Testimony of Deputy Secretary of the Treasury Wally Adeyemo before the Subcommittee on Financial Services and General Government, Committee on Appropriations, U.S Senate

As Prepared for Delivery

Chairman Van Hollen, Ranking Member Hyde-Smith, and members of the Subcommittee, thank you for giving me the opportunity to speak with you today and to answer your questions. The events of the past six months in Ukraine have been tragic to witness and challenging to address for governments across the globe. Those challenges have been keenly felt by the Department of the Treasury, where our dedicated career staff have been working around the clock to combat Russia’s aggression. I want to start by thanking the Committee and Congress for the additional resources provided in the Ukraine supplemental appropriations packages and for having enacted the FY 2022 omnibus.

Treasury has taken swift and bold actions to hold Russia accountable for this brutal war of choice. We have used sanctions in service of two objectives: denying the Kremlin access to the resources needed to prop up the Russian economy or invest in their military and degrading Russia’s ability to project power. Since January, we have sanctioned more than one thousand individuals and entities and frozen or blocked billions in assets. We have taken unprecedented measures to immobilize a significant share of Russia’s central bank reserves, neutralizing the war chest Putin spent years building for exactly this scenario—only to see U.S. sanctions blunt his efforts in a matter of days. And we are continuing to take additional steps to dismantle Putin’s war machine by targeting key nodes of his military industrial complex and disrupting their critical supply chains.

Just as our response to Russia’s actions has taken new forms, so too have efforts to evade our sanctions. Efforts like the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Taskforce have enabled us to identify and seize the assets of those supporting Putin and his war, even where those assets are hidden using novel and complex structures. Moreover, the Financial Crimes Enforcement Network (FinCEN) has been working vigilantly, along with other Treasury components, to prevent evasion of our sanctions through cryptocurrency transactions, shell companies, and other avenues. This has included direct engagements with financial institutions, and other stakeholders, to share actionable intelligence and flag suspicious activities, as well as the release of several FinCEN advisories targeted at potential sanctions evasion by Russia. 

These new actions and initiatives require substantial resources—from the personnel to conduct the analysis needed to target the right entities to the technology and systems needed to a mount a global response. It is critical that the Treasury as a whole be properly resourced to carry out these responsibilities. 

First, the President’s FY 2023 request includes a $49 million increase in funding for FinCEN to add some of the personnel required to implement the Anti-Money Laundering Act and the Corporate Transparency Act and to continue to build the systems we need to track beneficial ownership and leverage that information to pursue critical national security objectives.

Second, the FY 2023 budget request includes increases of $50 million for Treasury’s Departmental Offices and $135 million for department-wide investments in cybersecurity. The budget also includes an increase of $17 million for the Office of Terrorism and Finance Intelligence, which oversees our national security policy and sanctions. These funds will be used to add critical staff and make key investments in our classified information systems and the other tools we use to execute U.S. sanctions policy.

Of course, we know that fiscal resources are finite, and we do not ask for these funds lightly. As the federal agency tasked with managing our nation’s finances, we at Treasury are acutely aware of the need to raise the revenue needed to fund our government. That is why we are asking Congress to properly fund the IRS and provide it the resources needed to enforce our nation’s tax laws, especially against those who use tax shelters, loopholes, and accounting tricks to starve our country of the fiscal resources needed to pay for our domestic and national security priorities.

Today, economists estimate that more than $160 billion is lost every year from taxes that the wealthiest 1 percent of Americans choose not to pay. In total, we will lose approximately $7 trillion in tax revenue over the next decade to unpaid taxes. Unfortunately, it is easy to see how this situation developed. The IRS’s budget has decreased by more than 15 percent in real terms over the last decade, and its workforce is the roughly same size as in 1974, even though the U.S. population has grown by 60 percent and the complexity of the economy has increased exponentially. 

Moreover, the IRS’s technology is decades out of date, written in a programming language no longer taught, and incredibly expensive to maintain. The Master File that undergirds the tax system dates back to the 1960s, when there was no internet, no cell phones, and no spreadsheets or automatic payments. That IRS technology is so far behind the curve is simply staggering.
To begin to remedy this mismatch between the IRS’s responsibilities and its resources, the President’s FY 2023 budget requests an increase in the IRS’s budget of 12 percent from the FY 2022 enacted level. This increase would be a down payment to begin giving the IRS the funds needed to modernize its workforce and invest in updated technology. However, to fully bring the IRS into the 21st century, it needs stable, long-term funding over the course of a decade, as the President has called for. These investments will more than pay for themselves by enabling the IRS to narrow and work to close the tax gap.

Thank you again for your time today. I’m ready to take your questions.


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