Sanctions by the Numbers: Spotlight on Afghanistan

Prior to 9/11

Since 1999, the U.S. Department of the Treasury (Treasury) has issued a wide array of economic measures related to Afghanistan, targeting individuals and entities engaged in various illicit activities including terrorism and terrorist financing, narcotics trafficking, corruption, and money laundering. That year, President Bill Clinton signed Executive Order 13129, which froze Taliban assets based on findings that the organization had allowed Osama bin Laden and al Qaeda to use Afghanistan as a base of operations from which they planned acts of violence against the United States. This executive order issued the first set of U.S. sanctions against the Taliban under the authorities of the International Emergency Economic Powers Act, the National Emergencies Act, and other relevant U.S. legislation. This order codified under U.S. law and strengthened previous United Nations Security Council (UNSC) economic measures issued during the same year, which sought to freeze the Taliban’s funds and other financial resources in response to its sheltering of Osama bin Laden, who was also responsible for the 1998 bombings of the U.S. embassies in Kenya and Tanzania.

After 9/11

The way U.S. sanctions targeted the Taliban changed drastically following al Qaeda‘s terrorist attacks against the United States on September 11, 2001, as the executive branch created the first counterterrorism-related sanctions program and established the policy framework for a significant increase in Afghanistan-related sanctions. That year, President George W. Bush signed Executive Order 13224, which authorized the Treasury to expand its Specially Designated Nationals list to include foreign individuals and entities anywhere in the world who were providing support, services, or assistance to terrorists and terrorist organizations. This order created the first counterterrorism financing sanction authority known as the Specially Designated Global Terrorist (SDGT) list. Under Executive Order 13268, a 2002 amendment to this new authority, Treasury designated the Taliban as a terrorist group for its role in harboring al Qaeda militants who planned and executed terrorist attacks against the United States, effectively prohibiting any U.S. person or entity from engaging in any transaction or dealing with the Taliban.

As terrorism threats continued to increase, the Treasury created several subdivisions within its Office of Terrorism and Financial Intelligence (TFI) to tackle the financing of terrorism, leading to an increase in Afghanistan-related designations on the Taliban and other terrorist groups. One particularly relevant TFI-related initiative for Afghanistan was the Afghan Threat Finance Cell (ATFC) which has successfully identified and disrupted financial networks related to terrorism, the Taliban, narcotics trafficking, and corruption after its inception in 2008. In collaboration with the Department of Defense (DoD) and the Drug Enforcement Agency (DEA), Treasury’s contribution to the ATFC provided threat finance expertise and intelligence to U.S. civilian and military leaders within commands across Afghanistan, embedding nearly 60 ATFC personnel and vetted Afghan authorities. This cooperation was useful, as Taliban-run operations often involve drug trafficking, money laundering, and other illicit activities of interest to the DoD and DEA. Collaborative ATFC efforts have resulted in the collection of tens of thousands of financial documents which provided the legal framework for additional designations on Taliban-related targets.

Since the establishment of the ATFC in 2008, additional legislation and sanction authorities have strengthened U.S. efforts to address issues related to transnational crime, including terrorism and the financing of terrorist activities. President Barack Obama’s administration released its Strategy to Combat Transnational Organized Crime in 2011, which contributed to the three-fold increase in newly added Afghanistan-related sanctions designations from 2010 (7) to 2011 (24). Following its designation of the Haqqani Network as a foreign terrorist organization in 2012, the Obama administration maintained a high pace of sanctions designations on Taliban-related targets that year (24). This new strategy declared the intention of the National Security Council to “maximize use of the Kingpin Act [SDNTK] to pursue transnational drug organizations,” and created the Transnational Criminal Organization sanctions program to target a wider range of illicit activities. These two decisions significantly contributed to the rapid rise in sanctions designations related to Afghanistan under the Obama administration, and the Treasury continues to utilize these authorities today.

