U.S. GOVERNMENT PUBLISHING OFFICE

31–293 PDF WASHINGTON : 2018

EVALUATING THE EFFECTIVENESS 

OF U.S. SANCTIONS PROGRAMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 30, 2017 

Printed for the use of the Committee on Financial Services 

Serial No. 115–62 

( 

mcarroll on FSR431 with DISTILLER

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MACARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

KIRSTEN SUTTON MORK, Staff Director 

mcarroll on FSR431 with DISTILLER

(III) 

SUBCOMMITTEE ON MONETARY POLICY AND TRADE

ANDY BARR, Kentucky, Chairman 

ROGER WILLIAMS, Texas, Vice Chairman 

FRANK D. LUCAS, Oklahoma 

BILL HUIZENGA, Michigan 

ROBERT PITTENGER, North Carolina 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

ALEXANDER X. MOONEY, West Virginia 

WARREN DAVIDSON, Ohio 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

GWEN MOORE, Wisconsin, Ranking Member 

GREGORY W. MEEKS, New York 

BILL FOSTER, Illinois 

BRAD SHERMAN, California 

AL GREEN, Texas 

DENNY HECK, Washington 

DANIEL T. KILDEE, Michigan 

JUAN VARGAS, California 

CHARLIE CRIST, Florida 

mcarroll on FSR431 with DISTILLER

mcarroll on FSR431 with DISTILLER

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 30, 2017 ........................................................................................... 1 

Appendix: 

November 30, 2017 ........................................................................................... 31 

WITNESSES 

THURSDAY, NOVEMBER 30, 2017 

Billingslea, Hon. Marshall, Assistant Secretary for Terrorist Financing, U.S. 

Department of the Treasury ................................................................................ 4 

Smith, John E., Director, Office of Foreign Assets Control, U.S. Department 

of the Treasury ..................................................................................................... 6 

APPENDIX 

Prepared statements: 

Billingslea, Hon. Marshall ............................................................................... 32 

Smith, John E. .................................................................................................. 37 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Huizenga, Hon. Bill: 

Washington Post article entitled, ‘‘He ran North Korea’s secret moneymaking operation. Now he lives in Virginia.’’ ............................................. 46 

Billingslea, Hon. Marshall and Smith, John E.: 

Written responses to questions for the record submitted by Representative Sherman ................................................................................................. 50 

mcarroll on FSR431 with DISTILLER

mcarroll on FSR431 with DISTILLER

(1) 

EVALUATING THE EFFECTIVENESS 

OF U.S. SANCTIONS PROGRAMS 

Thursday, November 30, 2017 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MONETARY POLICY AND TRADE, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:24 p.m., in room 

2128, Rayburn House Office Building, Hon. Andy Barr [chairman 

of the subcommittee] presiding. 

Present: Representatives Barr, Williams, Huizenga, Pittenger, 

Hill, Mooney, Davidson, Tenney, Hollingsworth, Moore, Foster, 

Sherman, and Crist. 

Chairman BARR. The committee will come to order. Without objection, the Chair is authorized to declare a recess of the committee 

at any time, and all members will have 5 legislative days, within 

which to submit extraneous materials to the Chair for inclusion in 

the record. 

This hearing is entitled, ‘‘Evaluating the Effectiveness of U.S. 

Sanctions Programs.’’ I now recognize myself for 5 minutes to give 

an opening statement. 

I am pleased to welcome our colleagues and our witnesses to this 

subcommittee’s hearing on U.S. sanctions. From Iran, to North 

Korea, to Russia and Venezuela, sanctions are increasingly used as 

an instrument in our foreign policy toolkit, and Congress must ensure that they be held accountable for results. 

This hearing will examine major sanctions programs as we seek 

to evaluate their effectiveness. Let me highlight three points that 

may provide context for this discussion. 

First, sanctions are key to bringing about behavioral change 

abroad, and this committee has stressed that they should be designed accordingly. That means calibrating sanctions, and sanctions relief, based on specific and achievable actions we wish to see 

from a foreign actor. Tailoring sanctions in this way is especially 

important for secondary sanctions, given how banking restrictions 

tend to have broader and less predictable effects than primary 

measures. 

In October, the Financial Services Committee reported, and the 

full House overwhelmingly passed the Otto Warmbier North Korea 

Nuclear Sanctions Act, a piece of legislation that I was proud to 

sponsor with our Ranking Member, the gentlelady from Wisconsin. 

The bill would impose financial sanctions targeting every area of 

North Korea’s economy, including all petroleum imports, and any 

deployment of laborers abroad. This week’s test launch by the 

mcarroll on FSR431 with DISTILLER

2 

DPRK (Democratic People’s Republic of Korea) of an ICBM (intercontinental ballistic missile) that can reach any part of the United 

States underlines why maximum pressure is needed. 

Our bill outlines the principles that the majority and minority 

here consider essential for the use of secondary sanctions, not only 

with respect to North Korea, but other countries as well. Namely, 

we should strike with as much strength as possible, provide the 

President with flexibility, and link the termination of sanctions to 

a narrow set of realistic objectives. 

This approach is distinguished from what we might call, quote, 

‘‘symbolic sanctions,’’ unquote; that is, devoting scarce resources to 

designations with no real impact on our foreign policy objectives, 

or tying sanctions to a list of outcomes that no one expects to 

emerge in the foreseeable future. 

For sanctions to retain their credibility, we must guard against 

such half measures. If sanctions are akin to antibiotics, then we 

should ask what indiscriminate use will do for antibiotic resistance. 

At the same time, if we want to preserve the trust that the world 

continues to hold in the U.S. financial system, we must think clearly about what it means to restrict access to that system, and communicate with equal clarity so that others understand the rationale 

that governs both the imposition and lifting of our sanctions. 

The second point to underscore is the need for continuous engagement with Congress, when the Executive chooses to wield its 

sanctions’ powers. As we know, the Executive possesses broad authorities under the International Emergency Economic Powers Act 

(IEEPA). What may be less well-known is that IEEPA lays out explicit provisions for regular Congressional consultations and reports, so that these authorities are exercised with appropriate oversight. 

The committee would encourage our witnesses to examine whether the Office of Terrorism and Financial Intelligence (TFI) is upholding the letter and spirit of these provisions. TFI has been the 

recipient of bipartisan goodwill, and using emergency powers accountably will help ensure that such goodwill is sustained. 

This brings me to point number three. As our country becomes 

more reliant on economic sanctions to carry out its foreign policy, 

the Treasury Department will be increasingly called upon to make 

its voice heard on the substance of that policy. 

We have already seen bureaucratic changes that reflect the shift. 

In August, for instance, the President signed into law the Countering America’s Adversaries Through Sanctions Act (CAATSA), 

which included the secretary of the Treasury as a member of the 

National Security Council. 

In light of this trend, we should expect that Congress will look 

more and more to the department, and particularly, to TRI, not 

only to implement sanctions, but to help shape their goals, scope, 

and strategy, and to answer for sanctions’ shortcomings, if they fail 

to meet their objectives. Of course, Treasury undertakes these 

things to a certain extent already, but its accountability will only 

grow with its prominence in these debates. 

I want to thank our witnesses for testifying today, and look forward to working with them so that our sanctions programs are coherent, realistic, and impactful. 

mcarroll on FSR431 with DISTILLER

3 

The Chair now recognizes the Ranking Member of the subcommittee, the gentlelady from Wisconsin, Gwen Moore, for 5 minutes for an opening statement. 

Ms. MOORE. Thank you so much, Mr. Chairman. Before I begin 

my comments, let me thank our guests from the Treasury Department. I always look forward to hearing from these experts, and information is a powerful tool. 

Let me begin by thanking our Chairman for calling this hearing, 

and as he indicated before, I am a part of the bipartisan work on 

the North Korea sanctions; so proud to have worked on that in a 

bipartisan matter. I do believe that we have passed a strong bill, 

and I certainly hope that the Administration does the hard work 

of implementing this bill. 

With that said, I can’t pretend that I am not concerned about the 

general state of United States foreign policy, and this Administration’s commitment to implementing our sanctions programs. I can 

tell you that as an American, I think there are many other people 

who join me in feeling that we are isolated and weak, with even 

the British debating whether or not the President of the United 

States is welcome in England. This is stunning. 

My constituents are very concerned about the extent and depth 

of the relationships with human rights violators; with Putin, a relationship that has the President and many of his cabinet and advisers mired in deepening and widening scandals relating to Kremlin 

connections. 

I am concerned with reports that the Department of State eliminated the office of the coordinator for sanctions policy. We did the 

hard work in this committee to draft this North Korea sanctions 

bill, and I am sure that our witnesses are aware that the U.S. currently has sanctions against Russia, and that Congress recently 

passed further sanctions against Russia. 

So it is puzzling to me why the Department of State would eliminate the office that would coordinate these sanctions policies. I 

think you can catch my drift, and perhaps even empathize with me. 

Cutting out some people who could help you all— 

I am sure you are also aware that the Administration seems not 

to be implementing these Russian sanctions. Forgive me, but I 

grew up in a time and era where, as a public school student, as 

a little girl, we were diving under our desks, we were so afraid of 

Russia. 

It is puzzling to me why we are not implementing those Russian 

sanctions at this point. I am worried that the Administration is 

more interested in implementing the goals of the Kremlin, and to 

not have sanctions through the statutory mandates of this Congress to expand and strengthen the Russian sanctions. I really am 

interested in hearing about the Treasury’s efforts to make sure it 

is implementing Congressional intent and vigorously enforcing 

sanctions against Russia. 

I am going to apologize in advance for bowing out of the meeting 

somewhat early, because I have a conflict of another meeting that 

is extremely important as well. But I do look forward to hearing 

your testimony. I will be here to hear your testimony and answer 

some of these questions. 

Thank you so much, and Mr. Chairman, I yield back. 

mcarroll on FSR431 with DISTILLER

4 

Chairman BARR. The gentlelady yields back. Thank you for that 

opening statement. 

Today we welcome the testimony of Marshall Billingslea, the Assistant Secretary of the Treasury for Terrorist Financing. In this 

role, he helps oversee the Administration’s efforts in administering 

economic sanctions programs globally. 

