Financial Crime World

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Mongolia’s Financial Sector at Risk of Money Laundering and Terrorism Financing

Ulaanbaatar, Mongolia - The Mongolian government has identified the country as a high-risk nation for money laundering and terrorism financing. According to the National Risk Assessment (NRA), the country’s economic environment, social and political conditions, and geographical location all contribute to its vulnerability.

Key Factors Contributing to Vulnerability

  • Small population
  • Financial sector
  • Economic environment
  • Social and political conditions
  • Geographical location

Tourism Industry Risks

Mongolia’s tourism industry is a significant contributor to the economy, with over 4.8 million visitors in 2015. The majority of these tourists come from:

  • China (46.1%)
  • Russia (15.7%)
  • South Korea (10.5%)
  • Japan (4.2%)
  • USA (3.3%)

This influx of foreign nationals increases the risk of money laundering and terrorism financing.

Banking Sector Concerns

The country’s banking sector is a concern, with 95.7% of total assets held by banks. The report suggests that the banking sector needs to strengthen its anti-money laundering measures to prevent illegal activities.

Mining Industry Risks

Mongolia’s mining industry is another area of concern, with copper and coal exports making up 87% of the country’s main export products. The report notes that this high-value trade activity makes it vulnerable to foreign trade-based money laundering.

Government Response

The government has recognized the need to address these risks and has implemented measures to strengthen its anti-money laundering regulations. The Financial Action Task Force (FATF) has also recommended Mongolia to:

  • Improve customer due diligence
  • Report suspicious transactions
  • Cooperate with international organizations

Recommendations

To further mitigate the risk of money laundering and terrorism financing, we recommend:

  • Strengthening customer due diligence procedures
  • Improving reporting of suspicious transactions
  • Enhancing cooperation with international organizations
  • Increasing awareness among banks and NBFI on money laundering risks
  • Developing a comprehensive plan to combat money laundering and terrorism financing

Source

National Risk Assessment (NRA), 2015; Financial Action Task Force (FATF); World Bank database.