FCA warns UK banks and FinTechs on Afghanistan financial crime threat

Britain’s watchdog Financial Conduct Authority (FCA) warned banks to be vigilant about the risk of being used for criminal operations such as terrorist financing or money laundering in Afghanistan as the Taliban completes its takeover of the country.

As US troops pull out of the ground in Afghanistan first tie in 20 years, the Taliban authorities have been quick to declare a dramatic final victory.

Financial firms “should be aware of the possible impact” of recent events “when they assess risks related to particular customers and flows of funds,” the FCA said.

Banks should “appropriately monitor and assess transactions to Afghanistan to mitigate the risks if their firm is being exploited to launder money or finance terrorism,” it added.

Any suspicious activity should be reported to the relevant UK authorities, the regulator said, reminding banks of their legal obligations.

“While Afghanistan is not currently listed as a high-risk jurisdiction…firms are required…to apply risk sensitive enhanced due diligence measures where there is a high risk of money laundering or terrorist financing,” the FCA note said.

“We expect firms to consider the impact of these developments on their anti-money laundering policies and procedures in a risk-based manner, and to take the steps necessary to ensure they continue to meet their legal and regulatory anti-money laundering and reporting obligations,” the FCA said.

It also told firms to “ensure that suspicious activity is reported to the UK Financial Intelligence Unit at the National Crime Agency and that they meet their obligations under Money Laundering Regulations and terrorist financing legislation.”

The FCA also reminded firms that sanctions were in place in respect to Afghanistan and told firms to continue to screen against the UK sanctions list. Earlier this month, money transferring firm Western Union suspended all its services in Afghanistan when the political situation in the country started to degrade.

The warning comes as Afghanistan’s financial system is in turmoil with people queueing outside banks trying to withdraw money.

The FCA issued similar warnings over financial crime risks in 2015 in regard to banks’ dealings with Ukraine, following Russia’s annexation of Crimea months earlier. At the time, the watchdog urged corporations to take further precautions over any dealings or transactions with the nation after the EU launched sanctions and asset freezing orders towards members of Ukraine’s former authorities and people who had been allegedly threatening Ukraine’s independence.

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