Posts Tagged ‘U.S. Treasury’

How Hong Kong Makes Evading North Korea Sanctions Easier

March 17, 2018

The city presents itself as one of the world’s easiest places to do business—which goes for front companies, too

According to Hong Kong records, the sole shareholder and director of a company whose tanker Japan suspects of violating North Korean sanctions is Tang Yun Hui, and his address is this two-story farmhouse in a remote Chinese village. Mr. Tang says he is a sailor who has never heard of the company or owned a ship.
According to Hong Kong records, the sole shareholder and director of a company whose tanker Japan suspects of violating North Korean sanctions is Tang Yun Hui, and his address is this two-story farmhouse in a remote Chinese village. Mr. Tang says he is a sailor who has never heard of the company or owned a ship. PHOTO: JAMES T. AREDDY/THE WALL STREET JOURNAL

In late February, Japan’s government released photographs of a tanker it said it strongly suspects was making a transfer, likely of oil, to a North Korean ship in violation of international sanctions.

The tanker’s owner, Ha Fa Trade International Co., is registered to an address in Hong Kong’s Wan Chai district. But the company can’t be found there. Instead, the cluttered 23rd-floor office belongs to an agency that helps businesses register with the authorities, with scant information on their ultimate owners.

This isn’t an accident or an oversight: Hong Kong has positioned itself as one of the world’s easiest places to do business, allowing companies to register with minimal documentation in as little as a day.

U.S. and United Nations experts say this is making the city a hub for North Korean front companies—and the U.S. wants Hong Kong to crack down. A U.N. Panel of Experts report made public on Friday describes registration middlemen like Hong Kong’s as a “key vulnerability” allowing North Koreans to defy sanctions intended to starve the country’s nuclear and missile programs of funds.

Of the nine companies outside North Korea that the U.S. sanctioned in February for working on Pyongyang’s behalf, two are based in China, one each in Panama and Singapore—and five in Hong Kong. Attempts to track down three of those five firms led to a maze of secretarial agencies.

A military parade in Pyongyang, North Korea, last month; the country has been subject to increasingly strict international sanctions meant to stop its nuclear-weapons and missile programs.
A military parade in Pyongyang, North Korea, last month; the country has been subject to increasingly strict international sanctions meant to stop its nuclear-weapons and missile programs. PHOTO: ASSOCIATED PRESS

Experts say front companies allow North Koreans and their agents, many of whom are in China, to obfuscate their identities and operate without revealing their Pyongyang ties.

“Those who start front companies are very skilled at taking advantage of Hong Kong’s business-friendly regulatory and financial environment,” said Wendy Wysong, who heads law firm Clifford Chance’s anticorruption and trade-controls practice in Asia.

Hong Kong put new regulations into effect this month that aim to make money laundering more difficult, including stricter client-verification guidelines for company service agencies.

The city “has a robust and efficient supervision system in place,” a Hong Kong government spokesman said, and was “looking into cases in which Hong Kong-registered companies are alleged to be involved” in evading sanctions.

North Korea boasts about its nuclear weapons program by releasing photos and videos of its missiles. But in them are tiny clues to their true capability. A team of U.S. analysts, working outside the government, shows how they decode these images to determine when North Korea is bluffing – and when it is showing true power. Photo: North Korea State Media

Lawyers in Hong Kong who advise banks on sanctions enforcement say that while the new regulations are a step in the right direction, they won’t solve many of the problems the U.N. panel identified.

Even under the new rules, registering a company in Hong Kong typically requires merely filling in a form with such basic information as founding shareholders’ addresses and the director’s national-identity-document numbers. The company’s listed director can be its sole shareholder, and needn’t live in Hong Kong. Corporate-service agencies take care of the rest, and the whole process can be done online.

Agencies advertise such services as “24-hour express incorporation” and “shelf companies”—entities that have already been created and can be purchased by emailing copies of basic identity documents to the agency.

Above, the Xin Yuan 18, which Japanese authorities say belongs to Hong Kong-registered Ha Fa Trade International; below, photos released by the Japanese government showing what it suspects was an illicit transfer, likely of oil, from the Xin Yuan 18 to a sanctioned North Korean vessel, the Chon Ma San, in late February.
Above, the Xin Yuan 18, which Japanese authorities say belongs to Hong Kong-registered Ha Fa Trade International; below, photos released by the Japanese government showing what it suspects was an illicit transfer, likely of oil, from the Xin Yuan 18 to a sanctioned North Korean vessel, the Chon Ma San, in late February. ILLUSTRATION: MINISTRY OF DEFENSE, JAPAN

How Hong Kong Makes Evading North Korea Sanctions Easier

One North Korean technique, experts say, is to use agencies to establish a front company that opens a bank account, does a deal and then shuts down—leaving nobody for enforcers to find.

Many of the agencies operate one-room, one-person offices in Hong Kong to serve as postal addresses for dozens of client companies. The episode of the oil tanker cited by Japan last month shows how hard it is to peel back the layers.

The tanker, the Xin Yuan 18, was spotted by a Japanese military aircraft alongside a sanctioned North Korean vessel, the Chon Ma San, in the East China Sea late one February night. A “comprehensive assessment” led Japan to suspect that a ship-to-ship transfer of cargo had occurred, according to Japan’s foreign ministry.

The 23rd-floor office where Ha Fa Trade is registered belongs to an agency called Yirenjiaren Registration Secretary Ltd. A woman working there said she couldn’t confirm whether Ha Fa Trade is a client. A representative at the agency’s main office in Shenzhen, China, said Ha Fa Trade didn’t come to the agency directly and is a client of a different agency that uses the same Hong Kong office as its address.

