AML/CFT Developments in Central Asia

ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM (AML/CFT) NEWSLETTER FOR CENTRAL ASIA

Issue 72–August/September2012

Available online at

AML/CFT Developments in Central Asia

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AFGHANISTAN

Afghanistan enacted an AML/CFT law in 2004. The FIU was establishedin 2005. The on-site visit of Afghanistan’s mutual APG-IMF evaluationtook place in January2011. Afghanistan is a member of the Asia Pacific Group (APG) and an observer to the EAG. Afghan FIU became an Egmont Group member in June 2010.

BELARUS

The AML/CFT Law of Belarus was adopted in 2000. Belarus became a member of the Egmont Group in 2007. Belarus is a member of EAG. The Mutual Evaluation Report of Belarus was adopted by EAG in December 2008. TwoMutual Evaluation Follow-up Reports were adopted by EAG in December 2009 and December 2010.

CHINA

The AML/CFT law came into force on 1 January 2007. The Mutual Evaluation Report of China was adopted by FATF in June 2007 and by EAG in December 2007. The fifth Mutual Evaluation Follow-up Report was adopted by EAG in December 2010. China is a member of EAG and FATF, and also holds a position of a Vice-Chair of EAG and co-chairs the EAG Evaluation/Legal Working Group.In February 2012 the FATF adopted the follow up report of China and decided to take off China from its regular follow-up process. China will report back to the FATF Plenary on any further improvements to its AML/CFT regime on a biennial basis.

KAZAKHSTAN

The AML/CFT law was adopted in June 2009 and came into force on 9th March 2010. The Financial Monitoring Committee (FIU) was established within the Ministry of Finance on 24 April 2008. Kazakhstan is a member of EAG, and co-chairs the EAG Technical Assistance Working Group. In October 2010 Kazakhstanunderwent an EAG AML/CFT Mutual Evaluation.The Mutual Evaluation Report was adopted during the EAG Plenary in June 2011.In July 2011during the Egmont plenary meeting in Yerevan, Armenia theKazakh FIU became a member of the Egmont Group.

KYRGYZSTAN

Kyrgyz State Financial Intelligence Service - SFIS (FIU) became a member of the Egmont Group in May 2009. Kyrgyzstan is a member of EAG. The EAG 1st round Mutual Evaluation Report of Kyrgyzstan was adopted in June 2007. In October 2011 Kyrgyzstan was included in the FATF public document “Improving Global AML/CFT Compliance: On-going Process”.FATF has determined certain strategic AML/CFT deficiencies and encouragedKyrgyzstanto work on implementing its action plan to address these deficiencies.In May 2012 a sixth Mutual Evaluation Follow-up Report was adopted by the EAG Plenary. EAG recommendedKyrgyzstan to present the 7th Follow-up Report during the next plenary meeting.

RUSSIAN FEDERATION

A Joint AML/CFT Mutual Evaluation of Russian Federation was conducted by FATF/Moneyval/EAG in 2007. TheMutual Evaluation Report was adopted by FATF/Moneyval/EAG in June and July 2008. In December2010 the Russian Federation submitted its second follow-up report to the EAG Plenary. The second 3rd round progress report of the Russian Federation was adopted by Moneyval in September 2011. The Russian Federation is a member of FATF, Moneyval and EAG; it chairs the EAG and Moneyval and co-chairs the EAG Technical Assistance, Typologies, Evaluation/ Legal, and SupervisionWorking Groups.

TAJIKISTAN

On 25 March 2011 the AML/CFT Law was adopted by the Parliament and signed by the President. A decision to establish the Financial Monitoring Department (FIU) under the National Bank of Tajikistan was taken by the President on 20 October 2009. Tajikistan is a member of EAG. The World Bank mutual evaluation report was adopted by EAG in December 2008. In December 2008 the EAG placedTajikistan under the enhanced follow up procedure. In May 2012Tajikistan presented its seventh follow-up report to the EAG Plenary andtheEAG decided to keep Tajikistan on the enhancedfollow up procedure, thus requiring reporting to the EAG during the next plenary meeting. In June 2011 Tajikistanwasincluded inthe FATF public document “Improving Global AML/CFT Compliance: On-going Process”. The FATF encouragedTajikistan to address its remaining deficiencies and continue the process of implementing its action plan.In July 2012 during the 20th Egmont Plenary meeting in Saint Petersburg the Tajik FIU became a member of the Egmont Group.

