Financial Crime World

Armenia’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Framework: Areas for Improvement

The Financial Action Task Force (FATF) report highlights several key areas where Armenia’s AML/CFT framework requires improvement to effectively prevent and detect money laundering (ML) and terrorist financing (TF).

Key Areas of Concern

Risk Assessment

  • The authorities have not conducted a systemic assessment of ML/TF threats and risks in Armenia.
  • This lack of risk assessment hinders the development and implementation of a robust AML/CFT regime.

Financial System Vulnerability

  • Armenia’s financial system is small, bank-dominated, with a high level of cash-based economy, significant remittances from abroad, and relevant proceeds-generating crime.
  • This makes it vulnerable to ML, particularly in the “integration” stage.

AML/CFT Mechanisms

  • The Financial Intelligence Unit – the Financial Monitoring Center (FMC) is understaffed to properly undertake its responsibilities.
  • The AML/CFT law needs effective implementation, especially by designated non-financial businesses and professions (DNFBPs).

Criminal Provisions

  • Money laundering offense is broadly criminalized in line with international standards, but technical deficiencies have been identified regarding terrorism offenses.

Confiscation Framework

  • The seizure and confiscation framework requires strengthening, particularly with respect to predicate offenses.

Preventive Measures for Financial Institutions

  • The AML/CFT Law establishes preventive obligations broadly in line with FATF Recommendations.
  • Implementation across all sectors is evolving, particularly for non-banking sectors.
  • Armenia’s criminal provisions for money laundering are basically sound, but legal frameworks and regulatory requirements do not seem to be implemented effectively.

Recommendations

To address these concerns, the Armenian authorities should:

  1. Conduct a comprehensive risk assessment to identify and mitigate ML/TF risks.
  2. Enhance the capacity and resources of the FMC to effectively oversee and enforce AML/CFT regulations.
  3. Improve the implementation of preventive measures by financial institutions, particularly in high-risk sectors.
  4. Strengthen the confiscation framework and related laws to ensure effective enforcement.

Conclusion

By addressing these areas, Armenia can strengthen its AML/CFT regime and improve its ability to prevent and detect ML/TF activities.