tv Hearing Focuses on Impeding North Koreas Access to Funding CSPAN September 14, 2017 3:46pm-5:49pm EDT
conversation with the speaker or the president or with the d.r.e.a.m.ers that it is going to be the d.r.e.a.m. act sponsored by congresswoman lucille allard that on september 25th or 26th will morph into a bill by the chairwoman of the hispanic caucus into a discharge petition. that is what that is, uh-huh. >> the house financial subcommittee held a hearing on the proposed legislation to strengthen the u.s. sanctions against north korea as well as some of the can countries suspected of laundering money for north korea, and two of them former federal advisers testified on what provisions the legislators will have to boost the efficacy of the not just u.s. sanctions, but those from the united nations security council and this is about two hours
hours. and now for us to declare a recess of the committee at any time, and we will have five legislative days to submit extraneous materials to the chairman for inclusion into the record. this hearing is entitled a legislative proposal to impede north kr north korea's access to finance. i recognize myself for five minutes to give an opening statement. today's hearing will examine draft legislation to impose secondary sanctions on foreign banks whose business supports the north korean regime whether directly or indirectly. by encompassing virtually all of
north kr north korea's economic activity, these measures would are represent the toughest financial sanctions yet directed at pyongya pyongyang. this the means going after cole, petroleum, textiles and minerals as well as north korean laborers abroad. in addition, the bill would incentivize greater compliance with the u.n. sanctions by leveraging the vote at the international financial institutions where certain countries with the lax enforcement go to seek assistance. this bill puts those countries on notice. this proposed legislation has been informed by the committee's ongoing work on north korea as well as the panel's ongoing work of the sanctions effectiveness. needless to say, north korea's sixth nuclear test on september 3rd, coupled with the repeated launching of the intermediate and long range ballistic missiles undermines that more must be done. as a result, the legislative
draft we will be looking at lays out the choice. foreign banks can either do business that benefits north korea or othey can do business with the united states, but they cannot do both. as many of us here today are aware, this is a similar approach to the one taken in 2010 gaiagainst iran which help to compel the ayatollah's help to negotiate over the nuclear progr program, and while there are differences of opinion of how successful the negotiations were, there is consensus that in the absence of the secondary sanctions affecting banks, teheran would have been far less incentivize ed incentivized to engage in the talks. the focus on the banks is especially important given how north korea has evaded the sanctions in the past. as dr. john park of harvard's kennedy school testified before this subcommittee in july, the north koreans have moved much of the trading activity offshore using third kcountry brokers an front companies.
the spector of financial sanctions may concentrate the mi mines of foreign banks so that the work of dr. parker and others will create fewer option involvement. having said this, this bill would expand the scope of our sanctions to encompass even actors engaged in conventional trade with the north. given north korea's unchecked hostility, broadening our efforts in this way appears essential. nevertheless, china's response to stronger sanctions has been cited as a concern as the county accounts for an estimated 90% of north korea's trade. some have therefore argued that harsher sanks now may damage cooperative efforts with chinese leaders to curb north korea's weapons' program. but i would submit that those critics should be far more sensitive to a quarter century of failed multiological efforts
to reign in pyongyang. there comes a time when caution or quote strategic patience as one administration phrased it, becomes a euphemism for self delusion. as this subcommittee learned from his hearing in july, if china is not part of the solution to north korea, it is part of the problem. chinese officials have fallen short on enforcing u.n. sanctions that beijing itself has signed on to. and as the u.n. security council talks following the north's sixth nuclear test have demonstrated, it is still unclear if china is committed to meaningfully tackling the north korean threat. finally, we should acknowledge that kim jong-un's eagerness in forcing the withdrawal of u.s. troops from the region may not be entirely inconsistent with chinese interests. for all of the breathless talk of china exerting influence around the globe as a rival to
u.s. power, we're curiously asked to believe that its hands are tied when it comes to a small economically dependent state next door. well, if chinese officials' hands are tied, then we should proceed with secondary sanctions so that their banks can assist international efforts to cut off north korea's access to finance. if on the other hand china could do more than it has, then secondary sanctions may finally inspire it to do so. i want to change the witnesses for appearing today and i look forward to their testimony. the chair now recognizes the rairnging member of the subcommittee, the gentle lady from wisconsin gwen moore for five minutes for an opening statement. >> thank you so much. in the absence of our ranking member of the full committee, i would like to share some thoughts that she's committed to paper regarding today's hearing. i want to thank our witnesses for joining us to discuss the
legislative proposal aimed at expanding the united states sanctions against north korea. and pressuring the international community to enforce those restrictions as well. the situation in north korea is the most urgent and dangerous threat to peace and security that we face. and it's one that grows more dangerous as north korea aggressively pursuing the capacity to extend its nuclear reach to the united states cities. in fact, there are no good options for dealing with north korea. most experts agree that a pre-emptive strike at this point on north korea would be reckless beyond belief. of the least bad options, i like the idea of pressing china to lean more heavily on north korea and i like the idea of tougher sanctions. but we should not confuse either of those things with a coherent
strategy and we should be clear up front about our goals and objectives and what we expect sanction to accomplish. any ratcheting up of sanctions must be coupled with aggressive diplomatic engagement of the united states and within a framework that would entail nuance. this would require unprecedented policy making capacity and coordination across the united states government as well as skilled policy coordination with our allies. it concerns me, therefore, that just as this crisis is accelerating, our diplomatic capabilities, which opens channels for crisis communication and reduce the risk of miscalculation are diminished. not only are u.s. ambassadorships to japan and south korea still vacant, the president has yet to nominate a permanent assistant secretary of state for east asia and pacific affairs. the legislative proposal before us today rightly recognizes the
need to exert massive and immediate pressure on the north korean regime. and importantly enlist china and others in this effort. such a powerful approach towards sanctions, however, that have the capacity to reverberate throughout the global economy and present potentially disaster rouse unintended consequences must also allow for careful calibration in its implementation. we look forward to the witnesses views on the proposal before it as well as your views on how the u.s. can most effectively use its leverage to contain the alarming danger north korea presents. and i reserve my time. >> the chair now recognizes the gentleman from washington, mr. heck, for an opening statement. >> thank you, mr. chairman, and ranking member moore for the time and thank you all for convening this important hearing. responding effectively to north korea's provocations will
require a variety of tools. credible deterrent and defendant alliance management, skillful diplomacy and the careful design of nonmilitary sanctions. here in the financial services committee we have jurisdiction over only one of those tools, sanctions. but i believe it's important that we always keep the broader picture in mind as we work to perfect the discussions that have been put forward today. even with perfect compliance i believe it is very difficult to stop any country from pursuing a course of action which it views as vital to its survival through ang sanctions alone. these challenges are greater when dealing with a regime like north korea. a regime which relies on force to stay in power, a regime which has demonstrated indifference to the incredible suffering of its own people, a regime which can easily make sure its nuclear program are the last to feel any pinch. done right, however, sanctions can make further north korean
advances slower and more costly, giving more time for policy tools to work. and i look forward to hearing from our distinguished witnesses about how this proposed draft fits into a larger strategy. my constituents in the south pew gentleman sound who include the service members at the base are counting on us to respond to this crisis in a responsible manner. so too are our allies, like south korea and japan and in asian pacific region which has enjoyed decades of peace and prosperity in large part because of the credibility of u.s. security guarantees and a broader commitment to the region. we cannot afford to fail them. we have to get this right. and i'm hopeful that with steady american leadership working in a bipartisan manner we will get this right. i yield back, mr. chairman. >> the gentleman yields back and because of the significance of the issues under consideration
in this hearing and the importance of the north korean threat to our homeland and to the interests of our country, a number of members from the, from the full committee have expressed interest in participation in today's subcommittee hearing. and so i ask for unanimous consent that members on the full committee but not on this subcommittee may join in this hearing. without objection, that is ordered. today we welcome the testimony of a distinguished panel of witnesses. first david albright, the founder and president of the institute of science and national security. he's written numerous papers on the se keet nuclear systems throughout the world. published assessments in numerous technical and policy journals, including the bulletin of the atomic scientists, scientific american, science and global security, washington quarterly and arms control today. mr. albright has coauthored four
books including the world inventory of plutonium and peddling peril. how the secret trade arms america's enemies. mr. albright worked as a seen jr. staff scientist at the federation of american scientists and as a member of the research staff of princeton university center for energy and environmental studies. anthony ruggiero spent 17 years in the u.s. government. most recently he was a foreign policy fellow in the office of senator marco rubio and was the senior adviser on relations relating to the relations committee. mr. ruggiero as serveg as deputy director and office of global affairs in the office of financial crimes. prior to joining treasury, he spent over 13 years in various capacities at the state
department, including as chief of the defensive measures and wmd finance team. he was the no proliferation adviser to the six party talks in beijing and participated in u.s.-north korea meetings following the identification of a primary money laundering concern. he's served as an intelligence analyst kofrl north korea missile programs. bruce cling ner specializes in korean and japanese affairs as the senior research fellow for northeast asia at the asian studies center. he's a freak commentator. mr. cling ner's analysis and writing about north korea, south korea and japan are informed by his 20 years of service at the central intelligence agency and the defense intelligence agency. from 1996 to 2001 mr. cling ner
was cia's deputy division chief responsible for the analysis of political, military, economic and leadership issues for the president of the eyes and other senior u.s. policymakers. in 1993 and 1994 he was the chief of the cia's korea branch which analyzed military developments during a nuclear crisis with north korea. elizabeth rosenburg is a senior fellow and director of the energy economics and program at the center for a new american security. in the capacity she publishes and speaks on the national security and foreign policy implications of energy market shifts and the use of sanctions and economic state craft. from may 2009 through september 2013 ms. rosenberg served as a senior adviser to the assistant secretary for terrorist financing and financial crimes and to the undersecretary for terrorism and financial intelligence. in these roles she helped to develop and implement financial
and energy sanctions. she also helped to formulate anti-money laundering and counterterrorism financing policy and oversee financial regulatory enforcement activities. each of you will be recognized for five minutes to give an oral presentation of your testimony. each of your written statement wills be made part of the record. mr. albright, you are now recognized for five minutes. >> chairman barr, ranking member moore and other members of the committee, thank you for the opportunity to testify today. north korea's september 3rd nuclear test, its sixth overall and by far the largest in terms of explosive yield demonstrates its resolve and commitment to developing a nuclear arsenal able to strike its enemies. during the last few years north korea has embarked on an intensive nuclear weapons testing production campaign that's included the construction and operation of many nuclear facilities, three underground nuclear tests and tens of ballistic missile launches.