Breaking Down Afghanistan-related Sanctions

The overwhelming majority of Afghanistan-related U.S. sanctions involve counterterrorism financing activity benefiting SDGTs such as the Taliban, al Qaeda, the Islamic State, and other terrorist organizations. This underlines the severity of terrorism in the region and its connection to other transnational crime that funds its violent operations, especially drug trafficking. Although the Treasury has designated many affiliates and militants associated with the Pakistan-based Haqqani Network, the organization itself was not sanctioned until September 2012 for its involvement in terrorist activities in Afghanistan and Pakistan that were linked to the Taliban and al Qaeda. A month later, the UNSC said that the Haqqani Network participated in the “financing, planning, facilitating, preparing, or perpetrating of acts or activities” associated with the Taliban, which signified a cohesive U.S.-U.N. approach to Afghanistan. From 2012–2018, and across two presidential administrations, the Treasury made a concerted effort to sanction Haqqani Network financial facilitators, including hawala money transfer system operators.

Afghanistan-related Designations by Authority, 2001–2021

As most Afghanistan-related sanctions involve counterterrorism financing authorities, the U.S. government has made several strides in strengthening its economic approach to combating terrorism. Noting the success of the ATFC, the U.S. government sought to further enhance its counterterrorism finance efforts with additional capacity building. In 2017, the Trump administration established a joint counterterrorism effort with the government of Saudi Arabia called the Terrorist Financing Targeting Center (TFTC) to leverage existing economic tools among Washington, Riyadh, and other partners in the Gulf to counter terrorist financing. Since then, the TFTC has issued five rounds of designations against more than 60 global terrorist individuals and entities including the Taliban, as well as Islamic State, al Qaeda, Hezbollah, and Iran’s Islamic Revolutionary Guard Corps. This contributed to the six-fold increase in Afghanistan-related designations between 2017 (3) and 2018 (18).

Afghanistan-related Designations by Affiliation to Terrorist Groups, 2001–2021

Compared to the Obama administration, the Trump administration imposed far fewer sanctions against Taliban-related targets: 23 compared to the Obama administration’s 103. This is likely a result of the peace negotiations that began in 2018 and culminated in the 2020 Doha Agreement between the United States and the Taliban. While the U.S. government did not agree to the Taliban’s request of immediate sanctions relief, the U.S. government refrained from issuing new designations following the agreement as a form of confidence building with the Taliban for future negotiations. The Doha Agreement codified the eventual full withdrawal of U.S. forces from Afghanistan, which provided the framework for the Biden administration to fulfill that pledge in August 2021. The agreement also declared that with the start of intra-Afghan negotiations, the United States would initiate an administrative review of current U.S. sanctions and the Department of State’s Rewards for Justice List against members of the Taliban and the Haqqani Network with the goal of lifting designations. The latter refers to a U.S. government program to provide financial compensation to individuals in exchange for certain information about wanted Taliban and Haqqani Network leaders. Given the Taliban takeover of Afghanistan and its failure to negotiate a true intra-Afghan political process and peace settlement with Afghan leaders, it is unclear whether the United States will proceed with this review.

Future Policy Considerations

Current U.S. sanctions strategy for the Taliban faces major challenges as its leaders now assume greater political and economic roles in Afghanistan. The most pressing concerns for U.S. economic policy surround defining who and what exactly is “the Taliban,” the potential sanctions impacts on humanitarian assistance in response to the Taliban takeover, and how this all may affect future U.S.-U.N. sanctions coordination on the Taliban.

Defining the Taliban

An overarching issue in crafting an effective U.S. sanctions strategy is that the United States has yet to fully define what individuals and entities are considered “the Taliban” and thus designated under existing sanctions authorities. While policy options have begun to publicly emerge, this outstanding question has complicated sanctions compliance and enforcement efforts for U.S. and foreign financial institutions, governments, humanitarian aid organizations, and the private sector operating within Afghanistan. While the need to define the Taliban was less pressing when the Taliban operated as an insurgent group and shadow government within Afghanistan, this lack of definition and scope now raises difficult political and compliance questions as to which entities may or may not be considered part of the Taliban following the fall of Kabul in August 2021.

