Mongolia – Know Your Customer (KYC) Rules

 

 

Mongolia is not a regional financial center. There are few financial and economic crimes, although numbers have increased in the last five years. Mongolia is vulnerable to low-grade transnational crime due to the growth in tourism, investment, and remittances from abroad, but the overall rate of these crimes has not increased. The increase in reports of suspicious transactions is more likely a product of the increasing effectiveness and experience of the Bank of Mongolia‘s Financial Information Unit (FIU).

Mongolia‘s limited capacity to monitor its extensive borders with Russia and China is a liability in the fight against smuggling and narcotics trafficking, but drug use and trafficking remain limited and unsophisticated. There is a black market for smuggled goods, which appears largely tied to tax avoidance rather than drug trafficking. There are no indications that international narcotics traffickers exploit the banking system, and no instances of terrorist financing have been reported.

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KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

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: YES

Mongolia – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Mongolian Law:

    • Banks
    • Non-bank financial institutions
    • Savings and credit cooperatives
    • Insurance companies
    • Securities dealers
    • Foreign exchange units
    • Pawnshops and casinos (though casinos are currently prohibited in Mongolia)

Mongolia – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 56 from January 1 – November 1, 2011

Number of CTRs received and time frame: Over 300,000 from January 1 – November 1,2011

The following is a list of STR covered entities covered by Mongolian Law:

    • Banks

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: None
Convictions: None

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Bank of Mongolia‘s FIU expanded international cooperation by signing MOUs with the FIUs of Taiwan, Slovenia and Moldova. The Government of Mongolia (GOM) should strengthen cooperation by implementing a system for the identification and forfeiture of assets, along with arrangements for asset sharing. The GOM should also provide safe harbor protection for individuals and entities filing STRs and cooperating with authorized investigations, while also criminalizing ―tipping off‖ subjects of this reporting.

Although the Parliament passed a law on December 24, 2009, which improved AML/CFT efforts, it failed to bring Mongolia into compliance with international standards, and it is not clear that the GOM has the capacity fully to enforce this law. Deficiencies include inadequate criminalization of money laundering and terrorist financing, lack of adequate procedures to identify and freeze terrorist assets, and the absence of a fully operation and effectively functioning financial intelligence unit, among others.

The GOM should work to improve its legal framework by passing amendments to bring its system fully in line with international standards and dedicate the necessary resources to enforce the provisions. While highly professional, the FIU appears under-staffed, and coordination with other law enforcement organizations reportedly remains deficient. The increasing financial flows in advance of an expected mining-driven boom create a distinct challenge to the Mongolian FIU. Although five cases were opened during the year, the lack of a single successful prosecution to date illustrates the enforcement problem.