[Senate Hearing 117-749]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-749


                  TIGHTENING THE SCREWS ON RUSSIA: SMART 
                    SANCTIONS, ECONOMIC STATECRAFT, AND 
                    NEXT STEPS

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

                                HEARING

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                                   ON

        EXAMINING THE ECONOMIC ACTIONS TAKEN BY THE ADMINISTRATION 
          IN RESPONSE TO RUSSIA'S INVASION OF UKRAINE

                               __________

                           SEPTEMBER 20, 2022

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                


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

                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
53-633 PDF                 WASHINGTON : 2023                    
          
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         COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

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

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Dan Sullivan, Republican Chief Counsel

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                        Pat Lally, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                      TUESDAY, SEPTEMBER 20, 2022

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    29

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3
        Prepared statement.......................................    30

                               WITNESSES

Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing 
  and Financial Crimes, U.S. Department of the Treasury..........     5
    Prepared statement...........................................    31
    Responses to written questions of:
        Senator Hagerty..........................................    40
Andrew Adams, Director, Task Force KleptoCapture, U.S. Department 
  of Justice.....................................................     6
    Prepared statement...........................................    34
    Responses to written questions of:
        Senator Sinema...........................................    40

                                 (iii)

 
TIGHTENING THE SCREWS ON RUSSIA: SMART SANCTIONS, ECONOMIC STATECRAFT, 
                             AND NEXT STEPS

                              ----------                              


                      TUESDAY, SEPTEMBER 20, 2022

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 9 a.m., via Webex and in room SD-538, 
Dirksen Senate Office Building, Hon. Sherrod Brown, Chairman of 
the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Senate Committee on Banking, Housing, 
and Urban Affairs will come to order.
    Today's hearing, again, is a hybrid format. Witnesses are 
in person. Thank you both for being there. I know you have busy 
schedules, including today, so thank you.
    Members have the option to appear in person or virtually, 
as you know
    Vladimir Putin's war on Ukraine has massacred innocent 
civilian communities, leveled cities, weaponized food and 
energy sources, imperiled the security of a nuclear facility, 
and jeopardized the future of a sovereign democracy.
    His actions also, we know, threaten global order--drawing a 
clear distinction between those who stand for democracy and 
rule of law and the forces of repression and tyranny.
    But there are two things that Putin did not count on.
    First, the resilience and strength of spirit of the 
Ukrainian people, on clear display last week again when the 
Ukrainian military retook Kharkiv, Ukraine's second-largest 
city.
    Second, the ability of President Biden to assemble and lead 
a broad, unified coalition of allies, and to keep that 
coalition together.
    This Administration, with bipartisan and bicameral support 
from Congress, has spearheaded a forceful, comprehensive, and 
multilateral response to support the Ukrainian people and to 
isolate Russia.
    Today's hearing examines the economic piece of the 
Administration's strategy.
    This hearing follows on the Committee's work in evaluating 
our sanctions policy, as we did last year in a hearing on 
Treasury's sanctions review, and at a hearing this past July, 
where we heard from the Commerce Department on its expansive 
restrictions on exports to Russia.
    Because we are united, our efforts are beginning to work.
    As Secretary of State Blinken said the other week, ``Putin 
thought he would divide and weaken NATO.''
    Again, Putin he was wrong. His actions have led to NATO's 
growth. We are now poised to welcome Sweden and Finland. His 
actions led to NATO's growth, reminding the world the vital 
role this alliance of democracies plays.
    And America, and increasingly the world, is wise to Russian 
propaganda.
    This Administration has corralled an unprecedented 
multilateral coalition, which includes our European partners 
and other allied countries, to impose one of the most 
comprehensive sets of economic sanctions in recent years.
    These measures aim to limit trade and financial relations 
with Russia, to penalize corrupt Russian oligarchs for 
supporting Vladimir Putin, and to cripple Russia's economy, 
cutting off support for funding this brutal and immoral war.
    We have dramatically escalated this economic effort. And it 
is impacting every sector: sanctions against a number of major 
Russian banks, dozens of Russian officials, and Putin 
associates; expanded export controls that restrict Russia's 
access to the technologies needed to sustain its aggressive 
military capabilities; limitations on imports of Russian energy 
products; even the seizure of a $300 million yacht owned by a 
sanctioned Russian oligarch.
    The impact of the Administration's smart and targeted 
economic measures has rippled throughout the Russian economy, 
damaging their defense industrial base.
    Ukrainian troops have found Russian military equipment 
rigged with semiconductors that appear to have been taken out 
of home appliances like dishwashers and refrigerators.
    As we pass the 6-month mark of the war, we welcome back 
Elizabeth Rosenberg, who serves as Assistant Secretary for 
Terrorist Financing and Financial Crimes at the Department of 
Treasury, and we welcome Andrew Adams, Director of the 
KleptoCapture Task Force at the Department of Justice.
    We look forward to hearing from the witnesses about the 
economic sanctions designed to weaken Russia's economy and 
about our efforts to pursue corrupt Russian oligarchs' assets.
    We are making it increasingly difficult for Putin to fund 
his brutal war in the face of a shrinking Russian economy and 
its isolation on the global stage.
    We must maintain the pressure of our many sanctions 
regimes; we must keep the coalition intact.
    With so much of Russia's revenue coming from energy sales, 
I look forward to hearing more from the witnesses today about 
the intended impact and status of the price cap negotiations.
    Just last week I met with a group of Ukrainian Americans 
from Ohio. My State is proud to have a vibrant, active 
Ukrainian community. Their message was clear: we ``cannot lose 
the momentum.''
    We must continue to hold the Russian Government and 
sanctions evaders responsible.
    The multilateral coalition, which President Biden adeptly 
assembled, rolled out a sweeping series of rules designed to 
degrade Russia's military and technological capabilities. We 
will not let up while Russia continues to threaten the 
sovereignty of Ukraine.
    Senator Toomey.

             STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman, and thank you to 
our witnesses.
    Last week, Ukrainian forces recaptured the town of Izium in 
eastern Ukraine. It had been occupied by Russian soldiers for 6 
months.
    In the streets, overjoyed and tearful residents celebrated 
their liberation. But in the forest just outside town, the 
horrors of Russia's invasion were once again revealed. 
Ukrainian soldiers discovered a mass grave filled with hundreds 
of civilians. Many of these victims are believed to have been 
tortured, bound, assaulted, and murdered--not unlike the 
horrors that occurred in Bucha in April.
    Our Government has rightly said such atrocities committed 
by the Russians are war crimes. Identifying and prosecuting 
these war crimes are crucial to bringing justice to the 
Ukrainian people. But let us be clear: These crimes will 
continue unless we can force Vladimir Putin and those around 
him to conclude that abandoning the invasion is better than 
continuing it.
    Ending this war on terms acceptable to Ukraine's democratic 
Government is not just a morally righteous undertaking for the 
United States; it is also in the vital interests of our allies 
and ourselves. The outcome will have ramifications far beyond 
Ukraine. We cannot allow revisionist autocrats to feel free to 
redraw international borders and fundamentally challenge global 
stability.
    The principles of sovereignty and freedom must mean 
something, even when facing down the barrel of a gun. The 
stakes are high in Europe, where the United States has deep and 
longstanding security commitments, and they reach as far as 
Asia, where the Chinese Government is taking note of how the 
U.S. and its allies respond to Russia's invasion of its smaller 
neighbor.
    Today this Committee will examine the existing and future 
sanctions that the U.S. and its allies will bring to bear on 
the Kremlin for its invasion of Ukraine. While the outcome of 
the war will be determined on the battlefield, sanctions have 
the potential to dramatically hasten an end to the conflict by 
depriving the Kremlin of the funds it needs to continue this 
war.
    And let us be honest. The sanctions imposed on Russia thus 
far have not yet come remotely close to achieving this 
objective. Roughly $1 billion in hard currency continues to 
flow into the Kremlin's war chest every day from energy sales. 
Treasury Deputy Secretary Wally Adeyemo recently acknowledged, 
and I quote, ``There is one part of the Russian economy doing 
even better than when the war began: their oil industry.''
    By the way, Russia's gas industry is doing equally well. 
Gazprom recently announced record profits of over $40 billion--
record profits--for the first part of this year.
    Today's hearing will focus on the Administration's plan for 
a novel sanctions regime that imposes price caps on the 
purchase of Russian oil. This is an intriguing idea. I hope it 
will be considered for Russian gas as well. The premise of the 
idea is simple: Service providers, such as financiers and 
insurers, within the G7 will only be permitted to facilitate 
the purchase of Russian oil below the set cap price. Given that 
the vast majority of such service providers are, in fact, 
domiciled in G7 countries, I think this plan has the potential 
to significantly curtail Russian oil revenue.
    But several questions remain about this program, including: 
How low will the price cap be set? What will enforcement of the 
cap look like? And how will the Administration ensure that 
buyers in countries like China and India do not skirt the price 
cap for their own gain?
    This last question is, arguably, the most important to 
determining the effectiveness of this price cap regime. And 
because it is so important, Senator Van Hollen and I plan to 
introduce legislation that will complement the Administration's 
price cap scheme and impose mandatory sanctions on any foreign 
financial institution worldwide involved with any transaction 
in Russian oil above the price cap.
    The legislation will be the first major bipartisan 
sanctions legislation that has been introduced on Russia since 
February, and I intend to work with Senator Van Hollen to get 
this bill enacted as soon as possible so that Russia can no 
longer profit from the oil sales funding its war in Ukraine.
    Seven months after Putin began his ``special operation,'' 
as he puts it, in Ukraine, the Ukrainians have conducted a 
remarkably successful campaign to liberate portions of the 
country from Russian control. Concerns harbored by China and 
India about Putin's war have been aired publicly, and gas 
prices in Europe are actually falling, down 45 percent since 
late August.
    This war is not going as planned for Putin. I say this to 
my colleagues, now is not the time for half measures or 
complacency. It is time to crush the Kremlin's ability to 
continue this war.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey. I will now 
introduce today's witnesses.
    Elizabeth Rosenberg, Assistant Secretary for Terrorist 
Financing and Financial Crimes at Treasury. Welcome back to the 
Committee. As Assistant Secretary, she is responsible for 
leveraging the Treasury Department tools to target threats to 
national security and safeguarding the financial system from 
abuse.
    We also welcome Andrew Adams, Director of the KleptoCapture 
Task Force at DOJ, a task force and interagency law enforcement 
endeavor led by Justice prosecutors and dedicated to enforcing 
the sweeping sanctions in response to Russia's unprovoked 
military invasion, a former Federal prosecutor from New York 
where he focused on organized crime, money laundering, and the 
recovery of assets.
    Assistant Secretary Rosenberg, please begin.

   STATEMENT OF ELIZABETH ROSENBERG, ASSISTANT SECRETARY FOR 
 TERRORIST FINANCING AND FINANCIAL CRIMES, U.S. DEPARTMENT OF 
                          THE TREASURY

    Ms. Rosenberg. Chairman Brown, Ranking Member Toomey, and 
distinguished Members of the Committee, thank you for the 
opportunity to speak with you today about the Department of the 
Treasury's efforts to hold Russia accountable for its brutal 
and unjustified further invasion of Ukraine.
    The U.S. Department of the Treasury is working with 
Administration partners, including my colleague from the 
Department of Justice, whom I am joined by today, to implement 
the U.S. Government's holistic response to Putin's war. Since 
the further invasion began 6 months ago, we have been advancing 
President Biden's promise to ``squeeze Russia's access to 
finance and technology for strategic sectors of its economy and 
degrade its industrial capacity for years to come.''
    Just last week, we imposed additional sanctions to further 
degrade Russia's military, hold the perpetrators of this war 
accountable, and financially isolate Putin. To date, Treasury 
has sanctioned hundreds of Russian individuals and entities, 
and this includes a majority of Russia's largest financial 
institutions, key nodes in Russia's military-industrial supply 
chains, and the oligarchs and cronies who help perpetuate 
Putin's war.
    The United States has been joined by over 30 countries--
collectively representing more than half of the global 
economy--in imposing sanctions, the largest sanctions regime in 
modern history.
    On the other side, Russia's propagandists have been 
aggressively attempting to bury any unfavorable news and push 
misinformation, saying that, for example, sanctions are not 
working and cause food insecurity. In fact, Russia has crippled 
Ukraine's farming and export economy and dramatically driven up 
global energy and grain prices.
    The U.S. and partner economic responses to Russia's war 
have had and will continue to have a significant effect on 
Russia's ability to fund its war. Russia has been forced to 
impose draconian capital controls. The IMF expects Russia's 
economy will contract for at least the next 2 years, a sharp 
reversal from its 4.7 percent growth in 2021. The Russian stock 
market is about 35 percent below pre-war levels. Russia is 
unsustainably burning through its rainy-day funds, moving 
toward fiscal deficit by year's end. Simply put, Russia's 
economic picture is bleak and deteriorating.
    Significantly, these economic constraints are translating 
into real battlefield difficulties for Russia. Struggling to 
import industrial goods and technology, Russia has been forced 
to turn to outdated equipment and approach global pariahs like 
North Korea and Iran to source materiel.
    Because Russia is a sizable international economy and a 
globally important energy producer, imposing financial costs on 
Russia while mitigating the consequences of Russia's actions 
has required extraordinary planning, coordination, economic 
analysis, diplomacy, and creative policymaking. We have been 
keenly focused on Russia's large-volume oil exports and 
windfall earnings in a high energy price environment. At this 
point, this represents Russia's primary source of hard 
currency.
    Given the global nature of oil markets, elevated energy 
prices affect us all, including American households that have 
seen rising prices at the pump and inflationary pressure across 
the economy. High energy prices hit the poorest the hardest in 
our country and across the world.
    Our effort, alongside an international coalition starting 
with the G7, to impose a price cap on maritime Russian oil 
exports is the most viable option to support the security and 
affordability of the global oil supply. The policy involves 
price cap coalition countries offering services for Russia's 
maritime transport of oil priced below the cap and refraining 
from doing so for oil priced above the cap.
    The majority of providers of some maritime services, like 
insurance, payments, and trade finance, are located within the 
G7 and EU countries, so there is an overwhelming economic 
incentive for buyers to purchase under the price cap so that 
they can engage these services. It will be cheaper and less 
risky to move Russian oil cargoes in this way. We are already 
seeing this policy work, with Russia forced to negotiate steep 
discounts for oil it sells to buyers in Asia.
    To close, I would like to express my gratitude for the 
additional resources Congress provided in the Ukrainian 
supplemental appropriations packages, which helped us at 
Treasury and across the U.S. Government surge in the policy 
response to Russia's war and, critically, support the people of 
Ukraine. I would be happy to answer any further questions you 
have in this setting and to continue to work with you all in 
the future.
    Thank you.
    Chairman Brown. Thank you, Ms. Rosenberg.
    Director Adams.

