Deputy Comptroller for Market Risk Policy Testifies on LIBOR Transition

News Release 2021-46 | April 15, 2021

WASHINGTON—Deputy Comptroller for Market Risk Policy Kevin Walsh today testified during a hearing before the U.S. House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets regarding the upcoming cessation of the London Interbank Offered Rates (LIBOR).

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Testimony of Brian Smith, Deputy Assistant Secretary for Federal Finance, to the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets

Thank you to Chair Sherman and Ranking Member Huizenga for calling a hearing on this important issue. As Treasury’s Deputy Assistant Secretary for Federal Finance, I oversee the Department’s work on the LIBOR transition. 

Though LIBOR is used in more than $200 trillion of outstanding financial contracts today, two tenors of USD LIBOR will cease being published at the end of 2021, and the remainder will cease by June 2023. LIBOR’s widespread use in the financial system but short remaining lifespan underscores the urgency of a timely and effective transition. 

In recent years, Treasury has played an active role in highlighting the risks associated with the continued use of LIBOR and encouraging a market participant-led transition. Since 2013, annual reports of the Financial Stability Oversight Council, which the Treasury Secretary chairs, have called attention to LIBOR-related financial stability risks, encouraged market participants to formulate and execute transition plans, and recommended that member agencies use their authorities to facilitate transition. Treasury has served as an ex officio member of the Alternative Reference Rates Committee (ARRC) since that group was convened in 2014 by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York. The ARRC is composed of a diverse set of private-market participants working towards a successful transition away from LIBOR. As an alternative to LIBOR, the ARRC has recommended the Secured Overnight Financing Rate (SOFR), which is a robust rate based on nearly $1 trillion in daily transactions. The ARRC has also recommended robust contract fallback language for various financial products and worked closely with regulators to identify and tackle potential roadblocks to transition. Treasury applauds the passage of LIBOR transition legislation in New York State, which will provide meaningful relief for the transition of legacy contracts written under New York law. In addition, Treasury has also taken initial steps to address the potential tax consequences of modifying contracts that reference LIBOR, although some of the relevant tax statutes lack a grant of regulatory authority, which limits the tax relief that Treasury can provide. 

Despite this progress, challenges for the transition remain, and federal legislation is needed. As Secretary Yellen described in recent testimony before the House Financial Services Committee, legislation is necessary for so-called “tough legacy” contracts that do not specify a workable fallback rate and are not feasible for private-sector actors to modify on their own. Federal legislation could also ensure that Treasury has sufficient authority to address the tax consequences of the LIBOR transition and amend the Higher Education Act of 1965’s reference to LIBOR for Special Allowance Payments under the legacy guaranteed federal student loan program. 

With LIBOR’s cessation dates approaching quickly, market participants must make progress on transitioning legacy contracts, where feasible, and new contracts should begin referencing alternative rates like SOFR. In addition, in the case of consumer loans, it is imperative that lenders engage with consumers about how this transition will affect them and provide them timely notice of any changes. Lenders need to act responsibly so that consumers are not caught by surprise. 

With that, I will conclude my remarks. Chair Sherman and Ranking Member Huizenga, thank you again for your interest and engagement on this important issue. I look forward to your questions.

Opening Statements

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Readout: Secretary Yellen and Gene Sperling’s Meeting with NGA Executive Committee

Today, Secretary Janet L. Yellen met virtually with members of the National Governors Association’s Executive Committee to discuss ongoing efforts by Treasury to help states and localities recover from the COVID-19 pandemic. Secretary Yellen told governors present that she understands the significant economic challenges many states are facing and noted the importance of $350 billion in state, local and tribal assistance included in the American Rescue Plan (ARP) and the 159 million economic impact payments that have been disbursed.

Secretary Yellen was joined in the meeting by Gene Sperling, White House American Rescue Plan coordinator and a senior adviser to President Biden, and Jacob Leibenluft, the recently announced Chief Recovery Officer for the Treasury Department. Both Secretary Yellen and Mr. Sperling solicited input, thoughts, and advice from governors as Treasury determines the most efficient and effective way to get resources to states, and made clear that governors will continue to be key partners as Treasury implements all recovery programs including the State and Local Fiscal Recovery Fund, State Small Business Credit Initiative, and renter and homeowner assistance.

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Treasury Sanctions Russian Persons in the Crimea Region of Ukraine

OFAC takes action in partnership with the European Union, United Kingdom, Canada, and Australia

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated five individuals and three entities related to Russia’s occupation of the Crimea region of Ukraine and its severe human rights abuses against the local population. These designations, pursuant to Executive Orders (E.O.) 13660 and 13685, impose sanctions on individuals who have asserted governmental authority over the Crimea region of Ukraine without the authorization of Ukraine, as well as target individuals and entities for operating in the Crimea region of Ukraine. Today’s actions demonstrate the Department of the Treasury’s unwavering commitment to counter Russia’s attack on Ukraine’s sovereignty and territorial integrity and Russia’s human rights abuses against Ukrainians. Several of these individuals and entities have recently been sanctioned by the European Union (EU), United Kingdom (UK), Canada, and Australia.

“This action, taken in close cooperation with our allies, represents the international community’s firm commitment to hold Russia accountable for the attempted annexation of Crimea,” said OFAC Director Andrea M. Gacki. “These designations impose additional costs on Russia for its forceful integration with Crimea and highlight the abuses that have taken place under Russia’s attempted annexation. The United States remains committed to supporting Ukrainian sovereignty: Crimea is Ukraine.”

