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AML/CFT Snapshot By: Nesar Yosufzai

Certified Financial Crime Specialist


Certified Anti Money Laundering Specialist

Note: 03 | April 2018

Anti-Money Laundering and Counter Financing Terrorism Notes to


Insurance Sector of Afghanistan
Money Laundering is the process to conceal or disguise the proceeds of crime such as drug trafficking,
corruption, illicit arms trafficking, extortion, fraud, insider trading, organized crime, and other predicate
offenses and to make them appear legal. According to the International standards, including Financial Action
Task Force Recommendation, Palermo Convention, and European Union Directives, jurisdictions should
criminalize money laundering and enable its competent authorities to confiscate the proceeds of crime.

The existence of legal and regulatory framework to combat money laundering and terrorist financing is the
crucial and an integral element of a sound anti-money laundering and terrorist financing regime. Financial
Action Task Force recommends that countries should criminalize money laundering and terrorist financing with
a view to include the widest range of predicate offenses.

Although Afghanistan is not a financial center, the AML-PC law is to protect and promote the financial
proceeds of drug, corruption and bribery, illegal integrity of Afghanistan and fight against the use of
extraction of mines, tax evasion, forgery, financial institutions and designated non-financial
contraband, human smuggling, and usurpation of businesses and professions (DNFBPS) including
lands are shaped pieces of money laundering. Insurance Companies (ICs), for money laundering,
proceeds of crime, the proliferation of weapons of
Afghanistan’s first Anti-Money Laundering and
mass destruction and the financing of terrorism.
Proceeds of Crime law was passed in 2004 with the
The amended AML-PC law meets the action plan
purpose to prevent the use of financial institutions
items agreed with the International Cooperation
for money laundering and terrorist financing.
Review Group of Financial Action Task Force
Mutual Evaluation of Afghanistan had been
(ICRG/FATF)3. The law defines the predicate
undertaken in 20111, identified significant
offense as:
deficiencies in the legal and regulatory framework
"Predicate offense means any criminal acts
of anti-money laundering regime. Since then,
resulted in funds or properties, whether
Afghanistan has adopted the new anti-money
directly or indirectly irrespective of
laundering and terrorist financing laws and
whether the offense is committed inside or
regulations to assimilate with FATF
outside the country. These offenses shall
recommendations and other conventions.
include all categories of offenses
LEGAL FRAMEWORK prescribed by FATF standards, including
piracy in the high sea.”
1: Anti-Money Laundering and Proceeds of Crime
Law The categories of offenses listed by FATF are;
The Anti-Money Laundering and Proceeds of Crime
• “Participation in an organized criminal
Law (AML-PC) was adopted and published in
group and racketeering;
official Gazette # 1142 in July 2014. The law was
• Terrorism, including terrorist financing;
then amended in April 2015.2 The purpose of the

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• Trafficking in human beings and migrant the property is derived from illicit activity, and (v)
smuggling; assisting, organizing, supporting or facilitating
• Sexual exploitation, including sexual another person to do so.
exploitation of children;
• Illicit trafficking in narcotic drugs and An important element of the money laundering
psychotropic substances; offense is “knowledge” which may be inferred
from the objective of factual circumstance. As
• Illicit arms trafficking;
Afghanistan had few money laundering
• Illicit trafficking in stolen and other goods;
convictions, hence use of the legal principles to
• Corruption and bribery;
infer “willful blindness” or “deliberate avoidance
• Fraud;
of the knowledge of facts” would be an exercising
• Counterfeiting currency;
gap for investigators and prosecutors.
• Counterfeiting and piracy of products;
• Environmental crime; 2: Counter Financing of Terrorism Law
• Murder, grievous bodily injury; Counter Financing of Terrorism (CFT) law had been
• Kidnapping, illegal restraint and hostage- passed in September 2014 and then amended in
taking; April 20156. The CFT law criminalizes terrorist
• Robbery or theft; financing in compliance with recommendation # 5
• Smuggling; (including in relation to of the FATF. The purpose of this law is
customs and excise duties and taxes); implementing the International Convention for the
• Tax crimes (related to direct taxes and Suppression of Financing of Terrorism (1999) and
indirect taxes); its successor conventions, prevent the provision of
• Extortion; funds or property for terrorist acts, terrorist
• Forgery; organizations, or terrorist (s); and Implement UN
• Piracy; and Security Council Resolutions on combating the
• Insider trading and market financing of terrorism and the financing of
manipulation.” 4 proliferation of weapons of mass destruction.

