President Trump emphasized the need for a new approach in tackling criminal networks during his speech to Congress by officially designating certain groups as foreign terrorist organizations. This move, alongside the recent identification of six major international drug cartels for sanctions, sets the stage for financial warfare against these illicit networks.

Trump’s executive order last month labeled drug cartels as foreign terrorist organizations, with a subsequent memorandum aimed at strengthening sanctions against Iran. These actions highlight a shift towards using economic measures to target adversaries and disrupt criminal and terrorist networks.

The objective is clearly defined: unleashing financial warfare to disrupt criminal organizations and rogue states. However, the effectiveness of these sanctions enforcement policies remains in question. A potential solution could involve encouraging private parties to pursue civil lawsuits against sanctions violators through a strategy called “qui tam,” which has proven successful in other legal domains.

By empowering private individuals to sue violators on behalf of the government, the qui tam provision could create a strong incentivized structure driven by the market. This could lead to more aggressive pursuit of sanctions violators by private actors like whistleblowers, investigative firms, and compliance professionals, supplementing the efforts of under-resourced government agencies.

Enhancing enforcement actions against sanctions violators is critical for the success of financial warfare strategies. Despite the expansion of economic tools for statecraft, mechanisms for enforcing sanctions have struggled to keep up with the evolving global financial system. The administration’s intent to impose sanctions aggressively may fall short without sufficient resources and enhanced enforcement capabilities.

For instance, Iran has evaded sanctions through complex financial networks and affiliate groups, using extensive oil sales to fund destabilizing proxy groups in the Middle East. Similarly, drug cartels have circumvented sanctions to continue their operations through sophisticated money laundering schemes. The recent executive order targeting cartels aims to disrupt their financial networks, but enforcement by banks and financial institutions has been inadequate.

A qui tam approach could strengthen enforcement efforts against sanctions violators, especially by targeting vulnerabilities in financial flows and illicit operations. Incentivized private actors could play a pivotal role in tracking and reporting on these activities, leading to more effective enforcement, and increased scrutiny of facilitating financial institutions.

To make sanctions truly effective, utilizing a decentralized mechanism with incentives for the private sector and NGOs is crucial in combatting collusion and illicit activities. This shift towards a market-driven approach aligns with leveraging private enterprise to achieve public policy goals, signaling the need for a change to combat impunity among sanctions violators.