STATEMENT OF ANDREW ADAMS, DIRECTOR, TASK FORCE KLEPTOCAPTURE, 
                   U.S. DEPARTMENT OF JUSTICE

    Mr. Adams. Thank you, and good morning, Chairman Brown. I 
appreciate the opportunity to appear before you today on behalf 
of the United States Department of Justice and in my capacity 
as Director of the Department's Russian sanctions task force--
KleptoCapture--to discuss the important work of the task force 
in response to Russia's unprovoked, illegal, and brutal war of 
aggression in Ukraine.
    The atrocities committed since Russia's February invasion 
have been well publicized. Russian attacks have devastated 
Ukrainian cities, leaving some on the verge of humanitarian 
collapse. Estimates are that as many as 1.6 million Ukrainians 
have been interrogated, detained, and forcibly deported to 
Russia under the oversight of Russian officials. And numerous 
news reports have detailed how the Russian campaign against 
Ukrainians includes a program of torture and rape, reporting 
that tragically finds support in the findings of mass graves 
and devastation uncovered in the wake of Russia's retreat from 
the recent Ukrainian counteroffensive.
    This is why the work of the task force is so important. Our 
targets have and continue to profit from a system of corruption 
and violence, and they continue to sustain and enable that same 
corrupt and violent regime. Their willingness to facilitate and 
acquiesce in Russia's malign activities contributes to the 
death and destruction that we are witnessing in Ukraine.
    The task force is dedicated to enforcing the sanctions, 
export restrictions, and economic countermeasures that the 
United States has imposed, along with its international allies 
and partners, in response to this unprovoked military invasion. 
It draws on the expertise and energy of agents, analysts, 
translators, and prosecutors throughout the Department and 
throughout the U.S. Government, including prominently our 
colleagues at the Treasury Department.
    Our goals are, first, to bring charges against any 
individual or entity sanctioned under the Treasury designations 
or limited through Commerce Department rule making rolled out 
in response to Russian aggression.
    With respect to people and entities on those lists, we will 
pursue any charge or seizure theory available. Sanctions 
evasion and money laundering are obvious charges and theories 
in this space, but if opportunities to bring charges for bank 
fraud, visa fraud, extortion, or any other Federal crime, are 
presented as to a listed person or entity, that is a charge 
that this task force will support and pursue.
    Second, we would target those who would facilitate the 
evasion of economic sanctions and the Commerce Department's 
export controls for banks, real estate agents, broker-dealers, 
exporters, manufacturers, shipping companies, and others. Our 
goal is to shine a light where sanctioned actors may otherwise 
operate in shadow.
    Now, our immediate focus has been on disruption of those 
individuals and entities who have aided and supported the 
Russian regime. We have worked quickly with international 
partners to seize an oligarch's $90 million luxury yacht in 
Spain, to seize and transport a roughly half-billion-dollar 
yacht from Fiji to San Diego harbor, to seize millions of 
dollars associated with sanctioned parties held at multiple 
U.S. financial institutions, and to pursue oligarchs involved 
in violations of U.S. export controls. We have also filed and 
unsealed charges against Russian oligarchs themselves and their 
associates for evading sanctions and other related crimes.
    The Department welcomes the Committee's consideration of 
legislation to augment the task force's ability to seek charges 
and seize assets, resulting from oligarchs' corrupt dealings 
with the Russian Government, and enable the transfer of 
proceeds from those actions to Ukraine to remediate the harms 
caused by the Russian aggression.
    In addition, the Department continues to advocate for the 
following key proposals:
    One, our proposal to clamp down on the facilitation of 
sanctions evasion by amending the International Emergency 
Economic Powers Act, or IEEPA, and its penalty provision to 
extend the existing forfeiture authorities to facilitating 
property and not simply to the proceeds of such offenses.
    Second, our proposal to add criminal violations of IEEPA 
and the Export Control Reform Act to the definition of 
``racketeering activity'' in the Racketeer Influenced and 
Corrupt Organizations Act, or RICO. This proposal would extend 
a powerful forfeiture tool against racketeering enterprises 
engaged in sanctions violations and pave the way for 
prosecutions that appropriately capture the scope and the 
complexity of these evasion networks.
    Third, our proposal to extend the statute of limitations 
from 5 to 10 years for money laundering in connection with 
certain foreign offenses, which would grant our prosecutors 
time to follow the money and unravel the complex networks on 
which oligarchs rely to hide their wealth.
    And, fourth, our proposal to improve the United States' 
ability to work with our international partners to recover 
assets linked to foreign corruption.
    I appreciate the opportunity to appear here today and to 
discuss the task force's focus and efforts to date and 
potential legislation as it relates to Russia's unprovoked and 
illegal war of aggression in Ukraine.
    Thank you, sir.
    Chairman Brown. Thank you, Director.
    If we need yet another reminder that competency and 
commitment to our Nation's core values, democracy, and the rule 
of law are essential to good government, we need to look no 
further than this Administration and its Herculean effort to 
impose targeted smart sanctions on Russia, its leveraged 
targeted export controls on the Russian economy, done so with 
an unprecedented multilateral coalition. And, of course, we 
must continue to ratchet up the pain if Russia continues to 
fight this war of aggression.
    Assistant Secretary Rosenberg, tell us the right metrics to 
determine whether sanctions are working. And as you discuss 
that, what are the more significant challenges to make sure the 
sanctions continue to achieve that purpose?
    Ms. Rosenberg. Thank you, Senator, for the question. As you 
have noted, the sanctions that the United States and over 30 
countries have put in place alongside export controls have had 
a powerful economic effect in achieving our goal: depriving 
Russia of revenue and of military equipment to wage its brutal 
war. Some metrics here.
    Half of Russia's foreign exchange reserves have been locked 
up. Russia has been forced to resort to these draconian capital 
controls. It is burning through its fiscal buffers, heading 
toward fiscal deficit by the end of the year. It is struggling 
to fund imports, including of critical industrial goods 
necessary for manufacturing, and this is translating into 
battlefield difficulties for Russia crucial to the goal of 
depriving Russia of the ability to fight its war.
    Specifically, it has had to cannibalize its own domestic 
industry in order to manufacture battlefield equipment it 
cannot procure on the international market because of the 
capital controls in particular. It is also compelled to look to 
international pariahs Iran and North Korea in order to source 
some of its military equipment. The soldiers on its front line 
do not have access to the most modern warfighting equipment. 
Those are important indicators of the criteria that we should 
look to for the efficacy of this policy approach.
    With regard to challenges here, something that is forefront 
for us at the Treasury Department and our colleagues throughout 
the U.S. Government and elsewhere is to look to opportunities 
Russia may be pursuing to evade the sanctions, to find ways to 
skirt controls in order to engage in procurement for its 
military equipment. A current and future priority for us will 
be looking to enforce sanctions that get at Russia's supply 
networks they may be using for evasion.
    Chairman Brown. Thank you. What else can be done to keep 
the pressure on Russia?
    Ms. Rosenberg. In addition to the priority I just noted, 
going after major enforcement efforts, looking at Russia's 
illicit procurement networks, we can work closely with 
international allies to ensure that they are enforcing their 
own sanctions and expanding and augmenting them in ways that 
complement measures we have in place.
    For example, some of our partners still have the 
opportunity to put full blocking sanctions on some entities 
that we have fully blocked in the United States.
    Chairman Brown. Thank you.
    Earlier this month, the Administration, along with other G7 
countries, announced the plan that you both mentioned, you both 
discussed, to impose a price cap on imported Russian oil. 
Ranking Member Toomey spoke positively about it, its 
possibilities. Secretary Yellen said it would significantly 
reduce Russia's main source of funding for its illegal and 
immoral war, but keep supplies flowing to global energy 
markets.
    What do you estimate its impact would be to the Russian 
economy if the price cap is effective, number one? And as you 
answer, talk about the necessity or is there a necessity that 
China and Russia be a partner or at least be helpful or at 
least not be opposed to these?
    Ms. Rosenberg. Thank you for the question. Many of us have 
noticed and focused on the fact that Russia is earning windfall 
profits from energy exports given that it has driven up energy 
prices itself by invading Ukraine. And with this in mind, the 
G7 has put forward this price cap policy. It will have two 
major economic effects. So to affirm was Secretary Yellen has 
said, this will deprive Russia of revenue because it will be 
compelled to sell into the price cap here at lower prices. And 
a second important economic effect is that, given this downward 
pressure on prices, developing economies will have the 
opportunity to purchase them for less, for a lower price. That 
is significant to them and significant to security of supply.
    You mentioned China. It is important to note that China----
    Chairman Brown. And India. I may have misspoken. China and 
India both.
    Ms. Rosenberg. China and India. It is important to note 
that it is not essential--by design of this policy, it is not 
essential for such countries, such major importers of Russian 
oil to formally join this group. They can, nevertheless, use 
the existence of the price cap to leverage lower prices from 
Russia. And, in fact, we are seeing that already, where Asian 
purchasers have used the price cap in order to leverage lower 
prices, cut-rate prices for Russian energy. That is this policy 
already at work.
    Chairman Brown. Thank you.
    Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman.
    I want to focus on two aspects of this idea that the 
Administration has developed: the likelihood of evasion, but 
also the price cap level itself. Treasury's guidance on the 
price cap plan so far indicates that the policy is constructed 
as a prohibition on service providers within the G7 countries 
who finance, insure, and broker Russian oil transactions above 
this price cap level, wherever it ends up being set. And as I 
said, I am hopeful that this will be effective. It strikes me 
as a very constructive step.
    But, obviously, it is not meant to apply, it does not 
apply, certainly not directly, to oil service providers outside 
the G7. We have seen a huge increase in Indian and Chinese 
purchases of oil, just as U.S. and European purchases have 
declined. In fact, those purchases have fully offset the 
decline of the U.S. and the EU. And my concern is that China 
and India will continue to buy Russian oil and probably on a 
large scale. They will do so with their own service providers. 
It might not be quite as convenient as the existing regime, but 
they are quite capable of insuring and brokering and financing 
oil sales with indigenous companies and capabilities.
    So I wonder if, briefly, Ms. Rosenberg, you could comment 
on any concerns you have that there is still this mechanism, 
this opportunity for Russia to continue to sell oil, albeit not 
to G7 countries or those who use services of G7 countries, but 
outside of the G7?
    Ms. Rosenberg. Thank you, Senator, for the opportunity to 
address these important questions. This price cap policy 
envisions a scenario where countries--China and India, for 
example--continue to purchase Russian oil. That is envisioned 
within this policy.
    Senator Toomey. I understand, yes.
    Ms. Rosenberg. And it is possible that they could purchase 
that oil below the cap using G7 services. For example, there is 
a distinct advantage for them to do so: 80 to 90 percent of 
maritime insurance is concentrated in service providers within 
the EU--or, rather, within Europe, which means that India, for 
example, has a powerful interest in purchasing some of that oil 
below the price cap in order to take advantage of those 
services, which provide more reliability.
    Senator Toomey. Yes, could I--I am sorry to interrupt. I am 
short on time here. There is no question everybody would like 
to buy oil as cheaply as they possibly can. And I completely 
acknowledge that this regime, if it is effective with G7 
countries, might very well have some downward pressure. But 
there will also be efforts to evade it. There will be countries 
that will see an opportunity to get more discounted oil even if 
it is not fully discounted to the price level.
    This is why I think it is important that we address this 
question. I acknowledge that the big majority of the market for 
the service providers comes from companies within the G7. They 
would be affected by this. But they do not have monopolies, and 
the Chinese and the Indians, as I say, are quite capable of 
expanding the role of their indigenous service providers.
    This is not meant as really even a criticism of this 
arrangement. This is why Senator Van Hollen and I have 
introduced legislation that would require sanctions to be 
imposed on those who would evade this way.
    Let me ask you another question, if I could. What is your 
best estimate right now of the marginal cost of producing a 
barrel of oil in Russia?
    Ms. Rosenberg. Senator, there are varying costs for doing 
so. It depends on the geology of the field, the technology 
involved in lifting and the amortization cost. I hope I could 
take just 1 second to address a key facet of the point you made 
earlier.
    Senator Toomey. OK. But I do have another point I need to 
get to, and we have got a minute. So if we could do it quickly.
    Ms. Rosenberg. A key aspect of a successful price cap 
policy is the international approach involved here and the 
entirety of the G7. It is the case that some service providers 
may be able to function outside of it, but the broad coalition 
of the G7 and the existence of a price cap means that even 
outside of it, purchasers have the opportunity and leverage in 
order to ratchet down the price that they pay.
    Senator Toomey. I get that, and I am hoping that that 
dynamic works. And if that market dynamic works and Indian and 
Chinese buyers end up paying no more than the cap price, then 
our sanctions legislation is kind of moot. It will sit there as 
a backstop without doing any harm, without being implemented. 
But if it does not work--and let us be honest, the Russians 
have taken in a lot of revenue we did not fully anticipate--
then we would have a backstop.
    My point on the price level is I think it makes sense--and 
I am open to an alternative idea, but I think it makes sense--I 
do not think you guys have set a price cap level yet. I hope it 
will be very close to the marginal cost of production, and I 
get that that varies over the course of a massive country like 
Russia. But, still, keeping it as low as possible diminishes 
the profits that the Russians make. I think that is a very 
important step.
    A last point, Mr. Chairman, if you will indulge me. Just an 
observation for Mr. Adams' sake. I know the Administration has 
proposed expanding Justice's resources and tools to pursue 
administrative civil forfeiture and punish sanction evasions. I 
think enhancements might very well be appropriate to penalize 
Russia's aggression in Ukraine. But the Administration's 
proposals seem generally not to be limited to Russia, nor to be 
time-limited. And I think we should proceed very, very 
cautiously before we decide to expand these prosecutorial and 
administrative powers in areas unrelated to this invasion.
    Thank you.
    Chairman Brown. Senator Tillis is recognized from North 
Carolina.
    Senator Tillis. Thank you, Mr. Chair. Is that because I 
wore a tie today?
    Chairman Brown. That was why.
    Senator Tillis. Thank you all for being here. What research 
has been conducted to--you were talking about maybe a lot of 
the Russian consumption being at the price cap, possibly 
negotiated below it. But what are going to be the biggest 
changes in terms of consumption? Who are the top three 
countries that are likely to greatly increase their dependence 
on Russian oil over the next 12 months?
    Ms. Rosenberg. Senator, thank you for the question. The 
European Union has decided in its sixth sanctions package to 
stop the purchase of Russian oil and refined product, and that 
will take effect on December 5th for seaborne oil. So the 
several million barrels that Europe has been purchasing will 
flow elsewhere. Generally, that may include countries in Asia, 
Africa, or Latin America. There is not one single country or 
two that would take on all of it. It will likely be an array of 
countries.
    Senator Tillis. Would China and India top the list of some 
of the greatest increased consumption?
    Ms. Rosenberg. Those countries are significant consuming 
countries of Russian crude oil already. It is possible that 
Russia could increase its exports to those countries, but the 
volume that will come from Russia, given that Europe has pulled 
back from the market, will flow to many countries.
    Senator Tillis. So do you think the price cap alone is 
enough to get the price where we want it to be? Or is there 
