Evaluating the Effectiveness of U.S. Sanctions Programs

A subcommittee on national security, illicit finance and international financial institutions will come to order. Without objection, the chairman is authorized to declare recess at the committee at any time. This hearing is titled " Evaluating the Effectiveness of U. S. Sanctions Programs". Without objection, all members will have five legislative days within which to submit extraneous material to the chairman for inclusion in the record. I now recognize myself for four minutes for an opening statement. I welcome our distinguished witness, the Honorable Jonathan Burke, Assistant Secretary for Terrorist Financing at the U S Department of Treasury. Today's hearing provides the subcommittee an opportunity to review U S sanctions programs and the process for making sanctions policy and designations. Ensuring that our sanctions are effective, targeted, and strategic is vital to achieving our national security objectives. This discussion is especially timely as we work to further isolate Iran and prevent it from funding its nuclear program, ballistic missile development, and regional proxies who have made them the world's number one state sponsor of terror. As we have become more comfortable with sanctions over the past few decades, they've become a go-to tool to advance our national security objectives with designations on topics as varied as counterterrorism, anti-corruption, human rights, fraud, organized crime, and counter-narcotics. Sanctions are also a centerpiece of our response to bad actors like Russia and North Korea. In fact, as of twenty twenty-four, the United States had sanctioned targets in around a third of the world's countries. Too often, it seems that sanctions are used too easily without a coherent strategy or a clear theory of success. or metrics to assess the effectiveness. Furthermore, the use of sanctions is not without cost. They predictably cause hedging behavior, whether it's China and Russia conducting trade outside the dollar system, or Europe developing the digital Euro, Euro, in part as a way to evade US sanctions. It also provides, uh, without, without a, uh, clear connection to US foreign policy, We can't accurately signal when we might use signal uh might use sanctions, and it uh erodes our own credibility and weakens the deterrence effect as they become overused. Recently, the Robert M. Gates Global Policy Center released a noteworthy report summarizing several key shortcomings in our approach uh to sanctions policy, such as a lack of coherent and achievable goals, a failure to adequately communicate with the private sector, and the need for a single entity within government to communicate sanctions policy. Many of these concerns are well known and long-standing. Some have been acknowledged by Treasury, including the need for a more robust internal policy process to ensure sanctions remain strategic. Frustratingly, despite this wide-spread recognition, little has been done so far. So I hope this hearing will give us an opportunity to evaluate how we might fix these problems to ensure that the long-term viability of our sanctions toolkit and the strength of the dollar as the global reserve currency. Finally, Assistant Secretary Burke, eh given your role at, uh, uh, TFI, I would also like to touch on FENCIN. Uh, SAR and CTR thresholds have not been updated since the nineteen seventies, yet Treasury's latest, uh, Bank Secrecy Act rule fails to change them. Uh, the concern is we get a lot of noise and not enough signal. Furthermore, a year ago, the administration took the welcome step on the Corporate Transparency Act, uh, to narrow the scope to foreign companies. Uh, despite assurances Treasury still has not deleted the beneficial ownership information, millions of Americas have already turned over. Uh, I hope we can get some, uh, clarity on the time-line for when we can expect action on all of those fronts, and I yield back.

