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How America and its Allies Can Stop Hamas, Hezbollah, and Iran from Evading Sanctions and Financing Terror

House Financial Services Committee
Subcommittee on National Security, Illicit Finance, and Internation Financial Institutions
How America and its Allies Can Stop Hamas, Hezbollah, and Iran from Evading Sanctions and Financing Terror
Wednesday, October 25, 2023

Topline

  • Democrats asked questions about the intricacies of Iran’s funding to Hamas and other international terrorist organizations and crypto’s role in Iranian efforts.
  • Republicans expressed concerns about how current sanctions are proving to not be as effective as intended, and asked panelists specifically how to make sanctions more effective.

Witnesses

  • Mr. Richard Goldberg, Senior Advisor, Foundation for Defense of Democracies
  • Mr. Gabriel Noronha, Fellow, The Gemunder Center for Defense and Strategy, The Jewish Institute for National Security of America (JINSA)
  • Mr. Jason Brodsky, Policy Director, United Against Nuclear Iran
  • Mr. Adam Zarazinski, Chief Executive Officer, Inca Digital
  • Dr. Matthew Levitt, Fromer-Wexler Senior Fellow, The Washington Institute for Near East Policy

Opening Statements
Subcommittee Chairman Blaine Luetkemeyer (R-Mo.)
In his opening statement, Luetkemeyer said that Hamas’ behavior on October 7th confirmed that they are not a military organization, but a terrorist organization. He noted that a similarity between Hamas and Hezbollah is that they are sponsored by Iran. Luetkemeyer criticized the current Administration, noting that they reversed course on Iran sanctions in hopes of reviving a GCPOA. He closed by recognizing his bill, the Iran Sanctions Accountability Act, and noted that the bill will deploy reasonable due diligence standards that would close loopholes and require the president to attach requirements to humanitarian aid.

Subcommittee Ranking Member Joyce Beatty (D-Ohio)
In her opening statement, Beatty noted that the Treasury’s Office of Terrorism and Financial Intelligence has long endeavored to disrupt Hamas’ financing operations, and in the wake of its most recent attacks, has taken immediate steps to further target key Hamas operatives and financial facilitators. She also recognized that Treasury has utilized several national security tools such as including primary and secondary sanctions, strengthening AML and CFT frameworks in vulnerable jurisdictions, and partnering with regional allies in the private sector for information sharing and coalition building.

 

Testimony
Mr. Richard Goldberg, Senior Advisor, Foundation for Defense of Democracies
In his testimony, Goldberg recognized how important it is to reset assumptions and restore bipartisanship when it comes to supporting Israel. He said the US must force countries to make a decision regarding whether to help Israel or Gaza, and that the US has the economic tools to do just that. Goldberg closed by telling Congress that there should be bipartisan effort to lock down money so that it doesn’t go to Hamas.

Mr. Gabriel Noronha, Fellow, The Gemunder Center for Defense and Strategy, The Jewish Institute for National Security of America (JINSA)
In his testimony, Noronha said over the past two decades the Islamic Republic of Iran has spent more than $20 billion to support foreign terror groups in the Middle East. He noted that Iran is providing 93% of Hamas’ budget and that extra funding has allowed Hamas to lay low in preparation for its sneak attack. Noronha asked Congress to ensure that all state sponsors of terror, including Iran, are excluded from future allocations of special drawing rights. He closed by saying the status quo must end.

Mr. Jason Brodsky, Policy Director, United Against Nuclear Iran
In his testimony, Brodsky said the ties between Hamas, Tehran, and its proxies like Hezbollah have deepened over decades. He disclosed that an influx in Iranian funding to Tehran may explain the publicly reported increases in Iranian funding to Hamas over the last year and said that it is time for the US government to fully sanction vessels of funding to these entities. Brodsky warned that sanctions alone will not counter the Islamic Republic effectively, and advised Congress that sanctions must be paired with credit military threats.

Mr. Adam Zarazinski, Chief Executive Officer, Inca Digital
In his testimony, Zarazinski said there is an ability to utilize the advantages of blockchains and the crypto ecosystem, when combined with other open-source intelligence in financial institutions and government agencies, to identify and root out those who wish to do harm, both to consumers and to the US and its allies. He recognized that the overall discussion on crypto and how it’s used in illicit finance is oftentimes chaotic. Zarazinski closed by noting that in the crypto space, there are multiple competing narratives often at opposite sides of the spectrum.

Dr. Matthew Levitt, Fromer-Wexler Senior Fellow, The Washington Institute for Near East Policy
In his testimony, Levitt recognized how horrendous the attack on Israel was and recognized that Iran has financed Hamas since 1987. He recommended to Congress to look at not only the financing of Hamas and other terrorist groups, but the resourcing of funds. Levitt closed by saying that the US needs to focus on the constant amounts of money being funneled to Hamas and pressuring Iran more so that they cut back support for these militant groups.

