Hawala Industry Strikes Amid Reforms; Taliban’s Takeover Raises Concerns

The Struggle for Reform in Afghanistan’s Hawala Sector

Kabul, Afghanistan - The hawala industry in Afghanistan has been plagued by strikes and controversy over the past three years as the government sought to reform the sector. In May 2021, a 16-day strike was called by hawaladars protesting against reforms aimed at transitioning them into companies.

The Concerns of the Taliban’s Takeover

The latest development comes as the Taliban takes control of the Afghan government, raising concerns about the fate of the country’s financial system and its ability to combat terrorism financing. The hawala industry, which is largely unregulated, has been criticized for facilitating billions of dollars in illegal activities each year.

Efforts to Reform the Sector

In recent years, the Afghanistan Financial Action Task Force (AFT) had been working with international partners to implement key reforms aimed at increasing transparency and reducing money laundering risks in the sector. These efforts included the introduction of a new financial intelligence unit, FinTRACA, which was designed to share information with other countries to combat illicit activities.

The Fear of Undone Progress

However, the Taliban’s takeover has raised concerns that these efforts may be undone, leaving the country vulnerable to terrorism financing and other illegal activities. The unsupervised hawala industry creates substantial vulnerabilities that could facilitate billions of dollars in terrorism financing, narcotrafficking, and tax evasion.

Calls for Independent Leadership

“We urge the international community to hold the Taliban accountable for fulfilling its commitments to implementing key reforms in the hawala sector,” said a senior government official. “The unsupervised hawala industry creates substantial vulnerabilities that could facilitate billions of dollars in terrorism financing, narcotrafficking, and tax evasion.”

The Need for Independent Technocrats

The official called for independent technocrats to be appointed to lead and operate the Afghanistan Central Bank (DAB) and FinTRACA, rather than Taliban loyalists who lack requisite education or experience.

International Reactions

• Egmont Group: Has taken swift action to sever FinTRACA’s access to its secure messaging platform following the Taliban takeover.
• US Treasury Department: Has identified concrete steps that the Taliban can take to combat terrorism financing against known terrorist groups operating in the country, including ISIS-K, the Haqqani Network, and Al-Qaeda.

Recommendations for Combating Money Laundering and Terrorism Financing

Policymakers are urging a regional approach to combating money laundering and terrorism financing in the region, rather than relying solely on jurisdictional sanctions. The US Treasury Department is also considering establishing an offshore counterterrorism financing capability for Afghanistan, which could be achieved by relocating the Afghanistan Financial Attaché position to a major financial hub such as Dubai or Doha.

Conclusion

The policy challenges posed by the Taliban’s takeover are vast, but some of the most productive actions that can be taken now are fairly straightforward.