AFGHANISTAN: Financial Institutions Must Enhance Due Diligence Procedures Amid Rising Risks
In the wake of recent developments in Afghanistan, financial institutions operating in the region are being urged to bolster their systems and controls to mitigate the risks of money laundering and terrorist financing.
Importance of Robust Due Diligence Procedures
The UK’s financial regulator has emphasized the importance of robust due diligence procedures in assessing the risk posed by transactions involving Afghanistan. Despite not being listed as a high-risk jurisdiction, firms are required to apply enhanced due diligence measures where there is a heightened risk of money laundering or terrorist financing.
Factors to Consider
When conducting risk assessments, factors such as country risks and sanctions must be taken into account. This includes:
- Country risks: Financial institutions should consider the economic and political stability of Afghanistan when assessing the risk of transactions.
- Sanctions: Firms must screen against the UK Sanctions List and regime-specific list for Afghanistan to prevent any potential breaches.
Compliance with AML Regulations
To comply with anti-money laundering (AML) regulations, financial institutions must ensure that transactions involving Afghanistan are properly monitored and assessed. This includes:
- Reporting suspicious activity: Financial institutions must report suspicious activity to the UK Financial Intelligence Unit (UKFIU) at the National Crime Agency (NCA).
- Screening against sanctions lists: Firms must continue to screen against the UK Sanctions List and regime-specific list for Afghanistan.
Regulatory Guidance
The regulator’s Financial Crime Guide provides further guidance on systems and controls required for compliance with financial sanctions. In light of these developments, financial institutions operating in Afghanistan are advised to review their AML policies and procedures to ensure they remain effective in mitigating the risks posed by financial transactions.
Urgent Action Required
The regulator is urging firms to take immediate action to ensure their compliance with AML regulations and to review their procedures for reporting suspicious activity. With sanctions already in place, financial institutions operating in Afghanistan must remain vigilant in their efforts to prevent money laundering and terrorist financing.
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“Firms must be aware of the potential impact of these events on patterns of financial activity and establish systems and controls that respond to changing risks,” said a spokesperson from the regulator.
By taking immediate action to enhance due diligence procedures, financial institutions operating in Afghanistan can mitigate the rising risks of money laundering and terrorist financing.