Financial Crime World

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Mongolia Unable to Form Trusts or Similar Legal Arrangements

A recent assessment by international experts has revealed that Mongolia’s legal framework does not permit the formation of trusts or other similar legal arrangements. This lack of legal infrastructure means that foreign trusts are not a significant feature in the Mongolian economy, with no evidence suggesting that Designated Non-Financial Businesses and Professions (DNFBPs) are involved in the management or formation of foreign trusts.

Mongolia’s Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) regime is still developing, with significant gaps in its legal framework related to terrorist financing. While Mongolia has made progress in completing its first Money Laundering and Terrorist Financing Risk Assessment Report (NRA), the report primarily focused on money laundering threats and failed to incorporate threats, consequences, and vulnerabilities into a comprehensive assessment of Mongolia’s money laundering risk.

Areas for Improvement

The assessment team identified several areas for improvement, including:

  • Limited expertise among relevant agencies
  • Significant gaps in Mongolia’s legal framework related to terrorist financing
  • Lack of oversight of the non-profit organization (NPO) sector
  • Negligible implementation of terrorist financing regulations in the non-bank sector
  • No implementation in DNFBPs

Mongolia also appears to have exposure to PF-related sanctions evasion. Approximately 1,500 Democratic People’s Republic of Korea citizens work in Mongolia, paid via formal arrangements between Mongolia and DPRK, and there are known legal entities operating in Mongolia with direct links to the DPRK.

Improvement Needed

The assessment team concluded that across government agencies and the private sector, understanding of Mongolia’s money laundering and terrorist financing risks needs significant improvements. The team also noted that private sector involvement in the NRA was limited, with only larger banks providing data and participating in a limited number of workshops.

Overall Level of Effectiveness and Technical Compliance

The assessment report highlighted several areas where Mongolia’s AML/CFT regime requires improvement, including:

  • Risk assessments
  • Coordination and policy setting
  • Cooperation and coordination on proliferation financing (PF) in Mongolia is absent

Full Report

The full report can be accessed online at [insert URL].