Financial Crime World

Armenia’s AML/CFT Framework: Progress and Challenges according to IMF Report

The International Monetary Fund (IMF) assessed Armenia’s progress in implementing Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) measures in a new report. The evaluation, part of the IMF’s Report on Observance of Standards and Codes (ROSC), was conducted in 2009 using the 2004 Assessment Methodology.

Key Findings

  • Improvement in AML/CFT framework: Armenia has seen substantial advancement in its AML/CFT structure, primarily through the enactment of a more extensive law in 2008.
  • Areas for strengthening: Effective implementation of the new law, particularly by Designated Non-Financial Businesses and Professions (DNFBPs), is paramount.
  • Exposure to money laundering risks: Despite a small and bank-dominated financial system, Armenia’s vulnerability to money laundering is heightened due to factors like a cash-based economy, significant remittances, prevalence of proceeds-generating crime, and insufficient AML/CFT mechanisms in specific sectors, such as real estate.
  • Political commitment and resources: Armenia’s commitment towards combatting money laundering and terrorism financing is strong, but increased resources might be allocated to mitigate risks.

Report Recommendations

Despite low terrorism financing risks, the IMF report advised improvements in the following areas:

  • Enforcement of criminal provisions: More focus should be placed on enforcing money laundering and terrorism financing criminal provisions and establishing effective confiscation and seizure frameworks.
  • Compliance with UN Security Council Resolutions: Armenia needs to improve its compliance with relevant United Nations Security Council Resolutions.

Current State of AML/CFT Measures

  • Ratified conventions and provisions: Armenia has ratified essential conventions and implemented some, though not all, provisions.
  • Financial institutions’ AML/CFT measures: The financial system’s preventive measures for AML/CFT are comprehensive, yet their implementation is evolving, particularly in non-banking sectors.
  • Concerns and recommendations: The report raised concerns regarding areas like the lack of a prohibition on opening a business relationship through bearer bank records or other bearer securities, insufficient risk management procedures, deficient measures addressing compliance management arrangements and internal programs and controls, and a relatively low number of money laundering investigations, prosecutions, and convictions.

Conclusion

Armenia has made significant strides in implementing AML/CFT measures but must address concerns, particularly with regards to effective DNFBP implementation, risk assessment, and law enforcement capabilities.