U.S. GOVERNMENT PUBLISHING OFFICE

32–576 PDF WASHINGTON : 2019

S. HRG. 115–371 

RUSSIA SANCTIONS: CURRENT EFFECTIVENESS AND 

POTENTIAL FOR NEXT STEPS 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

ON 

EXAMINING THE IMPLEMENTATION AND EFFECTIVENESS OF THE 

SANCTIONS PROGRAM CURRENTLY IN PLACE AGAINST RUSSIA 

AUGUST 21, 2018 

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

( 

Available at: https://www.govinfo.gov/ 
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

MIKE CRAPO, Idaho, Chairman 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

PATRICK J. TOOMEY, Pennsylvania 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

DAVID PERDUE, Georgia 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

JERRY MORAN, Kansas 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

BRIAN SCHATZ, Hawaii 

CHRIS VAN HOLLEN, Maryland 

CATHERINE CORTEZ MASTO, Nevada 

DOUG JONES, Alabama 

GREGG RICHARD, Staff Director 

MARK POWDEN, Democratic Staff Director 

JOHN O’HARA, Chief Counsel for National Security Policy 

KRISTINE JOHNSON, Professional Staff Member 

ELISHA TUKU, Democratic Chief Counsel 

LAURA SWANSON, Democratic Deputy Staff Director 

COLIN MCGINNIS, Democratic Policy Director 

DAWN RATLIFF, Chief Clerk 

CAMERON RICKER, Deputy Clerk 

JAMES GUILIANO, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

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C O N T E N T S 

TUESDAY, AUGUST 21, 2018 

Page 

Opening statement of Chairman Crapo ................................................................. 1 

Prepared statement .......................................................................................... 47 

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2 

Prepared statement ................................................................................... 47 

WITNESSES 

Sigal P. Mandelker, Under Secretary, Terrorism and Financial Intelligence, 

and Acting Deputy Secretary, Department of the Treasury ............................ 5 

Prepared statement .......................................................................................... 49 

Responses to written questions of: 

Senator Brown ........................................................................................... 77 

Senator Toomey ......................................................................................... 78 

Senator Cotton ........................................................................................... 78 

Senator Menendez ..................................................................................... 79 

Senator Tester ........................................................................................... 79 

Senator Warren ......................................................................................... 80 

Senator Donnelly ....................................................................................... 81 

Senator Schatz ........................................................................................... 82 

Christopher Krebs, Under Secretary, National Protection and Programs Directorate, Department of Homeland Security .................................................... 6 

Prepared statement .......................................................................................... 70 

Responses to written questions of: 

Senator Brown ........................................................................................... 83 

Senator Moran ........................................................................................... 84 

Senator Tester ........................................................................................... 88 

Christopher A. Ford, Assistant Secretary, Bureau of International Security 

and Nonproliferation, Department of State ....................................................... 8 

Prepared statement .......................................................................................... 73 

Responses to written questions of: 

Senator Brown ........................................................................................... 89 

Senator Toomey ......................................................................................... 90 

Senator Cotton ........................................................................................... 91 

Senator Menendez ..................................................................................... 92 

Senator Schatz ........................................................................................... 93 

(III)

(1) 

RUSSIA SANCTIONS: CURRENT EFFECTIVENESS AND POTENTIAL FOR NEXT STEPS 

TUESDAY, AUGUST 21, 2018 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:02 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Mike Crapo, Chairman of the Committee, 

presiding. 

OPENING STATEMENT OF CHAIRMAN MIKE CRAPO 

Chairman CRAPO. This hearing will come to order. 

This morning the Committee will receive testimony from senior 

Administration officials from the Departments of Treasury, State, 

and Homeland Security on the implementation and effectiveness of 

the sanctions program currently in place against Russia. 

The reasons for these sanctions include Russia’s standing military incursions in Ukraine; abetting Assad’s atrocities in Syria; 

conducting cyberenabled information warfare activities and 

cyberattacks against United States critical infrastructure, including 

its malicious meddling in U.S. elections; and a host of other malign 

Russian activities. 

The Banking Committee plays a leading role in developing any 

legislation that proposes the use of sanctions and financial pressure, more especially those measures involving financial institutions, sovereign debt, and other financial instruments to address 

serious threats to the national security of the United States. 

Just about 1 year ago, on August 2nd, the President signed into 

law the Countering America’s Adversaries Through Sanctions Act 

of 2017, known as ‘‘CAATSA’’, which included in it, among other 

things, authorities for not only a set of strengthened sanctions 

against Russia but also brand-new authorities for several powerful 

mandatory secondary sanctions. 

It was this Committee that put together the foundation for those 

sanctions and financial measures on Russia and then worked with 

the Committee on Foreign Relations to expand them as a part of 

CAATSA. 

CAATSA was truly a foursquare effort. It was not only strongly 

bipartisan but also bicameral. It passed the House by a vote of 

419–3, and 2 days later by the Senate on a vote of 98–2. 

It is not often that Congress acts together in such a strong manner, as marked by near-unanimous votes. But then Russia is a 

menace on so many different levels today that Congress can be 
2 

compelled to act with a single voice to find solutions that will protect America and democratic values across the world. 

To its credit, the Administration, in the year since CAATSA, has 

imposed some of the toughest sanctions on Russia in years, particularly with regard to those imposed in April on Russia’s oligarchs 

and their business associations. 

The bulk of sanctions imposed against Russia pertain to its unlawful invasion and annexation of Crimea. These were strengthened by Congress in CAATSA and, absent any other change in 

Putin’s behavior, will likely remain in place until he is no longer 

in power and Crimea is returned. 

In all, over the last year the Administration has sanctioned over 

200 targeted Russian individuals and entities, for either its 

cyberattacks or Ukraine behavior, either pursuant to congressional 

sanctions or under its own executive authority. I hope to receive an 

update today from our witnesses on how the sanctions against Russia are being implemented and enforced. 

It was a positive step when, 2 weeks ago, in response to Russia’s 

use of a nerve agent in Britain against one of its former spies and 

his daughter, the State Department showed its resolve against 

Moscow while it took a stand with our British allies by imposing 

a set of escalatory sanctions under the Chemical and Biological 

Weapons Control and Warfare Elimination Act of 1991. 

The Administration is taking some important steps against 

Putin, his cronies, and the industrial apparatus they control. But 

can Congress expect more from the Administration? And when? 

Congress itself is positioned to do more. There are bills in this 

Committee and in the Foreign Relations Committee which seek to 

escalate economic pain throughout Russia’s banking and energy 

sectors and sovereign debt markets. 

As we all—and that includes the Administration—consider next 

steps to further constrain Putin, including sanctions and other diplomatic initiatives, two questions come to mind: 

What degree of success have the existing evolutions of sanctions, 

which work to constrain the Russian economy and derail the activities of those individuals closest to Putin, had on Putin’s behavior 

at home and abroad? 

And, second, what is the most effective way to coordinate and 

strengthen sanctions with our European allies and other partners? 

We will obviously have many more questions, but I am finished 

with that at this point. 

Senator Brown. 

OPENING STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman. I am really glad you 

are holding this hearing. Thank you to our witnesses for serving 

in our Government. This is the first in the coming weeks on sanctions and other measures to more forcefully counter Russia’s continuing efforts to attack the United States and our allies. 

While sanctions have had some effect on Russia’s economy, it is 

less clear what effect they have had on its malign activities around 

the world. Russia remains in Crimea, its proxies are still in Eastern Ukraine, it serves as the arsenal of Assad, and it continues to 

attack our elections and other critical infrastructure. 
3 

Earlier this morning Microsoft issued a new report outlining 

Russian attacks on the U.S. Senate and on think tanks, mostly 

anti-Russia or anti-Trump think tanks, one of which hosts an important kleptocracy initiative targeting oligarchs close to Putin. 

True to form, the Kremlin promptly denied involvement. That is 

nonsense. The President should call it that and forcefully respond. 

Our Government—we and the President both—must right now 

send a more powerful and direct message to Putin and those within 

his circles: ‘‘We know what you are doing. It must stop. And if it 

continues, if you continue, you and your Government will pay a 

dear price.’’ So far the President has basically been AWOL, undercutting even modest efforts of professionals in Treasury, in State, 

in DHS, and the intelligence community. 

Over a year ago, Congress gave the President, as the Chairman 

just said, the authority to use more assertive sanctions against 

Russia. My colleagues and I have pressed for nearly a year for 

stronger CAATSA implementation. After months of waiting, we requested assessments by the Inspectors General of the intelligence 

community, State, and Treasury Departments. 

These hearings and these IG audits are not simply a reaction to 

the President’s startling performance in Helsinki, which was widely panned on both sides of the aisle and both sides of the Atlantic. 

There is a deeper problem. With a few exceptions, the President 

has refused to forcefully use the new authorities under CAATSA. 

Let me give one example. Administration officials identified Russians responsible for supplying chemical weapons components for 

use in Syria, the ones that killed and maimed men, women, and 

children. Our U.N. Ambassador announced the imminent imposition of sanctions. The next day they were withdrawn, reportedly on 

orders from the President. 

Instead, the Administration requested that a broader waiver to 

Section 231 be included in the defense bill, basically because the 

President could not certify the key condition of the existing waiver: 

that Russia was reducing its cyberattacks against the United 

States. 

I think it was a bad idea to use the recent defense bill to relax 

waiver authorities on Russian defense and intelligence sector sanctions. Instead of strengthening sanctions, we have gone in the opposite direction. 

That is why the Administration continues to face fierce bipartisan criticism from this Committee, from this body, on its Russia 

policy, why a new round of oversight hearings is being convened— 

and I give the Chairman credit for that—and why members on 

both sides are proposing new sanctions. 

In addition to urging the Administration to use CAATSA more 

aggressively, I think most of us agree Congress should also do more 

to increase pressure. Congress crafted tough Russia sanctions enacted last August by overwhelming majorities in both chambers. 

We should build on that. 

We should focus on the facts and broader strategic questions: 

What is Russia’s Government still doing in Syria and Ukraine? 

What active cyberattacks are they directing against our elections 

and critical infrastructure? What powerful economic, trade, finan-
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cial, diplomatic, and political tools can we deploy now to deter 

those attacks? 

Russia’s election interference, confirmed unanimously by U.S. intelligence earlier this year and reaffirmed again today, poses a 

problem that goes far beyond foreign policy and strikes at the core 

of our democracy. In no way is this a partisan issue. 

We are 77 days away from another election, and the Director of 

National Intelligence, Microsoft, and others have been sounding the 

alarm that the warning lights are flashing red again. And while 

some efforts are being made to bolster State election security measures and otherwise contain these threats, it appears little is being 

done to address their source: Russia’s Government. 

I know my constituents are clear-eyed about these threats. The 

Ukrainian community in Ohio and around the world knows firsthand—like our NATO allies Latvia, Lithuania, Estonia—the dangers of unchecked Russian aggression. 

That is why we should not only press to more aggressively implement current Russian sanctions, but we must also strengthen our 

response. New bipartisan sanctions measures have been introduced. These hearings are a critical next step. 

Thank you to the three of you for joining us today. I am interested to hear where we are, what effects, if any, the current sanctions regime is having on Russia’s economy and, more importantly, 

on its behavior, and your ideas on how we will more forcefully confront these threats in the months to come. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you, Senator Brown. 

Today we will hear testimony from three Administration officials 

who deal firsthand with confronting the Russia threat. 

We will first hear testimony from Ms. Sigal Mandelker, the Acting Deputy Secretary and current Under Secretary of Treasury for 

Terrorism and Financial Crimes, who is the country’s chief sanctions architect. 

Next we will hear from Mr. Christopher Krebs, the Under Secretary of Homeland Security at the National Protection and Programs Directorate, who is responsible for reducing, if not eliminating, then recovering from threats to our Nation’s cyber and communications and other infrastructure. 

And, finally, we will hear from Dr. Christopher Ford, the Assistant Secretary of State responsible for the Bureau of International 

Security and Nonproliferation at the State Department, who can 

provide us with some valuable insight on challenges with Russia. 

As you can see, Members of the panel, we have a very good attendance, and a number of those who are not here are at a different hearing on Russia in the Foreign Relations Committee. And 

because of that I thank you, first of all, for your written testimony. 

It is extremely helpful to us. I ask you to honor and remember the 

5-minute rule for your oral testimony so we can get through the 

questioning period from our Senators. And I also remind our Senators that we have a 5-minute rule, and we will try today to stick 

very closely to that. 

With that, Ms. Mandelker. 
5 

STATEMENT OF SIGAL P. MANDELKER, UNDER SECRETARY, 

TERRORISM AND FINANCIAL INTELLIGENCE, AND ACTING 

DEPUTY SECRETARY, DEPARTMENT OF THE TREASURY 

Ms. MANDELKER. Thank you. Chairman Crapo, Ranking Member 

Brown, and distinguished Members of the Committee, thank you 

for inviting me here today to speak on behalf of the Treasury Department and provide an update on our comprehensive efforts to 

counter Russia’s malign activity. Our efforts, taken together with 

our partners across the U.S. Government and around the world, 

are guided by a clear understanding of the threat Russia poses to 

the United States and to our friends and allies. 

As this Committee is well aware, Russia seeks to challenge the 

United States and its allies in a variety of ways. They are continuing their occupation of Crimea and ongoing aggression against 

Ukraine. They are attempting to subvert Western democracies, including our own, through election interference. They have used 

chemical weapons in an attempt to assassinate a British citizen 

and his daughter in the United Kingdom. They are perpetrating 

malicious cyberattacks, and they are facilitating sanctions evasion 

and other illicit activity across the globe. The breadth and 

brazenness of Russia’s malign conduct demands a firm and vigorous response. 

Precisely for this reason, Treasury’s Russia sanctions program is 

among our most active and impactful. Since January 2017, this Administration has sanctioned 229 Russian-related individuals and 

entities for a broad range of access, 212 of which were sanctioned 

by there’s Office of Foreign Assets Control, including a number this 

morning. 

Indeed, we have issued Russia-related measures in 7 of the last 

9 months in a number of different actions. In doing so, we have targeted a veritable ‘‘Who’s Who’’ of Russia’s most prominent companies. These include Russia’s primary State-owned weapons trading 

company, one of the largest independent power companies in Russia, and a major Russian oil company. Our targets also include the 

heads of major State-owned banks and energy firms, such as VTB 

Bank and Gazprom, as well as some of Putin’s closest associates. 

These figures include Putin affiliates Oleg Deripaska and Viktor 

Vekselberg, as well as Putin’s son-in-law. 

Indeed, those who deal with such persons risk being targeted by 

our powerful secondary sanctions authorities under CAATSA. Sanctioning these Russian individuals and entities has made them radioactive. We have made clear to the world that those who choose 

to continue to do business with them do at their own peril. 

That CAATSA was passed by a near-unanimous vote demonstrated great resolve by Congress to counter Russia’s malign activity, and we share that resolve. 

As companies across the globe work to distance themselves from 

sanctioned Russian persons, our actions are imposing an unprecedented level of financial pressure on those supporting the Kremlin’s 

malign agenda and on key sectors of the Russian economy, as the 

impacts of our Russia-related actions are felt far and wide. 

Indeed, Treasury’s actions have extensively impacted the financial interests of targeted individuals and entities. Our oligarch 

sanctions alone have substantially reduced the net worth of those 
6 

individuals and their companies. Similarly, other companies designated for their links to Crimea have been forced to cut production 

and have lost business relationships with foreign commercial partners. 

In addition, we have cutoff malicious cyberactors from the U.S. 

financial system and beyond, including those providing offensive 

cybercapabilities to the Russian intelligence services and covertly 

working on behalf of the Kremlin to interfere with the 2016 U.S. 

election. 

In addition to sanctions, we are also strategically and smartly deploying Treasury’s other economic authorities to disrupt Russia’s illicit financial conduct and harden the international financial system against its predation. And we regularly engage our foreign allies and partners, especially those in Europe, to coordinate these efforts and augment the impact of our sanctions and our other actions. 

By strategically leveraging all of our complementary authorities, 

we are increasing financial pressure on Russia to advance our national security priorities while simultaneously mitigating collateral 

impacts on the United States, our European allies, and the global 

economy. 

There is no question that we have imposed major costs on Russia. Yet the significance of our actions and our other financial 

measures must ultimately be measured in terms of their strategic 

impact. Though Russia’s malign activities continue, its adventurism undoubtedly has been checked by the knowledge that we 

can bring even more economic pain to bear using our powerful 

range of authorities—and that we will not hesitate to do if its conduct does not demonstrably and significantly change. 

Thank you. 

Chairman CRAPO. Thank you. 

Mr. Krebs. 

STATEMENT OF CHRISTOPHER KREBS, UNDER SECRETARY, 

NATIONAL PROTECTION AND PROGRAMS DIRECTORATE, 

DEPARTMENT OF HOMELAND SECURITY 

Mr. KREBS. Chairman Crapo, Ranking Member Brown, Members 

of the Committee, thank you for the opportunity to discuss the Department of Homeland Security’s ongoing efforts to mitigate cybersecurity risk to our Nation’s critical infrastructure. Safeguarding 

and securing cyberspace is a core homeland security mission in an 

area that I have the honor to lead for DHS. 

Malicious cyberoperations remain one of the most significant 

strategic threats to the United States, holding our national security, economic prosperity, the integrity of our democracy and public 

health and safety at risk. Over the past several years, network defenders in both Government and industry have seen the threat 

landscape grow more crowded, active, and dangerous. In fact, 2017 

was one of the most costly and active in terms of global cybersecurity incidents, including the ‘‘WannaCry’’ ransomware incident attributed to North Korea and the ‘‘NotPetya’’ malware incident attributed to Russia. DHS and our interagency partners also worked 

with industry to identify and alert on Russian Government efforts 

to infiltrate domestic energy infrastructure. 
7 

But adversary actions did not begin or end in 2017. Russia’s attempts to interfere in the 2016 U.S. Presidential election are well 

and widely known, as are their activities to interfere in other elections in Western Europe. With the 2018 midterm just around the 

corner, we are working aggressively to support State and local efforts to secure elections. 

This partnership with election officials is representative of one of 

two core anchors of the U.S. deterrence strategy. Those two anchors are defense in depth to minimize or eliminate adversaries’ 

success and impose costs with strong consequences from malicious 

behavior. My partner agencies here at the hearing have equities in 

both denial and consequences, but my organization, the National 

Protection and Programs Directorate, is almost exclusively focused 

on defense through protection of critical infrastructure. 

Our approach is one of collective defense, emphasizing the shared 

responsibility of cybersecurity across industry and Government. We 

work through partnerships that identify stakeholder requirements, 

align unique capabilities to gaps, and add value and enable more 

effective security and risk management outcomes. We are focused 

on sharing information related to the threat and potential mitigation measures to improve defenses, leading integrated, coordinated 

industry and Government planning to address systemic risk, and 

conducting incident response to limit harm and inform defensive 

measures. 

We manage these activities out of operational centers within 

NPPD, my organization, that prioritize collaboration across the full 

range of stakeholders—industry or Government. Our National Cybersecurity and Communications Integration Center, or NCCIC, operates at the intersection of private sector, State and local governments, Federal agencies, international partners, law enforcement 

intelligence, and defense communities. The operational focus of the 

NCCIC is near-term, day-to-day cybersecurity risk management, 

providing stakeholders with a 24-by-7 steady-state capability to address today’s cybersecurity challenges. 

We also work with stakeholders to develop information-sharing 

venues for affinity groups. Recently, working with election officials, 

we established the Election Infrastructure–Information Sharing 

and Analysis Center, or EI–ISAC. All 50 States participate in what 

is the fastest-growing ISAC. 

The recently announced National Risk Management Center provides a forum for Government and industry collaboration on understanding risk and developing solutions for reducing cyber and other 

systemic risk to national and economic security. The operational 

focus of the National Risk Management Center is longer-term strategic risk, providing a cross-Government and industry capability to 

address tomorrow’s challenges. Through the NRMC, we will partner with innovative industry coalitions like the Financial Systemic 

Analysis and Resilience Center and the Council to Secure the Digital Ecosystem, aiming to break down sector-based silos to craft a 

more holistic understanding of national risk and the integrated 

strategies to drive down that risk. 

Our mission at DHS is to ensure that our stakeholders have the 

necessary tools and support to understand and act on risk. In the 

face of increasingly sophisticated threats, DHS is stepping up our 
8 

efforts to defend the Nation’s critical infrastructure from malicious 

cyberactivity. We are working to better evolve our protection of 

critical functions from Nation-State and other malicious activities. 

And before I close, I would like to thank Congress for the legislative progress thus far in strengthening DHS’ cybersecurity and critical infrastructure authorities. Now we must move on to the next 

step: to create the Cybersecurity and Infrastructure Security Agency, or CISA, at DHS, which would see our organization, the National Protection and Programs Directorate, renamed and established as a new agency, an operational agency. Establishing this 

agency would enhance DHS’ ongoing efforts as the focal point for 

private sector and Government stakeholders in support of our Nation’s cybersecurity. We strongly support this much-needed effort 

and urge quick action by the Senate to pass this into law. 

Thank you for the opportunity to appear before the Committee 

today. 

Chairman CRAPO. Thank you. 

Mr. Ford. 

STATEMENT OF CHRISTOPHER A. FORD, ASSISTANT SECRETARY, BUREAU OF INTERNATIONAL SECURITY AND NONPROLIFERATION, DEPARTMENT OF STATE 

Mr. FORD. Thank you, Chairman Crapo, Ranking Member 

Brown, and Senators. In light of the important role of this Committee in particular, as you outlined, Mr. Chairman, in international sanctions, I thought I would try to contribute today by explaining a bit of how we are employing the tools that Congress has 

given us vis-a-vis Russia in order to push back against the various 

malign activities of the Putin regime. I will focus in particular on 

Section 231 of CAATSA because that has fallen to my Bureau, the 

Bureau of International Security and Nonproliferation, to implement. 

In passing CAATSA last year, Congress made very clear that its 

intention was to pressure Russia to change its behavior with respect to a very wide variety of malign acts, including in response 

to Putin’s effort to interfere in our own Presidential election in 

2016. 

We have heard that message from Congress loud and clear, but 

I want to stress also that these sanctions tools have value in a 

broader arena of great-power competition and geopolitical competitive strategy. This is an important theme for our Administration. 

The new National Security Strategy calls out ‘‘the contest for 

power’’ as ‘‘[a] central continuity in history,’’ and it warns about 

challengers—specifically, ‘‘the revisionist powers of China and Russia, the rogue States of Iran and North Korea, and transnational 

threat organizations’’—that are, as it describes, ‘‘actively competing 

against the United States and our allies and partners.’’ 

Similarly, Mr. Chairman, the National Defense Strategy observes 

that ‘‘[t]he central challenge to U.S. prosperity and security’’ today 

is ‘‘the reemergence of long-term, strategic competition.’’ ‘‘It is increasingly clear,’’ that Defense Strategy says, ‘‘that China and Russia want to shape a world consistent with their authoritarian 

model—gaining veto authority over other Nations’ economic, diplomatic, and security decisions.’’ The National Defense Strategy notes 
9 

that ‘‘[b]oth revisionist powers and rogue regimes are competing 

[with us] across all dimensions of power.’’ 

And this mindset, Mr. Chairman, is one that we bring to approaching CAATSA with respect to Russia. Russia has undertaken 

a campaign of malign activities in its attempt to compete with us, 

our allies and our partners. And CAATSA 231 gives us more tools 

with which to respond. 

We are focusing in particular upon transactions with the Russian 

arms industry for multiple reasons. First of all, these are often the 

same arms that Russia itself uses and continues to use for aggression against Ukraine, for example. The world should shun transactions of that sort. 

Second, as Willie Sutton is reported to have said when asked 

why he robbed banks, ‘‘That is where the money is.’’ High-technology military equipment is one of the only competitive sectors of 

the Russian economy these days, and Moscow makes a good deal 

of money from selling arms abroad. These funds fuel the Kremlin’s 

malign activities, spread its influence, and support Russia’s development of newer and even more deadly weapons, and so we use 

sanctions tools to go after those revenues. 

But, more broadly, Russia continues to use its arms transactions 

as a tool of geopolitical influence. For Russia, it is not just about 

money, but about the relationships that its arms trade creates. 

Scaling back and shutting down Russia’s arms deals and deterring 

such transactions in the future strike directly at the Kremlin’s malign activities and its influence, and that is the philosophy that we 

bring to implementing Section 231. 

Naturally, we seek to cooperate with Russia wherever we can on 

issues of shared interest because that is important for the security 

of the world. But where we need to push back, we do so, and we 

do so hard. And we have hard real successes in using the availability of CAATSA sanctions and the threat of such penalties in deterring and dissuading transactions with the Russian arms business. 

There are billions of dollars in transactions that have not occurred and will not occur thanks to the tools that Congress has 

given us and our ability to use those to provide diplomatic leverage. 

That is billions of dollars that Putin’s war machine will not get and 

through which the Kremlin’s malign influence will not spread, and 

a slew of relationships between the Kremlin and its would-be arms 

clients that will not occur or broaden or deepen. 

So we have not yet had, in fact, the opportunity, the need to actually impose CAATSA sanctions yet, in part because we are in the 

business of trying to make sure that those dogs do not, in fact, 

bark. We want these things to be conspicuous by their absence, and 

we are making good progress in dissuading and deterring transactions from occurring. 

We are not reluctant to do this, and if circumstances warrant, we 

will certainly be forthright and vigorous in applying the full 

breadth of the available penalties. But I want to stress how important our successes have been to date in making sure that billions 

of dollars of transactions do not occur. 

In my written remarks, which I would ask, Mr. Chairman, be 

submitted as part of the record, I outline a series of principles 
10 

through which we approach implementation of Section 231. I would 

be delighted to talk about any or all of those as the course of the 

hearing progresses, but let me simply conclude by making the point 

that we are applying these as a vigorous tool of competitive strategy to make sure that we do as much as we can with those tools 

to undermine Russia’s ability and willingness to use its malign behavior as a way to accrue its own strategic advantage around the 

world. We are starting to have significant successes here, and I 

would be happy to talk about these and take any other questions 

that the Committee would like as this time goes forward. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you, Mr. Ford. 

I will start with you, Ms. Mandelker. As a number of you have 

said and we have said in our introductory remarks, there have 

been a number of sanctions imposed against Putin, his cronies, and 

the industrial apparatus they control. What type of sanctions have 

had the most impact on Putin? And what is the best strategy to 

change his behavior on either the Ukraine and cyberintrusions? 

Ms. MANDELKER. Thank you, Chairman Crapo, for that question. 

We have had, as I already mentioned, well over 220 sanctions 

across the interagency since the beginning of this Administration, 

and the impacts of our sanctions have been felt in a number of very 

significant ways. 

I would point as an example to the designations that we had in 

April against Russian oligarchs and very close associates to Putin, 

as well as a number of senior foreign officials. In addition to the 

oligarch sanctions, we also designated entities that were 50 percent 

owned or controlled by those that we designated, and as a result 

of those designations, we have seen a number of very significant 

impacts, as we have sent the clear message to those that surround 

themselves with Putin that there are very grave consequences for 

their involvement with him in malign activities around the world. 

As you saw in those oligarch sanctions, the net worth of the individuals who we designated as well as the net worth of a number 

of other Russian oligarchs decreased substantially. The companies 

that they own or control similarly suffered great consequences. We 

continue to see the impact of those designations in a number of different ways. 

Similarly, we have had very substantial designations against 

Russia’s largest weapons trading company, against a very significant power company, energy company. Our sectoral sanctions not 

only remain in place since the beginning of the Administration, but 

thanks to CAATSA, we have tightened the directives that govern 

those sectoral sanctions. And, likewise, we are seeing a very significant impact on the Russian economy, on their energy projects, and 

the like. 

Chairman CRAPO. Can Congress expect more designations from 

the Administration? And when? 

Ms. MANDELKER. Absolutely, Senator. In fact, this morning we 

issued designations, Russia-related designations, both in connection 

with our North Korea program where we designated Russian shipping companies and business owners as well as Russian vessels. 

We also designated entities and individuals that have been involved in sanctions evasion by an entity that we recently des-
11 

ignated in connection with their work with Russia’s intelligence 

sector. Of course, we did so this morning, and you will without a 

doubt continue to see more from this Administration. 

Chairman CRAPO. Thank you. Again, I do want to—I might have 

to come back and ask my questions of Mr. Krebs and Mr. Ford, but, 

Ms. Mandelker, Russian firms subject to sanctions have restrictions 

in place on their ability to borrow from U.S. capital markets. The 

Russian Government, however, can still sell bonds to U.S. investors 

and use the proceeds as loans to Russian firms under sanctions. 

Does this ability to invest in Russian sovereign debt undercut the 

intent and effectiveness of existing U.S. sanctions? 

Ms. MANDELKER. Senator, pursuant to CAATSA, the Treasury 

Department issued a report on Russian sovereign debt earlier this 

year. I know Secretary Mnuchin has commented on that report. I 

would leave it there. Of course, I know that there continues to be 

concern about ongoing investment with Russia which has as a general matter very significantly declined since the beginning of this 

Russia program. 

Chairman CRAPO. All right. Thank you. 

Mr. Krebs, the United States is currently in its primary and special election season right now. The 2018 midterm elections are now 

11 weeks away, and you mention in your testimony that, as a result of assessing activity in the 2016 election, DHS is actively increasing awareness of potential vulnerabilities and providing capabilities to enhance U.S. and allied election infrastructure. 

What authority or other help does DHS and its stakeholders 

need to better secure U.S. election infrastructure? 

Mr. KREBS. Sir, thank you for the question. I certainly think that 

since 2016 we have made significant progress in terms of securing 

America’s election infrastructure. As I mentioned in my opening 

statement, I think the one piece of legislation that I need within 

my organization is the Cybersecurity and Infrastructure Security 

Agency Act. I think that will streamline my organization and make 

us more effective in terms of engaging our stakeholders. You have 

to remember that my authorities are almost entirely voluntary, and 

so what I have to be able to do is clearly articulate who I am, what 

it is I do, and how I can help. And right now the National Protection and Programs Directorate does not really provide me that platform to describe those efforts. 

Chairman CRAPO. All right. Thank you. 

Senator Brown. 

Senator BROWN. Ms. Mandelker, in April, our U.N. Ambassador 

announced that Russian companies who had helped Syria make 

and deploy chemical weapons would be sanctioned. On the Sunday 

shows she said that Secretary Mnuchin ‘‘will be announcing those 

Monday, if he has not already,’’ and they will go directly to the sort 

of companies that were dealing with equipment related to Assad 

and chemical weapons use. The next day, those sanctions were 

pulled back, reportedly on orders from the President. 

My question is this: When she spoke, had entities that aided in 

the chemical weapons attacks been identified and cleared through 

the usual interagency process? 

Ms. MANDELKER. Senator, I am not going to get into interagency 

discussions. As you may be aware, in April we did designate 
12 

Rosoboronexport in connection with our Syria authorities. We have 

designated other Russian—and its subsidiary bank. We have designated other Russian entities in connection with our Syria—— 

Senator BROWN. I am sorry. I have a limited amount of time. Of 

course, the sanctions were pulled back that she announced, correct? 

Ms. MANDELKER. Again, Senator, I am not going to get into—— 

Senator BROWN. Well, I know you do not—but the answer is yes 

or no, that the sanctions were pulled back? 

Ms. MANDELKER. I am not going to get into those interagency 

discussions, Senator—— 

Senator BROWN. No, this is not an interagency discussion. This 

was—the sanctions were pulled back. I am not asking did President Trump do it personally. I am just asking, the sanctions were 

pulled back, correct, that she announced? 

Ms. MANDELKER. We did not on that Monday announce additional Syria-related designations, but we have subsequently announced a number of very tough designations in connection with 

Russia. 

