Financial Crime World

Mongolia’s Foreign Investment Boom Leaves Country Vulnerable to Money Laundering Threats

Ulaanbaatar, Mongolia (AP) - A surge in foreign investment has led to a significant growth in Mongolia’s economy, but experts warn that this rapid expansion also increases the risk exposure of the country to external money laundering threats.

Mining Sector Driving Economic Growth

The Mongolian government’s decision to grant mining licenses for nearly 20% of the country’s territory has led to a surge in foreign investment. The mining sector now accounts for over 70% of industrial output and 23% of GDP. In 2015, 9.5% of the country’s territory was granted mining licenses, with potential for further increase.

Key Statistics:

  • Mining sector accounts for:
    • 20% of total revenue
    • 24% of tax revenue
    • 70% of industrial output
    • 23% of GDP

Vulnerability to Money Laundering Threats

The country’s small population and financial sector make it vulnerable to external money laundering threats. The main risk exposure comes from:

  • Tourism
  • Contracted labor
  • Investment
  • Trade
  • Remittance
  • Loan movements directed towards Mongolia

Border Crossing Points Exposed to Money Laundering Risks

  • The number of people crossing the border has increased by 504.2 thousand or 11.6% in comparison with the previous year.
  • China is the largest source country, accounting for 46.1% of border crossings.

Foreign Trade and Money Laundering

Experts point out that foreign trade is widely used in money laundering at an international level. In Mongolia, mining products are highly exposed to foreign trade-based money laundering crime.

Mining Products Exposed to Foreign Trade-Based Money Laundering

  • Mining products accounted for 87% of Mongolia’s exports in 2015.
  • Livestock and industry products followed, accounting for 8% and 5%, respectively.

Financial Sector Concentration Increases Risk Exposure

The country’s financial sector is still dominated by banking institutions, with a share of 95.7% in total assets as of end-2015. Experts warn that this concentration can increase the risk exposure to money laundering threats.

Government Response

  • The government has announced plans to enhance the payment system to reduce cash settlements and lower the risk of money laundering.
  • The report highlights that the risk exposure to money laundering threats from China, Russia, South Korea, Japan, and USA is very high.