Anti-Money Laundering in Afghanistan

Overview of AML in Afghanistan


Money laundering and terrorist financing, mass cash smuggling, fraud continue to threaten Afghanistan's security and development. In Afghanistan, Terrorist organizations carry out their financial affairs through drug trafficking, smuggling, irregular trade, purchase contracts, and fraud. Afghanistan is the world's largest producer of opium, which increases methamphetamine production, so drug trafficking is particularly popular. These types of terrorist activities prevent the country's economic development and fund the terrorist groups that weaken its stability. Even though money laundering plays a critical role in this support, this prevents the Afghanistan government's economic growth and sustainability. Therefore, the Afghan government has passed laws and regulations to combat financial crimes but faces a significant challenge in implementing and enforcing existing laws and regulations.


FATF in Afghanistan


The last Mutual Evaluation Report on the implementation of money laundering and counter-terrorism financing standards in Afghanistan was prepared in 2011 by the Financial Action Task Force (FATF). Afghanistan is no longer on the FATF Country List, which is determined to have strategic AML deficiencies. In addition as part of the ongoing global AML / CFT compliance process, FATF is subject to monitoring Afghanistan.


Hawale System in Afghanistan


Most of its economic activities in Afghanistan are informal. Irregular cash transactions and transfers are also applied as a rule through a broker network known as hawala, the country's traditional money transfer system. According to the Financial Action Task Force (FATF), an international anti-money laundering body, hawala brokers are used in more than half of all transactions in Afghanistan. The Hawala system has become the center of Afghanistan's money laundering problems, largely due to its informality and opacity. Hawala brokers usually keep their bank accounts and use bank transfers to pay to other brokers abroad, and also Afghan banks use the system to send money to remote parts of the country. This prevents the government from determining which of the funds sent through the hawala system are above the board of directors. It is very difficult to prevent money laundering through the Hawala system, which has devastating effects on the Afghan economy.


Overall, the inability of the Afghan government to treat the hawala system as an unofficial cash flow instrument could lead to severe changes in money demand and increased volatility in international capital flows, interest and exchange rates. The unpredictable nature of money laundering and the loss of policy control it brings can make it difficult to achieve sound economic policy.


FinTRACA in Afganistan


The Afghanistan Financial Transactions and Reports Analysis Center (FinTRACA) was established as a Financial Intelligence Unit (FIU) in accordance with the AML law adopted by the President of Afghanistan in 2006. provide. Administratively independent FinTRACA contributes to the creation and maintenance of an environment to identify and combat money laundering activities and terrorist financing in Afghanistan. This goal has a national value as meeting Afghanistan's international obligations to fight money laundering (AML) and terrorism financing (CTF). Successful handling of these obligations and needs will help Afghanistan fight AML and CTF and have a positive impact on Afghanistan's relations with foreign countries and international organizations.





Request a demo and learn how Sanction Scanner protects your firm from the Financial Crimes.

Request Demo