big is the 
ecosystem that exists outside? It is going to be hard to know 
how much illegal money is flowing into that part of the 
economy. And the thing that we also know is that, if there are 
things that aren't covered by the beneficial ownership rule 
making, it is more likely that illicit finance will flow in 
that direction.
    So we are going to be in a place where, no matter what, I 
think we are going to need to come back to you as we see this 
develop to talk to you about whether we are going to have to 
further change the rule. And if we don't have the ability to 
change the law because we lack the legal authority, what 
additional legal authority that we need.
    But what I can say is that because of the legislation that 
you have passed, we are in a better position to make sure that 
we root out illicit finance within our country. But we also 
know based on other countries that have put in place beneficial 
ownership systems, is that at the edges where the rulemaking 
doesn't allow you to go is where illicit finance will start to 
flow. So we are going to need to think about this in multiple 
approaches.
    One is finalizing the rule based on the authority that 
Congress has already given us, and then seeing if we have the 
ability to use other rulemaking authorities to get at places 
where we see potentially illicit finance flowing. And if we 
don't, coming back to you and the members in terms of getting 
additional authorities.
    Senator Van Hollen. No, I appreciate that, right. Because 
you can shut one door and just opens the other door. And as you 
point out, if you are an illicit actor, you are going to look 
for the other open door and push on that.
    Can you give us an idea, your timeline here in terms of the 
rule and your determination of the extent of your authorities 
under existing law and what other authorities, if any, you may 
need? Your timeline there.
    Mr. Adeyemo. As you would expect, our notice of proposed 
rulemaking, we got a lot of comments from industry and our goal 
is to make sure that we carefully consider each one of those as 
we finish up the rulemaking.
    I have asked the staff to complete the rulemaking as soon 
as possible, with my hope being that before the end of this 
year that we will finalize the rule. But we also, as you know, 
have a number of other rule makings tied to setting up the 
beneficial ownership system. They are also looking to complete 
as quickly as possible as well.
    Senator Van Hollen. Thank you. In December, Secretary 
Yellen also, as she was discussing the updated CDA--CTA said, 
and I quote, ``we are also ensuring a similar principle applies 
to real estate because many corrupt actors can hide their money 
in Miami or Central Park's skyscrapers the same way they do in 
shell companies.''
    What actions are you taking? Is that part of the rulemaking 
or is that a separate effort with respect to making sure that 
real estate companies are not used as conduits for any illicit 
financing?
    Mr. Adeyemo. So it is both related but also separate in 
terms of the way we are thinking about this. And I think that 
our view is that we need to make sure that, and this speaks to 
the conversation we are just having, that people can't find 
other avenues for illicitly storing resources.
    And we know that real estate is a place where a number of 
people have bought in the past. And we want to make sure that 
both in terms of as we are thinking about beneficial ownership 
at large, we are doing everything we can in terms of rulemaking 
to prevent that from being a place where illicit finance can 
live in this country.
    Senator Van Hollen. So in this category of questions, there 
is just one final question, which is that, is there a feedback 
mechanism between FinCEN and law enforcement that lets you and 
the folks at FinCEN know the extent to which the information 
they are providing is being useful and actionable.
    Because obviously we are, you know, providing additional 
resources, as Senator Hyde-Smith mentioned, to--for the 
reporting mechanism. It would be, I think, important to have 
some back and forth so that we can be assured that the 
information that is being gathered is actually being put to 
effective use.
    Mr. Adeyemo. And I think, Senator, my--the best example of 
this, I think, is the repo task force, which I mentioned 
earlier. The repo task force, as you know, was established both 
by Secretary Yellen and the Attorney General.
    And we work very closely with the Department of Justice 
with regard to the repo task force and share the data and 
information that is coming in from FinCEN and from Treasury 
closely with DOJ. And it has helped in terms of helping take 
some of the actions that we have already taken, but also in 
terms of building cases.
    So I think the best example of the impact of the funding 
that you have already provided is some of the law enforcement 
cases that have already taken place, but also some of the law 
enforcement cases that are being developed today. Ultimately, 
the goal for us is to make sure that we have this information 
in order to both help our National Security agencies, but also 
our law enforcement agencies going forward.
    And I think if you speak to them, they have found the 
information that FinCEN has provided, as well as OFAC, has 
provided quite useful in terms of thinking about how we can use 
our criminal authorities going forward. And the final thing 
that I mention is that one of the things that we have been able 
to do through the repo task force is improve information 
sharing among some of our closest allies.
