Sudan’s Deep State: How Insiders Violently Privatized Sudan’s Wealth,
and How to Respond

Source: Enough Project

Sudan’s government is a violent kleptocracy, a system of misrule
characterized by state capture and co-opted institutions, where a
small ruling group maintains power indefinitely through various forms
of corruption and violence.

Sudan’s government is a violent kleptocracy, a system of misrule
characterized by state capture and co-opted institutions, where a
small ruling group maintains power indefinitely through various forms
of corruption and violence. Throughout his reign, President Omar
al-Bashir has overseen the entrenchment of systemic looting,
widespread impunity, political repression, and state violence so that
he and his inner circle can maintain absolute authority and continue
looting the state. The result of this process, on the one hand, has
been the amassment of fortunes for the president and a number of
elites, enablers, and facilitators, and on the other hand crushing
poverty and underdevelopment for most Sudanese people.

A Failed State?

For nearly three decades, President al-Bashir has maintained his
position at the pinnacle of Sudan’s political order after seizing
power through a military coup in 1989. During his rule, the government
of Sudan has perhaps been best known for providing safe haven to Osama
bin Laden and other Islamic militants in the 1990s, for committing
genocide and mass atrocities against its citizens in Darfur, for the
secession of South Sudan in 2011, and for ongoing armed
conflict—marked by the regime’s aerial bombardment of civilian targets
and humanitarian aid blockade—in South Kordofan and Blue Nile. Often
portrayed as a country wracked by intractable violence and hampered by
racial, religious, ethnic and social cleavages, Sudan ranks
consistently among the most fragile or failed states.

At the same time, Sudan has considerable natural resource wealth and
significant economic potential. The country is also home to a
celebrated culture that stresses the importance of family and
education. In 1999, Sudan became a major oil-producing country,
bringing billions of dollars in international investments. Agriculture
and livestock remain staples of economic production, while a recent
finding of substantial gold deposits has brought new hopes of
prosperity. Despite these economic resources, Sudan remains an
impoverished country marked by stark socioeconomic inequality. Nearly
half of the population lives under the global poverty line, while a
select few enjoy immense wealth and great power.

Political standing and proximity to the country’s ruling elites most
often determines on which side of the poverty line a Sudanese citizen
lives. The idea that Sudan is a classic failed state is not fully
accurate. Sudan is a failed state for the millions of displaced people
living in IDP camps in Darfur, for those living in conflict areas and
cut off from humanitarian assistance in South Kordofan and Blue Nile,
and for those struggling in marginalized communities in eastern Sudan
or in the sprawling informal settlements outside Khartoum. However,
Sudan is an incredibly successful state for a small group of ruling
elites that have amassed great fortunes by looting the country’s
resources for personal gain. In that sense, Sudan is more of a
hijacked state, working well for a small minority clique but failing
by all other measures for the vast majority of the population.

Conflict and Corruption

Armed conflict and corruption have featured prominently in the last
two centuries of Sudanese political life. Atrocities and preventable
famines occurred during Ottoman rule (the Turkiya era) and during a
brief period of Sudanese rule (the Mahdist era) in the 19th century.
Violence, subjugation, and exploitation likewise defined colonial rule
during the Anglo-Egyptian Condominium in the 20th century. The
Condominium also saw the implementation of divide-and-rule political
tactics that established the exploitative economic patterns between
Khartoum and the rural areas that persist today. Indeed, these
patterns of marginalization and exploitation led to the First Sudanese
Civil War, a brutal conflict that lasted from 1955 until 1972 and
claimed half a million lives.

Since winning independence in 1956, postcolonial Sudan has enjoyed a
few fleeting years of democratic rule and peace, sandwiched between
decades of authoritarianism and civil war. Corruption is hardly a new
phenomenon. Writing in 1985, El-Wathig Kameir and Ibrahim Kursany
observed: “Corruption in a Sudanese context can hardly be avoided. It
touches upon the life of every citizen.”

