Sanctioning Afghanistan via the FATF and Possible Repercussions for Pakistan

The Taliban takeover of Afghanistan continues to shock the international community, generating critical discourse around the US and NATO’s failures in the region. The catastrophic collapse of Western-mandated nation-building efforts spanning across two decades within a fortnight exposed the hollow nature of government and governance propped up in the country. However, beyond the long-reaching security implications of this reversal, there is a critical need to study the economic implications of the Taliban takeover, especially the multilateral response from global governance institutions.

Even as the Taliban scramble for international legitimacy, the global financial system and multilateral institutions remain poised to ostracize the new Taliban regime. This brief particularly focuses on the prospect of the Financial Action Task Force (FATF) placing Afghanistan on the list of countries subject to “Call for Action” (or the black list), effectively banning participation in the global financial system. The powers of the FATF, including its black listing of other non-cooperative regimes such as the Democratic People’s Republic of Korea (DPRK) and Iran, will be assessed in detail. The brief will conclude with possible scenarios panning out in Afghanistan with their implications, as well as actionable recommendations for Pakistan to mitigate any possible fall out.