Targeted Financial Sanctions - Federal Council

Contributions from theInterlaken Process

The Swiss Confederationin cooperation with theUnited Nations Secretariatand theWatson Institute for International StudiesBrown University

Targeted FinancialSanctions

A Manual for Designand Implementation

The Thomas J. Watson Jr.Institute for International StudiesBrown University, Box 1970Providence, Rhode Island 02912USA

Telephone: 401/863-2809Fax: 401/863-1270E-mail: [email protected]://www.WatsonInstitute.org

Thomas J. Biersteker, DirectorSue E. Eckert, Senior FellowPeter Romaniuk, Research AssistantAaron Halegua, Research AssistantNatalie Reid, Research Assistant

Statements of fact or opinions are solely those of the authors; theirpublication does not imply endorsement by the Thomas J. WatsonJr. Institute for International Studies.

Copyright 2001 by the Thomas J. Watson Jr. Institute for Interna-tional Studies. All rights reserved under International and PanAmerican Convention. No part of this report may be reproducedby any other means, electronic or mechanical, including photo-copy, recording, or any information storage retrieval system,without prior written permission from the publisher. All inquiriesshould be addressed to Publications Group, Thomas J. Watson Jr.Institute for International Studies.

Kofi AnnanSecretary-General of the United Nations

We the Peoples: The Role of theUnited Nations in the 21st Century

A/54/2000, paras. 232-33.March 2000

“Because economic sanctions haveproved to be such a blunt and evencounter-productive instrument, a numberof governments, and numerous civilsociety organizations and think tanksaround the world, have explored waysto make them smarter by better targetingthem. Switzerland has led an effort todesign instruments of targeted financialsanctions, including drafting modelnational legislation required to imple-ment them…These efforts are now suffi-ciently well advanced to merit seriousconsideration by Member States. I invitethe Security Council, in particular, tobear them in mind when designing andapplying sanctions regimes.”

CONTENTS

Preface viIntroduction ix

Part 1 Designing United Nations Security Council 1Resolutions on Targeted Financial Sanctions

Preamble 31. Objectives of Sanctions 52. Prohibitions 63. Exemptions and Exceptions 194. International Organizations 235. Sanctions Committee 246. Petition for Removal from List of Targets 287. Reporting 308. Monitoring 339. Appeals to States 3910. Nonliability for Compliance with Sanctions 4111. Sunset Clause 43Annex A: Mock Resolution 50Annex B: Critical Definitions 62Annex C: Specific Exemptions or Exceptions 71Annex D: Relevant Websites 76

Part 2 Implementing Targeted Financial Sanctions 79at the National Level

1. Legal Framework 822. Administering Agency 903. Information 944. Compliance 985. Exemptions and Exceptions 1036. Administration of Assets 1067. Enforcement 108

PREFACE

The past decade has witnessed a surge in United Nations imposedsanctions regimes. Sanctions have become an important tool in thehands of the international community to promote internationalpeace and security. Not all sanctions regimes, however, have beensuccessful in inducing the targeted leaderships to return to policiesrespectful of international norms. Furthermore, some sanctionshave been criticized as causing excessive suffering to civilianpopulations or inflicting economic damage on third states, typi-cally neighbors of the target state.

To address such concerns, the concept of “targeted sanctions” hasbeen developed. These sanctions are designed to focus on groupsof persons responsible for the breaches of the peace or the threatsto international peace and security, while ideally leaving otherparts of the population and international trade relations unaffected.Such sanctions can target financial assets as well as the freedom ofmovement of the targeted persons through travel and aviationsanctions.

Switzerland, in line with its humanitarian tradition and its belief infree trade, has taken up these ideas. In cooperation with the UNSecretariat, Switzerland has organized international expertmeetings in Interlaken and New York, and initiated what has cometo be known as the “Interlaken Process” on targeted financialsanctions.

The manual before us is the next step in this process. The docu-ment condenses the insights of the Interlaken and New Yorkmeetings into a ready-to-use manual which should make it easierto draft and implement targeted financial sanctions. It contains twoparts, one on model language for UN sanctions resolutions andanother on model legislation for effective sanctions implementa-tion at the national level. Targeted sanctions call for markedlyhigher administrative standards than traditional sanctions. Special

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attention is therefore given to areas like reporting, informationsharing and monitoring to enhance sanctions effectiveness.

In the aftermath of the recent shocking terrorist attacks, measuresto track and block funds financing terrorism have gained renewedattention. Against this background, the work done in InterlakenProcess and this manual have gained even further relevance.

I sincerely hope that this practical guide will prove useful to thoseresponsible for drafting and implementing sanctions and that it willcontribute to the development of incisive, yet selective sanctionsregimes.

Joseph DeissMinister of Foreign Affairs

Switzerland

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INTRODUCTION

In recent years, the concept and strategy of targeted sanctionsimposed by the United Nations Security Council under ChapterVII of the Charter of the United Nations, have been receivingincreased attention. Practitioners and analysts generally agree thatbetter targeting of such measures on the individuals responsible forthe policies condemned by the international community, and theelites who benefit from and support them, would increase theeffectiveness of sanctions, while minimizing the negative impacton the civilian population. The considerable interest in the devel-opment of targeted sanctions regimes has focused primarily onfinancial sanctions, travel and aviation bans, and embargoes onspecific commodities such as arms or diamonds.

Targeted financial sanctions entail the use of financial instrumentsand institutions to apply coercive pressure on transgressingparties—government officials, elites who support them, ormembers of non-governmental entities—in an effort to change orrestrict their behavior. Sanctions are targeted in the sense that theyapply only to a subset of the population—usually the leadership,responsible elites, or operationally responsible individuals; theyare financial in that they involve the use of financial instruments,such as asset freezes, blocking of financial transactions, orfinancial services; and they are sanctions in that they are coercivemeasures applied to effect change or constrain action.

Targeted financial sanctions are not a ‘cure-all’ solution; theycannot achieve the desired political goals in isolation, and arelikely to be most effective when considered as part of a broader,coordinated political and diplomatic strategy. At present,experience in developing and implementing targeted financialsanctions is limited. While some comprehensive sanctionsregimes have included financial elements, and other sanctionsefforts have attempted to focus on specific subsets of thepopulation, there are few instances of financial sanctions against alist of targeted individuals. The range of sanctions against UNITA

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Targeted Financial Sanctions

and the Taliban, first introduced in 1998 and 1999 respectively,are the only examples currently in force. However, targetedfinancial sanctions represent a potential refinement of thesanctions tool that could be used in conjunction with othercoercive efforts, such as travel bans, to minimize the unintendedeffects of comprehensive sanctions and achieve greatereffectiveness.

The Interlaken Process

The first comprehensive attempt to examine the feasibility oftargeted financial sanctions, initiated by the Swiss Government in1998, has come to be known as the “Interlaken Process.”1

Responding to a call from the Secretary-General of the UnitedNations Kofi Annan to make sanctions more effective, the SwissGovernment brought together representatives from nationalgovernments, central bank authorities, the United NationsSecretariat, various international organizations, the privatebanking sector, and academia to examine the instrument oftargeted financial sanctions.

The first meeting (Interlaken I) focused on the specific technicalrequirements of financial sanctions and identified a number ofpreconditions necessary for targeted sanctions to be effective:clear identification of the target, ability to identify and controlfinancial flows, and strengthening of the UN sanctions instrument.

The second Interlaken seminar (Interlaken II), attended by morethan seventy participants from twenty-two States on allcontinents, further developed recommendations on the technicalaspects of targeting, but also addressed issues arising fromdifferences in implementation of financial sanctions amongStates. One Working Group at Interlaken II developedstandardized texts or building blocks of language for future UNSecurity Council resolutions, including prohibitions andexemptions. Such language was utilized for the first time by theEuropean Union as part of its implementation of sanctions againstthe Federal Republic of Yugoslavia over the issue of Kosovo, andwas drawn upon by the Afghanistan Sanctions Committee.2

Standardized language and definitions in Security Councilresolutions could contribute to enhanced effectiveness of financialsanctions, through harmonized implementation across national

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Introduction

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borders. In addition, since States operate with different legalsystems, thereby creating difficulties in implementing SecurityCouncil resolutions in a consistent manner, the seminar examinedthe basic elements necessary for a legal framework to implementfinancial sanctions at the national level. Another InterlakenWorking Group developed a draft Model Law that States couldadopt to enable them to implement fully and consistently targetedfinancial sanctions imposed by the Security Council.

Beyond building blocks for Security Council resolutions and theModel Law, Interlaken II also addressed the need for the UnitedNations to develop greater capabilities for administering andmonitoring financial sanctions, including the provision ofguidance and technical assistance to help States implementsanctions on a consistent basis.

Overall, the Interlaken seminars concluded that targeted financialsanctions are technically feasible, but that additional concretemeasures on national and international levels, as well as withinthe UN Secretariat, are necessary for the instrument to bedeveloped more fully and made effective.

Beyond Interlaken—Practical results for the UN andnational governments

While significant progress has been made over the past severalyears on the design of targeted financial sanctions, there is also aclear recognition of the amount of detailed work that still needs tobe accomplished at the level of implementation to create aneffective regime.

In order to develop further measures and bring a practicalconclusion to the substantive work already accomplished ontargeted financial sanctions through the Interlaken Process, theSwiss Government asked the Thomas J. Watson Jr. Institute forInternational Studies at Brown University3 to undertake researchto develop two specific products related to the results of theInterlaken Process: a manual for drafting Security Councilresolutions imposing targeted financial sanctions, and a guide forStates in establishing the legal and administrative machinery andprocedures to implement targeted financial sanctions at thenational level.


To review the draft documents prepared by the Watson InstituteTargeted Financial Sanctions Project, a Workshop was convenedon 23 July 2001 in New York. Hosted by the Permanent ObserverMission of Switzerland to the United Nations, in cooperation withthe United Nations Secretariat, the Workshop included representa-tives of more than thirty permanent missions to the UnitedNations, as well as national officials and sanctions experts fromaround the world. Comments and feedback from the session havebeen incorporated into these final texts. Overall, participantsconcluded that sanctions remain a critical tool for the SecurityCouncil, and expressed a clear interest in refining the instrumentthrough the use of targeted financial sanctions.

Use of this manual

There are two primary audiences for the documents contained inthis manual: 1) officials in the Missions to the United Nations andthe UN Secretariat who will be called upon to draft future SecurityCouncil resolutions imposing targeted financial sanctions, and 2)officials of national governments responsible for implementing thesanctions after the Security Council has acted.

Part 1 of this manual—Designing United Nations SecurityCouncil Resolutions on Targeted Financial Sanctions—isintended as a guide for those who draft future Security Councilresolutions. It draws heavily upon the work of Interlaken II’sWorking Group 3, and owes a significant textual and intellectualdebt to the Working Group’s building blocks of text for SecurityCouncil resolutions imposing targeted financial sanctions.According to the final report from the seminar, “[t]he overallobjective of the Working Group was to contribute to the improvedeffectiveness of financial sanctions by providing standardlanguage elements and definitions which would serve as buildingblocks for future UN resolutions adopted under Article 41 of theCharter, and enhance unambiguous interpretation and uniformimplementation by all States of those resolutions.”4

Elements of the Interlaken II language have been utilized invarious forms since 1999. Practitioners’ recommendations,however, continued to call for the development of specificlanguage modules for Security Council resolutions that could beadapted quickly to unique circumstances. Part 1 also draws

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Introduction

heavily upon two other sources: resolutions passed by theSecurity Council and regulations issued by European Council(EC) that relate to targeted financial sanctions. EC regulations areuseful in that they serve as the domestic legislation for manyEuropean States, and have offered new alternative ways to designa targeted sanctions regime. Annex D to Part 1 contains theinternet links to all Security Council resolutions and ECregulations cited in this document.

Part 2 of the manual—Implementing Targeted FinancialSanctions at the National Level—focuses on the legal andadministrative requirements for the effective implementation oftargeted financial sanctions at the national level. These elementsinclude: a legal framework, designation of an administeringagency, development and dissemination of information,compliance initiatives, exemptions and exceptions, administrationof assets, and enforcement efforts. The document is intended toprovide practical guidance for States in establishing thesemeasures to implement sanctions effectively. It is based in largepart on the research derived from a questionnaire and discussionswith States regarding their implementation of previousmultilateral financial sanctions. From this information onindividual countries’ practices, the recommendations for “bestpractices” were developed.

We are grateful to the Swiss Government for their ongoingleadership on this issue, including their funding of this project, tothe Secretary-General for the support received from the UNSecretariat, and to the international team of experts whogenerously gave their time and expertise. It is our hope that thesedocuments will assist the United Nations community and States inmore effectively designing and implementing targeted financialsanctions.

Watson Institute Project onTargeted Financial SanctionsBrown UniversityOctober, 2001

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Endnotes

1 The papers presented at Interlaken I and Interlaken II areavailable on-line at <http://www.smartsanctions.ch>. Allreferences in this document to Interlaken II are to the publishedversion of the report.

2 See SC/6844, 13 April 2000, referring to a Note Verbaleissued by the Committee established pursuant to resolution 1267.In addition to providing a definition of the ‘funds and otherfinancial resources’ to be frozen by States, the Committee issuedan initial list of targets in the Note.

3 See <http://www.WatsonInstitute.org/tfs> for a summary ofprevious research and publications of the Targeted FinancialSanctions Project at the Watson Institute.

4 Published report of Interlaken II, p. 79.

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PART 1

DESIGNING

UNITED NATIONS SECURITY

COUNCIL RESOLUTIONS ON

TARGETED FINANCIAL

SANCTIONS

This document is not a model resolution. Rather, it providesoptions in the form of a menu of different language modules oftext to include in future resolutions, from which policymakers canchoose. Depending on the political goals of the Security Councilin imposing financial sanctions, the targets, scope, duration, andadministrative structure of the sanctions can be tailored to fit thecircumstances of each case by deleting or modifying individualelements of the draft text as appropriate.

To provide a context for evaluating the suggested text, anexplanation of its purpose within the sanctions resolutionaccompanies each language module of draft text. Whereapplicable, a brief discussion of the advantages and disadvantagesof different options and a summary of how similar text has beenused in past resolutions are also included. Paragraph numberingwithin the language modules is consistent with section numberingwithin this document. It is included for ease of reference only andfuture drafters would need to tailor the numbering to the specificresolution.

Annex A contains a complete mock resolution utilizing thelanguage modules given throughout. Annex B summarizes the

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definitions of specific terms used in Security Council resolutionsthat impose targeted financial sanctions as developed at InterlakenII, as well as provides a discussion of how they have beenmodified when used in EC regulations. Annex C summarizes thelist of specific exemptions to targeted financial sanctions, alsodeveloped at Interlaken II. Annex D provides internet links to theSecurity Council resolutions and European Council regulationsreferred to in this document, and other relevant websites.

Components of UN Security Council resolutions imposingtargeted financial sanctions

Preamble1. Objectives of Sanctions2. Prohibitions3. Exemptions and Exceptions4. International Organizations5. Sanctions Committee6. Petition for Removal from List of Targets7. Reporting8. Monitoring9. Appeals to States10. Nonliability for Compliance with Sanctions11. Sunset Clause

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Designing Security Council Resolutions

Preamble

All Security Council resolutions begin with a preamble. Thepreamble usually consists of several paragraphs and establishesthe context for issuing the resolution. It will include any or all ofthe following elements:

• A short description of the situation to which the SecurityCouncil is responding;

• The nature of the Council’s reaction;

• Recognition of either ongoing or concluded efforts atresolution of the conflict and affirmation of relevantinternational norms or agreements;

• Mention of any previous resolutions by relevant regionalor international bodies on the issue; and

• Previous actions of the Security Council and Secretary-General, especially regarding monitoring activities.

Paragraphs in the preamble normally begin with such phrases as:

The Security Council...Commending[Gravely]ConcernedConsidering[Deeply] DeploringDeterminingEmphasizingHaving heard/receivedNotes [with concern]Noting [in particular]ReaffirmingRecallingRecognizingStressingStrongly condemningStrongly supportingTaking noteWelcoming

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The preamble generally concludes with a reference to the sourceof the Security Council’s authority under the Charter of theUnited Nations, using the following phrases:

“Determining that … [the situation] … constitutes athreat to international peace and security,” and

“Acting under Chapter VII of the Charter of the UnitedNations,”

These phrases or similar formulations may appear later in theresolution if it has multiple parts1 and draws authority from morethan one chapter of the Charter.

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1. Objectives of Sanctions

It is essential that Council members agree on the goals of thesanctions at the outset. While the relevant paragraphs in thepreamble will answer the question of “why” the Security Councilis imposing sanctions—usually through a statement concerningthe objectionable behavior—section 1 should articulate exactly“what” it is that the Council hopes to achieve through theimposition of sanctions. A clear articulation of the objectives willalso assist decisionmakers in determining “how” these measuresare to be implemented. The objectives represent criteria that theCouncil expects the target to fulfill. These paragraphs typicallybegin with the word “Demands […]” and serve as the criteriaagainst which actions by the target are measured for decisionsconcerning the lifting or easing the sanctions (see section 11—Sunset Clause).

Therefore, well defined goals articulated at the outset help tominimize conflicts within the Sanctions Committees and SecurityCouncil by establishing clear criteria for determining how themeasures are to be imposed, their duration, and theireffectiveness.

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2. Prohibitions

Paragraphs that are not preambulatory are either mandatory orexhortative. The distinction between mandatory and exhortativelies in the obligatory or voluntary nature underlying theprovisions contained therein, and is signaled by the words thatopen the paragraph. For example, “calls upon” or “urges” areexhortative, while words such as “decides” or “requests” aremandatory and indicate that the provisions or requests containedin that paragraph are binding upon Member States under ChapterVII of the Charter of the United Nations. In stating the details ofthe sanctions—targets, scope, duration, exceptions, and othernecessary elements—both mandatory and exhortative paragraphsare used.

The prohibitions contained in this section of the resolutionconstitute the core elements of the sanctions and answer fourcritical questions:

1. Whom are the measures to be imposed against?2. Who will implement the measures?3. When and for how long are the measures to be

effective?4. What are the components of the financial sanction?

Specific issues within each of these broad questions are discussedbelow.

2.1 Whom are the measures to be imposed against?

Targeting is critical to the effectiveness of financial sanctions.Without a precise definition of categories of targets, and/or aspecific list of targets, States cannot implement targeted sanctions.Further, failure to maintain an accurate and up-to-date list oftargets undermines the effectiveness of targeted sanctionsaltogether.

Throughout this document, the phrases “targeting” and “targetedsanctions” are generally understood to mean measures imposedagainst identified persons (natural or legal). In some cases theterm “targeted sanctions” may be used in a broader sense, suchthat it includes a ban on selected activities or the means by which

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targets maintain their objectionable behavior.2 Where the term“targeted sanctions” is to be understood in this broader sense, theresolution text should be revised accordingly.

To answer the question “who is to be targeted?” the draft text inOption 1 provides a range of persons that may be subject totargeted financial sanctions. The word “persons” should beunderstood broadly to mean all natural and legal persons. Thephrase “legal persons” covers all government entities (e.g.ministries, departments, local authorities), state-owned oroperated entities (e.g. postal authorities), and all other private andpublic sector organizations. Targets are most often definedthrough general categories of such persons. These categories maybe narrow or broad, according to need, and in consideration ofwhether the list is “closed” or “open” (see below). The draft textbelow provides the option of defining categories of legal personswith greater specificity in an annex to the resolution. Althoughpast experience should not be considered limiting, categoriesgiven in resolutions to date have been based on membership in agovernment or political faction (such as the Taliban or UNITA),control of entities critical to the operations of such factions ormembership in the family of an individual in one of theaforementioned groups.3 Given the ease of transferring assets tofamily members, prohibitions against them are an importantconsideration.

While categories of targets are spelled out in the resolution, it israre for the resolution itself to name actual targeted persons.4 Thedraft text below acknowledges that decisions concerning specifictargets are more likely to be delegated to the SanctionsCommittee, which will be tasked with developing a list ofpersons, against whom the targeted measures are to beimplemented.

Once developed, it is important that the target list be kept up-to-date because of the ease with which targets can shift functions toother persons or entities, transfer assets and create front entities toevade sanctions. Options are provided in the draft text for closedor open lists. A closed list provides the Sanctions Committee withthe authority to designate the list of targets, limiting the ability ofmany States to act beyond the designated list.5 An open list alsogives primary responsibility to the Committee for developing and

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maintaining the list, but empowers States to act before theissuance of the Committee’s list (but within the categories oftargets established by the resolution) or go beyond it, when Statessuspect that targeted assets are within their jurisdiction. Thisapproach might be especially useful where the Committee isunable to reach a quick consensus on the identity of all targets(here, the names of targeted persons on which consensus can beachieved might be included in an annex to the resolution). To beeffective, the use of lists requires some degree of coordination tofacilitate information-sharing and consistent implementationacross States.6 For this reason, the option of delegating the task oftargeting exclusively to States without any involvement on thepart of the Committee7 is not optimal, and therefore is notincluded.

Regardless of how the list is developed and maintained, specificand reliable information on targeted persons is required toimplement effective targeted financial sanctions. For example,identifying information on targeted individuals should be ascomplete as possible, including full names, aliases, passportnumbers, date and place of birth, and any known addresses. Forcorporate entities, identifying information should includealternative names (especially where entities use different namesand/or multiple languages), business addresses, and wherepossible, the date and place of incorporation and any registrationnumbers.

2.2 Who will implement the measures?

To be effective, targeted financial sanctions must be implementedby all States, regardless of UN membership or the degree ofinvolvement in the global financial market. The ease oftransferring financial assets means that resolutions that fall shortof this standard weaken the effectiveness of sanctions by allowingcircumvention. For this reason, throughout the draft, the clearformulation “All States shall…” is preferred to alternatives thathave been used in past resolutions.8

In addition to requiring all States to implement sanctions,resolutions should also specify that the measures are intended tobind all persons under the jurisdiction of States. The draft textbelow requires that all States require all their nationals and any

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other person within their territories to implement the measuresimposed by the resolution. This phrase covers any dependentterritories of States, which may be of particular relevance in thecontext of financial sanctions given the importance of offshorefinancial centers.