Prior to joining Treasury, Mr. Billingslea served as Managing Director for Business Intelligence Services at Deloitte Advisory. He 

had previously held positions at the Department of Defense, where 

he served as Deputy Undersecretary of the Navy, and Principal 

Deputy Assistant Secretary of Defense for Special Operations and 

Low Intensity Conflict. 

Mr. Billingslea has also worked as a NATO Assistant Secretary 

General for Defense Investment, and as a staff member on the Senate Foreign Relations Committee. He is a recipient of the Defense 

Medal for Distinguished Public Service. 

John Smith is the Director of the Treasury Department’s Office 

of Foreign Assets Control, OFAC, which is responsible for administering economic and trade sanctions to advance U.S. national security and foreign policy goals. Mr. Smith has previously served as 

OFAC’s Acting Director, Deputy Director, and Assistant Director. 

Prior to joining OFAC, Mr. Smith served as an expert to the 

United Nations’ Al Qaida and Taliban Sanctions Committee from 

2004 to 2007, and as a trial attorney at the U.S. Department of 

Justice from 1999 to 2004. 

Each of you will be recognized for 5 minutes to give an oral presentation of your testimony. Without objection, each of your written 

statements will be made part of the record. 

Mr. Billingslea, you are now recognized for 5 minutes. 

STATEMENT OF THE HONORABLE MARSHALL BILLINGSLEA 

Mr. BILLINGSLEA. Chairman Barr, Vice Chairman Williams, 

Ranking Member Moore, and members of the committee, thank you 

for inviting me here today to offer testimony on the effectiveness 

of sanctions, and to talk about a number of the matters that you, 

Chairman, and you, Ranking Member, have raised in your opening 

statements. 

The Treasury Department has, in my view, pioneered the use of 

targeted sanctions as a tool of statecraft, and we are continually refining how we employ financial pressure. In the interest of time, 

I will skip to the bottom line up front, which is that I believe that 

there are several reasons why sanctions are quite effective tools. 

Chairman, I do actually agree with the way you laid out the overall 

context of sanctions. 

But I believe I can name, and I will name numerous examples 

in which our sanctions have been effective, and I would like to provide four specific reasons, or four specific matters which I think affect the effectiveness of sanctions, when we choose to employ them. 

Now, this Administration has aggressively targeted ISIS leaders 

and operatives for their operational and financial support around 

the world, and the result has been that we have engaged—John 

and OFAC have engaged in over 70 actions against ISIS leaders, 

their facilitators, recruiters, and affiliated money services businesses worldwide. 

mcarroll on FSR431 with DISTILLER

5 

U.S. and U.N. designations, along with close cooperation between 

United States and Iraqi authorities, in particular—in fact, I just 

came back from Baghdad a little more than a week ago—have effectively shut down a number of exchange houses that were functioning as key nodes for ISIS—or Daesh, as we might call them 

and their financial facilitating networks. 

Separately, we continue the effort against al Qaida and other terrorist groups through both unilateral and multilateral actions. Secretary Mnuchin, as you may know, recently announced the opening 

of a rather significant and rather innovative breakthrough, which 

is the creation of a multinational Terrorist Financing Targeting 

Center, the TFTC, that is housed in Saudi Arabia. 

In conjunction with that announcement, the six Gulf Cooperation 

Council member states—so seven of us altogether, seven nations— 

imposed sanctions on a network of al Qaida and ISIS financiers 

and weapons traffickers in Yemen. This was, in fact, one of the biggest multinational designations ever outside of the United Nations. 

We have also targeted, and I am sure you will hear more about 

the way we have gone after dozens of North Korean individuals 

and entities, including coal companies, banks, financial 

facilitators—any revenue that North Korea generates that can be 

used to support—or actually, any revenue they generate, period, is 

used to support the various weapons programs that the regime has, 

and we are determined to cut that off. 

Finally, and I know we will want to talk more about Iran today. 

Sanctions were the dominant factor in forcing Iran to the negotiating table over their nuclear weapons program, and we are committed, the Administration is committed to combating Iran’s malign behavior around the globe. Even Hezbollah’s leader, Hassan 

Nasrallah, has acknowledged that their donors are scared to continue remitting funds as a result of U.S. sanctions. 

Now, I mentioned four specific reasons why I think sanctions are 

effective. First is that we employ these against the backdrop of an 

international financial system that we are continuously working to 

improve to create capabilities to create standards through the Financial Action Task Force to cause the international financial system to embrace anti-money laundering (AML), and countering the 

financing of terrorism standards, and to create regimes that are enforceable across the globe. 

This has been a patient and long-standing effort of the Treasury 

Department. It is a bipartisan, nonpartisan endeavor that has 

stretched across multiple Administrations, and it is because of this 

backdrop of driving the creation of these regimes that we are, in 

fact, able to cause our partner nations to work with us, and to embrace and enforce these measures. 

In the interest of time, a second reason that sanctions are so effective is because of the financial diplomacy that goes with the actions we undertake. A specific Treasury action by OFAC or by 

FinCEN (Financial Crimes Enforcement Network) is often preceded 

by, and almost always followed up with engagement by the Treasury and State Departments, with our allies, our partners in the 

public and private sectors. As a general proposition, sanctions are 

most effective, as the Ranking Member indicated, when they are 

implemented multilaterally. 

mcarroll on FSR431 with DISTILLER

6 

That said, of course, this Administration, and in fact, no Administration would hesitate to take action unilaterally to defend the 

American people as necessary. But when and where possible, we do 

work with other nations to amplify our message, and drive concerted action. 

We, of course, pursue financial diplomacy through a variety of 

multilateral and multinational organizations, such as the United 

Nations, but I also mentioned the TFTC that was just established 

as another example. 

I am at time, but simply to summarize the final two reasons, 

which I can come back upon, as you wish. The third reason, and 

a third important criteria is that we have to be clear and consistent 

in our messaging: When we sanction; what is it that we are seeking 

to achieve. I would suggest, how we have approached Venezuela is 

a good example. 

The fourth that influences the effectiveness—and Mr. Chairman, 

you mentioned this specifically—is the extent to which the targeted 

individual, their finances, do they touch the international financial 

system? I would agree with you that symbolic sanctions probably 

are not worth the candle, though there are times and places where 

that is worthwhile. 

Again, I appreciate the chance to appear before the committee, 

Mr. Chairman. 

[The prepared statement of Mr. Billingslea can be found on page 

32 of the appendix.] 

Chairman BARR. Thank you. The gentleman’s time is expired. Director Smith, you are recognized now for 5 minutes. 

STATEMENT OF JOHN SMITH 

Mr. SMITH. Thank you, Chairman Barr, Vice Chairman Williams, 

Ranking Member Moore, and distinguished members of the committee. Thank you for inviting me here to discuss the important 

role of sanctions in addressing some of our Nation’s most prominent national security and foreign policy challenges. 

As the Director of the Treasury Department’s Office of Foreign 

Assets Control, or OFAC, I will speak to the sanctions my office 

has imposed against supporters of the destabilizing and provocative 

actions of governments such as North Korea, Iran, and Russia, as 

well as a range of other actors engaged in conduct antithetical to 

our Nation’s ideals and interests. 

When deployed strategically and with precision, sanctions are a 

highly effective way of pressuring regimes and malign actors to 

change their behavior. These regimes and actors ultimately rely on 

funding to operate, and by freezing their assets, cutting them off 

from the U.S. financial system, and restricting their ability to 

interface in the international financial system, the choice to them 

becomes clear: Either modify your behavior, or accept the isolation 

and negative economic effects of our financial blacklists. 

One of our highest priorities is targeting the North Korean regime and its key financial vulnerabilities. This year, OFAC has 

issued eight rounds of sanctions related to North Korea, adding 112 

individuals and entities to our Specially Designated Nationals and 

Blocked Persons List—what we call the SDN List. The regime requires revenue to maintain and expand its nuclear and ballistic 

mcarroll on FSR431 with DISTILLER

7 

missile programs, and we have focused our efforts on areas where 

we can have the maximum disruptive impact. 

Just last week, OFAC sanctioned several Chinese trading companies that were responsible for hundreds of millions of dollars of imports from and exports to North Korea over the last few years. Earlier this year, we designated a number of Chinese companies that 

had imported nearly half a billion dollars’ worth of North Korean 

coal between 2013 and 2016. That action, combined with diplomatic 

pressure and multilateral sanctions, helped pressure China to announce that it would halt all coal imports from North Korea, representing a blow to the regime’s revenue generation capabilities. 

Iran is another top priority, and since January OFAC has issued 

eight tranches of sanctions involving Iran, designating 78 targets 

around the globe in connection with the Islamic Revolutionary 

Guard Corps, the IRGC, and Iran’s ballistic missile program, support for terrorism, human rights abuses, cyberattacks, 

transnational criminal activity, and other destabilizing regional activity. We recently designated the IRGC, under the Global Terrorism Executive Order, pursuant to the Countering America’s Adversaries Through Sanctions Act, the CAATSA legislation that you 

mentioned. 

Just last week, we sanctioned an IRGC-Quds Force counterfeiting network that deceived European suppliers to procure advanced equipment and materials to print counterfeit Yemeni bank 

notes potentially worth hundreds of millions of dollars. 

Another significant priority for OFAC is addressing Russia’s destabilizing activities in Ukraine. This summer, we continued our 

regular pattern of sanctions, and designated 38 individuals and entities involved in the ongoing conflict in Ukraine. More recently, we 

have been hard at work implementing requirements and publishing 

guidance related to the CAATSA legislation passed by Congress. I 

want to be clear and emphasize: The Treasury has fully implemented every CAATSA requirement delegated to it within the statutory deadlines. 

We have also used our sanctions this year to address the erosion 

of democracy in Venezuela; disrupt major narcotics traffickers in 

Mexico, Colombia, Peru, and Venezuela; increased pressure on the 

Assad regime in Syria; denied terrorist groups like ISIS and 

Hezbollah the ability to access the U.S. financial system; and shine 

a spotlight on various governments for serious human rights 

abuses. 

