Financial Crime World

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Efforts to Combat Money Laundering and Terrorist Financing in Afghanistan Underwhelming

Background

Afghanistan has established various agencies to combat money laundering and terrorist financing, but a recent assessment reveals that these efforts have been hindered by inadequate resources, expertise, and coordination.

Challenges

  • Limited resources: The Afghan government and international donors have invested heavily in building the capacity of law enforcement agencies, but despite this, the country remains unable to effectively expose and disrupt financial crimes.
  • Corruption: Corruption has undermined efforts to implement effective regulations, including those related to money laundering and terrorist financing.
  • Lack of focus on the money trail: The country’s porous borders and proliferation of government agencies have made it challenging to track and prevent financial crimes.

Weaknesses in Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Measures

Declaration System for Cross-Border Transportation of Currency and Bearer Instruments

  • While a declaration system has been implemented at Kabul International Airport, its implementation elsewhere along Afghanistan’s borders is challenging due to the proliferation of government agencies.
  • The lack of coordination among these agencies hinders effective monitoring and control.

Financial Institutions’ AML/CFT Measures

  • Basic customer due diligence and record-keeping requirements are in place, but they fall short of international standards in several respects.
  • Correspondent relationships between financial institutions are not sufficiently regulated, and there is a lack of clarity around domestic wire transfer rules.
  • Only a few financial institutions have reported suspicious transactions to the Financial Transactions Reporting and Analysis Center (FinTRACA) as required by law.

Microfinance Sector

  • The country’s microfinance sector lacks effective AML/CFT measures.
  • While some microfinance institutions have implemented basic customer due diligence requirements, these measures are often inadequate and lack ongoing due diligence on business relationships.

Regulatory Framework

  • Market entry conditions and AML/CFT supervision in Afghanistan fall short of international standards.
  • The central bank and other regulatory bodies lack the resources and expertise to effectively supervise financial institutions.

Conclusion

Despite these challenges, the Afghan government remains committed to improving its AML/CFT framework. International partners are also working closely with the government to provide technical assistance and support to help address these issues.