going to be a need for secondary sanctions so that we go beyond 
the U.S. and the G7?
    Ms. Rosenberg. The price cap we believe will have a 
powerful effect in doing several things, certainly in the first 
instance denying Russia revenue to fund its war; and, second, 
by keeping Russian oil in the market at lower prices, it will 
reduce the potential for price spikes in the market. It 
enhances security of supply. It makes affordable energy 
available for lower-income countries. All of those things are 
important benefits to a price environment that is good for our 
economy and our partners' economies.
    Senator Tillis. The Russians have--Putin made a great 
mistake when he went into Ukraine. He is seeing that play out 
on the battlefield. We are talking about tens of thousands of 
casualties, probably 25,000 deaths. Now we also know that their 
supply chains have been greatly disrupted. Their ability to 
replace a lot of what they have lost on the battlefield has 
been greatly disrupted, and so they are going to countries like 
North Korea and Iran to look for support. I believe that is 
already in violation of sanctions. What more do we need to do 
to curb that and limit Russia's options outside of their own 
indigenous defense industrial base?
    Ms. Rosenberg. Senator, it is certainly a violation of 
sanctions when entities in Iran or North Korea supply Russian-
designated entities with military equipment. So, for example, 
earlier this month the Treasury Department imposed sanctions on 
Iranian entities that were supplying UAVs to Russia in 
violation of our Russia sanctions. And our approach here will 
be to continue to impose sanctions to hold accountable those 
suppliers to Russian-designated entities.
    Senator Tillis. Are there any in the works now based on 
transactions that have already occurred?
    Ms. Rosenberg. Senator, I am not in a position to forecast 
or speak about sanctions that may be coming, but please rest 
assured that this is a significant priority for us.
    Senator Tillis. I think there is estimated--is it $300 
billion in Russian assets that have been seized by the United 
States?
    Mr. Adams. Senator, I can respond, at least in part. With 
respect to seizures, that is correct. As----
    Senator Tillis. Or frozen. Frozen, not seized.
    Mr. Adams. Thank you, sir. There is a distinction.
    Senator Tillis. Now, the question is: How can we seize 
them? And what legal hurdles do you have for doing that?
    Mr. Adams. Thank you, Senator. So it is one of the 
Department's priorities to look at the assets that are close to 
hand and most readily investigatable. Those include assets that 
are frozen in the United States. We have a focus on looking at 
whether those relate to the proceeds of crime or have been 
facilitating money laundering in----
    Senator Tillis. What is the worldwide number on frozen 
assets? And have any of those in other jurisdictions been 
seized?
    Mr. Adams. Senator, the estimations of the total number 
range into the billions. I do not have a precise number to 
offer. There are foreign partners who have certainly frozen 
assets abroad, and in at least some jurisdictions, there are 
authorities that may ultimately lead to seizure and full 
confiscation, much like our civil forfeiture and criminal 
forfeiture.
    Senator Tillis. Well, I for one hope we put the foot on the 
accelerator and do everything we can to make sure that that 
money never falls back into the hands of the oligarchs. Thank 
you.
    Thank you, Mr. Chair.
    Chairman Brown. Thanks, Senator Tillis.
    Senator Van Hollen from Maryland is recognized.
    Senator Van Hollen. Thank you, Mr. Chairman. Thank you to 
both of our witnesses.
    As the Chairman and others have said, the Ukrainian people 
have inspired people throughout our country and throughout the 
world in their fight for freedom and for sovereignty. And the 
support from the United States and our allies to the people of 
Ukraine has been essential in that fight, both the military 
support and the economic sanctions. And I want to applaud the 
Biden administration for working with our allies to provide 
that essential military equipment and to impose those sanctions 
very rapidly. We have seen projections of Russian GDP having 
declined as a result of that.
    We all recognize--and I know the Biden administration does 
as well--that the one area where Russia has continued to 
generate a lot of revenue to fund their war machine is in their 
sale of energy--gas and especially oil. And so I also applaud 
the Administration's effort with the G7 to establish the price 
cap.
    I think we all know--a lot of us have been following this 
closely. I chair the FSGG Subcommittee. We had a hearing on 
June 14th with Deputy Secretary Adeyemo where we covered some 
of these issues. And it is pretty clear that there is some 
skepticism among oil traders about whether this will work. That 
is why I am really pleased to team up with Senator Toomey to 
introduce legislation which, as he described it, we see as a 
complement to the Administration's effort, a backstop, because 
you can easily imagine Vladimir Putin saying that he is not 
going to comply with this price cap, and that will set off a 
negotiation with those around the world who may be willing to 
purchase oil for a little bit above the price cap, which is 
still in their interests compared to global prices.
    And so the idea behind this legislation is to provide a 
uniform backstop worldwide and say to any financial institution 
that is thinking about financing or participating in a 
transaction to purchase Russian oil above the price cap set by 
the G7 will face penalties. And if you are right--and we hope 
you are--that we do not need anything like that, people comply 
voluntarily, great. But if they do not, you would have a 
backstop. And, again, if it works perfectly, you will not need 
it.
    So I guess my question is: What is your sense of the need 
for additional leverage? Wouldn't you support something that 
gives you a little bit extra leverage as you go around 
negotiating this price cap? Assistant Secretary Rosenberg.
    Ms. Rosenberg. Thank you, Senator, for the opportunity to 
address this point. The Biden-Harris administration and our G7 
partners have a good deal of leverage and authorities right now 
in order to pursue a policy that sets out, as you have 
recognized, a powerful set of incentives for purchasers of 
Russian oil to purchase that oil at cut-rate prices, below the 
cap here. We also have authorities that we can bring to bear 
for the purposes of enforcement, which I believe you are 
specifically addressing, when there is an instance, for 
example, of a purchaser that has committed fraud, that has made 
material misrepresentations to service providers that are 
acting in good faith to follow this price cap policy.
    Thus, to the extent that we need to use enforcement 
measures, we have sufficient authorities to pursue those 
avenues.
    Senator Van Hollen. I guess, Madam Secretary, that, as 
Senator Toomey pointed out, if you are Russia, you are going to 
be hell-bent on trying to develop different avenues to sell 
your oil at a price somewhat higher than whatever price the G7 
sets. And so this mechanism signals to Russia and others around 
the world that if you are involved in some kind of scheme to 
evade these price caps, you will be hit, and it will be 
automatic.
    I believe one of the benefits of putting this sort of 
threat of sanctions out in advance is everybody is on full 
alert that this is the law and this will apply. Clearly, if 
somebody is buying in good faith, you know, there can be 
exceptions for those purposes. But I do think there is a great 
benefit to having a worldwide backup so that Russia does not 
try, as it is bound to do, to play countries against each other 
if those countries know they are all going to be subject to the 
same uniform sanction penalty. Thank you.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Van Hollen.
    Senator Menendez of New Jersey is recognized.
    Senator Menendez. Thank you, Mr. Chairman. Let me start off 
by commending the Administration's leadership on the price cap. 
A successful cap, however, requires agreement from a broad 
group of countries and is a delicate balancing act.
    So, Secretary Rosenberg, where are we at in terms of 
securing the necessary buy-in and support to make the price cap 
work? Is there buy-in from other major economies beyond the G7?
    Ms. Rosenberg. Thank you, Senator, for the question and 
opportunity to speak to this. In negotiating and crafting the 
price cap policy, we have worked very closely with partners in 
the G7, and in this instance that includes the EU, so all of 
the EU Nations as well. That was enshrined and articulated in 
the G7 Ministerial Statement from several weeks ago with a 
commitment to implement this strategy. So we are in a very 
strong place when it comes to coordination across this group. 
That is meaningful because a significant majority of services 
for the maritime transport of Russian oil are concentrated in 
these countries.
    We have also had the opportunity to speak with major 
purchasing economies that are not part of the G7 but that would 
be in a position, already have been and will continue to be 
purchasers of Russian oil, and they understand the purpose of 
this policy, and we have significant common cause with them 
when it comes to their ability to purchase Russian oil at 
significantly decreased rates.
    Senator Menendez. Let me ask you, how much of a concern is 
Russia's efforts to create alternative insurance mechanisms? 
And what are we doing to make those efforts ineffective?
    Ms. Rosenberg. Thank you, Senator. Russia does have 
insurance, maritime insurance, that it has used. It does not 
have enough insurance though in order to support all Russian 
oil that it exports, which is one of the reasons why insurance 
provided by European countries has been important and I think 
will continue to be important for purchasers of Russian oil.
    Furthermore, those purchasers of Russian oil know that to 
use VLCC tankers, some of the largest tankers, they are 
essentially required to use European insurance. So there is a 
powerful incentive for those purchasers to continue to access 
G7 insurance and other services for the purchase of Russian 
oil.
    Senator Menendez. Well, India's importation of Russian oil 
has skyrocketed, helping it to maintain Russia's exports. How 
successful is our ongoing engagement with India on agreeing to 
adhere to a price cap? And can the price cap actually work if 
India and China are not part of the coalition of countries 
implementing it?
    Ms. Rosenberg. Thank you, Senator. It is the case that 
India has significantly increased its purchase of Russian oil. 
That is conceived of in this policy when it comes into force, 
and India continuing to purchase, including at a significant 
volume, can be entirely consistent with the price cap. What is 
key is that India is in the position to negotiate a lower 
price, a significantly lower price for the oil that it 
purchases.
    And to the latter question that you just asked, it is not 
essential that countries such as India or others in Southeast 
or East Asia that purchase Russian oil formally join the price 
cap in order to be able to use that cap to leverage a very low 
cost of oil. That will advance our purpose, driving down 
Russia's revenue and also keeping Russian oil on the market at 
depressed prices for security of supply.
    Senator Menendez. That is a great point, but it is also a 
question. If China wants to help Russia, then it can purchase 
oil beyond the price cap, and it is a direct way of helping 
Russia at a critical time without being more directly involved 
in Ukraine.
    So at some point, we have to think about how--these are not 
just any economies; these are major importing economies in 
terms of India and China--and they act in this context is going 
to be critical as to how successful we are. And I look forward 
to seeing how we are going to deal with that.
    I get concerned about--I have been the author of more 
sanctions than I would like to remember, and the challenge is, 
of course, enforcement and dealing with evasion. And so it is 
critical that the United States crack down on entities and 
Nations that seek to evade and subvert Western sanctions. I am 
particularly concerned about possible sanctions evasions by 
Turkish financial institutions through their use of Russia's 
domestic payment system, Mir. I was pleased to see that the 
U.S. just sanctioned the CEO of NSPK, which oversees Mir's 
operations.
    What further steps is the Administration taking to close 
loopholes that allow Western sanctions to be undermined through 
the use of the Mir payment system?
    Ms. Rosenberg. Thank you, Senator. We are quite concerned 
about the potential for evasion for Russian sanctions broadly 
in any jurisdiction, and as you note, this is one jurisdiction 
that we have focused on. Our Deputy Secretary has made a 
specific effort in that regard.
    We are also interested in how existing financial 
connectivity that Russia has to the rest of the world, whether 
in the payment service you noted or others, whether those can 
be abused. We should think of any such connectivity as 
potentially vulnerable and appropriate for enhanced due 
diligence. We will continue to engage with Turkiye to focus on 
that vulnerability.
    Senator Menendez. Mr. Chairman, I had one final question, 
if I may?
    Chairman Brown. Sure. Proceed.
    Senator Menendez. Thank you.
    Mr. Adams, we have seen a lot of high-profile yachts seized 
and what-not, although I do not know how much it costs us to 
maintain them before we can get rid of them. So I do not know 
what the net effect of that is. But certainly to those who lost 
them, it is significant.
    The long-term success of a successful seizure effort will 
come down to coordination and information sharing at multiple 
levels across jurisdictions. What are some of the biggest 
obstacles to ensuring a robust effort to identify and seize 
privately held assets? And how is the U.S. aiding other 
jurisdictions to ensure that that takes place?
    Mr. Adams. Thank you, Senator. I appreciate the concern 
behind that question. The biggest obstacle historically has 
been communication across borders in dealing with our 
international partners. In the wake of the February invasion, 
those obstacles have diminished greatly. There has been, in my 
experience, a significant uptick in the ability and the 
interest of international sharing, both in terms of law 
enforcement and intelligence.
    The key hurdle previously was a mismatch and a misalignment 
between the U.S. sanctions regime on the one hand and foreign 
partners' sanctions regimes on the other. As the European 
Union, as our partners in the United Kingdom and elsewhere 
around the globe have come into alignment with our sanctions 
regime, it has greatly increased our ability to effect 
seizures, to effect requests for searches, to request arrests, 
et cetera. That I think will only continue as those regimes 
continue to come into alignment and, in particular, as our 
partners in Europe and the United Kingdom continue to work on 
legislation of their own that will increase their own ability 
to proceed on civil asset forfeiture or an analogous 
proceeding.
    Senator Menendez. Thank you, Mr. Chairman.
    Chairman Brown. Thank you.
    Senator Rounds from South Dakota is recognized.
    Senator Rounds. Thank you, Mr. Chairman.
    Thank you to both of you for appearing before us today. Ms. 
Rosenberg, as you know, the use of sanctions has increased 
astronomically since the end of the cold war. My question is: 
Do you believe that sanctions are an effective way to advance 
U.S. national security and policy priorities?
    Ms. Rosenberg. Thank you for the question, Senator. I do 
believe that sanctions are an effective way to advance U.S. 
policy objectives, but not by themselves. They are effective in 
coordination with other authorities and tools of statecraft, 
including diplomacy, when appropriate the use of military or 
intelligence tools; and, furthermore, they are most effective 
when used alongside international partners, both as an economic 
matter and as a signaling matter to the target of the 
sanctions.
    Senator Rounds. In a globalized economy where Russia can 
still earn $1 billion a day in oil revenue, even while being 
heavily sanctioned, how do we make certain that our economic 
and other nonmilitary tools actually stay effective?
    Ms. Rosenberg. Senator, to this excellent point, I would 
refer back to my comment previously on the multilateralism 
here. So the United States is, of course, a significantly sized 
economy, but there are other significantly sized economies that 
have even greater connectivity with Russia. And when we act 
together, given their connectivity to Russia, it will have the 
greatest effect in causing economic and financial isolation for 
Russia. That is how multilateral sanctions can be most 
effective.
    Senator Rounds. It seems interesting that even though they 
have actually reduced the amount that they have produced and 
been able to deliver and the fact that they have got supply 
chain problems as well, with the price going up there were two 
messages that I had heard earlier in your opening statement. 
First was that we are successfully actually limiting and seeing 
their economy actually reduce in terms of its overall value. 
And yet at the same time, their largest industry, which is the 
production of petroleum, has substantially increased.
    Am I missing something between the two? It seems that the 
sanctions, specifically with regard to their ability to produce 
and to market oil, does not seem to have worked as well as what 
we had hoped that it would. Is that a fair statement?
    Ms. Rosenberg. Senator, this broad international coalition 
of sanctions and export controls, are having the effect of 
overall constraining Russia's economy and putting it into 
pretty difficult and dire conditions. Nevertheless, the 
particular area that you have noted, in energy, is actually the 
last significant remaining Russian opportunity to earn hard 
