Mongolia Falls Short on Sanctioning Unlicensed Entities

FATF Highlights Concerns Over Mongolia’s Efforts to Prevent Money Laundering and Terrorist Financing

Ulaanbaatar, Mongolia - The Financial Action Task Force (FATF) has released a report highlighting several concerns regarding Mongolia’s efforts to sanction unlicensed entities and prevent money laundering and terrorist financing.

Lack of AML/CTF Supervision for Non-Bank Financial Institutions

• The Mongolian Financial Regulatory Commission (FRC) has not conducted anti-money laundering and combating the financing of terrorism (AML/CFT) supervision for non-bank financial institutions (NBFIs).
• The FRC lacks resources to implement its supervisory role and has not prepared detailed regulations in line with new AML/CFT obligations.

Insufficient Implementation by NBFIs

• Remittance providers, in particular, have shown little evidence of AML/CFT implementation.
• There is no guidance provided to support their compliance.
• Money value transfer service operators are not required to maintain a current list of agents, leaving a significant sector of informal remittances outside the regulated channels.

Designated Non-Financial Businesses and Professions (DNFBPs) Lacking Regulation

• DNFBPs such as lawyers, notaries, and accountants have not been brought into the AML/CFT regime in Mongolia.
• These entities are required to report incomes to tax authorities but lack clear obligations to maintain records of customer identification or transaction data.

Trust Service Providers and Non-Profit Organizations (NPOs) Regulated

• Trust service providers are regulated as NBFIs in Mongolia, but there is no indication that particular attention has been paid to ensuring access to beneficial ownership information.
• NPOs in Mongolia are not specifically included in the new AML/CFT law and lack safe harbors for reporting suspicious transactions.

Positive Developments

• The establishment of a Cooperation Council at the Financial Intelligence Unit (FIU)
• Ratification of the Vienna Convention and the Terrorist Financing Convention
• However, Mongolia has not yet ratified the Palermo Convention and lacks a comprehensive offense to criminalize terrorist financing.

Conclusion

While Mongolia has made some progress in implementing AML/CFT measures, there are still several concerns regarding its efforts to sanction unlicensed entities and prevent money laundering and terrorist financing. The country’s authorities must take immediate action to address these concerns and ensure that its financial system is secure and stable.