THE TREASURY
2021 SANCTIONS
REVIEW
October 2021
THE TREASURY 2021 SANCTIONS REVIEW
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THE TREASURY 2021 SANCTIONS REVIEW
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Aer the September 11, 2001 attacks, economic and financial sanctions (“sanctions”) became a tool
of first resort to address a range of threats to the national security, foreign policy, and economy of the
United States. This tool rests on the formidable strength of, and trust in, the U.S. financial system and
currency. At their core, sanctions allow U.S. policymakers to impose a material cost on adversaries
to deter or disrupt behavior that undermines U.S. national security and signal a clear policy stance.
Treasury’s work on sanctions is conducted in close partnership with other parts of the Executive
Branch, in particular the Department of State and the National Security Council, which lead the
formulation of the foreign policy and strategic goals that sanctions serve, as well as the Department
of Justice. The Department of State also implements certain sanctions authorities in consultation with
the Treasury.
Over the last 20 years, the Department of the Treasury (Treasury), in close coordination with the
Department of State, has successfully employed sanctions to address various national security
challenges, including:
• Preventing Iran from using the international financial system and commercial markets to
generate revenue through oil sales and other activities that support its nuclear and ballistic
missile proliferation and support for terrorist activities. These sanctions pushed Iran to the
negotiating table on its nuclear program in 2015.
• In coordination with U.S. and foreign law enforcement action, freezing
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and seizing billions of
dollars in assets from front companies used by the Cali Cartel (at one point the world’s largest
drug traicking organization), culminating in the 2014 dismantling of the cartel and the arrest
and imprisonment of its leaders.
• Protecting tens of billions of dollars in Libyan assets from misappropriation by former
government oicials following civil unrest and the fall of the Qadhafi regime in 2011.
• Designating over 1,600 terrorist entities and individuals since 9/11, targeting, exposing, and
undermining terrorist groups and their operations. For example, U.S. sanctions so significantly
impaired Hizballah funding streams that in 2019 the organization had to reduce salaries for its
military arm and media eorts and publicly solicit donations.
1 This document is explanatory only and does not have the force of law. It does not modify statutory authorities, Executive
orders, regulations, or regulatory guidance. It is not intended to be, nor should it be interpreted as, comprehensive, or as
imposing requirements under U.S. law, or otherwise addressing any requirements under applicable law. It is not intended to,
and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the
United States, its departments, agencies, or entities, its oicers, employees, or agents, or any other person.
2 The primary impact of adding individuals and entities to Treasury’s Oice of Foreign Assets Control (OFAC)’s List of Specially
Designated Nationals and Blocked Persons (“the SDN List”) is that their property and interests in property are blocked.
When property is blocked (or “frozen”), title to the blocked property remains with the owner of the property and any funds
constituting or arising from blocked property must be placed into a blocked, interest-bearing account at a U.S. financial
institution. Blocking immediately imposes an across-the-board prohibition against transfers or dealings of any kind with
regard to the property. The exercise of powers and privileges normally associated with ownership of blocked property is
prohibited without authorization from OFAC.
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When used eectively, sanctions have the capacity to disrupt, deter, and prevent actions that
undermine U.S. national security. However, the United States now faces new, emerging challenges to
the eicacy of sanctions as a national security tool: cybercriminals; strategic economic competitors;
and a workforce and technical infrastructure under pressure from growing financial complexity
and competing demands from policymakers, market participants, and others. To ensure sanctions
continue to support U.S. national security objectives, the U.S. government must adapt and modernize
the underlying operational architecture by which sanctions are deployed.
These changes are also needed to keep pace with the evolution of the global financial architecture,
which has a profound impact on the eicacy of U.S. financial sanctions. American adversaries—and
some allies—are already reducing their use of the U.S. dollar and their exposure to the U.S. financial
system more broadly in cross-border transactions. While such changes have multiple causes beyond
U.S. financial sanctions, we must be mindful of the risk that these trends could erode the eectiveness
of our sanctions.