currency. To many people, including Members of this Committee, 
that is intolerable, that Russia should still continue to earn 
windfall profits from the sale of this energy, which is why we 
seek to address it with further policy measures.
    Senator Rounds. Thank you.
    Mr. Adams, it is my understanding that your task force is 
fully empowered to use the most cutting-edge investigating 
techniques, including data analytics, cryptocurrency tracing, 
foreign intelligence source, and information from financial 
regulators and private sector partners, to identify sanctions 
evasion and related criminal misconduct.
    In discussions with other Federal offices, I have been told 
that frequently the private sector actually provides more and 
better information than other sectors of the Federal 
Government.
    I guess my question would be: What role does the private 
sector play in assisting you in identifying Russia's evasion 
efforts? And have you experienced a similar level of 
information sharing?
    Mr. Adams. Thank you, Senator. The private sector has been 
an enormous partner throughout this effort, and I am referring 
here to the banking sector, to the financial services sector 
generally, to the insurance industry, to the shipping industry, 
et cetera.
    There are instances in which our job as law enforcement 
officers cannot be done without witnesses who have firsthand 
knowledge of how the economy is working on the ground and have 
specific knowledge about particular sanctions evaders, as you 
note.
    Working with the banking sector is not separate in my mind 
from working with the public sector and law enforcement. It is 
a symbiosis. We get information through bank secrecy reporting 
channels. We get information through less formal informants, et 
cetera.
    To be able to marry those sources of information with 
confidential sources, for example, to marry it with our ability 
to proceed via search warrants, et cetera, amplifies both sides 
of what is essentially the same coin.
    Senator Rounds. Thank you.
    Thank you, Mr. Chairman. My time has expired.
    Chairman Brown. Thank you, Senator Rounds.
    Senator Smith from Minnesota is recognized from her office.
    Senator Smith. Thank you, Mr. Chair, and thank you to our 
panelists for this excellent hearing.
    My question is around global food insecurity. The Russian 
war in Ukraine is contributing to a global food security 
crisis. Somalia is one of the worst-hit countries. Before the 
war, Ukraine and Russia contributed up to 90 percent of 
Somalia's grain supply, and now an estimated 7 million Somalis 
are facing acute food insecurity and near-famine conditions. 
And despite some progress in restoring shipments of wheat to 
East African Nations, we continue to see Russian efforts to 
steal and divert grain supplies and threats from Russian 
President Putin to look at reducing future shipments.
    So, Ms. Rosenberg, I was very glad to see last week 
Treasury announcing new sanctions against individuals that are 
overseeing the seizure and the theft of Ukraine's grain. Could 
you talk to us about how we can do more to use sanctions and 
other tools of economic statecraft to hold Russia accountable 
for intentionally exacerbating this food crisis?
    Ms. Rosenberg. Thank you, Senator, for the opportunity to 
speak to food insecurity and Russia's role in enhancing, 
unfortunately, the food insecurity that exists for so many 
countries.
    One thing that is important we have found to point out is 
the necessity to clarify the fact that our sanctions do not 
bear on the export or the trade of food, medicine, or medical 
devices. That speaks to misinformation out there. In fact, what 
we have sought to do is to clarify that we have permission in 
all of our sanctions structure to ensure that such trade can 
continue. We have issued general licenses to that effect and 
additional guidance.
    It is important to hold accountable those entities, 
including in Russia, that have been responsible for stealing 
Ukrainian grain and destroying their agricultural equipment 
from blockading the export of Ukrainian grain. And as you have 
noted, it is particularly outrageous and dismaying that Russia 
has been engaging in these activities, given the profound need 
by countries that are food insecure for this food aid that 
Ukraine has been in the position of supplying, as well as 
Russia, in the past.
    Beyond efforts that we can bring forward and continue to do 
so to hold accountable those in Russia that are responsible, it 
is, furthermore, essential to ensure that that grain is able to 
be exported, and so the agreements, the negotiated agreements 
that have come into place and hopefully will be retained in 
order to allow that grain to continue to be exported will be 
just as essential as holding accountable those who are 
responsible for preventing the export of that grain.
    Thank you.
    Senator Smith. Thank you. Thank you very much.
    Just in the time that I have left, I would like to follow 
up on the excellent questions from Senator Menendez and also 
Senator Rounds around strategies that Russia is deploying to 
evade sanctions. It seems as if this is a constantly evolving 
battle--right?--between new strategies on the part of Russia to 
evade sanctions and then our efforts to adapt and to evolve as 
well.
    So maybe, Mr. Adams, could you just talk a little bit about 
that? How have Russia's strategies to evade coalition sanctions 
evolved? And how are our detection and enforcement strategies 
evolving in response?
    Mr. Adams. Thank you, Senator. In many ways, I think we see 
the same playbook for sanctions evasion today that we have seen 
for years. There is clearly a drive to evade export controls in 
particular given the stark deficiencies of the Russian military 
and the ability to rearm itself. And so from a strategic 
standpoint, we at the Department are looking at efforts to 
evade both the financing, sanctionable financing of controlled 
exports and looking specifically at new financiers and new 
shell companies, new financial services firms that are popping 
up in order to essentially play a shell game in terms of how to 
hide that money.
    One strategy that we have adopted with the task force is to 
be as public as quickly as possible in setting out a road map 
for the private sector to look at. When we unseal affidavits, 
when we take actions, we try to speak with as much detail as 
possible about the specific companies involved, the specific 
route of money that is going through the financial system, so 
that we have an outsized effect beyond a particular case or a 
particular seizure, so that banks, insurance companies, 
financial services firms can look at our work product and take 
their own action as they instill their own cultures of 
compliance.
    Senator Smith. Thank you very much.
    Thank you, Mr. Chair.
    Chairman Brown. Thank you, Senator Smith.
    Senator Daines from Montana is recognized.
    Senator Daines. Chairman, thank you.
    I was one of the first U.S. officials to visit Ukraine 
following Putin's invasion on February 24th. That was in mid-
April I went over. Following that visit, I saw Putin's 
atrocities firsthand. In fact, I brought a New York Times 
reporter with me as we went and saw the atrocities there in the 
Bucha area, of course, kind of north and a bit to the west of 
Kyiv. I pushed the Biden administration on my return to take 
immediate actions to reopen the U.S. embassy as well as to send 
more lethal aid to Ukrainian people.
    On Sunday, the Guardian reported that Ukraine is lobbying 
the U.N. General Assembly to adopt a resolution to establish a 
mechanism that could leave the seizure of as much as $300 
billion of Russian State assets overseas.
    As the war raged on and Russia's actions became more brutal 
and barbaric, I then urged Treasury Secretary Yellen to impose 
tighter sanctions on Russia's financial institutions.
    In June, the U.S. Department of Justice stated the U.S. and 
its allies have frozen $30 billion--I believe the number now is 
closer to $39 billion--of Russian elite assets and $300 billion 
of Russian central bank assets held overseas. Not long ago, I 
introduced a bill, Senate bill 4283, that would authorize the 
Biden administration to confiscate these Russian assets and use 
these assets to offset the cost of our Nation's assistance to 
Ukraine. I can tell you, when you talk about that with the 
taxpayers of this country, they think that is a great idea, as 
we have been most generous in sending aid over to Ukraine.
    I think it seems prudent that we take advantage of our 
sanctions to the fullest and repurpose these Russian funds to 
help pay for the response to their invasion of Ukraine.
    For Mr. Adams and for Ms. Rosenberg, can either of you 
offer guidance on what the Biden administration plans to do 
with the roughly $39 billion of seized Russian assets? And, by 
the way, it is kind of a nice balance. We authorized about $40 
billion and change to support the Ukrainians. We have got about 
$39 billion in seized Russian assets. What does the 
Administration do with that? And why can't we just take those 
dollars and use them as an offset for the aid we have sent to 
Ukraine? We will start with Mr. Adams.
    Mr. Adams. Thank you, Senator. The concern behind the 
question is entirely felt within the Department and the 
Administration, heartfelt by the people at the task force. And 
the task force, the Department, stands ready to work with you, 
your office, with the Committee, with the Senate, to talk about 
legislation that has been proposed, that may be proposed, that 
may further expand our ability to go after----
    Senator Daines. And I thank you for that. Heartfelt, that 
is great. Concern, that is wonderful. But why aren't we taking 
action? What is the barrier prohibiting us from taking these 
seized assets here and using those to offset the aid that we 
have sent to Ukraine? The taxpayers would love to see that, I 
can tell you that.
    Mr. Adams. Thank you, Senator. To go directly to the 
hurdles here, with respect to frozen assets, which I think is a 
key distinction here between what has been seized pursuant to 
our warrants and----
    Senator Daines. What is the frozen asset number that you--
if you were to look at your tally, what is that number?
    Mr. Adams. I think that is the number that you are 
referring to.
    Senator Daines. Yes, correct. OK. Just to make sure we are 
on the same page, because that does match virtually what we 
sent to Ukraine. It is around about $40 billion.
    Mr. Adams. And with respect to frozen assets that sit in 
bank accounts, that sit in securities holdings, those are not 
entire co-extensive with what is today forfeitable, what we can 
bring a seizure warrant to go and ultimately divest all the 
ownership.
    Senator Daines. How much do you think we could provide of 
seizure warrant and actually take?
    Mr. Adams. It is difficult to predict today, and it is 
under investigation right now. The question is: As a general 
matter, are the assets either traceable to the proceeds of an 
existing crime, involving in money laundering, or the assets of 
a racketeering enterprise?
    Senator Daines. Thank you.
    Ms. Rosenberg, your thoughts.
    Ms. Rosenberg. Thank you, Senator. Let me just affirm that 
it is certainly our common cause and interest to pursue the 
restitution for the Ukrainian people. I would associate myself 
with the sentiment that it is challenging to move from frozen 
assets to forfeited assets, and there is a distinction between 
assets that are State assets versus assets that apply to 
oligarchs or to individuals, creating different legal standards 
for the both of them.
    Additionally, some of those assets that you have noted are 
held in the United States and U.S. jurisdiction and others are 
held abroad. It is most important that we move in parallel to 
certain of our international counterparts in order to have 
consistency and credibility across our regimes.
    Senator Daines. Would legislation help?
    Mr. Adams. Senator, from the Department's perspective, 
there are proposals that the Department has engaged with the 
Senate on that would help, I think, expand our ability both to 
investigate and ultimately to pursue the forfeiture of assets 
that are under consideration.
    Senator Daines. All right. Thank you.
    Chairman Brown. Thank you, Senator Daines.
    Senator Sinema from Arizona is recognized from her office.
    Senator Sinema. Thank you, Mr. Chairman, and thank you to 
the witnesses for being here today.
    Arizonans and Americans continue to stand with the 
Ukrainian people against Russia's illegal war. We are inspired 
by the courage and the determination of the Ukrainian people. 
We must continue to take smart, aggressive action to disrupt 
and dismantle Vladimir Putin's war machine and bring this 
bloody illegal conflict to a close.
    Earlier this month, the Russian Government announced that 
Putin has personally sanctioned me, Senator Kelly, and other 
distinguished Members of this Committee. You know, when Senator 
McCain served in the Senate, he was sanctioned by Putin in the 
exact same way, and I could not be prouder to share such a 
distinction with him. I consider it a badge of honor.
    What he said in response to Russia was this: ``While I 
suppose this means I will spend this Easter in Sedona rather 
than Siberia, I could not be more proud of being sanctioned by 
Vladimir Putin for standing up for freedom and human rights for 
the Russian people and against Putin's deadly aggression in 
Ukraine. I will never stop my efforts to support democracy, 
free speech, and the rule of law in Russia.''
    I could not agree more.
    Assistant Secretary Rosenberg, it is good to see you. I am 
encouraged by reports that the Russian military is being forced 
to repurpose domestic industry to obtain key inputs for its 
battlefield hardware because no respected world power will sell 
to them. This success shows what is possible when Nations put 
aside differences and work together toward a common goal.
    Can you expand on the direct combat implications of this 
achievement? And are these international export restrictions a 
factor in why the Russian military had to pull back from 
Kharkiv a few weeks ago?
    Ms. Rosenberg. Thank you, Senator, for the opportunity to 
discuss this issue. Indeed, we do believe that export 
restrictions and financial sanctions are directly meaningful 
for Russia's difficulty in sourcing modern, state-of-the-art 
battlefield equipment. Their soldiers on the front line do not 
have access to key warfighting equipment, which degrades 
Russia's readiness, its posture, and its ability to wage this 
war.
    Specifically, we have noticed and pointed out Russia's 
difficulty in getting access to chips, certain high-tech 
equipment that is significant as components to certain 
battlefield equipment. As you rightly noted, Russia has 
struggled to be able to procure on the open market because 
responsible countries of the world have denied it the 
opportunity to procure those goods. That is something that we 
will seek to continue: tightening those export controls. They 
are a vise that continues to tighten. Successively over time it 
will be more and more difficult for Russia to source that 
equipment, meaning that its second-rate materiel is an 
impediment for battlefield readiness for the period of the war 
yet ahead of us, unfortunately.
    Senator Sinema. Thank you. Do you have a sense of which 
industrial goods and technology are the most devastating for 
global suppliers to withhold from the Russian military?
    Ms. Rosenberg. Senator, I did not catch the beginning of 
your question, but to the extent that this is about particular 
goods and technology controls----
    Senator Sinema. Yes.
    Ms. Rosenberg. Yes, I would defer to my Commerce Department 
colleagues who maintain the lists and the particular 
prohibitions as well as my Defense Department colleagues and 
their analysts to make an assessment of what is most 
significant to Russia's warfighting ability and its battlefield 
readiness. But as I believe you have noted, the broad array of 
restrictions across many categories of equipment and technology 
that Russia uses to source its battlefield equipment are 
important, as well as the complementary financial sanctions 
that also seek to deprive Russia the opportunity to make such 
procurements.
    Senator Sinema. Thank you. I also want to ask you about the 
efficacy of current restrictions on Russian oil exports. Some 
reports state that Russian oil producers are attempting to 
circumvent the spirit of these restrictions by blending their 
oil with oil from other countries so that the percentage of 
Russian oil falls beneath 50 percent. Under current rules, that 
would allow the oil to be branded as a non-Russian country's 
blend, even though nearly half of the oil revenue will continue 
to go to Russia.
    Is this an issue of concern for the United States? Or is 
this primarily an issue for the European Commission?
    Ms. Rosenberg. Thank you. At this time we are putting 
together the price cap policy, which will come into force on 
December 5th. The point that you have made about blending of 
Russian crude is one that we have heard from other individuals 
and people in the industry. We have an opportunity to offer 
further clarity on this important point in the forthcoming 
guidance and frequently asked questions that the U.S. 
Government will put out in the coming weeks to effectuate our 
price cap. Our partners in other G7 countries will have the 
opportunity to do so--as well as to clarify the specifics here. 
But it is important to remember that Russian oil on the water 
is Russian oil on the water for the purposes of the price cap 
policy.
    Thank you.
    Senator Sinema. And my final question. Does the Department 
support European Commission efforts to tighten restrictions on 
this very type of blending scheme?
    Ms. Rosenberg. Thank you, Senator. We work very closely 
with the European Commission, which is part of the G7 coalition 
for the price cap. We all collectively see the price cap policy 
as strengthening and enforcing the existing set of restrictions 
