[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





                      EVALUATING THE EFFECTIVENESS
                       OF U.S. SANCTIONS PROGRAMS

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

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON MONETARY

                            POLICY AND TRADE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 30, 2017

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-62







[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
31-293 PDF                WASHINGTON : 2018                 

















                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                  Kirsten Sutton Mork, Staff Director
               Subcommittee on Monetary Policy and Trade

                     ANDY BARR, Kentucky, Chairman

ROGER WILLIAMS, Texas, Vice          GWEN MOORE, Wisconsin, Ranking 
    Chairman                             Member
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan              BILL FOSTER, Illinois
ROBERT PITTENGER, North Carolina     BRAD SHERMAN, California
MIA LOVE, Utah                       AL GREEN, Texas
FRENCH HILL, Arkansas                DENNY HECK, Washington
TOM EMMER, Minnesota                 DANIEL T. KILDEE, Michigan
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                CHARLIE CRIST, Florida
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana




























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 30, 2017............................................     1
Appendix:
    November 30, 2017............................................    31

                               WITNESSES
                      Thursday, November 30, 2017

Billingslea, Hon. Marshall, Assistant Secretary for Terrorist 
  Financing, U.S. Department of the Treasury.....................     4
Smith, John E., Director, Office of Foreign Assets Control, U.S. 
  Department of the Treasury.....................................     6

                                APPENDIX

Prepared statements:
    Billingslea, Hon. Marshall...................................    32
    Smith, John E................................................    37

              Additional Material Submitted for the Record

Huizenga, Hon. Bill:
    Washington Post article entitled, ``He ran North Korea's 
      secret moneymaking operation. Now he lives in Virginia.''..    46
Billingslea, Hon. Marshall and Smith, John E.:
    Written responses to questions for the record submitted by 
      Representative Sherman.....................................    50

 
                      EVALUATING THE EFFECTIVENESS
                       OF U.S. SANCTIONS PROGRAMS

                              ----------                              


                      Thursday, November 30, 2017

                     U.S. House of Representatives,
                 Subcommittee on Monetary Policy and Trade,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:24 p.m., in 
room 2128, Rayburn House Office Building, Hon. Andy Barr 
[chairman of the subcommittee] presiding.
    Present: Representatives Barr, Williams, Huizenga, 
Pittenger, Hill, Mooney, Davidson, Tenney, Hollingsworth, 
Moore, Foster, Sherman, and Crist.
    Chairman Barr. The committee will come to order. Without 
objection, the Chair is authorized to declare a recess of the 
committee at any time, and all members will have 5 legislative 
days, within which to submit extraneous materials to the Chair 
for inclusion in the record.
    This hearing is entitled, ``Evaluating the Effectiveness of 
U.S. Sanctions Programs.'' I now recognize myself for 5 minutes 
to give an opening statement.
    I am pleased to welcome our colleagues and our witnesses to 
this subcommittee's hearing on U.S. sanctions. From Iran, to 
North Korea, to Russia and Venezuela, sanctions are 
increasingly used as an instrument in our foreign policy 
toolkit, and Congress must ensure that they be held accountable 
for results.
    This hearing will examine major sanctions programs as we 
seek to evaluate their effectiveness. Let me highlight three 
points that may provide context for this discussion.
    First, sanctions are key to bringing about behavioral 
change abroad, and this committee has stressed that they should 
be designed accordingly. That means calibrating sanctions, and 
sanctions relief, based on specific and achievable actions we 
wish to see from a foreign actor. Tailoring sanctions in this 
way is especially important for secondary sanctions, given how 
banking restrictions tend to have broader and less predictable 
effects than primary measures.
    In October, the Financial Services Committee reported, and 
the full House overwhelmingly passed the Otto Warmbier North 
Korea Nuclear Sanctions Act, a piece of legislation that I was 
proud to sponsor with our Ranking Member, the gentlelady from 
Wisconsin. The bill would impose financial sanctions targeting 
every area of North Korea's economy, including all petroleum 
imports, and any deployment of laborers abroad. This week's 
test launch by the DPRK (Democratic People's Republic of Korea) 
of an ICBM (intercontinental ballistic missile) that can reach 
any part of the United States underlines why maximum pressure 
is needed.
    Our bill outlines the principles that the majority and 
minority here consider essential for the use of secondary 
sanctions, not only with respect to North Korea, but other 
countries as well. Namely, we should strike with as much 
strength as possible, provide the President with flexibility, 
and link the termination of sanctions to a narrow set of 
realistic objectives.
    This approach is distinguished from what we might call, 
quote, ``symbolic sanctions,'' unquote; that is, devoting 
scarce resources to designations with no real impact on our 
foreign policy objectives, or tying sanctions to a list of 
outcomes that no one expects to emerge in the foreseeable 
future.
    For sanctions to retain their credibility, we must guard 
against such half measures. If sanctions are akin to 
antibiotics, then we should ask what indiscriminate use will do 
for antibiotic resistance. At the same time, if we want to 
preserve the trust that the world continues to hold in the U.S. 
financial system, we must think clearly about what it means to 
restrict access to that system, and communicate with equal 
clarity so that others understand the rationale that governs 
both the imposition and lifting of our sanctions.
    The second point to underscore is the need for continuous 
engagement with Congress, when the Executive chooses to wield 
its sanctions' powers. As we know, the Executive possesses 
broad authorities under the International Emergency Economic 
Powers Act (IEEPA). What may be less well-known is that IEEPA 
lays out explicit provisions for regular Congressional 
consultations and reports, so that these authorities are 
exercised with appropriate oversight.
    The committee would encourage our witnesses to examine 
whether the Office of Terrorism and Financial Intelligence 
(TFI) is upholding the letter and spirit of these provisions. 
TFI has been the recipient of bipartisan goodwill, and using 
emergency powers accountably will help ensure that such 
goodwill is sustained.
    This brings me to point number three. As our country 
becomes more reliant on economic sanctions to carry out its 
foreign policy, the Treasury Department will be increasingly 
called upon to make its voice heard on the substance of that 
policy.
    We have already seen bureaucratic changes that reflect the 
shift. In August, for instance, the President signed into law 
the Countering America's Adversaries Through Sanctions Act 
(CAATSA), which included the secretary of the Treasury as a 
member of the National Security Council.
    In light of this trend, we should expect that Congress will 
look more and more to the department, and particularly, to TRI, 
not only to implement sanctions, but to help shape their goals, 
scope, and strategy, and to answer for sanctions' shortcomings, 
if they fail to meet their objectives. Of course, Treasury 
undertakes these things to a certain extent already, but its 
accountability will only grow with its prominence in these 
debates.
    I want to thank our witnesses for testifying today, and 
look forward to working with them so that our sanctions 
programs are coherent, realistic, and impactful.
    The Chair now recognizes the Ranking Member of the 
subcommittee, the gentlelady from Wisconsin, Gwen Moore, for 5 
minutes for an opening statement.
    Ms. Moore. Thank you so much, Mr. Chairman. Before I begin 
my comments, let me thank our guests from the Treasury 
Department. I always look forward to hearing from these 
experts, and information is a powerful tool.
    Let me begin by thanking our Chairman for calling this 
hearing, and as he indicated before, I am a part of the 
bipartisan work on the North Korea sanctions; so proud to have 
worked on that in a bipartisan matter. I do believe that we 
have passed a strong bill, and I certainly hope that the 
Administration does the hard work of implementing this bill.
    With that said, I can't pretend that I am not concerned 
about the general state of United States foreign policy, and 
this Administration's commitment to implementing our sanctions 
programs. I can tell you that as an American, I think there are 
many other people who join me in feeling that we are isolated 
and weak, with even the British debating whether or not the 
President of the United States is welcome in England. This is 
stunning.
    My constituents are very concerned about the extent and 
depth of the relationships with human rights violators; with 
Putin, a relationship that has the President and many of his 
cabinet and advisers mired in deepening and widening scandals 
relating to Kremlin connections.
    I am concerned with reports that the Department of State 
eliminated the office of the coordinator for sanctions policy. 
We did the hard work in this committee to draft this North 
Korea sanctions bill, and I am sure that our witnesses are 
aware that the U.S. currently has sanctions against Russia, and 
that Congress recently passed further sanctions against Russia.
    So it is puzzling to me why the Department of State would 
eliminate the office that would coordinate these sanctions 
policies. I think you can catch my drift, and perhaps even 
empathize with me. Cutting out some people who could help you 
all--
    I am sure you are also aware that the Administration seems 
not to be implementing these Russian sanctions. Forgive me, but 
I grew up in a time and era where, as a public school student, 
as a little girl, we were diving under our desks, we were so 
afraid of Russia.
    It is puzzling to me why we are not implementing those 
Russian sanctions at this point. I am worried that the 
Administration is more interested in implementing the goals of 
the Kremlin, and to not have sanctions through the statutory 
mandates of this Congress to expand and strengthen the Russian 
sanctions. I really am interested in hearing about the 
Treasury's efforts to make sure it is implementing 
Congressional intent and vigorously enforcing sanctions against 
Russia.
    I am going to apologize in advance for bowing out of the 
meeting somewhat early, because I have a conflict of another 
meeting that is extremely important as well. But I do look 
forward to hearing your testimony. I will be here to hear your 
testimony and answer some of these questions.
    Thank you so much, and Mr. Chairman, I yield back.
    Chairman Barr. The gentlelady yields back. Thank you for 
that opening statement.
    Today we welcome the testimony of Marshall Billingslea, the 
Assistant Secretary of the Treasury for Terrorist Financing. In 
this role, he helps oversee the Administration's efforts in 
administering economic sanctions programs globally.
    Prior to joining Treasury, Mr. Billingslea served as 
Managing Director for Business Intelligence Services at 
Deloitte Advisory. He had previously held positions at the 
Department of Defense, where he served as Deputy Undersecretary 
of the Navy, and Principal Deputy Assistant Secretary of 
Defense for Special Operations and Low Intensity Conflict.
    Mr. Billingslea has also worked as a NATO Assistant 
Secretary General for Defense Investment, and as a staff member 
on the Senate Foreign Relations Committee. He is a recipient of 
the Defense Medal for Distinguished Public Service.
    John Smith is the Director of the Treasury Department's 
Office of Foreign Assets Control, OFAC, which is responsible 
for administering economic and trade sanctions to advance U.S. 
national security and foreign policy goals. Mr. Smith has 
previously served as OFAC's Acting Director, Deputy Director, 
and Assistant Director.
    Prior to joining OFAC, Mr. Smith served as an expert to the 
United Nations' Al Qaida and Taliban Sanctions Committee from 
2004 to 2007, and as a trial attorney at the U.S. Department of 
Justice from 1999 to 2004.
    Each of you will be recognized for 5 minutes to give an 
oral presentation of your testimony. Without objection, each of 
your written statements will be made part of the record.
    Mr. Billingslea, you are now recognized for 5 minutes.

