The State of Financial Crime 2024
Learn about the latest trends in sanctions and their consequences in our free, comprehensive guide.
Download your copyTo address violations of international law, human rights abuses, other state-sponsored crimes, and threats to international security, governments may impose sanctions against designated targets around the world. Sanctions are a range of restrictions and penalties imposed on countries, entities, or individuals to discourage these activities and resolve geopolitical conflicts without resorting to military intervention.
The efficacy of sanctions depends on the ability of the issuing country to enforce them. Regulatory bodies, such as the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), publish sanctions lists identifying designated targets. Countries then enforce compliance through regulations and impose criminal penalties for violations.
Since sanctioned individuals or entities often seek to circumvent sanctions and continue conducting financial transactions, sanctions screening is crucial to AML regulatory compliance. Financial institutions (FIs) must, therefore, not only understand their compliance obligations but also stay updated on the latest sanctions and implement effective measures to address them. To support these efforts, this 2024 guide to sanctions will cover:
Sanctions can either be primary or secondary.
Across these two types, sanctions fall into six main categories.
Economic sanctions are imposed on countries, institutions, or individuals and aim to restrict their ability to conduct trade or financial transactions. These include import and/or export embargoes, trade and investment bans, and asset freezes.
Diplomatic sanctions are a less severe set of measures than economic sanctions and typically involve removing diplomatic ties and expelling diplomats from the country issuing the sanctions.
Military sanctions involve armed intervention. Since the use of military force is heavily restricted by international law, military sanctions are significantly rarer and more severe than other kinds. Economic sanctions that target a country’s military capabilities, such as an arms embargo, are also sometimes classed as military sanctions.
Sporting sanctions prevent targeted nations from participating in the international sporting scene, which means that athletes from these nations cannot compete in events, and competitions cannot be held in sanctioned countries.
Environmental sanctions are a more recent invention than other kinds of sanctions. Rather than a new type of sanctions altogether, they are a mixture of economic and diplomatic sanctions specifically relating to offenses against environmental protection.
Learn about the latest trends in sanctions and their consequences in our free, comprehensive guide.
Download your copyGlobally, sanctions are set by various national and international bodies and operate under the terms specified by each authority. Below is a list of key bodies responsible for issuing and enforcing sanctions.
As a pre-eminent global intergovernmental body, the United Nations takes a leading role in issuing sanctions. These are outlined in the UN Security Council (UNSC) Consolidated Sanctions List, which applies to all UN member states. The UN typically imposes sanctions for three types of behavior: violations of international law, threats to international peace, and violent activity within state borders.
However, UN sanctions are only passed when a majority of the UNSC votes in their favor. The UNSC consists of five permanent members (the US, the UK, France, China, and Russia) and ten non-permanent members on rotation. Any of the five permanent UNSC members may veto their application, which can hinder action; Russia has vetoed sanctions on North Korea, for example. The UN has no direct legislative power within member states, so it falls to domestic legislative authorities to enforce UN sanctions when they are passed.
The Office of Financial Assets Control (OFAC) maintains sanctions programs in the US. Its sanctions lists include the Consolidated Sanctions List and the Specially Designated Nationals (SDN) List. The US Bureau of Industry and Security (BIS) also maintains the BIS Entity List, detailing foreign entities subject to Export Administration Regulations (EARs). These typically regulate the export of dual-use goods that terrorists or oppressive governments may misuse.
The US sanctions regime is arguably the most influential in the world. Since the US shares many geopolitical, economic, and security concerns with other Western nations, its sanctions programs typically align with those of the UN, the UK, and the EU. In 2016, the US introduced a dedicated human rights sanctions program under the authority of the Global Magnitsky Act. This allows the US government to specifically address global human rights abuses by targeting the individuals and groups responsible for those crimes, rather than entire countries. The Magnitsky Act has inspired the development of similar human rights sanctions regimes across the West.
The EU issues various sanctions against global targets. The EU enforces some sanctions directly through EU law, but some measures are delegated to the domestic legislators of member states; all individuals and entities within the European Union’s 27 member states, alongside EU citizens operating anywhere in the world, must observe EU sanctions.
The EU Council implements UN and autonomous sanctions set out in the EU Consolidated Sanctions List. The EU’s sanctions regime has evolved since its inception. In May 2019, the EU introduced a cyber-crime sanctions regime, and in December 2020, a Global Human Rights Sanctions Regime (GHRSR), which specifically targets human rights abuses. The EU also has a Blocking Statute, which prevents EU persons from complying with secondary sanctions imposed by third countries. EU sanctions enforcement falls to member state governments rather than a centralized authority, and member states also control the penalties imposed for sanctions violations.
HM Treasury maintains the sanctions list of the United Kingdom, while the Office of Financial Sanctions Implementation (OFSI) is responsible for implementing and enforcing these sanctions. The UK list incorporates the consolidated UN and EU sanctions lists as well as the UK’s autonomous sanctions, which it has issued since its exit from the EU in 2020 under the Sanctions and Anti-Money Laundering Act (SAMLA). All FIs are forbidden from doing business with the countries and entities on the HM Treasury Sanctions List. British citizens and citizens of overseas territories are also subject to HM Treasury sanctions. Like the US, the UK has also implemented human rights sanctions and Global Anti-Corruption regimes.
Given the number of sanctions regimes currently active worldwide and the rate at which new entities are added to sanctions lists, it is impossible to present an exhaustive list of current sanctions (the EU, for example, has 30 sanctions programs in place as of August 2024). However, a few key trends are particularly relevant for FIs in 2024.
Sanctions against Russia have dominated the international sanctions landscape since the country invaded Ukraine in 2022 (although sanctions have been present in some form since 2014 owing to Russian aggression in the region). The US, UK, and EU, among others, have imposed measures on Russia, including state-level and individual sanctions, including import and export restrictions, asset freezes, and diplomatic sanctions. Belarus has also been targeted with sanctions for its support of Russia.
Iran’s nuclear proliferation program, military support for Russia, and human rights violations have prompted a range of sanctions from the US, the EU, and a host of other countries. Although a partial rapprochement occurred after the Biden administration lifted some sanctions as part of what it called a “good faith approach”, the US has since reiterated its commitment to countering Iran’s nuclear missile development through sanctions. After the UN’s sanctions on Iran expired in October 2023, the UK, France, and Germany carried them into their domestic legal frameworks.
Sanctions on North Korea have been in place since 2006, primarily due to the country’s nuclear weapons testing. The UN Security Council has passed various resolutions sanctioning North Korea, while several countries have implemented additional sanctions, including South Korea, Japan, and the US. OFAC has published several documents detailing interpretive guidance on North Korean sanctions, and on recognizing evasion techniques.
FIs need to have effective sanctions screening in place to avoid the reputational and financial consequences of non-compliance with sanctions, which should include certain best practices:
FIs worldwide rely on ComplyAdvantage’s sanctions screening software’s speed, accuracy, and ease of use. ComplyAdvantage’s data is powered by cutting-edge AI and refined by expert manual reviews. It goes beyond the minimum demanded by regulators by including entities linked to or controlled by those on sanctions lists, allowing firms to manage risk proactively, not reactively.
By using ComplyAdvantage’s software, FIs can:
Boost your risk intelligence with real-time updates on sanctions in force worldwide.
Get a demoOriginally published 21 June 2014, updated 26 September 2024
Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
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