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TERRORISM, MISSILES AND CORRUPTION: THE

RISKS OF ECONOMIC ENGAGEMENT WITH IRAN

HEARING

BEFORE THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

SECOND SESSION

MAY 12, 2016

Serial No. 114–180

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

DANIEL DONOVAN, New York 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Juan C. Zarate, chairman, Financial Integrity Network ........... 4

Mr. Mark Dubowitz, executive director, Foundation for the Defense of Democracies ..................................................................................................................... 28

Ms. Elizabeth Rosenberg, senior fellow and director, Energy, Economics and 

Security Program, Center for a New American Security .................................. 69

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Juan C. Zarate: Prepared statement ............................................ 7

Mr. Mark Dubowitz: Prepared statement .............................................................. 31

Ms. Elizabeth Rosenberg: Prepared statement ..................................................... 71

APPENDIX 

Hearing notice .......................................................................................................... 106

Hearing minutes ...................................................................................................... 107

The Honorable Eliot L. Engel, a Representative in Congress from the State 

of New York: Material submitted for the record ............................................... 109

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 111

The Honorable Michael T. McCaul, a Representative in Congress from the 

State of Texas: Questions submitted for the record to the panel ..................... 113

(1)

TERRORISM, MISSILES AND CORRUPTION: 

THE RISKS OF ECONOMIC ENGAGEMENT 

WITH IRAN 

THURSDAY, MAY 12, 2016

HOUSE OF REPRESENTATIVES,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The committee met, pursuant to notice, at 10:07 a.m., in room 

2172 Rayburn House Office Building, Hon. Edward Royce (chairman of the committee) presiding. 

Chairman ROYCE. This hearing will come to order. When the 

Obama administration was strong-arming Senate Democrats to 

save its Iran deal, many promises were made. Central to the White 

House storyline was the President’s claim that sanctions on Iran 

for terrorism, sanctions on Iran for human rights and ballistic missiles ‘‘will continue to be fully enforced.’’

As many will recall, Treasury Secretary Lew said unequivocally 

that ‘‘Iranian banks will not be able to clear U.S. dollars through 

New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing agreements or arrangements with U.S. banks.’’ He testified, and I quote, ‘‘Iran, in other 

words, will continue to be denied access to the world’s largest financial and commercial market.’’

But unfortunately, the administration’s words have not matched 

its actions. The administration has meekly responded to Iran’s provocative acts—thanks in part to the weak U.N. Security Council 

language it agreed to on ballistic missiles. And just one Iranian has 

been sanctioned for human rights abuses since negotiations began. 

Just one. 

Indeed, last month, a top Treasury official publically proclaimed 

that non-nuclear sanctions would undermine the Iran agreement. 

That is the opposite of what the committee was told. If Iran objects, 

the administration bends over backwards to accommodate. Effectively, the Supreme Leader now holds the veto pen over future 

Congressional action. 

Iran will keep pushing until the Obama administration stops 

rolling over. Congressional pressure may have knocked the administration off their plans—for now—to allow Iran access to the U.S. 

dollar, which is the world’s top currency, but the administration refuses to rule out a future move. And in the meantime, it is actively 

working other angles to push new investment into the Iranian 

economy. 

2

Secretary Kerry is in Europe this week taking the odd step of reassuring foreign firms that Iran is, in his words, ‘‘open for business.’’ Other administration officials go so far as to say that Iranian economic growth is in our national security interest. That is 

a tough case to make when you consider that Iran’s Islamic Revolutionary Guard Corps has been labeled Iran’s ‘‘most powerful economic actor,’’ and it was labeled so by the U.S. Treasury Department. That is the terrorist IRGC that they are talking about. The 

Iranian Revolutionary Guard Corps is Iran’s ‘‘most powerful economic actor,’’ according to our Treasury Department. 

The reality though is that the administration’s pep talks to international companies to spur investment in Tehran will be viewed 

skeptically. For investment is like a rope. It can’t be pushed into 

a country that is corrupt, that holds international businessmen 

hostage, that launches missiles marked ‘‘Israel must be wiped out.’’ 

Rather it is pulled into countries that are transparent, that respect 

contracts, and don’t threaten their neighbors. Banks want maximum certainty. And that just won’t be found in a country that 

ranks 130 of 168 on Transparency International’s corruption index. 

And as we will hear today, a CEO’s understanding of their company’s reputational risk is more powerful than any sanction Congress could write. An international banker doesn’t want to end up 

on the wrong side of a transaction which unwittingly funnels 

money to Iran’s ballistic missile program. And the designation of 

the entire territory of Iran as a ‘‘primary money laundering concern’’—and that is the way we designate it—means just that: Any 

financial transaction with Iran risks supporting the regime’s ongoing illicit activities. 

Many of the restrictions left on Iran are intended to protect our 

financial markets from such abuse. The international organization 

charged with countering money laundering worldwide declared this 

year that it is ‘‘exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this 

poses to the integrity of the international financial system.’’

That is why my legislation to prohibit the administration from 

allowing the U.S. dollar to be used to facilitate trade transactions 

with Iran and which upholds Iran’s designation as a ‘‘primary 

money laundering concern’’ is so key. 

Iran is still the world’s leading state sponsor of terrorism. Until 

it stops funding terror, until it stops the illicit weapons program, 

it should be treated like the global menace it is. 

I now turn to the ranking member for any opening comments he 

may have on our hearing today. 

Mr. ENGEL. Well, thank you very much, Mr. Chairman. Thank 

you for calling this hearing. And to our witnesses, welcome to the 

Foreign Affairs Committee. We value your time and your expertise, 

especially as the implications of the Iran deal begin to unfold. 

I was chuckling this morning that it occurs to me there’s a lot 

of Iran expertise on Capitol Hill today. We have a Presidential candidate up here meeting with the Speaker who told AIPAC about 

the Iran deal, ‘‘I have studied this issue in great detail. I would say 

actually greater by far than anybody else.’’ So perhaps he should 

be one of our witnesses, but I would rather have all of you, the 

three of you today, instead. 

3

When the details of the agreement were reached last year, it appeared that when sanctions were lifted the Iranians would receive 

a windfall to the tune of tens of billions of dollars. Last month, Secretary Kerry said that Iran has only come into about $3 billion as 

a result of sanctions relief. Now, I am not losing sleep because Iran 

can’t get its hands on huge sums of money, but it is worth asking 

now that the deal is going forward, why is Iran seeing just a trickle 

instead of a surge? 

The explanation, as I understand it, couldn’t be less of a surprise. Banks don’t want to do business with Iran. They understand 

the risks. They see the same patterns of dangerous behavior that 

the rest of the world has seen for years—an illegal ballistic missile 

program, support for terrorist groups, human rights abuses, corruption and money laundering. 

So it is no wonder that the Financial Action Task Force, what 

we call FATF, continues to designate Iran as a high risk jurisdiction. Just like Iran’s leaders, Iran’s financial institutions don’t play 

by the same rules as the rest of the world. As a result, international businesses and financial firms want nothing to do with 

Iran. 

So what does this mean for the deal? I certainly don’t think we 

should be making any concessions to Iran beyond the scope of what 

is in the deal. As you know, I voted against the deal. In my view, 

it is reasonable for the United States to clarify what is against our 

law and what is not, what kind of business transactions are now 

in bounds, and what kind of activity might run afoul of other laws 

and sanctions. 

But we have lived up to our end of the bargain. I didn’t like the 

deal, but I have no doubt that we will keep our word. At the end 

of the day, if Iran’s leaders are unhappy with the reluctance of the 

global business community to play ball, they have no one to blame 

but themselves. If Iran wants to shed its pariah status, it needs to 

abandon the activities that led it to isolation in the first place. Stop 

supporting terrorism. Stop suppressing the human rights of the 

Iranian people. Stop building ballistic missiles. 

Incidentally, that is where our focus should be as well, continuing to hold Iran’s feet to the fire in all of these areas. And I 

know the chairman and I have had many discussions and we will 

hold Iran’s feet to the fire. 

Secretary Kerry told this committee last summer, ‘‘We will not 

violate the JCPOA if we use our authorities to impose sanctions on 

Iran for terrorism, human rights, missiles, or any other non-nuclear reason. And the JCPOA does not provide Iran any relief from 

U.S. sanctions under any of these, of those authorities or other authorities.’’ That is a quote from Secretary Kerry. 

So when we see ballistic missiles with the words ‘‘Israel must be 

wiped out’’ etched on the side in Hebrew from the Iranians, when 

tens of millions of dollars go to Hamas to rebuild its network of terror tunnels, when thousands of rockets end up in Hezbollah’s 

hands, when Iran continues to prop up the Assad regime, Shia militias in Iraq and Houthi fighters in Yemen, when we intercept ship 

after ship carrying Iranian weapons, we need to consider whether 

we are putting those existing authorities to their best use. 

4

I look forward to hearing from our witnesses today about what 

more we can be doing to compel Iran to change course away from 

all these harmful and destabilizing actions. I look forward to your 

testimony. Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Mr. Engel. 

We have a distinguished panel before us this morning. Mr. Mark 

Dubowitz is the executive director of the Foundation for Defense of 

Democracies where he leads projects on Iran on sanctions and nonproliferation. He is the author of 15 studies examining economic 

sanctions, and we welcome him back to the committee here this 

morning. 

Mr. Juan Zarate is the chairman and co-founder of the Financial 

Integrity Network. Previously, Mr. Zarate served as the Deputy Assistant to the President and Deputy National Security Advisor for 

Combating Terrorism. From Orange County, California, Mr. Zarate 

was also the first ever Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes. Welcome again. 

Ms. Elizabeth Rosenberg is a senior fellow and director of the 

Energy, Economics, and Security Program at the Center for a New 

American Security, and previously Ms. Rosenberg served as a senior advisor at the Treasury Department. 

So without objection, the witnesses’ full prepared statements will 

be made part of the record. Members are going to have 5 calendar 

days to submit any statements or questions or any extraneous material for the record. But what we would encourage is for our witnesses to summarize their remarks. We will start with former Assistant Secretary Zarate and then go to Mr. Dubowitz and then Ms. 

Rosenberg. 

STATEMENT OF THE HONORABLE JUAN C. ZARATE, 

CHAIRMAN, FINANCIAL INTEGRITY NETWORK 

Mr. ZARATE. Chairman Royce, thank you very much for the invitation to be here and the honor to testify before this distinguished 

committee. Ranking Member Engel, thank you very much as well. 

I am honored to be on this panel with two great colleagues and 

friends, and so we are going to have a jovial panel today. I respect 

Mark and Liz very much, so thank you very much. 

I also want to say, Mr. Chairman, my father and brother are 

here visiting from Orange County, California, so I am very proud 

that they are here to see you and to witness this, so thank you very 

much. 

And a final preambulatory statement here, I want to thank you 

for your leadership and the leadership of this committee, former 

leadership as well, Congressman Ros-Lehtinen, for issues that 

don’t often receive a lot of attention in the press. Issues like Iran 

obviously do, but ending conflicts in Africa, worrying about proliferation networks, worrying about arms trafficking networks like 

those run by Viktor Bout are all things that you have worried 

about for years and we have worked on together, and I want to 

thank you for that commitment and the work of this committee. It 

has been serious and important. 

Chairman ROYCE. Thank you for your work in helping put Viktor 

Bout behind bars. 

Mr. ZARATE. Thank you, sir. I appreciate that. 

5

Well, let me now summarize some of the points of my testimony. 

As this committee may be aware, when the JCPOA was being debated and when I testified before the Senate I expressed deep concerns and reservations about the structure, demands, and effects of 

the nuclear deal on U.S. interests especially in anticipation and the 

likelihood of increased belligerence and adventurism from Iran. 

And as we know and we have witnessed, this belligerence has continued and been amplified. 

Iran has conducted repeated ballistic missile tests in violation of 

U.N. sanctions and promises further launches. Qasam Soleimani, 

the Iranian general, head of the Quds Force, traveled twice to Moscow, at least, in contravention of international travel bans to coordinate military cooperation with the Russian Government. 

Iran remains the leading state sponsor of terror and has continued its direct support to terrorist proxies throughout the world 

from Hezbollah to Iraqi Shiite militias to the Houthi rebels in 

Yemen. Iran has deployed shock troops to Syria to fight for, die, 

and defend the Assad regime, with reports of thousands on the 

ground. Iran has continued to engage in human rights abuses internally. It continues to detain two Iranian American citizens, and 

Robert Levinson missing from Kish Island since March 2007 remains missing and unaccounted for. And on January 12, 2016, we 

witnessed the Iranian naval forces arresting 10 American sailors at 

gunpoint and broadcasting the video of their detention in order to 

humiliate them and the U.S. Navy. 

