AML POLICY contributing to the instability in a country ). Typically , they also contain clauses that cover assistance to those participating in the specified activities , as well as provision of financial or technical support to them . In addition , a number of sanctions programs target specific exports or even entire industries in the sanctioned country .
Choosing to add listings to a sanctions program , or refraining from doing so , permits the sanctioning country to balance the relative amounts of “ stick ” ( i . e ., amount of pain in conducting financial affairs ) and “ carrot ” ( i . e ., providing incentive to change behavior so that sanctions could be loosened at a future date ). And this is not merely a theoretical bargaining chip . For example , the U . S . chose not to add names to the Myanmar sanctions program , despite recommendations from the State Department to do so , because it was conducting negotiations in secret with the ruling junta on democratization of that society .
What is sanctioned ?
The next thing to determine is what sort of restrictions apply . There is more variation than one might expect .
The bulk of economic sanctions imposed on specific targets are “ do not do business ” type of prohibitions . However , even here there are two very different types of sanctions , each associated with a different goal of sanctions . The most common sanctions are asset freezing or blocking sanctions , where the assets associated with an account or transaction are made unavailable to all parties ( i . e ., both the account holder / transactor and any counterparty ). Such sanctions are intended to prevent the use of assets by seizing them . In contrast , certain sanctions result in funds being returned to the party wishing to effect a transaction . In these cases , assets can be utilized for the intended purpose — just not in the sanctioning country ’ s financial systems or broader economy . As appropriate examples , the U . S . imposes a number of these sorts of sanctions , including the sectoral sanctions imposed on Russian energy , defense and financial services firms ( as does the EU ), and for example , the parties on OFAC ’ s Non-SDN Palestinian Leadership Council ( NS-PLC ) List ( part of the Consolidated Sanctions List ). While there is certainly inconvenience in such sanctions , the desired business can still be conducted elsewhere , perhaps at greater cost . If such restrictions are imposed unilaterally by a country rather than by a larger , more global coalition of nations , their effect is more of a slap on the wrist than an effort to inflict true economic hardship . Thus , while NS-PLC restrictions are largely symbolic , the sectoral sanctions , which were also adopted in the EU , have a significant impact on the designated sectors of the Russian economy .
Generally , a sanctions designation prevents all manner of transactions involving the targeted individual or company ( or cargo vessel or aircraft , in OFAC ’ s case ).
The bulk of economic sanctions imposed on spe cific targets are “ do not do business ” type of pro hibitions
However , sanctions can be restricted to specific classes of transactions . This allows the impact of the restrictions to be more finely calibrated — both the impact on the sanctions target and the consequences of those sanctions on the customers , suppliers and business partners of the target . The sectoral sanctions imposed on elements of the Russian economy is an apt example . These sanctions only prohibit dealing in long-term capital market issues and specific types of energy exploration activities . By doing so , Russian energy firms can continue to perform their current business activities but — because the sanctions impede the raising of capital via the securities markets — they will face challenges trying to finance the expansion of their business . In addition , even if they could continue to perform , they would be unable to obtain outside technical or other assistance in the actual exploration activities due to the prohibitions of OFAC ’ s Executive Order 13662 Directive 4 and its EU equivalent . However , by not actually sanctioning all business with these firms , while these firms ’ strategic planning for their business will be impacted , they will still be able to sell their current set of goods to Western Europe , which relies on their products . Had the sanctions been more comprehensive , Europeans might have struggled to meet their energy needs .
Beyond these financial sanctions — which largely ( with the exception of the aforementioned energy exploration restrictions ) revolve around restricting the flow of financial assets — once a sanctions program expands to encompass a country ’ s economy and not merely specific citizens , an even broader spectrum of economic sanctions can also be applied .
Perhaps the most notable of these restrictions are sector-specific or blanket restrictions on international trade , as well as transactions using the sanctioned country ’ s cargo vessels . An adjunct to these prohibitions is the one usually imposed on actions that facilitate third-party transactions . These include provision of approvals or guarantees , financial transactions such as financing or insurance related to the transactions , as well as any services that help advance the transaction , such as providing advisory services . In addition , investments in a country ’ s economy are also typically prohibited .
ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS . ORG | ACAMSTODAY . ORG 69