Markets Wired

WASHINGTON – Today the U.S. Department of the Treasury and Internal Revenue Service (IRS) released proposed guidance on the clean vehicle provisions of the Inflation Reduction Act (IRA) that are lowering costs for consumers, spurring a boom in U.S. manufacturing, and strengthening energy security by building resilient supply chains with allies and partners. Since the IRA was enacted, nearly $100 billion in private-sector investment has been announced across the U.S. clean vehicle and battery supply chain.

“The Inflation Reduction Act has unleashed an investment and manufacturing boom in the United States, and since President Biden enacted the law, ecosystems have developed in communities nationwide to onshore the clean vehicle supply chain,” said Secretary of the Treasury Janet L. Yellen. “The Inflation Reduction Act’s clean vehicle tax credit saves consumers up to $7,500 on a new clean vehicle and hundreds of dollars per year on gas, while creating American manufacturing jobs and strengthening our energy security.”

“President Biden entered office determined to reverse the decades-long trend of letting jobs and factories go overseas to China,” said John Podesta, Senior Advisor to the President for Clean Energy Innovation and Implementation. “Thanks to the Investing in America agenda and today’s important guidance from Treasury and the Department of Energy, we’re helping ensure that the electric vehicle future will be made in America.”

Today’s Notice of Proposed Rulemaking (NRPM) provides clarity and certainty around the IRA’s foreign entity of concern (FEOC) requirements. To strengthen the security of America’s supply chains, beginning in 2024, an eligible clean vehicle may not contain any battery components that are manufactured or assembled by a FEOC, and, beginning in 2025, an eligible clean vehicle may not contain any critical minerals that were extracted, processed, or recycled by a FEOC. In conjunction with today’s Treasury NPRM, the Department of Energy has released proposed guidance defining what entities are a FEOC.

In addition to the FEOC requirement, clean vehicles must also continue to meet additional statutory criteria, including additional sourcing requirements for both the critical minerals and battery components contained in the vehicle, a requirement that vehicles undergo final assembly in North America, and a requirement that vehicles do not exceed a Manufacturers Suggested Retail Price of $80,000 for a van, pickup truck, or sport utility vehicle, or $55,000 for any other vehicle. 
 

Foreign Entity of Concern Requirement

The NPRM provides proposed rules to determine whether applicable critical minerals (and their associated constituent materials) and battery components are manufactured or assembled by a FEOC for battery components, and extracted, processed, or recycled by a FEOC for critical minerals. The proposed rules would require manufacturers to conduct due diligence that complies with industry standards of tracing for battery materials.

Under the proposal, FEOC-compliance for battery components would be determined at the time of manufacture or assembly, and FEOC-compliance for critical minerals would be determined by reviewing all phases of applicable critical mineral extraction, processing, and recycling. For example, a mineral extracted by an entity that is not a FEOC but processed by an entity that is a FEOC would not be compliant. Compliant battery components would have to be tracked to FEOC-compliant battery cells, and cells could not be manufactured or assembled by a FEOC.

Critical minerals generally also must be traced. However, given that there is commingling in the critical mineral supply chains and suppliers may not be able to physically track certain specific masses of minerals to specific battery cells or batteries, the NPRM asks for comments on a temporary transition rule, under which critical minerals and associated constituent materials may be allocated to a particular set of battery cells. The battery cells would then have to be physically tracked to batteries and new clean vehicles using a serial number or other identification system.

The NPRM also asks for comment on a proposed additional transition rule as the automotive industry develops the ability to trace certain low-value materials with precision. The NPRM proposes a temporary transition rule through 2026 that would give the industry time to develop tracing standards for these low-value materials. The guidance asks for comment on the need for and design of such a rule, what materials should be included under this approach, and whether alternative approaches to such a transition rule would be more appropriate.

To allow compliant vehicles already on dealer lots and currently being manufactured to qualify for the credit while the rulemaking process proceeds, the proposed rules would provide a transition rule to expedite certification for new clean vehicles that do not contain battery components manufactured or assembled by a FEOC and are placed in service in 2024 between January 1 and 30 days after the rules are finalized.

The proposed rules would also create an upfront review system starting in 2025 that would provide additional oversight of FEOC compliance, as well as certainty to manufacturers. For new vehicles placed in service in 2025 or later, the IRS would track FEOC compliance via a compliant-battery ledger. Each year, automakers would be required to submit to the IRS an estimate of the number of FEOC-compliant batteries they expect to procure each year, along with supporting documentation, and the Department of Energy would review these submissions. Automakers’ balances would be adjusted to account for changes in the number of anticipated FEOC-compliant batteries and would be reduced as new credit-eligible clean vehicles are reported to the IRS. Once the ledger reaches zero for a year, the automaker could no longer submit vehicles as qualifying for the clean vehicle credit under section 30D.

Finally, the NPRM proposes a regime to incentivize compliance by automakers. Inadvertent errors may be cured; otherwise, the vehicle related to the error will no longer be credit eligible. If that vehicle has already been sold, the error would instead cause a reduction to the ledger.

Under the proposed enforcement framework, in cases of fraud or intentional disregard for the rules, all unsold vehicles of the automaker may be no longer eligible for the section 30D credit. The IRS may also terminate the automaker’s ability to qualify additional vehicles for the credit in the future. Treasury and the IRS will carefully consider public comments before issuing final rules.

