KABUL UNDER TALIBAN CONTROL: Hawala Industry and Financial System on Shaky Ground

Concerns Grow Over Security and Stability of Afghanistan’s Financial System

As the Taliban gains control over Afghanistan, concerns are mounting about the security and stability of the country’s financial system. The hawala industry, a crucial part of Afghanistan’s economy, is now under scrutiny as the international community grapples with the implications of a Taliban-controlled government.

Uncertainty Surrounds Hawala Industry Reform

In recent years, efforts to reform the hawala industry have made progress, but the Taliban’s takeover raises significant concerns about its ability and willingness to supervise this substantial sector of the Afghan economy. The appointment of Haji Mohammad Idris, a relatively unknown figure with no known economic or financial expertise, as central bank governor, has sparked fears that loyalty will trump technical competency.

Complications Arise from State-Owned Commercial Banks

The situation is further complicated by the fact that one-quarter of Afghanistan’s commercial banks are state-owned, placing even more of the country’s financial infrastructure under Taliban control. This could create sanctions exposure for U.S. persons and other counterparties, depending on how the U.S. government defines “the Taliban” and activities under sanctioned individuals’ control.

Da Afghanistan Bank: A Flashpoint in the Crisis

The Da Afghanistan Bank (DAB), now part of a Taliban-controlled government, is subject to U.S. economic sanctions while being responsible for anti-money laundering and combating the financing of terrorism (AML/CFT) supervision and overseeing Afghanistan’s Financial Intelligence Unit (FIU), FinTRACA. The FIU, which was previously responsible for investigating Taliban finances, will likely see major changes under the new regime.

Terrorist Financing Concerns

The Taliban’s takeover also raises questions about its ability to counter terrorist financing, with 16 known terrorist groups operating in Afghanistan, including ISIS-K, the Haqqani Network, and Al-Qaeda. The U.S. State and Treasury Departments are urging concrete steps from the Taliban to address this issue.

Mitigating Risks

To mitigate these risks, experts recommend a range of measures, including:

• Modifying the definition of “the Taliban” for economic sanctions purposes
• Using information-sharing authorities to support humanitarian assistance
• Establishing an offshore counterterrorism financing capability for Afghanistan

Conclusion

As the situation unfolds, one thing is clear: the hawala industry and financial system in Afghanistan are on shaky ground. The international community must work together to ensure that the country’s economy remains stable and secure in the face of these unprecedented challenges.