Senator BROWN. I do not understand why you cannot tell me 

what happened. You do not want to go into interagency discussions, but you cannot tell me what happened. The sanctions were 

or were not pulled back. She announced them. They did not happen. That would suggest pulled back, stopped. Choose your own 

verb. You may not want to talk about what happened in the interagency discussions, but facts are facts, even today in this country. 

Ms. MANDELKER. Again, you are asking me to comment on what 

happened within the interagency. Any particular set—— 

Senator BROWN. No, I am asking you—I am not asking you for 

discussions within the interagency. I am asking you, had the interagency actually identified and cleared them, and then what happened between her announcement and the inaction taken. But apparently you are not going to answer that. 

Let me ask a question of you and start with Mr. Ford and then 

back to Ms. Mandelker. Powerful sanctions authorities Congress 

gave you last year, at least as applied so far, have not worked to 

compel Russia to scale back its aggressive behavior against the 

U.S. and its allies. All three of you spoke to that. There is still a 

lot of room for the Administration to use powerful authorities provided in CAATSA that this body 98–2 gave you on corrupt 

oligarchs and defense and intelligence sector most responsible for 

many of these cyberattacks, other areas. 

If you would spell out, Mr. Ford, what is your plan to ratchet up 

pressure on the Kremlin in the short term prior to the elections to 

deter future attacks? Is it going after the personal assets of Putin 

and his cronies? Is it sanctioning State-owned entities like VEB, 

the Kremlin slush fund? Is it sanctioning Russia’s sovereign wealth 

fund? What steps? 

Mr. FORD. Thank you, Senator. With respect to influencing Russia’s behavior, there are obviously several ways that we try to approach this. I mentioned the one of trying to cut back specifically 

their arms transactions influence and revenues. 

More broadly, I would like to make the point also that this is 

only in part—obviously, the objective is to change Russia’s behavior. But even were Russia’s behavior not to improve as fast as we 
13 

wished that it would, we think that these approaches we are taking 

are having an impact in changing others’ behavior toward Russia 

in ways that will leave Russia less able to engage in its ongoing 

campaign of malign activities. It will not have as many resources, 

as many partners with which to work. If we stigmatize dealings 

with Russia in varieties of ways, they will be less able to exercise 

that influence, even to the degree that they still wish to engage in 

it. That is part of the chilling effect that we seek to achieve by economic sanctions more broadly. It is part of the effect that we are 

trying to achieve across the board here as well. 

So it is not just about influencing Russia directly. It is about having an influence upon the net impact of Russian behavior in the aggregate across the international community. 

So with that as a predicate, I am not in a position to sort of forecast exactly what steps we will take. We are as a matter of very 

high diplomatic priority putting a lot of emphasis both with our 

partners, in conjunction with our partners, and directly to the Russians on the importance of them understanding that we are firmly 

of the view that this kind of malign activity and further activity 

of this sort to which you were referring, sir, were it to occur, we 

would continue to confront Russia with painful, sharp, and stern 

consequences. They need to know that. 

Senator BROWN. Thank you, Mr. Ford. Is it especially important 

to announce bluntly and aggressively ahead of time what price 

Putin will pay if he engages in attacks on our elections? 

Mr. FORD. We are making it very clear, Senator, that there will, 

of course, be consequences, and painful ones, if they engage in additional unacceptable conduct. We also think it is important not to 

be too specific about that. This is not a game of forecasting or trying to encourage the Kremlin to study to test. But it is a game in 

which we are making it very clear that this behavior is not acceptable and will not be tolerated. We are trying to do that mindful of 

all of the things with which we agree with Congress. 

It has been very clear, for example, in talking about CAATSA 

legislation that there is a powerful desire here in Congress, which 

we share, to signal that Russia’s malign activities are unacceptable 

and to try to deter them in the future. 

We also understand and agree with what appears to be Congress’ 

clear view that it is important to do that in ways that do not have 

grave and unforeseen consequences for other aspects of our U.S. interests, whether that is issues of U.S. jobs and the economy and 

competitiveness or the relationships that we need to maintain with 

allies and partners and friends around the world, including that 

are important to us with respect to Russia policy. 

So we are trying to find the sweet spot between all of these various competing approaches, and we are grateful for the tools that 

Congress has given us to provide diplomatic leverage to that effect. 

Chairman CRAPO. Senator Kennedy. 

Senator KENNEDY. Thank you, Mr. Chairman, and I want to 

thank my colleagues for letting me jump the line here. 

Ms. Mandelker—am I pronouncing your name right? 

Ms. MANDELKER. Yes, Senator. 

Senator KENNEDY. OK. Does Mr. Putin personally own assets in 

the United States? 
14 

Ms. MANDELKER. Senator, I would defer to my colleagues in the 

intelligence community, and I would be happy to talk to them 

about providing you a briefing on that subject. 

Senator KENNEDY. Well, they are not here, but you are. So let 

me ask you again. Does Mr. Putin personally own assets in the 

United States? 

Ms. MANDELKER. Again, Senator, that is not something that we 

can discuss in an open or public setting, but we would be happy 

to sit down with you and provide a classified briefing with our intelligence community colleagues. 

Senator KENNEDY. Mr. Krebs, do you have anything to add to 

that? 

Mr. KREBS. No, sir. 

Senator KENNEDY. How about you, Dr. Ford? 

Mr. FORD. No, Senator. 

Senator KENNEDY. OK. If he did personally own assets in the 

United States, why would we not as a sanction consider seizing 

them, hypothetically? 

Ms. MANDELKER. Hypothetically, Senator, if any Russian oligarch 

or senior leader had assets in the United States, of course, that is 

an action that we would consider undertaking, assuming it is within our legal authorities to do so. 

Senator KENNEDY. Well, this is just my opinion, but here is what 

I think: I think Mr. Putin does own assets in the United States, 

and I think that Treasury knows what those assets are. And 

whether we do it in a classified or unclassified setting, that is 

above my pay grade. But I would like us to have a frank and honest discussion about the ramifications of seizing those assets. 

Would you object to that? 

Ms. MANDELKER. Not at all, Senator. 

Senator KENNEDY. OK. Last question. Dr. Ford, let us suppose 

that the President of the United States came to you and said, 

‘‘Look, I have had enough. Crimea, Ukraine, Syria, chemical weapons, meddling in American elections. I hate to do it, but I want to 

bring the Russian economy to its knees.’’ How would you do that? 

Mr. FORD. Well, Senator, I am afraid I am not enough of an economist to have a real crisp, off-the-cuff answer for you. I certainly 

would hope and expect that we would approach any challenge the 

President gives us with the kind of—— 

Senator KENNEDY. Excuse me for interrupting. I want to keep 

my—it sounds like you are not going to answer, so no offense, I am 

going to keep moving. 

Mr. Krebs. 

Mr. KREBS. I would have to defer to the other experts. We are 

focused on defending American infrastructure. 

Senator KENNEDY. All right. That is fair. I appreciate your candor. 

Ms. Mandelker. 

Ms. MANDELKER. Senator, were we to have any conversation 

along those lines, of course, we would want to consider what the 

global ramifications would be of taking those kinds of actions. So 

as I have already mentioned—— 

Senator KENNEDY. OK. Let us put the global ramifications to the 

side for a moment, though; then we can talk about the ramifica-
15 

tions. Your task is to bring the economy to its knees. How would 

you do that? 

Ms. MANDELKER. Again, Senator, I do not think you can have a 

discussion about how to bring Russia’s economy to its knees without having a full understanding of what the global consequences 

would be of taking certain kinds of actions. We have—— 

Senator KENNEDY. OK. Well, how about telling me what you 

would do and then telling me the consequences so we do not get 

the two mixed up? 

Ms. MANDELKER. Again, Senator, we have taken a number of 

very aggressive actions targeting the Russian economy—— 

Senator KENNEDY. I know that. 

Ms. MANDELKER. ——in very strategic, targeted, and impactful 

ways. 

Senator KENNEDY. But the economy has not been brought to its 

knees. Look, I do not want to use my time—if you are not going 

to answer the question, just tell me. 

Ms. MANDELKER. Again, Senator, we would be happy to have a 

conversation with you about that, but I think it is important that 

in any conversation where we are talking about very significant actions, we also have an understanding of what the global consequences would be. I think that is the responsible way to have 

that conversation. 

Senator KENNEDY. I just asked you to tell me those. I am out of 

time. Sorry, Mr. Chairman. Sorry, guys, I could not do any better. 

I tried to get answers. 

Chairman CRAPO. Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

I just came back from the Senate Foreign Relations Committee, 

which is also having a hearing on U.S.–Russia policy, and while 

that Committee obviously deals with foreign policy, this Committee’s jurisdiction over economic tools to promote our foreign policy 

is incredibly important, so I appreciate today’s hearing. 

Let me just ask you all, clearly, notwithstanding what the Congress has passed into law, what the Administration has enforced 

through your own testimony elements of that law, it is fair to say, 

is it not, that Russia has not been deterred in its actions and malign activities? Is that a fair statement? 

Ms. MANDELKER. I think, Senator, we are seeing a number of 

consequences as a result—and impacts as a result of the actions 

that we have taken. There is no question that we continue to see 

Russian malign activity and Russian malign—— 

Senator MENENDEZ. Well, today Microsoft announced that, in 

fact, there are attacks on the U.S. Senate and on some venerable 

conservative institutions. That is a continuing action. As far as I 

know, Russia is still annexing Crimea and engaged with their regular forces in Eastern Ukraine. As far as I know, Russia is propping up Assad in Syria. And I could go down through a list. 

So for the most part, I think it would be fair to say that Russia 

has not been deterred in terms of its activities. 

Ms. MANDELKER. I think it is very fair to say that Russia is continuing to engage in a wide range of malign activity that causes us 

grave concern. 

Senator MENENDEZ. OK. So on that we are agreed. 
16 

Now, with that as something that is a reality, obviously what we 

are doing, notwithstanding all the efforts of Congress and the Administration to date, has not deterred them in these malign activities in a way we would like to see, which is the purpose of sanctions in the first place. 

So I know that Senator Graham and I have legislation called 

‘‘Defending American Security From Kremlin Aggression.’’ I know 

that my colleague on the Committee with Senator Rubio also has 

the DETER Act. I am sure there are other initiatives. Maybe the 

Chairman is thinking of some with Senator Corker. 

The bottom line is instead of telling us what is wrong with these 

ideas and pieces of legislation, why don’t you tell us what, in fact, 

we can do to turn up the pressure on Moscow that we are not? 

Ms. MANDELKER. Senator, you know, in the last year, as you 

have seen, we have taken a number of very aggressive actions in 

connection with our Russia sanctions program, including a number 

of actions under—— 

Senator MENENDEZ. Madam Secretary, I do not need you to regurgitate and eat up my time by telling me what you have done. 

What you have done we have just collectively agreed has not moved 

the ball in a way we would like to see. So what I am saying—it 

is not a confrontational question. It is a question of—Congress is 

going to act. You might as well know that. I have been through Administrations, both Democratic and Republican, who did not want 

to see sanctions legislation. At the end of the day, Congress acted 

and many of them subsequently learned that what we did was the 

best tools that they had to try to move foreign policy. So it is going 

to act. I would rather it act in a way that has your insights about 

what would be helpful, but if you fail to provide insights, then we 

will provide you with a law that ultimately will take place without 

your insights. So that is all I am seeking here. 

If you are telling me—and this question is collective—there is 

nothing more that we can do than what we are doing, if that is the 

answer, that means that Russia will continue to do all the things 

I said before, nothing more that we can do than what we are doing 

is going to change the course—and that is a sad state of events for 

not only our country but the world. Is that what you are telling 

me? 

Ms. MANDELKER. Senator, we would be happy to work with you 

on any particular piece of legislation. What I can tell you is that 

we have a broad range of authorities currently in place that we 

have been very actively using—— 

Senator MENENDEZ. OK, with all due respect, I have heard you 

say this. You are very good at repeating the same thing, but it does 

not help me. 

So let me ask you this: The expectation among Senators is that 

you will continue to impose sanctions on oligarchs, but it seems to 

some of us that you have decided to diminish pressure. You have 

not designated any oligarchs since April 6th. You have delisted Estonian banks, and now there are reports that you may delist Rusal. 

What kind of signal does that send to the Kremlin? We are told 

to judge the Administration by its actions and not the President’s 

words, but these actions seem to be more in line with the President’s accommodating and disturbing rhetoric than a tougher ap-
17 

proach to the Kremlin. So why haven’t you listed any oligarchs 

since April 6th? And why are you delisting these other entities? 

Ms. MANDELKER. Senator, we have designated a number of additional Russian-related entities since April 6th. It is a very active 

program for us, including a number—— 

Senator MENENDEZ. I mentioned specifically oligarchs, not entities. 

Ms. MANDELKER. A number this morning. I am not going to preview what our plans are, but we continue to look very carefully at 

the oligarch report, and it continues to inform our actions. 

Senator MENENDEZ. Secretary Ford, let me—so the answer is you 

have not listed anybody else and you are delisting people. 

Let me ask you this, Secretary Ford. I understand your office implements Section 231. Convince me that your leverage to convince 

individuals to not purchase Russian defense equipment has somehow been strengthened by the new waiver provisions included in 

the National Defense Authorization Act. You have not imposed one 

sanction under this provision, not the new provision with waivers. 

You have not imposed one sanction under Section 231. Why? 

Mr. FORD. Well, Senator, what we have been stressing to our diplomatic interlocutors is that, unless and until something—well, of 

course, under the statute there has to be a significant transaction. 

We stress to our interlocutors that—— 

Senator MENENDEZ. Clearly there have been those. 

Mr. FORD. Well, no determination of significance has been made 

yet, sir. It is important to stress that our focus has been, as I indicated earlier, upon making sure as best we can that transactions 

do not occur. Obviously, if they do, we will, of course, evaluate its 

significance and reach a determination as quickly as the bureaucratic process permits. It is important to how we are approaching 

this to make sure that our interlocutors understand that what we 

are trying to do is, in fact, implement our own priorities and Congress’ priorities upon doing two things simultaneously. 

One, of course, we need—and it is imperative to do so, we need 

to make sure that Russia feels pressure from this. The objective is 

to change Russia’s behavior and, therefore, pain needs to be felt. 

And the point is to bring that pain. But the pain is against Russia, 

not against our friends and allies. And we also understand Congress was very clear in passing CAATSA also that this needs to be 

done in a way that is mindful of the importance of protecting the 

relationships that we have and that we need in our diplomacy and 

our foreign relations and our national security affairs around the 

world with people who may have had engagement with the Russian 

arms business but whom we do not want to simply throw away our 

relationship with. So we are trying to do those two things at the 

same time, sir. 

Chairman CRAPO. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. Thank you to the 

panel for being here this morning. 

I certainly want to echo the comments of the Ranking Member, 

the Chairman, and many of the Senators that reflect the importance of finding ways to constrain Russian aggression, especially as 

it relates to our country. And it seems like to many of us that our 

efforts have just not been effective enough. 
18 

If you look at from 2014 and forward, the sanctions, we have 

sanctioned hundreds of Russian entities in response to the annexation of Crimea, their human rights abuses, their cyberattacks, 

their support of the Assad regime, weapons proliferation. The list 

continues to go on and on and on to the Russian aggression, and 

yet there is so little that we can show for our efforts of sanctioning 

Russia. 

I have two questions. One is about understanding the certain 

sections of CAATSA that have yet to be implemented and what 

steps we can take to ensure that our policies are able to achieve 

the desired outcome. That is the first question. 

The second question is: While we are looking at the implementation of more sections of CAATSA, how do we protect our American 

businesses as it relates to the negative impact that will come from 

it? 

So I understand that you all are in an incredibly sensitive position trying to do two things that are actually not mutually exclusive but really weigh heavily on one another. The challenge of Senator Kennedy’s question that it is really a simple answer, frankly, 

if 70 percent of Russia’s exports are in the energy sector, it seems 

to me that the clear, simple answer is that if you wanted to have 

the most impact that has the ability to cripple the economy, the answer is in the energy sector. Perhaps the challenge is that the energy sector represents the sector that many of our allies in Europe 

depend heavily on. So it does make your task challenging, but the 

fact of the matter is that there is a very simple, clear, concise answer to Senator Kennedy’s question, which is that if 70 percent of 

the Russian economy—perhaps not 70, maybe it is 68 percent— 

flows through the energy sector, the answer is simple. I am not 

quite sure why we are having such a difficult time answering simple questions. We seem to be more evasive than helpful in our desire to understand and appreciate the magnitude of our actions on 

the Russian economy. And when there are sections beyond Section 

224 that deal specifically with crude oil exports, or Section 226 and 

227 and 228, and Bob mentioned 231 and 232 and 233 and 234, 

the answers are all the same, that we have not done much in those 

sections. 

I would come back to my original question; that is, as we look 

at CAATSA, how can we do more? It seems like I have just given 

you a list of options on doing more. And why aren’t we? And is the 

answer to my second question that the impact on our businesses 

is creating headwinds on our ability to impose more sanctions and 

do more damage to the Russian economy because we are afraid of 

what it does to our businesses and to our allies? 

Ms. MANDELKER. Thank you for your question, Senator. So just 

with respect to the very specific provisions of CAATSA, as you may 

be aware, we have designated over 160 entities and individuals 

under authorities that are either subject to a specific provision of 

CAATSA or Executive orders that have been codified by CAATSA. 

So our desire to implement and our execution of the implementation of CAATSA is very strong. 

Very specifically in the energy sector, not only have we designated entities under our energy authorities, but Russia’s energy 

sector is subject to two directives—Directive 2 and 4—that were 
19 

started in the Obama administration and which we have tightened 

in this Administration. And we have seen significant impact as a 

result of those designations. 

You asked about U.S. businesses. Well, Exxon announced earlier 

this year that they were withdrawing from joint venture projects 

in Russia with Rosneft. Similarly, we heard—it was announced 

that Rosneft was unable to complete certain projects in the Black 

Sea. Because of our sanctions, they were unable to get the kind of 

equipment and technology that they need in order to do so. 

Senator SCOTT. Thank you. Because I have 25 seconds left and 

the Chairman already called one Member down for going over time, 

I do not want to be the second Member, so I will not go over the 

time by that much. But I will just say that perhaps you would invest all of our time more wisely if we talked about the interconnectedness of the global economy and how at times if Russia is 

working with Saudi Arabia on output in order for us to have a 

more positive impact on Iran through our, you know, withdrawing 

from the JCPOA, we would have a more global and panoramic perspective on the challenges and consequences and the complexities 

of the task at hand, and we would have a more productive time in 

understanding and appreciating the challenges that you face, and 

at the same time be able to talk to our constituents about the challenges that we face, especially as the Wall Street Journal today reported that Russian hackers target conservative groups and widening cyberattacks, which only suggests that whatever we are 

doing is not enough. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Tester. 

Senator TESTER. Thank you, Mr. Chairman. 

I want to thank you all for being here, and I appreciate your testimony, although it would be nice to get answers to the questions. 

I am as frustrated as the folks who come before me. 

So let me ask you this, Ms. Mandelker, and it is an honest ques- tion because I do not know the answer to it. Say I have got a $10 

million ranch and I sell it to somebody who wants to launder 

money for $20 million, and they turn around and sell it for $15 million. Is that money then laundered? 

Ms. MANDELKER. It would depend on the facts and circumstances, but that sounds like a situation where money was 

laundered. 

Senator TESTER. OK. And is that legal? 

Ms. MANDELKER. If it is here in the United States, that could potentially be a violation of our money-laundering laws. 

Senator TESTER. OK. And is that something that we do, we go 

after folks who are trying to launder money? Is that something the 

Treasury Department does? 

Ms. MANDELKER. Absolutely, Senator. 

Senator TESTER. It does? 

Ms. MANDELKER. Well, again, the criminal authorities are the 

Justice Department’s authorities, but we go after illicit activity, 

money laundering, all over the world in a variety of different ways. 

Senator TESTER. Can you tell me or can you get back to me on 

how many money-laundering episodes in the last 5 years have occurred and how many have been actually prosecuted? 
20 

Ms. MANDELKER. Again, in terms of prosecutions, I would defer 

to the Justice Department—— 

Senator TESTER. Determined and turned over to the Department 

of Justice. How about that way? 

Ms. MANDELKER. I am sorry? 

Senator TESTER. Determined that it was a money-laundering situation and turned over to the Department of Justice. We will deal 

with their prosecution later. 

Ms. MANDELKER. Again—— 

Senator TESTER. Can you give me an example of how many have 

happened in the last 5 years? How many have been brought forth 

in the last 5 years by the Department of Treasury, not prosecuted 

but just pointed out by the Department of Treasury that they had 

grounds? 

Ms. MANDELKER. I cannot give you a number. We work—— 

Senator TESTER. Can you give me a number if you go back to 

your office and write it down on a sheet of paper and send it to 

my office? 

Ms. MANDELKER. Again, Senator, it would depend on the specifics of your—— 

Senator TESTER. Is this—no, no, no, no, no. 

Ms. MANDELKER. ——question, but we work very closely with the 

Justice—— 

Senator TESTER. Look, look, we had one of these hearings in a 

classified session that was worthless. And it was not worthless because of the Chairman and Ranking Member. It was worthless because you guys have filibuster down to an art. I just want to know 

the answer to the question. Do you have the number, yes or no? 

Ms. MANDELKER. Is your—— 

Senator TESTER. You do not have the number? 

Ms. MANDELKER. I want to make sure that I understand the 

question you are asking. 

Senator TESTER. I want to know the number of money-laundering episodes the Department of Treasury has turned over to the 

Department of Justice in the last 5 years—not 10, not 20, not 30. 

Five years, that is it. 

Ms. MANDELKER. Again, Senator, as you may be aware, 

FinCEN—— 

Senator TESTER. I am not aware. I just want to know how many. 

Ms. MANDELKER. I would have to go back to my office to see—— 

Senator TESTER. OK. Go back to your office and you will—— 

Ms. MANDELKER. ——if we have such a number. 

Senator TESTER. ——give me that information? 

Ms. MANDELKER. But I just want to be clear about what it is that 

we do. We follow, we trace, we track money laundering all over the 

world. We are also the recipients—— 

Senator TESTER. I just want to know about the stuff that happens in the United States. That is easier yet. 

Ms. MANDELKER. Let me go back and see what we can do to answer your question. 

Senator TESTER. I appreciate that very, very much. 

Mr. Krebs, you said in an answer to the Chairman’s question 

that you have made significant progress since the 2016 election. 
21 

Can you give me a list of the things you have done to make our 

election more secure this cycle? 

Mr. KREBS. Yes, sir. So four buckets: governance, information 

sharing, technical support, and incident response. 

Senator TESTER. OK. And have you done that to every State in 

the Union? 

Mr. KREBS. We work particularly through the Election Infrastructure ISAC. We work with all 50 States. We provide cyber remote-scanning capabilities to 36 States. 

Senator TESTER. I do not expect you to know this today, but can 

you go back to your office and send me a list of what you have done 

in Montana specifically? 

Mr. KREBS. We can certainly give you a briefing on the things 

we are doing nationwide. 

Senator TESTER. Just give me a sheet of paper. I do not need a 

briefing. Tell me the things you have done in Montana to help 

Montana have a more secure election cycle. 

Mr. KREBS. We can follow up, yes, sir. 

Senator TESTER. And just a suggestion. It might not hurt to do 

that for every Senator that is here. It would be a good thing. Just 

what—I see Donnelly is nodding his head, so you can do that for 

Indiana, and—— 

Mr. KREBS. We do need to—there is a certain degree of confidentiality on every engagement—— 

Senator TESTER. Oh, come on. These guys—now, look, look, look. 

If these guys are screwing with voter rolls, tell us how you fixed 

it. If they are screwing with voter machines, tell us how you fixed 

it. There is no security there. This is about confidence in our election system. Putin spent less money on doing what he did last cycle 

to promote communism and destroy democracy. I think the U.S. 

Senate needs to know this stuff. 

Mr. KREBS. I agree, yes, sir. Let me—— 

Senator TESTER. Just give us the information. 

Mr. KREBS. We can follow up. Yes, sir. 

Senator TESTER. OK. Thank you. 

Then can anybody tell me why Putin’s ownership of anything in 

this country is not public information? 

Ms. MANDELKER. Again, Senator, as I mentioned before, we 

would be happy to sit down and have a conversation with you 

about that. 

Senator TESTER. I do not want—just tell me. Why? What national security risk is that? 

Ms. MANDELKER. Again, Senator, any discussion about where assets are in the United States or elsewhere are either classified or 

not something that we would discuss in any kind of an open session. 

Senator TESTER. You do know that you can go down to the courthouse and find out how much land I own? You know that. So why 

is Putin different? 

Ms. MANDELKER. Again, Senator, I do not want to talk publicly 

about where assets are here or anywhere in the world. There are 

a number of different reasons—— 

Senator TESTER. OK. I got that. 
22 

Ms. MANDELKER. ——why we would not do that, but having 

had—— 

Senator TESTER. But a yes or no does not exactly—— 

Ms. MANDELKER. ——a sitdown and having a conversation—— 

Senator TESTER. A yes or no does not dictate section, township, 

and range. A yes or no just says, yeah, he owns property here. 

Ms. MANDELKER. Senator, I am not aware of any title or deed 

that would have Mr. Putin’s name on it here in the United States. 

But, again—— 

Senator TESTER. All right. All right. Thank you very much. OK. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Cotton. 

Senator COTTON. Thank you, Mr. Chairman. Thank you all for 

appearing here. I hope it is clear from the questions so far that we 

have bipartisan agreement about the threat that Russia poses to 

our democracy and our interests. It is good to have that agreement 

now, which we lacked for many years. In the last Administration, 

even as Russia was surging troops into Syria to prop up Bashir alAssad and Iran and invading Crimea and waging war in the 

Ukraine and beating a United States diplomat on the doorstep of 

our embassy in Russia and flagrantly violating the Open Skies 

Treaty and flagrantly violating the Intermediate Range Nuclear 

Forces Treaty and a whole host of other malign activities. 

Now, we have heard a lot today that Russia is still not deterred 

from these things. I would agree with that. We need to take additional action. But we have not heard much about the relative impact of the steps that this Administration has taken versus the last 

Administration, in particular after the 2016 election. 

Now, some members of the last Administration said that they did 

not want to take provocative steps in the fall of 2016 because they 

feared that Vladimir Putin and Russia’s intelligence services might 

take additional steps to undermine voter registration systems or 

vote tabulation systems. But after the election, the Administration 

kicked out a few Russian diplomats—it might not surprise you to 

know that those were perhaps Russian spies—closed two Russian 

vacation homes, and imposed sanctions on two Russian intelligence 

services. 

Ms. Mandelker, how much money did the U.S. Government get 

from those two intelligence services? 

Ms. MANDELKER. Senator, I am not aware of assets that were 

blocked as a result of those—— 

Senator COTTON. Is that perhaps because Russian intelligence 

services do not keep money in the United States banking system? 

Ms. MANDELKER. Again, Senator, that is not something I would 

discuss publicly, but rest assured the designations that we have 

had in this Administration have had far and wide-ranging impacts 

in a variety of different way. 

Senator COTTON. To say nothing of nonsanctions activities, for instance, like encouraging our NATO partners to spend more money 

on their defense, expanding our nuclear arsenal, spending more 

money on ballistic missile defenses, providing the antitank Javelin 

missiles that Ukraine’s Government begged for so long to receive. 

The Congress has also learned over the last 18 months that there 

was a serious interagency conversation in November and December 
23 

of 2016 about imposing tougher sanctions on Russia. In fact, I understand that the professional staff at the Treasury Department 

worked up a whole host of sectoral sanctions and specific sanctions 

against Russian companies like Kaspersky Labs. Yet those were 

strongly opposed by Secretary Jack Lew, National Security Adviser 

Susan Rice, and Deputy National Security Adviser Avril Haines. 

Ms. Mandelker, can you explain why Secretary Lew opposed taking tougher action after the election—after the election, not before 

the election. After the election. 

Ms. MANDELKER. Senator, I was not in the Administration, of 

course—— 

Senator COTTON. Though you are a representative of a the Treasury Department, which surely has continuity files. 

Ms. MANDELKER. What I can tell you, Senator, is that, as I have 

already made clear today, we have gone after very significant and 

impactful designations in connection with Russia’s election interference, in connection with their cyberattacks, in connection with 

their ongoing occupation of Crimea and the like, and we have seen 

those designations result in very impactful actions against, again, 

some of Putin’s closest allies and partners, his senior foreign official, officials in his Administration. We have seen companies who 

have tried to get into Crimea have a very heavy cost imposed upon 

them when we have sanctioned them. They have cutoff their ability 

to do business elsewhere in the world. 

What I can do is speak to the very heavy costs and impact of the 

designations that we have had. They have been quite substantial, 

and I would say far more substantial than those that were issued 

immediately after the November 2016—— 

Senator COTTON. It would be nice to know why Secretary Lew believed that and why President Obama accepted his opinion. 

Let us take one final question here about a gentleman you mentioned earlier: Oleg Deripaska, a Russian oligarch whom our Government has sanctioned. You have also sanctioned numerous companies that he runs or heads, such as Rusal, En+, Basic Element, 

and others. 

We now know, in fact, we have emails right here that have been 

released by the Congress between Christopher Steele, who compiled what Jim Comey called ‘‘a salacious and unverified dossier,’’ 

and Bruce Ohr, a senior Department of Justice official in the 

Obama administration, where Christopher Steele was advocating 

on behalf of Oleg Deripaska being admitted into the United States. 

Christopher Wray, the FBI Director, would not address a question 

I sent to him in a public hearing of the Intelligence Committee earlier this year about whether Christopher Steele was working for 

Oleg Deripaska. At the time, by all appearances, he is working for 

him. Is Christopher Steele and his business the kind of entity or 

subcontractor for a sanctioned Russian oligarch that you have the 

authority to sanction under CAATSA? 

Ms. MANDELKER. Senator, I am not going to talk to any particular individual, but Oleg Deripaska has been designated, and 

that designation is subject to secondary sanctions. And so what we 

have seen as a result of the Deripaska and other sanctions against 

these oligarchs is that they have become radioactive as the world 
24 

understands that any entities that they touch may similarly face 

severe consequences. 

Senator COTTON. Just one final question. Just yes or no. It is a 

question about a general legal principle. Do you have the authority 

under CAATSA or any other law to sanction professional service 

providers of sanctioned Russian oligarchs, lawyers, lobbyists, financial advisers, and so forth? 

Ms. MANDELKER. We would likely have that authority, Senator. 

Senator COTTON. Thank you. 

Chairman CRAPO. Senator Warner. 

Senator WARNER. Thank you, Mr. Chairman. I appreciate the 

witnesses’ testimony. 

I think the indication from Microsoft today of ongoing Russian 

targeting of our elections and our systems is showing that this is 

not something that is in the rearview mirror. The truth is manipulating social media is both cheap and effective, and Putin and his 

cronies realize that. I think it reinforces, and if there is one message that ought to be taken out of this hearing, it is that we all 

need to stay focused. And that focus ought to extend—and I have 

some sympathy for you, Mr. Krebs, in terms of trying to make sure 

our State and local election partners take this message seriously 

and recognize that this is not all in the rearview mirror, that none 

of these activities stopped in 2016. They are ongoing, and this is 

an ongoing threat. And I am particularly concerned about that lastmile issue of even if we notify, will they then take action? 

Ms. Mandelker, as I indicated to you beforehand and one of the 

things our Intel Committee investigation is looking back into in 

terms of Russian activity, we need your assistance. So I need your 

public commitment today that those outstanding document requests we have to FinCEN will be met in a timely manner. 

Ms. MANDELKER. Senator, as you know, we have produced thousands of documents—— 

Senator WARNER. But not all of the documents have been submitted. Will you meet our bipartisan requests for those documents? 

Ms. MANDELKER. Absolutely. 