KERCH STRAIT BRIDGE

Following Russia’s attempted annexation of Crimea in 2014, Russia sought to connect the Russian mainland to the Crimea region of Ukraine, which is separated from Russia by the Kerch Strait. In 2016, Russia began the construction of what would become the longest bridge in Europe: a railway bridge over the Kerch Strait. In 2018, construction was completed, linking Russia with the Crimea region of Ukraine. With our international partners, the United States has continued to take targeted actions against persons involved in this project, undertaken by Russia in furtherance of its illegitimate assertion of sovereignty over Ukraine. For example, on January29, 2020, OFAC designated one individual and one entity related to the construction of the Kerch Strait Bridge as well as seven so-called officials of the so-called Republic of Crimea.

In partnership with our international allies, Treasury designated Leonid Kronidovich Ryzhenkin (Ryzhenkin), Lenpromtransproyekt, and Joint-Stock Company The Berkakit-Tommot-Yakutsk Railway Line’s Construction Directorate in response to their involvement in the construction of the Kerch Strait Bridge. The construction of the Kerch Strait Bridge is a violation of Ukrainian sovereignty and has been condemned by the international community.

Ryzhenkin is a Russian national and the chief executive officer (CEO) of Mostotrest, a Russian construction company that operates in the Crimea region of Ukraine. Mostotrest’s share in the total construction of the Kerch Strait Bridge was worth more than $1.9 billion. Mostotrest and its owner, Arkady Rotenberg, were previously designated by OFAC pursuant to E.O. 13685 and E.O. 13661, respectively. Prior to Mostotrest, Ryzhenkin worked for another designated Russian construction company, Stroygazmontazh, where he also supervised projects related to the construction of the Kerch Strait Bridge. OFAC previously designated Stroygazmontazh pursuant to E.O. 13661. Ryzhenkin was designated pursuant to E.O. 13685 for being the leader of an entity operating in the Crimea region of Ukraine. Ryzhenkin was previously designated by the EU and the UK in 2020 and in 2021 by Canada and Australia.

Lenpromtransproyekt is a Russian company that designed the Kerch Strait Bridge. Lenpromtransproyekt was designated pursuant to E.O. 13685 for operating in the Crimea region of Ukraine. The company was previously designated by the EU and the UK in 2020 and in 2021 by Canada and Australia.

Joint-Stock Company The Berkakit-Tommot-Yakutsk Railway Line’s Construction Directorate is a Russian company that participated in the construction of the railway for the Kerch Strait Bridge. Joint-Stock Company The Berkakit-Tommot-Yakutsk Railway Line’s Construction Directorate was designated pursuant to E.O. 13685 for operating in the Crimea region of Ukraine. The company was previously designated by the EU and the UK in 2020 and in 2021 by Canada and Australia.

ABUSES AGAINST THE LOCAL POPULATION

The atrocious conditions at the Simferopol SIZO-1 pre-trial detention center in Simferopol, in the Crimea region of Ukraine, are emblematic of the widespread human rights abuses perpetrated against Ukraine’s people. The notorious prison is known for severe abuses, communicable diseases, poor and inhumane living conditions, and inadequate medical assistance. Prisoners are known to freeze, starve, suffer from parasites, and be kept in poorly ventilated, unsanitary cells. Among the wide variety of prisoners held at this overcrowded prison are those detained on politically motivated criminal charges, as well as Crimean Tatars and other Ukrainians held in indefinite detention. Simferopol SIZO-1 was designated pursuant to E.O. 13685 for operating in the Crimea region of Ukraine.

OFFICIALS CARRYING OUT THE OCCUPATION OF CRIMEA

Today’s action also targeted three Russian officials and a local official involved in Russia’s occupation of and efforts to control and govern the Crimea region of Ukraine. These bureaucrats are critical to the Russian government’s malign effort to exercise authority within Ukrainian territory following Russia’s illegal seizure of Crimea. Individuals included in this action were: Larisa Vitalievna Kulinich (Kulinich); Pavel Leonidovich Karanda (Karanda); Leonid Mikhailiuk (Mikhailiuk); and Vladimir Nikolaevich Terentiev (Terentiev).

Kulinich, a Ukrainian and Russian national, is the so-called Minister of Property and Land Relations in the so-called Republic of Crimea. Previously, Kulinich was First Deputy Minister of Property and Land Relations.

Karanda, a Russian national, is the so-called Minister of Internal Affairs for the so-called Republic of Crimea.

Mikhailiuk, a Russian national, is the so-called Chief of the Russian Intelligence Services’ Federal Security Service (FSB) Department in Crimea and Sevastopol. Prior to his illegitimate position in Crimea, Mikhailiuk was the head of the FSB departments in Russia’s Vologda and Kaliningrad oblasts.

Terentiev, a Russian national, is the so-called Head of the Main Directorate of the Investigative Committee in the so-called Republic of Crimea and Sevastopol.

Kulinich, Karanda, Mikhailiuk, and Terentiev were designated today pursuant to E.O. 13660 for asserting governmental authority over any part or region of Ukraine without the authorization of Ukraine.

SANCTIONS IMPLICATIONS

As a result of today’s action, all property and interests in property of these individuals and entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC’s regulations generally prohibit all dealings by U.S. persons or dealings within the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons. Additionally, any entities owned 50 percent or more in the aggregate by designated persons are also blocked by operation of law. Moreover, foreign persons that knowingly engage in a significant transaction or transactions with the persons designated today may themselves face the risk of designation.

View identifying information on the individuals designated today.

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Treasury Escalates Sanctions Against the Russian Government’s Attempts to Influence U.S. Elections

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took sweeping action against 16 entities and 16 individuals who attempted to influence the 2020 U.S. presidential election at the direction of the leadership of the Russian Government.

