Sanctions 'Safe Harbor' Needed for Banks, NGOs Sending Aid to Afghanistan, Former Officials Say

The Treasury Department needs to provide significant assurances to banks and non-governmental organizations that they will not be sanctioned for transactions related to humanitarian relief in Afghanistan (see 2108260055), a former sanctions official and an export control official said. Without those assurances, large banks will be unwilling to risk approving transactions to the country because they fear violating U.S. sanctions and potentially large enforcement penalties.

The hesitancy by NGOs and banks about delivering humanitarian aid to Afghanistan in part stems from a recent tendency toward over-compliance with U.S. sanctions, said Adam Smith, a former senior adviser to the director of the Office of Foreign Assets Control. He said most banks tend to over-comply with U.S. sanctions because of OFAC’s “history of significant enforcement actions,” which can cost banks and companies millions of dollars and reputational harm.

“Even if you have specific licenses, even if you have general licenses, I'm not convinced you'll find many institutions that are still going to be willing to engage” in Afghanistan, Smith, now a trade lawyer, said during a Sept. 2 event hosted by the Center for Strategic and International Studies. “Certainly not major institutions.”

Sanctions guidance also may not be enough, Sue Eckert, a humanitarian expert with CSIS and a former assistant secretary of Commerce for export administration during the Clinton administration, said during the event. “It's nice to provide guidance and guidance is important, but guidance is insufficient,” she said. “And you can provide a general license, you can provide legal protections for NGOs, but the financial institutions, if they don't have legal protection and certainty, are not going to transfer the funds.”

Smith said OFAC should consider issuing comfort letters and other “safe harbor” guarantees to banks, which may provide some legal protection against sanctions violations. “There needs to be something very forward leaning,” Smith said. “Otherwise, I don't think you'll find many people who are going to be willing to” participate in the transactions “even if there are these broad general licenses.” Treasury didn’t comment.

Although comfort letters may help, OFAC is in a “difficult situation,” Eckert said, partly because even they “don't have clarity on the situation” in Afghanistan. Although the Taliban is sanctioned by the U.S., many banks are unclear where exactly those sanctions apply and whether the entire Afghan government is now subject to restrictions.

“The group is designated, but as far as I know, no one has an ID card saying I am a member of the Taliban,” Smith said. “If the Taliban appoints a new minister for development or for education or the central bank governor, does that mean that those ministers” are sanctioned? “The answer may be no, it may be yes,” Smith said. “I don't know, and that's something that hasn't been clear.”