We have dedicated the bulk of our resources and attention on the 

issues most pressing to our Nation’s security. We greatly appreciate Congress’ partnership and continued efforts to ensure that 

OFAC and TFI are equipped with adequate tools and authorities. 

However, I will note that our existing powers are relatively 

broad, and in order to achieve maximum impact, we need flexibility 

in administering and enforcing our sanctions. Additionally, the increasing Congressional reporting requirements and statutes with 

no expiration dates ultimately draws resources away from our primary sanctions activities. 

Thank you, again, for the opportunity to speak with you today, 

and I look forward to continuing to work with you and your staff 

as we try to maximize the impact of our sanctions. 

mcarroll on FSR431 with DISTILLER

8 

[The prepared statement of Mr. Smith can be found on page 37 

of the appendix.] 

Chairman BARR. Thank you. The gentleman’s time is expired, 

and the Chair now recognizes himself for 5 minutes for questioning. 

Let me just first commend Treasury and the Trump Administration for abandoning this policy of strategic patience that has led 

North Korea to obtaining a nuclear arsenal, including a hydrogen 

bomb, and as we saw earlier this week, an intercontinental ballistic 

missile capable of reaching the continental United States, and potentially, a reentry vehicle for that missile. I would commend 

Treasury for its eight rounds of sanctions and designations in 

North Korea. 

However, I do want to read into the record an op-ed that you 

probably saw this morning in the Wall Street Journal entitled, 

‘‘Maximum Pressure on North Korea: China and the U.S. Still 

Haven’t Imposed Toughest Sanctions.’’ I will just read and quote 

from the article. 

Quote, ‘‘the Trump Administration has done more than its predecessors to thwart North Korea’s nuclear progress, but it is still far 

from using maximum pressure. It may not work in the end, but the 

alternatives are terrible: acquiescence or war. Wednesday’s ICBM 

test shows Kim is getting closer to his goal of threatening U.S. cities. So why is the U.S. not using all the tools it has to stop him?’’ 

So my question is this, to both of you: In a hearing before the 

Senate Banking Committee earlier this fall, Treasury Undersecretary Mandelker stated that the U.N. Security Council resolutions 

pertaining to North Korea represent, quote, ‘‘the floor, not the ceiling.’’ That is why, under the House-passed bill that we were referring to earlier, the North Korean sanctions bill that was bipartisan, 

we go beyond those resolutions to target all oil exports to the 

DPRK, and all of its foreign labor. 

So the question is this, if the U.N. resolution is truly just the 

floor for U.S. policy, what is Treasury doing to eliminate the petroleum and labor loopholes that are left by the resolutions, and why 

should Congress tolerate the same incremental strategy that has 

gotten the Kim regime where it is today? We will start with you, 

Mr. Billingslea. 

Mr. BILLINGSLEA. Thank you, Chairman. So obviously, the U.N. 

sanctions regime is multinationally crafted, and it requires the Chinese and the Russians to come along. In fact, Ambassador Haley 

at the U.N. reengaged in wake of the recent launch to drive again 

the need to further ratchet the pressure on North Korea for its continuing behavior. 

I would say we have actively worked to dry up all of the different 

mechanisms by which the North Korean regime obtains petroleum 

and other petroleum products, regardless of the fact that the U.N. 

Security Council resolution, that they ultimately did not agree to 

the U.S. position to shut off all crude oil imports. They agreed to 

a reduction in crude, and to a cessation of oil products. 

The number of things that we have done along these lines—and 

again, back to my point about, not everything is a sanction, right? 

There are a lot of other things TFI, the Treasury does in the financial diplomatic world that go beyond the individual discreet sancmcarroll on FSR431 with DISTILLER

9 

tions acts. But John is going to be able to tell you about the very 

specific sanctions designations that we have engaged in to target 

the different exchange mechanisms by which people were illicitly 

flowing petroleum into North Korea. 

But on top of that, we have identified the latest evasion technique that the North Koreans are using, which involves North Korean oil freighters pulling out into the middle of the ocean, and 

linking up with commercial chartered oil tankers to do ship-to-ship 

transfers. We have exposed a number of these. We have gone after 

their flagging authorities with the various nations, to yank the 

flagging authority, to cause the vessel to have difficulties. We are 

further investigating the network of shell and ownership structures 

that are created to hide the true ownership of these ships. 

On labor, I personally have engaged with a large number of 

countries overseas, particularly in the Middle East, to secure agreement to expel North Korean slave labor from these countries, and 

to identify the companies that were being used to exploit these people. 

Those are just two examples of how we are— 

Chairman BARR. If I could just jump in there, you did mention 

in the testimony about the designation of the four Chinese trading 

companies that have conducted business, and the designations 

there. But I am sure you are familiar with the recent report that 

indicated there are over 5,000 such companies in China. We just 

want to know how Treasury can make a dent in these Chinese 

firms’ business with North Korea if you are focusing on individual 

designations, as opposed to these secondary sanctions on these middlemen front companies. 

Mr. BILLINGSLEA. The challenge we have is when we see these 

press reports and these 5,000 here, 3,000 there. The challenge is 

that we have to meet evidentiary standards for the measures that 

we take, legal standards. So we do need much more granular information, so that John can take his actions. 

So when we get these leads, we follow them up aggressively. 

Chairman BARR. Thank you. My time is expired, and as my questioning points out, I think as our recently passed House bill makes 

clear, we believe there is a need for Treasury to exhaust all options 

available, especially in light of this most recent ballistic missile 

test. 

At this time, I would like to recognize the Ranking Member for 

5 minutes of questioning. 

Ms. MOORE. Thank you so much, Mr. Chairman. Thank you 

again. 

One of the most horrific acts that is occurring anywhere on planet Earth at this point is the ethnic cleansing of the Rohingya people, who have fled to Bangladesh since late August. I was wondering, is there any program under the Global Magnitsky Act that 

targets the senior-most members of these Burmese security forces, 

who likely ordered these rapes, and murders, and acts of arson. 

Have you identified any of these folks? When do we expect to see 

sanctions announced against Burma? 

Mr. SMITH. Thank you, Ranking Member. I am glad you mentioned the Global Magnitsky Act. We appreciate Congress’ giving 

us the authority to target human rights abusers and corrupt actors 

mcarroll on FSR431 with DISTILLER

10 

worldwide. As you mentioned, this authority gives us the opportunity to target those that are responsible for such activity, serious 

human rights abuses, no matter where they occur. Congress has 

given a mandate in that legislation, asking us to report at certain 

periods, and take action by certain periods, and the next period 

comes up in December. I think the Treasury Department is working to make sure that we implement this statute fully. It is something— 

Ms. MOORE. Have you identified any people in Burma? 

Mr. SMITH. We have not under Global Magnitsky. 

Ms. MOORE. OK. 

Mr. SMITH. It is authority that has just been delegated to us— 

Ms. MOORE. OK, OK, thank you for that. 

I was arrested hanging out with John Lewis—warn some of the 

freshmen about him—for protesting at the Sudanese embassy for 

crimes that have been committed in Sudan. The president, by the 

way, still remains under indictment by the International Criminal 

Court for War Crimes, including genocide. We impose sanctions for 

human rights violations, and yet we have relaxed them under this 

Administration. What did I miss? 

Mr. BILLINGSLEA. Relaxed—we actually removed them. 

Ms. MOORE. Removed them. Why? 

Mr. BILLINGSLEA. Correct. We removed them, by the way, on the 

basis of criteria established by President Obama. So President 

Obama established five specific criteria against which the Sudanese would be held accountable. 

Ms. MOORE. OK, thank you. My time is waning. I am going to 

continue on this theme of sanctions and human rights, because I 

am confused by what the policy of the Administration is. We have 

seen him following Obama’s agenda, he is re-imposing sanctions, 

strictures against Cuba. He has decided that Venezuela has become 

enemy number one because of the government’s role in undermining democratic processes and institutions. 

And yet, we see that he shows a fondness for totalitarian 

strongmen around the globe, including the Philippine president, 

Duterte, praising the authoritarian leader of Egypt, who had his 

political opponents gunned down, and jailed those dissidents, and 

the President thinks that they have done a fantastic job in a very 

difficult situation. Of course, defended President Putin against accusations that he has murdered journalists and dissidents. 

So I am wondering why it seems to be such a checkerboard approach to sanctions. Can you help me sort this out? 

Also, what I want to ask you, Mr. Smith, is, sometimes you can 

give waivers for—and I want to know if there are any waivers that 

we don’t know about. You can do it without coming to Congress, 

for reducing, relinquishing waivers against Russia. 

Mr. SMITH. So thank you for the questions. 

With respect to the human rights-related designations, we have 

continued to actively target, over the past year, human rights-related concerns in North Korea, Iran, South Sudan, and Venezuela, 

among other programs. So we have continued our focus on human 

rights concerns. 

In terms of waivers, with respect to Russia— 

Ms. MOORE. So how does this—yes, OK. Go on. 

mcarroll on FSR431 with DISTILLER

11 

Mr. SMITH. With respect to Russia, I think most of the waivers 

that might exist in statutory programs have been delegated to the 

State Department under the various authorities. OFAC can issue 

particular licenses, and under the CAATSA legislation, we are notified— 

Ms. MOORE. OK, and so I have 2 seconds left, very quickly. My 

time is expired. 

Chairman BARR. Gentlelady’s time is expired. Chair now recognizes the Vice Chairman of the subcommittee, and author of the 

Strengthening Oversight of Iran’s Access to Finance Act, the gentleman from Texas, Mr. Williams. 

Mr. WILLIAMS. Thank you, Chairman Barr, for your important 

work on sanctions legislation, most recently, the House passage of 

increased North Korea sanctions. Given the overwhelmingly increased aggression under the Kim regime, this legislation cannot 

be timelier. 

I would like to also welcome Assistant Secretary Billingslea and 

Director Smith to our subcommittee, and thank them for joining us 

this afternoon. I appreciate your time, and I appreciate your expert 

testimony. America and some of her most important allies, such as 

Israel, are under the constant threat by those who wish to harm 

us, and the work that both of you do in the sanctions field helps 

to keep the bad actors away. Appreciate that. 

