Financial Crime World

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Financial Institutions Must Comply with Sanctions and Conduct Thorough Customer Due Diligence

In a bid to combat money laundering and terrorist financing, financial institutions in Afghanistan have been urged to implement strict sanctions and conduct thorough customer due diligence.

The country’s Anti-Money Laundering and Proceeds of Crime Law requires financial institutions to comply with international sanctions and freeze the assets of designated individuals and entities. Failure to do so can result in penalties and reputational risk.

Customer Due Diligence

According to the law, financial institutions must:

  • Continuously monitor their customers’ transactions and report any suspicious activity to the relevant authorities.
  • Conduct regular checks on their customers’ identities and update their customer information regularly based on their risk profiles.

FATF Requirements

The Financial Action Task Force (FATF) requires countries to conduct money laundering and terrorist financing risk assessments, and financial institutions are not exempt from these requirements. In high-risk scenarios, financial institutions must apply enhanced due diligence measures to prevent illegal activities.

Sanctions Screening

Financial institutions have been advised to:

  • Implement sanctions screening electronically.
  • Prioritize “False Negative” and “False Positive” matches respectively.
  • Obtain the domestic and international sanctions list from competent authorities and screen their customers on a real-time basis.

Customer Due Diligence Measures

The article highlights the importance of customer due diligence, which includes:

  • Identifying and verifying customer identities
  • Obtaining sufficient information about beneficiaries
  • Conducting risk assessments

Financial institutions have been advised to develop policies and procedures for customer identification, acceptance, rejection, screening, and verification.

Additional Requirements

In addition, financial institutions must:

  • Identify and verify the beneficial owners of customers
  • Conduct regular reviews of their customers’ transactions
  • Keep records of all customer due diligence activities and make them available to relevant authorities upon request

Conclusion

The implementation of sanctions and customer due diligence measures is crucial in preventing money laundering and terrorist financing in Afghanistan. Financial institutions that fail to comply with these requirements risk facing penalties and reputational damage.