FAFT AML Deficient
Higher Risk Areas
Non - Compliance with FATF 40 + 9 Recommendations
Weakness in Government Legislation to combat Money Laundering
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
Medium Risk Areas
US Dept of State Money Laundering Assessment
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)
Mongolia is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 27 June 2014
The FATF welcomes Mongolia’s significant progress in improving its AML/CFT regime and notes that Mongolia has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2011. Mongolia is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Mongolia will work with APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report..
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Mongolia was undertaken by the Financial Action Task Force (FATF) in 2007. According to that Evaluation, Mongolia was deemed Compliant for 3 and Largely Compliant for 6 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.
APG Yearly Typologies Report - 2015
Emerging Trends; Declining Trends; Continuing Trends (INCSR)
- Sale of drugs and psychotropic substances, especially ice (crystal methamphetamine hydrochloride)
- Credit card fraud
Currently, declining trends are not identified by the Mongolian Police. However, due to increased inspections and reporting requirements from the Financial Information Unit, offenders may choose methods other than banking and financial institutions to launder proceeds of crime and illicit activities
- Association of ML with corruption, embezzlement, bribery of state funds
- Real estate purchase of valuable assets in foreign countries, especially luxury houses, apartments, vehicles in Korea, Hong Kong, Japan, USA.
- ML through establishing legal entity and building service sector real estate in Mongolia (e.g. involving a Korean organized crime group)
Cash couriers/currency smuggling (concealment) to exchange currencies in Mongolia as government control of currency exchange bureaus is not enforced to the full-extent
- Trade-related ML through invoice manipulation, trade mispricing in purchase of goods from abroad, either through legal persons or state institutions responsible for purchase of public goods
- Use of gatekeepers/professional services: accountants, bankers, companies, company service providers
- Wire transfer
- Use of shell companies
- Use of offshore banks/companies
- Use of credit cards
- Use of family members, third parties
- Identity fraud and use of false identification
- Use of foreign bank accounts
US Department of State Money Laundering assessment (INCSR)
Mongolia was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).
Key Findings from the report are as follows: -
Mongolia is not a regional financial center. There are few reported financial and economic crimes, although numbers have increased in the last five years. Mongolia is vulnerable to low- grade transnational crime due to the current level of tourism, investment, and remittances from abroad; however, the overall rate of these crimes has not increased. The risk of domestic corruption remains significant as Mongolia’s rapid economic growth continues.
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. There are no indications international narcotics traffickers exploit the banking system, and no instances of terrorism financing have been reported.
There are no international sanctions currently in force against this country.
Rating (100-Good / 0-Bad)
Transparency International Corruption Index
World Governance Indicator – Control of Corruption
INVESTMENT CLIMATE - Executive Summary (US State Department)
Mongolia’s main economic and political challenges are all linked to ensuring steady growth through the boom and bust cycles likely to visit this resource-dependent economy. Double-digit economic growth over the past few years—2011’s sizzling 17.3 % GDP growth, for instance—has been based on the investment in, and the production and export of, minerals. Mongolia is a major producer of several minerals including coal, copper, gold, zinc, and fluorspar. With extensive reserves, it has the potential to increase production considerably. For U.S. investors and firms, mining and mining-related services represent one of the most important and potentially most reliable sectors for long-term investment in Mongolia. Other promising sectors, based on Mongolia’s economic development needs, include infrastructure, transportation, energy, construction, healthcare, and environmental products and services.
However, Mongolia has suffered ongoing setbacks to its economic advancement. Indeed, growth has steadily slowed from 2011’s 17.3 % to 2013’s 11.7 %. Both the International Monetary Fund (IMF) and World Bank estimate 2014 GDP to decline to 9.5%; and 2015, depending on Mongolian policy decisions, may range from a high of 12% to as low as 2%. The IMF cites loose fiscal and monetary policies as likely causes for negative economic adjustment. (For IMF:
As with GDP, Foreign Direct Investment (FDI) has steadily declined, constraining development of the mining and infrastructure sectors. In 2012, FDI invested in Mongolia (mostly in the mining sector) reached USD $3.9 billion, which amounted to approximately 40% of that year’s GDP. In 2013, FDI had contracted by nearly 45%. In the first five months of 2014, Mongolia’s central bank reported that FDI through May was US $402.3 million compared to US $1.11 billion a year ago—a 64% year-on-year decline.
