Armenia Makes Progress in Combating Money Laundering and Terrorist Financing

Yerevan, Armenia - In a recent report, international experts have highlighted significant improvements made by Armenia in its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) framework. However, the country still faces challenges in implementing its new AML/CFT law and addressing vulnerabilities in its financial system.

Key Findings

• Armenia has replaced its outdated AML/CFT law with a more comprehensive one, passed in 2008.
• The authorities have not yet conducted a systemic assessment of money laundering (ML) and terrorist financing (TF) threats and risks to support the development and implementation of a robust AML/CFT regime.

Financial System Overview

• Armenia’s financial system remains small and bank-dominated, with most banks being domestically owned but foreign presence significant.
• The non-bank financial sector plays a limited role in financial intermediation.

Vulnerabilities and Risks

• Armenia is considered vulnerable to ML, particularly in the “integration” stage, due to:
  • Highly cash-based economy
  • Significant volume of remittances from abroad
  • Lack of adequate AML/CFT mechanisms in certain sectors such as real estate
• The risk of TF is deemed extremely low.

Coordination and Commitment

• Armenia has established an Interagency commission to boost coordination among authorities responsible for AML/CFT.
• Political commitment to fighting ML and TF is strong.
• The Financial Monitoring Center (FMC) under the Central Bank of Armenia provides guidance to financial institutions to improve the implementation of preventive measures.

Non-Compliance with FATF Recommendations

• Armenia’s requirements do not fully comply with the FATF Recommendations in areas such as:
  • Lack of prohibition on opening business relationships using bearer bank records or other bearer securities
  • Effective risk management procedures for customers utilizing business relationships prior to CDD verification
  • CDD measures for existing customers based on materiality and risk

Implementation of Preventive/Regulatory Requirements

• Implementation varies among financial institutions, with the banking sector being slightly more advanced than other important and risky sectors such as securities, insurance, foreign exchange offices, and money remitters.

Conclusion

While Armenia has made progress in combating ML and TF, it still faces challenges in implementing its AML/CFT law and addressing vulnerabilities in its financial system. Further efforts are needed to strengthen its AML/CFT regime and prevent the misuse of its financial system for illicit purposes.