2.3 When and for how long are the measuresto be effective?

In the past, UN targeted financial sanctions have come into forceeither on a date specified in the resolution (generally two weeksor one month following the passage of the resolution) or after aspecified period (e.g. one month following the passage of theresolution). Often the delay is designed to provide the target anopportunity to cease the objectionable behavior, thereby avoidingthe imposition of sanctions.9

While the delay between passage and implementation may intheory influence the behavior of targeted persons, it also providesthe opportunity for targets to take measures to circumventsanctions. Previous sanctions episodes with such delays haveresulted in significant sums of money being withdrawn prior tothe effective date, thereby enhancing the ability of the targets toevade sanctions.10 Therefore, sanctions should be implementedwithout a grace period at the UN level and with urgency at thenational level.

One means of addressing this problem is by tracing the movementof financial assets retroactively by requiring States to report onthe presence or movement of funds and other financial resourcesfor some period prior to the actual imposition of sanctions. Drafttext for such a measure follows at the end of this section and maybe useful in conjunction with either option provided below.Retroactive reporting can generate valuable informationconcerning the whereabouts of financial assets, which could be ofassistance to the Council in determining additional enforcementmeasures. Also, as a practical matter, the implementation ofsanctions by States maybe contingent upon the development of alist of targets (unless the list is open, as discussed above), with theeffect that national action can be delayed even further. For thesereasons, measures to trace assets retroactively should be

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considered as a strategy to help bridge the gap between the entryinto force and the domestic implementation of targeted financialsanctions.

The question of when sanctions are to cease is addressed in thediscussion of section 1 (Objectives of Sanctions) and in section 11(Sunset Clause).

2.4 What are the components of thefinancial sanction?

Targeted financial sanctions prohibit the use of existing and futurefunds and other financial resources by targeted persons. Toimplement these prohibitions, resolutions should require that thefunds and other financial resources owned or controlled, directlyor indirectly, presently and in the future, by targeted persons befrozen, and that “no funds and other financial resources [...] shallbe made available” to targeted persons. Therefore, existing fundsas well as future movements of funds and other financialresources are captured by the prohibitions.

To operationalize these prohibitions, Working Group 3 atInterlaken II developed standard definitions of key phrases. Thesedefinitions are provided in Annex B, as well as modifications ofdefinitions as used in EC regulations, plus commentary. TheInterlaken Working Group took the position that definitionsshould not be included in the resolution, preferring that the resultsof their work be understood as the basis upon which the Councilhas acted. However, if consensus on definitions can be achievedin the Council, definitions should be included in futureresolutions. The inclusion of definitions gives a clear statement ofthe Council’s intention and may be required to promote moreconsistent implementation at the national level. Definitions maybe included in an annex to the resolution, an approach that isreflected in the mock resolution (Annex A). European Councilregulations that impose targeted financial sanctions havecontained definitions in the operative paragraphs.

Also, the Interlaken Working Group included a ban on providingfinancial services to targeted persons. There is no clear consensusas to whether a separate paragraph is required to implement such

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a ban, considered by some experts to be covered by freezingfunds and other financial resources (note the comment in AnnexB). Because of the ambiguity concerning this question, a specificreference to a ban on financial services is in the draft text belowwith a separate paragraph,

Lastly, it should be noted what is not included in the prohibitionsdiscussed in this document. For example, if it is the drafters’intention to ban all forms of investment involving targetedpersons, a specific reference may be required, as some forms ofinvestment could be made through forms of payment not coveredby the prohibitions of the resolution (e.g. payments in goods).Also, as noted previously (see para. 2.1), this document does notcover activities (as opposed to merely the funds and otherfinancial resources) related to the maintenance of the target’sobjectionable behavior.11 Prohibitions of this scope may have theeffect of broadening the understanding of targeted sanctions asdiscussed above and is likely to be politically difficult for thisreason.

2.5 Options for prohibitions

Below are two alternative options to impose targeted financialsanctions. The first option broadly reflects past experience; thesecond—the “freeze and release” approach—is an alternative thatwas discussed in detail at the 23 July Workshop and is offered toindicate a new approach to imposing prohibitions that may beconsidered by the Council, if circumstances dictate.

Option 1:

The Security Council imposes a targeted financial sanction ona category or categories of persons. Subparagraphs (a) through(d) provide categories of targets which can be tailored to specificcircumstances.

OPTION 1 BASIC DRAFT TEXT:

Decides that all States shall ensure that all funds andother financial resources owned or controlled, directlyor indirectly, by:

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(a) officials of the [government], [name of politicalfaction, parastatal organization, or militaryjunta] in [target state];

(b) the immediate families of any of the above;(c) legal persons owned or controlled by (a) or (b),

[or as defined in Annex [xx]];(d) [insert reference to target list according to

Option 1A or 1B, below];

are frozen and that no funds and other financialresources, including funds derived from property, shallbe made available, by their nationals or by any personswithin their territory, directly or indirectly, to or for thebenefit of the persons, natural or legal, referred to in thisparagraph;

AS USED IN MODIFIED FORM IN:

(i) S/RES/1173 (1998) on UNITA, para. 11.(ii) S/RES/1267 (1999) on the Taliban, para. 4(b).(iii) S/RES/1333 (2000) on the Taliban, para. 8(c).

DRAFT TEXT (FINANCIAL SERVICES BAN):

Decides that all States shall prohibit the provision offinancial services by their nationals or by any personwithin their territory, in relation to any assets owned orcontrolled, directly or indirectly, by any person referredto in paragraph 2 above;

Note: Option 1 is incomplete without the inclusion of thetext from either Option 1A or 1B. Further options foropen or closed lists are also given.

Option 1A:

The Security Council delegates the designation of actualtargets to the Sanctions Committee in addition to its otherduties. Doing so accords considerable decisionmaking authorityto this subsidiary organ of the Council and the Committee shouldbe done as quickly as possible because States cannot implementsanctions against natural persons without a specific list of targets.

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Advantages: The Sanctions Committee—as a body morefocused on the specific issues related to sanctions—has agreater ability to administer sanctions, includingmanaging the myriad processes of implementingsanctions such as maintaining the list, mandatoryreporting, monitoring, and handling requests forexceptions. The Security Council, as the principalpolitical decisionmaking organ of the United Nations,cannot be expected to deal well with the specific detailsof each individual sanctions program.

Disadvantages: As seen below, this approach has beenused in the past, and the Sanctions Committees involvedhave not always acquitted themselves well.12 There isalso a lack of uniformity among Sanctions Committees inhow they fulfill the duties the Council gives to them. Inaddition, under the existing rules of procedure, aSanctions Committee can reach decisions only byconsensus, thereby permitting any one country to blockprogress. Experience also has shown that some requestsfor rulings of the Sanctions Committee require technicalknowledge of the subject matter well beyond what mightbe expected of the Committee members. Although this isnot a case specifically against this option, it does arguefor reforming the Sanctions Committees’ workingmethods. The Security Council’s Working Group onGeneral Issues on Sanctions (established in April 2000pursuant to a Note by the President of the SecurityCouncil, S/2000/319) is addressing these matters.

OPTION 1A DRAFT TEXT:

[closed list] “(d) persons, natural or legal, as designatedby the Committee established by paragraph 5 below;”

[open list] “(d) persons, natural or legal, including asdesignated by the Committee established by paragraph 5below;”

AS USED IN MODIFIED FORM FOR A CLOSED LIST IN: S/RES/1267 (1999) on the Taliban, para. 4(b) (which refers tothe Committee established in para. 6).

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If using an open list, the following text may be used toempower States to act beyond the list and establish thenecessary procedures:

Decides that in cases where States acquire or possesswell-founded information that a person is subject to theprohibitions in paragraph 2, they shall apply theprohibitions to this person, and decides that in suchcases States shall notify the Sanctions Committee of theiractions and forward any relevant information to theCommittee, and further decides that the SanctionsCommittee established by paragraph 5 below may decidethat [prohibitions in paragraph 2] shall no longer applyto said person, or shall add said person to the list oftargets;

Option 1B:

The Security Council issues an Annex to the resolution,containing the names of persons subject to the prohibitions.13

Advantages: Including this information in the resolutionis likely to facilitate timely implementation, as the Annexprovides a degree of certainty for which most Stateswould normally have to rely on the SanctionsCommittee. Furthermore, the real “critical period” ofsanctions implementation is the time from when thetarget suspects that funds will be frozen (and begins toconceal assets) to the time that institutions actually freezethe targeted funds. This approach reduces this period ofdelay.

Disadvantages: Because the Council lacks the time andexpertise required to produce a sufficiently descriptivelist of targets, this approach might result in a delay andlack of detail, particularly with regard to identifyinginformation. Under this option there is also a possiblelack of flexibility, unless the Security Council also passeson responsibility for providing the necessary details, aswell as list maintenance, to the Sanctions Committee.

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OPTION 1B DRAFT TEXT:

To designate persons in the Annex of a resolution, thefollowing phrase should be included in the basic textgiven above:

[closed list] “(d) persons, natural or legal, as designatedin Annex [xx] of this resolution;”

[open list] “(d) persons, natural or legal, including asdesignated in Annex [xx] of this resolution;”

AS USED IN MODIFIED FORM FOR AN OPEN LIST IN: EC Reg.1294/1999 over the matter of Kosovo, Art. 2.

If using an open list, the additional language in 1A tospecifically empower States to act beyond the list may beconsidered for inclusion here. Also, a reference to thisparagraph must be made in the relevant paragraph whichenumerates the powers of the Sanctions Committee, andought to include provision for reporting on State actionregarding targeting beyond those already designated bythe Committee (see sections 5 on Sanctions Committeeand 7 on Reporting).

Option 2:

In response to an emergency and recognizing the need for a quickand effective response, the Security Council decides upon a“freeze-and-release” approach, imposing financial sanctionson all persons, natural or legal, of the target state, with thestipulation that general sanctions must become targetedwithin a set period of time, leaving the determination oftargets to the Sanctions Committee.

The discussion of this option at the 23 July Workshopreflected that there is likely to be much resistance toimposing a comprehensive sanction of this nature, evenif only for a brief period. Further, skepticism exists aboutthe ability of the Committee to reach consensus on a listof targeted persons within a short time. Yet someparticipants suggested there may be circumstances in thefuture where it may be useful for the Council to consider

15


such an option. The draft text below requires that thesanctions be scaled back as soon as the Committeedesignates targeted persons, or by a specific time, as away of addressing these concerns.

Advantages: If the functional purpose of sanctions is todeny targets access to their funds through preventing theflight of assets, this option could result in a markedincrease in effectiveness. As the determination oftargeting would be made after imposing the financialsanction, the risk of forewarning to potential targetswould be reduced. The principal advantage of this optionis the speed of action in that, given the will of theSecurity Council to act, the resolution could be passedwith a minimum of discussion and time. The wordingneed not be complex, which would again help to reducediscussion time and clairfy meaning, especially if basedon the language provided below. The speed of actionwould reduce the possibility of forewarning potentialtargets and thus evasion of the sanctions.

Disadvantages: As noted above, much opposition existsto sanctions on the broader population, which this optionentails at the outset. There are several requirements thatmust be met for the subsequent targeting (freeze-and-release) aspect of the sanctions to function properly: theSanctions Committee (or whichever body will beresponsible for determining eventual targets) must beconvened rapidly; there must be significant cooperationbetween States and the Committee during the briefperiod of the general financial sanctions to enable thedevelopment of an accurate and comprehensive list oftargets and; the narrowed list must also be producedwithin a short timeframe. While these constraints inutilizing the freeze-and-release approach also pertain toOption 1, in this case there is the risk that prolongedcomprehensive sanctions will have negativehumanitarian consequences.

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OPTION 2 DRAFT TEXT:

Decides that all States shall ensure that all funds andother financial resources owned or controlled, directlyor indirectly, by any person, natural or legal, who is anational of, or residing in or operating in [target state],are frozen and that no funds and other financialresources, including funds derived from property, shallbe made available, nor financial services provided,directly or indirectly, to or for the benefit of the personsreferred to in this paragraph;


(i) S/RES/757 (1992) on the FRY (S&M), para. 5.(ii) S/RES/820 (1993) on FRY (S&M), para. 21.

Decides that the comprehensive freeze on funds andother financial resources, and ban on financial services,as imposed in the paragraph above shall enter into forceimmediately and shall be limited by [deadline] [or uponthe specification of targeted persons or categories ofpersons by the Sanctions Committee/Security Council][or whichever of these occurs first] to a freeze on thefunds and other financial resources of any persons orcategories of persons as to be designated by the[Sanctions Committee/Security Council], and confirmsthat all funds and other financial resources of all otherpersons shall be released and financial services may beprovided to them at this time;

2.6 Tracing funds retroactively

As previously discussed in section 2.3, it may be advantageous insome instances for the Security Council to include a clauseenabling targeted funds and other financial resources to be tracedretroactively. This is accomplished by requiring States to reporton the presence or movement of targeted assets within theirjurisdiction. This information could improve the capacity ofsanctions monitors to assess the effectiveness of the measuresimposed and address the “implementation gap” between theresolution coming into force and adoption of measures at the

17


national level. The text below refers to section 7 (Reporting) torequire that information gathered through asset tracing is reported.

DRAFT TEXT:

Requests that all States trace the funds and otherfinancial resources of targeted persons which werewithdrawn from or transferred out of their jurisdictionduring [xx] months preceding the entry into force of thisresolution and report to [...] in accordance withparagraph 7;

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3. Exemptions and Exceptions

The purpose of the exemptions and exceptions section is to allowthe Security Council or Sanctions Committee to identify generalareas or specific cases to which the prohibitions shall not apply.They include exemptions and exceptions for humanitarianpurposes, or to ensure that the sanctions do not overly disruptsender, neighboring or target economies, and attempt to ensurethat the sanctions are indeed targeted in their effect. While afinancial sanction that is truly targeted should require fewer suchprovisions (as it affects only the targeted individuals and not thepopulation at large), it is both customary and practical to includesuch measures in resolutions—if for no other reason than to createa process to deal with unforeseen situations that require arelaxation of the prohibitions.

The exemptions and exceptions section of the resolution addressestwo issues: the types of transactions permitted and whether theSanctions Committee or States are responsible for administeringthe exemptions or exceptions process.

Before addressing these issues, note that this document definesexemptions and exceptions consistent with the Bonn-BerlinExpert Working Group on Travel and Aviation related Sanctions:“[e]xceptions are cases that require prior approval by theSanctions Committee; exemptions are stated as such in theresolution and do not require Sanctions Committee approval.”14

Whereas this distinction has not been maintained systematically inpast resolutions, it is used here to contribute towards commonusage.

3.1 Permitted transactions

Permitted transactions may be stated in the resolution generally orspecifically, but are usually stated in general terms.

General exemptions or exceptions will most likely refer tomedical or humanitarian grounds for allowing targets to usefrozen funds. Other grounds for general exemptions or exceptionsinclude religious obligations, facilitating a peace process, graverisk of human rights violations, political and diplomatic efforts to

19


achieve the objective(s) of the sanctions, or the maintenance ofpeace and security. However, these general grounds have beenused more frequently for measures under Article 41 of the Charterother than targeted financial sanctions, such as travel and aviationbans.15

General categories have the advantage of “covering the field”—extending the authority of the Committee or States to coverspecific problems unforeseen at the time of drafting. This may beespecially important if the resolution is drafted quickly. However,general categories may be interpreted differently acrossCommittees and States, leading to inconsistent implementation.

Specific exemptions and exceptions have not been spelled out indetail in any Security Council resolution imposing targetedfinancial sanctions.16 The most detailed list of specific items wasdeveloped by Working Group 3 at Interlaken II. This list (alongwith corresponding draft text) and comments about it followingthe 23 July Workshop are discussed in Annex C. There may becircumstances in the future where the Council considers that thedetailed specification of exemptions or exceptions is appropriateto the objectives of sanctions.

Beyond categories of general and specific, exemptions or excep-tions may be permitted where particular humanitarian organiza-tions, including the UN and its agencies and the InternationalCommittee of the Red Cross (ICRC), are involved in a transaction.While institution-specific exemptions have been used in aviationrelated sanctions in the past, they may be relevant to targetedfinancial sanctions in certain circumstances. For example, if banksand financial institutions themselves were targeted, in a State witha state-run banking system, this might preclude the UN and itsagencies or the ICRC from operating in the target state.

3.2 Determining exemptions or exceptions

The resolution must decide whether payments out of frozenaccounts require the authorization of the Sanctions Committee(exceptions) or whether States administer the process according tonational practice (exemptions). To be clear, cases of exceptionscontemplate that States will petition the Committee to considerwhether the transaction is covered by the resolution (presumably

20


following an inquiry from a bank or financial institution). Casesof exemptions contemplate that States’ practices at the nationallevel will determine the procedures that banks and financialinstitutions must follow. Delegating exemptions to States may bemore efficient but risks inconsistent implementation. Delegatingthe administration of exceptions to the Committee facilitatesconsistent implementation, but may complicate administrationsince there may be a large number of applications.

3.3 Options for exemptions and exceptions17

Option 1:

The Security Council decides to list general categories ofexemptions to be determined by States.


Decides that all States may authorize exemptions to theprohibitions referred to in paragraph 2 on the grounds ofverified medical and humanitarian purposes;

AS USED IN MODIFIED FORM IN: S/RES/1267 (1999) on theTaliban, para. 4(b).

Decides that the activities of the United Nations and itsagencies and the International Committee of the RedCross shall not be restricted by the provisions of thisresolution;

Option 2:

The Security Council decides to list general categories ofexceptions to be determined by the Sanctions Committee.Where the Committee is tasked with this role, reference should bemade in the section that enumerates the powers of the Committee(see section 5, below).


Decides that the Committee established by paragraph 5may authorize exceptions to the prohibitions referred toin paragraph 2 above on a case-by-case basis under a

21


no-objection procedure on the grounds of verifiedmedical and humanitarian purposes;

Decides that the activities of the United Nations and itsagencies, the International Committee of the Red Crossand, upon decision by the Committee established byparagraph 5, further humanitarian organizations shallnot be restricted by the provisions of this resolution;

AS USED IN MODIFIED FORM IN: S/RES/1173 (1998) onUNITA, para. 13.

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4. International Organizations

The membership of the United Nations is restricted to sovereignStates, and therefore does not include international organizations.As a result, Council resolutions do not bind internationalorganizations.18 The Interlaken drafters considered it desirable “tocall upon such organizations to take measures […] to ensure theefficacy of the sanctions to be imposed pursuant to the resolution.It was recognized that the cooperation of international financialorganizations might be vital to the comprehensive application offinancial sanctions.”19 The draft text recognizes this idea bycalling upon international organizations to take measuresconsistent with UN targeted financial sanctions. In addition, theremay be a role for international institutions in reporting on andmonitoring the implementation of sanctions. For this reason, it isimportant that such organizations be made aware of sanctionsresolutions and requested to undertake these tasks specifically.This is also discussed in the relevant sections below (7 and 8).

DRAFT TEXT:

Calls upon international, regional, sub-regional, and allother organizations, to act strictly in accordance with theprovisions of the resolution and to cooperate fully withthe Committee established by paragraph 5 below [orother monitoring agencies] in the fulfillment of its/theirtasks, including supplying such information as may berequired by them in pursuance of this resolution;


(i) S/RES/1127 (1997) on UNITA, para. 10, whichcalls upon international and regionalorganizations to act strictly in accordance withthe provisions of the resolution.

(ii) S/RES/1267 (1999) on the Taliban, para. 9,which calls upon all States to cooperate with theCommittee in the fulfillment of its tasks.

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5. Sanctions Committee

Sanctions Committees are normally established in the initialresolution imposing sanctions and their duties routinely includeany or all of the following:20

• Matters relating to the target list;• Administering the exceptions process;• Soliciting and reviewing reports on national

implementation;• Reporting to the Council regarding the sanctions;• Developing recommendations to both the Council and

States on implementation, monitoring and enforcement,including the issuance of guidelines to States; and

• Aiding the Security Council in fulfilling its Article 50obligations.21

The draft text below lists these duties, organized by category.Following the paragraph that establishes the Committee, possibleduties are presented in the order in which they are discussed (andcross-referenced) in this document. These cross-references shouldbe checked when drawing upon the text below to ensure that thedrafter’s intention is reflected accurately, as discussions ofadvantages and disadvantages are included elsewhere. Moredetailed discussion and text on the Committee’s role inmonitoring sanctions is provided in section 8.

The menu of duties has been compiled, based primarily on pastresolutions, and is generally consistent with the duties forCommittees given by the Bonn-Berlin Expert Working Group onTravel and Aviation Related Bans.22 Two exceptions are worthnoting.

First, paragraph (d) on the “quick and efficient” distribution oflists is included in response to a concern raised in conjunctionwith the 23 July Workshop, that lists of targets previously havebeen circulated as press releases only. It is recommended that thisimportant information be communicated through official means.

Second, to reflect the discussion at the 23 July Workshop, theoption of empowering the Committee to consider petitions underArticle 50 of the UN Charter is included below and discussed

24


further in section 6.23 Some participants considered it importantthat the right to consult the Security Council established in Article50 be referred to specifically, in the interests of fairness.

DRAFT TEXT:

Establishment of the Sanctions Committee:

Decides to establish, in accordance with rule 28 of itsprovisional rules of procedure, a Committee of theSecurity Council, which consists of all the members ofthe Council, to undertake the following tasks and toreport on its work to the Council with its conclusions,observations, and recommendations:

Issues regarding the list of targeted persons:

(a) to designate the persons subject to the measuresimposed by paragraph 2 [by date] after havinginformed the country of nationality of the target,if not identical to the target country;

(b) to seek from all States, internationalorganizations, and other sources furtherinformation regarding the persons to whom themeasures imposed in paragraph 2 should apply;

(c) to decide on simplified procedures for listingand delisting targeted persons, and to reviewand maintain current the list of persons to whomthe measures imposed in paragraph 2 apply;

(d) to distribute quickly and efficiently the listreferred to in paragraph 2 to States andrelevant international organizations, throughofficial channels, upon its creation and anysubsequent modifications;

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(e) to make information it considers relevant,including the list referred to in paragraph 2,publicly available through appropriate media,including through the use of informationtechnology;

(f) to request that additional information beprovided to the Committee where appropriate;

Exceptions:

(g) to give consideration to, and decide upon,requests for the exceptions set out in paragraph3 above;

Implementation of measures:

(h) to promulgate expeditiously such guidelines andto offer any other support to States as may benecessary to facilitate implementation of themeasures imposed by paragraph 2;

Petition for removal: (see section 6)

(i) to take the necessary measures to fulfill itsobligations set out in paragraph 6 below;

Reporting: (see section 7)

(j) to seek continually from all States andinternational organizations further informationregarding the legal, administrative andpractical actions taken by them with a view ofeffectively implementing the measures imposedby paragraph 2 above;

(k) to examine the reports submitted pursuant toparagraph 7 [by States and internationalorganizations];

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Information sharing:

(l) where appropriate, to make available to Statesinformation received and facilitate informationexchange;

Monitoring: (see section 8)

(m) to take the necessary measures to fulfill itsobligations set out in paragraph 8 below;

Article 50 obligations:

(n) to provide opportunities for third States affectedby sanctions to brief the Committee onunintended impacts they are experiencing andassistance needed by them to mitigate negativeimpacts;

Debt issues:

(o) to consider and submit to the Council claimspending against targeted persons by their publicand private creditors with a view to facilitatingthe resolution of debt issues;


(i) S/RES/757 (1992) on FRY (S&M), para. 13(a),(b), (e), and (f).

