White House Requests More Funding for Russia Sanctions, Export Control Efforts
The Biden administration needs more funding to bolster its sanctions and export controls targeting Russia, the White House told Congress this week. The administration specifically asked for more resources for the Bureau of Industry and Security as it enforces dual-use export restrictions and more staff and funding for the Treasury Department for “sanctions targeting.”
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Congress should act “expeditiously” to include the supplemental funding request as part of a comprehensive government funding bill before the March 11 funding deadline, said Shalanda Young, acting director of the Office of Management and Budget. And “given the rapidly evolving situation in Ukraine,” Young said, “additional needs may arise over time.”
The administration is asking for an additional $21 million for BIS, which would give the agency more export enforcement resources and allow it to better analyze the “chokepoints” in Russian supply chains. It would also help BIS continue to coordinate export controls with allies, “including through possible use of embedded personnel,” and analyze how to best address Russia’s and China’s technological development and dependence on U.S. technologies.
Treasury needs an additional $91 million, the administration said, including $25 million for “sanctions support.” That money would allow the Office of Terrorism and Financial Intelligence to hire more staff and contractors for sanctions policy development, sanctions targeting, enforcement and intelligence support focused on Russia.
An additional $17 million should go toward salaries for up to 40 officials and lawyers working on the recently established Task Force KleptoCapture (see 2203020044). DOJ, which will help lead the interagency task force, requested $59 million to support the task force and other Russia-related operations. Its request includes additional funding for the FBI’s cybersecurity, counterintelligence and cryptocurrency tools, resources for the Criminal, Tax, and National Security divisions to “bring sanction evaders and cyber-criminals to justice,” and money to expand sanctions prosecutions and seize sanctioned Russian assets.
Another $30 million should go to the Internal Revenue Service’s Criminal Investigations unit to help it track “traditional and nontraditional financial activities” associated with sanctioned Russian entities. Russia, for example, could use cryptocurrency to evade some sanctions, according to lawmakers.
In a March 2 letter to Treasury, four Senate Democrats said Russia could use “dark web marketplaces” powered by cryptocurrencies to move funds and conduct transactions or use crypto wallets and mixing services to allow sanctioned entities to transfer and hide their wealth. Russia may also deploy a digital ruble that would allow it to operate outside of the U.S. dollar or conduct ransomware attacks that would allow it to recoup revenues lost to sanctions, the senators said.
The senators -- Elizabeth Warren of Massachusetts, Mark Warner of Virginia, Sherron Brown of Ohio and Jack Reed of Rhode Island -- asked Treasury whether it needs more resources to enforce its sanctions and prevent Russia from using cryptocurrency to evade restrictions. The senators also asked Treasury to explain how OFAC is working with others in the “international banking community” to prevent this sanctions evasion, any challenges it has faced in applying its October guidance on virtual currency (see 2110150069) and how many virtual currency-related sanctions violations have been self-disclosed.
While a Treasury official said “there’s always more we can do on our end to beef up” compliance, and the agency may seek more funding to target illegal uses of cryptocurrency, OFAC doesn’t believe Russia can use virtual currency to evade U.S. sanctions in a way that would sufficiently support its economy.
“You can’t run a G20 economy on crypto,” the official said March 3. Large banks need “real liquidity,” the official said, and conducting large transactions in virtual currency would likely be too slow and expensive. “Even at the level of individual elites,” the official said, “laundering billions of dollars through digital wallets would expose themselves to those tracking flows within virtual currency markets.”
In addition, virtual currency exchanges with touchpoints to the U.S. likely have anti-money laundering controls and anti-terrorism compliance controls, conduct customer due-dilligence and file suspicious transaction reports, they said. “As such, it will be extremely challenging to evade our sanctions without detection,” the official said. “While there are some deficient exchanges that may be willing to offer services to sanctioned persons and entities, they will not be able to support a large economy.”