Remarks by Secretary of the Treasury Janet L. Yellen Ahead of Roundtable with CEOs of German Banks in Frankfurt, Germany

As Prepared for Delivery

Thank you for joining me here this morning.

We see that the global economy is resilient. It has outperformed expectations amid a challenging geopolitical landscape, and global financial conditions have eased since last year’s banking sector turmoil.

However, while the risks are broadly balanced, there remains uncertainty, including due to geopolitical tensions. We also remain vigilant to potential vulnerabilities, including elevated levels of corporate debt, leverage and liquidity mismatches in the non-bank sector, and strains in commercial real estate markets.

Mitigating risks to financial stability in both the bank and non-bank sectors remains a priority of U.S. engagement abroad.

And hearing from financial institutions around the world helps us deepen our understanding of the economic and financial landscape you operate in and helps inform our actions.

Today, I would like to hear from you on the risks you and your clients are facing—from spillovers from Russia’s war on Ukraine, to shifting dynamics in the trade relationship with China, to financial sector vulnerabilities in the region. Your insights are extremely valuable. I also want to focus our time together today on Russia’s ongoing invasion of Ukraine. Specifically, I would like to discuss the Treasury Department’s actions on Russia sanctions and the crucial importance of the financial sector’s efforts to comply with and implement them. Our discussion today is timely given positive recent developments within Germany and across the EU to build European anti-money laundering and sanctions institutions, including efforts underway to establish a new German Federal Financial Crime Agency and a new EU Anti-Money Laundering Authority.

As Russia continues to wage its brutal, unjust, and illegal war on Ukraine, Treasury continues to explore new ways to advance the Biden Administration’s key goals: reducing the revenues the Kremlin has to fuel its war of choice against Ukraine and disrupting Russia’s ability to get the critical goods it needs to prosecute the war and bolster its military-industrial base. Russia is desperate to obtain critical goods from advanced economies like Germany and the United States. We must remain vigilant to prevent the Kremlin’s ability to supply its defense industrial base, and to access our financial systems to do so.

While we have seen the most concerning evasion through the use of jurisdictions like China, the UAE, and Türkiye, we are also working to disrupt evasion wherever we see it, from Central Asia to the Caucasus and throughout Europe. Across jurisdictions, financial institutions are on the front lines in implementing our global Coalition’s sanctions and export control policies. As we frequently tell U.S. banks, banks’ compliance measures and risk decisions are critical to combating Russian evasion.

As I am sure you know, last December, President Biden authorized secondary sanctions against foreign financial institutions if they conduct or facilitate any significant transaction or provide any service involving Russia’s military-industrial base. This strengthens the United States’ ability to disrupt and degrade Russia’s war machine.

In response, many financial institutions have bolstered their compliance measures in line with OFAC guidance.

We are seeing the positive impacts of these efforts: The global financial sector, including German banks, is helping to frustrate Russia’s ability to procure goods for the battlefield and its defense industrial base. Thank you for the efforts you have already made.

However, our objectives have only been partially met. Russia continues to procure sensitive goods and to expand its ability to domestically manufacture these goods. We must remain vigilant and be more ambitious.

I urge all institutions here to take heightened compliance measures and to increase your focus on Russian evasion attempts. I ask that you ensure that that your global sanctions compliance policies are stringently applied by your branches and subsidiaries abroad. I also recommend that you reach out to your foreign correspondent banking customers in high-risk jurisdictions to encourage them to do the same.

Taking these measures will also help prevent the exploitation of your institutions by other actors such as Iran, which we have seen leverage weaknesses in financial institutions to obtain critical goods from our economies and help fund terrorist groups throughout the Middle East.

Again, thank you for the work you have already done. I welcome the collaboration we have had to date, and I look forward to discussing the risks you are seeing to the global economic outlook and your efforts to support our collective goal of cracking down on sanctions evasion.

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