Brief Introduction of Amendment to the Anti-Money Laundering and Counter-Terrorism Financing Law
October 10, 2019. Ulaanbaatar city. Law on Amendment of the Anti-Money Laundering and Counter-Terrorism Financing Law, submitted by the Mongolian Government, was discussed and adopted by the Parliament of Mongolia on 26th April 2018 and has been enforced since 1st July 2018.
The amendment covers: (i) combat financing a mass-destruction weapons distribution, (ii) create a legal environment for implementing sanctions, adopted by the Security Council of the United Nations, establish the National Council with functions to develop the draft of national program on anti-money laundering and counter-terrorism financing, which subsequently will be approved by the Government and to take necessary measures to implement this law, (iii) expand the scopes of persons responsible for reporting and high-risk clients. As of the date of this article, the National Council has not been yet established.
Under the Anti-Money Laundering and Counter-Terrorism Financing Law, the persons responsible for reporting, i.e. bank, finance institutions, are required to report any transaction, asset or attempt to transact with an amount over MNT 20M to the Financial Information Bureau if they have suspected or knew that those transactions, assets or attempts were connected to the money laundering and terrorism or were the income of criminal activity. Pursuant to the amendment, the scope of persons responsible for reporting has expanded as the followings:
- Trader, who sells precious metals, gems or goods made with them;
- Lawyer or financial service consultant. These persons are obliged to report if they conduct the following services, within the value exceeding certain amount, on behalf of the client:
- Sell and purchase real estate;
- Incorporate legal entity, manage its activity or run/manage its certain activity on the base of transaction, or sell and purchase legal entity;
- Manage client’s assets;
- Organize and attract funds for the incorporation and operation of a company;
- Manage bank, savings and security account.
Furthermore, persons responsible for reporting has the following additional obligations:
- Approve and implement the internal supervision and risk-management program of anti-money laundering and counter-terrorism financing, which is approved by a board of directors, or authorities similar to such body;
- Before an introduction of new products or technology, constantly conduct risk assessment whether those can be used in money laundering and terrorism financing and implement effective measures to reduce the risk;
- Shall not provide any service to person, legal entity or any organization who are included in the Counter-Terrorism Law’s sanctions list, which should be developed in accordance with the UN Security Council’s sanctions /the list has not been developed at the moment/;
- Immediately after acknowledging or knowing the names of person, legal entity or organization, included in the sanction list, the persons responsible for reporting shall freeze the relevant account or asset movement without prior notice, and seize their transaction right without the permission of relevant authorities and subsequently notify these measures taken to the Financial Information Unit;
- Identify, through the comprehensive activity, the clients from region or country that is determined by the anti-money laundering and counter-terrorism financing international organizations as a territory which do not have adequate supervisory mechanism for money laundering and terrorism financing and, if necessary, take measures stated in the administrative rules and procedures, adopted in accordance with the law (please see the list in here).
Anti-Money Laundering and Counter-Terrorism Financing Law requires to carry out comprehensive activities in order to identify the “high-risk client”; and under its amendment, the following clients shall be deemed as the high-risk clients:
- An influential politician (please see the list in here);
- Person or legal entity of the country that is determined by the anti-money laundering and counter-terrorism financing international organization, as a territory which do not have adequate supervisory mechanism for money laundering and terrorism financing;
- Person or legal entity who is conducting its activity in high-risk sector, determined by the national risk assessment of anti-money laundering and counter-terrorism financing.
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