Balancing Sanctions Compliance and Human Rights

Balancing Sanctions Compliance and Human Rights

Implementing economic sanctions while respecting human rights is a complex balancing act. Sanctions aim to change behavior of foreign regimes, individuals and entities. But overly broad sanctions can negatively impact human rights of local populations. How can governments craft targeted sanctions to maximize pressure on bad actors while minimizing collateral damage?

What are Economic Sanctions?

Economic sanctions are restrictions on trade, financial transactions, investments, travel, or other economic activities involving a targeted country, entity, or individual. They are imposed for reasons like nuclear non-proliferation, counter-terrorism, democracy promotion, or human rights abuse. Some major sanctions programs in the U.S. include those on Iran, North Korea, Syria, Venezuela, Russia and Chinese military companies.

Sanctions use access to the U.S. financial system and economy as leverage. Cutting off this access imposes economic costs on targeted actors, pressuring them to change behavior. But overly broad sanctions affecting entire economies can worsen humanitarian conditions.

Balancing Pressure and Human Rights

Well-designed sanctions apply pressure on regimes, not local populations. But sanctions often have unintended consequences. Limiting financial access affects imports of food, medicine and humanitarian goods. De-risking by banks cuts remittances that families depend on. Economic contraction increases poverty.

These collateral effects disproportionately impact vulnerable groups like women, children, minorities, and the poor. Sanctions must be carefully crafted to mitigate harm to local populations. But governments also want to avoid loopholes that targeted actors exploit.

Recommendations

• Narrowly target sanctions on bad actors, not entire economies
• Allow food, agricultural, medical, and humanitarian trade
• Keep remittance channels open
• Consult with civil society groups to monitor impacts
• Communicate collateral effects are unintended and will be mitigated

Well-designed, multilateral sanctions applying economic pressure on regimes while allowing humanitarian trade may be most effective. Unilateral sanctions risk being overly blunt while undermining cooperation.

U.S. Sanctions Laws and Compliance

Several U.S. laws authorize sanctions to promote foreign policy and national security:

• Trading with the Enemy Act of 1917
• International Emergency Economic Powers Act of 1977
• Arms Export Control Act
• Export Administration Act of 1979
• Nuclear Proliferation Prevention Act of 1994
• Helms-Burton Act of 1996
• Iran Sanctions Act of 1996
• International Religious Freedom Act of 1998
• Syria Accountability and Lebanese Sovereignty Act of 2003

Key agencies enforcing sanctions include the Treasury Department’s Office of Foreign Assets Control (OFAC), State Department, and Commerce Department. OFAC publishes lists of sanctioned individuals and entities known as Specially Designated Nationals (SDNs).

U.S. persons and companies must comply with OFAC regulations. Penalties for violations can be severe. But sanctions rules are complex, changing frequently as geopolitics shift. This creates major compliance challenges for global corporations.

Sanctions Compliance Best Practices

• Screen customers, suppliers, partners against SDN lists
• Conduct due diligence on high-risk transactions
• Implement sanctions compliance software and procedures
• Train employees on sanctions laws and risks
• Get legal advice on complex transactions

Fines for non-compliance can be steep. JP Morgan Chase paid $88 million in 2011 for violating Cuba, Iran and Sudan sanctions. HSBC paid $1.9 billion in 2012 for violating sanctions on Iran, Libya, Sudan, Burma and Mexico.

Case Study: Impact of Venezuela Sanctions

U.S. sanctions on Venezuela highlight the complex balancing of pressuring authoritarian regimes while avoiding humanitarian impacts. The U.S. first imposed sanctions in 2015, targeting government officials and oil companies. Sanctions ramped up in 2019 when the U.S. designated Venezuela’s state oil company PDVSA as an SDN.

These measures deprived Venezuela of oil revenue needed to import food and medicine. Remittances from the Venezuelan diaspora were also restricted. The economy contracted by 65% from 2013 to 2019. Poverty rose from 48% to 90% of the population. Food insecurity spread.

While mismanagement by the Maduro regime drove the crisis, experts say U.S. sanctions exacerbated it. The intent was to pressure elites, but regular Venezuelans bore the brunt.

Some adjustments were made. General licenses allowed some oil exports to Europe and imports of food, medicine and humanitarian supplies. Remittances were partially restored. But more remains to be done to ease collateral damage while keeping pressure on the regime.

Balancing Counter-Terrorism and Human Rights

Counter-terrorism sanctions also require balancing security imperatives with human rights protections. Since 9/11, the UN and countries have adopted sweeping counter-terrorism financing and travel restrictions.

These aim to restrict terrorist activity by cutting off funding and movement. But overly broad measures can violate rights of due process, freedom of association and movement. And marginalized groups may be disproportionately impacted.

Critics argue current counter-terrorism sanctions are opaque, give inadequate legal recourse, and rely on intelligence lacking due process. Recommendations include improving transparency, oversight, and appeal processes.

The Kadi case highlights tensions between security and rights. UN sanctions froze assets of alleged Al Qaeda financier Yassin Abdullah Kadi without due process. Kadi appealed to the European Court of Justice, which ruled his rights had been violated. The UN eventually delisted Kadi after review.

Balancing counter-terrorism imperatives with rights remains challenging. But reforms can improve due process and oversight while still restricting terrorist financing and activities.

Conclusion

Economic sanctions are an important foreign policy tool. But they must be precisely targeted to maximize pressure on regimes while minimizing unintended humanitarian impacts. Narrowly designed sanctions coordinated multilaterally are ideal.

Sanctions laws remain complex. Companies must invest in strong compliance programs to manage risks. Policymakers should also build in monitoring mechanisms and be ready to calibrate measures to ease collateral damage if needed.

With care and oversight, sanctions can advance security and rights rather than undermining them. But it requires constant balancing of multiple interests in an ever-changing geopolitical context.

References

• Public Law 107-273
• National Defense Authorization Act for Fiscal Year 2017
• New York State Law Reporting Bureau Style Manual
• H.R. 4792 – Malicious Deep Fake Prohibition Act of 2021
• Public Law 104-297
• HHS Conscience Protection Rule