Financial Crime World

Uzbekistan’s Financial Institution Fraud Prevention Lacking in FATF Report

The Financial Action Task Force (FATF) recently released a report highlighting concerns over Uzbekistan’s efforts to prevent financial institution fraud. The country’s “Follow-Up Report” for 2023 shows that while some progress has been made, there are still significant gaps in implementing technical requirements to combat money laundering and terrorist financing.

Implementation of FATF Recommendations

The report reveals that Uzbekistan has not fully implemented several of the FATF Recommendations. Specifically:

  • Risk Assessment: Uzbekistan has failed to assess risk effectively and apply a risk-based approach to preventing fraud (R.1).
  • Cooperation and Coordination: The country lacks sufficient cooperation and coordination between national authorities (R.2).
  • Laws and Regulations: Uzbekistan has not established effective laws and regulations to criminalize money laundering and terrorist financing (R.3).

Other Shortcomings

Additionally, the report highlights several other areas where Uzbekistan has fallen short:

  • Confiscation and Provisional Measures: The country’s confiscation and provisional measures do not adequately address the risks associated with financial institution fraud (R.4).
  • Terrorist Financing Offenses: Uzbekistan has failed to target terrorist financing offenses effectively (R.5).
  • Financial Sanctions: The country is unable to impose targeted financial sanctions related to terrorism and terrorist financing (R.6).
  • Laws Governing Non-Profit Organizations: Uzbekistan’s laws governing non-profit organizations do not provide adequate transparency and accountability (R.8).
  • Customer Due Diligence: The country lacks sufficient customer due diligence measures (R.10).
  • Record-Keeping Requirements: Uzbekistan is missing record-keeping requirements (R.11) and internal controls (R.18) to prevent fraud.
  • Reliance on Third-Party Providers: The country’s reliance on third-party providers has been criticized for lacking sufficient oversight and control (R.17).
  • Beneficial Ownership Information: Uzbekistan lacks transparency in beneficial ownership information for legal persons and arrangements (R.24-25).

Progress Made

Despite these shortcomings, the FATF report did note some progress made by Uzbekistan:

  • Regulation and Supervision of Financial Institutions: The country has improved its regulation and supervision of financial institutions (R.26).
  • Powers of Supervisors: Uzbekistan’s powers of supervisors have been enhanced (R.27).
  • Responsibilities of Law Enforcement and Investigative Authorities: The country has clarified the responsibilities of law enforcement and investigative authorities (R.30).

Conclusion

The report’s findings are likely to prompt further action from Uzbekistan to strengthen its anti-money laundering and combating the financing of terrorism (AML/CFT) regime. With increased scrutiny by international bodies in recent years, this report is likely to reinforce calls for greater transparency and accountability in its financial sector.