Mongolia’s Fight Against Money Laundering and Terrorism Financing: A Work in Progress

Ulan Bator, Mongolia - Mongolia’s efforts to combat money laundering and terrorism financing (ML/TF) have been hailed as a step in the right direction, but experts say there is still much work to be done.

Key Vulnerabilities Remain

According to a recent report by the Asia-Pacific Group on Money Laundering (APG), Mongolia’s banking sector remains a key vulnerability in the fight against ML/TF. The sector holds 95.7% of the country’s financial assets and is exposed to cross-border risks, with only limited risk-based supervision and no on-site inspections finalized at the time of the assessment.

Real Estate Sector

The report also highlights the lack of regulation in Mongolia’s real estate sector, which has been identified as a haven for money laundering activities. Many businesses offer discounts on property purchases made with cash, while others may be involved in illegal activities such as selling raw gold to informal dealers.

Designated Non-Financial Businesses and Professions (DNFBPs)

Mongolia’s DNFBPs sector is also underdeveloped, with scope deficiencies in the coverage of AML/CFT legislation. The real estate agents and notaries are the only sectors included in the law, while other industries such as lawyers and accountants have limited obligations.

Terrorism Financing Vulnerabilities

The report notes that Mongolia has no reported or identified instances of Al Qaeda, Taliban or ISIL-related activities, but it still faces significant TF vulnerabilities due to limited expertise among relevant agencies, gaps in its legal framework, and lack of oversight of the non-profit sector.

Mongolia’s exposure to PF related sanctions evasion is also a concern, with approximately 1,500 Democratic Republic of North Korea citizens working in Mongolia and several known entities operating in the country with direct links to the DPRK.

Understanding ML/TF Risks

The report concludes that Mongolia’s ML/TF risks are not well understood by many government agencies, with limited risk assessments conducted and no comprehensive assessment of the country’s ML risk. The private sector also lacks understanding of Mongolia’s ML/TF risk, with only larger banks providing data for the national risk assessment (NRA).

National Cooperation and Coordination

Mongolia has two national cooperation and coordination mechanisms for its AML/CFT regime, but they are limited in their ability to coordinate operational activities related to ML or TF. Cooperation on PF is also absent.

Recommendations for Improvement

The report makes several recommendations to improve Mongolia’s AML/CFT regime, including:

Conducting a comprehensive risk assessment
Strengthening supervision of the banking sector
Implementing regulations in other sectors such as real estate

Conclusion

Mongolia has made significant progress in combating money laundering and terrorism financing, but it still faces many challenges. With continued efforts and cooperation from all stakeholders, the country can strengthen its AML/CFT regime and reduce its vulnerabilities to ML/TF threats.

References

Asia-Pacific Group on Money Laundering (APG) report: “Mongolia’s Fight Against Money Laundering and Terrorism Financing”