The Taliban in Afghanistan – the implications for UK banks

The questions frequently asked include: Whether the bank should continue with its business in Afghanistan? What to do (if anything) with existing customer funds? Whether to act on customer instructions? Whether there are any reporting obligations in the UK? And what are the sanctions for breach?

Financial sanctions regimes

The Foreign, Commonwealth and Development Office (FCDO) is responsible for determining the UK's international policy on sanctions, and the UK financial sanctions regime is implemented and administered by the Office of Financial Sanctions Implementation (OFSI), which is a part of HM Treasury.

A range of financial sanctions regimes have been implemented in the UK via regulations under The Sanctions and Money Laundering Act 2018. These include (amongst other things) The Afghanistan (Sanctions) (EU Exit) Regulations 2020 and The ISIL (Da’esh) and Al-Qaida (United Nations Sanctions) (EU Exit) Regulations 2019. Understanding these regulations, by reference to the sanctions lists maintained by the FCDO and OFSI, will likely be key in understanding the risks posed to the bank by a particular Afghan customer (or customers), and what the bank should be doing next. This might include (amongst other things) freezing customer funds, and/or reporting to UK regulators such as OFSI, and the FCA.

In addition to the financial sanctions regime, the bank will also need to be aware of its obligations under the UK’s CTF and AML regimes, which may include reporting suspicions of terrorist financing or money laundering to the NCA under the Terrorism Act 2000 (TACT) and/or the Proceeds of Crime Act 2002 (POCA), respectively.

A UK bank, where appropriate, may also need advice on the EU and/or US positions (which are autonomous sanctions regimes), and the possible implications of those regimes for business conducted by the bank in the EU and/or the US, and in Euros and/or US dollars, including reporting obligations in those jurisdictions.