its apparent goal is to have tens of nuclear war heads of many varieties meated to ballistic missiles with ranges stretching to intercontinental distances. few doubt that north korea can launch nuclear tipped ballistic missiles. there is rightly more skepticism that north korea is able to deliver a nuclear war head to an american city but it is making rapid progress toward that goal. i continue to believe that north korea can be peacefully denuclearized. however, substantive negotiations appear unlikely unless north korea changes its path. given north korea's own willingness to enter denuclearization talks and its provocative actions, there's little more. the u.n. passed on monday in an important step in that direction. a near term priority is to far
more effectively isolate north korea from the regional and international financial system. a central problem is that many countries are not enforcing sanctions effectively or in some cases willfully disregarding them. punitive measures are needed to encourage come pliengs and deter violations. additional u.s. legislation that supports that goal is useful. north korea appears to target entities and persons and engage in activities in violation of u.n. security council sanctions in tens of countries with weak and nonexistent trade systems, poor financing controls or higher than average corruption. although a range of remedies are needed to fix the performance in general of many of these counties, the creation of punitive measures may be an effective means to accelerate more compliant behavior in the short term among a wide range of
countries where entities and individuals see north korea as a quick way to make money or obtain military or other goods cheeply or unavailable elsewhere. dealing with china's trade of north korea is in a different category. north korea has depended on illegal procurements for decades for its nuclear programs. and as the sharm pointed out, they've got offshore quite successfully to acquire those goods. and they don't just acquire them in the country such as china. they're able to get the goods from the united states, europe and japan by operating in china and exploiting china's weak export control and sanctions legislati legislation. although china is improving its export control laws with, beijing has not done an adequate job of enforcing those laws. and i provided several examples in my testimony.
china remains north korea's central perhaps on witting supply conduit for its nuclear weapons program. and one of the priorities is to change that. the trump administration's efforts to sanction chinese and for that matter russian-owned companiesance individuals that significantly support north korea's weapons programs are a positive step. but unless china and russia show dramat dramatic improvements, the united states should go further and sanction major chinese and russian banks and company for any illicit north korean dealings. both countries have faced too few consequences for turning a blind eye to the sanction bustsing activities of their citizens and those in north korea in using thar economies for nefarious purposes. north korea has a diplomatic path out of its isolation and sanctions if it negotiates a fuel verify denuclearization of
its programs. any such negotiations would need to repair past mistakes where north korea was tiebl evade inspections, continue expanding its nuclear programs. an agreement would also need to allow unprecedented inspections and access allowing for a full accounting of the program as part of a denuclearization process. although this process -- prospect seems unlikely in the short term given north korea's current trajectory. it is important to keep this goal available as a matter of u.s. policy in case increased sanctions can convince north korea to negotiate in earnest. likewise the trump administration should continue to make clear that regime change is not the goal. and particularly if the goal was to seek cooperation from china that becomes more important. >> the gentleman's time as expired. we'll look forward to the remainder of your testimony during the question and answer system. mr. ruggiero you're now
recognized for five minute. >> thank you chairman barr, ranking member moore and distinguished members of the subcommittee. thank you for the opportunity to address you today on this important issue. often u.s. policy toward north korea gets stuck in a cycle whereby a north korean provocation is met with a strong american rhetoric or a token increase in sanctions. a pattern repeated over and over. if we don't break this cycle the kim regime can keep distracting the united states with his repeated provocations. we must ensure that the u.s. response to every north korea provocation advances our goal of denuclearizing north korea. some experts call for the white house to negotiate a freeze of north korea's nuclear program with claims that it will reduce the threat and eventually lead to denuclearization. but we have seen this movie before and its ending is not encouraging. north korea has made clear it has no interest in denuclearization. to the extent that pyongyang is interested in negotiations, it's
only for the purpose of extra extracting concessions and engs change the programs that it will quickly violate. in testimony before this sub committee in july i noted that u.s. sanctions did not have a sirius impact because they insufficiently targeted enough of pyongyang's international business nor have they targeted nonnorth korea. forgnat lit that appears to be changing. the trump administration has started to sanction north korea's international business partners. since march 31st, the u.s. has sanctioned 43 persons of whom 86% operate outside north korea and 54% are non-north koreans. but this work is not done. as i note, recent actions against north korea reveal three methods pyongyang uses for financing prohibited activities. in slide one, the first method starts with north korea revenue in china following the sale of
commodities brokered by chinese firms and individuals. the payment moves through a north korean bank, from there moving left to right, from there the funds move to a chinese company and then a front company that accesses u.s. banks. this only happens because the u.s. banks are tricked into processing the north korean transactions. this is how payment is made for the original item in u.s. dollars. this method is important to highlight with recent reports that chinese banks have cut off north korean accounts. the method relies on a ledger system between north korea and china where the chinese firms and individuals hold these bank accounts. slide two, please. the second method was identified by the justice department based on information from an unnamed north korean defeker. chinese entity one on the left side of the slide, chinese entity one owes money to north korea entity one.
