Uzbekistan’s Central Bank Strengthens Customer Due Diligence for Forex Transactions

Tashkent, Uzbekistan - September 2023

In a recent move aimed at enhancing transparency and supervision of foreign exchange (Forex) operations, the Banking Supervisory Committee has decided to implement stricter customer due diligence requirements. This decision is part of the Central Bank’s efforts to ensure compliance with legal regulations.

Background: Strengthening Know Your Customer (KYC) Procedures

As of late, Uzbekistan-based commercial banks have been receiving requests from foreign partner banks to strengthen KYC procedures for businesses involved in Forex transactions and suspend money transfers from other banks. In response, the Banking Supervisory Committee has issued instructions requiring business entities to conduct Forex transactions through the same bank where their main account is held.

Key Requirements

The key requirements for customer due diligence are as follows:

• Business entities must conduct Forex transactions through the same bank where their main account is held.
• Banks must establish that capital movements-related Forex transactions should be conducted through clients’ main accounts (Regulation No. 2536 of December 17, 2013).
• Banks must conduct foreign currency sales to businesses based on conclusions from their internal expert groups or compliance officers (Regulation No. 3281 of August 31, 2020).

Changes and Updates

Following feedback from the media and businesses, the Central Bank has since cancelled the requirement for business entities to conduct Forex operations through their primary account bank. Commercial banks have been instructed on how to properly implement compliance-control requirements when providing services to customers through secondary accounts.

Benefits of Strengthening KYC Procedures

The implementation of stricter customer due diligence requirements is expected to address concerns about the need for stronger KYC procedures in Uzbekistan’s Forex market. By enhancing transparency and supervision, the Central Bank aims to ensure compliance with legal regulations and protect against financial risks associated with unauthorized transactions.

Conclusion

Uzbekistan’s Banking Supervisory Committee has taken a significant step towards strengthening customer due diligence requirements for Forex transactions. This move is expected to enhance transparency and supervision in Uzbekistan’s Forex market and promote compliance with legal regulations.