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Sanctions: what to expect in 2021 and beyond

Sanctions: what to expect in 2021 and beyond

The new administration in the White House will undoubtedly impact the application of sanctions in various global hotspots. While the management of a COVID19 response is likely to monopolize President Biden's time during his first few weeks in office, he is expected to prioritize several geopolitical issues, particularly sanctions, some of which will be a concern to MENA-based organizations. 

We spoke to Ahmed Buckley, a sanctions and counterterrorism expert with the United Nations, for an insider's view of the global sanctions' environment and any possible impact on MENA.   

Expanded designations and strengthened relationships

President Biden’s team is likely to add to the list of designations, Mr Buckley believes. Expect a review of the Terrorism and Financial Intelligence Unit by his Treasury appointees, which may result in an expanded list of designations on terrorism finance. 

The new administration is also likely to prioritize the implementation of the anti-money laundering provisions of the National Defense Authorization Act 2001, to strengthen AML and terror financing controls. 

President Biden, a seasoned policymaker with an elder statesman demeanour and many years on the global stage, is expected to focus on rebuilding relationships and partnerships both domestically and internationally to increase cooperation between countries when it comes to the application of sanctions. 

Mr Buckley explains: "Insofar as the new administration is open to a more multilateral foreign policy approach, it will also be open to closer engagements and collaborations with allies on sanctions, including maybe joint, simultaneous designations across several jurisdictions." 

It is probably unlikely, therefore, that we will see any early changes to existing sanctions, although we can expect many media reports on the situation as relationships settle into a new pattern. 

Organizations should ignore the noise and focus only on decisions if and when they come; it may be a while before any real change, although a dramatic change in circumstances is always possible in the current global political environment.  This is as true for the high priority geopolitical issues such as Iran, China and North Korea as it is for less pressing issues.

Iran
Iran is a pressing concern. The Joint Comprehensive Plan of Action (JCPOA), signed in 2015, allowed the county to trade with other countries after many years of isolation. The U.S. withdrawal from the deal in 2018 triggered a sanctions snapback clause, and this sudden break in business relationships created a great deal of complexity for compliance teams. 

Reinstated restrictions include: 

  • An almost general restriction against the importation of goods and services from Iran
  • The addition of several Iranian individuals and entities to the Office of Foreign Assets Control’s (OFAC) list of Specially Designated Nationals. 
  • The targeting of specific sectors of the Iranian economy by Executive Order and authorized secondary sanctions against foreign entities that operate within these sectors. 

Even before the snapback, Congress authorized the imposition of sanctions using the Countering America's Adversaries Through Sanctions Act of 2017, " Mr Buckley explained.

There are many challenges ahead, and returning to full compliance will not be an easy road to walk. It may be some time before relationships settle back into their previous position, so most restrictions will likely remain in place for the time being. As Mr Buckley puts it, "Rolling back all these sanctions will be a challenge, and I don't think anyone in the sanctions space was under any impression that 2021 would be the year that sanctions against Iran end."

It remains, however, an extremely dynamic situation that could have implications for many MENA-based organizations. 

China
President Biden is said to favour a national strategy that will help strengthen the U.S. economic position on the global stage to compete with China, rather than rely on punitive actions to manage the relationship. 

If there is any increase in sanction activity against China, it is likely to be on the issue of human rights - in a phone call with President Xi Jinping, President Biden emphasized the U.S. position as a human rights champion. It seems likely, therefore, that existing sanctions will remain in place for the time being. Mr Buckley agrees that this is likely to be the case: "I think that domestic sentiments within the US would not lend to a quick rescinding of the gamut of President Trump’s sanctions against China, particularly those embodied in acts passed by Congress, such as the Uyghur Human Rights Policy Act and the Hong Kong Autonomy Act."

If there is any relaxation of restrictions, it will probably be in the form of tariffs and export controls rather than sanctions.

North Korea
Despite the historic meetings between President Trump and the North Korean leader Kim Jong Un, it seems that there was no meaningful progress in terms of denuclearization, and the U.S. upheld existing sanctions. A 2018 NATO initiative , which included the U.S., called for continued pressure on the country, a message reaffirmed during a meeting between U.S. Vice President Mike Pence and Japanese Prime Minister Shinzō Abe . 

