How America Can Stop Money Launderers From Funding Africa’s Worst Civil War.

A humanitarian and human rights catastrophe is unfolding in Sudan. With nearly 11 million people already displaced—three million of them children—the country is now home to the most people rendered homeless by conflict worldwide, and its populace sits poised on the brink of a major famine. A collapsing medical system renders the war’s true death toll unknown. Sudan’s capital, Khartoum, is being destroyed block by block.

It may be tempting to think of this tragedy as another episode in a multidecade conflict. The main combatants—the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF), the paramilitary group that the SAF organized out of the militias known as the Janjaweed—also helped drive the war in Darfur 20 years ago. That war prompted the twenty-first century’s first genocide, and genocidal violence has now returned to the Darfur region. In 2023, after the RSF turned on its former army benefactors and began taking over large swaths of Sudan, the United States partnered with Saudi Arabia to try to secure a cease-fire.

But these U.S. efforts failed, in part because the Sudanese civil war is not merely a reprise of old tensions. New players have joined the fray—international actors whose contributions to the violence both complicate the conflict and provide fresh opportunities to resolve it. Middle Eastern countries see especially tempting opportunities to exploit Sudan’s natural resources, access its ports along the Red Sea, use it as a base to combat the Houthis in Yemen, quash pro-democracy efforts, and strengthen the hand of Islamist or anti-Islamist groups. The illicit exporting of gold has become a particularly major source of funding for the war: Egypt is now buying gold originating from areas controlled by Sudan’s army. The United Arab Emirates has become a destination point for gold mined from RSF-controlled areas, and the country is allegedly delivering weapons to the RSF. Russia’s Wagner paramilitary company also facilitates large-scale purchases of RSF-controlled gold and provides the RSF with military aid such as surface-to-air missiles.

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With bipartisan encouragement from the U.S. Congress, in February U.S. President Joe Biden appointed a new special envoy to the region, the seasoned diplomat Tom Perriello. Perriello, a former member of Congress, was creative and indefatigable in his role as special envoy to the Democratic Republic of the Congo during President Barack Obama’s tenure, and his strong relationships on Capitol Hill will be critical for securing high-level attention from Washington.

But the biggest difference the United States can—and must—make is to dramatically increase its financial pressure on the proxies aggravating the war, particularly the United Arab Emirates but also Egypt, Wagner, and Iran, which has become an important arms supplier to the SAF. In the short run, those who wish to bring peace to Sudan must negotiate a meaningful cease-fire and establish safe corridors for the delivery of humanitarian aid. These cease-fire negotiations must also prioritize an inclusive transitional political arrangement, a key to ending the violence and to laying the groundwork for effective future governance. It will be critical, too, to involve civilian groups in negotiations to reflect the Sudanese people’s overwhelming desire for peace. To accomplish any of these objectives, however, the violent kleptocratic system now funding the war must be confronted.

GOLD DIGGERS

Sudan produces a great deal of gold. According to the World Gold Council, in 2022 it was the world’s 16th-largest gold producer and the fourth-largest gold producer in Africa, behind Ghana, Mali, and South Africa. The RSF’s leader, Mohamed Hamdan Dagalo—a former camel trader popularly known as Hemedti—established control of many of Sudan’s gold mines after becoming close to Omar al-Bashir, the country’s head of state for 30 years. Hemedti is not a loyal man: in 2019, he partnered with an SAF general, Abdel Fattah al-Burhan, and overthrew Bashir, joining a transitional government and talking up democracy. Two years later, he and Burhan ousted their civilian partners—the fourth such military coup in Sudan’s postcolonial history—before Hemedti turned on Burhan.

Hemedti’s reliance on the UAE, however, has been consistent. By the late 2010s, Hemedti’s trade in gold had made him one of the country’s wealthiest men. After taking over one of Sudan’s most lucrative mines in 2017, Hemedti used that wealth to cement a leading position in the country’s kleptocratic political system. As his role in the gold trade increased, his connections with Dubai’s leaders deepened; beginning in the mid-2010s, he supplied mercenary forces to fight on behalf of the UAE’s interests in both Libya and Yemen.