that we have to respond to Russia and what it does is buildupon 
the EU's sixth package that passed in the spring that has the 
provisional basis, the provisional legal basis for its ban on 
Russian services for third countries. So we will certainly work 
closely with the EU and other G7 partners as we continue to 
implement this policy.
    Thank you.
    Senator Sinema. Thank you.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Sinema.
    Senator Cortez Masto from Nevada is recognized from her 
office.
    Senator Cortez Masto. Thank you, Mr. Chairman. Thank you to 
both Ms. Rosenberg and Mr. Adams.
    Mr. Adams, let me talk with you. Let me just say this: I 
appreciate President Biden's implement robust sanctions against 
the Russian Government to stop the illegal and unprovoked 
invasion against the people of Ukraine. I also appreciate the 
work that you are doing in the creation of the KleptoCapture 
Task Force. Let me just talk about two things, because I have 
two proposals that I am working on, and thank you, I know we 
have reached out to DOJ and the Administration about this.
    But here is what I am interested in is your position on 
when you talk about the benefits of adding the crime of 
sanctions evasion to the definition of ``racketeering 
activity'' under RICO. As you well know, there are civil and 
criminal actions under the Racketeer Influenced and Corrupt 
Organizations Act, and I am interested in your thoughts if 
adding the crime of sanctions evasion would be helpful in the 
work that you are doing.
    Mr. Adams. Thank you, Senator, and my thanks to both you 
and your staff for the conversations about the proposed 
legislation. We are committed to continue those conversations.
    It would be helpful in a number of respects to add IEEPA 
and ECRA violations to the list of RICO predicates. There are a 
number of ways in which we expect that would inure to the 
benefit of seizing assets. Under the RICO criminal provisions 
and the forfeiture laws, the ability to go after racketeering 
enterprises and the assets, all assets of a racketeering 
enterprise is a particularly powerful forfeiture tool, and it 
is one that is appropriate in the context of sophisticated, 
complicated, complex, multinational racketeering enterprises 
that are engaged in a number of financial crimes.
    It is the case, as we have talked about today on a number 
of points, that what we see are efforts to evade sanctions in 
Russia, but they also tie into efforts to evade sanctions in 
Iran and North Korea. There are partnerships and growing 
partnerships in Iran and North Korea, in particular due to the 
success of our sanctions regime and the success of the export 
control regime.
    The ability to look at financial service providers, for 
example, to look at facilitators who are engaged generally in 
the efforts to make a buck on the back of sanctions evasion, 
irrespective of where in the world the sanctions evasions are 
taking place, would be particularly powerful and allow us to go 
after a broader set of actors and to use a particularly 
powerful forfeiture hammer to ultimately inure to the benefit 
of Ukraine.
    Senator Cortez Masto. Thank you. And, listen, I so 
appreciate your answers to some of the questions today. I have 
taken action both under civil and criminal RICO and addressed 
and tried to take action under forfeiture laws as well. It is 
very challenging, there is no doubt about it, and there are 
certain property rights that have to be taken into 
consideration.
    I do think we need to make sure that we are giving you all 
the tools that you need under our existing laws, and by adding 
just a sanction evasion as a RICO predicate would be one of the 
easiest things that we can do to give you more opportunity to 
take the action that we are all asking you to take, quite 
honestly.
    The second thing I want to ask you, I know the 
Administration seeks to extend the statute of limitations for 
acts against the U.S. for sanctions evasion from 5 to 10 years. 
Can you talk a little bit about that and why that is important?
    Mr. Adams. Thank you, Senator, and the proposal here is, as 
you say, to extend the statute of limitations, focusing on, in 
particular, activity and unlawful activity that is taking place 
abroad. The reason for the request is the difficulty in 
conducting those kinds of investigations in particular.
    I mentioned earlier that the realignment and the continuing 
alignment of our sanctions regime and our foreign partners' 
sanctions regime is encouraging. It has been robust, 
particularly in the last few months.
    That said, the difficulties of conducting transnational 
investigations of piercing often opaque jurisdictions that have 
an interest in concealing or providing a harbor for those who 
would conceal illegal activity is a tall order. It requires 
intensive resources, and it at times requires multiple years of 
investigation.
    Senator Cortez Masto. Right, so, in essence, you just need 
more time for the investigation. You do not have that because 
of the extent of the assets and what you are dealing with in an 
international perspective.
    Thank you again. I so appreciate both of you and the work 
that you do.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Cortez Masto.
    Senator Warren from Massachusetts is recognized.
    Senator Warren. Thank you, Mr. Chairman.
    So ever since President Biden announced sanctions against 
Russia for the invasion of Ukraine in February, I have had 
serious concerns about Russian elites potential using 
cryptocurrency to evade sanctions. Back then, we already knew 
that countries like North Korea had used crypto to skirt 
sanctions and launder at least hundreds of millions of dollars, 
and Russia could easily be part of that.
    So that is why I introduced the Digital Asset Sanctions 
Compliance Enhancement Act with many of my colleagues actually 
on this Committee to strengthen our sanctions regime. Since my 
bill's introduction in March, Treasury has identified numerous 
cases of Russian entities attempting to evade sanctions with 
crypto.
    In April, Treasury sanctioned multiple Russian crypto 
mining companies. Just last week, Treasury sanctioned five 
crypto addresses tied to a Russian neo-Nazi paramilitary group. 
And on top of that, Russia's Deputy Finance Minister announced 
earlier this month that Russia is looking into using 
stablecoins as a way around Western sanctions.
    Assistant Secretary Rosenberg, could digital assets be used 
right now by Russian oligarchs to evade sanctions on Russia?
    Ms. Rosenberg. Yes, Senator, that is possible.
    Senator Warren. All right. I appreciate your candid answer 
here. Many crypto boosters continue to claim that crypto could 
never be used as a way to evade sanctions. Despite the evidence 
to the contrary, they say that because blockchain is 
transparent, anybody can where the tokens are moving, so no 
problem here.
    Now, obviously, we know there are problems. A whole 
industry has popped up to create tools for illicit actors to 
tangle or hide the trail of crypto transactions. One of these 
tools is called a ``mixer,'' which pools funds with the 
explicit purpose of hiding the origins of the funds. In fact, 
one report estimates that so far this year, nearly a quarter of 
all funds sent to mixers came from illicit actors.
    Assistant Secretary Rosenberg, let us start with the 
basics. Do mixers and other technology used to hide 
cryptotransactions make it harder for Treasury officials to do 
their job of enforcing sanctions?
    Ms. Rosenberg. Anonymity-enhancing technologies, such as 
mixers that you mentioned, are indeed a concern for 
understanding the flow of illicit finance and getting after it. 
It is true that what you note, that on a public blockchain, it 
is possible to trace the source of money and where it is 
flowing. The detractor from that would be anonymity-enhancing 
technologies.
    Senator Warren. That is right, like these mixers. So that 
is why I was glad to see last month that Treasury sanctioned 
Tornado Cash, a mixer used by a North Korea-linked hacking 
group to launder nearly half-a-billion dollars. Earlier this 
year, the mixing service Blender was sanctioned for laundering 
funds for Russian and North Korean groups.
    Now, some in the crypto industry are furious over these 
sanctions, and they are fighting to have the chance to keep 
right on laundering money. Some downplay, some even lie about 
the risks associated with their products.
    One of the industry witnesses who testified before this 
Committee earlier this year claimed that mixers do not make it 
easier for illicit actors to hide their transactions. Well, 
that was clearly wrong. Tornado Cash alone has been used to 
launder over $7 billion with nearly 30 percent of its current 
business tied to illicit actors.
    Even so, Coinbase, the largest U.S.-based crypto exchange, 
is now bankrolling a lawsuit against Treasury for its work to 
sanction these mixers.
    So, Assistant Secretary Rosenberg, will sanctions against 
mixers like Tornado Cash help strengthen our sanctions regime 
against Russia and other illicit actors?
    Ms. Rosenberg. Thank you, Senator. Sanctions such as the 
one that you have noted, when they can serve as a deterrent to 
any criminal that would seek to use a mixer in order to launder 
their funds, the proceeds of corruption or other criminal 
activity, that is an effective avenue we can use in order to 
signal that we cannot tolerate money laundering. So whether 
that is for a Russian criminal actor, an Iranian, a North 
Korean, or wherever they may come from.
    Senator Warren. Well, I appreciate that. You know, one 
thing I have learned over the past couple of years is when the 
crypto boosters cry the loudest, you are probably on to 
something. If crypto has nothing to hide on money laundering 
for oligarchs or drug lords or tax evaders, then they should 
not mind a little transparency. Thanks very much.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warren.
    Senator Ossoff from Georgia is recognized from his office.
    Senator Ossoff. Thanks to both of our panelists for your 
service and your testimony today.
    Assistant Secretary Rosenberg, I would like to begin with 
you. What will be the most significant implementation 
challenges associated with the G7 price cap?
    Ms. Rosenberg. Thank you for the question. We have already 
begun significant work to implement this, by discussing and 
explaining it publicly. It is a different kind of sanction or a 
different kind of financial set of rules than we have imposed 
before, along with our G7 partners, so there is a good deal of 
work to be done, a good challenge to be had in explaining this 
and clarifying it to the parties that would be in the position 
to use it. And that includes the service providers that must 
know and understand it in order to be able to work within its 
parameters. We have sought to engage those service providers 
extensively as we have constructed the framework for compliance 
and have learned a great deal from them as well as from other 
countries that purchase Russian oil and that would seek to 
purchase Russian oil.
    So a challenge we have is being able to continue to discuss 
and explain this broadly with all those in a position to 
implement it.
    Senator Ossoff. Thank you, Ms. Rosenberg, and my 
understanding is that the guidance that has been issued, 
according to that guidance, financial institutions that 
inadvertently capitalize the shipment of oil that is not 
compliant with the cap will not be penalized for that. How will 
``inadvertent'' be defined? What due diligence will financial 
institutions be required to undertake in order to ensure that 
they are not facilitating oil trades which are not compliant 
with this arrangement?
    Ms. Rosenberg. Thank you, Senator. Our purpose is indeed 
strong compliance with the price cap policy such that 
purchasers of Russian oil will be in a position to leverage it, 
as I have noted before. Your reference to the guidance, the 
preliminary guidance that we put out does speak to service 
providers that may be duped or having received false 
information. If they are acting in good faith, if they are 
undertaking due diligence in the normal course along the lines 
of what they are required to do under other compliance 
frameworks or supervisory frameworks, that is in general terms 
the nature of the requirements that we would expect them to be 
undertaking here. Our focus by contrast as an enforcement 
matter would be on those purchasers making these material 
misrepresentations or lying to the service providers.
    Senator Ossoff. Thank you, Ms. Rosenberg. More broadly now, 
what forms of access to international markets or capital or 
technology that may not currently be constrained by the 
sanctions regime as constructed are more essential to the 
Russian Federation's capacity to generate military power over 
the next several years?
    Let me just restate the question for clarity. What forms of 
access to international markets and capital that the Russian 
Federation may still enjoy and to specific technologies, will 
the Russian Government and Russian industry be best able to 
exploit to generate military power given the high rate of 
attrition that they have experienced thus far during operations 
in Ukraine?
    Ms. Rosenberg. Thank you, Senator, for the question. One 
key area of focus for us is looking to Russia's significant 
source of wealth when it comes to its energy sales, its major 
source of hard currency at this time. That is important to 
Russia for budgetary support now and will be in the future, 
which is why policies such as the price cap policy are 
essential in degrading its fiscal basis now and into the 
future. And I would point out a policy which is not a U.S. 
policy but which will nevertheless be significant, and that is 
Europe's long-term goal to move away from the purchase of 
Russian energy and indeed to seek alternative energy supplies 
and greater efficiency. That has caused Russia to anticipate a 
decline in revenue, a very meaningful decline in revenue over 
the years to come. That is significant when it comes to its 
ability to sustain any kind of economic growth or achieve any 
kind of economic growth or sustain it into the future.
    Thank you.
    Senator Ossoff. Thank you.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Ossoff.
    That concludes the questioning. In bringing this hearing to 
a close, it is important that we all again realize what is at 
stake. The struggle of the Ukrainian people and Putin's 
inhumane war is a fight between democracy and tyranny. The 
price is high. Zelensky said it best, describing to Putin what 
Ukrainians would go without. He said, ``Without gas or without 
you? Without you. Without light or without you? Without you. 
Without food or without you? Without you. Without water or 
without you? Without you.''
    That is the strength of Ukrainian resolve and ours on this 
Committee and in this Congress, and the Administration must 
match it. Congress must work hand in hand with you, with the 
Administration, and our multilateral coalition to protect the 
sovereignty and protect the people of Ukraine.
    Again, thanks to the two of you for being here today and 
providing testimony.
    Senators who wish to submit questions, they are due 1 week 
from today, on Tuesday, September 27th. To the two of you as 
witnesses, please submit your responses to those questions for 
the record no more than 45 days from the day you receive them. 
Thank you again.
    With that, the hearing is adjourned.
    [Whereupon, at 10:31 a.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    The Committee on Banking, Housing, and Urban Affairs will come to 
order.
    Today's hearing is in a hybrid format. Our witnesses are in-person, 
but Members have the option to appear either in-person or virtually.
    Vladimir Putin's war on Ukraine has massacred innocent civilian 
communities, leveled cities, weaponized food and energy sources, 
imperiled the security of a nuclear facility, and jeopardized the 
future of a sovereign democracy.
    His actions also threaten global order--drawing a clear distinction 
between those who stand for democracy and rule of law and the forces of 
repression and tyranny.
    But there are two things that Putin did not count on:
    First: the resilience and strength of spirit of the Ukrainian 
people--which was on clear display last week, when the Ukrainian 
military retook Kharkiv, Ukraine's second-largest city.
    Second: the ability of President Biden to assemble and lead a 
broad, unified coalition of allies, and to keep that coalition 
together.
    This Administration, with bipartisan and bicameral support from 
Congress, has spearheaded a forceful, comprehensive, and multilateral 
response to support the Ukrainian people and isolate Russia.
    Today's hearing examines the economic piece of the Administration's 
strategy.
    This hearing follows on the Committee's work in evaluating our 
sanctions policy--as we did last year in a hearing on Treasury's 
sanctions review, and at a hearing this past July, where we heard from 
the Commerce Department on its expansive restrictions on exports to 
Russia.
    Because we are united, our efforts are beginning to work.
    As Secretary of State Antony Blinken said the other week, ``Putin 
thought he would divide and weaken NATO.''
    But he was wrong. Putin's actions have led to NATO's growth--We're 
now poised to welcome Sweden and Finland--reminding the world the vital 
role this alliance of democracies plays.
    And America, and increasingly the world, is wise to Russia's 
propaganda.
    This Administration has corralled an unprecedented multilateral 
coalition, which includes our European partners and other allied 
countries, to impose one of the most comprehensive sets of economic 
sanctions in recent years.
    Those measures aim to limit trade and financial relations with 
Russia, to penalize corrupt Russian oligarchs for supporting Vladimir 
Putin, and to cripple Russia's economy, cutting off support for funding 
this brutal and immoral war.
    We've dramatically escalated this economic effort. And it is 
impacting every sector:

