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Financial services
Sanctions
What are sanctions?
Sanctions are normally used by the international community for one or more of the following reasons:
- To encourage a change in the behaviour of a target country or regime.
- To apply pressure on a target country or regime to comply with set objectives.
- As an enforcement tool when international peace and security has been threatened and diplomatic efforts have failed.
- To prevent and suppress the financing of terrorists and terrorist acts.
Financial sanctions are normally one element of a package of measures used to achieve one or more of the above. Financial sanctions measures can vary from the comprehensive – prohibiting the transfer of funds to a sanctioned country and freezing the assets of a government, the corporate entities and residents of the target country – to targeted asset freezes on individuals/entities.
Under Chapter VII of the UN Charter, the Security Council can take enforcement measures to maintain or restore international peace and security. Such measures range from economic sanctions to international military action. Article 41 of the UN Charter states that the Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. The range of sanctions can vary from comprehensive economic and trade sanctions to more targeted measures such as arms embargoes, travel bans, financial or diplomatic restrictions.
The European Union applies sanctions in pursuit of the specific objectives of the Common Foreign and Security Policy (CFSP) as set out in the Treaty of the European Union. Sanctions in the CFSP framework include the interruption or reduction of economic relations with third countries and restrictions against specific individuals/entities. They also include the interruption or reduction of diplomatic relations, restrictions on admission and other measures not affecting economic relations with third countries. Restrictive measures are applied by the EU either in implementation of sanctions adopted by the UN Security Council in accordance with Chapter VII of the UN Charter or autonomously within the framework of the CFSP.
Who is responsible for sanctions policy in the UK?
The Foreign and Commonwealth Office (FCO) is responsible for overall policy on international sanctions including the scope and content of international sanction regimes. HM Treasury is responsible for the implementation and administration of international financial sanctions in the UK, for domestic designation (principally under the Terrorism Asset-Freezing etc. Act 2010) and for licensing exemptions to financial sanctions. The Department for Business Innovation and Skills (BIS) is responsible for trade sanctions.
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