Financial Crime World

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Financial System in Armenia: Progress Made, but Challenges Remain

Yerevan, Armenia - The financial system in Armenia has made significant progress in recent years, with the level of financial mediation constantly growing. However, despite efforts by the Central Bank of Armenia (CBA), there are still weaknesses in this space.

Key Challenges

According to a new report, unsatisfied demand for financial services, high transaction costs, and inadequate financial awareness among the population remain major challenges. The report also highlights potential vulnerabilities in the anti-money laundering and combating the financing of terrorism (AML/CFT) system, including:

  • Criminal liability of legal persons
  • Access to banking secrecy

CBA’s Efforts

The CBA has been working to strengthen the AML/CFT framework, with a legislative overhaul in 2014 aimed at aligning Armenian law with international standards. The report notes that while there have been improvements, more needs to be done to address vulnerabilities.

Financial Monitoring Center (FMC)

The FMC of the CBA was found to have an effective system for:

  • Receiving, analyzing, and disseminating ML/FT information
  • Cooperating on national and international levels

However, potential vulnerabilities were identified in the exercise of its functions.

Law Enforcement Agencies

Law enforcement agencies, including:

  • National Security Service
  • Police
  • Ministry of Finance
  • General Prosecutor’s Office

were found to have a mixed record in exercising their AML/CFT responsibilities. While there has been some progress, more needs to be done to improve practices in instigating and investigating criminal cases related to money laundering.

CBA Supervision

The CBA was also found to have an effective system for supervising financial institutions, with a risk-based approach helping to identify potential vulnerabilities. However, potential vulnerabilities were identified in the exercise of its licensing, regulatory, and supervisory functions.

Ministry of Finance (MoF)

The MoF was responsible for supervising designated non-financial businesses and professions (DNFBPs), including:

  • Licensed auditors
  • Casinos
  • Lottery organizers

The report found that while there have been some improvements, more needs to be done to ensure compliance with AML/CFT requirements.

Key Findings

  • Potential AML/CFT vulnerability from financial inclusion is rated medium, with a declining trend going forward.
  • Potential AML/CFT vulnerability from criminal liability of legal persons and access to banking secrecy is rated low.
  • Potential AML/CFT vulnerability from proper mechanisms for managing property seized, frozen, or confiscated and from non-conviction based confiscation is rated medium.
  • Potential AML/CFT vulnerability from the FMC in exercising its function of receiving, analyzing, and disseminating ML/FT information is rated very low.
  • Potential AML/CFT vulnerability from law enforcement and judicial authorities in exercising their function of criminal prosecution is rated medium, with a declining trend going forward.
  • Potential AML/CFT vulnerability from the CBA in exercising its licensing, regulatory, and supervisory functions is rated low, with a declining trend going forward.

Conclusion

The report highlights the need for continued efforts to strengthen Armenia’s AML/CFT system and address remaining vulnerabilities.