A representative for that agency, Fei Long International Business Co., said it had been approached to register Ha Fa Trade in Hong Kong by yet another company-service agent identified only as Liao. There was no response to repeated requests for comment left for that agent through Fei Long.

Documents obtained from Hong Kong’s company registry list Tang Yun Hui as Ha Fa Trade’s director and only shareholder. The documents show the company’s address in the remote village of Yaoxing in China’s Hubei province, but provide no phone number or email address.

Ha Fa Trade is registered in Hong Kong’s Wan Chai district, but the address actually belongs to an agency that provides registration services.
Ha Fa Trade is registered in Hong Kong’s Wan Chai district, but the address actually belongs to an agency that provides registration services. PHOTO: BILLY H.C. KWOK/BLOOMBERG NEWS

The address corresponds to a two-story house—empty on a recent visit—with broken glass and overripe cabbages in the yard. Reached by phone, using a mobile-phone number provided by another village resident, Mr. Tang said he is an “ordinary sailor” and knows nothing about Ha Fa Trade or Xin Yuan 18.

“I’ve worked on so many ships and never heard of that one,” he said. Told of the company documents, he expressed surprise: “How could they have my signature?”

The Chinese identification-card number on the documents is his, the 32-year-old Mr. Tang said, and the address is that of the farmhouse where he grew up.

The ID card has been out of his hands numerous times, Mr. Tang said, including in 2016 when he lost his wallet disembarking from a ship in Shanghai and during many Chinese port calls, when a ship’s third mate holds it to fill out paperwork.

Mr. Tang said he earns $8,000 to $9,500 a year as a sailor on Chinese ships and has never owned a ship, visited Hong Kong or been associated with North Korean trade. He said repeatedly he had not.

It wouldn’t be convenient to meet in person, he added: “I’m in the middle of the sea.”

The back of the farmhouse, which Mr. Tang says was his boyhood home.
The back of the farmhouse, which Mr. Tang says was his boyhood home. PHOTO: JAMES T. AREDDY/THE WALL STREET JOURNAL

An official who answered the phone at North Korea’s consulate in Hong Kong declined to comment for this article.

To curb money laundering, the new Hong Kong regulations require companies to keep a registry of the people that ultimately own them or have significant control. These registries, though, are available only to Hong Kong authorities, not to the public or to banks trying to check companies for North Korean links.

The U.N. report says an alleged North Korean military-equipment supplier, Glocom, established a web of front companies, including in Hong Kong, and used them to make payments and move money to other North Korea-controlled entities.

To pay an associate in Singapore, according to the report, a North Korean representative would transfer money from China to the account of a Hong Kong front company, which would then transfer it to the associate’s Singapore account. The Singapore bank would see only the receipts from the Hong Kong company.

Glocom didn’t respond to emailed questions.

During a Hong Kong visit in January, Sigal Mandelker, the U.S. Treasury’s undersecretary for terrorism and financial intelligence, urged leaders “to send a strong message that Hong Kong is not going to be a place where companies find any kind of safe harbor to facilitate front-company, shell-company activity.”

Write to Niharika Mandhana at, James T. Areddy at and Michael R. Gordon at

Appeared in the March 17, 2018, print edition as ‘North Korea Uses Hong Kong as Hub.’


Pakistan, Seeing New Pressure from the West, Moves Against a Militant Group

February 15, 2018

Islamabad hopes to avoid international terror financing watchlist as it seeks access to international financial markets

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JuD says it rejects ‘misleading and malicious assertions’ by the US State and Treasury departments [File-EPA]

Pakistan is hoping to head off an attempt by the Trump administration to exert further pressure over terrorism by putting the country on a global terror financing watch list, according to a senior Pakistani official.

Miftah Ismail, adviser to the country’s prime minister and Pakistan’s de facto finance minister, said that the country had in recent days undertaken a wide-ranging crackdown on the Jamaat-ud-Dawa group, which also is known as JuD and is blamed by the United Nations for the 2008 attack on the Indian city of Mumbai, which killed 166 people.

Washington has pressed Pakistan to take action against Islamist militants on its soil, and blamed the country for giving sanctuary to Afghan insurgents, announcing last month that it is withholding $2 billion in security assistance.

The international Financial Action Task Force, meeting in Paris next week, will consider a proposal by the U.S., co-sponsored by the U.K. and other Western governments, to put Pakistan on a list of countries that don’t comply with international regulations to squeeze financing of terrorist groups, said Mr. Ismail.

U.S. officials wouldn’t confirm that it had proposed Pakistan for the terror financing watch list, saying the process was confidential.

But the Treasury and other top Trump administration officials aired their concerns about Pakistan’s oversight of terror financing.

“The international community’s longstanding concerns about ongoing deficiencies in Pakistan’s implementation of its anti-money-laundering/counterterrorism finance regime are well documented,” a Treasury spokesman said in a statement.

A British official briefed on the matter echoed the sentiment. “It is important that Pakistan follows through on its FATF and UNSCR commitments to tackle the threat from terrorist groups,” the official said. “Whilst we recognize that Pakistan has suffered at the hands of terrorism, it has not made sufficient progress against the recommendations in FATF reports.”

Pakistan has seized some 200 properties belonging to JuD, including schools, religious seminaries, clinics and mosques. The government has taken over the group’s sprawling campus outside Lahore and, under a law passed this week, banned the group, said Mr. Ismail. The authorities also have seized more than 200 ambulances run by the group’s charity arm, he said.

“We’re taken the wind out of the sails of this proposal,” Mr. Ismail said, adding that the proposal focused on JuD. “We’ve basically done away with these organizations.”

In a statement, JuD said the government was closing down the group’s operations to please the U.S. and India. “This action has also affected thousands of poor people getting help from these institutions,” the group said.