Though there are areas where we can improve, I am specifically 

encouraged by the current Administration’s path forward in dealing with the world’s foremost state-sponsored terrorism in Iran. 

After 8 years of flawed policy toward Iran, culminating with the 

terrible JCPOA (Joint Comprehensive Plan of Action), I am encouraged by the President’s direction. 

So Assistant Secretary Billingslea, thank you for being here. Iran 

continues to be extremely concerning to me and those I represent. 

We must do all we can to ensure that appropriate sanctions are enacted to the world’s foremost state-sponsor of terror. To that end, 

I recently sponsored, as you heard, Strengthening Oversight of 

Iran’s Access to Finance Act, which was reported favorably out of 

this committee, and just yesterday was introduced by Senator Cruz 

and Senator Perdue in the Senate. My legislation will increase 

Congressional oversight of aircraft sales to Iran, and their effect on 

financial institutions. 

So Mr. Secretary, what similar steps can be taken to further prevent the abuse of the financial system by Iran in the way that promotes terrorism, human rights abuses, or assistance to the Assad 

regime? 

Mr. BILLINGSLEA. Thank you, Vice Chairman. As you have said, 

Iran is the foremost sponsor of terrorism around the world, and 

they have used their newfound access to financial resources to further support terrorism and foment instability across the Middle 

East and globally. 

The Iranian Quds Force, in particular, is heavily engaged in destabilization in Syria, in Iraq. They are moving money to 

Hezbollah, to Hamas, and to other terrorist organizations. Obviously, their role in Yemen and the civil war there, supporting the 

Houthis, is truly, truly incredible. 

mcarroll on FSR431 with DISTILLER

12 

Much more needs to be done to constrain Iran’s ability to obtain 

and move finances to terrorist organizations. That is why Congressional action under CAATSA with regard to the Iranian Revolutionary Guard Corps, as the parent organization of the Quds Force, 

is a major entity, or set of entities interwoven throughout the Iranian economy. 

One of the things that we have been cautioning our European allies and others, is to be very careful as you look at doing business 

with Iran, because we have sanctioned the IRGC—actually, the Europeans have as well, and we expect that extreme caution should 

be exercised before entertaining any type of business in that country, particularly when they have not only no safeguards and no 

anti-money laundering regime to speak of, but when they are engaged in outrageous counterfeiting behaviors that Director Smith 

mentioned, which completely fly against all of the norms of the financial services sector. 

Mr. WILLIAMS. Thank you. I would also like to further discuss 

the tools that the Treasury is utilizing in its fight against Iran’s 

destabilizing financial activity. In August, Congress passed new 

sanctions and legislation, giving the Trump Administration new 

tools for the fight against Iran’s missile program, terrorist assistance, and human rights abuses. I firmly believe that Iran will continue to develop new ways to work around U.S. and international 

sanctions to continue their campaign of terror across the globe. 

So another question I have is, how do we maintain pressure on 

Iran’s leadership and financial institutions, ensuring that the IRGC 

and related financial entities do not create loopholes to avoid these 

sanctions? 

Mr. BILLINGSLEA. Quickly, in two ways. I will talk with one, and 

then, I think Director Smith on the other. 

With regard to pressure on the regime, one of the things that 

they have to do is they have to create a legal framework, and be 

held accountable for stopping the financing of terrorism. They do 

not have sufficient laws in Iran. I don’t know that they would 

honor those laws, even if they had them. But they don’t have the 

regime in place, and we ought to insist that until they do have an 

anti-money laundering set of laws that are being enforced, counter 

measures should be imposed on their financial sector. 

Mr. SMITH. I was just going to say, I think we also need to keep 

doing what we are doing, and ramping up pressure, exposing the 

bad activity where we see it across the board. We are exposing it 

wherever we see around the world, no matter what country it is 

involved in, no matter what type of company, and we are exposing 

the different types, including the counterfeiting ring that I mentioned earlier. 

Mr. WILLIAMS. OK. Thank you. I yield my time back. 

Chairman BARR. The Chair now recognizes the gentleman from 

North Carolina, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. Thank you, gentlemen, for being with us today. Appreciate your commitment and 

your involvement with us. 

Director Smith, and I would say to you as well, Mr. Secretary, 

would you please discuss with us the tools that you believe are effective that, at your disposal, that will allow us to address export 

mcarroll on FSR431 with DISTILLER

13 

controls? I would like to discuss CFIUS (Committee on Foreign Investment in the United States) as well, and what modifications 

should be made, if any, to CFIUS, and the relevance of that committee, and particularly, as we deal with nations who have supported our adversaries, and also seek to acquire assets in our own 

country. So if you could respond to that, I would be grateful. 

Mr. SMITH. Thank you so much for the question. I think it has 

been very helpful to have the interest from Congress in making 

sure that we have the appropriate tools. 

When you ask about the appropriate tools that we can use, I 

think the power that Congress has given us, and the oversight that 

Congress plays has been a very important role in our success in 

being able to go after these types of activities of concern. The fact 

that we have the authority to call out these activities, freeze their 

assets, prohibit U.S. persons, wherever they may be, from engaging 

in this type of behavior, and then Congress nudging us to add additional designations or sanctions. For example, with respect to the 

IRGC, where we had designated it before, but we added to it under 

the terrorism authorities and all its agents, affiliates, and officials 

worldwide. That has been a very helpful all power for us to have. 

I think I will yield to my colleague, Marshall, on the CFIUS 

question. OFAC plays a role in terms of reviewing some of those, 

but it is not my expertise. 

Mr. PITTENGER. Thank you. 

Mr. BILLINGSLEA. Congressman, the issue I have is that this Administration and the CFIUS process belongs to a different part of 

the Treasury, and so I am hesitant to opine, when I think they 

would give you a better answer. But I will definitely arrange that 

discussion. 

Mr. PITTENGER. I thought maybe you might have a perspective 

just from— 

Mr. BILLINGSLEA. I do, in the sense that we need to ensure that 

the critical pieces of our economy are safeguarded from adversarial 

acquisition or influence. 

Mr. PITTENGER. Do you feel that they are vulnerable today? 

Mr. BILLINGSLEA. I do feel they are vulnerable today. 

Mr. PITTENGER. Do you feel that the expansion of the oversight 

of CFIUS is warranted today? 

Mr. BILLINGSLEA. I am not sure I understand exactly what is implied by that, but I do believe that— 

Mr. PITTENGER. A greater capability for oversight. 

Mr. BILLINGSLEA. Greater capability for investigation, from understanding the origin of funds, the structure of acquiring entities 

to make sure we truly understand who is behind acquisition of different companies. 

Mr. PITTENGER. Joint ventures and the like. 

Mr. BILLINGSLEA. Things such as that, yes, sir. Absolutely. 

Mr. PITTENGER. Very good. Mr. Secretary, another point: What is 

the typical evidentiary standard that is needed to designate a foreign entity for violating the U.S. sanctions? And, when dealing 

with the support of terrorism proliferators, what should that standard be? 

mcarroll on FSR431 with DISTILLER

14 

Mr. BILLINGSLEA. I am going to defer to Director Smith on the 

evidentiary standard, because he has a team of lawyers and counsel that help him on that. But it does tend to vary. 

Mr. PITTENGER. Very good. Thank you. Mike. 

Mr. SMITH. The standard is the basic administrative standard 

that is used across the Federal Government. It is the reasonable 

cause to believe. It is a relatively low standard, and in terms of 

when you think of the overall standards of proof beyond the reasonable doubt in the criminal context, or even a preponderance of evidence that says, more likely than not. Ours is just a reasonable 

cause to believe, so it is basically, are we reasonable in believing 

that? That is the standard that we use in our designations programs, as well as our enforcement of sanctions violations. 

Mr. PITTENGER. Given the actions of various countries like Qatar 

in the past, knowing we have an MOU with Qatar at this time, obviously, there have been concerns relative to ransoms for 

kidnappings, and safe harbors for Hamas, and Al Jazeera, and 

many other concerns. Do you believe that sanctions were warranted on Qatar or other countries that have been predisposed to 

be supportive of our adversaries? 

Mr. BILLINGSLEA. Congressman, that is a great question. I didn’t 

have time to get into it, but an entire paragraph in my testimony 

talks about all the non-sanctions dimensions to financial diplomacy. One of the things I emphasized was the importance when 

sanctions is a tool available to us, it is a threat that is lying there 

on the table that we can use to great effect with various third parties. 

One my very first trips in my capacity when I was confirmed by 

the Senate was to Qatar. I will tell you that we do have issues with 

Qatar on the terrorism front. We have issues, actually, with many 

countries in the Gulf on various terrorism issues. It differs country 

by country. 

The Qatari did, very, very recently, engage in a series of arrests 

of very senior al Qaida financiers, and we view that as crucial, and 

we are watching the prosecution process that is now unfolding 

very, very closely. 

Mr. PITTENGER. Good. They have—to date, they have not prosecuted anybody until now. 

Chairman BARR. Gentleman’s time is expired. The Chair recognizes the gentleman from Arkansas, Mr. Hill. 

Mr. HILL. Thank the Chairman. Appreciate you holding this 

hearing that we have done so consistently now over the last few 

weeks to assess how America is doing in our sanctions regime for 

some of the world’s most rogue nations. Sure appreciate our witnesses’ service to our country, and tackling these tough issues, because we are not going to be successful in countering illicit finance 

or terrorism without every asset at our disposal—diplomatic, military, and financial, economic. So thank you for leading the economic cause. 

I want to talk a minute, since we have talked a little about 

North Korea. Let us talk some more about Russia. I was particularly pleased Secretary Tillerson appointed Ambassador Volker as 

our special envoy regarding trying to break the frozen conflict 

around Minsk. I think this was something missing from the premcarroll on FSR431 with DISTILLER

15 

vious Administration, where America really partnered in the E.U., 

and heading in a different direction. I was intrigued by your comments and your testimony, talking about Russia’s obviously destabilizing actions in the Ukraine. 

But in addition to that, it continues to meddle in Eastern Europe, generally through cyberattacks, incursions, disinformation 

campaigns, and even evidence that they interfered in Montenegro’s 

elections last October. 