    It had existed long before Russia's invasion of Ukraine, 
but I think that the attention that Congress has put on this, 
as well as the importance of this issue, has allowed us to 
strengthen those information exchanges so that we are in a 
place where the information we have here in the United States 
is being shared with our allies and partners.
    But in addition to that, we are getting and requesting more 
information from them in order to get a holistic picture as to 
how Russian elites and oligarchs are attempting to hide their 
wealth, not just here in the United States, but around the 
world.
    Senator Van Hollen. Thank you. Senator Hyde-Smith.
    Senator Hyde-Smith. Continuing somewhat on that, can 
cryptocurrencies like Bitcoin, can that be used to evade 
Russian sanctions?
    Mr. Adeyemo. So, Senator, I think that what we found is 
that those who are looking to use any means can find a way to 
use cash, can use cryptocurrencies to try and evade Russian 
sanctions. What I can say is to date we haven't seen this to be 
a main route of evasion.
    But what we do know is that Russia itself is a--has been a 
host to a number of cyber criminals who have been using 
cryptocurrencies as a means to further their criminal 
enterprises.
    That is why we have used sanctions authorities to go after 
exchanges that exist in Russia. And we are committed to 
continuing to do so where we see illicit finance, where people 
are attempting to use crypto to evade our sanctions.
    Senator Hyde-Smith. Have you seized any crypto assets?
    Mr. Adeyemo. Oh, we have not--we have frozen exchanges and 
we have went--we have used our sanction authority against 
exchanges. But in terms of seizure at the Treasury Department, 
we, of course, have the right to freeze things, Senator, but we 
don't have the right at Treasury to seize things.
    Senator Hyde-Smith. And are you worried about the overuse 
of sanctions?
    Mr. Adeyemo. I am, Senator. And I think one of the things 
that I did before the Russia, Ukraine--Russia invaded Ukraine 
was Secretary Yellen asked me to do a review of the use of 
sanctions, and I conducted a review of the sanctions use from 
after 911 to this year. And I am happy to provide that 
information to you.
    But one of the things--many of the findings of that review 
have influenced the way that we have used sanctions with regard 
to Russia, Ukraine. And in the United States alone, we have 
placed a thousand sanctions on Russian entities and individuals 
over the course of Russia's invasion.
    I think one of the most important things we learned from 
the review was that sanctions were best placed when we did them 
in a multilateral fashion for a number of reasons, one being 
they had much more of an economic effect, and that is what we 
are seeing in Russia today. But it also meant that by doing it 
that way, you also had a bigger political effect, and you 
protected the U.S. economy from taking on--taking this on its 
own.
    So one of the things we have done at the President's 
direction is make sure that we do everything as much as 
possible in a multilateral way. The second point was that we 
wanted to make sure that we did serious analysis before we put 
sanctions in place, so we understand the economic consequences 
on the target, but also the economic downsides on the United 
States.
    And I want to thank you and the Members of this Committee 
for the money you provided in the supplemental, because that 
has helped us greatly to get the type of people into Treasury 
that have helped us through from economic policy to 
international affairs to domestic finance, to do a more robust 
economic analysis as we have put sanctions in place against 
Russia.
    In addition to doing that, there is a number of other steps 
that we are taking based on that sanctions review to ensure 
that we don't, to your point--or we use sanctions in a way that 
is the most effective without overusing them.
    Senator Hyde-Smith. And can you specifically tell us how 
Russia's economy, how it has affected it or how it has changed 
since Treasury's sanctions were imposed? What is the condition 
of their economy right now because of this?
    Mr. Adeyemo. To put it simply, Senator, the economy is 
smaller today than when they started the invasion of Ukraine 
because of our sanctions. And it is getting smaller every day. 
And it is also becoming harder for Russia to produce the things 
that it needs for its military, but also for its economy.
    Today, Russia--two of Russia's top tank producers, are not 
operating because of our sanctions and export controls. We know 
that it is harder for them to produce the missiles that they 
need to continue the war in Ukraine, but also to project power 
into the future.
    The Kremlin has been forced to introduce economic stimulus 
to help both their pensioners, but also others in the economy 
who are suffering.
    But the thing that we want to make clear to the Kremlin is 
that as long as the invasion of Ukraine continues, we are going 
to continue to use sanctions and export controls to constrain 
their ability to prop up their economy and to invest in their 
military going forward. And we continue to have a number of 
ways to do that in partnership with our allies and partners.
