Mongolia’s Anti-Money Laundering and Counter-Terrorism Financing Efforts Lag Behind

===============================================

A recent assessment by international experts has revealed that Mongolia’s efforts to combat money laundering and terrorist financing are lacking in several key areas.

Banking Sector Vulnerabilities

• Limited risk-based supervision: Only a few banks have implemented robust risk-based supervision, leaving many others vulnerable to money laundering.
• No on-site inspections: The lack of on-site inspections hinders the ability to detect and prevent suspicious transactions.

Designated Non-Financial Businesses and Professions (DNFBPs)

• Underdeveloped sector: Real estate agents, lawyers, and other DNFBPs are not adequately regulated, making them vulnerable to money laundering.
• Limited oversight: There is a lack of effective oversight over these sectors, allowing for potential illegal activities to go undetected.

Exposure to Terrorist Financing Threats

• Limited expertise: Relevant agencies lack the necessary expertise to effectively combat terrorist financing.
• Gaps in legal framework: Mongolia’s legal framework has significant gaps, making it difficult to implement anti-terrorist financing measures.
• Lack of oversight over NPOs: Non-profit organizations (NPOs) are not adequately monitored for potential terrorist financing activities.

Sanctions Evasion and North Korea Ties

• High exposure to sanctions evasion: Mongolia is estimated to have 1,500 North Korean citizens working in the country, creating a high risk of sanctions evasion.
• Investments in North Korean state-owned enterprises: Mongolian companies have invested in North Korean state-owned enterprises, potentially facilitating sanctions evasion.

National Risk Assessment (NRA)

• Limited focus on money laundering threats: The 2016 NRA did not adequately address money laundering threats and failed to provide a comprehensive assessment of the country’s ML risk.
• Lack of coordination: There is a need for major improvements in understanding ML and TF risks across government agencies and the private sector.

Recommendations

• Strengthen AML/CFT regime by:
  • Improving risk assessments
  • Enhancing supervision and regulation
  • Increasing financial intelligence
  • Implementing effective measures to prevent terrorist financing

Overall, the report paints a picture of a country with significant vulnerabilities to money laundering and terrorist financing threats. To effectively combat these risks, Mongolia must take immediate action to address its weaknesses and improve its AML/CFT regime.