Governments increasingly leverage their economic power to advance foreign policy objectives and protect their national security and/or economic security interests. “Economic statecraft” and its associated measures are often the tools of first resort to address a range of global challenges. As the economic statecraft landscape becomes more complex, there is a growing need for a common vernacular to define the field and its tools.

Misinterpretations of basic economic statecraft terms persist. Terms may assume different meanings depending on jurisdictions or may be wrongly used interchangeably.

The Atlantic Council’s Economic Statecraft Initiative is committed to promoting a shared understanding of economic statecraft and facilitating dialogue among international stakeholders in the field.

The Economic Statecraft Lexicon aims to overcome these obstacles. Through this page, you can learn more about relevant terms, regulatory bodies, and legal frameworks in the field. This page will be updated regularly with additional terms and definitions.

The definitions provided on this page are intended for informational purposes only. Please refer to the competent authorities within specific jurisdictions for additional information.

Common tools

Asset freeze

Asset freezes are a form of targeted financial sanctions. They are typically administrative measures (as opposed to court orders) imposed by a government to temporarily suspend the rights of targeted individuals or entities to assets they own, but are located within the sanctioning state’s jurisdiction. These suspended rights may include the transfer, conversion, disposition, or movement of such assets. Asset freezes are not confiscatory. They block access to, rather than seize or transfer ownership rights, property of targeted entities. In the United States, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) implements asset-freezing sanctions that are imposed using International Emergency Economic Powers Act authorities.

Export controls

Export controls, frequently referred to as “trade controls” in the European Union (EU) context, are restrictions on international trade involving licensing requirements or prohibitions on cross-border movement of goods, software, and technology identified on specified national or international control lists. Export controls can also apply even if no items cross an international boundary. “Deemed exports” prevent controlled information and technology from being transferred to foreign nationals, even when working within the controlling country, without a license. Noncompliance is subject to civil or criminal penalties. For example, the United States Department of Commerce has implemented a series of export controls that restrict Russia’s ability to acquire military equipment that could be leveraged in its attack against Ukraine, pursuant to US Export Administration Regulations.

Financial sanctions

Financial sanctions target entities and individuals involved in illicit or otherwise sanctionable activities and block their access to the global financial system. The United States Department of the Treasury has escalated the use of full-blocking financial sanctions since 9/11 and maintains various financial sanctions programs ranging from counterterrorism and illicit drug trade, to Russia, Iran, North Korea, and other adversarial regimes. US persons are restricted from transacting with any entity or individual included in the Treasury’s Specially Designated Nationals list, administered by OFAC. Financial assets of sanctioned persons, as well as their property in the United States, remain frozen until the sanctioned person provides evidence of positive change in behavior. The United States’ approach to financial sanctions differs from that of the EU’s and the United Kingdom’s. However, the common denominator is that sanctioned individuals are prohibited from using banks and currencies of sanctioning jurisdictions.

Foreign direct investment screening mechanisms

Foreign Direct Investment (FDI) screening mechanisms refer to measures allowing national authorities to review, authorize, impose conditions on, or prohibit certain inward investments based on a set of criteria. In recent years, most investment screening mechanisms have focused on national security concerns, but some countries (e.g., Canada, Australia) also consider whether a foreign investment would create a “net economic benefit” for the host country. Most FDI screening mechanisms cover foreign acquisitions of existing domestic firms, though some also review “greenfield investment,” in which a foreign investor creates an entirely new business entity in a host state.

Primary sanctions

Most sanctions are primary sanctions, through which a sanctioning country (the sender) prohibits persons subject to its jurisdiction from engaging in commercial transactions with the sanctions target. For more, see financial sanctions.

Restrictive economic measures 

Restrictive economic measures are actions taken by one country (unilateral economic sanctions) or a group of countries (multilateral economic sanctions) to impose economic costs on a target entity. Restrictive economic measures are frequently imposed to pressure the target into undertaking social or political change that benefits the sanctioning state’s interests. Restrictive economic measures may suspend customary trade relations with the target in various ways. Commonly, these measures limit trade in certain products, goods, or services. Blanket economic measures can prohibit commercial activity with an entire country’s industries. 

