How the U.S. is making sanctions more effective
A branch of Agrosoyuz Bank in Moscow.
Vladimir Gerdo | TASS | Getty Images
For years, the Agrosoyuz Commercial Bank made a great deal of money by facilitating illicit trade to advance North Korea’s weapons of mass destruction program.
Then, on February 4, 2019, the Russian bank collapsed—not because of a run on its assets, but in large part because of targeted sanctions imposed by the United States six months earlier to cut off illicit revenue streams funding North Korea’s unlawful weapons programs.
That’s the power of sanctions.
The United States’ financial markets are the largest and most liquid in the world, and the U.S. dollar and American financial institutions underpin global commerce and finance. For financial institutions around the world, access to the U.S. financial system is essential for their business. Conversely, being cut off from it can be devastating.
That’s what makes U.S. and multilateral economic and financial sanctions a critical tool for disrupting criminal and terrorist activities, imposing crippling costs on those who threaten our national security, and creating clear incentives for bad actors to change course.
Today, though, growing disruptions to the global financial and payments system threaten to reduce the effectiveness of U.S. and multilateral sanctions alike.
Strategic competitors, including the People’s Republic of China and Russia, are developing alternative payments systems to avoid dollar-based finance—both as an attempt to counter American leadership and as a tactical effort to evade our economic power and legal enforcement.
Cryptocurrency threat
At the same time, new financial technologies like cryptocurrency create opportunities to hold and transfer value outside of traditional financial and payments systems. This, in turn, makes it easier for criminal and terrorist syndicates to escape detection and risks diminishing the ability of the U.S. and our allies and partners to use sanctions to protect our national security.
Recognizing the important role sanctions play in protecting our national interests, earlier this year Secretary Janet Yellen initiated a comprehensive review, in consultation with the Department of State and other interagency partners, of how Treasury’s sanction authorities have evolved and how we can strengthen them for the future.
One of the review’s primary conclusions is that coordinating our efforts with our allies and partners, as the United States already does in many cases, can help ensure sanctions remain a highly effective tool in the face of these new challenges.
Powerful rebuke
A multilateral approach to sanctions enhances their efficacy for several reasons. First, when other countries and multilateral institutions stand together with the United States in imposing sanctions, it helps close gaps that could otherwise be exploited by the targets of those sanctions by shutting down their access to financial centers around the world. Ultimately, this makes it harder for our…