Thank you, Mister Chairman, and thank you to our Witness Assistant Secretary, Burke, for appearing here today. The title of the hearing is has been stated as evaluating the effectiveness of the United States sanctions program. I am frankly shocked that the majority on this committee has chosen to hold a hearing on sanctions effectiveness while we have a president with n- clear sanctioned policy and while we fifty-four days into a war with Iran. Sanctions are intended to apply targeted economic pressure on a country's leadership to change harmful behaviors without the use of military force. When used correctly, they are not just a show of strength, but a tool to bring adversaries to the negotiating table. Instead of utilizing this strategy, President Trump and his administration have abused sanctions in ways that fuel conflict. as evident by the current war in Iran, which undoubtedly shifts the burdens onto the American people through increased costs. Under this administration, sanctions have become erratic and ineffective. One day he's touting a maximum pressure campaign designed to cripple economies and the next he's easing pressure on adversaries like Iran and Russia, inconsistently enforcing sanctions and alienating our allies. That's not strategies, that's whiplash. Just like his chaotic tariffs that have weakened havoc on the United States businesses and consumers, Trump's reckless use of sanctions is driving up costs for Americans at the gas pump, at the grocery stores, making the affordability crises even worse for hard-working families. And I say this because we get the calls every day. about the price, whether it's gasoline or food. Democrats and Republicans have long agreed that the United States sanctions regime must be clear consistent and properly enforced. But now my colleagues across the aisle are standing by as president, dismantles that system. Their silence is enabling this administration to threaten our national security, destabilize global markets, and increase again costs for American consumers. To make matters worse, just yesterday, Republicans on this committee voted to advance a bill that repeals almost in its entirety the bipartisan, operative word, bipartisan Corporate Transparency Act, which seeks to unmask the bad actors hiding behind anonymous shell companies including sanctioned individuals. Instead of giving law enforcement better, sharper tools to crack down on money laundering, my colleagues across the aisle are making it easier to evade sanctions through opaque legal entities. We did that yesterday and that was in a full committee, I remind you. Then they turn around and hold a hearing on the effectiveness effectiveness of United States sanctions programs? The bottom line is sanctions are a serious national security tool, But when they are imposed and enforced inconsistently with no clear plan, they do what? They fall short, weaken our credibility, and undermine the United States' leadership on the global stage. Let me say thank you again, Mister Secretary, for appearing today, and I look forward to hearing your testimony and learning more about the administration sanctions policy. I yield back.

The gentlelady yields back. Today we welcome the testimony of the Honorable Jonathan Burke, the Assistant Secretary for Terrace Financing of the US Department of Treasury. Assistant Secretary Burke, we thank you for taking the time to be here. We thank you for your service. You will be recognized for five minutes to give an oral presentation of your written testimony without objection. Your written statement will be made part of the record. Assistant Secretary Burke, you are now recognized.

Thank you very much and good afternoon. Chairman Davidson, Ranking Member Beatty, and distinguished members of the committee. Thank you for the opportunity to b- appear before you. My name is Jonathan Burke and as you said I serve as the Assistant Secretary of the Treasury for Terrorist Financing. I look forward to discussing how under President Trump and Secretary Besant, the Treasury Department is safeguarding the US financial system from illicit actors. Now I'll be brief so we can move quickly to questions, but I will focus on three areas. One, the role of the Office of Terrorist Financing and Financial Crimes, known as TFFC, which I lead. Number two, key vulnerabilities facing the US financial system, and three, priorities for countering illicit finance. It has been an honor to return to Treasury to lead TFFC, an office that I previously served as a Career Policy Advisor from two thousand eight to twenty twelve. When I was there I focused on disrupting Iran-linked financial activity and strengthening the effect of US sanctions. After leaving government, I spent more than a decade in the financial services sector working on sanctions, and illicit finance, risk management, and compliance. The role of TFFC is to coordinate US anti-money laundering and counterterrorism financing policy. We serve as Treasury's policy office for national security functions, working with partners across government, and with offices including OFAC and FinCEN. We identify and deploy Treasury's financial tools against threats ranging from cartels and criminals to terrorist financiers. We also lead engagement with foreign governments, international bodies like the Financial Action Task Force, and the private sector to combat illicit finance. Our top priority remains safeguarding the range of national security threats against the United States and the integrity of the US financial system. While long-standing threats such as Iran, drug cartels, and terrorist financing persist, new risks have also emerged. Fraud has become a defining challenge. Organized criminal groups operate large scale scam centers abroad, while domestic fraud costs taxpayers hundreds of billions of dollars annually. This level of abuse is unacceptable. Adversaries are also using increasingly sophisticated methods to evade sanctions, including shadow fleets, shell companies, digital assets, and alternative payment systems. Cartels and drug traffickers have similarly advanced their financial operations, often in partnership with Chinese money laundering networks that move billions across borders. As President Trump and Secretary Besson have emphasized, economic security is national security. The Treasury Department is committed to addressing these risks. Doing so requires aligning resources to the most significant challenges in combating illicit finance. Let me highlight three of our key priorities. First, Treasury is supporting a whole of government effort to combat fraud. My office recently published the National Money Laundering Risk Assessment, which details the scale of fraud in the United States. We are leveraging financial intelligence, law enforcement partnerships, asset recovery tools, and collaboration with foreigner co- foreign counterparts and the private sector to disrupt networks and hold perpetrators accountable. Second, Iran remains a central focus. The regime continues to seek new ways to finance its weapons program, support terrorist proxies, and evade sanctions. Treasury is working with foreign partners and financial institutions to disrupt these activities. including by exposing and degrading Iranian shadow banking networks in line with the administration's maximum pressure campaign. Third, we are modernizing the US regulatory framework for illicit finance to ensure it is risk-based effective and fit for purpose. Our system should focus on the biggest risk areas and avoid unnecessary burdens on industry while also improving national security outcomes. A key component is implementation of the Genius Act, including proposed rules for stable coin issuers and broader efforts to support financial innovation. And we are advancing reforms to ensure AML CFT regulations allow financial institutions to focus on high-risk activities and are supervised on the basis of risk. Additionally, we are re- reviewing sanctions practices to improve their efficiency and impact. Current compliance practices, such as screening large sanctions lists, often generate high vo- volumes of false positives and divert resources from higher-risk threats. We are working to sharpen our sanctions tools, remove outdated designations, and provide guidance that helps financial institutions focus on meaningful risks. Success should be measured by the impact and national security outcomes. All of these efforts rely on strong partnerships with financial institutions, with law enforcement, with foreign governments, and with Congress, whose support and authorities are essential to our mission. I look forward to continuing this partnership and to your questions today. Thank you very much.

