Source: 2008
Released by the Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
Narcotics production in Afghanistan hit historic highs in 2007 for the second straight year. Afghanistan grew 93 percent of the world’s opium poppy, according to the United Nations Office on Drugs and Crime (UNODC). Opium poppy cultivation expanded from 165,000 ha in 2006 to 193,000 ha in 2007, an increase of 17 percent in land under cultivation. Favorable weather conditions and expanded planting in more fertile agricultural areas also boosted Afghanistan’s yield per hectare. UNODC estimates that Afghanistan produced 8,200 MT of opium in 2007, an increase of 2,556 MT over the 5,644 MT produced in 2006. In 2007, opium production was 34 percent above 2006 levels and nearly double the amount produced in 2005. The export value of this year’s illicit opium harvest, $4 billion, made up more than a third of Afghanistan’s combined total Gross Domestic Product (GDP) of $11.5 billion.
Afghanistan’s drug trade is undercutting efforts to establish a stable democracy with a licit economic free market in the country. The narcotics trade has strong links with the anti-government insurgency, most commonly associated with the Taliban. Narcotics traffickers provide revenue and arms to the Taliban, while the Taliban provides protection to growers and traffickers and keeps the government from interfering with their activities. During recent years, poppy production has soared in provinces where the Taliban is most active. Five relatively higher-income, agriculturally rich provinces along the Pakistan border accounted for 70 percent of Afghanistan’s 2007 poppy production, with Helmand Province alone accounting for 50 percent. At the same time, poppy cultivation declined in many of the poorer, but more secure northern and central provinces, with 13 provinces poppy-free in 2007, compared with only six provinces so designated in 2006. These statistics address the misconception that most farmers grow poppy because they have no economic alternative; poppy is flourishing in the areas with the richest land and best developed agricultural marketing and distribution networks. Nationwide, UNODC estimates that approximately 14.3 percent of Afghans were involved in poppy cultivation in 2007, up from 12.6 percent in 2006.
For the most part, farmers choose to plant opium poppy because it is a profitable, hardy, and low-risk crop. Credit is available, abundant manual labor makes harvesting cheap, and it is easy to market. Economic assistance alone will not overcome the overall narcotics problem in Afghanistan. Some provincial governors have reduced or eliminated cultivation through determined campaigns of persuasion, law enforcement, and eradication. Alternative development opportunities can yield acceptable incomes, but must also be backed by measures to increase risk to those who plant poppy. This risk should fall heaviest on those who plant the most.
The Government of the Islamic Republic of Afghanistan (GOIRA) is working cooperatively with the international community to implement its current counternarcotics strategy more effectively. Eliminating narcotics cultivation and trafficking in Afghanistan will require a long-term national and international commitment. The Afghan government must take decisive action against poppy cultivation soon to turn back the drug threat before its further growth and consolidation make it even more difficult to defeat. During 2007, President Karzai weighed the possibility of limited aerial spray eradication of opium poppy, but ultimately declined to approve the program.
II. Status of Country
During 2007, Afghanistan increased its position as the world’s largest heroin producing and trafficking country, with 93 percent of world cultivation. Afghanistan is involved in the full narcotics production cycle, from cultivation to finished heroin, with drug traffickers trading in all forms of opiates, including unrefined opium, semi-refined morphine base, and refined heroin. Terrorist violence such as roadside bombs, suicide bombings, and attacks on police rose across the country during 2007. Still, the overall Afghan economy continued its brisk growth rate of more than 10 percent annually over the last five years. Improvements to Afghanistan’s infrastructure since 2002 have created more economic alternatives and enhanced the Afghan government’s ability to combat drug trafficking in some parts of the country, even though improvements such as roads and modern communications can also be exploited by narcotics traffickers. Increased insecurity in Afghanistan’s south, where most poppy was grown, impeded the extension there of governance and law enforcement. Narcotics traffickers also exploited government weakness and corruption. Large parts of Afghanistan’s best agricultural lands in Nangarhar, Kandahar, Uruzgan, Nimruz, Farah, and Helmand provinces suffered from Taliban activity.
III. Country Actions Against Drugs in 2007
Policy Initiatives. In January 2006, the Afghan government inaugurated an eight-pillar National Drug Control Strategy (NDCS) calling for coordinated action in the areas of Public Information, Alternative Livelihoods, Law Enforcement, Criminal Justice, Eradication, Institutional Development, Regional Cooperation, and Demand Reduction. The NDCS approach is similar to U.S. and UK counternarcotics strategies for Afghanistan. While the NDCS is generally viewed as a sound strategy, the Afghan government failed in 2006 and 2007 to implement it in ways that could stop the growth of the country’s narcotics problem. The Ministry of Counter Narcotics, charged with directing implementation of the NDCS, was unable to effectively influence other government agencies. Counter Narcotics Minister, Habibullah Qaderi, resigned in July 2007 for personal reasons; the delay in appointing a successor struck some observers as indicative of the Afghan government’s lack of commitment to the fight against narcotics.