Battery Component Requirement

To meet the battery component requirement and be eligible for a $3,750 credit, the applicable percentage of the value of the battery components must be manufactured or assembled in North America

• For 2023, the applicable percentage is 50 percent.
• For 2024 and 2025, the applicable percentage is 60 percent.
• For 2026, the applicable percentage is 70 percent.
• For 2027, the applicable percentage is 80 percent.
• For 2028, the applicable percentage is 90 percent.
• Beginning in 2029, the applicable percentage is 100 percent.

Critical Mineral Requirement

To meet the critical mineral requirement and be eligible for a $3,750 credit, the applicable percentage of the value of the critical minerals contained in the battery must be extracted or processed in the United States or a country with which the United States has a free trade agreement or be recycled in North America—as mandated by the Inflation Reduction Act.

• For 2023, the applicable percentage is 40 percent.
• For 2024, the applicable percentage is 50 percent.
• For 2025, the applicable percentage is 60 percent.
• For 2026, the applicable percentage is 70 percent.
• Beginning in 2027, the applicable percentage is 80 percent.

Beginning in 2024, an eligible clean vehicle may not contain any battery components that are manufactured by a foreign entity of concern and beginning in 2025 an eligible clean vehicle may not contain any critical minerals that were extracted, processed, or recycled by a foreign entity of concern.

 

Clean Vehicle Credit Requirement	2024 (To receive $7,500)	2025 (To receive $7,500)
Foreign Entity of Concern (Battery Component)	YES	YES
Foreign Entity of Concern (Critical Minerals)	NO	YES
Battery Component Percentage	60%	60%
Critical Minerals Percentage	50%	60%

 

###

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is imposing sanctions on three entities and identifying as blocked property three vessels that used Price Cap Coalition services while carrying Russian crude oil above the Coalition-agreed price cap. These sanctions build on Treasury’s previous actions in October and November of this year and represent once again Treasury’s commitment, alongside its Coalition partners, to responsibly reduce oil revenues that the Russian government uses to fund its war against Ukraine.

“Enforcement of the price cap on Russian oil is a top priority for the United States and our Coalition partners,” said Deputy Secretary of the Treasury Wally Adeyemo. “By targeting these companies and their ships, we are upholding the dual goals of the price cap by restricting Russia’s profits from oil while promoting stable global energy markets.”

THE PRICE CAP

The United States is part of an international coalition of countries (the Price Cap Coalition), including the G7, the European Union, and Australia, that have agreed to prohibit the import of crude oil and petroleum products of Russian Federation origin. These countries, home to many best-in-class financial and professional services, have also agreed to restrict a broad range of services related to the maritime transport of crude oil and petroleum products of Russian Federation origin—unless that oil is bought and sold at or below the specific price caps established by the Coalition or is authorized by a license. This policy is known as the “price cap.” The price cap is intended to maintain a reliable supply of crude oil and petroleum products to the global market while reducing the revenues the Russian Federation earns from oil after its own war of choice against Ukraine inflated global energy prices. 

On October 12, 2023, the Price Cap Coalition published a Coalition Advisory for the Maritime Oil Industry and Related Sectors (“the Advisory”). The Advisory, which is directed at both government and private sector actors involved in the maritime trade of crude oil and refined petroleum products, provides recommendations concerning specific best practices and reflects our commitment to promoting responsible practices in the industry, preventing and disrupting sanctioned trade, and enhancing compliance with the price cap.

OFAC previously published an Alert on Possible Evasion of the Russian Oil Price Cap on April 17, 2023 and Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin on February 3, 2023.

VESSELS CARRYING RUSSIAN OIL PRICED ABOVE THE PRICE CAP

The crude oil price cap took effect in December 2022 with a cap on Russian crude oil at $60 per barrel. The vessels NS Champion, Viktor Bakaev, and HS Atlantica carried Russian Urals crude oil priced above $70 per barrel after the crude oil price cap took effect. The NS Champion, Viktor Bakaev, and HS Atlantica used U.S.-person services while transporting the Russian-origin crude oil.

United Arab Emirates-based (UAE-based) Sterling Shipping Incorporated is the registered owner of the NS Champion.

UAE-based Streymoy Shipping Limited is the registered owner of the Viktor Bakaev.

Liberia-based HS Atlantica Limited is the registered owner of the HS Atlantica.

Sterling Shipping Incorporated, Streymoy Shipping Limited, and HS Atlantica Limited were designated pursuant to Executive Order 14024 for operating or having operated in the marine sector of the Russian Federation economy. OFAC also identified the NS Champion, Viktor Bakaev, and HS Atlantica as property in which Sterling Shipping Incorporated, Streymoy Shipping Limited, and HS Atlantica Limited, respectively, have an interest.

SANCTIONS IMPLICATIONS

As a result of today’s action, all property and interests in property of the persons above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person. 

The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897 here. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

For identifying information on the entities sanctioned and vessels identified today, click here. 

###

Australia, Japan, the Republic of Korea, and the United States 

Sanction DPRK for its November 21 Satellite Launch

WASHINGTON — Today, in coordination with foreign partners, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned eight foreign-based Democratic People’s Republic of Korea’s (DPRK) agents that facilitate sanctions evasion, including revenue generation and missile-related technology procurement that support the DPRK’s weapons of mass destruction (WMD) programs. Additionally, OFAC sanctioned cyber espionage group Kimsuky for gathering intelligence to support the DPRK’s strategic objectives. 

Today’s actions are in response to the DPRK’s November 21 claimed military reconnaissance satellite launch and demonstrates the multilateral efforts of the United States and foreign partners to hinder the DPRK’s ability to generate revenue, procure materiel, and gather intelligence that advances the development of its WMD program and the unlawful export of arms and related materiel from the DPRK.

