READOUT: Secretary of the Treasury Janet L. Yellen’s Bilateral Meeting with Executive Vice President and Commissioner for Economy Paolo Gentiloni of the European Union

WASHINGTON – Today, U.S. Secretary of the Treasury Janet L. Yellen met with European Commissioner for Economy Paolo Gentiloni. They discussed several topics of mutual interest, such as our efforts to deprive Russia of its ability to wage war and support for Ukraine in its defense against Putin’s brutal invasion. Secretary Yellen congratulated the European Union for the passage of the Ukraine Facility, which will provide €50 billion in economic support to Ukraine over the next four years and help Ukraine enact the reforms necessary to advance in its EU accession efforts. Secretary Yellen reiterated the Administration’s ongoing efforts to secure direct budget support in FY 2024 as part of the national security supplemental request before Congress, and underscored the importance of Congress acting on financial support for Ukraine as quickly as possible.

 

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Treasury Sanctions Ecuador’s Notorious Los Choneros Gang and Its Leader

WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned one of Ecuador’s most violent gangs, Los Choneros, and its leader, José Adolfo Macías Villamar (also known by the alias “Fito”), pursuant to counter narcotics authorities. OFAC’s action follows a steep rise in violence in Ecuador attributed to the actions of Los Choneros and other drug trafficking gangs in the country. 

“Drug trafficking gangs such as Los Choneros, many with ties to powerful drug cartels in Mexico, threaten the lives and livelihoods of communities in Ecuador and throughout the region,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “We stand in support of Ecuador in its fight to combat drug trafficking, curb the proliferation of prison gangs and prison violence, and take back its streets.”

SITUATION IN ECUADOR

Ecuador is experiencing record levels of gang-driven violence, including the August 2023 assassination of presidential candidate Fernando Villavicencio, a January 2024 armed attack on a local TV network while it was broadcasting live, and the subsequent assassination of the prosecutor investigating that attack and widespread corruption. Mexico’s Sinaloa Cartel and Cartel Jalisco Nueva Generación have further fueled the violence by backing rival drug trafficking gangs within Ecuador as they battle to control trafficking routes in the country.

The latest wave of violence broke out in January 2024, just two days after the Government of Ecuador discovered José Adolfo Macías Villamar (Macías Villamar), the head of the Ecuadorian gang Los Choneros, missing from his prison cell—just ahead of his planned move to a maximum-security facility. In response to his escape, the Government of Ecuador declared a 60-day state of emergency, which sparked additional prison riots and gang attacks across the country, including kidnappings and bombings. On January 9, 2024, Ecuadorian President Daniel Noboa declared Ecuador to be in a state of internal armed conflict.

TARGETING A PROMINENT CRIMINAL ORGANIZATION

Los Choneros, one of Ecuador’s most violent criminal organizations, has been involved in drug trafficking in Ecuador since the 1990s and is a key driver of the escalating violence that has plagued Ecuador since 2020. Los Choneros has also been running operations from inside state and federal penitentiaries throughout the country. With support from the Sinaloa Cartel, Los Choneros gained control of key cocaine trafficking routes through Ecuador. In return, Los Choneros allegedly provided security and logistics services to the Sinaloa Cartel. 

Macias Villamar

A wanted poster for Macías Villamar posted by the Government of Ecuador

Macías Villamar, also known by the alias “Fito,” is a founding member of Los Choneros and has been the group’s sole leader since 2020. In 2011, the Government of Ecuador sentenced him to 34 years in prison for crimes that included murder and drug trafficking. In prison, Macías Villamar enjoyed access to cell phones and internet, which enabled him to continue to direct the activities of Los Choneros and publish external communications, including a music video posted to social media challenging the Ecuadorian government.

OFAC designated Los Choneros and Macías Villamar pursuant to Executive Order 14059 for having engaged in, or attempted to engage in, activities or transactions that materially contributed to, or pose a significant risk of materially contributing to, the international proliferation of illicit drugs or their means of production.

Separately, a $5 million reward offer from the U.S. Department of State remains in place for information leading to the arrest or conviction of co-conspirators and masterminds behind the August 2023 assassination of Ecuadorian presidential candidate Fernando Villavicencio. The U.S. Department of State issued this reward on September 28, 2023, under the Transnational Organized Crime Rewards Program. For more information, see this link.

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 Executive Order 14059.