A recent United Nations analysis found that the UAE aids the RSF by receiving gold that sanctioned firms illicitly smuggle out of Sudan—often in partnership with Wagner-affiliated companies—and laundering it, injecting it into the international gold market. The UN’s Expert Panel on Sudan has found that the UAE is further supporting the RSF militarily, violating a UN arms embargo. At the outset of the current conflict, the SAF was better armed than the RSF, and the Sudanese civil war could not have lasted this long without the UAE’s assistance to the RSF. The UN and multiple media outlets have reported that the UAE is giving the RSF direct military assistance in the form of howitzers, multiple-launch rocket systems, combat drones, and portable surface-to-air missiles.

This aid has enabled the RSF to change the balance of power to its advantage in many parts of Sudan, including Khartoum and key places in the east such as the capital of El Gezira State, the country’s breadbasket. By late 2023, four out of the five states in the long-embattled Darfur region had fallen to the RSF, whose troops have destroyed and burned villages, committed sexual assault and mass killings, and obstructed the delivery of humanitarian aid. Significant gold exporting operations exist in SAF-controlled areas of Sudan as well: since the onset of the war, the SAF has shifted its primary gold export destination from the UAE to Egypt. The smuggling of gold into Egypt has received less attention, but these illicit exports are also helping perpetuate violent conflict.

Cutting off Sudanese leaders’ ability to smuggle gold would not only reduce their ability to continue their destructive fighting. It could also hobble Russia’s efforts to subjugate Ukraine. Hemedti has been central to arrangements that allow Russia to access billions of dollars’ worth of Sudanese gold, either by importing it directly or by partnering with the UAE to launder it into international gold markets as a source of relatively untraceable cash. In July 2023, the United Kingdom’s parliamentary foreign affairs committee released a report on Wagner’s role in funding Russia’s war in Ukraine. It noted that “Wagner’s gold-smuggling operations from Sudan are significant, with one [interviewee] calling them ‘critical to Russia’s ability to withstand the significant sanctions deployed against it for its illegal invasion in Ukraine.’” Wagner may be earning over a billion dollars a year from illicitly bought and exported Sudanese gold.

SURFACE CLEAN

During the second half of 2023, U.S. Vice President Kamala Harris, Secretary of State Antony Blinken, National Security Adviser Jake Sullivan, and other American officials sought to have conversations with UAE leaders, urging them to stop supporting the RSF. These endeavors elicited no change, however, in the UAE’s policy toward Sudan. This diplomacy needs to be backed by much more financial pressure, primarily through the more muscular use of anti-money-laundering instruments and network sanctions that target both the illicit gold trade and illegal arms deliveries.

The UAE has long been a money-laundering hotspot. It acts as a major transshipment and destination point for global money laundering, from which it is estimated to derive up to 20 percent of its GDP. In 2020, a Carnegie Endowment for International Peace report stated that “both Emirati leaders and the international community continue to turn a blind eye to the problematic behaviors, administrative loopholes, and weak enforcement practices that make Dubai a globally attractive destination for dirty money.” The gold sector is a key target for that money laundering. The UAE itself has admitted that its gold and precious metals sector is attractive to criminals and that it must do more to stop the flow of dirty money and illicit gold from countries such as Sudan.

Although the UAE has launched several initiatives over the past few years to clean up its gold sector, concrete results remain scarce. In 2022, the country’s ministry of economy unveiled new guidelines on responsible gold sourcing, incorporating an independent audit. But the UAE has a questionable track record when it comes to relying on such audits: in 2020, a British court found that the accounting firm Ernst & Young was “colluding” with Dubai authorities to cover up evidence that a major jewelry firm had laundered billions of dollars; the judge accused the accounting firm of “professional misconduct” and a “breach” of “principles of integrity and objectivity.”