In an early phone call with the president of South Korea, Moon Jae-In, the two leaders agreed that there was a need for a more strategic approach to North Korea to achieve denuclearization on the Peninsula. Any decisions are now likely to be joint decisions made between Seoul, Washington and Tokyo. 

Russia 
Despite allegations of a cordial relationship between President Trump and President Putin, the former president did impose sanctions against Russia during his tenure. President Biden is expected to take a more rigid stance against Russia, and in this case, it seems that new sanctions may be imminent. 

The recent action against Russian dissident Alexei Navalny seems to have created a consensus between countries, and there is alignment between EU members and the U.S. in terms of sanctions. 

Venezuela 
Venezuela is currently in the midst of a deepening economic crisis, with hyperinflation contributing to a lack of critical supplies like water, food and energy. 

Shortly after President Biden's inauguration, President Maduro said that he was hopeful for the opportunity for better relations with Washington, but the U.S. Secretary of State Tony Blinken described Maduro as a 'brutal dictator' during his Senate confirmation. It does not appear, therefore, that there will be a resumption of diplomacy between the two countries, and further sanctions are likely. 

Increased enforcement activity 

Nearly a third of all enforcement activity in 2019 centred on financial institutions and regulated entities such as insurance companies. This resulted in 98.8% of OFAC’s penalties for the year, a massive USD 1.27 billion. In the words of OFAC Director Andrea Gacki, the agency's principal customers are financial institutions and regulated entities, both U.S. and non-U.S. actors . 

If President Biden’s administration follows a similar approach to President Obama’s administration, we should expect an uptick in enforcement activity. President Biden is apparently keen to rebuild skills and capacity within the department. 

"One of the priorities that President Biden signalled was to fix staffing and funding challenges within Treasury, including OFAC, and this has the potential to enable the U.S. to follow through a larger number of parallel investigations," Mr Buckley explained. 

A strengthened and expanded investigating and prosecuting team will increase the DOJ’s capacity and reach. 

What companies can do to protect themselves 

Given that ignorance is not accepted as a defence by authorities, lawmakers can hold companies liable for sanctions violations even if unintentional. 

Mr Buckley advises several steps to mitigate this risk, including: 

  • Voluntary self-disclosure as soon as a violation is detected or suspected. 
  • Full cooperation with OFAC investigations. 
  • Documented, credible evidence of steps taken to reduce the risk of inadvertent violations 
  • Reported activity to mitigate past errors and ensure they are not repeated, such as training from a reputable agency, appropriate automation, enhanced record keeping, adjusted processes, and regular review of customer and third-party risk. 

For organizations with a global footprint, complying with sanctions has become a challenging and time-consuming task. In recent years, the use of sanctions as a foreign policy tool has grown to be a fragmented, disjointed and dynamic endeavour, prone to frequent change, which increases the complexity of compliance. 

It seems that President Biden's focus will be on building strategy, capacity and consensus both within the DOJ and in relationships between the U.S. and its allies. In the context of compliance, it may help to reduce some of the complexity of international sanctions by allowing for a more long term view on compliance processes. Compliance departments would do well to follow the lead of President Biden and build their own capacity in terms of skills development and training, create their own strategy, and plan for the long road ahead. 

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About the interviewee

Ahmed El Buckley is an independent expert serving on the Analytical Support and Monitoring Team supporting the UN Security Council 1267/1989/2253 Committee concerning sanctions. An ACAMS Certified Global Sanctions Specialist, Ahmed co-designed and delivered trainings on sanctions implementation and compliance to national authorities, financial institutions, as well as to trainees at NATO’s Defense Against Terrorism Centre of Excellence. He co-drafted the Joint Report on Actions Taken by Member States to Disrupt Terrorism Finance pursuant to UNSC resolution 2462 (2019). He was previously Deputy Director of the Global Counterterrorism Unit at Egypt’s Ministry of Foreign Affairs and served diplomatic postings in Pakistan and Canada. During his diplomatic career, Ahmed delivered international cooperation programs in CVE, and supervised the implementation of development projects and technical assistance programs in Afghanistan and South Sudan.