Thank you, Assistant Secretary Burke, and we'll now turn to member questions. I'll now recognize myself for five minutes for questioning. Um, in your testimony you note that our adversaries are employing increasingly sophisticated ways to access funds and evade U S sanctions. I'm I'm um interested in two two areas of of sanctions, uh, especially when it comes to China. We we passed a bill called the Coins Act in the NDA that uh gives to the president additional sanctions authorities related to Chinese military industrial complex companies. And we we have a lot of different lists in the government. We have the CMIC list, the treasury, NSCS CMIC list, we have of course the commerce has all of the entity lists, uh and various other lists relating to export controls. Uh the department of war has Chinese military uh l uh lists. But can you speak to list coordination when it comes to sanctions and working on uh sanctions enforcement and and adversarial sanctions evasion? Is there any coordinated effort at Treasury to start coordinating these lists? Because if if we're trying to, for example, if if an entity is problematic enough to be listed uh on the Commerce Department's um BS BIS export controlists, why would they need not be on a treasury list that would restrict outbound capital flows to that same entity? What is the what is the work that's being done to coordinate on all of these lists?

Thank you, Mister Chairman. Um, y- you referenced several lists and I can tell you, even from my experience in the private sector, list management is a very complex exercise in terms of its implementation. The purpose of the lists have varied varying degrees of authorities impose different obligations. And the purpose of the list is to identify where there is a particular authority or restriction that needs to be imposed and implemented. So implementation of those lists is really at the private sector from a variety of of different private sector entities whether it's banks or exporters and so one of the things that we're doing uh w- w- because at treasury it's the sanctions list that we that we manage and as I mentioned in my opening remarks we're looking at how can we make the list most effective. And that's als- there's a couple different pieces to that. One is making sure that it's clean and that it's it's it's aligned to the priorities and it can be usable and implemented in institutions that are relying on that list.

Well, and and if I could just reclaim my time, I know you're not Office of Investment Security, but at Treasury generally, uh, do know that Congress in that in that legislation imposed additional responsibilities on Treasury to explain why certain comp- entities would be on one list but not on another. So we're actually trying to push Treasury to take a lead on on list coordination there. In twenty twenty one, Treasury identified the need to adopt a structured policy framework that links sanctions to a clear policy objective. Uh, can you tell us the status of this recommendation?

So, I recall that that uh that was in the previous administration where they did the sanctions review and put out uh uh views on how sanctions should be aligned to There's a lot in there that I think we agree with. Um, I haven't seen from the previous administration implementation of that. And so we're looking at how can we actually do that in a way that's meaningful and effective. And that's what I've mentioned in looking at not only the lists we have, but the how the sanctions are applied, what they're intended to achieve, and how they can complement the array of of tools and authorities available to the US government to achieve those objectives.

And could you discuss changes that treasury has made since that report?

I think what you've seen is the judicious use of sanctions since uh since this administration started uh we'd we you know we do continue to roll out sanctions against uh targets that are aligned with the national security objectives. And we also look at ways to make that meaningful. So in the Russia context you saw sanctions against Rosneft and Lukoil. That was welcomed by some of our global partners, but that was seen as a very meaningful measure that would support the US policy objective.

