New Refinitiv paper says one of the most significant trends observed in its analysis of sanctions data is a steep decline in the importance of the UN’s sanctions.
The consensus-based sanctions mechanisms created under the guidance of the United Nations (UN) have become an increasingly minor part of the global sanctions landscape, Refinitiv says in a new white paper.
The paper presents Refinitiv’s latest analysis to calculate the Global Sanctions Index (GSI), an innovative tool launched in April 2022 to provide the world’s first systematic quantitative measurement of how sanctions grow over time.
The GSI examines the net change in the number of sanctioned persons globally, drawing from sanctions data in the Refinitiv World-Check Risk Intelligence database, which tracks every major sanctions regime.
The index is calculated on a de-duplicated basis to account for individuals and entities that may be sanctioned by multiple regimes globally.
UN consensus mechanisms
According to Refinitiv, one of the most significant trends observed in the GSI data is a steep decline in the importance of the UN’s sanctions. The paper says 98 percent of all sanctions are now issued autonomously by national governments or regional bodies.
UN sanctions are administered by committees appointed by the Security Council, and designations are subject to veto from the five permanent members. As a result, the UN leans towards operating largely by consensus, which has stagnated as a sanctions mechanism since consensus on a variety of global issues is not possible, according to the paper.
Refinitiv says the growing inability for consensus to be reached has resulted in a significant decrease in the proportion of total sanctions issued by the UN over time. “The data suggests that autonomous sanctions regimes will continue to drive global sanctions activity moving forward.”
While the total number of sanctions the UN imposes has remained flat for at least five years, overall sanctions have experienced a phenomenon the paper calls “hyperinflation”.
Sanctions hyperinflation is part of a trend that started at least five years ago, the paper says. “So in fact the recent increases driven by the Russia-Ukraine war have not necessarily resulted in sanctions that were historically unprecedented at a global level.”
The GSI, taking January 2017 as its base, measures year-on-year growth in the number of sanctions designations globally. The total number of sanctioned individuals and entities reached more than 52,000 as of August 2022, compared to around 47,000 at the end of April.
Refinitiv recorded year-on-year global sanctions inflation of 14.6 percent for August 2022, a pace described as “deep hyperinflation”. If this rate of growth were to continue, it would take approximately four years and 10 months for total sanctions to double, the paper says.
Time series data illustrating sanctions inflation trends in major autonomous sanctions regimes shows that the US recorded year-on-year sanctions inflation at 14.3 percent; the EU at 49.6 percent; the UK at 55 percent; Japan at 80.1 percent; and Australia at 131 percent.
“While central banks received global attention when taking actions on curtailing price inflation, another type of inflation has taken root,” says Michael Meadon, who leads Refinitiv’s Customer & Third-Party Risk Solutions business in Asia.
“Sanctions inflation has surged with extremely wide-ranging consequences. It has risen to such an extent that the total number of sanctioned persons has increased by 275 percent since January 2017, and the current inflation rate of 14.8 percent is set to double again within the next five years.”
According to Meadon, the data presented in the paper highlights the extent to which the response to the Russia-Ukraine war has driven rapid sanctions inflation in the EU, UK, Japan and Australia. The paper states that in the current geopolitical environment, there is “no compelling reason” to believe that sanctions inflation will reduce.
The latest GSI figures also show that sanctions inflation is not simply high at the moment – but that it has been significant for the last five years. Over this time, explicit sanctions have more than doubled in number while also becoming inherently much more complex.
The rising volume and increasing complexity of explicit sanctions have had an “incalculable impact” on the cost of sanctions compliance for companies, the paper says.
“For individual companies, a well-designed screening programme with good matching and reliable data is now absolutely critical, both to ensure adherence to sanctions-related regulations and to protect against potential reputational damage in the event that sanctions are inadvertently breached,” it says.
The full paper is published here.