Treasury issues 5 recommendations for modernizing U.S. sanctions

The recommendations were included in a comprehensive review of the economic and financial sanctions the Treasury administers and enforces.

“When used effectively, sanctions have the capacity to disrupt, deter, and prevent actions that undermine U.S. national security,” the Treasury stated. “However, the United States now faces new, emerging challenges to the efficacy of sanctions as a national security tool,” including cybercriminals; economic competitors; and workforce pressures from policymakers, market participants, and others.

Other challenges that potentially reduce the efficacy of U.S. sanctions include “technological innovations such as digital currencies, alternative payment platforms, and new ways of hiding cross-border transactions,” the Treasury added. “These technologies offer malign actors opportunities to hold and transfer funds outside the traditional dollar-based financial system.”

The Treasury also expressed concern U.S. adversaries are “reducing their use of the U.S. dollar and their exposure to the U.S. financial system more broadly in cross-border transactions” and that “we must be mindful of the risk that these trends could erode the effectiveness of our sanctions.”

Five recommendations

With these risks in mind, the Treasury offered five steps “to modernize sanctions to address current policy priorities and keep the tool sufficiently nimble to address future threats.” These include:

• Adopting a structured policy framework that links economic and financial sanctions to a clear policy objective. Examples include countering forces that fuel regional conflict, ending support to a specific violent group or other malign and/or illicit activities, stopping the persecution of minority groups, curtailing nuclear proliferation activities, enhancing multilateral pressure, or ceasing specific atrocities. “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 review stated.
• Incorporating multilateral coordination wherever possible. “Allies and partners can be encouraged to coordinate sanctions policy through collaboration and sharing of policy frameworks and information; ongoing efforts to harmonize sanctions regimes; and efforts to build sanctions coordination into existing multilateral [efforts],” like advocating for UN sanctions, the Treasury stated.
• Calibrating sanctions to mitigate unintended economic, political, and humanitarian impact. The Treasury noted uncalibrated sanctions could lead to small businesses turning down opportunities to avoid the costs of sanctions compliance.
• Ensuring sanctions are easily understood, enforceable, and, where possible, reversible. “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,” the review stated.
• Investing in modernizing Treasury’s sanctions technology, workforce, and infrastructure. An example provided included updating the Treasury’s public website to offer clearer guidance to better support humanitarian groups, regulated entities, and even sanctions targets.

“Sanctions are a fundamentally important tool to advance our national security interests,” said Deputy Secretary Wally Adeyemo in a press release. “Treasury’s sanctions review has shown that this powerful instrument continues to deliver results but also faces new challenges. We’re committed to working with partners and allies to modernize and strengthen this critical tool.”