 “Today’s actions by the United States, Australia, Japan, and the Republic of Korea reflect our collective commitment to contesting Pyongyang’s illicit and destabilizing activities,” said Treasury’s Under Secretary for Terrorism and Financial Intelligence Brian E. Nelson. “The DPRK’s use of overseas laborers, money launderers, cyber espionage, and illicit funding continue to threaten international security and our allies in the region. We will remain focused on targeting these key nodes in the DPRK’s illicit revenue generation and weapons proliferation.”

DPRK ILLICIT ECONOMIC ACTIVITY

Today’s actions target the DPRK’s access to revenue and weapons, generated through state-owned entities, banks, and trading companies, specifically through their globally deployed trade and bank representatives. These individuals provide critical access to foreign technology vital to the DPRK’s domestic weapons program and enable DPRK revenue generation through access to the international financial system. A portion of the revenue from these activities has been funneled towards domestic WMD-related technology and missile systems.

OFAC is designating eight individuals that are associated with U.S.-designated DPRK state-owned weapons exporters, financial institutions, and front companies including Green Pine Associated Corporation (Green Pine), Foreign Trade Bank of the Democratic People’s Republic of Korea (FTB), KoryoCommercial Bank LTD. (KCB), Korea United Development Bank (KUDB), and Mansudae Overseas Project Group of Companies (MOP).

DPRK Weapons Sales Representatives 

U.S. and UN-designated Green Pine is responsible for approximately half of DPRK arms and related materiel exports. The Reconnaissance General Bureau (RGB)-controlled Green Pine specializes in the production of maritime military craft and armaments and has provided both technical assistance and weapons to Iranian defense-related firms. 

• Kang Kyong Il and Ri Sung Il are Tehran, Iran-based Green Pine representatives. Kang Kyong Il has attempted to sell Chinese-origin aluminum and Ri Sung Il has worked with other DPRK representatives to sell conventional weapons to foreign governments. Both Kang Kyong Il and Ri Sung Il have travelled to China together on multiple occasions.
•  Kang Phyong Guk is a Green Pine representative in Beijing, China and is a central liaison between Green Pine and its overseas representatives.

Ri Sung Il, Kang Kyong Il, and Kang Phyong Guk are being designated pursuant to E.O. 13551 for acting or purporting to act, for or on behalf of, directly or indirectly, Green Pine, an entity that was included in the Annex to E.O. 13551.

DPRK Financial Representatives

The DPRK continues to use agents and individuals associated with its state-owned entities and banks to access the international financial system to conduct illicit financial activity. They have long-standing networks of front or shell companies and use embassy personnel to move money and procure materiel for the DPRK’s WMD and ballistic missile programs as well as to procure conventional weapons. 

• So Myong is the chief representative of FTB in Vladivostok, Russia and has facilitated financial transfers on behalf of designated DPRK financial institutions and weapons trading entities and including representatives, of the U.S.-designated Second Academy of Natural Sciences. So Myong is designated pursuant to E.O. 13382 for having acted or purported to act for or on behalf of, directly or indirectly, FTB.
• Choe Un Hyok is a KUDB representative in Russia who has coordinated multiple payments to an entity subordinate to the U.S. and UN-designated, Munitions Industry Department. Choe Un Hyok is designated pursuant to E.O. 13722 for having acted or purported to act for or on behalf, of, directly or indirectly, KUDB.
• Jang Myong Chol is a KCB representative in China that has facilitated transactions worth hundreds of thousands of dollars. Jang Myong Chol is designated, pursuant to E.O. 13810 for having acted or purported to act for on or on behalf of, directly or indirectly, KCB.

DPRK Front Companies

Additionally, OFAC is designating two individuals that have generated revenue for the Government of North Korea and were previously designated by the European Union for generating revenue through the exportation of DPRK workers.

• Choe Song Chol and Im Song Sun have represented front companies for UN and U.S.-designated MOP. MOP was designated pursuant to E.O. 13722 for having engaged in, facilitated, or been responsible for the exportation of workers from North Korea [OFAC Press Release] 

Choe Song Chol and Im Song Sun are being designated pursuant to E.O. 13810 for being North Korean persons, including a North Korean person who has engaged in commercial activity that generates revenue for the Government of North Korea or the Worker’s Party of Korea.

A CYBER ESPIONAGE UNIT WITH STRATEGIC SIGNIFICANCE

Active since 2012, Kimsuky is subordinate to the UN- and U.S. designated Reconnaissance General Bureau (RGB), the DPRK’s primary foreign intelligence service. On August 30, 2010, OFAC designated the RGB by adding it to the annex of E.O. 13551. OFAC subsequently re-designated the RGB on January 2, 2015 pursuant to E.O. 13687 for being a controlled entity of the Government of North Korea. Malicious cyber activity associated with the Kimsuky advanced persistent threat is also known in the cybersecurity industry as APT43, Emerald Sleet, Velvet Chollima, TA406, and Black Banshee.

Although Kimsuky is primarily an intelligence collection entity, its cyber espionage campaigns directly support the DPRK’s strategic and nuclear ambitions. Kimsuky primarily uses spear-phishing to target individuals employed by government, research centers, think tanks, academic institutions, and news media organizations, including entities in Europe, Japan, Russia, South Korea, and the United States. Kimsuky employs social engineering to collect intelligence on geopolitical events, foreign policy strategies, and diplomatic efforts affecting its interests by gaining illicit access to the private documents, research, and communications of their targets.

