Armenia’s Struggle with Money Laundering and Financing of Terrorism
A recent report by [Organization] has highlighted several weaknesses in Armenia’s efforts to combat money laundering (ML) and financing of terrorism (FT). Despite progress in some areas, the country still faces significant challenges in its fight against these crimes.
Dealers in Precious Metals and Stones, Lawyers, and Accountants Face Scrutiny
The report singled out dealers in precious metals and stones, lawyers, and accountants as areas where Armenia’s Financial Supervision Department (FSD) has failed to conduct adequate risk assessments. The FSD relies heavily on the results of the National Risk Assessment (NRA) and cooperation with the Financial Monitoring Center (FMC), rather than conducting its own formal risk assessment.
Weaknesses in Supervisory Practices
- Armenia’s supervisory practices, while comprehensive in terms of prudential supervision, appear to be based on a rule-based approach rather than a risk-based one.
- This lack of understanding of risk by supervisors has resulted in inadequate oversight of dealers in precious metals and stones, lawyers, and accountants.
FMC Yet to Implement Supervision
The FMC was designated as the supervisor of real estate agents, dealers in precious metals and stones, accountants, TCSPs, lawyers, and law firms under the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Law. However, no supervisory regime has been implemented yet by the FMC.
Ineffective Use of Sanctions
- The Central Bank of Armenia (CBA) has adequate procedures for imposing sanctions, but it has not demonstrated effective use of its sanctioning regime.
- Sanctions are rarely used by supervisors to combat ML-related violations.
Private Sector Outreach Limited
While the CBA promotes understanding of ML/FT risks and obligations to the private sector through feedback and guidance, DNFBP supervisors have almost no outreach to the private sector.
Progress in Beneficial Ownership Information Transparency
- Armenia has made progress in ensuring transparency of beneficial ownership information.
- However, there is no formal mechanism for monitoring the adequacy, accuracy, or currency of this information, nor are there checks on changes to beneficial ownership.
International Cooperation
Armenia has demonstrated effectiveness in international cooperation, with authorities actively seeking legal assistance and exchanging information with foreign counterparts. However, law enforcement authorities have limited scope for informal exchange of information due to a lack of policy to identify ML/FT cases.
Priority Actions
To address these weaknesses, Armenia is advised to:
- Assess the magnitude and significance of criminal activity faced by the country
- Deepen analysis of vulnerabilities towards ML, including those stemming from DNFBPs, abuse of legal persons, corruption, shadow economy, and extensive use of cash
- Develop a national law enforcement policy to investigate and prosecute ML offenses
- Train relevant law enforcement authorities on the use of FMC intelligence products
By implementing these priority actions, Armenia can strengthen its efforts to combat money laundering and financing of terrorism.