Interview: The Impact of the Taliban's Return to Power on Financial Crime

Written by

Chris Caruana, VP of AML solutions at Feedzai
Chris Caruana, VP of AML solutions at Feedzai

The humanitarian crisis in Afghanistan following the recent withdrawal of US forces in the region has been the most prominent story covered in the media over recent weeks. In addition to the huge difficulties and tragic stories that have emerged amid mass evacuation efforts, the Taliban’s return to power following 20 years of occupation has presented several other longer-term fears for the nation. These include the impact on women’s rights, reprisals for Afghan citizens who previously worked with allied powers and the region’s potential to become a haven for international terrorism once again. A US-based group, Human Rights First, has even advised Afghans who remain in the country to erase their digital footprints to prevent the Taliban from using it against them.

Another concern is the potential new opportunities this development provides for money laundering activity amid already rising financial crime globally. To discuss how this may manifest and actions financial institutions can take to prevent and disrupt such activities, Infosecurity recently caught up with Chris Caruana, VP of AML solutions at Feedzai, a vendor that works to combat financial crime with the use of AI.

Are you expecting to see a surge in money laundering activity in Afghanistan due to the Taliban’s return to power? How is this likely to manifest?

We would do well to view this as a continuance and likely expansion of the Taliban’s criminal activity and the financial crime elements that accompany it. Just last year, the Taliban is estimated to have earned more than $460m from the cultivation of opium poppies, and their track record of human slavery, extortion and kidnapping is well documented. The Taliban now also controls some of the largest lithium reserves in the world, along with other minerals. Expect them to tap into these as they had (illegally) with other natural resources in Afghanistan in years past. A lack of infrastructure will slow this effort but won’t deter from their proven capabilities. 

The Taliban have largely avoided the formal financial system, choosing to embrace the hawala industry instead and relying on physical USD trade. Much has been written about their control over Afghanistan’s central bank and asset freezes, along with a raft of sanctions, that are coming to fruition. We’d be better positioned to examine the inevitable misappropriation and exploitation of humanitarian aid and funding that will likely flood Afghanistan in the coming months and years.  

"The main challenge for financial institutions will be to stay on top of a rapidly changing political landscape"

What challenges will these trends present for global banks?

The main challenge for financial institutions will be to stay on top of a rapidly changing political landscape. They will be faced with a combination of factors to account for: a hard-line militant group that operates outside traditional banking channels, with the proven ability to evade sanctions and exploit access to sought-after natural resources. Financial institutions will also need to balance additional scrutiny on not-for-profit and humanitarian organization payments to Afghanistan and the region. Carve-outs to sanctions already exist and country leaders globally have signalled their intent to permit the continuance of this for Taliban-controlled Afghanistan. 

What actions should banks be looking to take to disrupt money laundering activities in Afghanistan?

Banks will need to make sure they remain vigilant to changes and updates to international sanctions that are likely to be imposed on the Taliban regime.

The vast supplies of natural resources that are now under the control of the Taliban present an attractive opportunity for global entities, from governments to multinationals, to engage with the regime and potentially act as the middle man. This will require heavy scrutiny on financial institutions over the relationships between those who use their services and those connected by one, two or more degrees to Afghanistan-connected interests.

This scrutiny should extend to other banks, too, as other banking partners may have ties to Afghanistan and maybe working to direct money out of the country — a red flag of money laundering.

Is there anything governments and other organizations do to help the banking sector’s AML strategies regarding Afghanistan?

Governments should provide clear guidance to financial institutions regarding AML policies in the form of an official advisory that outlines the intelligence gathered on the Taliban’s activity. This will help financial institutions identify the areas of risk and better manage this extremely sensitive situation

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