         STATEMENT OF THE HONORABLE MARSHALL BILLINGSLEA

    Mr. Billingslea. Chairman Barr, Vice Chairman Williams, 
Ranking Member Moore, and members of the committee, thank you 
for inviting me here today to offer testimony on the 
effectiveness of sanctions, and to talk about a number of the 
matters that you, Chairman, and you, Ranking Member, have 
raised in your opening statements.
    The Treasury Department has, in my view, pioneered the use 
of targeted sanctions as a tool of statecraft, and we are 
continually refining how we employ financial pressure. In the 
interest of time, I will skip to the bottom line up front, 
which is that I believe that there are several reasons why 
sanctions are quite effective tools. Chairman, I do actually 
agree with the way you laid out the overall context of 
sanctions.
    But I believe I can name, and I will name numerous examples 
in which our sanctions have been effective, and I would like to 
provide four specific reasons, or four specific matters which I 
think affect the effectiveness of sanctions, when we choose to 
employ them.
    Now, this Administration has aggressively targeted ISIS 
leaders and operatives for their operational and financial 
support around the world, and the result has been that we have 
engaged--John and OFAC have engaged in over 70 actions against 
ISIS leaders, their facilitators, recruiters, and affiliated 
money services businesses worldwide.
    U.S. and U.N. designations, along with close cooperation 
between United States and Iraqi authorities, in particular--in 
fact, I just came back from Baghdad a little more than a week 
ago--have effectively shut down a number of exchange houses 
that were functioning as key nodes for ISIS--or Daesh, as we 
might call them and their financial facilitating networks.
    Separately, we continue the effort against al Qaida and 
other terrorist groups through both unilateral and multilateral 
actions. Secretary Mnuchin, as you may know, recently announced 
the opening of a rather significant and rather innovative 
breakthrough, which is the creation of a multinational 
Terrorist Financing Targeting Center, the TFTC, that is housed 
in Saudi Arabia.
    In conjunction with that announcement, the six Gulf 
Cooperation Council member states--so seven of us altogether, 
seven nations--imposed sanctions on a network of al Qaida and 
ISIS financiers and weapons traffickers in Yemen. This was, in 
fact, one of the biggest multinational designations ever 
outside of the United Nations.
    We have also targeted, and I am sure you will hear more 
about the way we have gone after dozens of North Korean 
individuals and entities, including coal companies, banks, 
financial facilitators--any revenue that North Korea generates 
that can be used to support--or actually, any revenue they 
generate, period, is used to support the various weapons 
programs that the regime has, and we are determined to cut that 
off.
    Finally, and I know we will want to talk more about Iran 
today. Sanctions were the dominant factor in forcing Iran to 
the negotiating table over their nuclear weapons program, and 
we are committed, the Administration is committed to combating 
Iran's malign behavior around the globe. Even Hezbollah's 
leader, Hassan Nasrallah, has acknowledged that their donors 
are scared to continue remitting funds as a result of U.S. 
sanctions.
    Now, I mentioned four specific reasons why I think 
sanctions are effective. First is that we employ these against 
the backdrop of an international financial system that we are 
continuously working to improve to create capabilities to 
create standards through the Financial Action Task Force to 
cause the international financial system to embrace anti-money 
laundering (AML), and countering the financing of terrorism 
standards, and to create regimes that are enforceable across 
the globe.
    This has been a patient and long-standing effort of the 
Treasury Department. It is a bipartisan, nonpartisan endeavor 
that has stretched across multiple Administrations, and it is 
because of this backdrop of driving the creation of these 
regimes that we are, in fact, able to cause our partner nations 
to work with us, and to embrace and enforce these measures.
    In the interest of time, a second reason that sanctions are 
so effective is because of the financial diplomacy that goes 
with the actions we undertake. A specific Treasury action by 
OFAC or by FinCEN (Financial Crimes Enforcement Network) is 
often preceded by, and almost always followed up with 
engagement by the Treasury and State Departments, with our 
allies, our partners in the public and private sectors. As a 
general proposition, sanctions are most effective, as the 
Ranking Member indicated, when they are implemented 
multilaterally.
    That said, of course, this Administration, and in fact, no 
Administration would hesitate to take action unilaterally to 
defend the American people as necessary. But when and where 
possible, we do work with other nations to amplify our message, 
and drive concerted action.
    We, of course, pursue financial diplomacy through a variety 
of multilateral and multinational organizations, such as the 
United Nations, but I also mentioned the TFTC that was just 
established as another example.
    I am at time, but simply to summarize the final two 
reasons, which I can come back upon, as you wish. The third 
reason, and a third important criteria is that we have to be 
clear and consistent in our messaging: When we sanction; what 
is it that we are seeking to achieve. I would suggest, how we 
have approached Venezuela is a good example.
    The fourth that influences the effectiveness--and Mr. 
Chairman, you mentioned this specifically--is the extent to 
which the targeted individual, their finances, do they touch 
the international financial system? I would agree with you that 
symbolic sanctions probably are not worth the candle, though 
there are times and places where that is worthwhile.
    Again, I appreciate the chance to appear before the 
committee, Mr. Chairman.
    [The prepared statement of Mr. Billingslea can be found on 
page 32 of the appendix.]
    Chairman Barr. Thank you. The gentleman's time is expired. 
Director Smith, you are recognized now for 5 minutes.