The difference between past iterations of misrule in Sudan and that of
the current regime is significant. While armed conflict and corruption
certainly were prevalent before, al-Bashir’s regime has used a degree
of violence and state capture far exceeding that of its predecessors.
Of course, not all members of the Sudanese government are corrupt, nor
is all or even the majority of Sudan a conflict zone. Instead, a
relatively small group of regime insiders, supported by domestic and
foreign commercial partners, have captured and distorted key sectors
of the Sudanese economy much more successfully than previous
governments. The current regime has institutionalized corruption
throughout government functions to an unprecedented degree. Also
different is underlying ideology and the extent and purpose of
violence that the current regime is willing to deploy against
political challengers and citizens alike. Thus, in addition to
committing mass atrocities in Sudan’s rural areas, historian W.J.
Berridge notes that perhaps the most significant reason for the
longevity of the current Sudanese regime is “the ruthlessness with
which it pursued its initial assault on the ‘modern forces’ [Sudanese
civil society, professionals, and labor unions],” as these forces had
been the principal drivers for ousting authoritarian regimes in 1964
and 1985. This is a key point, as the regime’s initial tenacity in
attacking, torturing, and killing members of the professional and
working classes and purging the professional, technically competent
civil service that could potentially ensure government function and
check the regime’s power established the precedent of impunity that
continues today.

Violent Kleptocracy

The system of rule by al-Bashir’s regime in Sudan is best
characterized as a violent kleptocracy, as its primary aims are
self-enrichment and maintaining power indefinitely. To pursue these
aims, the regime relies on a variety of tactics, including patronage
and nepotism, the threat and use of political violence, and severe
repression to co-opt or neutralize opponents and stifle dissent.
Unlike many other corrupt or repressive governments, however,
al-Bashir’s regime is willing to engage in much more brutal tactics,
such as ethnic cleansing, the use of starvation as a method of war,
and the indiscriminate bombardment of civilian populations. It is this
combination of extreme violence, authoritarian rule, and massive
self-enrichment that qualifies the current system as a violent
kleptocracy where state capture and hijacked institutions are the
purpose and the rule, rather than the exception.

This report demonstrates that the Sudanese regime has perpetuated a
system of violent kleptocracy with economic activities that have
devastated the Sudanese economy and resulted in underdevelopment that
will be very difficult to reverse. To substantiate this claim, this
report analyzes Sudan’s oil, gold, land, and weapons manufacturing
sectors, showing how the regime has distorted each sector for personal
gain and enrichment. Methodologically, this report relies on field
research completed in Khartoum, Addis Ababa, and Kampala; participant
interviews with Sudanese civil society, academics, and diaspora
members; as well as economic research and political analysis.

This report also examines why past approaches for achieving peace in
Sudan have failed and how a new approach, one in which a revitalized
peace process receives missing leverage through the expanded use of
modernized financial pressure policy tools, could succeed. The focus
would be to promote lasting peace and also to disrupt and ultimately
dismantle the most enduring root cause of continuing conflict and
dictatorship: the violent kleptocratic system constructed by President
al-Bashir and his inner circle.

Regime kleptocrats have thus far outwitted and outlasted all efforts
to achieve peace in Sudan because they feel no pressure to act
differently given the impunity that they have enjoyed for decades.
Modernized financial pressures could alter this incentive structure
and thus potentially influence the behavior of regime officials by
more effectively freezing those individuals and entities that are most
responsible for mass atrocities and grand corruption out of the global
financial system. Likewise, actions to fight money laundering, grand
corruption, and illicit financial flows would make it much more
difficult for these kleptocrats to access the global financial system,
therefore curtailing their ability to fund conflict and engage in
severe repression. If coupled with a robust foreign policy strategy
that includes a revitalized international peace process for all
Sudanese stakeholders, the use of financial pressure tools will equip
negotiators with the leverage that they need to secure meaningful
concessions from the regime toward establishing a lasting peace and
supporting more representative, inclusive, and transparent governance
in Sudan.

Policy Recommendations

To more effectively support peace, human rights, and good governance
in Sudan, policymakers should construct a new policy approach that
attempts to counter and ultimately dismantle Sudan’s violent
kleptocracy. Summarized here but described in full in Part IV, this
package of recommendations offers a new strategy to neutralize Sudan’s
kleptocrats and provide leverage to support a more inclusive
international peace process when one is constructed.