Unfortunately these actions are not surprising and they will continue. But more importantly, the nature of the regime, its control 

of the economy, its willingness to use the financial system to pursue all its goals, internally and externally, has not changed either. 

The Iranian system is corrupt, lacks transparency at all levels, and 

is centrally controlled by the regime. This along with the uncertainty of how the JCPOA, the nuclear deal, will unfold creates 

enormous risk for legitimate international actors and companies 

considering doing business in or with Iran. 

This in part explains why there hasn’t been a wave legitimate 

Western businesses investing aggressively or operating directly in 

Iran. The risks are real and they are significant and they are 

under consideration, especially when the IRGC remains in control 

of vast swaths of the Iranian economy, when the banks have been 

misused to finance terror and support the regime’s causes, when 

the clerical regime controls bonyads worth billions of dollars raising 

issues of kleptocracy and corruption. 

And there is no sign that the Iranians will stop using the financial system for illicit purposes. In fact, the U.S. Government and 

international bodies like the FATF have declared the Iranian system’s Central Bank as primary money laundering concerns and 

reason to have high risk and posture toward their activities. 

So this complicated risk environment has dissuaded most legitimate companies from doing business. There is the risk of existing 

sanctions, secondary sanctions, remaining EU and U.N. sanctions, 

the potential for enforcement not just by the U.S. Treasury but by 

other authorities. Also, the fundamental fact that there are financial risks that in 2016 are important for financial institutions and 

businesses to take into consideration. We are no longer simply worVerDate 0ct 09 2002 12:58 Aug 11, 2016 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\051216\20101 SHIRL
6

ried about sanctions risk in Iran. We are worried about other illicit 

financing risks. 

And certainly it appears that Iran has made it its business and 

its strategy to force the United States and Europe to help rehabilitate itself in the international system. This is something that we 

predicted. Something I testified to, something we had anticipated 

they would do and they have. 

But the U.S. shouldn’t fall into this trap. We shouldn’t be in a 

position of rehabilitating Iran. We shouldn’t be sending delegations 

around the world to explain how it is that we can do business in 

Iran legitimately. We should not be undercutting our authority by 

telling European businesses that they need not listen to the regulatory policy or other actions of U.S. Treasury or regulatory officials, quite the opposite. We should be reinforcing the effect and 

reach and suasion of our authorities around the world. 

And certainly we shouldn’t be giving Iran the accommodation 

and the ability to use dollars in offshore clearing accounts. Facilities that would give them something that certainly was not negotiated in the deal but would also give them the benefit of international trade and access to dollars. Certainly, not when this remains the leading state sponsor of terror and, under Section 311 

of PATRIOT Act, a primary money laundering concern. 

Mr. Chairman, I also think we shouldn’t diminish our ability to 

use targeted unwinding as this negotiation unfolds to benefit our 

strategic interests. For example, with respect to the Iranian banks, 

as opposed to simply plugging them back into the global system, 

we should have a system of strictly monitoring what is happening 

in those banks so that we have a monitored re-entry into the financial system allowing us both to monitor what is happening in those 

banks, but also giving reassurance to the financial system that we 

understand what is happening in and through those institutions. 

Finally, Mr. Chairman, I think the current state of affairs reveals that there were some faulty assumptions about where we 

were with the deal. The fact that our power was waning in terms 

of the ability to use financial suasion and tools of exclusion, that 

is not right. The fact that the deal would bring diplomatic unity, 

a reward for good behavior, that is not happening. The fact that 

the JCPOA would open channels for discussions with Iran about 

these other activities, that is not happening. 

In short, Mr. Chairman, the aversion to the risks of doing business in and with Iran will continue especially if Iran demonstrates 

an unwillingness to stop its provocative and dangerous activities. 

Iran will not be in a position to join the international community 

completely if it does not demonstrate clearly that it can engage as 

a trusted and transparent actor in the financial system. 

The onus to prove this should be on Iran’s shoulders. Any complaints about access to capital markets or investment should be 

posed to the clerical regime. Iran has to decide whether it will 

abide by international standards, norms and obligations, and we 

shouldn’t give them a free pass. Absent this, it will remain risky 

business to do business in or with Iran. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Zarate follows:]

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Chairman ROYCE. Thank you, Mr. Zarate. 

Doctor? 

STATEMENT OF MR. MARK DUBOWITZ, EXECUTIVE DIRECTOR, 

FOUNDATION FOR THE DEFENSE OF DEMOCRACIES 

Mr. DUBOWITZ. Chairman Royce, Ranking Member Engel, members of the committee, on behalf of FDD and its Center on Sanctions and Illicit Finance, thank you very much for inviting me to 

testify today. And it really is a great honor to be testifying with 

Juan and with Liz, whose work and whose service to our country 

I greatly admire. 

The nuclear deal with Iran provided Iran with a patient pathway 

to nuclear weapons capability by placing limited, temporary, and 

reversible constraints on its nuclear activities. The deal and the interim agreement that preceded it provided Iran with substantial 

economic relief to avoid an economic crisis and return to a modest 

recovery path. 

Iran’s return to oil markets and the lifting of restrictions in 

Iran’s use of some $100 billion in frozen overseas assets gave the 

regime badly needed hard currency to settle its outstanding debts, 

begin to repair its economy, rebuild its foreign exchange reserves, 

and ease a budgetary crisis which, in turn, freed up funds for the 

financing of terrorism and missiles. 

Iran already has gotten significant economic relief. It avoided an 

economic collapse. And Ranking Member Engel, I hope we have an 

opportunity to talk about your comment on the $3 billion that Secretary Kerry made which, interestingly enough, Glenn Kessler of 

the Washington Post, yesterday, gave that claim two Pinocchios, so 

we should discuss why. 

Now the nuclear deal did nothing to address Iran’s missile development, support for terrorism, regional destabilization, human 

rights abuses, and all of these things have remained just as problematic or in some cases have actually gotten worse since the 

JCPOA was reached. 

During last summer’s congressional review period, the administration pledged that the U.S. would continue to enforce these nonnuclear sanctions and oppose Iran’s dangerous activities, and Iran 

has threatened that if these non-nuclear sanctions are imposed it 

would walk away from the agreement and snap back its nuclear 

program, something that I have called the Nuclear Snapback in 

prior testimony. 

Congress should reject this nuclear blackmail. It needs to hold 

the administration accountable for the commitments that they 

made to you. Sanctions against Iran’s many malign activities are 

clearly not a violation of the JCPOA as Iran claims, but it is an 

affirmation of U.S. policy, actually as Secretary Kerry himself has 

articulated when he said, ‘‘We will do everything to oppose Iran’s 

destabilizing policies with every national security tool available.’’

But it sure doesn’t appear that the administration is going to 

stand behind its own policy. Since the nuclear deal was reached, 

only nine individuals and nine entities have been added to Treasury’s sanctions list for all of Iran’s ongoing illicit activities, including missile tests. And the administration has backed away from 

29

using the term ‘‘violations’’ instead of arguing that these tests are 

now inconsistent with the U.N. Security Council Resolution 2231. 

Nor are we likely to see action against human rights abusers. Indeed, when President Rouhani was elected in June 2013, there was 

a widespread but incorrect assumption that he was a moderate who 

would hail greater freedoms in Iran. But the regime’s domestic repression has only intensified. Since last summer, the administration has not designated any individuals or entities for human 

rights abuses, and only one individual and two entities since 

Rouhani came to power in the summer of 2013. 

And now the administration reportedly is considering this new 

concession that again Iran did not explicitly negotiate as part of 

the JCPOA. This is direct or indirect access to dollarized transactions. This concession undercuts the effectiveness of our entire 

non-nuclear sanction strategy, which depends on the private sector’s fear of the risks involved in transacting with Iran. Allowing 

dollarized transactions aids Iran’s push to legitimize its financial 

sector without ceasing the underlying terrorism proliferation, missile financing, and related money laundering and sanctions evasion. 

The Iran deal turned the regime from a nuclear pariah to a nuclear partner without having it come clean on its decades-long rap 

sheet of illegal weaponization activities. And it is important to understand that the regime is now seeking to follow the same 

legitimization strategy with respect to its illicit financial activity 

and human rights abuses. Iran should not be allowed to gain international acceptance without demonstrable changes in all of its dangerous behavior. 

And it is important again to understand that this has to go far 

beyond a mere exercise in checking the box on technical requirements from the Financial Action Task Force relating to money 

laundering and terror financing and it has to require fundamental 

and substantive changes in behavior. As long as Iran, for example, 

continues to fund Hezbollah, Iran should never be legitimatized as 

a responsible financial actor. 

Congress can maintain its leverage by strengthening and implementing non-nuclear sanctions and by considering some of the recommendations from my written testimony which I will summarize 

very quickly. Number one, we need to protect the integrity of the 

U.S. dollar from Iranian illicit financial activity. We need to codify 

existing restrictions, require the administration to report on financial institutions involved in dollarization, and link these prohibitions to the end of terrorism and missile development as well as 

compensation for victims of Iranian terrorism. There is still $53 billion in outstanding judgments. 

Number two, designate the IRGC in its entirety under EO 13224 

as a foreign terrorist organization; number three, impose sanctions 

on the IRGC as well as sectors of the Iranian economy that are involved in Iran’s ballistic missile development; number four, create 

an IRGC watch list to identify entities below the threshold for 

being owned or controlled by sanctioned entities; number five, expand these human rights sanctions to protect the Iranian people. 

Six, to target corruption not only for money laundering but also as 

a human rights abuse; and number seven, push back against Iran’s 

30

legitimization campaign at FATF and elsewhere by exposing its 

threats to the global financial system. 

Let me conclude with this. Secretary Lew has argued that sanctions are an effective instrument to address illicit activities but 

they must be lifted when the illicit behavior changes. This is a very 

important principle but it misses a crucial detail. Iran has not addressed the underlying behavior that prompted many of the U.S. 

sanctions in the first place. 

Thank you for the opportunity to testify and I look forward to 

your questions. 

[The prepared statement of Mr. Dubowitz follows:]

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Chairman ROYCE. Thank you, Mr. Dubowitz. 

Now, Ms. Rosenberg. 

STATEMENT OF MS. ELIZABETH ROSENBERG, SENIOR FELLOW 

AND DIRECTOR, ENERGY, ECONOMICS AND SECURITY PROGRAM, CENTER FOR A NEW AMERICAN SECURITY 

Ms. ROSENBERG. Thank you, Chairman Royce, Ranking Member 

Engel, and distinguished members of the committee. I appreciate 

the opportunity to testify before you today on the risks of economic 

engagement with Iran. 

The Iran sanctions regime was and remains the most comprehensive program of U.S. and international sanctions commensurate 

with the grave security concerns regarding Iran’s nuclear proliferation activities, its regional destabilization, ballistic missile programs, support for terrorism, and abuse of human rights. 

Many U.S. and international sanctions on Iran were waived on 

implementation day, the milestone of the nuclear deal recognizing 

Iran’s completion of its major initial nuclear commitments. However, the United States maintains sanctions authorities relevant to 

Iran as part of the deal as well as a wide array of sanctions on Iran 

outside the scope of the deal, as mentioned by my co-panelists and 

yourself as well. The existing architecture of Iran sanctions remains very powerful and affords an enormous amount of leverage 

to pursue Iranian security provocations and destabilization. 

Following implementation day, there are various reasons why 

Iran will expand its links to the international financial system only 

very slowly. The cumbersome unraveling of nuclear sanctions restrictions at banks and companies around the world in order to engage in now permitted business with Iran is only one factor. Remaining sanctions of Iran for its terrorist and ballistic missile activities are a deterrent to those who would contemplate business 

with Iran, along with prudential concerns related to a history of 

corruption, a lack of transparency and maneuverability for foreign 

firms in Iran’s financial system. 

Beyond remaining sanctions and Iran’s self-imposed financial 

troubles, its escalating regional provocations and continued aggression through proxies make the specter of future confrontation with 

its neighbors or the United States a real possibility. Iran has the 

largest and most lethal ballistic missile arsenal in the Middle East 

and has stepped up its missile tests in recent months, again as has 

been mentioned. It has also expanded its material support to the 

Houthis in Yemen and continues to support other proxies that destabilize the region, including President Assad and Hezbollah. 

