The Financial Conduct Authority (FCA) has warned firms about potential financial crime risks linked to the latest developments in Afghanistan.

The Taliban take-over of Afghanistan has highlighted the continuing need for financial firms to have robust systems and controls that respond to changing risks, according to the regulator in a statement released this morning.

The regulator said firms should be aware of the possible impact the events in Afghanistan may have on patterns of financial activity when they assess risks related to particular customers and flows of funds.

The regulator said it expects firms to “establish and maintain systems and controls to counter the risk they might be used to further financial crime”. Firms must also comply with their legal obligations under the Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

In the MLRs provisions related to firm risk assessments, customer due diligence, enhanced due diligence and transaction monitoring are particularly relevant in this context, according to the regulator. Whilst Afghanistan is not currently listed as a high-risk jurisdiction in the MLRs, firms are required to apply risk sensitive enhanced due diligence measures where there is a high risk of money laundering or terrorist financing, with regulations setting out factors that firms may use in their assessment including, but not limited to, country risks.

The regulator said: “We expect firms to consider the impact of these developments on their anti-money laundering policies and procedures in a risk-based manner, and to take the steps necessary to ensure they continue to meet their legal and regulatory anti-money laundering and reporting obligations.

“Specifically, firms should ensure that they appropriately monitor and assess transactions to Afghanistan to mitigate the risks if their firm being exploited to launder money or finance terrorism and continue to ensure that suspicious activity is reported to the UK Financial Intelligence Unit (UKFIU) at the National Crime Agency (NCA) and that they meet their obligations under Money Laundering Regulations and terrorist financing legislation.”

Sanctions are already in place in respect of Afghanistan. The regulator said financial firms should continue to screen against the UK Sanctions List and in particular the regime specific list for Afghanistan.