How did Mongolia get off the money laundering watch list in record time?
Society
Mongolia worked with development partners and donor nations
to craft a plan that pro-actively pursued policies on anti-money laundering and
combating the financing of terrorism
Every year an estimated $2.6 trillion is lost to corruption
worldwide. This fraudulent conduct undermines the rule of law, impedes economic
development, and diverts scarce resources from schools, hospitals, and other
essential services.
Developing countries in Asia are on the front line in the
fight against this societal scourge. One strategy that these countries use to
battle corruption is to join international agreements and adopt standards that
help stanch the money that flows into and out of activities such as tax
evasion, trafficking, and other crimes.
An important facet of this work relates to policies on
anti-money laundering and combating the financing of terrorism, or AML/CFT.
Countries ignoring these two initiatives face serious internal and external
consequences, such as higher costs of doing business and of banking
transactions, as well as de-risking, where entities exit certain relationships
as they are unable to manage potential AML/CFT risks involved.
Despite the challenges, developing countries can make
significant progress in curbing money laundering and terror financing. Mongolia
provides an example of what works. In October 2019, the country was placed on
the “grey list” by the Financial Action Task Force, a global money laundering
and terrorist financing watchdog group. Being on this list means that there are
strategic deficiencies in the country’s regimes to counter money laundering,
terrorist financing, and proliferation financing that need to be addressed.
Within 12 months, Mongolia was off the list. This was
extraordinarily quick for a developing country to undertake the reforms and
actions needed to get off the grey list, particularly amid a pandemic.
Combating money laundering and terror financing is extremely
complicated, requiring international expertise across a wide range of
government and private sector activities. Working with development partners who
have expertise in this area is key to an informed response. Mongolia leaned
into their network of experts to develop an effective strategy.
Mongolia worked with development partners and donor nations
to develop a plan that was in line with its action plan under the International
Co-operation Review Group, an initiative of the Financial Action Task Force
that works with countries at high risk of being compromised by money laundering
and terror financing. These are some of the world’s top experts in the
area.
They also brought together private sector professionals from
various sectors, such as real estate agents, accountants, dealers in precious
stones and metals, lawyers and notaries, to cooperate with training and adhere
to new reporting requirements.
Mongolia’s leaders brought to the task a focus on
cooperation, political will, and a willingness to adapt and learn new
procedures. This leadership allowed Mongolia’s government agencies to
concentrate on the changes needed for maximum results at the fastest possible
time by efficiently utilizing resources.
With clear, pre-determined goals to conserve time and
resources, and the Ministry of Finance taking ownership of and responsibility
for the response they were able to get multiple agencies moving quickly in the
same direction.
Some developing countries make the mistake of waiting until
they are pressured by the international community to address money laundering.
Mongolia did not take this path. When there were indications that it would be
put on the grey list, the country’s leaders immediately undertook actions to
begin studying and addressing the issue.
By the time Mongolia was placed on the grey list, the
country’s central bank and financial regulatory commission were already
addressing its anti-money laundering and terror financing deficiencies. Because
of this proactive work, instead of the expected 20 or so issues to be pointed
out by the International Co-operation Review Group, Mongolia only had to
address six key items.
Mongolia’s experience provides important lessons for other
countries facing similar issues with money laundering and terror financing. For
one, participation in international agreements and covenants are important but
lasting change can only happen when reforms benefit a country’s citizenry.
Anti-money laundering efforts should not be seen as
arbitrary new bureaucratic procedures being imposed from outside the country.
These changes decrease corruption, increase transparency in extractive
industries such as mining, strengthen the rule of law, improve the operation of
government, and improve the lives of the public in myriad other ways.
It is important to communicate these benefits to the public because people are more likely to support reforms when they understand them. And when it comes to the expertise needed, development partners have sent a clear message to developing countries: You can rely on us. We have your back.
By Declan Magee, Carlo Antonio Garcia
Source: blogs.adb.org