Immediate concerns include whether or not to consider Da Afghanistan Bank, the central bank of Afghanistan, which holds bank accounts in the United States, including an account at the Federal Reserve Bank of New York, as a Taliban-controlled entity. Additionally, the Taliban now apparently controls 3 out of the 12 Afghan banks (Pashtany Bank, Bank-e-Mellie Afghan, and New Kabul Bank) as they are state-owned financial institutions, which likely limits the ability of U.S. organizations and foreign entities accessing the U.S. financial system, including the U.S. dollar, to conduct transactions or dealings with these Afghan banks absent licenses or other redress. Another complicating factor is that Taliban affiliation lacks common identifying information like membership cards or addresses, adding difficulty to standard compliance and enforcement processes. The decision to expand or contract the definition of “the Taliban” has real and pressing implications for the Afghan banking and hawala money transfer systems, Afghan businesses and their international counterparts, as well as U.S. and international assistance efforts as a humanitarian crisis continues to unfold.

Humanitarian Concerns

The impact of sanctions on the flow and distribution of funds and resources for food, medicine, and other relief aid in Afghanistan raises significant humanitarian concerns. As in other sanctioned countries, these restrictions can amplify other counterparty risks, discouraging banks from facilitating these transactions. To date, Treasury has taken two approaches to allow humanitarian assistance to Afghanistan without going directly through the Taliban. First, Treasury issued nonpublic specific licenses and assurances in early September that “authorize the U.S. government and its contractors to support humanitarian assistance to people in Afghanistan, including the delivery of food and medicine.” Second, Treasury issued more expansive, and importantly, public, general licenses for humanitarian assistance and related activities on September 24, 2021. While U.S. sanctions will still prohibit most financial transactions involving the Taliban or Haqqani Network, these general licenses will allow transactions for “the purpose of effecting the payment of taxes, fees, or import duties to, or the purchase or receipt of permits, licenses, or public utility services.” The Office of Foreign Assets Control published an associated FAQ to help explain these broad humanitarian carve-outs and the legality of issuing humanitarian aid to Afghanistan amidst sanctions on the Taliban and the Haqqani Network. Previously, the U.S. government has reportedly confirmed to Western Union and MoneyGram that resuming operations to facilitate remittances is consistent with U.S. policy, which should also ease the financial pressures on some Afghans who receive assistance from friends and family abroad.

Although the various licenses and private guidance represent a positive step, questions may arise regarding the exact scope and purpose of U.S. government restrictions barring the involvement of Taliban authorities in most—but not all—financial transactions in the country. As a result, this may still inhibit the ability of humanitarian aid groups to provide services to the most vulnerable populations and leaves unanswered questions about the permissibility of financial transactions or dealings for development assistance or private businesses. Creating an Afghanistan-specific country program separate from existing sanctions authorities could grant Treasury more unilateral economic capabilities, but the U.S. government may be able to achieve similar objectives through more robust general licenses and clearer communication in definitions and prohibitions, especially regarding humanitarian aid efforts. However, while general licenses for humanitarian aid can ease some logistical difficulties in delivering necessary services, payments, and relief items to Afghanistan, the political and economic policies of the Taliban will ultimately decide the direction of the current humanitarian crisis in the country.

U.S. and U.N. Sanctions Coordination

While close coordination between the United States and its allies at the United Nations on sanctions policy toward the Taliban has strengthened efforts to financially isolate its leaders from the international community, bureaucratic processes will likely continue to limit their optimum effectiveness. For example, China and Russia serve as permanent members of the UNSC, which grants both countries the ability to block or delay new sanctions designations that could increase economic pressure on the Taliban and its supporters. Additionally, any efforts by these or other countries to officially recognize the Taliban government absent international consensus may lead to confusion and further complicate sanctions compliance efforts.

Another consideration is whether to continue to waive the travel ban on Taliban leaders since they failed to reach a peace agreement with other Afghan leaders. U.N. sanctions have prohibited travel for Taliban leaders in an attempt to limit their influence and operational bandwidth, but have inadvertently reduced the international community’s ability to engage in peace talks with the Taliban outside of Afghanistan. In 2019, the U.N. waived the travel ban for certain Taliban leaders for the explicit purpose of engaging in peace talks, but former State Department officials have since indicated that the Taliban misused the waiver. While the misuse of travel waivers is a constant probability, the Biden administration recently urged the UNSC to extend sanctions exemptions providing travel waivers for 14 Taliban leaders slotted to participate in international discussions aimed at promoting “peace and stability” in Afghanistan likely to demonstrate goodwill in the region.

