Mongolian Authorities Crack Down on Money Laundering and Terrorism Financing with New Law

In an effort to strengthen its stance against financial crimes, Mongolia’s Parliament has approved an amended version of the Law on Combating Money Laundering and Terrorism Financing. The new law, effective from April 11, 2022, aims to prevent and combat money laundering, proliferation financing, and terrorism financing within the country.

Key Provisions of the Law

This amended legislation covers reporting entities, such as:

1. Banks
2. Non-bank financial institutions
3. Insurance companies
4. Investment funds
5. Securities market entities
6. Saving and credit cooperatives
7. Real estate brokers
8. Dealers of precious metals
9. Jewelers
10. Notaries
11. Lawyers
12. Accountants
13. Financial advisors

Under the new law, these entities are required to:

1. Report transactions to the Financial Information Unit (FIU)
2. Conduct thorough customer identification and due diligence
3. Monitor transactions and report suspicious activities
4. Freeze assets and report information as needed.

Identification and Due Diligence

Reporting entities must:

• Identify their customers
• Verify their identities
• Understand the nature of the business relationship
• Identify the ultimate beneficiary
• Take reasonable measures to identify the beneficial owner

Customer Identification

• For individuals: full name, date of birth, registration number, and copy of identity card or passport
• For legal entities: name, address, national registration and tax payer number, contact phone number, and detailed information on management.

Suspicious Transactions

Entities must report transactions equivalent to or above 20 million tugrugs (MNT) within five working days and report suspected money laundering or terrorism financing instances within 24 hours.

Monitoring and Reporting

Reporting entities must monitor transactions and:

1. Take enhanced measures for high-risk situations
2. Freeze accounts and report information to the FIU and competent authorities
3. Submit information to law enforcement authorities

Enhanced Monitoring Measures

• Transactions of unusually large amounts
• Transactions without a clear economic or legal purpose
• Transactions involving politically exposed persons or strategic deficiencies

Regulations and Exemptions

• Customer due diligence measures, enhanced due diligence measures, identifying beneficial owners, risk assessment, and the submission of information to the FIU will be approved by the Governor of the Bank of Mongolia in consultation with relevant cabinet members and commission chairs.
• Exemptions for entities reporting suspicious transactions and information will not be considered a breach of confidentiality obligations.

Other Provisions

• Internal monitoring and risk management programs of reporting entities
• Transportation of cash across international borders
• Rights and responsibilities of competent state authorities.

The Mongolian government’s comprehensive efforts to combat money laundering, terrorism financing, and proliferation financing through the amended law demonstrate its commitment to building a strong and robust financial system.