Financial Crime World

Afghanistan’s Turmoil Highlights Compliance Risks in Finance Sector

The ongoing crisis in Afghanistan has underscored the need for robust systems and controls to mitigate the risks of financial crime, the Financial Conduct Authority (FCA) warned today.

Compliance Requirements

The regulator emphasized that firms must be aware of the potential impact of these developments on patterns of financial activity and assess risks related to specific customers and flows of funds accordingly. The FCA expects firms to establish and maintain effective systems and controls to counter the risk of being used to further financial crime, in compliance with their legal obligations under:

  • The Proceeds of Crime Act 2002
  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

Specific Requirements for Firms

Firms must adhere to provisions related to:

  • Firm risk assessments
  • Customer due diligence
  • Enhanced due diligence
  • Transaction monitoring in the MLRs

While Afghanistan is not currently listed as a high-risk jurisdiction, firms are required to apply risk-sensitive enhanced due diligence measures where there is a high risk of money laundering or terrorist financing.

Anti-Money Laundering Policies and Procedures

The FCA urges firms to consider the impact of these developments on their anti-money laundering policies and procedures in a risk-based manner and take necessary steps to ensure compliance with legal and regulatory obligations. Specifically, firms should:

  • Ensure that they appropriately monitor and assess transactions to Afghanistan to mitigate risks
  • Report suspicious activity to the UK Financial Intelligence Unit (UKFIU) at the National Crime Agency (NCA)
  • Meet their obligations under Money Laundering Regulations and terrorist financing legislation

Screening Against Sanctions Lists

The FCA reminds firms to continue screening against the UK Sanctions List, particularly the regime-specific list for Afghanistan. The regulator’s expectations regarding systems and controls in relation to compliance with financial sanctions are outlined in its Financial Crime Guide.

Compliance Action Required

The FCA emphasized that firms must remain vigilant and proactive in their efforts to prevent money laundering and terrorist financing, and failure to comply with these requirements could result in regulatory action.