It is for this reason back in June that Mr. Suozzi of New York 

and I introduced Fighting Russian Corruption Act, H.R. 2820. One 

thing I would like you to do today is if you could take a look at 

that legislation, and give me your thoughts about it, officially, from 

the Treasury. It sets up an anticorruption office over at State as 

a political matter, to work particularly in the E.U. with our European partners, about taking our knowledge, our capabilities that 

we have, both in cyber, illicit finance, and partnering with them to 

counter Russian political meddling. 

I think it would be important, because you do so much work in 

the technical assistance area, where Treasury would help train our 

U.S. diplomatic efforts in that regard, and make it part of our 

NATO effort, as well. We suggest that anticorruption become part 

of NATO’s readiness plan. So if you would take a look at H.R. 2820. 

We have twelve Republicans and four Democrats, and I appreciate 

the work with Mr. Suozzi on that. 

So given this political interference that you have established both 

in the Ukraine, and in Montenegro, and other Balkan countries, 

what is Treasury prepared to do to punish and deter activities like 

this under your existing authorities you have? 

Mr. BILLINGSLEA. Congressman, I think you have highlighted a 

number of worrisome activities by the Russians. I would also add 

to that list, actually, the money-laundering behaviors that we have 

seen them engaging in some of the Baltic nations, as well as in Cyprus and other places, which are fundamentally, when you talk 

about corruption, they are such a corrosive behavior that strikes at 

the heart of the financial integrity of these countries. 

It is crucial, in particular, that we go after Russian organized 

crime. We have done a number of actions, together with the Secret 

Service and others, in combating Russian organized crime. Russian 

organized crime tracks right back to parts of the regime in various 

ways, particularly when you start talking cyber matters. So I think 

you are pointing in the direction that we have to go. 

Mr. HILL. Good. 

Mr. BILLINGSLEA. Which is to focus on that corruption. 

Mr. HILL. Mr. Chairman, I hope that maybe we can have a 

roundtable, or maybe a classified briefing on that matter, and we 

spent a lot of time, as we should, on North Korea. But I think it 

would be useful to learn more here. 

In the time I have remaining, I know that Congress asks 

FinCEN and your offices for reporting, a lot of reporting. I think 

that is important. Our oversight responsibility is critical here, and 

you have that both to Foreign Affairs in some aspects, and here, 

at the Financial Services Committee. Are these requirements becoming too burdensome? How could we consolidate our requests to 

get the information that we want to have for oversight? But I know 

mcarroll on FSR431 with DISTILLER

16 

it seems like every measure we introduce has a Treasury-reporting 

obligation. Could you reflect on that? 

Mr. BILLINGSLEA. Congressman, we are beyond reasonable here. 

The reporting burden from north of 80, 90 different reports, some 

that date back 20 years, it is crushing. It is absolutely crushing on 

us. 

In your opening comments, you talked about how we needed to 

bring every asset to bear, and I will tell you that within the very 

small structure of TFI—we are talking 700 people total, of which 

half are focused on banking oversight. So when you talk about 

John’s shop, my shop, the under-secretary’s organization, our intel 

shop, we are consumed by reports. As a former Senate staffer, I 

can’t tell you that I know that all of these reports are even being 

read. 

Mr. HILL. Thank you, sir, and thank you, Mr. Chairman, for the 

time, and I hope we are more sensitive about our regulatory reporting burden on these important actors. Thank you. 

Chairman BARR. The gentleman yields back. The Chair recognizes the gentleman from West Virginia, Mr. Mooney. 

Mr. MOONEY. Thank you. My question is for Secretary 

Billingslea. You mentioned on page three of your testimony that 

some circumstances providing financial intelligence to a trusted 

foreign partner is all it takes to shutter terrorist exchange houses, 

or freeze a proliferator’s bank account. I want to go back a step further, because we have to get that intelligence from somebody first 

before we can share with somebody. Somebody has to give it to us. 

We have to find it. So the discussion today has revolved around the 

ways the United States sanctions rogue nations, terrorist states, 

and others that pose a threat to our people, and our economic and 

financial systems. 

With the conflicts around the globe we are embattled in we have 

partners who want to aid the United States in these fights, give 

us information. Some are countries, but some are individuals or 

groups that wish to aid us, give us information on certain activities 

of the funding of terrorist organizations. 

So my question to you is: Would it be helpful to our cause in general to get this information, if your office could reward those individuals or groups that step forward with helpful information about 

where our adversaries are keeping their finances? And if so, what 

incentives could be used to encourage such assistance? 

Mr. BILLINGSLEA. Congressman, I would like to talk with you 

more about that and understand, but at first blush, I think that 

is exactly the innovative, insightful support that, through legislation, Congress could help us in the missions that we have to undertake. You are spot on, in terms of the challenges we face, and the 

informational gaps we often have, particularly when it comes down 

to that last tactical mile of getting to the adversary’s bank account. 

So the idea of a rewards program, I can tell you from my time 

running the Special Operations and Low Intensity Conflict Office 

for Secretary Rumsfeld, we used reward authorities to great effect 

to elicit information. In my time, we used information and paid rewards for instance, leading to the identification of where Saddam 

Hussein’s two sons were, and we deployed Special Forces to bring 

them to justice, and that was highly effective. 

mcarroll on FSR431 with DISTILLER

17 

So in line with your idea, I would like to explore that with you 

further. But I think, Congressman, you are onto something there. 

Mr. MOONEY. Yes, I would like to talk about that further, too. I 

have a little more time left, so changing questions, and I am more 

specifically on a country, the IMF estimates that in 2016, the Venezuelan economy contracted by 18 percent, and saw inflation of 

over 250 percent, with the further contraction of 12 percent in 

2017, and inflation of 650 percent. 

So our understanding is that the Executive Order the President 

issued in August, which restricted dealings in Venezuelan debt, has 

further affected bond liquidity, and added to pressure on President 

Maduro, which I think is a great idea. President Maduro is like a 

sweaty rhino running out of control around that area. 

So having said that, given the regime’s resilience up to this 

point, can you articulate what the endgame of Venezuelan sanctions is? The government clearly hasn’t been moderating. So what 

outcome are you aiming for, and how appropriate are existing sanctions to achieving it? 

Mr. BILLINGSLEA. Venezuela’s economy is in a death spiral due 

to the kleptocratic policies of the Maduro regime, as they have engaged in wholesale looting of that country, of the state oil enterprise, and the ensuing humanitarian crisis that is erupting around 

us. This is a major national security issue, on top of a humanitarian disaster in the making, because it affects key allies like the 

Colombians next door. 

I am very concerned about, it looks like we are on the verge of 

a malarial epidemic now, because Maduro is blocking the bringing 

in of humanitarian assistance from the outside. He is preventing— 

and through his own economic mismanagement, they don’t have 

the resources to buy the anti-malarials, in particular. So we have 

a significant issue here, and the President has made it extremely 

clear: We will not participate in the looting of that country’s economy. Sanctions have been imposed—any new debt or equity, and 

those sanctions will only be removed if there is a return to the normal democratic process in that country. 

Mr. MOONEY. I, for one, appreciate the President’s aggressive approach in Venezuela. As you may know, my mother fled a communist country, Cuba, and America could have stopped that, and 

didn’t. Now, we have really bad actors trying to impose evil regimes on folks, and don’t care about human life, and stealing, and 

it is just, it is terrible. So I would like to encourage you to keep 

that up, and anything we can do here to help, I would sure appreciate. 

With that, Mr. Chairman, I will yield back the balance of my 

time. 

Chairman BARR. The gentleman yields back. The Chair recognizes the gentleman from California, Mr. Sherman. 

Mr. SHERMAN. Yes. Does the Venezuelan government own major 

assets in the United States? They used to own CITGO gas stations. 

Mr. BILLINGSLEA. Yes. CITGO is a wholly owned subsidiary of— 

Mr. SHERMAN. So how come we haven’t seized those assets for 

the benefit of the Venezuelan people? As long as they remain under 

the control of Maduro, they are going to be looted. We could seize 

them, sell them, put the money in trust for the Venezuelan people. 

mcarroll on FSR431 with DISTILLER

18 

Are you moving in that direction, or are you just going to let 

Maduro run the company into the ground, loot it, and abscond with 

the money? 

Mr. BILLINGSLEA. Congressman, excellent question. 

Mr. SHERMAN. If you need any legislation, why haven’t you submitted it? I bet you we could pass it. 

Mr. BILLINGSLEA. Thank you, sir. To your point, we have, in fact, 

specifically moved to prevent Maduro from being able to access any 

funds from CITGO. The Treasury Department, in working with the 

White House when the new Executive Order on Venezuela was 

issued, a specific provision was included to— 

Mr. SHERMAN. Could he sell the company and keep the money? 

Mr. BILLINGSLEA. —To prohibit any payment of dividends out of 

CITGO whatsoever. 

Mr. SHERMAN. No dividends, but can they just sell all the stock? 

Could Exxon buy the stock tomorrow? Don’t tell me about antitrust 

law. Could Amazon buy the stock tomorrow? 

Mr. BILLINGSLEA. The CITGO ownership structure, I would have 

to get back to on you, but it is— 

Mr. SHERMAN. OK, but if you don’t want to—you don’t want to 

be here after the barn door is closed. If he can sell the entire company tomorrow, and I don’t think you need CFIUS to de-invest in 

the United States. So anyway, just more work for you when you 

get back. 

Speaking of more work, obviously, we require a lot of reports, but 

that is because if we don’t require reports, sometimes we pass laws, 

and nothing happens. 

As to North Korea, the strategy of this Administration is to go 

after individual Chinese companies. That may raise the cost of 

doing business for North Korea a bit. But if the top 25 Chinese 

companies in an industry refuse to do business with North Korea, 

the 26th biggest may not care about doing business with the 

United States, and they may decide to pick up the North Korean 

business instead. 

The only way you are going to accomplish anything is if you at 

least threaten to sanction the whole country. It has to be something that hits the government in Beijing, not just the pocketbook 

of a few large companies. Because it is not a successful sanction if 

you force somebody to pay a higher ATM fee because the banks 

with the lower ATM fees won’t do business with them. 

