Markets Wired

As Prepared for Delivery

Thank you very much to ACI for inviting me here today. I’m very pleased to be back with this distinguished group of practitioners. I want to thank you for your continued frontline work to advise market participants on sensitive sanctions enforcement and compliance matters, especially during this time of great political and economic upheaval.

In December 2021, as many of you are likely aware, Treasury conducted a review of the use of sanctions. The review’s findings identified ways that Treasury would seek to ensure that the design, imposition, implementation, and enforcement of sanctions are more rigorous, more focused, and better fit to purpose. 

My staff have been working tirelessly ever since to put these findings into practice.

We have sought to broaden the impact of our sanctions through multilateral partnerships and joint implementation. We have also deepened engagement with you all in the private sector to make our sanctions easier to understand and, therefore, implement.

Further, we have promoted a targeted approach to sanctions implementation by deploying, where appropriate, mitigation measures designed to curb the unintended impacts of our actions.

The United States faces a changing world where financial innovation, shifts in global economic activity, and new geopolitical challenges are redefining how we use economic measures to support our national security objectives. By modernizing and adapting our sanctions policy and operational framework, Treasury is prepared to effectively confront these changes.

MULTILATERAL APPROACH TO SANCTIONS IN RUSSIA, MIDEAST AND BEYOND

Nowhere is our close coordination with partners and allies better reflected than in our joint responses to Russia’s brutal and illegal further invasion of Ukraine over the last two years.

In the immediate aftermath of the invasion, the United States and more than 30 allies and partners representing more than 50 percent of the global economy worked together at unprecedented speed to impose sanctions and other economic measures against the Russian Federation, its leadership, and those who enable it.

Two years on, those partnerships to build on, implement, and enforce our sanctions remain strong and continue to reduce Russian revenue and hamper Russia’s ability to acquire priority goods for their war machine.

Multilateral sanctions and export controls have caused Russia’s financial sector losses of hundreds of billions of dollars and created major setbacks for Russia’s technological advancement.

One example is the continued implementation of the multilateral price cap sanctions.

Under the price cap, members of the G7,Australia, and New Zealand have worked together to restrict Russia’s oil revenues, while keeping global energy markets stable. Despite initial skepticism, the price cap was successful over 2023—with Russia’s oil and gas tax revenues declining by almost 40 percent from January through October compared to the same period in 2022, without major disruptions to global oil markets.

In October, the price cap coalition shifted into phase two, which aims to tighten enforcement against the use of Coalition services outside the cap, while increasing the costs to the Kremlin of selling oil through an alternative shipping ecosystem.

Our data shows that Coalition sanctions enforcement is forcing Russia to sell oil at a steeper discount since the advent of phase two, while global oil markets have remained stable – a reassuring endorsement of our multilateral approach.

As we move into the next phase of our efforts to disrupt Russia’s military- industrial base by combatting Russian sanctions and export controls circumvention, both domestically and abroad, our continued ability to deny Russia the technology and inputs it needs to maintain and improve their military capabilities will be a direct function of the size and strength of our global response. And our multilateral work is not limited to Russia – it has extended over multiple programs, including our Counterterrorism, Cyber, Human Rights, and Counternarcotics sanctions, as well as country-specific programs like DPRK and Sudan.

In response to Hamas’ October 7 terrorist attacks on Israel, for example, Treasury, along with G7 partners, launched a sustained, global campaign against Hamas financing, and the EU created a new dedicated Hamas sanctions authority, which it used to designate several Hamas leaders and facilitators.

The U.S. and UK also took swift and decisive action to impose coordinated sanctions targeting several Iranian military organizations, individuals, and entities involved in Iran’s UAV and ballistic missile industries.

Treasury, the UK, and the EU have also taken action against malicious actors who undermine peace, security, and stability in the West Bank and Gaza in an effort to ensure that Israelis and Palestinians can attain equal measures of prosperity and freedom.

Our commitment to multilateralism and joint action in response to Russian aggression and the emboldened actions of Iran-backed terrorist proxy groups including Hamas, Hizballah, and the Houthis is essential to a more effective approach to address malign activities throughout the world.

PUBLIC-PRIVATE PARTNERSHIP ON SANCTIONS COMPLIANCE

Our sanctions partnership, however, is not solely comprised of nation states. We have the benefit of having institutional leaders across the world who are willing to stand up for the values that drive all our work at Treasury.

Treasury has expanded our outreach with industry and trade groups to understand compliance challenges. We also continue to tailor our guidance to specific sectors and market activities, as we recognize that both foreign and domestic institutions are on the frontlines of sanctions implementation.

We are increasingly doing this work in partnership with the Commerce Department given the intersection of sanctions evasion and export control violations.

Facilitators of Russian sanctions evasion, both within Russia and outside of Russia, are now on notice that the United States and our allies and partners will not hesitate to expose and disrupt attempts to support Russia and its war efforts.

President Biden made this abundantly clear when he issued the amendment to Executive Order 14024, which indicated to foreign financial institutions that facilitating significant transactions relating to Russia’s military- industrial base may expose them to U.S. sanctions.

To further these efforts, two weeks ago, I, along with my counterparts at Commerce and State convened senior finance ministry officials from the G7, as well as Australia and the Republic of Korea.

We committed to collectively devote more time and energy to bolstering sanctions and export controls compliance domestically through comprehensive private sector engagement over the coming months.

SHARPENING OUR TOOLS: CONSIDERED DEPLOYMENT, MITIGATION, AND HUMANITARIAN AID

Providing clear, plain language guidance or licenses to authorize specific conduct is also key to Treasury’s commitment to address financial sector de- risking, which may serve to hamper the unencumbered flow of development funding, as well as humanitarian and disaster relief, to vulnerable civilian populations.

In December 2022, Treasury took a major step forward to lead efforts at the United Nations to adopt UN Security Council Resolution 2664, which added a humanitarian exception across UN asset freeze programs. The United States acted quickly to implement the Resolution in our domestic regulations by issuing a set of baseline general licenses in our UN-based sanctions programs.

Further, we continue to issue additional authorizations for designations that risk humanitarian impacts to civilian populations in vulnerable jurisdictions like Yemen that are at the center of pressing global security challenges. We also continue to do roundtables and outreach to humanitarian groups and the sector to understand their compliance challenges to assist and update or clarify guidance as needed.

CONCLUSION

Since I joined Treasury in December 2021, I’ve challenged my team to continue to think creatively about how we are deploying our sanctions authorities and resources. I am consistently impressed with the results of their efforts and very excited about the work we’ve been doing and look forward to all that we can continue to achieve together.

Thank you very much for the opportunity to be with you today.