Compliance Risks in Finance Loom Large in Afghanistan

Regulatory bodies in Afghanistan are urging financial institutions to prioritize anti-money laundering (AML) and counter-terrorism financing (CTF) compliance, as the country’s financial sector faces increasing risks of non-compliance.

Importance of AML/CTF Compliance

The Da Afghanistan Bank, the central bank responsible for licensing, regulating, and supervising banks, foreign exchange brokers, money service providers, payment system operators, securities service providers, and securities transfer system operators, has emphasized the importance of AML/CTF compliance. The Financial Transactions and Reports Analysis Center (FinTRACA), established in 2006 as a Financial Intelligence Unit (FIU) pursuant to the AML legislation, plays a crucial role in collecting, analyzing, and disseminating information about money laundering and terrorism financing.

Key Measures for Compliance

For financial service providers operating in Afghanistan, ensuring compliance with regulations is paramount. Key measures include:

• Establishing an AML/CTF program that includes adequate policies, procedures, and controls to combat potential money laundering and terrorism financing risks
• Identifying customers properly and maintaining records of transactions
• Conducting regular audits and submitting reports to FinTRACA for large cash transactions and suspicious activities
• Training staff to carry out duties under the regulation

Proportionate AML/CTF Programs

Each financial institution’s AML/CTF program must be 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 in Afghanistan, it is essential to understand your reporting obligations. Notable ongoing reporting requirements include:

• Threshold reporting: reporting large cash transactions exceeding AFS 1,000,000 or its equivalent in other currencies
• Suspicious transaction reporting: reporting suspicious transactions or attempted transactions within three business days of suspicion arising
• Tipping off: prohibiting financial institutions, directors, and staff from reporting to clients or entities the existence of a FinTRACA or AML/CTF investigative study

Consequences of Non-Compliance

Compliance with AML/CTF regulations is crucial in Afghanistan, where financial institutions face significant risks of non-compliance. Failure to comply can result in severe consequences, including fines, penalties, and even revocation of licenses. Financial service providers operating in the country must prioritize compliance to avoid these risks and maintain a safe and stable financial environment.