(ii) S/RES/1267 (1999) on the Taliban, para. 6(a),(e), (f), and (g).

(iii) S/RES/1333 (2000) on the Taliban, paras. 12and 16(a), (b), (c), (d), and (e).

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6. Petition for Removal from List of Targets

Since targeted individuals could be designated erroneously, it isdesirable for the Security Council to consider procedures thatenable targeted individuals to petition for their removal from thelist. Although such provisions have not been included in previousresolutions, participants in the 23 July Workshop generallyendorsed such a measure. Since there are no routine proceduresfor listing targeted individuals, participants expressed concernthat the process for removal should be developed with care, withsufficient flexibility to add names to lists as well as remove themif circumstances require such actions.

The Bonn-Berlin Expert Working Group on Travel and Aviation-Related Bans addressed the right of targeted individuals to contestbeing named, and concluded that resolutions should provide thisoption. Targets may petition the Chair of the relevant SanctionsCommittee directly on the basis that their listing is unfounded orthat they have changed their behavior.24 However, the ExpertWorking Group recommended that this measure be implementedthrough a reference in the “Sanctions Committee” paragraph of aresolution, by empowering the Committee to keep the list up-to-date. The draft text expands upon this approach by offering aprocedure for targeted persons to petition the Chair of theSanctions Committee for removal from the list. It also authorizesthe Committee to gather information in order to consider thepetition.

Finally, participants in the 23 July Workshop discussed where theburden of proof regarding petitions for removal should lie, withsome suggesting that the Committee should carry the burden inthese cases. If the Council wishes for this to be the case,paragraph (b), below, should be redrafted to reflect this intentionclearly.

DRAFT TEXT:

(a) Decides that any individual [or] group ofindividuals listed as a target pursuant to thisresolution may submit to the Chair of theSanctions Committee established by paragraph

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5 any information showing that the prohibitionscontained in paragraph 2 should not apply orshould no longer apply;

(b) Decides that the Committee may gatherinformation relevant to deciding upon thesubmission received, pursuant to subparagraph(a), and requests that States and internationalorganizations cooperate with the Committee inthis regard;

(c) Requests that the Committee consider thepetition received and any information gatheredand decide whether the [prohibitions inparagraph 2] shall continue to apply to theindividual [or] group of individuals making thesubmission under subparagraph (a);

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7. Reporting

As the preceding sections indicate, Sanctions Committees may bedelegated duties that relate to both reporting and monitoring.Reporting refers to the obligations of States to provideinformation to UN organs, most likely to the Committee.Monitoring, discussed in detail in section 8, refers to the analysisof this information for purposes of determining effectiveness andenforcement actions.

Reporting is necessary to monitor sanctions effectively and shouldbe relevant to the stated objectives of the sanctions. Further, theSanctions Committee, as with all UN organs, knows littleconcerning implementation of the measures without States’cooperation. Failure to provide full and detailed informationcomplicates efforts to monitor sanctions, possibly underminingeffective implementation of targeted sanctions. This has been thecase in the past, with many States providing reports limited to afew lines stating that “all necessary measures” have been taken orfailing to report at all. In addition to requiring that States report,this section of the resolution should specify the matters on whichStates are to report and indicate how often reports are required.

7.1 Information to be reported

Past resolutions have required States to report on two generaltypes of information. First, an initial reporting requirement hasbeen imposed regarding the “steps Member States have takenwith a view to effectively implementing this resolution.” Second,States are requested to supply “such information as may berequired by the Committee in pursuance of this resolution.”25

While general requirements maintain the flexibility of theCommittee, more specific information is likely to be more usefulto the Committee. For example, the following types ofinformation may facilitate more effective monitoring:

• Copies of national legal and administrative texts relevantto implementation;

• Aggregated amounts of funds and other financialresources frozen pursuant to the prohibitions inparagraph 2; and

• Information on the administration of exemptions.

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It is also important that Sanctions Committees be more proactivein issuing specific guidance to States regarding categories ofinformation required to facilitate effective reporting. To this end,the development of “templates,” as endorsed by the SecurityCouncil’s Working Group on General Issues on Sanctions, maybe considered by future Committees.26

7.2 Reporting requirements

As indicated above, resolutions typically require States to reportafter an initial period and upon request of the SanctionsCommittee thereafter. However, clearly specifying reportingintervals may enhance meaningful cooperation by States. Reportsmay be required on a periodic basis, for example, at intervals of 4or 6 months. Alternatively, reporting requirements may beconsidered relevant to particular milestones in the life of theresolution, such as a stage in a peace process referred to in thePreamble or Objectives sections, or in a Sunset Clause.

DRAFT TEXT:

Requests that all States and calls upon the internationalorganizations referred to in paragraph 4 to report to theCommittee established by paragraph 5 above on:

Information to be reported:

• specific legislation passed or enacted or othermeasures taken;

• specific prohibited transactions detected;• aggregated amounts of funds and other

financial resources frozen pursuant to theprohibitions in paragraph 2;

• amount of funds withdrawn or transferred priorto entry into force of this resolution andinformation which may aid in determining thecurrent location and character of the funds [i.e.pursuant to the retroactive reporting provisionin paragraph 2];

• publication of any list of targeted personsreferred to in paragraph 2;

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• information on persons subject to prohibitions inparagraph 2;

• information on actions taken pursuant to[paragraphs on “open” list];27

• notification of persons added to the list oftargeted persons as provided in paragraph 2;

• exemptions issued;• other actions taken with a view to effectively

implementing paragraph 2;• any other action requested by the Committee or

other monitoring body;• matters relevant for the purposes of this

resolution and any other relevant matters;

Reporting intervals:

• within [xx] days of [the coming into force of thisresolution] [or] [the promulgation of a listpursuant to paragraph 2 by the Committee],[and];

• [on a periodic basis or relevant to a milestonein the resolution];

• and as requested by the Committee;


(i) S/RES/1127 (1997) on UNITA, para. 13,requesting reports some 90 days after thepassage of the resolution.

(ii) S/RES/1267 (1999) on the Taliban, para. 10,requesting reports 30 days after the coming intoforce of the resolution.

(iii) S/RES/1343 (2001) regarding Liberia, para. 18,requesting reports 30 days after thepromulgation of the list by the Committee.

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8. Monitoring

Monitoring is critical to ensuring the effectiveness of targetedfinancial sanctions and usually occurs in conjunction with themonitoring of other measures under Article 41 of the Charter. Themonitoring section of the resolution should specify the aspects ofsanctions implementation to be evaluated and delegate theresponsibility for doing so.

Two broad aspects of sanctions implementation are generallyaddressed through monitoring initiatives: any unintended impactsof sanctions, particularly negative humanitarian consequences;and the effectiveness of the sanctions, relevant to the statedobjectives of the sanctions. Monitoring is likely to lead torecommendations for changes to limit the unintendedconsequences and/or improve the effectiveness of theprohibitions.

Effective monitoring requires time and resources. While theSanctions Committee or Secretary-General is most likely to bedelegated responsibility for monitoring, other bodies may becreated or called upon. The Council has demonstrated thewillingness to appoint Panels of Experts or establish MonitoringMechanisms to investigate and make recommendations onspecific topics, such as alleged violations of the sanctions.Through a Monitoring Mechanism, a private sector agency can beengaged to pursue specific monitoring activities.28 Thesemeasures enhance the monitoring capacity of the UN and result inmore detailed investigations and reports. Different aspects ofmonitoring may be delegated to various monitors.29

Draft text is provided to identify monitoring agencies and specifytheir duties. The duties are not exclusive of each other and arepresented as a menu from which drafters may choose, consistentwith their objectives. However, note that some duties areroutinely assigned to a certain monitor. Descriptions of how andwhen these tasks have been assigned in the past are included.

Draft text for the establishment of a Panel of Experts orMonitoring Mechanism is provided, to reflect Security Councilpractice. Where the Council provides for the establishment of

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such bodies, they may be delegated broad monitoringresponsibilities, as indicated in the text below.

DRAFT TEXT:

MONITORS:

Decides that the [Secretary-General] [Secretary-Generalin consultation with the Committee] [SanctionsCommittee, in addition to those set out in paragraph 5above]30 should undertake the following tasks:

DUTIES:

Impact of the measures:

(—) to review the humanitarian [economic,] [social,][political,] [and] [security] implications of the measuresimposed by this resolution and to report back to theCouncil within [amount of time] of the adoption of thisresolution with an assessment and recommendations, toreport at regular intervals thereafter on anyhumanitarian [economic,] [social,] [political,] [and][security] implications [and to present a comprehensivereport on [this/these] issue(s) and any recommendationsno later than [amount of time] prior to the expiration ofthese measures];

AS USED IN: S/RES/1333 (2000) on the Taliban, para.15(d), where the Secretary-General, in consultation withthe Committee, was to report on the humanitarianimpacts. The preliminary report was due 90 days afterthe adoption of the resolution and the comprehensivereport 30 days before the measures were to expire.

Implementation of measures:

The ability to perform the tasks under this heading,particularly the first, is largely dependent on theinformation that States and international organizationsprovide pursuant to reporting requirements (section 7).The Security Council Working Group on General Issues

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on Sanctions has recommended that information besought from additional sources, such as oral reports fromrelevant organizations, as well as statistics and data fromoutside sources. Also, travel to the region may beconsidered to improve monitoring of sanctionsimplementation.

(—) to report to the Council by [date] regarding theactions taken by States and international organizationsto implement the measures specified in paragraph(s) 2above;

AS USED IN:

(i) S/RES/1173 (1998) on UNITA, para. 20(b),where the responsibility was given to theCommittee.

(ii) S/RES/1333 (2000) on the Taliban, para. 15(c),where the Secretary-General in consultationwith the Committee was assigned this task.

(—) to consider, where and when appropriate, a visit tocountries in the region by the Chairman of theCommittee and such other members as may be requiredto enhance the full and effective implementation of themeasures imposed by this resolution with a view tourging States to comply;

AS USED IN: S/RES/1333 (2000) on the Taliban, para.16(f).

Change in behavior by targeted persons:

This aspect of monitoring is tied to the Objectives andSunset Clause (sections 1 and 11). Since compliance ofthe target with the demands established is often thecriteria for lifting the sanctions, this task obligesmonitors to report on whether targets have altered theirbehavior to comply with the objectives. If Option 1 or 2is employed in the Sunset Clause—whereby lifting thesanctions is tied to a decision made by the Secretary-General on the compliance by the target—this

35


responsibility should be delegated to the Secretary-General. If the Council decides on Option 3, where themeasures expire on a certain date, the additional linerequiring a comprehensive report may be included toassist in determining whether or not to extend thesanctions.

(—) to submit a report to the Council by [amount oftime], and every [period of time] thereafter, drawing oninformation from all relevant sources, [including ...] onwhether [target] has complied with the demands inparagraph 1 above;

[…] and to present a comprehensive report on [this]issue no later than [amount of time] prior to theexpiration of these measures;

AS USED IN:

(i) S/RES/1127 (1997) on UNITA, para. 8, whichassigns this task to the Secretary-General.

(ii) S/RES/1333 (2000) on the Taliban, 15(c) and(d), where the Secretary-General in consultationwith the Committee was to produce the reportand where a comprehensive report was due by adate tied to the expiration of the measures.

(iii) S/RES/1343 (2001) regarding Liberia, para. 12,where the Secretary-General was required tosubmit the first report by a set date and reportagain at 6-month intervals.

Technical effectiveness:

(—) to make periodic assessments of andrecommendations on ways of increasing the technicaleffectiveness of the measures referred to in paragraph 2above to the Council;

AS USED IN: S/RES/1343 (2001) regarding Liberia, para.14(g), where the Committee was given this task as wellas that of recommending ways to limit the unintendedeffects of the sanctions.

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Violations of the sanctions:

As the Committee is responsible for receiving reports fromStates and international organizations, it is appropriate toinclude a role in dealing with violations of sanctions. Thedistinction in the two paragraphs is that the first deals withthe interaction between States and the Committee, whereasthe second paragraph deals with relaying this informationon to the Security Council along with recommendations.

(—) to consider any information brought to its attention byStates and international organizations concerning allegedor actual violations of the measures imposed by thisresolution, identifying where possible, persons, natural orlegal, reported to be engaged in such violations, and torecommend appropriate measures in response thereto;

(—) to make periodic reports to the Council on alleged oractual violations of the measures imposed by thisresolution, identifying where possible, persons, natural orlegal, reported to be engaged in such violations, andrecommendations for strengthening the effectiveness ofthese measures;

AS USED IN MODIFIED FORM IN: S/RES/1333 (2000) on theTaliban, para. 16(g), where this task was assigned to theSanctions Committee.

Enforcement:

(—) to assess the problems in enforcing the measuresimposed by paragraph 2 above and makerecommendations for strengthening enforcement;

AS USED IN: S/RES/1333 (2000) on the Taliban, para.15(c), where this task was assigned to the Secretary-General in consultation with the Committee.

Arrangement of monitoring activities:

While monitoring duties may be divided among severalbodies, it is helpful to have one agency coordinate the

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38

monitoring activities. This responsibility is usually givento the Sanctions Committee.

(—) to determine appropriate arrangements, on the basisof recommendations of the Secretariat, with competentinternational organizations, neighbouring and otherStates, and parties concerned with a view to improvingthe monitoring of the implementation of the measuresimposed by paragraph 2 above;

AS USED IN: S/RES/1267 (1999) on the Taliban, para. 12.

Panels of Experts and Monitoring Mechanisms:

The draft text below facilitates the establishment of aPanel of Experts or Monitoring Mechanism that may bedelegated monitoring duties similar to those discussedabove and also may be given a mandate beyondmonitoring sanctions (e.g. “to identify parties aiding andabetting the violations of the measures”).31 In addition,the reporting32 and funding33 requirements of thesemonitoring bodies will usually be spelled out in theresolution.

Requests the Secretary-General to establish, within [onemonth] from the date of adoption of this resolution, inconsultation with the Committee established byparagraph 5 above, a [Panel of Experts/MonitoringMechanism] for a period of [six months] consisting of nomore than [five] members, [drawing upon informationfrom […], with the following mandate […]:


(i) S/RES/1237 (1999) on UNITA, paras. 6, 7, and11.

(ii) S/RES/1295 (2000) on UNITA, para. 3.(iii) S/RES/1333 (2000) on the Taliban, para. 15.(iv) S/RES/1343 (2001) regarding Liberia, paras. 19

and 20.


9. Appeals to States

Resolutions may include exhortative paragraphs requesting thatStates take action related to specific measures. Generally, theseparagraphs remind States of their obligation to implement theresolution, call upon States to cooperate with the Committee orother sanctions monitors and suggest measures that States maypursue to implement the resolution at the national level. Strictlyspeaking, they are superfluous, as the UN Charter predeterminesthe degree to which these and other paragraphs bind States;however, drafters may consider such paragraphs as a usefulguidance to States in an effort to ensure consistentimplementation. In this context, such guidance may be givengreater weight if stated in a resolution rather than if issued by aCommittee or a subsequent monitoring body. Following aredifferent formulations used in previous resolutions.

DRAFT TEXT:

Reminds all States of their obligation to implementstrictly the measures imposed by paragraph(s) 2 of thisresolution;


Stresses the obligation of all States to comply fully withthe measures imposed against [target] contained inparagraph 2 and emphasizes that non-compliance withthose measures constitutes a violation of the provisionsof the Charter of the United Nations;

AS USED IN: S/RES/1295 (2000) on UNITA, para 1.

Calls upon all States to cooperate fully with theCommittee established by paragraph 5 above [or othermonitoring agencies] in the fulfillment of its/their tasks,including supplying such information as may be requiredby them in pursuance of this resolution;


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Calls upon States to bring proceedings against personswithin their jurisdiction that violate the measuresimposed by paragraph 2 above and to imposeappropriate penalties;


Calls upon all States to work with financial institutionson their territory to develop procedures to facilitate theidentification of funds and financial assets that may besubject to the measures contained in this resolution andthe freezing of such assets;

AS USED IN: S/RES/1295 (2000) on UNITA, para. 21.

Further urges all States to take immediate steps toenforce, strengthen or enact legislation making it acriminal offence under domestic law for their nations orother individuals operating on their territory to violatethe measures imposed by the Council against [target],where they have not already done so, and to inform theCommittee of the adoption of such measures, and invitesStates to report the results of all related investigations orprosecutions to the Committee;

AS USED IN: S/RES/1295 (2000) on UNITA, para 27.

40


10. Nonliability for Compliance with Sanctions

Sanctions are intended to exert pressure on the targeted persons,and not to affect detrimentally the interests of third parties,including non-target States, entities, and private parties.Accordingly, this section is designed to protect States andfinancial institutions from claims arising from their compliancewith sanctions resolutions (e.g. where banks are required toviolate contractual terms). There are limited precedents in pastresolutions, but international banks and financial institutions haveemphasized the importance of these provisions in all resolutionsimposing targeted financial sanctions. Since the freezing of fundsrequired by targeted financial sanctions could violate a financialinstitution’s obligations to its customers, it is crucial that a“nonliability” provision be included in the resolution to serve as adefense for those who comply with sanctions.

The first paragraph below obliges States and internationalorganizations to implement sanctions notwithstanding existingobligations. The second paragraph absolves those dealing with theassets of targeted persons from liabilities that would otherwisearise from freezing those assets. Reflecting the discussion at the23 July Workshop, the text has drawn upon the language of thecommon law of negligence (acting in “good faith”).

DRAFT TEXT:

Calls upon all States and international organizations toimplement the provisions of this resolution,notwithstanding the existence of any rights or obligationsconferred or imposed by any international agreement orany contract entered into or any license or permitgranted before the date of adoption of [the coming intoeffect of the measures contained in] this resolution;

AS USED IN MODIFIED FORM IN: S/RES/757 (1992) on FRY(S&M), para. 9.

Decides that all States shall ensure that no claim shall lieat the instance of any person referred to in paragraph 2above, or of any person claiming through or for thebenefit of any such person in connection with any

41


contract or other transaction performed in good faithpursuant to the measures taken by the Security Councilin this resolution;

AS USED IN MODIFIED FORM IN: S/RES/883 (1993) on Libya,para. 8.

42


11. Sunset Clause

This section aims to provide a means for the suspension andlifting of sanctions, upon the achievement of the objectivesidentified in the resolution. The “demands” made of the target inthe Objectives section of the resolution constitute the criteria forlifting the sanctions, and for this reason it is important that thelanguage concerning objectives be clear and specific.

Options for sunset clause

The three basic formulations provided below are typical of pastSecurity Council resolutions. While they represent alternativeoptions, a resolution imposing multiple Article 41 measures coulduse different approaches or different variations of an approach(i.e. with different dates of expiration) for each of theprohibitions.

Option 1:

The Security Council expresses its readiness to consider liftingthe sanctions if certain measures are taken or conditions met.This same wording is also used to introduce the possibility ofadditional measures, and is generally a way for the Council tosignal its willingness to consider lifting the prohibitions if targetschange their behavior. If this approach is selected, the Monitoringsection (section 8) should give the Secretary-General theresponsibility of evaluating the targets’ compliance with thedemands of the Council, as this text will oblige him or her toreach a conclusion on the matter.


Expresses its readiness to review all the measures in thepresent resolution with a view to lifting them if, after theprovisions set forth in paragraph 2 above have come intoforce, the Secretary-General reports to the Council that[target] has fulfilled the obligation(s) set out inparagraph 1 above;

43


AS USED IN:

(i) S/RES/820 (1993) on FRY (S&M), para. 31.(ii) S/RES/841 (1993) on Haiti, para. 16.(iii) S/RES/883 (1993) on Libya, para. 16.(iv) S/RES/1173 (1998) on UNITA, para. 15.

Option 2:

The Security Council decides to end the measures if certainconditions are met. This option is normally used if there isagreement in the Council on the terms for lifting the sanctions, orif the sanctions program’s duration is viewed as being short. Inone case, the terse wording of this paragraph contributed to theimpression that the imposition of sanctions was merely symbolic,that the targets’ compliance with the demands of previousresolutions was unlikely, and that the Council did not foreseemuch further debate on the issue. Again, if this option is selected,the Secretary-General should be responsible for monitoringcompliance by the target, as reflected in the Monitoring section.


Decides to terminate the measures imposed byparagraph 2 once the Secretary-General reports to theSecurity Council that [target] has fulfilled theobligation(s) set out in paragraph 1 above;


Option 3:

The Security Council decides that the prohibitions are to beimposed for a set period, and undertakes to considerextending the imposition of sanctions at that time.


Decides that the measures imposed by paragraph 2 areestablished for [time period] and that, at the end of thatperiod, the Council will decide whether the [target] hascomplied with the demands in paragraph 1, and,

44


accordingly, whether to extend these measures for afurther period with the same conditions;

AS USED IN:

(i) S/RES/1333 (2000) on the Taliban, para. 23, incombination with Option 2, above (para. 24).

(ii) S/RES/1343 (2001) regarding Liberia, paras. 9and 10.