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

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

For more information on the individual and entity designated today, click here

READOUT: Deputy Secretary of the Treasury Wally Adeyemo’s Travel to France

WASHINGTON – From February 5-6, Deputy Secretary of the Treasury Wally Adeyemo traveled to Paris, France to meet with senior French government counterparts and continue our close coordination with France on holding Russia accountable for its war against Ukraine. In engagements with senior officials at the Elysée, the Prime Minister’s Office, the Ministry of Finance, Ministry of Foreign Affairs, and the Banque de France, Deputy Secretary Adeyemo reiterated the importance of maintaining pressure on Russia’s ability to fund its illegal war and equip its military – including through the G7+ price cap on Russian energy exports. In Paris, Deputy Secretary Adeyemo also highlighted Treasury’s expanded sanctions authorities, which target foreign financial institutions that facilitate significant transactions for Russia’s military procurement and production of battlefield goods.

Lastly, Deputy Secretary Adeyemo noted the importance of sustaining the financial support for Ukraine that enable its brave resistance to Russia, and thanked French counterparts for their role in helping to secure €50 billion in economic assistance for Ukraine through the European Union’s Ukraine Facility. Deputy Secretary Adeyemo stressed the Biden Administration’s commitment to delivering direct budget support to Ukraine through its national security supplemental funding request before Congress, and discussed with French counterparts the importance of maintaining financial support for Ukraine over the medium- to long-term.

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Treasury Publishes 2024 National Risk Assessments for Money Laundering, Terrorist Financing, and Proliferation Financing

Reports Confirm and Update Key Illicit Finance Concerns in Response to Evolving Threat and Risk Environment 

 

WASHINGTON – Today, the U.S. Department of the Treasury published the 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing. These reports highlight the most significant illicit finance threats, vulnerabilities, and risks facing the United States. 

The reports detail recent, significant updates to the U.S. anti-money laundering/counter-financing of terrorism framework and explain changes to the illicit finance risk environment. These include the ongoing fentanyl crisis, foreign and domestic terrorist attacks and related financing, increased potency of ransomware attacks, the growth of professional money laundering, and continued digitization of payments and financial services. These assessments also address how significant threats to global peace and security—such as Russia’s ongoing illegal, unprovoked, and unjustified war in Ukraine and Hamas’s October 7, 2023 terrorist attacks in Israel—have shaped the illicit finance risk environment in the United States.

Today’s publications are the fourth iterations of the money laundering and terrorist financing risk assessment, and the third update of the proliferation financing risk assessment, in less than a decade. The public and private sectors can use these updated risk assessments to better understand the current illicit finance environment and inform their own risk mitigation strategies. 

“Whether it’s terrorism, drug trafficking, Russian aggression, or corruption, illicit finance is the common thread across our nation’s biggest national security threats,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Treasury, through our National Risk Assessments, is at the cutting edge of analyzing the global risk environment to protect the U.S. and international financial systems from abuse by illicit actors. We urge both the public and private sectors to engage with these reports, as well as our forthcoming National Strategy for Combatting Terrorist and Other Illicit Finance.”

Key findings:

  • Money Laundering: Criminals use both traditional and novel money laundering techniques, depending on availability and convenience, to move and conceal illicit proceeds and promote criminal activity that harms Americans. The crimes that generate the largest amount of illicit proceeds laundered in or through the United States remain fraud, drug trafficking, cybercrime, human trafficking and human smuggling, and corruption. The United States continues to face both persistent and emerging money laundering risks related to: (1) the misuse of legal entities; (2) the lack of transparency in certain real estate transactions; (3) the lack of comprehensive AML/CFT coverage for certain sectors, particularly investment advisers; (4) complicit merchants and professionals that misuse their positions or businesses; and (5) pockets of weaknesses in compliance or supervision at some regulated U.S. financial institutions. 

 

  • Terrorist Financing: The United States continues to face a wide range of terrorist financing threats and actors, both foreign and domestic. Consistent with the 2022 risk assessment, the most common financial connections between individuals in the United States and foreign terrorist groups entail individuals directly soliciting funds for or attempting to send funds to foreign terrorist groups utilizing cash, registered money services businesses, or in some cases, virtual assets. The 2024 report also discusses Hamas and the ways they exploit the international financial system, including through solicitation of funds from witting and unwitting donors worldwide. Additionally, domestic violent extremist movements have proliferated in recent years, posing an elevated threat to the United States and continued challenges for law enforcement.