Kimsuky is being designated pursuant to E.O. 13687, for being an agency, instrumentality, or a controlled entity of the Government of North Korea.

SANCTIONS IMPLICATIONS

As a result of today’s action, pursuant to E.O.s 13687, 13382, 13551, 13722, and 13810, all property and interests in property of the persons named above that are in the United States, or in the possession or control of U.S. persons, are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. 

Unless authorized by a general or specific license issued by OFAC, or otherwise exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. The prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods, or services from any such person.

In addition, persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to designation. Furthermore, any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions. 

The power and integrity of OFAC sanctions derive not only from its ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior.  For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897.

For additional information on the DPRK Cyber Activities refer to the Guidance on the North Korean Cyber Threat.

For additional information on Kimsuky’s recent social engineering operations refer to the Joint Cyber Advisory DPRK Using Social Engineering to Enable Hacking, its tactics, techniques and procedures Joint Cybersecurity Advisory.

For additional information on DPRK illicit finance and procurement activities see the North Korea Ballistic Missile Procurement Advisory and the FinCEN Advisory on North Korea’s Use of the International Financial System.

For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

Find identifying information on the individuals sanctioned today here.

 

###

 

WASHINGTON – Today, U.S. Secretary of the Treasury Janet L. Yellen met with Eurogroup President and Irish Minister Paschal Donohoe. Secretary Yellen and Minister Donohoe exchanged views on global economic issues and areas of collaboration and discussed the U.S. and EU’s respective economic relationships with China. Secretary Yellen emphasized the strong cooperation between the U.S. and EU on actions to hold Russia accountable for its illegal invasion of Ukraine, and our ongoing support for Ukraine. 

###

Treasury Coordinates with Government of Mexico to Further Disrupt CJNG Timeshare Fraud

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned three Mexican individuals and 13 Mexican companies.  These individuals and companies are linked, directly or indirectly, to timeshare fraud led by the Cartel de Jalisco Nueva Generacion (CJNG). CJNG, a violent Mexico-based organization, traffics a significant proportion of the illicit fentanyl and other deadly drugs that enter the United States. OFAC coordinated this action with the Government of Mexico, including its Financial Intelligence Unit, as well as U.S. Government partners, including the Federal Bureau of Investigation (FBI), and the Drug Enforcement Administration.   

“The CJNG cartel, a leading trafficker of narcotics like illicit fentanyl into the United States, generates substantial revenue for its multi-faceted criminal enterprise through its timeshare fraud network,” said Secretary of the Treasury Janet L. Yellen. “CJNG uses extreme violence and intimidation to control the timeshare network, which often targets elder U.S. citizens and can defraud victims of their life savings. Treasury remains committed to the Administration’s whole-of-government effort, in coordination with our partners in Mexico, to disrupt CJNG’s revenue sources and ability to traffic deadly drugs like fentanyl.”   

EXPOSING CJNG TIMESHARE FRAUD

On March 2, 2023, OFAC sanctioned eight Mexican companies pursuant to Executive Order (E.O.) 14059.  These companies are linked, directly or indirectly, to CJNG’s timeshare fraud activities. On April 27, 2023, OFAC sanctioned seven Mexican individuals, including drug trafficking fugitive Eduardo Pardo Espino, and 19 Mexican companies pursuant to E.O. 14059. These individuals and companies are also linked, directly or indirectly, to CJNG’s timeshare fraud activities.

Although there are different types of timeshare fraud, the schemes often involve the following: (1) third-party scammers, who claim to have ready buyers, make unsolicited purchase offers to timeshare owners;

(2) if offers are accepted, scammers make requests to timeshare owners for payments of advance fees and taxes, supposedly to facilitate or expedite the sale with assurances of reimbursement upon closing; and

(3) once multiple payments have been made to the scammers, timeshare owners eventually realize that the offers were fictitious, that there are no buyers, and that their money is gone. 

CONTINUING TO DISRUPT CJNG’S TIMESHARE FRAUD NETWORK

Building on the two actions taken earlier this year, today OFAC sanctioned additional Mexican individuals and companies pursuant to E.O. 14059 that are linked, directly or indirectly, to CJNG’s timeshare activities. Many of these individuals and entities are located in Puerto Vallarta, Jalisco, Mexico, which is a CJNG strategic stronghold for drug trafficking and various other illicit activities.   

Today, OFAC sanctioned Mexican individuals Teresa De Jesus Alvarado Rubio (Alvarado), Manuel Alejandro Foubert Cadena (Foubert), and Gabriela Del Villar Contreras (Del Villar) pursuant to E.O. 14059 for being owned, controlled, or directed by, or having acted or purported to act for on behalf of, directly or indirectly, CJNG, a person sanctioned pursuant to E.O. 14059. Alvarado has been linked to timeshare fraud activities in the Puerto Vallarta area for approximately 15 years. Foubert has been linked to timeshare fraud activities in Puerto Vallarta and elsewhere since at least 2016. Del Villar is a Puerto Vallarta attorney who engages in debt collection and real estate fraud on behalf of CJNG. 

Also today, OFAC sanctioned 13 Mexican companies pursuant to E.O. 14059. OFAC sanctioned Grupo Empresarial Epta, S.A. de C.V., which is purported to be engaged in real estate activities, for being owned, controlled, or directed by, or having acted or purported to act for or on behalf of, directly or indirectly, CJNG. 

