US Department of State: Remarks at the Association of Certified Anti-Money Laundering Specialists AML & Financial Crime Conference
OREANDA-NEWS. October 01, 2015. It’s a pleasure to be here for ACAMS’ 14th Annual AML and Financial Crime Conference. Within the U.S. government, this event has a reputation for being one of the world’s premiere gatherings of sanctions and illicit finance professionals.
My team at the State Department is responsible for developing and implementing sanctions and counter-threat finance policies and ensuring that they are aligned with and advancing our foreign policy and national security.
We are embedded in the Bureau of Economic and Business Affairs, which has the lead for the State Department in engaging with the private sector.
It is not an accident that we are housed in the Bureau of Economic and Business Affairs; rather, it is a recognition of the private sector’s centrality to the success of our efforts, as well as the burden that these efforts place on your companies and clients.
Against that backdrop, it is truly an honor to speak to all of you: the people who – day in and day out – shoulder the burden of complying with the ever-growing array of sanctions and AML regimes that make our economy and our country safer.
Without your diligence and expertise, sanctions would not be the pillar of U.S. foreign policy that they are today. Your hard work gives diplomats critical leverage at the negotiating table, and it protects our financial system from terrorists and other bad actors who seek to fund malicious activities.
It is no exaggeration to say that, in today’s increasingly complex global landscape, you are on the front lines of U.S. national security.
But as sanctions have become ever more popular, the ways in which they work – and, sometimes, don’t work – are still not well understood. Those who laud today’s sanctions as smarter, more targeted, and better than the sanctions of old are no doubt correct. Both the government and the private sector have found ways to make sanctions a sharper tool than they were just ten years ago. But sanctions remain a complicated and often-imprecise tool of U.S. foreign policy.
Just think about it. When the President of the United States orders the military to conduct an air strike, virtually the entire process is under the control of the U.S. government. The pilot is a U.S. government employee; the aircraft and the munitions are owned by – and are built under the auspices of – the U.S. government. The target is selected with the aid of U.S. intelligence assets. And of course, the operation is designed and carried out at the direction of the U.S. government.
The results of military force, to be sure, are often unpredictable. But from conception to implementation, it is a tool that the U.S. government controls.
The same is not true of sanctions. Compared with other tools of statecraft, sanctions are remarkably difficult to control. While the U.S. government decides which individuals and entities to add to the SDN List – and can create new mechanisms like the SSI List – it is ultimately a vast assortment of private-sector compliance divisions and legal departments – in effect, all of you – that implement U.S. sanctions.
You decide which assets to freeze and which transactions to block. The U.S. government picks the targets and designs the operations; but you build the aircraft and employ the pilots that carry them out.
The upshot of this reality is clear: the better you are at your jobs, the more effective a tool sanctions and AML regimes will become. So I could not be happier to see that this conference is so well attended.
Over the course of your three days here, I trust that you have learned methods and strategies for strengthening your sanctions compliance and AML regimes. I know that you will bring what you learn back to your firms and, in the process, continue to strengthen our national security.
But there is another important upshot of the complicated nature of sanctions: the imperative for us – the U.S. government – to engage in open and transparent dialogue with you – the private sector.
It is our responsibility to understand how sanctions are working where the rubber hits the road: the compliance divisions and legal departments of banks and companies.
If sanctions are not working as intended, we need to know. Without tips and information from you, we won’t be able to course correct when our sanctions are producing unintended and undesirable consequences.
So if there’s one thing I hope you take away from my remarks, it’s that I encourage you to contact us at the State Department to discuss how U.S. sanctions are affecting your business and the transactions that you facilitate. We need the best available information to continue improving the efficacy of sanctions as a tool of U.S. foreign policy.
This is especially true in the current national-security landscape. In our nation’s history, we have never relied on sanctions more than we do today to pressure foreign governments, fight terrorism, and deter bad international behavior.
At last year’s ACAMS Conference, my predecessor spoke about how sanctions were proliferating and growing increasingly complex. At that point, the SSI List – which imposes sanctions short of full blocking on various Russian entities – was only two months old. He predicted that such complicated tools were likely not an aberration, but rather the way of the future.
Well, if the past year is any indication, he was right. It is hard to imagine a year in which sanctions have changed so much – and dominated the headlines surrounding so many hot-button issues, from cyber security to Cuba, the crisis in Ukraine to North Korea’s destructive provocations.
