National strategy for anti-money laundering and countering financing of terrorism
Money laundering and terrorism financing are a nuisance to the world, which is negatively affecting the economic security of countries and becoming an obstacle to ensure the sustainable economic development, to reduce poverty, and to establish equality in society. Sources of money laundering crimes are mainly financial flows derived from illegal activities such as human trafficking, narcotic drugs sales, illegal arms trafficking, corruption, bribery, smuggling, environmental crimes, tax evasion, etc. In other words, the financial sector is being used as a tool for conversion and transfer of money obtained from illegal sources, and for rapid transport of financing of terrorism from one region to another. In recent years, criminals have been using the developing countries and countries with weak financial system as a transit center for money laundering and terrorism financing and it is increasing Mongolian financial sector’s risk of exposure to this type of crimes.
The Law on Combating Money Laundering and Terrorism Financing (AML/CFT Law) was approved by the Parliament of Mongolia on July 8, 2006. The Asia/Pacific Group on Money Laundering (APG), a regional body of the Financial Action Task Force (FATF), periodically evaluates the anti-money laundering and combating terrorism financing (AML/CFT) system of its member countries; the APG evaluated Mongolia's AML/CFT system for the first time in 2006.
The revised version of AML/CFT Law drafted in compliance with the FATF Recommendations was approved by the Parliament of Mongolia on May 31, 2013. However, Mongolia was identified by FATF as a "high risk and non-cooperative country," which is the "grey list", on the basis that some other laws and regulations were still not complied with the FATF’s Recommendations. The FATF then removed Mongolia from the "grey list" in June 2014, after the Plenary session of the Mongolian Parliament passed the Criminal Law and Criminal Procedure Law in compliance with the FATF's Recommendations on January 16, 2014.
The APG conducted the second-round assessment and Mutual evaluation on Mongolia's AML/CFT system on November 4, 2016, gave recommendations on action plan over the next 15 months until October 2018, and assigned Mongolia to report on the developments of the action plan.
Moreover, since the adoption of the revised AML/CFT Law, international organizations such as International Monetary Fund (IMF) and Asian Development Bank (ADB) through their technical assistances have been recommending Mongolia to have its legal framework of combating money laundering and financing of terrorism complied with the FATF's 2 Recommendations in conjunction with the current situation and the changes that have been occurring in the global AML/CFT system.
The FATF Recommendations are an international standard legal basis of an AML/CFT framework for a country. They also create the basis for a favorable environment for a country who implements these recommendations to cooperate with other countries in the financial sector.
Therefore, there is a need to adopt a National Strategy Anti-Money Laundering and Countering Terrorism Financing in order to fully implement the FATF Recommendations and strengthen the AML/CFT capacity.
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Implementation of the National Strategy for anti-money laundering and countering financing of terrorism (2017-2020)