Treasury Expands Sanctions on Republika Srpska Network Evading U.S. Sanctions

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is designating one individual and one entity who support a corrupt patronage network in Bosnia and Herzegovina (BiH) that is attempting to evade U.S. sanctions. This network is directly linked to U.S.-designated Igor Dodik (Igor), the son of Milorad Dodik (Dodik), the U.S.-designated President of BiH’s Republika Srpska (RS), one of two entities that make up BiH. For years, Dodik has used his official position to accumulate personal wealth through companies linked to himself and Igor. This corruption has contributed to an undermining of public confidence in BiH state institutions and the rule of law. 

“RS President Milorad Dodik, his associates, and his enablers continue to use their privileged position to erode public confidence in the regional peace frameworks and institutions that have brought stability and security to Bosnia and Herzegovina,” said Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence Bradley T. Smith. “The United States remains committed to exposing the efforts of Dodik and his family to maintain their corrupt patronage networks.” 

Today’s action bolsters previous designations against the Dodiks by exposing Igor’s blatant attempts to evade U.S. sanctions and targeting the individuals who enable the family’s activities that hinder democratic development in the RS. 

IGOR DODIK’S FINANCIAL NETWORK AND ATTEMPT TO EVADE THE EFFECTS OF U.S. SANCTIONS

The United States designated Dodik on January 5, 2022 pursuant to Executive Order (E.O.) 14033 for being responsible for or complicit in, or having directly or indirectly engaged in, a violation of, or an act that has obstructed or threatened the implementation of, the Dayton Peace Agreement (DPA), as well as for corrupt activities. The United States also previously designated Dodik on July 17, 2017 pursuant to E.O. 13304 for obstructing or threatening to obstruct the DPA. Additionally, the United States designated Dodik’s adult children, Igor and Gorica Dodik, on October 20, 2023 pursuant to E.O. 14033 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Dodik, a person whose property and interests in property are blocked pursuant to E.O. 14033.

The Dodiks’ efforts to enrich themselves led to OFAC’s October 20, 2023 and June 18, 2024 designations of core parts of the Dodiks’ corrupt patronage network, including several entities and individuals under Igor’s direct control. Since the designations, the Dodik network has pursued an aggressive strategy to attempt to circumvent the effects of sanctions, namely by restructuring and reestablishing corporate entities to obfuscate his control and transfer company assets from designated entities. 

Dodik used his official position to direct RS government contracts to a network of private companies that he and Igor oversee. While Igor controls many of the companies in this network, he obfuscates his personal connection to the companies by relying on distinct nominal owners and directors. One of these individuals is Vladimir Perisic (Perisic), the general director of Prointer ITSS (Prointer), designated by OFAC on June 18, 2024. As the general director of Prointer — an entity controlled by Igor — Perisic provided updates to Igor, solicited Igor’s approval and guidance, and executed business decisions based on Igor’s instructions. Additionally, Perisic proposed and followed through on a corrupt kickback scheme involving Prointer after receiving instructions and approval from Igor.

After Kaldera Company’s (Kaldera) designation on June 18, 2024, Igor directed U.S.-designated Milenko Cicic (Cicic) (designated on June 18, 2024) to establish Elpring d.o.o. Laktasi (Elpring), which would serve as a replacement for Kaldera. With Igor’s approval, Cicic established Elpring and coordinated the transfer of all of Kaldera’s assets and operations, to include Kaldera’s employees, to Elpring. Throughout this process, Cicic routinely requested Igor’s approval to make key business decisions and ensured that both Igor and himself would have an account for Elpring which they could exercise control over.

Perisic and Elpring are being designated pursuant to E.O. 14033 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Igor, a person whose property and interests in property are blocked pursuant to E.O. 14033.

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. Non-U.S. persons are also prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as from engaging in conduct that evades U.S. sanctions. OFAC’s Economic Sanctions Enforcement Guidelines provide more information regarding OFAC’s enforcement of U.S. sanctions, including the factors that OFAC generally considers when determining an appropriate response to an apparent violation.