Following UNODC’s announcement of poppy cultivation figures in August 2007, President Karzai convened the second annual national counternarcotics conference. This meeting brought together representatives from key Afghan government Ministries, governors from the 17 largest poppy producing provinces, tribal elders, police chiefs, religious leaders, and members of the international community. Afterward, the Ministry of Counter Narcotics (MCN) held a pre-planting season planning session for the 17 governors in attendance. The Afghan government instructed provincial and district leaders to launch pre-planting information campaigns to reduce poppy cultivation. The response from governors was uneven. Some governors (notably those in Balkh, Nangarhar, and Badakhshan) developed vigorous anti-poppy campaigns, while others did little to discourage poppy cultivation. The acting Minister of Counter Narcotics led government delegations to key narcotics-producing provinces to hold anti-narcotics shuras or community councils.
In mid 2007, the Afghan government’s Policy Advisory Group (PAG) added counternarcotics as one of its key policy pillars. The PAG was formed in late 2006 by the Afghan Government, in cooperation with the U.S., UK, Canada, the Netherlands, NATO International Security Assistance Force (ISAF), and United Nations Assistance Mission in Afghanistan (UNAMA), to deal with critical issues in the unstable southern provinces of Helmand, Kandahar, Farah, Zabol, Nimroz, and Uruzgan. In October 2007, the Afghan government agreed in the PAG to a 50,000 hectare national eradication target for 2008, 25 percent of the expected crop. The Afghan government also agreed to arrest high-level traffickers and provide one to two battalions (140-280 personnel) of Afghan National Army forces as protection for police eradication operations. Concerned that his forces would be stretched too thin, the Minister of Defense raised objections to their deployment to provide force protection to poppy eradicators. To date, the situation remains unresolved.
In November 2007, President Karzai issued an edict announcing the 2008 terms of the Good Performers Initiative (GPI), a U.S.-UK-funded initiative started in 2006 to reward provinces for successful counternarcotics performance. On the basis of UNODC poppy cultivation estimates to be released in August 2008, GPI will fund development projects proposed by governors of poppy-free provinces, provinces that reduce their poppy crop by more than 10 percent, and provinces that make a good faith effort to reduce poppy but fail to meet other GPI criteria. To date, the U.S. government has agreed to contribute $35 million to the GPI, while the UK has promised $6.5 million.
The Counter Narcotics Trust Fund (CNTF), in which some GPI funds are deposited, frustrated governors with delays in approving and implementing 2007 GPI projects. As of November 2007, CNTF had disbursed just $4.1 million of $10 million deposited a year earlier for GPI projects. Under U.S. and UK pressure, CNTF undertook to reform its grant-administration procedure in the fall of 2007. In order to promote faster disbursal of smaller GPI grants and provide additional incentives to governors, the U.S. Embassy is establishing a process by which it can directly disburse up to $50,000 for 2008 GPI projects.
The U.S.-funded Afghan government Poppy Elimination Program (PEP) developed and disseminated counternarcotics information to farmers and the general public in seven major poppy-growing provinces. In addition to organizing local shuras during pre-planting season, the provincial PEP teams worked to build public support for eradication activities undertaken by authorities.
Justice Reform. The Afghan government’s Criminal Justice Task Force (CJTF), with assistance from the U.S., UK and other donors, uses modern investigative techniques to investigate and prosecute narcotics traffickers under the December 2005 Counter Narcotics Law. Narcotics cases are tried before the Counter Narcotics Tribunal (CNT), which has exclusive national jurisdiction over mid- and high-level narcotics cases in Afghanistan. Under the new law, all drug cases that reach certain thresholds must be prosecuted by the CJTF before the CNT. The thresholds are possession of two kg of heroin, ten kg of opium, and 50 kg of hashish. Secure facilities, including offices, courtrooms, and a detention facility, for the CJTF and CNT will be opened at the Counternarcotics Justice Center (CNJC), constructed by the U.S. government in early 2008.
The Afghan government, with assistance from the U.S. and UNODC, refurbished a section of the Pol-i-Charkhi prison to house 100 maximum-security narcotics convicts. This prison is Afghanistan’s largest and is the site of frequent disturbances and unrest due to poor conditions, poor prison management, and lack of resources. Through the Corrections System Support Program (CSSP), the United States is helping to improve the corrections system with training, capacity-building, and infrastructure. The CSSP works closely with the U.S.-funded Justice Sector Support Program (JSSP), which has over 60 U.S. and Afghan justice advisors in Kabul and four provinces providing training, mentoring, and capacity-building for Afghanistan’s criminal justice system.