In addition to the definition of the predicate In addition to the CFT law, the new penal code also
offense provided in AML-PC law, another set of criminalizes terrorist financing. Terrorism offenses
dominating laws in Afghanistan criminalizes most defined in the new Penal Code include acts such as
of the predicate offenses listed above. suicide attack, crimes against persons, use of
explosive or lethal devices, dissemination or
Money Laundering Offense: The money destruction of the nuclear or radioactive materials,
laundering offense defined in article # 4 of the destruction of infrastructure, acts against the
Anti-Money Laundering and Proceeds of Crime airport, ship or fixed platform safety, control over
law, criminalizes money laundering in compliance an aircraft or ship, hostage taking for terrorism
with recommendation # 3 of the FATF and meets purposes and the establishment of terroristic
the international standards, particularly the organization and its membership. The above acts
elements of article # 6 of the United Nations against the Government of the Islamic Republic of
Convention Against Transnational Organized Crime Afghanistan or foreign country, national and
(Palermo Convention).5 In general, the money international organizations are criminalized. The
laundering offense includes; (i) the conversion or punishment for accomplice, accessory, starter, and
transfer to conceal the illicit origin of the property, conspirator are the same as principle offender.
(ii) concealing the true nature of the property, (iii)
possess and use of the property derived from INSURANCE SECTOR
predicate offenses, (iv), engage, participate,
Why is AML/CFT Program essential to an
attempt or enter into arrangement knowing that
Insurance Company?

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Insurance is a contract which is represented by a A total number of four insurance companies are
policy that an individual or entity receives financial present in the country offering the travel, personal
protection against losses from an insurance accident, fleet motor, fleet aviation, construction,
company. Insurance Policy is used to hedge against cargo, transit, property, and professional
the losses that may result from damage or liability indemnity types of insurances. Afghanistan
for damage.7 Insurance Company (IC) is a business Insurance Authority (AIA) was established in 2005
that provides financial coverage in the form of which had been housed in the Ministry of Finance.
compensation against losses, injury, treatment, AIA is the licensing and supervisory authority of the
and damages. Insurance companies are risk takers insurance companies in Afghanistan. Cornerstones
and calculate the risk of occurrence and determine and responsibilities of the authority are; (i) issuing
the premium which should be paid by the insured product licenses, (ii) issuance of license to
person. Insurance companies are vulnerable to insurance companies, brokers, agents, survivors,
money laundering and terrorist financing due to loss adjusters, audit companies and insurance
their nature of the business. ICs should avoid the consultants, (iii) avoid illegal insurance activities,
potential use of their businesses by criminals for (iv), on-site and off-site supervision of insurance
the purpose of money laundering and terrorist companies, (v) to appoint external audit company
financing. Some of the indicators for the life for insurance companies, (vi) to propose
insurance, annuities, and other policies are; (i) amendments to the insurance law, and (vii)
early termination without business reason or drafting regulations, policies and procedures to the
looking to a free cancellation period, (ii) sector.8
overpayments, (iii) purchase of the product
inconsistent with customer needs, (iv) structuring, The legal basis for having AML/CFT program in the
(v) injecting the proceeds of crime into the system, Insurance Company
(vi) unusual payments, and misuse of the product Based on the article # 5 of the Anti-Money
by agents or broker as they have sale motive rather Laundering and Proceeds of Crime Law, Insurance
than being compliance staff or unwitting. Company is called “Reporting Entity”. Relevant
articles of the law are compulsory applicable on
Insurance companies are exposed to reputational,
ICs. In the event of non-compliance, the penalties
operational, legal, and concentration risks. The key
and enforcement actions specified in article # 24 of
side effect of the reputational risk is the loss of
the law are enforceable by competent authorities.
confidence and integrity in the market. Inadequate
or failed internal processes, people, system, and The international standard for having AML/CFT
fraud are the exposures of operational risk. In the program in the Insurance Company
event, IC doesn’t have adequate AML/CFT The Financial Action Task Force (FATF) is an
compliance program, there might be the high-risk independent inter-governmental body that
of lawsuits and adverse judgments against the IC develops and promotes policies to protect the
which is also flagged as the legal risk. Without global financial system against money laundering,
proper due diligence and risk assessment, terrorist financing and the financing of
concentration in risky products, sector, and proliferation of weapons of mass destruction.
geography are the main streams of concentration
risk. Board of directors and AML/CFT compliance The FATF Recommendations are recognized as the
officer of the IC should make sure that their global anti-money laundering (AML) and counter-
organization is not exploited by money launderers terrorist financing (CFT) standards.9 Based on the
and terrorist financiers. FATF 40 recommendations, insurance companies
Insurance Sector of Afghanistan should comply with relevant recommendations. In
The insurance sector of Afghanistan is very small the event, insurance sector is not covered in the
and limited. AML/CFT legal framework of the country, this
might be considered as a deficiency during the

