Treasury Undersecretary for Terrorism and Financial Intelligence Stuart Levey said "Virtually all major financial institutions have either completely cut off or dramatically reduced their ties with Iran...The impact of these actions on Iran has been significant, and is deepening." Read more from the U.S. Treasury Department

Treasury Under Secretary for Terrorism and Financial Intelligence Stuart Levey Written Testimony before the Senate Foreign Relations Committee on “Iran Policy in the Aftermath of U.N. Sanctions”

Chairman Kerry, Ranking Member Lugar and distinguished members of the Committee. With the adoption of United Nations Security Council Resolution(UNSCR) 1929 two weeks ago, the international community made clear thatIran's continued failure to meet its international obligations will have increasingly serious consequences. As President Obama said, the Resolution demonstrates the growing costs of Iranian intransigence.  My colleague, Under Secretary Burns, will describe the wide range of challenges posed by Iran, and will provide an overview of the administration's dual-track approach to addressing the Iranian threat. I will focus my testimony today on the so-called "pressure track" of that strategy.  This track is intended to hold Iran accountable for its continued refusal to address the international community's concerns regarding its nuclear program, as well as its support for terrorism, suppression of domestic dissent, and abuse of the financial system.

The adoption of Resolution 1929 marks an inflection point in this strategy, as it broadens and deepens existing sanctions programs on Iran and creates an opportunity for us to further sharpen Iran's choices. We also intend to not only fulfill the letter of the Resolution's mandates, but also to live up to its spirit, by working together with our allies to impose measures that will affect Iranian decision-making.

As you know, we have been working to address Iran's illicit conduct and to protect the international financial system from Iranian abuse for the past several years. Last week, the Treasury Department initiated a series of new actions to both implement and build upon UNSCR 1929 and its predecessor resolutions. In addition to last week's actions, we published today a financial advisory providing public guidance on steps that can be taken to protect against the risks of transactions with Iran. Before I review the details of UNSCR 1929 and the new obligations it creates, I would like to provide an overview of our strategy to hold Iran accountable to its obligations and, in particular, the role that the private sector is playing in that strategy.

Strategy to Hold Iran Accountable

Our strategy to hold Iran accountable for its failure to meet its international obligations has two major fronts.

The first front is governmental action, encompassing actions by the United Nations and concerned governments around the world. While we are working to encourage full implementation of the four UN Security Council sanctions resolutions containing binding legal measures, governments around the world are also considering what additional measures might be necessary to address the grave threat posed by Iran.

We are also looking to international partners to implement the Financial Action Task Force's (FATF) call for countermeasures to address the risks that Iran poses to the international financial system. In February, the FATF issued its most recent of several statements regarding the risks posed by Iran's lack of an adequate anti-money laundering and counterterrorist financing (AML/CFT) regime. The FATF called once again for jurisdictions to impose countermeasures on Iran, and urged them to protect against correspondent relationships being used to bypass or evade countermeasures and risk mitigation practices. Iran is currently the only country in the world subject to a call for such countermeasures.

Perhaps as important as government action is the second front:  private sector action.  The steps private sector firms around the world have taken in recent years to protect themselves from Iran's illicit and deceptive activity are extremely important. We have found that when we use reliable financial intelligence to build cases against Iranian actors engaged in illicit conduct, many members of the private sector go beyond their legal requirements regarding their interactions with these and other Iranian actors because they do not want to risk handling illicit business. This behavior is a product of good corporate citizenship and a desire to protect their institutions' reputations.  The end result is that the voluntary actions of the private sector amplify the effectiveness of government-imposed measures. Thus, as we have taken action to target illicit Iranian conduct, we have shared some of the information that forms the basis for our actions with our partners in the private sector and, in response, virtually all major financial institutions have either completely cut off or dramatically reduced their ties with Iran. We are now starting to see companies across a range of sectors, including insurance, consulting, energy, and manufacturing, make similar decisions. Once some in the private sector decide to cut off ties to Iran, it becomes an even greater reputational risk for others not to follow, and so they often do. Such voluntary reductions in ties to Iran, beyond the requirements of UN and U.S. sanctions programs, in turn makes it even more palatable for foreign governments to impose restrictive measures because their countries' commercial interests are reduced. In the end, this dynamic can create a mutually-reinforcing cycle of public and private action.

The impact of these actions on Iran has been significant, and is deepening as a result of Iran's own conduct. As international sanctions on Iran have increased,Iran's response has been to attempt to evade those sanctions. For example, sanctioned Iranian banks have, as a standard practice, concealed their identity by stripping their names from transactions so their involvement cannot be detected. In addition, when Iranian assets have been targeted in Europe by international sanctions programs, branches of Iranian state-owned banks there have taken steps to disguise the ownership of assets on their books to protect those assets from future actions. Non-sanctioned banks also have stepped into the shoes of sanctioned banks in order to evade international sanctions. We have used this conduct to our advantage by exposing it and making it public, reinforcing the private sector's pre-existing fears about doing business with Iran. In this way,Iran's own evasion and deceptive conduct is increasing its isolation.

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