                     STATEMENT OF JOHN SMITH

    Mr. Smith. Thank you, Chairman Barr, Vice Chairman 
Williams, Ranking Member Moore, and distinguished members of 
the committee. Thank you for inviting me here to discuss the 
important role of sanctions in addressing some of our Nation's 
most prominent national security and foreign policy challenges.
    As the Director of the Treasury Department's Office of 
Foreign Assets Control, or OFAC, I will speak to the sanctions 
my office has imposed against supporters of the destabilizing 
and provocative actions of governments such as North Korea, 
Iran, and Russia, as well as a range of other actors engaged in 
conduct antithetical to our Nation's ideals and interests.
    When deployed strategically and with precision, sanctions 
are a highly effective way of pressuring regimes and malign 
actors to change their behavior. These regimes and actors 
ultimately rely on funding to operate, and by freezing their 
assets, cutting them off from the U.S. financial system, and 
restricting their ability to interface in the international 
financial system, the choice to them becomes clear: Either 
modify your behavior, or accept the isolation and negative 
economic effects of our financial blacklists.
    One of our highest priorities is targeting the North Korean 
regime and its key financial vulnerabilities. This year, OFAC 
has issued eight rounds of sanctions related to North Korea, 
adding 112 individuals and entities to our Specially Designated 
Nationals and Blocked Persons List--what we call the SDN List. 
The regime requires revenue to maintain and expand its nuclear 
and ballistic missile programs, and we have focused our efforts 
on areas where we can have the maximum disruptive impact.
    Just last week, OFAC sanctioned several Chinese trading 
companies that were responsible for hundreds of millions of 
dollars of imports from and exports to North Korea over the 
last few years. Earlier this year, we designated a number of 
Chinese companies that had imported nearly half a billion 
dollars' worth of North Korean coal between 2013 and 2016. That 
action, combined with diplomatic pressure and multilateral 
sanctions, helped pressure China to announce that it would halt 
all coal imports from North Korea, representing a blow to the 
regime's revenue generation capabilities.
    Iran is another top priority, and since January OFAC has 
issued eight tranches of sanctions involving Iran, designating 
78 targets around the globe in connection with the Islamic 
Revolutionary Guard Corps, the IRGC, and Iran's ballistic 
missile program, support for terrorism, human rights abuses, 
cyberattacks, transnational criminal activity, and other 
destabilizing regional activity. We recently designated the 
IRGC, under the Global Terrorism Executive Order, pursuant to 
the Countering America's Adversaries Through Sanctions Act, the 
CAATSA legislation that you mentioned.
    Just last week, we sanctioned an IRGC-Quds Force 
counterfeiting network that deceived European suppliers to 
procure advanced equipment and materials to print counterfeit 
Yemeni bank notes potentially worth hundreds of millions of 
dollars.
    Another significant priority for OFAC is addressing 
Russia's destabilizing activities in Ukraine. This summer, we 
continued our regular pattern of sanctions, and designated 38 
individuals and entities involved in the ongoing conflict in 
Ukraine. More recently, we have been hard at work implementing 
requirements and publishing guidance related to the CAATSA 
legislation passed by Congress. I want to be clear and 
emphasize: The Treasury has fully implemented every CAATSA 
requirement delegated to it within the statutory deadlines.
    We have also used our sanctions this year to address the 
erosion of democracy in Venezuela; disrupt major narcotics 
traffickers in Mexico, Colombia, Peru, and Venezuela; increased 
pressure on the Assad regime in Syria; denied terrorist groups 
like ISIS and Hezbollah the ability to access the U.S. 
financial system; and shine a spotlight on various governments 
for serious human rights abuses.
    We have dedicated the bulk of our resources and attention 
on the issues most pressing to our Nation's security. We 
greatly appreciate Congress' partnership and continued efforts 
to ensure that OFAC and TFI are equipped with adequate tools 
and authorities.
    However, I will note that our existing powers are 
relatively broad, and in order to achieve maximum impact, we 
need flexibility in administering and enforcing our sanctions. 
Additionally, the increasing Congressional reporting 
requirements and statutes with no expiration dates ultimately 
draws resources away from our primary sanctions activities.
    Thank you, again, for the opportunity to speak with you 
today, and I look forward to continuing to work with you and 
your staff as we try to maximize the impact of our sanctions.
    [The prepared statement of Mr. Smith can be found on page 
37 of the appendix.]
    Chairman Barr. Thank you. The gentleman's time is expired, 
and the Chair now recognizes himself for 5 minutes for 
questioning.
    Let me just first commend Treasury and the Trump 
Administration for abandoning this policy of strategic patience 
that has led North Korea to obtaining a nuclear arsenal, 
including a hydrogen bomb, and as we saw earlier this week, an 
intercontinental ballistic missile capable of reaching the 
continental United States, and potentially, a reentry vehicle 
for that missile. I would commend Treasury for its eight rounds 
of sanctions and designations in North Korea.
    However, I do want to read into the record an op-ed that 
you probably saw this morning in the Wall Street Journal 
entitled, ``Maximum Pressure on North Korea: China and the U.S. 
Still Haven't Imposed Toughest Sanctions.'' I will just read 
and quote from the article.
    Quote, ``the Trump Administration has done more than its 
predecessors to thwart North Korea's nuclear progress, but it 
is still far from using maximum pressure. It may not work in 
the end, but the alternatives are terrible: acquiescence or 
war. Wednesday's ICBM test shows Kim is getting closer to his 
goal of threatening U.S. cities. So why is the U.S. not using 
all the tools it has to stop him?''
    So my question is this, to both of you: In a hearing before 
the Senate Banking Committee earlier this fall, Treasury 
Undersecretary Mandelker stated that the U.N. Security Council 
resolutions pertaining to North Korea represent, quote, ``the 
floor, not the ceiling.'' That is why, under the House-passed 
bill that we were referring to earlier, the North Korean 
sanctions bill that was bipartisan, we go beyond those 
resolutions to target all oil exports to the DPRK, and all of 
its foreign labor.
    So the question is this, if the U.N. resolution is truly 
just the floor for U.S. policy, what is Treasury doing to 
eliminate the petroleum and labor loopholes that are left by 
the resolutions, and why should Congress tolerate the same 
incremental strategy that has gotten the Kim regime where it is 
today? We will start with you, Mr. Billingslea.
    Mr. Billingslea. Thank you, Chairman. So obviously, the 
U.N. sanctions regime is multinationally crafted, and it 
requires the Chinese and the Russians to come along. In fact, 
Ambassador Haley at the U.N. reengaged in wake of the recent 
launch to drive again the need to further ratchet the pressure 
on North Korea for its continuing behavior.
    I would say we have actively worked to dry up all of the 
different mechanisms by which the North Korean regime obtains 
petroleum and other petroleum products, regardless of the fact 
that the U.N. Security Council resolution, that they ultimately 
did not agree to the U.S. position to shut off all crude oil 
imports. They agreed to a reduction in crude, and to a 
cessation of oil products.
    The number of things that we have done along these lines--
and again, back to my point about, not everything is a 
sanction, right? There are a lot of other things TFI, the 
Treasury does in the financial diplomatic world that go beyond 
the individual discreet sanctions acts. But John is going to be 
able to tell you about the very specific sanctions designations 
that we have engaged in to target the different exchange 
mechanisms by which people were illicitly flowing petroleum 
into North Korea.
    But on top of that, we have identified the latest evasion 
technique that the North Koreans are using, which involves 
North Korean oil freighters pulling out into the middle of the 
ocean, and linking up with commercial chartered oil tankers to 
do ship-to-ship transfers. We have exposed a number of these. 
We have gone after their flagging authorities with the various 
nations, to yank the flagging authority, to cause the vessel to 
have difficulties. We are further investigating the network of 
shell and ownership structures that are created to hide the 
true ownership of these ships.
    On labor, I personally have engaged with a large number of 
countries overseas, particularly in the Middle East, to secure 
agreement to expel North Korean slave labor from these 
countries, and to identify the companies that were being used 
to exploit these people.
    Those are just two examples of how we are--
    Chairman Barr. If I could just jump in there, you did 
mention in the testimony about the designation of the four 
Chinese trading companies that have conducted business, and the 
designations there. But I am sure you are familiar with the 
recent report that indicated there are over 5,000 such 
companies in China. We just want to know how Treasury can make 
a dent in these Chinese firms' business with North Korea if you 
are focusing on individual designations, as opposed to these 
secondary sanctions on these middlemen front companies.
    Mr. Billingslea. The challenge we have is when we see these 
press reports and these 5,000 here, 3,000 there. The challenge 
is that we have to meet evidentiary standards for the measures 
that we take, legal standards. So we do need much more granular 
information, so that John can take his actions.
    So when we get these leads, we follow them up aggressively.
    Chairman Barr. Thank you. My time is expired, and as my 
questioning points out, I think as our recently passed House 
bill makes clear, we believe there is a need for Treasury to 
exhaust all options available, especially in light of this most 
recent ballistic missile test.
    At this time, I would like to recognize the Ranking Member 
for 5 minutes of questioning.
    Ms. Moore. Thank you so much, Mr. Chairman. Thank you 
again.
    One of the most horrific acts that is occurring anywhere on 
planet Earth at this point is the ethnic cleansing of the 
Rohingya people, who have fled to Bangladesh since late August. 
I was wondering, is there any program under the Global 
Magnitsky Act that targets the senior-most members of these 
Burmese security forces, who likely ordered these rapes, and 
murders, and acts of arson. Have you identified any of these 
folks? When do we expect to see sanctions announced against 
Burma?
    Mr. Smith. Thank you, Ranking Member. I am glad you 
mentioned the Global Magnitsky Act. We appreciate Congress' 
giving us the authority to target human rights abusers and 
corrupt actors worldwide. As you mentioned, this authority 
gives us the opportunity to target those that are responsible 
for such activity, serious human rights abuses, no matter where 
they occur. Congress has given a mandate in that legislation, 
asking us to report at certain periods, and take action by 
certain periods, and the next period comes up in December. I 
think the Treasury Department is working to make sure that we 
implement this statute fully. It is something--
    Ms. Moore. Have you identified any people in Burma?
    Mr. Smith. We have not under Global Magnitsky.
    Ms. Moore. OK.
    Mr. Smith. It is authority that has just been delegated to 
us--
    Ms. Moore. OK, OK, thank you for that.
