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Money Laundering and Terrorism Financing: A Threat to Mongolia’s Economy

Ulaanbaatar, Mongolia - Money laundering and terrorism financing are significant threats to Mongolia’s economy, according to a recent report by the National Risk Assessment (NRA).

Vulnerability of Mongolia’s Economic Environment

Mongolia’s economic environment is vulnerable to money laundering and terrorism financing due to its small population and financial sector. The country’s reliance on foreign trade, tourism, contracted labor, and remittances also increases its exposure to these threats.

High-Risk Border Crossing Points

In 2015, Mongolia’s border crossing points were used by over 4.8 million people, with 37% of them passing through the Zamyn-Uud border crossing point in Dorongovi aimag, which is considered a high-risk area for money laundering and terrorism financing.

Methods Used for Money Laundering

Foreign trade is a common method used for money laundering at the international level. Criminals often add illegal funds to normal prices stated in letters of credits or trade contracts, increasing payments to be transferred.

Financial Sector Dominated by Banking Sector

Mongolia’s financial sector is dominated by the banking sector, which accounted for 95.7% of total assets as of end-2015. However, other financial institutions such as non-bank financial institutions (NBFI) and credit cooperatives also play a significant role in the country’s financial system.

Recommendations

The report recommends that Mongolia:

  • Strengthen anti-money laundering and counter-terrorism financing regulations
  • Improve cooperation with foreign law enforcement agencies
  • Enhance public awareness of these threats
  • Implement measures to prevent over-invoicing in foreign trade transactions
  • Conduct regular training for financial sector professionals on money laundering and terrorism financing detection

Conclusion

Money laundering and terrorism financing are significant threats to Mongolia’s economy. The country must take immediate action to strengthen its anti-money laundering and counter-terrorism financing regulations, improve cooperation with foreign law enforcement agencies, and enhance public awareness of these threats.