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“Sanctions for Sanctions Violation”:
U.S. Department of Treasury Enforcement Actions against Financial Sector

Timofeev I.N.,

MGIMO University, Moscow, Russia; Russian International Affairs Council, Moscow, Russia , itimofeev@russiancouncil.ru

elibrary_id: 236879 | ORCID: 0000-0003-1676-2221 |

DOI: 10.17976/jpps/2020.06.06

Rubric: Orbis terrarum

For citation:

Timofeev I.N. “Sanctions for Sanctions Violation”: U.S. Department of Treasury Enforcement Actions against Financial Sector. – Polis. Political Studies. 2020. No. 6. https://doi.org/10.17976/jpps/2020.06.06

The author is sincerely grateful to Dmitriy V. Kiku – Deputy Director of the Department for External Restrictions Control of the Russian Ministry of Finance – for his comments on the draft of the article.

Abstract

Both Russian and foreign researchers have done much to study U.S. sanctions policy. Many focus on “initiator-target” relations, i.e. on state vs. state dyads. However, the U.S. government runs a proactive policy to enforce compliance from both business at home and abroad with the U.S. sanctions regimes. Literature often omits this state vs. business relationship, although business behavior may be crucial to promote or block the isolation of target-states. For business itself, sanctions pose a considerable political risk, fraught with material and reputational loses; the financial sector is under special risk. The article studies the U.S. Department of Treasury’s enforcement actions against financial companies. It raises the following questions: Why is the financial sector the most vulnerable to enforcement? What is the nature of risk for these companies – is it a result of the “special approach” of the government, or a consequence of structural features of the financial sector itself? Why do financial companies violate sanctions regimes? What are the strategies these companies have to deal with the U.S. government and to manage the risk? The research tests three hypotheses. (1) The financial sector suffers due to structural reasons; (2) Companies violate sanctions regimes due to reckless, rather than willful behavior; (3) They prefer to cooperate with the government and improve compliance rather than further conceal violations and repeat them. This rather shows how efficient the U.S. enforcement actions are at changing the behavior of business in financial sector. Testing these assumptions implies analysing 54 cases of enforcement actions against financial companies in 2009-2020, in comparison with a wider sample of 215 cases of other sectors of economy. 

Keywords

sanctions, financial sector, banks, U.S. Department of the Treasury, Office of Foreign Assets Control, enforcement, political risk.

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