In addition, financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action. The prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any designated person, or 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 hereFor detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

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

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OCC Designates Three Senior National Bank Examiners

Treasury Issues Final Rule Expanding CFIUS Coverage of Real Estate Transactions Around More Than 60 Military Installations

WASHINGTON – Today, the U.S. Department of the Treasury (Treasury), as Chair of the Committee on Foreign Investment in the United States (CFIUS), in close coordination and cooperation with the U.S. Department of Defense (Department of Defense), issued a final rule that significantly expands its ability to review certain real estate transactions by foreign persons near more than 60 military bases and installations across 30 states. Pursuant to legislation that Congress passed in 2018, CFIUS has the authority to review certain real estate transactions near specified military installations and to take action in appropriate circumstances. Nearly 60 military installations will be added to an existing list of military installations around which CFIUS has jurisdiction over real estate transactions and CFIUS jurisdiction around nearly 10 existing installations will be extended. This latest update expands the reach of CFIUS’s real estate jurisdiction while maintaining its sharp focus on national security.

“The Biden-Harris Administration will continue to use our strong investment screening tools to advance America’s national security and protect our military installations from external threats,” said Secretary of the Treasury Janet L. Yellen. “This final rule will significantly increase the ability of CFIUS to thoroughly review real estate transactions near bases and will allow us to deter and stop foreign adversaries from threatening our Armed Forces, including through intelligence gathering.”

“Today’s final rule is a significant milestone in safeguarding critical U.S. military and defense installations,” said Assistant Secretary for Investment Security Paul Rosen. “The expansion of CFIUS jurisdiction around more than 60 military installations across 30 states highlights the work of CFIUS to be nimble and responsive to the evolving nature of the threats we face in the context of foreign investment that raises national security concerns.”

CFIUS jurisdiction over real estate transactions, provided by Congress in the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), allows CFIUS to review the purchase or lease by, or concession to, a foreign person of real estate in the United States that is in close proximity to a military installation or another facility or property of the United States Government that is sensitive for reasons relating to national security; could reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or could otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance. The CFIUS regulations governing real estate transactions identify a subset of military installations around which certain real estate transactions are covered under CFIUS’s jurisdiction.

The Department of Defense, a member of CFIUS, regularly assesses its military installations and the geographic scope established under the CFIUS regulations to ensure appropriate application in light of evolving national security considerations. This final rule is the result of a recent comprehensive assessment conducted by the Department of Defense regarding its military installations. The final rule enhances CFIUS’s authorities through the following key changes:

  • Expands CFIUS’s jurisdiction over certain real estate transactions to include those within a one-mile radius around 40 additional military installations;

  • Expands CFIUS’s jurisdiction over certain real estate transactions to include those within a 100-mile radius around 19 additional military installations;

  • Expands CFIUS’s jurisdiction over certain real estate transactions between 1 mile and 100 miles around eight military installations already listed in the regulations;

  • Updates the names of 14 military installations already listed in the regulations to better assist the public in identifying the relevant sites; and

  • Updates the locations of seven military installations already listed in the current regulations to better assist the public in identifying the relevant sites.

The final rule will become effective 30 days after publication in the Federal Register and is available at https://www.cfius.gov/.

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U.S. Department of the Treasury’s CDFI Fund and Federal Housing Finance Agency Collaborate to Bolster CDFI Access to Capital

WASHINGTON—Today, the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) and the Federal Housing Finance Agency (FHFA) announced the establishment of a Working Group to increase capital for affordable housing lending from the Federal Home Loan Banks. The group will advance the Biden-Harris Administration’s priority of expanding the supply of affordable housing and reducing housing costs for American families and is part of a broad effort by Treasury and the FHFA to ensure that the Federal Home Loan Banks (FHLBs) live up to their housing mission. 

The CDFI Fund-FHFA Working Group will help more Community Development Financial Institutions (CDFIs) access affordable capital from FHLBs to address affordable housing needs in distressed communities not served by traditional banks and lenders. 