Law Enforcement Efforts. Eradication efforts, though stronger in 2007 than 2006, failed to keep pace with expanded poppy cultivation. Without an aerial eradication program, poppy reduction was limited to labor-intensive manual eradication efforts in medium to high threat areas. According to UNODC estimates, 19,047 ha were eradicated in 2007 compared to 15,300 ha in 2006. Governor-led eradication (GLE) accounted for 15,898 ha, and the Poppy Eradication Force (PEF), a U.S.-supported, centrally-deployed police unit specifically trained and equipped for eradication activities, eradicated another 3,149 ha of poppy in Helmand, Uruzgan, and Takhar provinces. The percent of the poppy crop eradicated increased from 8.9 percent of planted poppy in 2006 to 9.9 percent in 2007. For the most part, both GLE and PEF eradication were arranged through negotiations with poppy-growing communities, a practice that reduced eradication’s deterrent effect. Even so, violent resistance to manual ground-based eradication increased in 2007, resulting in 17 fatalities.
Narcotics law enforcement was hampered by corruption and incompetence within the justice system as well as the absence of governance in large sections of the country. Although narcotics make up one-third of Afghanistan’s GDP, no major drug traffickers have been arrested and convicted in Afghanistan since 2006. In addition, too few high-level drug traffickers served terms in Afghanistan’s prisons during 2007. However, from January to October 2007, the CJTF prosecuted 409 lower-level cases.
In 2003, the Ministry of Interior (MOI) established the Counter Narcotics Police of Afghanistan (CNPA), comprised of investigation, intelligence, and interdiction units. At the end of 2006, the CNPA had approximately 1,500 of its 2,900 authorized staff, including the 500-member PEF. The U.S. Drug Enforcement Administration (DEA) works closely with the CNPA to offer training, mentoring, and investigative assistance in order to develop MOI capacity.
The DEA operates permanently assigned personnel and the Foreign-deployed Advisory Support Teams (FAST) in Afghanistan. The FAST teams, which consist of eight special agents, one intelligence analyst, and one supervisor, operate in Afghanistan on 120-day rotations and deploy around the country with the Afghan National Interdiction Unit (NIU). During 2007, FAST and the NIU deployed to Herat, Farah, Helmand, Kandahar, Kunduz, and Nangarhar Provinces to conduct operations.
From September 2006 through September 2007, the CNPA reported the following seizures: 4,249 kg of heroin, 617 kg of morphine base, 39,304 kg of opium, and 71,078 kg of hashish. During the same period, the CNPA also destroyed 50 drug labs. The CNPA seized 37,509 kg of solid precursor chemicals and 33,008 liters of liquid precursors. The CNPA also reported 760 arrests for trafficking under the provisions of the Afghan Counter Narcotics law where possession of 2 kg of heroin (or morphine base), 10 kg of opium, or 50 kg of hashish mandates automatic jurisdiction for the CNT.
During 2007, the Afghan government, with DEA support, created two vetted units, the Sensitive Investigative Unit (SIU) and the Technical Investigative Unit (TIU), to investigate high-value targets. They will gather evidence through means authorized under Afghanistan’s Counter Narcotics Law and approved through the Afghan legal system. Personnel in these units were recruited from a wide variety of Afghan law enforcement agencies and had to pass rigorous examinations. The SIU was fully functional by the end of 2007, while the TIU will begin its work in 2008.
The SIU and TIU will carry on their work in a secure facility within the new National Interdiction Unit (NIU) base that opened in 2007. The Afghan government established the NIU in 2004 with DEA assistance. The NIU currently consists of 181 members, with an authorized strength 216. NIU officers receive a substantial amount of tactical training. The aim of this program is to have SIU and TIU investigations culminate in the issuance of arrest and search warrants executed by the NIU. The investigations conducted by the SIU and NIU with DEA assistance will be prosecuted at the Counter Narcotics Tribunal through the Criminal Justice Task Force (CJTF), which consists of Afghan prosecutors and investigators mentored by experienced Assistant U.S. Attorneys and U.S. Department of Justice Senior Trial Attorneys. The CJTF mentors have also been working with the Afghan authorities to create a formal legal process to gain authority for controlled deliveries of narcotics to trafficking suspects.
Haji Baz Mohammad, a major Afghan trafficker, was extradited to the United States in October 2005. In July 2006, he pled guilty to conspiracy to import heroin into the U.S. and in October 2007 was sentenced to more than 15 years in prison for running an international narcotics-trafficking organization that imported millions of dollars worth of illegal drugs into the United States. Similar to the indictment of Haji Bashir Noorzai, an Afghan drug kingpin who was indicted and then arrested in the United States in 2005, Baz Mohammad’s indictment also alleged that he was closely aligned with the Taliban.
During 2007, two drug traffickers with links to the insurgency volunteered to be transported from Afghanistan to stand trial in the United States. The first, Mohammad Essa, was a key heroin distributor for the Haji Baz Mohammad network in the United States. Essa had fled the United States when Baz Mohammad was sent to stand trial in New York. In December 2006, he was apprehended in Kandahar Province by the U.S. military, during a battle with insurgents, and he was voluntarily transferred to the United States in April 2007. The second was Khan Mohammad, who was a supporter of the insurgency and arrested in Nangarhar Province in October 2006. He was indicted for selling opium and heroin to CNPA/NIU informants, knowing that the drugs were destined for the United States. He agreed to return to the United States for trial and was transferred to U.S. authorities in November 2007 and will stand trial in Washington, D.C.