Senator WARNER. There has also been a BuzzFeed story that 

says that FinCEN has decided that some of those documents will 

not be turned over to the Committee. Will you refute that story and 

say that all documents that the Committee has requested will be 

turned over to the Committee? 

Ms. MANDELKER. I am not aware of that story, but I can assure 

you that we are going to continue to produce documents that—— 

Senator WARNER. All documents in a timely manner, within the 

next 30 days? Within the next 60 days? 

Ms. MANDELKER. I would have to consult with those who are reviewing the—— 

Senator WARNER. Many of these documents have been requested 

literally for months. 

Ms. MANDELKER. But we commit to you that we will continue to 

produce those documents on top of the thousands of—— 

Senator WARNER. In a timely process so that we cannot—— 

Ms. MANDELKER. Absolutely. 

Senator WARNER. Again, we are 7, 8 months behind on some of 

these document requests. 
25 

Ms. MANDELKER. We will absolutely continue to provide those 

documents. 

Senator WARNER. And then one of the things—we have made a 

formal request to you in the past, but I want to reiterate in a public forum, because of the nature of some of these documents that 

are fairly complicated, we need your office’s technical assistance in 

terms of interpretation of these documents. Will you be able to provide that technical assistance? 

Ms. MANDELKER. Senator, let me just add to my last response. 

I am told that we have a document production that we will be providing today, and as I mentioned before the hearing, we are happy 

to provide additional assistance. 

Senator WARNER. But what we need is that technical assistance 

to sort through this. I appreciate that. 

Mr. Krebs, again, I mentioned—and you indicated you have got 

only voluntary ability to work with those on the front line. One of 

the things I have grave concerns about. In a normal White House, 

when our country has been attacked, as it has been, in this bipartisan consensus, there would be someone designated in the White 

House as election security is a top matter or someone designated 

on the National Security Council as making this a top priority. 

One of the things that has been extraordinarily disturbing to me 

is we have had repeatedly top intelligence officials from the Trump 

administration indicate to us that they have not been told that 

election security ought to be a top priority, and that raises huge 

concerns to me, recognizing that you are trying to do your best at 

DHS. One of the questions—I have got a serious of questions for 

you here, recognizing I have only got a short amount of time. Is 

there any intention—we have sanctioned the IRA officers indicated 

by the Mueller indictments. Is there any effort to indicate or to 

sanction the 12 GRU officers that were also designated in the 

Mueller indictments? 

Ms. MANDELKER. Senator, as you are aware, we have sanctioned 

a number of individuals connected to the GRU and the FSB. In 

fact, some of the sanctions we issued this morning were specifically 

in connection to their relationship to the FSB. We did designate 

the—— 

Senator WARNER. The IRA but not some of the 12 GRU—— 

Ms. MANDELKER. We are very closely looking at that indictment. 

I cannot preview what our plans are, but rest assured that—— 

Senator WARNER. All I will say is it would help, I think, the 

American public, as we sanctioned these bad actors and these bad 

actors’ identities and a case that was built against them was provided by the actions and workings of the special prosecutor. It 

would do a great deal of benefit to the American public in terms 

of the seriousness of this threat if the President of the United 

States would not on a daily basis denigrate the Mueller investigation and call it a ‘‘witch hunt,’’ an investigation that has created 

30-plus indictments, a number of guilty pleas, and obviously has 

been a very valuable tool in identifying these bad actors who in the 

past and on an ongoing basis try to interfere in our election activities. 

Mr. Krebs, do you have indication of who attacked Senator 

McCaskill’s activities, a Senator up for reelection, other elected offi-
26 

cials? And what level of confidence do you have in terms of overall 

Russian activities toward current sitting elected officials and/or 

elections that are coming up in a few months? 

Mr. KREBS. So to the second question, certainly, I think, Congress is a target for foreign intelligence collection just based on 

your role in policy formation. So there are general espionage and 

foreign intelligence collection concerns there, with or without a 

midterm or a Presidential election coming up across the horizon. 

Now, the Microsoft, whether it was McCaskill or the recent announcements, they have been in contact, as I understand it, with 

DOJ and FBI. We have also had conversations with Microsoft to 

get a better understanding of what they saw that enabled them to 

take action. In terms of a formal attribution from the Government, 

I would have to defer to the intelligence community on that. 

But, again, rest assured we are engaging on a day-to-day basis 

with the Senate CIO, the House CIO, with the committees, and I 

would encourage you to encourage your staff to work with the Department of Homeland Security. And more than that, when you do 

go back to your districts or when you go back to your home States, 

please encourage your State and local officials to work with the Department of Homeland Security on election security matters. 

Senator WARNER. I think it is important then to make sure that, 

as you contact States, you indicate that this is an ongoing threat. 

It did not end in 2016. And, unfortunately, some of your communications to States within the last week or so have not had that 

kind of clarity. 

Mr. KREBS. I am happy to follow up, and I look forward to tomorrow’s closed session. 

Senator BROWN. Mr. Chairman, if I could, I just wanted to reinforce, in Senator Warner’s admonition and request, how the important these documents are that they be turned over in a timely 

manner. Thank you. 

Ms. MANDELKER. We appreciate that, Senator, and as I mentioned, we are dropping off another production today. We have a 

big staff who have been working to get these requests out quickly. 

Chairman CRAPO. Senator Moran. 

Senator MORAN. Chairman, thank you very much. 

I direct this first question to any and all. Can you identify 

changes in Russian behavior that have occurred since the summit 

between President Trump and President Putin in Helsinki? Different behavior by Russia than before the summit? 

Mr. KREBS. I do not have anything to add. No, sir. 

Senator MORAN. Anyone? 

Ms. MANDELKER. Senator, I would ask that any kind of question 

like that be addressed in a closed session. 

Senator MORAN. We have had a closed session, and I share the 

view of the Senator from Montana that getting answers in a closed 

session is no easier than getting answers in an open session. 

Ms. Mandelker, your unwillingness to answer the question—one 

of the things I thought would come from this hearing is a recommendation or a set of recommendations of what Congress might 

consider legislatively for additional sanctions. I have not reached 

any conclusion that additional sanctions are beneficial. I do not 

know the answer to that question. But I would have thought that 
27 

you could have been able to give us ideas of what we might look 

at or pursue in cooperation with you and the Administration. 

Am I to take from your unwillingness to answer that kind of 

question that there is opposition by the Administration to additional sanctions? Or what is a better explanation? 

Ms. MANDELKER. Senator, absolutely not. There is no opposition 

to sanctions. As I have already mentioned, we have designated well 

over 200 individuals and companies in connection with Russia—— 

Senator MORAN. I am talking about additional sanctions, something that we are looking at in this Committee. 

Ms. MANDELKER. Including additional sanctions that we issued 

just this morning. In terms of what additional authorities we may 

need, we already have, through CAATSA and through a variety of 

different Executive order, brought authority to target big sectors of 

the Russian economy, to go after the Russian oligarchs, to go after 

Russia’s malicious cyberactivities in a number of other areas. In 

fact, as I have already mentioned, we have targeted not only a 

number of very significant Russian companies, we have targeted 

the chairs of those companies, making it much more difficult for 

them to operate in the world. 

So we would be happy to sit down and talk to Congress about 

any proposed legislation, but we do have significant and substantial authorities already on the books. 

Senator MORAN. And maybe that is the answer to the question. 

It is not what you have been able to do, but the answer to the question what more do you need is nothing is known at the moment but 

you will consult with Congress if we come up with an idea, is my 

takeaway from your testimony. 

I think I generally agree with Senator Cotton that we ought to 

be looking at other issues in addition certainly to sanctions, which 

is our relationship with NATO, economic alliances around the 

globe, resolving our trade differences with other countries so that 

we are unified. I think the list is longer than sanctions. We generally are focused on sanctions in this Committee, but I take it 

from your answer that to date you believe you have the necessary 

authorities to combat what we are trying to combat with Russian 

behavior. Is that a fair assessment? 

Ms. MANDELKER. Yes, Senator, but we are happy to talk to you 

about—— 

Senator MORAN. Happy to have that conversation. 

Ms. MANDELKER. ——additional authorities, and I agree with you 

wholeheartedly, this is a whole-of-Government approach. Sanctions 

alone are not going to solve the problem, and this Administration 

has undertaken a number of additional activities in connection 

with the Russian threat other than sanctions. 

Senator MORAN. Thank you very much. 

The Administration—I think is probably—I do not know who this 

is for. The Administration has called for a complete cutoff of Iranian petroleum imports by November. That seems to me to be just 

in time for winter. Does it stand to reason that that will push Europe and others to be more dependent upon Russian oil and natural 

gas? And is there coordination on the sanctions that we are proposing pursuing with Iran and sanctions that we have in place 

with Russia or are proposing with Russia? 
28 

Ms. MANDELKER. Absolutely, Senator, there is extensive interagency coordination on those sanctions with the State Department, 

with the Department of Energy, and, of course, with our closest allies and partners. 

Senator MORAN. Mr. Krebs, in your testimony you note the leadership role that the Department plays in conducting elections, coordinating efforts to assess vulnerabilities and mitigate risk. Within this structure, DHS also plays an important role in sharing information with election officials. I have visited with county clerks, 

county election officers in Kansas, with personnel within our Secretary of State’s office that conducts oversight and management of 

elections in our State. 

What steps has DHS taken to ensure that information and intelligence is shared with local officials? My general impression is that 

while there is concern by election officials, they do not know the 

direct nature of any threat. 

Mr. KREBS. So we have prioritized security clearances for State 

and local election officials. I think right now we are up to about 92, 

and that includes every single State. But most importantly—— 

Senator MORAN. Is an election official somebody at the State 

level or somebody at the local level? 

Mr. KREBS. It started, yes, sir, at the Secretary of State or the 

chief election official in each State, and we are working our way 

down to the county level. Now, I do not think we are going to get 

to the county level in terms of specific clearances because our imperative here is to bring information out of the classified space as 

rapidly as possible and share actionable information so any—it 

does not matter what county or locality they are in, that they have 

information from DHS that is pulled generally from the intelligence 

community that they can act on. Our mission is to shorten that 

time period. 

So we are working on clearances, but more importantly, we are 

trying to convene information-sharing fora. I mentioned the ISAC. 

We have all 50 States and pushing a thousand local jurisdictions. 

The challenge here is there are close to 10,000 election jurisdictions 

nationwide. so while we have what is probably the fastest-growing, 

most successful ISAC, we still have a pretty big gap to fill. And so 

we are working through what is known as—it was mentioned by 

Senator Warner earlier—the ‘‘last mile.’’ We have our own last-mile 

initiative where we are developing tailored guidance to every single 

county, if they would like it, across this country. And that will include how to sign up for the ISAC, how to participate in instant 

response and tabletop exercises. 

Senator MORAN. What is the timeframe for that to be available? 

Mr. KREBS. We are marketing this aggressively now. We have already gotten four through the chute. We have 22—four States. We 

have 22 more States in the works right now. We have the capacity 

by the midterm, if every single State asks for a last mile—and it 

is a poster that we can share with you, and we will share it tomorrow at the closed session. It is an unclassified document. We can 

do all 50 States, if asked, by the midterm. 

Senator MORAN. Thank you. 

Chairman CRAPO. Senator Donnelly. 
29 

Senator DONNELLY. Thank you, Mr. Chairman. And thank you to 

the witnesses. 

Mr. Krebs, have you reviewed the security of elections in Indiana 

specifically? 

Mr. KREBS. I personally have not, but we do work with the State 

of Indiana, yes, sir. 

Senator DONNELLY. Do you know if there are any reports in regards to your Department and what has been done in terms of 

hardening and securing Indiana’s election for the upcoming election? 

Mr. KREBS. We certainly have a profile on the State and a record 

of engagements and how we have engaged with the State. 

Senator DONNELLY. Would that list all direct contacts between 

your agency and the State of Indiana? 

Mr. KREBS. I am sorry. Could you repeat the question? 

Senator DONNELLY. Would that list all the direct contacts that 

you have had back and forth, the meetings you have had? 

Mr. KREBS. Yes, sir, we track the in-person engagement. 

Senator DONNELLY. What I would like to do is get a copy of all 

of that so that we know on the State’s end that we can be helpful 

to our State to make sure that they are getting everything they 

need, the last-mile program, all of these things put in place so that 

we have the most secure possible election, obviously in my State, 

but we want to have that across the country. 

Mr. KREBS. We can certainly engage and provide you an update 

on what we are doing, particularly nationwide. But I do need to reinforce the fact that there is a level of confidentiality. Because my 

authorities are voluntary, I am in an entirely dependent position 

upon a State or a local jurisdiction to come to me and bring information and ask for help. 

Senator DONNELLY. I understand. 

Mr. KREBS. And if I am in a position where I am posting or sharing what is confidential information—this is just like attorney–client privilege. I am the attorney, they are the client, they own the 

privilege. So it is up to the partner to disclose—— 

Senator DONNELLY. Well, in your best judgment, you know, we 

would like to see what has been done to make sure that we are 

taking as many steps as possible in our State to secure the election. 

Mr. KREBS. Yes, sir. 

Senator DONNELLY. Ms. Mandelker, at the Helsinki Summit, do 

you know if the subject of sanctions was discussed between President Trump and Vladimir Putin? 

Ms. MANDELKER. Senator, I am not aware whether or not the 

subject of sanctions was discussed in that very specific—in the 

meeting between the two of them. But I believe the President has 

addressed his—— 

Senator DONNELLY. Well, I am not asking about the President. 

I am asking you. Do you have any knowledge of what was discussed in that summit between the President and Vladimir Putin 

since you are the one who implements the very sanctions that 

might have been discussed? 

Ms. MANDELKER. Senator, I know the President has—— 
30 

Senator DONNELLY. I am asking, were you given a briefing as to 

what was discussed regarding sanctions in that summit meeting? 

Ms. MANDELKER. Senator, we have had interagency discussions 

following the Helsinki—— 

Senator DONNELLY. Were you told what was discussed between 

the President and Vladimir Putin regarding sanctions? Were you 

given a reading as to everything that was discussed since you are 

the one who enforces sanctions? 

Ms. MANDELKER. Senator, we have had discussions following the 

Helsinki Summit about what was addressed in the summit, and my 

mandate has been the same since the summit, which is to continue 

to deploy impactful sanctions—— 

Senator DONNELLY. Were you told whether or not the President 

and Vladimir Putin discussed sanctions? 

Ms. MANDELKER. Again, Senator, we have had—— 

Senator DONNELLY. That is a simple question, yes or no. Either 

you were told or you were not. 

Ms. MANDELKER. Again—— 

Senator DONNELLY. Do you know if that subject was discussed? 

Ms. MANDELKER. Again, Senator, Secretary Pompeo has addressed what was discussed in Helsinki. I was not there. We have 

certainly had interagency discussions about the Helsinki Summit—— 

Senator DONNELLY. I will try one more time. This is about as 

simple as it gets. You can go, ‘‘Did you tie your shoe or not?’’ Yes 

or no. Did you hear whether or not sanctions were discussed in this 

meeting? Yes or no. Do you know if they were discussed or not? 

Ms. MANDELKER. I do not know the specifics of whether or not 

they discussed sanctions at that meeting, but I think the President 

has publicly discussed his conversations with Mr. Putin—— 

Senator DONNELLY. But you are in charge of implementing these 

sanctions. 

Ms. MANDELKER. What I can tell you is that, following the Helsinki Summit, my mandate remains the same, which is to continue 

to impose sanctions to counter Russia’s malign behavior, and we 

have done that in full force. 

Senator DONNELLY. The fact is Russia is still in Syria. They have 

not changed their behavior. They are still in Ukraine. They are still 

using cyberattacks. They are still meddling in elections. They are 

preparing to meddle in the upcoming elections. They are still violating the INF Treaty. This is all taking place while we have sanctions in place, which apparently have had no effect on this. 

As you look at this, what sanction would have the most effect to 

start to turn this behavior around? And let me ask you one other 

question. I am running out of time here. I know we are trying to 

run it tight. Who do you need to get approval from to take further 

sanction steps? 

Ms. MANDELKER. Senator, the determination—— 

Senator DONNELLY. There has got to be somebody. 

Ms. MANDELKER. Yes, sure. Determinations about most sanctions 

which are either subject to Executive order or statute are made 

typically by the Secretary of the Treasury in consultation with the 

Secretary of State. 
31 

Senator DONNELLY. Has the Secretary of Treasury approved you 

to take any further sanctions actions you deem necessary? 

Ms. MANDELKER. Absolutely. In fact, we issued sanctions just 

this morning in connection with Russia. 

Senator DONNELLY. OK. Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Perdue. 

Senator PERDUE. Thank you, Mr. Chairman. And thank you for 

your patience and forbearance this morning for being here, guys. 

First of all, I want to make a comment about the closed classified 

briefing we had on July 31st. I must have attended a different 

meeting, Mr. Chairman, but I got a lot out of that meeting. There 

are those today who have said that we got no answers, but I think 

we addressed one thing in that closed briefing that I would like to 

touch on today, knowing that we are in an open environment. 

Secretary Mandelker, first of all, let me clarify a couple things. 

Are you familiar with the Russian primary reserve fund that they 

have just closed down? 

Ms. MANDELKER. Generally, Senator, but not—— 

Senator PERDUE. So they just closed down their primary reserve 

fund. They are now using their welfare reserve fund for any profits, 

as you say, above $70 a barrel, let us say, on the oil sector. So we 

are beginning to have some impact, but it has not changed behavior yet. And here is my question: With the interconnectivity of the 

global economy, if we put sanctions on Russia, there is a trading 

partner that gets hit by that as well. Today there is a study out 

in Germany by the Institute of World Economy that says that 

about 40 percent of the detriment of a sanction is borne by the 

trading partners across 37 countries that are dealing with Russia. 

Now, that sends two messages, and I do not think either are bad. 

Number one, in Russia we are going to continue to do this, and 

trading partners of Russia, we are going to continue to do this. Is 

that true? 

Ms. MANDELKER. I cannot verify the particular statistics, but I 

can tell you there is no question that when you impose sanctions 

in particular types of entities in Russia, those impacts affect or are 

felt elsewhere, and that is because of the fact that Russia is part 

of the global economy. 

Senator PERDUE. Right, it is a global economy. Then the question 

is: Is it U.S. companies or is it European? Europeans are now saying that they are bearing more of the brunt because they have a 

higher degree of trade with Russia, and I have begun to believe 

that subjectively. But from a quantitative point of view, with 

CAATSA you have authority to do more than we are doing today. 

Is that true? 

Ms. MANDELKER. Senator, we have—as I have already mentioned, we have issued a wide swath of designations under 

CAATSA, under Executive orders. We can always do more, and you 

are going to continue to—— 

Senator PERDUE. So that is the question. Let me go—— 

Ms. MANDELKER. ——see more from us. 

Senator PERDUE. ——right there. Without getting into classified 

issues here, there are more things that you can do, but there is a 

Governor that is being used right now by someone in the Administration that says that the impact on the negative side here, the 
32 

short-term impact, we are not willing to bear that. Is that true or 

not? 

Ms. MANDELKER. I would not say that is true, Senator. With respect to any particular designation that we issue, of course, we 

very closely study the impact. We want to know what the impact 

is going to be to U.S. businesses, to U.S. jobs, what the impact is 

going to be to our closest allies and partners. We also engage in 

a number of different discussions with those allies and partners. 

We study those carefully. We look to see how we can mitigate those 

kinds of consequences, and we make our decisions accordingly. 

Senator PERDUE. But you would agree that with a larger economy like Russia, it is about a trillion-and-a-half economy. It is an 

entirely different equation than trying to deal with a $400 billion 

economy like Iran or a smaller economy like North Korea. That is 

a fact. 

Ms. MANDELKER. I agree that those are different complex problems, yes. 

Senator PERDUE. And the sanctioning regime is not an end-all. 

You have already said it has got to be a whole-of-Government. We 

have not talked enough about that today. Are you integrating with 

other facets of the Administration for an ultimate outcome here, 

and that is, a change in behavior in Russia? 

Ms. MANDELKER. Absolutely, Senator. 

Senator PERDUE. So what other agencies do you guys integrate 

with in terms of trying to change behavior in Russia? 

Ms. MANDELKER. We work closely with the State Department. 

We work closely with the intelligence community. We work closely 

with the Department of Homeland Security and others. 

Senator PERDUE. So, Secretary Ford, Russia has now dumped 

about $90 billion of U.S. Treasurys. They are doing other things to 

prepare for this next round of whatever sanction regime efforts 

that we might make. 

What efforts are you aware of that Russia is trying to do to prepare? Are there things that we can do to counter that prior to the 

issuing of any further sanctions? 

Mr. FORD. Thank you for the question, Senator. I think in an 

open session it is probably unwise to get too much into specifics 

about that. 

Senator PERDUE. I understand. 

Mr. FORD. You know, it is safe to assume that the Kremlin is 

preparing for potential future sanctions because they know full 

well what they intend to do and, therefore, I assume they can also 

anticipate that if they continue to do the kinds of things that they 

have done that have drawn sanctions in the past, we will continue 

to react to that. 

Senator PERDUE. And are we in the State Department dealing 

with our allies, particularly our European allies who I think are 

bearing a higher degree of impact of this, are we in a comfortable 

position that they are going to stay with us, particularly when we 

talk about Nord Stream 2 proactively? Are we going to try to do 

anything to preclude that? Are the Russian allies hanging in there 

with us right now? And how do you project that as we get further 

into the sanctioning effort? 
33 

Mr. FORD. That is an ongoing piece of the diplomatic challenge. 

We, of course, hope that the people will hang with us in this. We 

think we have been doing a pretty good job of keeping the team together so far. 

One example of that is the ongoing engagement that we have 

had with our European friends with respect to ensuring the continued rollover of sanctions against Russia for Crimea. You know, this 

is the kind of thing that we spend a lot of time doing. 

You mentioned the issue of mitigating impact upon the U.S. 

economy, for example. One of the things that we did when a couple 

of weeks ago we issued sanctions against Russia for its chemical 

weapons attack in the U.K., we had a series—the most significant 

piece of that had to do with denial of export of national securitycontrolled items, a presumption of denial from the United States. 

One of the carveouts that we had from that in an effort specifically to try to take into consideration the kind of concerns that you 

identified, sir, is a carveout for national security exports to U.S. 

companies operating in Russia so that we are not hurting our people operating in Russia, and we also had a carveout for Russians 

employed by U.S. companies in the United States, for example. So 

we are always mindful of those kinds of effects, and we try to mitigate them as best we can. 

Senator PERDUE. Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Jones. 

Senator JONES. Thank you, Mr. Chairman. 

I would like just a real quick—it is something that I have been 

concerned about, and that is, I hear in the classified meetings and 

I hear today, and I see all of the issues that are going and all the 

sanctions that are being imposed and the impact, the financial impact and everything, but yet we are not hearing as much of the deterrent—the impact and the effectiveness of the deterrent. And I 

am curious as to just a real—if you can, has the President’s comments about all this being a hoax and anything like that, is that 

undermining your efforts? Is Putin trying to just wait it out and 

hoping the President will have his way? Is that undermining your 

efforts? 

Ms. MANDELKER. I think to the contrary, Senator. If you look at 

the wide range of activities that this Administration has undertaken under the direction of the President, including the very significant sanctions that we have been able to launch, including the 

expulsion of 60 Russians out of our country, including the closing 

of Russian entities in the United States, what Russia sees is a 

United States that is very aggressively—— 

Senator JONES. Yeah, but when the President is standing right 

next to Mr. Putin and he is just talking about hoaxes on Twitter, 

it just seems to undermine that. But that is OK. I understand. And 

I understand the response. 

Mr. Krebs, I would like to ask you briefly, I know in my election 

in December, DHS had officials on the ground in case there were 

some problems. We had seen some issues with bots and other 

things coming up, but apparently there was not a lot of activity 

that day, at least as far as the Russians were concerned. 

I want to kind of follow up on what Senator Tester was asking. 

Are you going to be able to provide that kind of support this com-
34 

ing November for 50 States? And what kind of support would that 

look like? Are you focusing on specific response threats? What are 

we going to see from DHS on election day in November of this 

year? 

Mr. KREBS. Thank you for the question. So, absolutely, across the 

50 States, if requested, we will deploy our personnel, our field personnel—we have protective security advisers and cybersecurity advisers—across the country. They will be in the incident response 

cells for the State CIOs. They will also be sitting alongside the 

homeland security advisers. And we will deploy that again come 

midterms. 

We just actually ran through this process last week. We had Tabletop the Vote, which was a nationwide tabletop exercise, 3-day 

exercise. Forty-four States plus the District of Columbia ran 

through scenarios, both technical hacking of election infrastructure 

as well as foreign information operations. And a couple takeaways 

from that, and just again to reinforce, when you go home, please 

encourage your State and local officials to work with us. But there 

is a need, as I mentioned, in our dependent position, we need more 

information as soon as it comes up. The ‘‘If you see something, say 

something’’ mantra applies here as well. We really do need State 

and locals to alert us as quickly and as early as possible so that 

we can stitch together that national picture. 

So a few other things. We will be standing up, our National Cybersecurity and Communications Integration Center. We will be in 

kind of a war room posture that day. But we will also have a national situational awareness room where State and local officials 

can get on to basically a web chat, something like that, and they 

can share information across the country. 

So, again, if they see anything, they can put it up in the situational awareness room, and they can share information visibility to 

get that common operating picture of our election security posture 

on the midterm. 

Senator JONES. That is great. I want to follow up real quick with 

that, because you first said that if the States request it, I am assuming leading up to election day, though, there is going to be a 

considerable amount of information being shared. And if you are 

seeing something, you are going to be encouraging those States to 

request that information or try to do that. I mean, some States— 

you know, look, a lot of States are reluctant to get the Feds involved, Alabama probably one of them, you know, for a lot of reasons. But I assume there is going to be a lot of information sharing 

leading up to that, so you can help identify—not just relying on the 

States, but you can help identify where there is a particular vulnerability. 

Mr. KREBS. Yes, sir, absolutely. We have every single day steadystate engagement with all 50 States and local jurisdictions. Secretary Merrill has been a partner, and we look forward to continuing to work with him. We are not just waiting for election day. 

The amount of progress that we have made in the last year alone 

is quite substantial, and we will continue pushing, pushing, pushing through the midterm. And then we will do a hot wash. We will 

figure out where we need to get better, and we will make that run 

up to the 2020 Presidential. 
35 

Senator JONES. Great. Thank you. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Tillis. 

Senator TILLIS. Thank you, Mr. Chairman. Thank you all for 

being here and the good work you are doing. 

Ms. Mandelker, or, actually, Mr. Ford, this may be in your lane, 

but I think one of the things that would be helpful to the Committee that could either be provided in a classified setting or ideally in an open setting so we can cut through some of the stuff that 

we heard today are trend lines. I am very curious to see what— 

let us say activities with foreign direct investment into Russia, you 

know, if you applied it back over some period of time, if you take 

a look at exits, Exxon was mentioned here. Interestingly enough, 

I think that JV started in the 2013–14 timeframe, probably months 

before Crimea was invaded, and yet for that entire period of time 

under the prior Administration there was not enough action to 

make Exxon take pause as to whether or not it made sense to do 

that. This Administration has. 

So I think if we look at some of the economic fundamentals, 

movement in their GDP, the sorts of foreign direct engagement, 

those are going to be very helpful for us to have and kind of map 

that to actions that you all have taken. You may not be able to derive direct causation, but I think that that would be helpful to 

show, and I think we are seeing trends moving in the right direction. 

I do not know if you have any information you can provide with 

that or whether or not that could actually be provided publicly at 

some point. 

Ms. MANDELKER. Senator, we would be happy to provide that 

publicly or to you personally. There is no question that we are seeing those kinds of trend lines. There is no question that our sanctions are—the fact that we have actually gone after some of these 

very significant entities, oligarchs, military—— 

Senator TILLIS. Yeah, I would like to get that, because I would 

like to drill it down so that when you hear no action is being taken, 

no repercussions are being experienced, that seems to suggest—or 

to defy any logic with anybody that follows the Russian economy. 

Mr. Ford, do you have anything to add to that? 

Mr. FORD. Nothing to add, Senator, except that I think I would 

agree completely that it is very clear that Russia has been feeling 

pain from this. I do not have specific figures in front of me, but, 

of course, things like direct investment, clearly down—after we 

sanctioned them for the—— 

Senator TILLIS. Well, let us get that information, because I would 

really like to point to it, and we can talk more in the session tomorrow. 

Mr. Krebs, do you believe that Russia started meddling in elections just in 2016 in the United States? 

Mr. KREBS. Without speaking to any classified specifics, I find it 

hard to believe that the intelligence service has not been trying to 

collect information on policymakers and influence foreign outcomes. 

Senator TILLIS. Do you believe it is fair to say, without sharing 

anything of a classified nature here, that prior Administrations 

would have been aware of this? 
36 

Mr. KREBS. Well, certainly the last Administration was aware, 

and I think before that likely—— 

Senator TILLIS. Do you see any evidence that internally there 

was any aggressive action being taken as a matter of policy or request for Congress to act to provide additional tools in that timeframe? 

Mr. KREBS. So as the Under Secretary mentioned, I also was not 

there at that time. There is continuity of records. We have seen 

discussions. There were actions taken. I do think that there was 

perhaps a lack of appreciation at the time of the full scope of the 

efforts, and as you get more intelligence—— 

Senator TILLIS. It is easy to lay your hands on some of that that 

may be helpful in the closed session tomorrow, but that is not a 

formal request. If you can get it and it is easy, I want you to be 

prepared for what you intend to talk about tomorrow. 

You know, the other point in relation to some questions here 

about burning down the Russian economy, I think that that sounds 

good. It may be a good sound bite. I think it is not good as a matter 

of strategic, precise policy where you are trying to ratchet things 

up without having the unintended consequences. I think, Secretary 

Mandelker, that is what you were trying to get to. So I think in 

tomorrow’s session, if we could talk more about some of the matters that may not be appropriate for this setting, I would appreciate getting into that. 

Mr. Krebs, in my remaining time, you mentioned that there are 

22 States currently engaged that are getting into the last-mile program. Do you know whether or not or can you say whether or not 

North Carolina is one of them? 

Mr. KREBS. Sir, I would have to circle back on that, but, again, 

you know, we tend to not talk about specific State engagement. 

Senator TILLIS. I think the other thing that is very important, I 

think I heard you right by saying they have got to come and request your support. 

Mr. KREBS. Yes, sir. 

Senator TILLIS. So it would probably also be helpful for those of 

us in the Senate who want to make sure that the State is availing 

themselves of these resources, that we as Member of the Senate 

communicate to the Secretary of State or the election officials that 

this is a resource they should take advantage of. I would like to 

get your advice on how we should communicate that. 

Mr. KREBS. Absolutely. 

Senator TILLIS. Thank you, Mr. Chair. 

Chairman CRAPO. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

Mr. Krebs, I do not know if you are familiar with the story that 

was just out, a letter or a primary source from a young 17-yearold? 

Mr. KREBS. Yes, ma’am, I did see that this morning. 

Senator HEITKAMP. Very interesting reading, actually, attending 

a conference, a programming conference, where they were asked to 

try and hack into State databases and change numbers. But he decided he would do something different, and he ended up, in 5 minutes, without really knowing a lot about it, crashing the system. 
37 

You know, anyone who reads this has no confidence at all that 

we are headed in the right direction and that we are taking the 

right kind of prophylactic measures. And one of the things that we 

know we absolutely have to do is we have to have paper ballots. 

Mr. KREBS. Yes, ma’am. 

Senator HEITKAMP. So how many States have a system where 

they do not require paper ballots right now? 

Mr. KREBS. So 5 States are entirely electronic, 14 States total 

have some degree of electronic nonpaper ballots. 

Senator HEITKAMP. This is very problematic. 

Mr. KREBS. Yes, ma’am. 

