Economic Sanctions: Developments and Lessons for Boards in 2024

Continued volatility in geopolitical events this past year and corresponding responses in sanctions policies highlight the importance of integrating economic sanctions considerations in board agendas for 2024. In particular, boards of directors should be aware of the increasing global collaboration among sanctions authorities as well as the continuing expansion and application of sanctions in new domains such as digital assets. Sanctions developments can be expected to be particularly fluid in 2024 with respect to China, Russia and Venezuela.

Responses to Global Conflict and Crises  

In 2023, economic sanctions by the United States and its partners and allies continued to be a key component of conflict and crisis response.

For example, as the Russian offensive in Ukraine entered its second year, the United States, United Kingdom and European Union have maintained close coordination in the further imposition and enforcement of sanctions, in particular with respect to the enforcement of the price cap against Russian-origin crude oil and petroleum products.[1]

Also, in response to commitments made by representatives of Venezuelan President Maduro and the Unitary Platform relating to  democratic elections and the release of prisoners, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) suspended sanctions relating to oil and gas sector operations in Venezuela through April 18, 2024, authorized certain transactions involving the Venezuelan state-owned mining company and–consistent with private-sector sentiment and pressure–revoked a Trump-era ban on the ability of U.S. persons to purchase Petróleos de Venezuela, S.A. and Venezuelan sovereign bonds on the secondary market.[2] The U.S. government has threatened the reimposition of certain sanctions—most prominently the general license authorizing oil and gas transactions—if the Maduro regime fails to follow through with its commitments to take concrete steps toward a democratic election in 2024. 

In addition, following the October 7, 2023 attack by Hamas against Israel, the United States imposed several rounds of sanctions, primarily targeting Hamas operatives and financial facilitators, including conduits for illicit funds. The United States stated its intention to continue imposing such sanctions in 2024 to disrupt Hamas’s financial network, including through new sanctions authorities, as discussed below.[3]

Sanctions Coordination

The war in Ukraine has served as a catalyst for the Biden Administration’s emphasis on incorporating multilateral coordination into its sanctions policy. For example, in May 2023, members of the G7 and other partners imposed additional sanctions on Russia in response to commitments made at the G7 Leader’s Summit. Also, throughout 2023, the United States updated its sanctions guidance and enforcement posture relating to the joint price-cap on Russian crude oil and petroleum products in coordination with the price cap coalition countries.[4] 

October 2023 marked the first year of the OFAC-UK Office of Financial Sanctions Implementation (OFSI) Enhanced Partnership between U.S. and UK sanctions authorities,[5] through which OFAC and OFSI coordinated at multiple levels of seniority to exchange best practices, align on sanctions implementation and shared objectives, and hold joint private-sector engagements (including the first round table with fintech and digital assets stakeholders). This partnership has manifested in concrete actions, including coordinated sanctions in response to the Israel-Hamas conflict,[6] as well as joint coordination with Canada in imposing new actions against several individuals and entities for supporting Myanmar’s military regime.[7]

OFAC has similarly continued its bilateral EU partnership with the European External Action Service and the Directorate-General for Financial Stability, Financial Services and Capital Markets union. This coordination includes participation in the U.S.-EU Trade and Technology council, which continues to play a key role in coordinating action between the partners, particularly in the context of the war in Ukraine.

We expect that these communication channels, institutional structures and precedent established over the past two years will continue to facilitate and shape multilateral coordination on other issues.

Enforcement Against Non-U.S. Entities and Expanding Jurisdictional Reach

U.S. sanctions also continue to extend extraterritorially to non-U.S. entities, including in the digital asset realm. Indeed, of the 17 civil penalties imposed by OFAC in 2023, roughly half involved apparent violations by non-U.S. entities, including a $968,618,825 settlement with virtual currency exchange Binance Holdings, Ltd. in conjunction with the U.S. Department of Justice, the Financial Crimes Enforcement Network and the Commodity Futures Trading Commission.[8]

The U.S. government has also recently sought to expand OFAC’s statutory authorities to impose secondary sanctions against non-U.S. financial institutions and other entities on multiple fronts.  For example, on November 28, 2023, the U.S. Treasury Department requested that Congress expand its authority to impose secondary sanctions on digital asset service providers engaged in dealings with terrorist groups and other illicit actors outside of U.S. jurisdiction.[9] In turn, on December 11, 2023, a bipartisan group of senators introduced a bill directing the U.S. President to impose so-called “mandatory” sanctions against foreign financial institutions and digital asset service providers that knowingly facilitate any significant financial transaction with sanctioned terrorist organizations.[10] Similarly, on December 22, 2023, the Biden Administration issued an executive order authorizing the imposition of secondary sanctions against foreign financial institutions for engaging in significant transactions on behalf of certain sanctioned parties or otherwise involving Russia’s military-industrial base, including transactions relating to certain identified items.[11] 