The goal here is not to annoy Pyongyang; it is not to destroy 

Pyongyang. But it is to put them in a position where they feel their 

economy might be destroyed. 

Let us turn to Iran. Mahan Air is designated as a terrorist entity 

given its support for the Assad regime, its involvement in terrorism. Yet every day, Mahan Air lands at airports in Europe, and 

every day the flag airline from that country flies from that big airport to the United States. Why are we allowing European air carriers to start their flight at a Mahan-infested airport, and come to 

the United States? Why are we not going after the airports, or are 

we serious about Mahan Air? Do you have an answer? 

Mr. BILLINGSLEA. It is a great question, Congressman. We are 

very serious about Mahan Air. It is the aviation arm of the Quds 

Force. It is what they use to traffic weapons, terrorist assassins— 

mcarroll on FSR431 with DISTILLER

19 

Mr. SHERMAN. So why are we still doing business with airports 

that accommodate them? Why are American planes still buying 

fuel from the same companies that sell fuel to Mahan Air at European airports? 

Mr. BILLINGSLEA. Two points on that. One is that we have been 

in a departure from the previous Administration’s approach, we 

have been incredibly aggressive with the European— 

Mr. SHERMAN. Setting a rather low bar for yourself, but go on. 

Mr. BILLINGSLEA. At least we clear the bar, right? But I think 

you make a good point, and I think it would be very prudent for 

any company that transacts with Mahan Air to be exceptionally 

cautious, going forward. 

Mr. SHERMAN. I don’t think they should be cautious. I think you 

should nail. Then they will know. 

But now, let us talk about the IRGC. There are about 800 IRGC 

companies that have yet to be sanctioned. You have sanctioned 

about 80. You have sanctions on individual planes. I am not counting those. Likewise, only a handful of companies and individuals 

that have done business, or provided significant assistance to IRGC 

have suffered sectionary sanctions. 

Is your standard of proof too high? Is your staffing too low? How 

many Farsi-speaking individuals do you have working full-time on 

this? 

Mr. SMITH. So Congressman, I would say that—answering a few 

of your questions there quickly, on Mahan Air, I just wanted to say 

we have actually done some designations in the last few months 

against European airlines, Ukrainian airlines that had been servicing Ukraine—Mahan Air. We actually took action. We are looking 

for— 

Mr. SHERMAN. So is there a flight that has been canceled as a 

result of that? 

Mr. SMITH. There have been some routes that have been stopped 

over the previous months because of Mahan Air, because of the 

U.S. Government’s outreach over the past year, so— 

On the questions you ask on making sure the standard of proof, 

it is the reasonable belief standard that we have. It is not too high; 

it is something that we can live with. 

But in terms of what we are trying to do with IRGC and other 

targets, trying to hit the maximum impact ones. We are not trying 

to do a numbers game, where we give you 20— 

Mr. SHERMAN. How many Farsi speakers working full-time? 

Mr. SMITH. We have a number of them, but I can get back to you 

with the answer— 

Chairman BARR. The time of the gentleman is expired. We may 

have a chance for a second round. The Chair now recognizes the 

gentleman from Indiana, Mr. Hollingsworth. 

Mr. HOLLINGSWORTH. First and foremost, I want to echo all of 

what my colleagues have said in thanking you for the work that 

you, your teams put in every single day. Hoosiers back in the 

Ninth District feel unsafe with some of the things they see around 

the world, and I know you and your teams are working every day 

to ensure that the world becomes safer for Americans at home, and 

American interests abroad. 

mcarroll on FSR431 with DISTILLER

20 

I wanted to spin the globe back to Venezuela for a moment. Mr. 

Billingslea, you had mentioned that there is a restriction on new 

debt with regard to Venezuela. I certainly understand that. I know, 

also, that that restriction is fairly broad, and the summary of new 

debt, as provided by OFAC, is somewhat difficult to parse through 

and better understand. With regard to Russia, specifically, I think 

there were a number of frequently asked questions that were also 

posted to help people parse through what is new debt versus existing, etc. 

I wanted to find out whether there is any possibility, or whether 

there is expectation that more clarity will be provided around the 

new debt definition for Venezuela, specifically. That can go to either of you, frankly. 

Mr. SMITH. Congressman, thank you for the question. I think we 

have been responding, and we have published additional FAQs 

with respect to many of these questions, with respect to Venezuela. 

In fact, we did put something out with respect to what the meaning of debt, as well. So we can refer those FAQs to you or your constituents. We are getting a lot of calls on this. We are trying to be 

responsive. 

Mr. HOLLINGSWORTH. Fantastic. I think, as Mr. Sherman and 

some others have mentioned, some clarity around understanding 

what transactions are permissible, with regard to CITGO, as well. 

I know I have had some constituent companies that have been concerned about any dealings with them, or understanding what level 

of dealings with them, and don’t want to be unnecessarily or unintentionally caught up in something that is larger than they are. So 

I appreciate that as well. 

Mr. SMITH. I would just say, if you can have your constituents 

reach out to us, we have the compliance hotline that operates as 

well as the Licensing Division. We are taking a lot of calls on this, 

and trying to make sure that we get the clarity out there. 

Mr. HOLLINGSWORTH. Fantastic. I know that my constituents 

back home, and the companies that they own, operate, or manage 

that want to do the right thing, understand, as you well said, the 

humanitarian crisis, as well as the national security crisis this presents, but they want to do the right thing, and understand where 

they are with regard to the law. 

Following up on Venezuela a little bit further, I know that one 

of the things that economists have talked about is just the need to 

restructure the debt in Venezuela. Obviously, with the new restrictions in place, that can’t happen, or may happen only in some gray 

zone of understanding. Is it your understanding that we are going 

to require the Madura organization, administration, government 

itself to change? Or is there any capacity in which those officials 

themselves can get into compliance, such that there can be a restructuring of the debt by IMF or other external resources? 

Mr. BILLINGSLEA. So on the IMF question, this is a country, this 

is a regime that has failed to publicize any of the standard data 

that are expected by properly functioning economies. On top of 

that, you are dealing with a regime where, Maduro and his cronies, 

his vice president is a drug kingpin. He put him in charge of the 

debt discussions. This is a designated individual. On top of that, 

this is a country where its constitution specifies that the national 

mcarroll on FSR431 with DISTILLER

21 

assembly is the only organization that can authorize the issuance 

of new debt. But what Maduro did is wiped out democracy. 

He overturned the national assembly. These people have run for 

their lives. He has now established this constituent assembly, 

which is packed full of his people. This is not a— 

Mr. HOLLINGSWORTH. This is certainly understandable to say the 

regime needs to change, period, in order for us to be able to accomplish that. 

Mr. BILLINGSLEA. I don’t think we are saying that. I think we are 

saying we need a return to the democratic order. 

Mr. HOLLINGSWORTH. Got it. Understood. Then, is there any feeling what the timeframe or timeline might occur? Do you see any 

weakening in resistance by the administration, the administration’s cronies, etc., or it been as obdurate as it had proven in the 

past? 

Mr. BILLINGSLEA. To the extent that the regime has been enriching themselves at the expense of the Venezuelan people, including 

through the wholesale theft from PDVSA, the State oil company— 

it is clear that the gravy train has come to an end. They are out 

of money. 

They have crashed their economy. Presumably, at some point, 

people are going to look around and say, ‘‘Wow, the United States 

has designated me. The Canadians have designated me. The European Union is starting to designate officials above me. Maybe it is 

time to look at doing something different.’’ 

Mr. HOLLINGSWORTH. Yes. I hope that comes soon. Again, just in 

my closing, I wanted to thank you both for the efforts that you undertake every single day. 

Mr. BILLINGSLEA. Thank you. 

Mr. HOLLINGSWORTH. I will yield back, Mr. Chairman. 

Chairman BARR. Gentleman’s time has expired, and there has 

been an interest in a second round of questioning, if our witnesses 

are willing to take that responsibility on. We appreciate your testimony today, and again, appreciate your service in the interests of 

our national security, and using every economic lever we can to 

deter our adversaries. 

I do want to follow up on some of the questions regarding Russia. 

As we discussed earlier, I had an opportunity earlier this year to 

travel to Eastern Europe and visit with some of our NATO allies. 

We went to Germany and Poland, Lithuania, Estonia, and Montenegro, the newest member of NATO. I can tell you that our allies, 

and the foreign leaders in these countries were very consistent in 

the message that they delivered to us. That message was that in 

addition to Russia’s illicit annexation of Crimea, and the frozen 

conflict in Ukraine, that there is a whole range of malign activities 

that the Russians are engaged in to destabilize our NATO allies, 

from disinformation campaigns, to incursions into the Baltic with 

their air force. The attempted coup in Montenegro was a major 

topic of conversation and concern; the cyberattacks; the militarization of Kaliningrad was of great concern to the Baltic countries. 

It has been 4 months since the enactment of the Countering of 

America’s Adversaries Through Sanctions Act, which was the sanctions legislation on Russia. I want to just ask you all, what has 

Treasury specifically done in implementing that sanctions legislamcarroll on FSR431 with DISTILLER

22 

tion? Second, what has been the response? What has been the response of the Russians to that? What, if any, behavioral change 

have we seen from the Russians? I have probably given you too 

much to answer right there, so I will go ahead and leave both of 

you to consider both of those issues. 

Mr. SMITH. I can start out and say that we have been very busy 

to make sure that we are implementing the requirements of 

CAATSA, and we are doing it on time, as per the legislation. Just 

about every 30 days, starting at, I think, day 60, Congress in that 

statute required that we do some type of implementation of the Act 

with respect to Russia, as well as the other parts. On day 60, we 

started modifying our directives that were put out under the Russia-Ukraine sanctions programs to tighten the restrictions in there. 

We have done that at day 60; we have done that at day 90. 

So we started a few months ago, and in fact, we just, earlier this 

week, did additional modifications to continue tightening, and 

make sure that we also explain that to industry, and to the rest 

of the world so they know what they are and are not allowed to 

do. 

Chairman BARR. What has been the Russian response to this? 

Mr. SMITH. So the Russians haven’t been happy, as you can 

imagine. They were concerned with the legislation. I think they 

probably aired that publicly with you all at the time. I think we 

have heard that as well. I haven’t had any conversations directly 

with the Russians myself. 

