Financial Crime World

Uzbekistan’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Measures: A Review

Introduction

The Financial Action Task Force (FATF) Recommendations aim to prevent money laundering and terrorist financing globally. Uzbekistan, as a member of the international community, has implemented various measures to combat these threats. However, there are still areas for improvement.

Key Areas of Concern

Inconsistent Enforcement of AML/CFT Requirements

  • Detailed requirements for implementing Customer Due Diligence (CDD) measures vary across different types of financial institutions.
  • This inconsistency may lead to problematic enforcement and hinder the effectiveness of AML/CFT efforts.
  • There are gaps in verifying client information, determining whether a client is acting on their own behalf or not, and ascertaining ownership and management structures of clients operating as legal entities.
  • These gaps can compromise the integrity of the AML/CFT system.

Definition of Beneficial Owner

  • The meaning of “beneficial owner” introduced in the insurance sector does not comply with the FATF definition.
  • This discrepancy may lead to confusion and hinder the identification of beneficial owners.

Additional Areas for Improvement

  • Politically Exposed Persons (PEPs): Uzbekistan has not accepted the required measures regarding PEPs, and there is no regulation on correspondent bank relations.
  • Remote Access Transactions: The practice of maintaining suspense accounts and correspondent relations in non-banking sectors is absent, but some measures have been taken to prevent ML/FT-related risks associated with new technologies.
  • Client Identification and Transaction History Data: Financial institutions are required to store client identification and transaction history data for five years following the relationship termination date, but there is no explicit requirement for proper storage.
  • Complex Transactions: The special requirement to study the history and purpose of complex, very large or unusual transactions, record analysis results, store them, and make them available to competent authorities and auditors is absent in most sectors.
  • Suspicious Transaction Reports (STRs): Prior to April 2007, Uzbekistan used a system of mandatory controls for reporting STRs, but following the reinstatement of the AML/CFT system in April 2009, all transactions suspected by financial institutions of being involved in money laundering or terrorist financing are subject to reporting.
  • Financial Institution’s Internal Control: There is a general requirement for financial institutions to set up a system of internal control, but not all types of financial institutions have a complete set of requirements as required by Recommendation 15.
  • Shell Banks: No shell banks can be set up in Uzbekistan, and Uzbek banks are not allowed to establish or maintain correspondent relations with shell banks.

Conclusion

While Uzbekistan has made progress in implementing AML/CFT measures, there are still areas for improvement. Addressing these concerns is essential to strengthen the country’s AML/CFT framework and prevent money laundering and terrorist financing threats.