Question & Answer
Sanctions
Rep. Roger Williams (R-Texas) explained that the Biden administrations waivers and lack of enforcement on Iranian sanctions was assisting the regime in obtaining more financial resources to fund terror. He asked Noronha how the Iranian regime is exploiting gaps that exist within the current sanctions placed against them, and which types of sanctions have proven to be most effective. Noronha said that Iran is looking for the US to ignore shipments to China and that the tankers, insurance companies and ports that service those boats are looking to service Iran without penalty.

Rep. Barry Loudermilk (R-Ga.) asked Brodsky about his assertion that the US needs to place sanctions on Qatar, and asked whether those sanctions would lead Qatar to stop cooperating on $6 billion in frozen funds. Brodsky said there is a fungibility question as the $6 frees up space in Iran’s budget to fund terror and then said sanctions should only be placed on Qatar if they don’t turn over Hamas leadership. Loudermilk what Congress can do to ensure sanctions on Iran remain credible whole not discouraging current partners from engaging with the US. Brodsky said the US can start by enforcing sanctions consistently which the Biden administration stopped to lower tension between the US and Iran as part of diplomatic push by the administration.

Rep. Bill Foster (D-Ill.) asked how the US’s toolkit against Iran is. Levitt said that the sanctions the US has implemented will not make Iranians suddenly like their regime, but the goal of sanctions should be to target specific programs like the nuclear program instead of the overall economy. Levitt also said that sanctions that target the upper rungs of Iranian society who go to the West to shop and enjoy lavish lifestyles should be put into place rather than just on average citizens who can’t directly affect the regime.

Rep. Zach Nunn (R-Iowa) asked in what ways Congress can incentivize their partners or legal institutions to report on Iranian sanctions violations to hold bad actors accountable. Goldberg noted that there is already legislation on the issue, and that Congress should expand on it. He also said that Congress should subpoena communications between the administration, China, and Iran and conduct oversight to find instances of sanctions non-enforcement.

Rep. Josh Gottheimer (D-N.J) asked if the current sanctions against Iran are adequate or whether more should be put into place. Goldberg responded saying that the US should focus on quality over quantity with sanctions and target specific programs in a wide push to stop the financing of terrorism.

Rep. Wiley Nickel (D-N.C.) asked Zarazinski how the US can ensure that its sanctions are effectively enforced. Zarasinski noted that crypto markets need to be back onshore where the US can regulate it and work with firms to stop these illegal financing rings.

Rep. Bill Huizenga (R-Mich.) asked Noronha if he thinks all the provisions of the 2012 NDAA regarding sanctions are being fully implemented today. Noronha said they are not all being implemented.

Blockchain and Cryptocurrency
Luetkemeyer asked how Hamas and other international terrorist cells in the US are being funded. Noronha said they are primarily being financed through Iran and that Iran placed bounties on US officials. He then asked how that money is being transferred through terrorists. Noronha said that according to DOJ filings, terrorist groups are paid in the form of cryptocurrency.

Rep. Maxine Waters (D-Calif.) asked panelists if Iran is the crypto connection to Hamas. Levitt noted that crypto is centralized and is easily accessible to Iran without Iran’s help. Zarazinski also noted that Hamas has been using cryptocurrency to fundraise and said the US can track crypto donations to Hamas.

Nickel also asked Zarazinski to expand on the challenge of tracing funds in the era of digital currencies and decentralized finance and what legislative actions can be taken to counter financing to terror groups. Zarazinski said that there is the availability to trace suspicious transactions through the blockchain with firms reporting wallets with suspicious behavior.

Treasury and Monitoring
Beatty asked how Treasury is or can be working to disrupt these funding streams to terrorist groups and if more can be done. Levitt said that the additional sanctions and designation package against Hamas are a good start from Treasury, and that he expects more action to follow.

Beatty also asked about fungibility that is designated toward humanitarian purposes and asked for Levitt’s thoughts on the theory that there is no way to reliably ensure funds slated for humanitarian needs won’t be used to fund terrorism. Levitt says he had concerns about the $6 billion in frozen funds that were released by the US for humanitarian purposes to Iran but also explained those funds never moved and is not fungible. He continued saying the $6 billion is not thought to have helped fund this attack by Hamas as that would’ve been funded months prior.

Rep. Young Kim (R-Calif.) asked how the Iranian regime can elude monitoring by Treasury to use the unfrozen funds to finance international terrorist groups. Noronha said that his biggest concern is that there is no monitoring of goods when they enter Iran and that Iran has in the past been caught trying to send medicine and other goods over their border to sell on black markets in Iraq and other countries.

 

For more information on this meeting, please click here.
For an archive of past SIFMA hearing coverage, please click here.