    I was arrested hanging out with John Lewis--warn some of 
the freshmen about him--for protesting at the Sudanese embassy 
for crimes that have been committed in Sudan. The president, by 
the way, still remains under indictment by the International 
Criminal Court for War Crimes, including genocide. We impose 
sanctions for human rights violations, and yet we have relaxed 
them under this Administration. What did I miss?
    Mr. Billingslea. Relaxed--we actually removed them.
    Ms. Moore. Removed them. Why?
    Mr. Billingslea. Correct. We removed them, by the way, on 
the basis of criteria established by President Obama. So 
President Obama established five specific criteria against 
which the Sudanese would be held accountable.
    Ms. Moore. OK, thank you. My time is waning. I am going to 
continue on this theme of sanctions and human rights, because I 
am confused by what the policy of the Administration is. We 
have seen him following Obama's agenda, he is re-imposing 
sanctions, strictures against Cuba. He has decided that 
Venezuela has become enemy number one because of the 
government's role in undermining democratic processes and 
institutions.
    And yet, we see that he shows a fondness for totalitarian 
strongmen around the globe, including the Philippine president, 
Duterte, praising the authoritarian leader of Egypt, who had 
his political opponents gunned down, and jailed those 
dissidents, and the President thinks that they have done a 
fantastic job in a very difficult situation. Of course, 
defended President Putin against accusations that he has 
murdered journalists and dissidents.
    So I am wondering why it seems to be such a checkerboard 
approach to sanctions. Can you help me sort this out?
    Also, what I want to ask you, Mr. Smith, is, sometimes you 
can give waivers for--and I want to know if there are any 
waivers that we don't know about. You can do it without coming 
to Congress, for reducing, relinquishing waivers against 
Russia.
    Mr. Smith. So thank you for the questions.
    With respect to the human rights-related designations, we 
have continued to actively target, over the past year, human 
rights-related concerns in North Korea, Iran, South Sudan, and 
Venezuela, among other programs. So we have continued our focus 
on human rights concerns.
    In terms of waivers, with respect to Russia--
    Ms. Moore. So how does this--yes, OK. Go on.
    Mr. Smith. With respect to Russia, I think most of the 
waivers that might exist in statutory programs have been 
delegated to the State Department under the various 
authorities. OFAC can issue particular licenses, and under the 
CAATSA legislation, we are notified--
    Ms. Moore. OK, and so I have 2 seconds left, very quickly. 
My time is expired.
    Chairman Barr. Gentlelady's time is expired. Chair now 
recognizes the Vice Chairman of the subcommittee, and author of 
the Strengthening Oversight of Iran's Access to Finance Act, 
the gentleman from Texas, Mr. Williams.
    Mr. Williams. Thank you, Chairman Barr, for your important 
work on sanctions legislation, most recently, the House passage 
of increased North Korea sanctions. Given the overwhelmingly 
increased aggression under the Kim regime, this legislation 
cannot be timelier.
    I would like to also welcome Assistant Secretary 
Billingslea and Director Smith to our subcommittee, and thank 
them for joining us this afternoon. I appreciate your time, and 
I appreciate your expert testimony. America and some of her 
most important allies, such as Israel, are under the constant 
threat by those who wish to harm us, and the work that both of 
you do in the sanctions field helps to keep the bad actors 
away. Appreciate that.
    Though there are areas where we can improve, I am 
specifically encouraged by the current Administration's path 
forward in dealing with the world's foremost state-sponsored 
terrorism in Iran. After 8 years of flawed policy toward Iran, 
culminating with the terrible JCPOA (Joint Comprehensive Plan 
of Action), I am encouraged by the President's direction.
    So Assistant Secretary Billingslea, thank you for being 
here. Iran continues to be extremely concerning to me and those 
I represent. We must do all we can to ensure that appropriate 
sanctions are enacted to the world's foremost state-sponsor of 
terror. To that end, I recently sponsored, as you heard, 
Strengthening Oversight of Iran's Access to Finance Act, which 
was reported favorably out of this committee, and just 
yesterday was introduced by Senator Cruz and Senator Perdue in 
the Senate. My legislation will increase Congressional 
oversight of aircraft sales to Iran, and their effect on 
financial institutions.
    So Mr. Secretary, what similar steps can be taken to 
further prevent the abuse of the financial system by Iran in 
the way that promotes terrorism, human rights abuses, or 
assistance to the Assad regime?
    Mr. Billingslea. Thank you, Vice Chairman. As you have 
said, Iran is the foremost sponsor of terrorism around the 
world, and they have used their newfound access to financial 
resources to further support terrorism and foment instability 
across the Middle East and globally.
    The Iranian Quds Force, in particular, is heavily engaged 
in destabilization in Syria, in Iraq. They are moving money to 
Hezbollah, to Hamas, and to other terrorist organizations. 
Obviously, their role in Yemen and the civil war there, 
supporting the Houthis, is truly, truly incredible.
    Much more needs to be done to constrain Iran's ability to 
obtain and move finances to terrorist organizations. That is 
why Congressional action under CAATSA with regard to the 
Iranian Revolutionary Guard Corps, as the parent organization 
of the Quds Force, is a major entity, or set of entities 
interwoven throughout the Iranian economy.
    One of the things that we have been cautioning our European 
allies and others, is to be very careful as you look at doing 
business with Iran, because we have sanctioned the IRGC--
actually, the Europeans have as well, and we expect that 
extreme caution should be exercised before entertaining any 
type of business in that country, particularly when they have 
not only no safeguards and no anti-money laundering regime to 
speak of, but when they are engaged in outrageous 
counterfeiting behaviors that Director Smith mentioned, which 
completely fly against all of the norms of the financial 
services sector.
    Mr. Williams. Thank you. I would also like to further 
discuss the tools that the Treasury is utilizing in its fight 
against Iran's destabilizing financial activity. In August, 
Congress passed new sanctions and legislation, giving the Trump 
Administration new tools for the fight against Iran's missile 
program, terrorist assistance, and human rights abuses. I 
firmly believe that Iran will continue to develop new ways to 
work around U.S. and international sanctions to continue their 
campaign of terror across the globe.
    So another question I have is, how do we maintain pressure 
on Iran's leadership and financial institutions, ensuring that 
the IRGC and related financial entities do not create loopholes 
to avoid these sanctions?
    Mr. Billingslea. Quickly, in two ways. I will talk with 
one, and then, I think Director Smith on the other.
    With regard to pressure on the regime, one of the things 
that they have to do is they have to create a legal framework, 
and be held accountable for stopping the financing of 
terrorism. They do not have sufficient laws in Iran. I don't 
know that they would honor those laws, even if they had them. 
But they don't have the regime in place, and we ought to insist 
that until they do have an anti-money laundering set of laws 
that are being enforced, counter measures should be imposed on 
their financial sector.
    Mr. Smith. I was just going to say, I think we also need to 
keep doing what we are doing, and ramping up pressure, exposing 
the bad activity where we see it across the board. We are 
exposing it wherever we see around the world, no matter what 
country it is involved in, no matter what type of company, and 
we are exposing the different types, including the 
counterfeiting ring that I mentioned earlier.
    Mr. Williams. OK. Thank you. I yield my time back.
    Chairman Barr. The Chair now recognizes the gentleman from 
North Carolina, Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman. Thank you, 
gentlemen, for being with us today. Appreciate your commitment 
and your involvement with us.
    Director Smith, and I would say to you as well, Mr. 
Secretary, would you please discuss with us the tools that you 
believe are effective that, at your disposal, that will allow 
us to address export controls? I would like to discuss CFIUS 
(Committee on Foreign Investment in the United States) as well, 
and what modifications should be made, if any, to CFIUS, and 
the relevance of that committee, and particularly, as we deal 
with nations who have supported our adversaries, and also seek 
to acquire assets in our own country. So if you could respond 
to that, I would be grateful.
    Mr. Smith. Thank you so much for the question. I think it 
has been very helpful to have the interest from Congress in 
making sure that we have the appropriate tools.
    When you ask about the appropriate tools that we can use, I 
think the power that Congress has given us, and the oversight 
that Congress plays has been a very important role in our 
success in being able to go after these types of activities of 
concern. The fact that we have the authority to call out these 
activities, freeze their assets, prohibit U.S. persons, 
wherever they may be, from engaging in this type of behavior, 
and then Congress nudging us to add additional designations or 
sanctions. For example, with respect to the IRGC, where we had 
designated it before, but we added to it under the terrorism 
authorities and all its agents, affiliates, and officials 
worldwide. That has been a very helpful all power for us to 
have.
    I think I will yield to my colleague, Marshall, on the 
CFIUS question. OFAC plays a role in terms of reviewing some of 
those, but it is not my expertise.
    Mr. Pittenger. Thank you.
    Mr. Billingslea. Congressman, the issue I have is that this 
Administration and the CFIUS process belongs to a different 
part of the Treasury, and so I am hesitant to opine, when I 
think they would give you a better answer. But I will 
definitely arrange that discussion.
    Mr. Pittenger. I thought maybe you might have a perspective 
just from--
    Mr. Billingslea. I do, in the sense that we need to ensure 
that the critical pieces of our economy are safeguarded from 
adversarial acquisition or influence.
    Mr. Pittenger. Do you feel that they are vulnerable today?
    Mr. Billingslea. I do feel they are vulnerable today.
    Mr. Pittenger. Do you feel that the expansion of the 
oversight of CFIUS is warranted today?
    Mr. Billingslea. I am not sure I understand exactly what is 
implied by that, but I do believe that--
    Mr. Pittenger. A greater capability for oversight.
    Mr. Billingslea. Greater capability for investigation, from 
understanding the origin of funds, the structure of acquiring 
entities to make sure we truly understand who is behind 
acquisition of different companies.
    Mr. Pittenger. Joint ventures and the like.
    Mr. Billingslea. Things such as that, yes, sir. Absolutely.
    Mr. Pittenger. Very good. Mr. Secretary, another point: 
What is the typical evidentiary standard that is needed to 
designate a foreign entity for violating the U.S. sanctions? 
And, when dealing with the support of terrorism proliferators, 
what should that standard be?
    Mr. Billingslea. I am going to defer to Director Smith on 
the evidentiary standard, because he has a team of lawyers and 
counsel that help him on that. But it does tend to vary.
    Mr. Pittenger. Very good. Thank you. Mike.
    Mr. Smith. The standard is the basic administrative 