    Senator Hyde-Smith. And as horrible as this invasion has 
been and as many people that have lost lives there, why has the 
Treasury and the Administration not imposed a full trade 
embargo yet to force Putin's hand?
    Mr. Adeyemo. So, Senator, there is actually very little 
trade between the United States and Russia. We are not a major 
trading partner of the Russian Federation. The biggest trading 
partner for Russia is Europe. China is also a major trading 
partner. So what we have done is that we have taken significant 
actions here in the United States.
    For example, the President announced a ban on Russian 
energy coming into the United States. Europe is taking the 
steps to do that as well as they work towards energy 
independence.
    And our goal ultimately is to try and find additional ways 
to constrain Russia's economy going forward by going after the 
key inputs to their economy and the things that they need to 
prop up the economy and also to continue to build out their 
military industrial complex. And the best way to do that is to 
do that in collaboration, in coalition with our partners and 
allies, especially in Europe.
    Senator Hyde-Smith. So you don't think a trade embargo 
would increase that? That it is not needed?
    Mr. Adeyemo. So I think my--the thing that we are trying to 
do, Senator, is make sure that any action we take, we take it 
in concert with our allies and partners in Europe. The biggest 
economic impacts on Russia are felt by actions that are taken 
in this way, because Russia's biggest trading partner is 
Europe.
    The United States has very little trade with Russia. And we 
have taken a number of steps to limit that even further. For 
example, blocking the import of Russian energy into the United 
States and preventing many goods and services from coming from 
Russia to the United States, which leaves us in a place where 
we can continue to use our sanctions authorities and our export 
controls, but I do think that a full trade embargo from the 
United States would have a marginal impact on Russia's economy 
at best.
    Senator Hyde-Smith. And how do you analyze or how do you 
measure the effectiveness of that? Is it just truly a dollar 
amount or another reduction that you see in something? How do 
you analyze?
    Mr. Adeyemo. The way I think about it, Senator, is what 
will it do to economic growth, inflation, and Russia's economic 
future. Those are the things that I look to in terms of the 
impact.
    So the things we have tried to do is take actions that have 
reduced the amount of revenue that Russia is taking in in order 
to make sure that we are forcing them to have harder and harder 
choices to make, choices between whether you invest in propping 
up your economy or whether you invest in your military 
industrial complex.
    Every day, because of the sanctions we have already put in 
place, those choices are harder for the Kremlin, and they know 
they are going to get harder over time because they don't have 
key inputs to their economy. When you think about our export 
controls regime, for example, what we did was we built a regime 
where we prevented Russia from being able to get access to key 
technologies that they need to continue to build out their 
economy.
    And these are technologies that China doesn't have, so 
China can't give it to them. The only people who have these 
technologies are ourselves and our allies in Europe and our 
allies in Asia. So ultimately, the thing we are looking to is, 
how do we further constrain their economy and make their 
choices harder in terms of where they make investments.
    Senator Hyde-Smith. And my time is up. Thank you.
    Senator Van Hollen. Thank you, Senator. So, Mr. Deputy 
Secretary, just to follow up on that point a little bit. As you 
said at the outset, sanctions are just one tool among many. And 
I agree with you entirely. They are more effective when they 
are put in place multilaterally. Of course, the Iran sanctions 
was an example where secondary sanctions ended up having a 
multilateral effect because other countries did comply.
    Obviously, Iran is not Russia. But I do think that is an 
example of where secondary sanctions proved effective in 
achieving the goal of bringing Iran to the table to negotiate 
back in the day. And as you have pointed out, we have been 
working with our European partners. We have gotten--well, they 
also undertook the effort to reduce their reliance on Russian 
energy, especially oil, and looking for other sources of gas 
going forward.
    But when other countries increase their overall imports of 
Russian oil above what they were pre-Ukraine war, that is a 
pressure reliever on Russia. So I--true, that Russia is still 
selling that oil at a higher price than before, but it is still 
a discount to those countries and Russia is able to sell more.
    So I look forward to continuing that conversation. I just 
have about 5 minutes for questions. I want to turn to North 
Korea. And thank you. You and I got together months and months 
ago to discuss the sanctions on North Korea. You know, another 
example, whether they are an imperfect tool, but one of the 
things that we have available to increase pressure on North 
Korea.
    Thank you for taking a look at the leakage in that 
sanctions regime and the measures you took with respect to the 
two Russian banks under the authority of the Otto Warmbier on 
North Korea Nuclear Sanctions Act of 2019 that was coauthored 
by myself and Senator Toomey.