“The Biden-Harris Administration is focused on using every tool at its disposal to increase the supply of housing and lower costs for American families,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “Critical to our efforts is working to ensure that the Federal Home Loan Banks fulfill their statutory mission of supporting affordable housing. Helping lenders expand their sources of financing and access capital from the Federal Home Loan Banks will help these community banks support a range of projects that can lower housing costs in communities across the country for years to come.”

“This collaboration between FHFA and the CDFI Fund will help accelerate the ‘System at 100’ reforms to ensure the Federal Home Loan Banks meet their housing and community development mission and remain a stable source of liquidity for their members,” said FHFA Director Sandra L. Thompson. “CDFIs play a key role with FHFA and our regulated entities in efforts to address the nation’s affordable housing challenges, working on the ground in their communities to deliver positive outcomes for underserved households.”

The Working Group defined initial topics and priorities for consideration and exploration in 2024-2025. Topics areas defined by the Working Group to examine are:

  • New programs and approaches for increasing access to capital by non-depository CDFI members;
  • Examination of property appraisal and collateral mechanisms and valuation methods; and
  • Data sharing on non-depository CDFI activities and performance.

As detailed in FHFA’s FHLBank System at 100 report, it is a main priority for the FHLBanks to increase support to mission-oriented organizations. As such, CDFI Fund and FHFA have entered into a Memorandum of Understanding to share data to assist FHLBs to better serve CDFIs, allowing them to access capital necessary to meet urgent housing affordability needs. This effort aligns with U.S. Secretary of the Treasury Janet L. Yellen and U.S. Deputy Secretary of the Treasury Wally Adeyemo’s agenda to use all appropriate tools at Treasury’s disposal to expand housing supply, including through engaging with the FHLBs to increase their support of affordable housing.

Since its inception in 1994, the CDFI Fund has provided more than $8 billion through a variety of monetary award programs, $81 billion in tax credits through the New Markets Tax Credit Program and has guaranteed nearly $3 billion in bonds through the CDFI Bond Guarantee Program, all to increase the impact of CDFIs and other community development organizations in economically distressed and underserved communities. During this time, the CDFI Fund has helped build the capacity of more than 1,400 Certified CDFIs, which are in all 50 states as well as in the District of Columbia, Guam, and Puerto Rico. 

FHFA regulates Fannie Mae, Freddie Mac and the 11 FHLBs. These government-sponsored enterprises provide more than $8.4 trillion in funding for the U.S. mortgage markets and financial institutions.

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Report on U.S. Portfolio Holdings of Foreign Securities at Year-End 2023

Washington – The findings from the annual survey of U.S. portfolio holdings of foreign securities at year-end 2023 were released today and posted on the Treasury web site at https://home.treasury.gov/data/treasury-international-capital-tic-system/tic-forms-instructions/us-claims-on-foreigners-from-holdings-of-foreign-securities

The survey was undertaken jointly by the U.S. Department of the Treasury, the Federal Reserve Bank of New York, and the Board of Governors of the Federal Reserve System. 

A complementary survey measuring foreign portfolio holdings of U.S. securities also occurs annually. Data from the most recent such survey, which reports on securities held at end-June 2024, are being processed. Preliminary results are expected to be reported on February 28, 2025.

Overall Results

This survey measured the value of U.S. portfolio holdings of foreign securities at year-end 2023 as approximately $15.3 trillion, with $11.5 trillion held in foreign equity, $3.4 trillion held in foreign long-term debt securities (original term-to-maturity in excess of one year), and $0.4 trillion held in foreign short-term debt securities. The previous such survey, conducted as of year-end 2022, measured U.S. holdings of approximately $14.0 trillion, with $10.3 trillion held in foreign equity, $3.3 trillion held in foreign long-term debt securities, and $0.4 trillion held in foreign short-term debt securities.  The increase in U.S. holdings in 2023 was mainly in equity (see Table 1).