 

  • Proliferation Financing: Russia and the Democratic People’s Republic of Korea (DPRK) presented heightened risk since the 2022 assessment. To support its unlawful war in Ukraine, Russia has expanded efforts to illegally acquire U.S.-origin goods with military applications using a variety of obfuscation techniques, such as the use of front companies and transshipment points around the world. Networks linked to the DPRK increasingly exploit the digital economy, including through hacking of virtual asset service providers and the overseas deployment of fraudulent information technology workers.

Treasury’s Office of Terrorist Financing and Financial Crimes led the assessment process and coordinated closely with offices and bureaus across the Department, relevant law enforcement and regulatory agencies, staff of the federal functional regulators, and across the intelligence and diplomatic communities.

In the coming weeks, Treasury will release the 2024 National Strategy for Combatting Terrorist and Other Illicit Finance, a strategic plan directly informed by the analysis contained in the risk assessments. In the strategy, Treasury will share recommendations for addressing the highlighted issues. This valuable feedback has aided Treasury in assessing and addressing illicit finance risk identified in prior iterations of the strategy to support improvements to the AML/CFT regime, including the launching of the new beneficial ownership reporting requirement that went into effect on January 1, 2024, and informing forthcoming proposed rules to address illicit finance vulnerabilities in the residential real estate sector and for certain investment advisers.

Read more:

The 2024 National Money Laundering Risk Assessment

The 2024 National Terrorist Financing Risk Assessment

The 2024 National Proliferation Financing Risk Assessment

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READOUT: Treasurer Chief Malerba Outlines Biden-Harris Administration’s Historic Support for Tribal Communities at the National American Indian Housing Council’s Legislative Conference

WASHINGTON – Yesterday, U.S. Treasurer Chief Lynn Malerba delivered keynote remarks at the National American Indian Housing Council’s 2024 Legislative Conference. During her remarks, Chief Malerba discussed the Biden-Harris Administration’s historic support for Tribal communities, including efforts to strengthen housing security in Indian Country that prevented a wave of evictions and foreclosures.

In December at the White House Tribal Nation’s Summit, the Treasury Department released the Tribal Housing Stability Report which found that President Biden’s economic agenda stabilized housing markets in Indian Country and kept Native families in their homes. Specifically, the report details how three programs implemented under the Biden-Harris Administration – the State and Local Fiscal Recovery Funds (SLFRF) program, the Homeowners Assistance Fund (HAF), and the Emergency Rental Assistance (ERA1) program – helped homeowners and renters in Tribal communities avoid foreclosure and eviction, stabilized housing markets in Indian Country and surrounding regions, and strengthened local and national economies. The new evidence and data presented in this report demonstrates the measurable benefits of federal programs in increasing housing supply and security in Indian Country. 

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Federal Bank Regulatory Agencies Seek Comment on Interagency Effort to Reduce Regulatory Burden

The federal bank regulatory agencies today published their first of a series of requests for comment to reduce regulatory burden. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify any outdated or otherwise unnecessary regulatory requirements for their supervised institutions.

To facilitate this review, the agencies divided their regulations into 12 categories and are first soliciting comments on their regulations in three categories: Applications and Reporting, Powers and Activities, and International Operations. The public has 90 days from publication in the Federal Register to comment on the relevant regulations.

Over the next two years, the agencies will request comment on the regulations in the remaining categories, asking the public to identify regulations they believe are outdated, unnecessary, or unduly burdensome.

The agencies also plan to hold outreach meetings where interested parties may comment on applicable regulatory requirements directly to the agencies. Information about the outreach meetings will be publicized as details are finalized.

Related Links

U.S. Department of the Treasury, IRS Release New Analysis Showing the High Return on Investment from Inflation Reduction Act Resources

More comprehensive estimates show transformative investments, if sustained, will result in $851 billion in additional revenue through 2034

WASHINGTON – Today the U.S. Department of the Treasury and Internal Revenue Service (IRS) released a new analysis showing the high return on the Inflation Reduction Act (IRA) investment in rebuilding and modernizing the IRS. Taking a more comprehensive approach to evaluating the transformational initiatives enabled by the IRA, the IRS estimates in a new paper “Return on Investment: Re-Examining Revenue Estimates for IRS Funding” that the IRA as enacted would increase revenue by as much as $561 billion over 2024-2034, substantially more than earlier estimates. If IRA funding is renewed when it runs out, as the Administration has proposed, estimated revenues would be as much as $851 billion. 