TURKMENISTAN

The AML/CFT law was adopted by the Parliament and signed by the President in May 2009. A Financial Intelligence Unit (FIU) was established under the Ministry of Finance in 2009.Turkmenistan became a member of EAG in June 2010. The Mutual Evaluation Report and the first Follow-up Report of Turkmenistan were adopted by the EAG in June 2011.In May 2012Turkmenistan presented its third follow-up report to the EAG and EAG recommended Turkmenistan to provide its Follow-up Report during the next plenary meeting.The FATF during its June 2012 plenary meeting decided to remove Turkmenistan from its monitoring process under its on-going global AML/CFT compliance process. The FATF welcomed Turkmenistan’s significant progress in improving its AML/CFT regime and noted that Turkmenistan has largely met its commitments in its Action Plan regarding the strategic deficiencies identified by FATF. Turkmen FIU became an observer to Egmont Group during its 20th Plenary meeting in July 2012.

UZBEKISTAN

Uzbekistan is a member of EAG. The Mutual Evaluation Report of Uzbekistan was adopted during the EAG Plenary meeting in Almaty in June 2010. The first Mutual Evaluation Follow-up Report was adopted by EAG in December 2010.The amendments to the Uzbek AML/CFT Law came into force on April 22, 2009. Amendments to other 16 laws were adopted by the Parliament in September 2009.In its February 2010 statement the FATF welcomed Uzbekistan’s significant progress in improving its AML/CFT regime and noted that Uzbekistan addressed the AML/CFT deficiencies that the FATF had identified in February 2008. Uzbekistan is no longer subject to the FATF’s enhanced monitoring process.Uzbek FIU became an Egmont Group member during its 19th Plenarymeeting in July 2011.

INDIA

A Financial Intelligence Unit (FIU-IND) was set by the Government of India in November 2004 and is a member of Egmont Group. FIU-IND is an independent body reporting directly to the Economic Intelligence Council headed by the Finance Minister.India has criminalised money laundering under the Prevention of Money Laundering Act and the Narcotic Drugs and Psychotropic Substances Act. These laws came into force in 2005 and wereamended in 2009. The Unlawful Activities (Prevention) Act was amended in 2004 to criminalize, inter alia, terrorist financing, and it was further amended in December 2008 to broaden its scope and to bring the legislation more in line with the requirements of the International Convention for the Suppression of the Financing of Terrorism.India is a member of FATF and APG and in December 2010 became also a member of EAG. The Mutual Evaluation Report of India was adopted by FATF in June 2010.

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We welcome contributed articles of up to one page in length!

To submit information for inclusion to the newsletter or to be added to or removed from the distribution list, pleasecontact Mr. Klaudijo Stroligo at

 Joint MONEYVAL/EAG Workshop was held from 19 September to 21 September in Strasbourg, France.

A joint MONEYVAL/EAG workshop “Review of the FATF standards” was aimed at making member states of the two groups familiar with the changes in the FATF Recommendations

The meeting gathered the heads and leading specialists of the financial investigation units of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) and the Eurasian group. The most important presentations were made by the representatives of the FATF, the WB and the IMF. It’s worthwhile to notice an unusual format of the workshop letting all the participants be involved in the discussions. Almost all delegations had an opportunity to take floor on various themes.

Special attention was paid to implementation of the risk-based approach. The new version of the FATF standards outlines national risk assessment as main criteria of national AML/CFT systems effectiveness. In particular, further work on their development will be based on national risk assessment.

International cooperation of the FIUs in the field of combating money laundering, financing of terrorism and financing of proliferation turned to become another disputable issue of the workshop. Changes in the field of information exchange are called to make the world AML/CFT system more coherent and transparent.

For more information please visit EAG website:

TECHNICAL ASSISTANCE update

 Closer international co-operation needed to close gap between assets stolen and recovered, say participants at OSCE conference

The need for greater exchange of expertise and international co-operation in identifying and seizing stolen assets was highlighted by participants at a three-day OSCE seminar that was held in Vienna from 3 to 5 September 2012.

The seminar is a joint initiative of the Office of the Co-ordinator of OSCE Economic and Environmental Activities, the Stolen Asset Recovery (StAR) Initiative of the World Bank and the United Nations Office on Drugs and Crime (UNODC).

Experts and senior officials from OSCE participating States and Partners for Co-operation that deal with anti-corruption and anti-money laundering as well as representatives from financial institutions attended the event. They exchanged experience on asset recovery cases and issues related to legal instruments, the identification of risk groups, asset tracing, and international and regional co-operation frameworks. The seminar concluded on 5 September with a political segment that examined how recommendations from the expert discussions can be turned into increased political commitment and multilateral co-operation.