Senator HEITKAMP. And I cannot say enough about the need to 

be very vocal in those States where they do not have paper ballots. 

Mr. KREBS. As far as I have seen, every single State that does 

not have paper ballots is on track toward, whether at the legislative level—— 

Senator HEITKAMP. Will they be on track for the 2018 election? 

Mr. KREBS. I do not believe so, but I think every single one of 

them is aiming for 2020. 

Senator HEITKAMP. This is a real problem. And, you know, I am 

not—I was not there in the exercise. I do not know, you know, 

maybe in closed session we can talk a little bit about whether this 

experience that this young 17-year-old had is consistent with your 

concerns. But, you know, obviously very, very concerning and a 

wake-up call for all of us. 

Mr. KREBS. If I can comment on that article, you know, I try to 

look at the glass is half-full side of this. I think with the DefCon 

and Black Hat conference, what we are seeing is an awakening and 

an awareness of the importance of security and cybersecurity in 

election security. That is happening. No one is sitting back and 

taking this on the chin. We are stepping forward. We are making 

progress. 

I would also say that when you have—I think that individual has 

been in computer science for 5 or 6 years. That is also one of the 

greatest gaps that we have as a Nation, cybersecurity workforce, 

but also STEM education in our K–12 and higher education. 

So when I read that article, I have some doubts—— 

Senator HEITKAMP. He professed that he did not have a level of 

skill sets that would in any way match a Russian data base or 

bank of hackers. 

Mr. KREBS. But he is in the game, and I tell you what, that 17- 

year-old and the other 11-year-old that they were talking about, I 

want their resumes in 5 years. We need more of that. 

Senator HEITKAMP. Well, I am telling you, it is a wake-up call. 

Ms. Mandelker, you know, I am just going to say that I watch 

and we can look at all the metrics that Senator Tillis was talking 

about and GDP and effect. But let us get down on a microlevel because I have been watching your work regarding Rusal. It seems 

pretty schizophrenic. It seems not only on your side but on the tariff side where, you know, all of a sudden out of nowhere they are 

granted a waiver; when it becomes public, the waiver is withdrawn 

from their tariffs. 
38 

And so how does it really benefit us if we say we are going to 

give you extensions so that you can get rid of the oligarch so you 

can continue to function? And that seems schizophrenic to me. 

Ms. MANDELKER. So, Senator, I cannot talk to the tariffs. That 

is a decision made by the Department of Commerce. 

Senator HEITKAMP. I know that. 

Ms. MANDELKER. Very specifically, with respect to Rusal, we 

were clear that when we designated Deripaska and his companies, 

we were designating those companies because they were 50 percent 

or more owned or controlled by Mr. Deripaska. The same was true 

with respect to the other oligarchs who we designated. At the same 

time—— 

Senator HEITKAMP. But you let him take his money out of the 

company before—then said, ‘‘We will lift the sanctions.’’ 

Ms. MANDELKER. We have not lifted any sanctions on Rusal. On 

the very same day that we issued those designations, we also appreciated, as we have been discussing, that those kinds of designations can have wide-ranging—— 

Senator HEITKAMP. Isn’t that the purpose of these, to actually 

have wide-ranging effects that will lead to economic harm and will 

lead to consequences? 

Ms. MANDELKER. Yes, but, Senator, with all due respect, the impact that some of those sanctions can have, Rusal was—— 

Senator HEITKAMP. That is true in any kind of global economy. 

We are going to have—no one cares that soybean farmers are collateral damage. So why do we care if other people who use aluminum are collateral damage on sanctions? 

Ms. MANDELKER. So, Senator, Rusal is one of the biggest aluminum companies in the world. They have operations all over Europe. We have been in close discussions with our close partners and 

allies. We wanted to make sure that the impact of the designation 

was felt on Mr. Deripaska and not our close—— 

Senator HEITKAMP. I am out of time, but my only point on this 

is there is an approach avoidance on what you guys do, and it just 

seems to me that when you have your boot on the neck of a bad 

actor, you should keep it there. 

Chairman CRAPO. Senator Van Hollen. 

Senator VAN HOLLEN. Thank you, Mr. Chairman. I thank all of 

you for your testimony today. And, Mr. Krebs, you have been clear 

that the Department of Homeland Security focuses on defense, trying to harden our infrastructure, including when it comes to elections, our election information. But I think we would all agree that 

even as we need to harden our defense, the best defense would be 

if we could deter the actions ahead of time, regardless of what they 

may be. 

Mr. Krebs, you have talked about some of the positive signs you 

have seen with respect to the sanctions, and you talked primarily 

about other countries not engaging with the Russians when it 

comes to arms sales. You described it as ‘‘the dog that did not 

bark,’’ right? 

Mr. KREBS. I believe that was—— 

Senator VAN HOLLEN. I am sorry. Mr. Ford said that. 

But when it comes to interference in our elections, the dogs are 

barking really loudly, right? I mean, we have the Director of Na-
39 

tional Intelligence Dan Coats say the lights are flashing red. We 

had all of the President’s top national security advisers just a few 

weeks ago saying that the Russians are planning to interfere or are 

already interfering in the 2018 elections. We have got the Microsoft 

story today. We have the Facebook story from a couple weeks ago. 

So my question to you as an experienced diplomat, who is Putin 

listening to? Is he listening to DNI Coats or is he listening to what 

President Trump is saying in Helsinki and at the rally 24 hours 

after all those national security advisers met saying that this is ‘‘a 

Russian hoax’’? Who is President Putin listening to? 

Mr. FORD. I guess I will venture to take that one, Senator. 

Senator VAN HOLLEN. That is, I am sorry, Mr. Ford, for you. 

Mr. FORD. I am obviously not in a position to describe in any useful detail, you know, to whom President Putin is listening in his 

own inner councils. I certainly hope someone knows that, but I do 

not know myself. I can say that my own impression from these 

issues has been that the Russians are very well aware of what in 

the Soviet era they used to call ‘‘the correlation of forces.’’ They understand what it means to feel pain and what it is for economic 

and other sanctions—other factors to play together in a country’s 

national power. 

What we are trying to do, putting aside whatever it is—I understand your question, but I think from a Russian perspective, my 

guess would be that they are very attuned to the net impact we are 

having upon their ability to project power into—— 

Senator VAN HOLLEN. Mr. Ford, I am asking about the elections. 

We have evidence, including this morning, that they clearly have 

not gotten the message with respect to interfering in our politics, 

in our elections. You said earlier that the obvious objective is to influence Russian behavior. That is the obvious objective of sanctions. 

You also said that we need to make it clear that there will be a 

painful result if the Russians engage in malign behavior. 

Here is what Secretary Pompeo said in response to a question 

from Senator Rubio just a few weeks ago in the Senate Foreign Relations Committee, because Senator Rubio and I have introduced 

the DETER Act, which would establish very clear, certain penalties 

on Russian behavior if we catch them again interfering in our elections. 

Secretary Pompeo said, ‘‘Senator, I completely agree with you 

that there is a cost-benefit calculation that is undertaken before 

the Russians act. So it follows necessarily that putting them on notice with essentially a fail-safe about things that will follow has the 

likelihood of being successful in raising the cost in terms of how he 

calculates risks associated with a wide range of actions.’’ 

Do you agree with the Secretary’s statement? 

Mr. FORD. I clearly agree with Secretary Pompeo. I think it is 

important—as I was explaining a bit earlier, I think it is important 

to protect and advance a couple different equities simultaneously 

here. We need to influence Russian behavior. In the sanctions context, we need to protect the economic and competitive interests and 

job equities that we have. We need to protect our relationships 

with other players around the world. 

We do not have, to my knowledge, an interagency position on 

that particular piece of legislation at this time. I believe it presents 
40 

challenges from the perspective of the degree to which we are in— 

the degree to which it is possible to have a national security waiver. As part of—— 

Senator VAN HOLLEN. Mr. Ford, I am sorry. My time is running 

out, and we can work on issues regarding a waiver. 

Mr. FORD. We would be happy to engage in all these questions. 

Senator VAN HOLLEN. But I worried a little bit when you said 

they can study to the test. The reality is under the DETER Act, 

there is no getting around the penalties, right? That is the whole 

idea of deterrence. You have clear, harsh penalties. And I should 

stress these are contingent penalties. We have had a lot of talk 

about whether we should increase sanctions on Russia today. What 

we are talking about in this piece of legislation is if they get caught 

interfering in our elections in 2018, after this bill were to pass, 

then there would be harsh sanctions. Do you agree with the Secretary that that seems like a good framework to approach this 

issue? 

Mr. FORD. We have already made very clear that, you know, 

there are behaviors—and that is one of them—that would be unacceptable, and we certainly plan and would expect to make Russia 

regret any step of that sort. We would be happy to work with you 

and your staff to provide input to make sure that this legislation, 

if it moves forward, is as well crafted as it can be, including from 

the perspective of making sure that this is not a blunderbuss but 

more of a rapier or rheostat that we can use as a tool of diplomacy 

and behavioral inducement to help ensure that Russia behaves better and that we can modulate pressures in response to how their 

behavior—— 

Senator VAN HOLLEN. Well, thank you. That was a lot of adjectives, but the point—today we know that they are not getting the 

message. I mean, we know that, right? You do not have to tell us. 

The Director of National Intelligence and everybody has told us 

that they clearly are not getting the message today, despite what 

you and everybody else has been saying. 

So we have got about 80 days, less than that, to go, and my goodness, if we cannot come up with a way to safeguard the integrity 

of our democracy in the next 80 days, shame on us. 

Chairman CRAPO. Senator Cortez Masto. 

Senator CORTEZ MASTO. Thank you. 

Let me try a different tactic. Let me ask the three of you if you 

can help me understand the Administration’s strategy toward Russia’s election interference. What theory of behavioral change is the 

Administration pursuing that entails Treasury designating a series 

of Russian entities and individuals on the one hand, and has President Trump standing next to Putin and saying Russia is not targeting U.S. elections on the other? What is the thinking that links 

those two actions? Can any of you answer that? 

Ms. MANDELKER. Senator, I think the President later corrected 

what he had said during that press conference. But the bottom line 

is that we have been—— 

Senator CORTEZ MASTO. And are you getting clear direction from 

the President in addressing the concern that I am hearing from all 

of my colleagues in a bipartisan manner to address what Russia is 

doing in interfering with our election process? 
41 

Ms. MANDELKER. Absolutely, Senator. 

Senator CORTEZ MASTO. So what additional sanctions can Treasury impose? 

Ms. MANDELKER. Again, this morning we imposed additional 

sanctions. It is a very active program for us. As I have already 

mentioned, we have designated some of the biggest companies in 

Russia. We have designated some of Putin’s closest allies who have 

an enormous amount of wealth, which was seriously impacted by 

our sanctions. The impact of our sanctions has also had a worldwide impact for Russia. It has had a chilling effect on individuals 

and companies and countries who are considering doing business 

with Russia because they understand that—— 

Senator CORTEZ MASTO. Well, Ms. Mandelker, I only have so 

much time. Let me ask, because I know—— 

Ms. MANDELKER. ——there are always more to come from the 

Treasury Department. 

Senator CORTEZ MASTO. I appreciate that, and we have had this 

conversation in the confidential briefing as well, which I was not 

impressed with. 

There is evidence through the Panama Papers or Russian Forbes 

suggesting that several childhood friends of President Putin have 

come into enormous financial windfalls that raise strong suspicions 

of corruption. These men are just a few of the Russian individuals 

and entities that experts have suggested should be designated 

under CAATSA authority. Does Treasury have the authority under 

CAATSA to pursue these individuals? And are you pursuing them? 

Ms. MANDELKER. I cannot speak to any particular individuals 

without knowing their names and circumstances, but, absolutely, 

we have very broad—— 

Senator CORTEZ MASTO. So you are not aware of those individuals and the evidence through the Panama Papers or the Russian 

Forbes? You are not familiar with what I am talking about? 

Ms. MANDELKER. Senator, as you are aware, we have conducted 

with the interagency a very extensive report under CAATSA which 

detailed a number of oligarchs and senior foreign officials who are 

close to Putin. We have a great deal of information about those individuals, and we have designated a number of them. 

Senator CORTEZ MASTO. So my colleague just referred to the 

DETER Act. Do you support it? 

Ms. MANDELKER. Senator, I know the Administration is happy to 

work with the Senate on the DETER Act or any other particular 

piece of legislation—— 

Senator CORTEZ MASTO. Is there any language in the DETER Act 

that you have concerns about? 

Ms. MANDELKER. We are happy to sit down and provide that 

kind of guidance. I think those discussions have already been well 

underway. 

Senator CORTEZ MASTO. Mr. Krebs, you identified there were five 

States without paper ballots. Are you currently working with those 

States to shore up the integrity of their election? 

Mr. KREBS. Yes, ma’am. We work with all 50 States. 

Senator CORTEZ MASTO. And you are currently working with 

those five? 

Mr. KREBS. Yes, ma’am. 
42 

Senator CORTEZ MASTO. Is there anything that we can do in Congress to continue to support shoring up the election integrity in all 

of those States and what you are doing in working with them? 

Mr. KREBS. Absolutely. I think I have already mentioned that 

when you do go back to your jurisdictions, when you go back to 

your districts, please encourage your State and local officials to 

work with us. You know, we hit them up every day, but I think 

the more voices they hear—you know, I do not want to undersell 

the level of work and partnership we are seeing, but we can always 

do more. 

Senator CORTEZ MASTO. So there was an opportunity to supply— appropriate $250 million to the States, on top of the $380 million 

that was appropriated for the States that the States have utilized. 

Are you hearing from those States that additional dollars, the $250 

million, would have been helpful to help shore up the integrity of 

the election process? 

Mr. KREBS. As I understand it, they are in the process of implementing that $380 million, which was a much-needed infusion. 

Going forward, there will be a requirement for additional funding. 

What we are trying to help States with is refine what the ask is 

and really get to the bottom of what is it that they need and how 

are they going to use it. 

There have been investments at the State level because ultimately this is a State and local responsibility to administer Federal 

elections. We are in a supporting role. The question going forward 

is: Is there money needed? How much? Where is it going to come 

from? And then how are going to—if it is a Federal spend, how are 

we going to ensure the appropriate risk-based security outcome? 

Senator CORTEZ MASTO. And besides paper ballots, is there anything else that can be—— 

Mr. KREBS. Auditability, yes, ma’am. Auditability. 

Senator CORTEZ MASTO. OK. Thank you. I know my time is running out. Thank you very much. 

Chairman CRAPO. Thank you. 

Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

Sanctions usually involve an effort to follow the money, and Russians close to Putin are using every opportunity they can to make 

it harder for the United States to follow the money. The recent defense bill requires Treasury to brief Congress on the assets owned 

by Vladimir Putin and his cronies, including the location, value, 

size, and contents of their bank accounts, real estate holdings, and 

all other financial assets, and the shell companies they use to hide 

those assets. That bill has now been signed into law. 

Under Secretary Mandelker, when can we expect you to provide 

this briefing? 

Ms. MANDELKER. Senator, we would be happy to work with your 

staff on this briefing. What I can also tell you—— 

Senator WARREN. This is not about working with my staff. You 

are supposed to give a briefing to all of Congress. I just want to 

know when it will be ready. 

Ms. MANDELKER. I cannot give you a date, but I am happy to get 

back to you on that. I am happy to give you that briefing. 

Senator WARREN. Weeks? Months? 
43 

Ms. MANDELKER. Again, Senator, I believe that that requirement 

was that we conduct that briefing in consultation with the Director 

of National Intelligence and the State Department—— 

Senator WARREN. Have you started that? 

Ms. MANDELKER. ——and we will—we have a number of efforts 

underway. In fact, we detailed—— 

Senator WARREN. Is that a yes or a no? 

Ms. MANDELKER. Again, Senator, we have a number of efforts 

underway to follow the money. We just provided an extensive report to Congress pursuant to CAATSA, and—— 

Senator WARREN. Well, you know, you have a requirement here 

in the law, and I am just asking about one thing, about a report 

you are supposed to produce, and I just want to know when you 

are going to produce the report. I ask this question because, frankly, I am not convinced that Treasury is doing everything possible 

to hold Putin accountable for using cyberattacks to interfere in our 

elections and those of our allies, for illegally occupying Ukraine, for 

propping up Syrian dictator Assad. 

Congress required Treasury to provide a report on the net worth 

and income sources of senior Russians close to Putin, and instead, 

I saw what you did. You copied and pasted the Forbes billionaires 

list. Thank you, but we already had that. 

The Senate Intelligence Committee asked Treasury to help follow 

the trail of dirty Russian money to investigate Russia’s interference 

in our election, and you are reportedly dragging your feet on that. 

It has been over a year since Congress overwhelmingly passed 

sanctions on Russia. You still have not implemented seven mandatory provisions of that law. 

It is not hard to see why Putin thinks he can still interfere in 

our elections and get away with it. The American people and the 

world deserve to know how Putin makes his money, and if we want 

to squeeze Putin and his cronies, we need to follow the money and 

expose those assets so that these corrupt individuals have fewer 

ways to ignore the sanctions. 

So I want to ask you another question, following up on what Senator Heitkamp asked. Last month, just says after President Trump 

met with President Putin in Finland, Rusal, this sanctioned Russian aluminum company controlled by a sanctioned Putin crony, received an exemption from President Trump’s tariffs in the Commerce Department. Treasury reportedly signed off on this exemption. I sent a letter to the Commerce Department asking questions 

about the decision, and 1 day later, the Administration reversed its 

tariff exemption. I was very glad to see that. But can you tell me— 

I still have a simple question. How did Treasury allow a tariff exemption for the subsidiary of a sanctioned Russian company in the 

first place, given that the tariff was meant to protect American 

suppliers? 

Ms. MANDELKER. Senator, that was a decision by the Department 

of Commerce, not a decision by the Treasury Department. That is 

not a decision—— 

Senator WARREN. And so the information that you signed off on 

it and then reversed positions is not accurate? 

Ms. MANDELKER. That is right, Senator. 
44 

Senator WARREN. OK. You are saying it did not—it is not accurate that that did not happen. All right. So let me ask the rest of 

it. Meanwhile, Treasury is reportedly considering lifting sanctions 

on Rusal, which is sanctioned for its financial ties to a corrupt Russian oligarch who contributed to Putin’s illegal occupation of 

Ukraine. Treasury Secretary Mnuchin recently said he was concerned about ‘‘the hardworking people of Rusal.’’ 

So let me ask, has Putin withdrawn from the illegal occupation 

of Ukraine, stopped cyberattacks and disinformation, or halted efforts to spread corruption? 

Ms. MANDELKER. Senator, I just want to correct one point from 

your earlier question. 

Senator WARREN. Yes? 

Ms. MANDELKER. The oligarch report, the classified oligarch report, as we have said repeatedly, was a very extensive piece of 

work. It involved over 2,500 hours of work within the interagency. 

So in terms of following the money, we have undertaken—— 

Senator WARREN. Well, look, I am now out of time—— 

Ms. MANDELKER. ——not just in that report but in a number—— 

Senator WARREN. ——but let me just say on this, we just passed 

a law about this. I just asked you about when you—asking you for 

a report, and it was signed into law, and all I ask you is when are 

you going to follow that, and you tell me, ‘‘We already have.’’ If we 

thought you had already done it, we would not have passed another law asking for this report. So I think it is perfectly fair to 

ask you when you are going to comply with the law that President 

Trump recently signed in effect? 

Ms. MANDELKER. And, again, Senator, I have made clear that 

that law requires that we provide a briefing. We are happy to do 

that. We just provided a report last week—— 

Senator WARREN. When? That was my question. 

Ms. MANDELKER. ——covering illicit finance of money laundering 

by Russia. 

Senator WARREN. And when are you ready for that briefing? 

Ms. MANDELKER. Excuse me. 

Senator WARREN. When? That was my question. That was the 

whole question. It was a short question. 

Ms. MANDELKER. I understand. We are happy to get back to you. 

That is a briefing that we would do with the Director of National 

Intelligence and the State Department. I am not prepared to give 

you a date today, but we will give you a date in short order. 

Senator WARREN. Or even a ball park. Thank you. 

Chairman CRAPO. Senator Reed. 

Senator REED. Well, thank you, Mr. Chairman. 

Let me ask if anyone would disagree with the statement that we 

have irrefutable, uncontradicted evidence that the Russian Government, at the direction of President Putin, interfered in the 2016 

election to favor the candidacy of President Trump and disfavor the 

candidacy of Secretary Clinton, that they continue to engage in activities to undermine our election process throughout the United 

States? Does anyone disagree with that? 

Mr. KREBS. Sir, I think that tracks against the intelligence community’s assessment—— 
45 

Senator REED. That is a fact. So, again, going back to questions 

that Senator Jones and Senator Van Hollen raised, why does the 

President seem unwilling to accept this fact? As recently as yesterday, he suggested that it may or may not have been the Russians 

in an interview with Reuters. Why doesn’t he accept what is the 

facts? 

Mr. KREBS. Sir, I believe he has supported the intelligence community. He supports the intelligence community. As Under Secretary Mandelker said, he clarified his statement on the Tuesday 

after. Just a couple weeks ago in New York City, Vice President 

Pence was very emphatic about supporting the intelligence community and that protecting our elections is a priority. 

Senator REED. So why yesterday when he is asked about the 

Mueller investigation, he criticizes it, says it plays right into the 

hands of Russians, if it was the Russians? 

Mr. KREBS. Sir, I am not aware of that report. Again, I—— 

Senator REED. Well, it was in the newspaper today. 

Mr. KREBS. So the President has been clear he supports the intelligence community. I have all the guidance, the direction, and 

the authorities that I need to help State and local election officials. 

Senator REED. Would it help your efforts if the President of the 

United States, your efforts both nationally and internationally, if 

the President of the United States made a statement to the American people that essentially reaffirmed the statement I just made, 

i.e., we were attacked by the Russians at the direction of Putin, it 

was designed to affect the election in 2016, they are continuing to 

attack us? Would that help your efforts in terms of bolstering election security if the President actually said that directly rather than 

every other day equivocating? 

Mr. KREBS. Again, sir, the President supports the intelligence 

community assessment. He has said that publicly. I have what I 

need to—— 

Senator REED. Well, then why does he turn around and say, ‘‘I 

support the intelligence community assessment,’’ but just as recently as yesterday saying, ‘‘Well, it may be the Russians, maybe 

not’’? How does that support the intelligence community assessment when the intelligence community assessment, as you have all 

conceded, is absolutely conclusive as to the involvement of Russia 

at the direction of Putin, and their continuing ongoing threat to the 

United States? I mean, this is as if a previous President sort of 

said, ‘‘Well, you know, we were attacked, but it could have been 

those guys or maybe somebody else.’’ I do not think that is the way 

our previous Presidents have acted. I do not think you have an answer. 

Mr. KREBS. Sir, again, I have the guidance I need to go and engage. 

Senator REED. But what about engaging the American people 

and the international community? They are looking at, as my colleagues have suggested, questions of, well, the President does not 

really believe that. One of the issues that is coming up shortly is 

that the European Union every 6 months has to renew sanctions. 

That expires January 31st of 2019. Is there a chance that one—and 

it has to be unanimous—that one of those countries could say, you 
46 

know, ‘‘This is no big deal with the President, I mean, we do not 

have to do that’’? 

Ms. MANDELKER. Senator, we engage very extensively with our 

European colleagues precisely on those sanctions. They just issued 

additional sanctions at the end of last month that followed sanctions that we had previously designated. We are going to continue 

to work with our colleagues in the EU to have them continue to 

ratchet up the pressure that we have already been placing on the 

Russian economy. Those discussions have been quite productive. 

Senator REED. So have you heard any of your European colleagues suggest to you that they are confused about the President’s 

statements? 

Ms. MANDELKER. No, Senator. 

Senator REED. So they are as completely assured of his situation 

as we are? And, frankly, you cannot explain the comment yesterday. Neither can I. Why would one question whether the Russians 

are involved in the election as recently as yesterday if, in fact, you 

do support the intelligence community? 

Thank you. 

Chairman CRAPO. Thank you, Senator Reed, and that concludes 

the questioning. 

Questions submitted by Senators will be due by next Tuesday, 

and I ask all of our witnesses to respond promptly to those questions if they are submitted to them. 

And with that, this hearing is concluded. Thank you again for 

your attendance and willingness to share your expertise with us 

here today. Thank you. 

[Whereupon, at 12:14 p.m., the hearing was adjourned.] 

[Prepared statements and responses to written questions supplied for the record follow:] 
47 

PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO 

This morning the Committee will receive testimony from senior Administration officials from the Departments of Treasury, State, and Homeland Security on the implementation and effectiveness of the sanctions program currently in place against 

Russia. 

The reasons for these sanctions include Russia’s standing military incursions in 

Ukraine; abetting Assad’s atrocities in Syria; conducting cyberenabled information 

warfare activities and cyberattacks against United States critical infrastructure, including its malicious meddling in U.S. elections, among a host of other malign Russian activities. 

The Banking Committee plays a leading role in developing any legislation that 

proposes the use of sanctions and financial pressure, more especially those measures 

involving financial institutions, sovereign debt, and other financial instruments to 

address serious threats to the national security of the United States. 

Just about 1 year ago, on August 2nd, the President signed into law the Countering America’s Adversaries Through Sanctions Act of 2017, known as CAATSA, 

which included in it, among other things, authorities for not only a set of strengthened sanctions against Russia but also brand new authorities for several powerful 

mandatory secondary sanctions. 

It was this Committee that put together the foundation for those sanctions and 

financial measures on Russia and then worked with the Committee on Foreign Relations to expand them as part of CAATSA. 

CAATSA was truly a four-square effort: it was not only strongly bipartisan but 

also bicameral. It passed the House by a vote of 419–3 and two days later, by the 

Senate on a 98–2 vote. 

It’s not often that Congress acts together in such a strong manner, as marked by 

such near-unanimous votes. But, then, Russia is a menace on so many different levels, today, that Congress can be compelled to act with a single voice to find solutions 

that will protect America and democratic values across the world. 

To its credit, the Administration, in the year since CAATSA, has imposed some 

of the toughest sanctions in years on Russia, particularly with regard to those imposed in April on Russia’s oligarchs and their business associations. 

The bulk of sanctions imposed against Russia pertain to its unlawful invasion and 

annexation of Crimea. These were strengthened by Congress in CAATSA and absent 

any change in Putin’s behavior, will likely remain in place until he’s no longer in 

power and Crimea is returned. 

In all, over the last year, the Administration has sanctioned over 200 targeted 

Russian individuals and entities, for either its cyberattacks or Ukraine behavior either pursuant to congressional sanctions, or under its own executive authority. 

I hope to receive an update today from our witnesses on how the sanctions against 

Russia are being implemented and enforced. 

It was a positive step when, 2 weeks ago, in response to Russia’s use of a nerve 

agent in Britain against one of its former spies and his daughter, the State Department showed its resolve against Moscow while it took a stand with our British allies 

by imposing a set of escalatory sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991. 

The Administration is taking some important steps against Putin, his cronies, and 

the industrial apparatus they control, but can Congress expect more from the Administration—and, when? 

Congress itself is positioned to do more. There are bills in this Committee and 

in the Foreign Relations committee which seek to escalate economic pain throughout 

Russia’s banking and energy sectors and sovereign debt markets. 

As we all, and that includes the Administration, consider next steps to further 

constrain Putin, including sanctions and other diplomatic initiatives, several questions come to mind—— 

What degree of success have the existing evolutions of sanctions, which work to 

constrain the Russian economy and derail the activities of those individuals closest 

to Putin, had on Putin’s behavior at home and abroad? 

What is the most effective way to coordinate and strengthen sanctions with our 

European allies and other partners? 

PREPARED STATEMENT OF SENATOR SHERROD BROWN 

Mr. Chairman, thank you for agreeing to this important hearing, the first in a 

series in the coming weeks on sanctions and other measures that might more forcefully counter Russia’s continuing efforts to attack the U.S. and our allies. 
48 

While sanctions have had some effect on Russia’s economy, it’s not clear what effect they have had on Russia’s malign activities around the world. Russia remains 

in Crimea, its proxies are still in eastern Ukraine, it serves as the arsenal of Assad, 

and it continues to attack our electoral system and other key components of our infrastructure. 

We must send a more powerful and direct message to Putin and those within his 

circles: We know what you’re doing, it must stop, and if you continue, you and your 

Government will pay a dear price. 

Over a year ago, Congress gave the President the authority to use more assertive 

sanctions against Russia. 

My colleagues and I have pressed for nearly a year for stronger CAATSA implementation. After months of waiting, we requested assessments by the Inspectors 

General of the Intelligence Community, State, and Treasury Departments. 

These hearings, and these IG audits, are not simply a reaction to the President’s 

startling performance in Helsinki, which was widely panned on both sides of the 

aisle and the Atlantic. There is a deeper problem. With a few exceptions, the President has refused to use the new authorities under CAATSA. 

Let me give you one example. Administration officials identified Russians responsible for supplying chemical weapons components for use in Syria, the ones that 

killed and maimed men, women, and children alike. Our U.N. Ambassador announced the imminent imposition of sanctions. The next day they were withdrawn, 

reportedly on orders from the President. 

That is not the way mandatory sanctions operate. Section 231 of CAATSA requires that once violators are identified, they must be sanctioned, or waivers exercised—these defense and intelligence sanctions in CAATSA were not permissive, 

they were mandatory. And then the Administration requested that a broader waiver 

to section 231 be included in the defense bill last month, basically because the President could not certify the key condition of the existing waiver: that Russia was significantly reducing its cyberattacks against the United States. 

I think it was a bad idea to use the recent defense bill to relax waiver authorities 

on Russian defense and intelligence sector sanctions, and then effectively exempt 

those waivers from Congressional review under CAATSA. Instead of strengthening 

sanctions, we’ve gone in the opposite direction. We should be strengthening, not 

weakening, sanctions. 

And that’s why the Administration continues to face fierce bipartisan criticism on 

its Russia policy, why a new round of oversight hearings is being convened, and why 

members on both sides are proposing new sanctions. 

In addition to urging the Administration to use CAATSA as it was intended, I 

think most of us agree Congress should also do more to increase pressure. Congress 

crafted tough, comprehensive Russia sanctions, enacted last August by overwhelming majorities in both chambers—419–3 in the House, 98–2 in the Senate. We 

should build on that broad bipartisan consensus. 

We should focus on the facts and broader strategic questions: What is Russia’s 

Government still doing in Syria, Ukraine and Crimea? What active cyberattacks are 

they directing against our elections and critical infrastructure? And what powerful 

economic, trade, financial, diplomatic and political tools can we deploy now to deter 

those threats—or threaten to deploy by dropping the hammer if they continue? 

Russia’s election interference, confirmed unanimously by U.S. intelligence earlier 

this year, and reaffirmed since then, poses a problem that goes far beyond foreign 

policy, and strikes at the core of our democracy. This is not a partisan issue. There 

is no disagreement about what happened here. 

Now we’re less than 100 days away from another election, and the Director of National Intelligence has been sounding the alarm that the warning lights are blinking 

red again. 

And while some efforts are being made to bolster State election security measures, 

and otherwise contain these threats, including a markup of a measure this week in 

Rules, it appears little is being done to address their source: Russia’s Government. 

I know my constituents are clear-eyed about these threats. The Ukrainian community in Ohio and around the world knows firsthand—like our NATO allies Latvia, Lithuania, Estonia—the dangers of unchecked Russian aggression. 

I also know, as past Committee witnesses have said, U.S./EU unity is critical if 

sanctions on Russia are to be effective. 

That’s why we should not only press to more aggressively implement current Russian sanctions, but we must also strengthen our response. New bipartisan sanctions 

measures have been introduced. These hearings are a critical next step. 