45


Endnotes

1 For example, see S/RES/1173 (1998) on UNITA, Part B.2 This latter, broader sense of the term “targeted sanctions” is

utilized by the Bonn-Berlin Expert Working Group for thepurpose of aviation bans, but not travel bans. See BonnInternational Center for Conversion, “Design and Implementationof Arms Embargoes and Travel and Aviation Related Sanctions:Results of the ‘Bonn-Berlin Process,’” (Bonn, 2001), pp. 4-48, 69[hereafter “BICC”]. Kimberly Ann Elliott’s paper at Interlaken IIstresses that a “clear distinction must…be made between targetedsanctions and selective sanctions. Selective sanctions are less thancomprehensive sanctions involving restrictions on particularproducts or financial flows. Targeted sanctions are a subset ofselective sanctions that specifically aim for narrow or targetedeffects.” Published report of Interlaken II, p. 194.

3 If this option is included, the Council must resolve thefollowing questions, preferably by including specific references inthe text of the resolution itself: What is the definition of “family?”Are the sanctions intended to apply only to adult family members,however family is defined? What is the age at which a childbecomes an adult for the purposes of sanctions targeting? Howwill that age be verified? As elsewhere in the resolution (as in thesanctions in general) what is required is specificity; the Councilneeds to decide whether and which “family” members will betargeted.

4 Although, see S/RES/1333 (2000) on the Taliban, para. 8(c),which names Usama bin Laden and the Al-Qaida organization.Also, the European Union, in imposing a targeted financialsanction over the matter of Kosovo (EC Regulation No. 1294/1999), issued an annex listing persons subject to the prohibitions.

5 An example of a closed list is the targeted financial sanctionimposed against members of UNITA is in S/RES/1173 (1998) onUNITA, para. 11.

6 An example of an open list is EC Regulation 1294/1999against the FRY over the issue of Kosovo (see Articles 1-3),which also includes a reporting requirement, so that States actingbeyond the central list inform the European Commission andother Member States (Article 11) of their actions.

46


7 This was the case in the Libya sanctions, see S/RES/883(1993) on Libya, para. 3(iii), and following, where no provisionfor coordination was made.

8 These past formulations include S/RES/883 (1993) onLibya, which referred to “all States in which there are funds orother financial resources” (para. 3) and S/RES/1173 (1998) onUNITA, which provides that one State (in this case, Angola) isexcepted from having to implement sanctions (para. 11).

9 For example, S/RES/1267 (1999) on the Taliban, para. 3.10 Discussions with government representatives revealed that

in the case of the two-week delay between UN action andimplementation associated with the Libyan sanctions, more thanU.S. $300 million in cash was withdrawn from the banks of onecountry.

11 See EC Regulation 1294/1999 over the issue of Kosovo.Article 4 refers to activities “facilitating, promoting or otherwiseenabling the acquisition or extension of a participation in,ownership of or control over” real estate and entities located inthe target state or owned and controlled by the targetgovernments. Article 5 prohibits activities pursued with the aim ofcircumventing the prohibitions.

12 Anecdotal evidence, gleaned in particular from theinterventions of sanctions experts and representatives fromPermanent Missions to the UN at the Symposium on TargetedFinancial Sanctions (New York, December 1998), suggest that theCommittees tend to meet irregularly or not at all in some cases.Further, they are sometimes slow to issue guidelines (Libya), slowand imprecise in the identification of targets (Haiti), andvulnerable to the conflicting agendas of their constituent members(yet no more so than the Council itself).

13 This general approach was used by the European Union inimposing measures against the Federal Republic of Yugoslaviaover the matter of Kosovo (EC Regulation No. 1294/1999, seeespecially Articles 2 and 3) and again in EC Regulation No. 1081/2000 on Burma/Myanmar, Article 2. Notably, in the case of 1294/1999, to overcome the disadvantages of issuing a list before allinformation could be compiled, the EC ensured the list was open.The EC achieved this by providing concise definitions of the legalpersons targeted by the regulation (Article 1), enabling MemberStates to target subsidiary entities and individuals (i.e. persons

47


48

“acting or purporting to act for or on behalf of” the targetedgovernments). The Annex merely “deems” that the latter are“acting or purporting to act for or on behalf of” the former. Theoutcome is that the annex is an initial list that binds States. ForUN purposes, the draft text given has been adapted to achieve thisoutcome. In addition, Member States are specifically empoweredto act beyond the list and are obliged to report when they do so.

14 BICC, p. 58.15 For example, S/RES/1267 (1999) on the Taliban, para. 4(a)

and S/RES/1127 (1997) on UNITA, para. 6.16 The closest that the Council has come to listing specific

items is S/RES/942 (1994) on FRY (Bosnian Serbs), para. 13(a),which refers to payments for postal services.

17 Note that general categories of exemptions or exceptionsare sometimes dealt with in the paragraph imposing theprohibitions. See, for example, S/RES/1267 (1999) on theTaliban, para. 4(b).

18 See Article 48(b) of the United Nations Charter. Note thatthis paragraph is exhortative, not mandatory.

19 Published report of Interlaken II, p. 86.20 For the purposes of this document, it is assumed that the

resolution is the first to impose sanctions. If the Committee wasestablished by a previous resolution, the necessary changes shouldbe made to the draft text which references the Committee.

21 Article 50 of the United Nations Charter states: “Ifpreventive or enforcement measures against any state are taken bythe Security Council, any other state, whether a member of theUnited Nations or not, which finds itself confronted with specialeconomic problems arising from the carrying out those measuresshall have the right to consult the Security Council about asolution of those problems.”

22 BICC, pp. 55-60.23 For a short discussion of Article 50, see the Informal

Background Paper prepared by the UN Secretariat, Department ofPolitical Affairs in the published report of Interlaken II, pp. 151-53.

24 BICC, pp. 56-58.25 For example, see S/RES/1333 (2000) on the Taliban, paras.

20 and 19, respectively.


49

26 See also BICC, p. 59 on this point.27 If the Council decides that the list of targets should be

“open” (section 2), it is necessary to include this element in thereporting requirement to ensure that States inform the Committeeof persons they deem subject to the prohibitions.

28 See “Report of the Security Council Committee EstablishedPursuant to Resolution 864 (1993) Concerning the Situation inAngola,” issued as an Annex to S/2000/1255, 29 December 2000,para. 26.

29 For example, S/RES/1333 (2000) on the Taliban, whereduties are assigned to the “Secretary-General in consultation withthe Committee.”

30 Any of the responsibilities that would be delegated to theSanctions Committee alone could also be dealt with by listingthose responsibilities in the section on the Sanctions Committee(section 5).

31 For example, S/RES/1237 (1999) on UNITA, paras. 6(a).32 For example, the resolution may require that a Panel of

Experts report to the Council, through the Committee, onspecified matters at certain intervals. See S/RES/1343 (2001),regarding Liberia, para. 19.

33 The Security Council may fund a Panel of Experts orMonitoring Mechanism by creating a Trust Fund (S/RES 1237(1999) on UNITA, para. 11) or may simply request the Secretary-General to provide the necessary resources (S/RES/1343 (2001)regarding Liberia, para. 19).

AN

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X A

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50

RES

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51

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Dec

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as

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Ann

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xx]]

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3. E

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Opt

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Dec

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Co

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Re

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Dec

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activ

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enci

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tions

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natio

nal O

rgan

izat

ions

Cal

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pon

inte

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omm

ittee

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5 b

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[or

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fulfi

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supp

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form

atio

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may

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by

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of t

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ions

Com

mitt

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Dec

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in a

ccor

danc

e w

ith r

ule

28 o

f its

pro

visi

onal

rul

es o

f pro

cedu

re, a

Com

mitt

ee o

f the

Sec

urity

Cou

ncil,

whi

chco

nsis

ts o

f all

the

mem

bers

of t

he C

ounc

il, to

und

erta

ke th

e fo

llow

ing

task

s an

d to

rep

ort o

n its

wor

k to

the

Cou

ncil

with

its

conc

lusi

ons,

obse

rvat

ions

, and

rec

omm

enda

tions

:

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

55

(a)

to d

esig

nate

the

pers

ons

subj

ect t

o th

e m

easu

res

impo

sed

by p

arag

raph

2 [

by d

ate]

afte

r ha

ving

info

rmed

the

coun

try

ofna

tiona

lity

of th

e ta

rget

, if n

ot id

entic

al to

the

targ

et c

ount

ry;

(b)

to s

eek

from

all

Stat

es, i

nter

natio

nal o

rgan

izat

ions

, and

oth

er s

ourc

es fu

rthe

r in

form

atio

n re

gard

ing

the

pers

ons

to w

hom

the

mea

sure

s im

pose

d in

par

agra

ph 2

sho

uld

appl

y;(c

)to

dec

ide

on s

impl

ified

pro

cedu

res

for

listin

g an

d de

listin

g ta

rget

ed p

erso

ns, a

nd to

rev

iew

and

mai

ntai

n cu

rren

t the

list

of

pers

ons

to w

hom

the

mea

sure

s im

pose

d in

par

agra

ph 2

app

ly;

(d)

to d

istr

ibut

e qu

ickl

y an

d ef

ficie

ntly

the

list r

efer

red

to in

par

agra

ph 2

to S

tate

s an

d re

leva

nt in

tern

atio

nal o

rgan

izat

ions

,th

roug

h of

ficia

l cha

nnel

s, up

on it

s cr

eatio

n an

d an

y su

bseq

uent

mod

ifica

tions

;(e

)to

mak

e in

form

atio

n it

cons

ider

s re

leva

nt, i

nclu

ding

the

list r

efer

red

to in

par

agra

ph 2

, pub

licly

ava

ilabl

e th

roug

h ap

prop

riat

em

edia

, inc

ludi

ng th

roug

h th

e us

e of

info

rmat

ion

tech

nolo

gy;

(f)to

req

uest

that

add

ition

al in

form

atio

n be

pro

vide

d to

the

Com

mitt

ee w

here

app

ropr

iate

;(g

)to

giv

e co

nsid

erat

ion

to, a

nd d

ecid

e up

on, r

eque

sts

for

the

exce

ptio

ns s

et o

ut in

par

agra

ph 3

abo

ve;

(h)

to p

rom

ulga

te e

xped

itiou

sly

such

gui

delin

es a

nd to

offe

r an

y ot

her

supp

ort t

o St

ates

as

may

be

nece

ssar

y to

faci

litat

eim

plem

enta

tion

of th

e m

easu

res

impo

sed

by p

arag

raph

2;

(i)to

take

the

nece

ssar

y m

easu

res

to fu

lfill

its o

blig

atio

ns s

et o

ut in

par

agra

ph 6

bel

ow;

(j)to

see

k co

ntin

ually

from

all

Stat

es a

nd in

tern

atio

nal o

rgan

izat

ions

furt

her

info

rmat

ion

rega

rdin

g th

e le

gal,

adm

inis

trat

ive

and

prac

tical

act

ions

take

n by

them

with

a v

iew

of e

ffect

ivel

y im

plem

entin

g th

e m

easu

res i

mpo

sed

by p

arag

raph

2 a

bove

;(k

)to

exa

min

e th

e re

port

s su

bmitt

ed p

ursu

ant t

o pa

ragr

aph

7 [b

y St

ates

and

inte

rnat

iona

l org

aniz

atio

ns];

(l)w

here

app

ropr

iate

, to

mak

e av

aila

ble

to S

tate

s in

form

atio

n re

ceiv

ed a

nd fa

cilit

ate

info

rmat

ion

exch

ange

;(m

)to

take

the

nece

ssar

y m

easu

res

to fu

lfill

its o

blig

atio

ns s

et o

ut in

par

agra

ph 8

bel

ow;

(n)

to p

rovi

de o

ppor

tuni

ties

for

thir

d St

ates

affe

cted

by

sanc

tions

to b

rief

the

Com

mitt

ee o

n un

inte

nded

impa

cts

they

are

expe

rien

cing

and

ass

ista

nce

need

ed b

y th

em to

miti

gate

neg

ativ

e im

pact

s;

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

(o)

to c

onsi

der

and

subm

it to

the

Cou

ncil

clai

ms

pend

ing

agai

nst t

arge

ted

pers

ons

by th

eir

publ

ic a

nd p

riva

te c

redi

tors

with

avi

ew to

faci

litat

ing

the

reso

lutio

n of

deb

t iss

ues;

6. P

etiti

on fo

r R

emov

al

(a)

Dec

ides

that

any

indi

vidu

al [

or]

grou

p of

indi

vidu

als

liste

d as

a ta

rget

pur

suan

t to

this

res

olut

ion

may

sub

mit

to th

e C

hair

of

the

Sanc

tions

Com

mitt

ee e

stab

lishe

d by

par

agra

ph 5

any

info

rmat

ion

show

ing

that

the

proh

ibiti

ons

cont

aine

d in

par

agra

ph 2

shou

ld n

ot a

pply

or

shou

ld n

o lo

nger

app

ly;

(b)

Dec

ides

that

the

Com

mitt

ee m

ay g

athe

r in

form

atio

n re

leva

nt to

dec

idin

g up

on th

e su

bmis

sion

rec

eive

d, p

ursu

ant t

osu

bpar

agra

ph (a

), an

d re

ques

ts th

at S

tate

s an

d in

tern

atio

nal o

rgan

izat

ions

coo

pera

te w

ith th

e C

omm

ittee

in th

is r

egar

d;(c

)Re

ques

ts th

at th

e C

omm

ittee

con

side

r th

e pe

titio

n re

ceiv

ed a

nd a

ny in

form

atio

n ga

ther

ed a

nd d

ecid

e w

heth

er th

e [p

rohi

bitio

nsin

par

agra

ph 2

] sh

all c

ontin

ue to

app

ly to

the

indi

vidu

al [

or]

grou

p of

indi

vidu

als

mak

ing

the

subm

issi

on u

nder

sub

para

grap

h(a

);

7. R

epor

ting

Requ

ests

that

all

Stat

es a

nd c

alls

upo

n th

e in

tern

atio

nal o

rgan

izat

ions

ref

erre

d to

in p

arag

raph

4 to

rep

ort t

o th

e C

omm

ittee

esta

blis

hed

by p

arag

raph

5 a

bove

on:

Info

rmat

ion

to b

e re

porte

d:

•sp

ecifi

c le

gisl

atio

n pa

ssed

or e

nact

ed o

r oth

er m

easu

res t

aken

;•

spec

ific

proh

ibite

d tr

ansa

ctio

ns d

etec

ted;

•ag

greg

ated

am

ount

s of

fund

s an

d ot

her

finan

cial

res

ourc

es fr

ozen

pur

suan

t to

the

proh

ibiti

ons

in p

arag

raph

2;

56

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

•am

ount

of f

unds

with

draw

n or

tran

sfer

red

prio

r to

ent

ry in

to fo

rce

of th

is r

esol

utio

n an

d in

form

atio

n w

hich

may

aid

in d

eter

min

ing

the

curr

ent l

ocat

ion

and

char

acte

r of

the

fund

s [i

.e. p

ursu

ant t

o th

e re

troa

ctiv

e re

port

ing

prov

isio

n in

para

grap

h 2]

;•

publ

icat

ion

of a

ny li

st o

f tar

gete

d pe

rson

s re

ferr

ed to

in p

arag

raph

2;

•in

form

atio

n on

per

sons

sub

ject

to p

rohi

bitio

ns in

par

agra

ph 2

;•

info

rmat

ion

on a

ctio

ns ta

ken

purs

uant

to [

para

grap

hs o

n “o

pen”

list

];•

notif

icat

ion

of p

erso

ns a

dded

to th

e lis

t of t

arge

ted

pers

ons

as p

rovi

ded

in p

arag

raph

2;

•ex

empt

ions

issu

ed;

•ot

her a

ctio

ns ta

ken

with

a v

iew

to e

ffect

ivel

y im

plem

entin

g pa

ragr

aph

2;•

any

othe

r ac

tion

requ

este

d by

the

Com

mitt

ee o

r ot

her

mon

itori

ng b

ody;

•m

atte

rs r

elev

ant f

or th

e pu

rpos

es o

f thi

s re

solu

tion

and

any

othe

r re

leva

nt m

atte

rs;

Rep

ortin

g in

terv

als:

•w

ithin

[xx

] da

ys o

f [th

e co

min

g in

to fo

rce

of th

is r

esol

utio

n] [

or]

[the

pro

mul

gatio

n of

a li

st p

ursu

ant t

o pa

ragr

aph

2 by

the

Com

mitt

ee],

[and

];•

[on

a pe

riod

ic b

asis

or

rele

vant

to a

mile

ston

e in

the

reso

lutio

n];

•an

d as

requ

este

d by

the

Com

mitt

ee;

8. M

onito

ring

MO

NIT

OR

S:D

ecid

es th

e [S

ecre

tary

-Gen

eral

] [Se

cret

ary-

Gen

eral

in c

onsu

ltatio

n w

ith th

e C

omm

ittee

] [Sa

nctio

ns C

omm

ittee

, in

addi

tion

toth

ose

set o

ut in

par

agra

ph 5

abo

ve]

shou

ld u

nder

take

the

follo

win

g ta

sks:

57

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

DU

TIE

S: (—) t

o re

view

the

hum

anita

rian

[ec

onom

ic,]

[soc

ial,]

[po

litic

al,]

[and

] [s

ecur

ity]

impl

icat

ions

of t

he m

easu

res

impo

sed

byth

is r

esol

utio

n an

d to

rep

ort b

ack

to th

e C

ounc

il w

ithin

[am

ount

of t

ime]

of t

he a

dopt

ion

of th

is r

esol

utio

n w

ith a

nas

sess

men

t and

rec

omm

enda

tions

, to

repo

rt a

t reg

ular

inte

rval

s th

erea

fter

on a

ny h

uman

itari

an [

econ

omic

,] [s

ocia

l,][p

oliti

cal,]

[an

d] [

secu

rity

] im

plic

atio

ns [

and

to p

rese

nt a

com

preh

ensi

ve r

epor

t on

[thi

s/th

ese]

issu

e(s)

and

any

reco

mm

enda

tions

no

late

r th

an [

amou

nt o

f tim

e] p

rior

to th

e ex

pira

tion

of th

ese

mea

sure

s];

(—) t

o re

port

to th

e C

ounc

il by

[da

te]

rega

rdin

g th

e ac

tions

take

n by

Sta

tes

and

inte

rnat

iona

l org

aniz

atio

ns to

impl

emen

t the

mea

sure

s sp

ecifi

ed in

par

agra

ph(s

) 2 a

bove

;(—

) to

cons

ider

, whe

re a

nd w

hen

appr

opri

ate,

a v

isit

to c

ount

ries

in th

e re

gion

by

the

Cha

irm

an o

f the

Com

mitt

ee a

nd s

uch

othe

r mem

bers

as m

ay b

e re

quir

ed to

enh

ance

the

full

and

effe

ctiv

e im

plem

enta

tion

of th

e m

easu

res i

mpo

sed

by th

isre

solu

tion

with

a v

iew

to u

rgin

g St

ates

to c

ompl

y;(—

) to

subm

it a

repo

rt to

the

Cou

ncil

by [

amou

nt o

f tim

e], a

nd e

very

[pe

riod

of t

ime]

ther

eafte

r, dr

awin

g on

info

rmat

ion

from

all r

elev

ant s

ourc

es, [

incl

udin

g ...

] on

whe

ther

[ta

rget

] ha

s co

mpl

ied

with

the

dem

ands

in p

arag

raph

1 a

bove

;[…

] an

d to

pre

sent

a c

ompr

ehen

sive

rep

ort o

n [t

his]

issu

e no

late

r th

an [

amou

nt o

f tim

e] p

rior

to th

e ex

pira

tion

of th

ese

mea

sure

s;(—

) to

mak

e pe

riod

ic a

sses

smen

ts o

f and

rec

omm

enda

tions

on

way

s of

incr

easi

ng th

e te

chni

cal e

ffect

iven

ess

of th

e m

easu

res

refe

rred

to in

par

agra

ph 2

abo

ve to

the

Cou

ncil;

(—) t

o co

nsid

er a

ny in

form

atio

n br

ough

t to

its a

ttent

ion

by S

tate

s an

d in

tern

atio

nal o

rgan

izat

ions

con

cern

ing

alle

ged

orac

tual

vio

latio

ns o

f the

mea

sure

s im

pose

d by

this

res

olut

ion,

iden

tifyi

ng w

here

pos

sibl

e, p

erso

ns, n

atur

al o

r le

gal,

repo

rted

to b

e en

gage

d in

suc

h vi

olat

ions

, and

to r

ecom

men

d ap

prop

riat

e m

easu

res

in r

espo

nse

ther

eto;

58

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

(—) t

o m

ake

peri

odic

rep

orts

to th

e C

ounc

il on

alle

ged

or a

ctua

l vio

latio

ns o

f the

mea

sure

s im

pose

d by

this

res

olut

ion,

iden

tifyi

ng w

here

pos

sibl

e, p

erso

ns, n

atur

al o

r le

gal,

repo

rted

to b

e en

gage

d in

suc

h vi

olat

ions

, and

rec

omm

enda

tions

for

stre

ngth

enin

g th

e ef

fect

iven

ess o

f the

se m

easu

res;

(—) t

o as

sess

the

prob

lem

s in

enf

orci

ng th

e m

easu

res

impo

sed

by p

arag

raph

2 a

bove

and

mak

e re

com

men

datio

ns fo

rst

reng

then

ing

enfo

rcem

ent;

(—) t

o de

term

ine

appr

opri

ate

arra

ngem

ents

, on

the

basi

s of

rec

omm

enda

tions

of t

he S

ecre

tari

at, w

ith c

ompe

tent

inte

rnat

iona

lor

gani

zatio

ns, n

eigh

bour

ing

and

othe

r St

ates

, and

par

ties

conc

erne

d w

ith a

vie

w to

impr

ovin

g th

e m

onito

ring

of t

heim

plem

enta

tion

of th

e m

easu

res

impo

sed

by p

arag

raph

2 a

bove

;

Requ

ests

the

Secr

etar

y-G

ener

al to

est

ablis

h, w

ithin

[on

e m

onth

] fr

om th

e da

te o

f ado

ptio

n of

this

res

olut

ion,

in c

onsu

ltatio

n w

ithth

e C

omm

ittee

est

ablis

hed

by p

arag

raph

5 a

bove

, a [

Pane

l of E

xper

ts/M

onito

ring

Mec

hani

sm]

for

a pe

riod

of [

six

mon

ths]

cons

istin

g of

no

mor

e th

an [

five]

mem

bers

, [dr

awin

g up

on in

form

atio

n fr

om [

…],

with

the

follo

win

g m

anda

te [

…]:

