A few days ago, The European Commission decided to add Mongolia and eleven other countries to its list of states that pose financial risks to the bloc because of anti-money laundering and terrorism financing. So, to find out why, News.mn interviewed Mr. Traian Laurentiu Hristea, Ambassador of Head of the European Union Delegation to Mongolia about its black listing decision.
The European Union added Mongolia to its money-laundering blacklist. What was the reason? Was it affected by the decisions in regard to judiciary and legal environment besides of economic policies taken by the Mongolian authorities?
The European Union takes anti-money laundering and countering terrorism financing very seriously and it is one of our major priorities.
Internally, we apply demanding expectations from our Member States: As of January 2020, there are still 16 open cases for the infringement of not completely transposing the relevant legislation (the 4th Anti-Money Laundering Directive) and two open cases before the Court of Justice for non-communication.
Beyond our borders, we need to align the EU list closer to the lists published by the FATF (Financial Action Task Force). Our list dates back to 2016. Consequently, it increasingly diverges from the FATF lists, which represent the international consensus on the matter.
As Mongolia is still a country under Increased Monitoring by the FATF (confirmed in October 2019), the EU list needed to be updated.
The EU list up to now was largely outdated since it did not reflect latest lists adopted by the Financial Action Task Force (FATF) since October 2018. Therefore, it was necessary to adopt a new EU list and align the EU list closer to the lists published by the FATF in order to not expose the internal market to serious risks of money laundering and terrorist financing.
The proposed legislation will enter into force only from 1 October this year, because of COVID-19.
- What are the consequences of being blacklisted for Mongolia?
The only consequences are for the financial system: Banks and other entities are required to apply enhanced vigilance in transactions involving Mongolia (so called “enhanced customer due diligence requirements”). This is also in line with international obligations, where the FATF already calls on its Members to apply enhanced due diligence to high-risk countries. Those enhanced measures will lead to extra checks and monitoring of those transactions by banks and entities in order to prevent, detect and disrupt suspicious transactions. These measures do not entail any type of sanctions, restrictions to the legitimate trade relations or impediment to development aid; but it aims to apply enhanced vigilance measures in those cases. In such cases, entities need to apply extra checks (e.g. requesting additional information, additional checks, request approval of senior management or increased audits).
- What is the situation with money laundering and terrorist financing in Mongolia?
As you will recall, since October 2019, Mongolia continues to take significant steps towards improving its AML/CFT regime, including by demonstrating an increase in sanctions and remedial actions by financial supervisors for identified violations, and further seizing and confiscating falsely/non-declared currency.
Mongolia is actively working with the FATF to address strategic deficiencies in its regimes to counter money laundering, terrorist financing, and proliferation financing. Mongolia is committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.
- What do we need to do to get off the blacklist?
Mongolia should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) improving sectorial money laundering / terrorism financing risk understanding by Designated Non-Financial Business and Professions 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 financial institutions and designated non-financial business and professions supervisors with their proliferation financing-related targeted financial sanctions obligations, including the application of proportionate and dissuasive sanctions.
- What loans and projects has the European Union provided to Mongolia so far? Does this mean that the funding will stop in the future?
The EU listing does not entail any punitive effect; transactions made by EU financial institutions with persons established in Mongolia are not forbidden nor blocked. It does not impede development policy which is implemented in Mongolia. We are here to assist our partners that need technical assistance. We aim at supporting more our partners (not less) to address AML/CFT issues by better tailoring the existing technical assistance to address strategic deficiencies in the best interest of both parties.
The listing process does not affect the EU humanitarian assistance, the development policy or the provision of grants, procurement and budget support in those third countries put on the EU list. Therefore there should be no adverse effect with regard to actions physically implemented in listed jurisdictions.
- The trial of former Prime Minister of Mongolia M.Enkhsaikhan has finished yesterday, sentencing him for 4.6 year. The European Union’s Delegation said it was watching the trial closely and handed over a bear. Why did you pay close attention to this trial?
- Many people oppose the court’s decision. According to the EU Delegation, how do you see the court’s decision?
Mongolia has ratified a number of human rights treaties. These treaties include the International Covenant on Civil and Political rights, which includes the right to free trial, rules on pretrial detention, and other rights.
Mongolia is a beneficiary of the EU Generalized System of Preferences plus (GSP+). This means that around 6500 Mongolian goods can enter the EU markets without duties. In exchange of this preference, Mongolia has to implement and respect 27 international treaties. These treaties include the International Covenant on Civil and Political Rights I mentioned earlier.
It is our duty to gather information on how Mongolia is implementing all these treaties to be able to continue giving Mongolia these trade preferences.