Secondary sanctions

Secondary sanctions are extraterritorial applications of a sanction regime. When the United States imposes primary sanctions on an entity, it disallows US persons from engaging in financial transactions with that entity. Primary sanctions also disallow economic transactions between the designated entity, and even a non-US person if that transaction involves a “US nexus.” A transaction has a US nexus if it touches an entity that is subject to US jurisdiction, such as when a transaction between two non-US persons is routed through a US bank.

When the United States imposes secondary sanctions, it also prohibits non-US persons from engaging in financial transactions with that entity. While the US government enforces primary sanctions through civil and criminal penalties, it enforces secondary sanctions by imposing a range of additional sanctions (or access restrictions) on entities that are found to have provided material support to designated entities subject to secondary sanctions. These access restrictions can include designating the offenders so that they, too, are subject to sanctions. Less severe restrictions include denying offenders export licenses. Secondary sanctions on foreign financial institutions (FFI) affect correspondent relationships between banks and prohibit the opening and maintenance of correspondent accounts, which severely restricts the FFI’s access to the US financial system and US dollar.

Currently, the United States is the only country that imposes secondary sanctions. The use of secondary sanctions is controversial because of their extraterritoriality. The United States can enforce secondary sanctions because of the prevalence of the dollar and the global financial system’s reliance on US correspondent banks. Every single dollar-denominated transaction must be processed by US banks regardless of where the transaction is taking place. Because of this, no other country is in a position where it could implement an effective secondary sanction regime. Almost all entities that the United States has designated as subject to secondary sanctions are Iranian or North Korean and are designated for nuclear weapons proliferation rationales. However, the United States also maintains secondary sanctions authority related to Russia’s military industrial base and counterterrorism.

Tariff

A tariff is a tax levied on goods crossing national borders, primarily as an import tariff, which taxes goods brought into a country. Export tariffs are prohibited by the US Constitution (Article 1, Section 9). Tariffs serve two main purposes: protection, by making imported goods more expensive to shield domestic producers from foreign competition, and revenue, by generating income for governments. While tariffs have historically been a key source of revenue, especially in developing nations, their modern use often focuses on protecting industries or addressing trade imbalances. The economic impact varies depending on the country’s influence on global markets. Large economies can benefit through improved trade terms, while smaller ones typically experience price increases and reduced trade. Tariffs often burden consumers and businesses that depend on imports, with retaliatory tariffs from trading partners exacerbating negative effects.

Trade agreement

A trade agreement is a contractual partnership between two (bilateral trade partnership) or more states (multilateral trade partnership) through which countries negotiate and legally bind themselves to certain terms of their trade relationships, such as tariffs, quotas, restrictions on imports and exports, and provisions such as trade facilitation, intellectual property rights, and investment protection.

Trade embargo

Trade embargoes are bans on imports or exports to a particular entity or country. Comprehensive trade embargoes mandate the complete cessation of all trade with the embargoed entities. Selective embargoes, in contrast, restrict imports or exports of a narrower set of specific products or services, such as ones with military uses.

Trade embargoes may be pursued unilaterally by one country or may be imposed by a coalition of governments (multilateral embargoes). Comprehensive trade embargoes often have carve-outs for humanitarian goods, which can be traded with a license, despite the embargo.

There are numerous international legal bodies that attempt to govern the imposition of trade embargoes. The United Nations (UN) Charter allows the UN Security Council to impose trade embargoes against countries that are found to be threatening peace or engaging in acts of aggression under Chapter VII, Article 41. Countries harmed by a trade embargo may also lodge a complaint through the World Trade Organization’s (WTO) dispute settlement mechanism if they are members of the organization. However, trade embargoes justified on national security grounds have generally been judged in compliance with the WTO’s Article XXI security exception.

Visa restrictions

Section 212(a)(3)(C) of the Immigration and Nationality Act provides the US secretary of state the authority to apply visa restrictions denying, revoking, or reviewing visa statuses of certain individuals or groups based on foreign policy considerations. These considerations may include individual or group involvement in specific violent or harmful political movements or human rights abuses. Visa restriction is a common tool and is applied by the EU, UK, and numerous non-Western jurisdictions.