Looking Ahead

Entering 2024, boards of directors should prepare for another dynamic year with elections scheduled in over 50 countries representing more than half the global population. As political transitions bleed into potential changes in sanctions policies, boards should expect continued efforts among the United States and its partners and allies to cooperate on sanctions issues where interests align.[12] U.S. sanctions against Russia, in coordination with U.S. partners and allies, are expected to further expand, in particular against the Russian military-industrial complex, Kremlin-linked elites and sanctions and export control evasion networks.[13]  Companies with activities relating to Venezuela or its energy sector should also closely monitor the political situation in Venezuela for potential implications on U.S. sanctions policy.

Lastly, boards of directors should be cognizant of the willingness of OFAC to exercise its broad jurisdictional powers, including with respect to U.S. financial institutions and service providers in facilitating international and digital-asset transactions. Irrespective of the outcome of the 2024 U.S. presidential election, the U.S. government will likely continue to wield the threat of secondary sanctions and apply sanctions enforcement broadly with respect to key areas of focus, such as digital assets. 

This was republished by The Global Trade Law Journal.

[1] See e.g., U.S. Department of the Treasury,“Price Cap Coalition Advisory for the Maritime Oil Industry and Related Sectors” (October 12, 2023), available here; U.S. Department of State, “United States Imposes Additional Sanctions and Export Controls on Russia in Coordination with International Partners” (May 19, 2023), available here. For additional information see our blog posts on Russia-Ukraine sanctions updates here, and here.

[2]  U.S. Department of the Treasury, “Frequently Asked Questions Related to the Suspension of Certain U.S. Sanctions with Respect to Venezuela on October 18, 2023” (November 16, 2023), available here

[3] U.S. Department of the Treasury, “Following Terrorist Attack on Israel, Treasury Sanctions Hamas Operatives and Financial Facilitators” (October 18, 2023), available here; U.S. Department of the Treasury, “United States and United Kingdom Take Coordinated Action Against Hamas Leaders and Financiers” (November 14, 2023), available here..

[4] U.S. Department of the Treasury, “Possible Evasion of the Russian Oil Price Cap” (April 17, 2020), available here;  U.S. Department of the Treasury, “Treasury Imposes Additional Price Cap-Related Sanctions” (December 1, 2023), available here; U.S. Department of the Treasury, “Treasury Sanctions Additional Maritime Companies, Vessels Transporting Oil Sold Above the Coalition Price Cap” (November 16, 2023), available here  U.S. Department of the Treasury, “Treasury Sanctions Entities for Transporting Oil Sold Above the Coalition Price Cap to Restrict Russia’s War Machine” (October 12, 2023), available here ;See also U.S. Department of the Treasury, “The Price cap on Russian Oil: A Progress Report” (May 18, 2023), available here.

[5] U.S. Department of the Treasury, “ One Year On: The OFAC-OFSI Enhanced Partnership” (November 15, 2023), available here.

[6] U.S. Department of the Treasury, “United States and United Kingdom Take Coordinated Action Against Hamas Leaders and Financiers” (November 14, 2023), available here.

[7] Reuters, “Canada Imposes New Myanmar-related Sanctions in Coordination with US, UK” (October 31, 2023), available here.

[8] [Add x-ref to enforcement article]

[9] U.S. Department of the Treasury, “Remarks by Deputy Secretary of the Treasury Wally Adeyemo at the 2023 Blockchain Association’s Policy Summit” (November 29, 2023), available here.

[10] U.S. Senator for Rhode Island, Jack Reed, “Reed Helps Lead Bipartisan Effort to Enforce Sanctions & Crackdown on Illicit Crypto Terrorist Financing” (December 11, 2023), available here.

[11] U.S. Department of the Treasury, “Statement from Secretary Yellen on President Biden’s Executive Order Taking Additional Steps with Respect to Russia’s Harmful Activities” (December 22, 2023), available here.

[12] U.S. Department of Treasury, “U.S. and EU Sanctions Teams Enhance Bilateral Partnership” (May 16, 2023), available here

[13] U.S. Department of the Treasury, “With Wide-Ranging New Sanctions, Treasury Targets Russian Military-Linked Elites and Industrial Base” (September 14, 2023), available here ; U.S. Secretary of State, Antony Blinken, “Taking Additional Sweeping Measures Against Russia” (November 2, 2023), available here; U.S. Secretary of State, Antony Blinken, “Taking Additional Sweeping Measures Against Russia” (November 2, 2023), available here; U.S. Department of the Treasury, “Department of Commerce, Department of the Treasury, and Department of Justice Tri-Seal Compliance Note” (March 2, 2023), available here.