Financial Sanctions
Financial sanctions are restrictive measures imposed to limit access to financial systems, assets, or transactions.
Meaning in Practice
Governments or international bodies impose sanctions to restrict individuals, companies, or countries from accessing financial markets. Measures may include asset freezes, transaction bans, or exclusion from payment systems. Financial institutions must implement screening and monitoring systems to ensure compliance.
Why It Matters
Financial sanctions are a key geopolitical and regulatory tool to enforce international law and policy objectives. Non-compliance can lead to severe penalties and reputational damage for institutions.
Market Impact
Sanctions can disrupt trade flows, capital markets access, and currency stability. Affected companies and sovereign issuers may face funding constraints and valuation declines.
Example
A country is excluded from international payment networks, limiting its banks’ ability to conduct cross-border transactions.