It was unclear whether the Pakistan action, aimed at making Islamabad comply with U.N. Security Council resolutions, would satisfy Washington and the other sponsors of the nomination. Even if it doesn’t assuage them, Pakistan hopes to get enough support from other countries to block the nomination.

It wasn’t immediately apparent if JuD’s headquarters in Lahore, Pakistan’s second largest city, was still functional. The group’s leader, Hafiz Saeed, who was released by a Pakistani court from house arrest last year, lives in Lahore. JuD’s new political arm has taken part in a series of by-elections in recent months.

Being put on the FATF watch list likely would complicate the country’s ability to access international financial markets, add further scrutiny to international banking transactions, and create more red tape for Pakistan’s exporters. Pakistan was on the watch list from 2012 to 2015.

Greater damage would likely occur to the country’s reputation, as it seeks to attract foreign investment and project an image of a more “normal” country, said experts.

Washington’s concern over JuD, which targets India, is separate from its demand from Pakistan for action against the Taliban and the Haqqani network, which fight in Afghanistan. President Donald Trump has voiced his frustration over Pakistan, saying they “give safe haven to the terrorists we hunt in Afghanistan.”

Islamabad denies that there are any sanctuaries for militants on its territory and says that it has taken action against all groups “without discrimination”.

U.S. Director of National Intelligence Dan Coats told U.S. lawmakers Tuesday that Pakistan’s recent operations against the Taliban and related groups operating within the country weren’t adequate.

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FBI Director Christopher Wray (from left), CIA Director Mike Pompeo, Director of National Intelligence Dan Coats, Defense Intelligence Agency Director Lt. Gen. Robert Ashley, NSA Director Adm. Michael Rogers and National Geospatial-Intelligence Agency Director Robert Cardillo testify before the Senate intelligence committee on Tuesday.

Chip Somodevilla/Getty Images

“The actions taken thus far do not reflect a significant escalation of pressure against these groups, and are unlikely to have a lasting effect,” Mr. Coats told the Senate Intelligence Committee. “Pakistan-based militant groups continue to take advantage of their safe haven to conduct attacks in India and Afghanistan, including U.S. interests therein.”

Last month, the Trump administration levied new sanctions against several Taliban financiers who the U.S. Treasury said have been fundraising in Pakistan.

Write to Saeed Shah at, Ian Talley at and Dion Nissenbaum at

Treasury’s Mnuchin says Russian oligarch report to lead to sanctions

January 30, 2018


WASHINGTON (Reuters) – The Trump administration will seek to impose sanctions in connection with a U.S. government report identifying Russian oligarchs who are close to the Kremlin, Treasury Secretary Steven Mnuchin said on Tuesday

 Image result for Steven Mnuchin, photos

U.S. Treasury Secretary Steven Mnuchin testifies to the Senate Banking, Housing and Urban Affairs Committee on “The Financial Stability Oversight Council Annual Report to Congress” on Capitol Hill in Washington, U.S., January 30, 2018. REUTERS/Joshua Roberts

In testimony before the Senate Banking Committee, Mnuchin said while the administration has not levied sanctions under a new law designed to punish Moscow for alleged meddling in the 2016 U.S. election, it viewed the report as an initial step.

“This should in no way be interpreted as we’re not putting sanctions on any of the people in that report,” Mnuchin told lawmakers.

“There will be sanctions that come out of this report,” he said, adding that it could happen as soon as next month.

Late on Monday, the Treasury Department named major Russian businessmen, including the heads of the country’s two biggest banks, metals magnates and the boss of the state gas monopoly on a list of oligarchs close to the Kremlin.

Mnuchin said there was a classified component to the report, which was mandated by the law passed by Congress in July.

Democrats have criticized the Trump administration for failing to impose new sanctions on Russia. The State Department has said it was not yet seeking sanctions as the new law was already acting as a deterrent.

Reporting by Pete Schroeder; Editing by Paul Simao


U.S. Treasury Declines to Label China a Currency Manipulator

October 18, 2017

Nation remains on formal Monitoring List, along with Japan, South Korea, Germany and Switzerland

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The U.S. Treasury again declined to label China a currency manipulator, though it continued to criticize Beijing for its large trade surplus and restrictions on foreign investors.

“Treasury remains concerned by the lack of progress made in reducing the bilateral trade surplus with the United States,” the department said of China in its semiannual report on international exchange rates. “China should take concrete steps to level the playing field for American workers and firms.”

The Treasury Department’s report, released Tuesday, is the document in which Washington could formally criticize Beijing for manipulating the yuan lower in an effort to boost its exports. As a candidate, President Donald Trump said he would label China as a currency manipulator, but this is now the second of the semiannual reports in which his administration has declined to make the designation, a label that may have led to a deepening trade confrontation. The U.S. also is trying to encourage China to work with it in cracking down on trade and finance flows to North Korea.

The U.S. gave China credit for allowing the yuan to rise this year and noted that China’s trade surplus has been narrowing.

The report kept China on the Treasury’s formal Monitoring List, which is what the U.S. uses to place countries on notice that the government considers their currency and other economic policies to be putting the U.S. at unfair disadvantage.


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Since the spring, the Treasury has removed Taiwan from its monitoring list. It has continued to keep Japan, South Korea, Germany and Switzerland on it.

In removing Taiwa n from the watch list, Treasury cited the progress Taiwan has made in reducing the scale of its foreign-exchange interventions.

Placement on the list can trigger sanctions if the countries satisfy three criteria: persistently intervening in currency markets, running a significant trade surplus with the U.S. and running a large current account surplus overall. None of the countries met all three criteria.

The five countries remaining on the watchlist—China, Japan, South Korea, Germany and Switzerland—all trigger some of the criteria.

