Afghans Fail
in Money Laundering Fight

Afghan authorities have yet to implement anti-money laundering policies despite mandate from the U.S.

Afghanistan President Hamid Karzai / AP
December 11, 2012

Afghan authorities have failed to implement basic anti-money laundering procedures mandated by the U.S., potentially allowing large quantities of untraceable cash to flow to terrorists and drug runners, according to a report released Tuesday by the Special Inspector General for Afghanistan Reconstruction (SIGAR).

Rampant money laundering remains a persistent and "deeply troubling" issue in Afghanistan despite U.S. attempts to trace the outflow of funds from Kabul International Airport (KBL), the country’s main hub, the report said.

"While large cash movements are typical in Afghanistan because it is a cash-based economy, these bulk cash flows raise the risk of money laundering and bulk cash smuggling—tools often used to finance terrorist, narcotics, and other illicit operations," according to the report, which was addressed to Secretary of State Hillary Clinton and U.S. Ambassador to Afghanistan James Cunningham.

The report also details the Afghan government’s attempts to stymie and block U.S. efforts to crackdown on laundering, raising questions about the future of joint U.S.-Afghan efforts to combat terror and crime.

Inspectors from SIGAR’s office found that large quantities of cash continue to flow out of Afghanistan without first being screened and recorded by American-installed machines meant to track this activity, according to the report.

An estimated $4.5 billion exited Afghanistan in 2011 alone.

Officials fear that the untraceable money is making its way into the hands of terrorist operatives and other criminals who use the funds to promote instability across the globe.

"The persistent delays in instituting basic anti-money laundering procedures by [the Afghan authorities] at KBL are deeply troubling," the report said. "Although proper controls to monitor cash flows are important for any country to institute, they are particularly critical for a country fraught with corruption, narcotics trafficking, and insurgent activity."

Afghan officials stationed at the airport continue to allow prominent citizens and high-ranking officials to bypass the currency trackers despite the Afghan government’s promises to crackdown on money laundering, according to the report.

"We found that, more than 1 year since our last visit to KBL, the cash counters are still not being used for their intended purpose, and [prominent individuals] continue to bypass key controls," the report said.

"Passengers designated by [officials] as Very Important Persons (VIPs) could bypass the main security and customs screenings and instead use a separate facility to enter the airport’s secured area," inspectors found. "While these VIPs were required to declare the amount of currency they were carrying, their cash was not scanned through bulk currency counters, and Afghan officials reportedly had no plans to do so."

In some instances the currency machines were not even connected to the Internet, meaning that information they collected never made its way to the financial databases that track the currency.

Customs officials fear government-sponsored reprisals should they comply with the Americans.

"One [Department of Homeland Security] official told us that Afghan customs at KBL were afraid that they would experience negative repercussions from [the government] if progress in instituting controls at the airport was made," according to the report. "As of October 2012, according to DHS officials, efforts to connect the bulk currency counters to the internet or a computer server were ‘at a standstill.’ "

U.S. officials initially recommended that the currency trackers be installed more than two years ago.

The Afghans objected, leading to delays.

Once the machines were installed in 2011, officials then refused to properly use them.

"When we visited the airport in April 2011, the machines were being used to count declared cash, but not to record currency serial numbers and report financial data," according to the report.

When inspectors visited again from September to November of this year they discovered that "the cash counters are still not being used for their intended purpose, and VIPs continue to bypass key controls," according to the report.

Additionally, the machines were placed in inaccessible areas of the airport.

"Afghan customs officials have been provided on-the-job training on the use of the bulk currency counters, [but] we did not observe any use of the machines," the report said.

U.S. officials are additionally concerned about a new law raising the amount of money those leaving Afghanistan can claim from $10,000 to $20,000.

"This change is likely to increase the risk of illicit bulk cash movement and further weaken controls for monitoring money movements at KBL because it makes it easier for individuals to engage in a practice called ‘structuring,’ in which transactions such as money transfers or drug purchases are conducted repeatedly in small amounts to avoid suspicion," according to the report.

SIGAR recommends that the State Department hold the Afghan government accountable for its continued failure to combat laundering.