The press-release is available at

 The concluding meeting of the 20th OSCE Economic and Environmental Forum, which is focusing on promoting security and stability through good governance, combating corruption, money laundering and terrorism financing took place in Prague from 12 to 14 September 2012.

The three-day Forum brought together more than 250 participants representing national and international bodies, non-governmental organizations, academia and the business community.

Forum participants discussed the challenges OSCE participating States are facing in promoting good governance, and ways to address them both domestically and at the international level. They reviewed the implementation of existing OSCE commitments in the field of anti-corruption and discuss how the OSCE can support participating States.

The press-release is available at

 The OECD expert seminar “Investigation and Prosecution of Corruption: Bribery, Illicit Enrichment and Liability of Legal Persons” took place in Batumi, Georgia on 25 – 26 September 2012.

The seminar was organized by OECD Anti-Corruption Network for Eastern Europe and Central Asia and Ministry of Justice of Georgia and brought together 60 participants. The seminar focused on the following themes: investigating and prosecuting bribery offences with complex elements (1); investigating and prosecuting corruption involvinglegalpersons (2);criminalizing and enforcing the offence of illicit enrichment (3).

The seminar enabled practicing prosecutors and investigators to exchange practical experience and good practice ininvestigating and prosecuting corruption.

EgmontGroup update

“Egmont” Group Case study: Misuse of legitimate businesses

A businessman called Dirk applied for a credit facility in the amount of US $ 100,000,000 at a reputable financial institution, producing certificates of deposit with a total value of US$425,000,000 as a guarantee. The certificates were owned by a foreign foundation, of which Dirk was a board member. Dirk indicated that if the bank were to grant the credit facility, part of the loan - amounting to some US$ 17,000,000 - was to be transferred to a separate private account in the name of his girlfriend.

Although a credit facility of such size is profitable and desirable business for any financial institution, the account manager nevertheless had some concerns relating to the tranche. Due to his experience with banking matters and normal client behavior, the bank manager was concerned that the request for both the tranche and the transfer to a private account did not appear to be wholly bona fide. Rather than performing the transaction, the bank reported the matter to the national FIU.

The national FIU identified a number of previous law enforcement records relating to Dirk. He was registered in both national and international police databases for various fraudulent activities. The FIU forwarded the disclosure and supporting information immediately to the police. A team was put together to initiate a preliminary investigation. The investigation found that Dirk had recently been involved in a bankruptcy fraud case with proceeds totaling several million US dollars, in a second case involving sizeable false credit applications which utilized document forgery, and in a third fraud involving foreign government bonds with a total value of approximately US$ 210,000.

The investigating team was by now highly suspicious that the certificates of deposit used to obtain the tranche were forgeries. Inquiries in the country where the certificates had been issued revealed that the issuing bank had been liquidated some years ago - in effect the certificates were worthless. Through law enforcement investigations in this second country, further certificates of deposit with a total value of US$ 30,000,000 were seized from an individual who had previously been involved in the management of the defunct financial institution. In addition counterfeit government bonds with names of other banks on them were also discovered. The total value was well over US $ 850,000,000.

It became clear to the investigating unit that an entire organization was creating a range of fake bonds and certificates, supplying them to a number of fraudsters such as Dirk for use in large-scale international frauds against financial institutions. If a swindler was successful in obtaining credit using the false documentation, the bank guarantee obtained was used in turn for credit applications with other banks so as to create a network of interdependent guarantees between legitimate financial institutions, thereby increasing the total amount defrauded. The objective after a number of deceptions was for the fraudster to transfer significant amounts of funds into private accounts and disappear, leaving the legitimate organizations to sort out the complex interweave of debts.

Ongoing investigations are seeking to determine whether initial funds used to start some of the guarantee funds in motion were originally obtained from criminal activity, in order to obtain grounds for a primary prosecution for money laundering. Dirk has been charged on a number of offences in a range of countries.

Indicators:

Unusualbusiness activity - transfer into relatives account

A typical or uneconomical fund movement of funds

Documentationissued by an unfamiliar financial institution

FIU Action:

Crossreferencing with national and international law enforcement databases

«Egmont» group 100 Sanitized cases are available at:

For more information please visit the Egmont Group website:

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We welcome contributed articles of up to one page in length!

To submit information for inclusion to the newsletter or to be added to or removed from the distribution list, pleasecontact Mr. Klaudijo Stroligo at