Today we’re joined by Treasury Under Secretary Mandelker; Assistant Secretary 

for International Security and Non-Proliferation Chris Ford from the Department of 

State; and Christopher Krebs, Under Secretary for the National Protection and Pro-
49 

grams Directorate, Department of Homeland Security—three people responsible for 

policy on countering Russia within the Administration. I welcome you all. I am interested to hear your perspective on where we are, what effects the current sanctions regime is having on Russia’s economy and behavior, and where you think 

we’re headed in the coming months. 

PREPARED STATEMENT OF SIGAL P. MANDELKER 

UNDER SECRETARY, TERRORISM AND FINANCIAL INTELLIGENCE, AND ACTING DEPUTY

SECRETARY, DEPARTMENT OF THE TREASURY

AUGUST 21, 2018 

Treasury’s Efforts To Counter Russian Malign Activity 

Chairman Crapo, Ranking Member Brown, and distinguished Members of the 

Committee, thank you for inviting me here today to speak on behalf of the Treasury 

Department and provide an update on our comprehensive efforts to counter Russia’s 

malign activity. Our efforts, taken together with our partners across the U.S. Government and around the world, are guided by a clear understanding of the threat 

Russia poses to the United States and to our friends and allies. 

As Russia seeks to challenge the United States and its allies, we see this threat 

manifest itself in a variety of ways, including by: continuing its occupation of Crimea and ongoing aggression against Ukraine, attempting to subvert Western democracies, including our own, through election interference; enabling the Assad regime’s 

massacres in Syria; using chemical weapons in an attempt to assassinate a British 

citizen and his daughter in the United Kingdom; perpetrating malicious 

cyberattacks; maintaining ties to transnational organized criminal groups; violating 

human rights at home; fostering corruption across Russia’s economy; and facilitating 

sanctions evasion and other illicit activity across the globe. The breadth and 

brazenness of Russia’s malign conduct demands a firm and vigorous response. 

Precisely for this reason, Treasury’s Russia sanctions program is among our most 

active and impactful. Since January 2017, this Administration has sanctioned 217 

Russian-related individuals and entities for a broad range of activities, 200 of which 

were sanctioned by Treasury’s Office of Foreign Assets Control (OFAC). Indeed, we 

have issued Russia-related measures in 7 of the last 9 months. Since the start of 

this Administration, Treasury has also added 32 Russian entities to its Sectoral 

Sanctions Identification List, subjecting those listed to debt and equity restrictions, 

as well as prohibitions on the provision of goods, services, and technology in support 

of certain energy projects in Russia. Pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA), we have also tightened these restrictions. 

In doing so we have targeted a veritable ‘‘who’s who’’ of Russia’s most prominent 

companies. These include Rosoboronexport, Russia’s primary State-owned weapons 

trading company; EuroSibEnergo, among the largest independent power companies 

in Russia; and Surgutneftegaz, a major Russian oil company. 

Our targets also include the heads of major State-owned banks and energy firms, 

as well as some of Putin’s closest associates. These figures include Putin affiliates 

Oleg Deripaska and Viktor Vekselberg; Putin’s current or former son in law Kirill 

Shamalov; the heads of State-owned companies such as Gazprom’s Alexei Miller, 

Gazprombank’s Andrey Akimov, and VTB Bank’s Andre Kostin; the head of the 

Russian Security Council, Nikolai Patrushev; and the Russian Minister of Interior, 

Vladimir Kolokoltsev. Dealings with such persons on our Specially Designated Nationals and Blocked Persons List, moreover, create exposure to secondary sanctions 

under CAATSA, meaning that persons who deal with them risk being sanctioned 

themselves. Targeting these Russian individuals and entities have made them radioactive, as we have made clear to the world that those who choose to continue to 

do business with them do so at their own peril. 

That CAATSA was passed by a near unanimous vote demonstrated great resolve 

by Congress to counter Russia’s malign activity. We share that resolve. The Department of the Treasury’s approach towards Russia is informed by this Administration’s 2018 National Security Strategy, which clearly recognizes the full range of 

Russian malign activity, and which prioritizes the importance of economic tools to 

‘‘deter, coerce, and constrain’’ our adversaries. 

As companies across the globe work to distance themselves from sanctioned Russian persons, our actions are imposing an unprecedented level of financial pressure 

on those supporting the Kremlin’s malign agenda and on key sectors of the Russian 

economy. 

Treasury’s actions have caused extensive consequences to the financial interests 

of targeted individuals and entities, including blocking hundreds of millions of dol-
50 

lars in Russian assets in the United States. Targeted State-owned banks and other 

sanctioned entities likely have higher financing costs than they otherwise would if 

not for Treasury’s prohibitions on debt purchases. Russian companies designated for 

their links to Crimea have been forced to cut production and have lost business relationships with foreign commercial partners. In addition, we have cut off, from the 

U.S. financial system and beyond, malicious cyberactors, including those providing 

offensive cybercapabilities to the Russian intelligence services, some of whom covertly worked on behalf of the Kremlin to interfere with the 2016 U.S. election. Such 

reactions illustrate the substantial costs our measures are imposing on those who 

undermine U.S. interests. 

Building on sanctions implemented since 2014, the impacts of our Russia-related 

sanctions are felt far beyond the targeted entities and persons. Western sanctions 

and subsequent geopolitical tensions have raised uncertainty and dampened domestic and foreign private investment in Russia. In the energy sector, our sanctions 

have limited important investment in exploratory energy projects needed to help 

grow Russia’s oil and gas production capacity. Overall foreign direct investment into 

Russia has fallen over 5 percent since 2013, with sizeable declines in direct investments from the United States, which have fallen 80 percent since 2013. Direct investment into Russia from other major economies also declined over the same period. Russia is taking note of these impacts. 

In addition to sanctions, we are also strategically and smartly deploying Treasury’s other economic authorities—such as anti– money laundering (AML) measures, 

enforcement actions, actions under Section 311 of the USA PATRIOT Act, foreign 

engagement, and private sector partnerships, among other tools—to disrupt Russia’s 

illicit financial conduct and harden the international financial system against its 

predation. We are directly engaging our foreign allies and partners, especially those 

in Europe, to coordinate these efforts and augment the impact of our actions. We 

are working closely with our interagency partners to deploy the full range of other 

financial, intelligence, law enforcement, and diplomatic tools to expose, disrupt, and 

impose costs on those responsible for Russia’s malign activities. 

By strategically leveraging all of these complementary authorities, we are increasing financial pressure on Russia to advance our national security priorities while 

simultaneously mitigating unnecessary impacts on the United States, our European 

allies, and the global economy. We recently submitted a report pursuant to Section 

243 of CAATSA further elaborating on these efforts (see Attachment). 

We have imposed major costs on Russia. Yet the significance of our actions and 

other financial measures must ultimately be measured in terms of their strategic 

impacts. Though Russia’s malign activities continue, we believe its adventurism undoubtedly has been checked by the knowledge that we can bring much more economic pain to bear using our powerful range of authorities—and that we will not 

hesitate to do so if its conduct does not demonstrably and significantly change. 

Overview and Impact of April 6 Oligarch and Russian Official Designations 

An important example of the impact that Treasury actions have had on Russia 

was in our April 6, 2018, designation of 38 entities and individuals, including 7 Russian oligarchs and 12 companies they own or control, and a major State-owned Russian weapons trading company and its bank subsidiary. This action included sanctions against 17 senior Russian Government officials, many of whom were appointed 

to their posts by Putin and hold prominent positions in the Russian Government 

and business community. 

Among the 12 companies sanctioned are Renova Group, an international group of 

asset management companies and investment funds owned by Vekselberg; RUSAL, 

the second-largest producer of aluminum in the world; EN+, a publicly traded holding company for Deripaska’s metals and energy assets; GAZ Group, Russia’s leading 

producer of commercial vehicles; and EuroSibEnergo, as mentioned above, one of 

Russia’s largest independent power companies. 

As a result of this action, we have impeded the ability of these actors to access 

the financial system, reduced the value of their assets, and forced companies to extricate themselves from involvement with designated actors. Other tangible impacts 

include: 

• Since being designated, Deripaska’s estimated net worth has dropped by roughly 50 percent, and the share price of EN+ fell from $12.20 to $5.40 on the London Stock Exchange following its designation. 

• Vekselberg’s net worth dropped an estimated $3 billion, and foreign Governments have launched investigations and frozen Vekselberg’s assets in their jurisdictions. Additionally, Vekselberg’s Renova Group was forced to divest from 

ventures in Switzerland and Italy. 
51 

As our public actions continue to draw high-profile attention to those individuals 

and entities charged with carrying out Putin’s orders, the world takes note. Many 

have become pariahs in the international community and have lost their ability to 

portray themselves as legitimate businessmen. 

Additional Treasury Actions 

We have also targeted Russia’s malicious cyberactivity, sanctioning those behind 

Russia’s interference in the 2016 U.S. election, as well as companies developing and 

procuring offensive cybercapabilities and underwater technologies for the Federal 

Security Service (FSB). We designated two Russian intelligence organizations—FSB 

and the Main Intelligence Directorate (GRU)—both of which engage in activities 

that undermine U.S. cybersecurity on behalf of the Russian Government. 

In March, we designated Russian oligarch Yevgeniy Viktorovich Prigozhin under 

our cyberauthorities for funding the operations of the Internet Research Agency, 

which has covertly worked on behalf of the Kremlin to influence social media networks and interfere with the 2016 U.S. election. In exposing the activities of these 

organizations and designating companies for their dealings with them, we not only 

cut them off from the United States and U.S. persons, but subject third parties who 

deal with them to potential sanctions as well. 

We also are exposing and disrupting Russian support to rogue States. We used 

our Syria authorities to sanction Russia’s primary State-owned defense firm and its 

bank subsidiary for supplying Russian military equipment to the Assad regime, hindering the firm’s ability to receive payments from existing contracts with other 

countries. And just earlier this month, we designated a Russian bank, Agrosoyuz 

Commercial Bank, for knowingly facilitating a significant transaction on behalf of 

U.S. and U.N.-designated North Korean individuals and entities. 

Our sanctions have blocked hundreds of millions of dollars in Russian assets in 

the United States and caused extensive damage to the economic interests of affected 

individuals and entities. Companies and individuals around the world have cut ties 

to sanctioned actors in attempts to protect their commercial interests. Notably, in 

early 2018, Exxon announced that it had decided to end its joint exploration ventures with Rosneft due to the continued economic pressure imposed by our sanctions. In 2017, Rosneft separately announced a hold on a major South Black Sea 

project, citing sanctions as limiting its ability to obtain modem technology and 

equipment. 

We also continue to track and target illicit financial hubs where Russian actors 

try to hide their money. Earlier this year, we used our authorities under Section 

311 of the USA PATRIOT Act to find Latvian-based ABLV Bank to be a foreign financial institution of primary money laundering concern, proposing to prohibit U.S. 

financial institutions from maintaining correspondent accounts on behalf of the 

bank. In this finding and proposed rulemaking, FinCEN cited multiple instances of 

institutionalized money laundering in which ABLV management solicited high-risk 

shell company activity that enabled the bank and—its customers to launder funds. 

ABLV’s facilitation of shell company activity typically benefited illicit actors engaged 

in an array of illicit conduct, including transnational organized criminal activity, 

corruption, and sanctions evasion, including activity emanating from Russia. This 

finding and proposed action not only was a shock to the Latvian banking system, 

helping prompt that country to undertake certain reforms, but it also put financial 

institutions in other similar financial hubs on notice that we will not hesitate to act 

against banks that institutionalize money laundering as a pillar of their business 

practice. 

TFI’s Work To Advance Our National Security 

In the Office of Terrorism and Financial Intelligence (TFI), I work with some of 

the most dedicated professionals in the U.S. Government, who are working countless 

hours to implement programs that protect our national security. This is especially 

true when it comes to our Russia team, who are wholly committed to the mission. 

In addition to our robust Russia program, we also have teams of people working 

across a wide spectrum of other programs. Under this Administration, Treasury has 

sanctioned more than 1,300 individuals, entities, vessels, and aircraft. 

In order for us to implement all of these programs and maximize the effectiveness 

of our financial tools, Treasury also has spent significant resources drafting new Executive Orders, issuing advisories, and providing guidance such as Frequently 

Asked Questions to the public and private sector. Our team also travels around the 

world to ensure our sanctions are effectively implemented and the real-world risks 

of transacting with designated individuals and entities are fully understood. 

Here in Washington, our staff fields thousands of inquiries regarding compliance 

and licensing issues—many highly complicated questions that require substantial 
52 

amounts of time, expertise, and effort. Since the start of FY2018, OFAC has received nearly 50,000 phone calls for guidance on our sanctions programs, including 

our various Russia-related authorities. On top of this, we are required to prepare 

and submit at least 80 reports to Congress in 2018—reports that require thousands 

of hours of work. To highlight just one example, the classified oligarch report required by Section 241 of CAATSA encompassed more than 2,500 hours of interagency work over the course of several months. 

TFI and the interagency colleagues with whom we work bring this same dedication to the range of programs for which we are responsible. I am proud and humbled 

to lead these efforts on behalf of the Treasury Department and am grateful for the 

opportunity to help advance our work on behalf of our national security. 
53 

UNCLASSIFIED 

Report to Congress Pursuant to Section 243 of the Countering America's 

Adversaries Through Sanctions Act of2017 Regarding Interagency Efforts in the 

United States to Combat Illicit Finance Relating to the Russian Federation 

August 6, 2018 

Section 24 3 of the Countering America's Adversaries Through Sanctions Act of 2017 

(CAATSA) requires the Secretary of the Treasury to submit to the appropriate 

congressional committees not later than one year after CAATSA's enactment, and at the 

end of each 1-year period thereafter until 2021, a report describing interagency eftorts in 

the United States to combat illicit finance relating to the Russian Federation. Pursuant to 

Section 243(e), the report shall be submitted in unclassified form, but may contain a 

classified annex. This document serves as the first unclassified report submitted by the 

Secretary under CAATSA Section 243; additional information is provided in the 

classified annex. 

In line with the 2017 National Security Strategy of the United States, which highlights 

Russia's global subversion and aggression, the Administration actively employs the full 

range of its financial, intelligence, law enforcement, and diplomatic tools to expose, 

disrupt, and impose costs on those responsible for Russia's malign activities. Russian 

conduct includes, but is not limited to: attempts to subvert Western democracies through 

election interference; the continued occupation of Crimea; ongoing efforts to destabilize 

Ukraine; the illicit procurement of sensitive defense and intelligence technologies; 

malicious cyber-attacks; links to transnational organized crime (TOC); support to the 

murderous Assad regime in Syria; gross human rights violations and corruption; and the 

facilitation of sanctions evasion schemes by rogue states such as Iran and North Korea. 

In carrying out these malign activities, Russia relies on a highly sophisticated apparatus 

consisting of state and non-state agents and proxies, decades of experience carrying out 

innuence operations around the globe, and the strategic direction of Russian president 

Vladimir Putin. 

Russia's integration into the global economy and international financial system presents 

an especially unique challenge compared to other states subject to U.S. sanctions such as 

Iran, North Korea, and Syria. For example, a substantial portion of Russian sovereign 

bonds are held by external investors, including U.S. pension funds, asset managers, and 

banks, while Russian financial institutions have extensive global market linkages through 

debt, equities, and derivatives. 

As this report details, this Administration's eftorts against this threat are among its top 

priorities, resulting in an unprecedented level of financial pressure against those working 

on behalf of the Kremlin and in key sectors of the Russian economy targeted by U.S. 

sanc.tions. 

UNCLASSIFIED 
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UNClASSIFIED 

Treasury's Russia sanctions program is among our most acti1·e. Since 2017, this 

Administration has sanctioned 215 Russian-related indiliduals and entities, 199 of 111lich 

were under Treaswy authorities. including 136 under UlTaine/Russia-related sanctions 

codified by CAATSA. These actions hare blocked hundreds of millions of dollars in 

Russian assets in the United States and caused extensive consequences to the financial 

interests of affected individuals and entities. 

The impact of these measures is further seen in the efforts by companies around the world 

to separate themselves from persons we hare designated, and t~e efl'orts of designated 

persons to seek nell' (often costlier) methods to mol'e and hide funds. 

The Administration understands that an)· effort to embark on a more positil'e trajectol') 

11ith Russia depends on Russia's 11illingness to cease viewing the world through a zeroswn lens. Russia must also realize that the United States and its allies 11ill not wam in 

our detenminarion to pre1 ent it from undermining our democracies, economies, 

institutions, and the values on 11tlich these pillars of global stability-ensured by U.S. 

leadership- will eontinue to stand. As part of this Administration's efforts to disrupt and 

deter Russia from continued acts of subrersion and destabilization, and to impose eosiS 

for its ongoing aggression, the Administration has made focused fmancial p~ure, 

strategically applied, a eore element of our approach. Working together 11ith our 

interagency colleagues and international partners, Treasul')' 11111 continue to counter the 

corrupt and illicit financial networks of the Russian Federation in the United States and 

abroad, in addition to using other le-.m of significant economic pressure. 

Section 243(b)(l) - Efforts to identify, innstigate, map, and disrupt illicit financial 

flows linked to the Russian Fede.n tion if such flows affect the United States financial 

system or those of major aUies of tht United States 

EtTorts to ldentifv.lnrcstigate. and Map Illicit Financial Flo11~ 

Russia has spent decades de1·eloping complex and resilient networks to raise, tJansfer, 

bide, and obscure the origin and mo1ement of the funds generated through illicit acti1ity, 

including corruption, sanctions evasion and illicit am1s sales, and used for its malign 

activity. The National Intelligence Council (NIC) leads and coordinates efforts across the 

intelligence eommunity OCJ to produce anai)Sis and support polic)'makers regarding 

Russian illicit financial actility, as well as to inform efforts to identify and disrupt these 

illicit financial networks. As part of these eflorts, IC compOnents hal'e continued to 

identify and map a myriad of networks that support and fund the full range of malign 

Russian acti1ity, including by identi~ing llt\1' and emerging typologies and 

methodologies relating 10 Russia's illicit financial acti1ity. 

Of particular note in this regard is the classified annex to the report required under 

Section 241 ofCAATSA. Ltd by the Office of the Director of National Intelligence 

UNCLASSIFIED 

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UNCLASSIFIED 

(ODl\1), Treasury's Office of Intelligence and Analysis (O!A) and other IC elements 

conducted research o0n political figures and oligarchs, and assessed their closeness to the 

regime, corrupt activities, and involvement in destabilizing activities and repression. 

This substantial assessment was the result of a wide-ranging effort developed over the 

course of semal months and reflected over 2,500 hours of work. 

In addition to these examples of!C efforts, Section 243(b)(6) below describes parallel 

eftorts performed by other agencies in the sen~ce of providing leads to law enforcement. 

Efforts to Disrupt Illicit Financial Flows Linked to the Russian Federation 

The efforts to identify, investigate, and map the illicit financial flows linked to the 

Russian Federation directly inform the Administration's ongoing disruption actions. 

Ora\\mg upon this information, Treasury has led the U.S. campaign to impose economic 

and financial costs on those actors most responsible for enabling Russia to conduct its 

globe-spanning malign operations. 

As noted above, the Administration's efforts to target malign Russian actors are among its 

most active illicit finance undertakings, resulting in sanctions against 215 Russian-related 

individuals and entities under this Administration. Of these, Treasury's financial 

sanctions have been particularly powerful, imposing significant costs on targeted Russian 

actors and meaningfully impacting their ability to raise, move, and obscure the origin of 

illicit funds. 

However, the impact of these sanctions and other fmancialmeasures is far greater than 

the amount of funds frozen. This is demonstrated by the eftorts of companies around the 

world to distance themselves from sanctioned persons, and the efforts of designated 

actors to adopt new, often more difticult ways of moving and hiding their funds. From 

such reactions, it is clear that our measures have succeeded in imposing significant costs 

on those undennining U.S. interests and those of our partners and allies, in addition to 

disrupting such conduct. Tlte follo11ing paragraphs illustrate numerous discrete examples 

of disruption eftorts targeting the 11ide variety of Russian malign activities. 

Designations of Oligarchs and Senior Government Officials 

On April 6, 2018, Treasmy sanctioned 38 indil•iduals and entities, comprised of seven 

Russian oligarchs, 1'2 companies they own or control, 17 senior Russian government 

ofticials, and Russia's primary state-01111ed arn1s trading concern along 11ith its b;mk 

subsidiary. Many of these individuals were appointed to their posts by Put in and hold 

prominent positions in the govenunent and Russian business community. These 

designations delivered on Secretary of the Treasury's commitment, immediately 

follo11ing submissi()n of the CAATSA Section 241 report, to impose sanctions on 

oligarchs and oflicials identified in the report. 

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UNCLASSIFIED 

Among those sanctioned on April6 are oligarchs Oleg Deripaska and Vil1or Vekselberg: 

the heads of state·OI\1led companies such as Gazprombank, VTB Bank, and Gazprom; as 

well as the head of the Russian Security CoWKil and the Russian ~1inister of Interior. 

Among the 12 companies sanctioned are Rcnova Group, an international group of asset 

management companies and inrestment funds 011ned by Vekselberg; RUSAL, !he 

second·largest producer of aluminum in the 110rld; E~•. a holding company for 

Deripaska's metals and energy assets; Gaz Group, Russia's leading producer of 

commercial vehicles; and EwoSibEnergo, one of Russia's largest independent power 

companies. 

As a result of his designation, open sources estimate that Deripaska's personal net worth 

has dropped by more than 50%. 

TheApril6 actions also had a major impact on another sanctioned oligarch, \rJktor 

\'ekselberg. According to reliable press reportS, Vekselberg's net worth has dropped 

nearly USD 3 billioll, from an estimated USD 16.4 billion onApril5, 2018 to an 

estimated USD 13.5 billion as of July 26, 2018. Among the 12 companies sanctioned on 

April6 was Vekselberg's Reno111 Group, an international group of asset management 

companies and inl'estment funds. As a result of the action, Rcnova Group was forced to 

divest from S11iss·based industrial company Sulzer AG, of which Renol'a Group was a 

majority shareholder. Sulzer AG bought back five million of its 01m shares from Reno111 

Group follo111ng an emergency meeting daysafier Renova Group'sdesignation. Renova 

Group was also forced to di1·est 20 percent from ltaly·based IT company Octo 

Telematics, in whicll it had a 65 percent stake, to enable the company's continued 

operation and planned I PO. Moreol'er, U.S.·based investment management finn 

Columbus Nova, which manages Vekselberg 's assets and COWJts Reno1'8 Group as its 

biggest clien~ bas had to significantly limit its operations follo11ing the April6 action. 

These actions are also a part ofTreasury's efforts to counter Russian sanctions e1·asion by 

'follo11ing the money" and targeting those 11h0 support designated persons in mo1ing or 

concealing their assets. In designating Kirill Shamalov on April6, for example, Treasury 

sanctioned an indi1 idual 11fw rcceired assets from Gennadiy Tunchcnko, who 11115 

pre1iously sanctioned by Treasury for his support to senior Russian ofticials. 

Cyber Dtsign01io11s 

The April6 actions were but the latest and most significant of a continuing series of 

designations taken in response to Russia's malign acti1~1ies. By that time, in March 

2018, T reaswy had already exercised its authorities under E.~ecutil-e Order 13694 and 

CAATSA to take aim at entities and individuals ini'Oived in interfering in U.S. elections 

as well as for perpetrating dan1aging C)'ber-attacks. Part of this designation tranche 

targeted Russian in1elligence organit.ations - the Federal Security Serlice (FSB) and the 

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UNCLASSIFIED 

Main Intelligence Directorate (GRU)- both of which engage in acti1~ties that undennine 

U.S. cybersecurity on behalf of the Russian government. Specifically, the GRU 

interfered in the 20l6 U.S. election through cyber-enabled means while the FSB has 

utilized its cyber tools to maliciously target those critical of the Russian government, 

Russian politicians, and U.S. government ofticials. 

This designation tranche also targeted Russian oligarch Yevgeniy Viktorovich Prigozhin, 

who Treasury previously sanctioned for his material support to the Russian regime. The 

March 2018 designation further exposed his malign conduct, as evidenced by the fact that 

Prigozhin also funded the operations of the Internet Research Agency, which has covertly 

worked on behalf of the Kremlin to influence social media networks in Russia and 

abroad, including the United States. 

In its most recent cyber-related action, on June II, 2018, OFAC designated an additional 

five Russian entities and three Russian individuals under Executive Order 13694 and 

CAATSA Section 224. The primary targets that were designated, Digital Security (a 

Russia based private cybersecurity firn1), Kvant (a Russian state research institution), 

and Divetechnoservices (a Russia based private underwater technologies fmn), provided 

teclmological support to the FSB and served as enablers of the organization. Treasury 

also took action against several entities and individuals that were owned or controlled by 

or acted for or behalf of these entities. These actions were taken in order to respond to 

Russia's continued involvement in conducting malicious cyber-atlacks, restricting those 

who enable the FSB 's destructive activities from the U.S. financial system, and to raise 

the costs on those who do business 11~th the FSB. 

Digital Security, for example, developed a tool for the FSB that would increase the 

agenc)"S offensive and defensive cyber capabilities. As part ofTreasury's action, 

ERPScan and Embedi, both private cybersecurity finns, were also designated for being 

owned or controlled by Digital Security. Russia has also been actively trncking 

underwater communication cables, which carry the majority of the world's 

conmlunic~tion trnftic. Since 2007, Divetechnoservices has procured a variety of 

underwater and diving systems for Russian govermnent agencies, to include the FSB. 

Specifically, in 2011 it was awarded a contract to procure a submersible craft for the FSB, 

valued at USD 1.5 million. 

Designatio/IS Related to Russian Activity in Crimea/Ukraine 

In January 2018, OFAC sanctioned 21 individuals and nine entities under its 

Russia/Ukraine authorities, as well as identified 12 subsidiaries that are owned 50% or 

more by previously sanctioned Russian companies to provide additional infonnation to 

the private sector to assist 11~th sanctions compliance. This action targeted major Russian 

companies that have played a key role in supporting Russia's attempts to integrnte 

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UNCLASSIFIED 

Crimea into its own economy and infrastructure. ZAO VAD, for example, is a Russian 

company responsible for the construction of a major highway in Crimea that 11ill serve as 

a primary connection between lhe Kerch bridge and other cities in Crimea. The projected 

cost for this project is nearly USD 3 billion. OFAC also sanctioned Power Machines, a 

la~ge Russian engineering finn with extensive operations around the world, because of 

Power Machines' suppon to lhe U.S.·sanctioned company Technopromex-pon, one of the 

key companies invoked in the construction of power plants in Crimea. 

Also in this January 2018 action, OFAC sanctioned three individuals and four entities 

in1·olved in lhe illicit uade of coal from lhe SO<alled Donetsk and Luhansk People's 

Republics, including some working 11ith designated YanukOI')Ch associate Sergey 

Kurchenko, to expon coal from the separatist republics to Russia and Europe. 

Human Rights and Corruption Dtsignations 

Implementing authorities granted under the Global Magnitsky Human Rights 

Accountability Ad ("Global Magnitsk{), !he Administration issued two Russia-related 

sanctions in December 2017 that highlighted significant corruption as well as human 

rights abuses in Russia and Ukraine. On December 21, 2017, the President imposed 

sanctions on peoons from around the world in the Annex to E.O. 13818 implementing 

the Ac~ including Russian nationals Serge)' Kusiuk and Anem Chayka While in charge 

of290 elite Ukrainian police ofllcers, Kusiuk was a leader of an attack on peaceful 

protesters on N01·ember 30, 2013, many of 111Jom took pan in the beating of actil·ists. 

Kusiuk has also been named as an indilidual who took pan in the killings of acthists on 

Kyiv's Independence Square in February 2014. Kusiuk ordered the destruction of 

documentation related to the events, fled Ukraine, and is now in Moscow, where he was 

identified dispersing protesters as pan of a Russian riot police unit in June 2017. 

Chayka is the son of Russia's Prosecutor General and has lel'eraged his father's position 

to unfairly win contracts and put pressure on business competitors. In 2014, Chayka 's 

competitor for a highway reconstruction project suddenly fell under prosecutorial 

scrutiny and was forced to shut down, leaving Chayka in position to non<ompetitil·ely 

work on the high11ay project. Also in 2014, Chayka's competitor contested Chayka 's 

winning bid on a state-owned stone and gra1·el company and filed a lawsui~ after which 

his home was raided and he was indicted. After Chayka ·s competitor withdrew the 

lal\~uit, prosecutors dropped all charges. 

In December 2017, OFAC issued its sixth tranche of sanctions under lhe Sergei 

Magnitsky Rule of Law Accountability Act of20 12, bringing to 49the total number of 

indiliduals targeted by OFAC underthis authority. This round of names included 

Ramzan Kad)lOI', the Head of the Chechen Republic, who o1·ersees an administration 

inrolved in disappearances and extra·judicial killings. Following his designation 

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UNCLASSIFIED 

Kadyrov was removed from a major social media site, limiting his ability to engage in 

propaganda - apparent! y to his great consternation. 

Syria Sanctions Program 

On April6, 2018, OFAC also designated Rosoboronexport (ROE), a state-owned 

corporation managing Russian weapons exports, and its banking subsidiary Russian 

Financial Colj)Oration Bank (RFC). ROE has longstanding ties to the Government of 

Syria, with billions of dollars in weapons sales over more than a decade. 

North Korea Program 

Since the beginning of the current administration, Treasury has designated 17 targets in 

Russia uuder its North Korea authorities, including fire Russian companies (including 

one bank), four Russian individuals, seven North Korean financialftradelweapons 

representatives, and one North Korean labor firm. Most recently, on August 3, 2018, 

OFAC designated Russian-registered Agrosoyuz Commercial Bank for knowingly 

conducting or facilitating a significant transaction on behalf of the U.S. and UN· 

designated Moscow-based chief representative of Foreign Trade Bank (FTB), North 

Korea's primary foreign exchange bank. As of2016, Agrosoyuz had opened new 

accounts for a Nortll Korean front company, processed over USD 8 million and held the 

equivalent of over USD 3 million on behalf of the U.S. and UN-designated Korea United 

Development Bank. On the same day, OFAC also designated Ri Jong Won, the Moscow· 

based deputy representative of FTB. These designations further exposed the extent of 

North Korea's activities in Russia, including weapons-related acquisitions, placement of 

financial representa~ ves in violation ofUNSCRs, oil procurements, and overseas laborers 

generating revenue for the regime. 

In considering the iJ11pacts of Treasury's designations, it is important to understand that 

what we are able to <lbserve is but a part of the estimated eftect of our actions. Business 

rejected, bank accounts closed, investments avoided, and funds transfers denied assuredly 

occur with some regularity, even if they are not made known to us. They also pro ~de an 

oppot1unity for future diplomatic engagement or law enforcement action. The iJnpacts of 

these desig,tations go well beyond their immediately observable eftects and can be built 

upon in the furure. 

In addition Treasury frequently undertakes engagement 11ith foreign counterparts and the 

private sector-including intelligence and information-sharing-to disrupt the activities 

of malign actors. Illustrations of these eftorts are described in greater depth in Section 

(bX2), (bX3), and (b)(7) below. 

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Section 243(b)(2)- Efforts to conduct outreach to the private sector, including 

information sharing efforts to strengthen compliance efforts by entities, including 

financial institutions, to pm ent illicit finandal Oows described in paragraph (I) 

Financial institutions and other businesses often stand on the front lines against illicit 

financial acti1ity. Indeed, disrupti\·e impacts like those described abo1·e depend in large 

part on the business community's compliance 1\ith our sanctions. Accordingly, engaging 

and educating the pril'ate sector to ensure that our sanctions programs are as effective as 

possible is a core Treasury function. In light of Russia's linkages to the U.S. and global 

economy, these efforts are a particular priority in our comprehensive approach to 

targeting Russia ancl Russian malign actors. 

