Financial Crime World

Mongolia’s Anti-Money Laundering and Counter-Terrorist Financing Regime Faces Significant Challenges

A recent assessment of Mongolia’s anti-money laundering (AML) and counter-terrorist financing (CFT) regime has highlighted several significant challenges facing the country. The assessment, conducted by a team of experts from the Asia/Pacific Group on Money Laundering (APG), found that Mongolia’s legal framework for international cooperation is in line with the Financial Action Task Force (FATF) standards, but that the country faces numerous vulnerabilities and deficiencies in its AML/CFT regime.

The assessment team identified several challenges, including:

  • Lack of expertise among relevant agencies in combating terrorist financing
  • Significant gaps in Mongolia’s legal framework related to CFT
  • Limited oversight of the non-profit organization (NPO) sector
  • Negligible implementation of CFT measures in the non-bank sector and designated non-financial businesses and professions (DNFBPs)

Sanctions Evasion

The report also noted that Mongolia has exposure to sanctions evasion, particularly with respect to North Korea. This includes:

  • Approximately 1,500 Democratic People’s Republic of Korea (DPRK) citizens working in Mongolia
  • Formal arrangements between the two countries for payment
  • Mongolian companies owning or having owned shares in DPRK state-owned enterprises

Limited Private Sector Involvement and Coordination

The assessment team found that:

  • Private sector involvement in Mongolia’s AML/CFT regime is limited
  • Few organizations have a good understanding of the country’s ML/TF risk
  • Coordination and cooperation among government agencies and between agencies are lacking, particularly with respect to preventive measures (PF)

National Cooperation Council and National Counter Terrorism Coordinative Council

Mongolia has two national cooperation and coordination mechanisms for its AML/CFT regime:

  • The National Cooperation Council (NCC)
  • The National Counter Terrorism Coordinative Council (NCTCC)

However, the assessment team found that these mechanisms do not coordinate operational activities related to ML or TF effectively.

Financial Intelligence

The report noted that financial intelligence, including FIU operational analysis, is being used to a limited extent in Mongolia. The country’s Financial Intelligence Unit (FIU) has developed a draft national AML/CFT strategy, but it is not yet in force and has not been informed by the National Risk Assessment (NRA).

Overall Level of Effectiveness and Technical Compliance

The assessment team concluded that Mongolia faces significant challenges in its AML/CFT regime, including:

  • Limited expertise
  • Gaps in legal frameworks
  • Coordination deficiencies

The country needs to improve its understanding of ML/TF risk, enhance private sector involvement, and strengthen coordination and cooperation among government agencies and between agencies.

Recommendations

Based on the assessment team’s findings, several recommendations were made to Mongolia:

  1. Improve the understanding of ML/TF risk through comprehensive risk assessments.
  2. Enhance private sector involvement in AML/CFT regime.
  3. Strengthen coordination and cooperation among government agencies and between agencies.
  4. Implement CFT measures in the non-bank sector and DNFBPs.
  5. Develop a national CFT strategy informed by the NRA.

Mongolia has committed to addressing these recommendations and improving its AML/CFT regime, but significant challenges remain ahead.