This announcement follows the Intelligence Community’s (IC) “Assessment of Foreign Threats to the 2020 U.S. Federal Elections.” The IC assessment addresses the intentions and efforts of key foreign actors, including Russia, to influence or interfere with the U.S. elections and undermine public confidence in the election process. Russia employed a system of government officials, disinformation outlets, and companies to covertly influence U.S. voters and spread misinformation about U.S. political candidates and U.S. election processes and institutions.

“Treasury will target Russian leaders, officials, intelligence services, and their proxies that attempt to interfere in the U.S. electoral process or subvert U.S. democracy,” said Secretary Janet L. Yellen. “This is the start of a new U.S. campaign against Russian malign behavior.”

Today’s actions highlight how multiple Russian officials, proxies, and intelligence agencies coordinated to interfere with recent U.S. elections. Private and public sector corruption facilitated by President Vladimir Putin has enriched his network of confidants, who used their illicit business connections to advance Russia’s campaign to undermine the 2020 U.S. presidential election—and to give Russia plausible deniability in its disinformation activities. Members of this network include First Deputy Chief of Staff of the Presidential Administration of Russia Alexei Gromov (Gromov), previously designated as a government official pursuant to Executive Order (E.O.) 13661. Gromov leads the Kremlin’s use of its media apparatus that sought to exacerbate tensions in the United States by discrediting the 2020 U.S. election process. As a result, Treasury is designating Gromov pursuant to E.O. 13848 for having attempted to interfere in the 2020 U.S. presidential election. 

TREASURY TARGETS DISINFORMATION OUTLETS CONTROLLED BY RUSSIAN INTELLIGENCE SERVICES

Russian Intelligence Services, namely the Federal Security Service (FSB), the Main Intelligence Directorate (GRU), and the Foreign Intelligence Service (SVR), play critical roles in propagating Russian disinformation online. The FSB, GRU, and SVR operate a network of websites that obscure their Russian origin to appeal to Western audiences. Outlets operated by Russian Intelligence Services focus on divisive issues in the United States, denigrate U.S. political candidates, and disseminate false and misleading information. The GRU and FSB were first designated in 2016.

The FSB directly operates disinformation outlets. SouthFront is an online disinformation site registered in Russia that receives taskings from the FSB. It attempts to appeal to military enthusiasts, veterans, and conspiracy theorists, all while going to great lengths to hide its connections to Russian intelligence. In the aftermath of the 2020 U.S. presidential election, SouthFront sought to promote perceptions of voter fraud by publishing content alleging that such activity took place during the 2020 U.S. presidential election cycle.

NewsFront is a Crimea-based disinformation and propaganda outlet that worked with FSB officers to coordinate a narrative that undermined the credibility of a news website advocating for human rights. Part of NewsFront’s plan was to utilize Alexander Malkevich, who is also being re-designated in today’s action, to further disseminate disinformation. NewsFront was also used to distribute false information about the COVID-19 vaccine, which further demonstrates the irresponsible and reckless conduct of Russian disinformation sites.

The Strategic Culture Foundation (SCF) is an online journal registered in Russia that is directed by the SVR and closely affiliated with the Russian Ministry of Foreign Affairs. SCF is controlled by the SVR’s Directorate MS (Active Measures) and created false and unsubstantiated narratives concerning U.S. officials involved in the 2020 U.S. presidential election. It publishes conspiracy theorists, giving them a broader platform to spread disinformation, while trying to obscure the Russian origins of the journal so that readers may be more likely to trust the sourcing.

The GRU operates InfoRos. InfoRos calls itself a news agency but is primarily run by the GRU’s 72nd Main Intelligence Information Center (GRITs). GRITs is a unit within Russia’s Information Operations Troops, which is identified as Russia’s military force for conducting cyber espionage, influence, and offensive cyber operations. InfoRos operates under two organizations, “InfoRos, OOO” and “IA InfoRos.” InfoRos used a network of websites, including nominally independent websites, to spread false conspiracy narratives and disinformation promoted by GRU officials. Denis Tyurin (Tyurin) held a leadership role in InfoRos and had previously served in the GRU. 

Treasury designated SouthFront and the Strategic Culture Foundation pursuant to E.O. 13848 for having engaged in foreign interference in the U.S. 2020 presidential election. SouthFront was also designated pursuant to E.O. 13694, as amended, and E.O. 13382 for acting on behalf of the FSB. NewsFront was designated pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA), E.O. 13694, and E.O.  13382 for acting on behalf of the GRU. 

Treasury also designated InfoRos, OOO, IA InfoRos, and Tyurin pursuant to CAATSA, E.O. 13694, and E.O. 13382 for acting on behalf of the GRU. 

More guidance specific to disinformation and election interference can be found on the website of the U.S. Cybersecurity and Infrastructure Security Agency.

TREASURY FURTHER TARGETS YEVGENIY PRIGOZHIN’S NETWORK IN AFRICA

Yevgeniy Prigozhin (Prigozhin) is the Russian financier of the Internet Research Agency (IRA), the Russian troll farm that OFAC designated pursuant to E.O. 13848 in 2018 for interfering in the 2016 presidential election. Prigozhin has been designated pursuant to E.O.s 13848, 13694, and 13661. 