9. A

ppea

ls to

Sta

tes

Rem

inds

all

Stat

es o

f the

ir o

blig

atio

n to

impl

emen

t str

ictly

the

mea

sure

s im

pose

d by

par

agra

ph(s

) 2 o

f thi

s re

solu

tion;

Stre

sses

the

oblig

atio

n of

all

Stat

es to

com

ply

fully

with

the

mea

sure

s im

pose

d ag

ains

t [ta

rget

] co

ntai

ned

in p

arag

raph

2 a

ndem

phas

izes

that

non

-com

plia

nce

with

thos

e m

easu

res

cons

titut

es a

vio

latio

n of

the

prov

isio

ns o

f the

Cha

rter

of t

he U

nite

d N

atio

ns;

Cal

ls u

pon

all S

tate

s to

coo

pera

te fu

lly w

ith th

e C

omm

ittee

est

ablis

hed

by p

arag

raph

5 a

bove

[or

oth

er m

onito

ring

age

ncie

s] in

the

fulfi

llmen

t of i

ts/th

eir

task

s, in

clud

ing

supp

lyin

g su

ch in

form

atio

n as

may

be

requ

ired

by

them

in p

ursu

ance

of t

his

reso

lutio

n;

59

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

Cal

ls u

pon

Stat

es to

bri

ng p

roce

edin

gs a

gain

st p

erso

ns w

ithin

thei

r ju

risd

ictio

n th

at v

iola

te th

e m

easu

res

impo

sed

by p

arag

raph

2ab

ove

and

to im

pose

app

ropr

iate

pen

altie

s;

Cal

ls u

pon

all S

tate

s to

wor

k w

ith fi

nanc

ial i

nstit

utio

ns o

n th

eir

terr

itory

to d

evel

op p

roce

dure

s to

faci

litat

e th

e id

entif

icat

ion

offu

nds

and

finan

cial

ass

ets

that

may

be

subj

ect t

o th

e m

easu

res

cont

aine

d in

this

res

olut

ion

and

the

free

zing

of s

uch

asse

ts;

Furt

her

urge

s all

Stat

es to

take

imm

edia

te s

teps

to e

nfor

ce, s

tren

gthe

n or

ena

ct le

gisl

atio

n m

akin

g it

a cr

imin

al o

ffenc

e un

der

dom

estic

law

for

thei

r na

tions

or

othe

r in

divi

dual

s op

erat

ing

on th

eir

terr

itory

to v

iola

te th

e m

easu

res

impo

sed

by th

e C

ounc

ilag

ains

t [ta

rget

], w

here

they

hav

e no

t alr

eady

don

e so

, and

to in

form

the

Com

mitt

ee o

f the

ado

ptio

n of

suc

h m

easu

res,

and

invi

tes

Stat

es to

rep

ort t

he r

esul

ts o

f all

rela

ted

inve

stig

atio

ns o

r pr

osec

utio

ns to

the

Com

mitt

ee;

10. N

onlia

bilit

y fo

r C

ompl

ianc

e w

ith S

anct

ions

Cal

ls u

pon

all S

tate

s an

d in

tern

atio

nal o

rgan

izat

ions

to im

plem

ent t

he p

rovi

sion

s of

this

res

olut

ion,

not

with

stan

ding

the

exis

tenc

e of

any

righ

ts o

r ob

ligat

ions

con

ferr

ed o

r im

pose

d by

any

inte

rnat

iona

l agr

eem

ent o

r an

y co

ntra

ct e

nter

ed in

to o

r an

y lic

ense

or

perm

itgr

ante

d be

fore

the

date

of a

dopt

ion

of [

the

com

ing

into

effe

ct o

f the

mea

sure

s co

ntai

ned

in]

this

res

olut

ion;

Dec

ides

that

all

Stat

es s

hall

ensu

re th

at n

o cl

aim

sha

ll lie

at t

he in

stan

ce o

f any

per

son

refe

rred

to in

par

agra

ph 2

abo

ve, o

r of a

nype

rson

cla

imin

g th

roug

h or

for

the

bene

fit o

f any

suc

h pe

rson

or

body

, in

conn

ectio

n w

ith a

ny c

ontr

act o

r ot

her

tran

sact

ion

perf

orm

ed o

r no

t in

good

faith

pur

suan

t to

the

mea

sure

s ta

ken

by th

e Se

curi

ty C

ounc

il in

this

res

olut

ion;

60

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

11. S

unse

t Cla

use

Opt

ion

1

Expr

esse

s its

read

ines

s to

revi

ew a

ll th

e m

easu

res i

n th

e pr

esen

t res

olut

ion

with

a v

iew

to li

fting

them

if, a

fter t

he p

rovi

sion

s set

fort

h in

par

agra

ph 2

abo

ve h

ave

com

e in

to fo

rce,

the

Secr

etar

y-G

ener

al r

epor

ts to

the

Cou

ncil

that

[ta

rget

] ha

s fu

lfille

d th

eob

ligat

ion(

s) s

et o

ut in

par

agra

ph 1

abo

ve;

Opt

ion

2

Dec

ides

to te

rmin

ate

the

mea

sure

s im

pose

d by

par

agra

ph 2

onc

e th

e Se

cret

ary-

Gen

eral

repo

rts t

o th

e Se

curi

ty C

ounc

il th

at [t

arge

t]ha

s fu

lfille

d th

e ob

ligat

ion(

s) s

et o

ut in

par

agra

ph 1

abo

ve;

Opt

ion

3

Dec

ides

that

the

mea

sure

s im

pose

d by

par

agra

ph 2

are

est

ablis

hed

for

[tim

e pe

riod

] an

d th

at, a

t the

end

of t

hat p

erio

d, th

e C

ounc

ilw

ill d

ecid

e w

heth

er th

e [t

arge

t] h

as c

ompl

ied

with

the

dem

ands

in p

arag

raph

1, a

nd, a

ccor

ding

ly, w

heth

er to

ext

end

thes

e m

easu

res

for

a fu

rthe

r pe

riod

with

the

sam

e co

nditi

ons;

AN

NE

X O

N D

EFI

NIT

ION

S

Furt

her d

ecid

es th

at fo

r the

pur

pose

s of t

his r

esol

utio

n, th

e te

rm “

[xx]

” sh

all b

e de

fined

to m

ean

[…] [

see

Ann

ex B

]

61

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

62

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

Fund

s an

dot

her

finan

cial

reso

urce

s

AN

NE

X B

: Cri

tical

Def

initi

ons

“Fun

ds a

nd fi

nanc

ial

reso

urce

s” is

a s

ubse

t of

the

Inte

rlake

n II

defin

ition

of a

sset

s,be

low

, and

the

term

used

by

the

Uni

ted

Nat

ions

and

Eur

opea

nU

nion

to im

pose

targ

eted

fina

ncia

lsa

nctio

ns. T

o de

fine

asse

ts m

ore

broa

dly

isto

mov

e to

war

ds a

mor

eco

mpr

ehen

sive

sanc

tion.

The

EC re

gula

tions

mirr

or th

ose

deve

lope

dat

Inte

rlake

n II

, but

add

two

elem

ents

(sho

wn

inbo

ld) i

n or

der t

o be

mor

e co

mpl

ete.

The

Fund

s sh

all m

ean:

fina

ncia

l ass

ets

and

econ

omic

ben

efits

of a

ny k

ind,

incl

udin

g, b

ut n

ot n

eces

saril

ylim

ited

to,

•C

ash

•C

hequ

es, c

laim

s on

mon

ey,

draf

ts, m

oney

ord

ers

and

othe

rpa

ymen

t ins

trum

ents

•D

epos

its w

ith fi

nanc

ial

inst

itutio

ns o

r oth

er e

ntiti

es,

bala

nces

on

acco

unts

, deb

ts a

ndde

bt o

blig

atio

ns•

Publ

icly

and

priv

atel

y tra

ded

secu

ritie

s an

d de

bt in

stru

men

ts,

incl

udin

g st

ocks

and

sha

res,

certi

ficat

es re

pres

entin

gse

curit

ies,

bond

s, no

tes,

war

rant

s, de

bent

ures

,de

rivat

ives

con

tract

s

Fina

ncia

l ass

ets

and

econ

omic

ben

efits

of a

nyki

nd, i

nclu

ding

(with

out l

imita

tion)

:•

Cas

h•

Che

ques

, dra

fts, m

oney

ord

ers

and

othe

rpa

ymen

t ins

trum

ents

•D

epos

its w

ith fi

nanc

ial i

nstit

utio

ns o

r oth

eren

titie

s, ba

lanc

es o

n ac

coun

ts, d

ebts

and

deb

tob

ligat

ions

•Pu

blic

ly a

nd p

rivat

ely

trade

d se

curit

ies

and

debt

inst

rum

ents

, inc

ludi

ng s

tock

s an

d sh

ares

,ce

rtific

ates

repr

esen

ting

secu

ritie

s, bo

nds,

note

s, w

arra

nts,

debe

ntur

es, d

eriv

ativ

esco

ntra

cts

•In

tere

st, d

ivid

ends

or o

ther

inco

me

on o

rva

lue

accr

uing

from

or g

ener

ated

by

asse

ts•

Cre

dit,

right

s of

set

-off

, gua

rant

ees,

perf

orm

ance

bon

ds o

r oth

er fi

nanc

ial

com

mitm

ents

•Le

tters

of c

redi

t, bi

lls o

f lad

ing,

bill

s of

sal

e•

Doc

umen

ts e

vide

ncin

g an

inte

rest

in fu

nds

orfin

anci

al re

sour

ces

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

63

Ass

ets

of w

hich

any

aut

horit

y, e

ntity

or p

erso

nre

ferr

ed to

in p

arag

raph

1 is

the

lega

l or b

enef

icia

low

ner,

is e

ntitl

ed to

or h

as d

e fa

cto

cont

rol o

ver.

In d

eter

min

ing

owne

rshi

p or

con

trol,

a gr

eate

rth

an 5

0% in

tere

st in

the

asse

t on

the

part

of a

nyau

thor

ity, e

ntity

or p

erso

n re

ferr

ed to

in p

arag

raph

•In

tere

st, d

ivid

ends

or o

ther

inco

me

on o

r val

ue a

ccru

ing

from

or g

ener

ated

by

asse

ts•

Cre

dit,

right

s of

set

-off

,gu

aran

tees

, per

form

ance

bon

dsor

oth

er fi

nanc

ial c

omm

itmen

ts•

Lette

rs o

f cre

dit,

bills

of l

adin

g,bi

lls o

f sal

e•

Doc

umen

ts e

vide

ncin

g an

inte

rest

in fu

nds

or fi

nanc

ial

reso

urce

s, an

d an

y ot

her

inst

rum

ent o

f exp

ort-

finan

cing

.

seco

nd o

f the

sead

ditio

nal t

erm

s—“a

ndan

y ot

her i

nstru

men

t of

expo

rt-fin

anci

ng”—

mak

es it

cle

ar to

Sta

tes

that

targ

eted

fina

ncia

lsa

nctio

ns c

ould

hav

eim

plic

atio

ns fo

r tra

de.

Ow

ned

orco

ntro

lled,

dire

ctly

or

indi

rect

ly

Ow

ning

a c

ompa

ny, u

nder

taki

ng,

inst

itutio

n or

ent

ity m

eans

: bei

ng in

poss

essi

on o

f 50%

or m

ore

of th

epr

oprie

tary

righ

ts o

f a c

ompa

ny,

unde

rtaki

ng, i

nstit

utio

n or

ent

ity o

rha

ving

a m

ajor

ity in

tere

st th

erei

n;

Com

men

ts re

ceiv

edfo

llow

ing

the

23 J

uly

Wor

ksho

p ac

know

ledg

eth

e ad

vant

age

of h

avin

gth

e te

rm d

efin

ed,

parti

cula

rly w

hen

the

targ

et’s

sha

reho

ldin

g in

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

64

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

1, o

r in

an in

term

edia

te p

erso

n or

ent

ity h

avin

gow

ners

hip

of c

ontro

l of t

he a

sset

, will

be

dete

rmin

ativ

e.

An

inte

rest

of 5

0% o

r les

s in

the

asse

t, (o

r in

anin

term

edia

te p

erso

n or

ent

ity h

avin

g ow

ners

hip

orco

ntro

l of t

he a

sset

) may

con

stitu

te o

wne

rshi

p or

cont

rol,

depe

ndin

g on

the

fact

ual c

ircum

stan

ces,

and

in p

artic

ular

:•

the

repr

esen

tatio

n of

any

aut

horit

y, e

ntity

or

pers

on re

ferr

ed to

in p

arag

raph

1 in

the

man

agem

ent o

f the

ass

et;

•th

e ex

tent

of t

he in

tere

st o

f any

aut

horit

y,en

tity

or p

erso

n re

ferr

ed to

in p

arag

raph

1 in

the

asse

t;•

the

natu

re a

nd id

entit

y of

inte

rest

s ot

her t

han

thos

e of

any

aut

horit

y, e

ntity

or p

erso

nre

ferr

ed to

in p

arag

raph

1;

•th

e sp

read

and

div

ersi

ty o

f int

eres

ts in

the

asse

t;

Con

trol

ling

a co

mpa

ny,

unde

rtak

ing,

inst

itutio

n or

ent

itym

eans

any

of:

(a)

havi

ng th

e rig

ht to

app

oint

or

rem

ove

a m

ajor

ity o

f the

mem

bers

of th

e ad

min

istra

tive,

man

agem

ent

or s

uper

viso

ry b

ody

of a

com

pany

,un

derta

king

, ins

titut

ion

or e

ntity

;(b

)ha

ving

app

oint

ed s

olel

y as

are

sult

of th

e ex

erci

se o

f one

’s v

otin

grig

hts

a m

ajor

ity o

f the

mem

bers

of

the

adm

inis

trativ

e, m

anag

emen

t or

supe

rvis

ory

bodi

es o

f a c

ompa

ny,

unde

rtaki

ng, i

nstit

utio

n or

ent

ityw

ho h

ave

held

off

ice

durin

g th

epr

esen

t and

pre

viou

s fin

anci

al y

ear;

(c)

cont

rolli

ng a

lone

, pur

suan

t to

an a

gree

men

t with

oth

ersh

areh

olde

rs in

or m

embe

rs o

f aco

mpa

ny, u

nder

taki

ng, i

nstit

utio

n or

entit

y, a

maj

ority

of s

hare

hold

ers’

or

the

entit

y is

less

than

50%

. Whi

le th

eIn

terla

ken

II d

efin

ition

calls

atte

ntio

n to

fact

ors

that

may

con

stitu

teow

ners

hip/

cont

rol i

n su

chsi

tuat

ions

, the

EC

goe

sfu

rther

by

actu

ally

oper

atio

naliz

ing

the

term

“con

trol.”

Hen

ce, i

f afo

rmal

def

initi

on o

f thi

ste

rm is

to b

e in

clud

ed in

the

reso

lutio

n, th

e EC

defin

ition

sho

uld

certa

inly

be

cons

ider

ed.

65

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

•th

e ab

ility

of a

ny a

utho

rity,

ent

ity o

r per

son

refe

rred

to in

par

agra

ph 1

to in

fluen

cede

cisi

on-m

akin

g in

rela

tion

to th

e as

set.

Thes

e cr

iteria

are

not

exh

aust

ive

or re

stric

tive,

and

any

dete

rmin

atio

n as

to o

wne

rshi

p or

con

trol o

fas

sets

sho

uld

be c

onsi

sten

t with

the

obje

ctiv

e of

the

asse

ts fr

eeze

con

cern

ing

[the

Targ

et S

tate

] and

the

auth

oriti

es, e

ntiti

es a

nd p

erso

ns re

ferr

ed to

inpa

ragr

aph

1.

mem

bers

’ vot

ing

right

s in

that

com

pany

, und

erta

king

, ins

titut

ion

oren

tity;

(d)

havi

ng th

e rig

ht to

exe

rcis

e a

dom

inan

t inf

luen

ce o

ver a

com

pany

,un

derta

king

, ins

titut

ion

or e

ntity

,pu

rsua

nt to

an

agre

emen

t ent

ered

into

with

that

com

pany

, und

erta

king

,in

stitu

tion

or e

ntity

, or t

o a

prov

isio

nin

its

Mem

oran

dum

or A

rticl

es o

fA

ssoc

iatio

n, w

here

the

law

gove

rnin

g th

at c

ompa

ny,

unde

rtaki

ng, i

nstit

utio

n or

ent

itype

rmits

its

bein

g su

bjec

t to

such

agre

emen

t or p

rovi

sion

;(e

)ha

ving

the

pow

er to

exe

rcis

eth

e rig

ht to

exe

rcis

e a

dom

inan

tin

fluen

ce re

ferr

ed to

at (

d),w

ithou

tbe

ing

the

hold

er o

f tha

t rig

ht;

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

66

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

(f)

havi

ng th

e rig

ht to

use

all

orpa

rt of

the

asse

ts o

f a c

ompa

ny,

unde

rtaki

ng, i

nstit

utio

n or

ent

ity;

(g)

man

agin

g a

com

pany

,un

derta

king

, ins

titut

ion

or e

ntity

on

a un

ified

bas

is, w

hile

pub

lishi

ngco

nsol

idat

ed a

ccou

nts;

(h)

shar

ing

join

tly a

nd s

ever

ally

the

finan

cial

liab

ilitie

s of

a c

ompa

ny,

unde

rtaki

ng, i

nstit

utio

n or

ent

ity, o

rgu

aran

teei

ng th

em.

AS

USE

D IN

:•

Cou

ncil

Reg

ulat

ion

1294

/199

9ov

er th

e is

sue

of K

osov

o;A

rticl

e 1,

par

as. 5

and

6.

67

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

Free

zing

of f

unds

mea

ns: p

reve

ntin

gan

y m

ove,

tran

sfer

, alte

ratio

n, u

se o

for

dea

ling

with

fund

s in

any

way

that

wou

ld re

sult

in a

ny c

hang

e in

thei

r vol

ume,

am

ount

, loc

atio

n,ow

ners

hip,

pos

sess

ion,

cha

ract

er,

dest

inat

ion

or o

ther

cha

nge

that

wou

ld m

ake

poss

ible

the

use

of th

efu

nds,

incl

udin

g po

rtfol

iom

anag

emen

t.

AS U

SED

IN:

•C

ounc

il R

egul

atio

n 12

94/1

999

over

the

issu

e of

Kos

ovo;

Arti

cle

1, p

ara.

4.

Free

zeTo

free

ze [f

unds

and

fina

ncia

l res

ourc

es] m

eans

that

[the

se] a

sset

s m

ay n

ot b

e m

oved

, tra

nsfe

rred

,al

tere

d, u

sed

or d

ealt

with

in a

ny w

ay th

at w

ould

resu

lt in

any

cha

nge

in th

eir v

olum

e, a

mou

nt,

loca

tion,

ow

ners

hip,

pos

sess

ion

or c

hara

cter

;in

clud

ing

portf

olio

man

agem

ent,

exce

pt th

at a

nyin

tere

st o

r in

com

e ar

isin

g on

any

cap

ital

auto

mat

ical

ly r

epay

able

on

mat

urity

of a

ny a

sset

shal

l be

paid

into

and

hel

d in

a fr

ozen

acc

ount

.

Asi

de fr

om th

e gr

amm

ar,

two

diff

eren

ces

exis

tbe

twee

n th

e de

finiti

ons.

Firs

t, th

e bo

lded

ele

men

tin

the

EC d

efin

ition

is a

nad

ditio

n to

the

Inte

rlake

nII

def

initi

on. S

econ

d, th

eita

liciz

ed p

hras

e in

the

Inte

rlake

n de

finiti

on,

“exc

ept t

hat a

ny in

tere

stor

inco

me

aris

ing

on a

nyca

pita

l aut

omat

ical

lyre

paya

ble

on m

atur

ity o

fan

y as

set s

hall

be p

aid

into

and

hel

d in

a fr

ozen

acco

unt,”

is d

elet

ed fr

omth

e EC

def

initi

on a

ndin

clud

ed a

s an

exem

ptio

n/ex

cept

ion

toen

sure

cla

rity.

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

68

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

Any

act

ivity

, dis

cret

iona

ry o

r oth

erw

ise,

cond

ucte

d as

prin

cipa

l or a

gent

, inv

olvi

ng th

epr

ovis

ion,

cus

tody

, man

agem

ent,

utili

zatio

n,tra

nsfe

r, di

spos

al, m

ovem

ent o

r exc

hang

e of

fund

sor

oth

er fi

nanc

ial r

esou

rces

and

adv

ice

rela

ting

ther

eto,

incl

udin

g (w

ithou

t lim

itatio

n):

•B

anki

ng S

ervi

ces,

incl

udin

g th

e ac

cept

ance

of

depo

sits

and

mov

emen

t of b

alan

ces

onac

coun

ts, l

endi

ng, f

inan

cial

leas

ing,

the

exte

nsio

n of

cre

dit,

mon

ey tr

ansm

issi

ons,

purc

hasi

ng o

r sel

ling

fore

ign

exch

ange

,is

suin

g an

d ad

min

iste

ring

mea

ns o

f pay

men

t,gu

aran

tees

and

com

mitm

ents

•In

sura

nce

and

insu

ranc

e-re

late

d se

rvic

es,

incl

udin

g re

insu

ranc

e an

d re

troce

ssio

n,in

sura

nce

inte

rmed

iatio

n su

ch a

s br

oker

age

and

agen

cy, a

nd s

ervi

ces

auxi

liary

toin

sura

nce

such

as

cons

ulta

ncy,

act

uaria

l, ris

kas

sess

men

t and

cla

ims s

ettle

men

t ser

vice

s•

Trus

t cre

atio

n an

d m

anag

emen

t•

Inve

stm

ent s

ervi

ces,

incl

udin

g tra

ding

for

own

acco

unt o

r on

acco

unt o

f cus

tom

ers,

The

Euro

pean

Uni

on d

oes

not

dire

ctly

ban

“fin

anci

al se

rvic

es”

orgi

ve a

def

initi

on fo

r suc

h a

term

.H

owev

er, s

uch

activ

ities

are

effe

ctiv

ely

bann

ed b

y th

e R

egul

atio

nby

pro

hibi

ting

activ

ities

rela

ted

to o

rde

sign

ed to

circ

umve

nt th

e m

easu

res

impo

sed

in o

ther

par

agra

phs:

“The

par

ticip

atio

n, k

now

ingl

y an

din

tent

iona

lly, i

n re

late

d ac

tiviti

es, t

heob

ject

or e

ffec

t of w

hich

is, d

irect

lyor

indi

rect

ly, t

o ci

rcum

vent

the

[san

ctio

ns] s

hall

be p

rohi

bite

d;”

Arti

cle

5, p

ara.