In blaming China for currency manipulation during his presidential campaign, Donald Trump may have been fighting the last battle: China’s visions are far more potent and complex. Photo: Getty

The report faulted China for running the largest bilateral surplus with the U.S., and faulted Germany, Japan and South Korea for its U.S. surpluses and overall surpluses. Germany now runs the world’s largest current account surplus. Switzerland has a large current account balance and intervened heavily in its exchange markets, but runs a relatively small trade surplus with the U.S.

“The administration remains deeply concerned by the significant imbalances in the global economy,” the report said. “More broadly, current account surpluses in several major trading partners have not only been large but unusually persistent over the last decade.”

The report also added criticism of India, saying that there has been “a notable increase in the scale and persistence of India’s net foreign exchange purchases.”

Although it didn’t formally add India to its monitoring list, it said “Treasury will be closely monitoring India’s foreign exchange and macroeconomic policies.”

Write to Josh Zumbrun at

China is stumbling hard at acquiring the high-tech chip companies it wants so badly

September 16, 2017

September 14, 2017

US president Donald Trump yesterday (Sept. 13) vetoed a Chinese private-equity firm’s proposed $1.3 billion purchase of Lattice Semiconductor, an Oregon-based chip manufacturer.

The deal’s failure marks the latest instance where foreign governments have pushed back against China’s efforts to acquire technology assets in their country, as China invests heavily in hardware and software companies at home and abroad.

The semiconductor industry in particular has been a focus of China’s ambitions, as chips are the brains of nearly every electronic device. But as of 2014, China still imported 90% of its semiconductors. As a result, the country has gone on a spending spree, buying up semiconductor companies all over the world.

Many of these deals have fallen through, however, due to pressure from the Committee on Foreign Investment in the United States (CFIUS), an inter-agency branch of the Treasury that examines foreign purchases of domestic companies and assesses their potential impact on national security. While CFIUS does not “block” deals outright, it can make “recommendations” to both parties involved that the deal ought to be terminated. If necessary, CFIUS will refer cases to the president, who then holds the power to veto the deals—which is what happened with Lattice.

Lattice marks the seventh such major deal that has collapsed since mid-2015, and it’s the second to be vetoed by the US president within that period. This list shows just how badly China is failing at acquiring foreign semiconductor technology.


The largest attempted Chinese takeover of a US semiconductor maker began in July 2015, when media revealed that Tsinghua Unigroup, a state-affiliated Chinese chipmaker with ties to with Tsinghua University in Beijing, wanted to buy Idaho-based Micron. Tsinghua Unigroup reportedly had put up $23 billion (paywall) to purchase the company.

Micron made it clear it was cold on the deal from the get-go. Just days after Tsinghua Unigroup’s bid hit news outlets, a source at Micron told Reuters the deal was likely not possible as CFIUS would probably recommend against it. In August that year, senator Chuck Schumer, a frequent critic of China, directly called on CFIUS to formally investigatethe potential acquisition.

But the deal didn’t even get that far. Despite reports that Tsinghua’s chairman travelled to the US to talk to Micron, no further details about a deal emerged until November 2016, when Tsinghua confirmed it was not in any talks with the Idaho company.

Had both sides reached an agreement, the deal would have carried historic implications for the US tech industry. Micron to this day remains the last major US-based manufacturer of DRAM flash memory, a critical component in nearly all consumer electronic devices. Its American rivals all ceded ground to competitors in Japan, Korea, and Taiwan.

Fairchild Semiconductor

In December 2015, state-affiliated conglomerate China Resources Holdings made an unsolicited offer to purchase Fairchild Semiconductor, one of the oldest companies in Silicon Valley. The Chinese investors proposed paying $2.5 billion for the company, equivalent to $21.70 per share, a premium over what rival bidder, US-based On Semiconductor, had offered earlier. The Chinese suitors also offered a $108 million reverse termination fee in the event that CFIUS recommended against the purchase.

Despite the markup and the guarantee, Fairchild refused the offer in February 2016, stating that the deal presented an “unacceptable level of risk” of failing should it ever reach CFIUS. It ended up being sold to On Semiconductor in September 2016.


In March 2015, Dutch electronics giant Philips, which is also listed in the US, announced it intended to sell an 80% stake in Lumiled, a subsidiary that manufactures LEDs (light-emitting diodes), a semiconductor, to a Chinese consortium known as GO Scale Capital for $3.3 billion. In October, however, the company stated in its latest earnings report that CFIUS had “expressed certain unforeseen concerns” towards the deal, which could ultimately kill it.

The bid was dead by January 2016. “I am very disappointed about this outcome as this was a very good deal for both Lumileds and the GO Scale Capital-led consortium,” said Philips CEO Frans van Houten. While LEDs are generally associated with lighting, according to the New York Times, CFIUS held concerns that the gallium nitride used to make the components could also be used by China’s military (paywall). Philips eventually agreed to sell Lumiled to US-based private-equity firm Apollo Global Management in December 2016, at a discounted price of $2 billion.

Western Digital

In September 2015 Tsinghua Unisplendour, owned by the same parent as Tsinghua Unigroup, announced it intended to pay $3.78 billion for a 15% stake in Western Digital, the semiconductor maker best known for its hard-disk drive business. The company told investors it did not expect the deal to be subject to a CFIUS review because the stake was non-controlling. But in February 2016 Tsinghua backed out of the deal(paywall) once it became clear that a probe was indeed forthcoming. The two companies’ relationship didn’t end there, however. In September 2016 Western Digital and Tsinghua Unisplendour announced they had formed a China-based joint venture with Tsinghua as the majority shareholder.