Russian national Alexander Malkevich (Malkevich) and his company, the Foundation for National Values Protection (FZNC), have facilitated Prigozhin’s global influence operations since at least 2019. Malkevich, who was previously designated in 2018 pursuant to E.O. 13694 for directing USAReally, another designated Prigozhin-financed influence entity, has continued to support Prigozhin’s disinformation operations. Malkevich runs the FZNC website. Malkevich utilized the FZNC website along with other Prigozhin operatives to spread messages on behalf of Prigozhin. Prigozhin has evolved from simply providing financial support to his global disinformation network to also writing content to denigrate the U.S. electoral process. Malkevich and the FZNC were designated pursuant to E.O.s 13848, 13694, and 13661 for supporting Prigozhin’s global influence operations. FZNC was also designated pursuant to E.O. 13848 for being owned or controlled by Malkevich.

The Association For Free Research And International Cooperation (AFRIC), International Anticrisis Center, and Russian nationals Petr Byschkov (Byschkov), Yulia Afanasyeva (Afanasyeva), and Taras Pribyshin (Pribyshin) facilitate Prigozhin’s malign operations in Africa and Europe while primarily operating from Russia. AFRIC has served as a front company for Prigozhin’s influence operations in Africa, including by sponsoring phony election monitoring missions in Zimbabwe, Madagascar, the Democratic Republic of the Congo, South Africa, and Mozambique. Despite posing as an African-led initiative, AFRIC serves to disseminate Russia’s preferred messaging, often related to disinformation. AFRIC works in coordination with other elements of the Prigozhin network, including FZNC and the International Anticrisis Center, a fraudulent think tank controlled by Prigozhin’s operatives.  Byschkov manages Prigozhin’s “Africa Back Office,” a team of political consultants tasked with devising strategies for manipulating African politics in support of Prigozhin’s interests.  Afanasyeva, an employee of the “Africa Back Office,” ran AFRIC and the International Anticrisis Center. Pribyshin has conducted influence operations in Africa for the IRA in support of Prigozhin’s objectives in the region since at least 2019. 

AFRIC, International Anticrisis Center, Byschkov, Afanasyeva, and Pribyshin were designated pursuant to E.O.s 13848, 13694, and 13661 for their roles in Prigozhin’s operations.

TREASURY FURTHER TARGETS YEVGENIY PRIGOZHIN’S ATTEMPTS TO EVADE SANCTIONS

In addition, Prigozhin uses a complex network of shell and front companies to evade U.S. sanctions and to obscure his ownership in property. In 2019, two Russia-based companies, Trans Logistik, OOO (Trans Logistik) and OOO Yunidzhet (Yunidzhet), acted as covert procurement agents for Prigozhin to obtain aircraft related parts and maintenance. Trans Logistik obfuscated the ownership of Prigozhin’s blocked property, including the previously identified aircraft that is blocked property, M-VITO, while Yunidzhet provided management services to another previously identified aircraft that is blocked property, M-SAAN. Artem Stepanov (Stepanov) is the Deputy General Director of Yunidzhet. Maria Zueva is the General Director of Yunidzhet.  Kirill Shcherbakov is Yunidzhet’s ultimate owner and also owns OOO Alkon, a company with close ties to Yunidzhet.

Trans Logistik and Yunidzhet were designated pursuant to E.O.s 13848, 13694 and 13661 for supporting Prigozhin. Stepanov, Zueva, and Shcherbakov were also designated pursuant to E.O.s 13848, 13694, and 13661 for acting on behalf of Yunidzhet.  OOO Alkon was designated pursuant to E.O.s 13848, 13694, and 13661 for being owned by Stepanov.

The Federal Bureau of Investigation (FBI) is offering a reward of up to $250,000 for information leading to the arrest of Prigozhin.

TREASURY TARGETS IRA ENABLER

Pakistan-based Second Eye Solution (SES), also known as Forwarderz, is an organization that specializes in creating and selling fraudulent identities and has assisted the IRA in concealing its identity to evade sanctions. Since at least 2012, SES engaged in a scheme to provide digital photographs of fake documents including passports, driver’s licenses, bank statements, utility bills, and national identity documents. SES markets these fake documents for use to verify online accounts including money service business accounts and social media website accounts. In 2017, the IRA purchased 15 fraudulent U.S. driver licenses images from SES. The purchased licenses were used as supporting documents for online social media accounts opened by the IRA.

Pakistani Nationals Mohsin Raza, Mujtaba Raza, Syed Hasnain, Muhammad Hayat, Syed Raza, and Shahzad Ahmed are the owners and employees who were instrumental in processing payment for fraudulent identities. Fresh Air Farm House, Like Wise, and MK Softtech are four Pakistani front companies used to launder SES profits.

The fraudulent documents produced by SES are likely used at many online services to evade sanctions and anti-money laundering (AML) screening protocols beyond what OFAC has been able to identify. SES advertises that their fraudulent documents may be used on social media, freelancing job postings, and commerce platforms. 

As part of today’s listing of SES on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List), OFAC is also identifying digital currency addresses used by SES to fulfill customer orders in order to help assist financial institutions, and their third-party identity verification services, in identifying customers on their platforms who have purchased fraudulent identity documents. Known SES digital currency addresses have received over $2.5 million in digital currencies over more than 26,900 transactions from 2013 to March 2021. 

SES was designated pursuant to E.O.s 13848 and 13694, for acting on behalf of the IRA. Mohsin Raza, Mujtaba Raza, Seyed Hasnain, Muhammad Hayat, Syed Raza, and Shahzad Ahmed were designated pursuant to E.O.s 13848 and 13694, for acting for or on behalf of SES. Fresh Air Farm House, Like Wise, and MK Softtech were designated pursuant to E.O.s 13848 and 13694, for being owned or controlled by Mohsin Raza and Mujtaba Raza.

