International efforts to monitor flows of cash into Afghanistan following its takeover by the Taliban are underway as the new Afghan government must search for financial lifelines now that international funds are cut off.
What role trade-based financial crime will play in this current scenario and in Afghanistan’s eventual financial system is not yet known, but trade-based money laundering (TBML) has certainly featured in the past as a component in the machinery that channels proceeds from Afghan opiates around the world.
The US has frozen around US$9 billion in assets belonging to Afghanistan’s central bank while a US$6 billion budget for 2021 was expected to be financed by grants and borrowings led by foreign agencies according to the World Bank.
Moreover, the Taliban has vowed to ban the country’s lucrative opium trade, a very substantial source of hard currency.
Opiates and TBML
Whether the Taliban are able to wean themselves off finance from the country’s lucrative opium trade is questioned in several quarters. Heroin production has boomed in Afghanistan in recent years, helping fund the Taliban.
A 2014 report by the Financial Action Task Force (FATF) highlights that TBML is most likely an integral part of the financial system that supports Afghanistan’s opium trade.
Several of the 26 countries surveyed for the FATF publication, Financial Flows Linked to the Production and Trafficking of Afghan Opiates, highlighted the illicit activities of import-export companies registered in China that transfer funds into Afghanistan, probably as part of TBML schemes.
Many money or value transfer services operators in Afghanistan also control import-export companies and transfer money to recipients in China according to the report.
It says transactions frequently reference the purchase of goods, with some Afghanistan – China transactions showing under- or over-invoicing while others use totally fictitious invoices.
Most banks in Afghanistan closed when the Taliban took over though the new government is now trying to persuade them to reopen.
Banks at least in the US meanwhile are closely scrutinising transactions with Afghan counterparts, awaiting clarity on whether Washington’s sanctions on the Taliban apply across the country now that the Islamist group is in control according to the Wall Street Journal.
The FATF publication, Financial Flows Linked to the Production and Trafficking of Afghan Opiates, can be found here.
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