This article was initially drafted for a Perry World House conference on “The Intersection of Sanctions and Corruption,” which was made possible in part by a generous grant from Carnegie Corporation of New York. The views expressed are solely the author’s and do not reflect those of Perry World House, the University of Pennsylvania, or Carnegie Corporation of New York.
The United States has long used sanctions to combat corruption around the world, identifying the problem of corruption as a leading cause of State instability and therefore a threat to U.S. national security. Although this approach has faded from view for the moment, the tools that have been developed over decades to fight corruption still exist, and there is strong reason to believe that Washington will once again return to it.
Fighting corruption with targeted sanctions will continue to remain attractive in large part because today’s interdependent global market and financial system make it possible for adversarial states to weaponize graft and exploit weak systems to undermine U.S. interests around the world. Plus, the political salience of issues such as economic inequality, affordability, elite privilege, and foundational ideas of fairness and justice will continue to persist. Corruption remains politically charged, despite its current absence from U.S. foreign policy discussion. Although using sanctions to attack corruption has drawbacks, the overall effect of the use of these sanctions makes them worthwhile.
The Individual Versus the Network
The effectiveness of corruption sanctions is exceptionally difficult to study since it is hard to show that a particular designation caused corruption to subside. This challenge is complicated by a further debate over the nature of corruption itself, which informs the use of sanctions. Under U.S. government authorities, corruption is almost always understood as a principal-agent problem. That is, corruption is the result of an information asymmetry between the principal (for example, the electorate) and the agent (the elected politician), where the agent may engage in certain fraudulent activities or self-enrichment using the power of the office in such a way that the principal may not be able to hold them to account. On this view, the solution to corruption is transparency, independent anti-corruption agencies, and other mechanisms that might deter the agent from abusing this information asymmetry to their own benefit.
The two principal U.S. authorities for combating corruption abroad are the Section 7031(c) kleptocracy visa ban authority and Executive Order 13818, the Global Magnitsky authority. Neither of these defines what corruption is (nor does the United Nations Convention against Corruption), but the examples given in either authority, such as corruption related to natural resources or the misappropriation of State resources, indicate a traditional principal-agent understanding of corruption, in which an agent with access to State power is abusing that power for their own gain. In this regard, these sanctions authorities serve to disable a misbehaving agent. Although the United States is not pursuing a criminal law enforcement action in either case, publicly blocking the person from U.S. shores and the U.S. financial system is powerful and is compounded by private compliance databases listing the individual as a legal liability, resulting in them being de-banked by legitimate financial institutions. If the corrupt individual is the problem, then in theory this should solve it.
Unfortunately, this is not usually the case. In many instances, those sanctioned seem able to continue with their corrupt activities. This is partly due to the corrupt networks of which they are a part. Often, a corrupt agent will maintain a whole web of interlocutors, Western enablers, and subordinates that dull the effect of sanctions. As long as they retain access to their country’s wealth and can continue the patronage that maintains their hold on power, a corrupt actor is unlikely to be stopped by sanctions alone. Sanctions may even enhance their hold on power because the corrupt actor may attempt to present themselves as resisting unfair practices by the United States.
The Difficulty of Changing Behavior
The Office of Foreign Assets Control has often framed the goal of U.S. sanctions as freezing the maximum assets in order to achieve behavioral change. Freezing maximum assets is important in this theory of sanctions because of the assumption that the more assets the U.S. government freezes, the more likely it is to achieve behavioral change. When applied to States, such a theory is probably sound. Sanctions have repeatedly been shown to inflict economic and financial damage. However, drawing a causal link between this damage and desired policy change is harder; some scholars conclude that only about a third of sanctions generate the desired behavioral change. This becomes even more complicated with sanctions that target corrupt individuals.
It is often unclear how corrupt actors might change their behavior. This ambiguity leaves little off-ramp for corrupt actors, and the removal of targeted sanctions is rare (although not unheard of). Targets know this and once sanctioned, they are effectively forced to fight the designation, casting the new restrictions as illegitimate. They may quietly explore whether a deal can be made with the United States, but if the deal includes relinquishing power or standing trial, they are unlikely to accept it.
