Terrorist Financing Explained in Afghanistan: A Country Under Taliban Rule

The rapid takeover of Afghanistan by the Taliban has set back decades-long efforts to integrate the country into the international community, particularly in the realm of anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) reforms. Despite significant progress made by the previous government to raise compliance standards and crack down on major vulnerabilities in its economy, including the under-regulated hawala money transfer system, the Taliban is now overseeing Afghanistan’s enforcement of AML/CFT and economic sanctions.

The Challenges Ahead

As a group sanctioned by the United Nations, the United States, and other international partners, the Taliban is unlikely to meaningfully enforce UN sanctions against itself or crack down on the hawala industry in the same way as the previous government. According to a former senior Treasury Department official, “I can’t think of any case in which a terrorist group that’s already designated became the power in charge of a full country.”

The Implications

The Taliban’s takeover has particularly significant implications given the tragic and brazen attack by the Islamic State-Khorasan (ISIS-K) at the Kabul airport, which killed 13 US military personnel along with over 160 Afghan civilians. The international community must hold the Taliban responsible for allowing terrorist groups to operate in Afghanistan, and addressing AML/CFT risks presents one concrete way to measure the Taliban’s actions rather than its rhetoric in addressing terrorism and terrorism financing.

Understanding Afghanistan’s Post-9/11 Economic History

Understanding Afghanistan’s post-9/11 economic history allows policymakers to better address the current crisis. After decades of conflict and the Taliban’s prior five-year rule from 1996 to 2001, Afghanistan’s formal financial system was “virtually non-existent,” according to a 2003 World Bank study. Instead, it relied heavily on hawala, a centuries-old informal money exchange system that provides for both domestic and international transfers.

Regulatory Concerns

Regulators around the world hate the system because of its opacity and its role in helping to fund terrorism. With the Taliban now in power, it is crucial for the international community to closely monitor Afghanistan’s economic activities and ensure that terrorist groups are not able to exploit the country’s financial systems.

Key Points

• The Taliban’s takeover has set back decades-long efforts to integrate Afghanistan into the international community
• The hawala money transfer system remains a significant vulnerability in Afghanistan’s economy
• Regulators around the world hate the system due to its opacity and role in funding terrorism
• Addressing AML/CFT risks presents one concrete way to measure the Taliban’s actions in addressing terrorism financing.