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Armenia’s Prudential Norms: AML, CFT, Depositor Protection, and Bank Secrecy
In a bid to ensure financial stability and prevent illicit activities, Armenia has put in place a range of prudential norms governing the banking sector. This article will delve into the country’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations, depositor protection regime, and bank secrecy requirements.
AML/CFT Requirements
The Law on Combating Money Laundering and Terrorist Financing serves as the primary legal framework governing AML and CFT for banks in Armenia. In addition to this law, banks must also adhere to recommendations issued by the Central Bank of Armenia (CBA) and relevant international institutions.
To comply with AML/CFT regulations, banks are required to have internal acts in place, including:
- Conducting customer due diligence at both the initiation of a business relationship and during ongoing service provision
- Evaluating potential risks associated with transactions and business relationships
- Reporting transactions subject to mandatory reporting and suspicious transactions
- Suspending or terminating a transaction or business relationship if it is deemed impossible to comply with KYC requirements, resolve suspicious activity concerns, or if instructed to do so by the regulator
- Freezing assets directly or indirectly owned or controlled by persons related to terrorism or the proliferation of weapons of mass destruction
If a transaction is suspected of being illegal, a bank may suspend it and report it to the regulator. The bank must then act in accordance with the instructions provided by the regulator.
Depositor Protection Regime
The Deposit Guarantee Fund of Armenia (the “Fund”) is a non-commercial legal entity established by the CBA. All banks in Armenia are required to contribute to the Fund on a regular basis, and the amount of each contribution is calculated based on the bank’s total attracted deposits.
The Fund provides compensation guarantees for deposits within certain limits, including:
- AMD16 million for deposits in Armenian drams if a depositor only keeps an Armenian dram-denominated deposit in the insolvent or bankrupt bank
- AMD7 million for deposits in foreign currency if a depositor only keeps a foreign currency-denominated deposit in the insolvent or bankrupt bank
A compensation guarantee is not provided in certain cases, including where a depositor is a manager of the bank or a family member, or where funds in the deposit are recognized as proceeds of illegal activities.
Bank Secrecy Requirements
Bank secrecy refers to information belonging to a customer of which a bank becomes aware during the course of their business relationship. This includes customer account information, transaction details, trade secrets, and other confidential information.
The general rule is that the disclosure of bank secrecy is prohibited, and violation of these rules may lead to civil liability, administrative penalties, and criminal liability. However, there are certain cases where the disclosure of bank secrecy is allowed, subject to conditions such as customer consent or provision of information to regulatory bodies.
Conclusion
Armenia’s prudential norms aim to ensure financial stability and prevent illicit activities in the banking sector. By understanding these regulations, banks can better comply with AML/CFT requirements, provide depositor protection, and maintain bank secrecy while ensuring the integrity of the financial system.