A More Comprehensive and Inclusive Peace Process and Constitutional Convention

A credible constitutional convention and internationally-supported
peace process can lead to lasting peace in Sudan. Current mediation
efforts to end Sudan’s armed conflicts and bring peace to the country
have not succeeded. These efforts include negotiations led by the
African Union High-Level Implementation Panel for Sudan (AUHIP).
Despite 12 rounds of meetings between 2011 and 2016 and the signing of
the Roadmap Agreement in August 2016, the AUHIP negotiations have
failed to secure a cessation of hostilities or improve humanitarian
assistance for civilians. Despite the failure of these efforts to
achieve peace, a stubborn persistence to keep trying these same
approaches hinders real progress toward a lasting peace. The Sudanese
government’s National Dialogue has not resolved the country’s numerous
political issues. Significant opposition parties have boycotted this
process, deeming it to lack credibility. They characterized the
process as the government negotiating with itself, by including
sympathetic parties. Instead of supporting processes that have failed,
leaders should support a truly inclusive constitutional convention and
peace process that progress in a sequence that is negotiated by
Sudanese people. Whether a more comprehensive and inclusive peace
process spurs a more comprehensive and inclusive constitutional
convention or vice versa, both components are essential to restore
peace, security, and good governance, and both require broader support
and participation by more Sudanese people to become viable.

International Peace Process

Current and past peace processes have been piecemeal, stove-piped in
scope, and have often have amounted to negotiations between
belligerents. This approach only invites delay, further division, and
obstruction. Sudan’s violent kleptocracy continues in large part
because a small group of elites wields a disproportionate amount of
political and economic power, which allows for the subversion of peace
initiatives through bureaucratic and diplomatic maneuvering. A
comprehensive and inclusive peace process with strong U.S., regional,
and international support can check these maneuverings and allow
internally-driven reforms to take hold. All Sudanese stakeholders
should have a voice in resolving the country’s numerous political,
economic, and social issues and in outlining a plan for a transition
to a peaceful and democratic country where groups share power in a
governance structure that the public broadly accepts. This
comprehensive peace process must also include diverse voices from
civil society, professional organizations, student groups, community
organizations, women, youth, and marginalized communities.

Constitutional Convention

Sudan’s National Dialogue has failed because the process is controlled
by President al-Bashir and the National Congress Party, providing no
real room for debate within the ruling party, let alone among the
country’s different political movements and groups. Although the
United States, United Nations, and African Union have pressed
opposition political parties to join the National Dialogue, these
Sudanese opposition parties have declined because they do not view the
dialogue process as credible, and they consider that participating
lends the process an undeserved degree of legitimacy. A constitutional
convention could provide a new path for Sudanese people to discuss the
governance and power-sharing questions that they most seek to resolve
among themselves. Instead of supporting the National Dialogue process
that lacks credibility and inclusivity, the United States and other
interested partners should use their political influence to promote a
constitutional convention in Sudan that is led by Sudanese

Enhanced U.S. Diplomatic Engagement

Strong U.S. diplomatic engagement with Sudan is necessary to advance
an international peace process. To support this process, as well as to
achieve important national security objectives, the Trump
administration should appoint a new special envoy for Sudan and South
Sudan. The appointment of a special envoy must be done in conjunction
with a comprehensive plan for peace. Without a comprehensive
diplomatic strategy that includes a willingness to use financial
leverage to support the process, the appointment by itself of an envoy
will not lead to progress in Sudan. Further, given the demands that
both Sudan and South Sudan present for even the most experienced
diplomat, the Trump administration should consider appointing a
separate special envoy for each country as well as the requisite
support staff. Likewise, the U.S. Department of State should increase
its embassy staff in Khartoum, adding experienced political and
economic officers with critical language skills. The department should
also add additional staff to the Office of the Special Envoy.

Financial Pressure

To provide the necessary leverage for a revitalized peace process and
constitutional convention, Sudan’s violent kleptocracy must be
confronted directly. Accordingly, U.S. policymakers should use
theenhanced diplomatic engagement measures outlined above to support a
strategy of financial pressure and increased accountability that
addresses the root causes of Sudan’s violent kleptocracy. Five foreign
policy objectives that support this broader strategy are discussed
below. Further, this strategy can advance important U.S. national
security goals, such as safeguarding the integrity of the global
financial system, combating corruption, deterring future support for
terrorism, and strengthening human rights.

