Follow the Money

The United States and its partners are increasingly employing financial sanctions as an instrument of national power. The U.N. Security Council requires member states to impose sanctions on terrorist groups; financial sanctions are the centerpiece of resolutions dealing with Iran, Libya, and North Korea; and, while they may garner less attention in the media, the Security Council also has targeted sanctions in place related to Ivory Coast, Liberia, Libya, Somalia, Sudan, and the Democratic Republic of the Congo.

The targeted financial sanctions implemented by the United Nations have gained greater acceptance among governments and the private sector than the full-scale embargoes of years past, and they have had considerable success in advancing their goals. While these measures cannot be a policy in and of themselves, they have the tangible benefit of disrupting illicit networks and pressuring intransigent regimes by making it far more difficult for them to access needed financial services. But even these more powerful targeted sanctions could be dramatically more effective.

At present there are no real consequences, beyond the civil and criminal penalties that the United States imposes, for those who violate U.N.-mandated sanctions. The United Nations lacks enforcement mechanisms with real teeth -- a reality that is unlikely to change given the attitude of some Security Council members. There is, however, one step that could make a significant difference: The world's premier standard-setting body for combating terrorist financing and money laundering, the Financial Action Task Force (FATF), should develop and enforce standards for sanctions implementation.

FATF is well positioned to take on this mission. This organization, created by the G-7 in 1989, already has developed standards used by countries around the world to combat terrorist financing and money laundering; the expansion of its work to broadly cover sanctions implementation would be consistent with its mission of protecting the international financial system from abuse. Furthermore, more than 180 countries -- notably including China and Russia, which have often been difficult or reluctant partners on sanctions -- have committed to follow the group's standards and voluntarily subject themselves to evaluations by their peers. Finally, and perhaps most importantly, the private sector pays close attention to FATF's assessments and its identification of jurisdictions that pose a risk to the financial system.

These facts mean governments have a strong economic incentive to meet FATF's standards and respond meaningfully to its evaluations. If the United States and other concerned countries are serious about using financial tools to help solve some of the world's most intractable problems, enlisting FATF in the effort may be the single most effective step they can take to make sanctions work.

Countries or groups that face U.N. sanctions will inevitably try to evade the restrictions, often by enlisting the help of people and companies not on the sanctions list. Punishing or deterring such actions depends on imposing tangible consequences on violators. But at the moment, that almost never happens -- except in the United States.

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