Uh, FinCEN collects millions of reports under the Bank Secrecy Act, yet it failed to stop or deter major fraud schemes like the rampant benefits fraud in Minnesota. Uh, you testified about the focus of the administration on fraud. I applaud you for that. Can we have confidence, though, that FinCEN is making me- meaningful use of its reports when, you know, we we FinCEN did not uncover that that fraud that we saw in in Minnesota.

Thank you for the question. As as I mentioned, the you know the fraud priority is a whole of government effort, um and Finston has done a number of things to and continues to do things to support that effort. As you know the the the Vice President is leading the task force to eradicate fraud. Finston's role in that is included providing advisories to institutions to be able to enhance the reporting. uh as well as investigating money services businesses and other activities, and that will continue.

Well tha- thank you very much for your testimony. The chair now recognizes the ranking member of our subcommittee, Miss Beatty of Ohio, for five minutes.

Thank you, Mister Chairman, and thank you, Mister Secretary, for being here. I think you actually answered uh part of my first question, but let let me just skip down to the uh bottom uh of it. Um, do you think that the Trump administration believes that the sanctions, I think that Mister Barr also referenced, can be effective policy tools, and if so, under what um circumstances? And why didn't maximum pressure sanctions work?

Thank you for that that question. Um, I do think that sanctions are a very valid tool to support uh policy objectives. Um, they do a couple of dif- different things and they d- every situation can be different and sanctions can be used for different reasons and and to complement other tools uh that are available to the US government. Uh one of those is disruption, so when we see an uh uh a p- potential sanctions target and we're trying to protect the US financial system from exposure to that sanctions target, sanctions can be useful to uh isolate those sanctions targets and make sure they don't have access to the US or or not easy access to the US or freeze assets. Yeah, the other thing is to change behavior. So we can use sanctions in a variety of ways to try to change behavior. Even the the prospect of sanctions before using them can can be effective at changing behavior of various actors. So I do think sanctions continue to be an effective tool, and we we want to make sure they are used in an effective way, aligned to the strategy with clear objectives that we can see the impact of and make sure that they're still valued.

Okay. Uh, let me uh ask you another question. There is evidence from the United States intelligence community that Russia and Iran are working together to resist President Trump's goals in the Middle East, whatever those goals may be. Uh, Russia is sharing targeted data with Iran as the regime seeks to attack US soldiers, bases, equipments in the Middle East. What is your department doing to disrupt that cooperation, either directly or with federal partners or with our allies?

So we have a few approaches to addressing the uh we look at all risks to of the financial system and all forms of illicit finance. And so we we we we certainly uh continue to support the President's policy on seeing a peaceful resolution to the Russia-Ukraine conflict and supporting the President's policy of maximum pressure on Iran. So where there are instances of any illicit finance taking place uh through either one of those you know we continue to maintain our sanctions we continue to identify new ways to apply sanctions. and we continue to work with our international partners to make sure where there is vulnerability that they need to act on that we can share information and ensure that they can do that as well.

OK, Mister Burke, the conflict with Iran has been costly, result in resulting in the loss of American lives and billions of dollars, uh, worth of military equipment. In the case of Iran, can you explain why we are bombing a country, but also allowing them to sell their oil unsanctioned? Our reports are that thanks to the OFAC's actions, Iran was able to sell its oil above-breadth oil classification for multi-billionaire dollars uh profit in the case of Russia, why are we lifting sanctions and facilitating billions of oil revenue for a country that is helping Iran attack our military?

Thank you for the question. Um, I think in both instances, and as the secretary has been clear about this as well, the general licenses that were offered uh to allow the sale of Russian or Iran oil were were limited in nature, limit limited in time period, limited in scope, and they applied to oil that was already on the water. And we don't think that it would be um a material benefit to either country, and it would be very difficult for them to receive benefit from that, but it also allows the balance of supporting uh better stability in the energy markets. and and supporting our partners who who had the energy needs.

Um, let me see if I have time for one more question. Um, through the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act, more commonly known as our EPO repo act, Congress directed the president to use confiscated and liquidated Russian sovereign assets to compensate Ukraine for damages and needed reconstruction, resulting from Russia's invasion. The law also directed the government to work with allies to develop an international compensation mechanism for Ukraine. Does the United States plan to use the Russian assets as required by law? If so, how and when?

