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LAW OF MONGOLIA ON COMBATING MONEY LAUNDERING AND TERRORISM FINANCING

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LAW OF MONGOLIA
8 July 2006 Ulaanbaatar City
ON COMBATING MONEY LAUNDERING
AND TERRORISM FINANCING
CHAPTER ONE
General provisions
Article 1. Purpose of the Law
1.1. The purpose of this Law is to combat and prevent money laundering and
terrorism financing.
Article
2. Legislation
2.1. The law on combating money laundering and terrorism financing shall
consist of the Constitution of Mongolia,
the Criminal Code, this Law and
other legal acts adopted in conformity with these laws.
2.2. If an international treaty to which
Mongolia is a party is inconsistent with
this Law then the provisions of the international treaty shall prevail.
Article 3. Definitions
of terms
3.1. The meaning of the following terms used in this Law shall be as follows:
3.1.1. "money laundering" means to conduct
a transaction that involves
assets, knowing that they were obtained by illegal means, in order to
legalize the right to possess,
use or dispose of these assets and to
conceal the sources of these assets.
3.1.2. "terrorism financing" means to accumulate, transfer
or use assets in
any form knowing that these assets are intended to be used for
terrorism financing.
3.1.3. "reporting entity" refers
to the natural or legal persons, described in
Article 4 of this Law.
3.1.4. "assets derived from illegal activities" means assets
derived from
committing less grave, grave and exceptionally grave offences other
than those described in Article 166 of the Criminal
Code.
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3.1.5. "suspicious transaction" means a transaction that involves funds with
no clear source or recipient or a transaction
that is conducted via a
country that does not have a financial monitoring mechanism to
combat money laundering and terrorism financing
or a transaction that
is suspected of money laundering and terrorism financing.
3.1.6. "cash transaction" means a transaction involving
local and foreign
currency as well as checks, bills and securities widely used in
international settlement.
3.1.7. "suspension of
transaction" means to suspend a transaction to enable
the FIS to determine if the transaction is related to money laundering
or terrorist
financing.
3.2. The Governor of the Bank of Mongolia shall, pursuant to Provision 3.1.5 of
this Law, prepare a list of countries,
that do not have a financial monitoring
mechanism to combat money laundering and terrorism financing,.
CHAPTER TWO
Preventive measures
Article 4. Reporting entities
4.1. The following natural or legal persons, (Reporting Entities), shall report to
the Financial Information
Service on transactions described in Article 7 of
this Law.
4.1.1. banks;
4.1.2. non-bank financial institutions;
4.1.3. insurance
companies;
4.1.4. licensed securities market entities ;
4.1.5. natural or legal persons conducting pawnbroker activities;
4.1.6.
savings and credit cooperatives;
4.1.7. natural or legal persons conducting foreign currency exchange
activities;
4.1.8. Natural
or legal persons conducting gambling activities.
4.2. The natural or legal persons, other than those described in Article 4.1 of
this
Law, may report to the Financial Intelligence Unit any transactions that they
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suspect of money laundering or terrorism financing
or any cash transactions
of 20 million togrogs (or equivalent foreign currency) or above.
4.3. Reporting entities shall not open
an anonymous or numbered account or an
account in fictitious names, or make a transaction from or to such accounts,
or use closed
accounts.
Article 5. Examination of information on customers
5.1. Reporting entities shall obtain customer information in the following
cases:
5.1.1. prior to providing a financial service;
5.1.2. prior to conducting a transaction equal to or more than 20 million
togrogs
(or equivalent foreign currency);
5.1.3. if the total sum of several inter-related transactions is 20 million
togrogs (or equivalent
foreign currency) or above, the individual value
of any of these transactions is less than the threshold specified in
Article 5.1.2,
and there is a ground to suspect that the transactions are
conducted with the intent to avoid the reporting requirement of
Provision
5.2 of this Law.
5.1.4. if there is a need to verify the accuracy of previously obtained
information on customers;
5.1.5. prior to
conducting an international settlement transaction;
5.1.6. if there are other grounds to suspect that the customer or the
transaction
is involved with money laundering or terrorism financing;
5.2. Reporting entities shall obtain the following information from their
customers:
5.2.1. if the customer is an individual, his or her father's or mother's name,
given name, registration number, residential
address, contact phone
number, and a notarized copy of citizen's identity card;
5.2.2. if the customer is a legal entity, name of
the entity, its address, national
registration and tax payer number, contact phone number, a notarized
copy of its national registration
certificate, and detailed information on
its management;
5.2.3. information on purposes and beneficiaries of transactions;
5.2.4.
information about people who made wire transfers.
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5.3. If a customer refuses to provide the information provided for in Article
5.2
of this Law reporting entities shall be obliged to refuse to open an account,
to conduct a transaction, or to provide other financial
services.
5.4. Reporting entities Law shall update, within one year, the information on all
customers with whom it had established
financial relationships prior to the
adoption of this Law in conformity with the requirements of Article 5.2 of
this Law.
