Afghanistan’s Law Enforcement Revamp Falters: Corruption and Lack of Resources Impede Progress
Kabul, Afghanistan - A Missed Opportunity?
The Afghan government’s efforts to revamp its law enforcement system have fallen short of expectations, with corruption and lack of resources hindering the fight against money laundering and terrorist financing.
Ineffective Coordination between Law Enforcement Agencies
Despite the establishment of specialized agencies, their powers and responsibilities remain unclear, leading to a lack of effective coordination between law enforcement agencies. Investigations into financial crimes have been carried out, but none have resulted in prosecutions or convictions.
Partial Implementation of Declaration System
The declaration system for cross-border transportation of currency and bearer instruments is only partially implemented at Kabul International Airport, with implementation elsewhere along the country’s porous borders proving challenging due to the proliferation of government agencies present at airports.
Banking Sector Challenges
The banking sector has expanded significantly, with correspondent banking relationships established with financial institutions abroad. However, AML/CTF preventive measures imposed on all financial institutions need to be strengthened to improve compliance with international standards.
- Financial institutions are required to conduct customer due diligence and record keeping
- Requirements for enhanced due diligence for higher-risk customers and transactions are lacking
- Correspondent relationships are not sufficiently regulated
- Wire transfer rules lack clarity
Failure to Report Suspicious Transactions
The majority of financial institutions have failed to report suspicious transactions to FinTRACA, despite the requirement to do so. Financial institutions are required to develop internal policies and procedures to prevent money laundering, but guidance on what should be covered is lacking.
Market Entry Conditions and Supervision Fall Short
Market entry conditions and AML/CTF supervision fall short of international standards, with a lack of resources and expertise contributing to ineffective implementation. The central bank and Ministry of Finance have oversight responsibilities, but their ability to supervise and regulate financial institutions is hindered by corruption and vested interests.
Microfinance Sector Challenges
The country’s microfinance sector is also plagued by issues, with many money service providers operating outside the legal framework in provinces such as Kandahar, Helmand, and Herat. The government has failed to enforce licensing requirements and CDD obligations due to security constraints and limited resources.
International Concerns
The international community has expressed concern over Afghanistan’s lack of progress in combating financial crimes, and it remains to be seen whether the country can address these issues and meet its international commitments.