Risk-Based Compliance Monitoring Takes Center Stage in Afghanistan Amidst Turmoil

As the situation in Afghanistan continues to unfold, financial institutions and fintechs are being forced to rethink their approach to risk-based compliance monitoring. The Taliban’s takeover has sent shockwaves through global markets, raising concerns about corruption, terrorist financing, transnational organized crime, and drug trafficking.

Addressing Changing Landscape in Afghanistan

In response, organizations are taking proactive steps to assess their exposure to the country and its vast network of counterparty relationships. The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued new national anti-money laundering (AML) priorities, several of which are directly relevant to the situation in Afghanistan.

Key Areas for Review

• A comprehensive refresh of AML/CFT risk assessments is necessary to address the changing landscape in Afghanistan.
• Sanction-risk analysis associated with Afghanistan must be reviewed, as well as companies working with or for the Taliban.
• Country-risk models need to be updated to reflect the change in government, which is critical for customer risk analysis, transaction monitoring, and other risk-based approaches.

Assessing Counterparty Relationships

Direct counterparty relationships linked to Afghanistan must also be assessed, including those in corridor countries such as:

• Pakistan
• Central Asia
• The United Arab Emirates
• China

Exposure to Money Remitting Organizations

Organizations should review their exposure to money remitting organizations operating in Afghanistan or used to move funds within the country or internationally. This includes formal and informal channels like hawala networks.

Logistics Companies and Mining Organizations

• Logistics companies operating in South Asia with business relationships in Afghanistan are also a concern, as they may be subject to customers and border taxes imposed by the Taliban.
• The review of mining organizations that operate in Afghanistan and companies working with minerals extracted from the country is also crucial.

Proactive Compliance Approach

The above list highlights key areas for proactive compliance teams to consider as they navigate the complex landscape of risk-based compliance monitoring in Afghanistan.