In March 2016, California-based, Taiwan-listed semiconductor maker GCS announced it was in talks to be purchased by Sanan Optoelectronics, a Chinese maker of LED wafers and solar cells, for $226 million. In August, GCS confirmed that the deal had fallen through due to pressure from CFIUS. The body did not state its specific objections, but they likely stemmed from GCS’s contracts with the US military. Like Western Digital, GCS opted to form a joint venture with its Chinese suitor as an alternative.


In May 2016 China’s Fujian Grand Chip announced it had agreed to buy Germany’s Aixtron, a maker of semiconductor manufacturing equipment, for $752 million. In November, Aixtron announced that CFIUS told both parties there were “unresolved U.S. national security concerns regarding the proposed transaction.” Rather than kill the deal, Aixtron and Fujian Grand Chip said they would appeal the recommendation directly to president Barack Obama—who sided with CFIUS. The White House said that there was “credible evidence” that Fujian Grand Chip “might take action that threatens to impair the national security of the United States.” The process—a CFIUS warning, an appeal to the president, and then a veto–was the same process that led to the collapse of the Lattice deal.

China is stumbling hard at acquiring the high-tech chip companies it wants so badly

Read next: A fund linked to the tech deal Trump just vetoed is an investor in China’s national security

Donald Trump Faults GOP Leadership for Looming Debt Ceiling ‘Mess’

August 24, 2017

Treasury officials have said Congress must raise borrowing limit by the end of September

Image result for Secretary of the Treasury, Steven Mnuchin, with President Trump, photos

Updated Aug. 24, 2017 10:34 a.m. ET

President Donald Trump on Thursday blamed the congressional Republican leadership for what he called the “mess” awaiting lawmakers this fall as they seek to raise the government’s borrowing limit, the latest criticism by the president on members of his own party.

“I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval,” Mr. Trump tweeted Thursday morning, referring to Senate Majority Leader Mitch McConnell (R., Ky.) and House Speaker Paul Ryan (R., Wis.) “They didn’t do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!”

Republicans have in the past balked at voting to raise the debt limit, forcing GOP leaders to turn to Democrats for the votes for the must-pass legislation. The debt ceiling increase allows the government to pay the bills stemming from past spending and tax decisions. Republicans need Democratic votes in the Senate to reach the 60-vote threshold to pass a debt ceiling increase.

Spokesmen for Messrs. McConnell and Ryan didn’t immediately respond to requests for comment on Thursday.

Treasury officials have said Congress must raise the government’s borrowing limit at some point near the end of September. If Congress doesn’t raise the debt ceiling to allow new borrowing, the U.S. could default on its debt or miss payments for benefits and salaries.

Republicans earlier in the summer were considering tying an increase in the federal debt limit to a bill extending funding for a program that lets military veterans get medical care outside of Department of Veterans Affairs facilities, people familiar with the idea said.

Write to Rebecca Ballhaus at and Kristina Peterson at


U.S. Freezes Assets of Venezuelan President Nicolás Maduro

August 1, 2017

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Treasury Secretary Steven Mnuchin, left, national security adviser H.R. McMaster, right, speak at the beginning of the daily briefing at the White House in Washington, Monday, July 31, 2017, on the situation in Venezuela. (AP Photo/Susan Walsh)

The U.S. Treasury Department announced Monday it has frozen the assets of and sanctioned Venezuela President Nicolas Maduro for undermining democracy in going ahead with elections on Sunday for a new legislative assembly. “Yesterday’s illegitimate elections confirm that Maduro is a dictator who disregards the will of the Venezuelan people,” said Treasury Secretary Steven Mnuchin in a statement. Under the sanctions, U.S. banks are prohibited from dealing with Maduro.


U.S. Freezes Assets of Venezuelan President Nicolás Maduro

The Treasury Department cites human rights violations

Venezuelan President Nicolas Maduro celebrating election results Monday in Caracas, Venezuela.
Venezuelan President Nicolas Maduro celebrating election results Monday in Caracas, Venezuela. PHOTO: NATHALIE SAYAGO/EUROPEAN PRESSPHOTO AGENCY

Updated July 31, 2017 5:57 p.m. ET

The U.S. imposed sanctions against Venezuelan President Nicolás Maduro on Monday, saying his government abused human rights and organized an illegitimate vote designed to advance an authoritarian regime, as the leader threatened his domestic opponents with imprisonment.

The U.S. Treasury Department’s move freezes any assets Mr. Maduro has within American jurisdiction, putting him in a small club of leaders it targets including North Korea’s Kim Jong Un, Zimbabwe’s Robert Mugabe and Syria’s Bashar al-Assad.

It was unclear if Mr. Maduro had any U.S.-linked assets but the designation bans his access to the U.S. financial and commercial markets and prohibits any American entity from conducting business with him.

Caracas said 8.1 million people voted on Sunday to choose delegates to form an assemblyto write a new national charter. The results drew scorn from many Venezuelans and condemnation from governments in Europe and the Americas who say the assembly will give the government unchecked authority.

The results were a foregone conclusion, since voters had been asked to choose 545 delegates from 6,000 candidates handpicked by the ruling party. Critics of the vote said it also was plagued by a lack of independent observers and safeguards to prevent people from casting multiple ballots.

“Yesterday’s illegitimate elections confirm that Maduro is a dictator who disregards the will of the Venezuelan people,” U.S. Treasury Secretary Steven Mnuchin said, adding that Caracas used violence, repression and corruption to cow his opponents. The Treasury warned that any officials connected with the constituent assembly created in Sunday’s vote also risk U.S. sanctions.

The Treasury didn’t impose oil-related sanctions even though senior U.S. officials had warned they were considering a ban of the petroleum trade with Venezuela if Mr. Maduro moved ahead with the constituent assembly.

