Week of Monday, January 10, 2022 | Issue 58
Marco Parks, Filipe Neves, Sofia Pantoula, Alberto Suarez, CENTCOM Team; Sara Kulic, Jennifer Kelly, IFET Team
The Taliban and Iran’s flags
Date: January 10, 2022
Location: Tehran, Iran
Parties involved: US; United Nations (UN); Iran; Islamic Emirate of Afghanistan; The Taliban
The event: The economic and political instability in Afghanistan has exacerbated the current humanitarian crisis; since the Taliban takeover, thousands of Afghan refugees have fled to Iran daily. The Iranian Minister of Foreign Affairs called for the US to unfreeze Afghanistan’s overseas financial assets for humanitarian purposes, with billions of Afghanistan’s assets frozen since the Taliban takeover in August 2021. A Taliban envoy visited Tehran, Iran on January 9, 2022; however, Iran says it will not officially recognize the Taliban-led government. Regional powers have talked about providing humanitarian aid in Afghanistan, with Russia leading the talks; in December 2021, China provided Afghanistan with food, winter clothes, and blankets.
Analysis & Implications:
It is unlikely the US will unfreeze Afghanistan’s overseas financial assets, as it is very unlikely the Taliban will utilize the money for humanitarian purposes. The Taliban will likely use the funds to strengthen their operational capabilities by purchasing weapons to combat the threat from Islamic State-Khorasan Province (ISIS-K).
Iran likely aims to slow the increase of Afghan refugees to the country. Stability in Afghanistan likely serves Iranian interests as instability will very likely provide the opportunity for ISIS-K expansion into the country. Iran is almost certainly concerned about its eastern border’s vulnerability as it is likely that ISIS-K militants will use the refugee wave to penetrate Iran and launch terrorist attacks.
As the US is unlikely to unfreeze Afghanistan’s assets, the US is likely to be viewed as indifferent to the Afghan humanitarian crisis. This will likely diminish the international standing of the US as a promoter of human rights, almost certainly providing credibility to anti-Western narratives and recruits to terrorist groups. Reinforcement of non-Western narratives will very likely orient Afghanistan to regional actors like Iran, Russia, and China, who are likely to provide aid to expand their influence in the region.
Date: January 10, 2022
Location: Baghdad, Iraq
Parties involved: EU; Iraqi government; Iraqi Prime Minister Mustafa al-Kadhimi; the EU Ambassador to Iraq Ville Varjola; the Financial Action Task Force (FATF); United Kingdom (UK)
The event: On January 10, 2021, it was reported that Iraq has been removed from the EU list of countries with “strategic deficiencies in anti-money laundering (AML) and combatting the financing of terrorism (CFT)”. After his meeting with the Iraqi Prime Minister Mustafa al-Kadhimi, the EU Ambassador to Iraq Ville Varjola said removal from the list would provide financial cooperation and investment opportunities. The EU decision follows the FATF removal of Iraq from its “gray list” in 2018 and the UK removal of Iraq from its list of countries with a high risk for money laundering in March 2021. Since 2014, approximately 1,457,800 Iraqis have migrated to the EU, which accounts for 27.3% of all legal Iraqi emigrants.
Analysis & Implications:
The EU removal of Iraq from the AML and CFT lists will likely lead to further inclusion of the Iraqi economy in the global financial system. Foreign direct investments (FDI) and cash-based aid from the EU will very likely increase, likely strengthening financial cooperation between the EU and Iraq. Iraqi citizens will very likely benefit from a stronger relationship with the EU as FDI and financial aid will likely fund education, employment opportunities, and improve the public health sector in Iraq.
The funds sent to Iraq by the Iraqi population in Europe will very likely increase as Iraq is no longer on the EU’s AML and CFT list. However, due to Iraq’s history of terrorist activity, the resulting influx of cash to Iraq will likely pose terrorist-financing risks. An increase in terrorist financing to groups in Iraq such as ISIS would very likely strengthen the group’s regional control, heightening the threat of terrorist attacks domestically and internationally.
