Financial Crime World

Assistance to Da Afghanistan Bank (DAB) in Regulating and Supervising the Banking Sector

The Da Afghanistan Bank (DAB), the central bank of Afghanistan, has received assistance from various international agencies in regulating and supervising the country’s banking sector. This article provides an overview of the support provided by these agencies.

World Bank’s Assistance

  • Conducted audits of five commercial banks as part of the Financial Sector Rapid Response Project.
  • Two firms, Mazars and Talal Abu-Ghazaleh Organization, each conducted audits of five commercial banks.

USAID’s Technical Assistance

Overview of USAID’s Efforts

The United States Agency for International Development (USAID) has provided technical assistance to the DAB Financial Supervision Department (FSD) through a contract with BearingPoint (later Deloitte) from September 2003 to June 2011. This was part of the Economic Growth and Governance Initiative (EGGI), which aimed to strengthen supervision efforts and develop human capacity for bank examiners at DAB FSD.

Weak Oversight and Missed Opportunities

USAID’s oversight of the EGGI program was weak, leading to opportunities being lost to contain problems at Kabul Bank. Deloitte’s advisors did not follow up aggressively on indications of fraud, which resulted in a significant issue that could have been addressed earlier.

DOD’s Support

The Department of Defense (DOD) has provided assistance to Afghan banks to increase their ability to accept electronic funds transfers and develop a retail payments infrastructure. Additionally, Task Force for Business and Stability Operations has supported Afghan banks.

Treasury’s Assistance

Resident Advisor

The United States Department of the Treasury began supporting DAB in March 2006 with a resident advisor to the Financial Transactions and Reports Analysis Center of Afghanistan (the Afghan financial intelligence unit). This support aimed to enhance the country’s anti-money laundering and combating the financing of terrorism efforts.

Standard Rating System for AML/CFT Compliance

The resident advisor was assigned to begin providing support to the AML/CFT Section of the FSD in February 2010. The support included:

  • Developing thorough examination procedures for banks
  • Devising a standard rating system for AML/CFT compliance ratings
  • Preparing draft examination procedures for money services providers
  • Conducting targeted reviews of several money service providers

USAID’s Future Plans

USAID is willing to resume activities to strengthen DAB’s supervisory and regulatory capacity, provided that DAB meets certain conditions. These conditions include:

  • Committing to achieving designated milestones
  • Issuing a formal assistance request to the agency
  • Reforming Afghanistan’s banking and AML/CFT laws

If DAB meets these conditions, USAID may consider reengaging with the central bank to support its efforts in regulating and supervising the country’s banking sector.