SIGAR raises concerns about ‘misuse’ of Afghan fund in Swiss bank

In its latest report, SIGAR has expressed concerns regarding “misuse” of the Afghan Fund held in a Swiss bank, underscoring notable challenges that cast uncertainty over the future of the fund’s $3.5 billion.

This amount represents half of the $7 billion in Afghan central bank assets seized by the United States following the Republic’s collapse in August 2021.

The Switzerland-based Fund for the Afghan People was established in September 2022 with a mandate to disburse $3.5 billion in assets belonging to Afghanistan’s central bank, Da Afghanistan Bank (DAB), in support of Afghanistan’s macroeconomic stability. The Fund’s board comprises four individuals, including two Afghan nationals, Anwar ul-Haq Ahady and Shah Mehrabi, US Under Secretary of the Treasury for International Affairs Jay Shambaugh, and Ambassador Alexandra Baumann, the head of the prosperity and sustainability division at the Swiss Federal Department of Foreign Affairs (FDFA). The two Afghan nationals were selected (as per State’s response to SIGAR, using the terms “identified” and “certified”) by the US State Department.

In a report made public on January 8, the Special Inspector General for Afghanistan Reconstruction (SIGAR) responded to a March 2023 inquiry from Congressman Michael T. McCaul, chairman of the House Foreign Affairs Committee. Among other things, the inquiry sought a report from SIGAR on the Afghan Fund.

SIGAR expressed concern in its January 4 report that, while the Fund’s unanimous vote requirement could help prevent risky activities, there are currently no controls specifically addressing the issue of Taliban diversion. However, SIGAR noted that further safeguards addressing diversion may be developed in the future.

Despite previous assurances from Treasury and State that the Taliban is not part of the Afghan Fund, SIGAR revealed that the Fund’s articles of association do not explicitly refer to the Taliban, and there are currently no specific controls in place to prevent funds from being diverted to or misused by the Taliban. Additionally, Treasury reported that a compliance program to prevent funds from reaching sanctioned or criminal individuals, including members of the Taliban, was “under development,” contradicting the earlier claim of having “robust safeguards” in place.

A statement from an October 2023 board meeting indicated that the Fund’s trustees had approved a contract with a law firm to produce a framework ensuring “due diligence and controls procedures” related to disbursements. SIGAR questioned the potential conflict of interest, noting that one of the Fund’s trustees is also a member of DAB’s governing body, the Supreme Council. The report highlighted uncertainties about who determines a conflict of interest and how it is defined.

SIGAR further revealed that one of the individuals selected by the US State Department as a fiduciary of DAB’s assets had been fired from a previous position for misrepresenting credentials, raising questions about the adequacy of State’s vetting process. State’s Special Representative and Deputy Assistant Secretary for Afghanistan, Tom West, acknowledged that the selection process was not open and democratic, describing how the executive branch generated a list of former Afghan officials, investigated their pasts, and ultimately chose individuals in whom they had the most confidence.

According to Treasury, the US law firm chosen by the Fund’s trustees will help develop screening and verification measures before each disbursement, including checks against sanctions lists maintained by Treasury’s Office of Foreign Assets Control and the United Nations. Treasury emphasized that no disbursements would occur until this compliance program is in place.

Despite having controls not specific to the Taliban, such as external audits in accordance with Swiss law and holding assets at the Bank for International Settlements, the Fund’s purpose, as outlined in its articles of association, is to “receive, protect, preserve, and disburse” assets for the benefit of the Afghan people. However, specific details on how, when, and for what purposes remain unanswered, with no disbursements made to date.

SIGAR’s report notes that 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. These conditions are not met, given that DAB’s top three officials are senior Taliban leaders under US and UN sanctions.

In February 2023, USAID supported a third-party assessment of DAB, revealing weaknesses in the enforcement of anti-money laundering and countering-terrorist-financing measures. Treasury referred to the assessment as preliminary, and SIGAR’s report highlighted that the results had not been shared with the Afghan board members until later in the year.

SIGAR concluded its report by emphasizing the absence of specific controls addressing the issue of Taliban diversion, a significant concern for US officials in both the executive branch and Congress. Efforts seem underway to develop additional safeguards, as existing measures are not specifically tailored to prevent Taliban-related issues. For instance, the requirement for unanimous board approval for disbursements allows any of the four board members to veto a transaction.

Additionally, SIGAR expressed concern about a potential conflict of interest, as one of the Afghan board members, Mehrabi, is also a member of DAB’s governing body, the Supreme Council. The report questioned the process and authority for determining conflicts of interest related to the Afghan Fund.

SIGAR also raised doubts about the adequacy of State’s vetting process, noting that one individual selected as a fiduciary had been dismissed from a previous position for misrepresenting credentials. While the individual remains unnamed in the public report, the vetting process’s reliability is a point of contention.