Although the amount of assets targeted matters, it is the reputational damage and ability to travel that hurts these corrupt actors most. Reputational damage potentially endangers their ability to continue to wield power (and therefore their survival), while travel and the enjoyment of corrupt proceeds are often among the driving motivations of gaining and maintaining power illicitly. In any case, such pain more often produces entrenchment and evasion than behavioral change. Targets may also mount public relations campaigns and try to change the sanctioning country’s policy through strategic corruption or foreign influence.
Supporting Change from Within
There are counterarguments in support of corruption sanctions regardless of whether the target is disabled or reforms succeed — for example, naming and shaming the target, blocking their assets, and barring their travel provide a measure of public accountability that would otherwise be lost. However, the broader goal of targeted sanctions is to combat, prevent, and deter corruption in foreign states. This goal is best served if a given society is able to adopt a set of institutions, attitudes, and ideas that prevent the emergence of large-scale corruption. Most often, corruption is a collective action problem in which members of a society, most importantly up-and-coming elites, learn from a young age that engaging in corrupt activity is the most promising way to advance one’s standing. In such a society, the outcasts are those who resist business-as-usual since non-participation in corrupt acts appears foolish and self-defeating. Even in such a society, there is often a latent understanding among the population that corruption is not desirable or wrongly favors a privileged few, but it is tolerated during normal periods. This dissatisfaction, however, can erupt if an outspoken reformer emerges or another high-impact political shock takes place that might lead to a window of opportunity for reform.
It is during these moments that sanctions, combined with a host of other diplomatic actions to encourage reform, are most potent. Fundamentally, a country must want to fight corruption independently for sanctions to help it along on that course. Sanctions do not generate the reform impulse themselves. Consider Vlad Plahotniuc of Moldova, Aivars Lembergs of Latvia, and Liviu Dragnea of Romania. The United States sanctioned all of them after or as their countries took legal action against them. Here, U.S. sanctions acted as reinforcement for the foreign country’s actions. By all accounts, fighting corruption in these countries has mostly succeeded, at least in comparison to some of their near-peers. U.S. sanctions likely helped with the process but were not the whole story or even the primary driver. The will to reform emerged from the people in every instance, and sanctions simply provided the extra push. Sanctions should therefore be thought of as part of a broader diplomatic toolbox to help countries that are undergoing a self-driven transformation.
The imposition of sanctions on corrupt actors has also been inconsistent. At times, they appear to be largely informed by motivated non-governmental organizations and internal government policy actors (see, e.g., a report claiming that 34% of U.S. sanctions actions were based on civil society recommendations). This is not necessarily a bad thing if these organizations and actors are working more broadly for reform in a country that is itself driving change and sanctions are one part of the diplomatic puzzle, as in the above European examples. As a strategy for building broader deterrence against global corruption, however, this approach is unlikely to be effective. Under the first Trump and the Biden administrations, the majority of U.S. corruption sanctions were released in December on International Anti-Corruption Day. Often the list prioritized geographic diversity, reinforcing the impression that a corrupt actor anywhere could be designated. That impression was further strengthened by the statutory requirement that the government consider credible information submitted by NGOs, signaling that evidence could reach Washington from anywhere.
However, this approach was hamstrung because corruption sanctions, whether Global Magnitsky or 7031(c), are mostly placed on mid- and lower-tier foreign officials and the U.S. government often avoided countries that were important security partners, or where a designation was judged contrary to the national interest. This pragmatic approach is reasonable given how many national security priorities the United States has. As with human rights, often other priorities take precedence over the fight against corruption, even when corruption is itself treated as an important national security concern. Nonetheless, despite the lack of evidence for a deterrent effect, publicly announced sanctions that were imposed are widely celebrated by advocates for the accountability they provide.
Finally, one might interpret sanctions as a defensive tool — stopping corruption from reaching the United States. Sanctions fight corruption at home when they keep the world’s most corrupt officials from entering the country or banking here. In this respect, corruption sanctions may be effective simply by existing. Although their deterrent effect is questionable and their impact on a country’s reform process is difficult to pin down, the ability of sanctions to protect the United States from foreign corruption seems undeniable so long as sanctions evasion can be prevented and the potential knock-on effects (such as a foreign target rally-around-the-flag effect) can be tolerated.