For reasons of political and security risk, the existing sanctions, 

and the serious financial challenges associated with attempting 

business in Iran, many global banks have made it clear that they 

do not plan on doing business with Iran. The banks and companies 

that will attempt it are generally moving slowly with contracts and 

deals, and they are biding their time to discover what market pitfalls or potential future sanctions may mean for their business. 

And furthermore, many of the banks that are doing so are regional 

banks with relatively smaller capacity to handle trade and structured finance, and retail services. 

70

U.S. policymakers and European counterparts and others should 

publicly identify Iran’s self-imposed financial problems. Doing so 

will make it clear to Iran and the global community that Iran bears 

significant responsibility for improving its own economic conditions 

and that the removal of sanctions under the nuclear deal cannot 

independently deliver a windfall to Iran. 

The strongest and most credible strategy to highlight Iran’s need 

to improve its financial transparency and accountability is for technical experts to point out the problems in the anti-money laundering, counterterrorist financing, counter-corruption, and prudential financial stability domains that Iran must address. Additionally, such experts should be encouraged and allowed, by license if 

they are U.S. persons, to offer technical guidance to Iranian financial institutions to conduct this work. This will support U.S. policy 

interests in achieving greater transparency in the Iranian financial 

industry, and it will clearly demonstrate that the United States is 

not the roadblock to Iran’s economic reform. It could also help to 

reinvigorate private business in Iran to better challenge the insidious control of the IRGC over significant parts of the Iranian economy. 

In pursuing Iran sanctions now and in the future, U.S. policymakers must prioritize the important work of isolating Iranian entities engaged in dangerous and illicit behavior through aggressive 

implementation of existing sanctions authorities, and they must 

balance this with educational outreach to highlight Iran’s self-imposed financial problems and implementation of strategies to facilitate and encourage remediation of these problems by U.S. or foreign experts. 

Thank you for the opportunity to testify, and I look forward to 

answering any questions you may have. 

[The prepared statement of Ms. Rosenberg follows:]

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Chairman ROYCE. Thank you, Ms. Rosenberg. Thank you. 

Mr. Zarate, the body that most everybody looks to when considering these issues is the Financial Action Task Force 

headquartered in Brussels. This is the body that is charged with 

countering money laundering worldwide. And they have been quite 

emphatic in their warnings on Iran, calling it a high risk jurisdiction. 

As a matter of fact, 2 months ago, 2 months ago, the organization 

said it was exceptionally concerned about Iran’s failure to address 

the risk of terrorist financing and the serious threat that this poses 

to the integrity of the international financial system. But yesterday, a senior Treasury official appeared to suggest Iran might receive an improved rating from FATF, saying Iran should get credit 

for trying to come off that list. 

Is this a case of the U.S. working the refs? Are we beating up 

on the referee here? How would Iran get off of the FATF blacklist 

and do they deserve it? 

Mr. ZARATE. It is a great question, Mr. Chairman. The FATF 

sometimes feels like a bit of a mysterious body to those who 

haven’t seen it work from the inside. But as you said, it is the 

standard setting body. It is the assessment body that looks at 

whether or not jurisdictions are abiding by international antimoney laundering and counterterrorist financing systems. That is 

a technical body. And in being a technical body they look at the 

formulaic responses and activities of governments, whether or not 

they have passed anti-terrorist financing laws, whether or not they 

have suspicious activity reporting requirements for their financial 

institutions, whether or not they have regulatory bodies that are 

inspecting compliance systems, et cetera. So there is a very technical dimension to this. 

Iran has been recalcitrant across the board. They have not engaged the FATF, they obviously don’t have these kinds of laws and 

practices, and they clearly are a state sponsor of terror. So this is 

precisely why FATF for a number of years has held them to be a 

jurisdiction of high risk and has called on jurisdictions around the 

world to inform their financial institutions that Iran is highly suspect. 

What Iran has figured out though, Mr. Chairman, is that this is 

a body that can be engaged with and is open to being engaged 

with, and we should, I think, be open to that as well. But the challenge here is what reforms are we asking of Iran? Are they simply 

paper reforms that are not meaningful and don’t address the real 

risks behind what Iran is doing? 

And I think this is going to be a challenge for FATF, because 

FATF, I think, wants to engage, and the U.S. Treasury wants to 

engage this process, but we certainly don’t want to give Iran a free 

pass. And I don’t think my former colleagues at the U.S. Treasury 

are going to whitewash this because they believe fundamentally in 

issues of financial integrity and protecting the international financial system. The real question here is will Iran game the system, 

and we should not allow that to happen. 

Chairman ROYCE. But Mr. Zarate, Secretary Kerry is in London 

this morning. He and his British counterpart are meeting with the 

European bankers. There is a piece in the Financial Times about 

79

how the bankers are pushing back, British major institutions saying we don’t want to invest there in Iran. They spoke of bridging 

a gap between the political intention of the agreement and how the 

banks are reacting. And Secretary Kerry noted that as long as 

banks do their normal due diligence and know who they are dealing with then there won’t be issues. 

But isn’t the point of the international warnings on Iran and the 

Treasury’s designation of the entire country as a jurisdiction of 

‘‘primary money laundering concern,’’ isn’t that sending the message that due diligence can’t even be done in this environment because of the corruption inside of the country and the system? The 

IRGC is nationalized. Most of the major businesses are in the 

hands of the Iranian Revolutionary Guard Corps. 

Mr. ZARATE. Mr. Chairman, you have it exactly right. And this 

is the fundamental tension in the JCPOA, which is an agreement 

in which we promised the reintegration of Iran into the global financial and commercial system without demanding the change in 

the underlying conduct that has been the basis of their financial 

isolation. And I think what is happening now is the delta between 

that strategy of financial isolation for all of the things that Iran 

does, from terrorist support to ballistic missiles to the nuclear program, the nuclear issues are now off the table but those other 

issues were not on the table. 

And so the challenge here is we have a system and a set of sanctions and a set of international requirements, by the way U.S. requirements, that have become global norms. The global norms are 

U.S. standards that demand a change in conduct and a change in 

behavior and at a minimum require Iran to demonstrate that it is 

a legitimate actor in the system. That we can know what it is doing 

with its financial system, that we know the source of funds, that 

we understand the actors in the system. 

In fact, the Treasury just this past week in the wake of the Panama Papers has put out new regulations about customer due diligence which heightens the standards around beneficial ownership 

and what we should know about with whom we are transacting 

and what we are transacting in. That goes doubly and triply for 

Iran. 

And so I haven’t seen the full remarks of the Secretary, but I 

would say that it is a bit dangerous to suggest that all you have 

to do is engage in normal due diligence when talking about Iran, 

its behavior, and its history of using its financial and economic system for all of the nefarious conduct that they have been sanctioned 

for. 

Chairman ROYCE. Well, let me go to Mr. Dubowitz for a short answer here too, because I mentioned in my opening statement that 

we have had some success for now in pushing back on the administration’s plans to allow Iran access to the U.S. dollar. But what is 

Iran’s goal in getting access to the dollar? Is it the ease of doing 

business or is Iran seeking to get the stamp of approval in international financial markets without making the changes to its banking practices or underlying behavior which is transferring money 

directly into its missile program, the terrorism it funds, and so 

forth? 

80

Mr. DUBOWITZ. Well, Chairman Royce, it is both. I mean, Iran 

wants access to the U.S. dollar because the U.S. dollar is the global 

currency. It is responsible for something like 87 percent of global 

trade, 60 percent of foreign exchange reserves, and 40 percent of 

international financial transactions. On the other hand, Iran was 

actually getting paid for its oil under sanctions using euros and 

yens. So it is possible for Iran to actually transact internationally 

without access to the U.S. dollar, but the real reason they want access is exactly that. It is a stamp of approval. It is part of the 

legitimization strategy. It is to do what they did on the nuclear 

side. We are not going to come clean on our weaponization, but we 

are going to become a nuclear partner and a respectable international nuclear power. We are going to do the same thing on the 

financial side with the dollar. 

Chairman ROYCE. Thank you, Mr. Dubowitz. 

Mr. Engel. 

Mr. ENGEL. Thank you, Mr. Chairman. Last year, when the 

agreement with Iran was announced, we were told that because we 

were removing sanctions on Iran for its nuclear program it still did 

not preclude us from having sanctions on Iran for the other things 

they do—support of terrorism, ballistic missiles, whatever. 

The President wrote to our colleague Congressman Nather last 

summer during the consideration of the nuclear deal with Iran, and 

the letter said and I quote, ‘‘Critically I made sure that the United 

States reserve the right to maintain and enforce existing sanctions 

and even to deploy new sanctions to address those continuing concerns which we fully intend to do when circumstances warrant.’’

I would like your opinion about what additional authority does 

the administration need now to crack down on Iran’s terrible behavior? Would new non-nuclear sanctions violate the terms of the 

nuclear deal? Does the President have the authority now, enough 

authority now to go after Iran for terrorism or for ballistic missiles, 

or would Congress need to pass a law to give the President the authority? 

Mr. Dubowitz. 

Mr. DUBOWITZ. So Ranking Member Engel, I mean, the President 

has always had the authority under IEEPA to use executive orders 

to do whatever he wants with respect to Iran. But I think as Congress realized over the past at least decade those authorities were 

insufficient without Congress playing an important role in passing 

statutes that actually sent a clear message to the international 

business community that if you did business with Iran and you did 

business with designated entities that there would be secondary 

sanctions that would have a very powerful impact on your ability 

to then transact globally and particularly with the United States. 

And I think it is critical to understand that Congress needs to 

play that role going forward with respect to non-nuclear sanctions. 

And one example would be on the ballistic missile side that you 

mentioned. I mean, it is absolutely clear there are seven, eight sectors of Iran’s economy that are providing key technology and parts 

and components to Iran’s missile program. 

Now does the President have the authority to designate those 

sectors of the economy? He does under existing EOs, but I think 

Congress can play a very important role in holding the administraVerDate 0ct 09 2002 12:58 Aug 11, 2016 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\051216\20101 SHIRL
81

tion’s feet to the fire on identifying what sectors are playing a key 

role in Iran’s ballistic missile program, and then imposing secondary sanctions on any foreign entities that are doing business 

with those sectors. 

Mr. ENGEL. Thank you. Mr. Zarate, do you agree? 

Mr. ZARATE. Absolutely. What is interesting, Congressman, is 

that not only is there the patchwork of Iran’s sanctions related legislation and sanctions that Ms. Rosenberg talked about, but there 

is also a whole suite of executive orders based on IEEPA that go 

to the underlying conduct that we are worried about with respect 

to Iran. I will just give you a quick list. 

Terrorism, Executive Order 13224; drug trafficking, multiple executive orders; proliferation finance signed by President Bush in 

2005; the cyber executive order signed by President Obama, April 

1 of last year; the transnational organized crime executive order; 

human rights related elements of IEEPA provisions; the Syria 

sanctions in executive order; the Yemen executive order. 

So you go down the line in terms of all of the conduct that we 

are worried about with respect to Iran, not only does the administration have the existing authority based on Iran legislation and 

Iran sanctions but you also have the ability to affect the underlying 

conduct based on the way we have applied sanctions aggressively 

over the last 15 years. It also underscores why the question of Iranian conduct is so important, because we have built the sanctions 

program that has been so effective on Iran and other targets of 

these measures around the underlying conduct that they are engaged in. And if they are not changing their behavior they remain 

subject to those sanctions as well as the international program. 

So my answer to you is we have existing authorities. The administration has plenty of authority with which to work. And to Mark’s 

point, I think Congress’ role, I think, is to help clarify the lines of 

where that authority is and, frankly, where the threats still lie 

from Iran. 

Mr. ENGEL. Thank you. Ms. Rosenberg, you warn against limitations, and I quote you, that could ‘‘undermine the attractiveness or 

primacy of the U.S. financial system and the dollar as a reserve 

currency.’’

So let me ask you, what are the risks to the U.S. financial system if oil trade were to be done in, say, euros instead of dollars? 

With the amount of dollars in circulation compared to euros or 

other currencies it is even possible to shift to other currencies? And 

finally, what would be the impact of restrictions on the use of the 

dollar on the two U.S. clearance systems, which are Fedwire and 

CHIPS, and U.S. surveillance of financial flows? 