Article
6. Transactions of special monitoring
6.1. Reporting entities shall undertake special monitoring of the following
transactions:
6.1.1.
transactions equal to or more than 20 million togrogs (or equivalent
foreign currency);
6.1.2. transactions with no clear purpose;
6.1.3. transactions made via countries listed pursuant to Provision 3.2 of this
Law;
6.1.4. transactions that have no adequate information
on the entity or the
individual who undertook or who had someone undertake a wire
transfer;
6.1.5. transactions conducted in the
name of a public official or a political
party leader from a country listed country pursuant to Provision 3.2 of
this Law.
6.1.6.
transactions that are different from the customer's previous
transactions and that have no clear purposes;
6.2. Reporting entities
shall undertake all possible measures, to obtain additional
information or an explanation of the transactions described in Article
6.1 of
this Law.
Article 7. Reporting on suspicious transactions
7.1. Reporting entities shall report to the Financial Information
Service on cash
transactions pursuant to Articles 5.1.2, 5.1.3 and 5.1.5 of this Law.
7.2. The relevant information together with
its documentation shall be submitted
to the Financial Information Service in the prescribed form within 7 working
days after conducting
a transaction described in Provision 7.1 of this Law or
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within 24 hours if there is a ground to suspect that the transaction involved
has the intent of money laundering or terrorism financing.
7.3. Reporting entities shall deliver the information to the Financial
Information
Service by fax, in electronic form or in writing and it should be confirmed
immediately by fax or in writing if the information
was delivered by phone.
7.4. If the authorities make a written request to a reporting entity, it shall provide
information to them
on specific transactions and their participants in
accordance with the procedure jointly adopted by the Governor of the Bank
of Mongolia
and the Prosecutor ­ General on providing information.
Article 8. Retaining the information and documentation on customers
8.1. Reporting
entities shall retain, for not less than 5 years, information and
documentation on customers' transactions and closed accounts.
Article
9. Information on suspicious transactions
9.1. The following information on suspicious transactions shall be submitted to
the Financial
Information Service:
9.1.1. name and addresses of the reporting entity and the identity of the
officials who submitted the information;
9.1.2. information on customers and beneficiaries;
9.1.3. information on purpose, value, form, date, account number, account
holder
and participants of the transaction;
9.1.4. brief explanation of grounds and circumstances to suspect the
transaction;
9.1.5. other
related documents.
Article 10. Monitoring of accounts
10.1. If there are grounds to suspect that the account(s), mentioned in the
reports
from reporting entities, are being used for money laundering or terrorism
financing, then the Financial Information Service
may monitor the
account(s).
Article 11. Suspension of transactions
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11.1. If there are grounds to suspect that the transaction(s)
has or will be made by
clients for the purpose of money laundering or terrorism financing, then the
Financial Information Service
may decide to suspend the transactions.
11.2. A decision to suspend a transaction shall be delivered to the reporting entity
in writing,
or, if this is not possible, by phone and the written decision shall
be delivered within 24 hours.
11.3. The suspension of a transaction
shall not exceed three working days and the
Financial Information Service shall undertake the following measures during
this period:
11.3.1. obtain necessary information from related local and foreign
institutions;
11.3.2. if the established facts are sufficient
grounds to suspect that the given
transaction(s) had the purpose of money laundering or terrorism
financing, then it shall be reported
to the relevant authorities and the
related documents shall be sent to those parties for investigation;
11.3.3. if it is established
that the given transaction(s) did not have the purpose
of money laundering or terrorism financing, then the suspension
decision shall
be annulled and the reporting entity shall be immediately
informed.
Article 12. Relieving from liabilities
12.1. The provision of
reports by reporting entities to the Financial Information
Service and other relevant institutions, in accordance with provisions
of this
Law, shall not be considered as a breach of banking and professional
confidentiality.
12.2. Notwithstanding that the transaction
to which a report relates was
established not to have the purpose of money laundering or terrorism
financing, it is forbidden to
impose administrative and criminal charges
against the reporting entity.
12.3. Neither the Financial Information Service nor a reporting
entity is liable for
any damages arising from the suspension of a specific transaction, in
accordance with Article 11 of this Law,
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12.4. If damages are inflicted on a person or legal entity due to wrongful actions
undertaken by a reporting entity , and in violation
of this Law, then the
damages issue shall be settled according to the Civil Code.
Article 13. Confidentiality of reports
13.1. Reporting
entities and the Financial Information Service are prohibited from
disclosing information on clients' transactions to any other person
other than
as provided for in Article 7.4 of this Law.
13.2. The Director and Inspectors of the Financial Information Service shall
not
disclose at any time confidential information related to transactions.
Article 14. Internal monitoring of reporting entities
14.1. Reporting entities shall develop and implement an internal monitoring
program to combat money laundering and terrorism financing.
