De-Listed

This week, the United States agreed to remove Sudan from its terror blacklist on the condition that the country’s transitional government compensate the victims of the East African U.S. embassy bombings. The blacklist, the State Sponsors of Terrorism list, one of several blacklists utilized by the U.S, formally restricts a jurisdiction from debt relief and financing from lenders like the World Bank and the IMF. The eventual removal of Sudan by the United States, will leave only Iran, Syria and North Korea on the list.  The designation has exasperated Sudan’s faltering economy where inflation reached 212% last month and had far-reaching unintended consequences, which we highlighted in a piece from earlier this year titled ‘Kabul via Khartoum’, as the country navigates a “delicate process to democratic rule.”  

So, how effective is the use of blacklists?

In a working paper, which explores whether the threat of being blacklisted could change behavior, the Brookings Institute noted empirical studies that argue countries added to the FATF gray list were “significantly more likely to criminalize money laundering.” However, others, including Dr. Mark Nance at North Carolina State remain healthily skeptical about blacklists and their real impacts versus those that are effectively “just believed” to be true.  That said, being listed by the United States, which this week released its ‘National Plan to Combat Human Trafficking,’  on the State Department’s annual Trafficking in Person’s report “are more likely to subsequently criminalize human trafficking,” according to Brookings.

Yet, as we covered in last month’s piece Watch Out!,’ in response to the U.S. Commerce Department’s trade blacklist, there is a plethora of watchlists, whether international, regional or national, and which cover a range of issues, each with their own nuanced restrictions. With the case of Sudan demonstrating the unintended consequences, which experts suggest can be partly chalked to misconceptions surrounding such designations, the ability to fully understand and manage the increasingly complex set of non-financial risks cannot be overstated.  

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