Ms. ROSENBERG. Thank you for the question. It is hard to contemplate the trade of oil not in dollars. It is a massive market, it 

is highly liquid, and it is overwhelmingly done in the dollar. And 

even though conversation about de-dollarizing oil transactions has 

been ongoing for quite a long time, it is difficult to think how that 

would occur. If, however, there was a substantial amount of oil 

trade that did occur not in the U.S. dollar it would of course reduce 

the amount of flow through U.S. clearing mechanisms, financial institutions of course, which reduces the amount of activity and revenue they can collect there. 

82

And also, in addition to physical trade in oil, there is also a tremendous market in what is called paper trade or financial trade, 

sometimes called speculative trade, in oil that occurs around the 

physical trading. It occurs mostly in the United States because oil 

is denominated in dollars, and that business represents a huge 

amount of commerce that would not be in the United States if a 

majority or a significant amount of trade moved to a different currency and was therefore cleared in a different jurisdiction. 

And that is something that as a key global commodity, as a 

major global commodity market, should be of interest and concern 

for people who watch markets, market activity, and the opportunity 

for raising business in the United States. 

Mr. ENGEL. Thank you. 

Ms. ROSENBERG. Essentially, the same is true when you are 

thinking about foreign exchange transactions or other dollar clearing for those U.S. platforms that clear that in the United States. 

Mr. ENGEL. Thank you very much. 

Chairman ROYCE. We go to Ileana Ros-Lehtinen of Florida. 

Ms. ROS-LEHTINEN. Thank you so much, Chairman Royce, and 

thank you for your continued efforts to highlight the dangers of the 

Iranian nuclear deal and the many ways in which the administration has and continues to deceive Congress and the American people when it comes to implementing this agreement. It seems every 

week there is a new revelation that was previously undisclosed or 

some new concessions that the administration is offering to the regime that were not part of the agreement. 

Every time Iran threatens to walk away from the deal over perceived slights, the administration caves to Iranian demands. And 

the regime knows that it can continue to use this tactic and get 

what it wants because President Obama is intent on maintaining 

this weak and dangerous deal even if it means allowing the Iranians to undermine the intent and the letter of the JCPOA. 

Now we are hearing the administration backtracking on claims 

that it would not allow Iran access to the U.S. financial system and 

is actively working to ensure that Iran does indeed get its sanctions relief and that was not part of the deal. So how would the 

administration go about giving Iran access, either direct or indirect 

access to the U.S. dollar and our financial system, and what would 

that access mean for Iran’s coffers? 

And turning to the IRGC, we know that the IRGC controls a 

large portion of the Iranian economy, owning the country’s largest 

construction company, its main telecommunications company, and 

controlling as much as 25 percent of the Tehran Stock Exchange. 

It controls and owns banks. The officials sit on and control the 

boards of private companies and it is the primary player in Iran’s 

infrastructure and increasingly its energy sector. 

We know that the IRGC is largely responsible for the development of Iran’s ballistic missile program as well as overseeing the 

Quds Force, the asymmetric war and terror operators who are responsible for the deaths of hundreds of American servicemen and 

women and countless other individuals worldwide. 

What sort of impact would Iran getting access to our dollar and 

financial system have on the IRGC and the Quds Force? Why has 

the administration not designated the IRGC as a foreign terrorist 

83

organization? And more importantly, what do you suggest, what 

steps could we take to limit the IRGC’s financial growth, and what 

impact would Iran getting access to the U.S. dollar have on its ballistic missile program, its support for Hezbollah, et cetera? 

Lots of questions, you can answer any one of them. Thank you, 

ladies and gentlemen. 

Mr. DUBOWITZ. So Congressman Ros-Lehtinen, thank you for 

those questions. First of all, the way the administration would give 

access to the U.S. dollar, it is important to understand that the administration is committed not to give Iran access to the U.S. financial system, and that Treasury officials have been very clear that 

that means u-turn transactions to the U.S. financial system. 

My concern is that they are going to give dollarized transactions. 

They are going to give access to the U.S. dollar offshore. And why 

this is important is because getting access to the U.S. dollar means 

that it facilitates international financial transactions. So most importantly, it actually again, as Chairman Royce said, it is a stamp 

of approval on Iran. It is part of their legitimization strategy. They 

can say, if the United States of America is green-lighting the 

greenback, then FATF shouldn’t have us on the blacklist. Sorry to 

throw out so many colors. 

But that is their strategy, their financial legitimization strategy. 

And this really benefits the IRGC which ultimately is not going to 

work directly through designated IRGC entities. It is going to work 

through cutouts and front companies, and those cutouts and front 

companies are going to be controlled by the IRGC either through 

share ownership or boards of directors, and they are going to be 

able to use the U.S. dollar. 

Ms. ROS-LEHTINEN. I will give just 1 minute to anyone else who 

would like to——

Ms. ROSENBERG. Can I respond? As a point of clarification it is 

not practically possible to do a lot of dollar activity in large transactions, or a large number of transactions, outside of the U.S. financial system without using a U.S. financial institution. That is 

because at some point those dollars need to be cleared through a 

U.S. financial system. It is impossible not to. Possibly you could aggregate them over a period of time, but even as an omnibus clearing activity that would occur. 

Ms. ROS-LEHTINEN. Thank you. Mr. Zarate, you have got 30 seconds. Thank you, ma’am. 

Mr. ZARATE. I think one of the dangers, Congresswoman, is that 

you incentivize systems to actually be created. So even if there 

aren’t existing sort of volumes in systems, you actually incentivize 

actors to create offshore dollar clearing systems to facilitate IRGC 

activity, and frankly then allow them to hide some of their activity 

even further. 

One really important point here, too, is if we allow this concession in the context of the spirit of the deal, we will be conceding 

that access to the dollar is actually a part of the nuclear sanctions 

related relief. 

Ms. ROS-LEHTINEN. Thank you. 

Mr. ZARATE. That then doesn’t allow us to use non-access to the 

dollar as a tool for all the other activity that is important. 

Ms. ROS-LEHTINEN. Good point. Thank you, Mr. Chairman. 

84

Chairman ROYCE. Congressman Brad Sherman from Los Angeles. 

Mr. SHERMAN. We have to straighten out the difference between 

being pro-Iran deal, and there are many reasonable people who 

have taken that position, and pro-Iran. And those of us who criticize the Iran deal, can it not create a political circumstance where 

the defenders of the deal feel they need to not only defend the deal, 

which can be done with some credibility, but to defend Iran? 

And what we should be talking about is to demand full compliance with the deal and ourselves not over-comply and give to the 

Iranians more than they bargained for. There are, of course, those 

in the United States who would take military action against Iran, 

and those who are repelled by the idea of military action in general 

and specifically in the Middle East. That does not mean that letting Iran do what it wants ought to be the position of liberals and 

others whose instinctive belief is peace. Iran is taking its thugs to 

Syria and killing people by the hundreds every week, and those 

who believe in peace have to realize that they have no allies in 

Tehran. 

Energy prices, the current global decline has led to a significant 

pullback in investments in energy worldwide. For global energy 

companies what are the factors guiding their decisions on investing 

in Iran? Can Iran offer itself as an attractive place to invest at a 

time when you cannot be assured of getting more than $30 for a 

barrel of oil? Ms. Rosenberg. 

Ms. ROSENBERG. Can I respond? 

Mr. SHERMAN. Yes. 

Ms. ROSENBERG. Yes, thank you. Iran is an interesting case for 

large international companies, and particularly for independent 

companies, not nationally owned companies. They need to replace 

their reserves. They are looking for big, good opportunities to seek 

the opportunity to produce. Iran is one such place if you look at it 

from the perspective of its geology, the lack of technical difficulty 

in being able to produce the oil. 

Mr. SHERMAN. What is the lifting cost of Iranian oil? 

Ms. ROSENBERG. In the single digits. In the single digits, so by 

comparison to much U.S. production which is not economically 

liftable today under an oil price in the mid-40s and higher. 

Mr. SHERMAN. Got you. 

Ms. ROSENBERG. So this is in the world amongst the lowest global prices for lifting. Nevertheless, the difficulty, by comparison to 

the ease in the geology and the lifting costs, is the difficulty in 

making contracts with the Iranian Government. The IPC, their 

contract, hasn’t been finalized yet. They can’t agree on it. That is 

an immediate problem. Additionally, making payments, sourcing 

equipment, there are incredible——

Mr. SHERMAN. Is there anything we can do to make it even harder other than fuel efficient automobiles and low oil usage? 

Ms. ROSENBERG. It is harder even then—yes, it is harder even 

then what I mentioned too. 

Mr. SHERMAN. Rather than describe how hard it is, do you have 

any suggestions for making it even harder? 

Ms. ROSENBERG. For them to produce? There is——

Mr. SHERMAN. And to get oil companies to invest. 

85

Ms. ROSENBERG. There is nothing that the U.S. Government 

could do more powerful than the collapse in oil prices which have 

shut global oil companies out of sanctioning any kind of major energy project anywhere in the world. 

Mr. SHERMAN. Does anybody have any suggestions as to, obviously we can’t match the decline in oil prices, but any suggestions 

as to how we can make it tougher? Mr. Dubowitz. 

Mr. DUBOWITZ. Well, one of the things that I think would be interesting, actually, is to look at the Saudis and other Gulf countries 

and let them use their enormous economic leverage to put international companies to a choice between doing business in Iran’s energy sector or doing business in their energy sector. I mean that 

would be market based economic and financial warfare that would 

have nothing to do with sanctions. It would have to do with economic leverage being used by the Saudis——

Mr. SHERMAN. I want to go on to aircraft. Obviously IranAir is 

in a position to buy American aircraft. That was a bad part of the 

JCPOA. But Mahan Air is still designated as a terrorist organization. I hope colleagues here, well, you will be receiving a letter from 

me soon about urging the EU to designate Mahan Air under its terrorism sanctions, and of course to urge the Ukraine, which is seeking so much American support, to not allow Mahan Air to land in 

Kiev. With that I will yield back. 

Chairman ROYCE. Thank you. Thank you, Mr. Sherman. We go 

now to Mr. Joe Wilson. 

Mr. WILSON. Thank you, Mr. Chairman, and thank you for having witnesses here on such an important issue. And it is somewhat 

startling, I think the American people need to know the threats 

that are still coming out of Iran and the threats to American families, and somehow an agreement that really just, I think, promotes 

it obviously with the funding. And Mr. Dubowitz in particular I 

want to thank you for your service as executive director of the 

Foundation for Defense of Democracies. You make a difference promoting freedom worldwide. 

And Mr. Dubowitz, with the talk surrounding the administration’s decision to purchase heavy water from the Iranian Atomic 

Energy Organization, I want to note that the last facility to 

produce heavy water domestically was at the Savannah River site 

in Aiken, South Carolina. Nearly all of the commercial nuclear reactors in the United States use light water, and the purchase of 32 

tons of heavy water from Iran represents nearly half of the United 

States’ total imports of this material which usually comes from our 

great allies, Canada and India. 

I appreciate Chairman Ed Royce, who has questioned this purchase, inquiring what guarantees there are that the money 

wouldn’t be used to promote and fund terrorism. Mr. Dubowitz, are 

there any guarantees at all? 

Mr. DUBOWITZ. None at all. There are none at all. And the other 

thing that is remarkable is that we are actually paying the Iranians to perfect their ability to produce heavy water so that when 

all the restrictions on heavy water production reprocessing and the 

plutonium pathway to nuclear weapon go away over time the Iranians will actually have all of that time funded by us in order to 

86

perfect the essential element of a plutonium bomb, so I don’t know 

why we are facilitating that and paying for that. 

Mr. WILSON. And thank you for being so clear. And the American 

people need to know this, and to me the whole thing is bizarre, and 

how in the world we got to this place. And then Mr. Zarate, your 

testimony too has been so insightful and clear. Thank you. Sometimes diplomats come across a bit obfuscating. 

There are a number of senior Iranian officials that are complicit 

in human rights abuses, brutal treatment of the Iranian people. 

The administration has not sanctioned individuals such as Iran’s 

interior minister or the head of judiciary. Has there been any 

change in Iran since the deal was agreed to? 

Mr. ZARATE. None. None that is visible. None that has been demonstrated. There has been a lot of hope in the parliamentary elections, but that I think is a bit of a false hope. And we have seen 

none of those detained including the leaders of the Green Movement, those individuals remain detained. And I think we have bent 

over backwards both through the negotiating process and even now 

to not appear to be instigating or aggravating the Iranians, and I 

think that has muted our voice whether at the start of the Green 

Movement or even now. 

Mr. DUBOWITZ. Congressman, if I could just add to that. 