Corruption. Although the illicit production or distribution of narcotic or psychotropic drugs and other controlled substances and the laundering of proceeds from illegal drug transactions are illegal, many Afghan government officials are believed to profit from the drug trade. Narcotics-related corruption is particularly pervasive at the provincial and district levels of government. Corrupt practices range from facilitating drug activities to benefiting from revenue streams that the drug trade produces.
On June 28, 2007, five Afghan Border Police officers were arrested while transporting 123.5 kg of heroin from Nangarhar to Takhar Province. The heroin was seized outside Kabul. At the time, the officers were transporting the heroin in a Border Police truck. The officers worked for Border Police Commander Haji Zahir, also alleged to be a drug trafficker. Defendants in the case included his personal body guard and his nephew, who acts as his personal secretary. Though this seizure did not result in Zahir’s arrest, he was suspended from his position as commander in Takhar Province. The investigation into his involvement with this shipment continues.
Since Attorney General Sabit’s appointment in September 2006, he has become an anti-corruption activist, dismissing prosecutors across the country for corruption and pursuing corruption investigations against politically sensitive targets. A new reform-oriented Supreme Court Justice, Abdul Salam Azimi, was also appointed by President Karzai in August 2006. Azimi was asked by President Karzai to lead a completely Afghan-driven interagency commission to develop a government-wide anti-corruption strategy, the report of which is expected to be released in 2008.
Agreements and Treaties. Afghanistan is a party to the 1988 UN Drug Convention, the 1971 UN Convention, and the 1961 UN Single Convention on Psychotropic Substances. Afghanistan is also a party to the UN Convention Against Transnational Organized Crime. Afghanistan has signed, but has not yet ratified, the UN Convention Against Corruption. The Afghan government has no formal extradition or legal assistance arrangements with the United States, but American mentors are working with the Criminal Justice Task Force to help draft such a law. The 2005 Afghan Counter Narcotics law, however, allows the extradition of drug offenders under the 1988 UN Drug Convention. Haji Baz Muhammad, mentioned above, was extradited to the United States under the authority of the 1988 UN Drug Convention in October 2005. In 2006, however, a similar effort to extradite Misri Khan, a major trafficker, and his associates met with a request from President Karzai that the defendants first stand trial at Afghanistan’s Counter Narcotics Tribunal, which subsequently sentenced the defendants to 17 years in prison. The defendants are still incarcerated in Afghanistan as of December 2007.
Illicit Cultivation/Production. Based on UNODC data, the number of hectares under poppy cultivation in Afghanistan increased 17 percent, from 165,000 ha in 2006 to 193,000 in 2007. Resulting opium production reached a record 8,200 MT. The opium yield per hectare was the highest in five years, increasing from 37 kg/ha in 2006 to 42.5 kg/ha in 2007. UNODC attributed the high yield to ideal weather conditions, even though floods in Uruzgan moderated intensive poppy cultivation in that province. The number of people involved in opium cultivation increased in 2007 from 2.9 million to 3.3 million. According to UNODC estimates, 14.3 percent of Afghans were involved in opium cultivation during 2007. Considered in terms of its estimated $4 billion illicit export value, opium represented about one-third of Afghanistan’s total GDP (licit and illicit). On the other hand, the portion of narcotics money actually received by farmers was a small share of the whole: opium poppy’s $1 billion farm-gate value accounted for only 11 percent of total licit and illicit GDP.
Poppy is a hardy, low risk crop. High profits, access to land and credit, and trafficker-facilitated access to illicit markets outside of Afghanistan make poppy immensely attractive to farmers in Afghanistan’s circumstances. However, the reduction of poppy cultivation in the poorer northern and central provinces and the explosion of poppy cultivation in agriculturally rich areas such as Helmand, Kandahar, and Nangarhar, where poppy has displaced wheat and other legitimate crops, disproves the notion that most farmers grow poppy because they have no viable alternatives. In its 2007 Opium Survey for Afghanistan, UNODC stated “opium cultivation is no longer associated with poverty and is closely linked to the insurgency.”
Thirteen of Afghanistan’s 34 provinces were poppy-free in 2007. This compares favorably to the six provinces that were declared poppy free in 2006. In Badakhshan, according to UNODC, the governor combined persuasion and eradication to slash cultivation from 13,056 ha in 2006 to 3,642 ha in 2007. Governor-led eradication cut opium production in Balkh from 10,037 ha in 2006 to zero in 2007. Many farmers in Balkh province reverted to planting marijuana, a traditional crop in Balkh. UNODC estimated that 70,000 ha of marijuana were cultivated country-wide in 2007, an increase of 20,000 ha over 2006.
