Kazakhstan is not a regional financial center, but has the most developed financial system in the Central Asia region. Governmental corruption, an organized crime presence and a large shadow economy make the country vulnerable to money laundering and terrorist finance. The major sources of laundered proceeds stem from corruption, tax evasion and fraudulent financial activity, particularly transactions involving the use of shell companies. Smuggling of contraband goods and under-invoicing of imports and exports by Kazakhstani businessmen also remain relatively common practices.
The presence of hawalas and money or value transfer services poses risks in regard to money laundering. While there is little publicly available information on the scale, there are indications that these entities are used for trade-based money laundering and to move narcotics trafficking proceeds.
Casinos are legal in two geographic areas – Shuchinsk and Kapchagai, while online gambling is prohibited. Kazakhstan has several free trade zones (FTZ), including an FTZ agreement with CIS countries that will come into force in 2012. Both of these may pose money laundering risks.
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs:
A PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably
- Foreign PEP: YES
- Domestic PEP: NO
Kazakhstan – KYC covered entities
The following is a list of Know Your Customer entities covered by Kazakhstan Law:
- Banks and organizations that conduct banking transactions
- Stock exchanges and securities dealers/brokers
- Insurance (re-insurance) companies and insurance brokers
- Pension funds
- Central depositories
- Exchange offices and post operators
- Lawyers and independent legal experts
- Organizers of gambling businesses
Kazakhstan – Suspicious Transaction Reporting (STR) Requirements:
Number of STRs received and time frame: 30,399 – January 1-November 30, 2011
Number of CTRs received and time frame: 575,739 – January 1-November 30, 2011
The following is a list of STR covered entities covered by Kazakhstan Law:
- Insurance companies and brokers
- Pension funds
- Exchange offices
- Notaries and lawyers
- Gaming centers
- Securities brokers/dealers
- Post operators and funds remitters
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 70 – January – October 2011
Convictions: Eight – January – October, 2011
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
Kazakhstan should expand the reporting requirements under its AML law to pawn shops, micro-credit organizations, leasing organizations, entities dealing with jewelry and precious metals, financial management firms, travel agencies and dealers of arts, antiques, and other high-value consumer goods. These entities are not required to maintain customer information or report suspicious activity.
Currently all reporting entities subject to the AML/CFT law are inspected by their respective regulatory agencies, rather than by the FIU. Most of those agencies, however, lack the resources and expertise to inspect reporting entities for AML/CFT compliance. The Government of Kazakhstan (GOK) should allocate more resources to ensure the proper enforcement of its AML regulations. It also needs to educate local institutions and personnel on further implementation of the AML/CFT law. The GOK should extend the tipping off prohibition to directors, officers and employees of financial institutions.
Strict segregation of duties among law enforcement agencies hampers the government‘s ability to detect, investigate and prosecute money laundering crimes related to serious criminal offenses, including drug trafficking and trafficking in persons. The Financial Police is the only agency responsible for the investigation of money laundering crimes. The Ministry of Interior investigates a wide range of predicate offenses, but does not typically examine the financial aspects of crimes. Kazakhstani law enforcement agencies should develop a more integrated and coordinated approach to the investigation of money laundering related to serious criminal offenses, perhaps through interagency investigative groups.
The Criminal Code provides for the mandatory seizure, in part or in whole, of property of any person convicted for miscellaneous predicate offenses, as defined. In an effort to evade such forfeiture, criminals often register their assets in the names of straw owners or relatives. Since the burden of proof lies with law enforcement and can be difficult to meet, law enforcement agencies frequently do not attempt to determine the origin of assets during the initial stage of an investigation.
The legislation does not address the seizure of property of corresponding value or indirect benefits from the proceeds of a crime. Police seized almost $11.9 million during the first ten months of 2011 for money laundering crimes with defined losses of $15.2 million. Kazakhstan has no legal framework to allow the government to freeze terrorist assets in a timely manner; all asset freeze orders must have prior court approval. Kazakhstan also lacks a mechanism to share with other countries assets seized through joint or trans-boundary operations.