Additional Economic Measures

Policymakers must also grapple with the cumulative impact that asset freezing measures and sanctions will have on the viability of the formal Afghan economy. Following the Biden administration’s decision to freeze roughly $9.4 billion in reserve assets owned by the Afghan central bank within the United States, Washington cancelled dollar shipments and the International Monetary Fund (IMF) blocked the Taliban’s ability to access $460 million in emergency reserves on the grounds that IMF members did not agree on the identity of the government. These assets are likely to stay frozen, even after select humanitarian exemptions are implemented to allow remittances and aid. These measures prevented Taliban leaders from accessing new special drawing rights (SDRs), which would have been difficult to operationalize, but nonetheless the broader asset freezing continues to complicate the country’s access to cash needed for the dollarized economy, reinforcing the impact of the lack of humanitarian assistance, the capital and human flight and impairing regional trade.

The issue of recognition will be important for the IMF and other multilateral organizations since these entities typically fund member countries. Ultimately, if the United States and the other G7 nations (Canada, France, Germany, Italy, Japan, and the United Kingdom) refuse to recognize the Taliban as the legitimate government in Afghanistan, these asset blocks are likely to remain in place. The United States alone has a blocking vote in the IMF and could limit direct funding to Afghanistan as it has done with Venezuela and Iran, and more recently Myanmar, but the Biden administration will likely attempt to coordinate such agreements in line with allies and partners. Beyond the SDR issue, direct IMF lending to the Taliban is unlikely as the United States alone would likely be able to block country lending to Afghanistan, as it has blocked crisis loans to Iran. However, an immediate concern revolves around bilateral and multilateral aid. The United States and the international community have suspended nearly $9 billion in annual assistance to Afghanistan, which composed roughly 40 percent of the GDP and 75 percent of the former Afghan government’s budget. While European Union officials have already promised modest increases in aid to Afghanistan, implementation will be difficult and unlikely as aid will be imposed on the condition that the Taliban uphold “basic freedoms” not typically associated with their rule. Regardless, recent general licenses discussed above should ease some of the logistical burdens of these transfers as they explicitly carve out access for international organizations and non-U.S. persons engaged in humanitarian aid.

These difficulties leave Afghanistan even more reliant on its regional neighbors such as Pakistan, Iran, and China. Iran and Pakistan may be more interested in investing in, or providing support to, Afghanistan if only to reduce the risk of migration flows to their countries. Compared to other global powers, China and Russia have come closer to recognizing the Taliban as the legitimate government in Afghanistan, but have yet to provide meaningful support beyond the anti-sanctions rhetoric. Investment in Afghanistan, even from authoritarian regimes like China, will depend on the Taliban’s ability to provide security and a stable operating environment. Afghanistan has long run trade deficits with neighbors such as Iran and China, and its inability to pay for goods and decline in domestic demand due to brain drain is likely to restrain trade, unless there are major policy changes.

Conclusion

The fall of Kabul to the Taliban has further complicated U.S. sanctions strategy in the region. The Biden administration will likely continue to incorporate relevant sanctions programs within its foreign policy approach to Afghanistan, although it is unclear whether sanctions will play a reduced or enhanced role when compared to other policy tools. While U.S. economic options are more limited following the Taliban takeover, Washington can still leverage its existing economic frameworks and coordinate with partners and multilateral global institutions to craft a cohesive economic strategy toward a Taliban-run Afghanistan.

Methodology

Designations were drawn from the following sanctions programs: “Taliban,” SDGT, FTO, SDNTK, NPWMD, IFSR, and IRAN-EO13622. Please note that 1999 U.S. designations pursuant to the “Taliban” were codified under Executive Order 13129 and were not pursuant to an official sanctions program until 2001, which became the SDGT list.

Acknowledgments

The author would like to acknowledge the CNAS Communications and Publications Teams for their support, as well as CNAS Adjunct Senior Fellows Alex Zerden and Rachel Ziemba. The author would also like to thank CNAS Program Directors Emily Kilcrease and Lisa Curtis for their review of this report.

Learn More

The CNAS Sanctions by the Numbers series offers comprehensive analysis and graphical visualization of major patterns, changes, and developments in U.S. sanctions policy and economic statecraft. Members of the CNAS Energy, Economics, and Security Program collect and analyze data from publicly available government sources, such as the Treasury Department’s Office of Foreign Assets Control.