What are penalties?

Sanctions are an important governance tool in the global financial industry. States are increasingly using sanctions to address economic rather than physical problems, and as such, sanctions have become a common tool in foreign relations, peacekeeping and conflict resolution. Given their prevalence, everyone in the financial sector should have a good understanding of what sanctions are, how they work and why they are used.

United Nations sanctions

The United Nations publishes the consolidated list of sanctions of the United Nations Security Council:

• The UN Consolidated Sanctions List is applicable to all UN Member States and is organized into one list for groups and entities.
• The UN Security Council composes the sanctions, each of which is backed by a UN Security Council resolution.
• The UN does not have direct legislative power within member states, so national legislative authorities are responsible for enforcing UN sanctions.

European Union sanctions

As Europe’s central governmental body, the EU implements a series of financial sanctions:

The Council of the EU implements UN Security Council sanctions, as well as its own autonomous sanctions, in the Consolidated EU Sanctions List.

• All persons and entities within the European Union must observe EU sanctions and comply with the sanctions list.
• EU sanctions are also applicable to all EU citizens operating anywhere in the world.
• The EU applies some sanction measures directly through EU law, but some measures are delegated to national lawmakers in member states.

OFAC Sanctions

The Office of Financial Assets Control maintains a number of sanctions lists on behalf of the US Treasury:

• OFAC implements and enforces international sanctions issued by the United States government.
• OFAC’s sanctions lists include the Consolidated Sanctions List and the Specially Designated Nationals List.
• All individuals, banks, and financial services institutions under the jurisdiction of the United States must comply with OFAC sanctions.
• OFAC issues “blanket” sanctions that target countries, and “non-global” (or “selective”) sanctions that target specific individuals or entities.

Her Majesty’s Treasury Sanctions

The UK Treasury maintains the UK Sanctions List:

• The UK Treasury Sanctions List includes the consolidated UN and EU sanctions lists, as well as stand-alone UK sanctions.
• All banks and financial institutions are prohibited from doing business with countries and entities on Her Majesty’s Treasury Sanctions List.
• British citizens and citizens of Overseas Territories are also subject to Her Majesty’s Treasury sanctions.

The Office of Financial Sanctions Implementation (OFSI) is responsible for implementing and enforcing Her Majesty’s Treasury Financial Sanctions.

DFAT Penalties

The Department of Foreign Affairs and Trade (DFAT) implements and enforces sanctions for the Australian Government:

• The DFAT Sanctions List mirrors the United Nations Sanctions List as well as stand-alone sanctions issued by Australia.
• All banks and financial institutions in Australia must comply with the DFAT Sanctions List.
• DFAT sanctions apply equally to all Australian citizens, at home and abroad.

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