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Armenia’s Prudential Norms: AML/KYC, Depositor Protection, and Bank Secrecy

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In an effort to strengthen its financial system, Armenia has implemented a range of prudential norms aimed at preventing money laundering and terrorist financing, protecting depositors, and maintaining bank secrecy.

AML/CFT Requirements

Under the Law on Combating Money Laundering and Terrorist Financing, banks in Armenia are required to:

  • Conduct customer due diligence at both the initiation of a business relationship and during ongoing service provision
  • Evaluate potential risks associated with transactions and business relationships
  • Report suspicious transactions
  • Freeze assets owned or controlled by individuals related to terrorism

The Central Bank of Armenia (CBA) has issued recommendations on AML/CFT, which banks are obligated to follow. Banks must have internal policies and procedures in place to ensure compliance with these requirements.

Depositor Protection

In the event of a bank insolvency or bankruptcy, depositors can rely on the Deposit Guarantee Fund of Armenia (the “Fund”) for compensation. The Fund is managed by the CBA and is funded by contributions from all banks operating in the country.

The fund provides compensation up to AMD16 million (approximately $33,000) per depositor, with higher limits applying to deposits in Armenian drams. However, there are certain exceptions where compensation is not provided, including cases of fraud or illegal activity.

Bank Secrecy

Banks in Armenia are required to maintain confidentiality regarding customer information, trade secrets, and other sensitive data. The CBA has implemented strict regulations on bank secrecy, which prohibits the disclosure of such information except in specific circumstances, such as with the customer’s consent or where required by law.

Violations of bank secrecy rules can result in:

  • Civil penalties
  • Administrative penalties
  • Criminal penalties

Fines for non-compliance range from AMD2 million to AMD10 million (approximately $4,200 to $21,000).

These prudential norms demonstrate Armenia’s commitment to maintaining a stable and secure financial system, while also protecting the interests of depositors and upholding the principles of bank secrecy.