Russia Sanctions Disrupting Putin’s Military Efforts, Treasury Official Says
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Sanctions on Russia have succeeded in disrupting the country’s military manufacturing industry and are squeezing its economy, a senior U.S. Treasury Department official said.
The economic restrictions imposed by the U.S. and its allies have forced Russian tank manufacturers to shut down for a period, making it difficult for the country to obtain key parts such as ball bearings, according to Brian Nelson, undersecretary for the Treasury’s Office of Terrorism and Financial Intelligence, also known as TFI.
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The measures also have forced Russian President Vladimir Putin to spend billions of dollars to prop up the country’s economy, diverting resources away from the war in Ukraine, Mr. Nelson said in a recorded interview presented Wednesday at The Wall Street Journal’s Risk & Compliance Forum. The interview was recorded Monday.
“We’ve seen how fragile the supply chain is, frankly—we learned this during Covid—for his defensive efforts on the battlefield,” Mr. Nelson said, referring to Mr. Putin.
Amid the unprecedented sanctions program against Russia and ongoing pressure campaigns against Iran, Venezuela and other nations, the Treasury has been reviewing more broadly how it uses sanctions. One concern is the potential overuse of sanctions that could cause countries to turn to alternative financial systems. Global demand for the dollar—seen as a safe store of asset value—provides the U.S. the financial leverage for its sanction programs.
One measure the U.S. Treasury is taking to ensure its program remains potent is by hiring a chief sanctions economist to provide economic analysis around prospective sanctions actions, Mr. Nelson said.
In addition to the Russia sanctions, the Treasury’s Office of Terrorism and Financial Intelligence and its components also are reviewing potential regulatory actions around emerging cryptocurrency and blockchain markets, and working to implement sweeping new anti-money-laundering rules.
TFI houses the Financial Crimes Enforcement Network, or FinCEN, which has been tasked with building a corporate ownership database. The database is part of legislation passed last year that lawmakers hope will tamp down the use of anonymous shell companies.
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Groups representing small businesses have criticized the legislation for being overly onerous on their members. One group, the National Small Business Association, on Tuesday filed a lawsuit to block the new regulations, which are set to go into effect at the beginning of 2024.
The law, known as the Corporate Transparency Act, also requires the Treasury to conduct reviews that could identify other regulatory gaps in the U.S.’s financial crimes safeguards.
Mr. Nelson said the Treasury is assessing whether new rules are needed to close other potential gaps in anti-money-laundering oversight, including requiring robust compliance systems by investment advisers and the real-estate industry.
—Ian Talley contributed to this article.
Write to Dylan Tokar at dylan.tokar@wsj.com
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