So I understand that those assets remain frozen, the ones that have come into US jurisdiction. Um, and what I can say is that, you know, the the president has been clear about a desire to see a a peaceful resolution to that conflict. And we'll continue to support the President in achieving that.

Thank you. My time is up.

General Lady's time has expired. The Chair recognizes the Chairman of our Task Force on Monetary Policy, Mister Lucas of Oklahoma.

Thank you for holding this hearing, Mister Chairman, and thank you, Mister Burke, for testifying today. I want to begin our conversation discussing prevention. A top priority of mine has been sending my Protect Taiwan Act to the President's desk to ensure China understands the repercussions of threatening Taiwan. How does the Office of Terrorism and Financial Intelligence think about deterrence and the value of prevention before approaching sanctions?

Well, thank you for the question. Um, you know, part of what we do, you know, we support the secretary in his engagement with international um community or on a range of issues. When it comes to that issue we have um, you know, sanctions are a tool that can be used in to prevent certain, you know, behaviors or to change certain behaviors. But that's just one tool of many, uh, and we'll continue to support the secretary in his ongoing, uh, diplomatic engagement.

There's been no shortage of debate on the effectiveness of various economic and diplomatic sanctions regimes, uh, on altering bad behavior by our foreign adversaries. How does TFI define and monitor success when implementing sanctions? When do we know we're making some progress?

It's a great question. It's uh and it sometimes can be, you know there's lots of different ways to approach that question. Um and every situation is different. There are some, you know sanctions have a cumulative effect over long periods of time. I think if you look at Iran, we've had uh sanctions for decades uh with different periods of maximum pressure, which we've of course been on since Trump uh President Trump implemented that last year. And that has a long-term degrading effect, which I think also opened up opportunity for the use of different tools. And then we also have circumstances that require uh, uh where sanctions can be used to disrupt certain actors or prevent certain actors from obtaining financial services that would be used to support illicit activities.

Will the gentlemen suspend? Um, we'll freeze the time here. All um, all those in attendance are reminded in accordance with rule eleven, clause four of the House of Representatives to observe standards of dignity, propriety, courtesy, and decorum traditionally observed by the House and this committee. Witness now ca- may continue.

Thank you, Mr. Chairman. Um, so, uh, there are different circumstances that the sanctions will have a different effect, and we look at different ways of being able to measure that, whether that's a long-term objective or something that's more acute.

Can you expand on your written testimony about how does TFI work across agencies, and in coordination with the private sector to ensure everyone is contributing to the defense of our national security interest?

Thank you for that question. I do think it is not only uh a lot of the illicit finance issues are a whole of government approach but the private sector plays a very important role. Um a lot of times um you know banks have been seen or see themselves as the front line in the fight against financial crime. So we have to make sure that uh industry has the appropriate information and can be encouraged to use the appropriate tools to identify, prevent and disrupt various types of financial crime. And so we do work very closely across the inter-agency, particularly on international activities, uh but we work with the private sector to make sure they're well up equipped to address those risks.

Thank you very much, Secretary. I appreciate the mission of your organization and how difficult it is. And with that, Mr. Chairman, I yield back the balance of my time.

The gentleman yields back. The chair recognizes the ranking member of our subcommittee on financial institutions, Doctor Foster Villanueva for five minutes.

Uh, thank you, Mr. Chair, and to our witness. Um, um, let's see, in March, in response to the Genius Act that we passed and was signed by the president, the Department of Treasury published a report on innovative technologies to counter illicit finance involving digital assets. And in developing this report, the treasury noted that digital identity technology was endorsed by digital a asset industry leaders, and advocacy groups, uh quote " due to its innovative potential for countering illicit finance, evolving digital assets, streamlining compliance compliance requirements, and maintaining privacy for customers." In particular, the report highlighted the utility of Real ID compliant digital driver's licenses uh in the customer AML KYC processes. Uh not only does this technology allow financial institutions to streamline and and s make less expensive customer identification processes, they can also minimize the amount of sensitive data that gets collected. Now similar tools are already being utilized around the world as was reported um in the report including the EU, the UK, Japan, Korea, and the free democracies of the world. Um in my view, the United States is behind the curve. Um, you know, I imagine in your extensive experience in this front, you spent a lot of time tracking down identities, you know, mistaken or deliberately fraudulent or just confused identities. And that's not gonna be the case uh for citizens of the EU, for citizens of Japan, UK, you name it, but it will still be in the US. Um, and one particular uh obstacle to adoption that was noted in this report, is the fragmentation between state and federal and other digital identity standards. Now um in response to that, Congressman Sessions and I have recently introduced a Stop Identity Fraud and Identity Theft Act which would provide resources to the states that wish to create their own NIST compliant digital ID um con programs. You know, and mind you all of this technology was developed by NIST uh you know back over a decade ago and is now in Android and iPhone and is adopted around the world but not in the United States for um purposes like KYC. So do you believe that this kind of federal support, to encourage the development and deployment of digital ID technology among the states would uh support its use to secure the financial system more broadly?