1.

AS U

SED

IN:

•C

ounc

il R

egul

atio

n 12

94/1

999

over

the

issu

e of

Kos

ovo;

Arti

cle

5.

The

Inte

rlake

nde

finiti

ons

adop

ted

for

the

purp

oses

of

proh

ibiti

ng th

e us

e or

crea

tion

of “

fund

s an

dfin

anci

al re

sour

ces”

may

rend

er th

e ba

n on

the

prov

isio

n of

“fin

anci

al se

rvic

es”

tota

rget

ed p

erso

nsre

dund

ant.

Com

men

tsre

ceiv

ed s

ubse

quen

t to

the

23 J

uly

Wor

ksho

pre

veal

ed d

isag

reem

ent

on th

is p

oint

.Sp

ecifi

cally

, the

re w

asan

unr

esol

ved

ques

tion

of h

ow a

ban

on

“fin

anci

al se

rvic

es”

can

be o

pera

tiona

lized

beyo

nd th

e m

easu

res

requ

ired

to g

ive

effe

ct

Fina

ncia

lse

rvic

es

69

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

whe

ther

on

an e

xcha

nge,

in a

n ov

er-th

e-co

unte

r mar

ket o

r oth

erw

ise, i

n m

oney

mar

ket

instr

umen

ts (in

clud

ing

cheq

ues,

bills

,ce

rtific

ates

of d

epos

it), f

orei

gn e

xcha

nge,

trans

fera

ble

secu

ritie

s, ot

her n

egot

iabl

ein

strum

ents

and

finan

cial

ass

ets s

uch

asbu

llion

, der

ivat

ives

pro

duct

s (in

clud

ing

finan

cial

and

com

mod

ities

futu

res a

ndop

tions

), ex

chan

ge ra

tes a

nd in

tere

st ra

tein

strum

ents

(incl

udin

g pr

oduc

ts su

ch a

s sw

aps

and

forw

ard

rate

agr

eem

ents)

•Pa

rtici

patio

n in

issu

es o

f all

kind

s of s

ecur

ities

,in

clud

ing

unde

rwrit

ing

and

plac

emen

t as a

gent

and

prov

ision

of s

ervi

ces r

elat

ed to

such

issu

es•

Mon

ey b

roki

ng•

Settl

emen

t and

cle

arin

g se

rvic

es fo

r fin

anci

alas

sets,

incl

udin

g se

curit

ies,

deriv

ativ

espr

oduc

ts a

nd o

ther

neg

otia

ble

inst

rum

ents

•Pr

ovis

ion

and

trans

fer o

f fin

anci

alin

form

atio

n, a

nd fi

nanc

ial d

ata

proc

essi

ng•

Ass

et m

anag

emen

t, su

ch a

s ca

sh o

r por

tfolio

man

agem

ent,

all f

orm

s of

col

lect

ive

to th

e fr

eeze

on

“fun

dsan

d fin

anci

alre

sour

ces.”

In o

rder

tobe

cle

ar th

at th

epr

ovis

ion

of “

finan

cial

serv

ices

” to

targ

eted

pers

ons

is to

be

proh

ibite

d, g

iven

the

abse

nce

of c

oncl

usiv

eex

pert

opin

ion

and

the

prob

abili

ty th

atde

finiti

ons

may

not

be

incl

uded

in fu

ture

reso

lutio

ns, t

he d

raft

text

of t

his

docu

men

tfe

atur

es a

sepa

rate

para

grap

h to

impl

emen

tth

is b

an.

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

70

CR

ITIC

AL

PHR

ASE

INT

ER

LA

KE

N II

DE

FIN

ITIO

NE

C R

EG

UL

AT

ION

DE

FIN

ITIO

NC

OM

ME

NT

inve

stm

ent m

anag

emen

t, pe

nsio

n fu

ndm

anag

emen

t, cu

stod

ial,

depo

sit a

nd tr

ust

serv

ices

•A

dvis

ory,

inte

rmed

iatio

n an

d ot

her a

uxili

ary

finan

cial

ser

vice

s, in

clud

ing

audi

ting,

inve

stm

ent a

nd p

ortfo

lio re

sear

ch a

nd a

dvic

e

As

note

d ab

ove,

the

use

of th

is b

road

def

initi

onw

ould

impl

y a

com

preh

ensi

vesa

nctio

n. F

eedb

ack

rece

ived

sub

sequ

ent t

oth

e 23

Jul

y W

orks

hop

ques

tione

d th

eap

prop

riate

ness

of

incl

udin

g so

me

of th

ese

term

s (s

uch

as“c

ontra

ct”)

in th

ede

finiti

on o

f ass

ets,

with

out s

peci

fyin

g th

eir

mea

ning

.

Ass

ets

Any

pro

perty

or p

rope

rty in

tere

st, t

angi

ble

orin

tang

ible

, pre

sent

, fut

ure,

or c

ontin

gent

, and

may

incl

ude

(with

out l

imita

tion)

:•

Any

fund

s or

fina

ncia

l res

ourc

es (a

s de

fined

belo

w)

•R

eal p

rope

rty, i

nclu

ding

land

and

fixt

ures

tola

nd•

Mov

eabl

e pr

oper

ty, i

nclu

ding

goo

ds a

ndch

atte

ls•

Bul

lion,

pre

ciou

s m

etal

s an

d st

ones

•Pa

tent

s, tra

de m

arks

and

cop

yrig

hts

•C

ontra

cts,

licen

ces,

insu

ranc

e po

licie

s•

Goo

dwill

•Ju

dgem

ents

and

cla

ims

havi

ng m

onet

ary

valu

e•

Doc

umen

ts e

vide

ncin

g an

inte

rest

in a

sset

s

71

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

Alth

ough

it is

mos

t lik

ely

that

the

Secu

rity

Cou

ncil

will

dec

ide

to s

tate

exe

mpt

ions

or e

xcep

tions

onl

y in

gen

eral

term

s, fu

ture

circ

umst

ance

s m

ay re

quire

the

Cou

ncil

to d

esig

nate

the

adm

inis

tratio

n of

spe

cific

tran

sact

ions

to e

ither

the

Com

mitt

ee o

r Sta

tes.

The

tabl

e be

low

sum

mar

izes

and

giv

es c

omm

enta

ry o

n po

ssib

le it

ems

for i

nclu

sion

in a

spe

cific

list

, as

adap

ted

from

that

dev

elop

ed b

yW

orki

ng G

roup

3 a

t Int

erla

ken

II. S

ubpa

ragr

aph

(p) h

as b

een

adde

d su

bseq

uent

to fe

edba

ck re

ceiv

ed fo

llow

ing

the

23 J

uly

Wor

ksho

p.R

egar

dles

s of

the

sour

ce o

f the

item

s be

low

, the

list

is in

tend

ed a

s a

men

u of

opt

ions

for c

onsi

dera

tion

by th

e dr

afte

rs o

f fut

ure

reso

lutio

ns.

For a

list

of s

peci

fic e

xem

ptio

ns, a

dmin

iste

red

by S

tate

s, th

e fo

llow

ing

open

ing

para

grap

h sh

ould

be

used

:

Dec

ides

that

all

Stat

es s

hall

ensu

re th

at th

e pr

ohib

ition

s in

par

agra

ph 2

abo

ve s

hall

not a

pply

to [

paym

ents

from

the

orga

niza

tions

and

age

ncie

s lis

ted

in A

nnex

[xx

] to

this

res

olut

ion

and/

or]

paym

ents

from

acc

ount

s w

ith b

anks

or

othe

rau

thor

ized

fina

ncia

l ins

titut

ions

for

the

follo

win

g pu

rpos

es:

For a

list

of s

peci

fic e

xcep

tions

, adm

inis

tere

d by

the

Com

mitt

ee, t

he fo

llow

ing

open

ing

para

grap

h sh

ould

be

used

(and

a C

orre

spon

ding

refe

renc

e m

ade

in th

e Sa

nctio

ns C

omm

ittee

s se

ctio

n (5

)):

Dec

ides

that

the

Com

mitt

ee e

stab

lishe

d by

par

agra

ph 5

sha

ll ha

ve th

e au

thor

ity to

gra

nt e

xcep

tions

to th

e pr

ohib

ition

s re

ferr

edto

in p

arag

raph

2 a

bove

on

a ca

se-b

y-ca

se b

asis

und

er a

no-

obje

ctio

n pr

oced

ure,

on

the

grou

nds

of:

AN

NE

X C

: Spe

cific

Exe

mpt

ions

or

Exc

eptio

ns to

Tar

gete

d Fi

nanc

ial S

anct

ions

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

72

(a)

paym

ents

for

med

icin

es, p

harm

aceu

tical

s, m

edic

aleq

uipm

ent a

nd s

uppl

ies,

unle

ss th

e Se

curi

ty C

ounc

ilha

s de

cide

d ot

herw

ise;

(b)

paym

ents

for

food

stuf

fs a

nd b

asic

agr

icul

tura

leq

uipm

ent,

unle

ss th

e Se

curi

ty C

ounc

il ha

s de

cide

dot

herw

ise;

(c)

paym

ents

for

educ

atio

nal i

tem

s, ne

ws

mat

eria

ls a

ndite

ms

of a

rel

igio

us o

r cu

ltura

l nat

ure,

unl

ess

the

Secu

rity

Cou

ncil

has d

ecid

ed o

ther

wis

e;

(d)

paym

ents

for

book

s an

d pu

blic

atio

ns c

onsi

sten

t with

the

goal

s an

d pu

rpos

es o

f the

Uni

ted

Nat

ions

, unl

ess

the

Secu

rity

Cou

ncil

has d

ecid

ed o

ther

wis

e;

INT

ER

LA

KE

N D

RA

FT T

EX

TC

OM

ME

NT

Para

grap

hs (a

)-(e

) are

the

maj

or h

uman

itaria

n ex

empt

ions

dra

fted

atIn

terla

ken,

con

sist

ent w

ith th

e N

ote

by th

e Pr

esid

ent o

f the

Sec

urity

Cou

ncil:

Wor

k of

the

Sanc

tions

Com

mitt

ee (S

/199

9/92

, 29

Janu

ary

1999

). Th

e In

terla

ken

repo

rt (p

. 83)

not

es th

at th

e ph

rase

“un

less

the

Secu

rity

Cou

ncil

has

deci

ded

othe

rwis

e…”

is in

tend

ed to

den

ote

(alth

ough

the

phra

se is

tech

nica

lly s

uper

fluou

s) th

at s

uch

paym

ents

are

auto

mat

ical

ly a

utho

rized

unl

ess

the

Secu

rity

Cou

ncil

deci

des

to m

ake

them

sub

ject

to s

ome

spec

ific

auth

oriz

atio

n pr

oced

ure;

for e

xam

ple,

by m

akin

g th

em s

ubje

ct to

San

ctio

ns C

omm

ittee

app

rova

l.”

This

exe

mpt

ion

is in

tend

ed to

allo

w p

aym

ents

for c

ultu

ral i

tem

s. Th

eIn

terla

ken

Wor

king

Gro

up n

oted

that

this

wou

ld n

eed

to b

e m

onito

red

clos

ely

to e

nsur

e th

at s

uch

an e

xem

ptio

n is

not

exp

loite

d as

alo

opho

le. T

he W

orki

ng s

ugge

sted

that

UN

ESC

O m

ay b

e co

nsul

ted

rega

rdin

g w

hat k

inds

of i

tem

s w

ould

be

appr

opria

te to

be

incl

uded

unde

r thi

s ex

empt

ion.

73

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

INT

ER

LA

KE

N D

RA

FT T

EX

TC

OM

ME

NT

(e)

paym

ents

for

othe

r go

ods

inte

nded

str

ictly

for

hum

anita

rian

nee

ds a

nd a

utho

rise

d un

der

the

auth

ority

of t

he S

ecur

ity C

ounc

il (e

.g. s

oap,

dete

rgen

ts, c

loth

ing,

foot

wea

r, et

c);

(f)pa

ymen

ts o

f deb

ts o

wed

to c

redi

tors

oth

er th

an th

ose

in [

stat

e X]

, or

who

are

an

auth

ority

, ent

ity o

rpe

rson

ref

erre

d to

in p

arag

raph

[xx

], w

hich

deb

tsar

e du

e or

bec

ome

due

in re

spec

t of c

ontr

actu

alob

ligat

ions

fulfi

lled

by th

e cr

edito

r pr

ior

to th

e en

try

into

forc

e of

this

res

olut

ion;

(g)

paym

ents

due

in re

spec

t of t

axes

and

util

ities

, to

part

ies

othe

r th

an th

ose

in [

stat

e X]

;

(h)

paym

ents

due

in re

spec

t of r

ents

, pro

pert

ym

aint

enan

ce a

nd e

mpl

oyee

cos

ts, t

o pa

rtie

s ot

her

than

thos

e in

[st

ate

X] o

r w

ho a

re a

n au

thor

ity,

entit

y or

per

son

refe

rred

to in

par

agra

ph [x

x];

The

Inte

rlake

n W

orki

ng G

roup

felt

that

faili

ng to

incl

ude

this

par

agra

ph“w

ould

pen

aliz

e na

tiona

ls o

f the

san

ctio

ning

(as

oppo

sed

to ta

rget

)St

ates

, who

are

cre

dito

rs o

f the

targ

et; b

ut it

was

reco

gniz

ed th

at th

eex

empt

ion

does

giv

e ris

e to

a c

erta

in in

equa

lity

of tr

eatm

ent,

the

avai

labi

lity

of a

sset

s to

mee

t deb

ts b

eing

une

qual

bet

wee

n St

ates

. It a

lso

mea

ns th

at fr

ozen

ass

ets

that

mig

ht o

ther

wis

e ha

ve b

een

used

for

hum

anita

rian

purp

oses

may

be

exha

uste

d by

thei

r use

for s

ettle

men

t of

debt

s” (P

ublis

hed

repo

rt of

Inte

rlake

n II

, p. 8

4).

Subp

arag

raph

s (g

) and

(h) r

efer

to in

tere

sts,

incl

udin

g pr

oper

ty in

tere

sts,

of ta

rget

ed p

erso

ns o

utsi

de o

f the

ir co

untry

of n

atio

nalit

y or

hab

itual

resi

denc

e. T

he in

tent

her

e is

to p

reve

nt th

e si

tuat

ion

that

ent

ities

exi

stin

gin

san

ctio

ning

Sta

tes

are

forc

ed in

to c

losu

re fo

r fai

lure

to m

eet l

ocal

tax

oblig

atio

ns.

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

74

INT

ER

LA

KE

N D

RA

FT T

EX

TC

OM

ME

NT

(i)pa

ymen

ts fo

r au

thor

ised

goo

ds o

r no

npro

hibi

ted

serv

ices

;

(j)pa

ymen

ts b

y na

tura

l per

sons

for

nonp

rohi

bite

dpe

rson

al u

se;

(k)

paym

ent o

f due

s to

the

Uni

ted

Nat

ions

and

oth

erin

tern

atio

nal o

rgan

izat

ions

;

(l)pa

ymen

ts r

elat

ed to

the

cond

uct o

f dip

lom

atic

and

cons

ular

rel

atio

ns in

acc

orda

nce

with

inte

rnat

iona

lla

w;

(m)

mai

nten

ance

of a

ccou

nts

with

ban

ks o

r ot

her

auth

oriz

ed fi

nanc

ial i

nstit

utio

ns, p

rovi

ded

such

acco

unts

are

froz

en;

Incl

usio

n of

this

item

impl

ies

that

a b

road

er tr

ade

sanc

tion

is in

pla

ceag

ains

t the

Sta

te o

f nat

iona

lity

or h

abitu

al re

side

nce

of th

e ta

rget

edpe

rson

s. It

is o

nly

appr

opria

te to

use

this

exe

mpt

ion

whe

re g

oods

and

serv

ices

are

pro

hibi

ted,

bey

ond

a pu

rely

fina

ncia

l san

ctio

n on

targ

eted

pers

ons.

This

sub

para

grap

h is

inte

nded

to e

nabl

e na

tura

l per

sons

targ

eted

by

sanc

tions

to a

cces

s th

eir o

wn

fund

s fo

r liv

ing

expe

nses

.

This

sub

para

grap

h ha

s a

sim

ilar r

atio

nale

to th

at o

f sub

para

grap

h (f

) and

is d

esig

ned

to e

nabl

e a

targ

et s

tate

to h

onor

its

inte

rnat

iona

l obl

igat

ions

.

This

sub

para

grap

h is

des

igne

d to

ena

ble

a ta

rget

sta

te to

con

tinue

tofu

nd th

e ne

cess

ary

oper

atio

ns o

f its

dip

lom

atic

and

con

sula

r mis

sion

sab

road

.

Rec

all t

he In

terla

ken

defin

ition

of “

free

ze.”

The

se s

ubpa

ragr

aphs

oug

htto

be

incl

uded

to p

erm

it th

e m

aint

enan

ce o

f ban

k ac

coun

ts re

gard

less

of

whe

ther

the

ban

on fi

nanc

ial s

ervi

ces

is im

plem

ente

d th

roug

h a

sepa

rate

para

grap

h in

the

reso

lutio

n. “

Subp

arag

raph

(m) i

s de

sign

ed to

ena

ble

the

cont

inue

d op

erat

ion

of o

ther

wis

e fr

ozen

ban

k ac

coun

ts, t

hat i

s, th

e

75

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

INT

ER

LA

KE

N D

RA

FT T

EX

TC

OM

ME

NT

(n)

the

serv

ices

of a

udito

rs a

s nec

essa

ry to

com

ply

with

the

requ

irem

ents

of l

aw;

(o)

insu

ranc

e of

exi

stin

g as

sets

out

side

sta

te X

and

, to

the

exte

nt r

equi

red

by la

w, o

n na

tura

l per

sons

;

(p)

paym

ents

rel

ated

to te

leco

mm

unic

atio

ns, p

osta

lse

rvic

es a

nd le

gal s

ervi

ces c

onsi

sten

t with

this

reso

lutio

n;

mai

nten

ance

of t

he a

ccou

nts

and

any

non-

proh

ibite

d ac

tivity

in re

latio

nto

the

acco

unts

. Sub

para

grap

h (n

)…se

eks

to e

nsur

e th

at ta

rget

s do

not

cont

rave

ne re

gula

tions

or o

ther

man

dato

ry n

atio

nal l

aws

by v

irtue

of

sanc

tions

alo

ne. S

ubpa

ragr

aph

(o) i

s de

sign

ed to

per

mit

the

acqu

isiti

onor

mai

nten

ance

of i

nsur

ance

on

froz

en a

sset

s lo

cate

d ou

tsid

e th

e ta

rget

stat

e, a

nd p

aym

ents

of e

mpl

oyee

liab

ility

and

sim

ilar t

ypes

of m

anda

tory

insu

ranc

e de

sign

ed to

pro

tect

inte

rest

s in

san

ctio

ning

, rat

her t

han

targ

et,

stat

es”

(Pub

lishe

d re

port

of In

terla

ken

II, p

. 85)

.

This

was

add

ed in

resp

onse

to fe

edba

ck re

ceiv

ed fo

llow

ing

the

23 J

uly

Wor

ksho

p an

d is

inte

nded

to p

erm

it ta

rget

ed p

erso

ns fr

eedo

m to

com

mun

icat

e co

nsis

tent

with

the

aim

s of

the

reso

lutio

n.

76

Ta

rg

et

ed

Fin

an

cia

l S

an

cti

on

s

AN

NE

X D

: Web

site

s of S

ecur

ity C

ounc

il C

omm

ittee

s and

Res

olut

ions

,

a

nd E

urop

ean

Cou

ncil

Reg

ulat

ions

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

661

(199

0)co

ncer

ning

the

situ

atio

n be

twee

n Ir

aq a

nd K

uwai

t

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

748

(199

2)co

ncer

ning

the

Liby

an A

rab

Jam

ahiri

ya

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

864

(199

3)co

ncer

ning

the

situ

atio

n in

Ang

ola

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

985

(199

5)co

ncer

ning

the

situ

atio

n in

Lib

eria

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

1132

(199

7)co

ncer

ning

the

situ

atio

n in

Sie

rra

Leon

e

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

1160

(199

8)co

ncer

ning

the

FRY

(Kos

ovo)

Com

mitt

ee e

stab

lishe

d pu

rsua

nt to

Res

olut

ion

1267

(199

9)co

ncer

ning

the

situ

atio

n in

Afg

hani

stan

SEC

UR

ITY

CO

UN

CIL

CO

MM

ITT

EE

WE

B A

DD

RE

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http

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ww

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org/

Doc

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/com

mitt

ees/

Iraq

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ait/

Iraq

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tions

Com

mEn

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m

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org/

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s/sc

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http

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ww

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org/

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mitt

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ww

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org/

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org/

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htm

http

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ww

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org/

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ww

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org/

Doc

s/sc

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mitt

ees/

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hanT

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ate.

htm

77

De

sig

nin

g S

ec

ur

ity

Co

un

cil

Re

so

luti

on

s

http

://w

ww

.un.

org/

Doc

s/sc

res/

1990

/661

e.pd

fht

tp://

ww

w.u

n.or

g/D

ocs/

scre

s/19

91/6

87e.

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http

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org/

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s/sc

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1991

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1992

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1993

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org/

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1993

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1994

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org/

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1997

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org/

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/res1

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.pdf

http

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org/

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1991

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1992

1993

1993

1993

1993

1994

1994

1997

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1998

1999

1999

2000

2000

2001

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UN

ITA

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ITA

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rg

et

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l S

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s

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ulat

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(EC

)N

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)N

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en_3

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1081

.htm

l

PART 2

IMPLEMENTING

TARGETED FINANCIAL

SANCTIONS AT THE

NATIONAL LEVEL

This section of the manual builds on previous accomplishments ofthe Interlaken Process while focusing on the specific legal andadministrative elements necessary at the national level toimplement targeted financial sanctions. The elements necessaryfor the effective implementation include a legal framework,designation of an administering agency or agencies, developmentand dissemination of information, compliance initiatives,consideration of exemptions, administration of assets, andenforcement efforts.