U.S. portfolio holdings of foreign securities by country at the end of 2023 were the largest for the Cayman Islands ($2.7 trillion), followed by the United Kingdom ($1.5 trillion), Canada ($1.4 trillion), and Japan ($1.2 trillion) (see Table 2).  These four countries attracted 44 percent of total U.S. portfolio investment, the same as the previous year.
This survey is part of the International Monetary Fund’s Coordinated Portfolio Investment Survey, an effort to improve the measurement of portfolio asset holdings.

Table 1. U.S. holdings of foreign securities, by type of security, as of survey dates [1]

(Billions of dollars)

Type of Security

December 31, 2022

December 31, 2023

 

 

 

Long-term Securities

13,563

14,921

            Equity

10,280

11,492

            Long-term debt

3,283

3,429

Short-term debt securities

447

422

Total

14,009

15,343

Table 2. Market value of U.S. portfolio holdings of foreign securities, by country and type of security, for countries attracting the most U.S. investment, as of December 31, 2023 [2]

(Billions of dollars)

Country or category

Total

Equity

Debt

Total

Long-term

Short-term

Cayman Islands

2,663

1,935

729

719

9

United Kingdom

1,490

1,061

429

382

47

Canada

1,390

839

550

451

100

Japan

1,218

991

227

184

43

Ireland

924

823

101

79

23

France

816

597

219

173

46

Netherlands

668

508

159

151

8

Switzerland

655

607

47

46

1

Germany

514

418

97

79

17

Australia

442

269

172

132

41

India

352

342

10

10

0

Taiwan

316

316

0

0

0

Bermuda

267

215

52

52

0

Korea, South

253

227

25

25

0

Luxembourg

238

172

65

61

4

Denmark

219

206

13

12

0

China, mainland [2]

217

202

15

15

0

Sweden

197

156

40

19

21

Jersey

192

145

47

47

0

Brazil

181

157

24

23

1

Rest of the world

2,133

1,304

829

768

61

Total

15,343

11,492

3,851

3,429

422

* Greater than zero but less than $500 million. Items may not sum to totals due to rounding.

[1] The stock of foreign securities for December 31, 2023, reported in this survey may not, for a number of reasons, correspond to the stock of foreign securities on December 31, 2022, plus cumulative flows reported in Treasury’s transactions reporting system.  An analysis of the relationship between the stock and flow data is available in “U.S. Portfolio Holdings of Foreign Securities as of End-December 2023,” Table 2.

[2] China, Hong Kong, and Macau are all reported separately.

READOUT: U.S. Department of the Treasury Hosts Roundtable Discussion on the Financial Sector’s Response to Recent Hurricanes

WASHINGTON – The U.S. Department of the Treasury hosted a roundtable on October 30 with participants from the banking, credit union, and insurance industries; government-sponsored entities (Fannie Mae and Freddie Mac); consumer advocates; and state and federal regulators to discuss the financial sector’s responses to Hurricanes Helene and Milton, and to express the Biden-Harris Administration’s continued support and commitment in aiding hurricane response efforts.

At the roundtable, participants discussed the ways in which they have supported affected communities, including permitting flexibility by insurers and financial institutions in mortgage or other payments; opening mobile bank branches; staffing 24/7 claims offices; and suspending certain fees, changes in policies, and payments. Senior Treasury Department officials reiterated the importance of these and other initiatives and led discussions on efforts to reduce burdens and enable the swift and continual flow of aid for affected communities. 

Additionally, Treasury Department officials and participants engaged in dialogue on short- and long-term challenges in preparing for, and responding to, future climate-related crises. Treasury officials expressed their commitment to continued partnership and engagement with communities, state and local government entities, and industry to continue supporting recovery efforts.

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READOUT: Sixth Meeting of the Financial Working Group Between the United States and the People’s Republic of China

WASHINGTON – The United States and the People’s Republic of China held the sixth meeting of the Financial Working Group (FWG) on the sidelines of the IMF-World Bank Annual Meetings in Washington on October 28. The meeting was co-led by Brent Neiman, Assistant Secretary for International Affairs at the U.S. Treasury, and Xuan Changneng, Deputy Governor of the People’s Bank of China.

