Financial Crime World

Armenia’s Financial Sector Remains Low-Risk for Money Laundering and Terrorist Financing

Yerevan - A recent analysis has revealed that Armenia’s financial sector is at low risk for money laundering (ML) and terrorist financing (TF), due to several factors.

Factors Contributing to the Low Risk

  • Large Amount of Cash in Circulation: The volume of cash in circulation in Armenia averages 248.5 million Armenian drams per resident, which is a significant amount considering the country’s population of nearly 3 million people.
  • High Level of Dollarization: Estimated to be between 40-70%, this high level of dollarization reduces the risk of ML/TF.
  • Remittances from Abroad: Remittances play a crucial role in Armenia’s economy, with non-commercial remittances totaling $1.12 billion and inward remittances standing at $194.9 million in the first half of 2020. These remittances are largely used for consumer purposes, reducing the risk of ML/TF.
  • Efficient Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Systems: The efficiency of AML/CFT systems in countries with which Armenia has trade relations, such as EU countries, Russia, China, and the USA, mitigates the risk of ML/TF.
  • Homogeneous Population: Armenia’s population is relatively homogeneous, with Armenians making up 97.9% of the population, further reducing the country’s ML/FT risk.

Characteristics of the Financial Sector

  • Dominance of Banks: The financial sector is dominated by banks, which account for 91% of total assets.
  • Breakdown of Financial Institutions: Credit organizations, insurance companies, securities firms, pawnshops, and foreign exchange offices make up the remaining 9%.
  • Focus on Providing Loans, Insurance Products, and Facilitating Transactions: A breakdown of the characteristics of these entities reveals that they are mainly focused on providing loans, offering insurance products, and facilitating transactions.

Conclusion

Overall, Armenia’s financial sector is deemed low-risk for ML/TF due to its dollarized economy, remittance-based economy, and homogeneous population. Efforts by the government and regulatory bodies to implement effective AML/CFT systems and monitor financial transactions have also contributed to this assessment.