July 21, 2023

ICYMI: At Hearing, Warren Warns about Crypto’s Use by North Korea to Fund Nuclear Weapons Program and Evade to Sanctions

Warren Will Reintroduce Bipartisan Crypto Anti-Money Laundering Bill to Close Gaps that Allow Rogue States to Skirt Laws and Threaten National Security 

Hearing Exchange (YouTube)

Washington, D.C. – At a hearing of the Senate Armed Services Committee, U.S. Senator Elizabeth Warren (D-Mass.) warned about the national security risks of rogue states using crypto to evade sanctions and fund their weapons programs, spying, and cyberattacks – calling out North Korea for stealing over $3 billion in crypto over the past 5 years, and using proceeds to fund its illegal nuclear weapons program. 

In response to Senator Warren’s questions, Lieutenant General Timothy D. Haugh, nominee for commander of U.S. Cyber Command and Director of the National Security Agency, confirmed that crypto enables North Korea to raise funds for its military program. 

Senator Warren announced she will reintroduce her bipartisan bill with Senator Roger Marshall (R-Kan.) – the Digital Asset Anti-Money Laundering Act, which would help mitigate the risks that cryptocurrency and other digital assets pose to United States national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism (AML/CFT) framework and bringing the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system. 

Senator Warren closed by urging Senator Tommy Tuberville (R-Ala.) to lift his hold on military nominations. Two months ago, Secretary of Defense Lloyd J. Austin III raised concerns to Senator Warren about how this hold specifically impacts Cyber Command, the NSA, and military readiness, warning the “hold causes especially acute, self-inflicted problems in new domains of potential conflict.” 

Transcript: To consider the nomination of: Lieutenant General Timothy D. Haugh, USAF to be general and Director, National Security Agency/Chief, Central Security Service Commander, United States Cyber Command
U.S. Senate Committee on Armed Services 
July 20, 2023 

Senator Elizabeth Warren: Our nation's adversaries use crypto to evade sanctions and to fund their weapons programs, spying, and cyber attacks. Now, dirty crypto transactions are often hidden. But here's the part we know for sure. In 2022, cyber criminals aligned with rogue nations received over $8 billion in crypto payments in violation of US sanctions. 

Top of the list in its love for crypto is North Korea. Last year, North Korea stole a record breaking $1.7 billion in crypto, about two thirds of which was stolen from crypto’s so called Decentralized Finance or DeFi space, which allows actors to bypass traditional regulated financial intermediaries to move funds around. Over the past five years, North Korean hackers have stolen, that we know of more than $3 billion in crypto. So where does that money go? Straight into North Korea's illegal nuclear program. 

General Haugh, as Deputy Commander of US Cyber Command, you’ve seen the scale of North Korea's campaign to pay for its nuclear program with stolen laundered crypto. Do you know how much of North Korea's missile program has been funded by the spoils of crypto crime and cyber attacks?

Lieutenant General Timothy D. Haugh, nominee, general and Director, National Security Agency/Chief, Central Security Service Commander, United States Cyber Command: Senator, I don't have a specific number. But I do know that from a nation state, a ransomware actor, and DPRK both in their cryptocurrency theft and how they enable IT workers to gain funds, it’s an enabler for both the hackers in, from a nation state and ransomware perspective, and it is certainly an enabler for the DPRK to raise funds focused on their military program.

Senator Warren: Okay, and I think the best estimates are about half of their nuclear program is paid for with stolen crypto funds. Would that number surprise you? 

Lieutenant General Haugh: It wouldn't. 

Senator Warren: All right. So according to a recent Wall Street Journal report, since 2018, when North Korea began ramping up its large-scale crypto attacks, its missile launch attempts and successes have quote, mushroomed. In other words, that money has been valuable to advance what they want to do.

Cyber Command, the agency that you're nominated to lead, has played a critical role in helping law enforcement agencies track and seize crypto wallets used by North Korean hackers to steal millions of dollars in crypto and to launder that money through Chinese crypto networks. 

From your experience, General Haugh, when North Korea steals billions of dollars worth of crypto and uses Chinese money laundering networks and pours that money into its nuclear programs, does that pose a threat to our national security? 

Lieutenant General Haugh: It does, Senator. 

Senator Warren: So, I really appreciate your your forthright comments here. As you know, North Korea is not the only issue. Russian ransomware gangs, Chinese fentanyl manufacturers, transnational drug cartels, and others are using crypto to exploit the loopholes in our nation's anti-money laundering network. 

General Haugh, the Treasury Department recently recommended that the government strengthen our nation's anti-money laundering and countering-the-financing of terrorism rules by quote, closing any identified gaps in the Bank Secrecy Act, to the extent that they allow certain DeFi services to fall outside the scope of the BSA’s definition of financial institutions.

So let me ask you, do you agree that we need to stitch the loopholes that allow the DPRK and other dangerous actors to use crypto to fill their coffers?

Lieutenant General Haugh: Senator, I'm not, I'm not really aware of that specific recommendation. We would, that is certainly an area that we're focused on from a threat perspective and would love to be able to work with you on, what is the way that we can limit adversary hackers that threaten the United States through, through every means. 

Senator Warren: Alright. Senator Roger Marshall and I are reintroducing our crypto anti-money laundering legislation to close the gaps that let these bad actors skirt our country's laws and threaten our national security. Congress can't continue to sleep while North Korea and China and Russia are using crypto to threaten America's national security. 

So I want to close, I know I'm out of time. I just want to say one word, if I can, with your indulgence, about the impact of the Senator from Alabama's holds on our senior military nominees. These officers have served our country honorably for decades, and they don't deserve to be treated like a political football. 

I very much hope that the stay, that the hold will be lifted, so that we can move forward on these nominations. Thank you, Mr. Chairman.