OFAC sanctioned the following nine companies—listed with their purported activities—for being owned, controlled, or directed by, or having acted or purported to act for or on behalf of, directly or indirectly, Foubert, a person sanctioned pursuant to E.O. 14059: Assis Realty And Vacation Club, S.A. de C.V. (real estate activities), Axis Sale & Maintenance Buildings, S.A. de C.V. (real estate activities), Comercializadora de Servicios Turisticos de Vallarta, S.A. de C.V. (real estate activities), Condos & Vacations Buildings Sale & Maintenance, S.A. de C.V. (real estate activities), Grupo Minera Barro Pacifico, S.A.P.I. de C.V. (mining), International Realty & Maintenance, S.A. de C.V. (real estate activities), Mega Comercial Ferrelectrica, S.A. de C.V. (wholesale trade), Real Estates & Holiday Cities, S.A. de C.V. (real estate activities), and Terra Minas e Inversiones del Pacifico, S.A.P.I. de C.V. (mining). 

OFAC sanctioned the following three Mexican companies—listed with their purported activities—for being owned, controlled, or directed by, or having acted or purported to act for or on behalf of, directly or indirectly, Del Villar, a person sanctioned pursuant to E.O. 14059: Banlu Comercializadora, S.A. de C.V. (a.k.a. Cear Gym) (wholesale trade; sports club), Crowlands, S.A. de C.V. (real estate activities), and Skairu, S.A. de C.V. (real estate activities).   

OTHER ACTIONS AGAINST CJNG

On April 8, 2015, OFAC sanctioned CJNG pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act) for playing a significant role in international narcotics trafficking. On December 15, 2021, OFAC also designated CJNG pursuant to E.O. 14059. In other actions, OFAC has sanctioned numerous CJNG-linked companies that were engaged in various commercial activities and multiple individuals who played critical roles in CJNG’s drug trafficking, money laundering, and corruption. Many recent actions have focused on CJNG’s strategic stronghold of Puerto Vallarta. OFAC has sanctioned the following senior CJNG members based in Puerto Vallarta: Carlos Andres Rivera Varela (a.k.a. “La Firma”), Francisco Javier Gudino Haro (a.k.a. “La Gallina”), and Julio Cesar Montero Pinzon (a.k.a. Luis Armando Velazquez Baltazar; a.k.a. Cesar Hernandez Jimenez; a.k.a. “El Tarjetas”). These three individuals are part of a CJNG enforcement group based in Puerto Vallarta that orchestrates assassinations of rivals and politicians using high-powered weaponry. 

TIMESHARE FRAUD RESOURCES

On March 2, 2023, the FBI issued a public service announcement to consumers concerning scammers targeting owners of timeshares in Mexico.  Victims of this type of scam are encouraged to file a complaint with the FBI’s Internet Crime Complaint Center by visiting https://www.ic3.gov.   

At times, perpetrators of timeshare fraud misuse government agency names in attempts to appear legitimate. For example, perpetrators may call victims and claim to represent OFAC, demanding a payment in exchange for the release of funds that the perpetrator claims OFAC has “blocked.” On March 2, 2023, OFAC issued an alert regarding such scams, warning that individuals may falsely claim to represent OFAC in furtherance of their fraud.

SANCTIONS IMPLICATIONS

As a result of today’s action, all property and interests in property of the designated persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. U.S. persons may face civil or criminal penalties for violations of E.O. 14059 and the Kingpin Act.

Today’s action is part of a whole-of-government effort to counter the global threat posed by the trafficking of illicit drugs into the United States that is causing the deaths of tens of thousands of Americans annually, as well as countless more non-fatal overdoses. OFAC, in coordination with its U.S. Government partners and foreign counterparts, will continue to target and pursue accountability for foreign illicit drug actors.

The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the Specially Designated Nationals and Blocked Persons List (SDN List), but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897 here. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

For more information on the individuals and entities designated today, click here.

To view a chart on the entities designated today, click here.

###

 

###

 

As Prepared for Delivery

Good afternoon. Thank you, Barbara, for the introduction. I’m glad to be here in North Carolina to discuss the Biden Administration’s investments in manufacturing and to see firsthand here at Livent the impacts that these investments are having.

I’ll start with the broader context. Over the past three years, the Biden Administration has helped drive a historic economic recovery from the pandemic—the most equitable on record. GDP growth and the labor market are strong and inflation is now down substantially from its peak. We learned this week that our economy grew even faster in the third quarter of 2023 than we’d thought: the fastest in any quarter since 2021. That strength isn’t just apparent in aggregate statistics. It reflects contributions from consumers consuming more and businesses investing more, as our economy’s overall strength is translating to higher real household incomes and inflation cools. Real wages—earnings after inflation—are growing faster this year than they were before the pandemic. This all reflects what we’ve seen under this Administration: even as we don’t put too much weight on a single month or quarter’s numbers, a historically fast recovery is settling over time into sustainable growth.

The President and I know there’s still more work to do. Higher prices can affect household budgets, and we’re using the tools we have to address this in essential areas like energy and health care. We’re also tackling structural issues that have posed challenges for decades. Our country has seen slow productivity growth, entrenched income inequality, and regional divergences: Some regions have experienced economic stagnation while others have prospered. The President and I share a belief that addressing these challenges requires growing our economy from the bottom up and the middle out, not the top down. This underlies the President’s economic strategy—what we call Bidenomics. And it aligns with what I’ve called modern supply-side economics, increasing our long-term productive capacity while broadening economic opportunity across the country and addressing challenges like climate change.

