Hawala Industry Strikes Over Reforms Amid Taliban Takeover

Kabul, Afghanistan - The hawala industry, a vital part of Afghanistan’s informal financial system, has been plagued by strikes and reforms over the past three years as it transitioned from unregulated to regulated entities. Despite these efforts, the Taliban takeover of the government has raised concerns about the industry’s future.

Background

In May 2021, hawaladars went on a 16-day strike protesting against collecting customer information, a basic standard for banks worldwide to combat money laundering and terrorist financing. The strike was eventually resolved through negotiations with the Afghan government.

Challenges under Taliban Takeover

The Taliban takeover has created new challenges. Experts warn that an unsupervised hawala industry would create substantial vulnerabilities for terrorism financing, narcotics trafficking, and tax evasion. In an article published by the Egmont Group of Financial Intelligence Units, experts emphasized the need to hold the Taliban responsible for fulfilling previous commitments to supervise both the banking and hawala sectors.

The Way Forward

• Appoint independent technocrats to lead and operate key financial institutions, rather than loyalists who lack experience.
• Ensure that the Taliban does not misuse sensitive financial intelligence information held by these institutions. The Egmont Group has already taken steps to sever Afghanistan’s access to a secure messaging platform used by Financial Intelligence Units worldwide.

Concrete Steps Needed

To address concerns about counterterrorism financing, the U.S. State and Treasury Departments should:

• Identify concrete, measurable steps for the Taliban to take against known terrorist groups operating in Afghanistan such as ISIS-K, the Haqqani Network, and Al-Qaeda.
• Modify its definition of “the Taliban” to provide necessary regulatory clarity for financial institutions, aid organizations, and other stakeholders navigating economic sanctions.

International Cooperation

To support humanitarian assistance and other forms of aid in Afghanistan, experts urge:

• The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to consider using its new information-sharing authorities to convene a public-private partnership platform.
• The international community to return to a regional approach to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT), pursuing economic sanctions that fully assess Pakistan’s malign influence in Afghanistan, as well as the role of Iran and other regional actors.

Conclusion

As the policy challenges posed by a terrorist organization taking over a friendly government are vast, some of the most productive actions that can be taken now are fairly straightforward. Holding the Taliban accountable for fulfilling previous commitments to supervise key financial institutions, ensuring the proper use of sensitive financial intelligence information, and providing necessary regulatory clarity for stakeholders navigating economic sanctions are crucial steps towards addressing the concerns raised by the hawala industry strikes and reforms over the past three years.