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The past, present, and future of economic sanctions against organised crime

Read our summary of the recent RUSI report on how sanctions are used to combat organised crime, and what lessons can be learned for the future.

Napier AI
May 5, 2022

The Royal United Services Institute for Defence and Security Studies (RUSI), the UK’s esteemed think tank on defence and security matters of a national and global nature, released its Targeted Sanctions and Organised Crime report in March 2022.

While sanctions are increasingly employed to address an expanding array of abuses by rogue states globally, the RUSI paper is the first published study of its kind which measures, evaluates, and advises on past, present, and future policies and practices which specifically target organised crime.

Subtitled ‘Impact and Lessons for Future Sanctions Use’, the report asked and sought to answer the question:

“How have sanctions been used to address organised crime, and what lessons does this hold for other potential sanctions users in this area?"

In this blog, we summarise the insights RUSI offers on better understanding how sanctions have been used to address organised crime so far, and what lessons new and future sanctions issuers can learn.

We also look at where anti-money laundering (AML) practitioners can - and do - play their part in current and emerging sanctions regimes.

What do economic sanctions aim to achieve?

Essentially, economic sanctions are a mechanism of achieving focused sets of desired strategic outcomes in a targeted country or from an affiliated individual or entity, which can make their purpose challenging to define.

The World Economic Forum (WEF) describes the intention of sanctions as follows:

“The primary objective of imposing sanctions is to deter bad behaviour, enforcing economic punishment on the targeted country, and to force rehabilitation, or changed behaviour by that country.”

Implemented sensibly, sustainably, and effectively, sanctions have a unique, practical advantage over the jurisdictional discrepancies and delays in legal processes necessitated by transnational law enforcement operations.

The Global Initiative Against Transnational Organised Crime (GI-TOC) explains this succinctly on page 149 of its 2021 Global Organised Crime Index:

“The larger the number of sound economic regulations that are in place and the lower number of (and duration of) sanctions placed on a state, the higher resilience a country has to organized crime.”

How do economic sanctions combat organised crime?

Below, we outline the US and UK organised crime-focused sanctions regimes, however it’s worth noting that in the same timeframe, Australia, the EU, and the UN have also developed definitions, policies, and strategies governing such measures.

The US approach to sanctions

The US was the first global enforcer of sanctions focused on organised crime, which were unprecedented  when they were implemented close to 30 years ago.

In 1995, then-President Clinton signed Executive order 12978, which initiated the Specially Designated Narcotics Traffickers (SDNT) regime to counter transnational illegal narcotics trafficking into the US from Colombia, usually via fellow Latin American countries, whether by land, sea, or air.

A world-first of its kind, the SDNT identified drug trafficking-related violent crime and corruption in Colombia as a national emergency for the US. The SDNT sanctions aimed to counter the harms inflicted by the Colombian cartels on American citizens and communities by:

  • Prohibiting transactions with sanctioned individuals and entities, thus cutting off their access to the US financial system
  • Denying access to property ownership in the US
  • Denying visas or any form of entry into the US

In 1999, the US Congress expanded the SDNT to the Specially Designated Narcotics Trafficking Kingpin (SDNTK) regime. The SDNTK broadened the scope of sanctions to include cartel networks and their bosses trafficking illegal drugs anywhere in the world, not only directly into the USA.

In 2011, then-President Obama amplified the powers of organised crime-focused sanctions through the Transnational Criminal Organizations (TCO) sanctions programme, which widened the net of SDNTK sanctions authority to include all organised crime groups deemed a threat to US national security, not merely illegal narcotics trafficking enterprises. Furthermore, sanctions were made integral to the platform of Obama’s 2011 Strategy to Combat Transnational Organized Crime.

In 2021, US President Biden signed Executive Order 14059- (ILLICIT-DRUGS-EO) in an emphatic response to the 100,000 annual death toll of America’s ongoing opioid crisis. The ILLICIT-DRUGS-EO empowers the US to sanction any and all foreigners involved in the illicit drug trade, regardless of affiliations to cartels or other criminal organisations.

The UK’s approach to sanctions

The UK’s steps to acknowledge and implement legislation to address the threat of organised crime to national security is more recent.

