Financial Crime World

REGULATORY REQUIREMENTS FOR FINANCIAL INSTITUTIONS IN TAJIKISTAN

Introduction

Tajikistan’s financial sector is heavily regulated by the National Bank of Tajikistan (NBT), which maintains a managed float exchange rate regime and intervenes in currency markets to control inflation and devaluation. The banking system consists of 64 credit institutions, including 14 traditional banks and one Islamic bank.

Payment Methods

  • Large-scale corporate entities must process payments through the bank transfer system
  • Smaller firms often use cash prepayment with balance due upon delivery
  • Borrowing from personal contacts and informal channels of financing are still prevalent in Tajikistan’s market

Banking System

  • The banking sector has a poor history, with high non-performing loans (NPLs) resulting from government direction to provide loans to politically connected individuals
  • Two major banks were liquidated in 2016, but NPLs have decreased overall since then
  • Credit remains tight due to high bank numbers and low depositors
  • Microfinance institutions provide some lending at the small and medium enterprise (SME) level

Foreign Exchange Controls

  • Tajikistan is subject to International Monetary Fund’s Article VIII on Foreign Exchange controls
  • NBT controls the local currency somoni, which is officially fully convertible with US dollar
  • Companies must inform commercial banks in advance that limited volumes of US dollars may delay transactions

Managing Currency Flows

  • NBT maintains a managed float exchange rate regime and intervenes in currency markets to control inflation and devaluation
  • There are no unauthorized currency exchange points in Tajikistan since 2015, only authorized banks can conduct currency exchange operations

Correspondent Banking Relationships

  • NBT maintains a correspondent bank account with the Federal Reserve of New York
  • Sanctions compliance is a serious consideration due to Russia being Tajikistan’s number one trade partner and Iran as its seventh largest trade partner
  • The country relies on correspondent accounts with banks in Kazakhstan, Uzbekistan, Georgia, Azerbaijan, Turkey, and China

Regulatory Environment

  • The regulatory environment for financial institutions in Tajikistan is complex and subject to change
  • Financial institutions must comply with a range of regulations, including those related to foreign exchange controls, sanctions, and anti-money laundering (AML) requirements