1.      Stopping Illicit Financial Flows

U.S. policymakers, regulators, and law enforcement officials should
work together, and in concert with foreign government officials, to
stop illicit financial flows from Sudan. Kleptocratic elites rely on
illicit financial flows and international economic partners for
personal enrichment and to ensure safe haven for their ill-gotten
gains. More scrutiny is needed on the role Sudan’s international
economic partners play in diverting or enabling diversion of the
country’s wealth, with the complicity of Sudanese regime leaders.
Disrupting the networks that allow illicit financial flows to enter
the global financial system is crucial for bringing pressure to bear
on Sudanese kleptocrats and for safeguarding the integrity of the U.S.
and global financial systems. In Sudan, stopping these flows is
paramount to reducing corruption and improving economic development
outcomes. It is also essential for achieving peace, as war profiteers,
enablers, and facilitators require access to the global economy to
fund armed conflict. By enforcing anti-money laundering measures,
developing stronger but more targeted sanctions, and eliminating
regulatory loopholes, U.S. officials can better exclude these bad
actors from the global financial system, thereby building leverage and
creating incentives for peace. Congress should ensure that the U.S.
Treasury Department has sufficient resources and direction to
undertake investigations and enforcement in sub-Saharan Africa,
especially in high-risk countries such as Sudan. As these
investigations develop, U.S. officials should engage with appropriate
foreign governments to ensure they are also taking necessary action.

Enhancing and Enforcing Anti-Money Laundering Measures. Strong
anti-money laundering (AML) measures can help stop illicit financial
flows. Given the consistent use of the U.S. dollar by violent
kleptocrats in Sudan, U.S. agencies and financial institutions have
the power to act. For example, the U.S. Treasury Department’s
Financial Crimes Enforcement Unit (FinCEN) should more aggressively
counter money laundering involving regime elites and their entities,
including companies that are owned and controlled by the National
Intelligence and Security Service (NISS), by issuing a request under
Section 314(a) of the Patriot Act. This request will trigger more
rigorous reporting from banks and financial institutions, especially
financial entities connected to Sudan via correspondent banking.
FinCEN should also consider issuing an advisory to highlight the need
for additional information and reporting of financial transactions
involving Sudan’s correspondent banking network where there is
suspicious activity indicative of money laundering, such as through
laundering the proceeds of corruption or illicit gold trade. Based on
information gathered through the 314(a) and advisory processes, FinCEN
can evaluate whether to designate any institutions, class of
transactions, or accounts as “primary money laundering concerns” under
Section 311 of the Patriot Act. Finally, Congress should provide
FinCEN with greater support so that FinCEN can allocate more resources
to addressing money-laundering activities in high-risk countries like
Sudan. More robust enforcement of existing AML measures is also
necessary. Over time, U.S. authorities should share information with
foreign governments and enlist their assistance.

Sharing Information and Supporting Multilateral Efforts. U.S.
officials can address illicit financial flows more effectively by
sharing information with the Egmont Group and with foreign financial
intelligence units (FIUs), particularly in the Middle East and Europe
where Sudanese banking transactions tend to flow. U.S. officials
should also continue to support the Financial Action Task Force
(FATF), the leading intergovernmental body addressing money laundering
and terrorist financing, and regional anti-money laundering
organizations in their efforts to address concerns such as corruption
and gold smuggling. Finally, Congress should continue to support the
U.S. Africa Partnership on Illicit Finance (PIF). Launched at the
U.S.-Africa Leaders Summit in 2014, PIF brings U.S. and African
partners together to counter the generation and movement of proceeds
from corruption and serious financial crime through the development,
publication, and implementation of national action plans. These action
plans provide strategies to stem illicit finance, combat corruption,
and increase transparency and accountability. Participating in these
efforts not only makes U.S. anti-money laundering actions more
effective but also better distributes the bureaucratic burden and
contributes to a growing cooperative effort to fight corruption across

