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US SANCTIONS 10 AL-SHABAAB FINANCIAL SUPPORTERS AND PAKISTAN REMOVED FROM FATF GRAY LIST

October 20-26, 2022 | Issue 20 - IFET (Illicit Finance and Economic Threats)

Christine Saddy, IFET Team

Jashanpreet Malhi, Editor; Manja Vitasovic, Senior Editor

Drawings of weapons and the Al Shabaab flag[1]


Date: October 20, 2022

Location: East Africa

Parties involved: US; US Department of the Treasury’s Office of Foreign Assets Control (OFAC); Al-Shabaab; South Sudan law enforcement; Democratic Republic of Congo law enforcement; Kenya; Eritrea; Somalia; African countries; European countries

The event: On Monday, the US issued sanctions on 10 individuals who run Al-Shabaab's financing networks and procure their resources. The sanctioned individuals are responsible for extortion, managing fundraising charities, laundering fiat currency, and taxing local enterprises, imports at seaports, and other illicit activities for Al-Shabaab's financing. Al-Shabaab generates around USD 100 million annually and the US placed an award on information on some of these 10 individuals.[2]

Analysis & Implications:

  • US sanctions will likely discourage other African countries like Kenya and Eritrea from doing business with Al-Shabaab, which will likely undermine their financial capabilities. This will likely reduce the militia’s operational funding, likely reducing their power and likely slowing the recruitment of new members in Africa. There is a roughly even chance that a shortage of weapons and recruits will reduce the militia’s ability to enforce its capabilities, which could likely reduce the perceived threat of terrorist attacks in Somalia and nearby African countries.

  • Sanctions will unlikely impact Al-Shabaab's ability to generate funds for itself. The militia sympathizers and undetected foreign affiliates will likely help it financially to circumvent US sanctions. They will likely start operating in nearby African countries that will likely have limited counter-illicit finance regimes and regulation power, like South Sudan and the Democratic Republic of Congo, as there they will likely carry out illicit activities with minimal chances of detection.

Date: October 20, 2022

Location: Pakistan

Parties involved: Pakistan; US; Financial Action Task Force (FATF); the World Bank; International Monetary Fund (IMF)

The event: FATF will reportedly remove Pakistan from its "gray list" this week, after its on-site visit to evaluate the progress in fighting illicit financing. The FATF “gray list” covers all countries that need close monitoring due to limited money laundering regulations, and Pakistan will not be under increased monitoring anymore.[3]

Analysis & Implications:

  • Removing Pakistan from the “gray list” will likely attract foreign businesses to invest in the country and enhance Pakistan’s credibility in the global market. Increased foreign investment and export-import will likely revitalize Pakistan’s economy after COVID-19 and the recent floods. This will likely boost the labor market and create new jobs, likely improving living standards.

  • This measure will almost certainly bolster Pakistan's global reputation, and will likely encourage the World Bank, international assistance programs, and Western countries like the US to assist Pakistan financially. It will likely improve Pakistan's sovereign credit rating and spur the IMF to resume its USD 6 billion bailout program in Pakistan after its compliance with FATF requirements. Removing Pakistan from FATF increased monitoring will likely encourage banks to process wire transfers swiftly, which will likely incentivize Pakistani expatriates to send remittances to their relatives. Remittance will almost certainly increase the overall cash flow in the country and raise peoples’ purchasing power, consequently likely strengthening Pakistan’s economy.


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[1]Drawings of weapons and the Al Shabaab flag” by The African Union Mission in Somalia, licensed under Rawpixel

[2] US Sanctions Hit al-Shabab’s Financing System, OCCRP, October 2022 https://www.occrp.org/en/daily/16922-u-s-sanctions-hit-al-shabab-s-financing-system

[3] Pakistan hopes to get off global dirty money watchdog's 'grey list', Reuters, October 2022 https://www.reuters.com/world/asia-pacific/pakistan-hopes-get-off-global-dirty-money-watchdogs-grey-list-2022-10-20/

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