Abstract:
That the United States government exerts pressure on parties around the world through its use of economic sanctions is widely known. Less noticed, but no less significant, is a particular jurisdictional move in U.S. sanctions practice: attaching sanctions to transactions that never touch U.S. territory and involve no U.S. persons, yet are denominated in U.S. dollars. This “currency-based jurisdiction” occupies a liminal space between the traditional categories of “primary” and “secondary” sanctions, and it has a questionable relationship to international law rules on jurisdiction. It involves a U.S. nexus, but only a thin one, raising acute questions about the relationship between jurisdiction, regulation, and legality in modern sanctions enforcement.
Drawing on a novel dataset of sanctions enforcement actions across two presidential administrations, this work quantifies the scale of currency-based jurisdiction in practice. Of 127 enforcement actions comprising over $3 billion in penalties and settlements, roughly one in five relied on currency-based jurisdiction in some form. Yet those cases account for approximately sixty percent of the penalties and settlements during the period, making currency-based jurisdiction a cornerstone of U.S. sanctions enforcement. This finding matters for at least three reasons: first, it means that any serious engagement with U.S. sanctions practice must reckon with currency-based jurisdiction, if for no other reason than by virtue of its scale; second, the comparative size of the potential penalties at stake in such cases may have an outsized deterrent effect impacting parties that the U.S. otherwise would not be able to reach; and, third, it highlights that recent U.S. sanctions practice may be more at odds with international law than previously recognized.
Co-authored with Christine Abely.