On September 14, 2022, the United States established a Fund for the Afghan People (Afghan Fund) with $3.5 billion of the approximately $7 billion of Da Afghanistan Bank (DAB) assets that were frozen by the Treasury Department on August 15, 2021, and blocked by President Joseph R. Biden, Jr. on February 11, 2022.Footnote ¹ Created “in coordination with international partners including the government of Switzerland and Afghan economic experts,” the Afghan Fund, a non-profit Swiss foundation located in Geneva,Footnote ² aims to “receive, protect, preserve, and disburse assets for the benefit of the Afghan people, including foreign exchange rate and price stabilization objectives in Afghanistan.”Footnote ³ The ultimate disposition of the frozen assets had been debated within the U.S. government, subjected to contentious litigation in U.S. courts, and was the object of diplomatic negotiations between the United States and the Taliban. In establishing the Fund, the United States and its partners have sought to maintain the funds so that they will be used to stabilize the Afghan economy while not supporting or recognizing the authority of the Taliban (still designated Specially Designated Global Terrorists). The other $3.5 billion remains potentially available to terrorist victims to recover the damages that they have been awarded in suits against the Taliban.Footnote ⁴

When the Taliban toppled the Afghan government on August 15, 2021, approximately $9 billion in Afghan central bank assets were held overseas, roughly $7 billion of which, in bonds, cash, and gold, were deposited in the Federal Reserve Bank of New York (FRBNY).Footnote ⁵ Immediately, the Treasury Department froze the U.S.-based assets to prevent the Taliban, a group subject to U.S. sanctions that the United States refuses to recognize as the government of Afghanistan, from gaining control over them.Footnote ⁶ There was, according to Treasury, “uncertainty regarding who could authorize transactions on DAB's accounts.”Footnote ⁷ The freezing of DAB assets contributed to Afghanistan's economic instability and humanitarian crisis, but it was also an opportunity for U.S. plaintiffs who had (or expected to have) monetary judgments against the Taliban. Since the September 11, 2001 attacks on the United States, thousands of victims, family members of victims, property owners, and insurance companies, have filed lawsuits against the Taliban, alleging that the Taliban provided support to Al Qaeda. Other cases assert Taliban responsibility for subsequent terrorist acts.Footnote ⁸ Some have resulted in default judgments, now totaling well in excess of $7 billion (others are pending).Footnote ⁹ The Taliban had no assets in the United States, so the judgment creditors had no way to satisfy the awards in their favor.Footnote ¹⁰ But after the Taliban seized power in August 2021, the judgment creditors initiated litigation against the DAB assets in the United States. Reportedly, there were negotiations between attorneys representing the claimants and the U.S. government regarding a possible agreement to divide up the assets between the plaintiffs and Afghan humanitarian aid, though the legality of such a deal was uncertain.Footnote ¹¹

President Biden signed Executive Order 14064 on February 11, 2022 blocking “[a]ll property and interests in property of DAB that are held, as of the date of this order, in the United States by any United States financial institution” and ordering the prompt transfer of the blocked property to a consolidated account at the FRBNY.Footnote ¹² The White House explained that “[t]he Administration will seek to facilitate access to $3.5 billion of those assets for the benefit of the Afghan people and for Afghanistan's future pending a judicial decision.”Footnote ¹³ Biden further noted in the order that he “understand[s] that various parties, including representatives of victims of terrorism, have asserted legal claims against certain property of DAB or indicated in public court filings an intent to make such claims.”Footnote ¹⁴ The fact sheet indicated that “[e]ven if funds are transferred for the benefit of the Afghan people, more than $3.5 billion in DAB assets would remain in the United States and are subject to ongoing litigation by U.S. victims of terrorism. Plaintiffs will have a full opportunity to have their claims heard in court.”Footnote ¹⁵ The executive order sought to balance the humanitarian needs of Afghanistan with the moral and political imperative of allowing terrorist victims and their families the opportunity to have their claims to the DAB assets heard in court, and split the money accordingly.Footnote ¹⁶

That same day, in accordance with the executive order, the Treasury Department's Office of Foreign Assets Control issued a license to the FRBNY “to transfer up to $3,500,000,000.00 . . . for the benefit of the people of Afghanistan, including to an international financing mechanism (in which the United States is a member) holding and disbursing funds for the benefit of the people of Afghanistan, or to a United Nations fund, programme, specialized agency, or other entity or body for the benefit of the people of Afghanistan.”Footnote ¹⁷ Also that day, the United States submitted its statement of interest in the judgment creditors’ litigation against the assets. The United States argued that, under Second Circuit precedent interpreting the Terrorism Risk Insurance Act (which served as the legal basis for the creditors’ writs of execution), “the portion of the DAB Assets authorized by the OFAC License to be transferred for the benefit of the Afghan people, in view of the urgent humanitarian and economic crisis in Afghanistan, is not properly subject to attachment in this litigation.”Footnote ¹⁸ Two weeks later, on February 25, Magistrate Judge Sarah Netburn, with the parties’ consent, ordered “that the assets of Da Afghanistan Bank . . . regulated by the Office of Foreign Assets Control's [license] of February 11, 2022 . . . are not judicially restrained.”Footnote ¹⁹ The remaining DAB assets remained under judicial restraint, however, and litigation continues on the judgment creditors’ attempt to attach them.Footnote ²⁰