In 2015, the UK government showed a measurable uptick in organised crime-focused sanctions policy in its National Security Strategy and Strategic Defence Review, which noted in chapter 4 that “serious and organised crime affects the lives of ordinary people, businesses, and government.”

In 2018, the Sanctions and Anti-Money Laundering Act legalised measures against all organised crime, including a comprehensive list of sanction types and designated persons who could be sanctioned.

In 2020, the Global Human Rights Sanctions Regulations issued a stern and broad-based warning to organised crime groups (OCGs) whose activities threaten the life, health, dignity, or sovereignty of any individual in any way, regardless of location or intent, and whether within the UK or not.

How effective are economic sanctions against organised crime groups?

While the RUSI study highlights that the trend of sanctions legislation against organised crime is ultimately encouraging, the development of methodologies to measure their effectiveness has been stilted.

Without existing impact evaluation methodologies, most countries will be at a loss as to whether it would be beneficial to impose sanctions, or how to do so. The RUSI paper analyses two contrasting case histories of sanctions implementation – drug trafficking in Colombia, and migrant smuggling, human and oil smuggling in Libya – and uses these to draw conclusions and offer considerations for current and future sanction users.

1. Economic sanctions against Colombia

US sanctions against several criminal narcotics trafficking families in Colombia have long been hailed for their success in that they completely destroyed those particular networks. In 1995, the Cali cartel was charged with importing 200,000 kgs of cocaine to the USA and laundering $2billion.

In 2006 the Rodriguez Orejuela brothers, the cartel leaders, handed themselves over to authorities, were extradited to the USA and jailed. The cartel was found to have 246 front companies operating out of 10 countries, leading to the largest asset forfeiture operation in Colombian history.

However, RUSI has shown that the overall volume of cocaine being trafficked out of Colombia into the USA has not changed. New, small networks of individual farmers have developed which fly under the radar of major law enforcement efforts. Drug trafficking is a business where, having created a demand, suppliers will always find ways of meeting that demand.

2. Economic sanctions against Libya

The RUSI study indicates that while the United Nations undertook the training of Libya’s coast guards as the primary means of halting migrant smuggling, human trafficking, and sanctions-busting oil from Libya across the Mediterranean, the post-Ghaddafi government proved too corrupt for effective engagement. So much so, that in one case, just three months after the criminal head among coast guards was arrested, the government released him.

The post-Ghaddafi government of Libya proved to be so dysfunctional and entrenched in organised crime that no lessons have yet been gleaned as to the effectiveness of sanctions against organised crime. While oil sanctions were delisted when Libya handed over the Lockerbie bombers to justice, human trafficking appears to have increased in the last five years.

How economic sanctions targeting organised crime help achieve world peace and prosperity

In conclusions drawn from what has and hasn’t worked up until now, RUSI  lists the conditions that are essential for sanctions against organised crime to truly work:

  • The host government must be an honest partner willing to cooperate with the countries issuing the sanctions
  • The sanctions cannot stand alone; they must be embedded in a coherent and strategic raft of measures
  • There must be a clearly focused plan within which these measures are implemented
  • The purpose and objectives of issuing sanctions against organised criminal actors must be specified
  • Key agencies (for example, law enforcement) in both the country issuing sanctions and the country where they will be applied must be resourced and brought on board
  • The differing levels of vulnerability of various players across the chain of illicit actions needs to be taken into consideration when the targeting strategy is developed

Further consideration must be given to where, when, and how sanctions should be included in packages of anti-organised crime measures, ensuring these are enacted in liaison with other countries with similar goals, as well as with one’s own strategic approach to organised crime, such as posting alerts for unexplained wealth, or using other instruments such as asset freezing.

Thought should be given to the overlap between sanctions, corruption-fighting, cyber usage, and human rights legislation, to ensure that all policy tools are complementary and working to the same ends.

How can Napier help in the fight against organised crime?

It is in this arena that Napier’s cutting-edge technology finds itself in the thick of it. We enhance the care with which you onboard new clients, and constantly scrutinize established client relationships.

Napier’s ‘always on’ compliance platform can help your organisation, big or small, in your journey towards AML compliance and in the battle against organised crime.

Please request a demo of our capabilities here.

Photo by Almas Salakhov on Unsplash

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