    So I appreciate your attention to that. As we discussed, 
the UN panel of experts issues an annual report, I believe, 
they issued one in March of this year, that documented a number 
of other entities and categories of entities that contribute to 
leakage in the North Korea sanctions regime. They pointed 
specifically to China based entities in shipbuilding and 
shipping. And so I would encourage you to use that as a guide.
    I recognize that in order for us to impose sanctions, that 
we have to do a lot of due diligence and make sure we dot our 
I's and cross our T's. But can you assure me that you are 
continuing to look at that UN report with an eye toward seeing 
whether they qualify for U.S. sanctions?
    Mr. Adeyemo. Let me say a word of thanks to you, Senator, 
for providing that authority. That is a mandatory authority. 
And I can commit to you that our staff is looking very closely 
at that report, as well as any information we have to see what 
we can do in terms of imposing additional sanctions on North 
Korea in light of their destabilizing activity. As you 
mentioned recently, we did place sanctions on a number of 
entities that we had discussed previously and the team that 
continues to do research and work to identify additional 
targets.
    Senator Van Hollen. I appreciate that. I would just ask you 
to look at the China based entities only because they are front 
and center and they--in terms of being identified by the UN 
panel of experts. So my last question relates to something that 
we have covered a little bit, but in a different form, which is 
ransomware.
    I know you have been very focused on this issue. Can you 
talk a little bit about what the Department of Treasury is 
doing specifically? Obviously, we have lots of Federal agencies 
that are interested in cybersecurity.
    But what the Treasury Department is doing, what you are 
doing to recover funds that have been paid to some of the 
ransomware attackers, what we are doing to prevent future 
attacks, and the role of cyber currency in this effort.
    Mr. Adeyemo. So, Senator, I think this is an issue of grave 
importance to our entire economy, and it is a global issue. And 
one of the things and something that I have been focused on, I 
think what we are trying to do is increase the cost to cyber 
criminals in terms of their criminal activity by taking apart 
the ecosystem that allows them to operate.
    In some of those cases, that ecosystem does flow through 
cryptocurrency exchanges. We have taken action against some of 
those exchanges in particular, some of them that exist in 
Russia by sanctioning them, but also by thinking through what 
we can do to better make sure that companies that are subject 
to these cyber criminals are reporting the information to us, 
so we better understand the typologies of the attacks that are 
taking place and that we are in a position to best inform 
others in industry of what is happening.
    So a big piece of this for us is both working with the DOJ 
and with the other agencies in the Federal Government to make 
sure that we are taking actions with our relevant authorities, 
which includes sanctions at Treasury, but also in terms of 
providing guidance both from OFAC and FinCEN and collecting 
information.
    So at FinCEN, as we have talked about previously, they are 
doing a great deal in order to collect information from 
industries that have been targeted by cyber criminals, 
especially those using ransomware, in order to put us in a 
position to go after those criminals, but also to go after the 
networks and ecosystems that allow them to conduct these crimes 
going forward.
    I think this is a challenge that we feel as if the goal 
will be--the goal has to be working in partnership with the 
private sector. And the thing that we need to get the private 
sector to do is to work with us in order to improve the 
cybersecurity of their systems.
    As you know, Treasury is tasked with being the agency that 
works closely with the financial services sector. And this is 
not just our biggest institutions, but it is small institutions 
all over the country as well.
    And I am spending a great deal of time with these 
institutions, making sure that they are taking the steps to 
protect themselves from ransomware attacks, but also to make 
sure that we are sharing information, because ultimately the 
goal has got to be to better understand where these criminals 
are coming from so that we can go after them.
    So it is a holistic strategy at Treasury that we have 
developed that includes enforcement, information sharing, 
working closely with not only our partners here in the United 
States Government, but also with our allies abroad in order to 
make sure that we are protecting the system.
    Senator Van Hollen. I appreciate, and I agree that we have 
to have partnerships with the private sector as well as others 
overseas. Thank you. Senator Hyde-Smith.
    Senator Hyde-Smith. I want to talk about the FinCEN's 
beneficial ownership database. We have gotten a few calls about 
this because the new regulation means that the banks, credit 
unions, and all the financial institutions, they have to gather 
this information and verify this information about the 
individuals who run a business before a new account can be 
opened, any new account.
    You know, even if it is a new account for a current 
customer. So there is a lot of concern out there about this. 