In addition, technological innovations such as digital currencies, alternative payment platforms, and
new ways of hiding cross-border transactions all potentially reduce the eicacy of American sanctions.
These technologies oer malign actors opportunities to hold and transfer funds outside the traditional
dollar-based financial system. They also empower our adversaries seeking to build new financial and
payments systems intended to diminish the dollar’s global role. We are mindful of the risk that, if le
unchecked, these digital assets and payments systems could harm the eicacy of our sanctions.
“ I do seriously think we have a responsibility to use sanctions for important national
security issues. But we need to think about the long-term impact on the global currency.”
- Former Secretary of the Treasury Steven Mnuchin
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As part of a 2021 review of its economic and financial sanctions, Treasury met with individuals
representing hundreds of sanctions stakeholders, including Members of Congress and their stas,
interagency partners, the private sector, foreign governments, nongovernmental organizations,
academics, and Treasury’s sanctions workforce. The review focused on two primary issues: (1) the
framework guiding imposition of economic and financial sanctions and (2) potential operational,
structural, and procedural changes to improve Treasury’s ability to use sanctions now and in the future.
This review was neither an assessment of each of the 37 existing sanctions programs
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administered
and enforced by the Oice of Foreign Assets Controls (OFAC), and the over 12,000 OFAC designations
and nearly 3,000 OFAC delistings, nor a full examination of all economic statecra tools. In addition,
the review did not include separate sanctions authorities implemented by the Department of State or
other restrictive measures implemented by other Departments and Agencies, such as visa restrictions
or export controls.
The objective of this review was to ensure that economic and financial sanctions remain an eective tool
of U.S. national security and foreign policy now and in the future. This report incorporates highlights from
stakeholder perspectives as well as data and recommendations for improving Treasury’s implementation
of sanctions. It oers several steps to modernize sanctions to address current policy priorities and keep
the tool suiciently nimble to address future threats. These steps include:
3 There are multiple statutory or executive authorities (allowing for the imposition of sanctions based on certain criteria) in
each sanctions program. Sanctions are most commonly issued pursuant to Presidential authorities that the President has
delegated to Treasury in certain scenarios. Treasury implements those sanctions pursuant to criteria provided in both the
underlying statute and the relevant Presidential delegations.
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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 frameworkwill 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 eorts. 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.
“ We must guard against the impulse to reach for sanctions too lightly or in situations where
they have negligible impact.”
– Former Secretary of the Treasury Jack Lew
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2. Incorporating multilateral coordination, where possible
Sanctions are most eective 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 eorts to harmonize sanctions regimes; and (3)
eorts to build sanctions coordination into existing multilateral fora. These multilateral eorts include
advocating for UN sanctions when possible and appropriate to ensureglobalapplicabilityof 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 eort is worthy of significant time and eort 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 eective 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 eectively with stakeholders aected 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.
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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 eect 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 sta to support a robust and eective
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 aected 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 oer 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 oen in the President and delegated mainly to
the Treasury and the Department of State, as well as other federal agencies in some cases. Notably,
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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.
* * *
The United States faces a changing world where financial innovation, shis in global economic activity,
and new geopolitical challenges are redefining how economic power can be used to support national
security objectives. These shis are accompanied by new and rising threats for which sanctions
may be a critical tool of U.S. policy. To eectively confront these changes, Treasury must modernize
and adapt its sanctions policy and operational framework. A refined policy rubric and options for
modernizing Treasury’s sanctions infrastructure will provide Treasury with the right tools to stay
ahead of these changes and the adversaries seeking to take advantage of them. Though it will require
Treasury, and others in the U.S. government, to make diicult decisions about where and when to
recommend the use of sanctions, doing so will ultimately strengthen Treasury’s use of sanctions
in the long-term. These changes will lay the groundwork for future Treasury leadership to address
tomorrow’s challenges.