Consistent with the Interlaken approach,1 this document uses thephrase “national measures” as a comprehensive label, coveringsecondary legislation, regulations, orders, ordinances, notices,instruments, and all other kinds of executive measures. “Primarylegislation,” such as the Model Law, is understood as a principalact or statute that enables States to promulgate national measuresto implement sanctions without engaging the legislative process.

While the function of primary legislation is to bring a resolutioninto domestic law, national measures must provide the means bywhich sanctions are administered. Effective implementation oftargeted financial sanctions requires that timely and competentadministrative action be performed at the national level. Forexample, information must be developed and disseminated to the

79


public, banks, and financial institutions regarding the impositionof sanctions; compliance activities must be pursued to ensure theintegrity of the sanctions; exemptions to the measures imposedshould be considered in line with the Security Council resolution;assets subject to sanctions should be administered appropriately;and enforcement measures should be pursued against violations.

Since experience with targeted financial sanctions is limited, theattempt to determine “best practices” is necessarily incomplete.Further, depending on the size and sophistication of a country’sfinancial system, certain practices may not necessarily beappropriate for all countries. Throughout this document, Statesare categorized in terms of the size of their national financialsystems, consistent with accepted definitions of financial systemsestablished by the Bank for International Settlements and theFinancial Stability Forum.2

Implementation of targeted financial sanctions has significantimplications for key private sector actors: therefore best practiceshave been suggested with a view to facilitating cooperationamong these groups and national governments. Throughout thisdocument, the phrase “banks and financial institutions” should beunderstood in its broadest sense to mean any individual ororganization holding assets that may be subject to the sanctions.

Implications of anti-money laundering initiatives

Interlaken II addressed briefly the lessons that could be learnedfrom the work of the Financial Action Task Force on MoneyLaundering (FATF)3 noting the similarities of evasion strategies toavoid the identification and freezing of funds employed by targetsof UN sanctions as well as money launderers. Several aspects ofthe FATF process were considered relevant to targeted financialsanctions, such as the organization of regular meetings amongStates and greater emphasis on banks knowing their customers.However, the group concluded that the marked intrinsicdifferences between the objectives of anti-money launderingactivities and UN financial sanctions (e.g. the basis for action inpenal law, as opposed to a political decision of the SecurityCouncil) limited the relevance of one for the other.

80

Implementing Resolutions at the National Level

In the past several years, anti-money laundering initiatives haveadvanced significantly, resulting in the adoption by a number ofoffshore financial centers of changes promoting bankingsupervision and transparency. In many countries, the nature of thechanges potentially have the added benefit of improving theState’s capacity to implement financial sanctions. While thepurposes of targeted sanctions and anti-money launderinginitiatives clearly differ, there are examples in which advancesand developments in the one area can accrue to the other (e.g.designation of responsible officials, and “know your customer”and record-keeping requirements). The following sections alsoaddress these areas of opportunity and discuss how certain legaland administrative mechanisms adopted by countries as a result ofanti-money laundering initiatives could be utilized to implementtargeted financial sanctions more effectively.

81


1. Legal Framework

Under Article 41 the Council may

decide what measures not involving the use ofarmed force are to be employed to give effect toits decisions, and may call upon the Members ofthe United Nations to apply such measures.Those measures may include complete or partialinterruption of economic relations and of rail,sea, air, postal, telegraphic, radio, and othermeans of communications, and the severance ofdiplomatic relations.

These decisions are binding upon all Member States. By virtue ofArticle 25 (“The Members of the United Nations agree to acceptand carry out the decisions of the Security Council in accordancewith the present Charter”), States are obliged to implementdecisions taken by the Council under Article 41. Where thesedecisions impose targeted financial sanctions, there is a broadconsensus that States often need assistance in fulfilling theirobligations.

To this end, and in response to concerns that failure to implementsanctions uniformly across national legal jurisdictions underminestheir effectiveness, a draft Model Law was developed atInterlaken II, to give Security Council resolutions standing indomestic law. The Model Law, discussed in detail below,proposed general primary legislation enabling States to transformall Article 41 resolutions into national law through the adoptionof “national measures.”

Without a means for giving effect to Security Council resolutionsin domestic law, it is not possible for States to implementsanctions. The national legal framework therefore is crucial to theestablishment of the administrative practices to implementfinancial sanctions. The essential question is: Does the State havethe authority necessary to implement targeted financial sanctions?Since current practice indicate that States respond to this questionin numerous ways, Working Group 2 at Interlaken II developed aModel Law to establish consistent criteria for nationalimplementation.

82


1.1 The Model Law

The articles of the Model Law developed at Interlaken II are setout and discussed in the table overleaf. In Article 1, States areempowered through formal legal means to give effect to allSecurity Council resolutions under Article 41 of the UN Charter –a significant advantage of the Model Law approach. Articles 2-5of the Model Law establish criteria regarding nonliability forcompliance with resolutions, the reach of State action, penaltiesfor breaches, and the supremacy of national measures toimplement Security Council resolutions in the national legalsystem. Although these additional measures represent desirablefeatures, some States may find it difficult to implement them dueto constitutional, political and administrative constraints. Forexample, regarding Article 3 of the Model Law, whichcontemplates extraterritorial jurisdiction, some participants in the23 July meeting in New York objected to including this provisionas a necessary, let alone advantageous, element of primarylegislation. While some see a benefit in having such authority,others maintain the efficacy of sanctions when every countryimplements sanctions within their own borders.4

Although the Interlaken Model Law is not necessarily a “one sizefits all” approach to implementing sanctions, working groups atboth Interlaken conferences concluded that a Model Lawapproach is the preferred means to give effect to the intentions ofthe Security Council. This approach both expeditesimplementation and achieves uniformity across national systemsto the greatest extent possible. In addition, Article 1 of the ModelLaw enables States to implement all types of sanctions imposedby the Security Council, not just targeted financial sanctions. Italso obviates the need for the State to pass legislation each timethe Security Council passes a resolution imposing sanctions. Mostparticipants in the 23 July Workshop endorsed the InterlakenModel Law as a benchmark against which domesticimplementation may be measured. In addition, the provisions onnonliability for compliance and legislative supremacy areimportant; in that they provide legal security to banks andfinancial institutions5 and enable restrictive banking secrecy lawsto be superceded.

83

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3. 4. 5.


1.2 Current practices

States can give effect to a resolution under Article 41 of the UNCharter in domestic law in more than one way. This sectionsummarizes the four most common approaches to primarylegislation taken by States.

1.2.1 Primary legislation referring to SecurityCouncil resolutions

Consistent with the first Article of the Model Law, some Stateshave in place primary legislation that refers directly to decisionsof the Security Council, thereby transforming Article 41resolutions into domestic law through national measures. Thereare several strengths to this approach: the full range of measurescontemplated by Article 41 of the UN Charter can be transformedinto national law expeditiously; the intent and language of theresolution can be utilized directly in national measures, promotingthe goal of uniformity across States; and specific provisions mayensure the precedence of sanctions measures over existingnational laws.

Within this broad approach are alternative methods for adoptingnational measures. For example, where a resolution imposes arange of Article 41 sanctions, States may either pass omnibusnational measures (under the primary enabling act) to bring aboutthe specific measures or States may amend existing secondarylegislation in specific sectoral areas (i.e. aviation, exchangecontrol, trade, regulations). Depending on existing laws, Statesmay choose a mix of both methods.

1.2.2 Sector-specific primary legislation

Similar to the Model Law approach, Security Council resolutionscan be transformed into domestic law under sector-specificprimary legislation. Within this broad approach are severaldistinct alternatives.

Whereas the Interlaken Model Law refers directly to SecurityCouncil resolutions in a general primary act, some States refer toresolutions in an issue or sector-specific act. For example, to

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implement financial sanctions, the relevant banking or exchangecontrols legislation may be amended to refer directly to Councilresolutions. Doing so allows national measures to be passed foreach particular sanctions resolution imposed by the Council. Thismethod integrates the administration of financial sanctions withinexisting legislative and administrative structures. To utilize thismethod, States generally require constitutional powers similar tothose contemplated by the Model Law approach. Also, to enactthe breadth of measures contemplated by Article 41, this methodrequires similar legislative provisions in a potentially broad rangeof primary legislation.

Other States have specific primary legislation relating not todecisions of the Security Council, but to the domestic impositionof sanctions. Typically, this type of legislation will give thegovernment broad general authority to impose sanctions.Alternatively, the primary legislation may empower thegovernment to intervene in economic relations under specialcircumstances, such as national defense or under emergencyconditions. Under either approach to primary legislation, nationalmeasures are required. This method has the advantage of enablingStates to implement sanctions in anticipation of a SecurityCouncil resolution. However, given the goal of uniformimplementation across States, there may be limitations to thisapproach if the existing sanctions legislation diverges from thescope, intent, or language of the Security Council resolution, as isoften the case. It also may be difficult politically to amendsimultaneously standing banking, insurance, property ownership,and immigration legislation, as may be required by a particularCouncil resolution.

1.2.3 General purpose trade and financiallegislation

Some States draw upon existing trade, banking, financial servicesor exchange controls legislation to give effect to Security Councilresolutions that impose targeted financial sanctions. Existingregulations are amended on a case-by-case basis under suchgeneral-purpose primary legislation to implement sanctions.

There are several advantages to this method. The presence ofexisting legislation typically suggests that an administrative

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structure is already in place to oversee the implementation ofsanctions. Use of existing mechanisms permits sanctions to beimplemented expediently. Yet under this approach, existinglegislation may constrain implementation if it diverges from thescope, intent, or language of the Security Council resolution. Forexample, a resolution may call for a range of measures, of whichonly some can be adopted under general-purpose trade orfinancial legislation. Thus, the goal of uniform implementationacross national jurisdictions may be difficult to achieve.

In addition, the changing regulatory environment (i.e. theabolition of exchange controls) and a general trend toward freertrade may mean that mechanisms previously used to controlfinance and trade may not be available to implement sanctions.Therefore, while an existing administrative structure is likely tobe in place, its capacity to ensure the full compliance withsanctions may be constrained. Also, the provisions of the ModelLaw that relate to defense for nonperformance of obligationsaffected by the imposition of sanctions and the primacy ofsanctions laws, may not be guaranteed under this approach.

1.2.4 Generic constitutional authority

For some States, primary legislation as described in the threealternative approaches above is not required. In such cases, theremay be a general constitutional provision under which thegovernment can give effect to Security Council resolutions.Alternatively, it may be considered that the Council’s resolutionsare directly applicable in domestic law. Member States of theEuropean Union without existing implementing mechanisms maytake an analogous approach by relying on Brussels to pass aregulation having domestic effect.6

Where prompt national measures are supported by existingadministrative structures, the implementing State may be able toimplement sanctions in a timely manner. However, it is critical toensure that such an approach includes appropriate nationalmeasures and active administration. In this way, the existence ofsuch a constitutional provision, or the interposition of a regionalauthority such as the European Union, may facilitate the uniformimplementation of sanctions across States. States that implementsanctions successfully in this way employ the language of the

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resolution in their national measures and identify a specificadministering agency with a view to implementation.

1.3 Best practices

• Ensure that adequate legal authority to implement sanctionsat the national level exists without engaging the legislativeprocess for each Security Council resolution (for example, byenacting primary legislation similar to the Model Law andgiving effect to resolutions through national measures).

• Use the elements of the Model Law as a benchmark toevaluate the national legal framework.

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KEY LEGAL AND ADMINISTRATIVE ELEMENTS FOR

IMPLEMENTING TARGETED FINANCIAL SANCTIONS

Legal framework should:

• Ensure that States have legal authority toimplement sanctions at the national levelthrough national measures.

National measures should:

• Designate an official body or bodies toadminister sanctions (administering agency);

• Empower an administering agency to developguidance for banks and financial institutionsand disseminate information;

• Empower an administering agency to undertakecompliance activities;

• Specify the criteria and process for consideringand giving effect to decisions regardingexemptions and exceptions;

• Determine procedures for the administration ofassets;

• Specify what constitutes a violation ofsanctions, and impose penalties for breaches.


2. Administering Agency

Effective implementation of sanctions at the national levelrequires that agencies possess the authority, expertise, andcapacity to give effect to Security Council resolutions. Authorityrefers to legal authority to perform necessary tasks as establishedby the legal framework discussed above. Expertise refers to thetechnical know-how to administer sanctions, including matters ofUN sanctions policy and financial controls. Capacity refersadequate staffing and resources to implement sanctionseffectively.


It is essential that an administering agency or agencies be empow-ered to implement sanctions at the national level. A review ofcurrent practices by States indicates that a broad range of differentgovernment agencies possess the relevant authority, expertise, andcapacity to implement sanctions effectively in diffrent countries.

Major financial centers, often with the authority to imposesanctions unilaterally, may have a standing administrative agencyspecifically charged with implementing sanctions. Such agenciesderive their legal authority from domestic sanctions legislationempowering them to implement both UN and unilateral sanctions.Generally, such legislation provides broad authority to thedesignated agency and may include powers requiring that banksand financial institutions report on relevant matters. Expertiseconcentrated in such agencies is substantial, permitting dedicatedstaff and resources for compliance and enforcement functions.

It is neither required nor appropriate for all countries to establish aseparate agency to administer UN sanctions. Administrativepractices can and should be developed according to the needs andtraditions of individual countries. New administrative machinerydoes not necessarily need to be created to implement targetedfinancial sanctions. Rather, several States delegate legal authorityto a range of existing agencies while drawing upon the expertiseand capacity of each and dividing administrative tasks amongthem. These agencies include:

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2.1.1 The Ministry of Foreign Affairs (or equivalent)

Legal authority for all aspects of implementation may bedelegated to the Ministry of Foreign Affairs (MFA). For example,some States with primary legislation resembling the Model Lawissue omnibus regulations across issue areas contemplated byArticle 41, designating the MFA as the sole administering agency.Other States that draw upon generic constitutional authority issuesecondary legislation, that identifies the MFA as the coordinatingagency.

Regarding expertise, the MFA is the agency closest to the pointwhere resolutions are drafted, discussed, and voted upon (this isespecially the case for Council Members). Through officers inPermanent Missions to the UN, the MFA is a valuable source ofknowledge regarding Security Council intentions. Coordinationwith the Sanctions Committee and UN Secretariat in New Yorkmay be especially important where the Committee has broadpowers (e.g. the power to grant exemptions). As mentionedabove, some States designate the MFA as the coordinating agencyto oversee multiple agencies’ implementation of the variousmeasures pursued by the Security Council. In this way, the MFAmay play the role of a lead agency, but may delegate the day-to-day administrative tasks to other agencies.

Overall, tasks that relate to the Council’s administration ofsanctions (such as providing reports to the Committee) can beeffectively delegated to the MFA. The disadvantages of authorityresiding entirely with the MFA are that diplomats often lack thedetailed technical expertise about the financial service sectorrequired to implement financial sanctions. Further, diplomats mayprefer consensus that compromises consistency ofimplementation.

2.1.2 Financial supervisory and regulatory agencies

Bank supervisory agencies generally derive legal authority fromstanding legislation relevant to their area of competence.Authority to perform the tasks necessary for sanctionsimplementation often already exists in the standing legislation.

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These institutions are likely to be the best source of technicalexpertise for the administration of sanctions. For example, theagency is likely to have an ongoing relationship with banks andfinancial institutions that can aid in the development anddissemination of guidance. Past experience in administeringexchange controls may be especially helpful. Since experiencewith targeted sanctions to date has been limited, the preservationof corporate knowledge is important to effective implementationof sanctions. States of various sizes often create specialist officeswithin the central bank or finance ministry, but in many cases relyheavily upon the expertise of knowledgable individuals.

2.1.3 Other agencies

Some of the tasks required to implement sanctions are likely torequire the assistance of agencies beyond those discussed above.For example, enforcement of sanctions may involve agencieswhose principal duties include criminal investigations. Judicialauthorities will necessarily be engaged in pursuing breaches ofsanctions law. Further, Security Council resolutions may callupon States to assist the Council or relevant SanctionsCommittees in identifying targets. It is also likely that specialistliaison and intelligence agencies will be best placed to implementspecific aspects of sanctions often in cooperation with the MFA.

In response to anti-money laundering initiatives, some Stateshave created new agencies recently, or refashioned existingagencies, to oversee their banking and financial servicesindustries. These institutions have been given broad supervisoryand investigatory powers that are in line with the FATF’srecommendations. In some cases, the powers granted to theseagencies are similar to those required to implement targetedfinancial sanctions (e.g. record keeping and information sharingobligations). In addition, some States have increased theadministrative capacity of supervising agencies. One offshorefinancial center has undertaken to increase its staffing level in itsmonetary authority by seventy per cent to improve monitoring ofbank licensees. In this way, States responding to anti-moneylaundering scrutiny are developing related authority, expertise,and capacity that could be useful for implementing targetedfinancial sanctions. In at least one case to date, a financialintelligence unit established according to FATF

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recommendations, has indirectly assisted in the implementation ofsanctions by investigating a possible breach.

2.2 Best practices

• Identify and delegate legal authority to an administeringagency or agencies; an extensive new bureaucracy is notnecessarily required to implement sanctions effectively.

• Consider how best to employ existing expertise and dedicateresources to the development and maintenance of knowledgeon targeted financial sanctions.

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3. Information

It is critical that information regarding the imposition of andsubsequent modifications to targeted financial sanctions shouldreach all individuals, banks, and financial institutions that mayhave access to the funds and other financial resources of targetedpersons. The development and dissemination of this informationtakes place on two levels: general information on the backgroundand objectives of the sanctions for the public at large, and specificinformation and guidance for banks and financial institutions.Information necessary for banks and financial institutionsincludes guidelines that contain essential elements, such as theprecise time period within which transactions should be examined(for potential retroactive reporting); a clear statement of the legalbasis for sanctions; identification of targets; a detailed statementof prohibited transactions; information on exemptions orexceptions; and explanation of the process by which inquiriesand/or applications will be addressed and to whom.

In turn, information must be disseminated clearly and punctually.In many countries, official notice to the affected community isnecessary for the requirements to be legally binding. Notificationis also important to prevent inadvertent violations, and can playan important role in determining penalties, because negligencemay be a mitigating factor in some countries (see section 7). Theadministering agency must employ a variety of methods to ensurethat all relevant parties are notified of the imposition of sanctions.

While information on sanctions implementation should bedeveloped and disseminated on a case-by-case basis, a centralaspect of implementation is the nature of the relationship betweenthe administering agency and domestic banks and financialinstitutions. Financial institutions benefit from receiving timelyand detailed guidance on how to implement sanctions, while theadministering agency relies on the compliance efforts andinformation provided by affected parties to ensure theeffectiveness of sanctions. Implementation of sanctions is a two-way process that requires constant interaction and feedbackbetween the administering agency and financial community. Stepsshould be taken to ensure the development of a cooperativerelationship between these entities.

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In major financial centers, administering agencies develop anddisseminate information in three principal ways.

First, where national measures concerning the implementation ofsanctions are promulgated, notification will occur through officialpublication in a government journal. In addition to being a routinematter, many countries require this step to prosecute a breach ofsanctions.

Second, general information is made available to the publicthrough press releases, the posting of relevant material onwebsites, as well as making such information available throughfax, email, and postal services. There may be a division of laborbetween administering agencies for this purpose. In one countrywhere the economics ministry and the central bank shareresponsibility for administering sanctions, the ministrydisseminates general information while the central bank dealswith affected banks and financial institutions.

The third method of distributing information involves directguidance and instructions to banks and financial institutions, aswell as responding to inquiries. In one country, the central bankissues circulars to financial and business associations, explainingthe regulations and giving the necessary instructions and contactinformation should questions be raised. Another administeringagency develops a notice for each sanction that explains the legalnature of the sanctions, exactly who and what activities are beingtargeted, processes for administration of sanctions, as well as theprocedure and necessary contact information for receivingexemptions and directing inquiries. Typically, these notices aredistributed to financial associations, major banks, and financialinstitutions, import and export organizations, trade groups, andbank regulatory agencies. In some countries, notification is inwritten form only, but others also provide informationelectronically to facilitate incorporation of the list of targetedpersons into computer software, frequently used by banks andfinancial institutions to screen transactions.

In addition to written and electronic dissemination of information,some agencies conduct outreach activities by sending speakers to

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meet directly with segments of the industry that are particularlyaffected by the sanctions. When administering agencies canidentify targeted assets, they also issue notices to the holders ofblocked property, informing them of the restrictions concerningthese assets.

Offshore financial centers use a process for developing anddisseminating information consistent with that used by the majorfinancial centers. Ordinances implementing financial sanctionsappear in a journal of legal texts and are available upon requestfrom the administering agency. In numerous offshore centers, theMFA or central bank issues circulars. One country publishesnotices in all of its major newspapers upon the enactment ofordinances. Because of the small size of this State, simply issuingpress releases through the media may be effective in ensuring thatall concerned parties, particularly banks and financial institutions,will be notified of new regulations.

Several smaller European countries disseminate informationthrough similar mechanisms. Legal texts are publishedelectronically to overcome publication delays and make suchinformation more immediately accessible. Press releases are alsoused to notify the public and announce changes to the regulations.The administering agency develops a circular for distribution tofinancial institutions that describes the regulations. Additionally,this agency notifies individually those entities (companies,agencies, etc.) that are particularly affected by the sanctions.

A similar approach to developing and disseminating informationis being pursued by agencies responding to anti-money launderinginitiatives. In one case, an offshore financial center has delegatedbroad powers to a newly established agency to developinformation (e.g. through the promotion of public understandingand the establishment of a research office), as well as delegatedspecific powers to provide information to certain banks andfinancial institutions.

3.2 Best practices

• Inform the general public through notices in official journalsand the media, and promote widespread dissemination ofinformation via electronic means.

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• Maintain relationships with banks and financial institutions,including through outreach activities, and provide direct,specific and timely guidance to them regarding theimplementation of sanctions.

• Notification should include a statement of the legal basis forsanctions; the precise time period within which transactionsshould be examined; definition of targets; detailed guidelinesabout what is prohibited; information on exemptions; andinformation concerning to whom applications for exemptionsor exceptions and questions regarding sanctions should beaddressed.

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4. Compliance

Initiatives to ensure that banks and financial institutions complywith targeted financial sanctions can be pursued at two levels.

