Financial Crime World

Banking Regulation Tightens Grip on Unauthorized Activities

The Afghanistan Banking and Payments Authority (DAB) has issued a new regulation to strengthen the financial sector by preventing banking organizations from engaging in unauthorized activities.

Key Provisions of the Regulation

  • Prohibits banking organizations from acquiring or possessing real estate held for investment, in line with Article 33.10 of the Banking Law.
  • Prohibits banking organizations from engaging in whole-sale or retail trade, manufacturing, transportation, agriculture, fisheries, mining, building, and insurance activities, except for those specifically authorized under Section 9.1.2 of the Banking Law.
  • Imposes strict guidelines on the use and disclosure of customer information:
    • Present and past administrators and employees are prohibited from releasing or disclosing any information obtained in the course of their services to the organization, unless specifically authorized by DAB.
    • Certain exceptions apply, such as with written consent from the customer or for specific purposes authorized by DAB.

Additional Prohibitions

  • Prohibits banking organizations from offering non-qualifying variable-rate credit to their customers.
  • Prohibits banking organizations from accepting their own shares as collateral for a credit without prior written authorization of DAB.

Disposal of Real Estate Held for Investment

  • Banking organizations that currently possess real estate held for investment must present a plan to dispose of such assets to the Financial Supervision Department of DAB before December 31, 1383.
  • The plan must envision full disinvestment by December 31, 1384.

Expert Analysis

Experts believe that the regulation will have a positive impact on the financial sector, preventing unauthorized activities and ensuring that banking organizations operate within their authorized scope.

However, some experts have expressed concerns about the potential impact of the regulation on small and medium-sized enterprises (SMEs).

“The regulation may make it difficult for SMEs to access credit and other financial services,” said Dr. Nasir Ahmad, a professor at Kabul University. “This is because banking organizations will be required to focus more on their core activities and less on providing financing to SMEs.”

Despite these concerns, the majority of experts believe that the regulation is a step in the right direction.

“In the long run, this regulation will help strengthen the financial sector and promote economic growth,” said Dr. Ahmad Khan, a leading economist in Afghanistan. “It’s a necessary step towards creating a more stable and resilient financial system.”