Responsibilities of Financial Institutions in the AML

Architecture – AML Regulations in Afghanistan

Mr. Jafar Sadat, Da Afghanistan Bank

Who Is Included In the AML Architecture?

• Anyone offering the following services:– Acceptance of deposits– Lending of funds– Transferring of money or value– Processing of payments (e.g. credit cards, checks, etc.)– Financial guarantees– Trading in financial assets (e.g. securities, currencies)– Insurance dealers and brokers

• Dealers in precious metals and stones• Lawyers, transaction guides, and accountants• Real Estate Agents• Anyone else prescribed by DAB regulation• Supervisory authorities and auditors• (See AML Law for complete list)

What Responsibilities?• Customer Identification and Verification

– Customers must be identified when:• total amount transacted exceeds 1,000,000 AF• establishing on-going business relations• there is a suspicion that the funds to be transacted have an illegal or

illicit origin, or are intended to finance terrorism– Individuals must be identified with valid photo-bearing

identification (e.g. passport, national identity papers)– Businesses must be identified with legal registration documents.

• reasonable steps must be taken to verify identify information– Copies of identification information must be recorded and kept.– Identification procedures shall be repeated whenever there is a

significant change in the nature of the customer relationship– Whenever the customer is not acting on his own behalf (either

fully or partially) the beneficial customer shall be identified

What Responsibilities?

• Special Monitoring– Transactions that are unusual either in size or

characteristics, or that add no apparent economic value shall be subject to extra examination

– Transactions associated with entities (people or businesses) located in jurisdictions that apply less stringent AML controls than Afghanistan shall be subject to extra examination

What Responsibilities?• Politically Exposed Persons (PEPs)

– PEPs are people who either are or have been entrusted with significant public functions either in Afghanistan or elsewhere, or their relatives, or their close business and/or financial associates

– This definition might include, for example, the following:• the spouse of a former minister of a neighboring country.• An executive in a state-owned enterprise• A military officer of significant rank• The chairman of a major political party

– Opening of PEP accounts must be approved at the highest level of the organization

– The source of PEP funds must be established• Accounts must be rejected if the source of funds is illicit

– Enhanced monitoring of the PEP business relationship is required

What Responsibilities?• Record Keeping

– Identity records must be kept for the duration of the business relationship and for five years beyond the end of the relationship

– Transaction records must be kept for no fewer than five years after completion of the transaction.

– These records must be made available upon request to legally authorized officials of the government of Afghanistan

• Cooperation with the Financial Intelligence Unit– Each reporting entity must cooperate and coordinate AML

activities with the FIU– Reporting entities shall freeze transactions upon request of the

FIU• Any other responsibilities specifically required by

regulation

What Responsibilities?• Reporting

– Threshold Reports• Transactions (with single or multiple) by a customer in cash,

precious metals, or precious stones that exceed 1,000,000 in a 24 hour period must be reported to the Financial Intelligence Unit

– Suspicious Transaction Reports• Transactions or attempted transactions that are suspected to

involve criminal proceeds must be reported to the Financial Intelligence Unit, regardless of the amount involved.

• Transactions related to terrorists or terrorist acts must be reported to the Financial Intelligence Unit

• Reports must be submitted even if the suspicion is formed after completion of the transaction

How Should These Responsibilities be Implemented?

• Each entity included in the AML architecture shall:– Develop appropriate AML policies, procedures, and

controls– Create and apply AML screening standards for

employees– Provide ongoing AML training for employees– When the entity employs more than five persons:

• An administrative official shall be specifically designated to implement these responsibilities

• An internal audit capability shall be developed

How to Report• Currently

– Reporting forms currently exist for Threshold and Suspicious Reports– These forms can be found at the FIU’s website: http://www.ftraca.gov.af– When required, the forms should be prepared and hand delivered to the

Financial Intelligence Unit at DAB– Suspicious reports should be delivered as soon as practically possible

after initially forming the suspicion• Future Mode

– The FIU has established a working group with the ABA to improve the reporting process

– Similar working groups will be established with other reporting entities– The goals of these working groups are to improve the quality of

compliance while minimizing the cost