In response to the situation in Afghanistan, UK regulators - including Her Majesty’s Treasury’s Office of Financial Sanctions Implementation (OFSI) and the Financial Conduct Authority (FCA) - have issued new guidance on sanctions and anti-money laundering/counter-terrorist financing compliance.
The FCA expects firms to maintain robust systems and controls to mitigate financial crime risk and meet the requirements of the Money Laundering Regulations 2017 (as amended) (the MLRs). Under Regulation 33(1)(a) of the MLRs, firms must apply enhanced due diligence measures when there is an elevated risk of money laundering or the financing of terrorism. Although Afghanistan isn't currently listed as a "high risk jurisdiction", the FCA's guidance indicates that it expects firms to take into account the evolving country risks in determining appropriate levels of customer due diligence related to Afghanistan.
The FCA states that it expects firms to:
- make sure that their current processes for monitoring and assessing transactions in Afghanistan are sufficiently robust to effectively mitigate money laundering and terrorist financing risks.
- continue reporting suspicious activity to the National Crime Agency and ensure that they are fulfilling their obligations under applicable regulations.
The FCA also encouraged firms to continue screening against sanctions lists, including the regime-specific list for Afghanistan, and pointed to their expectation for firm compliance controls for sanctions in FCG 6 of its Financial Crime Guide.
UK Sanctions Guidance
OFSI issued guidance highlighting the ongoing uncertainty over the composition of the future Afghanistan government, and noting the sanctioned status of many Taliban leaders (under UN sanctions as well as ISIL (Da’esh) and Al-Qaida regimes). OFSI encourages those with ongoing or anticipated activity in Afghanistan to conduct enhanced due diligence on entities that may be owned or controlled by sanctioned individuals and to seek the advice of counsel where appropriate.
Charities should refer to the Charity Commission's Compliance Toolkit for further guidance. OFSI assures that it "will continue to uphold its international obligations, ensuring that [its] efforts do not unnecessarily disrupt, delay or discourage legitimate humanitarian activity."
Individuals and entities operating in the region should pay close attention to the changing political situation in Afghanistan and regulatory responses from the West.
The Export Joint Control Unit (ECJU) issued a notice to exporters that it removed Afghanistan as a permitted destination from 5 open general export licenses. Products subject to these licenses will now require a specific license for export to Afghanistan.
Developments in Afghanistan have highlighted the continuing need for robust systems and controls that respond to changing risks. Firms should be aware of the possible impact these events may have on patterns of financial activity when they assess risks related to particular customers and flows of funds.