standard that is used across the Federal Government. It is the 
reasonable cause to believe. It is a relatively low standard, 
and in terms of when you think of the overall standards of 
proof beyond the reasonable doubt in the criminal context, or 
even a preponderance of evidence that says, more likely than 
not. Ours is just a reasonable cause to believe, so it is 
basically, are we reasonable in believing that? That is the 
standard that we use in our designations programs, as well as 
our enforcement of sanctions violations.
    Mr. Pittenger. Given the actions of various countries like 
Qatar in the past, knowing we have an MOU with Qatar at this 
time, obviously, there have been concerns relative to ransoms 
for kidnappings, and safe harbors for Hamas, and Al Jazeera, 
and many other concerns. Do you believe that sanctions were 
warranted on Qatar or other countries that have been 
predisposed to be supportive of our adversaries?
    Mr. Billingslea. Congressman, that is a great question. I 
didn't have time to get into it, but an entire paragraph in my 
testimony talks about all the non-sanctions dimensions to 
financial diplomacy. One of the things I emphasized was the 
importance when sanctions is a tool available to us, it is a 
threat that is lying there on the table that we can use to 
great effect with various third parties.
    One my very first trips in my capacity when I was confirmed 
by the Senate was to Qatar. I will tell you that we do have 
issues with Qatar on the terrorism front. We have issues, 
actually, with many countries in the Gulf on various terrorism 
issues. It differs country by country.
    The Qatari did, very, very recently, engage in a series of 
arrests of very senior al Qaida financiers, and we view that as 
crucial, and we are watching the prosecution process that is 
now unfolding very, very closely.
    Mr. Pittenger. Good. They have--to date, they have not 
prosecuted anybody until now.
    Chairman Barr. Gentleman's time is expired. The Chair 
recognizes the gentleman from Arkansas, Mr. Hill.
    Mr. Hill. Thank the Chairman. Appreciate you holding this 
hearing that we have done so consistently now over the last few 
weeks to assess how America is doing in our sanctions regime 
for some of the world's most rogue nations. Sure appreciate our 
witnesses' service to our country, and tackling these tough 
issues, because we are not going to be successful in countering 
illicit finance or terrorism without every asset at our 
disposal--diplomatic, military, and financial, economic. So 
thank you for leading the economic cause.
    I want to talk a minute, since we have talked a little 
about North Korea. Let us talk some more about Russia. I was 
particularly pleased Secretary Tillerson appointed Ambassador 
Volker as our special envoy regarding trying to break the 
frozen conflict around Minsk. I think this was something 
missing from the previous Administration, where America really 
partnered in the E.U., and heading in a different direction. I 
was intrigued by your comments and your testimony, talking 
about Russia's obviously destabilizing actions in the Ukraine.
    But in addition to that, it continues to meddle in Eastern 
Europe, generally through cyberattacks, incursions, 
disinformation campaigns, and even evidence that they 
interfered in Montenegro's elections last October.
    It is for this reason back in June that Mr. Suozzi of New 
York and I introduced Fighting Russian Corruption Act, H.R. 
2820. One thing I would like you to do today is if you could 
take a look at that legislation, and give me your thoughts 
about it, officially, from the Treasury. It sets up an 
anticorruption office over at State as a political matter, to 
work particularly in the E.U. with our European partners, about 
taking our knowledge, our capabilities that we have, both in 
cyber, illicit finance, and partnering with them to counter 
Russian political meddling.
    I think it would be important, because you do so much work 
in the technical assistance area, where Treasury would help 
train our U.S. diplomatic efforts in that regard, and make it 
part of our NATO effort, as well. We suggest that 
anticorruption become part of NATO's readiness plan. So if you 
would take a look at H.R. 2820. We have twelve Republicans and 
four Democrats, and I appreciate the work with Mr. Suozzi on 
that.
    So given this political interference that you have 
established both in the Ukraine, and in Montenegro, and other 
Balkan countries, what is Treasury prepared to do to punish and 
deter activities like this under your existing authorities you 
have?
    Mr. Billingslea. Congressman, I think you have highlighted 
a number of worrisome activities by the Russians. I would also 
add to that list, actually, the money-laundering behaviors that 
we have seen them engaging in some of the Baltic nations, as 
well as in Cyprus and other places, which are fundamentally, 
when you talk about corruption, they are such a corrosive 
behavior that strikes at the heart of the financial integrity 
of these countries.
    It is crucial, in particular, that we go after Russian 
organized crime. We have done a number of actions, together 
with the Secret Service and others, in combating Russian 
organized crime. Russian organized crime tracks right back to 
parts of the regime in various ways, particularly when you 
start talking cyber matters. So I think you are pointing in the 
direction that we have to go.
    Mr. Hill. Good.
    Mr. Billingslea. Which is to focus on that corruption.
    Mr. Hill. Mr. Chairman, I hope that maybe we can have a 
roundtable, or maybe a classified briefing on that matter, and 
we spent a lot of time, as we should, on North Korea. But I 
think it would be useful to learn more here.
    In the time I have remaining, I know that Congress asks 
FinCEN and your offices for reporting, a lot of reporting. I 
think that is important. Our oversight responsibility is 
critical here, and you have that both to Foreign Affairs in 
some aspects, and here, at the Financial Services Committee. 
Are these requirements becoming too burdensome? How could we 
consolidate our requests to get the information that we want to 
have for oversight? But I know it seems like every measure we 
introduce has a Treasury-reporting obligation. Could you 
reflect on that?
    Mr. Billingslea. Congressman, we are beyond reasonable 
here. The reporting burden from north of 80, 90 different 
reports, some that date back 20 years, it is crushing. It is 
absolutely crushing on us.
    In your opening comments, you talked about how we needed to 
bring every asset to bear, and I will tell you that within the 
very small structure of TFI--we are talking 700 people total, 
of which half are focused on banking oversight. So when you 
talk about John's shop, my shop, the under-secretary's 
organization, our intel shop, we are consumed by reports. As a 
former Senate staffer, I can't tell you that I know that all of 
these reports are even being read.
    Mr. Hill. Thank you, sir, and thank you, Mr. Chairman, for 
the time, and I hope we are more sensitive about our regulatory 
reporting burden on these important actors. Thank you.
    Chairman Barr. The gentleman yields back. The Chair 
recognizes the gentleman from West Virginia, Mr. Mooney.
    Mr. Mooney. Thank you. My question is for Secretary 
Billingslea. You mentioned on page three of your testimony that 
some circumstances providing financial intelligence to a 
trusted foreign partner is all it takes to shutter terrorist 
exchange houses, or freeze a proliferator's bank account. I 
want to go back a step further, because we have to get that 
intelligence from somebody first before we can share with 
somebody. Somebody has to give it to us. We have to find it. So 
the discussion today has revolved around the ways the United 
States sanctions rogue nations, terrorist states, and others 
that pose a threat to our people, and our economic and 
financial systems.
    With the conflicts around the globe we are embattled in we 
have partners who want to aid the United States in these 
fights, give us information. Some are countries, but some are 
individuals or groups that wish to aid us, give us information 
on certain activities of the funding of terrorist 
organizations.
    So my question to you is: Would it be helpful to our cause 
in general to get this information, if your office could reward 
those individuals or groups that step forward with helpful 
information about where our adversaries are keeping their 
finances? And if so, what incentives could be used to encourage 
such assistance?
    Mr. Billingslea. Congressman, I would like to talk with you 
more about that and understand, but at first blush, I think 
that is exactly the innovative, insightful support that, 
through legislation, Congress could help us in the missions 
that we have to undertake. You are spot on, in terms of the 
challenges we face, and the informational gaps we often have, 
particularly when it comes down to that last tactical mile of 
getting to the adversary's bank account.
    So the idea of a rewards program, I can tell you from my 
time running the Special Operations and Low Intensity Conflict 
Office for Secretary Rumsfeld, we used reward authorities to 
great effect to elicit information. In my time, we used 
information and paid rewards for instance, leading to the 
identification of where Saddam Hussein's two sons were, and we 
deployed Special Forces to bring them to justice, and that was 
highly effective.
    So in line with your idea, I would like to explore that 
with you further. But I think, Congressman, you are onto 
something there.
    Mr. Mooney. Yes, I would like to talk about that further, 
too. I have a little more time left, so changing questions, and 
I am more specifically on a country, the IMF estimates that in 
2016, the Venezuelan economy contracted by 18 percent, and saw 
inflation of over 250 percent, with the further contraction of 
12 percent in 2017, and inflation of 650 percent.
    So our understanding is that the Executive Order the 
President issued in August, which restricted dealings in 
Venezuelan debt, has further affected bond liquidity, and added 
to pressure on President Maduro, which I think is a great idea. 
President Maduro is like a sweaty rhino running out of control 
around that area.
    So having said that, given the regime's resilience up to 
this point, can you articulate what the endgame of Venezuelan 
sanctions is? The government clearly hasn't been moderating. So 
what outcome are you aiming for, and how appropriate are 
existing sanctions to achieving it?
    Mr. Billingslea. Venezuela's economy is in a death spiral 
due to the kleptocratic policies of the Maduro regime, as they 
have engaged in wholesale looting of that country, of the state 
oil enterprise, and the ensuing humanitarian crisis that is 
erupting around us. This is a major national security issue, on 
top of a humanitarian disaster in the making, because it 
affects key allies like the Colombians next door.
    I am very concerned about, it looks like we are on the 
verge of a malarial epidemic now, because Maduro is blocking 
the bringing in of humanitarian assistance from the outside. He 
is preventing--and through his own economic mismanagement, they 
don't have the resources to buy the anti-malarials, in 
particular. So we have a significant issue here, and the 
President has made it extremely clear: We will not participate 
in the looting of that country's economy. Sanctions have been 
imposed--any new debt or equity, and those sanctions will only 
be removed if there is a return to the normal democratic 
process in that country.
    Mr. Mooney. I, for one, appreciate the President's 
aggressive approach in Venezuela. As you may know, my mother 
fled a communist country, Cuba, and America could have stopped 
that, and didn't. Now, we have really bad actors trying to 
impose evil regimes on folks, and don't care about human life, 
