US Department of the Treasury Announces Sanctions Review Results – Criminal Law

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Background

On October 18, 2021, the U.S. Department of the Treasury (the Treasury) announced the results of its review of U.S. economic and financial sanctions.1 At her confirmation hearing in January 2021, Janet L. Yellen, Secretary of the Treasury, pledged to conduct a full review of U.S. sanctions and their effectiveness. Wally Adeyemo, assistant secretary, oversaw this effort. Treasury officials have met with hundreds of sanctions actors, including “[m]members of Congress and their staff, interagency partners, the private sector, foreign governments, non-governmental organizations, academics, and Treasury sanctions personnel. The review focused on two main issues: (i) the framework that guides the Treasury’s imposition of economic and financial sanctions and (ii) the operational, structural and procedural changes that may be needed to improve efficiency. Sanctions.

Sanctions review results

The Treasury Review explains that sanctions are a formidable tool for dealing with a wide range of threats to national security, foreign policy, and the U.S. economy. The Treasury uses sanctions to impose material costs on American adversaries when their conduct threatens American interests. Sanctions can include the imposition of trade restrictions and the “freezing” of a party’s assets, which prohibits any transaction involving that person’s property without the approval of the Treasury. Sanctions have been used successfully, for example, to undermine Iran’s nuclear weapons program and to seize billions of dollars from the Cali Cartel, a drug trafficking organization.2

However, the review notes that there are new and emerging challenges to the effectiveness of sanctions. These challenges include the development of alternative payment platforms and digital currencies, which have created opportunities for sanctioned players to transact outside the US financial system. US adversaries and allies are also reducing their use of the US dollar, with the country’s use of sanctions increasing by more than 933% in the past 20 years.3

In the light of these technological and economic developments, the Treasury proposes five steps to modernize the sanctions and preserve their effectiveness: (i) adopt a structured political framework that links the sanctions to a clear political objective; (ii) integrate multilateral coordination when possible; (iii) calibrate sanctions to mitigate unforeseen economic, political and humanitarian impacts; (iv) ensure that sanctions are easily understood, enforceable and adaptable; and (v) invest in the modernization of technology, workforce and Treasury infrastructure in terms of sanctions.

The Treasury explains that the sanctions must be linked to a clear and discreet political objective and integrate “economic analysis, technical expertise and intelligence[.]“They should not be applied lightly, and the Treasury should assess whether they are the right tool for an identified policy objective. Sanctions are also more effective when the United States works together and shares information with its allies and partners. Multilateral coordination can harmonize sanctions regimes at the international level. and strengthen US leadership abroad.

While sanctions can thwart threats to the security and economy of the United States, they have the potential to have adverse and unintended effects on domestic workers and businesses, allies, and non-target populations at home. foreigner. The Treasury plans to adapt the sanctions to mitigate these negative effects and to extend the exceptions to sanctions to support humanitarian activities in sanctioned jurisdictions. The Treasury also intends to communicate more effectively with sanctions stakeholders by using plain language and improving the navigability of its public website. The Treasury recognizes that it should modernize its technology, workforce and infrastructure and deepen its knowledge of the digital asset and service space.

The Treasury believes that all of these actions should be taken in coordination with the National Security Council, the State Department, the United States Agency for International Development, the Department of Justice, and other interagency partners.

Implications

The Treasury recognizes that it will have to adapt to technological developments and economic changes that present risks to the effectiveness of sanctions. The measures he proposed in his review serve as a general framework for modernizing sanctions and addressing these new challenges.

Footnotes

1. US Department of the Treasury, The 2021 Treasury Sanctions Review (October 18, 2021), https://home.treasury.gov/system/files/136/Treasury-2021-sanctions-review.pdf.

2. The Treasury maintains a list of the persons and companies it has sanctioned, called the list of specially designated nationals and blocked persons (the SDN list). SeeUS Department of the Treasury, List of Specially Designated Nationals – Data Formats and Data Schemas (October 29, 2021), https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-list-data-formats-data-schemas.

3. On October 15, 2021, the Treasury’s Office of Foreign Assets Control (OFAC) issued sanctions compliance guidelines for the virtual currency industry. See United States Department of the Treasury, Office of Foreign Assets Control, Sanctions Compliance Guide for the Virtual Currency Industry (October 15, 2021), https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf;
see also OFAC issues sanctions compliance guidelines for the virtual currency industry (November 1, 2021), https://www.kramerlevin.com/en/perspectives-search/ofac-issues-sanctions-compliance-guidance-for-virtual-currency-industry.html.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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