    Sanctions against a number of major Russian banks and 
        dozens of Russian officials and Putin associates.

    Expanded export controls that restrict Russia's access to 
        the technologies needed to sustain its aggressive military 
        capabilities.

    Limitations on imports of Russian energy products.

    And even the seizure of a $300 million yacht owned by a 
        sanctioned Russian oligarch.

    The impact of our smart and targeted economic measures has rippled 
throughout the Russian economy, damaging their defense industrial base.
    Ukrainian troops have found Russian military equipment rigged with 
semiconductors that appear to have been taken out of home appliances 
like dishwashers and refrigerators.
    As we pass the 6 month mark of the war, we welcome back Elizabeth 
Rosenberg, who serves as Assistant Secretary for Terrorist Financing 
and Financial Crimes at the U.S. Department of the Treasury, and 
welcome Andrew Adams, Director of the KleptoCapture Task Force at the 
Department of Justice.
    We look forward to hearing from the witnesses about the economic 
sanctions designed to weaken Russia's economy and about our efforts to 
pursue corrupt Russian oligarchs' assets.
    We are making it increasingly difficult for Putin to fund his 
brutal war in the face of a shrinking Russian economy and its isolation 
on the global stage.
    We must maintain the pressure of our many sanctions regimes and we 
must keep the coalition intact.
    With so much of Russia's revenue coming from energy sales, I look 
forward to hearing more from the witnesses today about the intended 
impact and status of the price cap negotiations.
    Just last week I met with a group of Ukrainian Americans from 
Ohio--my State is proud to have a vibrant, active Ukrainian community--
and their message was clear:
    We ``cannot lose the momentum.'' We must continue to hold the 
Russian Government and sanctions evaders responsible.
    The multilateral coalition, which President Biden assembled, rolled 
out a sweeping series of rules designed to degrade Russia's military 
and technological capabilities. We will not let up while Russia 
continues to threaten the sovereignty of Ukraine.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Mr. Chairman, thank you.
    Last week, Ukrainian forces recaptured the town of Iziyum in 
eastern Ukraine. It had been occupied by Russian soldiers for 6 months.
    In the streets, overjoyed and tearful residents celebrated their 
liberation. But in a forest just outside town, the horrors of Russia's 
invasion were once again revealed.
    Ukrainian soldiers discovered a mass grave filled with hundreds of 
civilians. Many of these victims are believed to have been tortured, 
bound, assaulted, and murdered--not unlike the horrors that occurred in 
Bucha in April.
    Our Government has rightly said such atrocities committed by the 
Russians are war crimes. Identifying and prosecuting these war crimes 
are crucial to bringing justice to the Ukrainian people, but let's be 
clear: These crimes will continue unless we can force Vladimir Putin 
and those around him to conclude that abandoning the invasion is better 
than continuing it.
    Ending this war--on terms acceptable to Ukraine's democratic 
Government--is not just a morally righteous undertaking for the United 
States. It is also in the vital interests of our allies and ourselves.
    The outcome will have ramifications far beyond Ukraine. We cannot 
allow revisionist autocrats to feel free to redraw international 
borders and fundamentally challenge global stability.
    The principles of sovereignty and freedom must mean something--even 
when facing down the barrel of a gun. The stakes are sky high in 
Europe, where the United States has deep and longstanding security 
commitments, and they reach as far as Asia, where the Chinese 
Government is taking note of how the U.S. and its allies respond to 
Russia's invasion of its smaller neighbor.
    Today, this Committee will examine the existing and future 
sanctions that the U.S. and its allies will bring to bear on the 
Kremlin for its invasion of Ukraine. While the outcome of the war will 
be determined on the battlefield, sanctions have the potential to 
dramatically hasten an end to the conflict by depriving the Kremlin of 
the funds it needs to continue this war.
    And let's be honest: the sanctions imposed on Russia have not yet 
come remotely close to achieving this objective. Roughly $1 billion in 
hard currency continues to flow into the Kremlin's war chest every day 
from energy sales.
    Even Treasury Deputy Secretary Adeyemo recently acknowledged: 
``There is one part of the Russian economy doing even better than when 
the war began: their oil industry.'' Russia's gas industry is doing 
equally well: Gazprom recently announced record profits of over $40 
billion from the first part of this year.
    Today's hearing will focus on the Administration's plan for a novel 
sanctions regime that imposes price caps on the purchase of Russian 
oil. This is an intriguing idea that I hope will be considered for 
Russian gas as well.
    The premise of the scheme is simple: service providers, such as 
financiers and insurers, within the G7 will only be permitted to 
facilitate the purchase of Russian oil below the set cap. Given that 
the vast majority of such service providers are domiciled in G7 
countries, I think this plan has the potential to significantly curtail 
Russian oil revenue.
    But several questions remain about this program, including: How 
will the price cap be set? What will enforcement of the cap look like? 
And how will the Administration ensure that buyers in countries like 
China and India do not skirt the price cap for their own gain?
    This last question is arguably the most important to determining 
the effectiveness of the price cap regime. And because the G7 agreement 
does not address this question, I have joined with Senator Chris Van 
Hollen to introduce sanctions legislation that will complement the 
Administration's price cap scheme and impose mandatory sanctions on any 
foreign financial institution, worldwide, involved with any transaction 
in Russian oil above the price cap.
    This legislation is the first major bipartisan sanctions 
legislation that has been introduced on Russia since February. And I 
promise to work with Senator Van Hollen to get this bill enacted as 
soon as possible so that Russia can no longer profit from the oil sales 
funding its war in Ukraine.
    Seven months after Putin began his ``special operation'' in 
Ukraine, the Ukrainians have conducted a successful campaign to 
liberate portions of the country from Russian control, concerns 
harbored by China and India about Putin's war have been aired publicly, 
and gas prices in Europe are actually falling--down 45 percent since 
late August.
    The war is not going as planned for Putin. But I say this to my 
colleagues: now is not the time for half-measures or complacency. It is 
time to crush the Kremlin's will to continue this war.
                                 ______
                                 
