Responsibilities of Financial Institutions in the AML Architecture – AML Regulations in Afghanistan

1. Responsibilities of Financial Institutions in the AML Architecture – AML Regulations in Afghanistan Mr. Jafar Sadat, Da Afghanistan Bank

2. 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)

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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