Though we are investing in many parts of our economy, reinvigorating American manufacturing is core to our strategy. The United States lost one-third of our manufacturing jobs between the peak in 1979 and 2019. This is in part due to increases in productivity, trade, and other causes, but it still affected millions of Americans. America’s global share of manufacturing also fell. This has meant a tremendous missed opportunity, for American workers and for our country’s economic resilience.

So, the Biden Administration is scaling up our domestic manufacturing capacity to reverse the decades-long decline in American manufacturing. But let me be clear: We are not looking backward and trying to recreate the past. We are pursuing policies fit for the American economy in the 21st century. This means investing in the future of manufacturing: rebuilding the sector in a way that’s aligned with our current commitments to broaden economic opportunity and address climate change.

Scaling up our domestic manufacturing capacity—particularly in new industries—can help create well-paying, middle-class jobs for Americans across the country. Serving people and places that have too often been left behind unlocks their potential to fuel our country’s economic growth. Domestic manufacturing can also help secure our supply chains, reducing our vulnerability to shortages, such as of key medicines and medical equipment, which we saw at the start of the pandemic. And certain manufacturing investments—such as in clean energy technologies—can drive production and innovation to meet the pressing global challenges of our time.

So, today, I want to focus on the Inflation Reduction Act’s tax credits for clean energy manufacturing and explain how they are helping us achieve three distinct goals: broadening economic opportunity; bolstering energy security; and propelling us toward a clean energy future.

First, let me describe the credits and the boom in manufacturing we’re seeing. The IRA provides tax credits for producing key inputs to the clean energy economy, from components for wind and solar energy, to inverters, battery components, and critical minerals. These credits make it cheaper for companies to invest in new clean energy technologies. And the long-term timeframe over which they’ll be available means producers will benefit from not just lower costs but also from increased stability. Before the IRA, producers of clean energy lacked certainty. Important tax incentives routinely had short expiration dates and needed to be reauthorized. With the IRA, clean energy producers and their suppliers can have confidence that their investments in American manufacturing will continue to be good business decisions.  

Producers and investors are also indirectly incentivized by other IRA provisions. The IRA’s supply-side incentives are complemented by demand-side incentives, including tax credits for purchasing qualifying electric vehicles that will be available at the time of sale starting next year. We expect U.S. demand for EVs to continue to increase under this new structure, fueling the U.S. EV market’s rapid expansion. And as demand for EVs increases, manufacturers of battery components, for example, will see even more reason to increase manufacturing capacity to meet it. Growth in battery manufacturing for EVs will also support the production of other manufactured goods, such as cells for handheld devices and electric grid-scale batteries.

These incentives, alongside the Administration’s other actions, are working. Spurred on by President Biden’s economic plan, America is seeing a renaissance in manufacturing. Since the start of the Administration, private companies have announced $614 billion in manufacturing and clean energy investments, including $142 billion in EVs and batteries and $71 billion in clean energy manufacturing. In just the first year after the passage of the IRA, companies announced plans to build 83 clean energy manufacturing facilities across the country. We’re seeing the emergence of a battery belt across the Midwest and South. Capacity in the pipeline increased from around 700 gigawatt-hours before the passage of the IRA to 1,200 this past July. That’s a 70 percent increase.

North Carolina has been the site of major developments, including announcements of an $8 billion expansion of battery production lines in Liberty and $165 million for a new lithium-ion battery manufacturing plant in Morrisville. And here in Bessemer, Livent is building on an eighty-year history to create a crucial supply hub for lithium-ion batteries. It has built the first new lithium hydroxide production facility in North America in more than a decade, expanding its U.S. lithium hydroxide manufacturing capacity by 50 percent. This is the country’s largest facility, and Livent cites the IRA as a key driver of its investments.

The boom in manufacturing, driven by the IRA’s tax credits, is helping us achieve the first goal I mentioned: broadening economic opportunity. Unemployment is already near historic lows, with a larger share of those between 25 and 54 years-old employed than we’ve seen in 20 years. But this Administration is focused on how to ensure growth and jobs for middle-class Americans for the long term, whether or not they have four-year college degrees. That’s where manufacturing comes in. The IRA is creating well-paying jobs for construction workers, mechanics, technicians, electricians, and support staff, in significant numbers.

Key IRA provisions, such as prevailing wage and apprenticeship requirements, mean workers for certain clean energy projects will be fairly compensated and have pathways into these growing industries. Employers will gain access to a stable workforce equipped with the right skills. Upskilling workers is being further supported by the growth of workforce development programs, including Livent’s workforce development partnership with Gaston College. And organized labor is powerfully taking action to expand worker protections across the country. I saw the key role that unions play in training workers in these sectors during my visit to the IBEW facility in Las Vegas earlier this year.

Investments are also flowing to where they are most needed. New Treasury analysis shows that 86 percent of IRA-related investments have been in counties with below-average college graduation rates. This trend is supported by other IRA provisions not directly applicable to the manufacturing credits, such as boosts for investments in low-income communities and historic energy communities.

Investments in clean energy manufacturing are also helping achieve a second goal: bolstering our energy security. Our country’s energy security is dependent on the resilience of our supply chains. And for too long, the supply of critical raw materials and the manufacturing capacity to process them have been too concentrated beyond our borders. Key supply chains in areas like clean energy are overconcentrated in China, in part due to unfair non-market practices over decades. And overdependence, including on China, makes America more vulnerable to risks that disrupt our access to that foreign production, from natural disasters, to macroeconomic forces, to deliberate actions such as economic coercion. Disrupted access can result in economic disruption and higher prices for American consumers.  