TREASURY TARGETS KNOWN RUSSIAN AGENT KONSTANTIN KILIMNIK

Konstantin Kilimnik (Kilimnik) is a Russian and Ukrainian political consultant and known Russian Intelligence Services agent implementing influence operations on their behalf. During the 2016 U.S. presidential election campaign, Kilimnik provided the Russian Intelligence Services with sensitive information on polling and campaign strategy. Additionally, Kilimnik sought to promote the narrative that Ukraine, not Russia, had interfered in the 2016 U.S. presidential election. In 2018, Kilimnik was indicted on charges of obstruction of justice and conspiracy to obstruct justice regarding unregistered lobbying work. Kilimnik has also sought to assist designated former President of Ukraine Viktor Yanukovych. At Yanukovych’s direction, Kilimnik sought to institute a plan that would return Yanukovych to power in Ukraine. 

Kilimnik was designated pursuant to E.O. 13848 for having engaged in foreign interference in the U.S. 2020 presidential election. Kilimnik was also designated pursuant to E.O. 13660 for acting for or on behalf of Yanukovych. Yanukovych, who is currently hiding in exile in Russia, was designated in 2014 pursuant to E.O. 13660 for his role in violating Ukrainian sovereignty. 

The FBI is offering a reward of up to $250,000 for information leading to the arrest of Kilimnik.

SANCTIONS IMPLICATIONS

As a result of today’s designations, all property and interests in property of these targets that are subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them. Additionally, any entities 50 percent or more owned by one or more designated persons are also blocked. In addition, financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to secondary sanctions or be subject to an enforcement action.

The Office of the Director of National Intelligence election interference report can be found on its website.  

View more information on the persons designated today.

Treasury Sanctions Russia with Sweeping New Sanctions Authority

WASHINGTON — Today, the U.S. Department of the Treasury took multiple sanctions actions under a new Executive Order (E.O.) targeting aggressive and harmful activities by the Government of the Russian Federation.  Treasury’s actions include the implementation of new prohibitions on certain dealings in Russian sovereign debt, as well as targeted sanctions on technology companies that support the Russian Intelligence Services’ efforts to carry out malicious cyber activities against the United States.

“The President signed this sweeping new authority to confront Russia’s continued and growing malign behavior,” said Treasury Secretary Janet L. Yellen.  “Treasury is leveraging this new authority to impose costs on the Russian government for its unacceptable conduct, including by limiting Russia’s ability to finance its activities and by targeting Russia’s malicious and disruptive cyber capabilities.” 

NEW AUTHORITY IN RESPONSE TO RUSSIAN MALIGN ACTIVITIES

The E.O. of April 15, 2021, “Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation,” elevates the U.S. government’s capacity to deploy strategic and economically impactful sanctions to deter and respond to Russia’s destabilizing behavior.  In particular, this new E.O. authorizes sanctions to counter Russia’s harmful foreign activities that threaten the national security and foreign policy of the United States, including:  undermining the conduct of free and fair elections and democratic institutions in the United States and its allies and partners; engaging in and facilitating malicious cyber activities against the United States and its allies and partners that threaten the free flow of information; fostering and using transnational corruption to influence foreign governments; pursuing extraterritorial activities targeting dissidents or journalists; undermining security in countries and regions important to the United States’ national security; and violating well-established principles of international law, including respect for the territorial integrity of states.  To address these threats, the E.O. of April 15, 2021 authorizes sanctions on a wide range of persons, including, among others, those operating in the technology and defense and related materiel sectors of the Russian Federation economy, and in any additional sectors of the Russian Federation economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.

SOVEREIGN DEBT PROHIBITIONS

Pursuant to the E.O. of April 15, 2021, Treasury’s Office of Foreign Assets Control (OFAC) is issuing a directive that generally prohibits U.S. financial institutions from participating in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, and further prohibits U.S. financial institutions from lending ruble or non-ruble denominated funds to these three entities.  This directive expands upon existing prohibitions on certain dealings in Russian sovereign debt that have been in place since August 2019.

TREASURY DESIGNATES RUSSIAN COMPANIES IN THE TECHNOLOGY SECTOR SUPPORTING RUSSIAN INTELLIGENCE SERVICES

Treasury’s first use of the E.O. of April 15, 2021 targets companies operating in the technology sector of the Russian Federation economy that support Russian Intelligence Services. The following companies are designated for operating in the technology sector of the Russian Federation economy:  ERA Technopolis; Pasit, AO (Pasit); Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation (SVA); Neobit, OOO (Neobit); Advanced System Technology, AO (AST); and Pozitiv Teknolodzhiz, AO (Positive Technologies).

ERA Technopolis is a research center and technology park funded and operated by the Russian Ministry of Defense.  ERA Technopolis houses and supports units of Russia’s Main Intelligence Directorate (GRU) responsible for offensive cyber and information operations and leverages the personnel and expertise of the Russian technology sector to develop military and dual-use technologies.

Pasit is a Russia-based information technology (IT) company that conducted research and development in support of Russia’s Foreign Intelligence Service’s (SVR) malicious cyber operations.

SVA is a Russian state-owned research institute specializing in advanced systems for information security located in Russia.  SVA conducted research and development in support of the SVR’s malicious cyber operations.

Neobit is a Saint Petersburg, Russia-based IT security firm whose clients include the Russian Ministry of Defense, SVR, and Russia’s Federal Security Service (FSB).  Neobit conducted research and development in support of the cyber operations conducted by the FSB, GRU, and SVR.  Neobit was also designated today pursuant to cyber-related E.O. 13694, as amended by E.O. 13757, WMD-related E.O. 13382, and the Countering America’s Adversaries Through Sanctions Act (CAATSA) for providing material support to the GRU.  