Of course, no sanctions-related issue has consumed as many headlines this year as the Iran nuclear deal. And for good reason: with the help of sanctions, we have achieved the good deal that we sought.
The Joint Comprehensive Plan of Action between the P5+1 and Iran, or JCPOA, is a major accomplishment for U.S. diplomacy and a major step forward for U.S. national security. It was painstakingly negotiated over two years, it was endorsed by the UN Security Council, and most importantly, its full implementation will stop Iran from developing a nuclear bomb.
None of this would have been possible without the pressure – the diplomatic leverage – provided by sanctions.
The comprehensive understanding provides a path for the suspension and eventual termination of nuclear-related sanctions in exchange for Iran verifiably abiding by its commitments under the JCPOA.
So let’s talk for a minute about the current state of play on Iran sanctions and the timing and scope of the potential sanctions relief, as I know it’s of significant interest to the private sector. As a caveat, and given our limited time, I am going to discuss only the aspects of the deal that affect U.S. sanctions, and not EU or UN measures.
If you take anything away from my comments on Iran, please remember this: None of the sanctions relief provided for under the deal has gone into effect. Right now, sanctions against Iran remain fully in place, with the only exception being the limited relief offered under the JPOA – the interim deal that has been in place since January 2014.
The first phase of sanctions relief will not go into effect until what is referred to as Implementation Day. This is the day that the IAEA verifies that Iran has implemented certain key nuclear-related commitments.
We expect Implementation Day to occur several months from today, but it is difficult to predict more precisely than that. The timing depends on how quickly Iran implements its nuclear-related commitments and is not under the control of the United States.
Iran must accomplish a lot before it receives sanctions relief and it is by no means a forgone conclusion that it will do so. Therefore, in this intermediate period, before implementation of the JCPOA begins, we will continue to enforce the sanctions that remain in place.
On the scope of the sanctions relief, there are two key points to remember:
First: The bulk of the relief applies to nuclear-related secondary sanctions, meaning sanctions that affect non-U.S. persons acting outside of U.S. jurisdiction. Aside from a few limited exceptions, U.S. persons will continue to be prohibited from engaging in dealings with Iran or with Iranian persons.
And, second: Iran will remain a heavily-sanctioned country even after Implementation Day. Our sanctions focused on Iran’s support for terrorism, human rights abuses, and destabilizing activities in its region will not be relieved as part of this deal. This also includes U.S. sanctions that generally target WMD and missile proliferation around the world. We will continue to vigorously enforce these sanctions after Implementation Day.
Without a doubt, our comprehensive, multilateral sanctions regime was a major factor in bringing Iran to the negotiating table with the mindset necessary to make meaningful concessions on its nuclear program. We know that our sanctions only work with the support and compliance of the private sector, so I’d like to thank you for your part and recognize the burden that falls on your shoulders as a result of our sanctions.
Another major piece of sanctions-related news is our new policy toward Cuba.
Only a year ago, it would have been hard to imagine what has transpired over the past several months, including re-establishing diplomatic relations for the first time in 54 years
Our shift in policy was guided by a simple assessment: we believe the national interest is served by more openness and engagement, rather than isolation.
We know that normalizing our bilateral relations will be a long, complex process. It’s a two-way street that will take sustained interaction and dialogue between our two governments.
While the U.S. embargo on Cuba remains in place, the Administration has taken significant action on the regulatory front to give life to the new policy.
After two sets of regulatory amendments -- in January and mid-September-- we have General Licenses in all twelve categories of travel; a range of US companies that can have a physical presence in Cuba; closer U.S.-Cuba banking relations; a fuller range of telecommunications activities and exports, including authorization for U.S. telecommunications companies to enter into joint ventures and other business relationships with Cuban entities; and the importation of goods from independent Cuban entrepreneurs.
As your firms prepare to take advantages of these changes, it is critical to understand their purpose: to empower the Cuban people, to bolster Cuba’s nascent private sector, and to promote direct engagement with ordinary Cubans.
U.S. business has a vital role to play in helping move Cuba toward greater openness and prosperity, and we encourage you to seize this opportunity.
While we are easing certain sanctions to support the Cuban people, we are actively enforcing sanctions – halfway around the world – to pressure Russia to respect Ukraine’s sovereignty and territorial integrity.