The two sides discussed macroeconomic and financial conditions in both countries, as well as China’s recent stimulus efforts. Assistant Secretary Neiman and Deputy Governor Xuan also received readouts from FWG technical exercises on international macroeconomic data reporting, strengthening communication in the event of banking stress, and climate and insurance risk. The Joint Treasury-People’s Bank of China Cooperation and Exchange on Anti-Money Laundering also held its third meeting as part of the FWG. Both sides raised issues of concern.

U.S. Secretary of the Treasury Janet L. Yellen received a brief update from the FWG on its discussions. She noted the FWG’s role in the responsible management of the bilateral relationship.

The FWG is one of two working groups formed by Secretary Yellen and Vice Premier He Lifeng of the People’s Republic of China in 2023. The FWG reports directly to Secretary Yellen and Vice Premier He.

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Treasury Sanctions Key Members of La Linea, a Group Involved in Trafficking Fentanyl into the United States

WASHINGTON — Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned five Mexican nationals and two Mexico-based entities linked to La Linea, a violent Mexico-based drug trafficking organization responsible for trafficking fentanyl and other deadly drugs into the United States. Today’s action was coordinated closely with the Drug Enforcement Administration and the Government of Mexico, including La Unidad de Inteligencia Financiera (UIF), Mexico’s Financial Intelligence Unit.

“President Biden and Vice President Harris are committed to using every tool at our disposal to target and disrupt the cartels peddling deadly fentanyl on our streets. If La Linea continues to directly contribute to the proliferation of deadly fentanyl throughout our communities, Treasury will continue to use every took in our arsenal to go after their criminal activity,” said Deputy Secretary of the Treasury Wally Adeyemo. “The United States, in close coordination with our Mexican partners, remains committed to doing everything we can to hold these groups to account and to disrupt their ability to profit from and ultimately operate these criminal schemes.”

Treasury plays a leading role in countering the trafficking of fentanyl and other illicit drugs as part of President Biden’s Unity Agenda, leveraging its expertise to fight illicit financing and financial crimes to disrupt the flows of money that criminal organizations rely on to operate. Over the past two years, Treasury has sanctioned more than 350 targets for involvement in drug trafficking activities at all stages of the supply chain, from major cartel leaders to under-the-radar labs, transportation networks, and chemical suppliers. Last year, Secretary Yellen launched the Counter-Fentanyl Strike Force, which brings together Treasury’s expertise and resources in fighting financial crime, led by the Office of Terrorism and Financial Intelligence (TFI) and IRS Criminal Investigation (CI). Secretary Yellen has also engaged with international partners to combat fentanyl trafficking, including during her travel to Mexico last year. In April, Secretary Yellen also announced the launch of an exchange with the People’s Republic of China to enhance cooperating in combatting money laundering associated with drug trafficking and other crime.

LA LINEA’S EMERGENCE AS A VIOLENT REGIONAL POWER

La Linea began as an armed wing of the Juarez Cartel intended to help the drug trafficking organization defend its border territories in and around Ciudad Juarez in the state of Chihuahua, Mexico. Today, La Linea operates in Ciudad Juarez, where it has access to drug trafficking and human smuggling routes across the U.S.-Mexico border. La Linea taxes other Mexican drug trafficking organizations to move their merchandise through the Juarez Valley and generates other revenue via synthetic drug trafficking, illegal logging, and car theft in Chihuahua, Mexico. Associates of La Linea are also involved in human trafficking across the United States. In November 2019, La Linea members murdered nine American citizens, including six children, in the Mexican state of Sonora. In addition, La Linea and the Cartel Jalisco Nueva Generacion (CJNG) have been working together since September 2023, with CJNG serving as La Linea’s source-of-supply for cocaine, methamphetamine, and fentanyl.

In 2004, the President identified the Juarez Cartel as a significant foreign narcotics trafficker pursuant to the Kingpin Act. On December 15, 2021, OFAC also designated the Juarez Cartel pursuant to E.O. 14059, at which time La Linea was added as an alias of the Juarez Cartel. 