Mr. WILSON. Yes. 

Mr. DUBOWITZ. 2015 was a record year for executions in Iran. 

The human rights situation has gotten worse not better. That is 

not me saying that, that is Ahmed Shaheed, the U.N. Special 

Rapporteur on Human Rights. And yet the administration as I 

said, since Rouhani came to power in 2013, they have only sanctioned one individual and two entities for human rights abuses. 

What is the rationale for not imposing human rights abuses on 

the instruments of repression and the individuals who are engaged 

in these human rights abuses? If the administration is serious 

about non-nuclear sanctions and serious about protecting the 

American people, why has it been so remiss in using its existing 

authorities on human rights abuses? 

Mr. WILSON. And I thank both of you for referencing the Green 

Movement. The people of Iran deserve better, and so thank you for 

promoting that. And Mr. Dubowitz, and back right on point what 

you said, instead of the administration trying to encourage companies to do business with Iran, shouldn’t the focus be on cracking 

down on corruption which is robbing the Iranian people? And what 

is Iran’s current involvement with terrorist groups? 

Mr. DUBOWITZ. Well, again Iran is the leading state sponsor of 

terrorism. They support Hezbollah. They support Hamas. They 

support designated Iraqi Shiite militias, and they are obviously involved in the slaughter in Syria. And I think your point on corruption is exactly right. I mean, corruption is a human rights crime 

as well. Dictators use the fruits of corruption in order to both keep 

power and as instruments of repression. 

And I think that is something that actually has been widely acknowledged by the U.S. Government and by Assistant Secretary 

Danny Glaser in a number of speeches, and that corruption needs 

to be addressed through existing authorities. And if existing authorities are insufficient and clarification is needed, Congress needs 

87

to make it clear that corruption is not only a money laundering 

concern but it is a human rights concern, and actually crack down 

on those individuals involved in corruption. 

Mr. WILSON. And again, as we conclude, thank you, all three of 

you, for raising these issues that are so important to American 

families. 

Chairman ROYCE. Mr. David Cicilline from Rhode Island. 

Mr. CICILLINE. Thank you, Mr. Chairman. Thank you to our witnesses. The argument was advanced during our consideration of 

the JCPOA that successful implementation of the agreement with 

rigorous enforcement to ensure full compliance of the deal would 

put us in a stronger position to push back on Iran, and now a nonnuclear Iran and the other areas. And there were even predictions 

from many we heard from that there would be likely an increase 

in their nefarious and thuggish behavior as a response to the more 

extreme parts of the regime after the deal was struck as a way to 

sort of reassure them that they were still in control. And I think 

based on the testimony today and my own reading that is what we 

are seeing, an additional destabilizing activity. 

And so my first question, really, is do we read anything out of 

the election and the runoff election results in April? Some have 

suggested that there is some evidence that the reformers have 

made some progress and that that bodes well for the future. Can 

anyone comment on whether we should read anything into the election results? 

Mr. DUBOWITZ. Well, I think, first of all, it wasn’t an election. It 

was a selection. Over 90 percent of reformers were disqualified 

from running. The lists that were actually assembled for the parliamentary elections were lists where hardliners were included as 

moderates. So it was a great marketing job, but it didn’t fundamentally change the power structure within Iran. 

And I think if we have learned anything from the revelations on 

Ben Rhodes, the U.S. Government and the U.S. intelligence community doesn’t believe that the Iranian regime is moderate in any 

way and doesn’t believe that Rouhani is a moderate, and so that 

this whole moderate theme has maybe been a fiction of our imaginations rather than an accurate description of the interfactional 

power balance within the Iranian Government. 

Mr. CICILLINE. So are there——

Ms. ROSENBERG. If I could add to that. 

Mr. CICILLINE. Sure. 

Ms. ROSENBERG. It is true that these most recent elections are 

notable for trying to test the wind, if you will, in Iran and what 

is happening with the popular sentiment. Nevertheless, the upcoming Presidential election for Rouhani may be a better sign post to 

us. So we don’t have that data yet, we won’t for quite awhile until 

his election, he stands again for election. But that may be a better 

sign for us about the popular sentiment and the control of the Supreme Leader over that Revolutionary economy. 

Mr. CICILLINE. Thank you. And I would ask each of the panelists, 

are there any risks that you see to passing new sanctions even if 

they are outside the JCPOA? Does the administration need additional authority or is it just not using the authority it currently 

88

has? And maybe you answer that first and then I have a followup question. Yes. 

Ms. ROSENBERG. Right. So the administration does not need additional authorities. Mr. Zarate went through a number of authorities that the administration does have from support to Syria, 

Yemen, transnational organized crime, cyber, proliferation, terrorism. That covers a huge scope, and furthermore, there is the opportunity for iterations of those through various prongs within 

them for derivative designations. 

The danger that comes from additional sanctions is if there is an 

opportunity to set up statutes or language, definitions that don’t 

match creating confusion for the private sector. As was mentioned 

previously, I have warned about the concerns of diminishing the 

attractiveness of the U.S. dollar. That great power we do have that 

was spoken of by Mr. Dubowitz as well. 

And to the extent that we support and care about the proliferation security gains that have been accomplished in the nuclear 

deal, if imposing additional sanctions that reimpose sanctions that 

were lifted occurs and it undermines the deal, that could be a tremendous setback for proliferation security concerns. 

Mr. CICILLINE. Mr. Dubowitz? 

Mr. DUBOWITZ. Yes, if I could just make a quick comment. And 

we heard this debate for 10 years. Congress heard this debate from 

the administration, that they had all the existing authorities that 

they needed, but you still passed CISADA and ITRSHRA and IFCA 

and NDAA. So I think that this argument has been a longstanding 

argument. 

I think what Congress has realized is that A, you can impose secondary sanctions, which are a very powerful way to complement 

the executive orders; and B, through reporting language and clarification language you can begin to hold the administration accountable for its commitments to impose non-nuclear sanctions, which 

again are not a contravention of the JCPOA, but as Secretary 

Kerry said they are very much consistent with using all national 

security tools against Iran’s destabilizing behavior. 

So again, Congress has played a critical role in the Iran debate 

and I think Congress can continue to do so through new statutes. 

Mr. CICILLINE. Yes, sir. 

Mr. ZARATE. Congressman, I think Congress acts and the administration acts with great authority when the sanctions are based in 

fact, based on real activity of concern, and certainly are in furtherance of not just U.S. law but international norms. If the sanctions 

appear to be arbitrary and capricious and simply reimposing prior 

sanctions or capriciously targeting individuals because we don’t 

like them, that is problematic. I think when there is actual substantive concern about the real risks and those have been identified by both Congress and the administration that is incredibly 

powerful and frankly can’t be disputed. 

And one final point here, you know, Iran has emerged out from 

under many of these sanctions into a new world of heightened expectation for global financial transparency. They are starting at a 

very low bar. We should do everything possible to force them to the 

standards that now exist in 2016, because those are very real 

standards and they are very real risks if they don’t meet them. 

89

Mr. CICILLINE. Thank you very much. Thank you, Mr. Chairman, 

I yield back. 

Chairman ROYCE. Thank you. We go now to Jeff Duncan of 

South Carolina. 

Mr. DUNCAN. Thank you, Mr. Chairman. Thanks for this hearing. You know, how can anyone in America trust anything that the 

administration says at this point? They misled the American people 

about the Affordable Care Act. They misled the American people 

about the attacks in Benghazi and the motivation behind those attacks. They misled the American people about the IRS’ targeting 

of conservative groups. And now we see they have misled the 

American people over the Iran deal as evidenced by Ben Rhodes’ 

comments and the New York Times article this week, confirmed in 

the Washington Post article where the administration pushed a 

certain narrative. Misled not only the American people, misled the 

media who in turn misled the American people. And even White 

House spokesman Josh Earnest couldn’t find the words to deny the 

administration misled you, America. 

Mr. Chairman, I would like to recall, reiterate my call for the 

State Department to provide to this committee and the Committee 

on Homeland Security, a white paper referenced in their memo as 

they implemented the Visa Waiver Program Improvement and Terrorist Travel Prevention Act, which they are using to circumvent 

the will of Congress and the letter of the law to allow foreigners 

that have traveled to Iran and other areas of the world that host 

terrorists to have access to the Visa Waiver Program. 

There was a white paper referenced in their justification. We 

asked Secretary Kerry in this committee. We have sent letters to 

the Department of State. We have asked the Department of State 

officials and Homeland Security Committee for a copy of that white 

paper that they used to circumvent Congress and to circumvent the 

law. So I reiterate my call for that. 

Mr. Zarate, how much money would Iran have access to with this 

Iranian deal, unfrozen assets? Let’s just talk about unfrozen assets 

for just a second. 

Mr. ZARATE. Yes, Congressman, the estimates have been any- where between $70 billion to $150 billion. And obviously we have 

heard——

Mr. DUNCAN. That is a lot of money. 

Mr. ZARATE. A lot of money. And I have estimated and I have 

said this before in testimony that there are likely assets that are 

unaccounted for. Those are known assets——

Mr. DUNCAN. Known assets, right. 

Mr. ZARATE [continuing]. And largely central bank reserves——

Mr. DUNCAN. And a standing Iranian economy with sanctions 

being lifted, their ability to sell their oil in open market not the 

black market, would enhance that number somewhat. 

Mr. ZARATE. Absolutely. And that does not include the growth of 

their economy and the——

Mr. DUNCAN. Exactly. So let me read Ayatollah Khomeini’s 

words after this deal was struck. ‘‘Whether the deal is approved or 

disapproved, we will never stop supporting our friends in the region and the people of Palestine, Yemen, Syria, Iraq, Bahrain, and 

Lebanon.’’ Basically, Hezbollah, Hamas. 

90

Iran is the largest state sponsor of terrorism financially and with 

material support. And with his own words they are going to continue to support those terrorists, his own words. With a $150 billion and an expanding economy that is a heck of a lot of money to 

support terrorism. Should the free world be concerned? 

Mr. ZARATE. Absolutely. And it is precisely why we shouldn’t be 

giving Iran any special exemptions or special access to the dollar, 

be it onshore or offshore. I mean, we should expect and we know 

not only from what the Iranians have said but also what the terrorists have said, you know, Hassan Nasrallah himself said that we 

expect continued and expanded support from the Iranians. 

And so we know that it is going to happen, we know that there 

is an increased risk, a very real risk of flows of millions if not billions of dollars to Iranian proxies. We have seen with the interdiction of shipments to Yemen by international naval forces, including 

U.S. forces that they are trying to send arms into Yemen to the 

Houthi rebels acting as their proxies. So we know this is——

Mr. DUNCAN. They are active in Iraq. They are active in——

Mr. ZARATE. Yes. It is not just what they say, we see it on the 

ground. We understand it. We hear what their allies say. And so 

it is a real risk. 

Mr. DUNCAN. Yes. Let me reclaim my time. I chair the Western 

Hemisphere Subcommittee, and we have had hearings and we have 

been very vocal about the presence of Hezbollah in the Western 

Hemisphere. General Kelly, former commander of SOUTHCOM, 

has testified about his concern of Iran’s activity in the Western 

Hemisphere. 

Hezbollah is a proxy of Iran. Iran is active here, cultural centers 

and areas in Latin America that don’t have really strong Islamic 

ties or Muslim populations. We know that the Tri-Border region between Paraguay, Argentina, and Brazil is very active in Hezbollah. 

If Hezbollah is in the Western Hemisphere and Iran has $150 

billion to support their friends, Hezbollah and Hamas and the others that the Ayatollah himself mentioned, would reason not speak 

to the fact that they may support Hezbollah in the Western Hemisphere, and their own activity, Iran’s activity, in the Western 

Hemisphere that could target American interests or the interests 

of our friends and allies closer to home? Not in the Middle East but 

here in Latin America and the Western Hemisphere. Is that fair 

to assume? 

Mr. ZARATE. That is absolutely fair, and it is not just in the TriBorder Area. It is in places like Venezuela where there have been 

traditional and commercial ties between the Iranian Government 

and the Venezuelan Government. 

Mr. DUNCAN. And like I say, Air Tehran, Air Terror, whatever 

the flights. 

Mr. ZARATE. Exactly. Not to mention the expanse of Hezbollah 

network which the U.S. Treasury and the DEA have been exposing 

as a global criminal enterprise in Latin America, in West Africa, 

which is part of this infrastructure that Iran can tap into and certainly support with financing. 