National Security Adviser Lt. Gen. H. R. McMaster signaled at a White House press conference that the U.S. administration showed restraint out of concern some U.S. penalties could hurt ordinary Venezuelans. Mr. Trump is “only considering those options that would benefit directly the Venezuelan people,” Mr. McMaster said.

Last week, the U.S. leveled sanctions on 13 high-ranking Venezuelan officials for alleged corruption, human-rights violations and undermining the country’s democracy, warning that any individuals who became members of the constituent assembly risked being added to the U.S. sanctions list.

Analysts and people familiar with the matter say the latest sanctions are part of a broader set of escalating actions that politically isolate the Maduro government and complicate any of its efforts to raise fresh funds or sign new deals through state-owned entities.

“It shows the seriousness of the administration’s concerns and sends a message that the constituent assembly is not going to be accepted,” said Mark Schneider, a senior adviser at the Center for Strategic and International Studies and former top State Department official.

Mr. Maduro, a 54year-old former bus driver and union leader, was handpicked by his mentor, the late strongman Hugo Chávez. A former lawmaker who helped rewrite the constitution in 1999 under Mr. Chávez, Mr. Maduro served several years as Venezuela’s foreign minister and vice president.

Since taking office in 2013, Mr. Maduro has presided over a nation in disarray. The country´s economic meltdown intensified due to years of mismanagement and a sharp drop in oil prices, the country’s sole source of hard currency. Soaring inflation and severe shortages of food and medicine have led to widespread turmoil and an exodus of Venezuelans from the country. On Monday, he threatened to imprison his adversaries with imprisonment.

“Some will end up in a jail cell,” Mr. Maduro said. “We are going to write a new history.”

Mr. Maduro also said he would look to force the opposition to sit down for negotiations through a so-called truth commission that he previously said would be created by the new constituent assembly. Though he made his comments in a threatening manner, Stalin González, an opposition member of congress, said that the two sides needed to embark on real negotiations.

“An accord has to be the way out,” he said. “Today we have to bet on an accord being a possibility.”

Rhetoric on both sides portended heightened instability in a nation racked by protests. Ten more people died in confrontations between protesters and security forces on Sunday.

Still, the government deemed the vote a resounding success that would allow it to calm unrest and improve the economy. Mr. Maduro has done little, though, to clarify how the government would make corrections, since economists say state controls of the economy, including stringent price controls, are to blame.

“Now is the time to keep fighting in Venezuela for peace, for free elections,” Julio Borges, head of the opposition-led National Assembly, said in a television interview on Monday. “Maduro is behaving like an emperor.”

While many in the opposition despaired at what they said was an increasingly autocratic tint to the Maduro administration, others worried that a government saddled with a collapsing economy and low popularity risks collapse.

Francisco Rodríguez, who has strong links with government and opposition officials here and is the chief economist at New York-based brokerage Torino, said that as support for the administration declines, it may not be able to maintain its hold power “even with the institutions of an authoritarian state.”

“In other words,” he said in a note to client, “even non-democratic governments require some level of political support for their grasp on power to be stable, and it is unclear whether the government’s current numbers are still above that threshold.”

Write to Ian Talley at, Juan Forero at and Anatoly Kurmanaev at

Appeared in the August 1, 2017, print edition as ‘U.S. Hits Maduro With New Curbs.’


U.S. Treasury Stops Short of Calling China a Currency Manipulator

April 15, 2017

Department’s report does sharply criticize Chinese exchange-rate policies

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy.

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy. PHOTO: XAUME OLLEROS/BLOOMBERG NEWS

WASHINGTON—The U.S. Treasury sharply criticized China’s exchange-rate policies on Friday, though it stopped short of labeling the Asian trade giant a currency manipulator, as President Donald Trump said he would do while running for office.

“China has a long track record of engaging in persistent, large-scale, one-way foreign-exchange intervention,” the Treasury Department said in its semiannual report on foreign exchange policies of major U.S. trade partners. Although Beijing has allowed the yuan to slowly appreciate in recent years and actively fought depreciation recently, its past interventions “imposed significant and long-lasting hardship on American workers and companies,” the Treasury said.

The report followed an apparent warming of relations between the U.S. and China following a visit to Washington and Mr. Trump’s Mar-a-Lago resort by Chinese leader Xi Jinping last week. Mr. Trump is counting on Mr. Xi for support in a confrontation with North Korea. After the visit, Mr. Trump told The Wall Street Journal he wouldn’t name China a currency manipulator, a label that may have led to a deepening trade confrontation.

Still, the administration sought to stick to some of the tough themes Mr. Trump laid out as a candidate and as president on trade and currency.

“Treasury will be scrutinizing China’s trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the United States,” the Treasury report said.

The report has traditionally been used as a diplomatic tool to prod other countries whose currency policies were deemed a threat to U.S. industries. The latest report’s censure of China and other countries, including South Korea and Germany, could be used in the future as a pretext for new tariffs.

“Treasury is committed to aggressively and vigilantly monitoring and combating unfair currency practices,” the report said.

Preserving a two-decade precedent, no country was named a currency manipulator.

Along with Friday’s about-face was an acknowledgment by Mr. Trump and his team that Beijing has been propping the yuan up over the last two years, instead of pushing it down as the president had previously alleged. Building debt problems and a slowing economy has put downward pressure on the yuan, forcing the central bank to burn through $1 trillion, or a quarter of its foreign-exchange reserves, to keep the currency from falling.

“The administration clearly realized this was not the right time to have a fight with China over currency,” said Brad Setser, a senior fellow at the Council on Foreign Relations and a former senior U.S. Treasury official in the Obama administration.

