Law Enforcement in Afghanistan Fails to Stem Money Laundering and Terrorist Financing

Introduction

Kabul, Afghanistan - Despite significant efforts to establish a robust law enforcement system in Afghanistan, the country continues to struggle with money laundering and terrorist financing. The lack of adequate resources, expertise, and coordination among relevant agencies has hindered effective action against financial crimes.

Lack of Coordination and Resources

According to a recent assessment, specialized agencies have been created without clear definitions of their powers and responsibilities. While they have been granted investigative powers, they do not utilize them fully. Poor coordination between law enforcement agencies has resulted in duplication of efforts and the squandering of scarce resources.

• Investigations into money laundering and terrorist financing cases have been launched, but none have been prosecuted or forwarded to courts.
• The Afghan government and foreign donors have made continuous efforts to build the capacity of law enforcement agencies, but the country remains unable to effectively expose and disrupt financial crimes.

Corruption and Lack of Focus

Corruption is a significant obstacle to effective action against financial crimes. The lack of focus on the money trail and clarity as to the level of evidence required to initiate an investigation or secure a conviction also hinders progress.

• Declaration system for cross-border transportation of currency and bearer instruments has been implemented only partially, with limited implementation at crossings along Afghanistan’s porous border.
• The proliferation of government agencies at the Kabul International Airport further hampers its effectiveness.

Financial Institutions’ Responsibilities

Financial institutions in Afghanistan are required to implement anti-money laundering (AML) and counter-terrorism financing (CFT) measures, but these requirements fall short of international standards. Basic customer due diligence and record-keeping measures are imposed, but there is no requirement to determine whether a customer is acting on behalf of another person or to understand the ownership and control of legal persons.

• Correspondent relationships between financial institutions are not sufficiently regulated, and wire transfer rules lack clarity.
• Most financial transactions in Afghanistan are conducted through money service providers (MSPs), which have enabled financial intermediation despite security challenges and a lack of banks in rural areas.

Reporting Suspicious Transactions

Financial institutions are required to report suspicious transactions to the Financial Transactions Reporting and Analysis Center (FinTRACA), but few have done so in practice. The scope of this requirement is too narrow, considering that not all activities listed under international standards have been criminalized in Afghanistan.

Conclusion

The article concludes by highlighting the need for improvement in market entry conditions, AML/CFT supervision, and internal policies and procedures to prevent money laundering. Until these issues are addressed, Afghanistan will continue to struggle with financial crimes and related security risks.