Asset Recovery. By looting Sudan’s resource wealth and state assets,
regime elites have amassed personal fortunes at the expense of the
Sudanese people, often offshoring their assets in foreign
jurisdictions. U.S. and foreign government officials should
investigate these acts. After identifying tangible assets that are the
proceeds of corruption, they should move to recover these assets, and,
when possible, return them to the Sudanese people. The U.N. Convention
against Corruption, World Bank Stolen Asset and Recovery Initiative,
and U.S. Department of Justice Kleptocracy Asset Recovery Initiative
all provide legal mechanisms to recover and return stolen assets to
the people of countries affected by corruption. Whenever possible,
U.S. and foreign officials should utilize these mechanisms to recover
and return stolen assets to the people of Sudan.

2.      Implementing Modernized Sanctions to Create Leverage to
Support Accountability and Advance Human Rights

Policymakers from the United States, the European Union, and other
concerned stakeholdersshould construct and implement a modernized
sanctions framework to target the assets of the individuals and
entities most responsible for mass atrocities, serious human rights
violations, and grand corruption within Sudan. A modernized sanctions
program narrowly targets individuals and entities, but with a broader
array of tools that create real leverage, while also minimizing
de-risking and encouraging financial inclusion. This approach balances
the need to apply coercive economic pressure on the spoilers of peace,
while avoiding unnecessary harm to the Sudanese people.

Sectoral sanctions and sanctions on key regime institutions and
entities, with a 25 percentthreshold for ownership or control. In
addition to applying targeted sanctions on the networks of key
individuals and entities, particularly the NISS, policymakers from the
U.S. and other interested countries should impose sectoral sanctions
on Sudan’s gold and weapons sectors. Sectoral sanctions—as used
against similarly corrupt and repressive regimes in North Korea and
Libya—allow for specific targeting of economic activities that
directly contribute to violence and conflict, as these two economic
sectors do in Sudan. In order to ensure that the sanctions affect the
full networks of these entities, and to enhance enforcement, the U.S.
Treasury Department should use a threshold of 25 percent ownership or
control, consistent with general principles of beneficial ownership,
for which entities are targeted. Sanctions authorities in other
countries should also consider this 25 percent threshold principle as
they consider crafting their own sanctions programs.

Anti-Corruption Sanctions Designations. Using the new authorities
under the Global Magnitsky Human Rights and Accountability Act (a
provision of the 2017 National Defense Authorization Act), U.S.
congressional leaders should press the Trump administration to
introduce anti-corruption sanctions designations for individuals and
entities engaged in grand corruption within Sudan. This legislation
grants the U.S. president the authority to freeze assets or to deny or
revoke U.S. entry visas to foreign individuals who are deemed guilty
of targeting human rights defenders and whistleblowers. This law could
be used effectively toward Sudan. Similar legislation has been
introduced in the U.K. Parliament.

Mitigating the Unintended Negative Effects of Sanctions. Policymakers
should help to mitigate the unintended negative effects that financial
pressures can have on the Sudanese people by promoting financial
inclusion. To do so, U.S. officials should engage with other
governments to agree on how best to expand the participation of banks
and other financial service providers with Sudan while also ensuring
that these financial institutions engage more responsibly in Sudan.
Although ultimately a business decision, strong public messaging from
regulators can alleviate industry concern and nudge banks and others
financial services to avoid overcompliance. The United States and
other governments should also consider publication of a “watch list”
of companies that may be connected to sanctioned entities, in order to
enhance the screening efforts by financial institutions and mitigate
concerns about unintentional violations.

Transparency for Business Conducted in Sudan. As a balance to
promoting financial inclusion and to ensure that U.S. businesses are
not financing the violent kleptocracy in Sudan, the U.S. government
should require increased transparency of U.S. companies wishing to
conduct business in Sudan. U.S. policymakers could model such a
requirement on the measure implemented when sanctions were being eased
in Myanmar (Burma). Any requirement related to Sudan should be
triggered at a relatively low amount of business, such as $100,000 in
gross sales. Public reporting should focus on any business conducted
with the Sudanese ministries of defense, energy, and mining and with
the NISS and Sudan Armed Forces (SAF) as well as the due diligence
measures taken by the company to prevent contribution to conflict,
human rights violations, corruption, or other concerns.