why north korean entity two owes a similar amount to chinese entity two. the entities pay each other given the difficulties of moving the money over the border. slide three. the third method used by a russian company to receive u.s. dollars for shipment of gas oil to north korea. again this is very important given the new resolution that restricts energy sales. a u.s. bank would not process this transaction between sanctioned party to avoid this scrutiny, the front companies were created in singapore to on secure the nature of the transaction allowing almost $7 million in payments for this transfer. all three methods show that north korean suppliers prefer u.s. dollar payments. providing a key vulnerability that washington with exploit. this is why it's crucial for the trump administration to issue fines against chinese banks that are facilitating north korean banks. and matching the successful u.s. policy as the sharm said used to
pressure european financial institutions that were facilitating iran sanction violations. the fines will prompt chinese banks to increase jute any of north korea related transactions. to be clear, nongovernmental innings tugss here in washington can find the transaction bs, i'm confident that the largest banks in china can find them too. chinese banks need to do more or face severe consequences. in the meantime it is important to remember that there are other political consideration at play. pyongyang is trying to decouple the united states from our closest allies in south korea and japan. the kim's regime ultimate goal is not a suicidal nuclear attack on the u.s. homeland but rather using that threat to bolster pyongyang's effort to reunify the korean peninsula. a sanctions approach that focuses on north korea's financial activities has the best chance of success. thank you again for inviting me to testify and i look forward to
your questions. >> thank you. ms. rosenberg, you are recognized for five minutes. >> thank you chairman barr, ranking member moore, distinguished members of the committee. i appreciate the opportunity to testify before you today. north korea's alarming and dangerous recent ballistic missile launches and itself sixth nuclear test highlight the need for stronger pressure on the regime to limit the proliferation activities and cease provations. sanctions should be a core part of the strategy along with complimented by diplomatic engagement to move north korea toward stability. i applaud the work of congress for the sanctions this past summer to tighten financial pressure on north korea. however, nonenforcement innovation is dwraifly concerning particularly when it comes to china. for some observers the lack of sanctions enforcement is an
immediate indication that the current sanctions framework is inadequate and that the united states should make secondary sanctions shock treatment mandatory to force other country to comply with sanctions. current sanctions authorities are already very aggressive to apply pressure on north korea and its international enablers, i support the effort of this committee to consider ou mandatory second care sanctions should be deployed to enhance pressure. we must not forget that secondary sanctions require delicacy in their application. they may be counter productive if they're so aggressive that u.s. partners become utterly defiant, uncoop ty and create invasion schemes and impose economic punishments on u.s. firms abroud or a trade war. avoiding pitifuls and the use of secondary sanctions is primarily the responsibility of u.s. congress must oversee aggressive
sanctions implementation but give the administration adequate responsibility. even in the framework of the mandatory sanctions to impose the measures and manage their consequences for the united states and its partners. in addition to sanctions, u.s. policy leaders must deploy another form to target north korea pushing for rigorous risk based approaches to global banks for global banks to identify and curtail proliferation finance. currently only large u.s. banks and some major european and asian banks holistically pursue proliferation finance leaving all other global banks significantly vulnerable to abuse by north korean or other proliferators. for these other global banks weak supervisory frameworks and expectations, lack of knowledge and resources and insufficient prior tie dags of the threat means that they often take a ma
c mechanical approach against entities sanctioned by u.n. or national government, sometimes but not always include the u.s. this presents obvious opportunities for proliferators to use companies or proxies to get around limited controls outside of major flannel institutions and we've heard that described by some of the examples offered by my colleague. the financial action task force. endorses and approach toward proliferation finance along the lines of checking customers against sanctions list. instead of a risk-based evaluation of suspected proliferation conduct or proliferation type yolgs. this limited approach is inadequate and we need stronger leadership from the united states to clarify that global banks must take a more holistic risk based approach for proliferation finance and there must be stronger public/private information exchange. and in my written testimony i
outline several specific points in response to your legislative discussion draft and some ideas for additional legislative measures. to briefly summarize a few items, i support your tough approach on secondary sanctions and encourage the use of meaningful waiver provisions to manage consequences. i urge you to consider other way to provide additional support for the treasury and state departmentsance the u.s. intelligence committee to expand the group of exparts crafts and enforcing u.s. sanctions and offering technical assistance to countries related to sanctions enforcement. finally congress should mandate knew supervision requirements for u.s. banks extending to their foreign branches, subsidiaries and correspondents. facilitate greater public-private information sharing on this topic to impede the proliferation threat. thank you for the opportunity to testify and i look forward to
answering any questions you may have. >> thank you. and mr. cling ner, you're now recognized for five minutes. >> chairman barr, ranking member moore and distinguished members of the panel. it's an honor to be asked to speak before you. although the north korea nuclear missile programs are indij yous, it requires access to technology. and hard currency. pyongyang maintains covert access to the national banks system through a global array of networks. most of the foreign entities that cyst the regime are u.s. dollars and going through the u.s. banks. while the financial measures on north korea may apreach overwhelming, a closer examination reveals several encouraging characteristics. north korea uses a limited number of trusted individuals to run its covert nec networks. although the shell companies can be changed, the individuals responsible for establishing
them have remained often for years. by embedding their illicit activities into the global financial network, north koreans leave behind a digital trail. as a nongovernment organization using only publicly information discovered, while china accounts for 90% of north korean trade, the trading system consists of 5,000 countries. those firms are among a smaller number of large scale trading firms so that the top ten importers control 30% of the market. and those trading firms themselves are controlled by a smaller number of individuals. as much, the north korean network in china is centralized, limited and therefore vulnerable. therefore targeting a relatively small number of strategic choke points can have a disruptive ripple effects impacting multiple networks across multiple countries. every law enforcement action
could induce remaining components of the network to change routes, bank accounts and procedures to less effective means. even legitimate businesses will become more fearful of being entangled in illicit activity and more fully implemented due diligence measures. this reduce the rev sources, increase strains on the va jet stream and generate internal pressure on the regime. sanctions enforcement must be adaptive. but an north korea, law enforcement agents didn't keep pace. when north korea shifted to chinese brokers, the u.s. and u.n. agencies should have included them on sanctions list but lagged. to raise the cost of north korean defines, the u.s. must go beyond sanctions and diplomacy to include a full court press to economically isolate north korea from the international
community. for too long success i u.s. administrations have used sanctions as a calibrated and diplomatic response to north korean provocations rather than a law enforcement measure defending the tus financial system. the u.s. should target any entity suspected of aiding or abetting north korean missile and arms development, money laundering or the import of luxury goods. beijing has not paid a price for turning a blind eye to north korean proliferation and illicit activity occurring on chinese saw. washington has long cowered out of fear of undermining perceived assistance in pressuring north korea. the enhancement act mandates secondary sanctions on third county banks and companies that violate u.s. sanctions and u.s. law. the u.s. should penalize all
penalties including chinese financial institutions and businesses that trade with those on the sanctions list, export prohibited items or maintain correspondent accounts for north korean entities. washington should impose significant fines on china's four largest banks at a commiserate level to the $12 billion dollars in fine the u.s. leveed on european banks for money laundering for iran. and should designate medium or small chinese banks. in conclusion, the most progress mattic u.s. policy a comprehensive integrated strategy using all of the instruments of power to increase pressure of pyongyang's repeated defines, to expant panned operations against the regime, to highlight and condemn pyongyang's crimes against humanity, and to ensure that u.s. has defenses against himself and its allies. sanctions require time and the
political will to maintain them in order to work. sit a policy of a slow python constriction rather than a rapid cobra strike. thank you again for the privilege of appearing before you. >> thank you for your testimony and the chair now recognizes himself for five minutes of questioning. earlier this month russian president vladimir putin argued that the potential for north korea sanctions to be effective remains limited. he claimed the north koreans would prefer quote to eat graz unquote than give up their nuclear weapons. how would you respond to those who claim that north korea can always weather sanctions, that sanctions are not effective means of providing substance and meaning to our diplomacy and that the kim regime will never care if its economy will suffer in order for him to advance his weapons. and i'll ask all of you to briefly respond to that question. >> yeah, i think sanctions can have a very big impact on north
korea. partly for what you've been focusing on. they're not implemented. there's a lot of room to really press north korea to make -- to change its behavior. i think it's extremely valuable tool. i think part of the purpose of sanctions, i'd like to see north korea eat its nuclear weapons. i mean if that's what they choose. sanctions should start to have a cost and i think that can actually be done. and particularly in north korea, i think it's more vulnerable because it's surrounded by very big powers. this isn't like india and pakistan or even iran. north korea is a relatively weak state that is surrounded by very powerful neighbors who do increasingly, even in the case of russia, do not like its behavior. >> when you answer this question, could you also address the issue that of course north koreans have been very creative in using third-country brokers as you testified and front
companies to mask their illicit transactions. and so as you answer the question, could you address our draft bill and whether you think that banks in third countries, above all china, possess the capacity to identify the brokers, middlemen and front companies. >> on russia i would start with perhaps president putin should focus on his russian companies that are facilitating north korea sanctions of asia. the ones that are working with north korean proliferation entity called tan goon that was designated by the u.n. in 2009 that the u.s. sanctioned twice in the last couple of months. perhaps if he hads his own companies implementing sanctio s sanctions, they would do better. i would go back to 2005 in my experience at that time. the bank of delta asia was very effective in targeting north korea's financial activities. there's a difference here
because north korea is frankly not stupid enough to concentrate all of their financial activities in one bank. in terms of being creative, certainly this people criticize sanctions because it's game of wham a mole awhac-a-mole. but they're not invisible. as mr. cling ner said, the largest banks in the world can find them. that's the part i would highlight amongst other things in the legislation. is due diligence. in particular chinese banks and u.s. banks looking for these activities with that is the problem, that is the serious problem here. >> ms. rosenberg. >> i would add that china has a variety of strong reasons, strong interests ensuring there's no money laundering occurring in their own economy, not just related to their support or relationship with north korea. so yes, i agree that it's -- excuse me, china has the
capability to go after, investigate and take action on north korean money laundering or the use of front companies in the chinese economy. and if china, a country with extensive and sophisticated capital controls and has taken measur measures, including installing facial recognition cameras at atms in order to manage the flow of currency outside of china, then they can do a lot more to recognize some of these trusted agents of the north korean government that change their names and change their legal entities in order to launder money through china. >> and if you could answer the question and given how north korea has evaded sanctions in the past, i wanted you to specifically address your quote that every u.n. security council resolution is an incremental step forward. we have incremental law
enforcement because we get what china allows us to have. if the security council resolutions are incremental can we afford to rely only on those or do we need to do more in congress? >> i would tell mr. putin that sanctions have several objectives. they're enforcing u.s. law, imposing a penalty or a pain on those who violate our laws, they put in place measures to make it harder for north korea to import items for their programs, wuts in place a tougher proliferation measures and we hope with all of the instruments of national power it gets north korea to abide by resolutions and laws. i believe in doing the right thing, even if it's difficult, rather than throwing up our hands in despair i believe in rolling up our hands and getting to work. >> thank you. >> on implementation -- >> the time has expired. i'll have to yield to the gentleman from illinois at this point, mr. foster. maybe you can follow up during the remainder of the time. >> thank you, mr. chairman. and thank you to our witnesses.