So, America must increase efforts to bolster its energy and economic security, which is why the Biden Administration is pursuing far-ranging efforts to shore up our critical supply chains. America benefits from strong relations with our allies and partners. And through what I’ve called friendshoring, we’re seeking to strengthen our economic resilience by diversifying our supply chains across a wide range of trusted allies and partners.

But our long-term energy security also depends on shoring up our domestic manufacturing capacity, which the IRA is now enabling. We see that here in Bessemer, where Livent will source inputs from close partners like Canada and carry out critical processing steps in the U.S., helping automakers meet the IRA’s rules for sourcing battery components and critical minerals. And with massive increases in domestic manufacturing capacity, our country will become less dependent on other countries for the inputs we need and we will make great strides toward energy security.

Finally, from batteries, to solar, to wind, increasing domestic manufacturing through the IRA’s tax credits is also propelling us forward on the path to a third goal: reaching the clean energy future we need to address and prevent the mounting physical and economic impacts of climate change. President Biden has set ambitious targets of reducing emissions 50 to 52 percent from 2005 levels in 2030 and achieving net-zero by no later than 2050. Meeting these targets depends at least in part on investing in clean energy technologies. And the IRA is the most significant climate legislation in this country’s history, helping put us on track.

The IRA is fueling not just investment but also innovation at American companies that will help the whole industry advance. Livent’s innovation team is creating cutting edge lithium products to produce smaller batteries that hold more power and provide more range. Today, I was able to see this printable lithium firsthand. And investments at home help bring down the costs of clean energy technologies globally, by as much as 25 percent, driving increased uptake of clean energy technologies and global emissions reduction.

With that, thank you again for having me here today. We’re restoring manufacturing to its rightful place as a key driver of the American economy. And we’re doing so in a way that meets the needs of the current moment and allows us to take forward some of this Administration’s key policy priorities: broadening economic opportunity, securing our supply chains, and achieving our climate goals. It’s been only 15 months since the IRA was passed, but we’re already seeing tremendous change. It’s a testament to President Biden’s vision for Investing in America, a ready private sector, and the strength of American workers. In the years ahead, the impacts will increase, serving communities across the country and building our country’s long term economic strength so that there are benefits for generations to come.

###

As Prepared for Delivery

Thank you to Kristin for the introduction. It’s nice to be here with all of you.

Innovation, as you all know better than most, is at the core of America’s economic success. We are the most important economy in the world in large part due to the ingenuity of our entrepreneurs. From airplanes and the internet to cars and smart phones, rapid technological transformations that have reshaped how we live our lives as well as the ways we think about commerce. And we don’t shy away from change. A constant American advantage for centuries has been not only our capacity to embrace change but to also encourage it.

Many of you in this room are at the forefront of such change. It may be easy to lose sight of the scale of that change when you are immersed in the day to day, but over the last several years, the digital asset industry has grown at an exponential rate. 

According to the Office of Financial Research, in 2021 alone, companies reported more than 2 billion transactions totaling $1.4 trillion in virtual currency transactions. That’s about four times as many transactions and seven times the volume of the previous year. That’s why more than a year ago, at the Consensus conference in Austin, Texas, I spoke about the tremendous opportunity digital assets present to promote innovation that helps us reimagine commerce. 

But I also made clear the importance of industry proactively taking steps to prevent digital assets from being used by transnational criminal organizations, terrorists, and rogue states. I hoped the digital asset industry would take up this call to partner with government, design new tools, and pursue new ways to protect digital assets from being abused. 

While some have heeded our calls and taken steps to prevent illicit activity, the lack of action by too many firms—both large and small—represents a clear and present risk to our national security.       

Innovation Within the Law

Today I would like to focus on the steps we must now take in order to prevent bad actors from using the digital asset ecosystem for illicit activity. I want to directly address those within the digital asset industry who believe they are above the law, those that willfully turn a blind eye to the law, and those that promote assets and services that aid criminals, terrorists, and rogue states.

My message is simple: We will find you and hold you accountable. 

This is exactly what happened to Binance, the largest virtual currency exchange in the world. Over several years, Binance allowed itself to be used by the perpetrators of child sexual abuse, illegal narcotics trafficking, and terrorism, across more than 100,000 transactions. Groups like Hamas, Al Qaeda, and ISIS conducted these transactions. 

In response to this egregious activity, Treasury announced our largest enforcement action in history, with a total settlement amount of over $4 billion. Equally important, we are placing a monitor within Binance that will have access to their systems, transactions, and accounts in order to ensure the largest virtual currency exchange in the world is no longer a permissive environment for illicit proceeds.  

But our challenge extends beyond exchanges to other parts of the digital asset ecosystem. Earlier today, we sanctioned Sinbad.io (Sinbad), a virtual currency mixer that serves as a key money-laundering tool for a cyber hacking group sponsored by North Korea. Sinbad processed millions of dollars’ worth of virtual currency from cyber hacks and enabled cybercriminals to mask illicit transactions. 

Last month, Treasury announced a set of rulemakings intended to increase the transparency of mixers, making it harder for criminals and terrorists to use them to hide the source, destination, and amount of transactions. As we develop these rules, we have requested input from stakeholders in order to make sure we prevent illicit finance while permitting responsible innovation.

This action and others to cut other money-laundering mixers—like Tornado Cash—off from the U.S. financial system demonstrate that De-Fi services and platforms are not above the law. Taking steps like these to reduce the abuse of these types of services is not only in the government’s interest; it is in the interest of those that seek to build an innovative industry that is on the right side of the law.   

