Mongolia’s AML/CFT Arrangements: Not Formed Under Local Law

A recent assessment by international authorities has revealed that similar arrangements with foreign trusts cannot be formed under Mongolian law. This raises concerns about the effectiveness of Mongolia’s Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) regime.

Challenges in AML/CFT Regime

Mongolia’s legal framework for international cooperation is compliant with global standards, but there are significant challenges in its AML/CFT regime. These include:

• Limited expertise among relevant agencies
• Significant gaps in the legal framework related to terrorist financing (TF)
• Inadequate oversight of non-bank sectors and designated non-financial businesses and professions (DNFBPs)

National Risk Assessment

Mongolia’s National Risk Assessment (NRA) focused primarily on money laundering (ML) threats, but did not incorporate threats, consequences, and vulnerabilities into a comprehensive assessment of Mongolia’s ML risk. The NRA also lacked identification and analysis of Mongolia’s TF threats and vulnerabilities.

Private sector involvement in the NRA was limited to data provision and participation in workshops. Across government agencies and the private sector, understanding of Mongolia’s ML/TF risk needs significant improvements.

Coordination Mechanisms

Mongolia has two national cooperation and coordination mechanisms for its AML/CFT regime, but their effectiveness is limited. The country also lacks coordination on proceeds of crime (PF) related issues.

Recommendations

To address these challenges, the following recommendations are made:

• Improve risk assessments, coordination, and policy setting: Mongolia’s AML/CFT regime requires fundamental improvements in risk assessments, coordination, and policy setting.
• Enhance expertise among relevant agencies: Enhance expertise among relevant agencies to effectively address TF threats and vulnerabilities.
• Strengthen oversight of non-bank sectors and DNFBPs: Strengthen oversight of non-bank sectors and DNFBPs.
• Increase private sector involvement in the NRA process: Increase private sector involvement in the NRA process.

Conclusion

Mongolia must take concrete steps to address these issues and improve its AML/CFT regime to meet international standards. The country’s AML/CFT arrangements cannot be formed under local law, and significant improvements are needed to ensure effective implementation of its anti-money laundering and counter-terrorist financing regime.