Targeted Financial Sanctions

Countries surveyed:

United States, United Kingdom, France, Germany, Switzerland, Japan.

Legal authority for sanctions

1. While all the countries under consideration here implement sanctions regimes by way of primary national legislation, not all use the same kind of primary legislation. This distinction arises from differences in pre-existing legal and administrative traditions, and is manifest in the different frameworks that are erected to implement sanctions regimes. The first method, used in the United States and the United Kingdom, is by specific enabling or standing legislation. Under the authority of these statutes, which include acts authorising the government to act upon resolutions of the Security Council, specific regulations are issued which detail the scope of the sanctions regime. It is a comprehensive approach to sanctions.

2. The second—used in France, Germany, Japan, and to a certain extent Switzerland*—is under the authority of general purpose legislation relating to matters of international trade and finance. In Germany and Japan, sanctions are authorised by amending the regulations which are issued under this statutory authority to include specific mention of the targeted countries and the requirements of the sanctions regime, while the practice in France and Switzerland has been for the government to issue official decrees. This second approach is therefore done on a case-by-case basis.

3. The major distinction arising from this fundamental difference in statutory bases is that while the system for implementing sanctions in the United States and the United Kingdom has traditionally been one of prohibition, its parallel in France, Germany, Switzerland and Japan has been one of refusal of authorisation. Since 1992, with the entry into force of the Treaty on European Union, sanctions implementation (at least at the legislative and regulatory level) is becoming more harmonized across the various members of the EU, resulting in a reduced reliance on the case-by-case approach.

The Council of Ministers of the European Union first exercised its power to impose financial sanctions in 1993, through a Common Position outlining the decision to reduce economic relations with Libya (93/614/CFSP, OJ L 295, p. 7).

Administering agencies

1. The Office of Foreign Assets Control (OFAC) is not only the main administering agency of sanctions in the United States, it is also a primary resource for information on the legal and regulatory framework of sanctions regimes, both unilateral and multilateral. As such, the American system for implementing sanctions has been extensively (and exhaustively) documented.

2. There is no parallel to the Office of Foreign Assets Control (OFAC) in other countries. Financial sanctions are generally administered by the Central Bank (Bank of England, Deutsche Bundesbank etc.) as the agent of the relevant ministry of government. In the cases of France and Japan, where the regulatory systems for general trade and finance matters are more extensive, sanctions are administered by the ministry itself—the Treasury (Direction du trésor in the Ministère de l’économie, des finances et de l’industrie) and the Ministry of Finance, respectively. This is also the case for Switzerland, where the administering agency is the Federal Office for Foreign Economic Affairs (Export Controls and Sanctions Division) in the Ministry of the Economy, in consultation with the Ministry of Finance.

Penalties

1. In most of the countries under consideration here, the penalties for contravention of the laws or regulations on sanctions are set out in the relevant legal instrument, whether it be a section of the same statute authorising sanctions or in separate general-purpose criminal or penal legislation. Penalties sometimes include imprisonment, and usually a fine assessed as a percentage (varying from 50% to 200%) of the value of the illicit transaction.

2. In the case of the United States, however, the impressive array of primary enabling legislation available also creates a variation in the penalties that can be assessed. Depending on the statute invoked as the authority for the sanctions regime, the penalty for infraction can vary from 10 years’ imprisonment and a fine of $50,000 for criminal penalties under the Trading With the Enemy Act (1917) [TWEA], to 12 years and $1 million for violation of the Iraq Sanctions Act, Pub. L. 101513, 104 Stat. 2047-55 [ISA].

Table 1: General Overview—Legislative & Regulatory Regimes (download in PDF)

Definitions

1. The table presented here of the definitions used in national legislation for sanctions is fairly basic, and is intended to highlight two important distinctions. The first is the scope of the sanctions regimes: while the United States uses a very wide definition of assets that are subject to financial sanctions, essentially blocking or freezing anything of value owned by the target, its counterpart senders generally restrict their regimes to ‘funds and other financial resources’, i.e. bank accounts.

2. The second is in the persons understood to be under the jurisdiction of the national government for the purposes of implementing sanctions. For example, an important gap is noticeable in Japanese legislation, where the Japanese government may only exercise its practice of financial controls over persons resident in Japan.

Table 2: Definitions (download in PDF)

* Switzerland is a special case here, as it cites a section of its Constitution (Chapter II, Part II, Article 102, No. 8) as the legal authority for its ordinances prohibiting commerce and financial transactions with a target of UN sanctions.