Moving Ahead in Fighting Money Laundering and Terrorist

UNCLAS KABUL 003229 SENSITIVE SIPDIS DEPT FOR SRAP, SCA/FO, SCA/RA, AND SCA/A DEPT PASS AID/ASIA BUREAU CENTCOM FOR CSTC-A, USFOR-A E.O. 12958 N/A TAGS: EFIN EAID PGOV ETTC AF SUBJECT: Moving Ahead in Fighting Money Laundering and Terrorist Financing in Afghanistan - The Need to Act on Past Assessments ¶1. (SBU) SUMMARY: Between November 2006 and March 2009, three USG assessment teams traveled to Afghanistan to identify training and technical assistance needs in anti-money laundering (AML)/combating the financing of terrorism (CFT); a number of recommendations for technical assistance from those visits remain to be implemented. In November 2006, Treasury's Office of Technical Assistance (OTA) sent an advisor to assess potential interfaces between the Central Bank's Financial Intelligence Unit (FIU) and the Afghan Law Enforcement Community. In March, 2008, Treasury led an inter-agency needs assessment to Afghanistan to examine the main features of Afghanistan's AML/CFT regime and to identify technical assistance gaps. Finally, in March 2009, the Department's Office of the Coordinator for Counterterrorism (S/CT) led an interagency (State, Treasury, Department of Justice, and Department of Defense) Financial Sector Assessment Team (FSAT) to identify technical assistance and training needs. The Embassy's review of these reports finds similarities in many of their recommendations and that a number of the systemic vulnerabilities they found remain. Embassy requests Washington agencies review and look to act on the outstanding recommendations for targeted technical assistance contained in those reports. End Summary. ¶2. (SBU) Three interagency USG assessment teams - one led by Treasury's Office of Technical Assistance in November 2006, another Treasury-led group in examine the main features of Afghanistan's AML/CFT regime to identify technical assistance gaps in March 2008, and a third led by S/CT in March 2009 - have identified a number of areas where Afghan authorities need outside assistance. This cable contains the Embassy's review of the concerns identified in the reports and our understanding of where the teams' recommendations for assistance stand. STRENGTHEN THE CENTRAL BANK'S AML/CFT SUPERVISION DIVISION: -------------- Need: Provide Anti-Money Laundering/Counter Finance Terrorist (AML/CFT) training for the Central Bank's Supervision Department. (Recommended by Treasury's Office of Technical Assistance in 2006; Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) ; --Status: Banking Supervision staff received training in basic analysis of suspicious transactions, counter-terrorism (CT), investigative techniques, forensic accounting and typologies from their in-house USAID advisors. However, these USAID advisors are not AML/CFT experts. As a result, Treasury's Office of Technical Assistance (OTA) is planning to send a resident advisor to work with the Banking Supervision Department on AML/CFT issues in January/February 2010. This advisor would compliment the current USAID contract. Need: Provide training on International Financial Action Task Force (FATF) Standards. (Recommended by Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: In April, 2006, OTA advisors worked jointly with World Bank and Afghan Central Bank to train Central Bank supervisors, money service providers (hawaladars),microfinance banks, commercial banks, lawyers, real estate dealers, and jewelry and precious metal dealers on international best-practices. Note: We expect more work in this area following completion of the IMF AML/CFT mutual evaluation of Afghanistan in November. IMPROVE THE EFFECTIVENESS OF FINTRACA: -------------- Need: Provide basic Financial Investigative Techniques course. (Recommended by Treasury's Office of Technical Assistance in 2009; Treasury Interagency Team in 2008; and FSAT interagency Team in 2009.) --Status: OTA held a Financial Investigative Techniques course in late November 2008 for members of various law enforcement agencies and the Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA) analysts. (Note: FinTRACA is Afghanistan's Financial Intelligence Unit and is responsible for collecting, analyzing, and reporting financial information to law enforcement. End Note.) A separate two day introductory course was provided 24 judges. INL and USAID co-sponsored both courses. Individuals trained in the November 2008 course are now involved in active financial investigations. A second Financial Investigative Techniques course is tentatively scheduled for delivery in the first quarter of 2010. Need: Provide I2 (financial analysis) software training to analysts. (Recommended by FSAT Interagency Team in 2009.) --Status: Treasury's OTA will give a Financial Analytical Techniques Course (FATC) to FinTRACA analysts October 12-24. The seminar is a two-week combination of training and follow-on mentoring. The follow-on mentoring will include real time application of techniques learned in class to open Afghan cases and will include training in the I2 Analysts Notebook software. Need: United States' Financial Intelligence Unit (FinCEN) to lead efforts to prepare FinTRACA for membership in the Egmont Group. (Recommended by FSAT Interagency Team in 2009.) --Status: FinCEN provided support to FinTRACA and urged they be admitted as members of the Egmont Group at the first available opportunity. The