Financial Crime World

Uzbekistan’s Banking Sector Hammered by Widespread Fraud

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Officials Warn of Critical Threat to Reforms

Uzbekistan’s banking sector has been plagued by widespread fraud, with 676 bank employees stealing a staggering 354.2 billion sums ($32 million) over the past two years, according to the director of the Anti-Corruption Agency Akmal Burkhanov.

Widespread Corruption in Banking Sector

The problem is so severe that it poses a critical threat to reforms in the country, Burkhanov warned at a meeting of the Anti-Corruption Council of Tashkent last week. Despite efforts to combat corruption, bank employees continued to commit 128 corruption crimes in the first quarter of 2022 alone, making the banking sector the second most corrupt sector in the country after education.

Budgetary Funds Embezzled

Burkhanov pointed out that budgetary funds intended for social projects were being embezzled by some bank employees. For example:

  • Over 20 billion sums were stolen from programs aimed at supporting small businesses and youth employment.
  • The stolen funds included:
    • 1.3 billion sums from the National Bank of Ukraine
    • 2.4 billion sums from Microcredit bank
    • 3 billion sums from Halk Bank
    • 12.3 billion sums from Agro bank

State Capture and Inadequate Anti-Money Laundering Legislation

The problem extends beyond individual cases of fraud, Burkhanov warned. Large amounts are being siphoned off by high-ranking officials with the help of international organizations’ loans. The World Bank’s Second Systematic Country Diagnostic identified the risk of state capture by self-interested manipulations in Uzbekistan’s government.

Additionally, the country’s anti-money laundering legislation is woefully inadequate, ranking among the worst in Europe and Central Asia.

New Law Expected to Combat Corruption

A new law aimed at preventing conflicts of interest in public service is expected to be submitted to Parliament next year. However, experts say more needs to be done to combat corruption in the banking sector.