One other point I will just say, a friend and colleague of mine 

Alberto Nisman, the Argentine prosecutor, I believe was murdered 

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in part because he was investigating not just the attacks from Iranian sponsored terrorism in——

Mr. DUNCAN. In ’92 and ’94. Go ahead. 

Mr. ZARATE. But also looking at where Iran had presence in 

South America and in Latin America. 

Mr. DUNCAN. And just for the committee’s awareness, the gentleman, the Iranian that was implicated in those attacks was supposed to come to Colombia and may still lead a delegation to Colombia, should be arrested by INTERPOL. That is how close to 

home this is. With that I yield back. 

Mr. DUBOWITZ. And that is Mohsen Rabbani for those folks at 

INTERPOL who are paying attention. 

Chairman ROYCE. Yes. We will make this discussion available to 

INTERPOL and talk to the government in Colombia. 

Let’s go to Mr. Gerry Connolly of Virginia. 

Mr. CONNOLLY. Thank you, Mr. Chairman. I think this is our 

30th hearing on Iran. And I don’t know that this committee has 

cloaked itself in glory on the subject. We beat dead horses. And we 

have been proved wrong, I think. I am going to ask Ms. Rosenberg. 

Ms. Rosenberg, the JCPOA, the agreement that was completely 

decried and opposed by my friends on the other side of the aisle 

and some members of my own party—let me see. One of the requirements was that all uranium enrichment levels had to be reduced to 3.67 percent. Has that happened? 

Ms. ROSENBERG. The IAEA has certified that by the beginning of 

this year, in January, Iran had met all of its major basic and nuclear commitments which is the basis for——

Mr. CONNOLLY. I know, tell me one by one. So 3.67 percent, yes 

or no. 

Ms. ROSENBERG. Yes, I believe so. 

Mr. CONNOLLY. Did they in fact remove the core of the Iraq 

heavy water research reactor and fill it with concrete? 

Ms. ROSENBERG. Cement, yes. 

Mr. CONNOLLY. Did they reduce their stockpile of previously enriched uranium by 95 percent? 

Ms. ROSENBERG. Yes. 

Mr. CONNOLLY. Did they ship it out of the country? 

Ms. ROSENBERG. Yes, removed. 

Mr. CONNOLLY. Did they subject their centrifuge production and 

uranium mines and mills to surveillance by outside international 

nuclear inspectors? 

Ms. ROSENBERG. Yes, and their reports have been made public. 

Mr. CONNOLLY. And did they reduce the number of centrifuges 

as required by the agreement? 

Ms. ROSENBERG. Yes. 

Mr. CONNOLLY. Hm. Anything they cheated on that we know of? 

Ms. ROSENBERG. Not that we know of. 

Mr. CONNOLLY. Not that we know of, really. Now, I don’t know. 

I am not a nuclear expert, but if they met all of those metrics and 

we are supposed to believe that this was a smokescreen to allow 

Iran to become a, to give it a ‘‘patient pathway to the bomb,’’ it 

looks to me like that is not a patient pathway to a bomb. That actually reverses the development of a bomb. Would that be a fair 

statement from your point of view? 

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Ms. ROSENBERG. Yes. If I may add to that——

Mr. CONNOLLY. Of course. 

Ms. ROSENBERG [continuing]. Additionally. I don’t think, however, given the grave concerns that the international community 

has had about Iran’s demonstrated proliferation activities, that 

achieving those milestones we have just gone through, should give 

anyone any comfort that this is a the end of the road. 

Mr. CONNOLLY. Of course. 

Ms. ROSENBERG. Which is one reason, of course, why this nuclear 

agreement goes on much longer than just implementation day, and 

why many people correctly believe that this should be a strengthening of the international nonproliferation regime. Not just for 

Iran, but for any other state of proliferation concern. 

Mr. CONNOLLY. Right. But we know it is a fallacy in reason to 

argue because it isn’t absolute forever perfect we therefore should 

not do it. Sometimes we take incremental progress, real incremental progress that takes the immediate and short term existential threat and reduces it or reverses it significantly, that is better 

than the alternative, is it not? 

Ms. ROSENBERG. I think many people feel seriously reassured, 

very sincerely reassured, that Iran is further today from——

Mr. CONNOLLY. Right. 

Ms. ROSENBERG [continuing]. A nuclear bomb and nuclear warheads on its ballistic missiles arsenal than it was only a number 

of months ago. 

Mr. CONNOLLY. And I think they should be, because objectively 

they are. 

Ms. ROSENBERG. I agree. 

Mr. CONNOLLY. And that doesn’t mean, however, the threat is removed. It doesn’t mean that we are not going to face all kinds of 

other problems in the relationship. And it doesn’t mean that 15 or 

20 years hence they might want to reevaluate and reverse the commitments they made in this agreement—god forbid—and that is 

what we have got. But we have bought some time, and we didn’t 

just buy time and freeze it in place. We reversed it. 

And according to your testimony, and you are not the first to testify here, to the best of our knowledge they have met every metric. 

It is really interesting to me that we want to talk about everything 

but compliance, having of course predicted that they wouldn’t comply. 

Ms. ROSENBERG. I think it is appropriate to talk about, and I assume you would agree, to talk about these other issues of concern 

related to Iran. 

Mr. CONNOLLY. Absolutely. 

Ms. ROSENBERG. But nevertheless, very important to distinguish 

between nuclear, oversight of this nuclear deal and these other concerns, something that——

Mr. CONNOLLY. Listen, I am old enough to have lived through 

the Cold War. We had nuclear agreements with our bitter enemy 

that had promised to wipe us from the face of the earth, the Soviet 

Union. That didn’t stop us from negotiating under multiple administrations with Moscow, starting with John Kennedy after the 

Cuban Missile Crisis of all things. The first Nuclear Test Ban Treaty he negotiated with Khrushchev. Now we are capable of looking 

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at multiple compartments and manipulating them to our advantage where we can, and this is a good example. I yield back. 

Chairman ROYCE. We go now to Mr. Randy Weber of Texas. 

Mr. WEBER. I would follow up that by saying that the Russians 

weren’t strapping dynamite vests on kids and killing people in 

other countries, but that is just me. 

Mr. Dubowitz, I think in your exchange with Congressman Duncan you didn’t get to finish your last idea. Would you like to take 

time to do that now? 

Mr. DUBOWITZ. Yes, thank you, Congressman, a couple things. 

One is I would just make it clear that with respect to the Revolutionary Guards and Hezbollah, the fact that Boeing and Airbus are 

now signing, or trying to sign, multibillion dollar deals with 

IranAir, I would say that is incumbent upon those companies, and 

I would argue impossible for those companies, to ensure that the 

technologies that they are providing to IranAir are not going to end 

up in the hands of IRGC Air, which is Mahan Air. And I think that 

those agreements are incredibly difficult to enforce and that the 

due diligence will be exceptionally difficult to actually undertake. 

I would also actually take some exception to the exchange. Iran 

is in flagrant violation of U.N. Security Council Resolution 2231, 

which is the implementation resolution for the JCPOA which replaced all of the previous six U.N. Security Council resolutions, because it is engaged in multiple missile tests for long-range ballistic 

missiles capable of carrying a nuclear warhead—capable of carrying a nuclear warhead. 

A nuclear weapon is not just enrichment, a nuclear weapon is 

also a warhead and it is also the delivery vehicle which is the missile. So Congressman Connolly, Iran is in flagrant violation of U.N. 

Security Council Resolution 2231 and that should give us some serious pause. 

Mr. WEBER. Well, and thank you for saying that. Let me point 

out that my good friend from California earlier said that liberals, 

it was their, I believe their instinctive inclination to peace, and I 

just want to ask, did he say instinctive or was it extinctive? 

We need to be careful, because you are dealing with a regime 

that would take every opportunity to be in flagrant violation, to use 

your words, not only on all of the sending of, as I point out, terrorism to other countries, kids, dynamite strapped on, blowing up 

people, their commitment to destroying Israel, the United States 

ultimately. I think we should take them seriously. 

So I appreciate, for one, you all being here and pointing out that 

we need—and I had this conversation with John Kerry. We should 

have made them prove that they wanted to be a good world community neighbors, if that is the right word, by doing all of these 

things in a period of time. You know, they have been bad actors 

since 1979 when they took the hostages in Tehran. That is 30, back 

then, last year it was 36 years ago. Half of that time would be 18 

years. A fourth of that time would be 9 years. An eighth of that 

time would be 41⁄2 years. A sixteenth of that time would be 2 years 

basically. 

Couldn’t we just make them comply for 2 years to prove that 

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munity neighbors? I mean, the whole JCPOA was absolutely a 

travesty in my opinion. That is my opinion. 

But anyway I wanted to ask you all for your opinions while you 

are here. Three things, I want to know three things to apply pressure on Iran. How do we apply pressure, in your opinion, Mr. 

Dubowitz? Just give us three short things that we could make 

them comply as closely as possible. What would you do specifically? 

Well, give me one or two things. 

Mr. DUBOWITZ. I would require the administration to report to 

Congress on the sectors of Iran’s economy that are providing key 

technology and personnel. 

Mr. WEBER. That is not going to happen. I don’t trust this administration to report to us. I am sorry, I just don’t. What can we 

do as a Congress——

Mr. DUBOWITZ. So you could GAO to do the same report, and 

GAO would then look at other organizations that have done similar 

reports. We have done a report on Iran’s missile sector looking at 

the sectors of the economy. Congress could then pass legislation or 

affect the legislation. 

Mr. WEBER. What can we do—it is Mark, right, first name is 

Mark? 

Mr. DUBOWITZ. Mark, yes. 

Mr. WEBER. What can we do, Mark, to cut off funding, in the 

House of Representatives if we would have guts, so that when they 

want to use access to the United States financial institutions, we 

as the United States Congress, I know it would have to be in the 

House of Representatives, what could we do to shut down their access to the U.S. financial institutions? 

Mr. DUBOWITZ. So again I think—and Juan and Liz have talked 

about this. I mean, the best thing you can do is appeal to the market. The best thing that you can do is create this risk overhang 

that already is there and you can amplify it. Require companies 

and financial institutions to report to the SEC if they are doing 

business with IRGC entities. Not just designated IRGC entities, 

but entities that are on an IRGC watch list that GAO or CRS or 

independent organizations could provide. 

By creating a market risk what you are going to do is you are 

going to do what Juan talked about, which is you are going to focus 

on the conduct, the illicit conduct that Iran is engaged in and you 

can shine a spotlight on that. That does more to change market 

calculations by——

Mr. WEBER. I am out of time, but let me follow up by this, and 

I am not going to be able to get to the other two. How do we bring 

our friends on board with that whether it is Britain, whoever it is, 

how do we bring our allies on board with that? 

Mr. DUBOWITZ. Well, our allies need access to the U.S. market. 

Many of our allies have financial institutions with corresponding 

banking relationships in the United States. Many of our allies have 

companies that are trading on U.S. exchanges. So I would go 

around the governments and I would appeal to the companies. 

British banks today don’t want to go back into Iran despite the 

fact the British Government is trying to strong-arm them back into 

Iran, because they care about U.S. market access, they care about 

their reputations and they don’t want to be doing business with the 

95

Revolutionary Guards and entities and a state that is engaged in 

such illicit and dangerous conduct. 

Mr. WEBER. Okay. Thank you, Mr. Chairman, and I yield back. 

Chairman ROYCE. Thank you. Now we go to Mr. Ted Deutch of 

Florida. 

Mr. DEUTCH. Thank you, Mr. Chairman, and again I would like 

to thank you and Ranking Member Engel for your enduring commitment to ensure that this committee continues to provide oversight on the nuclear deal and remains engaged and vigilant on all 

of Iran’s troubling activities. 

For much of the week Secretary Kerry has been quoted in the 

press as proclaiming that Iran is open for business, and that as a 

U.S. official is quoted as saying, it is in fact not U.S. sanctions but 

Iran’s bad banking practices along with its ballistic missile 

launches, support for terrorism, and human rights abuses including, I might add, a long history of arresting foreign businessmen 

that make it an unfriendly business climate. 

And I would agree that every single company that is considering 

doing business in Iran should be deeply concerned by and should 

consider all of these factors before making any deal. The Washington Post, yesterday, reported that fear of running afoul of continued U.S. sanctions for all of these other bad behaviors is preventing banks and businesses from dealing with Iran. 