AST is a Russian IT security firm whose clients include the Russian Ministry of Defense, SVR, and FSB.  AST provided technical support to cyber operations conducted by the FSB, GRU, and SVR.  AST was also designated today pursuant to E.O. 13694, E.O. 13382, and CAATSA for providing support to the FSB.

Positive Technologies is a Russian IT security firm that supports Russian Government clients, including the FSB.  Positive Technologies provides computer network security solutions to Russian businesses, foreign governments, and international companies and hosts large-scale conventions that are used as recruiting events for the FSB and GRU.  Positive Technologies was also designated today pursuant to E.O. 13694, E.O. 13382, and CAATSA for providing support to the FSB.

SANCTIONS TARGET RUSSIAN MALICIOUS CYBER ACTORS

The Russian Intelligence Services — specifically the Federal Security Service (FSB), Russia’s Main Intelligence Directorate (GRU), and the Foreign Intelligence Service (SVR) — have executed some of the most dangerous and disruptive cyber attacks in recent history, including the SolarWinds cyber attack.  The FSB and GRU were previously sanctioned in 2016, and again in 2018, for malicious cyber activity, and most recently on March 2, 2021 for activities related to the proliferation of weapons of mass destruction (WMD).

The FSB was involved in the August 2020 poisoning of Aleksey Navalny with a chemical weapon, specifically a nerve agent known as Novichok.  The GRU also engaged in activities that materially contributed to the possession, transportation, and use of Novichok related to a March 2018 poisoning in the United Kingdom.

The FSB has also used its cyber capabilities to target Russian journalists and others who openly criticize the regime, as well as U.S. government personnel and millions of private citizens around the world.  To bolster its malicious cyber operations, the FSB cultivates and co-opts criminal hackers, including the previously designated Evil Corp, enabling them to engage in disruptive ransomware attacks and phishing campaigns.

The GRU’s malign cyber activities include deployment of the NotPetya and Olympic Destroyer malware; intrusions targeting the Organization for the Prohibition of Chemical Weapons and the World Anti-Doping Agency; cyber attacks on government systems and critical infrastructure in Ukraine and the state of Georgia; and hack-and-leak operations targeting elections in the United States and France.

In addition, the Russian Intelligence Services’ third arm, the SVR, is responsible for the 2020 exploit of the SolarWinds Orion platform and other information technology infrastructures.  This intrusion compromised thousands of U.S. government and private sector networks.  The scope and scale of this compromise combined with Russia’s history of carrying out reckless and disruptive cyber operations makes it a national security concern.  The SVR has put at risk the global technology supply chain by allowing malware to be installed on the machines of tens of thousands of SolarWinds’ customers.  Victims of the compromise include the financial sector, critical infrastructure, government networks, and many others.  Further, this incident will cost businesses and consumers in the United States and worldwide millions of dollars to fully address.

Additionally, the SVR stole “red team tools,” which mimic cyber attacks to help customers better protect themselves, from a U.S. cyber security company.  These tools, if made public or used offensively by the SVR or other actors, would create additional opportunities for malign actors to target computer systems worldwide.

The private and state-owned companies designated today enable the Russian Intelligence Services’ cyber activities.  These companies provide a range of services to the FSB, GRU, and SVR, ranging from providing expertise, to developing tools and infrastructure, to facilitating malicious cyber activities.

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, 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.  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.  

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Treasury, IRS disburse 2 million more Economic Impact Payments under the American Rescue Plan; VA beneficiaries bring total to approximately 159 million as payments continue

WASHINGTON — Today, the U.S. Department of the Treasury, the Internal Revenue Service, and the Bureau of the Fiscal Service announced they are disbursing nearly 2 million payments in the fifth batch of Economic Impact Payments from the American Rescue Plan.

Today’s announcement brings the total disbursed so far to approximately 159 million payments, with a total value of more than $376 billion, since these payments began rolling out to Americans in batches as announced on March 12.

The fifth batch of payments began processing on Friday, April 9, with an official payment date of April 14, with some people receiving direct payments in their accounts earlier as provisional or pending deposits. Here is additional information on this batch of payments:

  • In total, this batch includes nearly 2 million payments with a value of more than $3.4 billion.
  • More than 320,000 payments, with a total value of $450 million, went to Veterans Affairs (VA) beneficiaries who receive Compensation and Pension (C&P) benefit payments but who don’t normally file a tax return and didn’t use the Non-Filers tool last year.
  • Nearly 850,000 payments, with a total value of nearly $1.6 billion, went to eligible individuals for whom the IRS previously did not have information to issue an Economic Impact Payment but who recently filed a tax return.
  • This batch also includes additional ongoing supplemental payments for people who earlier this year received payments based on their 2019 tax returns but are eligible for a new or larger payment based on their recently processed 2020 tax returns. This batch included more than 700,000 million of these “plus-up” payments, with a total value of more than $1.2 billion.
  • Another 72,000 payments went to Social Security beneficiaries who didn’t file a 2020 or 2019 tax return and didn’t use the Non-Filers tool last year.
  • Overall, this fifth batch of payments contains nearly 1.2 million direct deposit payments (with a total value of just under $2 billion) and nearly 800,000 paper check payments (with a total value of over $1.4 billion).

Additional information is available on the first four batches of Economic Impact Payments from the American Rescue Plan, which began processing on April 2, March 26, March 19, and March 12.

A larger percentage of payments was made electronically during this round of payments than during previous rounds. This accelerated the delivery of payments to millions of American families whose payments would otherwise have been sent by mail. Over 95% of all Social Security beneficiaries have been paid electronically during this round of payments, compared to 70% in the first round and 72% in the second round.