The eastern province of Nangarhar demonstrated the historic volatility of Afghan poppy cultivation with a 285 percent jump in area planted in 2007 to 18,739 ha, placing the province second to Helmand in total cultivation. Nangarhar farmers had previously responded to a strong anti-narcotics campaign by the governor by virtually ceasing to grow poppy altogether in 2005. This fluctuating trend continued in fall and winter 2007, when the new governor, Gul Agha Sherzai, pursued his own pre-planting and eradication campaign, which is anticipated to cause a substantial drop in cultivation in 2008.
Afghanistan’s poppy free provinces are in the relatively secure central and northern parts of the country, while poppy cultivation has exploded where the insurgency is strong, particularly in the south and southwest. The United States, UK, UNODC, ISAF and other major international stakeholders now acknowledge that a symbiotic relationship exists between the insurgency and narcotics trafficking in Afghanistan. The Taliban taxes poppy farmers to fund the insurgency. Traffickers provide weapons, funding, and personnel to the insurgency in exchange for the protection of drug trade routes, poppy fields, and members of their organizations. For their part, narcotics traffickers thrive in the insecurity and absence of governance in areas where the Taliban is active. The nexus between militants and narcotics trafficking was vividly illustrated when the Taliban gained control in February 2007 of the Musa Qala district in northern Helmand. When Afghan and coalition troops retook the district nine months later, they found that Taliban governance had deliberately sheltered a flourishing narcotics industry. The full production cycle, from raw opium to finished heroin, was traded in Musa Qala’s open narcotics markets, benefiting local traffickers and Taliban tax-collectors alike.
The southern province of Helmand province was in a class of its own in 2007, growing 53 percent of Afghanistan’s poppy crop with 102,770 ha under cultivation. Helmand’s 2007 poppy crop increased 48 percent over 2006. Poppy cultivation has quadrupled in Helmand since 2005 and has almost entirely taken over a once prosperous agricultural region growing legal crops. Helmand opium production is organized on a large scale, employing thousands of seasonal migrant laborers and supporting cultivation with systems of credit and distribution. Massive amounts of development assistance to Helmand have not held back the explosion of poppy cultivation and trafficking there. As the recipient of $270 million in FY2007 alone, if Helmand were an independent country, it would be the sixth largest recipient of bilateral USAID development assistance in the world.
Drug Flow/Transit. Drug traffickers and financiers lend money to Afghan farmers in order to promote drug cultivation in the country. Traffickers buy the farmers’ crops at previously set prices or accept repayment of loans with deliveries of raw opium. In many provinces, opium markets exist under the control of regional warlords who also control the illicit arms trade and other criminal activities, including trafficking in persons. Traders sell to the highest bidder in these markets with little fear of legal consequences, and gangsters and insurgent groups tax the trade.
Drug labs operating within Afghanistan process an increasingly large portion of the country’s raw opium into heroin and morphine base. This process reduces the bulk of raw opium about one-tenth, which facilitates its movement to markets in Asia, Europe, and the Middle East with transit routes through Iran, Pakistan, and Central Asia. Opiates are transported to Turkey, Russia, and the rest of Europe by organized criminal groups that are often organized along regional and ethnic kinship lines. Pakistani nationals play a prominent role in all aspects of the drug trade along the Afghan/Pakistan border.
Precursor chemicals used in heroin production must be imported into Afghanistan. Limited police and administrative capacity hampered efforts to interdict precursor substances and processing equipment. Afghan law requires the tracking of precursor substances, but the MCN has failed to create an active registry to record data. Progress in this regard requires the establishment of new laws, a system for distinguishing between licit and potentially illicit uses of dual-use chemicals, and a specialized police force to enforce the new system. UNODC has established a five-man unit at CNPA that is charged with tracking precursor chemicals.
Domestic Programs/Demand Reduction. The Afghan government acknowledges a growing domestic drug abuse problem, particularly opium and increasingly heroin. In 2005, Afghanistan’s first nationwide survey on drug use was conducted in cooperation with UNODC. This survey estimated that Afghanistan had 920,000 drug users, including 150,000 users of opium and 50,000 heroin addicts, with 7,000 intravenous users.
The NDCS includes rehabilitation and demand reduction programs for drug abusers. Given Afghanistan’s shortage of general medical services, however, the government can only devote minimal resources to these programs. To address demand reduction needs, the UK and Germany have funded specific demand reduction and rehabilitation programs. For its part, the United States is funding five, 20-bed residential drug treatment centers in Afghanistan, including the only residential facility in the country dedicated to serving female addicts. In 2007, the United States also supported 26 mosque-based drug education programs, five drug prevention/life skills pilot programs in Afghan schools, drug prevention public awareness programs, and a research study on the effects of second-hand opium smoke.