Still, “there’s a clear suggestion that China needs to do more to open up its markets to U.S. goods and services,” Mr. Setser said. “The challenge will be getting real changes that have a real impact on the size of U.S. exports to China.”

Most Western economists agree Chinese authorities in the past used an undervalued exchange rate to help fuel its rise to being the No. 2 economy in the world. A cheaper currency makes products less expensive to produce and more attractive to buyers overseas. That was an essential factor in making China the world’s biggest manufacturing base, but it cost the U.S. and other countries millions of jobs.

During his campaign, Mr. Trump tapped into anger at China that was pent up in major manufacturing states, saying he would label the country a currency manipulator and slap fresh tariffs on its imports.

Amid rising concerns about an increasingly belligerent North Korea sparking a dangerous conflict with U.S. allies Asia, Mr. Trump earlier this week said he decided to treat Beijing with more leniency on trade and currency in exchange for Beijing’s help in reining in Pyongyang.

China was not alone in being targeted in Treasury’s latest report.

Repeating criticisms made under the Obama administration, the Treasury Department also kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a special “monitoring list” that flags trade partners with currency and other economic policies deemed to be a risk to the U.S. economy.

The name-and-shame list can trigger sanctions against offending trade partners if the countries can be shown to intervene in foreign-exchange markets and maintain large trade surpluses with the U.S. and rest of the world. None of the countries met all of the criteria.

Japan and South Korea, two major U.S. trade partners, have long been on Treasury’s radar in part because they have pushed down the value of their currencies in the past. And even though Germany doesn’t control the value of the euro because it is only one member of the European currency union, the country has been targeted because its economic policies and a relatively weak euro have helped the country to achieve the world’s largest trade surplus.

Future reports could step up the criticism, given Treasury’s latitude under the original laws guiding the report to Congress.

China could again allow the yuan to fall, triggering fresh criticism from U.S. manufacturers and renewed political pressure on the administration to label them a manipulator. There are costs to keeping the yuan stable beyond selling exchange-rate reserves. It also makes it harder for the government to meet its growth targets.

Also, the Commerce Department is preparing a study of why the U.S. has such large trade deficits with other nations, and some analysts believe that could lay the foundation for applying countervailing duties against countries that manipulate their currencies. The exchange-rate undervaluation, under a proposal the Commerce Department is considering, would be considered a subsidy.

While some trade experts question whether that plan would be compliant with current World Trade Organization rules, the administration could still use it as a pretense for levying across-the-board tariffs on imports from a currency-manipulating country.

Although many of the findings in the report repeated the basic assessments made under the Obama administration, the report still carried a distinct Trump administration tone. For example, it used sharper language in its warning trade partners against exchange-rate offenses.

“Though there has been a trend in the last two years towards reduced currency intervention by key trading partners, it is critical that this not represent merely an opportunistic response to shifting global macroeconomic conditions…but a durable policy shift away from foreign-exchange policies that facilitate unfair competitive advantage,” the report said.

“The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates,” it added.

Write to Ian Talley at


Trump’s Currency Complaints Hit Unexpected Targets

February 17, 2017

Top-five trading partners China, Japan and Germany brush them off; Taiwan and Switzerland seem to be paying heed


Feb. 17, 2017 3:47 a.m. ET

HONG KONG—U.S. President Donald Trump’s accusations of currency manipulation appear to be reaching an audience he may not have primarily intended.

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies,…

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies , while his top trade adviser Peter Navarro has accused Germany of benefiting from what he termed the “grossly undervalued” euro .

All three countries, which rank among the U.S.’s top five trading partners, have brushed off the Trump administration’s claims.

“No one has the right to tell us that the yen is weak,” Japan’s finance minister Taro Aso told parliament on Wednesday, following last weekend’s meeting between Mr. Trump and Prime Minister Shinzo Abe . Japan hasn’t directly intervened in currency markets since 2011 following a major tsunami and resulting Fukushima nuclear disaster.

“The charge that Germany exploits the U.S. and other countries with an undervalued currency is more than absurd,” Jens Weidmann , the president of the German central bank, said earlier this month.

China hasn’t directly commented on Mr. Trump’s criticisms, but most analysts say Beijing recently has been propping up the yuan by selling foreign-currency reserves rather than looking to weaken it.

Still, some smaller economies look like they are taking notice, notably Taiwan and Switzerland. The U.S. Treasury found in October that both had engaged in persistent, one-way currency intervention, essentially by buying foreign currencies like the U.S. dollar and selling their own to maintain weak exchange rates.

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Analysts say the central banks of Switzerland and Taiwan are now stepping back from those activities, perhaps to avoid closer scrutiny from the Trump administration. The upshot: The Swiss franc has advanced nearly 2% against the U.S. dollar this year, while the new Taiwan dollar has surged 5.3%. Both have outperformed the euro and yen since the U.S. election in early November.

Taiwan’s central bank bought $500 million in foreign currencies in the fourth quarter, well below its quarterly average of more than $3 billion since 2012, according to Khoon Goh , head of Asia research at ANZ in Singapore, who said he suspects it is stepping back from “currency-smoothing operations.” The central bank said it doesn’t comment on currency policy.

For the first nine months of last year, the Swiss National Bank /quotes/zigman/1379668/delayed CH:SNBN +0.12% intervened heavily in currency markets to slow the franc’s rise, spending an amount roughly equivalent to its current-account surplus for the period, J.P. Morgan/quotes/zigman/272085/composite JPM -0.76% analysts note. Over the following four months, the scale dropped to around two-thirds of the surplus.

“It’s not an entirely fanciful suggestion that the SNB might be tapering intervention in order to the guard against the risk of being cited by the U.S. Treasury as a currency manipulator,” the analysts wrote in a note.

The Swiss National Bank declined to comment.