the financial sanctions that we're talking about have two -- seem to be having two strategic goals. first is to cut off access to the technical components necessary for the development of what looks to be many dozens of deliverable nuclear weapons in the next several years. what is the rough estimate -- it has been widely reported that there's a lot of indigenous capability to make components inside north korea at this point. what is the rough amount of -- what is the dollar figure, a decent ballpark estimate for the dollar figure for how much they have to purchase outside their country to execute that program that everyone is worried about. >> i must confess, we don't -- when we watch their business of acquiring equipment and we focus mostly on the nuclear weapons program, they're buying things in orders of millions of dollars
and they're buying a lot. what they pay -- >> it's -- for example, it's a small fraction of a billion dollars in. >> yes. they also have an infrastructure that's been in place for 40 or 50 years that they've been paying for incrementally. while i see they seem to have no shortage of cash to buy things for the nuclear program. it's not huge amounts of money that they're using. >> but in terms of trying to understand how -- what sort of leaks we could tolerate in a sanctions regime designed to shut down their nuclear program, the answer is it would have to be really prohibitively tight. >> but these objects are -- even in the case of iran where they were put in place more deceptive practices in their procurements, the companies, governments are pretty good at detecting these things. we get a pretty good readout on a lot of what north korea has acquired over the years. and so -- and we use that both
strategically to understand their program and where it's going but also tactically you get a lot of information about the networks that you can then act on. i mean the problem has been china is not cooperating. so a company in -- let's say a german company in china is getting help from its own government to try to defeat the north korean efforts but the chinese government isn't doing much and they're the ones that should be doing the most. >> so the goal rather than to cut off money, is to actually increase information and increase our shaming ability towards -- >> well, but if you can -- once you identify the goods, you can move to cut off the financing. they're gve got to pay for it. so i think these things build upon each other. and i think -- i would agree that going after the money is the way to hurt them most. >> well the chinese are well known to be sort of past masters
at shuffling around money in black markets. if you look at the crypto currencies alone are enormous compared to thement amount of fund transfers we're talking about having to detect. the second part of the -- the second strategic goal is actually to put pressure on the general economy. you mentioned fuel, luxury goods things like that. and the strategic goal there seems to be to put the fear in the leadership in north korea of some sort of general unrest. and my big worry on that is if that comes to fruition it would be interpret as a decapitating strike or something like that that may trigger even a preexisting plan to retaliate certainly against our allies, which as you mentioned are very hard to defend against even their current nuclear capability. so i was wondering if you have any thoughts on that, on the
sort of risks that we're heading for. >> the question was directed at me? maybe someone else should answer it. >> ms. rosenberg. >> in addition to those two goals i would add a third, a primary goal for congress in contemplating secondary sanctions now. the third goal is putting pressure specifically on the foreign or third country enablers of north korea's either specific proliferation programs or their economy more broadly. so going after china in particular, chinese government entities or private institutions, banks and companies to encourage or compel their greater activity to advance your, as you outlined, the goals one and two. >> one of the functions of the pressure tactics along with increased information operations and ensuring sufficient defenses is to put greater pressure on the regime stability.
we want to make kim jong-un fearful if he continues down this path. that said i disagree with those who advocate regime change through a strike, special fourss or limited military strikes or a general military invasion. i think we're in a long-term game. it's like the cold war strategy against the soviet union. we're seeking to undermine. >> thank you. >> the gentleman's time expired. the chair now recognizes the vice chair of the subcommittee, the gentleman from texas, mr. williams. >> thank you, mr. chairman and thank to you to all of you witnesses for your testimony this morning. north korea continues to destabilize southeast asia and threaten the safe uty of the united states and our allies. the aggression shown by kim jong-un is equally concerning as the methods he uses. as the united states develops its strategy to curb the threat,
we must consider the to fouprofd effect that other nations have. kim has proven unresponsive to sanctions imprososed by the wes. nations unwilling to cut ties with rogue regimes suppress their people and threaten global security should not be in the business with the united states of america. with that, mr. cling ner, can you explain the decision that china is faced with when determining what to do business with the united states or continue financial and technological support with north korea? and foururthermore, is this a geopolitical investment for china or is their investment so substantial that there are severe financial implications to cutting them off? >> what i would focus on is those entities that are acting against the u.n.'s resolutions, as well as international and u.s. law. so entities that are violating
our laws by misusing the u.s. financial system, money laundering and other criminal acts or that are engaging in facilitating the north korea nuclear missile program. so i would focus on more of a law enforcement basis of going after those entities, banks, businesses, individuals, that are violating laws and resolutions. >> okay. another question. let me follow. if the dprk eventually falls, what do you believe whether be the fate of the north korean people who have been exposed to decades of propaganda and oppressi oppression. and do you believe they can adapt to a new way of life or a new forms of governance? >> i think the answer really sir is we don't know. they have been isolated for decades. they have been fed a daily diet of propaganda that said increasingly information from the outside world is getting in. so whether they believe the propaganda is a question we
debate amongst others. i think it varies by individual and certainly the access they have to outside information. that's one of the reasons like with east europe and the soviet union we're trying to get information into the regime as much as we can to have the citizens question the propaganda that their government gives them. >> thank you. mr. albright, can you discuss the level of nuclear cooperation that north korea has with other countries and who outside of china do you believe to be of the greatest concern? >> north korea had considerable nuclear cooperation with syria, including essentially building a nuclear reactor which was bombed by israel in 2007 prior to its operation. after that it's been much harder to track any nuclear cooperation. there's suspicions that something could happen between north korea and iran and that's
a very, well, very active area. but as far as i know, nothing substantial has been found. during the six party talks north korea committed in the singapore minute not to engage in proliferation. obviously we don't believe that is true. but i think it's on notice that if it does engage in significant cooperation, it will be incredibly significant and can trigger or cross a red line that would be very hard for the united states not to take very draconian action, including military action if it involved plutonium weapon grade uranium or a nuclear weapon. >> okay. thank you. and mr. ruggiero, can you discuss the ways in which the u.s. government exposes and then targets money laundering activity related to dprk and if we impose secondary sanctions are you confident we can identify illicit transactions
and stop them? >> well, i think what we're seeing now, in particular with china, is that the trump administration is using a combination of the justice department tools and the treasury department tools. on six occasions since late may they have used those tools to target money launders in particular those who are trying to do financial transactions throw the united states, whether it's designations, requests for asset forfeiture or the new one was what's called damming warrants which were setting up in u.s. banks understanding that chinese banks were going to do the transactions through u.s. banks. we need more of that. we need nongovernmental organizations exposing these networks and we need the u.s. government in particular putting the right amount of resources like we had on iran on this problem. and i'm not sure that that latter part is happening yet. >> thank you.