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mutual evaluation of the country. To meet the best - Compliance function;
international practices, Afghanistan legal and - Comprehensive training program; and
regulatory framework is now in par with FATF - Independent audit function.
standards.
The program should also include the role of the
AML/CFT GUIDANCE NOTES board of directors and identified deliverables
This article is not the interpretation of legal for internal control measures. FATF requires
framework or bypasses the legal responsibilities of that financial institutions, including ICs should
the insurance companies. This is only a non- have internal controls in place aimed to
exhaustive list of notes which can be considered by minimize money laundering and terrorist
insurance companies. Most importantly, IC should financing risks. Article # 19 of the dominant
have their own AML/CFT policies and procedures Anti-Money Laundering and Proceeds of Crime
which should be approved by the board of law of Afghanistan requires reporting entities,
directors. The policies, procedures, and guidelines including ICs to develop programs for the
should assess the adequacy of the AML/CFT prevention of money laundering and terrorist
program in line with the risk and context of each financing.
business.
2. AML/CFT Policy and Procedure
1. AML/CFT Compliance Program The existence of AML/CFT policies and
The fourth group of Financial Action Task force procedures are very important for ICs. Policy is
recommendations (9-23) describes the general voice of the organization and high-
preventative measures both for the financial level controls. Procedure (s) is to explain how
and non-financial businesses and professions, the policy will be implemented in practice. The
including ICs. This set of recommendations existence of policies and procedures are vital
covers the customer due diligence and record components of the combating abilities for ICs.
keeping, secrecy laws and tipping off, Even though simplified processes should be
correspondent banking and MVTS, new the outcome of comprehensive risk
technologies, reporting of suspicious assessment, the AML/CFT policy should
transactions, reliance on third parties and describe if there are areas of simplified
internal controls, high-risk countries and approaches, waivers or exemptions.
additional measures for specific customers and
The policy should be approved by the board of
activities.
directors, reviewed regularly and updated as
The AML-PC law and the FATF standards necessary at least every two years. The voice
require all financial institutions, including ICs should be given to all sections and employees
to develop effective frameworks, preventive of the organization that policy implementation
measures, systems, controls, and practices to will cover all including any global presence.
manage their potential money Employees should be required to comply with
laundering/terrorist financing (ML/TF) risks. AML/CFT standards in an ethical manner. Any
Financial institutions should have adequate failure in this part may push the ICs into the
controls and procedures in place to know their reputational risk and doing business dilemma.
customers with whom they are establishing
business relationships. Adequate due diligence The policy should reflect the responsibilities of
on new and existing customers is an important all stakeholders and list all the criminal, civil,
part of these controls. and disciplinary actions and penalties which
will harm the IC as well as employees. The
In general, a good AML/CFT compliance
Standard Operating Procedures (SoP) should
program includes the following pillars;
be detailed, cover all day to day operations and
- Policies, procedures, and internal controls; working practices. All vulnerable areas should

