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Education

Sanctions consist of lists of persons, entities, crypto
addresses and foreign jurisdictions that are simply not
allowed to be served by U.S. persons.
Legal ease: Sanctions exist to further U.S. foreign policy and national
security goals against targeted foreign countries and
regimes, terrorists, international narcotics traffickers,
those engaged in activities related to the proliferation of
weapons of mass destruction, and other threats to the
national security, foreign policy or economy of the United
States.
Sanctions are a way of acting versus an adversary
without going to war. For example, the United States
Sanctions compliance imposed sanctions against six entities associated with
equipment found on the Chinese spy balloon that floated
in payment over the United States in February 2023 (see https://reut.
rs/3EMdYQm).
processing Decisions related to sanctions are based on the criminal
attributes of the target but can also be based on the

Some have opined that excessive use of sanctions for
By Adam Atlas political posture taken in relation to another country.
Attorney at Law political purposes will weaken the dominance of the U.S.
dollar as the primary currency for international trade (see
erchants on Main Street who are applying https://on.ft.com/3y2I2n8), while others see no significant
for merchant accounts do not usually intend risk there (see https://bit.ly/41wFU4v).
to use those accounts to finance terrorism.
M That said, some merchants are not what they These divergent opinions have become especially
appear to be and are aiming to abuse the banking and pay- interesting as various countries consider issuing central
ments rails for illegal purposes. bank-issued digital currency (CBDC). If China becomes
the first country to issue a CBDC that is widely used, and
ISOs, processors and acquiring banks are on the front U.S. sanctions restrict a substantial amount of trade, could
lines of screening new clients to filter out the bad actors. that open the door for China to supplant U.S. dominance
ISOs usually don't stop to think about sanctions screening, in currency leadership?
so I thought it would be informative to take a look at the
framework and rules for sanctions that are a necessary On the other hand, does it make sense for any trading
part of day-to-day operations in any payments business. business or nation to place its trust in a CBDC that can
be controlled by a centralized—and potentially fickle or
What are sanctions? worse—issuer? These are some of the most interesting
macroeconomic and policy issues facing the next
Sanctions are rules preventing or limiting designated generation of policy-makers.
individuals or persons residing in certain countries or
having participated in criminal activity from using the Who administers sanctions?
U.S. financial system.
Sanctions are administered and enforced by the Office
The United States has the single largest GDP of any of Foreign Assets Control (OFAC) of the U.S. Department
country in the world, which makes it an attractive market of the Treasury, https://bit.ly/3kCDVuE. Most sanctions
for any business. The Fourth and Fifth Amendments to the enforcement is mundane and consists of simply verifying
U.S. Constitution protect the rights of individuals to their potential customers against OFAC lists and denying
property. With a large economy, constitutional protection service or freezing assets of specially designated persons
of private property and rule-of-law, the United States is (SNDs) who appear on OFAC lists.
arguably the best place in the world to conduct business.
Some sanctions enforcement grabs headlines with seizures
Congress decided that it was in the interest of the country of ships, large amounts of funds and arrests, etc. When
for the U.S. financial system to be closed to criminals there is a match against an SDN of an actual or potential
(for example, drug dealers) and terrorists (for example, merchant, that information must be administered in
Al-Qaeda). Congress went further and also took action accordance with the applicable anti-money laundering
against not just criminal and terrorist targets but also program of the acquirer in question and may result in the
political targets, such as regimes in North Korea, Cuba, freezing of the account and other consequences.
Venezuela and, more recently, Russia.
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