and stealing, and it is just, it is terrible. So I would like 
to encourage you to keep that up, and anything we can do here 
to help, I would sure appreciate.
    With that, Mr. Chairman, I will yield back the balance of 
my time.
    Chairman Barr. The gentleman yields back. The Chair 
recognizes the gentleman from California, Mr. Sherman.
    Mr. Sherman. Yes. Does the Venezuelan government own major 
assets in the United States? They used to own CITGO gas 
stations.
    Mr. Billingslea. Yes. CITGO is a wholly owned subsidiary 
of--
    Mr. Sherman. So how come we haven't seized those assets for 
the benefit of the Venezuelan people? As long as they remain 
under the control of Maduro, they are going to be looted. We 
could seize them, sell them, put the money in trust for the 
Venezuelan people. Are you moving in that direction, or are you 
just going to let Maduro run the company into the ground, loot 
it, and abscond with the money?
    Mr. Billingslea. Congressman, excellent question.
    Mr. Sherman. If you need any legislation, why haven't you 
submitted it? I bet you we could pass it.
    Mr. Billingslea. Thank you, sir. To your point, we have, in 
fact, specifically moved to prevent Maduro from being able to 
access any funds from CITGO. The Treasury Department, in 
working with the White House when the new Executive Order on 
Venezuela was issued, a specific provision was included to--
    Mr. Sherman. Could he sell the company and keep the money?
    Mr. Billingslea. --To prohibit any payment of dividends out 
of CITGO whatsoever.
    Mr. Sherman. No dividends, but can they just sell all the 
stock? Could Exxon buy the stock tomorrow? Don't tell me about 
antitrust law. Could Amazon buy the stock tomorrow?
    Mr. Billingslea. The CITGO ownership structure, I would 
have to get back to on you, but it is--
    Mr. Sherman. OK, but if you don't want to--you don't want 
to be here after the barn door is closed. If he can sell the 
entire company tomorrow, and I don't think you need CFIUS to 
de-invest in the United States. So anyway, just more work for 
you when you get back.
    Speaking of more work, obviously, we require a lot of 
reports, but that is because if we don't require reports, 
sometimes we pass laws, and nothing happens.
    As to North Korea, the strategy of this Administration is 
to go after individual Chinese companies. That may raise the 
cost of doing business for North Korea a bit. But if the top 25 
Chinese companies in an industry refuse to do business with 
North Korea, the 26th biggest may not care about doing business 
with the United States, and they may decide to pick up the 
North Korean business instead.
    The only way you are going to accomplish anything is if you 
at least threaten to sanction the whole country. It has to be 
something that hits the government in Beijing, not just the 
pocketbook of a few large companies. Because it is not a 
successful sanction if you force somebody to pay a higher ATM 
fee because the banks with the lower ATM fees won't do business 
with them.
    The goal here is not to annoy Pyongyang; it is not to 
destroy Pyongyang. But it is to put them in a position where 
they feel their economy might be destroyed.
    Let us turn to Iran. Mahan Air is designated as a terrorist 
entity given its support for the Assad regime, its involvement 
in terrorism. Yet every day, Mahan Air lands at airports in 
Europe, and every day the flag airline from that country flies 
from that big airport to the United States. Why are we allowing 
European air carriers to start their flight at a Mahan-infested 
airport, and come to the United States? Why are we not going 
after the airports, or are we serious about Mahan Air? Do you 
have an answer?
    Mr. Billingslea. It is a great question, Congressman. We 
are very serious about Mahan Air. It is the aviation arm of the 
Quds Force. It is what they use to traffic weapons, terrorist 
assassins--
    Mr. Sherman. So why are we still doing business with 
airports that accommodate them? Why are American planes still 
buying fuel from the same companies that sell fuel to Mahan Air 
at European airports?
    Mr. Billingslea. Two points on that. One is that we have 
been in a departure from the previous Administration's 
approach, we have been incredibly aggressive with the 
European--
    Mr. Sherman. Setting a rather low bar for yourself, but go 
on.
    Mr. Billingslea. At least we clear the bar, right? But I 
think you make a good point, and I think it would be very 
prudent for any company that transacts with Mahan Air to be 
exceptionally cautious, going forward.
    Mr. Sherman. I don't think they should be cautious. I think 
you should nail. Then they will know.
    But now, let us talk about the IRGC. There are about 800 
IRGC companies that have yet to be sanctioned. You have 
sanctioned about 80. You have sanctions on individual planes. I 
am not counting those. Likewise, only a handful of companies 
and individuals that have done business, or provided 
significant assistance to IRGC have suffered sectionary 
sanctions.
    Is your standard of proof too high? Is your staffing too 
low? How many Farsi-speaking individuals do you have working 
full-time on this?
    Mr. Smith. So Congressman, I would say that--answering a 
few of your questions there quickly, on Mahan Air, I just 
wanted to say we have actually done some designations in the 
last few months against European airlines, Ukrainian airlines 
that had been servicing Ukraine--Mahan Air. We actually took 
action. We are looking for--
    Mr. Sherman. So is there a flight that has been canceled as 
a result of that?
    Mr. Smith. There have been some routes that have been 
stopped over the previous months because of Mahan Air, because 
of the U.S. Government's outreach over the past year, so--
    On the questions you ask on making sure the standard of 
proof, it is the reasonable belief standard that we have. It is 
not too high; it is something that we can live with.
    But in terms of what we are trying to do with IRGC and 
other targets, trying to hit the maximum impact ones. We are 
not trying to do a numbers game, where we give you 20--
    Mr. Sherman. How many Farsi speakers working full-time?
    Mr. Smith. We have a number of them, but I can get back to 
you with the answer--
    Chairman Barr. The time of the gentleman is expired. We may 
have a chance for a second round. The Chair now recognizes the 
gentleman from Indiana, Mr. Hollingsworth.
    Mr. Hollingsworth. First and foremost, I want to echo all 
of what my colleagues have said in thanking you for the work 
that you, your teams put in every single day. Hoosiers back in 
the Ninth District feel unsafe with some of the things they see 
around the world, and I know you and your teams are working 
every day to ensure that the world becomes safer for Americans 
at home, and American interests abroad.
    I wanted to spin the globe back to Venezuela for a moment. 
Mr. Billingslea, you had mentioned that there is a restriction 
on new debt with regard to Venezuela. I certainly understand 
that. I know, also, that that restriction is fairly broad, and 
the summary of new debt, as provided by OFAC, is somewhat 
difficult to parse through and better understand. With regard 
to Russia, specifically, I think there were a number of 
frequently asked questions that were also posted to help people 
parse through what is new debt versus existing, etc.
    I wanted to find out whether there is any possibility, or 
whether there is expectation that more clarity will be provided 
around the new debt definition for Venezuela, specifically. 
That can go to either of you, frankly.
    Mr. Smith. Congressman, thank you for the question. I think 
we have been responding, and we have published additional FAQs 
with respect to many of these questions, with respect to 
Venezuela.
    In fact, we did put something out with respect to what the 
meaning of debt, as well. So we can refer those FAQs to you or 
your constituents. We are getting a lot of calls on this. We 
are trying to be responsive.
    Mr. Hollingsworth. Fantastic. I think, as Mr. Sherman and 
some others have mentioned, some clarity around understanding 
what transactions are permissible, with regard to CITGO, as 
well. I know I have had some constituent companies that have 
been concerned about any dealings with them, or understanding 
what level of dealings with them, and don't want to be 
unnecessarily or unintentionally caught up in something that is 
larger than they are. So I appreciate that as well.
    Mr. Smith. I would just say, if you can have your 
constituents reach out to us, we have the compliance hotline 
that operates as well as the Licensing Division. We are taking 
a lot of calls on this, and trying to make sure that we get the 
clarity out there.
    Mr. Hollingsworth. Fantastic. I know that my constituents 
back home, and the companies that they own, operate, or manage 
that want to do the right thing, understand, as you well said, 
the humanitarian crisis, as well as the national security 
crisis this presents, but they want to do the right thing, and 
understand where they are with regard to the law.
    Following up on Venezuela a little bit further, I know that 
one of the things that economists have talked about is just the 
need to restructure the debt in Venezuela. Obviously, with the 
new restrictions in place, that can't happen, or may happen 
only in some gray zone of understanding. Is it your 
understanding that we are going to require the Madura 
organization, administration, government itself to change? Or 
is there any capacity in which those officials themselves can 
get into compliance, such that there can be a restructuring of 
the debt by IMF or other external resources?
    Mr. Billingslea. So on the IMF question, this is a country, 
this is a regime that has failed to publicize any of the 
standard data that are expected by properly functioning 
economies. On top of that, you are dealing with a regime where, 
Maduro and his cronies, his vice president is a drug kingpin. 
He put him in charge of the debt discussions. This is a 
designated individual. On top of that, this is a country where 
its constitution specifies that the national assembly is the 
only organization that can authorize the issuance of new debt. 
But what Maduro did is wiped out democracy.
    He overturned the national assembly. These people have run 
for their lives. He has now established this constituent 
assembly, which is packed full of his people. This is not a--
    Mr. Hollingsworth. This is certainly understandable to say 
the regime needs to change, period, in order for us to be able 
to accomplish that.
    Mr. Billingslea. I don't think we are saying that. I think 
we are saying we need a return to the democratic order.
    Mr. Hollingsworth. Got it. Understood. Then, is there any 
feeling what the timeframe or timeline might occur? Do you see 
any weakening in resistance by the administration, the 
administration's cronies, etc., or it been as obdurate as it 
had proven in the past?
    Mr. Billingslea. To the extent that the regime has been 
enriching themselves at the expense of the Venezuelan people, 
including through the wholesale theft from PDVSA, the State oil 
company--it is clear that the gravy train has come to an end. 
They are out of money.
    They have crashed their economy. Presumably, at some point, 
people are going to look around and say, ``Wow, the United 
States has designated me. The Canadians have designated me. The 
European Union is starting to designate officials above me. 
Maybe it is time to look at doing something different.''
    Mr. Hollingsworth. Yes. I hope that comes soon. Again, just 
in my closing, I wanted to thank you both for the efforts that 
you undertake every single day.
    Mr. Billingslea. Thank you.
    Mr. Hollingsworth. I will yield back, Mr. Chairman.
    Chairman Barr. Gentleman's time has expired, and there has 
been an interest in a second round of questioning, if our 
