Financial Crime World

Afghanistan’s Banking Industry Stands Firm on Compliance Standards

=====================================================

The Afghan banking sector has been making significant strides in implementing robust anti-money laundering (AML) and counter-terrorism financing (CTF) standards, ensuring that financial institutions adhere to international best practices.

Da Afghanistan Bank Takes the Lead

At the helm of these efforts is the Da Afghanistan Bank, the country’s central bank, which is responsible for licensing, regulating, and supervising banks, foreign exchange brokers, money service providers, payment system operators, securities service providers, and securities transfer system operators. The bank has been working closely with other regulatory bodies to ensure that financial institutions are equipped to detect and prevent illegal activities.

Afghanistan Financial Transactions and Reports Analysis Center (FinTRACA)

Another key player in the country’s AML/CTF efforts is FinTRACA, a Financial Intelligence Unit (FIU) established in 2006. FinTRACA has been leading the charge against money laundering and terrorist financing, working hand-in-hand with financial regulators, law enforcement agencies, and legal professionals to create an environment conducive to detecting and combating these threats.

Compliance Requirements for Financial Service Providers

For financial service providers operating in Afghanistan, compliance is paramount. According to regulations, institutions must have adequate policies, procedures, and controls in place to combat potential money laundering and terrorism financing risks. This includes:

  • Proper customer identification
  • Regular risk assessments
  • Audit reports submitted to FinTRACA
  • Retaining records of transactions
  • Maintaining staff trained on AML/CTF protocols
  • Submitting large cash transaction and suspicious activity reports to FinTRACA

Unique Challenges Require Proportionate Measures

Each financial institution poses unique money laundering and terrorism financing threats, necessitating proportionate measures to mitigate these risks. The Da Afghanistan Bank emphasizes that AML/CTF programs must be risk-based, with a thorough risk assessment serving as the foundation for the entire program.

Financial institutions are also required to have processes in place to:

  • Classify, evaluate, track, handle, and minimize threats associated with money laundering and terrorism funding
  • Adopt a proactive approach to compliance

Ongoing Reporting Obligations

As a financial service provider operating in Afghanistan, it is essential to understand ongoing reporting obligations. These include:

  • Threshold reporting for large cash transactions exceeding AFS 1,000,000 or its equivalent in other currencies
  • Suspicious transaction reporting within three business days of suspicions arising
  • Prohibition on “tipping off” clients about FinTRACA investigations

Conclusion

As the Afghan banking sector continues to evolve, it is clear that compliance with AML/CTF standards will remain a top priority. By working together, financial service providers, regulatory bodies, and law enforcement agencies can create a safer and more secure environment for all stakeholders involved.