Chairman BARR. Have you seen major behavioral change? The 

disinformation campaigns, the destabilization efforts, the Russian 

aggression continues. Is that correct? 

Mr. SMITH. I think the Russian aggression has continued in 

many of the respects that Congress— 

Chairman BARR. That brings to mind the question of how we can 

make sanctions more effective in better changing behavior, and deterring Russian aggression. I want to focus on energy, the Russian 

energy sector. Many of our NATO allies have expressed interest in 

the United States helping Eastern Europe achieve energy independence; certainly independence from Russian gas. Also, in the 

case of Lithuania, the Astravets nuclear facility is being constructed about 30 miles from Vilnius. In Belarus—so the question 

is, should we consider sanctioning and getting more aggressive on 

the Nord Stream 2 project, Astravets, other energy projects that 

the Russians are endeavoring to interfere with NATO, and get 

NATO countries dependent and reliant on Russian energy? 

Mr. SMITH. So I think you probably heard—I know you all heard 

up in Congress as well—as the Administration, on the views of European partners and allies with respect to energy independence. I 

think in the CAATSA legislation, Congress did impose additional 

restrictions, additional tightening of the sanctions, with respect to 

many of those features. My understanding is that Congress engaged with the European partners, as well as did the Administration. 

From my perspective, I think we are still hearing from Europe 

as we implement those sanctions. I am not sure that there is anything that I have seen that is needed at this point. 

mcarroll on FSR431 with DISTILLER

23 

Chairman BARR. I can tell you that if the Russians do not respond to what we have done so far, we ought to send a message 

to the Russians, that if they continue their aggressive behavior, 

their energy exports to our NATO allies should be in the crosshairs 

of our sanctions regime. That is the view of one Member of Congress, but I would say that there are other Members of Congress 

who feel the same way, as well. 

With that, my time is expired, and so I will now recognize, for 

a second round of questioning, the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. OK. I would like to go back, first, to Venezuela. 

Do I understand, you will be going back to your office to make sure 

that Venezuela can’t just sell CITGO, and take the money back to 

Caracas? Do I have that right? 

Mr. BILLINGSLEA. It is actually prohibited under law. 

Mr. SHERMAN. So they can’t—neither the dividends— 

Mr. BILLINGSLEA. The dividends are not— 

Mr. SHERMAN. Right. But what they can, of course, do is overpay 

for oil. One way to dividend, if you have the retailer, is just have 

them pay $70 a barrel for the oil that comes out of Venezuela, and 

when the world price is closer to $50. Are we monitoring that? 

Mr. BILLINGSLEA. I will verify, but I— 

Mr. SHERMAN. Please answer for the record. 

Mr. BILLINGSLEA. Yes, sir. 

Mr. SHERMAN. But you are saying they can’t sell the stock of 

CITGO, nor can they pay a dividend. 

Mr. BILLINGSLEA. So they cannot pay the dividends under the 

Executive Order. A wholesale sale of CITGO would likely trigger 

a number things. Let me— 

Mr. SHERMAN. What would it trigger? If they were going to buy 

a major American company, that would trigger CFIUS, but I don’t 

know what it would trigger to sell— 

Mr. BILLINGSLEA. My understanding is PDVSA— 

Mr. SHERMAN. Or they could just sell some of the stock. So please 

answer for the record, but more promptly than we usually get questions for the record. What are we doing to make sure that CITGO 

is not overpaying its Venezuelan affiliate for either refined or nonrefined petroleum products; but second, what are we doing to prevent them from selling some, or a majority of, or all of the stock? 

Now, as to Mahan Air, it seems like Ukraine was the low-flying 

fruit, because it just so happens the Ukrainian airline is also in the 

airline servicing business. United doesn’t refuel American Airlines 

flights, but in some airports, the airline is also the— 

But it is not just sanctioning in that circumstance. Mahan Air is 

flying into Milan, and into Munich. Are we going to continue to 

allow American planes to fly into Milan and Munich, and are we 

going to continue to allow foreign planes to fly from Milan and Munich into the United States? 

Mr. SMITH. Sir, I can’t talk about what we would do in the future, but what I can tell you is that the Treasury Department— 

Mr. SHERMAN. Why haven’t we done it already in the past? 

Mr. SMITH. The Treasury— 

mcarroll on FSR431 with DISTILLER

24 

Mr. SHERMAN. This is Mahan Air. Why should American towns 

be connected by direct routes into airports that are servicing 

Mahan Air? 

Mr. SMITH. The Treasury Department is engaged exclusively— 

Mr. SHERMAN. We try to prevent American airplane travelers 

from coming close to terrorists. You are flying in, and the terrorist 

airline is already on the ground. 

Mr. SMITH. We have been engaging extensively with our European partners, who do not have Mahan Air on their sanctions list. 

We have been trying to make sure to provide them the information 

on Mahan Air that they need to have, and at the same time, enforcing and implementing the most major impactful sanctions designations. 

Mr. SHERMAN. I will ask you to answer for the record, why we 

should allow Americans to fly in and out of airports, when as they 

land, there are the terrorists, right there. Sounds pretty dangerous. 

I will go back to the question of staffing. Do you have enough 

staff to do your job, gentlemen? 

Mr. BILLINGSLEA. Congressman, that is always a challenging 

question. The formalistic view is that I would need to coordinate 

with OMB, and so on and so forth, and we are putting the budget 

request forward. 

The practical reality is that when you look at the use of Treasury 

authorities, we are burning hot. In fact, I think we just submitted 

to the Finance Committee the survey that is taken of our employees, and if you parse through the survey data, what you see is that 

maintaining work/life balance for our people is something we are 

keeping a very close eye on. 

Mr. SHERMAN. So your people are working enough so that their 

spouses are complaining. Sounds like we should get you some more 

people. 

Mr. BILLINGSLEA. I would say the taxpayers are getting their— 

Mr. SHERMAN. Getting their money to work—all the people you 

have now. I am told that between the two of you, you have maybe 

two Farsi-speaking individuals? Can either of you be confident that 

between the two of you, you have more than two that are working 

on Iran, and that actually speak Farsi? You can’t tell me, hey, you 

have five or six that you happen to know of, or anything like— 

Mr. SMITH. I can go back and ask. We actually do a list every 

year to make sure, and update it. We do have Farsi-speaking individuals, and that is, when we find a talent, a language talent that 

we need, we bring— 

Mr. SHERMAN. I have 30 people in my district, native Farsispeakers. Let me know. 

Mr. BILLINGSLEA. Chairman, I am always on the lookout for 

great resumes. 

Chairman BARR. Gentleman’s time is expired. The Chair recognizes the Vice Chairman of the subcommittee, Mr. Williams. 

Mr. WILLIAMS. Secretary Billingslea, the Obama Treasury Department authorized U.S. banks to draw on American savings to finance aircraft—we are back at that now—for the world’s foremost 

state sponsor of terrorism in jurisdiction primary money-laundering 

concerns. This allows our deposits to be used for state-owned airline, Iran Air, that was sanctioned in 2011 for providing support 

mcarroll on FSR431 with DISTILLER

25 

to the Islamic Revolutionary Guard Corps, and the Assad regime 

in Syria. 

So in a committee hearing last April, we learned that Iran Air 

flew at least 114 flights from Iran to Syria between the JCPOA’s 

implementation day and March 30, 2017, likely as an airlift in support of the Syrian’s government’s atrocities. So this is an easy question here, a simple yes or no. Can you certify for us today that Iran 

Air has ceased all sanctionable activities? 

Mr. BILLINGSLEA. I need to get back to you on that, Congressman. 

Mr. WILLIAMS. OK, if you would. 

Mr. BILLINGSLEA. Vice Chairman. Yes, sir. 

Mr. WILLIAMS. Next question: Which financial institutions, if 

any, have contacted Treasury with respect to aircraft finance for 

Iran? 

Mr. SMITH. I am not sure of the answer to that. I am not aware 

that any have, but we can get back to you. 

Mr. WILLIAMS. Would you, please. 

Third, can you assure us that a U.S. bank, or a foreign bank with 

a U.S. nexus, would not be exposed to any significant illicit finance 

risk if it did business with Iran Air? 

Mr. SMITH. I am not sure of the question. If you are saying, can 

we assure you that if a U.S. bank engaged in this transaction, in 

any transaction that was licensed, they would be part of a transaction that we authorized. But where the money goes to in Iran, 

I can’t assure you, or give you any guarantee of where that goes. 

Mr. WILLIAMS. OK. Do you agree that Congress has a right to 

know whether aircraft finance for Iran may benefit persons that 

engage in sanctionable activities, including support for terrorism, 

weapons proliferation, and human rights abuses? 

Mr. BILLINGSLEA. Absolutely. Absolutely, you should know that, 

and we commit to engage with you at any point that is— 

Mr. WILLIAMS. OK. 

Mr. BILLINGSLEA. —You want to have the discussions. 

Mr. WILLIAMS. So I think we have two questions we need to get, 

if you get back with us on that. 

Now, another question I have. As part of the omnibus package 

that was passed earlier, we requested that the Treasury Department issue a report on entities that were delisted under the 

JCPOA, and whether such entities have engaged in sanctionable 

activity since the JCPOA. We have not got that result yet, so if you 

could help us there. So what is the status of that report? Do you 

feel that any entities that had their sanctions lifted under the 

JCPOAs have continued to engage in sanctionable activity since 

the deal began to be enforced? 

Mr. SMITH. So we continue working on those reports. As we said, 

we have about 90 a year that we are working on, and most of 

those, we get in on time. Some are more difficult, because they are 

time-consuming. 

If we see sanctionable activity, if we see sanctionable conduct, we 

act against it. 

Mr. WILLIAMS. OK. Mr. Chairman, I yield my time back. 

mcarroll on FSR431 with DISTILLER

26 

Chairman BARR. Gentleman yields back. The Chair now recognizes the gentleman from Michigan, Mr. Huizenga, the Chairman 

of the Capital Markets, Securities, and Investment Subcommittee. 