Date: January 11, 2022
Location: United Arab Emirates (UAE)
Parties involved: Binance; UAE government; Dubai World Trade Center Authority (DWCTA); the Financial Action Task Force (FATF)
The event: Binance, the largest cryptocurrency exchange platform globally, is considering establishing its headquarters in the UAE. In December 2021, the DWCTA, which expressed its plans to become a “regulator for virtual assets and cryptocurrencies'' signed a Memorandum of Understanding (MOU) with Binance to advance the DWCTA’s vision of establishing a global virtual assets hub. Binance has been criticized for its alleged failure to comply with national anti-money laundering laws. The UAE is at risk of being “greylisted” by the FATF for its deficiencies in compliance with the anti-money laundering (AML) and counter-terrorist financing (CTF) framework.
Analysis & Implications:
The partnership between Binance and the UAE will likely attract other crypto-exchange platforms such as Uphold and Coinbase to establish themselves on the UAE market. Organized criminal groups involved in drug trafficking and illicit financing will likely exploit the UAE if government authorities do not regulate and monitor cryptocurrency transactions.
If Binance and the UAE do not improve their AML compliance, legitimate financial transactions and businesses will likely be deterred from the UAE, undermining the legitimacy and competitiveness of the UAE’s financial market. The UAE’s potential FATF greylisting will likely make other financial markets in the region, such as Saudi Arabia’s, more attractive to foreign capital inflows.
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 As famine stalks Afghanistan, West urged to rescue stricken economy, Reuters, January 2022, https://www.reuters.com/article/afghanistan-hunger-aid-idUSL8N2T14RQ
 Humanitarian needs in Iran rise as 300,000 Afghans arrive since Taliban takeover, Norwegian Refugee Council, November 2021, https://www.nrc.no/news/2021/november/humanitarian-needs-in-iran-rise-as-300000-afghans-arrive-since-taliban-takeover/
 Iran calls for US to unfreeze Afghanistan’s overseas funds, i24 News, January 2022, https://www.i24news.tv/en/news/economy/1641835728-iran-calls-for-us-to-unfreeze-afghanistan-s-overseas-funds
 Iran says won’t officially recognise Taliban after Tehran talks, Al Jazeera, January 2022, https://www.aljazeera.com/news/2022/1/10/iran-says-wont-officially-recognise-taliban-after-tehran-talks
 Regional powers back aid for Afghanistan, say U.S. and allies should pay, Reuters, October 2021, https://www.reuters.com/world/asia-pacific/russia-urges-international-aid-afghanistan-talks-with-taliban-2021-10-20/
 China donates winter clothes, blankets to Afghanistan as humanitarian aid, Business Standard, December 2021, https://www.business-standard.com/article/international/china-donates-winter-clothes-blankets-to-afghanistan-as-humanitarian-aid-121122500266_1.html
 Europe Says Iraq Is No Longer A High Risk For Money Laundering, Forbes, January 2022, https://www.forbes.com/sites/dominicdudley/2022/01/10/europe-says-iraq-is-no-longer-a-high-risk-for-money-laundering/?sh=3fb0a8e43971
 “Country Profiles Iraq,” Migrants & Refugees, 2020, https://migrants-refugees.va/country-profile/iraq/
 Binance Signs Agreement with Dubai World Trade Centre Authority to Establish an Industry Hub for Global Virtual Assets, Binance, December 2021, https://www.binance.com/en/support/announcement/46d81eb19a224cba807e078dc95aa886
 Binance is embracing regulation as it eyes UAE for its next global hub, CryptoSlate, January 2022, https://cryptoslate.com/binance-is-embracing-regulation-as-it-eyes-uae-for-its-next-global-hub/
 UAE Faces Risk of Inclusion on Global Watchlist Over Dirty Money, Bloomberg, January 2022, https://www.bloomberg.com/news/articles/2022-01-04/uae-faces-risk-of-inclusion-on-global-watchlist-over-dirty-money