next Egmont Group Plenary takes place in May 2010. To move the process forward, FinCEN will carry out an on-site assessment in January 2010. For FinTRACA to be admitted to the Egmont Group, they must be able to show that they are a fully operational financial intelligence unit that receives, analyzes and disseminates data to law enforcement. FinTRACA is receiving more quality data in 2009, but has not sent any cases forward to law enforcement for action. Treasury's OTA has taken over all technical assistance and training responsibilities for FinTRACA and will deliver a Financial Analytical Techniques Course (FATC) to its analysts October 12-24. Moreover, OTA maintains a resident advisor at FinTRACA to help with day-to-day development of the FIU. A resident advisor supported by the UK Serious Organized Crime Agency (SOCA) also helps in this work. Need: Promote interagency cooperation by having detailees from other domestic law enforcement and regulatory agencies assigned to FinTRACA. (Recommended by Treasury Interagency Team in 2008.) --Status: Not started. As part of Afghanistan's forthcoming IMF AML/CFT mutual evaluation, FinTRACA organized several national-level working group meetings. Through this process, FinTRACA improved relations with law enforcement entities and is better positioned to execute the recommendation. Furthermore, FinTRACA is considering detailing someone to the Major Crimes Task Force (MCTF),a positive step that would connect the FIU directly to law enforcement. Need: Provide training on how to process Suspicious Transaction Reports (STR's) within FinTRACA. (Recommended by Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: The OTA training for FinTRACA analysts October 12-24 will focus on prioritizing, targeting, processing and analysis of Suspicious Transaction Reports. Need: Providing a FinCEN advisor to lead efforts in the development of the financial intelligence unit. (Recommended by FSAT Interagency Team in 2009.) --Status: FinCEN is deploying a member of its staff to the Afghan Threat Finance Cell (ATFC) in October 2009. Besides providing direct analytical support to ATFC investigations, the FinCEN advisor will serve a conduit through which U.S. law enforcement will access FinTRACA's financial intelligence while abiding by Afghan law and international best practices. Need: Continue Hawala registration and oversight efforts outside Kabul. (Recommended by Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: This is the first year (since Taliban rule) hawalas in the provinces have been successfully licensed. To date, 159 hawalas are licensed in Kabul, 29 in Jalalabad, 43 in Kunduz and 67 in Mazar-e Sharif. More work is needed in Herat, Kandahar, and Mazar-e Sharif. Placing an AML/CFT Advisor in the Central Bank's Financial Supervision Department will help these efforts. In the interim, the Treasury Attache office is moving this work forward through regular outreach to the Central Bank at the highest levels. Need: Establish a separate hawala regulatory division in the Central Bank's Financial Supervision Department. (Recommended by Treasury Interagency Team in 2008.) --Status: At OTA's urging (including a written recommendation from OTA's Regional Advisor and meeting with the Central Bank Deputy Governor) the Central Bank established a separate AML/CFT section in the Financial Supervision Department in late 2008. This section is responsible for hawala regulation and oversight of the formal financial sector in this area. While establishing this section is a positive step, it is understaffed and needs additional training. IMPROVE BORDER ENFORCEMENT AND OPERATIONAL EFFICIENCY: -------------- Need: Training the Finance Ministry's Customs Revenue Department to augment mobile verification capacity, training in auditing and development of a Customs Institute to professionalize personnel. (Recommended by Treasury Interagency Team in 2008; and FSAT interagency Team in 2009.) --Status: The Finance Ministry's Customs and Revenue department is beginning to implement a number of initiatives to professionalize its staff and to extend connectivity and operations from Kabul into the provinces. The Ministry of Finance recently signed an agreement to open an Afghan Custom's Academy, which will begin operations in January 2010. Need: Provide training to combat bulk cash smuggling. (Recommended by Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: In May 2009, OTA's resident advisor provided Bulk Cash Smuggling and Trade Based Money Laundering (TBML) training in Herat province part of a DOJ training session. Another TBML/BCS training is being coordinated and planned for December 6-9 in Kabul, sponsored by DHS/CBP/ICE. ADDRESS WEAKNESSES IN NGO SUPERVISION AT THE MINISTRY OF ECONOMY: -------------- Need: Inventory Afghan charities/NGOs and existing oversight mechanisms; identify consolidation methods for more effective regulatory compliance and enforcement. (Recommended by Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: Not started. Charities and NGO's pose an illicit finance threat to Afghanistan and some NGOs may negotiate with the Taliban in operate in areas of low security. Due to insufficient technology and a lack of capacity, the Ministry of Economy's NGO division is unable to identify, license, and effectively monitor all NGO projects in Afghanistan. Earlier this year, PACOM and Treasury sponsored a South