First, States monitor banks and financial institutions to ensuretheir compliance with financial sanctions. States encouragecompliance through reporting requirements, audits, andexaminations to police sanctions implementation. They alsoensure that restrictive banking secrecy provisions do notconstitute a hindrance to sanctions implementation. Because thelevel of financial activity differs by country (varying also in thelikelihood of targeted financial assets being held in differentcountries’ institutions), each country’s approach should betailored to maximize its program’s effectiveness.

At the second level are efforts undertaken within banks andfinancial institutions to fulfill supervisory and soundnessrequirements aimed at raising standards in bankingadministration.7 While these initiatives are not specificallydesigned for sanctions, they are relevant for such purposes. Forexample, agencies and intergovernmental organizations such asthe FATF recommend “know your customer” and due diligenceprocedures. Further, the use of technology such as namerecognition software is an effective tool to promote compliancewith targeted financial sanctions.


Reporting and information sharing are important parts of acompliance program, and financial institutions are generallyexpected to report on sanctions implementation and theadministration of targeted funds. Reporting enables thedevelopment of a “watch list” of financial assets that theadministering agency can monitor. It is common practice in manycountries for financial institutions to be legally required to reporton any blocked accounts or to seek the permission of theadministering agency before taking any action concerning suchaccounts.

To promote compliance, some major financial centers employ asystem of random checks and audits to determine if banks have

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overlooked assets or failed to report certain transactions. Branchoffices of the central bank or the administering agency conducton-premises audits of credit institutions. In some cases, banksfound to be in violation are issued a warning—a practice that hasreportedly been successful in altering internal institutionalpractices to comply with the regulations. In others, administrativeviolations constitute civil offenses and are punishable by fines, upto the withdrawal of a license to provide financial services.

A major financial centers within the European Union performs anaudit whenever a request for an exemption to sanctions is made.This offers advantages, not only for gathering information onwhich to make a decision on the exemption, but also because ofthe possibility that the institution may have other dealings withentities in the targeted country or connected with the target. Inthis case, as with others, any information received regardingviolations of sanctions is investigated as part of the complianceprogram. Another country uses the banking sector to helpexamine methods of evading sanctions. This practice may assist aState in identifying loopholes used by targets or shortcomings ofits compliance efforts.

Another major financial center gives special emphasis tocompliance efforts by designating a separate division within theadministering agency. Specific steps are taken to encouragecompliance by banks and financial institutions: the list of targetsis distributed electronically; recommendations on useful softwareare made; general and case specific guidance materials areproduced; speakers address affected parties; and notices are issueddirectly to holders of blocked property. While such efforts arelikely to be effective in encouraging or compelling compliance,they are possible only because of the significant resources (humanand financial) devoted to this purpose that may not necessarily beavailable in other countries. Furthermore, while major efforts aredevoted to helping institutions comply with sanctions, whenauditing or monitoring results in the revelation of potentialviolations, compliance spills over into enforcement. Liaison withvarious agencies involved in criminal enforcement in the financialsector (e.g. anti-money laundering bodies) can also result ininformation that may aid in compliance efforts.

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Stressing the low volume of economic and financial activitybetween itself and most targeted countries (and the entities withinthem), one regional financial center casts itself in a very limitedrole in ensuring compliance. This center informs companies andfinancial institutions of the rules about sanctions, specificallyexplaining what they can and cannot do, and to respond toinquiries. If the government considers an activity to be a potentialviolation of the regulations, it warns the concerned party. Sinceviolations of sanctions are not a criminal offense in that country,the government is limited in its efforts to compel compliance andpenalize sanctions-busting efforts.

In addition to sanctions compliance initiatives, broader initiativesaimed at raising standards in banking administration are relevantfor targeted financial sanctions. In response to anti-moneylaundering initiatives, many States have taken steps that can beuseful for implementing targeted financial sanctions—“Know-your-customer” and due diligence requirements, provisions liftingbanking secrecy in criminal and sanctions cases, examination ofmethods of evasion, record-keeping requirements, andinvestigations of cases of financial wrongdoing—most ostensiblyto counter money laundering, but which can be valuable tools inassisting States to more effectively implement targeted financialsanctions.

While some offshore financial centers have developed complianceprograms that include reporting and auditing requirements, manyalso draw upon regulations and practices related to anti-moneylaundering initiatives to assist in implementing targeted financialsanctions. One such center amended its national legislation torequire financial institutions to identify and record thebeneficiaries of all assets, as well as to report on any funds andother financial resources that either have been frozen under thesanctions or are suspected of falling under the sanctions. Thiscountry also created a financial intelligence unit to examinemethods of evasion used to launder money, increasing its capacityto perform compliance tasks related to sanctions implementation.Compliance with sanctions may also be aided by the obligation ofall entities taking part in trade with foreign States, directly orindirectly, to provide relevant information and documents uponrequest by the competent authority.

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A further general practice that financial institutions may utilize inimplementing targeted financial sanctions is the use of technologysuch as name recognition or filtering software. Several offshorefinancial centers also report the use of this software in their banksand financial institutions, recognizing its value as a compliancetool. The box below discusses the application of this technologyto implementing sanctions.

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USING COMPUTER SOFTWARE IN IMPLEMENTING

TARGETED FINANCIAL SANCTIONS

The “filtering” or “interdiction” software employed bymany banks and financial institutions works like thespell-check feature of a word processing program. Onceinstalled, the software monitors every transaction,filtering out those that contain a name or informationfield (date of birth, place of birth, etc.) that matches thosefor which it was instructed to search. Matches or “hits”must be manually examined to determine whether thesoftware has in fact located a targeted transaction or ismerely a false alarm. Often the administering agency canassist in this determination. The benefits of usinginterdiction software are its ability to process a largevolume of transactions rapidly, the ease and speed withwhich to add new targets (by typing or directlydownloading their information), and the ability to assureon another level that a transaction has not beenoverlooked.

Even with the use of filtering software, it is important tohave specific information on a target. The moreinformation that is available, the better chance is of thesoftware locating a targeted transaction. For instance, ifthe software is searching for a name and date of birth, itwill catch a record where the target uses an alias. Yet itwould not if only the target’s name was known. Inreviewing hits, additional information can also be usefulif the identified transaction involves the intended targetor someone who, for instance, might happen to have thesame name but lives in the “wrong” country.

Although the cost of maintaining interdiction softwaremay deter some banks and financial institutions fromusing it, administering agencies can encourage itsadoption by considering its use as a mitigating factorwhen assessing fines for violations.


4.2 Best practices

• States should monitor the activities of banks and financialinstitutions to encourage compliance with financial sanctions,including capacity building, reporting, and external auditingrequirements.

• Financial institutions should be encouraged to raise theirinternal supervisory standards to conform with multilateralinitiatives and through the use of technology, and to employmethods to recognize and stop targeted transactions.

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5. Exemptions and Exceptions

In passing a resolution to impose targeted financial sanctions, theSecurity Council routinely identifies general areas or specificcases to which the prohibitions shall not apply. As stated earlier inthis document, exemptions and exceptions are defined such thatexceptions are cases that require prior approval by the SanctionsCommittee and exemptions do not require Sanctions Committeeapproval.

The practices outlined below refer to the administration of bothexemptions and exceptions. If a resolution sets out exceptions forsubmission to the Sanctions Committee, States act as a conduit,passing requests to New York. The details for activating thisprocess should be spelled out clearly in information that isdeveloped and disseminated to financial institutions whensanctions are imposed.

Individual States play a larger role in administering exemptionssince each State exercises greater discretion in interpretingexemptions enumerated in the resolution. To administerexemptions, a State must establish a process by which entities canapply for exemptions, empower an agency to make decisions, andprovide a means to give effect to those decisions (e.g. through alicense, order, etc.). Since exemptions often involve payments forhumanitarian goods, it is important that applications beconsidered on a timely basis. The administering agency shouldalso try to reflect the intentions of the Security Council andpractices of other States in its decisions on applications.


In major financial centers, the administering agency usuallymakes decisions regarding exemptions as part of its generaladministrative responsibilities. Countries generally require that allrequests for exemptions be submitted in writing. Upon receipt, theagency often consults with other agencies (such as the MFA andits Mission in New York), and then either rejects or grants theexemption on humanitarian or “national interests” grounds. Awritten decision is routinely issued. In some countries, theadministering agency is responsible for all aspects of

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implementing sanctions except for granting exemptions, which isdone by the Ministry of Foreign Affairs. To proceed legally with atransaction, an institution must possess a certificate issued by theMinister stating either that the relevant Security Councilresolution does not intend the act to be prohibited or, if theexception had been forwarded to New York, that the SanctionsCommittee has approved it.

Several other countries employ a system of licensing capitaltransactions to process exemptions. The agency is then able toapprove and deny licenses, as well as to alter or suspend theexecution of an approved transaction.8 Generally, a licensingsystem includes both general and specific (or “individual”)licenses. General licenses authorize whole categories oftransactions (e.g. crediting interest to blocked accounts), andindividual licenses governing transactions on a case-by-case basis.The ability to grant a general license, which in effect acts as anamendment to the regulation, can be an important timesavingmeasure in larger countries where there may be many similarrequests. In fact, while one of these countries reports being able todeal with requests in two to three days, another reports that theprocess may take up to three weeks. In light of this, the lattercountry has established procedures to consider applications on anemergency basis (within twenty-four hours) if necessary.

Offshore financial centers follow similar procedures—allapplications are submitted to the administering agency and aredealt with on a case-by-case basis. One country empowers thecentral bank to decide upon exemptions and requires that the bankgive permission before frozen funds are released. Another countryreports that a decision is issued through an official order to theapplicant “usually within four weeks” after receipt of theapplication. While interagency consultations on applications(often with the MFA) can be helpful, they often increase theamount of time the exemption process takes. To aid in complianceefforts, one country employs a practice of sharing informationamong all relevant agencies concerning decisions on exemptions.

One regional financial center forwards all requests to its Missionin New York, where officers familiar with sanctions issues andthe policy intentions of the Security Council decide onexemptions. Such an approach is likely to result in decisions

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consistent with the spirit and intention of the resolution; however,the potential trade-off may be the amount of time necessary forsecuring exemptions and decisions, that may be more difficult toimplement in practice.

5.2 Best practices

• Designate a responsible agency and determine the process toconsider exemptions and exceptions.

• For countries with a large volume of exception requests, aprocess authorizing categories of approved transactions(general licenses) may expedite the process.

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6. Administration of Assets

Future Security Council resolutions that include definitions of keyphrases may address the issue of how the frozen funds and otherfinancial resources of targeted persons should be administered.9

At present, banks and financial institutions, with direction fromadministering agencies, have developed general proceduresregarding management of these funds. Specific issues ofadministering assets (which should be understood to mean theadministration of any funds and other financial resourcesbelonging to targeted persons frozen according to a SecurityCouncil resolution) include handling claims to frozen funds,crediting interest, debiting bank charges, and securing andmaintaining the value of frozen funds.


General practice in each of the major financial centers is to creditinterest to frozen accounts and debit bank charges from them, inlieu of a decision by the Sanctions Committee or a provision in theresolution that instructs them to do otherwise.10 In most countries,these are not special procedures because bank charges are auto-matically debited as they would be if the account were active. Thebank credits interest at whatever rate is applicable to the account.The only difference is that the interest must remain frozen like therest of the account. One major financial center provides theexception to this rule, as a license is required from the administer-ing agency for bank charges to be debited from accounts.

In the past, the administration of assets has differed in majorfinancial centers when terms such as “economic benefits” and“property” have been used by the Security Council or the EC inimposing prohibitions. Other countries interpret “economicbenefits” to exclude property. In these cases, a country may freezeany payments relating to property, without seizing control over it,and financial institutions are required to ensure that the value ofthe assets, including property, does not change. Differences ininterpretation of such phrases may undermine the effectiveness oftargeted financial sanctions by creating loopholes and allowingtargets access to assets. In this case, the adoption of standard

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phrases and definitions has been effective in moving towardsuniform implementation across national jurisdictions.

Countries may use differing approaches in handling claims tofrozen funds and other financial resources. One major financialcenter includes a freeze on claims against those assets under itsgeneral definition of “freeze” and the process for pursuing such aclaim is to seek an exemption. Another country allows its bankinglaws or litigation to deal with these claims, if necessary. Note thatthe necessary consent as established by the sanctions regulationsmust be received, which is similar to handling requests forexemptions. One country assumes that any claim against frozenfunds would not be admitted by a tribunal, but would be consid-ered once the sanctions were suspended.

The policy of asset administration in offshore financial centerslargely mirrors that of major financial centers. In such centers,normal procedures of crediting interest and debiting charges areprovided for in the legal framework without changing thecharacter of the assets. In one case, a clause in its primarylegislation confirms that the value of any such property must bemaintained. As for claims on frozen funds, such countriesgenerally require an application for an exemption, which isgranted by an administering agency on a case-by-case basis. Thus,any action regarding frozen funds also requires authorization bythe agency.

6.2 Best practices

• Unless otherwise called for by the Security Councilresolution or by the Sanctions Committee, standard practicesconcerning crediting interest to and debiting charges fromfrozen accounts should generally be followed.

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7. Enforcement

Each State requires the ability to detect and punish breaches ofsanctions in order for them to be effective. The key elements of anenforcement program include a clear legal basis to prosecuteviolations, procedures to investigate and enforce sanctions, andcriminal and/or civil penalties to deter and punish violators.Authority needs to be delegated to appropriate agencies. Penaltiesof monetary fines and possible imprisonment should be“effective, dissuasive and proportionate.”11 Some countries alsohave seizure authority and the ability to require forfeiture ofassets for violations.


Whereas all States have elements of an enforcement program,certain capabilities can potentially increase the effectiveness ofenforcement measures. Some practices may be difficult for certaincountries to implement because they are inconsistent withconstitutional or legal frameworks; however, to the extent thatcountries strengthen enforcement efforts and deter sanctionsviolations, the effectiveness of targeted financial sanctions will beenhanced.

All major financial centers have the authority to prosecutebreaches of sanctions criminally, whether provided for in theprimary or secondary legislation.12 If the administering agencysuspects a breach of sanctions, most countries have the option ofeither issuing a warning or requesting a detailed explanation fromthe concerned party. Since the relationship between thegovernment and financial sectors is frequently cooperative,several countries report never having a situation escalate beyond awarning. Providing such flexibility to an administering agencycan therefore be useful since costly prosecutions often can beavoided and the relationship between the administering agencyand financial institutions remain cooperative.

Where necessary, these countries have the authority and capacityto prosecute sanctions breaches, although there is significantvariation in penalties across States. While one country sets themaximum fine upon conviction as double the amount (value) of

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the infraction, major financial centers usually punish violationsthrough a range of prison sentences and/or fines as shown below.

Since the costs (in time and money) of prosecuting a breachcriminally may not be justified by its severity, some countriessimply issue a warning to violators. Administering agencies ofother countries possess the authority to assess civil penalties(fines) without any judicial hearings. This capability, like otherswhereby States can punish violators without a full-scale criminalproceeding (e.g. prescribing penalties for summary convictions),allows for the punishment of violators while helping to preventinadvertent breaches—thereby increasing the effectiveness of theenforcement program.

The primary legislation of one offshore financial center definespenalties for noncompliance or any breach of financial sanctionsas a fine (see table below), unless conviction under the penal codetakes place, in which case the penalty is a prison sentence.Circumstances that mitigate punishment are those enumerated inthe penal code (e.g. juvenile status, role of accessory, committingthe offense out of fear) and negligence. Another offshore financialcenter considers a violation of executive orders as an offense andhandles enforcement efforts on a case-by-case basis. The natureof the violation determines which ministry handles the case.

The primary legislation in most regional financial centersestablishes a violation of sanctions as an offense that is punishableby a prison sentence and/or fine. In one of these countries, theexecutive prescribes penalties for the contravention of sanctionsin regulations. Furthermore, any entity that knowingly assists,promotes, or intends to violate the sanctions regulations is subjectto prosecution. In some countries only actual violations are

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COUNTRY CATEGORY

Major FinancialCenters

Offshore FinancialCenters

Regional FinancialCenters

MAXIMUM FINE13

• 9,506 - • 1,840,652

•43,065 - •657,404

• 5,907 - •23,625

MAXIMUM SENTENCE

3 yrs - 15 yrs

prescribed by penalcode

5 yrs


criminally prosecutable, whereas others also define attempts atevasion and contravention of sanctions as violations. In someregional financial centers, there is no legal authority to ascribecivil or criminal punishments to sanctions violations. Since thesanctions are implemented through decrees and no law explicitlymakes sanctions violations a crime, the country enforces targetedfinancial sanctions by issuing government warnings to companies,banks, and financial institutions as a means of compellingcompliance.

Several European countries also make a breach of sanctionspunishable by a prison sentence and/or fine while employingother innovative practices. One country increases penalties foreach subsequent breach by the same offender, and under specialcircumstances, may impose extra penalties such as the whole orpartial discontinuation of the offender’s enterprise. Somecountries provide specifically for the confiscation of goods orproperty belonging to the violator or relating to the offensecommitted, while one country’s primary legislation establishes theauthority to intervene in existing contracts as necessary. In thisState, virtually any object associated with the contravention of thesanctions may be confiscated, or the value of the objects forfeited,irrespective of the owner’s identity and without a criminal casebeing initiated against the violator.

7.2 Best practices

• Clearly define acts constituting a breach of sanctions, thenature of such violations (civil or criminal), and specificpenalties (prison sentences and/or fines) appropriate to deterviolations of financial sanctions.

• Encourage compliance and foster cooperative relations withfinancial institutions through a system of warnings and civilpenalties.

7.3 Other initiatives

To promote greater harmonization in the implementation ofsanctions across national boundaries thereby increasingeffectiveness, the following enforcement-related suggestions areoffered for consideration.

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7.3.1 Harmonize penalties for violations of sanctions

Penalties vary greatly according to national law and traditions, butefforts to harmonize penalties could increase the effectiveness ofsanctions. Imposing more drastic penalties (higher fines andlonger prison sentences) also could be an important and effectivedeterrent. Countries with penalties much less severe than mostothers could be viewed as the weakest link and be takenadvantage of by potential targets (resulting in their becomingpotential “target havens”). This step would obviously requiremuch effort, in that States would need to amend standinglegislation, but it would enhance the effectiveness of sanctions.14

One major financial center has already demonstrated a willingnessto harmonize its penalties with its European neighbors, and a billto raise penalties is being considered in its legislative assembly.

7.3.2 Consider additional penalties, such asforfeiture, for circumvention of sanctions

While some countries have detailed provisions regarding theforfeiture or confiscation of assets where an attempt to circumventsanctions is detected, others appear to have none. States shouldseek to provide authority for agencies to seize assets of partiesviolating sanctions. This may be important since sanctionsviolators will be less likely to operate in countries where the risksinclude loss all of their assets.

7.3.3 Enhance international information-sharing

There is also a need for greater international cooperation inexchanging information, particularly on methods of evasion. Justas all parties benefit from good information-sharing between theinstitutions within a State, the same advantages accrue from theexchange of knowledge among States. If a bank discovers an aliasthat is being employed by a target, other financial institutionstrying to implement sanctions will benefit from this information.Similarly, one nation’s sharing of intelligence concerningmethods of evasion will assist other countries in becoming awareof such practices. Moreover, multiple countries coming togetherto discuss these issues may lead to the discovery of new methodsthat were difficult to identify from a single domestic perspective.

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Some type of informal international information-sharing, perhapsunder the auspices of the United Nations, might be helpful forcountries to discuss common problems in implementing financialsanctions. If countries were to agree to take steps beyondinformation-sharing and agree upon steps that should be taken,action by the UN may be necessary to facilitate the domesticimplementation of those measures.

While laundering money is explicitly criminalized by the FATF,15

anti-money laundering initiatives have commanded a high degreeof international attention. To the extent that this level ofcooperation can be built upon and extended to related concerns,such as targeted financial sanctions, the effectiveness of thesanctions tool would be improved.

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Endnotes

1 See published report of Interlaken II, p. 64.2 See the BIS’ Guide to International Banking Statistics (July

2000) <http://www.bis.org/publ/meth07.htm>; and FinancialStability Forum, Report of the Working Group on OffshoreFinancial Centres (5 April 2000) <http://www.fsforum.org/Reports/RepOFC.html>.

3 See <http://www.oecd.org/fatf>.4 On this matter, also see Part 1, section 2.2.5 On this matter, also see Part 1, section 10.6 In these cases, penalties prescribed domestically will be for

a breach of EC regulations. The Expert Working Group on Traveland Aviation Related Sanctions make a similar point in notingthat a “Common Position…could function as an enabling law forthe [EC] for those matters…which fall under its competence”(BICC, p. 92).

7 This document has already referred to the FATF, FinancialStability Forum, and Basel Committee on Banking Supervision.Also relevant are the G7 (now G8) Finance Ministers’ meeting<http://www.g7.utoronto.ca/g7/summit/2000okinawa/abuse.htm>and the United Nations Office of Drug Control and CrimePrevention <http://www.odccp.org/money_laundering.html>.

8 Many countries that formerly required approval for alltransactions involving foreign entities or relied on exchangecontrols have moved toward liberalization and deregulation oftheir economies. It is important that such countries be consciousof the influence these changes may have on their ability toimplement financial sanctions. It is possible that they will beforced to develop new means or legislative bases to enforcesanctions.

9 For example, recall the Interlaken II definition of ‘freeze’(Part 1, Annex B), which permits the crediting of interest tofrozen accounts.

10 The crediting of interest in this instance refers to applyingstandard rates of interest to the frozen accounts. To manageaccounts beyond this (e.g. to maximize return) may amount to theprovision of financial services—something that may be prohibitedby Security Council resolutions.

11 Published report of Interlaken II, p. 40.

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12 European Union countries that employ EC regulations toimplement sanctions must still rely on their own nationallegislation to prosecute violators.

13 The exchange rates posted by the Financial Times as ofJuly 2, 2001, <http://mwprices.ft.com/custom/ft-com/currency.asp>, were used to convert all currencies to Euros (andthen rounded-up to the nearest Euro) in order to facilitatecomparison between the various penalties.

14 To achieve this end, it would be helpful if a country’sprimary legislation left the responsibility of determining penaltiesto the national measures. This would permit the executive,minister or agency responsible for implementing sanctions to set“harmonized” punishments in place when imposing a newsanction.

15 See Recommendation 4 of the FATF’s FortyRecommendations: <http://www.oecd.org/fatf/40Recs_en.htm>.

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Targeted Financial Sanctions - Federal Council

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