2022 marked the largest sanctions event in history as governments around the world imposed restrictions on Russia for invading Ukraine. Meanwhile, sanctions against Iran, Belarus, and Myanmar and global thematic sanctions targeting human rights and corruption continued to trend upward.
This report is based on Castellum.AI’s global sanctions database which captures changes to sanctions lists every five minutes. The global database covers sanctions adopted by top sanctions authorities like US OFAC and the EU but also from smaller countries like Singapore and Azerbaijan.
First, how have global sanctions changed since 2021?
Major sanctioning jurisdictions all saw significant increases in their total number of sanctions in 2022, with growth outpacing the number of sanctions added in 2021, largely as a response to Russia’s invasion.
Canada’s sanctions list increased the most in 2022 with over 100% growth. The growth in Swiss, British, Australian, French, and EU sanctions programs also increased dramatically last year as authorities in these jurisdictions responded to Russia’s invasion. The shift is more dramatic considering these sanctions lists grew between 3-10% last year.
Meanwhile the UN’s sanctions regime continued to shrink in 2022, posting a 2% decline in 2022 after shrinking by 3% in 2021. We have previously covered the UN’s inability to respond to global security threats through sanctions, including imposing restrictions on Russia because of Moscow’s veto at the UN Security Council.
..
..
Top Sanctions Targets in 2022
Sanctions against Russia led designations in 2022, outweighing the next most targeted country, Iran, by a factor of 20. Besides Russia, other sanctions hotspots include:
Iran: 451 new designations pertaining to the crackdown on protesters, evasion of existing sanctions, and enabling Russia’s war in Ukraine.
Belarus: 366 new designations primarily related to the government’s support of Russia’s war in Ukraine, including Belarus opening its territory for use as a staging ground for the invasion and facilitating Russia’s sanctions evasion efforts.
Myanmar: 347 new designations primarily targeting the military government that came to power in the February 2021 coup.
North Korea: 82 new designations related to Pyongyang’s continued development of WMDs and missiles.
China: 68 new designations based on location. While China is not the target of a specific sanctions program and is therefore excluded from the above chart, designeees located in China have been sanctioned for human rights abuses, facilitating Iranian and Russian sanctions evasion, and enabling North Korea’s WMD and missile programs.
Sanctions Removals in 2022
While removals of Russia-targeted sanctions were the highest, this is largely due to sanctions authorities eliminating duplicates or amending their sanctions lists. Other jurisdictions which saw sanctions removed in 2022 include:
Mexico: 34 removals, all related to narcotics trafficking sanctions.
Colombia: 30 removals, all related to narcotics trafficking sanctions.
Iraq: 23 removals, primarily related to UN sanctions removals.
Iran: 16 removals, largely related to parties no longer listed under programs related to cyber activities and the activities of the Iranian Revolutionary Guard Corps (IRGC).
North Korea: 12 removals, 11 of which relate to Australia’s removal of North Korean individuals or entities originally designated for facilitating sanctions evasion.
Increased Focus on Human Rights and Corruption
For the first time, thematic sanctions programs targeting human rights abuses and corruption outnumbered terrorism-related sanctions designations. This reflects increased use of sanctions as a tool to impose costs on human rights abusers and corrupt globally.
Programs that target human rights abuses and corruption – typically modeled on the Global Magnitsky sanctions adopted by the US in 2016 – are increasingly popular among sanctioning authorities. These enable authorities to designate a party anywhere in the globe, in contrast to sanctions programs that focus on a specific country.
The US dominated human rights sanctions in 2022, increasing their total number by 42% from 468 designations to 665 designations. Notably, Australia marked their first use of human rights and corruption sanctions in 2022 after adopting a law establishing this sanctions program in December 2021.
Despite having similar sanctions programs available, the EU and Canada both failed to use these powers last year.
Sanctions on Crypto Increase Amid Crypto Market Meltdown
Crypto continues to be targeted as authorities seek to crack down on the use of digital currencies as a means to evade sanctions or launder the proceeds of ransomware and other cyber attacks.
The US remains the primary jurisdiction listing crypto addresses as part of sanctions designations. However, the number of jurisdictions sanctioning crypto is growing. The UK issued its first crypto address designations in July 2022 when it designated Russian crypto exchange Garantex for enabling cyber criminals to launder funds. Elsewhere, Canadian law enforcement ordered crypto wallets frozen for their use funding far-right protests while Israel’s National Bureau for Counter Terror Financing has targeted crypto assets involved in financing terrorism. Additionally, the EU issued a ban on all crypto transactions involving Russia in October 2022.
In spite of the crypto winter, digital assets will continue to be targeted going forward as sanctions authorities target digital wallets used to evade sanctions or launder the proceeds of illicit activity.
Countries Under Continued Sanctions Pressure
China’s Bedfellows Get It In Sanctions Trouble
Diplomatic relations between China and the West reached a low point in 2021 as sanctions over the treatment of Uighurs in western China led to tit-for-tat designations announced by Beijing. However, this past year, the majority of sanctions against parties in China have been related to China’s activities elsewhere, such as assisting Iran, North Korea, and Russia with evading their own sanctions programs.