Commonly used terms

Anti-money laundering/Combating the financing of terrorism (AML/CFT)

Anti-money laundering and combating the financing of terrorism (AML/CFT) policies and regulatory regimes aim to prevent and combat money laundering (ML) and terrorist financing (TF) crimes. ML is the process of disguising the origins of illegally obtained money, while TF involves providing or receiving funds—whether from legitimate or illegitimate sources—to support terrorist activities. Although distinct in their sources of funds, both ML and TF exploit the same financial system vulnerabilities to conceal transactions and, as such, they are often addressed together.

Beneficial ownership

A beneficial owner of a company is the entity or individual who ultimately enjoys the benefits of owning that company. Beneficial ownership is distinct from legal ownership when an individual or entity owns a company, in whole or in part, indirectly.

Holding company

A holding company is a type of business entity that owns the outstanding stock of other companies. Its primary purpose is to control and manage the companies it owns, rather than to produce goods or services itself. Holding companies can own a variety of assets, including shares of other companies, real estate, patents, trademarks, and more. By holding a controlling interest in other companies, a holding company can influence or direct their policies and management decisions. This structure can provide benefits such as risk management, tax advantages, and simplified control over multiple businesses.

Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is an intergovernmental organization established in 1989 by the Group of Seven. It develops and promotes policies and standards to combat global money laundering, as well as terrorist and proliferation financing, through its “FATF Recommendations.”

FATF mutual evaluation

FATF mutual evaluations are comprehensive reports assessing a country’s AML/CFT legal framework, regulatory measures, institutional arrangements, and practices. These reports result from a peer review process involving experts from other FATF member countries. Experts evaluate both the effectiveness and technical compliance of the country’s AML/CFT efforts. Specifically, they determine whether the country’s AML/CFT system is functional and meets expected standards, and if adequate legal instruments are in place to address money laundering and terrorist financing risks. The evaluation concludes with focused recommendations to strengthen the country’s AML/CFT system.

FATF style regional bodies (FSRBs)

The nine FATF-Style Regional Bodies (FSRBs) are independent regional organizations tasked with disseminating the FATF Recommendations across two hundred member countries. Common functions of FSRBs include: (1) conducting mutual evaluations and peer reviews of member nations to assess compliance with FATF Recommendations; (2) researching regional AML/CFT typologies; (3) sharing best practices with various stakeholders, including the private sector, law enforcement, and regulatory bodies; (4) providing technical assistance for implementing FATF standards; and (5) aiding countries in comprehending digital assets, central digital currencies, cryptocurrencies, and similar matters.

Financial intelligence

Financial intelligence (FININT) consists of the collection and analysis of financial information of entities of interest. The collection and scrutiny of transactional data aims to identify persons or organizations potentially engaged in criminal activity. Activities could range from narcotics, organized crime, fraud, and cybercrime to terrorism, drug trafficking, and human trafficking. FININT is implemented by government agencies but may use data provided by banks or other entities as part of their regulatory obligations.

Illicit finance Flows

Illicit Finance Flows (IFFs) refer to the cross-border movement of capital whose sources (e.g., corruption, illegal arms sales, and the smuggling and trafficking of minerals, wildlife, drugs, and people), methods of transfer (e.g., tax evasion) or use (e.g., organized crime and terrorist financing) are illegal.

Suspicious Activity Reports (SARs) and Suspicious Transaction Reports (STRs)

Suspicious Activity Reports (SARs), referred to as Suspicious Transaction Reports (STRs) outside the US jurisdiction, are standardized forms used by financial institutions to report known or suspected violations of law or suspicious activities, pursuant to the legal requirements of a country. Financial institutions within US jurisdiction are required to file SARs with Treasury’s FinCEN in accordance with the Bank Secrecy Act. SARs are not considered an admission of guilt or that illegal activity has taken place. Information provided in SARs enables law enforcement agencies to investigate, identify, and prosecute money laundering, criminal financial schemes, and other illegal endeavors. SARs/STRs can vary across countries and sometimes among institutions, depending on the specific nature of the activity or the characteristics of the involved bank or fund.

Economic statecraft concepts

Economic coercion

Economic coercion is the threatened or actual imposition of economic measures—as opposed to diplomatic or military measures—to generate costs for a targeted entity (such as a state) by a sending state, group of states, or other entities acting on behalf of a state, in an attempt to incentivize changes in the target entity’s policies, practices, or governmental structure.