The Growing Digital Asset Illicit Finance Risk

It’s important that we continue tackle this problem today, so that virtual currencies do not grow into a larger illicit finance threat. As we take steps to prevent terrorists, transnational criminals, and rogue states from using the traditional financial system, we cannot let them find a new outlet in virtual currencies. There are a number of reasons bad actors turn to virtual currencies, but I would like to highlight two of them.  

First, illicit actors have always taken advantage of new technology. We saw this in the last decade when ISIS used social media to revolutionize jihadist recruitment. It mastered a new platform to spread its hate faster than social media companies or governments could impose appropriate safeguards. Addressing the challenge required establishing strategic partnerships between governments and social media platforms, which remain ongoing to this day. 

Second, we know that risk tends to migrate to places where global regulation and enforcement are less well developed. As rogue states and terrorist groups find it harder to use the traditional financial system to move money, it is logical they would turn to less regulated ways to move assets. This is exactly what we are seeing states like North Korea and groups like Hamas do already.  

The North Korean regime already accrues a great deal of its resources from cyber-criminal activity, including stealing virtual currency. Its preferred means of moving its ill-gotten gains is through the digital asset ecosystem rather than the traditional financial system. Our concern is that as Hamas is dislodged from Gaza and no longer able to extort and tax innocent Palestinians, it will increasingly use the digital asset ecosystem. 

These are just a couple of examples of the risks we face today. A digital asset ecosystem that lacks a shared commitment to preventing illicit finance provides ample opportunity for groups, like North Korea and Hamas to move resources in ways that are intended to undermine our efforts to stop them. 

Accountability

In order to address these challenges, we need a shared commitment. When I talk about “shared commitment,” I mean the digital asset industry and the government working hand in hand to cut off illicit actors before they are able to spread roots and for us to create a culture of accountability.

At Consensus 2022, I explained that our goal is to empower industry participants to do the right thing by building a responsible, compliant, and accountable digital asset ecosystem. That means companies need to be proactive in identifying risks, establishing standards and protocols to mitigate those risks, and isolating bad actors. A shared commitment requires action from this industry. 

Today, government and the traditional financial sector work in partnership to prevent the movement of illicit proceeds. We have built a regulatory framework that traditional financial firms not only adhere to, but help us to implement. These firms have invested in tools, personnel, and processes that help us identify and capture criminals, terrorists, and others that seek to move money illegally.

Just this week, the CEO of the American Bankers Association highlighted ongoing work to design, develop, and pilot a new information sharing exchange, which the ABA will manage, that focuses on combatting fraud, money laundering, and terrorist financing. This type of collaboration and proactive effort amongst industry participants both large and small is commendable and demonstrates the collective commitment that is necessary to stay ahead of bad actors. 

We need those in the digital asset industry to do the same. You have the capacity to build new tools that help prevent money laundering while continuing to provide legitimate protections to individuals. You also have the capacity to cut off firms from your ecosystem that are failing to take steps to prevent illicit finance. 

Without action by your industry, increased movement of illicit proceeds into the digital asset ecosystem will force us to restrict, restrain, and cut off elements of the digital asset ecosystem from the broader economy. Our actions over the last year send a clear message: we will not hesitate to bring to bear tools across government to protect our national security. 

New Tools

Yesterday, Treasury provided Congress a set of common-sense recommendations to expand our authorities and broaden our tools and resources to go after illicit actors in the digital asset space.

First, we are pursuing the creation of new sanctions tools targeted towards actors in the digital asset ecosystem that allow terrorist groups and other illicit actors to move their assets. We are calling on Congress to create a secondary sanction regime that will not only cut off a firm from the U.S. financial system, but will also expose any firm that continues to do business with the sanctioned entity to being cut off from the US financial system. This is a significant tool we do not request lightly. But we need to do everything in our power to make sure that groups like Hamas are not able to find safe haven within the digital asset ecosystem. 

Second, we need to update our illicit finance authorities to match the challenges we face today, including those presented by the evolving digital asset ecosystem. For example, we cannot rely on statutory definitions that are decades-old to address the illicit finance risks we face in 2023.  We cannot allow dollar-backed stable coin providers outside the United States to have the privilege of using our currency without the responsibility of putting in place procedures to prevent terrorists from abusing their platform. And we cannot permit offshore financial services providers to use jurisdiction-evasion tactics to avoid complying with our laws.  We are working to close these gaps and others. 

Finally, in addition to working with Congress, we are committed to working with the Financial Action Task Force (FATF) to make sure our allies and partners around the world join us in updating their regulatory approach. 

The last time we pursed major reforms to this architecture was after the terrorist attacks on 9/11. The threat actors and tools at their disposal have changed, but their goals remain the same. As terrorist and criminals innovate their approach to illicit finance, we need tools to be able to keep up with them. 

These reforms will not only help us curb illicit finances, but they will also level the playing field for the actors pursuing responsible and beneficial innovation and facilitate sustainable growth for the industry. 

For those in the industry skeptical that the digital asset industry can grow if regulated, remember that the seat belt and air bag did not squelch Henry Ford’s innovation. They simply protected people and helped to foster an environment where the automobile industry could enjoy sustainable growth. A regulatory environment that stops terrorists, criminal organizations, and rogue states from using virtual currencies to move their assets can also help legitimate firms thrive in the long term. 

Thank you so much for having me here today. I look forward to the discussion. 

###