thank you, mr. chairman. >> the chair recognizes the gentleman from california, mr. sherman for five minutes. >> mr. chairman, i want to commend you on this bill draft. i look forward to working with you on it. i look forward to cosponsoring it. >> thank you. >> but i've been doing this for 20 years, and for 20 years -- i want to applaud you for getting these witnesses here. i've heard them often. they have enlightened me. for 20 years i've sat on the foreign affairs committee and administration after administration expert and expert has come forward and we've gone from no nuclear weapon in north korea to hydrogen bombs and near icbms in north korea. what is less well known is that we've seen a 50% increase in the real gdp of north korea even while this regime is subject to sanctions. and then we're told we're going to change this with quote
unprecedented sanctions, which just means a little bit more than what we've been doing before. now, hydrogen weapons, icbhs, 50% gdp growth. some would say our policy has been a failure. but viewed another way, our policy has been a tremendous success, a success for the political class in washington. we've been able to tell americans we're doing all we can to protect them. and don't blame us. and at the same time we've avoided doing anything that's difficult for the political class in washington. what would those two difficult things be. the first would be to move beyond company sanctions to country sanctions. because these gentlemen and the lady are experts in how we can tell china go after this bank instead of that bank. but as long as china wants north korea to be relatively stable, they'll find a bank that will do business with them or they'll
set one up, you know. and yet company sanctions -- country sanctions would be very difficult for the political class here in washington because that would really concern big companies who would wonder whether there is a risk to their supply chain. the other thing we haven't done is set realistic objectives. we keep saying we're going to get the regime to give up all of their nuclear weapons. he's not going to give up all of his nuclear weapons. and if the thought his regime was falling, he would use them. so i want to commend you, mr. chairman, for the more realistic objective you have in this bill. because you sun set it upon verifiable limits on the nuclear weapons program. we might achieve those. so you've done something that those who spend their time on foreign affairs have been unwilling to do.
and you've taken a very constructive step. but i've, i've seen this go on -- let me ask mr. albright. if kim jong-un really thought his regime was going down, would he shrug his shoulder's engo to trial or would he use his nuclear weapons? >> if there was a conflict going on, i would imagine he would use them. if he's knocked off by some of his military generals, they very well may not use them. >> we could hope that they are saner and more peaceful than he is. >> i think they would be moving to survive and i think they would want to accommodate the neighbors. >> i will point out saddam's people didn't do that to him. gaddafi's people didn't do that to him. and many of the people around saddam and gadhafi would have been worse than their leader.
let's -- i've got -- how is the north korean economy grown by 50%? i'm trying to achieve 50% economic growth for my country -- in spite of all of these sanctions, ms. rosenberg or anybody else. >> well, for -- the first best answer to that is because they've been allowed to do that by a broad culture of noncompliance and nonenforcement with sanctions. >> yeah. >> so when active -- >> and even if there were no sanctions, 50% economic growth -- i do want to put this in context. their economy is only $15 billion today. they use as much oil in the whole country as 150 gas stations. i got 150 gas stations on ventura boulevard. this is -- they grow from a very small base and they are still very small which makes the
whac-a-mole a little more difficult because we're dealing with relatively small moles. i yield back. >> the gentleman yields back. the chair recognizes the gentleman from north carolina, mr. pittenger. >> thank you, mr. chairman. and thank each of you for your expert witness today and for the very important role that you play in these areas. as you may know, i authored an amendment to mdaa that was adopted, it would prohibit the defense department from doing business with chinese entities that provide material support to north korea cyberattacks. earlier this year i also led efforts to pun lish the chinese government affiliated firm zte located in the usa for violating export controls and selling embargo technology to the north korea government which resulted in a billion dollar fine. in your opinion, should by amendment cam churpture zte?
is this the appropriate response. >> and wouon the amendment in t anything that -- anything that suggests that firms need to do better at identifying north korea transactions and north korea companies and i think and amendment like that and the bill that's on the floor or that is proposed by the committee, the main goal is diligence and making sure that dod and others do not do transactions with companies in china. on cyber i would just point out that there's been some focus on north korean cyber. there have been some reports recently this month -- or this week, zuexcuse me, that north korea is looking at bitcoin and other cyber technologies to
avoid sanctions, including trying to steal bitcoin i believe from south korea. that's a different turn on their list of activities. >> do you believe the fines are a effective deterrent? >> zte is a good case. everybody would equate it with a medium sized chinese bank. and as you well know but others might forget, zte actually agreed to that fine and it was because they were caught doing the transactions. and i would also point out that there are some north korean front companies that are caught up in the zte -- >> you think it will be a deterrent? >> i think against zte and for the chinese leadership. look, if you're a senior official in the c suite of a chinese bank, you got to be worried right now. >> sure. what other entities like zte provide the most material
support to north korean cyberattacks? >> well, i think a lot of the north korean programs as i said before are indigenous but they need technology -- >> any specific ones you have in mind? >> i don't know specific companies right now, sir. >> would you support blocking those firms from doing business with the u.s. 0 are the department of defense? >> i think you should do business with north korea or have access to the u.s. financial system. that is a choice that companies should make. >> from a strategic standpoint whenever we discuss responses to north korea as you said earlier, we're really talking about u.s.-china policy. how can we better compel the chinese government to work with us on this issue? >> i think we need to separate law enforcement from diplomacy. we could continue on the u.n. path and cajoling and imploring and pressuring china to do more to implement the required u.n. sanctions but we don't need
chinese permission to enforce u.s. law. we make clear we're not going to negotiate away our law enforcement. so we have had incrementally better u.n. resolutions but we should not incrementally enforce u.s. law. >> if you could pull your mike up closer when you respond. could you elaborate on data sharing between the public and private sector and what we can do and what type of enhancement and capabilities that that could provide us and assist our efforts? >> sure. thank you for the question. in my written testimony i outlined a couple of ideas that i think would be a goods opportunity for congress to take action on increasing data sharing among financial institutions. so pursuant to 314b of the usa patriot act offering -- instructing the administration to offer some new guidance and adaptation in order to
facilitate more information sharing between financial institutions within u.s. jurisdiction. that will also transfer to their -- >> could this be done -- if you don't mind. could this be done be protectin privacies while enhancing capabilities? >> i believe that's feasible. to be sure not an easy, walk in the park. there's a lot of serious civil liberties and privacy considerations here, but if we can pioneer this as it has been done for the share iing of terrorism financing information, then it can and should be done for proliferation financing as well. >> thank you, my time has expired. appreciate your comments. >> the chair now recognizes gentleman from arkansas. mr. hill. . >> thanks the chairman for this hearing and i particularly
appreciate the expertise of our witnesses and share mr. sherman's compliments of their long standing work on this issue and appreciate your service for our government in office and out. bill newcome was here a few weeks ago to talk on this topic from johns hopkins and he basically in response to my question, i asked him, i said, we've been dealing with this as you have for three decades now. four presidencies. and i asked him, are we ever going to get serious about sanctions on north korea. and why weren't these great sanctions proposed to president clinton? clinton or bush or obama? he said i think the united states did too little for too long and they're just now thinking about getting serious about it. again, it depends on establishing this, meaning north korea as a national security
vital interest. boy, that confused me. because i watch tv in 2002 when push declared north korea part of the axis of evil. so i'm con feezed about about why north korea is so low on your chart. you've been in government. why is it that we're just now getting serious about north korea? tell me your top three reasons why we have not sanctioned north korea in an effective way? >> sir, it has not been the foreign policy priority. that is the bottom line. whether you look at getting rid of the sanctions against or giving the money back on delta asia in 2005, whether it's and this is going to be bipartisan. whether it's removing north korea from the state sponsor of
terrorism as dr. allbright said after we discovered they built a reactor in syria. whether it's this congress approving, insisting north korea be evaluated as a primary money laundering concern. when you look at that detailed information last year, you see the financial transactions went back to 2009. you start to ask what have we doi been doing and the answer is that it has not been the foreign policy priority. when i hear that suggests that this new administration policy is the same as the prior one, that is just frankly not true. they've gone after china six times. after russia. they've moved north korea off the chart, but there is a lot more to do and the question, to the question of how are we going to get to this point of denuclearization, the point i would make secretary tillerson
set the dial at five or six, it's the united states that's determine iing it's not at 20 n and that's what we need and it should be moved to an extreme level north korea will start to feel that. >> preesh appreciate that and t ambassador haley is doing in the united nations, but i don't think it's a substitute for increased pressure by the united states and i thank the chairman for bripging this draft bill before us. you said in your testimony that another suggestion was mandated inspection for north korean vessels. is that a united nations sanction, an american sanction? how does one do that in a legal manner? >> right. i think you know the u.n. sanctions use the phrase, reasonable ground.