With the writs lifted on the licensed portion of the DAB assets, those funds could be transferred. Negotiations for the transfer of all or part of those assets to the DAB, perhaps by means of a trust fund (that had not yet been established), took place through the summer. Talks broke down, however, after the United States learned that the Taliban had allowed Al Qaeda leader Ayman al-Zawahiri to live freely in Kabul.Footnote ²¹ The United States killed al-Zawahiri in a drone strike on July 31.Footnote ²² Thomas West, special representative for Afghanistan and deputy assistant secretary for South and Central Asian affairs, said in mid-August: “We do not see recapitalization of the Afghan central bank as a near-term option. . . . We do not have confidence that that institution has the safeguards and monitoring in place to manage assets responsibly. . . . And needless to say, the Taliban's sheltering of al Qa'ida leader Ayman al-Zawahiri reinforces deep concerns we have regarding diversion of funds to terrorist groups.”Footnote ²³ Reportedly, though, talks resumed a short time later.Footnote ²⁴

The Afghan Fund was registered on September 5,Footnote ²⁵ and $3.5 million in DAB assets were subsequently deposited in its account at the Bank of International Settlements.Footnote ²⁶ In a joint statement announcing the Fund on September 14, the Treasury and State Departments stated that the “$3.5 billion of Afghan central bank reserves [are] to be used for the benefit of the people of Afghanistan while keeping them out of the hands of the Taliban and other malign actors. The Afghan Fund will protect, preserve, and make targeted disbursements of that $3.5 billion to help provide greater stability to the Afghan economy.”Footnote ²⁷ To achieve its purpose, the Fund may, among other things, “use assets to provide Afghan banking sector liquidity, keep Afghanistan current on its debt service obligations, support exchange rate stability, transfer funds, as appropriate, to public Afghan financial institutions, including Afghanistan's central bank.”Footnote ²⁸ In the short term, the board will “promote monetary and macroeconomic stability . . . [including by] paying for critical imports like electricity, paying Afghanistan's arrears at international financial institutions to preserve their eligibility for financial support, paying for essential central banking services like SWIFT payments.”Footnote ²⁹ In the long term, the aim is for the funds “to be preserved to return to DAB.”Footnote ³⁰ The United States has stipulated, however, that it “will not support the return of these funds until DAB: (1) Demonstrates its independence from political influence and interference; (2) Demonstrates it has instituted adequate anti-money laundering and countering-the-financing-of-terrorism ([anti-money laundering and countering terrorist finance]) controls; and (3) Completes a third-party needs assessment and onboards a reputable third-party monitor.”Footnote ³¹

The Fund's statutes set out its organization. Fund decisions are to be made unanimously by its board of trustees.Footnote ³² Though the Fund's statutes do not specify the board's composition, beyond setting the minimum number of its members and how they are chosen, it is drafted in a way that anticipates that the United States will appoint a member.Footnote ³³ And in fact one of the board's inaugural four members is Scott Miller, the U.S. ambassador to Switzerland, who also serves as the board's chair.Footnote ³⁴ Effectively, then, the United States controls the board's agenda, through the chair, and is given a veto over the board's decisions, through the unanimity requirement. The board's other members are the Fund's founders Anwar Ahady, former governor of the DAB and Afghan finance minister, and Shah Mehrabi, a current member of the DAB Supreme Council, as well as Alexandra Baumann, head of the Prosperity and Sustainability Division of the Swiss Federal Department of Foreign Affairs.Footnote ³⁵ The board met for the first time on November 21.Footnote ³⁶ It “took steps to further operationalize” the Fund, including agreeing “to the principle of initial Afghan co-chairmanship and to the establishment of an Afghan Advisory Committee.”Footnote ³⁷

The Taliban denounced the establishment of the Afghan Fund as an “illegal venture” and a “violation of international norms.”Footnote ³⁸ Afghan Foreign Ministry Spokesperson Abdul Qahar Balkhi stated, “Disbursing these reserves for other purposes without the express agreement of the Afghan people is a negative step against Afghan economic stability taken by the United States.”Footnote ³⁹ China has also criticized the creation of the Afghan Fund, and Chinese Foreign Ministry Spokesperson Mao Ning indicated that the United States should lift all “unilateral sanctions” on Afghanistan as the funds are the “national property” of Afghanistan.Footnote ⁴⁰ Afghans and foreign policy experts have argued that the assets need to be returned to the DAB as soon as possible since an operational central bank is essential to a functioning economy.Footnote ⁴¹ They note that the assets belong to the people of Afghanistan, and not the U.S. government or the U.S. courts.