To aclcln:ss the incredibl) high ,·olume of inquiries from commercial and fmancial entities 

that results from this interconnectedness, Treasury has been extraordinarily actil'e in 

engaging with key public and pri,·ate counterparts closely to ensure the pri1'3te sector as 

well as allies and foreign partners understand our sanctions on Russia and are able to 

fully implement them, as well as that they understand the broader illicit finance threats 

emanating from Russia 

As part of these efforts, OFAC communicates its actions to the compliance community 

through Recent Action Notices, which are sent to a large distribUiion list of 01·er 50,000 

recipients, and through Treasury press releases describing in detail the basis forT n:asury 

designations. All sanctioned indi1~duals and entities are placed on OFAC's list of 

Specially Designated Nationals and Blocked Persons or Sectoral Sanctions Identification 

List, which puts the regulated public on notice and wftieh is used to populate compliance 

screening tools and infom1 global compliance programs. Although routine, these actions 

are critical to keeping the pril'3te sector informed ofOFAC's sanctions actions. 

To amplify Treasury actions, senior Tre.asury oflicials frequently engage with senior 

executi1·es, including compliance oflicials, at foreign financial institutions and other 

businesses regarding our Russia program and other applicable sanctions, affirm 

Administration policy towards Russia, and underscore our enforcement posture towards 

entities that facilitate malign Russian acti1ity. Treasury also bolds roundtables 11ith 

banks in jurisdictions at elel'ated le1-els of risk for Russian money laundering. including 

Cyprus and Latvia, to convey concems over this issue and urge the authorities to take 

steps to prel'ent the exploitation of their respecti1 e finandal sectors by bad actors. 

In addition, at least onee a year OFAC organizes a public S)1nposium to discuss its 

sanctions programs. Most recently, in Nol'cmber 2017. OFAC's symposium 11'35 

attended by close to I ,000 pecple, including legal and compliance professionals, 

interlocutors from foreign partners and allies, and leaders from both U.S. and 

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Ul\CLASSIFIED 

multinational businesses, some of whom helped moderate public discussions of 

Treasury's CAATSA guidance. 

OFAC also routinely engages in outreach with the private sector by sending 

representatives to various trade and sanctions conferences in the United State and abroad, 

these representatives give speeches, presentations, and answer sanctions compliance 

questions. In the last year many of these conferences have de1•oted significant time to 

issues raised by CAATSA and recent sanctions actions against Russia. OFAC also 

engages with trade groups representing U.S. and international business interests. The 

detailed feedback that OFAC receives from these contacts is crucial to understanding the 

impact ofTreasury's sanctions and tailoring current and future sanctions in ways that 

avoid undesirable collateral consequences. 

While it has been a long-standing practice ofTreasury to undertake such outreach to the 

private sector, we have dedicated especially signific.mt resources to ensuring that the 

financial sector understands the requirements created by CAATSA. Once key provisions 

of CAATSA became effective, OFAC established a CAATSA landing page on its website 

that clearly set out all of the public guidance that OFAC and the State Department had 

issued. OFAC bas also released a number ofCAATSA-related FAQs to ro1 e specific 

guidance to the public regarding the implementation of key provisions ofCAATSA 

sections 223(a), 226, 228, and 233. These FAQs were the result of extensive U.S. 

government outreach to our allies and partners as well as private sector companies. 

Additionally, OFAC amended and reissued Directives I, 2, and 4oft he sectoral sanctions 

under E.O. 13662 as required by sections 223(b)-(d) of CAATSA. OFAC also an1ended 

Ukraine-/Russia-related General License No. I A and reissued the general license as 

General License I B, which continues to authorize certain transactions involving 

derivative products that would otherwise be prohibited pursuant to Directives I, 2, or 3, 

and updated a number OFAC FAQs to account for the fact that CAATSA-related 

prohibitions in Directives I and 2 were now in eftect. These actions communicated 

sanctions prohibitions and authorizations directly to the public and private sector. 

OFAC's Compliance division also regularly fields calls from the private sector to explain 

CAATSA and provide guidance on adhering to its requirements. Since the passage of 

CAATSA, OFAC has responded to thousands of phone and email inquiries regarding 

CAATSA and Russia-related sanctions questions. OFAC Licensing provides a valuable 

interface fort he public, where the private sector can seek a license or receive interpretive 

guidance related to a panicular regulatory matter or fact pattern. 

Large and impactful sanctions actions such as those taken against major Russian 

oligarchs also require extensive private sector outreach and communication. Follo111ng 

the April6 designations, Treasury ofticials engaged in extensive discussions with allies 

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and partners, as well as companies linked to the sanctioned persons, to iden · ways to 

mitigate the negati1e impact on global markets while simultaneously imposing cosiS on 

tugeted Russian actors by compelling these fums to reduce the ownership and interest of 

sanctioned persons. 

As the primary regulator responsible for money laundering and illicit finance acti1~ty, 

FinC~ also closel)' engages with the pri1-ate sector, including to identi~ and 

disseminate information on emerging typologies supporting illicit financial actors such as 

Russia. 

With respect to proliferation finance, the FBI Counterproliferation Center- Russia (CPC3} has worked closely with FinCEN and a consortium of financial institutions through the 

FinC£,'11 Exchange Program to enhance information sharing 11ith the pri1-ate sector. 

Specifically, CPC-3 has shared Russian proliferation finance typologies to initiate 

information sharing among banks that could lead to the unco1-ering of complex Russian 

illicit financial net11 orts and develop actionable leads through Bank Secrecy Act 

reponing-including but not limited to SuspiciousActility Reports. These efforts assist 

CPC-3's efforts to identify illicit financial networks that aid in the procurement of U.S.· 

sensitive technology and allow for timely and ell'ective law enforcement disruptions. 

Further, in iiS posts and missions abroad. the State Department conduciS regular, 

significant outreach. to the private sector, induding at conferences in the United States 

and abroad that focus on sanctions policy, compliance, and enforcement. These 

confertnces are anended by sanctions practitioners, compliance professionals, and 

la"yers. State, often in conjunction 11ith TreaSUI)' officials, also engages in regular 

meetings 11ith private sector companies in order to explain our policies in relation to 

Russia, including our intent to prerent illicit fmaneial Oows. 

Section 243(b}(3)- Efforts to engage and coordinate with allied international 

partners on illicit finance, especially in Europe, to coordinate efforts to uncol'er and 

prosecute the nd"orks mponsible for illicit financial flows described in pangrapb 

(!), including exantplcs oftbat engagement and coordination 

Fmeign Enga2ement 11ith International Partners 

Engagement and coordination with allies and partners are essential elemeniS of the 

Administration's efforts to counter Russian malign influence. Both in Washington and in 

European capitals, T reaswy and State engage routinely at senior and staft"lel'els to share 

infonnation about, coordinate approaches to, and forge common understandings of this 

shared threat. 

Since the passage of CAA TSA, T reasul)' and the State Department ha1·e tra1·eled 

extensil'ely through Europe-including the United Kingdom, Gennany, France, 

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European Union, Italy, Poland, Denmark, the Netherlands, Lithuania, Estonia, Latvia, and 

Finland- to discuss the implementation of the Russia-related provisions of that statute 

with foreign and finance ministries. Treasury and the State Department have also 

engaged 11ith international partners through the G-7+ Contact Group (United States, 

United Kingdom, Gerntany, France, Italy, Canada, Australia, European Union, Norway, 

and Poland), a group of likeminded countries coordinating efforts to counter Russian 

malign influence and continue exerting pressure on the Kremlin to implement the Minsk 

agreements. The Department of Homeland Security has engaged European partners 

through the G7 Securit)' Ministers and U.S.-EU Justice and Home Affairs Ministerial 

meetings to coordinate similar efforts to counter Russian malign influence. Treasury and 

State also actively e11gage with the European External Action Sen1ce (EEAS) oflhe 

European Union, 11hich has provided useful feedback and insight on the impact of 

CAATSA and the recent April6 action on the European economy. 

These engagements also provide important opportunities for the AdministTation to press 

European partners to develop and employ the necessary tools to eftettively counter 

common threats such as Russia, including domestic sanctions authorities where they do 

not exist, and to enhance the ability of their financial intelligence units to collect, analyze, 

and share inforntation, including with respect to illicit Russian ftnancial activity. Senior 

Treasury ofticials have also regularly emphasized the Administration's strong opposition 

to Nord Stream !1, which if completed would generate additional funds the Kremlin could 

use to finance its malign activity, while simultaneously deny Ukraine substantial transit 

revenues it needs to defend itself against Russian aggression. 

The Administration has prioritized engagement \\1th jurisdictions with high volumes of 

Russian financial flows, including the United Kingdom, Cyprus, and Latvia, to advance 

U.S. objectives on Russia. As elabcrated below, such engagement and coordination 

significantly expands the reach and impact of our unilateral efforts to disrupt illicit 

Russian financial activity, amplifies multilateral messaging that the U.S. and its partners 

1\111 not tolerate Russian aggression, and helps maintain transatlantic unity against a 

Russia bent on undenmining these historic ties. 

United Kin~dom 

The scale of the UK fmancial services market and access to the EU hal'e made London 

and UK overseas territories such as the British Virgin Islands an attractive destination for 

illicit financial flows.llte UK National Crime Agency has e$timated that, "many 

hundreds of billions of pounds ofintemational criminal money is laundered through UK 

based banks and subsidiaries each year," to include Russian oligarch proceeds of 

corruption. Recognizing this, the United States and UK ha1•e regularized consultation 

and cooperation to coordinate our respectil'e eftorts to counter Russian malign influence, 

including its financial activity. 

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Senior ofticials from State and Treasury ha"e engaged Cypriot authorities extensi\'tl) 

O\'er the past year and a half to underscore concerns that Cyprus continues to host a large 

volume of suspicious Russian funds and im·estments, and have pressed Cypriot oftlcials 

to harden its financial S)stem against these threats. Vulnerabilities Cyprus presents 

include its pennissi'"e citizenship by investment progr.un, its weak supenision of 

Administrati,·e Service Pro\iders, and Ia.~ compan} formation requirements, "tuch are 

exploited by illicit actors to set up front companies and to use these fronts to open bank 

accounts and access the international financial system. 

Although Cyprus remains a jurisdiction of concern from the perspeeti,·e of Russian 

mont) laundering, the Administration is seeing some signs of progress. Follo,,ing the 

April6 oligarch designations, Oleg Deripaska and Victor Vekselberg both had bank 

accounts frozen. In May 2018 Cyprus issued a circular instructing its banks to address 

cenain illicit finance risks from shell companies, in particular the challenges in \trif)ing 

customers· backgroWKL 

Lah ia has long served as a permissh·e en,ironment for illicit Russian financial acti\ity 

due to its geography, demography, linguistic profile, del'eloped banking system, and 

membership in the European Union and Eurozone. For decades, Russian malign actors 

and their agents have exploited lax controls in Latvia's financial sector to launder illicit 

fundsand suppol1 Russia's destabilizing conduct. 

Under this AdminislJ3tion Treasury has redoubled its effons to wort ,,;th Lahia to 

strengthen its fmancial system by impro,ing tbe legislati'-e and regulatory framework as 

well as institutional capacity. In February2018, pursuant to Section 311 of the USA 

PATRIOT Act, FinCEN issued a notice of proposed rule-making against ABLV Bank, a 

Latvian bank it found had facilitated significant Russian-based illicit acti\~ty. FinCEN 

identified ABLY Bank as a foreign fmaneial institution of primary money laundering 

concern and proposed a spe~:ial measure that would prohibit U.S. financial institutions 

from opening or maintaining a correspondent account in the U.S. on behalf of the bank. 

(This action is discussed in greater detail in this report under Section 243(bX5)}. 

This bank's in\'Olrement in illicit fmancial acti\ity reflects broader systemic deficiencies 

in Lal\•ia that this Administration is working hard to address. These deficiencies reflect a 

historically ambivalent commitment to definitively reducing the risks Latvia faces from 

its high ,·olume of non-resident deposits, many of ''tuch emanate from Russia and other 

Commom\-ealth oflndependent States {CIS) countries and are held by opaque shell 

companies. 

UNCLASSIFIED 

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UK CLASSIFIED 

To strengthen the authorities in Latvia committed to redressing these vulnerabilities, 

senior Treasury leadership has undertaken regular, high level engagement Working 

closely 11ith Embassy Riga, senior Treasury officials have urged Latvian leadership to 

support and empower emerging voices in Latvia's financial sector to urge meaningful 

reforms, such as reducing Latvia's stock of non-resident deposits, bolstering the resources 

allocated to Latvia's Financial Intelligence Unit (FlU), and taking tougher enforcement 

action against banks that violate Lal\ian regulations against money laundering and 

sanctions evasion. 

Latvia has passed legislation banning shell companies and appointed a new FlU director. 

Latvia has also amended its Law on Sanctions to close legal loopholes and allow the 

banking regulator to issue regulations to prevent sanctions evasion (See additional detail 

in Section (b)(4) below). 

Foreign Deployed Subject Maller Experts 

Administration departments and agencies have also forward deployed illicit finance 

subject matter experts to partner countries to increase international cooperation targeting 

Russian illicit financial flows. The BEOU program manages Assistant Legal Attache 

(ALAl) positions who currently operate with two organized crime task forces in Eastern 

Europe. TheseALATs are fully embedded members within these task forces and serve as 

a point of contact between the foreign partner agency and the FBI writ large. 

In 2018, Treasury and the Department of Defense partnered to establish a new Treasury 

Liaison Officer position at U.S. European Command (EUCOM) in Stuttgart, Gennany. 

This new Treasury liaison role 11ill facilitate existing and establish new finance-related 

cooperation and information sharing among the Department of Defense, Treasury, and 

NATO allies. 

Section 243(b)(4)- Efforts to identify foreign sanctions evaders and loopholes within 

the sanctions regimes of foreign partners of the United States 

As described in greater detail under the response to Section 243(b)(l), the IC has 

constantly sought to identify and map out illicit financial networks supporting the 

Russian f~deration, which includes identi~·ing activity designed to evade existing 

sanctions programs. 

Through its leadership in the Financial Action Task Force (FATF)-where the United 

States currently holds the presidency- and in FATF-Style Regional Bodies (FSRBs), 

Treasury also works to strengthen intemational anti-money laundering/countering the 

financing of terrorism (AMUCFT) standards and ensure that these measures are 

effectively implemented around the world. For example, the FATF's efforts to ensure that 

all jurisdictions apply a high level of scrutiny to the financial activities of politically 

UNCLASSIFIED 

13 
66 

UXCLASSIFIED 

exposed pe~ns (PEPs) and collect information on the beneficial 011ners oflegal entities 

helps to enable the detection of detect anemptS by Russian ofticials to launder. hide, or 

move the proceeds of corruption. Similarly, the FATF"s work to promote the global 

implementation ofUN sanctions and hold underperforrning countries accountable 

through its "grey list" process helps undennine Russian attempts to circuml'ent 

international prohibitions on dealings 11ith North Korea, Iran, or other UN-listed 

programs. Indeed, one of the priorities of the current U.S. president) is proliferation 

finance. an effort intended to harden the world's financial systems against the type of 

illicit procurement and proliferation activity in which Russian actors are regularly 

invoil·ed. 

Section 243(b)(5)- Efforts to expand the number of ml estate geographic targeting 

orders or other rtgulatory actions, as appropriate, to degrade illicit financial 

activity relating to the Russian Federation in relation to the financial system of the 

United States 

As the Administration works aggressive!) to deter and pre1-ent illicit Russian financial 

actil·ity abroad, it is also focused intently on protecting the U.S. financial S)~tem. Of 

particular recent note, as referenced above, was FinCEN's February 16, 2018 finding 

pursuant to Section 311 of the USA PATRIOT Act that Lat1ia-hased ABLV Bank AS 

(''ABLV'") was a financial instirution of primary money laundering concern. In its public 

notice of proposed rolemaking. FinCEN cited multiple instances of instirutionalized 

money laundering in whichABLV management solicited high-risk shell company actil'ity 

that enabled the bank and its customers to launder funds. ABLV's facilitation of shell 

company actil1ty t)'Jlically benefitted illicit actors engaged in an array of illicit conduct, 

including llanSUational organized criminal acthity, corrup1ioo, and sanctions e~-asion, 

emanating mostly from Russia and former CIS counlries. Pursuant to this finding, 

FinCEN proposed the imposition of a prohibition on U.S. financial instirutions from 

opening or maintaining correspondent accounts for, or on behalf of, ABLV. 

FinCE.\l bas also utilized its authorities under the Bank Secrecy Act to issue Geographic 

Targeting Orders (GTO) to impose additional recordkeeping requirements on domes1ic 

financial institutions or other businesses in a specific geographic area. Specifically, 

FinCEN has issued GTOs to collect additional financial infomtation on transactions in 

the real estate sector in several jurisdictions kno11n for attracting large amounts of foreign 

inrestors, including those from Russia. 

Section 243(b)(6)- Efforts to provide support to counter those involved in illicit 

finance relating to the Russian Federation across all appropriate law enforcement, 

intelligence, regulatory, and financial authorities of the Federal GoHrnment, 

including by impos.ing sanctions with mpect to or prosecuting those invoh·ed 

UNCLASSIFIED 

14 
67 

UNCLASSIFIED 

Treasury's Office of intelligence and Analysis, FinCEN, CIA, and NSA, among other 

agencies, play critical roles in the Administration's work to support law enforcement and 

other authorities, especially in the imposition of sanctions and other impactful measures 

against illicit Russian financial activity. 

F'inCEN conducts research and analysis ofinfom1ation gathered pursuant to the Bank 

Secrecy Act relating to Russian illicit financial activity, both domestically and o1•erseas. 

FinCEN's financial intelligence products are disseminated primarily within the U.S. 

government, including to policymakers, Jaw enforcement agencies, and the Intelligence 

Community. FinCEN also exchanges infonnation with its counterpart financial 

intelligence units in other jurisdictions, including on matters related to Russian illicit 

finance. Additional details are provided in Section (bX7) below. 

Section 243(b)(7) - Efforts to investigate or otbenvise develop major cases, including 

a description of those cases 

The Administration has moved aggressively using the range of its law enforcement and 

regulatory tools against Russian malign activity. Descriptions of select cases are 

described below.' 

The investigation of the Department of Justice's Special Counsel thus far has led to the 

indictment of25 individuals and three companies for a variety of offenses-including 

conspirncy to commit wire fraud and bank fraud and conspirncy to launder moneycommitted in furtherance of Russia's scheme. The indictments describe a variety of 

methods used by the defendants to fund their operntions. 

As alleged in an indictment filed in Febmar)' 2018, one element of the operntion involved 

the use of two related companies to channel millions of dollars' worth of funds to 

approximately fourteen affiliated companies that in tum provided money to an 

organization that sought to engage in "infonnation warfare against the United States" and 

to "spread distmst towards the candidates and the political system in genernl." Certain 

of the defendants in this part of the operation also used stolen personal information to 

open accounts at a digital payment service provider. 

In another element of this influence operation focused on hac,king into the United States, 

as described in the Special Counsel's July 2018 indictment, ll Russian individuals 

aftiliated with Russia's military intelligence agency, the Main Intelligence Directorate of 

the General Stall" (GRU), conspired to launder the equivalent of more than $95,000 using 

cryptocurrencies such as bitcoin to lease servers, register domains, purchase at least one 

1 As wilh lhe classified \'ersion oflhis repo~. this unclassified ~rsion of the report does not discuss in 

detail open or pending i1westigations, law enforcement investigations or acti,·ities, or other disrup!h'e 

a<~ionsongoing at the time of release that have not been publiclydiseiOS<d in char&ing documents. 

UNCLASSIFIED 

IS 
68 

UNCLASSIFIED 

1•irtual private network account, and make other pa)ments in furtherance of their hacking 

acth·ity. As the indictment highlights, the conspirators engaged in a web of transactions 

structured to capitalize on the perceived anon)mity of cryptOCUITtncies such as bitcoin in 

their financial transactions 11ith U.S. pa)ment processing companies, including to pay 

web hosting companies, domain registrars ~nd other businesses. The conspirators also 

alleged!) mined bitcoin, purcbased bitcoin through peer-to-peer exchanges, mo1·ed funds 

through other digital currencies, used pre-paid cards, and worked 11ith a third-party 

exchanger that enal>led layered transactions through digital currency platforms. 

In July 2017, FinC~ assessed a SilO million dollar penalty against virtual currency 

exchange BTC-e (operated by a Russian citizen) for its failure to implement even basic 

controls to prevent the use of its services for illicit purposes. BTC-e ·s lack of ef!"ectil'e 

supen is ion led to it being e.~loited b)• a customer base that included many criminals 

who desired to conceal proceeds from crimes such as ransomware, fraud, identit) theft, 

public corruption, and drug traftlcking. BTC-e penni ned and failed to report millions in 

tranSactions from ransom ware such as Ctyptolocker and Locl·y. Importantly, FinCEN's 

BSAenforcement investigation also led to the assessment of a Sl2 miUion ci1il money 

penalty against one of BTC-e's administrators, Alexander Vinnik - the largest indilidual 

liability penalty FinCEN has assessed to date. At one point BTC-e served approximately 

700,000 customers across the world and was associated 11ith bitcoin wallets that had 

recei1•ed over 9.4 million bitcoins. lt also offered exchange in fiat currency, as well as 

conl'ertible 1irtual currencies Bitcoin, Dash, Litecoin, Namecoin, Novacoin. Pecrcoin, 

and Ether. In conjunction 11ith FinCEN's enforcement action, Alexander Vinnik and 

BTC-e were also indicted by the Department of Justice for operating an unlicensed 

money service business, money laundering, and related crimes. 

FBI is also partnering 11ith FinCEN to detect and disrupt illicit financial flows linked to 

the Russian Federation. Dra11ing on primarily 11ire transfer datasets shared by FinCEN 

and a dataset deri1'ed from the Panama Papers leak revealed by the International 

Consortium of lnrestigativeJoumalists, FBI used anal)1ic platforms to assist in 

processing nearly 4,000,000 intemational wire transfers centered on four Balkan and 

Cypriot banks kno\\11 by FiuCEN to facilitate illicit Russian financial flo11~. This effort 

enabled the FBI to expand its understanding against Russian-linked oOShore financial 

networks, identified a variety of new FBI targets, and enhanced FBI understanding of 

existing investigations. hnpacls under this initiative include but are not limited to the 

follo11ing: 

• FBI opening of a sensitive internal joint investigation by a counterintelligence and 

public corruption squad against a high level state elected ofiicial. 

UNCLASSIFIED 

16 
69 

UNCLASSIFIED 

• A targeting and potential intelligence reporting platform using links betw~n FBI -

derived information and Russia-aftiliated entities in FinCEN-FBI data holdings, 

including se'eral TOC and \'arious criminal targets. 

FBI also has an ope~ investigation on a multi-billion dollar international money 

laundering operation also tied to U.S. locations, 011ned llld operated by an identified 

Eurasian billionaire 11ith Strong ties to Eurasian organized crime. FBI developed U.S. law 

enforcement, U.S. intelligence, and international law enforcement partners to enhance 

this in\'estigatiort 

Conclusion 

As e1idenced by the comprehensi\'e effons illusllated abo\'e, the Administration is 

aggressively targeting and disrupting the illicit financial networks supporting Russian 

malign actility. The Department of the Treasury, in close coordination with other 

departments and agencies. 11ill continue to impose costs upon those acting on behalf of 

the Kremlin against U.S. interests and increase financial pressure on Russia to advance 

our national security priorities. Additional information on the full range of the 

Administration's eflons can be found in the cliiSSified annex to this report 

UNCLASSIFIED 

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70 

PREPARED STATEMENT OF CHRISTOPHER KREBS 

UNDER SECRETARY, NATIONAL PROTECTION AND PROGRAMS DIRECTORATE, DEPARTMENT OF HOMELAND SECURITY

AUGUST 21, 2018 

Chairman Crapo, Ranking Member Brown, and Members of the Committee, thank 

you for today’s opportunity to testify regarding cyberthreats to critical infrastructure. The Department of Homeland Security (DHS) serves a critical role in safeguarding and securing cyberspace, a core homeland security mission. The National 

Protection and Programs Directorate (NPPD) at DHS leads the Nation’s efforts to 

ensure the security and resilience of our cyber- and physical-infrastructure. 

DHS is responsible for assisting Federal agencies in protecting civilian Federal 

Government networks and collaborating with other Federal agencies, as well as 

State, local, tribal, and territorial governments, and the private sector to defend 

against cyberthreats. Our work enhances cyberthreat information-sharing across the 

globe to stop cyberincidents before they start and help businesses and Government 

agencies to protect their cybersystems and quickly recover should such an attack 

occur. By bringing together all levels of Government, the private sector, international partners, and the public, DHS is taking action to protect against cybersecurity risks, improve our whole-of-Government incident response capabilities, enhance 

information sharing of best practices and cyberthreats, and to strengthen resilience. 

Threats 

Cybersecurity threats remain one of the most significant strategic risks for the 

United States, threatening our national security, economic prosperity, and public 

health and safety. Regarding cyberthreats to our critical infrastructure, the Director 

of National Intelligence recently said that ‘‘the warning lights are blinking red.’’ We 

have seen advanced persistent threat actors, including cybercriminals Nation-States 

and proxies, increase the frequency and sophistication of malicious cyberactivity. 

Our adversaries have been developing and using advanced cybersecurity capabilities 

in attempts to undermine critical infrastructure, target our livelihoods and innovation, steal our national security secrets, and threaten our democracy. 

Although the intelligence community has not yet seen evidence that Russia intends to conduct a robust campaign aimed at tampering with our election infrastructure or influencing the makeup of the House or Senate in 2018, Russia has previously demonstrated the capability and intent to interfere with our elections. Russian efforts to influence the 2016 elections were one of the most recent expressions 

of Moscow’s longstanding desire to undermine the U.S.-led liberal democratic order. 

The Russian Government conducted malicious cyberoperations by compromising and 

leaking emails from U.S. political figures and institutions, and targeting election infrastructure. These activities demonstrated a significant escalation in directness, 

level of activity, and scope of effort compared to previous operations. Accordingly, 

we view the 2018 midterm elections as a potential target for Russian 

cyberoperations and are working aggressively to mitigate any foreign threats to our 

election systems or infrastructure. 

Global cyberincidents, such as the ‘‘WannaCry’’ ransomware incident attributed to 

North Korea and the ‘‘NotPetya’’ malware incident attributed to the Russian military in May and June 2017, respectively, are examples of malicious actors 

leveraging cyberspace to create disruptive effects and cause economic loss. These incidents exploited known vulnerabilities in software commonly used across the globe. 

Prior to these events, DHS had already taken actions to help protect networks from 

similar types of attacks. NPPD’s National Cybersecurity and Communications Integration Center (NCCIC) publishes a list of known software vulnerabilities and 

pushes this information out to stakeholders on a routine basis. Additionally, 

through requested vulnerability scanning, we helped stakeholders identify 

vulnerabilities on their networks so they could be patched before incidents and attacks occur. Recognizing that not all users are able to install patches immediately, 

we shared additional mitigation guidance to assist network defenders. As the incidents unfolded, we led the Federal Government’s incident response efforts, working 

with our interagency partners, in providing situational awareness, information sharing, malware analysis, and technical assistance to affected Government and critical 

infrastructure entities. 

In a series of incidents since at least May of last year, working with U.S. and 

international partners, DHS and FBI have identified Russian Government actors 

targeting Government entities and businesses in the energy, nuclear, water, aviation, and critical manufacturing sectors. DHS assesses that this campaign ultimately collected information pertaining to industrial control systems with the intent 

to gain access to industrial control systems environments. The intrusions have been 
71 

comprised of two distinct categories of victims: (1) staging and (2) intended targets. 

Through the Department’s incident response actions, we identified activities by Russian Government actors to target certain entities that then become pivot points, 

leveraging existing relationships between the initial victim and the intended targets 

to hide their activity, as part of a multistage intrusion campaign to gain access to 

networks of major, high-value assets that operate components of our Nation’s critical infrastructure. Based on our analysis and observed indicators of compromise, 

DHS has confidence that this campaign is still ongoing, and threat actors are actively pursuing their ultimate long-term campaign objectives. DHS and FBI continue to conduct incident response related to this activity and have published a joint 

technical alert and hosted public webinars to enable network defenders to identify 

and take action to reduce exposure to this malicious activity. 

Since 2015, the U.S. Government received information from multiple sources—including public and private sector cybersecurity research organizations and allies— 

that cyberactors are exploiting large numbers of network infrastructure devices 

(e.g., routers, switches, firewall, Network-based Intrusion Detection System devices) 

worldwide. Earlier this year, DHS, FBI, and the United Kingdom’s National Cyber 

Security Centre published a publicly available joint technical alert attributing this 

activity to Russian State-sponsored actors. Targets are primarily Government and 

private-sector organizations, critical infrastructure providers, and Internet service 

providers supporting these sectors. Several days after publication of the alert, an industry partner notified DHS and FBI of related malicious cyberactivity in which the 

actors redirected certain queries to their own infrastructure and obtained sensitive 

information, which included the configuration files of networked devices. Russian 

State-sponsored actors are using compromised routers to conduct man-in-the-middle 

attacks to support espionage, extract intellectual property, maintain persistent access to victim networks, and potentially lay a foundation for future offensive operations. 

Cybersecurity Priorities 

DHS, our Government partners, and the private sector are committed to a more 

strategic and unified approach as we work to improve our Nation’s overall defensive 

posture against this malicious cyberactivity. Presidential Policy Directive-21, Critical Infrastructure Security and Resilience, recognized that only a more integrated 

approach to managing risk would enable the Nation to counter malicious 

cyberactivity our adversaries. In May of this year, DHS published a Departmentwide Cybersecurity Strategy, providing DHS with a strategic framework to execute 

our cybersecurity responsibilities during the next 5 years. 

This Administration has leaned forward even further, prioritizing the protection 

and defense of our people and economy from the range of threats that exist today, 

including those emanating from cyberspace. Last year, the President signed Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical 

Infrastructure. This Executive Order set in motion a series of assessments and 

deliverables to enable the improvement of our defenses and lower our risk to 

cyberthreats. 

Executive Order 13800 requires continued examination of how the Federal Government and industry work together to protect our Nation’s critical infrastructure, 

prioritizing deeper, more collaborative public–private partnerships in threat assessment, detection, protection, and mitigation. In collaboration with civilian, defense, 

and intelligence agencies, we have worked to identify authorities and capabilities 

that agencies could employ, soliciting input from the private sector, and developed 

recommendations to support the cybersecurity efforts of those critical infrastructure 

entities at greatest risk of attacks that could result in catastrophic impacts. It is 

only through this collective defense model that we will be successful against this 

threat. 

NPPD’s NCCIC operates at the intersection of the private sector, State and local 

governments, Federal departments and agencies, international partners, law enforcement, intelligence, and defense communities. The Cybersecurity Information 

Sharing Act of 2015 established DHS as the Federal Government’s central hub for 

the automated sharing of cyberthreat indicators and defensive measures. The 

NCCIC’s automated indicator sharing (AIS) capability allows the Federal Government and the private sector network defenders to share technical information at 

machine speed,. The NCCIC also provides entities with information, technical assistance and guidance they can use to secure their networks, systems, assets, information, and maintains confidentiality with our data, by reducing vulnerabilities, ensuring resilience to cyberincidents, and private partners supporting their holistic 

risk management priorities. DHS does this in a way that protects privacy and civil 

liberties. 
72 

National Risk Management 

We are facing an urgent, evolving crisis in cyberspace. Our adversaries’ capabilities online are outpacing our stovepiped defenses. Working together with the private 

sector and our Government partners, we are addressing this problem and taking collective action against malicious cyberactors. 

Specifically, there is a need to enhance and promote the Department’s cross-sector, cross-Government coordination on critical infrastructure security and resilience. 

