Mongolia’s AML/CFT Regime Faces Challenges

Mongolia has made progress in implementing anti-money laundering (AML) and counter-terrorism financing (CFT) measures, but significant challenges remain. This article will discuss the current state of Mongolia’s AML/CFT regime and the recommendations for improvement.

Legal Framework for International Cooperation

According to a recent assessment by international experts, Mongolia’s legal framework for international cooperation is generally in line with the Financial Action Task Force (FATF) standards. However, there are still some challenges that need to be addressed.

Lack of Risk Assessments and Awareness

Mongolia has not assessed the money laundering (ML) and terrorist financing (TF) risks associated with its financial system. The country’s first ML/TF risk assessment report was completed in 2016, but it focuses primarily on ML threats and lacks a comprehensive assessment of Mongolia’s ML risk. Additionally, across government agencies and the private sector, there is a significant lack of understanding about Mongolia’s ML and TF risks. This lack of awareness hinders effective coordination and policy setting to combat these threats.

Vulnerabilities in the Non-Bank Sector

Mongolia’s TF vulnerabilities include limited expertise among relevant agencies, significant gaps in its legal framework related to TF, and negligible implementation of TF measures in the non-bank sector and DNFBPs (designated non-financial businesses and professions).

Exposure to Proliferation Financing

The country also appears to have exposure to proliferation financing (PF) related sanctions evasion. Mongolia has a significant number of North Korean citizens working in Mongolia, who are paid through formal arrangements between Mongolia and North Korea.

Recommendations for Improvement

To strengthen its AML/CFT regime, the assessment team recommends that Mongolia:

• Conduct comprehensive risk assessments to identify ML and TF risks associated with Mongolia’s financial system.
• Improve coordination and policy setting among government agencies and the private sector to combat ML and TF threats.
• Enhance private sector involvement in the AML/CFT regime through training, education, and awareness programs.

Key Findings

• Mongolia’s ML/TF risk assessment report lacks a comprehensive assessment of the country’s ML risk.
• Across government agencies and the private sector, there is a significant lack of understanding about Mongolia’s ML and TF risks.
• Mongolia’s TF vulnerabilities include limited expertise among relevant agencies, significant gaps in its legal framework related to TF, and negligible implementation of TF measures in the non-bank sector and DNFBPs.
• Mongolia appears to have exposure to PF related sanctions evasion.

By addressing these challenges and implementing the recommended improvements, Mongolia can strengthen its AML/CFT regime and reduce the risks associated with money laundering and terrorist financing.