Economic statecraft

David Baldwin famously defined economic statecraft as the use of economic means to pursue foreign policy goals. The Atlantic Council’s Economic Statecraft Initiative expands upon Baldwin’s definition to include national security and economic security objectives. Economic statecraft may include the intentional use of financial, regulatory, and economic tools by a state to shape other states’, commercial agents’, or other societal actors’ behaviors in ways that benefit the state’s foreign policy objectives.

States can pursue both negative and positive forms of economic statecraft. Negative economic statecraft involves threats or the imposition of penalties, while positive economic statecraft involves rewards, incentives, or other forms of encouraging deeper economic ties.

Economic security

Economic security refers to the policies and strategies adopted by states to ensure resilience and stability of their economies in the face of internal and external threats. Economic security involves safeguarding and nurturing critical industries and resources which are deemed essential to national survival, such as energy, technology, agriculture, and defense-related industries. It also involves promoting supply chain resilience, building resilient critical infrastructure, defending against nonmarket practices, and addressing economic coercion.

Geoeconomics

Geoeconomics is the study of how economic power and relationships shape, and are shaped by, political and strategic interests on the global stage. Geoeconomics is the nexus of economics, finance, geopolitics, and foreign policy.

Positive economic statecraft (PES)

The Atlantic Council’s Economic Statecraft Initiative coined the term “positive economic statecraft” (PES) to describe how governments use economic inducements to influence the behavior of another government. Common instruments of PES include: (1) official international development assistance or humanitarian aid (e.g., grants, capacity building, technical assistance, budget support); (2) development finance (e.g., loans, credits or guarantees, public-private partnerships); (3) access to currency; and (4) preferential trade and investment agreements.

Economic statecraft in the United States

US statutes, regulations, and sanctions lists

Bank Secrecy Act (BSA)

The Bank Secrecy Act (BSA) is a US law that, since 1970, has required financial institutions to provide documentation on cash transactions exceeding $10,000 (daily aggregate amount) into, out of, and within the United States and report suspicious activity that might imply unlawful activities such as money laundering, tax evasion, and terrorist financing.

Suspicious Activity Reports (SARs) are the primary documents that financial institutions file to comply with BSA requirements. The BSA is sometimes referred to as an “anti-money laundering” (AML) law or, jointly, as “BSA/AML.”

Foreign Terrorist Organization

A foreign organization can be designated by the Department of State’s Bureau of Counterterrorism as a Foreign Terrorist Organization (FTO) if it engages in or has the capability and intent to engage in terrorism, posing a threat to US nationals, national defense, foreign relations, or US economic interests. The penalties for this designation are: (1) FTOs are barred from entering the US; (2) it is unlawful for any person subject to US jurisdiction to provide “material support or resources” to FTOs; and (3) the Treasury may authorize US financial institutions to freeze all transactions involving assets belonging to FTOs.

Global Magnitsky Human Rights Accountability Act

The Global Magnitsky Human Rights Accountability Act, or “Global Magnitsky Act,” was enacted on December 23, 2016. It authorizes the US President to apply targeted sanctions, including visa restrictions, asset freezes, and prohibitions of transactions, to foreign individuals and entities involved in human rights abuses and corruption. President Trump’s Executive Order (E.O.) 13818 of 2017 further extends the Act’s scope and grants the secretary of the treasury sanctions determination authority in consultation with the secretary of state and the attorney general. OFAC administers the economic sanctions, while the State Department implements the visa sanctions. The Global Magnitsky Act expired in December 2022. However, because E.O. 13818 invokes national emergency authorities, sanctions may persist beyond the expiration of the Act through the President’s continuation of the national emergency declared in E.O. 13818.

Non-SDN Chinese Military Industrial Complex Companies (NS-CMIC) list

The Non-SDN Chinese Military Industrial Complex Companies list (NS-CMIC) is a program that prohibits US persons from buying or selling publicly traded securities and derivatives of Chinese entities designated as operating, or previously involved, in the defense and related materiel sector, as well as the surveillance technology sector. Originally named the “Communist Chinese Military Companies” program under the first Trump administration, it was retained and amended by the Biden administration. Currently, OFAC administers the list in coordination with the Departments of Defense and State.