I hope that in his travels Secretary Kerry is making clear to our 

allies that not only will those sanctions remain in place and be enforced with vigor, but they too should be enforcing these sanctions 

as they are not covered under the JCPOA. Let’s be clear here. If 

Iran wants business, it is up to the regime to change its behavior. 

Now the Washington Post also reported that detention of foreign 

citizens is another reason businesses are and should be wary of reentering Iran. And I would urge these companies to give deep consideration to the fact that the longest held American hostage in 

history disappeared in Iran. Robert Levinson went missing in Iran 

on March 9, 2007 and he is still not home. And more importantly, 

Iran is still not providing information as to his whereabouts. 

And I hope that Secretary Kerry has raised the issue of Bob 

Levinson in every one of his meetings with foreign banks and foreign businesses. And I hope that every single oil company, airplane 

manufacturer, construction company that meets with Iranian officials raises Bob Levinson’s case. And I hope that every one of these 

businesses as they contemplate their challenges to doing business 

in Iran contemplate the fact that Bob Levinson has been missing 

for 9 years and makes this an issue in those discussions. 

And they should be demanding that if Iran wants foreign investment to return, then it should begin to prove itself a responsible 

actor by fulfilling its oft-stated pledge of cooperating and providing 

information on Bob’s whereabouts and then helping to return him 

to his family. And I might add, I hope that in the reports in the 

press that our great media, who are following these issues so closely, whether or not businesses want to re-engage in Iran, will also 

raise in their discussions the fact that Bob Levinson is the longest 

held American hostage and that Iran has not provided the necessary information to help bring him home. 

96

Mr. Dubowitz, I understand that it may be unusual business 

practice for a company to engage with a government in areas that 

are commonly left to diplomats. But why should all of these companies looking to reenter Iran, why should they care about Iran’s 

human rights abuses? Why should they care about Iran’s support 

for terrorism? And why, to follow on my opening statement, why 

should they be concerned about an American who has been missing, went missing in Iran more than 9 years ago? 

Mr. DUBOWITZ. Congressman Deutch, I think for two fundamental reasons. Reason number one is that the next hostage that 

could be taken is them. The CEO or the director of business development for the Middle East for a major oil company or a major financial institution could be the next hostage, because Iran takes 

hostages as part of its standard operating procedure. 

And the second reason is because these international companies 

have reputations and those reputations are worth billions of dollars, and to have a reputation of doing business with a hostage-taking, genocide-threatening, nuclear-building, missile-testing, Holocaust-denying regime is just bad, fundamentally, for business. 

Mr. DEUTCH. Mr. Chairman, I would, before I yield back I would 

just say again, the members of this committee are probably tired 

of hearing me talk at every single committee hearing, every meeting we have on Iran about my constituent who needs to be returned to his family. 

But it is just inconceivable to me that all of the stories we have 

been reading this week have focused on whether or not Iran should 

be open for business, on whether or not other countries should 

worry about sanctions and going back in to do business deals in 

Iran without mentioning Bob Levinson’s name. I don’t understand 

it. There is an American who has been missing for more than 9 

years. Everybody, everybody should care about Bob Levinson. And 

I yield back. 

Mr. WEBER [presiding]. For the record, Congressman, we do not 

get tired of hearing about that. Thank you. And the chair now recognizes Scott Perry. 

Mr. PERRY. Thank you, Mr. Chairman. Mr. Dubowitz, Mr. 

Zarate, can you tell me in your opinion, I know this might be a little off-target for the hearing, but is Iran’s ballistic missile capability currently prepared to deliver whatever payload that it might 

desire to put on it, whether nuclear or otherwise, beyond, I don’t 

know, several hundred miles? Do they currently have that capability on a consistent basis? 

Mr. DUBOWITZ. Well, they certainly have the capability to in 

terms of range. 

Mr. PERRY. Right. 

Mr. DUBOWITZ. The question is do they have the capability to 

affix a nuclear warhead to those missiles. 

Mr. PERRY. With a triggering device. That is in question, right? 

Mr. DUBOWITZ. Right, that is in question. 

Mr. PERRY. So that is the continued testing that we see of the 

ballistic missiles. That is what they are working on. 

Mr. DUBOWITZ. Right. And the danger on the warhead side is, 

again Congressman Connolly seems to think that the Iranians are 

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in such full compliance, but on warhead issues we don’t know because warhead design is done in a room basically this size. 

Mr. PERRY. Right. 

Mr. DUBOWITZ. And we don’t even know if we are going to have 

access to military sites where that warhead design is likely to take 

place. 

Mr. PERRY. I am going to get to another question, but I just want 

to make the point, while Mr. Connolly feels that they are in compliance, and of course you have already elucidated to the fact that 

they are not in compliance, they are in flagrant violation of Resolution 2231, I would remind him that we will have the same conversation in 10 to 15 years when Iran has consolidated its gains 

in Yemen, Libya, Iraq, if I didn’t say Yemen already, Syria, et 

cetera, and will have also perfected its ballistic missile technology, 

will be within months of right where it was when we left off, when 

they left off of nuclear device, an armed warhead, and also have 

the air defense artillery from Russia to protect all that stuff, and 

we will be able to do very little about it just like we can do with 

North Korea right now, and I will revisit the conversation with Mr. 

Connolly at that time. 

That having been said, let me ask you folks this because we are 

talking about financial transactions. In addition to the sanctions 

risk, there is a considerable risk to companies entering Iran from 

a business perspective. For example, Iran banks will have to adjust 

to tougher international regulations and may need to offload nonperforming loans into a bad bank. 

Many of Iran’s banks are still struggling after piling up bad debt 

during the more than a decade long sanctions era, several banks 

having exposure to the country’s property market which turned 

sour in 2012 leaving problem loans in the system, compounding the 

situation. Thus, the Iranian financial sector is in a precarious situation. Official data showed that the ratio of nonperforming loans to 

total loans was 13.4 percent in the Iranian month ending of June 

21, 2015. Market estimates point to nearly double that figure with 

the equivalent of $40 billion at the top end investments for nonperforming loans. 

Since the 2008 financial crisis, most banks must adhere to international capital standard known as Basel III which required them 

to bolster their balance sheets. Iran remains a command economy 

dominated by the Islamic Revolutionary Guard Corps, the IRGC, to 

include the banking sector. While the Secretary is running around 

telling everybody it is going to fine to invest in Iran, I just want 

to know how significant the reforms would be for Iranian banks to 

meet international banking standards particularly with Basel III. 

Gentlemen. I would like to hear from them if you could, first. 

Mr. ZARATE. I haven’t looked at the balance sheets currently, but 

you are absolutely right that one of the questions that any institution going into Iran has to look at is what is the health of the financial system? And it is not just sort of, it is not only the balance 

sheet but it is also the requirements of safety and soundness postBasel III. 

So you are absolutely right, in terms of capital requirements as 

well as transparency and accountability which is now part of the 

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ronment than 15 years ago in terms of what the expectations are 

for a financial system. And so Iran, I think, has to undertake massive reforms. And what is odd to me is we are bending over backward to demonstrate that it is okay to do business in Iran when 

they aren’t even meeting any of those basic standards, be it post2008 or 2016. 

Mr. PERRY. We are bending over backwards. The United States 

is bending over backwards to tell the international community it is 

okay to invest there, knowing full well that they are far from compliance with international standards, particularly Basel III. Is 

that——

Mr. ZARATE. Yes. And we are certainly not sending out road 

shows for our allied economies that are struggling with de-risking 

and other challenges where major banks and businesses are derisking and getting out because they are not meeting standards. 

And so I don’t see Secretary Kerry talking about investment in 

Iraq——

Mr. PERRY. Right. 

Mr. ZARATE [continuing]. Which maybe we should be, but he is 

certainly not. And so I think there is a real danger here of mixing 

messages and altering our own standards by trying to meet the 

needs of the Iranians as they complain about the restrictions that 

they are facing in the international system when the international 

system is looking clearly at a very risky environment. 

Mr. PERRY. I mean, what would be the point of it from your perspective? Why would the United States engage in this? 

Mr. ZARATE. We certainly want to demonstrate that there is a 

benefit to the deal, that we can honor our side of the deal and that 

is to be commended. And I do take a little bit of issue with those 

of us who raised questions about the JCPOA. We very much were 

open, and certainly in the Bush administration, to negotiations, 

and in fact we started the pressure campaign in 2005 in parallel 

with the diplomatic process. Deputy Secretary Burns, who is part 

of the negotiating process for President Obama, was also negotiating on behalf of the Bush administration. 

So the reality is that we have used these tools as a way of isolating rogue behavior, and the challenge with the JCPOA is that 

we perhaps have negotiated away our ability to use them aggressively precisely because we have given Iran the voice to say you are 

not giving us the benefit of the deal, which was reintegration into 

international financial and commercial system. We can’t do that if 

they are not changing their behavior. That is the inherent tension 

of the deal and it is precisely what I told the Senate on two occasions when these issues were being debated. 

Mr. DUBOWITZ. Can I add something very quickly to that? I 

mean, just to clarify, we never committed to the Iranians in the 

JCPOA anything to do with outcomes. We never said that we are 

going to commit to you that you will be reintegrated in the global 

financial system. We never said to you that we are going to commit 

that your GDP is going to increase by 5 percent and there is going 

to be $500 billion of foreign direct investment. 

We committed that we were going to de-designate entities, and 

we are now, we should now be engaged in providing regulatory 

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ing the business development and trade promotion authority of the 

Islamic Republic of Iran. 

Mr. PERRY. I am sorry, my time is long expired. I yield. 

Mr. WEBER. I thank the gentleman for yielding back. Congressman Boyle, you are recognized for 5 minutes. 

Mr. BOYLE. Yes, thank you. I wanted to associate myself with 

comments that were made much earlier by my colleague Representative Brad Sherman. He, I believe, like myself was someone on the 

Democratic side of the aisle who found fault with the Iranian nuclear deal and ultimately opposed it. 

That said, I don’t think it is helpful or in any way productive to 

keep relitigating old ground, and that the point of our work today 

and in the future for what is in our national security interest as 

well as the interest of our allies is to ensure ways moving forward 

that we can benefit from the positives of the deal while at the same 

time addressing those areas of concern. Chief among them for me, 

and when I wrote an op-ed in The Philadelphia Enquirer in August 

announcing that I would be voting against the deal, I talked about 

how not 5 years from now, 10 years from now, 15 years from now, 

today the amount of money somewhere in the $2-4 billion range it 

is estimated that Iran is using to fund terrorism, whether it be 

Hezbollah and the over 100,000 rockets in southern Lebanon that 

are being pointed at Israel, whether it is Hamas, whether it is 

their actions to prop up the Assad regime, what they are doing in 

Yemen, et cetera, et cetera. 

So I want to kind of, you know, address my comments looking 

forward prospectively on what can be done today to address, sanctions-wise or other tools we have available, the bad Iranian behavior and the support for terrorism, while at the same time not doing 

anything that would violate our own obligations under the JCPOA. 

So with that comment, let me actually first invite Ms. Rosenberg 

who hasn’t had an opportunity for awhile to address that. 

Ms. ROSENBERG. Thank you for the question. There are a number 

of things that the United States can do along with partners and allies in the rest of the world to address these very serious terrorism 

concerns, also regional destabilization concerns, you have mentioned. Since we are talking about sanctions, first among them is 

using those authorities aggressively that the United States has, as 

has been mentioned previously. 

I fully support the suggestion that Congress could call upon the 

administration to designate the IRGC in its entirety under terrorism authorities as well as an aggressive campaign to go after its 

agents, instrumentalities, front companies, et cetera, in Iran and 

outside of it as a way to expose this activity and go after it. 

However, sanctions are certainly not the only tool, possibly not 

the most important tool, for truly combating terrorism activities 

that Iran sponsors in the region and beyond. Certainly counterterrorism cooperation with partners in the region, some of Iran’s 

neighbors, is an incredibly important activity that occurs already 

and should be a subject of support from this body and broadly, 

internationally. Intelligence sharing and covert operations are also 

critically important to that set of activities. So that is just a short 

list. 

Mr. BOYLE. If anyone wanted to add to that. 

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Mr. ZARATE. Congressman, I think Liz is absolutely right. I think 

part of this is the position that we need to push back and push 

back in ways where there are real threats and real risk. One of the 

suggestions that I have made in the past is much more aggressive 

interdiction of Iranian shipments, which we have seen some of in 

the context of Yemen. 

Mr. BOYLE. And we have seen some of that increase recently. 