In 2015, OFAC sanctioned CJNG pursuant to the Kingpin Act for playing a significant role in international narcotics trafficking. CJNG was subsequently designated pursuant to Executive Order (E.O.) 14059 on December 15, 2021.

LACERATING LA LINEA’S LEADERSHIP

Today, OFAC is designating various leaders and senior members in La Linea’s current organizational structure. 

Josefa Yadira Carrasco Leyva (Carrasco Leyva) is a senior member of La Linea who is involved in narcotics trafficking, human trafficking, and weapons smuggling. Jorge Adrian Ortega Gallegos (Ortega Gallegos) is a high-ranking member of La Linea who previously was indicted in the United States District Court for the District of New Mexico for drug conspiracy charges.

Heber Nieto Fierro (Nieto Fierro) is a drug trafficker and money launderer for La Linea. He owns or controls two companies that are also being designated today, R.y H. El Remate, Sociedad Anonima de Capital Variable, and Soluciones Tecnologicas y Paqueteria Tres, Sociedad Anonima de Capital Variable.

Jesus Salas Aguayo (Salas Aguayo) is a La Linea associate who controls a plaza in Chihuahua, Mexico, for the cartel. He previously was indicted in the United States District Court for the District of New Mexico for drug conspiracy charges. Adrian Aguayo is a La Linea associate who controls a plaza in Chihuahua, Mexico for the cartel.

OFAC sanctioned Carrasco Leyva, Ortega Gallegos, Nieto Fierro, Salas Aguayo, and Adrian Aguayo pursuant to E.O. 14059 for having engaged in, or attempted to engage in, activities or transactions that have materially contributed to, or pose a significant risk of materially contributing to, the international proliferation of illicit drugs or their means of production. OFAC sanctioned R.y H. El Remate, Sociedad Anonima de Capital Variable, and Soluciones Tecnologicas y Paqueteria Tres, Sociedad Anonima de Capital Variable pursuant to E.O. 14059 for being owned, controlled, or directed by, or having acted or purported to act for or on behalf of, directly or indirectly, Nieto Fierro. 

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. Non-U.S. persons are also prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as engaging in conduct that evades U.S. sanctions. OFAC’s Economic Sanctions Enforcement Guidelines provide more information regarding OFAC’s enforcement of U.S. sanctions, including the factors that OFAC generally considers when determining an appropriate response to an apparent violation.

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

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Minutes of the Meeting of the Treasury Borrowing Advisory Committee October 29, 2024

The Committee convened in a closed session at the Department of the Treasury at 9:00 a.m.  All members were present.  Heather Masciotti from Citigroup was also present to assist the Committee Chair.  Under Secretary for Domestic Finance Nellie Liang, Fiscal Assistant Secretary David Lebryk, Assistant Secretary for Financial Markets Josh Frost, Deputy Assistant Secretary for Federal Finance Brian Smith, Director of the Office of Debt Management Fred Pietrangeli, and Deputy Director of the Office of Debt Management Tom Katzenbach welcomed the Committee.  Other members of Treasury staff present were Dini Ajmani, Nahiomy Alvarez, Burcu Duygan Bump, Chris Cameron, Nicholas Chisholm, Dave Chung, Gabriella Csepe, Chris Kubeluis, Jeff Rapp, Andrew Schwartz, Joshua Stachura, Renee Tang, Thomas Teles, Laura Thrift, John Tuttle, and Chris Varvares.  Federal Reserve Bank of New York staff members Ellen Correia Golay, Oliver Giannotti, and Kyle Watson were also present. 

Director Pietrangeli reviewed receipts and outlays during FY2024.  Receipts totaled $4.92 trillion, which represents an increase of $479 billion (11%) year-over-year.  This increase was due to higher non-withheld and corporate taxes following an extension of several federal tax deadlines from FY2023 into FY2024, the new Corporate Alternative Minimum Tax (CAMT), and growth in wages and employment.  Outlays totaled $6.75 trillion, an increase of $617 billion (10%) year-over-year, which was largely attributable to higher gross interest on the public debt as well as cost-of-living adjustments to Social Security and other transfer payments.

