Armenia Makes Progress in Combating Money Laundering and Terrorist Financing, but Faces Challenges

Yerevan, Armenia - A recent report highlights the progress made by Armenia in strengthening its anti-money laundering (AML) and combating the financing of terrorism (CFT) framework. However, it also identifies areas where improvement is needed to ensure the country’s financial system remains resilient to these threats.

Progress Made

Armenia has updated its AML/CFT law, replacing an earlier version enacted in 2005 with a more comprehensive one in 2008. The new law needs to be effectively implemented, particularly by designated non-financial businesses and professions (DNFBPs).

Challenges Ahead

Despite progress made, Armenia’s financial system remains predominantly bank-dominated, with the banking sector accounting for approximately 91% of total assets. This concentration poses some risks, and the country is more vulnerable to the “integration” stage of money laundering due to its highly cash-based economy, significant volume of remittances from abroad, and lack of adequate AML/CFT mechanisms in certain sectors.

Areas for Improvement

• The report notes that while Armenia has established an interagency commission to boost coordination among authorities responsible for AML/CFT, more focus is needed on assessing the risk of money laundering exposure due to identified vulnerabilities.
• The Financial Intelligence Unit (FIU) and the Financial Monitoring Center (FMC) require additional staffing to fulfill their new responsibilities.

Legal Framework Shortcomings

Armenia’s legal framework falls short of international standards in several areas, including: + Restrictions on confiscation for all designated predicate offenses + Limitations on financial secrecy, which can hinder law enforcement agencies’ ability to trace and identify property subject to confiscation

Positive Developments

• The AML/CFT Law establishes principal preventive obligations for financial institutions in line with the Financial Action Task Force (FATF) Recommendations.
• However, implementation of these requirements by financial institutions varies across sectors, and some areas require further improvement, such as:
  • Risk-based customer due diligence
  • Compliance management arrangements

Recommendations

The report recommends that Armenia prioritize addressing the identified gaps to ensure its AML/CFT framework is effective in combating money laundering and terrorist financing threats. The country’s authorities have expressed commitment to implementing the recommendations outlined in this report to strengthen their anti-money laundering and counter-terrorist financing efforts.

By addressing these challenges, Armenia can further improve its financial system’s resilience to money laundering and terrorist financing threats, ultimately enhancing the stability of its economy and global reputation.