Rewards for Justice

The Rewards for Justice (RFJ) program is a US government interagency program, established by the 1984 Act to Combat International Terrorism. It offers rewards for information leading to the identification or location of any foreign person who is knowingly engaged in, or engaging in, US election interference, or attempting, committing, conspiring to commit, or aiding and abetting in the commission of terrorist acts, cyber activities against the United States, or supporting the North Korean regime. Over the years, the RFJ has rewarded 125 individuals with a total of $250 million for providing information that prevented or resolved international attacks or helped bring justice to those involved in prior acts. The RFJ was established by the 1984 Act to Combat International Terrorism (Public Law 98-533), and it is administered by the Department of State’s Bureau of Diplomatic Security.

RICO Act

The Racketeer Influenced and Corrupt Organization Act (RICO) is a US federal law passed in 1970 extending criminal penalties and a civil remedy for actions associated with organized crime. Violators of the statute may face fines up to $25,000 and a maximum prison sentence of twenty years.

Special Measures

Section 311 of the USA PATRIOT Act, passed shortly after the 9/11 terrorist attacks, grants FinCEN authority to mandate “special measures” to domestic financial institutions and agencies if it determines that certain categories of transactions within or involving a jurisdiction outside the United States are of “primary money laundering concern.” The measures include enhanced customer identification for correspondent accounts to obtain information levels comparable to those obtained for domestic customers, along with imposing restrictions on the opening or maintenance of correspondent or payable-through accounts for foreign bank institutions operating in the United States. For example, in 2019, FinCEN issued a final rule that identified the entire jurisdiction of the Islamic Republic of Iran as a primary money laundering concern.

Section 9714(a) of the Combating Russian Money Laundering Act, provides FinCEN authority to impose special measures as described in Section 311 of the USA PATRIOT Act or prohibit certain transmittal of funds by domestic financial institution or agency if a financial institution operating outside of the United States (or a class of transactions within, or involving, a jurisdiction outside of the United States, or types of accounts within, or involving, a jurisdiction outside of the United States) is of primary money laundering concern in connection with Russian illicit finance. For example, in 2023, FinCEN issued a final rule identifying Bitzlato Limited as a financial institution of primary money laundering concern.

Specially Designated Global Terrorist (SDGT)

Specially Designated Global Terrorists (SGDTs) are: (1) foreign persons determined by the US secretary of state, in consultation with the secretary of the treasury, the attorney general, and the secretary of homeland security, who have committed or pose a significant risk of committing acts of terrorism against the US national security; (2) persons determined by the secretary of the treasury, in consultation with the secretary of homeland security and the attorney general, who are owned or controlled by, or act on behalf of, any other SDGTs; and (3) persons who assisted in, sponsored, or provided financial, material, or technological support for acts of terrorism or any other SDGTs. SDGTs also include twenty-nine individuals and entities designated by President Bush in the annex to Executive Order (E.O.) 13224 of September 23, 2001. Any person designated as a global terrorist has all their property and interests in property that are in the United States, or within the possession or control of US persons, blocked.

Specially Designated National (SDN)

Specially Designated National (SDN) refers to United States persons (e.g., individuals, associations, partnerships, commercial entities, or other organizations) who the United States secretary of the treasury determines as acting on behalf of, owned, or controlled directly or indirectly by targeted countries. Individuals and entities involved in terrorism and drug trafficking designated under non-country-specific programs may also be identified as SDNs. US persons are prohibited from engaging in economic and financial transactions involving a SDN person, or any property possessed by a SDN subject to the jurisdiction of the United States. That is, entities with an SDN designation are subject to asset freezes. OFAC administers the SDN program.

Terrorism Watch list and No Fly list

The US federal government’s Terrorist Screening Database, commonly referred to as the “terrorism watchlist,” tracks information on people known or suspected to be involved in terrorism or related activities. The No Fly List is a subset of the terrorism watchlist and contains the identity information of known or suspected terrorists prohibited from boarding a commercial aircraft for travel to, from, or within the United States. Both the terrorism watchlist and the No Fly List are administered by the US Terrorist Screening Center.

Authors: Kim Donovan, Maia Nikoladze, Sarah Bauerle Danzman, Alessandra Magazzino
Contributors: Dan Tannebaum, Mikael Pir-Bugadyan

Economic Statecraft Initiative

Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) publishes leading-edge research and analysis on sanctions and the use of economic power to achieve foreign policy objectives and protect national security interests.