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Prudential Norms: AML, KYC, Depositor Protection, and Bank Secrecy

In an effort to maintain financial stability and prevent illegal activities, Armenia has implemented a range of prudential norms for the banking sector. These norms are designed to ensure that banks operate in a secure and transparent manner, while also protecting depositors and preventing money laundering and terrorist financing.

AML/CFT Requirements

The Law on Combating Money Laundering and Terrorist Financing is the primary legal framework governing anti-money laundering (AML) and combating the financing of terrorism (CFT) for banks. Banks are required to have internal acts in place regarding AML/CFT, including:

  • Policies
  • Risk assessment regulations
  • Know-your-customer (KYC) processes

Banks must conduct customer due diligence at both the initiation of a business relationship and during ongoing service provision, as well as evaluate the potential risks associated with transactions and business relationships. Suspicious transactions or business relationships must be reported to the regulator, and banks are required to freeze assets directly or indirectly owned by individuals related to terrorism or weapons proliferation.

Depositor Protection

The Deposit Guarantee Fund of Armenia is a non-commercial legal entity established by the Central Bank of Armenia (CBA) to protect depositors in the event of bank insolvency. The fund is responsible for managing funds and paying compensation where a “compensation event” occurs.

  • Covered deposits are protected up to AMD16 million
  • Different limits apply depending on the type of deposit and the bank’s currency denomination
  • However, there are certain cases where the depositor protection guarantee does not apply, including:
    • Where the depositor is a bank manager or significant shareholder

Bank Secrecy

Bank secrecy refers to the information belonging to a customer that becomes known to a bank during the course of their business relationship. This includes:

  • Account information
  • Transaction details
  • Trade secrets
  • Other confidential information

The disclosure of bank secrecy is generally prohibited, and violations can result in:

  • Civil liability
  • Administrative penalties
  • Criminal liability

However, there are certain exceptions where disclosure is allowed, including:

  • With customer consent
  • When providing information to regulatory authorities

These prudential norms are designed to ensure the stability and security of Armenia’s banking sector, while also protecting depositors and preventing illegal activities. Banks that fail to comply with these norms risk facing penalties and reputational damage.