Mongolia’s Progress in Financial Crime Risk Assessment: APG’s 5th Enhanced Follow-Up Report

The Asia/Pacific Group on Money Laundering (APG) has published its 5th Enhanced Follow-Up Report on Mongolia’s progress in addressing money laundering (ML), terrorism financing (TF), and proliferation financing risks.

Mongolia’s Rating Progress

Mongolia joined the APG in 2017, and its Mutual Evaluation Report (MER) was adopted that year. The latest report analyzes Mongolia’s progress in addressing the technical compliance requirements of the re-rated recommendations in the 5th Enhanced Follow-Up Report. This report does not evaluate any progress made to improve effectiveness. This report was prepared by expert Nirmala Devi Ramadass from Bank Negara Malaysia.

According to the report, Mongolia’s rating on R.15 and updated ratings based on earlier Follow-Up Reports (FURs) are as follows:

1. R. Rating (MER 2017) ➡️ R. Rating (FUR 2021)
   • PC ➡️ LC
   • PC ➡️ C
   • NC ➡️ LC
   • LC
   • LC
   • PC ➡️ LC
   • PC ➡️ LC
   • PC
   • LC
   • C
   • C
   • LC ➡️ PC
   • LC ➡️ PC

Deficiencies Identified in the MER

Given the deficiencies identified in the MER, Mongolia was classified in the enhanced follow-up category as of the last FUR.

Addressing Technical Compliance Deficiencies

To improve technical compliance, Mongolia has made progress in addressing changes to the legal and operational framework, such as R.15, which was amended after the adoption of Mongolia’s MER in 2017. Mongolia has now been re-rated on R.15 from PC to LC. The country has also conducted risk assessments to address ML/TF risks arising from new technologies and products. These assessments cover new virtual asset (VA) activities and virtual asset service providers (VASPs).

Mongolia’s Progress in Meeting APG’s Criteria

In the 2021 sectoral risk assessment, Mongolia met Criteria 15.1, as it conducted several national and sector level ML/TF risk assessments covering new technologies and products. It also meets Criteria 15.2, as FIs are required to undertake risk assessments prior to the launch/use of new products, technologies, or practices. However, it only partially meets Sub-criterion 15.3(b), as the 2021 risk assessment found that there were a limited number of VASPs operating in Mongolia at the time, and the existing risk ratings may not have been entirely accurate prior to the enactment of relevant laws and regulations.

Measures Taken to Address Identified Risks

In response to the identified risks, Mongolia has implemented measures to prevent or mitigate ML/TF risks commensurate with the risks identified. This includes the enactment of the Law on VASPs, which defines VASPs as legal entities conducting specific activities and requires registration through the Finance Regulatory Commission (FRC). The new law applies to virtual asset services provided both within and from Mongolia by VASPs who are legally registered entities in Mongolia. Mongolia is also finalizing the necessary regulations for on-site and off-site supervision of VA/VASP activities and is using the World Bank’s recently revised methodology to develop and conduct an updated sectoral risk assessment due in June 2022.

Conclusion

The 5th Enhanced Follow-Up Report on Mongolia’s progress towards financial crime risk assessments concludes that Mongolia has made significant progress in addressing technical compliance deficiencies identified since the amendment of R.15 and its last FUR. Mongolia is now re-rated as largely compliant on R.15.