Financial Crime World

Strengthening Afghanistan’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Framework

Key Issues

The current AML/CFT framework in Afghanistan is plagued by several issues that hinder its effectiveness. These key issues include:

  • Weak implementation: The lack of resources, expertise, and vested interests has led to a subpar implementation of the AML/CFT framework.
  • Lack of regulation: Correspondent relationships are not sufficiently regulated, and requirements for gathering information on respondent institutions are inadequate.
  • Insufficient customer due diligence (CDD): CDD requirements fall short of the standard, with no requirements to determine beneficial ownership or control of legal persons.
  • Limited STR reporting: Few financial institutions report suspicious transactions (STRs) to FinTRACA, and the scope of this requirement is too narrow.
  • Inadequate internal policies and procedures: Financial institutions have not developed adequate internal policies and procedures to prevent money laundering.

Recommendations

To address these key issues, we recommend the following solutions:

  • Strengthen AML/CFT framework: Enhance CDD requirements, strengthen STR reporting, and improve internal policies and procedures.
  • Enhance regulation of correspondent relationships: Introduce measures to regulate correspondent relationships, including gathering information on respondent institutions.
  • Increase resources and expertise: Provide financial institutions with sufficient resources and expertise to implement effective AML/CFT measures.
  • Improve market entry conditions: Implement measures to ensure the fit and properness of beneficial owners of financial institutions and conduct criminal background checks.
  • Enforce licensing requirements for MSPs: Ensure that all Money Service Providers (MSPs) operate within the legal framework, particularly in provinces with limited resources.

Additional Suggestions

To further enhance Afghanistan’s AML/CFT framework, we suggest:

  • Provide guidance on internal policies and procedures: Offer clear guidelines on what should be covered in internal policies and procedures to prevent money laundering.
  • Increase transparency and accountability: Establish a transparent system for reporting STRs and ensure that financial institutions are held accountable for non-compliance.
  • Enhance AML/CFT training and capacity building: Provide regular training and capacity-building programs for financial institution staff to improve their understanding of AML/CFT measures.

By addressing these key issues and implementing the recommended solutions, Afghanistan can strengthen its AML/CFT framework and reduce the risks associated with money laundering and terrorist financing.