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Mongolia’s Booming Mining Sector Attracts Foreign Investment, Raises Money Laundering Concerns

Ulaanbaatar, Mongolia - As the Mongolian government continues to grant mining licenses to foreign companies, the country is attracting a surge in foreign investment. However, experts warn that this influx of cash may increase the risk of money laundering and terrorism financing.

Mining Sector Driving Economic Growth

According to recent statistics, 19.9% of Mongolia’s territory has been designated for mining licenses, with 9.5% already granted to companies. The mining sector accounted for 20% of the country’s total revenue in 2015, making it a major driver of the economy.

Foreign Direct Investment

The majority of foreign direct investment in Mongolia comes from the mining sector, which accounted for 71% of total FDI in 2015. While this growth is welcomed by the government and local businesses, experts caution that it also increases the risk of money laundering and terrorism financing.

Money Laundering Risks

“Mongolia’s small financial sector makes it vulnerable to external threats,” said a senior economist at the World Bank. “The country’s tourism, labor, investment, trade, remittance, and loan movements are all potential entry points for illegal funds.”

  • Tourism is one of the key areas where money laundering risks are highest.
  • Over 4.8 million people crossed Mongolia’s borders in 2015, with citizens from China, Russia, South Korea, Japan, and the US making up the majority.

Payment System Concerns

The country’s payment system is also a concern, with cash still playing a significant role in transactions. The number of debit cards and POS terminals has increased significantly in recent years, but the amount of cash in circulation remains high, at 706.7 billion togrog (around $330 million USD).

Foreign Trade Risks

Experts warn that foreign trade is also a potential avenue for money laundering. “The main export products of Mongolia are mining products, which makes them highly vulnerable to foreign trade-based money laundering,” said a financial expert.

Mitigating the Risks

To mitigate these risks, the Bank of Mongolia has launched initiatives to reduce cash settlements and increase the use of non-cash payments. The government is also working to strengthen its anti-money laundering laws and regulations.

Balancing Economic Growth with Anti-Money Laundering Measures

While the risks are significant, experts believe that with careful management, Mongolia can balance its economic growth with anti-money laundering measures.

“Mongolia needs to strike a balance between attracting foreign investment and protecting its financial system,” said a senior official at the Bank of Mongolia. “We are working closely with international partners to ensure that our financial sector is transparent and secure.”