Enforcing Economic Sanctions: Analyzing How OFAC Punishes Violators of U.S. Sanctions

Abstract

How economic sanctions are enforced undoubtedly has a major impact on whether they are successful. To shed light on the ways in which governments enforce their sanctions, we conduct an empirically-driven case study of how the lead agency for enforcing economic sanctions in the United States, the Office of Foreign Assets Control (OFAC), has punished sanctions violations from 2003-2017. Our study explores three central questions related to how OFAC enforcement actions are initiated, which parties are subject to enforcement actions, and what explains the size of the penalties imposed by OFAC. Our findings reveal that OFAC engaged in two distinct enforcement strategies during our period of analysis: a “fishing” strategy that involved taking a lot of enforcement actions and imposing small fines and a “whale-hunting” strategy that involved pursuing fewer cases but imposing enormous fines. We explain that both politics and the law played a role in explaining why OFAC’s enforcement strategy changed and more broadly how the agency enforces sanctions. Our study also yields numerous novel insights into how the U.S. enforces its sanctions that should be of significant utility to future theory-building efforts.

Keywords: Economic Sanctions; OFAC; Enforcement; Treasury Department; United States; Penalties