Pietrangeli then turned to privately-held net marketable borrowing projections.  Primary dealer estimates for the next two fiscal years were marginally higher than previous estimates, with the median aggregate estimate for FY2025-FY2026 approximately $128 billion higher than last quarter.  Dealers voiced uncertainty regarding borrowing needs in FY2025 and FY2026, citing the path of monetary and fiscal policy, the duration of System Open Market Account (SOMA) redemptions, and the economic outlook. 

Deputy Director Katzenbach reviewed primary dealers’ expectations for coupon issuance, which had not significantly changed since July. All primary dealers expected nominal coupon issuance to remain unchanged at the November refunding.  Looking ahead, most continued to think that modest increases might be needed sometime between late-2025 and 2026.  However, several dealers cited uncertainty about borrowing needs and the expiration of the current debt limit suspension at the beginning of 2025 as possible complicating factors. 

Debt Manager Stachura summarized primary dealers’ views on current TIPS market conditions and whether Treasury should increase TIPS issuance in CY2025. Although several dealers commented that demand for TIPS, especially from retail investors, had weakened with the reduction in inflation, nearly all primary dealers felt that the market could absorb additional supply. Dealers overwhelmingly recommended that any increases to existing benchmark tenors should occur in the 5-year or 10-year tenors, and emphasized the importance of increasing sizes gradually. Most dealers seemed open to the prospect of a new TIPS benchmark in the short end of the curve while noting questions regarding potential auction scheduling in light of the current monthly auction cycle.

Under Secretary Liang welcomed Joe Demetrick, Sara Devereux, Greg Peters, and Scott Rofey as the newest members of the Committee.  Liang then provided a brief update on debt management and other Treasury priorities.

Debt Manager Chisholm then reviewed the results of recent Treasury buybacks. Since the launch of the program in May, Treasury has purchased more than $50 billion of securities across 25 operations.  While Treasury purchased the maximum par amount of $5 billion in each of the four cash management buybacks, Chisholm noted that Treasury only purchased the maximum amount in 11 of the 21 liquidity support buybacks. Chisholm explained that purchasing less than the maximum amount was consistent with Treasury’s price-sensitive approach for evaluating offers.

Chisholm subsequently reviewed primary dealers’ views on Treasury’s recent cash management buybacks. Chisholm noted that dealers’ feedback was generally positive and focused on the results and metrics that Treasury publishes after each operation. Dealers suggested that cash management buybacks helped to dampen volatility in both Treasury’s cash balance and Treasury bill auction sizes but cautioned that the modest initial size of cash management buybacks limited their effect. Dealers also stated that Treasury’s cash management purchases were supportive of liquidity in the one-month to two-year nominal coupons sector and provided similarly constructive feedback on the liquidity support buybacks that Treasury conducted during the latest refunding quarter. Finally, dealers expect Treasury to conduct another round of cash management buybacks in December 2024 and April 2025 during periods of high fiscal inflows and suggested that there is market capacity to increase the size of cash management buybacks.

The Committee then discussed the first charge addressing the efforts of the Inter-Agency Working Group on Treasury Market Surveillance (IAWG) to enhance Treasury market resilience. The presenting member pointed to several positive indicators, including: robust Treasury market liquidity, smooth market functioning through the regional banking crisis in 2023, the availability of funding liquidity for leveraged investors, improvements across Treasury market liquidity metrics, and greater availability of public data to strengthen investor confidence and improve transparency. However, the presenting member also noted limited growth in dealer intermediation capacity relative to issuance, slowing demand for Treasuries from some categories of investors, and the growing role of principal trading firms in market intermediation. Finally, the presenting member proposed additional initiatives for consideration, such as central clearing of the Federal Reserve’s Standing Repo Facility, exemption of Treasuries from the supplementary leverage ratio, and greater focus in stress testing on the risks generated by month-end spikes in trading volume. Several features of the Treasury market were discussed by attendees during the presentation, including: the use of futures versus cash Treasuries by asset managers, the role of Treasury securities in bank portfolios, as well as the evolution and implications of passive index investing. 