Asia charity workshop in New Delhi, which included the participation of seven Afghan officials. While this training provided general awareness, we need to develop and deploy a number of focused training initiatives that will assist the Ministry of Economy and its NGO division in fulfilling its roles and responsibilities. Treasury plans to send a policy advisor from its office of Terrorism and Financial Intelligence (TFFC) to Afghanistan to map radical support networks, explore alternative opportunities, and work to assess (and develop recommendations) current NGO registration and supervision efforts. Training and/or technical assistance may be the appropriate follow-up step. In June, S/CT proposed sending an assessment team to Afghanistan, but we have not heard further on its status. IMPROVING AFGHANISTAN'S LEGAL FRAMEWORK: -------------- Need: Expand the DOJ Task Force/Anti-Corruption Unit in the Attorney General's Office to include financial investigation. (Recommended by Treasury's Office of Technical Assistance in 2006; Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: The FBI will provide in depth training to those working at the Major Crimes Task Force. As part of this training, investigators will receive instruction on how to conduct financial investigations. Other efforts are underway to plan additional Financial Investigative Techniques training in to reach those not included in the Major Crimes Task Force way ahead. Need: Training for the Criminal Justice Task Force, Ministry of Interior and the Anti-Corruption Unit the Attorney General's Office is forming. (Recommended by Treasury's Office of Technical Assistance in 2006; Treasury Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: Members of the CJTF, SIU Financial Investigative Unit, and ACU participated in the November 2008 OTA-led Financial Investigative Techniques course. Efforts are underway to plan additional Financial Investigative Techniques training in Afghanistan. Need: An advisor to provide basic training to prosecutors and judges for one year on how to combat financial crimes. (Recommended by the FSAT Interagency Team in 2009.) --Status: The FSAT recommended DOJ place a mentor in Afghanistan for one year who would focus on basic training to combat financial crimes. The individual would work closely with the DOJ mentors already in place and build on the foundation these mentors have already constructed. The DOJ, however, has not provided such a mentor. Separately, OTA is planning/ recruiting for a resident advisor in 2010 to mentor the work of the Major Crimes Task Force (MCTF),a joint U.S.-Afghan unit dedicated to the investigation and prosecution of serious crimes, to improve further indigenous capacity to investigate economic crime cases. Need: Provide a basic Financial Investigative Techniques course. (Recommended by Treasury's Office of Technical Assistance in 2006; Treasury's Interagency Team in 2008; and FSAT Interagency Team in 2009.) --Status: The OTA held a Financial Investigative Techniques course, co-sponsored with INL and USAID, in November 2008 to members of various law enforcement agencies and FinTRACA analysts and a separate 2 day introductory course for judges. Individuals trained during the November 2008 course are now involved in active financial investigations. A second Financial Investigative Techniques course is tentatively scheduled for the first quarter of 2010 [Note: This training is also included under "Improve the Effectiveness of FinTRACA" above. End note.] RE-INSTATE ARTICLE 61 TO GIVE THE MINISTRY OF FINANCE OVERVIEW OF INTERNAL AUDIT -------------- Need: Provide training and technical assistance to Ministry of Finance employees in the Internal Audit Department on audit techniques, effective reporting and resolution of identified audit weaknesses. (Recommended by FSAT Interagency Team in 2009.) --Status: Re-instating Article 61 of the Public Finance and Expenditure Law of Afghanistan will give the Finance Ministry audit authority over all central line ministries. This step is a key benchmark of the World Bank administered Afghan Reconstruction Trust Fund (ARTF) incentive program. Currently, the Internal Audit Department employs 99 people in various capacities (i.e., audit, information technology, fraud, and administration). Training is needed in audit techniques, as well as in effective reporting and resolution of identified audit weaknesses. Treasury's Office of Technical Assistance plans to send an expert resident advisor to work with the Internal Audit Department in December 2009. MOVING FORWARD -------------- ¶3. (SBU) As the above review shows, the three assessment missions (performed from 2006-2008) put forth similar recommendations and proposals. Treasury's Office of Technical Assistance (OTA) is working to provide capacity building in internal auditing, AML/CFT central bank supervision, and the Major Crimes Task Force to help with financial investigations. Both Afghan and international officials have noted that the international community must avoid short-term fixes regarding enforcement of AML/CFT. As in other areas, building Afghan capacity to fight money laundering and terrorists' use of the financial system will require commitment and enhanced U.S. coordination (via State, Treasury and others) with other providers of technical assistance in Afghanistan, including UK/SOCA, World Bank, IMF, and UNODC. EIKENBERRY