Financial Crime World

Mongolia’s Strides in Anti-Money Laundering Regulations: APG Evaluates Progress

Background

Mongolia, a landlocked country in Central Asia, has been under close scrutiny by the Asia/Pacific Group on Money Laundering (APG) following the adoption of its Mutual Evaluation Report (MER) in September 2017. In the latest 5th Follow-Up Report (FUR), the APG assesses Mongolia’s progress in addressing the technical compliance requirements of the recommendations re-rated since the previous FUR in 2019.

APG’s Evaluation and Re-ratings

  • The APG is an inter-governmental organization committed to the effective implementation and enforcement of anti-money laundering (AML), countering financing of terrorism (CFT), and countering proliferation financing (CPF) standards set by the Financial Action Task Force (FATF).
  • The latest report, carried out by expert, Ms. Nirmala Devi Ramadass, from Bank Negara Malaysia, focuses on Mongolia’s progress on Recommendation 15.
  • Recommendation 15 now includes requirements for virtual assets (VA) and virtual asset service providers (VASPs). Mongolia’s compliance with R.15 was re-rated as “Partially Compliant” (PC) in the 2020 and 2021 FURs.
  • Mongolia requested a re-rating due to new controls in place and a completed risk assessment of VA/VASPs.

Mongolia’s Implementation of Recommendation 15

  • Mongolia reported conducting national and sector-level ML/TF risk assessments, including on new technologies such as VA and VASPs.
  • New legislation, including the AML/CFT Law, PMR, and FRC regulations, demands assessment of risks associated with new technologies.
  • The Financial Regulatory Commission (FRC) conducted a sectoral risk assessment in late 2021.

Formation of a VASP Risk Assessment Working Group

  • To ensure measures to prevent or mitigate ML/TF risks are commensurate with the identified risks, Mongolia established a VASP Risk Assessment Working Group.
  • The group, comprised of 12 government agencies, including the sector’s regulator, regularly assesses and identifies emerging risks using the World Bank’s recently revised methodology.

Enacted Legislation on VASP and Ongoing Challenges

  • Mongolia enacted the Law on Virtual Asset Service Providers (VASP Law) on December 17, 2021, which entered into force in February 2022.
  • The law defines VASPs as legal entities conducting specified activities within the country and requires a registration regime for these entities.

Gaps and Future Developments

  • The gap includes a lack of explicit regulatory measures to prevent associates of criminals from holding or being beneficial owners or holding management functions in a VASP.
  • The FRC currently only investigates criminal records of individuals and not their connections to criminal associations.
  • The agency is encouraged to expand its screening process and develop regulations to address these gaps.

Conclusion

Mongolia’s progress in implementing recommendations to combat financial crime will continue to be closely monitored by the APG and the international community.