The Committee adjourned at 11:50 a.m. for lunch.

The Committee reconvened at 1:20 p.m. 

Upon reconvening, the Committee turned to a presentation on digital assets and the Treasury market. The presenting member began by discussing the reasons for, and impact of, the rapid growth in cryptocurrency market capitalization over the past several years. The presenting member observed that because most stablecoin collateral reportedly consists of either Treasury bills or Treasury-backed repurchase agreement transactions, the growth in stablecoins has likely resulted in a modest increase in demand for short-dated Treasury securities. 

Subsequently, the presenting member reviewed both ongoing and proposed efforts related to the tokenization of Treasuries. Broadly speaking, tokenization attempts to represent ownership of a Treasury security using blockchain or distributed ledger technology. The Committee then engaged in a discussion of the costs and benefits of tokenization of Treasuries. On the one hand, tokenization could lead both to operational improvements and to innovation in the Treasury market. On the other hand, tokenization presents possible technological, operational, regulatory, and financial stability risks. In view of these risks, the presenting member argued that tokenization in the Treasury market would likely require the development of a privately controlled and permissioned blockchain managed by a trusted government authority. The presenting member concluded by observing that, in spite of potential risks, the growth in digital assets over the past several years currently has only marginal implications for both Treasury issuance and the health of the Treasury market. 

The Committee then discussed its financing recommendation for the upcoming quarters and advised that Treasury maintain nominal coupon and FRN auction sizes at current levels.  Finally, the Committee recommended gradual increases to TIPS auction sizes.

The Committee adjourned at 2:50 p.m.

The Committee reconvened at 3:00 p.m.

Finally, the Chair summarized key elements of the Committee report for Deputy Secretary Adeyemo and followed with a brief discussion of recent market developments.

The Committee adjourned at 3:35 p.m.

_________________________________

Brian Smith

Deputy Assistant Secretary for Federal Finance

United States Department of the Treasury

October 29, 2024

Certified by:

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Deirdre Dunn, Chair

Treasury Borrowing Advisory Committee

October 29, 2024

 

Treasury Borrowing Advisory Committee Quarterly Meeting

Committee Charge – October 29, 2024

Fiscal Outlook

Taking into consideration Treasury’s short, intermediate, and long-term financing requirements, as well as the variability in financing needs from quarter to quarter, what changes, if any, do you recommend to Treasury issuance?  Please also provide perspectives regarding market expectations for Treasury issuance, the effects of changes in SOMA holdings, the evolution of Treasury holdings by different types of investors, as well as auction calendar construction.

Treasury Market Resilience 

Since 2021, the Inter-Agency Working Group on Treasury Market Surveillance (IAWG) has been conducting an extensive program of analysis and policymaking to enhance Treasury market resilience.  The IAWG has organized around five workstreams and issued four annual reports highlighting its progress (2024202320222021).  Please comment on the effectiveness of the IAWG efforts to date.  To what extent will the policies that have been or are being implemented improve Treasury market resilience?  In which areas are additional policy changes needed? Please elaborate.

Digital Assets and the Treasury Market 

Please comment on the effects of the growth in digital assets on the Treasury market.  Please summarize existing efforts at using blockchain technology or tokenization for Treasury market related applications.  How might blockchain technology be used to innovate or improve on Treasury market operations? What are the potential benefits and costs of tokenization of Treasuries? What effects might these trends have on recommended Treasury issuance or the health of the Treasury secondary market?

Financing this Quarter

We would like the Committee’s advice on the following:

  • The composition of Treasury notes and bonds to refund approximately $116.4 billion of privately-held notes maturing on November 15, 2024.
  • The composition of Treasury marketable financing for the remainder of the October-December 2024 quarter.
  • The composition of Treasury marketable financing for the January-March 2025 quarter.