What is the Financial Action Task Force?

Financial Regulatory Commission of Mongolia

Mongolia became a member of the APG, an associate member of FATF in June 2004. In accordance with APG membership rules, APG members commit a mutual peer review system to determine the levels of compliance with the international AML/CFT standards. These peer reviews are referred to as “Mutual Evaluations”. A mutual evaluation involves a desk-based review of AML/CFT system of a member country and an on-site visit to the APG member by a team of the APG.

Since the completion of MER in 2017, Mongolia has made progress on a number of MER recommended actions to improve technical compliance and effectiveness, including by enhancing its money laundering and terrorist financing (ML/TF) risk understanding, and introducing a comprehensive institutional framework to give effect to proliferation financing and targeted finance sanction obligations, and enhancing legal framework through legislative measures and guidance.

In October 2019, Mongolia demonstrated a high-level political commitment to work with the FATF and APG to strengthen the effectiveness of its AML/CFT regime, and continues to take significant steps towards improving AML/CFT regime, by establishing an increase in sanctions and remedial actions by financial supervisors for identified violations, and further seizing and confiscating falsely/non-declared currency. Mongolia continues to work on implementing our action plan to address current strategic deficiencies, including by: (1) improving sectoral ML/TF risk understanding by DNFBP supervisors, applying a risk-based approach to supervision, particularly in relation to dealers in precious metals and stones; (2) demonstrating increased investigations and prosecutions of different types of ML activity in line with identified risks; and (3) monitoring compliance by FIs and Designated Non-Financial Businesses and Professions (DNFBPs) with their proliferation financing (PF) related TFS obligations, including the application of proportionate and dissuasive sanctions.

From the 2019 Follow up report, 35 of the 40 recommendations were rated as C (Compliant) and LC (Largely Compliant). However, partial progress was made on Recommendations 1, 8, 14 and 35 to justify a re-rating at that time.Recommendations 1 (Assessing risks and applying a risk-based approach), 14 (Money or value transfer services) and 28 (Regulation and supervision of DNFBP).

The FRC has made significant effort to improve the Law on Combating Money Laundering and Terrorism Financing and regulations, in accordance with the FATF standards. The FRC has made the progress of action plans a priority, as Mongolia made a high-level political commitment to improve the current AML/CFT framework and implement given action plan. As Dealers in precious metals and stones (DPMS) and Real Estate Agents (REA) sectors were added to FRC’s regulation and supervision in October 2019, amendments to the Law on Legal status of the Financial regulatory commission of Mongolia, Law on Licensing and Law on Anti Money Laundering and Terrorism Financing were made in October, 2019 and January, 2020 in compliance with the FATF recommendations to strengthen the legal framework. The FRC also made amendments to all of regulations of each regulated non-bank financial sectors in accordance with FATF standards. The FRC took initiative to improve market entry requirements for DNFBP’s by establishing “Regulation on fitness and propriety for non-bank financial institutions and non-financial businesses and professions” in April, 2020 with the main aim to reduce the risk that responsible persons of the regulated institutions are not fit and proper for their roles.

The FRC has been demonstrating high level commitment to strengthen the current AML/CFT system, and has made significant improvements to the levels of technical compliance with the FATF standards. This includes establishing an official Anti-Money Laundering Unit under the Supervision Department in 2019. The FRC implements AML/CFT risk-based supervision on all 4 regulated non-bank financial sectors including Non-Bank Financial Institutions (NBFIs), securities and insurance markets, savings and credit Cooperatives, and regulated DNFBP sectors including DPMS and REA. FRC has ensured the sufficient resources and expertise for conducting both on-site and off-site risk-based supervision, including use of proportionate and dissuasive sanction for AML/CFT breaches. The FRC had conducted sectoral risk assessment in all regulated sectors and shared the findings of the risk assessment with industry associations and participants. At the moment FRC has been working on National ML/TF risk assessment in cooperation with all stakeholders from both government organizations and private sectors.

The FRC has taken series of measures to enhance the outreach and guidance to NBFIs, securities and insurance companies, savings and credit cooperatives, DPMS and REA regarding ML/TF risks and AML/CFT obligations. Particularly, the support of the SRBs and industry associations allowed the supervisors to significantly improve outreach through training programmes with sector specific guidance on; (a) beneficial ownership obligations, (b) politically exposed people obligations, and (c) identification and mitigation of ML/TF risks. On an international scale, the Asian development bank has shown various technical assistance to the FRC to improve capacity, understanding, development of AML/CFT framework. Within the local scale, Mongolia has been actively cooperating with other government regulatory and supervisory bodies within National Council and Cooperation Council.

As of late May 2020, the FRC has successfully demonstrated compliance with Recommendation 14 (Money or value transfer services)and 28 (Regulation and supervision of DNFBP). Within the scope of Mongolia’s action plan from the Joint Group, in a limited amount of time, the FRC demonstrated vast improvement and compliance with Immediate outcomes 3 (FRC and other DNFBP supervisors should understand risks posed by individual institutions and demonstrate that the frequency and intensity of supervision is based on identified risks) and 11 (Provide evidence of cooperation and coordination between authorities to prevent sanctions from being evaded). FRC, along with other government organizations, has been working towards completing action items from the ICRG, demonstrating commitment and dedication amidst challenging times due to the Covid-19 pandemic.