Since Russia began its aggressive activities in Ukraine in March of last year, we have gradually increased sanctions. We started by targeting the inner circle of President Putin and those directly involved in the destabilization of Ukraine, but we’ve progressed to Russia’s banking, energy, and defense sectors.
Our Russia sanctions can be divided into three broad categories.
The first category includes individuals and entities involved in misappropriating Ukrainian assets, violating the sovereignty of Ukraine, and perpetrating other misdeeds that threaten Ukraine’s peace, security, or stability. These persons are on the SDN List and the target of full blocking sanctions.
The second category, in the vernacular, is known as “sectoral sanctions.” It includes large Russian banks, energy companies, and defense firms that are either state-owned or linked to President Putin’s inner circle. These entities are on the SSI List and the target of financial and technology restrictions.
The third and final category focuses on Crimea and was instituted last December. In addition to prohibiting U.S. persons from engaging in most economic activities with the territory of Crimea, it allows Treasury, in consultation with State, to designate any entity that operates in Crimea.
We have been clear about the purpose of our sectoral sanctions: to pressure Russia to respect Ukraine’s sovereignty and territorial integrity in general, and to comply with the Minsk agreements in particular.
If Russia implements its Minsk commitments in full – freeing all hostages, removing artillery and heavy weapons from Donbas, and sealing the internationally-recognized border between Russia and Ukraine – we will roll back significant sanctions.
But until that point, the costs to Russia will only grow. And as we demonstrated in our July 30 sanctions maintenance package, we are committed to active enforcement of existing sanctions.
The Crimea-related sanctions, on the other hand, will remain in place so long as Russia continues to occupy Crimea. We are committed to a long-term non-recognition policy, backed with the force of sanctions.
After Russia’s purported annexation of Crimea in March of last year, it has been striving to assimilate the region into its administrative fold. Doing so will require much new infrastructure to connect Crimea to Russia through transport and electricity links. We call this the “infrastructure of occupation.”
Part of the reason our Crimea sanctions are so sweeping is that they aim to make it prohibitively risky for companies to participate in such projects.
For both the sanctions related to Crimea and those linked to the crisis in Eastern Ukraine, cooperation with the European Union and other like-minded partners has been at the heart of our policy.
From the start, we’ve engaged in intensive diplomacy and outreach across the world to get broad support for our sanctions and ensure that U.S. companies are not simply backfilled by non-U.S. companies.
Regardless of what happens in Ukraine, the Russia sanctions offer a hint at where sanctions policy is likely headed. In short, I anticipate we’ll continue to impose ever-more complex sanctions to maximize costs for the target while minimizing the risks for the global economy.
As sanctions grow increasingly complex, they will affect areas that are not solely associated with the financial sector. We may well reach a point at which sanctions compliance is a major priority not only for financial institutions, but also for companies involved in energy and other extractive industries, insurance, transportation, technology, the Internet, and a wide variety of other sectors.
A recent example of the increasing scope of our sanctions efforts is Executive Order 13694, which authorizes the imposition of sanctions on those responsible for or complicit in malicious cyber activities that threaten our national security, foreign policy, economic health, or financial stability.
This Executive Order is the direct result of our rapidly changing world and the need for novel authorities to address new and difficult challenges. As the national security landscape continues to evolve, our policy and authorities surrounding those issues will need to keep pace. That’s why it’s so important that we’re having this discussion today.
If there is one unifying theme of all the various sanctions issues of the day, it is the imperative of clear and open communication between the government and the private sector.
As I noted earlier, at the State Department, our responsibility is to ensure that U.S. sanctions and counter-threat finance efforts are advancing the foreign-policy and national-security objectives that they are intended to achieve.
It would be impossible for us to do our job with any level of competence without open lines of communication with you.
After all, you are the ones charged with complying with sanctions day in, day out. And more broadly, the strength of your banks and companies is what makes our economy so central – and gives our sanctions so much force – to begin with.
Many of you already communicate with us regularly – whether you’re applying for a specific license, or you’re seeking a forthright conversation about how our sanctions are operating in practice.
But for those of you who have never engaged with the State Department, please know that we look forward to hearing from you. And that we rely – in part – on your information to assess the efficacy of our sanctions programs.
So, before opening up to questions, I’d like to thank you all one last time for everything that you do. Your hard work makes our sanctions stronger.
While your jobs are unlikely to become any easier in the months and years ahead, they will become more critical to our national security.