Financial Crime World

Financial Institution Compliance in Afghanistan Faces Major Growth and Evolution

In a remarkable achievement, Afghanistan’s Financial Supervision Department (FSD) has undergone significant growth over the past decade, transforming from a small team of 12 employees without banking supervision experience to a robust organization with 165 professional staff members.

Establishment and Reforms

The FSD was established in late 2003 following the enactment of DAB Law and Banking Law. Since then, it has implemented major reforms aimed at aligning its regulatory framework with international standards and best practices.

Vision and Goals

According to its vision, the FSD aims to have a stable and sound financial system in Afghanistan where banks and financial institutions provide conventional and Islamic banking products and services according to well-established policies and procedures and based on good governance practices. To achieve this goal, the FSD:

  • Conducts on-site examinations
  • Performs off-site analysis and surveillance
  • Takes corrective and enforcement actions
  • Fines banks that breach banking laws, regulations, and procedures
  • Evaluates and rates banks through a CAMEL rating system

Organizational Structure

The FSD’s organizational structure is headed by the Director General and comprises eight divisions, including:

  • General Supervision Division: responsible for on-site supervision and off-site analysis and surveillance
  • Regulatory Affairs Division: handles licensing, special supervision/enforcement, regulations, anti-money laundering and combating financing of terrorism, electronic money institutions, and research and development
  • Islamic Banking Division: has three areas:
    • On-site supervision
    • Off-site monitoring and analysis
    • Research and compliance with Shariah law

Capabilities and Strengths

With its robust organizational structure and expanded capabilities, the FSD is well-equipped to ensure financial stability and promote economic growth in Afghanistan. The department has 173 positions, with 8 non-administrative workers and housekeepers.

In conclusion, the Financial Supervision Department’s growth and evolution demonstrate its commitment to ensuring a stable and sound financial system in Afghanistan. Its robust organizational structure and expanded capabilities position it well to promote economic growth and stability in the country.