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October 22, 2021

Global Sanctions Dashboard: Halloween Edition

By Julia Friedlander, Michael Albanese and Castellum.AI

In the Dashboard’s summer recap, we unpacked the current state of sanctions against the Taliban, China’s utilization of its Anti-Foreign Sanctions Law, and growing efforts to combat global corruption and human rights abuses through sanctions policy. This month we examine OFAC’s evolving approach to cryptocurrencies, what the Pandora Papers say about the efficiency of sanctions, and ongoing international sanctions against Iran, Myanmar, and Russian authorities in Crimea. Not to mention the long-awaited sanctions review at the US Treasury…

After Secretary Yellen promised a review of the Treasury’s sanctions program during her confirmation hearing, Treasury published its much anticipated review of US sanctions policy. The review outlines plans to modernize to meet rising geopolitical and technological challenges. Much of what the review proposes aligns closely with the findings of this Dashboard, such as: [1] tying sanctions to clear, reasonable policy objectives, [2] incorporating multilateral coordination, where possible, [3] mitigating adverse economic and humanitarian impact, [4] improving communication with financial institutions, civil society, and allies, [5] and modernizing its workforce and operational capabilities. Yet we already see that the private sector and foreign governments will be left wanting much more: guidance, assurances, and outreach. Knowing how this all works, Dan Fried and Brian O’Toole responded quickly to offer their insight. The review itself may be over, but the work is just beginning.

The Wide World of Cryptocurrency

Responding to a series of hacks in both the public and private sectors, Treasury updated a ransomware advisory and offered best practices guide for the virtual currency industry, highlighting that ransom payments “may enable criminals and adversaries with a sanctions nexus to profit and advance their illicit aims.” OFAC also unveiled its first sanctions against a cryptocurrency exchange, Russia-based SUEX, where approximately 40% of known transaction history has been “associated with illicit actors.” While the United States and its partners debate how to regulate crypto effectively, OFAC notes that the crypto industry must have sanctions compliance policies and procedures, ensure adequate resources, and then threatens fines for those that do not comply.

According to Treasury Deputy Secretary Wally Adeyemo, most major exchanges engage in legal transactions and have improved their compliance regimes over the years, but “a subset of smaller nascent exchanges” account for the lion’s share of illicit crypto transactions. As the Biden administration aims to thwart future hacks, OFAC has opened the door to financial sanctions to disrupt criminal activity in the crypto space. But sanctions are of course reactionary and do not replace proper oversight and regulation or law enforcement response, which may prove more forceful than attempting financial interdiction. Nor are the mechanisms available to the US government well-equipped to detect criminal behavior or sanctions evasion outside of well-established reporting channels. As our interactive graphic above shows, the US could legally determine that a wide range of behavior is sanctionable, across platforms and around the world, but we have to know about it first.

Pandora’s Box: The reality is bigger than the myth…

We’ve now been treated to another trove of information revealing how a global shadow financial system serves the world’s ultra rich and powerful, including current and former heads of government from Czechia, Jordan, Kenya, Russia, Ukraine, and the United Kingdom. The Pandora Papers demonstrate how expansive this system really is, and the extent to which some go to evade sanctions. This week, the notorious Russian oligarch Oleg Deripaska saw his properties in the United States raided by the FBI under suspicion that he had violated his sanctions settlement with the United States government.

The Deripaska story, among many others, demonstrates that although they often fall short of meeting a greater political objective—sanctions are often effective at keeping the pressure on kleptocrats. But it only goes so far. Sanctions are only as good as their enforcement. In response to the Pandora Papers, Representatives John Curtis and Tom Malinowski introduced the ENABLERS Act, which seeks to close regulatory loopholes for financial intermediaries and service providers. For all of the political attention that sanctions get, it is the fine print that makes them worth all the while.

Momentum on Myanmar, Belarus and Xinjiang 

While the military junta in Myanmar attempts to legitimize its rule, the multilateral sanctions campaign against the regime has kept apace. Since April, 105 designations have been imposed against the junta from listing authorities including the US, UK, EU, Canada, France, and Switzerland.

Despite China’s willingness to engage with the military leadership, other regional partners have demurred. Most recently, Min Aung Hlaing, the leader of the military junta, has been excluded from attending the upcoming Association of Southeast Asian Nations (ASEAN) Summit in Brunei. The decision was certainly a bold step for ASEAN, which has traditionally practiced a non-interference approach. But while this sent a strong message, sanctions are unlikely to follow, as most ASEAN members maintain sanction regimes that are designed to target terrorists and extremists—for more information on these lists, click here. However, non-recognition of the junta’s authority is a great step in the right direction. And now as Australia builds out its Magnitsky sanctions program, Myanmar offers a prime opportunity for Canberra to bolster the multilateral campaign against the junta. Myanmar is only one of the zero-to-sixty campaigns of recent months. For context, we’ve compared this with efforts on Belarus and Xinjiang.

Mowing the Grass: Iran, Hizballah and Crimea

OFAC also imposed an additional 38 sanctions against Iran, including five Hong Kong-based companies and two individuals operating in mainland China, for laundering vast sums of money for both the IRGC’s Quds Force (IRGC-QF) and Hizballah. According to Treasury, these networks have laundered “tens of millions of dollars through regional financial systems” in support of both Hizballah and the IRGC-QF—both of whom rely on these funds to finance terrorist activities. Ironically (or not) these sanctions come at a time when talks on reviving the 2015 Iran nuclear deal appear to stall out in Vienna, where there is fear that the new administration in Tehran might expand its nuclear program in order to gain leverage in the negotiations. 

The EU recently boosted its Crimea-related sanctions by designating an additional eight individuals for “actively supporting actions and implementing policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.” France—who operates its own domestic sanctions program in addition to the EU’s—and Switzerland both followed suit with the designations. In the US, we used to refer to such actions as “sanctions maintenance” — it appears the concept has caught on.

Global Sanctions Dashboard

The Global Sanctions Dashboard provides a global overview of various sanctions regimes and lists. Each month you will find an update on the most recent listings and delistings and insights into the motivations behind them.

GeoEconomics Center

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Related Experts: Julia Friedlander