Financial Crime World

Mongolia’s Legal Framework and International Cooperation Pose Limitations in Addressing Money Laundering and Terrorist Financing Risks

A Recent Assessment Reveals Significant Challenges

A recent assessment has highlighted that Mongolia’s legal framework and international cooperation mechanisms face significant limitations in addressing money laundering (ML) and terrorist financing (TF) risks. While the country has made progress in implementing anti-money laundering (AML) and counter-terrorism financing (CFT) measures, its legal arrangements with similar structures or functions cannot be formed under existing laws.

Limitations in Mongolia’s AML/CFT Regime

The assessment found that Mongolia’s AML/CFT regime lacks a comprehensive understanding of ML/TF threats and vulnerabilities, with limited expertise among relevant agencies. The country’s legal framework related to TF is also characterized by significant gaps, which hinders the effective implementation of CFT measures.

International Cooperation and Coordination Mechanisms

International cooperation and coordination mechanisms in place are inadequate, with limited operational activities related to ML or TF. The absence of a national AML/CFT strategy and the lack of private sector involvement in the National Risk Assessment (NRA) process further exacerbate these limitations.

Areas of Concern

  • Limited Expertise: Limited expertise among relevant agencies in understanding Mongolia’s ML/TF risks.
  • Gaps in Legal Framework: Significant gaps in Mongolia’s legal framework related to TF.
  • Non-Profit Sector Oversight: Lack of oversight of the non-profit sector and negligible implementation of CFT measures in this sector.
  • DNFBPs: No implementation of CFT measures in designated non-financial businesses and professions (DNFBPs).
  • International Cooperation: Limited international cooperation and coordination mechanisms in place.

Exposure to Financial Sanctions Evasion

The assessment also noted that Mongolia’s exposure to potential financial sanctions evasion is significant, with approximately 1,500 Democratic Republic of North Korea citizens working in the country, paid via formal arrangements between Mongolia and DPRK.

Conclusion

While Mongolia has made some progress in implementing AML/CFT measures, its legal framework and international cooperation mechanisms face significant limitations in addressing ML/TF risks. To effectively address these risks, the country must prioritize strengthening its legal framework, improving private sector involvement, and enhancing international cooperation and coordination mechanisms.