Two factors have and will continue to affect Mongolia’s economic condition. First, more than 90 percent of Mongolia’s exports consistently go to China; and so, any slowing of China’s growth affects Mongolia. Second, economic policies designed to protect Mongolia’s sovereign interests and to respond to the expectations of the Mongolian public have discouraged FDI – despite statements from Mongolia’s senior politicians that the government is committed to improving the business environment, reigniting foreign direct investment flows, and fostering Mongolian growth. Recent policy decisions have been influenced by the political realities of a coalition government representing multiple platforms, which has complicated reaching consensus on politically sensitive issues. There are a range of views represented within parliament on what constitutes an appropriate legal and regulatory framework for mining and other activities. Statutes and regulations are thus often crafted in a manner which incorporates multiple approaches and political imperatives. Investors have told us that this approach to legislation and regulation can give the impression that laws are hastily passed and that regulations are slowly created and partially implemented. Some investors are concerned that criticism from some political quarters of current investment agreements and statutory obligations undertaken by past governments portends that commitments may not be fully respected.
Investors and companies may likely encounter bumpy short-run trends as Mongolia continues to come to terms with its mining endowments and how to bring them to the outside world, while satisfying domestic expectations that the mining sector should benefit the public. Investors may perceive, and have to accept that, the current political process creates an unclear policy environment that may increase investment risk, while Mongolian politicians see the process as yielding the necessary level of political comity. However, in the medium to long term, those willing to manage these issues and relationships with local partners with open eyes may find attractive opportunities in the aforementioned industries and sectors.
Mongolia’s rapid economic and social development, fueled by the discovery of significant mineral resources, has exacerbated governance and corruption challenges. To address this, a new OECD report says that Mongolia should complete the reform of its anti-corruption legislation, strengthen enforcement and make the prevention of political corruption a priority.
The report commends the Independent Authority Against
Corruption (IAAC) of Mongolia for its active work on corruption prevention,
public awareness-raising and investigation of corruption offences. But it
regrets that no actions were taken to improve the capacity of the IAAC to
deliver on its very broad mandate. The report calls on Mongolia to reject any
amnesty law that would grant protection from prosecution for corruption or lead
to termination of cases that are currently under investigation by the IAAC.
The report further recommends that Mongolia should:
- Adopt the new anti-corruption strategy without delay, and establish a high level mechanism for anti-corruption policy co-ordination;
- Bring national legislation in full compliance with international anti-corruption standards as part of the on-going reform of the Criminal Code;
- Limit immunities to remove barriers for effective investigation and prosecution of corruption, especially involving high-level officials;
- Ensure the de-politicisation of the civil service, including the Civil Service Council, and streamline legislation on conflicts of interests;
- Review the legal framework for public procurement, strengthen the Government Procurement Agency and the oversight mechanism;
- Bring the Mongolian Freedom of Information law in line with international standards, introduce dissuasive sanctions for its violation and establish an independent supervisory mechanism for its enforcement;
- De-criminalise defamation and insult to boost investigative journalism and introduce transparency of media ownership;
- Urgently reform regulations on political party financing, and ensure its effective supervision;
- Continue the reform of the judiciary to prevent corruption, political influence and nepotism.
The report also highlights important achievements of Mongolian anti-corruption reforms, such as the adoption of the Glass Accounts Law, development of public administration procedures, ensuring well-functioning National Audit Office, and establishing internal audit committees in all ministries. The report also welcomes evaluation of the state-owned enterprises commissioned by the IAAC and resulting recommendations on corporate transparent accounts and procurement, but stresses that further effective measure are need to promote business integrity.