Title: Armenia’s Financial Crime Reporting Requirements: IMF Assesses Progress and Recommendations

International Monetary Fund (IMF) Report on Armenia’s Adherence to FATF Recommendations

The International Monetary Fund (IMF) has released a report evaluating Armenia’s progress in implementing the Financial Action Task Force (FATF) Recommendations for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). The report, titled “Report on Observance of Standards and Codes for Armenia,” was prepared using the assessment methodology adopted by the FATF in 2004.

Acknowledging Progress and Emphasizing Effective Implementation

Armenia has made strides in enhancing its AML/CFT framework, with upgrades like the replacement of the initial AML/CFT law from 2005 with a more comprehensive law in 2008. However, the IMF team underscores the importance of effective implementation, particularly for Designated Non-Financial Businesses and Professions (DNFBPs).

Vulnerabilities and Risks in Armenia’s Financial System

Armenia’s financial system remains small and bank-dominated, but it is susceptible to the “integration” stage of money laundering due to factors like its highly cash-based economy, significant volumes of remittances, and lack of adequate AML/CFT mechanisms in certain sectors, such as real estate. The risk of terrorist financing is extremely low.

The Role and Capabilities of the Financial Intelligence Unit (FMC)

The Financial Intelligence Unit (FMC) is a young and active Financial Intelligence Unit (FIU) but is understaffed and primarily relies on the banking sector for suspicious transaction reports.

Deficiencies in the Criminal Code

The money laundering and terrorism financing offenses in the Armenian Criminal Code contain some deficiencies. For instance, legislative amendments are required to align with FATF Special Recommendations.

Opportunities for Improvement in Preventive Measures for Financial Institutions

Currently, AML/CFT preventive measures for financial institutions in Armenia are generally comprehensive, but there is room for improvement in their application, particularly in non-banking sectors. The authorities have recognized the need to update their supervisory manuals and examination procedures to accommodate their risk-based approach to supervision and the 2008 AML/CFT Law.

Key Findings for DNFBPs

All DNFBPs are covered within Armenia’s AML/CFT framework, but the legal regime for their preventive measures has significant shortcomings. Implementation across the sector is inadequate.

Recommendations for Improving Freezing Mechanisms

Additionally, the report calls for improvements in the freezing mechanism of terrorist-related assets, aiming to eliminate the need for a specific offense to be instigated before the freezing period elapses. Guidance is also required for financial institutions and other persons on their obligations for taking freezing actions concerning UN Security Council Resolutions.