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Editor’s Note: This month, the ACAMS moneylaundering.com legal team reviews U.S. anti-money laundering, counterterrorist financing policies towards Afghanistan amid continued concerns of corruption and weaknesses in the country’s banking system under the Taliban.

The Taliban’s rapid conquest of Afghanistan raises questions over the U.S. strategy for combating illicit finance linked to the nation, and also renews concerns over the militia’s funding sources and control of an already weakened financial system.

U.S. anti-financial crime strategy for Afghanistan since 9/11 has largely relied on imposing sanctions against drug traffickers, al-Qaida operatives, and Taliban leaders and supporters even as the broader nation-building campaign has suffered for years from several issues, particularly corruption within the now-deposed, U.S.-supported Afghan government.

Afghans identified public corruption as a significant problem in their country long before the theft of an estimated $1 billion from the Kabul Bank in the years following the Taliban’s downfall, and the discovery that then-President Hamid Karzai’s brother received several millions of dollars in questionable loans.

The lack of supervision over how Afghan officials spent international aid over the first decade of the U.S. and western occupation prompted concerns over the long-term stability of their country in 2011, and similar warnings from the U.S. Special Inspector General for Afghanistan Reconstruction, or SIGAR, the following year.

SIGAR repeatedly warned about the inadequate supervision of cash flows into and out of Afghanistan, how the dearth of oversight threatened U.S. nation-building efforts, and told federal lawmakers of the existential threat that the nation faced from graft and the illicit opium trade.

According to SIGAR, the U.S. government fueled corruption in Afghanistan by steering government contracts to certain recipients as part of a broader counterinsurgency strategy, without implementing safeguards to prevent corruption, self-dealing and fraud.

U.S. payments to warlords responsible for local governance exacerbated corruption, SIGAR found. According to the Brookings Institute, they also paved the way for the Taliban’s return to power.

U.S. officials eventually recognized the threat and began withdrawing funds from Afghanistan. In 2018, the U.N. Assistance Mission in Afghanistan mirrored SIGAR’s calls for more robust anti-corruption measures.

Independent researchers and think tanks also underscored the need for more robust enforcement against corruption and financial mismanagement in Afghanistan to protect the country’s hard-won democratic and social progress.

Following the leak of the Afghanistan Papers in 2019, SIGAR’s director, John Sopko, testified about rampant financial crime in Afghanistan and how U.S. support of corrupt, brutal warlords to quell the Taliban and ensure local governance had backfired, fueling the militia’s resurgence.

In January 2021, SIGAR reported that 86 percent of the $946 billion the U.S. had invested into nation-building efforts in Afghanistan over the past two decades had funded military operations rather than anti-corruption, anti-drug trafficking, and anti-money laundering efforts.

SIGAR published its final assessments of reconstruction efforts in Afghanistan in March 2021 and August 2021, reiterating that the U.S. perpetually struggled to develop and implement a coherent strategy for fostering the nation’s financial independence and economic health.

Following the U.S. and western withdrawal, lawmakers and nonprofits alike emphasized the need to restrain or otherwise monitor the Taliban’s finances, particularly in light of warnings issued by the United Nations and others of the militia’s continued ties with al-Qaida.

This month, Sen. Lindsey Graham (R-SC) and Rep. Mike Waltz (R-FL) introduced resolutions urging the State Department to designate the Afghan Taliban as a Foreign Terrorist Organization, and the White House and the State Department emphasized their commitment to combating terrorist groups and targeting their sources of funds.

Others have warned that the withdrawal of aid to Afghanistan will only accelerate the nation’s economic collapse.

Contact Leily Faridzadeh at LFaridzadeh@acams