Financial Crime World

Mongolia’s Anti-Money Laundering and Counter-Terrorism Financing Efforts Under Scrutiny

Ulan Bator, Mongolia - A recent report has highlighted several vulnerabilities in Mongolia’s anti-money laundering (AML) and counter-terrorism financing (CFT) regimes, raising concerns about the country’s ability to prevent financial crimes.

Vulnerabilities in Banking Sector

The report found that Mongolia’s banking sector is particularly exposed to money laundering and terrorist financing risks. Despite holding 95.7% of the country’s total financial assets, only recently implemented risk-based supervision, with no on-site inspections finalized at the time of the visit.

  • The banking sector lacks robust AML/CFT controls, making it vulnerable to exploitation by criminals.
  • Risk-based supervision is a recent development, leaving room for improvement in its implementation and effectiveness.

Non-Banking Sector Concerns

The non-banking sector, which includes a large variety of institutions and financial services, is subject to negligible rules-based AML/CFT supervision. This makes it vulnerable to exploitation by criminals.

  • The lack of effective oversight in this sector poses significant risks to the country’s financial stability.
  • Enhanced supervision and regulation are necessary to mitigate these risks.

Real Estate Sector Concerns

The real estate sector was also identified as a concern, with research suggesting that some businesses offer discounts on property purchases made using cash. The report noted that the sector is unregulated, with many businesses involved in the sale of real estate without proper oversight.

  • The lack of regulation and oversight in this sector creates an environment conducive to money laundering and terrorist financing.
  • Strengthening regulations and oversight mechanisms is essential to mitigate these risks.

Terrorist Financing Risks

The report highlighted Mongolia’s exposure to terrorist financing risks, citing limited expertise among relevant agencies and significant gaps in its legal framework related to terrorism financing.

  • The country’s limited expertise in identifying and investigating terrorist financing cases increases the risk of successful attacks.
  • Strengthening laws and regulations is necessary to address these gaps and enhance the country’s ability to combat terrorist financing.

Financial Intelligence Unit (FIU) Limitations

The report found that Mongolia’s FIU is using financial intelligence to a limited extent, with no information available on the use of FIU operational analysis to identify and investigate money laundering and terrorist financing cases.

  • The limited use of financial intelligence hinders the country’s ability to effectively combat money laundering and terrorist financing.
  • Enhancing the FIU’s capabilities and improving its analytical capacity is essential to address these limitations.

Implications and Recommendations

The report concludes that Mongolia’s AML/CFT regime requires significant improvements in risk assessment, coordination, and policy setting. The country needs to strengthen its financial intelligence capabilities, improve its legal framework, and enhance cooperation between government agencies and the private sector to effectively combat money laundering and terrorist financing.

  • The report’s findings are likely to prompt further scrutiny of Mongolia’s AML/CFT efforts by international organizations and other countries.
  • Strengthening Mongolia’s AML/CFT regime is essential to maintain financial stability and reputation.