IV. U.S. Policy Initiatives and Programs
Bilateral Cooperation/The Road Ahead. In 2007, the United States enhanced its five pillar Afghanistan counternarcotics strategy, which calls for decisive action in the near term and identifies a more extensive array of tactics in all sectors, including:
| Drugs Seized (kg) (Through September 2007) |
|||||
|---|---|---|---|---|---|
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Opium | 2,171 | 17,689 | 50,048 | 40,052 | 39,304 |
| Heroin | 977 | 14,006 | 5,592 | 1,927 | 4,249 |
| Morphine Base | 111 | 210 | 118 | 105 | 617 |
| Hashish | 10,269 | 74,002 | 40,052 | 17,675 | 71,078 |
| Precursor Chemicals Seized (Through September 2007) |
|||||
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Solid (kg) | 14,003 | 3,787 | 24,719 | 30,856 | 37,509 |
| Liquid (liters) | 0 | 4,725 | 40,067 | 12,681 | 33,008 |
| Arrests (for trafficking) (Through September 2007) |
|||||
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Arrests | 203 | 248 | 275 | 548 | 760 |
| Drug Labs Destroyed (Through September 2007) |
|||||
| 2003 | 2004 | 2005 | 2006 | 2007 | |
| Labs Destroyed | 31 | 78 | 26 | 248 | 50 |
Afghanistan produces 93 percent of the world’s opium. An increasingly large portion of the opium crop is being processed into heroin and morphine base by drug labs in Afghanistan. With no domestic chemical industry, the chemicals required for heroin processing must come from abroad. The principal sources are believed to be China, Europe, the Central Asian states and India, but traffickers skillfully hide the sources of their chemicals by re-packaging and false labeling. There are no legitimate requirements in Afghanistan for most of the chemicals used in heroin manufacture, and most are smuggled in through the Central Asian states, the Persian Gulf, including Iran, Syria and Pakistan, after being diverted elsewhere.
Afghanistan is a party to the 1988 UN Drug Convention. However, it lacks the administrative and regulatory infrastructure to comply with the Convention’s record keeping and other requirements.
The same factors that adversely impact the interdiction of narcotics, the investigation of major trafficking organizations and the enforcement of the poppy ban hinder efforts to interdict precursor chemicals and processing equipment.
Afghanistan is not a regional financial or banking center, and is not considered an offshore financial center. However, its formal financial system is growing rapidly while its traditional informal financial system remains significant in reach and scale. Afghanistan is a major drug trafficking and drug producing country and the illicit narcotics trade is the primary source of laundered funds. Afghanistan passed anti-money laundering and terrorist financing legislation in October 2005, and efforts are being made to strengthen police and customs forces. However, there remain few resources, limited capacity, little expertise and insufficient political will to combat financial crimes. The most fundamental obstacles continue to be legal, cultural and historical factors that conflict with more Western-style proposed reforms to the financial sector. Public corruption is a significant problem. Afghanistan is ranked 172 out of 180 countries in Transparency International’s 2007 Corruption Perception Index.
According to United Nations (UN) statistics, in 2005 and 2006, opium production increased and today Afghanistan accounts for over 90 percent of the world’s opium production. Opium gum is sometimes used as a currency—especially by rural farmers—and it is used as a store of value in prime production areas. It is estimated that at least one third of Afghanistan’s (licit plus illicit) gross domestic product (GDP) is derived directly from narcotics activities, and proceeds generated from the drug trade have reportedly fueled a growing real estate boom in Kabul, as well as a sharp increase in capital investment in rural poppy growing areas.
Much of the recent rise in opium production comes from Taliban strongholds in the southern part of the country. The Taliban impose taxes on narcotics dealers, which undoubtedly helps finance their terrorist activities. Additional revenue streams for the Taliban and regional warlords come from “protecting” opium shipments, running heroin labs, and from “toll booths” established on transport and smuggling routes.
Afghan opium is refined into heroin by production labs, more of which are being established within Afghanistan’s borders. The heroin is then often broken into small shipments and smuggled across porous borders for resale abroad. Payment for the narcotics outside the country is facilitated through a variety of means, including through conventional trade and the traditional hawala system that uses trade as the primary medium to balance accounts. In addition, the narcotics themselves are often used as tradable goods and as a means of exchange for automobiles, construction materials, foodstuffs, vegetable oils, electronics, and other goods between Afghanistan and neighboring Pakistan and Iran. Many of these goods are smuggled into Afghanistan from neighboring countries, particularly Iran and Pakistan, or enter via the Afghan Transit Trade Agreement (ATTA) without payment of customs duties or tariffs. Most of the trade goods imported into Afghanistan originate in Dubai. Invoice fraud, corruption, indigenous smuggling networks, underground finance, and legitimate commerce are all intertwined.
Afghanistan is widely served by the hawala system, which provides a range of financial and nonfinancial business services in local, regional, and international markets. Financial activities include foreign exchange transactions, funds transfers (particularly to and from neighboring countries with weak regulatory regimes for informal remittance systems), micro and trade finance, as well as some deposit-taking activities. While the hawala network may not provide financial intermediation of the same type as the formal banking system (i.e., deposit-taking for lending and investing purposes based on the assessment, underwriting, and pricing of risks), it is a traditional form of finance and deeply entrenched and widely used throughout Afghanistan and the neighboring region.
