Afghanistan's Agenda for Action - Economic Growth - usaid

Afghanistan’s Agenda for Action: Developing the Trade & Business Environment – August 2007the banks and financial institutions follow theseprocedures? This is difficult to determine, but probablynot. 172Implementing InstitutionsThe Central Bank houses the FIU, has staffed theunit, and is responsible for implementation andsupervision. Staffing needs to be increased and trainingexpanded to include training of those responsible ineach financial institution covered by these regulations –banks, financial institutions, money changers, real estateagents, dealers in precious stones and metals, lawyersand accountants. With regard to monitoring wiretransfers, and money transfers of all kinds, an MSB(Money Service Business) regulation has been issued,but compliance and enforcement is weak.All transactions over $10,000 (500,000 Afghanis) aresupposed to be investigated and reported. So far therehave been 5,000 reports per month but nothing“suspicious”. A Memorandum of Understanding hasbeen established with the Ministry of Interior’sEconomic Crimes Unit and the Counter NarcoticsPolice in order to gather the information needed forprosecutions. As mentioned, no convictions orprosecutions have been initiated because of theperceived need for an “airtight” case to get started. 173The Financial Transactions and Reports Analysis Centerof Afghanistan reports as follows:Overview. The Financial Transactions and ReportsAnalysis Center of Afghanistan (FinTRACA) wasestablished as a Financial Intelligence Unit (FIU) underthe Anti Money Laundering and Proceeds of Crime Lawpassed by decree late in 2004. The main purpose of thislaw is to protect the integrity of the Afghani financialsystem and to gain compliance with internationaltreaties and conventions. The Financial Intelligence Unitis a semi-independent body that is administrativelyhoused within the Central Bank of Afghanistan (Da172173This section is drawn from the questionnaireadministered by U.S. Treasury, to the advisors to theCentral Bank’s FIU (2006).Interview with a U.S. Government representative, Kabul(February 12, 2007).Afghanistan Bank).Objectives. The main objective of FinTRACA is todeny the use of the Afghani financial system to thosewho obtained funds as the result of illegal activity, andto those who would use it to support terroristactivities. In so doing, FinTRACA will make a significantcontribution to the overall integrity of the Afghanfinancial environment, the ability of the Afghan financialsystem to integrate with the global financial system, andto future economic growth, investment, and prosperityin Afghanistan.Functions. In order to meet its objectives, theFinTRACA collects and analyzes information from avariety of sources. These sources include entities withlegal obligations to submit reports to the FinTRACAwhen a suspicious activity is detected, as well asreports of cash transactions above a threshold amountspecified by regulation. Also, FinTRACA has access toall related Afghani government information anddatabases. When the analysis of this informationsupports the supposition of illegal use of the financialsystem, the FinTRACA works closely with lawenforcement to investigate and prosecute the illegalactivity. FinTRACA also cooperates internationally insupport of its own analyses and investigations and tosupport the analyses and investigations of foreigncounterparts, to the extent allowed by law. Otherfunctions include training of those entities with legalobligations to report information, development of lawsand regulations to support national-level AMLobjectives, and international and regional cooperationin the development of AML typologies andcountermeasures.Security. The FIU recognizes the important roll itplays as an independent intermediary betweenreporting entities and law enforcement. It rigorouslyapplies its legal obligations to protect the sources andconfidentiality of information received, and to useinformation received only for the specific purposesallowed under the law.Of course the bane of law enforcement in this area isthat the informal financial sector, the hawala system,operates outside their radar screen, in excess of twoand one half billion dollars. However, there is a plan todevelop a hawala bank program in the future that holds129