Beijing’s counter sanctions dropped off in 2022 after the spike in 2021. Over 60% of designations announced last year targeted individuals in Taiwan and the remainder targeted Western officials who have openly criticized China’s domestic or foreign policy.
International Response to Iran’s Crackdown
Iran continues to be a target of Western sanctions, and the number of countries imposing sanctions on Tehran increased in 2022 over 2021. The US had been largely alone in issuing new designations against Iran over its nuclear weapons program after leaving the JCPOA in 2018. Tehran’s crackdown on protesters in 2022, particularly in the wake of the death of Mahsa Amini, galvanized sanctions action by Canada, the EU, France, and UK in the last quarter of 2022.
Myanmar Continues Slide into Isolation
The fallout from Myanmar’s military coup in early-2021 and continued allegations of abuse of Rohingya Muslims in the country has led to continued isolation the past year. The number of designations adopted against Myanmar in 2022 increased 47% over the designations adopted in 2021, with Canada alone accounting for 47% of the new designations.
The Most Sanctioned Country in the World
Before invading Ukraine in February, Russia was already among the most sanctioned countries. Since February, sanctions against Russia by major Western countries have increased by 368%. Our Russia Sanctions Dashboard has tracked the dramatic rise since the start of the invasion.
The US leads countries imposing costs on Russia with major partner countries maintaining close alignment in designations. For example, the UK, EU, France, Switzerland, and Australia all designated Russian members of parliament within 72 hours of one another at the start of the conflict.
Notable among the list of countries imposing sanctions on Russia is Switzerland, which officially abandoned its official position of diplomatic neutrality after Russia’s invasion and decided to align its sanctions with those imposed by the EU.
One area of divergence between the US and partner countries is the focus of sanctions. The US alone accounted for 41% of all entities designated under Russia-related sanctions in 2022. Australia has only designated 65 Russian entities, or 9% of its designations against Russia to date.
Targeted sanction designations against individuals, entities, vessels and aircraft have been accompanied by significant sectoral sanctions. Sectoral sanctions and export controls – which range from crude oil price caps to bans on the export of high-tech computer chips – have accompanied the list-based targeted sanctions.
Belarus Faces Consequences for Aiding Russia
Belarus was the most sanctioned country in 2021 as a result of its repression of political dissidents and facilitation of the migrant crisis in Europe. In 2022, the justification shifted to the Lukashenko regime’s assistance provided to Russia for its invasion.
Predictions for 2023
Russia Sanctions Fines Are Coming
While the pace of new targeted sanctions adopted against Russia dropped off towards the end of 2022, sanctions authorities will continue to put pressure on Russia by identifying those who have been violating Russia sanctions (in the West, Middle East, Asia and Africa) freezing their assets and pursuing criminal charges against them. The impact for global compliance teams is clear: more vigilance and real time screening is needed to ensure customers and business counterparties do not have a sanctions nexus related to Russia.
Sanctions Evasion, and Fines, Will Rise in Malaysia, Kazakhstan, Turkey and UAE
As sanctions increase against Russia, Iran, North Korea and other rogue states, they will increasingly turn to neutral commercial centers to obtain cash and materiel. Countries such as Turkey and the UAE have already seen an increase in activity by Russian nationals and companies, and in November 2022 US OFAC designated a Switzerland-registered entity facilitating sanctions evasion by the Russian military.
More Countries Will Start to Sanction Crypto Addresses
Right now only the US, UK and Israel sanctions crypto wallets, but as authorities globally become increasingly concerned about the use of crypto for sanctions evasion and terrorist financing, they will begin to add crypto wallets to sanctions lists. The most likely to follow suit first? The EU, Switzerland and Singapore.
JCPOA is Dead and Gone – Iran will be Sanctioned for Another Generation
Iran’s new hardline president, his government’s brutal response to protests and its supply to Russia of drones and other military materiel has realigned the West against it. Although President Biden wanted to re-sign the JCPOA and the EU never abandoned the deal, it is now dead, cremated, and its ashes down to the wind.
Venezuela Brought in from the Cold
The US government may not recognize the government led by Nicolas Maduro, but Venezuela is no longer in the sanctions crosshairs. There were zero targeted sanctions added in 2022 and sanctions on oil were withdrawn in November as Washington seeks to unleash Venezuelan oil on the global market to compensate for sanctioned Russian supplies. These renewed efforts to normalize relations will lead to designation removals in 2023.
Public Investigations Kickstart Sanctions
With government resources stretched thin by other priorities, in-depth media investigations and coverage of human rights abuses, corruption, narcotics trade and more around the world will play an increasing role in laying the groundwork for sanctions designations by governments. The US and EU have already translated findings from organizations like The Sentry into sanctions designations against corrupt actors with links to the DRC and North Korea. Public investigations will increasingly fill in gaps where there are few official resources.
..
January 10, 2023 Published by Castellum.