material being transfers. i believe just as we did with raun u, south korea, japan, u.k., france and germany, that say we interpret that clause to now say there are reasonable ground s that every shipment north korea puts back is a violation and that it's subject to inspection. of course, there are you know, there are international walls to master consent and all that. that would have to be worked out. that would be a key element. >> i have other questions, but i yield back. >> mr. davidson. >> thank you, chairman and to your guests. i appreciate your testimony. oi just want to say that you
know, perhaps we're shooting for too low of a goal. it seems our goal is a nonluke lehr peninsula in korea. most don't want that outcome. it makes it a hard outcome to attain. we seem to desire it. we may be one of the few. as long as we got their back, i guess they're okay. if they don't have them themselves. japan doesn't want it. to set a higher goal, which should have been our goal since 1950, which is an instate that does not have the united states defending the cokorean peninsul or the korean peninsula all together. what would it take to do that? peace. the same sorts of conditions that led to the united states
minimizing our presence in germany. so, we haven't really moved down a path that pursues that. we've moved down a path that continues to escalate and make seeking nuclear weapons somewhat rational for a really irrational guy. generation of generation, so i think that begin with the end in mind, perhaps why we failed. doi feel that we have a good track record in iran to build on and we've had good track records in other situations to use economic action to hopefully pursue a peaceful outcome. to our desired end states. i get there's concerns about trade with china.
when you look at the risk on supply chain management, where we use all of the levers of u.s. power. just like banks are are forced to know your customer, the rest of the world needs to be forceded to know your supplier. and part of that will be hard. in china. p to enforce these good sanctions that are highlighted in the north korean sanctions, it may take that. mr. clinger, i think you highlighted a number of those things in your testimony. i'd like to say how is it that or ask how is it that we can take action down to that's allied themselves and moving products, services and cash back and forth. what steps can we take to close off that pipeline.
>> first of all, it's really having the political will. i have been surprised over the years that we, the u.s. has hesitated to enforce its own laws on the same degree to north korea as we have done to a greater degree on other countries for far less agree jous violations, so i think mr. hill's three what were the three reasons, i might say naivety, wishful thinking and will. we've gone down the diplomatic a number of times. and sort of unleash the law enforcement. if you talk to officials and government, they'd say for year, we had a list of chinese and north korean violators in my drawer and i'm allowed the take our ten or so when there's a provocation then have to put the
rest back in the drawer. i think it's time to empty the drawer, going against all those entities with we have evidence for. >> mr. albright. >> many of these companies are becoming multinational. what they haven't been doing gaining those shurnss in write ing that they will -- i think it's in u.s. law, but it should be applied much broader. ethical and legal standards that army men are adversaries. >> thank you, my time is expi expired. my conclusion is that we have an existing law in place. we don't really need more laws. we need to enforce our existing laws. i look forward to any other
feedback to help bridge that gap. >> i yield back. >> thank you, the gentleman's time is expired miss love the recognized. >> thank you all for being here. in the wake of north korea's sixth nuclear test, the proposal was circulated among u.n. security counsel members that would have frozen north korean leader's assets. could our witnesses just quickly comment on the desirability of expanding the prohibition in our draft legislation to include the members of north korea government and the d p prk's workers party? we can start with you, mr. albright. >> i think it's useful to do. >> i think there's already an executive order on this. i would go in a different direction. i would say the issue on leadership assets is a different
identification. so anything that can be done to incentivise those folks in banks and europe in particular that might have information on leadership assets, i think that would be more beneficial. >> also being able to share that among other banks because there's never an instance that will allow the variety of banks where these networks are and to stop it. >> i'd absolutely go after leadership assets. last year, the u.s. designated kim jong-un and nine others for human violation so, we have identified him in the past. there's an executive order january 2015 that gives us the authority to to sanction any member of the north korean government. simply picking a member of the
north korean government, so i think we can and should go after kim jong-un and the other senior leaders. >> along those same questions, mr. clinger, is that right? sorry. could you discuss the potential for north korea to assist countries such as iran in developing nuclear weapons and advance ballistic missiles? >> i think there's clearly been a missile relationship between north korea and iran. the first shah hib three missile ts were made in north korea. the information on cooperation is much more difficult to get. we know north korea was engaged in nuclear cooperation with pakistan through the network and libya and others, but the information with cooperation with iran is much more difficult to get, particularly outside of government. i think there is clearly a relationship on the nuclear side
between the two countries, but i think it's hard to get particularly unclassified information on it! with mr. albright, here's my connection between the two. i am concerned. that if we continue to just try and be as and we want to be as diplomatic as b possible, we want to be able to work with people willing to work with us, however, we've seen north korea incredibly defiant. we've seen them go test after test after test. it seems as if they're not a threat by itself. that the proliferation of these activities can support ambitiouses for other foreign regimes. are you concerned about that at all? >> certainly. you have to be concerned with north korea. they like to go and sell things of value. so you have to worry about that a great deal and that has to be part of what's watcheded for and
in the messages, delivered to north korea. i don't think it was a coincidence that the director of the cia was on fox news raising the issue. it's important to send the signal. if north korea crosses that line and is willing to sell weapon grade uranium or nuclear weapon, we will probably respond militarily to take out that regime. may be a bluff, but i think it's important that line has to be maintained and i would say enforced and north korea will get the message. they don't want to commit suicide. >> given beijing's reluctance to take a hard line with north korea, what arguments should be brought to bear in other words to convince the chinese pressuring the dictators of china is in trust? >> china wants to be a
reasonable member. a lot of these arguments on applying sanctions on chinese companies are the same arguments we newsed in the 1980s against germany, who was at that point, libya, iran and probably several others. with the where with all to make nuclear weapons, so i think these are not new arguments and china wants to be responsible and so it should start to act that way. >> thank you very much. my time is expired. >> the chair now recognizes the gentleman from indiana. mr. hollingsworth. >> good morning. i really appreciate everybody being here. as everyone has reiterated, this is an important and timely topic and something we need to take with grave earnestness, so i appreciate the consistent testimony that everyone has provided. one of the things i wanted to talk about is making sure we've got partners engaged in this as well and russia comes to mind.
my concern has continued to be they don't have an interest in enforcing sanctions at the same level that we do. and a willingness to combat this issue. the more the united states continues to be use the word distracted and i don't mean that lightly, but distracted by north korea, the better off they see themselves. can you talk about what we can do to engender cooperation and willingness on behalf of russia to be able to participate in whatever solution this looks like. that's for any of the panelists. >> i think, thank you for the question for us. i think a good strategy is one that we have discuss ed here primarily, using sanctions or other law enforcement to go after specific questions and entities on sanctions or specifically in valiolation of e u.n. sanctions!
what extent do you think the russian government will be able to shield those companies from the ill effects of those? >> such as the rhetorical gestures from president putin. if those companies want to use u.s. dollars, then they won't be able to if u.s. sanctions enforcement or law enforcement measures prevent them from doing that. trz and any bank that times to stay in the good graces of the united states, not with standing with their political top cover may offer them at home. >> so, you really believe these can be efficacious without participation from the political sector in russia. >> i do. and we've seep that in other instances not related to mc. for instance, in iran in the era before there was fraud,
international consensus about the need for strong sanctions, going after xwaecompanies and speaking directly with them was a way for them to get out far in front of their own governments. >> what does success look like? when will we know this has been successful and what's the next step after that? obviously, we want to the greatest extent possible to either slow down or stop the technical process. with icbms and nuclear/hydrogen weapon, but what does it look like after that? we put in place these very, very tight sanctions and just continue them forever or tell us about what phase two will look like? >> i think one is, should emphasize, we haven't talked about this much. the point of this is to have
meeping negotiations. that would be a sign of success. north korea without accepting benefits, that's one new change in this administration compared to others. they come after the actions, if there are meaningful negotiations, inspectors have never gone outside in north korea, yet we know there's other sites. that's important to work on this whole process. on that side, we'll know when we'll see it and with the new criteria being useded, it will bui
build on avoiding mistakes of the past. >> i would just, i agree with most of that. i would caution that we want to make sure. >> from my perspective, a freeze is not as valuable as some think it is. the next step f we're talking about negotiations is a demonstratable step by north korea of its commitment to denuclearization which would flip negotiations on its head. used to be we freeze, then drag them to denuclearization. we have to recognize this might not be the regime that's willing to do that. and if sanctions can't. >> i just want to comment on the second, in that makinge don't just freeze here at the pr precipice of icbm but instead
move that one back because we've seen their wlingness to reanything on promises before. i don't want us to be a month, a year and find them reneging in the future. >> the gentlemen's house has expired. the chairman of the investigations subcommittee, but also the foreign affairs committee. the gentle lady from st. louis, missouri. miss wagner. >> thank you, mr. chairman for hosting this very timely hearing. in august, i traveled to korea and japan and had the opportunity to visit not tonlon- watched chinese trucks with good drive cross the china korea friendship bridge. 70% of north korea's trade passes over that bridge and it
was a stark reminder that the united states should prioritize secondary sanctions against the chinese companies and banks that sustain the regime, i had the pleasure of hearing your testimony before. you wrote that north korea is the fourth most sanctioned country in the world. and given the recent security counsel resolution, how would you rank north korea today given that certain chinese investments and trade efforts are grandfathered in or exempted from the august and september u.n. sanctions. how effective do you think the resolutions will be? please. >> sure. i would just point out that february 2016 was number eight. when i testified before this subcommittee in mid july, it was number five. it's moving up the ranks.
