Afghanistan Cash Flow Pouring Out, Hawala Regulation Looms To Combat Money Laundering

A new proposal by Afghanistan's Central Bank aims to stem the flow of billions of dollars streaming out of the cash-strapped country, according to a Wall Street Journal report.

In a move that targets the traditional hawala banking system, Afghanistan's central bank governor Noorullah Delawari has proposed legislation to limit the amount of money that can be taken outside the country to $20,000 in a single trip.

TIME explains that hawala is an underground banking system, off the ledger, where a lack of contracts, bank statements and record-keeping allows vast sums of money to move across international borders in just a few hours. Hawala can refer to financial transfers in the formal banking sector, but it generally refers to "money transfers that occur in the absence of, or are parallel to, formal banking sector channels," according to the International Monetary Fund. Though legal by definition, the system has been used by terrorists and drug traffickers to transfer massive amounts of money without leaving a paper trail.

At present, there are no restrictions on how much cash can be transfered through Kabul's airport. An estimated $4.6 billion in cash -- more than the country's government budget -- left Afghanistan in 2011, though the actual figure is likely higher, according to the Wall Street Journal.

The U.S. has pressured Afghanistan to curb money laundering and terrorist financing. Afghanistan is highly dependent on foreign aid, as the CIA Factbook notes, yet aid money is often misused or stolen.

Furthermore, the Associated Press reports that the U.S. and Afghanistan have been in discussions for nearly a year about a partnership past 2014, when the Afghan government is expected to control the nation's security. U.S. forces are already transitioning out of a combat role.

According to the UN, Afghanistan is responsible for about 90 percent of the world's opium production.

Also on HuffPost:

Comments

[Thomas Nagano]

07:26 PM on 02/23/2012

We now know why we're in Afghanistan.

We're in Afghanistan to help enrich their [and our] leaders, improve the worldwide distribution of opium, arm their criminals with better weapons and destabilize the Middle East and Pakistan.

- TK

[Susan Shaffer]

01:25 AM on 02/23/2012

Legislate all you want but the whole point of Hawala banking is working on the same principles as the big banks. Sometimes the money does go from country a to country b. More often than not the two banks just reconcile and the money stays put...less the bank's commission.
There are plenty of afghanis who have left and are sending money back to the relatives in afghanistan. I would even suggest there is drug money being sent back. So instead of looking for suitcases of money they should be looking for suitcases of drugs.

[Susan Shaffer]

11:48 PM on 02/22/2012

I'm not sure I believe this completely. for one there is a large ex pat community that send funds back to afghanistan. Hawala banking exists for sure but to say the money only leaves the country is rediculous.
I seriously doubt that anyone can control Hawala banking. You can put in place all sorts of legislation but the fact is that like with the big banks the money doesn't actually go from one country to another. The banks just reconcile the money back and forth.
Remember the Pakistan border is still shut? well a tanker driver offered my husband the gas and the rate was half...except we have no where to store it.
there were something like 400 containers a day exiting karachi port to afghanistan. all those drivers are stuck with loaded trucks and no income.

[1776 or 1984]

06:50 PM on 02/22/2012

Don't tell me that only the locals are skimming.

[MilesToGo]

06:43 PM on 02/22/2012

Several years ago the pundits, along with our political leaders, denied similarity between what happened in Vietnam and what was happening in Afghanistan.

Well, the cesspool of corruption combined with a poorly-managed war makes the two strikingly similar, and is costing America way, way too much. I vaguely remember promises, after I returned from Vietnam, of "Never Again."

[Susan Shaffer]

11:51 PM on 02/22/2012

I was in Lahore in 2001 and was told by an ex pak army colonel that usa would lose the war because there was such an enormous cache of weapons that were left behind from 1980 proxy war against the soviets.
I remember a very nice 60 minute piece dated about 1980 suggesting that the afghanis actually made their weapons and showed them gradually boring a hole in a piece of metal to make a barrel. All smoke and mirrors.

[Rational Voice]

06:38 PM on 02/22/2012

Ridiculous -- They must actually want this. I mean, Uncle Sam (and the bankers that run him) encourage it, right? Why else would he be fighting two pointless wars in the exact same place? We know full well how to end the illicit drug-trade profits -- simply end the insane "drug war". And we know full well how to stop losing money in Afghanistan -- GET THE EFF OUT.

[AZHusker]

06:37 PM on 02/22/2012

We, the USA, needs to leave that country ASAP.

[DenverBigDaddy]

06:37 PM on 02/22/2012

How utterly shocking.......no way anyone could have predicted this.

[banderson2]

06:36 PM on 02/22/2012

The Bush administration flew two C-17 with over 800 billion dollars to Iraq to pay off the warlords so they wouldn't fight against American troops.

[Fattonecat]

06:33 PM on 02/22/2012

We can't , but they can.......... with OUR money.

[Montezuma336]

06:19 PM on 02/22/2012

Of course their major mullah flying out of the county, were guarding their poppy fields for them. They never made so much off a field in history until we started keeping harvests safe. Its so counter productive to be fighting terrorism, yet we guard the fields to hold regional peace that they then turn around and sell to.....you got it fund more terrorism.

[johnb123]

06:12 PM on 02/22/2012

It's flowing out of Afghanistan and into our politicians pockets.

[mark1966]

06:00 PM on 02/22/2012

Your kidding

[RightWingEqualsLosers]

05:19 PM on 02/22/2012

BUSH WASTED TRILLIONS
OBAMA CONTINUES THE WASTE

[seojimjames]

05:44 PM on 02/22/2012

but o_ba_m_a sings a lot better.

[mark1966]

06:01 PM on 02/22/2012

Continues to waste trillion and trillions

[NoPartyCharlie]

05:19 PM on 02/22/2012

The U.S spends billions in aid to other countries and doesn't use any of it on its own citizens. LOL