The UAE has been reprimanded repeatedly for its money laundering and illicit gold imports. In December 2022, the European Union added the UAE to its “high risk third-country jurisdiction” list, a designation that requires European financial institutions to enhance their due diligence on transactions stemming from identified nations. Earlier that same year, the Financial Action Task Force (FATF), the intergovernmental body founded in 1989 to combat money laundering worldwide, put the UAE on its gray list of countries with deficiencies in their anti-money-laundering frameworks, encouraging banks and companies to enhance their scrutiny of money flows from Dubai.

The UAE’s leadership was desperate to get off the FATF gray list. A 2021 IMF study of the impact of gray listing on 89 countries found that capital inflows in gray-listed countries decline, on average, by nearly eight percent of GDP. Transparency International has argued that the UAE’s on-paper reforms have yet to be implemented, but in late 2023 and early 2024 the UAE visited key FATF member states to lobby to be removed from the list, and in mid-February these efforts were rewarded when the FATF removed the country from its gray list. Geopolitical considerations undoubtedly played a decisive role, given Dubai’s crucial position in Middle East diplomacy and Europe’s energy security.

FOLLOW THE MONEY

Efforts to resolve the Sudanese crisis diplomatically are ramping up: in addition to Biden’s decision to appoint a special envoy, in November the UN secretary-general appointed a new envoy to Sudan to support peacemaking efforts. But the United States and its partners can do much more to build leverage ahead of the next phase of mediation in Sudan. Washington and willing European governments should signal to Dubai that as long as it is bankrolling war and genocide in Sudan, they will continue to gather information on any Emirati noncompliance with the FATF’s standards.

In June 2023, the FATF updated its rating methodology, increasing its focus on “effectiveness” of implementation to reflect that some countries adopt exemplary regulations but pursue very little subsequent enforcement. The United States and other governments should increase their intelligence gathering on money laundering in Dubai, share findings about gaps in implementation, deliver that information to the FATF, and continue to use their influence within the FATF to advocate that these loopholes are closed. As part of this scrutiny, it is imperative that the FATF undertake an independent analysis of the UAE’s gold sourcing. And the EU must keep the UAE on its own money-laundering gray list until Dubai stops illicitly importing Sudanese gold and arming the RSF.

The United States should also indicate that it will publish a UAE-specific business advisory similar to the ones it has issued for Myanmar, Sudan, and South Sudan, warning the private sector of the money laundering, sanctions evasion, and corruption risks of doing business with the UAE and calling for increased due diligence in high-risk sectors such as gold. Such an advisory would have a reputational impact on the UAE, and it could result in a loss of revenue for the country if U.S. businesses charge higher fees or interest rates to cover the costs of applying more stringent compliance measures and Emirati companies face higher barriers to accessing the U.S. market.

Washington must sanction the companies that help deliver weapons from the Middle East and Russia to Sudan.

In addition, Washington should issue sanctions on Emirati and other companies involved in the Sudanese illicit gold trade, particularly Wagner-affiliated firms. The United States has done this before, sanctioning UAE companies involved in Russian sanctions evasion. The United States and its European allies must also get more serious about sanctioning Sudanese entities. Last year, the United States began sanctioning a handful of Sudanese officials and companies profiting from violence. In January, the EU entered the fray by sanctioning six Sudanese companies for their roles in facilitating corruption and conflict in Sudan.

But these sanctions suffered from a problem common to sanctions imposed throughout Africa. Sanctioned individuals usually do not do business in their own names, instead working through shell companies and using the names of family members, associates, or even their minor children. The entire network of economic interests, proxies, and enablers surrounding key officials and targeted companies needs to be sanctioned for the flow of money funding conflict to be materially affected.

