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The Treasury 2021 Sanctions Review: Steps to Modernize Sanctions

Steps to Modernize Sanctions

1. Adopting a structured policy framework that links sanctions to a clear policy objective

Economic and financial sanctions should be tied to clear, discrete objectives that are consistent with relevant Presidential guidance—such as countering forces that fuel regional conflict, ending support to a specific violent organization or other malign and/or illicit activities, stopping the persecution of a minority group, curtailing nuclear proliferation activities, enhancing multilateral pressure, or ceasing specific instances of atrocities. To accomplish this, Treasury will adopt the use of a structured policy framework in order to inform its recommendations on the use of sanctions. This framework should reflect key policy considerations and ask whether a sanctions action:

a) Supports a clear policy objective within a broader U.S. government strategy: Sanctions should be deployed alongside other measures as part of a larger strategy in support of specific policy objectives.

b) Has been assessed to be the right tool for the circumstances: Sanctions should incorporate rigorous economic analysis, technical expertise, and intelligence to ensure that they are the right tool in our national security arsenal to pursue the identified objective.

c) Incorporates anticipated economic and political implications for the sanctions target(s), U.S. economy, allies, and third parties and has been calibrated to mitigate unintended impacts: Sanctions should be designed to tailor their impact so that costs fall on intended targets and that potential negative impact on others is minimized.

d) Includes a multilateral coordination and engagement strategy: Where possible, sanctions should be coordinated with allies, incorporating shared intelligence and resources, and accompanied by engagement with relevant stakeholders including industry, financial institutions, allies, civil society, and the media.

e) Will be easily understood, enforceable, and, where possible, reversible: Sanctions should be clearly communicated so that targets, allies, and others understand their specific objectives and the circumstances under which they may be escalated or reversed in response to the target’s behavior.

The consistent application of this sanctions policy framework will establish clear criteria for the use of sanctions. Treasury should also seek to develop and implement an analytical construct to assess its sanctions programs and actions systematically, incorporating this policy framework and building on existing evaluation efforts. The product of these assessments could be recommendations to augment, adapt, or wind down individual authorities or to list or delist particular individuals or entities.

2. Incorporating multilateral coordination, where possible

Sanctions are most effective when coordinated as an Administration with allies and partners who can magnify economic and political impact. This coordination also enhances the credibility of U.S. international leadership and shared policy or security goals of the United States and its allies. Coordinated actions also help mitigate the economic impact on American workers and firms. Allies and partners can be encouraged to coordinate sanctions policy through: (1) collaboration and sharing of policy frameworks and information; (2) ongoing efforts to harmonize sanctions regimes; and (3) efforts to build sanctions coordination into existing multilateral fora. These multilateral efforts include advocating for UN sanctions when possible and appropriate to ensure global applicability of restrictive measures and amplify messaging, as well as working through other multilateral organizations. The State Department, in particular, as the U.S. Government interagency lead for the formulation of foreign policy, is an essential partner and leader in this work.

3. Calibrating sanctions to mitigate unintended economic, political, and humanitarian impact

Treasury should seek to tailor sanctions in order to mitigate unintended economic and political impacts on domestic workers and businesses, allies, and non-targeted populations abroad. This will protect key constituencies and help preserve support for U.S. sanctions policy. For example, U.S. small businesses may lack the resources to bear the costs of sanctions compliance while competing with large companies at home and abroad; uncalibrated sanctions could unnecessarily lead them to turn down business opportunities in order to avoid these costs. Better tailored sanctions can help avoid these costs and maintain the competitiveness of U.S. businesses.

In addition, Treasury must address more systematically the challenges associated with conducting humanitarian activities through legitimate channels in heavily sanctioned jurisdictions. Where possible and appropriate, Treasury should expand sanctions exceptions to support the flow of legitimate humanitarian goods and assistance and provide clear guidance at the outset when sanctions authorities are created and implemented, particularly related to vulnerable populations. Going forward, Treasury will continue to review its existing authorities to consider the unintended consequences of current sanctions regimes on humanitarian activity necessary to support basic human needs, as well as potential changes to address them while continuing to deny support to malicious actors. We believe this effort is worthy of significant time and effort to ensure the world understands that the provision of legitimate humanitarian assistance reflects American values.

4. Ensuring sanctions are easily understood, enforceable, and adaptable

Sanctions are only as effective as their implementation, especially with regard to communication and engagement. In order to better calibrate the use of this tool, Treasury needs to communicate and coordinate more effectively with stakeholders affected by the use of financial sanctions. Treasury can build on existing outreach and engagement capabilities through enhanced communication with industry, financial institutions, allies, civil society, and the media, as well as new constituencies, particularly in the digital assets space.

Treasury should enhance its public messaging and engagement with key audiences domestically and internationally around its sanctions, ensuring that the messaging augments and closely aligns with key stakeholder groups. It should also coordinate closely with the Department of State on messaging for foreign engagement. Enhancing the public information on the Treasury website and communicating in plain language would also improve public understanding of the intent and effect of sanctions.

5. Investing in modernizing Treasury’s sanctions technology, workforce, and infrastructure

Modernization requires investing in Treasury’s sanctions workforce and operational capabilities. The Department must have the right expertise, technology, and staff to support a robust and effective sanctions policymaking and implementation process. These investments will sustain Treasury’s ability to execute a core tool of U.S. foreign policy and national security, protect the integrity of the U.S. financial system, and build on constructive relationships with a wide array of sanctions stakeholders. In particular, Treasury should invest in deepening its institutional knowledge and capabilities in the evolving digital assets and services space to support the full sanctions lifecycle of activities.

To better facilitate compliance, Treasury should expand its use of technology to provide critical information to domestic and foreign audiences affected by sanctions actions. This includes making certain tactical and operational improvements. For example, stakeholders reported that Treasury’s public website is viewed as cumbersome to navigate, and could be improved to offer clearer guidance to better support humanitarian groups and regulated entities, as well as sanctions targets themselves.

All of these steps must be taken in close coordination with the National Security Council, Department of State, U.S. Agency for International Development, Department of Justice, and other interagency partners. Sources of sanctions authorities continue to come from both Congress and executive orders, and those sources set out authorities, vested often in the President and delegated mainly to the Treasury and the Department of State, as well as other federal agencies in some cases. Notably, the Department of State administers and helps implement numerous sanctions authorities and holds a leading role among federal agencies in setting the foreign policy agenda pursued through U.S. sanctions. As Treasury pursues these recommendations, especially reinforcing a commitment to multilateral coordination, it is essential that the Departments of the Treasury, State, and other agencies continue and enhance their strong partnership and close coordination to advance U.S. government policy objectives and national security.

Categories: Sanctions Policy US Treasury Department Updates


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