Thank you, Congressman, for that question, it's a really important topic and I appreciate you highlighting the uh innovation report that was submitted uh to Congress following the uh, uh implementation of the Genius Act or during the implementation. Um, and you're right, digital ID was maybe first I can describe briefly what we've think of when we think of digital ID, because I do think that that carries different connotations for different uh different groups. Um and the message that we're hearing from industry, I think as you pointed out, is that they could be more effective at performing their compliance requirements around KYC understanding their customers and validating their identity, using and leveraging the technologies that are emerging or are available, including different data sources. So our objective is to really uh encourage, support, innovation in the financial services and in the ability to address these listed finance risks. And so we are going to pursue an effort to look at how digital ID technology can be leveraged by industry to be more effective at implementing their compliance requirements.

Yeah, now the treasury also identified the regulatory uncertainty among financial institutions on how to adopt these

Thank you. I don't have a timeline on the guidance. That was um, as I mentioned, we're gonna be undertaking uh a project to engage with

Mm. Mm.

the uh the industry to really find the right parameters that will help to shape what we can provide to them. As you rightly pointed out, a lot of the feedback we get is they they need to invest. So they're gonna need to invest in technologies and they need to be confident that those investments in the technologies they employ will pass muster with their regulators. And so we are engaging with the federal banking agencies and engaging with industry And we'll try to make sure that we can issue guidance that will support those needs, and make sure they can be effective at their implementation.

Yeah, because uh many of these uh in these businesses operate around the world, and they see the difference in their efficiency operating in the EU. Uh and it's gonna become more important w as the era of agentic finance comes into play where the first question you have to answer is who is the legally traceable human behind this agent that has just contacted my agent and the standards for that are NIST is actually leading the way in helping to get those to evolve, and it's gonna be crucial that we the starting point is a secure digital ID for citizens. Thank you. You're back.

Gentlemen, time's expired. The chair recognizes the chairman of the House Small Business Committee, Mister Williams of Texas.

Thank you, Mister Chairman, thank you, Mister Secretary, for being here. Uh, Mexican drug cartels have become more sophisticated in how they move their money, often working with Chinese money launderers through cross-border networks and non-bank channels. Uh, these bad actors are exploding gaps in our financial system and adapting faster traditional enforcement tools. We must cut the head of the snake if we're gonna going to protect our communities, and these uh terrorists from these drug uh cartels. So, Mister Burke, can you walk us through how Treasury is adapting its tools to target those financial networks? And what more should we do we be doing to eliminate their access to the US financial system?

Thank you for that question. Um, there are a number of facets to the approach the Chargery has taken to address the continuing risk of, of drug cartels and, and narco-trafficking, the financing that goes with that. Um, maybe I'll split it up into some of the domestic activities and then also some of our international activities. So domestically as you've seen, primarily through FinCEN, um, there's the deployment of geographic targeting orders that, uh, highlight certain risks and require enhanced reporting from certain institutions within that geography, and that gives more information to FinCEN that can be used to support law enforcement activities. Um, and so that that helps to concentrate where there can be a law enforcement applied to where where's the most risk. Internationally, and my office leads engagement primarily with with foreign governments on uh on these on illicit finance issues and we've had very robust engagement particularly with with the Mexican government, which is ongoing. to make sure that we're working together to identify these risks, uh and take action against those, not only from the US side but from the Mexican side as well, and strengthen their their framework domestically uh to address these risks also.

Uh in Texas, where I'm from, uh energy production is a major driver of jobs and economic growth, and our producers are competing in a global market shaped in by by US in part by the US sanctions policy. Those uh policy decisions don't happen in a vacuum. a ripple through global uh uh supply, pricing, and investment decisions. So again, how is Treasury working about uh or thinking about the downstream impact of licensing decisions on our domestic producers, and making sure we are not putting American energy at a disva disadvantage?