it's got a long way to go, unfortunately. the way i look to like it is like iran. resolution 1929, that was really the foundation and sanctions passed by the u.s. congress and, were what put iran on the edge and led it back to the negotiation table. we have the u.n. foundation. what we need is u.s. sanctions and i would just say it's concerning to hear the treasury secretary say we're going to wait and see if the chinese implement the u.n. resolution. i think that's the wrong approach. i think we should be moving forward with right now. >> agree. mr. cleanlehr, barring a threat to the regime's very survival,
kim will never come to negotiating table in good faith. must change kim's financial calculus as we've discussed here, which is why comprehensive secondary sanctions are so kritable, i believe. i appreciated your statement on increasing inspection and shipping. would you support mandatory anxio sanctions on ports? we must pay more attention to thi this. >> agree. that's something the congress has been look iing at is is particularly if a port doesn't implement required sanctions, then measures such as any ship cannot transit that port and enter the united states waters for six months or so.
all have been b a past with chapter 7 article 41 authority. where we're not allowed to board a ship on the high seas even if suspected of carrying nuclear missile contraband so we've been activating chapter 42, agencies intercept and board. >> the recent package a low us to board now and others in term os member states, i think they have some new tools don't they to stop high seas smuggling of these probted products? >> i believe that was included in the original u.s. draft, but it was something that was tossed over board that did not make it in the final resolution.
>> quickly, mr. albright, in my view, north korea has nuclear weapons from my constituents without access to classified information, it would be helpful if you can explain from public sources how many nuclear weapons the regime may have and where they may be. >> we estimate they may have 15 to 30. it's a rough estimate. we have no idea where they are. >> 30. i think the u.s. governments are higher than that. i think i've worked on this problem since 1985 and i've visited north korea a couple of times met their nuclear people. i think they're not giants. technologically and they encounter problems. so, that estimate tends to be lower than the u.s. government one, but it's still a significant number and it's growing. >> the gentle lady's time has
expired. >> thank you. because of the interest in the witness's testimony, members here i think are interested in a second round of questioning if we can seek the indulgence, i would recognize myself for an additional five minutes of questioning. just to revisit this issue of effectiveness of sax sanctions and you all heard the comments and questions of my colleague from california, mr. sherm on that point, that, a lower priority. but there have been sanctions none the less. see a con tin jous blinlg rans, a con tin jous development and acceleration of the development of the nuclear program of the kim regime. particularly in recent years. so, my question to anyone who
wants to answer is what is dimpblt if anything about the foreign policy, the sanctions efforts, of the current administration particularly the efforts of the ambassador haley and the u.n. sanctions, packages she's been able to secure at the united nations. we'll start with that question and start with mr. albright. >> one is i'd like to go back. u.s. policy has been to try to stop north korea acquiring goods. in the '80s and' 90s, a lot of effort was made to kick them out. and they were kicked out. what was not anticipated was that they would move to china. and set up shop there. and buy tgood frs european companies. get them to china and send them by truck up to the nuclear program and so, the problem has
been, the most important change to me in this administration, is they're willing to risk trade conflict with china to solve this problem. and since china's, north korea's set up shop in north korea, the administrations have not been willing to do that until this one and that's critical. >> as you answer that question, you've read the draft proposal, the bill we've presented to you. could you comment on that bill and the extent to which it would ratchet up this on the regime. we tend to get ourselves in this response cycle and we've done that over the last ten years. this administration has gone after china and russia to an extent that we haven't before.
it needs to be sustained. in the past, we've convinced ourselves, i've written, delivered, been in the same room. we give china a list and we convince ourselves we've done a tough way forward. in terms of the legislation, i've noted the due diligence component. beyond the various legislations out there, it's oversight. i think the key aspect here is ensuring that these bills that will become law are implemented. there are many companies that are still not sanctioned and should be subject to sanctions even from the sanctions law last year. >> can i just ask on the heels of that answer, again, revisiting your comment that the importance of of the distinction between the u.n. incremental
enforcement and the u.n. sanction, the two rounds of u.n. sanctions and congress the united states acting independently. how much more pressure would the legislation being propoeds or u.s. independent additional action on secondary sanctions how much of difference would that make above and beyond the most recent round of u.n. sanctions. u.n. sanctions are each one is ink incrementally better than the last. but the u.s. anxiouses are critical. it's ones that we can do ourselves. they're enforcing u.s. law. why should anyone be against enforcing our law to the full degree? these, the legislation as well as the oversight through which congress can hold the executive
branch's feet to the fire to try to push them to fully enforce the laws that are either on the books or could be on the books, the three main actions the obama administration did last year were really because they were pressure d by the north korea sanctions and policy enhancement act. >> i think the difference here is the things you mentioned, but also an issue of lax enforcement. enforcement is very, very rit c critical. the panel points to lax -- so these secondary sanctions are critical in applying the additional peaceful pressure and just i'll let miss rosenberg conclude on that point. these secretary sapgss you think would make a difference from previous efforts. >> i do. i think we've seen that happen in the last year and this year as well. and i think do more. one o the of the challenges about the new u.n. measures passed, they're not
self-reenforcing and a whether they rely on a reduction. petroleum, something that the u u.n. inaccurate data. so, i think there's a very high likelihood with with this even just as a matter of arithmetic and slow and poor reporting. what that means is when the united states can impose its sanctions to call out and highlight where foreign countries are not undertaking their requirements, it will have a major and significant effect in bring iing them where they a willing to cooperate to do so. >> mr. hill. >> thank you, chairman. in the substantialing committee
in china, two of seven members are from provinces are from north korea and that the presunlgts is that one gets on the standing committee of the ballot by hitting goals accomplishes. has late out quickly, we don't have aims for u.s. present or western at their border. on the political view from your point of view, do you antis mtht that china will be more helpful after their significant party has held in october.
let's talk about the politics in china about them understanding the united states' sincerity and ending this issue. once and for all. mr. clinger, you want to start. the message that's been given, a crisis on your board e, but your lack of pressure on north korea is only engaurnlging pyongyang to continue going down that path. that you don't like. it's also induce iing the u.s. take measures cline doesn't like, but we are being pushed into it by your ally, so you can pay me now or later. you need to increase pressure or we're going to head toward that crisis you don't want in china. >> your assessment of will there diplomatic or public position be any different after they complete their party congress? >> i've become pretty cynical about north korea and china. i think it's just they talk
well, they implement for about one to four months after each u.n. resolution then back off. >> comment on that? >> anyone who believes china will be more cooperative after the party congress is falli ini trap. they had a good summit at mar-a-lago, and the chinese are on board, what turned out, they were not. i unfortunately, i can do that over the last ten years. that has happened time and time again. how do you measure seriousness? that's a good question. how i measure is is that the chinese should not be closing north korean accounts and should be stopping those trucks from going over the bridge. they should be in those companies and saying here are the sanctions. how are you implementing them? they should be in those banks doing the same thing.
>> i can't really say i would agree that we do need signs of seriousness. i can give an example of a country. inspekding the border, with vital trade arrangements with china. they were literally blocked by the private company run ining t custom storage area. it's the signs we're looking for and i'd like to see some chinese busted. i've been involved in federal prosecutions of chinese national. i think these signs are critical.