For the U.S. to label an economy a currency manipulator under the current law, it must have a large trade surplus with the U.S. and a hefty current-account surplus and persistently intervene in the currency in one direction. As of October, no economies met all three criteria.

Recent comments from officials in South Korea, which the Treasury has flagged for its hefty trade surplus with the U.S. and its current-account surplus, suggest they’re similarly eager to avoid U.S. ire, says Govinda Finn , senior analyst at Standard Life Investments in Edinburgh. The Korean won has surged 5.2% against the dollar this year.

But any gains in the Korean and Taiwanese currencies due to U.S. political pressure may not last, he said: “On a longer-term horizon, there’s a pretty strong case to say both of those currencies can and will weaken as the authorities look to support their economies.”

Jenny W. Hsu contributed to this article.

Write to Saumya Vaishampayan at

The CIA Keeps Putin’s Secrets

January 4, 2017

Western governments stayed silent on the U.K. polonium murder of a Putin critic.

The Russian president in Saint Petersburg, Russia, Dec. 26.

 The Russian president in Saint Petersburg, Russia, Dec. 26. PHOTO: GETTY IMAGES

Jan. 3, 2017 7:05 p.m. ET

Here’s one more way U.S. intelligence on Russia may not be up to snuff. Many would like President Obama to repay Russian hacking by releasing secret details of Vladimir Putin’s stolen wealth, estimated at up to $160 billion. They may be disappointed to learn the data don’t exist.

The idea of weakening Mr. Putin by laying out his secrets is a good one. We proposed it here three years ago. But even then, when the U.S. Treasury announced sanctions on Mr. Putin’s “personal bank” after his Crimea grab, it was quoting the 10-year-old allegation of one of Mr. Putin’s domestic opponents. Treasury revealed nothing you couldn’t find from Google.

A second problem may be that Mr. Putin actually owns title to nothing. At least in the latter stages of Russia’s kleptocracy, he merely points to things and people give them to him. Recall Patriots owner Robert Kraft at first acquiescing in the politely diplomatic storyline that he gave his 2005 Super Bowl ring to Mr. Putin as a gift. Later, Mr. Kraft came clean: Mr. Putin asked to try the ring on, then “put it in his pocket, and three KGB guys got around him and walked out.”

The extreme murkiness of who owns what, and for how long, under Putin sufferance is illustrated by the financial coup with which he ended 2016.

To relieve a strained Russian budget and show the country’s appeal to Western investors, his underlings arranged a partial privatization of state-owned oil giant Rosneft. Yet the Italian bank supposedly financing the purchase admitted it was still mulling whether to participate. The key Western participant, Anglo-Swiss mining giant Glencore, was revealed in the Russian press to be off the hook for most of the cash for its $5 billion stake: “Russian banks provided it an exemption from this obligation.”

So where the money came from and who might end up owning many of the shares is about as clear as mud.

Still, critics are not wrong to suspect Mr. Putin is sensitive to corruption allegations. Nobody predicted the Arab Spring, the Ukrainian revolution, the fall of Gadhafi, etc. Mr. Putin cannot be certain when a public eruption might sweep him from his throne.

Igor Sechin, the Rosneft chief and Mr. Putin’s No. 1 ally, has been flinging lawsuits in all directions to suppress Russian media reports about his mansions and yachts. A billion-dollar palace on the Black Sea, allegedly built for Mr. Putin with diverted hospital funds, has been shrouded in murky transactions. Reportedly the property is now owned by a friendly businessman who paid many times its market value.

At least the CIA ought to have complete files on Mr. Putin’s early days when Russia’s media culture was wide open and free-wheeling. His alleged involvement in the disappearance of $93 million in food money as deputy mayor of St. Petersburg was documented by a special committee of the city’s elected legislature.

Ditto the 1999 apartment block bombings that killed 293 Russians and helped cinch his election as president. Even before the attacks, reputable European and Russian newspapers in Moscow reported that such outrages were being planned by Russia’s secret police. Several subsequent scholarly and journalistic studies have endorsed the view that these “terrorist” acts were actually engineered by Mr. Putin’s supporters.

U.S. intelligence agencies surely have definitive estimates on both of these episodes. The CIA may also be able to tell us more than we already know about many convenient murders and suspicious deaths that greased Mr. Putin’s rise and protected him from inopportune disclosures.

OK, let us stop kidding ourselves. Let Rep. Adam Schiff, a top Democrat calling for exposure of Putin secrets, stop kidding himself. Western governments have kept silent even on the polonium murder in London of dissident Alexander Litvinenko, an act of international nuclear terrorism. Why? Because they are unwilling to press hard on the Putin regime, fearing either blowback or his replacement by the devil they don’t know.

Mr. Obama’s sanctions have been precisely calibrated with these fears in mind, and Donald Trump brings only so much room for change. Rest your mind: Nothing in “The Art of the Deal” suggests Mr. Trump would voluntarily surrender the leverage Mr. Obama’s existing sanctions give him in future dealings with Mr. Putin. At the same time, he will stop accommodating Mr. Putin by supplying loud but weak rhetoric that Mr. Putin can play back to the Russian people as evidence the U.S. represents a geostrategic threat that Mr. Putin is manfully and victoriously outwitting.

The best and likeliest outcome if Mr. Trump is successful is that Mr. Putin will stop being an international problem in the run-up to his own re-election in 2018 and a year or so thereafter. Mr. Trump will be freer to concentrate on domestic reform and reacting to whatever emergencies the European Union inevitably throws up in the new year.

This holiday will be temporary. Mr. Putin, who has no realistic hope for a peaceful retirement, and whose society and economy are rotting out from under him, is almost certain to be a bane for the world and Russia in the coming decade.