Thank you for that question. Um, as I mentioned before, th you know this, well we look at some of the geopolitical challenges in the world that we're facing and the secretary is is uh managing very closely this the balance of the use of sanctions, the economic pressure, and the stability of energy markets. Um, and also looking at the need to make sure that where there's opportunity that US businesses have it uh have have the ability to participate. I think Venezuela is a good example of the uh the policy to uh now work with the Venezuelan government after the um the incredible actions that the president took to remove the leader, uh and set the stage for reopening of economic engagement with Venezuela, given their natural resources, and providing um the the authorities through OFAC, general licenses, and working with with US businesses as well to participate in that.

Uh finally, I hear from community and regional banks back home in Texas who tell me that their compliance costs have gone up significantly over the past several years, and they have. And while truly bad actors abroad keep finding ways around the system so quickly, Can we walk uh can you walk us through TF TFFC's uh distinguishes between a regional bank that may mark uh may make a minor screening error and a foreign bank that knowingly facilitates illicit payments and how should we think uh about tailoring the reinforcement approach in those different situations?

Thank you, that's a great question. It really goes to the heart of what one of the things we're trying to achieve at treasury now which is support for a risk-based approach. And you may be aware that uh the treasury just issued a notice of proposed rule making for uh an updated uh anti-money laundering program rule, which was called for under under AMLA I believe. Um and central to that is the risk-based approach, and using a risk-based approach to make sure that more resources are spent against higher risk activities, and less resources spent against lower risk activities within all financial institutions. And that really fundamental to that for any institution is the ability to understand those risks and then be able to align their controls appropriately. So you're exactly right, a community bank is gonna have a very different risk profile than a major global institution that might be operating throughout the world. And it's important that they also have the ability to uh tailor their controls to meet the risks they face and that they get the confidence that that they're doing it appropriately. So that's something very important to what we're doing right now.

Thank you very much, and I yield my time back.

Gentlemen yields, the chairman recognizes uh the well not he oh, the ranking member of the full committee, Ms. Waters, for five minutes.

Thank you very much. Assistant Secretary Burke. Trump's treasury has waived sanctions for Russia and for Iran. Allowing Russia to make an estimated two to ten billion dollars in first month of treasures free for all oil license. A similar license allowed Iran uh to make an estimated five billion over the past month. This is a windfall for Putin and the new Ayatollah and uh their war machines. These sales represent a blip uh to the global oil market's daily usage, but amounted to a huge windfall for these adversarial nations. Gas prices for Americans have not fallen and now we hear that the Energy Secretary thinks they won't fall until twenty twenty seven so please explain to us why enriching corrupt leaders like Putin and fueling wars that harm the US and our allies is good for US interests.

Thank you for for the question um I think as Secretary Besson has noted that the licenses that were offered were limited in scope, uh limited in time frame, do not believe that their windfall to Russia or Iran, in fact the payment mechanisms for their oil uh I believe makes it very difficult for them to benefit uh directly during that period of time yet it also is intended

Right.

to help uh provide stability to energy markets we had the meetings of the, you know, of World Bank and and the IMF last week where a number of countries expressed uh a request for relief from some of their en- energy needs. So that was both a way to stabilize uh or provide stability to the energy markets, support some of our closest partners uh during this time of need, while we're also trying to address um the risks posed by uh by Iran and as President has said see a peaceful resolution to the conflict with Russia.

Well sanctions uh give leverage uh to a president using a stick as a carrot, so to speak, to encourage the targeted person to act in a way that's beneficial to US national security interests, what leverage is created by lifting sanctions in Russia, Belarus and other friends of Putin and his war effort? By rewarding Russia with billions of extra dollars, especially through the general licenses allowing Russia to sell its illicit oil freely and above the oil price caps set by the United States, Europe and others. How will this get Putin uh to the negotiating table or convince Russia to end its unjustified invasion of Ukraine?