A more effective sanctions strategy would target networks of collaborators and companies that prop up key RSF and SAF officials, including Hemedti and Burhan themselves. Sanctioning actors in third countries and strengthening the enforcement of sanctions against Wagner and Iran would help, too—especially if sanctioning Emirati actors seems too politically difficult. The United States and its allies could more easily target companies and networks in third countries—such as the Central African Republic, Chad, and Uganda—that are involved in the delivery of Emirati weapons to the RSF.

Last year, the EU sanctioned officials complicit in gender-based violence in Russia, Afghanistan, and other countries. It can impose similar sanctions against RSF and SAF officials responsible for the huge increase in sexual violence in the country since the latest war erupted. And rather than dripping out a handful of sanctions every few months, the United Kingdom, the United States, and the EU must rapidly escalate these network-based sanctions in unison and commit to update them agilely in order to account for evolving changes in the companies’ nomenclatures and structures. Finally, the United States should amend its 2023 executive order related to Sudan to permit sanctions related to the illicit trade of natural resources, similar to the executive order permitting natural-resource-related sanctions against entities in the Democratic Republic of the Congo. This would make it much easier to sanction traders or companies buying conflict gold.

PEACE DIVIDENDS

The Biden administration faces political barriers to applying financial pressure to help resolve the Sudanese crisis. The United States needs Egypt, Saudi Arabia, and the UAE to help it defuse tensions in the war-ravaged Middle East, a region whose importance to the United States has historically far outweighed Sudan’s. Instruments of financial pressure would have to be wielded quietly, and they would likely be considered only in response to demands from a committed, bipartisan group of Congress members who have long advocated for a more robust U.S. response to the conflict in Sudan.

But Dubai is clearly sensitive to financial pressure, as evidenced by its full-court press to get off the FATF and EU gray lists. Increasing scrutiny by way of a business advisory, new network sanctions designations, and information-sharing with the FATF would likely affect the country’s appetite for importing illicit Sudanese gold and reduce its incentive to support the RSF militarily. If the UAE backed away from the conflict, it would dramatically curtail the RSF’s ability to continue to wage its destructive offensives across Sudan. And if Egypt reduced its SAF-related gold smuggling and new sanctions on Wagner and Iranian entities were implemented, it would increase the prospects of progress at the negotiating table.

Financial pressure behind the scenes would greatly strengthen the hand of diplomats, including Perriello, the United States’ new special envoy. He faces a complex task: previous efforts to set Sudan down a more stable path have suffered from a lack of input from Sudanese pro-democracy activists and civil society actors. The United States should increase the material support it provides to pro-democracy, anticorruption, and pro-peace Sudanese groups, as well as to community-level efforts to deliver humanitarian assistance. To further support these civilian efforts, the United States and European countries should commit to no longer recognizing any Sudanese government that emerges from the barrel of a gun and should increase their cooperation with the International Criminal Court to catalogue war crimes and crimes against humanity for possible future prosecutions.

But Washington must make bold moves because, in fact, it has vital interests in Sudan. It needs to counter Russia’s attempt to secure a base on the Red Sea. The Biden administration has also staked a great deal of political capital on supporting democracy worldwide, and helping restore Sudan’s democracy would make an important statement about the United States’ commitment to supporting African democracy and peacemaking. The role of Islamist groups and Iran in the SAF’s operations continues to grow; many SAF officials formed part of the Bashir regime that hosted Osama bin Laden and incubated al Qaeda’s commercial infrastructure.

The war engulfing Sudan is no simple ethnic conflict or power struggle between two warlords. Successive Sudanese regimes have constructed a kleptocracy built on violence and repression, and the country is now being relentlessly plundered by foreign actors. Most international players in Sudan are seeking to profit from the country’s crisis. The United States is the country in the best position to drive peace instead of war—but only if it applies financial and diplomatic pressure on Egypt, Iran, Russia, and the UAE, the places where it matters the most.

Source: Foreign Affairs By John Prendergast

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