It's easy: if an action is sanctioned, it is approved. If a person or group is sanctioned, then they are penalized or censured. For example: "The state has sanctioned the use of government funds for these purchases." vs. "The state sanctioned him for using government funds for unauthorized purchases." See the difference?

By looking at the rest of the rest sentence. You have to base it on context. For example, look at this headline. http://financefeeds.com/breaking-news-worldpay-sanctioned-by-french-government-for-processing-payments-from-israeli-fraudsters-takes-banks-to-court/ You can tell that it means "crack down on" because Worldpay did something bad. It would make no sense for the French government to "approve" of fraudulent behavior.

It's easy: if an action is sanctioned, it is approved. If a person or group is sanctioned, then they are penalized or censured. For example: "The state has sanctioned the use of government funds for these purchases." vs. "The state sanctioned him for using government funds for unauthorized purchases." See the difference?

lol...that is the best question ever! I hadn't even thought about that! But seriously, you just have to look at the context of the usage.