The IRS will continue to make Economic Impact Payments on a weekly basis. Ongoing payments will be sent to eligible individuals for whom the IRS previously did not have information to issue a payment but who recently filed a tax return, as well to people who qualify for “plus-up” payments.

Special reminder for those who don’t normally file a tax return

Although payments are automatic for most people, the IRS continues to urge people who don’t normally file a tax return and haven’t received Economic Impact Payments to file a 2020 tax return to get all the benefits they’re entitled to under the law, including tax credits such as the 2020 Recovery Rebate Credit, the Child Tax Credit, and the Earned Income Tax Credit. Filing a 2020 tax return will also assist the IRS in determining whether someone is eligible for an advance payment of the 2021 Child Tax Credit, which will begin to be disbursed this summer.

For example, some federal benefits recipients may need to file a 2020 tax return – even if they don’t usually file – to provide information the IRS needs to send payments for a qualifying dependent. Eligible individuals in this group should file a 2020 tax return as quickly as possible to be considered for an additional payment for their qualifying dependents.

People who don’t normally file a tax return and don’t receive federal benefits may qualify for these Economic Impact Payments. This includes those experiencing homelessness, the rural poor, and others. Individuals who didn’t get a first or second round Economic Impact Payment or got less than the full amounts may be eligible for the 2020 Recovery Rebate Credit, but they’ll need to file a 2020 tax return. See the special section on IRS.gov: Claiming the 2020 Recovery Rebate Credit if you aren’t required to file a tax return.

Free tax return preparation is available for qualifying people.

The IRS reminds taxpayers that the income levels in this new round of Economic Impact Payments have changed. This means that some people won’t be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly). The payments end at $80,000 for individuals ($160,000 for married filing jointly); people with Adjusted Gross Incomes above these levels are ineligible for a payment.

Individuals can check the Get My Payment tool on IRS.gov to see the payment status of these payments. Additional information on Economic Impact Payments is available on IRS.gov.

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READOUT: Deputy Secretary Wally Adeyemo’s Meeting with the California League of Cities

Today, Deputy Secretary Wally Adeyemo met virtually with more than 500 local government officials to discuss the Treasury Department’s upcoming distribution of the American Rescue Plan’s (ARP) $350 billion State and Local Fiscal Recovery Fund.  The meeting was hosted by the California League of Cities, the California municipal chapter of the National League of Cities.
 
Deputy Secretary Adeyemo spoke about the importance of bringing economic relief to states, cities, and localities, and distributing relief from the State and Local Fiscal Recovery Fund equitably and in a way that allows local leaders to meet the unique challenges of their communities. Deputy Secretary Adeyemo asked for feedback on how the Treasury Department can support local governments as they perform critical work helping their communities recover from the COVID-19 pandemic. The Deputy Secretary also introduced newly appointed Chief Recovery Officer Jacob Leibenluft, who will oversee all of the Treasury Department’s recovery programs, including the State and Local Fiscal Recovery Fund.  

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Treasury Sanctions Regional Commander of Mexico’s CJNG in Coordination with Justice and State Actions

WASHINGTON – Yesterday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) identified Audias Flores Silva (Flores Silva) as a significant foreign narcotics trafficker pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act).  Flores Silva (a.k.a. “Jardinero”) is one of the Cartel de Jalisco Nueva Generacion’s (CJNG) regional commanders in control of large portions of CJNG territory along the Pacific coast of Mexico, including the state of Nayarit.  CJNG is a violent Mexican drug trafficking organization responsible for trafficking a significant proportion of the fentanyl and other deadly drugs that enter the United States.  OFAC took this action in coordination with the Department of Justice, which unsealed an indictment against Flores Silva.  OFAC also coordinated with the Department of State, which has announced an up to $5 million reward for information leading to Flores Silva’s arrest or conviction.  OFAC’s action was the result of close and ongoing collaboration with the Los Angeles Field Division of the Drug Enforcement Administration (DEA) and the Department of Homeland Security’s Homeland Security Investigations (HSI) division.            

“OFAC is committed to working with our interagency partners to target all facets of the most significant Mexican drug trafficking organizations, whose members continue to flood our streets with fentanyl and other deadly drugs,” said OFAC Director Andrea Gacki.  “Flores Silva, who traffics massive amounts of opioids and cocaine, represents a major threat to the United States.”

Yesterday, an indictment charging Flores Silva on drug trafficking and weapons offenses was unsealed.  A grand jury in the U.S. District Court for the District of Columbia charged Flores Silva with a number of crimes, including conspiracy to distribute cocaine and heroin intending, knowing, and having reasonable cause to believe that such substances would be unlawfully imported into the United States and using a firearm in furtherance of a drug trafficking conspiracy.  The case is being prosecuted by the Narcotic and Dangerous Drug Section of the Criminal Division of the Department of Justice.  Flores Silva previously served a five-year prison term in the United States in connection with a conviction for narcotics trafficking.  After his release, he returned to Mexico.  In 2016, Mexican authorities arrested Flores Silva after being accused of orchestrating an April 2015 ambush against Mexican police officers in Soyatlan, Jalisco.  Flores Silva was later released from Mexican prison after fighting his charges in Mexican courts. 

“This indictment and the Treasury Department sanctions show that the Department of Justice, together with our law enforcement partners, will aggressively investigate and criminally prosecute the violent cartels and kingpins who import illegal drugs into our communities,” said Acting Assistant Attorney General Nicholas L. McQuaid. “The Department will continue to pursue cartels like the CJNG, and alleged kingpins like Flores Silva, as long as they continue doing harm to the American people.”