There are over 300 known hawala dealers in Kabul, with branches or additional dealers in each of the 34 provinces. These dealers are organized into informal provincial unions or guilds whose members maintain a number of agent-principal and partnership relationships with other dealers throughout the country and internationally. Their record keeping and accounting practices are robust, efficient, and take note of currencies traded, international pricing, deposit balances, debits and credits with other dealers, lending, cash on hand, etc. Hawaladars are supposed to be licensed; however the licensing regime that existed from April 2004 until September of 2006 was overly burdensome and resulted in issuance of few licenses. In September of 2006, Da Afghanistan Bank (DAB), Afghanistan’s Central Bank, issued a new money service provider regulation that streamlined the licensing process and substantially reduced the licensing and ongoing compliance burden for hawaladars. The focus of the regulation is on anti-money laundering and counter-terrorist financing (AML/CTF). The regulation requires and provides standard mechanisms for record keeping and reporting of large transactions. The DAB provided training sessions on the regulation and has developed a streamlined application process. In Kabul, approximately 100 licenses have been issued under the regulation, which is the result of the DAB outreach, law enforcement actions, and pressure from commercial banks where hawaladars hold accounts. Options for strengthening the hawaladar unions and promoting self-regulation are also being studied. The DAB has begun outreach efforts to money service providers in other large cities, specifically Mazar-e-Sharif and Herat, and hopes to expand the licensing to these cities in 2008. Given how widely used the hawala system is in Afghanistan, financial crimes undoubtedly occur through these entities.
In early 2004, the DAB worked in collaboration with international donors to establish the legislative framework for AML/CTF initiatives. Although Afghanistan was unable to meet its initial commitment to enact both pieces of legislation by September 30, 2004, they were both finalized and signed into law by late October 2004.
The Anti-Money Laundering and Proceeds of Crime and Combating the Financing of Terrorism laws incorporate provisions that are designed to meet the recommendations of the Financial Action Task Force (FATF). These laws address the criminalization of money laundering and the financing of terrorism, customer due diligence, the establishment of a financial intelligence unit (FIU), international cooperation, extradition, and the freezing and confiscation of funds. Under the law, money laundering and terrorist financing are criminal offences. The AML law also includes provisions to address cross-border currency reporting, and establishes authorities to seize and confiscate monies found to be undeclared or falsely declared, or determined to be transferred for illicit purposes.
Under the AML law, the Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA), Afghanistan’s FIU, has been established and is functioning as a semi-autonomous unit within the DAB. The FIU, originally to be established in January 2005, was actually initiated in October 2005—with the assignment of a General Director, office space, and other basic resources.
Banks and other financial and nonfinancial institutions are required to report to the FIU all suspicious transactions and large cash transactions above the equivalent of U.S. $10,000, as prescribed by the DAB. These financial institutions are also required to maintain their records for a minimum of 10 years. Approximately 10,000 large cash transaction reports are currently being received from financial institutions and processed each month. The FIU has over 140,000 large transaction reports currently stored in its database that can be searched using a number of criteria. The FIU has the legal authority to freeze financial assets for up to seven days. FinTRACA also has access to records and databases of other government entities.
The formal banking sector consists of sixteen licensed banks. AML examinations have been conducted for all these banks that have resulted in a growing awareness of AML requirements, deficiencies among the banks, and a need for building the AML capacity of the formal financial sector. Additionally, the Central Bank has worked with the banking community through the Afghan Bankers Association (ABA) to develop several ongoing topical working groups focused on AML issues. The ABA has recently designed a “know your customer” (KYC) form that has been accepted by the financial industry and has provided on-going education on identifying suspicious transactions. Seven suspicious transaction reports were received in 2007 by the FIU, one of which was referred to law enforcement for investigation.
The Afghanistan Central Bank has circulated a list of individuals and entities that have been included on the UN 1267 Sanctions Committee’s consolidated list of designated individuals and entities to financial institutions. There is no information currently available regarding the results of these lists being circulated.
The Supervision Department within the DAB was formed at the end of 2003, and is divided into four divisions: Licensing, General Supervision (which includes on-site and off-site supervision), Special Supervision (which deals with special cases of problem banks), and Regulation. The Department is charged with administering the AML/CTF legislation, conducting examinations, licensing new institutions, overseeing money service providers, and outreach to the commercial banking sector. The effectiveness of the Supervision Department in the AML area remains limited due to staffing, organization, and management issues. As a result, FinTRACA has taken on some supervisory responsibilities, yet resources are limited.
The Ministry of Interior (MOI) and the Attorney General’s Office are the primary financial enforcement and investigative authorities. They are responsible for tracing, seizing and freezing assets. While MOI generally has adequate police powers, it lacks the resources to trace, seize, and freeze assets. According to FinTRACA, it is not aware of Afghanistan freezing, seizing, or forfeiting related assets in 2007, or of any calls on the banking community for cooperation with enforcement efforts. FinTRACA has an MOU in place with the MOI for cooperation and currently shares information with the Sensitive Investigations Unit (SIU), a law enforcement group within the MOI.
