WASHINGTON/ISLAMABAD, July 21 (Reuters) – A U.S.-funded audit of Afghanistan’s Taliban-run central bank has failed to win Washington’s backing for a return of bank assets from a $3.5 billion Swiss-based trust fund, said two U.S. officials and a former U.S. official, a move that would help ease the country’s financial crisis.

The audit has not changed the U.S. Treasury’s view that the bank must make reforms before the department will support disbursements from the Afghan Fund to Da Afghanistan Bank, or DAB, as the central bank is known, said a U.S. Treasury official on condition of anonymity.

The Swiss-based Afghan Fund was set up last year with half of about $7 billion in central bank funds that were frozen in the Federal Reserve Bank of New York in August 2021 after the Taliban took control of the country as the last foreign forces withdrew following two decades of war.

DAB must show that it is free “from political influence and interference,” said the Treasury official, referring to the need for professional bankers to replace the three Taliban officials who oversee the bank and are under U.S. and U.N. sanctions.

It also must prove that it has “adequate” controls against money-laundering and terrorism financing and install a “reputable” independent monitor, said the Treasury official.

“Our assessment of DAB remains unchanged,” said one of the U.S. officials. The two officials and the former U.S. official, who has knowledge of the U.S. position, spoke on condition of anonymity because of the confidentiality of the matter.

A Taliban administration spokesman and a spokesperson for the Afghan central bank did not respond to request for comment.

Concerns in Washington and other capitals about the bank’s leadership and anti-money laundering safeguards are at the heart of a standoff over the Taliban’s demand for the return of DAB cash frozen in the United States and other countries after the Taliban seized power.

Because the four-member board that oversees the trust fund must approve disbursements unanimously, the support of its U.S. government representative is essential.

Afghanistan remains mired in grave humanitarian and economic crises that some experts say has been worsened by U.S. restrictions hampering DAB’s ability to perform key central bank functions, such as ensuring stable exchange rates and prices.

The audit, funded by the U.S. Agency for International Development (USAID) and conducted by an outside contractor, examined DAB’s controls against money laundering and terrorism financing, and its banking oversight and payments departments, according to an April report by the U.S. Special Inspector General for Afghanistan Reconstruction.

The findings have not been made public.

Calling the audit a “preliminary assessment,” the Treasury official said its “limitations” suggested that “more comprehensive third-party assessment efforts may be needed.”

Shah Mehrabi, an Afghan-American economics professor who is on DAB’s governing board and co-chairs the Afghan Fund board, said the audit – which he has not seen – was completed in March and currently is with the State Department.

The State Department declined to comment.

Mehrabi and his co-chair, Anwar ul-Haq Ahady, a former DAB governor and former finance minister, told Reuters that they would consider the findings once they are available.

Mehrabi said use of the Afghan Fund’s assets should focus on stabilising prices and ensuring banks had enough liquidity, as the entire financial system was at risk from declining foreign donor funds to Afghanistan.

The other $3.5 billion in DAB assets frozen in the United States is being sought in lawsuits against the Taliban brought by families of victims of the Sept. 11, 2001, attacks on the United States. A U.S. judge in February ruled against the plaintiffs who are appealing.