 Previous IRS estimates of IRA revenues were limited to revenues generated by direct enforcement activities resulting from higher enforcement staffing. This narrow focus does not capture the full range of ways that the technology, data, and service improvements made possible by the IRA will increase revenues. A full accounting of the revenue raised by this transformation requires a more comprehensive examination of the potential revenue impacts of higher funding.

 “The IRS’s previous estimates of revenue generated by IRA funding were limited to revenues directly resulting from increased enforcement staff­ing. Consequently, the estimates did not present a complete picture of the revenue benefits of the innovative investments we are making under the IRA SOP [Strategic Operating Plan,]” the new paper concludes. “The approach ignored many activities that will influence revenue, including enhanc­ing services to improve voluntary compliance, modernizing technology, and adopting analytic advances that can dramati­cally improve productivity. It also ignored the deterrence effect of compliance activities on taxpayers’ behavior. To account for the potential revenue impact of the full array of investments contemplated in the IRA SOP, we need to look at the effects on revenue collection in a more comprehensive way.” 

“IT modernization offers a wide array of potential revenue benefits. [E]xpanded data intake capacity and productivity will help increase compliance; improved audit selection and collection planning can increase the productivity of enforcement activities,” the paper finds. “A decade ago, the State of California undertook to modernize its tax administration infrastructure. Many of the changes im­plemented are similar to those we are undertaking now […] The California experience demonstrates that these improvements can substantially increase revenue.”

The new estimates released today are a first step in developing more comprehensive revenue estimates for IRS funding. They incorporate the benefits of improved technology, data analytics, and service, as well as the impact of deterrence on wealthy taxpayers who are audited. The estimates represent an important step forward and highlight the need for additional research: Treasury and the IRS will continue to study these issues and encourage outside research on these important topics as well.

The new findings also show what’s at stake in proposals to repeal or reduce this historic investment in the IRS. A $20 billion rescission would reduce revenues by over $100 billion. While the IRS would still be able to ramp up enforcement against big corporations and wealthy taxpayers who do not pay what they owe in the next several years, the rescissions would cause IRA enforcement funding to run out in 2029— about two years earlier than it would have under the IRA as enacted—reducing the revenue raised in 2029 and subsequent years. The Administration has proposed extending and maintaining IRS investments after the IRA funds are exhausted, which would enable the IRS to collect $851 billion over 2024-2034. Conversely, additional rescissions of IRA resources or cuts to IRS base funding would further reduce revenue collections and could reverse taxpayer service improvements that have already been made and even endanger near-term enforcement efforts.

The IRA investments in the IRS were necessary because a decade of deep funding cuts resulted in unacceptable service levels, prevented technological upgrades, and undermined enforcement, particularly efforts focused on wealthy people and big corporations that do not pay what they owe. Driven by these funding cuts, the audit rate on millionaires fell by more than 70% from 2010 to 2019, and the audit rate on large corporations fell by more than 50% over the same period. The tax gap—the difference between taxes owed and taxes paid—has grown to more than $600 billion annually.

The IRA is enabling the IRS to reverse this trend and make wealthy taxpayers and big corporations pay the taxes they owe. Already, the IRS has announced a suite of enforcement efforts targeted at wealthy taxpayers and big corporations, including expanded audits of the biggest corporations and complex partnerships; a focus on foreign-owned corporations that underpay their U.S. taxes; and a campaign to collect tax debt from 1,600 millionaires with at least $250,000 in back taxes that has recovered more than $500 million to date. At the same time, the IRS is implementing the IRA consistent with Secretary of the Treasury Janet L. Yellen’s commitment that audit rates for small businesses and taxpayers earning less than $400,000 will not increase relative to historic levels. 

Furthermore, all taxpayers will benefit from the far-reaching initiatives outlined in the IRA Strategic Operating Plan (SOP). The SOP details how the IRS will use IRA resources to provide taxpayers with world-class customer service, clearer guidance on how to correctly file taxes, increased options for filing electronically, and robust online accounts so that individuals and businesses can file quickly and independently. Taxpayers will have the tools, information and assistance needed to get their tax filings right the first time—both in paying what they owe and claiming the tax benefits for which they are eligible. 

 

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

The United States and the People’s Republic of China held the third meeting of the Economic Working Group (EWG) on February 5-6. This was the first meeting of the EWG in 2024 and its first meeting in China. 