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be served with adequate control. The internal implementation of policies and procedures,
controls may vary, including management (iv) monitor changes to the laws, regulations,
reports and built-in safeguards. If necessary; circulars, and guidelines issued by the AIA or
dual control, maker and checker, and/or any other competent authority, (v) develop
second review or approval should be and implement knowledge adequacy program
incorporated into the SoP. Internal control for compliance, customer facing, and other
measures should at least form the, (i) senior AML/CFT related staff, (vi) investigating the
management oversight, (ii) policy approval, money laundering red flags, parameters,
(iii) customer identification, verification, alerts, and filing the STR/SAR within three
acceptance and rejection of customer, (iv) working days after the formation of suspicion
SAR/STR reporting, (v) record keeping, (vi) to the Financial Intelligence Unit, (vii)
thresholds and limits, (vii) staff screening, (viii) responding to supervisory authority, Financial
dual control, built in safeguards and electronic Intelligence Unit and any other competent law
parameters set in electronic platform. enforcement agency or government body, and
last but not the least (viii) to ensure
3. AML/CFT Compliance Function implementation of the AML/CFT legislation,
Anti-Money Laundering and Proceeds of Crime circulars, and instructions issued by competent
Law of Afghanistan requires ICs to ensure bodies.
implementation of the legislation. It is highly
recommended that ICs should have an A dedicated stand-alone compliance
independent compliance department with department should at the minimum, include
adequate resources, including staff to ensure the sub-units of, (i) Know Your Customer (KYC),
implementation and to enforce combating (ii) Sanction Screening, (iii) Transaction
indicators. Chief Compliance Officer (CCO) Monitoring, (iv) Investigation, and (v) Program
should have required qualifications and Management.
relevant expertise. Board of directors appoints
the CCO and approves his/her sufficient The staff of the compliance department needs
authority to implement the day to day to be knowledgeable, experienced, and should
compliance functions. In some instances, the have high values of ethical standards. “Enemy
CCO might be approved or provided with “No - within the Organization” is a concern for ICs as
Objection” by the supervisory authority to well, therefor ICs should ensure to have the
ensure the criteria of being fit and proper proper employees’ onboarding and regular
person. Being a responsive function, CCO is screening. If necessary, ICs should conduct the
administratively hung under executive board, due diligence on third parties as well. Anti-
but the line of reporting is vectored to the Money Laundering and Proceeds of Crime Law
board of directors unless otherwise described of Afghanistan (Article # 19) requires the
differently in approved AML/CFT policy. CCO is reporting entities, including ICs to adopt
responsible for coordinating and monitoring adequate screening procedures to ensure high
the day to day compliance issues of the IC. standards when hiring employees.
Although the compliance function within each
As criminals are adopting new methods of
IC might look differently in terms of size and
money laundering and may try to own the
structure of the department; main
financial institution as the front business or
responsibilities of CCO leading the compliance
laundering machine; therefore, it is very
functions shall be, (i) risk assessment of the
important for the AML/CFT supervisory
products, customers, and delivery channels,
authority to set the requirements identifying
(ii) to ensure that policies, procedures, and
the fit and proper person mainly for the
internal control measures are complete and up
executive officers, high-level managerial
to date, (iii) leading and coordinating the