Mr. HUIZENGA. Thank you, Mr. Chairman, and appreciate your 

testimony today. Good to see you again, and a couple quick questions; one, I want to touch on China, and then, I want to talk a 

little bit about North Korea. 

In 2005, the U.S. designated China’s Banco Delta Asia as a financial institution of, quote, ‘‘primary money laundering concern’’ 

and Treasury Department recently did the same thing with China’s 

Bank of Dandong. However, these banks are relatively small institutions, and are there larger foreign financial institutions that 

Treasury is going after? 

Mr. BILLINGSLEA. Thanks for the question, Congressman. We, as 

a matter of practice, don’t tip our hand in advance of any actions. 

Mr. HUIZENGA. I don’t want to know names. I want to know 

whether there are bigger—there certainly are bigger fish to fry. I 

am looking for some reassurance that Treasury is looking at this, 

and is looking to pursue this. 

Mr. BILLINGSLEA. I think the best reassurance I can give you, because it is out there, is that we put out an advisory to all of our 

financial institutions through FinCEN, which delineated, which 

showed the typology the Bank of Dandong was engaged in, and 

then highlighted other areas where our banks need to be wary, and 

pointed them right at a particular part of China adjacent to North 

Korea, where we urge our banks to be vigilant. 

You can interpret directly from that that we have a lot of concerns, and we continue to investigate. 

Mr. HUIZENGA. Mr. Chairman, maybe—We had a great classified 

briefing yesterday, and maybe this would be an issue and a subject 

that we could, if we needed to go into a classified, bipartisan briefing, we might want to look at doing that. 

Quickly, in a July 13th Washington Post article, a high-level 

North Korea defector who was part of routinely evading sanctions 

noted how even when North Korean firms are on the blacklist, he 

said, quote, ‘‘North Korea is 100 percent state enterprise, so these 

companies just change their names the day after they are sanctioned. That way, the company continues, but with a different 

name than the one on the sanctions list,’’ endquote. Without objection, Mr. Chairman, I would like to enter that article into the 

record as well. So I assume I—without objection, I would like to 

enter an article into the record. 

Chairman BARR. So ordered. 

Mr. HUIZENGA. Thank you. 

We have also seen North Korean entities designated by Treasury—is there more energy being devoted to enablers in China, or 

Southeast Asia and elsewhere? Rather than just play Whack-amole with the DPRK entities. 

Mr. BILLINGSLEA. Yes, sir. The key is not to play Whack-a-mole. 

The key is to map these networks out, and then to take the networks down simultaneously, employing not just sanctions authorities from OFAC, but working with our law enforcement community, 

partner nations and their communities, the intelligence community 

mcarroll on FSR431 with DISTILLER

27 

and so on—diplomatic endeavors. Otherwise, you are treating 

symptoms of the problem, not the root cause. 

Mr. HUIZENGA. Yes, treating those symptoms, I wholeheartedly 

agree, yes. It just—this one stunned me. There are media reports 

that there is a proposal circulating within the U.N. Security Council that would have frozen North Korean leaders’ assets. I said to 

myself, ‘‘I didn’t know there wasn’t an asset that wasn’t frozen already.’’ If it hasn’t been frozen, why not? This was the sixth missile 

launch test that they have done. If we haven’t gotten to everybody, 

every Korean, significant Korean, North Korean leaders’ assets 

internationally—which, reports are, they are significant—we know 

that they have no problem starving their own people for advancement of both the weapons, as well as their own aggrandizement. 

But what is Treasury doing? Is Treasury going after those banks 

that hold those assets, as well? 

Mr. BILLINGSLEA. We are. 

Mr. HUIZENGA. OK. I would look forward—maybe we can unpack 

this a bit more in a slightly different setting, but I think this is 

a significant, significant issue, and this is one of the few tools that 

we know has worked in the past, and that we need to continue to 

implement that. 

So with that, Mr. Chairman, I yield back. 

Chairman BARR. The gentleman yields back. The Chair now recognizes the gentleman from West Virginia for 5 minutes. 

Mr. MOONEY. Thank you. OK, continuing right along on the 

North Korea issue line of questioning, and I think my first question 

is relating to the Office of Foreign Assets Control, so direct this 

first one to Mr. Smith. On September 26, OFAC announced it was 

designating eight North Korean financial institutions, along with 

26 representatives of North Korea, banks abroad. So how is it that 

as of September 2017, there were still any North Korean banks 

that remained unsanctioned, and how many more still have not 

been designated? 

Mr. SMITH. So when we identify a bank—and we use a specific 

terminology—when we identified those banks, we were identifying 

them for the ease of the public. But the state-owned banks had already been designated as a matter—their assets would have been 

frozen in the United States, because they were government of 

North Korea. So we use the term. We identified those banks, and 

then we sanctioned the additional financial representatives around 

the world, because we were adding them to our list. 

So it is very important for us, because our SDN List is used 

around the world. We want to make sure that is on every bank’s 

filter, no matter in the United States, but also around the world, 

so that they get a hit, even if it is not in the United States. 

Mr. MOONEY. OK, so you have it covered, then. 

Mr. SMITH. We have it covered. 

Mr. MOONEY. They have all been designated, one way or another, 

for sanctions, then. OK. 

Second then, what is the real impact of blocking a North Korean 

bank’s property in the United States? What is the magnitude of 

their assets? How would they have access to them under existing 

U.S. trade restrictions? 

mcarroll on FSR431 with DISTILLER

28 

Mr. SMITH. So the impact of sanctions can be different, depending on the entity that is sanctioned. A North Korean bank would 

likely not have had assets in the United States, because we had already prohibited that activity. 

But when I say the impact of sanctions is freezing the assets in 

the United States. It is putting on them on our blacklist, so no U.S. 

person around the world can deal with them. But it is also, our 

SDN List is used around the world, by banks around the world, by 

major companies and conglomerates around the world. So that is 

the impact, is making sure that not just in the United States, but 

the rest of the world can follow suit and hit our alarm. 

Mr. MOONEY. OK. 

Mr. BILLINGSLEA. It is not just banks that use the OFAC SDN 

List. There are certain governments—and we don’t talk much 

about this, but there are certain governments that actually will 

pursue parallel blocking actions on their own, based on an OFAC 

sanction. So we do get a magnifying effect from a number of key 

countries when OFAC takes action. 

Mr. MOONEY. Thank you. Second question, still on North Korea, 

either one of you who has more information, try to answer this one. 

I am going to cite a New York Times article. As a conservative, 

I don’t often cite the New York Times articles, but in this particular case, I think they have done some good work. 

In their article on September 8th, it was reported in this New 

York Times article that North Korea may now be exporting less to 

China, but North Korea may also be receiving trade credits from 

China to finance continued imports. Of course, these trade credits 

would help nullify the effect of sanctions, even if North Korea were 

having problems coming up with hard currency. So if Chinese entities, including banks, are negotiating the impact of trade sanctions, 

shouldn’t the Treasury be designating them? 

Mr. BILLINGSLEA. That is a great point, and I think we are seeing, as they evolve in response to U.N. Security Council resolutions, the constant effort to evade sanctions and barter is one of the 

ways they are— 

So trade credits, or maybe just plain old barter is another way 

that they are trying to evade the effect of the financial hammerlock 

that we are endeavoring to put on them. So we are tracking that, 

and if you trade with North Korea—I don’t care whether you are 

trading dollars, or won, or whatever, any barter relationship exposes you to U.S. sanctions. 

Mr. MOONEY. OK. Thank you, Mr. Chairman. I will yield back. 

Yield my time to the Chair. 

Chairman BARR. The gentleman yields back, and there is 1 

minute left remaining from the gentleman’s time, and if I could 

just ask one final question to our witnesses with respect to North 

Korea. 

A lot of the questions today on North Korea focused on secondary 

sanctions on Chinese entities, and we have talked a lot about the 

fact that those secondary sanctions may not yet have been fully exhausted. To the extent that is the case, is that because of U.S. fear 

or concern that we may lose Beijing cooperation, or is it merely a 

resource issue for OFAC and Treasury? 

mcarroll on FSR431 with DISTILLER

29 

Mr. BILLINGSLEA. It is not a fear in any stretch of the imagination. We have a game plan. We have a strategy, and we are executing that strategy, and that strategy involves a number of different prongs of activity, of which Treasury action is but one. We 

are maintaining synchronization with our activities in the United 

Nations, with our Ambassador there, with State Department, with 

law enforcement, intelligence, and the Department of Defense. 

When it sometimes seems like you are not quite sure why we are 

synchronizing things the way we are, we would be happy to come 

up and explain to you, because there is a method to this full-on economic pressure campaign. 

Chairman BARR. I would like to thank our witnesses not only for 

testimony today, but your service, and the work that you are putting in to keep the American people safe, and to advance the national security interests of our country. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

[Whereupon, at 3:54 p.m., the subcommittee was adjourned.] 

mcarroll on FSR431 with DISTILLER

mcarroll on FSR431 with DISTILLER

(31) 

A P P E N D I X 

November 30, 2017 

mcarroll on FSR431 with DISTILLER

32 

mcarroll on FSR431 with DISTILLER

33 

mcarroll on FSR431 with DISTILLER

34 

mcarroll on FSR431 with DISTILLER

35 

mcarroll on FSR431 with DISTILLER

36 

mcarroll on FSR431 with DISTILLER

37 

mcarroll on FSR431 with DISTILLER

38 

mcarroll on FSR431 with DISTILLER

39 

mcarroll on FSR431 with DISTILLER

40 

mcarroll on FSR431 with DISTILLER

41 

mcarroll on FSR431 with DISTILLER

42 

mcarroll on FSR431 with DISTILLER

43 

mcarroll on FSR431 with DISTILLER

44 

mcarroll on FSR431 with DISTILLER

45 

mcarroll on FSR431 with DISTILLER

46 

mcarroll on FSR431 with DISTILLER

47 

mcarroll on FSR431 with DISTILLER

48 

mcarroll on FSR431 with DISTILLER

49 

mcarroll on FSR431 with DISTILLER

50 

mcarroll on FSR431 with DISTILLER

51 

mcarroll on FSR431 with DISTILLER

52 

Æ 

mcarroll on FSR431 with DISTILLER