“These actions are yet another demonstration of the outstanding coordination with our Federal partners to protect our communities from the deadly surge of drugs coming from these violent cartels,” said DEA Los Angeles Special Agent in Charge Bill Bodner.  “These efforts illustrate our ongoing commitment to bring CJNG and drug traffickers like Flores Silva, who pose a threat to the American people, to justice.”

Today, the U.S. Department of State’s Narcotics Rewards Program also announced a reward offer of up to $5 million for information leading to the arrest or conviction of Flores Silva.  Tips can be submitted to DEA by phone (+1-213-237-9990) and by email ([email protected]).  Tips can also be submitted to HSI by calling the HSI tip line (+1-866-347-2423) or through their website (https://www.ice.gov/tipline).

PREVIOUS U.S. GOVERNMENT ACTIONS ON CJNG AND LOS CUINIS

Yesterday’s Kingpin Act designation marks OFAC’s fourteenth action against CJNG, which was designated on April 8, 2015, along with its leader, Ruben Oseguera Cervantes (a.k.a. “Mencho”), for playing a significant role in international narcotics trafficking.  In previous actions, OFAC designated a wide range of businesses and individuals linked to CJNG and its close ally, the previously designated Los Cuinis Drug Trafficking Organization.  The previously designated businesses in Mexico include shopping centers, real estate companies, agricultural companies, a music promotion business, and a luxury boutique hotel.  Many of these Mexican entities have engaged in the laundering of drug proceeds and represent attempts by CJNG and Los Cuinis to integrate themselves into the legitimate economy.  Among the previously designated individuals are those who play critical roles in CJNG’s drug trafficking activities, including money laundering, and those who facilitate corruption activities on behalf of CJNG and Los Cuinis.

The U.S. Department of State’s Narcotics Rewards Program has issued a reward offer of up to $10 million for information leading to the arrest and/or conviction of Oseguera Cervantes.  Tips can be submitted to DEA by phone (+1-213-237-9990) and by email ([email protected]).

As a result of yesterday’s OFAC designation, all property and interests in property of the designated individual that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.  OFAC’s regulations generally prohibit all transactions by U.S. persons or persons within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons.

Since June 2000, more than 2,200 entities and individuals have been sanctioned pursuant to the Kingpin Act for their role in international narcotics trafficking.  Penalties for violations of the Kingpin Act range from civil penalties of up to $1,548,075 per violation to more severe criminal penalties.  Criminal penalties for corporate officers may include up to 30 years in prison and fines of up to $5 million. Criminal fines for corporations may reach $10 million.  Other individuals could face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.

More information on the individual designated yesterday.

View the Kingpin Act chart on the individual designated yesterday.

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Treasury Establishes New Office to Lead Implementation of Relief and Recovery Programs

WASHINGTON – Today, the U.S. Department of the Treasury announced the establishment of the Office of Recovery Programs to lead the Department’s implementation of economic relief and recovery programs, including nearly $420 billion in programs from the American Rescue Plan Act of 2021. This new office, which will be led by the Chief Recovery Officer, will report to Treasury’s Deputy Secretary and will be principally focused on efficiently establishing and administering Treasury’s programs to support an equitable and swift recovery from the economic challenges precipitated by the COVID-19 pandemic.

The Office’s inaugural Chief Recovery Officer is Jacob Leibenluft, who will serve as the lead administrator of recovery programs and the principal advisor to the Secretary and Deputy Secretary on recovery program implementation. The Chief Recovery Officer and staff of the Office will work closely with Gene Sperling, the White House American Rescue Plan Coordinator and Senior Advisor to President Biden.

“A new, cohesive model for recovery program implementation at Treasury will help get relief distributed quickly and into the hands of those who need it most,” said Deputy Secretary Wally Adeyemo. “Already we are getting individual payments out the door faster and in greater volume than ever before. We hope to continue this improved delivery, while also supporting outreach between Treasury and important stakeholders across the country. We are thrilled that Jacob is willing to take on this portfolio. He has remarkable policy expertise to bring to these programs, and I’m confident that Americans will benefit from his dedication.”

“I am honored to take on this role and look forward to the opportunity to support equity, transparency, and accountability in the implementation of these programs,” said Chief Recovery Officer Jacob Leibenluft. “Treasury will continue to work around the clock to engage with stakeholders, understand the needs in communities across the country, and swiftly implement relief for those who need it most.”

The Office of Recovery Programs will oversee programs authorized through the CARES Act, the Consolidated Appropriations Act of 2021, and the American Rescue Plan Act, as well as other legislation. These programs include the State and Local Fiscal Recovery Fund, Emergency Rental Assistance, the Homeowner Assistance Fund, the State Small Business Credit Initiative, the Capital Projects Fund, the Coronavirus Economic Relief for Transportation Services (CERTS) Program, the Payroll Support Program, the Coronavirus Relief Fund and the Airline and National Security Loan Program.

Prior to the establishment of the Office of Recovery Programs, this work was led from disparate offices across the Treasury Department. The Office of Recovery Programs will build on that work and establish a sustainable model for efficiently and effectively implementing these programs that will make it easier for communities, businesses, and households to access relief.

The implementation of the recovery programs disbursed through the tax code, including Economic Impact Payments and the enhanced Child Tax Credit, will continue to be led by the Office of Tax Policy, the Internal Revenue Service, and the Bureau of Fiscal Service, in coordination with the Office of Recovery Programs.

While the Office of Recovery Programs is established, potential stakeholders can reach out to [email protected].

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