Financial Crime World

Compliance and Regulatory Issues in Finance in Afghanistan

In a country plagued by financial instability, compliance with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations is crucial for financial institutions operating in Afghanistan. The Da Afghanistan Bank, as the central bank, plays a significant role in licensing, regulating, and supervising banks, foreign exchange brokers, money service providers, payment system operators, securities service providers, and securities transfer system operators.

The Role of FinTRACA

The Financial Transactions and Reports Analysis Center (FinTRACA), established in 2006, serves as the country’s Financial Intelligence Unit (FIU) and has complete control over collecting, analyzing, and disseminating information on money laundering and terrorism financing. FinTRACA works closely with financial regulators, law enforcement agencies, and legal professionals to create an environment conducive to detecting and combating money laundering and terrorist financing in Afghanistan.

Complying with Regulations

As a financial service provider operating in Afghanistan, it is essential to establish and maintain an AML/CFT program that meets the country’s regulatory requirements. Key compliance measures include:

  • Implementing adequate policies, procedures, and controls to combat potential money laundering and terrorism financing risks.
  • Identifying customers properly and maintaining accurate records of transactions.
  • Conducting regular audits of the AML/CFT program every two years or as requested by the AML/CFT supervisor.
  • Submitting reports to FinTRACA for large cash transactions and suspicious activities.
  • Retaining records of transactions and having staff trained to carry out their duties under this regulation.

Risk-Based Approach

Each financial institution must have a risk-based AML/CFT program that is proportionate to its scale, scope, risks, and sophistication. The risk assessment serves as the foundation for the entire anti-money laundering/counter-terrorism financing program.

Reporting Obligations

As a financial service provider, it is crucial to report certain transactions and suspicious matters to FinTRACA. Key reporting obligations include:

  • Threshold Reporting: Large Cash Transaction Report, which requires individuals to notify FinTRACA of transactions exceeding AFS 1,000,000 or its equivalent in other currencies.
  • Suspicious Transaction Reporting: Financial institutions must notify FinTRACA within three business days of suspicions arising around any transaction or attempted transaction.
  • Tipping Off: Financial institutions, their directors, and staff are prohibited from reporting to clients or other entities the existence of a FinTRACA or AML/CTF investigative study.

Consequences of Non-Compliance

Failure to comply with these regulations can result in severe consequences, including fines, penalties, and even revocation of licenses. As Afghanistan continues to navigate its financial challenges, it is essential for financial institutions to prioritize compliance and ensure a stable and secure financial environment.