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positions, or any other person or legal entity reporting entities, including ICs to have
who exercises influence or degree of control internal audit arrangements to check
over the management and/or ultimately owns compliance with legal and regulatory
the business. requirements and effectiveness of the
measures taken place to apply the mentioned
4. AML/CFT Training Program legislation. Audit function should be
International standards suggest that reporting independent; compliance department or its
entities should have an ongoing and written staff shouldn’t be involved in the audit process
training program. Training is an important as the audit will assess the implementation of
component of a good and effective compliance planned activities including functions being
program. Anti-Money Laundering and carried out by the compliance department as
Proceeds of Crime Law of Afghanistan (Article well. Internal audit department or cell of the
# 19) also requires the reporting entities, ICs should directly report to the board of
including ICs to conduct ongoing trainings for directors or its sub-committee defined and
the officials and employees. Ongoing approved by the board. Chief Internal Auditor
awareness and training will demonstrate the should be assigned by the board. If needed or
seriousness of ICs about AML/CFT standards. instructed by AIA or any other competent
Staff should be regularly updated about their authority, external auditors might be selected
statutory obligations and mandates. Staff by the AIA to review the adequacy of the
should know that each can be individually compliance program including AML/CFT
liable for the failure to perform their duties in controls. ICs should constantly keep their eyes
accordance with the dominant legislation in open in deterring money launderers and
the country. The training contents, coverage, terrorist financiers from making use of them or
frequency, levels, and completeness should exploiting their products or delivery channels.
reflect the knowledge needs. As a minimum, Please note that an excel file titled “AML/CFT
AML/CFT training should cover the operation, Compliance Check-List” is also prepared to
customer facing, compliance, audit staff, and summarize the key functions of internal audit
senior management. Audit as the third-line of and other parts of this article. These notes or
defense should make sure about the the check-list are not mandatory obligations
relevancy, frequency, contents, and evaluation and just for guidance.
results of the training during the process of
regular audits. A good training plan should 6. Sanctions Implementation
describe, (i) what to train, (ii) who to train, (iii) Implementation of sanctions by reporting
how to train, and (iv) when to train. entities is essential not only for their domestic
obligations as well as international. Failure to
5. Independent Audit Function comply with sanctions may result in penalties
In order to ensure the effectiveness of the and reputational risk. In accordance with the
AML/CFT compliance program, the internal Counter Financing Terrorism Law, Anti-Money
audit within the ICs should test the program. Laundering Law, Standing Freezing Order of
Internal audit should attest the overall the Attorney General’s Office, and relevant
effectiveness, controls, transactions, assess procedures; ICs shall continuously comply with
employees’ knowledge, adequacy, accuracy the freezing order, avoid any type of
and completeness of training, process of transaction with designations and immediately
identifying suspicious activity, timely freeze the cash, bank account, movable and
reporting, and effective corrective actions. immovable assets and any other type of funds,
Recommendation # 18 of FATF and article # 19 properties and transactions.
of the Anti-Money Laundering and Proceeds of
Crime Law of Afghanistan require the

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As per the standing freezing order, frozen Based on the article # 12 of the dominant Anti-
funds and properties should be immediately Money Laundering and Proceeds of Crime Law,
reported to the Office National Security ICs should conduct the following measures on
Council and Attorney General’s Office through the beneficiaries of the life insurance and
the relevant regulatory bodies. As per the other investment products and policies:
Counter Financing Terrorism Law and CFT
- “For beneficiary (ies) that are
Regulation, any person who makes available,
identified as named natural or legal
directly or indirectly, any funds, property,
persons or legal arrangements –
economic resources or financial and/or other
taking the name of the person; and
related services available to or for the benefit
of designated persons shall commit an offense. - For beneficiary (ies) that are
Meanwhile, whoever fails to implement the designated by characteristics or by
freezing order shall commit an offense as class (e.g. spouse or children at the
well.10 time that the insured event occurs) or
by other means (e.g. under a will) –
ICs should obtain the domestic and obtaining sufficient information
international sanctions list from the concerning the beneficiary.”
competent authorities and screen their
customers not only on-boarding but also on ICs should conduct due diligence of customers
real-time basis. It is highly recommended that with whom they are dealing. An important
this process be made through the electronic step of due diligence is to develop customer
platform and prioritize “False Negative” and identification, acceptance, rejection,
“False Positive” matches respectively. screening, and verification policies and
procedures. It is recommended that customers
Sanctions screening should be implemented information should be regularly updated
before the establishments of the business based on their risk profile. In order to allocate
relationship and on on-going basis. The reason the resources and prioritize the vulnerabilities,
to have it on real-time basis is that national it is also recommended that customer due
and international sanctions get updated on a diligence should be conducted on risk-based.
regular basis. Most of the financial As minimum, customer due diligence should
organizations do prefer to have the electronic cover the followings:
platform for screening purpose.
- Identifying and verifying of customer’s
7. Customer Due Diligence (CDD) identity and documents using reliable
Customer due diligence is also an integral sources. E-IDs and online registries are
element of the compliance program. An very helpful in the process of
effective customer due diligence and verification. Verification can be carried
verification process, improves the combating out using the “Documentary” and
abilities of ICs. Financial Action Task Force (Rec “Non-documentary” process. This
10) requires reporting entities to undertake piece of CDD is crucial. In general,
customer due diligence when; (i) establishing verification of the identification
business relations, (ii) carrying out occasional should take place at the time of
transactions, (iii) above the applicable onboarding and relationship is
designated threshold, or (iv) there is suspicion established, verification may also take
of money laundering or terrorist financing, and place or allowed after the insurance
(v) the institution has doubt about the veracity contract is signed with the
or adequacy of previously obtained policyholder if the money laundering
documents. and terrorist financing risks are

