Recasting Sanctions and Anti-Money Laundering: From National Security to Unilateral Financial Regulation

Saravalle, Edoardo

Practitioners and academics traditionally think of U.S. sanctions and anti-money laundering rules as bargaining tools: measures that governments use to pressure adversaries and achieve national security goals. Open-ended non-state national security threats like terrorism, climate change, and corruption cast doubt on the accuracy of this “bargaining” model. This Note offers a “regulatory” view that treats these measures not as bargaining chips but as extra-territorial regulatory tools. This approach reflects the current state of these measures, which have leveraged U.S. dollar centrality and financial institutions’ rigorous rule-following to impose economic restrictions on global threats, often permanently. In addition to describing more accurately current U.S. sanctions and anti-money laundering practice, the “regulatory” view better articulates these measures’ functioning. Specifically, applying Professor Anu Bradford’s “Brussels Effect” framework for analyzing extra-territorial regulations yields three insights. First, it offers a granular explanation of these measures’ reach by offering five elements that are predictive of their functioning: “market size,” “regulatory capacity,” “stringent standards,” “inelastic targets,” and “non-divisibility.” Second, it highlights the particularities of U.S. sanctions and anti-money laundering rules. Counter to Bradford’s prediction, U.S. measures suggest that the extra-territorial regulation of finance is possible. Third, and finally, the application of Bradford’s predictive elements to U.S. sanctions and anti-money laundering rules suggests both the continued durability of these measures and future threats to their use.


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December 7, 2022