Illegal Wildlife Trade
Organised Transnational Crime
Sanctions are a critical tool in international diplomacy and financial regulation, aimed at influencing the behavior of governments, individuals, and entities that threaten global security, stability, or economic integrity. Sanctions can take various forms, including trade restrictions, asset freezes, financial prohibitions, and travel bans.
Understanding Sanctions: What Are They?
Sanctions are coercive measures imposed by governments or international organizations to:
- Punish violations of international laws (e.g., human rights abuses, terrorism, proliferation financing)
- Deter illicit financial activities, including money laundering, corruption, and organized crime
- Limit access to financial markets and resources for sanctioned entities
- Ensure compliance with global security mandates
Why Are Sanctions Imposed?
Sanctions serve multiple strategic purposes in global diplomacy and financial crime prevention. Key reasons for imposing sanctions include:
1. National Security and Counterterrorism
- Sanctions restrict terrorist financing networks and weaken insurgent groups.
- Example: Sanctions against Taliban-controlled entities in Afghanistan.
2. Preventing Money Laundering and Illicit Financial Flows
- High-risk jurisdictions and financial institutions involved in illicit activities face sanctions.
- Example: Pakistan was grey-listed by FATF for AML/CFT deficiencies in 2018 and removed in 2022.
3. Enforcing Compliance with International Law
- Countries violating human rights, sovereignty, or engaging in war crimes face sanctions.
- Example: Sanctions on Myanmar following military coup (2021).
4. Economic and Political Leverage
- Economic sanctions pressure governments to change policies without military intervention.
- Example: US-EU sanctions on Iran to curb its nuclear program.
FATF High-Risk Jurisdictions (2024): FATF Official Reports
The Impact of Sanctions on Economies and Financial Systems
1. Global Economic Disruptions
- Sanctions can disrupt global supply chains, oil markets, and trade relationships.
- Example: Russia-Ukraine war sanctions increased global energy prices (2022-2023).
2. Financial Institution Risks & Compliance Challenges
- Banks, insurers, and fintech firms must monitor compliance with international sanctions.
- Non-compliance results in heavy fines and reputational damage.
Example: Standard Chartered Bank fined $1.1 billion for violating US-Iran sanctions (2019).
3. Growth of Alternative Financial Systems
- Countries under sanctions develop alternative payment systems (e.g., Russia’s MIR Card System, China’s CIPS).
- Cryptocurrencies and DeFi are increasingly used to bypass financial sanctions
IMF Report on Economic Impact of Sanctions (2024): International Monetary Fund
Important to understand the following:-
- Understanding of Sanctions Compliance & applicability and the far-reaching provisions
- Application of Sanctions under various regimes & Global sanctions lists
- Name & Transaction screening
- Compliance procedures for Indian and global entities
- Consequences of non-compliance
- Best Practices, Case Studies & current geo-political tensions
Useful links -
- UN Sanctions List (2024): United Nations Security Council – https://www.un.org/securitycouncil/sanctions
- FATF High-Risk Jurisdictions (2024): FATF Official Reports – https://www.fatf-gafi.org/en/topics/high-risk-and-other-monitored-jurisdictions.html
- IMF Report on Economic Impact of Sanctions (2024): International Monetary Fund- https://www.imf.org/en/Publications
- FATF Financial Sanctions Guidelines (2024): FATF Official Reports- https://www.fatf-gafi.org/publications