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managed effectively and shall be incorporation, nature of business, tax
before the payout is made. identification certificate or clearance
certificate, articles of association,
- If the customer is acting on behalf of
partnership agreements if any, trust
others’, reasonable steps should be
deed, complete address, phone,
taken to identify and verify the subject
mobile and fax number (if available),
behind.
name and contacts of board members,
- Information about the nature of identification of board members,
business and intended purpose of the shareholders and senior management,
relationship. authorization documents, signature or
- Identify the beneficial owner (s). fingerprint, and any other information
listed in policies and procedures.
- Risk scoring of the customer. The
These requirements could be listed as
general categories are “High, Medium,
mandatory and optional considering
and Low”. As an example, Politically
the type and category of business.
Exposed Person (PEP) is a high-risk
customer due to its access to the Enhanced Due Diligence (EDD): Financial
public fund and resources. The Action Task Force requires countries to
indicators which are important for risk conduct money laundering and terrorist
scoring are the type and the financing risk assessment. Financial
background of the customer, institutions and designated non-financial
beneficial owner, source of payment, businesses and professions are not exempted
means of payment, nature of the from the requirements to apply enhanced due
activities, source of wealth, source of diligence measures when high-risk scenario is
fund, business relationship, role and identified.
involvement of third parties, and any Article # 11 of the Anti-Money Laundering and
other indicator which is found material Proceeds of Crime Law mandates reporting
during the risk assessment. entities to conduct enhanced due diligence
- Customer identification requirements measures where the risk of money laundering
for the natural person could be; full and terrorist financing is identified. In addition,
name of the individual, including alias article # 12 of the above-mentioned law
and family name, father name, requires reporting entities to conduct
business name if sole trader, gender, enhanced due diligence in circumstances that
marital status, national identification have been identified as high risk. It is also
(Tazkira or Passport), complete recommended to apply enhanced due
address, nationality, date of birth, diligence to all complex, unusual, or large
occupation and organization, income transaction which has no apparent economic
and source of income, phone number, purpose.
latest photo, assets, signature or In terms of differentiating the customer due
fingerprint, and any other information diligence and enhanced due diligence,
described in policies and procedures. additional information, including but not
These requirements could be listed as limited to the sources of fund and wealth,
mandatory and optional considering approval of senior management, enhanced on-
the type and category of customer. going monitoring, requiring verified
- Customer identification requirements certification from competent authorities,
for the legal person could be; legal enhanced due diligence on the veracity and
name of the business, certificate of validity of identification and/or registration

