Asset freeze and other economic sanction

Before the UN applies an asset freeze or other economic sanctions, certain actions are taking place. Typically, these are violations of UN sanctions, specifically the raising of financial means, regardless whether legally or illegally to fund sanctions-busting acquisitions of WMD, conventional arms, mercenaries, or other contravening activities. They may include the facilitation of transport, smuggling, bribing of officials, counterfeiting of documents.

 

In general, those who become the subject of an asset freeze tend to take the best advantage of whatever economic opportunities they can exploit with the least political and material costs. The following table summarizes some of the most frequently observed methods of payments for WMD sanctions violations.

 

 

Strategies observed for States Strategies observed for non-state violators (usually acting as agents, militias, auxiliaries)
Typology 1: Sufficiently rich economic resources to fund military and defense budgets
Normally applicable where states operate important revenue-generating industries, including defense production Rarely applicable but conceivable where violators can establish pseudo-governmental structures, such as the Revolutionary Guards in Iran, including revenue-raising mechanism (ownership of companies, taxes, duties, license fees)
Typology 2: Bilateral interactions (regardless whether legal or illegal)
Donations by friendly governments or by other armed groups Donations by friendly governments or by other non-state violators
Typology 3: Budgetary manipulations (regardless whether legal or illegal)
Extracting or extorting off-budgetary tax revenues, either by demanding a direct remittance from the taxed entity to the supplier, or to secret bank accounts from which payments for embargoed goods are made Various revenue-raising schemes ranging from head and business taxes to licensing fees for commercial, air- and sea- port fees, road and bridge tolls, imposing export/import duties and many other forms of pseudo-governmental revenues
Segregating the procurement and development of embargo-relevant projects (WMD proliferation) to organizations and entities that seem disconnected from the government (non-state violators), but receive ample government funding or exclusive and revenue-rich commercial opportunities N/a
Typology 4: Barter deals
Barter deals, involving a predetermined quantity of unrefined natural resources, in particular precious stones or minerals Barter deals, involving a predetermined quantity of unrefined natural resources, in particular precious stones or minerals
Barter deals, involving the right to exploit specific natural resource deposits, usually minerals, timber or oil Barter deals, involving the right to exploit specific natural resource deposits, usually minerals, timber or oil
Typology 5: Illegal appropriations
Confiscation of equipment held by hostages, prisoners of war, or enemy troops that either surrendered or were killed in and off-action Theft of existing national stockpiles or of deliveries to international peacekeeping organizations, or hijacking of vehicles and other equipment
N/a Payments from proceeds of legal or illegal commercial activities or sale of stolen government property and real estate
N/a Confiscation of equipment held by hostages, prisoners of war, or enemy troops that either surrendered or were killed in and off-action
N/a Bribing commanders and individual soldiers or police agents willing to surrender military material and ammunition, either in small individual quantities or in bulk

 

 

The financial aspects of UN embargoes usually consist of two levels that require careful monitoring and tracking of financial flows:

 

Financial sanctions that apply against transactions supporting or enabling the acquisition, supply, sale, manufacture, maintenance, use, or transfer and transportation of embargoed material, extending also to any form of related services, such as the provision of brokering, financial facilities, investment and insurance services.

 

An assets freeze for all individuals and entities that are listed under the asset freeze of UN sanctions regimes. For example, there is a DPRK Consolidated List of Entities and Individuals and a similar list under the Iran regime. There are also various providers of lists that consolidate all UN targets, and sometimes suppliers of lists combine individuals, companies, and entities targeted by the UN with those of other sanctions regimes.

 

Additionally, the Security Council has imposed under certain conditions economic sanctions that do not directly impede the financing of embargoed material. The freeze of personal assets of individuals associated with the DPRK’s or Iran’s proliferation projects (usually leaders of the Revolutionary Guards) are cases in point.