The program
shall contain the following:
14.1.1. Policies and procedures on detecting suspicious transactions, security
and confidentiality
of information, reporting and transfer of
documents to the Financial Information Service and other relevant
entities;
14.1.2. Rules
and procedures for the appointment and discharge, of officers
who will supervise and monitor the implementation of laws to combat
money laundering and terrorism financing, specifying the powers and
obligations of such staff and the implementation of the rules
provided
for in Article 14.1.1 of this Law.
14.1.3. Requirements for providing professional training for the staff provided
for in
Article 14.1.2 of this Law.
14.2. The program provided for in Article 14.1 of this Law shall be submitted for
registration to the
Financial Information Service.
14.3. Model rules for the purposes of Article 14.1.1 of this Law shall be approved
by the Governor
of Bank of Mongolia.
Article 15. Transportation of money across the borders of Mongolia
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15.1. Travellers carrying between 5 and
20 million togrogs (or its equivalent in
foreign currency in cash), across the Mongolian border shall declare truly the
amount of
cash in customs forms.
15.2. If a person crosses the Mongolian border carrying more than 20 million
togrogs in cash (or the equivalent
in foreign currency) he or she shall make a
declaration to the authorized representative of the Financial Information
Service in
the prescribed form.
15.3. A person who evades or objects to making a declaration or makes a false
declaration under Articles 15.1
or 15.2 of this Law shall be liable as
provided for in the Law.
15.4. Declaration forms for the purposes of Article 15.2 shall be
approved by the
Governor of the Bank of Mongolia.
CHAPTER THREE
Financial Information Service
Article 16. Financial Information Service
16.1. The Financial Information Service, whose functions will be to implement
laws to combat money laundering and terrorism financing,
shall be
established in the Bank of Mongolia.
16.2. The strategic plan and structure of the Financial Information Service shall be
approved by the Governor of the Bank of Mongolia.
16.3. The Director of the Financial Information Service shall be appointed by the
Governor of the Bank of Mongolia upon consultation with the Minister of
Finance.
16.4. The Director and Inspectors of the Financial
Information Service shall meet
the following requirements:
16.4.1. have served in banking, financial or legal professions for not
less than
three years;
16.4.2. have no overdue debts or liabilities;
16.4.3. have no criminal record
Article 17. Functions of the
Financial Information Service
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17.1. The Financial Information Service shall have the following functions, in
addition to those
provided for in Articles 10, and11 of this Law:
17.1.1.receive, collect and analyze information reported from reporting entities
as
well as information contained in data bases of relevant local and similar
foreign institutions;
17.1.2.using reports from authorized
institutions compile database on suspicious
and cash transactions;
17.1.3.regularly report to the reporting entities and competent
state institutions on
measures taken by the FIS on the basis of reports on suspicious and cash
transactions;
17.1.4.develop, provide
to and ensure the implementation by reporting entities of
a methodology to monitor and detect suspicious transactions and examine
information related to money laundering and terrorism financing;
17.1.5.disseminate information and raise public awareness to combat
and prevent
money laundering and terrorism financing;
17.2. Inspectors of the Financial Information Service have the power to examine
the implementation of the laws to combat money laundering and terrorism
financing and to require rectification of any breaches of
the Law by
reporting entities, or to make recommendations to the competent
authorities for further action including the cancellation
of special licenses.
17.3. Financial Information Service shall monitor how reporting entities and
their officers fulfil their obligations
imposed by this Law.
Article 18. Database
18.1. Financial Information Service shall have a unified database of information
compiled
in accordance with the provisions of this Law.
18.2. Rules on storage and use of information in the database shall be approved
by
the Governor of the Bank of Mongolia.
Article 19. Cooperation with similar foreign institutions
19.1. Financial Information Service
shall cooperate with foreign and
international institutions which conduct similar activities and have similar
confidentiality requirements
imposed by law.
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19.2. Financial Information Service may provide the required information at the
request of the institutions provided
for in Article 19.1 and in accordance
with the respective Laws.
CHAPTER FOUR
Miscellaneous
Article 20. Cooperation Council
20.1.
The Council, whose functions shall be to ensure the implementation of
laws to combat money laundering and terrorism financing, to
exchange
information, to prepare recommendations on preventative measures, shall
be established at the Financial Information Service.
The composition and
rules of this Council shall be approved by the Governor of the Bank of
Mongolia.
Article 21. Liabilities to be
imposed on those who breach the Law
21.1. If the violation of the Law to combat money laundering and terrorism
financing does not
constitute a criminal offence, then the Inspector of the
Financial Information Service shall impose the following administrative
sanctions against the guilty person:
21.2. Official who violates the provisions of Articles 4.3 and 5.3 of this Law
shall be imposed
a fine up to 250.000 togrogs , a legal entity ­ a fine of up
to 1.000.000 togrogs;
21.3. Official who violates the provisions of
Article 13 of this Law shall be fined
for up 500.000 togrogs, legal entity for up to 1.000.000 togrogs.
Speaker of Ts. Nyamdorj
the
Great Khural
of Mongolia