Afghanistan’s Law Enforcement Agencies Fall Short in Combating Money Laundering and Terrorist Financing
Kabul, Afghanistan - Despite significant efforts to establish specialized agencies and laws to combat money laundering and terrorist financing, Afghanistan’s law enforcement agencies have failed to effectively curb the illegal activities.
Lack of Resources, Expertise, and Coordination
According to a recent assessment, the lack of adequate resources, expertise, and coordination among law enforcement agencies has hindered their ability to investigate and prosecute cases. Specialized agencies created to tackle these issues have not been given clear definitions or powers, leading to duplication of efforts and waste of scarce resources.
Ineffective Investigations and Prosecutions
The report highlights that while investigations into money laundering and terrorist financing cases have been conducted, none of them have resulted in prosecutions or convictions. The country’s limited resources, corruption, and lack of focus on the money trail have all contributed to this failure.
Declaration System for Cross-Border Transportation of Currency and Bearer Instruments
Another area of concern is the implementation of a declaration system for cross-border transportation of currency and bearer instruments, which has only been partially implemented at Kabul International Airport (KIA). The limited implementation is further hampered by the proliferation of government agencies present at the airport.
Financial Sector Concerns
The financial sector in Afghanistan has also come under scrutiny. While all financial institutions are required to impose anti-money laundering and combating the financing of terrorism (AML/CFT) measures, these requirements need to be strengthened significantly to improve compliance with international standards.
- Correspondent relationships between Afghan banks and foreign institutions have not been sufficiently regulated.
- There is a lack of clarity in domestic wire transfer rules.
- Financial institutions are required to report suspicious transactions, but few have done so in practice.
Internal Policies and Procedures
The report also highlights the need for improved internal policies, procedures, and controls within financial institutions to prevent money laundering. Currently, these requirements are not clearly defined, leading to variations among institutions.
Market Entry Conditions and AML/CFT Supervision
Market entry conditions and AML/CFT supervision fall short of international standards, with a general lack of resources and expertise contributing to this failure. The central bank and Ministry of Finance have the responsibility for regulating and supervising financial institutions, but their efforts have been hindered by corruption and vested interests.
Microfinance Institutions (MFIs)
The report concludes that despite considerable efforts to bring MFIs under government monitoring, many MFIs continue to operate outside the legal framework, particularly in provinces such as Kandahar, Helmand, and Herat.
Urgent Action Required
The Afghan government has been urged to address these issues and implement effective measures to combat money laundering and terrorist financing. The country’s financial stability and security depend on its ability to effectively regulate and supervise its financial institutions and prevent illegal activities.