               PREPARED STATEMENT OF ELIZABETH ROSENBERG
Assistant Secretary for Terrorist Financing and Financial Crimes, U.S. 
                       Department of the Treasury
                           September 20, 2022
    Chairman Brown, Ranking Member Toomey, and distinguished Members of 
the Banking Committee, thank you for the opportunity to speak with you 
today and provide an update on the Department of the Treasury's efforts 
to hold Russia accountable for its brutal and unjustified further 
invasion of Ukraine.
    The U.S. Department of the Treasury is a key agency working 
alongside others across the Administration to implement the U.S. 
Government's holistic response to Putin's war. Since the further 
invasion began 6 months ago, we have been advancing President Biden's 
promise to ``squeeze Russia's access to finance and technology for 
strategic sectors of its economy and degrade its industrial capacity 
for years to come.'' \1\
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     \1\ https://www.whitehouse.gov/briefing-room/speeches-remarks/
2022/02/24/remarks-by-president-biden-on-russias-unprovoked-and-
unjustified-attack-on-ukraine/
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    Just last week, we imposed additional sanctions to further degrade 
Russia's ability to rebuild its military, hold the perpetrators of this 
war accountable, and further financially isolate Putin. To date, 
Treasury has sanctioned hundreds of Russian individuals and entities, 
cutting them off from the U.S. financial system. This includes a 
majority of Russia's largest financial institutions, key nodes in their 
military-industrial supply chains, and the oligarchs and cronies who 
steal from the Russian people to line their own pockets and help Putin 
perpetuate his war. For example, Treasury's sanctions over the last few 
months, including our latest tranche last week, have targeted elites 
tied to the Kremlin, firms connected to Russian steel production and 
the military-industrial base, and sanctions evasion networks operating 
on behalf of designated Russian entities. They have also exposed 
Russian agents and entities involved with Russian Government efforts to 
promulgate disinformation and election interference in the U.S. and 
Ukraine.
    Treasury has also implemented restrictions on dealings in Russian 
sovereign debt; prohibited economic dealings with the so-called Donetsk 
People's Republic and Luhansk People's Republic regions of Ukraine; 
prohibited new investment in the Russian Federation, and imposed 
services bans covering the provision of quantum computing, accounting, 
trust and corporate formation, and management consulting services to 
any person located in the Russian federation. We have also imposed 
prohibitions on importing certain commodities from Russia into the 
United States, including oil and natural gas, and similarly imposed 
prohibitions on exporting certain items like luxury goods and dollar-
denominated banknotes.
    The United States has been joined by over 30 countries--
representing more than half of the global economy--in imposing these 
measures. The G7, the EU, and other partners like South Korea, 
Singapore, and Australia have joined us in implementing the largest 
sanctions regime in modern history. To complement these targeted 
measures, Treasury has worked alongside colleagues at the Department of 
Justice to develop unprecedented and wide-reaching international 
information exchange activities with partner countries, including 
through the Russian Elites, Proxies, and Oligarchs (REPO) Task Force. 
These efforts facilitate our ability to share intelligence, law 
enforcement data, and relevant financial records in order to expose 
shadowy economic and commercial Russian evasion networks. We are also 
working with allies and the Government of Ukraine to examine how we may 
best use Russian assets that have been frozen and forfeited to support 
the people of Ukraine.
    In addition, Treasury has mounted an aggressive campaign to close 
the global financial policy and regulatory loopholes across 
jurisdictions that Russian aiders and abettors of this war, and other 
criminals, use to perpetuate their illicit activity. At home, this 
includes three key regulatory efforts: FinCEN's work to stand up a 
beneficial ownership database pursuant to the Corporate Transparency 
Act, developing new disclosure requirements for nonfinanced purchases 
of real estate, and ongoing analysis related to the illicit finance 
risks presented by investment advisers and funds. FinCEN has also 
issued several Russia-related alerts, including on Russia's attempts to 
evade sanctions. Abroad, Treasury is working to strengthen global 
standards for corporate transparency through the Financial Action Task 
Force (FATF) and enhance its focus on using financial transparency 
tools to combat the scourge of corruption. This includes launching new 
efforts at the FATF to address abuse of Citizenship by Investment, or 
so-called golden passport programs, and the risks for money laundering, 
corruption, and evasion of sanctions posed by financial gatekeepers and 
Politically Exposed Persons (PEPs). Notably, FATF has also taken the 
unprecedented step of downgrading Russia's standing within FATF as a 
result of its war in Ukraine, further delegitimizing it in the eyes of 
the international financial community.
    On the other side, Russian propagandists have been hard at work. In 
the style of the former Soviet Union, Moscow is aggressively attempting 
to bury any unfavorable news and push the paradoxical narrative--and 
misinformation--that sanctions are simultaneously not working and yet 
also cause food insecurity. In fact, Russia's invasion spiked the price 
of energy earlier this year by 21 percent. Russia's months-long 
blockade of Ukraine's Black Sea ports, coupled with the purposeful 
destruction and theft of agricultural infrastructure, crippled 
Ukraine's farming and export economy, dramatically drove up global 
grain prices, and outrageously deprived food-insecure recipients of 
much needed resources. Its attacks on a major food exporter produced 
similar shocks to global food prices. To detract focus from its brutal 
tactics, Russia continues to minimize the dislocations it has caused to 
global commodity markets and its inhumane deprivation of people in 
Ukraine and across the globe.
    This lies in stark contrast with the efforts of the U.S. and others 
to aid Ukraine and developing countries around the world suffering from 
Putin's actions. Foremost among these efforts are the Congressional 
commitments to provide Ukraine with budget support and economic 
assistance to keep critical Government functions going. In addition, we 
are pushing international donors to accelerate their complementary 
bilateral support. We thank Congress for already granting $8.5 billion 
for Ukraine assistance that has gone toward these efforts.
    The economic actions we have taken, both independently and jointly 
with our international partners, have had and will continue to have a 
significant effect on the Russian economy. Russia had been forced to 
impose draconian capital controls and is burning through its rainy-day 
fund, dramatically eroding its economic base and buffers in 
unsustainable ways. Russia will be in fiscal deficit by the end of this 
year. The IMF expects Russia's economy will contract for at least the 
next 2 years, a sharp reversal from its 4.7 percent growth in 2021. \2\ 
Russia's inflation rate after its invasion reached up to 21.3 percent, 
almost triple the rate from 2021, and remains in the double digits. \3\ 
The Russian stock market also reflects pessimism--its valuation remains 
depressed, sitting about 35 percent below pre-war levels. \4\ Further, 
the Central Bank Governor of Russia has started to advocate for 
``structural transformation.'' \5\ The bottom line is that Russia's 
economic picture is bleak and deteriorating.
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     \2\ https://www.imf.org/en/Publications/WEO/Issues/2022/07/26/
world-economic-outlook-update-july-2022
     \3\ https://www.cbr.ru/eng/press/keypr/
     \4\ Data from time series Moscow Stock Exchange Index available 
here: https://www.moex.com/.
     \5\ https://www.cbr.ru/eng/press/event/?id=14034
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    Significantly, these economic constraints are translating into real 
battlefield difficulties for Russia. The Russian Duma proposed wartime 
economic controls over the economy which would allow the State to 
commandeer private businesses as necessary and force employees of 
certain enterprises to work overtime. \6\ Struggling to import a host 
of industrial goods and technology, Russia has been forced to 
cannibalize its domestic industry to assemble battlefield hardware it 
can no longer buy from responsible countries. Russia has been forced to 
turn to outdated equipment and approach global pariahs like North Korea 
and Iran to source the tools to fight.
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     \6\ As reported by Russian media: https://tass.com/economy/
1476563.
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    Fundamentally, the challenge we face in using financial measures to 
hold Russia accountable while mitigating the effects of the war on 
third countries is of a different kind than we face in other sanctions 
programs. Russia is not North Korea, Iran, or Venezuela. Moreover, 
Russia is a sizeable international economy, a globally important energy 
producer, and over the last 30 years has grown closely tied--and in 
some instances inextricably intertwined--with some of our closest 
international partners and allies. Imposing financial costs on Russia 
for its brutal policies while mitigating the consequences of Russia's 
actions has required extraordinary planning, coordination, economic 
analysis and diplomacy, and creative policymaking, all alongside a 
large group of international partners.
    In line with the 2021 Treasury Sanctions Review, we are constantly 
re-evaluating and reassessing our course of action. We ask ourselves: 
Do our policies achieve our intended goals? How has the target adapted 
to our measures? What adjustments do we need to make to increase our 
effectiveness and mitigate unintended consequences? How do we sustain 
and strengthen the international coalition of countries working 
together to hold President Putin accountable for his horrific war?
    Examples of the real time adjustment Treasury has made to our 
financial policies include the multiple fact sheets we have issued just 
this year, including Preserving Agricultural Trade, Access to 
Communication, and Other Support to Those Impacted by Russia's War 
Against Ukraine in April 2022 and the Food Security Fact Sheet 
published in July 2022, which both offer expansive information about 
how sanctions are calibrated to avoid unintended impacts as well as to 
counter Russian disinformation. These public guidance documents also 
clarify, in writing, to both industry and the international community 
that agricultural and medical products are not the targets of U.S. 
sanctions. Rather, any impediments to the delivery of these vital 
commodities lie squarely with Russia and its war, theft of food 
products, and shelling of agricultural sites, in addition to Russia's 
own export restrictions on food and fertilizer.
    We have also been keenly focused on Russia's oil exports as we have 
implemented our evolving policy approach to deny Russia the money 
needed to sustain its war. At this point, these exports represent 
Russia's primary source of hard currency. Moreover, Russia is reaping 
windfall profits from oil and petroleum products due to rising energy 
costs, spurred by the geopolitical uncertainty Russia caused by 
choosing to pursue a land war in Europe. We are concerned with the way 
energy revenues fuel Russia's war efforts but the global nature of the 
oil market requires a careful approach.
    Energy security affects us all--including American households that 
have seen rising prices at the pump and elsewhere as the downstream 
effects of rising energy costs have applied inflationary pressures 
across the economy. Elevated energy prices hit the poorest the hardest, 
in our country and across the world. Simply put, applying financial 
pressure to curb Russia's windfall energy profits requires a different, 
creative approach to make sure that Russian coffers, not regular 
citizens in our economy and the rest of the world, bear the costs we 
impose. That challenge--and the need for a carefully tailored policy 
approach--is urgent. We cannot allow Russia to continue to fund its 
atrocities, and we must do all we can to prevent the recessionary risks 
that follow extended painful, unaffordable energy prices.
    Our commitment to counter Russia's energy war profiteering centers 
on our effort--alongside an international coalition, starting with the 
G7 countries--to impose a ``price cap'' on maritime Russian oil and 
product exports. Ultimately, the price cap policy is the most viable 
option to support the security and affordability of the global oil 
supply.
    The oil price cap mechanism is a tool for other importers--mainly 
developing and emerging economies suffering most as a result of Putin's 
war--to demand a lower price for Russian oil that they purchase. We are 
already seeing this take place with Russia negotiating steep discounts 
for the oil it sells to buyers in Asia. These discounts are already 
depriving Russia of revenues it would otherwise use to finance its 
reckless war.
    As a technical matter, this policy creates a framework for 
companies in price-cap-coalition countries offering services for 
Russia's maritime transport of oil: They can continue to offer these 
services for Russian oil priced below the cap, and may not for any 
Russian oil sold above that price. Given that premium service providers 
and the majority of providers of some maritime services--like 
insurance, payments, and trade finance--are located in G7 and EU 
countries, there is an overwhelming economic incentive for buyers to 
purchase under the price cap so they can engage these service 
providers. It will be cheaper and less risky to move Russian oil 
cargoes this way. We will continue to communicate closely with service 
providers, as we have already done in developing this framework, to 
collectively, constructively, and aggressively sustain participation in 
and the success of this policy.
    But make no mistake: This is and will remain very hard work. This 
is an entirely new way to use financial measures against a global 
bully. A price cap coalition requires unprecedented coordination with 
international partners, as well as close partnership with global 
maritime industries, and exceptional resolve in the face of hostile 
Russian bluster and threats, including the risk that Russia may seek to 
retaliate. I can tell you confidently that we at Treasury--and our 
partners across the U.S. Government--are extraordinarily diligent when 
it comes to these economic policies and the commitment to extensive and 
creative multilateral engagement. Moreover, we are laser-focused on the 
imperative to hold Russia accountable and support the people of 
Ukraine, to constantly understand the risk environment, and to advance 
a foreign and financial policy that embodies our goals and does not 
bend to the rants and coercion of a brutal bully.
    We know that Russia's war in Ukraine is not the only challenge for 
which the Treasury Department will be called upon to act. Other threats 
demand our attention as well, and the illicit finance landscape 
continues to evolve. Additionally, while the U.S. dollar, U.S. 
financial institutions and services, and our capital markets are still 
dominant in international finance and trade, our adversaries are 
actively finding ways to attack this centrality and insulate themselves 
from touchpoints with the U.S. financial system. These are long-term 
challenges that we cannot sanction ourselves out of. We must continue 
to strengthen the U.S. financial system and innovate new ways to use 
economic policies and authorities to meet both our domestic and foreign 
policy objectives. The price cap--a bold policy never previously 
attempted by the U.S. Treasury--is the vanguard for a new form of 
economic statecraft, and I am proud to be a part of the team pushing 
these boundaries in the interest of U.S. national security.
    Lastly, I'd like to echo Secretary Yellen and Deputy Secretary 
Adeyemo's sentiments from when they were last here and express my 
gratitude for the additional resources Congress has provided in the 
Ukraine supplemental appropriations packages. Your timely actions are 
what allow me and the dedicated career staff at Treasury to surge on 
this urgent national security priority. The partnership between 
Congress and the Administration has always been very important to U.S. 
policy toward Russia, sanctions, and responding to the crisis in 
Ukraine. I would be happy to answer your questions and look forward to 
working with you as we move forward. Thank you.
                                 ______
                                 
