Death by De-Risking: How US Sanctions Turn Bank Compliance into Civilian Harm

Abstract

Economic sanctions and asset freezes are central instruments of US foreign policy, but their implementation falls on the private sector, especially banks, which screen transactions, freeze assets, and exit markets through ‘de-risking’. For these institutions, the governing obligations lie in specialised sanctions law, the executive orders issued under them, and the OFAC regulations that enforce them. Cross-national data spanning 1971 to 2021 associate unilateral sanctions with an estimated 564 258 excess deaths annually, a toll similar to the global mortality burden of armed conflict, with the strongest effects for unilateral and US sanctions and no statistical evidence of an effect for UN sanctions. Because International Humanitarian Law does not apply in peacetime and human rights law offers only limited means of enforcing responsibility for the extraterritorial effects of economic measures, a gap opens in state-level accountability for this continuing toll. This paper argues that US sanctions law shifts the operational burden of economic coercion onto private financial institutions. Faced with strict liability and severe OFAC penalties, banks respond through systemic de-risking; yet that response may directly link them, under the UN Guiding Principles on Business and Human Rights, to adverse impacts on the rights to life, food, and health. Drawing on case studies from Afghanistan and Iran alongside the mortality evidence, the paper maps this compliance trap and argues that the United States must operationalise its humanitarian commitments through clear, protected carve-outs that make engagement, rather than exit, the compliant path.

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