We must improve our focus on examining the critical functions that drive our 

economy and facilitate national security. In other words, we need to continually advance our ability to organize and collaborate on risk strategies, planning, and solutions. For many years, DHS has worked closely with the private sector, but it has 

become clear that it must be a focal point for turning threat intelligence into joint 

action. 

At the Department’s first National Cybersecurity Summit this summer, in response to a clear demand signal and after extensive consultation with industry and 

Government partners, Secretary Nielsen announced the rebranding of the Office of 

Cyber and Infrastructure Analysis (OCIA) as the National Risk Management Center 

(NRMC). Housed within DHS, the NRMC is the logical evolution of the ongoing improvements made over the last several years in information sharing and partnership 

building between the Government and industry. The NRMC draws on existing resources and functions from across NPPD, the Department and our Federal and 

international partners to bring our risk management efforts to the next level in effectiveness. 

The NRMC’s mission is to continually facilitate analysts and planners, from both 

public and private sector, in their efforts to assess our country’s cyber-risks, plan 

to combat those risks and—most importantly—enable implementation of tailored solutions to protect our networks. The full expertise of the Federal Government should 

be brought to bear on these challenges. With this in mind, the NRMC will provide 

the private sector with an entrance point for project teams to access programs from 

all departments and agencies and coordinate defenses against cyberthreats that can 

affect all sectors. 

Perhaps most importantly, the Center’s core mission focuses on the systems or 

functions that cut across sectors. Ultimately, the Center will facilitate a partnership 

among and across Government and industry that can provide a unified, collective 

approach to the defense that the Nation needs to achieve superiority over our adversaries. 

We cannot fail to evolve as the threats continue to come. The NCCIC and National Infrastructure Coordination Center (NICC) will continue to carryout current 

operations but the NRMC will enhance their efforts. The NRMC will support 

NCCIC and NICC operations by helping with prioritization and other needs, while 

also looking ahead to plan more strategically, and leveraging feedback from the operations and other partners. 

Election Security 

DHS is committed to ensuring a coordinated Federal Government effort to assess 

vulnerabilities and mitigate risk to election infrastructure. We understand that 

working with election infrastructure stakeholders is essential to ensuring a more secure election. Based on our assessment of activity observed in the 2016 elections, 

DHS and our stakeholders are increasing awareness of potential vulnerabilities and 

providing capabilities to enhance the security of U.S. election infrastructure as well 

as that of our allies. 

Under the Constitution and our system of laws, State and local election officials 

in thousands of jurisdictions administer Federal elections. Risk management for 

election officials did not begin in 2016. State and local election officials across the 

country have a long-standing history of working both individually and collectively 

to reduce risks and ensure the integrity of U.S. elections. DHS is working with all 

50 States to provide value-added—yet voluntary—services to support their efforts to 

secure elections. 

This year our Nation is in the midst of primary and special elections as well as 

the general election in November. We have been working with election officials in 

all States to enhance the security of their elections by offering support and by establishing essential lines of communications at all levels—public and private—for reporting both suspicious cyberactivity and incidents. This information sharing is critical and our goal is to enhance transparency and have visibility of aggregated elections-related cybersecurity efforts. We are also working with election officials, vendors, the Election Assistance Commission (EAC), and National Institute of Standards and Technology (NIST) to characterize risk to election systems and ensure appropriate mitigations are understood and available in the marketplace. As a part 
73 

of this process, we work with these stakeholders to recommend best practices to ensure a secure and verifiable vote. Through the Government Coordinating Council, 

we also developed guidance for States on how best to spend funding received 

through the Help America Vote Act grant issued by the EAC. 

DHS has made tremendous progress and has been committed to working collaboratively with those on the front lines of administering our elections—State and local 

election officials and the vendor community—to secure election infrastructure from 

risks. Engagement with all 50 States and the establishment of the Election Infrastructure–Information Sharing and Analysis Center with nearly 1,000 members reflects the advances we have made in building a coalition committed to securing elections from cyberthreats. The establishment of Government and sector coordinating 

councils will build the foundations for this enduring partnership not only in 2018, 

but for future elections as well. We will remain transparent as well as agile in combating and securing our physical and cyberinfrastructure. However, we recognize 

that there is a significant technology deficit across State and local governments, and 

State and local election systems, in particular. It will take significant and continual 

investment to ensure that systems are upgraded and insecure or vulnerable systems 

are retired. 

Conclusion 

In the face of increasingly sophisticated threats, DHS employees stand on the 

frontlines of the Federal Government’s efforts to defend our Nation’s critical infrastructure from natural disasters, terrorism and adversarial threats, and technological risk such as those caused by cyberthreats. Our infrastructure environment 

today is complex and dynamic with interdependencies that add to the challenge of 

securing and making it more resilient while not endangering freedom of speech, 

freedom of religion or failing to protect an individual’s privacy. Technological advances have introduced the ‘‘Internet of Things’’ and cloud computing, offering increased access and streamlined efficiencies, while increasing access points that could 

be leveraged by adversaries to gain unauthorized access to networks. As new 

threats emerge, we must better integrate cyber and physical risk management in 

order to secure effectively the Nation. Expertise in cyberphysical risk assessments 

and cross-sector critical infrastructure interdependency evaluation is where NPPD 

brings unique experience and capabilities. 

We must ensure that NPPD is appropriately organized to address cybersecurity 

threats both now and in the future, and we appreciate this Committee’s leadership 

in working to establish the Cybersecurity and Infrastructure Security Agency to accomplish this goal. We are committed to working with Congress to ensure that we 

address cybersecurity in a way that cultivates a safer, more secure and resilient 

Homeland. 

Thank you for the opportunity to appear before the Committee today, and I look 

forward to your questions. 

PREPARED STATEMENT OF CHRISTOPHER A. FORD 

ASSISTANT SECRETARY, BUREAU OF INTERNATIONAL SECURITY AND

NONPROLIFERATION, DEPARTMENT OF STATE

AUGUST 21, 2018 

Chairman Crapo, Ranking Member Brown, and Senators, thank you for inviting 

us. 

I represent the Bureau of International Security and Nonproliferation (ISN), and 

I am pleased to join Treasury Under Secretary Sigal Mandelkar and DHS Under 

Secretary Christopher Krebs, to help explain how we are employing the various 

sanctions tools Congress has given us vis-a-vis the Russian Federation and the various malign activities of the Putin regime. For my part, I will be focusing principally 

upon Section 231 of the Countering America’s Adversaries Through Sanctions Act 

of 2017 (or CAATSA), because implementation of that section has been entrusted 

to my bureau at the State Department. 

But if I might, Mr. Chairman, before I talk about our approach to implementing 

Section 231, I’d like first to put my bureau’s work in this respect into a broader context. 

Our Philosophy of CAATSA Section 231 Implementation 

At the ISN Bureau, our traditional focus is upon the myriad threats and policy 

challenges facing the United States from the spread of weapons of mass destruction 

(WMD), to delivery systems, and advanced conventional weapons. These issues are 

of enormous importance to national and international security, of course, and ISN’s 
74 

eponymous role in ‘‘international security’’ has been seen primarily through the nonproliferation prism. 

But ‘‘international security’’ can—and does—encompass more than just nonproliferation, and one of our roles is to implement sanctions under Section 231 of 

CAATSA. In passing that legislation last year, Congress made very clear its intention that the purpose of the Russia sanctions provisions therein was to pressure 

Russia to change its behavior with respect to a wide variety of malign acts—including Vladimir Putin’s effort to interfere in the 2016 U.S. presidential election. We 

have heard that message loud and clear. 

Significantly, there is more to this than a much-deserved response to malign acts 

and deterrence to such provocations in the future—though those are, of course, laudable goals that we fully support, and which we are using CAATSA to help bring 

about. As I see it, these sanctions tools also have value in better equipping us to 

play a role in broader arenas of great-power competition and geopolitical competitive 

strategy. 

The new National Security Strategy calls out ‘‘the contest for power’’ as ‘‘[a] central continuity in history,’’ and warns about challengers—specifically, ‘‘the revisionist powers of China and Russia, the rogue States of Iran and North Korea, and 

transnational threat organizations’’—that ‘‘are actively competing against the 

United States and our allies and partners.’’ 

Similarly, the new National Defense Strategy observes that ‘‘[t]he central challenge to U.S. prosperity and security’’ today is ‘‘the reemergence of long-term, strategic competition.’’ ‘‘It is increasingly clear,’’ that document states, ‘‘that China and 

Russia want to shape a world consistent with their authoritarian model—gaining 

veto authority over other Nations’ economic, diplomatic, and security decisions.’’ Indeed, the NDS notes that ‘‘[b]oth revisionist powers and rogue regimes are competing [with the United States] across all dimensions of power.’’ 

This is the mindset that we also bring to approaching CAATSA sanctions against 

Russia. Russia has undertaken a campaign of malign activities in its attempt to 

compete with the United States and our allies and partners. The array of sanctions 

the United States has imposed against Russia, and those that materially support 

its malign activities, respond directly to its aggressive action against our country, 

our allies, and our partners. 

And this is where CAATSA’s Section 231 comes into play. The threat of mandatory sanctions against individuals or entities that have engaged in significant transactions with the Russian defense or intelligence sectors can be so useful, but we 

need to use this powerful tool surgically—to excise the malignancy without damaging our very important foreign relationships. As we have been implementing Section 231, we began by emphasizing to our allies that transactions with the Russian 

arms industry could have consequences. 

Firstly, these are the same arms that Russia used and continues to use in its aggression against Ukraine. Our implementation of the CAATSA sanctions reinforces 

this Administration’s unwavering commitment to Ukraine’s sovereignty and territorial integrity, including over Crimea. 

Secondly—as Willie Sutton reportedly said when asked why he robbed banks— 

‘‘that’s where the money is.’’ High-technology military equipment is one of the only 

competitive sectors of the Russian economy these days, and Moscow makes a great 

deal of money from selling arms abroad indiscriminately—be it to Iran or the Assad 

regime. These funds fuel the Kremlin’s malign activities, spread its malign influence, and support Russia’s development of newer, even more deadly weapons. Accordingly, if Russia is to feel pressure in response to its malign activities, it makes 

sense to go after these revenues—revenues that may also help offset the costs of 

developing newer, even more deadly weapons that threaten and undermine the security of the United States and our allies and partners. 

More broadly, however, Russia also uses its arms transactions as a tool of geopolitical influence. For Russia, it isn’t just about money, but about the relationships 

that the arms trade creates for Moscow. Scaling back and shutting down Russia’s 

arms deals and deterring such transactions in the future strike directly at the 

Kremlin’s malign activities and influence that it seeks to exert in the international 

community. 

That is our central philosophy behind Section 231 implementation. The broadest 

challenge, of course, is how to manage a relationship with Russia that has both important cooperative aspects and important points of disagreement. As the President 

and Secretary Pompeo have made clear, we seek to cooperate with Russia on subjects of shared interest wherever we can, because of course there are important 

shared interests on which it would be irresponsible of us not to cooperate. This was, 

for instance, well symbolized by the conference we held at the State Department on 

June 28 that brought together the United States, United Kingdom, and the Russian 
75 

Federation as the Depository States of the Nuclear Nonproliferation Treaty (NPT), 

to commemorate the 50th Anniversary of that Treaty being opened for signature. 

For the occasion, the three foreign ministers of these Depository States issued a 

joint communique reaffirming their shared commitment to the NPT and the nonproliferation regime of which it is the cornerstone. 

At the same time, the Department and my Bureau have not been shy about acting 

forthrightly in pushing back against Russian malign activities. The sanctions tools 

you have given the State Department, including CAATSA’s Section 231, are valuable elements of how this Administration is contributing to American success in responding to Russian aggression in this new era of great power competition. 

A Record of Successes to Date 

As we have dispatched our diplomats repeatedly around the world to spread word 

about Section 231 and encourage Russia’s arms clients to wean themselves from 

Moscow, we have had some notable successes to date. Most of these successes are 

ones about which it is not possible or advisable to speak in public, because most 

interlocutors who take action to reduce their exposure to Section 231 sanctions are 

not keen to publicize the fact. We very much wish to respect their sensibilities, because that’s how friends treat each other. We also want to honor these confidentialities because embarrassing partners who have done the right thing in reducing their 

Russian arms entanglements isn’t a good way to encourage others to follow suit— 

we are also cognizant of potential Russian retaliation against these interlocutors. 

Nevertheless, though we can’t speak about them publicly, we have had real successes—in the form of something on the order of billions of dollars in announced or 

expected Russian arms transactions that have quietly been abandoned as a result 

of our diplomatic outreach about Section 231. That’s billions that Putin’s war machine will not get, and through which the Kremlin’s malign influence will not 

spread, and a slew of strategic relationships between the Kremlin and overseas 

partners that will not broaden and deepen. We’re proud of this record, and we’re 

working hard to run up the score further. 

So effective has the threat of CAATSA sanctions been to date, moreover, that we 

have been able to do all this without imposing sanctions on a friend or partner State 

of our own. I urge you not to look at the scorecard as whether the United States 

has imposed sanctions. In this case, sanctions reflect our failure to turn off Russian 

arms deals. The time will come when we will have no choice but to impose sanctions, but we are keenly aware that Congress’ purpose in passing Section 231 was 

to pressure Russia and incentivize Russia to change its behavior, not to hurt U.S. 

friends and allies who might happen to purchase arms from Moscow. 

Six Principles for Implementation 

Mr. Chairman, I will be happy to answer any questions you have about these matters—at least as best I can in an open forum. I am also very happy to participate 

in or send briefers for a closed session. Before I conclude, however, let me say a few 

more words about our approach to Section 231. In particular, I’d like to outline six 

principles that help guide our work: 

1. First, as I said earlier, the target of Section 231 sanctions is Russia, not the 

countries that happen to purchase arms from Russia. Our interlocutors and 

partners need to know that although CAATSA may compel us to have challenging conversations with them, the underlying problem is not with them. 

Rather, our problem lies with Moscow and its own destabilizing role in the 

international community. I am sure that this is not always a great consolation, 

but it is vital that our interlocutors understand it all the same. 

2. Second, we are not usually concerned with Russia’s mere provision of spare 

parts or its maintenance of military equipment that another country already 

possesses. We know that many States still possess some Russian arms, and we 

are certainly not in the business of trying to insist that such countries give up 

on defending themselves. For CAATSA purposes, we are comfortable with the 

maintenance of equipment or the provision of spare parts not generally being 

considered a transaction that is considered significant under Section 231. 

Our concerns begin where and when something more consequential occurs— 

something such as a major transfer of foreign funds to the Russian defense 

sector, for instance, or a new shipment of equipment representing a qualitative 

upgrade in capability, such as an S-400. In such cases, the issue of ‘‘significance’’ becomes more problematic, and the risk of mandatory sanctions thus 

increases. This is the message we have been relaying to interlocutors in our 

diplomatic outreach, and it is one of which we hope Congress will approve. 

3. Third, we have also been sending the message that a transaction generally 

won’t be considered significant unless and until a major change in the status 
76 

quo actually occurs. Just talking about or announcing a Russian arms deal, in 

other words, is not generally in itself a trigger for Section 231 sanctions. The 

problem arises when new Russian equipment starts to show up or perhaps 

when large sums of money begin to change hands. 

We don’t expect Russia’s arms clients to disavow or renounce their deals. In 

truth, Russia is not a very good or reliable arms partner on a good day, and 

even with global suppliers more reputable and reliable than Russia, consummation of a purchase of sophisticated equipment can take a long time and 

experience detours, obstacles, or reasons to fall apart. If in this new CAATSA 

environment, Russia’s major arms clients never quite finalize their purchase, 

then the State Department will have nothing about which to have to assess 

‘‘significance’’ under Section 231 in the first place. 

4. And speaking of off-ramping, another piece of our diplomatic message has been 

that even with respect to new equipment, we are not necessarily asking countries immediately to go ‘‘cold turkey’’ on Russian arms. We understand that can 

be very difficult. As long as new deliveries of more advanced equipment don’t 

occur, we have room for some flexibility vis-a-vis new purchases, provided that 

the overall trend line is demonstrably ‘‘down.’’ That is, that such countries are 

weaning themselves off of the arms transactions that help fund Moscow’s adventurism and that create geopolitical partnerships that the Kremlin can 

thereafter exploit for destabilizing ends. 

5. With respect to the new CAATSA waiver language in the NDAA, we are glad 

to have greater flexibility on these issues. At Secretary Pompeo’s hearing before this Committee on July 25, Chairman Corker and Senator Cardin emphasized to him that Congress views the new waiver language as narrow—in your 

words, Mr. Chairman, ‘‘to allow countries that we’re dealing with that we wish 

to buy American military equipment to be weaned off Russian equipment.’’ Secretary Pompeo, in turn, made clear his agreement—noting that the new waiver 

is a way to avoid driving countries with historical Russian entanglements more 

into Moscow’s arms while permitting them ‘‘the capacity of spare parts’’ or to 

‘‘round out th[e] process’’ of weaning themselves of their dependency on Russia. 

We will use this understanding to guide implementation of Section 231. 

6. Finally, it’s worth pointing out that Section 231 only applies to Russian arms 

transactions. To the extent that a country contemplating a purchase of advanced Russian equipment can pursue alternative sources of supply in meeting 

its defense needs, therefore, this is an excellent way to avoid sanctions liability. 

Purchases from European or other international suppliers of sophisticated 

weaponry, for instance, would raise no Section 231 concern. Nor, of course, 

would purchases from the United States—and we are always happy to try to 

facilitate discussions with relevant U.S. interlocutors about such possibilities. 

These principles help guide our Section 231 diplomacy, and I think they are producing some very good results for the United States. 

Mr. Chairman, I am pleased to have had the chance to explain our approach to 

Section 231 of CAATSA, and I look forward to taking your questions. Thank you. 
77 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM SIGAL P. MANDELKER 

Q.1. CAATSA Implementation: Many of us on both sides have repeatedly urged more assertive implementation of mandatory sanctions under CAATSA, in order to deter further Russian attacks. I 

know you have begun to do a bit more in recent months, and in 

some cases would prefer to use EO authorities because you see 

them as more flexible. But there is still a lot more that could be 

done with mandatory CAATSA sanctions. 

Can you give us a more precise sense of what you have planned 

before the elections to signal more powerfully to Russia’s leaders 

that they must stop—and what you are preparing for generally, in 

terms of escalation, if the Russians continue their aggressive actions through the elections and beyond? 

What are the general sanctions areas—banking, energy, sovereign debt, sectoral sanctions, or a mix of all of them—that you 

think would have the most significant impact on Russian behavior? 

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

Q.2. Sovereign Debt: The Treasury Department’s unclassified report on sovereign debt required by CAATSA noted that, ‘‘expanding 

sanctions could hinder the competitiveness of large U.S. asset managers and potentially have negative spillover effects into global financial markets and businesses.’’ 

What would be the impact on U.S. interests if we expanded sanctions to include dealings in new Russian sovereign debt and the 

full range of derivatives, with a transition period, and with certain 

explicit limits on the term of such debt? What would be the impact 

on global financial markets and businesses, and what suggestions 

do you have for mitigating any unintended consequences if we decide to go this route? 

There have been articles, and concerns expressed by my colleagues (including at today’s hearing) that Treasury and/or 

FinCEN have been delaying the production of material requested 

by Congress and possibly withholding information that was requested by Congress—and I mean in response to even bipartisan 

requests. You committed to provide further documents requested 

by the Intelligence Committee immediately, and to cooperate on 

this front. My colleague Senator Warner noted that Treasury is 7– 

8 months behind in some of these document requests. My questions 

to you are these: 

Has Treasury or FinCEN ever intentionally delayed or withheld 

the production of material that was requested by Congress? 

Has anyone at Treasury ever directed FinCEN to delay or withhold the production of material requested by Congress? If so, can 

you describe those circumstances, and the rationale for such action? 

A.2. Response not received in time for publication. 

Q.3. Going After Putin Assets, and Those of His Cronies: Leaving 

aside the diplomatic consequences, if we were to require of banks 

that they block Putin’s personal assets, and those of his family 

members and close associates to whom he’s transferred assets—like 

we did years ago with certain Iranians—given that they are often 

so well-hidden in layers of dummy corporations and anonymous en-
78 

tities—would that have any real effect beyond the symbolic? I gather we have struggled to do this for many years, and he has hidden 

them well. But do we at least know who manages his assets for 

him, and could we not go after them with blocking or secondary 

bank sanctions? Why have we not done this already? 

A.3. Response not received in time for publication. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM SIGAL P. MANDELKER 

Q.1. Some European countries have expressed their opposition to 

the United States’ withdrawal from the JCPOA. 

The Treasury Department has indicated that on November 4, 

2018, renewed sanctions on Iran will include those ‘‘on the provision of specialized financial messaging services to the Central Bank 

of Iran and Iranian financial institutions,’’ per the Comprehensive 

Iran Sanctions and Divestment Act of 2010. These services include 

transactions on the Society for Worldwide Interbank Financial 

Telecommunications (SWIFT) network. Please explain, in unclassified terms, what will happen if the Treasury department is obligated to prohibit SWIFT transactions with the CBI and designated 

Iranian financial institutions but certain SWIFT member organizations elect to continue doing so. 

What will be the effect of the European Commission’s ‘‘blocking 

statute’’—a mechanism Jean-Claude Juncker has said will ‘‘neutralize the extraterritorial effects of U.S. sanctions in the EU’’—on 

European companies doing business with Iran? 

Has this changed Treasury’s view on the potential impact of 

sanctions on EU firms? 

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

RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON 

FROM SIGAL P. MANDELKER 

Q.1. Russia has recently embraced digital currencies, particularly 

Ethereum (see https://cointelegraph.com/news/suddenly-vladimirputin-meets-vitalik-buterin-endorses-ethereum). 

What can policymakers in the U.S. do to ensure that we are the 

leader in developing blockchain and digital currencies rather than 

Russia and China? 

The SWIFT network facilitates cross-border payments through 

its vast messaging system. If the President wants to isolate Russia 

like Iran, is it true that the international SWIFT payments network based in Belgium can follow Europe and not unplug banks 

from those countries? 

SWIFT and the EU’s cooperation are needed to ensure sanctions 

involving cross-border payments are fully implemented (https:// 

www.axios.com/trump-administration-iran-sanctions-swift-financial-messaging-8fae6cd6-11c9-42a8-9d5b-6d3140a7ae83.html). The 

next generation of payment infrastructure is likely to involve 

Blockchain and digital assets. 

How can policymakers support American payment companies utilizing this technology to ensure this innovation develops here and 

aligns with our national security interests? 
79 

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

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM SIGAL P. MANDELKER 

Q.1. In the April 6th sanctions designations, Oleg Deripaska was 

designated pursuant to E.O. 13661 for having acted or purported 

to act for or on behalf of, directly or indirectly, a senior official of 

the Government of the Russian Federation, as well as pursuant to 

E.O. 13662 for operating in the energy sector of the Russian Federation economy. 

As you gathered intelligence to build this sanctions package, did 

you examine Mr. Deripaska’s interference in the United States? 

Did you examine his relationship with Paul Manafort or other 

American citizens? 

The United States has imposed sanctions on the FSB and GRU. 

Please describe the tangible impact of those sanctions. 

How many FSB and GRU officers’ accounts have been frozen? 

How much money have these individuals lost access to as a result of these sanctions? 

Have any FSB or GRU officer’s property in the U.S. been seized 

as a result of these sanctions? 

Please describe your dialogue with those American entities who 

invest in Russian sovereign debt. What specific measures have you 

taken to encourage U.S. entities to not invest in Russian sovereign 

debt? 

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

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER 

FROM SIGAL P. MANDELKER 

Q.1. Economic Effects of Sanctions: What tools does the Department of Treasury use to measure the effectiveness of sanctions? 

Specifically, what metrics does the Treasury utilize to indicate 

when sanctions have had their intended effect? 

By these measures, have sanctions against Russia under the 

Countering America’s Adversaries Through Sanctions Act 

(CAATSA) been successful? 

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

Q.2. Money Laundering: With the understanding that the Department of Treasury’s Financial Crimes Enforcement Network 

(FinCEN) has no criminal investigative or arrest authority, it has 

data analysis to support investigations and prosecutions of financial crimes, and refers possible cases to law enforcement authorities when it is warranted. FinCEN also submits requests for information to financial institutions from law enforcement agencies conducting criminal investigations and has the authority to issue civil 

money penalties. 

Over the last 5 years, how many cases of money laundering has 

FinCEN referred to the Department of Justice or any other law enforcement authorities? 

Out of those, how many have involved Russian nationals? Of 

those involving Russian nationals, how many were connected with 

U.S. individuals, LLCs or nonprofits? 
80 

A.2. Response not received in time for publication. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM SIGAL P. MANDELKER 

Q.1. In the conference report attached to the Fiscal Year 2019 National Defense Authorization Act (NDAA), the Treasury Department, in coordination with other agencies, is directed to provide a 

briefing to Congress on the assets owned by Vladimir Putin, Russian business persons, and senior Russian Government officials, 

and their immediate family members and proxies. This briefing 

must include the location, value, size, and contents of their bank 

accounts, real estate holdings, and all other financial assets, and 

the shell companies they use to hide those assets. 

When will you schedule this briefing? 

Without disclosing intelligence sources and methods, would you 

consider publishing an unclassified report on the assets currently 

held by Putin, Russian business persons, senior Russian Government officials, and their immediate family members and proxies, 

and the companies they use to hide those assets, on a website of 

the Treasury Department? If yes, when can we expect Treasury to 

publish that unclassified report? If no, please explain why not. 

During their press conference in Helsinki last month, Russian 

President Putin announced that he and President Trump ‘‘agreed 

to create the high-level working group that would bring together 

captains of Russian and American business.’’ 

Can you guarantee that no individual or entity under U.S. sanctions will be included in this working group of U.S. and Russian 

business leaders, if this working group is implemented? If not, 

please explain why not. 

Based on the available information, do you believe that there is 

sufficient evidence to impose sanctions under existing U.S. law 

against Russian President Vladimir Putin personally? 

If there is sufficient evidence, why has the Treasury Department 

not imposed sanctions on Vladimir Putin? 

How many waivers have the Treasury Department granted for 

the Countering America’s Adversaries Through Sanctions Act 

(CAATSA)? Please describe the parties for whom Treasury has 

granted such waivers. 

Do you believe there is sufficient evidence to impose sanctions on 

the 12 Russian intelligence officers that the Justice Department indicted on July 13, 2018, for hacking the Democratic National Committee (DNC), the Democratic Congressional Campaign Committee 

(DCCC), and the presidential campaign of Hillary Clinton? If yes, 

does the Treasury Department intend to impose sanctions? If not, 

please explain why not. 

The Commerce Department on July 29, 2018, granted Rusal 

America an exemption from aluminum tariffs imposed by President 

Trump. This exemption (exclusion) was reversed one day after I 

wrote to the Commerce Department on August 7, 2018. Commerce 

Department officials indicated that ‘‘they had coordinated with the 

[Office of Foreign Assets Control] in considering the Rusal application,’’ and that OFAC ‘‘was ultimately the decider on whether sanctions should prevent approval of an exclusion.’’ 
81 

Is this statement by the Commerce Department accurate? 

Has the Commerce Department coordinated with OFAC or any 

other Treasury Department official regarding the eligibility of sanctioned companies generally for tariff exemptions? 

Has the Commerce Department coordinated with OFAC or any 

other Treasury Department official regarding the eligibility of 

Rusal America for tariff exemptions? 

Was OFAC ‘‘the decider’’ on whether Rusal America or any other 

sanctioned entity should be eligible to receive an exemption from 

the tariffs? 

Did the Treasury Department play any role in the reversal of the 

Rusal America exemption on August 8, 2018? Please provide any 

and all documents in the Department’s possession related to the 

July 9, 2018, or August 8, 2018, decisions on tariff exemptions for 

Rusal America. 

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

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR DONNELLY FROM SIGAL P. MANDELKER 

Q.1. Sanctions Effectiveness: Ms. Mandelker, since the United 

States stepped up sanctions against Russia in 2014, sanctions have 

not changed or moderated the behavior of the Putin Government. 

Are you currently holding back from taking enforcement actions 

against Russian entities or individuals that may currently be violating sanctions? 

Do you have the staff and resources to implement and enforce an 

effective sanctions regime? 

If provided, would additional staff and resources be used to implement and enforce existing sanctions, or to undertake additional 

enforcement actions? 

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

Q.2. North Korea Sanctions Enforcement: Ms. Mandelker, I am concerned that our hard work to strengthen North Korea sanctions 

has now gone to waste as Russia and China, among others, have 

relaxed their enforcement efforts. In the case of Russia, there are 

reports that it is still hiring North Korean workers and facilitating 

petroleum shipments. 

Do you think that the sanctions pressure we are currently applying is sufficient to achieve our objective of ending North Korea’s 

nuclear program? 

Has Russia’s and China’s enforcement of North Korea sanctions 

improved, remained the same, or worsened since the President’s 

summit in Helsinki? 

What steps are you taking to ensure that both Russia and China 

are enforcing sanctions on North Korea? 

A.2. Response not received in time for publication. 

Q.3. Sanctions on New Russian Sovereign Debt: There are various 

pending legislative proposals to strengthen Russia sanctions, including proposals to sanction Russian sovereign debt and related 

derivatives. But Treasury has stated in the past that such sanctions could negatively impact U.S. investors. 
82 

Do you think that sanctions on new Russian sovereign debt and 

related derivatives will help to change Putin’s calculus? 

Do you think that the EU would be open to implementing similar 

actions? 

As a last resort strategy, some have referred to sovereign debt 

sanctions as the ‘‘nuclear option’’. Do you support that conclusion, 

that sanctioning sovereign debt would only be considered after all 

else fails? 

A.3. Response not received in time for publication. 

Q.4. Beneficial Ownership and Corporate Transparency: Many reports have concluded that the U.S. is among the easiest countries 

to create an anonymous shell company. As a result, corrupt 

oligarchs and rogue Nations can often exploit our vulnerabilities to 

evade sanctions and move money through the U.S. as a legal business entity. 

To what extent have Russian officials utilized shadow companies 

to access the U.S. financial system? 

Do the use and exploitation of anonymous shell companies negatively impact our national security? 

Would legislation requiring corporate beneficial ownership transparency increase your ability to effectively apply sanctions against 

corrupt oligarchs and officials? 

In May, FinCEN implemented its Customer Due Diligence (CDD) 

Rule to require financial institutions to identify the beneficial 

owner of legal entity customers. The CDD rule will be helpful going 

forward, but it is not retroactive for existing accounts. 

What is the expected impact of the CDD rule on beneficial ownership disclosure? 

What additional steps must the United States take to eliminate 

the glaring systemic vulnerability of anonymous shell companies 

that criminals and corrupt foreign officials exploit to move money 

through the financial system? 

A.4. Response not received in time for publication. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ 

FROM SIGAL P. MANDELKER 

Q.1. Is the U.S. Government committed to deterring and, if necessary, punishing foreign interference in the democratic election, 

processes, or institutions of a treaty ally, political ally, or partner 

Government of the United States? 

If yes, describe the tools that are available to the U.S. Government to prevent and punish foreign interference in ally and partner 

Governments in Europe and Eurasia, including the existing sanctions authorities that the U.S. Government can levy against individuals or organizations suspected of foreign interference. 

How does the U.S. Government coordinate with NATO allies and 

the Governments of other political allies and partners to share information about suspected foreign interference in democratic elections, processes, or institutions? 

What mechanisms exist for the U.S. Government to gather information from NATO allies and the Governments of other political 

allies and partners about individuals and organizations responsible 
83 

for foreign interference in democratic elections, processes, or institutions overseas? 

Describe how, if at all, the U.S. Government currently makes decisions with NATO allies and the Governments of other political allies and partners to take actions to punish individuals or organizations for foreign interference in democratic elections, processes, or 

institutions overseas. 