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documents, structure of the corporate FATF Recommendations under certain
business and beneficial owners, and other conditions. A key model to identify the
relevant information can be collected to products for the financial inclusion is the
support the enhanced due diligence national money laundering and terrorist
objectives. financing risk assessment. Internally, the
financial and non-financial institutions can also
Politically exposed person: Financial Action
assess their risk and identify the low-risk
Task Force defines domestic PEP as; “Domestic
products, customers, and delivery channels.
PEPs are individuals who are or have been
entrusted domestically with prominent public Article # 11 of the current Anti-Money
functions, for example Heads of State or of Laundering and Proceeds of Crime Law allows
government, senior politicians, senior the reporting entities to conduct simplified
government, judicial or military officials, senior approaches of due diligence where the risk of
executives of state owned corporations, money laundering and terrorist financing is
important political party officials. Persons who identified as low. This is critically important to
are or have been entrusted with a prominent observe the quality of assessment which labels
function by an international organization the products, customers and distribution
refers to members of senior management, i.e. channels as the high, medium and low risk.
directors, deputy directors and members of the
Overlooking to the quality of assessment, may
board or equivalent functions.
misguide the practitioners. In regard to ICs,
Article # 15 of the current Anti-Money AML/CFT regulator can look into the
Laundering and Proceeds of Crime Law also compliance program, risk and context of each
requires reporting entities, including ICs to insurance company separately. In some
have appropriate risk management systems to jurisdictions, the regulator sets the thresholds
determine whether the customer or beneficial and identify the product (s) which can be
owner is a politically exposed person or not, allowed for simplified due diligence. Simplified
obtain senior management approval, and CDD shall not be applied if there is suspicion of
conduct enhanced monitoring of the business money laundering or terrorist financing or
relationship. specific higher risk scenario (s).
Board of directors should also approve a client Based on the international best practices,
acceptance policy with regard to PEP. This part including FATF recommendations, it is possible
of the policy will impact the reputation of the to rely on third parties for customer due
organization, especially when any money diligence, but the ultimate responsibility of
laundering scam is identified by law due diligence remains with the IC relying on
enforcement agencies. third parties.
Simplified Customer Due Diligence: Financial
8. Reporting STR/SAR
Action Task Force recommends that financial
Although Currency Transaction Report (CTR) or
institutions and designated non-financial
Large Cash Transaction Report (LCTR) are
businesses and professions should identify,
reporting requirements in some jurisdictions,
assess and take effective actions to mitigate
reporting suspicious transaction is very
their money laundering and terrorist financing
important to combating money laundering and
risk.
terrorist financing both for financial and non-
Where countries identify higher risks, they financial businesses and professions.
should ensure that their combating regime
Filing STR/SAR is the final output of the
adequately addresses such risks. Where
compliance program in financial and non-
countries identify lower risks, they may decide
financial businesses and professions, including
to allow simplified measures for some of the

