Sudan’s civilian government and a broad cross-section of Sudanese civil society have recently called on the US government to remove Sudan from its State Sponsors of Terrorism list. There are ways to achieve the goals Sudan’s pro-democracy forces have set for their country, but it will require multiple, methodical steps by both Sudan and the United States.
According to a new op-ed published in Just Security, The Sentry‘s* anti-money laundering advisor Hilary Mossberg and co-founder John Prendergast explore the myths around removing Sudan from the US State Sponsors of Terrorism list. They argue that while the US government should accelerate the process of removal, that alone will not be a panacea to immediately improve Sudan’s economy.
Sudan’s civilian government and a broad cross-section of Sudanese civil society have recently called on the US government to remove Sudan from its State Sponsors of Terrorism list. Many see such a move as the solution to reverse Sudan’s economic implosion, as the transitional government that emerged from last year’s toppling of dictator Omar al-Bashir seeks to move the country towards democracy. But the process required for delisting is widely misunderstood, the expectations for the results are exaggerated, and, most importantly, the real reforms necessary for economic recovery are grossly underappreciated. There are ways to achieve the goals Sudan’s pro-democracy forces have set for their country, but it will require multiple, methodical steps by both Sudan and the United States.
One myth is that the US terrorist list designation prohibits or even criminalizes foreign investment. This is widely believed in Sudan and the idea has been perpetuated in recent articles. In reality, the terrorism listing triggers specific restrictions on the US government’s foreign assistance to Sudan, bans defence exports and weapons sales, and controls the export to Sudan of dual-use items. The listing also prohibits exports to Sudan of certain agricultural goods and medical devices, but these bans have been almost entirely licensed away by the US Treasury Department. Broader restrictions on banking and investment actually were removed when the United States lifted its comprehensive sanctions against Sudan in 2017.
A second myth is that the terrorism listing is the only barrier to debt relief in Sudan. Indeed, the listing does prevent the US from voting in favour of International Monetary Fund (IMF) and World Bank debt relief packages and other multilateral loans and financing, but it does not prohibit any other country or group of countries from providing debt relief or aid. Even if the terrorism designation is lifted, IMF and World Bank policies on arrears will inhibit lending to Sudan.
There are also multiple myths and deep confusion surrounding the process required for removing Sudan from the State Sponsors of Terrorism list. The primary immediate obstacle to removal is the need for a negotiated settlement with the families of victims of terrorist attacks conducted with alleged material support from the former Sudanese government. Prime Minister Abdalla Hamdok indicated in December that his government is accepting responsibility for the actions of its predecessor and working on agreements with the families of those killed in the 1998 US Embassy bombings in Kenya and Tanzania as well as the 2000 bombing of the USS Cole. Only when those agreements are reached, and as long as Sudan continues its counterterrorism cooperation with the United States, can the delisting process begin.
This is where the issue gets even more complicated. The delisting process mandates that the US government conduct an in-depth, months-long assessment of whether Sudan continues to support terrorism and whether it is compliant with other benchmarks agreed upon by the two parties. Once that assessment has concluded and the determination is made to remove Sudan from the list, Congress has a 45-day window to block the move. The entire process will likely take several months.
The good news is that US economic relations with Sudan are already showing signs of a thaw, as indicated by the agreement signed in December 2019 giving the Khartoum-based Nile Bank access to the US technology giant Oracle’s mobile banking systems. While diplomatic relations with the US continue to improve, with the countries agreeing last month to exchange ambassadors for the first time in 23 years, a possible travel ban barring Sudanese from the United States would likely strain the relationship and hamper vital collaboration on counterterrorism.
Crucial Need for Reforms
Myths also surround the potential impact of delisting. When the comprehensive US sanctions on Sudan were lifted in 2017, many Sudanese held false hope of immediate economic improvement. That recovery didn’t happen for a number of reasons, foremost among them the kleptocratic government that Bashir had created and the failure of the Sudanese government and banks to address corruption and money laundering. The terrorism delisting almost certainly won’t result in immediate economic improvement either.