3.      Addressing Conflict-Affected Gold

A sizeable part of Sudanese gold is conflict-affected, entailing a
high risk for money laundering. To help address this concern, the U.S.
Treasury Department should issue an advisory for Sudanese gold, given
the industry’s extreme vulnerability to money laundering and
smuggling. Issued in coordination with sectoral sanctions, such an
advisory will exert substantial pressure on the Sudanese government to
address this issue. This advisory should be rooted in the 2015
guidance provided by the Financial Action Taskforce (FATF), the
international anti-money laundering body, on the ways the gold trade
is connected to money laundering. By rooting the advisory in the FATF
guidance, the U.S. government can then engage with other governments
to issue and amplify other warnings.

Private Sector Engagement. The private sector, including trade groups
such as the London Bullion Market Association, can also contribute to
this effort by continuing to refuse to list Sudanese gold until the
government addresses the conflict, smuggling, and money laundering
concerns now present in Sudan. Provided that the Sudanese government
begins to address these issues, industry leaders and development
organizations should engage with artisanal miners and support the
ethical development of this sector through sustainable practices that
limit environmental harm and address health risks.

4.      Fighting Corruption Through Other Means

U.S. officials and leaders from the United Kingdom, European Union,
and EU member states, along with other concerned countries and
organizations, should prioritize combating corruption in Sudan.
Systemic corruption undermines peace and security and can even
constitute a threat to national security. In Sudan, corruption is
closely linked to armed conflict, massive human rights violations,
underdevelopment, and poverty. U.S. and foreign officials should fight
corruption through anti-corruption sanctions measures, as indicated
above, and criminal prosecutions and by supporting Sudanese civil
society and media, especially individuals and organizations that
expose corruption and human rights abuses.

Criminal Investigations and Prosecutions. The Department of Justice
should investigate and prosecute embezzlement, extortion, and other
crimes related to corruption in Sudan. Although less relevant prior to
the recent decision to ease U.S. sanctions toward Sudan, the FCPA is
again an important tool for fighting corruption as U.S. commercial
interests explore business opportunities in what remains one of the
most corrupt countries in the world. The U.K. Bribery Act can also be
a critical tool in the fight against corruption, including in cases
that do not involve government officials.

Supporting Sudanese Civil Society and Media. Policymakers in the
United States, United Kingdom, European Union, and other concerned
governments, and multilateral donors, should provide a significant
increase in funding to Sudanese civil society and media. Civil society
leaders and local journalists are critical to a just, transparent
society, and they deserve support and protection. They are often the
target of state violence and repression. A significant increase in
funding to these groups and individuals, coupled with strong
statements of support by the U.S. government and others, will make
clear to the Sudanese government that better relations and the path to
normalization must include a free press and civil society.

5.      Engaging Sudan’s Political and Financial Supporters

Policymakers should engage Sudan’s political allies and financial
supporters to pressure the Sudanese government to work toward a
lasting peace. The Sudanese government has reoriented its foreign
policy to gain political and financial support from Arab Gulf states,
the European Union, and others. U.S. policymakers should work with
these entities to ensure that this financial support does not
contribute to illicit activities, additional violence, or human rights
violations. Without strong oversight and political pressure,
historical examples suggest that al-Bashir’s inner circle and regime
elites will simply accumulate these resources and use them to ward off
economic and political reform and to maintain political power

U.K. and EU Support for Refugee and Migration Containment. A recent
decision by the United Kingdom and the European Union to provide the
Sudanese government with substantial financial support to stem refugee
and migration flows has emboldened the Sudanese government and a group
called the Rapid Support Forces (RSF), a reconstituted Janjaweed force
with a history of atrocities. This EU money risks equipping and
empowering the latter. The German Corporation for International
Cooperation (GIZ) administers this support through the Khartoum
Process. Europe’s strengthening of Sudan’s violent kleptocracy will
only continue to devastate Sudan, the Sudanese people, and those
passing through Sudan. The EU policy will push more people to migrate
or engage in crimes like human trafficking and smuggling, or in some
cases, terrorism or armed resistance against the government.