Does the U.S. Government face any limitations with coordinating 

with NATO allies and the Governments of other political allies and 

partners as it relates to deterring suspected individuals or organizations from or punishing them for foreign interference in democratic elections, processes, or institutions overseas? 

If yes, what recommendations would you make to Congress to ensure that the U.S. Government has sufficient authority to coordinate with appropriate foreign Governments concerning election interference? 

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

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM CHRISTOPHER KREBS 

Q.1. Ongoing Russian cyberattacks on the U.S. have been widely 

reported—as your testimony notes, Homeland Security has issued 

warnings on Russian attempts to penetrate critical infrastructure, 

targeting organizations in the business, energy, nuclear, water, 

aviation, and manufacturing sectors. The alerts describe ‘‘multistage intrusion campaigns’’ which allowed remote access to U.S. energy sector networks, including the control systems for energy generation facilities. As you said, ‘‘we are facing an urgent, evolving 

crisis in cyberspace. Our adversaries’ capabilities online are outpacing our stovepiped defenses.’’ 

Can you describe the nature and scale of these attacks, their intensity, purposes, and key targets? Are they deploying malware for 

future use? Reconnaissance? Testing our system security? Do we 

think they could actually take control of any utility plants? 

A.1. Since at least March 2016, Russian Government cyberactors 

have targeted Government entities and multiple U.S. critical infrastructure sectors, including energy, nuclear, commercial facilities, 

water, aviation, and critical manufacturing sectors. The U.S. Department of Homeland Security (DHS) and the Federal Bureau of 

Investigation (FBI) characterize this activity as a multistage intrusion campaign by Russian Government cyberactors who targeted 

small commercial facility networks where they staged malware, 

conducted spear phishing, and gained remote access into energy 

sector networks. After obtaining access, the Russian Government 

cyberactors conducted network reconnaissance, moved laterally, 

and collected information pertaining to industrial control systems, 

or the operational technology that operates our Nation’s critical infrastructure. 

While significant and concerning, the activity identified in these 

incidents did not put these malicious cyberactors in a position to 

take control of utility plants. Additional information on this activity 

can be found in the joint technical alert by DHS and FBI, found 

online at: https://www.us-cert.gov/ncas/alerts/TA18-074A. 
84 

Q.2. Are your efforts to eliminate the stovepipe problem and better 

coordinate, both within the U.S. Government, and between the 

Federal Government and State and local governments, enough to 

defeat them? 

A.2. To break down information stovepipes and ensure cross-sector 

approaches to protecting our Nation, the Department’s specific cybersecurity authorities executed through NPPD—including authorities related to sharing, analyzing, and coordinating actionable information related to cybersecurity risks and incidents; protecting 

Federal information systems; and responding to cybersecurity incidents—enable NPPD to engage with Federal and non-Federal entities (i.e., all stakeholders—public, private, and international) and 

across and beyond all critical infrastructure sectors to collaboratively improve cybersecurity practices and protect Federal and 

non-Federal entities from cyber-risks. 

The Homeland Security Act of 2002, and following amendments, 

as well as Executive Branch policies, have centralized functions of 

the Federal Government focused on protecting critical infrastructure at the Department of Homeland Security (DHS). The Homeland Security Act was amended in 2014 and 2015 to codify the role 

of the Department’s National Cybersecurity and Communications 

Integration Center (NCCIC) as the Federal–civilian interface for 

sharing information regarding cybersecurity risks and incidents 

and authorize the NCCIC to provide cybersecurity related technical 

assistance, risk management support, and incident response capabilities to Federal and non-Federal entities. In a similar fashion, 

the Cybersecurity Act of 2015 also establishes the NCCIC as the 

Federal Government’s central hub for sharing cyberthreat indicators between the private sector and the Federal Government and 

requires the Department to establish the Federal Government’s capability and process for sharing cyberthreat indicators with both 

Federal and non-Federal entities. 

Cross-sector centralization and coordination of the Federal Government’s cybersecurity efforts is critical to our Nation’s national 

security, economic security, and public health and safety. Information regarding cybersecurity threats, vulnerability, and incidents 

must be shared as quickly as our adversaries move in cyberspace. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM CHRISTOPHER KREBS 

Q.1. The Federal Information Security Modernization Act of 2014 

(FISMA) expanded and clarified the Department of Homeland Security’s (DHS) responsibilities in implementation and oversight of 

information security at other Federal agencies upon enactment, including the authority to develop, issue, and oversee agencies’ implementation of ‘‘binding operational directives,’’ or BODs. With examples of BODs spanning from requiring agencies to participate in 

risk assessments to outright banning the use of Kaspersky Lab 

equipment, it is important for Congress to understand DHS’s decision-making and oversight processes. 

First, please describe how DHS identifies the necessary conditions to issue a BOD. 
85 

How does DHS establish and maintain oversight of agencies’ implementation of the BOD? 

Does DHS have the necessary authorities and capability to ensure accountability of BOD implementation across diverse agencies? 

How does DHS measure the effectiveness of the BOD? 

Ultimately, how are BODs integrated in a comprehensive cybersecurity strategy? 

A.1. The Secretary of the U.S. Department of Homeland Security 

(DHS), in consultation with the Director of the Office of Management and Budget (OMB), has the authority under 44 U.S.C. 

§3553(b)(2) to develop and oversee the implementation of binding 

operational directives (BOD). The Federal Information Security 

Modernization Act (FISMA) includes specific topics for BODs, including requirements for reporting security incidents to DHS’s National Cybersecurity and Communications Integration Center 

(NCCIC), requirements for the contents of the annual FISMA reports, requirements for the mitigation of exigent risks to information systems, and other operational requirements as OMB, or DHS 

in consultation with OMB, may determine are necessary. 

DHS, acting through the National Protection and Programs Directorate (NPPD), identifies risks or requirements to be addressed 

through BODs. DHS also accepts ideas for potential BODs from entities, such as the Federal Chief Information Officer (CIO) Council, 

independent security researchers, or other partners. As needed, 

DHS may convene a group of subject matter experts from Federal 

agencies, OMB, and the National Institute of Standards and Technology to consider the relative merits of particular risks in order 

to determine the appropriateness of a given BOD or determine the 

prioritization of different BODs. 

Generally, when determining whether a certain issue is appropriate for a BOD, DHS considers the following questions: 

• Is the proposed BOD related to an active threat? If so, what 

is the scope and magnitude of the problem? 

• Is the proposed BOD related to a potential identified risk? 

• What category/schedule does the potential BOD fit into 

(planned, escalation of issue, or emergency)? 

• Is this issue specific to a particular Federal agency or could it 

be applicable across the civilian Federal executive branch? 

• What is the difficulty to exploit the vulnerability? 

• Is the issue/subject sensitive or classified? 

• Are external events or threat intelligence driving the need for 

or request of the proposed BOD? 

• Can the proposed BOD be measured and validated by DHS? 

• Could the issue or threat be addressed satisfactorily and fully 

through other mechanisms? 

• Has DHS socialized the proposed BOD subject with applicable 

stakeholders, such as CIO/Chief Information Security Officer 

(CISO) councils? 

• What is the end state of proposed BOD? 
86 

• What other operational requirements have been issued by way 

of policy, guidance, and standards in relation to this BOD? 

• Does the BOD address or reemphasize Federal program such 

as Continuous Diagnostics and Mitigation, EINSTEIN, automated indicator sharing, etc.? 

• Is this BOD associated with the requirements for the content 

of the annual reports required to be submitted by Federal 

agencies? 

• Is this BOD associated with the requirements for reporting incidents to the NCCIC? 

• Is there another action that would be more effective than a 

BOD? 

DHS has found its current authorities to be effective at coordinating and driving the timely response and implementation of specific BOD requirements but acknowledges that, under certain circumstances, DHS will be unable to ensure implementation at the 

agency-level unilaterally. DHS ensures Federal agency compliance 

with BODs using several methods. First, BODs have historically 

been issued by the Secretary to Federal agency leadership as highpriority items, and their implementation status is followed closely 

by DHS’s senior leadership. When implementation issues arise, 

DHS engages with Federal agency CIOs and CISOs. If the agency 

continues not to comply, DHS leadership may engage with his or 

her counterpart at a noncompliant agency. When additional attention is needed, DHS may work with OMB. Ultimately, the Secretary or Deputy Secretary may, at their discretion, contact their 

counterparts at each noncompliant agency. 

DHS measures BOD effectiveness based on the completion of all 

required tasks by agencies, along with achieving the stated, desired 

end state which is defined by eliminating or adequately addressing 

the identified risk. Throughout the development of a BOD, required 

actions on the part of agencies are determined to ultimately minimize or eliminate the risk posed by previously identified 

vulnerabilities. For instance, in 2015 the Secretary directed agencies to promptly patch known vulnerabilities on their Internet-facing systems. Agencies have responded quickly in implementing the 

Secretary’s BOD and have sustained this progress. When the Secretary issued this BOD, NPPD identified more than 360 ‘‘stale’’ 

critical vulnerabilities across Federal civilian agencies, which 

means the vulnerabilities had been known for at least 30 days and 

remained unpatched. Since December 2015, NPPD has identified 

an average of less than 40 critical vulnerabilities at any given time, 

and agencies have addressed those vulnerabilities rapidly. 

Consistent with the Department’s cybersecurity strategy, BODs 

have addressed cybersecurity priorities requiring immediate attention and mandatory action by Federal agencies to protect Federal 

information and information systems. It is important to note that 

BODs are just one tool DHS has at its disposal to ensure Federal 

agencies and their associated networks are adequately and properly protected. 

Q.2. Your written testimony described the joint efforts of DHS and 

the Federal Bureau of Investigation (FBI) to identify practices of 
87 

Russian Government actors targeting certain entities that eventually become ‘‘pivot points’’ to leverage access to major, high-value 

assets operating the Nation’s infrastructure. 

What have been some of the priority recommendations that DHS 

and FBI have provided network defenders to reduce exposure to 

this malicious, yet strategic, exposure? 

A.2. Since at least March 2016, Russian Government cyberactors 

have targeted Government entities and multiple U.S. critical infrastructure sectors, including energy, nuclear, commercial facilities, 

water, aviation, and critical manufacturing sectors. The U.S. Department of Homeland Security (DHS) and the Federal Bureau of 

Investigation (FBI) characterize this activity as a multistage intrusion campaign by Russian Government cyberactors who targeted 

small commercial facility networks where they staged malware, 

conducted spear phishing, and gained remote access into energy 

sector networks. After obtaining access, the Russian Government 

cyberactors conducted network reconnaissance, moved laterally, 

and collected information pertaining to industrial control systems, 

or the operational technology that operates our Nation’s critical infrastructure. 

Additional information on this activity can be found in the joint 

technical alert by DHS and FBI, found online at: https://www.uscert.gov/ncas/alerts/TA18-074A. 

Recommendations provided to network defenders include monitoring for known indicators of compromise, active defense for spearphishing and watering hole intrusion vectors, blocking all outbound 

server message block network traffic, requiring the use of multifactor authentication for all external interfaces, use of malware signatures, and other recommended courses of action provided within 

the technical alert. 

Q.3. Your written testimony mentions the collaborative efforts of 

DHS with private industry actors to improve assessment, detection, 

protection, and mitigation of cyberthreats, including Executive 

Order 13800. 

What are some of the best examples of public–private partnerships that the agency has been a part of (that you are able to share 

with this Committee)? What exactly were those partnership able to 

achieve? 

A.3. Executive Order 13800, Strengthening the Cybersecurity of 

Federal Networks and Critical Infrastructure, recognizes that effective cybersecurity requires entities to identify, detect, respond, and, 

when necessary, recover from cyberintrusions. Through outreach to 

stakeholders, the U.S. Department of Homeland Security (DHS) is 

sharing cybersecurity threat information and assisting with the 

prioritization and mitigation of cybersecurity risks. 

DHS leads efforts to defend our Nation’s critical infrastructure 

from cyberthreats. Today’s infrastructure is more complex and dynamic with interdependencies that increase the challenge of reducing risk and ensuring resiliency. DHS not only shares unclassified 

and classified cyberthreat information as well as providing a full 

range of technical assistance capabilities, but also closely coordinates with our Federal partners, including intelligence agencies, 

law enforcement, and sector-specific agencies. 
88 

The National Cybersecurity and Communications Integration 

Center (NCCIC) fosters a strong network of trusted global partnerships. The NCCIC routinely collaborates with these trusted partners to share information, coordinate actions, conduct analysis, and 

develop common processes and joint plans. The NCCIC offers a 

portfolio of no-cost products and services organized around its core 

functions. Some examples include the Industrial Controls Systems 

Joint Working Group to facilitate information sharing and to reduce the cyber-risk to the Nation’s industrial control systems; the 

Cyber Information Sharing and Collaboration Program enables actionable, relevant, and timely unclassified information exchange 

through trusted public–private partnerships across all critical infrastructure sectors; the automated indicator sharing capability enables the exchange of cyberthreat indicators between and among 

the Federal Government and the private sector at machine speed; 

and the Enhanced Cybersecurity Services is an intrusion detection 

and prevention capability that is available to U.S.-based entities 

and State, local, tribal, and territorial government organizations. 

Q.4. With the support of the Administration and colleagues from 

both sides of the aisle, I was successful in getting the Modernizing 

Government Technology (MGT) Act signed into law as part of the 

National Defense Authorization Act for FY2018. The law addresses 

the foundational cybersecurity threats that outdated legacy systems in our Federal agencies pose. 

Would you agree that outdated, unsupported legacy IT systems 

pose a serious threat to the information security of our Federal 

agencies? 

A.4. Yes, the challenges posed by outdated, end-of-life (EOL), legacy Federal information technology systems create serious risks to 

the information security of our Federal agencies. For instance, the 

issue has been apparent in the implementation of the U.S. Department of Homeland Security’s (DHS) Binding Operational Directives 

(BOD). As an example, during the implementation of BOD 15-01 

(Mitigating Critical Vulnerabilities) and BOD 16-02 (Securing Network Infrastructure Devices), DHS identified and monitored dozens 

of EOL systems. Some legacy systems could no longer be patched, 

others were not supported by the vendor, and some experienced 

significant performance issues if not reconfigured during the security upgrade and enhancement process. Most legacy systems are 

simply not designed for the current environment and the need for 

modern security approaches. Fortunately, in most cases, DHS and 

the agency were able to address these issues and either upgrade, 

transition, or mitigate. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER 

FROM CHRISTOPHER KREBS 

Q.1. Please provide a detailed list of what DHS has taken to date 

in order to improve election security in the State of Montana since 

the 2016 election cycle. 

A.1. The U.S. Department of Homeland Security (DHS) engages 

with non-Federal entities, such as the State of Montana, to share 

cybersecurity information and provide technical assistance on a vol-
89 

untary basis. Successful voluntary partnerships require trust and 

confidentiality. As such, DHS generally defers to individual entities 

to respond to questions regarding details of an incident or steps 

that an entity may have taken to mitigate vulnerabilities. 

Q.2. To the best of your knowledge, has the State of Montana implemented any of the suggested election security improvements offered by DHS? 

A.2. As noted in the previous response, DHS generally defers to individual entities to respond to questions regarding details of an incident or steps that an entity may have taken to mitigate 

vulnerabilities. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM CHRISTOPHER A. FORD 

Q.1. CAATSA Implementation: Many of us on both sides have repeatedly urged more assertive implementation of mandatory sanctions under CAATSA, in order to deter further Russian attacks. I 

know you have begun to do a bit more in recent months, and in 

some cases would prefer to use EO authorities because you see 

them as more flexible. But there is still a lot more that could be 

done with mandatory CAATSA sanctions. 

Can you give us a more precise sense of what you have planned 

before the elections to signal more powerfully to Russia’s leaders 

that they must stop—and what you are preparing for generally, in 

terms of escalation, if the Russians continue their aggressive actions through the elections and beyond? 

A.1. The Department of State has made it clear to the Russian 

Government at the highest levels that any efforts to interfere in 

the 2018 midterm elections will not be tolerated and will be met 

with severe consequences. While the Department’s mandate is to 

lead on foreign policy, we will continue to support the efforts of the 

Departments of Homeland Security and Justice—and, as appropriate, State and local officials—to secure our elections, leveraging 

all necessary and available Department resources and tools to 

counter Russian malign influence. 

Q.2. What are the general sanctions areas—banking, energy, sovereign debt, sectoral sanctions, or a mix of all of them—that you 

think would have the most significant impact on Russian behavior? 

A.2. We have robust sanctions authorities at our disposal, which 

we are using in close coordination with our allies and partners to 

impose costs on Russia for the entirety of its malign behavior. 

Sanctions are a powerful foreign policy tool, and are most impactful 

when used in coordination with allies and partners to maximize 

their effectiveness. Sanctions have the strongest impact when tied 

to a clear foreign policy goal, and used in tandem with diplomatic 

outreach. Providing the State Department with flexibility in implementation allows us to engage with allies, maintain unity, and 

maximize sanctions pressure on Russia. For example, the threat of 

sanctions under CAATSA Section 231 has prompted other States to 

abandon billions of dollars in planned or announced arms deals 

with Russia, imposing additional financial costs on the Russian 
90 

Government. As a result, Russia has fewer resources with which to 

finance its influence campaigns. 

Q.3. Maintaining Multilateral Support for Sanctions: It’s clear that 

enlisting other countries in our efforts to push back on Russian aggression—including countries like France, Germany, Britain, the 

Baltic States, and others who have been victimized by Russian aggression—is critical. They also have a huge stake in ensuring Russia abides by international law in Crimea and Ukraine, and in protecting their own elections and infrastructure systems. 

Can you describe precisely what we are doing to enlist the support of other countries in our efforts to impose real costs on continuing Russian aggression across the board, in all these areas? 

A.3. We work closely with partners and allies to respond to Russian aggression, share best practices, expose Russian campaigns 

and tactics, and build collective resilience. We work both on a bilateral and multilateral basis to achieve these goals. For example, the 

coordinated expulsion of Russian officers from 28 countries and 

NATO in response to the Salisbury attack on Sergei and Yulia 

Skripal sent a strong message to Russia that its destabilizing and 

brazen activity will not be tolerated by the international community. Additionally, we support multilateral efforts to share information and build collective resilience, such as at the European Center 

for Countering Hybrid Threats in Helsinki. We have exposed Russian malicious cyberactivity publicly, in concert with partners. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM CHRISTOPHER A. FORD 

Q.1. Some European countries have expressed their opposition to 

the United States’ withdrawal from the JCPOA. 

The Treasury Department has indicated that on November 4, 

2018, renewed sanctions on Iran will include those ‘‘on the provision of specialized financial messaging services to the Central Bank 

of Iran and Iranian financial institutions,’’ per the Comprehensive 

Iran Sanctions and Divestment Act of 2010. These services include 

transactions on the Society for Worldwide Interbank Financial 

Telecommunications (SWIFT) network. Please explain, in unclassified terms, what will happen if the Treasury department is obligated to prohibit SWIFT transactions with the CBI and designated 

Iranian financial institutions but certain SWIFT member organizations elect to continue doing so. 

What will be the effect of the European Commission’s ‘‘blocking 

statute’’—a mechanism Jean-Claude Juncker has said will ‘‘neutralize the extraterritorial effects of U.S. sanctions in the EU’’—on 

European companies doing business with Iran? 

Has this changed Treasury’s view on the potential impact of 

sanctions on EU firms? 

A.1. Response not received in time for publication. 
91 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON 

FROM CHRISTOPHER A. FORD 

Q.1. Russia has recently embraced digital currencies, particularly 

Ethereum (see https://cointelegraph.com/news/suddenly-vladimirputin-meets-vitalik-buterin-endorses-ethereum). 

What can policymakers in the U.S. do to ensure that we are the 

leader in developing blockchain and digital currencies rather than 

Russia and China? 

A.1. The Department of State is closely monitoring both the development and deployment of this technology. U.S. private sector companies have made the United States a global leader in this emerging technology. Supporting a strong and open U.S. innovation ecosystem, pursuing promarket approaches, removing barriers to innovation, and preserving the freedom to pursue new ideas and business models will allow us to continue to lead blockchain innovation 

now and in the future. In contrast to State-led national planning 

for technological development, our light-touch and flexible approach 

allows the best technical solutions to succeed in the marketplace, 

while our multistakeholder approach to policymaking also ensures 

that all viewpoints can be taken into account. 

Q.2. The SWIFT network facilitates cross-border payments through 

its vast messaging system. If the President wants to isolate Russia 

like Iran, is it true that the international SWIFT payments network based in Belgium can follow Europe and not unplug banks 

from those countries? 

A.2. We consistently review all components of the international 

banking system, including developing payment infrastructures. We 

are closely engaged with our European allies in finding a way forward to end Russia’s destabilizing behavior. Transatlantic unity is 

the cornerstone of our sanctions against Russia. Providing the 

State Department with flexibility in implementation allows us to 

engage with allies, maintain unity, and maximize sanctions pressure on Russia. 

We have robust sanctions authorities at our disposal. We are 

using these authorities in close coordination with our allies and 

partners to impose costs on Russia for the entirety of its malign behavior. 

Q.3. SWIFT and the EU’s cooperation are needed to ensure sanctions involving cross-border payments are fully implemented 

(https://www.axios.com/trump-administration-iran-sanctions-swift 

-financial-messaging-8fae6cd6-11c9-42a8-9d5b-6d3140a7ae83.html). 

The next generation of payment infrastructure is likely to involve 

Blockchain and digital assets. 

How can policymakers support American payment companies utilizing this technology to ensure this innovation develops here and 

aligns with our national security interests? 

A.3. The U.S. Government encourages the development of new 

technologies by our innovative private sector. Innovation and creativity are the hallmarks of our private sector and U.S. industry 

has continually shown the ability to adopt new technologies to 

drive economic growth. Blockchain technology has potential to help 

U.S. industry in several areas including securing transactions, sup-
92 

ply chain management, and the financial sector, just to name a 

few. We will continue to monitor the development of and the private sector’s applications of this innovative technology. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR MENENDEZ FROM CHRISTOPHER A. FORD 

Q.1. The FY2019 National Defense Authorization Act includes a reporting requirement in Section 1294(c) regarding executive branch 

sanction determinations under Section 231 of CAATSA. Do I have 

your commitment that this report will be delivered to Congress on 

or before the 90-day deadline mandated in the law? 

A.1. The law requires the report to be submitted by the President. 

I am committed to providing the President or his delegate whatever information and support is needed to prepare and submit the 

report as required by law. 

Q.2. Can you put a dollar amount on the Russian arms deals that 

you have been able to turn off as a result of Section 231? 

A.2. We estimate that we have so far deterred several billion dollars in Russian arms deals as a result of our Section 231 implementation efforts. 

Q.3. Secretary Mattis was an ardent supporter of the new CAATSA 

waiver language with respect to Section 231 that was included in 

the FY2019 National Defense Authorization law. Has he also supported State’s efforts to wean Governments from purchasing Russian equipment? If so, how has he specifically supported your efforts? 

A.3. Secretary Mattis has been a strong voice in encouraging partner countries to end defense relationships with Russia and to seek 

an alternative source of supply. I refer you to the Department of 

Defense for any additional details on Secretary Mattis’ efforts. 

Q.4. How specifically has the State Department engaged and coordinated with the Defense Department on discouraging all significant transactions with the Russian defense industry? 

A.4. The Defense Department is an integral part of the interagency 

process for implementing CAATSA Section 231. We coordinate with 

the Defense Department on our engagement with partners and allies related to CAATSA Section 231. 

Q.5. On August 24, A.A. Mikheev, the Director General of 

Rosoboronexport said that contracts were under negotiation with 

India on the S-400 air defense system, 48 Mi-17 helicopters, and 

joint production of KA-226T helicopters. Do you assess that these 

contracts are indeed under negotiation? 

A.5. We are aware of the public reporting on this issue but will not 

speculate on the status of any deals that may be the subject of discussions between Russia and India. We have discussed CAATSA 

Section 231 extensively with the Government of India, and the 

United States is working with all partner and allied countries, including India, to discourage them from engaging in major defense 

purchases from Russia. 
93 

Q.6. Do you assess that India and Rosobornexport are negotiating 

contracts for other defense equipment, not mentioned above? 

A.6. I cannot speculate on the status of any further deals that may 

be the subject of discussions between Russia and India. However, 

we are aware that Russia is actively and publicly seeking to undermine U.S. sanctions, including by continuing to actively market 

weapons systems and other military equipment around the world. 

With regard to India, our focus is on discouraging them from engaging in major defense purchases from Russia. 

Q.7. If these contracts and transfers are completed, how do you assess they will affect U.S. defense cooperation with India, which the 

Pentagon reports has increased to significant levels in recent 

years? 

A.7. Our focus is on encouraging all partner and allied countries, 

including India, to not engage in sanctionable activity, so as to 

avoid the need for the imposition of sanctions under CAATSA 231. 

I cannot comment specifically on how U.S. defense cooperation with 

India will be affected if these purported transactions are completed. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ 

FROM CHRISTOPHER A. FORD 

Q.1. Is the U.S. Government committed to deterring and, if necessary, punishing foreign interference in the democratic election, 

processes, or institutions of a treaty ally, political ally, or partner 

Government of the United States? 

A.1. Yes. The Department works closely with partners and allies 

to build collective resilience, share best practices, and respond to 

Russian attempts to interfere in democratic processes and institutions. The Administration has made it clear that such interference 

is unacceptable. 

Q.2. If yes, describe the tools that are available to the U.S. Government to prevent and punish foreign interference in ally and partner 

Governments in Europe and Eurasia, including the existing sanctions authorities that the U.S. Government can levy against individuals or organizations suspected of foreign interference. 

A.2. The Department is committed to responding to Russian aggression, including its malign influence campaigns, and is committed to utilizing political, economic, diplomatic, and law enforcement tools in response. Since January 2017, the Trump administration has sanctioned 229 individuals and entities in Russia in response to its destabilizing behavior. We are also focused on 

leveraging our public diplomacy, foreign assistance, and diplomatic 

resources to improve the resilience of our partners and allies, as 

well as on sharing best practices and supporting multilateral efforts to build up our collective defenses. 

Q.3. How does the U.S. Government coordinate with NATO allies 

and the Governments of other political allies and partners to share 

information about suspected foreign interference in democratic 

elections, processes, or institutions? 

A.3. We work closely with NATO allies to share information regarding Russian aggression. This includes discussing best prac-
94 

tices, exposing Russian disinformation campaigns and tactics, and 

building collective resilience. Additionally, we support broader multilateral efforts to share information and build resilience, such as 

at the European Center of Excellence for Countering Hybrid 

Threats in Helsinki. We also work to expose Russian malicious 

cyberactivity publicly, in concert with allies. 

Q.4. What mechanisms exist for the U.S. Government to gather information from NATO allies and the Governments of other political 

allies and partners about individuals and organizations responsible 

for foreign interference in democratic elections, processes, or institutions overseas? 

A.4. NATO allies share information on common threats with each 

other on a regular basis. At the Warsaw Summit in July 2016, 

Heads of State and Government agreed to establish a new Joint Intelligence and Security Division (JISD), which merges civil and 

military intelligence functions in order to improve NATO’s ability 

to draw on a wide range of intelligence resources. JISD, led by the 

Assistant Secretary General for Intelligence and Security, has improved NATO’s ability to facilitate timely and relevant support to 

Allied decision-making and operations, particularly on terrorism, 

hybrid warfare, and cyberthreat issues. 

Q.5. Describe how, if at all, the U.S. Government currently makes 

decisions with NATO allies and the Governments of other political 

allies and partners to take actions to punish individuals or organizations for foreign interference in democratic elections, processes, 

or institutions overseas. 

A.5. At the NATO Summit in Brussels, we joined our NATO allies 

in affirming our shared concerns regarding threats from State and 

non-State actors who use hybrid activities that aim to create ambiguity and blur the lines between peace, crisis, and conflict. While 

NATO allies acknowledge that the primary responsibility for responding to hybrid threats rests with the targeted Nation, NATO 

stands ready, upon decision by the North Atlantic Council, to assist 

an Ally at any stage of a hybrid campaign. In Brussels allies announced the establishment of counterhybrid support teams, to provide tailored, targeted assistance to allies, upon their request, in 

preparing for and responding to hybrid activities. 

Q.6. Does the U.S. Government face any limitations with coordinating with NATO allies and the Governments of other political allies and partners as it relates to deterring suspected individuals or 

organizations from or punishing them for foreign interference in 

democratic elections, processes, or institutions overseas? 

A.6. The Department works closely with partners and allies to 

build collective resilience, share best practices, and respond to Russian attempts to interfere in democratic process and institutions. 

We utilize bilateral and multilateral engagements to coordinate efforts and response with partner Governments and NATO allies. 

There are no institutional limitations on this coordination. 

Q.7. If yes, what recommendations would you make to Congress to 

ensure that the U.S. Government has sufficient authority to coordinate with appropriate foreign Governments concerning election interference? 
95 

A.7. Transatlantic unity is the cornerstone of our sanctions against 

Russia; providing the State Department flexibility in implementation allows us to engage with allies, maintain unity, and maximize 

sanctions pressure on Russia. 

Q.8. Describe the U.S. Government’s interpretation of its commitment to protect the political independence of NATO members, as 

it relates to the North Atlantic Treaty of 1949. 

A.8. Maintaining such independence lies at the core of the Alliance, 

and the Washington Treaty obliges all allies to advance and defend 

the institutions that guarantee such independence. Under Article 2 

of the Treaty, all allies commit to ‘‘contribute toward the further 

development of peaceful and friendly international relations by 

strengthening their free institutions, by bringing about a better understanding of the principles upon which those institutions are 

founded, and by promoting conditions of stability and well-being.’’ 

Article 4 provides that the allies shall consult if, ‘‘in the opinion of 

any of them, the territorial integrity, political independence or security of any of the Parties is threatened.’’ And in the event that 

such independence is threatened by means of an armed attack, Article 5 States that ‘‘the parties agree that an armed attack against 

one or more of them in Europe or North America shall be considered an attack against them all.’’ In such case, each Party is obligated to ‘‘assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force.’’ 

The President, Vice President, Secretaries of State and Defense, 

and the Chairman of the Joint Chiefs of Staff have all reiterated 

that the U.S. commitment to these treaty obligations is ironclad. If 

allies agree that an armed attack has occurred within the meaning 

of Article 5, the United States will adhere to our treaty commitments and respond as appropriate with our NATO allies. 

Q.9. In your view, would NATO’s collective defense commitment to 

protect the political independence of member States be better 

served with an affirmative policy that treats foreign interference in 

the democratic election, processes, or institutions of one member as 

an effort to undermine the political independence of all members 

and their democratic institutions? 

A.9. Article 4 of the Washington Treaty provides that the allies 

shall consult when, ‘‘in the opinion of any of them, the territorial 

integrity, political independence or security of any of the Parties is 

threatened’’ in any manner, and the United States welcomes consultation with allies in such circumstances. The specific collective 

defense obligation of Article 5, however, is only activated in response to an armed attack. Over the past 69 years since the Alliance was formed, the allies’ understanding of what could constitute 

an armed attack has included terrorism, cyberattacks, and hybrid 

attacks. A precise determination would depend on the specific facts 

at hand, and be made collectively by all the allies. 

Q.10. If yes, would the Administration support an effort to develop 

a multinational sanctions regime under NATO to impose punishment on individuals or organizations suspected of interfering in the 
96 

democratic election, processes, or institutions of any NATO member? 

A.10. While primary responsibility for this issue within the Department of State rests with EUR Assistant Secretary A. Wess Mitchell, the Under Secretary for Political Affairs, and Secretary 

Pompeo, my understanding is that, if requested by an Ally under 

Article 4, the United States would welcome an opportunity to consult with allies regarding an appropriate response.