witnesses are willing to take that responsibility on. We 
appreciate your testimony today, and again, appreciate your 
service in the interests of our national security, and using 
every economic lever we can to deter our adversaries.
    I do want to follow up on some of the questions regarding 
Russia. As we discussed earlier, I had an opportunity earlier 
this year to travel to Eastern Europe and visit with some of 
our NATO allies. We went to Germany and Poland, Lithuania, 
Estonia, and Montenegro, the newest member of NATO. I can tell 
you that our allies, and the foreign leaders in these countries 
were very consistent in the message that they delivered to us. 
That message was that in addition to Russia's illicit 
annexation of Crimea, and the frozen conflict in Ukraine, that 
there is a whole range of malign activities that the Russians 
are engaged in to destabilize our NATO allies, from 
disinformation campaigns, to incursions into the Baltic with 
their air force. The attempted coup in Montenegro was a major 
topic of conversation and concern; the cyberattacks; the 
militarization of Kaliningrad was of great concern to the 
Baltic countries.
    It has been 4 months since the enactment of the Countering 
of America's Adversaries Through Sanctions Act, which was the 
sanctions legislation on Russia. I want to just ask you all, 
what has Treasury specifically done in implementing that 
sanctions legislation? Second, what has been the response? What 
has been the response of the Russians to that? What, if any, 
behavioral change have we seen from the Russians? I have 
probably given you too much to answer right there, so I will go 
ahead and leave both of you to consider both of those issues.
    Mr. Smith. I can start out and say that we have been very 
busy to make sure that we are implementing the requirements of 
CAATSA, and we are doing it on time, as per the legislation. 
Just about every 30 days, starting at, I think, day 60, 
Congress in that statute required that we do some type of 
implementation of the Act with respect to Russia, as well as 
the other parts. On day 60, we started modifying our directives 
that were put out under the Russia-Ukraine sanctions programs 
to tighten the restrictions in there. We have done that at day 
60; we have done that at day 90.
    So we started a few months ago, and in fact, we just, 
earlier this week, did additional modifications to continue 
tightening, and make sure that we also explain that to 
industry, and to the rest of the world so they know what they 
are and are not allowed to do.
    Chairman Barr. What has been the Russian response to this?
    Mr. Smith. So the Russians haven't been happy, as you can 
imagine. They were concerned with the legislation. I think they 
probably aired that publicly with you all at the time. I think 
we have heard that as well. I haven't had any conversations 
directly with the Russians myself.
    Chairman Barr. Have you seen major behavioral change? The 
disinformation campaigns, the destabilization efforts, the 
Russian aggression continues. Is that correct?
    Mr. Smith. I think the Russian aggression has continued in 
many of the respects that Congress--
    Chairman Barr. That brings to mind the question of how we 
can make sanctions more effective in better changing behavior, 
and deterring Russian aggression. I want to focus on energy, 
the Russian energy sector. Many of our NATO allies have 
expressed interest in the United States helping Eastern Europe 
achieve energy independence; certainly independence from 
Russian gas. Also, in the case of Lithuania, the Astravets 
nuclear facility is being constructed about 30 miles from 
Vilnius. In Belarus--so the question is, should we consider 
sanctioning and getting more aggressive on the Nord Stream 2 
project, Astravets, other energy projects that the Russians are 
endeavoring to interfere with NATO, and get NATO countries 
dependent and reliant on Russian energy?
    Mr. Smith. So I think you probably heard--I know you all 
heard up in Congress as well--as the Administration, on the 
views of European partners and allies with respect to energy 
independence. I think in the CAATSA legislation, Congress did 
impose additional restrictions, additional tightening of the 
sanctions, with respect to many of those features. My 
understanding is that Congress engaged with the European 
partners, as well as did the Administration.
    From my perspective, I think we are still hearing from 
Europe as we implement those sanctions. I am not sure that 
there is anything that I have seen that is needed at this 
point.
    Chairman Barr. I can tell you that if the Russians do not 
respond to what we have done so far, we ought to send a message 
to the Russians, that if they continue their aggressive 
behavior, their energy exports to our NATO allies should be in 
the crosshairs of our sanctions regime. That is the view of one 
Member of Congress, but I would say that there are other 
Members of Congress who feel the same way, as well.
    With that, my time is expired, and so I will now recognize, 
for a second round of questioning, the gentleman from 
California, Mr. Sherman.
    Mr. Sherman. OK. I would like to go back, first, to 
Venezuela. Do I understand, you will be going back to your 
office to make sure that Venezuela can't just sell CITGO, and 
take the money back to Caracas? Do I have that right?
    Mr. Billingslea. It is actually prohibited under law.
    Mr. Sherman. So they can't--neither the dividends--
    Mr. Billingslea. The dividends are not--
    Mr. Sherman. Right. But what they can, of course, do is 
overpay for oil. One way to dividend, if you have the retailer, 
is just have them pay $70 a barrel for the oil that comes out 
of Venezuela, and when the world price is closer to $50. Are we 
monitoring that?
    Mr. Billingslea. I will verify, but I--
    Mr. Sherman. Please answer for the record.
    Mr. Billingslea. Yes, sir.
    Mr. Sherman. But you are saying they can't sell the stock 
of CITGO, nor can they pay a dividend.
    Mr. Billingslea. So they cannot pay the dividends under the 
Executive Order. A wholesale sale of CITGO would likely trigger 
a number things. Let me--
    Mr. Sherman. What would it trigger? If they were going to 
buy a major American company, that would trigger CFIUS, but I 
don't know what it would trigger to sell--
    Mr. Billingslea. My understanding is PDVSA--
    Mr. Sherman. Or they could just sell some of the stock. So 
please answer for the record, but more promptly than we usually 
get questions for the record. What are we doing to make sure 
that CITGO is not overpaying its Venezuelan affiliate for 
either refined or non-refined petroleum products; but second, 
what are we doing to prevent them from selling some, or a 
majority of, or all of the stock?
    Now, as to Mahan Air, it seems like Ukraine was the low-
flying fruit, because it just so happens the Ukrainian airline 
is also in the airline servicing business. United doesn't 
refuel American Airlines flights, but in some airports, the 
airline is also the--
    But it is not just sanctioning in that circumstance. Mahan 
Air is flying into Milan, and into Munich. Are we going to 
continue to allow American planes to fly into Milan and Munich, 
and are we going to continue to allow foreign planes to fly 
from Milan and Munich into the United States?
    Mr. Smith. Sir, I can't talk about what we would do in the 
future, but what I can tell you is that the Treasury 
Department--
    Mr. Sherman. Why haven't we done it already in the past?
    Mr. Smith. The Treasury--
    Mr. Sherman. This is Mahan Air. Why should American towns 
be connected by direct routes into airports that are servicing 
Mahan Air?
    Mr. Smith. The Treasury Department is engaged exclusively--
    Mr. Sherman. We try to prevent American airplane travelers 
from coming close to terrorists. You are flying in, and the 
terrorist airline is already on the ground.
    Mr. Smith. We have been engaging extensively with our 
European partners, who do not have Mahan Air on their sanctions 
list. We have been trying to make sure to provide them the 
information on Mahan Air that they need to have, and at the 
same time, enforcing and implementing the most major impactful 
sanctions designations.
    Mr. Sherman. I will ask you to answer for the record, why 
we should allow Americans to fly in and out of airports, when 
as they land, there are the terrorists, right there. Sounds 
pretty dangerous.
    I will go back to the question of staffing. Do you have 
enough staff to do your job, gentlemen?
    Mr. Billingslea. Congressman, that is always a challenging 
question. The formalistic view is that I would need to 
coordinate with OMB, and so on and so forth, and we are putting 
the budget request forward.
    The practical reality is that when you look at the use of 
Treasury authorities, we are burning hot. In fact, I think we 
just submitted to the Finance Committee the survey that is 
taken of our employees, and if you parse through the survey 
data, what you see is that maintaining work/life balance for 
our people is something we are keeping a very close eye on.
    Mr. Sherman. So your people are working enough so that 
their spouses are complaining. Sounds like we should get you 
some more people.
    Mr. Billingslea. I would say the taxpayers are getting 
their--
    Mr. Sherman. Getting their money to work--all the people 
you have now. I am told that between the two of you, you have 
maybe two Farsi-speaking individuals? Can either of you be 
confident that between the two of you, you have more than two 
that are working on Iran, and that actually speak Farsi? You 
can't tell me, hey, you have five or six that you happen to 
know of, or anything like--
    Mr. Smith. I can go back and ask. We actually do a list 
every year to make sure, and update it. We do have Farsi-
speaking individuals, and that is, when we find a talent, a 
language talent that we need, we bring--
    Mr. Sherman. I have 30 people in my district, native Farsi-
speakers. Let me know.
    Mr. Billingslea. Chairman, I am always on the lookout for 
great resumes.
    Chairman Barr. Gentleman's time is expired. The Chair 
recognizes the Vice Chairman of the subcommittee, Mr. Williams.
    Mr. Williams. Secretary Billingslea, the Obama Treasury 
Department authorized U.S. banks to draw on American savings to 
finance aircraft--we are back at that now--for the world's 
foremost state sponsor of terrorism in jurisdiction primary 
money-laundering concerns. This allows our deposits to be used 
for state-owned airline, Iran Air, that was sanctioned in 2011 
for providing support to the Islamic Revolutionary Guard Corps, 
and the Assad regime in Syria.
    So in a committee hearing last April, we learned that Iran 
Air flew at least 114 flights from Iran to Syria between the 
JCPOA's implementation day and March 30, 2017, likely as an 
airlift in support of the Syrian's government's atrocities. So 
this is an easy question here, a simple yes or no. Can you 
certify for us today that Iran Air has ceased all sanctionable 
activities?
    Mr. Billingslea. I need to get back to you on that, 
Congressman.
    Mr. Williams. OK, if you would.
    Mr. Billingslea. Vice Chairman. Yes, sir.
    Mr. Williams. Next question: Which financial institutions, 
if any, have contacted Treasury with respect to aircraft 
finance for Iran?
    Mr. Smith. I am not sure of the answer to that. I am not 
aware that any have, but we can get back to you.
    Mr. Williams. Would you, please.
    Third, can you assure us that a U.S. bank, or a foreign 
bank with a U.S. nexus, would not be exposed to any significant 
illicit finance risk if it did business with Iran Air?
    Mr. Smith. I am not sure of the question. If you are 
saying, can we assure you that if a U.S. bank engaged in this 
transaction, in any transaction that was licensed, they would 
be part of a transaction that we authorized. But where the 