Senior officials from the U.S. Department of the Treasury and China’s Ministry of Finance convened for the two-day EWG meetings in Beijing, with participation by other agencies.  The two sides opened discussions with an exchange of views on domestic macroeconomic outlooks.  The meeting sessions included discussions on cooperating on shared challenges such as debt issues in low-income and emerging economies.  U.S. officials also frankly raised issues of concern, including China’s industrial policy practices and overcapacity, and the resulting impact on U.S. workers and firms.  U.S. officials reaffirmed that the U.S. is not seeking to decouple the two economies and instead seek a healthy economic relationship that provides a level playing field for American companies and workers.  The meetings concluded with both sides agreeing to meet again in April. 

While in Beijing, the Treasury delegation also met with Vice Premier He Lifeng, where they conveyed that Secretary Janet L. Yellen welcomed the progress made by the EWG and discussed the importance of continuing to deepen communication and work together on shared challenges.  They also indicated that the Secretary looks forward to a return visit to China this year at the appropriate time. 

The Economic and Financial Working Groups were established in September 2023. Both working groups report directly to Secretary Yellen and Vice Premier He.  

 

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READOUT: Under Secretary Brian Nelson’s Travel to the United Arab Emirates

DUBAI — Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson traveled to the United Arab Emirates from January 30 – February 2, to continue coordination on regional security, terrorist financing, and other illicit finance issues.

While in the UAE, Under Secretary Nelson met with senior government officials from multiple ministries and agencies. He thanked the UAE for its continued provision of humanitarian aid to support civilians in Gaza, and noted the long partnership between the U.S. and UAE in countering terrorist financing networks. Under Secretary Nelson also conveyed Treasury’s focus on rooting out evasion of U.S. sanctions —  particularly on Russia and Iran and their proxies — and highlighted President Biden’s recent Executive Order which authorizes the targeting of foreign financial institutions facilitating transactions that benefit Russia’s military. Under Secretary Nelson emphasized the importance of maintaining coordination to jointly combat ongoing threats to regional peace and security, including from the proliferation of UAVs. 

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READOUT: Deputy Secretary of the Treasury Wally Adeyemo’s Meeting with the Financial and Banking Information Infrastructure Committee

WASHINGTON — Today, U.S. Deputy Secretary of the Treasury Wally Adeyemo chaired a meeting with members of the Financial and Banking Information Infrastructure Committee (FBIIC) and recognized the agencies’ strong partnership to address critical issues that we face. The meeting focused on:

  • An update on the Treasury-led Cloud Executive Steering Group and their progress closing the gaps identified in the Cloud Adoption Report.  
  • An update on Treasury’s review of the financial services sector cyber incident response posture including findings, recommendations, and next steps.  
  • A discussion of the EquiLend cyber incident. Equilend is a securities lending platform owned by a consortium of large financial institutions, including global banks and broker-dealers, which suffered a ransomware attack affecting its Next Generation Trading (NGT) platform on January 22, 2024.   
  • An update from Treasury’s Chief Artificial Intelligence Officer on the progress of Treasury’s report on AI specific cyber risks to the financial sector. The report will be made fully public by the end of April.

The FBIIC includes the leadership of federal financial regulatory agencies and the associations of state regulatory agencies. The FBIIC is charged with improving coordination and communication among financial regulators, promoting public-private partnership within the financial sector, and enhancing the cyber and all-hazards resiliency of the financial sector.

MEMBER AGENCIES OF THE FBIIC INCLUDE:

  • American Council of State Savings Supervisors (ACSSS)
  • Commodities Futures Trading Commission (CFTC)
  • Conference of State Bank Supervisors (CSBS)
  • Consumer Financial Protection Bureau (CFPB)
  • Farm Credit Administration (FCA)
  • Federal Deposit Insurance Corporation (FDIC)
  • Federal Housing Finance Agency (FHFA)
  • Federal Reserve Bank of Chicago (FRB-CHI)
  • Federal Reserve Bank of New York (FRB-NY)
  • Federal Reserve Board (FRB)
  • National Association of Insurance Commissioners (NAIC)
  • National Association of State Credit Union Supervisors (NASCUS)
  • National Credit Union Administration (NCUA)
  • North American Securities Administrators Association (NASAA)
  • Office of the Comptroller of the Currency (OCC)
  • Securities and Exchange Commission (SEC)
  • Securities Investor Protection Corporation (SIPC)

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