But Treasury estimates the proposed rules to implement this 
Act, the Corporate Transparency Act, will require more than 25 
million existing small businesses to spend an aggregate amount 
of more than $4 billion to submit their reports on the 
beneficial owners to the Financial Crimes Enforcement Network.
    Is this an accurate estimate of the cost of the compliance 
for small businesses? And being that small businesses are the 
backbone of the economy, is it really wise to place more 
mandates on them at a time when we are just on the verge of a 
major recession? So do you think that is accurate?
    Mr. Adeyemo. So Senator, my understanding is that the costs 
to the average small business will be quite modest. You are 
right that those numbers in terms of total small businesses in 
our country is quite large, which I think is something that we 
want to grow at the Treasury Department.
    We want to create room for more small businesses in the 
country rather than less. And what we are going to do is make 
sure that we set up this regulatory regime in a way that is as 
scaled to the challenge as possible, so that small businesses 
reporting requirements are as modest as possible in light of 
the requirements that Congress has provided us with.
    Our goal is not to create a regime that will ask for more 
information than is needed, but rather to be in a position 
where we are able to protect the National Security for those 
small business--all the small businesses in this country as 
well.
    So we are happy to--we are going to continue to work with 
small businesses who submitted a great deal of comments to make 
sure that we set up a regime that is best suited to the 
challenges that they face going forward. And we are not looking 
to set up something that is overly robust.
    Senator Hyde-Smith. When do you think that they will have 
to start complying with this rule?
    Mr. Adeyemo. So Senator, I think we are going to continue 
to work through that. I don't want to--I don't have a sense at 
the moment as to when compliance will be required. But our goal 
is to try and put out the final rule as soon as possible and to 
build a database that is useful, frankly, to law enforcement 
going forward.
    Ultimately, I know that the thing that small businesses 
that I have talked to about this rulemaking but about 
regulation in general that they view is, they want to make sure 
that they can do what they can to help protect our country as 
well. But they want to make sure that the information they 
provide is actually going to be useful to helping to protect 
people in their community and around the country.
    So in addition to putting out the rule, we want to make 
sure that we create a database that is going to be useful to 
law enforcement in their communities, but around the country, 
and also to our National Security community. So we want to make 
sure that whatever we are collecting is going to be used and it 
is going to be used effectively going forward.
    Senator Hyde-Smith. Can you talk about any exceptions?
    Mr. Adeyemo. Exceptions to the rule----
    Senator Hyde-Smith. That they would not have to comply? Is 
there any exceptions that a business would not have to comply?
    Mr. Adeyemo. So, Senator, I think the goal for us is to 
make sure that we build a database that is inclusive of as many 
companies as possible in order to protect the National 
Security. To the conversation I was having with Senator Van 
Hollen, the challenge we have is that when we create 
exceptions, what then happens is that those who want to 
illicitly move money than simply create companies that fit 
within that exception.
    So our goal really is to try and find a way to make 
something that is comprehensive, but in which the reporting 
requirements are as modest as possible in order to make it as 
easy as possible for companies to comply and for us to have a 
holistic database in this country.
    Senator Hyde-Smith. A lot of people really see this just as 
an extra mandate and as extra work. So I hope that it does 
prove to be a very beneficial tool in addressing this issue 
because it will be extremely burdensome for a lot of people. 
Thank you.
    Mr. Adeyemo. So Senator, our goal is to take your feedback 
and the feedback of countless people to mind in terms of how we 
design this to make sure that we reduce the burden as much as 
possible.
    Because we know that ultimately the reason a bipartisan 
majority of Congress passed this legislation was because they 
cared deeply about our National Security. But they also want to 
make sure that we don't overly burden our small businesses. And 
we have kept those two things in mind as we think about the 
design of this regulation.


                     additional committee questions


    Senator Van Hollen. Well, thank you, Senator. Thank you, 
Deputy Secretary Adeyemo. Thank you for your service. Thank you 
for being here today, for this hearing. Our Members, the 
Members of this Subcommittee will have one week to submit 
questions for the record. They are due June 21.
    Mr. Deputy Secretary, appreciate it if your office could 
respond to those questions once they are submitted as soon as 
possible. Again, thank you for being here.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
    No questions were submitted.
    Senator Van Hollen. Thanks for your service and the 
subcommittee meeting is adjourned.


                           subcommitee recess


    [Whereupon, at 4:06 p.m., Tuesday, June 14, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]