money goes to in Iran, I can't assure you, or give you any 
guarantee of where that goes.
    Mr. Williams. OK. Do you agree that Congress has a right to 
know whether aircraft finance for Iran may benefit persons that 
engage in sanctionable activities, including support for 
terrorism, weapons proliferation, and human rights abuses?
    Mr. Billingslea. Absolutely. Absolutely, you should know 
that, and we commit to engage with you at any point that is--
    Mr. Williams. OK.
    Mr. Billingslea. --You want to have the discussions.
    Mr. Williams. So I think we have two questions we need to 
get, if you get back with us on that.
    Now, another question I have. As part of the omnibus 
package that was passed earlier, we requested that the Treasury 
Department issue a report on entities that were delisted under 
the JCPOA, and whether such entities have engaged in 
sanctionable activity since the JCPOA. We have not got that 
result yet, so if you could help us there. So what is the 
status of that report? Do you feel that any entities that had 
their sanctions lifted under the JCPOAs have continued to 
engage in sanctionable activity since the deal began to be 
enforced?
    Mr. Smith. So we continue working on those reports. As we 
said, we have about 90 a year that we are working on, and most 
of those, we get in on time. Some are more difficult, because 
they are time-consuming.
    If we see sanctionable activity, if we see sanctionable 
conduct, we act against it.
    Mr. Williams. OK. Mr. Chairman, I yield my time back.
    Chairman Barr. Gentleman yields back. The Chair now 
recognizes the gentleman from Michigan, Mr. Huizenga, the 
Chairman of the Capital Markets, Securities, and Investment 
Subcommittee.
    Mr. Huizenga. Thank you, Mr. Chairman, and appreciate your 
testimony today. Good to see you again, and a couple quick 
questions; one, I want to touch on China, and then, I want to 
talk a little bit about North Korea.
    In 2005, the U.S. designated China's Banco Delta Asia as a 
financial institution of, quote, ``primary money laundering 
concern'' and Treasury Department recently did the same thing 
with China's Bank of Dandong. However, these banks are 
relatively small institutions, and are there larger foreign 
financial institutions that Treasury is going after?
    Mr. Billingslea. Thanks for the question, Congressman. We, 
as a matter of practice, don't tip our hand in advance of any 
actions.
    Mr. Huizenga. I don't want to know names. I want to know 
whether there are bigger--there certainly are bigger fish to 
fry. I am looking for some reassurance that Treasury is looking 
at this, and is looking to pursue this.
    Mr. Billingslea. I think the best reassurance I can give 
you, because it is out there, is that we put out an advisory to 
all of our financial institutions through FinCEN, which 
delineated, which showed the typology the Bank of Dandong was 
engaged in, and then highlighted other areas where our banks 
need to be wary, and pointed them right at a particular part of 
China adjacent to North Korea, where we urge our banks to be 
vigilant.
    You can interpret directly from that that we have a lot of 
concerns, and we continue to investigate.
    Mr. Huizenga. Mr. Chairman, maybe--We had a great 
classified briefing yesterday, and maybe this would be an issue 
and a subject that we could, if we needed to go into a 
classified, bipartisan briefing, we might want to look at doing 
that.
    Quickly, in a July 13th Washington Post article, a high-
level North Korea defector who was part of routinely evading 
sanctions noted how even when North Korean firms are on the 
blacklist, he said, quote, ``North Korea is 100 percent state 
enterprise, so these companies just change their names the day 
after they are sanctioned. That way, the company continues, but 
with a different name than the one on the sanctions list,'' 
endquote. Without objection, Mr. Chairman, I would like to 
enter that article into the record as well. So I assume I--
without objection, I would like to enter an article into the 
record.
    Chairman Barr. So ordered.
    Mr. Huizenga. Thank you.
    We have also seen North Korean entities designated by 
Treasury--is there more energy being devoted to enablers in 
China, or Southeast Asia and elsewhere? Rather than just play 
Whack-a-mole with the DPRK entities.
    Mr. Billingslea. Yes, sir. The key is not to play Whack-a-
mole. The key is to map these networks out, and then to take 
the networks down simultaneously, employing not just sanctions 
authorities from OFAC, but working with our law enforcement 
community, partner nations and their communities, the 
intelligence community and so on--diplomatic endeavors. 
Otherwise, you are treating symptoms of the problem, not the 
root cause.
    Mr. Huizenga. Yes, treating those symptoms, I 
wholeheartedly agree, yes. It just--this one stunned me. There 
are media reports that there is a proposal circulating within 
the U.N. Security Council that would have frozen North Korean 
leaders' assets. I said to myself, ``I didn't know there wasn't 
an asset that wasn't frozen already.'' If it hasn't been 
frozen, why not? This was the sixth missile launch test that 
they have done. If we haven't gotten to everybody, every 
Korean, significant Korean, North Korean leaders' assets 
internationally--which, reports are, they are significant--we 
know that they have no problem starving their own people for 
advancement of both the weapons, as well as their own 
aggrandizement.
    But what is Treasury doing? Is Treasury going after those 
banks that hold those assets, as well?
    Mr. Billingslea. We are.
    Mr. Huizenga. OK. I would look forward--maybe we can unpack 
this a bit more in a slightly different setting, but I think 
this is a significant, significant issue, and this is one of 
the few tools that we know has worked in the past, and that we 
need to continue to implement that.
    So with that, Mr. Chairman, I yield back.
    Chairman Barr. The gentleman yields back. The Chair now 
recognizes the gentleman from West Virginia for 5 minutes.
    Mr. Mooney. Thank you. OK, continuing right along on the 
North Korea issue line of questioning, and I think my first 
question is relating to the Office of Foreign Assets Control, 
so direct this first one to Mr. Smith. On September 26, OFAC 
announced it was designating eight North Korean financial 
institutions, along with 26 representatives of North Korea, 
banks abroad. So how is it that as of September 2017, there 
were still any North Korean banks that remained unsanctioned, 
and how many more still have not been designated?
    Mr. Smith. So when we identify a bank--and we use a 
specific terminology--when we identified those banks, we were 
identifying them for the ease of the public. But the state-
owned banks had already been designated as a matter--their 
assets would have been frozen in the United States, because 
they were government of North Korea. So we use the term. We 
identified those banks, and then we sanctioned the additional 
financial representatives around the world, because we were 
adding them to our list.
    So it is very important for us, because our SDN List is 
used around the world. We want to make sure that is on every 
bank's filter, no matter in the United States, but also around 
the world, so that they get a hit, even if it is not in the 
United States.
    Mr. Mooney. OK, so you have it covered, then.
    Mr. Smith. We have it covered.
    Mr. Mooney. They have all been designated, one way or 
another, for sanctions, then. OK.
    Second then, what is the real impact of blocking a North 
Korean bank's property in the United States? What is the 
magnitude of their assets? How would they have access to them 
under existing U.S. trade restrictions?
    Mr. Smith. So the impact of sanctions can be different, 
depending on the entity that is sanctioned. A North Korean bank 
would likely not have had assets in the United States, because 
we had already prohibited that activity.
    But when I say the impact of sanctions is freezing the 
assets in the United States. It is putting on them on our 
blacklist, so no U.S. person around the world can deal with 
them. But it is also, our SDN List is used around the world, by 
banks around the world, by major companies and conglomerates 
around the world. So that is the impact, is making sure that 
not just in the United States, but the rest of the world can 
follow suit and hit our alarm.
    Mr. Mooney. OK.
    Mr. Billingslea. It is not just banks that use the OFAC SDN 
List. There are certain governments--and we don't talk much 
about this, but there are certain governments that actually 
will pursue parallel blocking actions on their own, based on an 
OFAC sanction. So we do get a magnifying effect from a number 
of key countries when OFAC takes action.
    Mr. Mooney. Thank you. Second question, still on North 
Korea, either one of you who has more information, try to 
answer this one.
    I am going to cite a New York Times article. As a 
conservative, I don't often cite the New York Times articles, 
but in this particular case, I think they have done some good 
work.
    In their article on September 8th, it was reported in this 
New York Times article that North Korea may now be exporting 
less to China, but North Korea may also be receiving trade 
credits from China to finance continued imports. Of course, 
these trade credits would help nullify the effect of sanctions, 
even if North Korea were having problems coming up with hard 
currency. So if Chinese entities, including banks, are 
negotiating the impact of trade sanctions, shouldn't the 
Treasury be designating them?
    Mr. Billingslea. That is a great point, and I think we are 
seeing, as they evolve in response to U.N. Security Council 
resolutions, the constant effort to evade sanctions and barter 
is one of the ways they are--
    So trade credits, or maybe just plain old barter is another 
way that they are trying to evade the effect of the financial 
hammerlock that we are endeavoring to put on them. So we are 
tracking that, and if you trade with North Korea--I don't care 
whether you are trading dollars, or won, or whatever, any 
barter relationship exposes you to U.S. sanctions.
    Mr. Mooney. OK. Thank you, Mr. Chairman. I will yield back. 
Yield my time to the Chair.
    Chairman Barr. The gentleman yields back, and there is 1 
minute left remaining from the gentleman's time, and if I could 
just ask one final question to our witnesses with respect to 
North Korea.
    A lot of the questions today on North Korea focused on 
secondary sanctions on Chinese entities, and we have talked a 
lot about the fact that those secondary sanctions may not yet 
have been fully exhausted. To the extent that is the case, is 
that because of U.S. fear or concern that we may lose Beijing 
cooperation, or is it merely a resource issue for OFAC and 
Treasury?
    Mr. Billingslea. It is not a fear in any stretch of the 
imagination. We have a game plan. We have a strategy, and we 
are executing that strategy, and that strategy involves a 
number of different prongs of activity, of which Treasury 
action is but one. We are maintaining synchronization with our 
activities in the United Nations, with our Ambassador there, 
with State Department, with law enforcement, intelligence, and 
the Department of Defense.
    When it sometimes seems like you are not quite sure why we 
are synchronizing things the way we are, we would be happy to 
come up and explain to you, because there is a method to this 
full-on economic pressure campaign.
    Chairman Barr. I would like to thank our witnesses not only 
for testimony today, but your service, and the work that you 
are putting in to keep the American people safe, and to advance 
the national security interests of our country.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    [Whereupon, at 3:54 p.m., the subcommittee was adjourned.]

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