Mr. ZARATE. Exactly, because the risk is going to increase precisely because they have more funding, they have more interest, 

there is more adventurism. That needs to be ramped up with our 

naval forces as well as allied naval forces. That also raises the 

specter, which is not included in the negotiations or how we have 

looked at the risk of the deal, a proliferation with North Korea. The 

very real possibility that Iran and North Korea continue to collaborate on things like ballistic missile technology has to be a part of 

what we are looking at in terms of risk and pushing back on. 

And I also think we shouldn’t ignore things like human rights. 

We have the Magnitsky Act in terms of Russia, why aren’t we 

thinking more aggressively about what Iran is doing? Certainly, I 

think one could argue that the human rights abuses in Iran equal 

if not surpass what is happening in Russia, so why isn’t there legislation or at least focus there? So I think we have muted our voices 

a bit because we have wanted the deal, to be honest, but if that 

is the case we have the deal, let’s make it work. 

Mr. BOYLE. Right. 

Mr. ZARATE. But there are real risks that are still attendant to 

this. Let’s push back on those risks. 

Mr. BOYLE. I am down to 12 seconds, so let me just kind of conclude with this. When Treasury Secretary Jack Lew sat right there 

and testified in front of this committee, there was debate on exactly 

how much money we were unfreezing or making available to them. 

There were estimates upwards of $150 billion. He said no, that actually the accurate figure is $56 billion. 

And I took the administration at that. My point was that even 

if 90 percent of those funds go toward improving their basket case 

economy, if they just siphon off 10 percent to continue terrorist behaviors that is more money than they have at their entire disposal 

now for all their terrorist activities. So making sure that we tackle 

those funds for behavior that they are doing today is, in my view, 

the single most important thing Congress can do. I yield back. 

Mr. WEBER. The gentleman makes a good point. The gentleman 

from New York is recognized for 5 minutes. 

Mr. DONOVAN. Thank you, Mr. Chairman. Our hearing is entitled, Terrorism, Missiles and Corruption, and I wanted to touch on 

the corruption in Iran. And the Foreign Corrupt Practices Act prohibits United States citizens, United States companies from doing 

business with people who are bribing officials for business transactions and purposes. 

Part of the implementation day, the administration issued an 

edict for the subsidiaries of United States companies to be able to 

do business with the Iran Government. I was just curious if any 

of you had any position or idea, are these subsidiaries actually violating the act? And if they are, how is the parent company proVerDate 0ct 09 2002 12:58 Aug 11, 2016 Jkt 000000 PO 00000 Frm 00104 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\051216\20101 SHIRL
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tected, the United States parent company from these subsidiaries 

protected from violating the act itself? 

Ms. ROSENBERG. So this is right that the foreign subs of U.S. 

parents are allowed under the agreement to be able to do business 

in Iran. There are a number of caveats which say that they can receive certain back office services from their U.S. parents, but they 

cannot avail themselves of U.S. persons, financial institutions, the 

dollar, and other services that many would consider necessary for 

their functioning. 

In practice I think it will be incredibly difficult, if not virtually 

impossible, for those foreign subsidiaries to do their business as 

long as they are planning to do so in a responsible manner following existing sanctions and FCPA regulations. And for the parent, to protect itself adequately requires, as has been discussed, a 

tremendous amount of due diligence to ensure that no part in this 

company, its subsidiary, is involved in inappropriate or illicit activities. 

Mr. DUBOWITZ. And Congressman, I will just add, your question 

on corruption, I think, is an important one and Juan underscored 

this. But the pending Global Magnitsky Human Rights Accountability Act, which is before Congress, is one mechanism which can 

be used to target corruption, because not only does it target human 

rights violators but also government officials and their associates 

who are responsible for or who are complicit in significant corruption. So Global Magnitsky, I think again is not only important for 

human rights, qua human rights, but also to target corruption. 

And if you look at Iran’s regime, and the Supreme Leader him- self runs a $95 billion holdco called the Execution of Imam Khomeini’s Order, which by the way was de-listed under the JCPOA, 

but it is a massive corruption mechanism, as are the bonyads. And 

so the corruption within the Iranian regime is something again not 

only should we target because it is an effective way to protect the 

financial system, but also these are the crooks and thieves that are 

stealing from the Iranian people. 

And there may be a lot of disagreement in Iran over the nuclear 

program or other issues, but on the corruption issue it is certainly 

clear that since 1979 and even before that the Iranian people have 

been cheated out of their national wealth. 

Mr. ZARATE. Congressman, I would just say in terms of the environment in 2016, corruption and the issues of kleptocracy are now 

on the global agenda. And you clearly see the Department of Justice focusing more and more on aggressive applications of the 

FCPA. The FIFA case is a great example of the use of anti-corruption prosecutions to actually go after prosecution rings and networks around the world, especially institutions. 

But three quick issues that I think are important in terms of corruption with respect to Iran. One is the lack of transparency as to 

who owns what and what is tied to the leadership, everything that 

Mark and Liz and we have been talking about. The second is the 

rule of law. What does contractual relationship in Iran look like? 

What does it look like and what are the benefits and facilitation 

fees, et cetera, tied to dealing with the IRGC or a state-owned company? What is the rule of law in that context? That is a big question. 

102

And the third is, there is an international standard around how 

you engage and enhance due diligence, ask lots of questions about 

politically exposed persons. That is called PEPs. It is a term of art. 

While Iran is full of PEPs, it is full of high risk of corruption. And 

so for businesses, one of the reasons they are having trouble with 

managing how you go in, if you even wanted to go into Iran, is you 

have a sea of PEPs that you now have to deal with and engage and 

enhance due diligence to understand how they source their funds, 

what they are doing, what businesses they control, and this is all 

part of these heightened global standards that Iran is now facing. 

They are not just facing potential recalcitrants as part of the deal, 

they are facing heightened international standards that they have 

never been forced to adhere to. 

Mr. DONOVAN. I thank you all. My time is expired. Thank you. 

Chairman ROYCE. Thank you. We go to Mr. Ron DeSantis of 

Florida. 

Mr. DESANTIS. Thank you, Mr. Chairman. 

Mr. Dubowitz, with this Ben Rhodes article I was thinking, because I remember during that time when Rouhani was elected and 

the people were starting to say he was a moderate and then this 

was like this great opening, and I never bought that. I think most 

of our members never bought it. But, you know, I did think that 

the administration was just being naive about it. It turns out, I 

mean, they never bought it either. I mean, they knew that this a 

deal that was really going to be done in conjunction with Iran’s 

hardliners. 

But it does seem to me just thinking back, I am interested in 

your thoughts that the deception was very effective. I mean, they 

did create a narrative in the media that this was a really important opening. That there was a chance for change here and that 

that is what they were grappling onto, even though they had already started down this road before Rouhani was ever elected. 

Mr. DUBOWITZ. Congressman, that is exactly right. And the reason that deception was so important is actually because of the technical issues around the nuclear deal. When I talked in my testimony about a patient pathway to nuclear weapon, what I mean is 

that these key restrictions that Congressman Connolly believes are 

so important are actually going to go away beginning after 5 years 

and 8 years, 81⁄2 years, 10, 15. 

Now if Iran ends up in 10, 15 years as a moderate regime with 

a nuclear weapons capability, an industrial size enrichment program and ICBM, a powerful economy, regional hegemony, then we 

are not going to be as concerned because actually they start to look 

more like Japan which has threshold nuclear capability. But if Iran 

is still ruled by the hard men of Iran, the hardliners, if Rouhani 

was the Supreme Leader, and he is a hardliner, then we have a 

very dangerous regime in possession of industrial size nuclear capability. That is why that deception that Ben Rhodes has spun out 

is so damaging. 

Mr. DESANTIS. I agree. In terms of the access to the dollar, I remember the testimony not just from this committee but others 

about the administration says, look, they are not going to have access to the financial system. I believe that they also said it 

wouldn’t even be indirect. But what is your recollection of that? Is 

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what they are trying to do now, does that conflict with any of the 

testimony that we heard from the administration to lead up to the 

deal? 

Mr. DUBOWITZ. Well, it certainly contradicts the spirit of what 

they said. I think they were really, really careful to talk about specific access to the U.S. financial system and u-turn transactions. 

And, you know, to Liz’s comment, you are right. At some point a 

U.S. financial institution is going to have to be involved in offshore 

dollar clearing because they are going to have to provide more dollars into the system. If those dollars have been used they have to 

replace the dollars that have been used. 

But you can get around that by providing a license to U.S. financial institutions that would legally protect them for providing dollars to the offshore dollar clearing facilities. You could also do it 

not only through offshore dollar facilities but through book transfers, intrabank book transfers within the same financial institution 

that does that conversion and transfer. 

So I am concerned the administration has been trying to very 

carefully thread the needle between its commitments to Congress 

and its desire to give Iran dollarized financial transactions generally or in specific classes of transactions. 

Ms. ROSENBERG. If I could just respond to that. 

Mr. DESANTIS. Hold on. I am going to have one at a time. Mr. 

Zarate, the Treasury recommends that people considering doing 

business in Iran or with Iranian persons conduct due diligence to 

ensure that they are not knowingly doing business with the Revolutionary Guard Corps. What are these companies supposed to do? 

Because, you know, there is a huge percentage of the businesses 

that are controlled by the Revolutionary Guard Corps. You are not 

going to have a Revolutionary Guard Corps general show up to 

broker the deals. I mean, these things are sheltered and there are 

different things. And so what are companies supposed to do, and 

can they ever really be sure in some of these instances that they 

are not providing money for the Revolutionary Guard Corps? 

Mr. ZARATE. It is incredibly opaque, and you are right. I think 

any due diligence, be it enhanced or otherwise, is limited by the 

structure and nature of the environment in which you are doing 

that diligence. And, you know, I doubt that Iran has a corporate 

registry for all of those companies run by the IRGC. Some of it is 

public actually. There has been a lot of research on some of those. 

But a lot of it is opaque and we know that they have used shell 

companies, we know that they have used procurement agents, we 

know that they have used classic layering in money laundering 

fashion to hide their activities. 

And so it is a very hostile environment to transparency and due 

diligence. And what you have are financial institutions that are 

being asked to do that kind of due diligence in other parts of the 

world in very harsh and difficult environments now contemplating 

that in the Iranian context along with all of the things that Iran 

does in using or misusing its financial system. That is why it is so 

risky in doing business and it is very hard for a CEO or compliance 

at a general counsel of a bank to say I feel fully comfortable that 

I understand with whom we are doing business, how we are doing 

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it, and to be able to fence-ring the kinds of risk that they are exposed to. 

Mr. DESANTIS. Yes, I agree. I think that is very well stated. And 

my time is up, but I appreciate everyone’s testimony. I yield back. 

Mr. ENGEL. Mr. Chairman, I am wondering if we could let Ms. 

Rosenberg finish her answer. 

Chairman ROYCE. Without objection, yes, Mr. Engel. 

Ms. ROSENBERG. Thank you. I just wanted to offer that as the 

President has stated, the U.S. Government is not considering giving Iran access to the U.S. financial system. In fact, under current 

restrictions, the u-turn penalty, this is something that banks take 

very seriously. And when they have abused it, as has been demonstrated in some of the big bank enforcement cases, including by 

using book-to-book transfers that were inappropriate and constituted evasion, they have been punished severely. So currently 

they are not considering it, it is not possible, and it is punishable 

with severe and expensive financial penalties. 

Mr. ENGEL. Thank you. Mr. Chairman, I ask unanimous consent 

to place into the record this letter from the Treasury Department 

explaining the administration’s policies related to Iranian transactions and access to the U.S. financial system. 

Chairman ROYCE. Without objection. 

Mr. DUBOWITZ. Mr. Chairman, may I say one quick thing? When 

the President of the United States says very clearly we will not 

give Iran direct or indirect access to the U.S. dollar, then I think 

you and your colleagues should be more assured. 

Chairman ROYCE. Thank you, Mr. Dubowitz. I thank all of our 

panel today. Mr. Zarate, good to see you again. And we thank you 

for your time, very insightful testimony. And this was a particularly timely discussion given Secretary Kerry’s meetings in Europe 

this week and yesterday, and as international financial institutions 

weigh their reputational risks with a country like Iran, which as 

we heard is not heeding basic international standards. 

So this hearing stands adjourned. 

[Whereupon, at 12:02 p.m., the committee was adjourned.] 

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MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE ELIOT L. ENGEL, A

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QUESTIONS SUBMITTED FOR THE RECORD TO THE PANEL BY THE HONORABLE MICHAEL

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