The US Special Inspector General for Afghanistan Reconstruction (SIGAR), John F. Sopko, says that there is no control in place to address risks of the Taliban’s diversion of Afghanistan’s frozen $3.5 billion Central Bank asset held in a bank in Switzerland.
In his new report to the US Congress that was made public on Monday, January 8, Mr. Sopko underscores considerable barriers surrounding the future of the fund. The report mentions that when the fund was established, the US Departments of State and Treasury assured that “The Taliban are not part of the Afghan Fund, and robust safeguards have been put in place to prevent [Fund monies] from being used for illicit activity.”
However, the report notes that the Fund’s articles of association do not explicitly refer to the Taliban, and there are currently no specific controls in place to ensure funds are not “diverted” to or “misused” by the Taliban.
Following the Taliban’s takeover of Afghanistan, The US government froze $7 billion in Afghan central bank assets that were held in the US Federal Reserve. Later, this amount was divided in half, $3.5 billion of which was transferred to a trust fund in Switzerland while the other half is currently subject to a legal claim by victims of the 9/11 attacks. The Switzerland-based Fund for the People of Afghanistan (Afghan Fund) was established in September 2022 with a mandate to disburse $3.5 billion in assets belonging to Afghanistan’s central bank (DAB) in support of Afghanistan’s macroeconomic stability.
The Afghan Fund’s purpose, per its articles of association, is to “receive, protect, preserve, and disburse” the assets it holds “for the benefit of the Afghan people.” Precisely how, and when the fund will be disbursed, remain unanswered questions. To date, no disbursements have been made.
In March 2023, the Chairman of the US House Foreign Affairs Committee, Michael McCaul, asked SIGAR for details on the Afghan Fund’s operations, policies, spending, and the measures in place to safeguard against waste, fraud, abuse, and diversion to the Taliban regime.
The Fund’s board of trustees comprises only four individuals: two Afghan nationals, former Finance Minister and DAB Governor Anwar ul-Haq Ahady and current DAB board member Shah Mehrabi, alongside Jay Shambaugh, the US Under Secretary of the Treasury for International Affairs, and Alexandra Baumann, who heads the prosperity and sustainability division at the Swiss Federal Department of Foreign Affairs (FDFA). The members of the board were selected by the U.S. Department of State.
SIGAR has now raised concerns about a potential conflict of interest since one of the Afghan board members, Shah Mehrabi, holds a position on DAB’s governing body, the Supreme Council. “It is not clear whether this constitutes a conflict of interest in the form of competing fiduciary responsibilities. It is also unclear who determines whether a conflict of interest exists or how it is defined,” the report said.
Mr. Mehrabi also has close family ties to the Dubai-based Azizi family who owns the largest private bank in Afghanistan, the Azizi Bank. He was one of the first advocates of the release of Afghanistan’s frozen assets to the Taliban-controlled central bank to regulate and support Afghanistan’s economy. He has previously been accused of corruption during his tenure on the Bank’s supreme council, including approving loans contrary to the bank’s procedures for its chief auditor.
The Taliban has repeatedly urged the US to roll back imposed sanctions and unfreeze the DAB’s assets over the past two years. In 2022, Suhail Shaheen, the Taliban’s designated representative to the UN, called for the entire amount to be released and kept under the control of DAB. “Stealing and takeover of frozen money which belongs to the Afghan people by the U.S. shows the lowest level of human and moral decline of a country,” Shaheen told Reuters.
According to SIGAR’s report, the US Treasury and State Departments are currently unwilling to support a return of funds to DAB. They insist on DAB implementing adequate anti-money laundering and countering-terrorist-financing controls, as well as demonstrating independence from political influence and interference.
Last year, the US-funded audit of Afghanistan’s Taliban-controlled central bank (DAB) also failed to win Washington’s backing for a return of bank assets from a $3.5 billion Afghan Fund. “DAB must show that it is free from political influence and interference,” a US Treasury official told Reuters, referring to the need for professional bankers to replace the three Taliban members who currently manage the bank and are in the US and UN sanction lists.
