In its 2021 Sanctions Review, Treasury recommended steps to improve the use of economic sanctions as a tool for responding to U.S. national security concerns and foreign policy challenges.

In the review, Treasury argued that "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," create challenges to the use of sanctions as an effective policy tool. In addition, Treasury warned that digital currencies and other technological innovations have the potential to undermine the efficacy of sanctions by empowering adversaries to develop new financial and payment systems not dependent on the U.S. dollar or the U.S. financial system. Treasury concluded that "the U.S. government must adapt and modernize the underlying operational architecture by which sanctions are deployed."

To ensure the future effectiveness of economic sanctions, Treasury recommended that economic sanctions be deployed when: (i) supported by clear policy objectives; (ii) coordinated with U.S. allies and partners, where possible; (iii) calibrated to mitigate unintended economic, political, and humanitarian consequences; (iv) easily understood, enforceable, and adaptable; and (v) supported by a modernized technological base, workforce, and infrastructure, including by "deepening [Treasury's] institutional knowledge and capabilities in the evolving digital assets and services space."


Aspects of Treasury's much-anticipated Sanctions Review will be welcome to financial institutions and others who face the challenge of ensuring compliance with the ever-expanding and increasingly complex panoply of U.S. economic sanctions programs. For example, the report concludes that modernizing sanctions "will require Treasury, and others in the U.S. government, to make difficult decisions about where and when to recommend the use of sanctions." This suggests that sanctions may not always be a "tool of first resort" in the future, as they have often been in the past. And if sanctions are indeed employed less frequently going forward, that could translate to fewer compliance challenges. Similarly, the report recommends that sanctions be "easily understood" - a goal to which all can surely agree.

The recommendation to "calibrate" sanctions - a step designed to mitigate unintended consequences - may itself have the unintended result of creating new compliance challenges by spinning complex webs of authorizations, exemptions, and licenses to carve out humanitarian or other activities. Similarly, increased coordination of sanctions with allies and partners has the potential to produce a patchwork of similar but not identical prohibitions, requiring a careful case-by-case analysis to ensure compliance. The aim of modernizing and simplifying sanctions is commendable, but the reality - especially when combined with challenges associated with digital currencies and other innovations - is likely to remain messy.

Primary Sources

  1. Treasury Press Release: U.S. Department of the Treasury Releases Sanctions Review
  2. The Treasury 2021 Sanctions Review

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