Pursuant to the Central Bank law, a Financial Services Tribunal will be established to review certain decisions and orders of the DAB. Judges and administrative staff will need to significantly increase their technical knowledge before the Tribunal is effective. The Tribunal will review supervisory actions of the DAB, but will not prosecute cases of financial crime. At present, all financial crime cases are being forwarded to the Kabul Provincial Court, where there has been little to no activity in the last three years. The process to prosecute and adjudicate cases is long and cumbersome, significantly underdeveloped, and corruption can play a role at various levels. There was one arrest for alleged terrorist financing in 2007 but the individual was not prosecuted.
Border security continues to be a major issue throughout Afghanistan. At present there are 21 border crossings that have come under central government control, utilizing international donor assistance as well as local and international forces. However, many of the border areas are not policed and therefore susceptible to illicit cross-border trafficking and trade-based money laundering. Many regional warlords also continue to control the international borders in their provincial areas, causing major security risks. Customs authorities, with the help of outside assistance, have made significant strides, but much work remains to be done.
Customs collection has improved, but smuggling and corruption continue to be major concerns, as well as trade fraud, which includes false and over-and under-invoicing. Thorough cargo inspections are not conducted at any gateway. A pilot program for declaring large, cross-border currency transactions has been developed at the Kabul International Airport (KIA). This prototype will serve as the foundation for expansion to other land, air and sea crossings. Currently, KIA requires incoming and outgoing passengers to fill out declarations forms for carrying cash in an amount of 1 million Afghanis (approximately U.S. $20,000) or its equivalent. The DAB is working with Customs authorities to further improve enforcement of airport declarations. However there is very little international air travel outside of Kabul. Although Afghanistan has limited resources to enforce customs declarations outside of Kabul, the DAB has sent delegations to border crossings in Hairatan and Islam Qala to assess the capacity and describe the provisions of the law to the local authorities. There is no restriction on transporting any amount of declared currency. However, in the case of cash smuggling at the airport, reports are entered into a Customs database and this information is shared with the FIU.
Under the Law on Combating the Financing of Terrorism, any nonprofit organization that wishes to collect, receive, grant, or transfer funds and property must be entered in the registry with the Ministry of Auqaf (Islamic Affairs). All nonprofit organizations are subject to a due diligence process which includes an assessment of accounting, record keeping, and other activities. However, the capacity of the Ministry to conduct such examinations is nearly nonexistent, and the reality is that any organization applying for a registration is granted one. Furthermore, because no adequate enforcement authority exists, many organizations operating under a “tax-exempt” nonprofit status in Afghanistan go completely unregistered, and illicit activities are suspected on the part of a number of organizations.
The Government of Afghanistan (GOA) is a party to 12 of the United Nations (UN) conventions and protocols against terrorism and is a signatory to the International Convention for the Suppression of Acts of Nuclear Terrorism (which is pending ratification). Afghanistan is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime. Afghanistan is also a signatory to the UN Convention against Corruption (UNCAC). Ratification of UNCAC, one of the benchmarks established under the London Compact, as well as amendment of domestic laws to conform to the UNCAC’s obligations, remain pending.
In July 2006, Afghanistan became a member in the Asia Pacific Group, a FATF-Style Regional Body (FSRB), and has also obtained observer status in the Eurasian Group, another FSRB. No mutual evaluation has been conducted on the AML/CTF regime of Afghanistan to date; however, the APG is scheduled to assess the financial system in the third quarter of 2009. FinTRACA, Afghanistan’s FIU, has active bilateral MOUs for cooperation with the FIU’s of the United Kingdom, Russia, the Kyrgyz Republic, and Belarus. Although FinTRACA is not yet a member of the Egmont Group of financial intelligence units, it has taken several steps to build its capacity in efforts to meet international standards.
The Government of Afghanistan has made progress over the past year in developing its overall AML/CTF regime. Improvement has been seen in development of its nascent FIU, the reporting of large cash transactions, participation in international AML bodies, improvement in bank AML compliance awareness, information technology systems, and in efforts to bring money service providers into a legal and regulatory framework. However, much work remains to be done. Afghanistan needs to commit additional resources and find the political will to seriously combat financial crimes, including corruption. Afghanistan should develop secure, reliable, and capable relationships among departments and agencies involved in law enforcement. Afghanistan should develop the investigative capabilities of law enforcement authorities in the various areas of financial crimes, particularly money laundering and terrorist finance. Judicial authorities need to become proficient in understanding the various elements required for money laundering prosecutions. The FIU should become autonomous and increase its staff and resources. Afghan customs authorities should implement cross-border currency reporting and learn to recognize forms of trade-based money laundering. Border enforcement should be a priority, both to enhance scarce revenue and to disrupt narcotics trafficking and illicit value transfer. Afghan authorities should also work to address the widespread corruption in commerce and government.