Thank you. As as I mentioned, the licenses were, you know, for a very short period of time intended to support the market and some of our key partners. We don't believe that that uh provides a windfall to Russia during that time. And we also continue to maintain sanctions on Russia Uh, one of the things I mentioned earlier that the the President and the Secretary want to make sure that the sanctions are meaningful and used strategically. Um, at the end of last year the uh uh uh Treasury announced sanctions against Rosneft and Lukoil which was pretty monumental at the time and had a incredible impact uh on on Russia and you've seen you know efforts now by uh Lukoil to sell their, their assets. So I think the sanctions remain a viable tool. And we'll continue to to support the president and the secretary in in that policy.

Well, you know, uh l let me just, you know, um divert from this a little bit. What does the president think about oil and gas prices now? Does he think he is helped or hurt?

So I haven't spoken with the president about gas prices. My role is to look at illicit finance risks and try to make sure we uh apply the tools appropriately to address this.

So, uh, you know Your role is uh to wanna do what's in the best interest of the American people. And if it means asking questions, if it means challenging, you're in the meetings, you know what's going on, you have an opinion. Do you believe, what did the president tell you, uh that he knows what he's doing and is helping uh the United States uh with this problem that we have with affordability uh and that um He does not believe that he's hurting in any way. The gas prices going up is somebody else's problem. Somebody else caused this. What do you know?

So so again, my focus is on uh the implementation of our tools to combat illicit finance and to uh support foreign policy through those tools such as sanctions, so I'm happy to take your point back. We have a building full of economists who are advising the secretary every day on Economic M- measures uh and economic indicators, I'm focused on the other side.

Gentlewoman's time has expired. And I recognize myself for five minutes for questions. Uh, Mister Burke, your role is uh, this is Secretary for Terra Financing, thank you for being here and thank you for what you do. You know, sanctions are among the most powerful tools Congress gives the executive branch, but they're also one of the least understood. Uh, to help me understand, or those watching, uh, how sanctions are designed, can you identify a current sanctions program, walk me through the objective, uh, what benchmarks might be used to gauge success, and then conditions under which you might see uh an opportunity to lift those sanctions. Sir?

Well, thank you for the question. Um, you you and I appreciate your reflection that they can be misunderstood, and and they're hard to f- to follow. Um, I'll try to keep it simple in the interest of of time, but I the sanctions, you know, and having done this for many, many years, I see kind of multi-layers of this. One is sanctions can be used to disrupt financial activity from certain actors, whether that's terrorist organizations, Iran, and their front companies. And so by using sanctions you can block assets, uh, and disrupt their ability to move that, move those funds. to support their illicit activities. Another way that sanctions have been used is to raise awareness about the various risks. So where the United States, you know, sanctions, when sanctions are applied, they're applied to U S persons or where U S persons come into contact with assets that they have to handle accordingly. Sometimes, uh, transactions might exist outside the U S jurisdiction or outside of U S reach. So the U S tools are to raise awareness of those risks, and then we have engagement with our partners around the world, to also raise awareness of those risks and encourage them to take action. Then there's other layers of sanctions, such as such as secondary sanctions, which the secretary mentioned last week are on the table with Iran. There's a number of authorities that provide for the application of secondary sanctions, where a party outside, particularly a bank that might be outside of US jurisdiction, is doing activity um that uh doesn't touch the United States, but would violate sanctions, and allows us to then impose secondary sanctions, uh, by removing their access to the United States. So there's multiple layers of the way sanctions work, and - and it provides us with the tools to be able to target, uh, behavior or activity that's posing a risk, even indirectly, to the US financial system, and try to protect the US system from that activity.

Yes, sir, and - and I - I wanna underscore, you know, the p- point that you're making, the complexity of the way sanctions can be structured, and quite frankly targeted to a specific uh state actor, entity, et cetera. And one set of sanctions may not look exactly like the other. And so to that point, you know, the efficacy of our sanctions relies on partnerships with the private sector, foreign governments and other actors. And I'm happy to see the United States use sanctions aggressively to advance American interests uh to quite frankly make the world a better place. But it's important that we ensure that we're leaning on our partners, to your point, to help with those sanctions and those regimes uh for our own strategic reasons. At the end of the day, we are the the our mere presence uh we are that provider of global security uh which impacts pricing in commodity markets, travel around the globe, et cetera. And so we'll put a pause there and the the brief time I have left sh shift to banks. You talked about the risk assessment. Um, when you identify a designation that no longer, you know, for a bank serves a strategic purpose, what does that delisting process look like for an institution? And how do you signal that we're not getting soft, but we we've changed our assessment on for this particular bank or entity? Sir?