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ICs to minimize the money laundering and formed, it should be reported immediately.
terrorist financing risks. FATF recommends About the details of the process, search the
that if a financial and non-financial institution public domain or website of the Financial
suspects or has reasonable grounds to suspect Intelligence Unit for a collection titled “How to
that funds are the proceeds of a criminal File a Good STR?”.
activity, or are related to terrorist financing, it
The reporting templates are available on
should be required by law, to report promptly
Financial Transactions and Reports Analysis
its suspicions to the financial intelligence unit.
Center of Afghanistan (the Financial
The word promptly is reflected in domestic
Intelligence Unit) website.11
legislation within three working days as the
ceiling. 9. Record Keeping
Based on the article # 18 of the Anti-Money Record keeping requirements apply to the
Laundering and Proceeds of Crime Law, designated non-financial businesses and
reporting entity should report the suspicious professions including ICs. Based on the
transaction where the reporting entity international best practices, ICs should keep
suspects or has reasonable ground to suspect the records for at least five years. The
that the transaction or the attempt is proceeds regulator can ask the ICs to keep the records
of crime, or be used for money laundering or for longer period especially records and
terrorism financing or related to terrorists or documents which form the suspicion of money
used for terrorism as soon as practicable but laundering and terrorist financing.
no later than three working days to the Based on article # 16 of the Anti-Money
financial intelligence unit. Laundering and Proceeds of Crime Law,
Reporting entity should report STR/SAR even if reporting entities should maintain records on
it becomes evident after the completion of the attempted or executed transactions for at
transaction. The reporting entity shall least five years following the execution or
immediately report the updates and additional attempt of the transaction or longer if required
information which may confirm or invalid the by the competent authorities. Record keeping
suspicion. Reporting entities and their staff are requirement includes the records on
prohibited by law not to disclose to the identification and verification through the CDD
relevant customer or any other person that and EDD measures, STR supporting
STR/SAR is filed with the Financial Intelligence documents, files and business
Unit. Any violation would be subject to correspondence.
criminal penalty.
10. Enforcing Compliance
Board of directors, senior management,
In addition to criminal penalties mentioned in
compliance and other staff of the ICs including
Anti-Money Laundering and Proceeds of Crime
internal audit should know that reporting STR
Law, article # 24 of the mentioned law
is a legal obligation, the violation might be
empowers the Financial Intelligence and other
considered a criminal act. It protects the
competent supervisory authorities to enforce
organization from allegations of collusion,
compliance.
supports the law enforcement agencies and
the financial intelligence unit to investigate The unit and any other supervisory authority
and prosecute criminals and protects the can impose the following sanctions;
reputation of the organization. - Issuance of warning letters;
STR should be investigated internally by the - Issuance of suspension orders;
“Investigation Unit” of the Compliance
- Revocation of business license;
Department of the IC. Once the suspicion is

10
- Impose the fine ranging from AFN
50,000.00 to 500,000.00 for every
infraction;
- Order to conduct the external audit at
cost of IC which will be selected by the
competent authority.
- Remove the administrator or any
other employee;
- Cease engaging in certain actions or
practices; and
- Take corrective actions.
There are rooms for the contest, which should
be dealt with by the Financial Disputes
Resolution Commission (FDRC)12.
This summary of AML/CFT Notes, should not be
considered as the exhaustive list or legal
obligations. ICs should consult with the relevant
competent bodies for their legal obligations. ***

ENDNOTES:

1 IMF, 2011. “Islamic Republic of Afghanistan: Detailed


6 DAB, 2015. “Counter Financing of Terrorism Law.”
Assessment Report on Anti-Money Laundering and
Combating the Financing of Terrorism.” http://dab.gov.af/Content/Media/Documents/CFTLaw
https://www.imf.org/external/pubs/ft/scr/2011/cr113 English1212015113829829553325325.pdf
17.pdf
7 Investopedia, 2018. “Insurance.”
2 DAB, 2015. “Amendments of Anti-Money Laundering
https://www.investopedia.com/terms/i/insurance.asp
and Proceeds of Crime Law.”
http://dab.gov.af/Content/Media/Documents/AMLLa 8 MOF, 2018. “Insurance Affairs Department.”
wEnglish1212015103612655553325325.pdf http://mof.gov.af/en/page/14369/dm-amin/insurance-
department
3 ICRG, 2012. “Action Plan.” http://apgml.org/my-

apg/default.aspx 9 FATF, 2018. “Financial Action Task Force.”


http://www.fatf-gafi.org/
4 FATF, 2012. “The FATF Recommendations.”

http://www.fatf- 10 AGO, 2016. “Standing Freezing Order.”


gafi.org/media/fatf/documents/recommendations/pdf http://fintraca.gov.af/assets/Freezing%20Orders/Stand
s/FATF_Recommendations.pdf ing%20Instruction_(Freezing%20Order)_English(1).pdf

5 UN, 2000. “United Nations Convention Against 11 FinTRACA, 2018. “Website.”


Transnational Organized Crime.” http://fintraca.gov.af/Default.html
https://www.unodc.org/documents/middleeastandnor
thafrica/organised- 12 FDRC, 2018. “Website.”
crime/UNITED_NATIONS_CONVENTION_AGAINST_TRA http://fdrc.gov.af/
NSNATIONAL_ORGANIZED_CRIME_AND_THE_PROTOC
OLS_THERETO.pdf

11