Fraudulent Activities in Afghanistan’s Finance Sector on the Rise
Introduction
The Afghan financial sector is facing a growing problem of fraudulent activities, with reports suggesting that numerous banks and financial institutions are failing to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
Lack of Oversight and Regulation
According to sources, the Da Afghanistan Bank, the country’s central bank, has been criticized for its lack of oversight and regulation of the financial sector. As the responsible authority 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 is failing to effectively monitor and prevent fraudulent activities.
Failure of Financial Intelligence Unit (FIU)
The Afghanistan Financial Transactions and Reports Analysis Center (FinTRACA), a FIU established in 2006, has also come under fire for its inability to effectively monitor and prevent fraudulent activities. FinTRACA is responsible for collecting, analyzing, and disseminating information about money laundering and terrorism financing.
Consequences of Failure
As a result of these failures, financial service providers are now required to implement AML/CTF programs to detect and combat money laundering and terrorist financing. These programs must include:
- Adequate policies, procedures, and controls to identify customers properly
- Regular auditing of transactions
- Retention of records
- Adequate training of staff
Each reporting entity is unique and poses its own set of risks, and financial institutions are required to develop risk-based AML/CTF programs that are proportionate to their scale, scope, risks, and sophistication.
Reporting Requirements
Financial service providers are obligated to report certain transactions and suspicious matters to FinTRACA. This includes reporting:
- Large cash transactions exceeding AFS 1,000,000 or its equivalent in other currencies
- Suspicious transactions regardless of size
Concerns about Integrity
The lack of effective regulation and oversight has led to concerns about the integrity of Afghanistan’s financial sector, with many calling for greater transparency and accountability. The government has pledged to take steps to address these issues and prevent fraudulent activities from continuing to plague the country’s economy.
Conclusion
Fraudulent activities in Afghanistan’s finance sector are on the rise, and it is essential that measures be taken to prevent and combat money laundering and terrorist financing. Financial institutions must implement effective AML/CTF programs and report suspicious transactions to FinTRACA. The government must also take steps to improve oversight and regulation of the financial sector to ensure the integrity of Afghanistan’s economy.