For an increase in foreign investment to occur, Sudan needs to implement crucial new reforms, especially within the banking sector, that are prerequisites for sound foreign investment and aid spending. In early 2019, analysis from The Sentry on Sudan’s anti-money laundering regime revealed that the government’s efforts to counter illicit finance were woefully insufficient, and not enough has changed since then. Several Sudanese banks are majority-owned by companies controlled by security forces or other government entities and still run by former members of Bashir’s inner circle and by senior members of the military and security services, thereby creating conflicts of interest and avenues of abuse within the banking sector for criminals and corrupt actors. While there have been promising signs in the last month that the Central Bank of Sudan is working to address its deficiencies, banking supervision remains weak, and the Central Bank—despite issuing new directives on bank oversight—does not wield enough power to crack down on corrupt banks.
These conditions create real risks for foreign investors and international banks and will continue to be a deterrent to investment even after Sudan is removed from the terrorism list. The investment climate in Sudan is risky, given the systemic corruption, and international banks are wary of taking on clients in Sudan.
In fact, Sudan’s entire economic system is opaque, making it difficult or even impossible for banks to conduct customer due diligence on Sudanese clients and companies and to understand their risk profile. Greater transparency in the banking sector is essential to increasing foreign investment, and Sudan’s banks will need to engage directly with major international banks to demonstrate that the systems they have in place are sufficient for global banks to provide correspondent, lending, and other critical services.
A Way Forward
Despite these challenges, there is a way forward for Sudan to address the remaining issues and for the United States and other countries to increase support. First, Sudan and the United States must come to a quick and fair agreement regarding payments to the American families affected by Sudan’s support for terrorism.
Second, the US government should accelerate the process of removing Sudan from the State Sponsors of Terrorism list. While it will take months to complete, there is no reason the US can’t begin the delisting process immediately while the compensation negotiations continue.
Third, Sudan’s government must enforce existing anti-money laundering laws and transparently implement banking supervision reforms. These reforms are absolutely necessary to encourage foreign investment, and without them, the country will not see much in the way of economic improvement. Sudanese government and banking officials should also start to engage with, and attend meetings of, critical institutions in the banking compliance sector, such as the Wolfsberg Group, the Association of Certified Anti-Money Laundering Specialists (ACAMS), and the global anti-corruption forum to be held in Seoul in June 2020.
Fourth, Sudan must take specific action to address concerns in the gold sector, which is a major contributor to Sudan’s gross domestic product but is riddled with money laundering, illicit financial flows, and human rights violations.
Fifth, the United States, other concerned governments, the African Union, and the European Union should impose targeted network sanctions on spoilers of democratic and economic reforms. Particular focus should be on the security sector, where senior officials seek to maintain the corrupt, captured state constructed under Bashir. Such spoilers prevent economic competition, use private banks to launder illicit gains, and loot the natural resources of the country.
Finally, the United States should issue an anti-money laundering advisory to banks, similar to those it issued on South Sudan in 2017 and Nicaragua in 2018, warning banks of the increased risk of corruption proceeds traversing the US financial system. The advisory could outline money laundering and corruption typologies that banks should be on the lookout for, update banks on the situation in Sudan, highlight areas of progress and risks, and promote public reporting of due diligence conducted by US companies investing in Sudan.
If Sudan’s removal from the terrorism list occurs in conjunction with meaningful reform and clear communication and regulatory support from the US government, the prospects for economic recovery will exponentially improve. With the extraordinary human capital and natural resource base in Sudan, sound economic policies and anti-corruption efforts could yield an era of unparalleled peace and prosperity in a war-weary country.
* The Sentry is an investigative and policy team that follows the dirty money connected to African war criminals and transnational war profiteers and seeks to shut those benefiting from violence out of the international financial system.
Disclaimer: The views and opinions expressed in this article are those of the contributing author or media and do not necessarily reflect the position of Radio Dabanga.
Hilary Mossberg is The Sentry’s anti-money laundering expert for Africa. She has over a decade of experience in illicit finance and national security. Mossberg was formerly a senior advisor for terrorist financing and financial crimes at the US Department of the Treasury, focused on developing anti-money laundering policy, conducting outreach with foreign governments to strengthen illicit finance efforts internationally, and directly supporting the US delegation to the Financial Action Task Force.
John Prendergast is a human rights and anti-corruption activist as well as a New York Times bestselling author who has focused on peace in Africa for over 35 years. He is the co-founder with George Clooney of The Sentry, an investigative initiative chasing the assets of African war criminals and their international collaborators, and whose Board of Directors includes Clooney, Don Cheadle, Matt Damon, and Brad Pitt. John is also the Founding Director of the Enough Project, a policy organization aimed at countering genocide and crimes against humanity.
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