>> talk about who's the partner, china or north korea. to refer back to the question posed by the chair at the beginning, what has changed, one thing i'll say in what you just said, the willingness of the u.s. president to offer tough rhetoric including raising the possibility of whether trade can and should occur between the u.s. and china. whether it's just meant to send a strong signal, that's different and has been a huge wake up call. so, obviously, now the devil's in the details, how do you do implementation and to be frank, when we've seen china comply with other international frameworks for iran and russia even others, when they have
gotten with the program, it hasn't, it has never looked like them saying to u.s. diplomats who go sit there, pass some intelligence, we got this. we're with you. it comes under a different guise. and so, i would welcome the to see china come forward with its own domestic law enforcement or regulatory action against certain companies as a matter of going after money laundering or prosecutoring corruption, which they have an sbes to do and if it has an effect on their relationship with north korea, all the better. i don't need them to get out in front. they'll have a problem politically looking like their capitulating to u.s. sanctions, but if they do it as a measure of domestic, financial sector integrity, all the better. >> agree with that. thank you. >> gentleman's time has expired. recognizes mr. green. >> thank you, mr. chairman.
thank the witnesses for appearing as well. and would indicate that we've had many duties related to some adverse circumstances that we encounter eed relateded to bad weather. that's putting it mildly. these things have attracted my attention, so my apologies for not being here for the entirety of the hearing. i am concerned about the sanctions. i do have some questions that probably have already been posed. so please forgive me for being redunn tant or superfluous. if we can perfect the sanctions as codified, which would be a impact on china first and then i'd like to move to secondary portion of the question, which relates to the impact on north korea. so, on china, what would be the impact if we perfect thesey ied
leave this question to whomever would like to respond initially. >> thank you for the question. a way to improve sanctions, is to go after them, prosecuting an aggressive strategy. and that may or may not include secretary sanctions measures, but by making an example of these sanctions and calling out the companies in china, certainly in north korea, entities and persons, but also in china and other international facilitators of north korea and proliferation entities or its economic activity, that's a strong and important way to improve upon these sanctions and make them more efficacious. >> thank you. would you care, sir. >> i would just take a step
back. there's going to be ab an impact on chinese companies. it's been a problem for a long time in terms of proliferation. whether it's with iran or north korea. a successful goal could be that china finally realizes that just issuing you know, a notice from their commerce department with a list of goods that are prohibited is not enough. that they need to do more engage ing their own companies, their banks and law enforcement actions. inspections at the border authorizing others. the chinese are the center of a market. and it's the market for proliferators. it's a problem. until they realize they have to change their way, we're not going to be successful.
>> if we perfect the sanctions proposed in their entirety, what will be the impact on north korea? one impact would be their guest centrifuge program that makes weapon grade uranium would probably stop. it may take a year or two, but they depend on what we consider perishable goods in order to operate that plant and they don't make those goods. if we had a perfect set of sanctions, i think you could cause serious damage to the progress of their nuclear program. couldn't stop what they have, but you could stop more. >> please do not assume that i have a position based upon the questions i'm posing. i think these are things i just need to hear answers to. next question has to do with china's position that if the
sanctions create turmoil extent that north korea becomes a government that no longer exists tr all-purposes and people start to flood into china, they've raised that as a possibility. is it possible that these sanctions could create such a circumstance if completely implemented against north korea? because china is the means by which we get to north korea. so would that create the breakdown in governments? >> that's china's fear. there's been newer talk in china that if anticipation of that, the people's army would occupy part of north korea. in order to block refugees coming into chip and also to build houses. so the expectation, would somehow seal north korea such that people could not migrate
into china? china fears that. that's part of the problem. fears that instability in north korea that could create problems itself and it worries about that more than north korea's nuclear weapons. t at the crux of the matter and u.s. has to solve that problem for china. >> the chair recognizes the man from ohio. mr. davidson. >> i neeyield one minute chairm. >> briefly, just a follow up on this hearing and proposal to impede north korea's access to finance. that has been discussed here today, would the passage of this legislation that's being proposed or the mere introduction of a bill that directed treasury to impose these additional secretary sanction, would that in your
judgment give secretary tillerson and ambassador haley additional leverage in their negotiations with china and russia with respect to north korea? >> i think that's right. when you look at society and sanctions andment act of 2010. there are many threats associated with that. and banks chain their procedures because of that bill. >> i yield back to my friend from ohio. >> thank you, chairman. south korea has announced they plan to participate in decapitation exercises. and i guess i'm just kurts for the panel, what your assessment of north korea's reaction to the rhetoric if not in fact the deeds.
>> he also emphasized they have surface to surface missiles. they demonstrated an attack, practice attack with using their f15 ks. and they had announced they would conduct such an attack if they detected signs that north korea was about to attack. pyongyang independent kalted they would -- one of my concerns is the risk of miscalculation by either korea or the u.s. and either we sort of stumble across the red line ainto some kind of military action baseded on very difficult to discern intelligence. >> thank you. i think that's accurate. >> doesn't that this make having
a nuclear deter rans given their weak stat chure a rational choi for north korea to pursue? >> not really. no one's planning to invade north korea. the sinking of their ship by the north korean submarine, the artillery. i think these actions, no one's planning. saddam had enemies. libya had enemies. north korea doesn't have anyone who wants to invade them. they don't understand that frankly.
they see division after division after division experiencing korea. if i'm a north korean, it looks like people are preparing to do that. respect the ability to draw different conclusions. i guess the next piece i want to talk about is our naval power. obviously, massive differential in power there. how much of it is dependent upon access to the sea? anybody know? >> the north korean naval forces are small and antiquated. so, it, they have given their focus in the past on ground forces and then as those conditions sort of deteriorated in the '90s when i was at the cia, they compensated by declining conventional capabilities by focusing on asymmetric capabilities. weapons, special forces. >> are they depending upon the
sea for their oil? >> not exclusively. there's, they have the capacity to take tanker or delivery as well as pipeline from north korea. from china. they get a fair bit by ocean. >> or tanker toefr bridge. for example, those are all. >> thank you. i guess the last thing is in the ability to use naval power, what portion of if you took this up to the next thing at a blockade, short of force, this is control the control the association. could this have an impact on north korea's economy? >> i would imagine. you have to consider the possibility of a submarine launched ballistic missile. far from that, but it's, you have to worry about their submarine force.
in answer to your question, certainly, an embargo would affect their economy. >> time's expired. i yield. >> thank you, gentleman's time has expired. i'd like to thank our witnesses for their testimony today. without objection, all members will have five days within which to smut questions for the witnesses to the chair,ed to ths for their response. i ask to please respond as promptly as you're able. this hearing is adjourned.
trump administration officials continues tomorrow with ben carson. house i housing and urban development secretary. he talks about his life, president trump and his job at hud. here's a look at some of what you'll see tomorrow. >> well, the mission of course is to provide safe, affordable housing and it has to be quality housing. for people. but in addition to that, we want to build communities. complete communities. instead of just stuffing people into a house. you need to have education alpha silties there. you need to have mechanism that allows people to become employable. you know u, you need to have food. you can't have these food deserts and you have to incentivise you know the grocery stores to come in there. it has to be b a safe environment. in other words, you have to, you
have to have a complete and nurturing community. and that's why we're restructuring things here. because other wise, we just continue down the same road. that we've been on for decades and decades and what we wind up with is people who are just you know, quite complacent to be in the same public housing that their mother or their grandmother was in. well, you know, not saying anything bad about their mother or grandmother, i understand that you have to say that now. but what i am saying is that we want to create ladders of opportunity so that people can move up and once again, recapture the american dream. and start thinking about what they can do not what they can't do and not what somebody else needs to do for r them. a. >> and you can watch the entire cspan profile interview with hud secretary ben carson tomorrow
night at 8:00 eastern on cspan. he talks about his personal life, his career as a doctor, his run for president and his interaction with president trump. hillary clinton gives her personal account of 2016 presidential campaign in her memo memoir, what happened. she'll talk about it monday evening. that will be life from the warner theatre here in washington, d.c. it starts at 7:00 p.m. eastern on cspan. sundays at 7:00 p.m. eastern on oral histories, a series of six interviews with prominent photojournalists. this sunday, a conversation with frank johnston about his photos and career. >> when they brought oswald out, he was within three feet of me when jack ruby who leaped out from behind me and went between
bob jackson and i, fired the gun. and we were all thrown to the floor because there must have been 100 police in that basement that sunday morning. >> watch our photojournalist interviews on oral histories, sundays at 7:00 p.m. eastern on american history tv on cspan 3. during tomorrow's "washington journal," we're in dover, delaware, as part of the cspan bus 50 capitals tour. delaware governor john carney is our featured guest at 9:30 a.m. eastern. join us tomorrow for the entire "washington journal" program at 7:00 a.m. eastern on cspan. >> the senate commerce science and transportation committee held a hearing on the future of self-driving trucks. witnesses spoke about the need for federal regulations to guide the development and safe i implementation of new self-driving technologies and the impact of driverless trucks on