                   PREPARED STATEMENT OF ANDREW ADAMS
     Director, Task Force KleptoCapture, U.S. Department of Justice
                           September 20, 2022
    Good morning, Chairman, Ranking Member, and Members of the 
Committee. I appreciate the opportunity to appear before you today on 
behalf of the United States Department of Justice and in my capacity as 
Director of the Department's Russian sanctions Task Force--
KleptoCapture--to discuss the Task Force and to discuss Federal asset 
forfeiture, both civil and criminal, as it relates to Russia's 
unprovoked and illegal war of aggression in Ukraine. Today, I will 
summarize the Task Force's structure, scope, and strategic priorities, 
before turning to particular tools utilized by the Task Force in its 
work to date and tools that, if provided, would further enhance the 
Task Force's ability to accomplish those strategic goals.
Task Force: Structure
    As this Committee is well-aware, the Department's response to 
Russia's invasion of Ukraine included the launch of Task Force 
KleptoCapture. The Task Force is an interagency law enforcement 
endeavor led by Justice Department prosecutors and dedicated to 
enforcing the sweeping sanctions and export restrictions that the 
United States has imposed, along with allies and partners, in response 
to Russia's unprovoked military invasion. The Task Force sits within 
the Office of the Deputy Attorney General and draws on the expertise 
and energy of agents, analysts, translators, and prosecutors throughout 
the Department. Two deputy directors have joined to aid in running the 
task force, both experienced attorneys within the Department of 
Justice, one hailing from the National Security Division, and the other 
from the Criminal Division's Money Laundering and Asset Recovery 
Section, with particular experience and expertise from his work with 
that Section's Kleptocracy Unit. In support of its mission, the Task 
Force draws on dedicated teams at FBI, Homeland Security, the IRS-
Criminal Investigations, the U.S. Postal Inspection Service, the 
Commerce Department, the State Department, every relevant component of 
the Treasury Department, and from the intelligence community, military 
branches, and our international partners.
    The Department has long targeted sanctions evasion, Russian 
organized crime and global kleptocracy, both through trial attorneys at 
Main Justice and through the extensive efforts of the United States 
Attorney's Office community. The efforts of those departmental 
components have been robust and successful. Charges targeting sanctions 
evasion and export control violations by individuals and major 
financial institutions; money laundering charges and seizures involving 
everything from cryptocurrency to trade-based money laundering; charges 
targeting kleptocracy and laundering of foreign bribes; and willful 
failures of anti-money laundering systems in both traditional and novel 
financial institutions--all are cases well within the experience of the 
Department.
    The Department's historical focus and past success informs the work 
of the Task Force in two ways. First--and as a core challenge to be met 
through our work--past action means that the fruits of corruption that 
might be found in the United States are likely to be buried deep 
beneath layers of sham owners and shell companies--while the most 
obvious and ostentatious forms of kleptocracy will be located outside 
of the United States, as the world has already seen.
    Second, those past efforts mean that cases under the ambit of the 
Task Force will continue to benefit from the leadership of the U.S. 
Attorney's Office community across the country, as well as from teams 
within Main Justice, who have been working in this space for several 
years. Subpoenas, search warrants, and the like will flow from grand 
juries and courts around the country, and prosecutors across the U.S. 
Attorney community and Main Justice will take part in running 
individual investigations under the Task Force's coordination.
Task Force: Scope
    The work of the Task Force is based on the sanctions and export 
controls imposed in response to Russian aggression since 2014. It is no 
exaggeration to say that, as of the early months of this year, the 
scope, intended impact, and international alignment of those measures 
are without precedent. The Committee will be familiar with the key 
categories of actions taken to date, but here I will summarize the 
principal measures undertaken to date for context and to emphasize the 
breadth and impact of those measures:
    First, the Treasury Department has rolled out lists of sanctioned 
individuals and entities subject to asset freezes, and sanctions 
targeting services that might be provided to, or transactions with, 
those listed targets. These are the classic sanctions that form the 
basis for most historical casework and figure most prominently in the 
public imagination. When we talk about locking down an oligarch's yacht 
as the fruit of a sanctions violation, for example, these measures are 
the tool to hand.
    Second, the Task Force's scope will be based in part on the 
Commerce Department's series of export controls placed on particular 
U.S. goods and technologies bound for Russia, and on actors within the 
global supply chain who provide Russia with the raw material for 
conducting wars of aggression.
    Third, the United States--in close coordination with foreign 
partners--has rolled out a series of sanctions targeting economically 
critical infrastructure within the Russian State and the Russian 
military industry. Perhaps most prominently those measures have 
included immobilizing the Russian Central Bank's assets, held in 
coffers around the world.
    Against the backdrop of those sanctions and controls the Task 
Force's goals are, first, to bring any appropriate charge against any 
individual or entity sanctioned under the Treasury Department 
designations, or limited through the Commerce Department's export 
controls, rolled out in response to Russian aggression. With respect to 
people and entities on those lists, we will pursue any charge or 
seizure theory available. Sanctions evasion and money laundering are 
obvious charges and theories in this space, but if opportunities to 
bring charges for bank fraud, visa fraud, narcotics trafficking, or any 
other Federal crime, are presented as to a listed person or entity, 
that is a charge that the Task Force will support and pursue.
    The Task Force's scope goes beyond those specifically designated 
persons, however. The Task Force will target those who would facilitate 
the evasion of economic sanctions and export controls. The Department 
has a track record of success in this vein that we will continue in our 
efforts today: For banks, real estate agents, broker-dealers, 
exporters, manufacturers, and others, our goal is to shine a light 
where sanctioned actors may operate in shadow.
Strategic Priorities in the Short- and Long-Term
    The Task Force's focus in its first 6 months has been on 
disruption, disgorgement, and discomfiture of those individuals and 
entities who have aided and supported the corrupt Russian regime. The 
aim has been to bring criminal charges and seize assets linked to 
particularly prominent, and often extravagantly wealthy, enablers of 
the Russian State. Since the Task Force's establishment in March, the 
Justice Department has worked with international partners to seize a 
sanctioned Russian oligarch's $90 million luxury yacht in Spain, to 
seize and transport a nearly half-billion-dollar yacht belonging to a 
sanctioned oligarch from Fiji to San Diego, to seize millions of 
dollars associated with sanctioned parties held at multiple U.S. 
financial institutions, and to pursue luxury aircraft and to publicly 
expose the opaque corporate structures masking the ownership of those 
assets. Those seizures are based on sanctions violations, bank fraud, 
and money laundering by several designated Russian nationals and their 
proxies. The Justice Department has also charged Russian oligarchs and 
their associates for evading sanctions, as well as for conducting 
foreign malign influence operations arising from illegal efforts to 
promote Russian propaganda and undermine Ukrainian democracy and 
society.
    These acts of immediate, significant, and public disruption of 
oligarchs' wealth and networks will continue apace. They have had a 
tangible deterrent effect, including in some cases the push toward 
active cooperation with the United States. The message of support 
underscored our seriousness of purpose and encouraged our international 
partners to align with our robust sanctions regime and to propose their 
own analogues to our law enforcement tools.
    As we witness the recent successes that have come from Ukraine's 
perseverance and struggle in the face of Russia's most recent, illegal 
aggression, it is appropriate that we reaffirm our commitment to the 
goals of disruption, disgorgement, and discomfiture of those 
individuals and entities who have aided the corrupt Russian regime, 
while also turning attention to the longer-term targeting of those 
actors who would facilitate the evasion of economic sanctions and 
critical export controls. Referred to here as ``Facilitators,'' these 
are individuals and entities across the economic spectrum who are not 
themselves sanctioned, but who assist sanctioned individuals or 
entities or those who wish to engage in export control violations in 
those illegal endeavors. Targeting Facilitators is a strategic priority 
for mid- to long-term success of the Task Force's mission, aimed at 
dismantling routes through which criminals would otherwise undermine 
the efficacy of the sanction and export control programs.
    As to these strategic priorities, first, the primary obstacle to 
identifying illicit proceeds and the actors for whom, and by whom, 
those funds are transmitted, is the use by criminal networks of shell 
corporations found in multiple, often offshore and relatively 
noncooperative, jurisdictions. Banks, accountancy firms, law firms, 
real estate agents, financial advisors and other traditional and 
nontraditional financial services firms are key gatekeepers for, and 
access points into, the global financial system, including favored U.S. 
markets. The Task Force is therefore directing particular attention to 
attempts by foreign individuals and entities, including off-shore shell 
corporations, to move funds through correspondent accounts at U.S. 
banks. In its simplest form, this may involve stripping critical 
information (or inserting affirmatively false information) from 
international wires, thereby undermining the anti-money laundering, 
countering-the-financing-of-terrorism, and sanctions-enforcement 
programs of U.S. financial institutions. In more complex form, we are 
examining the use of nested bank accounts and the U.S. dollar funding 
of offshore ``nostro'' accounts dedicated to use by sanctioned actors. 
If U.S. banks are unable to accurately determine the originator, 
beneficiary, purpose, or source of funds with respect to a transaction, 
through whatever means of obfuscation and omission, their ability to 
investigate, report, or block a suspicious transaction is compromised 
in material respects.
    Second, in order to help maximize the efficacy of strong Federal 
export controls, the Task Force has deployed a three-prong plan: (1) 
investigate and prosecute criminal violations of U.S. export control 
laws; (2) support interagency partners' efforts to deploy civil and 
administrative tools as enforcement mechanisms; and (3) collaborate 
with our partners to identify procurement networks and facilitators who 
seek to assist Russian end-users in their efforts to circumvent U.S. 
export control laws.
    The Task Force is committed to investigating and prosecuting 
individuals and entities who facilitate or conduct transactions 
designed to evade sanctions and export control regimes or otherwise 
protect or obscure the assets of sanctioned parties, and to highlight 
the breadth and international reach of those Federal laws. This is an 
effort that extends well beyond the subset of targets commonly 
recognized as the ``oligarch'' set, and one that will require 
continuous effort to maintain interdepartmental and interagency 
cooperation and communication.
Tools to Hand and Legislative Proposals
    Fundamentally, this Task Force is investigating entrenched, well-
funded, organized crime; and the means, methods, and approach for 
dealing with the mission of this Task Force must be grounded in the 
approach taken to successfully combat organized crime. We recognize 
that the offenses we are investigating are generating real--even if 
widely dispersed--victims. We must pursue aggressive, muscular 
investigations that will encompass not only the full financial picture 
of a subject's business, but will dive into their historical affairs, 
family offices, and deeply held personal motivations. We must be 
prepared to offer the opportunity for substantive, significant 
cooperation to individuals with serious criminal exposure, and be 
prepared to require accountability as part of that cooperation, 
understanding that reconciliation begins and ends in truth and candor. 
We must maintain a clear-eyed understanding that our targets will 
attempt to exploit people and institutions of good faith in efforts to 
intimidate witnesses into silence and to present false narratives to 
investigators and courts.
    Among the more prominent tools used to date has been the use of 
seizure warrants--authorized by Federal magistrate judges--to effect 
the seizure of criminal property and to begin the process of forfeiting 
that property through the Federal criminal and civil asset forfeiture 
laws, and liquidating forfeited property when appropriate. For many 
years I have been a Federal prosecutor focusing on organized crime, 
money laundering, and the recovery of assets. My home office is the 
United States Attorney's Office for the Southern District of New York, 
which sits in Manhattan, but its cases span around the United States 
and, indeed, around the world. One example of the global reach of that 
Office is the work done by New York prosecutors in the area of recovery 
of looted and stolen works of art and cultural property and the return 
of those works to rightful owners in Europe--all of this is done 
through the tools available through the Federal civil asset forfeiture 
laws. In 2019, those tools were specifically used to aid Ukraine: A 
painting, known as ``Amorous Couple'', was stolen from the National 
Museum of the Arts in Kyiv in the closing days of World War II. For 
decades, the painting was sought by the Museum for return, but remained 
missing until this past decade, when it began circulating in London and 
the United States under a new title. In 2019, the painting was 
identified by Federal investigators as the same piece stolen many 
decades prior. A warrant for the painting's seizure was authorized on 
the basis that the painting was tainted property--stolen property that 
had crossed into the United States after its theft. Without a thief to 
prosecute, or a criminally knowledgeable importer, that criminal 
investigation could not be resolved through the standard criminal 
processes of an indictment, a criminal trial, and a criminal 
sentencing. But because U.S. prosecutors have both criminal tools and 
civil asset forfeiture tools available to them, the painting was seized 
for civil forfeiture; notice was provided to the then-current owner, 
the auction house engaged in its sale, and to the world at large; and a 
proceeding to determine who had the right to ownership under U.S. law 
commenced. The answer in that case was clear, and the parties quickly 
resolved the issue--the painting had to be, and swiftly was, returned 
to Ukraine.
    That case was just one of many involving the return of tainted, 
criminal proceeds or facilitating property that would have been 
impossible without the tools available through the U.S. asset 
forfeiture procedures and without the human resources available to 
conduct those cases--the prosecutors, analysts, agents, and linguists 
that drive our Justice Department forward.
    Federal prosecutors utilize both criminal and civil forfeiture in 
cases across the Department. Criminal forfeiture is a penalty imposed 
following a criminal prosecution and following conviction. In criminal 
forfeiture, only the specific defendant's interest in an asset can be 
divested--other owners or persons claiming interests in the asset may 
petition the Court to protect their rights even as a convicted 
defendant's rights are divested. In criminal cases, the highest burden 
of proof under the U.S. legal system is applied--we must prove a 
person's guilt ``beyond a reasonable doubt'' before they are subject to 
any penalties, including incarceration or forfeiture. However, once 
convicted of a crime, the Government need only demonstrate that 
property is tied to that crime through the lower standard of proof, 
essentially whether it is more likely than not tainted. In criminal 
proceedings, as in civil proceedings, the Government provides notice of 
its intent to forfeit property to any possible claimants or owners, 
through direct notification and through broad publication of the intent 
to forfeit the property.
    Civil forfeiture is an adjunct to criminal forfeiture. In a civil 
forfeiture proceeding, the United States files a lawsuit against 
property itself--United States v. One Looted Painting by Pablo Picasso 
or United States v. $1,000,000 in Bank Account 1234, for example. We 
use this tool in several situations--where a criminal charge is 
unlikely to succeed because the criminal is either concealed to the 
point of anonymity or is located in a jurisdiction beyond the reach of 
extradition (in Russia, for example), or where the only person with 
criminal intent has died, and yet the proceeds of the crime live on.
    Regardless of the reason for proceeding through civil forfeiture, 
the United States must still demonstrate to the satisfaction of a court 
that property has a nexus to an identified crime, for example that the 
property is involved in a money laundering transaction or is the 
proceeds of a fraud, theft, or extortion. These ``theories'' of 
forfeiture are specific to the statute providing for forfeiture as to 
particular crimes--not all crimes carry forfeiture of property 
``involved in'' that offense, or ``facilitating'' that offense, as a 
component of their forfeiture penalties.
    Moreover, the Department must again provide notice to claimants and 
potential claimants and also provide notice to the world at large 
through publication of our intent to forfeit. The notion here is one of 
due process and respect for legitimate property rights--although 
criminal actors forfeit their rights in property generated through 
crime, everyone (including innocent owners) must be afforded notice and 
the opportunity to request a hearing prior to the divestment of rights 
in property.
    The Department greatly appreciates the efforts to date to craft 
proposals that, if passed, would augment the Justice Department's 
resources and tools to impose serious costs for Russia's unjustified 
aggression, and to isolate and target the crimes of Russian officials, 
Government-aligned elites, and those who aid or conceal their unlawful 
conduct. In addition to the Administration's announced proposal to 
apply administrative civil forfeiture proceedings to new classes of 
assets, the Department continues to advocate that the following 
critical proposals would strengthen the Justice Department's efforts:

    Enabling the Transfer of the Proceeds of Forfeited 
        Kleptocrat Property to Ukraine To Remediate Harms of Russian 
        Aggression. The proposal would improve the United States' 
        ability to use forfeited funds to remediate harms caused to 
        Ukraine by Russia's war of aggression against Ukraine. 
        Generally, existing statutory and regulatory authorities 
        require that forfeited funds are used to compensate victims of 
        the crimes underlying the forfeitures and for law enforcement 
        purposes. This proposal would permit the Departments of 
        Justice, the Treasury, and State to work together to return 
        funds forfeited to the U.S. Government to remediate harms of 
        Russian aggression toward Ukraine. Providing this authority 
        requires amendments to multiple statutes governing the use of 
        forfeited funds.

    Clamping Down on Facilitation of Sanctions Evasion. This 
        proposal would expand forfeiture authorities under the 
        International Emergency Economic Powers Act (IEEPA) to reach 
        property used to facilitate sanctions violations enabling the 
        Government to take away the violators' ``tools of the trade.'' 
        This proposal would amend IEEPA's penalty provision to extend 
        the existing forfeiture authorities to facilitating property, 
        not just to proceeds of the offenses. With this change, assets 
        that are used to mask sanctions evasion, without themselves 
        being the proceeds of that evasion, would be within the ambit 
        of our forfeiture authorities, just as under current 
        authorities we can forfeit a medical license held by a doctor 
        who used the license to distribute controlled substances in 
        violation of the Controlled Substances Act, or a vehicle used 
        by a drug dealer to transport narcotics to or from a drug 
        transaction.

    Modernizing Racketeering To Include Sanctions Evasion. This 
        proposal would improve the United States' ability to 
        investigate and prosecute sanctions evasion and export control 
        violations by adding criminal violations of IEEPA and the 
        Export Control Reform Act (ECRA) to the definition of 
        racketeering activity in the Racketeer Influenced and Corrupt 
        Organizations (RICO) Act. This proposal would extend a powerful 
        forfeiture tool against racketeering enterprises engaged in 
        sanctions evasion.

    Expanding the Time Limit to ``Follow the Money''. This 
        proposal would ensure that the United States can prosecute 
        violators and seek forfeitures based on foreign offenses more 
        effectively by extending the statute of limitations from 5 
        years to 10 years. The change would also extend the statute of 
        limitations for seeking forfeiture of property based on these 
        offenses, as a critical tool to deprive criminals of their ill-
        gotten gains.

    Leveraging Foreign Partners' Ability To Recover Oligarch 
        Wealth. This proposal would improve the United States' ability 
        to work with our international partners to recover assets 
        linked to foreign corruption. As kleptocrats and other 
        criminals commit crimes and launder money in multiple 
        jurisdictions, this proposal would expand upon existing U.S. 
        law to facilitate enforcement of foreign restraint and 
        forfeiture orders for criminal property. The proposal would 
        improve our ability to take these actions here in the United 
        States in support of international efforts to forfeit criminal 
        property.

    The Department is deeply appreciative of the effort and attention 
that the Committee's membership has devoted to these and other 
proposals that would strengthen the Department's immediate and longer-
term projects in support of Ukraine. The Task Force, and the Department 
writ large, stand ready to continue partnering with Congress to craft 
legislation that is diligent in its respect for the fundamental rights 
of Americans and robust in its response to what amounts to Russia's 
network of sophisticated and international organized crime.
       RESPONSES TO WRITTEN QUESTIONS OF SENATOR HAGERTY
                    FROM ELIZABETH ROSENBERG

Q.1. On September 15, the Administration imposed sanctions 
(https://www.state.gov/targeting-senior-russian-officials-
defense-industrial-base-financial-infrastructure-leaders-and-
human-rights-abusers/) on key financial institutions such as 
Russia's National Card Payment System, an entity owned by the 
Central Bank of Russia that operates the country's Mir payment 
card network, the payments by which were reportedly being 
rejected in Turkey.
    In May, a number of Republican Senators wrote to the Deputy 
Secretary of the Treasury Department requesting that the 
Administration extend the application of sanctions to target 
the National Card Payment System and review UnionPay's 
involvement in assisting Russia evade sanctions.
    Can you confirm that Turkey is no longer processing Mir 
payments?

A.1. During Treasury's engagements in Turkiye between October 
17 and 19, Turkish Government and banking officials confirmed 
that all Turkish banks have stopped accepting MIR payment 
cards. They noted that their decision was informed by the 
September 15, 2022, guidance from Treasury's Office of Foreign 
Assets Control (OFAC) on the use of the MIR National Payment 
System. \1\
---------------------------------------------------------------------------
     \1\ See ``Frequently Asked Questions: Russian Harmful Foreign 
Activities Sanctions'' (No. 1082), U.S. Department of the Treasury 
(Sept. 15, 2022), https://home.treasury.gov/policy-issues/financial-
sanctions/faqs/1082.

Q.2. Can you also comment on the status of Mir card acceptance 
in Vietnam, the United Arab Emirates, and other jurisdictions 
---------------------------------------------------------------------------
where they have a presence?

A.2. We understand there is one bank in Vietnam, the Vietnam-
Russia Joint Venture Bank (VRB), currently using the MIR 
National Payment System for ATM cash withdrawals only. These 
withdrawals are subject to per transaction and daily limits. 
The State Bank of Vietnam (SBV) has told us it does not expect 
any expansion of MIR usage in Vietnam and closely monitors the 
activities of VRB. Treasury will continue to examine this 
issue.
    Treasury does not have reporting at this time that any 
banks in the UAE currently accept MIR cards. Among the various 
risks arising from the MIR National Payment System, there are 
due diligence risks associated with using MIR cards, because a 
name does not need to be printed on the card, and many banks 
have avoided MIR for this and other reasons. There have been 
press reports, primarily from Russian news sources, about 
discussions between the UAE and Russia to introduce the use of 
MIR payment cards in UAE. Treasury has engaged top UAE banking 
and Government officials about this issue and will continue to 
do so.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                       FROM ANDREW ADAMS

Q.1. Your testimony mentions how Russian oligarchs and 
organized crime syndicates have utilized both cryptocurrency 
and trade-based money laundering to illicitly move funds. I've 
worked to improve Federal enforcement capacities against both 
of these sanctions evasion tactics.
    Could you help me scope the current size of these problems 
with the respect to Russian organized crime? Specifically, 
based on previously announced enforcement actions and charges 
and with respect to Russian organized crime, is cryptocurrency 
or trade-based money laundering currently a bigger problem?

A.1. Response not received in time for publication.

                           [all]